MasterCraft Boat (MCFT) - 2023 Q3 - Quarterly Report

PART I FINANCIAL INFORMATION Financial Statements The company's unaudited consolidated financial statements for April 2, 2023, show mixed sales trends, increased net income from continuing operations for the nine-month period, and asset growth to $338.3 million, with strong operating cash flow of $107.4 million Unaudited Condensed Consolidated Statements of Operations Net sales for the three months ended April 2, 2023, decreased by 1.5% to $166.8 million, while nine-month net sales increased by 11.5% to $495.5 million, reflecting the impact of discontinued operations Consolidated Statements of Operations Highlights (in thousands, except per share amounts) | Metric | Three Months Ended April 2, 2023 | Three Months Ended April 3, 2022 | Nine Months Ended April 2, 2023 | Nine Months Ended April 3, 2022 | | :--- | :--- | :--- | :--- | :--- | | Net Sales | $166,776 | $169,343 | $495,480 | $444,393 | | Gross Profit | $42,598 | $44,074 | $126,798 | $111,017 | | Operating Income | $29,026 | $31,604 | $87,709 | $71,603 | | Net Income from Continuing Operations | $22,782 | $24,306 | $67,400 | $54,397 | | Loss from Discontinued Operations, Net of Tax | $(272) | $(3,371) | $(21,139) | $(7,674) | | Net Income | $22,510 | $20,935 | $46,261 | $46,723 | | Diluted EPS (Continuing Operations) | $1.28 | $1.31 | $3.78 | $2.89 | Unaudited Condensed Consolidated Balance Sheets Total assets increased to $338.3 million as of April 2, 2023, driven by investments in held-to-maturity securities, while total stockholders' equity significantly grew to $176.1 million Balance Sheet Highlights (in thousands) | Metric | April 2, 2023 | June 30, 2022 | | :--- | :--- | :--- | | Cash and cash equivalents | $27,453 | $34,203 | | Held-to-maturity securities | $73,914 | $0 | | Inventories, net | $55,268 | $58,595 | | Total Assets | $338,274 | $297,052 | | Total current liabilities | $102,991 | $93,172 | | Long-term debt, net | $50,391 | $53,676 | | Total Liabilities | $162,127 | $153,404 | | Total Stockholders' Equity | $176,147 | $143,648 | Unaudited Condensed Consolidated Statements of Cash Flows Net cash provided by operating activities for the nine months ended April 2, 2023, was $107.4 million, with significant cash used in investing activities for held-to-maturity securities and capital expenditures Cash Flow Summary (in thousands) | Activity | Nine Months Ended April 2, 2023 | Nine Months Ended April 3, 2022 | | :--- | :--- | :--- | | Net cash provided by operating activities | $104,962 | $35,302 | | Net cash used in investing activities | $(92,881) | $(10,839) | | Net cash used in financing activities | $(18,831) | $(49,949) | | Net Change in Cash and Cash Equivalents | $(6,750) | $(25,486) | Notes to Unaudited Condensed Consolidated Financial Statements Key notes detail the $22.5 million loss from the NauticStar segment sale, $73.9 million in held-to-maturity securities, segment revenue breakdowns, and $16.0 million in stock repurchases - On September 2, 2022, the company sold its NauticStar business. The disposal is reported as discontinued operations, and a loss on sale of $22.5 million was recognized during the nine months ended April 2, 2023[27][32][35] - The company invested excess cash in short-term, investment-grade corporate bonds, classified as held-to-maturity. As of April 2, 2023, these investments totaled $73.9 million at amortized cost[37][38] - As of April 2, 2023, the company had $54.8 million in term loan debt outstanding and full availability of its $100.0 million revolving credit facility[47][53] - Under its stock repurchase program, the company bought back 625,794 shares for $16.0 million during the nine months ended April 2, 2023. Approximately $8.6 million remained available for repurchase[66] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses Q3 net sales decrease due to mix and incentives, nine-month sales growth from pricing, gross margin trends, segment performance, strong operating cash flow of $107.4 million, and macroeconomic risks - The company completed the sale of its NauticStar business on September 2, 2022, and is reporting it as discontinued operations. All analysis is presented on a continuing operations basis[74] - Management notes that while wholesale performance has been strong as dealers replenish inventory, they expect future wholesale demand to align more closely with retail demand, which may be impacted by macroeconomic uncertainty[75][76] Adjusted EBITDA Reconciliation (in thousands) | Metric | Three Months Ended April 2, 2023 | Three Months Ended April 3, 2022 | Nine Months Ended April 2, 2023 | Nine Months Ended April 3, 2022 | | :--- | :--- | :--- | :--- | :--- | | Net income from continuing operations | $22,782 | $24,306 | $67,400 | $54,397 | | Adjusted EBITDA | $32,986 | $35,005 | $98,746 | $82,959 | | Adjusted EBITDA Margin | 19.8% | 20.7% | 19.9% | 18.7% | Adjusted Net Income and Diluted EPS | Metric | Three Months Ended April 2, 2023 | Three Months Ended April 3, 2022 | Nine Months Ended April 2, 2023 | Nine Months Ended April 3, 2022 | | :--- | :--- | :--- | :--- | :--- | | Adjusted Net Income | $24,121 | $25,117 | $71,104 | $58,471 | | Adjusted Net Income per Diluted Share | $1.36 | $1.36 | $3.98 | $3.11 | Results of Continuing Operations Q3 FY2023 consolidated net sales decreased 1.5% to $166.8 million due to mix and incentives, while nine-month sales increased 11.5% to $495.5 million primarily from pricing - Q3 net sales decrease was caused by changes in model mix, decreased sales volumes, and increased dealer incentives, partially offset by higher prices[80] - Nine-month net sales increase was driven by higher prices and increased options sales, partially offset by changes in model mix and increased dealer incentives[81] - Q3 gross margin decreased 50 bps due to higher costs from inflation, mix changes, and higher dealer incentives, which were partially offset by price increases and improved production efficiencies[82] Segment Results Q3 FY2023 saw MasterCraft sales decline 1.9% and Crest sales drop 6.6%, while Aviara sales grew 22.5%, significantly reducing its operating loss MasterCraft Segment Q3 FY2023 vs Q3 FY2022 (in thousands) | Metric | Q3 2023 | Q3 2022 | Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Net Sales | $117,630 | $119,956 | $(2,326) | (1.9%) | | Operating Income | $25,298 | $28,051 | $(2,753) | (9.8%) | Crest Segment Q3 FY2023 vs Q3 FY2022 (in thousands) | Metric | Q3 2023 | Q3 2022 | Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Net Sales | $36,369 | $38,959 | $(2,590) | (6.6%) | | Operating Income | $4,962 | $5,568 | $(606) | (10.9%) | Aviara Segment Q3 FY2023 vs Q3 FY2022 (in thousands) | Metric | Q3 2023 | Q3 2022 | Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Net Sales | $12,777 | $10,428 | $2,349 | 22.5% | | Operating Loss | $(1,234) | $(2,015) | $781 | 38.8% | Liquidity and Capital Resources The company maintains strong liquidity with $27.5 million in cash, $73.9 million in held-to-maturity securities, and a $100.0 million available revolving credit facility - As of April 2, 2023, the company had $27.5 million in cash and cash equivalents and $73.9 million in held-to-maturity securities[111] - The company has full availability of its $100.0 million Revolving Credit Facility with no amounts outstanding as of April 2, 2023[112] - During the nine months ended April 2, 2023, the company repurchased 625,794 shares of common stock for $16.0 million[113] Quantitative and Qualitative Disclosures About Market Risk The company's market risk primarily stems from its held-to-maturity fixed income securities, but no impairment losses are anticipated due to their investment-grade quality and short-term nature - The company's market risk is primarily related to its investment portfolio of fixed income securities[121] - Due to the investment-grade quality, short-term nature, and held-to-maturity classification of its securities, the company does not anticipate recognizing impairment losses[121][122] Controls and Procedures Management concluded that disclosure controls and procedures were effective as of April 2, 2023, with no material changes to internal control over financial reporting during the quarter - The CEO and CFO concluded that disclosure controls and procedures were effective as of April 2, 2023[124] - No material changes to internal control over financial reporting occurred during the quarter ended April 2, 2023[125] PART II OTHER INFORMATION Legal Proceedings The company reported no legal proceedings for the period - None[126] Risk Factors No material changes to previously disclosed risk factors were reported during the period - No material changes to risk factors were reported during the three months ended April 2, 2023[127] Unregistered Sales of Securities and Use of Proceeds The company repurchased 210,150 shares for approximately $7.0 million in Q3 FY2023, with $8.6 million remaining under the stock repurchase program Share Repurchases (Q3 FY2023) | Period | Total Shares Purchased | Average Price Paid Per Share | | :--- | :--- | :--- | | Jan 2 - Jan 29, 2023 | — | $— | | Jan 30 - Feb 26, 2023 | 59,865 | $33.66 | | Feb 27 - Apr 2, 2023 | 150,285 | $33.14 | | Total | 210,150 | $33.29 | - As of April 2, 2023, the remaining authorization under the stock repurchase program was approximately $8.6 million[128] Exhibits, Financial Statement Schedules This section lists exhibits filed with the Form 10-Q, including CEO and CFO certifications and Inline XBRL documents - Exhibits filed include CEO and CFO certifications and Inline XBRL data files[134]