What changed in this filing

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Item 1. Business

2020-09-11 compared with 2019-09-13 · 161 added, 170 removed, 237 unchanged (58% of the section changed)

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The MasterCraft segment includes both our MasterCraft and Aviara brands.

Our MasterCraft brand is a world-renowned innovator, designer, manufacturer, and marketer of premium performance sport boats, with a leading market position in the U.S., a strong international presence, and dealers in 46 countries around the world.

Our boats are used for water skiing, wakeboarding, wake surfing, as well as general recreational boating.

Our MasterCraft brand is a world-renowned innovator, designer, manufacturer, and marketer of premium performance sport boats, with a leading market position in the U.S., and a strong international presence consisting of dealers in 37 countries around the world.

MasterCraft boats are used for water skiing, wakeboarding, wake surfing, as well as general recreational boating.

We believe that MasterCraft is the most recognized brand name in the performance sport boat category.

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In October 2018 we acquired Crest, a leading manufacturer of pontoon boats, providing us with additional product diversification and direct addressable market expansion.

With the acquisition of Crest, we expanded our product portfolio and now operate in three of the fastest growing segments of the powerboat industry – performance sport boats, outboard saltwater fishing boats and pontoon boats.

The pontoon category is also one of the fastest growing segments in the powerboat industry and participates in the outboard category.

In February 2019 we introduced a new brand, Aviara, specifically designed, engineered and manufactured to meet the exacting specifications of consumers seeking the ultimate luxury recreational day boat experience.

Partnering with the largest dealership in the U.S., MarineMax, Aviara began shipping and retailing in July 2019.

With three anticipated models ranging from 32 – 40 feet in length, using both outboard and sterndrive propulsion, the Aviara brand continues our track record of product diversification and addressable market expansion, both through acquisitions and utilization of our in-house product development capabilities.

Aviara will be built in our MasterCraft plant and will be part of the MasterCraft reportable segment.

We are committed to delivering an extraordinary boating experience to our customers.

From pioneering innovations that improve enjoyment on the water to offering products that promote rapid development of skills, our mission is to help our customers generate memories that will last a lifetime.

We utilize a comprehensive product development process in order to build the most relevant and exciting products for our customers, year after year.

The brand’s first model, the AV32, began selling during the first quarter of 2020 and the AV36 began selling during the second quarter of 2020.

In February 2020, we launched the third Aviara model, the AV40, which we expect to begin selling in the first half of fiscal 2021.

With three models ranging from 32 – 40 feet in length, using both outboard and sterndrive propulsion, the Aviara brand continues our track record of product diversification and addressable market expansion, both through acquisitions and utilization of our in-house product development capabilities.

Aviara is built in our MasterCraft facility and is part of the MasterCraft reportable segment.

Through our four brands, we operate in three of the fastest growing segments of the powerboat industry — performance sport boats, outboard saltwater fishing and pontoon boats — while entering the large, growing luxury day boat segment.

We are committed to delivering an extraordinary boating experience to our consumers.

From pioneering innovations that improve enjoyment on the water to offering products that promote rapid development of skills, our mission is to help our consumers generate memories that will last a lifetime.

We utilize a comprehensive product development process in order to build the most relevant and exciting products for our consumers, year after year.

We believe that our commitment to quality is unsurpassed, and we engage in operational excellence to deploy flexible and effective production systems that ensure we design and build the highest quality boats in the market.

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We believe our MasterCraft facility is the only boat manufacturing plant to achieve compliance with all three of the International Standard for Organization (“ISO”) 9001 (Quality Management Systems), 14001 (Environmental Management Systems), and 18001 (International Occupational Health and Safety Management System) standards.

MasterCraft’s industry-leading operations result in world-class quality, which enables us to offer, what we believe is a best-in-class five-year factory warranty and results in MasterCraft boats typically maintaining higher aftermarket resale value than our competitors’ boats.

MasterCraft’s industry-leading operations result in world-class quality, which enables us to offer a five-year factory warranty and results in MasterCraft boats typically maintaining higher aftermarket resale value than our competitors’ boats.

We sell our boats through an extensive network of independent dealers in North America and internationally.

Our MasterCraft boats are the exclusive performance sport boats offered by the majority of our dealers.

Our acquisition of NauticStar and Crest, along with the introduction of our Aviara brand, has allowed us to expand our dealer network over the past two years.

Since the acquisitions of NauticStar and Crest, and the introduction of our Aviara brand, we have expanded our dealer network over the past years.

We devote significant time and resources to find, develop, and improve the performance of our dealers.

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smooth and low at slalom and jump speeds yet well-defined at trick speeds.

Our roots in performance water ski boats were reinforced as we evolved over the next 50 years to produce leading pe rformance-oriented boats in the wakeboarding and wake surfing categories.

Today, we continue to produce the industry’s premier competitive water ski, wakeboarding, and wake surfing performance boats that also address our customers’ needs for versatility, f lexibility, fun, and functionality.

Our roots in performance water ski boats were reinforced as we evolved over the next 50 years to produce leading performance-oriented boats in the wakeboarding and wake surfing categories.

Today, we continue to produce the industry’s premier competitive water ski, wakeboarding, and wake surfing performance boats that also address our consumers’ needs for versatility, flexibility, fun, and functionality.

NauticStar, which we acquired in October 2017, was founded in 2002 and is located in Amory, Mississippi.

With more than 15 years of boat manufacturing experience—including a 200,000 square-foot manufacturing facility—NauticStar has a reputation for reliability, quality and consistency, with a loyal network of dealers and customers including professional and sport fishermen, and recreational and pleasure boating enthusiasts.

With many years of boat manufacturing experience, and a 200,000 square-foot manufacturing facility, NauticStar has a reputation for reliability, quality and consistency, with a loyal network of dealers and consumers including professional and sport fishermen, and recreational and pleasure boating enthusiasts.

Crest, which we acquired in October 2018, was founded in 1957 and is located on approximately 55 acres in Owosso, Michigan.

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Aviara is a de novo brand, developed in-house, and focused on serving the luxury recreational day boat segment of the powerboat industry.

Introduced at the Miami Boat Show in February 2019, Aviara will initially feature three models utilizing both outboard and sterndrive propulsion.

Introduced at the Miami Boat Show in February 2019, Aviara currently features three models utilizing both outboard and sterndrive propulsion.

The brand’s first model, the AV32 began selling during the first quarter of 2020 and the AV36 began selling during the second quarter of 2020.

In February 2020, we launched the third Aviara model, the AV40, which we expect to begin selling in the first half of fiscal 2021.

Aviara creates an elevated open water experience by fusing progressive style and effortless comfort in its modern luxury vessels.

Our Market Opportunity

During 2018, retail sales of new powerboats in the U.S.

During calendar 2019, retail sales of new powerboats in the U.S.

totaled $11.0 billion.

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The category that most directly corresponds to our NauticStar and Crest brand is the outboard category.

Aviara will most directly correspond to the outboard and sterndrive categories.

Given our product diversification driven by acquisitions and internal product development, we believe our addressable market also includes similar and adjacent powerboat categories identified by the NMMA, including sterndrive boats, inboard cruiser boats and jet boats.

Aviara directly corresponds to the outboard and sterndrive categories.

We believe we are well-positioned to benefit from several trends underway in our addressable market, including:

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premium bowriders between 30’ – 40’ in length, both outboard and sterndrive, are taking a greater share of the overall fiberglass powerboat category;

inventory of two to five-year-old pre-owned boats has become limited, driving consumers to purchase new boats;

ease-of-use and performance innovations have accelerated product cycles driving consumer demand for new products.

higher consumer confidence influenced by improving macroeconomic conditions, including increased home values, greater workforce participation and lower corporate and individual federal income tax rates, has helped to drive increased consumer demand for powerboats.

As growth in the general economy and overall boating industry has continued since the economic downturn that commenced in 2008, the performance sport boat and outboard categories have experienced a robust recovery.

In addition, as a result of the COVID-19 Pandemic, consumers have been turning to boating as a safe recreational alternative that allows for social distancing while enjoying the outdoors.

However, our marketplace continues to evolve as a result of the COVID-19 Pandemic and could change further in the future.

Please see Item 1A, “Risk Factors – Risks Relating to Our Business – The COVID-19 Pandemic has had, and may continue to have, certain negative impacts on our business and those of our consumers, dealers and suppliers, and such impacts may have a material adverse effect on our operations and business.”

According to the NMMA, new unit sales of performance sport boats in the U.S.

increased at a compound annual growth rate (“CAGR”) of 10.7% from 2014 to 2018 while new unit sales of all outboard boats and pontoons grew at a CAGR of 6.2% in the U.S.

increased at a compound annual growth rate (“CAGR”) of 9.7% from calendar 2015 to 2019 while new unit sales of all outboard boats grew at a CAGR of 4.3% in the U.S.

over the same period.

Total new unit sales of powerboats in the U.S.

(excluding personal water craft and jet boats) increased at a CAGR of 5.6% from 2014 to 2018.

(excluding personal watercraft and jet boats) increased at a CAGR of 3.9% from 2015 to 2019.

We believe the performance sport boat and outboard boat categories have grown at a faster rate than the rest of the powerboat industry due to increased innovation in the features, designs, and layouts of performance sport boats and outboard propulsion boats.

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We believe outboard boats are superior to sterndrive boats for recreational boating uses such as fishing and family boating for several reasons, including (i) relatively more passenger and storage space due to the location of the outboard engine housing, (ii) engine noise is significantly reduced in an outboard engine compared to a sterndrive engine, (iii) outboard engines are easier to access and maintain compared to a sterndrive engine, and (iv) outboard engines perform better and have greater durability in saltwater conditions.

The expanding popularity of boating has also contributed to the strong recovery in volumes.

We believe we are well-positioned to benefit from the increased popularity of recreational boating and the resulting larger prospective customer base.

The expanding popularity of boating has also contributed to the strong volumes.

We believe we are well-positioned to benefit from the increased popularity of recreational boating and the resulting larger prospective consumer base.

Our Strengths

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We believe the MasterCraft brand is well-known among boating enthusiasts for high performance, premier quality, and relentless innovation.

We believe that the market recognizes MasterCraft as a premier brand in the powerboat industry due to the overall superior value proposition that our boats deliver to our customers.

We believe that the market recognizes MasterCraft as a premier brand in the powerboat industry due to the overall superior value proposition that our boats deliver to our consumers.

The MasterCraft brand is built on a carefully crafted set of defining principles, including Legacy, Power, Precision and Progression.

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Leading Market Share Position in Performance Sport Boat, Outboard, and Pontoon Categories.

Over the last decade, we have consistently held a leading market share position in the U.S.

In recent history, we have consistently held a leading market share position in the U.S.

among manufacturers of premium performance sport boats based on unit volume.

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and Crest has the #8 market share, by brand, in the highly-fragmented pontoon segment.

We believe our sales have grown as dealers and customers continue to recognize the superior quality, performance, styling, and value of our recently released boats and that we are just starting to realize the market share benefits of the many recent new product offerings and product enhancement initiatives that our management team has implemented during the past several years.

We believe our sales will grow as dealers and consumers continue to recognize the superior quality, performance, styling, and value of our recently released boats and that we are just starting to realize the market share benefits of the many recent new product offerings and product enhancement initiatives that our management team has implemented during the past several years.

Industry-Leading Product Design and Innovation.

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Our entire MasterCraft product portfolio has been renewed in the past five years, giving us the newest overall product offering in the performance sport boat category.

Since acquiring NauticStar, we have introduced four new models, with future plans to introduce several new models over the coming years.

At Crest, we are in the beginning stages of designing and engineering new models that we believe will drive innovation in the pontoon segment.

Since acquiring NauticStar, we have introduced several new models, with future plans to introduce several new models over the coming years.

At Crest, we are designing and engineering new models that we believe will drive innovation in the pontoon segment.

Our Aviara brand, designed and engineered completely in-house, features several new innovations that we plan to introduce to the marketplace over the coming years.

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Our acquisition of NauticStar and Crest allows us to leverage this internal product development and manufacturing expertise to capitalize on operational improvement opportunities at our Amory, Mississippi and Owosso, Michigan facilities.

Our Aviara brand will be built in our existing MasterCraft facility, benefiting from the industry-leading quality, safety, and manufacturing process we already have in place there.

Our Aviara brand, which is built in our existing MasterCraft facility, has benefited from the industry-leading quality, safety, and manufacturing process we have in place there.

Strong Dealer Network.

We have worked extensively with our dealers to develop what we believe is one of the strongest dealer networks in the performance sport boat, outboard, and pontoon categories.

We have worked extensively with our dealers to develop what we believe is one of the strongest dealer networks in the performance sport boat and outboard categories.

We target our distribution to the market segments’ highest performing dealers.

We have established operating processes focused on optimizing dealers’ financial performance and service, and with a track record of balancing wholesale inventory and retail sales we are better able to manage dealer inventory, allowing for more transparent sales estimates and strong dealer relationships.

We believe our warranty programs are more transparent than those of our competitors and provide consumers with greater peace of mind.

Transparent and thorough warranty programs encourage customers to continue to visit our dealers for servicing, creating additional opportunities for boat trade-ins and purchases of accessories, thereby improving our dealers’ sales rates and financial health.

We have established operating processes focused on optimizing dealers’ financial performance and service, and with a track record of balancing wholesale inventory and retail sales we are better able to monitor dealer inventory, allowing for more transparent sales estimates and strong dealer relationships.

Transparent and thorough warranty programs encourage consumers to continue to visit our dealers for servicing, creating additional opportunities for boat trade-ins and purchases of accessories, thereby improving our dealers’ sales rates and financial health.

These actions have strengthened our existing dealer network and are driving increased interest from new potential dealers who want to join the MasterCraft, NauticStar and Crest platforms.

For our Aviara brand, we have exclusively partnered with MarineMax, the largest marine dealership in the U.S., to market our luxury recreational day boats.

For our Aviara brand, we have partnered with MarineMax, the largest marine dealership in the U.S., to market our luxury recreational day boats.

We believe introducing a new brand with an established dealer base provides the Aviara brand with instant credibility and the greatest opportunity for long-term success in the marketplace.

Differentiated Sales and Marketing Capabilities.

We believe our marketing efforts support each of our brand promises by focusing on superior value proposition and differentiating the performance and fe atures of our boats.

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

To highlight our Maste rCraft performance credibility and generate additional brand excitement, we sponsor a number of nationally ranked athletes.

We believe our superior sales and marketing capabilities effectively communicate our performance, styling, quality, authenticity, an d lifestyle, resulting in increased overall customer engagement.

We believe our marketing efforts support each of our brand promises by focusing on superior value proposition and differentiating the performance and features of our boats.

Our marketing efforts are conducted using an array of strategies, which include d igital advertising, social media engagement, advertisements in endemic media and the sponsorship of boating and water sport events.

To highlight our MasterCraft performance credibility and generate additional brand excitement, we sponsor a number of nation ally ranked athletes , and social influencers .

We believe our superior sales and marketing capabilities effectively communicate our performance, styling, quality, authenticity, and lifestyle, resulting in increased overall consumer engagement.

Highly Experienced Executive Team.

We have a highly seasoned and effective executive team.

With an average of close to 30 years of boating industry experience, our management team has proven its ability to develop and integrate new product lines, enhance operations, strengthen our distribution network, and recruit industry talent.

Senior management additions over the past few years have driven improvements to our manufacturing, quality, and product development systems and processes, which have collectively accelerated performance improvements as unit volumes have increased.

Our President and Chief Executive Officer, Terry McNew, has 32 years of boating industry experience.

He joined MasterCraft in August 2012 after serving as Executive Vice President of Brunswick Corporation’s recreational boat group, where he was in charge of manufacturing, product development, and engineering and quality systems.

His leadership has helped us implement dramatic process improvements contributing to superior results.

Tim Oxley, our Chief Financial Officer, has spent 29 years in the boating industry, including 13 years with MasterCraft, following 16 years with Brunswick Corporation where he served as Chief Financial Officer of several operating divisions.

Jay Povlin, President of NauticStar since March 2019, is a 26-year marine industry veteran and joined MasterCraft in 2013.

He brings considerable marine executive business leadership experience from both domestic and international markets.

During his many years in the marine industry, he has also held numerous senior leadership positions with Brunswick Corporation and in those roles provided strategic direction for business unit performance, manufacturing operations, sales and marketing efforts, and product development initiatives.

Patrick May, President of Crest, oversees sales, marketing, product development and manufacturing activities.

Before its acquisition by MasterCraft, he served as COO and CFO of Crest since April 2010.

With extensive boating industry experience, our management team has proven its ability to develop and integrate new product lines, enhance operations, strengthen our distribution network, and recruit industry talent.

Our Chief Executive Officer, Frederick Brightbill, has nearly 20 years of boating industry experience and has served as a member of our Board of Directors since 2009, including as Chairman since 2015.

On December 3rd, 2019, Mr.

Brightbill was appointed as the permanent Chief Executive Officer.

Brightbill previously served as President of the Aluminum Boat Group at Brunswick Corporation and in various leadership roles at Mercury Marine, including President of the Outboard Business Unit and Integrated Operations Division.

Tim Oxley, our Chief Financial Officer, has spent 30 years in the boating industry, including 14 years with the Company, following 16 years with Brunswick Corporation where he served as Chief Financial Officer of several operating divisions.

In addition to Messrs.

Brightbill and Oxley, the other members of our senior leadership team, collectively, have over 115 years of experience in the boating industry.

Continue to Develop New and Innovative Products.

As a leading innovator, designer, manufacturer, and marketer of premium performance sport boats, and high-quality bay, deck and center console outboard boats, we strive to design new and inventive products that appeal to a broad customer base.

As a leading innovator, designer, manufacturer, and marketer, we strive to design new and inventive products that appeal to a broad consumer base for all of our premium brands.

Since fiscal 2013, we have successfully launched a number of new products and features with best-in-class quality leading to increased sales and significant margin expansion.

Furthermore, our unique new product development process enables us to renew our product portfolio with innovative offerings at a rate that we believe will be difficult for our competitors to match without significant additional capital investments.

Our process involves each department in collaborative full “team” product launches that enable us to release several new models per year, per brand, while maintaining superior quality and controlling costs.

Our entire MasterCraft product portfolio has been renewed in the past five years, and we have released four new models at NauticStar since our acquisition in October 2017.

We intend to bring this product development process and discipline to Crest, and any future brands we may acquire, by continuing to release new products and features multiple times during the year, which we believe will further enhance our reputation as a cutting-edge boat manufacturer and consumer interest in our products.

Product development and innovation are the life blood of successful boat manufacturers and we will continue to invest significant resources to ensure a pipeline of new products to meet the needs of our consumers.

Capture Additional Share from Adjacent Boating Categories.

Our NauticStar, Crest, and Aviara brands provide us with direct access to the outboard and sterndrive categories, with outboards representing the largest category of the powerboat industry with $7.7 billion of sales in 2019, per the NMMA, and provides diversification from our existing MasterCraft product portfolio.

The additions of NauticStar, Crest, and Aviara, combined with our culture of innovation, enhances our ability to introduce new products with increased versatility, functionality, and performance to a more expansive customer base that values boats for competitive and recreational fishing, and general recreational boating purposes.

Ultimately, the versatile boating experience delivered by our MasterCraft, NauticStar, Crest, and Aviara boats allows us to attract customers from other boating categories, most notably from the sterndrive categories.

We intend to further enhance the performance, comfort, and versatility of our products to target additional customers seeking high performance water sport, fishing and general recreational activity.

Continuous Operational Improvement to Drive Margin Expansion.

We continue to implement a number of initiatives to reduce our cost base and to improve the efficiency of our manufacturing process.

These process improvements have lowered re-work, warranty claims, material waste, and inventory levels, reducing our costs, and have driven improved on-time delivery rates.

Since acquiring NauticStar and Crest, we have worked to revamp each of their respective manufacturing and product development processes, which should lead to operational efficiencies and drive margin expansion going forward.

Additionally, we have fostered a culture of operational improvement within our highly engaged workforce, at MasterCraft, NauticStar and Crest.

These processes are now ingrained in our culture, leading to a Company-wide focus on driving further margin expansion through continuous improvement.

We believe these important process improvements and culture of operational excellence provide us with a strong operational foundation and margin improvement opportunities in the future.

Effecti vely Manage Dealer Inventory and Further Strengthen Our Dealer Network.

The additions of NauticStar, Crest, and Aviara, combined with our culture of innovation, enhances our ability to introduce new products with increased versatility, functionality, and performance to a more expansive consumer base that values boats for competitive and recreational fishing, and general recreational boating purposes.

Ultimately, the versatile boating experience delivered by our brands allows us to attract consumers from other boating categories, most notably from the sterndrive categories.

We intend to further enhance the performance, comfort, and versatility of our products to target additional consumers seeking high performance water sport, fishing and general recreational activity.

Effectively Monitor Dealer Inventory and Further Strengthen Our Dealer Network.

Our goal is to achieve and maintain a leading market share in each of the markets in which we operate.

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Therefore, we devote significant time and resources to finding high quality dealers and developing and improving their performance over time.

We actively manage field inventory levels, as demonstrated by healthy and consistent inventory retail turns and balanced wholesale and retail unit sales, which leads to better margins and improved financial health for our dealers.

Additionally, our warranty programs for our products and predictable new product development cycles across our portfolio ensure that our dealers have high quali ty, compelling, and relevant products to sell to their customers.

We actively monitor field inventory levels, as demonstrated by healthy and consistent inventory retail turns and balanced wholesale and retail unit sales, which leads to better margins and improved financial health for our dealers.

Additionally, our predictable new product development cycles across our portfolio ensure that our dealers have high quality, compelling, and relevant products to sell to their customers.

We believe the quality and trust in our dealer relationships are more beneficial to our long-term success than the quantity of dealers.

We continue to leverage that dealer base while proacti vely developing strategies that will strengthen our overall network.

We continue to leverage that dealer base while proactively developing strategies that will strengthen our overall network.

For example, we intend to strengthen our current footprint by selectively recruiting market-leading dealers.

We believe our targeted initiatives to enhance and grow our dealer network wil l increase unit sales in the future.

Increase Our Sales in International Markets.

We currently have an extensive international distribution network with 45 international dealers in 76 locations around the world.

We believe our targeted initiatives to enhance and grow our dealer network will increase unit sales in the future.

Continued Focus on Sales in International Markets.

We currently have an extensive international dealer network with 66 international locations in 37 countries around the world.

We believe MasterCraft is the most well-known brand in the performance sport boat category globally, and that NauticStar, Crest, and Aviara have the potential for global growth.

Based on our brand recognition, innovative product offerings, and distribution strengths, we believe we are well positioned to leverage our reputation and capture additional international sales.

We believe that we will increase our international sales by promoting our new products in developed markets where we have a well-established dealer base and in international markets where rising consumer incomes are expected to increase demand for recreational products, such as Australia, Europe, Israel, Dubai, and Brazil.

We are also developing new product offerings that will specifically target certain product demand from our international consumers and that we believe will drive further sales growth in international markets.

Continuing retaliatory tariffs in the European Union and unfavorable exchange rates in other parts of the world are a current headwind.

We believe that we will maintain our international sales by promoting our new products in developed markets where we have a well-established dealer base.

Net sales outside of North America represented 4.8% of net sales in fiscal 2020.

We design, manufacture, and sell premium recreational performance sport boats, outboard, and sterndrive boats that we believe deliver superior performance for water skiing, wakeboarding, wake surfing, and fishing, as well as general recreational boating.

In addition, we offer various accessories, including trailers and aftermarket parts.

In addition, we

offer various accessories , including trailers and aftermarket parts.

We market our boats under four brands:

MasterCraft , NauticStar , Crest , and Aviara .

Our MasterCraft portfolio of Star Series, XSeries, XTSeries and NXT boats are designed for the highest levels of performance, styling, and enjoyment for both recreational and competitive use.

The Star Series and XSeries are geared towards the consumer seeking the most premium and highest performance boating experience that we offer, and generally command a price premium over our competitors’ boats at retail prices ranging from approximately $62,000 to $220,000.

The MasterCraft XT line was introduced in July 2016 as a multi-sport, category-defying crossover, with retail prices ranging from approximately $80,000 to $135,000.

Unveiled in January 2014, the MasterCraft NXT line introduced the quality, performance, styling, and innovation of the MasterCraft brand to the entry-level consumer, with retail prices ranging from approximately $62,000 to $90,000.

We have strategically designed and priced the MasterCraft NXT line to target the fast-growing entry-level customer group that is distinct from our traditional customer base, while maintaining our core MasterCraft brand attributes at profit margins comparable to our other offerings.

Our NauticStar portfolio of Nautic Bay Boats, Sport Deck Boats, Offshore Boats and Legacy Series boats are designed for a variety of uses, including recreational and competitive sport fishing in freshwater lakes or saltwater, and general recreational enjoyment.

The Nautic Bay Boats and Offshore Boats are geared towards the consumer seeking unmatched quality and features for fishability and family friendly comfort.

Our MasterCraft portfolio of ProStar, XStar, X, XT and NXT models are designed for the highest levels of performance, styling, and enjoyment for both recreational and competitive use.

The XStar and X models are geared towards the consumer seeking the most premium and highest performance boating experience that we offer, and generally command a price premium over our competitors’ boats at retail prices ranging from approximately $160,000 to $190,000.

The MasterCraft XT models were introduced in July 2016 with retail prices ranging from approximately $100,000 to $140,000.

Unveiled in January 2014, the MasterCraft NXT models introduced the quality, performance, styling, and innovation of the MasterCraft brand to the entry-level consumer, with retail prices ranging from approximately $ 75,000 to $95,000.

We have strategically designed and priced the MasterCraft NXT models to target the fast-growing entry-level consumer group that is distinct from our traditional consumer base, while maintaining our core MasterCraft brand attributes at profit margins comparable to our other offerings.

Our NauticStar portfolio of Bay Boats, Sport Deck Boats and Offshore Boats are designed for a variety of uses, including recreational and competitive sport fishing in freshwater lakes or saltwater, and general recreational enjoyment.

NauticStar’s Bay Boats and Offshore Boats are geared towards the consumer seeking unmatched quality and features for fishability and family friendly comfort.

The Sport Deck Boat line caters to consumers seeking the drive and ride of a V-hull, large capacity, and the styling and efficiency of a runabout.

The Legacy Series line is geared towards the consumer seeking the most premium and highest performance boating experience that NauticStar offers.

NauticStar’s retail prices range from approximately $35,000 to $300,000.

We believe all of the NauticStar models represent a tremendous value for consumers.

Our Crest portfolio of pontoon boats are designed for the ultimate in comfort and recreational pleasure boating.

Crest has continued to grow market share as it expands its distribution footprint.

Crest’s pontoon boats are designed to offer consumers the best in luxury, style and performance without compromise across a diverse product portfolio.

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Our Aviara portfolio of luxury recreational day boats was designed in-house with the vision to create pleasure crafts that defy compromise.

The Aviara brand drew on MasterCraft’s 50-year legacy of quality and will be built in our award-winning MasterCraft facility.

The Aviara brand drew on MasterCraft’s 50-year legacy of quality and is built in our award-winning MasterCraft facility.

Aviara’s boat designs were inspired by our four product design principles – Progressive Style, Elevated Control, Modern Comfort and Quality Details.

Aviara’s first model, the AV32, is a 32-foot luxury bowrider and is expected to have a retail price of approximately $300,000.

Future models to be introduced over the next year include the AV36, a 36-foot luxury bowrider, and the AV40, the brand’s flagship 40-foot luxury bowrider for the ultimate on-the-water experience.

All models will be available in either outboard or sterndrive propulsion, and will be exclusively sold at MarineMax dealerships across the U.S.

Aviara’s models consist of the AV32, a 32-foot luxury bowrider, the AV36, a 36-foot luxury bowrider, and the AV40, the brand’s flagship 40-foot luxury bowrider for the ultimate on-the-water experience.

All models are available in either outboard or sterndrive propulsion, and Aviara’s retail prices range from approximately $345,000 to $670,000.

Our Dealer Network

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For MasterCraft, NauticStar, Crest, and Aviara, we target our distribution to the market segment’s highest performing dealers.

The majority of our MasterCraft dealers are exclusive to our MasterCraft product lines within the performance sport boat category, highlighting the commitment of our key dealers to MasterCraft boats.

The majority of our MasterCraft dealers are exclusive to our MasterCraft product lines within the performance sport boat category, highlighting the commitment of our key dealers to the MasterCraft brand.

We establish performance criteria that our dealers must meet as part of their dealer agreements to ensure the continued quality of our dealer network.

As members of our network, dealers in North America may qualify for floor plan financing programs, rebates, seasonal discounts, promotional co-op payments, and other allowances.

As members of our network, dealers may qualify for wholesale rebates, retail rebates and promotions, floor plan reimbursement or cash discounts, and other allowances.

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

We constantly monitor the health and strength of our dealers by analyzing each dealer’s retail sales and inventory frequently and have established processes to identify underperforming dealers in order to assist them in improving their performance or to allow us to switch to a more effective dealer.

These processes also allow us to better manage dealer inventory levels and product turns and contribute to a healthier dealer network that is better able to stock and sell our products.

We constantly monitor the health and strength of our dealers by analyzing each dealer’s retail sales and inventory and have established processes to identify underperforming dealers in order to assist them in improving their performance or to allow us to switch to a more effective dealer.

These processes also allow us to better monitor dealer inventory levels and product turns and contribute to a healthier dealer network that is better able to stock and sell our products.

We believe our outstanding dealer network and our proactive approach to dealer management allow us to distribute our products more efficiently than our competitors and will help us capitalize on growth opportunities as our industry volumes continue to increase.

For fiscal 2019 the Company’s top ten dealers accounted for approximately 25% of our net sales and none of our dealers accounted for more than 3% of our total sales volume.

For fiscal 2020 the Company’s top ten dealers accounted for approximately 30% of our net sales and none of our dealers accounted for more than 5% of our total net sales.

North America.

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Our Crest brand had a total of 116 dealers across 130 locations in North America as of June 30, 2020.

We do not have a significant concentration of sales among our dealers.

We do not have a significant concentration of sales among our MasterCraft, NauticStar or Crest dealers.

Our Aviara brand is sold through a distribution network consisting of one dealer with 59 locations.

Outside of North America.

As of June 30, 2019, through our MasterCraft brand, we had a total of 45 international dealers in 76 locations and through our NauticStar brand we had one international dealer with a single location.

As of June 30, 2020, through our MasterCraft brand, we had a total of 41 international dealers and 41 locations and through our NauticStar brand we had eight international dealers in 41 locations.

We are present in Europe, Australia, Africa, Asia, including Hong Kong and the Middle East.

We generated 4.2%, 6.6% and 9.1% of our unit sales outside of North America in fiscal 2019, 2018, and 2017, respectively.

Dealer Management

We generated 4.8%, 5.2%, and 7.5% of our net sales outside of North America in fiscal 2020, 2019, and 2018, respectively.

Dealer Relations

We have developed a system of financial incentives for our dealers based on achievement of key benchmarks.

In addition, we provide our dealers with comprehensive sales training and a complete set of technology-based tools designed to help dealers maximize performance.

Our dealer incentive program has been refined through years of experience with some of the key elements including performance incentives, discounts paid for achieving volume and purchase scheduling targets, and cash discounts to encourage balanced demand throughout the year.

In addition, at MasterCraft, we pay incentives for attending our annual dealer meeting, an event featuring a robust program of dealer training seminars that focus on areas such as sales growth, inventory management, and retail strategy, in addition to product-oriented information.

This incentive payment is based on participation by all salespeople from a dealership, not solely the principals.

Our dealer incentive program has been refined through years of experience with some of the key elements including wholesale rebates, retail rebates and promotions, other allowances, and floor plan reimbursement or cash discounts to encourage balanced production throughout the year.

Beyond our incentive programs, we have developed a proprietary web-based management tool that is used by our dealers on a day-to-day basis to improve their own businesses as well as enhance communication with our factory and sales management teams.

Our proprietary DealerLink online business-to-business application efficiently executes many critical functions, including warranty registrations, warranty claims, boat ordering and tracking, parts ordering, technical support, and inventory reporting.

This system facilitates communication between our sales team and the dealer network and allows our manufacturing department to review customer demand in real time.

Our business-to-business application efficiently executes many critical functions, including warranty registrations, warranty claims, boat ordering and tracking, parts ordering, technical support, and inventory reporting.

This system facilitates communication between our sales team and the dealer network and allows our manufacturing department to review consumer demand in real time.

Sales Cycles and Floor Plan Financing

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During this first part of the model year, many of the dealers’ orders are standard configurations for their showrooms.

In the second part of the model year, more boats are customized by retail customers.

Many of these custom orders are placed during boat shows, which occur from January through early April across North America.

We offer our dealers the opportunity to purchase boats with cash or through floor plan financing programs wit h third-party floor plan financing providers.

We incentivize our dealers to purchase in cash by offering them a cash discount.

In the second part of the model year, more boats are customized by retail consumers.

Many of these custom orders are placed during boat shows, which typically occur from January through early April across North America.

We offer our dealers the opportunity to purchase boats with cash or through floor plan financing programs with third-party floor plan financing providers.

The floor plan financing programs allow dealers to establish lines of credit with third-party lenders to purchase inventory.

Upon purchase of a boat, dealers draw on the floor plan facility and the lenders pay the invoice price of the boat directly to us typically within 5 business days.

Consistent with industry practice, we offer various manufacturer-sponsored floor plan interest p rograms under which we agree to reimburse our dealers for certain floor plan interest costs incurred for up to nine months from the date of invoice.

Consistent with industry practice, we offer various manufacturer-sponsored floor plan interest programs under which we agree to reimburse our dealers for certain floor plan interest costs incurred for up to nine months from the date of invoice.

In some cases, cash discounts are offered as an alternative to floor plan subsidies.

These programs encoura ge dealers to rapidly replenish inventories during the spring and summer retail season, maintain sufficient inventories during the non-peak season, and balance wholesale purchases throughout the year.

These programs encourage dealers to rapidly replenish inventories during the spring and summer retail season, maintain sufficient inventories during the non-peak season, and balance wholesale purchases throughout the year.

Pursuant to the terms of the floor plan financing, if a dealer defaults on the terms of its credit line, we agree to repurchase new inventory repossessed from dealerships.

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We believe the MasterCraft brand is widely recognized even among non-enthusiasts.

Our NauticStar and Crest brands are relatively young compared to MasterCraft but have quickly established themselves as strong brands dedicated to innovation, style and quality.

Similarly, Crest’s nearly 60-year history has led to the brand being strongly recognized within the boating industry.

Our NauticStar brand is relatively young compared to MasterCraft but has quickly established itself as a strong brand dedicated to innovation, style and quality.

We are focused on enhancing the power of our brands through a multifaceted marketing strategy.

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Given the prevalence of our products in the markets these publications target, we also benefit from significant unpaid impressions in these industry publications, as our boats frequently appear in feature stories and advertisements for other products.

In addition to these traditional marketing channels, in the last several years we have created an active and highly successful digital advertising and social media platform, including the use of Facebook, Twitter, Instagram, YouTube, and Vimeo to deliver content to our target audience, increase awareness of our brands, foster loyalty, and build a community of MasterCraft, NauticStar and Crest enthusiasts.

In addition, we benefit from numerous user-generated videos and photos that are uploaded to these websites.

An important component of this strategy has been our investment in our own mastercraft.com, nauticstarboats.com, crestpontoonboats.com, and aviaraboats.com websites.

The sites are designed to allow significant interaction between us and our customer base through marketing content delivery, message boards, news and event postings, and product updates and specifications.

Our popular “Design-a-Boat” functionality allows consumers to design a boat and request a dealer quote.

The custom-designed product can be transmitted directly to our closest independent dealer as well as our in-house concierge who follows up directly with our dealer leads for MasterCraft and Aviara.

Our leading position in the performance sport boat category is further supported by our sponsorship of some of the most recognizable and successful athletes in water sports, as well as a number of highly visible competitions and events around the world.

Our activities in this area serve to deepen the penetration of our brands within the professional and enthusiast community, while also supporting the growth of the sports.

In addition to these traditional marketing channels, in the last several years we have

created an active and highly successful digital advertising and social media platform, including the use of Facebook, Twitter, Instagram, YouTube, and Vimeo , among others, to deliver content to our target audience, increase awareness of our brands, foster loyalty, and build a community of MasterCraft , NauticStar , Crest and Aviara enthusiasts .

In addition, we benefit from numerous user-generated videos and photos that are uploaded to these websites and social media platforms .

An important component of this strategy has been our investment in our own mastercraft.com , nauticstarboats.com , crestpontoonboats.com , and aviaraboa t s.com websites.

The sites are designed to allow significant interaction between us and our consumer base through marketing content delivery, message boards, news and event postings, and product updates and specification s.

Our popular “Design-a-Boat” functionality allows consumers to design a customized boat and request a dealer quote.

The custom design can be transmitted directly to our closest independent dealer as well as our in-house concierge who follows up directly with our dealer leads for MasterCraft and Aviara .

Our leading position in the performance sport boat category is further supported by our sponsorship of some of the most recognizable and successful athletes and influencers in water sports, as well as a number of highly visible competitions and events around the world.

Our activities in this area serve to deepen the penetration of our brands within the professional and enthusiast community, while also supporting the growth of watersports.

The events which we sponsor and in which we and our dealers participate feature the most popular figures in wakeboarding and water skiing, drawing large audiences of enthusiasts to a variety of sites around the country.

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In addition to the advertising generated by the athletes’ success in their sports, we also leverage our sponsorship of these athletes by having them attend boat shows and dealer events and appear in creative media events, in which they garner public relations interest, build our MasterCraft brand, and in many cases help sell our products directly to consumers.

Our sales organization’s primary role is to manage our network of existing dealers and work with them to increase sales of our products, as well as identifying and recruiting new and replacement dealers that we believe will provide enhanced sales and customer service for our end consumers.

Our sales organization’s primary role is to monitor our network of existing dealers and work with them to increase sales of our products, as well as identifying and recruiting new and replacement dealers that we believe will provide enhanced sales and customer service for our end consumers.

We employ proactive processes to monitor the health and performance of our dealers, and to help them improve their businesses and their sales of our products.

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We utilize regular performance reviews to drive improvement in underperforming dealers and to determine how to transition to new dealers when necessary.

In addition, we employ a number of tools to assist our dealers in improving their performance, including product, sales, and service training, marketing materials and content, and direct interaction with prospective customers such as our factory concierge service.

We encourage and expect our sales representatives to serve as advisors to our dealers, and believe this proactive sales approach leads to better dealer relationships and higher sales of our products.

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All of our MasterCraft and Aviara boats are designed, manufactured, and lake-tested in our Vonore, Tennessee facility.

All of our NauticStar boats are designed and manufactured in our Amory, Mississippi facility.

All of our Crest boats are designed and manufactured in our Owosso, Michigan facility.

We believe MasterCraft is the only boat manufacturing facility to achieve compliance with all three of the ISO 9001 (Quality Management Systems), 14001 (Environmental Management Systems), and 18001 (International Occupational Health and Safety Management System) standards.

The rigorous attention to detail with which we design and manufacture our MasterCraft products results in boats of high quality, which allows us to offer a “stem-to-stern” five-year warranty that comprehensively covers more parts of our boats than warranties offered by any of our competitors.

In recognition of our operational excellence, MasterCraft was named a 2015 IndustryWeek Best Plant in North America Recipient—the only boat manufacturer ever to receive that honor.

All of our NauticStar boats are manufactured in our Amory, Mississippi facility.

All of our Crest boats are manufactured in our Owosso, Michigan facility.

We believe MasterCraft has the only boat manufacturing facility to achieve compliance with all three of the ISO 9001 (Quality Management Systems), 14001 (Environmental Management Systems), and 18001 (International Occupational Health and Safety Management System) standards.

The rigorous attention to detail in the design and manufacturing of our products results in boats of high quality which affords our customers a great on water experience across all of our brands.

Our dedication to quality allows us to offer some of the longest and most inclusive warranty terms in the industry allowing our customers to enjoy our products with confidence.

Our boats are built through a continuous flow manufacturing process that encompasses fabrication, assembly, quality management, and testing.

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At MasterCraft and Aviara, our product development and engineering group comprises 24 professionals.

At NauticStar, our product development and engineering group comprises seven professionals.

At NauticStar, our product development and engineering group comprises five professionals.

At Crest, our product development and engineering group comprises five professionals.

These individuals bring to our product development efforts significant expertise across core disciplines, including boat design, computer-aided design, naval engineering, electrical engineering, and mechanical engineering.

They are responsible for execution of all facets of our new product strategy, starting with design and development of new boat models and innovative features, engineering these designs for manufacturing, and integrating new boats and innovations into production without disruption, at high quality, on time and on budget.

Our product development and engineering functions work closely with our Strategic Portfolio Management Team which includes senior leadership from Sales, Marketing and Finance, all working together to develop our long-term product and innovation strategies.

new boats and innovations into production without disruption, at high quality, on time and on budget.

We take a disciplined approach to the management of our product development strategy.

We have structured processes to obtain voices of the customer, dealer, and management to guide our long-term product lifecycle and portfolio planning.

We have structured processes to obtain voices of the consumer, dealer, and management to guide our long-term product lifecycle and portfolio planning.

In addition, extensive testing and coordination with our manufacturing group are important elements of our product development process, which we believe enable us to leverage the lessons from past launches and minimize the risk associated with the release of new products.

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Our research and product development expense for fiscal 2020, 2019 and 2018 was $5.2 million, $5.6 million, and $4.9 million, respectively.

We purchase a wide variety of raw materials from our supplier base, including resins, fiberglass, hydrocarbon feedstocks, and steel, as well as product parts and components such as engines and electronic controls.

Intellectual Property

We rely on a combination of patent, trademark, and copyright protection, trade secret laws, confidentiality procedures, and contractual provisions to protect our rights in our brands, products, and proprietary technology.

We also protect our vessel hull designs through vessel hull design registrations.

This is an important part of our business and we intend to continue protecting our intellectual property.

We currently hold 34 U.S.

patents and six foreign patents, including utility and design patents for our transom surf seating, our DockStar handling system, and our Gen 2 surf system technology.

Provided that we comply with all statutory maintenance requirements, our patents are expected to expire between 2021 and 2037.

We also have 14 pending U.S.

patent applications and ten pending foreign patent applications.

We also own in excess of 100 trademark registrations in various countries around the world, most notably for the MasterCraft, NauticStar, Crest, and Aviara names and/or logos, as well as numerous model names in MasterCraft’s Star Series, X, XT, and NXT product families, and we have several pending applications for additional registrations.

Such trademarks may endure in perpetuity on a country-by-country basis provided that we comply with all statutory maintenance requirements, including continued use of each trademark in each such country.

In addition, we own 38 registered U.S.

Finally, we have registered more than 40 vessel hull designs with the U.S.

From time to time, we are involved in intellectual property litigation, either accusing third parties of infringing our intellectual property rights, or defending against third-party claims that we are infringing the intellectual property of others.

We are not currently involved in any outstanding intellectual property litigation that we believe, individually or in the aggregate, will have a material adverse effect on our business, financial condition, results of operations, or cash flows.

However, we cannot predict the outcome of any pending or future litigation, and an unfavorable outcome could have an adverse impact on our business, financial condition, results of operations, or cash flows.

We purchase a wide variety of raw materials from our supplier base, including resins, fiberglass, aluminum and steel, as well as product parts and components such as engines and electronic controls.

We maintain long-term contracts with preferred suppliers and informal arrangements with other suppliers.

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

Temporary shortages, when they do occur, usually involve manufacturers of these products adjusting model mix, introducing new product lines, or limiting production in response to an industry-wide reduction in boat demand.

We are focused on developing our supply chain to enable cost improvement, world-class quality, and continuous product innovation.

We have engaged our top suppliers in collaborative preferred supplier relationships and have developed processes including annual cost reduction targets, regular reliability projects, and extensive product testing requirements to ensure that our suppliers produce at low cost and to the highest levels of quality expected of our brands.

We are focused on working with our supply chain partners to enable cost improvement, world-class quality, and continuous product innovation.

We have engaged our key suppliers in collaborative preferred supplier relationships and have developed processes including annual cost reduction targets, regular reliability projects, and extensive product testing requirements to ensure that our suppliers produce at lowest total cost and to the highest levels of quality expected of our brands.

These collaborative efforts begin at the design stage, with our key suppliers integrated into design and development planning well in advance of launch, which allows us to control costs and to leverage the expertise of our suppliers in developing product innovations.

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(“Ilmor”) is MasterCraft’s exclusive engine supplier, and for our NauticStar brand, Yamaha Motor Corporation (“Yamaha”) is our largest engine supplier, while Mercury Marine (“Mercury”) is Crest’s largest engine supplier.

Mercury also provides outboard engines available on our Aviara brand.

For our Aviara brand, Mercury also provides outboard engines and Ilmor provides sterndrive engines.

We maintain strong and long-standing relationships with Ilmor, Yamaha, and Mercury.

As of June 30, 2019, Ilmor is our largest overall supplier.

In addition to performance sport boat engines, Ilmor’s affiliates produce engines used in a number of leading racing boats and race cars.

Ilmor maintains a full-time customer service and warranty staff located at our MasterCraft office, resulting in extremely efficient management of all engine-related matters, mitigating potential warranty risk.

During the year ended June 30, 2020, Ilmor was our largest overall supplier.

In addition to performance sport boat and sterndrive engines, Ilmor’s affiliates produce engines used in a number of leading racing boats and race cars.

Ilmor maintains a full-time customer service and warranty representative at our MasterCraft office, resulting in extremely efficient management of all engine-related matters, mitigating potential warranty risk.

We work closely with Ilmor to remain at the forefront of engine design, performance, and manufacturing.

Engine packages are the most expensive single item input in the MasterCraft and Aviara boat-building process and we believe our long-term relationship with Ilmor is a key competitive advantage.

Engine packages are the most expensive single component in the MasterCraft, Aviara, NauticStar and Crest boat-building process and we believe our long-term relationship with our engine supplier partners is a key competitive advantage.

Transportation

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A select few dealers near our manufacturing facilities have elected to manage transportation and arrange for boats to be picked up directly from our manufacturing facilities.

Following delivery to port, international shipments are transferred to a third-party logistics provider who schedules them for shipment via ocean freight to their destination country.

International shipments are transferred to a third-party logistics provider who schedules them for shipment via ocean freight to their destination country.

Information Technology

Over the last several years, we have made a significant investment in information technology.

Our information technology strategy is to fully integrate IT into our business processes and planning initiatives, including not only our internal information management and communications processes but also our marketing and dealer management efforts.

Our IT team has been integral to our marketing efforts through website functionality such as the “Build-a-Boat” and “Factory Tour” features, helping us to develop stronger engagement between us and our end consumers.

In addition, our IT infrastructure is an essential component of our dealer management initiatives, allowing for efficient and timely communications with our dealers and a transparent and effective system for dealer orders and production planning.

We will continue to invest in our IT infrastructure in order to continue to leverage technology in support of our product development, manufacturing, and marketing strategies.

We continue to make investments in information systems and technology.

Our information systems and technology strategy support automation and integration of our business processes and strategic planning initiatives, including not only our internal information management and communications processes but also our marketing and dealer management efforts.

Our Information Systems and Technology team is integral to our marketing and sales front office initiatives, helping us to develop stronger engagement between us, our dealers and our end consumers.

We will continue to invest in our information systems and our IT infrastructure in order to leverage current and future technologies to support our product development, operations, and marketing strategies.

Insurance and Product Warranties

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We have the ability to refer claims to our suppliers and their insurers to pay the costs associated with any claims arising from such suppliers’ products.

Our 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 our suppliers.

Our insurance covers claims that are not adequately covered by a supplier’s insurance and provides for excess secondary coverage above the limits provided by our suppliers.

We provide product warranties for all of our boat models.

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These other warranties include warranties covering engines, among other components.

Intellectual Propert y

We also protect our vessel hull designs through vessel hull design registrations.

This is an important part of our business and we intend to continue protecting our intellectual property.

We currently hold 27 U.S.

patents and five foreign patents, including utility and design patents for our transom surf seating, our DockStar handling system, and our Gen 2 surf system technology.

Provided that we comply with all statutory maintenance requirements, our patents are expected to expire between 2021 and 2037.

We also have 14 pending U.S.

patent applications and four pending foreign patent applications.

We also own in excess of 95 trademark registrations in various countries around the world, most notably for the MasterCraft, NauticStar, and Aviara names and logos, as well as numerous model names in MasterCraft’s Star Series, X Series, XT Series, and NXT Series product families, and we have over 15 pending applications for additional registrations.

In addition, we own 38 registered U.S.

Finally, we have registered more than 30 vessel hull designs with the U.S.

However, we cannot predict the outcome of any pending or future litigation, and an unfavorable outcome could have an adverse impact on our business, financial condition, or results of operations.

The powerboat industry, including the performance sport boat, outboard, and pontoon categories, are highly fragmented, resulting in intense competition for customers and dealers.

The powerboat industry, including the performance sport boat, outboard, and sterndrive categories, are highly fragmented, resulting in intense competition for consumers and dealers.

Competition affects our ability to succeed in both the market segments we currently serve and new market segments that we may enter in the future.

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product mix, which is driven by boat model mix and higher option order rates;

while sales of all our boats generate comparable margins, sales of larger boats and boats with optional content produce higher absolute profits;

while sales of all our boats generate comparable margins, sales of larger boats and boats with optional content generally produce higher absolute profits;

inclement weather, which can affect production at our manufacturing facilities as well as consumer demand;

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The regulatory programs that impact our business include the following:

Hazardous Substance an d Waste Regulations

Hazardous Substance and Waste Regulations

Certain materials used in our manufacturing, including the resins used in production of our boats, are toxic, flammable, corrosive, or reactive and are classified by the federal and state governments as “hazardous materials.” Control of these substances is regulated by the Environmental Protection Agency (EPA) and state pollution control agencies under the Federal Resource Conservation and Recovery Act, and related state programs.

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The additional cost of complying with these regulations has increased our cost to purchase the engines and, accordingly, has increased the cost to manufacture our products.

If we are not able to pass these additional costs along to our customers, it may have a negative impact on our business and financial condition.

If we are not able to pass these additional costs along to our consumers, it may have a negative impact on our business and financial condition.

Boat Safety Standards

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

In the past, we have instituted recalls for defective component parts produced by us or certain of our third-party suppliers.

None of these recalls has had a material adverse effect on the Company.

In the past, we

have instituted recalls for defective component parts produced by us or certain of our third-party suppliers.

None of these r ecalls has had a material adverse effect on the Company.

We believe we maintain excellent relations with our employees, treating them as business partners and focusing on building their careers.

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In July 2015, we completed an initial public offering of our common stock.

Effective November 7, 2018, the name of the Company was changed from

MCBC Holdings, Inc.

Effective November 7, 2018, the name of the Company was changed from MCBC Holdings, Inc.

to MasterCraft Boat Holdings, Inc.

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We are not including the information contained in our website as part of, or incorporating it by reference into, this Annual Report on Form 10-K.

We make available, free of charge through our website, our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to these reports as soon as reasonably p racticable after we electronically file these materials with, or otherwise furnish them to, the SEC.

We make available, free of charge through our website, our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to these reports as soon as reasonably practicable after we electronically file these materials with, or otherwise furnish them to, the SEC.

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

What changed 10-K

Item 1. Business