MasterCraft Boat Holdings, Inc. announced financial results for its fiscal 2020 third quarter ended March 29, 2020.
“With the onset of the COVID-19 pandemic, all of us have been forced to adapt to new challenges that have impacted our families, our work, and our day-to-day lives,” MasterCraft CEO Fred Brightbill said. “I want to thank the MasterCraft team for their hard work and commitment to our Company. I know it has been a challenging last few weeks, and I am incredibly proud of how our team has come together to support one another and continue delivering on our commitment to our customers even as production was halted. We have a strong foundation, a resilient business model and a long-term plan to drive value and grow our market share, and I am confident that MasterCraft will come out of this situation stronger than ever.”
Net Sales for the third quarter were $102.6 million, a decrease of $25.8 million, or 20.1 percent, compared to $128.4 million for the prior-year period. The company said the decrease was primarily due to:
- a proactive decrease in unit production in anticipation of potential impact on retail demand from the COVID-19 pandemic;
- a continued reduction in unit sales volumes across each of the reportable segments to allow our dealers to right-size pipeline inventory levels;
- partially offset by the addition of the new Aviara brand.
Gross profit decreased $10.1 million, or 32.2 percent, to $21.3 million compared to $31.4 million for the prior-year period, principally driven by the lower unit sales volumes for each reportable segment, $1.5 million of compensation and employee benefit costs related to a temporary shutdown in response to the COVID-19 pandemic, and higher sales discounts.
The company attributed the decrease in consolidated gross margin percentage to a decrease in overhead absorption due to the lower unit sales volumes across each reportable segment, the transitory $1.5 million of COVID-19 shutdown costs, and higher sales discounts.
Operating expenses increased $55.6 million, or 430.9 percent, to $68.5 million for the third quarter compared to $12.9 million for the prior-year period. This increase was due to the $56.4 of Impairment Charges, partially offset by lower incentive compensation costs.
Net loss for the third quarter was $(36.7) million, or $(1.96) per share, compared to Net income of $12.8 million, or $0.68 per share, for the prior-year period. Adjusted Net Income of $8.6 million, or 0.46 per share, on a fully diluted, weighted average share count of 18.9 million shares, was computed using the company’s estimated annual effective tax rate of approximately 23.0 percent. This compares to Adjusted Net Income of $14.6 million, or 0.78 per fully diluted share, in the prior-year period.
“While COVID-19 presented many challenges for MasterCraft in the third quarter, we believe that we have implemented a plan to manage through the near-term headwinds, and position the Company for success as the economy begins to re-open,” Brightbill said. “We firmly believe the steps we have taken during the pandemic, including the enhanced financial flexibility gained from our cost-cutting measures and a proposed amendment to our credit facility will position MasterCraft for success throughout the transition and beyond. We anticipate that we will finalize the proposed credit amendment later this week, which will include temporary relief under our financial covenants.”
As previously disclosed, given the economic uncertainty around the business impact of the COVID-19 pandemic, the company has withdrawn the fiscal 2020 guidance contained in its second-quarter earnings press release and conference call on February 5, 2020. The company said it will revisit its decision to provide detailed sales and earnings guidance when visibility to accurately estimate its future results improves.