10-Q 1 mcft-20231231.htm 10-Q 10-Q
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{

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 10-Q

 

 

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

For the quarterly period ended: December 31, 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

 

 

img155753607_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 February 2, 2024, there were 17,033,805 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 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

25

 

 

 

PART II

OTHER INFORMATION

 

Item 1.

Legal Proceedings

26

Item 1A.

Risk Factors

26

Item 2.

Unregistered Sales of Securities and Use of Proceeds

26

Item 3.

Defaults Upon Senior Securities

26

Item 4.

Mine Safety Disclosures

26

Item 5.

Other Information

26

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, such as the conflict between Russia and Ukraine and the conflict in the Gaza Strip, 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, 2023, filed with the Securities and Exchange Commission (“SEC”) on August 30, 2023 (our “2023 Annual 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

 

 

 

Three Months Ended

 

 

Six Months Ended

 

 

 

 

December 31,

 

 

January 1,

 

 

December 31,

 

 

January 1,

 

 

(Dollar amounts in thousands, except per share data)

 

2023

 

 

2023

 

 

2023

 

 

2023

 

 

NET SALES

 

$

99,481

 

 

$

159,188

 

 

$

203,698

 

 

$

328,704

 

 

COST OF SALES

 

 

80,752

 

 

 

120,961

 

 

 

163,133

 

 

 

244,504

 

 

GROSS PROFIT

 

 

18,729

 

 

 

38,227

 

 

 

40,565

 

 

 

84,200

 

 

OPERATING EXPENSES:

 

 

 

 

 

 

 

 

 

 

 

 

 

Selling and marketing

 

 

3,150

 

 

 

3,042

 

 

 

6,614

 

 

 

6,821

 

 

General and administrative

 

 

8,111

 

 

 

8,235

 

 

 

17,468

 

 

 

17,718

 

 

Amortization of other intangible assets

 

 

450

 

 

 

489

 

 

 

912

 

 

 

978

 

 

Total operating expenses

 

 

11,711

 

 

 

11,766

 

 

 

24,994

 

 

 

25,517

 

 

OPERATING INCOME

 

 

7,018

 

 

 

26,461

 

 

 

15,571

 

 

 

58,683

 

 

OTHER INCOME (EXPENSE):

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense

 

 

(854

)

 

 

(666

)

 

 

(1,732

)

 

 

(1,228

)

 

Interest income

 

 

1,415

 

 

 

621

 

 

 

2,766

 

 

 

772

 

 

INCOME BEFORE INCOME TAX EXPENSE

 

 

7,579

 

 

 

26,416

 

 

 

16,605

 

 

 

58,227

 

 

INCOME TAX EXPENSE

 

 

1,652

 

 

 

6,433

 

 

 

3,602

 

 

 

13,609

 

 

NET INCOME FROM CONTINUING OPERATIONS

 

 

5,927

 

 

 

19,983

 

 

 

13,003

 

 

 

44,618

 

 

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

 

 

(41

)

 

 

(300

)

 

 

(922

)

 

 

(20,867

)

 

NET INCOME

 

$

5,886

 

 

$

19,683

 

 

$

12,081

 

 

$

23,751

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NET INCOME (LOSS) PER SHARE:

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

 

 

 

 

 

 

 

 

 

 

 

Continuing operations

 

$

0.35

 

 

$

1.13

 

 

$

0.76

 

 

$

2.51

 

 

Discontinued operations

 

 

 

 

 

(0.02

)

 

 

(0.05

)

 

 

(1.18

)

 

Net income

 

$

0.35

 

 

$

1.11

 

 

$

0.71

 

 

$

1.33

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted

 

 

 

 

 

 

 

 

 

 

 

 

 

Continuing operations

 

$

0.35

 

 

$

1.12

 

 

$

0.76

 

 

$

2.49

 

 

Discontinued operations

 

 

(0.01

)

 

 

(0.01

)

 

 

(0.06

)

 

 

(1.16

)

 

Net income

 

$

0.34

 

 

$

1.11

 

 

$

0.70

 

 

$

1.33

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

WEIGHTED AVERAGE SHARES USED FOR COMPUTATION OF:

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic earnings per share

 

 

17,010,116

 

 

 

17,669,645

 

 

 

17,083,204

 

 

 

17,807,853

 

 

Diluted earnings per share

 

 

17,091,633

 

 

 

17,774,329

 

 

 

17,158,124

 

 

 

17,903,027

 

 

 

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

 

 

 

December 31,

 

 

June 30,

 

(Dollar amounts in thousands, except per share data)

 

2023

 

 

2023

 

ASSETS

 

 

 

 

 

 

CURRENT ASSETS:

 

 

 

 

 

 

Cash and cash equivalents

 

$

36,246

 

 

$

19,817

 

Held-to-maturity securities (Note 4)

 

 

72,538

 

 

 

91,560

 

Accounts receivable, net of allowance of $38 and $122, respectively

 

 

8,786

 

 

 

15,741

 

Inventories, net (Note 5)

 

 

43,056

 

 

 

58,298

 

Prepaid expenses and other current assets

 

 

9,684

 

 

 

10,083

 

Total current assets

 

 

170,310

 

 

 

195,499

 

Property, plant and equipment, net (Note 6)

 

 

77,746

 

 

 

77,921

 

Goodwill (Note 7)

 

 

28,493

 

 

 

28,493

 

Other intangible assets, net (Note 7)

 

 

34,550

 

 

 

35,462

 

Deferred income taxes

 

 

12,769

 

 

 

12,428

 

Deferred debt issuance costs, net

 

 

341

 

 

 

304

 

Other long-term assets

 

 

7,577

 

 

 

3,869

 

Total assets

 

$

331,786

 

 

$

353,976

 

LIABILITIES AND EQUITY

 

 

 

 

 

 

CURRENT LIABILITIES:

 

 

 

 

 

 

Accounts payable

 

 

10,205

 

 

 

20,391

 

Income tax payable

 

 

438

 

 

 

5,272

 

Accrued expenses and other current liabilities (Note 8)

 

 

65,590

 

 

 

72,496

 

Current portion of long-term debt, net of unamortized debt issuance costs (Note 10)

 

 

4,368

 

 

 

4,381

 

Total current liabilities

 

 

80,601

 

 

 

102,540

 

Long-term debt, net of unamortized debt issuance costs (Note 10)

 

 

47,075

 

 

 

49,295

 

Unrecognized tax positions

 

 

7,936

 

 

 

7,350

 

Other long-term liabilities

 

 

2,843

 

 

 

2,702

 

Total liabilities

 

 

138,455

 

 

 

161,887

 

COMMITMENTS AND CONTINGENCIES

 

 

 

 

 

 

EQUITY:

 

 

 

 

 

 

Common stock, $.01 par value per share — authorized, 100,000,000 shares; issued and outstanding, 17,033,805 shares at December 31, 2023 and 17,312,850 shares at June 30, 2023

 

 

170

 

 

 

173

 

Additional paid-in capital

 

 

65,060

 

 

 

75,976

 

Retained earnings

 

 

127,901

 

 

 

115,820

 

MasterCraft Boat Holdings, Inc. equity

 

 

193,131

 

 

 

191,969

 

Noncontrolling interest

 

 

200

 

 

 

120

 

Total equity

 

 

193,331

 

 

 

192,089

 

Total liabilities and equity

 

$

331,786

 

 

$

353,976

 

 

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 EQUITY

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common Stock

 

 

Additional Paid-in

 

 

Retained

 

 

MasterCraft Boat Holdings,

 

 

Noncontrolling

 

 

 

 

(Dollar amounts in thousands)

 

Shares

 

 

Amount

 

 

Capital

 

 

Earnings

 

 

Inc. Equity

 

 

Interest

 

 

Total

 

Balance at June 30, 2023

 

 

17,312,850

 

 

$

173

 

 

$

75,976

 

 

$

115,820

 

 

$

191,969

 

 

$

120

 

 

$

192,089

 

Share-based compensation activity

 

 

185,055

 

 

 

 

 

 

(683

)

 

 

 

 

 

(683

)

 

 

 

 

 

(683

)

Repurchase and retirement of common stock

 

 

(241,764

)

 

 

(2

)

 

 

(5,783

)

 

 

 

 

 

(5,785

)

 

 

 

 

 

(5,785

)

Capital contribution from noncontrolling interest

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

80

 

 

 

80

 

Net income

 

 

 

 

 

 

 

 

 

 

 

6,195

 

 

 

6,195

 

 

 

 

 

 

6,195

 

Balance at October 1, 2023

 

 

17,256,141

 

 

 

171

 

 

 

69,510

 

 

 

122,015

 

 

 

191,696

 

 

 

200

 

 

 

191,896

 

Share-based compensation activity

 

 

(8,117

)

 

 

1

 

 

 

8

 

 

 

 

 

 

9

 

 

 

 

 

 

9

 

Repurchase and retirement of common stock

 

 

(214,219

)

 

 

(2

)

 

 

(4,458

)

 

 

 

 

 

(4,460

)

 

 

 

 

 

(4,460

)

Net income

 

 

 

 

 

 

 

 

 

 

 

5,886

 

 

 

5,886

 

 

 

 

 

 

5,886

 

Balance at December 31, 2023

 

 

17,033,805

 

 

$

170

 

 

$

65,060

 

 

$

127,901

 

 

$

193,131

 

 

$

200

 

 

$

193,331

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common Stock

 

 

Additional Paid-in

 

 

Retained

 

 

MasterCraft Boat Holdings,

 

 

Noncontrolling

 

 

 

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Earnings

 

 

Inc. Equity

 

 

Interest

 

 

Total

 

Balance at June 30, 2022

 

 

18,061,437

 

 

$

181

 

 

$

96,584

 

 

$

46,883

 

 

$

143,648

 

 

$

 

 

$

143,648

 

Share-based compensation activity

 

 

128,040

 

 

 

1

 

 

 

649

 

 

 

 

 

 

650

 

 

 

 

 

 

650

 

Repurchase and retirement of common stock

 

 

(191,360

)

 

 

(2

)

 

 

(4,176

)

 

 

 

 

 

(4,178

)

 

 

 

 

 

(4,178

)

Net income

 

 

 

 

 

 

 

 

 

 

 

4,068

 

 

 

4,068

 

 

 

 

 

 

4,068

 

Balance at October 2, 2022

 

 

17,998,117

 

 

 

180

 

 

 

93,057

 

 

 

50,951

 

 

 

144,188

 

 

 

 

 

 

144,188

 

Share-based compensation activity

 

 

2,466

 

 

 

 

 

 

745

 

 

 

 

 

 

745

 

 

 

 

 

 

745

 

Repurchase and retirement of common stock

 

 

(224,284

)

 

 

(2

)

 

 

(4,792

)

 

 

 

 

 

(4,794

)

 

 

 

 

 

(4,794

)

Net income

 

 

 

 

 

 

 

 

 

 

 

19,683

 

 

 

19,683

 

 

 

 

 

 

19,683

 

Balance at January 1, 2023

 

 

17,776,299

 

 

$

178

 

 

$

89,010

 

 

$

70,634

 

 

$

159,822

 

 

$

 

 

$

159,822

 

 

 

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

 

 

 

Six Months Ended

 

 

 

December 31,

 

 

January 1,

 

(Dollar amounts in thousands)

 

2023

 

 

2023

 

CASH FLOWS FROM OPERATING ACTIVITIES:

 

 

 

 

 

 

Net income

 

$

12,081

 

 

$

23,751

 

Loss from discontinued operations, net of tax

 

 

922

 

 

 

20,867

 

Net income from continuing operations

 

 

13,003

 

 

 

44,618

 

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

 

 

 

 

 

 

Depreciation and amortization

 

 

5,484

 

 

 

5,211

 

Share-based compensation

 

 

948

 

 

 

1,865

 

Unrecognized tax benefits

 

 

586

 

 

 

(370

)

Deferred income taxes

 

 

(341

)

 

 

4,634

 

Amortization of debt issuance costs

 

 

124

 

 

 

115

 

Changes in certain operating assets and liabilities

 

 

(89

)

 

 

22,705

 

Other, net

 

 

(513

)

 

 

985

 

Net cash provided by operating activities of continuing operations

 

 

19,202

 

 

 

79,763

 

Net cash used in operating activities of discontinued operations

 

 

(509

)

 

 

(1,865

)

Net cash provided by operating activities

 

 

18,693

 

 

 

77,898

 

 

 

 

 

 

 

 

CASH FLOWS FROM INVESTING ACTIVITIES:

 

 

 

 

 

 

Purchases of property, plant and equipment

 

 

(8,118

)

 

 

(11,915

)

Purchases of investments

 

 

(67,237

)

 

 

(59,687

)

Maturities of investments

 

 

87,195

 

 

 

 

Other, net

 

 

5

 

 

 

 

Net cash provided by (used in) investing activities of continuing operations

 

 

11,845

 

 

 

(71,602

)

Net cash used in investing activities of discontinued operations

 

 

 

 

 

(501

)

Net cash provided by (used in) investing activities

 

 

11,845

 

 

 

(72,103

)

 

 

 

 

 

 

 

CASH FLOWS FROM FINANCING ACTIVITIES:

 

 

 

 

 

 

Principal payments on long-term debt

 

 

(2,250

)

 

 

(1,500

)

Repurchase and retirement of common stock

 

 

(10,173

)

 

 

(8,972

)

Other, net

 

 

(1,686

)

 

 

(465

)

Net cash used in financing activities of continuing operations

 

 

(14,109

)

 

 

(10,937

)

NET CHANGE IN CASH AND CASH EQUIVALENTS

 

 

16,429

 

 

 

(5,142

)

 

 

 

 

 

 

 

CASH AND CASH EQUIVALENTS — BEGINNING OF PERIOD

 

 

19,817

 

 

 

34,203

 

CASH AND CASH EQUIVALENTS — END OF PERIOD

 

$

36,246

 

 

$

29,061

 

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:

 

 

 

 

 

 

Cash payments for interest, net of amounts capitalized

 

$

1,580

 

 

$

1,125

 

Cash payments for income taxes

 

 

8,116

 

 

 

5,845

 

NON-CASH INVESTING AND FINANCING ACTIVITIES:

 

 

 

 

 

 

Activity related to sales-type lease

 

 

3,898

 

 

 

 

Capital expenditures in accounts payable and accrued expenses

 

 

1,171

 

 

 

1,130

 

 

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 otherwise noted, dollars in thousands, except per share data)

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, 2023, and, in the opinion of management, reflect all adjustments considered necessary to present fairly the Company’s financial position as of December 31, 2023, its results of operations for the three and six months ended December 31, 2023 and January 1, 2023, its cash flows for the six months ended December 31, 2023 and January 1, 2023, and its statements of equity for the three and six months ended December 31, 2023 and January 1, 2023. 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, 2023 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 2023 Annual Report on Form 10-K.

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 six months ended December 31, 2023, as compared with those described in the Company’s audited consolidated financial statements for the fiscal year ended June 30, 2023.

Investment in Sales-Type Lease — On July 1, 2023, the Company became a lessor in a sales-type lease arrangement consisting of land valued at $3.9 million. In accordance with Accounting Standards Codification (“ASC”) 842, Leases, the underlying land was derecognized as Property, plant and equipment and a sales-type lease was recognized as a net investment in a lease. The net investment balances are represented as lease receivable and unguaranteed residual asset amounts on the balance sheet within other current assets and other long-term assets. The interest earned on the net investment will be recognized as interest income.

New Pronouncements Issued

Income Taxes

Accounting Standard Update ("ASU") No. 2023-09, Improvements to Income Tax Disclosures, requires entities to disclose in their rate reconciliation table additional categories of information about federal, state and foreign income taxes and provide more details about the reconciling items in some categories if items meet a quantitative threshold. Entities would have to provide qualitative disclosures about the new categories. The guidance will require all entities to disclose income taxes paid, net of refunds, disaggregated by federal (national), state and foreign taxes for annual periods and to disaggregate the information by jurisdiction based on a quantitative threshold. The guidance makes several other changes to the disclosure requirements. Entities are required to apply the guidance prospectively, with the option to apply it retrospectively. The guidance is effective for annual periods beginning after December 15, 2024, or fiscal 2026 for the Company. The Company is currently evaluating the impact, if any, that the adoption of this standard will have on financial disclosures.

 

 

8


 

 

Segment Reporting

ASU No. 2023-07, Improvements to Reportable Segment Disclosures, requires incremental disclosures about an entity’s reportable segments but does not change the definition of a segment or the guidance for determining reportable segments. The new guidance requires disclosure of significant segment expenses that are (1) regularly provided to (or easily computed from information regularly provided to) the chief operating decision maker and (2) included in the reported measure of segment profit or loss. The new standard also allows companies to disclose multiple measures of segment profit or loss if those measures are used to assess performance and allocate resources. This update is effective for fiscal years beginning after December 31, 2023, or fiscal 2025 for the Company, and should be adopted retrospectively unless impracticable. The Company is currently evaluating the impact, if any, that the adoption of this standard will have on financial disclosures.

2.
REVENUE RECOGNITION

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

 

 

 

Three Months Ended December 31, 2023

 

 

 

MasterCraft

 

 

Crest

 

 

Aviara

 

 

Total

 

Major Product Categories:

 

 

 

 

 

 

 

 

 

 

 

 

Boats and trailers

 

$

70,374

 

 

$

16,698

 

 

$

9,731

 

 

$

96,803

 

Parts

 

 

1,939

 

 

 

224

 

 

 

 

 

 

2,163

 

Other revenue

 

 

386

 

 

 

129

 

 

 

 

 

 

515

 

Total

 

$

72,699

 

 

$

17,051

 

 

$

9,731

 

 

$

99,481

 

 

 

 

Six Months Ended December 31, 2023

 

 

 

MasterCraft

 

 

Crest

 

 

Aviara

 

 

Total

 

Major Product Categories:

 

 

 

 

 

 

 

 

 

 

 

 

Boats and trailers

 

$

140,198

 

 

$

34,816

 

 

$

19,643

 

 

$

194,657

 

Parts

 

 

7,130

 

 

 

477

 

 

 

 

 

 

7,607

 

Other revenue

 

 

1,207

 

 

 

227

 

 

 

 

 

 

1,434

 

Total

 

$

148,535

 

 

$

35,520

 

 

$

19,643

 

 

$

203,698

 

 

 

 

Three Months Ended January 1, 2023

 

 

 

MasterCraft

 

 

Crest

 

 

Aviara

 

 

Total

 

Major Product Categories:

 

 

 

 

 

 

 

 

 

 

 

 

Boats and trailers

 

$

105,536

 

 

$

36,364

 

 

$

13,858

 

 

$

155,758

 

Parts

 

 

2,658

 

 

 

133

 

 

 

 

 

 

2,791

 

Other revenue

 

 

471

 

 

 

168

 

 

 

 

 

 

639

 

Total

 

$

108,665

 

 

$

36,665

 

 

$

13,858

 

 

$

159,188

 

 

 

 

Six Months Ended January 1, 2023

 

 

 

MasterCraft

 

 

Crest

 

 

Aviara

 

 

Total

 

Major Product Categories:

 

 

 

 

 

 

 

 

 

 

 

 

Boats and trailers

 

$

213,740

 

 

$

79,507

 

 

$

26,793

 

 

$

320,040

 

Parts

 

 

6,895

 

 

 

386

 

 

 

 

 

 

7,281

 

Other revenue

 

 

1,050

 

 

 

333

 

 

 

 

 

 

1,383

 

Total

 

$

221,685

 

 

$

80,226

 

 

$

26,793

 

 

$

328,704

 

 

Contract Liabilities

As of June 30, 2023, the Company had $3.3 million of contract liabilities associated with customer deposits and services. During the six months ended December 31, 2023, $1.2 million was recognized as revenue. As of December 31, 2023, total contract liabilities associated with customer deposits and services of $4.7 million were reported in Accrued expenses and other current liabilities and Other long-term liabilities on the condensed consolidated balance sheet, and $2.2 million is expected to be recognized as revenue during the remainder of the year ending June 30, 2024.

9


 

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.

During the six months ended January 1, 2023, the Company recognized a $22.5 million loss on sale. The final settlement of the purchase price was subject to customary working capital adjustments that had been in arbitration, but were settled in October 2023 without a significant impact to the loss on sale previously recorded. The value of the assets and liabilities that were retained at the time of sale, which are primarily related to certain claims, are subject to change. Certain of these claims have been settled or are expected to settle for higher amounts than previously estimated, with the related activity being recorded as discontinued operations.

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

 

 

Six Months Ended

 

 

December 31,

 

 

January 1,

 

 

2023

 

 

2023

 

NET SALES

$

37

 

 

$

7,780

 

COST OF SALES

 

260

 

 

 

9,412

 

GROSS PROFIT (LOSS)

 

(223

)

 

 

(1,632

)

OPERATING EXPENSES:

 

 

 

 

 

Selling, general and administrative

 

1,132

 

 

 

2,522

 

Total operating expenses

 

1,132

 

 

 

2,522

 

OPERATING LOSS

 

(1,355

)

 

 

(4,154

)

Loss on sale of discontinued operations

 

157

 

 

 

(22,487

)

LOSS BEFORE INCOME TAX BENEFIT

 

(1,198

)

 

 

(26,641

)

INCOME TAX BENEFIT

 

276

 

 

 

5,774

 

LOSS FROM DISCONTINUED OPERATIONS, NET OF TAX

$

(922

)

 

$

(20,867

)

The operating results, and components thereof, of discontinued operations for the three months ended December 31, 2023 and January 1, 2023 were not significant.

 

4.
HELD-TO-MATURITY SECURITIES

The amortized cost and net carrying amount, gross unrealized gains and losses, and estimated fair value of our investments classified as held-to-maturity at December 31, 2023 and June 30, 2023 are summarized as follows:

 

 

 

 

 

 

 

December 31, 2023

 

 

 

Amortized

 

 

Gross

 

 

Gross

 

 

Estimated

 

 

 

Cost / Net

 

 

Unrealized

 

 

Unrealized

 

 

Fair

 

 

 

Carrying Amount

 

 

Gains

 

 

Losses

 

 

Value

 

Held-to-maturity securities:

 

 

 

 

 

 

 

 

 

 

 

 

Fixed income securities:

 

 

 

 

 

 

 

 

 

 

 

 

Corporate bonds

 

$

72,538

 

 

$

18

 

 

$

(13

)

 

$

72,543

 

Total held-to-maturity securities

 

$

72,538

 

 

$

18

 

 

$

(13

)

 

$

72,543

 

 

10


 

 

 

 

 

 

 

 

June 30, 2023

 

 

 

Amortized

 

 

Gross

 

 

Gross

 

 

Estimated

 

 

 

Cost / Net

 

 

Unrealized

 

 

Unrealized

 

 

Fair

 

 

 

Carrying Amount

 

 

Gains

 

 

Losses

 

 

Value

 

Held-to-maturity securities:

 

 

 

 

 

 

 

 

 

 

 

 

Fixed income securities:

 

 

 

 

 

 

 

 

 

 

 

 

Corporate bonds

 

$

81,743

 

 

$

1

 

 

$

(160

)

 

$

81,584

 

U.S. treasury bills

 

 

9,817

 

 

 

31

 

 

 

(1

)

 

 

9,847

 

Total held-to-maturity securities

 

$

91,560

 

 

$

32

 

 

$

(161

)

 

$

91,431

 

 

5.
INVENTORIES

Inventories consisted of the following:

 

 

 

December 31,

 

 

June 30,

 

 

 

2023

 

 

2023

 

Raw materials and supplies

 

$

28,455

 

 

$

40,201

 

Work in process

 

 

10,038

 

 

 

9,465

 

Finished goods

 

 

6,134

 

 

 

10,335

 

Obsolescence reserve

 

 

(1,571

)

 

 

(1,703

)

Total inventories

 

$

43,056

 

 

$

58,298

 

 

 

6.
PROPERTY, PLANT, AND EQUIPMENT

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

 

 

December 31,

 

 

June 30,

 

 

 

 

2023

 

 

2023

 

 

Land and improvements

 

$

7,587

 

 

$

10,456

 

 

Buildings and improvements

 

 

48,618

 

 

 

46,759

 

 

Machinery and equipment

 

 

42,238

 

 

 

40,632

 

 

Furniture and fixtures

 

 

5,597

 

 

 

5,284

 

 

Construction in progress

 

 

11,801

 

 

 

10,180

 

 

Total property, plant, and equipment

 

 

115,841

 

 

 

113,311

 

 

Less accumulated depreciation

 

 

(38,095

)

 

 

(35,390

)

 

Property, plant, and equipment — net

 

$

77,746

 

 

$

77,921

 

 

 

 

 

7.
GOODWILL AND OTHER INTANGIBLE ASSETS

The following table presents the carrying amounts of goodwill as of December 31, 2023 and June 30, 2023 for each of the Company's reportable segments.

 

 

Gross Amount

 

 

Accumulated Impairment Losses

 

 

Total

 

MasterCraft

 

$

28,493

 

 

$

 

 

$

28,493

 

Crest

 

 

36,238

 

 

 

(36,238

)

 

 

 

Aviara

 

 

1,100

 

 

 

(1,100

)

 

 

 

Total

 

$

65,831

 

 

$

(37,338

)

 

$

28,493

 

 

11


 

 

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

 

 

 

December 31,

 

 

June 30,

 

 

 

2023

 

 

2023

 

 

 

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

 

 

$

(10,950

)

 

$

8,550

 

 

$

19,500

 

 

$

(10,050

)

 

$

9,450

 

Software

 

245

 

 

 

(245

)

 

 

 

 

245

 

 

 

(233

)

 

 

12

 

 

 

 

19,745

 

 

 

(11,195

)

 

 

8,550

 

 

 

19,745

 

 

 

(10,283

)

 

 

9,462

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unamortized intangible assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Trade names

 

 

33,000

 

 

 

(7,000

)

 

 

26,000

 

 

 

33,000

 

 

 

(7,000

)

 

 

26,000

 

Total other intangible assets

 

$

52,745

 

 

$

(18,195

)

 

$

34,550

 

 

$

52,745

 

 

$

(17,283

)

 

$

35,462

 

Amortization expense related to Other intangible assets, net for each of the three months and each of the six months ended December 31, 2023 and January 1, 2023, was $0.5 million and $1.0 million, respectively. Estimated amortization expense for the fiscal year ending June 30, 2024 is $1.8 million.

 

8.
ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

Accrued expenses and other current liabilities consisted of the following:

 

 

 

December 31,

 

 

June 30,

 

 

 

2023

 

 

2023

 

Warranty

 

$

31,235

 

 

$

31,780

 

Dealer incentives

 

 

20,079

 

 

 

24,987

 

Compensation and related accruals

 

 

3,384

 

 

 

5,838

 

Self-insurance

 

 

1,247

 

 

 

1,586

 

Inventory repurchase contingent obligation

 

 

2,123

 

 

 

1,515

 

Contract liabilities

 

 

2,692

 

 

 

1,477

 

Liabilities retained associated with discontinued operations

 

 

845

 

 

 

690

 

Other

 

 

3,985

 

 

 

4,623

 

Total accrued expenses and other current liabilities

 

$

65,590

 

 

$

72,496

 

 

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

 

 

 

December 31,

 

 

January 1,

 

 

 

2023

 

 

2023

 

Balance at the beginning of the period

 

$

31,780

 

 

$

25,824

 

Provisions

 

 

4,325

 

 

 

7,183

 

Payments made

 

 

(7,683

)

 

 

(5,604

)

Changes for pre-existing warranties

 

 

2,813

 

 

 

2,342

 

Balance at the end of the period

 

$

31,235

 

 

$

29,745

 

 

 

 

 

 

 

9.
COMMITMENTS AND CONTINGENCIES

Legal Proceedings

12


 

 

The Company is subject to various litigation, claims and proceedings, which have arisen in the ordinary course of business. The Company accrues for litigation, claims and proceedings when a liability is both probable and the amount can be reasonably estimated.

The Company’s accruals for litigation matters are not material. While these matters are subject to inherent uncertainties, management believes that current litigation, claims and proceedings, individually and in aggregate, and after considering expected insurance reimbursements and other contract indemnifications, are not likely to have a material adverse impact on the Company’s financial position, results of operations or cash flows.

 

10.
LONG-TERM DEBT

Long-term debt is as follows:

 

 

 

December 31,

 

 

June 30,

 

 

 

2023

 

 

2023

 

Term loan

 

$

51,750

 

 

$

54,000

 

Debt issuance costs on term loan

 

 

(307

)

 

 

(324

)

Total debt

 

 

51,443

 

 

 

53,676

 

Less current portion of long-term debt

 

 

4,500

 

 

 

4,500

 

Less current portion of debt issuance costs on term loan

 

 

(132

)

 

 

(119

)

Long-term debt, net of current portion

 

$

47,075

 

 

$

49,295

 

 

The Company has a credit agreement with a syndicate of certain financial institutions (the "Credit Agreement") that 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 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.

On October 4, 2023, the Company entered into the Third Amendment to the Credit Agreement to exclude certain amounts of stock repurchases during the fiscal year ending June 30, 2024 from the calculation of the minimum required fixed charge coverage ratio.

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 both the three and six months ended December 31, 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 December 31, 2023, the interest rate on the Company’s term loan was 6.71%.

The Credit Agreement will mature and all remaining amounts outstanding thereunder will be due and payable on June 28, 2026. As of December 31, 2023, the Company was in compliance with its financial covenants under the Credit Agreement.

Revolving Credit Facility

As of December 31, 2023, the Company had no amounts outstanding on its Revolving Credit Facility and had remaining availability of $100.0 million.

13


 

 

11.
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 add-back for Section 162(m) limitations, partially offset by a benefit associated with the foreign derived intangible income deduction. During the three months ended December 31, 2023 and January 1, 2023, the Company's effective tax rate was 21.8% and 24.4%, respectively, and for the six months ended December 31, 2023 and January 1, 2023, the Company’s effective tax rate was 21.7% and 23.4%, respectively. The Company’s effective tax rates for the three and six months ended December 31, 2023 are lower compared to the effective tax rate for the same prior-year periods, primarily due to a decrease in the effective state tax rate and an increase in the impact of federal tax credits, partially offset by an increase in the tax impact of uncertain state tax positions.

12.
SHARE-BASED COMPENSATION

 

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

 

 

 

Three Months Ended

 

 

Six Months Ended

 

 

 

 

December 31,

 

 

January 1,

 

 

December 31,

 

 

January 1,

 

 

 

 

2023

 

 

2023

 

 

2023

 

 

2023

 

 

Restricted stock awards

 

$

601

 

 

$

583

 

 

$

1,014

 

 

$

1,135

 

 

Performance stock units

 

 

(592

)

 

 

162

 

 

 

(66

)

 

 

730

 

 

Share-based compensation expense

 

$

9

 

 

$

745

 

 

$

948

 

 

$

1,865

 

 

 

Restricted Stock Awards

During the six months ended December 31, 2023, the Company granted 116,962 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 six months ended December 31, 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 six months ended December 31, 2023, was $21.07 per share.

The following table summarizes the status of nonvested RSAs as of December 31, 2023, and changes during the six months then ended.

 

 

 

 

 

 

Average

 

 

 

Nonvested

 

 

Grant-Date

 

 

 

Restricted

 

 

Fair Value

 

 

 

Shares

 

 

(per share)

 

Nonvested at June 30, 2023

 

 

91,907

 

 

$

23.66

 

Granted

 

 

116,962

 

 

 

21.07

 

Vested

 

 

(18,830

)

 

 

20.00

 

Forfeited

 

 

(14,801

)

 

 

23.26

 

Nonvested at December 31, 2023

 

 

175,238

 

 

 

22.36

 

 

As of December 31, 2023, there was $2.9 million of total unrecognized compensation expense related to nonvested RSAs. The Company expects this expense to be recognized over a weighted average period of 1.8 years.

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

14


 

 

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 December 31, 2023, and changes during the six months then ended.

 

 

 

 

 

 

Average

 

 

 

Nonvested

 

 

Grant-Date

 

 

 

Performance

 

 

Fair Value

 

 

 

Stock Units

 

 

(per share)

 

Nonvested at June 30, 2023

 

 

122,971

 

 

$

27.12

 

Granted

 

 

86,555

 

 

 

21.62

 

Forfeited

 

 

(21,816

)

 

 

25.80

 

Nonvested at December 31, 2023

 

 

187,710

 

 

 

24.74

 

 

As of December 31, 2023, there was $1.6 million of total unrecognized compensation expense related to nonvested PSUs. The Company expects this expense to be recognized over a weighted average period of 2.4 years.

 

13.
EARNINGS PER SHARE AND COMMON STOCK

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

 

 

 

Three Months Ended

 

 

Six Months Ended

 

 

 

 

December 31,

 

 

January 1,

 

 

December 31,

 

 

January 1,

 

 

 

 

2023

 

 

2023

 

 

2023

 

 

2023

 

 

Net income from continuing operations

 

$

5,927

 

 

$

19,983

 

 

$

13,003

 

 

$

44,618

 

 

Loss from discontinued operations, net of tax

 

 

(41

)

 

 

(300

)

 

 

(922

)

 

 

(20,867

)

 

Net income

 

$

5,886

 

 

$

19,683

 

 

$

12,081

 

 

$

23,751

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average shares — basic

 

 

17,010,116

 

 

 

17,669,645

 

 

 

17,083,204

 

 

 

17,807,853

 

 

Dilutive effect of assumed exercises of stock options

 

 

 

 

 

8,175

 

 

 

 

 

 

8,134

 

 

Dilutive effect of assumed restricted share awards/units

 

 

81,517

 

 

 

96,509

 

 

 

74,920

 

 

 

87,040

 

 

Weighted average outstanding shares — diluted

 

 

17,091,633

 

 

 

17,774,329

 

 

 

17,158,124

 

 

 

17,903,027

 

 

Basic net income (loss) per share

 

 

 

 

 

 

 

 

 

 

 

 

 

Continuing operations

 

$

0.35

 

 

$

1.13

 

 

$

0.76

 

 

$

2.51

 

 

Discontinued operations

 

$

 

 

$

(0.02

)

 

 

(0.05

)

 

 

(1.18

)

 

Net income

 

$

0.35

 

 

$

1.11

 

 

$

0.71

 

 

$

1.33

 

 

Diluted net income (loss) per share

 

 

 

 

 

 

 

 

 

 

 

 

 

Continuing operations

 

$

0.35

 

 

$

1.12

 

 

$

0.76

 

 

$

2.49

 

 

Discontinued operations

 

$

(0.01

)

 

$

(0.01

)

 

 

(0.06

)

 

 

(1.16

)

 

Net income

 

$

0.34

 

 

$

1.11

 

 

$

0.70

 

 

$

1.33

 

 

 

For the three and six months ended December 31, 2023 and January 1, 2023, an immaterial number of shares were excluded from the computation of diluted earnings per share as the effect would have been anti-dilutive.

Share Repurchase Program

On June 24, 2021, the board of directors of the Company authorized a share repurchase program that allowed for the repurchase of up to $50.0 million of the Company’s common stock during the three-year period ending June 24, 2024. While having $1.6 million of availability as of June 30, 2023, this program was fully utilized during the first quarter ended October 1, 2023.

15


 

 

On July 24, 2023, the board of directors of the Company authorized a new share repurchase program under which the Company may repurchase up to $50.0 million of its outstanding shares of common stock. The new authorization became effective upon the completion of the Company's existing $50.0 million stock repurchase authorization.

During the three months ended December 31, 2023 and January 1, 2023, the Company repurchased 214,219 shares and 224,284 shares of common stock for $4.4 million and $4.8 million, respectively, in cash, excluding related fees and expenses. During the six months ended December 31, 2023 and January 1, 2023, the Company repurchased 455,983 shares and 415,644 shares of common stock for $10.2 million and $9.0 million, respectively, in cash, excluding related fees and expenses. As of December 31, 2023, $41.5 million remained available under the program.

 

14.
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 six months ended December 31, 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 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.

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 December 31, 2023

 

 

 

MasterCraft

 

 

Crest

 

 

Aviara

 

 

Consolidated

 

Net sales

 

$

72,699

 

 

$

17,051

 

 

$

9,731

 

 

 

99,481

 

Operating income (loss)

 

 

10,294

 

 

 

469

 

 

 

(3,745

)

 

 

7,018

 

Depreciation and amortization

 

 

1,282

 

 

 

816

 

 

 

660

 

 

 

2,758

 

Purchases of property, plant and equipment

 

 

1,407

 

 

 

314

 

 

 

1,994

 

 

 

3,715

 

 

 

 

For the Six Months Ended December 31, 2023

 

 

 

MasterCraft

 

 

Crest

 

 

Aviara

 

 

Consolidated

 

Net sales

 

$

148,535

 

 

$

35,520

 

 

$

19,643

 

 

$

203,698

 

Operating income (loss)

 

 

20,584

 

 

 

732

 

 

 

(5,745

)

 

 

15,571

 

Depreciation and amortization

 

 

2,583

 

 

 

1,624

 

 

 

1,277

 

 

 

5,484

 

Purchases of property, plant and equipment

 

 

3,616

 

 

 

1,178

 

 

 

3,324

 

 

 

8,118

 

 

16


 

 

 

 

 

For the Three Months Ended January 1, 2023

 

 

 

MasterCraft

 

 

Crest

 

 

Aviara

 

 

Consolidated

 

Net sales

 

$

108,665

 

 

$

36,665

 

 

$

13,858

 

 

$

159,188

 

Operating income (loss)

 

 

22,899

 

 

 

5,071

 

 

 

(1,509

)

 

 

26,461

 

Depreciation and amortization

 

 

1,364

 

 

 

721

 

 

 

525

 

 

 

2,610

 

Purchases of property, plant and equipment

 

 

3,173

 

 

 

1,681

 

 

 

1,093

 

 

 

5,947

 

 

 

 

For the Six Months Ended January 1, 2023

 

 

 

MasterCraft

 

 

Crest

 

 

Aviara

 

 

Consolidated

 

Net sales

 

$

221,685

 

 

$

80,226

 

 

$

26,793

 

 

$

328,704

 

Operating income (loss)

 

 

46,971

 

 

 

12,614

 

 

 

(902

)

 

 

58,683

 

Depreciation and amortization

 

 

2,746

 

 

 

1,403

 

 

 

1,062

 

 

 

5,211

 

Purchases of property, plant and equipment

 

 

5,283

 

 

 

4,203

 

 

 

2,429

 

 

 

11,915

 

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

 

 

 

December 31, 2023

 

 

June 30, 2023

 

Assets:

 

 

 

 

 

 

MasterCraft

 

$

240,444

 

 

$

259,201

 

Crest

 

 

48,130

 

 

 

53,435

 

Aviara

 

 

43,212

 

 

 

41,340

 

Total assets

 

$

331,786

 

 

$

353,976

 

 

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 2023 Annual Report on Form 10-K. 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.

Discontinued Operations

The Company's results for all periods presented, as discussed in Management's Discussion and Analysis, are presented on a continuing operations basis. Results related to our former NauticStar business that was sold on September 2, 2022 are reported as discontinued operations for all periods presented. See Note 3 in Notes to Unaudited Condensed Consolidated Financial Statements for more information on Discontinued Operations.

Overview

As anticipated, general market volatility and economic headwinds continue to create uncertainty and softness in the retail environment. As previously disclosed, because of the anticipated softness in retail demand, the Company has approached its wholesale production plan for fiscal 2024 with a prudent level of caution and a focus on rebalancing dealer inventories consistent with the expected retail demand. As a result, net sales decreased $125.0 million, or 38.0 percent, for the first half of fiscal 2024 compared to the same prior-year period. Gross margin declined in the quarter as a result of lower cost absorption due to decreased sales volumes and higher dealer incentives, partially offset by higher prices and favorable mix and options. Dealer incentives include higher floor plan financing costs as a result of increased dealer inventories and interest rates, and other incentives as the retail environment remains competitive.

18


 

Results of Continuing Operations

Consolidated Results

 

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

 

 

Three Months Ended

 

 

2024 vs. 2023

 

 

Six Months Ended

 

 

2024 vs. 2023

 

 

 

December 31,

 

 

January 1,

 

 

 

 

 

%

 

 

December 31,

 

 

January 1,

 

 

 

 

 

%

 

 

 

2023

 

 

2023

 

 

Change

 

 

Change

 

 

2023

 

 

2023

 

 

Change

 

 

Change

 

(Dollar amounts in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consolidated statements of operations:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NET SALES

 

$

99,481

 

 

$

159,188

 

 

$

(59,707

)

 

 

(37.5

%)

 

$

203,698

 

 

$

328,704

 

 

$

(125,006

)

 

 

(38.0

%)

COST OF SALES

 

 

80,752

 

 

 

120,961

 

 

 

(40,209

)

 

 

(33.2

%)

 

 

163,133

 

 

 

244,504

 

 

 

(81,371

)

 

 

(33.3

%)

GROSS PROFIT

 

 

18,729

 

 

 

38,227

 

 

 

(19,498

)

 

 

(51.0

%)

 

 

40,565

 

 

 

84,200

 

 

 

(43,635

)

 

 

(51.8

%)

OPERATING EXPENSES:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Selling and marketing

 

 

3,150

 

 

 

3,042

 

 

 

108

 

 

 

3.6

%

 

 

6,614

 

 

 

6,821

 

 

 

(207

)

 

 

(3.0

%)

General and administrative

 

 

8,111

 

 

 

8,235

 

 

 

(124

)

 

 

(1.5

%)

 

 

17,468

 

 

 

17,718

 

 

 

(250

)

 

 

(1.4

%)

Amortization of other intangible assets

 

 

450

 

 

 

489

 

 

 

(39

)

 

 

(8.0

%)

 

 

912

 

 

 

978

 

 

 

(66

)

 

 

(6.7

%)

Total operating expenses

 

 

11,711

 

 

 

11,766

 

 

 

(55

)

 

 

(0.5

%)

 

 

24,994

 

 

 

25,517

 

 

 

(523

)

 

 

(2.0

%)

OPERATING INCOME

 

 

7,018

 

 

 

26,461

 

 

 

(19,443

)

 

 

(73.5

%)

 

 

15,571

 

 

 

58,683

 

 

 

(43,112

)

 

 

(73.5

%)

OTHER INCOME (EXPENSE):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense

 

 

(854

)

 

 

(666

)

 

 

(188

)

 

 

28.2

%

 

 

(1,732

)

 

 

(1,228

)

 

 

(504

)

 

 

41.0

%

Interest income

 

 

1,415

 

 

 

621

 

 

 

794

 

 

 

127.9

%

 

 

2,766

 

 

 

772

 

 

 

1,994

 

 

 

258.3

%

INCOME BEFORE INCOME TAX EXPENSE

 

 

7,579

 

 

 

26,416

 

 

 

(18,837

)

 

 

(71.3

%)

 

 

16,605

 

 

 

58,227

 

 

 

(41,622

)

 

 

(71.5

%)

INCOME TAX EXPENSE

 

 

1,652

 

 

 

6,433

 

 

 

(4,781

)

 

 

(74.3

%)

 

 

3,602

 

 

 

13,609

 

 

 

(10,007

)

 

 

(73.5

%)

NET INCOME FROM CONTINUING OPERATIONS

 

$

5,927

 

 

$

19,983

 

 

$

(14,056

)

 

 

(70.3

%)

 

$

13,003

 

 

$

44,618

 

 

$

(31,615

)

 

 

(70.9

%)

Additional financial and other data:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unit sales volume:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

MasterCraft

 

 

491

 

 

 

776

 

 

 

(285

)

 

 

(36.7

%)

 

 

985

 

 

 

1,557

 

 

 

(572

)

 

 

(36.7

%)

Crest

 

 

365

 

 

 

776

 

 

 

(411

)

 

 

(53.0

%)

 

 

727

 

 

 

1,622

 

 

 

(895

)

 

 

(55.2

%)

Aviara

 

 

28

 

 

 

34

 

 

 

(6

)

 

 

(17.6

%)

 

 

53

 

 

 

66

 

 

 

(13

)

 

 

(19.7

%)

Consolidated unit sales volume

 

 

884

 

 

 

1,586

 

 

 

(702

)

 

 

(44.3

%)

 

 

1,765

 

 

 

3,245

 

 

 

(1,480

)

 

 

(45.6

%)

Net sales:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

MasterCraft

 

$

72,699

 

 

$

108,665

 

 

$

(35,966

)

 

 

(33.1

%)

 

$

148,535

 

 

$

221,685

 

 

$

(73,150

)

 

 

(33.0

%)

Crest

 

 

17,051

 

 

 

36,665

 

 

 

(19,614

)

 

 

(53.5

%)

 

 

35,520

 

 

 

80,226

 

 

 

(44,706

)

 

 

(55.7

%)

Aviara

 

 

9,731

 

 

 

13,858

 

 

 

(4,127

)

 

 

(29.8

%)

 

 

19,643

 

 

 

26,793

 

 

 

(7,150

)

 

 

(26.7

%)

Consolidated net sales

 

$

99,481

 

 

$

159,188

 

 

$

(59,707

)

 

 

(37.5

%)

 

$

203,698

 

 

$

328,704

 

 

$

(125,006

)

 

 

(38.0

%)

Net sales per unit:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

MasterCraft

 

$

148

 

 

$

140

 

 

$

8

 

 

 

5.7

%

 

$

151

 

 

$

142

 

 

$

9

 

 

 

6.3

%

Crest

 

 

47

 

 

 

47

 

 

 

 

 

 

 

 

 

49

 

 

 

49

 

 

 

 

 

 

 

Aviara

 

 

348

 

 

 

408

 

 

 

(60

)

 

 

(14.7

%)

 

 

371

 

 

 

406

 

 

 

(35

)

 

 

(8.6

%)

Consolidated net sales per unit

 

 

113

 

 

 

100

 

 

 

13

 

 

 

13.0

%

 

 

115

 

 

 

101

 

 

 

14

 

 

 

13.9

%

Gross margin

 

 

18.8

%

 

 

24.0

%

 

(520) bps

 

 

 

 

 

 

19.9

%

 

 

25.6

%

 

(570) bps

 

 

 

 

Net sales decreased $59.7 million and $125.0 million during the second quarter and first six months of fiscal 2024, respectively, when compared with the same prior-year periods. The decrease in net sales is due to lower unit volume and an increase in dealer incentives, partially offset by higher prices and favorable mix and options. Dealer incentives include higher floor plan financing costs as a result of increased dealer inventories and interest rates, and other incentives as the retail environment remains competitive.

Gross margin percentage declined 520 and 570 basis points during the second quarter and first half of fiscal 2024, respectively, when compared to the same prior-year periods. Lower margins were the result of lower cost absorption due to planned decreased sales volume, higher dealer incentives, and higher costs related to material, labor and overhead inflation, partially offset by higher prices.

19


 

Operating expenses decreased slightly during the second quarter and $0.5 million during the first six months of fiscal 2024, when compared to the same prior-year periods.

Segment Results

MasterCraft Segment

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

 

 

 

Three Months Ended

 

 

2024 vs. 2023

 

 

Six Months Ended

 

 

2024 vs. 2023

 

 

 

December 31,

 

 

January 1,

 

 

 

 

 

%

 

 

December 31,

 

 

January 1,

 

 

 

 

 

%

 

(Dollar amounts in thousands)

 

2023

 

 

2023

 

 

Change

 

 

Change

 

 

2023

 

 

2023

 

 

Change

 

 

Change

 

Net sales

 

$

72,699

 

 

$

108,665

 

 

$

(35,966

)

 

 

(33.1

%)

 

$

148,535

 

 

$

221,685

 

 

$

(73,150

)

 

 

(33.0

%)

Operating income

 

 

10,294

 

 

 

22,899

 

 

 

(12,605

)

 

 

(55.0

%)

 

 

20,584

 

 

 

46,971

 

 

 

(26,387

)

 

 

(56.2

%)

Purchases of property, plant and equipment

 

 

1,407

 

 

 

3,173

 

 

 

(1,766

)

 

 

(55.7

%)

 

 

3,616

 

 

 

5,283

 

 

 

(1,667

)

 

 

(31.6

%)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unit sales volume

 

 

491

 

 

 

776

 

 

 

(285

)

 

 

(36.7

%)

 

 

985

 

 

 

1,557

 

 

 

(572

)

 

 

(36.7

%)

Net sales per unit

 

$

148

 

 

$

140

 

 

$

8

 

 

 

5.7

%

 

$

151

 

 

$

142

 

 

$

9

 

 

 

6.3

%

 

Net sales decreased $36.0 million and $73.2 million during the second quarter and first six months of fiscal 2024, respectively, when compared with the same prior-year periods. The decrease was driven by lower unit volume and increased dealer incentives, partially offset by higher prices and favorable mix and options. Dealer incentives include higher floor plan financing costs as a result of increased dealer inventories and interest rates, and other incentives as the retail environment remains competitive.

Operating income decreased $12.6 million and $26.4 million during the second quarter and first half of fiscal 2024, respectively, when compared to the same prior-year periods. The decrease was driven by decreased sales volume, higher dealer incentives, and higher costs related to material, labor and overhead inflation, partially offset by higher prices.

Crest Segment

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

 

 

 

Three Months Ended

 

 

2024 vs. 2023

 

 

Six Months Ended

 

 

2024 vs. 2023

 

 

 

December 31,

 

 

January 1,

 

 

 

 

 

%

 

 

December 31,

 

 

January 1,

 

 

 

 

 

%

 

(Dollar amounts in thousands)

 

2023

 

 

2023

 

 

Change

 

 

Change

 

 

2023

 

 

2023

 

 

Change

 

 

Change

 

Net sales

 

$

17,051

 

 

$

36,665

 

 

$

(19,614

)

 

 

(53.5

%)

 

$

35,520

 

 

$

80,226

 

 

$

(44,706

)

 

 

(55.7

%)

Operating income

 

 

469

 

 

 

5,071

 

 

 

(4,602

)

 

 

(90.8

%)

 

 

732

 

 

 

12,614

 

 

 

(11,882

)

 

 

(94.2

%)

Purchases of property, plant and equipment

 

 

314

 

 

 

1,681

 

 

 

(1,367

)

 

 

(81.3

%)

 

 

1,178

 

 

 

4,203

 

 

 

(3,025

)

 

 

(72.0

%)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unit sales volume

 

 

365

 

 

 

776

 

 

 

(411

)

 

 

(53.0

%)

 

 

727

 

 

 

1,622

 

 

 

(895

)

 

 

(55.2

%)

Net sales per unit

 

$

47

 

 

$

47

 

 

$

-

 

 

 

0.0

%

 

$

49

 

 

$

49

 

 

$

-

 

 

 

0.0

%

Net sales decreased $19.6 million and $44.7 million during the second quarter and first six months of fiscal 2024, respectively, when compared to the same prior-year periods, due to decreased net sales and increased dealer incentives, partially offset by higher prices.

Operating income for the second quarter of fiscal 2024 decreased $4.6 million when compared to the same prior-year period. The decrease is primarily the result of decreased net sales, as discussed above.

Operating income for the first half of fiscal 2024 decreased $11.9 million when compared to the same prior-year period. The decrease is primarily the result of lower net sales, as discussed above, and higher warranty costs related to prior model year expenses.

20


 

Aviara Segment

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

 

 

 

Three Months Ended

 

 

2024 vs. 2023

 

 

Six Months Ended

 

 

2024 vs. 2023

 

 

 

December 31,

 

 

January 1,

 

 

 

 

 

%

 

 

December 31,

 

 

January 1,

 

 

 

 

 

%

 

(Dollar amounts in thousands)

 

2023

 

 

2023

 

 

Change

 

 

Change

 

 

2023

 

 

2023

 

 

Change

 

 

Change

 

Net sales

 

$

9,731

 

 

$

13,858

 

 

$

(4,127

)

 

 

(29.8

%)

 

$

19,643

 

 

$

26,793

 

 

$

(7,150

)

 

 

(26.7

%)

Operating income (loss)

 

 

(3,745

)

 

 

(1,509

)

 

 

(2,236

)

 

 

148.2

%

 

 

(5,745

)

 

 

(902

)

 

 

(4,843

)

 

 

(536.9

%)

Purchases of property, plant and equipment

 

 

1,994

 

 

 

1,093

 

 

 

901

 

 

 

82.4

%

 

 

3,324

 

 

 

2,429

 

 

 

895

 

 

 

36.8

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unit sales volume

 

 

28

 

 

 

34

 

 

 

(6

)

 

 

(17.6

%)

 

 

53

 

 

 

66

 

 

 

(13

)

 

 

(19.7

%)

Net sales per unit

 

$

348

 

 

$

408

 

 

$

(60

)

 

 

(14.7

%)

 

$

371

 

 

$

406

 

 

$

(35

)

 

 

(8.6

%)

Net sales decreased $4.1 million and $7.2 million during the second quarter and first six months of fiscal 2024, respectively, when compared to the same prior-year periods, due to decreased unit volume, unfavorable mix and higher dealer incentives, partially offset by higher prices and lower warranty costs.

Operating losses for both comparative periods were primarily a result of higher costs related to material, labor and overhead inflation, inefficiencies related to the ramp up of new product launches, and higher dealer incentives, partially offset by higher prices.

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, the adjustment is for share-based compensation. We define EBITDA margin and Adjusted EBITDA margin as EBITDA 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 and share-based compensation.

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:

21


 

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;
Certain Non-GAAP measures do not reflect our tax expense or any cash requirements to pay income taxes;
Certain 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.

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 (expressed as a percentage of net sales) to EBITDA margin and Adjusted EBITDA margin (each expressed as a percentage of net sales) for the periods indicated:

 

 

 

Three Months Ended

 

Six Months Ended

 

 

 

December 31,

 

 

% of Net

 

January 1,

 

 

% of Net

 

December 31,

 

 

% of Net

 

January 1,

 

 

% of Net

 

(Dollar amounts in thousands)

 

2023

 

 

sales

 

2023

 

 

sales

 

2023

 

 

sales

 

2023

 

 

sales

 

Net income from continuing operations

 

$

5,927

 

 

6.0%

 

$

19,983

 

 

12.6%

 

$

13,003

 

 

6.4%

 

$

44,618

 

 

13.6%

 

Income tax expense

 

 

1,652

 

 

 

 

 

6,433

 

 

 

 

 

3,602

 

 

 

 

 

13,609

 

 

 

 

Interest expense

 

 

854

 

 

 

 

 

666

 

 

 

 

 

1,732

 

 

 

 

 

1,228

 

 

 

 

Interest income

 

 

(1,415

)

 

 

 

 

(621

)

 

 

 

 

(2,766

)

 

 

 

 

(772

)

 

 

 

Depreciation and amortization

 

 

2,758

 

 

 

 

 

2,610

 

 

 

 

 

5,484

 

 

 

 

 

5,211

 

 

 

 

EBITDA

 

 

9,776

 

 

9.8%

 

 

29,071

 

 

18.3%

 

 

21,055

 

 

10.3%

 

 

63,894

 

 

19.4%

 

Share-based compensation

 

 

9

 

 

 

 

 

745

 

 

 

 

 

948

 

 

 

 

 

1,865

 

 

 

 

Adjusted EBITDA

 

$

9,785

 

 

9.8%

 

$

29,816

 

 

18.7%

 

$

22,003

 

 

10.8%

 

$

65,759

 

 

20.0%

 

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:

22


 

 

 

Three Months Ended

 

 

Six Months Ended

 

 

 

December 31,

 

 

January 1,

 

 

December 31,

 

 

January 1,

 

 

(Dollar amounts in thousands, except per share data)

2023

 

 

2023

 

 

2023

 

 

2023

 

 

Net income from continuing operations

$

5,927

 

 

$

19,983

 

 

$

13,003

 

 

$

44,618

 

 

Income tax expense

 

1,652

 

 

 

6,433

 

 

 

3,602

 

 

 

13,609

 

 

Amortization of acquisition intangibles

 

450

 

 

 

462

 

 

 

912

 

 

 

924

 

 

Share-based compensation

 

9

 

 

 

745

 

 

 

948

 

 

 

1,865

 

 

Adjusted Net Income before income taxes

 

8,038

 

 

 

27,623

 

 

 

18,465

 

 

 

61,016

 

 

Adjusted income tax expense(a)

 

1,768

 

 

 

6,353

 

 

 

4,062

 

 

 

14,034

 

 

Adjusted Net Income

$

6,270

 

 

$

21,270

 

 

$

14,403

 

 

$

46,982

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted Net Income per share:

 

 

 

 

 

 

 

 

 

 

 

 

Basic

$

0.37

 

 

$

1.20

 

 

$

0.84

 

 

$

2.64

 

 

Diluted

$

0.37

 

 

$

1.20

 

 

$

0.84

 

 

$

2.62

 

 

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

 

 

 

 

 

 

 

 

 

 

 

 

Basic Adjusted Net Income per share

 

17,010,116

 

 

 

17,669,645

 

 

 

17,083,204

 

 

 

17,807,853

 

 

Diluted Adjusted Net Income per share

 

17,091,633

 

 

 

17,774,329

 

 

 

17,158,124

 

 

 

17,903,027

 

 

 

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 indicated:

 

 

 

Three Months Ended

 

 

Six Months Ended

 

 

 

December 31,

 

 

January 1,

 

 

December 31,

 

 

January 1,

 

 

 

2023

 

 

2023

 

 

2023

 

 

2023

 

Net income from continuing operations per diluted share

 

$

0.35

 

 

$

1.12

 

 

$

0.76

 

 

$

2.49

 

Impact of adjustments:

 

 

 

 

 

 

 

 

 

 

 

 

Income tax expense

 

 

0.09

 

 

 

0.36

 

 

 

0.21

 

 

 

0.76

 

Amortization of acquisition intangibles

 

 

0.03

 

 

 

0.03

 

 

 

0.05

 

 

 

0.05

 

Share-based compensation

 

 

 

 

 

0.04

 

 

 

0.06

 

 

 

0.10

 

Adjusted Net Income per diluted share before income taxes

 

$

0.47

 

 

 

1.55

 

 

 

1.08

 

 

 

3.40

 

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

 

 

(0.10

)

 

 

(0.35

)

 

 

(0.24

)

 

 

(0.78

)

Adjusted Net Income per diluted share

 

$

0.37

 

 

$

1.20

 

 

$

0.84

 

 

$

2.62

 

(a)
For fiscal 2024 and 2023, income tax expense reflects an income tax rate of 22.0% and 23.0%, respectively, for each period presented.
(b)
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 basic and diluted share for all periods presented herein.

Liquidity and Capital Resources

Our primary liquidity and capital resource needs are to finance working capital, fund capital expenditures, service our debt, fund potential acquisitions, and fund our share repurchase program. Our principal sources of liquidity are our cash balance, held-to-maturity securities, 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, held-to-maturity securities, 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 $36.2 million as of December 31, 2023, an increase of $16.4 million from $19.8 million as of June 30, 2023. Held-to-maturity securities totaled $72.5 million as of December 31, 2023, a decrease of $19.1 million from $91.6 million as of June 30, 2023. Total debt as of December 31, 2023 and June 30, 2023, was $51.4 million and $53.7 million, respectively.

As of December 31, 2023, we had no amounts outstanding under the Revolving Credit Facility, leaving $100.0 million of available borrowing capacity. Refer to Note 10 — Long Term Debt in the Notes to Unaudited Condensed Consolidated Financial Statements for further details.

23


 

On June 24, 2021, the board of directors of the Company authorized a share repurchase program that allowed for the repurchase of up to $50.0 million of our common stock during the three-year period ending June 24, 2024. While having $1.6 million of availability as of June 30, 2023, this program was fully utilized during the first quarter ended October 1, 2023.

On July 24, 2023, the board of directors of the Company authorized a new share repurchase program under which the Company may repurchase up to $50 million of its outstanding shares of common stock. The new authorization became effective upon the completion of the Company's prior $50 million stock repurchase authorization.

During the six months ended December 31, 2023, the Company repurchased 455,983 shares of common stock for $10.2 million in cash, excluding related fees and expenses under both plans.

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

 

 

 

Six Months Ended

 

 

 

 

December 31,

 

 

January 1,

 

 

(Dollar amounts in thousands)

 

2023

 

 

2023

 

 

Total cash provided by (used in):

 

 

 

 

 

 

 

Operating activities

 

$

19,202

 

 

$

79,763

 

 

Investing activities

 

 

11,845

 

 

 

(71,602

)

 

Financing activities

 

 

(14,109

)

 

 

(10,937

)

 

Net change in cash from continuing operations

 

$

16,938

 

 

$

(2,776

)

 

Six Months Ended December 31, 2023 Cash Flows from Continuing Operations

Net cash provided by operating activities for the six months ended December 31, 2023 was $19.2 million, primarily due to net income. Working capital had a net nominal effect on cash provided by operating activities. 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. Favorable changes in working capital primarily consisted of a decrease in accounts receivable, inventories and prepaid expenses. Partially offsetting favorable changes in working capital was a decrease in accounts payable, accrued expenses and other current liabilities and income tax payable. Accounts receivable decreased primarily as a result of timing of collections and lower sales at the end of the period compared to the end of the prior-year period. Inventories decreased as we continue to rebalance inventory levels to align with lower production levels, partially offset by increased materials costs from inflation. Accrued expenses and other current liabilities primarily decreased due to payment of dealer incentives and lower compensation related accruals, partially offset by an increase in contract liabilities. Accounts payable decreased as a result of decreased production levels as well as timing associated with the holiday season. Income tax payable decreased due to the timing of payments.

Net cash provided by investing activities was $11.8 million, which included net changes of $20.0 million in held-to maturity securities, partially offset by $8.1 million in net capital expenditures. Our capital spending was primarily focused on tooling, facility enhancements and information technology.

Net cash used in financing activities was $14.1 million, which included net payments of $2.3 million on long-term debt and stock repurchases totaling $10.2 million.

Six Months Ended January 1, 2023 Cash Flows from Continuing Operations

Net cash provided by operating activities for the six months ended January 1, 2023 was $79.8 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 a decrease in accounts receivable and inventories, and an increase in accrued expenses and other current liabilities. Partially offsetting favorable changes in working capital was a decrease in accounts payable and income tax payable. 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 rebalanced inventory levels after the summer selling season,

24


 

partially offset by increased materials costs from inflation. Accrued expenses and other current liabilities primarily increased due to increased warranty and floor plan interest costs, offset by payments of other dealer incentives. Accounts payable decreased as a result of decreased production levels during the holiday season. Income tax payable decreased due to the tax benefit generated from the sale of NauticStar.

Net cash used in investing activities was $71.6 million, due to investments in held-to-maturity securities of $59.7 million and $11.9 million of capital expenditures. Our capital spending was focused on expanding our capacity, maintenance capital, and information technology.

Net cash used in financing activities was $10.9 million, which included net payments of $1.5 million on long-term debt and stock repurchases totaling $9.0 million.

Off Balance Sheet Arrangements

The Company did not have any off balance sheet financing arrangements as of December 31, 2023.

Critical Accounting Estimates

As of December 31, 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, 2023, which was filed with the SEC on August 30, 2023.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

Refer to our 2023 Annual Report for discussion of the Company’s market risk. There have been no material changes in market risk from those disclosed therein.

ITEM 4. CONTROLS AND PROCEDURES.

Evaluation of Disclosure Controls and Procedures

 

We maintain disclosure controls and procedures (as defined in Rule 13a-15(e) 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 December 31, 2023.

Changes in Internal Control Over Financial Reporting

There have been no changes in our internal control over financial reporting during the quarter ended December 31, 2023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

25


 

PART II – OTHER INFORMATION

For a discussion of the Company’s legal proceedings, see Part I – Item 1. – Note 9 – Commitments and Contingencies to the Company’s unaudited condensed consolidated financial statements.

ITEM 1A. RISK FACTORS.

During the six months ended December 31, 2023, there were no material changes to the risk factors disclosed in “Part I, Item 1A. Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended June 30, 2023.

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

Share Repurchase Program

On June 24, 2021, the board of directors of the Company authorized a share repurchase program that allowed for the repurchase of up to $50.0 million of our common stock during the three-year period ending June 24, 2024. While having $1.6 million of availability as of June 30, 2023, this program was fully utilized during the first quarter ended October 1, 2023.

On July 24, 2023, the board of directors of the Company authorized a new share repurchase program under which the Company may repurchase up to $50.0 million of its outstanding shares of common stock. The new authorization became effective upon the completion of the Company's prior $50.0 million stock repurchase authorization.

During the first six months of fiscal 2024, we repurchased approximately $10.2 million of our common stock, including approximately $4.4 million during the three months ended December 31, 2023. As of December 31, 2023, the remaining authorization under the new program was approximately $41.5 million.

During the three months ended December 31, 2023, the Company repurchased the following shares of common stock:

Period

 

Total Number of Shares Purchased

 

 

Average Price Paid Per Share(a)(b)

 

 

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)

 

October 2, 2023 - October 29, 2023

 

 

 

 

$

 

 

 

 

 

$

45,883

 

October 30, 2023 - November 26, 2023

 

 

80,900

 

 

 

20.53

 

 

 

80,900

 

 

 

44,222

 

November 27, 2023 - December 31, 2023

 

 

133,319

 

 

 

20.63

 

 

 

133,319

 

 

 

41,471

 

Total

 

 

214,219

 

 

 

 

 

 

214,219

 

 

 

 

 

(a)
Represents weighted average price paid per share excluding commissions paid.
(b)
Average price per share excludes any excise tax imposed on certain stock repurchases as part of the Inflation Reduction Act of 2022.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES.

None.

ITEM 4. MINE SAFETY DISCLOSURES.

None.

ITEM 5. OTHER INFORMATION.

Except as set forth below, during the three months ended December 31, 2023, none of our directors or "officers" (as defined in Rule 16a-1(f) under the Exchange Act) adopted, modified or terminated "Rule 10b5-1 trading arrangements" or "non-Rule 10b5-1 trading arrangements" (each as defined in Item 408 of Regulation S-K).

 

26


 

 

 

 

Trading Arrangement

 

 

 

Action

Date

Rule 10b5-1(a)

Non-Rule 10b5-1(b)

Total Shares to be Sold

Expiration Date

Tim Oxley (Chief Financial Officer)

Adopt

12/13/2023

X

 

15,000

12/13/2024

 

(a) Intended to satisfy the affirmative defense of Rule 10b5-1(c)

(b) Not intended to satisfy the affirmative defense of Rule 10b5-1(c)

 

27


 

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 With Embedded Linkbases Document

 

 

 

 

 

 

 

 

 

*

 

104

 

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

 

 

 

 

 

 

 

 

 

*

 

 

* Filed herewith.

** Furnished herewith.

28


 

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:

February 7, 2024

By:

/s/ FREDERICK A. BRIGHTBILL

 

 

 

Frederick A. Brightbill

 

 

 

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

 

 

 

 

Date:

February 7, 2024

By:

/s/ TIMOTHY M. OXLEY

 

 

 

Timothy M. Oxley

 

 

 

Chief Financial Officer (Principal Financial and Accounting Officer),

 

 

 

Treasurer and Secretary

 

 

 

 

 

29