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MasterCraft, NauticStar release fiscal 2018 Q2 results

By MCBC Holdints, Inc.

MCBC Holdings, Inc. (NASDAQ:MCFT), the parent entity of MasterCraft Boat Company, LLC and Nautic Star, LLC announced financial results for its fiscal 2018 second quarter ended Dec. 31, 2017.

“Top-line sales grew significantly in the second quarter, driven by double-digit gains on the MasterCraft side and the addition of NauticStar,” said MCBC Holdings, Inc. President and Chief Executive Officer, Terry McNew. “As we further integrate NauticStar, we expect to realize additional efficiencies which will favorably impact margins.”

Net sales for the second quarter ended Dec. 31, 2017, rose 53.4 percent, or $27.3 million to $78.4 million, compared to $51.1 million for the year-ago second quarter.

The gain was primarily due to the inclusion of NauticStar which increased net sales by 39.5 percent, or $20.2 million. The remaining increase of 13.9 percent, or $7.1 million, was attributable to an increase in MasterCraft unit sales volume, favorable product mix and price increases.

For the second quarter, gross profit increased $5.6 million, or 39.5 percent, to $19.9 million compared to $14.3 million for the prior-year second quarter.

The inclusion of NauticStar contributed $3.5 million to gross profit. Growth in MasterCraft unit sales volume, a favorable product mix and price increases, offset by higher material and shipping costs, accounted for the remaining increase.

Gross margin decreased to 25.4 percent for the second quarter ended Dec. 31, 2017, compared to 27.9 percent for fiscal 2017’s second quarter. The decrease was primarily due to the inclusion of NauticStar’s gross margin, which is in the high-teens.

Selling and marketing expense increased $1.3 million, or 50.2 percent, to $3.7 million for the second quarter ended Dec. 31, 2017, compared to $2.4 million for the year-earlier period. This increase resulted mainly from the inclusion of NauticStar, which added $0.6 million in selling and marketing expenses, a rise in dealer meeting costs and an increase in promotional activities related to the introduction of the redesigned 2018 MasterCraft XStar.

General and administrative expense rose by $0.2 million, or 3.7 percent, to $5.0 million for the second quarter ended Dec. 31, 2017, compared to $4.8 million for the prior-year period. This increase resulted mainly from the inclusion of NauticStar, which added $0.8 million in general and administrative expenses, and an increase of $0.5 million for legal and advisory fees related to the NauticStar acquisition.

Increases in general and administrative expenses due to NauticStar were partially offset by a $0.9 million decrease for legal and advisory fees related to Malibu Boats litigation, which was subsequently settled during the fourth quarter of fiscal 2017.

Net income totaled $8.0 million for the second quarter ended Dec. 31, 2017, versus $4.0 million for the year-earlier period, driven by the inclusion of NauticStar and reduced tax rates from the enactment of the Tax Cuts and Jobs Act.

Adjusted net income of $7.8 million, or $0.42 per share, on a fully diluted, pro forma weighted average share count of 18.8 million shares, was computed using the company’s estimated annual effective tax rate of about 29 percent, which due to the Tax Cuts and Jobs Act, is expected to be lowered to about 24 percent for fiscal 2019. This compares with Adjusted net income of $4.9 million, or $0.26 per share, in the prior-year period.

Fiscal Year-to-Date Results
Net sales for the fiscal year-to-date period ended Dec. 31, 2017, increased 28.3 percent, or $31.7 million, to $143.5 million compared to $111.8 million for the year-earlier period. The gain was primarily due to the inclusion of NauticStar, which increased net sales by 18.1 percent, or $20.2 million. The remaining gain of 10.2 percent, or $11.5 million, was attributable to MasterCraft primarily due to an increase in sales volume, favorable product mix and price increases.

For the fiscal year-to-date period ended Dec. 31, 2017, gross profit increased $6.0 million, or 18.7 percent, to $38.1 million, compared to $32.1 million for the prior-year period. The inclusion of NauticStar contributed $3.5 million to gross profit.

The remaining increase stemmed from gains in MasterCraft unit sales volume and favorable pricing, partially offset by higher material and shipping costs. Gross margin decreased to 26.6 percent for the fiscal year-to-date period ended Dec. 31, 2017, compared to 28.7 percent for the fiscal 2017 year-to-date period. The decrease was primarily due to the inclusion of NauticStar’s gross margin, which is in the high-teens.

Selling and marketing expense increased $1.9 million, or 42.5 percent, to $6.4 million for the fiscal year-to-date period ended Dec. 31, 2017, compared to $4.5 million for the prior-year period. This increase resulted mainly from the inclusion of NauticStar, which added $0.6 million in selling and marketing expenses, a rise in dealer meeting costs and an increase in promotional activities related to the introduction of the redesigned 2018 MasterCraft XStar.

General and administrative expense increased by $0.4 million, or 4.7 percent, to $9.3 million for the fiscal year-to-date period ended Dec. 31, 2017, compared to $8.9 million for the fiscal 2017 six months. This increase resulted mainly from the inclusion of NauticStar, which increased general and administrative expenses by $0.8 million, and included a $1.4 million increase in for legal and advisory fees. These were partially offset by a decrease of $1.7 million for legal and advisory fees related to Malibu Boats litigation, which was settled during the fourth quarter of fiscal 2017. 

For the fiscal year-to-date period ended Dec. 31, 2017, net income totaled $15.1 million, versus $11.0 in the fiscal 2017 year-to-date period, driven by the inclusion of NauticStar and reduced tax rates from the enactment of the Tax Cuts and Jobs Act. Adjusted net income of $16.1 million, or $0.86 per share, for the six-month period, on a fully diluted, pro forma weighted average share count of 18.8 million shares, was computed using the company’s estimated normalized annual effective tax rate of about 29 percent, which due to the Tax Cuts and Jobs Act, is expected to be lowered to about 24 percent for fiscal 2019. This compares with Adjusted net income of $12.5 million, or $0.67 per share, in the prior-year period.

MCBC Holdings, Inc. will host a live conference call and webcast to discuss fiscal second-quarter results  Feb. 8,  at 5 p.m. ET. To access the call, dial (800) 219-6861 (domestic) or (574) 990-1024 (international) and provide the operator with the conference ID 7789176. Please dial in at least 10 minutes prior to the call. To access the live webcast, go to the investor section of the company’s website, www.mastercraft.com, on the day of the conference call and click on the webcast icon.

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