What changed in this filing

/stocks — the workspaceLOADING

Item 9A. Controls and Procedures

2022-09-09 compared with 2021-09-02 · 181 added, 286 removed, 700 unchanged (40% of the section changed)

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OTHER INFORMATION

On September 2, 2022, we completed the sale of our NauticStar business to certain affiliates of Iconic Marine Group, LLC (“Purchaser”) pursuant to the terms of an Asset Purchase Agreement, dated September 2, 2022 (the “Purchase Agreement”), by and between Nautic Star, LLC (“Seller”) and Purchaser.

Pursuant to the terms of the Purchase Agreement, Seller sold to Purchaser substantially all of the assets of NauticStar, 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 Purchaser assumed certain liabilities of NauticStar, including, among other things, product liability and warranty claims.

In connection with the sale, we expect to record a loss on sale between $20.0 million to $23.0 million.

DISCOLSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS

Not applicable.

DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.

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Financial Statements

Reports of Independent Registered Public Accounting Firms

Reports of Independent Registered Public Accounting Firm (PCAOB ID:

Consolidated Balance Sheets

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Credit Agreement, dated as of June 28, 2021, among MasterCraft Boat Holdings, Inc., the Lenders Party Thereto and JPMORGAN CHASE BANK, N.A., as Administrative Agent, Sole Bookrunner and Sole Lead Arranger and FIFTH THIRD BANK and BMO HARRIS BANK, N.A., as Co-Syndication Agents

Second Amendment to Credit 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

Rule 13a-14(a)/15d-14(a) Certification of Principal Executive Officer

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Inline XBRL Taxonomy Extension Label Linkbase Document

InlineXBRL Taxonomy Extension Presentation Linkbase Document

Inline XBRL Taxonomy Extension Presentation Linkbase Document

Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).

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

and subsidiaries (the "Company") as of June 30, 2021 and 2020, the related consolidated statements of operations, stockholders' equity, and cash flows, for each of the two years in the period ended June 30, 2021, 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, 2021 and 2020, and the results of its operations and its cash flows for each of the two years in the period ended June 30, 2021, in conformity with accounting principles generally accepted in the United States of America.

and subsidiaries (the "Company") as of June 30, 2022 and 2021, the related consolidated statements of operations, stockholders' equity, and cash flows, for each of the three years in the period ended June 30, 2022, 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, 2022 and 2021, and the results of its operations and its cash flows for each of the three years in the period ended June 30, 2022, in conformity with accounting principles generally accepted in the United States of America.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of June 30, 2022, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated September 8, 2022, expressed an unqualified opinion on the Company's internal control over financial reporting.

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We evaluated management’s ability to accurately estimate the accrued warranty liability by comparing the accrued warranty liability in the prior year to the actual product warranty claims paid in the current year.

We assessed management’s methodology and tested the valuation of the accrued warranty liability by developing an independent expectation for the accrual based on the historical amounts recorded as a percentage of sales and compared our expectation to the amounts recorded by management.

We further evaluated the completeness of the accrued warranty liability through inquiries of operational and executive management regarding knowledge of known product warranty claims or product issues and evaluated whether they were appropriately considered in the determination of the accrued warranty liability.

We evaluated the completeness of the accrued warranty liability through inquiries of operational and executive management regarding knowledge of known product warranty claims or product issues and evaluated whether they were appropriately considered in the determination of the accrued warranty liability.

We assessed management’s methodology and tested the valuation of the accrued warranty liability by developing an independent expectation for the accrual based on historical and current year warranty claims activity and any known trends in warranty claims or specific product issues, and compared our expectation to the amount recorded by management.

/s/ Deloitte & Touche LLP

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September 8, 2022

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 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 the year 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 the year ended June 30, 2019, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management.

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

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

/s/ BDO USA, LLP

Atlanta, Georgia

September 13, 2019

MASTERCRAFT BOAT HOLDINGS, INC.

AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

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Cash and cash equivalents

Accounts receivable, net of allowance of $ 115 and $ 247 , respectively

Accounts receivable, net of allowances of $ 274 and $ 115 , respectively

Income tax receivable

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Additional paid-in capital

Accumulated deficit

Retained earnings (accumulated deficit)

Total stockholders' equity

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Amortization of other intangible assets

Goodwill and other intangible asset impairment

Impairments (Notes 4 and 5)

Total operating expenses

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NET INCOME (LOSS)

EARNINGS (LOSS) PER SHARE:

NET INCOME (LOSS) PER SHARE:

WEIGHTED AVERAGE SHARES USED FOR COMPUTATION OF:

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CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

Retained Earnings

(Dollar amounts in thousands, except share data)

Balance at June 30, 2019

Adoption of accounting standard

Share-based compensation activity

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Share-based compensation activity

Net income (loss)

Balance at June 30, 2021

Share-based compensation activity (Note 10)

Share-based compensation activity

Repurchase and retirement of common stock

Balance at June 30, 2022

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Amortization of debt issuance costs

Goodwill and other intangible asset impairment

Loss on extinguishment of debt

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Prepaid expenses and other current assets

Income tax receivable

Accounts payable

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CASH FLOWS FROM INVESTING ACTIVITIES:

Payments for acquisitions, net of cash acquired

Purchases of property, plant and equipment

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Principal payments on revolving credit facility

Net cash (used in) provided by financing activities

Repurchase and retirement of common stock

Net cash used in financing activities

NET CHANGE IN CASH AND CASH EQUIVALENTS

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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;

MasterCraft Services, LLC;

MasterCraft Parts, Ltd.;

MasterCraft International Sales Administration, Inc.;

Aviara Boats, LLC;

Nautic Star, LLC;

NS Transport, LLC;

and Crest Marine, LLC.

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.”

Basis of Presentation and Principles of Consolidation — 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.

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

The consolidated financial statements include the accounts of MasterCraft Boat Holdings, Inc.

(“Holdings”) and its wholly owned subsidiaries from the dates of their acquisitions.

Holdings and its subsidiaries collectively are referred to herein as the “Company.” 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 in its subsidiaries, as of June 30, 2022 and 2021, and no material liabilities.

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Actual results could differ from those estimates.

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

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

Change in Reportable Segments — Beginning with the first quarter of fiscal 2022, our chief operating decision maker (“CODM”) began to manage our business, allocate resources, and evaluate performance based on the changes that were made in the Company’s management structure in connection with the transition of Aviara production to our Merritt Island, Florida facility.

As a result, the Company realigned its reportable segments to MasterCraft, Crest, NauticStar, and Aviara.

The Company has recast segment information for all prior periods presented.

Refer to Note 12 – Segment Information for further information on the Company’s reportable segments.

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

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For substantially all 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 business days of shipment.

The Company typically receives payment from the floor plan financing providers within 5 business days of shipment.

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

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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.

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.

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Shipping and handling costs includes those costs incurred to transport product to customers and internal handling costs, which relate to activities to prepare goods for shipment .

The Company has elected to account for shipping and handling costs associated with

outbound freight after control over a product has transferred to a customer as a fulfillment cost.

The Company has elected to account for shipping and handling costs associated with outbound freight after control over a product has transferred to a customer as a fulfillment cost.

The Company includes shipping and handling costs, including costs billed to customers, in Cost of sales in the consolidated statements of operations.

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Total purchases from this vendor were $ 45.0 million, $ 40.6 million, and $ 27.6 million for the years ended June 30, 2022, 2021, and 2020, respectively.

During the years ended June

30, 2022, 2021, and 2020, the Company purchased outboard engines for its Aviara boats and a majority of the engines for its Crest boats under a supply agreement with a single vendor .

Total purchases from this vendor were $ 36.2 million , $ 23.6 million , and $ 15.5 million for the years ended June 30, 2022, 2021, and 2020, respectively.

During the years ended June 30, 202 2 , 202 1 , and 20 20 , the Company purchased a majority of engines for its NauticStar boats under a supply agreement with one vendor.

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20 2 1 , and 20 20 , respectively .

During the years ended June 30, 2021, 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 $ 23.6 million , $ 15.5 million , and $ 20.4 million for the years ended June 30, 202 1, 20 20 , 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.

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Repairs and maintenance are charged to operations as incurred, and expenditures for additions and improvements that increase the asset’s useful life are capitalized.

Ranges of asset lives used for depreciation purposes are:

For the years ended June 30, 2022, 2021, and 2020, ranges of asset lives used for depreciation purposes are:

Buildings and improvements

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Furniture and fixtures

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

Goodwill and Other Intangible Assets — The Company does not amortize goodwill and other purchased intangible assets with indefinite lives, which are primarily related to trade names.

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.

The Company has three reporting units, MasterCraft, NauticStar, and Crest, which each relate to an operating segment as described in Note 13.

All of the Company’s goodwill assets relate to the MasterCraft reporting unit and all of the Company’s other intangible assets relate to each of the three reporting units.

The Company has four reporting units, MasterCraft, Crest, NauticStar, and Aviara, which each relate to an operating segment as described in Note 12.

As of June 30, 2022, all of the Company’s goodwill relates to the MasterCraft reporting unit and all of the Company’s other intangible assets relate to the MasterCraft and Crest reporting units.

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

The Company reviews goodwill for impairment annually, at its fiscal year-end annual impairment testing date, and whenever events or changes in circumstances indicate that the fair 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 be greater than their carrying values.

As part of the impairment tests, 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 be greater than their carrying values.

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 judgements 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.

The Company recognized no impairments related to goodwill for the year ended June 30, 2021.

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 impairment charges during each of those fiscal years (see Note 6).

The Company recognized $ 1.1 million and $ 44.4 million in goodwill impairment charges during the years ended June 30, 2022 and 2020, respectively (see Note 5).

Other Intangible Assets

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This method assumes the value of the trade name is the discounted cash flows of the amount that would be paid to third parties had the Company not owned the trade name and instead licensed the trade name from another company.

The basis for future sales projections for these methods are based on internal revenue forecasts by reporting unit, which the Company believes represent reasonable market participant assumptions.

The basis for future sales projections for these methods are internal revenue forecasts by reporting unit, which the Company believes represent reasonable market participant assumptions.

The future cash flows are discounted using an applicable Discount Rate as well as any potential risk premium to reflect the inherent risk of holding a standalone intangible asset.

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

The Company recognized no impairments related to other intangible assets for the year ended June 30, 2021.

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 reporting units were impaired.

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

The Company recognized $ 18.5 million and $ 12.0 million in other intangible asset impairment charges during the years ended June, 30, 2022 and 2020, respectively (see Note 5).

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.

A current expectation that, more likely than not, a long-lived asset (asset group) will be sold or otherwise disposed of significantly before the end of its previously estimated useful life will also trigger a review for impairment.

The Company performs its assessment by comparing the book value of the asset groups to the estimated future undiscounted cash flows associated with the asset groups.

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, 2021, 2020, and 2019.

The Company recognized $ 5.3 million in long-lived asset impairment charges during the year ended June 30, 2022, which adjusted the related assets to their estimated fair value (see Notes 4 and 5).

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

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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, 2021, 2020, and 2019 the Company incurred deferred financing costs of $ 0.6 million, $ 0.3 million, and $ 0.7 million, respectively.

For the years ended June 30, 2021, 2020, and 2019, the Company recorded related amortization expense of $ 0.6 million for each year.

Additionally, for the year ended June 30, 2021, the Company recognized a loss on early extinguishment of debt of $ 0.7 million related to the debt refinancing in fiscal 2021 (Note 8).

For the years ended June 30, 2021 and 2020, the Company incurred deferred financing costs of $ 0.6 million and $ 0.3 million, respectively.

For the years ended June 30, 2022, 2021, and 2020, the Company recorded related amortization expense of $ 0.2 million, $ 0.6 million, and $ 0.6 million, respectively.

Additionally, for the year ended June 30, 2021, the Company recognized a loss on early extinguishment of debt of $ 0.7 million related to the debt refinancing in fiscal 2021.

See Note 7 – Long-Term Debt for a discussion on debt issuance costs.

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

Leases — 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.

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

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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 10).

Non-recurring fair value measurements related to impairments of goodwill and other intangible assets and long-lived assets recorded in fiscal 2020 and 2022 are level 3 measurements.

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.

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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 $ 1.7 million, $ 1.2 million, and $ 1.2 million for the years ended June 30, 2021, 2020, and 2019, respectively.

The expense related to the defined contribution plan was $ 2.0 million, $ 1.7 million, and $ 1.2 million for the years ended June 30, 2022, 2021, and 2020, respectively.

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.

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.

Crest purchases fiberglass component parts from a supplier whose minority owner had been the same member of the Crest management team that had 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.

New Accounting Pronouncements Issued And 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 Company adopted this guidance for its fiscal year beginning July 1, 2020 .

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

Current Expected Credit Loss — In June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses (Topic 326) , which updated the ASC to use an impairment model that is based on expected losses rather than incurred losses.

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

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

New Accounting Pronouncements Issued But Not Yet Adopted

Income Taxes — In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740):

Income Taxes — In December 2019, the Financial Accounting Standards Board (the “FASB”) issued ASU 2019-12, Income Taxes (Topic 740):

Simplifying the Accounting for Income Taxes.

ASU 2019-12 simplifies the accounting for income taxes by removing certain exceptions to general principles in Income Taxes (Topic 740).

It also clarifies and amends existing guidance to improve consistent application.

It also clarifies and amends existing guidance to improve

consistent application.

The guidance is effective for fiscal years beginning after December 15, 2020.

We are currently evaluating the impact of the new guidance on our consolidated financial statements.

The adoption of this standard did not have an impact on the Company’s consolidated financial statements.

Reference Rate Reform — In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848):

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An entity may apply ASU 2020-04 as of any date from the beginning of an interim period that includes or is subsequent to March 12, 2020 through December 31, 2022.

The Company expects that the adoption of this guidance will not have a material impact on the Company’s financial position, results of operations or cash flows.

The adoption of this standard did not have an impact on the Company’s consolidated financial statements.

REVENUE RECOGNITION

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Other revenue

Year Ended June 30, 2019

For Year Ended June 30, 2020

Major Product Categories:

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Other revenue

(a) Crest was acquired on October 1, 2018

Sales outside of North America accounted for 4.5 %, 4.8 %, and 5.2 % of the Company’s net sales for the years ended June 30, 2021, 2020, and 2019, respectively.

On a consolidated basis, sales outside of North America accounted for 5.0 %, 4.5 %, and 4.8 % of the Company’s net sales for the years ended June 30, 2022, 2021, and 2020, 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, 2022, 2021, and 2020.

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See Note 1 for a description of the Company’s significant revenue recognition policies and Note 12 for a description of the Company’s segments.

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

Other current assets

Property, plant and equipment

Identifiable intangible assets (a)

Current liabilities

Fair value of assets acquired and liabilities assumed

Net cash consideration paid

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

See Note 6 for additional information.

Estimated Useful

Life (in years)

Definite-lived intangible assets:

Dealer network

Indefinite-lived intangible asset:

Total identifiable intangible assets

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.

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

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 had been the same member of the Crest management team that had 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 assumes that 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 fair value estimates on acquired tangible and intangible assets for the period.

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 not indicative of the results of operations that would have been achieved if the acquisition had taken place at the beginning of fiscal year 2019, or the results that may occur in the future:

Fiscal Year Ended

Basic earnings per share

Diluted earnings per share

Inventories consisted of the following:

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Total inventories

During 2021, the Company increased overall production levels, as well as increased safety stock as of June 30, 2021 to manage increased supply chain risks.

Raw materials and supplies have increased to support higher production volumes and to increase safety stock to manage supply chain risk.

PROPERTY, PLANT, AND EQUIPMENT

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Depreciation expense for the years ended June 30, 2022, 2021, and 2020 was $ 9.6 million, $ 7.7 million, and $ 6.6 million, respectively.

Merritt Island Facility

During October 2020, we completed the purchase of certain real property located in Merritt Island, Florida, including a boat manufacturing facility, for a purchase price of $ 14.2 million (the “Merritt Island Facility”).

We expanded our overall boat building capacity by moving all Aviara production to the Merritt Island Facility.

Additionally, removing Aviara production from our Vonore, Tennessee facility provided for an immediate increase in capacity and production for our MasterCraft brand.

During the fourth quarter of fiscal 2022, the Company identified an indication of impairment related to its NauticStar segment’s property, plant, and equipment.

After performing a recoverability test, the Company recognized an impairment charge of $ 5.3 million, which adjusted the related assets to their estimated fair value.

See Note 5 for further information related to the impairment analysis.

GOODWILL AND OTHER INTANGIBLE ASSETS

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

2020 Impairment Charges

In March 2020, the World Health Organization announced that the outbreak of the novel coronavirus had become a worldwide pandemic.

The resulting 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.

The impairment charges recorded within 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 within 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.

As of June 30, 2021, 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 within our MasterCraft segment or other intangible assets within each of our segments.

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 both June 30, 2021 and 2020, attributable to each of the Company’s reportable segments, were as follows:

As a result of this analysis, during the three months ended March 29, 2020, the Company recorded goodwill impairment charges totaling $ 36.2 million and $ 8.2 million and trade name impairment charges totaling $ 7.0 million and $ 5.0 million related to the Crest and NauticStar segments, respectively.

2022 Impairment Charges

Aviara Impairment Activity

Beginning with the first quarter of fiscal 2022, the Company realigned its reportable segments to MasterCraft, Crest, NauticStar, and Aviara.

Refer to Note 12 – Segment Information for further information on the Company’s reportable segments.

As a result of the change in segments, in accordance with ASC 350, Intangibles-Goodwill and Other, the Company reallocated the goodwill recorded in the MasterCraft reporting unit to the two separate MasterCraft and Aviara reporting units using a relative fair value approach.

Prior to realigning our segments, we evaluated our goodwill for impairment and determined no impairment existed as the fair value of our MasterCraft reporting unit, which was the only reporting unit containing goodwill, was in excess of its carrying amount.

In conjunction with the reallocation of goodwill, we tested the goodwill at our MasterCraft and Aviara reporting units for impairment using an income-based approach, specifically a discounted cash flow model.

The cash flow model included significant judgements and assumptions related to revenue growth and Discount Rates.

At the time of the impairment test, near-term operating losses generated by start-up inefficiencies negatively impacted the fair value of Aviara, causing the carrying value of the reporting unit to be in excess of the fair value.

Consequently, a $ 1.1 million goodwill impairment charge was recognized in the first quarter of fiscal 2022.

NauticStar Impairment Activity

Despite ongoing efforts to improve operational efficiency and throughput at our NauticStar reporting unit in order to improve sales volumes and yield more favorable margins, including the engagement of third-party consulting resources beginning in the third quarter, the NauticStar reporting unit recorded unplanned negative operating results in the fourth quarter.

These results, combined with the outlook for further supply chain disruptions, labor challenges, and higher costs from inflationary pressures, resulted in an impairment trigger in the fourth quarter related to the NauticStar reporting unit’s intangible and other long-lived assets.

In accordance with ASC 350, Intangibles – Goodwill and Other, we evaluated whether the carrying value of the NauticStar reporting unit’s indefinite-lived trade name intangible asset exceeded its fair value.

Based on our evaluation of projected future cash flows, we concluded that the trade name intangible asset of $ 8.0 million was fully impaired as of June 30, 2022.

In accordance with ASC 360-10, Property, Plant and Equipment – Impairment or Disposal of Long-Lived Assets (ASC 360), we then performed a probability-weighted undiscounted cash flow analysis for the asset group related to the NauticStar reporting unit that considered projected cash flows from continuing to operate the assets through their remaining estimated useful lives, a potential sale, and a potential exit of the business other than through a sale and concluded that the carrying value of the asset group was not recoverable.

The fair value of the finite-lived dealer network intangible asset was estimated using these cash flows, resulting in a full impairment of $ 10.5 million.

The fair value of the fixed assets, which primarily comprised of machinery and equipment, such as tooling, was estimated using liquidation values, resulting in an impairment charge of $ 5.3 million against the asset group’s fixed assets.

As a result of our impairment analyses, we recorded total impairment charges of $ 23.8 million related to the NauticStar reporting unit’s intangible and fixed assets.

Goodwill reallocation and impairment charges for the years ended June 30, 2022, 2021, and 2020, along with the carrying amounts of goodwill as of June 30, 2022 and 2021, attributable to each of the Company’s reportable segments, were as follows:

Goodwill, net at June 30, 2019

Goodwill, net at June 30, 2020 and 2021

Goodwill reallocation

Goodwill, net at June 30, 2022

As of June 30, 2022, 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 within our MasterCraft segment.

Accumulated Impairment Losses

Other Intangible Assets

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Total other intangible assets

See discussion above related to the intangible assets within our NauticStar segment.

Amortization expense related to Other intangible assets, net for years ended June 30, 2022, 2021 and 2020 was $ 4.0 million, $ 3.9 million, and $ 3.9 million, respectively.

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Accrued expenses and other current liabilities consisted of the following:

As of June 30,

Dealer incentives

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Accrued warranty liability activity was as follows:

For the Years Ended June 30,

Balance at the beginning of the period

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Long-term debt, net of current portion

Previously Existing 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 provided the Company with a $ 190.0 million senior secured credit facility, consisting of a $ 75.0 million term loan, an $ 80.0 million term loan, and a $ 35.0 million revolving credit facility.

Proceeds from the $ 80.0 million term loan were used to fund the Crest acquisition (see Note 3).

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 were 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 were in place through the quarter ended March 31, 2021, at which time the total net leverage ratio covenant and fixed charge coverage ratio covenant were reinstated and the Package of Financial Covenants sunsetted, 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.

On October 26, 2020, the Company entered into Amendment No.

4 and Joinder to the Fourth Amended Credit Agreement (the “Amendment No.

In conjunction with the new Merritt Island Facility purchase (see Note 5), the assets were organized in a new wholly-owned subsidiary of the Company.

The changes effected by Amendment No.

4 added this new subsidiary as a borrower under the Fourth Amended Credit Agreement.

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 1.50 % to 3.25 %, in each case based on the Company’s total net leverage ratio.

Current Credit Facility

On June 28, 2021, the Company entered into a credit agreement with a syndicate of certain financial institutions (the “Credit Agreement”).

The Credit Agreement provides the Company with a $ 160.0 million senior secured credit facility, consisting of a $ 60.0 million term loan (the “Term Loan”) and a $ 100.0 million revolving credit facility (the “Revolving Credit Facility”).

The Credit Agreement refinanced and replaced the Fourth Amended Credit Agreement.

The Credit Agreement refinanced and replaced the Fourth Amended Credit Agreement, which had been in place prior to the Credit Agreement and provided the Company with a $ 190.0 million senior secured credit facility, consisting of a $ 75.0 million term loan, and $ 80.0 million term loan, and a $ 35.0 million revolving credit facility.

The Credit Agreement is secured by a first priority security interest in substantially all of the Company’s assets.

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The Company is also required to pay a commitment fee for any unused portion of the revolving credit facility ranging from 0.15 % to 0.30 % based on the Company’s net leverage ratio.

As a result of entering into the Credit Agreement, the Company recognized a $ 0.7 million loss on early extinguishment of debt during the year ended June 30, 2021 related to unamortized debt issuance costs of the previously existing credit facility.

The Credit Agreement will mature and all remaining amounts outstanding thereunder will be due and payable on June 28, 2026.

As of June 30, 2022, the Company was in compliance with its financial covenants under the Credit Agreement.

As a result of entering into the Credit Agreement, the Company recognized a $ 0.7 million loss on early extinguishment of debt.

The remaining $ 0.5 million of unamortized deferred financing costs, plus additional capitalized amounts of $ 0.6 million are being amortized over the term of the Credit Agreement.

As of June 30, 2022 and 2021, the effective interest rate on borrowings outstanding was 2.94 % and 1.38 %, respectively.

On August 31, 2022, the Company entered into the Second Amendment to the Credit Agreement to obtain the necessary consents and waivers to the restrictions described above in the covenants of the Credit Agreement, as related to the sale of the NauticStar business on September 2, 2022, as discussed in Note 13.

Revolving Credit Facility

On March 19, 2020, the Company drew $ 35.0 million on its revolving credit facility under the Fourth Amended Credit Agreement 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 under its revolving credit facility.

The Company subsequently repaid all outstanding amounts during the three months ended October 4, 2020.

During October 2020, the Company borrowed $ 20.0 million under the revolving credit facility to fund the purchase of the Merritt Island Facility.

The Company subsequently repaid all outstanding amounts as of April 4, 2021.

In conjunction with the Credit Agreement entered into on June 28, 2021, the Company drew $ 33.7 million on its Revolving Credit Facility.

Drawn amounts were used to repay a same amount of outstanding borrowings under the term loans under the Fourth Amended Credit Agreement.

As of June 30, 2021, the Company had $ 33.7 million of borrowings outstanding on its Revolving Credit Facility and had remaining availability of $ 66.3 million.

As of June 30, 2022, the Company had repaid all outstanding borrowings under the Revolving Credit Facility and had remaining availability of $ 100.0 million.

Maturities for the Term Loan and Revolving Credit Facility subsequent to June 30, 2022 are as follows:

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Current income tax expense:

Benefit of current year tax credits

Benefit of operating loss carryforwards

Total current tax expense

Deferred tax expense (benefit):

Total deferred tax expense (benefit)

Deferred tax (benefit) expense

Total deferred tax (benefit) expense

Income tax expense (benefit)

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

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

Intangible asset basis difference

Warranty reserves

Accrued selling

Unrecognized tax benefits

Stock compensation

Repurchase agreements

State net operating loss

Unrecognized tax benefits

Net operating loss

Accrued compensation

Accrued selling

Repurchase agreements

Total deferred tax assets

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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 previous 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.

As of June 30, 2022, the Company has state net operating loss (NOL) carryforwards of $ 15.5 million.

Of this amount, $ 3.1 million expire in varying years ranging from June 30, 2025 to June 30, 2036, while the remainder can be carried forward indefinitely.

The Company has foreign NOL carryforwards of $ 0.2 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.

In recognition of this risk, the Company has provided a partial valuation allowance on the deferred tax assets relating to these state and foreign NOL carryforwards.

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

In recognition of this risk, the Company has provided a partial valuation allowance on the deferred tax assets relating to these state NOL carryforwards.

Unrecognized Tax Benefits

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Of this total, $ 4.7 million and $ 2.7 million as of June 30, 2022 and 2021, 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, 2021, 2020, and, 2019 was a benefit of $ 0.2 million and an expense of $ 0.3 million and $ 0.1 million, respectively.

The total amount of interest and penalties recorded in the consolidated statements of operations for the years ended June 30, 2022, 2021, and 2020 was an expense of $ 0.2 million, a benefit of $ 0.2 million, and an expense of $ 0.3 million, respectively.

The amounts accrued for interest and penalties at June 30, 2022 and 2021 were $ 0.8 million and $ 0.5 million, respectively, and is presented in unrecognized tax positions on the accompanying consolidated balance sheets.

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subsidiaries in those operations.

As of June 30, 2021, the Company has not made a provision for U.S.

As of June 30, 2022, the Company has not made a current provision for U.S.

or additional foreign withholding taxes on investments in foreign subsidiaries that are indefinitely reinvested.

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federal income tax, as well as various other state income taxes and foreign income taxes.

The federal income tax returns for the years ended June 30, 2018 through 2020 are subject to examination by the Internal Revenue Service.

The federal income tax returns for the years ended June 30, 2019 through 2021 are subject to examination by the

Internal Revenue Service.

For state purposes, the statutes of limitation vary by jurisdiction.

With few exceptions, the Company is no longer subject to examination by taxing authorities for years before June 30, 2018.

With few exceptions, t he Company is no longer subject to examination by taxing authorities for years before June 30, 201 9 .

The Company expects the total amount of unrecognized benefits to increase by approximately $ 0.4 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.

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

Because of the complexity of some of these uncertainties, the ultimate resolution may result in a payment that is materially different from our current estimate of the unrecognized tax benefit liabilities.

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

The total grant date fair value of RSAs vested during the years ended June 30, 2021, 2020, and 2019 was $ 1.6 million , $ 1.0 million and $ 0.7 million, respectively.

The fair value of RSAs vested during the years ended June 30, 2022, 2021, and 2020 was $ 2.4 million, $ 1.6 million, and $ 1.0 million, respectively.

A summary of RSA activity for the years ended June 30, 2022, 2021, and 2020, is as follows:

Number of Restricted Stock Awards

Number of Restricted Stock Awards Outstanding

Weighted Average Grant Date Fair Value

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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, 2021, 2020 and 2019 was $ 0.4 million, $ 0.2 million, and $ 0.4 million, respectively.

A summary of PSU activity for the years ending June 30, 2021, 2020 and 2019, is as follows:

The fair value of PSUs vested during the years ended June 30, 2022, 2021, and 2020 was $ 2.1 million, $ 0.4 million, and $ 0.2 million, respectively.

A summary of PSU activity for the years ended June 30, 2022, 2021, and 2020, is as follows:

Number of Performance Stock Units

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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, and 2019 was $ 0.2 million.

A summary of NSO activity for the years ending June 30, 2021, 2020, and 2019 is as follows:

The fair value of NSOs vested during the year ended June 30, 2020 was $ 0.2 million.

A summary of NSO activity for the years ended June 30, 2022, 2021, and 2020 is as follows:

Outstanding at June 30, 2019

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Outstanding at June 30, 2022

Fully vested and exercisable at June 30, 2021

COMMITMENTS AND CONTINGENCIES

Operating Leases

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, Lease Accounting, 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.

The lease-related balances as of June 30, 2021 and 2020, and activity and costs during the periods presented, other than the activity related to the Crest manufacturing facility discussed above, are not material.

Repurchase Obligations

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We incurred no penalties related to purchase commitments during the years ended June 30, 2022, 2021, and 2020.

In October 2021, the Company entered into a new supplier agreement to purchase marine outboard engines for its Crest pontoon boats.

During the term of the agreement, which expires July 2, 2022 , the Company is obligated to purchase a minimum annual gross dollar value in engines.

As of June 30, 2022, the obligation under the agreement had been satisfied.