What changed in this filing

/stocks — the workspaceLOADING

Item 1. Business

2020-08-31 compared with 2019-08-29 · 106 added, 112 removed, 344 unchanged (39% of the section changed)

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• we use the term “recreational powerboat industry” to refer to our industry group, which includes performance sport boats, sterndrive and outboard boats;

we use the term “performance sport boat category” to refer to our industry category, consisting primarily of fiberglass boats equipped with inboard propulsion and ranging from 19 feet to 26 feet in length, which we believe most closely corresponds to (1) the inboard ski/wakeboard category, as defined and tracked by the National Marine Manufacturers Association, or NMMA, and (2) the inboard skiboat category, as defined and tracked by Statistical Surveys, Inc., or SSI;

• we use the term “performance sport boat category” to refer to the industry category, consisting primarily of fiberglass boats equipped with inboard propulsion and ranging from 19 feet to 26 feet in length, which we believe most closely corresponds to (1) the inboard ski/wakeboard category, as defined and tracked by the National Marine Manufacturers Association, or NMMA, and (2) the inboard skiboat category, as defined and tracked by Statistical Surveys, Inc., or SSI;

• we use the terms “sterndrive” and “outboard” to refer to the industry category, consisting primarily of sterndrive and outboard boats ranging from 20 feet to 40 feet, which most closely corresponds to (1) the sterndrive and outboard categories, as defined and tracked by NMMA, and (2) the sterndrive and outboard propulsion categories, as defined and tracked by SSI;

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We are a leading designer, manufacturer and marketer of a diverse range of recreational powerboats, including performance sport boats, sterndrive and outboard boats under four brands—Malibu, Axis, Cobalt, and Pursuit.

We have the #1 market share position in the United States in the performance sport boat category through our Malibu and Axis brands and the #1 market share position in the United States in the 24’—29’ segment of the sterndrive category through our Cobalt brand, and we are in a leading position in the fiberglass outboard fishing boat market with our Pursuit brand.

We have the #1 market share position in the United States in the performance sport boat category through our Malibu and Axis brands and the #1 market share position in the United States in the 24’—29’ segment of the sterndrive category through our Cobalt brand, and we are among the leading market share positions in the fiberglass outboard fishing boat market with our Pursuit brand.

Our product portfolio of premium brands are used for a broad range of recreational boating activities including, among others, water sports such as water skiing, wakeboarding and wake surfing, as well as general recreational boating and fishing.

Our passion for consistent innovation, which has led to propriety technology such as Surf Gate, has allowed us to expand the market for our products by introducing

consumers to new and exciting recreational activities.

Our passion for consistent innovation, which has led to propriety technology such as Surf Gate, has allowed us to expand the market for our

products by introducing consumers to new and exciting recreational activities.

We design products that appeal to an expanding range of recreational boaters and water sports enthusiasts whose passion for boating and water sports is a key aspect of their lifestyle and provide consumers with a better customer-inspired experience.

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Our flagship Malibu boats offer our latest innovations in performance, comfort and convenience, and are designed for consumers seeking a premium performance sport boat experience.

We launched our Axis boats in 2009 to appeal to consumers who desire a more affordable performance sport boat product but still demand high performance, functional simplicity and the option to upgrade key features.

Our Axis boats appeal to consumers who desire a more affordable performance sport boat product but still demand high performance, functional simplicity and the option to upgrade key features.

Our Cobalt boats consist of mid to large-sized luxury cruisers and bowriders that we believe offer the ultimate experience in comfort, performance and quality.

Our Pursuit boats expand our product offerings into the saltwater outboard fishing market and includes center console, dual console and offshore models.

Our Pursuit boats expand our product offerings into the saltwater outboard fishing market and include center console, dual console and offshore models.

Retail prices for our boat models range from $60,000 to $800,000 .

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Our engineering teams closely collaborate with our manufacturing personnel in order to improve product quality and process efficiencies.

The results of this collaboration are reflected in our receipt of numerous industry awards, including the Boating Industry Magazine's "Top Product" award for the Malibu 25 LSV in 2019, Surf Band in 2018 and for our Integrated Surf Platform ("ISP") in 2016, as well as the Boating Industry's Best New and Innovative Products in 2019 for the Cobalt A29.

Malibu has also earned the honors of "WSIA Innovation of Year" award for Malibu Monsoon Engines in 2019 and our Malibu Command Center in 2017.

The results of this collaboration are reflected in our receipt of numerous industry awards, including the Boating Industry Magazine's "Top Product" award for the Malibu M240 in 2020, Pursuit S 378 in 2020, Malibu 25 LSV in 2019, Surf Band in 2018 and for our Integrated Surf Platform ("ISP") in 2016, as well as the Boating Industry's Best New and Innovative Products in 2019 for the Cobalt A29.

We have also been recognized as Sounding Trade Only Today’s “2019 Top Most Innovative Marine Companies,” and we earned the honors of "WSIA Innovation of Year" award for our Malibu M240 M-Line Hull with Surf Gate Fusion in 2020, Malibu Monsoon Engines in 2019 and our Malibu Command Center in 2017.

We sell our boats through a dealer network that we believe is the strongest in the recreational powerboat industry.

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We devote significant time and resources to find, develop and improve the performance of our dealers and believe our dealer network gives us a distinct competitive advantage.

Financial Information About Segments

We currently report our results of operations under four reportable segments:

Malibu U.S., Malibu Australia, Cobalt and Pursuit, based on our boat manufacturing operations.

The Malibu U.S.

and Malibu Australia segments participate in the manufacturing, distribution, marketing and sale of Malibu and Axis performance sport boats.

The Malibu U.S.

segment primarily serves markets in North America, South America, Europe, and Asia while the Malibu Australia operating segment principally serves the Australian and New Zealand markets.

Our Cobalt segment participates in the manufacturing, distribution, marketing and sale of Cobalt boats throughout the world.

Our Pursuit segment participates in the manufacturing, distribution, marketing and sale of Pursuit boats throughout the world.

Additional segment information is contained in Note 19 - Segment Reporting, in the notes to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K.

Impact of COVID-19 Pandemic

The COVID-19 pandemic has significantly impacted health and economic conditions throughout the United States and world, and it had a significant impact on our operations and financial results for fiscal year 2020.

On March 24, 2020, we elected to suspend operations at all of our facilities, and we subsequently resumed operations at our facilities in late April and May 2020.

As a result of the suspension of our production of boats, our net sales declined by $30.9 million, or 4.5%, and our unit sales decreased by 918 units, or 12.5%, for fiscal year 2020 compared to fiscal 2019.

However, sales at our dealers, while impacted negatively by COVID-19 in late March and through April, improved materially from May through July 2020 and that increase has depleted inventory at our dealers.

For more information on how the COVID-19 pandemic has impacted us and may continue to impact us, see the risk factor “The COVID-19 pandemic is adversely affecting, and is expected to continue to adversely affect, our operations, and those of our dealers and suppliers, thereby adversely affecting our business, financial condition and results of operations.” under Part I.

of this Form 10- K, and “Management’s Discussion and Analysis of Financial Conditions and Results of Operations--Impact of the COVID-19 Pandemic” under Part I., Item 7.

of this Form 10-K.

Our Market Opportunity

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The following table illustrates the size of our addressable market in units and retail sales for calendar year 2019:

Powerboat Category

Recreational Powerboat Category Unit Sales Retail Sales

(Dollars in millions)

Outboard 172,700 $ 7,656

Sterndrive 10,100 883

Performance sport boat 11,100 1,232

Jet boat 5,900 289

Cruisers 1,600 1,269

Total addressable market 201,400 $ 11,329

With our acquisition of Pursuit in October 2018, we expanded our available selection of outboard models.

We believe the outboard category will continue to be the largest and one of the strongest categories of the recreational powerboat industry, and

that significant opportunity remains for us to enhance our outboard product portfolio and dealer distribution network to capitalize on the outboard category’s performance.

Our Strengths

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We believe that our innovation in the design of new boat models and new features has been a key to our success, helping us increase our market share within our categories and generally broaden the appeal of our products among recreational boaters.

As a result of the features we have introduced, such as our Integrated Surf Platform which includes patented Surf Gate and Power Wedge technology along with Swim Step, our boats can be used for an increasingly wide range of activities.

As a result of the features we have introduced, such as our Integrated Surf Platform which includes patented Surf Gate and Power Wedge technology along with tailored swim steps and hard tank ballast, our boats can be used for an increasingly wide range of activities.

At the same time they are increasingly easier to use, while maintaining the highest level of performance characteristics that consumers expect.

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Our commitment to developing new boat models and introducing new features are reflected in the fact we consistently and successfully bring multiple new model introductions year after year.

Focus on Vertical Integration Opportunities.

We have vertically integrated a number of key components of our manufacturing process, including the manufacturing of boat trailers, towers and tower accessories, machined and billet parts, and tooling.

Most recently, we have been engaged in the marinization of our own engines for our Malibu and Axis brands.

Vertical integration efforts around engines continue according to plan and we believe we will successfully incorporate our engines in all Malibu and Axis models in fiscal 2020.

Focus on V ertical Integration Opportunities.

We have vertically integrated a number of key components of our manufacturing process, including the manufacturing of our own engines, boat trailers, towers and tower accessories, machined and billet parts, and tooling.

We began including our engines, branded as Malibu Monsoon engines, in our Malibu and Axis boats for model year 2019.

We believe our engine marinization initiative will reduce our reliance on our previous engine suppliers for our Malibu and Axis brands while reducing the risk that a change in cost or production from any engine supplier for such brands could adversely affect our business.

Recently we began producing soft grip flooring for our Malibu, Axis and new Cobalt models.

Vertical integration of key components of our boats gives us the ability to increase incremental margin per boat sold by reducing our cost base and improving the efficiency of our manufacturing process.

Additionally, it allows us to have greater control over design, consumer customization options, construction quality, and our supply chain.

We continually review our manufacturing process to identify opportunities for additional vertical integration investments across our portfolio of premium brands.

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For over the past 40 years, Pursuit has established a premium brand through its extensive dealer network and longstanding commitment to customers.

We build on our

brand recognition and support through a series of marketing initiatives coordinated with our dealers or executed directly by us.

We build on our brand recognition and support through a series of marketing initiatives coordinated with our dealers or executed directly by us.

Our marketing efforts are conducted using an array of strategies, which include digital advertising, social media engagement, advertisements in endemic media and the sponsorship of grass-roots boating and watersport events.

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We are able to engage consumers across multiple categories within the recreational powerboat industry.

Malibu and Axis are market leaders in the performance sport boat category, Cobalt operates in the sterndrive category and has also expanded into wake surfing and outboard product lines, and our most recent acquisition, Pursuit, competes in the saltwater outboard fishing boat market with center console, dual console and offshore models.

Malibu and Axis are market leaders in the performance sport boat category, Cobalt operates in the sterndrive category and has also expanded into wake surfing and outboard product lines, and Pursuit competes in the saltwater outboard fishing boat market with center console, dual console and offshore models.

We intend to capitalize on the recovery in the recreational powerboat industry through the following strategies:

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Second, we seek to develop and integrate innovative new or enhanced optional feature offerings into our boats.

For our Malibu and Axis brands this includes Surf Gate, Malibu Command Center, Power Wedge III, and integrated Swim Step.

For Cobalt, it includes launching reverse outboard propulsion models to expand its addressable market.

Cobalt has been able to achieve growth in recent years partly by pivoting and expanding into the performance sport boat category through its new Cobalt Surf series, combining new surf features into successful preexisting models.

For the Pursuit brand, the focus has been on expanding our award winning Dual Console, Sport and Offshore product offerings that continue to combine innovative features and dependable performance in refined designs that accommodate a broad array of activities on the water.

For our Malibu and Axis brands this includes Surf Gate, Malibu Command Center, Power Wedge III, Tower Mister, Fast Fill Ballast System, G5 Tower and integrated flip down Swim Step.

For Cobalt, it includes outboard propulsion models to expand its addressable market.

Cobalt has been able to achieve growth in recent years partly by pivoting and expanding into the sterndrive surfing category through its Cobalt Surf series, which now features Surf Gate.

In addition, other new features have included Splash and Stow and a new electronic flip down Swim Step for model year 2021 boats.

We intend to continue releasing new products and features multiple times during the year, which we believe enhances our reputation as a leading-edge boat manufacturer and provides us with a competitive advantage.

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Continue to Seek Vertical Integration Opportunities.

Over the past several years, we have focused on expanding our vertical integration capabilities, having brought in-house the production of towers and tower accessories, trailers, machined and billet parts, and, most recently, producing our own engines for our Malibu and Axis brand boats.

Additional vertical integration opportunities exist across our product portfolio and we are aggressively monitoring these opportunities.

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One of our growth strategies is to drive growth in our business through targeted acquisitions that add value while considering our existing brands and product portfolio.

We have focused on growth through acquisitions both domestically and abroad, as evidenced by our recent acquisition of Pursuit in October 2018, our acquisition of Cobalt in July 2017 and our acquisition of our Australian licensee in October 2014.

The primary objectives of our acquisitions are to expand our presence in new or adjacent categories, to expand into other product lines and business that may benefit from our operating strengths, and to increase the size of our addressable market.

We have focused on growth through acquisitions both domestically and abroad, as evidenced by our acquisition of Pursuit in October 2018, our acquisition of Cobalt in July 2017 and our acquisition of our Australian licensee in October 2014.

The primary objectives of our acquisitions are to expand our presence in new or adjacent categories, to expand into other product lines and business that may benefit from our

operating strengths, and to increase the size of our addressable market.

When we identify potential acquisitions, we attempt to target companies with a leading market share, strong cash flows, and an experienced management team and workforce that provide a fit with our existing operations.

After completing an acquisition, we focus on integrating the company with our existing business to provide additional value to the combined entity through cost savings and revenue synergies, such as the optimization of manufacturing operations, improved processes around product development, enhancement of our existing dealer distribution network, administrative cost savings, shared procurement, vertical integration and cross-selling opportunities.

Accelerate International Expansion.

Based on our U.S.

leadership position, brand recognition, diverse, innovative product offering and distribution strengths, we believe that we are well-positioned to increase our international sales.

We believe we can

increase our international sales both by promoting our products in developed markets where we have a well-established dealer base, such as Western Europe, and by penetrating new and emerging markets where we expect rising consumer incomes to increase demand for recreational products, such as Asia and South America.

Our Products and Brands

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Malibu, Axis, Cobalt and Pursuit.

We believe we deliver superior performance for general recreational purposes with a significant focus on water sports, including wakeboarding, water skiing and wake surfing as well as general recreational boating and fishing.

We believe we deliver superior performance for general recreational purposes with a significant focus on water sports, including wakeboarding, water skiing and wake surfing

as well as general recreational boating and fishing.

In addition, we also offer various accessories and aftermarket parts.

The following

table provides an overview of our product offerings by brand:

(In thousands)

Founded in 1982, Malibu targets consumers seeking a premium boating experience with our latest innovations in performance, comfort and convenience.

The following table provides an overview of our product offerings by brand:

Brand Number of

Models Lengths Retail Price

(In thousands) Description

Malibu 11 20'-25' $60-$210 Founded in 1982, Malibu targets consumers seeking a premium boating experience with our latest innovations in performance, comfort and convenience.

Malibu is comprised of three product lines:

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• Response Series - Our line of high-performance water ski focused towboats completely redesigned in 2017.

Launched in 2009, Axis was formed to target a younger demographic by providing a more affordably priced, high quality, entry-level boat with high performance, functional simplicity and the option to upgrade key features such as Surf Gate.

Axis 5 20’-24’ $65-$115 Launched in 2009, Axis was formed to target a younger demographic by providing a more affordably priced, high quality, entry-level boat with high performance, functional simplicity and the option to upgrade key features such as Surf Gate.

Axis currently features five models.

Founded in 1967, Cobalt is a premium luxury sterndrive and outboard boat manufacturer available in five product lines:

Cobalt 16 20’-36’ $60-$450 Founded in 1967, Cobalt is a premium luxury sterndrive and outboard boat manufacturer available in five product lines:

• Gateway Series - Our entry level fiberglass sterndrive sporting the refined quality of Cobalt boats.

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• SC Series - Our line of outboard boats designed for increased saltwater durability and ease of maintenance.

• WSS Surf Series - Focused on watersports and based on our Gateway Series and R Series.

• Surf Series - Focused on watersports and based on our Gateway Series and R Series.

Features a sport tower for higher tow point, storage racks, integrated billet board racks, optional tower lights, ballast, surf systems and directional speakers with a look designed to appeal to our younger customers

Launched in 1977, Pursuit is a premium brand of saltwater outboard fishing boats available in three product lines:

• Center Console Series - Our center console series provides a central helm and open hull to provide 360-degree access to the water and is ideal for fishing.

Pursuit 15 22'-44' $80-$800 Launched in 1977, Pursuit is a premium brand of saltwater outboard fishing boats available in three product lines:

• Sport Center Console Series - Our center console series provides a central helm and open hull to provide 360-degree access to the water and is ideal for fishing.

• Dual Console Series - Our dual console series offers a versatile design ideal for casual cruising and entertainment provided by the superior and comfortable seating yet makes for an ideal fishing boat.

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Among our most successful and most innovative has been Surf Gate.

Introduced in July 2012 and initially patented in September 2013, Surf Gate is available as an optional feature on all Malibu Wakesetter models and Axis brand boats.

Introduced in July

2012 and initially patented in September 2013, Surf Gate is available as an optional feature on all Malibu Wakesetter models and Axis brand boats.

Surf Gate has revolutionized the increasingly popular sport of wake surfing.

Prior to Surf Gate, boaters

needed to empty ballast tanks on one side of the boat and shift passengers around to lean the boat to create a larger, more pronounced surf-quality wake.

Prior to Surf Gate, boaters needed to empty ballast tanks on one side of the boat and shift passengers around to lean the boat to create a larger, more pronounced surf-quality wake.

By employing precisely engineered and electronically controlled panels, Surf Gate alleviates this time-consuming and cumbersome process, allowing boaters to easily surf behind an evenly weighted boat without the need to wait for ballast changes.

For the 2016 model year, we introduced our patented Surf Band technology that allows the rider to control the surf wave, shape, size and side.

Some of our other notable innovations include Power Wedge III, G3/GX Tower, Electronic Dashboard Controls, Swim Step, and TrueWave.

We won the Boating Industry Magazine's "Top Product" award for the Malibu 25 LSV in 2019, Surf Band in 2018 and for our Integrated Surf Platform ("ISP") in 2016, as well as the Boating Industry's Best New and Innovative Products in 2019 for the new Cobalt A29.

Malibu has also earned the honors of "WSIA Innovation of Year" award for Malibu Monsoon Engines in 2019 and our Malibu Command Center in 2017.

Some of our other notable innovations include Power Wedge III, G5/GX Tower, Electronic Dashboard Controls, Swim Step, Tower Mister, Splash and Stow and TrueWave.

We won the Boating Industry Magazine's "Top Product" award for the Malibu M240 in 2020, Pursuit S 378 in 2020, Malibu 25 LSV in 2019, Surf Band in 2018 and for our Integrated Surf Platform ("ISP") in 2016, as well as the Boating Industry's Best New and Innovative Products in 2019 for the Cobalt A29.

We have also been recognized as Sounding Trade Only Today’s “2019 Top Most Innovative Marine Companies,” and we earned the honors of "WSIA Innovation of Year" award for the Malibu M240 M-Line Hull with Surf Gate Fusion in 2020, Malibu Monsoon Engines in 2019 and our Malibu Command Center in 2017.

We also offer an array of less technological, but nonetheless value-added boat features such as gelcoat upgrades, upholstery upgrades, engine drivetrain enhancements (such as silent exhaust tips, propeller upgrades and closed cooling engine configuration), sound system upgrades, bimini tops, boat covers and trailers which further increase the level of customization afforded to consumers.

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Approximately 50% of our dealer locations have been with us, or with Cobalt and Pursuit prior to our acquisition of them, for over ten years.

For fiscal year 2019, our top ten dealers on a consolidated basis accounted for approximately 38% of our total units sold.

The top ten dealers for each of Malibu U.S., Cobalt and Pursuit represented approximately 50%, 49% and 83%, respectively, of units sold in fiscal year 2019.

Our top ten dealers represented 38.5%, 39.6% and 37.8%, of our net sales for fiscal year 2020, 2019 and 2018, respectively.

The top ten dealers for each of Malibu, Cobalt and Pursuit represented approximately 45.8%, 45.3% and 82.7%, respectively, of net sales in fiscal year 2020.

The top ten dealers for each segment are not the same across all segments.

Sales to our dealers under common control of OneWater Marine, Inc.

represented approximately 15% of consolidated net sales in fiscal year 2019, including approximately 8%, 16% and 33% of consolidated sales in fiscal year 2019 for Malibu U.S., Cobalt and Pursuit, respectively.

represented approximately 15.2%, 15.1% and 10.7% of consolidated net sales in fiscal years 2020, 2019, and 2018 respectively including approximately 7.6%, 15.7% and 34.5% of consolidated sales in fiscal year 2020 for Malibu, Cobalt and Pursuit, respectively.

We consistently review our distribution network to identify opportunities to expand our geographic footprint and improve our coverage of the market.

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Our dealer agreements also are typically terminable without cause by the dealer with 60 days’ prior notice and by us for a dealer failing to meet performance criteria.

We may also generally terminate these agreements immediately for cause upon certain events.

We may also generally terminate these agreements

immediately for cause upon certain events.

Pursuant to our dealer agreements, the dealers typically agree to, among other things:

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Our North American dealers often purchase boats through floor plan financing programs with third-party floor plan financing providers.

During fiscal year 2019 , approximately 85% of our North American shipments were made pursuant to floor plan financing programs through which our dealers participate.

During fiscal year 2020, approximatel y 85% of our North American shipments were made pursuant to floor plan financing programs through which our dealers participate.

These programs allow dealers across our brands to establish lines of credit with third-party lenders to purchase inventory.

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Our obligation to repurchase such repossessed products for the unpaid balance of our original invoice price for the boat is subject to reduction or limitation based on the age and condition of the boat at the time of repurchase, and in certain cases by an aggregate cap on repurchase obligations associated with a particular floor financing program.

Our exposure under repurchase agreements with third-party lenders is mitigated by our ability to reposition inventory with a new dealer in the event that a repurchase event occurs.

The primary cost to us of a repurchase event is any margin loss on the resale of a repurchased unit.

Our exposure under repurchase agreements with third-party lenders is mitigated by our ability to reposition inventory with a ne w dealer in the event that a repurchase event occurs.

The primary cost to us of a repurchase event is any margin loss on the

resale of a repurchased unit.

Historically, we have been able to resell repurchased boats at an amount that exceeds our cost.

In addition, the historical margin loss on the resale of repurchased units has often been below 10% of the repurchased amount.

For fiscal year 2019, we agreed to accept a return associated with the repurchase of eight units from the lender of two of our former dealers.

In fiscal year 2020 these boats were resold above their cost and at minimal margin loss.

For fiscal year 2018 and 2017, we did not repurchase any boats under our repurchase agreements.

For fiscal year 2020, we repurchased two units from a lender of one of our former dealers and those units were subsequently resold in fiscal year 2020 above their cost and at a minimal margin loss.

For fiscal year 2019, we repurchased eight units from a lender of two of our former dealers and those units were subsequently resold in fiscal year 2020 above their cost and at minimal margin loss.

For fiscal year 2018, we did not repurchase any boats under our repurchase agreements.

Marketing and Sales

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In addition to the Malibu, Axis, Cobalt, and Pursuit websites and traditional marketing channels such as print advertising and tradeshows, we maintain an active digital advertising and social media platform for all brands, including use of Facebook and Twitter to increase brand awareness, foster loyalty and build a community of users.

In addition, we benefit from various Cobalt, Malibu, Axis, and Pursuit user-generated videos and photos that are uploaded to websites including YouTube, Vimeo and Instagram.

In addition, we benefit from various Malibu, Axis, Cobalt and Pursuit user-generated videos and photos that are uploaded to websites including YouTube, Vimeo and Instagram.

Product Development and Engineering

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Application of the phase gate process requires management to establish an overall timeline that is sub-divided into milestones, or “gates,” for product development.

Setting milestones at certain intervals in the product development process ensures that each phase of development occurs in an organized manner and enables management to become aware of and address any issues in timely fashion, which facilitates on-time, on-target release of new products with expected return on investment.

Setting milestones at certain intervals in the product development process ensures that each phase of development occurs in an organized manner and enables management to become aware of and address any issues in a timely fashion, which facilitates on-time, on-target release of new products with expected return on investment.

Extensive testing and coordination with our manufacturing group are important elements of our product development process, which we believe enable us to minimize the risk associated with the release of new products.

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We produce performance sport boats through our Malibu and Axis brands at our Tennessee and Australia manufacturing facilities and sterndrive and outboard boats through our Cobalt brand at our Kansas manufacturing facility and our Pursuit brand in Fort Pierce, Florida.

We plan to expand our facilities in Kansas and Florida over the next few years.

We completed expansion projects at our facilities in Kansas and Florida during fiscal year 2020.

For our Malibu and Axis brands, we manufacture towers, tower accessories and stainless steel and aluminum billet at our California facility and engines and trailers at our Tennessee facility.

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Production of cruisers occurs on a dedicated line that allows for the increased time needed to add the additional content required for production of larger boats.

Trailers are also produced in a continuous flow manufacturing process involving cutting and bending of the main frame from raw top grade carbon steel, painting using our state of the art system and installation of components.

Trailers are also produced in a continuous flow manufacturing process involving cutting and bending of the main frame from raw top grade carbon steel,

painting using our state of the art system and installation of components.

We manufacture certain components and subassemblies for our boats, such as upholstery, stainless steel and aluminum billet and towers.

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General Motors will provide up to a one-year warranty on the engines supplied to us and we have agreed to indemnify General Motors for claims and costs arising from or relating to the engines resulting from our actions.

In August 2018, in connection with our acquisition of Pursuit, we entered into an agreement with Yamaha Motor Corporation, U.S.A., or Yamaha.

Under our agreement with Yamaha, we have agreed to purchase Yamaha outboard engines for use in at least 90% of all Pursuit and Cobalt branded boats that are pre-equipped with outboard motors when sold by us.

We must pay damages to Yamaha if we do not achieve pre-approved purchase volume targets for each year of the agreement and for the entire term of the agreement, which is scheduled to expire on June 30, 2023, unless renewed by both parties.

We have not paid any damages to Yamaha through June 30, 2019.

In September 2019, in response to the United Auto Workers' ("UAW") strike against General Motors, we entered into purchase agreements with two suppliers for additional engines to supplement our inventory as General Motors suspended delivery of engine blocks to us during the UAW strike.

These agreements were fulfilled and completed during fiscal year 2020 and we have since continued the agreement with General Motors once their operations resumed after the labor strike.

In August 2018, in connection with our acquisition of Pursuit, we entered into a joint marketing agreement with Yamaha Motor Corporation, U.S.A., or Yamaha.

Under our agreement with Yamaha, in exchange for certain incentives we have agreed to purchase Yamaha outboard engines for use in at least 90% of all Pursuit and Cobalt branded boats that are pre-equipped with outboard motors when sold by us.

We must pay penalties to Yamaha if we do not achieve pre-determined purchase volume targets for each year of the agreement and for the entire term of the agreement, which is scheduled to expire on June 30, 2023, unless renewed by both parties.

No such penalties have been paid to date.

We have not experienced any material shortages in any of our raw materials, product parts or components.

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Our policies are generally based on our safety record as well as market trends in the insurance industry and are subject to certain deductibles, limits and policy terms and conditions.

Our Malibu and Axis brands have a limited warranty for a period up to five years.

Prior to fiscal year 2016, we provided a limited warranty for a period of up to three years for our Malibu brand boats and two years for our Axis boats.

For our Cobalt brand boats, we provide a structural warranty of up to ten years which covers hull/deck joints, bulkheads, floor, transom, stringers, and motor mount.

In addition, we provide a five year bow-to-stern warranty on all components manufactured or purchased (excluding hull and deck structural components), including canvas and upholstery.

Our Malibu and Axis brand boats have a limited warranty for a period up to five years.

Our Cobalt brand boats have (1) a structural warranty of up to ten years which covers the hull, deck joints, bulkheads, floor, transom, stringers, and motor mount, and (2) a five year bow-to-stern warranty on all components manufactured or purchased (excluding hull and deck structural components), including canvas and upholstery.

Gelcoat is covered up to three years for Cobalt and one year for Malibu and Axis.

For Pursuit boats, we provide a limited warranty for a period of up to five years on structural components such as the hull, deck and defects in the gelcoat surface of the hull bottom.

Some materials,

components or parts of the boat that are not covered by our limited product warranties are separately warranted by their manufacturers or suppliers.

These other warranties include warranties covering engines purchased from suppliers and other components.

We provide for a limited warranty of up to five years or five-hundred hours on engines that we manufacture for our Malibu and Axis models.

Pursuit brand boats have a (1) limited warranty for a period of up to five years on structural components such as the hull, deck and defects in the gelcoat surface of the hull bottom, and (2) a bow-to-stern warranty of two years (excluding hull and deck structural components).

For each boat brand, there are certain materials, components or parts of the boat that are not covered by our warranty and certain components or parts that are separately warranted by the manufacturer or supplier (such as the engine).

Engines that we manufacture for Malibu and Axis models have a limited warranty of up to five years or five-hundred hours.

Intellectual Property

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We currently hold 36 U.S.

patents, four Australian patents, and five pending U.S.

patent applications.

We also acquired seven U.S.

patents, two U.S.

patent applications, and two foreign applications in connection with our acquisition of Pursuit Boats.

We own 37 registered trademarks in various countries around the world, including 18 valid trademarks for Malibu in the U.S., five valid trademarks for Malibu in Australia and eight valid trademarks for Malibu in Canada.

We also own four U.S.

trademarks for Cobalt and two U.S.

trademarks for Pursuit.

patents, four Australian patents, one Canadian patent and one Japanese patent.

We also have eight pending U.S.

patent applications and one pending European patent application.

We own 45 registered trademarks in various countries around the world, including 21 U.S.

trademarks, five Australian trademarks, six Canadian trademarks and three European trademarks, all owned by Malibu.

Additionally, Cobalt owns six U.S.

trademarks and Pursuit owns four 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.

We also have 16 pending trademarks in the U.S., Canada, and Australia.

We currently do not own any registered copyrights.

We also have nine pending trademark applications in the U.S.

The recreational powerboat industry, including the performance sport boat, sterndrive and outboard categories, is highly competitive for consumers and dealers.

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The handling, storage, release, treatment and recycling or disposal of these substances and wastes from our operations are regulated in Australia by the Australian Department of Environment and Energy, the New South Wales Environmental Protection Agency and other state and local authorities.

Failure by us to properly handle, store, release, treat, recycle or dispose of our hazardous materials and wastes could result in liability for us, including fines, penalties, or obligations to investigate and remediate any contamination originating from our operations or facilities.

Failure by us to properly handle, store, release, treat, recycle or dispose of our hazardous materials and wastes could result in liability for us, including

fines, penalties, or obligations to investigate and remediate any contamination originating from our operations or facilities.

We are not aware of any material contamination at our current or former facilities for which we could be liable under environmental laws or regulations, and we currently are not undertaking any remediation or investigation activities in connection with any contamination.

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In the United States, the federal Clean Air Act (“CAA”) and corresponding state and local laws and rules regulate emissions of air pollutants.

Because our manufacturing operations involve molding and coating of fiberglass materials, which involves the emission of certain volatile organic compounds, hazardous air pollutants, and particulate matter, we are required to maintain and comply with a CAA operating permit (Title V permit) for our Tennessee, Kansas and Florida facilities and local

air permits for our California facilities.

Our air permits generally require us to monitor our emissions and periodically certify that our emissions are within specified limits.

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The engines used in our products are subject to these regulations.

CARB also recently adopted an evaporative emissions regulation that applies to all spark-ignition marine watercraft with permanently installed fuel tanks sold in California.

This regulation will apply to our boats beginning with model year 2019.

CARB recently adopted an evaporative emissions regulation that applies to all spark-ignition marine watercraft with permanently installed fuel tanks sold in California.

The new regulation requires subject boat manufacturers to use specific CARB-certified components for the fuel systems in their boats, or to certify the boat meets a related performance standard.

The USEPA and CARB emissions regulations have increased the cost to manufacture our products.

In the United States, the Occupational Safety and Health Administration (“OSHA”) standards limit the amount of emissions to which an employee may be exposed without the need for respiratory protection or upgraded plant ventilation.

In the United States, the Occupational Safety and Health Administration (“OSHA”) standards address workplace safety generally, and limit the amount of emissions to which an employee may be exposed without the need for respiratory protection or upgraded plant ventilation.

Our facilities are regularly inspected by OSHA and by state and local inspection agencies and departments.

We believe that our facilities comply in all material aspects with these regulations.

Although capital expenditures related to compliance with environmental laws are expected to increase, we do not currently anticipate any material expenditure will be required to continue to comply with existing OSHA environmental or safety regulations in connection with our existing manufacturing facilities.

Although capital expenditures related to compliance with environmental and safety laws are expected to increase, we do not currently anticipate any material expenditure will be required to continue to comply with existing OSHA environmental or safety regulations in connection with our existing manufacturing facilities.

At our New South Wales, Australia (“NSW”) facility, employee health and safety is regulated by SafeWork NSW, which also has requirements that limit the amount of certain emissions to which an employee may be exposed without the need for respiratory protection or upgraded plant ventilation.

In addition, SafeWork NSW provides licensing and registration for potentially dangerous work, investigates workplace incidents, and enforces work health and safety laws in NSW.

Our NSW facilities are routinely inspected by SafeWork NSW.

Our NSW facilities can be routinely inspected by SafeWork NSW.

We believe that our facilities comply in all material aspects with these requirements.

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In addition, safety of recreational boats in the United States is subject to federal regulation under the Boat Safety Act of 1971, which requires boat manufacturers to recall products for replacement of parts or components that have demonstrated defects affecting safety.

We have instituted recalls for defective component parts produced by certain of our third-party suppliers, including a recent recall on our fuel pumps supplied by a third party.

We have instituted recalls for defective component parts produced by certain of our third-party suppliers, including a recall on our fuel pumps supplied by a third party during fiscal year 2019.

None of our recalls have had a material adverse impact on us.

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was incorporated as a Delaware corporation on November 1, 2013 in anticipation of our IPO to serve as a holding company that owns only an interest in Malibu Boats Holdings, LLC.

Immediately after the completion of our IPO and the recapitalization we completed in connection with our IPO, Malibu Boats, Inc.

Immediately after the completion of our IPO and

the recapitalization we completed in connection with our IPO, Malibu Boats, Inc.

held approximately 49.3% of the economic interest in the LLC, which has since increased to approximately 96.6 % of the economic interest in the LLC as of June 30, 2020.

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for each LLC Unit held by such holder.

Pursuant to our certificate of incorporation and bylaws, each share

of Class A Common Stock entitles the holder to one vote with respect to each matter presented to our stockholders on which the holders of Class A Common Stock are entitled to vote.

Pursuant to our certificate of incorporation and bylaws, each share of Class A Common Stock entitles the holder to one vote with respect to each matter presented to our stockholders on which the holders of Class A Common Stock are entitled to vote.

Each holder of Class B Common Stock is entitled to the number of votes equal to the total number of LLC units held by such holder multiplied by the exchange rate specified in the exchange agreement with respect to each matter presented to our stockholders on which the holders of Class B Common Stock are entitled to vote.

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Exchanges and Other Transactions with Holders of LLC Units

owner (or its permitted transferee) has the right to exchange its LLC Units for shares of our Class A Common Stock on a one-for-one basis, subject to customary conversion rate adjustments for stock splits, stock dividends and reclassifications, or, at our option, except in the event of a change in control, for a cash payment equal to the market value of the Class A Common Stock.

The exchange agreement provides, however, that such exchanges must be for a minimum of the lesser of 1,000 LLC Units, all of the LLC Units held by the holder, or such amount as we determine to be acceptable.

In connection with our IPO and the recapitalization we completed in connection with our IPO, we entered into an exchange agreement with the pre-IPO owners of the LLC under which (subject to the terms of the exchange agreement) each pre-IPO owner (or its permitted transferee) has the right to exchange its LLC Units for shares of our Class A Common Stock on a one-for-one basis, subject to customary conversion rate adjustments for stock splits, stock dividends and reclassifications, or, at our option, except in the event of a change in control, for a cash payment equal to the market value of the Class A Common Stock.

The exchange agreement provides, however, that such exchanges must be for a minimum of the lesser of 1,000 LLC Units, all

of the LLC Units held by the holder, or such amount as we determine to be acceptable.

The exchange agreement also provides that an LLC member will not have the right to exchange LLC Units if Malibu Boats, Inc.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business