What changed in this filing

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Item 2. Management’s Discussion and Analysis

2022-05-11 compared with 2022-02-03 · 116 added, 98 removed, 158 unchanged (58% of the section changed)

11 unchanged sentences

In order to better align the Company’s reported results with the internal metrics used by the Company's management to evaluate business performance as well as to provide better comparisons to prior periods and peer data, non-GAAP measures exclude the impact of purchase accounting amortization related to business acquisitions.

The COVID-19 pandemic has facilitated strong marine retail demand as consumers have taken advantage of more flexible work schedules allowing for more leisure time and marine product usage.

This strong retail demand has created historically low dealer inventory levels which, in turn, has increased wholesale demand for our products.

Year over year, we have increased production rates to address wholesale demand.

While supply chain disruptions, production inefficiencies, and inflationary pressures have impacted the results for the three and six months ended January 2, 2022 as discussed below, net sales increased 36.4 percent for the first half of fiscal 2022 compared to the same prior-year period.

Supply Chain Disruptions.

Demand for raw materials and components used in the production of our products has surged.

As a result, some of the materials and components that we use are in short supply.

To reduce the impact of supply chain disruptions on production, we have increased our raw materials safety stock and pursued alternative sourcing of raw materials and components where possible.

Additionally, work in process has increased as a result of supply chain shortages delaying our ability to finish production units.

Production Inefficiencies .

Business processes have been altered to address completion of boats waiting on parts while maintaining normal production lines, resulting in increased labor costs.

Absenteeism and implementing COVID-19 mitigating procedures also burdened our work force as we continue to focus on ramp-up of production.

Inflationary Pressures.

Inflationary pressures have increased the costs of raw materials and components used to build our products, negatively impacting our margins during the first half of 2022.

New model year price increases took effect for fiscal 2022;

however, these price increases did not fully offset the increased material costs caused by inflation.

In response to worsening inflationary pressures, we began phasing in additional mid-cycle price increases during the second quarter of fiscal 2022.

As we continue to navigate the unprecedented confluence of demand and disruption precipitated by the COVID-19 pandemic, our production rates and results going forward will depend, in large part, on our and our suppliers’ capacity and ability to alleviate ongoing and changing risks.

We will continue to actively monitor the impact of the COVID-19 pandemic and may take further actions to alter business operations as may be required by government authorities, or that are determined to be in the best interest of our employees, dealers, suppliers, and stakeholders.

The full extent of the COVID-19 pandemic impact on our business, operations, and financial results will depend on evolving factors that we cannot predict.

See “Risk Factors — Risks Relating to Our Business — Actual or potential public health emergencies, epidemics, or pandemics, such as the current coronavirus (“COVID-19”) pandemic, could have a material adverse effect on our business, results of operations, or financial condition” set forth in our 2021 Annual Report on Form 10-K.

Dealer inventory levels remain low compared to pre-pandemic levels, which has sustained the increased wholesale demand for our product.

Year over year, we have increased production rates to address wholesale demand, yet supply chain and labor challenges have disrupted our efforts to replenish dealer inventory levels.

Furthermore, these challenges, coupled with inflationary pressures, have increased costs and reduced our margins.

To mitigate the impact of these challenges on our business, we have increased raw material safety stock, pursued alternative sourcing, altered business processes, and phased in additional mid-cycle price increases.

However, the full extent of the impact on our business, operations, and financial results will depend on evolving factors that we cannot predict.

Risk Factors set forth in our 2021 Annual Report on Form 10-K.

Macroeconomic Events

We are actively monitoring the impact of changing macroeconomic conditions on our business, including geopolitical events, disrupted global supply chains, and inflation.

The impact of these factors has affected many manufacturers across various industries including ours.

Supply chain challenges continue to evolve, driven by increased demand, labor shortages, logistical constraints, and rising prices to our suppliers, creating inefficiencies and shipping delays.

Rapidly increasing material and overhead costs are outpacing price increases as we try to mitigate the impact.

Furthermore, the uncertainty associated with the COVID-19 pandemic remains, which we continue to actively monitor in terms of its potential impact on our results of operations.

The extent to which our operations will be impacted by COVID-19 will largely depend on future developments, which are highly uncertain and cannot be accurately predicted.

Results of Operations

Consolidated Results

The table below presents our consolidated results of operations for the three and six months ended:

The table below presents our consolidated results of operations for the three and nine months ended:

Three Months Ended

Six Months Ended

Nine Months Ended

Consolidated statements of operations :

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Consolidated net sales per unit

Net sales increased 34.4 percent and 36.4 percent during the second quarter and first six months of fiscal 2022, respectively, when compared with the same prior year periods.

Net sales in the MasterCraft, Crest, and Aviara segments benefited from increased sales volume as our dealers continue to have high retail demand and look to restock their inventories.

Net sales increased 26.3 percent and 32.4 percent during the third quarter and first nine months of fiscal 2022, respectively, when compared with the same prior year periods.

Net sales benefited from increased sales volume as our dealers continue to restock their inventories.

Higher prices, favorable model mix, and higher option sales were also favorable compared to the prior period.

Gross margin percentage declined 260 basis points and 350 basis points during the second quarter and first six months of fiscal 2022, respectively, compared to the same prior year periods.

Higher revenues yielded a lower margin due to supply chain disruptions and inflationary pressures that drove material and labor costs higher.

Though we began phasing in mid-cycle price increases to offset these headwinds, the impact will not be fully realized until the second half of fiscal 2022.

In addition, overhead from the new Aviara facility created unfavorable overhead absorption.

Operating expense increased 18.8 percent and 22.1 percent during the second quarter and first six months of fiscal 2022 when compared to the same prior year periods.

Despite our increased costs, selling, general, and administrative expenses as a percentage of sales have decreased for the second quarter and first half of 2022 when compared to the same prior year periods.

Selling and marketing expense increased due to timing of prior-year expenses being impacted by the COVID-19 pandemic, resulting in lower costs for the second quarter and first half of fiscal 2021.

General and administrative expenses increased as a result of increased variable compensation costs and continued investments in information technology.

Refer to the MasterCraft, Crest, NauticStar, and Aviara segments for further details on the drivers of net sales changes.

Gross margin percentage declined 270 basis points and 310 basis points during the third quarter and first nine months of fiscal 2022, respectively, compared to the same prior year periods.

Lower margins were the result of supply chain disruptions and inflationary pressures that drove material and overhead costs higher and were most pronounced at the NauticStar segment.

Though we implemented mitigating procedures and phased in mid-cycle price increases to offset these headwinds, supply chain disruptions and inflationary pressures continued to impact our margins.

Operating expenses were flat during the third quarter and increased 13.7 percent during the first nine months of fiscal 2022 when compared to the same prior year periods.

Despite our increased costs during the first nine months, selling, general, and administrative expenses as a percentage of sales have decreased when compared to the same prior-year period.

Selling and marketing expense increased due to timing of prior-year expenses being impacted by the COVID-19 pandemic, resulting in lower costs for the first nine months of fiscal 2021.

General and administrative expenses increased during the first nine months as a result of continued investments in information technology.

Additionally, an impairment charge related to the allocated goodwill associated with the Aviara segment was recorded in the first quarter of fiscal 2022, as discussed in Note 4 to the Unaudited Condensed Consolidated Financial Statements.

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Segment Results

As discussed in Note 1 to our Unaudited Condensed Consoslidated Financial Statements and beginning with the first quarter of fiscal 2022, our CODM began to manage our business, allocate resources, and evaluate performance based on the reportable segments of MasterCraft, Crest, NauticStar, and Aviara.

As discussed in Note 1 to our Unaudited Condensed Consolidated Financial Statements and beginning with the first quarter of fiscal 2022, our CODM began to manage our business, allocate resources, and evaluate performance based on the reportable segments of MasterCraft, Crest, NauticStar, and Aviara.

MasterCraft Segment

The following table sets forth MasterCraft segment results for the three and six months ended:

The following table sets forth MasterCraft segment results for the three and nine months ended:

Three Months Ended

Six Months Ended

Nine Months Ended

Operating income

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Net sales per unit

Net sales increased 34.3 percent and 33.3 percent during the second quarter and first six months of fiscal 2022, respectively, when compared with the same prior year periods, primarily driven by an increase in sales volume and favorable model mix.

Additionally, net sales benefited from higher prices and higher option sales.

Operating income increased $4.6 million and $6.5 million during the second quarter and first half of fiscal 2022, respectively, when compared to the same prior year periods.

The increase was driven by higher net sales, and partially offset by inflationary pressures, the production inefficiencies from supply chain disruptions, and higher general and administrative costs.

Net sales increased 23.6 percent and 29.5 percent during the third quarter and first nine months of fiscal 2022, respectively, when compared with the same prior year periods.

The increase was primarily driven by favorable model mix, higher prices, and higher option sales.

For the third quarter, the increase was partially offset by decreased sales volumes.

Lower sales volume for the quarter was driven by supply chain disruptions and absenteeism due to COVID-19, which created inefficiencies and shipping delays.

In contrast to the third quarter, the first nine months benefited from increased sales volumes.

Operating income increased $7.2 million and $13.7 million during the third quarter and first nine months of fiscal 2022, respectively, when compared to the same prior year periods.

The increase was driven by higher net sales, offset by inflationary pressures and production inefficiencies from supply chain disruptions and labor challenges.

Additionally, for the first nine months of fiscal 2022, Selling and marketing expense increased due to timing of prior-year expenses being impacted by the COVID-19 pandemic, resulting in lower costs for the first nine months of fiscal 2021.

Also, General and administrative expenses increased as a result of continued investments in product development and information technology.

Crest Segment

The following table sets forth Crest segment results for the three and six months ended:

The following table sets forth Crest segment results for the three and nine months ended:

Three Months Ended

Six Months Ended

Nine Months Ended

Operating income

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Net sales per unit

Net sales increased $8.7 million and $23.5 million during the second quarter and first half of fiscal 2022, respectively, when compared to the same prior year periods, as a result of higher sales volumes and higher prices.

Operating income for second quarter and first half of fiscal 2022 increased 75.0 percent and 95.6 percent, respectively, when compared to the same prior year periods.

Net sales increased $8.6 million and $32.1 million during the third quarter and first nine months of fiscal 2022, respectively, when compared to the same prior year periods, as a result of higher sales volumes and higher prices.

Operating income for the third quarter and first nine months of fiscal 2022 increased 34.2 percent and 65.5 percent, respectively, when compared to the same prior year periods.

The increase is primarily the result of higher net sales, partially offset by higher costs from inflationary pressures.

Purchases of property, plant, and equipment increased $0.8 million and $1.8 million for the third quarter and first nine months of fiscal 2022, respectively, when compared to the same prior year periods due to investments in manufacturing capacity expansion and maintenance capital.

NauticStar Segment

The following table sets forth NauticStar segment results for the three and six months ended:

The following table sets forth NauticStar segment results for the three and nine months ended:

Three Months Ended

Six Months Ended

Operating loss

Nine Months Ended

Operating (loss) / income

Purchases of property, plant and equipment

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Net sales per unit

Net sales were $15.1 million and $28.4 million for the second quarter and first six months of fiscal 2022, respectively.

Net sales benefited from higher prices and higher option sales, and was offset by decreased sales volume, when compared to the same prior year periods.

Operating loss was $3.1 million and $5.4 million for the second quarter and first six months of fiscal 2022, respectively, when compared to the same prior year periods.

Higher costs from inflationary pressures, supply chain disruptions, and labor challenges offset higher net sales.

Net sales decreased $0.7 million for the third quarter of fiscal 2022 when compared to the same prior-year period.

The benefits of higher prices and favorable model mix did not overcome the decreased sales volume during the third quarter.

Lower sales volume was driven by supply chain disruptions and production inefficiencies, which created shipping delays.

Net sales increased $0.5 million for the first

nine months of fiscal 2022 , due to higher prices , favorable model mix, and higher option sales , partially offse t by decreased sales volumes.

Operating loss was $4.1 million and $9.5 million for the third quarter and first nine months of fiscal 2022, respectively.

Supply chain disruptions, labor challenges, and higher costs from inflationary pressures, offset benefits from higher sales prices.

Additionally, for the third quarter of fiscal 2022, $0.2 million in expense was recognized for third-party consulting fees in an effort to improve operational efficiency and increase throughput at the NauticStar segment.

Aviara Segment

The following table sets forth Aviara segment results for the three and six months ended:

The following table sets forth Aviara segment results for the three and nine months ended:

Three Months Ended

Six Months Ended

Nine Months Ended

Operating loss

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Net sales per unit

Net sales increased $4.7 million and $6.7 million during the second quarter and first six months of fiscal 2022, respectively, when compared to the same prior year periods, due to an increase in unit sales volume attributed to increased capacity from the new Merritt Island facility and favorable model mix.

During the second quarter and first six months of 2022, all Aviara boats were manufactured in our 140,000 square foot Merritt Island, Florida facility, which we purchased in October 2020 for $14.2 million.

During the second quarter and first six months of 2021, the production of Aviara boats at our MasterCraft facility in Vonore, Tennessee, was winding down and transitioning to the Merritt Island facility.

As a result of this transition, overhead costs attributable to Aviara increased significantly which creates a dilutive near-term impact on Aviara’s margins and profitability.

Operating loss increased $0.3 million and $2.9 million for the second quarter and first half of fiscal 2022, respectively, when compared to the same prior year periods, as a result of ramp up related inefficiencies in the Merritt Island facility, including higher overhead costs associated with the new facility.

Additionally, a goodwill impairment charge was recorded during the first quarter of fiscal 2022.

Net sales increased $8.0 million and $14.7 million during the third quarter and first nine months of fiscal 2022, respectively, when compared to the same prior year periods, due to an increase in sales volume, favorable model mix, and higher prices.

During fiscal 2022, all Aviara boats were manufactured in our 140,000 square foot Merritt Island, Florida facility, which we purchased in October 2020.

During the first six months of 2021, the production of Aviara boats at our MasterCraft facility in Vonore, Tennessee, was winding down and transitioning to the Merritt Island facility.

As a result of this transition, overhead costs attributable to Aviara increased significantly which created a dilutive near-term impact on Aviara’s margins and profitability.

Operating loss decreased $0.7 million for the third quarter of fiscal 2022 as a result of increased production, partially offset by inflationary pressures when compared to the third quarter of fiscal 2021.

Operating loss increased $2.2 million for the first nine months of fiscal 2022, compared to the same prior-year period due to inflation, ramp up related inefficiencies at the Merritt Island facility, including higher overhead costs associated with the new facility, and a goodwill impairment charge recorded during the first quarter of fiscal 2022.

See Note 4 in Notes to Unaudited Condensed Consolidated Financial Statements for more information on the impairment charge.

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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 Aviara transition costs and certain non-cash items including goodwill impairment and share-based compensation.

For the periods presented herein, these adjustments include operational improvement initiative costs, Aviara transition costs, and certain non-cash items including goodwill impairment and share-based compensation.

We define Adjusted EBITDA margin as Adjusted EBITDA expressed as a percentage of Net sales.

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We define Adjusted Net Income and Adjusted Net Income per share as net income 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 Aviara transition costs and certain non-cash items including goodwill impairment, other intangible asset amortization, and share-based compensation.

EBITDA, Adjusted EBITDA, 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.

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Three Months Ended

Six Months Ended

Nine Months Ended

Income tax expense

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Share-based compensation

Goodwill impairment (a)

Aviara transition costs (b)

Operational improvement initiative (a)

Goodwill impairment (b)

Aviara transition costs (c)

Adjusted EBITDA

Represents third-party consulting fees associated with the operational improvement initiative at our NauticStar segment.

Represents a non-cash charge recorded in the Aviara segment for impairment of goodwill.

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Three Months Ended

Six Months Ended

Nine Months Ended

(Dollars in thousands, except per share data)

Income tax expense

Share-based compensation

Amortization of acquisition intangibles

Goodwill impairment (a)

Aviara transition costs (b)

Share-based compensation

Operational improvement initiative (a)

Goodwill impairment (b)

Aviara transition costs (c)

Adjusted Net Income before income taxes

Adjusted income tax expense (c)

Adjusted income tax expense (d)

Adjusted Net Income

Adjusted Net Income per share:

Weighted average shares used for the computation of:

Weighted average shares used for the computation of (e) :

Basic Adjusted Net Income per share

Diluted Adjusted Net Income per share

Represents third-party consulting fees associated with the operational improvement initiative at our NauticStar segment.

Represents a non-cash charge recorded in the Aviara segment for impairment of goodwill.

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Reflects income tax expense at an income tax rate of 23.0% for each period presented.

Represents the Weighted Average Shares used for the computation of Basic and Diluted earnings per share as presented on the Consolidated Statements of Operations to calculate Adjusted Net Income per diluted share for all periods presented herein.

The following table presents the reconciliation of net income per diluted share to Adjusted Net Income per diluted share for the periods presented:

Three Months Ended

Six Months Ended

Nine Months Ended

Net income per diluted share

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Income tax expense

Share-based compensation

Amortization of acquisition intangibles

Goodwill impairment (a)

Aviara transition costs (b)

Share-based compensation

Operational improvement initiative (a)

Goodwill impairment (b)

Aviara transition costs (c)

Adjusted Net Income per diluted share before income taxes

Impact of adjusted income tax expense on net income per diluted share before income taxes (c)

Impact of adjusted income tax expense on net income per diluted share before income taxes (d)

Adjusted Net Income per diluted share

Represents third-party consulting fees associated with the operational improvement initiative at our NauticStar segment.

Represents a non-cash charge recorded in the Aviara segment for impairment of goodwill.

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Our principal sources of liquidity are our cash balance, 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 $13.6 million as of January 2, 2022, a decrease of $25.6 million from $39.3 million as of June 30, 2021.

Total debt as of January 2, 2022 and June 30, 2021 was $73.7 million and $93.1 million, respectively.

Our working capital was impacted by the $24.9 million increase in inventory during the first half of fiscal 2022 mainly due to an increase in raw materials to support higher production volumes and to increase safety stock to manage supply chain risk.

Cash and cash equivalents totaled $13.8 million as of April 3, 2022, a decrease of $25.5 million from $39.3 million as of June 30, 2021.

Total debt as of April 3, 2022 and June 30, 2021 was $65.0 million and $93.1 million, respectively.

Our working capital was impacted by the $28.9 million increase in inventory during the first nine months of fiscal 2022 mainly due to an increase in raw materials to support higher production volumes and to increase safety stock to manage supply chain risk.

Work in process has increased due to supply chain disruptions.

As of January 2, 2022, we had $15.7 million outstanding under the Revolving Credit Facility, leaving $84.3 million of available borrowing capacity.

As of April 3, 2022, we had $7.7 million outstanding under the Revolving Credit Facility, leaving $92.3 million of available borrowing capacity.

Refer to Note 7 — Long Term Debt in the Notes to Unaudited Condensed 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 the six months ending January 2, 2022 the Company repurchased 414,675 shares of common stock for $11.4 million in cash, including related fees and expenses.

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

We are continuing to monitor the impact of supply chain disruptions, production inefficiencies, and inflationary pressures on our business.

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The following table summarizes our cash flows from operating, investing, and financing activities:

Six Months Ended

Nine Months Ended

(Dollars in thousands)

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Net change in cash

Six Months Ended January 2, 2022 Cash Flow

Net cash provided by operating activities for the first half of 2022 was $12.2 million mainly due to net income, partially offset by working capital usage.

Working capital usage primarily consisted of an increase in inventory and a decrease in accounts payable.

Partially offsetting the working capital usage was a decrease in accounts receivable and an increase in accrued expenses and other current liabilities.

As discussed above, inventory increased $24.9 million for first half of 2022.

Accounts payable decreased as a result of the timing of purchases and payment of invoices.

Accounts receivable decreased as a result of timing of customer payments.

Accrued expenses and other current liabilities increased due to an increase in customer deposits, as described in Note 2 – Revenue Recognition, and warranty costs, partially offset by the payment in the first quarter of fiscal 2022 of variable compensation that was accrued at June 30, 2021.

Nine Months Ended April 3, 2022 Cash Flow

Net cash provided by operating activities for the nine months ended April 3, 2022 totaled $35.3 million versus $54.4 million compared to the same prior-year period.

The decrease is primarily due to working capital usage, partially offset by higher net earnings during fiscal 2022.

Working capital usage primarily consisted of an increase in inventory, accounts receivable, and prepaid expenses and other current assets.

Partially offsetting the working capital usage was an increase in accounts payable and accrued expenses and other current liabilities.

As discussed above, inventory increased $28.9 million for first nine months of 2022.

Accounts receivable increased as a result of timing of shipments.

Prepaid expenses and other current assets increased due to higher general insurance premiums.

Accounts payable increased as a result of increased production levels.

Accrued expenses and other current liabilities increased due to an increase in warranty costs and dealer incentives.

Net cash used for investing activities was $10.8 million, which included capital expenditures.

Our capital spending was focused on expanding our capacity and maintenance capital.

Net cash used for financing activities was $31.1 million, which included net payments of $19.5 million on long-term debt and funding of the stock repurchase program totaling $11.4 million.

Six Months Ended January 3, 2021 Cash Flow

Net cash provided by operating activities in first quarter 2021 totaled $30.2 million primarily due to net income, an increase in accrued expenses and other current liabilities, and an increase in accounts payable, partially offset by an increase in inventory and accounts receivable.

Accrued expenses and other current liabilities increased due to timing of variable compensation costs and an increase in customer deposits.

Net cash used for financing activities was $49.9 million, which included net payments of $28.3 million on long-term debt and stock repurchases totaling $21.5 million.

Nine Months Ended April 4, 2021 Cash Flow

Net cash provided by operating activities for the nine months ended April 4, 2021 totaled $54.4 million primarily due to net income net of non-cash expense items, an increase in accounts payable and accrued expenses and other current liabilities, and a decrease in income tax receivable, partially offset by an increase in inventory, accounts receivable, and prepaid expenses and other current assets.

Accounts payable and inventory increased as a result of increased production.

Accrued expenses and other current liabilities increased due to timing of variable compensation costs, increased warranty, dealer incentive, and transportation costs, and an increase in customer deposits.

Income tax receivable decreased due to a receipt of a tax refund associated with fiscal 2020.

Accounts receivable increased as a result of increased sales.

Prepaid expenses and other current assets increased due to payment of annual insurance premiums during the third quarter of fiscal 2021.

Net cash used for investing activities was $23.8 million, which consisted of capital expenditures, including the purchase of the Merritt Island, Florida manufacturing facility.

Net cash used for financing activities was $15.5 million and related primarily to payments of long-term debt.

Net cash used for financing activities was $18.0 million and related primarily to net payments of long-term debt.

Contractual Obligations

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

In October 2021, we entered into 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.

Except for the new purchase agreement and the net repayment of debt of $19.5 million during the six months ended January 2, 2022, there were no material changes to our contractual obligations disclosed in “Part II, Item 7.

Except for the new purchase agreement and the net repayment of debt of $28.3 million during the nine months ended April 3, 2022, there were no material changes to our contractual obligations disclosed in “Part II, Item 7.

Management’s Discussion and Analysis of Financial Condition and Results of Operations” set forth in our Annual Report on Form 10-K for the fiscal year ended June 30, 2021.

Off Balance Sheet Arrangements

The Company did not have any off balance sheet financing arrangements as of January 2, 2022.

The Company did not have any off balance sheet financing arrangements as of April 3, 2022.

Critical Accounting Policies

As of January 2, 2022 there were no significant changes in or changes to the application of our critical accounting policies or estimation procedures from those presented in our Annual Report on Form 10-K for the fiscal year ended June 30, 2021, which was filed with the SEC on September 2, 2021 .

Except as noted below, as of April 3, 2022 there were no significant changes in or changes to the application of our critical accounting policies or estimation procedures from those presented in our Annual Report on Form 10-K for the fiscal year ended June 30, 2021, which was filed with the SEC on September 2, 2021.

Other Intangible Assets

During the three and nine months ended April 3, 2022 and April 4, 2021, the Company did not 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.

See Note 4 in the Notes to Unaudited Condensed Consolidated Financial Statements for further details.

QUANTITATIVE AND QUALITATI VE DISCLOSURES ABOUT MARKET RISK.

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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 2. Management’s Discussion and Analysis