What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2021-02-10 compared with 2020-11-12 · 98 added, 65 removed, 286 unchanged (36% of the section changed)

32 unchanged sentences

Three Months Ended

September 29,

Six Months Ended

COST OF SALES

25 unchanged sentences

Total current assets

Property, plant and equipment, net

Property, plant and equipment, net (Note 4)

Goodwill (Note 5)

16 unchanged sentences

Common stock, $ .01 par value per share — authorized, 100,000,000 shares;

issued and outstanding, 18,952,338 shares at October 4, 2020 and 18,871,637 shares at June 30, 2020

issued and outstanding, 18,949,295 shares at January 3, 2021 and 18,871,637 shares at June 30, 2020

Additional paid-in capital

10 unchanged sentences

Balance at October 4, 2020

Share-based compensation activity

Balance at January 3, 2021

Balance at June 30, 2019

1 unchanged sentence

Balance at September 29, 2019

Share-based compensation activity

Balance at December 29, 2019

Notes to Unaudited Condensed Consolidated Financial Statements form an integral part of the condensed consolidated financial statements.

3 unchanged sentences

(Dollars in thousands)

Three Months Ended

September 29,

Six Months Ended

CASH FLOWS FROM OPERATING ACTIVITIES:

12 unchanged sentences

Principal payments on revolving credit facility

Borrowings on revolving credit facility

Principal payments on long-term debt

Principal payments on insurance premium financing

Cash paid for withholding taxes on vested stock

Net cash provided by financing activities

17 unchanged sentences

MasterCraft Parts, Ltd.;

and MasterCraft International Sales Administration, Inc.

(collectively “MasterCraft”);

MasterCraft International Sales Administration, Inc.;

and Aviara, LLC (collectively “MasterCraft”);

Nautic Star, LLC and NS Transport, LLC (collectively “NauticStar”);

3 unchanged sentences

Therefore, the fiscal quarter end will not always coincide with the date of the end of a calendar month.

The unaudited condensed consolidated financial statements have been prepared on the same basis as the Company’s audited consolidated financial statements for the year ended June 30, 2020 and, in the opinion of management, reflect all adjustments considered necessary to present fairly the Company’s financial position as of October 4, 2020, its results of operations for the three months ended October 4, 2020 and September 29, 2019, its cash flows for the three months ended October 4, 2020 and September 29, 2019, and its statements of stockholders’ equity for the three months ended October 4, 2020 and September 29, 2019.

The unaudited condensed consolidated financial statements have been prepared on the same basis as the Company’s audited consolidated financial statements for the year ended June 30, 2020 and, in the opinion of management, reflect all adjustments considered necessary to present fairly the Company’s financial position as of January 3, 2021, its results of operations for the three and six months ended January 3, 2021 and December 29, 2019, its cash flows for the six months ended January 3, 2021 and December 29, 2019, and its statements of stockholders’ equity for the three and six months ended January 3, 2021 and December 29, 2019.

All adjustments are of a normal, recurring nature.

7 unchanged sentences

COVID-19 Pandemic — To balance wholesale production with the then anticipated impacts to retail demand caused by the economic impacts of the COVID-19 pandemic, the Company reduced production in February 2020 and, in late March 2020, temporarily suspended manufacturing operations at all of the Company’s facilities to protect the health of employees and to comply with governmental mandates.

The Company resumed operations at reduced production levels at our manufacturing facilities by mid-May 2020 and the Company continues to ramp up production.

The Company remains subject to risks and uncertainties as a result of the COVID-19 pandemic (including the possibility of a second wave of infections).

The extent of the impact of the COVID-19 pandemic on the Company’s business is highly uncertain and difficult to predict, as the response to the COVID-19 pandemic continues to evolve in many countries, including the United States and other markets where the Company operates.

The Company resumed operations at reduced production levels at our manufacturing facilities by mid-May.

Since that time, our facilities have increased production rates above their pre-COVID levels.

Demand for the Company’s products has been strong and, as a result of our employee’s committed efforts, disruptions to the Company’s production have been minimal since resuming operations in May 2020.

However, the Company remains subject to risks and uncertainties as a result of the COVID-19 pandemic.

The extent of the impact of the COVID-19 pandemic on the Company’s business remains uncertain and difficult to predict, as the response to the COVID-19 pandemic continues to evolve in many countries, including the United States and other markets where the Company and its suppliers operate.

Capital markets and economies worldwide have also been negatively impacted by the COVID-19 pandemic, and it has caused economic downturns or recessions in the U.S.

3 unchanged sentences

The magnitude and overall effectiveness of these actions remain uncertain.

The severity of the impact of the COVID-19 pandemic on the Company's business will depend on a number of factors, including, but not limited to, the duration, spread, severity, and impact of the pandemic, the remedial actions and stimulus measures adopted by local and federal governments, the effects of the pandemic on the Company's consumers, dealers, suppliers and workforce, and to the extent

normal economic and operating conditions can resume, all of which are uncertain and cannot be predicted.

and federal governments, the effects of the pandemic on the Company's consumers, dealers, suppliers and workforce, and to the extent normal economic and operating conditions can resume, all of which are uncertain and cannot be predicted.

The Company's future results of operations, cash flows, and liquidity could be adversely impacted by delays in payments of outstanding receivable amounts beyond normal payment terms, supply chain or workforce disruptions and uncertain demand, impairment charge s , and the impact of any initiatives that the Company may undertake to address financial and operational challenges faced by it and its consumers, dealers, and suppliers.

As of the date of issuance of these consolidated financial statements, the extent to which the COVID-19 p andemic may materially impact the Company's financial condition, liquidity, or results of operations is uncertain.

There were no significant changes in or changes in the application of the Company’s significant or critical accounting policies or estimation procedures for the three months ended October 4, 2020 as compared with the significant accounting policies described in the Company’s audited consolidated financial statements for the fiscal year ended June 30, 2020.

There were no significant changes in or changes in the application of the Company’s significant or critical accounting policies or estimation procedures for the three and six months ended January 3, 2021 as compared with the significant accounting policies described in the Company’s audited consolidated financial statements for the fiscal year ended June 30, 2020.

New Accounting Pronouncements Issued But Not Yet Adopted

14 unchanged sentences

REVENUE RECOGNITION

The following table presents the Company’s revenue by major product category for each reportable segment.

Three Months Ended October 4, 2020

Three Months Ended September 29, 2019

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

Three Months Ended January 3, 2021

Three Months Ended December 29, 2019

Major Product Categories:

1 unchanged sentence

Other revenue

Six Months Ended January 3, 2021

Six Months Ended December 29, 2019

Major Product Categories:

Boats and trailers

Other revenue

Contract Liabilities

As of June 30, 2020, the Company had $ 0.6 million of contract liabilities associated with customer deposits.

During the three months ended October 4, 2020, all of this amount was recognized as revenue.

As of October 4, 2020, total contract liabilities associated with customer deposits were $ 1.1 million, were reported in Accrued expenses and other current liabilities on the condensed consolidated balance sheet, and are expected to be recognized as revenue during the remainder of the year ended June 30, 2021.

During the six months ended January 3, 2021, all of this amount was recognized as revenue.

As of January 3, 2021, total contract liabilities associated with customer deposits were $ 1.5 million, were reported in Accrued expenses and other current liabilities on the condensed consolidated balance sheet, and are expected to be recognized as revenue during the remainder of the year ended June 30, 2021.

Inventories consisted of the following:

4 unchanged sentences

Total inventories

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

Merritt Island Facility

During October 2020 we completed the purchase of certain real property located in Merritt Island, Florida, including a boat manufacturing facility, for a purchase price of $ 14.2 million (the “Merritt Island Facility”).

The new Merritt Island Facility provides a dedicated manufacturing center for our Aviara brand.

GOODWILL AND OTHER INTANGIBLE ASSETS

The carrying amounts of goodwill as of October 4, 2020 and June 30, 2019, attributable to each of the Company’s reportable segments, were as follows:

The carrying amounts of goodwill as of January 3, 2021 and June 30, 2020, attributable to each of the Company’s reportable segments, were as follows:

Accumulated Impairment Losses

8 unchanged sentences

Total other intangible assets

Amortization expense related to Other intangible assets, net for each of the three months ended October 4, 2020 and September 29, 2019 was $ 1.0 million.

Amortization expense related to Other intangible assets, net for the three and six months ended both January 3, 2021 and December 29, 2019 was $ 1.0 million and $ 2.0 million, respectively.

Estimated amortization expense for the fiscal year ended June 30, 2021 is $ 4.0 million.

3 unchanged sentences

Compensation and related accruals

Floor plan interest

Inventory repurchase contingent obligation

Insurance premium financing

Self-insurance

1 unchanged sentence

Total accrued expenses and other current liabilities

Accrued warranty liability activity was as follows for the three months ending:

September 29,

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

Balance at the beginning of the period

2 unchanged sentences

Balance at the end of the period

Insurance Premium Financing

On March 27, 2020, the Company executed an insurance premium financing agreement of $ 1.1 million with a premium finance company in order to finance certain of its annual insurance premiums.

Beginning on April 1, 2020, the financing agreement is payable in eleven monthly installments of principal and interest of approximately $ 0.1 million.

The agreement bears interest at 3.6 %.

The balance of the insurance premium financing as of October 4, 2020 was $ 0.4 million and is recorded in Accrued expenses and other current liabilities.

LONG-TERM DEBT

6 unchanged sentences

On October 1, 2018, the Company entered into a Fourth Amended and Restated Credit and Guaranty Agreement with a syndicate of certain financial institutions (the “Fourth Amended Credit Agreement”).

The Fourth Amended Credit Agreement provides the Company with a $ 190.0 million senior secured credit facility, consisting of a $ 75.0 million term loan, and an $ 80.0 million term loan (together,

the “Term Loans”), and a $ 35.0 million revolving credit facility (the “Revolving Credit Facility”).

The Fourth Amended Credit Agreement provides the Company with a $ 190.0 million senior secured credit facility, consisting of a $ 75.0 million term loan, and an $ 80.0 million term loan (together, the “Term Loans”), and a $ 35.0 million revolving credit facility (the “Revolving Credit Facility”).

The Fourth Amended Credit Agreement is secured by substantially all the assets of the Company.

1 unchanged sentence

The Term Loans will mature and all remaining amounts outstanding thereunder will be due and payable on October 1, 2023.

Amendment to Fourth Amended Credit Agreement

Amendment No.

3 to Fourth Amended Credit Agreement

On May 7, 2020, the Company entered into Amendment No.

3 to the Fourth Amended Credit Agreement (the “Amendment”).

The changes effected by the Amendment include, among others, the temporary removal and replacement of the Company’s financial covenants, the addition of a 50 basis point floor on LIBOR, modifications to the range of applicable LIBOR and prime interest rate margins, and a revision of the Total Net Leverage Ratio calculation.

Under the Amendment, the Total Net Leverage Ratio covenant and Fixed Charge Coverage Ratio covenant of the Fourth Amended Credit Agreement are temporarily replaced with three separate covenants:

3 to the Fourth Amended Credit Agreement (the “Amendment No.

The changes effected by Amendment No.

3 include, among others, the temporary removal and replacement of the Company’s financial covenants, the addition of a 50 basis point floor on LIBOR, modifications to the range of applicable LIBOR and prime interest rate margins, and a revision of the Total Net Leverage Ratio calculation.

Under Amendment No.

3, the Total Net Leverage Ratio covenant and Fixed Charge Coverage Ratio covenant of the Fourth Amended Credit Agreement are temporarily replaced with three separate covenants:

(i) an Interest Coverage Ratio, (ii) a Minimum Liquidity threshold, and (iii) a Maximum Unfinanced Capital Expenditures limitation (the “Package of Financial Covenants”).

1 unchanged sentence

In addition, the Total Net Leverage Ratio calculation was temporarily revised to include all unrestricted cash balances, without limitation, until June 30, 2021.

As of October 4, 2020, the Company was in compliance with its financial covenants under the Amendment to the Fourth Amended Credit Agreement.

Pursuant to the Amendment, the applicable interest, at the Company’s option, is at either the prime rate plus an applicable margin ranging from 0.5 % to 2.25 % or at a LIBOR rate, subject to a 50 basis point floor, plus an applicable margin ranging from 1.5 % to 3.25 %, in each case based on the Company’s Total Net Leverage Ratio.

During the quarter, the applicable margin for loans accruing interest at the prime rate was 1.25 % and the applicable margin for loans accruing interest at LIBOR was 2.25 %.

As of January 3, 2021, the Company was in compliance with its financial covenants under Amendment No.

3 to the Fourth Amended Credit Agreement.

in each case based on the Company’s Total Net Leverage Ratio.

As of January 3, 2021 the applicable margin for loans accruing interest at the prime rate was 1.00 % and the applicable margin for loans accruing interest at LIBOR was 2.00 %.

Amendment No.

4 and Joinder to Fourth Amended Credit Agreement

On October 26, 2020, the Company entered into Amendment No.

4 and Joinder to the Fourth Amended Credit Ageement (the “Amendment No.

In conjunction with the new Merritt Island Facility purchase (see Note 4), the assets were organized in a new wholly-owned subsidiary of the Company.

The changes effected by Amendment No.

4 add this new subsidiary as a borrower under the Fourth Amended Credit Agreement.

Revolving Credit Facility

During the three months ended October 4, 2020, the Company repaid $ 10.0 million on its $ 35.0 million Revolving Credit Facility and the availability under the Revolving Credit Facility as of October 4, 2020 was $ 35.0 million.

During October 2020 the Company borrowed $ 20.0 million under its $ 35.0 million Revolving Credit Facility to fund the purchase of the Merrit Island Facility.

The Company subsequently repaid all outstanding amounts and, as of January 3, 2021, the availability under the Revolving Credit Facility was $ 35.0 million.

The Company’s consolidated interim effective tax rate is based on a current estimate of the annual effective income tax rate adjusted to reflect the impact of discrete items.

The differences between the Company’s effective tax rates and the statutory federal tax rate of 21.0 % primarily relate to the inclusion of the state tax rate in the overall effective rate, the benefit of federal and state credits, and a permanent benefit associated with the foreign derived intangible income deduction, partially offset by a permanent add-back for Section 162(m) limitations.

During the three months ended October 4, 2020 and September 29, 2019, the Company’s effective tax rates were 22.8 % and 24.0 %, respectively.

The Company’s effective tax rate for the three months ended October 4, 2020 is lower compared to the effective tax rate for the three months ended September 29, 2019, primarily due to an increase in the benefit of federal and state tax credits, partially offset by a decrease in the Company’s net permanent benefits, largely driven by changes in the foreign derived intangible income deduction, and add-back for Section 162(m) limitations.

During the three months ended January 3, 2021 and December 29, 2019, the Company’s effective tax rates were 22.2 % and 24.4 %, respectively.

During the six months ended January 3, 2021 and December 29, 2019, the Company’s effective tax rates were 22.5 % and 24.2 %, respectively.

The Company’s effective tax rate for the three and six months ended January 3, 2021 is lower compared to the effective tax rate for the three and six months ended December 29, 2019, primarily due to an increase in the benefit of federal and state tax credits and a reduction in the effective state tax rate, partially offset by a decrease in the Company’s net permanent benefits, largely driven by changes in the foreign derived intangible income deduction and add-back for Section 162(m) limitations.

EARNINGS PER SHARE

1 unchanged sentence

Three Months Ended

September 29,

Six Months Ended

Weighted average shares — basic

4 unchanged sentences

Diluted earnings per share

For the three months ended October 4, 2020 and September 29, 2019, an immaterial number of shares were excluded from the computation of diluted earnings per share as the effect would have been anti-dilutive.

For the three and six months ended January 3, 2021 and December 29, 2019, an immaterial number of shares were excluded from the computation of diluted earnings per share as the effect would have been anti-dilutive.

SHARE-BASED COMPENSATION

1 unchanged sentence

Three Months Ended

September 29,

Six Months Ended

Restricted stock awards

3 unchanged sentences

Restricted Stock Awards

During the three months ended October 4, 2020, the Company granted 87,047 restricted stock awards (“RSAs”) to the Company’s non-executive directors, officers and certain other key employees.

Generally, the shares of restricted stock granted during the three months ended October 4, 2020, vest pro-rata over three years for officers and certain other key employees and over one year for non-executive directors.

During the six months ended January 3, 2021, the Company granted 87,047 restricted stock awards (“RSAs”) to the Company’s non-executive directors, officers and certain other key employees.

Generally, the shares of restricted stock granted during the six months ended January 3, 2021, vest pro-rata over three years for officers and certain other key employees and over one year for non-executive directors.

The Company determined the fair value of the shares awarded by using the close price of our common stock as of the date of grant.

The weighted average grant date fair value of RSAs granted in the three months ended October 4, 2020, was $ 19.96 per share.

The following table summarizes the status of nonvested RSAs as of October 4, 2020, and changes during the three months then ended.

The weighted average grant date fair value of RSAs granted in the six months ended January 3, 2021, was $ 19.96 per share.

The following table summarizes the status of nonvested RSAs as of January 3, 2021, and changes during the six months then ended.

Nonvested at June 30, 2020

Nonvested at October 4, 2020

As of October 4 , 2020 , there was $ 2.3 million of total unrecognized compensation expense related to nonvested RSAs.

Nonvested at January 3, 2021

As of January 3, 2021, there was $ 1.9 million of total unrecognized compensation expense related to nonvested RSAs.

The Company expects this expense to be recognized over a weighted average period of 1.9 years.

16 unchanged sentences

The Supplemental PSUs are capped at 90 % of the Existing PSUs’ original fair value and would be reduced for any shares issuable upon satisfaction of the performance criteria pursuant to the Existing PSUs.

The following table summarizes the status of nonvested PSUs as of October 4, 2020, and changes during the three months then ended.

The following table summarizes the status of nonvested PSUs as of January 3, 2021, and changes during the six months then ended.

Nonvested at June 30, 2020

Nonvested at October 4, 2020

As of October 4, 2020, there was $ 2.2 million of total unrecognized compensation expense related to nonvested PSUs.

Nonvested at January 3, 2021

As of January 3, 2021, there was $ 1.9 million of total unrecognized compensation expense related to nonvested PSUs.

The Company expects this expense to be recognized over a weighted average period of 2.0 years.

7 unchanged sentences

Production of Aviara boats began during the year ended June 30, 2019 and the Company began selling these boats in July 2019.

During the three months ended January 3, 2021, the Company began transitioning Aviara production to the Merritt Island, Facility.

The Company anticipates all Aviara boats to be produced at the Merritt Island Facility by the end of fiscal 2021.

The NauticStar segment produces boats at its Amory, Mississippi facility.

3 unchanged sentences

Each segment distributes its products through its own dealer network.

The CODM regularly reviews the operating performance of each segment including measures of performance based on operating income.

The Chief Operating Decision Maker (“ CODM ”) , which is our Chief Executive Officer, regularly reviews the operating performance of each segment including measures of performance based on operating income.

Each segment has its own management structure which is responsible for the operations of the segment and which is directly accountable to the CODM.

2 unchanged sentences

Selected financial information for the Company’s reportable segments was as follows:

For the Three Months Ended October 4, 2020

For the Three Months Ended January 3, 2021

Operating income (loss)

1 unchanged sentence

Purchases of property, plant and equipment

For the Three Months Ended September 29, 2019

Operating income

For the Six Months Ended January 3, 2021

Operating income (loss)

Depreciation and amortization

Purchases of property, plant and equipment

For the Three Months Ended December 29, 2019

Operating income (loss)

Depreciation and amortization

Purchases of property, plant and equipment

For the Six Months Ended December 29, 2019

Operating income (loss)

Depreciation and amortization

Purchases of property, plant and equipment

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

October 4, 2020

January 3, 2021

Eliminations (a)

Represents the Company’s initial investment in NauticStar and Crest, which is included in total assets attributed to the MasterCraft segment.

SUBSEQUENT EVENT

On August 13, 2020 , the Company entered into an agreement to purchase certain real property located in Merritt Island, Florida, including an approximately 140,000 sq.

boat manufacturing facility.

During October 2020, the Company completed this purchase for a total cost of $ 14.2 million.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements