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. 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. Our actual results may differ materially from those contained in or implied by any forward-looking statements. This section generally discusses 2022 and 2021 items and year-to-year comparisons between 2022 and 2021. Discussions of 2020 items and year-to-year comparisons between 2021 and 2020 are not included in this Annual Report on Form 10-K and can be found in Item 7 of the Company's Annual Report on Form 10-K for the year endedJune 30, 2021 , which was filed with theSEC onSeptember 2, 2021 . Key Performance Measures From time to time we use certain key performance measures in evaluating our business and results of operations and we may refer to one or more of these key performance measures in this "Management's Discussion and Analysis of Financial Condition and Results of Operations." These key performance measures include:
• Unit sales volume - We define unit sales volume as the number of our boats
sold to our dealers during a period.
• Net sales per unit - We define net sales per unit as net sales divided by
unit sales volume.
• Gross margin - We define gross margin as gross profit divided by net sales,
expressed as a percentage.
• 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. 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. For a reconciliation of
Adjusted EBITDA margin to net income margin, see "Non-GAAP Measures" below.
• 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. For a reconciliation of net income (loss) to Adjusted Net Income, see "Non-GAAP Measures" below.
Fiscal 2022 Overview
In fiscal 2022, the Company achieved record net sales of
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. The full extent of the impact on our business, operations, and financial results will depend on evolving factors that we cannot predict. See Part I - Item 1A. Risk Factors. 21 --------------------------------------------------------------------------------
NauticStar Impairment Activity and Sale Subsequent to Yearend
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. 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. 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). Subsequent to fiscal yearend, we sold the NauticStar business. 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. The resulting loss on sale of the NauticStar business is estimated to be in a range of approximately$20.0 to$23.0 million . The results of the NauticStar business will be presented as discontinued operations in the Company's fiscal 2023 first quarter. In conjunction with the purchase agreement, the Company entered into a joint employer services agreement and a transition services agreement which provide certain services to the purchaser for various periods of time after the sale. In addition, the Company amended its Credit Agreement and received certain consents and waivers under the Credit Agreement, as amended, related to the sale of the NauticStar business (see Note 13 for more information related to these agreements). 22 --------------------------------------------------------------------------------
Results of Operations
We derived the consolidated statements of operations for the fiscal years endedJune 30, 2022 and 2021 from our audited consolidated financial statements and related notes included elsewhere in this Form 10-K. Our historical results are not necessarily indicative of the results that may be expected in the future. Consolidated Results 2022 vs. 2021 2022 2021 Change % Change (Dollar amounts in thousands) Consolidated statements of operations: NET SALES$ 707,862 $ 525,808 $ 182,054 34.6 % COST OF SALES 545,500 395,837 149,663 37.8 % GROSS PROFIT 162,362 129,971 32,391 24.9 % OPERATING EXPENSES: Selling and marketing 14,624 13,021 1,603 12.3 % General and administrative 40,960 37,049 3,911 10.6 % Amortization of other intangible assets 3,988 3,948 40 1.0 % Impairments 24,933 - 24,933 - Total operating expenses 84,505 54,018 30,487 56.4 % OPERATING INCOME 77,857 75,953 1,904 2.5 % OTHER EXPENSE: Interest expense 1,471 3,392 (1,921 ) (56.6 %) Loss on extinguishment of debt - 733 (733 ) (100.0 %) INCOME BEFORE INCOME TAX EXPENSE 76,386 71,828 4,558 6.3 % INCOME TAX EXPENSE 18,172 15,658 2,514 16.1 % NET INCOME$ 58,214 $ 56,170 $ 2,044 3.6 % Additional financial and other data: Unit sales volume: MasterCraft 3,596 3,301 295 8.9 % Crest 3,156 2,467 689 27.9 % NauticStar 1,365 1,387 (22 ) (1.6 %) Aviara 100 42 58 138.1 % Consolidated unit sales volume 8,217 7,197 1,020 14.2 % Net sales: MasterCraft$ 466,027 $ 350,812 $ 115,215 32.8 % Crest 140,859 102,688 38,171 37.2 % NauticStar 66,253 59,846 6,407 10.7 % Aviara 34,723 12,462 22,261 178.6 % Consolidated net sales$ 707,862 $ 525,808 $ 182,054 34.6 % Net sales per unit: MasterCraft$ 130 $ 106 $ 24 22.6 % Crest 45 42 3 7.1 % NauticStar 49 43 6 14.0 % Aviara 347 297 50 16.8 % Consolidated net sales per unit 86 73 13 17.8 % Gross margin 22.9 % 24.7 % (180) bpsNet Sales .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. Refer to Segment Results for further details on the drivers of net sales changes. Gross Margin. Gross Margin percentage declined 180 basis points during fiscal 2022 when compared to fiscal 2021. Lower margins were the result of supply chain disruptions, labor challenges, and inflationary pressures that drove material and overhead costs higher, 23 --------------------------------------------------------------------------------
which 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. Operating expenses increased 56.4 percent for fiscal 2022 when compared to the same prior-year period. 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. Additionally, general and administrative expense increased as a result of continued investments in information technology and product development. Moreover, third-party consulting fees were recognized at the NauticStar segment in an effort to improve operational efficiency and increase throughput. Selling and marketing expense increased due to prior-year expenses being impacted by the COVID-19 pandemic. 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. Interest expense decreased
Loss on Extinguishment of Debt. Loss on extinguishment of debt totaling$0.7 million was recognized upon refinancing the Company's debt in fiscal 2021. The loss was comprised of unamortized debt issuance costs related to the previously existing credit facility. Income Tax Expense. Our consolidated effective income tax rate increased to 23.8 percent for fiscal 2022 from 21.8 percent for fiscal 2021. See Note 8 in Notes to Consolidated Financial Statements for more information.
Segment Results
MasterCraft Segment
The following table sets forth MasterCraft segment results for the fiscal years ended: 2022 vs. 2021 (Dollar amounts in thousands) 2022 2021 Change % Change Net sales$ 466,027 $ 350,812 $ 115,215 32.8 % Operating income 105,341 73,354 31,987 43.6 % Purchases of property, plant and equipment 6,642 5,273 1,369 26.0 % Unit sales volume 3,596 3,301 295 8.9 % Net sales per unit$ 130 $ 106 $ 24 22.6 %
Net sales increased 32.8 percent during fiscal 2022, when compared to fiscal 2021. The increase was primarily driven by increased sales volumes, higher prices, favorable model mix, and higher option and content sales.
Operating income increased 43.6 percent during fiscal 2022, when compared to the same prior year period. The increase was driven by higher net sales, offset by inflationary pressures and production inefficiencies from supply chain disruptions and labor challenges. Additionally, Selling and marketing expense increased due to prior-year expenses being impacted by the COVID-19 pandemic. Also, General and administrative expenses increased as a result of continued investments in information technology and product development. 24 --------------------------------------------------------------------------------
Crest Segment
The following table sets forth Crest segment results for the fiscal years ended: 2022 vs. 2021 (Dollar amounts in thousands) 2022 2021 Change % Change Net sales$ 140,859 $ 102,688 $ 38,171 37.2 % Operating income 19,892 13,605 6,287 46.2 % Purchases of property, plant and equipment 4,193 892 3,301 370.1 % Unit sales volume 3,156 2,467 689 27.9 % Net sales per unit$ 45 $ 42 $ 3 7.1 %
Net sales increased 37.2 percent during fiscal 2022, when compared to fiscal 2021, as a result of higher sales volumes and higher prices.
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.
Purchases of property, plant, and equipment increased
NauticStar Segment
The following table sets forth NauticStar segment results for the fiscal years ended: 2022 vs. 2021 (Dollar amounts in thousands) 2022 2021 Change % Change Net sales$ 66,253 $ 59,846 $ 6,407 10.7 % Operating loss (38,338 ) (2,690 ) (35,648 ) 1325.2 % Impairments 23,833 - 23,833 - Purchases of property, plant and equipment 3,524 2,643 881 33.3 % Unit sales volume 1,365 1,387 (22 ) (1.6 %) Net sales per unit$ 49 $ 43 $ 6 14.0 % Net sales increased 10.7 percent during fiscal 2022, when compared to fiscal 2021. The increase was primarily driven by higher prices, higher option sales, and favorable model mix, partially offset by decreased sales volumes. Operating loss was$38.3 million for fiscal 2022, compared to$2.7 million for fiscal 2021. Benefits from higher sales prices were offset by supply chain disruptions, labor challenges, and higher costs from inflationary pressures. 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. Moreover, for fiscal 2022,$1.2 million in expense was recognized for third-party consulting fees in an effort to improve operational efficiency and increase throughput at the NauticStar segment. 25 --------------------------------------------------------------------------------
Aviara Segment
The following table sets forth Aviara segment results for the fiscal years ended: 2022 vs. 2021 (Dollar amounts in thousands) 2022 2021 Change % Change Net sales$ 34,723 $ 12,462 $ 22,261 178.6 % Operating loss (9,038 ) (8,316 ) (722 ) 8.7 % Impairment 1,100 - 1,100 - Purchases of property, plant and equipment 1,461 19,054 (17,593 ) (92.3 %) Unit sales volume 100 42 58 138.1 % Net sales per unit$ 347 $ 297 $ 50 16.8 % 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. Operating loss was$9.0 million for fiscal 2022, compared to$8.3 million for fiscal 2021. Inflation, ramp up related inefficiencies at theMerritt 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. See Note 5 in Notes to Consolidated Financial Statements for more information on the impairment charge. 26 --------------------------------------------------------------------------------
Non-GAAP Measures
EBITDA, Adjusted EBITDA, and Adjusted EBITDA Margin
We define EBITDA as earnings before interest expense, income taxes, depreciation and amortization. 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 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
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. 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 inthe United States , orU.S. GAAP. The Non-GAAP Measures are not measures of performance in accordance withU.S. GAAP and should not be considered as an alternative to net income (loss), net income (loss) per share, or operating cash flows determined in accordance withU.S. GAAP. Additionally, Adjusted EBITDA is not intended to be a measure of cash flow. We believe that the inclusion of the Non-GAAP Measures is appropriate to provide additional information to investors because securities analysts and investors use the Non-GAAP Measures to assess our operating performance across periods on a consistent basis and to evaluate the relative risk of an investment in our securities. We use Adjusted Net Income and Adjusted Net Income per share to facilitate a comparison of our operating performance on a consistent basis from period to period that, when viewed in combination with our results prepared in accordance withU.S. GAAP, provides a more complete understanding of factors and trends affecting our business than doesU.S. GAAP measures alone. 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 underU.S. GAAP. Some of these limitations are:
• 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;
• The Non-GAAP Measures do not reflect our cash expenditures, or future
requirements for capital expenditures or contractual commitments;
• The Non-GAAP Measures do not reflect changes in, or cash requirements
for, our working capital needs; • The Non-GAAP Measures do not reflect our tax expense or any cash requirements to pay income taxes; • The Non-GAAP Measures do not reflect interest expense, or the cash
requirements necessary to service interest payments on our indebtedness;
and
• 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.
27 -------------------------------------------------------------------------------- The following table presents a reconciliation of net income (loss) as determined in accordance withU.S. 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: % of Net % of Net % of Net 2022 sales 2021 sales 2020 sales Net income (loss)$ 58,214 8.2%$ 56,170 10.7%$ (24,047 ) -6.6% Income tax expense (benefit) 18,172 15,658 (7,565 ) Interest expense 1,471 3,392 5,045 Depreciation and amortization 13,614 11,630 10,527 EBITDA 91,471 12.9% 86,850 16.5% (16,040 ) -4.4% Impairments(a) 24,933 - 56,437 Share-based compensation 3,458 2,984 1,061 Operational improvement initiative(b) 1,216 - - Aviara transition costs(c) - 2,150 - Debt refinancing charges(d) - 769 - Aviara start-up costs(e) - - 1,446 COVID-19 shutdown costs(f) - - 1,394 Adjusted EBITDA$ 121,078 17.1%$ 92,753 17.6%$ 44,298 12.2%
(a) Represents non-cash charges of
for impairment of goodwill and
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. See
Notes 4 and 5 within the Notes to the Consolidated Financial Statements for
more information on impairment charges.
(b) Represents third-party consulting fees associated with the operational
improvement initiative at our NauticStar segment.
(c) Represents costs to transition production of the Aviara brand from
costs and costs not indicative of ongoing operations (such as training and
facility preparation).
(d) 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.
(e) Represents start-up costs associated with Aviara, a completely new boat brand
in an industry category previously not served by the Company. Start-up costs
presented for fiscal 2020 are related to the AV36 and AV40 models.
(f) 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. 28
-------------------------------------------------------------------------------- The following table sets forth a reconciliation of net income (loss) as determined in accordance withU.S. GAAP to Adjusted Net Income for the periods indicated: 2022 2021 2020 (Dollars in thousands, except per share) Net income (loss)$ 58,214 $ 56,170 $ (24,047 ) Income tax expense (benefit) 18,172 15,658 (7,565 ) Impairments(a) 24,933 - 56,437 Amortization of acquisition intangibles 3,881 3,842 3,842 Share-based compensation 3,458 2,984 1,061 Operational improvement initiative(b) 1,216 - - Aviara transition costs(c) - 2,150 - Debt refinancing charges(d) - 769 - Aviara start-up costs(e) - - 1,446 COVID-19 shutdown costs(f) - - 1,394 Adjusted Net Income before income taxes 109,874 81,573 32,568 Adjusted income tax expense(g) 25,271 18,762 7,491 Adjusted Net Income$ 84,603 $
62,811
Adjusted Net Income per share: Basic $ 4.58$ 3.34 $ 1.34 Diluted $ 4.54$ 3.31 $ 1.34 Weighted average shares used for the computation of(h): Basic Adjusted Net Income per share 18,455,226 18,805,464 18,734,482 Diluted Adjusted Net Income per share 18,636,512
18,951,521 18,734,482
(a) Represents non-cash charges of
for impairment of goodwill and
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. See
Notes 4 and 5 within the Notes to the Consolidated Financial Statements for
more information on impairment charges.
(b) Represents third-party consulting fees associated with the operational
improvement initiative at our NauticStar segment.
(c) Represents costs to transition production of the Aviara brand from
costs and costs not indicative of ongoing operations (such as training and
facility preparation).
(d) 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.
(e) Represents start-up costs associated with Aviara, a completely new boat brand
in an industry category previously not served by the Company. Start-up costs
presented for fiscal 2020 are related to the AV36 and AV40 models.
(f) 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.
(g) Reflects income tax expense at a tax rate of 23.0% for each period presented.
(h) 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. 29
--------------------------------------------------------------------------------
The following table presents the reconciliation of net income (loss) per diluted share to Adjusted net income per diluted share for the periods presented:
2022 2021
2020
Net income (loss) per diluted share
$ (1.28 ) Impact of adjustments: Income tax expense (benefit) 0.98 0.83 (0.40 ) Impairments(a) 1.34 -
3.01
Amortization of acquisition intangibles 0.21 0.20
0.20
Share-based compensation 0.19 0.16
0.06
Operational improvement initiative(b) 0.07 - - Aviara transition costs(c) - 0.11 - Debt refinancing charges(d) - 0.04 - Aviara start-up costs(e) - - 0.08 COVID-19 shutdown costs(f) - - 0.07 Adjusted Net Income per diluted share before income taxes 5.91 4.30
1.74
Impact of adjusted income tax expense on net income per diluted share before income taxes(g) (1.37 ) (0.99 ) (0.40 ) Adjusted Net Income per diluted share$ 4.54 $ 3.31
(a) Represents non-cash charges of
for impairment of goodwill and
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. See
Notes 4 and 5 within the Notes to the Consolidated Financial Statements for
more information on impairment charges.
(b) Represents third-party consulting fees associated with the operational
improvement initiative at our NauticStar segment.
(c) Represents costs to transition production of the Aviara brand from
costs and costs not indicative of ongoing operations (such as training and
facility preparation).
(d) 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.
(e) Represents start-up costs associated with Aviara, a completely new boat brand
in an industry category previously not served by the Company. Start-up costs
presented for fiscal 2020 are related to the AV36 and AV40 models.
(f) 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.
(g) Reflects income tax expense at a tax rate of 23.0% for each period presented.
30 --------------------------------------------------------------------------------
Liquidity and Capital Resources
Our primary liquidity and capital resource needs are to finance working capital, fund capital expenditures, service our debt, and fund our stock repurchase program. 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$34.2 million as ofJune 30, 2022 , a decrease of$5.1 million from$39.3 million as ofJune 30, 2021 . Total debt as ofJune 30, 2022 andJune 30, 2021 was$56.5 million and$93.1 million , respectively.
Our working capital was impacted by the
As ofJune 30, 2022 , we have repaid all amounts outstanding under the Revolving Credit Facility, leaving$100.0 million of available borrowing capacity. As ofJune 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. OnJune 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 endingJune 24, 2024 . During fiscal 2022, the Company repurchased 975,161 shares of common stock for$25.5 million in cash, including related fees and expenses. As ofJune 30, 2022 , there was$24.5 million of availability remaining under the stock repurchase program.
We believe our cash balance, cash from operations, and our ability to borrow, will be sufficient to provide for our liquidity and capital resource needs, including authorized stock repurchases.
The following table summarizes the cash flows from operating, investing, and financing activities: 2022 2021 2020 Total cash provided by (used in): Operating activities$ 73,311 $ 68,538 $ 30,198 Investing activities (15,820 ) (27,832 ) (14,218 ) Financing activities (62,540 ) (17,773 ) (5,487 ) Net change in cash$ (5,049 ) $ 22,933 $ 10,493 Fiscal 2022 Cash Flow Net cash provided by operating activities was$73.3 million , mainly due to net income, partially offset by working capital usage. 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. 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. As discussed above, inventory increased$25.2 million . Accounts receivable increased due to increased sales. Prepaid and other current assets increased due to higher general insurance premiums. Accrued expenses and other current liabilities increased due to an increase in warranty costs and dealer incentives. Accounts payable increased as a result of increased production levels.
Net cash used for investing activities was
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 . 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. Accounts receivable increased$5.9 million primarily due to increased sales across all segments. Inventory increased$28.6 million , driven by increases to support higher production 31 -------------------------------------------------------------------------------- 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. 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. Our capital spending was focused on expanding our capacity by purchasing the Merritt Island Facility for$14.2 million , capital related to the Aviara transition to the Merritt Island Facility, and maintenance capital.
Net cash used for financing activities was
Off-Balance Sheet Arrangements
The Company did not have any off-balance sheet financing arrangements as of
Contractual Obligations
As of
Long-Term Debt Obligations - See Note 7 - Long-Term Debt in the accompanying Notes to Consolidated Financial Statements for further information.
Interest on Long-Term Debt Obligations - As ofJune 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. Interest on variable rate debt instruments was calculated using interest rates in effect for our borrowings as ofJune 30, 2022 and holding them constant for the life of the instrument.
Purchase Commitments - As of
Repurchase Obligations - The Company has reserves to cover potential losses associated with repurchase obligations based on historical experience and current facts and circumstances. We incurred no material impact from repurchase events during fiscal 2022, 2021, or 2020. 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. See Note 10 in the accompanying Notes to Consolidated Financial Statements for more information.
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. See Note 8 in Notes to Consolidated Financial Statements for more information.
Application of Critical Accounting Policies and Estimates
Significant accounting policies are described in the notes to the consolidated financial statements. 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. For additional information regarding these policies, see Note 1 - Significant Accounting Policies in Notes to Consolidated Financial Statements.
Asset Impairment
The Company reviews goodwill for impairment at its annual impairment testing date, which isJune 30 , and whenever events or changes in circumstances indicate that the fair value of a reporting unit may be below its carrying value. 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. 32 -------------------------------------------------------------------------------- If the fair value of a reporting unit does not meet the "more likely than not" criteria discussed above, the impairment test for goodwill is a quantitative test. This test involves comparing the fair value of the reporting unit with its carrying value. If the fair value exceeds the carrying value, goodwill is not considered impaired. If the carrying amount exceeds the fair value then the goodwill is considered impaired and an impairment loss is recognized in an amount by which the carrying value exceeds the reporting unit's fair value, not to exceed the carrying amount of the goodwill allocated to that reporting unit. The Company calculates the fair value of its reporting units considering both the income approach and market approach. 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. 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. As discussed further in Note 5 to the Consolidated Financial Statements, during the years endedJune 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 ofJune 30, 2022 , only the MasterCraft reporting unit has a goodwill balance. The fair value of this reporting unit substantially exceeds its carrying value. Other Intangible Assets The Company's primary intangible assets other than goodwill are dealer networks and trade names acquired in business combinations. These intangible assets are initially valued using a methodology commensurate with the intended use of the asset. The dealer networks were valued using an income approach, which requires an estimate or forecast of the expected future cash flows from the dealer network through the application of the multi-period excess earnings approach. The fair value of trade names is measured using a relief-from-royalty approach, a variation of the income approach, which requires an estimate or forecast of the expected future cash flows. This method assumes the value of the trade name is the discounted cash flows of the amount that would be paid to third parties had the Company not owned the trade name and instead licensed the trade name from another company. The basis for future sales projections for these methods are based on internal revenue forecasts by reporting unit, which the Company believes represent reasonable market participant assumptions. The future cash flows are discounted using an applicable Discount Rate as well as any potential risk premium to reflect the inherent risk of holding a standalone intangible asset.
The key judgements in these fair value calculations, as applicable, are: assumptions used in developing internal revenue growth and dealer expense forecasts, assumed dealer attrition rates, the selection of an appropriate royalty rate, as well as the perceived risk associated with those forecasts in determining the Discount Rate.
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. 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. As part of the annual test, the Company may perform a qualitative, rather than quantitative, assessment to determine whether each trade name intangible asset is "more likely than not" impaired. In performing this qualitative analysis, the Company considers various factors, including macroeconomic events, industry and market events and cost related events. If the "more likely than not" criteria is not met, the impairment test for indefinite-lived intangible assets consists of a comparison of the fair value of the intangible asset with its carrying amount. An impairment loss is recognized for the amount by which the carrying value exceeds the fair value of the asset. As discussed further in Note 5 to the Consolidated Financial Statements, during the years endedJune 30, 2022 and 2020, the Company performed quantitative tests related to its indefinite-lived intangible assets and, during the year endedJune 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. During the years endedJune 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.
Long-Lived Assets
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. A current expectation that, 33 -------------------------------------------------------------------------------- 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. 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 groups. 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. As discussed further in Notes 4 and 5 to the Consolidated Financial Statements, during the year endedJune 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. 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. 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. The key judgements that affect our estimate for warranty liability include the number of units sold, historical and anticipated rates of warranty claims and cost per claim. We periodically assess the adequacy of the recorded warranty liabilities and adjust the amounts as actual claims are determined or as changes in the obligations become reasonably estimable. We also adjust our liability for specific warranty matters when they become known and exposure can be estimated. Future warranty claims may differ from our estimate of the warranty liability, which could lead to changes in the Company's warranty liability in future periods. Income Taxes-We are subject to income taxes inthe United States of America and theUnited Kingdom . 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. Although we believe our reserves are reasonable, we cannot provide assurance that the final tax outcome of these matters will not be different from that which is reflected in our historical income tax provisions and accruals. We adjust these reserves in light of changing facts and circumstances, such as the closing of a tax audit or the refinement of an estimate. To the extent that the final tax outcome of these matters is different than the amounts recorded, such differences will impact the provision for income taxes in the period in which such determination is made. 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. 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. For substantially all sales, this occurs when the product is released to the carrier responsible for transporting it to a customer. The Company typically receives payment from the floor plan financing providers within 5 business days of shipment. 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. The consideration recognized represents the amount specified in a contract with a customer, net of estimated incentives the Company reasonably expects to pay. The estimated liability and reduction in revenue for dealer incentives is recorded at the time of sale. Subsequent adjustments to incentive estimates are possible because actual results may differ from these estimates if conditions dictate the need to enhance or reduce sales promotion and incentive programs or if dealer achievement or other items vary from historical trends. Accrued dealer incentives are included in Accrued expenses and other current liabilities in the accompanying consolidated balance sheets.
Rebates and Discounts
Dealers earn wholesale rebates based on purchase volume commitments and achievement of certain performance metrics. The Company estimates the amount of wholesale rebates based on historical achievement, forecasted volume, and assumptions regarding dealer behavior. Rebates that apply to boats already in dealer inventory are referred to as retail rebates. The Company estimates the amount of retail rebates based on historical data for specific boat models adjusted for forecasted sales volume, product mix, dealer and consumer behavior, and assumptions concerning market conditions. The Company also utilizes various programs whereby it offers cash discounts or agrees to reimburse its dealers for certain floor plan interest costs incurred by dealers for limited periods of time, generally ranging up to nine months. 34 --------------------------------------------------------------------------------
Other Revenue Recognition Matters
Dealers generally have no right to return unsold boats. Occasionally, the Company may accept returns in limited circumstances and at the Company's discretion under its warranty policy. 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. 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. The estimated fair value takes into account our estimate of the loss we will incur upon resale of any repurchases. The Company accrues the estimated fair value of this obligation based on the age of inventory currently under floor plan financing and estimated credit quality of dealers holding the inventory. Inputs used to estimate this fair value include significant unobservable inputs that reflect the Company's assumptions about the inputs that market participants would use and, therefore, this liability is classified within Level 3 of the fair value hierarchy. We incurred no material impact from repurchase events during fiscal 2022, 2021, or 2020. See Note 10 in Notes to Consolidated Financial Statements for more information on repurchase obligations.
New Accounting Pronouncements
See "Part II, Item 8. Financial Statements and Supplementary Data - Note 1 - Significant Accounting Policies - New Accounting Pronouncements."
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