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What changed in MasterCraft Boat Holdings, Inc.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of MasterCraft Boat Holdings, Inc.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+358 added−178 removedSource: 10-K (2023-08-30) vs 10-K (2022-09-09)

Top changes in MasterCraft Boat Holdings, Inc.'s 2023 10-K

358 paragraphs added · 178 removed · 128 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

52 edited+203 added−13 removed22 unchanged
Biggest changeAll models are available in either outboard or sterndrive propulsion, and Aviara’s retail prices range from approximately $430,000 to over $1,000,000. The AV32, AV36, and AV40 began selling in fiscal 2020, fiscal 2021, and fiscal 2022, respectively. In addition, we believe there will be significant model expansion opportunities for Aviara.
Biggest changeAviara’s models consist of the AV32, a 32-foot luxury bowrider, the AV36, a 36-foot luxury bowrider, the AV40, the brand’s flagship 40-foot luxury bowrider, and beginning in fiscal 2024, AV28, a 28-foot luxury bowrider, for the ultimate on-the-water experience. All models are available in either outboard or sterndrive propulsion, and Aviara’s retail prices range from approximately $200,000 to over $1,300,000.
We have engaged our key suppliers in collaborative preferred supplier relationships and have developed processes including annual cost reduction targets, regular reliability projects, and extensive product testing requirements to ensure that our suppliers produce at lowest total cost and to the highest levels of quality expected of our brands.
We have engaged our key suppliers in collaborative preferred supplier relationships and have developed processes including annual cost reduction targets, regular reliability projects, and extensive product testing requirements to ensure that our suppliers produce to the highest levels of quality expected of our brands and at lowest total cost.
We have strategically designed and priced the MasterCraft NXT models to target the fast-growing entry-level consumer group that is distinct from our traditional consumer base, while maintaining our core MasterCraft brand attributes at profit margins comparable to our other offerings. Our Crest portfolio of pontoon boats are designed for the ultimate in comfort and recreational pleasure boating.
We have strategically designed and priced the MasterCraft NXT models to target the fast-growing entry-level consumer group that is distinct from our traditional consumer base, while maintaining our core MasterCraft brand attributes at profit margins comparable to our other offerings. 2 Our Crest portfolio of pontoon boats are designed for the ultimate in comfort and recreational pleasure boating.
One of our four strategic priorities is developing a high-performing work organization and work environment that is consumer-focused and attracts and retains superior employees. We strive to offer our employees career-specific tools, training, resources, and support development opportunities. We utilize a talent management process, which includes performance appraisal and development planning.
One of our strategic priorities is developing a high-performing work organization and work environment that is consumer-focused and attracts and retains superior employees. We strive to offer our employees career-specific tools, training, resources, and support development opportunities. We utilize a talent management process, which includes performance appraisal and development planning.
We also own in excess of 130 trademark registrations in various countries around the world, most notably for the MasterCraft, Crest, NauticStar, and Aviara names and/or logos, as well as numerous model names in MasterCraft’s Star Series, X, XT, and NXT product families, and we have several pending applications for additional registrations.
We also own in excess of 130 trademark registrations in various countries around the world, most notably for the MasterCraft, Crest, and Aviara names and/or logos, as well as numerous model names in MasterCraft’s Star Series, X, XT, and NXT product families, and we have several pending applications for additional registrations.
We make available, free of charge through our website, our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to these reports as soon as reasonably practicable after we electronically file these materials with, or otherwise furnish them to, the SEC. 6
We make available, free of charge through our website, our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to these reports as soon as reasonably practicable after we electronically file these materials with, or otherwise furnish them to, the SEC.
Environmental, Safety, and Regulatory Matters Our operations are subject to extensive and frequently changing federal, state, local, and foreign laws and regulations, including those concerning product safety, environmental protection, and occupational health and safety. We believe that our operations and products are in compliance with these regulatory requirements.
Environmental, Safety, and Regulatory Matters Our operations are subject to extensive and frequently changing federal, state, local, and foreign laws and regulations, including those concerning product safety, environmental protection, and occupational health and safety. We believe that our operations and products 5 are in compliance with these regulatory requirements.
We compete by operating, developing, and acquiring a diversified portfolio of leading brands focused on the fastest growing segments of the powerboat industry; focusing relentlessly on delivering the best overall ownership experience to consumers; developing and continuously improving highly efficient production techniques and methods which result in highly innovative products; distributing our products through extensive, consumer-driven independent dealer networks; and attracting, developing, and retaining high-performing employees.
We compete by operating, developing, and acquiring a diversified portfolio of leading brands focused on the fastest growing segments of the powerboat industry; focusing relentlessly on delivering the best overall ownership experience to consumers; developing and continuously improving highly efficient production techniques and methods which result in highly innovative products; distributing our products through extensive, consumer-centric independent dealer networks; and attracting, developing, and retaining high-performing employees.
Crest has continued to grow market share as it expands its distribution footprint. Crest’s pontoon boats are designed to offer consumers the best in luxury, style and performance without compromise across a diverse model lineup ranging in length from 20 to 29 feet. The Signature Line is home to Crest’s Classic models.
Crest has continued to grow market share as it expands its distribution footprint. Crest’s pontoon boats are designed to offer consumers the best in luxury, style and performance without compromise across a diverse model lineup ranging in length from 20 to 27 feet. The Signature Line is home to Crest’s Classic models.
Such trademarks may endure in perpetuity on a country-by-country basis provided that we comply with all statutory maintenance requirements, including continued use of each trademark in each such country. In addition, we own 38 registered U.S. copyrights. Finally, we have registered more than 35 vessel hull designs with the U.S.
Such trademarks may endure in perpetuity on a country-by-country basis provided that we comply with all statutory maintenance requirements, including continued use of each trademark in each such country. In addition, we own 38 registered U.S. copyrights. Finally, we have registered more than 50 vessel hull designs with the U.S.
Suppliers We purchase a wide variety of raw materials from our supplier base, including resins, fiberglass, aluminum, lumber and steel, as well as product parts and components such as engines and electronic controls. We maintain long-term contracts with strategic suppliers and informal arrangements with other suppliers.
Suppliers We purchase a wide variety of raw materials from our supplier base, including resins, fiberglass, aluminum, lumber and steel, as well as parts and components such as engines and electronic controls. We maintain long-term contracts with certain strategic suppliers and informal arrangements with other suppliers.
We constantly monitor the health and strength of our dealers by analyzing each dealer’s retail sales and inventory and have established processes to identify underperforming dealers in order to assist them in improving their performance, to allow us to switch to a more effective dealer, or to direct product to markets with the greatest retail demand.
We constantly monitor the health and strength of our dealers by analyzing each dealer’s retail sales and inventory and have established processes to identify under-performing dealers in order to assist them in improving their performance, to allow us to switch to a more effective dealer, or to direct product to markets with the greatest retail demand.
We believe these collaborative relationships with our most important suppliers have contributed to our significant improvements in product quality, innovation, and profitability. The most significant components used in manufacturing our boats, based on cost, are engine packages. For our MasterCraft brand, Ilmor Engineering, Inc.
We believe these collaborative relationships with our key strategic suppliers have contributed to significant improvements in product quality, innovation, and profitability. The most significant components used in manufacturing our boats, based on cost, are engine packages. For our MasterCraft brand, Ilmor Engineering, Inc.
We have developed a strategy to launch several new models each year, which will allow us to renew our product portfolio with innovative offerings at a rate that we believe will be difficult for our competitors to match without significant additional capital investments.
Our strategy is to launch several new models each year, which will allow us to renew our product portfolio with innovative offerings at a rate that we believe will be difficult for our competitors to match without significant additional capital investments.
These collaborative efforts begin at the design stage, with our key suppliers integrated into design and development planning well in advance of launch, which allows us to control costs and to leverage the expertise of our suppliers in developing product innovations.
These collaborative efforts begin at the design stage, as our key suppliers are integrated into design and development planning well in advance of launch, which allows us to control costs and to leverage the expertise of our suppliers in developing product innovations.
We currently hold more than 40 U.S. patents and more than 10 foreign patents, including utility and design patents for our transom surf seating, our DockStar handling system, and our SurfStar surf system technology among numerous other innovations. Provided that we comply with all statutory maintenance requirements, our patents are expected to expire between 2028 and 2040.
We currently hold more than 50 U.S. patents and more than 10 foreign patents, including utility and design patents for our transom surf seating, our DockStar handling system, and our SurfStar surf system technology among numerous other innovations. Provided that we comply with all statutory maintenance requirements, our patents are expected to expire between 2028 and 2041.
Our research and product development expense for fiscal 2022, 2021, and 2020 was $8.2 million, $6.8 million, and $5.2 million, respectively. Intellectual Property We rely on a combination of patent, trademark, and copyright protection, trade secret laws, confidentiality procedures, and contractual provisions to protect our rights in our brands, products, and proprietary technology.
Our research and product development expense for fiscal 2023, 2022, and 2021 was $8.3 million, $7.2 million, and $5.8 million, respectively. 4 Intellectual Property We rely on a combination of patent, trademark, and copyright protection, trade secret laws, confidentiality procedures, and contractual provisions to protect our rights in our brands, products, and proprietary technology.
The XStar and X models are geared towards the consumer seeking the most premium and highest performance boating experience that we offer, and generally command a price premium over our competitors’ boats at retail prices ranging from approximately $175,000 to $300,000.
The ProStar, XStar and X models are geared towards the consumer seeking the most premium and highest performance boating experience that we offer, and generally command a price premium over our competitors’ boats at retail prices ranging from approximately $185,000 to $320,000.
We have several exclusive supplier partnerships for critical purchased components, such as aluminum billet, towers, and engine packages. For MasterCraft, we also build custom trailers that match the exact size and color of our boats.
We have several exclusive supplier partnerships for certain critical components, such as aluminum billet, towers, and engine packages. For MasterCraft, we also build custom trailers that match the exact size and design-characteristics of our boats.
Significant competition exists for each of our brands and the markets in which we compete range from being relatively concentrated for the ski/wake category, to being fragmented for the pontoon, and deck and saltwater fishing categories. As of December 2021, based on Statistical Surveys, Inc.
Significant competition exists for each of our brands, and the markets in which we compete range from being relatively concentrated for the ski/wake category, to being fragmented for the pontoon category. As of December 2022, based on Statistical Surveys, Inc.
Crest Segment Our Crest segment consists of our Crest brand, which manufactures pontoon boats. Crest participates in the second-fastest growing category in the powerboat industry. Crest, which we acquired in October 2018, was founded in 1957 and has grown to be one of the top producers of innovative, high-quality pontoon boats ranging from 20 to 29 feet.
Crest participates in the second-fastest growing category in the powerboat industry. Crest, which we acquired in October 2018, was founded in 1957 and has grown to be one of the top producers of innovative, high-quality pontoon boats ranging from 20 to 27 feet.
The MasterCraft XT lineup is designed to offer ultimate flexibility to consumers with maximum customization and maximum performance at retail prices ranging from approximately $120,000 to $180,000. The NXT models offer the quality, performance, styling, and innovation of the MasterCraft brand to the entry-level consumer, with retail prices ranging from approximately $90,000 to $120,000.
The MasterCraft XT lineup is designed to offer ultimate flexibility to consumers with maximum customization and maximum performance at retail prices ranging from approximately $130,000 to $190,000. The NXT models offer the quality, performance, styling, and innovation of the MasterCraft brand to the entry-level consumer, with retail prices ranging from approximately $100,000 to $150,000.
Manufacturing MasterCraft boats and trailers are manufactured and lake-tested at our 285,000 square-foot facility located in Vonore, Tennessee. We believe MasterCraft has the only boat manufacturing facility to achieve compliance with all three of the ISO 9001 (Quality Management Systems), 14001 (Environmental Management Systems), and 18001 (International Occupational Health and Safety Management System) standards.
We believe MasterCraft has the only boat manufacturing facility to achieve compliance with all three of the ISO 9001 (Quality Management Systems), 14001 (Environmental Management Systems), and 18001 (International Occupational Health and Safety Management System) standards. Crest boats are manufactured at our 270,000 square-foot facility located in Owosso, Michigan.
Aviara Segment Our Aviara segment consists of our Aviara brand, which manufactures luxury day boats. Aviara is a de novo brand, developed in-house, and focused on serving the luxury recreational day boat category of the powerboat industry.
Aviara is a de novo brand, developed in-house, and focused on serving the luxury recreational day boat category of the powerboat industry.
Copyright Office, the most recent of which will remain in force through 2027, and have 10 additional vessel hull designs pending. Competitive Conditions and Position We believe each of our brands are highly competitive and have a reputation for quality.
Copyright Office, the most recent of which will remain in force through 2030. Competitive Conditions and Position We believe each of our brands are highly competitive and have a reputation for quality.
Our Aviara brand is sold through a distribution network consisting of one dealer with 79 locations as of June 30, 2022. 3 Outside of North America. As of June 30, 202 2 , through our MasterCraft brand, we had a total of 41 international dealers and 41 locations . Our Crest brand had two international dealers in two locations.
Our Aviara brand is sold through a distribution network consisting of one dealer with 57 locations. Outside of North America. As of June 30, 2023, through our MasterCraft brand, we had a total of 43 international dealers and 43 locations. Our Crest brand had two international dealers in two locations. Aviara had no international dealers.
The rigorous and consumer-centric attention to detail in the design and manufacturing of our products results in boats of high quality which provides an exceptional on water experience across all of our brands. Our dedication to quality permits our consumers to enjoy our products with confidence.
Aviara boats are manufactured at our 130,000 square-foot facility in Merritt Island, Florida. The rigorous and consumer-centric attention to detail in the design and manufacturing of our products results in boats of high quality which provides an exceptional on water experience across all of our brands. Our dedication to quality permits our consumers to enjoy our products with confidence.
As of December 202 1 , based on SSI data, the Aviara brand has the # 7 market share in the 30-foot to 4 3 -foot bowrider category with 5.7 %.
As of December 2022, based on SSI data, the Crest brand has the #9 market share in the aluminum pontoon category with 4.1%. As of December 2022, based on SSI data, the Aviara brand has the #7 market share in the 30-foot to 43-foot bowrider category with 6.3%.
As of June 30, 2022, our product development and engineering group includes 60 professionals. These individuals bring to our product development efforts significant expertise across core disciplines, including boat design, computer-aided design, naval engineering, electrical engineering, and mechanical engineering.
These individuals bring to our product development efforts significant expertise across core disciplines, including boat design, computer-aided design, naval engineering, electrical engineering, and mechanical engineering.
In addition, we offer various accessories, including trailers and aftermarket parts. Our MasterCraft portfolio of ProStar, XStar, X, XT, and NXT models are designed for the highest levels of performance, styling, and enjoyment for both recreational and competitive use.
Our MasterCraft portfolio of ProStar, XStar, X, XT, and NXT models are designed for the highest levels of performance, styling, and enjoyment for both recreational and competitive use.
(“Ilmor”) is our exclusive engine supplier, and for our Crest brand, Mercury Marine (“Mercury”) is our largest engine supplier, while Yamaha Motor Corporation (“Yamaha”) is the largest engine supplier for our NauticStar brand. For our Aviara brand, Mercury provides outboard engines and Ilmor provides sterndrive engines. We maintain strong and long-standing relationships with Ilmor, Mercury, and Yamaha.
(“Ilmor”) is our exclusive engine supplier and for our Crest brand, Mercury Marine (“Mercury”) is our largest engine supplier. For our Aviara brand, Mercury provides outboard engines and Ilmor provides sterndrive engines. We maintain strong and long-standing relationships with Ilmor and Mercury. During fiscal 2023, Ilmor was our largest overall supplier.
During fiscal 2022, Ilmor was our largest overall supplier. In addition to ski/wake and sterndrive engines, Ilmor’s affiliates produce engines used in a number of leading racing boats and race cars. We work closely with Ilmor to 4 remain at the forefront of engine design, performance, and manufacturing.
In addition to ski/wake and sterndrive engines, Ilmor’s affiliates produce engines used in a number of leading racing boats and race cars. We work closely with Ilmor to remain at the forefront of engine design, performance, and manufacturing. We believe our long-term relationships with our engine supplier partners is a key competitive advantage.
Crest’s long-standing reputation for high-quality, standard features and content, and innovation provides Crest with strong dealer and consumer bases in its core geographic markets.
Crest’s long-standing reputation for high-quality, standard features and content, and innovation provides Crest with strong dealer and consumer bases in its core geographic markets. Aviara Segment Our Aviara segment consists of our Aviara brand, which manufactures luxury day boats.
In addition, we provide our dealers with comprehensive sales training and a complete set of technology-based tools designed to help dealers maximize performance.
Dealer Relations We have developed a system of financial incentives for our dealers based on achievement of key benchmarks. In addition, we provide our dealers with comprehensive sales training and a complete set of technology-based tools designed to help dealers maximize performance.
Through our four brands, we have leading market share positions in three of the fastest growing categories of the powerboat industry, ski/wake boats, outboard saltwater fishing, and pontoon boats, while entering the large, growing luxury day boat segment.
Through these three brands, over the last five years, we have had leading market share positions in two of the fastest growing categories of the powerboat industry, ski/wake boats and pontoon boats, while also growing market share within the luxury day boat segment.
We believe the MasterCraft brand is known among boating enthusiasts for high performance, premier quality, and relentless innovation. We believe that the market recognizes MasterCraft as a premier brand in the powerboat industry due to the overall superior value proposition that our boats deliver to consumers. We work tirelessly every day to maintain this iconic brand reputation.
We believe that the market recognizes MasterCraft as a premier brand in the powerboat industry due to the overall superior value proposition that our boats deliver to consumers. We work tirelessly every day to maintain this iconic brand reputation. Crest Segment Our Crest segment consists of our Crest brand, which manufactures pontoon boats.
ITEM 1. BUSINESS We are a leading designer, manufacturer, and marketer of recreational powerboats sold under a diversified portfolio of four brands, MasterCraft, Crest, NauticStar, and Aviara.
ITEM 1. B USINESS We are a leading innovator, designer, manufacturer, and marketer of recreational powerboats sold through our three brands, MasterCraft, Crest, and Aviara.
Our other brands are generally served on a nonexclusive basis by their respective dealers. We consistently review our distribution networks to identify opportunities to expand our geographic footprint and improve our coverage of the market.
We consistently review our distribution networks to identify opportunities to expand our geographic footprint and improve our coverage of the market.
(“SSI”) data with all states reporting, the top five brands accounted for approximately 72% of the ski/wake markets, approximately 52% for the pontoon market, and approximately 28% of the deck and saltwater fishing category. Market participants also range from small, single-product businesses to large, diversified companies.
(“SSI”) data, the top five brands accounted for approximately 71% of the ski/wake markets and approximately 50% for the pontoon market. Market participants also range from small, single-product businesses to large, diversified companies. In addition, we compete indirectly with businesses that offer alternative leisure products and activities.
For fiscal 2022, the Company’s top ten dealers accounted for approximately 30% of our net sales and none of our dealers individually accounted for more than 10% of our total net sales. North America. In North America, our MasterCraft brand had a total of 112 dealers across 152 locations as of June 30, 2022.
For fiscal 2023, the Company’s top ten dealers accounted for approximately 40% of our net sales and one of our dealers individually accounted for 14.9%, or approximately $98.6 million. North America. As of June 30, 2023, our MasterCraft brand had a total of 108 dealers across 158 locations. Our Crest brand had a total of 148 dealers across 185 locations.
As a leader in recreational marine, we strive to deliver the best on-water experience through innovative, high-quality products with a relentless focus on the consumer. Our Segments MasterCraft Segment Our MasterCraft segment consists of our MasterCraft brand, which manufactures premium ski/wake boats.
As a leader in recreational marine, we strive to deliver the best on-water experience through innovative, high-quality products with a relentless focus on the consumer. On September 2, 2022, the Company completed the sale of its NauticStar business.
In addition, we compete indirectly with businesses that offer alternative leisure products and activities. 5 In recent history, the MasterCraft brand has consistently competed for the leading market share position in the U.S. among manufacturers of premium ski/wake boats based on unit volume.
In recent history, the MasterCraft brand has consistently competed for the leading market share position in the U.S. among manufacturers of ski/wake boats based on unit volume. As of December 2022, based on SSI data, the MasterCraft brand has the #1 market share in the ski/wake category with 20.8%.
Our business-to-business application efficiently executes many critical functions, including warranty registrations, warranty claims, boat ordering and tracking, parts ordering, technical support, and inventory reporting. This system facilitates communication between our sales team and the dealer network and allows our manufacturing department to review consumer demand in real time.
Our business-to-business application efficiently executes many critical functions, including warranty registrations, warranty claims, boat ordering and tracking, parts ordering, technical support, and inventory reporting.
Human Capital Resources We have approximately 1,750 employees as of June 30, 2022, of whom 785 work at our MasterCraft facility in Tennessee, 360 work at our Crest facility in Michigan, 375 work at our NauticStar facility in Mississippi, and 230 work at our Aviara facility in Florida.
Human Capital Resources We have approximately 1,060 employees as of June 30, 2023, of whom 560 primarily work at our MasterCraft facility in Tennessee, 260 primarily work at our Crest facility in Michigan, and 240 primarily work at our Aviara facility in Florida. None of our employees are unionized or subject to collective bargaining agreements.
Our Dealer Network Our products are sold through extensive networks of independent dealers in North America and internationally. We target our distribution to the market category’s highest performing dealers. The majority of our MasterCraft brand dealers are exclusive to our MasterCraft product lines within the ski/wake category, highlighting the commitment of our key dealers to the MasterCraft brand.
We believe there will be significant model expansion opportunities for Aviara in the future. Our Dealer Network Our products are sold through extensive networks of independent dealers in North America and internationally. We target our distribution to the market category’s highest performing dealers.
However, we have been successful in targeting dual sourcing of some key materials and components to help mitigate risks related to supply constraints. Research and Development, Product Development and Engineering We are strategically and financially committed to innovation, as reflected in our dedicated product development and engineering groups and evidenced by our track record of new product and feature introduction.
Research and Development, Product Development and Engineering We are strategically and financially committed to innovation, as reflected in our dedicated product development and engineering groups and evidenced by our track record of new product and feature introduction. As of June 30, 2023, our product development and engineering group includes 67 professionals.
Unless the context otherwise requires, “MasterCraft,” “Crest,” “NauticStar,” and “Aviara,” as used herein, refers to our segments as described above. 2 Our Products We design, manufacture, and sell premium recreational inboard ski/wake, outboard, and sterndrive boats that we believe deliver superior performance for water skiing, wakeboarding, wake surfing, and fishing, as well as general recreational boating.
Our Products We design, manufacture, and sell premium recreational inboard ski/wake, outboard, and sterndrive boats that we believe deliver superior performance for water skiing, wakeboarding, and wake surfing, as well as general recreational boating. In addition, we offer various accessories, including trailers and aftermarket parts.
O ur NauticStar brand had two international dealer s in two location s . Aviara had no international dealer s . We define international dealers as those dealers with locations outside of North America. We are prese nt in Europe, Australia, South America, Africa, Asia, including Hong Kong and the Middle East.
We define international dealers as those dealers with locations outside of North America. We are present in Europe, Australia, South America, Africa, Asia, including Hong Kong, and the Middle East. We generated 4.6%, 5.5%, and 5.1% of our net sales outside of North America in fiscal 2023, 2022, and 2021, respectively.
We believe all of the NauticStar models represent a tremendous value for consumers. Our Aviara portfolio of luxury recreational day boats was designed in-house with the vision to create pleasure crafts that defy compromise. The Aviara brand drew on MasterCraft’s 50-plus year legacy of quality.
Our Aviara portfolio of luxury recreational day boats was designed in-house with the vision to create pleasure crafts that defy compromise. The Aviara brand drew on MasterCraft’s legacy of quality. Aviara’s boat designs were inspired by four product design principles – Progressive Style, Elevated Control, Modern Comfort and Quality Details.
The MasterCraft brand was founded in 1968 and evolved over the next 50-plus years to become the most award-winning ski/wake boat manufacturer in the world. Today, MasterCraft participates in the fastest growing category within the powerboat industry by producing the industry’s premier competitive water ski, wakeboarding, and wake surfing performance boats.
Today, MasterCraft participates in the fastest growing category within the powerboat industry by producing the industry’s premier competitive water ski, wakeboarding, and wake surfing performance boats. We believe the MasterCraft brand is known among boating enthusiasts for high performance, premier quality, and relentless innovation.
We maintain clean, safe and healthy workplaces through our vigorous training programs and professional safety standards systems, including job hazard assessments and industrial hygiene and ventilation practices. In 2022, we proudly completed a major milestone in workplace safety: over two million safe hours worked without a lost time incident, which continues to accumulate.
We maintain clean, safe and healthy workplaces through our vigorous training programs and professional safety standards systems, including job hazard assessments and industrial hygiene and ventilation practices. Our compensation program is designed to facilitate high performance and generate results that will create value for our stockholders.
Introduced in February 2019, Aviara is currently focused on models between 30 feet and 40 feet in length and currently features three models utilizing both outboard and sterndrive propulsion. Aviara boats feature distinct European styling and offer an elevated open water experience by fusing progressive style and effortless comfort in its modern luxury vessels.
Aviara boats feature distinct European styling and offer an elevated open water experience by fusing progressive style and effortless comfort in its modern luxury vessels. Unless the context otherwise requires, “MasterCraft,” “Crest,” and “Aviara,” as used herein, refers to our segments as described above.
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NauticStar Segment Our NauticStar segment consists of our NauticStar brand, which manufactures saltwater fishing boats, deck boats, and bay boats designed for a variety of uses, including recreational and competitive sport fishing in freshwater lakes or saltwater, and general recreational enjoyment. NauticStar participates in the third-fastest growing category in the powerboat industry.
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This business, which was previously reported as the Company's NauticStar segment until fiscal 2023, is being reported as discontinued operations for all periods presented. Consolidated financial information presented for all periods is related to the continuing operations. See Note 3 in Notes to Consolidated Financial Statements for more information on Discontinued Operations.
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NauticStar, which we acquired in October 2017, was founded in 2002. On August 9, 2022, we announced the Board of Directors was evaluating strategic alternatives for our NauticStar business, including a wide range of available alternatives to maximize shareholder value, with the intention of exiting the NauticStar business. On September 2, 2022, we sold the NauticStar business.
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Our Segments MasterCraft Segment Our MasterCraft segment consists of our MasterCraft brand, which manufactures premium ski/wake boats. The MasterCraft brand was founded in 1968 and evolved over the next 55 years to become the most award-winning ski/wake boat manufacturer in the world.
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Pursuant to the terms of the purchase agreement, substantially all of the assets of NauticStar were sold, including, among other things, all of the issued and outstanding membership interests in its wholly-owned subsidiary NS Transport, LLC, all owned real property, equipment, inventory, intellectual property and accounts receivable, and the purchaser assumed certain liabilities of NauticStar, including, among other things, product liability and warranty claims.
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From its introduction in February 2019 through June 2023, Aviara expanded to three models between 32 feet and 40 feet in length, and in fiscal 2024, will expand to include a 28 foot model, all of which feature both outboard and sterndrive propulsion.
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Crest’s retail prices range from approximately $35,000 to $220,000. Our NauticStar portfolio of bay boats, sport deck boats and offshore boats are designed for a variety of uses, including recreational and competitive sport fishing in freshwater lakes or saltwater, and general recreational enjoyment.
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The Electric Line harmonizes industry innovations by introducing eco-friendly pontoon boats. The new Current model allows consumers to enjoy a new level of peace and relaxation with less noise and minimal emissions. Crest’s retail prices range from approximately $35,000 to $220,000.
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NauticStar’s bay boats and offshore boats are geared towards the consumer seeking unmatched quality and features for fishability and family friendly comfort. The sport deck boat line caters to consumers seeking the drive and ride of a V-hull, large capacity, and the styling and efficiency of a runabout. NauticStar’s retail prices range from approximately $50,000 to $275,000.
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The majority of our MasterCraft brand dealers are exclusive to our MasterCraft product lines within the ski/wake category, highlighting the commitment of our key dealers to the MasterCraft brand. Our other brands are generally served on a nonexclusive basis by their respective dealers.
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Aviara’s boat designs were inspired by four product design principles – Progressive Style, Elevated Control, Modern Comfort and Quality Details. Aviara’s models consist of the AV32, a 32-foot luxury bowrider, the AV36, a 36-foot luxury bowrider, and the AV40, the brand’s flagship 40-foot luxury bowrider for the ultimate on-the-water experience.
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This system facilitates communication between our sales team and the dealer network and allows our manufacturing department to review consumer demand in real time. 3 Manufacturing MasterCraft boats and trailers are manufactured and lake-tested at our 310,000 square-foot facility located in Vonore, Tennessee.
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Our Crest brand had a total of 132 dealers across 161 locations in North America as of June 30, 2022. Our NauticStar brand had a total of 110 dealers across 119 locations in North America as of June 30, 2022.
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We also use our website as a means of disclosing additional information, including for complying with our disclosure obligations under the SEC's Regulation FD (Fair Disclosure). 6 ITEM 1A.
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We generated 5 .0 %, 4. 5 %, and 4.8 % of our net sales outside of North America in fiscal 202 2 , 202 1 , and 20 20 , respectively. Dealer Relations We have developed a system of financial incentives for our dealers based on achievement of key benchmarks.
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RISK FACTORS RISK FACTORS Our operations and financial results are subject to certain risks and uncertainties, including those described below, which could adversely affect our business, financial condition, results of operations, cash flows, and the trading price of our common stock.
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Crest boats are manufactured at our 150,000 square-foot facility located in Owosso, Michigan. NauticStar boats are manufactured at our 225,000 square-foot facility located in Amory, Mississippi. Aviara boats are manufactured at our 140,000 square-foot facility in Merritt Island, Florida.
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Risks Relating to Economic and Market Conditions Global economic conditions, particularly in the U.S., significantly affect our industry and business, and economic decline can materially impact our financial results. In times of economic uncertainty or recession, consumers tend to have less discretionary income and to defer significant spending on non-essential items, which may adversely affect our financial performance.
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W e believe our long-term relationship with our engine supplier partners is a key competitive advantage. We have and continue to see supply chain disruptions that we believe are caused by evolving macroeconomic conditions, including, but not limited to, the dislocation in the labor and logistics markets, as well as upstream supply constraints.
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The economic uncertainty caused by (i) general economic conditions, (ii) the impact of inflation and rising interest rates, (iii) labor shortages, (iv) supply chain disruptions, (v) regional or global conflicts, (vi) public health crises, pandemics, or national emergencies and (vii) actions and stimulus measures adopted by local, state and federal governments may lead to unfavorable business outcomes.
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As of December 202 1 , based on SSI data, the MasterCraf t brand has the #1 market share in the ski/wake category with 21. 3 %. As of December 202 1 , based on SSI data, the Crest brand has the # 9 market share in the pontoon category with 4.0 %.
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We continue to develop our portfolio of brands, but our business remains cyclical and sensitive to consumer spending on new boats.
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As of December 202 1 , based on SSI data, the NauticStar brand has the # 8 market share in the deck and saltwater fishing category with 4. 3 %.
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Deterioration in general economic conditions that in turn diminishes consumer confidence or discretionary income may reduce our sales, or we may decide to lower pricing for our products, which could adversely affect our financial results, including increasing the potential for future impairment charges.
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Achieving two million safe hours worked without a lost time incident showcases the Company’s continuous commitment to safety, an essential element of the Company’s core values in delivering world-class boats. Our compensation program is designed to facilitate high performance and generate results that will create value for our stockholders.
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Further, our products are recreational, and consumers’ limited discretionary income in times of economic hardship may be diverted to other activities that occupy their time, such as other forms of recreational, religious, cultural, or community activities.
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In addition, economic uncertainty may also increase certain costs of operation, such as financing costs, energy costs and insurance premiums, which in turn may impact our results of operations. We cannot predict the strength of global economies or the timing of economic recovery, either globally or in the specific markets in which we compete.
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Inflation and rising interest rates could adversely affect our financial results. The market prices of certain materials and components used in manufacturing our products, especially resins that are made with hydrocarbon feedstocks, fiberglass, aluminum, lumber, and steel, can be volatile.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeITEM 2. PROPERTIES. As of June 30, 2022, all our MasterCraft boats are manufactured and lake-tested at our 250,000 square-foot manufacturing facility located on approximately 60 acres of lakefront land in Vonore, Tennessee. In addition, we own a 35,000 square-foot facility in Vonore where we manufacture trailers. Our MasterCraft boat and trailer manufacturing sites combined total 285,000 square-feet.
Biggest changeITEM 2. PRO PERTIES. As of June 30, 2023, all our MasterCraft boats and trailers are manufactured and lake-tested at our 310,000 square-foot manufacturing facility located on approximately 60 acres of lakefront land in Vonore, Tennessee. We also lease a 3,000 square-foot warehouse facility in West Yorkshire, England for warehousing of parts.
All our Aviara boats are manufactured in our 140,000 square-foot manufacturing facility on approximately 38 acres in Merritt Island, Florida.
All our Crest boats are manufactured in our 270,000 square-foot manufacturing facility located on approximately 63 acres in Owosso, Michigan. All our Aviara boats are manufactured in our 130,000 square-foot manufacturing facility on approximately 38 acres in Merritt Island, Florida.
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We also lease a 3,000 square-foot warehouse facility in West Yorkshire, England for warehousing of parts. All our Crest boats are manufactured in our 150,000 square-foot manufacturing facility located on approximately 55 acres in Owosso, Michigan. All our NauticStar boats are manufactured in our 225,000 square-foot manufacturing facility located on 17 acres of land in Amory, Mississippi.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeITEM 3. LEGAL PROCEEDINGS. For a discussion of the Company’s legal proceedings, see Part IV – Item 15. – Note 10 Commitments and Contingencies to the Company’s Consolidated Financial Statements. ITEM 4. MINE SAFETY DISCLOSURES. Not applicable. 18 PART II
Biggest changeITEM 3. LEGAL PROCEEDINGS. For a discussion of the Company’s legal proceedings, see Part IV – Item 15. – Note 12 Commitments and Contingencies to the Company’s Consolidated Financial Statements. ITEM 4. MINE SAFE TY DISCLOSURES. Not applicable. 18 PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeDuring the three months ended June 30, 2022, the Company repurchased the following shares of common stock: Period Total Number of Shares Purchased Average Price Paid Per Share (a) Total Number of Shares Purchased as part of Publicly Announced Program Approximate Dollar Value of Shares that May Yet be Purchased Under the Plan (dollars in thousands) April 4, 2022 - May 1, 2022 163,602 $ 24.29 163,602 $ 24,568 May 2, 2022 - May 29, 2022 936 23.78 936 24,546 May 30, 2022 - June 30, 2022 — — — 24,546 Total 164,538 24.29 164,538 24,546 (a) Represents weighted average price paid per share excluding commissions paid. 19 Stock Performance Graph This performance graph shall not be deemed “soliciting material” or to be “filed” with the SEC for purposes of Section 18 of the Exchange Act of 1934, or otherwise subject to the liabilities under that section, and shall not be deemed to be incorporated by reference into any filing of ours under the Securities Act or the Exchange Act.
Biggest changeDuring the three months ended June 30, 2023, the Company repurchased the following shares of common stock: Period Total Number of Shares Purchased Average Price Paid Per Share (a)(b) Total Number of Shares Purchased as part of Publicly Announced Program Approximate Dollar Value of Shares that May Yet be Purchased Under the Plan (dollars in thousands) April 3, 2023 - April 30, 2023 59,396 $ 29.29 59,396 $ 6,867 May 1, 2023 - May 28, 2023 112,490 28.24 112,490 3,690 May 29, 2023 - June 30, 2023 74,375 27.63 74,375 1,634 Total 246,261 $ — 246,261 - (a) Represents weighted average price paid per share excluding commissions paid.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES. Market Information Our common stock has been publicly traded on the NASDAQ Global Market under the symbol “MCFT” since July 17, 2015. Prior to that time, there was no public market for our common stock.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY AND RELATED STO CKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES. Market Information Our common stock has been publicly traded on the NASDAQ Global Market under the symbol “MCFT” since July 17, 2015. Prior to that time, there was no public market for our common stock.
The following stock performance graph illustrates the cumulative total shareholder return on our common stock for the period from June 30, 2017 to June 30, 2022, as compared to the Russell 2000 Index and the Dow Jones US Recreational Products Index.
The following stock performance graph illustrates the cumulative total shareholder return on our common stock for the period from June 30, 2018 to June 30, 2023, as compared to the Russell 2000 Index and the Dow Jones US Recreational Products Index.
As of September 2, 2022, we had approximately 8,500 holders of record of our common stock. Dividends We presently do not anticipate declaring or paying cash dividends on our common stock.
As of August 25, 2023, we had approximately 12,600 holders of record of our common stock. Dividends We presently do not anticipate declaring or paying cash dividends on our common stock.
The comparison assumes (i) a hypothetical investment of $100 in our common stock and the two above mentioned indices on June 30, 2017 and (ii) the full reinvestment of all dividends. The comparisons in the graph are not intended to be indicative of possible future performance of our common stock.
The comparison assumes (i) a hypothetical investment of $100 in our common stock and the two above mentioned indices on June 30, 2018 and (ii) the full reinvestment of all dividends.
Securities Authorized for Issuance Under Equity Compensation Plans For information regarding securities authorized for issuance under our equity compensation plans, see Note 9 – Share-Based Compensation in Item 8 and Item 12: Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters. ITEM 6. Reserved 20
The comparisons in the graph are not intended to be indicative of possible future performance of our common stock. 19 Securities Authorized for Issuance Under Equity Compensation Plans For information regarding securities authorized for issuance under our equity compensation plans, see Note 11 – Share-Based Compensation in Item 8 and Item 12: Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
During the fiscal year ended June 30, 2022, we repurchased approximately $25.5 million of our common stock, including approximately $4.0 million during the three months ended June 30, 2022. We did not repurchase any common stock during the year ended June 30, 2021. As of June 30, 2022, the remaining authorization under the program was approximately $24.5 million.
During the fiscal years ended June 30, 2023 and 2022, we repurchased approximately $22.9 million and $25.5 million of our common stock, respectively. As of June 30, 2023, the remaining authorization under the program was approximately $1.6 million.
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(b) Average price per share excludes any excise tax imposed on certain stock repurchases as part of the Inflation Reduction Act of 2022. On July 24, 2023, the board of directors of the Company authorized a new share repurchase program under which the Company may repurchase up to $50 million of its outstanding shares of common stock.
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The new authorization will become effective upon the expiration of the Company's existing $50 million share repurchase authorization. As of June 30, 2023, there was $1.6 million of availability remaining under the existing stock repurchase program.
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Stock Performance Graph This performance graph shall not be deemed “soliciting material” or to be “filed” with the SEC for purposes of Section 18 of the Exchange Act of 1934, or otherwise subject to the liabilities under that section, and shall not be deemed to be incorporated by reference into any filing of ours under the Securities Act or the Exchange Act.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeGAAP 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 $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.
Biggest changeGAAP to EBITDA and Adjusted EBITDA, and net income from continuing operations 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 2023 sales 2022 sales 2021 sales Net income from continuing operations $ 90,452 13.7% $ 87,945 13.7% $ 58,438 12.5% Income tax expense 27,135 26,779 16,080 Interest expense 2,679 1,471 3,392 Interest income (3,351 ) — — Depreciation and amortization 10,569 9,731 8,368 EBITDA 127,484 19.3% 125,926 19.6% 86,278 18.5% Share-based compensation 3,656 3,510 2,932 Business development consulting costs (a) 312 — — Goodwill impairment (b) — 1,100 — Aviara transition costs (c) — — 2,150 Debt refinancing charges (d) — — 769 Adjusted EBITDA $ 131,452 19.9% $ 130,536 20.3% $ 92,129 19.8% (a) Represents non-recurring third-party costs associated with business development activities, primarily relating to consulting costs for evaluation and execution of internal growth and other strategic initiatives.
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.
Some of these limitations are: 24 • 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.
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.
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 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.
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.
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. 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.
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.
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. Other Revenue Recognition Matters Dealers generally have no right to return unsold boats.
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 estimate the costs that may be incurred under our basic limited warranty and record as a liability the amount 29 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.
The Non-GAAP Measures are not measures of performance in accordance with U.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 with U.S. GAAP. Additionally, Adjusted EBITDA is not intended to be a measure of cash flow.
The Non-GAAP Measures are not measures of performance in accordance with U.S. GAAP and should not be considered as an alternative to net income, net income per share, or operating cash flows determined in accordance with U.S. GAAP. Additionally, Adjusted EBITDA is not intended to be a measure of cash flow.
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. GAAP.
EBITDA, Adjusted EBITDA, EBITDA margin, 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 or operating income as determined under accounting principles generally accepted in the United States, or U.S. GAAP.
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.
Actual results could differ from those estimates and cause our reported net income 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.
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.
A current expectation that, 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.
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.
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 2023, 2022, or 2021.
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.
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 12 in the accompanying Notes to Consolidated Financial Statements for more information.
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.
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 margin — We define net income margin as net income from continuing operations divided by net sales, expressed as a percentage. • Adjusted EBITDA — We define Adjusted EBITDA as net income from continuing operations, before interest, 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.
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.
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 10 in Notes to Consolidated Financial Statements for more information.
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. 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.
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.
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.
Our actual results may differ materially from those contained in or implied by any forward-looking statements. This section generally discusses 2023 and 2022 items and year-to-year comparisons between 2023 and 2022.
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.
Adjusted Net Income and Adjusted Net Income Per Share We define Adjusted Net Income and Adjusted Net Income per share as net income from continuing operations 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.
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. We incurred no material impact from repurchase events during fiscal 2022, 2021, or 2020.
See Note 12 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. We incurred no material impact from repurchase events during fiscal 2023, 2022, or 2021.
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 Adjusted EBITDA margin to net income margin, see “Non-GAAP Measures” below. • Adjusted Net Income — We define Adjusted Net Income as net income from continuing operations, 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 related to non-GAAP adjustments.
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.”
See Note 12 in Notes to Consolidated Financial Statements for more information on repurchase obligations. 30 New Accounting Pronouncements See “Part II, Item 8. Financial Statements and Supplementary Data — Note 1 — Significant Accounting Policies — New Accounting Pronouncements.”
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 ended June 30, 2021 , which was filed with the SEC on September 2, 2021.
Discussions of 2021 items and year-to-year comparisons between 2022 and 2021 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 ended June 30, 2022 , which was filed with the SEC on September 9, 2022.
We define Adjusted EBITDA margin as Adjusted EBITDA expressed as a percentage of Net sales.
We define EBITDA margin and Adjusted EBITDA margin as EBITDA and Adjusted EBITDA, respectively, expressed as a percentage of Net sales.
See Note 8 in Notes to Consolidated Financial Statements for more information.
See Note 10 in Notes to Consolidated Financial Statements for more information.
(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.
(e) Reflects income tax expense at a tax rate of 23.0% for each period presented. 26 Liquidity and Capital Resources Our primary liquidity and capital resource needs are to finance working capital, fund capital expenditures, service our debt, fund potential acquisitions, and fund our stock repurchase program.
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. 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.
Interest on variable rate debt instruments was calculated using interest rates in effect for our borrowings as of June 30, 2023 and holding them constant for the life of the instrument. Purchase Commitments — As of June 30, 2023, the Company is committed to purchasing $28.5 million of engines, of which $19.5 million is committed during the next 12 months.
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.
Interest on Long-Term Debt Obligations — As of June 30, 2023, the Company has estimated total interest payments on its outstanding long-term debt obligations of $8.9 million, of which $4.0 million is due during the next 12 months.
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.
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. 28 The Company calculates the fair value of its reporting units considering both the income approach and market approach.
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 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 share-based compensation, business development consulting costs, goodwill impairment, Aviara transition costs, and debt refinancing charges, as described in more detail below.
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.
As discussed further in Note 3 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.
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 of June 30, 2022, a decrease of $5.1 million from $39.3 million as of June 30, 2021.
Our principal sources of liquidity are our cash balance, held-to-maturity securities, 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 $19.8 million as of June 30, 2023, a decrease of $14.4 million from $34.2 million as of June 30, 2022.
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 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.
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.
Our effective tax rates differ from the statutory rates, primarily due to a change in state taxes as a result of selling NauticStar, as further described in Note 10 in Notes to Consolidated Financial Statements. Significant judgment is required in evaluating our uncertain tax positions and determining our provision for income taxes.
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. During fiscal 2022, the Company repurchased 975,161 shares of common stock for $25.5 million in cash, including related fees and expenses.
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.
Off-Balance Sheet Arrangements The Company did not have any off-balance sheet financing arrangements as of June 30, 2022. Contractual Obligations As of June 30, 2022, the Company’s material cash obligations were as follows: Long-Term Debt Obligations — See Note 7 – Long-Term Debt in the accompanying Notes to Consolidated Financial Statements for further information.
Contractual Obligations As of June 30, 2023, the Company’s material cash obligations were as follows: Long-Term Debt Obligations — See Note 9 – Long-Term Debt in the accompanying Notes to Consolidated Financial Statements for further information.
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. Other Intangible Assets The Company's primary intangible assets other than goodwill are dealer networks and trade names acquired in business combinations.
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.
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 $15.8 million, which included capital expenditures. Our capital spending was focused on expanding our capacity, maintenance capital, and investments in information technology.
Accounts receivable increased due to increased sales. Prepaid and other current assets increased due to higher general insurance premiums. Accrued expenses and other 27 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 in investing activities was $12.3 million, which included capital expenditures.
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.
Segment Results MasterCraft Segment The following table sets forth MasterCraft segment results for the fiscal years ended: (Dollar amounts in thousands) 2023 2022 Change % Change Net sales $ 468,656 $ 466,027 $ 2,629 0.6 % Operating income 101,324 105,341 (4,017 ) (3.8 %) Purchases of property, plant and equipment 17,414 6,642 10,772 162.2 % Unit sales volume 3,407 3,596 (189 ) (5.3 %) Net sales per unit $ 138 $ 130 $ 8 6.2 % Net sales increased 0.6 percent during fiscal 2023, when compared to fiscal 2022.
As of June 30, 2022, we have repaid all amounts outstanding under the Revolving Credit Facility, leaving $100.0 million of available borrowing capacity. 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.
Total debt outstanding under the Term Loan as of June 30, 2023 and June 30, 2022 was $53.7 million and $56.5 million, respectively. Refer to Note 9 — Long Term Debt in the Notes to Consolidated Financial Statements for further details.
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.
Working capital usage primarily consisted of an increase in inventory, accounts receivable and prepaid and other current assets, partially offset an increase in accrued expenses and other current liabilities and accounts payable. Inventory increased due to an increase in raw materials to support higher production volumes and to increase safety stock to manage supply chain risk.
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 discussed further in Note 7 to the Consolidated Financial Statements, during the year ended June 30, 2022, the Company performed a quantitative test and recognized a $1.1 million goodwill impairment charge related to its Aviara reporting unit. As of June 30, 2023, only the MasterCraft reporting unit has a goodwill balance.
Costs include duplicative overhead 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.
(c) 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). (d) Represents loss recognized upon refinancing the Company’s debt in fiscal 2021.
Costs include duplicative overhead 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.
(c) 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). (d) Represents loss recognized upon refinancing the Company’s debt in fiscal 2021.
Costs include duplicative overhead 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.
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.
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.
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.
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.
As discussed further in Note 3 to the Consolidated Financial Statements, during the year ended June 30, 2022, the Company recognized $18.5 million in intangible asset impairment charges related to its indefinite lived intangible asset and its dealer network intangible asset within the NauticStar reporting unit. These charges are included in the loss from discontinued operations.
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.
The increase was primarily driven by higher selling prices, partially offset by decreased sales volumes, less favorable model mix, and increased dealer incentives. Operating income decreased 3.8 percent during fiscal 2023, when compared to the same prior year period.
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 with U.S.
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. Due to the effects of discontinued operations, as discussed above in “Part I, Item 1.
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 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.
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.
For the periods presented herein, these adjustments include other intangible asset amortization, share-based compensation, business development consulting costs, goodwill impairment, Aviara transition costs, and debt refinancing charges.
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.
We believe our cash balance, investments, cash from operations, and our ability to borrow, will be sufficient to provide for our liquidity and capital resource needs.
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.
Crest Segment The following table sets forth Crest segment results for the fiscal years ended: (Dollar amounts in thousands) 2023 2022 Change % Change Net sales $ 141,247 $ 140,859 $ 388 0.3 % Operating income 20,106 19,892 214 1.1 % Purchases of property, plant and equipment 7,149 4,193 2,956 70.5 % Unit sales volume 2,836 3,156 (320 ) (10.1 %) Net sales per unit $ 50 $ 45 $ 5 11.1 % Net sales increased 0.3 percent during fiscal 2023, when compared to fiscal 2022, as a result of higher prices, and favorable model mix and options, partially offset by decreased unit volume and increased dealer incentives.
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 $1.9 million driven by lower effective interest rates and lower average outstanding debt balances during fiscal 2022. Loss on Extinguishment of Debt.
Selling, general and administrative expenses as a percentage of net sales were relatively flat during fiscal 2023 when compared to the same prior year period. Interest Expense. Interest expense increased $1.2 million primarily due to higher effective interest rates. Interest Income.
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.
Operating expenses increased 1.5 percent during fiscal 2023 when compared to the same prior year period. During fiscal 2022, a $1.1 million goodwill impairment charge was recorded in the Aviara segment, as discussed in Note 7 in the Notes to 22 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.
The increase was primarily due to capital spending focused on capacity expansion. 23 Aviara Segment The following table sets forth Aviara segment results for the fiscal years ended: (Dollar amounts in thousands) 2023 2022 Change % Change Net sales $ 52,143 $ 34,723 $ 17,420 50.2 % Operating loss (4,515 ) (9,038 ) 4,523 50.0 % Goodwill impairment — 1,100 (1,100 ) — Purchases of property, plant and equipment 5,760 1,461 4,299 294.3 % Unit sales volume 134 100 34 34.0 % Net sales per unit $ 389 $ 347 $ 42 12.1 % Net sales increased 50.2 percent during fiscal 2023, when compared to fiscal 2022, mainly due to increased sales volume and higher selling prices, partially offset by higher dealer incentives.
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 ended June 30, 2022 and 2021 from our audited consolidated financial statements and related notes included elsewhere in this Form 10-K.
Results of Operations We derived the consolidated statements of operations for the fiscal years ended June 30, 2023 and 2022 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.
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 $3.3 million during fiscal 2022, when compared to the same prior-year period due to investments in manufacturing capacity expansion and maintenance capital.
Purchases of property, plant, and equipment increased $3.0 million during fiscal 2023, when compared to the same prior-year period.
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.
Net Sales increased 3.2 percent for fiscal 2023 when compared to fiscal 2022. The increase was a result of higher prices, partially offset by decreased sales volumes, increased dealer incentives, and less favorable model mix.
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.
The following table and discussion below relate to our cash flows from continuing operations for operating, investing, and financing activities: 2023 2022 2021 Total cash provided by (used in): Operating activities $ 136,824 $ 82,378 $ 73,961 Investing activities (120,933 ) (12,296 ) (25,219 ) Financing activities (27,148 ) (62,540 ) (17,773 ) Net change in cash from continuing operations $ (11,257 ) $ 7,542 $ 30,969 Fiscal 2023 Cash Flow from Continuing Operations Net cash provided by operating activities was $136.8 million, primarily due to net income, as well as reductions of working capital.
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.
Our capital spending was focused on expanding our capacity, maintenance capital, and investments in information technology. Net cash used in financing activities was $62.5 million, which included net payments of $36.7 million on long-term debt and $25.5 million of stock repurchases. Off-Balance Sheet Arrangements The Company did not have any off-balance sheet financing arrangements as of June 30, 2023.
Operating loss was $9.0 million for fiscal 2022, compared to $8.3 million for fiscal 2021. 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.
Operating loss decreased 50.0 percent for fiscal 2023, when compared to fiscal 2022. The change was primarily a result of higher prices, improved production efficiencies, and increased sales volume, partially offset by higher costs from inflationary pressures, and increased dealer incentives. Additionally, a goodwill impairment charge was recorded during the first quarter of fiscal 2022.
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.
Operating income increased 1.1 percent during fiscal 2023, when compared to the same prior year period. The increase was primarily due to higher selling prices, and favorable model mix and options, partially offset by higher costs from inflationary pressures, decreased unit volume, and increased dealer incentives.
(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 with U.S.
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. 25 The following table sets forth a reconciliation of net income from continuing operations as determined in accordance with U.S.
Gross profit increased to $162.4 million, up 24.9 percent from $130.0 million in fiscal 2021. 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.
Total selling, general and administrative expenses as a percentage of net sales remained relatively flat during fiscal 2023 when compared to the same prior year period.
Removed
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 $707.9 million, an increase of 34.6 percent from fiscal 2021. Consolidated unit sales volume increased to 8,217 units, up 14.2 percent from the prior year.
Added
For a reconciliation of net income from continuing operations to Adjusted Net Income, see “Non-GAAP Measures” below. Discontinued Operations On September 2, 2022, the Company completed the sale of its NauticStar business. This business, which was previously reported as the Company's NauticStar segment until fiscal 2023, is being reported as discontinued operations for all periods presented.
Removed
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.
Added
The Company's results for all periods presented, as discussed in Management's Discussion and Analysis, are presented on a continuing operations basis with prior year amounts recast to provide comparability. See Note 3 in Notes to Consolidated Financial Statements for more information on Discontinued Operations. Fiscal 2023 Overview Net sales were up slightly during fiscal 2023 when compared to fiscal 2022.
Removed
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.
Added
The increase was primarily due to higher pricing to offset inflationary cost pressures, partially offset by a decrease in wholesale volume, dealer incentives and less favorable model mix. We achieved our goal of rebalancing dealer inventories; however, due to a slowing retail environment, the number of wholesale units sold were lower when compared to prior year.
Removed
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.
Added
Model mix trended towards smaller-sized models as more boats were sold as inventory stock versus retail-sold boats. Also, because of increased dealer inventories, higher interest rates, and an increasingly competitive retail environment, dealer incentives, which include floor plan financing costs and other incentives, have increased. Gross margin declined during fiscal 2023 when compared to fiscal 2022.
Removed
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.
Added
Offsetting the increased net sales discussed above were increased expenses related to material, labor and overhead inflation. Other contributory expenses included increased insurance premiums and warranty-related costs. Overall, including the impact of dealer incentives in net sales noted above, the gross margin percentage declined 60 basis points. 21 Operating expenses slightly increased during fiscal 2023 when compared to fiscal 2022.
Removed
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
Consolidated Results 2023 2022 Change % Change (Dollar amounts in thousands) Consolidated statements of operations : NET SALES $ 662,046 $ 641,609 $ 20,437 3.2 % COST OF SALES 492,333 473,419 18,914 4.0 % GROSS PROFIT 169,713 168,190 1,523 0.9 % OPERATING EXPENSES: Selling and marketing 13,808 12,869 939 7.3 % General and administrative 37,034 36,070 964 2.7 % Amortization of other intangible assets 1,956 1,956 — 0.0 % Goodwill impairment — 1,100 (1,100 ) — Total operating expenses 52,798 51,995 803 1.5 % OPERATING INCOME 116,915 116,195 720 0.6 % OTHER INCOME (EXPENSE): Interest expense (2,679 ) (1,471 ) (1,208 ) 82.1 % Interest income 3,351 — 3,351 — INCOME BEFORE INCOME TAX EXPENSE 117,587 114,724 2,863 2.5 % INCOME TAX EXPENSE 27,135 26,779 356 1.3 % NET INCOME FROM CONTINUING OPERATIONS $ 90,452 $ 87,945 $ 2,507 2.9 % Additional financial and other data: Unit sales volume: MasterCraft 3,407 3,596 (189 ) (5.3 %) Crest 2,836 3,156 (320 ) (10.1 %) Aviara 134 100 34 34.0 % Consolidated unit sales volume 6,377 6,852 (475 ) (6.9 %) Net sales: MasterCraft $ 468,656 $ 466,027 $ 2,629 0.6 % Crest 141,247 140,859 388 0.3 % Aviara 52,143 34,723 17,420 50.2 % Consolidated net sales $ 662,046 $ 641,609 $ 20,437 3.2 % Net sales per unit: MasterCraft $ 138 $ 130 $ 8 6.2 % Crest 50 45 5 11.1 % Aviara 389 347 42 12.1 % Consolidated net sales per unit 104 94 10 10.6 % Gross margin 25.6 % 26.2 % (60) bps Net Sales.
Removed
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.
Added
Dealer incentives include higher floor plan financing costs as a result of increased dealer inventories and interest rates, and other incentives as the retail environment becomes more competitive. Gross Margin. Gross Margin percentage declined 60 basis points during fiscal 2023 when compared to fiscal 2022.
Removed
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.
Added
Lower margins were the result of higher costs related to material and overhead inflation, higher costs from dealer incentives, lower absorption due to decreased sales volumes, less favorable model mix, and increased warranty costs related to prior model year expenses, partially offset by higher prices and improved production efficiencies. Operating Expenses .
Removed
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.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

3 edited+1 added−0 removed2 unchanged
Biggest changeSee Note 7 in Notes to Consolidated Financial Statements for more information regarding our long-term debt. A hypothetical 1% increase or decrease in interest rates would have resulted in a $0.7 million change to our interest expense for fiscal 2022.
Biggest changeSee Note 9 in Notes to Consolidated Financial Statements for more information regarding our long-term debt. A hypothetical 1% increase or decrease in interest rates would have resulted in a $0.6 million change to our interest expense for fiscal 2023. ITEM 8. FINANCIAL STATEMENT S AND SUPPLEMENTARY DATA.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. Market risk represents the risk of changes in the value of market risk sensitive instruments caused by fluctuations in foreign exchange rates, interest rates, and commodity prices. Changes in these factors could cause fluctuations in the results of our operations and cash flows.
ITEM 7A. QUANTITATIVE AND QUALITATI VE DISCLOSURES ABOUT MARKET RISK. Market risk represents the risk of changes in the value of market risk sensitive instruments caused by fluctuations in foreign exchange rates, interest rates, and commodity prices. Changes in these factors could cause fluctuations in the results of our operations and cash flows.
Substantial increases in the prices of raw materials, parts, and components would increase our operating costs, and could reduce our profitability if we are unable to recoup the increased costs through higher product prices or improved operating efficiencies. As of June 30, 2022, we had $57.0 million of long-term debt outstanding, bearing interest at the effective interest rate of 2.94%.
Substantial increases in the prices of raw materials, parts, and components would increase our operating costs, and could reduce our profitability if we are unable to recoup the increased costs through higher product prices or improved operating efficiencies. As of June 30, 2023, we had $54.0 million of long-term debt outstanding, bearing interest at the effective interest rate of 6.50%.
Added
The financial statements and supplementary financial information required to be filed under this Item 8 are presented in Part IV, Item 15 of this Form 10-K. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUN TANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. None.

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