What changed in this filing

/stocks — the workspaceLOADING

Item 9A. Controls and Procedures

2020-09-11 compared with 2019-09-13 · 440 added, 539 removed, 513 unchanged (66% of the section changed)

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Based on such assessment our management has concluded that, as of June 30, 2020, our internal control over financial reporting is effective based on those criteria.

Under guidelines established by the SEC, companies are permitted to exclude an acquired business from management’s report on internal control over financial reporting for the first year subsequent to the acquisition while integrating the acquired operations.

Accordingly, management has excluded Crest from its annual report on internal control over financial reporting as of June 30, 2019.

Crest represents approximately 35% of the Company’s consolidated total assets as of June 30, 2019, 16% of the Company’s consolidated net sales for the year ended June 30, 2019, and 21% of the Company’s consolidated operating income for the year ended June 30, 2019.

See Notes 5 and 16 in Notes to Consolidated Financial Statements included elsewhere in this Form 10-K.

This annual report does not include an attestation report from our registered public accounting firm regarding internal control over financial reporting.

Management's report was not subject to attestation by our registered public accounting firm pursuant to rules of the SEC that permit emerging growth companies, which we are, to provide only management's report in this annual report.

Management's assessment of the effectiveness of internal controls over financial reporting was not subject to attestation by our registered public accounting firm pursuant to rules of the SEC that permit emerging growth companies, which we are, to provide only management's assessment in this annual report.

Changes in Internal Control Over Financial Reporting

Excluding the Crest acquisition, there have been no changes in our internal control over financial reporting, as defined in Exchange Act Rule 13a-15(f), during the period covered by this report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

There have been no changes in our internal control over financial reporting, as defined in Exchange Act Rule 13a-15(f), during the period covered by this report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

OTHER INFORMATION

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The information required by this Item 10 will be included in the Proxy Statement and is incorporated herein by reference.

EXECUTI VE COMPENSATION

EXECUTIVE COMPENSATION

The information required by this Item 11 will be included in the Proxy Statement and is incorporated herein by reference.

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Financial Statements

Report of Independent Registered Public Accounting Firm

Reports of Independent Registered Public Accounting Firm s

Consolidated Balance Sheets

Consolidated Statements of Operations

Consolidated Statements of Stockholders' Equity (Deficit)

Consolidated Statements of Stockholders' Equity

Consolidated Statements of Cash Flows

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Certificate of Amendment to Amended and Restated Certificate of Incorporation of MasterCraft Boat Holdings, Inc.

Third Amended and Restated By-laws of MasterCraft Boat Holdings, Inc.

Certificate of Amendment to Amended and Restated Certificate of Incorporation of MasterCraft Boat Holdings, Inc.

Fourth Amended and Restated By-laws of MasterCraft Boat Holdings, Inc.

Common stock certificate of MasterCraft Boat Holdings, Inc.

Warrant to Purchase Common Stock of MasterCraft Boat Holdings, Inc.

dated June 30, 2009

Description of Registrant’s Securities Registered Pursuant to Section 12 of the Securities Exchange Act of 1934

MCBC Holdings, Inc.

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Form of Performance Stock Unit Award Agreement under 2015 Incentive Award Plan

Third Amended and Restated Credit and Guaranty Agreement, dated October 2, 2017, by and among MasterCraft Boat Company, LLC, MasterCraft Services, Inc., MCBC Hydra Boats, LLC, MasterCraft International Sales Administration, Inc., Nautic Star, LLC, NS Transport, LLC and Navigator Marine, LLC as borrowers and other credit parties, various lenders and Fifth Third Bank as the agent and L/C issuer and lender

Fourth Amended and Restated Credit and Guaranty Agreement, dated October 1, 2018, by and among MasterCraft Boat Holdings, Inc.

as a guarantor, MasterCraft Boat Company, LLC, MasterCraft Services, LLC, MasterCraft International Sales Administration, Inc., Nautic Star, LLC, NS Transport, LLC, and Crest Marine LLC as borrowers, Fifth Third Bank as the agent and letter of credit issuer, and the lenders party thereto

Amendment No.

3 to the Fourth Amended and Restated Credit and Guaranty Agreement

Letter Agreement, dated October 30, 2019

Offer Letter, dated December 2, 2019

Offer Letter, dated July 16, 2020

Form of PSU Award Agreement

List of subsidiaries of MasterCraft Boat Holdings, Inc .

Consent of Deloitte & Touche LLP, independent registered public accounting firm

Consent of BDO USA, LLP, independent registered public accounting firm

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XBRL Taxonomy Extension Calculation Linkbase Document

XBRL Taxonomy Extension Definition Linkbase

XBRL Taxonomy Extension Definition Linkbase Document

XBRL Taxonomy Extension Label Linkbase Document

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MASTERCRAFT BOAT HOLDINGS, INC.

/s/ TERRY MCNEW

President and Chief Executive Officer

/s/ FREDERICK A.

Chief Executive Officer (Principal Executive Officer) and Chairman of the Board

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

/s/ TERRY MCNEW

President and Chief Executive Officer (Principal Executive Officer) and Director

/s/ FREDERICK A.

Chief Executive Officer (Principal Executive Officer) and Chairman of the Board

September 11, 2020

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September 11, 2020

/s/ FREDERICK A.

Chairman of the Board

September 13, 2019

PATRICK BATTLE

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September 11, 2020

REPORT OF INDEPENDENT REGIST ERED PUBLIC ACCOUNTING FIRM

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the stockholders and the Board of Directors of MasterCraft Boat Holdings, Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheet of MasterCraft Boat Holdings, Inc.

and subsidiaries (the "Company") as of June 30, 2020, the related consolidated statements of operations, stockholders' equity, and cash flows, for the year ended June 30, 2020, and the related notes (collectively referred to as the "financial statements").

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of June 30, 2020, and the results of its operations and its cash flows for the year ended June 30, 2020, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These financial statements are the responsibility of the Company's management.

Our responsibility is to express an opinion on the Company's financial statements based on our audit.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.

As part of our audit, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.

Accordingly, we express no such opinion.

Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.

Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that our audit provides a reasonable basis for our opinion.

/s/ Deloitte & Touche LLP

Nashville, Tennessee

September 11, 2020

We have served as the Company's auditor since 2019.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors and Stockholders

MasterCraft Boat Holdings, Inc.

and Subsidiaries

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheets of MasterCraft Boat Holdings, Inc.

(the “Company”) and subsidiaries as of June 30, 2019 and 2018, the related consolidated statements of operations, stockholders’ equity (deficit), and cash flows for each of the three years in the period ended June 30, 2019, and the related notes (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company and subsidiaries at June 30, 2019 and 2018, and the results of their operations and their cash flows for each of the three years in the period ended June 30, 2019 , in conformity with accounting principles generally accepted in the United States of America.

We have audited the accompanying consolidated balance sheet of MasterCraft Boat Holdings, Inc.

and subsidiaries (the “Company”) as of June 30, 2019, the related consolidated statements of operations, stockholders’ equity, and cash flows for each of the two years in the period ended June 30, 2019, and the related notes (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at June 30, 2019, and the results of their operations and their cash flows for each of the two years in the period ended June 30, 2019, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

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Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits.

We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

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Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud.

The Company is not required to, nor were we engaged to perform, an audit of its internal control over financial reporting.

The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.

As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.

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We believe that our audits provide a reasonable basis for our opinion.

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

/s/ BDO USA, LLP

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CONSOLIDATED BALANCE SHEETS

(Dollar amounts in thousands, except share and per share data)

As of June 30

(Dollar amounts in thousands, except per share data)

CURRENT ASSETS:

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Long term debt, net of unamortized debt issuance costs (Note 8)

Deferred income taxes (Note 12)

Unrecognized tax positions (Note 9)

Other long-term liabilities

Total liabilities

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CONSOLIDATED STATEMENTS OF OPERATIONS

(Dollar amounts in thousands, except share and per share data)

For the Years Ended June 30

(Dollar amounts in thousands, except per share data)

COST OF SALES

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General and administrative

Amortization of intangible assets

Amortization of other intangible assets

Goodwill and other intangible asset impairment

Total operating expenses

OPERATING INCOME

OPERATING INCOME (LOSS)

OTHER EXPENSE:

Interest expense

INCOME BEFORE INCOME TAX EXPENSE

INCOME TAX EXPENSE

EARNINGS PER COMMON SHARE:

INCOME (LOSS) BEFORE INCOME TAX EXPENSE (BENEFIT)

INCOME TAX EXPENSE (BENEFIT)

NET INCOME (LOSS)

EARNINGS (LOSS) PER SHARE:

WEIGHTED AVERAGE SHARES USED FOR COMPUTATION OF:

Basic earnings per share

Diluted earnings per share

Basic earnings (loss) per share

Diluted earnings (loss) per share

The Notes to Consolidated Financial Statements are an integral part of these consolidated financial statements.

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AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)

(Dollar amounts in thousands, except share and per share data)

Balance at July 1, 2016

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(Dollar amounts in thousands, except share data)

Balance at June 30, 2017

Share-based compensation activity

Offering costs

Balance at June 30, 2018

Adoption of accounting standards

Share-based compensation activity

Balance at June 30, 2019

Adoption of accounting standards (Note 3)

Share-based compensation activity (Note 10)

Net income (loss)

Balance at June 30, 2020

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CONSOLIDATED STATEMENTS OF CASH FLOWS

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

For the Years Ended June 30

(Dollar amounts in thousands)

CASH FLOWS FROM OPERATING ACTIVITIES:

Adjustments to reconcile net income to net cash provided by operating activities:

Net income (loss)

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

Depreciation and amortization

Inventory obsolescence reserve

Amortization of deferred debt issuance costs

Share-based compensation

Change in interest rate cap fair value

Unrecognized tax benefits

Deferred income taxes

Net provision of doubtful accounts

Loss on disposal of fixed assets

Unrecognized tax benefits

Amortization of debt issuance costs

Goodwill and other intangible asset impairment

Changes in operating assets and liabilities:

Changes in certain operating assets and liabilities

Accounts receivable

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Accounts payable

Income tax payable

Accrued expenses and other current liabilities

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CASH FLOWS FROM INVESTING ACTIVITIES:

Disposal of assets

Payment for acquisition, net of cash acquired

Purchases of property and equipment

Payments for acquisitions, net of cash acquired

Purchases of property, plant and equipment

Proceeds from disposal of property, plant and equipment

Net cash used in investing activities

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Proceeds from issuance of long-term debt

Payments of costs directly associated with offerings

Cash paid for withholding taxes on vested stock

Excess tax benefits

Principal payments on long-term debt

Payments on revolving line of credit

Payments of deferred debt issuance costs

Net cash provided by (used in) financing activities

Borrowings on revolving credit facility

Principal payments on revolving credit facility

Proceeds from insurance premium financing

Principal payments on insurance premium financing

Net cash provided (used) by financing activities

NET CHANGE IN CASH AND CASH EQUIVALENTS

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

ORGANIZATION AND NATURE OF BUSINESS

MasterCraft Boat Holdings, Inc.

(Unless otherwise noted, dollars in thousands, except per share data and per unit data)

SIGNIFICANT ACCOUNTING POLICIES

Organization – MasterCraft Boat Holdings, Inc.

(“Holdings”) was formed on January 28, 2000, as a Delaware holding company and operates primarily through its wholly owned subsidiaries, MasterCraft Boat Company, LLC;

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and Crest Marine, LLC (“Crest”).

The Company acquired NauticStar on October 2, 2017 and Crest on October 1, 2018.

Holdings and its subsidiaries collectively are referred to herein as the “Company.”

On October 2, 2017, the Company acquired all of the outstanding membership interests and other equity securities of NauticStar, a Mississippi limited liability company and its subsidiaries.

On October 1, 2018, the Company acquired all of the outstanding membership interest of Crest, a Michigan limited liability company.

As a result of the acquisitions, the Company consolidated the financial results of NauticStar and Crest beginning on the respective dates acquired.

The Company is a leading innovator, designer, manufacturer and marketer of recreational powerboats that operates in three reportable segments:

MasterCraft, NauticStar and Crest.

BASIS OF PRESENTATION

The accompanying financial statements are prepared in accordance with accounting principles generally accepted in the United States of America (“U.S.

The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries.

SIGNIFICANT ACCOUNTING POLICIES

Segment Information — Operating segments are identified as components of an enterprise about which discrete financial information is available for evaluation by the chief operating decision maker in making decisions on how to allocate resources and assess performance.

The Company views its operations in three operating segments based on its operations and management structures:

MasterCraft, NauticStar, and Crest (see Note 13).

Basis of Presentation – The accompanying financial statements are prepared in accordance with accounting principles generally accepted in the United States of America (“U.S.

The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries from the dates of their acquisitions.

Principles of Consolidation — The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries.

All significant intercompany accounts and transactions have been eliminated in consolidation.

Holdings has no independent operations and no material assets, other than its wholly owned equity interests of MasterCraft, NauticStar, and Crest, which totaled $163,013 and $81,160 as of June 30, 2019 and 2018, respectively, and no material liabilities.

As of June 30, 2019, Holdings had no material contingencies, long-term obligations, or guarantees other than a guarantee of the Company’s long-term debt (see Note 11).

Immaterial Correction of Error — During the fourth quarter of fiscal 2018, the Company recorded an out of period adjustment that effected the Consolidated Statement of Operations for the year ended June 30, 2018.

The adjustment related to improperly projecting warranty claims based on part sales rather than part costs.

The impact of this adjustment resulted in an increase in net income of $1,033 for the fiscal year ended June 30, 2018, with a corresponding decrease in accrued expenses and other current liabilities on the consolidated balance sheet as of June 30, 2018.

During the second quarter of fiscal 2019, the Company identified two errors in how accrued warranty was calculated that resulted in a net out-of-period adjustment that decreased earnings for the three months ended December 30, 2018 and increased accrued expenses and other current liabilities as of December 30, 2018 by $225.

The Company determined that inaccurate data on the cost of parts was used to estimate the warranty liability.

The impact of this adjustment resulted in a $1,125 increase in earnings for the three months ended December 30, 2018, with a corresponding decrease in accrued expenses and other current liabilities on the consolidated balance sheet as of December 30, 2018.

The Company also determined that faulty assumptions were used when estimating costs for warranty periods impacted by the change to a five-year warranty.

The adjustment resulted in a $1,350 decrease in earnings for the three months ended December 30, 2018, with a corresponding increase in accrued expenses and other current liabilities on the consolidated balance sheet as of December 30, 2018.

Management evaluated the effect of these adjustments on the Company’s financial statements under the provision of ASC 250:

Accounting Changes and Error Corrections and Staff Accounting Bulletin No.

Considering the Effects of Prior Year Misstatements When Quantifying Misstatements in Current Year Financial Statements and concluded that it was immaterial to the current year and prior years’ annual and quarterly financial statements.

Holdings has no independent operations and no material assets, other than its wholly owned equity interests of MasterCraft, NauticStar, and Crest, which totaled $163.0 million as of June 30, 2020 and 2019, and no material liabilities.

As of June 30, 2020, Holdings had no material contingencies, long-term obligations, or guarantees other than a guarantee of the Company’s subsidiaries’ long-term debt (see Note 8).

Use of Estimates — The preparation of the Company’s consolidated financial statements in conformity with U.S.

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The Company bases these estimates on historical results and various other assumptions believed to be reasonable.

The Company’s most significant financial statement estimates include allowances for bad debts, warranty liability, dealer incentives liability, self-insurance liability, fair value of share-based compensation, inventory repurchase contingent obligation, unrecognized tax positions,

impairment of long-lived assets and intangible assets subject to amortization, impairment of goodwill and indefinite-lived intangibles, and potential litigation claims and settlements.

The Company’s most significant financial statement estimates include warranty liability, dealer incentives liability, fair value of share-based compensation, inventory repurchase contingent obligation, unrecognized tax positions, impairment of long-lived assets and intangible assets subject to amortization, impairment of goodwill and indefinite-lived intangible assets, and potential litigation claims and settlements.

Actual results could differ from those estimates.

Revenue Recognition — The Company’s revenue is derived primarily from the sale of boats, marine parts, and accessories.

Reclassifications — Certain historical amounts have been reclassified in the accompanying consolidated financial statements to conform to the current presentation.

Revenue Recognition — The Company’s revenue is derived primarily from the sale of boats and trailers, marine parts, and accessories to its independent dealers.

The Company recognizes revenue when obligations under the terms of a contract are satisfied and control over promised goods is transferred to a customer.

For the majority of sales, this occurs when the product is released to the carrier responsible for transporting it to a customer.

The Company typically receives payment within 5 days of shipment.

The Company typically receives payment within 5 business days of shipment.

Revenue is measured as the amount of consideration it expects to receive in exchange for a product.

The Company offers discounts and sales incentives that include retail promotions, rebates, and floor plan reimbursement costs that are recorded as reductions of revenues in Net sales in the consolidated statements of operations.

The consideration recognized represents the amount specified in a contract with a customer, net of estimated dealer and retail sales incentives the Company reasonably expects to pay.

The estimated liability and reduction in revenue for sales incentives is recorded at the time of sale.

The Company estimates the amount of sales incentives based on historical data for specific boat models adjusted for forecasted sales volume, product mix, customer behavior and assumptions concerning market conditions.

Subsequent adjustments to incentive estimates are possible because actual results may differ from these estimates if market conditions dictate the need to enhance or reduce sales promotion and incentive programs or if dealer achievement or other items vary from historical trends.

Dealer Incentives

Dealer incentives include seasonal discounts, volume commitment rebates and other allowances.

Dealer rebate and sales promotion incentives recorded during the years ended June 30, 2019, 2018, and 2017, were $11,598, $6,361, and $5,660, respectively.

The Company offers dealer incentives that include wholesale rebates, retail rebates and promotions, floor plan reimbursement or cash discounts, and other allowances that are recorded as reductions of revenues in Net sales in the consolidated statements of operations.

The consideration recognized represents the amount specified in a contract with a customer, net of estimated incentives the Company reasonably expects to pay.

The estimated liability and reduction in revenue for dealer incentives is recorded at the time of sale.

Subsequent adjustments to incentive estimates are possible because actual results may differ from these estimates if conditions dictate the need to enhance or reduce sales promotion and incentive programs or if dealer achievement or other items vary from historical trends.

Accrued dealer incentives are included in Accrued expenses and other current liabilities in the accompanying consolidated balance sheets.

Rebates and Discounts

Dealers earn wholesale rebates based on purchase volume commitments and achievement of certain performance metrics.

The Company estimates the amount of wholesale rebates based on historical achievement, forecasted volume, and assumptions regarding dealer behavior.

Rebates that apply to boats already in dealer inventory are referred to as retail rebates.

Retail rebates recorded during the years ended June 30, 2019, 2018, and 2017, were $4,220, $1,932, and $5,484, respectively.

Accrued rebates are included in Accrued expenses and other current liabilities in the accompanying consolidated balance sheets.

Dealers generally have no rights to return unsold boats.

Occasionally, the Company may accept returns in limited circumstances and at the Company’s discretion under its warranty policy (Note 9).

The Company may be obligated, in the event of default by a dealer, to accept returns of unsold boats under its repurchase commitment to floor financing providers, who are able to obtain such boats through foreclosure.

The Company accrues the estimated fair value of this obligation based on the age of inventory currently under floor plan financing and estimated credit quality of dealers holding the inventory.

Floor Plan Reimbursement Costs

The Company participates in various programs whereby it agrees to reimburse its dealers for certain floor plan interest costs incurred by such dealers for limited periods of time, generally ranging up to nine months.

Such costs are included as a reduction in net sales in the consolidated statements of operations and totaled $7,452, $5,143, and $3,705 for the years ended June 30, 2019, 2018, and 2017, respectively.

The Company estimates the amount of retail rebates based on historical data for specific boat models adjusted for forecasted sales volume, product mix, dealer and consumer

behavior, and assumptions concerning market conditions.

The Company also utilizes va rious programs whereby it offers cash discounts or agrees to reimburse its dealers for certain floor plan interest costs incurred by dealers for limited periods of time, generally ranging up to nine months.

Shipping and Handling Costs

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Other Revenue Recognition Matters

Dealers generally have no right to return unsold boats.

Occasionally, the Company may accept returns in limited circumstances and at the Company’s discretion under its warranty policy.

The repurchase commitment is on an individual unit basis with a term from the date it is financed by the lending institution through the payment date by the dealer, generally not exceeding 30 months.

The Company accounts for these arrangements as guarantees and recognizes a liability based on the estimated fair value of the repurchase obligation.

The estimated fair value takes into account our estimate of the loss we will incur upon resale of any repurchases.

The Company accrues the estimated fair value of this obligation based on the age of inventory currently under floor plan financing and estimated credit quality of dealers holding the inventory.

Inputs used to estimate this fair value include significant unobservable inputs that reflect the Company’s assumptions about the inputs that market participants would use and, therefore, this liability is classified within Level 3 of the fair value hierarchy.

The Company has excluded sales and other taxes assessed by a governmental authority in connection with revenue-producing activities from the determination of the transaction price for all contracts.

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The Company writes-off accounts receivable when they become uncollectible, and payments subsequently received on such receivables are credited to bad debt recovery.

Amounts recorded as bad debt expense, write-offs, and recoveries were not material for the years ended June 30, 2020, 2019, and 2018.

Cash and Cash Equivalents — The Company considers all highly-liquid investments with an original maturity of three months or less to be cash and cash equivalents.

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The Company is dependent on third-party equipment manufacturers, distributors, and dealers for certain parts and materials utilized in the manufacturing process.

In 2019, 2018, and 2017 the Company purchased all engines for its MasterCraft performance sport boats under a supply agreement with a single vendor.

Total purchases to this vendor were $39,252, $34,734 and $31,075 for 2019, 2018, and 2017, respectively.

In 2019 and 2018, the Company purchased a majority of engines for its NauticStar boats under a supply agreement with one vendor.

Total purchases from this vendor were $23,718 and $19,668 for 2019 and 2018, respectively.

In 2019, the Company purchased a majority of the engines for its Crest boats under a supply agreement with a single vendor.

Total purchases from this vendor were $20,382 for 2019.

Inventories — Inventories are valued at the lower of cost or net realizable value and are shown net of an inventory allowance in the balance sheet.

During the years ended June 30, 2020 , 2019 , and 2018 the Company purchased all engines for its MasterCraft performance sport boats under a supply agreement with a single vendor.

Total purchases to this vendor were $27.6 million , $39.3 million, and $34.7 million for the years ended June 30, 2020 , 2019 , and 2 018 , respectively.

During the years ended June 30, 2020 and 2019 , the Company purchased a majority of engines for its NauticStar boats under a supply agreement with one vendor.

Total purchases from this vendor were $15.2 million , $23.7 million, and $19.7 m illion for the years ended June 30, 2020 .

2019 , and 2018 , respectively .

During the years ended June 30, 2020 and 2019 , the Company purchased a majority of the engines for its Crest boats under a supply agreement with a single vendor.

Total purchases from this vendor were $15.5 million and $20.4 million for the years ended June 30, 2020 and 2019, respectively .

Inventories — Inventories are valued at the lower of cost or net realizable value and are shown net of an inventory allowance in the consolidated balance sheet.

Inventory cost includes material, labor, and manufacturing overhead and is determined based on the first-in, first-out (FIFO) method.

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Goodwill and Other Intangible Assets — The Company does not amortize goodwill and other purchased intangible assets with indefinite lives.

All of the Company’s goodwill and intangible assets relate to either our MasterCraft, NauticStar, or Crest reporting units (see Note 16).

The Company’s intangible assets with finite lives consist primarily of dealer networks and are carried at their estimated fair values at the time of acquisition, less accumulated amortization.

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Intangible assets that are subject to amortization are evaluated for impairment using a process similar to that used to evaluate long-lived assets described below.

All of the Company’s goodwill and other intangible assets relate to our MasterCraft, NauticStar, or Crest reporting units (see Note 13).

Goodwill results from the excess of purchase price over the net identifiable assets of businesses acquired.

All three of the Company's reporting units, which are also the Company's reportable segments, have a goodwill balance.

The Company reviews goodwill for impairment annually , at fiscal yearend, and whenever events or changes in circumstances indicate that the fai r value of a reporting unit may be below its carrying value.

As part of the annual test, the Company may perform a qualitative, rather than quantitative, assessment to determine whether the fair values of its reporting units are “more likely than not” to b e greater than their carrying values.

The Company reviews goodwill for impairment annually, at fiscal yearend, and whenever events or changes in circumstances indicate that the fair value of a reporting unit may be below its carrying value.

In performing this qualitative analysis, the Company considers various factors, including the effect of market or industry changes and the reporting units' actual results compared to projected results.

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The key uncertainties in these calculations are the assumptions used in determining the reporting unit’s forecasted future performance, including revenue growth and operating margins, as well as the perceived risk associated with those forecasts in determining the Discount Rate, along with selecting representative market multiples.

For the year ended June 30, 2019, the Company performed a quantitative test for all three reporting units and determined that the goodwill allocated to the NauticStar reporting unit was impaired.

The Company recognized an associated goodwill impairment charge of $28,000 in its statement of operations for the year ended June 30, 2019 (see Note 8).

The Company recognized no goodwill impairment for the years ended June 30, 2018 and 2017.

During the years ended June 30, 2020 and 2019, the Company performed quantitative impairment tests for all three reporting units and determined that goodwill attributable to the NauticStar and Crest reporting units was impaired.

As a result, the Company recognized associated i mpairment charges during each of those fiscal years (see Note 6) .

The Company recognized no impairments related to goodwill for the year ended June 30, 2018.

Other Intangible Assets

The Company's primary intangible assets are dealer networks and trade names acquired in business combinations.

Intangible assets are initially valued using a methodology commensurate with the intended use of the asset.

The Company's primary intangible assets other than goodwill are dealer networks and trade names acquired in business combinations.

These intangible assets are initially valued using a methodology commensurate with the intended use of the asset.

The dealer networks were valued using an income approach, which requires an estimate or forecast of the expected future cash flows from the dealer network through the application of the multi-period excess earnings approach.

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The key uncertainties in these fair value calculations, as applicable, are:

assumptions used in developing internal revenue growth and customer expense forecasts, assumed customer attrition rates, the selection of an appropriate royalty rate, as well as the perceived risk associated with those forecasts in determining the Discount Rate.

assumptions used in developing internal revenue growth and dealer expense forecasts, assumed dealer attrition rates, the selection of an appropriate royalty rate, as well as the perceived risk associated with those forecasts in determining the Discount Rate.

The costs of amortizable intangible assets, including dealer networks, are recognized over their expected useful lives, approximately ten years for the dealer networks, using the straight-line method.

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An impairment loss is recognized for the amount by which the carrying value exceeds the fair value of the asset.

For the year ended June 30, 2019, the Company recognized a $3,000 impairment charge related to the NauticStar trade name (see Note 8).

The Company recognized no impairments related to other intangible assets for the years ended June 30, 2018 and 2017.

During the years ended June 30, 2020 and 2019, the Company performed quantitative impairment tests for intangible assets and determined that trade names attributable to the NauticStar and Crest were impaired.

As a result, the Company recognized associated impairment charges during each of those fiscal years (see Note 6).

The Company recognized no impairments related to other intangible assets for the year ended June 30, 2018.

Long-Lived Assets Other than Intangible Assets — The Company assesses the potential for impairment of its long-lived assets if facts and circumstances, such as declines in sales, earnings, or cash flows or adverse changes in the business climate, suggest that they may be impaired.

The Company performs its review by comparing the book value of the assets to the estimated future undiscounted cash flows

associated with the assets.

If any impairme nt in the carrying value of its long-lived assets is indicated, the assets would be adjusted to an estimate of fair value.

The Company performs its review by comparing the book value of the assets to the estimated future undiscounted cash flows associated with the assets.

If any impairment in the carrying value of its long-lived assets is indicated, the assets would be adjusted to an estimate of fair value.

The Company incurred no such impairments during the years ended June 30, 2020, 2019, and 2018.

Income Taxes — Income tax expense is the total of the current year income tax due or refundable and the change in deferred tax assets and liabilities.

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The Company believes that its accruals for tax liabilities are adequate for all open tax years based on its assessment of many factors, including interpretations of tax law and prior experience.

This assessment relies on estimates and assumptions and may involve a series of judgments about future events.

This assessment relies on

estimates and assumptions and may involve a ser ies of judgments about future events.

New information may become available that causes the Company to change its judgment regarding the adequacy of existing tax liabilities;

such changes to tax liabilities will have an impact on tax expense in the period that such a determination is made.

The income tax effects of the differences we identify are classified as long-term deferred tax assets and liabilities in our consolidated balance sheets.

such changes to tax liabilities will have an impact on tax expense in the period t hat such a determination is made.

The income tax effects of the differences we identify are classified as deferred tax assets and liabilities in our c onsolidated b alance s heets .

Product Warranties — The Company offers warranties on the sale of certain products for periods of between one and five years.

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Research and Development — Research and development expenditures are expensed as incurred.

Research and development expense for the years ended June 30, 2019, 2018, and 2017 was $5,566, $4,933, and $3,550, respectively, and is included in operating expenses in the consolidated statements of operations.

Research and development expense for the years ended June 30, 2020, 2019, and 2018 was $5.2 million, $5.6 million, and $4.9 million, respectively, and is included in Operating expenses in the consolidated statements of operations.

Self-Insurance — The Company is self-insured for certain losses relating to product liability claims and employee medical claims.

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Deferred Debt Issuance Costs — Certain costs incurred to obtain financing are capitalized and amortized over the term of the related debt using the effective interest method.

For the years ended June 30, 2019 and 2018 the Company incurred deferred financing costs of $729 and $1,240, respectively.

For the year ended June 30, 2017 the Company did not incur any deferred financing costs.

For the years ended June 30, 2019, 2018, and 2017 the Company recorded amortization of $553, $496, and $361, respectively.

For the years ended June 30, 2020, 2019, and 2018 the Company incurred deferred financing costs of $0.3 million, $0.7 million, and $1.2 million, respectively.

For the years ended June 30, 2020, 2019, and 2018 the Company recorded related amortization expense of $0.6 million, $0.6 million, and $0.5 million, respectively.

Share-Based Compensation — The Company records amounts for all share-based compensation, including grants of restricted stock awards, performance stock units, and nonqualified stock options over the vesting period in the consolidated statements of operations based on their fair values at the date of the grant.

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See Note 10 – Share-Based Compensation for a description of the Company's accounting for share-based compensation plans.

Advertising — Advertising costs are expensed as incurred.

Advertising expense recognized during the years ended June 30, 2019, 2018, and 2017, was $9,347, $6,787, and $5,201, respectively, and is included in selling and marketing expenses in the consolidated statements of operations.

Fair Value Measurements — The Company measures its financial assets and liabilities and utilizes the established framework for measuring fair valu e and disclosing information about fair value measurements.

Fair value is the price expected to be received to transfer an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

Measuring fair v alue involves a hierarchy of valuation inputs.

This hierarchy prioritizes the inputs into three levels as follows:

Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities;

Level 2 inputs are quoted prices for sim ilar assets and liabilities in active markets or inputs that are observable for the asset or liability, either directly or indirectly;

and, Level 3 inputs are unobservable inputs for which little or no market data exists, therefore requiring a company to d evelop its own valuation assumptions.

Advertising — Advertising costs are expensed when the advertising first takes place.

Advertising expense recognized during the years ended June 30, 2020, 2019, and 2018, was $7.0 million, $9.3 million, and $6.8 million, respectively, and is included in Selling and marketing expenses in the consolidated statements of operations.

Fair Value Measurements — The Company measures certain of its financial assets and liabilities at fair value and utilizes the established framework for measuring fair value and disclosing information about fair value measurements.

Fair value is the exchange price that would be r eceived for an asset or paid to transfer a liability (exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date.

There are three levels of inputs that m ay be used to measure fair values:

Level 1 — Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date.

Level 2 — Significant other observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities;

quoted prices in markets that are not active;

or other inputs that are observable or can be corroborated by observable market data.

Level 3 — Significant unobservable inputs that reflect a company’s own assumptions about the inputs that market participants would use in pricing an asset or liability.

When measuring fair value, the Company considers the principal or most advantageous market in which it would transact and considers assumptions that market participants would use when pricing the asset or liability.

When possible, the Company looks to active and observable markets to price identical assets.

When identical assets are not traded in active markets, the Company looks to market observable data for similar assets.

The Company’s most significant financial asset or liability measured at fair value on a recurring basis is its inventory repurchase contingent obligation (see “Revenue Recognition - Other Revenue Recognition Matters” and Note 11).

Fair Value of Financial Instruments — The carrying amounts of the Company’s financial instruments, consisting of cash and cash equivalents, accounts receivable, accounts payable and other liabilities, approximate their estimated fair values due to the relative short-term nature of the amounts.

The carrying amount of debt approximates fair value due to variable interest rates at customary terms and rates the Company could obtain in current financing.

Repurchase Commitments — In connection with its dealers’ wholesale floor-plan financing of boats, the Company has entered into repurchase agreements with various lending institutions.

The repurchase commitment is on an individual unit basis with a term from the date it is financed by the lending institution through the payment date by the dealer, generally not exceeding 30 months.

The Company accounts for these arrangements as guarantees and recognizes a liability based on the estimated fair value of the repurchase obligation.

The estimated fair value takes into account our estimate of the loss we will incur upon resale of any repurchases.

The Company has applied these provisions to its floor plan repurchase agreements as disclosed in Notes 9 and 14.

Earnings Per Common Share — Basic earnings per common share reflects reported earnings divided by the weighted average number of common shares outstanding during the reporting period.

Diluted earnings per common share include the effect of dilutive stock options and restricted share awards, unless inclusion would not be dilutive.

Operating Leases — The Company leases its Crest production facility and various equipment under operating lease arrangements.

Lease agreements may include rent holidays, rent escalation clauses, and tenant improvement allowances.

The Company recognizes scheduled rent increases on a straight-line basis over the lease term beginning with the date the Company takes possession of the leased property.

Postretirement Benefits – The Company has a defined contribution plan and makes contributions including matching and discretionary contributions which are based on various percentages of compensation, and in some instances are based on the amount of the employees' contributions to the plans.

The expense related to the defined contribution plans was $1,208, $826, and $640 for the years ended June 30, 2019, 2018, and 2017, respectively.

Comparability between these years has been affected, primarily, by the acquisition of Crest and NauticStar during the years ended June 30, 2019 and 2018, respectively (See Note 5).

The Company views its operations in three operating segments based on its operation and management structure:

MasterCraft, NauticStar, and Crest (see Note 16).

New Accounting Pronouncements Issued But Not Yet Adopted

In June 2018, the Financial Accounting Standards Board (the “FASB”) issued ASU 2018-07 , Compensation—Stock Compensation (Topic 718):

Improvements to Nonemployee Share-Based Payment Accounting .

This guidance provides clarity and reduces complexity when applying the guidance in Topic 718, Compensation—Stock Compensation to the term or condition of share-based payments to nonemployees.

ASU 2018-07 is effective for annual reporting periods, and interim periods therein, beginning after December 15, 2018.

The Company will adopt this guidance for its fiscal year beginning July 1, 2019.

The Company does not expect adoption of this standard to have a material impact on its financial condition, results of operations, or cash flows.

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842) .

The new standard establishes a right-of-use (“ROU”) model that requires a lessee to record a ROU asset and a lease liability on the balance sheet for all leases with terms longer than 12 months.

Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the statement of operations.

The new standard is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years.

A modified retrospective transition approach is required for lessees for capital and operating leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements, with certain practical expedients available.

In July 2018, the FASB issued ASU 2018-11, Targeted Improvements , providing for an additional transition method by allowing entities to initially apply the new leases standard at the adoption date and recognize a cumulative-effect adjustment to the opening balance of retained earnings.

The Company will adopt the new standard on July 1, 2019 and use the effective date as the date of initial application.

The new standard provides a number of optional practical expedients in transition.

The Company expects to elect the ‘package of practical expedients’, which permits it not to reassess under the new standard the Company’s prior conclusions about lease identification, lease classification, and initial direct costs.

The Company does not expect to elect the use-of-hindsight or the practical expedient pertaining to land easements;

the latter not being applicable to the Company.

The Company expects that the most significant effects relate to the recognition of the new ROU assets and lease liabilities on the Company’s balance s heet for its building and equipment operating leases and providing significant new disclosures about its leasing activities.

The Company anticipates the adoption of the standard will result in the recognition of approximately $4 ,000 in right-of-use assets and associated lease obligations on the consolidated balance sheets and will not materially impact results on the consolidated statements of operations.

The expense related to the defined contribution plans was $1.2 million, $1.2 million, and $0.8 million for the years ended June 30, 2020, 2019, and 2018, respectively.

Comparability between the years ended June 30, 2019 and 2018 was impacted, primarily, by the acquisition of Crest and NauticStar during the years ended June 30, 2019 and 2018, respectively (See Note 3).

COVID-19 Pandemic — The outbreak of a novel coronavirus throughout the world, including the United States, during early calendar year 2020 has caused widespread business and economic disruption through mandated and voluntary business closings and restrictions on the movement and activities of people (“COVID-19 Pandemic”).

We are subject to risks and uncertainties as a result of the COVID-19 Pandemic.

The extent of the impact of the COVID-19 Pandemic on the Company's business is highly uncertain and difficult to predict, as the response to the COVID-19 Pandemic is rapidly evolving in many countries, including the United States and other markets where the Company operates.

It is expected that many of the Company's consumers, dealers, and suppliers could be impacted by these closings and restrictions which could materially and adversely affect demand for our products, our ability to obtain or deliver inventory, and our ability to collect accounts receivables as our dealers and financing counterparties face higher liquidity and solvency risk.

Furthermore, capital markets and economies worldwide have also been negatively impacted by the COVID-19 Pandemic, and it has caused economic downturns or recessions in the U.S.

and other markets where the Company operates.

Such economic disruption could have a material adverse effect on our business as retail demand for our products could decline which would in-turn reduce wholesale demand from our dealers.

Policymakers around the world have responded with fiscal and monetary policy actions to support the economy.

The magnitude and overall effectiveness of these actions remains uncertain.

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 mandates.

As a result of this action, the Company temporarily laid off nearly all of its hourly workforce.

We resumed operations at all our manufacturing facilities by mid-May 2020.

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 Company continues to evaluate and monitor the health and safety of its employees and will adhere to federal and local government mandates and guidelines.

The severity of the impact of the COVID-19 Pandemic on the Company's 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 govern ments, the effects of the pandemic on the Company's consumers , dealers , suppliers and workforce , and to the extent normal economic and operating conditions can resume, all of which are uncertain and cannot be predicted.

The Company's future results of oper ations, cash flows, and liquidity could be adversely impacted by delays in payments of outstanding receivable amounts beyond normal payment terms, supply chain or workforce disruptions and uncertain demand, additional goodwill and other intangible asset impairment charges (see Note 6), and the impact of any initiatives that the Company may undertake to address financial and operational challenges faced by it and its consumers , dealers, and suppliers.

As of the date of issuance of these consolidated finan cial statements, the extent to which the COVID-19 Pandemic may materially impact the Company's financial condition, liquidity, or results of operations is uncertain.

New Accounting Pronouncements Issued And Adopted

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606) , which provides principle-based accounting guidance for revenue recognition.

ASU 2014-09, as amended, became effective for public companies for annual and interim periods beginning after December 15, 2017.

Effective July 1, 2018, the Company adopted the new revenue standard using the modified retrospective transition approach by recognizing a cumulative adjustment to the opening balance of retained earnings.

Due to the implementation of ASU 2014-09, the Company has changed the timing of when it records retail promotions and rebates.

The cumulative effect of the changes made to the Company’s consolidated balance sheet as of July 1, 2018 for the adoption of the new revenue standard was as follows:

Leases — In February 2016, the Financial Accounting Standards Board (“FASB”) issued ASU 2016-02, Leases, (“ASC 842”) which, among other things, requires lessees to recognize assets and liabilities on the balance sheet for all operating leases.

On July 1, 2019, the Company adopted ASC 842 and all related amendments.

The Company elected the optional transition method provided by the FASB in ASU 2018-11, Leases (Topic 842):

Targeted Improvements , and as a result, has not restated its consolidated financial statements for prior periods presented.

The Company has elected the package of practical expedients upon transition which allowed the Company to retain the lease classification for any leases that existed prior to adoption, to not reassess whether any contracts entered into prior to adoption are leases, and to not reassess initial direct costs for any leases that existed prior to adoption.

In addition, the Company elected not to record on the consolidated balance sheet any lease with a term of twelve months or less.

ASC 842 did not have a material impact on the Company's consolidated statements of operations.

The cumulative effect of the changes made to the Company's consolidated balance sheet as of July 1, 2019 for the adoption of ASC 842 was as follows:

Balance as of

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Due to ASC 842

Accrued expenses and other current liabilities

Deferred income taxes

Accumulated deficit

The following table summarizes the impact of ASU 2014-09 on the Company’s consolidated statement of operations for the year ended June 30, 2019:

Balances without

Statement of Operations

Effect of Change

adoption of ASC 606

Income before income tax expense

Income tax expense

The following table summarizes the impact of ASU 2014-09 on the Company’s consolidated balance sheet as of June 30, 2019:

Balances without

Balance Sheet

Effect of Change

adoption of ASC 606

Other long-term assets

Current liabilities

Accrued expenses and other current liabilities

Accumulated deficit

In August 2016, the FASB issued ASU 2016-15, Classification of Certain Cash Receipts and Cash Payments .

ASU 2016-15 addresses how certain cash receipts and cash payments are presented and classified in the statement of cash flows under Topic 230, Statement of Cash Flow , and other Topics.

ASU 2016-15 is effective for annual reporting periods, and interim periods therein, beginning after December 15, 2017.

The Company adopted this standard for its fiscal year beginning July 1, 2018.

The adoption of this standard did not have a material impact on the Company’s financial condition, results of operations, or cash flows.

In January 2017, the FASB issued ASU 2017-04 , Intangibles—Goodwill and Other (Topic 350):

Simplifying the Test for Goodwill Impairment.

This guidance eliminates Step 2 from the goodwill impairment test.

Instead, an entity should recognize an impairment charge for the amount by which the carrying value exceeds the reporting unit’s fair value, not to exceed the total amount of goodwill allo cated to that reporting unit.

Long-term liabilities

Other long-term liabilities

The Company leases various equipment under operating lease arrangements.

The Company determines if an arrangement is a lease at lease inception.

Operating lease right-of-use (“ROU”) assets and operating lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at the commencement date.

Because the rates implicit in the Company's lease contracts are not readily determinable, the Company uses its incremental borrowing rate based on information available at the commencement date in determining the present value of future payments.

The incremental borrowing rate is estimated to approximate the interest rate on a collateralized basis with similar terms and payments, and in economic environments where the leased asset is located.

The operating lease ROU asset also includes any initial direct costs and lease payments made prior to lease commencement and excludes lease incentives incurred.

The Company's lease terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise that option.

Operating lease expense is recognized on a straight-line basis over the lease term.

The Company may enter into lease agreements that contain both lease and non-lease components, which it has elected to account for as a single lease component for all asset classes.

See Note 11 for information regarding the Company’s leases.

Share-Based Compensation — In June 2018, the Financial Accounting Standards Board issued ASU 2018-07 , Compensation—Stock Compensation (Topic 718):

Improvements to Nonemployee Share-Based Payment Accounting .

This guidance provides clarity and reduces complexity when applying the guidance in Topic 718, Compensation—Stock Compensation to the term or condition of share-based payments to nonemployees.

ASU 2018-07 is effective for annual reporting periods, and interim periods therein, beginning after December 15, 2018.

Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates afte r January 1, 2017.

The Company early adopted this standard for its annual goodwill impairment tests performed on June 30, 2019.

The adoption of this standard did not have a material impact on the Company’s financial condition, results of operations, or ca sh flows .

The Company adopted this guidance for its fiscal year beginning July 1, 2019.

The adoption of this standard did not have a material impact on the consolidated financial statements.

New Accounting Pronouncements Issued But Not Yet Adopted

Fair Value Measurements — In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820):

Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement .

This guidance modifies the disclosure requirements on fair value measurements in Topic 820 by removing disclosures regarding transfers between Level 1 and Level 2 of the fair value hierarchy, by modifying the measurement uncertainty disclosure, and by requiring additional disclosures for Level 3 fair value measurements, among others.

The amendments are effective for all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019.

The Company does not expect the adoption of this new guidance to have a material impact on the consolidated financial statements.

Current Expected Credit Loss — In June 2016, the FASB issued ASU 2016-13, Measurement of Credit Losses on Financial Instruments , which updated the ASC to use an impairment model that is based on expected losses rather than incurred losses.

The Company will adopt this guidance for its fiscal year beginning July 1, 2020.

Our evaluation of this guidance is substantially complete, and the adoption of this standard is not expected to have a material impact on the consolidated financial statements.

REVENUE RECOGNITION

The following table presents the Company’s revenue by major product categories for the year ended June 30, 2019:

The following table presents the Company’s revenue by major product category for each reportable segment.

Year Ended June 30, 2020

Year Ended June 30, 2019

Major Product Categories:

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Other revenue

As of July 1, 2018, the Company had $2,194 of contract liabilities associated with customer deposits.

(a) Crest was acquired on October 1, 2018.

Sales outside of North America accounted for 4.8%, 5.2%, and 7.5% of the Company’s net sales for the years ended June 30, 2020, 2019, and 2018, respectively.

The Company had no significant concentrations of sales to individual dealers or in countries outside of North America during the years ended June 30, 2020, 2019, and 2018.

Contract Liabilities

As of June 30, 2019, the Company had $0.8 million of contract liabilities associated with customer deposits.

During the year ended June 30, 2020, all of this amount was recognized as revenue.

As of June 30, 2019, total contract liabilities were $759 and were reported in Accrued expenses and other current liabilities on the consolidated balance sheet and are expected to be recognized as revenue during the year ended June 30, 2020.

As of June 30, 2020, total contract liabilities were $0.6 million, were reported in Accrued expenses and other current liabilities on the consolidated balance sheet and are expected to be recognized as revenue during the year ended June 30, 2021.

See Note 1 for a description of the Company’s significant revenue recognition policies.

Crest Acquisition

On October 1, 2018, the Company completed its acquisition of Crest, a manufacturer of pontoon boats.

With the acquisition of Crest, the Company expanded its product portfolio and now operates in three segments of the powerboat industry – performance sport boats, outboard saltwater fishing boats and pontoon boats.

The purchase price was $81,729, including customary adjustments for working capital in the acquired business at the closing date.

For accounting purposes, Crest meets the definition of a business and has been accounted for as a business combination.

Beginning October 1, 2018, our consolidated statement of operations include the results of Crest.

Since the date of acquisition, net sales of $76,556 and operating income of $7,055 have been included in our consolidated statement of operations.

The total consideration paid has been allocated to the assets acquired and liabilities assumed based on their fair values as of the date of acquisition.

Amounts recorded for goodwill and intangible assets are disclosed in Note 8.

The measurements of fair value were based on estimates utilizing the assistance of third-party valuation specialists.

A combination of income, market and cost approaches were used for the valuation where appropriate, depending on the asset or liability being valued.

Valuation inputs in these models and analyses considered market participant assumptions.

Management finalized the valuation related to the assets acquired and liabilities assumed , and t he following table summarizes the purchase price allocation for the Crest acquisition :

Purchase Price:

Cash paid, net of cash acquired

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

Fiscal 2019 Acquisition

On October 1, 2018, the Company completed its acquisition of Crest for $81.7 million.

Crest, a manufacturer of pontoons, expands the Company’s product portfolio.

Proceeds from the $80.0 term loan (see Note 8) were used to fund this acquisition.

The following table is a summary of the assets acquired, liabilities assumed, and net cash consideration paid for Crest during fiscal 2019:

Accounts receivable

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Property, plant and equipment

Identifiable intangible assets

Identifiable intangible assets (a)

Current liabilities

Fair value of assets acquired and liabilities assumed

The following table summarizes the intangible assets acquired as part of the acquisition:

Estimates of Fair

Net cash consideration paid

(a) The goodwill and other intangible assets recorded for the Crest acquisition are deductible for tax purposes.

Estimated Useful

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Total identifiable intangible assets

The value allocated to inventories was based on the expected sales price of the inventory, less an estimated cost to complete and a reasonable profit margin.

The value allocated to accounts receivable represents expected collection of those receivables.

The fair value of the identifiable intangible assets was determined based on the following approaches:

Dealer Network – The value associated with Crest’s dealer network is attributed to its long-standing dealer relationships.

The estimate of fair value assigned to this asset was determined using the income approach, which requires an estimate or forecast of the expected future cash flows from the dealer network through the application of the multi-period excess earnings approach.

Software – The value attributed to Crest’s software was determined using the replacement cost method, a variation of cost approach, which requires an estimate of the replacement cost and incorporates an obsolescence factor and a developer’s profit margin.

Trade Name – The value attributed to Crest’s trade name was determined using the relief from royalty method, a variation of the income approach, which requires an estimate or forecast of the expected future cash flows.

The trade name has an indefinite life.

The fair value of the definite-lived intangible assets are being amortized using the straight-line method to recognize the expense over the estimated useful life.

Indefinite-lived intangible assets are not amortized, but instead are evaluated for potential impairment on an annual basis .

The weighted average useful life of identifiable definite-lived intangible assets acquired was 9.9 years.

Goodwill of $36,238 resulting from the acquisition consists of future growth prospects including dealer expansion into new geographic markets and capacity expansion as well as intangible assets that do not qualify for separate recognition.

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

The value allocated to property, plant and equipment reflects the fair value of the acquired property, plant and equipment using a combination of the income, cost, and market approaches, which are primarily based on significant Level 2 and Level 3 assumptions, such as estimates of absorption period, lease-up costs, market rent, operating expenses, and terminal capitalization and discount rates.

A cquisition related costs of $ 1,510, which were incurred by the Company during the fiscal year-ended June 30 , 2019, were expensed in the period incurred, and are included in general and administrative expenses in the consolidated statement of operations.

Crest Related Party Transactions

Effective October 1, 2018, in connection with the purchase of Crest, the Company entered into a lease agreement with Crest Marine Real Estate LLC (“Real Estate”) for a manufacturing facility, storage and office building.

The ten-year lease expires September 30, 2028, subject to four consecutive five year extension periods.

The annual rent is $330 for the first five years of the lease term and will increase to $425 for the remaining five years.

Additionally, during the option terms the rent will be adjusted every five years based on the increase in the Consumer Price Index.

Related Party Transactions

In connection with the operations of Crest, the Company made rental payments to Crest Marine Real Estate LLC (“Real Estate”) for a manufacturing facility, storage and office building (the “Crest Facility”).

One of the minority owners of Real Estate is a member of the Crest management team.

During the year ended June 30, 2019, the Company recognized related rent expense of $248.

Crest purchases fiberglass component parts from a supplier whose minority owner is the same member of the Crest management team that has a minority ownership in Real Estate.

During year ended June 30, 2019, the Company purchased $2,830 of products from the supplier.

As of June 30, 2019, the outstanding balance due to the supplier was $146.

NauticStar Acquisition

On October 2, 2017, the Company completed its acquisition of NauticStar which adds to its product diversity.

The purchase price was $80,511, including customary adjustments for the amount of working capital in the acquired business at the closing date.

The Company accounted for the transaction using the acquisition method.

The total consideration has been allocated to the assets acquired and liabilities assumed based on estimates of their fair values as of the date of acquisition.

The Company has recorded the goodwill and intangible assets acquired based on their fair values as of October 2, 2017.

The measurements of fair value were based upon estimates utilizing the assistance of third-party valuation specialists.

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

Purchase Price:

Cash paid, net of cash acquired

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

Accounts receivable

Other current assets

Indemnification asset

Deferred income taxes

Property, plant and equipment

Identifiable intangible assets

Current liabilities

Unrecognized tax positions

Fair value of assets acquired and liabilities assumed

The fair value estimates for the Company’s identifiable intangible assets acquired as part of the acquisition are as follows:

Estimates of Fair

Estimated Useful

Life (in years)

Definite-lived intangible:

Dealer network

Indefinite-lived intangible:

Total identifiable intangible assets

The value allocated to inventories reflects the fair value of the acquired inventory based on the sales price of the inventory, less cost to complete and a reasonable profit margin.

The value allocated to accounts receivable represents the fair value of the acquired receivables based on the expected collection of those receivables.

The fair value of the identifiable intangible assets was determined based on the following approaches:

Dealer Network - The value associated with NauticStar’s dealer network is attributed to its long-standing dealer distribution network.

Trade Name - The value attributed to NauticStar’s trade name was determined using the relief from royalty method, a variation of the income approach, which requires an estimate or forecast of the expected future cash flows.

The trade name has an indefinite life.

The fair value of the definite-lived intangible asset is being amortized using the straight-line method to amortization of intangible assets expense over the estimated useful life.

Indefinite-lived intangible assets are not amortized, but instead are evaluated for potential impairment on an annual basis.

The weighted average useful life of identifiable definite-lived intangible assets acquired was 10 years.

Goodwill of $36,199 resulting from the acquisition consists of future growth prospects including dealer expansion into new geographic markets and capacity expansion as well as intangible assets that do not qualify for separate recognition such as an assembled workforce.

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

Acquisition related costs of $1,486, which were incurred by the Company during the fiscal year ended June 30, 2018, were expensed during the period, and are included in general and administrative expenses in the consolidated statement of operations.

The lease was to expire on September 30, 2028, and was subject to four consecutive, five-year renewal periods.

The lease terms included an option for the Company to purchase the Crest Facility for an amount equal to its fair market value, as determined by appraisals and negotiation between the Company and Real Estate (the “Purchase Option”).

The annual rent under the lease was $0.3 million for the first five years of the lease term, and was to increase to $0.4 million for the remaining five years.

Additionally, at the beginning of each of the optional renewal terms the rent was to be adjusted based on the change in the Consumer Price Index.

In accordance with the Purchase Option, on October 24, 2019 the Company purchased the Crest Facility for $4.1 million.

See Note 11 for additional information regarding the purchase.

Crest purchases fiberglass component parts from a supplier whose minority owner was the same member of the Crest management team that has a minority ownership interest in Real Estate.

On January 31, 2020 this minority ownership interest was divested and this supplier ceased being a related party.

During the period beginning July 1, 2019 and ending January 31, 2020, the Company purchased $1.8 million of products from the supplier.

During the year ended June 30, 2019, the Company purchased $2.8 million of products from the supplier.

Pro Forma Financial Information

The following unaudited pro forma consolidated results of operations for the fiscal year ended June 30, 2019, June 30, 2018 and June 30, 2017, assumes that the acquisition of NauticStar occurred as of July 1, 2017, and the acquisition of Crest occurred as of July 1, 2018.

The unaudited pro forma financial information combines historical results of MasterCraft, NauticStar, and Crest with adjustments for depreciation and amortization attributable to preliminary fair value estimates on acquired tangible and intangible assets for the respective periods.

The following unaudited pro forma consolidated results of operations for the fiscal years ended June 30, 2019 and 2018, assumes that the acquisition of NauticStar (acquired on October 2, 2017) and Crest (acquired on October 1, 2018) occurred as of the beginning of the earliest period presented in the consolidated financial statements.

The unaudited pro forma financial information combines historical results of MasterCraft, NauticStar, and Crest with adjustments for depreciation and amortization attributable to fair value estimates on acquired tangible and intangible assets for the respective periods.

Non-recurring pro forma adjustments associated with the fair value step up of inventory were included in the reported pro forma cost of sales and earnings.

The unaudited pro forma financial information is presented for informational purposes only and is not indicative of the results of operations that would have been achieved if the acquisitions had taken place at the beginning of fiscal years 2018 and 2017, or the results that may occur in the future:

The unaudited pro forma financial information is not indicative of the results of operations that would have been achieved if the acquisitions had taken place at the beginning of fiscal year 2018, or the results that may occur in the future:

Fiscal Years Ended

Basic earnings per common share

Diluted earnings per common share

Inventories at June 30, 2019 and 2018 consisted of the following:

Basic earnings per share

Diluted earnings per share

Inventories consisted of the following:

As of June 30,

Raw materials and supplies

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PROPERTY, PLANT, AND EQUIPMENT

Property, plant, and equipment — net at June 30, 2019 and 2018, consisted of the following:

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

As of June 30,

Land and improvements

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Property, plant, and equipment, net

Depreciation expense for the years ended June 30, 2019, 2018, and 2017 was $4,295, $3,489, and $3,124, respectively.

Depreciation expense for the years ended June 30, 2020, 2019, and 2018 was $6.6 million, $4.3 million, and $3.5 million, respectively.

Subsequent Event

On August 13, 2020, the Company entered into an agreement to purchase certain real and personal property located in Merritt Island, Florida, including a 140,000 sq.

boat manufacturing facility, (the “Property”) for $14.0 million (the “Purchase Agreement”).

The Company plans to use the Property to expand its boat building capacity.

The Purchase Agreement is subject to customary closing conditions and closing is expected to occur in October 2020.

The Company expects to use liquidity sources existing as of June 30, 2020 to fund this purchase.

GOODWILL AND OTHER INTANGIBLE ASSETS

The following table summarizes changes in the carrying amount of goodwill for the fiscal years ended June 30, 2019 and 2018.

Balance as of June 30, 2017

Goodwill acquired

Balance as of June 30, 2018

Goodwill acquired

Impairment charges

Balance as of June 30, 2019

Goodwill acquired during the years ended June 30, 2019 and 2018 are related to the acquisitions as described in Note 5 and are derived from the value of the businesses acquired.

The acquisitions represented operating segments added to our reporting structure and the related goodwill was assigned accordingly.

For the purpose of goodwill impairment testing, the operating segments (MasterCraft, NauticStar and Crest) are considered reporting units and are tested on a stand-alone basis.

We performed our annual goodwill analysis as of June 30, 2019 and elected to early adopt ASU 2017-14 (See Note 3).

The goodwill impairment analysis required significant judgements to calculate the fair value for each reporting unit, including estimation of future cash flows, which is dependent on internal forecasts, estimation of long-term growth rate for each reporting unit, and determination of the weighted average cost of capital.

A number of significant assumptions and estimates are involved in the application of the discounted cash flow model to forecast operating cash flows, including market growth and market share, sales volumes and prices, costs to produce, discount rate, and estimated capital needs.

Management considers historical experience and all available information at the time that the fair values of its reporting units are estimated.

Assumptions in estimating future cash flows are subject to a high degree of judgment and complexity.

Changes in assumptions and estimates may affect the fair value of goodwill and could result in impairment charges in future periods.

As a result of our analysis, we recorded a goodwill impairment charge of $28,000 related to the NauticStar reporting unit.

Goodwill and Other Intangible Asset Impairment

The current economic environment, including the significant share price and market volatility, as well as disruptions to supply chains resulting from the COVID-19 Pandemic, triggered an interim impairment analysis for the Company’s intangible assets including goodwill.

As a result of this analysis, the Company recorded impairment charges totaling $56.4 million during the three months ended March 29, 2020 related to the NauticStar and Crest segments.

As of June 30, 2020, our annual impairment test date, the Company performed a qualitative assessment and identified no events or circumstances that indicated that there existed a more likely than not probability of impairment of goodwill and other intangible assets.

The impairment charges recorded for each segment are detailed below and are included in Goodwill and other intangible asset impairment on the consolidated statement of operations.

The impairment recorded in fiscal 2020 was principally a result of a decline, in the fiscal third quarter, in market conditions, including our share price, and the then current outlook for sales and operating performance relative to the Company’s acquisition plans and impairment test performed as of June 30, 2019.

During our fiscal 2019 annual assessment of intangible assets including goodwill, the Company recorded impairment charges of $31.0 million related to the NauticStar segment.

The impairment was principally a result of a decline, in the fiscal fourth quarter, in the outlook for sales and operating performance relative to our acquisition plan.

This charge is included in Goodwill and other intangible asset impairment on the June 30, 2019 consolidated statement of operations.

No goodwill impairment charges were recorded for the MasterCraft or Crest reporting units.

It is possible that t he Company’s assumptions regarding the key uncertainties in these fair value calculations could change in the near term.

If actual results differ from the Company’s assumptions regarding the key uncertainties in these fair value calculations, it is possible that one or more of the Company’s reporting units could incur goodwill impairment charges in future periods.

NauticStar goodwill as of June 30, 2019 was $8,199.

If our assessment of the relevant facts and circumstances change, or if the actual performance falls short of expected results, future impairment charges may be required.

An impairment of goodwill may also lead us to record an impairment of other intangible assets.

We completed our annual goodwill impairment review during the fiscal fourth quarters of 2018 and 2017 and concluded that there were no indicators of goodwill impairment during those periods.

See Note 1 for a discussion of the methods used to determine the fair value of goodwill and other intangible assets.

In assessing the need for goodwill and intangible impairment, management utilizes a number of estimates, including operating results, business plans, economic projections, anticipated future cash flows, transactions and marketplace data.

Accordingly, these fair value measurements fall in Level 3 of the fair value hierarchy.

Goodwill and other intangible asset impairment charges for the years ended June 30, 2020 and 2019 were as follows:

While the extent and duration of the economic impact from the COVID-19 pandemic remain unclear, changes in assumptions and estimates may affect the fair value of goodwill and other intangible assets and could result in additional impairment charges in future periods.

The carrying amounts of goodwill as of June 30, 2020 and 2019, attributable to each of the Company’s reportable segments, were as follows:

Accumulated Impairment Losses

Other Intangible Assets

We have identified intangible assets with definite and indefinite lives primarily representing dealer networks, software and trade names.

In fiscal 2019 and 2018, the acquisition of Crest added $35,245 and the acquisition of NauticStar added $36,000 of intangible assets respectively.

The intangible assets acquired primarily represent trade names and dealer networks with a weighted average estimated useful life of the acquired assets of 10 years.

Refer to Note 5 for further discussion regarding the 2019 and 2018 acquisitions.

The following table presents changes in the carrying amount of other intangible assets, net.

Balance as of June 30, 2017

Intangible assets acquired

Balance as of June 30, 2018

Intangible assets acquired

Impairment charges

The following table presents the carrying amount of Other intangible assets, net as of June 30, 2020 and 2019.

Accumulated Amortization / Impairment

Other intangible assets, net

Accumulated Amortization / Impairment

Other intangible assets, net

Amortized intangible assets

Dealer networks

Unamortized intangible assets

Total other intangible assets

The following table presents the cost and accumulated amortization of our other intangible assets as of June 30, 2019 and 2018.

June 30, 2019

Life in Years

Dealer network

Total identified other intangible assets

June 30, 2018

Life in Years

Dealer network

Total identified other intangible assets

Intangible assets that become fully amortized are removed from the accounts and are no longer represented in the gross carrying value or accumulated amortization.

The trade names have been determined to have indefinite lives and are not being amortized, based on management’s expectation that trade names will generate cash flows for an indefinite period.

Management expects to maintain usage of the trade names on existing products and introduce new products in the future under the trade names, thus extending their lives indefinitely.

During our annual assessment of indefinite-lived intangibles, trade names, the Company recorded an impairment charge on trade names of $3,000 related to the NauticStar reporting unit.

The impairment was principally a result of a decline, in the fiscal fourth quarter, in the outlook for sales and operating performance relative to our acquisition plan.

This charge was included in Goodwill and other intangible asset impairment on the consolidated statement of operations.

No other intangible asset impairment loss was recorded for the MasterCraft or Crest reporting units.

Amortization expense fo r the fiscal years ended June 30, 201 9 , 201 8 , and 201 7 , was $ 3,492 , $ 1,597 and $ 107 , respectively.

Estimated amortization expense for the five years subsequent to June 30, 201 9 , is presented in the following table:

Amortization expense related to Other intangible assets, net for years ended June 30, 2020, 2019 and 2018 was $3.9, $3.5, and $1.6 million, respectively.

The following table presents estimated future amortization expense for the next five fiscal years and thereafter.

Fiscal years ending June 30,

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ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

Accrued expenses and other current liabilities at June 30, 2019 and 2018, consisted of the following:

Accrued expenses and other current liabilities consisted of the following:

As of June 30,

Dealer incentives

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Total accrued expenses and other current liabilities

The following table summarizes the activity in the accrued warranty liability for the years ended June 30, 2019 and 2018:

Beginning balance

Additions for business acquisitions

A ccrued warranty liability activity was as follows :

For the Years Ended June 30,

Balance at the beginning of the period

Additions for Crest acquisition

Payments made

Adjustments to preexisting warranties

Ending balance

FAIR VALUE MEASUREMENTS

Fair value is the exchange price that would be received for an asset or paid to transfer a liability (exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date.

There are three levels of inputs that may be used to measure fair values:

Level 1 — Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date.

Level 2 — Significant other observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities;

quoted prices in markets that are not active;

or other inputs that are observable or can be corroborated by observable market data.

Level 3 — Significant unobservable inputs that reflect a company’s own assumptions about the inputs that market participants would use in pricing an asset or liability.

When determining the fair value measurements for assets or liabilities required or permitted to be recorded at and/or marked to fair value, the Company considers the principal or most advantageous market in which it would transact and considers assumptions that market participants would use when pricing the asset or liability.

When possible, the Company looks to active and observable markets to

price identical assets.

When identical assets are not traded in active markets, the Company looks to market observable data for similar assets.

Fair Value Measurements on a Recurring Basis

The following tables summarize the Company’s financial assets and liabilities measured at fair value on a recurring basis as of June 30, 2019 and 2018:

2019 Fair Measurements at the End of the Reporting Period Using

Quoted Prices in Active Markets for Identical Assets

Significant Other Observable Inputs

Significant Unobservable Inputs

Asset — interest rate cap

2018 Fair Measurements at the End of the Reporting Period Using

Quoted Prices in Active Markets for Identical Assets

Significant Other Observable Inputs

Significant Unobservable Inputs

Asset — interest rate cap

Interest Rate Cap

In November 2017, the Company entered into an interest rate cap agreement (“Interest Rate Cap”) with a certain financial institution.

The Interest Rate Cap provides for the Company to receive monthly payments based on (i) an amortizing notional amount and (ii) the amount by which the one-month London Inter-Bank Offered Rate exceeds 2.00%.

The notional amount as of June 30, 2019 was $32,813.

The Interest Rate Cap will terminate on December 31, 2020.

The Interest Rate Cap is valued utilizing pricing models which use inputs such as interest rate forecasts and notional amounts.

Fair value measurements for the Company’s Interest Rate Cap are classified under Level 2 because such measurements are based on significant other observable inputs.

There were no transfers of assets or liabilities between Level 1 and Level 2 during the fiscal year ended June 30, 2019.

Fair Value Measurements on a Nonrecurring Basis

NauticStar Goodwill — The Company performed its annual goodwill analysis as of June 30, 2019.

As a result, the fair value of goodwill attributable to the NauticStar reporting unit was estimated to be $8,199 as of June 30, 2019.

Inputs used to estimate this fair value include significant unobservable inputs that reflect the Company’s own assumptions about the inputs that market participants would use and, therefore, goodwill attributable to the NauticStar reporting unit is classified within Level 3 of the fair value hierarchy.

NauticStar Trade Name — During the goodwill assessment noted above, the Company also analyzed indefinite-lived assets, or trade names.

As a result, the fair value of the NauticStar trade name was estimated to be $13,000 as of June 30, 2019.

Inputs used to estimate this fair value include significant unobservable inputs that reflect the Company’s own assumptions about the inputs that market participants would use and, therefore, the NauticStar trade name is classified within Level 3 of the fair value hierarchy.

See Note 8 for a description of the valuation techniques and inputs used in the fair value measurement of goodwill attributable to the NauticStar reporting unit and the NauticStar trade name.

Aggregate changes for preexisting warranties

Balance at the end of the period

Insurance Premium Financing

On March 27, 2020, the Company executed an insurance premium financing agreement of $1.1 million with a premium finance company in order to finance certain of its annual insurance premiums.

Beginning on April 1, 2020, the financing agreement is payable in eleven monthly installments of principal and interest of approximately $0.1 million.

The agreement bears interest at 3.6%.

The balance of the insurance premium financing as of June 30, 2020 was $0.7 million and is recorded in Accrued expenses and other current liabilities.

LONG-TERM DEBT

Long-term debt outstanding at June 30, 2019 and 2018 was as follows:

Long-term debt outstanding was as follows:

As of June 30,

Revolving credit facility

Senior secured term loans

Deferred debt issuance costs on term loans

Debt issuance costs on term loans

Less current portion of long-term debt

Less current portion of deferred debt issuance costs on term loans

Long-term debt — less current portion

Previously Existing Credit Facilities

In May 2016, the Company entered into a Second Amended and Restated Credit and Guaranty Agreement with a syndicate of certain financial institutions (the “Prior Credit Agreement”).

The Prior Credit Agreement replaced the Company’s First Amended Credit Agreement, dated March 13, 2015 (as amended in February 2016).

The Prior Credit Agreement provided the Company with an $80,000 senior secured credit facility, consisting of a $50,000 term loan and a $30,000 revolving credit facility.

The Company used the proceeds to pay a $79,945 cash dividend to common stockholders in June 2016.

The cash dividend payment per share was $4.30 based on shares outstanding as of June 6, 2016.

Less current portion of debt issuance costs on term loans

Long-term debt, net of current portion

Previously Existing Credit Facility

On October 2, 2017, the Company entered into a Third Amended and Restated Credit and Guaranty Agreement with a syndicate of certain financial institutions (the “Third Amended Credit Agreement”).

The Third Amended Credit Agreement replaced and paid off the Company’s Prior Credit Agreement, dated May 27, 2016.

The Third Amended Credit Agreement provided the Company with a $145,000 senior secured credit facility, consisting of a $115,000 term loan (the “Third Term Loan”) and a $30,000 revolving credit facility.

The Third Amended Credit Agreement provided the Company with a $145.0 million senior secured credit facility, consisting of a $115.0 million term loan and a $30.0 million revolving credit facility.

A portion of the proceeds from the Third Amended Credit Agreement were used for the Company’s acquisition of NauticStar.

The Third Amended Credit Agreement bore interest, at the Company’s option, at either the prime rate plus an applicable margin ranging from 0.75% to 1.75% or at an adjusted LIBOR plus an applicable margin ranging from 1.75% to 2.75%, in each case based on the Company’s senior leverage ratio.

Based on the Company’s senior leverage ratio for the fiscal year ended June 30, 2018, the applicable margin for loans accruing interest at the prime rate was 1.0% and the applicable margin for loans accruing interest at LIBOR was 2.0%.

In connection with the Third Amended Credit Agreement, the Company paid $1,240 of deferred debt issuance costs during the year ended June 30, 2018.

Current Credit Facility

On October 1, 2018, the Company entered into a Fourth Amended and Restated Credit and Guaranty Agreement with a syndicate of certain financial institutions (the “Fourth Amended Credit Agreement”).

The Fourth Amended Credit Agreement replaced the Company’s Third Amended and Restated Credit Agreement, dated October 2, 2017.

The Fourth Amended Credit Agreement provides the Company with a $190,000 senior secured credit facility, consisting of a $75,000 term loan, and an $80,000 term loan (together, the “Term Loans”), and a $35,000 revolving credit facility (the “Revolving Credit Facility”).

Proceeds from the $80,000 term loan were used to fund the Crest acquisition.

The Fourth Amended Credit Agreement provides the Company with a $190.0 million senior secured credit facility, consisting of a $75.0 million term loan, and an $80.0 million term loan (together, the “Term Loans”), and a $35.0 million revolving credit facility (the “Revolving Credit Facility”).

Proceeds from the $80.0 million term loan were used to fund the Crest acquisition.

The Fourth Amended Credit Agreement is secured by substantially all the assets of the Company.

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The Term Loans will mature and all remaining amounts outstanding thereunder will be due and payable on October 1, 2023.

In connection with the Fourth Amended Credit Agreement, the Company paid $729 of deferred debt issuance costs during the year ended June 30, 2019.

Maturities for the Term Loans subsequent to June 30, 2019 are as follows:

Fiscal years ending June 30,

The Fourth Amended Credit Agreement bears interest, at the Company’s option, at either the prime rate plus an applicable margin ranging from 0.5% to 1.5% or at an adjusted LIBOR rate plus an applicable margin ranging from 1.5% to 2.5%, in each case based o n the Company’s senior leverage ratio.

Based on the Company’s senior leverage ratio as of June 30, 2019 , the applicable margin for loans accruing interest at the prime rate is 0.75 % and the applicable margin for loans accruing interest at LIBOR is 1.75 %.

Amendment to Fourth Amended Credit Agreement

On May 7, 2020, the Company entered into Amendment No.

3 to the Fourth Amended Credit Agreement (the “Amendment”).

The changes effected by the Amendment include, among others, the temporary removal and replacement of the Company’s financial covenants, the addition of a 50 basis point floor on LIBOR, modifications to the range of applicable LIBOR and prime interest rate margins, and a revision of the Total Net Leverage Ratio calculation.

Under the Amendment, the Total Net Leverage Ratio covenant and Fixed Charge Coverage Ratio covenant of the Fourth Amended Credit Agreement are temporarily replaced with three separate covenants:

(i) an Interest Coverage Ratio, (ii) a Minimum Liquidity threshold, and (iii) a Maximum Unfinanced Capital Expenditures limitation (the “Package of Financial Covenants”).

The Package of Financial Covenants are in place through the quarter ended March 31, 2021, at which time the Total Net Leverage Ratio covenant and Fixed Charge Coverage Ratio covenant will be reinstated and the Package of Financial Covenants will sunset, and with the minimum liquidity covenant being tested on the last day of each fiscal month through May 31, 2021.

In addition, the Total Net Leverage Ratio calculation was temporarily revised to include all unrestricted cash balances, without limitation, until June 30, 2021.

Pursuant to the Amendment, the Company’s debt bore interest at LIBOR, subject to a 50 basis point floor, plus 3.25% through June 30, 2020.

Beginning on July 1, 2020, the applicable margin, at the Company’s option, is at either the prime rate plus an applicable margin ranging from 0.5% to 2.25% or at an adjusted LIBOR rate plus an applicable margin ranging from 1.5% to 3.25%, in each case based on the Company’s Total Net Leverage Ratio.

As of June 30, 2020 and 2019, the effective interest rate on borrowings outstanding was 3.75% and 4.48%, respectively.

During the year ended June 30, 2019, the Company made voluntary prepayments on the Term Loans of $32,660, using cash generated from operations.

As of June 30, 2019 and 2018, the Company’s unamortized debt issuance costs related to the Term Loans were $1,608 and $1,500, respectively.

These costs are being amortized over the term of the Fourth Amended Credit Agreement.

As of June 30, 2019, the Company had no borrowings outstanding on its Revolving Credit Facility and the availability under the Revolving Credit Facility was $35,000.

The Company’s unamortized debt issuance costs related to the Revolving Credit Facility was $451 and $383 as of June 30, 2019 and 2018, respectively.

As of June 30, 2019, the Company was in compliance with all of its debt covenants under its Fourth Amended Credit Agreement.

Earnings from continuing operations before income taxes and equity by jurisdiction were all in the U.S.

except for income of $70 and $112 and a loss of $53 in 2019, 2018 and 2017, respectively.

Revolving Credit Facility

On March 19, 2020, the Company drew $35.0 million on its Revolving Credit Facility as a precautionary measure in order to increase its cash position and preserve financial flexibility in light of uncertainty in the global markets resulting from the COVID-19 Pandemic.

As of June 30, 2020, the Company had $10.0 million of borrowings outstanding on its Revolving Credit Facility and the availability under the Revolving Credit Facility was $25.0 million.

All amounts outstanding under the Revolving Credit Facility mature in October 2023.

As of June 30, 2020, the Company was in compliance with its financial covenants under the Amendment to the Fourth Amended Credit Agreement.

Maturities for the Term Loans and Revolving Credit Facility subsequent to June 30, 2020 are as follows:

Earnings before income taxes by jurisdiction were all in the U.S.

except for income of approximately $0.1 million during each of the years ended June 30, 2020, 2019 and 2018.

For the years ended June 30, the components of the provision for income taxes are as follows:

For the Years Ended June 30,

Current income tax expense:

Benefit of operating loss carryforwards

Benefit of current year tax credits

Total current tax expense

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Total deferred tax (benefit) expense

Income tax expense

Income tax (benefit) expense

The difference between the statutory and the effective federal tax rate for the periods below is attributable to the following:

For the Years Ended June, 30

Statutory income tax rate

State taxes (net of federal income tax benefit and valuation allowance)

Change in valuation allowance

Revalue of deferred taxes for change in federal tax rate

Uncertain tax positions

Change in valuation allowance

Permanent differences

Uncertain tax positions

Effective income tax rate

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Deferred tax assets:

Goodwill and other intangible asset basis difference

Warranty reserves

Intangible asset basis difference

Repurchase agreements

Accrued selling

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Stock compensation

Repurchase agreements

State net operating loss

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Deferred tax liabilities:

Intangible asset basis difference

Total deferred tax liabilities

Net deferred tax assets (liabilities)

Noncurrent deferred tax assets (liabilities)

Net deferred tax assets (liabilities)

The Tax Cuts and Jobs Act (“Tax Reform Act”), which became effective December 22, 2017, overhauls U.S.

Net deferred tax assets

On March 27, 2020, President Trump signed into law the Coronavirus Aid, Relief, and Economic Security Act (H.R.

748) (the “CARES Act”).

Among the changes to the U.S.

federal income tax rules, the CARES Act included a revision to depreciation rules enacted as part of the Tax Cuts and Jobs Act of 2017.

In addition to impacting the current fiscal year, the CARES Act results in the ability to retroactively apply these regulations to certain assets placed in service during the years ended June 30, 2018 and 2019.

The Company has evaluated the impacts of the aforementioned provisions and incorporated the necessary changes to tax depreciation methods.

We have not identified any material effect on results of operations, financial condition, or cash flows.

The Tax Cuts and Jobs Act (“Tax Reform Act”), which became effective December 22, 2017, overhauled U.S.

corporate income tax law by lowering the U.S.

federal corporate income tax rate from 35% to 21% (blended rate in year one for fiscal year filers), implementing a territorial tax system, imposing a one time “deemed repatriation” tax on all untaxed offshore earnings, and adding/modifying/deleting several major tax deductions significant to the Company.

The Company’s deferred tax liabilities decreased $647 in fiscal 2018 from the impact of the corporate tax rate change from the Tax Reform Act.

The Company has state net operating loss (NOL) carryforwards of $2,785 that expire in varying years ranging from June 30, 2024 to June 30, 2029, and foreign NOL carryforwards of $376 that can be carried forward indefinitely.

As of June 30, 2020, the Company has state net operating loss (NOL) carryforwards of $0.3 million that expire in varying years ranging from June 30, 2024 to June 30, 2029, and foreign NOL carryforwards of $0.3 million that can be carried forward indefinitely.

However, the Company determined that it is more likely than not that the benefit from certain state and foreign NOL carryforwards will not be realized.

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Balance at June 30

Of this total, $ 1,934 and $ 1,308 as of June 30, 201 9 and 201 8 , respectively represent the amount of unrecognized tax benefits that, if recognized, would favorably affect the effective income tax rate in future periods.

The total amount of interest and penalties recorded in the consolidated statements of operations for the years ended June 30, 201 9 , and 201 8 was a n expense of $120, and a benefit of $288, respectively.

The amounts accrued for interest and penalties at June 30, 201 9 and 201 8 were $ 391 and $ 271 respectively and is presented in unrecognized tax positions on the accompanying consolidated balance sheets.

Of this total, $ 2.1 million and $ 1.9 million as of June 30, 2020 and 2019 , respectively , represent the amount of unrecognized tax benefits that, if recognized, would favorably affect the effective income tax rate in future periods.

The total amount of interest and penalties recorded in the consolidated statements of operations for the years e nded June 30, 2020 , and 2019 was a n expense of $ 0.3 million and $ 0.1 million , respectively.

The amounts accrued for interest and penalties at June 30, 2020 and 2019 were $ 0.7 million and $ 0.4 million respectively and is presented in unrecognized tax positi ons on the accompanying consolidated balance sheets.

In general, it is the practice and intention of the Company to reinvest the earnings of its non-U.S.

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The Company is no longer subject to examination by taxing authorities for years before June 30, 2017.

The Company expects the total amount of unrecognized benefits to increase by approximately $968 in the next twelve months.

The Company expects the total amount of unrecognized benefits to increase by approximately $0.2 million in the next twelve months.

The Company records unrecognized tax benefits as liabilities and adjusts these liabilities when its judgment changes as a result of the evaluation of new information not previously available.

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SHARE-BASED COMPENSATION

During the year ended June 30, 2015 the Company adopted the Amended and Restated MCBC Holdings, Inc.

2015 Incentive Award Plan (“2015 Plan”) in order to facilitate the grant of cash and equity incentives to non-employee directors, employees, and consultants of the Company and certain of its affiliates and to enable the Company and certain of its affiliates to obtain and retain the services of these individuals, which is essential to its long-term success.

On July 16, 2015 the Board amended and restated the 2015 Plan which provided that the aggregate number of shares available to be issued thereunder was 220,723.

On July 22, 2015, the Company consummated an 11.139-for-1 stock split in connection with the Company’s initial public offering (“Stock Split”).

In accordance with the terms of the 2015 Plan, the Stock Split increased the shares available for issuance commensurately, to 2,458,633 shares.

The Plan provides for the grant of stock options, including incentive stock options, and nonqualified stock options (“NSOs”), restricted stock, dividend equivalents, stock payments, restricted stock units, restricted stock awards (“RSAs”), deferred stock, deferred stock units, performance awards, stock appreciation rights, performance stock units (“PSUs”), and cash awards.

The 2015 Incentive Award Plan (“2015 Plan”) provides for the grant of stock options, including incentive stock options, and nonqualified stock options (“NSOs”), restricted stock, dividend equivalents, stock payments, restricted stock units, restricted stock awards (“RSAs”), deferred stock, deferred stock units, performance awards, stock appreciation rights, performance stock units (“PSUs”), and cash awards.

As of June 30, 2020, there were 1,485,683 shares available for issuance under the 2015 Plan.

The following table presents the components of share-based compensation expense by award type for the years ended June 30, 2020, 2019 and 2018.

Restricted stock awards

Beginning in fiscal year 2017, all RSAs granted to non-employees vest over the remainder of that fiscal year, and all RSAs granted to employees vest over a period of between one to three years.

Generally, non-vested RSAs are forfeited if employment is terminated prior to vesting.

Performance stock units

Stock options

Share-based compensation expense

Adjustment to Share-Based Compensation

In conjunction with the resignation of an executive officer in October 2019, approximately $0.5 million of share-based compensation expense recognized in prior periods was reversed during fiscal 2020 for RSAs and PSUs that were forfeited.

Additionally, based upon current economic trends, the probability of attaining the performance criteria of the PSUs has been lowered.

The amount of compensation cost the Company recognizes over the requisite service period is based on the Company’s best estimate of the achievement of the performance conditions.

The amount of compensation expense is adjusted on a cumulative basis;

therefore, this adjustment lowered the amount of share-based compensation expense recognized during the year ended June 30, 2020.

The following table presents the income tax benefit related to share-based compensation expense recognized by award type.

Restricted stock awards

Performance stock units

Stock options

Share-based compensation expense

Restricted Stock Awards

Beginning in the year ended June 30, 2018, all RSAs granted to non-employee directors vest over the remainder of that fiscal year, and all RSAs granted to employees vest over a period of between one to three years.

Generally, non-vested RSAs are forfeited if employment

is terminated prior to vesting.

RSAs are granted at a per share fair value equal to the market value of the Company’s common stock on the grant date.

The Company recognizes the cost of non-vested RSAs ratably over the requisite service period.

During the years ended June 30, 2019, 2018 and 2017, the Company recognized $913, $616, and $321, respectively, of compensation expense for non-vested RSAs.

The related income tax benefit recognized during the years ended June 30, 2019, 2018 and 2017 was $217, $190, and $121, respectively.

The fair value of RSAs vested during the years ended June 30, 2019, 2018, and 2017 was $713, $434, and $240, respectively.

The Company recognizes the cost of no n-vested RSAs ratably over the requisite service period.

The total grant date fair value of RSAs vested during the years ended June 30, 2020, 2019, and 2018 was $1.0 million , $0.7 million and $0.4 million, respectively.

A summary of RSA activity for the years ended June 30, 2020, 2019 and 2018, is as follows:

Number of Restricted Stock Awards

Weighted Average Grant Date Fair Value

Total Non-vested Restricted Stock Awards at June 30, 2017

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Total Non-vested Restricted Stock Awards at June 30, 2020

As of June 30, 2019, there was $764 of total unrecognized compensation expense related to non-vested RSAs.

As of June 30, 2020, there was $1.2 million of total unrecognized compensation expense related to non-vested RSAs.

The Company expects this expense to be recognized over a weighted average period of 1.71 years.

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The TSR modifier estimate is determined by using a Monte Carlo Simulation model, which considers the likelihood of all possible outcomes of long-term market performance.

Compensation expense related to non-vested PSUs is recognized ratably over the performance period.

During the years ended June 30, 2019, 2018 and 2017, the Company recognized $563, $355, and $150, respectively, of compensation expense for non-vested PSUs.

The related income tax benefit recognized during the years ended June 30, 2019, 2018 and 2017 was $134, $110, and $56, respectively.

The fair value of PSUs vested during the year ended June 30, 2019 was $384.

No PSUs vested during the years ended June 30, 2018 and 2017.

The amount of compensation cost the Company recognizes over the requisite service period is based on management’s best estimate of the achievement of the performance criteria.

The fair value of PSUs vested during the year ended June 30, 2020 and 2019 was $0.2 million and $0.4 million.

No PSUs vested during the years ended June 30, 2018.

A summary of PSU activity for the years ending June 30, 2020 , 2019 and 2018 , is as follows:

Number of Performance Stock Units

Weighted Average Grant Date Fair Value

Total Non-vested Performance Stock Units at June 30, 2017

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Total Non-vested Performance Stock Units at June 30, 2020

As of June 30, 2019, there was $750 of total unrecognized compensation expense related to non-vested PSUs.

As of June 30, 2020, there was $0.2 million of total unrecognized compensation expense related to non-vested PSUs.

The Company expects this expense to be recognized over a weighted average period of 2.0 years.

Nonqualified Stock Options

In July 2015, the Company granted 137,786 NSOs to certain employees at an option price equal to the $15.00 per share of the Company’s common stock, which was the initial public offering price.

These NSOs vested in four equal annual installments on each of the first four grant date anniversaries.

Pursuant to the terms of the 2015 Plan, the exercise price of options were reduced by $4.30, the amount of the special cash dividend paid on June 10, 2016, from an exercise price of $15.00 to an exercise price of $10.70.

The other terms of the options remain unchanged.

The Company estimated the grant date fair value of stock options using the Black-Scholes pricing model assuming a risk-free interest rate of 1.93%, an expected term of 6.25 years, no dividend yield and a volatility rate of 56.7%.

The Company determined that it did not have sufficient information on which to base a reasonable and supportable estimate of expected volatility of its share price, because of limited or no active stock transactions with third parties.

Therefore, the Company elected to use the calculated value method.

Under this method, the Company used comparable public companies to estimate expected volatility.

The Company used historical data to estimate option exercise and post-vesting termination behavior.

The risk-free interest rate for the expected term of the option was based on the U.S.

Treasury yield curve in effect at the time of the grant.

During the years ended June 30, 2019, 2018 and 2017, the Company recognized $201, $215, and $240, respectively, of compensation expense for non-vested NSOs.

The related income tax benefit recognized during the years ended June 30, 2019, 2018 and 2017 was $48, $66, and $91, respectively.

The fair value of NSOs vested during the years ended June 30, 2019, 2018, and 2017 was $215, $215, and $253, respectively.

In July 2015, the Company granted 137,786 NSOs to certain employees.

As of July 2019, all outstanding options were fully vested and exercisable.

The fair value of NSOs vested during each of the years ended June 30, 2020, 2019, and 2018 was $0.2 million.

A summary of NSO activity for the years ending June 30, 2020, 2019, and 2018 is as follows:

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Operating Leases

The Company leases certain equipment as well as the Crest production facility in Owosso, Michigan under operating lease agreements expiring through 2029.

Rental expense for the years ended June 30, 2019, 2018, and 2017 was $712, $666, and $603, respectively.

Future minimum rental payments under all non-cancelable operating leases with remaining lease terms in excess of one year at June 30, 2019, are as follows:

Fiscal years ending June 30,

and thereafter

The Company has lease agreements for certain personal and real property.

Leases with an initial lease term of 12 months or less are not recorded on the balance sheet.

Our lease agreements do not include any significant renewal options.

Our lease agreements do not contain any material residual value guarantees or material restrictive covenants.

Upon adoption of ASC 842 on July 1, 2019, the Company’s most significant lease was for the Crest manufacturing facility, which was classified as an operating lease.

This lease included a purchase option for the Company to acquire the premises.

During the three months ended September 29, 2019, the decision was made to exercise the purchase option which resulted in $2.8 million of operating lease assets and liabilities being reclassified to finance lease assets and liabilities on the September 29, 2019 condensed consolidated balance sheet.

In addition, the decision to exercise the purchase option resulted in the remeasurement of the related lease balances which added $1.3 million of additional finance lease assets and finance lease liabilities to the September 29, 2019 condensed consolidated balance sheet.

In accordance with the purchase option, on October 24, 2019 the Company completed the purchase of the Crest manufacturing facility for $4.1 million.

Upon completion of this purchase, the Company recognized approximately $4.1 million in Property, plant and equipment, net and derecognized approximately $4.1 million of both Finance lease assets and Accrued expenses and other current liabilities.

The purchase price of the Crest Facility was determined by appraisal and negotiation between the Company and the seller, whose minority ownership included a member of the Crest management team.

The Company funded the purchase by utilizing cash from operations.

Total lease cost, including immaterial amounts of variable and short-term lease cost, for the year ended June 30, 2020 was $0.5 million and was primarily recognized in Cost of sales.

As of June 30, 2020, the total weighted-average discount rate and remaining lease term for the Company's operating leases were 4.73% and 2.26 years, respectively.

For the year ended June 30, 2020, total operating cash flows related to operating leases were $0.5 million.

As of June 30, 2020, future payments due under the Company’s operating leases total $0.5 million and are immaterial in each of the next five years.

Prior to the adoption of ASC 842, future minimum rental payments under all non-cancelable operating leases with remaining lease terms in excess of one year at June 30, 2019, were as follows:

Repurchase Obligations

Under certain conditions, the Company is obligated to repurchase new inventory repossessed from dealerships by financial institutions that provide credit to boat dealerships.

Under the terms of these repurchase agreements, the Company is obligated to repurchase inventory repossessed by these financial institutions for a period ranging up to 30 months from the date of the original sale of the products to the respective dealers.

Repossession of products by the financial institutions normally occurs when a dealer goes out of business or defaults with a lender.

The maximum obligation of the Company under such floor plan agreements totaled approximately $229,744 as of June 30, 2019.

Under certain conditions, the Company is obligated to repurchase new inventory repossessed from dealerships by financial institutions that provide credit to the Company’s dealers.

See Note 1 for more information regarding the terms and accounting policies related to this obligation.

The maximum obligation of the Company under such floor plan agreements totaled approximately $131.4 million as of June 30, 2020.

We incurred no material impact from repurchase events during the years ended June 30, 2020, 2019, and 2018.

The Company recorded a repurchase liability of $1,936 and $1,265 as of June 30, 2019 and 2018, respectively, after giving effect to proceeds anticipated to be received from the resale of those products to alternative dealers, and taking into consideration the credit quality of the dealers.

The Company recorded a repurchase liability of $1.1 million and $1.9 million as of June 30, 2020 and 2019, respectively.

Purchase Commitments

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This contract makes this vendor the only supplier to MasterCraft for in-board engines and expires June 30, 2023.

The Company is

obligated to purchase a minimum number of engines for each model year under this contract .

The Company could also be required to pay a penalty to this vendor in order to maintain exclusivity if annual purchases under the agreement fail to meet a certain threshold.

The Company is obligated to purchase a minimum number of engines for each model year under this contract.

The Company could also be required to pay a penalty to this vendor in order to maintain exclusivity if annual purchases under the agreement fail to meet a certain volume threshold.

Legal Proceedings

The Company is involved in certain claims and legal actions arising in the ordinary course of business.

In the opinion of management, the ultimate disposition of these matters is not expected to have a material adverse effect on the Company’s financial condition or results of operations.

In the opinion of management, the ultimate disposition of these matters is not expected to have a material adverse effect on the Company’s financial con dition , results of operations or cash flows .

EARNINGS PER SHARE

The factors used in the earnings per share computation are as follows:

Weighted average common shares — basic

Net income (loss)

Weighted average shares — basic

Dilutive effect of assumed exercises of stock options

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Weighted average outstanding shares — diluted

Basic earnings per share

Diluted earnings per share

The calculation of dilutive earnings per share for the years ended June 30, 2019, 2018, and 2017, exclude 10,681, 25,908, and 100,247 potentially dilutive stock options and restricted share awards/units which had the effect of being anti-dilutive.

Basic net income (loss) per share

Diluted net income (loss) per share

For the year ended June 30, 2020, the dilutive effect of approximately 45,000 outstanding RSAs, PSUs and NSOs have been excluded from the calculation of diluted earnings per share as the effect would have been anti-dilutive because of the net loss for the year ended June 30, 2020.

For the years ended June 30, 2019 and 2018, an immaterial number of shares were excluded from the computation of diluted earnings per share as the effect would have been anti-dilutive.

SEGMENT INFORMATION

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The Company’s segments are defined by the Company’s operational and reporting structures.

MasterCraft Segment

The MasterCraft segment produces boats under two product brands, MasterCraft and Aviara, at its Vonore, Tennessee facility.

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Production of Aviara boats began during the year ended June 30, 2019 and the Company began selling these boats in July 2019.

NauticStar Segment

The NauticStar segment produces boats at its Amory, Mississippi facility.

NauticStar’s boats are primarily used for saltwater fishing and general recreational boating.

Crest Segment

The Crest segment produces pontoon boats at its Owosso, Michigan facility.

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All material corporate costs are allocated to the MasterCraft segment.

Sales outside of North America accounted for 5.2%, 7.5%, and 9.1% of the Company’s net sales for the years ended June 30, 2019, 2018, and 2017, respectively.

The Company had no significant concentrations of sales to individual dealers or countries outside of North America during the years ended June 30, 2019 and 2018.

The following tables present selected financial information for the Company’s reportable segments for the yea r s ended June 30, 201 9 , and 2018 .

Year Ended June 30, 2019

Operating income

Selected financial information for the Company’s reportable segments was as follows:

For the Year Ended June 30, 2020

Operating income (loss)

Depreciation and amortization

Goodwill and other intangible asset impairment

Purchases of property and equipment

Year Ended June 30, 2018

Operating income

Purchases of property, plant and equipment

For the Year Ended June 30, 2019

Operating income (loss)

Depreciation and amortization

Purchases of property and equipment

June 30, 2019

June 30, 2018

Goodwill and other intangible asset impairment

Purchases of property, plant and equipment

For the Year Ended June 30, 2018

NauticStar (b)

Operating income (loss)

Depreciation and amortization

Purchases of property, plant and equipment

(a) Crest was acquired on October 1, 2018.

(b) NauticStar was acquired on October 2, 2017.

The following table presents total assets for the Company’s reportable segments as of June 30, 2020, and 2019.

QUARTERLY FINANCIAL REPORTING (UNAUDITED)

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Due to effects of rounding, the quarterly results presented may not sum to the fiscal year results presented.

Quarter Ended

Fiscal Quarter Ended

Fiscal Year Ended

June 30, 2019

March 31, 2019

December 30, 2018

September 29,

June 30, 2019

Goodwill and other intangible asset impairment (a)

Operating income (loss)

Net income (loss)

Basic earnings per common share (loss)

Diluted earnings per common share (loss)

Weighted average shares used for computation of:

Basic earnings (loss) per common share

Diluted earnings (loss) per common share

Quarter Ended

Fiscal Year Ended

June 30, 2018

April 1, 2018

December 31, 2017

October 1, 2017

June 30, 2018

Operating income

Weighted average shares used for computation of:

Basic earnings per common share

Diluted earnings per common share

Fiscal Quarter Ended

Fiscal Year Ended

September 30,

Goodwill and other intangible asset impairment (a)

Operating income (loss)

Net income (loss)

Basic earnings (loss) per common share

Diluted earnings (loss) per common share

Weighted average shares used for computation of:

1 unchanged sentence

Diluted earnings per common share

(a) Goodwill and other intangible asset impairment charges are discussed in Note 6 .

(b) Crest was acquired on October 1, 2018.

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 9A. Controls and Procedures