What changed in this filing

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Item 1. Financial Statements

2022-02-03 compared with 2021-11-10 · 79 added, 37 removed, 307 unchanged (27% of the section changed)

32 unchanged sentences

Three Months Ended

Six Months Ended

COST OF SALES

46 unchanged sentences

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

issued and outstanding, 18,961,205 shares at October 3, 2021 and 18,956,719 shares at June 30, 2021

issued and outstanding, 18,610,822 shares at January 2, 2022 and 18,956,719 shares at June 30, 2021

Additional paid-in capital

Accumulated deficit

Retained earnings / (accumulated deficit)

Total stockholders' equity

5 unchanged sentences

(Dollars in thousands)

Retained Earnings/

Balance at June 30, 2021

2 unchanged sentences

Balance at October 3, 2021

Share-based compensation activity

Repurchase and retirement of common stock

Balance at January 2, 2022

Balance at June 30, 2020

1 unchanged sentence

Balance at October 4, 2020

Share-based compensation activity

Balance at January 3, 2021

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

Six Months Ended

CASH FLOWS FROM OPERATING ACTIVITIES:

6 unchanged sentences

Changes in certain operating assets and liabilities

Net cash (used in) provided by operating activities

Net cash provided by operating activities

CASH FLOWS FROM INVESTING ACTIVITIES:

33 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, 2021 and, in the opinion of management, reflect all adjustments considered necessary to present fairly the Company’s financial position as of October 3, 2021, its results of operations for the three months ended October 3, 2021 and October 4, 2020, its cash flows for the three months ended October 3, 2021 and October 4, 2020, and its statements of stockholders’ equity for the three months ended October 3, 2021 and October 4, 2020.

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, 2021 and, in the opinion of management, reflect all adjustments considered necessary to present fairly the Company’s financial position as of January 2, 2022, its results of operations for the three and six months ended January 2, 2022 and January 3, 2021, its cash flows for the six months ended January 2, 2022 and January 3, 2021, and its statements of stockholders’ equity for the three and six months ended January 2, 2022 and January 3, 2021.

All adjustments are of a normal, recurring nature.

6 unchanged sentences

Due to the seasonality of the Company’s business, the interim results are not necessarily indicative of the results that may be expected for the remainder of the fiscal year.

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

There were no significant changes in or changes to the application of the Company’s significant or critical accounting policies or estimation procedures for the three and six months ended January 2, 2022 as compared with those described in the Company’s audited consolidated financial statements for the fiscal year ended June 30, 2021.

Change in Reportable Segments — Beginning with the first quarter of fiscal 2022, our chief operating decision maker (“CODM”) began to manage our business, allocate resources, and evaluate performance based on the changes that have been made in the Company’s management structure in connection with the transition of Aviara production to our Merritt Island facility.

2 unchanged sentences

Refer to Note 11 – Segment Information for further information on the Company’s reportable segments.

Reclassifications — Certain historical amounts have been reclassified in these condensed consolidated financial statements and the accompanying notes herewith to conform to the current presentation.

Reclassifications — Certain historical amounts have been reclassified in these notes to the condensed consolidated financial statements to conform to the current presentation.

Recently Adopted Accounting Standards

14 unchanged sentences

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

Three Months Ended October 3, 2021

Three Months Ended January 2, 2022

Major Product Categories:

1 unchanged sentence

Other revenue

Three Months Ended October 4, 2020

Six Months Ended January 2, 2022

Major Product Categories:

1 unchanged sentence

Other revenue

Three Months Ended January 3, 2021

Major Product Categories:

Boats and trailers

Other revenue

Six Months Ended January 3, 2021

Major Product Categories:

Boats and trailers

Other revenue

Contract Liabilities

As of June 30, 2021, the Company had $ 1.8 million of contract liabilities associated with customer deposits.

During the three months ended October 3, 2021, $ 1.3 million of this amount was recognized as revenue.

As of October 3, 2021, total contract liabilities associated with customer deposits were $ 4.3 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 ending June 30, 2022.

During the six months ended January 2, 2022, $ 1.6 million of this amount was recognized as revenue.

As of January 2, 2022, total contract liabilities associated with customer deposits were $ 4.8 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 ending June 30, 2022.

Inventories consisted of the following:

13 unchanged sentences

The cash flow model included significant judgements and assumptions related to revenue growth and discount rates.

Near-term operating losses generated by start-up inefficiencies have negatively impacted the fair value of Aviara, causing the carrying value of the reporting unit to be in excess of the fair value.

Consequently, a $ 1.1 million impairment charge was recognized in the three months ended October 3, 2021.

At the time of the impairment test, near-term operating losses generated by start-up inefficiencies had negatively impacted the fair value of Aviara, causing the carrying value of the reporting unit to be in excess of the fair value.

Consequently, a $ 1.1 million impairment charge was recognized in the first quarter of fiscal 2022.

The carrying amounts of goodwill attributable to each of the Company’s reportable segments, were as follows:

3 unchanged sentences

Goodwill reallocation

Goodwill, net at October 3, 2021

Goodwill, net at January 2, 2022

The following table presents the carrying amount of Other intangible assets, net:

7 unchanged sentences

Total other intangible assets

Amortization expense related to Other intangible assets, net for both the three months ended October 3, 2021 and October 4, 2020 was $ 1.0 million.

Amortization expense related to Other intangible assets, net for both the three and six months ended January 2, 2022 and January 3, 2021 was $ 1.0 million and $ 2.0 million, respectively.

Estimated amortization expense for the fiscal year ending June 30, 2022 is $ 4.0 million.

7 unchanged sentences

Total accrued expenses and other current liabilities

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

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

Balance at the beginning of the period

2 unchanged sentences

Balance at the end of the period

COMMITMENTS AND CONTINGENCIES

Purchase Commitments

In October 2021, we signed a new supplier agreement to purchase marine outboard engines during fiscal 2022.

During the term of the agreement, we committed to purchasing a minimum annual gross dollar value of $ 27.0 million in engines.

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 January 2, 2022, 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 the 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.

LONG-TERM DEBT

22 unchanged sentences

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.

Effective during the quarter, the applicable margin for loans accruing at the prime rate was 0.25 % and the applicable margin for loans accruing interest at LIBOR was 1.25 %.

As of October 3, 2021, the interest rate on the Company’s term loan and revolving credit facility was 1.38 %.

Effective during the three and six months ended January 2, 2022, the applicable margin for loans accruing at the prime rate was 0.25 % and the applicable margin for loans accruing interest at LIBOR was 1.25 %.

As of January 2, 2022, the interest rate on the Company’s term loan and revolving credit facility was 1.38 %.

The Credit Agreement will mature and all remaining amounts outstanding thereunder will be due and payable on June 28, 2026.

As of October 3, 2021, the Company was in compliance with its financial covenants under the Credit Agreement.

As of January 2, 2022, the Company was in compliance with its financial covenants under the Credit Agreement.

Revolving Credit Facility

As of January 2, 2022, the Company had $ 15.7 million of borrowings outstanding on its Revolving Credit Facility and had remaining availability of $ 84.3 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 3, 2021 and October 4, 2020, the Company’s effective tax rates were 24.0 % and 22.8 %, respectively.

The Company’s effective tax rate for the three months ended October 3, 2021 is higher compared to the effective tax rate for the three months ended October 4, 2020, primarily due to an increase in the effective state tax rate, an increase in the tax impact of uncertain state tax positions and a reduction in the benefit of federal and state tax credits, partially offset by an increase in the Company’s net permanent benefits, largely driven by changes in the foreign derived intangible income due to an increase in forecasted taxable income, foreign sales and gross margin.

During the three months ended January 2, 2022 and January 3, 2021, the Company’s effective tax rate was 23.7 % and 22.2 %, respectively.

During the six months ended January 2, 2022 and January 3, 2021, the Company’s effective tax rate was 23.8 % and 22.5 %, respectively.

The Company’s effective tax rate for the three and six months ended January 2, 2022 is higher compared to the effective

tax rate for th e three and six months ended January 3, 2021 , primarily due to an increase in the effective state tax rate, an increase in the tax impact of uncertain state tax positions and a reduction in the benefit of federal and state tax credits, partially offset by an increase in the Company’s net permanent benefits, largely driven by changes in foreign derived intangible income due to an increase in forecasted foreign taxable income, sales and gross margin.

SHARE-BASED COMPENSATION

1 unchanged sentence

Three Months Ended

Six Months Ended

Restricted stock awards

2 unchanged sentences

Restricted Stock Awards

During the three months ended October 3, 2021, the Company granted 72,677 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 3, 2021, 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 2, 2022, the Company granted 74,961 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 2, 2022, 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 3, 2021, was $ 26.04 per share.

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

The weighted average grant date fair value of RSAs granted in the six months ended January 2, 2022, was $ 26.14 per share.

The following table summarizes the status of nonvested RSAs as of January 2, 2022, and changes during the six months then ended.

Nonvested at June 30, 2021

Nonvested at October 3, 2021

As of October 3, 2021, there was $ 2.7 million of total unrecognized compensation expense related to nonvested RSAs.

Nonvested at January 2, 2022

As of January 2, 2022, there was $ 2.3 million of total unrecognized compensation expense related to nonvested RSAs.

The Company expects this expense to be recognized over a weighted average period of 1.8 years.

6 unchanged sentences

The grant date fair value is determined based on both the probability assessment of the Company achieving the performance criteria and an estimate of the expected TSR modifier.

The TSR modifier estimate is determined using a Monte Carlo Simulation model, which considers the likelihood of numerous possible outcomes of long-term market performance.

The TSR modifier estimate is determined using a Monte Carlo Simulation model, which considers the

likelihood of numerous possible outcomes of long-term market performance.

Compensation expense related to nonvested PSUs is recognized ratably over the performance period.

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

The following table summarizes the status of nonvested PSUs as of January 2, 2022, and changes during the six months then ended.

Nonvested at June 30, 2021

Nonvested at October 3, 2021

As of October 3, 2021, there was $ 3.2 million of total unrecognized compensation expense related to nonvested PSUs.

Nonvested at January 2, 2022

As of January 2, 2022, there was $ 2.9 million of total unrecognized compensation expense related to nonvested PSUs.

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

2 unchanged sentences

Three Months Ended

Six Months Ended

Weighted average shares — basic

4 unchanged sentences

Diluted net income per share

For the three months ended October 3, 2021 and October 4, 2021, 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 2, 2022 and January 3, 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 our common stock during the three-year period ending June 24, 2024.

During the quarter ended October 3, 2021, the Company repurchased 58,379 shares of common stock for $ 1.5 million in cash, including related fees and expenses.

During the three months ended January 2, 2022, the Company repurchased 356,296 shares of common stock for $ 9.9 million in cash, including related fees and expenses.

During the six months ended January 2, 2022, the Company repurchased 414,675 shares of common stock for $ 11.4 million in cash, including related fees and expenses.

As of January 2, 2022, $ 38.6 million remained available under the program.

SEGMENT INFORMATION

3 unchanged sentences

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 three months ended October 3, 2021, the Company’s CODM regularly assessed the operating performance of the Company’s boat brands under four operating and reportable segments:

For the three and six months ended January 2, 2022, the Company’s CODM regularly assessed the operating performance of the Company’s boat brands under four operating and reportable segments:

The MasterCraft segment produces boats at its Vonore, Tennessee facility.

12 unchanged sentences

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

For the Three Months Ended October 3, 2021

For the Three Months Ended January 2, 2022

Operating income (loss)

1 unchanged sentence

Purchases of property, plant and equipment

For the Three Months Ended October 4, 2020

For the Six Months Ended January 2, 2022

Operating income (loss)

Depreciation and amortization

Goodwill impairment

Purchases of property, plant and equipment

For the Three Months Ended January 3, 2021

Operating income (loss)

Depreciation and amortization

Purchases of property, plant and equipment

For the Six Months Ended January 3, 2021

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 3, 2021

January 2, 2022

June 30, 2021

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