UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
☑ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended: June 30, 2023
OR
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from
to
MASTERCRAFT BOAT HOLDINGS, INC.
(Exact name of registrant as specified in its charter)
Delaware
(State or Other Jurisdiction
of Incorporation or Organization)
001-37502
(Commission
File Number)
06-1571747
(I.R.S. Employer
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
Common Stock
Trading
Symbol(s)
MCFT
Name of each exchange on which registered
NASDAQ
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
☐ Yes
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. ☐ Yes
☑ No
☑ No
Securities registered pursuant to Section 12(g) of the Act:
None
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 (§229.405 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
Non-accelerated filer
Emerging growth company
☐
☐
☐
Accelerated filer
Smaller reporting 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 has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under
Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☑
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to
previously issued financial statements. ☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive
o(cid:127)cers during the relevant recovery period pursuant to §240.10D-1(b). ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). ☐ Yes
☑ No
The aggregate market value of the outstanding common stock, other than shares held by persons who may be deemed affiliates of the registrant, as of the last business day of the registrant’s
most recently completed second fiscal quarter, which ended January 1, 2023 and based on the closing sale price as reported on the NASDAQ Global Select Market system, was approximately
$447,000,000. As of August 25, 2023, there were 17,202,716 shares of the Registrant’s common stock, par value $0.01 per share, issued and outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the proxy statement for the 2023 annual meeting of stockholders, which will be filed no later than 120 days after the close of the registrant’s fiscal year ended June 30, 2023, are
incorporated by reference into Part III of this report.
MASTERCRAFT BOAT HOLDINGS, INC.
ANNUAL REPORT ON FORM 10-K
FOR THE YEAR ENDED JUNE 30, 2023
TABLE OF CONTENTS
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
BASIS OF PRESENTATION
PART I
Business
Item 1.
Item 1A. Risk Factors
Item 1B. Unresolved Staff Comments
Item 2.
Item 3.
Item 4. Mine Safety Disclosures
Properties
Legal Proceedings
PART II
Item 5. Market for Registrant’s Common Equity and Related Stockholder Matters and Issuer Purchases of Equity
Securities
Reserved
Item 6.
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 7A. Quantitative and Qualitative Disclosures about Market Risk
Financial Statements and Supplementary Data
Item 8.
Item 9.
Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
Item 9A. Controls and Procedures
Item 9B. Other Information
Item 9C. Disclosure Regarding Foreign Jurisdictions That Prevent Inspections
PART III
Item 10. Directors, Executive Officers and Corporate Governance
Item 11.
Item 12.
Item 13. Certain Relationships and Related Transactions, and Director Independence
Item 14.
Executive Compensation
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Principal Accountant Fees and Services
PART IV
Item 15.
Item 16.
Exhibits, Financial Statement Schedules
Form 10-K Summary
ii
Page
1
1
2
7
18
18
18
18
19
20
21
31
31
31
31
32
32
33
33
33
33
33
34
36
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Annual Report on Form 10-K contains forward-looking statements within the meaning of the Private Securities Litigation Reform
Act of 1995. All statements contained in this Form 10-K that do not relate to matters of historical fact should be considered forward-
looking statements, including but not limited to statements regarding our expected market share, business strategy, dealer network,
anticipated financial results, and liquidity. We use words such as “could,” “may,” “might,” “will,” “expect,” “likely,” “believe,”
“continue,” “anticipate,” “estimate,” “intend,” “plan,” “project,” and other similar expressions to identify some forward-looking
statements, but not all forward-looking statements include these words. All of our forward-looking statements involve estimates and
uncertainties that could cause actual results to differ materially from those expressed in the forward-looking statements. Accordingly,
any such statements are qualified in their entirety by reference to the information described under the caption “Risk Factors” and
elsewhere in this Form 10-K.
The forward-looking statements contained in this Form 10-K are based on assumptions that we have made in light of our industry
experience and our perceptions of historical trends, current conditions, expected future developments, and other factors we believe are
appropriate under the circumstances. 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. We believe these important factors include, but are not limited to, those described under “Risk Factors” and “Management’s
Discussion and Analysis of Financial Condition and Results of Operations” in this Form 10-K and our other filings with the Securities
and Exchange Commission (“SEC”). 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. In addition, new important factors that could cause our business not to develop as we expect may emerge
from time to time.
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 Form 10-K 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. The forward-looking statements
contained herein should not be relied upon as representing our views as of any date subsequent to the filing date of this Form 10-K.
BASIS OF PRESENTATION
Our fiscal year begins on July 1 and ends on June 30 with the interim quarterly reporting periods consisting of thirteen weeks. Therefore,
the quarter end will not always coincide with the date of the end of the calendar month. We refer to our fiscal years based on the calendar-
year in which they end. Accordingly, references to fiscal 2023, fiscal 2022 and fiscal 2021 represent our financial results for the fiscal
years ended June 30, 2023, June 30, 2022, and June 30, 2021, respectively. For ease of reference, we identify our fiscal years in this
Form 10-K by reference to the period from July 1 to June 30 of the year in which the fiscal year ends. For example, “fiscal 2023” refers
to our fiscal year ended June 30, 2023.
MasterCraft Boat Holdings, Inc. (the “Company”), a Delaware corporation, operates primarily through its wholly-owned subsidiaries,
MasterCraft Boat Company, LLC, MasterCraft Services, LLC, MasterCraft Parts, Ltd., MasterCraft International Sales Administration,
Inc., Aviara Boats, LLC, Crest Marine, LLC, and NSB Boats, LLC. Unless the context otherwise requires, the Company and its
subsidiaries collectively are referred to as the “Company,” “we,” or “us” in this Form 10-K.
1
ITEM 1. BUSINESS
PART I
We are a leading innovator, designer, manufacturer, and marketer of recreational powerboats sold through our three brands, MasterCraft,
Crest, and Aviara. Through these three brands, over the last five years, we have had leading market share positions in two of the fastest
growing categories of the powerboat industry, ski/wake boats and pontoon boats, while also growing market share within the luxury day
boat segment. As a leader in recreational marine, we strive to deliver the best on-water experience through innovative, high-quality
products with a relentless focus on the consumer.
On September 2, 2022, the Company completed the sale of its NauticStar business. This business, which was previously reported as the
Company's NauticStar segment until fiscal 2023, is being reported as discontinued operations for all periods presented. Consolidated
financial information presented for all periods is related to the continuing operations. See Note 3 in Notes to Consolidated Financial
Statements for more information on Discontinued Operations.
Our Segments
MasterCraft Segment
Our MasterCraft segment consists of our MasterCraft brand, which manufactures premium ski/wake boats. The MasterCraft brand was
founded in 1968 and evolved over the next 55 years to become the most award-winning ski/wake boat manufacturer in the world. Today,
MasterCraft participates in the fastest growing category within the powerboat industry by producing the industry’s premier competitive
water ski, wakeboarding, and wake surfing performance boats. We believe the MasterCraft brand is known among boating enthusiasts
for high performance, premier quality, and relentless innovation. We believe that the market recognizes MasterCraft as a premier brand
in the powerboat industry due to the overall superior value proposition that our boats deliver to consumers. We work tirelessly every
day to maintain this iconic brand reputation.
Crest Segment
Our Crest segment consists of our Crest brand, which manufactures pontoon boats. Crest participates in the second-fastest growing
category in the powerboat industry. Crest, which we acquired in October 2018, was founded in 1957 and has grown to be one of the top
producers of innovative, high-quality pontoon boats ranging from 20 to 27 feet. Crest’s long-standing reputation for high-quality,
standard features and content, and innovation provides Crest with strong dealer and consumer bases in its core geographic markets.
Aviara Segment
Our Aviara segment consists of our Aviara brand, which manufactures luxury day boats. Aviara is a de novo brand, developed in-house,
and focused on serving the luxury recreational day boat category of the powerboat industry. From its introduction in February 2019
through June 2023, Aviara expanded to three models between 32 feet and 40 feet in length, and in fiscal 2024, will expand to include a
28 foot model, all of which feature both outboard and sterndrive propulsion. Aviara boats feature distinct European styling and offer an
elevated open water experience by fusing progressive style and effortless comfort in its modern luxury vessels.
Unless the context otherwise requires, “MasterCraft,” “Crest,” and “Aviara,” as used herein, refers to our segments as described above.
Our Products
We design, manufacture, and sell premium recreational inboard ski/wake, outboard, and sterndrive boats that we believe deliver superior
performance for water skiing, wakeboarding, and wake surfing, as well as general recreational boating. In addition, we offer various
accessories, including trailers and aftermarket parts.
Our MasterCraft portfolio of ProStar, XStar, X, XT, and NXT models are designed for the highest levels of performance, styling, and
enjoyment for both recreational and competitive use. The ProStar, XStar and X models are geared towards the consumer seeking the
most premium and highest performance boating experience that we offer, and generally command a price premium over our competitors’
boats at retail prices ranging from approximately $185,000 to $320,000. The MasterCraft XT lineup is designed to offer ultimate
flexibility to consumers with maximum customization and maximum performance at retail prices ranging from approximately $130,000
to $190,000. The NXT models offer the quality, performance, styling, and innovation of the MasterCraft brand to the entry-level
consumer, with retail prices ranging from approximately $100,000 to $150,000. We have strategically designed and priced the
MasterCraft NXT models to target the fast-growing entry-level consumer group that is distinct from our traditional consumer base, while
maintaining our core MasterCraft brand attributes at profit margins comparable to our other offerings.
2
Our Crest portfolio of pontoon boats are designed for the ultimate in comfort and recreational pleasure boating. Crest has continued to
grow market share as it expands its distribution footprint. Crest’s pontoon boats are designed to offer consumers the best in luxury, style
and performance without compromise across a diverse model lineup ranging in length from 20 to 27 feet. The Signature Line is home
to Crest’s Classic models. The Premium Line boasts three Caribbean models with sleek lines, available tower options, unique color
combinations and top-quality construction. The Ultimate Luxury Line represents the pinnacle of lavish amenities, featuring the
Continental, Continental NX, and Savannah models. This lineup anticipates every need with thoughtful options, an industry-first
integrated dual windshield and premium upholstery and audio upgrades. The Electric Line harmonizes industry innovations by
introducing eco-friendly pontoon boats. The new Current model allows consumers to enjoy a new level of peace and relaxation with
less noise and minimal emissions. Crest’s retail prices range from approximately $35,000 to $220,000.
Our Aviara portfolio of luxury recreational day boats was designed in-house with the vision to create pleasure crafts that defy
compromise. The Aviara brand drew on MasterCraft’s legacy of quality. Aviara’s boat designs were inspired by four product design
principles – Progressive Style, Elevated Control, Modern Comfort and Quality Details. Aviara’s models consist of the AV32, a 32-foot
luxury bowrider, the AV36, a 36-foot luxury bowrider, the AV40, the brand’s flagship 40-foot luxury bowrider, and beginning in fiscal
2024, AV28, a 28-foot luxury bowrider, for the ultimate on-the-water experience. All models are available in either outboard or
sterndrive propulsion, and Aviara’s retail prices range from approximately $200,000 to over $1,300,000. We believe there will be
significant model expansion opportunities for Aviara in the future.
Our Dealer Network
Our products are sold through extensive networks of independent dealers in North America and internationally. We target our
distribution to the market category’s highest performing dealers. The majority of our MasterCraft brand dealers are exclusive to our
MasterCraft product lines within the ski/wake category, highlighting the commitment of our key dealers to the MasterCraft brand. Our
other brands are generally served on a nonexclusive basis by their respective dealers.
We consistently review our distribution networks to identify opportunities to expand our geographic footprint and improve our coverage
of the market. We constantly monitor the health and strength of our dealers by analyzing each dealer’s retail sales and inventory and
have established processes to identify under-performing dealers in order to assist them in improving their performance, to allow us to
switch to a more effective dealer, or to direct product to markets with the greatest retail demand. These processes also allow us to better
monitor dealer inventory levels and product turns and contribute to a healthier dealer network that is better able to stock and sell our
products. We believe our outstanding dealer networks and our proactive approach to dealer management allow us to distribute our
products more efficiently than our competitors and will help us capitalize on growth opportunities as our industry volumes continue to
increase.
For fiscal 2023, the Company’s top ten dealers accounted for approximately 40% of our net sales and one of our dealers individually
accounted for 14.9%, or approximately $98.6 million.
North America. As of June 30, 2023, our MasterCraft brand had a total of 108 dealers across 158 locations. Our Crest brand had a total
of 148 dealers across 185 locations. Our Aviara brand is sold through a distribution network consisting of one dealer with 57 locations.
Outside of North America. As of June 30, 2023, through our MasterCraft brand, we had a total of 43 international dealers and 43
locations. Our Crest brand had two international dealers in two locations. Aviara had no international dealers. We define international
dealers as those dealers with locations outside of North America. We are present in Europe, Australia, South America, Africa, Asia,
including Hong Kong, and the Middle East. We generated 4.6%, 5.5%, and 5.1% of our net sales outside of North America in fiscal
2023, 2022, and 2021, respectively.
Dealer Relations
We have developed a system of financial incentives for our dealers based on achievement of key benchmarks. In addition, we provide
our dealers with comprehensive sales training and a complete set of technology-based tools designed to help dealers maximize
performance. Our dealer incentive program has been refined through years of experience with some of the key elements including
wholesale rebates, retail rebates and promotions, other allowances, and floor plan interest reimbursement or cash discounts to encourage
balanced production throughout the year.
Beyond our incentive programs, we have developed a proprietary web-based management tool that is used by our dealers on a day-to-
day basis to improve their own businesses as well as enhance communication with our factory and sales management teams. Our
business-to-business application efficiently executes many critical functions, including warranty registrations, warranty claims, boat
ordering and tracking, parts ordering, technical support, and inventory reporting. This system facilitates communication between our
sales team and the dealer network and allows our manufacturing department to review consumer demand in real time.
3
Manufacturing
MasterCraft boats and trailers are manufactured and lake-tested at our 310,000 square-foot facility located in Vonore, Tennessee. We
believe MasterCraft has the only boat manufacturing facility to achieve compliance with all three of the ISO 9001 (Quality Management
Systems), 14001 (Environmental Management Systems), and 18001 (International Occupational Health and Safety Management
System) standards. Crest boats are manufactured at our 270,000 square-foot facility located in Owosso, Michigan. Aviara boats are
manufactured at our 130,000 square-foot facility in Merritt Island, Florida.
The rigorous and consumer-centric attention to detail in the design and manufacturing of our products results in boats of high quality
which provides an exceptional on water experience across all of our brands. Our dedication to quality permits our consumers to enjoy
our products with confidence.
Our boats are built through a continuous flow manufacturing process that encompasses fabrication, assembly, quality management, and
testing. We manufacture certain components and subassemblies for our boats, such as upholstery, and procure other components from
third-party vendors and install them on the boat. We have several exclusive supplier partnerships for certain critical components, such
as aluminum billet, towers, and engine packages. For MasterCraft, we also build custom trailers that match the exact size and design-
characteristics of our boats.
Suppliers
We purchase a wide variety of raw materials from our supplier base, including resins, fiberglass, aluminum, lumber and steel, as well
as parts and components such as engines and electronic controls. We maintain long-term contracts with certain strategic suppliers and
informal arrangements with other suppliers.
We are focused on working with our supply chain partners to enable cost improvement, world-class quality, and continuous product
innovation. We have engaged our key suppliers in collaborative preferred supplier relationships and have developed processes including
annual cost reduction targets, regular reliability projects, and extensive product testing requirements to ensure that our suppliers produce
to the highest levels of quality expected of our brands and at lowest total cost. These collaborative efforts begin at the design stage, as
our key suppliers are integrated into design and development planning well in advance of launch, which allows us to control costs and
to leverage the expertise of our suppliers in developing product innovations. We believe these collaborative relationships with our key
strategic suppliers have contributed to significant improvements in product quality, innovation, and profitability.
The most significant components used in manufacturing our boats, based on cost, are engine packages. For our MasterCraft brand, Ilmor
Engineering, Inc. (“Ilmor”) is our exclusive engine supplier and for our Crest brand, Mercury Marine (“Mercury”) is our largest engine
supplier. For our Aviara brand, Mercury provides outboard engines and Ilmor provides sterndrive engines. We maintain strong and long-
standing relationships with Ilmor and Mercury. During fiscal 2023, Ilmor was our largest overall supplier. In addition to ski/wake and
sterndrive engines, Ilmor’s affiliates produce engines used in a number of leading racing boats and race cars. We work closely with
Ilmor to remain at the forefront of engine design, performance, and manufacturing. We believe our long-term relationships with our
engine supplier partners is a key competitive advantage.
Research and Development, Product Development and Engineering
We are strategically and financially committed to innovation, as reflected in our dedicated product development and engineering groups
and evidenced by our track record of new product and feature introduction. As of June 30, 2023, our product development and
engineering group includes 67 professionals. These individuals bring to our product development efforts significant expertise across
core disciplines, including boat design, computer-aided design, naval engineering, electrical engineering, and mechanical engineering.
They are responsible for execution of all facets of our new product and innovation strategy, starting with design and development of
new boat models and innovative features, engineering these designs for manufacturing, and integrating new boats and features into
production. Our product development and engineering functions work closely with our Strategic Portfolio Management Team which
includes senior leadership from Sales, Marketing and Finance, all working together to develop our long-term product and innovation
strategies.
We have structured processes to obtain consumer, dealer, and management feedback to guide our long-term product lifecycle and
portfolio planning. In addition, extensive testing and coordination with our manufacturing groups are important elements of our product
development process, which we believe enable us to leverage the lessons from past launches and minimize the risk associated with the
release of new products. Our strategy is to launch several new models each year, which will allow us to renew our product portfolio
with innovative offerings at a rate that we believe will be difficult for our competitors to match without significant additional capital
investments. In addition to our product strategy, we manage a separate innovation development process which allows us to design
innovative new features for our boats in a disciplined manner and to launch these innovations in a more rapid time frame and with higher
quality. These enhanced processes have reduced the time to market for our new product pipeline. Our research and product development
expense for fiscal 2023, 2022, and 2021 was $8.3 million, $7.2 million, and $5.8 million, respectively.
4
Intellectual Property
We rely on a combination of patent, trademark, and copyright protection, trade secret laws, confidentiality procedures, and contractual
provisions to protect our rights in our brands, products, and proprietary technology. We also protect our vessel hull designs through
vessel hull design registrations. This is an important part of our business and we intend to continue protecting our intellectual property.
We currently hold more than 50 U.S. patents and more than 10 foreign patents, including utility and design patents for our transom surf
seating, our DockStar handling system, and our SurfStar surf system technology among numerous other innovations. Provided that we
comply with all statutory maintenance requirements, our patents are expected to expire between 2028 and 2041. We also have additional
patent applications pending in the U.S. and worldwide. We also own in excess of 130 trademark registrations in various countries around
the world, most notably for the MasterCraft, Crest, and Aviara names and/or logos, as well as numerous model names in MasterCraft’s
Star Series, X, XT, and NXT product families, and we have several pending applications for additional registrations. Such trademarks
may endure in perpetuity on a country-by-country basis provided that we comply with all statutory maintenance requirements, including
continued use of each trademark in each such country. In addition, we own 38 registered U.S. copyrights. Finally, we have registered
more than 50 vessel hull designs with the U.S. Copyright Office, the most recent of which will remain in force through 2030.
Competitive Conditions and Position
We believe each of our brands are highly competitive and have a reputation for quality. We compete by operating, developing, and
acquiring a diversified portfolio of leading brands focused on the fastest growing segments of the powerboat industry; focusing
relentlessly on delivering the best overall ownership experience to consumers; developing and continuously improving highly efficient
production techniques and methods which result in highly innovative products; distributing our products through extensive, consumer-
centric independent dealer networks; and attracting, developing, and retaining high-performing employees.
Significant competition exists for each of our brands, and the markets in which we compete range from being relatively concentrated
for the ski/wake category, to being fragmented for the pontoon category. As of December 2022, based on Statistical Surveys, Inc. (“SSI”)
data, the top five brands accounted for approximately 71% of the ski/wake markets and approximately 50% for the pontoon market.
Market participants also range from small, single-product businesses to large, diversified companies. In addition, we compete indirectly
with businesses that offer alternative leisure products and activities.
In recent history, the MasterCraft brand has consistently competed for the leading market share position in the U.S. among manufacturers
of ski/wake boats based on unit volume. As of December 2022, based on SSI data, the MasterCraft brand has the #1 market share in the
ski/wake category with 20.8%. As of December 2022, based on SSI data, the Crest brand has the #9 market share in the aluminum
pontoon category with 4.1%. As of December 2022, based on SSI data, the Aviara brand has the #7 market share in the 30-foot to 43-
foot bowrider category with 6.3%.
Human Capital Resources
We have approximately 1,060 employees as of June 30, 2023, of whom 560 primarily work at our MasterCraft facility in Tennessee,
260 primarily work at our Crest facility in Michigan, and 240 primarily work at our Aviara facility in Florida. None of our employees
are unionized or subject to collective bargaining agreements.
One of our strategic priorities is developing a high-performing work organization and work environment that is consumer-focused and
attracts and retains superior employees. We strive to offer our employees career-specific tools, training, resources, and support
development opportunities. We utilize a talent management process, which includes performance appraisal and development planning.
We are also deeply invested in attracting and developing the next generation of workforce talent to the boating industry. We’ve partnered
with local community and technical colleges by developing training programs and donating boats and supplies to position graduates for
jobs in the boating industry upon graduation.
Employee safety is always a top priority. We are focused on improving and innovating when it comes to the well-being of our dedicated
workforce across our portfolio of brands. We take great care to ensure everyone at the Company is empowered to do their best work, in
a safe and well-managed environment. We maintain clean, safe and healthy workplaces through our vigorous training programs and
professional safety standards systems, including job hazard assessments and industrial hygiene and ventilation practices.
Our compensation program is designed to facilitate high performance and generate results that will create value for our stockholders.
We structure executive compensation to pay for performance, reward our executives with equity in the Company in order to align their
interests with the interests of our stockholders and allow those employees to share in our stockholders’ success, which we believe creates
a performance culture, maintains morale and attracts, motivates and retains top talent.
Environmental, Safety, and Regulatory Matters
Our operations are subject to extensive and frequently changing federal, state, local, and foreign laws and regulations, including those
concerning product safety, environmental protection, and occupational health and safety. We believe that our operations and products
5
are in compliance with these regulatory requirements. Historically, the cost of achieving and maintaining compliance with applicable
laws and regulations has not been material. However, we cannot provide assurance that future costs and expenses required for us to
comply with such laws and regulations, including any new or modified regulatory requirements, or to address newly discovered
environmental conditions, will not have a material adverse effect on our business, financial condition, operating results, or cash flows.
We have not been notified of and are otherwise currently not aware of any contamination at our current or former facilities for which
we could be liable under environmental laws or regulations and we currently are not undertaking any remediation or investigation
activities in connection with any contamination. However, future spills or accidents or the discovery of currently unknown conditions
or non-compliances may give rise to investigation and remediation obligations or related liabilities and damage claims, which may have
a material adverse effect on our business, financial condition, operating results, or cash flows.
Other Information
We were incorporated under the laws of the State of Delaware under the name MCBC Holdings, Inc. on January 28, 2000. In July 2015,
we completed an initial public offering of our common stock. Effective November 7, 2018, the name of the Company was changed from
MCBC Holdings, Inc. to MasterCraft Boat Holdings, Inc. We maintain a website with the address www.mastercraft.com. We are not
including the information contained in our website as part of, or incorporating it by reference into, this Annual Report on Form 10-K.
We make available, free of charge through our website, our annual reports on Form 10-K, quarterly reports on Form 10-Q, current
reports on Form 8-K, and amendments to these reports as soon as reasonably practicable after we electronically file these materials with,
or otherwise furnish them to, the SEC. We also use our website as a means of disclosing additional information, including for complying
with our disclosure obligations under the SEC's Regulation FD (Fair Disclosure).
6
ITEM 1A. RISK FACTORS
RISK FACTORS
Our operations and financial results are subject to certain risks and uncertainties, including those described below, which could
adversely affect our business, financial condition, results of operations, cash flows, and the trading price of our common stock.
Risks Relating to Economic and Market Conditions
Global economic conditions, particularly in the U.S., significantly affect our industry and business, and economic decline can
materially impact our financial results.
In times of economic uncertainty or recession, consumers tend to have less discretionary income and to defer significant spending on
non-essential items, which may adversely affect our financial performance. The economic uncertainty caused by (i) general economic
conditions, (ii) the impact of inflation and rising interest rates, (iii) labor shortages, (iv) supply chain disruptions, (v) regional or global
conflicts, (vi) public health crises, pandemics, or national emergencies and (vii) actions and stimulus measures adopted by local, state
and federal governments may lead to unfavorable business outcomes. We continue to develop our portfolio of brands, but our business
remains cyclical and sensitive to consumer spending on new boats.
Deterioration in general economic conditions that in turn diminishes consumer confidence or discretionary income may reduce our sales,
or we may decide to lower pricing for our products, which could adversely affect our financial results, including increasing the potential
for future impairment charges. Further, our products are recreational, and consumers’ limited discretionary income in times of economic
hardship may be diverted to other activities that occupy their time, such as other forms of recreational, religious, cultural, or community
activities. In addition, economic uncertainty may also increase certain costs of operation, such as financing costs, energy costs and
insurance premiums, which in turn may impact our results of operations. We cannot predict the strength of global economies or the
timing of economic recovery, either globally or in the specific markets in which we compete.
Inflation and rising interest rates could adversely affect our financial results.
The market prices of certain materials and components used in manufacturing our products, especially resins that are made with
hydrocarbon feedstocks, fiberglass, aluminum, lumber, and steel, can be volatile. While, historically, inflation has not had a material
effect on our results of operations, significant increases in inflation, particularly those related to wages and increases in the cost of raw
materials, recently have, and may continue to have, an adverse impact on our business, financial condition, and results of operations.
In addition, new boat buyers often finance their purchases. Inflation, along with rising interest rates, could translate into an increased
cost of boat ownership. Should inflation and increased interest rates continue to occur, prospective consumers may choose to forego or
delay their purchases or buy a less expensive boat in the event credit is not available to finance their boat purchases.
In addition, as discussed in more detail below, rising interest rates could also incentivize dealers to reduce their inventory levels in order
to reduce their interest exposure.
Rising interest rates may also increase the borrowing costs on new debt, which could affect the fair value of our investments.
Fiscal concerns and policy changes may negatively impact worldwide economic and credit conditions and adversely affect our
industry, business, and financial condition.
Fiscal policy could have a material adverse impact on worldwide economic conditions, the financial markets, and availability of credit
and, consequently, may negatively affect our industry, business, and overall financial condition. Consumers often finance purchases of
our products, and as interest rates rise, the cost of financing the purchase also increases. While credit availability is adequate to support
demand, interest rates began to rise significantly in the second half of fiscal 2022, and continued to rise throughout fiscal 2023. If credit
conditions worsen and adversely affect the ability of consumers to finance potential purchases at acceptable terms and interest rates, it
could result in a decrease in sales or delay improvement in sales.
Our variable rate indebtedness subjects us to interest rate risk, which could cause our debt service obligations to increase
significantly.
Borrowings under our revolving credit facility and term loans are at variable rates of interest and expose us to interest rate risk. Reference
rates used to determine the applicable interest rates for our debt began to rise significantly in the second half of fiscal 2022, and continued
to rise throughout fiscal 2023. If interest rates continue to increase, the debt service obligations on our indebtedness will continue to
increase even if the amount borrowed remains the same, and our net income and cash flows, including cash available for servicing our
7
indebtedness, will correspondingly decrease. Please see Part II, Item 7A, “Quantitative and Qualitative Disclosures about Market Risk”
for discussion of our market risk related to interest rates.
An increase in energy costs may materially adversely affect our business, financial condition, and results of operations.
Our results of operations can be directly affected, positively and negatively, by volatility in the cost and availability of energy, which is
subject to global supply and demand and other factors beyond our control. Prices for crude oil, natural gas and other energy supplies
have been increasing and have been subject to high volatility, including as a result of geopolitical factors or otherwise. Further, the
global clean energy movement may also reduce the availability of fossil fuels, which may in turn cause increases to energy costs. Higher
energy costs result in increases in operating expenses at our manufacturing facilities, in the expense of shipping raw materials to our
facilities, and in the expense of shipping products to our dealers. In addition, increases in energy costs may adversely affect the pricing
and availability of petroleum-based raw materials, such as resins and foams that are used in our products. Higher fuel prices may also
have an adverse effect on demand for our boats, as they increase cost of boat ownership and possibly affect product use. Higher fuel
prices may also have an effect on consumer preferences causing a shift from traditional fuel-powered boats to electric boats.
Fluctuations in foreign currency exchange rates could adversely affect our results.
We sell products manufactured in the U.S. into certain international markets in U.S. dollars. The changing relationship of the U.S. dollar
to foreign currencies has, from time to time, had a negative impact on our results of operations. Fluctuations in the value of the U.S.
dollar relative to these foreign currencies can adversely affect the price of our products in foreign markets and the costs we incur to
import certain components for our products. We will often attempt to offset these higher prices with increased discounts, which can lead
to reduced net sales per unit.
Risks Relating to Our Business
Our ability to adjust for demand in a rapidly changing environment may adversely affect our results of operations.
The seasonality of retail demand for our products, together with our goal of balancing production throughout the year, requires us to
manage our manufacturing and allocate our products to our dealer network to address anticipated retail demand and manage demand
fluctuations caused by macroeconomic conditions and other factors. In addition, our dealers must manage seasonal changes in consumer
demand and inventory. Our business may experience difficulty in adapting to rapidly changing production and sales volumes. We may
not be able to recruit or maintain sufficient skilled labor or our suppliers may not be able to deliver sufficient quantities of parts and
components for us to match production with rapid changes in forecasted demand. In addition, consumers may pursue other recreational
activities if dealer pipeline inventories fall too low and it is not convenient to purchase our products, consumers may purchase from
competitors, or our fixed costs may grow in response to increased demand. A failure to adjust dealer pipeline inventory levels to meet
demand could adversely impact our results of operations. In addition, if our dealers reduce their inventories in response to weakness in
retail demand, we could be required to reduce our production, resulting in lower rates of absorption of fixed costs in our manufacturing
and, therefore, lower margins. As a result, we must balance the economies of level production with seasonal retail sales patterns
experienced by our dealers and other macroeconomic conditions. Failure to adjust manufacturing levels adequately may have a material
adverse effect on our financial condition and results of operations.
We have a fixed cost base that will affect our profitability if our sales decrease.
The fixed cost levels of operating a powerboat manufacturer can put pressure on profit margins when sales and production decline. Our
profitability depends, in part, on our ability to spread fixed costs over a sufficiently large number of products sold and shipped, and if
we make a decision to reduce our rate of production, gross or net margins could be negatively affected. Consequently, decreased demand
or the need to reduce production can lower our ability to absorb fixed costs and materially impact our financial condition or results of
operations.
We may not be able to execute our manufacturing strategy successfully, which could cause the profitability of our products to suffer.
Our manufacturing strategy is designed to improve product quality and increase productivity, while reducing costs and increasing
flexibility to respond to ongoing changes in the marketplace. To implement this strategy, we must be successful in our continuous
improvement efforts, which depend on the involvement of management, production employees, and suppliers. Any inability to achieve
these objectives could adversely impact the profitability of our products and our ability to deliver desirable products to our consumers.
In addition, we have made strategic capital investments in capacity expansion activities to successfully capture growth opportunities
and enhance product offerings, including brand relocation and plant expansions. Moving production to a different plant and expanding
capacity at an existing facility involves risks, including difficulties initiating production within the cost and timeframe estimated,
supplying product to customers when expected, integrating new products, and attracting sufficient skilled labor to handle additional
production demands. If we fail to meet these objectives, it could adversely affect our ability to meet customer demand for products and
8
increase the cost of production versus projections, both of which could result in a significant adverse impact on operating and financial
results. Additionally, plant expansion can result in manufacturing inefficiencies, additional expenses, including higher wages or
severance costs, and cost inefficiencies, which could negatively impact financial results.
Adverse weather conditions and climate change events can have a negative effect on revenues.
Changes in seasonal weather conditions can have a significant effect on our operating and financial results. Sales of our boats are
typically stronger just before and during spring and summer, and favorable weather during these months generally has had a positive
effect on consumer demand. Conversely, unseasonably cool weather, excessive rainfall, or drought conditions during these periods can
reduce or change the timing of demand. Climate change could have an impact on longer-term natural weather trends, resulting in
environmental changes including, but not limited to, increases in severe weather, changing sea levels, changes in sea, land and air
temperatures, poor water conditions, or reduced access to water, could disrupt or negatively affect our business.
Catastrophic events, including natural and environmental disasters, acts of terrorism, or civil unrest, could have a negative effect on
our operations and financial results.
We rely on the continuous operation of our manufacturing facilities in Vonore, Tennessee, Merritt Island, Florida, and Owosso, Michigan
for the production of our products. Any natural disaster or other serious disruption to our facilities due to fire, snow, flood, earthquake,
pandemics, civil insurrection or social unrest or any other unforeseen circumstance could adversely affect our business, financial
condition, and results of operations. Hurricanes, floods, earthquakes, storms, and catastrophic natural or environmental disasters, as well
as acts of terrorism or civil unrest, could disrupt our distribution channel, operations, or supply chain and decrease consumer demand.
If a catastrophic event takes place in one of our major sales markets, our sales could be diminished. Additionally, if such an event occurs
near our business locations, manufacturing facilities or key supplier facilities, business operations, and/or operating systems could be
interrupted.
We could be uniquely affected by weather-related catastrophic events, as we have dealers and third-party suppliers located in regions of
the United States that have been and may be exposed to damaging storms, such as hurricanes and tornados, floods and environmental
disasters. Although preventative measures may help to mitigate damage, the damage and disruption resulting from natural and
environmental disasters may be significant. Such disasters can disrupt our consumers, dealers, or suppliers, which can interrupt our
operational processes and our sales and profits.
Our ability to remain competitive depends on successfully introducing new products and services that meet consumer expectations.
We believe that our consumers look for and expect quality, innovation, and advanced features when evaluating and making purchasing
decisions about products and services in the marketplace. Our ability to remain competitive and meet our growth objectives may be
adversely affected by difficulties or delays in product development, such as an inability to develop viable new products, gain market
acceptance of new products, generate sufficient capital to fund new product development, or obtain adequate intellectual property
protection for new products. To meet ever-changing consumer demands, both timing of market entry and pricing of new products are
critical. As a result, we may not be able to introduce new products that are necessary to remain competitive in all markets that we serve.
Furthermore, we must continue to meet or exceed consumers' expectations regarding product quality and after-sales service or our
operating results could suffer.
Our financial results may be adversely affected by our third-party suppliers' increased costs or inability to adjust for our required
production levels due to changes in demand or global supply chain disruptions.
We rely on a complex global supply chain of third parties to supply raw materials used in the manufacturing process, including resins,
fiberglass, aluminum, lumber and steel, as well as product parts and components. The prices for these raw materials, parts, and
components fluctuate depending on market conditions and, in some instances, commodity prices or trade policies, including tariffs.
Substantial increases in the prices of raw materials, parts, and components would increase our operating costs, and could reduce our
profitability if we are unable to recoup the increased costs through higher product prices or improved operating efficiencies. Similarly,
if a critical supplier were to close its operations, cease manufacturing, or otherwise fail to deliver an essential component necessary to
our manufacturing operations, that could detrimentally affect our ability to manufacture and sell our products, resulting in an interruption
in business operations and/or a loss of sales.
In addition, engines used in the manufacturing processes of certain segments are available from a sole-source supplier. Other components
used in our manufacturing process, such as boat windshields, towers, and surf tabs may only be available from a limited number of
suppliers. Operational and financial difficulties that these or other suppliers may face in the future could adversely affect their ability to
supply us with the parts and components we need, which could significantly disrupt our operations. It may be difficult to find a
replacement supplier for a limited or sole source raw material, part, or component without significant delay or on commercially
reasonable terms. In addition, an uncorrected defect or supplier's variation in a raw material, part, or component, either unknown to us
or incompatible with our manufacturing process, could jeopardize our ability to manufacture products.
9
Some additional supply chain disruptions that could impact our operations, impair our ability to deliver products to customers, and
negatively affect our financial results include:
•
•
•
•
•
•
•
an outbreak of disease or facility closures due to public health threats;
a deterioration of our relationships with suppliers;
events such as natural disasters, power outages, or labor strikes;
financial or political instability in any of the countries in which our suppliers operate;
financial pressures on our suppliers due to a weakening economy or unfavorable conditions in other end markets;
supplier manufacturing constraints and investment requirements; or
termination or interruption of supply arrangements.
These risks are exacerbated in the case of single-source suppliers, and the exclusive supplier of a key component could potentially exert
significant bargaining power over price, quality, warranty claims, or other terms.
We continue to evaluate and shift production; consequently, our need for raw materials and supplies continues to fluctuate. Our suppliers
must be prepared to shift operations and, in some cases, hire additional workers and/or expand capacity in order to fulfill our orders and
those of other customers. Cost increases, defects, or sustained interruptions in the supply of raw materials, parts, or components due to
delayed start-up periods, or sudden changes in requirements, our suppliers experience as they shift production efforts create risks to our
operations and financial results. The Company has experienced periodic supply shortages and increases in costs to certain materials. We
continue to address these issues by identifying alternative suppliers for key materials and components, working to secure adequate
inventories of critical supplies, and continually monitoring the capabilities of our supplier base. In the future, however, we may
experience shortages, delayed delivery, and/or increased prices for key materials, parts, and supplies that are essential to our
manufacturing operations.
Our business and operations are dependent on the expertise of our key contributors, our successful implementation of succession
plans, and our ability to attract and retain management employees and skilled labor.
The talents and efforts of our employees, particularly key managers, are vital to our success. We have observed an overall tightening
and increasingly competitive labor market in recent years, which could inhibit our ability to recruit, train and retain employees we
require at efficient costs and could lead to increased costs, such as increased overtime to meet demand and increased wage rates to attract
and retain employees. Our management team has significant industry experience and would be difficult to replace. We may be unable
to retain them or to attract other highly qualified employees. Failure to hire, develop, and retain highly qualified and diverse employee
talent and to develop and implement an adequate succession plan for the management team could disrupt our operations and adversely
affect our business and our future success. We perform an annual review of management succession plans with our board of directors,
including reviewing executive officer and other important positions to substantially mitigate the risk associated with key contributor
transitions, but we cannot ensure that all transitions will be implemented successfully.
Our ability to continue to execute our growth strategy could potentially be adversely affected by the effectiveness of organizational
changes. Any disruption or uncertainty resulting from such changes could have a material adverse impact on our business, results of
operations, and financial condition.
Much of our future success depends on, among other factors, our ability to attract and retain skilled labor, which is critical to our
operations. We may experience difficulty maintaining desired staffing levels due to increased competition for employees, higher
employee turnover rates and low unemployment rates in many of the geographic areas in which we manufacture or distribute goods.
We continually invest in automation and improve our efficiency, but availability and retention of skilled hourly workers remains critical
to our operations. In order to manage this risk, we regularly monitor and make improvements to wages and benefit programs, as well as
develop and improve recruiting, training, and safety programs to attract and retain an experienced and skilled workforce.
We depend on our network of independent dealers which creates additional risks.
Substantially all of our sales are derived from our network of independent dealers. Maintaining a reliable network of dealers is essential
to our success. Our agreements with dealers in our networks typically provide for one-year terms, although some agreements have longer
terms. The loss of one or more of these dealers could have a material adverse effect on our financial condition and results of operations.
The number of dealers supporting our products and the quality of their marketing and servicing efforts are essential to our ability to
generate sales. We face competition from other manufacturers in attracting and retaining independent boat dealers. Although our
management believes that the quality of our products in the premium performance sport, outboard boat, and sterndrive boat industries
should permit us to maintain our relationships with our dealers and our market share position, there can be no assurance that we will be
able to maintain or improve our relationships with our dealers or our market share position. In addition, independent dealers in the
10
powerboat industry have experienced significant consolidation in recent years, which could result in the loss of one or more of our
dealers in the future if the surviving entity in any such consolidation purchases similar products from a competitor. A significant
deterioration in the number or effectiveness of our dealers could have a material adverse effect on our business, financial condition,
results of operations, and cash flows.
Although at present we believe dealer health to be generally favorable, weakening demand for marine products could hurt our dealers’
financial performance. In particular, reduced cash flow from decreases in sales and tightening credit markets could impair dealers' ability
to fund operations. Inability to fund operations can force dealers to cease business, and we may be unable to obtain alternate distribution
in the vacated market. An inability to obtain alternate distribution could unfavorably affect our net sales through reduced market
presence. If economic conditions deteriorate, we anticipate that dealer failures or voluntary market exits would increase, especially if
overall retail demand materially declines.
Our dealers require adequate liquidity to finance their operations, including purchasing our products. Dealers are subject to numerous
risks and uncertainties that could unfavorably affect their liquidity positions, including, among other things, continued access to adequate
financing sources on a timely basis on reasonable terms. These financing sources are vital to our ability to sell products through our
network of dealers. Many of our dealers have floor plan financing arrangements with third-party finance companies. Many factors,
including creditworthiness of our dealers and overall aging and level of pipeline inventories, continue to influence the availability and
terms of financing that our dealers are able to secure, which could cause dealers to shift the timing of purchases or reduce the total
amount purchased in a given period of time, adversely affecting sales of our products. In addition, rising interest rates could also
incentivize dealers to reduce their inventory levels in order to reduce their interest exposure, which may further adversely impact the
sales of our products and our results of operations.
We may be required to repurchase inventory of certain dealers.
Floor plan financing arrangements with third-party finance companies enable dealers to purchase our products. In connection with these
agreements, we may have an obligation to repurchase our products from a finance company under certain circumstances. This obligation
is triggered if a dealer defaults on its debt obligations to a finance company. In addition, applicable laws regulating dealer relations may
also require us to repurchase our products from our dealers under certain circumstances. In such circumstances, we may not have any
control over the timing or amount of any repurchase obligation nor have access to capital on terms acceptable to us to satisfy any
repurchase obligation. If we were obligated to repurchase a significant number of units under any repurchase agreement or under
applicable dealer laws, our business, operating results, financial condition and cash flows could be adversely affected.
Future declines in marine industry demand could cause an increase in repurchase activity or could require us to incur losses in excess of
established reserves. In addition, our cash flow and loss experience could be adversely affected if repurchased inventory is not
successfully distributed to other dealers in a timely manner, or if the recovery rate on the resale of the product declines. The finance
companies could require changes in repurchase terms that would result in an increase in our contractual obligations.
Our industry is characterized by intense competition, which affects our sales and profits.
The premium performance sport boat, outboard, and sterndrive boat categories and the powerboat industry as a whole are highly
competitive for consumers and dealers. We also compete against consumer demand for used boats. Competition affects our ability to
succeed in both the markets we currently serve and new markets that we may enter in the future. Competition is based primarily on
brand name, price, product selection, and product performance. We compete with several large manufacturers that may have greater
financial, marketing, and other resources than we do and who are represented by dealers in the markets in which we now operate and
into which we plan to expand. We also compete with a variety of small, independent manufacturers. We cannot provide assurance that
we will not face greater competition from existing large or small manufacturers or that we will be able to compete successfully with
new competitors. Our failure to compete effectively with our current and future competitors would adversely affect our business,
financial condition, and results of operations.
We compete with a variety of other activities for consumers’ scarce leisure time.
Our boats are used for recreational and sport purposes, and demand for our boats may be adversely affected by competition from other
activities that occupy consumers’ leisure time and by changes in consumer lifestyle, usage pattern, or taste. Similarly, an overall decrease
in consumer leisure time may reduce consumers’ willingness to purchase and enjoy our products.
Our sales may be adversely impacted by increased consumer preference for used boats or the supply of new boats by competitors in
excess of demand.
During an economic downturn, we could experience a shift in consumer demand toward purchasing more used boats, primarily because
prices for used boats are typically lower than retail prices for new boats. If this were to occur, it could have the effect of reducing demand
among retail purchasers for our new boats. Also, while we have taken steps designed to balance production volumes for our boats with
demand, our competitors could choose to reduce the price of their products, which could have the effect of reducing demand for our
11
new boats. In addition, as previously mentioned, a shift from traditional fuel-powered boats to electric boats, alternative fuel-powered
boats, or other technologies could reduce demand for our boats. Reduced demand for new boats could lead to reduced sales by us, which
could adversely affect our business, results of operations, and financial condition.
Significant product repair and/or replacement due to product warranty claims or product recalls could have a material adverse
impact on our results of operations.
We provide a limited warranty for our products. We may provide additional warranties related to certain promotional programs, as well
as warranties in certain geographical markets as determined by local regulations and market conditions.
Although we employ quality control procedures, sometimes a product is distributed that needs repair or replacement. Our standard
warranties require us or our dealers to repair or replace defective products during such warranty periods at no cost to the consumer.
Historically, product recalls have been administered through our dealers and distributors. The repair and replacement costs we could
incur in connection with a recall could adversely affect our business. In addition, product recalls could harm our reputation and cause
us to lose consumers, particularly if recalls cause consumers to question the safety or reliability of our products.
An inability to identify and complete targeted acquisitions could negatively impact financial results.
We may in the future explore acquisitions and strategic alliances that will enable us to acquire complementary skills and capabilities,
offer new products, expand our consumer base, enter new product categories or geographic markets, and obtain other competitive
advantages. We cannot provide assurance, however, that we will identify acquisition candidates or strategic partners that are suitable to
our business, obtain financing on satisfactory terms, or complete acquisitions or strategic alliances. In managing our acquisition strategy,
we conduct rigorous due diligence, involve various functions, and continually review target acquisitions, all of which we believe
mitigates some of our acquisition risks. However, we cannot assure that suitable acquisitions will be identified or consummated or that,
if consummated, they will be successful. Acquisitions include a number of risks, including our ability to project and evaluate market
demand, realize potential synergies and cost savings, and make accurate accounting estimates, as well as diversion of management
attention. Uncertainties exist in assessing the value, risks, profitability, and liabilities associated with certain companies or assets,
negotiating acceptable terms, obtaining financing on acceptable terms, and receiving any necessary regulatory approvals. As we continue
to grow, in part, through acquisitions, our success depends on our ability to anticipate and effectively manage these risks. Our failure to
successfully do so could have a material adverse effect on our financial condition and results of operations.
The inability to successfully integrate acquisitions could negatively impact financial results.
Our strategic acquisitions pose risks, such as our ability to project and evaluate market demand; maximize potential synergies and cost
savings; make accurate accounting estimates; and achieve anticipated business objectives. Acquisitions we may complete in the future,
present these and other integration risks, including:
•
•
•
•
the possibility that the expected synergies and value creation will not be realized or will not be realized within the expected
time period;
the risk that unexpected costs and liabilities will be incurred;
diversion of management attention; and
difficulties retaining employees.
If we fail to timely and successfully integrate new businesses into existing operations, we may see higher costs, lost sales, or otherwise
diminished earnings and financial results.
Negative public perception of our products, our environmental, social and governance (ESG) practices or restrictions on the access
or the use of our products in certain locations could materially adversely affect our business or results of operations.
Demand for our products depends in part on their acceptance by the public. Public concerns about the environmental impact of our
products or their perceived safety, or our ESG practices generally, could result in diminished public perception of the products we sell.
Government, media, or activist pressure to limit emissions could also negatively impact consumers’ perceptions of our products. Any
decline in the public acceptance of our products could negatively impact their sales or lead to changes in laws, rules and regulations that
prevent access to certain locations or restrict use or manner of use in certain areas or during certain times, which could also negatively
impact sales. Any material decline in the public acceptance of our products could impact our ability to retain existing consumers or
attract new ones which, in turn, could have a material adverse effect on our business, results of operations or financial condition.
Our business operations could be negatively impacted by an outage or breach of our information technology systems, network
disruptions, or a cybersecurity event.
12
We manage our business operations through a variety of information technology systems and their underlying infrastructure, which we
continually enhance to increase efficiency and security. In addition to the disruptions in our information technology systems,
cybersecurity threats and sophisticated and targeted cyberattacks pose a risk to our information technology systems. We have established
security policies, processes, and defenses, including employee awareness training regarding phishing, malware, and other cyber risks,
designed to help identify and protect against intentional and unintentional misappropriation or corruption of our information technology
systems and information and disruption of our operations. Additionally, we maintain quarterly discussions with our board of directors
to address cyber risks and system and process enhancements. Despite these efforts, our information technology systems may be damaged,
disrupted, or shut down due to attacks by unauthorized access, malicious software, computer viruses, undetected intrusion, hardware
failures, or other events, and in these circumstances our disaster recovery plans may be ineffective or inadequate. These breaches or
intrusions could lead to business interruption, exposure of proprietary or confidential information, data corruption, damage to our
reputation, exposure to legal and regulatory proceedings, and other costs. A security breach might also lead to violations of privacy
laws, regulations, trade guidelines or practices related to our customers and associates and could result in potential claims from
customers, associates, shareholders, or regulatory agencies. Any failure to maintain compliance with such laws, regulations, trade
guidelines or practices may cause us to incur significant penalties and generate negative publicity, and may require us to change our
business practices, increase our costs or otherwise adversely affect our business. Such events could adversely impact our reputation,
business, financial position, results of operations, and cash flows. In addition, we could be adversely affected if any of our significant
customers or suppliers experiences any similar events that disrupt their business operations or damage their reputation.
While we maintain monitoring practices and protections of our information technology to reduce these risks and test our systems on an
ongoing basis for potential threats, there can be no assurance that these efforts will prevent a cyber-attack or other security breach. We
carry cybersecurity insurance to help mitigate the financial exposure and related notification procedures in the event of intentional
intrusion; however, there can be no assurance that our insurance will adequately protect against potential losses that could adversely
affect our business.
We rely on third parties for computing, storage, processing, and similar services. Any disruption of or interference with our use of
these third-party services could have an adverse effect on our business, financial condition, and operating results.
Many of our business systems reside on third-party outsourced cloud infrastructure providers. We are therefore vulnerable to service
interruptions experienced by these providers and could experience interruptions, delays, or outages in service availability in the future
due to a variety of factors, including infrastructure changes, human, hardware or software errors, hosting disruptions, and capacity
constraints. While we have mitigation and service redundancy plans in place, outages and/or capacity constraints could still arise from
a number of causes such as technical failures, natural disasters, fraud, or internal or third-party security attacks, which could negatively
impact our ability to manufacture and/or operate our business.
Our credit facilities contain covenants which may limit our operating flexibility; failure to comply with covenants may result in our
lenders restricting or terminating our ability to borrow under such credit facilities.
In the past, we have relied on our existing credit facilities to provide us with adequate liquidity to operate our business. The availability
of borrowing amounts under our credit facilities is dependent on compliance with the debt covenants set forth in our credit agreement.
Violation of those covenants, whether as a result of operating losses or otherwise, could result in our lenders restricting or terminating
our borrowing ability under our credit facilities. If our lenders reduce or terminate our access to amounts under our credit facilities, we
may not have sufficient capital to fund our working capital and other needs, and we may need to secure additional capital or financing
to fund our operations or to repay outstanding debt under our credit facilities. We cannot provide assurance that we will be successful
in ensuring the availability of amounts under our credit facilities or in raising additional capital, or that any amount, if raised, will be
sufficient to meet our cash needs or will be on terms as favorable as those which have been available to us historically. If we are not
able to maintain our ability to borrow under our credit facilities, or to raise additional capital when needed, our business and operations
will be materially adversely affected.
Actual or potential public health emergencies, epidemics, or pandemics, such as the COVID-19 pandemic, could have a material
adverse effect on our business, results of operations, or financial condition.
The impact of actual or potential public health emergencies, epidemics, or pandemics on the Company, our suppliers, dealers, and
consumers, and the general economy could be wide-ranging and significant, depending on the nature of the issue, governmental actions
taken in response, and the public reaction. The impact of such events could include employee illness, quarantines, cancellation of events
and travel, business and school shutdowns, reduction in economic activity, widespread unemployment, and supply chain interruptions,
which collectively could cause significant disruptions to global economies and financial markets.
In addition, these events could result in future significant volatility in demand, positively or negatively, for our products. Demand
volatility may be caused by, among other things: the temporary inability of consumers to purchase our products due to illness, quarantine,
or other travel restrictions; dealership closures due to illness or government restrictions; a reduction in boating activity as a result of
governmental actions or self-quarantine measures; shifts in demand away from discretionary products; and reduced options for
13
marketing and promotion of products. If such events occur over a prolonged period, they could increase our costs and difficulty of
operating our business, including accurately planning and forecasting for our operations and inventory levels, which may adversely
impact our results.
The COVID-19 pandemic resulted in disruption, uncertainty, and volatility in the global financial and credit markets, and similar future
events could to the same. Such volatility could impact our access to capital resources and liquidity in the future, including making credit
difficult to obtain or only available on less favorable terms. The impact on our operations could also be material. For example, we could
experience absenteeism caused by illness or quarantine measures. Additionally, we rely on original equipment manufacturers, dealers,
and distributors to market and sell most of our products, and effects on their businesses or financial condition as a result of future
pandemics could result in various adverse operational impacts including, but not limited to, lower sales, delayed cash payments,
interrupted customer warranty service, and increased credit risk.
Risks Relating to Intellectual Property
Our success depends on the continued strength of our brands and the value of our brands, and sales of our products could be
diminished if we, the athletes who use our products, or the sports and activities in which our products are used are associated with
negative publicity.
We believe that our brands are a significant contributor to the success of our business and that maintaining and enhancing our brands is
important to expanding our consumer and dealer base. Failure to continue to protect our brands may adversely affect our business,
financial condition, and results of operations.
Negative publicity, including that resulting from severe injuries or death occurring in the sports and activities in which our products are
used, could negatively affect our reputation and result in restrictions, recalls, or bans on the use of our products. Further, actions taken
by athletes associated with our products that harm the reputations of those athletes could also harm our brand image and adversely affect
our financial condition. If the popularity of the sports and activities for which we design, manufacture, and sell products were to decrease
as a result of these risks or any negative publicity, sales of our products could decrease, which could have an adverse effect on our net
sales, profitability, and operating results. In addition, if we become exposed to additional claims and litigation relating to the use of our
products, our reputation may be adversely affected by such claims, whether or not successful, including by generating potential negative
publicity about our products, which could adversely impact our business and financial condition.
Our intellectual property rights may be inadequate to protect our business.
We rely on a combination of patents, trademarks, copyrights, protected design, and trade secret laws; employee and third-party non-
disclosure agreements; and other contracts to establish and protect our technology and other intellectual property rights. However, we
remain subject to risks, including:
•
•
•
the steps we take to protect our proprietary technology may be inadequate to prevent misappropriation of our technology;
third parties may independently develop similar technology;
agreements containing protections may be breached or terminated;
• we may not have adequate remedies for breaches;
•
•
•
pending patent, trademark, and copyright applications may not be approved;
existing patent, trademark, copyright, and trade secret laws may afford limited protection;
a third party could copy or otherwise obtain and use our products or technology without authorization; or
• we may be required to litigate to enforce our intellectual property rights, and we may not be successful.
Policing unauthorized use of our intellectual property is difficult and litigating intellectual property claims may result in substantial cost
and divert management’s attention.
In addition, we may be required to defend our products against patent or other intellectual property infringement claims or litigation.
Besides defense expenses and costs, we may not prevail in such cases, forcing us to seek licenses or royalty arrangements from third
parties, which we may not be able to obtain on reasonable terms, or subjecting us to an order or requirement to stop manufacturing,
using, selling, or distributing products that included challenged intellectual property, which could harm our business and financial
results.
If third parties claim that we infringe on their intellectual property rights, our financial condition could be adversely affected.
14
We face the risk of claims that we have infringed third parties’ intellectual property rights. Any claims of patent or other intellectual
property infringement, even those without merit, could be expensive and time consuming to defend, cause us to cease making, licensing,
or using products that incorporate the challenged intellectual property, require us to redesign, re-engineer, or re-brand our products, if
feasible, divert management’s attention and resources, or require us to enter into royalty or licensing agreements in order to obtain the
right to use a third party’s intellectual property. Any royalty or licensing agreements, if required, may not be available to us on acceptable
terms or at all. A successful claim of infringement against us could result in our being required to pay significant damages, enter into
costly license or royalty agreements, or stop the sale of certain products, any of which could have a negative impact on our business,
financial condition, and results of operations. While we are not currently involved in any outstanding intellectual property litigation that
we believe, individually or in the aggregate, will have a material adverse effect on our business, financial condition, or results of
operations, we cannot predict the outcome of any pending litigation and an unfavorable outcome could have an adverse impact on our
business, financial condition, or results of operations.
Risks Relating to Our Regulatory, Accounting, Legal, and Tax Environment
International tariffs could materially and adversely affect our business and results of operations.
Changes in laws and policies governing foreign trade could adversely affect our business. The institution of global trade tariffs, trade
sanctions, new or onerous trade restrictions, embargoes and other stringent government controls carries the risk of negatively affecting
global economic conditions, which could have a negative impact on our business and results of operations. Also, certain foreign
governments have imposed tariffs on certain U.S. goods and may take additional retaliatory trade actions stemming from the tariffs,
which could increase the pricing of our products and result in decreased consumer demand for our products outside of the United States,
which could materially and adversely affect our business and results of operations.
In addition, U.S. initiated tariffs on certain foreign goods, including raw materials, commodities, and products manufactured outside the
United States that are used in our manufacturing processes may cause our manufacturing cost to rise, which would have a negative
impact on our business and results of operations.
An impairment in the carrying value of goodwill, trade names, and other long-lived assets could negatively affect our consolidated
results of operations and net worth.
Goodwill and indefinite-lived intangible assets, such as our trade names, are recorded at fair value at the time of acquisition and are not
amortized, but are reviewed for impairment at least annually or more frequently if impairment indicators arise. In evaluating the potential
for impairment of goodwill and trade names, we make assumptions regarding future operating performance, business trends, and market
and economic conditions. Such analyses further require us to make certain assumptions about sales, operating margins, growth rates,
and discount rates. Uncertainties are inherent in evaluating and applying these factors to the assessment of goodwill and trade name
recoverability. We could be required to evaluate the recoverability of goodwill or trade names prior to the annual assessment if we
experience business disruptions, unexpected significant declines in operating results, a divestiture of a significant component of our
business, or declines in market capitalization.
We also continually evaluate whether events or circumstances have occurred that indicate the remaining estimated useful lives of our
definite-lived intangible assets and other long-lived assets may warrant revision or whether the remaining balance of such assets may
not be recoverable. We use an estimate of the related undiscounted cash flow over the remaining life of the asset in measuring whether
the asset is recoverable.
As of June 30, 2023, the balance of total goodwill and indefinite lived intangible assets was $54.5 million, which represents
approximately 15 percent of total assets. If the future operating performance of either the Company or individual operating segments is
not sufficient, we could be required to record non-cash impairment charges. Impairment charges could substantially affect our reported
earnings in the periods such charges are recorded. In addition, impairment charges could indicate a reduction in business value which
could limit our ability to obtain adequate financing in the future.
Compliance with environmental, health, safety, and other regulatory requirements may increase costs and reduce demand for our
products.
We are subject to federal, state, local, and foreign laws and regulations, including those concerning product safety, environmental
protection, and occupational health and safety. Some of these laws and regulations require us to obtain permits and limit our ability to
discharge hazardous materials into the environment. Failure to comply with these requirements could result in the assessment of fines
and penalties, obligations to conduct remedial or corrective actions, or, in extreme circumstances, revocation of our permits or
injunctions preventing some or all of our operations. In addition, the components of our boats must meet certain regulatory standards,
including stringent air emission standards for boat engines. Failure to meet these standards could result in an inability to sell our boats
in key markets, which would adversely affect our business. Moreover, compliance with these regulatory requirements could increase
the cost of our products, which in turn, may reduce consumer demand.
15
While we believe that we are in compliance with applicable federal, state, local, and foreign regulatory requirements, and hold all
licenses and permits required thereunder, we cannot provide assurance that we will, at all times, be able to continue to comply with
applicable regulatory requirements. Compliance with increasingly stringent regulatory and permit requirements may, in the future, cause
us to incur substantial capital costs and increase our cost of operations, or may limit our operations, all of which could have a material
adverse effect on our business or financial condition.
Our manufacturing processes involve the use, handling, storage, and contracting for recycling or disposal of hazardous substances and
wastes. The failure to manage or dispose of such hazardous substances and wastes properly could expose us to material liability or fines,
including liability for personal injury or property damage due to exposure to hazardous substances, damages to natural resources, or for
the investigation and remediation of environmental conditions. Under environmental laws, we may be liable for remediation of
contamination at sites where our hazardous wastes have been disposed or at our current or former facilities, regardless of whether such
facilities are owned or leased or regardless of whether we were at fault. While we do not believe that we are presently subject to any
such liabilities, we cannot assure you that environmental conditions relating to our prior, existing, or future sites or operations or those
of predecessor companies will not have a material adverse effect on our business or financial condition.
Additionally, we are subject to laws governing our relationships with employees, including, but not limited to, employment obligations
and employee wage, hour, and benefits issues, such as health care benefits. Compliance with these rules and regulations, and compliance
with any changes to current regulations, could increase the cost of our operations.
We manufacture and sell products that create exposure to potential claims and litigation.
Our manufacturing operations and the products we produce could result in product quality, warranty, personal injury, property damage,
and other issues, thereby increasing the risk of litigation and potential liability, as well as regulatory fines. We have in the past incurred
such liabilities and may in the future be exposed to liability for such claims. We maintain product and general liability insurance of the
types and in the amounts that we believe are customary for the industry. However, we may experience material losses in the future, incur
significant costs to defend claims or issue product recalls, experience claims in excess of our insurance coverage or that are not covered
by insurance, or be subjected to fines or penalties. Our reputation may be adversely affected by such claims, whether or not successful,
including potential negative publicity about our products. In addition, if any of our products are, or are alleged to be, defective, we may
be required to participate in a recall of that product if the defect or alleged defect relates to safety. These and other claims we may face
could be costly to us and require substantial management attention.
The nature of our business exposes us to workers’ compensation claims and other workplace liabilities.
Certain materials we use require our employees to handle potentially hazardous or toxic substances. While our employees who handle
these and other potentially hazardous or toxic materials receive specialized training and wear protective clothing, there is still a risk that
they, or others, may be exposed to these substances. Exposure to these substances could result in significant injury to our employees
and damage to our property or the property of others, including natural resource damage. Our personnel are also at risk for other
workplace related injuries, including slips and falls. We have in the past been, and may in the future be, subject to fines, penalties, and
other liabilities in connection with any such injury or damage. Although we currently maintain what we believe to be suitable and
adequate insurance in excess of our self-insured amounts, we may be unable to maintain such insurance on acceptable terms or such
insurance may not provide adequate protection against potential liabilities.
Increases in income tax rates or changes in income tax laws or enforcement could have a material adverse impact on our financial
results.
Changes in domestic and international tax legislation could expose us to additional tax liability. Although we monitor changes in tax
laws and work to mitigate the impact of proposed changes, such changes may negatively impact our financial results. In addition,
increases in individual income tax rates would negatively affect our potential consumers’ discretionary income and could decrease the
demand for our products.
Risks Relating to Ownership of our Common Stock
Inefficient or ineffective allocation of capital could adversely affect our operating results and/or stockholder value.
We strive to allocate capital in a manner that enhances stockholder value, lowers our cost of capital, or demonstrates our commitment
to return excess capital to stockholders, while maintaining our ability to invest in strategic growth opportunities. In July 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 will become effective upon the expiration of the Company's existing
$50 million share repurchase authorization. The Company intends to purchase shares under the repurchase authorization from time to
time on the open market at the discretion of management, subject to strategic considerations, market conditions, and other factors.
Repurchases under our share repurchase program will reduce the market liquidity for our stock, potentially affecting its trading volatility
and price. Future share repurchases will also diminish our cash reserves, which may impact our ability to pursue attractive strategic
16
opportunities. Therefore, if we do not properly allocate our capital or implement a successful cash management strategy, including with
respect to returning value to our stockholders through this share repurchase authorization, we may fail to produce optimal financial
results and experience a reduction in stockholder value.
Shareholders may be diluted by future issuances of common stock in connection with our incentive plans, acquisitions, or otherwise;
future sales of such shares in the public market, or the expectations that such sales may occur, could lower our stock price.
Our amended and restated certificate of incorporation authorizes us to issue shares of common stock and options, rights, warrants, and
appreciation rights relating to common stock for the consideration and on the terms and conditions established by our board of directors
in its sole discretion, whether in connection with acquisitions or otherwise.
Any common stock that we issue, including under our 2015 Incentive Award Plan or other equity incentive plans that we may adopt in
the future, would dilute the percentage ownership of holders of our common stock.
We currently do not intend to pay dividends on our common stock.
While we have paid dividends in the past, we currently have no intention to pay dividends on our common stock. Any decision to declare
and pay dividends in the future will be made at the discretion of our board of directors and will depend on, among other things, our
results of operations, financial condition, cash requirements, contractual restrictions, and other factors that our board of directors may
deem relevant. Furthermore, our ability to declare and pay dividends may be limited by instruments governing future outstanding
indebtedness we may incur.
Certain activist shareholder actions could cause us to incur expense and hinder execution of our strategy.
We actively engage in discussions with our shareholders regarding further strengthening our Company and creating long-term
shareholder value. This ongoing dialogue can include certain divisive activist tactics, which can take many forms. Some shareholder
activism, including potential proxy contests, could result in substantial costs, such as legal fees and expenses, and divert management’s
and our board of director’s attention and resources from our businesses and strategic plans. Additionally, public shareholder activism
could give rise to perceived uncertainties as to our future, adversely affect our relationships with dealers, distributors, or consumers,
make it more difficult to attract and retain qualified personnel, and cause our stock price to fluctuate based on temporary or speculative
market perceptions or other factors that do not necessarily reflect the underlying fundamentals and prospects of our business. These
risks could adversely affect our business and operating results.
17
ITEM 1B. UNRESOLVED STAFF COMMENTS.
None.
ITEM 2. PROPERTIES.
As of June 30, 2023, all our MasterCraft boats and trailers are manufactured and lake-tested at our 310,000 square-foot manufacturing
facility located on approximately 60 acres of lakefront land in Vonore, Tennessee. We also lease a 3,000 square-foot warehouse facility
in West Yorkshire, England for warehousing of parts. All our Crest boats are manufactured in our 270,000 square-foot manufacturing
facility located on approximately 63 acres in Owosso, Michigan. All our Aviara boats are manufactured in our 130,000 square-foot
manufacturing facility on approximately 38 acres in Merritt Island, Florida.
ITEM 3. LEGAL PROCEEDINGS.
For a discussion of the Company’s legal proceedings, see Part IV – Item 15. – Note 12 Commitments and Contingencies to the
Company’s Consolidated Financial Statements.
ITEM 4. MINE SAFETY DISCLOSURES.
Not applicable.
18
PART II
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS AND
ISSUER PURCHASES OF EQUITY SECURITIES.
Market Information
Our common stock has been publicly traded on the NASDAQ Global Market under the symbol “MCFT” since July 17, 2015. Prior to
that time, there was no public market for our common stock. As of August 25, 2023, we had approximately 12,600 holders of record of
our common stock.
Dividends
We presently do not anticipate declaring or paying cash dividends on our common stock. Any future determination as to the declaration
and payment of dividends, will be at the discretion of our board of directors and will depend on then-existing conditions, including our
operating results, financial condition, contractual restrictions, capital requirements, business prospects, and other factors our board of
directors may deem relevant. See Item 1A “Risk Factors — Risks Relating to Ownership of Our Common Stock.”
Issuer Purchases of Equity Securities
On June 24, 2021, the board of directors of the Company authorized a stock repurchase program that allows for the repurchase of up to
$50.0 million of our common stock during the three-year period ending June 24, 2024. During the fiscal years ended June 30, 2023 and
2022, we repurchased approximately $22.9 million and $25.5 million of our common stock, respectively. As of June 30, 2023, the
remaining authorization under the program was approximately $1.6 million.
During the three months ended June 30, 2023, the Company repurchased the following shares of common stock:
Period
April 3, 2023 - April 30, 2023
May 1, 2023 - May 28, 2023
May 29, 2023 - June 30, 2023
Total
Total Number of
Shares
Purchased
59,396
112,490
74,375
246,261
Average
Price Paid
Per Share(a)(b)
29.29
$
28.24
27.63
—
$
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)
$
59,396
112,490
74,375
246,261
6,867
3,690
1,634
—
(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.
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 will become effective upon the expiration
of the Company's existing $50 million share repurchase authorization. As of June 30, 2023, there was $1.6 million of availability
remaining under the existing stock repurchase program.
Stock Performance Graph
This performance graph shall not be deemed “soliciting material” or to be “filed” with the SEC for purposes of Section 18 of the
Exchange Act of 1934, or otherwise subject to the liabilities under that section, and shall not be deemed to be incorporated by reference
into any filing of ours under the Securities Act or the Exchange Act.
The following stock performance graph illustrates the cumulative total shareholder return on our common stock for the period from June
30, 2018 to June 30, 2023, as compared to the Russell 2000 Index and the Dow Jones US Recreational Products Index.
The comparison assumes (i) a hypothetical investment of $100 in our common stock and the two above mentioned indices on June 30,
2018 and (ii) the full reinvestment of all dividends. The comparisons in the graph are not intended to be indicative of possible future
performance of our common stock.
19
Securities Authorized for Issuance Under Equity Compensation Plans
For information regarding securities authorized for issuance under our equity compensation plans, see Note 11 – Share-Based
Compensation in Item 8 and Item 12: Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters.
ITEM 6. Reserved
20
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS.
The following discussion and analysis should be read together with the sections entitled “Risk Factors” and the financial statements
and the accompanying notes included elsewhere in this Form 10-K. In addition, the statements in this discussion and analysis regarding
the performance expectations 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” and in “Risk Factors”
above. Our actual results may differ materially from those contained in or implied by any forward-looking statements.
This section generally discusses 2023 and 2022 items and year-to-year comparisons between 2023 and 2022. Discussions of 2021 items
and year-to-year comparisons between 2022 and 2021 are not included in this Annual Report on Form 10-K and can be found in Item
7 of the Company’s Annual Report on Form 10-K for the year ended June 30, 2022, which was filed with the SEC on September 9, 2022.
Key Performance Measures
From time to time we use certain key performance measures in evaluating our business and results of operations and we may refer to
one or more of these key performance measures in this “Management’s Discussion and Analysis of Financial Condition and Results of
Operations.” These key performance measures include:
• Unit sales volume — We define unit sales volume as the number of our boats sold to our dealers during a period.
•
Net sales per unit — We define net sales per unit as net sales divided by unit sales volume.
• Gross margin — We define gross margin as gross profit divided by net sales, expressed as a percentage.
•
•
•
•
Net income margin — We define net income margin as net income from continuing operations divided by net sales, expressed
as a percentage.
Adjusted EBITDA — We define Adjusted EBITDA as net income from continuing operations, before interest, income taxes,
depreciation, and amortization (“EBITDA”), as further adjusted to eliminate certain non-cash charges and unusual items that
we do not consider to be indicative of our core/ongoing operations. For a reconciliation of EBITDA to Adjusted EBITDA, see
“Non-GAAP Measures” below.
Adjusted EBITDA margin — We define Adjusted EBITDA margin as Adjusted EBITDA divided by net sales, expressed as a
percentage. For a reconciliation of Adjusted EBITDA margin to net income margin, see “Non-GAAP Measures” below.
Adjusted Net Income — We define Adjusted Net Income as net income from continuing operations, adjusted to eliminate
certain non-cash charges and other items that we do not consider to be indicative of our core/ongoing operations and adjusted
for the impact to income tax expense related to non-GAAP adjustments. For a reconciliation of net income from continuing
operations to Adjusted Net Income, see “Non-GAAP Measures” below.
Discontinued Operations
On September 2, 2022, the Company completed the sale of its NauticStar business. This business, which was previously reported as the
Company's NauticStar segment until fiscal 2023, is being reported as discontinued operations for all periods presented. The Company's
results for all periods presented, as discussed in Management's Discussion and Analysis, are presented on a continuing operations basis
with prior year amounts recast to provide comparability. See Note 3 in Notes to Consolidated Financial Statements for more information
on Discontinued Operations.
Fiscal 2023 Overview
Net sales were up slightly during fiscal 2023 when compared to fiscal 2022. The increase was primarily due to higher pricing to offset
inflationary cost pressures, partially offset by a decrease in wholesale volume, dealer incentives and less favorable model mix. We
achieved our goal of rebalancing dealer inventories; however, due to a slowing retail environment, the number of wholesale units sold
were lower when compared to prior year. Model mix trended towards smaller-sized models as more boats were sold as inventory stock
versus retail-sold boats. Also, because of increased dealer inventories, higher interest rates, and an increasingly competitive retail
environment, dealer incentives, which include floor plan financing costs and other incentives, have increased.
Gross margin declined during fiscal 2023 when compared to fiscal 2022. Offsetting the increased net sales discussed above were
increased expenses related to material, labor and overhead inflation. Other contributory expenses included increased insurance premiums
and warranty-related costs. Overall, including the impact of dealer incentives in net sales noted above, the gross margin percentage
declined 60 basis points.
21
Operating expenses slightly increased during fiscal 2023 when compared to fiscal 2022. Total selling, general and administrative
expenses as a percentage of net sales remained relatively flat during fiscal 2023 when compared to the same prior year period.
Results of Operations
We derived the consolidated statements of operations for the fiscal years ended June 30, 2023 and 2022 from our audited consolidated
financial statements and related notes included elsewhere in this Form 10-K. Our historical results are not necessarily indicative of the
results that may be expected in the future.
Consolidated Results
(Dollar amounts in thousands)
Consolidated statements of operations:
NET SALES
COST OF SALES
GROSS PROFIT
OPERATING EXPENSES:
Selling and marketing
General and administrative
Amortization of other intangible assets
Goodwill impairment
Total operating expenses
OPERATING INCOME
OTHER INCOME (EXPENSE):
Interest expense
Interest income
INCOME BEFORE INCOME TAX EXPENSE
INCOME TAX EXPENSE
NET INCOME FROM CONTINUING OPERATIONS
Additional financial and other data:
Unit sales volume:
MasterCraft
Crest
Aviara
Consolidated unit sales volume
Net sales:
MasterCraft
Crest
Aviara
Consolidated net sales
Net sales per unit:
MasterCraft
Crest
Aviara
Consolidated net sales per unit
Gross margin
2023
2022
Change
% Change
$
$
$
$
$
$
$
$
$
$
662,046
492,333
169,713
13,808
37,034
1,956
—
52,798
116,915
(2,679)
3,351
117,587
27,135
90,452
3,407
2,836
134
6,377
468,656
141,247
52,143
662,046
138
50
389
104
25.6%
641,609
473,419
168,190
12,869
36,070
1,956
1,100
51,995
116,195
(1,471)
—
114,724
26,779
87,945
3,596
3,156
100
6,852
466,027
140,859
34,723
641,609
130
45
347
94
26.2%
$
20,437
18,914
1,523
939
964
—
(1,100)
803
720
(1,208)
3,351
2,863
356
2,507
(189)
(320)
34
(475)
2,629
388
17,420
20,437
8
5
42
10
(60) bps
$
$
$
$
3.2%
4.0%
0.9%
7.3%
2.7%
0.0%
—
1.5%
0.6%
82.1%
—
2.5%
1.3%
2.9%
(5.3%)
(10.1%)
34.0%
(6.9%)
0.6%
0.3%
50.2%
3.2%
6.2%
11.1%
12.1%
10.6%
Net Sales. Net Sales increased 3.2 percent for fiscal 2023 when compared to fiscal 2022. The increase was a result of higher prices,
partially offset by decreased sales volumes, increased dealer incentives, and less favorable model mix. 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
becomes more competitive.
Gross Margin. Gross Margin percentage declined 60 basis points during fiscal 2023 when compared to fiscal 2022. Lower margins were
the result of higher costs related to material and overhead inflation, higher costs from dealer incentives, lower absorption due to
decreased sales volumes, less favorable model mix, and increased warranty costs related to prior model year expenses, partially offset
by higher prices and improved production efficiencies.
Operating Expenses. Operating expenses increased 1.5 percent during fiscal 2023 when compared to the same prior year period. During
fiscal 2022, a $1.1 million goodwill impairment charge was recorded in the Aviara segment, as discussed in Note 7 in the Notes to
22
Consolidated Financial Statements. Selling, general and administrative expenses as a percentage of net sales were relatively flat during
fiscal 2023 when compared to the same prior year period.
Interest Expense. Interest expense increased $1.2 million primarily due to higher effective interest rates.
Interest Income. Interest income of $3.4 million during fiscal 2023 is derived from investments in fiscal 2023 in a portfolio of fixed
income securities as part of the Company's cash management strategy.
Income Tax Expense. Our consolidated effective income tax rate decreased to 23.1 percent for fiscal 2023 from 23.3 percent for fiscal
2022. See Note 10 in Notes to Consolidated Financial Statements for more information.
Segment Results
MasterCraft Segment
The following table sets forth MasterCraft segment results for the fiscal years ended:
(Dollar amounts in thousands)
Net sales
Operating income
Purchases of property, plant and equipment
Unit sales volume
Net sales per unit
2023
2022
Change
% Change
$
$
468,656
101,324
17,414
3,407
138
$
$
466,027 $
105,341
6,642
2,629
(4,017)
10,772
3,596
130 $
(189)
8
0.6%
(3.8%)
162.2%
(5.3%)
6.2%
Net sales increased 0.6 percent during fiscal 2023, when compared to fiscal 2022. The increase was primarily driven by higher selling
prices, partially offset by decreased sales volumes, less favorable model mix, and increased dealer incentives.
Operating income decreased 3.8 percent during fiscal 2023, when compared to the same prior year period. The overall decrease was
driven by higher costs from inflationary pressures, higher dealer incentives, less favorable model mix, decreased sales volumes, and
increased warranty costs related to prior model year expenses, partially offset by favorable pricing.
Purchases of property, plant, and equipment increased $10.8 million during fiscal 2023, when compared to fiscal 2022. The increase
was due to capital spending focused on facility enhancements, strategic initiatives, and information technology.
Crest Segment
The following table sets forth Crest segment results for the fiscal years ended:
(Dollar amounts in thousands)
Net sales
Operating income
Purchases of property, plant and equipment
Unit sales volume
Net sales per unit
2023
2022
Change
% Change
$
$
141,247
20,106
7,149
2,836
50
$
$
140,859 $
19,892
4,193
3,156
45 $
388
214
2,956
(320)
5
0.3%
1.1%
70.5%
(10.1%)
11.1%
Net sales increased 0.3 percent during fiscal 2023, when compared to fiscal 2022, as a result of higher prices, and favorable model mix
and options, partially offset by decreased unit volume and increased dealer incentives.
Operating income increased 1.1 percent during fiscal 2023, when compared to the same prior year period. The increase was primarily
due to higher selling prices, and favorable model mix and options, partially offset by higher costs from inflationary pressures, decreased
unit volume, and increased dealer incentives.
Purchases of property, plant, and equipment increased $3.0 million during fiscal 2023, when compared to the same prior-year period.
The increase was primarily due to capital spending focused on capacity expansion.
23
Aviara Segment
The following table sets forth Aviara segment results for the fiscal years ended:
(Dollar amounts in thousands)
Net sales
Operating loss
Goodwill impairment
Purchases of property, plant and equipment
Unit sales volume
Net sales per unit
2023
2022
Change
% Change
$
$
52,143
(4,515)
—
5,760
134
389
$
$
$
34,723
(9,038)
1,100
1,461
17,420
4,523
(1,100)
4,299
100
347
$
34
42
50.2%
50.0%
—
294.3%
34.0%
12.1%
Net sales increased 50.2 percent during fiscal 2023, when compared to fiscal 2022, mainly due to increased sales volume and higher
selling prices, partially offset by higher dealer incentives.
Operating loss decreased 50.0 percent for fiscal 2023, when compared to fiscal 2022. The change was primarily a result of higher prices,
improved production efficiencies, and increased sales volume, partially offset by higher costs from inflationary pressures, and increased
dealer incentives. Additionally, a goodwill impairment charge was recorded during the first quarter of fiscal 2022.
Purchases of property, plant, and equipment increased $4.3 million during fiscal 2023, when compared to fiscal 2022. The increase was
due to capital spending focused on capacity expansion and tooling.
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, these adjustments include share-based compensation,
business development consulting costs, goodwill impairment, Aviara transition costs, and debt refinancing charges, as described in more
detail below. We define EBITDA margin and Adjusted EBITDA margin as EBITDA and Adjusted EBITDA, respectively, 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, share-based compensation, business development consulting costs,
goodwill impairment, Aviara transition costs, and debt refinancing charges.
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:
24
• 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;
The Non-GAAP Measures do not reflect our tax expense or any cash requirements to pay income taxes;
The 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.
Due to the effects of discontinued operations, as discussed above in “Part I, Item 1. Business,” 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
Adjusted EBITDA margin (expressed as a percentage of net sales) for the periods indicated:
Net income from continuing operations
Income tax expense
Interest expense
Interest income
Depreciation and amortization
EBITDA
Share-based compensation
Business development consulting costs(a)
Goodwill impairment(b)
Aviara transition costs(c)
Debt refinancing charges(d)
Adjusted EBITDA
2023
90,452
27,135
2,679
(3,351)
10,569
127,484
3,656
312
—
—
—
131,452
$
$
% of Net
sales
13.7% $
19.3%
19.9% $
2022
87,945
26,779
1,471
—
9,731
125,926
3,510
—
1,100
—
—
130,536
% of Net
sales
13.7% $
19.6%
20.3% $
2021
58,438
16,080
3,392
—
8,368
86,278
2,932
—
—
2,150
769
92,129
% of Net
sales
12.5%
18.5%
19.8%
(a) Represents non-recurring third-party costs associated with business development activities, primarily relating to consulting costs for evaluation and execution of
internal growth and other strategic initiatives. The evaluation and execution of the internal growth and other strategic initiatives is a bespoke initiative, and the costs
associated therewith do not constitute normal recurring cash operating expenses necessary to operate the Company's business.
(b) Represents a non-cash charge recorded in the Aviara segment for impairment of goodwill.
(c) Represents costs to transition production of the Aviara brand from Vonore, Tennessee to Merritt Island, Florida. Costs include duplicative overhead costs and costs
not indicative of ongoing operations (such as training and facility preparation).
(d) Represents loss recognized upon refinancing the Company’s debt in fiscal 2021. The loss is comprised of unamortized debt issuance costs related to the previously
existing credit facility and third-party legal costs associated with the refinancing.
25
The following table sets forth a reconciliation of net income from continuing operations as determined in accordance with U.S. GAAP
to Adjusted Net Income for the periods indicated:
Net income from continuing operations
Income tax expense
Amortization of acquisition intangibles
Share-based compensation
Business development consulting costs(a)
Goodwill impairment(b)
Aviara transition costs(c)
Debt refinancing charges(d)
Adjusted Net Income before income taxes
Adjusted income tax expense(e)
Adjusted Net Income
Adjusted Net Income per share:
Basic
Diluted
Weighted average shares used for the computation of(e):
Basic Adjusted Net Income per share
Diluted Adjusted Net Income per share
2023
2022
(Dollars in thousands, except per share)
2021
$
$
$
$
90,452
27,135
1,849
3,656
312
—
—
—
123,404
28,383
95,021
5.39
5.35
$
$
$
$
87,945
26,779
1,849
3,510
—
1,100
—
—
121,183
27,872
93,311
5.06
5.01
$
$
$
$
58,438
16,080
1,849
2,932
—
—
2,150
769
82,218
18,910
63,308
3.37
3.34
17,618,797
17,765,117
18,455,226
18,636,512
18,805,464
18,951,521
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 presented:
Net income from continuing operations per diluted share
Impact of adjustments:
Income tax expense
Amortization of acquisition intangibles
Share-based compensation
Business development consulting costs(a)
Goodwill impairment(b)
Aviara transition costs(c)
Debt refinancing charges(d)
Adjusted Net Income per diluted share before income taxes
Impact of adjusted income tax expense on net income per diluted
share before income taxes(e)
Adjusted Net Income per diluted share
2023
2022
2021
$
5.09
$
4.72
$
1.53
0.10
0.21
0.02
—
—
—
6.95
1.44
0.10
0.19
—
0.06
—
—
6.51
3.08
0.85
0.10
0.15
—
—
0.11
0.04
4.33
(1.60)
5.35
$
(1.50)
5.01
$
(0.99)
3.34
(a) Represents non-recurring third-party costs associated with business development activities, primarily relating to consulting costs for evaluation and execution of
internal growth and other strategic initiatives. The evaluation and execution of the internal growth and other strategic initiatives is a bespoke initiative, and the costs
associated therewith do not constitute normal recurring cash operating expenses necessary to operate the Company's business.
(b) Represents a non-cash charge recorded in the Aviara segment for impairment of goodwill.
(c) Represents costs to transition production of the Aviara brand from Vonore, Tennessee to Merritt Island, Florida. Costs include duplicative overhead costs and costs
not indicative of ongoing operations (such as training and facility preparation).
(d) Represents loss recognized upon refinancing the Company’s debt in fiscal 2021. The loss is comprised of unamortized debt issuance costs related to the previously
existing credit facility and third-party legal costs associated with the refinancing.
(e) Reflects income tax expense at a tax rate of 23.0% for each period presented.
26
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 stock 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.
Cash and cash equivalents totaled $19.8 million as of June 30, 2023, a decrease of $14.4 million from $34.2 million as of June 30, 2022.
Held-to-maturity securities totaled $91.6 million as of June 30, 2023. As of June 30, 2022, there were no outstanding held-to-maturity
securities. As of June 30, 2023, we had no amounts outstanding under the Revolving Credit Facility, leaving $100.0 million of available
borrowing capacity. Total debt outstanding under the Term Loan as of June 30, 2023 and June 30, 2022 was $53.7 million and $56.5
million, respectively. Refer to Note 9 — Long Term Debt in the Notes to Consolidated Financial Statements for further details.
On June 24, 2021, the board of directors of the Company authorized a stock repurchase program that allows for the repurchase of up to
$50.0 million of our common stock during the three-year period ending June 24, 2024. During fiscal 2023 and fiscal 2022, the Company
repurchased 872,055 shares and 975,161 shares of common stock for $22.9 million and $25.5 million, respectively, in cash, including
related fees and expenses. As of June 30, 2023, there was $1.6 million of availability remaining under the stock repurchase program.
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 will become effective upon the expiration
of the Company's existing $50 million share repurchase authorization.
We believe our cash balance, investments, cash from operations, and our ability to borrow, will be sufficient to provide for our liquidity
and capital resource needs.
The following table and discussion below relate to our cash flows from continuing operations for operating, investing, and financing
activities:
Total cash provided by (used in):
Operating activities
Investing activities
Financing activities
Net change in cash from continuing operations
Fiscal 2023 Cash Flow from Continuing Operations
2023
2022
2021
$
$
136,824
(120,933)
(27,148)
(11,257)
$
$
82,378
(12,296)
(62,540)
7,542
$
$
73,961
(25,219)
(17,773)
30,969
Net cash provided by operating activities was $136.8 million, primarily due to net income, as well as reductions of 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 consolidated balance
sheets, excluding the impact of acquisitions and non-cash adjustments. Favorable working capital change primarily consisted of an
increase in accrued expenses and other current liabilities, and a decrease in accounts receivable, offset by a decrease in accounts payable,
and an increase in prepaid expenses and other current assets. Accrued expenses and other current liabilities increased as a result of an
increase in warranty costs and dealer incentives. 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. Accounts payable decreased as a result of decreased production levels. Prepaid and
other current assets increased primarily as a result of higher general insurance premiums.
Net cash used in investing activities was $120.9 million, due to net investments in held-to-maturity securities of $90.6 million and $30.3
million of capital expenditures. Our capital spending was focused on tooling, capacity expansion, strategic initiatives, and information
technology.
Net cash used in financing activities was $27.1 million, which included net payments of $3.0 million on long-term debt and $22.9 million
of stock repurchases.
Fiscal 2022 Cash Flow from Continuing Operations
Net cash provided by operating activities was $82.4 million, mainly due to net income, partially offset by working capital usage. Working
capital usage primarily consisted of an increase in inventory, accounts receivable and prepaid and other current assets, partially offset
an increase in accrued expenses and other current liabilities and accounts payable. Inventory increased due to an increase in raw materials
to support higher production volumes and to increase safety stock to manage supply chain risk. Accounts receivable increased due to
increased sales. Prepaid and other current assets increased due to higher general insurance premiums. Accrued expenses and other
27
current liabilities increased due to an increase in warranty costs and dealer incentives. Accounts payable increased as a result of increased
production levels.
Net cash used in investing activities was $12.3 million, which included capital expenditures. Our capital spending was focused on
expanding our capacity, maintenance capital, and investments in information technology.
Net cash used in financing activities was $62.5 million, which included net payments of $36.7 million on long-term debt and $25.5
million of stock repurchases.
Off-Balance Sheet Arrangements
The Company did not have any off-balance sheet financing arrangements as of June 30, 2023.
Contractual Obligations
As of June 30, 2023, the Company’s material cash obligations were as follows:
Long-Term Debt Obligations — See Note 9 – Long-Term Debt in the accompanying Notes to Consolidated Financial Statements for
further information.
Interest on Long-Term Debt Obligations — As of June 30, 2023, the Company has estimated total interest payments on its outstanding
long-term debt obligations of $8.9 million, of which $4.0 million is due during the next 12 months. Interest on variable rate debt
instruments was calculated using interest rates in effect for our borrowings as of June 30, 2023 and holding them constant for the life of
the instrument.
Purchase Commitments — As of June 30, 2023, the Company is committed to purchasing $28.5 million of engines, of which $19.5
million is committed during the next 12 months. See Note 12 in the accompanying Notes to Consolidated Financial Statements for more
information.
Repurchase Obligations — The Company has reserves to cover potential losses associated with repurchase obligations based on
historical experience and current facts and circumstances. We incurred no material impact from repurchase events during fiscal 2023,
2022, or 2021. An adverse change in retail sales, however, could require us to repurchase boats repossessed by floor plan financing
companies upon an event of default by any of our dealers, subject in some cases to an annual limitation. See Note 12 in the accompanying
Notes to Consolidated Financial Statements for more information.
In addition to the above, we have unrecognized tax benefits that are not reflected here because the Company cannot predict when open
income tax years will close with completed examinations. See Note 10 in Notes to Consolidated Financial Statements for more
information.
Application of Critical Accounting Policies and Estimates
Significant accounting policies are described in the notes to the consolidated financial statements. In the application of these policies,
certain estimates are made that may have a material impact on our financial condition and results of operations. Actual results could
differ from those estimates and cause our reported net income to vary significantly from period to period. For additional information
regarding these policies, see Note 1 – Significant Accounting Policies in Notes to Consolidated Financial Statements.
Asset Impairment
Goodwill
The Company reviews goodwill for impairment at its annual impairment testing date, which is June 30, and whenever events or changes
in circumstances indicate that the fair value of a reporting unit may be below its carrying value. As part of the impairment tests, the
Company may perform a qualitative, rather than quantitative, assessment to determine whether the fair values of its reporting units are
“more likely than not” to be greater than their carrying values. In performing this qualitative analysis, the Company considers various
factors, including the effect of market or industry changes and the reporting units' actual results compared to projected results.
If the fair value of a reporting unit does not meet the "more likely than not" criteria discussed above, the impairment test for goodwill is
a quantitative test. This test involves comparing the fair value of the reporting unit with its carrying value. If the fair value exceeds the
carrying value, goodwill is not considered impaired. If the carrying amount exceeds the fair value then the goodwill is considered
impaired and an impairment loss is recognized in an amount by which the carrying value exceeds the reporting unit’s fair value, not to
exceed the carrying amount of the goodwill allocated to that reporting unit.
28
The Company calculates the fair value of its reporting units considering both the income approach and market approach. The income
approach calculates the fair value of the reporting unit using a discounted cash flow method. Internally forecasted future cash flows,
which the Company believes reasonably approximate market participant assumptions, are discounted using a weighted average cost of
capital (“Discount Rate”) developed for each reporting unit. The Discount Rate is developed using market observable inputs, as well as
considering whether or not there is a measure of risk related to the specific reporting unit’s forecasted performance. Fair value under the
market approach is determined for each reporting unit by applying market multiples for comparable public companies to the reporting
unit’s financial results. The key judgements in these calculations are the assumptions used in determining the reporting unit’s forecasted
future performance, including revenue growth and operating margins, as well as the perceived risk associated with those forecasts in
determining the Discount Rate, along with selecting representative market multiples.
As discussed further in Note 7 to the Consolidated Financial Statements, during the year ended June 30, 2022, the Company performed
a quantitative test and recognized a $1.1 million goodwill impairment charge related to its Aviara reporting unit. As of June 30, 2023,
only the MasterCraft reporting unit has a goodwill balance. The fair value of this reporting unit substantially exceeds its carrying value.
Other Intangible Assets
The Company's primary intangible assets other than goodwill are dealer networks and trade names acquired in business combinations.
These intangible assets are initially valued using a methodology commensurate with the intended use of the asset. The dealer networks
were valued using an income approach, which requires an estimate or forecast of the expected future cash flows from the dealer network
through the application of the multi-period excess earnings approach. The fair value of trade names is measured using a relief-from-
royalty approach, a variation of the income approach, which requires an estimate or forecast of the expected future cash flows. This
method assumes the value of the trade name is the discounted cash flows of the amount that would be paid to third parties had the
Company not owned the trade name and instead licensed the trade name from another company. The basis for future sales projections
for these methods are based on internal revenue forecasts by reporting unit, which the Company believes represent reasonable market
participant assumptions. The future cash flows are discounted using an applicable Discount Rate as well as any potential risk premium
to reflect the inherent risk of holding a standalone intangible asset.
The key judgements in these fair value calculations, as applicable, are: assumptions used in developing internal revenue growth and
dealer expense forecasts, assumed dealer attrition rates, the selection of an appropriate royalty rate, as well as the perceived risk
associated with those forecasts in determining the Discount Rate.
The costs of amortizable intangible assets, including dealer networks, are recognized over their expected useful lives, approximately ten
years for the dealer networks, using the straight-line method. Intangible assets that are subject to amortization are evaluated for
impairment using a process similar to that used to evaluate long-lived assets as described below. Intangible assets not subject to
amortization are assessed for impairment at least annually and whenever events or changes in circumstances indicate that it is more
likely than not that an asset may be impaired. As part of the annual test, the Company may perform a qualitative, rather than quantitative,
assessment to determine whether each trade name intangible asset is “more likely than not” impaired. In performing this qualitative
analysis, the Company considers various factors, including macroeconomic events, industry and market events and cost related events.
If the “more likely than not” criteria is not met, the impairment test for indefinite-lived intangible assets consists of a comparison of the
fair value of the intangible asset with its carrying amount. An impairment loss is recognized for the amount by which the carrying value
exceeds the fair value of the asset.
As discussed further in Note 3 to the Consolidated Financial Statements, during the year ended June 30, 2022, the Company recognized
$18.5 million in intangible asset impairment charges related to its indefinite lived intangible asset and its dealer network intangible asset
within the NauticStar reporting unit. These charges are included in the loss from discontinued operations.
Long-Lived Assets
The Company assesses the potential for impairment of its long-lived assets if facts and circumstances, such as declines in sales, earnings,
or cash flows or adverse changes in the business climate, suggest that they may be impaired. A current expectation that, more likely
than not, a long-lived asset (asset group) will be sold or otherwise disposed of significantly before the end of its previously estimated
useful life will also trigger a review for impairment. The Company performs its assessment by comparing the book value of the asset
groups to the estimated future undiscounted cash flows associated with the asset groups. If any impairment in the carrying value of its
long-lived assets is indicated, the assets would be adjusted to an estimate of fair value.
As discussed further in Note 3 to the Consolidated Financial Statements, during the year ended June 30, 2022, the Company recognized
$5.3 million in long-lived asset impairment charges related to its NauticStar reporting unit.
Product Warranties — The Company offers warranties on the sale of certain products for periods of between one and five years from
the date of retail sale. These warranties require us or our dealers to repair or replace defective products during the warranty period at no
cost to the consumer. We estimate the costs that may be incurred under our basic limited warranty and record as a liability the amount
29
of such costs at the time the product revenue is recognized. The key judgements that affect our estimate for warranty liability include
the number of units sold, historical and anticipated rates of warranty claims and cost per claim. We periodically assess the adequacy of
the recorded warranty liabilities and adjust the amounts as actual claims are determined or as changes in the obligations become
reasonably estimable. We also adjust our liability for specific warranty matters when they become known and exposure can be estimated.
Future warranty claims may differ from our estimate of the warranty liability, which could lead to changes in the Company’s warranty
liability in future periods.
Income Taxes—We are subject to income taxes in the United States of America and the United Kingdom. Our effective tax rates differ
from the statutory rates, primarily due to a change in state taxes as a result of selling NauticStar, as further described in Note 10 in Notes
to Consolidated Financial Statements.
Significant judgment is required in evaluating our uncertain tax positions and determining our provision for income taxes. Although we
believe our reserves are reasonable, we cannot provide assurance that the final tax outcome of these matters will not be different from
that which is reflected in our historical income tax provisions and accruals. We adjust these reserves in light of changing facts and
circumstances, such as the closing of a tax audit or the refinement of an estimate. To the extent that the final tax outcome of these matters
is different than the amounts recorded, such differences will impact the provision for income taxes in the period in which such
determination is made. The provision for income taxes includes the impact of reserve provisions and changes to reserves that are
considered appropriate, as well as the related net interest.
Revenue Recognition — The Company’s revenue is derived primarily from the sale of boats and trailers, marine parts, and accessories
to its independent dealers. The Company recognizes revenue when obligations under the terms of a contract are satisfied and control
over promised goods is transferred to a customer. For substantially all sales, this occurs when the product is released to the carrier
responsible for transporting it to a customer. The Company typically receives payment from the floor plan financing providers within 5
business days of shipment. Revenue is measured as the amount of consideration we expect to receive in exchange for a product. The
Company offers dealer incentives that include wholesale rebates, retail rebates and promotions, floor plan reimbursement or cash
discounts, and other allowances that are recorded as reductions of revenues in net sales in the consolidated statements of operations. The
consideration recognized represents the amount specified in a contract with a customer, net of estimated incentives the Company
reasonably expects to pay. The estimated liability and reduction in revenue for dealer incentives is recorded at the time of sale.
Subsequent adjustments to incentive estimates are possible because actual results may differ from these estimates if conditions dictate
the need to enhance or reduce sales promotion and incentive programs or if dealer achievement or other items vary from historical
trends. Accrued dealer incentives are included in Accrued expenses and other current liabilities in the accompanying consolidated
balance sheets.
Rebates and Discounts
Dealers earn wholesale rebates based on purchase volume commitments and achievement of certain performance metrics. The Company
estimates the amount of wholesale rebates based on historical achievement, forecasted volume, and assumptions regarding dealer
behavior. Rebates that apply to boats already in dealer inventory are referred to as retail rebates. The Company estimates the amount of
retail rebates based on historical data for specific boat models adjusted for forecasted sales volume, product mix, dealer and consumer
behavior, and assumptions concerning market conditions. The Company also utilizes various programs whereby it offers cash discounts
or agrees to reimburse its dealers for certain floor plan interest costs incurred by dealers for limited periods of time, generally ranging
up to nine months.
Other Revenue Recognition Matters
Dealers generally have no right to return unsold boats. Occasionally, the Company may accept returns in limited circumstances and at
the Company’s discretion under its warranty policy. The Company may be obligated, in the event of default by a dealer, to accept returns
of unsold boats under its repurchase commitment to floor plan financing providers, who are able to obtain such boats through foreclosure.
The repurchase commitment is on an individual unit basis with a term from the date it is financed by the lending institution through the
payment date by the dealer, generally not exceeding 30 months. The Company accounts for these arrangements as guarantees and
recognizes a liability based on the estimated fair value of the repurchase obligation. The estimated fair value takes into account our
estimate of the loss we will incur upon resale of any repurchases. The Company accrues the estimated fair value of this obligation based
on the age of inventory currently under floor plan financing and estimated credit quality of dealers holding the inventory. Inputs used to
estimate this fair value include significant unobservable inputs that reflect the Company’s assumptions about the inputs that market
participants would use and, therefore, this liability is classified within Level 3 of the fair value hierarchy. We incurred no material impact
from repurchase events during fiscal 2023, 2022, or 2021. See Note 12 in Notes to Consolidated Financial Statements for more
information on repurchase obligations.
30
New Accounting Pronouncements
See “Part II, Item 8. Financial Statements and Supplementary Data — Note 1 — Significant Accounting Policies — New Accounting
Pronouncements.”
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Market risk represents the risk of changes in the value of market risk sensitive instruments caused by fluctuations in foreign exchange
rates, interest rates, and commodity prices. Changes in these factors could cause fluctuations in the results of our operations and cash
flows. In the ordinary course of business, we are primarily exposed to inflation and interest rate risks.
We rely on third parties to supply raw materials used in the manufacturing process, including resins, fiberglass, aluminum, lumber, and
steel, as well as product parts and components. The prices for these raw materials, parts, and components fluctuate depending on market
conditions and, in some instances, commodity prices or trade policies, including tariffs. Substantial increases in the prices of raw
materials, parts, and components would increase our operating costs, and could reduce our profitability if we are unable to recoup the
increased costs through higher product prices or improved operating efficiencies.
As of June 30, 2023, we had $54.0 million of long-term debt outstanding, bearing interest at the effective interest rate of 6.50%. See
Note 9 in Notes to Consolidated Financial Statements for more information regarding our long-term debt.
A hypothetical 1% increase or decrease in interest rates would have resulted in a $0.6 million change to our interest expense for fiscal
2023.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The financial statements and supplementary financial information required to be filed under this Item 8 are presented in Part IV, Item
15 of this Form 10-K.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE.
None.
ITEM 9A. 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 Form 10-K Annual Report, 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 on this evaluation, our chief executive officer and chief financial officer have concluded that our
disclosure controls and procedures were effective as of June 30, 2023.
Management’s Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rule
13a-15(f) and 15d-15(f) under the Exchange Act. Internal control over financial reporting is a process to provide reasonable assurance
regarding the reliability of our financial reporting for external purposes in accordance with accounting principles generally accepted in
the United States. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.
Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of
changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Our management, including our chief executive officer and chief financial officer, assessed the effectiveness of our internal control over
financial reporting as of June 30, 2023. In making this assessment, we used the criteria set forth by the Committee of Sponsoring
Organizations of the Treadway Commission ("COSO") in Internal Control-Integrated Framework (2013). Based on such assessment
our management has concluded that, as of June 30, 2023, our internal control over financial reporting is effective based on those criteria.
31
The effectiveness of our internal control over financial reporting as of June 30, 2023, has been audited by our independent registered
public accounting firm, Deloitte & Touche LLP, as stated in their report which is included in Item 15 of this Annual Report on Form
10-K.
Changes in Internal Control Over Financial Reporting
There have been no changes in our internal control over financial reporting, as defined in Exchange Act Rule 13a-15(f) and 15d-15(f),
during the period covered by this report that have materially affected, or are reasonably likely to materially affect, our internal control
over financial reporting.
ITEM 9B. OTHER INFORMATION
Director and Officer Rule 10b5-1 Trading Arrangements
During the three months ended June 30, 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).
ITEM 9C. DISCOLSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS
Not applicable.
32
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.
The information required by this Item 10 will be included in the Proxy Statement and is incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this Item 11 will be included in the Proxy Statement and is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
STOCKHOLDER MATTERS
The information required by this Item 12 will be included in the Proxy Statement and is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS, AND DIRECTOR INDEPENDENCE
The information required by this Item 13 will be included in the Proxy Statement and is incorporated herein by reference.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
The information required by this Item 14 will be included in the Proxy Statement and is incorporated herein by reference.
33
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES.
PART IV
a. Documents included in this report:
1. Financial Statements
Reports of Independent Registered Public Accounting Firm (PCAOB ID: 34)
Consolidated Balance Sheets
Consolidated Statements of Operations
Consolidated Statements of Equity
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
2. Financial Statement Schedules
38
41
42
43
44
45
Financial statement schedules have been omitted because they are either not required, not applicable or the information
required to be presented is included in our financial statements and related notes.
3. Exhibits
The following documents are filed as a part of this annual report on Form 10-K or are incorporated by reference to previous
filings, if so indicated:
Exhibit
No.
Description
Form
File No.
Exhibit
Filing Date
Filed
Herewith
3.1
3.2
3.3
3.4
4.1
4.2
10.1†
10.2†
10.3†
10.4†
10.5†
10.6†
10.7†
Amended and Restated Certificate of Incorporation of
MCBC Holdings, Inc.
10-K
001-37502
10-Q
001-37502
3.1
3.2
9/18/15
11/9/18
Certificate of Amendment to Amended and Restated
Certificate of Incorporation of MasterCraft Boat
Holdings, Inc.
Certificate of Amendment
to Amended and Restated
Certificate of Incorporation of MasterCraft Boat Holdings,
Inc.
Fourth Amended and Restated By-laws of MasterCraft
Boat Holdings, Inc.
Common stock certificate of MasterCraft Boat Holdings,
Inc.
Description of Registrant’s Securities Registered Pursuant
to Section 12 of the Securities Exchange Act of 1934
8-K
001-37502
3.1
10/25/19
8-K
001-37502
3.2
10/25/19
S-1/A 333-203815
4.1
7/15/15
*
MCBC Holdings, Inc. 2010 Equity Incentive Plan
S-1/A 333-203815
MCBC Holdings, Inc. 2015 Incentive Award Plan
S-1/A 333-203815
10.2
10.4
6/25/15
7/15/15
Form of Restricted Stock Award Agreement and Grant
Notice under 2015 Incentive Award Plan (employee)
Form of Stock Option Agreement and Grant Notice under
2015 Incentive Award Plan (employee)
S-1/A 333-203815
10.10
7/1/15
S-1/A 333-203815
10.12
7/7/15
Form of Restricted Stock Award Grant Notice under 2015
Incentive Award Plan (director)
S-1/A 333-203815
10.13
7/7/15
Senior Executive Incentive Bonus Plan
10-K
001-37502
Non-Employee Director Compensation Policy
10-K
001-37502
10.8
10.7
9/18/15
9/13/19
34
10.8†
10.9†
10.10†
10.11
10.12
10.13†
10.14†
10.15
10.16
10.17
10-K
001-37502
10.10
9/13/19
S-1/A 333-203815
10.9
7/7/15
8-K
001-37502
10.1
8/26/16
8-K
001-37502
10.1
10/1/18
Employment Agreement Between Crest Marine, LLC and
Patrick May
Form of Indemnification Agreement for directors and
officers
Form of Performance Stock Unit Award Agreement under
2015 Incentive Award Plan
Fourth Amended and Restated Credit and Guaranty
Agreement, dated October 1, 2018, by and among
MasterCraft Boat Holdings,
a guarantor,
MasterCraft Boat Company, LLC, MasterCraft Services,
LLC, MasterCraft International Sales Administration,
Inc., Nautic Star, LLC, NS Transport, LLC, and Crest
Marine LLC as borrowers, Fifth Third Bank as the agent
and letter of credit issuer, and the lenders party thereto
Inc.
as
Amendment No. 3 to the Fourth Amended and Restated
Credit and Guaranty Agreement
10-Q
001-37502
10.1
5/8/20
Offer Letter, dated December 2, 2019
Form of PSU Award Agreement
8-K
8-K
001-37502
001-37502
Agreement for Purchase and Sale of Merritt Island Facility
10-Q
001-37502
10.1
10.1
10.1
12/3/19
7/22/20
11/12/20
Amendment No. 4 and Joinder to Fourth Amended and
Restated Credit and Guaranty Agreement
Credit Agreement, dated as of June 28, 2021, among
the Lenders Party
MasterCraft Boat Holdings,
Thereto and JPMORGAN CHASE BANK, N.A., as
Administrative Agent, Sole Bookrunner and Sole Lead
Arranger and FIFTH THIRD BANK and BMO HARRIS
BANK, N.A., as Co-Syndication Agents
Inc.,
10-Q
001-37502
10.1
2/10/21
8-K
001-37502
10.1
6/28/2021
10.18
Second Amendment to Credit Agreement
21.1
23.1
31.1
31.2
32.1
32.2
List of subsidiaries of MasterCraft Boat Holdings, Inc.
Consent of Deloitte & Touche LLP,
registered public accounting firm
independent
Rule 13a-14(a)/15d-14(a) Certification of Principal
Executive Officer
Rule 13a-14(a)/15d-14(a) Certification of Principal
Financial Officer
Section 1350 Certification of Chief Executive Officer
Section 1350 Certification of Chief Financial Officer
101.INS
Inline XBRL Instance Document
101.SCH Inline XBRL Taxonomy Extension Schema Document
101.CAL
Inline XBRL Taxonomy Extension Calculation Linkbase
Document
101.DEF
Inline XBRL Taxonomy Extension Definition Linkbase
Document
101.LAB
Inline XBRL Taxonomy Extension Label Linkbase
Document
35
*
*
*
*
*
**
**
*
*
*
*
*
101.PRE
Inline XBRL Taxonomy Extension Presentation Linkbase
Document
104
Cover Page Interactive Data File (formatted as Inline
XBRL and contained in Exhibit 101).
† Indicates management contract or compensatory plan.
* Filed herewith.
** Furnished herewith.
ITEM 16. FORM 10-K SUMMARY.
Not Applicable.
*
*
36
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
Date: August 30, 2023
MASTERCRAFT BOAT HOLDINGS, INC.
By:
/s/ FREDERICK A. BRIGHTBILL
Chief Executive Officer (Principal Executive Officer) and
Chairman of the Board
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on
behalf of the registrant and in the capacities and on the dates indicated.
Signature
Title
Date
/s/ FREDERICK A. BRIGHTBILL
Frederick A. Brightbill
Chief Executive Officer (Principal Executive Officer) and
Chairman of the Board
/s/ TIMOTHY M. OXLEY
Timothy M. Oxley
/s/ W. PATRICK BATTLE
W. Patrick Battle
/s/ JACLYN BAUMGARTEN
Jaclyn Baumgarten
/s/ DONALD C. CAMPION
Donald C. Campion
/s/ JENNIFER DEASON
Jennifer Deason
/s/ ROCH LAMBERT
Roch Lambert
/s/ PETER G. LEEMPUTTE
Peter G. Leemputte
Chief Financial Officer (Principal Financial and Accounting
Officer), Treasurer and Secretary
Director
Director
Director
Director
Director
Director
/s/ KAMILAH MITCHELL-THOMAS
Kamilah Mitchell-Thomas
Director
August 30, 2023
August 30, 2023
August 30, 2023
August 30, 2023
August 30, 2023
August 30, 2023
August 30, 2023
August 30, 2023
August 30, 2023
37
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the stockholders and the Board of Directors of MasterCraft Boat Holdings, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of MasterCraft Boat Holdings, Inc. and subsidiaries (the "Company")
as of June 30, 2023 and 2022, the related consolidated statements of operations, equity, and cash flows, for each of the three years in
the period ended June 30, 2023, and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial
statements present fairly, in all material respects, the financial position of the Company as of June 30, 2023 and 2022, and the results of
its operations and its cash flows for each of the three years in the period ended June 30, 2023, in conformity with accounting principles
generally accepted in the United States of America.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB),
the Company's internal control over financial reporting as of June 30, 2023, based on criteria established in Internal Control — Integrated
Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated August
30, 2023, expressed an unqualified opinion on the Company's internal control over financial reporting.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the
Company's financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be
independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of
the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error
or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding
the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and
significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that
our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was
communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to
the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical
audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the
critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Product Warranties — Refer to Notes 1 and 8 to the financial statements
Critical Audit Matter Description
The Company offers warranties on the sale of certain of its products for periods of between one and five years. Estimated costs that may
be incurred under these warranties are accrued at the time the product revenue is recognized. These estimated costs are based upon the
number of units sold, historical and anticipated rates of warranty claims, and the cost per claim.
We identified the accrued warranty liability of $24.6 million for the MasterCraft brand as a critical audit matter because of the significant
judgments made by management to estimate the anticipated rates of warranty claims and cost per claim related to product warranties at
the time the product revenue is recognized. This required a high degree of auditor judgment and an increased extent of effort when
performing audit procedures to evaluate the reasonableness of management’s estimates of the rates and costs of future warranty claims.
How the Critical Audit Matter Was Addressed in the Audit
Our audit procedures related to the accrued warranty liability for the MasterCraft brand included the following, among others:
38
• We evaluated the design and operating effectiveness of controls over management’s estimation of the accrued warranty
liability, including those over historical product warranty claim data and projected future product warranty claims.
• We evaluated the accuracy and completeness of the historical product warranty claims as an input to management’s accrued
warranty liability calculation.
• We evaluated management’s ability to accurately estimate the accrued warranty liability by comparing the accrued
warranty liability in the prior year to the actual product warranty claims paid in the current year.
• We evaluated the completeness of the accrued warranty liability through inquiries of operational and executive
management regarding knowledge of known product warranty claims or product issues and evaluated whether they were
appropriately considered in the determination of the accrued warranty liability.
• We assessed management’s methodology and tested the valuation of the accrued warranty liability by developing an
independent expectation for the accrual based on historical and current year warranty claims activity and any known trends
in warranty claims or specific product issues, and compared our expectation to the amount recorded by management.
/s/ Deloitte & Touche LLP
Nashville, Tennessee
August 30, 2023
We have served as the Company's auditor since 2019.
39
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the stockholders and the Board of Directors of MasterCraft Boat Holdings, Inc.
Opinion on Internal Control over Financial Reporting
We have audited the internal control over financial reporting of MasterCraft Boat Holdings Inc. and subsidiaries (the “Company”) as of
June 30, 2023, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO). In our opinion, the Company maintained, in all material respects, effective internal
control over financial reporting as of June 30, 2023, based on criteria established in Internal Control — Integrated Framework (2013)
issued by COSO.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB),
the consolidated financial statements as of and for the year ended June 30, 2023, of the Company and our report dated August 30, 2023,
expressed an unqualified opinion on those financial statements.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of
the effectiveness of internal control over financial reporting, included in the accompanying Management's Report on Internal Control
over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based
on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company
in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission
and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.
Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness
exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such
other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting
principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the
maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the
company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in
accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in
accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention
or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the
financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections
of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in
conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ Deloitte & Touche LLP
Nashville, Tennessee
August 30, 2023
40
MASTERCRAFT BOAT HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
Dollar amounts in thousands, except per share data)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents
Held-to-maturity securities (Note 4)
Accounts receivable, net of allowance of $122 and $214, respectively
Inventories, net (Note 5)
Prepaid expenses and other current assets
Current assets associated with discontinued operations (Note 3)
Total current assets
Property, plant and equipment, net (Note 6)
Goodwill (Note 7)
Other intangible assets, net (Note 7)
Deferred income taxes
Deferred debt issuance costs, net
Other long-term assets
Non-current assets associated with discontinued operations (Note 3)
Total assets
LIABILITIES AND EQUITY
CURRENT LIABILITIES:
Accounts payable
Income tax payable
Accrued expenses and other current liabilities (Note 8)
Current portion of long-term debt, net of unamortized debt issuance costs (Note 9)
Current liabilities associated with discontinued operations (Note 3)
Total current liabilities
Long-term debt, net of unamortized debt issuance costs (Note 9)
Unrecognized tax positions
Other long-term liabilities
Total liabilities
COMMITMENTS AND CONTINGENCIES (Note 12)
EQUITY:
Common stock, $.01 par value per share — authorized, 100,000,000 shares; issued and outstanding, 17,312,850
shares at June 30, 2023 and 18,061,437 shares at June 30, 2022
Additional paid-in capital
Retained earnings
MasterCraft Boat Holdings, Inc. equity
Noncontrolling interest
Total equity
Total liabilities and equity
June 30,
2023
June 30,
2022
19,817
91,560
15,741
58,298
10,083
—
195,499
77,921
28,493
35,462
12,428
304
3,869
—
353,976
20,391
5,272
72,496
4,381
—
102,540
49,295
7,350
2,702
161,887
173
75,976
115,820
191,969
120
192,089
353,976
$
$
$
34,203
—
22,472
58,595
7,232
23,608
146,110
55,823
28,493
37,418
21,525
406
1,290
5,987
297,052
23,375
4,600
54,437
2,873
7,887
93,172
53,676
6,358
198
153,404
181
96,584
46,883
143,648
—
143,648
297,052
$
$
$
The Notes to Consolidated Financial Statements are an integral part of these consolidated financial statements.
41
MASTERCRAFT BOAT HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollar amounts in thousands, except per share data)
NET SALES
COST OF SALES
GROSS PROFIT
OPERATING EXPENSES:
Selling and marketing
General and administrative
Amortization of other intangible assets
Goodwill impairment
Total operating expenses
OPERATING INCOME
OTHER INCOME (EXPENSE):
Interest expense
Interest income
Loss on extinguishment of debt
INCOME BEFORE INCOME TAX EXPENSE
INCOME TAX EXPENSE
NET INCOME FROM CONTINUING OPERATIONS
LOSS FROM DISCONTINUED OPERATIONS, NET OF TAX (Note 3)
NET INCOME
NET INCOME (LOSS) PER SHARE:
Basic
Continuing operations
Discontinued operations
Net income
Diluted
Continuing operations
Discontinued operations
Net income
For the Years Ended June 30
2022
2023
2021
662,046
492,333
169,713
13,808
37,034
1,956
—
52,798
116,915
(2,679)
3,351
—
117,587
27,135
90,452
(21,515)
68,937
5.13
(1.22)
3.91
5.09
(1.21)
3.88
$
$
$
$
$
$
641,609
473,419
168,190
12,869
36,070
1,956
1,100
51,995
116,195
(1,471)
—
—
114,724
26,779
87,945
(29,731)
58,214
4.77
(1.62)
3.15
4.72
(1.60)
3.12
$
$
$
$
$
$
465,962
340,831
125,131
11,576
32,956
1,956
—
46,488
78,643
(3,392)
—
(733)
74,518
16,080
58,438
(2,268)
56,170
3.11
(0.12)
2.99
3.08
(0.12)
2.96
$
$
$
$
$
$
WEIGHTED AVERAGE SHARES USED FOR COMPUTATION OF:
Basic earnings per share
Diluted earnings per share
17,618,797
17,765,117
18,455,226
18,636,512
18,805,464
18,951,521
The Notes to Consolidated Financial Statements are an integral part of these consolidated financial statements.
42
MASTERCRAFT BOAT HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EQUITY
(Dollar amounts in thousands, except share data)
Balance at June 30, 2020
Share-based compensation activity
Net income
Balance at June 30, 2021
Share-based compensation activity
Repurchase and retirement of common stock
Net income
Balance at June 30, 2022
Share-based compensation activity
Repurchase and retirement of common stock
Capital contribution from noncontrolling interest
Net income
Balance at June 30, 2023
Additional
Retained
Earnings
Paid-in
Common Stock
Shares Amount Capital
(Accumulated
Deficit)
MasterCraft
Boat
Holdings,
Inc.
Equity
18,871,637 $
85,082
—
18,956,719
79,879
(975,161)
—
18,061,437
123,468
(872,055)
—
—
17,312,850 $
189 $ 116,182 $
—
—
189
1
(9)
—
181
1
(9)
—
—
173 $
2,748
—
118,930
3,099
(25,445)
—
96,584
2,452
(23,060)
—
—
75,976 $
(67,501) $
—
56,170
(11,331)
—
—
58,214
46,883
—
—
—
68,937
115,820 $
48,870 $
2,748
56,170
107,788
3,100
(25,454)
58,214
143,648
2,453
(23,069)
—
68,937
191,969 $
Noncontrolling
Interest
Total
Equity
— $ 48,870
—
2,748
— 56,170
— 107,788
—
3,100
— (25,454)
— 58,214
— 143,648
2,453
—
— (23,069)
120
120
— 68,937
120 $192,089
The Notes to Consolidated Financial Statements are an integral part of these consolidated financial statements.
43
MASTERCRAFT BOAT HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollar amounts in thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income
Loss from discontinued operations, net of tax
Net income from continuing operations
Adjustments to reconcile net income from continuing operations to net cash provided by
operating activities:
2023
For the Years Ended June 30
2022
2021
$
$
68,937
21,515
90,452
$
58,214
29,731
87,945
Depreciation and amortization
Share-based compensation
Unrecognized tax benefits
Deferred income taxes
Goodwill impairment
Changes in certain operating assets and liabilities
Accounts receivable
Inventories
Prepaid expenses and other current assets
Income taxes
Accounts payable
Accrued expenses and other current liabilities
Other, net
Net cash provided by operating activities of continuing operations
Net cash used in operating activities of discontinued operations
Net cash provided by operating activities
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and equipment
Purchases of investments
Maturities of investments
Net cash used in investing activities of continuing operations
Net cash used in investing activities of discontinued operations
Net cash used in investing activities
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on long-term debt
Repurchase and retirement of common stock
Proceeds from issuance of long-term debt
Borrowings on revolving credit facility
Principal payments on revolving credit facility
Other, net
Net cash used in financing activities of continuing operations
NET CHANGE IN CASH AND CASH EQUIVALENTS
CASH AND CASH EQUIVALENTS — BEGINNING OF PERIOD
CASH AND CASH EQUIVALENTS — END OF PERIOD
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash payments for interest
Cash payments for income taxes
NON-CASH INVESTING AND FINANCING ACTIVITIES:
Capital expenditures in accounts payable and accrued expenses
10,569
3,656
992
9,097
—
10,332
868
(2,851)
672
(3,258)
16,155
140
136,824
(2,628)
134,196
(30,323)
(123,360)
32,750
(120,933)
(501)
(121,434)
(3,000)
(22,949)
—
—
—
(1,199)
(27,148)
(14,386)
34,203
19,817
2,425
10,053
980
$
$
$
$
9,731
3,510
2,528
(6,390)
1,100
(13,010)
(18,105)
(2,208)
4,224
3,253
10,189
(389)
82,378
(9,067)
73,311
(12,296)
—
—
(12,296)
(3,524)
(15,820)
(3,000)
(25,454)
—
12,000
(45,728)
(358)
(62,540)
(5,049)
39,252
34,203
1,190
18,833
706
$
$
56,170
2,268
58,438
8,368
2,932
147
839
—
(3,835)
(20,751)
(1,358)
5,406
9,888
12,272
1,615
73,961
(5,423)
68,538
(25,219)
—
—
(25,219)
(2,613)
(27,832)
(99,993)
—
60,000
56,228
(32,500)
(1,508)
(17,773)
22,933
16,319
39,252
2,852
9,170
265
The Notes to Consolidated Financial Statements are an integral part of these consolidated financial statements.
44
MASTERCRAFT BOAT HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unless otherwise noted, dollars in thousands, except per share data and per unit data)
1. SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation and Principles of Consolidation — The accompanying financial statements are prepared in accordance with
accounting principles generally accepted in the United States of America (“U.S. GAAP”). The consolidated financial statements include
the accounts of MasterCraft Boat Holdings, Inc. (“Holdings”) and its wholly owned subsidiaries from the dates of their acquisitions.
Holdings and its subsidiaries collectively are referred to herein as the “Company.” All significant intercompany accounts and
transactions have been eliminated in consolidation.
Holdings has no independent operations and no material assets, other than its wholly owned equity interests in its subsidiaries, as of
June 30, 2023 and 2022, and no material liabilities. As of June 30, 2023 and 2022, Holdings had no material contingencies, long-term
obligations, or guarantees other than a guarantee of its subsidiaries’ long-term debt (see Note 9).
Discontinued Operations — On September 2, 2022, the Company sold substantially all of the assets and liabilities of its NauticStar
segment. The disposal represented the Company's exit from the saltwater and deck boat category, a strategic shift that has a significant
effect on the Company's operations and financial results, and as such, qualifies for reporting as discontinued operations. The NauticStar
segment results, for the periods presented, are reflected in our consolidated statements of operations and consolidated statements of cash
flows as discontinued operations. Additionally, the related assets and liabilities associated with the discontinued operations are classified
as discontinued operations in our consolidated balance sheet for the prior period presented (see Note 3).
Unless otherwise indicated, the financial disclosures and related information provided herein relate to our continuing operations and we
have recast prior period amounts to reflect discontinued operations.
Reclassifications — Certain historical amounts have been reclassified in these consolidated financial statements and the accompanying
notes herewith to conform to current presentation.
Use of Estimates — The preparation of the Company’s consolidated financial statements in conformity with U.S. GAAP requires
management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, and expenses and related
disclosures. The Company bases these estimates on historical results and various other assumptions believed to be reasonable. The
Company’s most significant financial statement estimates include impairment of goodwill and indefinite-lived intangible assets,
warranty liability, unrecognized tax positions, inventory repurchase contingent obligations, and impairment of long-lived assets and
intangible assets subject to amortization. Actual results could differ from those estimates.
Revenue Recognition — The Company’s revenue is derived primarily from the sale of boats and trailers, marine parts, and accessories
to its independent dealers. The Company recognizes revenue when obligations under the terms of a contract are satisfied and control
over promised goods is transferred to a customer. For substantially all sales, this occurs when the product is released to the carrier
responsible for transporting it to a customer. The Company typically receives payment from the floor plan financing providers within 5
business days of shipment. Revenue is measured as the amount of consideration it expects to receive in exchange for a product. The
Company offers dealer incentives that include wholesale rebates, retail rebates and promotions, floor plan reimbursement or cash
discounts, and other allowances that are recorded as reductions of revenues in Net sales in the consolidated statements of operations.
The consideration recognized represents the amount specified in a contract with a customer, net of estimated incentives the Company
reasonably expects to pay. The estimated liability and reduction in revenue for dealer incentives is recorded at the time of sale.
Subsequent adjustments to incentive estimates are possible because actual results may differ from these estimates if conditions dictate
the need to enhance or reduce sales promotion and incentive programs or if dealer achievement or other items vary from historical
trends. Accrued dealer incentives are included in Accrued expenses and other current liabilities in the accompanying consolidated
balance sheets.
Rebates and Discounts
Dealers earn wholesale rebates based on purchase volume commitments and achievement of certain performance metrics. The Company
estimates the amount of wholesale rebates based on historical achievement, forecasted volume, and assumptions regarding dealer
behavior. Rebates that apply to boats already in dealer inventory are referred to as retail rebates. The Company estimates the amount of
retail rebates based on historical data for specific boat models adjusted for forecasted sales volume, product mix, dealer and consumer
behavior, and assumptions concerning market conditions. The Company also utilizes various programs whereby it offers cash discounts
or agrees to reimburse its dealers for certain floor plan interest costs incurred by dealers for limited periods of time, generally ranging
up to nine months.
45
Shipping and Handling Costs
Shipping and handling costs includes those costs incurred to transport product to customers and internal handling costs, which relate to
activities to prepare goods for shipment. The Company has elected to account for shipping and handling costs associated with outbound
freight after control over a product has transferred to a customer as a fulfillment cost. The Company includes shipping and handling
costs, including costs billed to customers, in Cost of sales in the consolidated statements of operations.
Contract Liabilities
A contract liability is created when customers prepay for goods or services prior to the Company transferring control of those goods or
services to the customer. The contract liability is reduced once control of the goods is transferred to the customer. The difference between
the opening and closing balances of the Company’s contract liabilities primarily results from the timing difference between the
Company’s performance and the point at which it receives pre-payment from the customer.
Other Revenue Recognition Matters
Dealers generally have no right to return unsold boats. Occasionally, the Company may accept returns in limited circumstances and at
the Company’s discretion under its warranty policy. The Company may be obligated, in the event of default by a dealer, to accept returns
of unsold boats under its repurchase commitment to floor financing providers, who are able to obtain such boats through foreclosure.
The repurchase commitment is on an individual unit basis with a term from the date it is financed by the lending institution through the
payment date by the dealer, generally not exceeding 30 months. The Company accounts for these arrangements as guarantees and
recognizes a liability based on the estimated fair value of the repurchase obligation. The estimated fair value takes into account our
estimate of the loss we will incur upon resale of any repurchases. The Company accrues the estimated fair value of this obligation based
on the age of inventory currently under floor plan financing and estimated credit quality of dealers holding the inventory. Inputs used to
estimate this fair value include significant unobservable inputs that reflect the Company’s assumptions about the inputs that market
participants would use and, therefore, this liability is classified within Level 3 of the fair value hierarchy.
The Company has excluded sales and other taxes assessed by a governmental authority in connection with revenue-producing activities
from the determination of the transaction price for all contracts. The Company has not adjusted net sales for the effects of a significant
financing component because the period between the transfer of the promised goods and the customer's payment is expected to be one
year or less.
Accounts Receivable — Accounts receivable represents amounts billed to customers under credit terms customary in its industry. The
Company normally does not charge interest on its accounts receivable. The Company carries its accounts receivable at face value, net
of an allowance for doubtful accounts, which the Company records on a regular basis based upon known bad debt risks and past loss
history, customer payment practices and economic conditions. Actual collection experience may differ from the current estimate of net
receivables. A change to the allowance for doubtful accounts may be required if a future event or other change in circumstances results
in a change in the estimate of the ultimate collectability of a specific account. Amounts recorded as bad debt expense, write-offs, and
recoveries were not material for the years ended June 30, 2023, 2022, and 2021.
Cash and Cash Equivalents — The Company considers all highly-liquid investments with an original maturity of three months or less
to be cash and cash equivalents. The Company's cash and cash equivalents include cash deposits and money market funds. The
Company’s cash deposits may at times exceed federally insured amounts.
Held-to-Maturity Securities — The Company invests excess cash balances in short-term debt securities, such as government-sponsored
securities, and/or corporate bonds. The Company accounts for its investments in debt securities in accordance with Accounting Standard
Codification ("ASC") 320, Investments — Debt and Equity Securities.
We classify our investments in debt securities based on the facts and circumstances present at the time of purchase of the securities. We
subsequently reassess the appropriateness of that classification at each reporting date. As of June 30, 2023, all of our investments in debt
securities were classified as held-to-maturity and are due to mature within one year (see Note 4).
Inputs used to estimate the fair value of our investments include significant other observable inputs and, therefore, are classified within
Level 2 of the fair value hierarchy.
46
Concentrations of Credit and Business Risk — Financial instruments that potentially subject the Company to concentrations of credit
risk primarily consist of trade receivables. Credit risk on trade receivables is mitigated as a result of the Company’s use of trade letters
of credit, dealer floor plan financing arrangements, and the geographically diversified nature of the Company’s customer base.
Supplier Concentrations
The Company is dependent on the ability of its suppliers to provide products on a timely basis and on favorable pricing terms. The loss
of certain principal suppliers or a significant reduction in product availability from principal suppliers could have a material adverse
effect on the Company. Business risk insurance is in place to mitigate the business risk associated with sole suppliers for sudden
disruptions such as those caused by natural disasters.
The Company is dependent on third-party equipment manufacturers, distributors, and dealers for certain parts and materials utilized in
the manufacturing process. During the years ended June 30, 2023, 2022, and 2021, the Company purchased all engines for its
MasterCraft performance sport boats under a supply agreement with a single vendor. Total purchases for all segments from this vendor
were $47.6 million, $45.0 million, and $40.6 million for the years ended June 30, 2023, 2022, and 2021, respectively. During the years
ended June 30, 2023, 2022, and 2021, the Company purchased outboard engines for its Aviara boats and a majority of the engines for
its Crest boats under a supply agreement with a single vendor. Total purchases from this vendor were $31.0 million, $34.0 million, and
$22.7 million for the years ended June 30, 2023, 2022, and 2021, respectively.
Inventories — Inventories are valued at the lower of cost or net realizable value and are shown net of an inventory allowance in the
consolidated balance sheet. Inventory cost includes material, labor, and manufacturing overhead and is determined based on the first-in,
first-out (FIFO) method. Provisions are made as necessary to reduce inventory amounts to their net realizable value or to provide for
obsolete inventory.
Property, Plant, and Equipment — Property, plant, and equipment are recorded at historical cost less accumulated depreciation and are
depreciated on a straight-line basis over the estimated useful lives. Repairs and maintenance are charged to operations as incurred, and
expenditures for additions and improvements that increase the asset’s useful life are capitalized.
For the years ended June 30, 2023, 2022, and 2021, ranges of asset lives used for depreciation purposes are:
Buildings and improvements
Machinery and equipment
Furniture and fixtures
7
3
3
-
-
-
40
7
7
years
years
years
Goodwill and Other Intangible Assets — The Company does not amortize goodwill and other purchased intangible assets with indefinite
lives, which are primarily related to trade names. The Company’s intangible assets with finite lives consist primarily of dealer networks
and are carried at their estimated fair values at the time of acquisition, less accumulated amortization. Amortization is recognized on a
straight-line basis over the estimated useful lives of the respective assets (see Note 7). Intangible assets that are subject to amortization
are evaluated for impairment using a process similar to that used to evaluate long-lived assets described below. The Company has three
reporting units, MasterCraft, Crest, and Aviara, which each relate to an operating segment as described in Note 14. As of June 30, 2023,
all of the Company’s goodwill relates to the MasterCraft reporting unit and all of the Company’s other intangible assets relate to the
MasterCraft and Crest reporting units.
Goodwill
Goodwill results from the excess of purchase price over the net identifiable assets of businesses acquired. The Company reviews
goodwill for impairment annually, at its fiscal year-end annual impairment testing date, and whenever events or changes in circumstances
indicate that the fair value of a reporting unit may be below its carrying value. As part of the impairment tests, the Company may perform
a qualitative, rather than quantitative, assessment to determine whether the fair values of its reporting units are “more likely than not”
to be greater than their carrying values. In performing this qualitative analysis, the Company considers various factors, including the
effect of market or industry changes and the reporting units' actual results compared to projected results.
If the fair value of a reporting unit does not meet the "more likely than not" criteria discussed above, the impairment test for goodwill is
a quantitative test. This test involves comparing the fair value of the reporting unit with its carrying value. If the fair value exceeds the
carrying value, goodwill is not considered impaired. If the carrying amount exceeds the fair value then the goodwill is considered
impaired and an impairment loss is recognized in an amount by which the carrying value exceeds the reporting unit’s fair value, not to
exceed the carrying amount of the goodwill allocated to that reporting unit.
The Company calculates the fair value of its reporting units by considering both the income approach and market approach. The income
approach calculates the fair value of the reporting unit using a discounted cash flow method. Internally forecasted future cash flows,
which the Company believes reasonably approximate market participant assumptions, are discounted using a weighted average cost of
capital (“Discount Rate”) developed for each reporting unit. The Discount Rate is developed using observable market inputs, as well as
47
considering whether or not there is a measure of risk related to the specific reporting unit’s forecasted performance. Fair value under the
market approach is determined for each unit by applying market multiples for comparable public companies to the unit’s financial
results. The key judgements in these calculations are the assumptions used in determining the reporting unit’s forecasted future
performance, including revenue growth and operating margins, as well as the perceived risk associated with those forecasts in
determining the Discount Rate, along with selecting representative market multiples.
The Company recognized a $1.1 million goodwill impairment charge within the Aviara segment during the year ended June 30, 2022
(see Note 7).
Other Intangible Assets
The Company's primary intangible assets other than goodwill are dealer networks and trade names acquired in business combinations.
These intangible assets are initially valued using a methodology commensurate with the intended use of the asset. The dealer networks
were valued using an income approach, which requires an estimate or forecast of the expected future cash flows from the dealer network
through the application of the multi-period excess earnings approach. The fair value of trade names is measured using a relief-from-
royalty approach, a variation of the income approach, which requires an estimate or forecast of the expected future cash flows. This
method assumes the value of the trade name is the discounted cash flows of the amount that would be paid to third parties had the
Company not owned the trade name and instead licensed the trade name from another company. The basis for future sales projections
for these methods are internal revenue forecasts by reporting unit, which the Company believes represent reasonable market participant
assumptions. The future cash flows are discounted using an applicable Discount Rate as well as any potential risk premium to reflect
the inherent risk of holding a standalone intangible asset.
The key judgements in these fair value calculations, as applicable, are: assumptions used in developing internal revenue growth and
dealer expense forecasts, assumed dealer attrition rates, the selection of an appropriate royalty rate, as well as the perceived risk
associated with those forecasts in determining the Discount Rate.
The costs of amortizable intangible assets, including dealer networks, are recognized over their expected useful lives, approximately ten
years for the dealer networks, using the straight-line method. Intangible assets that are subject to amortization are evaluated for
impairment using a process similar to that used to evaluate long-lived assets described below. Intangible assets not subject to
amortization are assessed for impairment at least annually and whenever events or changes in circumstances indicate that it is more
likely than not that an asset may be impaired. As part of the annual test, the Company may perform a qualitative, rather than quantitative,
assessment to determine whether each trade name intangible asset is “more likely than not” impaired. In performing this qualitative
analysis, the Company considers various factors, including macroeconomic events, industry and market events and cost related events.
If the “more likely than not” criteria is not met, the impairment test for indefinite-lived intangible assets consists of a comparison of the
fair value of the intangible asset with its carrying amount. An impairment loss is recognized for the amount by which the carrying value
exceeds the fair value of the asset.
The Company recognized $18.5 million in other intangible asset impairment charges related to the NauticStar reporting unit during the
year ended June 30, 2022. These charges are included in the loss from discontinued operations (see Note 3).
Long-Lived Assets Other than Intangible Assets — The Company assesses the potential for impairment of its long-lived assets if facts
and circumstances, such as declines in sales, earnings, or cash flows or adverse changes in the business climate, suggest that they may
be impaired. A current expectation that, more likely than not, a long-lived asset (asset group) will be sold or otherwise disposed of
significantly before the end of its previously estimated useful life will also trigger a review for impairment. The Company performs its
assessment by comparing the book value of the asset groups to the estimated future undiscounted cash flows associated with the asset
groups. If any impairment in the carrying value of its long-lived assets is indicated, the assets would be adjusted to an estimate of fair
value.
The Company recognized $5.3 million in long-lived asset impairment charges related to the NauticStar reporting unit during the year
ended June 30, 2022. These charges are included in the loss from discontinued operations (see Note 3).
Product Warranties — The Company offers warranties on the sale of certain products for periods of between one and five years. These
warranties require us or our dealers to repair or replace defective products during the warranty period at no cost to the consumer. We
estimate the costs that may be incurred under our basic limited warranty and record as a liability the amount of such costs at the time
the product revenue is recognized. Factors that affect our warranty liability include the number of units sold, historical and anticipated
rates of warranty claims, and cost per claim. We periodically assess the adequacy of the recorded warranty liabilities and adjust the
amounts as actual claims are determined or as changes in the obligations become reasonably estimable. We also adjust our liability for
specific warranty matters when they become known, and the exposure can be estimated. Future warranty claims may differ from our
estimate of the warranty liability, which could lead to changes in the Company’s warranty liability in future periods.
48
Income Taxes — Income tax expense is the total of the current year income tax due or refundable and the change in deferred tax assets
and liabilities. The Company records its global tax provision based on the respective tax rules and regulations for the jurisdictions in
which it operates. Deferred tax assets and liabilities are the expected future tax amounts for the temporary differences between carrying
amounts and tax bases of assets and liabilities, computed using enacted tax rates.
Valuation allowances are recorded to reduce deferred tax assets when it is more likely than not that a tax benefit will not be realized.
Significant judgment is required in evaluating the need for and magnitude of appropriate valuation allowances against deferred tax
assets. The realization of these assets is dependent on generating future taxable income.
A tax position is recognized as a benefit only if it is “more likely than not” that the tax position would be sustained in a tax examination,
with a tax examination being presumed to occur. The amount recognized is the largest amount of tax benefit that is greater than 50%
likely of being realized on examination. For tax positions not meeting the “more likely than not” test, no tax benefit is recorded.
The Company recognizes interest and/or penalties related to income tax matters in income tax expense.
In determining the amount of current and deferred tax the Company takes into account the impact of uncertain tax positions and whether
additional taxes, interest and penalties may be due. The Company believes that its accruals for tax liabilities are adequate for all open
tax years based on its assessment of many factors, including interpretations of tax law and prior experience. This assessment relies on
estimates and assumptions and may involve a series of judgments about future events. New information may become available that
causes the Company to change its judgment regarding the adequacy of existing tax liabilities; such changes to tax liabilities will have
an impact on tax expense in the period that such a determination is made.
Research and Development — Research and development expenditures are expensed as incurred. Research and development expense
for the years ended June 30, 2023, 2022, and 2021 was $8.3 million, $7.2 million, and $5.8 million, respectively, and is included in
Operating expenses in the consolidated statements of operations.
Self-Insurance — The Company is self-insured for certain losses relating to product liability claims and employee medical claims. The
Company has purchased stop-loss coverage in order to limit its exposure to any significant levels for these matters. Losses are accrued
based on the Company’s estimates of the aggregate liability for self-insured claims incurred using certain actuarial assumptions followed
in the insurance industry and the Company’s historical experience.
Deferred Debt Issuance Costs — Certain costs incurred to obtain financing are capitalized and amortized over the term of the related
debt using the effective interest method. For the year ended June 30, 2021, the Company incurred deferred financing costs of $0.6
million. For the years ended June 30, 2023, 2022, and 2021, the Company recorded related amortization expense of $0.2 million, $0.2
million, and $0.6 million, respectively. Additionally, for the year ended June 30, 2021, the Company recognized a loss on early
extinguishment of debt of $0.7 million related to the debt refinancing in fiscal 2021. See Note 9 – Long-Term Debt for a discussion on
debt issuance costs.
Share-Based Compensation — The Company records amounts for all share-based compensation, including grants of restricted stock
awards and performance stock units over the vesting period in the consolidated statements of operations based on their fair values at the
date of the grant. Forfeitures of share-based compensation, if any, are recognized as they occur. Share-based compensation costs are
included in Selling and marketing and General and administrative expense in the consolidated statements of Operations. See Note 11 –
Share-Based Compensation for a description of the Company's accounting for share-based compensation plans.
Advertising — Advertising costs are expensed when the advertising first takes place. Advertising expense recognized during the years
ended June 30, 2023, 2022, and 2021, was $5.7 million, $4.4 million, and $4.4 million, respectively, and is included in Selling and
marketing expenses in the consolidated statements of operations.
49
Fair Value Measurements — The Company measures certain of its financial assets and liabilities at fair value and utilizes the
established framework for measuring fair value and disclosing information about fair value measurements. Fair value is the exchange
price that would be received for an asset or paid to transfer a liability (exit price) in the principal or most advantageous market for the
asset or liability in an orderly transaction between market participants on the measurement date. There are three levels of inputs that
may be used to measure fair values:
Level 1 — Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity has the ability to access as of the
measurement date.
Level 2 — Significant other observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted
prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.
Level 3 — Significant unobservable inputs that reflect a company’s own assumptions about the inputs that market participants would
use in pricing an asset or liability.
When measuring fair value, the Company considers the principal or most advantageous market in which it would transact and considers
assumptions that market participants would use when pricing the asset or liability. When possible, the Company looks to active and
observable markets to price identical assets. When identical assets are not traded in active markets, the Company looks to market
observable data for similar assets. The Company’s most significant financial asset or liability measured at fair value on a recurring basis
is its inventory repurchase contingent obligation (see “Revenue Recognition - Other Revenue Recognition Matters” and Note 12). The
non-recurring fair value measurement related to the impairment of goodwill recorded in fiscal 2022 is a level 3 measurement.
Fair Value of Financial Instruments — The carrying amounts of the Company’s financial instruments, consisting of cash and cash
equivalents, accounts receivable, accounts payable and other liabilities, approximate their estimated fair values due to the relative short-
term nature of the amounts. The carrying amount of debt approximates fair value due to variable interest rates at customary terms and
rates the Company could obtain in current financing.
Earnings Per Common Share — Basic earnings per common share reflects reported earnings divided by the weighted average number
of common shares outstanding during the reporting period. Diluted earnings per common share include the effect of dilutive stock
options, restricted stock awards, and performance stock units unless inclusion would not be dilutive.
Postretirement Benefits — The Company has a defined contribution plan and makes contributions including matching and discretionary
contributions which are based on various percentages of compensation, and in some instances are based on the amount of the employees'
contributions to the plans. The expense related to the defined contribution plan was $1.9 million, $1.7 million, and $1.4 million for the
years ended June 30, 2023, 2022, and 2021, respectively.
New Accounting Pronouncements Issued And Adopted
Income Taxes — In December 2019, the Financial Accounting Standards Board (the “FASB”) issued ASU 2019-12, Income Taxes
(Topic 740): Simplifying the Accounting for Income Taxes. ASU 2019-12 simplifies the accounting for income taxes by removing
certain exceptions to general principles in Income Taxes (Topic 740). It also clarifies and amends existing guidance to improve consistent
application. The guidance is effective for fiscal years beginning after December 15, 2020. The adoption of this standard did not have an
impact on the Company’s consolidated financial statements.
Reference Rate Reform — In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the
Effects of Reference Rate Reform on Financial Reporting. ASU 2020-04 provides optional expedients and exceptions for applying U.S.
GAAP to contracts, hedging relationships, and other transactions, subject to meeting certain criteria, that reference London Interbank
Offered Rate (“LIBOR”) or another reference rate expected to be discontinued because of reference rate reform. An entity may apply
ASU 2020-04 as of any date from the beginning of an interim period that includes or is subsequent to March 12, 2020 through December
31, 2022. The adoption of this standard did not have an impact on the Company’s consolidated financial statements.
2. REVENUE RECOGNITION
The following tables present the Company’s net sales by major product category for each reportable segment.
Major Product Categories:
Boats and trailers
Parts
Other revenue
Total
MasterCraft
Year Ended June 30, 2023
Aviara
Crest
Total
$
$
$
$
452,903
13,922
1,831
468,656
50
139,654
1,070
523
141,247
$
$
52,143
—
—
52,143
$
$
644,700
14,992
2,354
662,046
Major Product Categories:
Boats and trailers
Parts
Other revenue
Total
Major Product Categories:
Boats and trailers
Parts
Other revenue
Total
MasterCraft
Year Ended June 30, 2022
Aviara
Crest
$
$
$
$
450,734
13,170
2,123
466,027
MasterCraft
336,785
12,934
1,093
350,812
$
$
$
$
138,841
962
1,056
140,859
$
$
34,723
—
—
34,723
For Year Ended June 30, 2021
Crest
Aviara
101,208
1,091
389
102,688
$
$
12,462
—
—
12,462
Total
624,298
14,132
3,179
641,609
Total
450,455
14,025
1,482
465,962
$
$
$
$
For fiscal 2023, the Company’s top ten dealers accounted for approximately 40% of our net sales and one of our dealers individually
accounted for 14.9%, or approximately $98.6 million. For fiscal 2022 and 2021, the Company's top ten dealers accounted for
approximately 30% of our net sales and none of our dealers individually accounted for more than 10% of our total net sales.
On a consolidated basis, sales outside of North America accounted for 4.6%, 5.5%, and 5.1% of the Company’s net sales for the years
ended June 30, 2023, 2022, and 2021, respectively. The Company had no significant concentrations of sales to individual dealers or in
countries outside of North America during the years ended June 30, 2023, 2022, and 2021.
Contract Liabilities
As of June 30, 2023, the Company had $3.3 million of contract liabilities associated with customer deposits and services reported in
Accrued expenses and other current liabilities and Other long-term liabilities on the consolidated balance sheet. The Company expects
to recognize $1.5 million of this amount during the year ending June 30, 2024, and $1.8 million thereafter. As of June 30, 2022, total
contract liabilities were $1.4 million. During the year ended June 30, 2023, all of this amount was recognized as revenue.
See Note 1 for a description of the Company’s significant revenue recognition policies and Note 14 for a description of the Company’s
segments.
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.
In conjunction with the purchase agreement, the Company entered into a joint employer services agreement and a transition services
agreement, which provided certain services to the Purchaser for various periods of time after the sale. Both agreements ended during
the second quarter of fiscal 2023. These agreements did not a have a material impact on expenditures, earnings, nor cash flows during
the year ended June 30, 2023.
Further, the Company entered into the Second Amendment to the Credit Agreement as described further in Note 9 related to waivers of
restrictions within the Credit Agreement, as amended, on the sale of assets.
During the year ended June 30, 2023, the Company recognized a $22.5 million loss on sale, subject to further changes based upon a
customary working capital adjustment which is currently undergoing arbitration. The outcome of this matter is uncertain at this time.
Furthermore, assets and liabilities retained, primarily related to certain claims, are subject to change, with activity after the date of sale
being recorded as discontinued operations.
51
The following table summarizes the results of discontinued operations for the following periods:
NET SALES
COST OF SALES
GROSS LOSS
OPERATING EXPENSES:
Selling, general and administrative
Amortization of other intangible assets
Impairments
Total operating expenses
OPERATING LOSS
Loss on sale of discontinued operations
LOSS BEFORE INCOME TAX BENEFIT
INCOME TAX BENEFIT
LOSS FROM DISCONTINUED OPERATIONS, NET OF TAX
Years Ended June 30,
2022
2023
2021
$
$
$
7,766
10,253
(2,487)
$
66,253
72,081
(5,828)
2,859
—
—
2,859
(5,346)
(22,487)
(27,833)
6,318
(21,515)
$
6,645
2,032
23,833
32,510
(38,338)
—
(38,338)
8,607
(29,731)
$
59,846
55,006
4,840
5,538
1,992
—
7,530
(2,690)
—
(2,690)
422
(2,268)
The following table summarizes the assets and liabilities associated with discontinued operations:
CURRENT ASSETS:
Accounts receivable, net of allowance
Inventories, net
Other current assets
Total current assets classified as discontinued operations
NON-CURRENT ASSETS:
Property, plant and equipment, net
Other long-term assets
Total non-current assets classified as discontinued operations
CURRENT LIABILITIES:
Accounts payable
Accrued expenses and other current liabilities
Total current liabilities classified as discontinued operations
NauticStar Impairment Activity
June 30,
2022
3,130
20,044
434
23,608
5,924
63
5,987
4,675
3,212
7,887
$
$
$
$
$
$
In the fourth quarter of fiscal year 2022, the NauticStar reporting unit recorded unplanned negative operating results despite ongoing
efforts to improve sales volumes and yield more favorable margins, including the engagement of third-party consulting resources.
These results, combined with the outlook for further supply chain disruptions, labor challenges, and higher costs from inflationary
pressures, resulted in an impairment trigger in the fourth quarter related to the NauticStar reporting unit’s intangible and other long-
lived assets. Based on our evaluation of projected future cash flows, we concluded that the trade name intangible asset of $8.0 million
was fully impaired as of June 30, 2022.
We then performed a probability-weighted undiscounted cash flow analysis for the asset group related to the NauticStar reporting unit
that considered projected cash flows from continuing to operate the assets through their remaining estimated useful lives, a potential
sale, and a potential exit of the business other than through a sale and concluded that the carrying value of the asset group was not
recoverable. The fair value of the finite-lived dealer network intangible asset was estimated using these cash flows, resulting in a full
impairment of $10.5 million. The fair value of the fixed assets, which primarily comprised of machinery and equipment, such as
tooling, was estimated using liquidation values, resulting in an impairment charge of $5.3 million against the asset group’s fixed
assets.
As a result of our impairment analyses, we recorded total impairment charges of $23.8 million related to the NauticStar reporting
unit’s intangible and fixed assets during the year ended June 30, 2022, which are included in Impairments in the results of
discontinued operations above.
52
4. HELD-TO-MATURITY SECURITIES
During the year ended June 30, 2023, we invested a portion of our cash and cash equivalents in short-term investments, which primarily
consist of investment grade corporate bonds and U.S. treasury bills. We have the ability and intention to hold these investments until
maturity and therefore have classified these investments as held-to-maturity and recorded them at amortized cost and presented them in
“Held-to-maturity securities” on our consolidated balance sheet as of June 30, 2023. The income recognized for these investments is
recorded within Interest income on the Consolidated Statements of Operations. As of June 30, 2022, there were no outstanding held-to-
maturity investments.
The following is a summary of investments as of June 30, 2023:
Amortized
Cost / Net
Carrying Amount
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Estimated
Fair
Value
$
$
81,743
9,817
91,560
$
$
1
31
32
$
$
(160)
(1)
(161)
$
$
81,584
9,847
91,431
Held-to-maturity securities:
Fixed income securities:
Corporate bonds
U.S. treasury bills
Total held-to-maturity securities
5. INVENTORIES
Inventories consisted of the following:
Raw materials and supplies
Work in process
Finished goods
Obsolescence reserve
Total inventories
6. PROPERTY, PLANT, AND EQUIPMENT
Property, plant, and equipment, net consisted of the following:
Land and improvements
Buildings and improvements
Machinery and equipment
Furniture and fixtures
Construction in progress
Total property, plant, and equipment
Less accumulated depreciation
Property, plant, and equipment — net
June 30,
2023
June 30,
2022
40,201
9,465
10,335
(1,703)
58,298
$
$
45,021
7,634
7,710
(1,770)
58,595
June 30,
2023
June 30,
2022
10,456
46,759
40,632
5,284
10,180
113,311
(35,390)
77,921
$
$
6,367
35,379
39,457
3,394
6,315
90,912
(35,089)
55,823
$
$
$
$
Depreciation expense for the years ended June 30, 2023, 2022, and 2021 was $8.6 million, $7.7 million, and $6.4 million, respectively.
Property, plant, and equipment, net increased mainly due to capital spending focused on tooling, capacity expansion, strategic initiatives,
and information technology.
53
7. GOODWILL AND OTHER INTANGIBLE ASSETS
Goodwill and Other Intangible Asset Impairment
See Note 1 for a discussion of the methods used to determine the fair value of goodwill and other intangible assets. In assessing the need
for goodwill and intangible impairment, management utilizes a number of estimates, including operating results, business plans,
economic projections, anticipated future cash flows, transactions and marketplace data. Accordingly, these fair value measurements fall
in Level 3 of the fair value hierarchy.
Fiscal 2022 Goodwill Impairment
In fiscal 2022, the Company realigned its reportable segments. As a result of the change in segments, the Company reallocated the
goodwill recorded in the MasterCraft reporting unit to the two separate MasterCraft and Aviara reporting units. In conjunction with the
reallocation of goodwill, the Company tested goodwill at our MasterCraft and Aviara segments and determined the carrying value of
the Aviara reporting unit to be in excess of the fair value. Consequently, a $1.1 million impairment charge was recognized for our Aviara
reporting unit in fiscal 2022.
Goodwill
Goodwill reallocation and impairment charge for the year ended June 30, 2022, were as follows:
Goodwill, net at June 30, 2021
Goodwill reallocation
Impairment loss
Goodwill, net at June 30, 2022
MasterCraft
Aviara
Total
$
$
29,593
(1,100)
—
28,493
$
$
— $
1,100
(1,100)
— $
29,593
—
(1,100)
28,493
As of June 30, 2023, our annual impairment test date, the Company performed a qualitative assessment and identified no events or
circumstances that indicated that there existed a more likely than not probability of impairment of goodwill within our MasterCraft
segment.
The following table presents the carrying amounts of goodwill as of June 30, 2023 and 2022 for each of the Company's reportable
segments.
MasterCraft
Crest
Aviara
Total
Other Intangible Assets
Gross Amount
28,493
$
36,238
1,100
65,831
$
Accumulated
Impairment
Losses
$
$
—
(36,238)
(1,100)
(37,338)
$
$
Total
28,493
—
—
28,493
The following table presents the carrying amount of Other intangible assets, net as of June 30, 2023 and 2022.
Amortized intangible assets
Dealer networks
Software
Unamortized intangible assets
Trade names
Total other intangible assets
June 30,
2023
Accumulated
Amortization
/ Impairment
Gross
Amount
Other
intangible
assets, net
Gross
Amount
June 30,
2022
Accumulated
Amortization
/ Impairment
Other
intangible
assets, net
$
19,500 $
245
19,745
(10,050) $
(233)
(10,283)
9,450 $
12
9,462
19,500 $
245
19,745
(8,143) $
(184)
(8,327)
11,357
61
11,418
33,000
52,745 $
$
(7,000)
(17,283) $
26,000
35,462 $
33,000
52,745 $
(7,000)
(15,327) $
26,000
37,418
54
As of June 30, 2023, our annual impairment test date, the Company performed a qualitative assessment and identified no events or
circumstances that indicated that there existed a more likely than not probability of impairment of other intangible assets within our
MasterCraft and Crest segments.
Amortization expense related to Other intangible assets, net for each of the years ended June 30, 2023, 2022 and 2021 was $2.0 million.
The following table presents estimated future amortization expense for the next five fiscal years and thereafter.
Fiscal years ending June 30,
2024
2025
2026
2027
2028
and thereafter
Total
8. ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES
Accrued expenses and other current liabilities consisted of the following:
Warranty
Dealer incentives
Compensation and related accruals
Self-insurance
Inventory repurchase contingent obligation
Contract liabilities
Liabilities retained associated with discontinued operations
Other
Total accrued expenses and other current liabilities
Accrued warranty liability activity was as follows:
Balance at the beginning of the period
Provisions
Payments made
Aggregate changes for preexisting warranties
Balance at the end of the period
9. LONG-TERM DEBT
Long-term debt outstanding was as follows:
Term loan
Debt issuance costs on term loan
Total debt
Less current portion of long-term debt
Less current portion of debt issuance costs on term loan
Long-term debt, net of current portion
$
$
1,812
1,800
1,800
1,800
1,800
450
9,462
June 30,
2023
June 30,
2022
$
$
$
$
$
$
31,780
24,987
5,838
1,586
1,515
1,477
690
4,623
72,496
June 30,
2023
25,824
15,302
(12,899)
3,553
31,780
June 30,
2023
54,000
(324)
53,676
4,500
(119)
49,295
$
$
$
$
$
$
25,824
15,508
4,908
1,171
661
1,447
—
4,918
54,437
June 30,
2022
20,655
12,520
(9,057)
1,706
25,824
June 30,
2022
57,000
(451)
56,549
3,000
(127)
53,676
On June 28, 2021, the Company entered into a credit agreement with a syndicate of certain financial institutions (the “Credit
Agreement”). The Credit Agreement 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 refinanced and replaced the Fourth Amended Credit Agreement, which had been in place prior to the Credit Agreement and
55
provided the Company with a $190.0 million senior secured credit facility, consisting of a $75.0 million term loan, and $80.0 million
term loan, and a $35.0 million 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.
As a result of entering into the Credit Agreement, the Company recognized a $0.7 million loss on early extinguishment of debt during
the year ended June 30, 2021 related to unamortized debt issuance costs of the previously existing credit facility.
On August 31, 2022, the Company entered into the Second Amendment to the Credit Agreement to obtain the necessary consents and
waivers to the restrictions described above in the covenants of the Credit Agreement, as related to the sale of the NauticStar business on
September 2, 2022, as discussed in Note 3.
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 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. As of June 30, 2023 and 2022, the effective interest
rate on borrowings outstanding was 6.50% and 2.94%, respectively.
The Credit Agreement will mature and all remaining amounts outstanding thereunder will be due and payable on June 28, 2026. As of
June 30, 2023, the Company was in compliance with its financial covenants under the Credit Agreement.
Revolving Credit Facility
In conjunction with the Credit Agreement entered into on June 28, 2021, the Company drew $33.7 million on its Revolving Credit
Facility. Drawn amounts were used to repay a same amount of outstanding borrowings under the term loans under the Fourth Amended
Credit Agreement. As of June 30, 2022, the Company had repaid all outstanding borrowings under the Revolving Credit Facility and
had remaining availability of $100.0 million. The Company has not utilized the revolver as of June 30, 2023, and still holds availability
of $100.0 million.
Maturities for the Term Loan subsequent to June 30, 2023 are as follows:
2024
2025
2026
Total
10. INCOME TAXES
$
$
4,500
4,500
45,000
54,000
The Company's sources of earnings before income taxes are primarily derived in the U.S. Earnings in jurisdictions outside of the U.S.
were not significant during each of the years ended June 30, 2023, 2022 and 2021.
For the years ended June 30, the components of the provision for income taxes for continuing operations are as follows:
Current income tax expense:
Federal
State
Total current tax expense
Deferred tax (benefit) expense:
Federal
State
Foreign
Total deferred tax expense (benefit)
Income tax expense (benefit)
2023
2022
2021
25,115
5,728
30,843
$
$
(3,739) $
31
—
(3,708)
27,135
$
22,563
5,680
28,243
$
$
(1,044) $
(413)
(7)
(1,464)
26,779
$
12,795
3,276
16,071
858
(849)
—
9
16,080
$
$
$
$
56
The difference between the statutory and the effective federal tax rate related to continuing operations for the periods below is
attributable to the following:
Statutory income tax rate
State taxes (net of federal income tax benefit and valuation allowance)
Tax credits
Change in valuation allowance
Permanent differences
Uncertain tax positions
Other
Effective income tax rate
2023
2022
2021
21.00%
2.20%
(0.93%)
—
(0.90%)
1.90%
(0.19%)
23.08%
21.00%
1.76%
(0.66%)
(0.03%)
(0.69%)
1.99%
(0.03%)
23.34%
21.00%
1.21%
(0.77%)
0.19%
(0.74%)
0.74%
(0.05%)
21.58%
As of June 30, 2023, and 2022, a summary of the significant components of the Company’s deferred tax assets and liabilities was as
follows:
2023
2022
Deferred tax assets:
Intangible asset basis difference
Warranty reserves
Accrued selling
Capitalized research costs
Stock compensation
Unrecognized tax benefits
Inventory
Net operating loss
Other
Total deferred tax assets
Valuation allowance
Total deferred tax assets, net of the valuation allowance
Deferred tax liabilities:
Depreciation
Other
Total deferred tax liabilities
Net deferred tax assets
$
$
3,224
7,448
2,177
1,835
1,463
1,328
504
750
1,463
20,192
(2)
20,190
(6,201)
(1,561)
(7,762)
12,428
$
$
15,886
6,515
390
—
1,183
1,145
1,142
705
943
27,909
(2)
27,907
(5,404)
(978)
(6,382)
21,525
As of June 30, 2023, the Company has state net operating loss (NOL) carryforwards of $16.7 million. Of this amount, $1.0 million
expire in varying years ranging from June 30, 2025 to June 30, 2038, while the remainder can be carried forward indefinitely.
Unrecognized Tax Benefits
A reconciliation of the beginning and ending amount of unrecognized tax benefits, excluding accrued amounts for interest and penalties,
is as follows:
Balance at July 1
Additions based on tax positions related to the current year
Additions for tax positions of prior years
Reductions for tax positions of prior years
Balance at June 30
2023
2022
$
$
5,513
1,289
30
(600)
6,232
$
$
3,304
2,004
296
(91)
5,513
Of this total, $5.4 million and $4.7 million as of June 30, 2023 and 2022, respectively, represent the amount of unrecognized tax benefits
that, if recognized, would favorably affect the effective income tax rate in future periods. The total amount of interest and penalties
recorded in the consolidated statements of operations for the years ended June 30, 2023, 2022, and 2021 was an expense of $0.2 million,
an expense of $0.2 million, and a benefit of $0.2 million, respectively. The amounts accrued for interest and penalties at June 30, 2023
and 2022 were $1.1 million and $0.8 million, respectively, and is presented in unrecognized tax positions on the accompanying
consolidated balance sheets.
In general, it is the practice and intention of the Company to reinvest the earnings of its non-U.S. subsidiaries in those operations. As of
June 30, 2023, the Company has not made a current provision for U.S. or additional foreign withholding taxes on investments in foreign
57
subsidiaries that are indefinitely reinvested. Generally, such amounts become subject to U.S. taxation upon the remittance of dividends
and under certain other circumstances.
The Company and its subsidiaries are subject to U.S. federal income tax, as well as various other state income taxes and foreign income
taxes. The federal income tax returns for the years ended June 30, 2020 through 2022 are subject to examination by the Internal Revenue
Service. For state purposes, the statutes of limitation vary by jurisdiction. With few exceptions, the Company is no longer subject to
examination by taxing authorities for years before June 30, 2020. The Company expects the total amount of unrecognized benefits to
increase by approximately $0.8 million in the next twelve months. The Company records unrecognized tax benefits as liabilities and
adjusts these liabilities when its judgment changes as a result of the evaluation of new information not previously available. Because of
the complexity of some of these uncertainties, the ultimate resolution may result in a payment that is materially different from our current
estimate of the unrecognized tax benefit liabilities. These differences will be reflected as increases or decreases to income tax expense
in the period in which new information is available.
11. SHARE-BASED COMPENSATION
The 2015 Incentive Award Plan (“2015 Plan”) provides for the grant of stock options, including incentive stock options, and nonqualified
stock options (“NSOs”), restricted stock, dividend equivalents, stock payments, restricted stock units, restricted stock awards (“RSAs”),
deferred stock, deferred stock units, performance awards, stock appreciation rights, performance stock units (“PSUs”), and cash awards.
As of June 30, 2023, there were 1,045,380 shares available for issuance under the 2015 Plan.
The following table presents the components of share-based compensation expense within continuing operations by award type for the
years ended June 30, 2023, 2022, and 2021.
Restricted stock awards
Performance stock units
Share-based compensation expense
2023
2022
2021
$
$
2,283
1,373
3,656
$
$
1,684
1,826
3,510
$
$
1,541
1,391
2,932
The amount of compensation cost the Company recognizes over the requisite service period is based on the Company’s best estimate of
the achievement of the performance conditions and can fluctuate over time.
The following table presents the income tax benefit related to share-based compensation expense within continuing operations
recognized by award type.
Restricted stock awards
Performance stock units
Share-based compensation expense
Restricted Stock Awards
2023
2022
2021
$
$
530
319
849
$
$
383
416
799
$
$
342
309
651
All RSAs granted to non-employee directors vest over the remainder of that fiscal year, and all RSAs granted to employees vest over a
period of between one to three years. Generally, non-vested RSAs are forfeited if employment is terminated prior to vesting. RSAs are
granted at a per share fair value equal to the market value of the Company’s common stock on the grant date. The Company recognizes
the cost of non-vested RSAs ratably over the requisite service period.
The fair value of RSAs vested during the years ended June 30, 2023, 2022, and 2021 was $3.2 million, $2.4 million, and $1.6 million,
respectively. A summary of RSA activity within continuing operations for these years is as follows:
58
Total Non-vested Restricted Stock Awards at June 30, 2020
Granted
Vested
Forfeited
Total Non-vested Restricted Stock Awards at June 30, 2021
Granted
Vested
Forfeited
Total Non-vested Restricted Stock Awards at June 30, 2022
Granted
Vested
Forfeited
Total Non-vested Restricted Stock Awards at June 30, 2023
Number of Restricted
Stock Awards
Outstanding
Weighted Average
Grant Date Fair
Value
$
106,894
93,357
(73,385)
(8,673)
118,193
95,753
(99,004)
(8,534)
106,408
104,657
(112,789)
(6,369)
91,907
18.01
20.34
18.54
19.29
19.42
25.04
22.01
24.65
21.65
23.91
22.10
21.83
23.66
As of June 30, 2023, there was $1.8 million of total unrecognized compensation expense related to non-vested RSAs. The Company
expects this expense to be recognized over a weighted average period of 1.5 years.
Performance Stock Units
During the years ended June 30, 2023, 2022, and 2021, the Company granted performance shares to certain employees. 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 continues for a three-year period, ending
on June 30 of the applicable year. The probability of achieving the performance criteria is assessed quarterly. Following the
determination of the Company’s achievement with respect to the performance criteria, the amount of shares awarded will be subject to
adjustment based on the application of a total shareholder return (“TSR”) modifier. The grant date fair value is determined based on
both the assessment of the probability of the Company’s achieving the performance criteria and an estimate of the expected TSR
modifier. The TSR modifier estimate is determined by using a Monte Carlo Simulation model, which considers the likelihood of all
possible outcomes of long-term market performance. The amount of compensation cost the Company recognizes over the requisite
service period is based on management’s best estimate of the achievement of the performance criteria.
The fair value of PSUs vested during the years ended June 30, 2023, 2022, and 2021 was $1.7 million, $2.1 million, and $0.4 million,
respectively. A summary of PSU activity within continuing operations for these years is as follows:
Total Non-vested Performance Stock Units at June 30, 2020
Granted
Vested
Forfeited
Total Non-vested Performance Stock Units at June 30, 2021
Granted
Vested
Forfeited
Total Non-vested Performance Stock Units at June 30, 2022
Granted
Vested
Forfeited
Total Non-vested Performance Stock Units at June 30, 2023
Number of
Performance Stock
Units
Weighted Average
Grant Date Fair
Value
$
67,404
123,096
(14,627)
(15,588)
160,285
53,842
(99,860)
(9,077)
105,190
76,567
(56,790)
(1,996)
122,971
20.02
22.11
26.29
20.25
21.03
28.73
20.16
26.71
25.30
26.08
22.38
26.15
27.12
59
As of June 30, 2023, there was $1.5 million of total unrecognized compensation expense related to non-vested PSUs. The Company
expects this expense to be recognized over a weighted average period of 1.9 years.
Nonqualified Stock Options
In July 2015, the Company granted 137,786 NSOs to certain employees. As of July 2019, all outstanding options were fully vested and
exercisable. All outstanding options as of June 30, 2022, were exercised during the year ended June 30, 2023. A summary of NSO
activity within continuing operations for these years is as follows:
Outstanding at June 30, 2020
Granted
Exercised
Forfeited or expired
Outstanding at June 30, 2021
Granted
Exercised
Forfeited or expired
Outstanding at June 30, 2022
Granted
Exercised
Forfeited or expired
Outstanding at June 30, 2023
Weighted
Average
Exercise
Price
Weighted
Average
Remaining
Contractual
Term (Yrs.)
Aggregate
Intrinsic
Value
10.70
10.70
10.70
10.70
10.70
10.70
5.1 $
270
4.1
3.1
381
157
$
Shares
32,392
—
(7,952)
—
24,440
—
(9,294)
—
15,146
—
(15,146)
—
—
12. COMMITMENTS AND CONTINGENCIES
Repurchase Obligations
Under certain conditions, the Company is obligated to repurchase new inventory repossessed from dealerships by financial institutions
that provide credit to the Company’s dealers. See Note 1 for more information regarding the terms and accounting policies related to
this obligation. The Company's obligations under such floor plan agreements are subject to various calculations and caps based on
amounts currently owed by dealers to these financial institutions and, based on such terms, totaled approximately $53.1 million and
$46.0 million as of June 30, 2023 and June 30, 2022, respectively. We incurred no material impact from repurchase events during the
years ended June 30, 2023, 2022, and 2021. The Company recorded a repurchase liability of $1.6 million and $0.7 million as of June
30, 2023 and 2022, respectively.
Purchase Commitments
The Company is engaged in an exclusive contract with a single vendor to provide engines for its MasterCraft performance sport boats.
This contract makes this vendor the only supplier to MasterCraft for in-board engines and expires June 30, 2025. The Company is
obligated to purchase a minimum number of engines for each model year under this contract. The Company could also be required to
pay a penalty to this vendor in order to maintain exclusivity if annual purchases under the agreement fail to meet a certain volume
threshold. We incurred no penalties related to purchase commitments during the years ended June 30, 2023, 2022, and 2021.
Operating Leases
The Company has lease agreements for certain personal and real property. Leases with an initial lease term of 12 months or less are not
recorded on the balance sheet. Our lease agreements do not include any significant renewal options. Our lease agreements do not contain
any material residual value guarantees or material restrictive covenants.
The Company determines if an arrangement is a lease at lease inception. Operating lease right-of-use (“ROU”) assets and operating
lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at the
commencement date. Because the rates implicit in the Company's lease contracts are not readily determinable, the Company uses its
incremental borrowing rate based on information available at the commencement date in determining the present value of future
60
payments. The incremental borrowing rate is estimated to approximate the interest rate on a collateralized basis with similar terms and
payments, and in economic environments where the leased asset is located. The operating lease ROU asset also includes any initial
direct costs and lease payments made prior to lease commencement and excludes lease incentives incurred.
The Company's lease terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise that
option. Operating lease expense is recognized on a straight-line basis over the lease term. The Company may enter into lease agreements
that contain both lease and non-lease components, which it has elected to account for as a single lease component for all asset classes.
The lease-related balances as of June 30, 2023 and 2022, and activity and costs during the periods presented are not material.
Legal Proceedings
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.
As of June 30, 2023, 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, are not likely to have a material adverse impact on the Company’s financial position, results of
operations or cash flows.
13. EARNINGS PER SHARE AND COMMON STOCK
The factors used in the earnings per share computation are as follows:
Net income from continuing operations
Loss from discontinued operations, net of tax
Net income
Weighted average shares — basic
Dilutive effect of assumed exercises of stock options
Dilutive effect of assumed restricted share awards/units
Weighted average outstanding shares — diluted
Basic net income (loss) per share
Continuing operations
Discontinued operations
Net income
Diluted net income (loss) per share
Continuing operations
Discontinued operations
Net income
2023
2022
2021
$
$
$
$
$
$
90,452
(21,515)
68,937
17,618,797
5,270
141,050
17,765,117
5.13
(1.22)
3.91
5.09
(1.21)
3.88
$
$
$
$
$
$
87,945
(29,731)
58,214
18,455,226
11,110
170,176
18,636,512
4.77
(1.62)
3.15
4.72
(1.60)
3.12
$
$
$
$
$
$
58,438
(2,268)
56,170
18,805,464
14,814
131,243
18,951,521
3.11
(0.12)
2.99
3.08
(0.12)
2.96
For the years ended June 30, 2023, 2022, and 2021, an immaterial number of shares were excluded from the computation of diluted
earnings per share as the effect would have been anti-dilutive.
Stock Repurchase Program
On June 24, 2021, the board of directors of the Company authorized a stock repurchase program that allows for the repurchase of up to
$50.0 million of the Company’s common stock during the three-year period ending June 24, 2024. During the fiscal years ended June
30, 2023 and 2022, the Company repurchased 872,055 shares and 975,161 shares of common stock for $22.9 million and $25.5 million
in cash, including related fees and expenses. We did not repurchase any common stock during fiscal 2021. As of June 30, 2023, $1.6
million remained available under the current authorization.
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 will become effective upon the expiration
of the Company's existing $50 million share repurchase authorization.
61
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 year ended June 30, 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’s 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:
Net sales
Operating income (loss)
Depreciation and amortization
Purchases of property, plant and equipment
Net sales
Operating income (loss)
Depreciation and amortization
Goodwill impairment
Purchases of property, plant and equipment
Net sales
Operating income (loss)
Depreciation and amortization
Purchases of property, plant and equipment
For the Year Ended June 30, 2023
MasterCraft
468,656
$
101,324
5,555
17,414
Crest
$141,247
20,106
2,841
7,149
Aviara Consolidated
662,046
$
$ 52,143
116,915
(4,515)
10,569
2,173
30,323
5,760
For the Year Ended June 30, 2022
MasterCraft
466,027
$
105,341
4,968
—
6,642
Crest
$140,859
19,892
2,665
—
4,193
Aviara Consolidated
641,609
$ 34,723
$
116,195
(9,038)
9,731
2,098
1,100
1,100
12,296
1,461
For the Year Ended June 30, 2021
MasterCraft
350,812
$
73,354
4,479
5,273
Crest
$102,688
13,605
2,503
892
Aviara Consolidated
465,962
$ 12,462
$
78,643
(8,316)
8,368
1,386
25,219
19,054
The following table presents total assets for the Company’s reportable segments as of June 30, 2023, and 2022.
Assets:
MasterCraft
Crest
Aviara
Discontinued operations
Total assets
June 30, 2023
June 30, 2022
$
$
259,201
53,435
41,340
—
353,976
$
$
178,386
53,956
35,115
29,595
297,052
62
15. QUARTERLY FINANCIAL REPORTING (UNAUDITED)
The Company maintains its financial records on the basis of a fiscal year ending on June 30, with the fiscal quarters equaling thirteen
weeks. The following tables set forth summary quarterly financial information for the years ended June 30, 2023 and 2022, and reflects
the retrospective presentation of discontinued operations as discussed in Note 3. Due to the effects of rounding, the quarterly results
presented may not sum to the fiscal year results presented.
Net sales
Gross profit
Operating income
Net income from continuing operations
Loss from discontinued operations
Net income
Basic net income (loss) per common share
Continuing operations
Discontinued operations
Net income
Diluted net income (loss) per common share
Continuing operations
Discontinued operations
Net income
Weighted average shares used for computation of:
Basic earnings per common share
Diluted earnings per common share
Net sales
Gross profit
Operating income
Net income from continuing operations
Loss from discontinued operations
Net income
Basic net income (loss) per common share
Continuing operations
Discontinued operations
Net income
Diluted net income (loss) per common share
Continuing operations
Discontinued operations
Net income
Weighted average shares used for computation of:
Basic earnings per common share
Diluted earnings per common share
Fiscal Quarter Ended
June 30,
2023
April 2,
2023
January 1,
2023
October 2,
2022
Fiscal Year
Ended
June 30,
2023
$
$
$
$
$
$
$
$
$
$
$
$
166,566
42,915
29,206
23,052
(376)
22,676
1.33
(0.02)
1.31
1.32
(0.02)
1.30
17,299,562
17,505,504
June 30,
2022
197,216
57,173
44,592
33,548
(22,057)
11,491
1.87
(1.23)
0.64
1.85
(1.22)
0.63
$
$
$
$
$
$
$
$
$
$
$
$
166,776
42,598
29,026
22,782
(272)
22,510
1.30
(0.02)
1.28
1.28
(0.01)
1.27
$
$
$
$
$
$
159,188
38,227
26,461
19,983
(300)
19,683
1.13
(0.02)
1.11
1.12
(0.01)
1.11
17,559,920
17,748,910
17,669,645
17,774,329
Fiscal Quarter Ended
April 3,
2022
January 2,
2022
169,343
44,074
31,604
24,306
(3,371)
20,935
1.33
(0.19)
1.14
1.31
(0.18)
1.13
$
$
$
$
$
$
144,400
36,361
23,619
17,859
(2,457)
15,402
0.95
(0.13)
0.82
0.94
(0.13)
0.81
$
$
$
$
$
$
$
$
$
$
$
$
169,516
45,973
32,222
24,635
(20,567)
4,068
1.38
(1.15)
0.23
1.37
(1.14)
0.23
$
$
$
$
$
$
662,046
169,713
116,915
90,452
(21,515)
68,937
5.13
(1.22)
3.91
5.09
(1.21)
3.88
17,946,061
18,031,725
17,618,797
17,765,117
October 3,
2021
Fiscal Year
Ended
June 30,
2022
130,650
30,582
16,380
12,232
(1,846)
10,386
0.65
(0.10)
0.55
0.65
(0.10)
0.55
$
$
$
$
$
$
641,609
168,190
116,195
87,945
(29,731)
58,214
4.77
(1.62)
3.15
4.72
(1.60)
3.12
17,952,267
18,155,449
18,295,949
18,487,346
18,722,386
18,899,136
18,850,301
19,004,119
18,455,226
18,636,512
63
[THIS PAGE INTENTIONALLY LEFT BLANK]