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MasterCraft Boat Holdings, Inc. - Quarter Report: 2019 December (Form 10-Q)

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549

 

 

FORM 10-Q

 

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended: December 29, 2019

OR

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                                    to                                                  

 

Commission File Number 001-37502

 

 

 

MASTERCRAFT BOAT HOLDINGS, INC.

(Exact name of registrant as specified in its charter)

 

 

Delaware

 

06-1571747

(State or Other Jurisdiction

 

(I.R.S. Employer

of Incorporation or Organization)

 

Identification No.)

 

100 Cherokee Cove Drive, Vonore, TN 37885

(Address of Principal Executive Office) (Zip Code)

 

(423) 884-2221

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

 

Trading

Symbol(s)

 

Name of each exchange on which registered

Common Stock

 

MCFT

 

NASDAQ

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.          Yes               No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).          Yes               No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

Accelerated filer

 

 

 

 

Non-accelerated filer

Smaller reporting company

 

 

 

 

Emerging growth company

 

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).          Yes               No

As of February 3, 2020, there were 18,872,166 shares of the Registrant’s common stock, par value $0.01 per share, issued and outstanding.

 

 

 


 

 

TABLE OF CONTENTS

 

 

 

 

 

 

Page

 

 

 

PART I

FINANCIAL INFORMATION

 

Item 1.

Financial Statements

 

 

Unaudited Condensed Consolidated Statements of Operations

4

 

Unaudited Condensed Consolidated Balance Sheets

5

 

Unaudited Condensed Consolidated Statements of Stockholders’ Equity

6

 

Unaudited Condensed Consolidated Statements of Cash Flows

7

 

Notes to Unaudited Condensed Consolidated Financial Statements

8

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

20

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

30

Item 4.

Controls and Procedures

30

 

 

 

PART II

OTHER INFORMATION

 

Item 1.

Legal Proceedings

31

Item 1A.

Risk Factors

31

Item 2.

Unregistered Sales of Securities and Use of Proceeds

31

Item 3.

Defaults Upon Senior Securities

31

Item 4.

Mine Safety Disclosures

31

Item 5.

Other Information

31

Item 6.

Exhibits, Financial Statement Schedules

32

 

 

 

SIGNATURES

 

33

 

2


 

 

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This quarterly report on Form 10-Q contains certain “forward-looking statements” within the meaning of the federal securities laws. These forward-looking statements can generally be identified by the use of statements that include words such as “could,” “may,” “might,” “will,” “expect,” “likely,” “believe,” “continue,” “anticipate,” “estimate,” “intend,” “plan,” “project” and other similar words or phrases. Forward-looking statements involve estimates and uncertainties that could cause actual results to differ materially from those expressed in the forward-looking statements.

The forward-looking statements contained in this quarterly report on Form 10-Q are based on assumptions that we have made considering our industry experience and our perceptions of historical trends, current conditions, expected future developments and other important factors we believe are appropriate under the circumstances. As you read and consider this quarterly report on Form 10-Q, you should understand that these statements are not guarantees of performance or results. They involve risks, uncertainties (many of which are beyond our control) and assumptions. Although we believe that these forward-looking statements are based on reasonable assumptions, you should be aware that many important factors could affect our actual operating and financial performance and cause our performance to differ materially from the performance anticipated in the forward-looking statements, including but not limited to the following: general economic conditions, demand for our products, changes in consumer preferences, competition within our industry, our reliance on our network of independent dealers, our ability to manage our manufacturing levels and our fixed cost base, the successful introduction of our new products and the other important factors described under the caption “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended June 30, 2019, filed with the Securities and Exchange Commission (the “SEC”) on September 13, 2019. Should one or more of these risks or uncertainties materialize, or should any of these assumptions prove incorrect, our actual operating and financial performance may vary in material respects from the performance projected in these forward-looking statements.

Further, any forward-looking statement speaks only as of the date on which it is made, and except as required by law, we undertake no obligation to update any forward-looking statement contained in this quarterly report on Form 10-Q to reflect events or circumstances after the date on which it is made or to reflect the occurrence of anticipated or unanticipated events or circumstances. New important factors that could cause our business not to develop as we expect may emerge from time to time, and it is not possible for us to predict all of them.

3


 

 

MASTERCRAFT BOAT HOLDINGS, INC. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Dollars in thousands, except share and per share data)

 

 

 

Three Months Ended

 

 

Six Months Ended

 

 

 

December 29,

 

 

December 30,

 

 

December 29,

 

 

December 30,

 

 

 

2019

 

 

2018

 

 

2019

 

 

2018

 

NET SALES

 

$

99,628

 

 

$

121,541

 

 

$

209,417

 

 

$

215,182

 

COST OF SALES

 

 

78,486

 

 

 

94,467

 

 

 

162,742

 

 

 

164,906

 

GROSS PROFIT

 

 

21,142

 

 

 

27,074

 

 

 

46,675

 

 

 

50,276

 

OPERATING EXPENSES:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Selling and marketing

 

 

4,343

 

 

 

4,257

 

 

 

8,407

 

 

 

8,547

 

General and administrative

 

 

5,477

 

 

 

7,108

 

 

 

13,262

 

 

 

13,880

 

Amortization of other intangible assets

 

 

987

 

 

 

987

 

 

 

1,974

 

 

 

1,517

 

Total operating expenses

 

 

10,807

 

 

 

12,352

 

 

 

23,643

 

 

 

23,944

 

OPERATING INCOME

 

 

10,335

 

 

 

14,722

 

 

 

23,032

 

 

 

26,332

 

OTHER EXPENSE:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense

 

 

1,237

 

 

 

2,042

 

 

 

2,581

 

 

 

2,962

 

INCOME BEFORE INCOME TAX EXPENSE

 

 

9,098

 

 

 

12,680

 

 

 

20,451

 

 

 

23,370

 

INCOME TAX EXPENSE

 

 

2,219

 

 

 

2,492

 

 

 

4,949

 

 

 

4,718

 

NET INCOME

 

$

6,879

 

 

$

10,188

 

 

$

15,502

 

 

$

18,652

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

EARNINGS PER SHARE:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.37

 

 

$

0.55

 

 

$

0.83

 

 

$

1.00

 

Diluted

 

$

0.37

 

 

$

0.54

 

 

$

0.83

 

 

$

0.99

 

WEIGHTED AVERAGE SHARES USED FOR COMPUTATION OF:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic earnings per share

 

 

18,730,688

 

 

 

18,653,111

 

 

 

18,727,267

 

 

 

18,649,575

 

Diluted earnings per share

 

 

18,770,783

 

 

 

18,772,322

 

 

 

18,770,770

 

 

 

18,770,543

 

 

Notes to Unaudited Condensed Consolidated Financial Statements form an integral part of the condensed consolidated financial statements.

 

 

4


 

 

MASTERCRAFT BOAT HOLDINGS, INC. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

(Dollars in thousands, except share and per share data)

 

 

 

December 29,

 

 

June 30,

 

 

 

 

2019

 

 

2019

 

 

ASSETS

 

 

 

 

 

 

 

 

 

CURRENT ASSETS:

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

5,448

 

 

$

5,826

 

 

Accounts receivable, net of allowances of $193 and $281, respectively

 

 

4,383

 

 

 

12,463

 

 

Income tax receivable

 

 

1,762

 

 

 

951

 

 

Inventories, net (Note 4)

 

 

29,486

 

 

 

30,660

 

 

Prepaid expenses and other current assets

 

 

4,259

 

 

 

4,464

 

 

Total current assets

 

 

45,338

 

 

 

54,364

 

 

Property, plant and equipment, net

 

 

41,562

 

 

 

33,636

 

 

Goodwill (Note 6)

 

 

74,030

 

 

 

74,030

 

 

Other intangible assets, net (Note 6)

 

 

77,824

 

 

 

79,799

 

 

Deferred income taxes

 

 

5,559

 

 

 

6,240

 

 

Deferred debt issuance costs, net

 

 

398

 

 

 

451

 

 

Operating lease assets (Note 8)

 

 

861

 

 

 

 

 

Other long-term assets

 

 

246

 

 

 

253

 

 

Total assets

 

$

245,818

 

 

$

248,773

 

 

LIABILITIES AND STOCKHOLDERS' EQUITY

 

 

 

 

 

 

 

 

 

CURRENT LIABILITIES:

 

 

 

 

 

 

 

 

 

Accounts payable

 

$

9,637

 

 

$

17,974

 

 

Income tax payable

 

 

 

 

 

426

 

 

Accrued expenses and other current liabilities (Note 5)

 

 

38,803

 

 

 

41,421

 

 

Current portion of long-term debt, net of unamortized debt issuance costs (Note 7)

 

 

8,994

 

 

 

8,725

 

 

Total current liabilities

 

 

57,434

 

 

 

68,546

 

 

Long-term debt, net of unamortized debt issuance costs (Note 7)

 

 

96,683

 

 

 

105,016

 

 

Operating lease liabilities (Note 8)

 

 

529

 

 

 

 

 

Unrecognized tax positions

 

 

3,262

 

 

 

2,895

 

 

Total liabilities

 

 

157,908

 

 

 

176,457

 

 

COMMITMENTS AND CONTINGENCIES

 

 

 

 

 

 

 

 

 

STOCKHOLDERS' EQUITY:

 

 

 

 

 

 

 

 

 

Common stock, $.01 par value per share — authorized, 100,000,000 shares; issued and outstanding, 18,872,166 shares at December 29, 2019 and 18,764,037 shares at June 30, 2019

 

 

189

 

 

 

188

 

 

Additional paid-in capital

 

 

115,673

 

 

 

115,582

 

 

Accumulated deficit

 

 

(27,952

)

 

 

(43,454

)

 

Total stockholders' equity

 

 

87,910

 

 

 

72,316

 

 

Total liabilities and stockholders' equity

 

$

245,818

 

 

$

248,773

 

 

 

Notes to Unaudited Condensed Consolidated Financial Statements form an integral part of the condensed consolidated financial statements.

 

5


 

 

MASTERCRAFT BOAT HOLDINGS, INC. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(Dollars in thousands, except share data)

 

 

 

Six Months Ended December 29, 2019

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

 

 

 

 

 

 

 

 

 

Common Stock

 

 

Paid-in

 

 

Accumulated

 

 

 

 

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Deficit

 

 

Total

 

Balance at June 30, 2019

 

 

18,764,037

 

 

$

188

 

 

$

115,582

 

 

$

(43,454

)

 

$

72,316

 

Equity-based compensation activity

 

 

108,129

 

 

 

1

 

 

 

91

 

 

 

 

 

 

92

 

Net income

 

 

 

 

 

 

 

 

 

 

 

15,502

 

 

 

15,502

 

Balance at December 29, 2019

 

 

18,872,166

 

 

$

189

 

 

$

115,673

 

 

$

(27,952

)

 

$

87,910

 

 

 

 

Three Months Ended December 29, 2019

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

 

 

 

 

 

 

 

 

 

Common Stock

 

 

Paid-in

 

 

Accumulated

 

 

 

 

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Deficit

 

 

Total

 

Balance at September 29, 2019

 

 

18,838,997

 

 

$

189

 

 

$

115,751

 

 

$

(34,831

)

 

$

81,109

 

Equity-based compensation activity

 

 

33,169

 

 

 

 

 

 

(78

)

 

 

 

 

 

(78

)

Net income

 

 

 

 

 

 

 

 

 

 

 

6,879

 

 

 

6,879

 

Balance at December 29, 2019

 

 

18,872,166

 

 

$

189

 

 

$

115,673

 

 

$

(27,952

)

 

$

87,910

 

 

 

 

Six Months Ended December 30, 2018

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

 

 

 

 

 

 

 

 

 

Common Stock

 

 

Paid-in

 

 

Accumulated

 

 

 

 

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Deficit

 

 

Total

 

Balance at June 30, 2018

 

 

18,682,338

 

 

$

187

 

 

$

114,052

 

 

$

(61,717

)

 

$

52,522

 

Adoption of accounting standards

 

 

 

 

 

 

 

 

 

 

 

(3,091

)

 

 

(3,091

)

Equity-based compensation activity

 

 

43,852

 

 

 

 

 

 

642

 

 

 

 

 

 

642

 

Net income

 

 

 

 

 

 

 

 

 

 

 

18,652

 

 

 

18,652

 

Balance at December 30, 2018

 

 

18,726,190

 

 

$

187

 

 

$

114,694

 

 

$

(46,156

)

 

$

68,725

 

 

 

 

Three Months Ended December 30, 2018

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

 

 

 

 

 

 

 

 

 

Common Stock

 

 

Paid-in

 

 

Accumulated

 

 

 

 

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Deficit

 

 

Total

 

Balance at September 30, 2018

 

 

18,721,420

 

 

$

187

 

 

$

114,331

 

 

$

(56,343

)

 

$

58,175

 

Equity-based compensation activity

 

 

4,770

 

 

 

 

 

 

363

 

 

 

(1

)

 

 

362

 

Net income

 

 

 

 

 

 

 

 

 

 

 

10,188

 

 

 

10,188

 

Balance at December 30, 2018

 

 

18,726,190

 

 

$

187

 

 

$

114,694

 

 

$

(46,156

)

 

$

68,725

 

 

Notes to Unaudited Condensed Consolidated Financial Statements form an integral part of the condensed consolidated financial statements.

6


 

 

MASTERCRAFT BOAT HOLDINGS, INC. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

 (Dollars in thousands)

 

 

 

Six Months Ended

 

 

 

December 29,

 

 

December 30,

 

 

 

2019

 

 

2018

 

CASH FLOWS FROM OPERATING ACTIVITIES:

 

 

 

 

 

 

 

 

Net income

 

$

15,502

 

 

$

18,652

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

5,053

 

 

 

3,359

 

Noncash lease expense

 

 

233

 

 

 

 

Inventory obsolescence reserve

 

 

224

 

 

 

164

 

Amortization of debt issuance costs

 

 

282

 

 

 

268

 

Share-based compensation

 

 

544

 

 

 

788

 

Change in interest rate cap fair value

 

 

49

 

 

 

184

 

Unrecognized tax benefits

 

 

367

 

 

 

312

 

Deferred income taxes

 

 

681

 

 

 

488

 

Net provision for doubtful accounts

 

 

(87

)

 

 

113

 

(Gain) loss on disposal of fixed assets

 

 

(11

)

 

 

8

 

 

 

 

 

 

 

 

 

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Accounts receivable

 

 

8,167

 

 

 

4,280

 

Inventories

 

 

950

 

 

 

2,546

 

Prepaid expenses and other current assets

 

 

156

 

 

 

(210

)

Income tax receivable and payable, net

 

 

(1,237

)

 

 

(1,762

)

Other assets

 

 

7

 

 

 

 

Accounts payable

 

 

(7,856

)

 

 

(6,512

)

Accrued expenses and other current liabilities

 

 

(2,957

)

 

 

5,183

 

Operating lease liabilities

 

 

(223

)

 

 

 

Net cash provided by operating activities

 

 

19,844

 

 

 

27,861

 

 

 

 

 

 

 

 

 

 

CASH FLOWS FROM INVESTING ACTIVITIES:

 

 

 

 

 

 

 

 

Payments for acquisitions, net of cash acquired

 

 

 

 

 

(81,729

)

Purchases of property, plant and equipment

 

 

(11,491

)

 

 

(6,022

)

Proceeds from disposal of property, plant and equipment

 

 

14

 

 

 

5

 

Net cash used in investing activities

 

 

(11,477

)

 

 

(87,746

)

 

 

 

 

 

 

 

 

 

CASH FLOWS FROM FINANCING ACTIVITIES:

 

 

 

 

 

 

 

 

Proceeds from issuance of long-term debt

 

 

 

 

 

80,000

 

Principal payments on long-term debt

 

 

(8,292

)

 

 

(8,656

)

Payments of debt issuance costs

 

 

 

 

 

(728

)

Cash paid for withholding taxes on vested stock

 

 

(453

)

 

 

(146

)

Net cash provided by (used in) financing activities

 

 

(8,745

)

 

 

70,470

 

NET CHANGE IN CASH AND CASH EQUIVALENTS

 

 

(378

)

 

 

10,585

 

 

 

 

 

 

 

 

 

 

CASH AND CASH EQUIVALENTS — BEGINNING OF PERIOD

 

 

5,826

 

 

 

7,909

 

CASH AND CASH EQUIVALENTS — END OF PERIOD

 

$

5,448

 

 

$

18,494

 

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:

 

 

 

 

 

 

 

 

Cash payments for interest

 

$

2,025

 

 

$

1,146

 

Cash payments for income taxes

 

 

5,376

 

 

 

5,679

 

SIGNIFICANT NON-CASH INVESTING AND FINANCING ACTIVITIES:

 

 

 

 

 

 

 

 

Capital expenditures in accounts payable and accrued expenses

 

 

427

 

 

 

390

 

 

Notes to Unaudited Condensed Consolidated Financial Statements form an integral part of the condensed consolidated financial statements.

 

7


 

MASTERCRAFT BOAT HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unless stated otherwise dollars in thousands, except share and per share data)

1.ORGANIZATION, BASIS OF PRESENTATION, AND SIGNIFICANT ACCOUNTING POLICIES

Organization — MasterCraft Boat Holdings, Inc. (“Holdings”) was formed on January 28, 2000, as a Delaware holding company and operates primarily through its wholly owned subsidiaries, MasterCraft Boat Company, LLC, MasterCraft Services, LLC, MasterCraft Parts, Ltd., and MasterCraft International Sales Administration, Inc. (collectively, “MasterCraft”); Nautic Star, LLC and NS Transport, LLC (collectively, “NauticStar”); and Crest Marine LLC (“Crest”). Holdings and its subsidiaries collectively are referred to herein as the “Company”.

The Company is a leading innovator, designer, manufacturer, and marketer of recreational powerboats that operates in three reportable segments: MasterCraft, NauticStar and Crest. See Note 12 for information regarding the Company’s reportable segments.

Basis of Presentation — The Company’s fiscal year begins July 1 and ends June 30, with the interim quarterly reporting periods consisting of 13 weeks. Therefore, the fiscal quarter end will not always coincide with the date of the end of a calendar month.

The unaudited condensed consolidated financial statements have been prepared on the same basis as the Company’s audited consolidated financial statements for the year ended June 30, 2019 and, in the opinion of management, reflect all adjustments considered necessary to present fairly the Company’s financial position as of December 29, 2019, its results of operations for the three and six months ended December 29, 2019 and December 30, 2018, its cash flows for the six months ended December 29, 2019 and December 30, 2018, and its statements of stockholders’ equity for the three and six months ended December 29, 2019 and December 30, 2018. All adjustments are of a normal, recurring nature. Certain information and footnote disclosures normally included in annual consolidated financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and the applicable rules and regulations of the U.S. Securities and Exchange Commission (“SEC”) for financial information have been condensed or omitted pursuant to such rules and regulations. The June 30, 2019 condensed consolidated balance sheet data was derived from the audited financial statements but does not include all disclosures required by U.S. GAAP for complete financial statements. However, management believes that the disclosures in these condensed consolidated financial statements are adequate to make the information presented not misleading. These condensed consolidated financial statements should be read in conjunction with the Company’s consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the fiscal year ended June 30, 2019, which was filed with the SEC on September 13, 2019.

Due to the seasonality of the Company’s business, the interim results are not necessarily indicative of the results that may be expected for the remainder of the fiscal year.

With the exception of Accounting Standards Codification (“ASC”) 842 discussed below, there were no significant changes in or changes in the application of the Company’s significant or critical accounting policies or estimation procedures for the six months ended December 29, 2019 as compared with the significant accounting policies described in the Company’s audited consolidated financial statements for the fiscal year ended June 30, 2019.

Recently Adopted Accounting Standards

Leases

In February 2016, the Financial Accounting Standards Board (“FASB”) issued ASU 2016-02, Leases, (“ASC 842”) which requires lessees to recognize assets and liabilities on the balance sheet for all leases with terms greater than twelve months. On July 1, 2019, the Company adopted ASC 842 and all related amendments. The Company elected the optional transition method provided by the FASB in ASU 2018-11, Leases (Topic 842): Targeted Improvements, and as a result, has not restated its condensed consolidated financial statements for prior periods presented. The Company has elected the package of practical expedients upon transition which allowed the Company to retain the lease classification for any leases that existed prior to adoption, to not reassess whether any contracts entered into prior to adoption are leases, and to not reassess initial direct costs for any leases that existed prior to adoption.

8


 

 

ASC 842 did not have a material impact on the Company's condensed consolidated statements of operations. The cumulative effect of the changes made to the Company's consolidated balance sheet as of July 1, 2019 for the adoption of ASC 842 was as follows:  

 

 

 

Balance as of

 

 

Adjustments

 

 

Balance as of

 

 

 

June 30, 2019

 

 

Due to ASC 842

 

 

July 1, 2019

 

Assets

 

 

 

 

 

 

 

 

 

 

 

 

Operating lease assets

 

$

-

 

 

$

3,931

 

 

$

3,931

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

 

 

 

 

 

 

Accrued expenses and other current liabilities

 

 

41,421

 

 

 

547

 

 

 

41,968

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Long-term liabilities

 

 

 

 

 

 

 

 

 

 

 

 

Operating lease liabilities

 

 

-

 

 

 

3,384

 

 

 

3,384

 

 

The Company determines if an arrangement is a lease at lease inception. Operating lease right-of-use (“ROU”) assets and operating lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at the commencement date. As the Company's lease contracts generally do not include an implicit rate, the Company uses its incremental borrowing rate based on information available at commencement date in determining the present value of future payments. The incremental borrowing rate is estimated to approximate the interest rate on a collateralized basis with similar terms and payments, and in economic environments where the leased asset is located. The operating lease ROU asset also includes any initial direct costs and lease payments made prior to lease commencement, and excludes lease incentives incurred.

 

The Company's lease terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise that option. Operating lease expense for minimum lease payments is recognized on a straight-line basis over the lease term. The Company may enter into lease agreements that contain both lease and non-lease components, which it has elected to account for as a single lease component for all asset classes. See Note 8 for information regarding the Company’s leases.

 

Share-Based Compensation

 

In June 2018, the Financial Accounting Standards Board issued ASU 2018-07, Compensation—Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting. This guidance provides clarity and reduces complexity when applying the guidance in Topic 718, Compensation—Stock Compensation to the term or condition of share-based payments to nonemployees. ASU 2018-07 is effective for annual reporting periods, and interim periods therein, beginning after December 15, 2018. The Company adopted this guidance for its fiscal year beginning July 1, 2019. The adoption of this standard did not have a material impact on its financial statements.

 

Recently Issued Accounting Standards

 

Fair Value Measurements

 

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement. This guidance modifies the disclosure requirements on fair value measurements in Topic 820 by removing disclosures regarding transfers between Level 1 and Level 2 of the fair value hierarchy, by modifying the measurement uncertainty disclosure, and by requiring additional disclosures for Level 3 fair value measurements, among others. The amendments are effective for all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. The Company does not expect the adoption of this new guidance to have a material impact on its financial statements.

9


 

 

2.

REVENUE RECOGNITION

The following tables present the Company’s revenue from contracts with customers by major product category and reportable segment.

 

 

 

Three Months Ended December 29, 2019

 

 

 

MasterCraft

 

 

NauticStar

 

 

Crest

 

 

Total

 

Major Product Categories:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Boats and trailers

 

$

66,332

 

 

$

15,485

 

 

$

16,097

 

 

$

97,914

 

Parts

 

 

1,276

 

 

 

87

 

 

 

121

 

 

 

1,484

 

Other revenue

 

 

149

 

 

 

4

 

 

 

77

 

 

 

230

 

Total

 

$

67,757

 

 

$

15,576

 

 

$

16,295

 

 

$

99,628

 

 

 

 

Six Months Ended December 29, 2019

 

 

 

MasterCraft

 

 

NauticStar

 

 

Crest(a)

 

 

Total

 

Major Product Categories:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Boats and trailers

 

$

135,619

 

 

$

33,319

 

 

$

34,721

 

 

$

203,659

 

Parts

 

 

4,707

 

 

 

246

 

 

 

301

 

 

 

5,254

 

Other revenue

 

 

344

 

 

 

6

 

 

 

154

 

 

 

504

 

Total

 

$

140,670

 

 

$

33,571

 

 

$

35,176

 

 

$

209,417

 

 

 

 

Three Months Ended December 30, 2018

 

 

 

MasterCraft

 

 

NauticStar

 

 

Crest

 

 

Total

 

Major Product Categories:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Boats and trailers

 

$

74,976

 

 

$

19,182

 

 

$

25,754

 

 

$

119,912

 

Parts

 

 

1,101

 

 

 

14

 

 

 

86

 

 

 

1,201

 

Other revenue

 

 

320

 

 

 

 

 

 

108

 

 

 

428

 

Total

 

$

76,397

 

 

$

19,196

 

 

$

25,948

 

 

$

121,541

 

 

 

 

Six Months Ended December 30, 2018

 

 

 

MasterCraft

 

 

NauticStar

 

 

Crest(a)

 

 

Total

 

Major Product Categories:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Boats and trailers

 

$

147,352

 

 

$

36,305

 

 

$

25,754

 

 

$

209,411

 

Parts

 

 

4,682

 

 

 

294

 

 

 

86

 

 

 

5,062

 

Other revenue

 

 

597

 

 

 

4

 

 

 

108

 

 

 

709

 

Total

 

$

152,631

 

 

$

36,603

 

 

$

25,948

 

 

$

215,182

 

 

(a)

Crest was acquired on October 1, 2018.

 

Contract Liabilities

 

As of June 30, 2019, the Company had $0.8 million of contract liabilities associated with customer deposits. During the six months ended December 29, 2019, all of this amount was recognized as revenue. As of December 29, 2019, total contract liabilities associated with customer deposits were $0.7 million, were reported in Accrued expenses and other current liabilities on the condensed consolidated balance sheet, and are expected to be recognized as revenue during the remainder of the year ended June 30, 2020.   

 

10


 

 

3.

RELATED PARTY TRANSACTIONS         

Crest Facility Lease

 

In connection with the operations of Crest, the Company made rental payments to Crest Marine Real Estate LLC (“Real Estate”) for a manufacturing facility, storage and office building (the “Crest Facility”).  One of the minority owners of Real Estate is a member of the Crest management team. The lease was to expire on September 30, 2028, and was subject to four consecutive, five-year renewal periods. The lease terms included an option for the Company to purchase the Crest Facility for an amount equal to its fair market value, as determined by appraisals and negotiation between the Company and Real Estate (the “Purchase Option”). The annual rent under the lease was $0.3 million for the first five years of the lease term, and was to increase to $0.4 million for the remaining five years. Additionally, at the beginning of each of the optional renewal terms the rent was to be adjusted based on the change in the Consumer Price Index. In accordance with the Purchase Option, on October 24, 2019 the Company purchased the Crest Facility for $4.1 million. See Note 8 for additional information regarding the purchase.

   

Crest Supplier Relationship

 

Crest purchases fiberglass component parts from a supplier whose minority owner is the same member of the Crest management team that has a minority ownership interest in Real Estate. During the three and six months ended December 29, 2019, the Company purchased $0.8 million  and $1.6 million, respectively, of products from the supplier. As of December 29, 2019 and June 30, 2019, the outstanding balance due to the supplier was $0.1 million.

 

4.

INVENTORIES

Inventories consisted of the following:

 

 

 

December 29,

 

 

June 30,

 

 

 

2019

 

 

2019

 

Raw materials and supplies

 

$

19,511

 

 

$

20,034

 

Work in process

 

 

4,918

 

 

 

4,571

 

Finished goods

 

 

6,433

 

 

 

7,207

 

Obsolescence reserve

 

 

(1,376

)

 

 

(1,152

)

Total inventories

 

$

29,486

 

 

$

30,660

 

 

5.

ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

Accrued expenses and other current liabilities consisted of the following:

 

 

 

December 29,

 

 

June 30,

 

 

 

2019

 

 

2019

 

Warranty

 

$

18,495

 

 

$

17,205

 

Dealer incentives

 

 

8,643

 

 

 

12,623

 

Floor plan interest

 

 

3,506

 

 

 

2,060

 

Compensation and related accruals

 

 

1,854

 

 

 

3,494

 

Inventory repurchase contingent obligation

 

 

1,503

 

 

 

1,936

 

Self-insurance

 

 

861

 

 

 

606

 

Debt interest

 

 

631

 

 

 

405

 

Current operating lease liabilities

 

 

332

 

 

 

 

Other

 

 

2,978

 

 

 

3,092

 

Total accrued expenses and other current liabilities

 

$

38,803

 

 

$

41,421

 

 

11


 

 

The following activity related to warranty liabilities was recorded in Accrued expenses and other current liabilities during the six months ended December 29, 2019 and December 30, 2018:

 

 

 

Six Months Ended

 

 

 

December 29,

 

 

December 30,

 

 

 

2019

 

 

2018

 

Balance at the beginning of the period

 

$

17,205

 

 

$

13,077

 

Provisions

 

 

3,858

 

 

 

3,621

 

Additions for Crest acquisition

 

 

 

 

 

681

 

Payments made

 

 

(4,332

)

 

 

(3,657

)

Aggregate changes for preexisting warranties

 

 

1,764

 

 

 

2,242

 

Balance at the end of the period

 

$

18,495

 

 

$

15,964

 

      

6.GOODWILL AND OTHER INTANGIBLE ASSETS

The carrying amounts of goodwill as of December 29, 2019 and June 30, 2019, attributable to each of the Company’s reportable segments, were as follows:

 

 

 

Gross Amount

 

 

Accumulated Impairment Losses

 

 

Total

 

MasterCraft

 

$

29,593

 

 

$

-

 

 

$

29,593

 

NauticStar

 

 

36,199

 

 

 

(28,000

)

 

 

8,199

 

Crest

 

 

36,238

 

 

 

-

 

 

 

36,238

 

Total

 

$

102,030

 

 

$

(28,000

)

 

$

74,030

 

 

The following table presents the carrying amount of Other intangible assets, net as of December 29, 2019 and June 30, 2019.

 

 

 

December 29,

 

 

June 30,

 

 

 

2019

 

 

2019

 

 

 

Gross Amount

 

 

Accumulated Amortization / Impairment

 

 

Other intangible assets, net

 

 

Gross Amount

 

 

Accumulated Amortization / Impairment

 

 

Other intangible assets, net

 

Amortized intangible assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dealer networks

 

$

39,500

 

 

$

(7,860

)

 

$

31,640

 

 

$

39,500

 

 

$

(5,909

)

 

$

33,591

 

Software

 

 

245

 

 

 

(61

)

 

 

184

 

 

 

245

 

 

 

(37

)

 

 

208

 

 

 

 

39,745

 

 

 

(7,921

)

 

 

31,824

 

 

 

39,745

 

 

 

(5,946

)

 

 

33,799

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unamortized intangible assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Trade names

 

 

49,000

 

 

 

(3,000

)

 

 

46,000

 

 

 

49,000

 

 

 

(3,000

)

 

 

46,000

 

Total other intangible assets

 

$

88,745

 

 

$

(10,921

)

 

$

77,824

 

 

$

88,745

 

 

$

(8,946

)

 

$

79,799

 

 

Amortization expense related to Other intangible assets, net for the three and six months ended December 29, 2019 was $1.0 million and $2.0 million, respectively. Amortization expense related to Other intangible assets, net for the three and six months ended December 30, 2018 was $1.0 million and $1.5 million, respectively. Estimated amortization expense for the fiscal year ended June 30, 2020 is $4.0 million.

 

During the fiscal fourth quarter of the year ended June 30, 2019, the Company recorded a $28.0 million impairment of goodwill and a $3.0 million impairment of trade name in our NauticStar segment. If actual performance or assumptions underlying the fair value of recorded goodwill for any reportable segment falls short of expected results, additional material impairment charges may be required.

 

12


 

 

During the three and six months ended December 29, 2019, the Company assessed all reporting units for triggering events that could indicate the need to perform an impairment test and concluded there were no such triggering events during the periods.

 

7.LONG-TERM DEBT

Long-term debt is as follows:

 

 

 

December 29,

 

 

June 30,

 

 

 

2019

 

 

2019

 

Senior secured term loans

 

$

107,058

 

 

$

115,349

 

Debt issuance costs on term loans

 

 

(1,381

)

 

 

(1,608

)

Total debt

 

 

105,677

 

 

 

113,741

 

Less current portion of long-term debt

 

 

9,420

 

 

 

9,167

 

Less current portion of debt issuance costs on term loans

 

 

(426

)

 

 

(442

)

Long-term debt, net of current portion

 

$

96,683

 

 

$

105,016

 

 

On October 1, 2018, the Company entered into the Fourth Amended and Restated Credit and Guaranty Agreement with a syndicate of certain financial institutions (the “Fourth Amended Credit Agreement”). The Fourth Amended Credit Agreement replaced the Company’s Third Amended and Restated Credit Agreement, dated October 2, 2017. The Fourth Amended Credit Agreement provides the Company with a $190.0 million senior secured credit facility, consisting of a $75.0 million term loan, and an $80.0 million term loan (together, the “Term Loans”), and a $35.0 million revolving credit facility (the “Revolving Credit Facility”).

The Fourth Amended Credit Agreement bears interest, at the Company’s option, at either the prime rate plus an applicable margin ranging from 0.5% to 1.5% or at an adjusted LIBOR rate plus an applicable margin ranging from 1.5% to 2.5%, in each case based on the Company’s senior leverage ratio. Based on the Company’s senior leverage ratio as of December 29, 2019, the applicable margin for loans accruing interest at the prime rate is 0.75% and the applicable margin for loans accruing interest at LIBOR is 1.75%.

 

As of December 29, 2019, the Company had no borrowings outstanding on its $35.0 million Revolving Credit Facility. The Company’s unamortized debt issuance costs related to the Revolving Credit Facility were $0.4 million and $0.5 million as of December 29, 2019 and June 30, 2019, respectively. As of December 29, 2019, the Company was in compliance with its financial covenants under the Fourth Amended Credit Agreement.    

 

8.LEASES

 

The Company has lease agreements for certain personal and real property. Leases with an initial lease term of 12 months or less are not recorded on the balance sheet. Our lease agreements do not include any significant renewal options. Our lease agreements do not contain any material residual value guarantees or material restrictive covenants.

 

Upon adoption of ASC 842 on July 1, 2019, the Company’s most significant lease was for the Crest Facility, which was classified as an operating lease.  This lease included the Purchase Option for the Company to acquire the premises. During the three months ended September 29, 2019, the decision was made to exercise the Purchase Option which resulted in $2.8 million of operating lease assets and liabilities being reclassified to finance lease assets and liabilities on the September 29, 2019 condensed consolidated balance sheet. In addition, the decision to exercise the Purchase Option resulted in the remeasurement of the related lease balances which added $1.3 million of additional finance lease assets and finance lease liabilities to the September 29, 2019 condensed consolidated balance sheet.  

 

13


 

 

In accordance with the Purchase Option, on October 24, 2019 the Company completed the purchase of the Crest Facility for $4.1 million. Upon completion of this purchase, the Company recognized approximately $4.1 million in Property, plant and equipment, net and derecognized approximately $4.1 million of both Finance lease assets and Accrued expenses and other current liabilities on the condensed consolidated balance sheet.

 

The purchase price of the Crest Facility was determined by appraisal and negotiation between the Company and Real Estate. The Company funded the purchase by utilizing cash from operations.

 

A summary of the Company's lease assets and lease liabilities as of December 29, 2019 is as follows:

 

 

 

 

 

December 29,

 

 

 

Classification

 

2019

 

Lease Assets

 

 

 

 

 

 

Operating lease assets

 

Operating lease assets

 

$

861

 

 

 

 

 

 

 

 

Lease Liabilities

 

 

 

 

 

 

Current operating lease liabilities

 

Accrued expenses and other current liabilities

 

 

332

 

Non-current operating lease liabilities

 

Operating lease liabilities

 

 

529

 

Total lease liabilities

 

 

 

$

861

 

 

A summary of the Company's total lease cost for the three and six months ended December 29, 2019 is as follows:

 

 

 

Classification

 

Three Months Ended

 

 

Six Months Ended

 

Operating lease cost

 

Cost of sales

 

$

95

 

 

$

289

 

 

 

General and administrative

 

 

10

 

 

 

16

 

Total lease cost(a)

 

 

 

$

105

 

 

$

305

 

 

(a)

Includes total variable lease cost and total short-term lease cost, both of which were immaterial.

 

The Company's maturity analysis of its operating lease liabilities as of December 29, 2019 is as follows:

 

Remainder of 2020

 

 

 

$

183

 

2021

 

 

 

 

359

 

2022

 

 

 

 

298

 

2023

 

 

 

 

72

 

2024

 

 

 

 

1

 

Total lease payments

 

 

 

 

913

 

Less: Interest

 

 

 

 

(52

)

Present value of lease payments

 

 

 

$

861

 

 

The total weighted-average discount rate and remaining lease term for the Company's operating leases were 4.73% and 2.60 years, respectively, as of December 29, 2019. For the six months ended December 29, 2019, total operating cash flows related to operating leases were $0.3 million.

 

14


 

 

Future minimum rental payments under all non-cancelable operating leases with remaining lease terms in excess of one year at June 30, 2019, were as follows:

 

2020

 

 

 

$

703

 

2021

 

 

 

 

690

 

2022

 

 

 

 

628

 

2023

 

 

 

 

402

 

2024

 

 

 

 

402

 

Thereafter

 

 

 

 

1,806

 

Total

 

 

 

$

4,631

 

 

9.

INCOME TAXES

The Company’s consolidated interim effective tax rate is based on a current estimate of the annual effective income tax rate adjusted to reflect the impact of discrete items. The differences between the Company’s effective tax rates and the statutory federal tax rate of 21.0% primarily relate to the inclusion of the state tax rate in the overall effective rate offset by a permanent benefit associated with the foreign derived intangible income deduction. During the three months ended December 29, 2019 and December 30, 2018, the Company’s effective tax rates were 24.4% and 19.7%, respectively.  During the six months ended December 29, 2019 and December 30, 2018, the Company’s effective tax rates were 24.2% and 20.2%, respectively.  The Company’s effective tax rates for the three and six months ended December 29, 2019 are higher compared to the effective tax rates for the three and six months ended December 30, 2018, primarily due to favorable discrete adjustments which reduced the effective tax rates for the three and six months ended December 30, 2018.

10.

EARNINGS PER SHARE

The following table sets forth the computation of the Company’s earnings per share:

 

 

 

Three Months Ended

 

 

Six Months Ended

 

 

 

December 29,

 

 

December 30,

 

 

December 29,

 

 

December 30,

 

 

 

2019

 

 

2018

 

 

2019

 

 

2018

 

Net income

 

$

6,879

 

 

$

10,188

 

 

$

15,502

 

 

$

18,652

 

Weighted average shares — basic

 

 

18,730,688

 

 

 

18,653,111

 

 

 

18,727,267

 

 

 

18,649,575

 

Dilutive effect of assumed exercises of stock options

 

 

22,629

 

 

 

50,261

 

 

 

25,052

 

 

 

51,307

 

Dilutive effect of assumed restricted share awards/units

 

 

17,466

 

 

 

68,950

 

 

 

18,451

 

 

 

69,661

 

Weighted average outstanding shares — diluted

 

 

18,770,783

 

 

 

18,772,322

 

 

 

18,770,770

 

 

 

18,770,543

 

Basic earnings per share

 

$

0.37

 

 

$

0.55

 

 

$

0.83

 

 

$

1.00

 

Diluted earnings per share

 

$

0.37

 

 

$

0.54

 

 

$

0.83

 

 

$

0.99

 

 

For the three and six months ended December 29, 2019 and December 30, 2018, the weighted average shares that were anti-dilutive, and therefore excluded from the computation of diluted earnings per share, included:

 

 

 

Three Months Ended

 

 

Six Months Ended

 

 

 

December 29,

 

 

December 30,

 

 

December 29,

 

 

December 30,

 

 

 

2019

 

 

2018

 

 

2019

 

 

2018

 

Restricted stock awards

 

 

69,199

 

 

 

2,925

 

 

 

47,791

 

 

 

775

 

Performance stock units

 

 

48,709

 

 

 

1,559

 

 

 

56,310

 

 

 

775

 

 

15


 

 

11.

SHARE-BASED COMPENSATION

 

The following table presents the components of share-based compensation expense by award type.

 

 

 

Three Months Ended

 

 

Six Months Ended

 

 

 

December 29,

 

 

December 30,

 

 

December 29,

 

 

December 30,

 

 

 

2019

 

 

2018

 

 

2019

 

 

2018

 

Restricted stock awards

 

$

268

 

 

$

260

 

 

$

520

 

 

$

462

 

Performance stock units

 

 

(236

)

 

 

97

 

 

 

15

 

 

 

225

 

Stock options

 

 

-

 

 

 

47

 

 

 

9

 

 

 

101

 

Share-based compensation expense

 

$

32

 

 

$

404

 

 

$

544

 

 

$

788

 

Forfeiture of Equity Awards

In conjunction with the resignation of an executive officer in October 2019, aproximately $0.5 million of share-based compensation expense was reversed during the three months ended December 29, 2019 for nonvested Restricted Stock Awards (“RSAs”) and Performance Stock Units (“PSUs”) that were forfeited.

Restricted Stock Awards

During the six months ended December 29, 2019, the Company granted 138,457 RSAs to the Company’s non-executive directors, officers and certain other key employees. Generally, the shares of restricted stock granted during the six months ended December 29, 2019, vest pro-rata over three years for officers and certain other key employees and over one year for non-executive directors. The Company determined the fair value of the shares awarded by using the close price of our common stock as of the date of grant. The weighted average grant date fair value of RSAs granted in the six months ended December 29, 2019, was $17.41 per share.

The following table summarizes the status of nonvested RSAs as of December 29, 2019, and changes during the six months then ended.

 

 

 

 

 

 

 

Average

 

 

 

Nonvested

 

 

Grant-Date

 

 

 

Restricted

 

 

Fair Value

 

 

 

Shares

 

 

(per share)

 

Nonvested at June 30, 2019

 

 

53,804

 

 

$

22.94

 

Granted

 

 

138,457

 

 

 

17.41

 

Vested

 

 

(24,694

)

 

 

20.84

 

Forfeited

 

 

(34,797

)

 

 

20.24

 

Nonvested at December 29, 2019

 

 

132,770

 

 

 

18.28

 

As of December 29, 2019, there was $2.0 million of total unrecognized compensation expense related to nonvested RSAs.  The Company expects this expense to be recognized over a weighted average period of 1.9 years.

Performance Stock Units

PSUs are a form of long-term incentive compensation awarded to executive officers and certain other key employees designed to directly align the interests of employees to the interests of the Company’s stockholders, and to create long-term stockholder value. The awards will be earned based on the Company’s achievement of certain performance criteria over a three-year performance period. The performance period for the awards commences on July 1 of the fiscal year in which they were granted and continue for a three-year period, ending on June 30 of the applicable year. The probability of achieving the performance criteria is assessed quarterly. Following the determination of the Company’s achievement with respect to the performance criteria, the amount of shares awarded is subject to further adjustment based on the application of a total shareholder return (“TSR”) modifier. The grant date fair value is determined

16


 

 

based on both the assessment of the probability of the Company’s achieving the performance criteria and an estimate of the expected TSR modifier. The TSR modifier estimate is determined using a Monte Carlo Simulation model, which considers the likelihood of numerous possible outcomes of long-term market performance. Compensation expense related to nonvested PSUs is recognized ratably over the performance period.

The following table summarizes the status of nonvested PSUs as of December 29, 2019, and changes during the six months then ended.

 

 

 

 

 

 

 

Average

 

 

 

Nonvested

 

 

Grant-Date

 

 

 

Performance

 

 

Fair Value

 

 

 

Stock Units

 

 

(per share)

 

Nonvested at June 30, 2019

 

 

50,621

 

 

$

23.34

 

Granted

 

 

72,048

 

 

 

18.13

 

Vested

 

 

-

 

 

 

-

 

Forfeited

 

 

(46,882

)

 

 

20.82

 

Nonvested at December 29, 2019

 

 

75,787

 

 

 

19.95

 

As of December 29, 2019, there was $1.1 million of total unrecognized compensation expense related to nonvested PSUs.  The Company expects this expense to be recognized over a weighted average period of 2.2 years.                                

 

12.SEGMENT INFORMATION

The Company designs, manufactures, and markets recreational performance sport boats, luxury day boats, and outboard boats under three operating and reportable segments: MasterCraft, NauticStar, and Crest. The Company’s segments are defined by the Company’s operational and reporting structures.

MasterCraft Segment

The MasterCraft segment produces boats under two product brands, MasterCraft and Aviara, at its Vonore, Tennessee facility.  MasterCraft boats are premium recreational performance sport boats primarily used for water skiing, wakeboarding, wake surfing, and general recreational boating. Aviara boats are luxury day boats primarily used for general recreational boating. Production of Aviara boats began during the year ended June 30, 2019 and the Company began selling these boats in July 2019.

NauticStar Segment

The NauticStar segment produces boats at its Amory, Mississippi facility. NauticStar’s boats are primarily used for saltwater fishing and general recreational boating.

Crest Segment

The Crest segment produces pontoon boats at its Owosso, Michigan facility. Crest’s boats are primarily used for general recreational boating.    

17


 

 

The following tables present financial information for the Company’s reportable segments for the three and six months ended December 29, 2019 and December 30, 2018 and total assets at December 29, 2019 and June 30, 2019.

 

 

 

Three Months Ended December 29, 2019

 

 

 

MasterCraft

 

 

NauticStar

 

 

Crest

 

 

Consolidated

 

Net sales

 

$

67,757

 

 

$

15,576

 

 

$

16,295

 

 

$

99,628

 

Operating income (loss)

 

 

10,600

 

 

 

(673

)

 

 

408

 

 

 

10,335

 

Depreciation and amortization

 

 

1,158

 

 

 

924

 

 

 

601

 

 

 

2,683

 

Purchases of property, plant and equipment

 

 

1,631

 

 

 

1,095

 

 

 

4,447

 

 

 

7,173

 

 

 

 

Six Months Ended December 29, 2019

 

 

 

MasterCraft

 

 

NauticStar

 

 

Crest(a)

 

 

Consolidated

 

Net sales

 

$

140,670

 

 

$

33,571

 

 

$

35,176

 

 

$

209,417

 

Operating income (loss)

 

 

22,807

 

 

 

(646

)

 

 

871

 

 

 

23,032

 

Depreciation and amortization

 

 

2,177

 

 

 

1,725

 

 

 

1,151

 

 

 

5,053

 

Purchases of property, plant and equipment

 

 

4,365

 

 

 

1,914

 

 

 

5,212

 

 

 

11,491

 

 

 

 

Three Months Ended December 30, 2018

 

 

 

MasterCraft

 

 

NauticStar

 

 

Crest

 

 

Consolidated

 

Net sales

 

$

76,397

 

 

$

19,196

 

 

 

25,948

 

 

$

121,541

 

Operating income

 

 

11,415

 

 

 

1,072

 

 

 

2,235

 

 

 

14,722

 

Depreciation and amortization

 

 

732

 

 

 

654

 

 

 

537

 

 

 

1,923

 

Purchases of property, plant and equipment

 

 

1,737

 

 

 

823

 

 

 

37

 

 

 

2,597

 

 

 

 

Six Months Ended December 30, 2018

 

 

 

MasterCraft

 

 

NauticStar

 

 

Crest(a)

 

 

Consolidated

 

Net sales

 

$

152,631

 

 

$

36,603

 

 

$

25,948

 

 

$

215,182

 

Operating income

 

 

22,944

 

 

 

1,153

 

 

 

2,235

 

 

 

26,332

 

Depreciation and amortization

 

 

1,537

 

 

 

1,285

 

 

 

537

 

 

 

3,359

 

Purchases of property, plant and equipment

 

 

4,472

 

 

 

1,513

 

 

 

37

 

 

 

6,022

 

 

(a)

Crest was acquired on October 1, 2018.

 

 

 

December 29,

2019

 

 

June 30,

2019

 

Assets:

 

 

 

 

 

 

 

 

MasterCraft

 

$

272,620

 

 

$

273,046

 

NauticStar

 

 

52,175

 

 

 

52,761

 

Crest

 

 

84,036

 

 

 

85,979

 

Eliminations

 

 

(163,013

)

 

 

(163,013

)

Total assets

 

$

245,818

 

 

$

248,773

 

 

13.ACQUISITION

 

On October 1, 2018, we acquired Crest, a manufacturer of pontoon boats. For accounting purposes, Crest meets the definition of a business and has been accounted for as a business combination. We finalized the purchase price allocation and recorded measurement period adjustments to the initial allocation as disclosed in the notes to our consolidated financial statements included in our Annual Report on Form 10-K for the fiscal year ended June 30, 2019, filed with the SEC on September 13, 2019. Beginning October 1, 2018, our consolidated results of operations include the results of Crest.

 

18


 

 

The unaudited pro forma financial results shown in the table below for the three and six months ended December 30, 2018, combine the consolidated results of the Company and Crest giving effect to the Crest acquisition as if it had been completed on July 1, 2017. The unaudited pro forma financial results do not give effect to any of our other acquisition activity that occurred after July 1, 2017, and do not include any anticipated synergies or other assumed benefits of the Crest acquisition. This unaudited pro forma financial information is presented for informational purposes only and is not indicative of future operations or results had the Crest acquisition been completed as of July 1, 2017. The unaudited pro forma financial results include certain adjustments for acquisition-related costs, debt service costs and additional amortization expense based upon definite-life amortizable assets acquired. The provision for income taxes has also been adjusted for all periods, based upon the foregoing adjustments to historical results.

 

 

 

Three Months Ended

 

 

Six Months Ended

 

 

 

December 30,

 

 

December 30,

 

 

 

2018

 

 

2018

 

Net sales

 

$

121,541

 

 

$

236,175

 

Net income

 

$

10,466

 

 

$

20,179

 

Basic earnings per share

 

$

0.56

 

 

$

1.08

 

Diluted earnings per share

 

$

0.56

 

 

$

1.08

 

 

 

 

19


 

ITEM 2.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

 

The following discussion and analysis should be read together with the unaudited condensed consolidated financial statements and notes thereto included elsewhere in this Quarterly Report on Form 10-Q. In addition, the statements in this discussion and analysis regarding our expectations concerning the performance of our business, anticipated financial results, liquidity and the other non-historical statements are forward-looking statements. These forward-looking statements are subject to numerous risks and uncertainties, including, but not limited to, the risks and uncertainties described in “Cautionary Note Regarding Forward-Looking Statements” above and in “Risk Factors” set forth in our Annual Report on Form 10-K for the fiscal year ended June 30, 2019. Our actual results may differ materially from those contained in or implied by any forward-looking statements.

 

Certain statements in the following discussions are based on non-GAAP financial measures. A “non-GAAP financial measure” is a numerical measure of a registrant’s historical or future financial performance, financial position or cash flows that excludes amounts, or is subject to adjustments that have the effect of excluding amounts, that are included in the most directly comparable measure calculated and presented in accordance with U.S GAAP in the statements of operations, balance sheets or statements of cash flows of the issuer; or includes amounts, or is subject to adjustments that have the effect of including amounts, that are excluded from the most directly comparable measure so calculated and presented. Non-GAAP financial measures do not include operating and statistical measures. The Company includes non-GAAP financial measures in Management’s Discussion and Analysis, as the Company’s management believes that these measures and the information they provide are useful to users of the financial statements, including investors, because they permit users of the financial statements to view the Company’s performance using the same tools that management utilizes and to better evaluate the Company’s ongoing business performance. In order to better align the Company’s reported results with the internal metrics used by the Company's management to evaluate business performance as well as to provide better comparisons to prior periods and peer data, non-GAAP measures exclude the impact of purchase accounting amortization related to business acquisitions.

 

Overview

Net sales were $99.6 million for the second quarter of 2020, which represented a decrease of 18.0 percent as compared to the second quarter of 2019, due to lower wholesale unit volumes primarily as a result of production cuts in response to a challenging retail market environment, which was driven by the weather-impacted summer selling season and continuing softness in the saltwater category. Partially offsetting this decline was Aviara sales included in our MasterCraft segment, higher average wholesale prices for the MasterCraft brand and NauticStar, and lower sales discounts for our Canadian dealers related to import tariff support.

Net sales were $209.4 million for the six months ended December 29, 2019, which represented a decrease of 2.7 percent as compared to the six months ended December 30, 2018, primarily for the same reasons described above for the quarterly period. Partially offsetting this decline was a net $9.2 million increase for Crest, acquired in the second quarter of 2019. The $18.9 million of net sales for Crest in the first quarter of 2020 was partially offset by a $9.7 million period-over-period decrease for Crest in the second quarter of 2020.

Gross profit for the second quarter of 2020 decreased 21.9 percent, primarily due to lower unit sales volume for each reportable segment partially offset by price increases for each reportable segment as well as lower sales discounts for our Canadian dealers related to import tariff support and lower warranty costs for the MasterCraft segment. Gross margin percentage decreased by 1.1 percentage points to 21.2 percent for the second quarter of 2020 from 22.3 percent for the second quarter of 2019 primarily due to lower overhead absorption resulting from lower unit sales volume. This decline was partially offset by margin improvement for our MasterCraft brand, driven by price increases and lower discounts and warranty costs relative to gross sales.

Gross profit for the six months ended December 29, 2019 decreased 7.2 percent, primarily for the same reasons described above for the quarterly period. This decline was partially offset by the same factors described above for the quarterly period and the inclusion of Crest’s first quarter 2020 results. Gross margin percentage decreased by 1.1 percentage points to 22.3 percent for the six months ended December 29, 2019 from 23.4 percent for the six months ended December 30, 2018, primarily due to the same reasons described above

20


 

for the quarterly period and the inclusion of Crest’s first quarter 2020 results, since Crest generates a lower gross margin percentage than our MasterCraft segment. This decline was partially offset by the same factors described above for the quarterly period.

 

Net income was $6.9 million for the second quarter of 2020, representing a decrease of 32.5 percent as compared to the second quarter of 2019. Diluted net income per share was $0.37, or a decrease of 31.5 percent compared to the prior year period.

 

Net income was $15.5 million for the six months ended December 29, 2019, representing a decrease of 16.9 percent as compared to the six months ended December 30, 2018. Diluted net income per share was $0.83, or a decrease of 16.2 percent compared to the prior year period.

 

Aviara Brand Launch

 

We began selling boats under the Aviara brand during the first quarter of 2020. Aviara boats are designed, engineered, and manufactured to meet the exacting specifications of consumers seeking the ultimate luxury recreational day boat experience. The brand’s first model, the AV32, began selling during the first quarter of 2020 and the AV36 began selling during the second quarter of 2020. We expect to introduce one additional model, the AV40, in late fiscal 2020. Aviara is built in our MasterCraft facility and is part of the MasterCraft reportable segment.

 

 

 

21


 

Results of Operations

 

The table below presents our consolidated results of operations for the three months ended:

 

 

 

Three Months Ended

 

 

 

 

 

 

December 29,

 

 

December 30,

 

 

2020 vs. 2019

 

 

 

2019

 

 

2018

 

 

Change

% Change

 

 

 

(Dollars in thousands)

 

 

 

 

 

 

 

 

 

Consolidated statements of operations:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NET SALES

 

$

99,628

 

 

$

121,541

 

 

$

(21,913

)

 

 

(18.0

%)

COST OF SALES

 

 

78,486

 

 

 

94,467

 

 

 

(15,981

)

 

 

(16.9

%)

GROSS PROFIT

 

 

21,142

 

 

 

27,074

 

 

 

(5,932

)

 

 

(21.9

%)

OPERATING EXPENSES:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Selling and marketing

 

 

4,343

 

 

 

4,257

 

 

 

86

 

 

 

2.0

%

General and administrative

 

 

5,477

 

 

 

7,108

 

 

 

(1,631

)

 

 

(22.9

%)

Amortization of other intangible assets

 

 

987

 

 

 

987

 

 

 

-

 

 

 

0.0

%

Total operating expenses

 

 

10,807

 

 

 

12,352

 

 

 

(1,545

)

 

 

(12.5

%)

OPERATING INCOME

 

 

10,335

 

 

 

14,722

 

 

 

(4,387

)

 

 

(29.8

%)

OTHER EXPENSE:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense

 

 

1,237

 

 

 

2,042

 

 

 

(805

)

 

 

(39.4

%)

INCOME BEFORE INCOME TAX EXPENSE

 

 

9,098

 

 

 

12,680

 

 

 

(3,582

)

 

 

(28.2

%)

INCOME TAX EXPENSE

 

 

2,219

 

 

 

2,492

 

 

 

(273

)

 

 

(11.0

%)

NET INCOME

 

$

6,879

 

 

$

10,188

 

 

$

(3,309

)

 

 

(32.5

%)

Additional financial and other data:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unit sales volume:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

MasterCraft

 

 

716

 

 

 

893

 

 

 

(177

)

 

 

(19.8

%)

NauticStar

 

 

337

 

 

 

480

 

 

 

(143

)

 

 

(29.8

%)

Crest

 

 

420

 

 

 

675

 

 

 

(255

)

 

 

(37.8

%)

Consolidated unit sales volume

 

 

1,473

 

 

 

2,048

 

 

 

(575

)

 

 

(28.1

%)

Net sales:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

MasterCraft

 

$

67,757

 

 

$

76,397

 

 

$

(8,640

)

 

 

(11.3

%)

NauticStar

 

 

15,576

 

 

 

19,196

 

 

 

(3,620

)

 

 

(18.9

%)

Crest

 

 

16,295

 

 

 

25,948

 

 

 

(9,653

)

 

 

(37.2

%)

Consolidated net sales

 

$

99,628

 

 

$

121,541

 

 

$

(21,913

)

 

 

(18.0

%)

Net sales per unit:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

MasterCraft

 

$

95

 

 

$

86

 

 

$

9

 

 

 

10.5

%

NauticStar

 

 

46

 

 

 

40

 

 

 

6

 

 

 

15.0

%

Crest

 

 

39

 

 

 

38

 

 

 

1

 

 

 

2.6

%

Consolidated net sales per unit

 

 

68

 

 

 

59

 

 

 

9

 

 

 

15.3

%

Gross margin percentage

 

 

21.2

%

 

 

22.3

%

 

-110 bpts

 

 

 

 

 

 

Three Months Ended December 29, 2019 Compared to the Three Months Ended December 30, 2018

 

Net Sales.  Net Sales for the second quarter were $99.6 million, a decrease of $21.9 million, or 18.0 percent, compared to $121.5 million for the prior-year period. The decrease was primarily due to:

 

an $8.6 million decrease for the MasterCraft segment, primarily due to lower unit sales volume for our MasterCraft brand as we work to right-size our dealer inventory levels after the weather-impacted summer selling season, partially offset by a richer mix of higher-priced and higher-contented models and lower sales discounts for our Canadian dealers as the Canadian retaliatory import tariffs on boats, first imposed in July 2018, were rescinded in May 2019. Within the MasterCraft segment, the decrease for the MasterCraft brand was partially offset by Aviara sales;

22


 

 

a $9.7 million decrease for the Crest segment primarily due to lower unit sales volume as we work to right-size our dealer inventory levels after the weather-impacted summer selling season; and

 

a $3.6 million decrease for the NauticStar segment primarily due to lower unit sales volume as a result of continued softness in the overall saltwater category. The impact of lower volumes for NauticStar was partially offset by a greater mix of larger products and higher average wholesale prices as we continue to expand our portfolio with larger boats.

 

Gross Profit and Gross Margin Percentage.  Gross profit decreased $5.9 million, or 21.9 percent, to $21.1 million compared to $27.1 million for the prior-year period. The decrease was primarily driven by lower unit sales volume for each reportable segment and was partially offset by price increases for each reportable segment and lower sales discounts for our Canadian dealers related to import tariff support and lower warranty costs for the MasterCraft segment.

 

Gross margin percentage decreased primarily due to lower overhead absorption driven by lower unit sales volume for each reportable segment. This decline was partially offset by margin improvement at our MasterCraft brand, driven by price increases and lower discounts and warranty costs relative to gross sales.

 

Operating Expenses. Operating expenses decreased $1.5 million, or 12.5 percent, to $10.8 million for the second quarter compared to $12.4 million for the prior-year period. The decrease was primarily due to lower acquisition-related costs attributable to the Crest acquisition, lower share-based compensation expense as a result of the resignation of an executive officer in October 2019, and lower variable compensation costs.

 

Interest Expense.  Interest expense decreased $0.8 million, or 39.4 percent, as $31.0 million of voluntary prepayments on our term loans over the last twelve months have resulted in lower average debt balances, and lower effective interest rates during the quarter compared to the prior-year period.

 

Income Tax Expense.  Our consolidated interim effective income tax rate increased to 24.4 percent for the second quarter of 2020 from 19.7 percent for second quarter 2019, primarily due to favorable discrete adjustments for the second quarter of 2019, which reduced the interim effective tax rate for that period.

 

23


 

The table below presents our consolidated results of operations for the six months ended:

 

 

 

Six Months Ended

 

 

 

 

  

 

December 29,

 

 

December 30,

 

 

2020 vs. 2019

 

 

 

2019

 

 

2018

 

 

Change

% Change

 

 

 

(Dollars in thousands)

 

 

 

 

 

 

 

 

 

Consolidated statements of operations:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NET SALES

 

$

209,417

 

 

$

215,182

 

 

$

(5,765

)

 

 

(2.7

%)

COST OF SALES

 

 

162,742

 

 

 

164,906

 

 

 

(2,164

)

 

 

(1.3

%)

GROSS PROFIT

 

 

46,675

 

 

 

50,276

 

 

 

(3,601

)

 

 

(7.2

%)

OPERATING EXPENSES:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Selling and marketing

 

 

8,407

 

 

 

8,547

 

 

 

(140

)

 

 

(1.6

%)

General and administrative

 

 

13,262

 

 

 

13,880

 

 

 

(618

)

 

 

(4.5

%)

Amortization of other intangible assets

 

 

1,974

 

 

 

1,517

 

 

 

457

 

 

 

30.1

%

Total operating expenses

 

 

23,643

 

 

 

23,944

 

 

 

(301

)

 

 

(1.3

%)

OPERATING INCOME

 

 

23,032

 

 

 

26,332

 

 

 

(3,300

)

 

 

(12.5

%)

OTHER EXPENSE:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense

 

 

2,581

 

 

 

2,962

 

 

 

(381

)

 

 

(12.9

%)

INCOME BEFORE INCOME TAX EXPENSE

 

 

20,451

 

 

 

23,370

 

 

 

(2,919

)

 

 

(12.5

%)

INCOME TAX EXPENSE

 

 

4,949

 

 

 

4,718

 

 

 

231

 

 

 

4.9

%

NET INCOME

 

$

15,502

 

 

$

18,652

 

 

$

(3,150

)

 

 

(16.9

%)

Additional financial and other data:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unit sales volume:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

MasterCraft

 

 

1,457

 

 

 

1,741

 

 

 

(284

)

 

 

(16.3

%)

NauticStar

 

 

733

 

 

 

906

 

 

 

(173

)

 

 

(19.1

%)

Crest(a)

 

 

946

 

 

 

675

 

 

 

271

 

 

 

40.1

%

Consolidated unit sales volume

 

 

3,136

 

 

 

3,322

 

 

 

(186

)

 

 

(5.6

%)

Net sales:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

MasterCraft

 

$

140,670

 

 

$

152,631

 

 

$

(11,961

)

 

 

(7.8

%)

NauticStar

 

 

33,571

 

 

 

36,603

 

 

 

(3,032

)

 

 

(8.3

%)

Crest(a)

 

 

35,176

 

 

 

25,948

 

 

 

9,228

 

 

 

35.6

%

Consolidated net sales

 

$

209,417

 

 

$

215,182

 

 

$

(5,765

)

 

 

(2.7

%)

Net sales per unit:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

MasterCraft

 

$

97

 

 

$

88

 

 

$

9

 

 

 

10.2

%

NauticStar

 

 

46

 

 

 

40

 

 

 

6

 

 

 

15.0

%

Crest(a)

 

 

37

 

 

 

38

 

 

 

(1

)

 

 

(2.6

%)

Consolidated net sales per unit

 

 

67

 

 

 

65

 

 

 

2

 

 

 

3.1

%

Gross margin percentage

 

 

22.3

%

 

 

23.4

%

 

-110 bpts

 

 

 

 

 

 

(a)

Crest was acquired on October 1, 2018.

 

Six Months Ended December 29, 2019 Compared to the Six Months Ended December 30, 2018

 

Net Sales.  Net Sales for the six months ended December 29, 2019 were $209.4 million, a decrease of $5.8 million, or 2.7 percent, compared to $215.2 million for the prior-year period. The decrease was primarily due to:

 

a $12.0 million decrease for the MasterCraft segment, primarily for the same reasons described above for the quarterly period. Within the MasterCraft segment, the decrease for the MasterCraft brand was partially offset by Aviara sales;

 

a $3.0 million decrease for the NauticStar segment primarily for the same reasons described above for the quarterly period;

 

partially offset by a net $9.2 million increase as the Crest acquisition in October 2018 added net sales of $18.9 million for the first quarter of 2020 which, as discussed above for the quarterly period, was partially offset by a $9.7 million period-over-period decrease for the second quarter of 2020.

 

24


 

Gross Profit and Gross Margin Percentage.  Gross profit decreased $3.6 million, or 7.2 percent, to $46.7 million compared to $50.3 million for the prior-year period. The decrease was primarily due to the same reasons described above for the quarterly period and partially offset by the same factors described above for the quarterly period and $2.6 million of gross profit attributable to Crest’s first quarter 2020 results.

 

Gross margin percentage decreased primarily due to the same reasons described above for the quarterly period and the inclusion of Crest’s first quarter 2020 results, as Crest generates a lower gross margin percentage than our MasterCraft segment. This decline was partially offset by the same factors described above for the quarterly period.

 

Operating Expenses. Operating expenses decreased $0.3 million, or 1.3 percent, to $23.6 million for the six months ended December 29, 2019 compared to $23.9 million for the prior-year period. The decrease was primarily due to:

 

a $2.3 million decrease at our MasterCraft segment mainly due to lower acquisition-related costs and lower share-based compensation expense as a result of our CEO transition, and lower variable compensation costs;

 

partially offset by the inclusion of Crest which added $2.2 million related to the first quarter 2020.

 

Interest Expense.  Interest expense decreased $0.4 million, or 12.9 percent, primarily due to lower effective interest rates during the six months ended December 29, 2019 compared to the prior-year period.

 

Income Tax Expense.  Our consolidated interim effective income tax rate increased to 24.2 percent for the six months ended December 29, 2019 from 20.2 percent for the six months ended December 30, 2018, primarily due to favorable discrete adjustments for the six months ended December 30, 2018, which reduced the interim effective tax rate for that period.

 

Non-GAAP Measures

 

EBITDA, Adjusted EBITDA, and Adjusted EBITDA Margin

 

We define EBITDA as earnings before interest expense, income taxes, depreciation and amortization. We define Adjusted EBITDA as EBITDA further adjusted to eliminate certain non-cash charges or other items that we do not consider to be indicative of our core and/or ongoing operations. For the periods presented herein, these adjustments include Aviara (new brand) startup costs, transaction expenses associated with acquisitions and certain non-cash items including share-based compensation, and an acquisition-related inventory step-up adjustment. We define Adjusted EBITDA Margin as Adjusted EBITDA expressed as a percentage of Net sales.

Adjusted Net Income and Adjusted Net Income per share

 

We define Adjusted Net Income and Adjusted Net Income per share as net income adjusted to eliminate certain non-cash charges or other items that we do not consider to be indicative of our core and/or ongoing operations. For the periods presented herein, these adjustments include Aviara (new brand) startup costs, transaction expenses associated with acquisitions, and certain non-cash items including other intangible asset amortization, share-based compensation, and an acquisition-related inventory step-up adjustment. 

EBITDA, Adjusted EBITDA, Adjusted EBITDA Margin, Adjusted Net Income, and Adjusted Net Income per share, which we refer to collectively as the Non-GAAP Measures, are not measures of net income or operating income as determined under accounting principles generally accepted in the United States, or U.S. GAAP. The Non-GAAP Measures are not measures of performance in accordance with U.S. GAAP and should not be considered as an alternative to net income, net income per share, or operating cash flows determined in accordance with U.S. GAAP. Additionally, Adjusted EBITDA is not intended to be a measure of cash flow for management’s discretionary use. We believe that the inclusion of the Non-GAAP Measures is appropriate to provide additional information to investors because securities analysts and investors use the Non-GAAP Measures to assess our operating performance across periods on a consistent basis and to evaluate the relative risk of an investment in our securities. We use Adjusted Net Income and Adjusted Net Income per share to facilitate a comparison of our operating performance on a consistent basis from period to period that, when viewed in combination with our results prepared in accordance with U.S. GAAP, provides a more complete understanding of factors and trends affecting our business than does U.S. GAAP measures alone.  We believe Adjusted Net Income and Adjusted Net

25


 

Income per share assists our board of directors, management, investors, and other users of the financial statements in comparing our net income on a consistent basis from period to period because it removes non-cash items and items not indicative of our core and/or ongoing operations. The Non-GAAP Measures have limitations as an analytical tool and should not be considered in isolation or as a substitute for analysis of our results as reported under U.S. GAAP. Some of these limitations are:

 

Although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future and Adjusted EBITDA does not reflect any cash requirements for such replacements;

 

Adjusted EBITDA does not reflect our cash expenditures, or future requirements for capital expenditures or contractual commitments;

 

Adjusted EBITDA does not reflect changes in, or cash requirements for, our working capital needs;

 

Adjusted EBITDA does not reflect our tax expense or any cash requirements to pay income taxes;

 

Adjusted EBITDA does not reflect interest expense, or the cash requirements necessary to service interest payments on our indebtedness; and

 

Adjusted Net Income, Adjusted Net Income per share, and Adjusted EBITDA do not reflect the impact of earnings or charges resulting from matters we do not consider to be indicative of our core and/or ongoing operations, but may nonetheless have a material impact on our results of operations.

In addition, because not all companies use identical calculations, our presentation of the Non-GAAP Measures may not be comparable to similarly titled measures of other companies, including companies in our industry.

 

The following table presents a reconciliation of net income as determined in accordance with U.S. GAAP to EBITDA, Adjusted EBITDA and Adjusted EBITDA Margin for the periods indicated:

 

 

 

Three Months Ended

 

 

Six Months Ended

 

 

 

December 29,

 

 

December 30,

 

 

December 29,

 

 

December 30,

 

 

 

2019

 

 

2018

 

 

2019

 

 

2018

 

 

 

 

 

 

 

 

Net income

 

$

6,879

 

 

$

10,188

 

 

$

15,502

 

 

$

18,652

 

Income tax expense

 

 

2,219

 

 

 

2,492

 

 

 

4,949

 

 

 

4,718

 

Interest expense

 

 

1,237

 

 

 

2,042

 

 

 

2,581

 

 

 

2,962

 

Depreciation and amortization

 

 

2,683

 

 

 

1,923

 

 

 

5,053

 

 

 

3,359

 

EBITDA

 

 

13,018

 

 

 

16,645

 

 

 

28,085

 

 

 

29,691

 

Aviara start-up costs(a)

 

 

507

 

 

 

483

 

 

 

815

 

 

 

763

 

Share-based compensation

 

 

32

 

 

 

404

 

 

 

544

 

 

 

788

 

Transaction expense(b)

 

 

-

 

 

 

699

 

 

 

-

 

 

 

2,017

 

Inventory step-up adjustment - acquisition related(c)

 

 

-

 

 

 

382

 

 

 

-

 

 

 

382

 

Adjusted EBITDA

 

$

13,557

 

 

$

18,613

 

 

$

29,444

 

 

$

33,641

 

Adjusted EBITDA Margin

 

 

13.6

%

 

 

15.3

%

 

 

14.1

%

 

 

15.6

%

 

(a)

Represents start-up costs associated with Aviara, a completely new boat brand in an industry category previously not served by the Company. We began selling the brand’s first two models, the AV32 and the AV36, during the first and second quarters of fiscal 2020, respectively. We expect to begin selling one additional model, the AV40, in late fiscal 2020. Start-up costs presented for fiscal 2020 are related to the AV36 and AV40 models. Start-up costs presented for fiscal 2019 are related to the launch of the Aviara brand and the three initial Aviara models which had not yet begun selling. We expect to adjust EBITDA for Aviara start-up costs through fiscal 2020.

(b)

Represents fees, expenses, and integration costs associated with our acquisition of Crest in fiscal 2019.

(c)

Represents post-acquisition adjustment to cost of goods sold for the fair value step-up of inventory acquired, all of which was sold during fiscal 2019.

 

26


 

The following table presents a reconciliation of net income as determined in accordance with U.S. GAAP to Adjusted Net Income for the periods indicated:

 

 

 

Three Months Ended

 

 

Six Months Ended

 

 

 

December 29,

 

 

December 30,

 

 

December 29,

 

 

December 30,

 

 

 

2019

 

 

2018

 

 

2019

 

 

2018

 

 

 

(Dollars in thousands, except share and per share amounts)

 

Net income

 

$

6,879

 

 

$

10,188

 

 

$

15,502

 

 

$

18,652

 

Income tax expense

 

 

2,219

 

 

 

2,492

 

 

 

4,949

 

 

 

4,718

 

Amortization of acquisition intangibles

 

 

961

 

 

 

961

 

 

 

1,921

 

 

 

1,464

 

Aviara start-up costs(a)

 

 

507

 

 

 

483

 

 

 

815

 

 

 

763

 

Share-based compensation

 

 

32

 

 

 

404

 

 

 

544

 

 

 

788

 

Transaction expense(b)

 

 

-

 

 

 

699

 

 

 

-

 

 

 

2,017

 

Inventory step-up adjustment - acquisition related(c)

 

 

-

 

 

 

382

 

 

 

-

 

 

 

382

 

Adjusted Net Income before income taxes

 

 

10,598

 

 

 

15,609

 

 

 

23,731

 

 

 

28,784

 

Adjusted income tax expense(d)

 

 

2,438

 

 

 

3,512

 

 

 

5,458

 

 

 

6,476

 

Adjusted Net Income

 

$

8,160

 

 

$

12,097

 

 

$

18,273

 

 

$

22,308

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted Net Income per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.44

 

 

$

0.65

 

 

$

0.98

 

 

$

1.20

 

Diluted

 

$

0.43

 

 

$

0.64

 

 

$

0.96

 

 

$

1.18

 

Weighted average shares used for the computation of:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic Adjusted Net Income per share

 

 

18,730,688

 

 

 

18,653,111

 

 

 

18,727,267

 

 

 

18,649,575

 

Diluted Adjusted Net Income per share(e)

 

 

18,949,175

 

 

 

18,849,173

 

 

 

18,954,927

 

 

 

18,861,834

 

 

(a)

Represents start-up costs associated with Aviara, a completely new boat brand in an industry category previously not served by the Company. We began selling the brand’s first two models, the AV32 and the AV36, during the first and second quarters of fiscal 2020, respectively. We expect to begin selling one additional model, the AV40, in late fiscal 2020. Start-up costs presented for fiscal 2020 are related to the AV36 and AV40 models. Start-up costs presented for fiscal 2019 are related to the launch of the Aviara brand and the three initial Aviara models which had not yet begun selling. We expect to adjust net income for Aviara start-up costs through fiscal 2020.

(b)

Represents fees, expenses, and integration costs associated with our acquisition of Crest in fiscal 2019.

(c)

Represents post-acquisition adjustment to cost of goods sold for the fair value step-up of inventory acquired, all of which was sold during fiscal 2019.

(d)

Reflects income tax expense at an estimated annual effective income tax rate of 23.0% for fiscal 2020 and 22.5% for the prior-year period.

(e)

See table below for reconciliation of weighted average shares used for computation of Basic earnings per share to weighted average shares used for Diluted Adjusted Net Income per share.

 

The following table presents the reconciliation of weighted average shares used for computation of Basic earnings per share to weighted average shares used for Diluted Adjusted Net income per share:

 

 

 

Six Months Ended

 

 

Six Months Ended

 

 

December 29,

 

 

December 30,

 

 

December 29,

 

 

December 30,

 

 

 

 

2019

 

 

2018

 

 

2019

 

 

2018

 

 

Weighted average shares used for computation of Basic earnings per share

 

 

18,730,688

 

 

 

18,653,111

 

 

 

18,727,267

 

 

 

18,649,575

 

 

Dilutive effect of outstanding stock options(a)

 

 

9,930

 

 

 

36,988

 

 

 

16,066

 

 

 

51,171

 

 

Dilutive effect of outstanding restricted share awards/units(b)

 

 

208,557

 

 

 

159,074

 

 

 

211,594

 

 

 

161,088

 

 

Weighted average shares used for the computation of Diluted Adjusted Net Income per share

 

 

18,949,175

 

 

 

18,849,173

 

 

 

18,954,927

 

 

 

18,861,834

 

 

 

(a)

Represents the dilutive effect of stock options calculated using the treasury stock method, but instead of using the average market price, the market price on the last business day of the period is used.

(b)

Represents the dilutive effect of restricted stock awards (“RSAs”) and performance stock units (“PSUs”) assuming the total outstanding awards/unit at each period end are fully dilutive.

 

27


 

The following table presents the reconciliation of net income per diluted share to Adjusted net income per diluted weighted average share for the periods presented:

 

 

 

Three Months Ended

 

 

Six Months Ended

 

 

 

December 29,

 

 

December 30,

 

 

December 29,

 

 

December 30,

 

 

 

2019

 

 

2018

 

 

2019

 

 

2018

 

Net income per diluted share

 

$

0.37

 

 

$

0.54

 

 

$

0.83

 

 

$

0.99

 

Impact of adjustments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income tax expense

 

 

0.12

 

 

 

0.13

 

 

 

0.26

 

 

 

0.25

 

Amortization of acquisition intangibles

 

 

0.05

 

 

 

0.05

 

 

 

0.10

 

 

 

0.08

 

Aviara start-up costs(a)

 

 

0.03

 

 

 

0.03

 

 

 

0.04

 

 

 

0.04

 

Share-based compensation

 

 

-

 

 

 

0.02

 

 

 

0.03

 

 

 

0.04

 

Transaction expense(b)

 

 

-

 

 

 

0.04

 

 

 

-

 

 

 

0.11

 

Inventory step-up adjustment - acquisition related(c)

 

 

-

 

 

 

0.02

 

 

 

-

 

 

 

0.02

 

Adjusted Net Income per diluted share before income taxes

 

 

0.57

 

 

 

0.83

 

 

 

1.26

 

 

 

1.53

 

Impact of adjusted income tax expense on net income per diluted share before income taxes(d)

 

 

(0.13

)

 

 

(0.19

)

 

 

(0.29

)

 

 

(0.35

)

Impact of increased share count(e)

 

 

(0.01

)

 

 

-

 

 

 

(0.01

)

 

 

-

 

Adjusted Net Income per diluted weighted average share

 

$

0.43

 

 

$

0.64

 

 

$

0.96

 

 

$

1.18

 

 

(a)

Represents start-up costs associated with Aviara, a completely new boat brand in an industry category previously not served by the Company. We began selling the brand’s first two models, the AV32 and the AV36, during the first and second quarters of fiscal 2020, respectively. We expect to begin selling one additional model, the AV40, in late fiscal 2020. Start-up costs presented for fiscal 2020 are related to the AV36 and AV40 models. Start-up costs presented for fiscal 2019 are related to the launch of the Aviara brand and the three initial Aviara models which had not yet begun selling. We expect to adjust net income for Aviara start-up costs through fiscal 2020.

(b)

Represents fees, expenses, and integration costs associated with our acquisition of Crest in fiscal 2019.

(c)

Represents post-acquisition adjustment to cost of goods sold for the fair value step-up of inventory acquired, all of which was sold during fiscal 2019.

(d)

Reflects income tax expense at an estimated annual effective income tax rate of 23.0% for fiscal 2020 and 22.5% for the prior-year period.

(e)

Reflects the impact of increased share counts giving effect to the exchange of all RSAs, the vesting of all PSUs and for the dilutive effect of stock options included in outstanding shares and rounding.

 

Liquidity and Capital Resources

 

Our primary liquidity and capital resource needs are to finance working capital, fund capital expenditures, and service our debt. Our principal sources of funds are cash generated from operating activities and the refinancing and/or new issuance of long-term debt. As of December 29, 2019, we had borrowing availability of $35.0 million under the Revolving Credit Facility. We believe cash from operations, along with the ability to borrow, will be sufficient to provide for our liquidity and capital resource needs for at least the next 12 months. The following table summarizes our cash flows from operating, investing, and financing activities:

 

 

 

Six Months Ended

 

 

 

 

 

 

 

 

 

 

 

December 29,

 

 

December 30,

 

 

2020 vs. 2019

 

 

 

2019

 

 

2018

 

 

Change

 

 

% Change

 

 

 

(Dollars in thousands)

 

 

 

 

 

 

 

 

 

Total cash provided by (used in):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating activities

 

$

19,844

 

 

$

27,861

 

 

$

(8,017

)

 

 

(28.8

%)

Investing activities

 

 

(11,477

)

 

 

(87,746

)

 

 

76,269

 

 

 

(86.9

%)

Financing activities

 

 

(8,745

)

 

 

70,470

 

 

 

(79,215

)

 

 

(112.4

%)

Net change in cash

 

$

(378

)

 

$

10,585

 

 

 

(10,963

)

 

 

(103.6

%)

 

Operating Activities

Net cash provided by operating activities decreased primarily due to unfavorable working capital usage and lower operating income. Working capital is defined as Accounts receivable, Income tax receivable, Inventories, and Prepaid expenses and other current assets net of Accounts payable, Income tax payable, and Accrued expenses and other current liabilities as presented in the condensed

28


 

consolidated balance sheets, excluding the impact of acquisitions and non-cash adjustments. Cash flows from working capital changes decreased $6.3 million primarily due to:

 

an $8.1 million decrease related to Accrued expenses and other current liabilities largely from higher dealer incentive spending and timing of dealer incentive payments;

 

a $1.6 million decrease attributable to Inventories mainly due to a temporary benefit in 2019 from the strategic reduction of inventory acquired as part of the Crest acquisition;

 

a $1.3 million decrease attributable to Accounts payable as a result of lower production levels in December 2019 as compared to December 2018 and the timing of vendor payments;

 

partially offset by a $3.9 million increase related to Accounts receivable primarily due to the timing of shipments surrounding the scheduled holiday shutdown during December 2019 when compared to the same period of the prior year.

Investing Activities

 

Net cash used in investing activities decreased primarily due to the 2019 Crest acquisition for $81.7 million. Capital outlays during the six months ended December 29, 2019 included the purchase of the Crest manufacturing facility, expansion activities, molds, and equipment. See Note 8 in Notes to Unaudited Condensed Consolidated Financial Statements for additional information regarding the Crest facility purchase.

 

Financing Activities

 

Net financing cash flow decreased primarily as the result of lower proceeds from the issuance of long-term debt. The Crest acquisition, completed during the second quarter of 2019, was funded using $80 million of proceeds from the issuance on long-term debt. During the six months ended December 29, 2019, the Company made $8.3 million of principal payments on its term loans, including $6.0 million of voluntary prepayments.

 

Off-Balance Sheet Arrangements

 

The Company did not have any off-balance sheet financing arrangements as of December 29, 2019.

 

Contractual Obligations

 

During the first quarter of 2020, the Company elected to exercise its option to purchase the leased Crest manufacturing facility and on October 24, 2019 the purchase was completed. See Note 8 in Notes to Unaudited Condensed Consolidated Financial Statements for additional information regarding this purchase.

 

As a result of this purchase, the Company’s Operating Lease Obligations, as presented in the Contractual Obligations table in our Annual Report on Form 10-K for the fiscal year ended June 30, 2019 were impacted as follows:

 

Payments due in Less than 1 year were reduced by $0.3 million,

 

Payments due in  1-3 years were reduced by $0.7 million,

 

Payments due in 4-5 years were reduced by $0.7 million, and

 

Payments due in More than 5 years were reduced by $1.8 million.

 

Emerging Growth Company

 

We are an emerging growth company, as defined in the JOBS Act. For as long as we are an emerging growth company, we may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies, including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404(b) of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding stockholder advisory “say-on-pay” votes on executive compensation.

29


 

The JOBS Act also provides that an emerging growth company can utilize the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. Pursuant to Section 107 of the JOBS Act, we have irrevocably chosen to opt out of such extended transition period and, as a result, we will comply with new or revised accounting standards on the relevant dates on which adoption of such standards is required for companies that are not “emerging growth companies.”

 

We will continue to be an emerging growth company until the earliest to occur of (i) the last day of fiscal year during which we had total annual gross revenues of at least $1.07 billion, (ii) the last day of the fiscal year following the fifth anniversary of the closing of the IPO, June 30, 2021, (iii) the date on which we have, during the previous three-year period, issued more than $1.0 billion in non-convertible debt, or (iv) the date on which we are deemed to be a “large accelerated filer,” as defined under the Exchange Act.

 

Critical Accounting Policies

 

As of December 29, 2019 there were no significant changes in or changes in the application of our critical accounting policies or estimation procedures from those presented in our Annual Report on Form 10-K for the fiscal year ended June 30, 2019, which was filed with the SEC on September 13, 2019.

ITEM 3.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

 

Refer to our Annual Report on Form 10-K for the fiscal year ended June 30, 2019, which was filed with the SEC on September 13, 2019 for a complete discussion of the Company’s market risk. There have been no material changes in market risk from those disclosed therein.

ITEM 4.CONTROLS AND PROCEDURES.

 

Evaluation of Disclosure Controls and Procedures

 

We maintain disclosure controls and procedures (as defined in Rule 13a-15(e) of the Exchange Act) that are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our chief executive officer and chief financial officer, as appropriate, to allow timely decisions regarding required disclosures. Any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives.

 

As of the end of the period covered by this Quarterly Report, we carried out an evaluation under the supervision and with the participation of our management, including our chief executive officer and chief financial officer, of the effectiveness of our disclosure controls and procedures. Based upon this evaluation, our chief executive officer and chief financial officer have concluded that our disclosure controls and procedures were effective at a reasonable assurance level as of December 29, 2019.

Changes in Internal Control Over Financial Reporting

There have been no changes in our internal control over financial reporting during the quarter ended December 29, 2019 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

30


 

PART II – OTHER INFORMATION

ITEM 1.

LEGAL PROCEEDINGS.

None.

ITEM 1A.

RISK FACTORS.

Except as noted below, there have been no material changes to the risk factors disclosed in our Annual Report on Form 10-K for the fiscal year ended June 30, 2019, which was filed with the SEC on September 13, 2019 under “Part I, Item 1A. Risk Factors”

We depend on third-party suppliers to provide components and raw materials essential to the construction of our boats.

We depend on third-party suppliers to provide components and raw materials essential to the construction of our boats. While we believe that our relationships with our current suppliers are sufficient to provide the materials necessary to meet present production demand, we cannot provide assurance that these relationships will not be affected by disruptions felt by our third-party suppliers.  Because our suppliers are located in a number of countries throughout the Americas, Asia and Europe, they are subject to risks of changes in economic, political, and welfare conditions in those countries, including the inability of suppliers to meet demands due to the effect of exposure to infectious disease and epidemics, including the coronavirus outbreak.

ITEM 2.

UNREGISTERED SALES OF SECURITIES AND USE OF PROCEEDS.

None.

ITEM 3.

DEFAULTS UPON SENIOR SECURITIES.

None.

ITEM 4.

MINE SAFETY DISCLOSURES.

None.

ITEM 5.

OTHER INFORMATION.

None.

31


 

ITEM 6.EXHIBITS, FINANCIAL STATEMENT SCHEDULES.

 

 

 

 

 

Incorporated by Reference

 

Exhibit
No.

 

Description

 

Form

 

File No.

 

Exhibit

 

Filing Date

 

Filed
Herewith

 

3.1  

 

Amended and Restated Certificate of Incorporation of MCBC Holdings, Inc.

 

10-K

 

001-37502

 

3.1

 

9/18/15

 

 

 

3.2  

 

Certificate of Amendment to Amended and Restated Certificate of Incorporation of MasterCraft Boat Holdings, Inc.

 

10-Q

 

001-37502

 

3.2

 

11/9/18

 

 

 

3.3  

 

Certificate of Amendment to Amended and Restated Certificate of Incorporation of MasterCraft Boat Holdings, Inc.

 

8-K

 

001-37502

 

3.1

 

10/25/19

 

 

 

3.4  

 

Fourth Amended and Restated By-laws of MasterCraft Boat Holdings, Inc.

 

8-K

 

001-37502

 

3.2

 

10/25/19

 

 

 

10.1

 

Letter Agreement, dated October 30, 2019

 

8-K

 

001-37502

 

10.1

 

10/30/19

 

 

10.2

 

Offer Letter, dated December 2, 2019

 

8-K

 

001-37502

 

10.1

 

12/3/19

 

 

31.1

 

Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer

 

 

 

 

 

 

 

 

 

*

 

31.2

 

Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer

 

 

 

 

 

 

 

 

 

*

 

32.1

 

Section 1350 Certification of Chief Executive Officer

 

 

 

 

 

 

 

 

 

**

 

32.2

 

Section 1350 Certification of Chief Financial Officer

 

 

 

 

 

 

 

 

 

**

 

101.INS

 

XBRL Instance Document

 

 

 

 

 

 

 

 

 

*

 

101.SCH

 

XBRL Taxonomy Extension Schema Document

 

 

 

 

 

 

 

 

 

*

 

101.CAL

 

XBRL Taxonomy Extension Calculation Linkbase Document

 

 

 

 

 

 

 

 

 

*

 

101.LAB

 

XBRL Taxonomy Extension Label Linkbase Document

 

 

 

 

 

 

 

 

 

*

 

101.PRE

 

XBRL Taxonomy Extension Presentation Linkbase Document

 

 

 

 

 

 

 

 

 

*

 

101.DEF

 

XBRL Taxonomy Extension Definition Linkbase Document

 

 

 

 

 

 

 

 

 

*

 

 

Indicates management contract or compensatory plan.

*

Filed herewith.

**

Furnished herewith.

32


 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

 

Signature

 

Title

 

Date

 

 

 

 

 

/s/ FREDERICK A. BRIGHTBILL

 

Chief Executive Officer (Principal Executive Officer) and Director

 

 

Frederick A. Brightbill

 

 

 

February 5, 2020

 

 

 

 

 

/s/ TIMOTHY M. OXLEY

 

Chief Financial Officer (Principal Financial and Accounting Officer), Treasurer and Secretary

 

 

Timothy M. Oxley

 

 

 

February 5, 2020

 

33