MasterCraft Boat Company, Inc.

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MasterCraft Boat Company, Inc.

100 Cherokee Cove
Vonore, Tennessee 37885
U.S.A.
Telephone: (423) 884-2221
Fax: (423) 884-2295
Web site: http://www.mastercraft.com

Private Company
Incorporated: 1968
Employees: 591
Sales: $199.2 million (2007 est.)
NAIC: 336612 Boat Building

MasterCraft Boat Company, Inc., is the world's leading manufacturer of waterskiing, wakeboarding, and luxury sport powerboats. Its product lines include the ProStar, for tournament waterskiing; the X-Series, for wakeboarding; and the MariStar and Saltwater Series, which combine water sport performance capabilities and luxury appointments. The firm produces more than 3,500 boats per year at prices starting at about $50,000. MasterCraft is owned by members of management and investment firm U.S. Equity.

BEGINNINGS

MasterCraft was founded in 1968 by a young waterskiing instructor named Rob Shirley. Shirley had been hired in 1963 to run the ski school of Leo Bentz. Three years earlier, Bentz had developed the first fiberglass-hulled, inboard-motor speedboat that was designed specifically for waterskiing. Bentz sold the mold and name Ski Nautique to boatbuilder Correct Craft in 1961, but Shirley continued to use a Ski Nautique at the school, as well as at the Florida-based waterskiing school he founded in 1965. Three years later, Shirley decided to build a boat of his own when his engine blew up, and he enlisted several fellow skiers to help him widen a Ski Nautique hull. The boat was completed in August, and first shown at the U.S. Nationals in Canton, Ohio.

At about this time an accident at Shirley's ski school led to a lawsuit whose settlement costs forced him to close the school and move to his wife's parents' farm in Maryville, Tennessee. Seizing on the fact that the Ski Nautique line had no competition, he began to build fiberglass ski boats in a barn under the name MasterCraft Boat Company, completing 12 during the first year. Shirley's boats started to gain notice among waterskiing enthusiasts for their ability to pull skiers quickly out of the water and their low, easy-to-ride wake at slalom speeds of 30 to 36 miles per hour. As orders increased the firm grew and additional employees were hired, including Shirley's brother-in-law George Fowler, who served as general manager.

In 1977 Fowler was enticed by a local businessman to leave the firm and found his own boat company, and when his Ski Supreme appeared blatantly to copy MasterCraft's design, Shirley sued. The lawsuit was dismissed, however, and Fowler soon founded another boat company, Supra, which would become a major competitor of MasterCraft.

By the early 1980s the company had grown to employ 200, and in 1984 Shirley sold MasterCraft to camping gear manufacturer the Coleman Co. of Wichita, Kansas. That same year he helped found the professional waterskiing tour, which would use MasterCraft boats exclusively. In 1987 Chuck West was hired to run the firm, which had annual sales of approximately $15 million and was the established sales leader in the ski boat market. MasterCraft had introduced a number of key design improvements over the years, including adding directional fins for more precise tracking and turning, and its boats had been used to set more American Water Ski Association records than all other manufacturers combined.

During the mid-1980s the company began adding amenities to its boats so that they could be used for a wider range of activities beyond waterskiing, and in 1989 the luxuriously appointed MariStar line was introduced, which was specifically targeted at families and included items like a tilt steering wheel, copious storage space, and a large deck that could be used for sunning and socializing. Most MasterCraft buyers were affluent, and some bought the firm's boats because they were attracted by the brand's association with tournament waterskiing, though they would use them primarily for family activities.

MACANDREWS & FORBES BUYS COMPANY IN 1989

In 1989 MasterCraft parent the Coleman Co. was sold to financier Ron Perelman's MacAndrews & Forbes Holdings, Inc., which later made the firm part of its Meridian Sports unit. The ski boat industry's sales were beginning to fall due to a growing U.S. economic recession as well as the booming popularity of personal watercraft, which were small, fast boats that could hold one or two riders.

In response to a developing industry trend toward longer and wider boats that produced less spray for riders, MasterCraft introduced a new hull design incorporating these characteristics for the 1991 model year, its first major change since 1977. The firm had previously been the only company in the industry to offer a ten-year limited warranty on hulls and engines, and this was upgraded to a limited lifetime warranty, with MasterCraft covering the hull and Mobil Oil the engine, as long as Mobil lubrication was used.

MasterCraft boats continued to be regarded by many as the best in the industry, with the 1991 MariStar 210 named ski boat of the year by Powerboat magazine in a typical accolade for the firm. They were also the only tow boats used at Florida's famed Cypress Gardens and on the Pro Waterski Tour. The company sponsored a 17-member professional waterskiing team that endorsed its products, and had a network of 105 U.S. dealers and 10 foreign distributors who sold them. They were advertised extensively in boating and water-skiing magazines.

A number of the company's designs featured open bows to accommodate more riders and a "v-drive" engine configuration, which had an inboard motor that was mounted in the rear facing forward, and used a geared shaft to transmit power to the propeller that was essentially beneath it.

In 1992 MasterCraft formed a Marine Services division to offer insurance and extended warranties to its boat owners, with the goal of facilitating one-stop shopping at dealers and improving customer satisfaction. The following January the company paid $700,000 to purchase the assets of WetJet International, Ltd., of Minnesota, a struggling seven-year-old maker of personal watercraft. Later in the year parent Meridian Sports was expanded with the acquisition of boat makers Boston Whaler, Skeeter Bass Boats, and O'Brien Ski Boats.

MOVE TO NEW FACILITY ON TELLICO LAKE IN 1994

In June 1993 MasterCraft bought a 150,000-square-foot manufacturing plant on Tellico Lake near Monroe, Tennessee, from competitor Sea-Ray, where it moved early the following year. The area was a hotbed of boat building, with many such companies headquartered in the area. The firm was producing nine model lines, with tournament boats starting at $25,000 and recreational ones at $32,000.

COMPANY PERSPECTIVES

The company's mission is to deliver consumers the ultimate water sports experience by designing and building the world's highest quality, best performing sports luxury boats in every significant inboard niche.

During the early 1990s MasterCraft joined with General Motors and Indmar Products in a $10 million research and development project to create a marine engine with electronic fuel injection. A 350-cubic-inch engine was produced for it by Indmar, while the more powerful 310 horsepower General Motors LT-1 engine (also used on GM cars like the Corvette and Cadillac Eldorado) was also available as an option.

In 1994 the company's employees voted 199 to 135 against representation by the Teamsters Union after the firm waged an aggressive campaign to convince them not to join. During the year, production of WetJets reached 5,000, but the subsidiary was proving a heavy drag on the bottom line as the Coast Guard mandated a recall of some models for repairs. After the company recalled every single boat built for additional work, production was halted in the fall of 1995. Write-downs related to the WetJet debacle would eventually total more than $50 million.

As the problems with WetJet came to a head, president Chuck West resigned in mid-1995, followed by several other executives. He was temporarily replaced by industry veteran Jim Hoag, and then in March 1996, Gary Lownsdale was named to run the company. Lownsdale had served as program manager for the team that designed and produced General Motors' Saturn car.

FIRST WAKEBOARDING BOAT PRODUCED IN 1996

During the 1990s a new water sport called wakeboarding that used a single wide board began to surge in popularity. To meet the unique needs of this sport, which required a strong, steady wake behind a tow boat, in 1996 the firm introduced a new rear-engine boat with an adjustable ballast system that it would dub the X-Series. Sales soon took off, helped in large part by the boat's use on ESPN television's X-games.

During 1996 the company also worked to get back on track financially and cut $2 million from its operating expenses by improving manufacturing systems. Employees were asked to become more involved by spotting quality lapses and offering suggestions for improvements to the production process.

MasterCraft had begun working with the University of Cincinnati to eliminate sources of onboard vibration, and its 1998 models boasted reduced levels of up to 80 percent. The 30th anniversary model year was the firm's biggest ever, and featured three redesigned boats and seven new ones, including the $19,950 SportStar 19 and the outboard-motor PowerStar 200, priced at $32,495. Orders were strong, and Lownsdale put the firm's staff on extra shifts to facilitate production of up to six additional boats per day. At year's end the company's employees were rewarded with bonuses for their efforts.

In 1998 MasterCraft formed a new partnership with General Motors' Cadillac Motor Car Division to collaborate on advertising and promotion, with MariStar models offering a Cadillac Northstar engine as optional equipment. Cadillac was seeking to reach a younger demographic with a new sport-utility vehicle it was introducing for the 1999 model year, and sought to tap into MasterCraft's buyers, who typically ranged in age from 34 to 54 years old. The firm was making 3,200 boats per year and had 44 percent of the market for inboard tournament-style ski boats.

In December 1998 Gary Lownsdale resigned, citing personal reasons, and was replaced by John Dorton, a one-time competitive water skier who had served as the firm's marketing director since 1996. Dorton, who had long sought to work for MasterCraft, began to spend time each week on the factory floor to understand the manufacturing process and to look for improvements, as well as to assist the team of professional waterskiers who tested each completed boat on Tellico Lake.

KEY DATES

1968:: Rob Shirley begins building ski boats in Florida.
1969:: Shirley moves operation to Maryville, Tennessee.
1984:: Camping products maker the Coleman Co. acquires firm.
1989:: Luxury MariStar line debuts; MacAndrews & Forbes buys MasterCraft parent company.
1993:: Personal watercraft maker WetJet International is acquired.
1994:: Production is moved to former Sea-Ray facility in Vonore, Tennessee.
1995:: Personal watercraft production is halted following product recalls.
1996:: New line of wakeboarding boats debuts.
1998:: John Dorton is named president and CEO.
2000:: Dorton and other top executives buy firm with help from Pouschine Cook.
2004:: MasterCraft is recapitalized with backing from U.S. Equity to buy out Pouschine Cook.
2005:: Saltwater Series is introduced.

MANAGEMENT-LED BUYOUT IN 2000

In March 2000 Dorton led a group of about 20 company executives to purchase MasterCraft from Meridian Sports, with backing from Pouschine Cook Capital Partners, who took controlling interest. In October the firm increased production and began a 56,000-square-foot addition to its Vonore manufacturing facility, which would be boosted to a total of 328,000 square feet. New equipment for laminating and cutting were also added and 40 more employees were hired. Sales for the year topped $100 million, with the firm selling every boat it was able to produce.

MasterCraft had long worked to foster a continuing relationship with its boats' owners by publishing a newsletter and sponsoring annual get-togethers, and with the advent of the Internet an online discussion forum was added. The company also offered a "fantasy camp" where boat owners could learn from waterskiing stars like Sammy Duvall, whose signature boat it produced. The firm was sending a promotional bus to 40 ski tournaments and other events per year, as well as to dealerships.

In the fall of 2004 MasterCraft was recapitalized, with U.S. Equity selected from a group of some 81 potential investors to buy out Pouschine Cook Capital Partners. The deep pockets of the firm's new backer would also enable it to introduce new models, and eventually expand the plant and make acquisitions. Interest in wakeboarding was continuing to grow, and the X-Series line accounted for more than half of sales. Annual revenues stood at $160 million.

In 2005 MasterCraft introduced the Saltwater Series for use in coastal waters, which had a more durable design. The firm's boats ranged in length from 19 to 28 feet and in price from nearly $50,000 to $120,000. Though sales of some boat manufacturers, including industry leader Brunswick Corp., were falling, MasterCraft continued to sell all the boats it could produce, and had boosted its employee ranks to over 500.

In 2007 the firm posted record revenues and production numbers for the sixth straight year, which it attributed to success at boat shows and an aggressive new-model introduction strategy. The tally for the fiscal year ended in June was 3,639 boats sold and revenues of $199.2 million, up 9 percent and 12 percent, respectively, from the year before.

As it neared the 40-year mark MasterCraft Boat Company, Inc., continued to grow, setting records for sales and production on an annual basis. The firm's dominance of the professional waterskiing and wakeboarding tours, its innovative designs and reputation for quality, and committed owner/managers all boded well for future success.

Frank Uhle

PRINCIPAL COMPETITORS

Brunswick Corporation; Genmar Holdings, Inc.; Yamaha Motor Corporation; Correct Craft, Inc.; Skier's Choice, Inc.; Malibu Boats; Tige Boats, Inc.; Calabria Genuine Ski Boats; Fineline Industries, Inc.