LOUDON, Tenn., Feb. 06, 2019 (GLOBE NEWSWIRE) — Malibu Boats, Inc. (Nasdaq: MBUU) today announced its financial results for the second quarter ended December 31, 2018.
Highlights for the Second Quarter of Fiscal Year 2019
- Net sales increased 45.0% to $165.8 million compared to the second quarter of fiscal year 2018.
- Unit volume increased 18.2% to 1,760 boats compared to the second quarter of fiscal year 2018.
- Net sales per unit increased 22.6% to $94,200 per unit compared to the second quarter of fiscal year 2018.
- Gross profit increased 39.2% to $38.3 million compared to the second quarter of fiscal year 2018.
- Net income increased 368.6% to $15.0 million, or $0.68 per share compared to the second quarter of fiscal year 2018.
- Adjusted EBITDA increased 42.5% to $29.4 million compared to the second quarter of fiscal year 2018.
- Adjusted fully distributed net income increased 64.5% to $18.8 million compared to the second quarter of fiscal year 2018.
- Adjusted fully distributed net income per share increased 62.3% to $0.86 on a fully distributed weighted average share count of 21.8 million shares of Class A Common Stock as compared to the second quarter of fiscal year 2018.
- Completed acquisition of assets of the Pursuit Boats division (“Pursuit”) of S2 Yachts, Inc. for $100.1 million on October 15, 2018.
“We saw ongoing momentum in our business during the second fiscal quarter of 2019, as demand for our product at Malibu, Cobalt and Pursuit, which we closed on October 15th, continues to be very strong. Dealers’ orders remain robust, which has created a strong order book across all of our brands and channel inventories are at near optimal levels. In the first half of fiscal 2019, we introduced a number of new boats and features, all of which have been incredibly well-received by customers and dealers alike. In addition, our operational excellence initiatives are bearing fruit as we are seeing positive results in gross margins in our comparable year- over-year business where we expanded margins meaningfully,” commented, Jack Springer, Chief Executive Officer of Malibu Boats, Inc.
“Our second quarter results reinforce our ability to deliver consistent profitable growth, while leveraging our world-class brands. As we look forward, we remain optimistic about the outlook for the marine industry and broader economy. We are laser-focused on continued execution and even better performance from Malibu, Cobalt and Pursuit, and believe we are well-positioned to deliver increasing value for our stakeholders,” concluded Mr. Springer.
| Results of Operations for the Second Quarter of Fiscal Year 2019 (Unaudited) | ||||||||||||
| Three Months Ended December 31, | Six Months Ended December 31, 2018 | |||||||||||
| 2018 | 2017 | 2018 | 2017 | |||||||||
| (In thousands, except unit and per unit data) | ||||||||||||
| Net sales | $ | 165,793 | $ | 114,373 | $ | 289,276 | $ | 217,914 | ||||
| Cost of sales | 127,478 | 86,857 | 220,460 | 167,475 | ||||||||
| Gross profit | 38,315 | 27,516 | 68,816 | 50,439 | ||||||||
| Operating expenses: | ||||||||||||
| Selling and marketing | 4,601 | 3,122 | 8,099 | 6,711 | ||||||||
| General and administrative | 11,232 | 7,435 | 20,203 | 14,509 | ||||||||
| Amortization | 1,538 | 1,304 | 2,818 | 2,612 | ||||||||
| Operating income | 20,944 | 15,655 | 37,696 | 26,607 | ||||||||
| Other expense, net: | ||||||||||||
| Other income, net | (17 | ) | (30,333 | ) | (34 | ) | (27,736 | ) | ||||
| Interest expense | 1,844 | 1,014 | 3,015 | 3,213 | ||||||||
| Other (income) expense, net | 1,827 | (29,319 | ) | 2,981 | (24,523 | ) | ||||||
| Income before provision for income taxes | 19,117 | 44,974 | 34,715 | 51,130 | ||||||||
| Provision for income taxes | 4,119 | 50,558 | 7,702 | 50,300 | ||||||||
| Net income (loss) | 14,998 | (5,584 | ) | 27,013 | 830 | |||||||
| Net income attributable to non-controlling interest
Net income (loss) attributable to Malibu |
741 |
799 |
1,458 |
1,328 |
||||||||
| Boats, Inc. | $ | 14,257 | $ | (6,383 | ) | $ | 25,555 | $ | (498 | ) | ||
| Unit volumes | 1,760 | 1,489 | 3,276 | 2,798 | ||||||||
| Net sales per unit | $ | 94,200 | $ | 76,812 | $ | 88,302 | $ | 77,882 | ||||
Comparison of the Second Quarter Ended December 31, 2018 to the Second Quarter Ended December 31, 2017
Net sales for the three months ended December 31, 2018 increased $51.4 million, or 45.0%, to $165.8 million as compared to the three months ended December 31, 2017. Unit volume for the three months ended December 31, 2018, increased 271 units, or 18.2%, to 1,760 units as compared to the three months ended December 31, 2017.
Net sales attributable to our Malibu U.S. segment increased $14.6 million, or 21.5%, to $82.7 million for the three months ended December 31, 2018, compared to the three months ended December 31, 2017. Unit volumes attributable to our Malibu U.S. segment increased 112 units for the three months ended December 31, 2018, compared to the three months ended December 31, 2017. The increase in net sales and unit volume for Malibu U.S. was driven primarily by strong demand for new models and optional features.
Net sales from our Cobalt segment increased $6.5 million, or 16.5%, to $45.9 million for the three months ended December 31, 2018, compared to the three months ended December 31, 2017. Unit volumes attributable to Cobalt increased 35 units for the three months ended December 31, 2018 compared to the three months ended
December 31, 2017. The increase in Cobalt net sales and unit volume was driven primarily by strong demand for our R series models.
Since our acquisition of Pursuit on October 15, 2018, net sales and unit volume contributed by Pursuit were $29.9 million and 111 units, respectively, for the three months ended December 31, 2018.
Net sales from our Malibu Australia segment increased $0.4 million, or 5.4%, to $7.3 million for the three months ended December 31, 2018, compared to the three months ended December 31, 2017.
Overall consolidated net sales per unit increased 22.6% to $94,200 for the three months ended December 31, 2018, compared to the three months ended December 31, 2017. Net sales per unit for our Malibu U.S. segment increased 8.0% to $82,308 for the three months ended December 31, 2018, compared to the three months ended December 31, 2017, driven by strong demand for optional features and year-over-year price increases. Net sales per unit for our Cobalt segment increased 9.0% to $84,121 for the three months ended December 31, 2018, compared to the three months ended December 31, 2017, driven by a favorable mix of R series models which have a higher average selling price as well as year-over-year price increases. Net sales per unit for Pursuit for the three months ended December 31, 2018 was $269,613.
Cost of sales for the three months ended December 31, 2018 increased $40.6 million, or 46.8%, to $127.5 million as compared to the three months ended December 31, 2017. The increase in cost of sales was driven primarily by incremental costs contributed by Pursuit since its acquisition in October 2018 and an increase in unit volumes at our Malibu U.S. and Cobalt businesses.
Gross profit for the three months ended December 31, 2018 increased $10.8 million, or 39.2%, to $38.3 million compared to the three months ended December 31, 2017. The increase in gross profit was due mainly to higher unit volumes. Gross margin for the three months ended December 31, 2018 decreased 100 basis points from 24.1% to 23.1% over the same period in the prior fiscal year primarily due to $0.9 million of additional expense related to the fair value step up of Pursuit inventory acquired and sold during the period. Our gross margins increased year-over- year for our comparable businesses primarily as a result of our operational efficiency initiatives.
Selling and marketing expenses for the three month period ended December 31, 2018, increased $1.5 million or 47.4% compared to the three months ended December 31, 2017 due primarily to the incremental expenses from Pursuit since its acquisition. As a percentage of sales, selling and marketing expenses increased 10 basis points compared to the same period in the prior fiscal year. General and administrative expenses for the three months ended December 31, 2018, increased $3.8 million, or 51.1%, to $11.2 million as compared to the three months ended December 31, 2017, largely due to incremental general and administrative expenses attributable to Pursuit since its acquisition, acquisition related expenses for our acquisition of Pursuit, which we completed in October 2018 and higher legal expenses. As a percentage of sales, general and administrative expenses increased 30 basis points to 6.8% for the three months ended December 31, 2018 compared to the three months ended December 31, 2017. Amortization expense for the three month period ended December 31, 2018, increased $0.2 million, or 17.9% to $1.5 million compared to the three months ended December 31, 2017 due to additional amortization expense related to intangibles acquired as part of the Pursuit acquisition.
Operating income for the second quarter of fiscal year 2019 increased to $20.9 million from $15.7 million in the second quarter of fiscal year 2018. Net income for the second quarter of fiscal year 2019 increased 368.6% to net income of $15.0 million from a net loss of $5.6 million and net income margin increased to 9.0% from (4.9)% in the second quarter of fiscal year 2018. Adjusted EBITDA in the second quarter of fiscal year 2019 increased 42.5% to $29.4 million from $20.6 million, while Adjusted EBITDA margin decreased to 17.7% from 18.0% in the second quarter of fiscal year 2018.
Webcast and Conference Call Information
The Company will host a webcast and conference call to discuss second quarter fiscal year 2019 results on Wednesday, February 6, 2019, at 8:30 a.m. Eastern Time. Investors and analysts can participate on the conference call by dialing (855) 433-0928 or (484) 756-4263 and using Conference ID #6684254. Alternatively, interested parties can listen to a live webcast of the conference call by logging on to the Investor Relations section on the Company’s website at http://investors.malibuboats.com. A replay of the webcast will also be archived on the Company’s website for twelve months.
About Malibu Boats, Inc.
Based in Loudon, Tennessee, Malibu Boats, Inc. (MBUU) is a leading designer, manufacturer and marketer of a diverse range of recreational powerboats, including performance sport, sterndrive and outboard boats. Malibu Boats Inc. is the commanding market leader in the performance sport boat category through its Malibu and Axis Wake Research boat brands, the leader in the 20’ – 40’ segment of the sterndrive boat category through its Cobalt brand and in a leading position in the offshore fishing boat market with its Pursuit brand. A pre-eminent innovator in the powerboat industry, Malibu Boats, Inc. designs products that appeal to an expanding range of recreational boaters, fisherman and water sports enthusiasts whose passion for boating is a key component of their active lifestyles.
Forward Looking Statements
This press release includes forward-looking statements (as such term is defined in the Private Securities Litigation Reform Act of 1995). Forward-looking statements can be identified by such words and phrases as “believes,” “anticipates,” “expects,” “intends,” “estimates,” “may,” “will,” “should,” “continue” and similar expressions, comparable terminology or the negative thereof, and includes the statements in this press release regarding our expectation for the marine industry and economy, the performance of Malibu, Cobalt and Pursuit and our belief that we are well-positioned to continue to deliver increasing value for our stakeholders.
Forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those expressed or implied in the forward-looking statements, including, but not limited to: the impact of our recent acquisition of the assets of Pursuit; our ability to grow our business through acquisitions or strategic alliances and new partnerships; general industry, economic and business conditions; demand for our products; changes in consumer preferences; competition within our industry; our reliance on our network of independent dealers; our ability to manage our manufacturing levels and our large fixed cost base; the successful introduction of our new products; the success of our engines integration strategy; and other factors affecting us detailed from time to time in our filings with the Securities and Exchange Commission. Many of these risks and uncertainties are outside our control, and there may be other risks and uncertainties which we do not currently anticipate because they relate to events and depend on circumstances that may or may not occur in the future. Although we believe that the expectations reflected in any forward-looking statements are based on reasonable assumptions at the time made, we can give no assurance that our expectations will be achieved. Undue reliance should not be placed on these forward- looking statements, which speak only as of the date hereof. We undertake no obligation (and we expressly disclaim any obligation) to update or supplement any forward-looking statements that may become untrue because of subsequent events, whether because of new information, future events, changes in assumptions or otherwise. Comparison of results for current and prior periods are not intended to express any future trends or indications of future performance, unless expressed as such, and should only be viewed as historical data.
Use and Definition of Non-GAAP Financial Measures
This release includes the following financial measures defined as non-GAAP financial measures by the SEC: Adjusted EBITDA, Adjusted EBITDA Margin, Adjusted Fully Distributed Net Income and Adjusted Fully Distributed Net Income per Share. These measures have limitations as analytical tools and should not be considered as an alternative to, or more meaningful than, net income as determined in accordance with GAAP or as an indicator of our liquidity. Our presentation of these non-GAAP financial measures should also not be construed as an inference that our results will be unaffected by unusual or non-recurring items. Our computations of these non- GAAP financial measures may not be comparable to other similarly titled measures of other companies.
We define Adjusted EBITDA as net income before interest expense, income taxes, depreciation, amortization and non-cash, non-recurring or non-operating expenses, including certain professional fees, acquisition and integration related expenses, non-cash compensation expense, expenses related to our engine development initiative and adjustments to our tax receivable agreement liability. We define Adjusted EBITDA Margin as Adjusted EBITDA divided by net sales. Adjusted EBITDA and Adjusted EBITDA Margin are not measures of net income as determined by GAAP. Management believes Adjusted EBITDA and Adjusted EBITDA Margin allow investors to evaluate our operating performance and compare our results of operations from period to period on a consistent basis by excluding items that management does not believe are indicative of core operating performance.
Management uses Adjusted EBITDA to assist in highlighting trends in our operating results without regard to our financing methods, capital structures, and non-recurring or non-operating expenses. We exclude the items listed above from net income in arriving at Adjusted EBITDA because these amounts can vary substantially from company to company within our industry depending upon accounting methods and book values of assets, capital structures, the methods by which assets were acquired and other factors.
Certain items excluded from Adjusted EBITDA are significant components in understanding and assessing a company’s financial performance, such as a company’s cost of capital and tax structure, as well as the historical costs of depreciable assets.
We define Adjusted Fully Distributed Net Income as net income attributable to Malibu Boats, Inc. (i) excluding income tax expense, (ii) excluding the effect of non-recurring or non-cash items, (iii) assuming the exchange of all LLC units into shares of Class A Common Stock, which results in the elimination of non-controlling interest in Malibu Boats Holdings, LLC (the “LLC”), and (iv) reflecting an adjustment for income tax expense on fully distributed net income before income taxes at our estimated effective income tax rate. Adjusted Fully Distributed Net Income is a non-GAAP financial measure because it represents net income attributable to Malibu Boats, Inc., before non-recurring or non-cash items and the effects of non-controlling interests in the LLC. We use Adjusted Fully Distributed Net Income to facilitate a comparison of our operating performance on a consistent basis from period to period that, when viewed in combination with our results prepared in accordance with GAAP, provides a more complete understanding of factors and trends affecting our business than GAAP measures alone. We believe Adjusted Fully Distributed Net Income assists our board of directors, management and investors in comparing our net income on a consistent basis from period to period because it removes non-cash or non-recurring items, and eliminates the variability of non-controlling interest as a result of member owner exchanges of LLC units into shares of Class A Common Stock. In addition, because Adjusted Fully Distributed Net Income is susceptible to varying calculations, the Adjusted Fully Distributed Net Income measures, as presented in this release, may differ from and may, therefore, not be comparable to similarly titled measures used by other companies.
A reconciliation of our net income as determined in accordance with GAAP to Adjusted EBITDA and Adjusted EBITDA Margin, and of our net income attributable to Malibu Boats, Inc. to Adjusted Fully Distributed Net Income is provided under “Reconciliation of Non-GAAP Financial Measures”.
Investor Contacts
Malibu Boats, Inc.
Wayne Wilson
Chief Financial Officer
(865) 458-5478
Zac Lemons
Investor Relations
(865) 458-5478
[email protected]
| MALIBU BOATS, INC. AND SUBSIDIARIES | ||||||||
| Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) (Unaudited) (In thousands, except share and per share data) |
||||||||
| Three Months Ended December 31 | Six Months Ended December 31, | |||||||
| 2018 | 2017 | 2018 | 2017 | |||||
| Net sales | $ | 165,793 | $ | 114,373 | $ | 289,276 | $ | 217,914 |
| Cost of sales | 127,478 | 86,857 | 220,460 | 167,475 | ||||
| Gross profit | 38,315 | 27,516 | 68,816 | 50,439 | ||||
| Operating expenses: | ||||||||
| Selling and marketing | 4,601 | 3,122 | 8,099 | 6,711 | ||||
| General and administrative | 11,232 | 7,435 | 20,203 | 14,509 | ||||
| Amortization | 1,538 | 1,304 | 2,818 | 2,612 | ||||
| Operating income | 20,944 | 15,655 | 37,696 | 26,607 | ||||
| Other (income) expense, net: | ||||||||
| Other income, net | (17) | (30,333) | (34) | (27,736) | ||||
| Interest expense | 1,844 | 1,014 | 3,015 | 3,213 | ||||
| Other (income) expense, net | 1,827 | (29,319) | 2,981 | (24,523) | ||||
| Income before provision for income taxes | 19,117 | 44,974 | 34,715 | 51,130 | ||||
| Provision for income taxes | 4,119 | 50,558 | 7,702 | 50,300 | ||||
| Net income (loss) | 14,998 | (5,584) | 27,013 | 830 | ||||
| Net income attributable to non-controlling interest | 741 | 799 | 1,458 | 1,328 | ||||
| Net income (loss) attributable to Malibu Boats, Inc. | $ | 14,257 | $ | (6,383) | $ | 25,555 | $ | (498) |
| Comprehensive income (loss): | ||||||||
| Net income (loss) | $ | 14,998 | $ | (5,584) | $ | 27,013 | $ | 830 |
| Other comprehensive income (loss), net of tax: | ||||||||
| Change in cumulative translation adjustment | (367) | (66) | (771) | 234 | ||||
| Other comprehensive income (loss), net of tax | (367) | (66) | (771) | 234 | ||||
| Comprehensive income (loss), net of tax | 14,631 | (5,650) | 26,242 | 1,064 | ||||
| Less: comprehensive income attributable to non- | ||||||||
| controlling interest, net of tax | 723 | 806 | 1,416 | 1,360 | ||||
| Comprehensive income (loss) attributable to Malibu Boats, Inc., net of tax |
$ | 13,908 | $ | (6,456) | $ | 24,826 | $ | (296) |
| Weighted average shares outstanding used in computing net income (loss) per share: |
||||||||
| Basic | 20,875,243 | 20,429,627 | 20,758,095 | 19,804,192 | ||||
| Diluted | 20,990,313 | 20,429,627 | 20,883,868 | 19,804,192 | ||||
| Net income (loss) available to Class A Common Stock per share: |
||||||||
| Basic | $ | 0.68 | $ | (0.31) | $ | 1.23 | $ | (0.03) |
| Diluted | $ | 0.68 | $ | (0.31) | $ | 1.22 | $ | (0.03) |
| MALIBU BOATS, INC. AND SUBSIDIARIES | ||||||
| Condensed Consolidated Balance Sheets (Unaudited) (In thousands, except share data) |
||||||
| December 31, 2018 | June 30, 2018 | |||||
| Assets | ||||||
| Current assets | ||||||
| Cash | $ | 23,903 | $ | 61,623 | ||
| Trade receivables, net | 13,545 | 24,625 | ||||
| Inventories, net | 68,465 | 44,268 | ||||
| Prepaid expenses and other current assets | 5,979 | 3,298 | ||||
| Income tax receivable | 1,363 | 100 | ||||
| Total current assets | 113,255 | 133,914 | ||||
| Property, plant and equipment, net | 60,193 | 40,845 | ||||
| Goodwill | 51,410 | 32,230 | ||||
| Other intangible assets, net | 149,206 | 94,221 | ||||
| Deferred tax asset | 64,566 | 64,105 | ||||
| Other assets | 313 | 453 | ||||
| Total assets | $ | 438,943 | $ | 365,768 | ||
| Liabilities | ||||||
| Current liabilities | ||||||
| Accounts payable | $ | 25,996 | $ | 24,349 | ||
| Accrued expenses | 43,058 | 35,685 | ||||
| Income taxes and tax distribution payable | 335 | 1,420 | ||||
| Payable pursuant to tax receivable agreement, current portion | 3,932 | 3,932 | ||||
| Total current liabilities | 73,321 | 65,386 | ||||
| Deferred tax liabilities | 270 | 341 | ||||
| Payable pursuant to tax receivable agreement, less current portion | 53,667 | 51,114 | ||||
| Long-term debt | 143,676 | 108,487 | ||||
| Other long-term liabilities | 704 | 569 | ||||
| Total liabilities | 271,638 | 225,897 | ||||
| Stockholders’ Equity | ||||||
| Class A Common Stock, par value $0.01 per share, 100,000,000 shares authorized; 20,836,429 shares issued and outstanding as of December 31, 2018; 20,555,348 issued and outstanding as of June 30, 2018 |
207 | 204 | ||||
| Class B Common Stock, par value $0.01 per share, 25,000,000 shares authorized; 16 shares issued and outstanding as of December 31, 2018; 17 shares issued and outstanding as of June 30, 2018 |
— | — | ||||
| Preferred Stock, par value $0.01 per share; 25,000,000 shares authorized; no shares issued and outstanding as of December 31, 2018 and June 30, 2018 |
— | — | ||||
| Additional paid in capital | 111,347 | 108,360 | ||||
| Accumulated other comprehensive loss | (2,755 | ) | (1,984 | ) | ||
| Accumulated earnings | 53,346 | 27,789 | ||||
| Total stockholders’ equity attributable to Malibu Boats, Inc. | 162,145 | 134,369 | ||||
| Non-controlling interest | 5,160 | 5,502 | ||||
| Total stockholders’ equity | 167,305 | 139,871 | ||||
| Total liabilities and stockholders’ equity | $ | 438,943 | $ | 365,768 | ||
MALIBU BOATS, INC. AND SUBSIDIARIES
Reconciliation of Non-GAAP Financial Measures
Reconciliation of Net Income (Loss) to Non-GAAP Adjusted EBITDA and Adjusted EBITDA Margin (Unaudited):
The following table sets forth a reconciliation of net income (loss) as determined in accordance with GAAP to Adjusted EBITDA and Adjusted EBITDA Margin for the periods indicated (dollars in thousands):
Three Months Ended December 31, |
Six Months Ended December 31, 2018 |
|||||||
| 2018 | 2017 | 2018 | 2017 | |||||
| Net income (loss) | $ | 14,998 | $ | (5,584) | $ | 27,013 | $ | 830 |
| Provision for income taxes 1 | 4,119 | 50,558 | 7,702 | 50,300 | ||||
| Interest expense | 1,844 | 1,014 | 3,015 | 3,213 | ||||
| Depreciation | 2,495 | 1,687 | 4,358 | 3,417 | ||||
| Amortization | 1,538 | 1,304 | 2,818 | 2,612 | ||||
| Professional fees 2 | 383 | — | 383 | 26 | ||||
| Acquisition and integration related expenses 3 | 2,552 | 322 | 3,909 | 2,137 | ||||
| Stock-based compensation expense 4 | 655 | 488 | 1,131 | 850 | ||||
| Engine development 5 | 787 | 1,140 | 1,939 | 2,587 | ||||
| Adjustments to tax receivable agreement liability 6 |
— | (30,317) | — | (27,702) | ||||
| Adjusted EBITDA | $ | 29,371 | $ | 20,612 | $ | 52,268 | $ | 38,270 |
| Adjusted EBITDA margin | 17.7% | 18.0% | 18.1% | 17.6% | ||||
- Provision for income taxes for the three months and six months ended December 31, 2018 reflects the impact of the Tax Cuts and Jobs Act of 2017 (“Tax Act”) adopted in December 2017, which among other items, lowered the U.S. corporate income tax rate from 35% to 21%, effective January 1, 2018.
- For the three and six months ended December 31, 2018, represents legal and advisory fees related to our litigation with Skier’s Choice, Inc. For the six months ended December 31, 2017, represents legal and advisory fees related to our litigation with MasterCraft Boat Company, LLC (“MasterCraft”) which was settled in May 2017.
- For the three and six months ended December 31, 2018, represents legal and advisory fees incurred in connection with our acquisition of Pursuit on October 15, 2018. For the three and six months ended December 31, 2017 represents legal and advisory fees as well as integration costs incurred in connection with our acquisition of Cobalt on July 6, 2017. Integration related expenses for the three and six months ended December 31, 2018 include post-acquisition adjustments to cost of goods sold of $0.9 million for the fair value step up of Pursuit inventory acquired, most of which was sold during the second quarter of fiscal 2019. Integration related expenses for the three and six months ended December 31, 2017 include post-acquisition adjustments to cost of goods sold of $1.5 million for the fair value step up of Cobalt inventory acquired, most of which was sold during the first quarter of fiscal 2018.
- Represents equity-based incentives awarded to key employees under the Malibu Boats, Inc. Long-Term Incentive Plan and profit interests issued under the previously existing limited liability company agreement of the LLC.
- Represents costs incurred in connection with our vertical integration of engines including product development costs and supplier transition performance incentives.
- For the three and six months ended December 31, 2017, we recognized other income as a result of a decrease in our estimated tax receivable agreement liability. The reduction in our tax receivable agreement liability resulted from the adoption of the Tax Act, which decreased the estimated tax rate used in computing our future tax obligations and, in turn, decreased the future tax benefit we expect to realize related to increased tax basis from previous sales and exchanges of LLC Units by our pre-IPO owners.
Reconciliation of Non-GAAP Adjusted Fully Distributed Net Income (Unaudited):
The following table shows the reconciliation of the numerator and denominator for net income (loss) available to Class A Common Stock per share to Adjusted Fully Distributed Net Income per Share of Class A Common Stock for the periods presented (in thousands except share and per share data):
| Three Months Ended December 31, | Six Months Ended December 31, | |||||||
| 2018 | 2017 | 2018 | 2017 | |||||
| Reconciliation of numerator for net income (loss) available to Class A Common Stock per share to Adjusted Fully Distributed Net Income per Share of Class A Common Stock: | $ 14,257 | $ (6,383) | $ 25,555 | $ (498) | ||||
| Net Income (loss) attributable to Malibu Boats, Inc. 1 | 50,558 | 7,702 | 50,300 | |||||
| Professional fees 2 | 383 | — | 383 | 26 | ||||
| Acquisition and integration related expenses 3 | 3,688 | 1,017 | 5,798 | 3,523 | ||||
| Fair market value adjustment for interest rate swap 4 | 129 | (172) | 132 | (203) | ||||
| Stock-based compensation expense 5 | 655 | 488 | 1,131 | 850 | ||||
| Engine development 6 | 787 | 1,140 | 1,939 | 2,587 | ||||
| Adjustments to tax receivable agreement liability 7 | — | (30,317) | — | (27,702) | ||||
| Net income attributable to non-controlling interest 8 | 741 | 799 | 1,458 | 1,328 | ||||
| Fully distributed net income before income taxes | 24,759 | 17,130 | 44,098 | 30,211 | ||||
| Income tax expense on fully distributed income before income taxes 9 | 5,967 | 5,704 | 10,628 | 10,060 | ||||
| Adjusted fully distributed net income | $ 18,792 | $ 11,426 | $ 33, 470 | $ 20, 151 | ||||
| Three Months Ended December 31, | Six Months Ended December 31, | |||
| 2018 | 2017 | 2018 | 2017 | |
| Reconciliation of denominator for net income available to Class A Common Stock per share to Adjusted Fully Distributed Net Income per Share of Class A CommonStock: | ||||
| Weighted average shares outstanding of Class A Common Stock used for basic net income per share: 10 | 20,875,243 | 20,436,110 | 20,758,095 | 19,819,438 |
| Adjustments to weighted average shares of Class A Common Stock: | ||||
| Weighted-average LLC units held by non-controlling unit holders 11 | 844,652 | 1,170,314 | 925,963 | 1,211,709 |
| Weighted-average unvested restricted stock awards issued to management 12 | 125,378 | 126,447 | 128,491 | 128,199 |
| Adjusted weighted average shares of Class A Common Stock outstanding used in computing Adjusted Fully Distributed Net Income per Share of Class A Common Stock | 21,845,273 | 21,732,871 | 21,812,549 | 21,159,346 |
The following table shows the reconciliation of net income (loss) available to Class A Common Stock per share to Adjusted Fully Distributed Net Income per Share of Class A Common Stock for the periods presented:
| Three Months Ended December 31, | Six Months Ended December 31, | |||||||
| 2018 | 2017 | 2018 | 2017 | |||||
| Net income available to Class A Common Stock per share | $ | 0.68 | $ | (0.31) | $ | 1.23 | $ | (0.03) |
| Impact of adjustments: | ||||||||
| Provision for income taxes 1 | 0.20 | 2.47 | 0.37 | 2.54 | ||||
| Professional fees 2 | 0.02 | — | 0.02 | — | ||||
| Acquisition and integration related expenses 3 | 0.18 | 0.05 | 0.28 | 0.18 | ||||
| Fair market value adjustment for interest rate swap 4 | 0.01 | (0.01) | 0.01 | (0.01) | ||||
| Stock-based compensation expense 5 | 0.03 | 0.02 | 0.05 | 0.04 | ||||
| Engine development 6 | 0.04 | 0.06 | 0.09 | 0.13 | ||||
| Adjustment to tax receivable agreement liability 7 | — | (1.48) | — | (1.40) | ||||
| Net income attributable to non-controlling interest 8 | 0.04 | 0.04 | 0.07 | 0.07 | ||||
| Fully distributed net income per share before income taxes | 1.20 | 0.84 | 2.12 | 1.52 | ||||
| Impact of income tax expense on fully distributed income taxes 9 | (0.29) | (0.28) | (0.51) | (0.51) | ||||
| Impact of increased share count | (0.05) | (0.03) | (0.08) | (0.06) | ||||
| Adjusted Fully Distributed Net Income per Share of Class A Common Stock | $ | 0.86 | $ | 0.53 | $ | 1.53 | $ | 0.95 |
- Provision for income taxes for the three months and six months ended December 31, 2018 reflects the impact of the Tax Act adopted in December 2017, which among other items, lowered the U.S. corporate income tax rate from 35% to 21%, effective January 1, 2018.
- For the three and six months ended December 31, 2018, represents legal and advisory fees related to our litigation with Skier’s Choice, Inc. For the six months ended December 31, 2017, represents legal and advisory fees related to our litigation with MasterCraft which was settled in May 2017.
- For the three and six months ended December 31, 2018, represents legal and advisory fees incurred in connection with our acquisition of Pursuit on October 15, 2018. For the three and six months ended December 31, 2017 represents legal and advisory fees as well as integration costs incurred in connection with our acquisition of Cobalt on July 6, 2017. Integration related expenses for the three and six months ended December 31, 2018 include post-acquisition adjustments to cost of goods sold of $0.9 million for the fair value step up of inventory acquired, most of which was sold during the second quarter of fiscal 2019. In addition, for the three and six months ended December 31, 2018, integration related expenses includes $0.4 million in depreciation and amortization associated with our fair value step up of property, plant and equipment and intangibles acquired in connection with the acquisition of Pursuit. Also, for the three and six months ended December 31, 2018, integration related expenses includes $0.7 million and $1.5 million, respectively, in amortization associated with our fair value step up of intangibles acquired in connection with the acquisition of Cobalt. Integration related expenses for the three and six months ended December 31, 2017 include post-acquisition adjustments to cost of goods sold of $1.5 million for the fair value step up of inventory acquired, most of which was sold during the first quarter of fiscal 2018. In addition, for the three and six months ended December 31, 2017, integration related expenses includes $0.7 million and $1.4 million, respectively, in depreciation and amortization associated with our fair value step up of property, plant and equipment and intangibles acquired in connection with the acquisition of Cobalt.
- Represents the change in the fair value of our interest rate swap entered into on July 1, 2015.
- Represents equity-based incentives awarded to certain of our employees under the Malibu Boats, Inc. Long-Term Incentive Plan and profit interests issued under the previously existing limited liability company agreement of the LLC.
- Represents costs incurred in connection with our vertical integration of engines including product development costs and supplier transition performance incentives.
- For the three and six months ended December 31, 2017, we recognized other income as a result of a decrease in our estimated tax receivable agreement liability. The reduction in our tax receivable agreement liability resulted from the adoption of the Tax Act, which decreased the estimated tax rate used in computing our future tax obligations and, in turn, decreased the future tax benefit we expect to realize related to increased tax basis from previous sales and exchanges of LLC Units by our pre-IPO owners.
- Reflects the elimination of the non-controlling interest in the LLC as if all LLC members had fully exchanged their LLC Units for shares of Class A Common Stock.
- Reflects income tax expense at an estimated normalized annual effective income tax rate of 24.1% and 33.3% of income before income taxes for the three and six months ended December 31, 2018 and 2017, respectively, assuming the conversion of all LLC Units into shares of Class A Common Stock. The estimated normalized annual effective income tax rate is based on the federal statutory rate plus a blended state rate adjusted for deductions under Section 199 of the Internal Revenue Code of 1986, as amended, state taxes attributable to the LLC, and foreign income taxes attributable to our Australian based subsidiary. The decrease in the normalized annual effective income tax rate to 24.1% for the three and six months ended December 31, 2018, is primarily the result of the Tax Act which was effective for periods after January 1, 2018, lowering the corporate tax rate to 21%, as well as an updated blended state rate, which considers the impacts of the Cobalt acquisition and a recent law change in Tennessee.
- The difference in weighted average shares outstanding for the three and six months ended December 31, 2017 relates to the difference in the weighting of shares outstanding of Class A common stock during this period for the calculation of basic net income per share for our financial statements and basic net income per share for adjusted fully distributed net income.
- Represents the weighted average shares outstanding of LLC Units held by non-controlling interests assuming they were exchanged into Class A Common Stock on a one-for-one basis.
- Represents the weighted average unvested restricted stock awards included in outstanding shares during the applicable period that were convertible into Class A Common Stock and granted to members of management.
- Reflects impact of increased share counts assuming the exchange of all weighted average shares outstanding of LLC Units into shares of Class A Common Stock and the conversion of all weighted average unvested restricted stock awards included in outstanding shares granted to members of management.
