What changed in this filing

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Item 1A. Risk Factors

2023-08-29 compared with 2022-08-25 · 129 added, 107 removed, 332 unchanged (42% of the section changed)

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Consequently, decreased demand or the need to reduce production can lower our ability to absorb fixed costs and materially impact our financial condition or results of operations.

Shortages, or increases in the cost, of raw materials, commodities, component parts and transportation could negatively impact our business.

The primary raw materials used in manufacturing our boats are petroleum-based resins, fiberglass and vinyl.

Our profitability is affected by significant fluctuations in the prices of the raw materials and commodities that we use in our products and in the cost of freight and shipping to source materials, commodities, and other component parts necessary to assemble our products.

In addition, our suppliers could face increased costs or an inability to meet required production levels due to their own limited market supply and, the tariffs the U.S.

has imposed on certain foreign goods, including raw materials and components used in our manufacturing process.

This could negatively impact our cost of sales, by increasing the price of raw materials and components used in our supply chain.

Any disruption in our suppliers’ operations could disrupt our production schedule.

Our financial results may be adversely affected by our third-party suppliers ’ increased costs or inability to meet required production levels due to changing demand or global supply chain disruptions.

We rely on a global supply chain of third parties to supply raw materials used in our manufacturing process, including resins, fiberglass, and vinyl, as well as parts and components.

The prices for these raw materials, parts, and components fluctuate depending on market conditions and, in some instances, commodity prices or trade policies, including tariffs.

Substantial increases in the prices of raw materials, parts, and components would increase our operating costs, and could reduce our profitability if we are unable to recoup the increased costs through higher product prices or improved operating efficiencies.

Our profitability in recent years has been, and in the future may be, affected by significant fluctuations in the prices of the raw materials and commodities that we use in our products and in the cost of freight and shipping of source materials, commodities, and other component parts necessary to assemble our products.

Our ability to maintain production is dependent upon our suppliers delivering sufficient amounts of components, raw materials and parts on time to manufacture our products and meet our production schedules.

In some instances, we purchase components, raw materials and parts that are ultimately derived from a single source or geographic area and we may therefore be at an increased risk for supply disruptions.

Historically, we have not entered into long-term agreements with suppliers of our raw materials and components other than for our engines and outboard motors.

Any number of factors, including labor disruptions, weather events, the occurrence of a contagious disease or illness, contractual or other disputes, unfavorable economic or industry conditions, delivery delays or other performance problems or financial difficulties or solvency problems, could disrupt our suppliers’ operations and lead to uncertainty in our supply chain or cause supply disruptions for us, which could, in turn, disrupt our operations.

We have experienced supply chain disruptions since fiscal year 2020 related to numerous factors, including COVID-19, severe weather events, labor shortages, ongoing domestic logistical constraints, West Coast port challenges and rising prices to suppliers, in part due to inflationary pressures and geopolitical conflicts.

If we continue to experience supply disruptions or they intensify, we may not be able to develop alternate sourcing quickly or at all.

Material disruption of our production schedule caused by a worsening, prolonged or other unexpected shortage of components, raw materials or parts have caused and could cause us not to be able to meet customer demand, to alter production schedules, to delay production launch schedules, or suspend production entirely, which could cause a loss of revenues, which could materially and adversely affect our results of operations.

These disruptions have had and may continue to have in the future an adverse impact on our prospects and operating results.

We rely solely on General Motors for the supply of Malibu and Axis engines, which we integrate into our products for marine use.

The availability and cost of engines used in the manufacture of our boats are critical.

We purchase engines from General Motors LLC that we then prepare for marine use for our Malibu and Axis boats.

Our current agreement with General Motors LLC provides us with engines through model year 2023.

We are currently working to renew our agreement with General Motors and anticipate having a new deal complete before the expiration of the existing agreement.

If we are required to replace General Motors as our engine supplier for Malibu and Axis boats for any reason, it could cause a decrease in such boats available for sale or an increase in our cost of sales, either of which could adversely affect our business, financial condition and results of operations.

For instance, in fiscal year 2020 we experienced interruption to our engine supply as a result of the United Auto Workers’ strike against General Motors.

Supply chain disruptions could occur for any number of factors, including facility closures due to labor disruptions, weather events, cyber intrusions, the occurrence of a contagious disease or illness, such as COVID-19, contractual or other disputes, unfavorable economic or industry conditions, political instability, delivery delays, performance problems, or financial difficulties of suppliers.

These events could disrupt our suppliers’ operations and lead to uncertainty in our supply chain or cause supply disruptions for us, which could, in turn, disrupt our operations.

For example, we have experienced supply chain disruptions beginning in fiscal year 2020 related to numerous factors, including COVID-19, severe weather events, labor shortages, ongoing domestic logistical constraints, West Coast port challenges and rising prices for our suppliers, in part due to inflationary pressures.

In some instances, we purchase components, raw materials and parts that are ultimately derived from a single source or geographic area or a limited number of suppliers and we may therefore be at an increased risk for supply disruptions.

It may be difficult to find a replacement supplier for a limited or sole source raw material, part, or component without significant delay or on commercially reasonable terms, and as a result, an exclusive supplier of a key component could potentially exert significant bargaining power over price, quality, warranty claims, or other terms.

Some components used in our manufacturing processes, including engines, boat windshields, certain electrical components and gel coats are available from a sole supplier or a limited number of suppliers.

We currently purchase engines from General Motors LLC, or General Motors, that we then prepare for marine use for certain Malibu, Axis and Cobalt boats, and we purchase outboard engines from Yamaha Motor Corporation, U.S.A., or Yamaha, for a significant percentage of our Cobalt, Pursuit and Maverick Boats Group branded boats that are pre-rigged for outboard motors.

We had agreements with Yamaha for the supply of outboard motors that expired on June 30, 2023.

We are in discussions with Yamaha to extend those agreements and Yamaha has continued to supply outboard motors to us since those agreements expired.

If we are required to replace either General Motors or Yamaha as an engine supplier for any reason, it could cause a decrease in boats available for sale or an increase in our cost of sales, either of which could adversely

affect our business, financial condition and results of operations.

In fiscal year 2020 we experienced interruption to our engine supply as a result of the United Auto Workers’ strike against General Motors.

During the UAW strike, General Motors suspended delivery of engine blocks to us and we incurred $2.6 million in costs by entering into purchase agreements with two suppliers for additional engines to supplement our inventory of engine blocks for Malibu and Axis boats.

We have agreed to purchase substantially all of our outboard motors from Yamaha, which makes us reliant on Yamaha for our supply of outboard engines.

We have two joint marketing agreements with Yamaha Motor Corporation, U.S.A., or Yamaha, that require us to supply most of our boats that are pre-rigged with outboard motors with Yamaha outboard engines.

In August 2018, we entered into a joint marketing agreement with Yamaha that became effective upon completion of our acquisition of Pursuit.

Under our agreement with Yamaha, in exchange for certain incentives, we have agreed to purchase Yamaha outboard engines for use in all Pursuit and Cobalt branded boats that are pre-equipped with outboard motors when sold by us, except for up to 10% of Pursuit and Cobalt branded boats for sale in the United States.

In addition, Maverick Boat Group has an agreement with Yamaha that we assumed when we acquired Maverick Boat Group.

Under that agreement, Maverick Boat Group, in exchange for certain incentives, has agreed to purchase Yamaha outboard engines for use in all Maverick Boat Group branded boats that are pre-equipped with outboard motors when sold by us, except for up to 15% of Maverick Boat Group branded boats for sale in the United States and certain other limited exceptions.

While we believe that these agreements with Yamaha will provide the engines we need for our boats that use outboard motors, Yamaha could potentially exert significant bargaining power over quality, warranty claims, or other terms relating to the outboard engines we use.

We also must pay penalties to Yamaha under each agreement if we do not achieve pre-determined purchase volume targets for each year of the agreement and for the entire term of the agreement.

We may not be able to meet the purchase volume targets, which would require us to pay penalties to Yamaha.

Our agreements with Yamaha that cover our Cobalt, Pursuit and Maverick Boat Group branded boats are scheduled to expire on June 30, 2023, unless extended by the parties to such agreement.

Termination or interruption of informal supply arrangements could have a material adverse effect on our business or results of operations.

We have informal supply arrangements with many of our suppliers of components, raw materials and parts.

Historically, we have not entered into long-term agreements with suppliers of our raw materials and components other than for our engines and outboard motors.

Instead, we have informal supply arrangements with many of our suppliers of components, raw materials and parts.

In the event of a termination of the supply arrangement, there can be no assurance that alternate supply arrangements will be made on satisfactory terms.

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We cannot assure you that we will be able to attract and retain qualified employees to meet current or future manufacturing needs at a reasonable cost, or at all.

For instance, even when there are high unemployment rates in the regions where we have manufacturing facilities, it can be difficult to retain skilled employees.

For instance, even when there are high unemployment rates in the regions where we have manufacturing facilities, we have had difficulty retaining skilled employees and could experience such difficulties in the future.

Although none of our employees are currently covered by collective bargaining agreements, we cannot assure you that our employees will not elect to be represented by labor unions in the future.

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The nature of our business exposes us to workers' compensation claims and other workplace liabilities.

Certain materials we use require our employees to handle potentially hazardous or toxic substances.

Certain materials that we use require our employees to handle potentially hazardous or toxic substances.

While our employees who handle these and other potentially hazardous or toxic materials receive specialized training and wear protective clothing, there is still a risk that they, or others, may be exposed to these substances.

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however we may not be successful in completing future acquisitions or integrating future acquisitions in a way that fully realizes their expected benefits to our business.

A key part of our growth strategy, as shown by our acquisition of Maverick Boat Groups in 2020, Pursuit in 2018, Cobalt in 2017 and our Australian licensee in 2014, has been to acquire other companies that expand our consumer base, enter new product categories or obtain other competitive advantages.

A key part of our growth strategy, as shown by our acquisition of Maverick Boat Group in 2020, Pursuit in 2018, Cobalt in 2017 and our Australian licensee in 2014, has been to acquire other companies that expand our consumer base, enter new product categories or obtain other competitive advantages.

We expect to continue to acquire companies as an element of our growth strategy;

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The integration process with any acquisition may disrupt our business and, if implemented ineffectively, may preclude realization of the full benefits expected by us and could harm our results of operations.

In addition, the overall integration of the combining companies may result in unanticipated problems, expenses, liabilities and competitive responses and may cause our stock price to decline.

In addition, the overall integration of the combining

companies may result in unanticipated problems, expenses, liabilities and competitive responses and may cause our stock price to decline.

Even if the operations of an acquisition are integrated successfully, we may not realize the full benefits of the acquisition, including the synergies, cost savings or growth opportunities that we expect.

Our growth strategy may require us to secure significant additional capital, the amount of which will depend upon the size, timing, and structure of future acquisitions or vertical integrations and our working capital and general corporate needs.

Our growth strategy includes the possible acquisition of other businesses, such as our acquisitions of Cobalt, Pursuit and Maverick, and the potential integration of new product lines or related products to our boats, such as our initiatives to integrate the production of engines and trailers for our Malibu and Axis models.

Our growth strategy includes the possible acquisition of other businesses, such as our acquisitions of Cobalt, Pursuit and Maverick Boat Group, and the potential integration of new product lines or related products to our boats, such as our initiatives to integrate the production of engines and trailers for our Malibu and Axis models, our Monsoon engines into some of our Cobalt models and our new Tooling Design Center.

These actions may require us to secure significant additional capital through the borrowing of money or the issuance of equity.

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Our reliance upon patents, trademark laws and contractual provisions to protect our proprietary rights may not be sufficient to protect our intellectual property from others who may sell similar products and may lead to costly litigation.

We are currently, and may be in the future, party to lawsuits and other intellectual property rights claims that are expensive and time-consuming.

We have in the past, and may be in the future, party to lawsuits and other intellectual property rights claims that are expensive and time-consuming.

We hold patents and trademarks relating to various aspects of our products and believe that proprietary technical know- how is important to our business.

Proprietary rights relating to our products are protected from unauthorized use by third parties

only to the extent that they are covered by valid and enforceable patents or trademarks or are maintained in confidence as trade secrets.

Proprietary rights relating to our products are protected from unauthorized use by third parties only to the extent that they are covered by valid and enforceable patents or trademarks or are maintained in confidence as trade secrets.

We cannot be certain that we will be issued any patents from any pending or future patent applications owned by or licensed to us or that the claims allowed under any issued patents will be sufficiently broad to protect our technology.

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If the outcome of any litigation challenging our patents is unfavorable to us, our business, financial condition and results of operations could be adversely affected.

Our business operations could be negatively impacted by an outage or breach of our information technology systems, operational technology systems, or a cybersecurity event.

We manage our business operations through a variety of information technology (IT) and operational technology systems which we continually enhance to increase efficiency and security.

We depend on these systems for commercial transactions, customer interactions, manufacturing, branding, employee tracking, and other applications.

New system implementations, such as the current implementation of our new enterprise resource planning (ERP) system, across the enterprise also pose risks of outages or disruptions, which could affect our suppliers, commercial operations, and customers.

We continue to upgrade, streamline, and integrate these systems but, like those of other companies, our systems are susceptible to outages due to natural disasters, power loss, computer viruses, security breaches, hardware or software vulnerabilities, disruptions, and similar events.

We are subject to stringent and evolving U.S.

and foreign laws, regulations, rules, contractual obligations, policies and other obligations related to data privacy and security.

Our actual or perceived failure to comply with such obligations could lead to

regulatory investigations or actions;

litigation (including class claims) and mass arbitration demands;

fines and penalties;

disruptions of our business operations;

reputational harm;

loss of revenue or profits;

and other adverse business consequences.

In the ordinary course of business, we process personal data and other sensitive information.

Our data processing activities subject us to numerous data privacy and security obligations, which arise out of various laws, regulations, guidance, industry standards, representations made in privacy and security policies, marketing materials and other statements, contractual requirements, and other obligations relating to data privacy and security.

In the United States, federal, state, and local governments have enacted numerous data privacy and security laws that are quickly changing, becoming increasingly stringent, and creating regulatory uncertainty, including data breach notification laws, personal data privacy laws, consumer protection laws (e.g., Section 5 of the Federal Trade Commission Act), and other similar laws (e.g., wiretapping laws).

For example, the California Consumer Privacy Act of 2018, as amended by the California Privacy Rights Act of 2020 (collectively, “CCPA”), applies to personal information of consumers, business representatives, and employees who are California residents, and requires businesses to provide specific disclosures in privacy notices and honor requests of such individuals to exercise certain privacy rights.

The CCPA provides for administrative fines of up to $7,500 per violation and allows private litigants affected by certain data breaches to recover significant statutory damages.

Other states have also passed comprehensive privacy laws, and similar laws are being considered in several other jurisdictions.

Outside the United States, an increasing number of laws, regulations, and industry standards may govern data privacy and security.

For example, under European Union’s General Data Protection Regulation (“EU GDPR”), companies may face temporary or definitive bans on data processing and other corrective actions;

fines of up to 20 million Euros under the EU GDPR or 4% of annual global revenue, whichever is greater.

We may at times fail (or be perceived to have failed) in our efforts to comply with our data privacy and security obligations.

Moreover, despite our efforts, our personnel or third parties on whom we rely may fail to comply with such obligations, which could negatively impact our business operations and we could face significant consequences, including but not limited to:

government enforcement actions (e.g., investigations, fines, penalties, audits, inspections, and similar);

litigation (including class-action claims) and mass arbitration demands;

additional reporting requirements and/or oversight;

bans on processing personal data;

and orders to destroy or not use personal data.

In particular, plaintiffs have become increasingly more active in bringing privacy-related claims against companies, including class claims and mass arbitration demands.

Some of these claims allow for the recovery of statutory damages on a per violation basis, and, if viable, carry the potential for monumental statutory damages, depending on the volume of data and the number of violations.

Any of these events could have a material adverse effect on our reputation, business, or financial condition, including but not limited to:

loss of customers;

inability to process personal data or to operate in certain jurisdictions;

limited ability to develop or commercialize our products;

expenditure of time and resources to defend any claim or inquiry;

adverse publicity;

or substantial changes to our business model or operations.

Our business operations could be negatively impacted by an outage or breach of our information technology systems or operational technology systems (or those of the third parties upon which we rely), our sensitive data, or a cybersecurity event.

We manage our business operations through a variety of information technology (IT) and operational technology systems (“IT Systems”).

We depend on these systems for commercial transactions, customer interactions, manufacturing, branding, employee tracking, processing sensitive data and other applications.

New system implementations, across the enterprise also pose risks including without limitation those in connection with future or past business transactions, to our IT systems, including risks of outages or disruptions, which could affect our suppliers, commercial operations, and customers.

We continue to upgrade, streamline, and integrate these systems but, like those of other companies, our systems and data, and those of the third parties we rely on, are susceptible to outages due to natural disasters, power loss, computer viruses, and worms, malware, personnel misconduct or error, ransomware attacks, supply-chain attacks, security breaches, hardware or software vulnerabilities, disruptions, and similar events.

In particular, severe ransomware attacks are becoming increasingly prevalent and can lead to significant interruptions in our operations (including without limitation, our manufacturing, marketing and financial operations), loss of sensitive data, revenue and income loss, reputational harm and loss of customers, and diversion of funds.

Extortion payments may alleviate the negative impact of a ransomware attack, but we may be unwilling or unable to make such payments due to, for example, applicable laws or regulations prohibiting such payments.

We exchange information with many trading partners across all aspects of our commercial operations through our IT systems.

A breakdown, outage, malicious intrusion, breach, random attack, or other disruption of communications could result in erroneous or fraudulent transactions, disclosure of confidential information, loss of reputation and confidence, and may also result in legal claims or proceedings, penalties, and remediation costs.

A breakdown, outage, malicious intrusion, breach, random attack, or other disruption of communications could result in erroneous or fraudulent transactions, disclosure of confidential or other sensitive information, loss of reputation and confidence, and may also result in legal claims or proceedings, penalties, and remediation costs.

We have experienced cyber-attacks, but to our knowledge, we have not experienced any material disruptions or breaches of our information technology systems or connected products.

The risk of these systems-related events and security breaches occurring has intensified, in part because we maintain certain information necessary to conduct our businesses in digital form stored on cloud servers.

If our security measures are breached or fail, unauthorized persons may be able to obtain access to or acquire personal or other confidential data.

While we have implemented security measures designed to protect against security incidents, there can be no assurance that these measures will be effective.

We take steps to detect and remediate vulnerabilities, but we may not be able to detect and remediate all vulnerabilities because the threats and techniques used to exploit the vulnerability change frequently and are often sophisticated in nature.

Therefore, such vulnerabilities could be exploited but may not be detected until after a security incident

has occurred.

These vulnerabilities pose material risks to our business.

Further, we may experience delays in developing and deploying remedial measures designed to address any such identified vulnerabilities.

Threats of system-related events and security breaches are prevalent and continue to rise, are increasingly difficult to detect, and come from a variety of sources, including traditional computer “hackers,” threat actors, “hacktivists,” organized criminal threat actors, personnel (such as through theft or misuse), sophisticated nation states, and nation-state-supported actors.

If our security measures are breached or fail, unauthorized persons may be able to obtain access to or acquire personal or other confidential data, or we may need to temporarily suspend production or operations in order to restore security.

Depending on the nature of the information compromised, we may also have obligations to notify consumers and/or employees about the incident, and we may need to provide some form of remedy, such as a subscription to a credit monitoring service, for the individuals affected by the incident.

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Moreover, the amount and scope of insurance we maintain against losses resulting from any such events or security breaches may not be sufficient to cover our losses or otherwise adequately compensate us for any disruptions to our businesses that may result, and the occurrence of any such events or security breaches could have a material adverse effect on our business and results of operations.

We have started the implementation of a new enterprise resource planning (ERP) system and if we are not able to successfully develop and manage that implementation, it could adversely affect our business or results of operations.

Additionally, our contracts may not contain limitations of liability, and even where they do, there can be no assurance that limitations of liability in our contracts are sufficient to protect us from liabilities, damages, or claims related to our data privacy and security obligations

We have started the design and implementation of a new enterprise resource planning (ERP) system and if we are not able to successfully develop and manage that implementation, it could adversely affect our business or results of operations.

We have begun the process of designing and implementing a new ERP system.

We are currently in the design phases of the project.

This project will require significant capital and human resources, the re-engineering of many processes of our business, and the attention of our management and other personnel who would otherwise be focused on other aspects of our business.

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As a result of doing business in foreign countries and with foreign partners, we are exposed to a heightened risk of violating anti-corruption and trade control laws and sanctions regulations.

Our operations and sales have been adversely impacted by the COVID-19 pandemic, and we must successfully manage the demand, supply, and operational challenges associated with the actual or perceived effects of COVID-19 and the related widespread public health crisis.

Our business has been, and may continue to be, negatively impacted by the fear of exposure to or actual effects of the COVID-19 pandemic in the United States and other countries where we operate or our dealers or suppliers are located.

The impacts of the pandemic on our operations have included:

• The temporary shutdown of our facilities between March and May of 2020, limiting our ability to ship boats to our dealers during the period of shut-down, which negatively impacted our net sales for the second half of fiscal year 2020.

• Supply chain disruptions created by the temporary shutdown of facilities of our suppliers, which led us to limit our production levels during the first half of fiscal 2021 in an attempt to allow our supply chain to partially recover in preparation of higher manufacturing volumes that we planned for the second half of fiscal 2021.

• Lower production levels that, coupled with strong retail demand, contributed to lower inventory levels at our dealers as of June 30, 2021 compared to June 30, 2020.

Furthermore, COVID-19 has impacted and may further impact the general economy, including negatively impacting economic growth, the proper functioning of financial and capital markets, foreign currency exchange rates, interest rates, and liquidity.

Despite our efforts to manage and remedy COVID-19 related impacts to us, their ultimate impact also depends on factors beyond our knowledge or control, including any resurgences of the COVID-19 virus, third-party actions taken to contain its spread and mitigate its public health effects, and the related impact on consumer confidence and spending.

Catastrophic events, including natural or environmental disasters, pandemics or other disruptions at our facilities could adversely affect our business, financial condition and results of operations.

Catastrophic events, including natural or environmental disasters, pandemics, such as the COVID-19 pandemic or other disruptions at our facilities could adversely affect our business, financial condition and results of operations.

We rely on the continuous operation of our facilities in Tennessee, Florida, Kansas, California, Alabama, and Australia.

Any natural or environmental disaster, pandemic or other serious disruption to our facilities due to fire, flood, earthquake, acts of terrorism, civil insurrection or social unrest or any other unforeseen circumstances could adversely affect our business, financial condition and results of operations.

For example, as a result of the COVID-19 pandemic, we experienced a temporary shutdown of our facilities, which negatively impacted our net sales and production levels and created supply chain disruptions, which led to lower inventory levels at our dealers for a period of time.

If there is a disruption in our business it could result in a reduction of production and cause delays in our ability to meet consumer demand or receive supplies from our vendors.

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Changes in domestic and international tax legislation could expose us to additional tax liability and could impact the amount of our tax receivable agreement liability.

For example, in August 2022, the U.S.

Congress passed the Inflation Reduction Act of 2022.

The key tax provisions applicable to us include a 1% excise tax on stock repurchases effective January 1, 2023.

We currently do not expect these changes to have a material impact on our financial position;

however, we will continue to evaluate the impact as further information becomes available.

Although we monitor changes in tax laws and work to mitigate the impact of proposed changes, such changes may negatively impact our financial results.

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The loss of services of any members of our senior management or key personnel or the inability to hire or retain qualified personnel in the future could adversely affect our business, financial condition, and results of operations.

For instance, we are currently conducting a search process to identify and appoint a new permanent Chief Financial Officer.

If we are unable to attract and retain a qualified candidate to become our Chief Financial Officer, it could have an adverse impact on our business, including impacting our ability to meet financial and operation goals and implementing our strategic plans.

Risks Related to Our Markets and the Recreational Powerboat Industry

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Our failure to introduce new technologies and product offerings that our markets desire could adversely affect our business, financial condition and results of operations.

Also, we believe we have been able to achieve higher margins in part as a result of the introduction of new features or enhancements to our existing boat models.

Also, we believe we have been able to achieve higher margins in part as

a result of the introduction of new features or enhancements to our existing boat models.

If we fail to introduce new features or those we introduce fail to gain market acceptance, our margins may suffer.

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It may be difficult to control negative publicity, regardless of whether it is accurate.

Negative incidents, such as quality and safety concerns, product recalls, severe incidents or injuries related to our products or

actions, or statements or actions of our employees or dealers or the athletes associated with our products, could lead to tangible adverse effects on our business, including lost sales or employee retention and recruiting difficulties.

Negative incidents, such as quality and safety concerns, product recalls, severe incidents or injuries related to our products or actions, or statements or actions of our employees or dealers or the athletes associated with our products, could lead to tangible adverse effects on our business, including lost sales or employee retention and recruiting difficulties.

Also, public concerns about the environmental impact of our products could result in diminished public perception of our brands.

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Our sales may be adversely impacted by increased consumer preference for used boats or the supply of new boats by competitors in excess of demand.

During the economic downturn that commenced in 2008, we observed a shift in consumer demand toward purchasing more used boats, primarily because prices for used boats are typically lower than retail prices for new boats.

If this were to occur again, it could have the effect of reducing demand among retail purchasers for our new boats.

In the past, we have observed a shift in consumer demand toward purchasing more used boats during economic downturns, primarily because prices for used boats are typically lower than retail prices for new boats.

If consumer demand shifts toward purchasing more used boats, it could have the effect of reducing demand among retail purchasers for our new boats.

Also, while we have taken steps designed to balance production volumes for our boats with demand, our competitors could choose to reduce the price of their products, which could have the effect of reducing demand for our new boats.

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The recreational powerboat industry, and in particular the performance sport boat category, is highly competitive for consumers and dealers.

Competition affects our ability to succeed in the markets we currently serve, including the saltwater outboard fishing boat market that we recently entered with our acquisitions of Pursuit and Maverick Boat Group, and new markets that we may enter in the future.

Competition affects our ability to succeed in the markets we currently serve, including the saltwater

outboard fishing boat market that we recently entered with our acquisitions of Pursuit and Maverick Boat Group, and new markets that we may enter in the future.

Competition is based primarily on brand name, price, product selection and product performance.

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Consequently, a strong U.S.

dollar may adversely affect reported revenues.

We also maintain a portion of our manufacturing operations in Australia which partially

mitigates the impact of a strengthening U.S.

dollar may adversely affect reported revenues and, with the recent strengthening of the U.S.

dollar, we have experienced a corresponding negative impact on our financial results with respect to our foreign operations.

We also maintain a portion of our manufacturing operations in Australia which partially mitigates the impact of a strengthening U.S.

dollar in that country.

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The market prices of certain materials and components used in manufacturing our products, especially resins that are made with hydrocarbon, feedstocks, copper, aluminum and stainless steel, can be volatile.

While, historically, inflation has not had a material effect on our results of operations, significant increases in inflation, particularly those related to wages and increases in the cost of raw materials, recently have, and may continue to have, an adverse impact on our business, financial condition, and results of operations.

While, historically, inflation has not had a material effect on our results of operations, significant increases in inflation, particularly those related to wages and increases in the cost of raw materials, recently have had, and may continue to have, an adverse impact on our business, financial condition, and results of operations.

In addition, new boat buyers often finance their purchases.

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represented approximately 17.2% , 16.8% and 16.3% of consolidated net sales in fiscal years 2023, 2022 and 2021, respectively.

Sales to our dealers under common control of Tommy's Boats represented approximately 10.7%, 9.4% and 7.3% of our consolidated net sales in the fiscal years ended June 30, 2023 , 2022 and 2021 respectively.

The loss of a significant number of these dealers could have a material adverse effect on our financial condition and results of operations.

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In addition, independent dealers in the recreational powerboat industry have experienced significant consolidation in recent years, which could result in the loss of one or more of our dealers in the future if the surviving entity in any such consolidation purchases similar products from a competitor.

A significant deterioration in the number or effectiveness of our dealers could have a material adverse effect on our business, financial condition and results of operations.

A significant deterioration in the

number or effectiveness of our dealers could have a material adverse effect on our business, financial condition and results of operations.

Our success depends, in part, upon the financial health of our dealers and their continued access to financing.

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In connection with these agreements, we may have an obligation to repurchase our products from a finance company under certain circumstances, and we may not have any control over the timing or amount of any repurchase obligation nor have access to capital on terms acceptable to us to satisfy any repurchase obligation.

This obligation is triggered

if a dealer defaults on its debt obligations to a finance company, the finance company repossesses the boat and the boat is returned to us.

This obligation is triggered if a dealer defaults on its debt obligations to a finance company, the finance company repossesses the boat and the boat is returned to us.

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

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If our products are found to be defective or used incorrectly by our customers, bodily injury, property damage or other injury, including death, may result and this could give rise to additional product liability or economic loss claims against us and adversely affect our brand image or reputation.

For instance, a jury recently found that our subsidiary, Malibu Boats, LLC, and another entity that was the manufacturer of the boat at issue, Malibu Boats West, Inc., negligently failed to warn of a hazard posed by the boat and that such failure was a proximate cause of the death of a passenger in the boat.

For instance, we recently settled certain product liability matters for $100.0 million after a jury found that our subsidiary, Malibu Boats, LLC, and another entity that was the manufacturer of the boat at issue, Malibu Boats West, Inc., negligently failed to warn of a hazard posed by the boat and that such failure was a proximate cause of the death of a passenger in the boat.

Malibu Boats West, Inc.

is not, and has never been, a subsidiary of ours but was a separate legal entity whose assets were purchased by Malibu Boats, LLC in 2006.

Based on the jury’s finding of successor liability, the trial court entered judgment for the full amount of the verdict against Malibu Boats, LLC, with a potential maximum liability to Malibu Boats, LLC of $140 million, plus post-judgment interest at a rate of 6.25% per annum.

Malibu Boats, LLC may also be required to pay an award of reasonable attorney’s fees to the plaintiffs, which the plaintiffs claim should be approximately $56 million.

The trial court has postponed any ruling on the plaintiffs' contested motion for attorney’s fees pending the resolution of our post-trial motions and related appeals.

On July 17, 2022, the trial court denied the post-trial motions of Malibu Boats, LLC, and we have 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.

While we maintain product liability insurance applicable to this case, such insurance coverage may be limited to $26 million.

Further, while we have other claims that we may decide to pursue with respect to this matter, we cannot provide any assurance that we will pursue those claims or be successful if we do.

If the outcome of the case is ultimately unfavorable to us after appeal, we would need to pay for any final judgment in excess of the amount paid by our insurance providers.

See Note 17 of our audited consolidated financial statements included elsewhere in this Annual Report on Form 10-K for additional information.

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

Any of these laws, rules, or regulations may cause us to incur significant expenses to achieve or maintain compliance, require us to modify our products, or modify our approach to our workforce, adversely affecting the price of or demand for some of our products, and ultimately affect the way we conduct our operations.

some of our products, and ultimately affect the way we conduct our operations.

Failure to comply with any of these laws, rules, or regulations could result in harm to our reputation and/or could lead to fines and other penalties, including restrictions on the importation of our products into, and the sale of our products in, one or more jurisdictions until compliance is achieved.

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from paying dividends or making distributions to Malibu Boats, Inc.

Our credit agreement permits, however, (i) distributions to members of the LLC, including Malibu Boats, Inc., based on the member’s allocated taxable income, (ii) distributions to fund payments that are required under the our tax receivable agreement, (iii) purchases of stock or stock options of the LLC from former officers, directors or employees of loan parties under the credit agreement or payments pursuant to stock option and other benefit plans up to $3.0 million in any fiscal year, and (iv) distributions to Malibu Boats, Inc.

for the repurchase of its capital stock of up to $35.0 million 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 $10.0 million in any fiscal year, subject to compliance with other financial covenants.

However, our credit agreement permits (i) distributions to members of the LLC, including Malibu Boats, Inc., based on the member’s allocated taxable income, (ii) distributions to fund payments that are required under the our tax receivable agreement, (iii) purchases of stock or stock options of the LLC from former officers, directors or employees of loan parties under the credit agreement or payments pursuant to stock option and other benefit plans up to $5.0 million in any fiscal year, and (iv) repurchases of the outstanding stock and LLC units of Malibu Boats, Inc..

In addition, the LLC may make dividends and distributions, subject to compliance with other financial covenants.

The credit agreement governing our revolving credit facility contains restrictive covenants which may limit our operating flexibility and may impair our ability to access sufficient capital to operate our business.

We rely on our revolving credit facility to provide us with adequate liquidity to operate our business.

The credit agreement governing our revolving credit facility contains 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 credit agreement governing our revolving credit facility contains restrictive covenants regarding indebtedness, liens, fundamental changes, investments, share repurchases, dividends and distributions, disposition of assets, transactions with affiliates, negative pledges, hedging transactions, certain prepayments of indebtedness, accounting changes and governmental regulation.

The credit agreement also requires compliance with financial covenants consisting of a minimum ratio of EBITDA to interest expense and a maximum ratio of total debt to EBITDA.

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Borrowings under our revolving credit facility are at variable rates of interest and expose us to interest rate risk.

Interest rates are currently at relatively low levels.

If interest rates increase, our debt service obligations on the variable rate indebtedness will increase even though the amount borrowed remains the same, and our net income and cash flows, including cash available for servicing our indebtedness, will correspondingly decrease.

On July 8, 2022, we entered into a Third Amended and Restated Credit Agreement (the “Amended Credit Agreement”) that amended and restated our second amended and restated credit agreement dated as of June 28, 2017 (the “Prior Credit Agreement”).

The Amended Credit Agreement provides us 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.

Borrowings under the Amended Credit Agreement bear interest at a rate equal to either, at our 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.

During the past year, interest rates have been increasing, which results in increased debt service obligations under our revolving credit facility even if our amount borrowed remains the same.

Borrowings under our revolving credit facility bear interest at a variable rate equal to either, at our 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.

If the rate used to calculate interest on our outstanding floating rate debt under our Prior Credit Agreement or Amended Credit Agreement were to increase by 1.0%, we would expect to incur additional interest expense on such indebtedness as of June 30, 2022 of approximately $1.2 million on an annualized basis.

While we do not expect the potential impact of our transition from LIBOR to SOFR as the benchmark rate under our credit agreement to have a material effect on our financial results based on our currently outstanding debt, uncertainty as to the use of SOFR or other reforms that could occur could adversely impact our interest expense on our floating rate debt.

For instance, the use of SOFR may result in interest that does not correlate over time with the payments that would have been made on our indebtedness if LIBOR were available in its current form.

As of August 24, 2023, we had $65.0 million outstanding under our revolving credit facility.

If the rate used to calculate interest on our outstanding floating rate debt under our revolving credit facility Credit Agreement were to increase by 1.0%, we would expect to incur additional interest expense on such indebtedness as of August 24, 2023 of approximately $0.7 million on an annualized basis.

We will be required to pay the pre-IPO owners (or any permitted assignee) for certain tax benefits pursuant to our tax receivable agreement with them, and the amounts we may pay could be significant.

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Assuming no material changes in the relevant tax law, and that we earn sufficient taxable income to realize all tax benefits that are subject to the agreement, we expect that future payments under the tax receivable agreement relating to the purchases by Malibu Boats, Inc.

of LLC Units will be approximately $45.5 million over the next fifteen (15) years.

of LLC Units will be approximately $43.5 million over the next sixteen (16) years.

Future payments to pre-IPO owners (or their permitted assignees) in respect of subsequent exchanges or purchases would be in addition to these amounts and are expected to be substantial.

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may have an obligation to make tax receivable agreement payments for a certain amount while receiving distributions from the LLC in a lesser amount, which would negatively affect our liquidity.

The payments under the

tax receivable agreement are not conditioned upon the pre-IPO owners’ (or any permitted assignees’) continued ownership of us.

The payments under the tax receivable agreement are not conditioned upon the pre-IPO owners’ (or any permitted assignees’) continued ownership of us.

Malibu Boats, Inc.

is required to make a good faith effort to ensure that it has sufficient cash available to make any required payments under the tax receivable agreement.

The limited liability company agreement of the LLC requires the LLC to make “tax distributions” which, in the ordinary course, will be sufficient to pay the actual tax liability of Malibu Boats, Inc.

The limited liability company agreement of the LLC requires the LLC to make

“tax distributions” which, in the ordinary course, will be sufficient to pay the actual tax liability of Malibu Boats, Inc.

and to fund required payments under the tax receivable agreement.

If for any reason the LLC is not able to make a tax distribution in an amount that is sufficient to make any required payment under the tax receivable agreement or we otherwise lack sufficient funds, interest would accrue on any unpaid amounts at LIBOR, plus 500 basis points until they are paid.Recent actions taken by the Chief Executive of the U.K.

Financial Conduct Authority (the “FCA”), which regulates LIBOR, indicate that the continuation of U.S.

LIBOR on the current basis cannot and will not be guaranteed after June 30, 2023.

Moreover, it is possible that U.S.

LIBOR will be discontinued or modified prior to June 30, 2023.

Our tax receivable agreement, however, does not provide for an alternative reference rate to LIBOR and, while we do not currently anticipate failing to pay any amounts owed under our tax receivable agreement, it is unclear how we would determine interest on any such amounts should we fail to pay as required under our tax receivable agreement.

Recent actions taken by the Chief Executive of the U.K.

Financial Conduct Authority (the “FCA”), which regulates LIBOR, discontinued U.S.

LIBOR after June 30, 2023.

Our tax receivable agreement does not provide for an alternative reference rate to LIBOR.

Therefore, pursuant to the Adjustable Interest Rate (LIBOR) Act (the “ LIBOR Act ”), 12 U.S.C.

§§ 5801-5807, and the regulations promulgated to carry out the LIBOR Act, 12 C.F.R.

Part 253, on July 1, 2023 we believe LIBOR with respect to the tax receivables agreement was automatically replaced by operation of law with the SOFR plus a spread adjustment.

We do not currently anticipate failing to pay any amounts owed under our tax receivable agreement.

In certain cases, payments under the tax receivable agreement to the pre-IPO owners (or any permitted assignees) of LLC Units may be accelerated or significantly exceed the actual benefits we realize in respect of the tax attributes subject to the tax receivable agreement.

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Sales of a substantial number of shares of our Class A Common Stock in the public market, in particular sales by our directors, officers or other affiliates, or the perception that these sales might occur, could depress the market price of our Class A Common Stock and could impair our ability to raise capital through the sale of additional equity securities.

Furthermore, any Class A Common Stock that we issue in connection with our Long-Term Incentive Plan or other equity incentive plans that we

may adopt in the future, our acquisitions or otherwise would dilute the percentage ownership of holders of our Class A Common Stock.

Furthermore, any Class A Common Stock that we issue in connection with our Long-Term Incentive Plan or other equity incentive plans that we may adopt in the future, our acquisitions or otherwise would dilute the percentage ownership of holders of our Class A Common Stock.

Our governing documents and Delaware law could prevent a takeover that stockholders consider favorable and could also reduce the market price of our stock.

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

What changed 10-K

Item 1A. Risk Factors