What changed in this filing

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Item 1A. Risk Factors

2020-09-11 compared with 2019-09-13 · 140 added, 91 removed, 335 unchanged (41% of the section changed)

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In such an event, the trading price of our common stock may decline, and you may lose all or part of your investment.

Risks Related to Our Business

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.

The COVID-19 Pandemic has significantly impacted worldwide economic conditions and could have a material adverse effect on our operations and business and those of our consumers, dealers and suppliers.

In response to the COVID-19 Pandemic, governmental authorities, including in many of the jurisdictions in which we operate, have taken measures to limit the spread of the outbreak, including mandatory business closures, travel restrictions, quarantines, declarations of states of emergency, “stay-at-home” or “shelter-in-place” orders and social distancing protocols, in addition to seeking voluntary facility closures and other restrictions.

These actions and the potential resurgence or enhancement of these actions could materially adversely affect our ability, and our consumers’, dealers’ and suppliers’ ability, to adequately staff, manage and maintain their respective businesses.

Furthermore, our future results of operations, cash-flows and liquidity could be adversely impacted by the COVID-19 Pandemic due to delays in payments of outstanding receivable amounts beyond normal payment terms, supply chain disruptions, uncertain demand and additional goodwill and other intangible asset impairment charges.

To balance wholesale production with the then anticipated impacts to retail demand caused by the economic impacts of the COVID-19 Pandemic, we reduced production in February 2020 and, in late March 2020, temporarily suspended manufacturing operations at all of our facilities to protect the health of our employees and comply with governmental mandated shutdowns.

As a result of these actions, we temporarily laid off nearly all our hourly workforce.

We paid lump sum severance payments to certain of our laid off employees and provided for the temporary continuation of their healthcare benefits, resulting in charges totaling approximately $1.4 million during the fiscal third and fourth quarters (the “COVID-19 Shutdown Costs”).

We resumed operations at reduced production levels at our manufacturing facilities by mid-May 2020 and we are continuing to ramp up production.

Our facilities resumed operations with new temperature screening, social distancing, personal protective equipment, and cleaning protocols to protect our employees and mitigate risk of further business interruption.

The COVID-19 Pandemic has impacted our supply chain, particularly as a result of mandatory shutdowns in locations where products are manufactured.

It is also possible that we could experience future disruptions to our supply chain that are significant as well as significant deterioration in macroeconomic factors that typically affect us, such as consumer spending and demand for our products.

In addition, we have experienced and are likely to continue to experience disruptions in manufacturing and logistics due to the COVID-19

Pandemic, and we may experience disruptions in manufacturing or logistics in the future due to inconsistent and unanticipated order patterns, our inability to develop long-term relationships with key suppliers, other diseases or pandemics or un foreseen natural disasters or public health emergencies.

Further, if there are future closures we may face obstacles and delays in re-opening our manufacturing facilities as we may have to hire and train a substantial number of new employees as some of the employees that we have temporarily laid off may seek or have found other employment.

The disruptions caused by the COVID-19 Pandemic, including the temporary manufacturing suspension and supplier and workforce constraints, resulted in a decline in wholesale unit sales volume of nearly 50% during the February 2020 to June 2020 period as compared to the same prior-year period.

In addition, the COVID-19 Pandemic has caused a significant economic slowdown, which could cause a global recession, which we expect would negatively impact the sale of our boats.

If general economic conditions deteriorate further we cannot predict the duration or strength of an economic recovery, either in the United States or in the specific markets where we sell our products.

Further, consumers often finance purchases of our boats from dealers and accordingly, consumer credit market conditions also influence demand for our boats from dealers.

If credit conditions worsen and adversely affect the ability of consumers to finance potential purchases at acceptable terms and interest rates, it could result in a decrease in the sales of our products.

On March 19, 2020, we drew $35.0 million on our revolving credit agreement as a precautionary measure in order to increase our cash position and preserve financial flexibility in light of uncertainty in the global markets resulting from the COVID-19 Pandemic.

Additionally, on May 7, 2020, we entered into Amendment No.

3 (the “Amendment”) to the Fourth Amended & Restated Credit and Guarantee Agreement (the “Credit Facility”) to strengthen our financial flexibility.

Among other things, the changes effected by the Amendment provide temporary relief under our financial covenants.

See Note 8 in Notes to Consolidated Financial Statements for more information regarding these changes.

While the performance of the business and our cash management activities provided the flexibility to repay $25.0 million of the Credit Facility as of June 30, 2020, as a result of the COVID-19 Pandemic, we may be required to raise additional capital and any such additional debt financing that may be needed, beyond the $25.0 million of borrowing availability on the Credit Facility, may not be available on commercially reasonable terms, if at all.

The severity of the impact of the COVID-19 Pandemic on our business will depend on a number of factors, including, but not limited to, the duration, spread, severity and impact of the pandemic, the remedial actions and stimulus measures adopted by local and federal governments, the effects of the pandemic on our consumers and suppliers, and to the extent normal economic and operating conditions can resume, all of which are uncertain and cannot be predicted.

The inherent uncertainty surrounding COVID-19, due in part to rapidly changing governmental directives, public health challenges and progress, and market reactions thereto, also makes it more challenging for our management to estimate the potential impact and the future performance of our business.

Accordingly, the anticipated negative financial impact to our operating results cannot be reasonably estimated at this time, but could be material and last for an extended period of time.

General economic conditions, particularly in the U.S., affect our industry, demand for our products and our business, and results of operations.

Demand for premium sport boat, outboard boat brands and pontoon boats can be, and in the past have been, significantly influenced by weak economic conditions, low consumer confidence, high unemployment, and increased market volatility worldwide, especially in the U.S.

Demand for premium sport boats, outboard boats, and sterndrive boats can be, and in the past has been, significantly influenced by weak economic conditions, low consumer confidence, high unemployment, and increased market volatility worldwide, especially in the U.S.

In times of economic uncertainty and contraction, consumers tend to have less discretionary income and tend to defer or avoid expenditures for discretionary items, such as our products.

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Our business is cyclical in nature and its success is impacted by economic conditions, the overall level of consumer confidence and discretionary income levels.

Any substantial deterioration in general economic conditions that diminishes consumer confidence or discretionary income may reduce our sales and materially adversely affect our business, financial condition and results of operations.

Any substantial deterioration in general economic conditions (including as a result of the COVID-19 Pandemic) that diminishes consumer confidence or discretionary income may reduce our sales and materially adversely affect our business, financial condition and results of operations.

Corporate restructurings, layoffs, declines in the value of investments and residential real estate, higher fuel and energy prices, higher interest rates, and increases in federal and state taxation may also each materially adversely affect our business, financial condition, and results of operations.

Consumers often finance purchases of our products, and as a result, consumer credit market conditions influence demand for our boats.

If credit conditions worsen, and adversely affect the ability of consumers to finance potential purchases at acceptable terms and interest rates, it could result in a decrease in the sales of our products.

Our annual and quarterly financial results are subject to significant fluctuations depending on various factors, many of which are beyond our control.

If credit conditions worsen (including as a result of the COVID-19 Pandemic), and adversely affect the ability of consumers to finance potential purchases at acceptable terms and interest rates, it could result in a decrease in the sales of our products.

Our annual and quarterly financial results are subject to sig nificant fluctuations depending on various factors, many of which are beyond our control.

Our sales and operating results can vary significantly from quarter to quarter and year to year depending on various factors, many of which are beyond our control.

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failure to maintain a premium brand image;

disruption in the operation of our manufacturing facilities;

disruption in the operation of our manufacturing facilities, including those as a result of the COVID-19 Pandemic;

variations in the timing and volume of our sales;

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changes in competitive and economic conditions generally;

consumer preferences and competition for consumers’ leisure time;

consumer preferences and competition for consumers’ leisure time, including those as a result of the COVID-19 Pandemic;

impact of unfavorable weather conditions;

changes in trade policy or the imposition of additional tariffs;

civil insurrection or social unrest (such as the recent protests and social movements across several North American cities);

changes in the cost or availability of our labor;

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There can be no assurance that weather conditions will not have a material effect on the sales of any of our products.

We depend on our network of independent dealers, face increasing competition for dealers, and have little control over their activities.

Our results after acquisitions may suffer if we do not effectively manage our expanded operations following our recent acquisitions.

The size of our business has increased significantly as a result of our acquisitions.

Our future success depends, in part, on our ability to manage this expanded business, which will pose substantial challenges for management, including challenges related to the management and monitoring of additional operations and associated increased costs and complexity.

There can be no assurances we will be successful or that we will realize the expected benefits currently anticipated from these or any other acquisitions.

The acquisitions may underperform relative to our expectations.

We may not be able to maintain the levels of revenue, earnings or operating efficiency as a combined business that MasterCraft, NauticStar, and Crest have previously achieved or might achieve separately.

The business and financial performance of the acquisitions are subject to certain risks and uncertainties, including the risk of the loss of, or changes to, its relationships with its dealers and suppliers, increased product liability and warranty claims, and negative publicity or other events that could diminish the value of the NauticStar or Crest brand, which in turn could also adversely affect the MasterCraft brand.

If we are unable to achieve the same growth,

revenues and profitability that our acquisitions have achieved in the past, our business, financial condition , results of operations , or cash flows could be adversely affected.

In relation to such acquisitions, we recognized significantly higher amounts of intangible assets, including goodwill.

These intangible assets are subject to impairment testing and an impairment of our intangible assets was triggered as of March 29, 2020, due to the economic outlook at that time, the significant declines in our share price, market volatility and the disruption in our operations, as a result of the COVID-19 Pandemic.

As a result of the analysis, we recorded impairment charges totaling $56.4 million related to the NauticStar and Crest segments (the “Impairment Charges”).

The Impairment Charges were principally a result of a decline, in the fiscal third quarter, in market conditions, including our share price, and the outlook for retail and wholesale sales and operating performance, as of March 29, 2020, relative to our acquisition plans and annual impairment test performed as of June 30, 2019.

See Note 6 in Notes to Consolidated Financial Statements for more information regarding the Impairment Charges.

This impairment charge, along with the impairment charge recognized in fiscal 2019 related to NauticStar, resulted in the elimination of all goodwill associated with the NauticStar and Crest acquisitions.

However as of June 30, 2020, there was $47.5 million of intangible assets other than goodwill remaining on our consolidated balance sheet.

We could continue to incur a significant impact to our financial statements in the form of impairment charges related to these remaining intangible assets if assumptions and expectations related to our acquisitions are not realized.

We depend on our network of independent dealers and face increasing competition for dealers.

Substantially all of our sales are derived from our network of independent dealers.

Our agreements with dealers in our networks typically provide for one-year terms, although some agreements have a term of up to three years.

For fiscal 2019, our top ten dealers accounted for 25% of our total net sales.

Our agreements with dealers in our networks typically provide for one-year terms, although some agreements have longer terms.

The loss of one or more of these dealers could have a material adverse effect on our financial condition and results of operations.

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Competition for dealers among performance sport boat manufacturers continues to increase based on the quality, price, value, and availability of the manufacturers’ products, the manufacturers’ attention to customer service, and the marketing support that the manufacturer provides to the dealers.

We face intense competition from other premium performance sport, outboard boat, and pontoon boat manufacturers in attracting and retaining dealers (some of whom also sell products from other premium performance sport and outboard boat manufacturers), affecting our ability to attract or retain relationships with qualified and successful dealers.

Although our management believes that the quality of our products in the premium performance sport, outboard boat, and pontoon boat industries should permit us to maintain our relationships with our dealers and our market share position, there can be no assurance that we will be able to maintain or improve our relationships with our dealers or our market share position.

We face intense competition from other premium performance sport, outboard, and sterndrive boat manufacturers in attracting and retaining dealers (some of whom also sell products from other premium performance sport, outboard, and sterndrive boat manufacturers), affecting our ability to attract or retain relationships with qualified and successful dealers.

Although our management believes that the quality of our products in the premium performance sport, outboard boat, sterndrive boat industries should permit us to maintain our relationships with our dealers and our market share position, there can be no assurance that we will be able to maintain or improve our relationships with our dealers or our market share position.

In addition, independent dealers in the 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 substantial deterioration in the number of dealers or quality of our network of dealers would have a material adverse effect on our business, financial condition, and results of operations.

A substantial deterioration in the number of dealers or quality of our network of dealers would have a material adverse effect on our business, financial condition, results of operations, and cash flows.

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

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Our business, financial condition, and results of operations may be adversely affected if the financial health of the dealers that sell our products suffers.

Their financial health may suffer for a variety of reasons, including a downturn in general economic conditions, rising interest rates, higher rents, increased labor costs and taxes, compliance with regulations, and personal financial issues.

In addition, our dealers require adequate liquidity to finance their operations, including purchases of our products.

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In addition, applicable laws regulating dealer relations may also require us to repurchase our products from our dealers 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.

If we were obligated to repurchase a significant number of units under any repurchase agreement or under applicable dealer laws, our business, operating results, and financial condition could be adversely affected.

If we were obligated to repurchase a significant number of units under any repurchase agreement or under applicable dealer laws, our business, operating results, financial condition and cash flows could be adversely affected.

If we fail to manage our manufacturing levels while still addressing the seasonal retail pattern for our products, our business and margins may suffer.

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As a result, we must balance the economies of level production with the seasonal retail sales pattern experienced by our dealers.

Failure to adjust manufacturing levels adequately may have a material adverse effect on our financial condition and results of operations.

We have a large fixed cost base that will affect our profitability if our sales decrease.

In addition, as we navigate the unprecedented confluence of demand and disruption precipitated by the COVID-19 Pandemic, our production during this ramp up period will depend, in large part, on our suppliers’ capacity and our ability to grow and maintain a high-performing workforce.

Failure to adjust manufacturing levels adequately may have a material adverse effect on our financial condition, results of operations, and cash flows.

Our sales and profitability depend, in part, on the successful introduction of new products.

Market acceptance of our products depends on our technological innovation and our ability to implement technology in our boats.

Our sales and profitability may be adversely affected by difficulties or delays in product development, such as an inability to develop viable or innovative new products.

In February 2019 we introduced a new brand, Aviara, with sales beginning in the first quarter of 2020.

Our failure to introduce new technologies and product offerings that consumers desire, including our new Aviara models, could adversely affect our business, financial condition, results of operations, and cash flows.

Also, our ability to achieve higher margins, in part, relies on 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.

In addition, some of our direct competitors and indirect competitors may have significantly more resources to develop and patent new technologies.

It is possible that our competitors will develop and patent equivalent or superior technologies and other products that compete with ours.

They may assert these patents against us and we may be required to license these patents on unfavorable terms or cease using the technology covered by these patents, either of which would harm our competitive position and may materially adversely affect our business.

We also cannot be certain that our products or features have not infringed or will not infringe the proprietary rights of others.

Any such infringement could cause third parties, including our competitors, to bring claims against us, resulting in significant costs and potential damages.

We have a fixed cost base that will affect our profitability if our sales decrease.

The fixed cost levels of operating a powerboat manufacturer can put pressure on profit margins when sales and production decline.

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Our industry is characterized by intense competition, which affects our sales and profits.

The premium performance sport boat, outboard and pontoon boat categories and the powerboat industry as a whole are highly competitive for consumers and dealers.

The premium performance sport boat, outboard, and sterndrive boat categories and the powerboat industry as a whole are highly competitive for consumers and dealers.

We also compete against consumer demand for used boats.

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

Competition affects our ability to

succeed in both the markets we currently serve and new markets that we may enter in the future.

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

We compete with several large manufacturers that may have greater financial, marketing, and other resources than we do and who are represented by dealers in the markets in which we now operate and into which we plan to expand.

We also compete with a variety of small, independent manufacturers.

We compete with several large ma nufacturers that may have greater financial, marketing, and other resources than we do and who are represented by dealers in the markets in which we now operate and into which we plan to expand.

We also compete with a variety of small, independent manufact urers.

We cannot provide assurance that we will not face greater competition from existing large or small manufacturers or that we will be able to compete successfully with new competitors.

Our failure to compete effectively with our current and future competitors would adversely affect our business, financial condition, and results of operations.

Our failure to compete effectively with our current and future com petitors would adversely affect our business, financial condition, and results of operations.

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.

If this were to occur again (including as a result of the COVID-19 Pandemic), 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.

Reduced demand for new boats could lead to reduced sales by us, which could adversely affect our business, results of operations, and financial condition.

Our sales and profitability depend, in part, on the successful introduction of new products.

Market acceptance of our products depends on our technological innovation and our ability to implement technology in our boats.

Our sales and profitability may be adversely affected by difficulties or delays in product development, such as an inability to develop viable or innovative new products.

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

Also, 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.

In addition, some of our direct competitors and indirect competitors may have significantly more resources to develop and patent new technologies.

It is possible that our competitors will develop and patent equivalent or superior technologies and other products that compete with ours.

We also cannot be certain that our products or features have not infringed or will not infringe the proprietary rights of others.

Any such infringement could cause third parties, including our competitors, to bring claims against us, resulting in significant costs and potential damages.

Our international markets require significant management attention, expose us to difficulties presented by international economic, political, legal, and business factors, and may not be successful or produce desired levels of sales and profitability.

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unfamiliarity with local demographics, consumer preferences, and discretionary spending patterns;

difficulties in attracting customers due to a reduced level of customer familiarity with our brand;

difficulties in attracting consumers due to a reduced level of consumer familiarity with our brand;

competition with new, unfamiliar competitors;

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difficulties in enforcing or defending intellectual property rights;

insurrection or war that may disrupt or limit our relationships with our foreign customers.

insurrection or war that may disrupt or limit our relationships with our foreign consumers.

Our international operations may not produce desired levels of total sales, or one or more of the foregoing factors may harm our business, financial condition, or results of operations.

Our results after acquisitions may suffer if we do not effectively manage our expanded operations following our recent acquisitions.

The size of our business has increased significantly as a result of our acquisitions.

There can be no assurances we will be successful or that we will realize the expected benefits currently anticipated from these or any other acquisitions.

We have and will continue to incur significant acquisition-related integration costs and transaction expenses in connection with the acquisitions and the related financing transactions.

We are currently implementing a plan to integrate the operations of our recent acquisitions of NauticStar and Crest.

In connection with those plans, we have incurred, and anticipate that we may continue to incur, certain non-recurring charges.

However, we cannot currently identify the timing, nature and amount of all such charges.

Further, we incurred significant transaction costs relating to negotiating and completing the acquisitions.

These integration costs and transaction expenses are and will continue to be charged as an expense in the period incurred.

The significant transaction costs and integration costs could materially affect our results of operations in the period in which such charges are recorded.

Although we believe that the elimination of duplicative costs, as well as the realization of other efficiencies related to the integration of the business, will offset incremental transaction and integration costs over time, this net benefit may not be achieved in the near term, or at all.

The acquisitions may underperform relative to our expectations.

If we are unable to achieve the same growth, revenues and profitability that our acquisitions have achieved in the past, our business, financial condition or results of operations could be adversely affected.

In relation to such acquisitions, we have recognized significantly higher amounts of intangible assets, including goodwill.

These intangible assets will be subject to impairment testing, and we could incur a significant impact to our financial statements in the form of impairment charges if assumptions and expectations related to our acquisitions are not realized.

Rising concern regarding international tariffs could materially and adversely affect our business and results of operations.

International tariffs could materially and adversely affect our business and results of operations.

The current political landscape has introduced significant uncertainty with respect to future trade regulations and existing international trade agreements, as shown by the recent U.S.-initiated renegotiation of the North America Free Trade Agreement, and Brexit in Europe.

This uncertainty includes the possibility of imposing tariffs or penalties on products manufactured outside the U.S., including the recent announcement of the U.S.

government’s institution of tariffs on a range of products from China, and the potential for increased trade barriers between the UK and the European Union.

This uncertainty includes the possibility of imposing additional tariffs or penalties on products manufactured outside the U.S and the potential for increased trade barriers between the UK and the European Union.

The institution of global trade tariffs carries the risk of negatively affecting global economic conditions, which could have a negative impact on our business and results of operations.

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initiated tariffs on certain foreign goods, including raw materials, commodities, and products manufactured outside the United States that are used in our manufacturing processes may cause our manufacturing cost to rise, which would have a negative impact on our business and results of operations.

The unaudited pro forma financial information we filed on Form 8-K/A on December 7, 2018 may not be indicative of our future results with Crest.

The unaudited pro forma financial information we filed on Form 8-K/A on December 7, 2018 may not reflect what our results of operations, financial position and cash flows would have been after giving effect to the acquisition of Crest, as well as the related financing during the periods presented or be indicative of what our results of operations, financial position and cash flows may be in the future.

The unaudited pro forma financial information has been derived from our historical financial statements and the historical

financial statements of Crest , as well as adjustments and assumptions made regarding the combined entity following the transaction.

While we believe these assumptions and adjustments are reasonable, they are preliminary in nature and difficult to make with accuracy.

Moreover, the unaudited pro forma financial statements do not reflect all costs that may be incurred by the combined company in connection with the transaction.

The assump tions used and adjustments made in preparing the unaudited pro forma financial information may prove to be inaccurate.

Fluctuations in foreign currency exchange rates could result in declines in our reported sales and net earnings.

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We will often attempt to offset these higher prices with increased discounts, which can lead to reduced net sales per unit.

Our variable rate indebtedness subjects us to interest rate risk, which could cause our debt service obligations to increase significantly.

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

Reference rates used to determine the applicable interest rates for our debt are currently at relatively low levels.

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

Please see Part II, Item 7A, “Quantitative and Qualitative Disclosures about Market Risk” for discussion of our market risk related to interest rates.

The Chief Executive of the U.K.

Financial Conduct Authority (the “FCA”), which regulates LIBOR, has announced that the FCA will no longer persuade or compel banks to submit rates for the calculation of LIBOR after calendar year 2021.

That announcement indicates that the continuation of LIBOR on the current basis cannot and will not be guaranteed after calendar year 2021.

Moreover, it is possible that LIBOR will be discontinued or modified prior to the end of calendar year 2021.

All of our $108.6 million of debt outstanding under our credit agreement as of June 30, 2020 bears interest at a floating rate that uses either LIBOR or the prime rate as the reference rate to calculate our interest rate.

Our credit agreement provides that, if the administrative agent has determined that adequate means do not exist for ascertaining LIBOR or that LIBOR does not adequately and fairly reflect the cost to lenders for making, funding or maintaining their loans, then all of our outstanding loans under the credit agreement will be converted into loans that accrue interest at the prime rate.

Further, the lenders under our credit agreement will no longer be obligated to make loans using LIBOR as the reference rate.

Uncertainty as to the nature of potential changes to LIBOR, fallback provisions, alternative reference rates or other reforms could adversely impact our interest expense on our floating rate debt that currently uses LIBOR as the applicable reference rate.

Further, the discontinuance or modification of LIBOR and the use of the prime rate may result in an increase in the cost of future indebtedness, which could have a material adverse effect on our financial condition, cash flow and results of operations.

We intend to closely monitor the financial markets and the use of fallback provisions and alternative reference rates in anticipation of the discontinuance or modification of LIBOR by the end of calendar year 2021.

We compete with a variety of other activities for consumers’ scarce leisure time.

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Although none of our employees are currently covered by collective bargaining agreements, we cannot provide assurance that our employees will not elect to be represented by labor unions in the future, which could increase our labor costs.

Additionally, with unemployment rates at low levels, competition for qualified employees could require us to pay higher wages to attract a sufficient number of employees.

Additionally, competition for qualified employees could require us to pay higher wages to attract a sufficient number of employees.

Significant increases in manufacturing workforce costs could materially adversely affect our business, financial condition, or results of operations.

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While we believe that our relationships with our current suppliers are sufficient to provide the materials necessary to meet present production demand, we cannot provide assurance that these relationships will continue or that the quantity or quality of materials available from these suppliers will be sufficient to meet our future needs, irrespective of whether we successfully implement our growth strategy.

As production

increases, our need for raw materials and supplies will increase.

Our suppliers must be prepared to ramp up operations and, in many cases, hire additional workers and/or expand capacity in order to fulfill the orders placed by us and other customers.

Our suppliers’ ability to provide the components and raw materials essential to the construction of our boats may also be adversely impacted as a result of the COVID-19 Pandemic.

As production increases, our need for raw materials and supplies will increase.

Our suppliers must be prepared to ramp up operations and, in many cases, hire additional workers and/or expand capacity in order to fulfill the orders placed by us and other consumers.

Operational and financial difficulties that our suppliers may face in the future could adversely affect their ability to supply us with the parts and components we need, which could significantly disrupt our operations.

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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.

Further, the patents we own could be

challenged, invalidated, or circumvented by others.

F urther, we cannot provide assurance that competitors will not infringe our patents, or that we will have adequate resources to enforce our patents.

Further, the patents we own could be challenged, invalidated, or circumvented by others.

Further, we cannot provide assurance that competitors will not infringe our patents, or that we will have adequate resources to enforce our patents.

We also rely on unpatented proprietary technology.

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Third parties may also oppose our trademark applications, or otherwise challenge our use of the trademarks.

In the event that our trademarks are successfully challenged, we could be forced to rebrand our products, which could result in loss of brand recognition, and could require us to devote resources to advertising and marketing new brands.

In the event that our trademarks are successfully challenged, we could be forced to rebrand our products, which could result in loss of brand recognition,

and could require us to devote resources to advertising and marketing new br ands.

Further, we cannot provide assurance that competitors will not infringe our trademarks, or that we will have adequate resources to enforce our trademarks.

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Historically, product recalls have been administered through our dealers and distributors.

The repair and replacement costs we could

incur in connection with a recall could adversely affect our business.

In addition, product recalls could harm our reputation and cause us to lose customers, particularly if recalls cause consumers to question the safety or reliability of our products.

The repair and replacement costs we could incur in connection with a recall could adversely affect our business.

In addition, product recalls could harm our reputation and cause us to lose consumers, particularly if recalls cause consumers to question the safety or reliability of our products.

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

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We use many information technology systems and their underlying infrastructure to operate our business.

The size and complexity of our computer systems make them potentially vulnerable to breakdown, malicious intrusion, and random attack.

Likewise, data privacy breaches by employees or others with permitted access to our systems may pose a risk that sensitive data may be exposed to unauthorized persons or to the public.

While we have invested in protection of data and information technology, there can be no assurance that our efforts will prevent breakdowns or breaches in our systems that could adversely affect our business.

In addition to the disruptions that may occur from interruptions in our information technology systems, cybersecurity threats and sophisticated and targeted cyberattacks pose a risk to our information technology systems.

We have established security policies, processes, and defenses designed to help identify and protect against intentional and unintentional misappropriation or corruption of our information technology systems

and information and disruption of our operations.

Despite these efforts, our information technology systems may be damaged, disrupted, or shut down due to attacks by unauthorized acc ess, malicious software, computer viruses, undetected intrusion, hardware failures, or other events, and in these circumstances our disaster recovery plans may be ineffective or inadequate.

These breaches or intrusions could lead to business interruption, exposure of proprietary or confidential information, data corruption, damage to our reputation, exposure to legal and regulatory proceedings, and other costs.

A security breach might also lead to violations of privacy laws, regulations, trade guidelines or practices related to our customers and associates and could result in potential claims from customers, associates, shareholders, or regulatory agencies.

Such events could adversely impact our reputation, business, financial position, results of operations , and cash flows.

In addition, we could be adversely affected if any of our significant customers or suppliers experiences any similar events that disrupt their business operations or damage their reputation.

While we maintain monitoring practices and protections of our information technology to reduce these risks and test our systems on an ongoing basis for potential threats, there can be no assurance that these efforts will prevent a cyber-attack or other security breach.

We carry cybersecurity insurance to help mitigate the financial exposure and related notification procedures in the event of intentional intrusion;

however, there can be no assurance that our insurance will adequately protect against potential losses that could adversely affect our business.

An increase in energy costs may materially adversely affect our business, financial condition, and results of operations.

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Our continued international expansion, including in developing countries, and our development of new partnerships and joint venture relationships worldwide increase the risk of FCPA or OFAC violations in the future.

If we are unable to comply with environmental and other regulatory requirements, our business may be exposed to material liability and/or fines.

If we are unable to comp ly with environmental and other regulatory requirements, our business may be exposed to material liability and/or fines.

Our operations are subject to extensive and frequently changing federal, state, local, and foreign laws and regulations, including those concerning product safety, environmental protection, and occupational health and safety.

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While we do not believe that we are presently subject to any such liabilities, we cannot assure you that environmental conditions relating to our prior, existing, or future sites or operations or those of predecessor companies will not have a material adverse effect on our business or financial condition.

Natural disasters, environmental disasters, the effects of climate change, or other disruptions at our manufacturing facilities or in other regions of the United States could adversely affect our business, financial condition, and results of operations.

Negative public perception of our products or restrictions on the access or the use of our products in certain locations could materially adversely affect our business or results of operations.

Demand for our products depends in part on their acceptance by the public.

Public concerns about the environmental impact of our products or their perceived safety could result in diminished public perception of the products we sell.

Government, media, or activist pressure to limit emissions could also negatively impact consumers’ perceptions of our products.

Any decline in the public acceptance of our products could negatively impact their sales or lead to changes in laws, rules and regulations that prevent access to certain locations or restrict use or manner of use in certain areas or during certain times, which could also negatively impact sales.

Any material decline in the public acceptance of our products could impact our ability to retain existing consumers or attract new ones which, in turn, could have a material adverse effect on our business, results of operations or financial condition.

Natural disasters, environmental disasters, the effects of climate change, pandemics, or other disruptions, or civil insurrection or social unrest at our manufacturing facilities or in other regions of the United States could adversely affect our business, financial condition, and results of operations.

We rely on the continuous operation of our manufacturing facilities in Vonore, Tennessee, Armory, Mississippi, and Owosso, Michigan for the production of our products.

Any natural disaster or other serious disruption to our facilities due to fire, snow, flood, earthquake, or any other unforeseen circumstance could adversely affect our business, financial condition, and results of operations.

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

Changes in climate could adversely affect our operations by limiting or increasing the costs associated with equipment or fuel supplies.

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In addition, we have dealers and third-party suppliers located in regions of the United States that have been and may be exposed to damaging storms, such as hurricanes and tornados, floods and environmental disasters.

Although preventative measures may help to mitigate damage, the damage and disruption resulting from natural and environmental disasters may be significant.

Such disasters can disrupt our dealers, suppliers, or customers, which can interrupt our operational processes and our sales and profits.

Although preventative measures may help to

mitigate damage, the damage and disruption resulting from natural and environmental disasters may be significant.

Such disasters can disrupt our c onsumers, dealers, or suppliers, which can interrupt our operational processes and our sales and profits.

Increases in income tax rates or changes in income tax laws or enforcement could have a material adverse impact on our financial results.

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Our amended and restated certificate of incorporation authorizes us to issue shares of common stock and options, rights, warrants, and appreciation rights relating to common stock for the consideration and on the terms and conditions established by our board of directors in its sole discretion, whether in connection with acquisitions or otherwise.

We have reserved shares for issuance under the Amended and Restated MCBC Holdings, Inc.

2015 Incentive Award Plan (“2015 Incentive Award Plan”) in an amount equal to 1,613,864 shares.

Any common stock that we issue, including under our 2015 Incentive Award Plan or other equity incentive plans that we may adopt in the future, would dilute the percentage ownership of holders of our common stock.

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changes in general market, economic, and political conditions in the U.S.

and global economies or financial markets, including those resulting from natural disasters, terrorist attacks, acts of war, and responses to such events.

and global economies or financial markets, including those resulting from the COVID-19 Pandemic, natural disasters, terrorist attacks, acts of war, civil insurrection and social unrest, and responses to such events.

As a result, volatility in the market price of our common stock may prevent investors from being able to sell their common stock at or above the price they paid for it or at all.

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In addition, our amended and restated certificate of incorporation and our amended and restated by-laws currently contain provisions that may make the acquisition of our company more difficult without the approval of our board of directors, including, but not limited to, the following:

our board of directors is currently classified into three classes, each of which serves for a staggered three-year term;

our board of directors will be classified into three classes until our 2022 annual meeting of stockholders;

only our board of directors may call special meetings of our stockholders;

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We cannot predict if investors will find our common stock less attractive as a result of our taking advantage of these exemptions and as a result, there may be a less active trading market for our common stock and our stock price may be more volatile.

We will remain an “emerging growth company” until the earliest of (i) the last day of fiscal year during which we had total annual gross revenues of at least $1.07 billion, (ii) June 30, 2021, which is the last day of our fiscal year following the fifth anniversary of the date of completion of our initial public offering, (iii) the date on which we have, during the previous three-year period, issued more than $1.07 billion in non-convertible debt, or (iv) the date on which we are deemed to be a “large accelerated filer,” as defined under the Exchange Act.

The obligations associated with being a public company require significant resources and management attent ion, which may divert us from our business operations.

We will remain an “emerging growth company” until June 30, 2021, which is the last day of our fiscal year following the fifth anniversary of the date of completion of our initial public offering.

The obligations associated with being a public company require significant resources and management attention, which may divert us from our business operations.

As a result of our initial public offering, we are subject to the reporting requirements of the Exchange Act and the Sarbanes-Oxley Act.

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The existence of any material weakness in our internal control over financial reporting could also result in errors in our financial statements that could require us to make out of period adjustments, restate our financial statements, cause us to fail to meet our reporting obligations, and cause stockholders to lose confidence in our reported financial information, all of which could materially and adversely affect our business and share price.

If securities analysts do not publish re search or reports about our company, or if they issue unfavorable commentary about us or our industry or downgrade our common stock, the price of our common stock could decline.

If se curities analysts do not publish research or reports about our company, or if they issue unfavorable commentary about us or our industry or downgrade our common stock, the price of our common stock could decline.

The trading market for our common stock depends in part on the research and reports that third-party securities analysts publish about our company and our industry.

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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