Company Quick10K Filing
MCBC Holdings
Price14.62 EPS1
Shares19 P/E13
MCap275 P/FCF8
Net Debt107 EBIT37
TEV383 TEV/EBIT10
TTM 2019-09-29, in MM, except price, ratios
10-Q 2020-03-29 Filed 2020-05-08
10-Q 2019-12-29 Filed 2020-02-05
10-Q 2019-09-29 Filed 2019-11-07
10-K 2019-06-30 Filed 2019-09-13
10-Q 2019-03-31 Filed 2019-05-09
10-Q 2018-12-30 Filed 2019-02-08
10-Q 2018-09-30 Filed 2018-11-09
10-K 2018-06-30 Filed 2018-09-07
10-Q 2018-04-01 Filed 2018-05-11
10-Q 2017-12-31 Filed 2018-02-09
10-Q 2017-10-01 Filed 2017-11-13
10-K 2017-06-30 Filed 2017-09-08
10-Q 2017-04-02 Filed 2017-05-12
10-Q 2017-01-01 Filed 2017-02-10
10-Q 2016-10-02 Filed 2016-11-10
10-K 2016-06-30 Filed 2016-09-09
10-Q 2016-03-27 Filed 2016-05-06
10-Q 2015-12-27 Filed 2016-02-05
10-Q 2015-09-27 Filed 2015-11-06
10-K 2015-06-30 Filed 2015-09-18
8-K 2020-09-09 Earnings, Exhibits
8-K 2020-08-13 Regulation FD, Exhibits
8-K 2020-08-03 Officers, Exhibits
8-K 2020-07-16 Officers, Exhibits
8-K 2020-07-01 Regulation FD, Exhibits
8-K 2020-05-06
8-K 2020-04-22
8-K 2020-03-25
8-K 2020-03-19
8-K 2020-02-05
8-K 2019-12-02
8-K 2019-11-07
8-K 2019-10-30
8-K 2019-10-30
8-K 2019-10-23
8-K 2019-09-26
8-K 2019-09-12
8-K 2019-07-18
8-K 2019-05-09
8-K 2019-03-08
8-K 2019-02-07
8-K 2018-11-08
8-K 2018-10-23
8-K 2018-10-01
8-K 2018-09-13
8-K 2018-09-10
8-K 2018-09-06
8-K 2018-07-01
8-K 2018-05-10
8-K 2018-02-08

MCFT 10Q Quarterly Report

Item 2.Management's Discussion and Analysis of Financial Condition and Results of Operations.
Item 3.Quantitative and Qualitative Disclosures About Market Risk.
Item 4.Controls and Procedures.
Part II - Other Information
Item 1. Legal Proceedings.
Item 1A. Risk Factors.
Item 2. Unregistered Sales of Securities and Use of Proceeds.
Item 3. Defaults Upon Senior Securities.
Item 4. Mine Safety Disclosures.
Item 5. Other Information.
Item 6.Exhibits, Financial Statement Schedules.
EX-10.1 mcft-ex101_137.htm
EX-31.1 mcft-ex311_6.htm
EX-31.2 mcft-ex312_7.htm
EX-32.1 mcft-ex321_8.htm
EX-32.2 mcft-ex322_9.htm

MCBC Holdings Earnings 2020-03-29

Balance SheetIncome StatementCash Flow
28022216410648-102013201520172020
Assets, Equity
130101724314-152013201520172020
Rev, G Profit, Net Income
65355-25-55-852013201520172020
Ops, Inv, Fin

10-Q 1 mcft-10q_20200329.htm 10-Q mcft-10q_20200329.htm

 

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: March 29, 2020

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

 

 

 

MASTERCRAFT BOAT HOLDINGS, INC.

(Exact name of registrant as specified in its charter)

 

 

Delaware

 

06-1571747

(State or Other Jurisdiction

 

(I.R.S. Employer

of Incorporation or Organization)

 

Identification No.)

 

100 Cherokee Cove Drive, Vonore, TN 37885

(Address of Principal Executive Office) (Zip Code)

 

(423) 884-2221

(Registrant’s telephone number, including area code)

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

Title of each class

 

Trading

Symbol(s)

 

Name of each exchange on which registered

Common Stock

 

MCFT

 

NASDAQ

 

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

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

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

 

Large accelerated filer

Accelerated filer

 

 

 

 

Non-accelerated filer

Smaller reporting company

 

 

 

 

Emerging growth company

 

 

 

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

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

As of May 4, 2020, there were 18,872,119 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

22

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

34

Item 4.

Controls and Procedures

34

 

 

 

PART II

OTHER INFORMATION

 

Item 1.

Legal Proceedings

36

Item 1A.

Risk Factors

36

Item 2.

Unregistered Sales of Securities and Use of Proceeds

36

Item 3.

Defaults Upon Senior Securities

36

Item 4.

Mine Safety Disclosures

37

Item 5.

Other Information

37

Item 6.

Exhibits, Financial Statement Schedules

38

 

 

 

SIGNATURES

 

39

 

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: the potential effects of the coronavirus (“COVID-19”) pandemic on the Company, general economic conditions, demand for our products, changes in consumer preferences, competition within our industry, our reliance on our network of independent dealers, our ability to manage our manufacturing levels and our fixed cost base, the successful introduction of our new products and the other important factors described under the caption “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended June 30, 2019, filed with the Securities and Exchange Commission (the “SEC”) on September 13, 2019 (our “2019 Annual Report”), our Quarterly Report on Form 10-Q for the fiscal quarter ended December 29, 2019, filed with the SEC on February 5, 2020 (our “Fiscal Second Quarter Quarterly Report”), and this Quarterly Report on Form 10-Q (this “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 share and per share data)

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

March 29,

 

 

March 31,

 

 

March 29,

 

 

March 31,

 

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

NET SALES

 

$

102,562

 

 

$

128,390

 

 

$

311,979

 

 

$

343,572

 

COST OF SALES

 

 

81,288

 

 

 

97,033

 

 

 

244,030

 

 

 

261,939

 

GROSS PROFIT

 

 

21,274

 

 

 

31,357

 

 

 

67,949

 

 

 

81,633

 

OPERATING EXPENSES:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Selling and marketing

 

 

4,933

 

 

 

5,210

 

 

 

13,340

 

 

 

13,757

 

General and administrative

 

 

6,094

 

 

 

6,696

 

 

 

19,356

 

 

 

20,576

 

Amortization of other intangible assets

 

 

987

 

 

 

987

 

 

 

2,961

 

 

 

2,504

 

Goodwill and other intangible asset impairment

 

 

56,437

 

 

 

-

 

 

 

56,437

 

 

 

-

 

Total operating expenses

 

 

68,451

 

 

 

12,893

 

 

 

92,094

 

 

 

36,837

 

OPERATING INCOME (LOSS)

 

 

(47,177

)

 

 

18,464

 

 

 

(24,145

)

 

 

44,796

 

OTHER EXPENSE:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense

 

 

1,086

 

 

 

1,867

 

 

 

3,667

 

 

 

4,829

 

INCOME (LOSS) BEFORE INCOME TAX EXPENSE

 

 

(48,263

)

 

 

16,597

 

 

 

(27,812

)

 

 

39,967

 

INCOME TAX EXPENSE (BENEFIT)

 

 

(11,550

)

 

 

3,834

 

 

 

(6,601

)

 

 

8,552

 

NET INCOME (LOSS)

 

$

(36,713

)

 

$

12,763

 

 

$

(21,211

)

 

$

31,415

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NET INCOME (LOSS) PER SHARE:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

(1.96

)

 

$

0.68

 

 

$

(1.13

)

 

$

1.68

 

Diluted

 

$

(1.96

)

 

$

0.68

 

 

$

(1.13

)

 

$

1.67

 

WEIGHTED AVERAGE SHARES USED FOR COMPUTATION OF:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic earnings per share

 

 

18,739,480

 

 

 

18,657,719

 

 

 

18,731,338

 

 

 

18,652,289

 

Diluted earnings per share

 

 

18,739,480

 

 

 

18,756,605

 

 

 

18,731,338

 

 

 

18,765,897

 

 

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

 

 

4


 

 

MASTERCRAFT BOAT HOLDINGS, INC. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

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

 

 

 

March 29,

 

 

June 30,

 

 

 

2020

 

 

2019

 

ASSETS

 

 

 

 

 

 

 

 

CURRENT ASSETS:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

40,991

 

 

$

5,826

 

Accounts receivable, net of allowances of $340 and $281, respectively

 

 

10,148

 

 

 

12,463

 

Income tax receivable

 

 

5,703

 

 

 

951

 

Inventories, net (Note 4)

 

 

37,159

 

 

 

30,660

 

Prepaid expenses and other current assets

 

 

4,979

 

 

 

4,464

 

Total current assets

 

 

98,980

 

 

 

54,364

 

Property, plant and equipment, net

 

 

41,669

 

 

 

33,636

 

Goodwill (Note 6)

 

 

29,593

 

 

 

74,030

 

Other intangible assets, net (Note 6)

 

 

64,836

 

 

 

79,799

 

Deferred income taxes

 

 

13,792

 

 

 

6,240

 

Deferred debt issuance costs, net

 

 

371

 

 

 

451

 

Operating lease assets (Note 8)

 

 

779

 

 

 

 

Other long-term assets

 

 

248

 

 

 

253

 

Total assets

 

$

250,268

 

 

$

248,773

 

LIABILITIES AND STOCKHOLDERS' EQUITY

 

 

 

 

 

 

 

 

CURRENT LIABILITIES:

 

 

 

 

 

 

 

 

Accounts payable

 

$

14,008

 

 

$

17,974

 

Income tax payable

 

 

 

 

 

426

 

Accrued expenses and other current liabilities (Note 5)

 

 

42,912

 

 

 

41,421

 

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

 

 

9,004

 

 

 

8,725

 

Total current liabilities

 

 

65,924

 

 

 

68,546

 

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

 

 

129,429

 

 

 

105,016

 

Operating lease liabilities (Note 8)

 

 

445

 

 

 

 

Unrecognized tax positions

 

 

3,114

 

 

 

2,895

 

Total liabilities

 

 

198,912

 

 

 

176,457

 

COMMITMENTS AND CONTINGENCIES

 

 

 

 

 

 

 

 

STOCKHOLDERS' EQUITY:

 

 

 

 

 

 

 

 

Common stock, $.01 par value per share — authorized, 100,000,000 shares; issued and outstanding, 18,872,119 shares at March 29, 2020 and 18,764,037 shares at June 30, 2019

 

 

189

 

 

 

188

 

Additional paid-in capital

 

 

115,832

 

 

 

115,582

 

Accumulated deficit

 

 

(64,665

)

 

 

(43,454

)

Total stockholders' equity

 

 

51,356

 

 

 

72,316

 

Total liabilities and stockholders' equity

 

$

250,268

 

 

$

248,773

 

 

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

 

5


 

 

MASTERCRAFT BOAT HOLDINGS, INC. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(Dollars in thousands, except share data)

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

 

 

 

 

 

 

 

 

 

Common Stock

 

 

Paid-in

 

 

Accumulated

 

 

 

 

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Deficit

 

 

Total

 

Balance at June 30, 2019

 

 

18,764,037

 

 

$

188

 

 

$

115,582

 

 

$

(43,454

)

 

$

72,316

 

Share-based compensation activity

 

 

74,960

 

 

 

1

 

 

 

169

 

 

 

 

 

 

170

 

Net income

 

 

 

 

 

 

 

 

 

 

 

8,623

 

 

 

8,623

 

Balance at September 29, 2019

 

 

18,838,997

 

 

 

189

 

 

 

115,751

 

 

 

(34,831

)

 

 

81,109

 

Share-based compensation activity

 

 

33,169

 

 

 

 

 

 

(78

)

 

 

 

 

 

(78

)

Net income

 

 

 

 

 

 

 

 

 

 

 

6,879

 

 

 

6,879

 

Balance at December 29, 2019

 

 

18,872,166

 

 

 

189

 

 

 

115,673

 

 

 

(27,952

)

 

 

87,910

 

Share-based compensation activity

 

 

(47

)

 

 

 

 

 

159

 

 

 

 

 

 

159

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

(36,713

)

 

 

(36,713

)

Balance at March 29, 2020

 

 

18,872,119

 

 

$

189

 

 

$

115,832

 

 

$

(64,665

)

 

$

51,356

 

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

 

 

 

 

 

 

 

 

 

Common Stock

 

 

Paid-in

 

 

Accumulated

 

 

 

 

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Deficit

 

 

Total

 

Balance at June 30, 2018

 

 

18,682,338

 

 

$

187

 

 

$

114,052

 

 

$

(61,717

)

 

$

52,522

 

Adoption of accounting standards

 

 

 

 

 

 

 

 

 

 

 

(3,091

)

 

 

(3,091

)

Share-based compensation activity

 

 

39,082

 

 

 

 

 

 

279

 

 

 

 

 

 

279

 

Net income

 

 

 

 

 

 

 

 

 

 

 

8,465

 

 

 

8,465

 

Balance at September 30, 2018

 

 

18,721,420

 

 

 

187

 

 

 

114,331

 

 

 

(56,343

)

 

 

58,175

 

Share-based compensation activity

 

 

4,770

 

 

 

 

 

 

363

 

 

 

(1

)

 

 

362

 

Net income

 

 

 

 

 

 

 

 

 

 

 

10,188

 

 

 

10,188

 

Balance at December 30, 2018

 

 

18,726,190

 

 

 

187

 

 

 

114,694

 

 

 

(46,156

)

 

 

68,725

 

Share-based compensation activity

 

 

(2,196

)

 

 

 

 

 

371

 

 

 

 

 

 

371

 

Net income

 

 

 

 

 

 

 

 

 

 

 

12,763

 

 

 

12,763

 

Balance at March 31, 2019

 

 

18,723,994

 

 

$

187

 

 

$

115,065

 

 

$

(33,393

)

 

$

81,859

 

 

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

 

 

 

March 29,

 

 

March 31,

 

 

 

2020

 

 

2019

 

CASH FLOWS FROM OPERATING ACTIVITIES:

 

 

 

 

 

 

 

 

Net income (loss)

 

$

(21,211

)

 

$

31,415

 

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

7,686

 

 

 

5,450

 

Share-based compensation

 

 

703

 

 

 

1,159

 

Deferred income taxes

 

 

(7,552

)

 

 

62

 

Unrecognized tax benefits

 

 

219

 

 

 

646

 

Amortization of debt issuance costs

 

 

420

 

 

 

410

 

Goodwill and other intangible asset impairment

 

 

56,437

 

 

 

 

Changes in certain operating assets and liabilities

 

 

(13,657

)

 

 

(382

)

Other, net

 

 

855

 

 

 

792

 

Net  cash provided by operating activities

 

 

23,900

 

 

 

39,552

 

 

 

 

 

 

 

 

 

 

CASH FLOWS FROM INVESTING ACTIVITIES:

 

 

 

 

 

 

 

 

Payments for acquisitions, net of cash acquired

 

 

 

 

 

(81,729

)

Purchases of property, plant and equipment

 

 

(13,601

)

 

 

(10,387

)

Proceeds from disposal of property, plant and equipment

 

 

25

 

 

 

5

 

Net cash used in investing activities

 

 

(13,576

)

 

 

(92,111

)

 

 

 

 

 

 

 

 

 

CASH FLOWS FROM FINANCING ACTIVITIES:

 

 

 

 

 

 

 

 

Proceeds from issuance of long-term debt

 

 

 

 

 

80,000

 

Principal payments on long-term debt

 

 

(10,647

)

 

 

(29,015

)

Borrowings on revolving credit facility

 

 

35,000

 

 

 

 

Proceeds from insurance premium financing

 

 

1,130

 

 

 

 

Principal payments on insurance premium financing

 

 

(189

)

 

 

 

Payments of debt issuance costs

 

 

 

 

 

(146

)

Cash paid for withholding taxes on vested stock

 

 

(453

)

 

 

(728

)

Net cash provided by financing activities

 

 

24,841

 

 

 

50,111

 

NET CHANGE IN CASH AND CASH EQUIVALENTS

 

 

35,165

 

 

 

(2,448

)

 

 

 

 

 

 

 

 

 

CASH AND CASH EQUIVALENTS — BEGINNING OF PERIOD

 

 

5,826

 

 

 

7,909

 

CASH AND CASH EQUIVALENTS — END OF PERIOD

 

$

40,991

 

 

$

5,461

 

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:

 

 

 

 

 

 

 

 

Cash payments for interest

 

$

3,263

 

 

$

3,957

 

Cash payments for income taxes

 

 

6,146

 

 

 

7,765

 

SIGNIFICANT NON-CASH INVESTING AND FINANCING ACTIVITIES:

 

 

 

 

 

 

 

 

Capital expenditures in accounts payable and accrued expenses

 

 

80

 

 

 

399

 

 

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

 

7


 

MASTERCRAFT BOAT HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

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

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

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

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

The unaudited condensed consolidated financial statements have been prepared on the same basis as the Company’s audited consolidated financial statements for the year ended June 30, 2019 and, in the opinion of management, reflect all adjustments considered necessary to present fairly the Company’s financial position as of March 29, 2020, its results of operations for the three and nine months ended March 29, 2020 and March 31, 2019, its cash flows for the nine months ended March 29, 2020 and March 31, 2019, and its statements of stockholders’ equity for the three and nine months ended March 29, 2020 and March 31, 2019. All adjustments are of a normal, recurring nature. Certain information and footnote disclosures normally included in annual consolidated financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and the applicable rules and regulations of the U.S. Securities and Exchange Commission (“SEC”) for financial information have been condensed or omitted pursuant to such rules and regulations. The June 30, 2019 condensed consolidated balance sheet data was derived from the audited financial statements but does not include all disclosures required by U.S. GAAP for complete financial statements. However, management believes that the disclosures in these condensed consolidated financial statements are adequate to make the information presented not misleading. These condensed consolidated financial statements should be read in conjunction with the Company’s consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the fiscal year ended June 30, 2019, filed with the SEC on September 13, 2019 (our “2019 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.

 

COVID-19 Pandemic — The outbreak of a novel coronavirus throughout the world, including the United States, during early calendar year 2020 has caused widespread business and economic disruption through mandated and voluntary business closings and restrictions on the movement and activities of people (“COVID-19 Pandemic”). We are subject to risks and uncertainties as a result of the COVID-19 Pandemic. The extent of the impact of the COVID-19 Pandemic on the Company's business is highly uncertain and difficult to predict, as the response to the COVID-19 Pandemic is rapidly evolving in many countries, including the United States and other markets where the Company operates. It is expected that many of the Company's customers, dealers, and suppliers could be impacted by these closings and restrictions which could materially and adversely affect demand for our products, our ability to obtain or deliver inventory, and our ability to collect accounts receivables as customers face higher liquidity and solvency risk. Furthermore, capital markets and economies worldwide have also been negatively impacted by the COVID-19 Pandemic, and it is possible that it could cause an economic downturn, recession, or depression. Such economic disruption could have a material adverse effect on our business as retail demand for our products could decline which would in-turn reduce wholesale demand from our dealers. Policymakers around the world have responded with fiscal and monetary policy actions to support the economy. The magnitude and overall effectiveness of these actions remains uncertain.

 

8


 

 

To protect the health of its manufacturing employees and to balance wholesale production with retail demand, the Company suspended operations at its manufacturing facilities for all of its brands in late March 2020. As a result of this action, the Company temporarily laid off nearly all of its hourly workforce. After further evaluation, the Company intends to resume operations at its Owosso, Michigan facility (Crest Marine boats) on May 11, 2020, its Amory, Mississippi facility (NauticStar boats) on May 11, 2020, and its Vonore, Tennessee facility (MasterCraft and Aviara boats) on May 12, 2020.  As the Company resumes its operations, it will continue to evaluate and monitor the health and safety of its employees and will adhere to federal and local government mandates and guidelines.

The severity of the impact of the COVID-19 Pandemic on the Company's business will depend on a number of factors, including, but not limited to, the duration, spread, severity, and impact of the pandemic, the remedial actions and stimulus measures adopted by local and federal governments, the effects of the pandemic on the Company's customers, dealers and suppliers, and to the extent normal economic and operating conditions can resume, all of which are uncertain and cannot be predicted. The Company's future results of operations, cash flows, and liquidity could be adversely impacted by delays in payments of outstanding receivable amounts beyond normal payment terms, supply chain disruptions and uncertain demand, additional goodwill and intangible impairment charges (see Note 6), and the impact of any initiatives that the Company may undertake to address financial and operational challenges faced by it and its customers, dealers, and suppliers. As of the date of issuance of these condensed consolidated financial statements, the extent to which the COVID-19 Pandemic may materially impact the Company's financial condition, liquidity, or results of operations is uncertain.

With the exception of Accounting Standards Codification (“ASC”) 842 discussed below, there were no significant changes in or changes in the application of the Company’s significant or critical accounting policies or estimation procedures for the nine months ended March 29, 2020 as compared with the significant accounting policies described in the Company’s audited consolidated financial statements for the fiscal year ended June 30, 2019.

Recently Adopted Accounting Standards

Leases

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

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

 

 

 

Balance as of

 

 

Adjustments

 

 

Balance as of

 

 

 

June 30, 2019

 

 

Due to ASC 842

 

 

July 1, 2019

 

Assets

 

 

 

 

 

 

 

 

 

 

 

 

Operating lease assets

 

$

-

 

 

$

3,931

 

 

$

3,931

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

 

 

 

 

 

 

Accrued expenses and other current liabilities

 

 

41,421

 

 

 

547

 

 

 

41,968

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Long-term liabilities

 

 

 

 

 

 

 

 

 

 

 

 

Operating lease liabilities

 

 

-

 

 

 

3,384

 

 

 

3,384

 

 

The Company determines if an arrangement is a lease at lease inception. Operating lease right-of-use (“ROU”) assets and operating lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at the commencement date. As the Company's lease contracts generally do not include an implicit rate, the Company uses its incremental

9


 

 

borrowing rate based on information available at commencement date in determining the present value of future payments. The incremental borrowing rate is estimated to approximate the interest rate on a collateralized basis with similar terms and payments, and in economic environments where the leased asset is located. The operating lease ROU asset also includes any initial direct costs and lease payments made prior to lease commencement and excludes lease incentives incurred.

 

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

 

Share-Based Compensation

 

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

 

Recently Issued Accounting Standards

 

Fair Value Measurements

 

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

2.

REVENUE RECOGNITION

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

 

 

 

Three Months Ended March 29, 2020

 

 

 

MasterCraft

 

 

NauticStar

 

 

Crest

 

 

Total

 

Major Product Categories:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Boats and trailers

 

$

68,684

 

 

$

14,053

 

 

$

17,696

 

 

$

100,433

 

Parts

 

 

1,705

 

 

 

103

 

 

 

136

 

 

 

1,944

 

Other revenue

 

 

142

 

 

 

 

 

 

43

 

 

 

185

 

Total

 

$

70,531

 

 

$

14,156

 

 

$

17,875

 

 

$

102,562

 

 

 

 

Nine Months Ended March 29, 2020

 

 

 

MasterCraft

 

 

NauticStar

 

 

Crest(a)

 

 

Total

 

Major Product Categories:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Boats and trailers

 

$

204,303

 

 

$

47,372

 

 

$

52,417

 

 

$

304,092

 

Parts

 

 

6,411

 

 

 

349

 

 

 

437

 

 

 

7,197

 

Other revenue

 

 

487

 

 

 

6

 

 

 

197

 

 

 

690

 

Total

 

$

211,201

 

 

$

47,727

 

 

$

53,051

 

 

$

311,979

 

 

10


 

 

 

 

Three Months Ended March 31, 2019

 

 

 

MasterCraft

 

 

NauticStar

 

 

Crest

 

 

Total

 

Major Product Categories:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Boats and trailers

 

$

77,329

 

 

$

21,624

 

 

$

27,065

 

 

$

126,018

 

Parts

 

 

1,798

 

 

 

22

 

 

 

166

 

 

 

1,986

 

Other revenue

 

 

304

 

 

 

6

 

 

 

76

 

 

 

386

 

Total

 

$

79,431

 

 

$

21,652

 

 

$

27,307

 

 

$

128,390

 

 

 

 

Nine Months Ended March 31, 2019

 

 

 

MasterCraft

 

 

NauticStar

 

 

Crest(a)

 

 

Total

 

Major Product Categories:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Boats and trailers

 

$

224,604

 

 

$

58,187

 

 

$

52,819

 

 

$

335,610

 

Parts

 

 

6,464

 

 

 

57

 

 

 

252

 

 

 

6,773

 

Other revenue

 

 

994

 

 

 

11

 

 

 

184

 

 

 

1,189

 

Total

 

$

232,062