Annual: 2013 in the books…

Annual Owner memo:To understand how sweet 2013 was we would like to format the challenges faced leading to this era and lengthy market upheaval.Each year we try to visit here and leave you just a taste of what last year was like for us and indicate how 2014 will be. Here is a bit sample of our impression coming off 2013. 2013 was obviously a better season for the Bass Cat and much better for Yar-Craft. As indicated by the recent purchase of 30,000 in building space and two (2) years of stellar growth from 2012, stacked on top of solid rebuilding year in 2010 and another growth year in 2011. You folks have allowed BCB to regain the level of prominence that 1988 through 1997 gathered for the company. That was a good ten year run. We cant begin how to impress upon you how strong Yar-Craft has gotten and how far it has come these past 18 months. There were high point stellar years during the 2004 through 2008 model years, though we all know the challenges that our financial times brought us in 2009 with fuel prices and bank or finance debacles. In both 2000 and 2010 we lost major industry companies. To know where any industry or company is one has to know where they came from that forged those patterns, what molded their character. Let us start now educating those younger than some on the last 10 to 15 years of history in our industry. Those who choose to miss this can jump to Section B: and begin on todays world. Made that easier for you… OMC failed in fall or 2000 (December 22, 2000 – 2001 Model Year) with a major percentage of engine sales, boat companies and insecurity among many dealerships. This represented a 34% market share of outboard engines in the marine industry. Some weaker dealers who were tied solidly to OMC (Johnson & Evinrude) failed in their wake unable to float. Bombardier eventually salvaged that moving it to WI. There were other factors that assisted in particular bass boat company failures in fall of 2000, besides Stratos (parent was OMC), and those knocked out Sprint, Hawk, Champion, Cobra Viper and several more. During those times rumors were abundant and local companies slung mud that stuck to our faces sometimes. They were all diverting from their true situations and in time those rumors were proven unfounded, and they all slipped to the fate which others were accused of. 2001 and 2002 model year were tough years. The internet is full of koolade drinkers saying not brand A, H or C, they were stronger than ever in loyalists eyes. Smoke and fire come to mind, though if smoke meant fire we sure had plenty of smoke around us with the rumors. Those trying to stay afloat going into early 2001 made profitability suffer greatly. They were literally throwing discounts around, significantly reducing retail prices trying to gain enough production to cover overheads. Seems all reason went out the window and it only slowed the inevitable. 1998 through 2000 Marine Industry sales numbers were false reality as they were fabricated by reduced prices starting in 1998 that led to inability to sustain in 2000, each year trickling profits lower to attempt and survive. This was also prompted by a new manufacturer who used lower pricing to build market share and buy market. Then the house of cards fell, and some fell hard. You dont earn a position in the market on a shrinking or limited base of sales, you buy it and that takes real deep pockets. Eventually Brunswick buoyed that competitor and took an $18,000,000.00 write off to close the book, yes 18 million. Our thoughts are that all of this present financial debacle started in mid 1997 and led to the melt down of the stock market in March of 2000. The roller coaster between 2000 and 2010 we feel was our economy struggling to find a new footing to hold all markets stable. Going through 911 (September 2001) gave corporate America a reason to reduce costs that were in that 97 to 2000 retention. They had to as it was obvious we could not sustain the levels in any industry. Let alone the marine industry and a leisure product atmosphere. 2003 and 2004 saw hurricanes rock refineries and gulf coast oil platforms. China raised oil consumption and fuel spiked from $1 a gallon to where it is now. Levels post Katrina, Rita, Ike and other natural disasters were us trying to claw out of the hole we would eventually fall into post 2009. Now as we climb out of that hole we again find reborn companies and players entering the market. Sort of a trend as they have boasted to be the next image of ourselves, or they tout their strength in comparison from numbers on registrations. We are who we are and we are not going to over expand. That has cost every single competitor other than ourselves, as every single competitor either came from a leveraged situation. Bullet and Allison stand alone in their worlds also, and those stories remains to be final chronicled. Jumping to 2010 we saw that second major industry player fall in the time frame we speak of, as Genmar filed bankruptcy that same exact day that General Motors filed for bankruptcy protection, June 1, 2009. (coincidence – Hmm?) This was boosted some by a Textron Financial decision to leave the marine industry, leaving only GE as a major lender for floor plan. Genmar was the second largest boat builder in the world, and largest hard body boat builder when RIB boats are removed from the data. They were a major force and the pains of 2000 OMC were felt by this industry again. Companies were struggling to make payroll, finance shriveled and survival came in question. Literally dozens of vendors took supplies from open account to COD, on top of that we had lost most financing for floor planned products. Credit lines were shrunk for vendors and dealers. Dealers struggled to find credit lines for cash purchases and they used their own cash along the way when they could. Through it all most BCB dealers were servicing dealers and survived. We were fortunate to loose extremely few dealers in 2009 through 2011.These experiences are what makes 2012 and 2013 so extremely sweet when we look back on history. It was a year we turned a corner in an industry still on the rebound. Things are far from bright for marine, though they are far from fright also. When you have looked at the light from the bottom of the hole, claw and climb out to look down at that darkness, this leaves a memory of respect. It humbles you and the chinks in your armor are earned. Others have their own wounds and those young pups on the scene cant yet understand who they are as they have not yet forged that character or the history of product sustenance. No company can come into our market and be who we are without those marks and wounds that forged our character. Now we move forward to pick up the speed readers who jumped ahead. Thanks for the read if you followed along. SECTION B:Now in December of 2010 comes Yar-Craft. This was a very nice addition to BCB. With combined HIN (BAS or YAR serial number) production we have manufactured more product than we have in years. Adding other factors to the mix has just made us stronger, more versatile and better able to withstand torrent. The future is bright for both brands and new product is in development stages. In 2012s annual we told you we would be withholding more information in 2013. Referring you to more look here for an answer, rather than being so fluid in responses. We stayed true to that course and we also referred you more to dealers for solutions and information. We were still transparent while trying to offer different content. This process was continued in the 2014 Excellence In Action meeting as we gave dealers much more information on construction, resins, fiberglass, gelcoat and other products. We have stayed the course referring you to Humminbird and Lowrance so those companies can build their data bases. We tried to get Detwiler and Atlas involved on issues, as we can not repair a product those companies build, we simply install them. In 2013 we elevated some steering components and both ends of the hydraulic steering sector were boosted in performance. We made large strides in Resin and Fiberglass in 13 and at the meeting the dealers were shown lots of information on what happens in laminates. Resin samples were displayed and over the course of the last 20 months we have tested no less than 35 resins. Finally in September of 2012 we feel we have settled on a nice alternative that was a special blend for us specifically. This resin has performed very well in 2013 and Iaconellis rig is from the same resin product you bought. We are still not pleased with where we are, though we are so much better off than where we were. Several boat companies continue to use the same resins we were not pleased with. Dealers who attended the 14 meeting will be much more prepared to answer your questions on resins and laminates. We really tried to give them only the fundamentals we look for and how to assess things. Seats performed stellar in 2013 were the new seat vinyls as there were extremely few seat issues with the excessive vinyl costs we selected in 2013. If you stay to the base vinyls we had a Zero failure rate on the premium vinyl. We have really been pleased with the seats and vinyls, plus we have bumped that to Cool Touch on Pewter, Coal and Black in 2014. This will drop each colors seat temperatures 15 to 20 degrees on a hot day. This should help prevent some burned touches.The new covers were a major challenge and Aurora could not leave an extra inch here or miss a seam an inch shorter there. We have to feel that Aurora lost lots of money in developing this cover and we all suffered. Those that fit were extremely pleased and those that did not are some still struggling patiently, or impatiently in some cases. For 2014 we have split Yar-Craft covers and Deans will handle Yar-Craft. We are still fitting though we are getting there. Hopefully helping Aurora to focus on the new strapless design. The Radiance Package, LED interior lighting and other aspects are new. White Cap latches are gone on Advantage models. They built a significant market from companies not desiring to spend for Southcos and the price gap was closed significantly in late 2013. Thus we have gone back to two options, Perko or Southco and the more expensive latches. Southco latches are higher also and the individual parts price will be adjusted, plus we add the secure mounting ring that is custom stamped. We made some minor trailer changes, and we intend to make more as rolling changes in 2014. From 2003 through 2013 Bass Cat has been almost explosive with designs and styling. We have made large strides since the development of the Cougar FTD and for now we intend to just be satisfied. We may have a mid year introduction and we have other projects in the R & D area, though we are satisfied for now. Will we surprise you, SURE! When? Thats a surprise… When we look at where we came from since 2000, what we struggled through to get here and the things we brought out since 2003 we have really been busting tail in the R&D shop. New hulls several times, revised deck designs, rear storages, mini bolts, steering wheels, integrated finished center boxes. From the Jaguar to the Margay the line is fresh. Then we have the Eyra that is stunning in presentation, and those lines were replicated on the Cougar FTD and Puma FTD. Now we move on to Yar-Craft, a line we are revising all the time and usually in areas you will not see. What have we done you can not see? We have reconstructed the internal guts and build. The 209 and 219 once shared the same precut stringers, though now they each have their own tweaks and those two fit much better in the hull. The 186 models are still built stringers and we are not yet prepared to drop a grid in place that is glass. We have tried and have complications we have to work around. Though we are getting closer and hope in 2015 to have that. The 1785 BT model was resurrected from the pasture and we had a fair amount of success there. This would also make an excellent crappie cruiser for those southern boys. From there we combined flake colors in 2013 and we finished the on line color selector so you can tweak your own at home. Then we did a redesign on console doors for the 209 and 219, which the dealers like a bunch. Early in 2013 we began glassing the fuel tanks in place. Seems these were prone to slip around under the floors of those abused on big waters. This is an extremely solid mount and we bumped the amount of fiberglass to more than anyone thought we should have. The walleye world runs big water and we are taking that serious. Overall lots of great things internally with some nice dress features including two (2) interior colors now. The 2095 BTX is obviously the oldest model and one we are working to revise. We have been very open about integrating lots of concepts into this model and taking that sector where it never has been. From there we hope to launch our ideas in the multi species market. When will the 095 BTX be done, we dont know. Though we do know that we are working hard to get there and we have let the walleye anglers in on more of our plans than your Bass Cat brothers will ever get. The best part is we are not done yet. We hope to never be done as we continue to build the next widget and a different twist on something. In the presentation at meeting Bass Cat dealers were shown three images of a hull that stayed on screen for just over one (1) second. Will that be something that fits you? Who knows, though it will fit someone and make another Bass Cat or Yar-Craft owner pleased. The final thoughts are the new building. We will move Parts and Service into their own offices with their own storage, packaging and shipping departments all chained together for better flow and less delivery times. Information in house is better tracked and shipment tracking has been improved, as we gather email addresses to better inform each of you. We are trying to stop the “did it ship yet” calls. Backorders are a part of todays economy called JIT for manufacturers. Unfortunately that does not fit well into the department store and internet times we have. Though we are hard bent on improving and we know we needed to. We brought back really great people who have loved the boating industry and sought other incomes for one reason or another. Steven, Richard, Paul and others are all assets we hope to build on. Then we have new young blood to energize those old dawgs and get things rolling along. Training is deep and the staff is by far the best we have ever had in the facility. The weaknesses are few and crossover or multi training is solid. Economy wise we are not expecting a change in status that comes quick, any lapses we feel will be temporary infusions and confusions. Obviously we are planning on growing these companies more. With the building enhancement we have the capacity for between 30% and 50% more production. The final potential numbers are a bit vague, though we are going to enhance these markets with lots of concepts going ahead. We could go on about the things we are planning for 2014, though we will just stop now. We hope this gives you all a concept of where we are at and where we are headed, plus what brought us here along the way. Overall 2013 was a great year for us and we used that success as we launched forwards into 2014 with that same commitment and passion. Thanks for the read! Rick PierceBass Cat & Yar-Craft Boats