MasterCraft reports 1Q results

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MasterCraft had some gross margin pressure in its first quarter because of a model changeover that included several new features — such as new dashes and ZDT2 towers — and a costlier than expected launch of the XStar, shown here.

MasterCraft had some gross margin pressure in its first quarter because of a model changeover that included several new features — such as new dashes and ZDT2 towers — and a costlier than expected launch of the XStar, shown here.

MCBC Holdings Inc., parent company of MasterCraft Boat Co. and Nautic Star, increased net sales 7.2 percent, to $65 million in the first quarter, but saw gross margins decrease 140 basis points, to 27.9 percent.

The company said that was compared to “an exceptionally high” 29.3 percent gross margin comparison in the first quarter of 2016 and pointed to new features such as dashboards, sound systems and ZDT2 towers as contributors to burdensome 2018 model-year changeover costs. The company said those costs would not affect results apart from the quarter.

“We continue to see solid retail activity and are comfortable with our current inventory levels,” said MCBC Holdings president and CEO Terry McNew in a statement. “We remain optimistic about fiscal 2018 and we’re diligently working with our strong dealer network to maximize their opportunities moving forward.”

Net income for the quarter that ended Oct. 1 was $7.05 million, or 38 cents a diluted share, compared with $6.98 million, or 38 cents a share, in the quarter a year earlier.

EBITDA was $11.8 million, compared to $12.4 million in the prior-year period. Adjusted EBITDA margin declined 200 basis points, to 19.9 percent, from 21.9 percent in the prior-year period. Adjusted EBITDA was $12.9 million, a 2.8 percent decrease from $13.3 million in the prior-year period.

“Top-line sales grew nicely in the first quarter, driven by demand for performance sports boats. And we continue to deliver outstanding working capital management,” McNew said. “Additionally, we recently welcomed NauticStar to the MasterCraft family. NauticStar is a well respected, expertly built and uniquely positioned brand, and their outboard bay, deck and offshore center console boats provide us with additional product diversity and opportunities for growth going forward.”

For the full fiscal 2018 the company expects to see adjusted EBITDA margins for MasterCraft, excluding NauticStar, to grow to the low 19 percent range, up slightly from the 19 percent margin the company had in fiscal year 2017.

After taking the dilutive effect of the NauticStar acquisition, consolidated EBITDA margins for the fiscal 2018 are expected to be in the mid-to-high 17 percent range. Going forward, consolidated results will include both brands.

MasterCraft’s parent company acquired NauticStar Oct. 2, after the first quarter ended, for about $79.8 million. Amory, Miss.-based NauticStar builds and distributes 18- to 28-foot bay boats, deckboats and offshore center consoles. The company plans to increase NauticStar production 15 to 20 percent in the first year and tapped industry veteran Tim Schiek — who most recently spent more than 20 years at Brunswick Corp. — to serve as the company’s president.

“Looking ahead we’re optimistic about prospects for our fiscal 2018 with the sales and profit growth opportunities we have for both NauticStar and MasterCraft,” McNew said.

“And we remain committed to our five-pronged growth strategy: developing new and innovative products; further penetrating the entry-level and mid-line segment of the performance sport boat category; capturing share from adjacent boating categories; strengthening our dealer network; and driving margin expansion through continuous operational excellence.”

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