What changed in this filing

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Item 1. Financial Statements

2022-05-11 compared with 2022-02-03 · 59 added, 51 removed, 335 unchanged (25% of the section changed)

23 unchanged sentences

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, including but not limited to the following:

the potential effects of supply chain disruptions and production inefficiencies as a result of the coronavirus (“COVID-19”) pandemic on the Company, general economic conditions, demand for our products, inflation, changes in consumer preferences, competition within our industry, our reliance on our network of independent dealers, our ability to manage our manufacturing levels and our fixed cost base, the successful introduction of our new products and the other important factors described under the caption “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended June 30, 2021, filed with the Securities and Exchange Commission (“SEC”) on September 2, 2021 (our “2021 Annual Report”).

the potential effects of supply chain disruptions and production inefficiencies as a result of the coronavirus (“COVID-19”) pandemic on the Company, general economic conditions, demand for our products, inflation, changes in consumer preferences, competition within our industry, our reliance on our network of independent dealers, our ability to manage our manufacturing levels and our fixed cost base, the successful introduction of our new products, geopolitical conflicts and the other important factors described under the caption “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended June 30, 2021, filed with the Securities and Exchange Commission (“SEC”) on September 2, 2021 (our “2021 Annual Report”).

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.

6 unchanged sentences

Three Months Ended

Six Months Ended

Nine Months Ended

COST OF SALES

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

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

issued and outstanding, 18,208,788 shares at April 3, 2022 and 18,956,719 shares at June 30, 2021

Additional paid-in capital

15 unchanged sentences

Balance at January 2, 2022

Share-based compensation activity

Repurchase and retirement of common stock

Balance at April 3, 2022

Balance at June 30, 2020

3 unchanged sentences

Balance at January 3, 2021

Share-based compensation activity

Balance at April 4, 2021

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

3 unchanged sentences

(Dollars in thousands)

Six Months Ended

Nine Months Ended

CASH FLOWS FROM OPERATING ACTIVITIES:

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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 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.

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 April 3, 2022, its results of operations for the three and nine months ended April 3, 2022 and April 4, 2021, its cash flows for the nine months ended April 3, 2022 and April 4, 2021, and its statements of stockholders’ equity for the three and nine months ended April 3, 2022 and April 4, 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 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.

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 nine months ended April 3, 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 notes to the condensed consolidated financial statements to conform to the current presentation.

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

Recently Adopted Accounting Standards

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

Three Months Ended January 2, 2022

Three Months Ended April 3, 2022

Major Product Categories:

1 unchanged sentence

Other revenue

Six Months Ended January 2, 2022

Nine Months Ended April 3, 2022

Major Product Categories:

1 unchanged sentence

Other revenue

Three Months Ended January 3, 2021

Three Months Ended April 4, 2021

Major Product Categories:

1 unchanged sentence

Other revenue

Six Months Ended January 3, 2021

Nine Months Ended April 4, 2021

Major Product Categories:

3 unchanged sentences

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

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.

During the nine months ended April 3, 2022, all of this amount was recognized as revenue.

As of April 3, 2022, total contract liabilities associated with customer deposits were $ 2.2 million, were reported in Accrued expenses and other current liabilities on the condensed consolidated balance sheet, and substantially all of the amounts are expected to be recognized as revenue during the remainder of the year ending June 30, 2022.

Inventories consisted of the following:

20 unchanged sentences

Goodwill reallocation

Goodwill, net at January 2, 2022

Goodwill, net at April 3, 2022

During the three and nine months ended April 3, 2022 and April 4, 2021, the Company did no t record impairment charges related to its Other intangible assets.

Given current period operating losses combined with a history of operating losses and operational inefficiencies, the Company continues to monitor the NauticStar segment’s outlook for sales and operating performance relative to the forecasts of expected future cash flows used in the Company’s previous impairment tests in order to evaluate whether the carrying value of the segment’s intangible assets remain above fair value.

Should economic conditions, such as supply chain disruptions, labor challenges, and inflationary pressures, deteriorate in future periods or remain depressed for a prolonged period of time, or operational inefficiencies grow, estimates of future cash flows may not be sufficient to support the carrying value of NauticStar’s intangible assets.

For more information related to the Company’s Other intangible assets and our accounting policies related to determining fair values of our intangible assets and impairment evaluations, see Notes 1 and 6 to the Consolidated Financial Statements in Item 8 of the Form 10-K for the fiscal year ended June 30, 2021.

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 and six months ended January 2, 2022 and January 3, 2021 was $ 1.0 million and $ 2.0 million, respectively.

Amortization expense related to Other intangible assets, net for both the three and nine months ended April 3, 2022 and April 4, 2021 was $ 1.0 million and $ 3.0 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 six months ended:

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

Balance at the beginning of the period

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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.

In October 2021, the Company entered into a new supplier agreement to purchase marine outboard engines during fiscal 2022.

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

Legal Proceedings

1 unchanged sentence

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.

As of April 3, 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.

23 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 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 %.

Effective during the three and nine months ended April 3, 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 April 3, 2022, the interest rates on the Company’s term loan and revolving credit facility were 1.75 % and 3.75 %, respectively.

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

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

As of April 3, 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.

As of April 3, 2022, the Company had $ 7.7 million of borrowings outstanding on its Revolving Credit Facility and had remaining availability of $ 92.3 million.

Subsequent to April 3, 2022, the Company repaid all outstanding borrowings and availability under the Revolving Credit Facility was $ 100.0 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 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.

During the three months ended April 3, 2022 and April 4, 2021, the Company’s effective tax rate was 22.9 % and 19.4 %, respectively.

During the nine months ended April 3, 2022 and April 4, 2021, the Company’s effective tax rate was 23.4 % and 21.2 %, respectively.

The Company’s effective tax rate for the three and nine months ended April 3, 2022 is higher compared to the effective tax rate for the three and nine months ended April 4, 2021, primarily due to an increase in the tax impact of uncertain state tax positions and the increase in the effective state tax rate.

SHARE-BASED COMPENSATION

1 unchanged sentence

Three Months Ended

Six Months Ended

Nine Months Ended

Restricted stock awards

2 unchanged sentences

Restricted Stock Awards

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.

During the nine months ended April 3, 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 nine months ended April 3, 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 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.

The weighted average grant date fair value of RSAs granted in the nine months ended April 3, 2022, was $ 26.14 per share.

The following table summarizes the status of nonvested RSAs as of April 3, 2022, and changes during the nine months then ended.

Nonvested at June 30, 2021

Nonvested at January 2, 2022

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

Nonvested at April 3, 2022

As of April 3, 2022, there was $ 1.7 million of total unrecognized compensation expense related to nonvested RSAs.

The Company expects this expense to be recognized over a weighted average period of 1.7 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 January 2, 2022, and changes during the six months then ended.

The following table summarizes the status of nonvested PSUs as of April 3, 2022, and changes during the nine months then ended.

Nonvested at June 30, 2021

Nonvested at January 2, 2022

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

Nonvested at April 3, 2022

As of April 3, 2022, there was $ 2.3 million of total unrecognized compensation expense related to nonvested PSUs.

The Company expects this expense to be recognized over a weighted average period of 1.7 years.

2 unchanged sentences

Three Months Ended

Six Months Ended

Nine Months Ended

Weighted average shares — basic

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Diluted net income per share

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.

For the three and nine months ended April 3, 2022 and April 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.

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 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.

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 three months ended April 3, 2022, the Company repurchased 395,948 shares of common stock for $ 10.1 million in cash, including related fees and expenses.

During the nine months ended April 3, 2022, the Company repurchased 810,623 shares of common stock for $ 21.5 million in cash, including related fees and expenses.

As of April 3, 2022, $ 28.5 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 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:

For the three and nine months ended April 3, 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 January 2, 2022

For the Three Months Ended April 3, 2022

Operating income (loss)

1 unchanged sentence

Purchases of property, plant and equipment

For the Six Months Ended January 2, 2022

For the Nine Months Ended April 3, 2022

Operating income (loss)

2 unchanged sentences

Purchases of property, plant and equipment

For the Three Months Ended January 3, 2021

For the Three Months Ended April 4, 2021

Operating income (loss)

1 unchanged sentence

Purchases of property, plant and equipment

For the Six Months Ended January 3, 2021

For the Nine Months Ended April 4, 2021

Operating income (loss)

2 unchanged sentences

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

January 2, 2022

April 3, 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