MALIBU BOATS, INC. 10-K

Item 8. Financial Statements and Supplementary Data INDEX TO FINANCIAL STATEMENTS Page Report of Management on Internal Control Over Financial Reporting 59 Reports of Independent Registered Public Accounting Firm 60 Consolidated Statements of Operations and Comprehensive Income for the Fiscal Years Ended June 30, 2022, 2021, and 2020 63 Consolidated Balance Sheets as of June 30, 2022 and 2021 64 Consolidated Statements of Stockholders' Equity for the Fiscal Years Ended June 30, 2022, 2021, and 2020 65 Consolidated Statements of Cash Flows for the Fiscal Years ended June 30, 2022, 2021, and 2020 67 Notes to Consolidated Financial Statements 68 58 Table of Contents MALIBU BOATS, INC. AND SUBSIDIARIES Report of Management on Internal Control Over Financial Reporting Malibu Boats, Inc.'s (the "Company") management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rule 13a-15(f) under the Securities Exchange Act of 1934, as amended. Internal control over financial reporting is a process to provide reasonable assurance regarding the reliability of the Company's financial reporting for external purposes in accordance with U.S. generally accepted accounting principles. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. The Company's management, including its chief executive officer and chief financial officer, assessed the effectiveness of the Company's internal control over financial reporting as of June 30, 2022. In making this assessment, the Company used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission ("COSO") in Internal Control-Integrated Framework (2013) . Based on such assessment the Company's management has concluded that, as of June 30, 2022, its internal control over financial reporting is effective based on those criteria. The effectiveness of internal control over financial reporting as of June 30, 2022 has been audited by KPMG LLP, an independent registered public accounting firm, as stated in its attestation report, which is included herein. Malibu Boats, Inc. Loudon, Tennessee August 25, 2022 59 Table of Contents Report of Independent Registered Public Accounting Firm To the Stockholders and Board of Directors Malibu Boats, Inc.: Opinion on Internal Control Over Financial Reporting We have audited Malibu Boats, Inc. and subsidiaries' (the Company) internal control over financial reporting as of June 30, 2022, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of June 30, 2022, 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, 2022 and 2021, 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, 2022, and the related notes (collectively, the consolidated financial statements), and our report dated August 25, 2022 expressed an unqualified opinion on those consolidated financial statements. Basis for Opinion The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Report of Management on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Definition and Limitations of Internal Control Over Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. /s/ KPMG LLP Knoxville, Tennessee August 25, 2022 60 Table of Contents Report of Independent Registered Public Accounting Firm To the Stockholders and Board of Directors Malibu Boats, Inc.: Opinion on the Consolidated Financial Statements We have audited the accompanying consolidated balance sheets of Malibu Boats, Inc. and subsidiaries (the Company) as of June 30, 2022 and 2021, 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, 2022, 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, 2022 and 2021, and the results of its operations and its cash flows for each of the years in the three-year period ended June 30, 2022, in conformity with U.S. generally accepted accounting principles. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of June 30, 2022, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated August 25, 2022 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting. Basis for Opinion These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matter The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of a critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. Evaluation of certain assumptions underlying the product warranty liability for certain brands As discussed in Note 9 to the consolidated financial statements, the Company’s product warranty liability as of June 30, 2022 was $38.7 million. The product warranty liability represents estimated future costs to repair or replace defective products during the warranty period for each boat sold. The Company’s estimated future costs to repair or replace defective products includes assumptions regarding the anticipated warranty costs per boat by brand. We identified the evaluation of the anticipated warranty costs per boat that are used to estimate the product warranty liability for Malibu and Axis branded boats as a critical audit matter. A higher degree of subjective auditor judgment was required to evaluate the Company’s estimate of the anticipated warranty costs per boat, due to the nature of the audit evidence. Specifically, for Axis and Malibu model years prior to 2016, historical claims experience only exists for a warranty term of two and three years, respectively. This historical claim experience is shorter in duration than the five-year warranty term associated with the Company’s current warranty program. The following are the primary procedures we performed to address this critical audit matter. We evaluated the design and tested the operating effectiveness of certain internal controls over the Company’s warranty accrual process. This included controls over the development of the assumptions used to estimate the warranty cost per boat for warranty year five, for 61 Table of Contents which little claims experience exists. We performed sensitivity analyses to assess the potential for possible changes to these assumptions on the product warranty liability. We assessed the Company’s historical claims experience and the relationship between the historical warranty costs per boat incurred by warranty year. We further assessed the Company’s assumptions underlying the anticipated warranty costs per boat for warranty year five by considering warranty claims received after year-end but before the consolidated financial statements were issued, to identify trends not considered by the Company when it developed its assumptions. We also compared the Company’s prior year product warranty liability related to claims expected to be incurred in the current year to actual claims received in the current year to evaluate the historical accuracy of the Company’s estimate. /s/ KPMG LLP We have served as the Company’s auditor since 2015. Knoxville, Tennessee August 25, 2022 62 Table of Contents MALIBU BOATS, INC. AND SUBSIDIARIES Consolidated Statements of Operations and Comprehensive Income (In thousands, except share and per share data) Fiscal Year Ended June 30, 2022 2021 2020 Net sales $ 1,214,877 $ 926,515 $ 653,163 Cost of sales 904,826 690,030 503,893 Gross profit 310,051 236,485 149,270 Operating expenses: Selling and marketing 22,900 17,540 17,917 General and administrative 66,371 61,915 39,912 Amortization 6,957 7,255 6,131 Operating income 213,823 149,775 85,310 Other expense (income), net: Other expense (income), net 983 ( 1,015 ) ( 2,310 ) Interest expense 2,875 2,529 3,888 Other expense (income), net 3,858 1,514 1,578 Income before provision for income taxes 209,965 148,261 83,732 Provision for income taxes 46,535 33,979 19,076 Net income 163,430 114,282 64,656 Net income attributable to non-controlling interest 5,798 4,441 3,094 Net income attributable to Malibu Boats, Inc. $ 157,632 $ 109,841 $ 61,562 Comprehensive income: Net income $ 163,430 $ 114,282 $ 64,656 Other comprehensive (loss) income Change in cumulative translation adjustment ( 1,868 ) 1,493 ( 304 ) Other comprehensive (loss) income ( 1,868 ) 1,493 ( 304 ) Comprehensive income 161,562 115,775 64,352 Less: comprehensive income attributable to non-controlling interest, net of tax 5,731 4,507 3,083 Comprehensive income attributable to Malibu Boats, Inc., net of tax $ 155,831 $ 111,268 $ 61,269 Weighted average shares outstanding used in computing net income per share: Basic 20,749,237 20,752,652 20,662,750 Diluted 20,986,256 21,011,087 20,852,361 Net income available to Class A Common Stock per share: Basic $ 7.60 $ 5.29 $ 2.98 Diluted $ 7.51 $ 5.23 $ 2.95 The accompanying notes are an integral part of these Consolidated Financial Statements. 63 Table of Contents MALIBU BOATS, INC. AND SUBSIDIARIES Consolidated Balance Sheets (In thousands, except share and per share data) June 30, 2022 June 30, 2021 Assets Current assets Cash $ 83,744 $ 41,479 Trade receivables, net 51,598 49,844 Inventories, net 157,002 116,685 Prepaid expenses and other current assets 6,155 4,775 Total current assets 298,499 212,783 Property and equipment, net 170,718 132,913 Goodwill 100,804 101,033 Other intangible assets, net 228,304 235,363 Deferred tax assets 42,314 48,022 Other assets 10,687 12,670 Total assets $ 851,326 $ 742,784 Liabilities Current liabilities Current maturities of long-term debt $ 1,563 $ 4,250 Accounts payable 44,368 45,992 Accrued expenses 87,742 77,179 Income tax and distribution payable 1,670 3,209 Payable pursuant to tax receivable agreement, current portion 3,958 3,773 Total current liabilities 139,301 134,403 Deferred tax liabilities 26,965 27,869 Other liabilities 11,855 15,892 Payable pursuant to tax receivable agreement, less current portion 41,583 44,441 Long-term debt 118,054 139,025 Total liabilities 337,758 361,630 Commitments and contingencies (See Note 17) Stockholders' Equity Class A Common Stock, par value $ 0.01 per share, 100,000,000 shares authorized; 20,501,081 shares issued and outstanding as of June 30, 2022; 20,847,019 shares issued and outstanding as of June 30, 2021 203 207 Class B Common Stock, par value $ 0.01 per share, 25,000,000 shares authorized; 10 shares issued and outstanding as of June 30, 2022; 10 shares issued and outstanding as of June 30, 2021 — — Preferred Stock, par value $ 0.01 per share; 25,000,000 shares authorized; no shares issued and outstanding as of June 30, 2022; no shares issued and outstanding as of June 30, 2021 — — Additional paid in capital 85,294 111,308 Accumulated other comprehensive loss, net of tax ( 3,507 ) ( 1,639 ) Accumulated earnings 421,184 263,552 Total stockholders' equity attributable to Malibu Boats, Inc. 503,174 373,428 Non-controlling interest 10,394 7,726 Total stockholders’ equity 513,568 381,154 Total liabilities and stockholders' equity $ 851,326 $ 742,784 The accompanying notes are an integral part of these Consolidated Financial Statements. 64 Table of Contents MALIBU BOATS, INC. AND SUBSIDIARIES Consolidated Statements of Stockholders' Equity (In thousands, except number of Class B shares) Additional Paid In Capital Accumulated Other Comprehensive Loss, net of tax Accumulated Earnings Non-controlling Interest in LLC Total Stockholders' Equity Class A Common Stock Class B Common Stock Shares Amount Shares Amount Balance at June 30, 2019 20,853 $ 207 15 $ — $ 113,004 $ ( 2,828 ) $ 93,852 $ 6,118 $ 210,353 Net income — — — — — — 61,562 3,094 64,656 Stock based compensation, net of withholding taxes on vested equity awards 112 1 — — 2,191 — — — 2,192 Issuances of equity for services 2 — — — 851 — — — 851 Issuance of equity for exercise of options 12 — — — 377 — — — 377 Repurchase and retirement of common stock ( 483 ) ( 5 ) — — ( 13,828 ) — — — ( 13,833 ) Cumulative-effect transition adjustment for ASC 842 — — — — — — ( 1,703 ) — ( 1,703 ) Increase in payable pursuant to the tax receivable agreement — — — — ( 1,041 ) — — — ( 1,041 ) Increase in deferred tax asset from step-up in tax basis — — — — 1,364 — — — 1,364 Exchange of LLC Units for Class A Common Stock 100 1 — — 879 — — ( 879 ) 1 Distributions to LLC Unit holders — — — — — — — ( 1,370 ) ( 1,370 ) Foreign currency translation adjustment — — — — — ( 304 ) — ( 16 ) ( 320 ) Balance at June 30, 2020 20,596 204 15 — 103,797 ( 3,132 ) 153,711 6,947 261,527 Net income — — — — — — 109,841 4,441 114,282 Stock based compensation, net of withholding taxes on vested equity awards 109 2 — — 4,316 — — — 4,318 Issuances of equity for services 1 — — — 834 — — — 834 Issuance of equity for exercise of options 11 — — — 375 — — — 375 Increase in payable pursuant to the tax receivable agreement — — — — ( 2,142 ) — — — ( 2,142 ) Increase in deferred tax asset from step-up in tax basis — — — — 2,755 — — — 2,755 65 Table of Contents 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 ) Foreign currency translation adjustment — — — — — 1,493 — 52 1,545 Balance at June 30, 2021 20,847 207 10 — 111,308 ( 1,639 ) 263,552 7,726 381,154 Net income — — — — — — 157,632 5,798 163,430 Stock based compensation, net of withholding taxes on vested equity awards 95 1 — — 4,196 — — — 4,197 Issuances of equity for services 1 — — — 1,140 — — — 1,140 Issuance of equity for exercise of options 113 1 — — 3,286 — — — 3,287 Repurchase and retirement of common stock ( 555 ) ( 6 ) — — ( 34,636 ) — — — ( 34,642 ) Distributions to LLC Unit holders — — — — — — — ( 3,076 ) ( 3,076 ) Foreign currency translation adjustment — — — — — ( 1,868 ) — ( 54 ) ( 1,922 ) Balance at June 30, 2022 20,501 $ 203 10 $ — $ 85,294 $ ( 3,507 ) $ 421,184 $ 10,394 $ 513,568 The accompanying notes are an integral part of these Consolidated Financial Statements. 66 Table of Contents MALIBU BOATS, INC. AND SUBSIDIARIES Consolidated Statements of Cash Flows (In thousands) Fiscal Year Ended June 30, 2022 2021 2020 Operating activities: Net income $ 163,430 $ 114,282 $ 64,656 Adjustments to reconcile net income to net cash provided by operating activities: Non-cash compensation expense 6,342 5,581 3,042 Non-cash compensation to directors 1,054 834 829 Depreciation 19,365 15,636 12,249 Amortization 6,957 7,255 6,131 Deferred income taxes 4,793 6,992 8,715 Adjustment to tax receivable agreement liability 1,025 ( 88 ) ( 1,672 ) Other items, net 1,350 2,075 2,211 Change in operating assets and liabilities (excluding effects of acquisition): Trade receivables ( 1,777 ) ( 32,860 ) 14,193 Inventories ( 38,050 ) ( 35,555 ) ( 5,263 ) Prepaid expenses and other assets ( 1,303 ) 3,038 551 Accounts payable ( 287 ) 24,459 ( 5,812 ) Accrued expenses 10,579 24,894 ( 239 ) Income taxes receivable and payable ( 794 ) 3,539 ( 1,164 ) Other liabilities ( 4,140 ) ( 5,263 ) ( 828 ) Payment pursuant to tax receivable agreement ( 3,698 ) ( 3,505 ) ( 3,458 ) Net cash provided by operating activities 164,846 131,314 94,141 Investing activities: Purchases of property and equipment ( 55,064 ) ( 30,677 ) ( 41,291 ) Proceeds from sale of property and equipment 9 9 897 Payment for acquisition, net of cash acquired ( 6,566 ) ( 150,427 ) — Net cash used in investing activities ( 61,621 ) ( 181,095 ) ( 40,394 ) Financing activities: Principal payments on long-term borrowings ( 76,250 ) ( 625 ) — Proceeds from long-term borrowings — 25,000 — Payment of deferred financing costs — ( 638 ) — Proceeds from revolving credit facility 72,000 65,000 103,800 Payments on revolving credit facility ( 20,000 ) ( 28,800 ) ( 135,000 ) Repurchase and retirement of Class A Common Stock ( 34,642 ) — ( 13,833 ) Cash paid for tax withholdings ( 2,058 ) ( 1,208 ) ( 831 ) Distributions to non-controlling LLC Unit holders ( 2,717 ) ( 1,758 ) ( 1,836 ) Proceeds received from exercise of stock options 3,287 375 377 Net cash (used in) provided by financing activities ( 60,380 ) 57,346 ( 47,323 ) Effect of exchange rate changes on cash ( 580 ) 127 ( 29 ) Changes in cash 42,265 7,692 6,395 Cash—Beginning of period 41,479 33,787 27,392 Cash—End of period $ 83,744 $ 41,479 $ 33,787 Supplemental cash flow information: Cash paid for interest $ 2,294 $ 2,021 $ 3,810 Cash paid for income taxes 42,064 23,469 10,529 Non-cash operating, investing and financing activities: Establishment of deferred tax assets from step-up in tax basis — 2,755 1,364 Establishment of amounts payable under tax receivable agreements — 2,142 1,041 Exchange of LLC Units for Class A Common Stock — 1,373 879 Tax distributions payable to non-controlling LLC Unit holders 1,045 687 104 Capital expenditures in accounts payable 1,032 2,419 1,129 The accompanying notes are an integral part of these Consolidated Financial Statements. 67 Table of Contents MALIBU BOATS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Dollars in thousands, except per unit and share and per share data) 1. Organization, Basis of Presentation, and Summary of Significant Accounting Policies Organization Malibu Boats, Inc. (together with its subsidiaries, the “Company” or "Malibu"), a Delaware corporation formed on November 1, 2013, is the sole managing member of Malibu Boats Holdings, LLC, a Delaware limited liability company (the "LLC"). The Company operates and controls all of the LLC's business and affairs and, therefore, pursuant to Financial Accounting Standards Board ("FASB") Accounting Standards Codification (“ASC”) Topic 810, Consolidation , consolidates the financial results of the LLC and its subsidiaries, and records a non-controlling interest for the economic interest in the Company held by the non-controlling holders of units in the LLC ("LLC Units"). Malibu Boats Holdings, LLC was formed in 2006. 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. 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 The accompanying consolidated financial statements of the Company have been prepared in accordance with U.S. generally accepted accounting principles ("GAAP"). Units and shares are presented as whole numbers while all dollar amounts are presented in thousands, unless otherwise noted. Principles of Consolidation The accompanying consolidated financial statements include the operations and accounts of the Company and all subsidiaries thereof. All intercompany balances and transactions have been eliminated upon consolidation. Segment Reporting The Company has three reportable segments, Malibu, 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 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. Additional segment information is contained in Note 19. Use of Estimates The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates, and such differences could be material. 68 Table of Contents Certain Significant Risks and Uncertainties The Company is subject to those risks common in manufacturing-driven markets, including, but not limited to, competitive forces, dependence on key personnel, consumer demand for its products, the successful protection of its proprietary technologies, compliance with government regulations and the possibility of not being able to obtain additional financing if and when needed. Concentration of Credit and Business Risk A majority of the Company’s sales are made pursuant to floor plan financing programs in which the Company participates on behalf of its dealers through a contingent repurchase agreement with various third-party financing institutions. Under these arrangements, a dealer establishes a line of credit with one or more of these third-party lenders for the purchase of dealer boat inventory. When a dealer purchases and takes delivery of a boat pursuant to a floor plan financing arrangement, it draws against its line of credit and the lender pays the invoice cost of the boat directly to the Company within approximately two weeks. For dealers that use local floor plan financing programs or pay cash, the Company may extend credit without collateral under the dealer agreement based on the Company’s evaluation of the dealer’s credit risk and past payment history. The Company maintains allowances for potential credit losses that it believes are adequate. See Trade Accounts Receivable section within this footnote for more information. The Company’s top ten dealers represented 39.9 %, 38.7 % and 38.5 %, of the Company’s net sales for the fiscal years ended June 30, 2022, 2021 and 2020, respectively. Sales to the Company's dealers under common control of OneWater Marine, Inc. represented approximately 16.8 % , 16.3 % and 15.2 % of the Company's consolidated net sales in the fiscal years ended June 30, 2022 , 2021 , and 2020 respectively. Cash The Company considers all highly liquid investments purchased with an original maturity of 90 days or less to be cash equivalents. Cash equivalents are stated at cost, which approximates fair value. As of June 30, 2022 and 2021, no highly liquid investments were held and the entire balance consists of cash. At June 30, 2022 and 2021, substantially all cash on hand was held by two financial institutions. This cash on deposit may be, at times, in excess of insurance limits provided by the FDIC. Trade Accounts Receivable Trade receivables are carried at original invoice amount less an estimate made for doubtful receivables based on a review of all outstanding amounts on a monthly basis. As of June 30, 2022 and 2021, 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. Recoveries of trade receivables previously written off are recorded when received. A trade receivable is considered to be past due if any portion of the receivable balance is outstanding beyond customer terms. Goodwill Goodwill is an asset representing the future economic benefits arising from other assets acquired in a business combination that are not individually identified and separately recognized. Goodwill amounts are not amortized, but rather are evaluated for potential impairment on an annual basis, as of June 30, in accordance with the provisions of ASC Topic 350, Intangibles—Goodwill and Other . Under the guidance, the Company may assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If this assessment indicates the possibility of impairment, the income approach to test for goodwill impairment would be used. Under the income approach, management calculates the fair value of its reporting units based on the present value of estimated future cash flows. If the fair value of an individual reporting unit exceeds the carrying value of the net assets including goodwill assigned to that unit, goodwill is not impaired. If the carrying value of the reporting unit’s net assets including goodwill exceeds the fair value of the reporting unit, then management determines the implied fair value of the reporting unit’s goodwill. If the carrying value of the reporting unit’s goodwill exceeds its implied fair value, then the Company would record an impairment loss equal to the difference. For fiscal years ended June 30, 2022 and 2021, the Company performed a qualitative assessment which indicated that the fair value of its reporting units more likely than not exceeded their respective carrying amounts. The Company did no t recognize any goodwill impairment charges in the fiscal years ended June 30, 2022, 2021 and 2020. 69 Table of Contents Intangible Assets 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. Definite lived intangible assets are being amortized using the straight-line method based on their estimated useful lives ranging from 5 to 20 years. The estimated useful lives of dealer relationships consider the average length of dealer relationships at the time of acquisition, historical rates of dealer attrition and retention, the Company’s history of renewal and extension of dealer relationships, as well as competitive and economic factors resulting in a range of useful lives. The estimated useful lives of the Company’s trade names are based on a number of factors including technological obsolescence and the competitive environment. The estimated useful lives of legal and contractual rights are estimated based on the benefits that the patent provides for its remaining terms unless competitive, technological obsolescence or other factors indicate a shorter life. The useful life of the non-compete agreement is based on a ten-year agreement entered into by the Company and former owner of the Licensee as part of the acquisition. In addition, the Company has indefinite lived intangible assets for acquired trade names. Management, assisted by third-party valuation specialists, determined the estimated fair values of separately identifiable intangible assets at the date of acquisition under the income approach. Significant data and assumptions used in the valuations included cost, market and income comparisons, discount rates, royalty rates and management forecasts. Discount rates for each intangible asset were selected based on judgment of relative risk and approximate rates of returns investors in the subject assets might require. The royalty rates were based on historical and projected sales and profits of products sold and management’s assessment of the intangibles’ importance to the sales and profitability of the product. Management provided forecasts of financial data pertaining to assets, liabilities and income statement balances to be utilized in the valuations. While management believes the assumptions, estimates, appraisal methods and ensuing results are appropriate and represent the best evidence of fair value in the circumstances, modification or use of other assumptions or methods could have yielded different results. The carrying amount of definite lived intangible assets are reviewed whenever circumstances arise that indicate the carrying amount of an asset may not be recoverable. The carrying value of these assets is compared to the undiscounted future cash flows the assets are expected to generate. If the asset is considered to be impaired, the carrying value is compared to the fair value and this difference is recognized as an impairment loss. Intangible assets not subject to amortization are assessed for impairment at least annually and whenever events or changes in circumstances indicate that it is more likely than not that an asset may be impaired. The impairment test for indefinite-lived intangible assets consists of a comparison of the fair value of the intangible asset with its carrying amount. An impairment loss is recognized for the amount by which the carrying value exceeds the fair value of the asset. There was no impairment loss recognized on intangible assets for the fiscal years ended June 30, 2022, 2021 and 2020. Dealer Incentives The Company provides for various structured dealer rebate and sales promotions incentives, which are recognized as a component of sales in measuring the amount of consideration the Company expects to receive in exchange for transferring goods, at the time of sale to the dealer. Examples of such programs include rebates, seasonal discounts, promotional co-op arrangements and other allowances. Dealer rebates and sales promotion expenses are estimated based on current programs and historical achievement and/or usage rates. Actual results may differ from these estimates if market conditions dictate the need to enhance or reduce sales promotion and incentive programs or if dealer achievement or other items vary from historical trends. Free floor financing incentives include payments to the lenders providing floor plan financing to the dealers or directly to the dealers themselves. Free floor financing incentives are estimated at the time of sale to the dealer based on the expected expense to the Company over the term of the free flooring period and are recognized as a reduction in sales. The Company accounts for both incentive payments directly to dealers and payment to third party lenders in this manner. Dealer incentives are included in accrued expenses on the Company's consolidated balance sheets. 70 Table of Contents Changes in the Company’s accrual for dealer rebates were as follows: Fiscal Year Ended June 30, 2022 2021 2020 Balance at beginning of year $ 11,666 $ 6,865 $ 6,376 Add: Dealer rebate incentives 35,210 28,629 19,555 Additions for acquisitions — 219 — Less: Dealer rebates paid ( 31,024 ) ( 24,047 ) ( 19,066 ) Balance at end of year $ 15,852 $ 11,666 $ 6,865 Changes in the Company’s accrual for floor financing were as follows: Fiscal Year Ended June 30, 2022 2021 2020 Balance at beginning of year $ 121 $ 719 $ 681 Add: Flooring incentives 3,717 4,157 9,492 Additions for acquisitions — 30 — Less: Flooring paid ( 3,651 ) ( 4,785 ) ( 9,454 ) Balance at end of year $ 187 $ 121 $ 719 Tax Receivable Agreement As a result of exchanges of LLC Units into Class A Common Stock and purchases by the Company of LLC Units from holders of LLC Units, the Company will become entitled to a proportionate share of the existing tax basis of the assets of the LLC at the time of such exchanges or purchases. In addition, such exchanges or purchases of LLC Units are expected to result in increases in the tax basis of the assets of the LLC that otherwise would not have been available. These increases in tax basis may reduce the amount of tax that the Company would otherwise be required to pay in the future. These increases in tax basis may also decrease gains (or increase losses) on future dispositions of certain capital assets to the extent tax basis is allocated to those capital assets. In connection with the recapitalization the Company completed in connection with its IPO, the Company entered into a tax receivable agreement with the pre-IPO owners of the LLC that provides for the payment by the Company to the pre-IPO owners (or any permitted assignees) of 85 % of the amount of the benefits, if any, that the Company deems to realize as a result of (i) increases in tax basis and (ii) certain other tax benefits, including those attributable to payments, under the tax receivable agreement. These contractual payment obligations are the Company's obligations and are not obligations of the LLC, and are accounted for in accordance with ASC 450, Contingencies , since the obligations were deemed to be probable and reasonably estimable. For purposes of the tax receivable agreement, the benefit deemed realized by the Company will be computed by comparing its actual income tax liability (calculated with certain assumptions) to the amount of such taxes that it would have been required to pay had there been no increase to the tax basis of the assets of the LLC as a result of the purchases or exchanges, and had the Company not entered into the tax receivable agreement. The timing and/or amount of aggregate payments due under the tax receivable agreement may vary based on a number of factors, including the amount and timing of the taxable income the Company generates in the future and the tax rate then applicable and amortizable basis. The term of the tax receivable agreement will continue until all such tax benefits have been utilized or expired, unless the Company exercises its right to terminate the tax receivable agreement for an amount based on the agreed payments remaining to be made under the agreement. In certain mergers, asset sales or other forms of business combinations or other changes of control, the Company (or its successor) would owe to the pre-IPO owners of the LLC (or any permitted assignees) a lump-sum payment equal to the present value of all forecasted future payments that would have otherwise been made under the tax receivable agreement that would be based on certain assumptions, including a deemed exchange of all LLC Units and that the Company would have had sufficient taxable income to fully utilize the deductions arising from the increased tax basis and other tax benefits related to entering into the tax receivable agreement. 71 Table of Contents Income Taxes Malibu Boats, Inc. is taxed as a C corporation for U.S. income tax purposes and is therefore subject to both federal and state taxation at a corporate level. Following the IPO, the LLC continues to operate in the United States as a partnership for U.S. federal income tax purposes. 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. The Company accounts for the current and deferred tax effects of such returns using the asset and liability method. Significant judgments and estimates are required in determining the Company's current and deferred tax assets and liabilities, which reflect management's best assessment of the estimated future taxes it will pay. These estimates are updated throughout the year to consider income tax return filings, its geographic mix of earnings, legislative changes and other relevant items. The Company recognizes deferred tax assets and liabilities based on the differences between the financial statement carrying amounts of assets and liabilities and the amounts applicable for income tax purposes. Deferred tax assets represent items to be realized as a tax deduction or credit in future tax returns. Realization of the deferred tax assets ultimately depends on the existence of sufficient taxable income of the appropriate character in either the carryback or carryforward period. Each quarter the Company analyzes the likelihood that its deferred tax assets will be realized. A valuation allowance is recorded if, based on the weight of all available positive and negative evidence, it is more likely than not (a likelihood of more than 50%) that some portion, or all, of a deferred tax asset will not be realized (see Note 13). On an annual basis, the Company performs a comprehensive analysis of all forms of positive and negative evidence based on year end results. During each interim period, the Company updates its annual analysis for significant changes in the positive and negative evidence. If the Company later determines that realization is more likely than not for deferred tax assets with a valuation allowance, the related valuation allowance will be reduced. Conversely, if the Company determines that it is more likely than not that the Company will not be able to realize a portion of its deferred tax assets, the Company will increase the valuation allowance. The Company recognizes a tax benefit associated with an uncertain tax position when, in its judgment, it is more likely than not that the position will be sustained based upon the technical merits of the position. For a tax position that meets the more-likely-than-not recognition threshold, the Company initially and subsequently measures the income tax benefit as the largest amount that it judges to have a greater than 50% likelihood of being realized. The liability associated with unrecognized tax benefits is adjusted periodically due to changing circumstances, such as the progress of tax audits, case law developments and new or emerging legislation. Such adjustments are recognized entirely in the period in which they are identified. The Company's income tax provision includes the net impact of changes in the liability for unrecognized tax benefits. The Company has filed federal and state income tax returns that remain open to examination for fiscal years 2019 through 2021, while its subsidiaries, Malibu Boats Holdings, LLC and Malibu Boats Pty Ltd., remain open to examination for years 2018 through 2021. The Company considers an issue to be resolved at the earlier of the issue being “effectively settled,” settlement of an examination, or the expiration of the statute of limitations. Upon resolution, unrecognized tax benefits will be reversed as a discrete event. The Company's liability for unrecognized tax benefits is generally presented as noncurrent. However, if it anticipates paying cash within one year to settle an uncertain tax position, the liability is presented as current. The Company classifies interest and penalties recognized on the liability for unrecognized tax benefits as income tax expense. Revenue Recognition Revenue is recognized as performance obligations under the terms of contracts with customers are satisfied; this occurs when control of promised goods (boats, parts, or other) is transferred to the customer, which is upon shipment. Revenue is measured as the amount of consideration the Company expects to receive in exchange for transferring goods or providing services. The Company generally manufactures products based on specific orders from dealers and often ships completed products only after receiving credit approval from financial institutions. The amount of consideration the Company receives and revenue it recognizes varies with changes in marketing incentives and rebates it offers to its dealers and their customers. Dealers generally have no rights to return unsold boats. From time to time, however, the Company may accept returns in limited circumstances and at the Company’s discretion under its warranty policy, which generally limits returns to instances of manufacturing defects. The Company may be obligated, in the event of default by a dealer, to accept returns of unsold boats 72 Table of Contents under its repurchase commitment to floor financing providers, who are able to obtain such boats through foreclosure. The Company accrues returns when a repurchase and return, due to the default of one of its dealers, is determined to be probable and the amount of the return is reasonably estimable. Historically, product returns, resulting from repurchases made under the floorplan financing program, have not been material and the returned boats have been subsequently resold above their cost. Refer to Note 9 and Note 17 related to the Company’s product warranty and repurchase commitment obligations, respectively. Revenue associated with sales of materials, parts, boats or engine products sold under the Company’s exclusive manufacturing and distribution agreement with its Australian subsidiary are eliminated in consolidation. The Company earns royalties on boats shipped with the Company's proprietary wake surfing technology under licensing agreements with various marine manufacturers. Royalty income is recognized when products are used or sold with the Company's patented technology by other boat manufacturers and industry suppliers. The usage of the Company's technology satisfies the performance obligation in the contract. See Note 2 for more information. Delivery Costs Shipping and freight costs are included in cost of sales in the accompanying consolidated statements of operations and comprehensive income. Advertising Costs Advertising costs are expensed as incurred. Advertising expenses are included in selling and marketing expenses and were not material for the fiscal years ended June 30, 2022, 2021, and 2020. Fair Value of Financial Instruments Financial instruments for which the Company did not elect the fair value option include accounts receivable, prepaid expenses and other current assets, credit facilities, accounts payable, accrued expenses and other current liabilities. The carrying amounts of these financial instruments approximate their fair values as a result of their short-term nature or variable interest rates. Fair Value Measurements The Company applies the provisions of ASC Topic 820, Fair Value 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. ASC Topic 820 also establishes a framework for measuring fair value and expands disclosures about fair value measurements. In addition to the financial assets and liabilities measured on a recurring basis, certain nonfinancial assets and liabilities are to be measured at fair value on a nonrecurring basis in accordance with applicable GAAP. This includes items such as nonfinancial assets and liabilities initially measured at fair value in a business combination (but not measured at fair value in subsequent periods) and nonfinancial long-lived asset groups measured at fair value for an impairment assessment. In general, non-financial assets including goodwill, other intangible assets and property and equipment are measured at fair value when there is an indication of impairment and are recorded at fair value only when any impairment is recognized. Equity-Based Compensation The Company expenses employee share-based awards under ASC Topic 718, Compensation—Stock Compensation , which requires compensation cost for the grant-date fair value of share-based awards to be recognized over the requisite service period. The Company estimated the grant date fair value of the share-based awards issued in the form of profit interests granted prior to November 1, 2013 using the Black-Scholes option pricing model and those granted on November 1, 2013 under the Probability-Weighted Expected Return method. Stock options granted to executives on June 29, 2017, November 6, 2017, August 22, 2018 and January 14, 2019 were valued using the Black-Scholes option pricing model. Stock awards granted on November 3, 2021, 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. See Note 15 for more information. 73 Table of Contents Foreign Currency Translation The functional currency for the Company's consolidated foreign subsidiary is the applicable local currency. The assets and liabilities are translated at the foreign exchange rate in effect at the applicable reporting date, and the consolidated statements of operations and comprehensive income and cash flows are translated at the average exchange rate in effect during the applicable period. Exchange rate fluctuations on translating the foreign currency financial statements into U.S. dollars that result in unrealized gains or losses are referred to as translation adjustments. Cumulative translation adjustments are reflected as a component of "Accumulated other comprehensive loss, net of tax," in the stockholders' equity section of the accompanying consolidated balance sheets and periodic changes are included in comprehensive income. Comprehensive Income Components of comprehensive income include net income and foreign currency translation adjustments. The Company has chosen to disclose comprehensive income in a single continuous statement of operations and comprehensive income. COVID-19 Pandemic 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 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 the Company's 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 throughout fiscal year 2021 and continued into fiscal year 2022. Fiscal year 2022 retail demand continued at a strong pace, albeit at lower levels than the record fiscal year 2021 levels, and in spite of limited inventory. Increases in fiscal year 2022 wholesale production combined with lower retail demand levels, as compared to fiscal year 2021, have combined to increase inventory levels modestly at our Malibu and Cobalt segment dealers at the end of fiscal year 2022. Saltwater Fishing segment dealers remain low on inventory. Dealer inventories continue to be well below historical levels and a full recovery to historical inventory levels will depend on the ability of our supply chain to provide materials to us timely and the level of retail demand during the upcoming year. Additionally, the Company experienced supply chain disruptions throughout fiscal year 2022 that it believes were driven by numerous factors, including labor shortages, ongoing domestic logistical constraints, West Coast port challenges and rising prices to the Company’s suppliers, in part due to inflationary pressures. Such supply chain disruptions along with increased costs for raw materials, parts and components, shipping and labor, are having industry-wide impacts affecting the Company and its suppliers, dealers and customers. The future impact of COVID-19 and ongoing supply chain disruptions on the Company’s financial condition and results of operations may result in further constrained production and increased costs and will depend on a number of factors, including factors that the Company may not be able to forecast at this time. Recent Accounting Pronouncements On July 1, 2019, the Company adopted the new accounting standard, ASC Topic 842, Leases , which superseded the requirements in ASC Topic 840, Leases . ASC Topic 842 requires lessees to recognize on the balance sheet a right-of-use asset, representing its right to use the underlying asset for the lease term, and a lease liability for all leases with terms greater than 12 months. The guidance also requires qualitative and quantitative disclosures designed to assess the amount, timing, and uncertainty of cash flows arising from leases. The Company applied the modified retrospective transition method which allowed for the election of the application of practical expedients, which among other things, allowed the Company to carry forward the historical lease classification. Under this new transition method, at the adoption date the Company recognized a cumulative-effect adjustment to the opening balance of retained earnings. The adoption of ASC Topic 842 did not have a material impact on the Company’s consolidated results of operations, equity or cash flows as of the adoption date. Under the 74 Table of Contents optional transition approach, comparative information was not restated, but will continue to be reported under the standards in effect for those periods. See Note 11 for further information regarding the Company’s leases. In June 2016, the FASB issued 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. ASU 2016-13 will replace today’s “incurred loss” approach with an “expected loss” model for instruments measured at amortized cost. ASU 2018-19 will affect loans, debt securities, trade receivables, net investments in leases, off balance sheet credit exposures, reinsurance receivables, and any other financial assets not excluded from the scope of this amendment that have the contractual right to receive cash. 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. 2. Revenue Recognition The following table disaggregates the Company's revenue by major product type and geography: Fiscal Year Ended June 30, 2022 Malibu Saltwater Fishing Cobalt Consolidated Revenue by product: Boat and trailer sales $ 590,059 $ 340,725 $ 262,679 $ 1,193,463 Part and other sales 17,484 1,205 2,725 21,414 Total revenue $ 607,543 $ 341,930 $ 265,404 $ 1,214,877 Revenue by geography: North America $ 548,826 $ 336,816 $ 253,812 $ 1,139,454 International 58,717 5,114 11,592 75,423 Total revenue $ 607,543 $ 341,930 $ 265,404 $ 1,214,877 75 Table of Contents Fiscal Year Ended June 30, 2021 Malibu Saltwater Fishing Cobalt Consolidated Revenue by product: Boat and trailer sales $ 464,738 $ 241,750 $ 196,654 $ 903,142 Part and other sales 18,787 1,164 3,422 23,373 Total revenue $ 483,525 $ 242,914 $ 200,076 $ 926,515 Revenue by geography: North America $ 434,660 $ 234,680 $ 191,477 $ 860,817 International 48,865 8,234 8,599 65,698 Total revenue $ 483,525 $ 242,914 $ 200,076 $ 926,515 Fiscal Year Ended June 30, 2020 Malibu Saltwater Fishing Cobalt Consolidated Revenue by product: Boat and trailer sales $ 341,886 $ 122,850 $ 172,267 $ 637,003 Part and other sales 12,883 776 2,501 16,160 Total revenue $ 354,769 $ 123,626 $ 174,768 $ 653,163 Revenue by geography: North America $ 327,049 $ 115,363 $ 167,755 $ 610,167 International 27,720 8,263 7,013 42,996 Total revenue $ 354,769 $ 123,626 $ 174,768 $ 653,163 Boat and Trailer Sales Consists of sales of boats and trailers to the Company's dealer network, net of sales returns, discounts, rebates and free flooring incentives. Boat and trailer sales also includes optional boat features. Sales returns consist of boats returned by dealers under the Company's warranty program. Rebates, free flooring and discounts are incentives that the Company provides to its dealers based on sales of eligible products. Part and Other Sales Consists primarily of parts and accessories sales, royalty income and clothing sales. Parts and accessories sales include replacement and aftermarket boat parts and accessories sold to the Company's dealer network. Royalty income is earned from license agreements with various boat manufacturers, including Nautique, Chaparral, Mastercraft, and Tige related to the use of the Company's intellectual property. 3. Non-controlling Interest The non-controlling interest on the consolidated statements of operations and comprehensive income represents the portion of earnings or loss attributable to the economic interest in the Company's subsidiary, Malibu Boats Holdings, LLC, held by the non-controlling LLC Unit holders. Non-controlling interest on the consolidated balance sheets represents the portion of net assets of the Company attributable to the non-controlling LLC Unit holders, based on the portion of the LLC Units owned by such Unit holders. The ownership of Malibu Boats Holdings, LLC is summarized as follows: 76 Table of Contents As of June 30, 2022 As of June 30, 2021 Units Ownership % Units Ownership % Non-controlling LLC unit holders ownership in Malibu Boats Holdings, LLC 600,919 2.8 % 600,919 2.8 % Malibu Boats, Inc. ownership in Malibu Boats Holdings, LLC 20,501,081 97.2 % 20,847,019 97.2 % 21,102,000 100.0 % 21,447,938 100.0 % Balance of non-controlling interest as of June 30, 2020 $ 6,947 Allocation of income to non-controlling LLC Unit holders for period 4,441 Distributions paid and payable to non-controlling LLC Unit holders for period ( 2,341 ) Reallocation of non-controlling interest ( 1,321 ) Balance of non-controlling interest as of June 30, 2021 7,726 Allocation of income to non-controlling LLC Unit holders for period 5,798 Distributions paid and payable to non-controlling LLC Unit holders for period ( 3,076 ) Reallocation of non-controlling interest ( 54 ) Balance of non-controlling interest as of June 30, 2022 $ 10,394 Issuance of Additional LLC Units Under the first amended and restated limited liability company agreement of the LLC, as amended (the "LLC Agreement'), the Company is required to cause the LLC to issue additional LLC Units to the Company when the Company issues additional shares of Class A Common Stock. Other than in connection with the issuance of Class A Common Stock in connection with an equity incentive program, the Company must contribute to the LLC net proceeds and property, if any, received by the Company with respect to the issuance of such additional shares of Class A Common Stock. The Company must cause the LLC to issue a number of LLC Units equal to the number of shares of Class A Common Stock issued such that, at all times, the number of LLC Units held by the Company equals the number of outstanding shares of Class A Common Stock. During the fiscal year ended June 30, 2022, the Company caused the LLC to issue a total of 225,989 LLC Units to the Company in connection with (i) the Company's issuance of Class A Common Stock to a non-employee director for her services, (ii) the issuance of Class A Common Stock for the vesting of awards granted under the Malibu Boats, Inc. Long-Term Incentive Plan (the "Incentive Plan"), (iii) the issuance of restricted Class A Common Stock granted under the Incentive Plan and (iv) the issuance of Class A Common Stock for the exercise of options granted under the Incentive Plan. During fiscal year 2022, 16,932 LLC Units were canceled in connection with the vesting of share-based equity awards to satisfy employee tax withholding requirements and the retirement of 16,932 treasury shares in accordance with the LLC Agreement. Also during fiscal year 2022, 554,995 LLC Units were redeemed and canceled by the LLC in connection with the purchase and retirement of 554,995 treasury shares under the Company's stock repurchase program. Distributions and Other Payments to Non-controlling Unit Holders Distributions for Taxes As a limited liability company (treated as a partnership for income tax purposes), Malibu Boats Holdings, LLC does not incur significant federal, state or local income taxes, as these taxes are primarily the obligations of its members. As authorized by the LLC Agreement, the LLC is required to distribute cash, to the extent that the LLC has cash available, on a pro rata basis, to its members to the extent necessary to cover the members’ tax liabilities, if any, with respect to their share of LLC earnings. The LLC makes such tax distributions to its members based on an estimated tax rate and projections of taxable income. If the actual taxable income of the LLC multiplied by the estimated tax rate exceeds the tax distributions made in a calendar year, the LLC may make true-up distributions to its members, if cash or borrowings are available for such purposes. As of June 30, 2022 and 2021, tax distributions payable to non-controlling LLC Unit holders were $ 1,045 and $ 687 , respectively. During the fiscal years ended June 30, 2022, 2021, and 2020, tax distributions paid to the non-controlling LLC Unit holders were $ 2,717 , $ 1,758 , and $ 1,836 , respectively. Other Distributions 77 Table of Contents Pursuant to the LLC Agreement, the Company has the right to determine when distributions will be made to LLC members and the amount of any such distributions. If the Company authorizes a distribution, such distribution will be made to the members of the LLC (including the Company) pro rata in accordance with the percentages of their respective LLC units. 4. Acquisitions Acquisition of Certain Assets of AmTech, LLC and BTR, LLC On February 1, 2022, Malibu Electronics, LLC, a newly-formed, wholly-owned, direct subsidiary of Boats LLC, entered into an asset purchase agreement to acquire certain assets of AmTech, LLC, an Alabama limited liability company, and real property of BTR, LLC, an Alabama limited liability company. Boats LLC acquired the assets related to the manufacturing and distribution of wiring harnesses that had previously been sold by Amtech, LLC to Boats LLC and its subsidiaries. The acquisition continues the vertical integration strategy of the Company by acquiring its primary supplier of wiring harnesses for Malibu and Axis boats. The Company accounted for the transaction in accordance with ASC Topic 805, Business Combinations . 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. 78 Table of Contents 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: Cash $ 248 Accounts receivable 3,204 Inventories 7,756 Other current assets 194 Property, plant and equipment 22,618 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 Goodwill 49,189 Total purchase price $ 150,675 The fair value estimates for the Company's identifiable intangible assets acquired as part of the acquisition are as follows: Estimates of Fair Value Estimated Useful Life (in years) Definite-lived intangibles: Dealer relationships $ 47,900 20 Total definite-lived intangibles 47,900 Indefinite-lived intangible: Trade name 54,700 Total other intangible assets $ 102,600 The value allocated to inventories reflects the estimated fair value of the acquired inventory based on the expected sales price of the inventory, less an estimated cost to complete and a reasonable profit margin. The fair value of the identifiable intangible assets were determined based on the following approaches: Dealer Relationships - The value associated with 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 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 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 $ 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. 79 Table of Contents 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, 2022, 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 interest on debt financing, 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. The unaudited pro forma financial information is presented for informational purposes only and is not indicative of the results of operations that would have been achieved if the acquisition had taken place at the beginning of fiscal year 2020 or the results that may occur in the future: Fiscal Year Ended June 30, 2022 2021 2020 Net sales $ 1,214,877 $ 982,535 $ 774,126 Net income 163,430 116,598 69,907 Net income attributable to Malibu Boats, Inc. 157,632 112,104 66,671 Basic earnings per share $ 7.60 $ 5.40 $ 3.23 Diluted earnings per share $ 7.51 $ 5.34 $ 3.20 5. Inventories, net Inventories are stated at the lower of cost or net realizable value, determined on the first in, first out (“FIFO”) basis. Manufacturing cost includes materials, labor and manufacturing overhead. Unallocated overhead and abnormal costs are expensed as incurred. Inventories consisted of the following: As of June 30, 2022 2021 Raw materials $ 129,233 $ 92,324 Work in progress 20,929 15,862 Finished goods 6,840 8,499 Total inventories $ 157,002 $ 116,685 6. Property, Plant, and Equipment, net Property, plant, and equipment acquired outside of acquisition are stated at cost. When property, plant, and equipment is retired or otherwise disposed of, the related cost and accumulated depreciation is removed from the accounts and any resulting gain or loss is accounted for in the statement of operations and comprehensive income. Major additions are capitalized; maintenance, repairs and minor improvements are charged to operating expenses as incurred if they do not increase the life or productivity of the related capitalized asset. Depreciation on leasehold improvements is computed using the straight-line method based on the lesser of the remaining lease term or the estimated useful life and depreciation of equipment is computed using the straight-line method over the estimated useful life as follows: Years Building 20 Leasehold improvements Shorter of useful life or lease term Machinery and equipment 3 - 5 Furniture and fixtures 3 - 5 80 Table of Contents The Company accounts for the impairment and disposition of long-lived assets in accordance with ASC Topic 360, Property, Plant, and Equipment . In accordance with ASC Topic 360, long-lived assets to be held are reviewed for events or changes in circumstances that indicate that their carrying value may not be recoverable. The Company periodically reviews for indicators and, if indicators are present, tests the carrying value of long-lived assets, assessing their net realizable values based 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, 2022, 2021 and 2020 in the Company’s consolidated financial statements. Property, plant, and equipment, net consisted of the following: As of June 30, 2022 2021 Land $ 4,905 $ 4,600 Building and leasehold improvements 81,030 74,622 Machinery and equipment 82,469 66,792 Furniture and fixtures 10,805 9,600 Construction in process 52,852 22,005 232,061 177,619 Less accumulated depreciation ( 61,343 ) ( 44,706 ) $ 170,718 $ 132,913 Depreciation expense was $ 19,365 , $ 15,636 and $ 12,249 for the fiscal years ended June 30, 2022, 2021 and 2020, respectively, substantially all of which was recorded in cost of sales. During fiscal year 2022, the Company disposed of various assets with a net book value of $ 3 and recorded a gain of $ 6 related to these disposals. 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. 7. Goodwill and Other Intangible Assets, net The changes in the carrying amount of goodwill for the fiscal years ended June 30, 2022 and 2021 were as follows: Malibu Saltwater Fishing Cobalt Consolidated 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 571 — — 571 Goodwill as of June 30, 2021 12,528 68,714 19,791 101,033 Addition related to the acquisition of Malibu Electronics 329 — — 329 Effect of foreign currency changes on goodwill ( 558 ) — — ( 558 ) Goodwill as of June 30, 2022 $ 12,299 $ 68,714 $ 19,791 $ 100,804 81 Table of Contents The components of other intangible assets were as follows: As of June 30, Estimated Useful Life (in years) Weighted Average Remaining Useful Life (in years) 2022 2021 Dealer relationships $ 131,806 $ 159,394 8 - 20 16.6 Patent 2,600 3,986 12 - 15 10.0 Trade name 100 24,667 15 8.0 Non-compete agreement 48 53 10 2.3 Total 134,554 188,100 Less: Accumulated amortization ( 24,450 ) ( 70,937 ) Total definite-lived intangible assets, net 110,104 117,163 Indefinite-lived intangible: Trade names 118,200 118,200 Total other intangible assets $ 228,304 $ 235,363 Amortization expense recognized on all amortizable intangibles was $ 6,957 , $ 7,255 and $ 6,131 for the fiscal years ended June 30, 2022, 2021 and 2020, respectively. Estimated future amortization expenses as of June 30, 2022 are as follows: Fiscal Year As of June 30, 2022 2023 $ 6,812 2024 6,812 2025 6,809 2026 6,807 2027 6,807 2028 and thereafter 76,057 $ 110,104 8. Accrued Expenses Accrued expenses consisted of the following: As of June 30, 2022 2021 Warranties $ 38,673 $ 35,035 Dealer incentives 16,357 12,479 Accrued compensation 21,076 19,965 Current operating lease liabilities 2,121 2,027 Accrued legal and professional fees 1,939 1,440 Customer deposits 4,851 3,449 Other accrued expenses 2,725 2,784 Total accrued expenses $ 87,742 $ 77,179 9. Product Warranties The Company's Malibu and Axis brand boats have a limited warranty for a period up to five years . The Company's Cobalt brand boats have (1) a structural warranty of up to ten years which covers the hull, deck joints, bulkheads, floor, transom, stringers, and motor mount, and (2) a five year bow-to-stern warranty on all components manufactured or purchased (excluding 82 Table of Contents hull and deck structural components), including canvas and upholstery. Gelcoat is covered up to three years for Cobalt and one year for Malibu and Axis. Pursuit brand boats have (1) a limited warranty for a period of up to five years on structural 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 the Company's warranty and certain components or parts that are separately warranted by the manufacturer or supplier (such as the engine). Engines that the Company manufactures for Malibu and Axis models have a limited warranty of up to five years or five-hundred hours. The Company’s standard warranties require it or its dealers to repair or replace defective products during the warranty period at no cost to the consumer. The 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. Factors that affect the Company’s warranty liability include the number of units sold, historical and anticipated rates of warranty claims and cost per claim. The Company assesses the adequacy of its recorded warranty liabilities and adjust the amounts as necessary. Beginning in model year 2016, the Company increased the term of its limited warranty for Malibu brand boats from three years to five years and for Axis brand boats from two years to five years . Beginning in model year 2018, the Company increased the term of its bow-to-stern warranty for Cobalt brand boats from three years to five years . As a result of these changes, all of the Company’s Malibu, Axis and Cobalt brand boats with historical claims experience that are no longer covered under warranty had warranty terms shorter than the current warranty term of five years . Accordingly, the Company has little 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 the Company's 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 sheets, were as follows: Fiscal Year Ended June 30, 2022 2021 2020 Beginning balance $ 35,035 $ 27,500 $ 23,820 Add: Warranty Expense 21,280 21,973 14,339 Additions for Maverick Boat Group acquisition — 883 — Less: Warranty claims paid ( 17,642 ) ( 15,321 ) ( 10,659 ) Ending balance $ 38,673 $ 35,035 $ 27,500 10. Financing Outstanding debt consisted of the following: As of June 30, 2022 2021 Term loan $ 23,125 $ 99,375 Revolving credit loan 97,000 45,000 Less unamortized debt issuance costs ( 508 ) ( 1,100 ) Total debt 119,617 143,275 Less current maturities 1,563 4,250 Long term debt less current maturities $ 118,054 $ 139,025 Long-Term Debt As of June 30, 2022, the Company had a revolving credit facility with borrowing capacity of up to $ 170,000 and term loans with an aggregate principal amount outstanding of $ 23,125 . As of June 30, 2022, the Company had $ 97,000 outstanding under its revolving credit facility and $ 1,379 in outstanding letters of credit with $ 71,621 available for borrowing. The revolving 83 Table of Contents credit facility matures on July 1, 2024 and a term loan made on December 30, 2020 in a principal amount of $ 25,000 , of which $ 23,125 was outstanding as of June 30, 2022, (the “Incremental Term Loan”) matures on July 1, 2024. The Company had additional term loans in a principal amount of $ 75,000 , of which $ 72,000 was due on July 1, 2022 (the “Existing Term Loans,” and together with the Incremental Term Loans, the “Term Loans”). In June 2022, the Company used proceeds from drawing on the revolving credit facility to repay the Existing Term Loans in full. The Incremental Term Loan remained outstanding as of June 30, 2022. On December 30, 2020, Boats LLC entered into the Third Amendment (the “Third Amendment”) to its 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 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 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 London Inter-bank Offered Rate ("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, 2022, the interest rate on the Company’s term loans and revolving credit facility wa s 3.04 % . 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. The Existing Term Loans required an amortization payment of approximately $ 3,000 on March 31, 2022 and the remaining balance of the Existing Term Loans is due on the scheduled maturity date of July 1, 2022, each reflected as current maturities of long-term obligations. The Incremental Term Loan of $ 25,000 is subject to quarterly amortization at a rate of 5.0 % per year through December 31, 2022 and 7.5 % per year through June 30, 2024, resulting in $ 1,563 being reflected as current maturities of long-term obligations with the balance of the Incremental Term Loan 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. The Credit Agreement also requires compliance with certain customary financial covenants, including a minimum ratio of EBITDA to fixed charges and a maximum ratio of total debt to EBITDA. The Credit Agreement contains certain restrictive covenants, which, among other things, place limits on certain activities of the loan parties under the Credit Agreement, such as the incurrence of additional indebtedness and additional liens on property and limit the future payment of dividends or distributions. For example, the Credit Agreement generally prohibits the LLC, Boats LLC and the subsidiary guarantors from paying dividends or making distributions, including to the Company. The credit facility permits, however, (i) distributions based on a member’s allocated taxable income, (ii) distributions to fund payments that are required under the LLC’s tax receivable agreement, (iii) purchase of stock or stock options of the LLC from former officers, directors or employees of loan parties or payments pursuant to stock option and other benefit plans up to $ 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 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. 84 Table of Contents On July 8, 2022, the Company entered into a Third Amended and Restated Credit Agreement that amended and restated the Credit Agreement. Refer to Note 21 related to Subsequent Events. Covenant Compliance As of June 30, 2022 and 2021, the Company was in compliance with the financial covenants contained in the Credit Agreement. Interest Rate Swap On July 1, 2015, the Company entered into a five year floating to fixed interest rate swap with an effective start date of July 1, 2015. The swap is based on a one-month LIBOR rate versus a 1.52 % fixed rate on a notional value of $ 39,250 , which under terms of the previously existing credit agreement is equal to 50 % of the outstanding balance of the term loan at the time of the swap arrangement. Under ASC Topic 815, Derivatives and Hedging, all derivative instruments are recorded on the consolidated balance sheets at fair value as either short term or long term assets or liabilities based on their anticipated settlement date. The Company has elected not to designate its interest rate swap as a hedge; therefore, changes in the fair value of the derivative instrument are being recognized in earnings in the Company's consolidated statements of operations and comprehensive income. The swap matured on March 31, 2020. For the fiscal year ended June 30, 2020, 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. 11. Leases The Company leases certain manufacturing facilities, warehouses, office space, land, and equipment. The Company determines if a contract is a lease or contains an embedded lease at the inception of the agreement. The Company recorded right-of-use assets, included in other assets on the 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. Other information concerning the Company's operating leases accounted for under ASC Topic 842 is as follows: As of June 30, Classification 2022 2021 Assets Right-of-use assets Other assets $ 10,659 $ 12,606 Liabilities Current operating lease liabilities Accrued expenses $ 2,121 $ 2,027 Long-term operating lease liabilities Other liabilities 10,062 12,198 Total lease liabilities $ 12,183 $ 14,225 Fiscal Year Ended June 30, Classification 2022 2021 2020 Operating lease costs (1) Cost of sales $ 2,611 $ 2,170 $ 1,966 Selling and marketing, and general and administrative 857 854 863 Sublease income Other expense (income), net ( 38 ) ( 38 ) ( 38 ) Cash paid for amounts included in the measurement of operating lease liabilities Cash flows from operating activities 2,517 2,617 2,606 (1) Includes short-term leases, which are insignificant, and are not included in the lease liability. 85 Table of Contents 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 for the fiscal year ended June 30, 2022 and 2021 was 5.53 years and 6.44 years, respectively. As of June 30, 2022 and 2021, the weighted average discount rate determined based on the Company's incremental borrowing rate is 3.63 %, respectively. Future annual minimum lease payments for the following fiscal years as of June 30, 2022 are as follows: Amount 2023 $ 2,522 2024 2,579 2025 2,308 2026 2,255 2027 2,255 2028 and thereafter 1,505 Total 13,424 Less imputed interest ( 1,241 ) Present value of lease liabilities $ 12,183 12. Tax Receivable Agreement Liability The Company has a Tax Receivable Agreement with the pre-IPO owners of the LLC that provides for the payment by the Company to the pre-IPO owners (or their permitted assignees) of 85 % of the amount of the benefits, if any, that the Company is deemed to realize as a result of (i) increases in tax basis and (ii) certain other tax benefits related to the Company entering into the Tax Receivable Agreement, including those attributable to payments under the Tax Receivable Agreement. These contractual payment obligations are obligations of the Company and not of the LLC. The Company's Tax Receivable Agreement liability was determined on an undiscounted basis in accordance with ASC 450, Contingencies , since the contractual payment obligations were deemed to be probable and reasonably estimable. For purposes of the Tax Receivable Agreement, the benefit deemed realized by the Company is computed by comparing the actual income tax liability of the Company (calculated with certain assumptions) to the amount of such taxes that the Company would have been required to pay had there been no increase to the tax basis of the assets of the LLC as a result of the purchases or exchanges, and had the Company not entered into the Tax Receivable Agreement. The following table reflects the changes to the Company's Tax Receivable Agreement liability: As of June 30, 2022 2021 Beginning balance $ 48,214 $ 49,665 Additions (reductions) to tax receivable agreement: Exchange of LLC Units for Class A Common Stock — 2,142 Adjustment for change in estimated tax rate 1,025 ( 88 ) Payment under tax receivable agreement ( 3,698 ) ( 3,505 ) 45,541 48,214 Less current portion under tax receivable agreement ( 3,958 ) ( 3,773 ) Ending balance $ 41,583 $ 44,441 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 86 Table of Contents the LLC. In addition, a pre-IPO owner may elect to unilaterally terminate the Tax Receivable Agreement with respect to such pre-IPO owner, which would obligate the Company to pay to such existing owner certain payments for tax benefits received through the taxable year of the election. When estimating the expected tax rate to use in order to determine the tax benefit expected to be recognized from the Company’s increased tax basis as a result of exchanges of LLC Units by the pre-IPO owners of the LLC, the Company continuously monitors changes in its overall tax posture, including changes resulting from new legislation and changes as a result of new jurisdictions in which the Company is subject to tax. As an example, the Company increased the state tax rate used in computing its future tax obligations as a result of its acquisition of assets for its wire harnessing facility in Alabama, which added Alabama as a new jurisdiction. As of June 30, 2022 and 2021, the Company recorded deferred tax assets of $ 115,952 and $ 114,242 , respectively, associated with basis differences in assets upon acquiring an interest in Malibu Boats Holdings, LLC and pursuant to making an election under Section 754 of the Internal Revenue Code of 1986 (the "Internal Revenue Code"), as amended. These basis differences are included in the overall partnership basis differences disclosed in Note 13. The aggregate Tax Receivable Agreement liability represents 85 % of the tax benefits that the Company expects to receive in connection with the Section 754 election. In accordance with the Tax Receivable Agreement, the next annual payment is anticipated approximately 75 days after filing the federal tax return due by April 15, 2023. 13. Income Taxes Malibu Boats, Inc. is taxed as a C corporation for U.S. income tax purposes and is therefore subject to both federal and state taxation at a corporate level. The LLC continues to operate in the United States as a partnership for U.S. federal income tax purposes. 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. The Company has deferred tax assets and liabilities and maintains valuation allowances where it is more likely than not that all or a portion of deferred tax assets will not be realized. To the extent the Company determines that it will not realize the benefit of some or all of its deferred tax assets, such deferred tax assets will be adjusted through the Company’s provision for income taxes in the period in which this determination is made. On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) was signed into law. The CARES Act contains significant business tax provisions, including modifications to the rules limiting the deductibility of net operating losses (NOLs), expensing of qualified improvement property (QIP) and business interest in Internal Revenue Code Sections 172(a) and 163(j), respectively. The effects of the new legislation are recognized upon enactment. The Company did not recognize any significant impact to income tax expense for fiscal year 2020 relating to the CARES Act. The components of provision for income taxes are as follows: Fiscal Year Ended June 30, 2022 2021 2020 Current tax expense: Federal $ 33,689 $ 21,737 $ 8,062 State 6,632 4,014 1,979 Foreign 1,532 1,284 378 Total current 41,853 27,035 10,419 Deferred tax expense: Federal 4,661 6,147 7,849 State 94 899 917 Foreign ( 73 ) ( 102 ) ( 109 ) Total deferred 4,682 6,944 8,657 Income tax expense $ 46,535 $ 33,979 $ 19,076 The income tax expense differs from the amount computed by applying the federal statutory income tax rate to income from continuing operations before income taxes. The sources and tax effects of the differences are as follows: 87 Table of Contents Fiscal Year Ended June 30, 2022 2021 2020 Federal tax provision at statutory rate 21.0 % 21.0 % 21.0 % State income taxes, net of federal benefit 2.8 2.9 2.9 Permanent differences attributable to partnership investment ( 1.0 ) ( 0.3 ) ( 0.2 ) Non-controlling interest ( 0.6 ) ( 0.7 ) ( 0.9 ) Total income tax expense on continuing operations 22.2 % 22.9 % 22.8 % The Company’s effective tax rate includes a rate benefit attributable to the fact that the Company’s subsidiary operated as a limited liability company which was not subject to federal income tax. Accordingly, the portion of the Company’s subsidiary earnings attributable to the non-controlling interest are subject to tax when reported as a component of the non-controlling interests’ taxable income. The components of the Company's net deferred income tax assets and liabilities at June 30, 2022 and 2021 are as follows: As of June 30, 2022 2021 Deferred tax assets: Partnership basis differences $ 49,740 $ 56,323 Accrued liabilities and reserves 955 876 State tax credits and NOLs 7,178 6,004 Foreign tax credits 580 580 Other 336 345 Less valuation allowance ( 15,633 ) ( 15,279 ) Total deferred tax assets 43,156 48,849 Deferred tax liabilities: Fixed assets and intangibles 27,754 28,644 Other 53 52 Total deferred tax liabilities 27,807 28,696 Total net deferred tax assets $ 15,349 $ 20,153 On an annual basis, the Company performs a comprehensive analysis of all forms of positive and negative evidence to determine whether realizability of deferred tax assets is more likely than not. During each interim period, the Company updates its annual analysis for significant changes in the positive and negative evidence. At June 30, 2022 and 2021, the Company concluded that $ 15,633 and $ 15,279 , respectively, of valuation allowance against deferred tax assets was necessary. 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 2037. This also includes a valuation allowance in the amount of $ 580 related to foreign tax credit carryforward that is not expected to be utilized in the future. Unrecognized tax benefits are discussed in the Company's accounting policy for income taxes (Refer to Note 1 on Income Taxes for more information). The Company has filed federal and state income tax returns that remain open to examination for fiscal years 2019 through 2021, while its subsidiaries, Malibu Boats Holdings, LLC and Malibu Boats Pty Ltd., remain open to examination for fiscal years 2018 through 2021. 88 Table of Contents A reconciliation of changes in the amount of unrecognized tax benefits for the fiscal years ended June 30, 2022, 2021, 2020 is as follows: Fiscal Year Ended June 30, 2022 2021 2020 Balance as of July 1 $ 1,452 $ 1,445 $ 1,401 Additions based on tax positions taken during the current period 314 304 314 Reductions for settlements with taxing authorities — ( 250 ) ( 93 ) Reductions due to statute settlements ( 286 ) ( 50 ) ( 64 ) (Reductions) additions for tax positions of prior years ( 8 ) 3 ( 113 ) Balance as of June 30 $ 1,472 $ 1,452 $ 1,445 In fiscal year 2022, the Company reduced its uncertain tax positions $ 286 as a result of statute settlements, and recorded $ 314 in connection with its current year state filing positions. As of June 30, 2022, it is reasonably possible that $ 156 of the total unrecognized tax benefits recorded will reverse within the next twelve months. Of the total unrecognized tax benefits recorded on the consolidated balance sheet, $ 1,226 would impact the effective tax rate once settled. As discussed in Note 1 to the Consolidated Financial Statements, the Company's policy is to accrue interest related to potential underpayment of income taxes within the provision for income taxes. At June 30, 2022, the Company had $ 244 of accrued interest related to unrecognized tax benefits. The Company did not provide for U.S. federal, state income taxes or foreign withholding taxes in fiscal year 2022 on the outside basis difference of its non-U.S. subsidiary, as such foreign earnings are considered to be permanently reinvested. The estimated income and withholding tax liability associated with the remittance of these earnings is nominal. 14. 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. Exchange of LLC Units for Class A Common Stock 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 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 was 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. During fiscal year 2022, no non-controlling LLC Unit holders exchanged LLC Units for the issuance of Class A Common Stock. As there were no exchanges, no shares of Class B Common Stock were automatically transferred to the Company and retired. As of June 30, 2022, 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 “Fiscal 2020 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. 89 Table of Contents On November 3, 2021, the board of directors of the Company authorized a stock repurchase program for the repurchase of up to $ 70,000 of Class A Common Stock and the LLC Units for the period from November 8, 2021 to November 8, 2022 (the “Fiscal 2022 Repurchase Program”). During the fiscal year ended June 30, 2022, the Company repurchased 554,995 shares of Class A Common Stock for $ 34.6 million in cash including related fees and expenses. As of June 30, 2022, an additional $ 35.4 million was available to repurchase shares of Class A Common Stock and LLC Units under the Fiscal 2022 Repurchase Program. The Fiscal 2022 Repurchase Program expires on November 8, 2022. Class A Common Stock and Class B Common Stock Voting Rights Holders of Class A Common Stock and Class B Common Stock will have voting power over Malibu Boats, Inc., the sole managing member of the LLC, at a level that is consistent with their overall equity ownership of the Company's business. Pursuant to the Company's certificate of incorporation and bylaws, each share of Class A Common Stock entitles the holder to one vote with respect to each matter presented to the Company's stockholders on which the holders of Class A Common Stock are entitled to vote. Each holder of Class B Common Stock shall be entitled to the number of votes equal to the total number of LLC Units held by such holder multiplied by the exchange rate specified in the Exchange Agreement with respect to each matter presented to the Company's stockholders on which the holders of Class B Common Stock are entitled to vote. Accordingly, the holders of LLC Units collectively have a number of votes that is equal to the aggregate number of LLC Units that they hold. Subject to any rights that may be applicable to any then outstanding preferred stock, the Company's Class A and Class B Common Stock vote as a single class on all matters presented to the Company's stockholders for their vote or approval, except as otherwise provided in the Company's certificate of incorporation or bylaws or required by applicable law. Holders of the Company's Class A and Class B Common Stock do not have cumulative voting rights. Except in respect of matters relating to the election and removal of directors on the Company's board of directors and as otherwise provided in the Company's certificate of incorporation, the Company's bylaws, or as required by law, all matters to be voted on by the Company's stockholders must be approved by a majority of the shares present in person or by proxy at the meeting and entitled to vote on the subject matter. Dividends Subject to preferences that may apply to any shares of preferred stock outstanding at the time, the holders of the Company's Class A Common Stock will be entitled to share equally, identically and ratably in any dividends that the board of directors may determine to issue from time to time. Holders of the Company's Class B Common Stock do not have any right to receive dividends. Liquidation Rights In the event of any voluntary or involuntary liquidation, dissolution or winding up of the Company's affairs, holders of the Company's Class A Common Stock would be entitled to share ratably in the Company's assets that are legally available for distribution to stockholders after payment of its debts and other liabilities. If the Company has any preferred stock outstanding at such time, holders of the preferred stock may be entitled to distribution and/or liquidation preferences. In either such case, the Company must pay the applicable distribution to the holders of its preferred stock before it may pay distributions to the holders of its Class A Common Stock. Holders of the Company Class B Common Stock do not have any right to receive a distribution upon a voluntary or involuntary liquidation, dissolution or winding up of the Company's affairs. Other Rights Holders of the Company's Class A Common Stock will have no preemptive, conversion or other rights to subscribe for additional shares. The rights, preferences and privileges of the holders of the Company's Class A Common Stock will be subject to, and may be adversely affected by, the rights of the holders of shares of any series of the Company's preferred stock that the Company may designate and issue in the future. Preferred Stock Though the Company currently has no plans to issue any shares of preferred stock, its board of directors has the authority, without further action by the Company's stockholders, to designate and issue up to 25,000,000 shares of preferred stock in one or more series. The Company's board of directors may also designate the rights, preferences and privileges of the holders of each such series of preferred stock, any or all of which may be greater than or senior to those granted to the holders of common stock. Though the actual effect of any such issuance on the rights of the holders of common stock will not be known until the 90 Table of Contents Company's board of directors determines the specific rights of the holders of preferred stock, the potential effects of such an issuance include: • diluting the voting power of the holders of common stock; • reducing the likelihood that holders of common stock will receive dividend payments; • reducing the likelihood that holders of common stock will receive payments in the event of the Company's liquidation, dissolution, or winding up; and • delaying, deterring or preventing a change-in-control or other corporate takeover. LLC Units In connection with the recapitalization the Company completed in connection with the Company's IPO, the LLC Agreement was amended and restated to, among other things; modify its capital structure by replacing the different classes of interests previously held by the LLC unit holders to a single new class of units called “LLC Units.” As a result of the Company's IPO and the recapitalization the Company completed in connection with the Company's IPO, the Company holds LLC Units in the LLC and is the sole managing member of the LLC. Holders of LLC Units do not have voting rights under the LLC Agreement. Further, the LLC and the pre-IPO owners entered into the Exchange Agreement under which (subject to the terms of the Exchange Agreement) they have the right to exchange their LLC Units for shares of the Company's Class A Common Stock on a one -for-one basis, subject to customary conversion rate adjustments for stock splits, stock dividends and reclassifications, or at the Company's option, except in the event of a change in control, for a cash payment equal to the market value of the Class A Common Stock. As of June 30, 2022, the Company held 20,501,081 LLC Units, representing a 97.2 % economic interest in the LLC, while non-controlling LLC Unit holders held 600,919 LLC Units, representing a 2.8 % interest in the LLC. Refer to Note 3 for additional information on non-controlling interest. As discussed in Note 3, net profits and net losses of the LLC will generally be allocated to the LLC’s members (including the Company) pro rata in accordance with the percentages of their respective limited liability company interests. The LLC Agreement provides for cash distributions to the holders of LLC Units if the Company determines that the taxable income of the LLC will give rise to taxable income for its members. In accordance with the LLC Agreement, the Company intends to cause the LLC to make cash distributions to holders of LLC Units for purposes of funding their tax obligations in respect of the income of the LLC that is allocated to them. 15. Stock-Based Compensation Equity Awards Issued Under the Malibu Boats, Inc. Long-Term Incentive Plan On January 6, 2014, the Company’s board of directors adopted the Malibu Boats, Inc. Incentive Plan. The Incentive Plan, which became effective on January 1, 2014, reserves for issuance up to 1,700,000 shares of Malibu Boats, Inc. Class A Common Stock for the Company’s employees, consultants, members of its board of directors and other independent contractors at the discretion of the compensation committee. Incentive stock awards authorized under the Incentive Plan including unrestricted shares of Class A Common Stock, stock options, SARs, restricted stock, restricted stock units, dividend equivalent awards and performance awards. As of June 30, 2022, there were 479,227 shares available for future issuance under the Incentive Plan. On November 22, 2019, under the Incentive Plan, the Company granted approximately 43,000 restricted service-based stock units and 28,000 restricted service based stock awards to key employees under the Incentive Plan. The grant date fair value of these awards was $ 2,714 based on a stock price of $ 38.05 per share on the date of grant. Under the terms of the agreements, approximately 60 % of the awards will vest ratably over three years and approximately 40 % of the awards will 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 22, 2019, under the Incentive Plan, the Company granted to key employees a target amount of approximately 21,000 restricted stock awards with a performance condition. The number of shares that will ultimately be issued, if any, is based on the attainment of a specified amount of earnings during the fiscal year ending June 30, 2022. The maximum number of shares that can be issued if an elevated earnings target is met is approximately 32,000 . The grant date fair value of the awards were estimated to be $ 810 , based on a stock price of $ 38.05 . Compensation costs associated with the performance awards are recognized over the requisite service period based on probability of achievement in accordance with ASC Topic 718, Compensation—Stock Compensation . 91 Table of Contents 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 maximum number of shares that can be issued if an elevated TSR target is met is approximately 42,000 . The grant date fair value of the awards were estimated to be $ 1,039 , which is estimated using a Monte Carlo simulation. The Monte Carlo simulation model utilizes multiple input variables that determine the probability of satisfying the market condition stipulated in the award grant and calculates the fair market value for the stock award. Compensation costs are recognized over the requisite service period based on probability of achievement in accordance with ASC Topic 718, Compensation—Stock Compensation . 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 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 6, 2023. 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. On November 3, 2021, under the Incentive Plan, the Company granted approximately 32,000 restricted service-based stock units and 23,000 restricted service-based stock awards to key employees under the Incentive Plan. The grant date fair value of these awards was $ 4,149 based on a stock price of $ 74.25 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, 2021, 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, 2024. The maximum number of shares that can be issued if an elevated earnings target is met is approximately 26,000 . The grant date fair value of the awards was estimated to be $ 1,305 , based on a stock price of $ 74.25 . 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, 2021, under the Incentive Plan, the Company granted to key employees a target amount of approximately 18,000 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 3, 2024. The maximum number of shares that can be issued if an elevated TSR target is met is approximately 35,000 . The grant date fair value of the awards were estimated to be $ 1,688 , 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 . 92 Table of Contents On May 6, 2022, under the Incentive Plan, the Company granted approximately 27,000 restricted service-based stock units to key employees under the Incentive Plan. The grant date fair value of these awards was $ 1,376 based on a stock price of $ 51.89 per share on the date of grant. The grant vests ratably over three years on a bi-annual basis. Stock-based compensation expense attributable to the service-based units and awards is amortized on a straight-line basis over the requisite service period. The following table presents the number, grant date stock price per share, and weighted-average exercise price per share of the Company’s employee option awards: Fiscal Year Ended June 30, 2022 2021 2020 Shares Weighted Average Exercise Price/Share Shares Weighted Average Exercise Price/Share Shares Weighted Average Exercise Price/Share Total outstanding Options at beginning of year 161,723 $ 32.64 173,348 $ 32.61 185,473 $ 32.51 Options granted — — — — — — Options exercised ( 112,500 ) 29.22 ( 11,625 ) 32.24 ( 12,125 ) 31.08 Outstanding options at end of year 49,223 $ 40.46 161,723 $ 32.64 173,348 $ 32.61 Exercisable at end of year 31,730 $ 40.26 111,737 $ 30.32 74,869 $ 29.67 The Company expects all outstanding options to vest. The weighted average remaining contractual life of options outstanding and options outstanding and exercisable as of June 30, 2022 was 2.29 years and 2.31 years, respectively. The total intrinsic value of options exercised during the years ended June 30, 2022, 2021 and 2020 was $ 3,751 , $ 322 and $ 200 , respectively. The total intrinsic value of options outstanding and options outstanding and exercisable at June 30, 2022 was $ 603 and $ 395 , respectively. The total intrinsic values are based on the Company’s closing stock price on the last trading day of the applicable year for in-the-money options. The Company's non-employee directors receive an annual retainer for their services as directors consisting of both a cash retainer and equity awards in the form of Class A Common Stock or restricted stock units. Directors may elect that their cash annual retainer be converted into either fully vested shares of Class A Common Stock or restricted stock units paid on a deferral basis. Equity awards issued to directors are fully vested at the date of grant. Directors receiving restricted stock units as compensation for services have no rights as a stockholder of the Company, no dividend rights (except with respect to dividend equivalent rights), and no voting rights until Class A Common Stock is actually issued to them upon separation from service or change in control as defined in the Incentive Plan. If dividends are paid by the Company to its stockholders, directors would be entitled to receive an equal number of restricted stock units based on their proportional interest. For the fiscal year ended June 30, 2020, the Company issued 2,870 shares of Class A Common Stock and 22,206 restricted stock units with a weighted-average grant date fair value of $ 32.93 to its non-employee directors for their services as directors pursuant to the Incentive Plan. For the fiscal year ended June 30, 2021, the Company issued 1,376 shares of Class A Common Stock and 13,624 restricted stock units with a weighted-average grant date fair value of $ 55.61 to its non-employee directors for their services as directors pursuant to the Incentive Plan. For the fiscal year ended June 30, 2022, the Company issued 1,481 shares of Class A Common Stock and 14,258 restricted stock units with a weighted-average grant date fair value of $ 72.42 to its non-employee directors for their services as directors pursuant to the Incentive Plan. The following table presents the number and weighted-average grant date fair value of the Company’s director and employee restricted stock units and restricted stock awards: 93 Table of Contents Fiscal Year Ended June 30, 2022 2021 2020 Number of Restricted Stock Units and Restricted Stock Awards Outstanding Weighted Average Grant Date Fair Value Number of Restricted Stock Units and Restricted Stock Awards Outstanding Weighted Average Grant Date Fair Value Number of Restricted Stock Units and Restricted Stock Awards Outstanding Weighted Average Grant Date Fair Value Total Non-vested Restricted Stock Units and Restricted Stock Awards at beginning of year 314,916 $ 44.46 277,696 $ 35.43 226,240 $ 29.64 Granted 164,290 70.74 141,642 54.96 168,048 37.49 Vested ( 100,441 ) 44.82 ( 93,492 ) 32.88 ( 112,084 ) 26.89 Forfeited ( 9,116 ) 56.41 ( 10,930 ) 50.24 ( 4,508 ) 34.27 Total Non-vested Restricted Stock Units and Restricted Stock Awards at end of year 369,649 $ 55.75 314,916 $ 44.46 277,696 $ 35.43 As of June 30, 2022, the total unrecognized compensation cost related to nonvested, share-based compensation was $ 10,820 , which the Company expects to recognize over a weighted-average period of 2.2 years. Stock compensation expense attributable to all of the Company's equity awards was $ 6,342 , $ 5,581 and $ 3,042 for fiscal years 2022, 2021 and 2020, 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 years 2022, 2021 and 2020, the Company withheld 27,420 , 21,081 and 25,469 shares at an aggregate cost of $ 2,058 , $ 1,208 and $ 831 , respectively, as permitted by the applicable equity award agreements, to satisfy employee tax withholding requirements for employee share-based equity awards that have vested. 16. Net Earnings Per Share Basic net income per share of Class A Common Stock is computed by dividing net income attributable to the Company's earnings by the weighted average number of shares of Class A Common Stock outstanding during the period. The weighted average number of shares of Class A Common Stock outstanding used in computing basic net income per share includes fully vested restricted stock units awarded to directors that are entitled to participate in distributions to common shareholders through receipt of additional units of equivalent value to the dividends paid to Class A Common Stock holders. Diluted net income per share of Class A Common Stock is computed similarly to basic net income per share except the weighted average shares outstanding are increased to include additional shares from the assumed exercise of any common stock equivalents using the treasury method, if dilutive. The Company’s LLC Units and non-qualified stock options are considered common stock equivalents for this purpose. The number of additional shares of Class A Common Stock related to these common stock equivalents and stock options are calculated using the treasury stock method. Stock awards with a performance condition that are based on the attainment of a specified amount of earnings are only included in the computation of diluted earnings per share to the extent that the performance condition would be achieved based on the current amount of earnings, and only if the effect would be dilutive. Stock awards with a market condition that are based on the performance of the Company's stock price in relation to a market index over a specified time period are only included in the computation of diluted earnings per share to the extent that the shares would be issued based on the current market price of the Company's stock in relation to the market index, and only if the effect would be dilutive. 94 Table of Contents Basic and diluted net income per share of Class A Common Stock has been computed as follows (in thousands, except share and per share amounts): Fiscal Year Ended June 30, 2022 2021 2020 Basic: Net income attributable to Malibu Boats, Inc. $ 157,632 $ 109,841 $ 61,562 Shares used in computing basic net income per share: Weighted-average Class A Common Stock 20,511,571 20,528,723 20,455,895 Weighted-average participating restricted stock units convertible into Class A Common Stock 237,666 223,929 206,855 Basic weighted-average shares outstanding 20,749,237 20,752,652 20,662,750 Basic net income per share $ 7.60 $ 5.29 $ 2.98 Diluted: Net income attributable to Malibu Boats, Inc. $ 157,632 $ 109,841 $ 61,562 Shares used in computing diluted net income per share: Basic weighted-average shares outstanding 20,749,237 20,752,652 20,662,750 Restricted stock units granted to employees 116,874 123,179 131,314 Weighted-average stock options convertible into Class A Common Stock 47,525 76,844 15,721 Weighted-average market performance awards convertible into Class A Common Stock 72,620 58,412 42,576 Diluted weighted-average shares outstanding 1 20,986,256 21,011,087 20,852,361 Diluted net income per share $ 7.51 $ 5.23 $ 2.95 1 The Company excluded 686,178 , 685,271 , and 826,250 potentially dilutive shares from the calculation of diluted net income per share for the fiscal year ended June 30, 2022, 2021, and 2020, respectively, as these units would have been antidilutive. The shares of Class B Common Stock do not share in the earnings or losses of Malibu Boats, Inc. and are therefore not included in the calculation. Accordingly, basic and diluted net income per share of Class B Common Stock has not been presented. 17. Commitments and Contingencies Repurchase Commitments In connection with its dealers’ wholesale floor-plan financing of boats, the Company has entered into repurchase agreements with various lending institutions. The reserve methodology used to record an estimated expense and loss reserve in each accounting period is based upon an analysis of likely repurchases based on current field inventory and likelihood of repurchase. Subsequent to the inception of the repurchase commitment, the Company evaluates the likelihood of repurchase and adjusts the estimated loss reserve accordingly. When a potential loss reserve is recorded it is presented in accrued liabilities in the accompanying consolidated balance 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. The total amount financed under the floor financing programs with repurchase obligations was $ 183,953 and $ 79,599 as of June 30, 2022 and 2021, respectively. Repurchases and subsequent sales are recorded as a revenue transaction. The net difference between the repurchase price and the resale price is recorded against the loss reserve and presented in cost of sales in the accompanying consolidated statements of operations and comprehensive income. For fiscal year 2022, the Company did no t repurchase any units under its repurchase agreements. For fiscal year 2021 , the Company did not repurchase any units 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. Accordingly, the Company did not carry a reserve for repurchases as of June 30, 2022 and 2021, respectively. 95 Table of Contents The Company has collateralized receivables financing arrangements with a third-party floor plan financing provider for European dealers. Under terms of these arrangements, the Company transfers the right to collect a trade receivable to the financing provider in exchange for cash but agrees to repurchase the receivable if the dealer defaults. Since the transfer of the 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, 2022 and 2021 , the Company had financing receivables of $ 0 and $ 95 , respectively, recorded in other current assets and accrued expenses related to these arrangements. Contingencies Product Liability The Company is engaged in a business that exposes it to claims for product liability and warranty claims in the event the Company’s products actually or allegedly fail to perform as expected or the use of the Company’s products results, or is alleged to result, in property damage, personal injury or death. Although the Company maintains product and general liability insurance of the types and in the amounts that the Company believes are customary for the industry, the Company is not fully insured against all such potential claims. The Company may have the ability to refer claims to its suppliers and their insurers to pay the costs associated with any claims arising from the suppliers’ products. The Company’s insurance covers such claims that are not adequately covered by a supplier’s insurance and provides for excess secondary coverage above the limits provided by the Company’s suppliers. The Company may experience legal claims in excess of its insurance coverage or claims that are not covered by insurance, either of which could adversely affect its business, financial condition and results of operations. Adverse determination of material product liability and warranty claims made against the Company could have a material adverse effect on its financial condition and harm its reputation. In addition, if any of the Company products are, or are alleged to be, defective, the Company may be required to participate in a recall of that product if the defect or alleged defect relates to safety. These and other claims that the Company faces could be costly to the Company and require substantial management attention. Refer to Note 9 for discussion of warranty claims. The Company insures against product liability claims and, except as disclosed below, believes there are no material product liability claims as of June 30, 2022 that will have a material adverse impact on the Company's results of operations, financial condition or cash flows. Litigation Certain conditions may exist which could result in a loss, but which will only be resolved when future events occur. The Company, in consultation with its legal counsel, assesses such contingent liabilities, and such assessments inherently involve an exercise of judgment. If the assessment of a contingency indicates that it is probable that a loss has been incurred, the Company accrues for such contingent loss when it can be reasonably estimated. If the assessment indicates that a potentially material loss contingency is not probable but reasonably estimable, or is probable but cannot be estimated, the nature of the contingent liability, together with an estimate of the range of possible loss if determinable and material, is disclosed. If the assessment of a contingency deemed to be both probable and reasonably estimable involves a range of possible losses, the amount within the range that appears at the time to be a better estimate than any other amount within the range would be accrued. When no amount within the range is a better estimate than any other amount, the minimum amount in the range is accrued even though the minimum amount in the range is not necessarily the amount of loss that will be ultimately determined. Estimates of potential legal fees and other directly related costs associated with contingencies are not accrued but rather are expensed as incurred. Except as disclosed below, management does not believe there are any pending claims (asserted or unasserted) at June 30, 2022 or June 30, 2021 that will have a material adverse impact on the Company’s financial condition, results of operations or cash flows. Legal Proceedings Batchelder Matters The Company and its indirect subsidiary Boats LLC are defendants in the product liability case Batchelder et al. v. Malibu Boats, LLC, f/k/a Malibu Boats, Inc.; Malibu Boats West, Inc., et. al., Superior Court of Rabun County, Georgia, Civil Action Case No. 2016-CV-0114-C (the "Batchelder I Matter"), brought by, among others, Stephan Paul Batchelder and Margaret Mary Batchelder as Administrators of the Estate of Ryan Paul Batchelder, deceased (“Batchelder I Plaintiffs”). The Batchelder I Plaintiffs also sued the manufacturer of the boat at issue in the case, Malibu Boats West, Inc. (“West”). West is not, and has never been, a subsidiary of the Company but was a separate legal entity whose assets were purchased by Boats LLC in 2006. The case involves a personal injury accident in 2014 involving a 2000 model year boat that was manufactured by West. On August 28, 2021, the jury rejected the Batchelder I Plaintiffs’ design defect claims and found that the driver of the boat was 96 Table of Contents 75 % at fault for the accident. Notwithstanding those findings, the jury found that Boats LLC and West negligently failed to warn of a hazard posed by the relevant boat and that such failure was a proximate cause of the death of the decedent. The jury also found that Boats LLC is a legal successor of, and responsible for the liabilities of, West. The jury awarded compensatory damages of $ 80 million and apportioned 15 % of such damages to Boats LLC and 10 % of such damages to West. In addition, the jury awarded $ 80 million of punitive damages against Boats LLC and $ 40 million of punitive damages against West. Based on the jury’s finding of successor liability, the trial court entered judgment for the full amount of the verdict against Boats LLC, with a potential maximum liability to Boats LLC of $ 140 million, plus post-judgment interest at a rate of 6.25 % per annum. The Batchelder I Plaintiffs also filed motions, after the judgment, seeking orders requiring Boats LLC to pay pre-judgment interest and a portion of their attorney fees. They claimed they are owed attorney fees of approximately $ 56 million. The Company opposed both motions, arguing that the Batchelder I Plaintiffs have no right either to pre-judgment interest or to reimbursement of their attorneys’ fees, and in the alternative that the amount of attorneys’ fees sought was unreasonable. The trial court denied the Batchelder I Plaintiffs’ motion for prejudgment interest and held that ruling on the Batchelder I Plaintiffs’ motion for attorneys’ fees would be premature, indicating that it would decide whether the Batchelder I Plaintiffs have the right to attorneys’ fees, and if so what amount is reasonable, if still necessary upon the resolution of the Company’s post-trial motions and any related appeals. On July 17, 2022, the trial court denied Boats LLC’s post-trial motions. Boats LLC has since filed a notice of appeal. Pending resolution of the appeals process, the payment of any damages in this matter is expected to be stayed. Based on the current status of the process, the Company believes a loss is reasonably possible and that the potential range of loss could be from $ 0 to $ 140 million, plus post-judgment interest at 6.25 % per annum. The Company may also be required to pay an award of reasonable attorney’s fees to the Batchelder I Plaintiffs, which the Batchelder I Plaintiffs claim should be approximately $ 56 million. As noted above, the trial court has postponed any ruling on the Batchelder I Plaintiffs' contested motion for attorney's fees pending the resolution of the Company's post-trial motions and any related appeals. While the Company and Boats LLC maintain product liability insurance applicable to this case, such insurance coverage may be limited to $ 26 million. Further, while Boats LLC has other claims that it may decide to pursue with respect to this matter, the Company cannot provide any assurance that it will pursue those claims or be successful if it does. The Company did not carry a reserve for loss as of June 30, 2022. The Company is also a defendant in a related product liability case, Stephan Paul Batchelder and Margaret Mary Batchelder, as Natural Guardians of Josh Patrick Batchelder, a minor; Darin Batchelder, individually, and as Natural Guardian of Zach Batchelder, a minor; and Kayla Batchelder (the “Batchelder II Plaintiffs”) v. Malibu Boats, LLC v. Dennis Michael Ficarra; State Court of Rabun County, Civil Action File No. 2022-CV-0034. The complaint was filed on February 9, 2022 as a purported renewal of earlier claims by the Batchelder II Plaintiffs that were dismissed without prejudice. The case involves claims by the Batchelder II Plaintiffs of their own alleged bodily injury and emotional distress stemming from the same accident involving the alleged swamping of the boat manufactured and sold by West that is the subject of the Batchelder I Matter. As noted above, West is not, and has never been, a subsidiary of the Company but was a separate legal entity whose assets were purchased by the Company in 2006. Four Batchelder II Plaintiffs (including three children) seek damages for personal injury and punitive damages, alleging that the accident was caused by a design defect and a failure to warn. The Batchelder II Plaintiffs were all dismissed without prejudice from the Batchelder I Matter shortly before the trial for the Batchelder I Matter, however, and thus the new complaint is a renewal action of the original complaint. The Company believes that the allegations in this case are unfounded and denies that there was a design defect or a duty to warn, that the Batchelder II Plaintiffs suffered the alleged injuries, or that any defect in the boat or failure to warn was a legal cause of the alleged injuries. The Company also contends that the incident was caused by the negligence of the driver of the boat and has filed a Third-Party Complaint against the driver, Dennis Ficarra, based on his negligence. 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. 18. Related Party Transactions As of June 30, 2022, there were two non-employee members of the Company's board of directors that are also original shareholders of the Company and receive an annual retainer as compensation for services rendered. For the fiscal years ended June 30, 2022, 2021 and 2020, $ 385 , $ 315 and $ 310 , respectively, was paid to these directors in both cash and equity for their services. Of the amount paid, $ 74 and $ 51 was a prepayment for services through the 2022 and 2021 annual meetings for both of the years ended June 30, 2022 and 2021, respectively. 19. Segment Reporting 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 Saltwater Fishing segment participates in the manufacturing, distribution, marketing and sale throughout the world of Pursuit 97 Table of Contents 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. There is no country outside of the United States from which the Company (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, 2022, 2021, and 2020. Fiscal Year Ended June 30, 2022 Malibu Saltwater Fishing Cobalt Total Net sales $ 607,543 $ 341,930 $ 265,404 $ 1,214,877 Depreciation and amortization 8,398 10,880 7,044 26,322 Net income before provision for income taxes 137,133 34,049 38,783 209,965 Capital expenditures 22,072 26,806 6,186 55,064 Long-lived assets 68,739 307,057 124,030 499,826 Total assets $ 264,551 $ 384,684 $ 202,091 $ 851,326 Fiscal Year Ended June 30, 2021 Malibu Saltwater Fishing 1 Cobalt Total Net sales $ 483,525 $ 242,914 $ 200,076 $ 926,515 Depreciation and amortization 9,397 7,682 5,812 22,891 Net income before provision for income taxes 88,511 35,079 24,671 148,261 Capital expenditures 11,269 9,962 9,446 30,677 Long-lived assets 52,533 291,960 124,816 469,309 Total assets $ 211,510 $ 360,481 $ 170,793 $ 742,784 Fiscal Year Ended June 30, 2020 Malibu Saltwater Fishing Cobalt Total Net sales $ 354,769 $ 123,626 $ 174,768 $ 653,163 Depreciation and amortization 8,809 4,313 5,258 18,380 Net income before provision for income taxes 55,567 10,890 17,275 83,732 Capital expenditures 10,260 22,181 8,850 41,291 Long-lived assets 49,771 114,196 121,508 285,475 Total assets $ 194,502 $ 129,024 $ 153,820 $ 477,346 1 Represents the results of Maverick Boat Group since the acquisition on December 31, 2020. 98 Table of Contents 20. Quarterly Financial Reporting (Unaudited) Quarter Ended Fiscal Year Ended June 30, 2022 June 30, 2022 March 31, 2022 December 31, 2021 September 30, 2021 Net sales $ 353,206 $ 344,287 $ 263,887 $ 253,497 $ 1,214,877 Gross profit 89,627 97,121 63,551 59,752 310,051 Operating income 65,411 71,537 40,187 36,688 213,823 Net income 49,685 54,833 30,979 27,933 163,430 Net income attributable to non-controlling interest 1,766 1,955 1,088 989 5,798 Net income attributable to Malibu Boats, Inc. $ 47,919 $ 52,878 $ 29,891 $ 26,944 $ 157,632 Basic net income per share $ 2.34 $ 2.54 $ 1.43 $ 1.29 $ 7.60 Diluted net income per share $ 2.31 $ 2.51 $ 1.41 $ 1.28 $ 7.51 Quarter Ended Fiscal Year Ended June 30, 2021 June 30, 2021 March 31, 2021 December 31, 2020 September 30, 2020 Net sales $ 276,722 $ 273,162 $ 195,647 $ 180,984 $ 926,515 Gross profit 69,227 72,028 49,489 45,741 236,485 Operating income 45,031 46,865 28,928 28,951 149,775 Net income 34,962 35,135 22,147 22,038 114,282 Net income income attributable to non-controlling interest 1,235 1,339 922 945 4,441 Net income attributable to Malibu Boats, Inc. $ 33,727 $ 33,796 $ 21,225 $ 21,093 $ 109,841 Basic net income per share $ 1.62 $ 1.62 $ 1.03 $ 1.02 $ 5.29 Diluted net income per share $ 1.60 $ 1.61 $ 1.01 $ 1.01 $ 5.23 21. Subsequent Event Third Amended and Restated Credit Agreement On July 8, 2022, Malibu Boats, LLC as the borrower (the “Borrower”), a wholly owned indirect subsidiary of the Malibu Boats, Inc., a Delaware corporation (the “Company”), entered into a Third Amended and Restated Credit Agreement (the “Amended Credit Agreement”) that amended and restated its second amended and restated credit agreement dated as of June 28, 2017 (the “Prior Credit Agreement”), by and among the Borrower, Malibu Boats Holdings, LLC, parent of the Borrower and a wholly owned subsidiary of the Company (the “LLC”), and certain subsidiaries of the Borrower parties thereto, as guarantors (together with the Borrower and the LLC, collectively, the “Loan Parties”), the lenders parties thereto, and Truist Bank, as administrative agent (the “Administrative Agent”), swingline lender and issuing bank. The Amended Credit Agreement provides the Borrower a revolving credit facility in an aggregate principal amount of up to $ 350.0 million (of which $ 121.7 million was drawn on July 8, 2022 to refinance the loans under the Prior Credit Agreement as well as to pay certain fees and expenses related to entering into the Amended Credit Agreement) with a maturity date of July 8, 2027. The Borrower has the option to request that lenders increase the amount available under the revolving credit facility by, or obtain incremental term loans of, up to $ 200.0 million, subject to the terms of the Amended Credit Agreement and only if existing or new lenders choose to provide additional term or revolving commitments. Borrowings under the Amended Credit Agreement bear interest at a rate equal to either, at the Borrower’s option, (i) the highest of the prime rate, the Federal Funds Rate plus 0.5 %, or one-month Term SOFR plus 1 % (the “Base Rate”) or (ii) SOFR, in each case plus an applicable margin ranging from 1.25 % to 2.00 % with respect to SOFR borrowings and 0.25 % to 1.00 % with respect to Base Rate borrowings. The applicable margin will be based upon the consolidated leverage ratio of the LLC and its subsidiaries. The Borrower will also be required to pay a commitment fee for the unused portion of the revolving credit 99 Table of Contents facility, which will range from 0.15 % to 0.30 % per annum, depending on the LLC’s and its subsidiaries’ consolidated leverage ratio. The Company was not a party to the Prior Credit Agreement and is not a party to the Amended Credit Agreement. As with the Prior Credit Agreement, the obligations of the Borrower under the Amended Credit Agreement are guaranteed by its parent, the LLC, and, subject to certain exceptions, the present and future domestic subsidiaries of the Borrower, and all such obligations are secured by substantially all of the assets of the LLC, the Borrower and such subsidiary guarantors pursuant to the Third Amended and Restated Security Agreement, by and among the Borrower, the LLC, the subsidiary guarantors, and Truist Bank, as administrative agent, dated as of July 8, 2022, and other collateral documents. The Amended Credit Agreement contains certain customary representations and warranties, and notice requirements for the occurrence of specific events such as the occurrence of any event of default or pending or threatened litigation. The Amended Credit Agreement also requires compliance with certain customary financial covenants consisting of a minimum ratio of EBITDA to interest expense and a maximum ratio of total debt to EBITDA. The Amended Credit Agreement contains certain customary restrictive covenants regarding indebtedness, liens, fundamental changes, investments, restricted payments, disposition of assets, transactions with affiliates, negative pledges, hedging transactions, certain prepayments of indebtedness, accounting changes and governmental regulation. The Amended Credit Agreement also contains customary events of default. Events of default under the Amended Credit Agreement include (subject to grace periods in certain instances): (i) the failure by any Loan Party to timely make payments due under the Amended Credit Agreement; (ii) material misrepresentations or misstatements in any representation or warranty by any Loan Party when made; (iii) failure by any Loan Party to comply with the covenants under the Amended Credit Agreement and other related agreements; (iv) certain defaults under a specified amount of other indebtedness of Loan Parties; (v) insolvency or bankruptcy-related events with respect to the Loan Parties; (vi) certain undischarged, non-appealable judgments against Loan Parties; (vii) certain ERISA- related events reasonably expected to result in liability above a specified threshold to Loan Parties taken as a whole; (viii) any loan documents or a material part of the liens under the loan documents ceasing to be, or being asserted by any Loan Party not to be, in full force and effect; (ix) any obligations under the loan documents ceasing to constitute senior indebtedness; and (x) the occurrence of a change of control. If an event of default has occurred and continues beyond any applicable cure period, the Administrative Agent may (i) accelerate all outstanding obligations under the Amended Credit Agreement or (ii) terminate the commitments, amongst other remedies. Additionally, the lenders are not obligated to fund any new borrowing under the Amended Credit Agreement while an event of default is continuing. 100 Table of Contents Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure None.