Malibu Boats Inc.

05/04/2021 | Press release | Distributed by Public on 05/04/2021 14:10

Quarterly Report (SEC Filing - 10-Q)

Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
☑ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2021
OR
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number: 001-36290
MALIBU BOATS, INC.
(Exact Name of Registrant as specified in its charter)
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
(Registrant's telephone number,
including area code)
Securities registered pursuant to Section 12(b) of the Act:
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

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes☑No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes☑No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of 'large accelerated filer,' 'accelerated filer,' 'smaller reporting company,' and 'emerging growth company' in Rule 12b-2 of the Exchange Act:
Large Accelerated Filer ☑ Accelerated filer ☐
Non-accelerated filer
☐
Smaller reporting company ☐
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. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes ☐ No ☑


Class A Common Stock, par value $0.01, outstanding as of May 3, 2021:
20,847,019 shares
Class B Common Stock, par value $0.01, outstanding as of May 3, 2021:
10 shares


Table of Contents
TABLE OF CONTENTS
Page
PART I
FINANCIAL INFORMATION
1
Item 1.
Financial Statements
1
Condensed Consolidated Statements of Operations and Comprehensive Income (Unaudited)
1
Condensed Consolidated Balance Sheets (Unaudited)
2
Condensed Consolidated Statements of Stockholders' Equity (Unaudited)
3
Condensed Consolidated Statements of Cash Flows (Unaudited)
6
Notes to Unaudited Condensed Consolidated Financial Statements
7
Item 2.
Management's Discussion and Analysis of Financial Condition and Results of Operations
24
Item 3.
Quantitative and Qualitative Disclosures About Market Risk
45
Item 4.
Controls and Procedures
45
PART II
OTHER INFORMATION
46
Item 1.
Legal Proceedings
46
Item 1A.
Risk Factors
46
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
46
Item 3.
Defaults Upon Senior Securities
46
Item 4.
Mine Safety Disclosures
46
Item 5.
Other Information
46
Item 6.
Exhibits
47
SIGNATURES
48


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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains forward-looking statements. All statements other than statements of historical facts contained in this Form 10-Q are forward-looking statements, including statements regarding the effects of the COVID-19 pandemic on us; demand for our products and expected industry trends, our business strategy and plans, our prospective products or products under development, our vertical integration initiatives, our acquisition strategy and management's objectives for future operations. In particular, many of the statements under the heading 'Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations' constitute forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as 'may,' 'will,' 'should,' 'expects,' 'plans,' 'anticipates,' 'believes,' 'estimates,' 'predicts,' 'potential,' 'continue,' the negative of these terms, or by other similar expressions that convey uncertainty of future events or outcomes to identify these forward-looking statements. These statements are only predictions, involving known and unknown risks, uncertainties and other factors that may cause our or our industry's actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. Such factors include, but are not limited to: the effects of the COVID-19 pandemic on us; general industry, economic and business conditions; significant fluctuations in our annual and quarterly financial results; unfavorable weather conditions, policies impacting access to waterways and shelter-in-place orders; our reliance on our network of independent dealers and increasing competition for dealers; the financial health of our dealers and their continued access to financing; our obligation to repurchase inventory of certain dealers; the success of our engine integration strategy; our reliance on certain suppliers for our engines and outboard motors; our reliance on third-party suppliers for raw materials and components and any interruption of our informal supply arrangements; our ability to meet our manufacturing workforce needs; exposure to workers' compensation claims and other workplace liabilities; our ability to grow our business through acquisitions and integrate such acquisitions to fully realize their expected benefits, including our recent acquisition of Maverick Boat Group; our growth strategy which may require us to secure significant additional capital; our large fixed cost base; intense competition within our industry; increased consumer preference for used boats or the supply of new boats by competitors in excess of demand; the successful introduction of new products; competition with other activities for consumers' scarce leisure time; the continued strength of our brands; our ability to execute our manufacturing strategy successfully; our exposure to claims for product liability and warranty claims; our dependence on key personnel; our ability to protect our intellectual property; disruptions to our network and information systems; risks inherent in operating in foreign jurisdictions; rising concern regarding international tariffs; changes in currency exchange rates; an increase in energy and fuel costs; any failure to comply with laws and regulations including environmental and other regulatory requirements; a natural disaster, global pandemic or other disruption at our manufacturing facilities; increases in income tax rates or changes in income tax laws; covenants in our credit agreement governing our revolving credit facility and term loan which may limit our operating flexibility; our variable rate indebtedness which subjects us to interest rate risk; and any failure to maintain effective internal control over financial reporting or disclosure controls or procedures. We discuss many of these factors, risks and uncertainties in greater detail under the heading 'Item 1A. Risk Factors' in our Form 10-K for the year ended June 30, 2020, filed with the Securities and Exchange Commission on August 31, 2020, and 'Item 1A. Risk Factors' in our Form 10-Q for the quarter ended December 31, 2020, filed with the Securities and Exchange Commission on February 9, 2021, as such disclosures may be amended, supplemented or superseded from time to time by other reports we file with the Securities and Exchange Commission, including subsequent annual reports on Form 10-K and quarterly reports on Form 10-Q.
Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Actual results may differ materially from those suggested by the forward-looking statements for various reasons. Except as required by law, we assume no obligation to update forward-looking statements for any reason after the date of this Form 10-Q to conform these statements to actual results or to changes in our expectations.
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Part I - Financial Information


Item 1. Financial Statements
MALIBU BOATS, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Operations and Comprehensive Income (Unaudited)
(In thousands, except share and per share data)

Three Months Ended
March 31, 		Nine Months Ended
March 31,
2021 2020 2021 2020
Net sales $ 273,162 $ 182,310 $ 649,793 $ 534,502
Cost of sales 201,134 136,461 482,535 408,784
Gross profit 72,028 45,849 167,258 125,718
Operating expenses:
Selling and marketing 4,667 4,572 12,280 14,304
General and administrative 18,402 9,643 45,092 30,389
Amortization 2,094 1,501 5,142 4,622
Operating income 46,865 30,133 104,744 76,403
Other (income) expense, net:
Other income, net (7) (1,660) (29) (1,679)
Interest expense 796 940 1,797 3,064
Other (income) expense, net 789 (720) 1,768 1,385
Income before provision for income taxes 46,076 30,853 102,976 75,018
Provision for income taxes 10,941 6,987 23,656 16,872
Net income 35,135 23,866 79,320 58,146
Net income attributable to non-controlling interest 1,339 1,088 3,206 2,787
Net income attributable to Malibu Boats, Inc. $ 33,796 $ 22,778 $ 76,114 $ 55,359
Comprehensive income:
Net income $ 35,135 $ 23,866 $ 79,320 $ 58,146
Other comprehensive income (loss):
Change in cumulative translation adjustment (262) (2,078) 1,790 (2,086)
Other comprehensive income (loss) (262) (2,078) 1,790 (2,086)
Comprehensive income 34,873 21,788 81,110 56,060
Less: comprehensive income attributable to non-controlling interest 1,329 993 3,282 2,692
Comprehensive income attributable to Malibu Boats, Inc. $ 33,544 $ 20,795 $ 77,828 $ 53,368
Weighted average shares outstanding used in computing net income per share:
Basic 20,799,405 20,630,741 20,722,339 20,684,034
Diluted 21,032,360 20,775,108 20,939,927 20,827,958
Net income available to Class A Common Stock per share:
Basic $ 1.62 $ 1.11 $ 3.67 $ 2.68
Diluted $ 1.61 $ 1.09 $ 3.63 $ 2.66

The accompanying notes are an integral part of the Condensed Consolidated Financial Statements (Unaudited).
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MALIBU BOATS, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets (Unaudited)
(In thousands, except share and per share data)

March 31, 2021 June 30, 2020
Assets
Current assets
Cash $ 42,993 $ 33,787
Trade receivables, net 36,918 13,767
Inventories, net 115,712 72,946
Prepaid expenses and other current assets 5,279 3,954
Total current assets 200,902 124,454
Property, plant and equipment, net 123,988 94,310
Goodwill 101,126 51,273
Other intangible assets, net 237,493 139,892
Deferred tax assets 49,208 52,935
Other assets 17,549 14,482
Total assets $ 730,266 $ 477,346
Liabilities
Current liabilities
Current maturities of long-term obligations $ 4,250 $ -
Accounts payable 40,596 15,846
Accrued expenses 75,606 50,485
Income taxes and tax distribution payable 4,585 243
Payable pursuant to tax receivable agreement, current portion 3,589 3,589
Total current liabilities 128,626 70,163
Deferred tax liabilities 28,177 14
Other liabilities 20,518 16,727
Payable pursuant to tax receivable agreement, less current portion 48,150 46,076
Long-term debt 159,190 82,839
Total liabilities 384,661 215,819
Commitments and contingencies (See Note 16)
Stockholders' Equity
Class A Common Stock, par value $0.01 per share, 100,000,000 shares authorized; 20,844,019 shares issued and outstanding as of March 31, 2021; 20,595,969 issued and outstanding as of June 30, 2020
207 204
Class B Common Stock, par value $0.01 per share, 25,000,000 shares authorized; 11 shares issued and outstanding as of March 31, 2021; 15 shares issued and outstanding as of June 30, 2020
- -
Preferred Stock, par value $0.01 per share; 25,000,000 shares authorized; no shares issued and outstanding as of March 31, 2021 and June 30, 2020
- -
Additional paid in capital 109,692 103,797
Accumulated other comprehensive loss (1,342) (3,132)
Accumulated earnings 229,825 153,711
Total stockholders' equity attributable to Malibu Boats, Inc. 338,382 254,580
Non-controlling interest 7,223 6,947
Total stockholders' equity 345,605 261,527
Total liabilities and stockholders' equity $ 730,266 $ 477,346
The accompanying notes are an integral part of the Condensed Consolidated Financial Statements (Unaudited).
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MALIBU BOATS, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Stockholders' Equity (Unaudited)
(In thousands, except number of Class B shares)
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
Balance at June 30, 2020 20,596 $ 204 15 $ - $ 103,797 $ (3,132) $ 153,711 $ 6,947 $ 261,527
Net income - - - - - - 21,093 945 22,038
Stock based compensation, net of withholding taxes on vested equity awards (3) - - - 658 - - - 658
Issuances of equity for services - - - - 59 - - - 59
Issuances of equity for exercise of stock options 9 - - - 300 - - - 300
Increase in payable pursuant to the tax receivable agreement - - - - (330) - - - (330)
Increase in deferred tax asset from step-up in tax basis - - - - 480 - - - 480
Exchange of LLC Units for Class A Common Stock 28 - (2) - 264 - - (264) -
Distributions to LLC Unit holders - - - - - - - (449) (449)
Foreign currency translation adjustment - - - - - 630 - 22 652
Balance at September 30, 2020 20,630 $ 204 13 $ - $ 105,228 $ (2,502) $ 174,804 $ 7,201 $ 284,935
Net income - - - - - - 21,225 922 22,147
Stock based compensation, net of withholding taxes on vested equity awards 110 2 - - 750 - - - 752
Issuances of equity for services 1 - - - 659 - - - 659
Increase in payable pursuant to the tax receivable agreement - - - - (213) - - - (213)
Increase in deferred tax asset from step-up in tax basis - - - - 229 - - - 229
Exchange of LLC Units for Class A Common Stock 12 - (1) - 118 - - (118) -
Distributions to LLC Unit holders - - - - - - - (495) (495)
Foreign currency translation adjustment - - - - - 1,422 - 48 1,470
Balance at December 31, 2020 20,753 $ 206 12 $ - $ 106,771 $ (1,080) $ 196,029 $ 7,558 $ 309,484
Net income - - - - - - 33,796 1,339 35,135
Stock based compensation, net of withholding taxes on vested equity awards 2 - - - 1,400 - - - 1,400
Issuances of equity for services - - - - 59 - - - 59
Issuances of equity for exercise of stock options 2 - - - 75 - - - 75
Increase in payable pursuant to the tax receivable agreement - - - - (1,531) - - - (1,531)
Increase in deferred tax asset from step-up in tax basis - - - - 1,963 - - - 1,963
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Exchange of LLC Units for Class A Common Stock 87 1 (1) - 955 - - (955) 1
Distributions to LLC Unit holders - - - - - - - (710) (710)
Foreign currency translation adjustment - - - - - (262) - (9) (271)
Balance at March 31, 2021 20,844 $ 207 11 $ - $ 109,692 $ (1,342) $ 229,825 $ 7,223 $ 345,605

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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
Balance at June 30, 2019 20,853 $ 207 15 $ - $ 113,004 $ (2,828) $ 93,852 $ 6,118 $ 210,353
Net income - - - - - - 15,859 823 16,682
Stock based compensation, net of withholding taxes on vested equity awards (5) - - - 435 - - - 435
Issuances of equity for services - - - - 80 - - - 80
Repurchase and retirement of common stock (383) (4) - - (11,119) - - - (11,123)
Cumulative-effect transition adjustment for ASC 842 - - - - - - (1,703) - (1,703)
Distributions to LLC Unit Holders - - - - - - - (399) (399)
Foreign currency translation adjustment - - - - - (623) - (25) (648)
Balance at September 30, 2019 20,465 $ 203 15 $ - $ 102,400 $ (3,451) $ 108,008 $ 6,517 $ 213,677
Net income - - - - - - 16,722 876 17,598
Stock based compensation, net of withholding taxes on vested equity awards 116 1 - - 236 - - - 237
Issuances of equity for services 2 - - - 655 - - - 655
Distributions to LLC Unit Holders - - - - - - - (446) (446)
Foreign currency translation adjustment - - - - - 615 - 25 640
Balance at December 31, 2019 20,583 $ 204 15 $ - $ 103,291 $ (2,836) $ 124,730 $ 6,972 $ 232,361
Net income - - - - - - 22,778 1,088 23,866
Stock based compensation, net of withholding taxes on vested equity awards 1 - - - 789 - - - 789
Issuances of equity for services - - - - 58 - - - 58
Issuances of equity for exercise of stock options 12 - - - 377 - - - 377
Repurchase and retirement of common stock (100) (1) - - (2,709) - - - (2,710)
Increase in payable pursuant to the tax receivable agreement - - - - (440) - - - (440)
Increase in deferred tax asset from step-up in tax basis - - - - 574 - - - 574
Exchange of LLC Units for Class A Common Stock 41 1 - - 344 - - (344) 1
Distributions to LLC Unit Holders - - - - - - - (421) (421)
Foreign currency translation adjustment - - - - - (2,078) - (84) (2,162)
Balance at March 31, 2020 20,537 $ 204 15 $ - $ 102,284 $ (4,914) $ 147,508 $ 7,211 $ 252,293


The accompanying notes are an integral part of the Condensed Consolidated Financial Statements (Unaudited).

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MALIBU BOATS, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows (Unaudited)
(In thousands)
Nine Months Ended March 31,
2021 2020
Operating activities:
Net income $ 79,320 $ 58,146
Adjustments to reconcile net income to net cash provided by operating activities:
Non-cash compensation expense 4,060 2,306
Non-cash compensation to directors 627 621
Depreciation 11,215 9,040
Amortization 5,142 4,622
Deferred income taxes 6,032 7,876
Adjustment to tax receivable agreement liability - (1,650)
Other items, net 1,434 1,731
Change in operating assets and liabilities (excluding effects of acquisition):
Trade receivables (19,922) 6,217
Inventories (34,453) (21,601)
Prepaid expenses and other assets (1,623) (213)
Accounts payable 20,873 8,717
Income taxes payable 4,805 (2,122)
Accrued expenses 23,473 2,192
Other liabilities (614) (1,701)
Net cash provided by operating activities 100,369 74,181
Investing activities:
Purchases of property, plant and equipment (19,117) (30,143)
Payment for acquisition, net of cash acquired (150,427) -
Net cash used in investing activities (169,544) (30,143)
Financing activities:
Proceeds from long-term borrowings 25,000 -
Proceeds from revolving credit facility 65,000 103,800
Principal payments on long-term borrowings (313) -
Payments on revolving credit facility (8,800) (25,000)
Payment of deferred financing costs (638) -
Proceeds received from exercise of stock options 375 377
Cash paid for withholding taxes on vested restricted stock (1,208) (831)
Distributions to LLC Unit holders (1,048) (1,415)
Repurchase and retirement of common stock - (13,833)
Net cash provided by financing activities 78,368 63,098
Effect of exchange rate changes on cash 13 (366)
Changes in cash 9,206 106,770
Cash-Beginning of period 33,787 27,392
Cash-End of period $ 42,993 $ 134,162
Supplemental cash flow information:
Cash paid for interest $ 1,433 $ 2,964
Cash paid for income taxes 12,599 10,323

The accompanying notes are an integral part of the Condensed Consolidated Financial Statements (Unaudited).
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MALIBU BOATS, INC. AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements
(Dollars in thousands, except per unit and per share data)
1. Organization, Basis of Presentation, and Summary of Significant Accounting Policies
Organization
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. The LLC, through its wholly owned subsidiary, Malibu Boats, LLC, ('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 December 31, 2020, the Company acquired all of the outstanding stock of Maverick Boat Group, Inc. ('Maverick Boat Group'). As a result of the acquisition, the Company consolidates the financial results of the Maverick Boat Group. Maverick Boat Group designs and manufactures center console, dual console, flats and bay boats under four brands -- Cobia, Pathfinder, Maverick and Hewes brands. In addition to the Maverick Boat Group's family of brands, the Company sells its boats under the Malibu, Axis, Cobalt and Pursuit brands. In connection with the acquisition of Maverick Boat Group, the Company revised its segment reporting to report its results of operations under three reportable segments -- Malibu, Cobalt and Saltwater Fishing.
COVID-19 Pandemic
The COVID-19 pandemic has impacted the Company's operations and financial results since the third quarter of fiscal year 2020 and continues to impact the Company. The Company elected to suspend operations at all of its facilities on March 24, 2020. The shut-down continued into the fourth quarter 2020 with operations resuming between late April and early May, depending on the facility. As a result, the Company was not able to ship boats to its dealers during the period of shut-down, which negatively impacted its net sales for the second half of fiscal year 2020. In addition, the COVID-19 pandemic has impacted and may continue to impact the operations of the Company's dealers and suppliers. The future impact of COVID-19 on the Company's financial condition and results of operations will depend on a number of factors, including factors that we may not be able to forecast at this time.
Basis of Presentation
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, 2020, included in the Company's Annual Report on Form 10-K. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Units and shares are presented as whole numbers while all dollar amounts are presented in thousands, unless otherwise noted.
Acquisition of Maverick Boat Group, Inc. and Related Financing
On December 31, 2020, MBG Holdco, Inc., a wholly-owned subsidiary of Boats, LLC, acquired all of the outstanding shares of Maverick Boat Group from its existing stockholders for a purchase price of $150,675. The purchase price was subject to customary adjustments for the amounts of cash, indebtedness and working capital in the business at the closing date and subject to adjustment for certain capital expenditures made by Maverick Boat Group prior to closing at the Company's request. With two manufacturing facilities located in Fort Pierce, Florida, Maverick Boat Group designs and manufactures center console, dual console, flats and bay boats under four brand names Cobia, Pathfinder, Maverick, and Hewes. The Company paid the purchase price with cash on hand and $90,000 of borrowings under its credit facilities following an amendment to increase the amount available under its credit facilities as described below.
On December 30, 2020, Boats, LLC, as the borrower, entered into the Third Incremental Facility Amendment and Third Amendment (the 'Third Amendment') to its existing Second Amended and Restated Credit Agreement dated as of June 28,
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2017, by and among Boats LLC, the LLC and certain subsidiaries of Boats LLC parties thereto, as guarantors, the lenders parties thereto and Truist Bank (successor by merger to SunTrust Bank), as administrative agent, swingline lender and issuing bank (as amended, the 'Credit Agreement'). The Third Amendment added a $25,000 incremental term loan facility with a maturity date of July 1, 2024 and increased the borrowing capacity available under the revolving credit facility by $50,000 from $120,000 to $170,000. The $25,000 incremental term loans made pursuant to the Third Amendment is subject to quarterly amortization at a rate of 5.0% per annum through December 31, 2022 and at a rate of 7.5% per annum thereafter and accrues interest at the same rate as other loans under the Credit Agreement.
Refer to Notes 4, 10and 17for further information.
Segment Information
Effective December 31, 2020, the Company revised its segment reporting to account for its acquisition of Maverick Boat Group and conform to changes in its internal management reporting based on the Company's boat manufacturing operations. The Company previously had three reportable segments, Malibu, Cobalt and Pursuit. The Company now aggregates Pursuit and Maverick Boat Group into one reportable segment as they have similar economic characteristics and qualitative factors. As a result the Company continues to have three reportable segments, Malibu, Cobalt and Saltwater Fishing. See Note 17.
Principles of Consolidation
The accompanying unaudited interim condensed consolidated financial statements include the operations and accounts of the Company and all subsidiaries thereof. All intercompany balances and transactions have been eliminated upon consolidation.
Recent Accounting Pronouncements
In June 2016, the FASB issued Accounting Standards Update ('ASU') 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, and in November 2018 issued a subsequent amendment, ASU 2018-19, Codification Improvements to Topic 326, Financial Instruments - Credit Losses. ASU 2016-13 significantly changes how entities will measure credit losses for most financial assets and certain other instruments that are not measured at fair value through net income. ASU 2016-13 will replace today's 'incurred loss' approach with an 'expected loss' model for instruments measured at amortized cost. ASU 2018-19 will affect loans, debt securities, trade receivables, net investments in leases, off balance sheet credit exposures, reinsurance receivables, and any other financial assets not excluded from the scope of this amendment that have the contractual right to receive cash. On July 1, 2020, the Company adopted this standard and the adoption did not have a material impact on the Company's consolidated financial position, results of operations, equity or cash flows.
There are no other new accounting pronouncements that are expected to have a significant impact on the Company's consolidated financial statements and related disclosures.
2. Revenue Recognition
The following tables disaggregate the Company's revenue by major product type and geography:
Three Months Ended March 31, 2021 Nine Months Ended March 31, 2021
Malibu Cobalt Saltwater Fishing Consolidated Malibu Cobalt Saltwater Fishing Consolidated
Revenue by product:
Boat and trailer sales $ 133,349 $ 54,585 $ 79,510 $ 267,444 $ 333,030 $ 144,922 $ 155,336 $ 633,288
Part and other sales 4,678 661 379 5,718 13,445 2,284 776 16,505
Total revenue $ 138,027 $ 55,246 $ 79,889 $ 273,162 $ 346,475 $ 147,206 $ 156,112 $ 649,793
Revenue by geography:
North America $ 119,936 $ 52,256 $ 76,429 $ 248,621 $ 314,096 $ 141,405 $ 149,020 $ 604,521
International 18,091 2,990 3,460 24,541 32,379 5,801 7,092 45,272
Total revenue $ 138,027 $ 55,246 $ 79,889 $ 273,162 $ 346,475 $ 147,206 $ 156,112 $ 649,793

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Three Months Ended March 31, 2020 Nine Months Ended March 31, 2020
Malibu Cobalt Saltwater Fishing Consolidated Malibu Cobalt Saltwater Fishing Consolidated
Revenue by product:
Boat and trailer sales $ 100,037 $ 45,580 $ 33,472 $ 179,089 $ 276,470 $ 143,459 $ 102,993 $ 522,922
Part and other sales 2,567 448 206 3,221 9,341 1,714 525 11,580
Total revenue $ 102,604 $ 46,028 $ 33,678 $ 182,310 $ 285,811 $ 145,173 $ 103,518 $ 534,502
Revenue by geography:
North America $ 94,250 $ 43,601 $ 32,720 $ 170,571 $ 262,810 $ 139,181 $ 98,085 $ 500,076
International 8,354 2,427 958 11,739 23,001 5,992 5,433 34,426
Total revenue $ 102,604 $ 46,028 $ 33,678 $ 182,310 $ 285,811 $ 145,173 $ 103,518 $ 534,502
Boat and Trailer Sales
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 are incentives that the Company provides to its dealers based on sales of eligible products.
Parts and Other Sales
Consists primarily of parts and accessories sales, royalty income and clothing sales. Parts and accessories sales include replacement and aftermarket boat parts and accessories sold to the Company's dealer network. Royalty income is earned from license agreements with various boat manufacturers, including Nautique, Chaparral, Mastercraft, and Tige related to the use of the Company's intellectual property.
3. Non-controlling Interest
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 March 31, 2021 As of June 30, 2020
Units Ownership % Units Ownership %
Non-controlling LLC Unit holders ownership in Malibu Boats Holdings, LLC 603,919 2.8 % 730,652 3.4 %
Malibu Boats, Inc. ownership in Malibu Boats Holdings, LLC 20,844,019 97.2 20,595,969 96.6
21,447,938 100.0 % 21,326,621 100.0 %
Issuance of Additional LLC Units
Under the first amended and restated limited liability company 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 nine months ended March 31, 2021, the Company caused the LLC to issue a total of 257,715 LLC Units to the Company in connection with (i) the Company's issuance of Class A Common Stock to a non-employee director for her services, (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
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Plan'), (iii) the issuance of restricted Class A Common Stock granted under the Incentive Plan (iv) the issuance of Class A Common Stock to LLC Unit holders in exchange of their LLC Units and (v) the issuance of Class A Common Stock for the exercise of options granted under the Incentive Plan. During the ninemonths ended March 31, 2021, 9,665 LLC Units were canceled in connection with the vesting of share-based equity awards to satisfy employee tax withholding requirements and the retirement of 9,665 treasury shares in accordance with the LLC Agreement.
Distributions and Other Payments to Non-controlling Unit Holders
Distributions for Taxes
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 March 31, 2021 and June 30, 2020, tax distributions payable to non-controlling LLC Unit holders were$710 and $104, respectively. During the nine months ended March 31, 2021 and 2020, tax distributions paid to the non-controlling LLC Unit holders were $1,048 and $1,415, respectively.
Other Distributions
Pursuant to the LLC Agreement, the Company has the right to determine when distributions will be made to LLC members and the amount of any such distributions. If the Company authorizes a distribution, such distribution will be made to the members of the LLC (including the Company) pro rata in accordance with the percentages of their respective LLC units.
4.Acquisitions
On December 31, 2020, the Company completed its acquisition of all the outstanding stock of Maverick Boat Group. The aggregate purchase price for the transaction was $150,675, funded with cash and borrowings under the Company's credit facilities. The aggregate purchase price was subject to certain adjustments, including customary adjustments for the amount of cash, indebtedness and working capital in the business at the closing date and subject to adjustment for certain capital expenditures made by Maverick Boat Group prior to closing at the Company's request. The Company accounted for the transaction in accordance with ASC Topic 805, Business Combinations.
The total consideration given to the stockholders of Maverick Boat Group has been allocated to the assets acquired and liabilities assumed based on preliminary estimates of fair value as of the date of the acquisition. The preliminary measurements of fair value were determined based upon estimates utilizing the assistance of third party valuation specialists, and are subject to change within the measurement period (up to one year from the acquisition date). The Company expects appraisals of tangible and intangible assets and working capital adjustments to be finalized during the fourth quarter of fiscal 2021.
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The following table summarizes the preliminary purchase price allocation based on the estimated fair values of the assets acquired and liabilities assumed at the acquisition date:
Consideration:
Cash consideration paid $ 150,675
Recognized preliminary amounts of identifiable assets acquired and (liabilities assumed), at fair value:
Cash $ 248
Accounts receivable 3,204
Inventories 7,756
Other current assets 194
Property, plant and equipment 22,618
Identifiable intangible assets 102,600
Other assets 4,410
Current liabilities (6,611)
Deferred tax liabilities (28,528)
Other liabilities (4,405)
Fair value of assets acquired and liabilities assumed 101,486
Goodwill 49,189
Total purchase price $ 150,675
The preliminary fair value estimates for the Company's identifiable intangible assets acquired as part of the acquisition are as follows:
Estimates of Fair Value Estimated Useful Life (in years)
Definite-lived intangibles:
Dealer relationships $ 47,900 20
Total definite-lived intangibles 47,900
Indefinite-lived intangible:
Trade name 54,700
Total intangible assets $ 102,600
The preliminary value allocated to inventories reflects the estimated fair value of the acquired inventory based on the expected sales price of the inventory, less an estimated cost to complete and a reasonable profit margin. The fair value of the identifiable intangible assets were determined based on the following approaches:
Dealer Relationships - The value associated with Maverick Boat Group's dealer relationships is attributed to its long standing dealer distribution network. The estimate of fair value assigned to this asset was determined using the income approach, which requires an estimate or forecast of the expected future cash flows from the dealer relationships through the application of the multi-period excess earnings approach. The estimated remaining useful life of dealer relationships is approximately twenty years.
Trade Name -The value attributed to Maverick Boat Group's trade names was determined using a variation of the income approach called the relief from royalty method, which requires an estimate or forecast of the expected future cash flows. The trade name has an indefinite life.
The fair value of the definite-lived intangible assets are being amortized using the straight-line method to amortization expenses over their estimated useful lives. Indefinite-lived intangible assets are not amortized, but instead are evaluated for potential impairment on an annual basis in accordance with the provisions of ASC Topic 350, Intangibles-Goodwill and Other. The weighted average useful life of identifiable definite-lived intangible assets acquired was 20 years. Goodwill of $49,189 arising from the acquisition consists of expected synergies and cost savings as well as intangible assets that do not qualify for separate recognition.
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Acquisition-related costs of $2,602, which were incurred by the Company in the first nine months of fiscal year 2021 related to the Maverick Boat Group 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 nine months ended March 31, 2021.
Pro Forma Financial Information (unaudited):
The following unaudited pro forma consolidated results of operations for the three and nine months ended March 31, 2021 and 2020, assumes that the acquisition of Maverick Boat Group occurred as of July 1, 2019. The unaudited interim pro forma financial information combines historical results of Malibu and Maverick Boat Group, 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 2020 or the results that may occur in the future:
Three Months Ended March 31, Nine Months Ended March 31,
2021 2020 2021 2020
Net sales $ 273,162 $ 213,945 $ 705,813 $ 630,946
Net income 35,135 25,719 81,636 62,196
Net income attributable to Malibu Boats, Inc. 33,796 24,571 78,377 59,295
Basic earnings per share $ 1.62 $ 1.19 $ 3.78 $ 2.87
Diluted earnings per share $ 1.61 $ 1.18 $ 3.74 $ 2.85

5. Inventories
Inventories, net consisted of the following:
As of March 31, 2021 As of June 30, 2020
Raw materials $ 85,436 $ 52,530
Work in progress 19,706 10,778
Finished goods 10,570 9,638
Total inventories $ 115,712 $ 72,946

6. Property, Plant and Equipment
Property, plant and equipment, net consisted of the following:
As of March 31, 2021 As of June 30, 2020
Land $ 4,600 $ 2,540
Building and leasehold improvements 73,989 54,318
Machinery and equipment 62,236 55,831
Furniture and fixtures 8,230 7,031
Construction in process 16,098 10,470
165,153 130,190
Less: Accumulated depreciation (41,165) (35,880)
Property, plant and equipment, net $ 123,988 $ 94,310
Depreciation expense was $4,130 and $2,938 for the three months ended March 31, 2021 and 2020, respectively, and $11,215 and $9,040 for the nine months ended March 31, 2021 and 2020, respectively substantially all of which was recorded in cost of sales.
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7. Goodwill and Other Intangible Assets
Changes in the carrying amount of goodwill for the nine months ended March 31, 2021 were as follows:
Malibu Cobalt Saltwater Fishing Consolidated
Goodwill as of June 30, 2020
$ 11,957 $ 19,791 $ 19,525 $ 51,273
Addition related to the acquisition - - 49,189 49,189
Effect of foreign currency changes on goodwill 664 - - 664
Goodwill as of March 31, 2021
$ 12,621 $ 19,791 $ 68,714 $ 101,126
The components of other intangible assets were as follows:
As of March 31, 2021 As of June 30, 2020 Estimated Useful Life (in years) Weighted Average Remaining Useful Life
(in years)
Definite-lived intangibles:
Dealer relationships $ 159,426 $ 111,293
8-20
17.8
Patent 3,986 3,986
12-15
11.3
Trade name 24,667 24,667 15 1.2
Non-compete agreement 54 48 10 3.6
Total 188,133 139,994
Less: Accumulated amortization (68,840) (63,602)
Total definite-lived intangible assets, net 119,293 76,392
Indefinite-lived intangible:
Trade name 118,200 63,500
Total other intangible assets, net $ 237,493 $ 139,892
Amortization expense recognized on all amortizable intangibles was $2,094 and $1,501 for the three months ended March 31, 2021 and 2020, respectively, and $5,142 and $4,622 for the nine months ended March 31, 2021 and 2020, respectively.
The estimated future amortization of definite-lived intangible assets is as follows:
Fiscal years ending June 30: Amount
Remainder of 2021 $ 2,112
2022 6,964
2023 6,828
2024 6,828
2025 6,824
2026 and thereafter 89,737
$ 119,293

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8. Accrued Expenses
Accrued expenses consisted of the following:
As of March 31, 2021 As of June 30, 2020
Warranties $ 32,271 $ 27,500
Dealer incentives 12,520 7,777
Accrued compensation 17,729 9,885
Current operating lease liabilities 2,034 2,006
Accrued legal and professional fees 1,831 1,055
Customer deposits 7,152 1,059
Other accrued expenses 2,069 1,203
Total accrued expenses $ 75,606 $ 50,485

9. Product Warranties
Malibu and Axis brand boats have a limited warranty for a period up to five years for both Malibu and Axis brand boats. The Company's Cobalt brand boats have (1) a structural warranty of up to ten years which covers the hull, deck joints, bulkheads, floor, transom, stringers, and motor mount and (2) a five year bow-to-stern warranty on all components manufactured or purchased (excluding hull and deck structural components), including canvas and upholstery. Gelcoat is covered up to three years for Cobalt and one year for Malibu and Axis. Pursuit brand boats have (1) a limited warranty for a period of up to five years on structural components such as the hull, deck and defects in the gelcoat surface of the hull bottom and (2) a bow to stern warranty of two years (excluding hull and deck structural components). Maverick, Pathfinder and Hewes brand boats have (1) a limited warranty for a period of up to five years on structural components such as the hull, deck and defects in the gelcoat surface of the hull bottom and (2) a bow to stern warranty of one year (excluding hull and deck structural components). Cobia brand boats have (1) a limited warranty for a period of up to ten years on structural components such as the hull, deck and defects in the gelcoat surface of the hull bottom and (2) a bow to stern warranty of three years (excluding hull and deck structural components). For each boat brand, there are certain materials, components or parts of the boat that are not covered by the Company's warranty and certain components or parts that are separately warranted by the manufacturer or supplier (such as the engine). Engines that the Company manufactures for Malibu and Axis models have a limited warranty of up to five years or five-hundred hours.
The Company's standard warranties require it or its dealers to repair or replace defective products during the warranty period at no cost to the consumer. The Company estimates warranty costs it expects to incur and records a liability for such costs at the time the product revenue is recognized. The Company utilizes historical claims trends and analytical tools to develop the estimate of its warranty obligation on a per boat basis, by brand and warranty year. 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 and adjusts the amounts as necessary. Beginning in model year 2016, the Company increased the term of its limited warranty for Malibu brand boats from three years to five years and for Axis brand boats from two years to five years. Beginning in model year 2018, the Company increased the term of its bow-to-stern warranty for Cobalt brand boats from three years to five years. As a result of these changes, all of the Company's Malibu, Axis and Cobalt brand boats with historical claims experience that are no longer covered under warranty had warranty terms shorter than the current warranty term of five years. Accordingly, the Company has little to no historical claims experience for warranty years four and five, and as such, these estimates give rise to a higher level of estimation uncertainty. Future warranty claims may differ from the Company's estimate of the warranty liability, which could lead to changes in the Company's warranty liability in future periods.
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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:
Three Months Ended March 31, Nine Months Ended March 31,
2021 2020 2021 2020
Beginning balance $ 31,046 $ 26,710 $ 27,500 $ 23,820
Add: Warranty expense 4,700 3,665 14,346 12,767
Additions for acquisitions - - 883 -
Less: Warranty claims paid (3,475) (2,977) (10,458) (9,189)
Ending balance $ 32,271 $ 27,398 $ 32,271 $ 27,398

10. Financing
Outstanding debt consisted of the following:
As of March 31, 2021 As of June 30, 2020
Term loan $ 99,688 $ 75,000
Revolving credit loan 65,000 8,800
Less unamortized debt issuance costs (1,248) (961)
Total debt 163,440 82,839
Less current maturities 4,250 -
Long-term debt less current maturities $ 159,190 $ 82,839
Long-Term Debt
As of March 31, 2021, the Company has a revolving credit facility with borrowing capacity of up to $170,000 and term loans with an aggregate principal amount of $99,688outstanding. As of March 31, 2021, the Company had $65,000 outstanding under its revolving credit facility and $1,234 in outstanding letters of credit, with $103,766available for borrowing. The revolving credit facility matures on July 1, 2024, the incremental term loan made on December 30, 2020 in a principal amount of $25,000 (the 'Incremental Term Loan') matures on July 1, 2024 and the remaining $75,000 of outstanding term loans (the 'Existing Term Loans,' and together with the Incremental Term Loans, the 'Term Loans') mature on July 1, 2022.
On December 30, 2020, Boats LLC entered into the Third Amendment to its Credit Agreement. The Third Amendment added a $25,000 Incremental Term Loan facility with a maturity date of July 1, 2024 and increased the borrowing capacity of the revolving credit facility by $50,000 from $120,000 to $170,000. The Incremental Term Loan is subject to quarterly amortization at a rate of 5.0% per annum through December 31, 2022 and at a rate of 7.5% per annum through June 30, 2024 and accrues interest at the same interest rate applicable to other loans under the Credit Agreement as described below.
The obligations of Boats LLC under the Credit Agreement are guaranteed by the LLC, and, subject to certain exceptions, the present and future domestic subsidiaries of Boats LLC, and all such obligations are secured by substantially all of the assets of the LLC, Boats LLC and such subsidiary guarantors. Malibu Boats, Inc. is not a party to the Credit Agreement. 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 London Inter-bank Offered Rate ('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 the LLC and its subsidiaries calculated on a consolidated basis. As of March 31, 2021, the interest rate on the Company's term loans and revolving credit facility was 1.36%. The Company is required to pay a commitment fee for any 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 Loans without any penalties. The Existing Term Loans require an amortization payment of approximately $3,000 on March 31, 2022, reflected as current maturities of long-term obligations, and the balance of the Existing Term Loans is due on the scheduled maturity date of July 1, 2022. The Incremental Term Loan of $25,000 is subject to quarterly amortization at a rate of 5.0% per year through December 31, 2022, resulting in $1,250 being
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reflected as current maturities of long-term obligations, 7.5% per year through June 30, 2024 and the balance of the Incremental Term Loan is due on the scheduled maturity date of July 1, 2024. The Credit Agreement also requires 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 $3,000 in any fiscal year, and (iv) share repurchase payments up to $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 $10,000 in any fiscal year, subject to compliance with other financial covenants.
In connection with entering into the Credit Agreement, the Company capitalized $2,074 in deferred financing costs during fiscal 2017. In connection with Third Amendment the Company capitalized $638 in deferred financing costs during the nine months ended March 31, 2021. These costs, in addition to the unamortized balance related to costs associated with the Company's previous credit facility of $671, are being amortized over the term of the Credit Agreement into interest expense using the effective interest method and presented as a direct offset to the total debt outstanding on the consolidated balance sheets.
The Company used proceeds from an offering on August 24, 2017 to repay $50,000 on its Existing Term Loans 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. 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.
Covenant Compliance
As of March 31, 2021, the Company was in compliance with the financial covenants contained in the Credit Agreement.
Interest Rate Swap
On July 1, 2015, the Company entered into a five year floating to fixed interest rate swap with an effective start date of July 1, 2015. The swap was based on a one-month LIBOR rate versus a 1.52% fixed rate on a notional value of $39,250, which under terms of the previously existing credit agreement, was equal to 50% of the outstanding balance of the term loan at the time of the swap arrangement. Under ASC Topic 815, Derivatives and Hedging, all derivative instruments are recorded on the unaudited interim condensed consolidated balance sheets at fair value as either short term or long term assets or liabilities based on their anticipated settlement date. The Company has elected not to designate its interest rate swap as a hedge for accounting purposes; therefore, changes in the fair value of the derivative instrument were being recognized in earnings in the Company's unaudited interim condensed consolidated statements of operations and comprehensive income. The swap matured on March 31, 2020. For the three and nine months ended March 31, 2020, the Company recorded a loss of $10 and $68, respectively, for the change in fair value of the interest rate swap, which was included in interest expense in the unaudited interim condensed consolidated statements of operations and comprehensive income.
11. Leases
The Company leases certain manufacturing facilities, warehouses, office space, land, and equipment. The Company determines if a contract is a lease or contains an embedded lease at the inception of the agreement. The Company recorded right-of-use assets, included in other assets on the consolidated balance sheet, totaling $16,142 as of July 1, 2019. Leases with an initial term of 12 months or less are not recorded on the unaudited interim condensed consolidated balance sheet. The Company does not separate non-lease components from the lease components to which they relate, and instead accounts for each separate lease and non-lease component associated with that lease component as a single lease component for all underlying asset classes. The Company's lease liabilities do not include future lease payments related to options to extend or terminate lease agreements as it is not reasonably certain those options will be exercised.
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Other information concerning the Company's operating leases accounted for under ASC Topic 842, Leasesis as follows:
Classification As of March 31, 2021 As of June 30, 2020
Assets
Right-of-use assets Other assets $ 13,111 $ 14,315
Liabilities
Current operating lease liabilities Accrued expenses $ 2,034 $ 2,006
Long-term operating lease liabilities Other liabilities 12,720 14,013
Total lease liabilities $ 14,754 $ 16,019

Classification Three Months Ended March 31, 2021 Three Months Ended March 31, 2020 Nine Months Ended March 31, 2021 Nine Months Ended March 31, 2020
Operating lease costs (1)
Cost of sales $ 561 $ 491 $ 1,573 $ 1,441
Selling and marketing, and general and administrative 217 211 639 654
Sublease income Other income, net 10 10 29 29
Cash paid for amounts included in the measurement of operating lease liabilities Cash flows from operating activities 661 653 1,970 1,955
(1) Includes short-term leases, which are insignificant, and are not included in the lease liability.
The lease liability for operating leases that contain variable escalating rental payments with scheduled increases that are based on the lesser of a stated percentage increase or the cumulative increase in an index, are determined using the stated percentage increase.
The weighted average remaining lease term for the three months ended March 31, 2021 and 2020 was 6.66 years and 7.52 years, respectively. As of March 31, 2021 and 2020, the weighted average discount rate determined based on the Company's incremental borrowing rate is 3.63% and 3.65%, respectively.
Future annual minimum lease payments for the following fiscal years as of March 31, 2021 are as follows:
Amount
Remainder of 2021 $ 645
2022 2,508
2023 2,519
2024 2,603
2025 2,313
2026 and thereafter 6,014
Total 16,602
Less imputed interest (1,848)
Present value of lease liabilities $ 14,754

12. Tax Receivable Agreement Liability
The Company has a tax receivable agreement with the pre-IPO owners of the LLC that provides for payment by the Company to the pre-IPO owners (or their permitted assignees) of 85% of the amount of the benefits, if any, that the Company is
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deemed to realize as a result of (i) increases in tax basis and (ii) certain other tax benefits related to the Company entering into the tax receivable agreement, including those attributable to payments under the tax receivable agreement. These contractual payment obligations are obligations of the Company and not of the LLC. The Company's tax receivable agreement liability was determined on an undiscounted basis in accordance with ASC Topic 450, Contingencies, since the contractual payment obligations were deemed to be probable and reasonably estimable. The tax receivable agreement further provides that, upon certain mergers, asset sales or other forms of business combinations or other changes of control, the Company (or its successor) would owe to the pre-IPO owners of the LLC a lump-sum payment equal to the present value of all forecasted future payments that would have otherwise been made under the tax receivable agreement that would be based on certain assumptions, including a deemed exchange of LLC Units and that the Company would have sufficient taxable income to fully utilize the deductions arising from the increased tax basis and other tax benefits related to entering into the tax receivable agreement. The Company also is entitled to terminate the tax receivable agreement, which, if terminated, would obligate the Company to make early termination payments to the pre-IPO owners of the LLC. In addition, a pre-IPO owner may elect to unilaterally terminate the tax receivable agreement with respect to such pre-IPO owner, which would obligate the Company to pay to such existing owner certain payments for tax benefits received through the taxable year of the election.

For purposes of the tax receivable agreement, the benefit deemed realized by the Company will be computed by comparing the actual income tax liability of the Company (calculated with certain assumptions) to the amount of such taxes that the Company would have been required to pay had there been no increase to the tax basis of the assets of the LLC as a result of the purchases or exchanges, and had the Company not entered into the tax receivable agreement.
The following table reflects the changes to the Company's tax receivable agreement liability:
As of March 31, 2021 As of June 30, 2020
Payable pursuant to tax receivable agreement $ 49,665 $ 53,754
Additions (reductions) to tax receivable agreement:
Exchange of LLC Units for Class A Common Stock 2,074 1,041
Adjustment for change in estimated tax rate - (1,672)
Payments under tax receivable agreement - (3,458)
51,739 49,665
Less current portion under tax receivable agreement (3,589) (3,589)
Payable pursuant to tax receivable agreement, less current portion $ 48,150 $ 46,076
When estimating the expected tax rate to use in order to determine the tax benefit expected to be recognized from the Company's increased tax basis as a result of exchanges of LLC Units by the pre-IPO owners of the LLC, the Company continuously monitors changes in its overall tax posture, including changes resulting from new legislation and changes as a result of new jurisdictions in which the Company is subject to tax.
As of March 31, 2021 and June 30, 2020, the Company had deferred tax assets of $114,180 and $111,511, respectively, associated with basis differences in assets upon acquiring an interest in Malibu Boats Holdings, LLC and pursuant to making an election under Section 754 of the Internal Revenue Code of 1986 (the 'Internal Revenue Code'), as amended. The aggregate tax receivable agreement liability represents 85% of the tax benefits that the Company expects to receive in connection with the Section 754 election. In accordance with the tax receivable agreement, the next annual payment is anticipated approximately 75 days after filing the federal tax return, which was filed on March 12, 2021.
13. Income Taxes
Malibu Boats, Inc. is taxed as a C corporation for U.S. income tax purposes and is therefore subject to both federal and state taxation at a corporate level. The LLC continues to operate in the United States as a partnership for U.S. federal income tax purposes.
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.
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As of March 31, 2021 and June 30, 2020, the Company maintained a total valuation allowance of $15,006 and $14,582, respectively, 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. This also includes a valuation allowance in the amount of $580 related to foreign tax credit carryforward that is not expected to be utilized in the future.
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 as well as other adjustments to accruals for tax uncertainties, are recognized in the quarter in which the related event occurs. On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) was signed into law. The CARES Act contains significant business tax provisions, including modifications to the rules limiting the deductibility of net operating losses (NOLs), expensing of qualified improvement property (QIP) and business interest in Internal Revenue Code Sections 172(a) and 163(j), respectively. The effects of the new legislation are recognized upon enactment. The Company did not recognize any significant impact to income tax expense for the nine months ended March 31, 2021 relating to the CARES Act.
For the three months ended March 31, 2021 and 2020, the Company's effective tax rate was 23.7% and 22.6%, respectively. For the nine months ended March 31, 2021 and 2020, the Company's effective tax rate was 23.0% and 22.5%, respectively. For the three and nine months ended March 31, 2021 and 2020, the Company's effective tax rate exceeded the statutory federal income tax rate of 21% primarily due to the impact of U.S. state taxes. This increase in tax rate in both periods was partially offset by a windfall benefit generated by certain stock based compensation, and benefits from the foreign derived intangible income deduction, the research and development tax credit, and the impact of non-controlling interests in the LLC.
14. Stock-Based Compensation
The Company adopted a long term incentive plan which became effective on January 1, 2014, and reserves for issuance up to 1,700,000 shares of Malibu Boats, Inc. Class A Common Stock for the Company's employees, consultants, members of its board of directors and other independent contractors at the discretion of the compensation committee. Incentive stock awards authorized under the Incentive Plan include unrestricted shares of Class A Common Stock, stock options, stock appreciation rights, restricted stock, restricted stock units, dividend equivalent awards and performance awards. As of March 31, 2021, 596,372 shares remain available for future issuance under the long term incentive plan.
On November 3, 2020, under the Incentive Plan, the Company granted approximately 33,000 restricted service based stock units and 25,000 restricted service based stock awards to key employees under the Incentive Plan. The grant date fair value of these awards was $3,145 based on a stock price of $54.47 per share on the date of grant. Approximately 58% of the awards vest ratably over three years and approximately 42% of the awards vest ratably over four years. Stock-based compensation expense attributable to the service based units and awards is amortized on a straight-line basis over the requisite service period.
On November 3, 2020, under the Incentive Plan, the Company granted to key employees a target amount of approximately 18,000 restricted stock awards with a performance condition. The number of shares that will ultimately be issued, if any, is based on the attainment of a specified amount of earnings during the fiscal year ending June 30, 2023. The maximum number of shares that can be issued if an elevated earnings target is met is approximately 28,000. The grant date fair value of the awards were estimated to be $1,002, based on a stock price of $54.47. Compensation costs associated with the performance awards are recognized over the requisite service period based on probability of achievement in accordance with ASC Topic 718, Compensation-Stock Compensation.
On November 3, 2020, under the Incentive Plan, the Company granted to key employees a target amount of approximately 18,000 stock awards with a market condition. The number of shares that will ultimately be issued, if any, is based on a total shareholder return ('TSR') computation that involves comparing the movement in the Company's stock price to movement in a market index from the grant date through November 6, 2023. The maximum number of shares that can be issued if an elevated TSR target is met is approximately 37,000. The grant date fair value of the awards were estimated to be $1,293, which is estimated using a Monte Carlo simulation. The Monte Carlo simulation model utilizes multiple input variables that determine the probability of satisfying the market condition stipulated in the award grant and calculates the fair market value for the stock award. Compensation costs are recognized over the requisite service period based on probability of achievement in accordance with ASC Topic 718, Compensation-Stock Compensation.
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The following is a summary of the changes in the Company's stock options for the nine months ended March 31, 2021:
Shares Weighted Average Exercise Price/Share
Total outstanding options as of June 30, 2020
173,348 $ 32.61
Options granted - -
Options exercised (11,625) 32.24
Outstanding options as of March 31, 2021
161,723 32.64
Exercisable as of March 31, 2021
85,737 $ 31.67
The following is a summary of the changes in non-vested restricted stock units and restricted stock awards for the nine months ended March 31, 2021:
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, 2020
277,696 $ 35.43
Granted 140,916 54.83
Vested (92,766) 32.51
Forfeited (4,237) 41.51
Total Non-vested Restricted Stock Units and Restricted Stock Awards as of March 31, 2021
321,609 $ 44.69
Stock compensation expense attributable to the Company's share-based equity awards was $1,449 and $816 for the three months ended March 31, 2021 and 2020, respectively, and $4,060 and $2,306 for the nine months ended March 31, 2021 and 2020. Stock compensation expense attributed to share-based equity awards issued under the Incentive Plan is recognized on a straight-line basis over the terms of the respective awards and is included in general and administrative expense in the Company's unaudited interim condensed consolidated statement of operations and comprehensive income. Awards vesting during the three and nine months ended March 31, 2021 include 947 and 12,898 fully vested restricted stock units issued to non-employee directors for their service as directors for the Company.
15. Net Earnings Per Share
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.
Diluted net income per share of Class A Common Stock is computed similarly to basic net income per share except the weighted average shares outstanding are increased to include additional shares from the assumed exercise of any common stock equivalents using the treasury method, if dilutive. The LLC Units and non-qualified stock options are considered common stock equivalents for this purpose. The number of additional shares of Class A Common Stock related to these common stock equivalents and stock options are calculated using the treasury stock method.
Stock awards with a performance condition that are based on the attainment of a specified amount of earnings are only included in the computation of diluted earnings per share to the extent that the performance condition would be achieved based on the current amount of earnings, and only if the effect would be dilutive.
Stock awards with a market condition that are based on the performance of the Company's stock price in relation to a market index over a specified time period are only included in the computation of diluted earnings per share to the extent that the shares would be issued based on the current market price of the Company's stock in relation to the market index, and only if the effect would be dilutive.
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Basic and diluted net income per share of Class A Common Stock has been computed as follows (in thousands, except share and per share amounts):
Three Months Ended March 31, Nine Months Ended March 31,
2021 2020 2021 2020
Basic:
Net income attributable to Malibu Boats, Inc. $ 33,796 $ 22,778 $ 76,114 $ 55,359
Shares used in computing basic net income per share:
Weighted-average Class A Common Stock 20,571,601 20,417,829 20,499,949 20,479,874
Weighted-average participating restricted stock units convertible into Class A Common Stock 227,804 212,912 222,390 204,160
Basic weighted-average shares outstanding 20,799,405 20,630,741 20,722,339 20,684,034
Basic net income per share $ 1.62 $ 1.11 $ 3.67 $ 2.68
Diluted:
Net income attributable to Malibu Boats, Inc. $ 33,796 $ 22,778 $ 76,114 $ 55,359
Shares used in computing diluted net income per share:
Basic weighted-average shares outstanding 20,799,405 20,630,741 20,722,339 20,684,034
Restricted stock units granted to employees 97,376 105,096 90,592 109,225
Stock options granted to employees 69,613 13,535 61,030 8,963
Market performance awards granted to employees 65,966 25,736 65,966 25,736
Diluted weighted-average shares outstanding 1
21,032,360 20,775,108 20,939,927 20,827,958
Diluted net income per share $ 1.61 $ 1.09 $ 3.63 $ 2.66
1 The Company excluded (i) 603,919and 889,500 potentially dilutive shares from the calculation of diluted net income per share for the three months ended March 31, 2021 and 2020, respectively, and (ii) 622,306 and 890,750 potentially dilutive shares from the calculation of diluted net income per share for the ninemonths ended March 31, 2021 and 2020, respectively, as these units would have been antidilutive.
The shares of Class B Common Stock do not share in the earnings or losses of Malibu Boats, Inc. and, therefore, are not included in the calculation. Accordingly, basic and diluted net earnings per share of Class B Common Stock has not been presented.
16. Commitments and Contingencies
Repurchase Commitments
In connection with its dealers' wholesale floor plan financing of boats, the Company has entered into repurchase agreements with various lending institutions. The reserve methodology used to record an estimated expense and loss reserve in each accounting period is based upon an analysis of likely repurchases based on current field inventory and likelihood of repurchase. Subsequent to the inception of the repurchase commitment, the Company evaluates the likelihood of repurchase and adjusts the estimated loss reserve accordingly. When a potential loss reserve is recorded it is presented in accrued liabilities in the accompanying unaudited interim condensed consolidated balance sheet. If the Company were obligated to repurchase a significant number of units under any repurchase agreement, its business, operating results and financial condition could be
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adversely affected. The total amount financed under the floor financing programs with repurchase obligations was $201,137 and $161,356 as of March 31, 2021 and June 30, 2020, respectively.

Repurchases and subsequent sales are recorded as a revenue transaction. The net difference between the repurchase price and the resale price is recorded against the loss reserve and presented in cost of sales in the accompanying unaudited interim condensed consolidated statements of operations and comprehensive income. During the three and nine months ended March 31, 2021, there were no repurchases and as of March 31, 2021, the Company has not been notified about any probable repossessions. Therefore, the Company did not carry a reserve for repurchases as of March 31, 2021 consistent with June 30, 2020.

The Company has collateralized receivables financing arrangements with a third-party floor plan financing provider for European dealers. Under terms of these arrangements, the Company transfers the right to collect a trade receivable to the financing provider in exchange for cash but agrees to repurchase the receivable if the dealer defaults. Since the transfer of the receivable to the financing provider does not meet the conditions for a sale under ASC Topic 860, Transfers and Servicing, the Company continues to report the transferred trade receivable in other current assets with an offsetting balance recorded as a secured obligation in accrued expenses in the Company's unaudited condensed consolidated balance sheets. As of March 31, 2021 and June 30, 2020, the Company had financing receivables of $73and $375, respectively, recorded in other current assets and accrued expenses related to these arrangements.
Contingencies
Product Liability
The Company is engaged in a business that exposes it to claims for product liability and warranty claims in the event the Company's products actually or allegedly fail to perform as expected or the use of the Company's products results, or is alleged to result, in property damage, personal injury or death. Although the Company maintains product and general liability insurance of the types and in the amounts that the Company believes are customary for the industry, the Company is not fully insured against all such potential claims. The Company may have the ability to refer claims to its suppliers and their insurers to pay the costs associated with any claims arising from the suppliers' products. The Company's insurance covers such claims that are not adequately covered by a supplier's insurance and provides for excess secondary coverage above the limits provided by the Company's suppliers.
The Company may experience legal claims in excess of its insurance coverage or claims that are not covered by insurance, either of which could adversely affect its business, financial condition and results of operations. Adverse determination of material product liability and warranty claims made against the Company could have a material adverse effect on its financial condition and harm its reputation. In addition, if any of the Company's products are, or are alleged to be, defective, the Company may be required to participate in a recall of that product if the defect or alleged defect relates to safety. These and other claims that the Company faces could be costly to the Company and require substantial management attention. Refer to Note 9for discussion of warranty claims. The Company insures against product liability claims and believes there are no material product liability claims as of March 31, 2021 that would not be covered by our insurance.
LegalProceedings
On January 12, 2018, the Company filed suit against Skier's Choice, Inc., or 'Skier's Choice,' in the U.S. District Court for the Eastern District of Tennessee, seeking monetary and injunctive relief. The Company's complaint alleges Skier's Choice's infringement of three utility patents - U.S. Patent Nos. 9,260,161, 8,578,873, and 9,199,695 - related to wake surfing technology. Skier's Choice denied liability arising from the causes of action alleged in the Company's complaint and filed counterclaims alleging invalidity of the asserted patents. On June 19, 2019, the Company filed a second action against Skier's Choice in the U.S. District Court for the Eastern District of Tennessee, seeking monetary and injunctive relief. The Company's complaint alleges Skier's Choice's surf systems on its Moomba and Supra lines of boats infringe U.S. Patent No. 10,322,777, a patent related to wake surfing technology. Skier's Choice denied liability arising from the causes of action alleged in the Company's complaint and filed counterclaims alleging invalidity of the asserted patents. On June 27, 2019, Skier's Choice filed a motion to consolidate these two actions, and to continue deadlines in the earlier case for nine months, which the Company opposed. On August 22, 2019, the motion for consolidation was referred by Judge Thomas Varlan to Magistrate Judge Bruce Guyton, and the two cases were stayed pending resolution of that motion. On November 27, 2019, Judge Guyton ordered the two cases to be consolidated. On January 7, 2020, the consolidated cases were reassigned to Judge Jon McCalla. On January 23, 2020, Judge McCalla issued a Scheduling Order, scheduling trial on the consolidated cases to begin on September 29, 2020. On July 23, 2020, the Company moved to dismiss its allegations of infringement of U.S. Patent No. 9,199,695, which Skier's Choice opposed. On August 25, 2020, Judge McCalla issued a claim construction order and set a scheduling conference for August 27, 2020, for purposes of resetting the pretrial calendar and trial dates. On September 11, 2020, the Court issued a
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Scheduling Order resetting the trial for the consolidated cases to begin on January 25, 2021. On December 11, 2020, the Court issued an Order resetting the trial for the consolidated cases to begin on May 10, 2021. The Company intends to vigorously pursue this litigation to enforce its rights in its patented technology and believes that Skier's Choice's counterclaims are without merit.
17. Segment Information
Effective December 31, 2020, the Company revised its segment reporting to account for its acquisition of Maverick Boat Group and conform to changes in its internal management reporting based on the Company's boat manufacturing operations. The Company previously had three reportable segments, Malibu, Cobalt and Pursuit. The Company now aggregates Pursuit and Maverick Boat Group into one reportable segment as they have similar economic characteristics and qualitative factors. As a result, the Company continues to have three reportable segments, Malibu, Cobalt and Saltwater Fishing. The Malibu segment participates in the manufacturing, distribution, marketing and sale of Malibu and Axis performance sports boats throughout the world. The Cobalt segment participates in the manufacturing, distribution, marketing and sale of Cobalt boats throughout the world. The Saltwater Fishing segment participates in the manufacturing, distribution, marketing and sale throughout the world of Pursuit boats and the Maverick Boat Group brand boats (Maverick, Cobia, Pathfinder and Hewes).
There is no country outside of the United States from which we (a) derived net sales equal to 10% of total net sales, or (b) attributed assets equal to 10% of total assets. Net sales are attributed to countries based on the location of the dealer.
The following tables present financial information for the Company's reportable segments for the three and nine months ended March 31, 2021 and 2020, respectively, and the Company's financial position at March 31, 2021 and June 30, 2020, respectively:
Three Months Ended March 31, 2021 Nine Months Ended March 31, 2021
Malibu Cobalt Saltwater Fishing Total Malibu Cobalt Saltwater Fishing Total
Net sales $ 138,027 $ 55,246 $ 79,889 $ 273,162 $ 346,475 $ 147,206 $ 156,112 $ 649,793
Income before provision for income taxes $ 27,631 $ 7,373 $ 11,072 $ 46,076 $ 62,758 $ 17,338 $ 22,880 $ 102,976
Three Months Ended March 31, 2020 Nine Months Ended March 31, 2020
Malibu Cobalt Saltwater Fishing Total Malibu Cobalt Saltwater Fishing Total
Net sales $ 102,604 $ 46,028 $ 33,678 $ 182,310 $ 285,811 $ 145,173 $ 103,518 $ 534,502
Income before provision for income taxes $ 21,669 $ 6,178 $ 3,006 $ 30,853 $ 48,331 $ 16,937 $ 9,750 $ 75,018

As of March 31, 2021 As of June 30, 2020
Assets
Malibu $ 218,051 $ 194,502
Cobalt 169,377 153,820
Saltwater Fishing 342,838 129,024
Total assets $ 730,266 $ 477,346

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Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with the unaudited interim condensed consolidated financial statements and notes thereto included herein.

Malibu Boats, Inc. is a Delaware corporation with its principal offices in Loudon, Tennessee. We use the terms 'Malibu,' the 'Company,' 'we,' 'us,' 'our' or similar references to refer to Malibu Boats, Inc., its subsidiary, Malibu Boats Holdings, LLC, or the LLC, and its subsidiary Malibu Boats, LLC, or Boats, LLC and its consolidated subsidiaries, including Cobalt Boats, LLC, PB Holdco, LLC, through which we acquired the assets of Pursuit, and MBG Holdco, Inc., through which we acquired all of the outstanding stock of Maverick Boat Group, Inc.
Overview
We are a leading designer, manufacturer and marketer of a diverse range of recreational powerboats, including performance sport boats, sterndrive and outboard boats. 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 eight brands-(Malibu; Axis; Cobalt; Pursuit; Maverick; Cobia; Pathfinder; and Hewes), and we report our results of operations under three reportable segments, (Malibu, Cobalt and Saltwater Fishing), as shown in the table below. We revised our segment reporting to report our results of operations under these three reportable segments in connection with our acquisition of Maverick Boat Group on December 31, 2020. See Note 17to our unaudited interim condensed consolidated financial statements for more information about our reporting segments.

% of Total Revenues
Segment Brands Nine Months Ended March 31, 2020
Fiscal year ended June 30, 2020
Malibu Malibu 53.3% 54.3%
Axis
Cobalt Cobalt 22.7% 26.8%
Saltwater Fishing Pursuit 24.0% 18.9%
Maverick
Cobia
Pathfinder
Hewes

Our Malibu segment participates in the manufacturing, distribution, marketing and sale throughout the world of Malibu and Axis performance sports boats. 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. We are the market leader in the United States in the performance sport boat category through our Malibu and Axis Wake Research boat brands. Our Axis boats appeal to consumers who desire a more affordable performance sport boat product but still demand high performance,
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functional simplicity and the option to upgrade key features. Retail prices of our Malibu and Axis boats typically range from $60,000 to $210,000.
Our Cobalt segment participates in the manufacturing, distribution, marketing and sale throughout the world of Cobalt boats. 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. We are the market leader in the United States in the 20' - 40' segment of the sterndrive boat category through our Cobalt brand. Retail prices for our Cobalt boats typically range from $60,000 to $450,000.
Our Saltwater Fishing segment participates in the manufacturing, distribution, marketing and sale throughout the world of Pursuit boats and the Maverick Boat Group family of boats (Maverick, Cobia, Pathfinder and Hewes). Our Pursuit boats expand our product offerings into the saltwater outboard fishing market and include center console, dual console and offshore models. As noted below, we recently acquired Maverick Boat Group and added Maverick, Cobia, Pathfinder and Hewes to our brands. Our Maverick Boat Group family of boats are highly complementary to Pursuit, expanding our saltwater outboard offerings with a strong focus in length segments under 30 feet. We are among the market leaders in the fiberglass outboard fishing boat category with the brands in our Saltwater Fishing segment. Retail prices for our Saltwater Fishing boats typically range from $50,000 to $1,200,000.
We sell our boats through a dealer network that we believe is the strongest in the recreational powerboat category. As of December 31, 2020, our worldwide distribution channel consisted of over 400 dealer locations globally. Our dealer base is an important part of our consumers' experience, our marketing efforts and our brands. We devote significant time and resources to find, develop and improve the performance of our dealers and believe our dealer network gives us a distinct competitive advantage.
On a consolidated basis, we achieved thirdquarter fiscal 2021 net sales, gross profit, net income and adjusted EBITDA of $273.2 million, $72.0 million, $35.1 million and $57.0 million, respectively, compared to $182.3 million, $45.8 million, $23.9 million and $36.4 million, respectively, for the thirdquarter of fiscal 2020. For the thirdquarter of fiscal 2021, net sales increased 49.8%, gross profit increased 57.1%, net income increased 47.2% and adjusted EBITDA increased 56.7% as compared to the thirdquarter of fiscal 2020. For the definition of adjusted EBITDA and a reconciliation to net income, see 'GAAP Reconciliation of Non-GAAP Financial Measures.'
Acquisition of Maverick Boat Group, Inc. and Related Financing
On December 31, 2020, we acquired all of the outstanding shares of Maverick Boat Group from its existing stockholders for a purchase price of $150.7 million. The purchase price was subject to customary adjustments for the amounts of cash, indebtedness and working capital in the business at the closing date and subject to adjustment for certain capital expenditures made by Maverick Boat Group prior to closing at our request. With two manufacturing facilities located in Fort Pierce, Florida, Maverick Boat Group designs and manufactures center console, dual console, flats and bay boats under four brand names -- Cobia, Pathfinder, Maverick, and Hewes. We paid the purchase price with cash on hand and $90.0 million of borrowings under our credit facilities following an amendment to increase the amount available under the credit facilities as described below.
On December 30, 2020, our subsidiary, Boats, LLC, as the borrower, entered into the Third Incremental Facility Amendment and Third Amendment to its existing Second Amended and Restated Credit Agreement dated as of June 28, 2017 with Truist Bank, as the administrative agent, swingline lender and issuing bank. The third amendment added a $25.0 million incremental term loan facility with a maturity date of July 1, 2024 and increased the borrowing capacity available under the revolving credit facility by $50.0 million from $120.0 million to $170.0 million. The $25.0 million incremental term loan made pursuant to the third amendment is subject to quarterly amortization at a rate of 5.0% per year through December 31, 2022 and at a rate of 7.5% per year through June 30, 2024 and accrues interest at the same rate as other loans under the credit agreement. See '--Liquidity and Capital Resources--Loans and Commitments' below for more information.
Impact of the COVID-19 Pandemic
The COVID-19 pandemic has impacted our operations and financial results since the third quarter of fiscal year 2020 and continues to have an impact on us. On March 24, 2020, we elected to suspend operations at all of our facilities. The shut-down continued into the fourth quarter of fiscal year 2020 with operations resuming between late April and early May, depending on the facility. As a result, we were not able to ship boats to our dealers during the period of shut-down, which negatively impacted our net sales for the second half of fiscal year 2020. During the first half of fiscal 2021, we constrained our production levels in an attempt to allow our supply chain to more fully recover from the impacts of COVID-19 in preparation of higher wholesale manufacturing volumes that we have planned for the second half of fiscal 2021. While our net sales for the first half of fiscal year 2021 were impacted by our lower production levels, retail sales have improved during the first nine months of fiscal 2021 as consumers turn to boating as a form of outdoor, socially distanced recreation during the COVID-19 pandemic. The increase in retail sales during fiscal 2021 combined with our lower wholesale shipment levels during the second half of
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fiscal year 2020 and constrained production in the first half of fiscal 2021 resulted in lower inventory levels at our dealers as of March 31, 2021 compared to last year. We expect these lower inventory levels, while having the potential to impact retail sales in the near-term, will provide us strong order flow for our model year 2022 product, unless broader economic activity meaningfully contracts and negatively impacts customer demand.
In addition to our operations, the COVID-19 pandemic has impacted and continues to impact the operations of our dealers and suppliers. While some of our dealers and suppliers had to suspend their operations during the pandemic, many continued to operate and we are not aware of any of our dealers or suppliers that have closed permanently. Our suppliers have been impacted by COVID-19 and continue to ramp production to meet increased demand for their products. As mentioned, we have successfully managed our production levels to ensure that challenges related to parts procurement have minimal impact on our operations and we have not experienced any significant shortages related to COVID-19.
We believe we are well-positioned to withstand any further disruptions that may occur as result of the ongoing pandemic. We have approximately $43.0 million of cash on hand as of March 31, 2021 and approximately$103.8 million available for borrowing under our revolving credit facility as of March 31, 2021. Further, we have a flexible cost structure that allows us to more closely align our costs with wholesale shipments. The future impact of COVID-19 on our financial condition and results of operations, however, will depend on a number of factors, including factors that we may not be able to forecast at this time. In addition, a resurgence of COVID-19 in certain parts of the world, including the United States and parts of Europe, may lead to more restrictions being implemented again to reduce the spread of COVID-19. These measures could result in further interruptions to our operations and potentially a decrease in consumer spending. See the risk factor 'The COVID-19 pandemic is adversely affecting, and is expected to continue to adversely affect, our operations, and those of our dealers and suppliers, thereby adversely affecting our business, financial condition and results of operations.' under Part I. Item 1A. of our Form 10-K for the year ended June 30, 2020.
Outlook
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 5.8% between 2011 and 2020, for the 50 reporting states. While retail growth in powerboats was negatively impacted by weak retail sales in March and April 2020 due to COVID-19, domestic retail demand growth for powerboats accelerated during calendar year 2020, in part because consumers turned to boating as a form of outdoor, socially distanced recreation during the COVID-19 pandemic. These increases were led by growth in our core market, performance sport boats, which produced a double-digit compound annual growth rate between 2011 and 2020 and is primarily served by our Malibu and Axis brands. Outboard boats and fiberglass sterndrive boats have seen their combined market grow at a 5.0% compound annual growth rate between 2011 and 2020. This combined growth has been driven primarily by the outboard market. We target the outboard market with our Pursuit, Cobia, Pathfinder, Maverick and Hewes brands, as well as our Cobalt brand, which is a new entrant to the outboard market, and we plan to meaningfully expand our share of the fiberglass outboard category in the future. We cater to the sterndrive market through our Cobalt brand. While the market for sterndrive propulsion, particularly in lower foot length products, has been challenged, Cobalt's performance continues to be helped by the higher foot length product market it serves, which has grown and through gains in market share by Cobalt. Despite the impact of COVID-19 early in the year, the acceleration of demand growth during 2020 was broad based across recreational powerboat categories. Year-over-year domestic retail growth rates for 2020 in the performance sport boat, fiberglass outboard and sterndrive segments were approximately 22%, 10% and 9%, respectively. The early part of 2021 has seen continued strong year-over-year retail growth rates and we believe strong growth will continue through at least May 2021 at which point we believe the higher growth rates of 2020 may lead to lower growth or even year-over-year decreases in retail registrations. We believe in total 2021 retail registrations will remain strong given the current retail activity and cadence at our dealers.
The combination of continued strong retail market activity through 2020 and into 2021 and the temporary suspension of our operations from March and into May 2020 depleted inventory levels at our dealers below prior year levels. Our planned ramp in manufacturing throughput during the third quarter of fiscal 2021 was well supported by our supply chain. However, it was negatively impacted by operational challenges and supply chain constraints created by severe winter weather. An extreme cold front in Kansas limited our ability to produce boats at Cobalt during the quarter and caused supply chain constraints that reduced production levels at certain of our operations, further delaying our ability to add to depleted inventory levels. As a result of these lower dealer inventory levels, we expect to see meaningful wholesale demand to restock our dealer inventories through fiscal year 2022 and beyond. We expect lower dealer inventory levels will support our wholesale shipments and financial performance through fiscal year 2022. We believe that strength is likely to continue into fiscal year 2023. Numerous other variables have the potential to impact our volumes, both positively and negatively. For example, we believe a substantial increase or decrease in the price of oil, strength or weakness of the U.S. dollar and tariffs can result in greater or reduced demand for our boats in certain markets. To date, growth in our domestic market has offset the significantly diminished demand
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from economies that are driven by the oil industry and international markets. Consumer confidence, expanded or eroded, is a variable that can also impact demand for our products 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 launched surf systems competitive with our patented Surf Gate system. This competitive environment has continued throughout the past few years, with strong performance from Malibu and Axis in 2019 expanding our market share lead over our nearest competitors in the performance sport boats category. However, we believe decreased dealer inventory levels driven by strong retail growth in the second half of 2020 negatively impacted market share. Our ability to continue to add inventory at our dealers is important to maintain and grow our market share across our brands. We believe our new product pipeline, strong dealer network and ability to increase production will allow us to maintain and potentially expand our industry leading market position in performance sports boats. In addition, we continue to be the market share leader in both the premium and value-oriented product sub-categories for performance sports boats.
We also 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, Pursuit and Maverick Boat Group acquisitions. While Cobalt, Pursuit and the Maverick Boat Group brands are market leaders in certain areas, we believe our experience positions us to execute a strategy to drive enhanced share by expanding the Cobalt, Pursuit and Maverick Boat Group product offerings with different foot lengths, different boat types and different propulsion technologies. Our new product development efforts at Cobalt, Pursuit and Maverick Boat Group will take time and our ability to influence near-term model introductions is limited, but we have already begun to execute on this strategy. With respect to Cobalt, we introduced five new models of boats during the first half of fiscal year 2021 and we have included Splash and Stow and a new electronic flip down Swim Step for model year 2021 boats. For the Pursuit brand, our focus has been on expanding the award-winning Dual Console, Sport and Offshore product offerings that continue to combine innovative features and dependable performance in refined designs that accommodate a broad array of activities on the water, including the Electric Sliding Entertainment Center on the new S 378. Our newest acquisition, Maverick Boat Group, is in the very early stages of integration into the business and meaningful product and innovation changes will be developed for coming years. We believe enhancing new product development combined with diligent management of the Cobalt, Pursuit and Maverick Boat Group dealer networks will position us to meaningfully improve our share of the sterndrive and outboard markets over time.
Factors Affecting Our Results of Operations
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. We discuss each of these factors in more detail under the heading 'Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations--Factors Affecting Our Results of Operations' in our Form 10-K for the year ended June 30, 2020. 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.
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Components of Results of Operations
Net Sales
We generate revenue from the sale of boats to our dealers. The substantial majority of our net sales are derived from the sale of boats, including optional features included at the time of the initial wholesale purchase of the boat. Net sales consists of the following:
•Gross sales from:
•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.
•Net sales are net of:
•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
•Rebates, free flooring and discounts-consists of incentives, rebates and free flooring, we provide to our dealers based on sales of eligible products. For our Malibu and Axis models, if a domestic dealer meets its monthly or quarterly commitment volume, as well as other terms of the dealer performance program, the dealer is entitled to a specified rebate. For our Cobalt models, if a domestic dealer meets its quarterly commitment volume, as well as other terms of the dealer performance program, the dealer is entitled to a specified rebate. For our Pursuit models, if a dealer meets its quarterly or annual volume goals, the dealer is entitled to a specific rebate applied to their wholesale volume purchased from Pursuit. For Malibu and Cobalt models and select Saltwater Fishing models, our dealers that take delivery of current model year boats in the offseason, typically July through April in the U.S., are also entitled to have us pay the interest to floor the boat until the earlier of (1) the sale of the unit or (2) a date near the end of the current model year, which incentive we refer to as 'free flooring.' From time to time, we may extend the flooring program to eligible models beyond the offseason period.
Cost of Sales
Our cost of sales includes all of the costs to manufacture our products, including raw materials, components, supplies, direct labor and factory overhead. For components and accessories manufactured by third-party vendors, such costs represent the amounts invoiced by the vendors. Shipping costs and depreciation expense related to manufacturing equipment and facilities are also included in cost of sales. Warranty costs associated with the repair or replacement of our boats under warranty are also included in cost of sales.
Operating Expenses
Our operating expenses include selling and marketing, and general and administrative costs. Each of these items includes personnel and related expenses, supplies, non-manufacturing overhead, third-party professional fees and various other operating expenses. Further, selling and marketing expenditures include the cost of advertising and various promotional sales incentive programs. General and administrative expenses include, among other things, salaries, benefits and other personnel related expenses for employees engaged in product development, engineering, finance, information technology, human resources and executive management. Other costs include outside legal and accounting fees, investor relations, risk management (insurance) and other administrative costs. Amortization expenses include amortization of our definite-lived intangible assets that are being amortized over their estimated useful lives.
Other (Income) Expense, Net
Other (income) expense, net consists of interest expense and other income or expense, net. Interest expense consists of interest charged under our outstanding debt, interest on our interest rate swap arrangement and change in the fair value of our interest rate swap we entered into on July 1, 2015, which matured on March 31, 2020, and amortization of deferred financing costs on our credit facilities. Other (income) expense, net also consists of adjustments to our tax receivable agreement liability.
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Income Taxes
Malibu Boats, Inc. is subject to U.S. federal and state income tax in multiple jurisdictions with respect to our allocable share of any net taxable income of the LLC. The LLC is a pass-through entity for federal purposes but incurs income tax in certain state jurisdictions.
Net Income Attributable to Non-controlling Interest
As of March 31, 2021 and 2020, we had a 97.2%and 96.3% controlling economic interest, respectively, and 100% voting interest in the LLC and, therefore, we consolidate the LLC's operating results for financial statement purposes. Net income attributable to non-controlling interest represents the portion of net income attributable to the non-controlling LLC members.
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Results of Operations
The table below sets forth our unaudited interim consolidated results of operations, expressed in thousands (except unit volume and net sales per unit) and as a percentage of net sales, for the periods presented. Our unaudited interim consolidated financial results for these periods are not necessarily indicative of the consolidated financial results that we will achieve in future periods. Certain totals for the table below will not sum to exactly 100% due to rounding.
Three Months Ended March 31, Nine Months Ended March 31,
2021 2020 2021 2020
$ % Revenue $ % Revenue $ % Revenue $ % Revenue
Net sales 273,162 100.0 % 182,310 100.0 % 649,793 100.0 % 534,502 100.0 %
Cost of sales 201,134 73.6 136,461 74.9 482,535 74.3 408,784 76.5
Gross profit 72,028 26.4 45,849 25.1 167,258 25.7 125,718 23.5
Operating expenses:
Selling and marketing 4,667 1.7 4,572 2.5 12,280 1.9 14,304 2.7
General and administrative 18,402 6.7 9,643 5.3 45,092 6.9 30,389 5.7
Amortization 2,094 0.8 1,501 0.8 5,142 0.8 4,622 0.9
Operating income 46,865 17.2 30,133 16.5 104,744 16.1 76,403 14.2
Other (income) expense, net:
Other income, net (7) - (1,660) (0.9) (29) - (1,679) (0.3)
Interest expense 796 0.3 940 0.5 1,797 0.3 3,064 0.5
Other (income) expense, net 789 0.3 (720) (0.4) 1,768 0.3 1,385 0.2
Income before provision for income taxes 46,076 16.9 30,853 16.9 102,976 15.8 75,018 14.0
Provision for income taxes 10,941 4.0 6,987 3.8 23,656 3.6 16,872 3.2
Net income 35,135 12.9 23,866 13.1 79,320 12.2 58,146 10.8
Net income attributable to non-controlling interest 1,339 0.5 1,088 0.6 3,206 0.5 2,787 0.5
Net income attributable to Malibu Boats, Inc. 33,796 12.4 % 22,778 12.5 % 76,114 11.7 % 55,359 10.3 %
Three Months Ended March 31, Nine Months Ended March 31,
2021 2020 2021 2020
Unit Volumes % Total Unit Volumes % Total Unit Volumes % Total Unit Volumes % Total
Volume by Segment
Malibu 1,385 56.5 % 1,139 63.4 % 3,517 60.3 % 3,254 61.1 %
Cobalt 504 20.5 521 29.0 1,451 24.9 1,652 31.0
Saltwater Fishing 565 23.0 136 7.6 863 14.8 421 7.9
Total units 2,454 100 % 1,796 100 % 5,831 100 % 5,327 100 %
Net sales per unit $ 111,313 $ 101,509 $ 111,438 $ 100,338

Comparison of theThree Months Ended March 31, 2021 to the Three Months Ended March 31, 2020
Net Sales
Net sales for the three months ended March 31, 2021 increased $90.9 million, or 49.8%, to $273.2 million as compared to the three months ended March 31, 2020. The increase in net sales was driven primarily by a favorable model mix in our Malibu and Cobalt segments and increased unit volumes in our Malibu and Saltwater Fishing segments due mostly to our acquisition of Maverick Boat Group on December 31, 2020. Unit volume for the three months ended March 31, 2021, increased 658 units, or
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36.6%, to 2,454 units as compared to the three months ended March 31, 2020. Our unit volume increased primarily due to strong demand at our Malibu segment and additional volume in Saltwater Fishing due mostly to our acquisition of Maverick Boat Group but also supported by robust growth at Pursuit. The increase in unit volumes was constrained by the impact of severe weather on our Cobalt operations and our supply chain's operations.
Net sales attributable to our Malibu segment increased $35.5 million, or 34.6%, to $138.0 million for the three months ended March 31, 2021, compared to the three months ended March 31, 2020. Unit volumes attributable to our Malibu segment increased 246 units for the three months ended March 31, 2021, compared to the three months ended March 31, 2020. The increase in net sales was driven primarily by increased volume, strong demand for our new, larger models and optional features.
Net sales attributable to our Cobalt segment increased $9.2 million, or 20.0%, to $55.3 million for the three months ended March 31, 2021, compared to the three months ended March 31, 2020. Unit volumes attributable to Cobalt decreased 17 units for the three months ended March 31, 2021 compared to the three months ended March 31, 2020. The increase in net sales was driven by a favorable product mix of our Cobalt models impacting net sales per unit, offset by lower volume. Our unit volumes for our Cobalt segment decreased during the three months ended March 31, 2021 as a result of weather related shutdowns of our operations and suppliers' operations.
Net sales attributable to our Saltwater Fishing segment increased $46.2 million, or 137.2%, to $79.9 million, for the three months ended March 31, 2021, compared to the three months ended March 31, 2020. Unit volume increased 429 units for the three months ended March 31, 2021 compared to the three months ended March 31, 2020. The increase in net sales was driven primarily by the increased volumes due to the acquisition of Maverick Boat Group on December 31, 2020.
Overall consolidated net sales per unit increased 9.7% to $111,313 per unit for the three months ended March 31, 2021, compared to the three months ended March 31, 2020. Net sales per unit for our Malibu segment increased 10.6% to $99,658 per unit for the three months ended March 31, 2021, compared to the three months ended March 31, 2020, driven by higher sales of new, more expensive models and optional features. Net sales per unit for our Cobalt segment increased 24.1% to $109,615 per unit for the three months ended March 31, 2021, compared to the three months ended March 31, 2020, driven by higher sales of larger, more expensive models. Net sales per unit for our Saltwater Fishing segment decreased 42.9% to $141,396 per unit for the three months ended March 31, 2021 driven primarily by mix of models due mostly to the acquisition of Maverick Boat Group on December 31, 2020.
Cost of Sales
Cost of sales for the three months ended March 31, 2021 increased $64.7 million, or 47.4%, to $201.1 million as compared to the three months ended March 31, 2020. The increase in cost of sales was driven by higher costs related to higher net sales in all our segments. In the Malibu segment, higher per unit material and labor costs contributed $19.8 million to the increase in cost of sales and were driven by an increased mix of larger product that corresponded with higher net sales per unit. In the Cobalt segment, higher per unit material and labor costs contributed $6.3 million to the increase in cost of sales and were driven by an increased mix of larger product that corresponded with higher net sales per unit. Within our Saltwater Fishing segment, higher volumes, primarily related to the acquisition of Maverick Boat Group, drove $34.0 million of increase in cost of sales which was also modestly impacted by higher per unit costs.
Gross Profit
Gross profit for the three months ended March 31, 2021 increased $26.2 million, or 57.1%, to $72.0 million compared to the three months ended March 31, 2020. The increase in gross profit was driven primarily by higher sales revenue with a more favorable product mix partially offset by the increased cost of sales for the reasons noted above. Gross margin for the three months ended March 31, 2021 increased 130 basis points from 25.1% to 26.4%.
Operating Expenses
Selling and marketing expenses for the three months ended March 31, 2021 increased $0.1 million, or 2.1% to $4.7 million compared to the three months ended March 31, 2020. The increase was driven primarily by incremental selling and marketing expenses from the acquisition of Maverick Boat Group offset by decreased travel and promotional events due mostly to restrictions imposed by COVID-19. As a percentage of sales, selling and marketing expenses decreased 80 basis points compared to the same period in the prior fiscal year. General and administrative expenses for the three months ended March 31, 2021, increased $8.8 million, or 90.8%, to $18.4 million as compared to the three months ended March 31, 2020 driven primarily by acquisition and integration related costs, compensation, higher legal expenses related to intellectual property litigation and incremental general and administrative expenses due to the acquisition of Maverick Boat Group. As a percentage of sales, general and administrative expenses increased 140 basis points to 6.7% for the three months ended March 31, 2021 compared to the three months ended March 31, 2020. Amortization expense for the three months ended March 31, 2021
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increased $0.6 million, or 39.5% to $2.1 million compared to the three months ended March 31, 2020. The increase is due to amortization of intangibles acquired as part of the acquisition of Maverick Boat Group on December 31, 2020.
Other Expense, Net
Other expense, net for the three months ended March 31, 2021 increased by $1.5 million, or 209.6% to expense of $0.8 million, compared to income of $0.7 million for the three months ended March 31, 2020 . We reduced our tax receivable agreement liability by $1.7 million for the three months ended March 31, 2020 that resulted in a corresponding amount being recognized as other income during the same period, which income was not recognized during the three months ended March 31, 2021. The remaining change in other expense resulted from decreased interest expense due to lower interest rates on higher average outstanding debt during the three months ended March 31, 2021 compared to the three months ended March 31, 2020.
Provision for Income Taxes
Our provision for income taxes for the three months ended March 31, 2021, increased $4.0 million, or 56.6%, to $10.9 million compared to the three months ended March 31, 2020. The increase primarily resulted from increased pre-tax earnings. For the three months ended March 31, 2021 and 2020, our effective tax rate of 23.7% and 22.6%, respectively, exceeded the statutory federal income tax rate of 21% primarily due to the impact of U.S. state taxes. This increase in tax rate was partially offset by a windfall benefit generated by certain stock based compensation, the benefits of the foreign derived intangible income deduction, the research and development tax credit, and the impact of non-controlling interests in the LLC.
Non-controlling Interest
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 applicable period, by the percentage ownership in the LLC not directly attributable to us. For the three months ended March 31, 2021 and 2020, the weighted average non-controlling interest attributable to ownership interests in the LLC not directly attributable to us was 3.0% and 3.8%, respectively.
Comparison of theNine Months Ended March 31, 2021 to the Nine Months Ended March 31, 2020
Net Sales
Net sales for the nine months ended March 31, 2021 increased $115.3 million, or 21.6%, to $649.8 million as compared to the nine months ended March 31, 2020. The increase in net sales was driven primarily by a favorable model mix in our Malibu segment and increased unit volumes in our Malibu and Saltwater Fishing segments due mostly to our acquisition of Maverick Boat Group on December 31, 2020. Unit volume for the nine months ended March 31, 2021, increased 504 units, or 9.5%, to 5,831 units as compared to the nine months ended March 31, 2020.
Net sales attributable to our Malibu segment increased $60.7 million, or 21.2%, to $346.5 million for the nine months ended March 31, 2021, compared to the nine months ended March 31, 2020. Unit volumes attributable to our Malibu segment increased 263 units for the nine months ended March 31, 2021, compared to the nine months ended March 31, 2020. The increase in net sales and unit volumes was driven primarily by strong demand for our new, larger models and optional features.
Net sales attributable to our Cobalt segment increased $2.0 million, or 1.4%, to $147.2 million for the nine months ended March 31, 2021, compared to the nine months ended March 31, 2020. Unit volumes attributable to Cobalt decreased 201 units for the nine months ended March 31, 2021 compared to the nine months ended March 31, 2020. The increase in net sales was driven by a favorable product mix of our Cobalt models impacting net sales per unit, offset by lower volume. Our unit volumes for our Cobalt segment decreased during the nine months ended March 31, 2021 driven by our lower production levels for our Cobalt segment at the end of fiscal year 2020. The planned lower production rates were driven by our investment in the plant to optimize efficiency and expand capacity, the introduction of six new Cobalt models during the nine months ended March 31, 2021 and challenges around labor and supply as a result of the pandemic and severe winter weather.
Net sales attributable to our Saltwater Fishing segment increased $52.6 million, or 50.8%, to $156.1 million, for the nine months ended March 31, 2021, compared to the nine months ended March 31, 2020. Unit volumes increased 442 units for the nine months ended March 31, 2021 compared to the nine months ended March 31, 2020. The increase in net sales was driven primarily by the increased volumes due to the acquisition of Maverick Boat Group on December 31, 2020 and the sales of larger, more expensive models.
Overall consolidated net sales per unit increased 11.1% to $111,438 per unit for the nine months ended March 31, 2021, compared to the nine months ended March 31, 2020. Net sales per unit for our Malibu segment increased 12.2% to $98,514 per unit for the nine months ended March 31, 2021, compared to the nine months ended March 31, 2020, driven by higher sales of
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new, more expensive models and optional features. Net sales per unit for our Cobalt segment increased 15.4% to $101,451 per unit for the nine months ended March 31, 2021, compared to the nine months ended March 31, 2020, driven by higher sales of larger, more expensive models and optional features. Net sales per unit for our Saltwater Fishing segment decreased 26.4% to $180,895 per unit for the nine months ended March 31, 2021 driven by mix of models due to the acquisition of Maverick Boat Group on December 31, 2020.
Cost of Sales
Cost of sales for the nine months ended March 31, 2021 increased $73.8 million, or 18.0%, to $482.5 million as compared to the nine months ended March 31, 2020. The increase in cost of sales was driven by higher costs related to higher net sales in our Malibu and Saltwater Fishing segments. In the Malibu segment, higher per unit material and labor costs contributed $31.0 million to the increase in cost of sales and were driven by an increased mix of larger product that corresponded with higher net sales per unit. Within our Saltwater Fishing segment, higher volumes, primarily related to the acquisition of Maverick Boat Group, drove $36.6 million of increase in cost of sales which was also modestly impacted by higher per unit costs. Both the Malibu and Saltwater Fishing segment cost of sales increases were partially offset by flat cost of sales at Cobalt that was driven by decreased volume, but offset by per unit cost of sales increases driven by a mix of larger, more expensive product.
Gross Profit
Gross profit for the nine months ended March 31, 2021 increased $41.5 million, or 33.0%, to $167.3 million compared to the nine months ended March 31, 2020. The increase in gross profit was driven primarily by higher sales revenue with a more favorable product mix partially offset by the increased cost of sales for the reasons noted above. Gross margin for the nine months ended March 31, 2021 increased 220 basis points from 23.5% to 25.7%.
Operating Expenses
Selling and marketing expenses for the nine months ended March 31, 2021, decreased $2.0 million, or 14.1% to $12.3 million compared to the nine months ended March 31, 2020 primarily driven by decreased travel and promotional events due mostly to restrictions imposed by COVID-19. As a percentage of sales, selling and marketing expenses decreased 80 basis points compared to the same period in the prior fiscal year. General and administrative expenses for the nine months ended March 31, 2021, increased $14.7 million, or 48.4%, to $45.1 million as compared to the nine months ended March 31, 2020 driven primarily by acquisition related costs, compensation, higher legal expenses related to intellectual property litigation and incremental general and administrative expenses due to the acquisition of Maverick Boat Group. As a percentage of sales, general and administrative expenses increased 120 basis points to 6.9% for the nine months ended March 31, 2021 compared to the nine months ended March 31, 2020. Amortization expense for the nine months ended March 31, 2021 increased $0.5 million, or 11.3% to $5.1 million compared to the nine months ended March 31, 2020. The increase is due to amortization of intangibles acquired as part of the acquisition of Maverick Boat Group on December 31, 2020.
Other Expense, Net
Other expense, net for the nine months ended March 31, 2021 increased by $0.4 million, or 27.7% to expense of $1.8 million, compared to expense of $1.4 million for the nine months ended March 31, 2020. We reduced our tax receivable agreement liability by $1.7 million in the nine months ended March 31, 2020, that resulted in a corresponding amount being recognized as other income during the same period, which income was not recognized during the nine months ended March 31, 2021. Our interest expense decreased by $1.3 million during the nine months ended March 31, 2021 compared to the nine months ended March 31, 2020 due to lower interest rates on outstanding debt.
Provision for Income Taxes
Our provision for income taxes for the nine months ended March 31, 2021, increased $6.8 million, or 40.2%, to $23.7 million compared to the nine months ended March 31, 2020. The increase primarily resulted from increased pre-tax earnings. For the nine months ended March 31, 2021 and 2020, our effective tax rate of 23.0% and 22.5%, respectively, exceeded the statutory federal income tax rate of 21% primarily due to the impact of U.S. state taxes. This increase in tax rate 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 interests in the LLC.
Non-controlling Interest
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 applicable period, by the percentage ownership in the
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LLC not directly attributable to us. For the nine months ended March 31, 2021 and 2020, the weighted average non-controlling interest attributable to ownership interests in the LLC not directly attributable to us was 3.2% and 3.8%, respectively.
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GAAP Reconciliation of Non-GAAP Financial Measures
Adjusted EBITDA
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 EBITDA as net income before interest expense, income taxes, depreciation, amortization and non-cash, non-recurring or non-operating expenses, including certain professional fees, acquisition and integration-related expenses, non-cash compensation expense,expenses related to interruption to our engine supply during the labor strike by United Auto Workers ('UAW') against General Motors and adjustments to our tax receivable agreement liability. We define adjusted EBITDA margin as adjusted EBITDA divided by net sales. Adjusted EBITDA and adjusted EBITDA margin are not measures of net income as determined by GAAP. Management believes adjusted EBITDA and adjusted EBITDA margin allow investors to evaluate the Company's operating performance and compare our results of operations from period to period on a consistent basis by excluding items that management does not believe are indicative of our core operating performance. Management uses Adjusted EBITDA to assist in highlighting trends in our operating results without regard to our financing methods, capital structure and non-recurring or non-operating expenses. We exclude the items listed above from net income in arriving at adjusted EBITDA because these amounts can vary substantially from company to company within our industry depending upon accounting methods and book values of assets, capital structures, the methods by which assets were acquired and other factors. Adjusted EBITDA has limitations as an analytical tool and should not be considered as an alternative to, or more meaningful than, net income as determined in accordance with GAAP or as an indicator of our liquidity. Certain items excluded from adjusted EBITDA are significant components in understanding and assessing a company's financial performance, such as a company's cost of capital and tax structure, as well as the historical costs of depreciable assets. Our presentation of adjusted EBITDA and adjusted EBITDA margin should not be construed as an inference that our results will be unaffected by unusual or non-recurring items. Our computations of adjusted EBITDA and adjusted EBITDA margin may not be comparable to other similarly titled measures of other companies.
The following table sets forth a reconciliation of net income as determined in accordance with GAAP to adjusted EBITDA and presentation of net income margin and adjusted EBITDA margin for the periods indicated (dollars in thousands):
Three Months Ended March 31, Nine Months Ended March 31,
2021 2020 2021 2020
Net income $ 35,135 $ 23,866 $ 79,320 $ 58,146
Provision for income taxes 10,941 6,987 23,656 16,872
Interest expense 796 940 1,797 3,064
Depreciation 4,130 2,938 11,215 9,040
Amortization 2,094 1,501 5,142 4,622
Professional fees 1
948 124 3,186 500
Acquisition and integration related expenses 2
1,530 - 4,107 -
Stock-based compensation expense3
1,449 816 4,060 2,306
UAW strike impact 4
- 877 - 2,564
Adjustments to tax receivable agreement liability 5
- (1,650) - (1,650)
Adjusted EBITDA $ 57,023 $ 36,399 $ 132,483 $ 95,464
Net Sales $ 273,162 $ 182,310 $ 649,793 $ 534,502
Net Income Margin 6
12.9 % 13.1 % 12.2 % 10.8 %
Adjusted EBITDA Margin 6
20.9 % 20.0 % 20.4 % 17.9 %

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(1)
Represents legal and advisory fees related to our litigation with Skier's Choice, Inc. See Note 16to our unaudited interim condensed consolidated financial statements included elsewhere in this Quarterly Report.
(2) For the three months and nine months ended March 31, 2021, represents legal and advisory fees incurred in connection with our acquisition of Maverick Boat Group on December 31, 2020. Integration related expenses for the three and nine months ended March 31, 2021 include post-acquisition adjustments to cost of goods sold of $0.9 million for the fair value step up of inventory acquired from Maverick Boat Group, which was sold during the third quarter of fiscal 2021.
(3)
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 14to our unaudited interim condensed consolidated financial statements included elsewhere in this Quarterly Report.
(4)
For the three and nine months ended March 31, 2020, represents costs incurred in connection with interruption to our engine supply during the UAW strike against General Motors. We purchase engines from General Motors LLC that we then prepare for marine use for our Malibu and Axis boats. During the UAW strike, General Motors suspended delivery of engine blocks to us and we incurred costs by entering into purchase agreements with two suppliers for additional engines to supplement our inventory of engine blocks for Malibu and Axis boats.
(5) For the three and nine months ended March 31, 2020 we recognized other income from an adjustment in our tax receivable agreement liability as a result of a decrease in the estimated tax rate used in computing our future tax obligations and in turn, a decrease in the future tax benefit we expect to pay under our tax receivable agreement with pre-IPO owners.
(6)
We calculate net income margin as net income divided by net sales and we define adjusted EBITDA margin as adjusted EBITDA divided by net sales.

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Adjusted Fully Distributed Net Income
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.
We use Adjusted Fully Distributed Net Income to facilitate a comparison of our operating performance on a consistent basis from period to period that, when viewed in combination with our results prepared in accordance with GAAP, provides a more complete understanding of factors and trends affecting our business than GAAP measures alone.
We believe Adjusted Fully Distributed Net Income assists our board of directors, management and investors in comparing our net income on a consistent basis from period to period because it removes non-cash or non-recurring items, and eliminates the variability of non-controlling interest as a result of member owner exchanges of LLC Units into shares of Class A Common Stock.
In addition, because Adjusted Fully Distributed Net Income is susceptible to varying calculations, the Adjusted Fully Distributed Net Income measures, as presented in this Quarterly Report, may differ from and may, therefore, not be comparable to similarly titled measures used by other companies.
The following table shows the reconciliation of the numerator and denominator for net income available to Class A Common Stock per share to Adjusted Fully Distributed Net Income per Share of Class A Common Stock for the periods presented (in thousands except share and per share data):
Three Months Ended March 31, Nine Months Ended March 31,
2021 2020 2021 2020
Reconciliation of numerator for net income available to Class A Common Stock per share to Adjusted Fully Distributed Net Income per Share of Class A Common Stock:
Net income attributable to Malibu Boats, Inc. $ 33,796 $ 22,778 $ 76,114 $ 55,359
Provision for income taxes 10,941 6,987 23,656 16,872
Professional fees 1
948 124 3,186 500
Acquisition and integration related expenses 2
3,170 1,053 7,894 3,200
Fair market value adjustment for interest rate swap 3
- 10 - 68
Stock-based compensation expense 4
1,449 816 4,060 2,306
UAW strike impact 5
- 877 - 2,564
Adjustments to tax receivable agreement liability 6
- (1,650) - (1,650)
Net income attributable to non-controlling interest 7
1,339 1,088 3,206 2,787
Fully distributed net income before income taxes 51,643 32,083 118,116 82,006
Income tax expense on fully distributed income before income taxes8
12,187 7,539 27,875 19,271
Adjusted fully distributed net income $ 39,456 $ 24,544 $ 90,241 $ 62,735

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Three Months Ended March 31, Nine Months Ended March 31,
2021 2020 2021 2020
Reconciliation of denominator for net income available to Class A Common Stock per share to Adjusted Fully Distributed Net Income per Share of Class A Common Stock:
Weighted average shares outstanding of Class A Common Stock used for basic net income per share: 20,799,405 20,630,741 20,722,339 20,684,034
Adjustments to weighted average shares of Class A Common Stock:
Weighted-average LLC units held by non-controlling unit holders 9
643,292 805,822 686,407 822,042
Weighted-average unvested restricted stock awards issued to management 10
231,165 181,015 206,406 146,905
Adjusted weighted average shares of Class A Common Stock outstanding used in computing Adjusted Fully Distributed Net Income per Share of Class A Common Stock: 21,673,862 21,617,578 21,615,152 21,652,981
The following table shows the reconciliation of net income available to Class A Common Stock per share to Adjusted Fully Distributed Net Income per Share of Class A Common Stock for the periods presented:
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Three Months Ended March 31, Nine Months Ended March 31,
2021 2020 2021 2020
Net income available to Class A Common Stock per share $ 1.62 $ 1.11 $ 3.67 $ 2.68
Impact of adjustments:
Provision for income taxes 0.53 0.34 1.14 0.82
Professional fees 1
0.04 - 0.15 0.02
Acquisition and integration related expenses 2
0.15 0.05 0.38 0.15
Fair market value adjustment for interest rate swap 3
- - - -
Stock-based compensation expense 4
0.07 0.04 0.20 0.11
UAW strike impact 5
- 0.04 - 0.12
Adjustment to tax receivable agreement liability 6
- (0.08) - (0.08)
Net income attributable to non-controlling interest 7
0.06 0.05 0.15 0.13
Fully distributed net income per share before income taxes 2.47 1.55 5.69 3.95
Impact of income tax expense on fully distributed income before income taxes 8
(0.59) (0.37) (1.34) (0.94)
Impact of increased share count 11
(0.06) (0.05) (0.18) (0.12)
Adjusted Fully Distributed Net Income per Share of Class A Common Stock $ 1.82 $ 1.13 $ 4.17 $ 2.89

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(1)
Represents legal and advisory fees related to our litigation with Skier's Choice, Inc. See Note 16to our unaudited interim condensed consolidated financial statements included elsewhere in this Quarterly Report.
(2)
For the three and nine months ended March 31, 2021, represents legal and advisory fees incurred in connection with the acquisition of Maverick Boat Group and amortization of intangibles acquired in connection with the acquisition of Maverick Boat Group, Pursuit and Cobalt. Integration related expenses for the three and nine months ended March 31, 2021 include post-acquisition adjustments to cost of goods sold of $0.9 million for the fair value step up of inventory acquired from Maverick Boat Group, which was sold during the second quarter of fiscal 2021. For the three and nine months ended March 31, 2020, represents amortization of intangibles acquired in connection with the acquisition of Pursuit and Cobalt.
(3) Represents the change in the fair value of our interest rate swap entered into on July 1, 2015. The swap matured on March 31, 2020.
(4)
Represents equity-based incentives awarded to certain of our 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. See Note 14to our unaudited interim condensed consolidated financial statements included elsewhere in this Quarterly Report.
(5) For the three and nine months ended March 31, 2020, represents costs incurred in connection with interruption to our engine supply during the UAW strike against General Motors. We purchase engines from General Motors LLC that we then prepare for marine use for our Malibu and Axis boats. During the UAW strike, General Motors suspended delivery of engine blocks to us and we incurred costs by entering into purchase agreements with two suppliers for additional engines to supplement our inventory of engine blocks for Malibu and Axis boats.
(6) For the three and nine months ended March 31, 2020, we recognized other income from an adjustment in our tax receivable agreement liability as a result of a decrease in the estimated tax rate used in computing our future tax obligations and in turn, a decrease in the future tax benefit we expect to pay under our tax receivable agreement with pre-IPO owners.
(7) Reflects the elimination of the non-controlling interest in the LLC as if all LLC members had fully exchanged their LLC Units for shares of Class A Common Stock.
(8) Reflects income tax expense at an estimated normalized annual effective income tax rate of 23.6% and 23.5% of income before income taxes for the three and nine month periods ended March 31, 2021 and 2020, respectively, assuming the conversion of all LLC Units into shares of Class A Common Stock. The estimated normalized annual effective income tax rate for fiscal year 2021 is based on the federal statutory rate plus a blended state rate adjusted for the research and development tax credit, the foreign derived intangible income deduction, and foreign income taxes attributable to our Australian subsidiary.
(9) Represents the weighted average shares outstanding of LLC Units held by non-controlling interests assuming they were exchanged into Class A Common Stock on a one-for-one basis.
(10) Represents the weighted average unvested restricted stock awards included in outstanding shares during the applicable period that were convertible into Class A Common Stock and granted to members of management.
(11) Reflects impact of increased share counts assuming the exchange of all weighted average shares outstanding of LLC Units into shares of Class A Common Stock and the conversion of all weighted average unvested restricted stock awards included in outstanding shares granted to members of management.

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Liquidity and Capital Resources
Our primary sources of funds are cash provided by operating activities and borrowings under our credit agreement. Our primary use of funds has been for capital investments, repayments under our debt arrangements, acquisitions and cash payments under our tax receivable agreement. The following table summarizes the cash flows from operating, investing and financing activities (dollars in thousands):
Nine Months Ended March 31,
2021 2020
Total cash (used in) provided by:
Operating activities $ 100,369 $ 74,181
Investing activities (169,544) (30,143)
Financing activities 78,368 63,098
Impact of currency exchange rates on cash balances 13 (366)
Increase in cash $ 9,206 $ 106,770
Comparison of the Nine Months Ended March 31, 2021 to the Nine Months Ended March 31, 2020
Operating Activities
Net cash provided by operating activities was $100.4 million for the nine months ended March 31, 2021, compared to $74.2 million for the nine months ended March 31, 2020, an increase of $26.2 million. The increase in cash provided by operating activities primarily resulted from an increase of $25.1 million 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) and a net increase in operating assets and liabilities of $1.1 million related to the timing of collections of accounts receivables, payments for accruals and payables, and purchases of inventory.
Investing Activities
Net cash used in investing activities was $169.5 million for the nine months ended March 31, 2021, compared to $30.1 million for the nine months ended March 31, 2020, an increase of $139.4 million. The increase in cash used for investing activities was primarily related to the acquisition of Maverick Boat Group on December 31, 2020 offset by a reduction in capital expenditures compared to the capital outlays for our expansion activities at our Pursuit and Cobalt plants in the nine months ended March 31, 2020.
FinancingActivities
Net cash provided by financing activities was $78.4 million for the nine months ended March 31, 2021, compared to net cash provided by financing activities of $63.1 million for the nine months ended March 31, 2020, a change of $15.3 million. During the nine months ended March 31, 2021, we received proceeds of $25.0 million from a new incremental term loan and $65.0 million from additional borrowings under our revolving credit facility to fund the acquisition of Maverick Boat Group. During the nine months ended March 31, 2021, we also repaid $8.8 million of borrowings under our revolving credit facility, we repaid $0.3 million on our term loan, paid $1.2 million on taxes for shares withheld upon the vesting of restricted stock awards, paid $0.6 million in deferred financing costs, paid $1.0 million in distributions to LLC unit holders and received $0.3 million in proceeds from the exercise of stock options. During the nine months ended March 31, 2020, we received $103.8 million in proceeds from our credit facility primarily to provide financial flexibility in light of the uncertainty resulting from the COVID-19 pandemic. We repurchased $13.8 million of our Class A Common Stock under our previously announced stock repurchase program. We repaid $25.0 million of revolving debt and we paid $1.4 million in distributions to LLC unit holders and $0.8 million on taxes for shares withheld on restricted stock vestings and we received $0.4 million in proceeds from the exercise of stock options during the nine months ended March 31, 2020.
Loansand Commitments
We amended our existing credit agreement on December 30, 2020 in connection with our acquisition of Maverick Boat Group. As a result of that amendment, we currently have a revolving credit facility with borrowing capacity of up to $170.0 million and $99.7 million aggregate principal amount of term loans outstanding. As of March 31, 2021, we had $65.0 million outstanding under our revolving credit facility and $1.2 million in outstanding letters of credit, with $103.8 million available for borrowing. Our revolving credit facility matures on July 1, 2024, the incremental term loan made on December 30, 2020 in a principal amount of $25.0 million (which we refer to as the incremental term loan) matures on July 1, 2024 and the remaining $75.0 million of term loans (which we refer to as the existing term loans, and together with the incremental term loan, the term
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loans) mature on July 1, 2022. The revolving credit facility and term loans are governed by a credit agreement with Boats LLC as the borrower and Truist Bank, as the administrative agent, swingline lender and issuing bank. The obligations of Boats LLC under the credit agreement are guaranteed by the LLC and, subject to certain exceptions, the present and future domestic subsidiaries of Boats LLC, and all such obligations are secured by substantially all of the assets of the LLC, Boats LLC and such subsidiary guarantors. Malibu Boats, Inc. is not a party to the credit agreement.
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 the LLC and its subsidiaries calculated on a consolidated basis. As of March 31, 2021, the interest rate on our term loans and revolving credit facility was 1.36%. We are required to pay a commitment fee for the 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 loans without any penalties. The existing term loans require an amortization payment of approximately $3.0 million on March 31, 2022 and the balance of the existing term loans are due on the scheduled maturity date of July 1, 2022. The incremental term loan of $25.0 million is subject to quarterly amortization at a rate of 5.0% per year through December 31, 2022, 7.5% per year through June 30, 2024 and the balance of the incremental term loan is due on the scheduled maturity date of July 1, 2024. The credit agreement also requires 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 us. 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 $3.0 million in any fiscal year, and (iv) share repurchase payments up to $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 $10.0 million in any fiscal year, subject to compliance with other financial covenants.
Potential Impact of LIBOR Transition
The Chief Executive of the U.K. Financial Conduct Authority (the 'FCA'), which regulates the London Interbank Offered Rate, or LIBOR, has announced that the FCA will no longer persuade or compel banks to submit rates for the calculation of LIBOR after 2021. However, for U.S dollar LIBOR, the relevant date has been deferred to at least June 30, 2023 for certain tenors (including overnight and one, three, six and 12 months), at which time the LIBOR administrator has indicated that it intends to cease publication of U.S. dollar LIBOR. Despite this deferral, the LIBOR administrator has advised that no new contracts using U.S. dollar LIBOR should be entered into after December 31, 2021. These actions indicate that the continuation of U.S. LIBOR on the current basis cannot and will not be guaranteed after June 30, 2023. Moreover, it is possible that U.S. LIBOR will be discontinued or modified prior to June 30, 2023.
All of our$164.7million of debt outstanding under our credit agreement as of March 31, 2021 bears interest at a floating rate that uses LIBOR as the applicable reference rate to calculate the interest. Our credit agreement provides that, if it is publicly announced that the administrator of LIBOR has ceased or will cease to provide LIBOR, if it is publicly announced by the applicable regulatory supervisor that LIBOR is no longer representative or if either the administrative agent or lenders holding 50% of the aggregate principal amount of our revolving commitments and term loans elect, we and the administrative agent may amend our credit agreement to replace LIBOR with an alternative benchmark rate. This alternative benchmark rate may include a forward-looking term rate that is based on the secured overnight financing rate, also known as SOFR, published by the Federal Reserve Bank of New York.
In addition, our tax receivable agreement provides that, if for any reason the LLC is not able to make a tax distribution in an amount that is sufficient to make any required payment under the tax receivable agreement or we otherwise lack sufficient funds, interest would accrue on any unpaid amounts at LIBOR plus 500 basis points until they are paid. Our tax receivable agreement, however, does not provide for an alternative reference rate to LIBOR and, while we do not currently anticipate
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failing to pay any amounts owed under our tax receivable agreement, it is unclear how we would determine interest on any such amounts should we fail to pay as required under our tax receivable agreement.
If the rate used to calculate interest on our outstanding floating rate debt under our credit agreement that currently uses LIBOR were to increase by 1.0% either as a result of an increase in LIBOR or the result of the use of the alternative benchmark rate, we would expect to incur additional interest expense on such indebtedness as of March 31, 2021 of approximately $1.6 million on an annualized basis. While we do not expect the potential impact of any LIBOR transition to have a material effect on our financial results based on our currently outstanding debt, uncertainty as to the nature of potential changes to LIBOR, fallback provisions, alternative reference rates or other reforms could adversely impact our interest expense on our floating rate debt that currently uses LIBOR as the applicable reference rate. In addition, any alternative reference rates to LIBOR may result in interest that does not correlate over time with the payments that would have been made on our indebtedness if LIBOR was available in its current form. Further, the discontinuance or modification of LIBOR and uncertainty of an alternative reference rate may result in the increase in the cost of future indebtedness, which could have a material adverse effect on our financial condition, cash flow and results of operations. We intend to closely monitor the financial markets and the use of fallback provisions and alternative reference rates in anticipation of the discontinuance or modification of U.S. LIBOR by June 30, 2023.
Future Liquidity Needs and Capital Expenditures
Management believes that our existing cash, borrowing capacity under our revolving credit facility and cash flows from operations will be sufficient to fund our operations for the next 12 months. We estimate that approximately $3.6 million will be due under the tax receivable agreement within the next 12 months. In accordance with the tax receivable agreement, the next payment is anticipated to occur approximately 75 days after filing the federal tax return which was filed March 12, 2021.
Our future capital requirements will depend on many factors, including the general economic environment in which we operate and our ability to generate cash flow from operations, which are more uncertain as a result of the COVID-19 pandemic and its impact on the general economy. Our liquidity needs during this uncertain time will depend on multiple factors, including our ability to continue operations and production of boats, the COVID-19 pandemic's effects on our dealers, suppliers and retail customers, the availability of sufficient amounts of financing, and our operating performance.
Stock Repurchase Program
On August 27, 2020, our Board of Directors authorized a stock repurchase program to allow for the repurchase of up to $50.0 million of our Class A Common Stock and the LLC's LLC Units (the 'Repurchase Program') for the period from September 2, 2020 to July 1, 2021. We intend to fund repurchases under the Repurchase Program from cash on hand. We did not repurchase any shares of our Class A Common Stock during the three and nine months ended March 31, 2021. As of March 31, 2021, we may repurchase up to $50.0 million in shares of Class A Common Stock and LLC Units under the program.
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Contractual Obligations and Commitments
As of March 31, 2021, our continuing contractual obligations were as follows:
Payments Due by Period
Total Less than 1 Year 1-3 Years 3-5 Years More than 5 Years
Bank debt 1
$ 164,688 $ 4,250 $ 74,813 $ 85,625 $ -
Interest expense 2
5,220 2,268 2,658 294 -
Operating leases 3
16,602 2,528 5,096 4,655 4,323
Purchase obligations 4
157,381 157,381 - - -
Payments pursuant to tax receivable agreement 5
51,739 3,589 7,712 8,282 32,156
Total $ 395,630 $ 170,016 $ 90,279 $ 98,856 $ 36,479

(1)
Principal payments on our outstanding bank debt per terms of our credit agreement, which is comprised of a $100.0 million term loan, of which $99.7 million is outstanding as of March 31, 2021 and $170.0 million revolving credit facility, of which $65.0 million was outstanding as of March 31, 2021. Assumes no additional borrowings or repayments under our revolving credit facility prior to its maturity. The balance of outstanding term loans matures on July 1, 2022, the incremental term loan matures on July 1, 2024 and the revolving credit facility matures on July 1, 2024.
(2) Interest payments on our outstanding term loans under our credit agreement. Our term loan bears interest at variable rates. We have calculated future interest obligations based on the interest rate as of March 31, 2021.
(3)
Pursuant to the adoption of ASC Topic 842, Leases, as of July 1, 2019 our lease liability for all leases with terms greater than 12 months as represented on the balance sheet respective of maturity.
(4) As part of the normal course of business, we enter into purchase orders from a variety of suppliers, primarily for raw materials, in order to manage our various operating needs. The orders are expected to be purchased throughout fiscal year 2021 and 2022.
(5) Reflects amounts owed under our tax receivables agreement that we entered into with our pre-IPO owners at the time of our IPO. Under the tax receivables agreement, we pay the pre-IPO owners (or any permitted assignees) 85% of the amount of cash savings, if any, in U.S. federal, state and local income tax or franchise tax that we actually realize, or in some circumstances are deemed to realize, as a result of an expected increase in our share of tax basis in LLC's tangible and intangible assets, including increases attributable to payments made under the tax receivable agreement. These obligations will not be paid if we do not realize cash tax savings.

Off Balance Sheet Arrangements
In connection with our dealers' wholesale floor plan financing of boats, we have entered into repurchase arrangements with various lending institutions. The repurchase commitment is on an individual unit basis with a term from the date it is financed by the lending institution through payment date by the dealer, generally not exceeding two and a half years. Such arrangements are customary in the industry and our exposure to loss under such arrangements is limited by the resale value of the inventory which is required to be repurchased. Refer to Note 16of our unaudited interim condensed consolidated financial statements included elsewhere in this Quarterly Report for further information on repurchase commitments.
Seasonality
Our dealers experience seasonality in their business. Retail demand for boats is seasonal, with a significant majority of sales occurring during peak boating season, which coincides with our first and fourth fiscal quarters. In order to minimize the impact of this seasonality on our business, we manage our manufacturing processes and structure dealer incentives to tie our annual volume rebates program to consistent ordering patterns, encouraging dealers to purchase our products throughout the year. In this regard, we may offer free flooring incentives to dealers from the beginning of our model year through April 30 of each year. Further, in the event that a dealer does not consistently order units throughout the year, such dealer's rebate is materially reduced. We may offer off-season retail promotions to our dealers in seasonally slow months, during and ahead of boat shows, to encourage retail demand.
Critical Accounting Policies
On December 31, 2020, we acquired all of the outstanding stock of Maverick Boat Group and allocated the fair value of purchase consideration to the tangible assets acquired, liabilities assumed and intangible assets acquired based on their estimated fair values. The excess of the fair value of purchase consideration over the fair values of these identifiable assets and liabilities is recorded as goodwill. Our valuation procedures include consultation with an independent adviser. When determining the fair values of assets acquired and liabilities assumed, management makes significant estimates and
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assumptions, especially with respect to intangible assets. Critical estimates in valuing certain intangible assets include but are not limited to projected future cash flows, dealer attrition and discount rates. Management's estimates of fair value are based upon assumptions believed to be reasonable, but which are inherently uncertain and unpredictable and, as a result, actual results may differ from estimates and changes could be significant. We expect to finalize these amounts during the second half of fiscal 2021.
Other estimates associated with the accounting for acquisitions may change as additional information becomes available regarding the assets acquired and liabilities assumed, as more fully discussed in Note 4of our unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report.
As of March 31, 2021, there were no other significant changes in the application of our critical accounting policies or estimation procedures from those presented in our Annual Report on Form 10-K for the fiscal year ended June 30, 2020.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Refer to our Annual Report on Form 10-K for the year ended June 30, 2020, for a complete discussion on the Company's market risk. There have been no material changes in market risk from those disclosed in the Company's Form 10-K for the year ended June 30, 2020.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
We maintain disclosure controls and procedures (as defined in Rule 13a-15(e) of the Exchange Act) that are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms, and that such information is accumulated and communicated to our management, including our chief executive officer and chief financial officer, as appropriate, to allow timely decisions regarding required disclosures. Any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives.
As of the end of the period covered by this Quarterly Report, we carried out an evaluation under the supervision and with the participation of our management, including our chief executive officer and chief financial officer, of the effectiveness of our disclosure controls and procedures. Based upon this evaluation, our chief executive officer and chief financial officer have concluded that our disclosure controls and procedures were effective at a reasonable assurance level as of March 31, 2021.
Changes in Internal Control Over Financial Reporting
On December 31, 2020, we acquired all of the outstanding stock of Maverick Boat Group. Prior to the acquisition, Maverick Boat Group was a privately-held company and was not subject to the Sarbanes-Oxley Act of 2002, the rules and regulations of the SEC, or other corporate governance requirements applicable to public reporting companies. As part of our ongoing integration activities, we are continuing to incorporate our controls and procedures into Maverick Boat Group and to augment our company-wide controls to reflect the risks that may be inherent in acquisitions of privately-held companies.
Other than our integration of Maverick Boat Group, there have been no changes in our internal control over financial reporting during the quarter ended March 31, 2021 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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Part II - Other Information
Item 1. Legal Proceedings
The discussion of legal matters under the section entitled 'Legal Proceedings' is incorporated by reference from Note 16of our unaudited interim condensed consolidated financial statements included elsewhere in this Quarterly Report.
Item 1A.Risk Factors
There have been no material changes to the risk factors discussed in Part I, Item 1A. 'Risk Factors' of our Annual Report on Form 10-K for the year ended June 30, 2020, as supplemented by the risk factors included in Part II, Item 1A. 'Risk Factors' of our Quarterly Report on Form 10-Q for the quarter ended December 31, 2020.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Unregistered Sales of Equity Securities
On February 5, 2021, in connection with the exchange of limited liability company interests of the LLC by a member of the LLC, the Company issued a total of 6,549 shares of its Class A Common Stock, par value $0.01 per share for nominal consideration to such member in reliance on the exemption under Section 4(a)(2) of the Securities Act.
On February 11, 2021, in connection with the exchange of limited liability company interests of the LLC by a member of the LLC, the Company issued a total of 38,935 shares of its Class A Common Stock, par value $0.01 per share for nominal consideration to such member in reliance on the exemption under Section 4(a)(2) of the Securities Act
On February 11, 2021, in connection with the exchange of limited liability company interests of the LLC by a member of the LLC, the Company issued a total of 25,602 shares of its Class A Common Stock, par value $0.01 per share for nominal consideration to such member in reliance on the exemption under Section 4(a)(2) of the Securities Act
On February 11, 2021, in connection with the exchange of limited liability company interests of the LLC by a member of the LLC, the Company issued a total of 8,800 shares of its Class A Common Stock, par value $0.01 per share for nominal consideration to such member in reliance on the exemption under Section 4(a)(2) of the Securities Act
On February 11, 2021, in connection with the exchange of limited liability company interests of the LLC by a member of the LLC, the Company issued a total of 7,500 shares of its Class A Common Stock, par value $0.01 per share for nominal consideration to such member in reliance on the exemption under Section 4(a)(2) of the Securities Act
Repurchase of Class A Common Stock
On August 27, 2020, our Board of Directors authorized a new stock repurchase program for the repurchase of up to $50.0 million of Class A Common Stock and the LLC Units for the period from September 2, 2020 to July 1, 2021. No shares have been repurchased under our new repurchase program during the quarter ended March 31, 2021. As of March 31, 2021, we may repurchase up to $50.0 million in shares of Class A Common Stock and LLC Units under the program.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not Applicable.
Item 5. Other Information
None.
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Item 6. Exhibits
Exhibit No. Description
2.1
Stock Purchase Agreement dated December 31, 2020 among Malibu Boats, LLC, MBG Holdco, Inc., Maverick Boat Group, Inc., and the other parties named therein. 6
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
First Amendment, dated as of February 5, 2014, to First Amended and Restated Limited Liability Company Agreement of Malibu Boats Holdings, LLC 3
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
Description of Class A Common Stock 5
4.2
Form of Class A Common Stock Certificate 1
4.3
Form of Class B Common Stock Certificate 1
4.4
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
4.5
Exchange Agreement, dated as of February 5, 2014, by and among Malibu Boats, Inc. and the Members of Malibu Boats Holdings, LLC 2
4.6
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
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
The following financial statements from the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 2021 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.
104
The cover page from the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 2021, formatted in Inline XBRL (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.
(2) Filed as an exhibit to the Company's Current Report on Form 8-K (File No. 001-36290) filed on February 6, 2014.
(3) Filed as an exhibit to the Company's Quarterly Report on Form 10-Q/A (File No. 001-36290) filed on May 13, 2014.
(4) Filed as an exhibit to the Company's Current Report on Form 8-K (File No. 001-36290) filed on June 27, 2014.
(5) Filed as an exhibit to the Company's Annual Report on Form 10-K (File No. 001-36290) filed on August 29, 2019.





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Table of Contents
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
May 4, 2021 MALIBU BOATS, INC.
By: /s/ Jack Springer
Jack Springer,
Chief Executive Officer
(Principal Executive Officer)
By: /s/ Wayne Wilson
Wayne Wilson,
Chief Financial Officer
(Principal Financial Officer and Principal Accounting Officer)


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