What changed in this filing

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Item 1. Business

2022-09-09 compared with 2021-09-02 · 59 added, 56 removed, 133 unchanged (46% of the section changed)

We are a leading designer, manufacturer, and marketer of recreational powerboats sold under a diversified portfolio of four brands, MasterCraft, NauticStar, Crest, and Aviara.

We are a leading designer, manufacturer, and marketer of recreational powerboats sold under a diversified portfolio of four brands, MasterCraft, Crest, NauticStar, and Aviara.

Through our four brands, we have leading market share positions in three of the fastest growing categories of the powerboat industry, ski/wake boats, outboard saltwater fishing, and pontoon boats, while entering the large, growing luxury day boat segment.

As a leader in recreational marine, we strive to deliver the best on-water experience through innovative, high-quality products with a relentless focus on the consumer.

Our strategy is centered on four key pillars:

Consumer Experience:

Delivering the best experience throughout the life-cycle of the consumer journey;

Digital Marketing:

Accelerating consumer acquisition and retention by activating a stronger, more consumer-driven digital marketing strategy;

Operational Excellence:

Providing best-in-class products to consumers at an exceptional value;

Developing a high-performing work organization and work environment that is consumer-focused and attracts and retains superior employees.

MasterCraft Segment

Our MasterCraft segment consists of our MasterCraft brand, which manufactures premium ski/wake boats, and our Aviara brand, which manufactures luxury day boats.

Our MasterCraft segment consists of our MasterCraft brand, which manufactures premium ski/wake boats.

The MasterCraft brand was founded in 1968 and evolved over the next 50-plus years to become the most award-winning ski/wake boat manufacturer in the world.

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We work tirelessly every day to maintain this iconic brand reputation.

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

Introduced in February 2019, Aviara is currently focused on models between 30 feet and 40 feet in length and currently features three models utilizing both outboard and sterndrive propulsion.

Aviara boats feature distinct European styling and offer an elevated open water experience by fusing progressive style and effortless comfort in its modern luxury vessels.

NauticStar Segment

Our NauticStar segment consists of our NauticStar brand, which manufactures saltwater fishing boats, deck boats, and bay boats designed for a variety of uses, including recreational and competitive sport fishing in freshwater lakes or saltwater, and general recreational enjoyment.

NauticStar participates in the third-fastest growing category in the powerboat industry.

NauticStar, which we acquired in October 2017, was founded in 2002.

We believe NauticStar has a reputation for reliability, quality and consistency, with a loyal network of dealers and consumers including professional and sport fishermen, and recreational and pleasure boating enthusiasts.

Crest Segment

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Crest’s long-standing reputation for high-quality, standard features and content, and innovation provides Crest with strong dealer and consumer bases in its core geographic markets.

Unless the context otherwise requires, “MasterCraft,” “NauticStar,” and “Crest,” as used herein, refers to our segments as described above.

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

NauticStar Segment

NauticStar participates in the third-fastest growing category in the powerboat industry.

NauticStar, which we acquired in October 2017, was founded in 2002.

On August 9, 2022, we announced the Board of Directors was evaluating strategic alternatives for our NauticStar business, including a wide range of available alternatives to maximize shareholder value, with the intention of exiting the NauticStar business.

On September 2, 2022, we sold the NauticStar business.

Pursuant to the terms of the purchase agreement, substantially all of the assets of NauticStar were sold, including, among other things, all of the issued and outstanding membership interests in its wholly-owned subsidiary NS Transport, LLC, all owned real property, equipment, inventory, intellectual property and accounts receivable, and the purchaser assumed certain liabilities of NauticStar, including, among other things, product liability and warranty claims.

Aviara Segment

Our Aviara segment consists of our Aviara brand, which manufactures luxury day boats.

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

Introduced in February 2019, Aviara is currently focused on models between 30 feet and 40 feet in length and currently features three models utilizing both outboard and sterndrive propulsion.

Aviara boats feature distinct European styling and offer an elevated open water experience by fusing progressive style and effortless comfort in its modern luxury vessels.

Unless the context otherwise requires, “MasterCraft,” “Crest,” “NauticStar,” and “Aviara,” as used herein, refers to our segments as described above.

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

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

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

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

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

Crest’s pontoon boats are designed to offer consumers the best in luxury, style and performance without compromise across a diverse model lineup ranging in length from 20 to 29 feet.

The Signature Line is home to Crest’s Classic models.

The Premium Line boasts three Caribbean models with sleek lines, available tower options, unique color combinations and top-quality construction.

The Ultimate Luxury Line represents the pinnacle of lavish amenities, featuring the Continental, Continental NX, and Savannah models.

This lineup anticipates every need with thoughtful options, an industry-first integrated dual windshield and premium upholstery and audio upgrades.

Crest’s retail prices range from approximately $35,000 to $220,000.

Our NauticStar portfolio of bay boats, sport deck boats and offshore boats are designed for a variety of uses, including recreational and competitive sport fishing in freshwater lakes or saltwater, and general recreational enjoyment.

NauticStar’s bay boats and offshore boats are geared towards the consumer seeking unmatched quality and features for fishability and family friendly comfort.

The sport deck boat line caters to consumers seeking the drive and ride of a V-hull, large capacity, and the styling and efficiency of a runabout.

NauticStar’s retail prices range from approximately $50,000 to $275,000.

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

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

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All models are available in either outboard or sterndrive propulsion, and Aviara’s retail prices range from approximately $430,000 to over $1,000,000.

The AV32 and AV36 began selling in fiscal 2020 and fiscal 2021, respectively, and the AV40 is expected to begin selling in fiscal 2022.

The AV32, AV36, and AV40 began selling in fiscal 2020, fiscal 2021, and fiscal 2022, respectively.

In addition, we believe there will be significant model expansion opportunities for Aviara.

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

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

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

NauticStar’s retail prices range from approximately $40,000 to $200,000.

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

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

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

Crest’s pontoon boats are designed to offer consumers the best in luxury, style and performance without compromise across a diverse model lineup ranging in length from 20 to 29 feet.

Crest’s retail prices range from approximately $30,000 to $200,000.

Our Dealer Network

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In North America, our MasterCraft brand had a total of 112 dealers across 152 locations as of June 30, 2022.

Our NauticStar brand had a total of 88 dealers across 100 locations in North America as of June 30, 2021.

Our Crest brand had a total of 132 dealers across 161 locations in North America as of June 30, 2022.

Our Aviara brand is sold through a distribution network consisting of one dealer with 77 locations.

Our NauticStar brand had a total of 110 dealers across 119 locations in North America as of June 30, 2022.

Our Aviara brand is sold through a distribution network consisting of one dealer with 79 locations as of June 30, 2022.

Outside of North America.

As of June 30, 2021, through our MasterCraft brand, we had a total of 40 international dealers and 40 locations and through our NauticStar brand we had one international dealer in one location.

Our Crest brand had a total of two

international dealers in two locations.

As of June 30, 202 2 , through our MasterCraft brand, we had a total of 41 international dealers and 41 locations .

Our Crest brand had two international dealers in two locations.

O ur NauticStar brand had two international dealer s in two location s .

Aviara had no international dealer s .

We define international dealers as those dealers with locations outside of North America.

We are prese nt in Europe, Australia, South America, Africa, Asia, including Hong Kong and the Middle East.

We generated 4.5%, 4.8%, and 5.2% our net sales outside of North America in fiscal 2021, 2020, and 2019, respectively.

We generated 5 .0 %, 4.

5 %, and 4.8 % of our net sales outside of North America in fiscal 202 2 , 202 1 , and 20 20 , respectively.

Dealer Relations

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

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

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

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

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

NauticStar boats are manufactured at our 200,000-square-foot facility located in Amory, Mississippi.

Crest boats are manufactured at our 150,000 square-foot facility located in Owosso, Michigan.

In October 2020, we purchased a 140,000-square-foot boat manufacturing facility in Merritt Island, Florida.

Aviara boats were manufactured in our Vonore, Tennessee facility until the third quarter of fiscal 2021 and are now manufactured solely at our Merritt Island, Florida facility.

NauticStar boats are manufactured at our 225,000 square-foot facility located in Amory, Mississippi.

Aviara boats are manufactured at our 140,000 square-foot facility in Merritt Island, Florida.

The rigorous and consumer-centric attention to detail in the design and manufacturing of our products results in boats of high quality which provides an exceptional on water experience across all of our brands.

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For our MasterCraft brand, Ilmor Engineering, Inc.

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

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

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

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

During the year ended June 30, 2021, Ilmor was our largest overall supplier.

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

During fiscal 2022, Ilmor was our largest overall supplier.

In addition to ski/wake and sterndrive engines, Ilmor’s affiliates produce engines used in a number of leading racing boats and race cars.

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

We work closely with Ilmor to remain at the forefront of

engine design, performance, and manufacturing.

We work closely with Ilmor to

remain at the forefront of engine design, performance, and manufacturing.

W e believe our long-term relationship with our engine supplier partners is a key competitive advantage.

We have and continue to see supply chain disruptions that we believe are caused by the dislocation in the labor and logistics markets as well as upstream supply challenges.

We have and continue to see supply chain disruptions that we believe are caused by evolving macroeconomic conditions, including, but not limited to, the dislocation in the labor and logistics markets, as well as upstream supply constraints.

However, we have been successful in targeting dual sourcing of some key materials and components to help mitigate risks related to supply constraints.

Research and Development, Product Development and Engineering

We are strategically and financially committed to innovation, as reflected in our dedicated product development and engineering groups and evidenced by our track record of new product and feature introduction.

Since June 30, 2020, the Company has approximately doubled the number of product development and engineering personnel, further solidifying our commitment to being the most consumer-centric and innovative company in our industry.

As of June 30, 2022, our product development and engineering group includes 60 professionals.

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

We currently hold 43 U.S.

patents and six foreign patents, including utility and design patents for our transom surf seating, our DockStar handling system, and our SurfStar surf system technology among numerous other innovations.

We currently hold more than 40 U.S.

patents and more than 10 foreign patents, including utility and design patents for our transom surf seating, our DockStar handling system, and our SurfStar surf system technology among numerous other innovations.

Provided that we comply with all statutory maintenance requirements, our patents are expected to expire between 2028 and 2040.

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and worldwide.

We also own in excess of 130 trademark registrations in various countries around the world, most notably for the MasterCraft, NauticStar, Crest, and Aviara names and/or logos, as well as numerous model names in MasterCraft’s Star Series, X, XT, and NXT product families, and we have several pending applications for additional registrations.

We also own in excess of 130 trademark registrations in various countries around the world, most notably for the MasterCraft, Crest, NauticStar, and Aviara names and/or logos, as well as numerous model names in MasterCraft’s Star Series, X, XT, and NXT product families, and we have several pending applications for additional registrations.

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

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Finally, we have registered more than 35 vessel hull designs with the U.S.

Copyright Office, the most recent of which will remain in force through 2027, and have 10 additional vessel hull designs pending.

Competitive Conditions and Position

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As of December 2021, based on Statistical Surveys, Inc.

(“SSI”) data, the top five brands accounted for over 75% of the ski/wake markets, approximately 55% for the pontoon market, and approximately 32% of the deck and saltwater fishing category.

(“SSI”) data with all states reporting, the top five brands accounted for approximately 72% of the ski/wake markets, approximately 52% for the pontoon market, and approximately 28% of the deck and saltwater fishing category.

Market participants also range from small, single-product businesses to large, diversified companies.

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As of December 202 1 , based on SSI data, the MasterCraf t brand has the #1 market share in the ski/wake category with 21.

As of December 2020, based on SSI data, the NauticStar brand has the #9 market share in the deck and saltwater fishing category with 4.1%.

As of December 202 1 , based on SSI data, the Crest brand has the # 9 market share in the pontoon category with 4.0 %.

As of December 202 1 , based on SSI data, the NauticStar brand has the # 8 market share in the deck and saltwater fishing category with 4.

As of December 202 1 , based on SSI data, the Aviara brand has the # 7 market share in the 30-foot to 4 3 -foot bowrider category with 5.7 %.

Human Capital Resources

We have approximately 1,500 employees as of June 30, 2021, of whom 750 work at our MasterCraft facility in Tennessee, 150 work at our Aviara facility in Florida, 300 work at our NauticStar facility in Mississippi, and 300 work at our Crest facility in Michigan.

We have grown our workforce by more than 600 employees during fiscal 2021 as we ramp up our operations to meet the demand for our products.

We have approximately 1,750 employees as of June 30, 2022, of whom 785 work at our MasterCraft facility in Tennessee, 360 work at our Crest facility in Michigan, 375 work at our NauticStar facility in Mississippi, and 230 work at our Aviara facility in Florida.

One of our four strategic priorities is developing a high-performing work organization and work environment that is consumer-focused and attracts and retains superior employees.

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We maintain clean, safe and healthy workplaces through our vigorous training programs and professional safety standards systems, including job hazard assessments and industrial hygiene and ventilation practices.

In 2022, we proudly completed a major milestone in workplace safety:

over two million safe hours worked without a lost time incident, which continues to accumulate.

Achieving two million safe hours worked without a lost time incident showcases the Company’s continuous commitment to safety, an essential element of the Company’s core values in delivering world-class boats.

Our compensation program is designed to facilitate high performance and generate results that will create value for our stockholders.

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

What changed 10-K

Item 1. Business