MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
−Removed: The following discussion and analysis should be read together with the sections entitled “Risk Factors,” “Selected Financial Data,” and the financial statements and the accompanying notes included elsewhere in this Form 10-K.
−Removed: In addition, the statements in this discussion and analysis regarding industry outlook, our expectations regarding the performance of our business, anticipated financial results, liquidity and the other non-historical statements are forward-looking statements.
+Added: The following discussion and analysis should be read together with the sections entitled “Risk Factors” and the financial statements and the accompanying notes included elsewhere in this Form 10-K.
+Added: In addition, the statements in this discussion and analysis regarding the performance expectations of our business, anticipated financial results, liquidity and the other non-historical statements are forward-looking statements.
These forward-looking statements are subject to numerous risks and uncertainties, including, but not limited to, the risks and uncertainties described in “Cautionary Note Regarding Forward-Looking Statements” and in “Risk Factors” above.
7 unchanged sentences
Gross margin — We define gross margin as gross profit divided by net sales, expressed as a percentage.
−Removed: Net income margin — We define net income (loss) margin as net income divided by net sales, expressed as a percentage.
+Added: Net income (loss) margin — We define net income (loss) margin as net income (loss) divided by net sales, expressed as a percentage.
Adjusted EBITDA — We define Adjusted EBITDA as earnings before interest expense, income taxes, depreciation, and amortization (“EBITDA”), as further adjusted to eliminate certain non-cash charges and unusual items that we do not consider to be indicative of our core/ongoing operations.
−Removed: For a reconciliation of Adjusted EBITDA to net income (loss), see “Non-GAAP Measures” below.
+Added: For a reconciliation of EBITDA to Adjusted EBITDA, see “Non-GAAP Measures” below.
Adjusted EBITDA margin — We define Adjusted EBITDA margin as Adjusted EBITDA divided by net sales, expressed as a percentage.
1 unchanged sentence
Adjusted Net Income — We define Adjusted Net Income as net income (loss) adjusted to eliminate certain non-cash charges and other items that we do not consider to be indicative of our core/ongoing operations and adjusted for the impact to income tax expense (benefit) related to non-GAAP adjustments.
−Removed: For a reconciliation of Adjusted Net Income to net income (loss), see “Non-GAAP Measures” below.
−Removed: COVID-19 Pandemic
−Removed: Though the Company has been impacted by supply chain disruptions as a result of the COVID-19 pandemic, demand for our products has been strong and, as a result of our employees’ committed efforts, our facilities are now running at production rates above their pre-COVID-19 levels.
−Removed: However, we continue to be subject to risks and uncertainties as a result of the COVID-19 pandemic.
−Removed: The extent of the impact of the COVID-19 pandemic on our business remains uncertain and difficult to predict, as the response to the COVID-19 pandemic is still evolving in many countries, including the United States and other markets where we and our suppliers operate.
−Removed: Impact to Operations
−Removed: To balance wholesale production with the then anticipated impacts to retail demand caused by the economic impacts of the COVID-19 pandemic, we reduced production in February 2020, and, in late March 2020, temporarily suspended manufacturing operations at all of our facilities to protect the health of our employees and comply with governmental mandates.
−Removed: We resumed operations at reduced production levels at our manufacturing facilities by mid-May 2020.
−Removed: As governmental restrictions were lifted and as a result of social distancing abilities, demand in the U.S.
−Removed: retail marine market accelerated in May 2020, and has remained elevated, driving dealer inventory levels to historic lows, which remain at depressed levels despite our increased production rates being above pre-COVID-19 levels.
−Removed: Additionally, the Company’s operations have been impacted by supply chain disruptions.
−Removed: To reduce the impact of supply chain disruptions on production, the Company has increased its safety stock.
−Removed: Impact to Liquidity and Capital Resources
−Removed: On March 19, 2020, we drew $35.0 million on our revolving credit agreement as a precautionary measure in order to increase our cash position and preserve financial flexibility in light of uncertainty in the global markets resulting from the COVID-19 pandemic.
−Removed: Additionally, on May 7, 2020, we entered into Amendment No.
−Removed: 3 (the “Amendment”) to the Fourth Amended & Restated Credit and Guarantee Agreement to strengthen our financial flexibility.
−Removed: Among other things, the changes effected by the Amendment provided temporary relief under our financial covenants.
−Removed: See Note 8 in Notes to Consolidated Financial Statements for more information regarding these changes, including sunsetting of the temporary relief provisions.
−Removed: The performance of the business and our cash management activities provided the flexibility to repay the entire $35.0 million revolving credit facility during the first quarter of fiscal 2021.
−Removed: Since that time, our strong operating performance has continued which has allowed us to refinance our debt and build our cash balance to $39.3 million as of June 30, 2021.
−Removed: The refinancing allowed us to reduce our borrowing under our term loan by $33.7 million by drawing that same amount on our revolving credit agreement, which leaves us with $66.3 million of availability under the revolving credit agreement as of June 30, 2021.
−Removed: These actions provide us with the flexibility to expedite principal payments on total debt.
−Removed: We were in compliance with our financial covenants as of June 30, 2021.
−Removed: We believe strong marine retail demand coupled with abnormally low dealer inventory levels for all our brands has created a growth opportunity, and as a result, we plan to further increase production rates, which are already above their pre-COVID-19 levels.
−Removed: However, as we navigate the unprecedented confluence of demand and disruption precipitated by the COVID-19 pandemic, our production rates going forward will depend, in large part, on our suppliers’ capacity and ability to remain open if infection rates increase.
−Removed: Additionally, demand for raw materials and components used in the production of our products has surged.
−Removed: As a result, some of the materials and components that we use, including certain resins, fiberglass, aluminum, lumber and steel, are in short supply.
−Removed: Our ability to grow also requires our Company to retain a high-performing workforce which will be critical to meeting our production objectives.
−Removed: 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.
−Removed: The full extent of the impact of the COVID-19 pandemic on our business, operations, and financial results will depend on evolving factors that we cannot predict.
−Removed: See Item 1A “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.”
−Removed: Overview of Results of Operations
−Removed: Net sales were $525.8 million for fiscal 2021, an increase of 44.8 percent from fiscal 2020, which was impacted by, among other things, the COVID-19 pandemic.
−Removed: The increase was primarily the result of higher sales volumes, higher prices, and lower dealer incentives, partially offset by the impact of model mix.
−Removed: Gross margin increased 390 basis points to 24.7 percent from fiscal 2020, primarily due to higher prices, higher sales volume, and lower dealer incentives.
−Removed: The increase was partially offset by costs associated with the transition of production of our Aviara brand to the Merritt Island, Florida facility and increased labor and material costs.
−Removed: Net income was $56.2 million for fiscal 2021, compared to Net loss of $24.0 million for fiscal 2020.
−Removed: Diluted net income per share was $2.96, compared to Diluted net loss per share of $1.28 for fiscal 2020.
−Removed: Net loss for fiscal 2020 included Goodwill and other intangible asset impairment charges of $56.4 million, or $(3.01) per diluted share.
−Removed: Merritt Island Facility and Aviara Transition
−Removed: On October 26, 2020, we completed the purchase of certain real property located in Merritt Island, Florida, including an approximately 140,000-square-foot boat manufacturing facility, (the “Merritt Island Facility”) for a purchase price of $14.2 million.
−Removed: We expanded our overall boat building capacity by moving all Aviara production to the Merritt Island Facility.
−Removed: While we believe this additional capacity will help facilitate Aviara’s long-term growth, importantly, relocating Aviara production from our Vonore, Tennessee facility provided for an immediate increase in capacity and productivity for our MasterCraft brand.
−Removed: We began producing Aviara in the Merritt Island Facility in December and shipments from the new facility commenced in the third quarter of fiscal 2021.
+Added: For a reconciliation of net income (loss) to Adjusted Net Income, see “Non-GAAP Measures” below.
+Added: Fiscal 2022 Overview
+Added: In fiscal 2022, the Company achieved record net sales of $707.9 million, an increase of 34.6 percent from fiscal 2021.
+Added: Consolidated unit sales volume increased to 8,217 units, up 14.2 percent from the prior year.
+Added: Gross profit increased to $162.4 million, up 24.9 percent from $130.0 million in fiscal 2021.
+Added: Despite our increased costs in operating expenses, selling, general, and administrative expenses as a percentage of sales in fiscal 2022 decreased compared to the prior-year period.
+Added: Macroeconomic Events
+Added: We are actively monitoring the impact of changing macroeconomic conditions on our business, including geopolitical events, disrupted global supply chains, and inflation.
+Added: The impact of these factors has affected many manufacturers across various industries including ours.
+Added: 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.
+Added: Rapidly increasing material and overhead costs are outpacing price increases as we try to mitigate the impact.
+Added: The full extent of the impact on our business, operations, and financial results will depend on evolving factors that we cannot predict.
+Added: See Part I – Item 1A.
+Added: Risk Factors.
+Added: NauticStar Impairment Activity and Sale Subsequent to Yearend
+Added: Despite ongoing efforts to improve operational efficiency and throughput at our NauticStar reporting unit in order to improve sales volumes and yield more favorable margins, including the engagement of third-party consulting resources beginning in the third quarter, the NauticStar reporting unit recorded unplanned negative operating results in the fourth quarter.
+Added: These results, combined with the outlook for further supply chain disruptions, labor challenges, and higher costs from inflationary pressures, resulted in an impairment trigger in the fourth quarter related to the NauticStar reporting unit’s intangible and other long-lived assets.
+Added: As a result of our impairment testing, we recognized impairment charges of $23.8 million at our NauticStar segment (see Note 5 to the Consolidated Financial Statements for more information related to impairment charges).
+Added: Subsequent to fiscal yearend, we sold the NauticStar business.
+Added: Pursuant to the terms of the purchase agreement, substantially all of the assets were sold, and certain liabilities of NauticStar were assumed by the purchaser, including product liability and warranty claims.
+Added: The resulting loss on sale of the NauticStar business is estimated to be in a range of approximately $20.0 to $23.0 million.
+Added: The results of the NauticStar business will be presented as discontinued operations in the Company’s fiscal 2023 first quarter.
+Added: In conjunction with the purchase agreement, the Company entered into a joint employer services agreement and a transition services agreement which provide certain services to the purchaser for various periods of time after the sale.
+Added: In addition, the Company amended its Credit Agreement and received certain consents and waivers under the Credit Agreement, as amended, related to the sale of the NauticStar business (see Note 13 for more information related to these agreements).
Results of Operations
−Removed: The consolidated statements of operations presented below should be read together with “Selected Consolidated Financial Data,” and our consolidated financial statements and related notes included elsewhere in this Form 10-K.
We derived the consolidated statements of operations for the fiscal years ended June 30, 2022 and 2021 from our audited consolidated financial statements and related notes included elsewhere in this Form 10-K.
Our historical results are not necessarily indicative of the results that may be expected in the future.
−Removed: (Dollars in thousands)
+Added: Consolidated Results
+Added: (Dollar amounts in thousands)
Consolidated statements of operations :
4 unchanged sentences
Amortization of other intangible assets
−Removed: Goodwill and other intangible asset impairment
Total operating expenses
−Removed: OPERATING INCOME (LOSS)
+Added: OPERATING INCOME
OTHER EXPENSE:
1 unchanged sentence
Loss on extinguishment of debt
−Removed: INCOME (LOSS) BEFORE INCOME TAX EXPENSE
−Removed: INCOME TAX EXPENSE (BENEFIT)
−Removed: NET INCOME (LOSS)
+Added: INCOME BEFORE INCOME TAX EXPENSE
+Added: INCOME TAX EXPENSE
Additional financial and other data:
4 unchanged sentences
Consolidated net sales per unit
−Removed: Fiscal 2021 Compared to Fiscal 2020
−Removed: Net Sales for fiscal 2021 were $525.8 million, an increase of $162.7 million, or 44.8 percent, compared to $363.1 million for fiscal 2020.
−Removed: The increase was primarily due to:
−Removed: A $116.8 million increase for the MasterCraft segment driven by a 47.4 percent increase in sales volumes, a favorable mix of higher priced and higher contented models, lower dealer incentives, and higher part sales volume,
−Removed: a $41.0 million increase for the Crest segment resulting from a 66.5 percent increase in sales volume, lower dealer incentives, higher prices, and option favorability, and
−Removed: a $4.9 million increase for the NauticStar segment, primarily due to higher sales volumes and higher prices, partially offset by unfavorable product mix.
−Removed: Gross Profit and Gross Margin.
−Removed: Gross profit increased $54.6 million, or 72.5 percent, to $130.0 million compared to $75.4 million for the prior year.
−Removed: Gross margin increased 390 basis points to 24.7 percent in fiscal 2021 from 20.8 percent in fiscal 2020.
−Removed: increase was primarily due to higher prices, higher sales volume and lower dealer incentives.
−Removed: The increase was partially offset by costs to transition production of our Aviara brand to the Merritt Island, Florida facility and increased labor and material costs.
+Added: Net Sales increased 34.6 percent for fiscal 2022 when compared to fiscal 2021 as a result of increased sales volumes, higher prices, favorable model mix, and higher option and content sales.
+Added: Refer to Segment Results for further details on the drivers of net sales changes.
+Added: Gross Margin.
+Added: Gross Margin percentage declined 180 basis points during fiscal 2022 when compared to fiscal 2021.
+Added: Lower margins were the result of supply chain disruptions, labor challenges, and inflationary pressures that drove material and overhead costs higher,
+Added: which were most pronounced at the NauticStar segment.
+Added: 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.
−Removed: Operating expenses decreased $47.9 million, or 47.0 percent, to $54.0 million for fiscal 2021 compared to $101.9 million for fiscal 2020.
−Removed: The decrease was primarily driven by $56.4 million of goodwill and other intangible asset impairment charges related to our NauticStar and Crest segments recorded in fiscal 2020.
−Removed: There were no impairment charges in fiscal 2021.
−Removed: See Note 6 in Notes to Consolidated Financial Statements for more information on the impairment charges.
−Removed: In addition, the Company had lower selling and marketing costs in fiscal 2021 primarily due to the impacts of the COVID-19 pandemic.
−Removed: The decrease was partially offset by higher general and administrative expenses resulting from higher incentive compensation costs and additional investments related to product development and information technology.
+Added: Operating expenses increased 56.4 percent for fiscal 2022 when compared to the same prior-year period.
+Added: During fiscal 2022, a $1.1 million goodwill impairment charge was recorded in the Aviara segment and $23.8 million was recorded in the NauticStar segment for impairment of other intangible assets and fixed assets, as discussed in Notes 4 and 5 in the Notes to Consolidated Financial Statements.
+Added: Additionally, general and administrative expense increased as a result of continued investments in information technology and product development.
+Added: Moreover, third-party consulting fees were recognized at the NauticStar segment in an effort to improve operational efficiency and increase throughput.
+Added: Selling and marketing expense increased due to prior-year expenses being impacted by the COVID-19 pandemic.
+Added: Despite our increased costs, selling, general, and administrative expenses as a percentage of net sales in fiscal 2022 decreased compared to the prior-year period.
Interest Expense.
−Removed: Interest expense decreased $1.7 million, or 14.5 percent, primarily driven by lower effective interest rates and lower average outstanding debt balances during fiscal 2021.
+Added: Interest expense decreased $1.9 million driven by lower effective interest rates and lower average outstanding debt balances during fiscal 2022.
Loss on Extinguishment of Debt.
Loss on extinguishment of debt totaling $0.7 million was recognized upon refinancing the Company’s debt in fiscal 2021.
−Removed: The loss is comprised of unamortized debt issuance costs related to the previously existing credit facility.
−Removed: See Note 8 in Notes to Consolidated Financial Statements for more information on the Company’s debt refinancing.
−Removed: Income Tax Expense (Benefit) .
−Removed: Our consolidated effective income tax rate decreased to 21.8 percent for fiscal 2021 from 23.9 percent for fiscal 2020.
+Added: The loss was comprised of unamortized debt issuance costs related to the previously existing credit facility.
+Added: Income Tax Expense.
+Added: Our consolidated effective income tax rate increased to 23.8 percent for fiscal 2022 from 21.8 percent for fiscal 2021.
See Note 8 in Notes to Consolidated Financial Statements for more information.
+Added: Segment Results
+Added: MasterCraft Segment
+Added: The following table sets forth MasterCraft segment results for the fiscal years ended:
+Added: (Dollar amounts in thousands)
+Added: Operating income
+Added: Purchases of property, plant and equipment
+Added: Unit sales volume
+Added: Net sales per unit
+Added: Net sales increased 32.8 percent during fiscal 2022, when compared to fiscal 2021.
+Added: The increase was primarily driven by increased sales volumes, higher prices, favorable model mix, and higher option and content sales.
+Added: Operating income increased 43.6 percent during fiscal 2022, when compared to the same prior year period.
+Added: The increase was driven by higher net sales, offset by inflationary pressures and production inefficiencies from supply chain disruptions and labor challenges.
+Added: Additionally, Selling and marketing expense increased due to prior-year expenses being impacted by the COVID-19 pandemic.
+Added: Also, General and administrative expenses increased as a result of continued investments in information technology and product development.
+Added: Crest Segment
+Added: The following table sets forth Crest segment results for the fiscal years ended:
+Added: (Dollar amounts in thousands)
+Added: Operating income
+Added: Purchases of property, plant and equipment
+Added: Unit sales volume
+Added: Net sales per unit
+Added: Net sales increased 37.2 percent during fiscal 2022, when compared to fiscal 2021, as a result of higher sales volumes and higher prices.
+Added: Operating income increased 46.2 percent during fiscal 2022, when compared to the same prior year period, primarily due to higher net sales, offset by inflationary pressures.
+Added: Purchases of property, plant, and equipment increased $3.3 million during fiscal 2022, when compared to the same prior-year period due to investments in manufacturing capacity expansion and maintenance capital.
+Added: NauticStar Segment
+Added: The following table sets forth NauticStar segment results for the fiscal years ended:
+Added: (Dollar amounts in thousands)
+Added: Operating loss
+Added: Purchases of property, plant and equipment
+Added: Unit sales volume
+Added: Net sales per unit
+Added: Net sales increased 10.7 percent during fiscal 2022, when compared to fiscal 2021.
+Added: The increase was primarily driven by higher prices, higher option sales, and favorable model mix, partially offset by decreased sales volumes.
+Added: Operating loss was $38.3 million for fiscal 2022, compared to $2.7 million for fiscal 2021.
+Added: Benefits from higher sales prices were offset by supply chain disruptions, labor challenges, and higher costs from inflationary pressures.
+Added: Additionally, $23.8 million was recorded for impairment charges related to other intangible assets and fixed assets, as discussed in Notes 4 and 5 in Notes to Consolidated Financial Statements.
+Added: Moreover, for fiscal 2022, $1.2 million in expense was recognized for third-party consulting fees in an effort to improve operational efficiency and increase throughput at the NauticStar segment.
+Added: Aviara Segment
+Added: The following table sets forth Aviara segment results for the fiscal years ended:
+Added: (Dollar amounts in thousands)
+Added: Operating loss
+Added: Purchases of property, plant and equipment
+Added: Unit sales volume
+Added: Net sales per unit
+Added: Net sales increased 178.6 percent during fiscal 2022, when compared to fiscal 2021, mainly due to an increase in sales volumes, higher prices, and favorable model mix.
+Added: Operating loss was $9.0 million for fiscal 2022, compared to $8.3 million for fiscal 2021.
+Added: 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, offset the benefits from increased net sales.
+Added: See Note 5 in Notes to Consolidated Financial Statements for more information on the impairment charge.
Non-GAAP Measures
2 unchanged sentences
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.
−Removed: For the periods presented herein, these adjustments include Aviara transition costs, debt refinancing charges, goodwill and other intangible asset impairment charges, Aviara (new brand) startup costs, COVID-19 shutdown costs, transaction expenses associated with an acquisition and certain non-cash items including share-based compensation and acquisition-related inventory step-up adjustments.
+Added: For the periods presented herein, these adjustments include impairment charges, share-based compensation, operational improvement initiative costs, Aviara transition costs, debt refinancing charges, Aviara startup costs, and COVID-19 shutdown costs.
We define Adjusted EBITDA margin as Adjusted EBITDA expressed as a percentage of Net sales.
Adjusted Net Income and Adjusted Net Income Per Share
−Removed: We define Adjusted Net Income and Adjusted Net Income per share as net income (loss) 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 adjusted for the impact to income tax expense (benefit) related to non-GAAP adjustments.
−Removed: For the periods presented herein, these adjustments include Aviara transition costs, debt refinancing charges, goodwill and other intangible asset impairment charges, Aviara (new brand) startup costs, COVID-19 shutdown costs, transaction expenses associated with an acquisition, and certain non-cash items including other intangible asset amortization, share-based compensation, and an acquisition-related inventory step-up adjustment.
+Added: We define Adjusted Net Income and Adjusted Net Income per share as net income (loss) 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.
+Added: For the periods presented herein, these adjustments include impairment charges, income tax expense (benefit), amortization of acquisition intangibles, share-based compensation, operational improvement initiative costs, Aviara transition costs, debt refinancing charges, Aviara startup costs, and COVID-19 shutdown costs.
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 (loss) or operating income (loss) as determined under accounting principles generally accepted in the United States, or U.S.
6 unchanged sentences
GAAP measures alone.
−Removed: We believe Adjusted Net Income and Adjusted Net Income per share assists our board of directors, management, investors, and other users of the financial statements in comparing our net income (loss) on a consistent basis from period to period because it removes certain non-cash items and other items that we do not consider to be indicative of our core and/or ongoing operations and adjusts for the impact to income tax expense (benefit) related to non-GAAP adjustments.
+Added: We believe Adjusted Net Income and Adjusted Net Income per share assists our board of directors, management, investors, and other users of the financial statements in comparing our net income (loss) on a consistent basis from period to period because it removes certain non-cash items and other items that we do not consider to be indicative of our core and/or ongoing operations and reflecting income tax expense on adjusted net income before income taxes at our estimated annual effective tax rate.
The Non-GAAP Measures have limitations as an analytical tool and should not be considered in isolation or as a substitute for analysis of our results as reported under U.S.
Some of these limitations are:
−Removed: Although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future and Adjusted EBITDA does not reflect any cash requirements for such replacements;
−Removed: Adjusted EBITDA does not reflect our cash expenditures, or future requirements for capital expenditures or contractual commitments;
−Removed: Adjusted EBITDA does not reflect changes in, or cash requirements for, our working capital needs;
−Removed: Adjusted EBITDA does not reflect our tax expense or any cash requirements to pay income taxes;
−Removed: Adjusted EBITDA does not reflect interest expense, or the cash requirements necessary to service interest payments on our indebtedness;
−Removed: Adjusted Net Income, Adjusted Net Income per share, and Adjusted EBITDA do not reflect the impact of earnings or charges resulting from matters we do not consider to be indicative of our core and/or ongoing operations, but may nonetheless have a material impact on our results of operations.
+Added: Although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future and the Non-GAAP Measures do not reflect any cash requirements for such replacements;
+Added: The Non-GAAP Measures do not reflect our cash expenditures, or future requirements for capital expenditures or contractual commitments;
+Added: The Non-GAAP Measures do not reflect changes in, or cash requirements for, our working capital needs;
+Added: The Non-GAAP Measures do not reflect our tax expense or any cash requirements to pay income taxes;
+Added: The Non-GAAP Measures do not reflect interest expense, or the cash requirements necessary to service interest payments on our indebtedness;
+Added: The Non-GAAP Measures do not reflect the impact of earnings or charges resulting from matters we do not consider to be indicative of our core and/or ongoing operations, but may nonetheless have a material impact on our results of operations.
In addition, because not all companies use identical calculations, our presentation of the Non-GAAP Measures may not be comparable to similarly titled measures of other companies, including companies in our industry.
The following table presents a reconciliation of net income (loss) as determined in accordance with U.S.
−Removed: GAAP to EBITDA and Adjusted EBITDA, and net income margin (expressed as a percentage of net sales) to Adjusted EBITDA margin (expressed as a percentage of net sales) for the periods indicated:
−Removed: (Dollars in thousands)
−Removed: % of Net sales
−Removed: % of Net sales
−Removed: % of Net sales
+Added: GAAP to EBITDA and Adjusted EBITDA, and net income (loss) margin (expressed as a percentage of net sales) to Adjusted EBITDA margin (expressed as a percentage of net sales) for the periods indicated:
Net income (loss)
2 unchanged sentences
Depreciation and amortization
+Added: Impairments (a)
Share-based compensation
−Removed: Aviara transition costs (a)
−Removed: Debt refinancing charges (b)
−Removed: Goodwill and other intangible asset impairment (c)
−Removed: Aviara start-up costs (d)
−Removed: COVID-19 shutdown costs (e)
−Removed: Transaction expense (f)
−Removed: Inventory step-up adjustment - acquisition related (g)
+Added: Operational improvement initiative (b)
+Added: Aviara transition costs (c)
+Added: Debt refinancing charges (d)
+Added: Aviara start-up costs (e)
+Added: COVID-19 shutdown costs (f)
Adjusted EBITDA
+Added: Represents non-cash charges of $1.1 million recorded in the Aviara segment for impairment of goodwill and $23.8 million recorded in the NauticStar segment for impairment of other intangible assets and fixed assets in fiscal 2022, and non-cash charges recorded in the NauticStar and Crest segments for impairment of goodwill and trade name intangible assets in fiscal 2020.
+Added: See Notes 4 and 5 within the Notes to the Consolidated Financial Statements for more information on impairment charges.
+Added: Represents third-party consulting fees associated with the operational improvement initiative at our NauticStar segment.
Represents costs to transition production of the Aviara brand from Vonore, Tennessee to Merritt Island, Florida.
Costs include duplicative overhead costs and costs not indicative of ongoing operations (such as training and facility preparation).
−Removed: Represents loss recognized upon refinancing the Company’s debt.
+Added: Represents loss recognized upon refinancing the Company’s debt in fiscal 2021.
The loss is comprised of unamortized debt issuance costs related to the previously existing credit facility and third-party legal costs associated with the refinancing.
−Removed: Represents non-cash charges recorded in the NauticStar and Crest segments for impairment of goodwill and trade name intangible assets.
−Removed: See Note 6 in Notes to Consolidated Financial Statements for more information on the impairment charges.
Represents start-up costs associated with Aviara, a completely new boat brand in an industry category previously not served by the Company.
−Removed: We began selling the brand’s first two models, the AV32 and the AV36, during the first and second quarters of fiscal 2020, respectively.
−Removed: We expect to begin selling one additional model, the AV40, in fiscal 2022.
Start-up costs presented for fiscal 2020 are related to the AV36 and AV40 models.
−Removed: Start-up costs presented for fiscal 2019 are related to the launch of the Aviara brand and the three initial Aviara models which had not yet begun selling.
Represents lump sum severance payments and costs related to temporary continuation of healthcare benefits for certain laid off employees, in connection with the COVID-19 pandemic.
−Removed: Represents acquisition related costs and other integration costs associated with our acquisition of Crest in fiscal 2019.
−Removed: Represents post-acquisition adjustment to cost of goods sold for the fair value step up of inventory acquired all of which was sold during fiscal 2019.
The following table sets forth a reconciliation of net income (loss) as determined in accordance with U.S.
GAAP to Adjusted Net Income for the periods indicated:
−Removed: (Dollars in thousands)
+Added: (Dollars in thousands, except per share)
Net income (loss)
Income tax expense (benefit)
+Added: Impairments (a)
Amortization of acquisition intangibles
Share-based compensation
−Removed: Aviara transition costs (a)
−Removed: Debt refinancing charges (b)
−Removed: Goodwill and other intangible asset impairment (c)
−Removed: Aviara start-up costs (d)
−Removed: COVID-19 shutdown costs (e)
−Removed: Transaction expense (f)
−Removed: Inventory step-up adjustment - acquisition related (g)
+Added: Operational improvement initiative (b)
+Added: Aviara transition costs (c)
+Added: Debt refinancing charges (d)
+Added: Aviara start-up costs (e)
+Added: COVID-19 shutdown costs (f)
Adjusted Net Income before income taxes
−Removed: Adjusted income tax expense (h)
+Added: Adjusted income tax expense (g)
Adjusted Net Income
Adjusted Net Income per share:
−Removed: Weighted average shares used for the computation of:
+Added: Weighted average shares used for the computation of (h) :
Basic Adjusted Net Income per share
−Removed: Diluted Adjusted Net Income per share (i)
+Added: Diluted Adjusted Net Income per share
+Added: Represents non-cash charges of $1.1 million recorded in the Aviara segment for impairment of goodwill and $23.8 million recorded in the NauticStar segment for impairment of other intangible assets and fixed assets in fiscal 2022, and non-cash charges recorded in the NauticStar and Crest segments for impairment of goodwill and trade name intangible assets in fiscal 2020.
+Added: See Notes 4 and 5 within the Notes to the Consolidated Financial Statements for more information on impairment charges.
+Added: Represents third-party consulting fees associated with the operational improvement initiative at our NauticStar segment.
Represents costs to transition production of the Aviara brand from Vonore, Tennessee to Merritt Island, Florida.
Costs include duplicative overhead costs and costs not indicative of ongoing operations (such as training and facility preparation).
−Removed: Represents loss recognized upon refinancing the Company’s debt.
+Added: Represents loss recognized upon refinancing the Company’s debt in fiscal 2021.
The loss is comprised of unamortized debt issuance costs related to the previously existing credit facility and third-party legal costs associated with the refinancing.
−Removed: Represents non-cash charges recorded in the NauticStar and Crest segments for impairment of goodwill and trade name intangible assets.
−Removed: See Note 6 in Notes to Consolidated Financial Statements for more information on the impairment charges.
Represents start-up costs associated with Aviara, a completely new boat brand in an industry category previously not served by the Company.
−Removed: We began selling the brand’s first two models, the AV32 and the AV36, during the first and second quarters of fiscal 2020, respectively.
−Removed: We expect to begin selling one additional model, the AV40, in fiscal 2022.
Start-up costs presented for fiscal 2020 are related to the AV36 and AV40 models.
−Removed: Start-up costs presented for fiscal 2019 are related to the launch of the Aviara brand and the three initial Aviara models which had not yet begun selling.
Represents lump sum severance payments and costs related to temporary continuation of healthcare benefits for certain laid off employees, in connection with the COVID-19 pandemic.
−Removed: Represents acquisition related costs and other integration costs associated with our acquisition of Crest in fiscal 2019.
−Removed: Represents post-acquisition adjustment to cost of goods sold for the fair value step up of inventory acquired all of which was sold during fiscal 2019.
−Removed: Reflects income tax expense at a tax rate of 23.0% for fiscal 2021, 23.0% for fiscal 2020 and 22.5% for 2019.
+Added: Reflects income tax expense at a tax rate of 23.0% for each period presented.
Represents the Weighted Average Shares Used for the Computation of Basic and Diluted earnings (loss) per share as presented on the Consolidated Statements of Operations to calculate Adjusted Net Income per diluted share for all periods presented herein.
3 unchanged sentences
Income tax expense (benefit)
+Added: Impairments (a)
Amortization of acquisition intangibles
Share-based compensation
−Removed: Aviara transition costs (a)
−Removed: Debt refinancing charges (b)
−Removed: Goodwill and other intangible asset impairment (c)
−Removed: Aviara start-up costs (d)
−Removed: COVID-19 shutdown costs (e)
−Removed: Transaction expense (f)
−Removed: Inventory step-up adjustment - acquisition related (g)
+Added: Operational improvement initiative (b)
+Added: Aviara transition costs (c)
+Added: Debt refinancing charges (d)
+Added: Aviara start-up costs (e)
+Added: COVID-19 shutdown costs (f)
Adjusted Net Income per diluted share before income taxes
−Removed: Impact of adjusted income tax expense on net income per diluted share before income taxes (h)
+Added: Impact of adjusted income tax expense on net income per diluted share before income taxes (g)
Adjusted Net Income per diluted share
+Added: Represents non-cash charges of $1.1 million recorded in the Aviara segment for impairment of goodwill and $23.8 million recorded in the NauticStar segment for impairment of other intangible assets and fixed assets in fiscal 2022, and non-cash charges recorded in the NauticStar and Crest segments for impairment of goodwill and trade name intangible assets in fiscal 2020.
+Added: See Notes 4 and 5 within the Notes to the Consolidated Financial Statements for more information on impairment charges.
+Added: Represents third-party consulting fees associated with the operational improvement initiative at our NauticStar segment.
Represents costs to transition production of the Aviara brand from Vonore, Tennessee to Merritt Island, Florida.
Costs include duplicative overhead costs and costs not indicative of ongoing operations (such as training and facility preparation).
−Removed: Represents loss recognized upon refinancing the Company’s debt.
+Added: Represents loss recognized upon refinancing the Company’s debt in fiscal 2021.
The loss is comprised of unamortized debt issuance costs related to the previously existing credit facility and third-party legal costs associated with the refinancing.
−Removed: Represents non-cash charges recorded in the NauticStar and Crest segments for impairment of goodwill and trade name intangible assets.
−Removed: See Note 6 in Notes to Consolidated Financial Statements for more information on the impairment charges.
Represents start-up costs associated with Aviara, a completely new boat brand in an industry category previously not served by the Company.
−Removed: We began selling the brand’s first two models, the AV32 and the AV36, during the first and second quarters of fiscal 2020, respectively.
−Removed: We expect to begin selling one additional model, the AV40, in fiscal 2022.
Start-up costs presented for fiscal 2020 are related to the AV36 and AV40 models.
−Removed: Start-up costs presented for fiscal 2019 are related to the launch of the Aviara brand and the three initial Aviara models which had not yet begun selling.
−Removed: (e) Represents lump sum severance payments and costs related to temporary continuation of healthcare benefits for certain laid off employees, in connection with the COVID-19 pandemic.
−Removed: Represents acquisition related costs and other integration costs associated with our acquisition of Crest fiscal 2019.
−Removed: Represents post-acquisition adjustment to cost of goods sold for the fair value step up of inventory acquired all of which was sold during fiscal 2019.
−Removed: Reflects income tax expense at a tax rate of 23.0% for fiscal 2021, 23.0% for fiscal 2020 and 22.5% for 2019.
−Removed: Change in Non-GAAP Financial Measure
−Removed: Prior to fiscal year 2020, the Company’s calculation of a diluted per share amount of Adjusted Net Income included an adjustment to fully dilute this non-GAAP measure for all outstanding share-based compensation grants.
−Removed: This additional dilution was incorporated by adjusting the GAAP measure, Weighted Average Shares Used for the Computation of Basic earnings (loss) per share, as presented on the Consolidated Statements of Operations, to include a dilutive effect for all outstanding restricted stock awards, performance stock units, and stock options.
−Removed: Beginning with the fiscal year 2020 presentation, the Company no longer includes this additional dilution impact in its calculation of Adjusted Net Income per diluted share.
−Removed: The Company has instead utilized the Weighted Average Shares Used for the Computation of Basic and Diluted earnings (loss) per share as presented on the Consolidated Statements of Operations to calculate Adjusted Net Income per diluted share for all periods presented herein.
−Removed: The Company believes that, because its outstanding share-based compensation grants no longer result in a material amount of dilution of its earnings as was the case nearer to the date of our IPO, the adjustment methodology previously used no longer provides meaningful information to management or other users of its financial statements.
−Removed: This change resulted in an increase of $0.02 in the year ended June 30, 2020 in the amount of Adjusted Net Income per diluted share from what would have been reported using the previous methodology.
−Removed: The change also resulted in an increase of $0.01 for the year ended June 30, 2019 in the amount of Adjusted Net Income per diluted share from what was previously reported.
−Removed: In addition, the fiscal 2019 amount for Transaction expense, in the reconciliation of net income (loss) per diluted share to Adjusted net income per diluted share, decreased by $0.01 from what was previously reported as a result of a change in the presentation of the impact of rounding.
+Added: Represents lump sum severance payments and costs related to temporary continuation of healthcare benefits for certain laid off employees, in connection with the COVID-19 pandemic.
+Added: Reflects income tax expense at a tax rate of 23.0% for each period presented.
Liquidity and Capital Resources
1 unchanged sentence
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.
−Removed: Cash and cash equivalents totaled $39.3 million as of June 30, 2021, an increase of $23.0 million from $16.3 million as of June 30, 2020.
+Added: Cash and cash equivalents totaled $34.2 million as of June 30, 2022, a decrease of $5.1 million from $39.3 million as of June 30, 2021.
Total debt as of June 30, 2022 and June 30, 2021 was $56.5 million and $93.1 million, respectively.
−Removed: On June 28, 2021, we refinanced our debt and entered into a new credit agreement increasing the capacity under our revolving credit facility from $35.0 million to $100.0 million.
−Removed: As of June 30, 2021, we had $33.7 million outstanding under the facility, leaving $66.3 million of available borrowing capacity.
+Added: Our working capital was impacted by the $25.2 million increase in inventory during 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.
+Added: As of June 30, 2022, we have repaid all amounts outstanding under the Revolving Credit Facility, leaving $100.0 million of available borrowing capacity.
+Added: As of June 30, 2022, we had $56.5 million outstanding under the Term Loan.
Refer to Note 7 — Long Term Debt in the Notes to Consolidated Financial Statements for further details.
+Added: 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.
+Added: During fiscal 2022, the Company repurchased 975,161 shares of common stock for $25.5 million in cash, including related fees and expenses.
+Added: As of June 30, 2022, there was $24.5 million of availability remaining under the stock repurchase program.
We believe our cash balance, cash from operations, and our ability to borrow, will be sufficient to provide for our liquidity and capital resource needs, including authorized stock repurchases.
The following table summarizes the cash flows from operating, investing, and financing activities:
−Removed: (Dollars in thousands)
Total cash provided by (used in):
4 unchanged sentences
Fiscal 2022 Cash Flow
+Added: Net cash provided by operating activities was $73.3 million, mainly due to net income, partially offset by working capital usage.
+Added: Working capital is defined as accounts receivable, income tax receivable, inventories, and prepaid expenses and other current assets net of accounts payable, income tax payable, and accrued expenses and other current liabilities as presented in the consolidated balance sheets, excluding the impact of acquisitions and non-cash adjustments.
+Added: Working capital usage primarily consisted of an increase in inventory, accounts receivable and prepaid expenses and other current assets, partially offset by an increase in accrued expenses and other current liabilities and accounts payable.
+Added: As discussed above, inventory increased $25.2 million.
+Added: Accounts receivable increased due to increased sales.
+Added: Prepaid and other current assets increased due to higher general insurance premiums.
+Added: Accrued expenses and other current liabilities increased due to an increase in warranty costs and dealer incentives.
+Added: Accounts payable increased as a result of increased production levels.
+Added: Net cash used for investing activities was $15.8 million, which included capital expenditures.
+Added: Our capital spending was focused on expanding our capacity, maintenance capital, and investments in information technology.
+Added: Net cash used for financing activities was $62.5 million, which included net payments of $36.7 million on long-term debt and stock repurchases totaling $25.5 million.
+Added: Fiscal 2021 Cash Flow
Net cash provided by operating activities in fiscal 2021 totaled $68.5 million versus $30.2 million in fiscal 2020.
The increase is primarily due to higher net earnings, net of non-cash items, partially offset by changes in working capital that were affected by production ramp-up activities as we experienced an increase in retail demand.
−Removed: Working capital is defined as Accounts receivable, Income tax receivable, Inventories, and Prepaid expenses and other current assets net of Accounts payable, Income tax payable, and Accrued expenses and other current liabilities as presented in the consolidated balance sheets, excluding the impact of acquisitions and non-cash adjustments.
Accounts receivable increased $5.9 million primarily due to increased sales across all segments.
−Removed: Inventory increased $28.6 million, driven by increases to support higher production volumes and to increase safety stock to manage supply chain risk.
+Added: Inventory increased $28.6 million, driven by increases to support higher production
+Added: volumes and to increase safety stock to manage supply chain risk.
Accounts payable increased $13.4 million primarily due to timing of payments and higher production activities.
−Removed: Accrued expenses and other current liabilities increased $12.2 million primarily driven by share-based compensation related to higher net earnings and higher warranty reserves for the increased sales volumes.
+Added: Accrued expenses and other current liabilities increased $12.2 million primarily driven by incentive -based compensation related to higher net earnings and higher warranty reserves for the increased sales volumes.
Net cash used for investing activities was $27.8 million, which primarily included capital expenditures.
1 unchanged sentence
Net cash used for financing activities was $17.8 million and primarily related to net payments of long-term debt.
−Removed: Fiscal 2020 Cash Flow
−Removed: In fiscal 2020, net cash provided by operating activities totaled $30.2 million versus $55.9 million in fiscal 2019.
−Removed: This comparison reflects the economic impacts of the COVID-19 pandemic where production was reduced, and temporarily suspended from late March to mid-May 2020.
−Removed: Accounts receivable decreased $6.3 million primarily due to reduced sales.
−Removed: Inventory decreased $4.8 million driven by lower production activities.
−Removed: Accounts payable decreased $6.9 million due to timing of payments and lower production activities.
−Removed: Accrued expenses and other current liabilities decreased $5.6 million driven by reduced dealer incentives and share-based compensation related to lower sales and financial results.
−Removed: Net cash used for investing activities was $14.2 million, which primarily included capital expenditures.
−Removed: Our capital spending was focused on maintenance capital and purchasing the previously leased Crest Facility.
−Removed: Refer to Note 11 – Commitments and Contingencies in the Notes to Consolidated Financial Statements for further details.
−Removed: Net cash used for financing activities was $5.5 million and primarily related to net payments of long-term debt .
Off-Balance Sheet Arrangements
1 unchanged sentence
Contractual Obligations
−Removed: As of June 30, 2021, the Company’s contractual cash obligations were as follows:
−Removed: Payments Due by Period
−Removed: (Dollars in thousands)
−Removed: Long-Term Debt Obligations (1)
−Removed: Interest on Long-Term Debt Obligations (2)
−Removed: Operating Lease Obligations
−Removed: Purchase Obligations (3)
−Removed: Total Contractual Obligations (4)
−Removed: See Note 8 in Notes to Consolidated Financial Statements for additional information regarding the Company's debt.
−Removed: “Long-Term Debt Obligations” refers to future cash principal payments.
−Removed: Interest payments on variable rate debt instruments were calculated using June 30, 2021 interest rates and holding them constant for the life of the instruments.
−Removed: Purchase obligations represent agreements with suppliers and vendors entered into as part of the normal course of business, including engine purchase commitments.
−Removed: Unrecognized tax benefits of $3.8 million are not reflected in this table because the Company cannot predict when open income tax years will close with completed examinations.
−Removed: See Note 9 in Notes to Consolidated Financial Statements.
+Added: As of June 30, 2022, the Company’s material cash obligations were as follows:
+Added: Long-Term Debt Obligations — See Note 7 – Long-Term Debt in the accompanying Notes to Consolidated Financial Statements for further information.
+Added: Interest on Long-Term Debt Obligations — As of June 30, 2022, the Company has estimated total interest payments on its outstanding long-term debt obligations of $6.6 million, of which $1.8 million is due during the next 12 months.
+Added: Interest on variable rate debt instruments was calculated using interest rates in effect for our borrowings as of June 30, 2022 and holding them constant for the life of the instrument.
+Added: Purchase Commitments — As of June 30, 2022, the Company is committed to purchasing $44.8 million of engines, of which $15.7 million is committed during the next 12 months.
+Added: See Note 10 in the accompanying Notes to Consolidated Financial Statements for more information.
Repurchase Obligations — The Company has reserves to cover potential losses associated with repurchase obligations based on historical experience and current facts and circumstances.
1 unchanged sentence
An adverse change in retail sales, however, could require us to repurchase boats repossessed by floor plan financing companies upon an event of default by any of our dealers, subject in some cases to an annual limitation.
−Removed: See Note 11 in Notes to Consolidated Financial Statements included elsewhere in this Form 10-K for more information related to our obligations under floor plan financing agreements.
−Removed: Critical Accounting Policies
−Removed: A “critical accounting policy” is one which is both important to the understanding of our financial condition and results of operations and requires management’s most difficult, subjective, or complex judgments, often of the need to make estimates about the effect of matters that are inherently uncertain.
+Added: See Note 10 in the accompanying Notes to Consolidated Financial Statements for more information.
+Added: In addition to the above, we have unrecognized tax benefits that are not reflected here because the Company cannot predict when open income tax years will close with completed examinations.
+Added: See Note 8 in Notes to Consolidated Financial Statements for more information.
+Added: Application of Critical Accounting Policies and Estimates
+Added: Significant accounting policies are described in the notes to the consolidated financial statements.
+Added: In the application of these policies, certain estimates are made that may have a material impact on our financial condition and results of operations.
Actual results could differ from those estimates and cause our reported net income (loss) to vary significantly from period to period.
−Removed: We believe that the policies listed below involve the greatest degree of judgment and complexity.
−Removed: Accordingly, we believe these are the most critical to understand in order to evaluate fully our financial condition and results of operations.
For additional information regarding these policies, see Note 1 – Significant Accounting Policies in Notes to Consolidated Financial Statements.
−Removed: Goodwill and Other Intangible Assets — The Company does not amortize goodwill and other purchased intangible assets with indefinite lives.
−Removed: The Company’s intangible assets with finite lives consist primarily of dealer networks and are carried at their estimated fair values at the time of acquisition, less accumulated amortization.
+Added: Asset Impairment
The Company reviews goodwill for impairment at its annual impairment testing date, which is June 30, and whenever events or changes in circumstances indicate that the fair value of a reporting unit may be below its carrying value.
−Removed: As part of the annual test, the Company may perform a qualitative, rather than quantitative, assessment to determine whether the fair values of its reporting units are “more likely than not” to be greater than their carrying values.
+Added: As part of the impairment tests, the Company may perform a qualitative, rather than quantitative, assessment to determine whether the fair values of its reporting units are “more likely than not” to be greater than their carrying values.
In performing this qualitative analysis, the Company considers various factors, including the effect of market or industry changes and the reporting units' actual results compared to projected results.
4 unchanged sentences
The Company calculates the fair value of its reporting units considering both the income approach and market approach.
−Removed: The income approach calculates the fair value of the reporting unit using a discounted cash flow approach.
+Added: The income approach calculates the fair value of the reporting unit using a discounted cash flow method.
Internally forecasted future cash flows, which the Company believes reasonably approximate market participant assumptions, are discounted using a weighted average cost of capital (“Discount Rate”) developed for each reporting unit.
The Discount Rate is developed using market observable inputs, as well as considering whether or not there is a measure of risk related to the specific reporting unit’s forecasted performance.
−Removed: Fair value under the market approach is determined for each unit by applying market multiples for comparable public companies to the unit’s financial results.
+Added: Fair value under the market approach is determined for each reporting unit by applying market multiples for comparable public companies to the reporting unit’s financial results.
The key judgements in these calculations are the assumptions used in determining the reporting unit’s forecasted future performance, including revenue growth and operating margins, as well as the perceived risk associated with those forecasts in determining the Discount Rate, along with selecting representative market multiples.
+Added: As discussed further in Note 5 to the Consolidated Financial Statements, during the years ended June 30, 2022 and 2020, the Company performed quantitative tests and recognized $1.1 million and $44.4 million in goodwill impairment charges related to its Aviara and its Crest and NauticStar reporting units, respectively.
As of June 30, 2022, only the MasterCraft reporting unit has a goodwill balance.
The fair value of this reporting unit substantially exceeds its carrying value.
−Removed: However, it is possible that the Company’s assumptions regarding the key judgements in this fair value calculation could change in the future.
−Removed: If actual results differ from the Company’s assumptions, it is possible that the MasterCraft reporting unit could incur goodwill impairment charges in future periods.
Other Intangible Assets
9 unchanged sentences
The costs of amortizable intangible assets, including dealer networks, are recognized over their expected useful lives, approximately ten years for the dealer networks, using the straight-line method.
−Removed: Intangible assets that are subject to amortization are evaluated for impairment using a process similar to that used to evaluate long-lived assets.
+Added: Intangible assets that are subject to amortization are evaluated for impairment using a process similar to that used to evaluate long-lived assets as described below.
Intangible assets not subject to amortization are assessed for impairment at least annually and whenever events or changes in circumstances indicate that it is more likely than not that an asset may be impaired.
3 unchanged sentences
An impairment loss is recognized for the amount by which the carrying value exceeds the fair value of the asset.
−Removed: During fiscal 2020, impairment charges were incurred for the NauticStar and Crest trade name-related intangible asset, as well as during fiscal 2019 for the NauticStar trade name-related intangible asset.
−Removed: As of fiscal year-end 2021, which is our annual impairment testing date under ASC 350, there were favorable changes in circumstances as compared to those existing in fiscal 2020, such as strong marine retail demand coupled with record low retail inventory levels that have created a growth opportunity, which we believe indicates that it is not more likely than not that the current carrying values of these assets are higher than the fair values.
−Removed: Changes in assumptions and estimates such as declines in projected results, however, may affect the fair value of these intangible assets and could result in additional impairment charges in future periods.
−Removed: Product Warranties — The Company offers warranties on the sale of certain products for periods of between one and five years.
−Removed: These warranties require us or our dealers to repair or replace defective products during the warranty period at no cost to the
+Added: As discussed further in Note 5 to the Consolidated Financial Statements, during the years ended June 30, 2022 and 2020, the Company performed quantitative tests related to its indefinite-lived intangible assets and, during the year ended June 30, 2022, the Company also performed a recoverability analysis related to its dealer network intangible asset within the NauticStar reporting unit which is subject to amortization.
+Added: During the years ended June 30, 2022 and 2020, the Company recognized $18.5 million and $12.0 million in intangible asset impairment charges related to its NauticStar and to its Crest and NauticStar reporting units, respectively.
+Added: Long-Lived Assets
+Added: The Company assesses the potential for impairment of its long-lived assets if facts and circumstances, such as declines in sales, earnings, or cash flows or adverse changes in the business climate, suggest that they may be impaired.
+Added: A current expectation that,
+Added: more likely than not, a long-lived asset (asset group) will be sold or otherwise disposed of significantly before the end of its previously estimated useful life will also trigger a review for impairment.
+Added: The Company performs its assessment by comparing the book value of the asset groups to the estimated future undiscounted cash flows associated with the asset group s.
+Added: If any impairment in the carrying value of its long-lived assets is indicated, the assets would be adjusted to an estimate of fair value.
+Added: As discussed further in Notes 4 and 5 to the Consolidated Financial Statements, during the year ended June 30, 2022, the Company recognized $5.3 million in long-lived asset impairment charges related to its NauticStar reporting unit which adjusted the related assets to their estimated fair value.
+Added: Product Warranties — The Company offers warranties on the sale of certain products for periods of between one and five years from the date of retail sale.
+Added: These warranties require us or our dealers to repair or replace defective products during the warranty period at no cost to the consumer.
We estimate the costs that may be incurred under our basic limited warranty and record as a liability the amount of such costs at the time the product revenue is recognized.
4 unchanged sentences
Income Taxes— We are subject to income taxes in the United States of America and the United Kingdom.
−Removed: Our effective tax rates differ from the statutory rates, primarily due to changes in the valuation allowance and non-deductible expenses, as further described in Note 9 in Notes to Consolidated Financial Statements.
+Added: Our effective tax rates differ from the statutory rates, primarily due to changes in non-deductible expenses and the valuation allowance, as further described in Note 8 in Notes to Consolidated Financial Statements.
Significant judgment is required in evaluating our uncertain tax positions and determining our provision for income taxes.
3 unchanged sentences
The provision for income taxes includes the impact of reserve provisions and changes to reserves that are considered appropriate, as well as the related net interest.
−Removed: Significant judgment is also required in determining any valuation allowance recorded against deferred tax assets.
−Removed: In assessing the need for a valuation allowance, we consider all available evidence, including past operating results, estimates of future taxable income, and the feasibility of tax planning strategies.
−Removed: In the event that we change our determination as to the amount of deferred tax assets that can be realized, we will adjust our valuation allowance with a corresponding impact to the provision for income taxes in the period in which such determination is made.
−Removed: Realization of our deferred tax assets is dependent on generating sufficient taxable income in future periods.
−Removed: If future events cause us to conclude that it is not more likely than not that we will be able to recover the value of our deferred tax assets, we are required to establish a valuation allowance on deferred tax assets at that time.
Revenue Recognition — The Company’s revenue is derived primarily from the sale of boats and trailers, marine parts, and accessories to its independent dealers.
The Company recognizes revenue when obligations under the terms of a contract are satisfied and control over promised goods is transferred to a customer.
−Removed: For the majority of sales, this occurs when the product is released to the carrier responsible for transporting it to a customer.
−Removed: The Company typically receives payment within 5 business days of shipment.
−Removed: Revenue is measured as the amount of consideration it expects to receive in exchange for a product.
+Added: For substantially all sales, this occurs when the product is released to the carrier responsible for transporting it to a customer.
+Added: The Company typically receives payment from the floor plan financing providers within 5 business days of shipment.
+Added: Revenue is measured as the amount of consideration we expect to receive in exchange for a product.
The Company offers dealer incentives that include wholesale rebates, retail rebates and promotions, floor plan reimbursement or cash discounts, and other allowances that are recorded as reductions of revenues in Net sales in the consolidated statements of operations.
12 unchanged sentences
Occasionally, the Company may accept returns in limited circumstances and at the Company’s discretion under its warranty policy.
−Removed: The Company may be obligated, in the event of default by a dealer, to accept returns of unsold boats under its repurchase commitment to floor financing providers, who are able to obtain such boats through foreclosure.
−Removed: The repurchase commitment is on an individual unit basis with a term from the date it is financed by the lending
−Removed: institution through the payment date by the dealer, generally not exceeding 30 months.
+Added: The Company may be obligated, in the event of default by a dealer, to accept returns of unsold boats under its repurchase commitment to floor plan financing providers, who are able to obtain such boats through foreclosure.
+Added: The repurchase commitment is on an individual unit basis with a term from the date it is financed by the lending institution through the payment date by the dealer, generally not exceeding 30 months.
The Company accounts for these arrangements as guarantees and recognizes a liability based on the estimated fair value of the repurchase obligation.
8 unchanged sentences
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.