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MasterCraft Boat Holdings, Inc. - Quarter Report: 2023 April (Form 10-Q)

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: April 2, 2023

OR

TRANSITION 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

 

 

img155725646_0.jpg 

 

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 Exchange Act). Yes No

As of May 5, 2023, there were 17,495,267 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

18

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

25

Item 4.

Controls and Procedures

26

 

 

 

PART II

OTHER INFORMATION

 

Item 1.

Legal Proceedings

27

Item 1A.

Risk Factors

27

Item 2.

Unregistered Sales of Securities and Use of Proceeds

27

Item 3.

Defaults Upon Senior Securities

27

Item 4.

Mine Safety Disclosures

27

Item 5.

Other Information

27

Item 6.

Exhibits, Financial Statement Schedules

28

 

 

 

SIGNATURES

 

29

 

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: changes in interest rates, the potential effects of supply chain disruptions and production inefficiencies, general economic conditions, demand for our products, inflation, 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, geopolitical conflicts, financial institution disruptions 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, 2022, filed with the Securities and Exchange Commission (“SEC”) on September 9, 2022 (our “2022 Annual Report”) and our Quarterly Report on Form 10-Q for the fiscal quarter ended January 1, 2023, filed with the SEC on February 8, 2023 (our "Fiscal Second Quarter Quarterly Report"). 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 per share amounts)

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

April 2,

 

 

April 3,

 

 

April 2,

 

 

April 3,

 

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

NET SALES

 

$

166,776

 

 

$

169,343

 

 

$

495,480

 

 

$

444,393

 

COST OF SALES

 

 

124,178

 

 

 

125,269

 

 

 

368,682

 

 

 

333,376

 

GROSS PROFIT

 

 

42,598

 

 

 

44,074

 

 

 

126,798

 

 

 

111,017

 

OPERATING EXPENSES:

 

 

 

 

 

 

 

 

 

 

 

 

Selling and marketing

 

 

3,927

 

 

 

3,017

 

 

 

10,748

 

 

 

9,966

 

General and administrative

 

 

9,156

 

 

 

8,964

 

 

 

26,874

 

 

 

26,881

 

Amortization of other intangible assets

 

 

489

 

 

 

489

 

 

 

1,467

 

 

 

1,467

 

Goodwill impairment

 

 

 

 

 

 

 

 

 

 

 

1,100

 

Total operating expenses

 

 

13,572

 

 

 

12,470

 

 

 

39,089

 

 

 

39,414

 

OPERATING INCOME

 

 

29,026

 

 

 

31,604

 

 

 

87,709

 

 

 

71,603

 

OTHER INCOME (EXPENSE):

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense

 

 

(695

)

 

 

(341

)

 

 

(1,923

)

 

 

(1,080

)

Interest income

 

 

1,195

 

 

 

 

 

 

1,967

 

 

 

 

INCOME BEFORE INCOME TAX EXPENSE

 

 

29,526

 

 

 

31,263

 

 

 

87,753

 

 

 

70,523

 

INCOME TAX EXPENSE

 

 

6,744

 

 

 

6,957

 

 

 

20,353

 

 

 

16,126

 

NET INCOME FROM CONTINUING OPERATIONS

 

 

22,782

 

 

 

24,306

 

 

 

67,400

 

 

 

54,397

 

LOSS FROM DISCONTINUED OPERATIONS, NET OF TAX (Note 3)

 

 

(272

)

 

 

(3,371

)

 

 

(21,139

)

 

 

(7,674

)

NET INCOME

 

$

22,510

 

 

$

20,935

 

 

$

46,261

 

 

$

46,723

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NET INCOME (LOSS) PER SHARE:

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

 

 

 

 

 

 

 

 

 

 

Continuing operations

 

$

1.30

 

 

$

1.33

 

 

$

3.80

 

 

$

2.92

 

Discontinued operations

 

 

(0.02

)

 

 

(0.19

)

 

 

(1.19

)

 

 

(0.41

)

Net income

 

$

1.28

 

 

$

1.14

 

 

$

2.61

 

 

$

2.51

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted

 

 

 

 

 

 

 

 

 

 

 

 

Continuing operations

 

$

1.28

 

 

$

1.31

 

 

$

3.78

 

 

$

2.89

 

Discontinued operations

 

 

(0.01

)

 

 

(0.18

)

 

 

(1.19

)

 

 

(0.40

)

Net income

 

$

1.27

 

 

$

1.13

 

 

$

2.59

 

 

$

2.49

 

 

 

 

 

 

 

 

 

 

 

 

 

 

WEIGHTED AVERAGE SHARES USED FOR COMPUTATION OF:

 

 

 

 

 

 

 

 

 

 

 

 

Basic earnings per share

 

 

17,559,920

 

 

 

18,295,949

 

 

 

17,725,208

 

 

 

18,622,878

 

Diluted earnings per share

 

 

17,748,910

 

 

 

18,487,346

 

 

 

17,851,655

 

 

 

18,796,867

 

 

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 per share amounts)

 

 

 

April 2,

 

 

June 30,

 

 

 

2023

 

 

2022

 

ASSETS

 

 

 

 

 

 

CURRENT ASSETS:

 

 

 

 

 

 

Cash and cash equivalents

 

$

27,453

 

 

$

34,203

 

Held-to-maturity securities (Note 4)

 

 

73,914

 

 

 

 

Accounts receivable, net of allowance of $155 and $214, respectively

 

 

18,688

 

 

 

22,472

 

Inventories, net (Note 5)

 

 

55,268

 

 

 

58,595

 

Prepaid expenses and other current assets

 

 

10,673

 

 

 

7,232

 

Current assets associated with discontinued operations (Note 3)

 

 

 

 

 

23,608

 

Total current assets

 

 

185,996

 

 

 

146,110

 

Property, plant and equipment, net (Note 6)

 

 

70,510

 

 

 

55,823

 

Goodwill (Note 7)

 

 

28,493

 

 

 

28,493

 

Other intangible assets, net (Note 7)

 

 

35,951

 

 

 

37,418

 

Deferred income taxes

 

 

14,331

 

 

 

21,525

 

Deferred debt issuance costs, net

 

 

330

 

 

 

406

 

Other long-term assets

 

 

2,663

 

 

 

1,290

 

Non-current assets associated with discontinued operations (Note 3)

 

 

 

 

 

5,987

 

Total assets

 

$

338,274

 

 

$

297,052

 

LIABILITIES AND STOCKHOLDERS' EQUITY

 

 

 

 

 

 

CURRENT LIABILITIES:

 

 

 

 

 

 

Accounts payable

 

 

27,335

 

 

 

23,375

 

Income tax payable

 

 

5,582

 

 

 

4,600

 

Accrued expenses and other current liabilities (Note 8)

 

 

66,070

 

 

 

54,437

 

Current portion of long-term debt, net of unamortized debt issuance costs (Note 9)

 

 

4,004

 

 

 

2,873

 

Current liabilities associated with discontinued operations (Note 3)

 

 

 

 

 

7,887

 

Total current liabilities

 

 

102,991

 

 

 

93,172

 

Long-term debt, net of unamortized debt issuance costs (Note 9)

 

 

50,391

 

 

 

53,676

 

Unrecognized tax positions

 

 

6,469

 

 

 

6,358

 

Other long-term liabilities

 

 

2,276

 

 

 

198

 

Total liabilities

 

 

162,127

 

 

 

153,404

 

COMMITMENTS AND CONTINGENCIES

 

 

 

 

 

 

STOCKHOLDERS' EQUITY:

 

 

 

 

 

 

Common stock, $.01 par value per share — authorized, 100,000,000 shares; issued and outstanding, 17,571,882 shares at April 2, 2023 and 18,061,437 shares at June 30, 2022

 

 

176

 

 

 

181

 

Additional paid-in capital

 

 

82,827

 

 

 

96,584

 

Retained earnings

 

 

93,144

 

 

 

46,883

 

Total stockholders' equity

 

 

176,147

 

 

 

143,648

 

Total liabilities and stockholders' equity

 

$

338,274

 

 

$

297,052

 

 

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)

 

 

 

 

 

 

 

 

 

Additional

 

 

 

 

 

 

 

 

 

Common Stock

 

 

Paid-in

 

 

Retained

 

 

 

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Earnings

 

 

Total

 

Balance at June 30, 2022

 

 

18,061,437

 

 

$

181

 

 

$

96,584

 

 

$

46,883

 

 

$

143,648

 

Share-based compensation activity

 

 

128,040

 

 

 

1

 

 

 

649

 

 

 

 

 

 

650

 

Repurchase and retirement of common stock

 

 

(191,360

)

 

 

(2

)

 

 

(4,176

)

 

 

 

 

 

(4,178

)

Net income

 

 

 

 

 

 

 

 

 

 

 

4,068

 

 

 

4,068

 

Balance at October 2, 2022

 

 

17,998,117

 

 

 

180

 

 

 

93,057

 

 

 

50,951

 

 

 

144,188

 

Share-based compensation activity

 

 

2,466

 

 

 

 

 

 

745

 

 

 

 

 

 

745

 

Repurchase and retirement of common stock

 

 

(224,284

)

 

 

(2

)

 

 

(4,792

)

 

 

 

 

 

(4,794

)

Net income

 

 

 

 

 

 

 

 

 

 

 

19,683

 

 

 

19,683

 

Balance at January 1, 2023

 

 

17,776,299

 

 

 

178

 

 

 

89,010

 

 

 

70,634

 

 

 

159,822

 

Share-based compensation activity

 

 

5,733

 

 

 

 

 

 

883

 

 

 

 

 

 

883

 

Repurchase and retirement of common stock

 

 

(210,150

)

 

 

(2

)

 

 

(7,066

)

 

 

 

 

 

(7,068

)

Net income

 

 

 

 

 

 

 

 

 

 

 

22,510

 

 

 

22,510

 

Balance at April 2, 2023

 

 

17,571,882

 

 

$

176

 

 

$

82,827

 

 

$

93,144

 

 

$

176,147

 

 

 

 

 

 

 

 

 

 

Additional

 

 

Retained Earnings

 

 

 

 

 

 

Common Stock

 

 

Paid-in

 

 

(Accumulated

 

 

 

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Deficit)

 

 

Total

 

Balance at June 30, 2021

 

 

18,956,719

 

 

$

189

 

 

$

118,930

 

 

$

(11,331

)

 

$

107,788

 

Share-based compensation activity

 

 

62,865

 

 

 

1

 

 

 

705

 

 

 

 

 

 

706

 

Repurchase and retirement of common stock

 

 

(58,379

)

 

 

(1

)

 

 

(1,486

)

 

 

 

 

 

(1,487

)

Net income

 

 

 

 

 

 

 

 

 

 

 

10,386

 

 

 

10,386

 

Balance at October 3, 2021

 

 

18,961,205

 

 

 

189

 

 

 

118,149

 

 

 

(945

)

 

 

117,393

 

Share-based compensation activity

 

 

5,913

 

 

 

 

 

 

1,159

 

 

 

 

 

 

1,159

 

Repurchase and retirement of common stock

 

 

(356,296

)

 

 

(3

)

 

 

(9,885

)

 

 

 

 

 

(9,888

)

Net income

 

 

 

 

 

 

 

 

 

 

 

15,402

 

 

 

15,402

 

Balance at January 2, 2022

 

 

18,610,822

 

 

 

186

 

 

 

109,423

 

 

 

14,457

 

 

 

124,066

 

Share-based compensation activity

 

 

(6,086

)

 

 

 

 

 

766

 

 

 

 

 

 

766

 

Repurchase and retirement of common stock

 

 

(395,948

)

 

 

(4

)

 

 

(10,075

)

 

 

 

 

 

(10,079

)

Net income

 

 

 

 

 

 

 

 

 

 

 

20,935

 

 

 

20,935

 

Balance at April 3, 2022

 

 

18,208,788

 

 

$

182

 

 

$

100,114

 

 

$

35,392

 

 

$

135,688

 

 

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)

 

 

 

Nine Months Ended

 

 

 

April 2,

 

 

April 3,

 

 

 

2023

 

 

2022

 

CASH FLOWS FROM OPERATING ACTIVITIES:

 

 

 

 

 

 

Net income

 

$

46,261

 

 

$

46,723

 

Loss from discontinued operations, net of tax

 

 

21,139

 

 

 

7,674

 

Net income from continuing operations

 

 

67,400

 

 

 

54,397

 

Adjustments to reconcile net income from continuing operations to net cash provided by operating activities:

 

 

 

 

 

 

Depreciation and amortization

 

 

7,833

 

 

 

7,329

 

Share-based compensation

 

 

2,892

 

 

 

2,927

 

Unrecognized tax benefits

 

 

111

 

 

 

1,340

 

Deferred income taxes

 

 

7,194

 

 

 

(3

)

Amortization of debt issuance costs

 

 

172

 

 

 

178

 

Goodwill impairment

 

 

 

 

 

1,100

 

Changes in certain operating assets and liabilities

 

 

21,610

 

 

 

(15,946

)

Other, net

 

 

153

 

 

 

541

 

Net cash provided by operating activities of continuing operations

 

 

107,365

 

 

 

51,863

 

Net cash used in operating activities of discontinued operations

 

 

(2,403

)

 

 

(16,561

)

Net cash provided by operating activities

 

 

104,962

 

 

 

35,302

 

 

 

 

 

 

 

 

CASH FLOWS FROM INVESTING ACTIVITIES:

 

 

 

 

 

 

Purchases of property, plant and equipment

 

 

(18,871

)

 

 

(8,021

)

Purchases of investments

 

 

(83,509

)

 

 

 

Maturities of investments

 

 

10,000

 

 

 

 

Net cash used in investing activities of continuing operations

 

 

(92,380

)

 

 

(8,021

)

Net cash used in investing activities of discontinued operations

 

 

(501

)

 

 

(2,818

)

Net cash used in investing activities

 

 

(92,881

)

 

 

(10,839

)

 

 

 

 

 

 

 

CASH FLOWS FROM FINANCING ACTIVITIES:

 

 

 

 

 

 

Principal payments on revolving credit facility

 

 

 

 

 

(38,000

)

Borrowings on revolving credit facility

 

 

 

 

 

12,000

 

Principal payments on long-term debt

 

 

(2,250

)

 

 

(2,250

)

Repurchase and retirement of common stock

 

 

(15,972

)

 

 

(21,454

)

Other, net

 

 

(609

)

 

 

(245

)

Net cash used in financing activities of continuing operations

 

 

(18,831

)

 

 

(49,949

)

NET CHANGE IN CASH AND CASH EQUIVALENTS

 

 

(6,750

)

 

 

(25,486

)

 

 

 

 

 

 

 

CASH AND CASH EQUIVALENTS — BEGINNING OF PERIOD

 

 

34,203

 

 

 

39,252

 

CASH AND CASH EQUIVALENTS — END OF PERIOD

 

$

27,453

 

 

$

13,766

 

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:

 

 

 

 

 

 

Cash payments for interest

 

$

1,773

 

 

$

874

 

Cash payments for income taxes

 

 

6,209

 

 

 

13,139

 

NON-CASH INVESTING AND FINANCING ACTIVITIES:

 

 

 

 

 

 

Capital expenditures in accounts payable and accrued expenses

 

 

2,855

 

 

 

421

 

 

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

7


 

1.
BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES

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 accompanying unaudited condensed consolidated financial statements include the accounts of MasterCraft Boat Holdings, Inc. ("Holdings") and its wholly owned subsidiaries. Holdings and its subsidiaries collectively are referred to herein as the "Company." 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, 2022, and, in the opinion of management, reflect all adjustments considered necessary to present fairly the Company’s financial position as of April 2, 2023, its results of operations for the three and nine months ended April 2, 2023 and April 3, 2022, its cash flows for the nine months ended April 2, 2023 and April 3, 2022, and its statements of stockholders’ equity for the three and nine months ended April 2, 2023 and April 3, 2022. 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 SEC for financial information have been condensed or omitted pursuant to such rules and regulations. The June 30, 2022 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 2022 Annual Report.

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.

There were no significant changes in or changes to the application of the Company’s significant or critical accounting policies or estimation procedures for the three and nine months ended April 2, 2023, as compared with those described in the Company’s audited consolidated financial statements for the fiscal year ended June 30, 2022.

Investments — The Company has, and may continue to invest excess cash balances in short-term debt securities, such as money market funds, government-sponsored securities, corporate bonds, and/or certificates of deposit. The Company accounts for its investments in debt securities in accordance with ASC 320, Investments — Debt and Equity Securities.

We classify our investments in debt securities based on the facts and circumstances present at the time of purchase of the securities. We subsequently reassess the appropriateness of that classification at each reporting date. As of April 2, 2023, all of our investments in debt securities were classified as held-to-maturity and are due to mature within one year (see Note 4).

Estimated fair value measurements related to our debt securities are Level 2 measurements. See Part IV. Item 15, Note 1 — Significant Accounting Policies, Fair Value Measurements in Notes to Consolidated Financial Statements in our 2022 Annual Report for further fair value measurement details.

Discontinued Operations — On September 2, 2022, the Company sold substantially all of the assets and liabilities of its NauticStar segment. The disposal represented the Company's exit from the saltwater fishing and deck boat category, a strategic shift that has a significant effect on the Company's operations and financial results, and as such, qualifies for reporting as discontinued operations. The NauticStar segment results, for the periods presented, are reflected in our condensed consolidated statements of operations and condensed consolidated statements of cash flows as discontinued operations. Additionally, the related assets and liabilities associated with the discontinued operations are classified as discontinued operations in our condensed consolidated balance sheet for the prior period presented (see Note 3).

Unless otherwise indicated, the financial disclosures and related information provided herein relate to our continuing operations and we have recast prior period amounts to reflect discontinued operations.

Reclassifications — Certain historical amounts have been reclassified in these condensed consolidated financial statements and the accompanying notes herewith to conform to the current presentation.

8


 

 

2.
REVENUE RECOGNITION

The following tables present the Company's revenue by major product category for each reportable segment:

 

 

 

Three Months Ended April 2, 2023

 

 

 

MasterCraft

 

 

Crest

 

 

Aviara

 

 

Total

 

Major Product Categories:

 

 

 

 

 

 

 

 

 

 

 

 

Boats and trailers

 

$

114,514

 

 

$

35,936

 

 

$

12,777

 

 

$

163,227

 

Parts

 

 

2,798

 

 

 

285

 

 

 

 

 

 

3,083

 

Other revenue

 

 

318

 

 

 

148

 

 

 

 

 

 

466

 

Total

 

$

117,630

 

 

$

36,369

 

 

$

12,777

 

 

$

166,776

 

 

 

 

Nine Months Ended April 2, 2023

 

 

 

MasterCraft

 

 

Crest

 

 

Aviara

 

 

Total

 

Major Product Categories:

 

 

 

 

 

 

 

 

 

 

 

 

Boats and trailers

 

$

328,254

 

 

$

115,444

 

 

$

39,570

 

 

$

483,268

 

Parts

 

 

9,693

 

 

 

671

 

 

 

 

 

 

10,364

 

Other revenue

 

 

1,368

 

 

 

480

 

 

 

 

 

 

1,848

 

Total

 

$

339,315

 

 

$

116,595

 

 

$

39,570

 

 

$

495,480

 

 

 

 

Three Months Ended April 3, 2022

 

 

 

MasterCraft

 

 

Crest

 

 

Aviara

 

 

Total

 

Major Product Categories:

 

 

 

 

 

 

 

 

 

 

 

 

Boats and trailers

 

$

116,964

 

 

$

38,351

 

 

$

10,428

 

 

$

165,743

 

Parts

 

 

2,742

 

 

 

262

 

 

 

 

 

 

3,004

 

Other revenue

 

 

250

 

 

 

346

 

 

 

 

 

 

596

 

Total

 

$

119,956

 

 

$

38,959

 

 

$

10,428

 

 

$

169,343

 

 

 

 

Nine Months Ended April 3, 2022

 

 

 

MasterCraft

 

 

Crest

 

 

Aviara

 

 

Total

 

Major Product Categories:

 

 

 

 

 

 

 

 

 

 

 

 

Boats and trailers

 

$

309,356

 

 

$

100,088

 

 

$

24,192

 

 

$

433,636

 

Parts

 

 

8,625

 

 

 

649

 

 

 

 

 

 

9,274

 

Other revenue

 

 

763

 

 

 

720

 

 

 

 

 

 

1,483

 

Total

 

$

318,744

 

 

$

101,457

 

 

$

24,192

 

 

$

444,393

 

 

Contract Liabilities

As of June 30, 2022, the Company had $1.4 million of contract liabilities associated with customer deposits. During the nine months ended April 2, 2023, all of this amount was recognized as revenue. As of April 2, 2023, total contract liabilities associated with customer deposits and services were $2.8 million, were reported in Accrued expenses and other current liabilities and Other long-term liabilities on the condensed consolidated balance sheet, and $1.1 million of the amounts are expected to be recognized as revenue during the remainder of the year ending June 30, 2023.

3.
DISCONTINUED OPERATIONS

On September 2, 2022, the Company sold its NauticStar business to certain affiliates of Iconic Marine Group, LLC ("Purchaser"). Pursuant to the terms of the purchase agreement, substantially all of the assets of NauticStar were sold, including, among other things, all of the issued and outstanding membership interests in its wholly-owned subsidiary NS Transport, LLC, all owned real property, equipment, inventory, intellectual property and accounts receivable, and the Purchaser assumed substantially all of the liabilities of NauticStar, including, among other things, product liability and warranty claims.

In conjunction with the purchase agreement, the Company entered into a joint employer services agreement and a transition services agreement, which provide certain services to the Purchaser for various periods of time after the sale. Both agreements ended during the second quarter of fiscal 2023. These agreements did not a have a material impact on expenditures, earnings, nor cash flows during the three and nine months ended April 2, 2023.

9


 

 

Further, the Company entered into the Second Amendment to the Credit Agreement as described further in Note 9 related to waivers of restrictions within the Credit Agreement, as amended, on the sale of assets.

During the nine months ended April 2, 2023, the Company recognized a $22.5 million loss on sale, subject to further changes based upon a customary working capital adjustment. Furthermore, assets and liabilities retained, primarily related to certain claims, are subject to change, with activity after the date of sale being recorded as discontinued operations.

The following table summarizes the operating results of discontinued operations for the following periods:

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

April 3,

 

 

April 2,

 

 

April 3,

 

 

 

2022

 

 

2023

 

 

2022

 

NET SALES

 

$

17,392

 

 

$

7,767

 

 

$

45,817

 

COST OF SALES

 

 

19,433

 

 

 

9,732

 

 

 

49,481

 

GROSS LOSS

 

 

(2,041

)

 

 

(1,965

)

 

 

(3,664

)

OPERATING EXPENSES:

 

 

 

 

 

 

 

 

 

Selling, general and administrative

 

 

1,578

 

 

 

2,639

 

 

 

4,322

 

Amortization of other intangible assets

 

 

498

 

 

 

 

 

 

1,533

 

Total operating expenses

 

 

2,076

 

 

 

2,639

 

 

 

5,855

 

OPERATING LOSS

 

 

(4,117

)

 

 

(4,604

)

 

 

(9,519

)

Loss on sale of discontinued operations

 

 

 

 

 

22,487

 

 

 

 

LOSS BEFORE INCOME TAX BENEFIT

 

 

(4,117

)

 

 

(27,091

)

 

 

(9,519

)

INCOME TAX BENEFIT

 

 

746

 

 

 

5,952

 

 

 

1,845

 

LOSS FROM DISCONTINUED OPERATIONS, NET OF TAX

 

$

(3,371

)

 

$

(21,139

)

 

$

(7,674

)

The operating results, and components thereof, of discontinued operations for the three months ended April 2, 2023 were not significant.

The following table summarizes the assets and liabilities associated with discontinued operations:

 

 

June 30,

 

 

 

2022

 

CURRENT ASSETS:

 

 

 

Accounts receivable, net of allowance

 

$

3,130

 

Inventories, net

 

 

20,044

 

Other current assets

 

 

434

 

Total current assets classified as discontinued operations

 

$

23,608

 

 

 

 

 

NON-CURRENT ASSETS:

 

 

 

Property, plant and equipment, net

 

$

5,924

 

Other long-term assets

 

 

63

 

Total non-current assets classified as discontinued operations

 

$

5,987

 

 

 

 

 

CURRENT LIABILITIES:

 

 

 

Accounts payable

 

$

4,675

 

Accrued expenses and other current liabilities

 

 

3,212

 

Total current liabilities classified as discontinued operations

 

$

7,887

 

 

10


 

 

4.
INVESTMENTS

 

During the three and nine months ended April 2, 2023, we invested a portion of our cash and cash equivalents in short-term investments, which primarily consist of investment grade corporate bonds. We have the ability and intention to hold these investments until maturity and therefore have classified these investments as held-to-maturity and recorded them at amortized cost and presented them in “Held-to-maturity securities” on our condensed consolidated balance sheet as of April 2, 2023. As of June 30, 2022, there were no outstanding held-to-maturity investments.

The following is a summary of investments as of April 2, 2023:

 

 

 

 

 

 

Gross

 

 

Gross

 

 

Estimated

 

 

 

Amortized

 

 

Unrealized

 

 

Unrealized

 

 

Fair

 

 

 

Cost

 

 

Gains

 

 

Losses

 

 

Value

 

Held-to-maturity securities:

 

 

 

 

 

 

 

 

 

 

 

 

Fixed income securities:

 

 

 

 

 

 

 

 

 

 

 

 

Corporate bonds

 

$

73,914

 

 

$

22

 

 

$

(132

)

 

$

73,804

 

Total held-to-maturity securities

 

$

73,914

 

 

$

22

 

 

$

(132

)

 

$

73,804

 

 

5.
INVENTORIES

Inventories consisted of the following:

 

 

 

April 2,

 

 

June 30,

 

 

 

2023

 

 

2022

 

Raw materials and supplies

 

$

37,617

 

 

$

45,021

 

Work in process

 

 

11,478

 

 

 

7,634

 

Finished goods

 

 

8,306

 

 

 

7,710

 

Obsolescence reserve

 

 

(2,133

)

 

 

(1,770

)

Total inventories

 

$

55,268

 

 

$

58,595

 

 

6.
PROPERTY, PLANT, AND EQUIPMENT

Property, plant, and equipment, net consisted of the following:

 

 

April 2,

 

 

June 30,

 

 

 

 

2023

 

 

2022

 

 

Land and improvements

 

$

6,457

 

 

$

6,367

 

 

Buildings and improvements

 

 

36,437

 

 

 

35,379

 

 

Machinery and equipment

 

 

41,438

 

 

 

39,457

 

 

Furniture and fixtures

 

 

3,863

 

 

 

3,394

 

 

Construction in progress

 

 

21,062

 

 

 

6,315

 

 

Total property, plant, and equipment

 

 

109,257

 

 

 

90,912

 

 

Less accumulated depreciation

 

 

(38,747

)

 

 

(35,089

)

 

Property, plant, and equipment — net

 

$

70,510

 

 

$

55,823

 

 

 

Property, plant, and equipment, net increased mainly due to capital spending focused on maintenance capital, which includes tooling, capacity expansion, and information technology.

11


 

 

7.
GOODWILL AND OTHER INTANGIBLE ASSETS

The carrying amounts of goodwill as of April 2, 2023 and June 30, 2022, along with accumulated goodwill reallocations and accumulated impairment losses attributable to each of the Company’s reportable segments, were as follows:

 

 

 

MasterCraft

 

 

Crest

 

 

Aviara

 

 

Total

 

Goodwill

 

$

29,593

 

 

$

36,238

 

 

$

 

 

$

65,831

 

Goodwill reallocation

 

 

(1,100

)

 

 

 

 

 

1,100

 

 

 

 

Accumulated impairment losses

 

 

 

 

 

(36,238

)

 

 

(1,100

)

 

 

(37,338

)

Goodwill, net

 

 

28,493

 

 

 

 

 

 

 

 

 

28,493

 

Fiscal 2022 Goodwill Impairment

During the first quarter of fiscal 2022, a $1.1 million impairment charge was recognized for our Aviara reporting unit. See Part IV. Item 15, Note 5 — Goodwill and Other Intangible Assets in Notes to Consolidated Financial Statements in our 2022 Annual Report for further details. No goodwill impairment charges were recognized during the three and nine months ended April 2, 2023.

The following table presents the carrying amount of Other intangible assets, net:

 

 

 

April 2,

 

 

June 30,

 

 

 

2023

 

 

2022

 

 

 

Gross Amount

 

 

Accumulated Amortization / Impairment

 

 

Other intangible assets, net

 

 

Gross Amount

 

 

Accumulated Amortization / Impairment

 

 

Other intangible assets, net

 

Amortized intangible assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dealer networks

 

$

19,500

 

 

$

(9,573

)

 

$

9,927

 

 

$

19,500

 

 

$

(8,143

)

 

$

11,357

 

Software

 

245

 

 

 

(221

)

 

 

24

 

 

245

 

 

 

(184

)

 

 

61

 

 

 

 

19,745

 

 

 

(9,794

)

 

 

9,951

 

 

 

19,745

 

 

 

(8,327

)

 

 

11,418

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unamortized intangible assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Trade names

 

 

33,000

 

 

 

(7,000

)

 

 

26,000

 

 

 

33,000

 

 

 

(7,000

)

 

 

26,000

 

Total other intangible assets

 

$

52,745

 

 

$

(16,794

)

 

$

35,951

 

 

$

52,745

 

 

$

(15,327

)

 

$

37,418

 

Amortization expense related to Other intangible assets, net for the three and nine months ended April 2, 2023 and April 3, 2022, was $0.5 million and $1.5 million, respectively. Estimated amortization expense for the fiscal year ending June 30, 2023 is $2.0 million.

 

8.
ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

Accrued expenses and other current liabilities consisted of the following:

 

 

 

April 2,

 

 

June 30,

 

 

 

2023

 

 

2022

 

Warranty

 

$

30,652

 

 

$

25,824

 

Dealer incentives

 

 

20,914

 

 

 

15,508

 

Compensation and related accruals

 

 

5,151

 

 

 

4,908

 

Contract liabilities

 

 

1,465

 

 

 

1,447

 

Inventory repurchase contingent obligation

 

 

1,315

 

 

 

661

 

Self-insurance

 

 

1,179

 

 

 

1,171

 

Liabilities retained associated with discontinued operations

 

 

776

 

 

 

 

Other

 

 

4,618

 

 

 

4,918

 

Total accrued expenses and other current liabilities

 

$

66,070

 

 

$

54,437

 

 

12


 

 

Accrued warranty liability activity was as follows for the nine months ended:

 

 

 

April 2,

 

 

April 3,

 

 

 

2023

 

 

2022

 

Balance at the beginning of the period

 

$

25,824

 

 

$

20,655

 

Provisions

 

 

10,766

 

 

 

8,453

 

Payments made

 

 

(9,069

)

 

 

(6,192

)

Aggregate changes for preexisting warranties

 

 

3,131

 

 

 

1,266

 

Balance at the end of the period

 

$

30,652

 

 

$

24,182

 

 

9.
LONG-TERM DEBT

Long-term debt is as follows:

 

 

 

April 2,

 

 

June 30,

 

 

 

2023

 

 

2022

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Term loan

 

$

54,750

 

 

$

57,000

 

Debt issuance costs on term loan

 

 

(355

)

 

 

(451

)

Total debt

 

 

54,395

 

 

 

56,549

 

Less current portion of long-term debt

 

 

4,125

 

 

 

3,000

 

Less current portion of debt issuance costs on term loan

 

 

(121

)

 

 

(127

)

Long-term debt, net of current portion

 

$

50,391

 

 

$

53,676

 

 

On June 28, 2021, the Company entered into a credit agreement with a syndicate of certain financial institutions (the “Credit Agreement”). The Credit Agreement provides the Company with a $160.0 million senior secured credit facility, consisting of a $60.0 million term loan (the “Term Loan”) and a $100.0 million revolving credit facility (the “Revolving Credit Facility”). The Credit Agreement refinanced and replaced the previously existing credit agreement. The Credit Agreement is secured by a first priority security interest in substantially all of the Company’s assets.

The Credit Agreement contains a number of covenants that, among other things, restrict the Company’s ability to, subject to specified exceptions, incur additional debt; incur additional liens and contingent liabilities; sell or dispose of assets; merge with or acquire other companies; liquidate or dissolve; engage in businesses that are not in a related line of business; make loans, advances or guarantees; pay dividends or make other distributions; engage in transactions with affiliates; and make investments. The Company is also required to maintain a minimum fixed charge coverage ratio and a maximum net leverage ratio.

On August 31, 2022, the Company entered into the Second Amendment to the Credit Agreement to obtain the necessary consents and waivers related to the sale of the NauticStar segment on September 2, 2022, as discussed in Note 3.

The Credit Agreement, as amended, bears interest, at the Company’s option, at either the prime rate plus an applicable margin ranging from 0.25% to 1.00% or at an adjusted term benchmark rate plus an applicable margin ranging from 1.25% to 2.00%, in each case based on the Company’s net leverage ratio. The Company is also required to pay a commitment fee for any unused portion of the revolving credit facility ranging from 0.15% to 0.30% based on the Company’s net leverage ratio. Effective during the three and nine months ended April 2, 2023, the applicable margin for loans accruing at the prime rate was 0.25% and the applicable margin for loans accruing interest at the benchmark rate was 1.25%. As of April 2, 2023, the interest rate on the Company’s term loan was 6.16%.

13


 

 

The Credit Agreement will mature and all remaining amounts outstanding thereunder will be due and payable on June 28, 2026. As of April 2, 2023, the Company was in compliance with its financial covenants under the Credit Agreement.

Revolving Credit Facility

As of April 2, 2023, the Company had no amounts outstanding on its Revolving Credit Facility and had remaining availability of $100.0 million.

10.
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, the benefit of federal and state credits, and a permanent benefit associated with the foreign derived intangible income deduction, partially offset by a permanent add-back for Section 162(m) limitations. During the three months ended April 2, 2023 and April 3, 2022, the Company's effective tax rate was 22.8% and 22.3%, respectively. During the nine months ended April 2, 2023 and April 3, 2022, the Company's effective tax rate was 23.2% and 22.9%, respectively.

11.
SHARE-BASED COMPENSATION

 

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

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

April 2,

 

 

April 3,

 

 

April 2,

 

 

April 3,

 

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

Restricted stock awards

 

$

587

 

 

$

441

 

 

$

1,723

 

 

$

1,399

 

Performance stock units

 

 

439

 

 

 

453

 

 

 

1,169

 

 

 

1,528

 

Share-based compensation expense

 

$

1,026

 

 

$

894

 

 

$

2,892

 

 

$

2,927

 

 

Restricted Stock Awards

During the nine months ended April 2, 2023, the Company granted 97,525 restricted stock awards (“RSAs”) to the Company’s non-executive directors, officers and certain other key employees. Generally, the shares of restricted stock granted during the nine months ended April 2, 2023, 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 nine months ended April 2, 2023, was $23.55 per share.

The following table summarizes the status of nonvested RSAs as of April 2, 2023, and changes during the nine months then ended.

 

 

 

 

 

 

Average

 

 

 

Nonvested

 

 

Grant-Date

 

 

 

Restricted

 

 

Fair Value

 

 

 

Shares

 

 

(per share)

 

Nonvested at June 30, 2022

 

 

106,408

 

 

$

21.65

 

Granted

 

 

97,525

 

 

 

23.55

 

Vested

 

 

(34,418

)

 

 

18.71

 

Forfeited

 

 

(5,509

)

 

 

21.96

 

Nonvested at April 2, 2023

 

 

164,006

 

 

 

23.39

 

 

As of April 2, 2023, there was $2.2 million of total unrecognized compensation expense related to nonvested RSAs. The Company expects this expense to be recognized over a weighted average period of 1.7 years.

14


 

 

Performance Stock Units

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 number 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 based on both the probability assessment of the Company 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 April 2, 2023, and changes during the nine months then ended.

 

 

 

 

 

 

Average

 

 

 

Nonvested

 

 

Grant-Date

 

 

 

Performance

 

 

Fair Value

 

 

 

Stock Units

 

 

(per share)

 

Nonvested at June 30, 2022

 

 

105,190

 

 

$

25.30

 

Granted

 

 

76,567

 

 

 

26.08

 

Forfeited

 

 

(1,996

)

 

 

26.15

 

Nonvested at April 2, 2023

 

 

179,761

 

 

 

25.62

 

 

As of April 2, 2023, there was $2.0 million of total unrecognized compensation expense related to nonvested PSUs. The Company expects this expense to be recognized over a weighted average period of 1.9 years.

Nonqualified Stock Options

In July 2015, the Company granted 137,786 nonqualified stock options ("NSOs") to certain employees. As of July 2019, all outstanding options were fully vested and exercisable. All outstanding options as of June 30, 2022, were exercised during the three months ended April 2, 2023.

The following table summarizes the NSO activity for the nine months ended April 2, 2023.

 

 

 

 

 

Weighted

 

 

 

 

 

 

Average

 

 

 

 

 

 

Exercise

 

 

 

Shares

 

 

Price

 

Outstanding at June 30, 2022

 

 

15,146

 

 

$

10.70

 

Granted

 

 

 

 

 

 

Exercised

 

 

(15,146

)

 

 

10.70

 

Forfeited or expired

 

 

 

 

 

 

Outstanding at April 2, 2023

 

 

 

 

 

 

 

15


 

 

12.
EARNINGS PER SHARE AND COMMON STOCK

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

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

April 2,

 

 

April 3,

 

 

April 2,

 

 

April 3,

 

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

Net income from continuing operations

 

$

22,782

 

 

$

24,306

 

 

$

67,400

 

 

$

54,397

 

Loss from discontinued operations, net of tax

 

 

(272

)

 

 

(3,371

)

 

 

(21,139

)

 

 

(7,674

)

Net income

 

$

22,510

 

 

$

20,935

 

 

$

46,261

 

 

$

46,723

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average shares — basic

 

 

17,559,920

 

 

 

18,295,949

 

 

 

17,725,208

 

 

 

18,622,878

 

Dilutive effect of assumed exercises of stock options

 

 

4,816

 

 

 

9,044

 

 

 

7,028

 

 

 

12,093

 

Dilutive effect of assumed restricted share awards/units

 

 

184,174

 

 

 

182,353

 

 

 

119,419

 

 

 

161,896

 

Weighted average outstanding shares — diluted

 

 

17,748,910

 

 

 

18,487,346

 

 

 

17,851,655

 

 

 

18,796,867

 

Basic net income (loss) per share

 

 

 

 

 

 

 

 

 

 

 

 

Continuing operations

 

$

1.30

 

 

$

1.33

 

 

$

3.80

 

 

$

2.92

 

Discontinued operations

 

 

(0.02

)

 

$

(0.19

)

 

 

(1.19

)

 

 

(0.41

)

Net income

 

$

1.28

 

 

$

1.14

 

 

$

2.61

 

 

$

2.51

 

Diluted net income (loss) per share

 

 

 

 

 

 

 

 

 

 

 

 

Continuing operations

 

$

1.28

 

 

$

1.31

 

 

$

3.78

 

 

$

2.89

 

Discontinued operations

 

 

(0.01

)

 

$

(0.18

)

 

 

(1.19

)

 

 

(0.40

)

Net income

 

$

1.27

 

 

$

1.13

 

 

$

2.59

 

 

$

2.49

 

 

For the three and nine months ended April 2, 2023 and April 3, 2022, an immaterial number of shares were excluded from the computation of diluted earnings per share as the effect would have been anti-dilutive.

Stock Repurchase Program

On June 24, 2021, the board of directors of the Company authorized a stock repurchase program that allows for the repurchase of up to $50.0 million of the Company’s common stock during the three-year period ending June 24, 2024. During the three months ended April 2, 2023 and April 3, 2022, the Company repurchased 210,150 shares and 395,948 shares of common stock for $7.0 million and $10.1 million, respectively, in cash, including related fees and expenses. During the nine months ended April 2, 2023 and April 3, 2022, the Company repurchased 625,794 shares and 810,623 shares of common stock for $16.0 million and $21.5 million, respectively, in cash, including related fees and expenses. As of April 2, 2023, $8.6 million remained available under the program.

 

13.
SEGMENT INFORMATION

Reportable Segments

Operating segments are identified as components of an enterprise about which discrete financial information is available for evaluation by the CODM in making decisions on how to allocate resources and assess performance. For the three and nine months ended April 2, 2023, the Company’s CODM regularly assessed the operating performance of the Company’s boat brands under three operating and reportable segments:

The MasterCraft segment produces boats at its Vonore, Tennessee facility. These are premium recreational performance sport boats primarily used for water skiing, wakeboarding, wake surfing, and general recreational boating.
The Crest segment produces pontoon boats at its Owosso, Michigan facility. Crest’s boats are primarily used for general recreational boating.
The Aviara segment produces luxury day boats at its Merritt Island, Florida facility. Aviara boats are primarily used for general recreational boating.

16


 

 

Each segment distributes its products through its own independent dealer network. Each segment also has its own management structure which is responsible for the operations of the segment and is directly accountable to the CODM for the operating performance of the segment, which is regularly assessed by the CODM who allocates resources based on that performance.

The Company files a consolidated income tax return and does not allocate income taxes and other corporate-level expenses, including interest, to operating segments. All material corporate costs are included in the MasterCraft segment.

Selected financial information for the Company’s reportable segments was as follows:

 

 

 

For the Three Months Ended April 2, 2023

 

 

 

MasterCraft

 

 

Crest

 

 

Aviara

 

 

Consolidated

 

Net sales

 

$

117,630

 

 

$

36,369

 

 

$

12,777

 

 

$

166,776

 

Operating income (loss)

 

 

25,298

 

 

 

4,962

 

 

 

(1,234

)

 

 

29,026

 

Depreciation and amortization

 

 

1,386

 

 

 

701

 

 

 

535

 

 

 

2,622

 

Purchases of property, plant and equipment

 

 

3,151

 

 

 

2,089

 

 

 

1,716

 

 

 

6,956

 

 

 

 

For the Nine Months Ended April 2, 2023

 

 

 

MasterCraft

 

 

Crest

 

 

Aviara

 

 

Consolidated

 

Net sales

 

$

339,315

 

 

$

116,595

 

 

$

39,570

 

 

$

495,480

 

Operating income (loss)

 

 

72,269

 

 

 

17,576

 

 

 

(2,136

)

 

 

87,709

 

Depreciation and amortization

 

 

4,132

 

 

 

2,104

 

 

 

1,597

 

 

 

7,833

 

Purchases of property, plant and equipment

 

 

8,434

 

 

 

6,292

 

 

 

4,145

 

 

 

18,871

 

 

 

 

For the Three Months Ended April 3, 2022

 

 

 

MasterCraft

 

 

Crest

 

 

Aviara

 

 

Consolidated

 

Net sales

 

$

119,956

 

 

$

38,959

 

 

$

10,428

 

 

$

169,343

 

Operating income (loss)

 

 

28,051

 

 

 

5,568

 

 

 

(2,015

)

 

 

31,604

 

Depreciation and amortization

 

 

1,248

 

 

 

657

 

 

 

602

 

 

 

2,507

 

Purchases of property, plant and equipment

 

 

1,434

 

 

 

1,146

 

 

 

496

 

 

 

3,076

 

 

 

 

For the Nine Months Ended April 3, 2022

 

 

 

MasterCraft

 

 

Crest

 

 

Aviara

 

 

Consolidated

 

Net sales

 

$

318,744

 

 

$

101,457

 

 

$

24,192

 

 

$

444,393

 

Operating income (loss)

 

 

65,533

 

 

 

14,004

 

 

 

(7,934

)

 

 

71,603

 

Depreciation and amortization

 

 

3,762

 

 

 

1,998

 

 

 

1,569

 

 

 

7,329

 

Goodwill impairment

 

 

 

 

 

 

 

 

1,100

 

 

 

1,100

 

Purchases of property, plant and equipment

 

 

4,966

 

 

 

2,190

 

 

 

865

 

 

 

8,021

 

 

The following table presents total assets for the Company’s reportable segments.

 

 

 

April 2, 2023

 

 

June 30, 2022

 

Assets:

 

 

 

 

 

 

MasterCraft

 

$

248,457

 

 

$

178,386

 

Crest

 

 

52,075

 

 

 

53,956

 

Aviara

 

 

37,742

 

 

 

35,115

 

Discontinued operations

 

 

 

 

 

29,595

 

Total assets

 

$

338,274

 

 

$

297,052

 

 

17


 

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 2022 Annual Report and our Fiscal Second Quarter Quarterly Report. 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

We are a leading innovator, designer, manufacturer and marketer of recreational powerboats sold through our three brands, MasterCraft, Crest, and Aviara. Through our three brands, we have leading market share positions in two of the fastest growing segments of the powerboat industry, performance sports boats and pontoon boats, while entering the large growing luxury day boat segment. As a leader in recreational marine, we strive to deliver the best on-water experience through innovative, high-quality products with a relentless focus on the consumer.

Discontinued Operations

On September 2, 2022, the Company completed the sale of its NauticStar business. This business, which was previously reported as the Company's NauticStar segment until fiscal 2023, is being reported as discontinued operations for all periods presented. The Company's results for all periods presented, as discussed in Management's Discussion and Analysis, are presented on a continuing operations basis with prior year amounts recast to provide visibility and comparability. See Note 3 in Notes to Unaudited Condensed Consolidated Financial Statements for more information on Discontinued Operations.

Outlook

During the COVID-19 pandemic, the marine industry benefited from changes in consumer preferences, which accelerated retail sales of our products during fiscal 2021 and fiscal 2022. Strong retail demand created historically low dealer inventory levels which, in turn, increased wholesale demand for our products. Despite lower retail demand from normalized seasonality, fiscal 2023 has continued to have strong wholesale performance while dealers replenish inventory levels. As retail trends evolve in the future, we expect wholesale demand to be more closely aligned with retail demand.

With respect to retail demand, we are actively monitoring the impact of retail trends on our business, which may be impacted by macroeconomic conditions outside our control such as inflation, rising interest rates, financial institution disruptions, geopolitical conflicts and the corresponding economic uncertainty. The full extent of the impact on our business, operations, and financial results cannot be predicted. See Item 1A. "Risk Factors" set forth in our 2022 Annual Report and our Fiscal Second Quarter Quarterly Report.

18


 

Results of Continuing Operations

Consolidated Results

 

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

 

 

 

Three Months Ended

 

 

2023 vs. 2022

 

 

Nine Months Ended

 

 

2023 vs. 2022

 

 

 

April 2,

 

 

April 3,

 

 

 

 

 

%

 

 

April 2,

 

 

April 3,

 

 

 

 

 

%

 

 

 

2023

 

 

2022

 

 

Change

 

 

Change

 

 

2023

 

 

2022

 

 

Change

 

 

Change

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consolidated statements of operations:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NET SALES

 

$

166,776

 

 

$

169,343

 

 

$

(2,567

)

 

 

(1.5

%)

 

$

495,480

 

 

$

444,393

 

 

$

51,087

 

 

 

11.5

%

COST OF SALES

 

 

124,178

 

 

 

125,269

 

 

 

(1,091

)

 

 

(0.9

%)

 

 

368,682

 

 

 

333,376

 

 

 

35,306

 

 

 

10.6

%

GROSS PROFIT

 

 

42,598

 

 

 

44,074

 

 

 

(1,476

)

 

 

(3.3

%)

 

 

126,798

 

 

 

111,017

 

 

 

15,781

 

 

 

14.2

%

OPERATING EXPENSES:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Selling and marketing

 

 

3,927

 

 

 

3,017

 

 

 

910

 

 

 

30.2

%

 

 

10,748

 

 

 

9,966

 

 

 

782

 

 

 

7.8

%

General and administrative

 

 

9,156

 

 

 

8,964

 

 

 

192

 

 

 

2.1

%

 

 

26,874

 

 

 

26,881

 

 

 

(7

)

 

 

(0.0

%)

Amortization of other intangible assets

 

 

489

 

 

 

489

 

 

 

 

 

 

0.0

%

 

 

1,467

 

 

 

1,467

 

 

 

 

 

 

0.0

%

Goodwill impairment

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,100

 

 

 

(1,100

)

 

 

 

Total operating expenses

 

 

13,572

 

 

 

12,470

 

 

 

1,102

 

 

 

8.8

%

 

 

39,089

 

 

 

39,414

 

 

 

(325

)

 

 

(0.8

%)

OPERATING INCOME

 

 

29,026

 

 

 

31,604

 

 

 

(2,578

)

 

 

(8.2

%)

 

 

87,709

 

 

 

71,603

 

 

 

16,106

 

 

 

22.5

%

OTHER INCOME (EXPENSE):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense

 

 

(695

)

 

 

(341

)

 

 

(354

)

 

 

103.8

%

 

 

(1,923

)

 

 

(1,080

)

 

 

(843

)

 

 

78.1

%

Interest income

 

 

1,195

 

 

 

 

 

 

1,195

 

 

 

 

 

 

1,967

 

 

 

 

 

 

1,967

 

 

 

 

INCOME BEFORE INCOME TAX EXPENSE

 

 

29,526

 

 

 

31,263

 

 

 

(1,737

)

 

 

(5.6

%)

 

 

87,753

 

 

 

70,523

 

 

 

17,230

 

 

 

24.4

%

INCOME TAX EXPENSE

 

 

6,744

 

 

 

6,957

 

 

 

(213

)

 

 

(3.1

%)

 

 

20,353

 

 

 

16,126

 

 

 

4,227

 

 

 

26.2

%

NET INCOME FROM CONTINUING OPERATIONS

 

$

22,782

 

 

$

24,306

 

 

$

(1,524

)

 

 

(6.3

%)

 

$

67,400

 

 

$

54,397

 

 

$

13,003

 

 

 

23.9

%

Additional financial and other data:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unit sales volume:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

MasterCraft

 

 

900

 

 

 

900

 

 

 

 

 

 

 

 

 

2,457

 

 

 

2,569

 

 

 

(112

)

 

 

(4.4

%)

Crest

 

 

722

 

 

 

855

 

 

 

(133

)

 

 

(15.6

%)

 

 

2,344

 

 

 

2,261

 

 

 

83

 

 

 

3.7

%

Aviara

 

 

34

 

 

 

29

 

 

 

5

 

 

 

17.2

%

 

 

100

 

 

 

71

 

 

 

29

 

 

 

40.8

%

Consolidated unit sales volume

 

 

1,656

 

 

 

1,784

 

 

 

(128

)

 

 

(7.2

%)

 

 

4,901

 

 

 

4,901

 

 

 

 

 

 

0.0

%

Net sales:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

MasterCraft

 

$

117,630

 

 

$

119,956

 

 

$

(2,326

)

 

 

(1.9

%)

 

$

339,315

 

 

$

318,744

 

 

$

20,571

 

 

 

6.5

%

Crest

 

 

36,369

 

 

 

38,959

 

 

 

(2,590

)

 

 

(6.6

%)

 

 

116,595

 

 

 

101,457

 

 

 

15,138

 

 

 

14.9

%

Aviara

 

 

12,777

 

 

 

10,428

 

 

 

2,349

 

 

 

22.5

%

 

 

39,570

 

 

 

24,192

 

 

 

15,378

 

 

 

63.6

%

Consolidated net sales

 

$

166,776

 

 

$

169,343

 

 

$

(2,567

)

 

 

(1.5

%)

 

$

495,480

 

 

$

444,393

 

 

$

51,087

 

 

 

11.5

%

Net sales per unit:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

MasterCraft

 

$

131

 

 

$

133

 

 

$

(2

)

 

 

(1.5

%)

 

$

138

 

 

$

124

 

 

$

14

 

 

 

11.3

%

Crest

 

 

50

 

 

 

46

 

 

 

4

 

 

 

8.7

%

 

 

50

 

 

 

45

 

 

 

5

 

 

 

11.1

%

Aviara

 

 

376

 

 

 

360

 

 

 

16

 

 

 

4.4

%

 

 

396

 

 

 

341

 

 

 

55

 

 

 

16.1

%

Consolidated net sales per unit

 

 

101

 

 

 

95

 

 

 

6

 

 

 

6.3

%

 

 

101

 

 

 

91

 

 

 

10

 

 

 

11.0

%

Gross margin

 

 

25.5

%

 

 

26.0

%

 

(50) bps

 

 

 

 

 

 

25.6

%

 

 

25.0

%

 

60 bps

 

 

 

 

Net sales decreased 1.5 percent during the third quarter of fiscal 2023 when compared with the same prior-year period. The decrease was the result of changes in model mix, decreased sales volumes, increased dealer incentives, and decreased options sales, partially offset by higher prices. Dealer incentives include higher floor plan financing costs and other incentives as a result of increased dealer inventories and interest rates.

Net sales increased 11.5 percent during the first nine months of fiscal 2023 when compared with the same prior-year period. Net sales benefited from higher prices and increased options sales, partially offset by changes in model mix and increased dealer incentives.

19


 

Gross margin decreased 50 basis points during the third quarter of fiscal 2023, when compared with the same prior-year period, due to higher costs from inflationary pressures, changes in mix, higher dealer incentives, and increased warranty costs, partially offset by higher prices and improved production efficiencies.

Gross margin increased 60 basis points during the first nine months of fiscal 2023, when compared with the same prior-year period, due to higher prices and improved production efficiencies, partially offset by higher costs from inflationary pressures, changes in mix, increased dealer incentives and increased warranty costs.

Operating expenses increased $1.1 million during the third quarter of fiscal 2023, when compared to the same prior-year period, primarily related to increased boat show related costs and investments in digital marketing.

Operating expenses decreased $0.3 million during the first nine months of fiscal 2023, when compared to the same prior-year period, primarily due to an impairment charge of $1.1 million related to the allocated goodwill associated with the Aviara segment recorded in the first quarter of fiscal 2022, as discussed in Note 7 to the Unaudited Condensed Consolidated Financial Statements, partially offset by an increase in boat show related costs and investments in digital marketing.

Interest expense increased $0.4 million and $0.8 million during the third quarter and first nine months of fiscal 2023, respectively, when compared to the same prior-year periods due to higher effective interest rates.

Interest income of $1.2 million and $2.0 million during the third quarter and first nine months of fiscal 2023, respectively, is derived primarily from investments in a portfolio of fixed income securities as part of the Company's cash management strategy.

Segment Results

MasterCraft Segment

The following table sets forth MasterCraft segment results for the three and nine months ended:

 

 

 

Three Months Ended

 

 

2023 vs. 2022

 

 

Nine Months Ended

 

 

2023 vs. 2022

 

 

 

April 2,

 

 

April 3,

 

 

 

 

 

%

 

 

April 2,

 

 

April 3,

 

 

 

 

 

%

 

 

 

2023

 

 

2022

 

 

Change

 

 

Change

 

 

2023

 

 

2022

 

 

Change

 

 

Change

 

Net sales

 

$

117,630

 

 

$

119,956

 

 

$

(2,326

)

 

 

(1.9

%)

 

$

339,315

 

 

$

318,744

 

 

$

20,571

 

 

 

6.5

%

Operating income

 

 

25,298

 

 

 

28,051

 

 

 

(2,753

)

 

 

(9.8

%)

 

 

72,269

 

 

 

65,533

 

 

 

6,736

 

 

 

10.3

%

Purchases of property, plant and equipment

 

 

3,151

 

 

 

1,434

 

 

 

1,717

 

 

 

119.7

%

 

 

8,434

 

 

 

4,966

 

 

 

3,468

 

 

 

69.8

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unit sales volume

 

 

900

 

 

 

900

 

 

 

-

 

 

 

0.0

%

 

 

2,457

 

 

 

2,569

 

 

 

(112

)

 

 

(4.4

%)

Net sales per unit

 

$

131

 

 

$

133

 

 

$

(2

)

 

 

(1.5

%)

 

$

138

 

 

$

124

 

 

$

14

 

 

 

11.3

%

 

Net sales decreased 1.9 percent during the third quarter of fiscal 2023, when compared with the same prior-year period, due to changes in model mix, decreased options sales, and increased dealer incentives, partially offset by higher prices.

 

Net sales increased 6.5 percent during the first nine months of fiscal 2023, when compared with the same prior-year period, due to higher prices and increased options sales, partially offset by decreased sales volume and changes in model mix.

Operating income decreased $2.8 million during the third quarter of fiscal 2023 when compared to the same prior-year period. The decrease was driven by changes in model mix, higher material and overhead costs from inflationary pressures, higher dealer incentives, decreased option sales, and increased warranty costs, partially offset by higher prices.

Operating income increased $6.7 million during the first nine months of fiscal 2023, when compared with the same prior-year period, due to higher prices, partially offset by higher material and overhead costs from inflationary pressures, changes in model mix, higher dealer incentives, and increased warranty costs.

Purchases of property, plant, and equipment increased 119.7 percent and 69.8 percent during the third quarter and first nine months of fiscal 2023, respectively, when compared to the same prior-year periods, due to capital spending focused on maintenance capital, which includes tooling, capacity expansion, and information technology.

20


 

Crest Segment

The following table sets forth Crest segment results for the three and nine months ended:

 

 

 

Three Months Ended

 

 

2023 vs. 2022

 

 

Nine Months Ended

 

 

2023 vs. 2022

 

 

 

April 2,

 

 

April 3,

 

 

 

 

 

%

 

 

April 2,

 

 

April 3,

 

 

 

 

 

%

 

 

2023

 

 

2022

 

 

Change

 

 

Change

 

 

2023

 

 

2022

 

 

Change

 

 

Change

 

Net sales

 

$

36,369

 

 

$

38,959

 

 

$

(2,590

)

 

 

(6.6

%)

 

$

116,595

 

 

$

101,457

 

 

$

15,138

 

 

 

14.9

%

Operating income

 

 

4,962

 

 

 

5,568

 

 

 

(606

)

 

 

(10.9

%)

 

 

17,576

 

 

 

14,004

 

 

 

3,572

 

 

 

25.5

%

Purchases of property, plant and equipment

 

 

2,089

 

 

 

1,146

 

 

 

943

 

 

 

82.3

%

 

 

6,292

 

 

 

2,190

 

 

 

4,102

 

 

 

187.3

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unit sales volume

 

 

722

 

 

 

855

 

 

 

(133

)

 

 

(15.6

%)

 

 

2,344

 

 

 

2,261

 

 

 

83

 

 

 

3.7

%

Net sales per unit

 

$

50

 

 

$

46

 

 

$

4

 

 

 

8.7

%

 

$

50

 

 

$

45

 

 

$

5

 

 

 

11.1

%

Net sales decreased 6.6 percent during the third quarter of fiscal 2023 when compared to the same prior-year period, as a result of decreased unit volume and increased dealer incentives, partially offset by higher prices and favorable model mix.

Net sales increased 14.9 percent during the first nine months of fiscal 2023 when compared to the same prior-year period, as a result of higher prices and higher option sales, partially offset by increased dealer incentives.

Operating income decreased 10.9 percent during the third quarter of fiscal 2023 when compared to the same prior-year period. The decrease was driven by decreased unit volume, higher material costs from inflationary prices, increased dealer incentives, and increased warranty costs, partially offset by higher prices.

Operating income increased 25.5 percent for the first nine months of fiscal 2023 when compared to the same prior-year period. The increase is primarily the result of higher prices, partially offset by higher material costs from inflationary pressures, increased dealer incentives, and increased warranty costs.

Purchases of property, plant, and equipment increased 82.3 percent and 187.3 percent during the third quarter and first nine months of fiscal 2023, respectively, when compared to the same prior-year periods due to capital spending focused on capacity expansion.

Aviara Segment

The following table sets forth Aviara segment results for the three and nine months ended:

 

 

 

Three Months Ended

 

 

2023 vs. 2022

 

 

Nine Months Ended

 

 

2023 vs. 2022

 

 

 

April 2,

 

 

April 3,

 

 

 

 

 

%

 

 

April 2,

 

 

April 3,

 

 

 

 

 

%

 

 

2023

 

 

2022

 

 

Change

 

 

Change

 

 

2023

 

 

2022

 

 

Change

 

 

Change

 

Net sales

 

$

12,777

 

 

$

10,428

 

 

$

2,349

 

 

 

22.5

%

 

$

39,570

 

 

$

24,192

 

 

$

15,378

 

 

 

63.6

%

Operating loss

 

 

(1,234

)

 

 

(2,015

)

 

 

781

 

 

 

38.8

%

 

 

(2,136

)

 

 

(7,934

)

 

 

5,798

 

 

 

73.1

%

Goodwill impairment

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,100

 

 

 

(1,100

)

 

 

 

Purchases of property, plant and equipment

 

 

1,716

 

 

 

496

 

 

 

1,220

 

 

 

246.0

%

 

 

4,145

 

 

 

865

 

 

 

3,280

 

 

 

379.2

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unit sales volume

 

 

34

 

 

 

29

 

 

 

5

 

 

 

17.2

%

 

 

100

 

 

 

71

 

 

 

29

 

 

 

40.8

%

Net sales per unit

 

$

376

 

 

$

360

 

 

$

16

 

 

 

4.4

%

 

$

396

 

 

$

341

 

 

$

55

 

 

 

16.1

%

Net sales increased $2.3 million and $15.4 million during the third quarter and first nine months of fiscal 2023, respectively, when compared to the same prior-year periods, due to increased sales volume and higher prices.

Operating loss decreased 38.8 percent and 73.1 percent for the third quarter and first nine months of fiscal 2023, respectively, when compared to the same prior-year periods. The change was primarily a result of higher prices, improved production efficiencies, and increased sales volume, partially offset by higher material costs from inflationary pressures. Additionally, a goodwill impairment charge was recorded during the first quarter of fiscal 2022.

Purchases of property, plant, and equipment increased 246.0 percent and 379.2 percent during the third quarter and first nine months of fiscal 2023, respectively, when compared to the same prior-year periods due to capital spending focused on capacity expansion.

21


 

Non-GAAP Measures

EBITDA, Adjusted EBITDA, EBITDA Margin, and Adjusted EBITDA Margin

We define EBITDA as net income from continuing operations, before interest, 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 share-based compensation, business development consulting costs, and goodwill impairment. We define EBITDA margin and Adjusted EBITDA margin as EBIDTA and Adjusted EBITDA, respectively, each 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 from continuing operations, 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 and reflecting income tax expense on adjusted net income before income taxes at our estimated annual effective tax rate. For the periods presented herein, these adjustments include other intangible asset amortization, share-based compensation, business development consulting costs, and goodwill impairment.

EBITDA, Adjusted EBITDA, EBITDA margin, 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. 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 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 certain non-cash items and other items that we do not consider to be indicative of our core and/or ongoing operations and reflecting income tax expense on adjusted net income before income taxes at our estimated annual effective tax rate. 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 the Non-GAAP measures do not reflect any cash requirements for such replacements;
The Non-GAAP measures do not reflect our cash expenditures, or future requirements for capital expenditures or contractual commitments;
The Non-GAAP measures do not reflect changes in, or cash requirements for, our working capital needs;
The Non-GAAP measures do not reflect our tax expense or any cash requirements to pay income taxes;
The Non-GAAP measures do not reflect interest expense, or the cash requirements necessary to service interest payments on our indebtedness; and
The Non-GAAP measures 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.

22


 

Beginning in the first quarter of fiscal 2023, due to the effects of discontinued operations, as discussed above, the Company's non-GAAP financial measures are presented on a continuing operations basis, for all periods presented.

The following table presents a reconciliation of net income from continuing operations as determined in accordance with U.S. GAAP to EBITDA, and Adjusted EBITDA, and net income from continuing operations margin to EBITDA margin and Adjusted EBITDA Margin (each expressed as a percentage of net sales) for the periods indicated:

 

 

 

Three Months Ended

 

Nine Months Ended

 

 

April 2,

 

 

% of Net

 

April 3,

 

 

% of Net

 

April 2,

 

 

% of Net

 

April 3,

 

 

% of Net

 

 

2023

 

 

sales

 

2022

 

 

sales

 

2023

 

 

sales

 

2022

 

 

sales

Net income from continuing operations

 

$

22,782

 

 

13.7%

 

$

24,306

 

 

14.4%

 

$

67,400

 

 

13.6%

 

$

54,397

 

 

12.2%

Income tax expense

 

 

6,744

 

 

 

 

 

6,957

 

 

 

 

 

20,353

 

 

 

 

 

16,126

 

 

 

Interest expense

 

 

695

 

 

 

 

 

341

 

 

 

 

 

1,923

 

 

 

 

 

1,080

 

 

 

Interest income

 

 

(1,195

)

 

 

 

 

 

 

 

 

 

(1,967

)

 

 

 

 

 

 

 

Depreciation and amortization

 

 

2,622

 

 

 

 

 

2,507

 

 

 

 

 

7,833

 

 

 

 

 

7,329

 

 

 

EBITDA

 

 

31,648

 

 

19.0%

 

 

34,111

 

 

20.1%

 

 

95,542

 

 

19.3%

 

 

78,932

 

 

17.8%

Share-based compensation

 

 

1,026

 

 

 

 

 

894

 

 

 

 

 

2,892

 

 

 

 

 

2,927

 

 

 

Business development consulting costs(a)

 

 

312

 

 

 

 

 

 

 

 

 

 

312

 

 

 

 

 

 

 

 

Goodwill impairment(b)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,100

 

 

 

Adjusted EBITDA

 

$

32,986

 

 

19.8%

 

$

35,005

 

 

20.7%

 

$

98,746

 

 

19.9%

 

$

82,959

 

 

18.7%

(a)
Represents non-recurring third-party costs associated with business development activities, primarily relating to consulting costs for evaluation and execution of internal growth and other strategic initiatives.
(b)
Represents a non-cash charge recorded in the Aviara segment for impairment of goodwill.

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

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

April 2,

 

 

April 3,

 

 

April 2,

 

 

April 3,

 

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

 

 

(Dollars in thousands, except per share data)

 

Net income from continuing operations

 

$

22,782

 

 

$

24,306

 

 

$

67,400

 

 

$

54,397

 

Income tax expense

 

 

6,744

 

 

 

6,957

 

 

 

20,353

 

 

 

16,126

 

Amortization of acquisition intangibles

 

 

462

 

 

 

462

 

 

 

1,386

 

 

 

1,386

 

Share-based compensation

 

 

1,026

 

 

 

894

 

 

 

2,892

 

 

 

2,927

 

Business development consulting costs(a)

 

 

312

 

 

 

 

 

 

312

 

 

 

 

Goodwill impairment(b)

 

 

 

 

 

 

 

 

 

 

 

1,100

 

Adjusted Net Income before income taxes

 

 

31,326

 

 

 

32,619

 

 

 

92,343

 

 

 

75,936

 

Adjusted income tax expense(c)

 

 

7,205

 

 

 

7,502

 

 

 

21,239

 

 

 

17,465

 

Adjusted Net Income

 

$

24,121

 

 

$

25,117

 

 

$

71,104

 

 

$

58,471

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted Operating Net Income per share:

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

1.37

 

 

$

1.37

 

 

$

4.01

 

 

$

3.14

 

Diluted

 

$

1.36

 

 

$

1.36

 

 

$

3.98

 

 

$

3.11

 

Weighted average shares used for the computation of(d):

 

 

 

 

 

 

 

 

 

 

 

 

Basic Adjusted Net Income per share

 

 

17,559,920

 

 

 

18,295,949

 

 

 

17,725,208

 

 

 

18,622,878

 

Diluted Adjusted Net Income per share

 

 

17,748,910

 

 

 

18,487,346

 

 

 

17,851,655

 

 

 

18,796,867

 

(a)
Represents non-recurring third-party costs associated with business development activities, primarily relating to consulting costs for evaluation and execution of internal growth and other strategic initiatives.
(b)
Represents a non-cash charge recorded in the Aviara segment for impairment of goodwill.
(c)
Reflects income tax expense at an income tax rate of 23.0% for each period presented.
(d)
Represents the Weighted Average Shares used for the computation of Basic and Diluted earnings per share as presented on the Consolidated Statements of Operations to calculate Adjusted Net Income per diluted share for all periods presented herein.

23


 

The following table presents the reconciliation of net income from continuing operations per diluted share to Adjusted Net Income per diluted share for the periods presented:

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

April 2,

 

 

April 3,

 

 

April 2,

 

 

April 3,

 

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

Net income from continuing operations per diluted share

 

$

1.28

 

 

$

1.31

 

 

$

3.78

 

 

$

2.89

 

Impact of adjustments:

 

 

 

 

 

 

 

 

 

 

 

 

Income tax expense

 

 

0.38

 

 

 

0.38

 

 

 

1.14

 

 

 

0.87

 

Amortization of acquisition intangibles

 

 

0.03

 

 

 

0.02

 

 

 

0.08

 

 

 

0.07

 

Share-based compensation

 

 

0.06

 

 

 

0.05

 

 

 

0.16

 

 

 

0.16

 

Business development consulting costs(a)

 

 

0.02

 

 

 

 

 

 

0.02

 

 

 

 

Goodwill impairment(b)

 

 

 

 

 

 

 

 

 

 

 

0.06

 

Adjusted Net Income per diluted share before income taxes

 

 

1.77

 

 

 

1.76

 

 

 

5.18

 

 

 

4.05

 

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

 

 

(0.41

)

 

 

(0.40

)

 

 

(1.20

)

 

 

(0.94

)

Adjusted Net Income per diluted share

 

$

1.36

 

 

$

1.36

 

 

$

3.98

 

 

$

3.11

 

(a)
Represents non-recurring third-party costs associated with business development activities, primarily relating to consulting costs for evaluation and execution of internal growth and other strategic initiatives.
(b)
Represents a non-cash charge recorded in the Aviara segment for impairment of goodwill.
(c)
Reflects income tax expense at an income tax rate of 23.0% for each period presented.

Liquidity and Capital Resources

Our primary liquidity and capital resource needs are to finance working capital, fund capital expenditures, service our debt, fund our stock repurchase program, and fund potential business acquisitions. Our principal sources of liquidity are our cash balance, investments due to their short-term nature, cash generated from operating activities, our revolving credit agreement and the refinancing and/or new issuance of long-term debt. We believe our cash balance, investments, cash from operations, and our ability to borrow will be sufficient to provide for our liquidity and capital resource needs.

Cash and cash equivalents totaled $27.5 million as of April 2, 2023, a decrease of $6.7 million from $34.2 million as of June 30, 2022. Held-to-maturity securities totaled $73.9 million as of April 2, 2023. As of June 30, 2022, there were no outstanding held-to-maturity securities. Total debt as of April 2, 2023 and June 30, 2022, was $54.4 million and $56.5 million, respectively.

As of April 2, 2023, we had no amounts outstanding under the Revolving Credit Facility, leaving $100.0 million of available borrowing capacity. Refer to Note 9 — Long Term Debt in the Notes to Unaudited Condensed Consolidated Financial Statements for further details.

On June 24, 2021, the board of directors of the Company authorized a stock repurchase program that allows for the repurchase of up to $50.0 million of our common stock during the three-year period ending June 24, 2024. During the nine months ended April 2, 2023, the Company repurchased 625,794 shares of common stock for $16.0 million in cash, including related fees and expenses.

The following table and discussion below relate to our cash flows from continuing operations for operating, investing, and financing activities:

 

 

 

Nine Months Ended

 

 

 

April 2,

 

 

April 3,

 

 

 

2023

 

 

2022

 

 

 

(Dollars in thousands)

 

Total cash provided by (used in):

 

 

 

 

 

 

Operating activities

 

$

107,365

 

 

$

51,863

 

Investing activities

 

 

(92,380

)

 

 

(8,021

)

Financing activities

 

 

(18,831

)

 

 

(49,949

)

Net change in cash from continuing operations

 

$

(3,846

)

 

$

(6,107

)

 

24


 

Nine Months Ended April 2, 2023 Cash Flows from Continuing Operations

Net cash provided by operating activities for the nine months ended April 2, 2023 was $107.4 million, primarily due to net income and cash provided by favorable changes in working capital. 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 consolidated balance sheets, excluding the impact of acquisitions and non-cash adjustments. Favorable changes in working capital primarily consisted of an increase in accrued expenses and other current liabilities and accounts payable, and a decrease in accounts receivable and inventories. Partially offsetting favorable changes in working capital was an increase in prepaid expenses and other current assets. Accrued expenses and other current liabilities primarily increased due to increased warranty, floor plan interest, and retail rebate costs. Accounts payable increased mainly due to increased payables related to capital spending. Accounts receivable decreased primarily as a result of lower sales at the end of the period compared to the end of the prior-year period. Inventories decreased as we maintain rebalanced inventory levels after the prior summer selling season, partially offset by increased materials costs from inflation. Prepaid expenses and other current assets increased due to payment of annual general insurance premiums which have increased since the prior-year period.

Net cash used in investing activities was $92.4 million, due to net investments in held-to-maturity securities of $73.5 million and $18.9 million of capital expenditures. Our capital spending was focused on maintenance capital, which includes tooling, expanding our capacity, and information technology.

Net cash used in financing activities was $18.8 million, which included net payments of $2.3 million on long-term debt and $16.0 million of stock repurchases.

Nine Months Ended April 3, 2022 Cash Flows from Continuing Operations

Net cash provided by operating activities for the nine months ended April 3, 2022 totaled $51.9 million mainly due to net income, partially offset by working capital usage. Working capital usage primarily consisted of an increase in inventory, accounts receivable and prepaid expenses and other current assets. Partially offsetting the working capital usage was an increase in accrued expenses and other current liabilities and accounts payable. Inventory increased $19.7 million for the first nine months of fiscal 2022 due to an increase in raw materials to support higher production volumes and to increase safety stock to manage supply chain risk. Work in process increased due to supply chain disruptions. Accounts receivable increased due to increased sales at the end of the period compared to the end of the prior-year period. Prepaid expenses and other current assets increased due to higher general insurance premiums. Accrued expenses and other current liabilities increased due to an increase in warranty costs and dealer incentives. Accounts payable increased as a result of increased production levels.

Net cash used in investing activities was $8.0 million, which consisted of capital expenditures. Our capital spending was focused on expanding our capacity and maintenance capital.

Net cash used in financing activities was $49.9 million, which included net payments of $28.3 million on long-term debt and $21.5 million of stock repurchases.

Off Balance Sheet Arrangements

The Company did not have any off balance sheet financing arrangements as of April 2, 2023.

Critical Accounting Policies

As of April 2, 2023, there were no significant changes in or changes to 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, 2022, which was filed with the SEC on September 9, 2022.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

We maintain an investment portfolio comprised of fixed income securities, all designated as held-to-maturity securities. Fixed income securities do carry some degree of interest rate and credit risk. However, due to the securities' investment grade ratings, short-term nature, and our intention to hold the securities to maturity, we do not expect to recognize impairment losses on declines in fair value

25


 

below our cost basis. See Note 4 in Notes to Unaudited Condensed Consolidated Financial Statements for more information on investments.

ITEM 4. CONTROLS AND PROCEDURES.

Evaluation of Disclosure Controls and Procedures

 

We maintain disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-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 on Form 10-Q, 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 April 2, 2023.

Changes in Internal Control Over Financial Reporting

There have been no changes in our internal control over financial reporting during the quarter ended April 2, 2023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

26


 

PART II – OTHER INFORMATION

None.

ITEM 1A. RISK FACTORS.

During the three months ended April 2, 2023, there were no material changes to the risk factors disclosed in “Part I, Item 1A. Risk Factors” in our Annual Report and our Fiscal Second Quarter Quarterly Report.

ITEM 2. UNREGISTERED SALES OF SECURITIES AND USE OF PROCEEDS.

Stock Repurchase Program

On June 24, 2021, the board of directors of the Company authorized a stock repurchase program that allows for the repurchase of up to $50.0 million of our common stock during the three-year period ending June 24, 2024. During the first nine months of fiscal 2023, we repurchased approximately $16.0 million of our common stock, including approximately $7.0 million during the three months ended April 2, 2023. As of April 2, 2023, the remaining authorization under the program was approximately $8.6 million.

During the three months ended April 2, 2023, the Company repurchased the following shares of common stock:

Period

 

Total Number of Shares Purchased

 

 

Average Price Paid Per Share(a)

 

 

Total Number of Shares Purchased as part of Publicly Announced Program

 

 

Approximate Dollar Value of Shares that May Yet be Purchased Under the Plan (dollars in thousands)

 

January 2, 2023 - January 29, 2023

 

 

 

 

$

 

 

 

 

 

$

15,574

 

January 30, 2023 - February 26, 2023

 

 

59,865

 

 

 

33.66

 

 

 

59,865

 

 

 

13,558

 

February 27, 2023 - April 2, 2023

 

 

150,285

 

 

 

33.14

 

 

 

150,285

 

 

 

8,574

 

Total

 

 

210,150

 

 

$

33.29

 

 

 

210,150

 

 

 

8,574

 

 

(a)
Represents weighted average price paid per share excluding commissions paid.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES.

None.

ITEM 4. MINE SAFETY DISCLOSURES.

None.

ITEM 5. OTHER INFORMATION.

None.

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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

 

 

 

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

 

Inline XBRL Instance Document

 

 

 

 

 

 

 

 

 

*

 

101.SCH

 

Inline XBRL Taxonomy Extension Schema Document

 

 

 

 

 

 

 

 

 

*

 

101.CAL

 

Inline XBRL Taxonomy Extension Calculation Linkbase Document

 

 

 

 

 

 

 

 

 

*

 

101.LAB

 

Inline XBRL Taxonomy Extension Label Linkbase Document

 

 

 

 

 

 

 

 

 

*

 

101.PRE

 

Inline XBRL Taxonomy Extension Presentation Linkbase Document

 

 

 

 

 

 

 

 

 

*

 

101.DEF

 

Inline XBRL Taxonomy Extension Definition Linkbase Document

 

 

 

 

 

 

 

 

 

*

 

104

 

Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).

 

 

 

 

 

 

 

 

 

*

 

 

* Filed herewith.

** Furnished herewith.

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SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

 

 

MASTERCRAFT BOAT HOLDINGS, INC.

 

 

(Registrant)

 

 

 

 

Date:

May 10, 2023

By:

/s/ FREDERICK A. BRIGHTBILL

 

 

 

Frederick A. Brightbill

 

 

 

Chief Executive Officer (Principal Executive Officer) and Chairman of the Board

 

 

 

 

Date:

May 10, 2023

By:

/s/ TIMOTHY M. OXLEY

 

 

 

Timothy M. Oxley

 

 

 

Chief Financial Officer (Principal Financial and Accounting Officer),

 

 

 

Treasurer and Secretary

 

 

 

 

 

29