MasterCraft Boat
Annual Report 2017

Plain-text annual report

Table of ContentsUNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549 FORM 10-K ☑ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended: June 30, 2017OR☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the transition period from to MCBC HOLDINGS, INC.(Exact name of registrant as specified in its charter) Delaware001-3750206-1571747(State or Other Jurisdiction(Commission(I.R.S. Employerof Incorporation or Organization)File Number)Identification No.) 100 Cherokee Cove Drive, Vonore, TN 37885(Address of Principal Executive Office) (Zip Code) (423) 884-2221(Registrant’s telephone number, including area code)Securities registered pursuant to Section 12(b) of the Act: Title of each class Name of each exchange on which registeredCommon Stock, par value $0.01 per share NASDAQ Global Select MarketSecurities registered pursuant to Section 12(g) of the Act:None(Title of Class)Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.☐ Yes ☑ NoIndicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.☐ Yes ☑ No 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 suchshorter 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 ☐ NoIndicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant toRule 405 of Regulation S-T (§229.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).☑ Yes ☐ NoIndicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’sknowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.☑ Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a 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☐ (Do not check if a smaller reporting company) 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 standardsprovided 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 Act).☐ Yes ☑ NoThe aggregate market value of the outstanding common stock, other than shares held by persons who may be deemed affiliates of the registrant, as of the last business day of the registrant’s most recentlycompleted second fiscal quarter, which ended January 1, 2017 and based on the closing sale price as reported on the NASDAQ Global Select Market system, was approximately $271,090,256. As ofSeptember 7, 2017, there were 18,637,445 shares of the Registrant’s common stock, par value $0.01 per share, issued and outstanding.DOCUMENTS INCORPORATED BY REFERENCEPortions of the proxy statement for the 2017 annual meeting of stockholders, which will be filed no later than 120 days after the close of the registrant’s fiscal year ended June 30, 2017, are incorporatedby reference into Part III of this report. Table of ContentsMCBC HOLDINGS, INC. ANNUAL REPORT ON FORM 10-KFOR THE YEAR ENDED JUNE 30, 2017 TABLE OF CONTENTS Page CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS BASIS OF PRESENTATION PART I Item 1. Business2Item 1A. Risk Factors18Item 1B. Unresolved Staff Comments34Item 2. Properties34Item 3. Legal Proceedings34Item 4. Mine Safety Disclosures34 PART II Item 5. Market for Registrant’s Common Equity and Related Stockholder Matters and Issuer Purchases ofEquity Securities35Item 6. Selected Financial Data36Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations38Item 7A. Quantitative and Qualitative Disclosures about Market Risk53Item 8. Financial Statements and Supplementary Data54Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure54Item 9A. Controls and Procedures54Item 9B. Other Information55 PART III Item 10. Directors, Executive Officers and Corporate Governance55Item 11. Executive Compensation55Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters55Item 13. Certain Relationships and Related Transactions, and Director Independence55Item 14. Principal Accountant Fees and Services55 PART IV Item 15. Exhibits, Financial Statement Schedules56 ii Table of ContentsCAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTSThis Annual Report on Form 10-K contains forward-looking statements within the meaning of the Private SecuritiesLitigation Reform Act of 1995. All statements contained in this Form 10-K that do not relate to matters of historical factshould be considered forward-looking statements, including but not limited to statements regarding our expected marketshare, business strategy, dealer network, anticipated financial results, and liquidity. We use words such as “could,” “may,”“might,” “will,” “expect,” “likely,” “believe,” “continue,” “anticipate,” “estimate,” “intend,” “plan,” “project,” and othersimilar expressions to identify some forward-looking statements, but not all forward-looking statements include these words.All of our forward- looking statements involve estimates and uncertainties that could cause actual results to differ materiallyfrom those expressed in the forward-looking statements. Accordingly, any such statements are qualified in their entirety byreference to the information described under the caption “Risk Factors” and elsewhere in this Form 10-K.The forward-looking statements contained in this Form 10-K are based on assumptions that we have made in light of ourindustry experience and our perceptions of historical trends, current conditions, expected future developments, and otherfactors we believe are appropriate under the circumstances. You should understand that these statements are not guarantees ofperformance or results. They involve risks, uncertainties (many of which are beyond our control), and assumptions. Althoughwe believe that these forward-looking statements are based on reasonable assumptions, you should be aware that manyimportant factors could affect our actual operating and financial performance and cause our performance to differ materiallyfrom the performance anticipated in the forward-looking statements. We believe these important factors include, but are notlimited to, those described under “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition andResults of Operations” in this Form 10-K and our other filings with the Securities and Exchange Commission (“SEC”).Should one or more of these risks or uncertainties materialize, or should any of these assumptions prove incorrect, our actualoperating and financial performance may vary in material respects from the performance projected in these forward-lookingstatements. In addition, new important factors that could cause our business not to develop as we expect may emerge fromtime to time.Further, any forward-looking statement speaks only as of the date on which it is made, and except as required by law, weundertake no obligation to update any forward-looking statement contained in this Form 10-K to reflect events orcircumstances after the date on which it is made or to reflect the occurrence of anticipated or unanticipated events orcircumstances. The forward-looking statements contained herein should not be relied upon as representing our views as ofany date subsequent to the filing date of this Form 10-K.BASIS OF PRESENTATIONOur fiscal year begins on July 1 and ends on June 30 with the interim quarterly reporting periods consisting of thirteenweeks. Therefore, the quarter end will not always coincide with the date of the end of the calendar month. We refer to ourfiscal years based on the calendar-year in which they end. Accordingly, references to fiscal 2017, fiscal 2016 and fiscal 2015represent our financial results for the fiscal years ended June 30, 2017, June 30, 2016 and June 30, 2015, respectively. Forease of reference, we identify our fiscal years in this Form 10-K by reference to the period from July 1 to June 30 of the year inwhich the fiscal year ends. For example, “fiscal 2017” refers to our fiscal year ended June 30, 2017.Unless the context otherwise requires, the terms “MasterCraft,” the “Company,” ”we,” and “us” in this Form 10-K refer toMCBC Holdings, Inc. and its consolidated subsidiaries. 1 Table of Contents PART I ITEM 1.BUSINESS Our Company We are a world-renowned innovator, designer, manufacturer, and marketer of premium performance sport boats, with aleading market position in the U.S., a strong international presence, and dealers in 39 countries around the world. Our boatsare used for water skiing, wakeboarding, and wake surfing, as well as general recreational boating. We believe thatMasterCraft is the most recognized brand name in the performance sport boat category. Founded in 1968, we have cultivatedour iconic brand image through a rich history of industry-leading innovation, which has led to numerous industryachievements, awards, and accolades. Our robust product portfolio of performance sport boats is manufactured to the highestspecifications in quality, performance, and styling. We are committed to delivering an extraordinary boating experience to our customers. From pioneering innovations thatimprove enjoyment on the water to offering products that promote rapid development of skills, our mission is to help ourcustomers generate memories that will last a lifetime. We utilize a comprehensive product development process in order tobuild the most relevant and exciting products for our customers, year after year. We believe that our commitment to quality isunsurpassed in the performance sport boat category, and we engage in operational excellence to deploy flexible and effectiveproduction systems that ensure we design and build the highest quality boats in the market. All of our boats, from hull to upholstery, are hand-crafted by our skilled workforce at our corporate headquarters nearKnoxville, Tennessee. We use only the highest quality materials from industry-preferred suppliers and all of our boats areextensively tested on the water at our state-of-the-art facility prior to sale. In recent years, we have made significantinvestments in improving design, engineering, manufacturing, and operational processes as we strive to be the most efficientperformance sport boat manufacturer in the industry. We are the only boat manufacturer to achieve compliance with all threeof the International Standard for Organization (“ISO”) 9001 (Quality Management Systems), 14001 (EnvironmentalManagement Systems), and 18001 (International Occupational Health and Safety Management System) standards. Ourindustry-leading operations result in world-class quality, which enables us to offer a best-in-class five-year factory warrantyand results in MasterCraft boats typically maintaining higher aftermarket resale value than our competitors’ boats. We sell our boats through an extensive network of independent dealers in North America and internationally. Our boats arethe exclusive performance sport boats offered by the majority of our dealers. We devote significant time and resources tofind, develop, and improve the performance of our dealers. We continuously cultivate and strengthen our dealer relationshipswith marketing, training, and service programs designed to increase our dealers’ sales and profitability. We believe thestrength of our dealer network and our proactive efforts to help our dealers improve their businesses give us a distinctcompetitive advantage in our industry. Our History MasterCraft was founded in 1968 when we built our first custom hull ski boat in a two-stall horse barn on a farm in Maryville,Tennessee. Dissatisfied with the large wakes and pull of other ski boats, we designed a hull that had the smallest wake in theindustry: smooth and low at slalom and jump speeds yet well-defined at trick speeds. Our roots in performance water skiboats were reinforced as we evolved over the next 40 years to produce leading performance-oriented boats in thewakeboarding and wake surfing categories. Today, we continue to produce the industry’s premier competitive water ski,wakeboarding, and wake surfing performance boats that also address our customers’ needs for versatility, flexibility, fun, andfunctionality. 2 Table of ContentsOur Market Opportunity During 2016, retail sales of new powerboats in the U.S. totaled $8.3 billion. Of the categories defined and tracked by theNational Marine Manufacturers Association (“NMMA”) our core market corresponds most directly to the inboardski/wakeboard category, which we refer to as the performance sport boat category. We believe our addressable market alsoincludes similar and adjacent powerboat categories identified by the NMMA, including sterndrive boats, outboard boats, andjet boats. We believe we are well-positioned to benefit from several trends underway in our addressable market, including: ·performance sport boats are taking greater share of the overall fiberglass powerboat category; ·inventory of two to five year old pre-owned boats has become limited, driving consumers to purchase new boats; ·ease-of-use and performance innovations have accelerated product cycles driving consumer demand for new products;and ·higher consumer confidence influenced by improving macroeconomic conditions, including increased home values andgreater workforce participation, has helped to drive increased consumer demand for powerboats. As the recovery in the general economy and overall boating industry from the economic downturn that commenced in 2008has continued, the performance sport boat category has experienced a robust recovery. According to Statistical Surveys, Inc.(“SSI”), new unit sales of performance sport boats in the U.S. increased at a compound annual growth rate (“CAGR”) of12.6% from 2013 to 2016 while new unit sales of all fiberglass power boats contracted at a CAGR of 5.5% in the U.S. overthe same period. We believe the performance sport boat category has grown at a faster rate due to increased innovation in thefeatures, designs, and layouts of performance sport boats. These innovations have improved the performance, functionality,and versatility of these boats as compared with other recreational powerboats, particularly boats in the sterndrive category,which have not experienced the same degree of innovation. We believe inboard boats are superior to sterndrive boats for towsports such as water skiing, wakeboarding, and wake surfing for several reasons, including (i) the larger and more propulsivewakes that only inboard engine configurations can enable, (ii) enhanced rider safety as a result of the location of the inboardpropeller underneath the boat instead of protruding from the stern, as is generally the case with boats in the sterndrivecategory, and (iii) relatively more passenger and storage space due to the location of the inboard engine housing. Performance sport boats have also continued to take share from other powerboat categories, in particular the sterndrivecategory, with new performance sport boat unit sales volume steadily increasing from 2002 through 2016 as a percentage ofthe total combined new unit sales volume of performance sport and sterndrive boats. We believe our strong market shareposition and broad offering of boat models and features will continue to attract customers from other powerboat categories toour performance sport boats. While the performance sport boat category has grown in recent years, new unit sales remainedsignificantly below historical peaks. According to NMMA, the 8,782 new performance sport boat units sold in 2016 wereapproximately 30% below the observed peak in 2006. The expanding popularity of boating has also contributed to the strong recovery in volumes. We believe we are well-positioned to benefit from the increased popularity of recreational boating and the resulting larger prospective customerbase. Our Strengths Iconic Brand Synonymous with Quality, Innovation, and Performance. We believe the MasterCraft brand is well-knownamong boating enthusiasts for high performance, premier quality, and relentless innovation. We believe that the market3 Table of Contentsrecognizes MasterCraft as a premier brand in the performance sport boat category due to the overall superior valueproposition that our boats deliver to our customers. The MasterCraft brand is built on a carefully crafted set of defining principles: ·Legacy: Our heritage of successful product innovations has contributed to our status as one of the most widelyrecognized brands in the boating industry. We work tirelessly every day to maintain our iconic brand reputationrelative to our competition. ·Power: MasterCraft boats are renowned for their superior performance. For example, our flagship water ski boat, theProStar, is widely recognized as the premier three-event ski boat in the industry and has been responsible for drivinga number of world record ski and ski jumping performances since its launch. Notable achievements include theWorld Men’s Ski Flying Record of 312 feet and records in over 50 events at the 2014 World 35+ Water SkiChampionships, as well as numerous personal records for amateur skiers around the world. ·Precision: The rigorous attention to detail with which we design and manufacture our products results in highquality boats that command significant resale premiums to comparable competitor boats. The high quality anddurability of our products allow us to offer a “stem-to-stern” five-year warranty that comprehensively covers moreparts of our boats than warranties offered by any of our competitors. ·Progression: Our brand is known to represent innovation and achievement. For example, only MasterCraft offersthe most boats with a longer, more powerful “Zone 4” surfing wake, which was introduced on the MasterCraft X23,the winner of the 2015 NMMA Innovation Award. “Zone 4” wakes are measured as 15 to 20 feet from the swimplatform of the boat and provide more traversable wave surface area and the ability to surf bigger boards. We havepioneered multiple technological innovations in the industry, many of which have advanced the performancestandards of our industry and have garnered innovation awards from organizations such as the NMMA and BoatingWriters International. Leading Market Share Position in Performance Sport Boat Category. Over the last decade, we have consistently held aleading market share position in the U.S. among manufacturers of premium performance sport boats based on unit volume.According to SSI our U.S. market share in December of 2016 was 21.5%. We believe our sales have grown as dealers andcustomers continue to recognize the superior quality, performance, styling, and value of our recently released boats and thatwe are just starting to realize the market share benefits of the many recent new product offerings and product enhancementinitiatives that our management team has implemented during the past several years. For example, our MasterCraft NXT lineof entry-level boats further increases our market share as it represents our first offering in this market segment, which accountsfor approximately one-third of the performance sport boat category. Industry-Leading Product Design and Innovation. We believe that our innovation in the design of new boat models and newfeatures has been a key to our success, helping us maintain our market share, command higher price points, and generallybroaden the appeal of our products among recreational boaters. As a result of the features we have introduced, we believe thatour boats are used for an increasingly wide range of activities. Our commitment to consistently developing new boat modelsand introducing new features is reflected in several notable recent achievements, including NMMA Innovation Awards forour ProStar water skiing boat, Gen 2 integrated surf system, X23 performance tow boat and the DockStar Handling System.These MasterCraft products helped us win our sixth Innovation Awards in seven years for the performance sport boatcategory presented by the NMMA at the 2016 Miami Boat Show. Recently we launched the new Dockstar Handling Systemwhich is an innovative flanking rudder system that allows drivers to easily maneuver tight spaces and crowded marinas inreverse. Our entire product portfolio has been renewed in the past five years, giving us the4 Table of Contentsnewest overall product offering in the performance sport boat category, which we believe positions us for strong growth inthe coming periods. Highly Efficient Product Development and Manufacturing. A key to our success has been our renewed focus on operationalimprovements and world-class business processes. We believe our new product development capabilities are industry-leading and enable us to consistently create unique high performance hull shapes and product features in shorter designiterations and at lower development costs than our competitors. These capabilities enable us to precisely design custom hullsand performance features that enhance each boat’s unique performance characteristics and increase our speed to market withexciting new products. We have also made recent significant investments in infrastructure, value-added processes, and engineering. Theseinvestments have resulted in lower material waste, reduced labor hours per boat, reduced re-work, and increased productionefficiencies. We were named a 2015 IndustryWeek Best Plant in North America Recipient—the only boat manufacturer toreceive that honor. In addition, our manufacturing quality performance has allowed us to reduce our warranty costs evenwhile offering an industry-leading five-year “stem-to-stern” warranty. We believe that our scalability and operationalefficiency has allowed us to limit our annual Company-wide weighted average boat price increase to less than 3% annuallyfrom model year 2013 to model year 2016, enabling us to narrow the pricing gap between us and our competitors. We areable to narrow this pricing gap while increasing margins by controlling costs through our highly disciplined engineering andmanufacturing processes. Strong Dealer Network. We have worked extensively with our dealers to develop what we believe is the strongest dealernetwork in the performance sport boat category. Our extensive dealer network allows us to distribute our products moreeffectively than our competitors. We target our distribution on the category’s highest performing dealers, with more of ourdealers placing in Boating Industry magazine’s Top 20 Dealers than any of our competitors in the performance sport boatcategory. We have established operating processes focused on optimizing dealers’ financial performance and service, andwith a track record of balancing wholesale inventory and retail sales we are better able to manage dealer inventory, allowingfor more transparent sales estimates and strong dealer relationships. In addition, we have a “stem-to-stern” five-year warrantyfor all of our product lines. We believe our warranty is simpler and more transparent than those of our competitors, andprovide consumers with more peace of mind. This industry-leading warranty encourages customers to continue to visit ourdealers for servicing, creating additional opportunities for boat trade-ins and purchases of accessories, thereby improving ourdealers’ sales rates and financial health. These actions have strengthened our existing dealer network and are drivingincreased interest from new potential dealers who want to join the MasterCraft platform. Differentiated Sales and Marketing Capabilities. We believe our marketing efforts support the MasterCraft brand promiseby focusing on the superior MasterCraft value proposition and differentiating the performance and features of our boats. Tohighlight our performance credibility and generate additional brand excitement, we sponsor the #2, #3, and #5 rankedprofessional wakeboarding athletes, the #2 ranked water ski jumper, and the #3 ranked male and #3 ranked female waterskiers, who all trust the performance of our boats to enhance their careers. In addition, we partner with The EnthusiastNetwork Media Group (“TEN”), a leading action sports media company with an annual audience of approximately 158million people, and avid surfers Donavon Frankenreiter and Kelia “Sister” Moniz to promote our boats’ wake surfingcapabilities and our brand lifestyle. We also partner with other innovative athletes and brands such as Travis Pastrana, GreggGodfrey, GoPro, Nixon, Hobie, ESPN, Von Zipper, Sun Bum, Blackberry Farm, Kaboo Music Festival, Stance and Sanuk, alloffering compelling co-marketing opportunities to expand our brand’s lifestyle positioning. We believe our superior salesand marketing capabilities effectively communicate our performance, styling, quality, authenticity, and lifestyle, resulting inincreased overall customer engagement. Highly Experienced Management Team. We have a highly seasoned and effective management team. With an average ofmore than 28 years of boating industry experience, our management team has proven its ability to develop and integrate5 Table of Contentsnew product lines, enhance operations, strengthen our distribution network, and recruit industry talent. Senior managementadditions over the past few years have driven improvements to our manufacturing, quality, and product development systemsand processes, which have collectively accelerated performance improvements as unit volumes have increased. Our Presidentand Chief Executive Officer, Terry McNew, has 30 years of boating industry experience. He joined MasterCraft in August2012 after serving as Executive Vice President of Brunswick Corp’s recreational boat group, where he was in charge ofmanufacturing, product development, and engineering and quality systems. His leadership has helped us implement dramaticprocess improvements contributing to superior results. Tim Oxley, our Chief Financial Officer, has spent 27 years in theboating industry, including 11 years with MasterCraft, following 16 years with Brunswick Corp. where he served as ChiefFinancial Officer of several operating divisions. Our Strategy We intend to continue to capitalize on the ongoing recovery in the broader boating industry and performance sport boatcategory through the following strategies: Continue to Develop New and Innovative Products in Our Core Market. As a leading innovator, designer, manufacturer, andmarketer of premium performance sport boats, we strive to design new and inventive products that appeal to a broad customerbase. Since the completion of our management changes in fiscal 2013, we have successfully launched a number of newproducts and features with best-in-class quality leading to increased sales and significant margin expansion. Furthermore, ourunique new product development process enables us to renew our product portfolio with innovative offerings at a rate thatwe believe will be difficult for our competitors to match without significant additional capital investments. Our processinvolves each department in collaborative full “team” product launches that enable us to release three new models per yearwhile maintaining superior quality and controlling costs. Our entire product portfolio has been renewed in the past five years.We intend to continue releasing new products and features multiple times during the year, which we believe enhances ourreputation as a cutting-edge boat manufacturer and will drive consumer interest in our products. Penetrate the Entry-Level and Mid-Line Segments of the Performance Sport Boat Category. Our near-term productdevelopment strategy is to expand our product line to reach underserved segments of the performance sport boat categorythat are distinct from our traditional customer base. We believe the launch of our MasterCraft NXT product line has made theMasterCraft brand more accessible to a much broader demographic of the recreational boating industry. With the NXTproduct line, we are targeting a new market segment for MasterCraft with a product that offers the highest levels of quality,style, reliability, functionality, and performance expected from our MasterCraft brand. The unique design of the MasterCraftNXT, along with our existing supplier relationships, material agreements, and manufacturing processes, allows us to offer thisproduct at an attractive price point for the consumer while sustaining our gross margins and the product attributes critical tothe MasterCraft brand. Further broadening our consumer base, we launched the MasterCraft XT product line, our latest multi-sport line. Designed to be do-it-all crossovers, the new XT models will target the sweet spot between our entry-level NXT lineand the award-winning, premium X series. Capture Additional Share from Adjacent Boating Categories. Our culture of innovation enhances our ability to introducenew products with increased versatility, functionality, and performance to a more expansive customer base that values boatsfor both water sports and general recreational boating purposes. We have experienced success with several recent marketingcampaigns that focus on new product launches and help to educate the market on our value proposition to customers.Ultimately, the versatile boating experience delivered by our performance sport boats allows us to attract customers fromother boating categories, most notably from the sterndrive category. For example, the MasterCraft X26, our 26 foot boatmodel, has the capacity to seat 18 people and offers the quality, performance, and styling associated with our iconic brand ina package that can compete with large day cruisers in the sterndrive category. 6 Table of ContentsWe intend to further enhance the performance, comfort, and versatility of our products in order to target additional crossovercustomers seeking high performance powerboats for general recreational activity. We believe that several of our recentlylaunched and planned new products will appeal to a broader range of recreational boaters by offering the performancebenefits of our products, including superior drivability and water sports versatility, while also providing greater seatingcapacity and comfort, a roomy, plush interior and extensive storage space to allow an increased number of family and friendsto spend time together on the water. Continuous Operational Improvement to Drive Margin Expansion. We continue to implement a number of initiatives toreduce our cost base and to improve the efficiency of our manufacturing process. We revamped our manufacturing andproduct development processes, which led to operational efficiencies that have driven margin expansion. These processimprovements have lowered re-work, warranty claims, material waste, and inventory levels, reducing our costs, and havedriven improved on-time delivery rates. Additionally, we have fostered a culture of operational improvement within ourhighly engaged workforce. We have also implemented a faster and more disciplined product development process, whichwill allow us to completely renew our product portfolio every four years. These processes are now ingrained in the culture atMasterCraft, leading to a Company-wide focus on driving further margin expansion through continuous improvement. Webelieve these important process improvements and culture of operational excellence provide us with a strong operationalfoundation. Effectively Manage Dealer Inventory and Further Strengthen Our Dealer Network. Our goal is to achieve and maintain aleading market share in each of the markets in which we operate. We view our dealers as our partners and product champions.Therefore, we devote significant time and resources to finding high quality dealers, and developing and improving theirperformance over time. We actively manage dealer inventory levels, as demonstrated by healthy and consistent inventoryretail turns and balanced wholesale and retail unit sales, which leads to better margins and improved financial health for ourdealers. Additionally, our unique “stem-to-stern” warranty and predictable new product development cycle ensure that ourdealers have high quality, compelling, and relevant products to sell to their customers. We believe the quality and trust inour dealer relationships are more beneficial to our long-term success than the quantity of dealers. We continue to leveragethat dealer base while proactively developing strategies that will strengthen our overall network. For example, we intend tostrengthen our current footprint by selectively recruiting market-leading dealers. We believe our targeted initiatives toenhance and grow our dealer network will increase unit sales in the future. Increase Our Sales in International Markets. We currently have an extensive international distribution network with 43international dealers in 75 locations around the world. We believe we have the most well-known brand in the performancesport boat category globally. Based on our brand recognition, innovative product offerings, and distribution strengths, webelieve we are well positioned to leverage our reputation and capture additional international sales. We believe that we willincrease our international sales by promoting our new products in developed markets where we have a well-establisheddealer base and in international markets where rising consumer incomes are expected to increase demand for recreationalproducts, such as Australia, Europe, Israel, Dubai, and Brazil. We are also developing new product offerings that willspecifically target certain product demand from our international consumers and that we believe will drive further salesgrowth in international markets. Net sales outside of North America represented 9.1% of net sales volume in fiscal 2017. Our Products We design, manufacture, and sell premium recreational performance sport boats that we believe deliver superior performancefor water skiing, wakeboarding, and wake surfing, as well as general recreational boating. In addition, we offer variousaccessories, including trailers and aftermarket parts. Our MasterCraft-branded portfolio of Star Series, XSeries, XTSeries and NXT boats are designed for the highest levels ofperformance, styling, and enjoyment for both recreational and competitive use. The Star Series and XSeries are geared7 Table of Contentstowards the consumer seeking the most premium and highest performance boating experience that we offer, and generallycommand a price premium over our competitors’ boats at retail prices ranging from approximately $60,000 to $200,000. TheMasterCraft XT line was introduced in July 2016 as a multi-sport, category-defying crossover, with retail prices ranging fromapproximately $80,000 to $135,000. Unveiled in January 2014, the MasterCraft NXT line introduced the quality,performance, styling, and innovation of the MasterCraft brand to the entry-level consumer, with retail prices ranging fromapproximately $50,000 to $75,000. We have strategically designed and priced the MasterCraft NXT line to target the fast-growing entry-level customer group that is distinct from our traditional customer base, while maintaining our coreMasterCraft brand attributes at profit margins comparable to our other offerings. Over the past 40 years, we have been a leading and consistent innovator in the boating industry, beginning in 1968 with ourfirst custom hull ski boat. We have been the first to market with numerous innovations, including the first swim platform in1976, the patented wearguard ski pylon in 1989, a V-drive drivetrain and a dedicated wakeboard-specific boat in 1996, anow popular pickle-fork style bow in 2003, a twin V-drive engine in 2004, wake and surf shaping devices in 2009, ourpatented Gen 2 fully integrated surf system in 2013, and the recently launched Dockstar Handling System. Each of thesepioneering introductions has allowed our customers to more fully enjoy the ultimate water skiing, wakeboarding, wakesurfing, and on-the-water recreational experience that our boats provide. Throughout our history, our boats have receivednumerous industry awards for product innovations, including recent NMMA Innovation Awards for our ProStar water skiingboat, Gen 2 integrated surf system, X23 performance tow boat and DockStar Handling System. We launched the newDockstar Handling System which is an innovative flanking rudder system that allows drivers to easily maneuver tight spacesand crowded marinas in reverse. The revolutionary new technology essentially removes the last entry barrier into the inboardmarket for owners who previously preferred the handling of an outboard or stern drive configuration when driving inreverse. We believe our innovative features are important factors in our end consumer’s purchasing decision and theavailability and desirability of these features increase our sales and market share. These MasterCraft products helped us winour sixth Innovation Award in seven years for the performance sport boat category presented by the NMMA at the 2016Miami Boat Show. Our Dealer Network We rely on an extensive network of independent dealers to sell our products in North America and internationally. We targetour distribution on the market segment’s highest performing dealers, with more of our dealers placing in Boating Industrymagazine’s Top 20 Dealers than any of our competitors in the performance sport boat category. The majority of our dealersare exclusive to our MasterCraft product lines within the performance sport boat category, highlighting the commitment ofour key dealers to MasterCraft boats. We establish performance criteria that our dealers must meet as part of their dealeragreements to ensure the continued quality of our dealer network. As members of our network, dealers in North America mayqualify for floor plan financing programs, rebates, seasonal discounts, promotional co-op payments, and other allowances. We consistently review our distribution network to identify opportunities to expand our geographic footprint and improveour coverage of the market. We constantly monitor the health and strength of our dealers by analyzing each dealer’s retailsales and inventory frequently, and have established processes to identify underperforming dealers in order to assist them inimproving their performance or to allow us to switch to a more effective dealer. These processes also allow us to bettermanage dealer inventory levels and product turns and contribute to a healthier dealer network that is better able to stock andsell our products. We believe our outstanding dealer network and our proactive approach to dealer management allow us todistribute our products more efficiently than our competitors and will help us capitalize on growth opportunities as ourindustry volumes continue to increase. 8 Table of ContentsNorth America. In North America, we had a total of 96 dealers across 155 locations as of June 30, 2017. We do not have asignificant concentration of sales among our dealers. For fiscal 2017, our top ten dealers accounted for approximately 36% ofour gross sales and none of our dealers accounted for more than 6.5% of our total sales volume. Outside of North America. As of June 30, 2017, we had a total of 43 international dealers in 75 locations. We are present inEurope, Australia, Africa, Asia, including Hong Kong and the Middle East. We generated 9.1%, 8.6% and 9.9% of our unitsales outside of North America in fiscal 2017, 2016, and 2015, respectively. Dealer Management We have developed a system of financial incentives for our dealers based on achievement of key benchmarks. In addition, weprovide our dealers with comprehensive sales training and a complete set of technology-based tools designed to help dealersmaximize performance. Our dealer incentive program has been refined through over 45 years of experience with some of thekey elements including performance incentives, discounts paid for achieving volume and purchase scheduling targets, andcash discounts during the first six months of the model year to encourage balanced demand throughout the year. In addition,we pay incentives for attending our annual dealer meeting, a three-day event featuring a robust program of dealer trainingseminars that focus on areas such as sales growth, inventory management, and retail strategy, in addition to product-orientedinformation. This incentive payment is based on participation by all salespeople from a dealership, not solely the principals. Beyond our incentive programs, we have developed a proprietary web- based management tool that is used by our dealers ona day-to-day basis to improve their own businesses as well as enhance communication with our factory and salesmanagement teams. Our proprietary DealerLink online business-to-business application efficiently executes many criticalfunctions, including warranty registrations, warranty claims, boat ordering and tracking, parts ordering, technical support,and inventory reporting. This system facilitates communication between our sales team and the dealer network and allowsour manufacturing department to review customer demand in real time. Our relationship with our dealers is governed by dealer agreements. Each dealer agreement typically has a finite term lastingbetween one and three years. Our dealer agreements are typically terminable without cause by the dealer at any time and byus with 90 days’ prior notice. We may also generally terminate these agreements immediately for cause upon certain events.Pursuant to our dealer agreements, the dealers typically agree to, among other things (i) represent our products at specifiedboat shows; (ii) market our products only to retail end users in a specific geographic territory; (iii) promote and demonstrateour products to consumers; (iv) place a specified minimum number of orders of our products during the term of the agreementin exchange for rebate eligibility that varies according to the level of volume they commit to purchase; (v) provide us withregular updates regarding the number and type of our products in their inventory; (vi) maintain a service department toservice our products and perform all appropriate warranty service and repairs; and (vii) indemnify us for certain claims. Our dealer network, including all additions, renewals, non-renewals, or terminations, is managed by our sales personnel. Oursales team operates using a semi-annual dealer review process involving our senior management team. Each individual dealeris reviewed semi-annually with a broad assessment across multiple key elements, including the dealer’s geographic region,market share, and customer service ratings, to identify underperforming dealers for remediation and to manage the transitionprocess when non-renewal or termination is a necessary step. Sales Cycles and Floor Plan Financing We manage our annual sales plan through distinct buying periods. Our rebates are tiered so that dealers have a financialincentive to take the stocking risk for boats purchased prior to the traditional retail selling season (April - June). These9 Table of Contentsincentives, accompanied by floor plan subsidies for up to nine months from the date of invoice, drive “level loading” ofproduction. During this first part of the model year, many of the dealers’ orders are standard configurations for theirshowrooms. In the second part of the model year, more boats are customized by retail customers. Many of these custom ordersare placed during boat shows, which occur from January through early April across North America. We offer our dealers the opportunity to purchase boats with cash or through floor plan financing programs with third-partyfloor plan financing providers. We encourage our dealers to purchase in cash by offering them a cash discount. The floor planfinancing programs allow dealers to establish lines of credit with third-party lenders to purchase inventory. Upon purchase ofa boat, dealers draw on the floor plan facility and the lenders pay the invoice price of the boat directly to us within 10business days. Collection is guaranteed through an assigned approval number or cash receipt prior to shipment of the boat.Consistent with industry practice, we offer various manufacturer-sponsored floor plan interest programs under which we agreeto reimburse our dealers for certain floor plan interest costs incurred for up to nine months from the date of invoice. Cashdiscounts are offered as an alternative to floor plan subsidies during the “off-season” for retail sales (July - March). Theseprograms encourage dealers to rapidly replenish inventories during the spring and summer retail season, maintain sufficientinventories during the non-peak season, and balance wholesale purchases throughout the year. Pursuant to the terms of the floor plan financing, if a dealer defaults on the terms of its credit line, we agree to repurchase newinventory repossessed from dealerships for a period of up to 30 months from the date of the original sale of the products.Under most circumstances, the repurchase obligation is for any amount outstanding up to 100% of the invoice amount for thefirst 12 months after sale, 90% of the invoice amount for the next 12 months after sale, and 80% of the invoice amount for thefinal six months of our repurchase commitment period. Our obligation to repurchase such repossessed products for the unpaidbalance of our original invoice price for the boat is subject to reduction or limitation based on the age and condition of theboat at the time of repurchase, and in certain cases, by an aggregate cap on repurchase obligations associated with aparticular floor plan financing program. We have not incurred any losses from a finance company mandated repurchase since the recession. Repurchased inventoryhas historically been resold to other dealers at approximately 80% to 90% of original wholesale prices, thereby avoidingsignificant losses. During fiscal year ended June 30, 2015, we repurchased 9 units under the repurchase obligation agreementwith GE Australia and all of the boats repurchased were re-sold. There were no boats repurchased during the fiscal yearsended June 30, 2017 or June 30, 2016. Marketing and Sales Marketing Our over 45-year history of manufacturing and design leadership has made MasterCraft one of the most well-known andiconic brands in the boating industry. We believe the MasterCraft brand is widely recognized even among non- enthusiasts.We are focused on enhancing the power of our brand through a multifaceted marketing strategy. Our addressable market istargeted through a variety of specialized means, ranging from grass-roots event sponsorships to far-reaching strategicalliances. We have created a unified print and digital advertising strategy that is refreshed each year, featuring the unique attributes ofeach of our products while maintaining focus on the MasterCraft brand. We maintain a meaningful presence for our StarSeries and XSeries product lines in several endemic water sports publications, including, Alliance Wakeboard Magazine, andUSA WaterSkier. Given the prevalence of our products in the markets these publications target, we also benefit fromsignificant unpaid impressions in these industry publications, as our boats frequently appear in feature stories andadvertisements for other products. In addition to these traditional marketing channels, in the last several years we havecreated an active and highly successful digital advertising and social media platform, including the use of Facebook,10 Table of ContentsTwitter, Instagram, YouTube, and Vimeo to deliver content to our target audience, increase awareness of our brand, fosterloyalty, and build a community of MasterCraft enthusiasts. In addition, we benefit from numerous user-generated videos andphotos that are uploaded to these websites. An important component of this strategy has been our investment in our ownmastercraft.com website. The site is designed to allow significant interaction between us and our customer base throughmarketing content delivery, message boards, news and event postings, and product updates and specifications. In addition,mastercraft.com’s popular “Design-a-Boat” functionality allows consumers to design a boat and request a dealer quote. Thecustom-designed product can be transmitted directly to our closest independent dealer as well as our in-house concierge whofollows up directly with our dealer leads on behalf of MasterCraft. We are focused on generating relevant and compelling content for our network of customers and enthusiasts in order to driveindustry-leading engagement with our target consumer, and our capabilities in this regard have been well recognized bothinside and outside our industry. We also selectively partner with leading franchises from other industries that have similarbrand attributes and demographic characteristics. The goal of this non-endemic strategy is to create a wider, actionableaudience by teaming up with other appropriate brands to get access to their existing market. We partnered with musician andpro surfer Donavon Frankenreiter along with Sanuk and Grind-Media for the launch of the all-new XT23, and worked withleading female surfer, Leila Frost, on the XT22 campaign to communicate the XT's superior crossover performance and toreinforce the lifestyle attributes of our MasterCraft brand. These initiatives not only connect our brand with these valuableand highly recognizable partners, but more importantly they lead to engagement with our end consumers and ultimately tosales leads for our dealers. We believe that our associations with leading franchises and brands such as these reinforce theaspirational, high-performance attributes of our brand, allow us to reach a very large population of affluent, action-orientedconsumers as well as new customers for our new products, and allow us to reinforce and expand our MasterCraft brand’slifestyle positioning. Our leading position in the performance sport boat category is further supported by our sponsorship of some of the mostrecognizable and successful athletes in water sports, as well as a number of highly visible competitions and events around theworld. Our activities in this area serve to deepen the penetration of our brand within the professional and enthusiastcommunity, while also supporting the growth of the sports. The events which we sponsor and in which we and our dealersparticipate feature the most popular figures in wakeboarding and water skiing, drawing large audiences of enthusiasts to avariety of sites around the country. Furthermore, we sponsor top ranked professional wakeboarding athletes, water skijumpers, and water skiers. In addition to the advertising generated by the athletes’ success in their sports, we also leverageour sponsorship of these athletes by having them attend boat shows and dealer events and appear in creative media events, inwhich they garner public relations interest, build our MasterCraft brand, and in many cases help sell our products directly toconsumers. We believe that our differentiated marketing capabilities and our multi-channel, content-driven marketing strategies alignwith our strategic focus on product innovation, performance, and quality to attract aspiring and enthusiast consumers to ourbrands and products. These sales and marketing efforts allow us to more effectively launch and support our products, helpdrive actionable sales leads for our dealers, and reinforce our MasterCraft brand and lifestyle attributes. Sales Our sales effort is led by Jay Povlin, our Vice President of Global Sales and Marketing, who joined us in 2013. The NorthAmerican sales organization includes a national sales manager, four business development managers, and two inside salesmanagers. Most of our domestic sales team has been with us for at least ten years. Our sales team is further supported by aninternational sales manager and three independent sales representatives. Our sales organization’s primary role is to manage our network of existing dealers and work with them to increase sales of ourproducts, as well as identifying and recruiting new and replacement dealers that we believe will provide enhanced11 Table of Contentssales and customer service for our end consumers. We employ proactive processes to monitor the health and performance ofour dealers, and to help them improve their businesses and their sales of MasterCraft products. Our strategy is to improve theindividual market shares of each of our dealers in their respective markets, and to add new dealers in new markets or replacedealers in existing markets where we believe we can achieve improved market share and customer service. We utilize regularperformance reviews to drive improvement in underperforming dealers and to determine how to transition to new dealerswhen necessary. In addition, we employ a number of tools to assist our dealers in improving their performance, includingproduct, sales, and service training, marketing materials and content, and direct interaction with prospective customers suchas our factory concierge service. We encourage and expect our sales representatives to serve as advisors to our dealers, andbelieve this proactive sales approach leads to better dealer relationships and higher sales of our products. Manufacturing All of our boats are designed, manufactured, and lake-tested in our Vonore, Tennessee facility. We are the only boatmanufacturer to achieve compliance with all three of the ISO 9001 (Quality Management Systems), 14001 (EnvironmentalManagement Systems), and 18001 (International Occupational Health and Safety Management System) standards. Therigorous attention to detail with which we design and manufacture our products results in boats of high quality, which allowsus to offer a “stem-to-stern” five-year warranty that comprehensively covers more parts of our boats than warranties offered byany of our competitors. In recognition of our operational excellence, we were named a 2015 IndustryWeek Best Plant inNorth America Recipient—the only boat manufacturer to receive that honor. Our boats are built through a continuous flow manufacturing process that encompasses fabrication, assembly, qualitymanagement, and testing. Each boat is produced over a six and a half day cycle that includes the fabrication of the hull anddeck through gelcoat application and fiberglass lamination, grinding and hole cutting, installation of components, rigging,finishing, detailing, and on-the-water testing. We manufacture certain components and subassemblies for our boats, such asupholstery, and procure other components from third-party vendors and install them on the boat. We have several exclusivesupplier partnerships for critical purchased components, such as aluminum billet, towers, and engine packages. We also buildcustom trailers that match the exact size and color of our boats. Our manufacturing efforts are led by Larry Janosek, our Vice President of Operations, who joined us in March 2012 and hasmore than 19 years of cross-functional business experience in the automotive industry. Our culture of continuousimprovement is aptly captured in one of our core operating principles: “Seek Perfection.” Our operations team maintainstight control over all aspects of the process, starting with cross-functional sales planning processes to maximize model mix,daily layered boat audits while products are moving down the line, and real time supervisor-level variance reporting andquality checks that stop the line if defects are identified. In addition, we sponsor a number of best practices programs, including: Ideas Implemented. Using tools to identify and reduce waste, employees standardize improvement in their work proceduresand implement countermeasures to problems identified daily. This program led to tens of thousands of employeeimprovement suggestions being implemented. Kaizen. We chartered and began several different continuous workplace improvement, or Kaizen, projects during the yearthat use cross-functional teams to improve value and reduce waste in a defined narrow scope of work flow or process. Theseprojects, which take on average one month to complete, have generated improvements including cost savings, improvedquality, increased output, and additional capacity. 12 Table of ContentsLean Academy. We have institutionalized learning in our organization by teaching employees to utilize efficient tools andprocesses, which we refer to as “lean.” The program has various degrees of development and bronze, silver, and goldcertification levels. Participants from all areas of our Company, including manufacturing, product development, and alladministrative departments, learn lean manufacturing to enable them to reduce waste and become lean leaders. Our active management process has led to the institution of a number of manufacturing and quality control initiatives on thefactory floor, such as the implementation of parts bar coding for improved inventory control, the deployment of automatedresin counters for greater materials control, a reduction in the number of mold sets used in the manufacturing process toincrease run-rates, and an automated quality control system that creates a “birth certificate” for every boat throughout our2,500-check manufacturing process. We are one of only sixteen manufacturing sites in the state of Tennessee to have beenrecognized by the Tennessee Department of Labor and Workforce Development (“TOSHA”) for achieving and maintaining asafe and healthful workplace, as recognized through the receipt of TOSHA’s Commissioner’s Award. The Commissioner’sAward honors employers and their employees who together have achieved the required number of hours worked withoutexperiencing a lost workday case and have maintained total injury and illness incident rates at least 10% below the nationalaverage, an accomplishment that we believe has reduced workers’ compensation claims and warranty costs as our most-experienced employees continue to remain on the job. Product Development and Engineering We are strategically and financially committed to innovation, as reflected in our dedicated product development andengineering group and evidenced by our track record of new product introduction. Our product development andengineering group comprises 20 professionals. These individuals bring to our product development efforts significantexpertise across core disciplines, including boat design, computer-aided design, naval engineering, electrical engineering,and mechanical engineering. They are responsible for execution of all facets of our new product strategy, starting with designand development of new boat models and innovative features, engineering these designs for manufacturing, and integratingnew boats and innovations into production without disruption, at high quality, on time and on budget. Our productdevelopment and engineering functions are led by our Vice President of Operations, with significant engagement from ourStrategic Portfolio Management Team which includes senior leadership from Sales, Marketing and Finance, all workingtogether to develop our long-term product and innovation strategies. We take a disciplined approach to the management of our product development strategy. We have structured processes toobtain voices of the customer, dealer, and management to guide our long-term product lifecycle and portfolio planning. Inaddition, extensive testing and coordination with our manufacturing group are important elements of our productdevelopment process, which we believe enable us to leverage the lessons from past launches and minimize the risk associatedwith the release of new products. We have developed a strategy to launch at least three new models each year, which willallow us to renew our product portfolio with innovative offerings at a rate that we believe will be difficult for our competitorsto match without significant additional capital investments. In addition to our new product strategy, we manage a separateinnovation development process which allows us to design innovative new features for our boats in a disciplined manner andto launch these innovations in a more rapid time frame and with higher quality. These newly implemented processes havereduced the time to market for our new product pipeline. Our research and development center is equipped with computer assisted design (“CAD”) workstations for designdevelopment and computer numerically controlled tool paths for molds and parts. The CAD system allows for integration ofvendor design resources to improve accuracy and reduce development time. The CAD system also provides flexibility tochange fundamental design characteristics through the elimination of iterative prototyping processes and lowers new productdevelopment costs through acceleration of the development cycle. Furthermore, the CAD system also allows much greaterprecision in use of materials and assembly, reducing warranty and manufacturing start-up costs. Models are tested underextreme conditions to validate performance, safety, failure limits, and design intention. After a boat successfully13 Table of Contentscompletes validation, it is ready for final pricing, marketing, scheduling, and production. Our product development expensefor fiscal 2017, 2016 and 2015 were $3.6 million, $3.5 million, and $3.0 million, respectively. Suppliers We purchase a wide variety of raw materials from our supplier base, including resins, fiberglass, hydrocarbon feedstocks, andsteel, as well as product parts and components such as engines and electronic controls, through a sales order process. Wemaintain long-term contracts with preferred suppliers and informal arrangements with other suppliers. We have notexperienced any material shortages in any of our raw materials, product parts, or components. Temporary shortages, whenthey do occur, usually involve manufacturers of these products adjusting model mix, introducing new product lines, orlimiting production in response to an industry-wide reduction in boat demand. We are focused on developing our supply chain to enable cost improvement, world-class quality, and continuous productinnovation. We have engaged our top suppliers in collaborative preferred supplier relationships and have developedprocesses including annual cost reduction targets, regular reliability projects, and extensive product testing requirements toensure that our suppliers produce at low cost and to the highest levels of quality expected of the MasterCraft brand. Thesecollaborative efforts begin at the design stage, with our key suppliers integrated into design and development planning wellin advance of launch, which allows us to control costs and to leverage the expertise of our suppliers in developing productinnovations. We believe these collaborative relationships with our most important suppliers have contributed to oursignificant improvements in product quality, innovation, and profitability since 2012. The most significant components used in manufacturing our boats, based on cost, are engine packages. We maintain a strongand long-standing relationship with our primary supplier of engine packages, Ilmor Engineering, Inc. “(Ilmor”), whoseaffiliates produce engines used in a number of leading racing boats and race cars. Ilmor maintains a full-time customer serviceand warranty staff located at our office, resulting in extremely efficient management of all engine-related matters, mitigatingpotential warranty risk. As of June 30, 2017, Ilmor is our largest supplier. We work closely with Ilmor to remain at theforefront of engine design, performance, and manufacturing. Engine packages are the most expensive single item input in theboat-building process and we believe our long-term relationship with Ilmor is a key competitive advantage. Transportation We utilize third party logistics and transportation services to deliver our boats to our dealer network. We secure trailer loadsof one to four boats at our manufacturing facility. Our third party logistics partners transport them to our domestic dealers orto port for international shipments, generally within one week. A select few dealers near our manufacturing facility haveelected to manage transportation and arrange for boats to be picked up directly from our manufacturing facility. Followingdelivery to port, international shipments are transferred to a third party logistics provider who schedules them for shipmentvia ocean freight to their destination country. Information Technology Over the last several years, we have made a significant investment in information technology. Our information technologystrategy is to fully integrate IT into our business processes and planning initiatives, including not only our internalinformation management and communications processes but also our marketing and dealer management efforts. Our IT teamhas been integral to our marketing efforts through functionality such as the “Build-a-Boat” and “Factory Tour” features ofour website, helping us to develop stronger engagement between us and our end consumers. In addition, our IT infrastructureis an essential component of our dealer management initiatives, allowing for efficient and timely communications with ourdealers and a transparent and effective system for dealer orders and production planning. We14 Table of Contentswill continue to invest in our IT infrastructure in order to continue to leverage technology in support of our productdevelopment, manufacturing, and marketing strategies. Insurance and Product Warranties We purchase insurance to cover standard risks in our industry, including policies that cover general product liability,workers’ compensation, auto liability, and other casualty and property risks. Our insurance rates are based on our safetyrecord as well as trends in the insurance industry. We also maintain workers’ compensation insurance and auto insurancepolicies that are retrospective in that the cost per year will vary depending on the frequency and severity of claims in thepolicy year. We face an inherent risk of exposure to product liability claims in the event that, among other things, the use of our productsresults in injury. With respect to product liability coverage, we carry customary insurance coverage. Our coverage involvesself-insured retentions with primary and excess liability coverage above the retention amount. We have the ability to referclaims to our suppliers and their insurers to pay the costs associated with any claims arising from such suppliers’ products.Our insurance covers such claims that are not adequately covered by a supplier’s insurance and provides for excess secondarycoverage above the limits provided by our suppliers. We provide the same product warranties for all of our models. The high quality and durability of our products allow us tooffer a “stem-to-stern” five-year warranty that comprehensively covers more parts of our boats than warranties offered by anyof our competitors. During the warranty period, we reimburse dealers and MasterCraft authorized service facilities for all or aportion of the cost of repair or replacement performed on the products (mainly composed of parts or accessories provided byus and labor costs incurred by dealers or MasterCraft authorized service facilities). Some materials, components or parts of theboat that are not covered by our product warranties are separately warranted by their manufacturers or suppliers. These otherwarranties include warranties covering engines, among other components. Intellectual Property We rely on a combination of patent, trademark, and copyright protection, trade secret laws, confidentiality procedures, andcontractual provisions to protect our rights in our brand, products, and proprietary technology. We also protect our vesseldesigns through design registrations. This is an important part of our business and we intend to continue protecting ourintellectual property. We currently hold 17 U.S. patents and 2 foreign patents, including a utility patent for an integratedlight and tow-line attachment, utility and design patents for our transom surf seating, a utility patent for the DockStarhandling system, and 7 utility patents for the Gen 2 surf system technology, which is the only surf system that is customdesigned for each hull and allows users to customize a four-zone, 20-foot long wake to rider preferences using asophisticated-yet-easy-to-use interface. Provided that we comply with all statutory maintenance requirements, our patents areexpected to expire between 2021 and 2036. We also hold 11 pending U.S. patent applications and 3 pending foreign patentapplications. We also own in excess of 80 registered trademarks in various countries around the world, most notably theMasterCraft name and logo and the Star Series, XSeries, XTSeries, and NXT product family names, and we own severalapplications for additional registrations. Such trademarks may endure in perpetuity on a country-by-country basis providedthat we comply with all statutory maintenance requirements, including continued use of each trademark in each suchcountry. In addition, we own 38 registered U.S. copyrights. Finally, we have registered 29 vessel hull designs with the U.S.Copyright Office, the most recent of which will remain in force through 2024. From time to time, we are involved in intellectual property litigation, either accusing third parties of infringing ourintellectual property rights, or defending against third-party claims that we are infringing the intellectual property of others.We are not currently involved in any outstanding intellectual property litigation that we believe, individually or in theaggregate, will have a material adverse effect on our business, financial condition, or results of operations. However, we15 Table of Contentscannot predict the outcome of any pending or future litigation, and an unfavorable outcome could have an adverse impact onour business, financial condition, or results of operations. Competition The powerboat industry, including the performance sport boat category, is highly fragmented, resulting in intensecompetition for customers and dealers. Competition affects our ability to succeed in both the market segments we currentlyserve and new market segments that we may enter in the future. We compete with several large manufacturers that may havegreater financial, marketing, and other resources than we do. We also compete with a wide variety of small privately heldindependent manufacturers. Competition in our industry is based primarily on brand name, price, innovative features, design,and product performance. Please see Item 1A, “Risk Factors” — Risks Related to Our Business — Our industry ischaracterized by intense competition, which affects our sales and profits. Seasonality Our operating results are subject to annual and seasonal fluctuations resulting from a variety of factors, including: ·seasonal variations in retail demand for boats, with a significant majority of sales occurring during peakboating season, which we attempt to manage by providing incentive programs and floor plan subsidies toencourage dealer purchases throughout the year; ·product mix, which is driven by boat model mix and higher option order rates; while sales of all of ourboats generate comparable margins, sales of larger boats and boats with optional content produce higherabsolute profits; ·inclement weather, which can affect production at our manufacturing facility as well as consumer demand; ·competition from other performance sports boat manufacturers; and ·general economic conditions. Research and Development Research and development expenditures for fiscal 2017, 2016, and 2015 were $3.6 million, $3.5 million and $3.0 million,respectively. Environmental, Safety, and Regulatory Matters Our operations are subject to extensive and frequently changing federal, state, local, and foreign laws and regulations,including those concerning product safety, environmental protection, and occupational health and safety. We believe thatour operations and products are in compliance with these regulatory requirements. We have received certificates from third-party accreditors of compliance with the ISO 9001 (Quality Management Systems), 14001 (Environmental ManagementSystems), and 18001 (International Occupational Health and Safety Management System) standards. Historically, the cost ofachieving and maintaining compliance with applicable laws and regulations has not been material. However, we cannotassure you that future costs and expenses required for us to comply with such laws and regulations, including any new ormodified regulatory requirements, or to address newly discovered environmental conditions, will not have a material adverseeffect on our business, financial condition, operating results, or cash flow.16 Table of Contents We have not been notified of and are otherwise currently not aware of any contamination at our current or former facilities forwhich we could be liable under environmental laws or regulations and we currently are not undertaking any remediation orinvestigation activities in connection with any contamination. However, future spills or accidents or the discovery ofcurrently unknown conditions or non-compliances may give rise to investigation and remediation obligations or relatedliabilities and damage claims, which may have a material adverse effect on our business, financial condition, operatingresults, or cash flow. The regulatory programs that impact our business include the following: Hazardous Substance and Waste Regulations Certain materials used in our manufacturing, including the resins used in production of our boats, are toxic, flammable,corrosive, or reactive and are classified by the federal and state governments as “hazardous materials.” Control of thesesubstances is regulated by the Environmental Protection Agency (EPA) and state pollution control agencies under the federalResource Conservation and Recovery Act, and related state programs. Storage of these materials must be maintained inappropriately labelled and monitored containers, and disposal of wastes requires completion of detailed waste manifests andrecordkeeping requirements. Any failure by us to properly store or dispose of our hazardous materials could result in liability,including fines, penalties, or obligations to investigate and remediate any contamination originating from our operations. OSHA The Occupational Safety and Health Administration (OSHA) Act imposes standards of conduct for and regulates workplacesafety, including limits on the amount of emissions to which an employee may be exposed without the need for respiratoryprotection or upgraded plant ventilation. Our facilities are regularly inspected by OSHA and by state and local inspectionagencies and departments. We believe that our facilities comply in all material aspects with these regulations. We have madea considerable investment in safety awareness programs and provide ongoing safety training for all of our employees. Wehave implemented a program that requires frequent safety inspections of our facilities by managers and an internal safetycommittee. The safety committee, which is led by a dedicated Health and Safety professional, prepares a monthly action planbased on its findings. Clean Air Act The Clean Air Act (the “CAA”) and corresponding state rules regulate emissions of air pollutants. Because our manufacturingoperations involve molding and coating of fiberglass materials, which involves the emission of certain volatile organiccompounds, hazardous air pollutants, and particulate matter, we are required to maintain and comply with a CAA operatingpermit (or “Title V” permit). Our Title V Permit requires us to monitor our emissions and periodically certify that ouremissions are within specified limits. To date, we have not had material difficulty complying with those limits. In addition to the regulation of our manufacturing operations, the EPA has adopted regulations stipulating that many marinepropulsion engines meet an air emission standard that requires fitting a catalytic converter to the engine. The engines used inour products, all of which are manufactured by third parties, are warrantied by the manufacturers to be in compliance with theEPA’s emission standards. The additional cost of complying with these regulations has increased our cost to purchase theengines and, accordingly, has increased the cost to manufacture our products. 17 Table of ContentsIf we are not able to pass these additional costs along to our customers, it may have a negative impact on our business andfinancial condition. Boat Safety Standards Powerboats sold in the U.S. must be manufactured to meet the standards of certification required by the U.S. Coast Guard. Inaddition, boats manufactured for sale in the European Community must be certified to meet the European Community’simported manufactured products standards. These certifications specify standards for the design and construction ofpowerboats. We believe that all of our boats meet these standards. In addition, safety of recreational boats is subject to federalregulation under the Boat Safety Act of 1971, which requires boat manufacturers to recall products for replacement of parts orcomponents that have demonstrated defects affecting safety. In the past, we have instituted recalls for defective componentparts produced by us or certain of our third-party suppliers. None of these recalls has had a material adverse effect on ourCompany. Employees We believe we maintain excellent relations with our employees, treating them as business partners and focusing on buildingtheir careers. We have approximately 490 employees as of June 30, 2017. Our employees are fully integrated into ourcontinuous improvement culture and are empowered to seek out waste reduction and cost improvement opportunitiesthroughout our manufacturing process. This engagement resulted in tens of thousands of employee suggestions beingimplemented for operating improvements. None of our employees are represented by a labor union, and since our founding in1968, we have never experienced a labor-related work stoppage. Other Information We were incorporated under the laws of the State of Delaware under the name MCBC Holdings, Inc. on January 28, 2000. InJuly 2015, we completed an initial public offering of our common stock. We maintain a website with the addresswww.mastercraft.com. We are not including the information contained in our website as part of, or incorporating it byreference into, this Annual Report on Form 10-K. We make available, free of charge through our website, our annual reportson Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to these reports as soon asreasonably practicable after we electronically file these materials with, or otherwise furnish them to, the SEC. ITEM 1A.RISK FACTORS. RISK FACTORS Investing in our common stock involves a high degree of risk. You should carefully consider the following risk factors, aswell as other information in this Form 10-K, before deciding whether to invest in shares of our common stock. Theoccurrence of any of the events described below could harm our business, financial condition, results of operations, andgrowth prospects. In such an event, the trading price of our common stock may decline and you may lose all or part of yourinvestment. Risks Related to Our Business General economic conditions, particularly in the U.S., affect our industry, demand for our products and our business, andresults of operations. Demand for premium sport boat brands has been significantly influenced by weak economic conditions, low consumerconfidence, high unemployment, and increased market volatility worldwide, especially in the U.S. In times of economic18 Table of Contentsuncertainty and contraction, consumers tend to have less discretionary income and tend to defer or avoid expenditures fordiscretionary items, such as our products. Sales of our products are highly sensitive to personal discretionary spending levels.Our business is cyclical in nature and its success is impacted by economic conditions, the overall level of consumerconfidence and discretionary income levels. Any substantial deterioration in general economic conditions that diminishesconsumer confidence or discretionary income may reduce our sales and materially adversely affect our business, financialcondition and results of operations. We cannot predict the duration or strength of an economic recovery, either in the U.S. orin the specific markets where we sell our products. Corporate restructurings, layoffs, declines in the value of investments andresidential real estate, higher gas prices, higher interest rates, and increases in federal and state taxation may each materiallyadversely affect our business, financial condition, and results of operations. Consumers often finance purchases of our products. Although consumer credit markets have improved, consumer creditmarket conditions continue to influence demand, especially for boats, and may continue to do so. There continue to be fewerlenders, tighter underwriting and loan approval criteria, and greater down payment requirements than in the past. If creditconditions worsen, and adversely affect the ability of consumers to finance potential purchases at acceptable terms andinterest rates, it could result in a decrease in the sales of our products. Our annual and quarterly financial results are subject to significant fluctuations depending on various factors, many ofwhich are beyond our control. Our sales and operating results can vary significantly from quarter to quarter and year to year depending on various factors,many of which are beyond our control. These factors include, but are not limited to: ·seasonal consumer demand for our products;·discretionary spending habits;·changes in pricing in, or the availability of supply in, the used powerboat market;·failure to maintain a premium brand image;·disruption in the operation of our manufacturing facilities;·variations in the timing and volume of our sales;·the timing of our expenditures in anticipation of future sales;·sales promotions by us and our competitors;·changes in competitive and economic conditions generally;·consumer preferences and competition for consumers’ leisure time;·impact of unfavorable weather conditions;·changes in the cost or availability of our labor; and·increased fuel prices. Due to these and other factors, our results of operations may decline quickly and significantly in response to changes in orderpatterns or rapid decreases in demand for our products. We anticipate that fluctuations in operating results will continue inthe future. 19 Table of ContentsUnfavorable weather conditions may have a material adverse effect on our business, financial condition, and results ofoperations, especially during the peak boating season. Adverse weather conditions in any year in any particular geographic region may adversely affect sales in that region,especially during the peak boating season. Sales of our products are generally stronger just before and during spring andsummer, which represent the peak boating months in most of our markets, and favorable weather during these monthsgenerally has a positive effect on consumer demand. Conversely, unseasonably cool weather, excessive rainfall, reducedrainfall levels, or drought conditions during these periods may close area boating locations or render boating dangerous orinconvenient, thereby generally reducing consumer demand for our products. Our annual results would be materially andadversely affected if our net sales were to fall below expected seasonal levels during these periods. We may also experiencemore pronounced seasonal fluctuation in net sales in the future as we continue to expand our businesses. Additionally, to theextent that unfavorable weather conditions are exacerbated by global climate change or otherwise, our sales may be affectedto a greater degree than we have previously experienced. There can be no assurance that weather conditions will not have amaterial effect on the sales of any of our products. We depend on our network of independent dealers, face increasing competition for dealers, and have little control overtheir activities. Substantially all of our sales are derived from our network of independent dealers. We have agreements with the dealers inour network that typically provide for one-year terms, although some agreements have a term of up to three years. For fiscal2017, our top ten dealers accounted for 36% of our total units sold. The loss of a significant number of these dealers couldhave a material adverse effect on our financial condition and results of operations. The number of dealers supporting ourproducts and the quality of their marketing and servicing efforts are essential to our ability to generate sales. Competition fordealers among performance sport boat manufacturers continues to increase based on the quality, price, value, and availabilityof the manufacturers’ products, the manufacturers’ attention to customer service, and the marketing support that themanufacturer provides to the dealers. We face intense competition from other performance sport boat manufacturers inattracting and retaining dealers (some of whom also sell products from other performance sport boat manufactures), affectingour ability to attract or retain relationships with qualified and successful dealers. Although our management believes that thequality of our products in the performance sport boat industry should permit us to maintain our relationships with our dealersand our market share position, there can be no assurance that we will be able to maintain or improve our relationships withour dealers or our market share position. In addition, independent dealers in the powerboat industry have experiencedsignificant consolidation in recent years, which could result in the loss of one or more of our dealers in the future if thesurviving entity in any such consolidation purchases similar products from a competitor. A substantial deterioration in thenumber of dealers or quality of our network of dealers would have a material adverse effect on our business, financialcondition, and results of operations. Our success depends, in part, upon the financial health of our dealers and their continued access to financing. Because we sell nearly all of our products through dealers, their financial health is critical to our success. Our business,financial condition, and results of operations may be adversely affected if the financial health of the dealers that sell ourproducts suffers. Their financial health may suffer for a variety of reasons, including a downturn in general economicconditions, rising interest rates, higher rents, increased labor costs and taxes, compliance with regulations, and personalfinancial issues. In addition, our dealers require adequate liquidity to finance their operations, including purchases of our products. Dealersare subject to numerous risks and uncertainties that could unfavorably affect their liquidity positions, including, amongother things, continued access to adequate financing sources on a timely basis on reasonable terms. These sources offinancing are vital to our ability to sell products through our distribution network. Access to floor plan financing generally20 Table of Contentsfacilitates our dealers’ ability to purchase boats from us, and their financed purchases reduce our working capitalrequirements. If floor plan financing were not available to our dealers, our sales and our working capital levels would beadversely affected. The availability and terms of financing offered by our dealers’ floor plan financing providers willcontinue to be influenced by: ·their ability to access certain capital markets and to fund their operations in a cost-effective manner; ·the performance of their overall credit portfolios; ·their willingness to accept the risks associated with lending to dealers; and ·the overall creditworthiness of those dealers. We may be required to repurchase inventory of certain dealers. Many of our dealers have floor plan financing arrangements with third-party finance companies that enable the dealers topurchase our products. In connection with these agreements, we may have an obligation to repurchase our products from afinance company under certain circumstances, and we may not have any control over the timing or amount of any repurchaseobligation nor have access to capital on terms acceptable to us to satisfy any repurchase obligation. This obligation istriggered if a dealer defaults on its debt obligations to a finance company, the finance company repossesses the boat and theboat is returned to us. Our obligation to repurchase a repossessed boat for the unpaid balance of our original invoice price forthe boat is subject to reduction or limitation based on the age and condition of the boat at the time of repurchase, and incertain cases, by an aggregate cap on repurchase obligations associated with a particular floor plan financing program. Wehave not incurred any losses from a finance company mandated repurchase since the recession. Repurchased inventory hashistorically been resold to other dealers at approximately 80% to 90% of original wholesale prices, thereby avoidingsignificant losses. During fiscal year ended June 30, 2015, we repurchased 9 units under the repurchase obligation agreementwith GE Australia and all of the boats repurchased were re-sold. There were no boats repurchased during the fiscal yearsended June 30, 2017 or June 30, 2016. In addition, applicable laws regulating dealer relations may also require us torepurchase our products from our dealers under certain circumstances, and we may not have any control over the timing oramount of any repurchase obligation nor have access to capital on terms acceptable to us to satisfy any repurchaseobligation. If we were obligated to repurchase a significant number of units under any repurchase agreement or underapplicable dealer laws, our business, operating results, and financial condition could be adversely affected. If we fail to manage our manufacturing levels while still addressing the seasonal retail pattern for our products, ourbusiness and margins may suffer. The seasonality of retail demand for our products, together with our goal of balancing production throughout the year,requires us to manage our manufacturing and allocate our products to our dealer network to address anticipated retaildemand. Our dealers must manage seasonal changes in consumer demand and inventory. If our dealers reduce theirinventories in response to weakness in retail demand, we could be required to reduce our production, resulting in lower ratesof absorption of fixed costs in our manufacturing and, therefore, lower margins. As a result, we must balance the economies oflevel production with the seasonal retail sales pattern experienced by our dealers. Failure to adjust manufacturing levelsadequately may have a material adverse effect on our financial condition and results of operations. We have a large fixed cost base that will affect our profitability if our sales decrease. The fixed cost levels of operating a powerboat manufacturer can put pressure on profit margins when sales and productiondecline. Our profitability depends, in part, on our ability to spread fixed costs over a sufficiently large number of products21 Table of Contentssold and shipped, and if we make a decision to reduce our rate of production, gross or net margins could be negativelyaffected. Consequently, decreased demand or the need to reduce production can lower our ability to absorb fixed costs andmaterially impact our financial condition or results of operations. Our industry is characterized by intense competition, which affects our sales and profits. The performance sport boat category and the powerboat industry as a whole are highly competitive for consumers anddealers. We also compete against consumer demand for used boats. Competition affects our ability to succeed in both themarkets we currently serve and new markets that we may enter in the future. Competition is based primarily on brand name,price, product selection, and product performance. We compete with several large manufacturers that may have greaterfinancial, marketing, and other resources than we do and who are represented by dealers in the markets in which we nowoperate and into which we plan to expand. We also compete with a variety of small, independent manufacturers. We cannotassure you that we will not face greater competition from existing large or small manufacturers or that we will be able tocompete successfully with new competitors. Our failure to compete effectively with our current and future competitors wouldadversely affect our business, financial condition, and results of operations. Our sales may be adversely impacted by increased consumer preference for used boats or the supply of new boats bycompetitors in excess of demand. During the economic downturn that commenced in 2008, we observed a shift in consumer demand toward purchasing moreused boats, primarily because prices for used boats are typically lower than retail prices for new boats. If this were to occuragain, it could have the effect of reducing demand among retail purchasers for our new boats. Also, while we have taken stepsdesigned to balance production volumes for our boats with demand, our competitors could choose to reduce the price of theirproducts, which could have the effect of reducing demand for our new boats. Reduced demand for new boats could lead toreduced sales by us, which could adversely affect our business, results of operations, and financial condition. Our sales and profitability depend, in part, on the successful introduction of new products. Market acceptance of our products depends on our technological innovation and our ability to implement technology in ourboats. Our sales and profitability may be adversely affected by difficulties or delays in product development, such as aninability to develop viable or innovative new products. Our failure to introduce new technologies and product offerings thatconsumers desire could adversely affect our business, financial condition, and results of operations. Also, we have been ableto achieve higher margins in part as a result of the introduction of new features or enhancements to our existing boat models.If we fail to introduce new features or those we introduce fail to gain market acceptance, our margins may suffer. In addition, some of our direct competitors and indirect competitors may have significantly more resources to develop andpatent new technologies. It is possible that our competitors will develop and patent equivalent or superior technologies andother products that compete with ours. They may assert these patents against us and we may be required to license thesepatents on unfavorable terms or cease using the technology covered by these patents, either of which would harm ourcompetitive position and may materially adversely affect our business. We also cannot be certain that our products or features have not infringed or will not infringe the proprietary rights of others.Any such infringement could cause third parties, including our competitors, to bring claims against us, resulting insignificant costs and potential damages. 22 Table of ContentsOur international markets require significant management attention, expose us to difficulties presented by internationaleconomic, political, legal, and business factors, and may not be successful or produce desired levels of sales andprofitability. We currently sell our products throughout the world. International markets have been, and will continue to be, a focus forsales growth. We believe many opportunities exist in the international markets, and over time we intend for internationalsales to comprise a larger percentage of our total revenue. Several factors, including weakened international economicconditions, could adversely affect such growth and there can be no assurance that we will be able to sustain our currentinternational sales levels in the future. The expansion of our existing international operations and entry into additionalinternational markets require significant management attention. Some of the countries in which we market, and in which ourdistributors or licensee(s) sell our products, are subject to political, economic, or social instability. Our internationaloperations expose us and our representatives, agents, and distributors to risks inherent in operating in foreign jurisdictions.These risks include, but are not limited to: ·increased costs of customizing products for foreign countries; ·unfamiliarity with local demographics, consumer preferences, and discretionary spending patterns; ·difficulties in attracting customers due to a reduced level of customer familiarity with our brand; ·competition with new, unfamiliar competitors; ·the imposition of additional foreign governmental controls or regulations, including rules relating toenvironmental, health, and safety matters and regulations, and other laws applicable to publicly-tradedcompanies, such as the Foreign Corrupt Practices Act, or the FCPA; ·new or enhanced trade restrictions and restrictions on the activities of foreign agents, representatives, anddistributors; ·the imposition of increases in costly and lengthy import and export licensing and other compliancerequirements, customs duties and tariffs, license obligations, and other non-tariff barriers to trade; ·the relative strength of the U.S. dollar compared to local currency, making our products less price-competitiverelative to products manufactured outside of the U.S.; ·laws and business practices favoring local companies; ·longer payment cycles and difficulties in enforcing agreements and collecting receivables through certainforeign legal systems; ·difficulties in enforcing or defending intellectual property rights; and ·insurrection or war that may disrupt or limit our relationships with our foreign customers. Our international operations may not produce desired levels of total sales, or one or more of the foregoing factors may harmour business, financial condition, or results of operations. Fluctuations in foreign currency exchange rates could result in declines in our reported sales and net earnings. The changing relationships of primarily the U.S. dollar to the Canadian dollar, the Australian dollar, the euro, the BritishPound Sterling, the Japanese yen, and certain other foreign currencies have from time to time had a negative impact on ourresults of operations. Fluctuations in the value of the U.S. dollar relative to these foreign currencies can adversely affect theprice of our products in foreign markets and the costs we incur to import certain components for our products.23 Table of ContentsIn addition, we will often attempt to offset these higher prices with increased discounts, which can lead to reduced net salesper unit. We compete with a variety of other activities for consumers’ scarce leisure time. Our boats are used for recreational and sport purposes, and demand for our boats may be adversely affected by competitionfrom other activities that occupy consumers’ leisure time and by changes in consumer lifestyle, usage pattern, or taste.Similarly, an overall decrease in consumer leisure time may reduce consumers’ willingness to purchase and enjoy ourproducts. Our success depends upon the continued strength of our brand and the value of our brand, and sales of our products couldbe diminished if we, the athletes who use our products, or the sports and activities in which our products are used areassociated with negative publicity. We believe that our brand is a significant contributor to the success of our business and that maintaining and enhancing ourbrand is important to expanding our consumer and dealer base. Failure to continue to protect our brand may adversely affectour business, financial condition, and results of operations. Negative publicity, including that resulting from severe injuries or death occurring in the sports and activities in which ourproducts are used, could negatively affect our reputation and result in restrictions, recalls, or bans on the use of our products.Further, actions taken by athletes associated with our products that harm the reputations of those athletes could also harm ourbrand image and adversely affect our financial condition. If the popularity of the sports and activities for which we design,manufacture, and sell products were to decrease as a result of these risks or any negative publicity, sales of our products coulddecrease, which could have an adverse effect on our net sales, profitability, and operating results. In addition, if we becomeexposed to additional claims and litigation relating to the use of our products, our reputation may be adversely affected bysuch claims, whether or not successful, including by generating potential negative publicity about our products, which couldadversely impact our business and financial condition. We may not be able to execute our manufacturing strategy successfully, which could cause the profitability of our productsto suffer. Our manufacturing strategy is designed to improve product quality and increase productivity, while reducing costs andincreasing flexibility to respond to ongoing changes in the marketplace. To implement this strategy, we must be successful inour continuous improvement efforts, which depend on the involvement of management, production employees, andsuppliers. Any inability to achieve these objectives could adversely impact the profitability of our products and our abilityto deliver desirable products to our consumers. Our ability to meet our manufacturing workforce needs is crucial to our results of operations and future sales andprofitability. We rely on the existence of an available hourly workforce to manufacture our boats. We cannot assure you that we will beable to attract and retain qualified employees to meet current or future manufacturing needs at a reasonable cost, or at all.Although none of our employees are currently covered by collective bargaining agreements, we cannot assure you that ouremployees will not elect to be represented by labor unions in the future, which could increase our labor costs. Additionally,competition for qualified employees could require us to pay higher wages to attract a sufficient number of employees.Significant increases in manufacturing workforce costs could materially adversely affect our business, financial condition, orresults of operations. 24 Table of ContentsWe rely on third-party suppliers and, in particular, a single supplier of the engine packages used in the manufacturing ofour boats. We depend on third-party suppliers to provide components and raw materials essential to the construction of our boats.While we believe that our relationships with our current suppliers are sufficient to provide the materials necessary to meetpresent production demand, we cannot assure you that these relationships will continue or that the quantity or quality ofmaterials available from these suppliers will be sufficient to meet our future needs, irrespective of whether we successfullyimplement our growth strategy. As production increases, our need for raw materials and supplies will increase. Our suppliersmust be prepared to ramp up operations and, in many cases, hire additional workers and/or expand capacity in order to fulfillthe orders placed by us and other customers. Operational and financial difficulties that our suppliers may face in the futurecould adversely affect their ability to supply us with the parts and components we need, which could significantly disruptour operations. The availability and cost of engines used in the manufacture of our boats are especially critical. For fiscal 2016, wepurchased all of the inboard engine packages for our MasterCraft brand boats from Ilmor. While we believe that ourrelationship with Ilmor is sufficient to provide the materials necessary to meet present production demand, there can be noassurance that it will continue or that the quantity or quality of the engines provided will be sufficient to meet our futureneeds, irrespective of whether we successfully implement our growth strategy. If we are required to replace Ilmor as ourinboard engine supplier, it could cause a decrease in products available for sale or an increase in the cost of goods sold, eitherof which could adversely affect our business, financial condition, and results of operations. In addition to the risk ofinterruption of our engine supply, Ilmor could potentially exert significant bargaining power over price, quality, warrantyclaims, or other terms relating to the inboard engines we use. We are required to purchase a minimum volume of engines fromIlmor annually or pay a penalty to Ilmor in order to maintain our exclusivity. While these minimums are significantly belowour current volumes, there can be no assurance that we will continue to meet these minimums in the future. Termination or interruption of informal supply arrangements could have a material adverse effect on our business orresults of operations. We have informal supply arrangements with some of our suppliers, including the sole supplier of our gas and ballast tanks. Inthe event of a termination of a supply arrangement, there can be no assurance that alternate supply arrangements will be madeon satisfactory terms. If we need to enter into supply arrangements on unsatisfactory terms, or if there are any delays to oursupply arrangements, it could adversely affect our business and operating results. We depend upon key personnel and we may not be able to retain them or attract, assimilate, and retain highly qualifiedemployees in the future. Our future success will depend in significant part upon the continued service of our senior management team and ourcontinuing ability to attract, assimilate, and retain highly qualified and skilled managerial, product development,manufacturing, marketing, and other personnel. The loss of the services of any members of our senior management or otherkey personnel or the inability to hire or retain qualified personnel in the future could adversely affect our business, financialcondition, and results of operations. We may attempt to grow our business through acquisitions or strategic alliances and new partnerships, which we may notbe successful in completing or integrating. We may in the future explore acquisitions and strategic alliances that will enable us to acquire complementary skills andcapabilities, offer new products, expand our consumer base, enter new product categories or geographic markets, and obtainother competitive advantages. We cannot assure you, however, that we will identify acquisition candidates or25 Table of Contentsstrategic partners that are suitable to our business, obtain financing on satisfactory terms, complete acquisitions or strategicalliances, or successfully integrate acquired operations into our existing operations. Once integrated, acquired operationsmay not achieve anticipated levels of sales or profitability, or otherwise perform as expected. Acquisitions also involvespecial risks, including risks associated with unanticipated challenges, liabilities and contingencies, and diversion ofmanagement attention and resources from our existing operations. Similarly, our partnership with leading franchises fromother industries to market our products or with third-party technology providers to introduce new technology to the marketmay not achieve anticipated levels of consumer enthusiasm and acceptance, or achieve anticipated levels of sales orprofitability, or otherwise perform as expected. Our intellectual property rights may be inadequate to protect our business. We attempt to protect our intellectual property through a combination of patent, trademark, copyright, protected design, andtrade secret laws. We hold patents, trademarks, copyrights, and design rights relating to various aspects of our products andbelieve that proprietary technical know-how is important to our business. Proprietary rights relating to our products areprotected from unauthorized use by third parties only to the extent that they are covered by valid and enforceable patents,trademarks, or copyrights, to the extent they are protected designs, or to the extent they are maintained in confidence as tradesecrets. We cannot be certain that we will be issued any patents from any pending or future patent applications owned by or licensedto us, or that the claims allowed under any issued patents will be sufficiently broad to protect our technology. Further, thepatents we own could be challenged, invalidated, or circumvented by others. Further, we cannot assure you that competitorswill not infringe our patents, or that we will have adequate resources to enforce our patents. We also rely on unpatented proprietary technology. It is possible that others will independently develop the same or similartechnology or otherwise obtain access to our unpatented technology. To protect our trade secrets and other proprietaryinformation, we require employees, consultants, advisors, and collaborators to enter into confidentiality agreements. Wecannot assure you that these agreements will provide meaningful protection for our trade secrets, know-how, or otherproprietary information in the event of any unauthorized use, misappropriation, or disclosure of such trade secrets, know-how, or other proprietary information. If we are unable to maintain the proprietary nature of our technologies, we could bematerially adversely affected. Further, we have attempted to protect certain of our vessel hull designs by seeking to register those designs with the UnitedStates Copyright Office. We cannot assure you that our applications will be approved. If approved, protection of the vesseldesign lasts ten years. However, our protected vessel hull designs could be challenged, invalidated, or circumvented byothers. Further, we cannot assure you that competitors will not infringe our designs, or that we will have adequate resourcesto enforce our rights. We rely on our trademarks, trade names, and brand names to distinguish our products from the products of our competitors,and have registered or applied to register many of these trademarks. We cannot assure you that our trademark applicationswill be approved. Third parties may also oppose our trademark applications, or otherwise challenge our use of the trademarks.In the event that our trademarks are successfully challenged, we could be forced to rebrand our products, which could resultin loss of brand recognition, and could require us to devote resources to advertising and marketing new brands. Further, wecannot assure you that competitors will not infringe our trademarks, or that we will have adequate resources to enforce ourtrademarks. If third parties claim that we infringe upon their intellectual property rights, our financial condition could be adverselyaffected.26 Table of ContentsWe face the risk of claims that we have infringed third parties’ intellectual property rights. Any claims of patent or otherintellectual property infringement, even those without merit, could be expensive and time consuming to defend, cause us tocease making, licensing, or using products that incorporate the challenged intellectual property, require us to redesign,reengineer, or rebrand our products, if feasible, divert management’s attention and resources, or require us to enter intoroyalty or licensing agreements in order to obtain the right to use a third party’s intellectual property. Any royalty orlicensing agreements, if required, may not be available to us on acceptable terms or at all. A successful claim of infringementagainst us could result in our being required to pay significant damages, enter into costly license or royalty agreements, orstop the sale of certain products, any of which could have a negative impact on our business, financial condition, and resultsof operations. While we are not currently involved in any outstanding intellectual property litigation that we believe,individually or in the aggregate, will have a material adverse effect on our business, financial condition, or results ofoperations, we cannot predict the outcome of any pending litigation and an unfavorable outcome could have an adverseimpact on our business, financial condition, or results of operations. Product liability, warranty, personal injury, property damage, and recall claims may materially affect our financialcondition and damage our reputation. We are engaged in a business that exposes us to claims for product liability and warranty claims in the event our productsactually or allegedly fail to perform as expected, or the use of our products results, or is alleged to result, in property damage,personal injury, or death. We have in the past incurred such liabilities and may in the future be exposed to liability for suchclaims. Although we maintain product and general liability insurance of the types and in the amounts that we believe arecustomary for the industry, we are not fully insured against all such potential claims. We may experience legal claims inexcess of our insurance coverage or claims that are not covered by insurance, either of which could adversely affect ourbusiness, financial condition, and results of operations. Adverse determination of material product liability and warrantyclaims made against us could have a material adverse effect on our financial condition and harm our reputation. In addition,if any of our products are, or are alleged to be, defective, we may be required to participate in a recall of that product if thedefect or alleged defect relates to safety. These and other claims we may face could be costly to us and require substantialmanagement attention. Significant product repair and/or replacement due to product warranty claims or product recalls could have a materialadverse impact on our results of operations. We provide a limited warranty for a period of five years. We may provide longer warranties related to certain promotionalprograms, as well as longer warranties in certain geographical markets as determined by local regulations and marketconditions. Although we employ quality control procedures, sometimes a product is distributed that needs repair orreplacement. Our standard warranties require us or our dealers to repair or replace defective products during such warrantyperiods at no cost to the consumer. Historically, product recalls have been administered through our dealers and distributors.The repair and replacement costs we could incur in connection with a recall could adversely affect our business. In addition,product recalls could harm our reputation and cause us to lose customers, particularly if recalls cause consumers to questionthe safety or reliability of our products. The nature of our business exposes us to workers’ compensation claims and other workplace liabilities. Certain materials we use require our employees to handle potentially hazardous or toxic substances. While our employeeswho handle these and other potentially hazardous or toxic materials receive specialized training and wear protectiveclothing, there is still a risk that they, or others, may be exposed to these substances. Exposure to these substances couldresult in significant injury to our employees and damage to our property or the property of others, including natural resourcedamage. Our personnel are also at risk for other workplace- related injuries, including slips and falls. We have in the pastbeen, and may in the future be, subject to fines, penalties, and other liabilities in connection with any such injury or damage.27 Table of ContentsAlthough we currently maintain what we believe to be suitable and adequate insurance in excess of our self- insuredamounts, we may be unable to maintain such insurance on acceptable terms or such insurance may not provide adequateprotection against potential liabilities. We may be subject to information technology system failures, network disruptions, and breaches in data security. We use many information technology systems and their underlying infrastructure to operate our business. The size andcomplexity of our computer systems make them potentially vulnerable to breakdown, malicious intrusion, and randomattack. Likewise, data privacy breaches by employees or others with permitted access to our systems may pose a risk thatsensitive data may be exposed to unauthorized persons or to the public. While we have invested in protection of data andinformation technology, there can be no assurance that our efforts will prevent breakdowns or breaches in our systems thatcould adversely affect our business. An increase in energy costs may materially adversely affect our business, financial condition, and results of operations. Higher energy costs result in increases in operating expenses at our manufacturing facility and in the expense of shippingproducts to our dealers. In addition, increases in energy costs may adversely affect the pricing and availability of petroleum-based raw materials, such as resins and foams that are used in our products. Also, higher fuel prices may have an adverseeffect on demand for our boats, as they increase the cost of ownership and operation. We are subject to U.S. and other anti-corruption laws, trade controls, economic sanctions, and similar laws andregulations, including those in the jurisdictions where we operate. Our failure to comply with these laws and regulationscould subject us to civil, criminal, and administrative penalties and harm our reputation. Doing business on a worldwide basis requires us to comply with the laws and regulations of various foreign jurisdictions.These laws and regulations place restrictions on our operations, trade practices, partners, and investment decisions. Inparticular, our operations are subject to U.S. and foreign anti-corruption and trade control laws and regulations, such as theFCPA, export controls, and economic sanctions programs, including those administered by the U.S. Treasury Department’sOffice of Foreign Assets Control, or OFAC. As a result of doing business in foreign countries and with foreign partners, we areexposed to a heightened risk of violating anti-corruption and trade control laws and sanctions regulations. The FCPA prohibits us from providing anything of value to foreign officials for the purpose of obtaining or retainingbusiness or securing any improper business advantage. It also requires us to keep books and records that accurately and fairlyreflect our transactions. Economic sanctions programs restrict our business dealings with certain sanctioned countries, persons, and entities. Inaddition, because we act through dealers and distributors, we face the risk that our dealers, distributors, or consumers mightfurther distribute our products to a sanctioned person or entity, or an ultimate end-user in a sanctioned country, which mightsubject us to an investigation concerning compliance with OFAC or other sanctions regulations. Violations of anti-corruption and trade control laws and sanctions regulations are punishable by civil penalties, includingfines, denial of export privileges, injunctions, asset seizures, debarment from government contracts, and revocations orrestrictions of licenses, as well as criminal fines and imprisonment. We cannot assure you that all of our local, strategic, orjoint partners will comply with these laws and regulations, in which case we could be held liable for actions taken inside oroutside of the U.S., even though our partners may not be subject to these laws. Such a violation could materially andadversely affect our reputation, business, results of operations and financial condition. Our continued international28 Table of Contentsexpansion, including in developing countries, and our development of new partnerships and joint venture relationshipsworldwide increase the risk of FCPA or OFAC violations in the future. If we are unable to comply with environmental and other regulatory requirements, our business may be exposed to materialliability and/or fines. Our operations are subject to extensive and frequently changing federal, state, local, and foreign laws and regulations,including those concerning product safety, environmental protection, and occupational health and safety. Some of these lawsand regulations require us to obtain permits, and limit our ability to discharge hazardous materials into the environment. Ifwe fail to comply with these requirements, we may be subject to civil or criminal enforcement actions that could result in theassessment of fines and penalties, obligations to conduct remedial or corrective actions, or, in extreme circumstances,revocation of our permits or injunctions preventing some or all of our operations. In addition, the components of our boatsmust meet certain regulatory standards, including stringent air emission standards for boat engines. Failure to meet thesestandards could result in an inability to sell our boats in key markets, which would adversely affect our business. Moreover,compliance with these regulatory requirements could increase the cost of our products, which in turn, may reduce consumerdemand. While we believe that we are in material compliance with applicable federal, state, local, and foreign regulatory requirements,and hold all licenses and permits required thereunder, we cannot assure you that we will, at all times, be able to continue tocomply with applicable regulatory requirements. Compliance with increasingly stringent regulatory and permit requirementsmay, in the future, cause us to incur substantial capital costs and increase our cost of operations, or may limit our operations,all of which could have a material adverse effect on our business or financial condition. As with most boat construction businesses, our manufacturing processes involve the use, handling, storage, and contractingfor recycling or disposal of hazardous substances and wastes. The failure to manage or dispose of such hazardous substancesand wastes properly could expose us to material liability or fines, including liability for personal injury or property damagedue to exposure to hazardous substances, damages to natural resources, or for the investigation and remediation ofenvironmental conditions. Under environmental laws, we may be liable for remediation of contamination at sites where ourhazardous wastes have been disposed or at our current or former facilities, regardless of whether such facilities are owned orleased or whether the environmental conditions were created by us, a prior owner or tenant, or a third-party. While we do notbelieve that we are presently subject to any such liabilities, we cannot assure you that environmental conditions relating toour prior, existing, or future sites or operations or those of predecessor companies will not have a material adverse effect onour business or financial condition. Natural disasters, environmental disasters, the effects of climate change, or other disruptions at our manufacturing facilityor in other regions of the United States could adversely affect our business, financial condition, and results of operations. We rely on the continuous operation of our only manufacturing facility in Vonore, Tennessee for the production of ourproducts. Any natural disaster or other serious disruption to our facility due to fire, snow, flood, earthquake, or any otherunforeseen circumstance could adversely affect our business, financial condition, and results of operations. Changes inclimate could adversely affect our operations by limiting or increasing the costs associated with equipment or fuel supplies.In addition, adverse weather conditions, such as increased frequency and/or severity of storms, or floods could impair ourability to operate by damaging our facilities and equipment or restricting product delivery to customers. The occurrence ofany disruption at our manufacturing facility, even for a short period of time, may have an adverse effect on our productivityand profitability, during and after the period of the disruption. These disruptions may also cause personal injury and loss oflife, severe damage to or destruction of property and equipment, and environmental damage. Although we maintain property,casualty, and business interruption insurance of the types and in the amounts that we believe are29 Table of Contentscustomary for the industry, we are not fully insured against all potential natural disasters or other disruptions to ourmanufacturing facility. In addition, we have dealers and third-party suppliers located in regions of the United States that have been and may beexposed to damaging storms, such as hurricanes and tornados, floods and environmental disasters. Although preventativemeasures may help to mitigate damage, the damage and disruption resulting from natural and environmental disasters may besignificant. Such disasters can disrupt our dealers, suppliers, or customers, which can interrupt our operational processes andour sales and profits. Increases in income tax rates or changes in income tax laws or enforcement could have a material adverse impact on ourfinancial results. Changes in domestic and international tax legislation could expose us to additional tax liability. Although we monitorchanges in tax laws and work to mitigate the impact of proposed changes, such changes may negatively impact our financialresults. In addition, any increase in individual income tax rates, such as those implemented in the U.S. at the beginning of2013, would negatively affect our potential consumers’ discretionary income and could decrease the demand for ourproducts. Our credit facilities contain covenants which may limit our operating flexibility; failure to comply with covenants mayresult in our lenders restricting or terminating our ability to borrow under such credit facilities. In the past, we have relied upon our existing credit facilities to provide us with adequate liquidity to operate our business.The availability of borrowing amounts under our credit facilities is dependent upon compliance with the debt covenants setforth in our credit agreement. Violation of those covenants, whether as a result of operating losses or otherwise, could resultin our lenders restricting or terminating our borrowing ability under our credit facilities. If our lenders reduce or terminate ouraccess to amounts under our credit facilities, we may not have sufficient capital to fund our working capital and other needs,and we may need to secure additional capital or financing to fund our operations or to repay outstanding debt under ourcredit facilities. We cannot assure you that we will be successful in ensuring the availability of amounts under our creditfacilities or in raising additional capital, or that any amount, if raised, will be sufficient to meet our cash needs or will be onterms as favorable as those which have been available to us historically. If we are not able to maintain our ability to borrowunder our credit facilities, or to raise additional capital when needed, our business and operations will be materially andadversely affected. Risks Relating to Ownership of our Common Stock You may be diluted by future issuances of common stock in connection with our incentive plans, acquisitions, or otherwise;future sales of such shares in the public market, or the expectations that such sales may occur, could lower our stock price. Our amended and restated certificate of incorporation authorizes us to issue shares of common stock and options, rights,warrants, and appreciation rights relating to common stock for the consideration and on the terms and conditions establishedby our board of directors in its sole discretion, whether in connection with acquisitions or otherwise. We have reserved shares for issuance under the Amended and Restated MCBC Holdings, Inc. 2015 Incentive Award Plan inan amount equal to 1,722,190 shares. Any common stock that we issue, including under our 2015 Incentive Award Plan orother equity incentive plans that we may adopt in the future, would dilute the percentage ownership of holders of ourcommon stock. 30 Table of ContentsOur common stock price may be volatile or may decline regardless of our operating performance It is possible that an active trading market for our common stock will not be sustained, which could make it difficult for youto sell your shares of common stock at an attractive price or at all. Volatility in the market price of our common stock may prevent you from being able to sell your shares at or above the priceyou paid for them. Many factors, which are outside our control, may cause the market price of our common stock to fluctuatesignificantly, including those described elsewhere in this “Risk Factors” section and this Form 10-K, as well as the following: ·our operating and financial performance and prospects; ·our quarterly or annual earnings or those of other companies in our industry compared to market expectations; ·conditions that impact demand for our services; ·future announcements concerning our business or our competitors’ businesses; ·the public’s reaction to our press releases, other public announcements, and filings with the SEC; ·coverage by or changes in financial estimates by securities analysts or failure to meet their expectations; ·market and industry perception of our success, or lack thereof, in pursuing our growth strategy; ·strategic actions by us or our competitors, such as acquisitions or restructurings; ·changes in laws or regulations that adversely affect our industry or us; ·changes in accounting standards, policies, guidance, interpretations, or principles; ·changes in senior management or key personnel; ·issuances, exchanges or sales, or expected issuances, exchanges or sales of our capital stock; ·changes in our dividend policy; ·adverse resolution of new or pending litigation against us; and ·changes in general market, economic, and political conditions in the U.S. and global economies or financialmarkets, including those resulting from natural disasters, terrorist attacks, acts of war, and responses to suchevents. As a result, volatility in the market price of our common stock may prevent investors from being able to sell their commonstock at or above the price they paid for it or at all. These broad market and industry factors may materially reduce the marketprice of our common stock, regardless of our operating performance. In addition, price volatility may be greater if the publicfloat and trading volume of our common stock is low. As a result, you may suffer a loss on your investment. We do not intend to pay dividends on our common stock for the foreseeable future. While we have paid dividends in the past, we presently have no intention to pay dividends on our common stock at any timein the foreseeable future. Any decision to declare and pay dividends in the future will be made at the discretion of our boardof directors and will depend on, among other things, our results of operations, financial condition, cash requirements,contractual restrictions, and other factors that our board of directors may deem relevant. Certain of our debt instrumentscontain covenants that restrict the ability of our subsidiaries to pay dividends to us. In addition, we will be permitted under31 Table of Contentsthe terms of our debt instruments to incur additional indebtedness, which may restrict or prevent us from paying dividends onour common stock. Furthermore, our ability to declare and pay dividends may be limited by instruments governing futureoutstanding indebtedness we may incur. Delaware law and certain provisions in our amended and restated certificate of incorporation may prevent efforts by ourstockholders to change the direction or management of our Company. We are a Delaware corporation, and the anti-takeover provisions of Delaware law impose various impediments to the abilityof a third party to acquire control of us, even if a change of control would be beneficial to our existing stockholders. Inaddition, our amended and restated certificate of incorporation and our amended and restated by-laws contain provisions thatmay make the acquisition of our company more difficult without the approval of our board of directors, including, but notlimited to, the following: ·our board of directors is classified into three classes, each of which serves for a staggered three-year term; ·only our board of directors may call special meetings of our stockholders; ·our stockholders have only limited rights to amend our by-laws; and ·we require advance notice and duration of ownership requirements for stockholder proposals. These provisions could discourage, delay, or prevent a transaction involving a change in control of our company. Theseprovisions could also discourage proxy contests and make it more difficult for you and other stockholders to elect directorsof your choosing and cause us to take other corporate actions you desire. In addition, because our board of directors isresponsible for appointing the members of our management team, these provisions could in turn affect any attempt by ourstockholders to replace current members of our management team. For as long as we are an emerging growth company, we will not be required to comply with certain reporting requirements,including those relating to accounting standards and disclosure about our executive compensation, that apply to otherpublic companies. We are an “emerging growth company,” as defined in Section 2(a) of the Securities Act, as modified by the JOBS Act. Assuch, we are eligible to take advantage of certain exemptions from various reporting requirements that are applicable to otherpublic companies that are not “emerging growth companies,” including, but not limited to, (i) not being required to complywith the auditor attestation requirements of Section 404(b) of the Sarbanes-Oxley Act, (ii) reduced disclosure obligationsregarding executive compensation in our periodic reports and proxy statements, and (iii) exemptions from the requirementsof holding a non-binding advisory vote on executive compensation and of stockholder approval of any golden parachutepayments not previously approved. We have elected to adopt these reduced disclosure requirements. We cannot predict ifinvestors will find our common stock less attractive as a result of our taking advantage of these exemptions and as a result,there may be a less active trading market for our common stock and our stock price may be more volatile. We could remain an “emerging growth company” for up to five years or until the earliest of (a) the last day of the first fiscalyear in which our annual gross revenues exceed $1 billion, (b) the date that we become a “large accelerated filer” as definedin Rule 12b-2 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), which would occur if themarket value of our common stock that is held by non-affiliates exceeds $700 million as of the last business day of our mostrecently completed fiscal quarter, and (c) the date on which we have issued more than $1 billion in non-convertible debtsecurities during the preceding three-year period. 32 Table of ContentsThe obligations associated with being a public company require significant resources and management attention, whichmay divert us from our business operations. As a result of our initial public offering, we are subject to the reporting requirements of the Exchange Act and the Sarbanes-Oxley Act. The Exchange Act requires that we file annual, quarterly, and current reports with respect to our business andfinancial condition. The Sarbanes-Oxley Act requires, among other things, that we establish and maintain effective internalcontrols and procedures for financial reporting. As a result, we have and will continue to incur significant legal, accounting,and other expenses that we did not previously incur. In addition, the need to establish the corporate infrastructure demanded of a public company may divert management’sattention from implementing our business strategy, which could prevent us from improving our business, results ofoperations, and financial condition. We have made, and will continue to make, changes to our internal controls, includinginformation technology controls, and procedures for financial reporting and accounting systems to meet our reportingobligations as a public company. However, the measures we take may not be sufficient to satisfy our obligations as a publiccompany. If we do not continue to develop and implement the right processes and tools to manage our changing enterpriseand maintain our culture, our ability to compete successfully and achieve our business objectives could be impaired, whichcould negatively impact our business, financial condition, and results of operations. In addition, we cannot predict orestimate the amount of additional costs we may incur to comply with these requirements. We anticipate that these costs willbe material to our general and administrative expenses. Furthermore, as a public company, we have and will continue to incur additional legal, accounting, and other expenses thathave not been reflected in our historical financial statements. In addition, rules implemented by the SEC and NASDAQ haveimposed various requirements on public companies, including establishment and maintenance of effective disclosure andfinancial controls and changes in corporate governance practices. Our management and other personnel will need to devote asubstantial amount of time to these compliance initiatives. These rules and regulations result in our incurring legal andfinancial compliance costs and will make some activities more time-consuming and costly. For example, we expect theserules and regulations to make it more difficult and more expensive for us to maintain director and officer liability insurance,and we may be required to accept reduced policy limits and coverage or incur substantially higher costs to maintain the sameor similar coverage. As a result, it may be more difficult for us to attract and retain qualified people to serve on our board ofdirectors, on our board committees, or as executive officers. Our failure to achieve and maintain effective internal control over financial reporting in accordance with Section 404 ofthe Sarbanes-Oxley Act as a public company could have a material adverse effect on our business and share price. Prior to the completion of our initial public offering, we had not operated as a public company and were not required toindependently comply with Section 404(a) of the Sarbanes-Oxley Act. Section 404(a) of the Sarbanes-Oxley Act requiresannual management assessments of the effectiveness of our internal control over financial reporting, starting with the secondannual report that we file with the SEC. We were required to meet these standards in the course of preparing our financialstatements as of and for the year ended June 30, 2017, and our management is required to report on the effectiveness of ourinternal control over financial reporting for such year. Additionally, once we are no longer an emerging growth company, asdefined by the JOBS Act, our independent registered public accounting firm will be required pursuant to Section 404(b) ofthe Sarbanes-Oxley Act to attest to the effectiveness of our internal control over financial reporting on an annual basis. Therules governing the standards that must be met for our management to assess our internal control over financial reporting arecomplex and require significant documentation, testing, and possible remediation. Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability offinancial reporting and the preparation of financial statements in accordance with generally accepted accounting principles.We are currently in the process of reviewing, documenting, and testing our internal control over financial reporting. We33 Table of Contentsmay encounter problems or delays in implementing any changes necessary to make a favorable assessment of our internalcontrol over financial reporting. In addition, we may encounter problems or delays in completing the implementation of anyrequested improvements and receiving a favorable attestation in connection with the attestation to be provided by ourindependent registered public accounting firm after we cease to be an emerging growth company. If we cannot favorablyassess the effectiveness of our internal control over financial reporting, or if our independent registered public accountingfirm is unable to provide an unqualified attestation report on our internal controls after we cease to be an emerging growthcompany, investors could lose confidence in our financial information and the price of our common stock could decline. Additionally, the existence of any material weakness or significant deficiency may require management to devote significanttime and incur significant expense to remediate any such material weaknesses or significant deficiencies and managementmay not be able to remediate any such material weaknesses or significant deficiencies in a timely manner. The existence ofany material weakness in our internal control over financial reporting could also result in errors in our financial statementsthat could require us to restate our financial statements, cause us to fail to meet our reporting obligations, and causestockholders to lose confidence in our reported financial information, all of which could materially and adversely affect ourbusiness and share price. If securities analysts do not publish research or reports about our company, or if they issue unfavorable commentary aboutus or our industry or downgrade our common stock, the price of our common stock could decline. The trading market for our common stock will depend in part on the research and reports that third-party securities analystspublish about our company and our industry. We may be unable or slow to attract research coverage and if one or moreanalysts cease coverage of our company, we could lose visibility in the market. In addition, one or more of these analystscould downgrade our common stock or issue other negative commentary about our company or our industry. As a result ofone or more of these factors, the trading price of our common stock could decline. ITEM 1B.UNRESOLVED STAFF COMMENTS. None. ITEM 2.PROPERTIES. All of our boats are designed, manufactured, and lake-tested at our 252,000-square-foot manufacturing facility located onapproximately 60 acres of lakefront land we own in Vonore, Tennessee. In addition, we lease a 60,000 square-foot facility inVonore where we manufacture our trailers, and a 3,000 square-foot warehouse facility in West Yorkshire, England forwarehousing of aftermarket parts. ITEM 3.LEGAL PROCEEDINGS. Legal Proceedings On May 2, 2017, we reached a resolution of our pending patent litigation with Malibu Boats. The resolution of the litigationincluded a full release of all claims and counterclaims by the parties. The resolution of the litigation also included a $2.5million settlement charge and the Company entering into a license agreement related to certain of Malibu’s patents. ITEM 4.MINE SAFETY DISCLOSURES. Not applicable.34 Table of Contents PART II ITEM 5.MARKET FOR REGISTRANT’S COMMON EQUITY AND RELATED STOCKHOLDER MATTERSAND ISSUER PURCHASES OF EQUITY SECURITIES. Market Information Our common stock has been publicly traded on the NASDAQ Global Market under the symbol “MCFT” since July 17, 2015.Prior to that time, there was no public market for our common stock. The following table sets forth, for the periods indicated,the high and low sales prices of our common stock as reported by the NASDAQ Global Market since our initial publicoffering: High Low Fiscal 2016 First quarter (from July 17, 2015) $16.47 $11.93 Second quarter 14.82 10.70 Third quarter 14.73 10.99 Fourth quarter 15.97 10.25 Fiscal 2017 First quarter $12.88 $10.44 Second quarter 14.71 10.84 Third quarter 17.51 13.67 Fourth quarter 20.00 15.58 On May 26, 2016, we declared a special dividend of $4.30 per share. The record date was June 6, 2016 and the payment datewas June 10, 2016. The closing sales prices for each period listed above in fiscal year ended June 30, 2017, represent theactual closing prices and have not been adjusted to reflect the special dividend. On September 5, 2017, the last reported sale price on the NASDAQ Global Market of our common stock was $17.66 per share.As of September 7, 2017, we had 17 holders of record of our common stock. The actual number of stockholders is greater thanthis number of record holders, and includes stockholders who are beneficial owners, but whose shares are held in street nameby brokers and other nominees. This number of holders of record also does not include stockholders whose shares may beheld in trust by other entities. Dividend Policy On May 26, 2016, we declared a special dividend of $4.30 per share which was paid on June 10, 2016. No dividends weredeclared or paid during the fiscal year ended June 30, 2017. We presently intend to retain our earnings, if any, to finance thedevelopment and growth of our business and operations and do not anticipate declaring or paying cash dividends on ourcommon stock in the foreseeable future. Any future determination as to the declaration and payment of dividends, if any, willbe at the discretion of our board of directors and will depend on then-existing conditions, including our operating results,financial condition, contractual restrictions, capital requirements, business prospects, and other factors our board of directorsmay deem relevant. In addition, our Senior Secured Credit Facility contains restrictions that restrict our ability to pay cashdividends. See Item 1A “Risk Factors” — Risks Relating to Ownership of Our Common Stock — We do not intend to paydividends on our common stock for the foreseeable future. 35 Table of ContentsStock Performance Graph This performance graph shall not be deemed “soliciting material” or to be “filed” with the SEC for purposes of Section 18of the Exchange Act of 1934, or otherwise subject to the liabilities under that section, and shall not be deemed to beincorporated by reference into any filing of ours under the Securities Act or the Exchange Act. The following stock performance graph illustrates the cumulative total shareholder return on our common stock for theperiod from July 17, 2015 (the first day of trading for our common stock) to June 30, 2017, as compared to the Russell 2000Index and the Dow Jones US Recreational Products Index. The comparison assumes (i) a hypothetical investment of $100 in our common stock and the two above mentioned indiceson July 17, 2015 and (ii) the full reinvestment of all dividends. The comparisons in the graph and table are required by theSEC and are not intended to be indicative of possible future performance of our common stock. Securities Authorized for Issuance Under Equity Compensation Plans For information regarding securities authorized for issuance under our equity compensation plans, see Note 12: Stock-BasedCompensation in Item 8 and Item 12: Security Ownership of Certain Beneficial Owners and Management and RelatedStockholder Matters. ITEM 6.SELECTED FINANCIAL DATA. The selected historical consolidated financial data and other data of MCBC Holdings, Inc. set forth below should be readtogether with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and ourconsolidated financial statements and related notes, each of which is included elsewhere in this Form 10-K. 36 Table of ContentsWe derived the consolidated statement of operations for the fiscal years ended June 30, 2017, June 30, 2016 and June 30,2015 and our consolidated balance sheet data as of June 30, 2017 and 2016 from our audited consolidated financialstatements and related notes included elsewhere in this Form 10-K. We derived the consolidated statement of operations forthe fiscal years ended June 30, 2014 and June 30, 2013 and our consolidated balance sheet data as of June 30, 2015, June30, 2014 and June 30, 2013 from audited consolidated financial statements that have not been included in this Form 10-K.Our historical results are not necessarily indicative of the results that may be expected in the future. Fiscal Year Ended June 30, June 30, June 30, June 30, June 30, 2017 2016 2015 2014 2013 (Dollars in thousands, except for shares and per share amounts) Consolidated statement of operations: Net sales $228,634 $221,600 $214,386 $177,587 $162,009 Cost of sales 165,158 160,521 163,220 139,975 131,303 Gross profit 63,476 61,079 51,166 37,612 30,706 Operating expenses: Selling and marketing 9,380 9,685 8,552 8,837 7,948 General and administrative 20,474 29,162 18,472 9,960 10,518 Amortization of intangible assets 107 221 222 221 222 Total selling, general and administrative expenses 29,961 39,068 27,246 19,018 18,688 Operating income 33,515 22,011 23,920 18,594 12,018 Other expense (income): Interest expense, including related party amounts 2,222 1,280 5,171 7,555 9,239 Change in common stock warrant fair value — 3,425 6,621 2,526 — Other income — (1,212) — — — Income before income tax expense (benefit) 31,293 18,518 12,128 8,513 2,779 Income tax expense (benefit) 11,723 8,308 6,594 (11,414) (37) Net income $19,570 $10,210 $5,534 $19,927 $2,816 Weighted average shares used for computation of: Basic 18,592,885 17,849,319 11,139,000 11,139,000 11,139,000 Diluted 18,620,708 18,257,007 11,862,699 11,182,264 11,139,000 Net income per common share: Basic $1.05 $0.57 $0.50 $1.79 $0.25 Diluted 1.05 0.56 0.47 1.78 0.25 Consolidated balance sheet data: Total assets $83,321 $82,533 $89,676 $96,142 $87,153 Total liabilities 71,560 90,912 131,929 99,929 110,869 Current portion of long-term debt 3,687 7,885 18,275 8,621 — Long-term debt 30,790 44,342 60,487 57,359 75,300 Total debt 34,477 52,227 78,762 65,980 75,300 Total stockholders’ equity (deficit) 11,761 (8,379) (42,253) (3,787) (23,716) Additional financial and other data (unaudited): Unit volume: MasterCraft 2,790 2,742 2,547 2,135 1,949 Hydra-Sports — — 45 50 49 MasterCraft sales $228,634 $221,600 $199,907 $163,631 $148,750 Hydra-Sports sales — — 14,479 13,956 13,259 Consolidated sales $228,634 $221,600 $214,386 $177,587 $162,009 Per Unit: MasterCraft sales $82 $81 $78 $77 $76 Hydra-Sports sales — — 322 279 271 Consolidated sales $82 $81 $83 $81 $81 Gross margin 27.8% 27.6% 23.9% 21.2% 19.0%Adjusted EBITDA $43,476 $41,227 $31,540 $18,403 $11,813 Adjusted net income $24,335 $23,362 $14,778 $5,361 $383 Adjusted EBITDA margin 19.0% 18.6% 15.8% 11.2% 7.9%(1)The weighted average shares used for computation of basic and diluted earnings per common share gives effect to the 11.139-for-1stock split consummated on July 22,2015 in connection with the Company’s initial public offering and excludes the 6,071,429 shares sold for periods prior to fiscal year ended June 30, 2016.(2)We define MasterCraft sales as net sales less net sales associated with Hydra-Sports.(3)Adjusted EBITDA, Adjusted net income and Adjusted EBITDA margin are non-GAAP financial measures. We define Adjusted EBITDA margin as Adjusted EBITDAexpressed as a percentage of MasterCraft sales. For definitions of Adjusted EBITDA, Adjusted net income and a reconciliation of each to net income, see “Item 7Management’s Discussion and Analysis of Financial Condition and Results of Operations.”37 (1)(1)(2)(3)(3)(3)Table of Contents ITEM 7.MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OFOPERATIONS. The following discussion and analysis should be read together with the sections entitled “Risk Factors,” “SelectedFinancial Data,” and the financial statements and the accompanying notes included elsewhere in this Form 10-K. Thestatements in this discussion and analysis regarding industry outlook, our expectations regarding the performance of ourbusiness, anticipated financial results, liquidity and the other non-historical statements are forward-looking statementswithin the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are subject tonumerous risks and uncertainties, including, but not limited to, the important factors described in “Risk Factors.” Ouractual results may differ materially from those contained in or implied by any forward-looking statements. Overview We are a world-renowned innovator, designer, manufacturer, and marketer of premium recreational sport boats, with a leadingmarket position in the U.S., a strong international presence, and dealers in 39 countries around the world. Our boats are usedfor water skiing, wakeboarding, and wake surfing, as well as general recreational boating. Our robust product portfolio ofperformance sport boats are manufactured to the highest standards of quality, performance, and styling. We sell our boats through an extensive network of independent dealers in North America and internationally. We partnerwith 96 North American dealers with 155 locations and 43 international dealers with 75 locations throughout the rest of theworld. In fiscal 2017, 90.9% of our net sales were generated from North America and 9.1% of our net sales were generatedfrom outside of North America. In July 2015, we completed the initial public offering of our common stock, in which we issued and sold 6,071,429 shares ofcommon stock (exclusive of 910,714 shares of common stock sold by the selling stockholders pursuant to the exercise of anover-allotment option granted to the underwriters in connection with the offering) at a public offering price of $15.00 pershare after giving effect to the 11.139-for-1 stock split consummated on July 22, 2015. The aggregate net proceeds receivedby us from our initial public offering were $81.8 million, after deducting underwriting discounts and commissions andoffering expenses payable by us. Outlook Our sales are impacted by general economic conditions, which affect the demand for our products, the demand for optionalfeatures, the availability of credit for our dealers and retail consumers, and overall consumer confidence. While theperformance sport boat category has grown in recent years, new unit sales remain significantly below historical peaks. Whilethere is no guarantee that our market will continue to grow, we believe that increased consumer demand and limited usedboat inventory present a long runway for future growth. We believe our sales have grown as dealers and customers continue to recognize the superior quality, performance, styling,and value proposition of our recently released boats. Our entire product portfolio has been renewed in the last four years,giving us the newest overall product offering in the performance sport boat category. We believe these factors stronglyposition us for growth in the coming periods. We believe our broad offering of boat models and features will continue toattract customers from our competitors, particularly in the performance sport boat and sterndrive categories, and will driveincreased unit volume and market share gains. Our revamped manufacturing and product development processes have led tooperational efficiencies which we expect will continue to drive margin expansion. Recent Transactions In December 2016, we completed two secondary offerings for a total of 2,995,000 shares of common stock held by certainentities associated with Wayzata Investment Partners (collectively, the “Selling Stockholders”). The public offering price forthe first offering consisting of 1,495,000 shares was $13.35 per share which included 195,000 shares sold by the Selling38 Table of ContentsStockholders pursuant to the over-allotment option granted to the underwriter, which was exercised concurrently with theclosing of the secondary offering. The public offering price for the second offering consisting of 1,500,000 shares was $13.45per share. We received no proceeds from the secondary offerings. We incurred $0.2 million for offering expenses duringDecember 2016, which are reflected as a reduction to paid-in capital. Wayzata Investment Partners has now divested of alloutstanding shares of our common stock acquired in connection with our initial public offering. In September 2016, we completed a follow-on offering of 4,600,000 shares of common stock held by certain entitiesassociated with the Selling Stockholders at a public offering price of $10.25 per share. This included 600,000 shares sold bythe Selling Stockholders pursuant to the over-allotment option granted to the underwriters, which was exercised concurrentlywith the closing of the follow-on offering. We received no proceeds from the follow-on offering. We paid $0.3 million foroffering expenses incurred during September 2016, which are reflected as a reduction to paid-in capital. Seasonality and Other Factors That Affect Our Business Our operating results are subject to annual and seasonal fluctuations resulting from a variety of factors, including: ·seasonal variations in retail demand for boats, with a significant majority of sales occurringduring peak boating season, which we attempt to manage by providing incentive programs andfloor plan subsidies to encourage dealer purchases throughout the year, which may includeoffering off-season retail promotions to our dealers in seasonally slow months, during andahead of boat shows, to encourage retail demand; ·product mix, which is driven by boat model mix and higher option order rates; while product mixdoes not significantly affect margins, sales of larger boats and boats with optional contentproduce higher absolute profits; ·inclement weather, which can affect production at our manufacturing facility as well as consumer demand; ·competition from other performance sports boat manufacturers; ·general economic conditions; and ·foreign currency exchange rates. Key Performance Measures From time to time we use certain key performance measures in evaluating our business and results of operations and we mayrefer to one or more of these key performance measures in this “Management’s Discussion and Analysis of FinancialCondition and Results of Operations.” These key performance measures include: ·Unit volume — We define unit volume as the number of our boats sold to our dealers during a period. ·Net sales per unit — We define net sales per unit as net sales divided by unit volume. ·Gross margin — We define gross margin as gross profit divided by net sales, expressed as a percentage. ·Adjusted EBITDA — We define Adjusted EBITDA as earnings before interest expense, income taxes, depreciation,and amortization, as further adjusted to eliminate certain non-cash charges and unusual items that we do notconsider to be indicative of our ongoing operations. For a reconciliation of Adjusted EBITDA to net income, see“Non-GAAP Measures” below. ·Adjusted net income — We define Adjusted net income as net income excluding income tax expense (benefit)adjusted to eliminate certain non-cash charges and unusual items that we do not consider to be indicative of ourongoing operations and an adjustment for income tax expense at a normalized annual effective tax rate. For areconciliation of Adjusted net income, see “Non-GAAP Measures” below. 39 Table of ContentsComponents of Results of Operations Net Sales We generate sales from the sale of boats, trailers, and accessories to our dealers. The substantial majority of our net sales arederived from the sale of boats, including optional features included at the time of the initial wholesale purchase of the boat.Net sales consist of the following: ·Gross sales, which are derived from: ·Boat sales — sales of boats to our dealer network. In addition, nearly all of our boat sales include optionalfeature upgrades, which increase the average selling price of our boats; and ·Trailers, parts and accessories, and other revenues — sales of boat trailers, replacement and aftermarketboat parts and accessories, and transportation charges to our dealer network. ·Net of: ·Dealer programs and flooring subsidies — incentives, including rebates and subsidized flooring, weprovide to our dealers to drive volume and level dealer purchases throughout the year. If a dealer meetscertain volume levels over the course of the year during certain defined periods, the dealer will be entitledto a specified rebate. These rebates change annually and include volume and exclusivity incentives.Dealers who participate in our floor plan financing program may be entitled to have their flooring costssubsidized by us to promote dealer orders in the off-season. Cost of Sales Our cost of sales includes all of the costs to manufacture our products, including raw materials, components, supplies, directlabor, and factory overhead. For components and accessories manufactured by third-party vendors, our costs are the amountsinvoiced to us by the vendors. Cost of sales includes shipping and handling costs, depreciation expense related tomanufacturing equipment and facilities, and warranty costs associated with the repair or replacement of our boats underwarranty. Operating Expenses Our operating expenses include selling and marketing costs, general and administrative costs, impairment losses andamortization costs. These items include personnel and related expenses, non-manufacturing overhead, and various otheroperating expenses. Further, selling and marketing expenditures include the cost of advertising and marketing materials.General and administrative expenses include, among other things, salaries, benefits, and other personnel related expenses foremployees engaged in product development, engineering, finance, information technology, human resources, and executivemanagement. Other costs include outside legal and accounting fees, investor relations, risk management (insurance), andother administrative costs. Other Expense Other expense includes interest expense, including related party amounts, legal settlements and change in common stockwarrant fair value. Interest expense, including related party amounts, consists of interest charged under our credit facilities,including interest paid to funds affiliated with Wayzata Investment Partners, deferred financing fees, and debt issuance costswritten off in connection with the pay down of amounts owed on our credit facilities. Income Tax Expense Our accounting for income tax expense reflects management’s assessment of future tax assets and liabilities based onassumptions and estimates for timing, likelihood of realization, and tax laws existing at the time of evaluation. We record avaluation allowance, when appropriate, to reduce deferred tax assets to an amount that is more likely than not to be realized.40 Table of ContentsResults of Operations The consolidated statement of operations presented below should be read together with “Selected Consolidated FinancialData,” and our consolidated financial statements and related notes included elsewhere in this Form 10-K. We derived the consolidated statement of operations for the fiscal years ended June 30, 2017, 2016 and 2015 and ourconsolidated balance sheets data as of June 30, 2017 and 2016 from our audited consolidated financial statements andrelated notes included elsewhere in this Form 10-K. Our historical results are not necessarily indicative of the results that maybe expected in the future. For the Years Ended June 30, 2017 2016 2015 (Dollars in thousands) Consolidated statement of operations: Net sales $228,634 $221,600 $214,386 Cost of sales 165,158 160,521 163,220 Gross profit 63,476 61,079 51,166 Operating expenses: Selling and marketing 9,380 9,685 8,552 General and administrative 20,474 29,162 18,472 Amortization of intangible assets 107 221 222 Total operating expenses 29,961 39,068 27,246 Operating income 33,515 22,011 23,920 Other expense (income): Interest expense 2,222 1,280 5,171 Change in common stock warrant fair value — 3,425 6,621 Other income — (1,212) — Income before income tax expense 31,293 18,518 12,128 Income tax expense 11,723 8,308 6,594 Net income $19,570 $10,210 $5,534 Additional financial and other data: Unit volume: MasterCraft 2,790 2,742 2,547 Hydra-Sports — — 45 MasterCraft sales $228,634 $221,600 $199,907 Hydra-Sports sales — — 14,479 Net sales $228,634 $221,600 $214,386 Per Unit: MasterCraft sales $82 $81 $78 Hydra-Sports sales — — 322 Net sales per unit $82 $81 $83 Gross margin 27.8% 27.6% 23.9% (1)We define MasterCraft sales as net sales less net sales associated with Hydra-Sports. Fiscal 2017 Compared to Fiscal 2016 Net Sales. Our net sales for fiscal 2017 were $228.6 million, reflecting an increase of $7.0 million, or 3.2%, compared to$221.6 million for fiscal 2016. The increase was due to an increase in unit volume of 48 units, or 1.8% and an increase in ournet sales per unit of 1.4%. This increase was due to price increases, as well as increased sales of higher content optionpackages. 41 (1)Table of ContentsCost of Sales. Our cost of sales increased $4.7 million, or 2.9%, to $165.2 million for fiscal 2017 compared to $160.5 million for fiscal2016. The increase in cost of sales resulted primarily from a 1.8% increase in total unit volume and an increase in our cost of sales per unit of1.1% due primarily to increased sales of higher content option packages, partially offset by lower warranty costs. Gross Profit. For fiscal 2017, our gross profit increased $2.4 million, or 3.9%, to $63.5 million compared to $61.1 million for fiscal 2016.Gross margin increased to 27.8% for fiscal 2017 compared to 27.6% for fiscal 2016. The increase in gross profit margin and gross marginresulted primarily from price increases and sales of higher content option packages as well as lower warranty costs, partially offset by rebatesassociated with increased retail demand from our winter sales program Operating Expenses. Selling and marketing expense decreased $0.3 million, or 3.1%, to $9.4 million for fiscal 2017 compared to $9.7 millionfor fiscal 2016. This decrease resulted mainly from reduced spending on the marketing events. General and administrative expense decreasedby $8.7 million, or 29.8%, to $20.5 million for fiscal 2017 compared to $29.2 million for fiscal 2016. This decrease resulted mainly from$13.0 million in reduced stock-based compensation cost partially offset by an increase of $4.3 million in legal and advisoryfees related to our litigation with Malibu Boats, which includes a $2.5 million charge to settle the Malibu patent case.Operating expenses, as a percentage of net sales, decreased by 4.5 percentage points to 13.1% for fiscal 2017 compared to17.6% for fiscal 2016. This decrease was the result of the decrease in general and administrative expenses and selling andmarketing expenses described above. Other Expense (income). Interest expense increased $0.9 million or 73.6%, to $2.2 million for fiscal 2017 compared to $1.3million for fiscal 2016. The increase is due to interest expense incurred on our Second Amended and Restated Credit andGuaranty Agreement entered into in May 2016, partially offset by the write-off of deferred financing costs related to the debtextinguishment during fiscal 2016. There was no change in common stock warrant fair value for the fiscal 2017, as allwarrants were exercised during fiscal 2016. We recognized a gain during fiscal 2016 upon settlement of a litigation matter of$1.2 million. Income Tax Expense. Our income tax expense was $11.7 million for fiscal 2017, reflecting a reported effective tax rate of37.5%, which differs from the statutory federal income tax rate of 35% primarily due to the inclusion of the state tax rate inthe overall effective rate. Our income tax expense was $8.3 million for fiscal 2016, reflecting a reported effective tax rate of44.9%, which also differs from the statutory federal income tax rate of 35% primarily due to permanent differences relating tothe change in fair value of the common stock warrant. Fiscal 2016 Compared to Fiscal 2015 Net Sales. Our net sales for fiscal 2016 were $221.6 million, reflecting an increase of $7.2 million, or 3.4%, compared to$214.4 million for fiscal 2015. MasterCraft net sales, which exclude the terminated Hydra-Sports manufacturing contract,increased 10.9%, or $21.7 million to $221.6 million for fiscal 2016 compared to $199.9 million. The increase in net sales wasprimarily due to an increase in MasterCraft unit volume of 195 units, or 7.7%. Net sales per Mastercraft unit increased by3.8%, primarily driven by price increases, demand for new models, in particular the X23, X26 and NXT22 and increasedadoption of higher content option packages. Cost of Sales. Our cost of sales decreased $2.7 million, or 1.7%, to $160.5 million for fiscal 2016 compared to$163.2 million for fiscal 2015 resulting from an increase in unit volume offset by a 7.0% decline in cost per unit. Thereduction in cost per unit was primarily a result of lower material costs driven by engineering and manufacturing initiativesto reduce production costs and termination of the Hydra-Sports production. Overhead costs per unit were lower due tooperating efficiencies and leverage on fixed costs. Gross Profit. For fiscal 2016, our gross profit increased $9.9 million, or 19.3%, to $61.1 million compared to $51.2 millionfor fiscal 2015. Gross margin increased to 27.6% for fiscal 2016 compared to 23.9% for fiscal 2015. The increase in grossmargin resulted primarily from the cost reductions referenced above, increased sales of higher content option packages whichincrease average margins per unit, lower warranty costs, operating leverage from increased unit sales, and our replacement oflower margin Hydra-Sports production with higher margin MasterCraft production. 42 Table of ContentsOperating Expenses. Selling and marketing expense increased $1.1 million, or 12.8%, to $9.7 million for fiscal 2016compared to $8.6 million for fiscal 2015, primarily due to investments in marketing. General and administrative expenseincreased by $10.7 million, or 57.8%, to $29.2 million for fiscal 2016 compared to $18.5 million for fiscal 2015. Thisexpected increase resulted primarily from $13.7 million of stock-based compensation and increases in costs associated withbeing a public company partially offset by the elimination of $5.7 million in transaction costs incurred during fiscal 2015related to our recapitalization activities. Operating expenses, as a percentage of net sales, increased by 4.9 percentage pointsto 17.6% for fiscal 2016 compared to 12.7% for fiscal 2015 primarily as a result of the increase in general and administrativeexpenses. Other Expense (income). Other expense (income) decreased $8.3 million, or 70.3%, to $4.7 million for fiscal 2016 comparedto $11.8 million for fiscal 2015. This decrease was driven by lower interest expense as a result of repaying all of ouroutstanding borrowings with the proceeds from our initial public offering offset by the interest expense incurred uponentering into a Second Amended and Restated Credit and Guaranty Agreement in May 2016. In connection with therepayment of our outstanding borrowings with the proceeds from our initial public offering, the Company recorded a loss ondebt extinguishment of $0.7 million in interest expense for fiscal 2016. Change in common stock warrant fair valuedecreased $3.2 million to $3.4 million for fiscal 2016 compared to $6.6 million for fiscal 2015. This decrease was a result ofall outstanding common stock warrants being exchanged or exercised for shares as of June 30, 2016. We recognized a gain of$1.2 million during fiscal 2016 upon settlement of a litigation matter. Income Tax Expense. Our income tax expense was $8.3 million for fiscal 2016, reflecting a reported effective tax rate of44.9%, which differs from the statutory federal income tax rate of 35% primarily due to permanent differences relating to thechange in fair value of the common stock warrant. Our income tax expense was $6.6 million for fiscal 2015, reflecting areported effective tax rate of 54.4%, which also differs from the statutory federal income tax rate of 35% primarily due topermanent differences relating to the change in fair value of the common stock warrant. Non-GAAP Measures We define EBITDA as earnings before interest expense, income taxes, depreciation and amortization. We define AdjustedEBITDA as EBITDA further adjusted to eliminate certain non-cash charges and other items that we do not consider to beindicative of our ongoing operations, including change in common stock warrant fair value, fees and expenses related to theour initial public offering, our stock-based compensation and the results of operations of our terminated Hydra-Sportsmanufacturing contract. We define Adjusted net income as net income adjusted to eliminate certain non-cash charges andother items that we do not consider to be indicative of our ongoing operations, including change in common stock warrantfair value, fees and expenses related to our initial public offering, our stock-based compensation and the results of operationsof our terminated Hydra-Sports manufacturing contract and an adjustment for income tax expense at a normalized annualeffective tax rate. We define Adjusted EBITDA margin as Adjusted EBITDA expressed as a percentage of MasterCraft sales.Adjusted EBITDA, Adjusted net income and Adjusted EBITDA margin are not measures of net income or operating incomeas determined under accounting principles generally accepted in the United States, which we refer to as GAAP. AdjustedEBITDA and Adjusted net income are not measures of performance in accordance with GAAP and should not be consideredas an alternative to net income or operating cash flows determined in accordance with GAAP. Additionally, AdjustedEBITDA is not intended to be a measure of cash flow for management’s discretionary use. We believe that the inclusion ofEBITDA, Adjusted EBITDA and Adjusted net income is appropriate to provide additional information to investors becausesecurities analysts, noteholders and other investors use these non GAAP financial measures to assess our operatingperformance across periods on a consistent basis and to evaluate the relative risk of an investment in our securities. We useAdjusted 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 offactors and trends affecting our business than GAAP alone measures. We believe Adjusted net income assists our board ofdirectors, management and investors in comparing our net income on a consistent basis from period to period because itremoves non-cash items and items not indicative of our ongoing operations. Adjusted EBITDA and43 Table of ContentsAdjusted net income have limitations as an analytical tool and should not be considered in isolation or as a substitute foranalysis of our results as reported under GAAP. Some of these limitations are: ·Although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will oftenhave to be replaced in the future and Adjusted EBITDA does not reflect any cash requirements for suchreplacements;·Adjusted EBITDA does not reflect our cash expenditures, or future requirements for capital expenditures orcontractual commitments;·Adjusted EBITDA does not reflect changes in, or cash requirements for, our working capital needs;·Adjusted EBITDA does not reflect our tax expense or any cash requirements to pay income taxes;·Adjusted EBITDA does not reflect interest expense, or the cash requirements necessary to service interest paymentson our indebtedness; and·Adjusted net income and Adjusted EBITDA do not reflect the impact of earnings or charges resulting from matterswe do not consider to be indicative of our ongoing operations, but may nonetheless have a material impact on ourresults of operations, including the operations related to our Hydra-Sports manufacturing contract for periods priorto its termination. In addition, because not all companies use identical calculations, our presentation of Adjusted EBITDA and Adjusted netincome may not be comparable to similarly titled measures of other companies, including companies in our industry. The following table sets forth a reconciliation of Adjusted EBITDA to net income as determined in accordance withU.S. GAAP for the periods indicated (unaudited): Fiscal Years Ended 2017 2016 2015 Net income $19,570 $10,210 $5,534 Income tax expense 11,723 8,308 6,594 Interest expense 2,222 1,280 5,171 Depreciation and amortization 3,231 3,444 3,278 EBITDA 36,746 23,242 20,577 Change in common stock warrant fair value — 3,425 6,621 Transaction expense 71 479 7,068 Litigation charge 5,948 1,606 539 Litigation settlement — (1,212) — Hydra-Sports — — (3,265) Stock-based compensation 711 13,687 — Adjusted EBITDA 43,476 41,227 31,540 Adjusted EBITDA Margin 19.0% 18.6% 15.8% (a)Represents non-cash expense related to increases in the fair market value of our common stock warrant. (b)Represents fees and expenses related to our secondary offerings, follow-on offering and initial public offering,payment of a special cash dividend in June 2016 and expenses associated with recapitalization activities completedin March 2015. (c)Represents legal and advisory fees for our litigation with Malibu Boats, LLC for fiscal 2017 and fiscal 2016, whichincludes settling the Malibu patent case in fiscal 2017 and settlement of a litigation matter for fiscal 2015. 44 (a)(b)(c)(d)(e)(f)Table of Contents(d)Represents receipt of a one-time payment to settle certain litigation matters. (e)Represents the operating income attributable to the operations of our Hydra-Sports business and the relatedmanufacturing agreement, adjusted to exclude depreciation and amortization related to Hydra-Sports. Wepreviously divested the Hydra-Sports business in June 2012, but continued to manufacture Hydra-Sports boats forthe purchaser of the business pursuant to an agreement that expired on June 30, 2015 (and which was not renewed).This adjustment was calculated by identifying the applicable cost of sales and operating expenses directlyattributable to the Hydra-Sports business for such period, excluding any corporate overhead or other shared costs. (f)We define Adjusted EBITDA margin as Adjusted EBITDA expressed as a percentage of MasterCraft sales. The following table sets forth a reconciliation of Adjusted net income to net income as determined in accordance withU.S. GAAP for the periods indicated (unaudited): Fiscal Years Ended 2017 2016 2015 Net income $19,570 $10,210 $5,534 Income tax expense 11,723 8,308 6,594 Change in common stock warrant fair value — 3,425 6,621 Transaction expense 71 479 7,068 Litigation charge 5,948 1,606 539 Litigation settlement — (1,212) — Hydra-Sports — — (3,265) Stock-based compensation 711 13,687 — Adjusted net income before income taxes 38,023 36,503 23,091 Adjusted income tax expense 13,688 13,141 8,313 Adjusted net income $24,335 $23,362 $14,778 Pro-forma Adjusted net income per common share Basic 1.31 1.28 0.86 Diluted 1.30 1.24 0.79 Pro-forma weighted average shares used for the computation of: Basic Adjusted net income per share 18,597,357 18,283,755 17,210,429 Diluted Adjusted net income per share 18,711,089 18,772,373 18,822,858 (a)Represents non-cash expense related to increases in the fair market value of our common stock warrant. (b)Represents fees and expenses related to our secondary offerings, follow-on offering and initial public offering,payment of a special cash dividend in June 2016 and expenses associated with recapitalization activities completedin March 2015. (c)Represents legal and advisory fees for our litigation with Malibu Boats, LLC for fiscal 2017 and fiscal 2016, whichincludes settling the Malibu patent case in fiscal 2017 and settlement of a litigation matter for fiscal 2015. (d)Represents receipt of a one-time payment to settle certain litigation matters. (e)Represents the operating income attributable to the operations of our Hydra-Sports business and the relatedmanufacturing agreement, adjusted to exclude depreciation and amortization related to Hydra-Sports. Wepreviously divested the Hydra-Sports business in June 2012, but continued to manufacture Hydra-Sports boats45 (a)(b)(c)(d)(e)(f)(g)(g)Table of Contentsfor the purchaser of the business pursuant to an agreement that expired on June 30, 2015 (and which was notrenewed). This adjustment was calculated by identifying the applicable cost of sales and operating expenses directlyattributable to the Hydra-Sports business for such period, excluding any corporate overhead or other shared costs. (f)Reflects income tax expense at an estimated normalized annual effective income tax rate of 36.0% for the periodspresented. (g)The weighted average shares used for computation of pro-forma basic and diluted earnings per common share giveseffect to the 26,417 shares of restricted stock awards, the 40,612 performance stock units granted under the 2015Incentive Award Plan during the fiscal year ended June 30, 2017 and 52,660 shares for the dilutive effect of stockoptions. The average of the prior quarters is used for computation of the fiscal year ended periods. The following table shows the reconciliation of earnings per diluted share to Adjusted net income per diluted pro-formaweighted average share for the periods presented: Fiscal Years Ended 2017 2016 2015 Net income per diluted share $1.05 $0.56 $0.47 Impact of adjustments: Income tax expense 0.63 0.46 0.56 Change in common stock warrant fair value - 0.19 0.56 Transaction expense - 0.03 0.60 Litigation charge 0.32 0.09 0.05 Litigation settlement - (0.07) - Hydra-Sports - - (0.28) Stock-based compensation 0.04 0.75 - Adjusted net income per diluted share before income taxes 2.04 2.01 1.96 Impact of adjusted income tax expense on net income per diluted sharebefore income taxes (0.73) (0.72) (0.71) Impact of increased share count (0.01) (0.05) (0.46) Adjusted net income per diluted pro-forma weighted average share 1.30 1.24 0.79 (a)Represents non-cash expense related to increases in the fair market value of our common stock warrant. (b)Represents fees and expenses related to our secondary offerings, follow-on offering and initial public offering,payment of a special cash dividend in June 2016 and expenses associated with recapitalization activities completedin March 2015. (c)Represents legal and advisory fees for our litigation with Malibu Boats, LLC for fiscal 2017 and fiscal 2016, whichincludes settling the Malibu patent case in fiscal 2017 and settlement of a litigation matter for fiscal 2015. (d)Represents receipt of a one-time payment to settle certain litigation matters. (e)Represents the operating income attributable to the operations of our Hydra-Sports business and the relatedmanufacturing agreement, adjusted to exclude depreciation and amortization related to Hydra-Sports. Wepreviously divested the Hydra-Sports business in June 2012, but continued to manufacture Hydra-Sports boats forthe purchaser of the business pursuant to an agreement that expired on June 30, 2015 (and which was not renewed).This adjustment was calculated by identifying the applicable cost of sales and operating expenses46 (a)(b)(c)(d)(e)(f)(g)Table of Contentsdirectly attributable to the Hydra-Sports business for such period, excluding any corporate overhead or other sharedcosts. (f)Reflects income tax expense at an estimated normalized annual effective income tax rate of 36.0% for the periodspresented. (g)Reflects impact of increased share counts giving effect to the exchange of all restricted stock awards, the vesting ofall performance stock units and for the dilutive effect of stock options included in outstanding shares. Liquidity and Capital Resources Our primary liquidity and capital resource needs are to finance working capital, fund capital expenditures, and service ourdebt. Our principal source of funds is cash generated from operating activities. As of June 30, 2017, we had borrowingavailability of $29.7 million under our Revolving Credit Facility after giving effect to our $0.3 million in outstanding lettersof credit. We believe our cash from operations, along with borrowings under our Revolving Credit Facility, will be sufficientto provide for our working capital, capital expenditures, and debt service needs for at least the next 12 months. The followingtable summarizes the cash flows from operating, investing, and financing activities: Fiscal Year Ended 2017 2016 2015 (Dollars in thousands) Total cash provided by (used in): Operating activities $26,232 $30,747 $25,254 Investing activities (4,135) (3,817) (3,477) Financing activities (18,132) (28,024) (33,149) Net increase (decrease) in cash $3,965 $(1,094) $(11,372) Operating Activities Our net cash provided by operating activities decreased by $4.5 million, or 14.7%, for fiscal 2017 compared to fiscal 2016, to$26.2 million from $30.7 million. This decrease was primarily due to a decrease in cash generated from changes in operatingassets and liabilities of $3.1 million, an increase in cash payments for interest of $1.6 million and payments of $5.9 millionfor legal and advisory fees related to our litigation with Malibu Boats, which includes a $2.5 million payment to settle theMalibu patent case, partially offset by higher net income, adjusted for non-cash items, which was driven by our improvedoperating performance as described above and a decrease in cash payments for income taxes of $3.1 million. Our net cash provided by operating activities increased by $5.5 million, or 21.8%, for fiscal 2016 compared to fiscal 2015, to$30.7 million from $25.3 million. This increase was primarily due to higher net income, adjusted for non-cash items, whichwas driven by our improved operating performance as described above and a decrease in cash payments for interest of $2.3million, partially offset by a decrease in cash generated from changes in operating assets and liabilities of $0.2 million and anincrease in cash payments for income taxes of $9.1 million. Investing Activities Net cash used in investing activities increased $0.3 million, or 8.3%, for fiscal 2017 compared to fiscal 2016. This increasewas due to increased capital expenditures driven by increased spending on product development and higher facilities andinformation technology spending. 47 Table of ContentsNet cash used in investing activities increased $0.3 million, or 9.8%, for fiscal 2016 compared to fiscal 2015. This increasewas due to increased capital expenditures driven by increased spending on product development and higher facilities andinformation technology spending. Financing Activities Net cash used in financing activities decreased by $9.9 million, or 35.3%, in fiscal 2017 compared to fiscal 2016. Thisdecrease was due primarily to payments during fiscal 2017 of $14.9 million and $3.1 million on our term loan and ourrevolving credit facility, respectively, compared to the net cash used in financing activities of $28.0 million during fiscal2016 which included proceeds obtained from our initial public offering, net of expenses, which were used to payoff existingdebt, a payment of $79.9 million for a special dividend, and the repurchase and retirement of $4.5 million in common stock. Net cash used in financing activities decreased by $5.1 million, or 15.5%, in fiscal 2016 compared to fiscal 2015. Thisdecrease was due primarily to proceeds obtained from our initial public offering, net of expenses, which were used to pay offexisting debt, partially offset by a payment of $79.9 million for a special dividend, that was funded through the proceedsobtained from our Amended Credit Facility and cash on hand, and the repurchase and retirement of $4.5 million in commonstock. Senior Secured Credit Facility. In December 2013, we entered into a credit and guaranty agreement (the “Senior SecuredCredit Facility”) with Fifth Third Bank. The Senior Secured Credit Facility, among other things, provided an initial TermLoan Facility of $25 million and a Revolving Credit Facility of $10 million. In November 2014, we entered into a first amendment to the Senior Secured Credit Facility to, among other things, increasethe Term Loan Facility to $50 million, repay all amounts outstanding under our Senior Secured PIK Notes due 2014 andextend the maturity date to November 26, 2019. In March 2015, we entered into an amended and restated credit and guaranty agreement (the “Amended and Restated CreditAgreement”) with Fifth Third Bank. The Amended and Restated Credit Agreement amended and restated the Senior SecuredCredit Facility to, among other things, increase the Term Loan Facility to $75 million and increase the commitments underthe Revolving Credit Facility to $30 million. In July 2015, we repaid all outstanding borrowings under our Term LoanFacility and our Revolving Credit Facility with the proceeds from our initial public offering and the Term Loan Facility wascanceled. In February 2016, we amended our Senior Secured Credit Facility to provide that the Company may make share repurchasesin an aggregate amount not to exceed $20 million during the period commencing February 18, 2016 and ending on the lastday of the term of the Senior Secured Credit Facility In May 2016, we entered into a Second Amended and Restated Credit and Guaranty Agreement (the “Amended CreditAgreement”) with Fifth Third Bank. The Amended Credit Agreement replaces our Amended and Restated Credit Agreementfrom March 2015. The Amended Credit Agreement provides us with an $80 million senior secured credit facility, consistingof a $50 million term loan (the “Senior Secured Term Loan”) and a $30 million revolving credit facility (the “RevolvingCredit Facility”). The term loan will mature and all remaining amounts outstanding thereunder will be due and payable onMay 26, 2021. We used the proceeds from the term loan, cash on hand and our revolving credit facility to pay a $79.9million cash dividend to common stockholders in June 2016. 48 Table of ContentsAs of June 30, 2017, the current net revolving line of credit availability was $29.7 million. Our availability under theRevolving Credit Facility was reduced by our outstanding letters of credit of $0.3 million. As of June 30, 2017, we were incompliance with all financial covenants and no event of default had occurred. Off-Balance Sheet Arrangements As of June 30, 2017, we did not have any off-balance sheet financings. Contractual Obligations As of June 30, 2017, our continuing contractual obligations were as follows: Payments Due by Period Less than More than Total 1 year 1-3 years 3-5 years 5 years (Dollars in thousands) Long-Term Debt Obligations $35,135 $3,904 $31,231 $ — $ — Interest on Long-Term Debt Obligations $4,572 $1,453 $3,025 $93 $ — Operating Lease Obligations $1,082 $484 $515 $83 $ — Purchase Obligations $4,276 $1,153 $2,653 $ — $470 Total Contractual Obligations $45,065 $6,994 $37,424 $176 $470 (1)Consists of obligations under our Senior Secured Term Loan due May 2021. (2)For purposes of this table, future interest payments are calculated based on the assumption that (a) all debtoutstanding as of June 30, 2017 remains outstanding until maturity, (b) the per annum rate of interest applicable tothe indebtedness as of June 30, 2017 remains constant until maturity, (c) any accrued and unpaid interest prior toJune 30, 2017 is excluded and (d) the unused line commitment fee, if applicable, is included at a constant rate perannum against the amount of the unused line as of June 30, 2017 through maturity. Actual borrowing levels andinterest costs may differ. (3)Consists of minimum purchase amounts under various agreements. Our dealers have arrangements with certain finance companies to provide secured floor plan financing for the purchase of ourproducts. These arrangements indirectly provide liquidity to us by financing dealer purchases of our products, therebyminimizing the use of our working capital in the form of accounts receivable. A majority of our sales are financed undersimilar arrangements, pursuant to which we receive payment within a few days of shipment of the product. We have agreed torepurchase products repossessed by the finance companies if a dealer defaults on its debt obligations to a finance companyand the boat is returned to us, subject to certain limitations. Our financial exposure under these agreements is limited to thedifference between the amounts unpaid by the dealer with respect to the repossessed product plus costs of repossession andthe amount received on the resale of the repossessed product. We have not incurred any losses from a finance companymandated repurchase since the recession. Repurchased inventory has historically been resold to other dealers atapproximately 80% to 90% of original wholesale prices, thereby avoiding significant losses. During fiscal year ended June30, 2015, we repurchased 9 units under the repurchase obligation agreement with GE Australia and all of the boatsrepurchased were re-sold. There were no boats repurchased during the fiscal years ended June 30, 2017 or June 30, 2016. Anadverse change in retail sales, however, could require us to repurchase repossessed units upon an event of default by any ofour dealers, subject in some cases to an annual limitation. See Note 13 to our audited consolidated financial statementsincluded elsewhere in this Form 10-K for more information related to our obligations under our floor plan financingagreements.49 (1)(2)(3)Table of Contents Emerging Growth Company We are an emerging growth company, as defined in the JOBS Act. For as long as we are an emerging growth company, wemay take advantage of certain exemptions from various reporting requirements that are applicable to other public companiesthat are not emerging growth companies, including, but not limited to, not being required to comply with the auditorattestation requirements of Section 404(b) of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executivecompensation in our periodic reports and proxy statements, and exemptions from the requirements of holding stockholderadvisory “say-on-pay” votes on executive compensation and stockholder advisory votes on golden parachute compensation. The JOBS Act also provides that an emerging growth company can utilize the extended transition period provided inSection 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. Pursuant to Section 107 ofthe JOBS Act, we have irrevocably chosen to opt out of such extended transition period and, as a result, we will comply withnew or revised accounting standards on the relevant dates on which adoption of such standards is required for companies thatare not “emerging growth companies.” We will continue to be an emerging growth company until the earliest to occur of (i) the last day of fiscal year during whichwe had total annual gross revenues of at least $1 billion (as indexed for inflation), (ii) June 30, 2021, which is the last day ofour fiscal year following the fifth anniversary of the date of completion of our initial public offering, (iii) the date on whichwe have, during the previous three-year period, issued more than $1 billion in non-convertible debt, or (iv) the date on whichwe are deemed to be a “large accelerated filer,” as defined under the Exchange Act. Inflation The market prices of certain materials and components used in manufacturing our products, especially resins that are madewith hydrocarbon feedstocks, copper, aluminum, and stainless steel, can be volatile. Historically, however, inflation has nothad a material effect on our results of operations. Significant increases in inflation, particularly those related to wages andincreases in the cost of raw materials, could have an adverse impact on our business, financial condition, and results ofoperations. New boat buyers often finance their purchases. Inflation typically results in higher interest rates that could translate into anincreased cost of boat ownership. Should inflation and increased interest rates occur, prospective consumers may choose toforego or delay their purchases or buy a less expensive boat in the event credit is not available to finance their boatpurchases. Critical Accounting Policies A “critical accounting policy” is one which is both important to the understanding of our financial condition and results ofoperations and requires management’s most difficult, subjective, or complex judgments, often of the need to make estimatesabout the effect of matters that are inherently uncertain. Actual results could differ from those estimates and cause ourreported net income (loss) to vary significantly from period to period. We believe that of our significant accounting policies, which are described in full in Note 3 to our audited consolidatedfinancial statements appearing elsewhere in this Form 10-K, those policies listed below involve the greatest degree ofjudgment and complexity. Accordingly, we believe these are the most critical to understand in order to evaluate fully ourfinancial condition and results of operations. 50 Table of ContentsGoodwill, Impairment, and Other Indefinite-lived Intangible Assets We test goodwill for impairment by first assessing qualitative factors to determine if it is more likely than not that the fairvalue of a reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform the two-step goodwill impairment test. In circumstances where we determine that it is more likely than not that the fair value of a reporting unit is less than itscarrying amount, goodwill is tested for impairment at the reporting unit level (operating segment or one level below anoperating segment) on an annual basis in the fourth quarter, and between annual tests if an event occurs or circumstanceschange that would more likely than not reduce the fair value of a reporting unit below its carrying value. These events orcircumstances could include a significant change in the business climate, legal factors, operating performance indicators,competition, or sale or disposition of a significant portion of a reporting unit. Application of the goodwill impairment testrequires judgment, including the identification of reporting units, assignment of assets and liabilities to reporting units,assignment of goodwill to reporting units, and determination of the fair value of each reporting unit. The fair value of eachreporting unit is estimated using the income approach, on a discounted cash flow methodology in the two-step goodwillimpairment test. This analysis requires estimation of future cash flows, which is dependent on internal forecasts, estimation ofthe long-term rate of growth for our business, estimation of the useful life over which cash flows will occur, anddetermination of our weighted-average cost of capital. The carrying value of our goodwill was $29.6 million as of June 30,2017 and 2016. The estimates used to calculate the fair value of a reporting unit change from year to year based on operating results andmarket conditions. Changes in these estimates and assumptions could materially affect the determination of fair value andgoodwill impairment for each reporting unit. Based on the analysis performed, there was no impairment through June 30,2017 and 2016. During the year ended June 30, 2013, we early adopted ASU 2012- 02, Intangibles — Goodwill and Other(Topic 350): Testing Indefinite Lived Intangible Assets for Impairment, which allows us to perform a qualitative assessmentto determine whether further impairment testing of indefinite-lived intangible assets is necessary, similar in approach togoodwill impairment testing. These qualitative factors include macroeconomics, adverse changes in legal and regulatoryenvironment, loss of key customer or vendor, change in key management, and adverse changes in business climate. Werecorded no impairment related to our indefinite-lived intangible asset through 2017 and 2016, as a result of the qualitativeassessment. Impairment of Other Long-Lived Assets We periodically evaluate long-lived assets held for use and held for sale, including intangible assets with finite lives whichconsist of a dealer network, developed technologies, software, and order backlog, whenever events or changes incircumstances indicate that the carrying amount of those assets may not be recoverable. Assets are grouped and evaluated forimpairment at the lowest level of which there are identifiable cash flows, which is generally at the reporting unit level.Reporting units are reviewed for impairment using factors including, but not limited to, our future operating plans andprojected cash flows. We recognize impairment if the sum of the undiscounted future cash flows does not exceed the carryingvalue of the assets. For impaired assets, we recognize a loss equal to the difference between the net book value of the assetand its estimated fair value. Fair value is based on discounted future cash flows of the asset using a discount ratecommensurate with the risk. We did not identify any impairment indicators of such long-lived assets through 2017 and 2016. Income Taxes We are subject to income taxes in the United States of America and the United Kingdom. Our effective tax rates differ fromthe statutory rates, primarily due to changes in the valuation allowance and non-deductible expenses, as further51 Table of Contentsdescribed in the notes to our consolidated financial statements included in this Form 10-K. Our effective tax rate was 37.5%,44.9% and 54.4% in the fiscal years ended 2017, 2016 and 2015, respectively. Significant judgment is required in evaluating our uncertain tax positions and determining our provision for income taxes.Although we believe our reserves are reasonable, we cannot assure you that the final tax outcome of these matters will not bedifferent from that which is reflected in our historical income tax provisions and accruals. We adjust these reserves in light ofchanging facts and circumstances, such as the closing of a tax audit or the refinement of an estimate. To the extent that thefinal tax outcome of these matters is different than the amounts recorded, such differences will impact the provision forincome taxes in the period in which such determination is made. The provision for income taxes includes the impact ofreserve provisions and changes to reserves that are considered appropriate, as well as the related net interest. Significant judgment is also required in determining any valuation allowance recorded against deferred tax assets. Inassessing the need for a valuation allowance, we consider all available evidence, including past operating results, estimatesof future taxable income, and the feasibility of tax planning strategies. In the event that we change our determination as tothe amount of deferred tax assets that can be realized, we will adjust our valuation allowance with a corresponding impact tothe provision for income taxes in the period in which such determination is made. Realization of our deferred tax assets is dependent on generating sufficient taxable income in future periods. If future eventscause us to conclude that it is not more likely than not that we will be able to recover the value of our deferred tax assets, weare required to establish a valuation allowance on deferred tax assets at that time. Revenue Recognition We generally manufacture products based on specific orders from dealers and ship completed products only aftercollectability has been assured. Typically, this involves receiving credit approval from third-party financial institutions orthose participating in floor plan financing programs. In some cases, boats are shipped “cash in advance” where third-partycredit is unavailable. Revenue associated with sales to dealers is primarily recorded when all of the following conditionshave been met: ·an order for a product has been received; ·a common carrier signs the delivery ticket accepting responsibility for the product; and ·the product is removed from our property for delivery. If these conditions are generally met, then title passes. Our shipping terms specify that title and risk of loss transfer to thedealer when the boat leaves our facility. Dealers generally have no rights to return unsold boats. From time to time, however, we may accept returns in limitedcircumstances and at our discretion under our warranty policy, which generally limits returns to instances of manufacturingdefects. We estimate the costs that may be incurred under our basic limited warranty and record a liability in the amount ofsuch costs at the time the product revenue is recognized. We may also be obligated, in the event of default by a dealer, toaccept returns of unsold boats under our repurchase commitment to floor plan financing providers, which are able to obtainsuch boats through foreclosure. We accrue estimated losses when a loss, due to the default of one of our dealers, is determinedto be probable and the amount of the loss is reasonably estimable. Refer to Note 13 to our audited consolidated financialstatements included elsewhere in this Form 10-K for more information related to our repurchase commitment obligations. Revenue from boat part sales is recorded as the product is shipped from our location, which is free on board shipping point.52 Table of Contents Rebates, Promotions, Floor Plan Financing, and Incentives We provide for various structured dealer rebate and sales promotions incentives, which are most often recognized as areduction in net sales, at the time of sale to the dealer. Dealer rebate and sales promotions incentives are based on actualwholesale rebate and applicable sales promotion expenses at the time of sale to the dealer. Examples of such programsinclude seasonal discounts, volume commitment rebates and other allowances. Rebates may apply to boats already in dealer inventory. These “retail rebates” on boats in the dealer’s inventory are recordedwhen the rebate is communicated to the dealer. Retail rebates are estimated based on current programs and historicalachievement and/or usage rates. Actual results may differ from these estimates if market conditions dictate the need toenhance or reduce sales promotion and incentive programs or if dealer achievement or other items vary from historical trends. Product Warranties We provide a limited warranty for a period of five years for our products. Our standard warranties require us or our dealers torepair or replace defective products during the warranty period at no cost to the consumer. We estimate the costs that may beincurred under our basic limited warranty and record as a liability the amount of such costs at the time the product revenue isrecognized. Factors that affect our warranty liability include the number of units sold, historical and anticipated rates ofwarranty claims, and cost per claim. We periodically assess the adequacy of the recorded warranty liabilities and adjust theamounts as necessary. We utilize historical trends and analytical tools to assist in determining the appropriate warrantyliability. Repurchase Agreements In connection with our dealers’ wholesale floor plan financing of boats, we have entered into repurchase agreements withvarious lending institutions. The repurchase commitment is on an individual unit basis with a term from the date it isfinanced by the lending institution through payment date by the dealer, generally not exceeding two and a half years. Suchagreements are customary in the industry and our exposure to loss under such agreements is limited by the resale value of theinventory which is required to be repurchased. We had no repurchase events during the fiscal year ended June 30, 2017 or thefiscal year ended June 30, 2016. During fiscal 2015, we repurchased nine boats under the repurchase obligation agreementwith GE Australia. ITEM 7A.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. Market risk represents the risk of changes in the value of market risk sensitive instruments caused by fluctuations in foreignexchange rates, interest rates, and commodity prices. Changes in these factors could cause fluctuations in the results of ouroperations and cash flows. In the ordinary course of business, we are primarily exposed to interest rate risks. Borrowings under our existing revolving credit facility and term loan facility are subject to changing interest rates. Althoughchanges in interest rates do not impact our results of operations, the changes could affect the fair value of our debt and relatedinterest payments. On July 22, 2015, the Company repaid all outstanding borrowings under its $75 million term loan facility and itsoutstanding borrowings under its $30 million revolving line of credit with the proceeds received from the IPO. The Companycarried no outstanding borrowings from July 22, 2015 through May 26, 2016, which is when we entered into a SecondAmended and Restated Credit and Guaranty Agreement (the “Amended Credit Agreement”), which replaced our53 Table of ContentsAmended and Restated Credit Agreement, dated March 13, 2015. The Amended Credit Agreement provides the Companywith an $80 million senior secured credit facility, consisting of a $50 million term loan and a $30 million revolving creditfacility. Therefore, the Company had outstanding borrowings during the entire fiscal year ended June 30, 2017. Ahypothetical 1% increase or decrease in interest rates would have resulted in a $0.5 million change to our interest expense forfiscal 2017. ITEM 8.FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. The financial statements and supplementary financial information required to be filed under this Item 8 are presented in PartIV, Item 15 of this Form 10-K and are incorporated herein by reference. ITEM 9.CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING ANDFINANCIAL DISCLOSURE. None. ITEM 9A.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 toensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act isrecorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms, and that suchinformation is accumulated and communicated to our management, including our chief executive officer and chief financialofficer, as appropriate, to allow timely decisions regarding required disclosures. Any controls and procedures, no matter howwell designed and operated, can provide only reasonable assurance of achieving the desired control objectives. As of the end of the period covered by this Form 10-K Annual Report, we carried out an evaluation under the supervision andwith the participation of our management, including our chief executive officer and chief financial officer, of theeffectiveness of our disclosure controls and procedures. Based upon this evaluation, our chief executive officer and chieffinancial officer have concluded that our disclosure controls and procedures were effective at a reasonable assurance level asof June 30, 2017. Management’s Report on Internal Control over Financial Reporting Our management is responsible for establishing and maintaining adequate internal control over financial reporting as definedin Rule 13a-15(f) under the Exchange Act. Internal control over financial reporting is a process to provide reasonableassurance regarding the reliability of our financial reporting for external purposes in accordance with accounting principlesgenerally accepted in the United States. Because of its inherent limitations, internal control over financial reporting may notprevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risk thatcontrols may become inadequate because of changes in conditions, or that the degree of compliance with the policies orprocedures may deteriorate. Our management, including our chief executive officer and chief financial officer, assessed the effectiveness of our internalcontrol over financial reporting as of June 30, 2017. In making this assessment, we used the criteria set forth by theCommittee of Sponsoring Organizations of the Treadway Commission ("COSO") in Internal Control-Integrated Framework(2013). Based on such assessment our management has concluded that, as of June 30, 2017, our internal control overfinancial reporting is effective based on those criteria. This annual report does not include an attestation report from our registered public accounting firm regarding internalcontrol over financial reporting. Management's report was not subject to attestation by our registered public accounting54 Table of Contentsfirm pursuant to rules of the SEC that permit emerging growth companies, which we are, to provide only management's reportin this annual report. Changes in Internal Control Over Financial Reporting There have been no changes in our internal control over financial reporting during the quarter ended June 30, 2017 that havematerially affected, or are reasonably likely to materially affect, our internal control over financial reporting. ITEM 9B.OTHER INFORMATION None. PART III ITEM 10.DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE. The information required by this Item 10 will be included in the Proxy Statement and is incorporated herein by reference. ITEM 11.EXECUTIVE COMPENSATION The information required by this Item 11 will be included in the Proxy Statement and is incorporated herein by reference. ITEM 12.SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT ANDRELATED STOCKHOLDER MATTERS The information required by this Item 12 will be included in the Proxy Statement and is incorporated herein by reference. ITEM 13.CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS, AND DIRECTORINDEPENDENCE The information required by this Item 13 will be included in the Proxy Statement and is incorporated herein by reference. ITEM 14.PRINCIPAL ACCOUNTANT FEES AND SERVICES. The information required by this Item 14 will be included in the Proxy Statement and is incorporated herein by reference. 55 Table of Contents PART IV ITEM 15.EXHIBITS, FINANCIAL STATEMENT SCHEDULES. a. Documents included in this report: 1. Financial Statements Report of Independent Registered Public Accounting FirmF-1 Consolidated Balance SheetsF-2 Consolidated Statements of OperationsF-3 Consolidated Statements of Stockholders' DeficitF-4 Consolidated Statements of Cash FlowsF-5 Notes to the Consolidated Financial StatementsF-6 1. Financial Statement Schedules Financial statement schedules have been omitted because they are either not required, not applicable or theinformation required to be presented is included in our financial statements and related notes. 2. Exhibits The following documents are filed as a part of this annual report on Form 10-K or are incorporated by referenceto previous filings, if so indicated: 56 Table of ContentsExhibitNo.DescriptionFormFile No.ExhibitFiling DateFiledHerewith3.1Amended and Restated Certificate of Incorporation of MCBCHoldings, Inc.10-K001-375023.19/18/15 3.2Amended and Restated By-laws of MCBC Holdings, Inc.10-K001-375023.29/18/15 4.1Common stock certificate of MCBC Holdings, Inc.S-1/A333-2038154.17/15/15 4.2Warrant to Purchase Common Stock of MCBC Holdings, Inc.dated June 30, 2009S-1/A333-2038154.26/25/15 10.1Registration Rights Agreement between MCBC Holdings,Inc. and Wayzata Opportunities Fund II, L.P.; WayzataOpportunities Fund Offshore II, L.P. and Wayzata RecoveryFund, LLC, dated July 22, 201510-K001-3750210.19/18/15 10.2†MCBC Holdings, Inc. 2010 Equity Incentive PlanS-1/A333-20381510.26/25/15 10.3†MCBC Holdings, Inc. Management Incentive Plan(terminated on February 6, 2015)S-1/A333-20381510.37/7/15 10.4†MCBC Holdings, Inc. 2015 Incentive Award PlanS-1/A333-20381510.47/15/15 10.5†Form of Restricted Stock Award Agreement and Grant Noticeunder 2015 Incentive Award Plan (employee)S-1/A333-20381510.107/1/15 10.6†Form of Stock Option Agreement and Grant Notice under2015 Incentive Award Plan (employee)S-1/A333-20381510.127/7/15 10.7†Form of Restricted Stock Award Grant Notice under 2015Incentive Award Plan (director)S-1/A333-20381510.137/7/15 10.8†Senior Executive Incentive Bonus Plan10-K001-3750210.89/18/15 10.9†Non-Employee Director Compensation PolicyS-1/A333-20381510.177/1/15 10.10†Employment Agreement between MasterCraft BoatCompany LLC and Timothy M. Oxley, dated October 3,2007S-1/A333-20381510.56/25/15 10.11†Employment Agreement between MasterCraft Boat Companyand Terry McNew, dated July 26, 2012S-1/A333-20381510.66/25/15 10.12†Employment Agreement between MCBC Holdings, Inc. andTerry McNew, effective as of July 1, 2015S-1/A333-20381510.147/7/15 10.13†Employment Agreement between MCBC Holdings, Inc. andTimothy M. Oxley, effective as of July 1, 2015S-1/A333-20381510.157/7/15 10.14†Employment Agreement between MCBC Holdings, Inc. andShane Chittum, effective as of July 1, 2015S-1/A333-20381510.167/7/15 10.15Amended and Restated Credit and Guaranty Agreementamong MasterCraft Boat Company, LLC, MasterCraftServices, Inc., MCBC Hydra Boats LLC, MasterCraftInternational Sales Administration, Inc. as borrowers andother credit parties, various lenders and Fifth Third Bank asthe agent and L/C issuer and lender dated March 13, 2015S-1/A333-20381510.76/25/15 10.16Amended and Restated Security Agreement amongMasterCraft Boat Company, LLC, MasterCraft Services, Inc.,MCBC Hydra Boats, LLC and MasterCraft InternationalSales Administration, Inc. and other grantors and Fifth ThirdBank as agent, dated March 13, 2015S-1/A333-20381510.86/25/15 10.17†Form of Indemnification Agreement for directors and officersS-1/A333-20381510.97/7/15 57 Table of Contents10.18Amendment No. 1, dated as of February 18, 2016, to theAmended and Restated Credit and Guaranty Agreementamong MasterCraft Boat Company, LLC, MasterCraftServices, Inc., MCBC Hydra Boats LLC, MasterCraftInternational Sales Administration, Inc. as borrowers andother credit parties, various lenders and Fifth Third Bank asthe agent and L/C issuer and lender8-K001-3750210.12/19/16 10.19Second Amended and Restated Credit and GuarantyAgreement, dated May 26, 2016, by and among MasterCraftBoat Company, LLC, MasterCraft Services, Inc., MCBCHydra Boats LLC, MasterCraft International SalesAdministration, Inc. as borrowers and other credit parties,various lenders and Fifth Third Bank as the agent and L/Cissuer and lender8-K001-3750210.15/27/16 10.20Amendment No. 1, dated as of August 19, 2016, to theSecond Amended and Restated Credit and GuarantyAgreement, dated May 26, 2016, by and among MasterCraftBoat Company, LLC, MasterCraft Services, Inc., MCBCHydra Boats LLC, MasterCraft International SalesAdministration, Inc. as borrowers and other credit parties,various lenders and Fifth Third Bank as the agent and L/Cissuer and lender10-K001-3750210.209/9/16 10.21†Form of Performance Stock Unit Award Agreement under2015 Incentive Award Plan8-K001-3750210.18/26/16 21.1List of subsidiaries of MCBC Holdings, Inc. *23.1Consent of BDO USA, LLP, independent registered publicaccounting firm *31.1Rule 13a-14(a)/15d-14(a) Certification of PrincipalExecutive Officer *31.2Rule 13a-14(a)/15d-14(a) Certification of Principal FinancialOfficer *32.1Section 1350 Certification of Chief Executive Officer **32.2Section 1350 Certification of Chief Financial Officer **101.INSXBRL Instance Document *101.SCHXBRL Taxonomy Extension Schema Document *101.CALXBRL Taxonomy Extension Calculation LinkbaseDocument *101.DEFXBRL Taxonomy Extension Definition Linkbase Document *101.LABXBRL Taxonomy Extension Label Linkbase Document *101.PREXBRL Taxonomy Extension Presentation LinkbaseDocument * †Indicates management contract or compensatory plan.*Filed herewith.**Furnished herewith. 58 Table of Contents SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly causedthis report to be signed on its behalf by the undersigned, thereunto duly authorized. Date: September 7, 2017MCBC HOLDINGS, INC. By:/s/ TERRY MCNEW President and Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the followingpersons on behalf of the registrant and in the capacities and on the dates indicated. Signature Title Date /s/ TERRY MCNEW President and Chief Executive Officer (PrincipalExecutive Officer) and Director Terry McNew September 7, 2017 /s/ TIMOTHY M. OXLEY Chief Financial Officer (Principal Financial andAccounting Officer), Treasurer and Secretary Timothy M. Oxley September 7, 2017 /s/ FREDERICK A. BRIGHTBILL Director Frederick A. Brightbill September 7, 2017 /s/ W. PATRICK BATTLE Director W. Patrick Battle September 7, 2017 /s/ DONALD C. CAMPION Director Donald C. Campion September 7, 2017 /s/ TJ CHUNG Director TJ Chung September 7, 2017 /s/ ROCH LAMBERT Director Roch Lambert September 7, 2017 /s/ PETER G. LEEMPUTTE Director Peter G. Leemputte September 7, 2017 59 Table of ContentsREPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM Board of Directors and StockholdersMCBC Holdings, Inc.Vonore, Tennessee We have audited the accompanying consolidated balance sheets of MCBC Holdings, Inc. as of June 30, 2017 and 2016, andthe related consolidated statements of operations, stockholders’ equity (deficit), and cash flows for each of the three years inthe period ended June 30, 2017. These financial statements are the responsibility of the Company’s management. Ourresponsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (UnitedStates). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether thefinancial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform,an audit of its internal control over financial reporting. Our audits included consideration of internal control over financialreporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose ofexpressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, weexpress no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosuresin the financial statements, assessing the accounting principles used and significant estimates made by management, as wellas evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for ouropinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financialposition of MCBC Holdings, Inc. at June 30, 2017 and 2016, and the results of its operations and its cash flows for each ofthe three years in the period ended June 30, 2017, in conformity with accounting principles generally accepted in the UnitedStates of America. /s/ BDO USA, LLP Memphis, TennesseeSeptember 7, 2017 F-1 Table of ContentsMCBC HOLDINGS, INC. AND SUBSIDIARIESCONSOLIDATED BALANCE SHEETS(Dollar amounts in thousands, except share and per share data) June 30, 2017 2016 ASSETS CURRENT ASSETS: Cash and cash equivalents $4,038 $73 Accounts receivable — net of allowances of $82 and $65, respectively 3,500 2,966 Income tax receivable — 5 Inventories — net (Note 4) 11,676 13,268 Prepaid expenses and other current assets (Note 5) 2,438 1,780 Total current assets 21,652 18,092 Property, plant and equipment — net (Note 6) 14,827 13,826 Intangible assets — net (Note 7) 16,643 16,750 Goodwill 29,593 29,593 Deferred debt issuance costs — net 481 601 Deferred income taxes (Note 2 and 11) — 3,501 Other 125 170 Total assets $83,321 $82,533 LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) CURRENT LIABILITIES: Accounts payable $11,008 $13,112 Income tax payable 780 1,108 Accrued expenses and other current liabilities (Note 8) 21,410 22,276 Current portion of long term debt, net of unamortized debt issuance costs (Note 10) 3,687 7,885 Total current liabilities 36,885 44,381 Long term debt, net of unamortized debt issuance costs (Note 10) 30,790 44,342 Deferred income taxes (Note 2 and 11) 953 — Unrecognized tax positions (Note 11) 2,932 2,189 Total liabilities 71,560 90,912 COMMITMENTS AND CONTINGENCIES (Note 13) STOCKHOLDERS' EQUITY (DEFICIT): Common stock, $.01 par value per share — authorized, 100,000,000 shares; issued andoutstanding, 18,637,445 shares at June 30, 2017 and 18,591,808 shares at June 30, 2016 186 186 Additional paid-in capital 112,945 112,375 Accumulated deficit (101,370) (120,940) Total stockholders' equity (deficit) 11,761 (8,379) Total liabilities and stockholders' equity (deficit) $83,321 $82,533 The notes form an integral part of the consolidated financial statements. F-2 Table of ContentsMCBC HOLDINGS, INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF OPERATIONS(Dollar amounts in thousands, except share and per share data) For the Years Ended June 30, 2017 2016 2015 NET SALES $228,634 $221,600 $214,386 COST OF SALES 165,158 160,521 163,220 GROSS PROFIT 63,476 61,079 51,166 OPERATING EXPENSES: Selling and marketing 9,380 9,685 8,552 General and administrative 20,474 29,162 18,472 Amortization of intangible assets 107 221 222 Total operating expenses 29,961 39,068 27,246 OPERATING INCOME 33,515 22,011 23,920 OTHER EXPENSE (INCOME): Interest expense 2,222 1,280 5,171 Change in common stock warrant fair value — 3,425 6,621 Other income — (1,212) — INCOME BEFORE INCOME TAX EXPENSE 31,293 18,518 12,128 INCOME TAX EXPENSE 11,723 8,308 6,594 NET INCOME $19,570 $10,210 $5,534 EARNINGS PER COMMON SHARE: Basic $1.05 $0.57 $0.50 Diluted $1.05 $0.56 $0.47 WEIGHTED AVERAGE SHARES USED FOR COMPUTATION OF: Basic earnings per share 18,592,885 17,849,319 11,139,000 Diluted earnings per share 18,620,708 18,257,007 11,862,699 The notes form an integral part of the consolidated financial statements. F-3 Table of ContentsMCBC HOLDINGS, INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)(Dollar amounts in thousands, except share and per share data) Additional Common Stock Paid-in Accumulated Shares Amount Capital Deficit Total Balance at July 1, 2014 11,139,000 $111 $8,841 $(12,739) $(3,787) Dividends declared — — — (44,000) (44,000) Net Income — — — 5,534 5,534 Balance at July 1, 2015 11,139,000 111 8,841 (51,205) (42,253) Sale of common stock in IPO, net of $9,309 in underwriterdiscounts, commissions and offering expenses 6,071,429 61 81,701 — 81,762 Issuance of shares of common stock warrants and options 864,946 9 12,653 — 12,662 Repurchase and retirement of common stock (378,417) (4) (4,322) — (4,326) Equity-based compensation, net of withholding taxes on equityawards 894,850 9 13,502 — 13,511 Dividends declared (79,945) (79,945) Net income — — — 10,210 10,210 Balance at June 30, 2016 18,591,808 $186 $112,375 $(120,940) $(8,379) Equity-based compensation activity 45,637 — 1,019 — 1,019 Offering costs — — (449) — (449) Net income — — — 19,570 19,570 Balance at June 30, 2017 18,637,445 $186 $112,945 $(101,370) $11,761 The notes form an integral part of the consolidated financial statements. F-4 Table of Contents MCBC HOLDINGS, INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF CASH FLOWS (Dollars amounts in thousands, except share and per share data) For the Years Ended June 30, 2017 2016 2015 CASH FLOWS FROM OPERATING ACTIVITIES: Net income $19,570 $10,210 $5,534 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 3,231 3,444 3,278 Inventory obsolescence reserve 399 359 776 Paid in kind interest — — 1,034 Deferred issuance costs 361 109 169 Stock-based compensation 711 13,687 — Loss on extinguishment of debt — 716 852 Change in common stock warrant fair value — 3,425 6,621 Unrecognized tax benefits 743 1,670 (101) Deferred income taxes 4,454 (3,923) 6,062 Net provision of doubtful accounts 17 (27) (373) Loss on disposal of fixed assets 10 1 78 Changes in operating assets and liabilities: Accounts receivable (551) (286) 2,126 Inventories 1,193 (2,086) (632) Prepaid expenses and other current assets (658) 3,348 (5,667) Income tax receivable 5 (5) — Other assets 45 (45) (45) Accounts payable (2,104) (1,697) 1,788 Income tax payable (328) 884 42 Accrued expenses and other current liabilities (866) 963 3,712 Net cash provided by operating activities 26,232 30,747 25,254 CASH FLOWS FROM INVESTING ACTIVITIES: Disposal of assets — — (10) Purchases of property and equipment (4,135) (3,817) (3,467) Net cash used in investing activities (4,135) (3,817) (3,477) CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from issuance of common stock — 91,071 — Proceeds from issuance of long-term debt — 50,000 75,000 Payments of costs directly associated with offerings (449) (7,202) — Cash paid for withholding taxes on vested stock (4) — — Excess tax benefits 312 — Principal payments on long-term debt (14,865) (71,250) (70,764) Proceeds from revolving line of credit — 9,208 20,188 Payments on revolving line of credit (3,126) (14,271) (12,000) Repurchase and retirement of common stock — (4,502) — Payments of debt discount — (923) (1,120) Payments of deferred financing costs — (300) (453) Dividends paid — (79,945) (44,000) Proceeds from exercise of common stock warrant — 90 — Net cash used in financing activities (18,132) (28,024) (33,149) NET CHANGE IN CASH AND CASH EQUIVALENTS 3,965 (1,094) (11,372) CASH AND CASH EQUIVALENTS — BEGINNING OF PERIOD 73 1,167 12,539 CASH AND CASH EQUIVALENTS — END OF PERIOD $4,038 $73 $1,167 SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Cash payments for interest $2,006 $397 $2,725 Cash payments for income taxes $6,541 $9,635 551 SIGNIFICANT NON-CASH INVESTING AND FINANCING ACTIVITIES: Payment of costs directly associated with the issuance of common stock — 2,107 — Issuance of shares of common stock warrants $ — $12,572 $ — The notes form an integral part of the consolidated financial statements. F-5 Table of ContentsMCBC HOLDINGS, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Dollars in thousands, except per share data and per unit data) 1.ORGANIZATION AND NATURE OF BUSINESS MCBC Holdings, Inc. (“MCBC” or the “Company”) was formed on January 28, 2000, as a Delaware holding company thatoperates primarily through its wholly owned subsidiaries, MasterCraft Boat Company, LLC and MCBC Hydra Boats, LLC.MCBC and its subsidiaries collectively are referred to herein as the “Company”. The Company is a designer and manufacturer of premium inboard tournament ski boats and luxury performance V-driverunabouts under the MasterCraft brand. The Company also leases a parts warehouse in the United Kingdom to expediteservice, primarily to dealers and customers in the European Union. 2.BASIS OF PRESENTATION The accompanying financial statements are prepared in accordance with accounting principles generally accepted in theUnited States of America (“U.S. GAAP”). The consolidated financial statements include the accounts of the Company and itswholly owned subsidiaries, MasterCraft Boat Company, LLC; MasterCraft Services, Inc.; MCBC Hydra Boats, LLC;MasterCraft Parts, Ltd.; and MasterCraft International Sales Administration, Inc. 3.SIGNIFICANT ACCOUNTING POLICIES Principles of Consolidation — The consolidated financial statements include the accounts of MCBC and its wholly ownedsubsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation. Use of Estimates — The preparation of the Company’s consolidated financial statements in conformity with U.S. GAAPrequires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, sales, andexpenses and related disclosures. The Company bases these estimates on historical results and various other assumptionsbelieved to be reasonable. The Company’s most significant financial statement estimates include allowances for bad debts,warranty liability, inventory allowance for obsolescence, self-insurance liability, fair value of stock options and warrant,inventory repurchase contingent obligation, uncertain tax positions, impairment of long-lived assets and intangibles subjectto amortization, impairment of goodwill and indefinite-lived intangibles, and potential litigation claims and settlements.Actual results could differ from those estimates. Revenue Recognition — The Company’s revenue is derived primarily from the sale of boats, marine parts, and accessories.Revenue is recognized in accordance with the terms of the sale, primarily upon shipment to customers, once the sales price isfixed or determinable and collectability is reasonably assured. The Company offers discounts and sales incentives thatinclude retail promotions, rebates, and floor plan reimbursement costs that are recorded as reductions of revenues in net salesin the consolidated statements of operations. The estimated liability and reduction in revenue for sales incentives is recordedat the later of when the program has been communicated to the customer or at the time of sale. Dealers generally have no rights to return unsold boats. Occasionally, the Company may accept returns in limitedcircumstances and at the Company’s discretion under its warranty policy (Note 8). The Company may be obligated, in theevent of default by a dealer, to accept returns of unsold boats under its repurchase commitment to floor financing providers,F-6 Table of ContentsMCBC HOLDINGS, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)(Dollars in thousands, except per share data and per unit data) who are able to obtain such boats through foreclosure. The Company accrues estimated losses when a loss, due to the defaultof one of its dealers, is determined to be probable and the amount of the loss is reasonably estimable. Dealer Incentives The Company provides for various structured dealer rebate and sales promotions incentives, which are recognized as areduction in net sales, at the time of sale to the dealer. Dealer rebate and sales promotions incentives are based on actualwholesale rebate and applicable sales promotion expenses at the time of sale to the dealer. Examples of such programsinclude seasonal discounts, volume commitment rebates and other allowances. Dealer rebate and sales promotion incentivesrecorded during the years ended June 30, 2017, 2016, and 2015, were $5,660, $6,701 and $5,152, respectively. Rebates may apply to boats already in dealer inventory. These “retail rebates” on boats in the dealer’s inventory are recordedwhen the rebate is communicated to the dealer. Retail rebates are estimated based on current programs and historicalachievement and/or usage rates. Actual results may differ from these estimates if market conditions dictate the need toenhance or reduce sales promotion and incentive programs or if dealer achievement or other items vary from historical trends.Retail rebates recorded during the years ended June 30, 2017, 2016, and 2015, were $5,484, $3,628 and $2,987, respectively. Accrued rebates are included in accrued expenses and other current liabilities in the accompanying consolidated balancesheets. Floor Plan Reimbursement Costs The Company participates in various programs whereby it agrees to reimburse its dealers for certain floor plan interest costsincurred by such dealers for limited periods of time, ranging up to nine months. Such costs are included as a reduction in netsales in the consolidated statements of operations and totaled $3,705, $3,472 and $2,459 for the years ended June 30, 2017,2016, and 2015, respectively. Shipping and Handling Costs — The Company includes shipping and handling costs billed to customers in net sales in theconsolidated statements of operations. The Company includes costs incurred to transport product to customers and internalhandling costs, which relate to activities to prepare goods for shipment, in cost of sales. For the years ended June 30, 2017,2016, and 2015, shipping and handling costs billed to customers totaled $4,124, $4,043 and $4,050, respectively, andshipping and handling costs included in cost of sales totaled $3,584, $3,952 and $4,461, respectively. Accounts Receivable — Accounts receivable represents amounts billed to customers under credit terms customary in itsindustry. The Company normally does not charge interest on its accounts receivable. The Company determines its allowancefor doubtful accounts by considering a number of factors, including the length of time trade accounts receivable are past due,the Company’s previous loss history, the customer’s current ability to pay its obligation to the Company, and the conditionof the general economy and the industry as a whole. The Company writes-off accounts receivable when they becomeuncollectible, and payments subsequently received on such receivables are credited to bad debt recovery. F-7 Table of ContentsMCBC HOLDINGS, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)(Dollars in thousands, except per share data and per unit data) Cash and Cash Equivalents — The Company considers all highly-liquid investments with an original maturity of threemonths or less to be cash and cash equivalents. The Company’s cash deposits are in financial institutions located inTennessee and Ohio and may at times exceed federally insured amounts. The Company had no cash equivalents at June 30,2017 and 2016. Concentrations of Credit and Business Risk — Financial instruments that potentially subject the Company toconcentrations of credit risk primarily consist of trade receivables. Credit risk on trade receivables is mitigated as a result ofthe Company’s use of trade letters of credit, dealer floor plan financing arrangements, and the geographically diversifiednature of the Company’s customer base. The Company is dependent on third-party equipment manufacturers, distributors, and dealers for certain parts and materialsutilized in the manufacturing process. In 2017, 2016, and 2015 the Company purchased all engines for its MasterCraft boatsunder a supply agreement with one vendor. Total purchases to this vendor were $31,075, $31,232 and $29,027 for 2017,2016, and 2015, respectively. Total accounts payable to this vendor were $2,291 and $2,309 as of June 30, 2017 and 2016,respectively. The Company is dependent on the ability of its suppliers to provide products on a timely basis and on favorablepricing terms. The loss of certain principal suppliers or a significant reduction in product availability from principal supplierscould have a material adverse effect on the Company. Business risk insurance is in place to mitigate the business riskassociated with sole suppliers for sudden disruptions such as those caused by natural disasters. Inventories — Inventories are valued at the lower of cost or market and are shown net of an inventory allowance in thebalance sheet. Inventory cost includes material, labor, and manufacturing overhead and is determined based on the first-in,first-out (FIFO) method. Provisions are made as necessary to reduce inventory amounts to their net realizable value or toprovide for obsolete products. Property, Plant, and Equipment — Property, plant, and equipment are recorded at historical cost less accumulateddepreciation, and depreciated on a straight-line basis over the estimated useful lives. Repairs and maintenance are charged tooperations as incurred, and expenditures for additions and improvements that increase the asset’s useful life are capitalized. Ranges of asset lives used for depreciation purposes are: Buildings and improvements 7-40years Machinery and equipment 3-7years Furniture and fixtures 3-5years Goodwill and Other Intangible Assets — The Company does not amortize goodwill and other purchased intangible assetswith indefinite lives. All of the Company’s goodwill and intangible assets relate to the MasterCraft reporting unit. TheCompany’s primary intangible assets with finite lives consist of a dealer network, developed technologies, software, andorder backlog, and are carried at their estimated fair values at the time of acquisition, less accumulated amortization.Amortization is recognized on a straight-line basis over the estimated useful lives of the respective assets (see Note 7).Intangible assets that are subject to amortization are evaluated for impairment using a process similar to that used to evaluatelong-lived assets described below.F-8 Table of ContentsMCBC HOLDINGS, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)(Dollars in thousands, except per share data and per unit data) Impairment of Goodwill and Other Intangible Assets — The Company performed a qualitative assessment of goodwill andother indefinite-lived intangible assets for the years ended June 30, 2017, 2016 and 2015 to determine if it was more likelythan not that the fair value of a reporting unit was less than its carrying amount. Based on the Company’s qualitativeassessments it was determined that there was no impairment charge related to its intangible assets during the years endedJune 30, 2017, 2016, and 2015. These assets are reviewed for impairment at least annually and whenever events or changes incircumstances indicate that the carrying value may not be recoverable. Impairment of Long-Lived Assets Other Than Indefinite-Lived Assets — The Company assesses the potential for impairmentof its long- lived assets if facts and circumstances, such as declines in sales, earnings, or cash flows or adverse changes in thebusiness climate, suggest that they may be impaired. The Company performs its review by comparing the book value of theassets to the estimated future undiscounted cash flows associated with the assets. If any impairment in the carrying value ofits long-lived assets is indicated, the assets would be adjusted to an estimate of fair value. The Company did not evaluate itslong-lived assets for impairment as of June 30, 2017 and 2016 as no triggering event occurred. Income Taxes — Income tax expense is the total of the current year income tax due or refundable and the change in deferredtax assets and liabilities. The Company records its global tax provision based on the respective tax rules and regulations forthe jurisdictions in which it operates. Deferred tax assets and liabilities are the expected future tax amounts for the temporarydifferences between carrying amounts and tax bases of assets and liabilities, computed using enacted tax rates. Valuation allowances are recorded to reduce deferred tax assets when it is more likely than not that a tax benefit will not berealized. Significant judgment is required in evaluating the need for and magnitude of appropriate valuation allowancesagainst deferred tax assets. The realization of these assets is dependent on generating future taxable income. A tax position is recognized as a benefit only if it is “more likely than not” that the tax position would be sustained in a taxexamination, with a tax examination being presumed to occur. The amount recognized is the largest amount of tax benefitthat is greater than 50% likely of being realized on examination. For tax positions not meeting the “more likely than not”test, no tax benefit is recorded. The Company recognizes interest and/or penalties related to income tax matters in income tax expense. In determining the amount of current and deferred tax the Company takes into account the impact of uncertain tax positionsand whether additional taxes, interest and penalties may be due. The Company believes that its accruals for tax liabilities areadequate for all open tax years based on its assessment of many factors, including interpretations of tax law and priorexperience. This assessment relies on estimates and assumptions and may involve a series of judgments about future events.New information may become available that causes the Company to change its judgment regarding the adequacy of existingtax liabilities; such changes to tax liabilities will have an impact on tax expense in the period that such a determination ismade. The income tax effects of the differences we identify are classified as long-term deferred tax assetsF-9 Table of ContentsMCBC HOLDINGS, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)(Dollars in thousands, except per share data and per unit data) and liabilities in our Consolidated Balance Sheets as of June 30, 2017 and June 30, 2016, following the adoption of ASU2015-17, Income Taxes during the year ended June 30, 2016. Product Warranties — The Company offers warranties on the sale of certain products for a period of up to five years andrecords an accrual for estimated future claims. Such accruals are based upon historical experience and management’sestimates of the level of future claims, and are subject to adjustment as actual claims are determined or as changes in theobligations become reasonably estimable. Such costs are included in cost of sales in the consolidated statements ofoperations. In fiscal 2014, the Company entered into a contract with an insurance company to reimburse warranty claims paidto independent boat dealerships for years two through five of the warranty period. During fiscal 2016, the Companyterminated this insurance contract. Research and Development — Research and development expenditures are expensed as incurred. The amount chargedagainst the years ended June 30, 2017, 2016, and 2015 was $3,550, $3,508 and $3,027, respectively, and is included inoperating expenses in the consolidated statements of operations. Self-Insurance — The Company is self-insured for certain losses relating to product liability claims and employee medicalclaims. The Company has purchased stop-loss coverage in order to limit its exposure to any significant levels under theseplans. Losses are accrued based upon the Company’s estimates of the aggregate liability for self-insured claims incurredusing certain actuarial assumptions followed in the insurance industry and the Company’s historical experience. Deferred Financing Costs — Certain costs incurred to obtain financing are capitalized and amortized over the term of therelated debt using the effective interest method. For the year ended June 30, 2017 the Company did not incur any deferredfinancing costs. For the years ended June 30, 2016 and 2015, the Company incurred deferred financing costs of $300 and$453, respectively. For the years ended June 30, 2017, 2016, and 2015 the Company recorded amortization of $361, $85 and$42, respectively. Stock-Based Compensation — Compensation cost is recognized for stock options issued to employees, based on the fairvalue of these awards at the date of grant. The Black-Scholes model is utilized to estimate the fair value of stock options.Compensation cost is recognized over the required service period, generally defined as the vesting period. For awards withgraded vesting, compensation cost is recognized on a straight-line basis over the requisite service period for the entire award. Common Stock Warrant — The Company accounted for its freestanding common stock warrant as a liability untilsettlement. As of June 3, 2016, all of the common stock warrants were exercised or exchanged. Changes in the estimated fairvalue of the warrant are separately stated in the consolidated statements of operations. Advertising — Advertising costs are expensed as incurred. The amount charged against operations during the years endedJune 30, 2017, 2016, and 2015, was $5,201, $5,725 and $5,521, respectively, and is included in selling and marketingexpenses in the consolidated statements of operations. F-10 Table of ContentsMCBC HOLDINGS, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)(Dollars in thousands, except per share data and per unit data) Fair Value Measurements — The Company measures its “financial” assets and liabilities and certain “non-financial” assetsand liabilities at fair value and utilizes the established framework for measuring fair value and disclosing information aboutfair value measurements. Fair value is the price received to transfer an asset or paid to transfer a liability in an orderlytransaction between market participants at the measurement date. Measuring fair value involves a hierarchy of valuationinputs used to measure fair value. This hierarchy prioritizes the inputs into three broad levels as follows: Level 1 inputs arequoted prices (unadjusted) in active markets for identical assets or liabilities; Level 2 inputs are quoted prices for similarassets and liabilities in active markets or inputs that are observable for the asset or liability, either directly or indirectly; and,Level 3 inputs are unobservable inputs in which little or no market data exists, therefore requiring a company to develop itsown valuation assumptions. Fair Value of Financial Instruments — The carrying amounts of the Company’s financial instruments, consisting of cashand cash equivalents, accounts receivable, accounts payable and other liabilities, approximate their estimated fair values dueto the relative short-term nature of the amounts. The carrying amount of debt approximates fair value due to variable interestrates at customary terms and rates the Company could obtain in current financing. Repurchase Commitments — In connection with its dealers’ wholesale floor-plan financing of boats, the Company hasentered into repurchase agreements with various lending institutions. The repurchase commitment is on an individual unitbasis with a term from the date it is financed by the lending institution through the payment date by the dealer, generally notexceeding two and a half years. The Company accrues estimated losses for obligations to repurchase inventory repossessedfrom dealerships by financial institutions when it is probable that a loss has been incurred and the amount of loss isreasonably estimable. The Company has applied these provisions to its floor plan repurchase agreements as disclosed inNotes 8 and 13. Earnings Per Common Share — Basic earnings per common share reflects reported earnings divided by the weightedaverage number of common shares outstanding. Diluted earnings per common share include the effect of dilutive stockoptions and warrant and the respective tax benefits, unless inclusion would not be dilutive. Operating Leases — The Company leases warehouse space and equipment under operating lease arrangements. Leaseagreements may include rent holidays, rent escalation clauses, and tenant improvement allowances. The Companyrecognizes scheduled rent increases on a straight-line basis over the lease term beginning with the date the Company takespossession of the leased space. Segment Information — Operating segments are identified as components of an enterprise about which discrete financialinformation is available for evaluation by the chief operating decision maker in making decisions on how to allocateresources and assess performance. The Company views its operations in two operating segments based on product brandconsisting of the MasterCraft brand and the Hydra-Sports brand. Hydra-Sports production was terminated on June 30, 2015. New Accounting Pronouncements Issued But Not Yet AdoptedIn May 2017, the Financial Accounting Standards Board (the “FASB”) issued ASU 2017-09, Compensation—StockCompensation (Topic 718): Scope of Modification Accounting. This guidance provides clarity and reduces complexityF-11 Table of ContentsMCBC HOLDINGS, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)(Dollars in thousands, except per share data and per unit data) when applying the guidance in Topic 718, Compensation—Stock Compensation to a change to the term or condition of ashare-based payment. ASU 2017-09 is effective for annual reporting periods, and interim periods therein, beginning afterDecember 15, 2017. The Company is currently evaluating the effect that the adoption of this new guidance is expected tohave on our financial position or results of operations and related disclosures.In January 2017, the FASB issued ASU 2017-04, Intangibles—Goodwill and Other (Topic 350): Simplifying the Test forGoodwill Impairment. This guidance eliminates Step 2 from the goodwill impairment test. Instead, an entity shouldrecognize an impairment charge for the amount by which the carrying value exceeds the reporting unit’s fair value, not toexceed the total amount of goodwill allocated to that reporting unit. ASU 2017-04 is effective for annual reporting periods,and interim periods therein, beginning after December 15, 2019. The Company is currently evaluating the effect that theadoption of this new guidance is expected to have on our financial position or results of operations and related disclosures. In May 2014, the FASB and International Accounting Standards Board jointly issued ASU 2014-09, Revenue from Contractswith Customers (Topic 606), which includes new principles-based accounting guidance for revenue recognition that willsupersede virtually all existing revenue guidance. The core principle of this guidance is that an entity should recognizerevenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration towhich the entity expects to be entitled in exchange for those goods and services. To achieve the core principle, the guidanceestablishes the following five steps: 1) identify the contract(s) with a customer, 2) identify the performance obligation in thecontract, 3) determine the transaction price, 4) allocate the transaction price to the performance obligations in the contract,and 5) recognize revenue when (or as) the entity satisfies a performance obligation. The guidance also details the accountingtreatment for costs to obtain or fulfill a contract. Lastly, disclosure requirements have been enhanced to provide sufficientinformation to enable users of financial statements to understand the nature, amount, timing, and uncertainty of revenue andcash flows arising from contracts with customers. In July 2015, the FASB announced that the implementation date would bedelayed by one year. During 2016, the FASB issued certain amendments to clarify and improve the implementation of theguidance in ASU 2014-09. The effective date and transition requirements for these amendments and ASU 2014-09 are nowfor annual and interim periods beginning after December 15, 2017. The Company will adopt this guidance for our fiscal yearbeginning July 1, 2018. The Company is continuing to assess the potential effects of these ASUs on its consolidated financial statements, businessprocesses, systems and controls. The Company plans to use the modified retrospective approach in applying the newstandard. Based on the Company’s progress, it expects an impact from the new standard for dealers who are offered retailpromotions which are currently recorded at the later of when the program has been communicated to the dealer or at the timeof sale. Under the new standard, the Company expects these retail promotions to be recognized at the time of sale. As a result,the Company expects a change in the timing of recording retail promotions and rebates; however, it does not expect a changein the total amount of cumulative revenue recognized for each transaction. Any potential effect of adoption of these ASUshave not yet been quantified. Additionally, the Company’s expectations may change as its implementation progresses. In August 2016, the FASB issued ASU 2016-15, Classification of Certain Cash Receipts and Cash Payments. ASU 2016-15addresses how certain cash receipts and cash payments are presented and classified in the statement of cash flows under Topic230, Statement of Cash Flow, and other Topics. ASU 2016-15 is effective for annual reporting periods, and interimF-12 Table of ContentsMCBC HOLDINGS, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)(Dollars in thousands, except per share data and per unit data) periods therein, beginning after December 15, 2017. The Company does not expect the adoption of this guidance to have amaterial impact on its consolidated financial statements. In March 2016, the FASB issued ASU 2016-09, Compensation – Stock Compensation (Topic 718): Improvements toEmployee Share-Based Payment Accounting. This guidance identifies areas for simplification involving several aspects ofaccounting for share-based payment transactions, including the income tax consequences, classification of awards as eitherequity or liabilities, an option to recognize gross stock compensation expense with actual forfeitures recognized as theyoccur, as well as certain classifications on the statement of cash flows. This ASU is effective for annual reportingperiods beginning after December 15, 2016, and interim periods within those annual periods with early adoptionpermitted. The Company is currently evaluating the impact of this new guidance, but does not expect it will have a materialimpact on its consolidated financial statements. In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). This guidance establishes a right-of-use (“ROU”)model that requires a lessee to record a ROU asset and a lease liability on the balance sheet for all leases with terms longerthan 12 months. Leases will be classified as either finance or operating, with classification affecting the pattern of expenserecognition in the income statement. The new standard is effective for fiscal years beginning after December 15, 2018,including interim periods within those fiscal years. A modified retrospective transition approach is required for lessees forcapital and operating leases existing at, or entered into after, the beginning of the earliest comparative period presented inthe financial statements, with certain practical expedients available. The Company is currently evaluating the impact thisnew guidance is expected to have on its financial position or results of operations and related disclosures. In July 2015, the FASB issued Accounting Standards Update (“ASU”) 2015-11, Simplifying the Measurement of Inventory. This ASU changes the measurement principle for inventories valued under the FIFO or weighted-average methods from thelower of cost or market to the lower of cost and net realizable value. Net realizable value is defined by the FASB as estimatedselling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal and transportation.This ASU is effective for annual reporting periods beginning after December 15, 2016, and interim periods within thoseannual periods with early adoption permitted. The Company is currently evaluating the impact of this new guidance, butdoes not expect it will have a material impact on its consolidated financial statements.There are no other recently issued accounting pronouncements that are expected to have a material impact on our financialposition or results of operations and related disclosures. F-13 Table of ContentsMCBC HOLDINGS, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)(Dollars in thousands, except per share data and per unit data) 4.INVENTORIES Inventories at June 30, 2017 and 2016 consisted of the following: 2017 2016 Raw materials and supplies $7,164 $5,420 Work in process 1,772 2,196 Finished goods 3,427 5,984 Obsolescence reserve (687) (332) Total inventories $11,676 $13,268 Activity in the obsolescence reserve was as follows for the years ended June 30, 2017 and 2016: 2017 2016 Beginning balance $(332) $(480) Charged to costs and expenses (399) (359) Disposals 44 507 Ending balance $(687) $(332) 5. PREPAID EXPENSES AND OTHER CURRENT ASSETS Prepaid expenses and other current assets at June 30, 2017 and 2016, consisted of the following: 2017 2016 Prepaid photo shoot $497 $650 Insurance 765 591 Trade show deposits 73 133 Other 1,103 406 Total prepaid expenses and other current assets $2,438 $1,780 6.PROPERTY, PLANT, AND EQUIPMENT Property, plant, and equipment — net at June 30, 2017 and 2016, consisted of the following: 2017 2016 Land and improvements $1,125 $1,125 Buildings and improvements 8,208 8,371 Machinery and equipment 16,189 17,666 Furniture and fixtures 847 1,028 Construction in progress 3,465 1,930 Total property, plant, and equipment 29,834 30,121 Less accumulated depreciation (15,007) (16,295) Property, plant, and equipment — net $14,827 $13,826 F-14 Table of ContentsMCBC HOLDINGS, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)(Dollars in thousands, except per share data and per unit data) Depreciation expense for the years ended June 30, 2017, 2016, and 2015 was $3,124, $3,223 and $3,057, respectively. 7.INTANGIBLE ASSETS As of June 30, 2017 and 2016, details of the Company’s intangible assets other than goodwill were as follows: 2017 Gross Net Carrying Accumulated Carrying Amount Amortization Amount Dealer network $1,590 $(947) $643 Total amortizable intangible assets 1,590 (947) 643 Trade names 16,000 — 16,000 Total intangible assets $17,590 $(947) $16,643 2016 Gross Net CarryingAccumulated Carrying AmountAmortization Amount Dealer network $1,590 $(840) $750 Total amortizable intangible assets 1,590 (840) 750 Trade names 16,000 — 16,000 Total intangible assets $17,590 $(840) $16,750 The amortizable intangible assets reflected in the table above were determined by management to have finite lives. Theuseful life for the dealer network intangible, which is 14 years, was based on the average tenure of the dealer group. The tradenames have been determined to have indefinite lives and are not being amortized, based on management’s expectation thattrade names will generate cash flows for an indefinite period. Management expects to maintain usage of the trade names onexisting products and introduce new products in the future under the trade names, thus extending their lives indefinitely. Amortization expense for the years ended June 30, 2017, 2016, and 2015, was $107, $221 and $222, respectively. Estimatedamortization expense for the five years subsequent to June 30, 2017, is shown in the following table: Fiscal years ending June 30, 2018 $107 2019 107 2020 107 2021 107 2022 107 and thereafter 108 Total $643 F-15 Table of ContentsMCBC HOLDINGS, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)(Dollars in thousands, except per share data and per unit data) 8.ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES Accrued expenses and other current liabilities at June 30, 2017 and 2016, consisted of the following: 2017 2016 Warranty $12,237 $11,392 Self-insurance 763 809 Compensation and related accruals 1,691 1,706 Inventory repurchase contingent obligation 1,008 742 Interest 1,008 1,178 Dealer incentives 2,755 4,336 Other 1,948 2,113 Total accrued expenses and other current liabilities $21,410 $22,276 The following table provides a roll forward of the accrued warranty liability for the years ended June 30, 2017 and 2016: 2017 2016 Beginning balance $11,392 $10,228 Provisions 4,723 5,461 Payments made (3,052) (4,297) Adjustments to preexisting warranties (825) — Ending balance $12,237 $11,392 Activity in dealer incentives for the years ended June 30, 2017 and 2016 was as follows: 2017 2016 Beginning balance $4,336 $3,568 Provisions 11,160 10,759 Payments made (12,741) (9,991) Ending balance $2,755 $4,336 9. FAIR VALUE MEASUREMENTS Fair value is the exchange price that would be received for an asset or paid to transfer a liability (exit price) in the principal ormost advantageous market for the asset or liability in an orderly transaction between market participants on the measurementdate. There are three levels of inputs that may be used to measure fair values: Level 1 — Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity has the ability toaccess as of the measurement date. Level 2 — Significant other observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities;quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable marketdata.F-16 Table of ContentsMCBC HOLDINGS, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)(Dollars in thousands, except per share data and per unit data) Level 3 — Significant unobservable inputs that reflect a company’s own assumptions about the assumptions that marketparticipants would use in pricing an asset or liability. When determining the fair value measurements for assets or liabilities required or permitted to be recorded at and/or markedto fair value, the Company considers the principal or most advantageous market in which it would transact and considersassumptions that market participants would use when pricing the asset or liability. When possible, the Company looks toactive and observable markets to price identical assets. When identical assets are not traded in active markets, the Companylooks to market observable data for similar assets. The following summarizes the basis used to measure certain financial assets and liabilities at fair value as of June 30, 2017: 2017 Fair Value Measurements Using Level 1 Level 2 Level 3 Asset — interest rate cap $ — $90 $ — There were no financial assets or liabilities subject to fair value measurements at June 30, 2016. The interest rate cap isvalued utilizing pricing models taking into account inputs such as interest rates and notional amounts. Fair valuemeasurements for the Company’s interest rate cap are classified under Level 2 because such measurements are based onsignificant other observable inputs. There were no transfers of assets or liabilities between Level 1 and Level 2 during thefiscal year ended June 30, 2017. The Company had issued a common stock warrant for the purchase of 1,113,900 shares of common stock which wasclassified within Level 3 because it was valued using valuation techniques using certain inputs that are unobservable in themarket. The strike price was $4.27 per share and is subject to adjustment based on stock splits, stock dividends and certainother events or transactions. The Company used an option pricing model to estimate the fair value of the warrant as of June30, 2015. Key inputs used in valuing the Company’s warrant include the Company’s common stock price (estimated using acombination of the income and market approach), the Company’s common stock price volatility, risk-free interest rate, andexercise price of the warrant. The estimated expected volatility was based on the volatility of common stock of a group ofcomparable, publicly traded companies. As of June 3, 2016 all holders of the common stock warrants had exchanged orexercised their warrants for common stock. The following table shows the reconciliation from the beginning to the ending balance for the Company’s common stockwarrant liability measured at fair value on a recurring basis using significant unobservable inputs (i.e., Level 3) at June 30,2016: 2016 Beginning balance 9,147 Issuance of shares for common stock warrant (12,572) Change in common stock warrant fair value 3,425 Ending balance — F-17 Table of ContentsMCBC HOLDINGS, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)(Dollars in thousands, except per share data and per unit data) 10. LONG-TERM DEBT Long-term debt outstanding at June 30, 2017 and 2016 is as follows: 2017 2016 Revolving credit facility $ — $3,126 Senior secured term loan 35,135 50,000 Debt issuance costs on term loan (658) (899) Total debt 34,477 52,227 Less current portion of long-term debt 3,904 8,126 Less current portion of debt issuance costs on term loan (217) (241) Long-term debt — less current portion $30,790 $44,342 In December 2013, certain of the Company’s subsidiaries entered into a credit and guaranty agreement with Fifth Third Bank,as the agent and letter of credit issuer, SunTrust Bank as the syndication agent and the other lenders party thereto, the(“Senior Secured Credit Facility”). The Senior Secured Credit Facility provided, among other things, for (i) an initial termloan commitment of $25,000; and (ii) a revolving loan commitment of $10,000. In November 2014, the Company enteredinto a first amendment to the Senior Secured Credit Facility to, among other things, increase the Term Loan Facility to$50,000, repay all amounts outstanding under our Senior Secured PIK Notes due 2014 with the additional borrowings underour Term Loan Facility and extend the maturity date to November 26, 2019. In March 2015, the Company entered into anAmended and Restated Credit and Guaranty Agreement (the “Amended and Restated Credit and Guaranty Agreement”)which increased the term loan commitment from $50,000 to $75,000 and increased the revolving loan to $30,000. TheCompany initially borrowed $20,000 on the revolving loan and repaid $10,000 during March 2015. The Company used$44,000 of the proceeds to pay a cash dividend to common stockholders in March 2015. The dividend per basic and dilutedcommon share was $3.95 and $3.71, respectively. In July 2015, the Company repaid all outstanding borrowings under its $75,000 term loan facility and its outstandingborrowings under its $30,000 revolving line of credit with the proceeds received from the IPO. The Company recorded a losson debt extinguishment of $716, consisting of a charge of $676 to extinguish the debt discount and $40 in unamortizeddeferred financing costs incurred under its $75,000 term loan facility. In February 2016, the Company amended its SeniorSecured Credit Facility to provide that the Company may repurchase shares in an aggregate amount not to exceed $20,000. In May 2016, the Company entered into a Second Amended and Restated Credit and Guaranty Agreement with Fifth ThirdBank, as the agent and letter of credit issuer, and the lenders party thereto (the “Amended Credit Agreement”). The AmendedCredit Agreement replaces the Company’s Amended and Restated Credit Agreement, dated March 13, 2015 (as amended inFebruary 2016. The Amended Credit Agreement provides the Company with an $80,000 senior secured credit facility,consisting of a $50,000 term loan (the “Term Loan”) and a $30,000 revolving credit facility (the “Revolving CreditFacility”). The Amended Credit Agreement bears interest, at the Company’s option, at either the prime rate plus an applicablemargin ranging from 0.75% to 1.50% or at an adjusted London Interbank Offered Rate (“LIBOR”) plus an applicable marginranging from 2.75% to 3.50%, in each case based on the Company’s senior leverage ratio. Based on the Company’s seniorleverage ratio for the fiscal year ended June 30, 2017, the applicable margin for loans accruing interest at the prime rate is0.75% and the applicable margin for loans accruing interest at LIBOR is 2.75%. The Amended CreditF-18 Table of ContentsMCBC HOLDINGS, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)(Dollars in thousands, except per share data and per unit data) Agreement is secured by a first-priority security interest in substantially all of the Company’s assets. Obligations under theAmended Credit Agreement are guaranteed by the Company and each of its domestic subsidiaries. The Amended Credit Agreement contains a number of covenants that, among other things, restrict the Company’s ability to,subject to specified exceptions, incur additional debt; incur additional liens and contingent liabilities; sell or dispose ofassets; merge with or acquire other companies; liquidate or dissolve; engage in businesses that are not in a related line ofbusiness; make loans, advances or guarantees; pay dividends or make other distributions; engage in transactions withaffiliates; and make investments. The Company is also required to maintain a specified consolidated fixed charge coverageratio and a specified total leverage ratio. The Amended Credit Agreement includes customary events of default, including,but not limited to, payment defaults, covenant defaults, breaches of representations and warranties, cross-defaults to certainindebtedness, certain events of bankruptcy and insolvency, defaults under any security documents, and a change of control.The Term Loan will mature and all remaining amounts outstanding thereunder will be due and payable on May 26, 2021.The Company used the proceeds to pay a $79,945 cash dividend to common stockholders in June 2016. The cash dividendpayment per share was $4.30 based on shares outstanding as of June 6, 2016. Under the Revolving Credit Facility, as of June 30, 2017, the Company had no borrowings and as of June 30, 2016, theCompany had borrowings of $3,126. As of June 30, 2017 and 2016, the Company had net availability of $29,750 and$26,627, respectively. Availability was reduced by outstanding letters of credit of $250 at June 30, 2017 and June 30, 2016.As of June 30, 2017 and 2016, the effective interest rate on borrowings outstanding were 3.803% and 3.559%, respectively.As of June 30, 2017 the Company was in compliance with all of its debt covenants under its Term Loan and RevolvingCredit Facility. Long-term debt maturities for the Term Loan subsequent to June 30, 2017 are as follows: Fiscal years ending June 30, 2018 $3,9042019 5,8562020 5,8562021 19,5192022 —Total $35,135 F-19 Table of ContentsMCBC HOLDINGS, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)(Dollars in thousands, except per share data and per unit data) 11. INCOME TAXES Earnings from continuing operations before income taxes and equity by jurisdiction were all in the U.S. except for a loss of$53 and income of $53 in 2017 and 2016, respectively. For the years ended June 30, the components of the provision for income taxes are as follows: For the Years Ended June 30, 2017 2016 2015 Current income tax expense: Federal $5,803 $10,530 $436 State and other 1,584 2,020 96 Benefit of operating loss carryforwards (118) (319) — Total current tax expense 7,269 12,231 532 Deferred tax expense: Federal 4,154 (3,583) 5,636 State and other 300 (340) 426 Total deferred tax expense 4,454 (3,923) 6,062 Income tax expense $11,723 $8,308 $6,594 The difference between the statutory and the effective federal tax rate for the periods below is attributable to the following: For the Years Ended June, 30 2017 2016 2015 Statutory income tax rate 35.00% 35.00% 34.00%State taxes (net of federal income tax benefit and valuation allowance) 2.83 0.41 2.73 Valuation allowance — 0.06 0.30 Tax credits (0.62) (2.82) — Other 0.04 (0.21) (2.95) Uncertain tax positions 1.93 6.06 (0.55) Permanent differences (1.72) 6.36 20.84 Effective income tax rate 37.46% 44.86% 54.37% F-20 Table of ContentsMCBC HOLDINGS, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)(Dollars in thousands, except per share data and per unit data) As of June 30, 2017 and 2016, a summary of the significant components of the Company’s deferred tax assets and liabilitieswas as follows: 2017 2016 Deferred tax assets: Warranty reserves $4,392 $4,301 Repurchase agreements 362 280 Other reserves 121 998 Unrecognized tax benefits 859 719 Stock Compensation 336 4,527 State net operating loss 130 130 Foreign net operating loss 104 117 Valuation allowance (234) (247) Total deferred tax assets 6,070 10,825 Deferred tax liabilities: Depreciation (984) (907) Intangible asset basis difference (6,037) (6,406) Other (2) (11) Total deferred tax liabilities (7,023) (7,324) Net deferred tax assets (liabilities) $(953) $3,501 2017 2016 Noncurrent deferred tax assets — 3,501 Noncurrent deferred tax liabilities (953) — Net deferred tax assets (liabilities) $(953) $3,501 The Company has state net operating loss (NOL) carryforwards of $3,013 that expire in varying years ranging from June 30,2024 to June 30, 2029, and foreign NOL carryforwards of $494 that can be carried forward indefinitely. However, theCompany determined that it is more likely than not that the benefit from these state and foreign NOL carryforwards will notbe realized. In recognition of this risk, the Company has provided a full valuation allowance on the deferred tax assetsrelating to these state and foreign NOL carryforwards. Unrecognized Tax Benefits A reconciliation of the beginning and ending amount of unrecognized tax benefits, excluding accrued amounts for interestand penalties, is as follows: 2017 2016 Balance at July 1 $2,054 $328 Additions based on tax positions related to the current year 413 623 Additions for tax positions of prior years — 1,143 Reductions for tax positions of prior years (25) (40) Balance at June 30 $2,442 $2,054 Of this total, $910 and $667 as of June 30, 2017 and 2016, respectively represent the amount of unrecognized tax benefitsthat, if recognized, would favorably affect the effective income tax rate in future periods. The total amount of interest andpenalties recorded in the consolidated statements of operations for the years ended June 30, 2017, and 2016 were a benefitF-21 Table of ContentsMCBC HOLDINGS, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)(Dollars in thousands, except per share data and per unit data) of $355 and $57, respectively. The amounts accrued for interest and penalties at June 30, 2017 and 2016 were $490 and$135 respectively. In general, it is the practice and intention of the Company to reinvest the earnings of its non-U.S. subsidiaries in thoseoperations. As of June 30, 2017, the Company has not made a provision for U.S. or additional foreign withholding taxes oninvestments in foreign subsidiaries that are indefinitely reinvested. Generally, such amounts become subject to U.S. taxationupon the remittance of dividends and under certain other circumstances. The Company and its subsidiaries are subject to U.S. federal income tax, as well as various other income state taxes andforeign income taxes. The Company is no longer subject to examination by taxing authorities for years before June 30, 2011.The Company expects the total amount of unrecognized benefits to increase by approximately $845 in the next twelvemonths. 12.STOCK-BASED COMPENSATION During fiscal year ended June 30, 2015 the Company adopted the Amended and Restated MCBC Holdings, Inc. 2015Incentive Award Plan (“2015 Plan”) in order to facilitate the grant of cash and equity incentives to non-employee directors,employees, and consultants of the Company and certain of its affiliates and to enable the Company and certain of itsaffiliates to obtain and retain the services of these individuals, which is essential to our long-term success. In July 2015, theBoard amended and restated the Company's 2015 Plan which became effective just prior to the closing of the Company’sinitial public offering to increase the shares available for issuance under the 2015 Plan from 1,518,958 shares to 2,458,633shares. The Plan provides for the grant of stock options, including incentive stock options, or ISOs, and nonqualified stockoptions, or NSOs, restricted stock, dividend equivalents, stock payments, restricted stock units, or RSUs, restricted stockawards, or RSAs, deferred stock, deferred stock units, performance awards, stock appreciation rights, or SARs, performancestock units, or PSUs, and cash awards. As of June 30, 2017, there were 1,722,190 shares available for issuance under the 2015Plan. All outstanding awards granted under the Company’s 2010 Equity Incentive Plan have vested. The Company does notintend to grant additional awards under this plan. In May 2015, the Company granted to certain employees 841,585 shares of restricted stock under the 2015 Plan. Foraccounting purposes, the vesting conditions were not probable at the time of the grant. Upon completion of the IPO, thevesting conditions had been met at which time the restricted shares had a per share fair value of $15.00, which was the initialpublic offering price. The award included performance conditions that were based on either an initial public offering or achange in control and until consummation of the event it was not considered probable for accounting purposes. In July2015, the Company granted 47,146 shares of restricted stock under the 2015 Plan to certain non-employee directors at a pershare fair value of $15.66, which was the closing price of the stock on July 24, 2015. For these restricted stock awards, theCompany recognized stock-based compensation through the vesting date on a straight-line basis over 181 days from theCompany’s initial public offering date. In April 2016, the Company granted 6,140 shares of restricted stock under the 2015Plan to certain non-employee directors at a per share fair value of $13.41, which was the closing price of the stock on April 2,2016. For these restricted stock awards, the Company recognized stock-based compensation through the vesting date of June30, 2016. In August 2016, the Company granted to certain employees 28,391 shares of RSAs under the 2015 Plan at a per share fairvalue of $11.85, which is the market value of the Company’s common stock on the grant date. The RSAs will vest in threeequal annual installments. In addition, the Company granted 10,770 RSAs under the 2015 Plan to certain non-employeedirectors for their annual equity award at a per share fair value of $11.85. In December 2016, the Company granted 5,572F-22 Table of ContentsMCBC HOLDINGS, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)(Dollars in thousands, except per share data and per unit data) RSAs under the 2015 Plan to its two new non-employee directors for their pro-rata portion of their annual equity award at aper share fair value of $13.47. In January 2017, the Company granted 1,968 RSAs under the 2015 Plan to its new non-employee directors for the pro-rata portion of their annual equity award at a per share fair value of $14.63. During the fiscalyears ended June 30, 2017 and 2016, the Company recognized $321 and $13,444, respectively, in stock-based compensationfrom RSAs. A summary of restricted stock award activity for the year ended June 30, 2017 is as follows: Number of RestrictedStock AwardsOutstanding Weighted AverageGrant Date FairValueTotal Non-vested Restricted Stock Awards at beginning of year — $ —Granted 47,131 12.22Vested (18,740) 18.94Forfeited (1,974) 19.55Total Non-vested Restricted Stock Awards at end of year 26,417 $12.22 In July 2015, the Company granted 137,786 NSOs to certain employees at an option price equal to the $15.00 per share ofthe Company’s common stock, which was the initial public offering price, which will vest in 25% increments annually oneach of the first four anniversaries of the grant date. During the fiscal year ended June 30, 2016, there were 15,146 stockoptions forfeited. During the fiscal year ended June 30, 2017 and 2016, the Company recognized $240 and $243,respectively, from these NSOs in stock-based compensation. The Company estimated the grant date fair value of stock options using the Black-Scholes pricing model assuming a risk-freeinterest rate of 1.93%, an expected term of 6.25 years, no dividend yield and a volatility rate of 56.7%. The Companydetermined that it does not have sufficient information on which to base a reasonable and supportable estimate of expectedvolatility of its share price, because they have limited or no active stock transactions with third parties. Therefore, theCompany has selected to use the calculated value method. Under this method, the Company used comparable publiccompanies to estimate expected volatility. The Company uses historical data to estimate option exercise and post-vestingtermination behavior. The risk-free interest rate for the expected term of the option is based on the U.S. Treasury yield curvein effect at the time of the grant. There was no stock-based compensation recognized for the fiscal year ended June 30, 2015. A summary of option activity for the year ending June 30, 2017 is as follows: Weighted Weighted Average Average Remaining Aggregate Exercise Contractual Intrinsic Shares Price Term (Yrs.) Value Outstanding at beginning of year 122,640 $10.70 9.1 $43 Granted — $ — — $ — Exercised (1,578) $10.70 8.1 $ — Forfeited or expired (4,734) $10.70 8.1 $ — Outstanding at end of year 116,328 $10.70 8.1 $1,030 Fully vested and exercisable at end of year — $— — $ — F-23 Table of ContentsMCBC HOLDINGS, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)(Dollars in thousands, except per share data and per unit data) A summary of option activity for the year ending June 30, 2016 is as follows: Weighted Weighted Average Average Remaining Aggregate Exercise Contractual Intrinsic Shares Price Term (Yrs.) Value Outstanding at beginning of year 86,985 $4.03 4.7 $833 Granted 137,786 $15.00 10.0 $— Exercised (86,985) $4.03 — $ — Forfeited or expired (15,146) $15.00 — $— Outstanding at end of year 122,640 $10.70 9.1 $43 Fully vested and exercisable at end of year — $— — $— Pursuant to the terms of the 2015 Plan, the exercise price of options were reduced by $4.30, the amount of the special cashdividend paid on June 10, 2016, from an exercise price of $15.00 to an exercise price of $10.70. The other terms of theoptions remain unchanged. In August 2016, the Company granted 42,587 performance stock units (“PSUs”) under its 2015 Plan to certain employees at aper share fair value of $11.85, which was the market value of the Company’s common stock on the grant date. The awardswill be earned based upon the Company’s obtainment of certain performance criteria over a three-year period. Theperformance period for the awards are a three-year period commencing July 1, 2016 and ending June 30, 2019. Followingthe determination of the Company’s achievement with respect to the performance criteria, the amount of shares awarded willbe subject to adjustment based upon the application of a total shareholder return (“TSR”) modifier. The probability ofachieving the performance criteria is assessed quarterly, and compensation expense is recognized ratably over theperformance period in accordance with ASC 718, Compensation—Stock Compensation. The Company recognized $150 instock-based compensation expense from these PSUs during the fiscal year ended June 30, 2017. A summary of performance stock award activity for the year ending June 30, 2017 is as follows: Number ofPerformance StockUnits Outstanding WeightedAverage GrantDate Fair ValueTotal Non-vested Performance Stock Units at beginning of year — $ —Granted 42,587 11.85Vested — —Forfeited (1,974) 11.85Total Non-vested Performance Stock Units at end of year 40,613 $11.85 13. COMMITMENTS AND CONTINGENCIES The Company leases equipment and warehouse space under operating lease agreements expiring through 2020. Rentalexpense was $603, $468, and $262 during the years ended June 30, 2017, 2016, and 2015, respectively. Future minimumrental payments under all non-cancelable operating leases with remaining lease terms in excess of one year at June 30, 2017,are as follows:F-24 Table of ContentsMCBC HOLDINGS, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)(Dollars in thousands, except per share data and per unit data) Fiscal years ending June 30, 2018 $484 2019 314 2020 114 2021 87 2022 72 and thereafter 11 Total $1,082 Under certain conditions, the Company is obligated to repurchase new inventory repossessed from dealerships by financialinstitutions that provide credit to boat dealerships. Under the terms of these repurchase agreements, the Company isobligated to repurchase inventory repossessed by these financial institutions for a period ranging from 18 months to30 months from the date of the original sale of the products to the respective dealers. Repossession of products by thefinancial institutions normally occurs when a dealer goes out of business or defaults with a lender. The maximum obligationof the Company under such floor plan agreements aggregated approximately $94,046 and $88,810 as of June 30, 2017 and2016, respectively. No units were repurchased for the fiscal year ended June 30, 2017 or June 30, 2016. The Companyrecorded a liability of $1,008 and $742 as of June 30, 2017 and 2016, respectively, after giving effect to proceeds anticipatedto be received from the resale of those products to alternative dealers, and taking into consideration the credit quality of thedealers. The Company is engaged in an exclusive contract with Ilmor Marine to provide engines for its MasterCraft boats. Thiscontract makes Ilmor Marine the only supplier to MasterCraft for in-board engines and expires June 30, 2019. The Companyis obligated to purchase a minimum number of engines during each model year and penalties can be assessed if the Companydoes not meet the purchase requirements. The Company did not incur any penalties related to engine purchase shortfalls forthe years ended June 30, 2017 and 2016. Estimated purchases under the agreement range from approximately $26,000 to$27,000 for each of the years ending June 30, 2018 and 2019. Future minimum purchase commitments under supply and other agreements are as follows: Fiscal years ending June 30, 2018 $1,153 2019 1,153 2020 1,500 2021 — 2022 — and thereafter 470 Total $4,276 The Company is involved in certain claims and legal actions arising in the ordinary course of business. In the opinion ofmanagement, the ultimate disposition of these matters is not expected to have a material adverse effect on the Company’sfinancial condition or results of operations. On May 2, 2017, the Company reached a resolution of its pending patent litigation with Malibu Boats. The resolution ofthe litigation included a full release of all claims and counterclaims by the parties. The resolution of the litigation alsoincluded a $2.5 million settlement charge, which is included in general and administrative expense in the accompanyingF-25 Table of ContentsMCBC HOLDINGS, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)(Dollars in thousands, except per share data and per unit data) consolidated statement of operations, and the Company entering into a license agreement related to certain of Malibu’spatents. 14. RELATED PARTY The schedule below identifies balances included in the consolidated statements of operations for the years ended June 30,2017, 2016 and 2015. 2017 2016 2015 Interest expense (Wayzata Investment Partners) — — 1,639 15. COMMON STOCK As of June 30, 2017, the Company has authorized 100,000,000 shares of common stock, par value of $0.01 per share. Holdersof common stock are each entitled to one vote for each share held of record on all matters submitted to a vote of stockholders.Holders are entitled to receive dividends when and if declared by the board of directors. In the event of liquidation,dissolution, or winding up, holders of common stock are entitled to receive a pro rata share of remaining assets available fordistribution. Initial Public Offering — On July 22, 2015, the Company completed the initial public offering of its common stock, inwhich it issued and sold 6,071,429 shares of common stock (exclusive of 910,714 shares of common stock sold by the sellingstockholders pursuant to the exercise of an over-allotment option granted to the underwriters in connection with the offering)at a public offering price of $15.00 per share after giving effect to the 11.139-for-1 stock split consummated on July 22,2015. The aggregate net proceeds received by the Company from the Company’s initial public offering were $81,762 afterdeducting $6,375 for underwriting discounts and commissions and $2,934 for offering expenses paid by the Company ofwhich $827 were paid during the year ended June 30, 2016. These condensed consolidated financial statements give effectretrospectively to the stock split consummated on July 22, 2015. On May 26, 2016, the Company declared a specialdividend of $4.30 per share which was paid on June 10, 2016. Follow-on Offering — In September 2016, the Company completed a follow-on offering of 4,600,000 shares of its commonstock held by the Selling Stockholders at a public offering price of $10.25 per share. This included 600,000 shares sold bythe Selling Stockholders pursuant to the over-allotment option granted to the underwriters, which was exercised concurrentlywith the closing of the follow-on offering. The Company received no proceeds from the follow-on offering. The Companypaid $254 for offering expenses incurred during September 2016, which are reflected as a reduction to paid-in capital. Secondary Offerings — In December 2016, the Company completed two secondary offerings for a total of 2,995,000 sharesof its common stock held by certain entities associated with Wayzata Investment Partners (collectively, the “SellingStockholders”). The public offering price for the first offering consisting of 1,495,000 shares was $13.35 per share whichincluded 195,000 shares sold by the Selling Stockholders pursuant to the over-allotment option granted to the underwriter,which was exercised concurrently with the closing of the secondary offering. The public offering price for the second offeringconsisting of 1,500,000 shares was $13.45 per share. The Company received no proceeds from the secondaryF-26 Table of ContentsMCBC HOLDINGS, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)(Dollars in thousands, except per share data and per unit data) offerings. The Company incurred $181 for offering expenses during December 2016, which are reflected as a reduction topaid-in capital. Wayzata Investment Partners has now divested of all outstanding shares of the Company’s common stockacquired in connection with the Company’s initial public offering. 16. EARNINGS PER SHARE The factors used in the earnings per share computation are as follows: 2017 2016 2015 Net income $19,570 $10,210 $5,534 Weighted average common shares — basic 18,592,885 17,849,319 11,139,000 Dilutive effect of assumed exercises of stock options 4,488 50,775 57,126 Dilutive effect of assumed restricted share awards\units 23,335 268,853 — Dilutive effect of assumed exercises of common stock warrant — 88,060 666,573 Weighted average outstanding shares — diluted 18,620,708 18,257,007 11,862,699 Basic earnings per share $1.05 $0.57 $0.50 Diluted earnings per share $1.05 $0.56 $0.47 For the year ended June 30 2017 and June 30, 2016, stock options for 91,980 and 124,020 shares of common stock,respectively, were not considered in computing diluted earnings per share because they were anti-dilutive. There were noanti-dilutive options or warrant shares excluded from the dilutive shares outstanding for the year ended June 30, 2015. 17. SEGMENT INFORMATION The Company designs, manufactures, and markets recreational performance boats and prior to July 1, 2015 had two operatingand reportable segments: MasterCraft and Hydra-Sports. The Company’s segments are defined by management’s reportingstructure, product brands, and distribution channels. The MasterCraft product brand consists of recreational performanceboats primarily used for water skiing, wakeboarding and wake surfing, and general recreational boating. The Companydistributes the MasterCraft product brand through its dealer network. The Company manufactured Hydra-Sports recreationalfishing boats under a contract manufacturing agreement with Hydra-Sports Custom Boats, LLC, an unrelated third party. Allsales related to the Hydra-Sports brand were to the unrelated third party. The Company’s chief operating decision maker(“CODM”) regularly reviews the operating performance of each product brand including measures of performance based onincome from operations. The Company considers each of the product brands to be an operating segment and has furtherconcluded that presenting disaggregated information of these two operating segments provides meaningful information ascertain economic characteristics are dissimilar as well as the characteristics of the customer base served. On June 30, 2012, the Company sold the trade name, tooling, certain machinery, and finished goods of its Hydra-Sportsbusiness to Hydra-Sports Custom Boats, LLC, an unaffiliated third party. The Company concurrently entered into anagreement with the purchaser to contract manufacture a specified number of Hydra-Sports models annually at establishedprices, using certain of the tooling and machinery assets sold to Hydra-Sports Custom Boats, LLC which remained in use bythe Company at the Company’s manufacturing facility for the duration of the manufacturing contract. This manufacturingagreement expired on June 30, 2015 and the Company did not renew it. The Company determined that this did not have amajor effect on its operations and financial results and decided to early adopt FASB issued ASUF-27 Table of ContentsMCBC HOLDINGS, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)(Dollars in thousands, except per share data and per unit data) 2014-08, Presentation of Financial Statements (Topic 205) and Property, Plant, and Equipment (Topic 360): ReportingDiscontinued Operations and Disclosures of Disposals of Components of an Entity. Sales outside of North America accounted for 9.1%, 8.6%, and 10.1% of net sales of the MasterCraft segment for the yearsended the years ended June 30, 2017, 2016, and 2015, respectively. The Company has no significant assets, concentration ofsales to individual dealers or countries outside of North America during the years ended June 30, 2017 and 2016. All sales forthe fiscal year ended June 30, 2015 in the Hydra-Sports segment were domestic. Management evaluates performance based on business segment operating income. The Company files a consolidated incometax return and does not allocate income taxes and other corporate level expenses including interest to operating segments. The Company does not maintain separate balance sheets for operating segments because this information is not consideredmeaningful for decision making as the CODM manages the business on a consolidated basis. All corporate costs are allocatedto MasterCraft. All amounts in the accompanying Consolidated Statements of Operations for the years ended June 30, 2017and 2016 pertain exclusively to the MasterCraft segment. For the year ended June 30, 2015, the operating information for the reportable segments is as follows: MasterCraft Hydra-Sports Consolidated Net sales $199,907 $14,479 $214,386 Cost of sales 150,622 12,598 163,220 Operating income 21,695 2,225 23,920 Depreciation and amortization 3,169 109 3,278 18. QUARTERLY FINANCIAL REPORTING (UNAUDITED)The following table sets forth summary quarterly financial information for the years ended June 30, 2017 and 2016. June 30 April 2 January 1 October 2 2017 2017 2017 2016 Net sales $58,325 $58,486 $51,134 $60,689 Gross profit 16,456 14,925 14,286 17,809 Operating income 10,559 4,282 7,039 11,635 Net income $6,315 $2,241 $4,031 $6,983 Basic earnings per common share $0.34 $0.12 $0.22 $0.38 Diluted earnings per common share $0.34 $0.12 $0.22 $0.38 Weighted average shares used for computation of: Basic earnings per common share 18,593,501 18,593,296 18,592,936 18,591,808 Diluted earnings per common share 18,659,246 18,625,904 18,605,078 18,592,603 F-28 Table of ContentsMCBC HOLDINGS, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)(Dollars in thousands, except per share data and per unit data) June 30 March 27 December27 September27 2016 2016 2015 2015 Net sales $53,386 $57,030 $55,203 $55,981 Gross profit 14,033 15,842 15,365 15,839 Operating income 7,698 7,513 2,780 4,020 Net income $4,769 $4,894 $1,870 $(1,323) Basic earnings per common share $0.27 $0.26 $0.10 $(0.08) Diluted earnings per common share $0.26 $0.26 $0.10 $(0.08) Weighted average shares used for computation of: Basic earnings per common share 17,849,319 18,574,887 17,998,796 16,263,793 Diluted earnings per common share 18,257,007 18,779,557 18,606,884 16,263,793 F-29Exhibit 21.1 Legal Name State of Incorporation MasterCraft Boat Company, LLCDelaware MasterCraft Services, Inc.Tennessee MCBC Hydra Boats, LLCTennessee MasterCraft Parts LimitedThe United Kingdom MasterCraft International Sales Administration, Inc.Delaware CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM MCBC Holdings, Inc. and subsidiariesVonore, TennesseeWe hereby consent to the incorporation by reference in the Registration Statements on Form S-3 (No. 333-212812) and Form S-8 (No. 333-205825) of MCBC Holdings, Inc. of our report dated September 7, 2017,relating to the consolidated financial statements which appear in this Annual Report on Form 10-K./s/ BDO USA, LLPMemphis, TennesseeSeptember 7, 2017Exhibit 31.1CERTIFICATIONSI, Terry McNew, certify that: 1. I have reviewed this Annual Report on Form 10-K of MCBC Holdings, Inc.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state amaterial fact necessary to make the statements made, in light of the circumstances under which such statements were made,not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairlypresent in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, theperiods presented in this report; 4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controlsand procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (asdefined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures tobe designed under our supervision, to ensure that material information relating to the registrant, including its consolidatedsubsidiaries, is made known to us by others within those entities, particularly during the period in which this report is beingprepared; b) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures tobe designed under our supervision, to ensure that material information relating to the registrant, including its consolidatedsubsidiaries, is made known to us by others within those entities, particularly during the period in which this report is beingprepared; c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in thisreport our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period coveredby this report based on such evaluation; and d) Disclosed in this report any change in the registrant’s internal control over financial reporting thatoccurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report)that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financialreporting; and 5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internalcontrol over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (orpersons performing the equivalent functions): a) All significant deficiencies and material weaknesses in the design or operation of internal control overfinancial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize andreport financial information; and b) Any fraud, whether or not material, that involves management or other employees who have a significantrole in the registrant’s internal control over financial reporting. Date: September 7, 2017 /s/ Terry McNew Terry McNew President and Chief Executive Officer(Principal Executive Officer) Exhibit 31.2CERTIFICATIONSI, Timothy M. Oxley, certify that: 1. I have reviewed this Annual Report on Form 10-K of MCBC Holdings, Inc.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state amaterial fact necessary to make the statements made, in light of the circumstances under which such statements were made,not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairlypresent in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, theperiods presented in this report; 4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controlsand procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (asdefined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures tobe designed under our supervision, to ensure that material information relating to the registrant, including its consolidatedsubsidiaries, is made known to us by others within those entities, particularly during the period in which this report is beingprepared; b) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures tobe designed under our supervision, to ensure that material information relating to the registrant, including its consolidatedsubsidiaries, is made known to us by others within those entities, particularly during the period in which this report is beingprepared; c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in thisreport our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period coveredby this report based on such evaluation; and d) Disclosed in this report any change in the registrant’s internal control over financial reporting thatoccurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report)that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financialreporting; and 5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internalcontrol over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (orpersons performing the equivalent functions): a) All significant deficiencies and material weaknesses in the design or operation of internal control overfinancial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize andreport financial information; and b) Any fraud, whether or not material, that involves management or other employees who have a significantrole in the registrant’s internal control over financial reporting. Date: September 7, 2017 /s/ Timothy M. Oxley Timothy M. Oxley Chief Financial Officer, Treasurer and Secretary(Principal Financial and Accounting Officer) Exhibit 32.1CERTIFICATION PURSUANT TO18 U.S.C. SECTION 1350,AS ADOPTED PURSUANT TOSECTION 906 OF THE SARBANES-OXLEY ACT OF 2002I, Terry McNew, Chief Executive Officer of MCBC Holdings, Inc. (the “Company”), hereby certify, pursuant to 18 U.S.C.§1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge: (1) The Annual Report on Form 10-K of the Company for the fiscal year ended June 30, 2017 (the “Report”) fullycomplies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and resultsof operations of the Company. September 7, 2017 /s/ Terry McNew Terry McNew President and Chief Executive Officer (PrincipalExecutive Officer) Exhibit 32.2CERTIFICATION PURSUANT TO18 U.S.C. SECTION 1350,AS ADOPTED PURSUANT TOSECTION 906 OF THE SARBANES-OXLEY ACT OF 2002I, Timothy M. Oxley, Chief Financial Officer of MCBC Holdings, Inc. (the “Company”), hereby certify, pursuant to 18 U.S.C.§1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge: (1)The Annual Report on Form 10-K of the Company for the fiscal year ended June 30, 2017 (the “Report”) fullycomplies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and (2)The information contained in the Report fairly presents, in all material respects, the financial condition and resultsof operations of the Company. September 7, 2017 /s/ Timothy M. Oxley Timothy M. Oxley Chief Financial Officer, Treasurer and Secretary(Principal Financial and Accounting Officer) 

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