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MasterCraft Boat Holdings, Inc. Reports Fiscal 2020 First Quarter Results

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VONORE, Tenn., Nov. 07, 2019 (GLOBE NEWSWIRE) -- MasterCraft Boat Holdings, Inc. (NASDAQ:MCFT) today announced financial results for its fiscal 2020 first quarter ended September 29, 2019.

First Quarter Highlights:

  • Net sales increased to $109.8 million, up 17.2 percent from $93.6 million in the prior-year period.
  • GAAP net income was $8.6 million, up slightly from $8.5 million in the prior-year period.
  • GAAP diluted earnings per share increased in the first quarter by $0.01, up 2.2 percent to $0.46, from the prior year period.
  • Diluted Adjusted Net Income per share, a non-GAAP measure, was $0.53 compared to $0.54 in the prior-year period.
  • Adjusted EBITDA, a non-GAAP measure, rose 5.7 percent to $15.9 million from $15.0 million in the prior-year period.
  • New luxury day boat brand, Aviara, began selling during the first quarter and is included in our MasterCraft segment results.

Fred Brightbill, interim Chief Executive Officer, commented, "MasterCraft Boat Holdings delivered strong operational results in the fiscal first quarter. The continued successful execution of our operational excellence and product development initiatives across all our brands led to record first-quarter results in net sales and adjusted earnings. Despite a challenging retail demand environment this past summer due principally to bad weather, the combined strength of our brands and improved retail activity in the fiscal first quarter of 2020 led to improved dealer inventory levels at the end of the quarter. We remain on course to drive continued dealer inventory improvements through the boat show season, allowing for healthy dealer pipelines ahead of the peak summer selling season and beyond."

"As I assume the role of interim CEO, I look forward to working alongside the long-tenured, industry-veteran leadership team and seasoned and dedicated employees at MasterCraft, Aviara, NauticStar and Crest to support them in executing the strategic objectives currently underway," Brightbill concluded.

First Quarter Results

Net Sales for the first quarter were $109.8 million, an increase of $16.1 million, or 17.2 percent, compared to $93.6 million for the prior-year period. The increase was primarily due to:

  • the inclusion of Crest, acquired during the second quarter of 2019, which contributed incremental net sales of $18.9 million;
  • a $0.6 million increase for NauticStar driven by higher wholesale average selling prices due to a greater mix of larger products and price increases, partially offset by lower unit sales volumes; and
  • a $3.3 million decrease for the MasterCraft segment, primarily due to lower unit sales volumes for our MasterCraft brand as we work to right-size our dealer inventory levels after the weather-impacted summer selling season, partially offset by a richer mix of higher-priced and higher-contented models. The decrease for the MasterCraft brand was partially offset by the start of sales for our new Aviara brand.

Gross profit increased $2.3 million, or 10.0 percent, to $25.5 million compared to $23.2 million for the prior-year period. The increase was primarily due to the inclusion of Crest which grew gross profit by $2.6 million.
             
Consolidated gross margin percentage decreased primarily due to the inclusion of Crest, as Crest generates a lower gross margin percentage than our MasterCraft segment. This dilutive effect on consolidated gross margin percentage was partially offset by margin improvement at our MasterCraft segment, driven by price increases, lower discounts and lower materials cost relative to gross sales at our MasterCraft brand, and at NauticStar, primarily driven by price increases and operational efficiencies.

Operating expenses increased $1.2 million, or 10.7 percent, to $12.8 million for the first quarter compared to $11.6 million for the prior-year period. The increase was primarily due to:

  • the inclusion of Crest which added $2.2 million; partially offset by
  • a $1.1 million decrease at our MasterCraft segment due to lower acquisition-related costs and lower selling and marketing costs partially offset by higher legal and professional fees.

Net Income for the first quarter was $8.6 million, or $0.46 per share, reflecting an increase of $0.2 million, or 1.9 percent, compared to $8.5 million, or $0.45 per share, for the prior-year period. Adjusted Net Income of $10.1 million, or $0.53 per share, on a fully diluted, weighted average share count of 19.0 million shares, was computed using the company's estimated annual effective tax rate of approximately 23.0 percent. This compares to Adjusted Net Income of $10.2 million, or $0.54 per fully diluted share, in the prior-year period.

Adjusted EBITDA was $15.9 million for the first quarter, compared to $15.0 million in the prior-year period. Adjusted EBITDA margin was 14.5 percent, down from 16.0 percent in prior-year period principally due to the dilutive effect of Crest.

See "Non-GAAP Measures" below for a reconciliation of Adjusted EBITDA, Adjusted EBITDA margin, Adjusted Net Income, and Adjusted Net Income per share to the most directly comparable financial measures presented in accordance with GAAP.

Outlook

Said Brightbill, "We are bullish on the long-term prospects of both the markets we serve and the brands we own, despite any near-term fluctuations. The launch of our new Aviara brand is being extremely well received by our dealer partner, MarineMax, and consumers alike, and we've made significant improvements in our dealer pipeline inventory through our first fiscal quarter. As we continue to navigate the challenges ahead, including economic, trade and political uncertainty, we remain steadfast in our focus to prudently manage the company and position it for long-term success. We will use the transition to a new CEO as an opportunity to build on the company's historical success and position it for the next stage of growth."

Given the above-mentioned factors, the company's consolidated fiscal 2020 outlook remains as follows:

  • Net Sales – down low-single digit percent
  • Adjusted EBITDA Margin – down 50 to 100 basis points
  • Adjusted Earnings per Share – down high-single digit percent

Conference Call and Webcast Information
MasterCraft Boat Holdings, Inc. will host a live conference call and webcast to discuss first quarter 2020 results today, November 7, 2019, at 10:00 a.m. EST. To access the call, dial (800) 219-6861 (domestic) or (574) 990-1024 (international) and provide the operator with the conference ID 4536166. Please dial in at least 10 minutes prior to the call. To access the live webcast, go to the investor section of the company's website, www.mastercraft.com, on the day of the conference call and click on the webcast icon.  

For an audio replay of the conference call, dial (855) 859-2056 (domestic) or (404) 537-3406 (international) and enter audience passcode 4536166. The audio replay will be available beginning at 12 p.m. EST on Thursday, November 7, 2019, through 11:59 p.m. EST on Thursday, November 21, 2019.

About MasterCraft Boat Holdings, Inc.
Headquartered in Vonore, Tenn., MasterCraft Boat Holdings, Inc. (NASDAQ:MCFT) is a leading innovator, designer, manufacturer and marketer of recreational powerboats through its four brands, MasterCraft, NauticStar, Crest and Aviara. Through these four brands, MasterCraft Boat Holdings has leading market share positions in three of the fastest growing segments of the powerboat industry – performance sport boats, outboard saltwater fishing and pontoon boats – while entering the large, growing luxury day boat segment. For more information about MasterCraft Boat Holdings, and its four brands, visit: Investors.MasterCraft.com, www.MasterCraft.com, www.NauticStarBoats.com, www.CrestPontoonBoats.com, and www.AviaraBoats.com.

Forward-Looking Statements
This press release includes forward-looking statements (as such term is defined in the Private Securities Litigation Reform Act of 1995). Forward-looking statements can often be identified by such words and phrases as "believes," "anticipates," "expects," "intends," "estimates," "may," "will," "should," "continue" and similar expressions, comparable terminology or the negative thereof, and include statements in this press release concerning an exciting pipeline of launches; our ability to continue our operating momentum, capture additional market share and deliver continued growth; expectations regarding driving margin expansion, sales increases and organic growth; our fiscal 2020 outlook and key growth initiatives; and our anticipated financial performance for fiscal 2020.

Forward-looking statements are subject to risks, uncertainties and other important factors that could cause actual results to differ materially from those expressed or implied in the forward-looking statements, including general economic conditions, demand for our products, changes in consumer preferences, competition within our industry, our reliance on our network of independent dealers, our ability to manage our manufacturing levels and our large fixed cost base, recent changes to U.S. federal income tax law, the overall impact and interpretation of which remain uncertain, and the successful introduction of our new products. These and other important factors discussed under the caption "Risk Factors" in our Annual Report on Form 10-K for the fiscal year ended June 30, 2019, filed with the Securities and Exchange Commission (the "SEC") on September 13, 2019 and our other filings with the SEC could cause actual results to differ materially from those indicated by the forward-looking statements. The discussion of these risks is specifically incorporated by reference into this press release.

Any such forward-looking statements represent management's estimates as of the date of this press release. These forward-looking statements should not be relied upon as representing our views as of any date subsequent to the date of this press release. We undertake no obligation (and we expressly disclaim any obligation) to update or supplement any forward-looking statements that may become untrue or cause our views to change, whether because of new information, future events, changes in assumptions or otherwise. Comparison of results for current and prior periods are not intended to express any future trends or indications of future performance, unless expressed as such, and should only be viewed as historical data.

Use of Non-GAAP Financial Measures
To supplement the Company's condensed consolidated financial statements prepared in accordance with U.S. generally accepted accounting principles ("GAAP"), the Company uses certain non-GAAP financial measures in this release. Reconciliations of the non-GAAP financial measures used in this release to the most comparable GAAP measures for the respective periods can be found in tables immediately following the condensed consolidated statements of operations. Non-GAAP financial measures have limitations as analytical tools and should not be considered in isolation or as a substitute for the Company's financial results prepared in accordance with GAAP.


Results of Operations for the Three Months Ended September 29, 2019


MASTERCRAFT BOAT HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

 (Dollars in thousands, except per share data)

    Three Months Ended
    September 29,   September 30,
    2019   2018
         
     
Net sales   $   109,789   $   93,641
Cost of sales       84,256       70,438
Gross profit       25,533       23,203
Operating expenses:                
Selling and marketing       4,064       4,290
General and administrative       7,785       6,772
Amortization of other intangible assets       987       530
Total operating expenses       12,836       11,592
Operating income       12,697       11,611
Other expense:                
Interest expense       1,344       920
Income before income tax expense       11,353       10,691
Income tax expense       2,730       2,226
Net income   $   8,623   $   8,465
                 
Earnings per common share:                
Basic   $   0.46   $   0.45
Diluted   $   0.46   $   0.45
Weighted average shares used for computation of:                
Basic earnings per share       18,723,845       18,646,039
Diluted earnings per share       18,770,756       18,768,764
                 


MASTERCRAFT BOAT HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS

(Dollars in thousands, except per share data)

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    September 29,     June 30,  
    2019     2019  
ASSETS                
CURRENT ASSETS:                    
Cash and cash equivalents   $   6,411     $   5,826  
Accounts receivable, net of allowances of $248 and $281, respectively       9,287         12,463  
Income tax receivable       1,415         951  
Inventories, net       34,914         30,660  
Prepaid expenses and other current assets       4,560         4,464  
Total current assets       56,587         54,364  
Property, plant and equipment, net       35,982         33,636  
Goodwill       74,030         74,030  
Other intangible assets, net       78,811         79,799  
Deferred income taxes       6,090         6,240  
Deferred debt issuance costs, net       424         451  
Finance lease assets       4,115          
Operating lease assets       942          
Other long-term assets       253         253  
Total assets   $   257,234     $   248,773  
LIABILITIES AND STOCKHOLDERS' EQUITY                    
CURRENT LIABILITIES:                    
Accounts payable   $   16,974
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