Malibu Boats, Inc. (together with its subsidiaries, the “Company” or "Malibu"), a Delaware corporation formed on November 1, 2013, is the sole managing member of Malibu Boats Holdings, LLC, a Delaware limited liability company (the "LLC"). The Company operates and controls all of the LLC's business and affairs and, therefore, pursuant to Financial Accounting Standards Board ("FASB") Accounting Standards Codification (“ASC”) Topic 810, Consolidation, consolidates the financial results of the LLC and its subsidiaries, and records a non-controlling interest for the economic interest in the Company held by the non-controlling holders of units in the LLC ("LLC Units"). Malibu Boats Holdings, LLC was formed in 2006 with Malibu's acquisition by an investor group, including affiliates of Black Canyon Capital LLC, Horizon Holdings, LLC and then-current management. The LLC, through its wholly owned subsidiary, Malibu Boats, LLC, is engaged in the design, engineering, manufacturing and marketing of innovative, high-quality, recreational powerboats that are sold through a world-wide network of independent dealers. On July 6, 2017, the Company acquired all ~~the~~ outstanding units of Cobalt Boats, LLC (“Cobalt”) further expanding the Company's product offering across a broader segment of the recreational boating industry including performance sport boats, sterndrive and outboard boats. As a result of the acquisition, the Company ~~also~~ consolidates the financial results of Cobalt. ~~Refer to Note 4. The Company reports its results~~On October 15, 2018, the Company's subsidiary Malibu Boats, LLC, purchased the assets of ~~operations under three reportable segments: Malibu U.S.~~Pursuit Boats ("Pursuit") from S2 Yachts, Inc., ~~Malibu Australia, and Cobalt, based on their~~expanding the Company's product offering into the fiberglass outboard fishing boat ~~manufacturing operations.~~market.

The accompanying unaudited interim condensed consolidated financial statements of the Company have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim condensed financial statements and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all information and disclosures of results of operations, financial position and changes in cash flow in conformity with GAAP for complete financial statements. Such statements should be read in conjunction with the audited consolidated financial statements and notes thereto of Malibu Boats, Inc. and subsidiaries for the year ended June 30, ~~2018,~~2019, included in the Company's Annual Report on Form 10-K. In the opinion of management, the accompanying unaudited interim condensed consolidated financial statements reflect all adjustments considered necessary to present fairly the Company’s financial position at September 30, ~~2018,~~2019, and the results of its operations for the three month periods ended September 30, ~~2018~~2019 and September 30, ~~2017,~~2018, and its cash flows for the three month periods ended September 30, ~~2018~~2019 and September 30, ~~2017.~~2018. Operating results for the three months ended September 30, ~~2018,~~2019, are not necessarily indicative of the results that may be expected for the full year ending June 30, ~~2019.~~2020. Certain reclassifications have been made to the prior period presentation to conform to the current period presentation. Units and shares are presented as whole numbers while all dollar amounts are presented in thousands, unless otherwise noted.

During the three months ended September 30, 2019, the Company revised its segment reporting to conform to changes in its internal management reporting based on the Company’s boat manufacturing operations. Segment information has been revised for comparison purposes for all periods presented in the condensed consolidated financial statements. The Company previously had 4 reportable segments, Malibu U.S., Malibu Australia, Cobalt and Pursuit. Beginning with the three months ended September 30, 2019, the Company is aggregating Malibu U.S. and Malibu Australia into 1 reportable segment as they have similar economic characteristics and qualitative factors and as a result has 3 reportable segments, Malibu, Cobalt and Pursuit. See Note 18 for revised segment information for the current and prior periods.

The following table disaggregates the Company's revenue by major product type and geography:

Consists of sales of boats and trailers to the Company's dealer network, net of sales returns, discounts, rebates and free flooring incentives. Boat and trailer sales also includes optional boat features. Sales returns consist of boats returned by dealers under our warranty program. Rebates, free flooring and discounts ~~consists of~~are incentives ~~including rebates, volume discounts and free flooring~~ that the Company provides to its dealers based on sales of eligible products.

The non-controlling interest on the unaudited interim condensed consolidated statement of operations and comprehensive income represents the portion of earnings attributable to the economic interest in the Company's subsidiary, Malibu Boats Holdings, LLC, held by the non-controlling LLC Unit holders. Non-controlling interest on the unaudited interim condensed consolidated balance sheets represents the portion of net assets of the Company attributable to the non-controlling LLC Unit holders, based on the portion of the LLC Units owned by such Unit holders. The ownership of Malibu Boats Holdings, LLC is summarized as follows:



	As of September 30, 2019			As of June 30, 2019
	Units	Ownership %		Units	Ownership %
Non-controlling LLC Unit holders ownership in Malibu Boats Holdings, LLC	830,152	3.9	%	830,152	3.8	%
Malibu Boats, Inc. ownership in Malibu Boats Holdings, LLC	20,465,064	96.1	%	20,852,640	96.2	%
	21,295,216	100.0	%	21,682,792	100.0	%

Under the first amended and restated limited liability agreement of the LLC, as amended (the "LLC Agreement"), the Company is required to cause the LLC to issue additional LLC Units to the Company when the Company issues additional shares of Class A Common Stock. Other than in connection with the issuance of Class A Common Stock in connection with an equity incentive program, the Company must contribute to the LLC net proceeds and property, if any, received by the Company with respect to the issuance of such additional shares of Class A Common Stock. The Company must cause the LLC to issue a number of LLC Units equal to the number of shares of Class A Common Stock issued such that, at all times, the number of LLC Units held by the Company equals the number of outstanding shares of Class A Common Stock. During the three months ended September 30, ~~2018,~~2019, the Company caused the LLC to issue a total of ~~229,784~~2,947 LLC Units to the Company in connection with (i) the Company's issuance of Class A Common Stock to a non-employee director for ~~his~~her services and (ii) the issuance of Class A Common Stock for the vesting of awards granted under the Malibu Boats, Inc. Long-Term Incentive Plan (the "Incentive Plan"), (iii) the issuance of Class A Common Stock to LLC Unit holders for exchange of their LLC Units, and (iv) the issuance of Class A Common Stock for the exercise of vested stock options granted under the Incentive Plan.. During the three months ended September 30, ~~2018, 8,481~~2019, 7,119 LLC Units were canceled in connection with the vesting of share-based equity awards to satisfy employee tax withholding requirements and the retirement of ~~8,481~~7,119 treasury

As a limited liability company (treated as a partnership for income tax purposes), Malibu Boats Holdings, LLC does not incur significant federal, state or local income taxes, as these taxes are primarily the obligations of its members. As authorized by the LLC Agreement, the LLC is required to distribute cash, to the extent that the LLC has cash available, on a pro rata basis, to its members to the extent necessary to cover the members’ tax liabilities, if any, with respect to their share of LLC earnings. The LLC makes such tax distributions to its members based on an estimated tax rate and projections of taxable income. If the actual taxable income of the LLC multiplied by the estimated tax rate exceeds the tax distributions made in a calendar year, the LLC may make true-up distributions to its members, if cash or borrowings are available for such purposes. As of September 30, ~~2018~~2019 and June 30, ~~2018,~~2019, tax distributions payable to non-controlling LLC Unit holders were ~~$354~~$399 and ~~$511,~~$568, respectively. During the three months ended September 30, ~~2018~~2019 and ~~2017,~~2018, tax distributions paid to the non-controlling LLC Unit holders were ~~$556~~$568 and ~~$312,~~$556, respectively.

~~4. Acquisition~~

The total consideration given to the former ~~members~~owners of ~~Cobalt~~Pursuit has been allocated to the assets acquired and liabilities assumed based on estimates of fair value as of the date of the acquisition. The measurements of fair value were determined 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 of ~~Cobalt~~Pursuit assumed at the acquisition date:



Consideration:
Cash consideration paid	$	100,073

Recognized amounts of identifiable assets acquired and (liabilities assumed), at fair value:
Inventories	$	8,332
Other current assets	350
Property, plant and equipment	17,454
Identifiable intangible assets	57,900
Current liabilities	(3,488		)
Fair value of assets acquired and liabilities assumed	80,548
Goodwill	19,525
Total purchase price	$	100,073

Acquisition-related costs of ~~$3,056,~~$1,293, which were incurred by the Company in in the first quarter of fiscal year ~~2018~~2019 related to the ~~Cobalt~~Pursuit acquisition, were expensed in the period incurred, and are included in general and administrative expenses in the consolidated statement of operations and comprehensive income for the ~~fiscal year~~three months ended ~~June~~September 30, 2018.

The following unaudited pro forma consolidated results of operations for the three months ended September 30, ~~2018~~2019 and ~~2017,~~2018, assumes that the acquisition of ~~Cobalt~~Pursuit occurred as of July 1, ~~2016.~~2018. The unaudited interim pro forma financial information combines historical results of Malibu and ~~Cobalt,~~Pursuit, with adjustments for depreciation and amortization attributable to preliminary 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 interim 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 acquisition had taken place at the beginning of fiscal year ~~2017~~2019 or the results that may occur in the future:

Inventories, net consisted of the following:



	As of September 30, 2019		As of June 30, 2019
Raw materials	$	50,852	$	45,910
Work in progress	12,944		10,839
Finished goods	11,490		11,019
Total inventories	$	75,286	$	67,768

As of September 30, 2018 As of June 30, 2018
Land $ 634
$ 634
Building and leasehold improvements 20,133
20,110
Machinery and equipment 32,996
32,471
Furniture and fixtures 5,154
4,667
Construction in process 3,844
5,636
62,761
63,518
Less: Accumulated depreciation (21,234 ) (22,673 )
Property, plant and equipment, net $ 41,527
$ 40,845

Amortization expense recognized on all amortizable intangibles was ~~$1,280~~$1,584 and ~~$1,308~~$1,280 for the three months ended September 30, ~~2018~~2019 and ~~2017,~~2018, respectively.

Accrued expenses consisted of the following:



	As of September 30, 2019		As of June 30, 2019
Warranties	$	25,034	$	23,820
Dealer incentives	9,028		7,394
Accrued compensation	8,473		13,122
Current operating lease liabilities	1,978		—
Accrued legal and professional fees	750		740
Accrued interest	110		161
Other accrued expenses	3,534		3,860
Total accrued expenses	$	48,907	$	49,097

~~Effective for model year 2016, the Company began providing~~Malibu and Axis brands have a limited warranty for a period up to five years for both Malibu and Axis brand boats. ~~For model years prior~~Prior to fiscal year 2016, the Company provided a limited warranty for a period of up to three years for its Malibu brand boats and two years for its ~~Malibu and~~ Axis ~~brands, respectively.~~boats. For its Cobalt brand boats, the Company provides a structural warranty of up to ten years which covers the hull, deck joints, bulkheads, floor, transom, stringers, and motor mount. In addition, the Company provides a five

The Company’s standard warranties require the Company or its dealers to repair or replace defective products during such warranty period at no cost to the consumer. The Company estimates the costs that may be incurred under its limited warranty and records a liability for such costs at the time the product revenue is recognized. Factors that affect the Company’s warranty liability include the number of units sold, historical and anticipated rates of warranty claims and cost per claim. The Company assesses the adequacy of its recorded warranty liabilities by brand on a quarterly basis and adjusts the amounts as necessary. The Company utilizes historical claims trends and analytical tools to assist in determining the appropriate warranty liability.

Changes in the Company’s product warranty liability, which is included in accrued expenses on the unaudited interim condensed consolidated balance sheets, were as follows:

Borrowings under the Credit Agreement bear interest at a rate equal to either, at the Company's option, (i) the highest of the prime rate, the Federal Funds Rate plus 0.5%, or one-month LIBOR plus 1% (the “Base Rate”) or (ii) LIBOR, in each case plus an applicable margin ranging from 1.25% to 2.25% with respect to LIBOR borrowings and ~~Restated Security Agreement, by and among Boats LLC,~~0.25% to 1.25% with respect to Base Rate borrowings. The applicable margin will be based upon the consolidated leverage ratio of the LLC ~~the subsidiary guarantors,~~ and ~~SunTrust Bank, as administrative agent, dated as~~its subsidiaries calculated on a consolidated basis. As of ~~June 28, 2017, and other collateral documents. The weighted average~~September 30, 2019, the interest rate on the Company’s term loan and revolving credit facility was ~~4.1%~~3.27%. The Company is required to pay a commitment fee for the ~~three months ended September 30, 2018.~~unused portion of the revolving credit facility which will range from 0.20% to 0.40% per annum, depending on the LLC’s and its subsidiaries’ consolidated leverage ratio.

The Credit Agreement permits prepayment of the term loan ~~facilities~~ without ~~penalty. The $55,000~~any penalties. On August 17, 2017 the Company made a voluntary principal payment on the term loan ~~is subject to quarterly installments~~in the amount of approximately $700 per quarter until March 31, 2019, then approximately $1,000 per quarter until June 30, 2021, and approximately $1,400 per quarter through March 31, 2021. The $105,000 term loan is subject to quarterly installments$50,000 with a portion of ~~approximately $1,300 per quarter until March 31, 2019, then approximately $2,000 per quarter until June 30, 2021, and approximately $2,600 per quarter through March 31, 2022. The Company used~~the net proceeds from anits equity offering completed on August 14, ~~2017 to repay $50,000 on its term loans under the Credit Agreement and~~2017. The Company exercised its option to apply the prepayment in forward order to principal installments on its term loan through December 31, 2021 and a portion of the principal installments due on March 31, 2022. ~~Accordingly, no principal payments are required under~~As a result, the ~~Credit Agreement until~~term loan is subject to a quarterly installment of approximately $3,000 on March 31, 2022 and as such, all borrowings as of June 30, 2018 and September 30, 2018, are reflected as noncurrent. The $50,000 repayment resulted in a write-off of deferred financing costs of $829 which was included in amortization expense on the ~~condensed consolidated statement of operations and comprehensive income. The~~ balance of ~~both~~the term ~~loans~~loan is due on the scheduled maturity date of July 1, 2022. The Credit Agreement is also subject to prepayments from the net cash proceeds received by Boats LLC or any guarantors from certain asset sales and recovery events, subject to certain reinvestment rights, and from excess cash flow, subject to the terms and conditions of the Credit Agreement.

The Credit Agreement contains certain customary representations and warranties, and notice requirements for the occurrence of specific events such as the occurrence of any event of default, or pending or threatened litigation. The Credit Agreement also requires compliance with certain customary financial covenants, including a minimum ratio of EBITDA to fixed charges and a maximum ratio of total debt to EBITDA. The Credit Agreement contains certain restrictive covenants, which, among other things, place limits on certain activities of the loan parties under the Credit Agreement, such as the incurrence of additional indebtedness and additional liens on property and limit the future payment of dividends or distributions. For example, the Credit Agreement generally prohibits the LLC, Boats LLC and the subsidiary guarantors from paying dividends or making distributions, including to the Company. The credit facility permits, however, (i) distributions based on a member’s allocated taxable income, (ii) distributions to fund payments that are required under the LLC’s tax receivable agreement, (iii) purchase of stock or stock options of the LLC from former officers, directors or employees of loan parties or payments pursuant to stock option and other benefit plans up to $2,000 in any fiscal year, and (iv) share repurchase payments up to ~~$20,000~~$35,000 in any fiscal year subject to one-year carry forward and compliance with other financial covenants. In addition, the LLC may make dividends and distributions of up to ~~$6,000~~$10,000 in any fiscal year, subject to compliance with other financial covenants.

The Company used proceeds from an offering on August 24, 2017 to repay $50,000 on its term loan under the Credit Agreement and exercised its option to apply the prepayment to principal installments through December 31, 2021, and a portion of principal installments due on March 31, 2022. Accordingly, no principal payments are required under the Credit Agreement until March 31, 2022, and as such, all borrowings as of ~~September 30,~~March 31, 2018 and June 30, ~~2018.~~2017, are reflected as noncurrent. The $50,000 repayment resulted in a write off of deferred financing costs of $829 in fiscal year 2018, which was included in amortization expense on the consolidated statement of operations and comprehensive income.

On May 8, 2019, the Company entered into the Second Incremental Facility Amendment and Second Amendment (the “Amendment”) to the Credit Agreement dated as of June 28, 2017. The Amendment converted $35,000 of the outstanding principal amount under the term loan to outstanding borrowings under the revolving credit facility, increased the borrowing capacity of the revolving credit facility by $35,000 and extended the maturity date of the revolving credit facility by two years to July 1, 2024. In connection with the Amendment, the Company wrote off $137 of deferred financing costs and capitalized an additional $370 of deferred financing cost related to insubstantial modification leaving an unamortized balance of $1,367 in deferred financing costs. These are being amortized into interest expense using the effective interest method and presented as a direct offset to the total debt outstanding on the consolidated balance sheet.

In determining the fair value of certain assets and liabilities, the Company employs a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. As defined in ASC Topic 820, Fair Value Measurements and Disclosures, fair value is the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (i.e., the exit price). Financial assets and financial liabilities recorded on the unaudited interim condensed consolidated balance sheets at fair value are categorized based on the reliability of inputs to the valuation techniques as follows:

The hierarchy gives the highest priority to Level 1 inputs and the lowest priority to Level 3 inputs. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, the level in the fair value hierarchy within which the fair value measurement in its entirety falls has been determined based on the lowest level input that is significant to the fair value measurement in its entirety. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability.

Fair Value Measurements at Reporting Date Using
Total
Quoted Prices
in Active
Markets for
Identical Assets
(Level 1)

Significant
Other
Observable
Inputs
(Level 2)

Significant
Unobservable
Inputs
(Level 3)
As of September 30, 2018:
Assets
Interest rate swap not designated as cash flow hedge $ 415
$ —
$ 415
$ —
Total assets at fair value $ 415
$ —
$ 415
$ —

As of June 30, 2018:
Assets
Interest rate swap not designated as cash flow hedge $ 418
$ —
$ 418
$ —
Total assets at fair value $ 418
$ —
$ 418
$ —

The Company’s nonfinancial assets and liabilities that have nonrecurring fair value measurements include property, plant and equipment, goodwill and intangibles.

In assessing the need for goodwill impairment, management relies on a number of factors, 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. The Company generally uses projected cash flows, discounted as necessary, to estimate the fair values of property, plant and equipment and intangibles using key inputs such as management’s projections of cash flows on a held-and-used basis (if applicable), management’s projections of cash flows upon disposition and discount rates. Accordingly, these fair value measurements fall in Level 3 of the fair value hierarchy. These assets and certain liabilities are measured at fair value on a nonrecurring basis as part of the Company’s impairment assessments and as circumstances require.

Income taxes are computed in accordance with ASC Topic 740, Income Taxes, and reflect the net tax effects of temporary differences between the financial reporting carrying amounts of assets and liabilities and the corresponding income tax amounts. The Company has deferred tax assets and liabilities and maintains valuation allowances where it is more likely than not that all or a portion of deferred tax assets will not be realized. To the extent the Company determines that it will not realize the benefit of some or all of its deferred tax assets, such deferred tax assets will be adjusted through the Company’s provision for income taxes in the period in which this determination is made.

As of both September 30, ~~2018~~2019 and June 30, ~~2018,~~2019, the Company maintained a total valuation allowance of ~~$13,215 and $12,716, respectively,~~$14,252 against deferred tax assets related to state net operating losses and future amortization deductions (with respect to the Section 754 election) that are reported in the Tennessee corporate tax return without offsetting income, which is taxable at the LLC. ~~The increase~~This also includes a valuation allowance in the ~~valuation allowance~~amount of $761 related to foreign tax credit carryforward that is ~~due~~not expected to be utilized in the ~~exchanges of LLC Units into Class A common stock by certain LLC Unit holders during the three months ended September 30, 2018.~~future.

On December 22, 2017, the Tax Cuts and Jobs Act was enacted which, among a number of its provisions, lowered the U.S. corporate tax rate from 35% to 21%, effective January 1, 2018. The Company’s consolidated interim effective tax rate is based upon expected annual income from operations, statutory tax rates and tax laws in the various jurisdictions in which the Company operates. Significant or unusual items, including those related to the change in U.S. tax law noted above as well as other adjustments to accruals for tax uncertainties, are recognized in the quarter in which the related event occurs.

Basic net income per share of Class A Common Stock is computed by dividing net income attributable to the Company's earnings by the weighted average number of shares of Class A Common Stock outstanding during the period. The weighted average number of shares of Class A Common Stock outstanding used in computing basic net income per share includes fully vested restricted stock units awarded to directors that are entitled to participate in distributions to common shareholders through receipt of additional units of equivalent value to the dividends paid to Class A Common Stock holders.

We are a leading designer, manufacturer and marketer of a diverse range of recreational powerboats, including performance sport boats, sterndrive and outboard boats. ~~Malibu Boats Inc. is~~We are the market leader in the United States in the performance sport boat category through our Malibu and Axis Wake Research boat brands, the leader in the United States in the 20’ - 40’ segment of the sterndrive boat category through our Cobalt brand and ~~as a result of our recent acquisition,~~ in a leading position in the fiberglass outboard fishing boat market with our Pursuit brand. ~~See “--Acquisition of Pursuit” below for more information.~~ Our product portfolio of premium brands are used for a broad range of recreational boating activities including, among others, water sports, general recreational boating and fishing. Our passion for consistent innovation, which has led to propriety technology such as Surf Gate, has allowed us to expand the market for our products by introducing consumers to new and exciting recreational activities. We design products that appeal to an expanding range of recreational boaters and water sports enthusiasts whose passion for boating and water sports is a key component of their active lifestyle and provide consumers with a better customer-inspired experience. With performance, quality, value and multi-purpose features, our product portfolio has us well positioned to broaden our addressable market and achieve our goal of increasing our market share in the expanding recreational boating industry.

We currently sell our boats under four brands—Malibu; Axis; Cobalt; and Pursuit. Our flagship Malibu boats offer our latest innovations in performance, comfort and convenience, and are designed for consumers seeking a premium performance sport boat experience. Retail prices of our Malibu boats typically range from ~~$55,000~~$60,000 to ~~$180,000.~~$190,000. We launched our Axis boats in 2009 to appeal to consumers who desire a more affordable performance sport boat product but still demand high performance, functional simplicity and the option to upgrade key features. Retail prices of our Axis boats typically range from ~~$55,000~~$60,000 to ~~$105,000.~~$110,000. Our Cobalt boats consist of mid to large-sized luxury cruisers and bowriders that we believe offer the ultimate experience in comfort, performance and quality. Retail prices for our Cobalt boats typically range from ~~$55,000~~$60,000 to ~~$750,000.~~$770,000. Our recent acquisition of Pursuit expands our product offerings into the saltwater outboard fishing market and

On a consolidated basis, we achieved first quarter fiscal ~~2019~~2020 net sales, gross profit, net income and adjusted EBITDA of $172.1 million, $40.0 million, $16.7 million and $28.4 million, respectively, compared to $123.5 million, $30.5 million, $12.0 million and $22.9 million, respectively, ~~compared to $103.5 million, $22.9 million, $6.4 million and $17.7 million, respectively,~~ for the first quarter of fiscal ~~2018.~~2019. For the first quarter of fiscal ~~2019,~~2020, net sales increased ~~19.3%~~39.4%, gross profit increased ~~33.1%~~31.1%, net income increased ~~87.3%~~38.8% and adjusted EBITDA increased ~~29.7%~~24.0% as compared to the first quarter of fiscal ~~2018.~~2019. Our results for the first quarter of fiscal ~~2019 do not reflect any results from our purchase of~~2020 include Pursuit, ~~because our acquisition of Pursuit was completed~~which we acquired on October 15, 2018. For the definition of adjusted EBITDA and a reconciliation to net income, see “GAAP Reconciliation of Non-GAAP Financial Measures.”

~~We currently report our results of operations under~~During the three ~~reportable segments: Malibu U.S., Malibu Australia, and Cobalt,~~months ended September 30, 2019, the Company revised its segment reporting to conform to changes in its internal management reporting based on ~~our~~the Company’s boat manufacturing operations. Segment information has been revised for comparison purposes for all periods presented in the condensed consolidated financial statements. The Company now has three reportable segments, Malibu, Cobalt and Pursuit. The Malibu ~~U.S. and Malibu Australia segments participate~~segment participates in the manufacturing, distribution, marketing and sale of Malibu and Axis performance ~~sport boats.~~sports boats throughout the world. The ~~Malibu U.S. segment primarily serves markets in North America, South America, Europe,~~Cobalt and ~~Asia while the Malibu Australia operating segment principally serves the Australian and New Zealand markets. Our Cobalt segment participates~~Pursuit segments participate in the manufacturing, distribution, marketing and sale of Cobalt and Pursuit boats, respectively, throughout the world. Malibu ~~U.S.~~ is our largest segment and represented ~~56.1%~~49.9% and ~~58.8%~~60.9% of our net sales for the three months ended September 30, ~~2018~~2019 and September 30, ~~2017,~~2018, respectively. Cobalt represented ~~39.1%~~29.1% and ~~35.7%~~39.1% of our net sales for the three months ended September 30, ~~2018~~2019 and September 30, ~~2017,~~2018, respectively. ~~Malibu Australia~~We completed the acquisition of Pursuit on October 15, 2018 and Pursuit represented ~~4.8% and 5.6%~~21.0% of our net sales for the three months ended September 30, ~~2018 and September 30, 2017,~~2019, respectively. See Note 1618 to our unaudited interim condensed consolidated financial statements for more information about our reporting segments.

Industry-wide marine retail registrations continue to recover from the years following the global financial crisis. According to Statistical Surveys, Inc., domestic retail registration volumes of performance sport boats, fiberglass sterndrive and fiberglass outboards increased at a compound annual growth rate of approximately ~~6.5%~~6.0% between 2011 and ~~2017,~~2018, for the 50 reporting states. This has been led by growth in our core market, performance sport boats, having produced a ~~double digit~~double-digit compound annual growth rate over that period. Domestic retail demand growth has continued in performance sport boats for calendar year ~~2018 and, in fact,~~2019, however the growth rate has ~~accelerated versus 2017.~~decelerated compared to prior years. Fiberglass sterndrive and outboard boats, the target markets for our Cobalt and Pursuit branded products, have seen their combined market grow at a ~~6.0%~~5.4% compound annual growth rate between 2011 and ~~2017.~~

We expect the growing demand for our products to continue, albeit at a lower pace than the past eight years, and there are numerous variables that have the potential to impact our volumes, both positively and negatively. ~~For example, we~~We also believe the substantial decrease in the price of oil, ~~and the~~ broad strength of the U.S. dollar ~~has~~and recently implemented tariffs have resulted in reduced demand for our boats in certain markets. To date, growth in our domestic market has offset significantly diminished demand from economies that are driven by the oil industry and international markets. Consumer confidence, expanded or eroded, is aanother variable that could also impact demand in both directions. Other challenges that could impact demand for recreational powerboats include higher interest rates reducing retail consumer appetite for our product, the availability of credit to our dealers and retail consumers, fuel costs, a meaningful reduction in the value of global or domestic equity markets, the continued acceptance of our new products in the recreational boating market, our ability to compete in the competitive power boating industry, and the costs of labor and certain of our raw materials and key components.

Since 2008, we have increased our market share among manufacturers of performance sport boats due to new product development, improved distribution, new models, and innovative features. As the market for our product has recovered, our competitors have become more aggressive in their product introductions, increased their distribution and begun to compete with our patented Surf Gate system. This competitive environment has continued ~~throughout~~ the past few years, but we continue to maintain a strong lead over our nearest competitor in terms of market position and we believe that we are well positioned to maintain our industry leading position given our strong dealer network and new product pipeline. In addition, we continue to be the market share leader in both the premium and value-oriented product sub-categories.

We believe our track record of expanding our market share due to new product development, improved distribution, new models, and innovative features is directly transferable to our Cobalt and Pursuit acquisitions. While Cobalt and Pursuit are market leaders in certain areas, we believe our experience positions us to execute a strategy to drive enhanced share by expanding both the Cobalt and Pursuit product offerings with different foot lengths, different boat types and different propulsion technologies. Our new product development efforts at Cobalt and Pursuit will take time and our ability to influence near-term model introductions is limited, but we have already begun to execute on this strategy. We believe enhancing new product development combined with diligent management of the Cobalt and Pursuit dealer networks positions us to meaningfully improve our share of the sterndrive and outboard markets over time.

We believe that our results of operations and our growth prospects are affected by a number of factors, such as the economic environment and consumer demand for our products, our ability to develop new products and innovate, our product mix, our ability to manage manufacturing costs, including through our vertical integration efforts, sales cycles and inventory levels, the strength of our dealer network and our ability to offer dealer financing and incentives. While we do not have control of all factors affecting our results from operations, we work diligently to influence and manage those factors which we can impact to enhance our results of operations.

We ~~primarily~~ generate revenue from sales of boats to our dealers. The substantial majority of our net sales are derived from the sale of boats, ~~and trailers,~~ including optional features ~~included~~added at the time of the initial wholesale purchase of the boat. Net sales consists of the following:

Net sales for the three months ended September 30, ~~2018~~2019 increased ~~$19.9~~$48.6 million, or ~~19.3%~~39.4%, to ~~$123.5~~$172.1 million as compared to the three months ended September 30, ~~2017.~~2018. Unit volume for the three months ended September 30, ~~2018,~~2019, increased ~~207~~211 units, or ~~15.8%~~13.9%, to ~~1,516~~1,727 units as compared to the three months ended September 30, ~~2017.~~2018. The increase in net sales and unit volumes were driven primarily by our acquisition of Pursuit in October 2018, as well as increased demand for our Malibu and Axis brands coupled with year-over-year price increases across our Malibu, Axis and Cobalt brands.

Net sales attributable to our Malibu ~~U.S.~~ segment increased ~~$8.4~~$10.7 million, or ~~13.8%~~14.2%, to ~~$69.2~~$85.9 million for the three months ended September 30, ~~2018,~~2019, compared to the three months ended September 30, ~~2017.~~2018. Unit volumes attributable to our Malibu ~~U.S.~~ segment increased 8681 units for the three months ended September 30, ~~2018,~~2019, compared to the three months ended September 30, ~~2017.~~2018. The increase in net sales and unit volume for Malibu ~~U.S.~~ was driven primarily by strong demand for new models and ~~continued strong demand~~optional features, which led to a higher net sales per unit for Malibu and Axis models. Net sales was also impacted by year-over-year price increases on all of our ~~larger~~Malibu and Axis ~~A24.~~models.

Net sales from our Cobalt segment increased ~~$11.3~~$1.9 million, or ~~30.7%~~3.9%, to ~~$48.3~~$50.2 million for the three months ended September 30, ~~2018~~2019, compared to the three months ended September 30, ~~2017.~~2018. Unit volumes attributable to Cobalt ~~increased 114~~decreased 13 units for the three months ended September 30, ~~2018~~2019 compared to the three months ended September 30, ~~2017.~~2018. The increase in Cobalt net sales ~~and unit volume~~ was driven ~~primarily~~ by ~~strong demand for~~year-over-year price increases on all of our ~~R series~~Cobalt models.

Net sales ~~from our Malibu Australia segment increased $0.2~~and unit volume contributed by Pursuit were $36.0 million ~~or 4%, to $6.0 million~~and 143 units, respectively, for the three months ended September 30, ~~2018,~~2019. We acquired the assets of Pursuit on October 15, 2018.

Overall consolidated net sales per unit increased 22.3% to $99,641 per unit for the three months ended September 30, 2019, compared to the three months ended September 30, ~~2017.~~

Cost of sales for the three months ended September 30, ~~2018~~2019 increased ~~$12.4~~$39.1 million, or ~~15.3%~~42.0%, to ~~$93.0~~$132.1 million as compared to the three months ended September 30, ~~2017.~~2018. The increase in cost of sales was driven primarily by incremental costs contributed by Pursuit since its acquisition in October 2018 and an increase in unit ~~volumes.~~volumes at our Malibu business.

Gross profit for the three months ended September 30, ~~2018~~2019 increased ~~$7.6~~$9.5 million, or ~~33.1%~~31.1%, to ~~$30.5~~$40.0 million compared to the three months ended September 30, ~~2017.~~2018. The increase in gross profit was due mainly to higher unit volumes. Gross margin for the three months ended September 30, ~~2018 increased 260~~2019 decreased 150 basis points from ~~22.1%~~24.7% to ~~24.7%~~23.2% over the same period in the prior fiscal year primarily due to ~~efficiencies gained in our Cobalt business and an overall increase in unit volumes.~~the integration of Pursuit.

Selling and marketing expenses for the three ~~month period~~months ended September 30, ~~2018, decreased $0.1~~2019, increased $1.6 million or ~~2.5%,~~44.8% compared to the three months ended September 30, ~~2017.~~2018 due primarily to the incremental expenses attributable to Pursuit. As a percentage of sales, selling and marketing expenses ~~decreased 70~~increased 10 basis points compared to the same period in the prior fiscal year. General and administrative expenses for the three months ended September 30, ~~2018,~~2019, increased ~~$1.9~~$1.7 million, or ~~26.8%~~18.9%, to ~~$9.0~~$10.7 million as compared to the three months ended September 30, ~~2017,~~2018, largely due to ~~higher acquisition related~~incremental general and administrative expenses attributable to ~~our acquisition of Pursuit, which we completed in October 2018, partially offset by lower development costs associated with our engines vertical integration initiative.~~Pursuit. As a percentage of sales, general and administrative expenses ~~increased 50~~decreased 110 basis points to ~~7.3%~~6.2% for the three months ended September 30, ~~2018~~2019 compared to the three months ended September 30, ~~2017.~~2018. Amortization expense for the three ~~month period~~months ended September 30, ~~2018, was flat~~2019, increased $0.3 million, or 23.8% to $1.6 million compared to the three months ended September 30, ~~2017.~~2018 due to additional amortization expense related to intangibles acquired as part of the Pursuit acquisition.

Other (income) expense, net for the three ~~month period~~months ended September 30, ~~2018 decreased $3.6~~2019 remained flat at $1.2 million as compared to the three months ended September 30, ~~2017. The decrease in other~~2018. Other expense, net, ~~was~~consisted primarily ~~due to a $2.6 million adjustment in~~of interest expense on our ~~tax receivable agreement liability~~outstanding debt for each of the three months ended September 30, ~~2017 that we did not have during the three months ended September 30,~~2019 and 2018. The increase to our tax receivable agreement liability for the three months ended September 30, 2017 related to an increase in the estimated tax rate used in computing our future tax obligations for the three months ended September 30, 2017, which, in turn, resulted in an increase in the future tax benefit we expect to realize related to increased tax basis from previous sales and exchanges of LLC Units by pre-IPO owners. Other expense, net also increased as a result of

Our provision for income taxes for the three months ended September 30, ~~2018,~~2019, increased ~~$3.8~~$1.3 million, to ~~$3.6~~$4.8 million compared to the three months ended September 30, ~~2017. The~~2018. This increase ~~in our provision for income taxes is the result of higher net income before income taxes and a higher effective tax rate of 23.0% for~~was primarily due to increased consolidated earnings, including Pursuit. For the three months ended September 30, ~~2018 compared to~~2019, our effective tax rate of ~~(4.2)% for~~22.5% exceeded the ~~three months ended September 30, 2017.~~ statutory federal income tax rate of 21% primarily due to the impact of U.S. state taxes. This increase was partially offset by the benefits of the foreign derived intangible income deduction, the research and development tax credit and the impact of non-controlling

Non-controlling interest represents the ownership interests of the members of the LLC other than us and the amount recorded as non-controlling interest in our unaudited interim condensed consolidated statements of operations and comprehensive income is computed by multiplying pre-tax income for the ~~three month~~applicable period, ~~ended September 30, 2018,~~ by the percentage ownership in the LLC not directly attributable to us. For the three months ended September 30, ~~2018~~2019 and ~~2017,~~2018, the weighted average non-controlling interest attributable to ownership interests in the LLC not directly attributable to us was ~~4.7%~~3.8% and ~~6.1%~~4.7%, respectively.

Adjusted EBITDA and adjusted EBITDA margin are non-GAAP financial measures that are used by management as well as by investors, commercial bankers, industry analysts and other users of our financial statements.

We define Adjusted Fully Distributed Net Income as net income attributable to Malibu Boats, Inc. (i) excluding income tax expense, (ii) excluding the effect of non-recurring or non-cash items, (iii) assuming the exchange of all LLC units into shares of Class A Common Stock, which results in the elimination of non-controlling interest in the LLC, and (iv) reflecting an adjustment for income tax expense on fully distributed net income before income taxes at our estimated effective income tax rate. Adjusted Fully Distributed Net Income is a non-GAAP financial measure because it represents net income attributable to Malibu Boats, Inc., before non-recurring or non-cash items and the effects of non-controlling interests in the LLC.

Our primary sources of funds ~~have been~~are cash provided by operating activities and borrowings under our credit agreement. Our primary use of funds has been for acquisitions, repayments under our debt arrangements, capital investments, cash distributions to members of the LLC and cash payments under our tax receivable agreement. The following table summarizes the cash flows from operating, investing and financing activities (dollars in thousands):

Net cash provided by operating activities was $27.7 million for the three months ended September 30, 2019, compared to $13.2 million for the three months ended September 30, 2018, ~~compared to net cash provided by operating activities of $5.0 million for the three months ended September 30, 2017,~~ an increase of ~~$8.2~~$14.5 million. The increase in cash provided by operating activities primarily resulted from ~~an increase of $5.6 million due to an increase in~~a net ~~income (as adjusted for non-cash items), and an~~ increase in operating assets and liabilities of ~~$2.6~~$6.8 million related to the timing of collections of accounts receivables, payments for accruals and payables, and purchases of ~~inventory.~~inventory and an increase of $7.7 million due to increases in net income (after consideration of non-cash items included in net income, primarily related to depreciation, amortization, deferred tax assets and non-cash compensation).

Net cash used for investing activities was $10.7 million for the three months ended September 30, 2019, compared to $2.2 million for the three months ended September 30, 2018, ~~compared~~an increase of $8.5 million. The increase in cash used for investing activities was primarily related to ~~$127.4~~the increase in capital outlays for our expansion activities at our Pursuit and Cobalt plants and normal purchases for manufacturing infrastructure, molds and equipment.

Net cash used by financing activities was $11.9 million for the three months ended September 30, ~~2017, a decrease of $125.2 million. Cash used for investing activities for the three months ended September 30, 2018 was primarily related~~2019, compared to capital outlays consisting of normal purchases for manufacturing infrastructure and expansion activities, molds, and equipment in the ordinary course of business. Cash used for investing activities for the three months ended September 30, 2017 was primarily related to our acquisition of Cobalt in July 2017, for cash consideration of $125.6 million, net of cash on hand.

We currently have a ~~$110.0~~revolving credit facility with borrowing capacity of up to $120.0 million and a $75.0 million term loan outstanding. As of September 30, 2019, we had $40.0 million outstanding ~~and an $85.0 million~~under our revolving credit ~~facility.~~facility and $1.2 million in outstanding letters of credit. The revolving credit facility matures on July 1, 2024 and the term loan matures on July 1, 2022. The revolving credit facility and term loan are governed by a credit agreement with Malibu Boats, LLC (“Boats LLC”) as the borrower ~~(“Boats LLC”) entered into a Second Amended~~ and ~~Restated Credit Agreement with~~ SunTrust Bank, as the administrative agent, swingline lender and issuing ~~bank, on June 28, 2017, to refinance our prior credit facility and to provide funds for our purchase of Cobalt.~~bank. The credit agreement provided us with a term loan facility in an aggregate principal amount of $160.0 million ($55.0 million of which was drawn on June 28, 2017 to refinance the outstanding loans under our prior credit facility and $105.0 million of which was drawn on July 6, 2017 to fund the payment of the purchase price for our acquisition of Cobalt and certain fees and expenses related to entering into the credt agreement) and a revolving credit facility of up to $35.0 million. On August 17, 2017 we made a voluntary principal payment on the term loans in the amount of $50.0 million with a portion of the net proceeds from our equity offering completed on August 14, 2017. On August 21, 2018, in connection with the acquisition of Pursuit, Boats LLC entered into the First Incremental Facility Amendment and First

Borrowings under our credit agreement bear interest at a rate equal to either, at our option, (i) the highest of the prime rate, the Federal Funds Rate plus 0.5%, or one-month LIBOR plus 1% (the “Base Rate”) or (ii) LIBOR, in each case plus an applicable margin ranging from 1.25% to 2.25% with respect to LIBOR borrowings and 0.25% to 1.25% with respect to Base Rate borrowings. The applicable margin will be based upon the consolidated leverage ratio of Malibu Boats Holdings, LLC and its subsidiaries calculated on a consolidated basis. As of September 30, 2019, the interest rate on our term loan and revolving

The credit agreement permits prepayment of the term ~~loans~~loan without any penalties. The $55.0 million term loan is subject to quarterly installments of approximately $0.7 million per quarter until March 31, 2019, then approximately $1.0 million per quarter until June 30, 2021, and approximately $1.4 million per quarter through March 31, 2021. The $105.0 million term loan is subject to quarterly installments of approximately $1.3 million per quarter until March 31, 2019, then approximately $2.0 million per quarter until June 30, 2021, and approximately $2.6 million per quarter through March 31, 2022. The balance of both term loans is due on the scheduled maturity date of July 1, 2022. On August 17, 2017 we made a voluntary principal payment on the term ~~loans~~loan in the amount of $50.0 million with a portion of the net proceeds from our equity offering completed on August 14, 2017. We exercised our option to apply the prepayment in forward order to principal installments on our term ~~loans~~loan through December 31, 2021 and a portion of the principal installments due on March 31, 2022. As a result, the term loan is subject to a quarterly installment of approximately $3.0 million on March 31, 2022 and the balance of the term loan is due on the scheduled maturity date of July 1, 2022. The credit agreement is also subject to prepayments from the net cash proceeds received by Boats LLC or any guarantors from certain asset sales and recovery events, subject to certain reinvestment rights, and from excess cash flow, subject to the terms and conditions of the credit agreement. As of September 30, ~~2018,~~2019, the outstanding principal amount of our term ~~loans~~loan and revolving credit facility was ~~$110.0~~$115.0 million.

The credit agreement contains certain customary representations and warranties, and notice requirements for the occurrence of specific events such as the occurrence of any event of default, or pending or threatened litigation. The credit agreement also requires compliance with certain customary financial covenants, including a minimum ratio of EBITDA to fixed charges and a maximum ratio of total debt to EBITDA. The credit agreement contains certain restrictive covenants, which, among other things, place limits on certain activities of the loan parties under the credit agreement, such as the incurrence of additional indebtedness and additional liens on property and limit the future payment of dividends or distributions. For example, the credit agreement generally prohibits Malibu Boats Holdings, LLC, Boats LLC and the subsidiary guarantors from paying dividends or making distributions, including to the Company. The credit facility permits, however, (i) distributions based on a member’s allocated taxable income, (ii) distributions to fund payments that are required under the LLC’s tax receivable agreement, (iii) purchase of stock or stock options of the LLC from former officers, directors or employees of loan parties or payments pursuant to stock option and other benefit plans up to $2.0 million in any fiscal year, and (iv) share repurchase payments up to ~~$20.0~~$35.0 million in any fiscal year subject to one-year carry forward and compliance with other financial covenants. In addition, the LLC may make dividends and distributions of up to ~~$6.0~~$10.0 million in any fiscal year, subject to compliance with other financial covenants.

All changes to our contractual obligations during the three months ended September 30, ~~2018~~2019 were completed in the normal course of business and are not considered material. ~~As noted above, on October 15, 2018,~~Subsequent to September 30, 2019 we ~~borrowed $50.0 million under~~entered into purchase agreements with two suppliers for additional engines to supplement our ~~revolving credit facility to pay~~engine inventory during the recent labor strikes at General Motors, who supplies our engine blocks for ~~a portion of the purchase price of Pursuit Boats.~~our Malibu and Axis boats.

None.

Not Applicable.

None.



Delaware	5075 Kimberly Way,	Loudon,	Tennessee	37774	46-4024640
(State or other jurisdiction of incorporation or organization)	(Address of principal executive offices, including zip code)				(I.R.S. Employer Identification No.)

		~~(865) 458-5478~~

(865)	458-5478
(Registrant’s telephone number, including area code)



Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Class A Common Stock, par value $0.01	MBUU	Nasdaq Global Select Market



Large ~~accelerated filer~~Accelerated Filer	¨☑	Accelerated filer	þ☐

Non-accelerated filer	¨☐	Smaller reporting company	¨☐

~~Emerging growth company~~	þ
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. þ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes ¨ No þ	☐	No	☑



Class A Common Stock, par value $0.01, outstanding as of November 5, ~~2018:~~2019:	~~20,824,950~~20,465,064	shares
Class B Common Stock, par value $0.01, outstanding as of November 5, ~~2018:~~2019:	1615	shares



(Mark One)
☑	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934



☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934




		Page
PART I	FINANCIAL INFORMATION	2
Item 1.	Financial Statements	2
	Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) (Unaudited)	2
	Condensed Consolidated Balance Sheets (Unaudited)	3
	Condensed Consolidated Statements of Stockholders' Equity (Unaudited)	4
	Condensed Consolidated Statements of Cash Flows (Unaudited)	5
	Notes to Unaudited Condensed Consolidated Financial Statements	6
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	22
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	3836
Item 4.	Controls and Procedures	36

PART II	OTHER INFORMATION	37
Item 1.	Legal Proceedings	37
Item 1A.	Risk Factors	37
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	37
Item 3.	Defaults Upon Senior Securities	37
Item 4.	Mine Safety Disclosures	37
Item 5.	Other Information	37
Item 6.	Exhibits	38

~~PART II~~SIGNATURES		~~OTHER INFORMATION~~	40
~~Item 1.~~	~~Legal Proceedings~~	40
~~Item 1A.~~	~~Risk Factors~~	40
~~Item 2.~~	~~Unregistered Sales of Equity Securities and Use of Proceeds~~	40
~~Item 3.~~	~~Defaults Upon Senior Securities~~	40
~~Item 4.~~	~~Mine Safety Disclosures~~	40
~~Item 5.~~	~~Other Information~~	40
~~Item 6~~.	~~Exhibits~~	41

~~SIGNATURES~~		4239


	Three Months Ended September 30,						Three Months Ended September 30,
	2018			2017			2019			2018
Net sales	123,483			$	103,541		$	172,080		$	123,483
Cost of sales	92,982			80,618			132,079			92,982
Gross profit	30,501			22,923			40,001			30,501
Operating expenses:
Selling and marketing	3,498			3,589			5,066			3,498
General and administrative	8,971			7,074			10,668			8,971
Amortization	1,280			1,308			1,584			1,280
Operating income	16,752			10,952			22,683			16,752
Other expense, net:
Other (income) expense, net	(17		)	2,597
Other (income) expense, net:
Other income, net							(10		)	(17		)
Interest expense	1,171			2,199			1,167			1,171
Other expense, net	1,154			4,796			1,157			1,154
Income before provision for income taxes	15,598			6,156			21,526			15,598
Provision for (benefit from) income taxes	3,583			(258		)
Provision for income taxes							4,844			3,583
Net income	12,015			6,414			16,682			12,015
Net income attributable to non-controlling interest	717			529			823			717
Net income attributable to Malibu Boats, Inc.	$	11,298		$	5,885		$	15,859		$	11,298

Comprehensive income:
Net income	$	12,015		$	6,414		$	16,682		$	12,015
Other comprehensive (loss) income, net of tax:
Other comprehensive income (loss), net of tax:
Change in cumulative translation adjustment	(404		)	300			(623		)	(404		)
Other comprehensive (loss) income, net of tax	(404		)	300
Other comprehensive loss, net of tax							(623		)	(404		)
Comprehensive income, net of tax	11,611			6,714			16,059			11,611
Less: comprehensive income attributable to non-controlling interest, net of tax	693			554			792			693
Comprehensive income attributable to Malibu Boats, Inc., net of tax	$	10,918		$	6,160		$	15,267		$	10,918

Weighted average shares outstanding used in computing net income per share:
Basic	20,640,418			19,178,756			20,830,121			20,640,418
Diluted	20,750,353			19,303,794			20,928,741			20,750,353
Net income available to Class A Common Stock per share:
Basic	$	0.55		$	0.31		$	0.76		$	0.55
Diluted	$	0.54		$	0.31		$	0.76		$	0.54


	September 30, 2018			June 30, 2018			September 30, 2019			June 30, 2019
Assets
Current assets
Cash	$	72,169		$	61,623		$	32,345		$	27,392
Trade receivables, net	22,704			24,625			22,962			27,961
Inventories, net	52,784			44,268			75,286			67,768
Prepaid expenses and other current assets	3,718			3,298			6,075			4,530
Income tax receivable	209			100
Total current assets	151,584			133,914			136,668			127,651
Property, plant and equipment, net	41,527			40,845			72,978			65,756
Goodwill	32,061			32,230			51,160			51,404
Other intangible assets, net	92,888			94,221			144,415			146,061
Deferred tax assets	66,164			64,105			58,926			60,407
Other assets	443			453			15,658			35
Total assets	$	384,667		$	365,768		$	479,805		$	451,314
Liabilities
Current liabilities
Accounts payable	$	28,574		$	24,349		$	29,240		$	21,174
Accrued expenses	34,059			35,685			48,907			49,097
Income taxes and tax distribution payable	2,563			1,420			3,280			1,469
Payable pursuant to tax receivable agreement, current portion	3,932			3,932			3,592			3,592
Total current liabilities	69,128			65,386			85,019			75,332
Deferred tax liabilities	299			341			113			145
Other liabilities							17,099			1,689
Payable pursuant to tax receivable agreement, less current portion	53,667			51,114			50,162			50,162
Long-term debt	108,581			108,487			113,735			113,633
Other long-term liabilities	599			569
Total liabilities	232,274			225,897			266,128			240,961
Commitments and contingencies (See Note 15)
Commitments and contingencies (See Note 17)
Stockholders' Equity
Class A Common Stock, par value $0.01 per share, 100,000,000 shares authorized; 20,776,651 shares issued and outstanding as of September 30, 2018; 20,555,348 issued and outstanding as of June 30, 2018	206			204
Class B Common Stock, par value $0.01 per share, 25,000,000 shares authorized; 16 shares issued and outstanding as of September 30, 2018; 17 shares issued and outstanding as of June 30, 2018	—			—
Preferred Stock, par value $0.01 per share; 25,000,000 shares authorized; no shares issued and outstanding as of September 30, 2018 and June 30, 2018	—			—
Class A Common Stock, par value $0.01 per share, 100,000,000 shares authorized; 20,465,064 shares issued and outstanding as of September 30, 2019; 20,852,640 issued and outstanding as of June 30, 2019							203			207
Class B Common Stock, par value $0.01 per share, 25,000,000 shares authorized; 15 shares issued and outstanding as of September 30, 2019; 15 shares issued and outstanding as of June 30, 2019							—			—
Preferred Stock, par value $0.01 per share; 25,000,000 shares authorized; no shares issued and outstanding as of September 30, 2019 and June 30, 2019							—			—
Additional paid in capital	110,685			108,360			102,400			113,004
Accumulated other comprehensive loss	(2,388		)	(1,984		)	(3,451		)	(2,828		)
Accumulated earnings	39,087			27,789			108,008			93,852
Total stockholders' equity attributable to Malibu Boats, Inc.	147,590			134,369			207,160			204,235
Non-controlling interest	4,803			5,502			6,517			6,118
Total stockholders’ equity	152,393			139,871			213,677			210,353
Total liabilities and stockholders' equity	$	384,667		$	365,768		$	479,805		$	451,314



	Class A Common Stock				Class B Common Stock				Additional Paid In Capital			Accumulated Other Comprehensive Loss			Accumulated Earnings		Non-controlling Interest in LLC			Total Stockholders' Equity
	Shares		Amount		Shares		Amount		Additional Paid In Capital			Accumulated Other Comprehensive Loss			Accumulated Earnings		Non-controlling Interest in LLC			Total Stockholders' Equity
Balance at June 30, 2018	20,555		$	204	17		$	—	$	108,360		$	(1,984	)	$	27,789	$	5,502		$	139,871
Net income	—		—		—		—		—			—			11,298		717			12,015
Stock based compensation, net of withholding taxes on vested equity awards	(4	)	—		—		—		(50		)	—			—		—			(50		)
Issuances of equity for services	—		—		—		—		71			—			—		—			71
Issuance of equity for exercise of options	26		—		—		—		672											672
Increase in payable pursuant to the tax receivable agreement	—		—		—		—		(2,553		)	—			—		—			(2,553		)
Increase in deferred tax asset from step-up in tax basis	—		—		—		—		3,138			—			—		—			3,138
Exchange of LLC Units for Class A Common Stock	199		2		—		—		1,047			—			—		(1,047		)	2
Cancellation of Class B Common Stock	—		—		(1	)	—		—			—			—		—			—
Distributions to LLC Unit holders	—		—		—		—		—			—					(354		)	(354		)
Foreign currency translation adjustment	—		—		—		—		—			(404		)	—		(15		)	(419		)
Balance at September 30, 2018	20,776		$	206	16		$	—	$	110,685		$	(2,388	)	$	39,087	$	4,803		$	152,393


	Three months ended September 30, 2018								Three Months Ended September 30, 2019
	Malibu US		Cobalt		Malibu Australia		Consolidated		Malibu		Cobalt		Pursuit		Consolidated
Revenue by product:
Boat and trailer sales	$	66,080	$	47,439	$	5,831	$	119,350	$	82,083	$	49,300	$	35,806	$	167,189
Part and other sales	3,150		821		162		4,133		3,797		851		243		4,891
Total revenue	$	69,230	$	48,260	$	5,993	$	123,483	$	85,880	$	50,151	$	36,049	$	172,080

Revenue by geography:
North America	$	67,858	$	44,974	$	—	$	112,832	$	78,917	$	48,758	$	32,251	$	159,926
International	1,372		3,286		5,993		10,651		6,963		1,393		3,798		12,154
Total revenue	$	69,230	$	48,260	$	5,993	$	123,483	$	85,880	$	50,151	$	36,049	$	172,080



	As of September 30, 2018			As of June 30, 2018
	Units	Ownership %		Units	Ownership %
Non-controlling LLC Unit holders ownership in Malibu Boats Holdings, LLC	844,652	3.9	%	1,043,186	4.8	%
Malibu Boats, Inc. ownership in Malibu Boats Holdings, LLC	20,776,651	96.1	%	20,555,348	95.2	%
	21,621,303	100.0	%	21,598,534	100.0	%



Consideration:
Cash consideration paid	$	129,525
Equity consideration paid	1,000
Fair value of total consideration transferred	$	130,525

Recognized amounts of identifiable assets acquired and (liabilities assumed), at fair value:
Cash	$	3,973
Accounts receivable	2,329
Inventories	14,343
Other current assets	363
Property, plant and equipment	12,934
Identifiable intangible assets	89,900
Current liabilities	(13,108		)
Fair value of assets acquired and liabilities assumed	110,734
Goodwill	19,791
Total purchase price	$	130,525



	Estimates of Fair Value		Estimated Useful Life (in years)
Definite-lived intangibles:
Dealer relationships	$	25,400	20
Total definite-lived intangibles	25,400
Indefinite-lived intangible:
Trade name	32,500
Total intangible assets	$	57,900



Fiscal years ending June 30:
	Remainder of 2020	$	4,545
	2021	6,052
	2022	4,551
	2023	4,414
	2024	4,414
	Thereafter	56,939
		$	80,915



Fiscal years ending June 30:
	Remainder of 2019	$	3,783
	2020	4,873
	2021	4,792
	2022	3,291
	2023	3,154
	Thereafter	41,995
		$	61,888



	As of September 30, 2019			As of June 30, 2019
Land	$	2,194		$	2,194
Building and leasehold improvements	29,476			28,957
Machinery and equipment	48,941			46,618
Furniture and fixtures	6,850			6,734
Construction in process	17,079			9,764
	104,540			94,267
Less: Accumulated depreciation	(31,562		)	(28,511		)
Property, plant and equipment, net	$	72,978		$	65,756



Goodwill as of June 30, 2019	$	51,404
Effect of foreign currency changes on goodwill	(244		)
Goodwill as of September 30, 2019	$	51,160



Goodwill as of June 30, 2018	$	32,230
Effect of foreign currency changes on goodwill	(169		)
Goodwill as of September 30, 2018	$	32,061



	Three Months Ended
	September 30, 2018			September 30, 2017
Beginning balance	$	17,217		$	10,050
Add: Warranty expense	2,916			3,008
Additions for Cobalt acquisition	—			4,404
Less: Warranty claims paid	(2,134		)	(2,737		)
Ending balance	$	17,999		$	14,725



	As of September 30, 2019			As of June 30, 2019
Term loans	$	75,000		$	75,000
Revolving credit loan	40,000			40,000
Less unamortized debt issuance costs	(1,265		)	(1,367		)
Total debt	113,735			113,633
Less current maturities	—			—
Long-term debt less current maturities	$	113,735		$	113,633



Classification		As of September 30, 2019
Assets
Right-of-use assets	Other assets	$	15,622

Liabilities
Current operating lease liabilities	Accrued expenses	$	1,978
Long-term operating lease liabilities	Other liabilities	15,412
Total lease liabilities		$	17,390



Classification		Three months ended September 30, 2019
Operating lease costs ⁽¹⁾	Cost of sales	$	477
	Selling, general and administrative	223

Sublease income	Other income (expense)	10

Cash paid for amounts included in the measurement of operating lease liabilities	Cash flows from operating activities	647



	Amount
2020 (nine months remaining)	$	1,932
2021	2,495
2022	2,358
2023	2,422
2024	2,563
2025 and thereafter	8,321
Total	20,091
Less imputed interest	(2,701		)
Present value of lease liabilities	$	17,390



	Amount
2020	$	2,552
2021	2,541
2022	2,432
2023	2,489
2024	2,649
2025 and thereafter	8,577
Total	$	21,240



	Fair Value Measurements at Reporting Date Using
	Total		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
As of September 30, 2019:
Assets
Interest rate swap not designated as cash flow hedge	$	30	$	—	$	30	$	—
Total assets at fair value	$	30	$	—	$	30	$	—

As of June 30, 2019:
Assets
Interest rate swap not designated as cash flow hedge	$	68	$	—	$	68	$	—
Total assets at fair value	$	68	$	—	$	68	$	—



	Shares	Weighted Average Exercise Price/Share
Total outstanding options as of June 30, 2019	185,473	$	32.51
Options granted	—	—
Options exercised	—	—
Outstanding options as of September 30, 2019	185,473	32.51
Exercisable as of September 30, 2019	51,000	$	31.07



	September 30, 2018
	Shares		Price or range per share	Weighted Average Exercise Price/Share
Total outstanding options at beginning of year	144,000		$27.24	$	27.24
Options granted	50,000		42.13	42.13
Options exercised	(26,000	)	(25.85)	(25.85		)
Outstanding options at end of period	168,000		25.85 - 42.13	31.89
Exercisable at end of period	5,000		$30.87	$	30.87



	Number of Restricted Stock Units and Restricted Stock Awards Outstanding		Weighted Average Grant Date Fair Value
Total Non-vested Restricted Stock Units and Restricted Stock Awards as of June 30, 2019	226,240		$	29.64
Granted	1,411		38.85
Vested	(33,667	)	(23.67		)
Forfeited	—		—
Total Non-vested Restricted Stock Units and Restricted Stock Awards as of September 30, 2019	193,984		$	30.75


•	Boat and trailer sales—consists of sales of boats and trailers to our dealer network. Nearly all of our boat sales include optional feature upgrades purchased by the consumer, which increase the average selling price of our boats; and


•	Parts and other sales—consists of sales of replacement and aftermarket boat parts and accessories to our dealer network; and consists of royalty income earned from license agreements with various boat manufacturers, including Nautique, Chaparral, Mastercraft, and Tige related to the use of our intellectual property.


•	Sales returns—consists primarily of contractual repurchases of boats either repossessed by the floor plan financing provider from the dealer or returned by the dealer under our warranty program; and



(1)	Provision for income taxes for the three months ended September 30, ~~2018~~2019 reflects ~~the impact of the Tax Act adopted in December 2017, which among other items, lowered the U.S. corporate~~an increase to income tax ~~rate from 35%~~expense of $1.3 million primarily due to ~~21%, effective January 1, 2018.~~increased consolidated earnings, including Pursuit. See Note 1214 to our unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report.
(2)	For the three months ended September 30, ~~2017,~~2019, represents legal and advisory fees related to our litigation with ~~MasterCraft Boat Company, LLC ("MasterCraft") which was settled~~Skier's Choice, Inc. See Note 17 to our unaudited interim condensed consolidated financial statements included elsewhere in ~~May 2017.~~this Quarterly Report.
(3)	For the three months ended September 30, 2018, represents legal and advisory fees incurred in connection with our acquisition of Pursuit on October 15, ~~2018. For the three months ended September 30, 2017 represents legal~~2018 and ~~advisory fees as well as~~ integration costs ~~incurred in connection with~~related to our ~~acquisition~~acquisitions of Cobalt on July 6, 2017. Integration related expenses for the three months ended September 30, 2017 include post-acquisition adjustments to cost of goods sold of $1.5 million for the fair value step up of inventory acquired, most of which was sold during the first quarter of fiscal 2018.Pursuit and Cobalt.
(4)	Represents equity-based incentives awarded to key employees under the Malibu Boats, Inc. Long-Term Incentive Plan and profit interests issued under the previously existing limited liability company agreement of the LLC. For more information, see Note 1315 to our unaudited interim condensed consolidated financial statements included elsewhere in this Quarterly Report.
(5)	Represents costs incurred in connection with our vertical integration of engines including product development costs and supplier transition performance incentives.
~~(6)~~	For the three months ended September 30, 2017, represents an increase in the estimated tax receivable agreement liability attributable to an expansion of state jurisdictions related to our acquisition of Cobalt in July 2017. This expansion resulted in an increase in the estimated tax rate used in computing our future tax obligations and, in turn, increased the future tax benefit we expect to realize related to increased tax basis from previous sales and exchanges of LLC Units by pre-IPO owners.



Period	Total Number of Shares Purchased	Average Price Paid Per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans	Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plan⁽¹⁾
July	—	$	—	—	$	35,000
August	—	—		—	35,000
September	383,404	29.01		383,404	23,877
Total	383,404	$	29.01	383,404	$	23,877



Exhibit No.		Description
~~2.1~~3.1		~~Asset Purchase Agreement, dated August 21, 2018 among Malibu Boats, LLC, PB Holdco, LLC, S2 Yachts, Inc., Gen 123 Properties, LLC and the other parties named therein~~ ⁵
~~3.1~~		Certificate of Incorporation of Malibu Boats, Inc. ¹
3.2		Bylaws of Malibu Boats, Inc. ¹
3.3		Certificate of Formation of Malibu Boats Holdings, LLC ¹
3.4		First Amended and Restated Limited Liability Company Agreement of Malibu Boats Holdings, LLC, dated as of February 5, 2014 ²
3.4.1		First Amendment, dated as of February 5, 2014, to First Amended and Restated Limited Liability Company Agreement of Malibu Boats Holdings, LLC ³
3.4.2		Second Amendment, dated as of June 27, 2014, to First Amended and Restated Limited Liability Company Agreement of Malibu Boats Holdings, LLC ⁴
4.1		Form of Class A Common Stock Certificate ¹
4.2		Form of Class B Common Stock Certificate ¹
4.3		Exchange Agreement, dated as of February 5, 2014, by and among Malibu Boats, Inc. and Affiliates of Black Canyon Capital LLC and Horizon Holdings, LLC ²
4.4		Exchange Agreement, dated as of February 5, 2014, by and among Malibu Boats, Inc. and the Members of Malibu Boats Holdings, LLC ²
4.5		Tax Receivable Agreement, dated as of February 5, 2014, by and among Malibu Boats, Inc., Malibu Boats Holdings, LLC and the Other Members of Malibu Boats Holdings, LLC ²
~~10.1~~		First Incremental Facility Amendment and First Amendment dated August 21, 2018 to the Second Amended and Restated Credit Agreement, by and among Malibu Boats, LLC, Malibu Boats Holdings, LLC, the other guarantors party thereto, the lenders party thereto, and SunTrust Bank, as administrative agent, as issuing bank and as swingline lender⁵
31.1		Certificate of the Chief Executive Officer of Malibu Boats, Inc. pursuant to Rule 13a-14 or 15d-14 of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2		Certificate of the Chief Financial Officer of Malibu Boats, Inc. pursuant to Rule 13a-14 or 15d-14 of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32		Certification of the Chief Executive Officer and Chief Financial Officer of Malibu Boats, Inc. pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
~~101.INS~~101		~~XBRL Instance Document~~The following financial statements from the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2019 were formatted in Inline XBRL: (i) Condensed Consolidated Statements of Operations and Comprehensive Income (Loss), (ii) Condensed Consolidated Balance Sheets, (iii) Condensed Consolidated Statements of Stockholders’ Equity, (iv) Condensed Consolidated Statements of Cash Flows, and (v) the Notes to Condensed Consolidated Financial Statements, tagged as blocks of text and including detailed tags.
~~101.SCH~~104		The cover page from the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2019, formatted in Inline XBRL ~~Taxonomy Extension Schema Document~~
~~101.CAL~~		~~XBRL Taxonomy Calculation Linkbase Document~~
~~101.DEF~~		~~XBRL Definition Linkbase Document~~
~~101.LAB~~		~~XBRL Taxonomy Label Linkbase Document~~
~~101.PRE~~		~~XBRL Taxonomy Presentation Linkbase Document~~(Included as Exhibit 101).


(1)	Filed as an exhibit to Amendment No. 1 to the Company’s registration statement on Form S-1 (Registration No. 333-192862) filed on January 8, 2014.