VONORE, Tenn., May 10, 2018 (GLOBE NEWSWIRE) -- MCBC Holdings, Inc. (NASDAQ:MCFT), the parent entity of MasterCraft
Boat Company, LLC (“MasterCraft”), and NauticStar, LLC (“NauticStar”), today announced financial results for its fiscal 2018 third
quarter ended April 1, 2018.
Highlights:
- Net sales for the third quarter increased to $93.8 million, up 60.4 percent from $58.5 million in the prior-year period from
improvements in MasterCraft’s core business and the inclusion of NauticStar. Net sales year-to-date rose to $237.3 million, up
from $170.3 million.
- Gross profit for the third quarter increased to $24.4 million, up 63.4 percent from $14.9 million in the prior-year period.
Gross profit year-to-date rose to $62.5 million, up from $47.0 million.
- Third-quarter gross margin increased 50 basis points to 26.0 percent, from 25.5 percent in the prior-year period.
MasterCraft’s standalone margin increase, mainly from reduced retail rebate activity, was partially offset by the inclusion of
NauticStar. Year-to-date gross margin decreased 130 basis points.
- Net income totaled $11.5 million for the 2018 third quarter, an increase of $9.3 million, or 411.1 percent, from the
prior-year period. Year-to-date net income increased $13.3 million to $26.5 million.
- Third-quarter diluted earnings per share increased by $0.49, to $0.61, up from $0.12 in the prior-year period. Year-to-date
diluted earnings per share increased to $1.42, versus $0.71 in fiscal 2017.
- Adjusted EBITDA, a non-GAAP measure, increased 79.4 percent to $17.3 million from $9.6 million in the prior-year third
quarter. Year-to-date Adjusted EBITDA rose to $43.8 million from $31.9 million.
- Adjusted EBITDA margin, a non-GAAP measure, increased 200 basis points to 18.4 percent, from 16.4 percent in the prior-year
third quarter period. Adjusted EBITDA margin year-to-date decreased 20 basis points to 18.5 percent, from 18.7 percent.
- Third-quarter fully diluted, pro forma Adjusted net income per share, a non-GAAP measure, increased by $0.28, a 100 percent
increase, to $0.56, up from $0.28 in the prior-year period, and year-to-date was up $0.47, to $1.42, versus $0.95.
- Year-to-date the company made debt payments of $28.3 million enabled by its strong cash generation capability.
Terry McNew, MCBC Holdings, Inc. President and Chief Executive Officer, commented, “We continue to deliver strong top- and
bottom-line performance, driven by double-digit gains from MasterCraft, the addition of NauticStar and our commitment to
operational excellence across both organizations.”
Third-Quarter Results
Net sales for the third quarter ended April 1, 2018, rose 60.4 percent, or $35.3 million, to $93.8 million, compared to $58.5
million for the year-ago third quarter. The gain was primarily due to the inclusion of NauticStar which increased net sales by 42.0
percent, or $24.6 million. The remaining increase of 18.4 percent, or $10.7 million, was attributable to an increase in MasterCraft
unit sales volume, favorable product mix and price increases.
Fiscal third-quarter gross profit increased $9.5 million, or 63.4 percent, to $24.4 million compared to
$14.9 million for the prior-year period. NauticStar contributed $4.9 million to gross profit. Growth in MasterCraft unit sales
volume, a favorable product mix, price increases and reduced retail rebate activity, offset by higher material costs, accounted for
the remaining increase. Gross margin increased to 26.0 percent for the fiscal third quarter, compared to 25.5 percent for the
year-earlier third quarter. The increase primarily stemmed from reduced retail rebate activity, which was partially offset by the
inclusion of NauticStar’s gross margin.
Said McNew, “Retail activity continues to gain momentum and we remain comfortable with our inventory levels, despite the effect of
unseasonably cold and rainy weather and its effect on boat deliveries. We look forward to finishing fiscal year-end June 30, 2018
strong and working with our dealer network to further maximize their opportunities.”
Selling and marketing expense increased $0.9 million, or 32.9 percent, to $3.6 million for the third quarter ended April 1,
2018, compared to $2.7 million for the year-earlier period. This increase resulted mainly from the inclusion of NauticStar,
which added $0.8 million in selling and marketing expenses.
Third-quarter general and administrative expense declined by $2.8 million, or 35.8 percent, to $5.1 million, compared
to $7.9 million for the prior-year period. This decline resulted mainly from a $4.3 million decrease for legal and advisory
fees related to the fiscal 2017 Malibu Boats litigation, which was subsequently settled. This was partially offset by the inclusion
of NauticStar, which added $0.9 million in general and administrative expenses, and an increase of $0.2 million for legal and
advisory fees related to the acquisition.
Fiscal third-quarter net income totaled $11.5 million, versus $2.2 million for the year-earlier period driven by the inclusion
of NauticStar, reduced retail rebate activity and reduced tax rates from the enactment of the Tax Cuts and Jobs Act. Adjusted net
income of $10.6 million, or $0.56 per share, on a fully diluted, pro forma weighted average share count of 18.8 million shares, was
computed using the company’s estimated annual effective tax rate of about 29 percent, which due to the Tax Cuts and Jobs Act, is
expected to be lowered to about 24 percent for fiscal 2019. This compares with Adjusted net income of $5.3 million, or $0.28 per
share, in the prior-year period.
EBITDA was $16.7 million for the third quarter, compared to $5.1 million in the prior-year period. Adjusted EBITDA margin was
18.4 percent, from 16.4 percent in fiscal 2017. Adjusted EBITDA was $17.3 million, versus $9.6 million in the prior-year
period. See “Non-GAAP Measures” below for a reconciliation of Adjusted EBITDA, Adjusted EBITDA margin and Adjusted net income to
the most directly comparable financial measures presented in accordance with GAAP.
Fiscal Year-to-Date Results
Net sales for the fiscal year-to-date period ended April 1, 2018, increased 39.3 percent, or $67.0 million, to $237.3 million
compared to $170.3 million for the year-earlier period. The gain was primarily due to the inclusion of NauticStar which increased
net sales by 26.3 percent, or $44.8 million. The remaining gain of 13.0 percent, or $22.2 million, was attributable to MasterCraft
and stemmed from an increase in sales volume, favorable product mix and price increases.
Year-to-date gross profit increased $15.5 million, or 32.9 percent, to $62.5 million, compared to $47.0 million
for the prior-year period. The inclusion of NauticStar contributed $8.5 million to gross profit. The remaining increase stemmed
from gains in MasterCraft unit sales volume, reduced retail rebate activity and price increases, partially offset by higher
material costs. Gross margin decreased to 26.3 percent year-to-date, compared to 27.6 percent for fiscal 2017. The decrease was
primarily due to the inclusion of NauticStar’s gross margin which is in the high-teens.
Selling and marketing expense increased $2.8 million, or 38.9 percent, to $10.0 million for the fiscal year-to-date period
ended April 1, 2018, compared to $7.2 million for the prior-year period. This increase resulted mainly from the inclusion of
NauticStar, which added $1.4 million in selling and marketing expenses, a rise in dealer meeting and training costs, higher
compensation expense and an increase in promotional activities related to the introduction of the redesigned 2018 MasterCraft
XStar.
General and administrative expense decreased by $2.4 million, or 14.4 percent, to $14.4 million for the fiscal
year-to-date period ended April 1, 2018, compared to $16.8 million for the fiscal 2017 nine months. This decrease resulted
mainly from a decrease of $5.9 million for legal and advisory fees related to Malibu Boats litigation referenced above. These
declines were partially offset by the inclusion of NauticStar, which increased general and administrative expenses by $1.7 million,
and included a $1.7 million increase in for legal and advisory fees related to the NauticStar acquisition.
Fiscal year-to-date net income totaled $26.5 million, versus $13.3 in fiscal 2017 driven by the inclusion of NauticStar, reduced
retail rebate activity and reduced tax rates from the enactment of the Tax Cuts and Jobs Act. Adjusted net income of $26.7 million,
or $1.42 per share, for the nine-month period, on a fully diluted, pro forma weighted average share count of 18.8 million shares,
was computed using the company’s estimated normalized annual effective tax rate of about 29 percent, which due to the Tax Cuts and
Jobs Act, is expected to be lowered to about 24 percent for fiscal 2019. This compares with Adjusted net income of $17.8 million,
or $0.95 per share, in the prior-year period.
Year-to-date EBITDA was $40.7 million, compared to $25.4 million in the prior-year period. Adjusted EBITDA margin was 18.5
percent, from 18.7 percent in the prior-year period. Adjusted EBITDA was $43.8 million, from $31.9 million in the prior-year
period. See “Non-GAAP Measures” below for a reconciliation of Adjusted EBITDA, Adjusted EBITDA margin and Adjusted net income to
the most directly comparable financial measures presented in accordance with GAAP.
Market Milestones
NauticStar
Since acquiring NauticStar in October 2017, MCBC Holdings has made significant progress leveraging its industry-leading
strengths in operational excellence and financial management to further improve NauticStar’s output, quality and margin.
Said McNew, “In less than six months, we’ve helped NauticStar reconfigure their plant layout and increase daily production
volume while improving both safety and quality. Additionally, we continue to add new NauticStar dealers with 18 dealer locations
added this calendar year. We look forward to continuing to optimize NauticStar and driving their growth.”
MasterCraft
In February, the National Marine Manufacturers Association (NMMA) and Boating Writers International honored MasterCraft’s XStar
with a 2018 Innovation Award in the towboat category.
Said McNew, “With the new XStar, validation came when ranks of pro wakeboarders outside of the MasterCraft team were raving
about its versatility. It’s truly the first wakeboard boat in the world that enables progression for anyone from family riders to
the world’s best. We’re thrilled and honored to receive our seventh innovation award in nine years from the NMMA. We recognize that
so many owners buy MasterCraft because of our industry-leading innovation, and with the XStar, its innovations transcend even
beyond its on-water performance.”
Two decades after changing the sport of wakeboarding with the first XStar, the first true performance wakeboard boat, the 2018
XStar was completely redesigned to debut as the highest performing, most technologically advanced wake-specific boat in the
industry.
Outlook
Concluded McNew, “Our year-to-date performance gives us confidence in our ability to deliver a strong finish to fiscal year-end
June 30, 2018. And as always, we remain committed to our five-pronged growth strategy: developing new and innovative products;
further penetrating the entry-level and mid-line segment of the performance sport boat category; capturing share from adjacent
boating categories; strengthening our dealer network; and driving margin expansion through continuous operational excellence.”
For full fiscal year-end June 30, 2018 guidance, MCBC Holdings now expects net sales growth to be in the low- to mid-40 percent
range including nine months of NauticStar’s projected net sales. Adjusted EBITDA margins for MasterCraft, excluding NauticStar, are
expected to grow to the mid-19 percent range from 19.0 percent in 2017. After taking the dilutive effect of the NauticStar
acquisition, consolidated EBITDA margins are expected to be in the low-18 percent range. Adjusted EPS is expected to grow in the
high-40 percent range. NauticStar is expected to provide accretion of $0.15 to $0.20 per share during the nine months post
acquisition.
Conference Call and Webcast Information
MCBC Holdings, Inc. will host a live conference call and webcast to discuss fiscal third-quarter results today, May 10, 2018, at
5:00 p.m. ET. To access the call, dial (800) 219-6861 (domestic) or (574) 990-1024 (international) and provide the operator with
the conference ID 6986468. 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 6986468. The audio replay will be available beginning at 8 p.m. ET on Thursday, May 10, 2018,
through 11:59 p.m. ET on Thursday, May 24, 2018.
About MCBC Holdings, Inc.
Headquartered in Vonore, Tenn., MCBC Holdings, Inc. (NASDAQ:MCFT) is the parent entity of MasterCraft Boat Company and
NauticStar.
About MasterCraft
MasterCraft is a world-renowned innovator, designer, manufacturer and marketer of premium performance sport boats. Founded in 1968,
the company has cultivated its iconic brand image through a rich history of industry-leading innovation, and more than four decades
after the original MasterCraft made its debut the company’s goal remains the same – to continue building the world’s best ski,
wakeboard, wakesurf and luxury performance powerboats. For more information, visit www.mastercraft.com.
About NauticStar
Founded in 2002, NauticStar is located on 17 acres in Amory, Mississippi. With more than 200,000 square feet of manufacturing floor
space, NauticStar is one of the top producers of high quality bay boats, deck boats and offshore center console boats from 18 to 28
feet. Professional and sport fishermen, recreational and pleasure boating enthusiasts appreciate the many standard and available
features that are offered by NauticStar for a customized fit for their lifestyle. For more information on NauticStar, visit
www.NauticStarBoats.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 2018 outlook and key growth initiatives; the anticipated impact of the Tax Cuts and
Jobs Act; and our anticipated financial performance for fiscal 2018.
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, the successful integration of NauticStar,
LLC into our business, 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, 2017, filed with the Securities and Exchange
Commission (the “SEC”) on September 7, 2017, in our Quarterly Report on Form 10-Q for the fiscal quarter ended October 1, 2017,
filed with the SEC on November 13, 2017 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 MasterCraft’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 U.S. 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 MasterCraft's financial results prepared in
accordance with GAAP.
Contacts:
Tim Oxley
Chief Financial Officer
(423) 884-2221
Tim.Oxley@mastercraft.com
Matt Sullivan
(612) 455-1709
Matt.Sullivan@padillaco.com
|
Results of Operations for the Three and Nine
Months Ended April 1, 2018
MCBC HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS |
|
(Unaudited)
(Dollars in thousands, except share and per share data) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended |
|
Nine Months
Ended |
|
|
April 1, |
|
April 2, |
|
April 1, |
|
April 2, |
|
|
2018 |
|
2017 |
|
2018 |
|
2017 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales |
|
$ |
93,811 |
|
$ |
58,486 |
|
$ |
237,295 |
|
$ |
170,309 |
Cost of sales |
|
|
69,429 |
|
|
43,561 |
|
|
174,816 |
|
|
123,289 |
Gross profit |
|
|
24,382 |
|
|
14,925 |
|
|
62,479 |
|
|
47,020 |
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
Selling and marketing |
|
|
3,560 |
|
|
2,678 |
|
|
9,969 |
|
|
7,176 |
General and administrative |
|
|
5,099 |
|
|
7,939 |
|
|
14,388 |
|
|
16,808 |
Amortization of intangible assets |
|
|
524 |
|
|
26 |
|
|
1,077 |
|
|
80 |
Total operating expenses |
|
|
9,183 |
|
|
10,643 |
|
|
25,434 |
|
|
24,064 |
Operating income |
|
|
15,199 |
|
|
4,282 |
|
|
37,045 |
|
|
22,956 |
Other expense: |
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense |
|
|
897 |
|
|
561 |
|
|
2,527 |
|
|
1,684 |
Income before income tax expense |
|
|
14,302 |
|
|
3,721 |
|
|
34,518 |
|
|
21,272 |
Income tax expense |
|
|
2,848 |
|
|
1,480 |
|
|
8,009 |
|
|
8,017 |
Net income |
|
$ |
11,454 |
|
$ |
2,241 |
|
$ |
26,509 |
|
$ |
13,255 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per common share: |
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
$ |
0.62 |
|
$ |
0.12 |
|
$ |
1.42 |
|
$ |
0.71 |
Diluted |
|
$ |
0.61 |
|
$ |
0.12 |
|
$ |
1.42 |
|
$ |
0.71 |
Weighted average shares used for computation of: |
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per share |
|
|
18,622,083 |
|
|
18,593,296 |
|
|
18,619,006 |
|
|
18,592,680 |
Diluted earnings per share |
|
|
18,728,424 |
|
|
18,625,904 |
|
|
18,705,801 |
|
|
18,607,862 |
|
MCBC HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS |
|
(Dollars in thousands, except share and per share
data) |
|
|
|
|
|
|
|
|
|
April 1, |
|
June 30, |
|
|
2018 |
|
2017 |
|
|
(Unaudited) |
|
|
|
ASSETS |
|
|
CURRENT ASSETS: |
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
8,500 |
|
|
$ |
4,038 |
|
Accounts receivable — net of allowances of $71 and $82, respectively |
|
|
5,975 |
|
|
|
3,500 |
|
Income tax receivable |
|
|
61 |
|
|
|
— |
|
Inventories — net |
|
|
20,290 |
|
|
|
11,676 |
|
Prepaid expenses and other current assets |
|
|
3,596 |
|
|
|
2,438 |
|
Total current assets |
|
|
38,422 |
|
|
|
21,652 |
|
Property, plant and equipment — net |
|
|
19,728 |
|
|
|
14,827 |
|
Intangible assets — net |
|
|
51,566 |
|
|
|
16,643 |
|
Goodwill |
|
|
66,713 |
|
|
|
29,593 |
|
Deferred debt issuance costs — net |
|
|
406 |
|
|
|
481 |
|
Other |
|
|
297 |
|
|
|
125 |
|
Total assets |
|
$ |
177,132 |
|
|
$ |
83,321 |
|
LIABILITIES AND STOCKHOLDERS' EQUITY |
|
|
|
|
|
|
CURRENT LIABILITIES: |
|
|
|
|
|
|
Accounts payable |
|
$ |
18,082 |
|
|
$ |
11,008 |
|
Income tax payable |
|
|
1,280 |
|
|
|
780 |
|
Accrued expenses and other current liabilities |
|
|
30,343 |
|
|
|
21,410 |
|
Current portion of long term debt, net of unamortized debt issuance costs |
|
|
5,101 |
|
|
|
3,687 |
|
Total current liabilities |
|
|
54,806 |
|
|
|
36,885 |
|
Long term debt, net of unamortized debt issuance costs |
|
|
80,946 |
|
|
|
30,790 |
|
Deferred income taxes |
|
|
172 |
|
|
|
953 |
|
Unrecognized tax positions |
|
|
2,134 |
|
|
|
2,932 |
|
Total liabilities |
|
|
138,058 |
|
|
|
71,560 |
|
COMMITMENTS AND CONTINGENCIES |
|
|
|
|
|
|
STOCKHOLDERS' EQUITY: |
|
|
|
|
|
|
Common stock, $.01 par value per share — authorized, 100,000,000 shares;
issued and outstanding, 18,683,678 shares at April 1, 2018 and 18,637,445 shares at June 30, 2017 |
|
|
187 |
|
|
|
186 |
|
Additional paid-in capital |
|
|
113,748 |
|
|
|
112,945 |
|
Accumulated deficit |
|
|
(74,861 |
) |
|
|
(101,370 |
) |
Total stockholders' equity |
|
|
39,074 |
|
|
|
11,761 |
|
Total liabilities and stockholders' equity |
|
$ |
177,132 |
|
|
$ |
83,321 |
|
Supplemental Operating Data
The following table sets forth certain supplemental operating data for the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended |
|
|
|
|
Nine Months
Ended |
|
|
|
|
|
|
April 1, |
|
April 2, |
|
% |
|
|
April 1, |
|
April 2, |
|
% |
|
|
|
|
2018 |
|
2017 |
|
Variance |
|
|
2018 |
|
2017 |
|
Variance |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Unaudited) |
|
|
|
(Dollars in thousands) |
|
Unit volume: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
MasterCraft |
|
|
804 |
|
|
741 |
|
8.5 % |
|
|
|
|
2,254 |
|
|
2,090 |
|
7.8 % |
|
|
|
NauticStar |
|
|
628 |
|
|
— |
|
|
|
|
|
1,154 |
|
|
— |
|
|
|
|
MasterCraft sales |
|
$ |
69,257 |
|
$ |
58,486 |
|
18.4 % |
|
|
|
$ |
192,545 |
|
$ |
170,309 |
|
13.1 % |
|
|
|
NauticStar sales |
|
$ |
24,554 |
|
$ |
— |
|
|
|
|
$ |
44,750 |
|
$ |
— |
|
|
|
|
Consolidated sales |
|
$ |
93,811 |
|
$ |
58,486 |
|
60.4 % |
|
|
|
$ |
237,295 |
|
$ |
170,309 |
|
39.3 % |
|
|
|
Per Unit: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
MasterCraft sales |
|
$ |
86 |
|
$ |
79 |
|
8.9 % |
|
|
|
$ |
85 |
|
$ |
81 |
|
4.9 % |
|
|
|
NauticStar sales |
|
$ |
39 |
|
$ |
— |
|
|
|
|
$ |
39 |
|
$ |
— |
|
|
|
|
Consolidated sales |
|
$ |
66 |
|
$ |
79 |
|
(17.0)% |
|
|
|
$ |
70 |
|
$ |
81 |
|
(14.6)% |
|
|
|
Gross margin |
|
|
26.0 |
% |
|
25.5 |
% |
|
|
|
|
26.3 |
% |
|
27.6 |
% |
|
|
|
Non-GAAP Measures
We define EBITDA as earnings before interest expense, income taxes, depreciation and amortization. We define Adjusted EBITDA as
EBITDA further adjusted to eliminate certain non-cash charges and other items that we do not consider to be indicative of our
ongoing operations, including fees and expenses related to the company’s follow-on offering, transaction expenses associated with
the acquisition of NauticStar, acquisition related inventory step up adjustment and our stock-based compensation. We define
Adjusted net income as net income adjusted to eliminate certain non-cash charges and other items that we do not consider to be
indicative of our ongoing operations, including fees and expenses related to the company’s follow-on offering, transaction expenses
associated with the acquisition of NauticStar, our stock-based compensation and an adjustment for income tax expense at a
normalized annual effective tax rate. We define Adjusted EBITDA margin as Adjusted EBITDA expressed as a percentage of sales.
Adjusted EBITDA, Adjusted net income and Adjusted EBITDA margin are not measures of net income or operating income as determined
under accounting principles generally accepted in the United States, which we refer to as “GAAP.” Adjusted EBITDA and Adjusted net
income are not measures of performance in accordance with GAAP and should not be considered as an alternative to net income or
operating cash flows determined in accordance with GAAP. Additionally, Adjusted EBITDA is not intended to be a measure of cash flow
for management’s discretionary use. We believe that the inclusion of EBITDA, Adjusted EBITDA, Adjusted EBITDA margin and Adjusted
net income is appropriate to provide additional information to investors because securities analysts, noteholders and other
investors use these non-GAAP financial 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 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 GAAP, provides a more complete understanding of factors and trends affecting our business than GAAP alone measures.
We believe Adjusted net income assists our board of directors, management and investors in comparing our net income on a consistent
basis from period to period because it removes non-cash items and items not indicative of our ongoing operations. Adjusted EBITDA
and Adjusted net income 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 GAAP. Some of these limitations are:
- Although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be
replaced in the future and Adjusted EBITDA does not reflect any cash requirements for such replacements;
- Adjusted EBITDA does not reflect our cash expenditures, or future requirements for capital expenditures or contractual
commitments;
- Adjusted EBITDA does not reflect changes in, or cash requirements for, our working capital needs;
- Adjusted EBITDA does not reflect our tax expense or any cash requirements to pay income taxes;
- Adjusted EBITDA does not reflect interest expense, or the cash requirements necessary to service interest payments on our
indebtedness; and
- Adjusted net income and Adjusted EBITDA do not reflect the impact of earnings or charges resulting from matters we do not
consider to be indicative of our 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 Adjusted EBITDA and Adjusted net income
may not be comparable to similarly titled measures of other companies, including companies in our industry.
Furthermore, certain non-GAAP financial measures presented in this release have been provided for comparison purposes only and
these non-GAAP financial measures may change in the future based on our calculations and forecasts regarding the interpretation of
certain recent changes to U.S. federal income tax law and anticipated impacts on our financial results.
The following table sets forth a reconciliation of net income as determined in accordance with GAAP to Adjusted EBITDA for the
periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended |
|
Nine Months
Ended |
|
|
|
April 1, 2018 |
|
April 2, 2017 |
|
April 1, 2018 |
|
April 2, 2017 |
|
|
|
|
|
|
|
|
|
|
|
|
|
(Unaudited) |
|
|
|
(Dollars in thousands) |
|
Net income |
|
$ |
11,454 |
|
|
$ |
2,241 |
|
|
$ |
26,509 |
|
|
$ |
13,255 |
|
|
Income tax expense |
|
|
2,848 |
|
|
|
1,480 |
|
|
|
8,009 |
|
|
|
8,017 |
|
|
Interest expense |
|
|
897 |
|
|
|
561 |
|
|
|
2,527 |
|
|
|
1,684 |
|
|
Depreciation and amortization |
|
|
1,456 |
|
|
|
821 |
|
|
|
3,665 |
|
|
|
2,442 |
|
|
EBITDA |
|
|
16,655 |
|
|
|
5,103 |
|
|
|
40,710 |
|
|
|
25,398 |
|
|
Transaction expense(a) |
|
|
247 |
|
|
|
4 |
|
|
|
1,733 |
|
|
|
63 |
|
|
Inventory step-up adjustment – acquisition related(b) |
|
|
— |
|
|
|
— |
|
|
|
501 |
|
|
|
— |
|
|
Litigation charge(c) |
|
|
— |
|
|
|
4,295 |
|
|
|
— |
|
|
|
5,948 |
|
|
Stock-based compensation |
|
|
353 |
|
|
|
215 |
|
|
|
881 |
|
|
|
520 |
|
|
Adjusted EBITDA |
|
$ |
17,255 |
|
|
$ |
9,617 |
|
|
$ |
43,825 |
|
|
$ |
31,929 |
|
|
Adjusted EBITDA margin(d) |
|
|
18.4% |
|
|
|
16.4% |
|
|
|
18.5% |
|
|
|
18.7% |
|
|
(a) |
Represents fees, expenses and integration costs associated with our
acquisition of NauticStar and our follow-on offering and secondary offering in the prior-year period. |
(b) |
Represents post-acquisition adjustment to cost of goods sold for the
fair value step up of inventory acquired all of which was sold during the second quarter of fiscal 2018. |
(c) |
Represents fees and expenses related to our litigation with Malibu
Boats, LLC, which was settled during the fourth quarter of fiscal 2017. |
(d) |
We define Adjusted EBITDA margin as Adjusted EBITDA expressed as a
percentage of net sales. |
The following table sets forth a reconciliation of net income as determined in accordance with GAAP to Adjusted net income for
the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended |
|
Nine Months
Ended |
|
|
|
April 1, 2018 |
|
April 2, 2017 |
|
April 1, 2018 |
|
April 2, 2017 |
|
|
|
|
|
|
|
|
|
|
|
|
|
(Unaudited) |
|
|
|
(Dollars in thousands, except for share and per share
amounts) |
|
Net income |
|
$ |
11,454 |
|
$ |
2,241 |
|
$ |
26,509 |
|
$ |
13,255 |
|
Income tax expense |
|
|
2,848 |
|
|
1,480 |
|
|
8,009 |
|
|
8,017 |
|
Transaction expense(a) |
|
|
247 |
|
|
4 |
|
|
1,733 |
|
|
63 |
|
Inventory step-up adjustment – acquisition related(b) |
|
|
— |
|
|
— |
|
|
501 |
|
|
— |
|
Litigation charge(c) |
|
|
— |
|
|
4,295 |
|
|
— |
|
|
5,948 |
|
Stock-based compensation |
|
|
353 |
|
|
215 |
|
|
881 |
|
|
520 |
|
Adjusted net income before income taxes(d) |
|
|
14,902 |
|
|
8,235 |
|
|
37,633 |
|
|
27,803 |
|
Adjusted income tax expense(e) |
|
|
4,322 |
|
|
2,965 |
|
|
10,914 |
|
|
10,009 |
|
Adjusted net income |
|
$ |
10,580 |
|
$ |
5,270 |
|
$ |
26,719 |
|
$ |
17,794 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pro-forma Adjusted net income per common share |
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
$ |
0.57 |
|
$ |
0.28 |
|
$ |
1.43 |
|
$ |
0.96 |
|
Diluted |
|
$ |
0.56 |
|
$ |
0.28 |
|
$ |
1.42 |
|
$ |
0.95 |
|
Pro-forma weighted average shares used for the computation of: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic Adjusted net income per share(f) |
|
|
18,624,381 |
|
|
18,593,296 |
|
|
18,621,350 |
|
|
18,593,296 |
|
Diluted Adjusted net income per share(f) |
|
|
18,803,396 |
|
|
18,722,582 |
|
|
18,797,949 |
|
|
18,704,546 |
|
(a) |
Represents fees, expenses and integration costs associated with our
acquisition of NauticStar and our follow-on offering and secondary offering in the prior-year period. |
(b) |
Represents post-acquisition adjustment to cost of goods sold for the
fair value step up of inventory acquired all of which was sold during the second quarter of fiscal 2018. |
(c) |
Represents legal and advisory fees related to our litigation with
Malibu Boats, LLC, which was settled during the fourth quarter of fiscal 2017. |
(d) |
Prior periods presented exclude amortization charges for acquired
intangible assets incurred during the third quarter of fiscal 2018 and the year to date period of $0.5 million and $1.0
million, respectively. |
(e)
|
Reflects income tax expense at an estimated annual effective income tax
rate of 29% for all current-year periods presented and 36% for all prior-year periods presented. We expect our estimated annual
effective income tax rate to be reduced to about 24% for fiscal 2019. |
(f)
|
The weighted average shares used for computation of pro-forma diluted
earnings per common share gives effect to 59,297 shares of restricted stock awards, 66,134 performance stock units and 53,584
shares for the dilutive effect of stock options. The average of the prior quarters is used for computation of the nine months
ended periods. |
|
|
The following table shows the reconciliation of diluted net income per share to diluted pro forma Adjusted net income per share
for the periods presented:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended |
|
Nine Months
Ended |
|
|
|
April 1, 2018 |
|
April 2, 2017 |
|
April 1, 2018 |
|
April 2, 2017 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Unaudited) |
|
|
|
|
|
Net income per diluted share |
|
$ |
0.61 |
|
|
$ |
0.12 |
|
|
$ |
1.42 |
|
|
$ |
0.71 |
|
|
Impact of adjustments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax expense |
|
|
0.15 |
|
|
|
0.08 |
|
|
|
0.43 |
|
|
|
0.43 |
|
|
Transaction expense(a) |
|
|
0.01 |
|
|
|
— |
|
|
|
0.09 |
|
|
|
— |
|
|
Inventory step-up adjustment – acquisition related(b) |
|
|
— |
|
|
|
— |
|
|
|
0.03 |
|
|
|
— |
|
|
Litigation charge(c) |
|
|
— |
|
|
|
0.23 |
|
|
|
— |
|
|
|
0.32 |
|
|
Stock-based compensation |
|
|
0.02 |
|
|
|
0.01 |
|
|
|
0.05 |
|
|
|
0.03 |
|
|
Net income per diluted share before income
taxes(d) |
|
|
0.79 |
|
|
|
0.44 |
|
|
|
2.02 |
|
|
|
1.49 |
|
|
Impact of adjusted income tax expense on net income per diluted share
before income taxes(e) |
|
|
(0.23 |
) |
|
|
(0.16 |
) |
|
|
(0.58 |
) |
|
|
(0.54 |
) |
|
Impact of increased share count(f) |
|
|
— |
|
|
|
— |
|
|
|
(0.02 |
) |
|
|
— |
|
|
Adjusted Net Income per diluted pro-forma weighted average
share |
|
|
0.56 |
|
|
|
0.28 |
|
|
|
1.42 |
|
|
|
0.95 |
|
|
(a) |
Represents fees, expenses and integration costs
associated with our acquisition of NauticStar and our follow-on offering and secondary offering in the prior-year period. |
(b) |
Represents post-acquisition adjustment to cost of goods sold for the
fair value step up of inventory acquired all of which was sold during the second quarter of fiscal 2018. |
(c) |
Represents legal and advisory fees related to our
litigation with Malibu Boats, LLC, which was settled during the fourth quarter of fiscal 2017. |
(d) |
Prior periods presented exclude amortization charges for acquired
intangible assets incurred during the third quarter of fiscal 2018 and the year to date period of $0.5 million and $1.0
million, respectively. |
(e) |
Reflects income tax expense at an estimated annual effective income tax
rate of 29% for all current-year periods presented and 36% for all prior-year periods presented. We expect our estimated annual
effective income tax rate to be reduced to about 24% for fiscal 2019. |
(f) |
Reflects impact of increased share counts giving
effect to the exchange of all restricted stock awards, the vesting of all performance stock units and for the dilutive effect
of stock options included in outstanding shares. |