What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2021-08-26 compared with 2020-08-31 · 290 added, 301 removed, 1085 unchanged (35% of the section changed)

18 unchanged sentences

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).

The Company acquired Maverick Boat Group, Inc.

on December 31, 2020.

As permitted by guidelines established by the Securities and Exchange Commission for newly acquired business, management excluded Maverick Boat Group, Inc.

from the scope of its annual report on internal controls over financial reporting for the fiscal year ended June 30, 2021.

Maverick Boat Group, Inc.

contributed approximately 27% to consolidated total assets as of June 30, 2021 and 8% to consolidated net sales for the fiscal year ended June 30, 2021.

The Company is in the process of integrating this business into its overall internal controls over financial reporting process and plans to include it in the scope for the fiscal year ended June 30, 2022.

Based on such assessment the Company's management has concluded that, as of June 30, 2021, its internal control over financial reporting is effective based on those criteria.

10 unchanged sentences

In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of June 30, 2021, 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.

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, 2021 and 2020, the related consolidated statements of operations and comprehensive income, stockholders’ equity, and cash flows for each of the fiscal years in the three-year period ended June 30, 2021, and the related notes (collectively, the consolidated financial statements), and our report dated August 26, 2021 expressed an unqualified opinion on those consolidated financial statements.

The Company acquired Maverick Boat Group, Inc.

during the fiscal year ended June 30, 2021, and management excluded from its assessment of the effectiveness of the Company’s internal control over financial reporting as of June 30, 2021, Maverick Boat Group, Inc.’s internal control over financial reporting associated with approximately 27% of consolidated total assets and 8% of consolidated net sales included in the consolidated financial statements of the Company as of and for the fiscal year ended June 30, 2021.

Our audit of internal control over financial reporting of the Company also excluded an evaluation of the internal control over financial reporting of Maverick Boat Group, Inc.

Basis for Opinion

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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.

and subsidiaries (the Company) as of June 30, 2021 and 2020, the related consolidated statements of operations and comprehensive income, stockholders’ equity, and cash flows for each of the fiscal years in the three-year period ended June 30, 2021, 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, 2021 and 2020, and the results of its operations and its cash flows for each of the fiscal years in the three-year period ended June 30, 2021, in conformity with U.S.

generally accepted accounting principles.

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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.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that:

(1) relate 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 critical audit matters 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 matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Evaluation of certain assumptions underlying the product warranty liability for certain brands

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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

a warranty term of three years.

For Cobalt model years prior to 2018, historical claims experience only exists for 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.

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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.

Evaluation of the acquisition date fair value of intangible assets

As discussed in Notes 1 and 4 to the consolidated financial statements, the Company acquired Maverick Boat Group, Inc.

(Maverick Boat Group) in a business combination on December 31, 2020.

In connection with the acquisition, Maverick Boat Group’s dealer relationships and trade name were identified as intangible assets with acquisition date fair values of $47.9 million and $54.7 million, respectively.

We identified the evaluation of certain assumptions used to determine the acquisition date fair value of the Maverick Boat Group dealer relationships and trade name as a critical audit matter.

Specifically, the projected net sales, projected dealer attrition rate, and discount rate used to value the dealer relationships required subjective auditor judgment due to limited observable market data.

In addition, the projected net sales and discount rate used to value the trade name required subjective auditor judgment due to the limited observable market data.

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 related to the Company’s acquisition date valuation process, including controls related to the development of the projected net sales, projected dealer attrition rate, and discount rate assumptions.

We performed sensitivity analyses over the assumptions to assess the impact of changes in those assumptions on the acquisition date fair values.

We evaluated the projected net sales by comparing them to the historical net sales of Maverick Boat Group, the historical net sales of other boat manufacturers, and third-party industry revenue growth forecasts.

We assessed the Company’s projected dealer attrition rate by comparing the estimate to (1) historical dealer attrition experienced by Maverick Boat Group, and (2) the Company’s attrition rate for other boat brands that sell their boats to similar dealer distributors.

We involved valuation professionals with specialized skills and knowledge, who assisted in evaluating the discount rates by using third party data to develop an independent estimate of the (1) internal rate of return for the transaction, (2) weighted average cost of capital, and (3) after-tax rate of return, and comparing those amounts to the amounts used by the Company to determine the discount rate assigned to the intangible assets.

We have served as the Company’s auditor since 2015.

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Consolidated Statements of Operations and Comprehensive Income

(In thousands, except share data)

(In thousands, except share and per share data)

Fiscal Year Ended June 30,

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Operating income 149,775 85,310 98,112

Other (income) expense, net:

Other expense, net:

Other income, net ( 1,015 ) ( 2,310 ) ( 149 )

Interest expense 2,529 3,888 6,464

Other (income) expense, net 1,578 6,315 ( 19,320 )

Other expense, net 1,514 1,578 6,315

Net income before provision for income taxes 148,261 83,732 91,797

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Net income $ 114,282 $ 64,656 $ 69,701

Other comprehensive income (loss), net of tax:

Other comprehensive income (loss)

Change in cumulative translation adjustment 1,493 ( 304 ) ( 844 )

Other comprehensive income (loss), net of tax ( 304 ) ( 844 ) ( 621 )

Comprehensive income, net of tax 64,352 68,857 30,348

Other comprehensive income (loss) 1,493 ( 304 ) ( 844 )

Comprehensive income 115,775 64,352 68,857

comprehensive income attributable to non-controlling interest, net of tax 4,507 3,083 3,591

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Consolidated Balance Sheets

(In thousands, except share data)

(In thousands, except share and per share data)

June 30, 2021 June 30, 2020

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Current liabilities

Current maturities of long-term debt $ 4,250 $ —

Accounts payable 45,992 15,846

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(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

Additional Paid In Capital Non-controlling Interest in LLC Accumulated Earnings (Deficit) Accumulated Other Comprehensive Loss Total Stockholders Equity

Class A Common Stock Class B Common Stock

Shares Amount Shares Amount

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Issuances of equity for services — — — — 784 — — — 784

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 )

Issuance of equity for exercise of options 29 — — — 749 — — — 749

Increase in payable pursuant to the tax receivable agreement — — — — ( 2,676 ) — — — ( 2,676 )

1 unchanged sentence

Exchange of LLC Units for Class A Common Stock 214 2 — — 1,136 ( 1,136 ) — — 2

Cancellation of Class B Common Stock — — ( 2 ) — — — — — —

Cancellation of Class B Common Stock for Exchange of LLC Units — — ( 2 ) — — — — — —

Distributions to LLC Unit holders — — — — — ( 1,845 ) ( 3 ) — ( 1,848 )

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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 )

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Exchange of LLC Units for Class A Common Stock 100 1 — — 879 ( 879 ) — — 1

Cancellation of Class B Common Stock — — ( 2 ) — — — — — —

Distributions to LLC Unit holders — — — — — ( 1,370 ) — — ( 1,370 )

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Issuance of equity for exercise of options 11 — — — 375 — — — 375

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 — — — — ( 2,142 ) — — — ( 2,142 )

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Exchange of LLC Units for Class A Common Stock 130 1 — — 1,373 ( 1,373 ) — — 1

Cancellation of Class B Common Stock for Exchange of LLC Units — — ( 5 ) — — — — — —

Distributions to LLC Unit holders — — — — — ( 2,341 ) — — ( 2,341 )

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Payments on revolving credit facility ( 28,800 ) ( 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 ) —

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Establishment of amounts payable under tax receivable agreements 2,142 1,041 2,676

Equity issued as consideration for acquisition — — 1,000

Exchange of LLC Units for Class A Common Stock 1,373 879 1,136

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Notes to Consolidated Financial Statements

(Dollars in thousands, except per unit and per share data)

(Dollars in thousands, except per unit and share and per share data)

Organization, Basis of Presentation, and Summary of Significant Accounting Policies

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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.

Malibu Boats Holdings, LLC was formed in 2006.

The LLC, through its wholly owned subsidiary, Malibu Boats, LLC, (“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 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.

On December 31, 2020, the Company acquired all of the outstanding stock of Maverick Boat Group, Inc.

(“Maverick Boat Group”).

As a result of the acquisition, the Company consolidates the financial results of the Maverick Boat Group.

Maverick Boat Group designs and manufactures center console, dual console, flats and bay boats under four brands -- Cobia, Pathfinder, Maverick and Hewes brands.

In addition to the Maverick Boat Group’s family of brands, the Company sells its boats under the Malibu, Axis, Cobalt and Pursuit brands.

In connection with the acquisition of Maverick Boat Group, the Company revised its segment reporting to report its results of operations under three reportable segments -- Malibu, Saltwater Fishing and Cobalt.

Basis of Presentation

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Units and shares are presented as whole numbers while all dollar amounts are presented in thousands, unless otherwise noted.

Acquisition of Maverick Boat Group, Inc.

and Related Financing

On December 31, 2020, MBG Holdco, Inc., a wholly-owned subsidiary of Boats, LLC, acquired all of the outstanding shares of Maverick Boat Group from its existing stockholders for a purchase price of $ 150,675 .

The purchase price was subject to customary adjustments for the amounts of cash, indebtedness and working capital in the business at the closing date and subject to adjustment for certain capital expenditures made by Maverick Boat Group prior to closing at the Company’s request.

With two manufacturing facilities located in Fort Pierce, Florida, Maverick Boat Group designs and manufactures center console, dual console, flats and bay boats under four brand names Cobia, Pathfinder, Maverick, and Hewes.

The Company paid the purchase price with cash on hand and $ 90,000 of borrowings under its credit facilities following an amendment to increase the amount available under its credit facilities as described below.

On December 30, 2020, Boats, LLC, as the borrower, entered into the Third Incremental Facility Amendment and Third Amendment (the “Third Amendment”) to its existing Second Amended and Restated Credit Agreement dated as of June 28, 2017, by and among Boats LLC, the LLC and certain subsidiaries of Boats LLC parties thereto, as guarantors, the lenders parties thereto and Truist Bank (successor by merger to SunTrust Bank), as administrative agent, swingline lender and issuing bank (as amended, the “Credit Agreement”).

The Third Amendment added a $ 25,000 incremental term loan facility with a maturity date of July 1, 2024 and increased the borrowing capacity available under the revolving credit facility by $ 50,000 from $ 120,000 to $ 170,000 .

The $ 25,000 incremental term loans made pursuant to the Third Amendment is subject to quarterly amortization at a rate of 5.0 % per annum through December 31, 2022 and at a rate of 7.5 % per annum thereafter and accrues interest at the same rate as other loans under the Credit Agreement.

Refer to Notes 4, 10 and 19 for further information.

Principles of Consolidation

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Segment Reporting

The Company has three reportable segments, Malibu, Cobalt and Pursuit.

The Company has three reportable segments, Malibu, Saltwater Fishing and Cobalt.

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.

The Saltwater Fishing segment participates in the manufacturing, distribution, marketing and sale throughout the world of Pursuit boats and the Maverick Boat Group boats (Maverick, Cobia, Pathfinder and Hewes).

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

The Company revised its segment reporting effective December 31, 2020, to account for its acquisition of Maverick Boat Group and 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 three reportable segments, Malibu, Pursuit and Cobalt.

The Company now aggregates Pursuit and Maverick Boat Group into one reportable segment as they have similar economic characteristics and qualitative factors.

As a result, the Company continues to have three reportable segments, Malibu, Saltwater Fishing and Cobalt.

All segment information in the accompanying consolidated financial statements has been revised to conform to the Company’s current reporting segments for comparison purposes.

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The Company’s top ten dealers represented 38.7 %, 38.5 % and 39.6 %, of the Company’s net sales for the fiscal years ended June 30, 2021, 2020 and 2019, 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.

Sales to the Company's dealers under common control of OneWater Marine, Inc.

represented approximately 16.3 % , 15.2 % and 15.1 % of the Company's consolidated net sales in the fiscal years ended June 30, 2021 , 2020 , and 2019 respectively.

The Company considers all highly liquid investments purchased with an original maturity of 90 days or less to be cash equivalents.

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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.

As of June 30, 2021 and 2020, the allowance for doubtful receivables was $ 0 .

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.

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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 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.

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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,

then management determines the implied fair value of the reporting unit’s goodwill.

If the carrying value of the reporting unit’s net assets including goodwill exceeds the fair value of the reporting unit, 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.

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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.

Intangible assets consist primarily of relationships, 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.

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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.

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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.

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.

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The Company accounts for both incentive payments directly to dealers and payment to third party lenders in this manner.

Dealer incentives are included in accrued expenses on our consolidated balance sheet.

Changes in the Company’s accrual for dealer rebates were as follows:

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Balance at beginning of year $ 6,865 $ 6,376 $ 5,559

Dealer rebate incentive 19,555 20,712 15,713

Additions for Pursuit acquisition — 205 —

Dealer rebate incentives 28,629 19,555 20,712

Additions for acquisitions 219 — 205

Dealer rebates paid ( 24,047 ) ( 19,066 ) ( 20,100 )

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Balance at beginning of year $ 719 $ 681 $ 211

Flooring incentive 9,492 8,526 5,813

Additions for Cobalt acquisition — — 132

Flooring incentives 4,157 9,492 8,526

Additions for acquisitions 30 — —

Flooring paid ( 4,785 ) ( 9,454 ) ( 8,056 )

10 unchanged sentences

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.

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.

Malibu Boats, Inc.

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federal income tax purposes.

Maverick Boat Group is taxed as a C corporation for U.S.

income tax purposes and is separately subject to both federal and state taxation at a corporate level.

The Company files various federal and state tax returns, including some returns that are consolidated with subsidiaries.

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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.

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.

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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.

The Company applies the provisions of ASC Topic 820, Fair Value Measurement , 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.

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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

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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.

Stock awards granted on

November 3, 2020 and 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.

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dollars that result in unrealized gains or losses are referred to as translation adjustments.

Cumulative translation adjustments are reflected as a

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.

Cumulative translation adjustments are reflected as a 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

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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.

The COVID-19 pandemic has impacted the Company’s operations and financial results since the third quarter of fiscal year 2020 and continues to impact the Company.

The Company elected to suspend operations at all of its facilities from March 2020 until late April and early May 2020, depending on the facility.

As a result, the Company was not able to ship boats to its dealers during the period of shut-down, which negatively impacted its net sales for the second half of fiscal year 2020.

In addition, the COVID-19 pandemic has impacted and may continue to impact the operations of the Company’s dealers and suppliers.

During the first half of fiscal 2021, the Company constrained its production levels in an attempt to allow its supply chain to more fully recover from the impacts of COVID-19 in preparation of higher wholesale manufacturing volumes that it planned for the second half of fiscal 2021.

While the Company’s net sales for fiscal year 2021 were impacted by lower production levels, retail sales improved during fiscal year 2021 as consumers turned to boating as a form of outdoor, socially distanced recreation during the COVID-19 pandemic.

The increase in retail sales during fiscal year 2021 combined with our lower wholesale shipment levels during the second half of fiscal year 2020 and constrained production in the first half of fiscal year 2021 resulted in lower inventory levels at the Company’s dealers as of June 30, 2021 compared to last year.

The future impact of COVID-19 on the Company’s financial condition and results of operations will depend on a number of factors, including factors that we may not be able to forecast at this time.

Recent Accounting Pronouncements

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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.

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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 .

In June 2016, the FASB issued Accounting Standards Update ("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.

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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.

On July 1, 2020, the Company adopted this standard and the adoption did not have a material impact on the Company’s consolidated financial position, results of operations, equity or cash flows.

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848):

Facilitation of Effects of Reference Rate Reform on Financial Reporting , which provides practical expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met.

The elective amendments provide expedients to contract modification, affected by reference rate reform if certain criteria are met.

The expedients and exceptions provided by this guidance apply only to contracts, hedging relationships, and other transactions that reference the London interbank offered rate (“LIBOR”) or another reference rate expected to be discontinued as a result of reference rate reform.

This guidance is not applicable to contract modifications made and hedging relationships entered into or evaluated after December 31, 2022.

The guidance can be applied immediately through December 31, 2022.

The Company will adopt this standard when LIBOR is discontinued and does not expect a material impact to its financial condition, results of operations or disclosures based on the current debt portfolio and capital structure.

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.

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Fiscal Year Ended June 30, 2021

Malibu Cobalt Pursuit Consolidated

Malibu Saltwater Fishing Cobalt Consolidated

Revenue by product:

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Fiscal Year Ended June 30, 2020

Malibu Cobalt Pursuit Consolidated

Malibu Saltwater Fishing Cobalt Consolidated

Revenue by product:

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Total revenue $ 354,769 $ 123,626 $ 174,768 $ 653,163

Fiscal Year Ended June 30, 2019

Malibu Saltwater Fishing Cobalt Consolidated

Revenue by product:

Boat and trailer sales $ 362,200 $ 102,070 $ 203,825 $ 668,095

Part and other sales 12,411 737 2,773 15,921

Total revenue $ 374,611 $ 102,807 $ 206,598 $ 684,016

Revenue by geography:

North America $ 341,190 $ 93,003 $ 196,734 $ 630,927

International 33,421 9,804 9,864 53,089

Total revenue $ 374,611 $ 102,807 $ 206,598 $ 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.

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During fiscal year 2021, 9,665 LLC Units were canceled in connection with the vesting of share-based equity awards to satisfy employee tax withholding requirements and the retirement of 9,665 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

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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.

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.

Maverick Boat Group

On December 31, 2020, the Company completed its acquisition of all the outstanding stock of Maverick Boat Group.

The aggregate purchase price for the transaction was $ 150,675 , funded with cash and borrowings under the Company's credit facilities.

The aggregate purchase price was subject to certain adjustments, including customary adjustments for the amount of cash, indebtedness and working capital in the business at the closing date and subject to adjustment for certain capital expenditures made by Maverick Boat Group prior to closing at the Company’s request.

The Company accounted for the transaction in accordance with ASC Topic 805, Business Combinations .

The total consideration given to the stockholders of Maverick Boat Group 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:

The following table summarizes the purchase price allocation based on the estimated fair values of the assets acquired and liabilities assumed at the acquisition date:

Consideration:

Cash consideration paid $ 150,675

Recognized amounts of identifiable assets acquired and liabilities assumed, at fair value:

Recognized preliminary amounts of identifiable assets acquired and (liabilities assumed), at fair value:

Accounts receivable 3,204

Inventories 7,756

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Identifiable intangible assets 102,600

Other assets 4,410

Current liabilities ( 6,611 )

Deferred tax liabilities ( 28,528 )

Other liabilities ( 4,405 )

Fair value of assets acquired and liabilities assumed 101,486

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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.

Dealer Relationships - The value associated with Maverick Boat Group'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 .

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 estimated remaining useful life of dealer relationships is approximately 20 years.

Trade Name - The value attributed to Maverick Boat Group's trade names 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.

The fair value of the definite-lived intangible assets are being amortized using the straight-line method to amortization 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.

$ 49,189 arising from the acquisition consists of expected synergies and cost savings as well as intangible assets that do not qualify for separate recognition.

Acquisition-related costs of $ 2,648 , w hich were incurred by the Company in the fiscal year ended June 30, 2021 related to the Maverick Boat Group 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.

The following unaudited pro forma consolidated results of operations for the fiscal years ended June 30, 2021 and 2020, assumes that the acquisition of Maverick Boat Group occurred as of July 1, 2019.

The unaudited pro forma financial information combines historical results of Malibu and Maverick Boat Group, with adjustments for depreciation and amortization attributable to 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.

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Fiscal Year Ended June 30,

2020 2019 2018

Net sales $ 982,535 $ 774,126

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Diluted earnings per share $ 5.34 $ 3.20

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.

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 Topic 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 Cobalt assumed at the acquisition date:

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

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:

Trade receivables 2,329

Inventories $ 8,332

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Dealer relationships $ 25,400 20

Patent 2,600 15

Total definite-lived intangibles 25,400

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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.

Dealer Relationships - The value associated with Pursuit's dealer relationships is attributed to its long standing dealer distribution network.

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.

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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 deductible for income tax purposes.

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.

The indefinite-lived intangible asset and goodwill acquired are expected to be deductible for income tax purposes.

Acquisition-related costs of $ 2,848 incurred by the Company for fiscal year ended June 30, 2019, 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, 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.

The following unaudited pro forma consolidated results of operations for the fiscal years ended June 30, 2021, 2020 and 2019, assumes that the acquisition of Pursuit occurred as of July 1, 2018.

The unaudited pro forma financial information combines historical results of Malibu and Pursuit, with adjustments for depreciation and amortization attributable to 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.

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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

on estimated undiscounted cash flows over their remaining estimated useful lives.

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 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.

No impairment charges were recorded for the fiscal years ended June 30, 2021, 2020 and 2019 in the Company’s consolidated financial statements.

Property, plant, and equipment, net consisted of the following:

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During fiscal year 2021 the Company disposed of various assets with a net book value of $ 383 and recorded a loss of $ 374 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.

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.

Goodwill and Other Intangible Assets

The changes in the carrying amount of goodwill for the fiscal years ended June 30, 2021 and 2020 were as follows:

Malibu Saltwater Fishing Cobalt Consolidated

Goodwill as of June 30, 2019 $ 12,088 $ 19,525 $ 19,791 $ 51,404

Addition related to the acquisition of Pursuit

Effect of foreign currency changes on goodwill

( 131 ) — — ( 131 )

Goodwill as of June 30, 2020 11,957 19,525 19,791 51,273

Addition related to the acquisition of Maverick Boat Group — 49,189 — 49,189

Effect of foreign currency changes on goodwill

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As of June 30, Estimated Useful Life (in years) Weighted Average Remaining Useful Life (in years)

Reacquired franchise rights $ — $ 1,264 5 0.0

Dealer relationships $ 159,394 $ 111,293 8 - 20

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Fiscal Year As of June 30, 2021

Thereafter 52,538

2027 and thereafter 82,909

Accrued Expenses

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Accrued legal and professional fees 1,440 1,055

Accrued interest — 161

Customer deposits 3,449 1,059

Other accrued expenses 2,784 1,203

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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

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).

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

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

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

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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 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.

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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.

Accordingly, the Company has little 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:

Changes in the Company’s product warranty liability, which are included in accrued expenses in the accompanying consolidated balance sheets, were as follows:

Fiscal Year Ended June 30,

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Warranty Expense 21,973 14,339 12,331

Additions for Cobalt acquisition — — 4,404

Additions for Pursuit acquisition — — 1,872

Additions for Maverick Boat Group acquisition 883 — —

Warranty claims paid ( 15,321 ) ( 10,659 ) ( 7,600 )

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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.

As of June 30, 2021, the Company currently has a revolving credit facility with borrowing capacity of up to $ 170,000 and term loans with an aggregate principal amount outstanding of $ 99,375 .

As of June 30, 2021, the Company had $ 45,000 outstanding under its revolving credit facility and $ 1,234 in outstanding letters of credit with $ 123,800 available for borrowing.

The revolving credit facility matures on July 1, 2024, the incremental term loan made on December 30, 2020 in a principal amount of $ 25,000 , of which $ 24,375 is outstanding as of June 30, 2021, (the “Incremental Term Loan”) matures on July 1, 2024 and the remaining $ 75,000 of outstanding term loans (the “Existing Term Loans,” and together with the Incremental Term Loans, the “Term Loans”) mature on July 1, 2022.

On December 30, 2020, Boats LLC entered into the Third Amendment to its Credit Agreement.

The Third Amendment added a $ 25,000 Incremental Term Loan facility with a maturity date of July 1, 2024 and increased the borrowing capacity of the revolving credit facility by $ 50,000 from $ 120,000 to $ 170,000 .

The Incremental Term Loan is subject to quarterly amortization at a rate of 5.0 % per annum through December 31, 2022 and at a rate of 7.5 % per annum through June 30, 2024 and accrues interest at the same interest rate applicable to other loans under the Credit Agreement as described below.

The obligations of Malibu Boats LLC (“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.

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.

All 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 %.

As of June 30, 2021, the interest rate on the Company’s term loans and revolving credit facility wa s 1.35 %.

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 Existing Term Loans require an amortization payment of approximately $ 3,000 on March 31, 2022, reflected as current maturities of long-term obligations, and the balance of the Existing Term Loans is due on the scheduled maturity date of July 1, 2022.

The Incremental Term Loan of $ 25,000 is subject to quarterly amortization at a rate of 5.0 % per year through December 31, 2022, resulting in $ 1,250 being reflected as current maturities of long-term obligations, 7.5 % per year through June 30, 2024 and the balance of the Incremental Term Loan is due on the scheduled maturity date of July 1, 2024.

The Credit Agreement also requires 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.

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.

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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.

parties or payments pursuant to stock option and other benefit plans up to $ 3,000 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.

In connection with entering into the Credit Agreement in fiscal year 2017, the Company capitalized $ 2,074 in deferred financing costs during fiscal 2017.

In connection with Third Amendment entered into in December 2020, the Company capitalized $ 638 in deferred financing costs during fiscal year 2021.

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 Company used proceeds from an offering on August 24, 2017 to repay $ 50,000 on its Existing Term Loans 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.

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.

As of June 30, 2021 and 2020, the Company was in compliance with the financial covenants contained in the Credit Agreement.

Interest Rate Swap

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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;

1 unchanged sentence

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.

For the fiscal year ended June 30, 2020, the Company record a loss of $ 68 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.

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 recorded right-of-use assets, included in other assets on the consolidated 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 consolidated 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

Other information concerning the Company's operating leases accounted for under ASC Topic 842 is as follows:

Classification As of June 30, 2021 As of As of June 30, 2020

Right-of-use assets Other assets $ 12,606 $ 14,315

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Total lease liabilities $ 14,225 $ 16,019

Classification Fiscal Year Ended June 30, 2020

Classification Fiscal Year Ended June 30, 2021 Fiscal Year Ended June 30, 2020

Operating lease costs (1)

Cost of sales $ 2,170 $ 1,966

Selling, general and administrative 863

Sublease income Other income (expense) 38

Selling and marketing, and general and administrative 854 863

Sublease income Other income, net 38 38

Cash paid for amounts included in the measurement of operating lease liabilities Cash flows from operating activities 2,617 2,606

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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.

The weighted average remaining lease term for the fiscal year ended June 30, 2021 and 2020 was 6.44 years and 7.27 years, respectively.

As of June 30, 2021 and 2020, the weighted average discount rate determined based on the Company's incremental borrowing rate is 3.63 % and 3.65 %, respectively.

Future annual minimum lease payments for the following fiscal years as of June 30, 2021 are as follows:

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Present value of lease liabilities $ 14,225

The following represents the Company's future minimum rental payments at June 30, 2019 for agreements classified as operating leases under ASC Topic 840:

2025 and thereafter 8,577

Total $ 21,240

Tax Receivable Agreement Liability

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Ending balance $ 44,441 $ 46,076

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 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 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.

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federal income tax purposes.

Maverick Boat Group is separately subject to U.S.

federal and state income tax with respect to its net taxable income.

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.

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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.

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Federal tax provision at statutory rate 21.0 % 21.0 % 21.0 %

Change in federal statutory rate — — 36.2

State income taxes, net of federal benefit 2.9 2.9 4.4

Permanent differences attributable to partnership investment ( 0.3 ) ( 0.2 ) ( 0.8 )

Section 199 deductions — — ( 1.2 )

Non-controlling interest ( 0.7 ) ( 0.9 ) ( 0.9 )

Change in valuation allowance — — ( 0.4 )

Other, net — — 0.4

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Foreign tax credits 580 580

Acquisition costs — 6

Other 345 275

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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.

During each interim period, the Company updates

its annual analysis for significant changes in the positive and negative evidence.

At June 30, 2021 and 2020, the Company concluded that $ 15,279 and $ 14,582 , 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.

The Company continues to record the valuation allowance against the deferred tax asset generated by the state impact of the 743(b) amortization and 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 2036.

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Reductions due to statute settlements ( 50 ) ( 64 ) —

Reductions for tax positions of prior years ( 113 ) — —

Additions (reductions) for tax positions of prior years 3 ( 113 ) —

Balance as of June 30 $ 1,452 $ 1,445 $ 1,401

In fiscal year 2021, the Company settled $ 250 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.

Also in fiscal year 2021, the Company reduced its uncertain tax positions $ 50 as a result of statute settlements, and recorded $ 304 in connection with its current year state filing positions.

As of June 30, 2021, it is reasonably possible that $ 286 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.

Of the total unrecognized tax benefits recorded on the consolidated balance sheet, $ 1,225 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.

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The estimated income and withholding tax liability associated with the remittance of these earnings is nominal.

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

Identical Assets

(Level 1) Significant

(Level 2) Significant

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

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.

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.

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.

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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.

In connection with the exchange, no shares of Class B Common Stock was 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.

During fiscal year 2021, nine non-controlling LLC Unit holders exchanged LLC Units for the issuance of Class A Common Stock.

In connection with the exchange, five shares of Class B Common Stock were automatically transferred to the

Company and retired.

As of June 30, 2021, the Company had a total of 10 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.

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.

During the fiscal year ended June 30, 2020, the Company repurchased 483,679 shares of Class A Common Stock for $ 13.8 million in cash including related fees and expenses.

The Fiscal 2020 Repurchase Program expired on July 1, 2020.

On August 27, 2020, the board of directors of the Company authorized a stock 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 (the “Fiscal 2021 Repurchase Program”).

No shares were repurchased under the Fiscal 2021 Repurchase Program.

The Fiscal 2021 Repurchase Program expired on July 1, 2021.

Class A Common Stock and Class B Common Stock

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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.

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.

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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

Company's board of directors determines the specific rights of the holders of preferred stock, the potential effects of such an issuance include:

Though the actual effect of any such issuance on the rights of the holders of common stock will not be known until the 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;

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As of June 30, 2021, there were 602,339 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

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.

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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 .

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.

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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

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 number of shares that will ultimately be issued, if any, is 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 .

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Compensation costs are recognized over the requisite service period based on probability of achievement in accordance with ASC Topic 718, Compensation—Stock Compensation .

On November 3, 2020, under the Incentive Plan, the Company granted approximately 33,000 restricted service based stock units and 25,000 restricted service based stock awards to key employees under the Incentive Plan.

The grant date fair value of

these awards was $ 3,145 based on a stock price of $ 54.47 per share on the date of grant.

Approximately 58 % of the awards vest ratably over three years and approximately 42 % of the awards vest ratably over four years .

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 3, 2020, under the Incentive Plan, the Company granted to key employees a target amount of approximately 18,000 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, 2023.

The maximum number of shares that can be issued if an elevated earnings target is met is approximately 28,000 .

The grant date fair value of the awards were estimated to be $ 1,002 , based on a stock price of $ 54.47 .

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 3, 2020, under the Incentive Plan, the Company granted to key employees a target amount of approximately 18,000 stock awards with a market condition.

The maximum number of shares that can be issued if an elevated TSR target is met is approximately 37,000 .

The grant date fair value of the awards were estimated to be $ 1,293 , 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:

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Options exercised ( 11,625 ) 32.24 ( 12,125 ) 31.08 ( 28,500 ) 26.29

Options canceled — — — — — —

Outstanding options at end of year 161,723 $ 32.64 173,348 $ 32.61 185,473 $ 32.51

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The weighted average remaining contractual life of options outstanding and options outstanding and exercisable as of June 30, 2021 was 2.55 years and 2.36 years, respectively.

The total intrinsic value of options exercised during the year ended June 30, 2020 was $ 200 .

The total intrinsic value of options exercised during the years ended June 30, 2021, 2020 and 2019 was $ 322 , $ 200 and $ 732 , respectively.

The total intrinsic value of options outstanding and options outstanding and exercisable at June 30, 2021 was $ 6,580 and $ 4,806 , respectively.

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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.

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.

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Total Non-vested Restricted Stock Units and Restricted Stock Awards at end of year 314,916 $ 44.46 277,696 $ 35.43 226,240 $ 29.64

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.

As of June 30, 2021, the total unrecognized compensation cost related to nonvested, share-based compensation was $ 8,504 , which the Company expects to recognize over a weighted-average period of 2.1 years.

Stock compensation expense attributable to all of the Company's equity awards was $ 5,581 , $ 3,042 and $ 2,607 for fiscal years 2021, 2020 and 2019, respectively, is included in general and administrative expense in the Company's consolidated statements 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.

During fiscal years 2021, 2020 and 2019, the Company withheld 21,081 , 25,469 and 26,458 shares at an aggregate cost of $ 1,208 , $ 831 and $ 1,219 , respectively, as permitted by the applicable equity award agreements, to satisfy employee tax withholding requirements for employee share-based equity awards that have vested.

Net Earnings Per Share

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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.

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 sheets.

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.

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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 2021, the Company did no t repurchase any boats under its repurchase agreements.

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 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, 2021 and 2020, respectively.

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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

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.

Since the transfer of the 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 sheets.

As of June 30, 2021 and 2020 , the Company had financing receivables of $ 95 and $ 375 , respectively, recorded in other current assets and accrued expenses related to these arrangements.

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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.

The Company insures against product liability claims and, except as disclosed below, believes there are no material product liability claims as of June 30, 2021 that will have a material adverse impact on the Company's results of operations, financial condition or cash flows.

Certain conditions may exist which could result in a loss, but which will only be resolved when future events occur.

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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.

Except as disclosed below, management does not believe there are any pending claims (asserted or unasserted) at June 30, 2021

or June 30, 2020 that will have a material adverse impact on the Company’s financial condition, results of operations or cash flows.

Legal Proceedings

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On January 23, 2020, Judge McCalla issued a Scheduling Order, scheduling trial on the consolidated cases to begin on September 29, 2020.

On July 23, 2020, the Company moved to dismiss its allegations of infringement of U.S.

9,199,695, which Skier’s Choice opposed.

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.

On September 11, 2020, the Court issued a Scheduling Order resetting the trial for the consolidated cases to begin on January 25, 2021.

On December 11, 2020, the Court issued an Order resetting the trial for the consolidated cases to begin on May 10, 2021.

During the trial, the Court found that Skier’s Choice did not infringe one claim of the ’873 Patent, and also found that Skier’s Choice did infringe one claim of the ’777 Patent.

On May 21, 2021, a jury returned a verdict finding that Skier’s Choice did not infringe three claims from the ’777 and ’161 Patents, and also found four claims from the ’777 and ’161 Patents to be invalid.

Malibu did not pursue an appeal of the verdict.

On June 4, 2021, Skier’s Choice filed a motion seeking an award of attorney’s fees and costs.

Malibu opposed Skier’s Choice’s motion.

The Company is a defendant in a product liability case alleging defective product design and failure to warn.

The case is Stephen Paul Batchelder and Margaret Mary Batchelder Individually, as Administrators of the Estate of Ryan Paul Batchelder, deceased, etc., et al Plaintiffs, v.

Malibu Boats, LLC, f/k/a Malibu Boats, Inc.;

Malibu Boats West, Inc., et al, Defendants, In the Superior Court of Rabun County, Georgia, Civil Action Case No.

2016-CV-0114-C.

The case involves a personal injury accident involving the propeller of a boat manufactured by the Company.

Plaintiffs seek damages, including economic and punitive damages, alleging that the accident was caused by a design defect and a failure to warn.

The Company maintains product liability insurance that is applicable to this case.

The complaint was initially filed in the Superior Court of Rabun County, Georgia on May 9, 2016.

The trial commenced on August 16, 2021 and is continuing as of the date of this Annual Report on Form 10-K.

The Company believes that the allegations in the case are unfounded and denies that there was a design defect or that any defect in the boat was a legal cause of the injury.

The Company is unable to provide any reasonable evaluation of the likelihood that a loss will be incurred or any reasonable estimate of the range of possible loss.

Related Party Transactions

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Segment Reporting

The Company has three reportable segments, Malibu, Cobalt and Pursuit.

The Company has three reportable segments, Malibu, Saltwater Fishing and Cobalt.

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.

The Saltwater Fishing segment participates in the manufacturing, distribution, marketing and sale throughout the world of Pursuit boats and the Maverick Boat Group brand boats (Maverick, Cobia, Pathfinder and Hewes).

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

Prior to this change in reporting segments, the Company had three reportable segments, Malibu, Cobalt and Pursuit.

The Company now aggregates Pursuit and Maverick Boat Group into one reportable segment as they have similar economic characteristics and qualitative factors.

As a result, the Company continues to have three reportable segments, Malibu, Saltwater Fishing and Cobalt.

All segment information in the accompanying consolidated financial statements has been revised to conform to the Company’s current reporting segments for comparison purposes.

There is no country outside of the United States from which we (a) derived net sales equal to 10% of total net sales, or (b) attributed assets equal to 10% of total assets.

Net sales are attributed to countries based on the location of the dealer.

The following table presents financial information for the Company’s reportable segments for fiscal years ended June 30, 2021, 2020, and 2019.

Fiscal Year Ended June 30, 2021

Malibu Cobalt Pursuit 1

Malibu Saltwater Fishing 1

Net sales $ 483,525 $ 242,914 $ 200,076 $ 926,515

5 unchanged sentences

Fiscal Year Ended June 30, 2020

Malibu Cobalt Pursuit 1

Malibu Saltwater Fishing 1

Net sales $ 354,769 $ 123,626 $ 174,768 $ 653,163

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Fiscal Year Ended June 30, 2019

Malibu Cobalt Pursuit 1

Malibu Saltwater Fishing 1

Net sales $ 374,611 $ 102,807 $ 206,598 $ 684,016

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Total assets $ 185,154 $ 114,679 $ 151,481 $ 451,314

1 Represents the results of Pursuit since the acquisition on October 15, 2018 .

1 Represents the results of Maverick Boat Group since the acquisition on December 31, 2020 and Pursuit since the acquisition on October 15, 2018 .

Quarterly Financial Reporting (Unaudited)

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

What changed 10-K

Item 8. Financial Statements and Supplementary Data