MALIBU BOATS, INC. 10-K

Item 8. Financial Statements and Supplementary Data INDEX TO FINANCIAL STATEMENTS Page Report of Management on Internal Control Over Financial Reporting 65 Reports of Independent Registered Public Accounting Firm 66 Consolidated Statements of Operations and Comprehensive Income for the Fiscal Years Ended June 30, 2020, 2019, and 2018 69 Consolidated Balance Sheets as of June 30, 2020 and 2019 70 Consolidated Statements of Stockholders' Equity for the Fiscal Years Ended June 30, 2020, 2019, and 2018 71 Consolidated Statements of Cash Flows for the Fiscal Years ended June 30, 2020, 2019, and 2018 73 Notes to Consolidated Financial Statements 74 64 Table of Contents MALIBU BOATS, INC. AND SUBSIDIARIES Report of Management on Internal Control Over Financial Reporting Malibu Boats, Inc.'s (the "Company") management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rule 13a-15(f) under the Securities Exchange Act of 1934, as amended. Internal control over financial reporting is a process to provide reasonable assurance regarding the reliability of the Company's financial reporting for external purposes in accordance with U.S. generally accepted accounting principles. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. The Company's management, including its chief executive officer and chief financial officer, assessed the effectiveness of the Company's internal control over financial reporting as of June 30, 2020. In making this assessment, the Company used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission ("COSO") in Internal Control-Integrated Framework (2013) . Based on such assessment the Company's management has concluded that, as of June 30, 2020, its internal control over financial reporting is effective based on those criteria. The effectiveness of internal control over financial reporting as of June 30, 2020 has been audited by KPMG LLP, an independent registered public accounting firm, as stated in its attestation report, which is included herein. Malibu Boats, Inc. Loudon, Tennessee August 31, 2020 65 Table of Contents Report of Independent Registered Public Accounting Firm To the Stockholders and Board of Directors Malibu Boats, Inc.: Opinion on Internal Control Over Financial Reporting We have audited Malibu Boats, Inc. and subsidiaries’ (the Company) internal control over financial reporting as of June 30, 2020, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of June 30, 2020, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of June 30, 2020 and 2019, the related consolidated statements of operations and comprehensive income, stockholders’ equity, and cash flows for each of the years in the three-year period ended June 30, 2020, and the related notes (collectively, the consolidated financial statements), and our report dated August 31, 2020 expressed an unqualified opinion on those consolidated financial statements. Basis for Opinion The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Definition and Limitations of Internal Control Over Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. /s/ KPMG LLP Knoxville, Tennessee August 31, 2020 66 Table of Contents Report of Independent Registered Public Accounting Firm To the Stockholders and Board of Directors Malibu Boats, Inc.: Opinion on the Consolidated Financial Statements We have audited the accompanying consolidated balance sheets of Malibu Boats, Inc. and subsidiaries (the Company) as of June 30, 2020 and 2019, the related consolidated statements of operations and comprehensive income, stockholders’ equity, and cash flows for each of the years in the three-year period ended June 30, 2020, and the related notes (collectively, the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of June 30, 2020 and 2019, and the results of its operations and its cash flows for each of the years in the three-year period ended June 30, 2020, in conformity with U.S. generally accepted accounting principles. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of June 30, 2020, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated August 31, 2020 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting. Change in Accounting Principle As discussed in Note 1 to the consolidated financial statements, the Company has changed its method of accounting for leases as of July 1, 2019 due to the adoption of Accounting Standards Codification Topic 842, Leases . Basis for Opinion These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matter The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of a critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. Evaluation of certain assumptions underlying the product warranty liability for certain brands As discussed in Note 9 to the consolidated financial statements, the Company’s product warranty liability as of June 30, 2020 was $27.5 million. The product warranty liability represents estimated future costs to repair or replace defective products during the warranty period for each boat sold. The Company’s estimated future costs to repair or replace defective products includes assumptions regarding the anticipated warranty costs per boat by brand. We identified the evaluation of the anticipated warranty costs per boat that are used to estimate the product warranty liability for Malibu, Axis and Cobalt branded boats as a critical audit matter. A higher degree of subjective auditor judgment was required to evaluate the Company’s estimate of the anticipated warranty costs per boat, due to the nature of the audit evidence. Specifically, for Axis and Malibu model years prior to 2016, historical claims experience only exists for a warranty term of two and three years, respectively. For Cobalt model years prior to 2018, historical claims experience only exists for 67 Table of Contents a warranty term of three years. This historical claims experience is shorter in duration than the five-year warranty term associated with the Company’s current warranty program. The following are the primary procedures we performed to address this critical audit matter. We evaluated the design and tested the operating effectiveness of certain internal controls over the Company’s warranty accrual process. This included controls over the development of the assumptions used to estimate the warranty cost per boat for warranty years four and five, for which little or no historical claims experience exists. We performed sensitivity analyses to assess the potential for possible changes to these assumptions on the product warranty liability. We assessed the Company’s historical claims experience and the relationship between the historical warranty costs per boat incurred by warranty year. We further assessed the Company’s assumptions underlying the anticipated warranty costs per boat for warranty years four and five by considering warranty claims received after year-end but before the consolidated financial statements were issued, to identify trends not considered by the Company when it developed its assumptions. We also compared the Company’s prior year product warranty liability related to claims expected to be incurred in the current year to actual claims received in the current year to evaluate the historical accuracy of the Company’s estimates. /s/ KPMG LLP We have served as the Company’s auditor since 2015. Knoxville, Tennessee August 31, 2020 68 Table of Contents MALIBU BOATS, INC. AND SUBSIDIARIES Consolidated Statements of Operations and Comprehensive Income (In thousands, except share data) Fiscal Year Ended June 30, 2020 2019 2018 Net sales $ 653,163 $ 684,016 $ 497,002 Cost of sales 503,893 517,746 376,660 Gross profit 149,270 166,270 120,342 Operating expenses: Selling and marketing 17,917 17,946 13,718 General and administrative 39,912 44,256 31,359 Amortization 6,131 5,956 5,198 Operating income 85,310 98,112 70,067 Other (income) expense, net: Other income, net ( 2,310 ) ( 149 ) ( 24,705 ) Interest expense 3,888 6,464 5,385 Other (income) expense, net 1,578 6,315 ( 19,320 ) Net income before provision for income taxes 83,732 91,797 89,387 Income tax provision 19,076 22,096 58,418 Net income 64,656 69,701 30,969 Net income attributable to non-controlling interest 3,094 3,635 3,356 Net income attributable to Malibu Boats, Inc. $ 61,562 $ 66,066 $ 27,613 Comprehensive income: Net income $ 64,656 $ 69,701 $ 30,969 Other comprehensive income (loss), net of tax: Change in cumulative translation adjustment ( 304 ) ( 844 ) ( 621 ) Other comprehensive income (loss), net of tax ( 304 ) ( 844 ) ( 621 ) Comprehensive income, net of tax 64,352 68,857 30,348 Less: comprehensive income attributable to non-controlling interest, net of tax 3,083 3,591 3,328 Comprehensive income attributable to Malibu Boats, Inc., net of tax $ 61,269 $ 65,266 $ 27,020 Weighted average shares outstanding used in computing net income per share: Basic 20,662,750 20,832,445 20,179,381 Diluted 20,852,361 20,966,539 20,281,210 Net income available to Class A Common Stock per share: Basic $ 2.98 $ 3.17 $ 1.37 Diluted $ 2.95 $ 3.15 $ 1.36 The accompanying notes are an integral part of these Consolidated Financial Statements. 69 Table of Contents MALIBU BOATS, INC. AND SUBSIDIARIES Consolidated Balance Sheets (In thousands, except share data) June 30, 2020 June 30, 2019 Assets Current assets Cash $ 33,787 $ 27,392 Trade receivables, net 13,767 27,961 Inventories, net 72,946 67,768 Prepaid expenses and other current assets 3,954 4,530 Total current assets 124,454 127,651 Property and equipment, net 94,310 65,756 Goodwill 51,273 51,404 Other intangible assets, net 139,892 146,061 Deferred tax assets 52,935 60,407 Other assets 14,482 35 Total assets $ 477,346 $ 451,314 Liabilities Current liabilities Accounts payable $ 15,846 $ 21,174 Accrued expenses 50,485 49,097 Income tax and distribution payable 243 1,469 Payable pursuant to tax receivable agreement, current portion 3,589 3,592 Total current liabilities 70,163 75,332 Deferred tax liabilities 14 145 Other liabilities 16,727 1,689 Payable pursuant to tax receivable agreement, less current portion 46,076 50,162 Long-term debt 82,839 113,633 Total liabilities 215,819 240,961 Commitments and contingencies (See Note 18) Stockholders' Equity Class A Common Stock, par value $ 0.01 per share, 100,000,000 shares authorized; 20,595,969 shares issued and outstanding as of June 30, 2020; 20,852,640 shares issued and outstanding as of June 30, 2019 204 207 Class B Common Stock, par value $ 0.01 per share, 25,000,000 shares authorized; 15 shares issued and outstanding as of June 30, 2020; 15 shares issued and outstanding as of June 30, 2019 — — Preferred Stock, par value $ 0.01 per share; 25,000,000 shares authorized; no shares issued and outstanding as of June 30, 2020; no shares issued and outstanding as of June 30, 2019 — — Additional paid in capital 103,797 113,004 Accumulated other comprehensive loss ( 3,132 ) ( 2,828 ) Accumulated earnings 153,711 93,852 Total stockholders' equity attributable to Malibu Boats, Inc. 254,580 204,235 Non-controlling interest 6,947 6,118 Total stockholders’ equity 261,527 210,353 Total liabilities and stockholders' equity $ 477,346 $ 451,314 The accompanying notes are an integral part of these Consolidated Financial Statements. 70 Table of Contents MALIBU BOATS, INC. AND SUBSIDIARIES Consolidated Statements of Stockholders' Equity (In thousands, except number of Class B shares) Malibu Boats, Inc. Common Stock Additional Paid In Capital Non-controlling Interest in LLC Accumulated Earnings (Deficit) Accumulated Other Comprehensive Loss Total Stockholders Equity Class A Class B Shares Amount Shares Amount Balance at June 30, 2017 17,938 $ 179 19 $ — $ 48,328 $ 4,941 $ 151 $ ( 1,363 ) $ 52,236 Net Income — — — — — 3,356 27,613 — 30,969 Stock based compensation, net of withholding taxes on vested equity awards 56 1 — — 1,282 — — — 1,283 Issuances of equity for services 5 — — — 867 — — — 867 Issuance of Class A common stock for acquisition 39 — — — 1,000 — — — 1,000 Issuance of Class A Common Stock for Offerings, net of underwriting discounts 2,300 23 — — 55,294 — — — 55,317 Capitalized Offering costs — — — — ( 650 ) — — — ( 650 ) Increase in payable pursuant to the tax receivable agreement — — — — ( 1,685 ) — — — ( 1,685 ) Increase in deferred tax asset from step-up in tax basis — — — — 3,004 — — — 3,004 Exchange of LLC Units for Class A Common Stock 217 1 — — 920 ( 920 ) — — 1 Cancellation of Class B Common Stock — — ( 2 ) — — — — — — Distributions to LLC Unit holders — — — — — ( 1,852 ) 25 — ( 1,827 ) Foreign currency translation adjustment — — — — — ( 23 ) — ( 621 ) ( 644 ) Balance at June 30, 2018 20,555 204 17 — 108,360 5,502 27,789 ( 1,984 ) 139,871 Net Income — — — — — 3,635 66,066 — 69,701 Stock based compensation, net of withholding taxes on vested equity awards 55 1 — — 1,376 — — — 1,377 Issuances of equity for services — — — — 784 — — — 784 Issuance of equity for exercise of options 29 — — — 749 — — — 749 71 Table of Contents Increase in payable pursuant to the tax receivable agreement — — — — ( 2,676 ) — — — ( 2,676 ) Increase in deferred tax asset from step-up in tax basis — — — — 3,275 — — — 3,275 Exchange of LLC Units for Class A Common Stock 214 2 — — 1,136 ( 1,136 ) — — 2 Cancellation of Class B Common Stock — — ( 2 ) — — — — — — Distributions to LLC Unit holders — — — — — ( 1,845 ) ( 3 ) — ( 1,848 ) Foreign currency translation adjustment — — — — — ( 38 ) — ( 844 ) ( 882 ) Balance at June 30, 2019 20,853 207 15 — 113,004 6,118 93,852 ( 2,828 ) 210,353 Net income — — — — — 3,094 61,562 — 64,656 Stock based compensation, net of withholding taxes on vested equity awards 112 1 — — 2,191 — — — 2,192 Issuances of equity for services 2 — — — 851 — — — 851 Issuance of equity for exercise of options 12 — — — 377 — — — 377 Repurchase and retirement of common stock ( 483 ) ( 5 ) — — ( 13,828 ) — — — ( 13,833 ) Cumulative-effect transition adjustment for ASC 842 — — — — — — ( 1,703 ) — ( 1,703 ) Increase in payable pursuant to the tax receivable agreement — — — — ( 1,041 ) — — — ( 1,041 ) Increase in deferred tax asset from step-up in tax basis — — — — 1,364 — — — 1,364 Exchange of LLC Units for Class A Common Stock 100 1 — — 879 ( 879 ) — — 1 Distributions to LLC Unit holders — — — — — ( 1,370 ) — — ( 1,370 ) Foreign currency translation adjustment — — — — — ( 16 ) — ( 304 ) ( 320 ) Balance at June 30, 2020 20,596 $ 204 15 $ — $ 103,797 $ 6,947 $ 153,711 $ ( 3,132 ) $ 261,527 The accompanying notes are an integral part of these Consolidated Financial Statements. 72 Table of Contents MALIBU BOATS, INC. AND SUBSIDIARIES Consolidated Statements of Cash Flows (In thousands) Fiscal Year Ended June 30, 2020 2019 2018 Operating activities: Net income $ 64,656 $ 69,701 $ 30,969 Adjustments to reconcile net income to net cash provided by operating activities: Non-cash compensation expense 3,042 2,607 1,973 Non-cash compensation to directors 829 791 834 Depreciation 12,249 10,004 7,656 Amortization 6,131 5,956 5,198 Deferred income taxes 8,715 6,794 45,793 Adjustment to tax receivable agreement liability ( 1,672 ) ( 103 ) ( 24,637 ) Other items, net 2,211 802 793 Change in operating assets and liabilities (excluding effects of acquisition): Trade receivables 14,193 ( 3,041 ) ( 12,181 ) Inventories ( 5,263 ) ( 15,410 ) ( 6,336 ) Prepaid expenses and other assets 551 ( 786 ) ( 447 ) Accounts payable ( 5,812 ) ( 2,791 ) 4,612 Accrued expenses ( 239 ) 9,598 6,547 Income taxes receivable and payable ( 1,164 ) 125 1,723 Other liabilities ( 828 ) 1,118 251 Payment pursuant to tax receivable agreement ( 3,458 ) ( 3,865 ) ( 4,293 ) Net cash provided by operating activities 94,141 81,500 58,455 Investing activities: Purchases of property and equipment ( 41,291 ) ( 17,938 ) ( 10,449 ) Proceeds from sale of property and equipment 897 — 145 Payment for acquisition, net of cash acquired ( 100,073 ) ( 125,552 ) Net cash used in investing activities ( 40,394 ) ( 118,011 ) ( 135,856 ) Financing activities: Principal payments on long-term borrowings — ( 35,000 ) ( 50,000 ) Proceeds from long-term borrowings — — 105,000 Payment of deferred financing costs — ( 370 ) ( 1,148 ) Proceeds from revolving credit facility 103,800 90,000 — Payments on revolving credit facility ( 135,000 ) ( 50,000 ) — Proceeds from issuance of Class A Common Stock in offerings, net of underwriting discounts — — 55,317 Payment of costs directly associated with offerings — — ( 650 ) Repurchase and retirement of Class A Common Stock ( 13,833 ) — — Cash paid for tax withholdings ( 831 ) ( 1,219 ) ( 691 ) Distributions to non-controlling LLC Unit holders ( 1,836 ) ( 1,785 ) ( 1,626 ) Proceeds received from exercise of stock options 377 749 — Net cash provided by (used in) by financing activities ( 47,323 ) 2,375 106,202 Effect of exchange rate changes on cash ( 29 ) ( 95 ) — Changes in cash 6,395 ( 34,231 ) 28,801 Cash—Beginning of period 27,392 61,623 32,822 Cash—End of period $ 33,787 $ 27,392 $ 61,623 Supplemental cash flow information: Cash paid for interest $ 3,810 $ 6,011 $ 4,352 Cash paid for income taxes 10,529 14,173 9,887 Non-cash operating, investing and financing activities: Establishment of deferred tax assets from step-up in tax basis 1,364 3,275 3,004 Establishment of amounts payable under tax receivable agreements 1,041 2,676 1,685 Equity issued as consideration for acquisition — — 1,000 Exchange of LLC Units for Class A Common Stock 879 1,136 920 Tax distributions payable to non-controlling LLC Unit holders 104 568 511 Capital expenditures in accounts payable 1,129 647 1,053 The accompanying notes are an integral part of these Consolidated Financial Statements. 73 Table of Contents MALIBU BOATS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Dollars in thousands, except per unit and per share data) 1. Organization, Basis of Presentation, and Summary of Significant Accounting Policies Organization Malibu Boats, Inc. (together with its subsidiaries, the “Company” or "Malibu"), a Delaware corporation formed on November 1, 2013, is the sole managing member of Malibu Boats Holdings, LLC, a Delaware limited liability company (the "LLC"). The Company operates and controls all of the LLC's business and affairs and, therefore, pursuant to Financial Accounting Standards Board ("FASB") Accounting Standards Codification (“ASC”) Topic 810, Consolidation , consolidates the financial results of the LLC and its subsidiaries, and records a non-controlling interest for the economic interest in the Company held by the non-controlling holders of units in the LLC ("LLC Units"). Malibu Boats Holdings, LLC was formed in 2006 with Malibu's acquisition by an investor group, including affiliates of Black Canyon Capital LLC, Horizon Holdings, LLC and then-current management. The LLC, through its wholly owned subsidiary, Malibu Boats, LLC, is engaged in the design, engineering, manufacturing and marketing of innovative, high-quality, recreational powerboats that are sold through a world-wide network of independent dealers. On July 6, 2017, the Company acquired all the outstanding units of Cobalt Boats, LLC (“Cobalt”) further expanding the Company's product offering across a broader segment of the recreational boating industry including performance sport boats, sterndrive and outboard boats. As a result of the acquisition, the Company also consolidates the financial results of Cobalt. On October 15, 2018, the Company's subsidiary Malibu Boats, LLC, purchased the assets of Pursuit Boats ("Pursuit") from S2 Yachts, Inc., expanding the Company's product offering into the fiberglass outboard fishing boat market. Refer to Note 4. The Company reports its results of operations under three reportable segments: Malibu, Cobalt, and Pursuit based on their boat manufacturing operations. Basis of Presentation The accompanying consolidated financial statements of the Company have been prepared in accordance with U.S. generally accepted accounting principles ("GAAP"). Certain reclassifications have been made to the prior period presentation to conform to the current period presentation. Units and shares are presented as whole numbers while all dollar amounts are presented in thousands, unless otherwise noted. Principles of Consolidation The accompanying consolidated financial statements include the operations and accounts of the Company and all subsidiaries thereof. All intercompany balances and transactions have been eliminated upon consolidation. Segment Reporting The Company has three reportable segments, Malibu, Cobalt and Pursuit. The Malibu segment participates in the manufacturing, distribution, marketing and sale of Malibu and Axis performance sports boats throughout the world. The Cobalt and Pursuit segments participate in the manufacturing, distribution, marketing and sale of Cobalt and Pursuit boats, respectively, throughout the world. The Company revised its segment reporting effective July 1, 2019 to conform to changes in its internal management reporting based on the Company’s boat manufacturing operations. Prior to this change in reporting segments, the Company had four reportable segments, Malibu U.S., Malibu Australia, Cobalt and Pursuit. The Company now aggregates Malibu U.S. and Malibu Australia into one reportable segment as they have similar economic characteristics and qualitative factors. All segment information in the accompanying consolidated financial statements has been revised to conform to the Company’s current reporting segments for comparison purposes. Additional segment information is contained in Note 20. Use of Estimates The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates, and such differences could be material. Certain Significant Risks and Uncertainties 74 Table of Contents The Company is subject to those risks common in manufacturing-driven markets, including, but not limited to, competitive forces, dependence on key personnel, consumer demand for its products, the successful protection of its proprietary technologies, compliance with government regulations and the possibility of not being able to obtain additional financing if and when needed. Concentration of Credit and Business Risk A majority of the Company’s sales are made pursuant to floor plan financing programs in which the Company participates on behalf of its dealers through a contingent repurchase agreement with various third-party financing institutions. Under these arrangements, a dealer establishes a line of credit with one or more of these third-party lenders for the purchase of dealer boat inventory. When a dealer purchases and takes delivery of a boat pursuant to a floor plan financing arrangement, it draws against its line of credit and the lender pays the invoice cost of the boat directly to the Company within approximately two weeks. For dealers that use local floor plan financing programs or pay cash, the Company may extend credit without collateral under the dealer agreement based on the Company’s evaluation of the dealer’s credit risk and past payment history. The Company maintains allowances for potential credit losses that it believes are adequate. See Trade Accounts Receivable section within this footnote for more information. The Company’s top ten dealers represented 38.5 %, 39.6 % and 37.8 %, of the Company’s net sales for the fiscal years ended June 30, 2020, 2019 and 2018, respectively. Sales to our dealers under common control of OneWater Marine, Inc. represented approximately 15.2 %, 15.1 % and 10.7 % of consolidated net sales in the fiscal years ended June 30, 2020 , 2019 , and 2018 respectively. Cash The Company considers all highly liquid investments purchased with an original maturity of 90 days or less to be cash equivalents. Cash equivalents are stated at cost, which approximates fair value. As of June 30, 2020 and 2019, no highly liquid investments were held and the entire balance consists of cash. At June 30, 2020 and 2019, substantially all cash on hand was held by two financial institutions. This cash on deposit may be, at times, in excess of insurance limits provided by the FDIC. Trade Accounts Receivable Trade receivables are carried at original invoice amount less an estimate made for doubtful receivables based on a review of all outstanding amounts on a monthly basis. As of June 30, 2020 and 2019, the allowance for doubtful receivables was $ 0 and $ 69 , respectively. Management determines the allowance for doubtful accounts by identifying troubled accounts and by using historical experience applied to an aging of accounts. Trade receivables are written off when deemed uncollectible. Recoveries of trade receivables previously written off are recorded when received. A trade receivable is considered to be past due if any portion of the receivable balance is outstanding beyond customer terms. Capitalization of Offering Costs Capitalized offering costs are costs directly attributable to the Company's shelf registration statement and equity offerings. As of June 30, 2020 and 2019, $ 140 of costs directly attributable to the Company's shelf registration statement and equity offerings were capitalized as prepaid assets. Upon closing of the offerings, these costs are netted against the proceeds and, as such, are reclassified into additional paid in capital. For the fiscal year ended June 30, 2019, the Company capitalized $ 60 related to a shelf registration statement. For the fiscal year ended June 30, 2018 the Company netted $ 650 against the proceeds of future offerings under the shelf registration statement based on the number of shares sold in the offering and total number of shares available for issuance under the shelf registration statement. Refer to Note 15 for additional information regarding the Company's equity offerings. Goodwill Goodwill is an asset representing the future economic benefits arising from other assets acquired in a business combination that are not individually identified and separately recognized. Goodwill amounts are not amortized, but rather are evaluated for potential impairment on an annual basis, as of June 30, in accordance with the provisions of ASC Topic 350, Intangibles—Goodwill and Other . Under the guidance, the Company may assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If this assessment indicates the possibility of impairment, the income approach to test for goodwill impairment would be used. Under the income approach, management calculates the fair value of its reporting units based on the present value of estimated future cash flows. If the fair value of an individual reporting unit exceeds the carrying value of the net assets including goodwill assigned to that unit, goodwill is not impaired. If the carrying value of the reporting unit’s net assets including goodwill exceeds the fair value of the reporting unit, 75 Table of Contents then management determines the implied fair value of the reporting unit’s goodwill. If the carrying value of the reporting unit’s goodwill exceeds its implied fair value, then the Company would record an impairment loss equal to the difference. For fiscal years ended June 30, 2020 and 2019, the Company performed a qualitative assessment which indicated that the fair value of its reporting units more likely than not exceeded their respective carrying amounts. The Company did no t recognize any goodwill impairment charges in the fiscal years ended June 30, 2020, 2019 and 2018. Intangible Assets Intangible assets consist primarily of relationships, reacquired franchise rights, product trade names, legal and contractual rights surrounding a patent and a non-compete agreement. These assets are recorded at their estimated fair values at the acquisition dates using the income approach. Definite lived intangible assets are being amortized using the straight-line method based on their estimated useful lives ranging from 5 to 20 years. The estimated useful lives of dealer relationships consider the average length of dealer relationships at the time of acquisition, historical rates of dealer attrition and retention, the Company’s history of renewal and extension of dealer relationships, as well as competitive and economic factors resulting in a range of useful lives. The useful life of reacquired franchise rights is based on the remainder of the contractual term of the Licensee's exclusive manufacturing and distributors agreement with the Company. The estimated useful lives of the Company’s trade names are based on a number of factors including technological obsolescence and the competitive environment. The estimated useful lives of legal and contractual rights are estimated based on the benefits that the patent provides for its remaining terms unless competitive, technological obsolescence or other factors indicate a shorter life. The useful life of the non-compete agreement is based on a ten-year agreement entered into by the Company and former owner of the Licensee as part of the acquisition. In addition we have indefinite lived intangible assets for acquired trade names. Management, assisted by third-party valuation specialists, determined the estimated fair values of separately identifiable intangible assets at the date of acquisition under the income approach. Significant data and assumptions used in the valuations included cost, market and income comparisons, discount rates, royalty rates and management forecasts. Discount rates for each intangible asset were selected based on judgment of relative risk and approximate rates of returns investors in the subject assets might require. The royalty rates were based on historical and projected sales and profits of products sold and management’s assessment of the intangibles’ importance to the sales and profitability of the product. Management provided forecasts of financial data pertaining to assets, liabilities and income statement balances to be utilized in the valuations. While management believes the assumptions, estimates, appraisal methods and ensuing results are appropriate and represent the best evidence of fair value in the circumstances, modification or use of other assumptions or methods could have yielded different results. The carrying amount of definite lived intangible assets are reviewed whenever circumstances arise that indicate the carrying amount of an asset may not be recoverable. The carrying value of these assets is compared to the undiscounted future cash flows the assets are expected to generate. If the asset is considered to be impaired, the carrying value is compared to the fair value and this difference is recognized as an impairment loss. Intangible assets not subject to amortization are assessed for impairment at least annually and whenever events or changes in circumstances indicate that it is more likely than not that an asset may be impaired. The impairment test for indefinite-lived intangible assets consists of a comparison of the fair value of the intangible asset with its carrying amount. An impairment loss is recognized for the amount by which the carrying value exceeds the fair value of the asset. There was no impairment loss recognized on intangible assets for the fiscal years ended June 30, 2020, 2019 and 2018. Dealer Incentives The Company provides for various structured dealer rebate and sales promotions incentives, which are recognized as a component of sales in measuring the amount of consideration the Company expects to receive in exchange for transferring goods, at the time of sale to the dealer. Examples of such programs include rebates, seasonal discounts, promotional co-op arrangements and other allowances. Dealer rebates and sales promotion expenses are estimated based on current programs and historical achievement and/or usage rates. Actual results may differ from these estimates if market conditions dictate the need to enhance or reduce sales promotion and incentive programs or if dealer achievement or other items vary from historical trends. Free floor financing incentives include payments to the lenders providing floor plan financing to the dealers or directly to the dealers themselves. Free floor financing incentives are estimated at the time of sale to the dealer based on the expected expense to the Company over the term of the free flooring period and are recognized as a reduction in sales. The Company accounts for both incentive payments directly to dealers and payment to third party lenders in this manner. Changes in the Company’s accrual for dealer rebates were as follows: 76 Table of Contents Fiscal Year Ended June 30, 2020 2019 2018 Balance at beginning of year $ 6,376 $ 5,559 $ 3,178 Add: Dealer rebate incentive 19,555 20,712 15,713 Additions for Pursuit acquisition — 205 — Less: Dealer rebates paid ( 19,066 ) ( 20,100 ) ( 13,332 ) Balance at end of year $ 6,865 $ 6,376 $ 5,559 Changes in the Company’s accrual for floor financing were as follows: Fiscal Year Ended June 30, 2020 2019 2018 Balance at beginning of year $ 681 $ 211 $ 117 Add: Flooring incentive 9,492 8,526 5,813 Additions for Cobalt acquisition — — 132 Less: Flooring paid ( 9,454 ) ( 8,056 ) ( 5,851 ) Balance at end of year $ 719 $ 681 $ 211 Tax Receivable Agreement As a result of exchanges of LLC Units into Class A Common Stock and purchases by the Company of LLC Units from holders of LLC Units, the Company will become entitled to a proportionate share of the existing tax basis of the assets of the LLC at the time of such exchanges or purchases. In addition, such exchanges or purchases of LLC Units are expected to result in increases in the tax basis of the assets of the LLC that otherwise would not have been available. These increases in tax basis may reduce the amount of tax that the Company would otherwise be required to pay in the future. These increases in tax basis may also decrease gains (or increase losses) on future dispositions of certain capital assets to the extent tax basis is allocated to those capital assets. In connection with the recapitalization the Company completed in connection with its IPO, the Company entered into a tax receivable agreement with the pre-IPO owners of the LLC that provides for the payment by the Company to the pre-IPO owners (or any permitted assignees) of 85 % of the amount of the benefits, if any, that the Company deems to realize as a result of (i) increases in tax basis and (ii) certain other tax benefits, including those attributable to payments, under the tax receivable agreement. These contractual payment obligations are the Company's obligations and are not obligations of the LLC, and are accounted for in accordance with ASC 450, Contingencies , since the obligations were deemed to be probable and reasonably estimable. For purposes of the tax receivable agreement, the benefit deemed realized by the Company will be computed by comparing its actual income tax liability (calculated with certain assumptions) to the amount of such taxes that it would have been required to pay had there been no increase to the tax basis of the assets of the LLC as a result of the purchases or exchanges, and had the Company not entered into the tax receivable agreement. The timing and/or amount of aggregate payments due under the tax receivable agreement may vary based on a number of factors, including the amount and timing of the taxable income the Company generates in the future and the tax rate then applicable and amortizable basis. The term of the tax receivable agreement will continue until all such tax benefits have been utilized or expired, unless the Company exercises its right to terminate the tax receivable agreement for an amount based on the agreed payments remaining to be made under the agreement. In certain mergers, asset sales or other forms of business combinations or other changes of control, the Company (or its successor) would owe to the pre-IPO owners of the LLC (or any permitted assignees) a lump-sum payment equal to the present value of all forecasted future payments that would have otherwise been made under the tax receivable agreement that would be based on certain assumptions, including a deemed exchange of all LLC Units and that the Company would have had sufficient taxable income to fully utilize the deductions arising from the increased tax basis and other tax benefits related to entering into the tax receivable agreement. Income Taxes Malibu Boats, Inc. is taxed as a C corporation for U.S. income tax purposes and is therefore subject to both federal and state taxation at a corporate level. Following the IPO, the LLC continues to operate in the United States as a partnership for U.S. federal income tax purposes. 77 Table of Contents The Company files various federal and state tax returns, including some returns that are consolidated with subsidiaries. The Company accounts for the current and deferred tax effects of such returns using the asset and liability method. Significant judgments and estimates are required in determining the Company's current and deferred tax assets and liabilities, which reflect management's best assessment of the estimated future taxes it will pay. These estimates are updated throughout the year to consider income tax return filings, its geographic mix of earnings, legislative changes and other relevant items. The Company recognizes deferred tax assets and liabilities based on the differences between the financial statement carrying amounts of assets and liabilities and the amounts applicable for income tax purposes. Deferred tax assets represent items to be realized as a tax deduction or credit in future tax returns. Realization of the deferred tax assets ultimately depends on the existence of sufficient taxable income of the appropriate character in either the carryback or carryforward period. Each quarter the Company analyzes the likelihood that its deferred tax assets will be realized. A valuation allowance is recorded if, based on the weight of all available positive and negative evidence, it is more likely than not (a likelihood of more than 50%) that some portion, or all, of a deferred tax asset will not be realized (see Note 13). On an annual basis, the Company performs a comprehensive analysis of all forms of positive and negative evidence based on year end results. During each interim period, the Company updates its annual analysis for significant changes in the positive and negative evidence. If the Company later determines that realization is more likely than not for deferred tax assets with a valuation allowance, the related valuation allowance will be reduced. Conversely, if the Company determines that it is more likely than not that the Company will not be able to realize a portion of our deferred tax assets, the Company will increase the valuation allowance. The Company recognizes a tax benefit associated with an uncertain tax position when, in its judgment, it is more likely than not that the position will be sustained based upon the technical merits of the position. For a tax position that meets the more-likely-than-not recognition threshold, the Company initially and subsequently measures the income tax benefit as the largest amount that it judges to have a greater than 50% likelihood of being realized. The liability associated with unrecognized tax benefits is adjusted periodically due to changing circumstances, such as the progress of tax audits, case law developments and new or emerging legislation. Such adjustments are recognized entirely in the period in which they are identified. The Company's income tax provision includes the net impact of changes in the liability for unrecognized tax benefits. The Company closed the IRS examination of its June 30, 2015 return during the fourth quarter of fiscal 2019, resulting in an immaterial adjustment to its tax liability. The Company has filed federal and state income tax returns that remain open to examination for fiscal years 2017 through 2019, while its subsidiaries, Malibu Boats Holdings, LLC and Malibu Boats Pty Ltd., remain open to examination for years 2016 through 2019. The Company considers an issue to be resolved at the earlier of the issue being “effectively settled,” settlement of an examination, or the expiration of the statute of limitations. Upon resolution, unrecognized tax benefits will be reversed as a discrete event. The Company's liability for unrecognized tax benefits is generally presented as noncurrent. However, if it anticipates paying cash within one year to settle an uncertain tax position, the liability is presented as current. The Company classifies interest and penalties recognized on the liability for unrecognized tax benefits as income tax expense. Revenue Recognition Revenue is recognized as performance obligations under the terms of contracts with customers are satisfied; this occurs when control of promised goods (boats, parts, or other) is transferred to the customer, which is upon shipment. Revenue is measured as the amount of consideration we expect to receive in exchange for transferring goods or providing services. The Company generally manufactures products based on specific orders from dealers and often ships completed products only after receiving credit approval from financial institutions. The amount of consideration the Company receives and revenue it recognizes varies with changes in marketing incentives and rebates it offers to its dealers and their customers. Dealers generally have no rights to return unsold boats. From time to time, however, the Company may accept returns in limited circumstances and at the Company’s discretion under its warranty policy, which generally limits returns to instances of manufacturing defects. The Company may be obligated, in the event of default by a dealer, to accept returns of unsold boats under its repurchase commitment to floor financing providers, who are able to obtain such boats through foreclosure. The Company accrues returns when a repurchase and return, due to the default of one of its dealers, is determined to be probable and the amount of the return is reasonably estimable. Historically, product returns, resulting from repurchases made under the floorplan financing program, have not been material and the returned boats have been subsequently resold above their cost. Refer to Note 9 and Note 18 related to the Company’s product warranty and repurchase commitment obligations, respectively. 78 Table of Contents Revenue associated with sales of materials, parts, boats or engine products sold under the Company’s exclusive manufacturing and distribution agreement with its Australian subsidiary are eliminated in consolidation. The Company earns royalties on boats shipped with the Company's proprietary wake surfing technology under licensing agreements with various marine manufacturers. Royalty income is recognized when products are used or sold with our patented technology by other boat manufacturers and industry suppliers. The usage of our technology satisfies the performance obligation in the contract. See Note 2 for more information. Delivery Costs Shipping and freight costs are included in cost of sales in the accompanying consolidated statements of operations and comprehensive income. Advertising Costs Advertising costs are expensed as incurred. Advertising expenses are included in selling and marketing expenses and were not material for the fiscal years ended June 30, 2020, 2019, and 2018. Fair Value of Financial Instruments Financial instruments for which the Company did not elect the fair value option include accounts receivable, prepaid expenses and other current assets, credit facilities, accounts payable, accrued expenses and other current liabilities. The carrying amounts of these financial instruments approximate their fair values as a result of their short-term nature or variable interest rates. Fair Value Measurements The Company applies the provisions of ASC Topic 820, Fair Value Measurements and Disclosures, for fair value measurements of financial assets and financial liabilities, and for fair value measurements of nonfinancial items that are recognized or disclosed at fair value in the financial statements on a recurring basis. ASC Topic 820 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. ASC Topic 820 also establishes a framework for measuring fair value and expands disclosures about fair value measurements. In addition to the financial assets and liabilities measured on a recurring basis, certain nonfinancial assets and liabilities are to be measured at fair value on a nonrecurring basis in accordance with applicable GAAP. This includes items such as nonfinancial assets and liabilities initially measured at fair value in a business combination (but not measured at fair value in subsequent periods) and nonfinancial long-lived asset groups measured at fair value for an impairment assessment. In general, non-financial assets including goodwill, other intangible assets and property and equipment are measured at fair value when there is an indication of impairment and are recorded at fair value only when any impairment is recognized. See Note 14 for more information. Equity-Based Compensation The Company expenses employee share-based awards under ASC Topic 718, Compensation—Stock Compensation , which requires compensation cost for the grant-date fair value of share-based awards to be recognized over the requisite service period. The Company estimated the grant date fair value of the share-based awards issued in the form of profit interests granted prior to November 1, 2013 using the Black-Scholes option pricing model and those granted on November 1, 2013 under the Probability-Weighted Expected Return method. Stock options granted to executives on June 29, 2017, November 6, 2017, August 22, 2018 and January 14, 2019 were valued using the Black-Scholes option pricing model. Stock awards granted on November 22, 2019 based on total shareholder return were valued using a Monte Carlo simulation. The fair value of restricted stock unit awards granted under the Company's Long Term Incentive Plan ("Incentive Plan") are measured based on the market price of the Company’s stock on the grant date. See Note 16 for more information. Foreign Currency Translation The functional currency for the Company's consolidated foreign subsidiary is the applicable local currency. The assets and liabilities are translated at the foreign exchange rate in effect at the applicable reporting date, and the consolidated statements of operations and comprehensive income and cash flows are translated at the average exchange rate in effect during the applicable period. Exchange rate fluctuations on translating the foreign currency financial statements into U.S. dollars that result in unrealized gains or losses are referred to as translation adjustments. Cumulative translation adjustments are reflected as a 79 Table of Contents component of "Accumulated other comprehensive loss," in the stockholders' equity section of the accompanying consolidated balance sheets and periodic changes are included in comprehensive income. Comprehensive Income Components of comprehensive income include net income and foreign currency translation adjustments. The Company has chosen to disclose comprehensive income in a single continuous statement of operations and comprehensive income. COVID-19 Pandemic In March 2020, the World Health Organization characterized the coronavirus (“COVID-19”) a pandemic, and the President of the United States declared the COVID-19 outbreak a national emergency. The COVID-19 pandemic has significantly impacted health and economic conditions throughout the United States. The COVID-19 pandemic has impacted the Company’s operations and financial results. Due to the impact of the COVID-19 pandemic, the Company elected to suspend operations at all of its facilities on March 24, 2020, which impacted the second half of fiscal year 2020. The shut-down continued into the fourth quarter with operations resuming between late April and early May, depending on the facility. Due to the rapidly changing business environment, unprecedented market volatility and heightened degree of uncertainty resulting from COVID-19, the Company cannot reasonably estimate the length or severity of the pandemic or its impact on the Company’s liquidity, results of operations, and financial condition, which could have a material adverse effect. Recent Accounting Pronouncements On July 1, 2018, the Company adopted the new accounting standard, ASC Topic 606, Revenue from Contracts with Customers , and all the related amendments (“ASC 606”) and applied the provisions of the standard to all contracts using the modified retrospective method. The cumulative effect of adopting the new revenue standard was immaterial and no adjustment has been recorded to the opening balance of retained earnings. Prior year information has not been restated and continues to be reported under the accounting standards in effect for those periods. Substantially all of the Company’s revenue continues to be recognized at a point in time when the product is either shipped or received from the Company's facilities and control of the product is transferred to the customer. New controls and processes designed to meet the requirements of the standard were implemented, and the required new disclosures are presented in Note 2. The adoption of ASC Topic 606 did not have a material impact on the amounts reported in the Company's consolidated financial position, results of operations or cash flows. On July 1, 2019, the Company adopted the new accounting standard, ASC Topic 842, Leases , which superseded the requirements in ASC Topic 840, Leases . ASC Topic 842 requires lessees to recognize on the balance sheet a right-of-use asset, representing its right to use the underlying asset for the lease term, and a lease liability for all leases with terms greater than 12 months. The guidance also requires qualitative and quantitative disclosures designed to assess the amount, timing, and uncertainty of cash flows arising from leases. The Company applied the modified retrospective transition method which allowed for the election of the application of practical expedients, which among other things, allowed the Company to carry forward the historical lease classification. Under this new transition method, at the adoption date the Company recognized a cumulative-effect adjustment to the opening balance of retained earnings. The adoption of ASC Topic 842 did not have a material impact on the Company’s consolidated results of operations, equity or cash flows as of the adoption date. Under the optional transition approach, comparative information was not restated, but will continue to be reported under the standards in effect for those periods. See Note 11 for further information regarding the Company’s leases. In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments , and in November 2018 issued a subsequent amendment, ASU 2018-19, Codification Improvements to Topic 326, Financial Instruments - Credit Losses . ASU 2016-13 significantly changes how entities will measure credit losses for most financial assets and certain other instruments that are not measured at fair value through net income. ASU 2016-13 will replace today’s “incurred loss” approach with an “expected loss” model for instruments measured at amortized cost. ASU 2018-19 will affect loans, debt securities, trade receivables, net investments in leases, off balance sheet credit exposures, reinsurance receivables, and any other financial assets not excluded from the scope of this amendment that have the contractual right to receive cash. ASU 2016-13 is effective for fiscal years and interim periods beginning after December 15, 2019, and is effective for the Company’s fiscal year beginning July 1, 2020. The adoption of the ASU is not expected to have a material impact on the Company’s consolidated financial position, results of operations, equity or cash flows. There are no other new accounting pronouncements that are expected to have a significant impact on the Company's consolidated financial statements and related disclosures. 2. Revenue Recognition 80 Table of Contents The following table disaggregates the Company's revenue by major product type and geography: Fiscal Year Ended June 30, 2020 Malibu Cobalt Pursuit Consolidated Revenue by product: Boat and trailer sales $ 341,886 $ 172,267 $ 122,850 $ 637,003 Part and other sales 12,883 2,501 776 16,160 Total revenue $ 354,769 $ 174,768 $ 123,626 $ 653,163 Revenue by geography: North America $ 327,049 $ 167,755 $ 115,363 $ 610,167 International 27,720 7,013 8,263 42,996 Total revenue $ 354,769 $ 174,768 $ 123,626 $ 653,163 Fiscal Year Ended June 30, 2019 Malibu Cobalt Pursuit Consolidated Revenue by product: Boat and trailer sales $ 362,200 $ 203,825 $ 102,070 $ 668,095 Part and other sales 12,411 2,773 737 15,921 Total revenue $ 374,611 $ 206,598 $ 102,807 $ 684,016 Revenue by geography: North America $ 341,190 $ 196,734 $ 93,003 $ 630,927 International 33,421 9,864 9,804 53,089 Total revenue $ 374,611 $ 206,598 $ 102,807 $ 684,016 Boat and Trailer Sales Consists of sales of boats and trailers to the Company's dealer network, net of sales returns, discounts, rebates and free flooring incentives. Boat and trailer sales also includes optional boat features. Sales returns consist of boats returned by dealers under our warranty program. Rebates, free flooring and discounts are incentives that the Company provides to its dealers based on sales of eligible products. Part and Other Sales Consists primarily of parts and accessories sales, royalty income and clothing sales. Parts and accessories sales include replacement and aftermarket boat parts and accessories sold to the Company's dealer network. Royalty income is earned from license agreements with various boat manufacturers, including Nautique, Chaparral, Mastercraft, and Tige related to the use of the Company's intellectual property. 3. Non-controlling Interest The non-controlling interest on the consolidated statement of operations and comprehensive income represents the portion of earnings or loss attributable to the economic interest in the Company's subsidiary, Malibu Boats Holdings, LLC, held by the non-controlling LLC Unit holders. Non-controlling interest on the consolidated balance sheets represents the portion of net assets of the Company attributable to the non-controlling LLC Unit holders, based on the portion of the LLC Units owned by such Unit holders. The ownership of Malibu Boats Holdings, LLC is summarized as follows: 81 Table of Contents As of June 30, 2020 As of June 30, 2019 Units Ownership % Units Ownership % Non-controlling LLC unit holders ownership in Malibu Boats Holdings, LLC 730,652 3.4 % 830,152 3.8 % Malibu Boats, Inc. ownership in Malibu Boats Holdings, LLC 20,595,969 96.6 % 20,852,640 96.2 % 21,326,621 100.0 % 21,682,792 100.0 % Balance of non-controlling interest as of June 30, 2018 $ 5,502 Allocation of income to non-controlling LLC Unit holders for period 3,635 Distributions paid and payable to non-controlling LLC Unit holders for period ( 1,845 ) Reallocation of non-controlling interest ( 1,174 ) Balance of non-controlling interest as of June 30, 2019 6,118 Allocation of income to non-controlling LLC Unit holders for period 3,094 Distributions paid and payable to non-controlling LLC Unit holders for period ( 1,370 ) Reallocation of non-controlling interest ( 895 ) Balance of non-controlling interest as of June 30, 2020 $ 6,947 Issuance of Additional LLC Units Under the first amended and restated limited liability company agreement of the LLC, as amended (the "LLC Agreement'), the Company is required to cause the LLC to issue additional LLC Units to the Company when the Company issues additional shares of Class A Common Stock. Other than in connection with the issuance of Class A Common Stock in connection with an equity incentive program, the Company must contribute to the LLC net proceeds and property, if any, received by the Company with respect to the issuance of such additional shares of Class A Common Stock. The Company must cause the LLC to issue a number of LLC Units equal to the number of shares of Class A Common Stock issued such that, at all times, the number of LLC Units held by the Company equals the number of outstanding shares of Class A Common Stock. During the fiscal year ended June 30, 2020, the Company caused the LLC to issue a total of 242,741 LLC Units to the Company in connection with (i) the Company's issuance of Class A Common Stock to a non-employee director for her services, (ii) the issuance of Class A Common Stock for the vesting of awards granted under the Malibu Boats, Inc. Long-Term Incentive Plan (the "Incentive Plan"), (iii) the issuance of restricted Class A Common Stock granted under the Incentive Plan, (iv) the issuance of Class A Common Stock to LLC Unit holders in exchange of their LLC Units and (v) the issuance of Class A Common Stock for the exercise of options granted under the Incentive Plan. During fiscal year 2020, 15,733 LLC Units were canceled in connection with the vesting of share-based equity awards to satisfy employee tax withholding requirements and the retirement of 15,733 treasury shares in accordance with the LLC Agreement. During the fiscal year ended June 30, 2020, 483,679 LLC Units were redeemed and canceled by the LLC in connection with the purchase and retirement of 483,679 treasury shares under the Company's stock repurchase program. Distributions and Other Payments to Non-controlling Unit Holders Distributions for Taxes As a limited liability company (treated as a partnership for income tax purposes), Malibu Boats Holdings, LLC does not incur significant federal, state or local income taxes, as these taxes are primarily the obligations of its members. As authorized by the LLC Agreement, the LLC is required to distribute cash, to the extent that the LLC has cash available, on a pro rata basis, to its members to the extent necessary to cover the members’ tax liabilities, if any, with respect to their share of LLC earnings. The LLC makes such tax distributions to its members based on an estimated tax rate and projections of taxable income. If the actual taxable income of the LLC multiplied by the estimated tax rate exceeds the tax distributions made in a calendar year, the LLC may make true-up distributions to its members, if cash or borrowings are available for such purposes. As of June 30, 2020 and 2019, tax distributions payable to non-controlling LLC Unit holders were $ 104 and $ 568 , respectively. During the fiscal years ended June 30, 2020, 2019, and 2018, tax distributions paid to the non-controlling LLC Unit holders were $ 1,836 , $ 1,785 , and $ 1,647 , respectively. Other Distributions 82 Table of Contents Pursuant to the LLC Agreement, the Company has the right to determine when distributions will be made to LLC members and the amount of any such distributions. If the Company authorizes a distribution, such distribution will be made to the members of the LLC (including the Company) pro rata in accordance with the percentages of their respective LLC units. 4. Acquisitions Pursuit On October 15, 2018, the Company completed its acquisition of the assets of Pursuit. The aggregate purchase price for the transaction was $ 100,073 , funded with cash and borrowings under the Company's credit agreement. The aggregate purchase price was subject to certain adjustments, including customary adjustments for the amount of working capital in the business at the closing date. The Company accounted for the transaction in accordance with ASC 805, Business Combinations . The total consideration given to the former owners of Pursuit has been allocated to the assets acquired and liabilities assumed based on estimates of fair value as of the date of the acquisition. The measurements of fair value were determined based upon estimates utilizing the assistance of third party valuation specialists. The following table summarizes the purchase price allocation based on the estimated fair values of the assets acquired and liabilities of Pursuit assumed at the acquisition date: Consideration: Cash consideration paid $ 100,073 Recognized amounts of identifiable assets acquired and liabilities assumed, at fair value: Inventories $ 8,332 Other current assets 350 Property, plant and equipment 17,454 Identifiable intangible assets 57,900 Current liabilities ( 3,488 ) Fair value of assets acquired and liabilities assumed 80,548 Goodwill 19,525 Total purchase price $ 100,073 The fair value estimates for the Company's identifiable intangible assets acquired as part of the acquisition are as follows: Estimates of Fair Value Estimated Useful Life (in years) Definite-lived intangibles: Dealer relationships $ 25,400 20 Total definite-lived intangibles 25,400 Indefinite-lived intangible: Trade name 32,500 Total other intangible assets $ 57,900 The value allocated to inventories reflects the estimated fair value of the acquired inventory based on the expected sales price of the inventory, less an estimated cost to complete and a reasonable profit margin. The fair value of the identifiable intangible assets were determined based on the following approaches: Dealer Relationships - The value associated with Pursuit's dealer relationships is attributed to its long standing dealer distribution network. The estimate of fair value assigned to this asset was determined using the income approach, which requires an estimate or forecast of the expected future cash flows from the dealer relationships through the application of the multi-period excess earnings approach. The estimated remaining useful life of dealer relationships is approximately twenty years . 83 Table of Contents Trade Name - The value attributed to Pursuit's trade name was determined using a variation of the income approach called the relief from royalty method, which requires an estimate or forecast of the expected future cash flows. The trade name has an indefinite life. The fair value of the definite-lived intangible assets are being amortized using the straight-line method to general and administrative expenses over their estimated useful lives. Indefinite-lived intangible assets are not amortized, but instead are evaluated for potential impairment on an annual basis in accordance with the provisions of ASC Topic 350, Intangibles—Goodwill and Other . The weighted average useful life of identifiable definite-lived intangible assets acquired was 20 years. Goodwill of $ 19,525 arising from the acquisition consists of expected synergies and cost savings as well as intangible assets that do not qualify for separate recognition. The indefinite-lived intangible asset and goodwill acquired are expected to be deductible for income tax purposes. Acquisition-related costs of $ 2,848 and $ 329 incurred by the Company for fiscal years ended June 30, 2019 and 2018, respectively, related to the Pursuit acquisition, were expensed in the period incurred, and are included in general and administrative expenses in the consolidated statement of operations and comprehensive income. Pro Forma Financial Information (unaudited): The following unaudited pro forma consolidated results of operations for the fiscal years ended June 30, 2020 and 2019, assumes that the acquisition of Pursuit occurred as of July 1, 2017. The unaudited pro forma financial information combines historical results of Malibu and Pursuit, with adjustments for depreciation and amortization attributable to preliminary fair value estimates on acquired tangible and intangible assets for the respective periods. Non-recurring pro forma adjustments associated with the fair value step up of inventory were included in the reported pro forma cost of sales and earnings. The unaudited pro forma financial information is presented for informational purposes only and is not indicative of the results of operations that would have been achieved if the acquisition had taken place at the beginning of fiscal year 2018 or the results that may occur in the future: Fiscal Year Ended June 30, 2020 2019 2018 Net sales $ 653,163 $ 725,658 $ 620,908 Net income 64,656 73,672 33,618 Net income attributable to Malibu Boats, Inc. 61,562 69,830 29,871 Basic earnings per share $ 2.98 $ 3.35 $ 1.48 Diluted earnings per share $ 2.95 $ 3.33 $ 1.47 Cobalt On July 6, 2017, the Company completed its acquisition of Cobalt. The aggregate purchase price for the transaction was $ 130,525 , consisting of $ 129,525 funded with cash and borrowings under the Company's credit agreement and $ 1,000 in equity equal to 39,262 shares of the Company's Class A Common Stock based on a closing stock price of $ 25.47 per share on June 27, 2017. The aggregate purchase price was subject to certain adjustments, including customary adjustments for the amount of working capital in the business at the closing date and subject to adjustment for any judgment or settlement in connection with a pending litigation matter between Cobalt and Sea Ray Boats, Inc. and Brunswick Corporation. William Paxson St. Clair, Jr., a former owner of Cobalt, was appointed as a director to the Company's Board of Directors and as President of Cobalt. The Company accounted for the transaction in accordance with ASC 805, Business Combinations. The total consideration given to the former members of Cobalt has been allocated to the assets acquired and liabilities assumed based on estimated fair values as of the date of the acquisition. The measurements of fair value were determined based upon estimates utilizing the assistance of third party valuation specialists. The following table summarizes the purchase price allocation based on the estimated fair values of the assets acquired and liabilities of Cobalt assumed at the acquisition date: 84 Table of Contents Consideration: Cash consideration paid $ 129,525 Equity consideration paid 1,000 Fair value of total consideration transferred $ 130,525 Recognized amounts of identifiable assets acquired and liabilities assumed, at fair value: Cash $ 3,973 Trade receivables 2,329 Inventories 14,343 Other current assets 363 Property, plant, and equipment 12,934 Identifiable intangible assets 89,900 Current liabilities ( 13,108 ) Fair value of assets acquired and liabilities assumed 110,734 Goodwill 19,791 Total purchase price $ 130,525 The fair value estimates for the Company's identifiable intangible assets acquired as part of the acquisition are as follows: Estimates of Fair Value Estimated Useful Life (in years) Definite-lived intangibles Dealer relationships $ 56,300 20 Patent 2,600 15 Total definite-lived intangibles 58,900 Indefinite-lived intangible: Trade name 31,000 Total other intangible assets $ 89,900 The value allocated to inventories reflects the estimated fair value of the acquired inventory based on the expected sales price of the inventory, less an estimated cost to complete and a reasonable profit margin. The fair value of the identifiable intangible assets were determined based on the following approaches: Dealer Relationships - The value associated with Cobalt's dealer relationships is attributed to its long standing dealer distribution network. The estimate of fair value assigned to this asset was determined using the income approach, which requires an estimate or forecast of the expected future cash flows from the dealer relationships through the application of the multi-period excess earnings approach. The estimated remaining useful life of dealer relationships is approximately twenty years . Patent - The value associated with the patented technology was based on financial projections and the patent's estimated remaining legal life of approximately fifteen years using a variation of the income approach called the royalty savings method. Trade Name - The value attributed to Cobalt's trade name was determined using a variation of the income approach called the relief from royalty method, which requires an estimate or forecast of the expected future cash flows. The trade name has an indefinite life. The fair value of the definite-lived intangible assets are being amortized using the straight-line method to general and administrative expenses over their estimated useful lives. Indefinite-lived intangible assets are not amortized, but instead are evaluated for potential impairment on an annual basis in accordance with the provisions of ASC Topic 350, Intangibles—Goodwill and Other . The weighted average useful life of identifiable definite-lived intangible assets acquired was 19.8 years. Goodwill of $ 19,791 arising from the acquisition consists of expected synergies and cost savings as well as intangible assets that do not qualify for separate recognition. The indefinite-lived intangible asset and goodwill acquired are deductible for income tax purposes. 85 Table of Contents Acquisition-related costs of $ 489 and $ 3,056 incurred by the Company for fiscal years ended June 30, 2019 and 2018, were expensed as incurred, and are included in general and administrative expenses in the consolidated statements of operations and comprehensive income. Pro Forma Financial Information (unaudited): The following unaudited pro forma consolidated results of operations for the fiscal years ended June 30, 2020, 2019 and 2018, assumes that the acquisition of Cobalt occurred as of July 1, 2017. The unaudited pro forma consolidated financial information combines historical results of Malibu and Cobalt, with adjustments for depreciation and amortization attributable to preliminary fair value estimates on acquired tangible and intangible assets for the respective periods. Non-recurring pro forma adjustments associated with the fair value step up of inventory were included in the reported pro forma cost of sales and earnings. The unaudited pro forma financial information is presented for informational purposes only and is not indicative of the results of operations that would have been achieved if the acquisition had taken place at the beginning of fiscal year 2018 or the results that may occur in the future: Fiscal Year Ended June 30, 2020 2019 2018 Net sales $ 653,163 $ 684,016 $ 497,002 Net income 64,656 69,701 30,696 Net income attributable to Malibu Boats, Inc. 61,562 66,066 27,361 Basic earnings per share $ 2.98 $ 3.17 $ 1.36 Diluted earnings per share $ 2.95 $ 3.15 $ 1.35 5. Inventories Inventories are stated at the lower of cost or net realizable value, determined on the first in, first out (“FIFO”) basis. Manufacturing cost includes materials, labor and manufacturing overhead. Unallocated overhead and abnormal costs are expensed as incurred. Inventories consisted of the following: As of June 30, 2020 2019 Raw materials $ 52,530 $ 45,910 Work in progress 10,778 10,839 Finished goods 9,638 11,019 Total inventories $ 72,946 $ 67,768 6. Property, Plant, and Equipment Property, plant, and equipment acquired outside of acquisition are stated at cost. When property, plant, and equipment is retired or otherwise disposed of, the related cost and accumulated depreciation is removed from the accounts and any resulting gain or loss is accounted for in the statement of operations and comprehensive income. Major additions are capitalized; maintenance, repairs and minor improvements are charged to operating expenses as incurred if they do not increase the life or productivity of the related capitalized asset. Depreciation on leasehold improvements is computed using the straight-line method based on the lesser of the remaining lease term or the estimated useful life and depreciation of equipment is computed using the straight-line method over the estimated useful life as follows: Years Building 20 Leasehold improvements Shorter of useful life or lease term Machinery and equipment 3 - 5 Furniture and fixtures 3 - 5 The Company accounts for the impairment and disposition of long-lived assets in accordance with ASC Topic 360, Property, Plant, and Equipment . In accordance with ASC Topic 360, long-lived assets to be held are reviewed for events or changes in circumstances that indicate that their carrying value may not be recoverable. The Company periodically reviews for indicators and, if indicators are present, tests the carrying value of long-lived assets, assessing their net realizable values based 86 Table of Contents on estimated undiscounted cash flows over their remaining estimated useful lives. If the carrying amount of an asset exceeds its estimated undiscounted future cash flows, an impairment charge is measured as the amount by which the carrying amount of the asset exceeds the fair value of the asset, based on discounted cash flows. No impairment charges were recorded for the fiscal years ended June 30, 2020, 2019 and 2018 in the Company’s consolidated financial statement. Property, plant, and equipment, net consisted of the following: As of June 30, 2020 2019 Land $ 2,540 $ 2,194 Building and leasehold improvements 54,318 28,957 Machinery and equipment 55,831 46,618 Furniture and fixtures 7,031 6,734 Construction in process 10,470 9,764 130,190 94,267 Less accumulated depreciation ( 35,880 ) ( 28,511 ) $ 94,310 $ 65,756 Depreciation expense was $ 12,249 , $ 10,004 and $ 7,656 for the fiscal years ended June 30, 2020, 2019 and 2018, respectively, substantially all of which was recorded in cost of sales. During fiscal year 2020 the Company disposed of various assets with a net book value of $ 958 and recorded a loss of $ 61 related to these disposals. During fiscal year 2019, the Company disposed of various molds for models not currently in production with zero net book value. Sale-Leaseback Transaction In March 2008, the Company sold its two primary manufacturing and office facilities for a total of $ 18,250 , which resulted in a gain of $ 726 . Expenses incurred related to the sale were $ 523 . Simultaneous with the sale, the Company entered into an agreement to lease back the buildings for an initial term of 20 years. The net gain on this transaction of $ 203 had been deferred and is being amortized over the initial lease term. On July 1, 2019, as part of lease implementation under Topic 842 the Company recognized the unamortized portion of the gain on the sale leaseback of $ 89 . For the fiscal years ended June 30, 2019 and 2018, the realized gain recognized was $ 10 and $ 10 respectively. 7. Goodwill and Other Intangible Assets The changes in the carrying amount of goodwill for the fiscal years ended June 30, 2020 and 2019 were as follows: Goodwill as of June 30, 2018 $ 32,230 Addition related to the acquisition of Pursuit 19,525 Effect of foreign currency changes on goodwill ( 351 ) Goodwill as of June 30, 2019 51,404 Effect of foreign currency changes on goodwill ( 131 ) Goodwill as of June 30, 2020 $ 51,273 The components of other intangible assets were as follows: 87 Table of Contents As of June 30, Estimated Useful Life (in years) Weighted Average Remaining Useful Life (in years) 2020 2019 Reacquired franchise rights $ — $ 1,264 5 0.0 Dealer relationships 111,293 111,339 8 - 20 17.3 Patent 3,986 3,986 12 - 15 12.0 Trade name 24,667 24,667 15 1.4 Non-compete agreement 48 49 10 4.3 Total 139,994 141,305 Less: Accumulated amortization ( 63,602 ) ( 58,744 ) Total definite-lived intangible assets, net 76,392 82,561 Indefinite-lived intangible: Trade names 63,500 63,500 Total other intangible assets $ 139,892 $ 146,061 Amortization expense recognized on all amortizable intangibles was $ 6,131 , $ 5,956 and $ 5,198 for the fiscal years ended June 30, 2020, 2019 and 2018, respectively. Estimated future amortization expenses as of June 30, 2020 are as follows: Fiscal Year As of June 30, 2020 2021 $ 6,054 2022 4,553 2023 4,417 2024 4,417 2025 4,413 Thereafter 52,538 $ 76,392 8. Accrued Expenses Accrued expenses consisted of the following: As of June 30, 2020 2019 Warranties $ 27,500 $ 23,820 Dealer incentives 7,777 7,394 Accrued compensation 9,885 13,122 Current operating lease liabilities 2,006 — Accrued legal and professional fees 1,055 740 Accrued interest — 161 Other accrued expenses 2,262 3,860 Total accrued expenses $ 50,485 $ 49,097 9. Product Warranties The Company's Malibu and Axis brand boats have a limited warranty for a period up to five years . The Company's 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. Pursuit brand boats have (1) a limited warranty for a period of up to five years on structural 88 Table of Contents 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. The Company’s standard warranties require it or its dealers to repair or replace defective products during the warranty period at no cost to the consumer. The Copmany estimates warranty costs it expects to incur and record a liability for such costs at the time the product revenue is recognized. The Company utilizes historical claims trends and analytical tools to develop the estimate of its warranty obligation on a per boat basis, by brand and warranty year. Factors that affect the Company’s warranty liability include the number of units sold, historical and anticipated rates of warranty claims and cost per claim. The Company assesses the adequacy of its recorded warranty liabilities and adjust the amounts as necessary. Beginning in model year 2016, the Company increased the term of its limited warranty for Malibu brand boats from three years to five years and for Axis brand boats from two years to five years . Beginning in model year 2018, the Company increased the term of its bow-to-stern warranty for Cobalt brand boats from three years to five years . As a result of these changes, all of the Company’s Malibu, Axis and Cobalt brand boats with historical claims experience that are no longer covered under warranty had warranty terms shorter than the current warranty term of five years . Accordingly, the Company has little to no historical claims experience for warranty years four and five, and as such, these estimates give rise to a higher level of estimation uncertainty. Future warranty claims may differ from our estimate of the warranty liability, which could lead to changes in the Company’s warranty liability in future periods. Changes in the Company’s product warranty liability, which are included in accrued expenses in the accompanying consolidated balance sheet, were as follows: Fiscal Year Ended June 30, 2020 2019 2018 Beginning balance $ 23,820 $ 17,217 $ 10,050 Add: Warranty Expense 14,339 12,331 9,861 Additions for Cobalt acquisition — — 4,404 Additions for Pursuit acquisition — 1,872 — Less: Warranty claims paid ( 10,659 ) ( 7,600 ) ( 7,098 ) Ending balance $ 27,500 $ 23,820 $ 17,217 10. Financing Outstanding debt consisted of the following: As of June 30, 2020 2019 Term loan $ 75,000 $ 75,000 Revolving credit loan 8,800 40,000 Less unamortized debt issuance costs ( 961 ) ( 1,367 ) Total debt 82,839 113,633 Less current maturities — — Long term debt less current maturities $ 82,839 $ 113,633 Long-Term Debt The Company currently has a revolving credit facility with borrowing capacity of up to $ 120,000 and a $ 75,000 term loan outstanding. As of June 30, 2020, the Company had $ 8,800 outstanding under its revolving credit facility and $ 1,185 in outstanding letters of credit. On March 19, 2020, the Company elected to draw the then remaining available funds of $ 98,800 from the revolving credit facility. In June 2020, the Company repaid $ 110,000 on the revolving credit facility. The revolving credit facility matures on July 1, 2024 and the term loan matures on July 1, 2022. The revolving credit facility and term loan are governed by a credit agreement (the “Credit Agreement”) with Malibu Boats, LLC (“Boats LLC”) as the borrower and Truist Financial Corp. (previously known as SunTrust Bank), as the administrative agent, swingline lender and issuing bank. The obligations of Boats LLC under the Credit Agreement are guaranteed by the LLC, and, subject to certain exceptions, the present and future domestic subsidiaries of Boats LLC, and all such obligations are secured by substantially all of the assets of the LLC, Boats LLC and such subsidiary guarantors. Malibu Boats, Inc. is not a party to the Credit Agreement. 89 Table of Contents Borrowings under the Credit Agreement bear interest at a rate equal to either, at the Company's option, (i) the highest of the prime rate, the Federal Funds Rate plus 0.5 %, or one-month LIBOR plus 1 % (the “Base Rate”) or (ii) LIBOR, in each case plus an applicable margin ranging from 1.25 % to 2.25 % with respect to LIBOR borrowings and 0.25 % to 1.25 % with respect to Base Rate borrowings. The applicable margin will be based upon the consolidated leverage ratio of the LLC and its subsidiaries calculated on a consolidated basis. As of June 30, 2020, the interest rate on the Company’s term loan and revolving credit facility wa s 1.66 %. The Company is required to pay a commitment fee for any unused portion of the revolving credit facility which will range from 0.20 % to 0.40 % per annum, depending on the LLC’s and its subsidiaries’ consolidated leverage ratio. The Credit Agreement permits prepayment of the term loan without any penalties. On August 17, 2017 the Company made a voluntary principal payment on the term loan in the amount of $ 50,000 with a portion of the net proceeds from its equity offering completed on August 14, 2017. The Company exercised its option to apply the prepayment in forward order to principal installments on its term loan through December 31, 2021 and a portion of the principal installments due on March 31, 2022. As a result, the term loan is subject to a quarterly installment of approximately $ 3,000 on March 31, 2022 and the balance of the term loan is due on the scheduled maturity date of July 1, 2022. The Credit Agreement is also subject to prepayments from the net cash proceeds received by Boats LLC or any guarantors from certain asset sales and recovery events, subject to certain reinvestment rights, and from excess cash flow, subject to the terms and conditions of the Credit Agreement. As of June 30, 2020, the outstanding principal amount of the Company’s term loan and revolving credit facility was $ 83,800 . The Credit Agreement contains certain customary representations and warranties, and notice requirements for the occurrence of specific events such as the occurrence of any event of default, or pending or threatened litigation. The Credit Agreement also requires compliance with certain customary financial covenants, including a minimum ratio of EBITDA to fixed charges and a maximum ratio of total debt to EBITDA. The Credit Agreement contains certain restrictive covenants, which, among other things, place limits on certain activities of the loan parties under the Credit Agreement, such as the incurrence of additional indebtedness and additional liens on property and limit the future payment of dividends or distributions. For example, the Credit Agreement generally prohibits the LLC, Boats LLC and the subsidiary guarantors from paying dividends or making distributions, including to the Company. The credit facility permits, however, (i) distributions based on a member’s allocated taxable income, (ii) distributions to fund payments that are required under the LLC’s tax receivable agreement, (iii) purchase of stock or stock options of the LLC from former officers, directors or employees of loan parties or payments pursuant to stock option and other benefit plans up to $ 2,000 in any fiscal year, and (iv) share repurchase payments up to $ 35,000 in any fiscal year subject to one-year carry forward and compliance with other financial covenants. In addition, the LLC may make dividends and distributions of up to $ 10,000 in any fiscal year, subject to compliance with other financial covenants. In connection with entering into the Credit Agreement, the Company capitalized $ 2,074 in deferred financing costs during fiscal 2017. These costs, in addition to the unamortized balance related to costs associated with the Company's previous credit facility of $ 671 , are being amortized over the term of the Credit Agreement into interest expense using the effective interest method and presented as a direct offset to the total debt outstanding on the consolidated balance sheet. As described above, the Company used proceeds from an offering on August 24, 2017 to repay $ 50,000 on its term loan under the Credit Agreement and exercised its option to apply the prepayment to principal installments through December 31, 2021, and a portion of principal installments due on March 31, 2022. Accordingly, no principal payments are required under the Credit Agreement until March 31, 2022, and as such, all borrowings as of June 30, 2020 and June 30, 2019, are reflected as noncurrent. The $ 50,000 repayment resulted in a write off of deferred financing costs of $ 829 in fiscal year 2018, which was included in amortization expense on the consolidated statement of operations and comprehensive income. On May 8, 2019, the Company entered into the Second Incremental Facility Amendment and Second Amendment (the “Amendment”) to the Credit Agreement dated as of June 28, 2017. The Amendment converted $ 35,000 of the outstanding principal amount under the term loan to outstanding borrowings under the revolving credit facility, increased the borrowing capacity of the revolving credit facility by $ 35,000 and extended the maturity date of the revolving credit facility by two years to July 1, 2024. In connection with the Amendment, the Company wrote off $ 137 of deferred financing costs and capitalized an additional $ 370 of deferred financing cost related to insubstantial modification leaving an unamortized balance of $ 1,367 in deferred financing costs. These are being amortized into interest expense using the effective interest method and presented as a direct offset to the total debt outstanding on the consolidated balance sheet. Covenant Compliance As of June 30, 2020 and 2019, the Company was in compliance with the covenants contained in the Credit Agreement. Interest Rate Swap 90 Table of Contents On July 1, 2015, the Company entered into a five year floating to fixed interest rate swap with an effective start date of July 1, 2015. The swap is based on a one-month LIBOR rate versus a 1.52 % fixed rate on a notional value of $ 39,250 , which under terms of the previously existing credit agreement is equal to 50 % of the outstanding balance of the term loan at the time of the swap arrangement. Under ASC Topic 815, Derivatives and Hedging, all derivative instruments are recorded on the consolidated balance sheets at fair value as either short term or long term assets or liabilities based on their anticipated settlement date. Refer to Fair Value Measurements in Note 14. The Company has elected not to designate its interest rate swap as a hedge; therefore, changes in the fair value of the derivative instrument are being recognized in earnings in the Company's consolidated statements of operations and comprehensive income. The swap matured on March 31, 2020. For the fiscal year ended June 30, 2020 and 2019, the Company record a loss of $ 68 and $ 350 , respectively, for the change in fair value of the interest rate swap, which is included in interest expense in the consolidated statements of operations and comprehensive income. 11. Leases The Company leases certain manufacturing facilities, warehouses, office space, land, and equipment. The Company determines if a contract is a lease or contains an embedded lease at the inception of the agreement. The Company recorded right-of-use assets, included in other assets on the balance sheet, totaling $ 16,142 as of July 1, 2019. Leases with an initial term of 12 months or less are not recorded on the balance sheet. The Company does not separate non-lease components from the lease components to which they relate, and instead accounts for each separate lease and non-lease component associated with that lease component as a single lease component for all underlying asset classes. The Company's lease liabilities do not include future lease payments related to options to extend or terminate lease agreements as it is not reasonably certain those options will be exercised. Lease expense recorded in the fiscal year ended June 30, 2020 under ASC Topic 842 was not materially different from lease expense that would have been recorded under the previous lease accounting standard. Other information concerning the Company's operating leases accounted for under ASC Topic 842 is as follows (in thousands): Classification As of June 30, 2020 Assets Right-of-use assets Other assets $ 14,315 Liabilities Current operating lease liabilities Accrued expenses $ 2,006 Long-term operating lease liabilities Other liabilities 14,013 Total lease liabilities $ 16,019 Classification Fiscal Year Ended June 30, 2020 Operating lease costs (1) Cost of sales $ 1,966 Selling, general and administrative 863 Sublease income Other income (expense) 38 Cash paid for amounts included in the measurement of operating lease liabilities Cash flows from operating activities 2,606 (1) Includes short-term leases, which are insignificant, and are not included in the lease liability. The lease liability for operating leases that contain variable escalating rental payments with scheduled increases that are based on the lesser of a stated percentage increase or the cumulative increase in an index, are determined using the stated percentage increase. The weighted average remaining lease term is 7.27 years. The weighted average discount rate determined based on the Company's incremental borrowing rate is 3.65 %, as of June 30, 2020. Future annual minimum lease payments for the following fiscal years as of June 30, 2020 are as follows: 91 Table of Contents Amount 2021 $ 2,548 2022 2,391 2023 2,442 2024 2,570 2025 2,308 2026 and thereafter 6,014 Total 18,273 Less imputed interest ( 2,254 ) Present value of lease liabilities $ 16,019 The following represents the Company's future minimum rental payments at June 30, 2019 for agreements classified as operating leases under ASC Topic 840: Amount 2020 $ 2,552 2021 2,541 2022 2,432 2023 2,489 2024 2,649 2025 and thereafter 8,577 Total $ 21,240 12. Tax Receivable Agreement Liability The Company has a Tax Receivable Agreement with the pre-IPO owners of the LLC that provides for the payment by the Company to the pre-IPO owners (or their permitted assignees) of 85 % of the amount of the benefits, if any, that the Company is deemed to realize as a result of (i) increases in tax basis and (ii) certain other tax benefits related to the Company entering into the Tax Receivable Agreement, including those attributable to payments under the Tax Receivable Agreement. These contractual payment obligations are obligations of the Company and not of the LLC. The Company's Tax Receivable Agreement liability was determined on an undiscounted basis in accordance with ASC 450, Contingencies , since the contractual payment obligations were deemed to be probable and reasonably estimable. For purposes of the Tax Receivable Agreement, the benefit deemed realized by the Company is computed by comparing the actual income tax liability of the Company (calculated with certain assumptions) to the amount of such taxes that the Company would have been required to pay had there been no increase to the tax basis of the assets of the LLC as a result of the purchases or exchanges, and had the Company not entered into the Tax Receivable Agreement. The following table reflects the changes to the Company's Tax Receivable Agreement liability: As of June 30, 2020 2019 Beginning balance $ 53,754 $ 55,046 Additions (reductions) to tax receivable agreement: Exchange of LLC Units for Class A Common Stock 1,041 2,676 Adjustment for change in estimated tax rate ( 1,672 ) ( 103 ) Payment under tax receivable agreement ( 3,458 ) ( 3,865 ) 49,665 53,754 Less current portion under tax receivable agreement ( 3,589 ) ( 3,592 ) Ending balance $ 46,076 $ 50,162 The Tax Receivable Agreement further provides that, upon certain mergers, asset sales or other forms of business combinations or other changes of control, the Company (or its successor) would owe to the pre-IPO owners of the LLC a lump-sum payment equal to the present value of all forecasted future payments that would have otherwise been made under the Tax 92 Table of Contents Receivable Agreement that would be based on certain assumptions, including a deemed exchange of LLC Units and that the Company would have sufficient taxable income to fully utilize the deductions arising from the increased tax basis and other tax benefits related to entering into the Tax Receivable Agreement. The Company also is entitled to terminate the Tax Receivable Agreement, which, if terminated, would obligate the Company to make early termination payments to the pre-IPO owners of the LLC. In addition, a pre-IPO owner may elect to unilaterally terminate the Tax Receivable Agreement with respect to such pre-IPO owner, which would obligate the Company to pay to such existing owner certain payments for tax benefits received through the taxable year of the election. When estimating the expected tax rate to use in order to determine the tax benefit expected to be recognized from the Company’s increased tax basis as a result of exchanges of LLC Units by the pre-IPO owners of the LLC, the Company continuously monitors changes in its overall tax posture, including changes resulting from new legislation and changes as a result of new jurisdictions in which the Company is subject to tax. As of June 30, 2020 and 2019, the Company recorded deferred tax assets of $ 111,511 and $ 110,545 , respectively, associated with basis differences in assets upon acquiring an interest in Malibu Boats Holdings, LLC and pursuant to making an election under Section 754 of the Internal Revenue Code of 1986 (the "Internal Revenue Code"), as amended. These basis differences are included in the overall partnership basis differences disclosed in Note 13. The aggregate Tax Receivable Agreement liability represents 85 % of the tax benefits that the Company expects to receive in connection with the Section 754 election. In accordance with the Tax Receivable Agreement, the next annual payment is anticipated approximately 75 days after filing the federal tax return due by April 15, 2021. 13. Income Taxes Malibu Boats, Inc. is taxed as a C corporation for U.S. income tax purposes and is therefore subject to both federal and state taxation at a corporate level. The LLC continues to operate in the United States as a partnership for U.S. federal income tax purposes. Income taxes are computed in accordance with ASC Topic 740, Income Taxes , and reflect the net tax effects of temporary differences between the financial reporting carrying amounts of assets and liabilities and the corresponding income tax amounts. The Company has deferred tax assets and liabilities and maintains valuation allowances where it is more likely than not that all or a portion of deferred tax assets will not be realized. To the extent the Company determines that it will not realize the benefit of some or all of its deferred tax assets, such deferred tax assets will be adjusted through the Company’s provision for income taxes in the period in which this determination is made. On December 22, 2017, the Tax Act was enacted which, among a number of its provisions, lowered the U.S. corporate tax rate from 35% to 21%, effective January 1, 2018. The Company's statutory tax rate for each of fiscal years 2020 and 2019 was 21% as a result of the change in statutory rates. For fiscal year 2018, the Company recorded an increase to income tax expense of $ 44,500 for the remeasurement of deferred taxes on the enactment date and the deferred tax impact related to the reduction in the tax receivables agreement liability. On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) was signed into law. The CARES Act contains significant business tax provisions, including modifications to the rules limiting the deductibility of net operating losses (NOLs), expensing of qualified improvement property (QIP) and business interest in Internal Revenue Code Sections 172(a) and 163(j), respectively. The effects of the new legislation are recognized upon enactment. The Company did not recognize any significant impact to income tax expense for fiscal year 2020 relating to the CARES Act. The components of provision for income taxes are as follows: 93 Table of Contents Fiscal Year Ended June 30, 2020 2019 2018 Current tax expense: Federal $ 8,062 $ 11,240 $ 10,111 State 1,979 3,368 1,758 Foreign 378 725 756 Total current 10,419 15,333 12,625 Deferred tax expense: Federal 7,849 5,336 51,358 State 917 1,609 ( 5,369 ) Foreign ( 109 ) ( 182 ) ( 196 ) Total deferred 8,657 6,763 45,793 Income tax expense $ 19,076 $ 22,096 $ 58,418 The income tax expense differs from the amount computed by applying the federal statutory income tax rate to income from continuing operations before income taxes. The sources and tax effects of the differences are as follows: Fiscal Year Ended June 30, 2020 2019 2018 Federal tax provision at statutory rate 21.0 % 21.0 % 28.0 % Change in federal statutory rate — — 36.2 State income taxes, net of federal benefit 2.9 4.4 3.9 Permanent differences attributable to partnership investment ( 0.2 ) ( 0.8 ) ( 0.1 ) Section 199 deductions — — ( 1.2 ) Non-controlling interest ( 0.9 ) ( 0.9 ) ( 1.0 ) Change in valuation allowance — — ( 0.4 ) Other, net — 0.4 — Total income tax expense on continuing operations 22.8 % 24.1 % 65.4 % The Company’s effective tax rate includes a rate benefit attributable to the fact that the Company’s subsidiary operated as a limited liability company which was not subject to federal income tax. Accordingly, the portion of the Company’s subsidiary earnings attributable to the non-controlling interest are subject to tax when reported as a component of the non-controlling interests’ taxable income. The components of the Company's net deferred income tax assets and liabilities at June 30, 2020 and 2019 are as follows: 94 Table of Contents As of June 30, 2020 2019 Deferred tax assets: Partnership basis differences $ 61,650 $ 69,632 Accrued liabilities and reserves 496 428 State tax credits and NOLs 5,004 3,902 Foreign tax credits 580 761 Acquisition costs — 6 Other 275 337 Less valuation allowance ( 14,582 ) ( 14,252 ) Total deferred tax assets 53,423 60,814 Deferred tax liabilities: Fixed assets and intangibles 467 545 Other 35 7 Total deferred tax liabilities 502 552 Total net deferred tax assets $ 52,921 $ 60,262 On an annual basis, the Company performs a comprehensive analysis of all forms of positive and negative evidence to determine whether realizability of deferred tax assets is more likely than not. During each interim period, the Company updates its annual analysis for significant changes in the positive and negative evidence. At June 30, 2020 and 2019, the Company concluded that $ 14,582 and $ 14,252 , respectively, of valuation allowance against deferred tax assets was necessary. The Company continues to record the valuation allowance on state net operating losses generated by current and future amortization deductions (with respect to the Section 754 election) that are reported in the Tennessee corporate tax return without offsetting income, which is taxable at the LLC. These net operating losses have a 15 year carryover and will expire, if unused, between 2030 and 2035. This also includes a valuation allowance in the amount of $ 580 related to foreign tax credit carryforward that is not expected to be utilized in the future. Unrecognized tax benefits are discussed in the Company's accounting policy for income taxes (Refer to Note 1 on Income Taxes for more information). The Company has filed federal and state income tax returns that remain open to examination for fiscal years 2017 through 2019, while its subsidiaries, Malibu Boats Holdings, LLC and Malibu Boats Pty Ltd., remain open to examination for fiscal years 2016 through 2019. The Company closed the IRS examination of its June 30, 2015 return during the fourth quarter of fiscal year 2019, resulting in an immaterial adjustment to its tax liability. A reconciliation of changes in the amount of unrecognized tax benefits for the fiscal years ended June 30, 2020, 2019, 2018 is as follows: Fiscal Year Ended June 30, 2020 2019 2018 Balance as of July 1 $ 1,401 $ 329 $ 113 Additions based on tax positions taken during the current period 314 1,216 216 Reductions for settlements with taxing authorities ( 93 ) ( 144 ) — Reductions due to statute settlements ( 64 ) — — Reductions for tax positions of prior years ( 113 ) — — Balance as of June 30 $ 1,445 $ 1,401 $ 329 In fiscal year 2020, the Company settled $ 93 related to its state tax filing positions. Also in fiscal year 2020, the Company reduced its uncertain tax positions $ 92 as a result of a method change filed in connection with inventory subject to Internal Revenue Code Sec. 263A, and recorded $ 203 in connection with its current year state filing positions. As of June 30, 2020, it is reasonably possible that $ 307 of the total unrecognized tax benefits recorded will reverse within the next twelve months. Of the total unrecognized tax benefits recorded on the balance sheet, $ 1,226 would impact the effective tax rate once settled. As discussed in Note 1 to the Consolidated Financial Statements, our policy is to accrue interest related to potential underpayment of income taxes within the provision for income taxes. At June 30, 2020, we had $ 231 of accrued interest related to unrecognized tax benefits. 95 Table of Contents The Company did not provide for U.S. federal, state income taxes or foreign withholding taxes in fiscal year 2020 on the outside basis difference of its non-U.S. subsidiary, as such foreign earnings are considered to be permanently reinvested. The estimated income and withholding tax liability associated with the remittance of these earnings is nominal. 14. Fair Value Measurements In determining the fair value of certain assets and liabilities, the Company employs a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. As defined in ASC Topic 820, Fair Value Measurements and Disclosures , fair value is the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (i.e., the exit price). Financial assets and financial liabilities recorded on the consolidated balance sheets at fair value are categorized based on the reliability of inputs to the valuation techniques as follows: • Level 1—Financial assets and financial liabilities whose values are based on unadjusted quoted prices in active markets for identical assets. • Level 2—Financial assets and financial liabilities whose values are based on quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in non-active markets; or valuation models whose inputs are observable, directly or indirectly, for substantially the full term of the asset or liability. • Level 3—Financial assets and financial liabilities whose values are based on prices or valuation techniques that require inputs that are both unobservable and significant to the overall fair value measurement. These inputs reflect the Company’s estimates of the assumptions that market participants would use in valuing the financial assets and financial liabilities. The hierarchy gives the highest priority to Level 1 inputs and the lowest priority to Level 3 inputs. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, the level in the fair value hierarchy within which the fair value measurement in its entirety falls has been determined based on the lowest level input that is significant to the fair value measurement in its entirety. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability. Assets and liabilities that had recurring fair value measurements as of June 30, 2020 and 2019 were as follows: Fair Value Measurements at Reporting Date Using Total Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) As of June 30, 2020: Interest rate swap not designated as cash flow hedge $ — $ — $ — $ — Total assets at fair value $ — $ — $ — $ — As of June 30, 2019: Interest rate swap not designated as cash flow hedge $ 68 $ — $ 68 $ — Total liabilities at fair value $ 68 $ — $ 68 $ — Fair value measurement for the Company's interest rate swap are classified under Level 2 because such measurements are based on significant other observable inputs. There were no transfers of assets or liabilities between Level 1 and Level 2 as of June 30, 2020 or 2019, respectively. The Company’s nonfinancial assets and liabilities that have nonrecurring fair value measurements include property, plant and equipment, goodwill and intangibles. In assessing the need for goodwill impairment, management relies on a number of factors, including operating results, business plans, economic projections, anticipated future cash flows, transactions and marketplace data. Accordingly, these fair value measurements fall in Level 3 of the fair value hierarchy. The Company generally uses projected cash flows, discounted as necessary, to estimate the fair values of property, plant and equipment and intangibles using key inputs such as management’s 96 Table of Contents projections of cash flows on a held-and-used basis (if applicable), management’s projections of cash flows upon disposition and discount rates. Accordingly, these fair value measurements fall in Level 3 of the fair value hierarchy. These assets and certain liabilities are measured at fair value on a nonrecurring basis as part of the Company’s impairment assessments and as circumstances require. There were no impairments recorded in connection with tangible and intangible long-lived assets for fiscal years ended June 30, 2020, 2019 or 2018, respectively. 15. Stockholders' Equity The Company is authorized to issue 150,000,000 shares of capital stock, consisting of 100,000,000 shares of Class A Common Stock, 25,000,000 shares of Class B Common Stock, and 25,000,000 shares of Preferred Stock, par value $ 0.01 per share. Offerings On August 14, 2017, the Company completed an offering of 2,300,000 shares of Class A Common Stock that were issued and sold by the Company at a price to the public of $ 24.05 per share (the "Offering"). This included 300,000 shares issued and sold by the Company pursuant to the option granted to the underwriters, which was exercised concurrently with the closing of the Offering. The aggregate gross proceeds from the Offering was $ 58,075 . Of these proceeds, the Company received $ 55,317 after deducting $ 2,758 in underwriting discounts and commissions. Of the net proceeds received from the Offering, $ 50,000 was used to repay amounts outstanding on its loans under the Credit Agreement (Refer to Note 10). The remaining net proceeds were used for general working capital purposes. Exchange of LLC Units for Class A Common Stock During fiscal year 2018, eleven non-controlling LLC Unit holders exchanged LLC Units for the issuance of Class A Common Stock. In connection with the exchange, one share of Class B Common Stock was automatically transferred to the Company and retired. As of June 30, 2018, the Company had a total of 17 shares of its Class B Common Stock issued and outstanding. During fiscal year 2019, five non-controlling LLC Unit holders exchanged LLC Units for the issuance of Class A Common Stock. In connection with the exchange, two shares of Class B Common Stock was automatically transferred to the Company and retired. As of June 30, 2019, the Company had a total of 15 shares of its Class B Common Stock issued and outstanding. During fiscal year 2020, four non-controlling LLC Unit holders exchanged LLC Units for the issuance of Class A Common Stock. In connection with the exchange, no shares of Class B Common Stock were automatically transferred to the Company and retired. As of June 30, 2020, the Company had a total of 15 shares of its Class B Common Stock issued and outstanding. Stock Repurchase Program On June 18, 2019, the board of directors of the Company authorized a stock repurchase program to allow for repurchase of up to $ 35,000 of the Company’s Class A Common Stock and the LLC's LLC units for the period from July 1, 2019 to July 1, 2020 (the “Repurchase Program”). Under the Repurchase Program, the Company may repurchase its Class A Common Stock and the LLC Units at any time or from time to time, without prior notice, subject to market conditions and other considerations. The Company’s repurchases may be made through 10b5-1 plans, open market purchases, privately negotiated transactions, block purchases or other transactions. The Company intends to fund repurchases under the Repurchase Program from cash on hand. In accordance with the LLC Agreement, in connection with any repurchases by the Company under the Repurchase Program, the LLC must redeem an equal number of LLC Units held by the Company as shares of Class A Common Stock repurchased by the Company at a redemption price equal to the redemption price paid for the Class A Common Stock repurchased by the Company. The Company has no obligation to repurchase any shares under the Repurchase Program and may suspend or discontinue it at any time. During the fiscal year ended June 30, 2020, we repurchased 483,679 shares of Class A Common Stock for $ 13.8 million in cash including related fees and expenses. During the fiscal year ended June 30, 2019, no shares were repurchased under the existing Repurchase Program. The program expired on July 1, 2020. 97 Table of Contents On August 27, 2020, our Board of Directors authorized a new stock repurchase program (the "New Repurchase Program") for the repurchase of up to $ 50,000 of Class A Common Stock and the LLC Units for the period from September 2, 2020 to July 1, 2021. No shares have been repurchased under the New Repurchase Program. Class A Common Stock and Class B Common Stock Voting Rights Holders of Class A Common Stock and Class B Common Stock will have voting power over Malibu Boats, Inc., the sole managing member of the LLC, at a level that is consistent with their overall equity ownership of the Company's business. Pursuant to the Company's 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 the Company's stockholders on which the holders of Class A Common Stock are entitled to vote. Each holder of Class B Common Stock shall be 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 the Company's stockholders on which the holders of Class B Common Stock are entitled to vote. Accordingly, the holders of LLC Units collectively have a number of votes that is equal to the aggregate number of LLC Units that they hold. Subject to any rights that may be applicable to any then outstanding preferred stock, the Company's Class A and Class B Common Stock vote as a single class on all matters presented to the Company's stockholders for their vote or approval, except as otherwise provided in the Company's certificate of incorporation or bylaws or required by applicable law. Holders of the Company's Class A and Class B Common Stock do not have cumulative voting rights. Except in respect of matters relating to the election and removal of directors on the Company's board of directors and as otherwise provided in the Company's certificate of incorporation, the Company's bylaws, or as required by law, all matters to be voted on by the Company's stockholders must be approved by a majority of the shares present in person or by proxy at the meeting and entitled to vote on the subject matter. Equity Consideration On July 6, 2017, in connection with the acquisition of Cobalt, the Company issued 39,262 shares of Class A Common Stock to the William Paxson St. Clair, Jr., a former owner of Cobalt, as equity consideration. Refer to Note 4 for more information on the acquisition. Dividends Subject to preferences that may apply to any shares of preferred stock outstanding at the time, the holders of the Company's Class A Common Stock will be entitled to share equally, identically and ratably in any dividends that the board of directors may determine to issue from time to time. Holders of the Company's Class B Common Stock do not have any right to receive dividends. Liquidation Rights In the event of any voluntary or involuntary liquidation, dissolution or winding up of our affairs, holders of the Company's Class A Common Stock would be entitled to share ratably in the Company's assets that are legally available for distribution to stockholders after payment of its debts and other liabilities. If the Company has any preferred stock outstanding at such time, holders of the preferred stock may be entitled to distribution and/or liquidation preferences. In either such case, the Company must pay the applicable distribution to the holders of its preferred stock before it may pay distributions to the holders of its Class A Common Stock. Holders of the Company Class B Common Stock do not have any right to receive a distribution upon a voluntary or involuntary liquidation, dissolution or winding up of the Company's affairs. Other Rights Holders of the Company's Class A Common Stock will have no preemptive, conversion or other rights to subscribe for additional shares. The rights, preferences and privileges of the holders of the Company's Class A Common Stock will be subject to, and may be adversely affected by, the rights of the holders of shares of any series of the Company's preferred stock that the Company may designate and issue in the future. Preferred Stock Though the Company currently has no plans to issue any shares of preferred stock, its board of directors has the authority, without further action by the Company's stockholders, to designate and issue up to 25,000,000 shares of preferred stock in one or more series. The Company's board of directors may also designate the rights, preferences and privileges of the holders of each such series of preferred stock, any or all of which may be greater than or senior to those granted to the holders of common stock. Though the actual effect of any such issuance on the rights of the holders of common stock will not be known until the 98 Table of Contents Company's board of directors determines the specific rights of the holders of preferred stock, the potential effects of such an issuance include: • diluting the voting power of the holders of common stock; • reducing the likelihood that holders of common stock will receive dividend payments; • reducing the likelihood that holders of common stock will receive payments in the event of the Company's liquidation, dissolution, or winding up; and • delaying, deterring or preventing a change-in-control or other corporate takeover. LLC Units In connection with the recapitalization we completed in connection with our IPO, the LLC Agreement was amended and restated to, among other things; modify its capital structure by replacing the different classes of interests previously held by the LLC unit holders to a single new class of units called “LLC Units.” As a result of our IPO and the recapitalization we completed in connection with our IPO, the Company holds LLC Units in the LLC and is the sole managing member of the LLC. Holders of LLC Units do not have voting rights under the LLC Agreement. Further, the LLC and the pre-IPO owners entered into the Exchange Agreement under which (subject to the terms of the Exchange Agreement) they have the right to exchange their LLC Units for shares of the Company's 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 the Company's 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. As of June 30, 2020, the Company held 20,595,969 LLC Units, representing a 96.6 % economic interest in the LLC, while non-controlling LLC Unit holders held 730,652 LLC Units, representing a 3.4 % interest in the LLC. Refer to Note 3 for additional information on non-controlling interest. As discussed in Note 3, net profits and net losses of the LLC will generally be allocated to the LLC’s members (including the Company) pro rata in accordance with the percentages of their respective limited liability company interests. The LLC Agreement provides for cash distributions to the holders of LLC Units if the Company determines that the taxable income of the LLC will give rise to taxable income for its members. In accordance with the LLC Agreement, the Company intends to cause the LLC to make cash distributions to holders of LLC Units for purposes of funding their tax obligations in respect of the income of the LLC that is allocated to them. 16. Stock-Based Compensation Equity Awards Issued Under the Malibu Boats, Inc. Long-Term Incentive Plan On January 6, 2014, the Company’s board of directors adopted the Malibu Boats, Inc. Incentive Plan. The Incentive Plan, which became effective on January 1, 2014, reserves for issuance up to 1,700,000 shares of Malibu Boats, Inc. Class A Common Stock for the Company’s employees, consultants, members of its board of directors and other independent contractors at the discretion of the compensation committee. Incentive stock awards authorized under the Incentive Plan including unrestricted shares of Class A Common Stock, stock options, SARs, restricted stock, restricted stock units, dividend equivalent awards and performance awards. As of June 30, 2020, there were 713,346 shares available for future issuance under the Incentive Plan. On November 6, 2017, the Company granted 78,900 restricted stock units and restricted stock awards to certain key employees. The grant date fair value of these awards was $ 2,436 based on a stock price of $ 30.87 per share on the date of grant. Under the terms of the agreements, approximately 72 % of the awards vest in substantially equal annual installments over a four year period, and the remaining 28 % of the awards vest in tranches based on the achievement of annual performance targets. Compensation costs associated with performance based awards are recognized over the requisite service period based on probability of achievement. On November 6, 2017, the Company granted 40,000 options to certain key employees to purchase from the Company shares of Class A Common Stock at a price of $ 30.87 per share. The term of the options commenced on November 6, 2017 and will expire on November 5, 2023, the day before the sixth anniversary of the grant date. Under the terms of the agreements, approximately 50 % of the awards will vest ratably over four years on each anniversary of their grant date and approximately 50 % of the awards will vest in tranches based on the achievement of annual or cumulative performance targets. At November 6, 2017, the fair value of the option awards was $ 405 and is estimated using the Black-Scholes option-pricing model with the following assumptions: risk-free rate of 2.0 %, expected volatility of 37.1 %, expected term of 4.25 years, and no dividends. Stock-based compensation expense attributable to the time based options is amortized on a straight-line basis over the requisite 99 Table of Contents service period. Compensation costs associated with performance based option awards are recognized over the requisite service period based on probability of achievement. On August 22, 2018, the Company granted 50,000 options to certain key employees to purchase from the Company shares of Class A Common Stock at a price of $ 42.13 per share. The term of the options commenced on August 22, 2018 and will expire on August 21, 2024, the day before the sixth anniversary of the grant date. Under the terms of the agreements, the awards will vest ratably over four years on each anniversary of their grant date. At August 22, 2018, the fair value of the option awards was $ 733 and was estimated using the Black-Scholes option-pricing model with the following assumptions: risk-free rate of 2.7 %, expected volatility of 38.4 %, expected term of 4.25 years, and no dividends. Stock-based compensation expense attributable to the service based options is amortized on a straight-line basis over the requisite service period. Compensation costs associated with performance based option awards are recognized over the requisite service period based on probability of achievement in accordance with ASC Topic 718, Compensation—Stock Compensation . On November 1, 2018, the Company granted 35,000 restricted stock units and 48,000 restricted stock awards to key employees under the Incentive Plan. The grant date fair value of these awards was $ 3,474 based on a stock price of $ 41.85 per share on the date of grant. Under the terms of the agreements, 71 % of the awards will vest ratably over four years beginning on November 6, 2019 and approximately 29 % of the awards will vest in tranches based on the achievement of annual or cumulative performance targets. Compensation costs associated with performance based awards are recognized over the requisite service period based on probability of achievement in accordance with ASC Topic 718, Compensation—Stock Compensation. On January 14, 2019, the Company granted 19,973 options to certain key employees to purchase from the Company shares of Class A Common Stock at a price of $ 37.55 per share. The term of the options commenced on January 14, 2019 and will expire on January 13, 2025, the day before the sixth anniversary of the grant date. Under the terms of the agreements, the awards will vest ratably over four years on each anniversary of their grant date. At January 14, 2019, the fair value of the option awards was $ 263 and was estimated using the Black-Scholes option-pricing model with the following assumptions: risk-free rate of 2.53 %, expected volatility of 39.0 %, expected term of 4.25 years, and no dividends. Stock-based compensation expense attributable to the service based options is amortized on a straight-line basis over the requisite service period. Compensation costs associated with performance based option awards are recognized over the requisite service period based on probability of achievement in accordance with ASC Topic 718, Compensation—Stock Compensation . Risk-free interest rate. The risk-free rate for the expected term of the option is based on the U.S. Treasury yield curve at the date of grant. Expected term. The Company used the simplified method to estimate the expected term of stock options. The simplified method assumes that employees will exercise share options evenly between the period when the share options are vested and ending on the date when the share options would expire. Expected volatility. The Company determined expected volatility based on its historical volatility calculated using daily observations of the closing price of its publicly traded common stock. Expected dividend. The Company has not estimated any dividend yield as the Company currently does not pay a dividend and does not anticipate paying a dividend over the expected term. On November 22, 2019, under the Incentive Plan, the Company granted approximately 43,000 restricted service-based stock units and 28,000 restricted service based stock awards to key employees under the Incentive Plan. The grant date fair value of these awards was $ 2,714 based on a stock price of $ 38.05 per share on the date of grant. Under the terms of the agreements, approximately 60 % of the awards will vest ratably over three years beginning on November 6, 2019 and approximately 40 % of the awards will vest ratably over four years beginning on November 6, 2019. Stock-based compensation expense attributable to the service based units and awards is amortized on a straight-line basis over the requisite service period. On November 22, 2019, under the Incentive Plan, the Company granted to key employees a target amount of approximately 21,000 restricted stock awards with a performance condition. The number of shares that will ultimately be issued, if any, is based on the attainment of a specified amount of earnings during the fiscal year ending June 30, 2022. The maximum number of shares that can be issued if an elevated earnings target is met is approximately 32,000 . The grant date fair value of the awards were estimated to be $ 810 , based on a stock price of $ 38.05 . Compensation costs associated with the performance awards are recognized over the requisite service period based on probability of achievement in accordance with ASC Topic 718, Compensation—Stock Compensation . On November 22, 2019, under the Incentive Plan, the Company granted to key employees a target amount of approximately 21,000 stock awards with a market condition. The number of shares that will ultimately be issued, if any, is 100 Table of Contents based on a total shareholder return ("TSR") computation that involves comparing the movement in the Company's stock price to movement in a market index from the grant date through November 22, 2022. The maximum number of shares that can be issued if an elevated TSR target is met is approximately 42,000 . The grant date fair value of the awards were estimated to be $ 1,039 , which is estimated using a Monte Carlo simulation. The Monte Carlo simulation model utilizes multiple input variables that determine the probability of satisfying the market condition stipulated in the award grant and calculates the fair market value for the stock award. Compensation costs are recognized over the requisite service period based on probability of achievement in accordance with ASC Topic 718, Compensation—Stock Compensation . The following table presents the number, grant date stock price per share, and weighted-average exercise price per share of the Company’s employee option awards: Fiscal Year Ended June 30, 2020 2019 2018 Shares Weighted Average Exercise Price/Share Shares Weighted Average Exercise Price/Share Shares Weighted Average Exercise Price/Share Total outstanding Options at beginning of year 185,473 $ 32.51 144,000 $ 27.24 104,000 $ 25.85 Options granted — — 69,973 40.82 40,000 30.87 Options exercised ( 12,125 ) 31.08 ( 28,500 ) 26.29 — — Options canceled — — — — — — Outstanding options at end of year 173,348 $ 32.61 185,473 $ 32.51 144,000 $ 27.24 Exercisable at end of year 74,869 $ 29.67 33,500 $ 26.97 26,000 $ 25.85 The Company expects all outstanding options to vest. The weighted average remaining contractual life of options outstanding and options outstanding and exercisable as of June 30, 2020 was 3.56 years and 3.31 years, respectively. The total intrinsic value of options exercised during the year ended June 30, 2020 was $ 200 . The total intrinsic value of options outstanding and options outstanding and exercisable at June 30, 2020 was $ 3,532 and $ 1,668 , respectively. The total intrinsic values are based on the Company’s closing stock price on the last trading day of the applicable year for in-the-money options. The Company's non-employee directors receive an annual retainer for their services as directors consisting of both a cash retainer and equity awards in the form of Class A Common Stock or restricted stock units. Directors may elect that their cash annual retainer be converted into either fully vested shares of Class A Common Stock or restricted stock units paid on a deferral basis. Equity awards issued to directors are fully vested at the date of grant. Directors receiving restricted stock units as compensation for services have no rights as a stockholder of the Company, no dividend rights (except with respect to dividend equivalent rights), and no voting rights until Class A Common Stock is actually issued to them upon separation from service or change in control as defined in the Incentive Plan. If dividends are paid by the Company to its stockholders, directors would be entitled to receive an equal number of restricted stock units based on their proportional interest. For the fiscal year ended June 30, 2018, the Company issued 4,567 shares of Class A Common Stock and 23,838 restricted stock units with a weighted-average grant date fair value of $ 30.52 to its non-employee directors for their services as directors pursuant to the Incentive Plan. For the fiscal year ended June 30, 2019, the Company issued 853 shares of Class A Common Stock and 17,663 restricted stock units with a weighted-average grant date fair value of $ 42.29 to its non-employee directors for their services as directors pursuant to the Incentive Plan. For the fiscal year ended June 30, 2020, the Company issued 2,870 shares of Class A Common Stock and 22,206 restricted stock units with a weighted-average grant date fair value of $ 32.93 to its non-employee directors for their services as directors pursuant to the Incentive Plan. The following table presents the number and weighted-average grant date fair value of the Company’s director and employee restricted stock units and restricted stock awards: 101 Table of Contents Fiscal Year Ended June 30, 2020 2019 2018 Number of Restricted Stock Units and Restricted Stock Awards Outstanding Weighted Average Grant Date Fair Value Number of Restricted Stock Units and Restricted Stock Awards Outstanding Weighted Average Grant Date Fair Value Number of Restricted Stock Units and Restricted Stock Awards Outstanding Weighted Average Grant Date Fair Value Total Non-vested Restricted Stock Units and Restricted Stock Awards at beginning of year 226,240 $ 29.64 227,154 $ 20.84 225,854 $ 15.77 Granted 168,048 37.49 107,321 41.63 102,738 30.80 Vested ( 112,084 ) 26.89 ( 103,811 ) 22.98 ( 99,613 ) 19.57 Forfeited ( 4,508 ) 34.27 ( 4,424 ) 25.00 ( 1,825 ) 22.58 Total Non-vested Restricted Stock Units and Restricted Stock Awards at end of year 277,696 $ 35.43 226,240 $ 29.64 227,154 $ 20.84 As of June 30, 2020, the weighted-average years non-vested for service period awards and performance target awards was approximately 0.8 years and 0.5 year, respectively. Stock compensation expense attributable to all of the Company's equity awards was $ 3,042 , $ 2,607 and $ 1,973 for fiscal years 2020, 2019 and 2018, respectively, is included in general and administrative expense in the Company's consolidated statement of operations and comprehensive income. The cash flow effects resulting from all equity awards were reflected as noncash operating activities. During fiscal year 2020, the Company withheld approximately 25,469 shares at an aggregate cost of approximately $ 831 , as permitted by the applicable equity award agreements, to satisfy employee tax withholding requirements for employee share-based equity awards that have vested. As of June 30, 2020 and 2019, unrecognized compensation cost related to nonvested, share-based compensation was $ 7,931 and $ 6,431 , respectively. 17. Net Earnings Per Share Basic net income per share of Class A Common Stock is computed by dividing net income attributable to the Company's earnings by the weighted average number of shares of Class A Common Stock outstanding during the period. The weighted average number of shares of Class A Common Stock outstanding used in computing basic net income per share includes fully vested restricted stock units awarded to directors that are entitled to participate in distributions to common shareholders through receipt of additional units of equivalent value to the dividends paid to Class A Common Stock holde rs. Diluted net income per share of Class A Common Stock is computed similarly to basic net income per share except the weighted average shares outstanding are increased to include additional shares from the assumed exercise of any common stock equivalents using the treasury method, if dilutive. The Company’s LLC Units and non-qualified stock options are considered common stock equivalents for this purpose. The number of additional shares of Class A Common Stock related to these common stock equivalents and stock options are calculated using the treasury stock method. Stock awards with a performance condition that are based on the attainment of a specified amount of earnings are only included in the computation of diluted earnings per share to the extent that the performance condition would be achieved based on the current amount of earnings, and only if the effect would be dilutive. Stock awards with a market condition that are based on the performance of the Company's stock price in relation to a market index over a specified time period are only included in the computation of diluted earnings per share to the extent that the shares would be issued based on the current market price of the Company's stock in relation to the market index, and only if the effect would be dilutive. Basic and diluted net income per share of Class A Common Stock has been computed as follows (in thousands, except share and per share amounts): 102 Table of Contents Fiscal Year Ended June 30, 2020 2019 2018 Basic: Net income attributable to Malibu Boats, Inc. $ 61,562 $ 66,066 $ 27,613 Shares used in computing basic net income per share: Weighted-average Class A Common Stock 20,455,895 20,645,973 20,012,627 Weighted-average participating restricted stock units convertible into Class A Common Stock 206,855 186,472 166,754 Basic weighted-average shares outstanding 20,662,750 20,832,445 20,179,381 Basic net income per share $ 2.98 $ 3.17 $ 1.37 Diluted: Net income attributable to Malibu Boats, Inc. $ 61,562 $ 66,066 $ 27,613 Shares used in computing diluted net income per share: Basic weighted-average shares outstanding 20,662,750 20,832,445 20,179,381 Restricted stock units granted to employees 131,314 119,476 101,563 Weighted-average stock options convertible into Class A Common Stock 15,721 14,618 266 Weighted-average market performance awards convertible into Class A Common Stock 42,576 — — Diluted weighted-average shares outstanding 1 20,852,361 20,966,539 20,281,210 Diluted net income per share $ 2.95 $ 3.15 $ 1.36 1 The Company excluded 826,250 , 930,125 , and 1,205,249 potentially dilutive shares from the calculation of diluted net income per share for the fiscal year ended June 30, 2020, 2019, and 2018, respectively, as these units would have been antidilutive. The shares of Class B Common Stock do not share in the earnings or losses of Malibu Boats, Inc. and are therefore not included in the calculation. Accordingly, basic and diluted net income per share of Class B Common Stock has not been presented. 18. Commitments and Contingencies Repurchase Commitments In connection with its dealers’ wholesale floor-plan financing of boats, the Company has entered into repurchase agreements with various lending institutions. The reserve methodology used to record an estimated expense and loss reserve in each accounting period is based upon an analysis of likely repurchases based on current field inventory and likelihood of repurchase. Subsequent to the inception of the repurchase commitment, the Company evaluates the likelihood of repurchase and adjusts the estimated loss reserve accordingly. When a potential loss reserve is recorded it is presented in accrued liabilities in the accompanying consolidated balance sheet. If the Company were obligated to repurchase a significant number of units under any repurchase agreement, its business, operating results and financial condition could be adversely affected. The total amount financed under the floor financing programs with repurchase obligations was $ 161,356 and $ 239,315 as of June 30, 2020 and 2019, respectively. Repurchases and subsequent sales are recorded as a revenue transaction. The net difference between the repurchase price and the resale price is recorded against the loss reserve and presented in cost of sales in the accompanying consolidated statements of operations and comprehensive income. For fiscal year 2020, the Company repurchased two units from a lender of one of its 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, the Company repurchased eight units from a lender of two of its former dealers and those units were subsequently resold in fiscal year 2020 above their cost and at minimal margin loss. For fiscal year 2018, the Company did not repurchase any units under its repurchase agreements. Accordingly, the Company did not carry a reserve for repurchases as of June 30, 2020 and 2019, respectively. The Company has collateralized receivables financing arrangements with a third-party floor plan financing provider for European dealers. Under terms of these arrangements, the Company transfers the right to collect a trade receivable to the financing provider in exchange for cash but agrees to repurchase the receivable if the dealer defaults. Since the transfer of the 103 Table of Contents receivable to the financing provider does not meet the conditions for a sale under ASC Topic 860, Transfers and Servicing , the Company continues to report the transferred trade receivable in other current assets with an offsetting balance recorded as a secured obligation in accrued expenses in the Company's consolidated balance sheet. As of June 30, 2020 and 2019, the Company had financing receivables of $ 375 and $ 768 , respectively, recorded in other current assets and accrued expenses related to these arrangements. Contingencies Product Liability The Company is engaged in a business that exposes it to claims for product liability and warranty claims in the event the Company’s products actually or allegedly fail to perform as expected or the use of the Company’s products results, or is alleged to result, in property damage, personal injury or death. Although the Company maintains product and general liability insurance of the types and in the amounts that the Company believes are customary for the industry, the Company is not fully insured against all such potential claims. The Company may have the ability to refer claims to its suppliers and their insurers to pay the costs associated with any claims arising from the suppliers’ products. The Company’s insurance covers such claims that are not adequately covered by a supplier’s insurance and provides for excess secondary coverage above the limits provided by the Company’s suppliers. The Company may experience legal claims in excess of its insurance coverage or claims that are not covered by insurance, either of which could adversely affect its business, financial condition and results of operations. Adverse determination of material product liability and warranty claims made against the Company could have a material adverse effect on its financial condition and harm its reputation. In addition, if any of the Company products are, or are alleged to be, defective, the Company may be required to participate in a recall of that product if the defect or alleged defect relates to safety. These and other claims that the Company faces could be costly to the Company and require substantial management attention. Refer to Note 9 for discussion of warranty claims. The Company insures against product liability claims and believes there are no material product liability claims as of June 30, 2020 that would not be covered by our insurance. Litigation Certain conditions may exist which could result in a loss, but which will only be resolved when future events occur. The Company, in consultation with its legal counsel, assesses such contingent liabilities, and such assessments inherently involve an exercise of judgment. If the assessment of a contingency indicates that it is probable that a loss has been incurred, the Company accrues for such contingent loss when it can be reasonably estimated. If the assessment indicates that a potentially material loss contingency is not probable but reasonably estimable, or is probable but cannot be estimated, the nature of the contingent liability, together with an estimate of the range of possible loss if determinable and material, is disclosed. If the assessment of a contingency deemed to be both probable and reasonably estimable involves a range of possible losses, the amount within the range that appears at the time to be a better estimate than any other amount within the range would be accrued. When no amount within the range is a better estimate than any other amount, the minimum amount in the range is accrued even though the minimum amount in the range is not necessarily the amount of loss that will be ultimately determined. Estimates of potential legal fees and other directly related costs associated with contingencies are not accrued but rather are expensed as incurred. Except as disclosed below, management does not believe there are any pending claims (asserted or unasserted) at June 30, 2020 or June 30, 2019 that will have a material adverse impact on the Company’s financial condition, results of operations or cash flows. Legal Proceedings On January 12, 2018, the Company filed suit against Skier’s Choice, Inc., or "Skier’s Choice," in the U.S. District Court for the Eastern District of Tennessee, seeking monetary and injunctive relief. The Company's complaint alleges Skier’s Choice’s infringement of three utility patents - U.S. Patent Nos. 9,260,161, 8,578,873, and 9,199,695 - related to wake surfing technology. Skier’s Choice denied liability arising from the causes of action alleged in the Company's complaint and filed counterclaims alleging invalidity of the asserted patents. On June 19, 2019, the Company filed a second action against Skier’s Choice in the U.S. District Court for the Eastern District of Tennessee, seeking monetary and injunctive relief. The Company’s complaint alleges Skier’s Choice’s surf systems on its Moomba and Supra lines of boats infringe U.S. Patent No. 10,322,777, a patent related to wake surfing technology. Skier’s Choice denied liability arising from the causes of action alleged in the Company's complaint and filed counterclaims alleging invalidity of the asserted patents. On June 27, 2019, Skier’s Choice filed a motion to consolidate these two actions, and to continue deadlines in the earlier case for nine months, which the Company opposed. On August 22, 2019, the motion for consolidation was referred by Judge Thomas Varlan to Magistrate Judge Bruce Guyton, and the two cases were stayed pending resolution of that motion. On November 27, 2019, Judge Guyton ordered the two cases to be consolidated. On January 7, 2020, the consolidated cases were reassigned to Judge Jon McCalla. On January 23, 2020, Judge McCalla issued a Scheduling Order, scheduling trial on the consolidated cases to begin on September 29, 2020. 104 Table of Contents On August 25, 2020, Judge McCalla issued a claim construction order and set a scheduling conference for August 27, 2020, for purposes of resetting the pretrial calendar and trial dates. The Company intends to vigorously pursue this litigation to enforce its rights in its patented technology and believes that Skier’s Choice’s counterclaims are without merit. 19. Related Party Transactions As of June 30, 2020, there were two non-employee members of the Company's board of directors that are also original shareholders of the Company and receive an annual retainer as compensation for services rendered. On November 2, 2018, one non-employee member of the Company's board of directors that is also an original shareholder departed from the board. For the fiscal years ended June 30, 2020, 2019 and 2018, $ 310 , $ 347 and $ 421 , respectively, was paid to these directors in both cash and equity for their services. Of the amount paid, $ 51 was a prepayment for services through the 2020 and 2019 annual meetings for both of the years ended June 30, 2020 and 2019 . 20. Segment Reporting The Company has three reportable segments, Malibu, Cobalt and Pursuit. The Malibu segment participates in the manufacturing, distribution, marketing and sale of Malibu and Axis performance sports boats throughout the world. The Cobalt and Pursuit segments participate in the manufacturing, distribution, marketing and sale of Cobalt and Pursuit boats, respectively, throughout the world. The Company revised its segment reporting effective July 1, 2019 to conform to changes in its internal management reporting based on the Company’s boat manufacturing operations. Prior to this change in reporting segments, the Company had four reportable segments, Malibu U.S., Malibu Australia, Cobalt and Pursuit. The Company now aggregates Malibu U.S. and Malibu Australia into one reportable segment as they have similar economic characteristics and qualitative factors. All segment information in the accompanying consolidated financial statements has been revised to conform to the Company’s current reporting segments for comparison purposes. The following table presents financial information for the Company’s reportable segments for fiscal years ended June 30, 2020, 2019, and 2018. 105 Table of Contents Fiscal Year Ended June 30, 2020 Malibu Cobalt Pursuit 1 Total Net sales $ 354,769 $ 174,768 $ 123,626 $ 653,163 Depreciation and amortization 8,809 5,258 4,313 18,380 Net income before provision for income taxes 55,567 17,275 10,890 83,732 Capital expenditures 10,260 8,850 22,181 41,291 Long-lived assets 49,771 121,508 114,196 285,475 Total assets $ 194,502 $ 153,820 $ 129,024 $ 477,346 Fiscal Year Ended June 30, 2019 Malibu Cobalt Pursuit 1 Total Net sales $ 374,611 $ 206,598 $ 102,807 $ 684,016 Depreciation and amortization 7,674 5,252 3,034 15,960 Net income before provision for income taxes 54,160 28,691 8,946 91,797 Capital expenditures 9,153 4,404 4,381 17,938 Long-lived assets 49,207 117,702 96,312 263,221 Total assets $ 185,154 $ 151,481 $ 114,679 $ 451,314 Fiscal Year Ended June 30, 2018 Malibu Cobalt Pursuit 1 Total Net sales $ 316,687 $ 180,315 $ — $ 497,002 Depreciation and amortization 7,468 5,386 — 12,854 Net income before provision for income taxes 69,670 19,717 — 89,387 Capital expenditures 9,279 1,170 — 10,449 Long-lived assets 48,784 118,512 — 167,296 Total assets $ 208,152 $ 157,616 — $ 365,768 1 Represents the results of Pursuit since the acquisition on October 15, 2018 . 21. Quarterly Financial Reporting (Unaudited) 106 Table of Contents Quarter Ended Fiscal Year Ended June 30, 2020 June 30, 2020 March 31, 2020 December 31, 2019 September 30, 2019 Net sales $ 118,661 $ 182,310 $ 180,112 $ 172,080 $ 653,163 Gross profit 23,552 45,849 39,868 40,001 149,270 Operating income 8,907 30,133 23,587 22,683 85,310 Net income 6,510 23,866 17,598 16,682 64,656 Net income attributable to non-controlling interest 307 1,088 876 823 3,094 Net income attributable to Malibu Boats, Inc. $ 6,203 $ 22,778 $ 16,722 $ 15,859 $ 61,562 Basic net income per share $ 0.30 $ 1.11 $ 0.81 $ 0.76 $ 2.98 Diluted net income per share $ 0.29 $ 1.09 $ 0.81 $ 0.76 $ 2.95 Quarter Ended Fiscal Year Ended June 30, 2019 June 30, 2019 March 31, 2019 December 31, 2018 September 30, 2018 Net sales $ 194,822 $ 199,918 $ 165,793 $ 123,483 $ 684,016 Gross profit 47,732 49,722 38,315 30,501 166,270 Operating income 29,854 30,562 20,944 16,752 98,112 Net income 20,485 22,203 14,998 12,015 69,701 Net income income attributable to non-controlling interest 1,073 1,104 741 717 3,635 Net income attributable to Malibu Boats, Inc. $ 19,412 $ 21,099 $ 14,257 $ 11,298 $ 66,066 Basic net income per share $ 0.93 $ 1.01 $ 0.68 $ 0.55 $ 3.17 Diluted net income per share $ 0.92 $ 1.01 $ 0.68 $ 0.54 $ 3.15 107 Table of Contents Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure None.