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Malibu Boats, Inc. Announces Record Second Quarter Fiscal 2020 Results

Feb 06, 2020

LOUDON, Tenn., Feb. 06, 2020 (GLOBE NEWSWIRE) -- Malibu Boats, Inc. (Nasdaq: MBUU) today announced its financial results for the second quarter ended December 31, 2019.

Highlights for the Second Quarter of Fiscal Year 2020

  • Net sales increased 8.6% to $180.1 million compared to the second quarter of fiscal year 2019.
  • Unit volume increased 2.5% to 1,804 boats compared to the second quarter of fiscal year 2019.
  • Net sales per unit increased 6.0% to $99,840 per unit compared to the second quarter of fiscal year 2019.
  • Gross profit increased 4.1% to $39.9 million compared to the second quarter of fiscal year 2019.
  • Net income increased 17.3% to $17.6 million, or $0.81 per share compared to the second quarter of fiscal year 2019.
  • Adjusted EBITDA increased 4.5% to $30.7 million compared to the second quarter of fiscal year 2019.
  • Adjusted fully distributed net income increased 7.0% to $20.1 million compared to the second quarter of fiscal year 2019.
  • Adjusted fully distributed net income per share increased 8.1% to $0.93 on a fully distributed weighted average share count of 21.6 million shares of Class A Common Stock as compared to the second quarter of fiscal year 2019.

“Our momentum extended into the second fiscal quarter of 2020. We delivered strong financial and operational results driven by robust growth across our brands, and at the same time, we very successfully overcame the headwinds as a result of the UAW strike and the impact it had on our engine supply. In addition, the Malibu team’s dedication to operational excellence, coupled with our commitment to enhancing our best-in-class vertical integration initiatives, supported operating margin expansion during the quarter. Initial feedback from January boat shows supports our belief of continued healthy market conditions and underscored the strength of our model year 2020 products,” commented Jack Springer, Chief Executive Officer of Malibu Boats Inc.

“Our superior product innovation and cadence of new model introductions has propelled further market share gains across our brands during 2019. In addition, our initiatives to expand production capacity for Cobalt and Pursuit are on track, and once completed, will position us to further extend our leadership positions in these important markets. As we look to the balance of fiscal year 2020, we remain confident that we can maintain our strong track record of consistent profitable growth and increasing value for our shareholders.”

Results of Operations for the Second Quarter of Fiscal Year 2020 (Unaudited)

    Three Months Ended December 31,   Six Months Ended December 31,
    2019   2018   2019   2018
                 
    (In thousands, except unit and per unit data)
Net sales   $ 180,112     $ 165,793     $ 352,192     $ 289,276  
Cost of sales   140,244     127,478     272,323     220,460  
Gross profit   39,868     38,315     79,869     68,816  
Operating expenses:                
Selling and marketing   4,666     4,601     9,732     8,099  
General and administrative   10,078     11,232     20,746     20,203  
Amortization   1,537     1,538     3,121     2,818  
Operating income   23,587     20,944     46,270     37,696  
Other (income) expense, net:                
Other income, net   (9 )   (17 )   (19 )   (34 )
Interest expense   957     1,844     2,124     3,015  
Other expense, net   948     1,827     2,105     2,981  
Income before provision for income taxes   22,639     19,117     44,165     34,715  
Provision for income taxes   5,041     4,119     9,885     7,702  
Net income   17,598     14,998     34,280     27,013  
Net income attributable to non-controlling interest   876     741     1,699     1,458  
Net income attributable to Malibu Boats, Inc.   $ 16,722     $ 14,257     $ 32,581     $ 25,555  
                 
Unit volumes   1,804     1,760     3,531     3,276  
Net sales per unit   $ 99,840     $ 94,200     $ 99,743     $ 88,302  

Effective July 1, 2019, we revised our segment reporting to conform to changes in our internal management reporting based on our boat manufacturing operations.  Segment information has been revised for comparison purposes for all periods presented in the condensed consolidated financial statements.  We previously had four reportable segments, Malibu U.S., Malibu Australia, Cobalt and Pursuit.  We now aggregate Malibu U.S. and Malibu Australia into one reportable segment as they have similar economic characteristics and qualitative factors. As a result we now have three reportable segments, Malibu, Cobalt and Pursuit.

Comparison of the Second Quarter Ended December 31, 2019 to the Second Quarter Ended December 31, 2018

Net sales for the three months ended December 31, 2019 increased $14.3 million, or 8.6%, to $180.1 million as compared to the three months ended December 31, 2018. Unit volume for the three months ended December 31, 2019, increased 44 units, or 2.5%, to 1,804 units as compared to the three months ended December 31, 2018. The increase in net sales and unit volumes were driven primarily by increased demand for our Cobalt and Pursuit brands coupled with year-over-year price increases across all brands, partially offset by the lower average selling price of Pursuit models due to the mix of models sold.

Net sales attributable to our Malibu segment increased $7.3 million, or 8.1%, to $97.3 million for the three months ended December 31, 2019, compared to the three months ended December 31, 2018. Unit volumes attributable to our Malibu segment decreased three units for the three months ended December 31, 2019, compared to the three months ended December 31, 2018. The increase in net sales for Malibu was driven primarily by higher sales of new, more expensive models and optional features, which led to a higher net sales per unit for Malibu and Axis models partially offset by the slight decrease in overall units sold. Net sales was also impacted by year-over-year price increases on all of our Malibu and Axis models.

Net sales from our Cobalt segment increased $3.1 million, or 6.9%, to $49.0 million for the three months ended December 31, 2019, compared to the three months ended December 31, 2018.  Unit volumes attributable to Cobalt increased 16 units for the three months ended December 31, 2019 compared to the three months ended December 31, 2018. The increase in Cobalt net sales was driven by an increase in units sold and year-over-year price increases on our Cobalt models.

Net sales from our Pursuit segment increased $3.9 million, or 12.9%, to $33.8 million, for the three months ended December 31, 2019, compared to the three months ended December 31, 2018. Unit volumes attributable to Pursuit increased 31 units for the three months ended December 31, 2019 compared to the three months ended December 31, 2018. The increase in Pursuit net sales was driven by an increase in units sold and year-over-year price increases, offset by the lower average selling price due to the mix of models sold. We acquired the assets of Pursuit on October 15, 2018.

Overall consolidated net sales per unit increased 6.0% to $99,840 per unit for the three months ended December 31, 2019, compared to the three months ended December 31, 2018. Net sales per unit for our Malibu segment increased 8.4% to $88,399 per unit for the three months ended December 31, 2019, compared to the three months ended December 31, 2018, driven by higher sales of new, more expensive models and optional features and year-over-year price increases. Net sales per unit for our Cobalt segment increased 3.8% to $87,333 per unit for the three months ended December 31, 2019, compared to the three months ended December 31, 2018, driven by year-over-year price increases. Net sales per unit for Pursuit segment decreased 11.7% to $237,965 for the three months ended December 31, 2019, compared to the three months ended December 31, 2018, driven by a lower average selling price due to the mix of models sold offset slightly by year-over-year price increases.

Cost of sales for the three months ended December 31, 2019 increased $12.8 million, or 10.0%, to $140.2 million as compared to the three months ended December 31, 2018. The increase in cost of sales was driven primarily by a higher cost of sales per unit that corresponded with an increase in higher average selling price.  Cost of sales also increased due to higher volumes and costs related to the United Auto Workers' ("UAW") strike against General Motors.

Gross profit for the three months ended December 31, 2019 increased $1.6 million, or 4.1%, to $39.9 million compared to the three months ended December 31, 2018. The increase in gross profit was due mainly to contribution from higher net sales, offset by expenses related to the UAW strike.  Gross margin for the three months ended December 31, 2019 decreased 100 basis points from 23.1% to 22.1% over the same period in the prior fiscal year primarily due to $1.7 million in costs related to the UAW strike.

Selling and marketing expenses for the three months ended December 31, 2019, increased $0.1 million or 1.4% compared to the three months ended December 31, 2018. As a percentage of sales, selling and marketing expenses decreased 20 basis points compared to the same period in the prior fiscal year. General and administrative expenses for the three months ended December 31, 2019, decreased $1.2 million, or 10.3%, to $10.1 million as compared to the three months ended December 31, 2018, due primarily to acquisition related expenses for Pursuit in the three months ended December 31, 2018 offset by higher general and administrative expenses attributable to Pursuit in the three months ended December 31, 2019. As a percentage of sales, general and administrative expenses decreased 120 basis points to 5.6% for the three months ended December 31, 2019 compared to the three months ended December 31, 2018. Amortization expense for the three months ended December 31, 2019 remained flat at $1.5 million compared to the three months ended December 31, 2018.

Operating income for the second quarter of fiscal year 2020 increased to $23.6 million from $20.9 million in the second quarter of fiscal year 2019. Net income for the second quarter of fiscal year 2020 increased 17.3% to net income of $17.6 million from $15.0 million and net income margin increased to 9.7% in the second quarter of fiscal year 2020 from 9.0% in the second quarter of fiscal year 2019. Adjusted EBITDA in the second quarter of fiscal year 2020 increased 4.5% to $30.7 million from $29.4 million, while Adjusted EBITDA margin decreased to 17.0% from 17.7% in the second quarter of fiscal year 2019.

Webcast and Conference Call Information

The Company will host a webcast and conference call to discuss second quarter of fiscal year 2020 results on Thursday, February 6, 2020, at 8:30 a.m. Eastern Time. Investors and analysts can participate on the conference call by dialing (855) 433-0928 or (484) 756-4263 and using Conference ID #3799527. Alternatively, interested parties can listen to a live webcast of the conference call by logging on to the Investor Relations section on the Company’s website at http://investors.malibuboats.com. A replay of the webcast will also be archived on the Company’s website for twelve months.

About Malibu Boats, Inc.

Based in Loudon, Tennessee, Malibu Boats, Inc. (MBUU) is a leading designer, manufacturer and marketer of a diverse range of recreational powerboats, including performance sport, sterndrive and outboard boats. Malibu Boats, Inc. is the commanding market leader in the performance sport boat category through its Malibu and Axis Wake Research boat brands, the leader in the 20’ - 40’ segment of the sterndrive boat category through its Cobalt brand and in a leading position in the offshore fishing boat market with its Pursuit brand. A pre-eminent innovator in the powerboat industry, Malibu Boats, Inc. designs products that appeal to an expanding range of recreational boaters, fisherman and water sports enthusiasts whose passion for boating is a key component of their active lifestyles.

Forward Looking Statements

This press release includes forward-looking statements (as such term is defined in the Private Securities Litigation Reform Act of 1995). Forward-looking statements can be identified by such words and phrases as “believes,” “anticipates,” “expects,” “intends,” “estimates,” “may,” “will,” “should,” “continue” and similar expressions, comparable terminology or the negative thereof, and includes the statements in this press release regarding the expected momentum of our model year 2020 products, our expectation that we will extend our leadership positions in the Cobalt and Pursuit markets and our ability to provide consistent profitable growth and increasing value to our shareholders.

Forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those expressed or implied in the forward-looking statements, including, but not limited to: general industry, economic and business conditions; our ability to grow our business through acquisitions and integrate such acquisitions to fully realize their expected benefits; our reliance on our network of independent dealers and increasing competition for dealers; our large fixed cost base; intense competition within our industry; increased consumer preference for used boats or the supply of new boats by competitors in excess of demand; the successful introduction of new products; our ability to execute our manufacturing strategy successfully; the success of our engines integration strategy; and other factors affecting us detailed from time to time in our filings with the Securities and Exchange Commission. Many of these risks and uncertainties are outside our control, and there may be other risks and uncertainties which we do not currently anticipate because they relate to events and depend on circumstances that may or may not occur in the future. Although we believe that the expectations reflected in any forward-looking statements are based on reasonable assumptions at the time made, we can give no assurance that our expectations will be achieved. Undue reliance should not be placed on these forward-looking statements, which speak only as of the date hereof. We undertake no obligation (and we expressly disclaim any obligation) to update or supplement any forward-looking statements that may become untrue because of subsequent events, whether because of new information, future events, changes in assumptions or otherwise. Comparison of results for current and prior periods are not intended to express any future trends or indications of future performance, unless expressed as such, and should only be viewed as historical data.

Use and Definition of Non-GAAP Financial Measures

This release includes the following financial measures defined as non-GAAP financial measures by the SEC: Adjusted EBITDA, Adjusted EBITDA Margin, Adjusted Fully Distributed Net Income and Adjusted Fully Distributed Net Income per Share. These measures have limitations as analytical tools and should not be considered as an alternative to, or more meaningful than, net income as determined in accordance with GAAP or as an indicator of our liquidity. Our presentation of these non-GAAP financial measures should also not be construed as an inference that our results will be unaffected by unusual or non-recurring items. Our computations of these non-GAAP financial measures may not be comparable to other similarly titled measures of other companies.

We define Adjusted EBITDA as net income before interest expense, income taxes, depreciation, amortization and non-cash, non-recurring or non-operating expenses, including certain professional fees, acquisition and integration related expenses, non-cash compensation expense, expenses related to our engine development initiative and expenses related to interruption to our engine supply during the labor strike by UAW against General Motors. We define Adjusted EBITDA Margin as Adjusted EBITDA divided by net sales. Adjusted EBITDA and Adjusted EBITDA Margin are not measures of net income as determined by GAAP. Management believes Adjusted EBITDA and Adjusted EBITDA Margin allow investors to evaluate our operating performance and compare our results of operations from period to period on a consistent basis by excluding items that management does not believe are indicative of core operating performance. Management uses Adjusted EBITDA to assist in highlighting trends in our operating results without regard to our financing methods, capital structures, and non-recurring or non-operating expenses. We exclude the items listed above from net income in arriving at Adjusted EBITDA because these amounts can vary substantially from company to company within our industry depending upon accounting methods and book values of assets, capital structures, the methods by which assets were acquired and other factors.

Certain items excluded from Adjusted EBITDA are significant components in understanding and assessing a company’s financial performance, such as a company’s cost of capital and tax structure, as well as the historical costs of depreciable assets.

We define Adjusted Fully Distributed Net Income as net income attributable to Malibu Boats, Inc. (i) excluding income tax expense, (ii) excluding the effect of non-recurring or non-cash items, (iii) assuming the exchange of all LLC units into shares of Class A Common Stock, which results in the elimination of non-controlling interest in Malibu Boats Holdings, LLC (the "LLC"), and (iv) reflecting an adjustment for income tax expense on fully distributed net income before income taxes at our estimated effective income tax rate. Adjusted Fully Distributed Net Income is a non-GAAP financial measure because it represents net income attributable to Malibu Boats, Inc., before non-recurring or non-cash items and the effects of non-controlling interests in the LLC. We use Adjusted Fully Distributed Net Income to facilitate a comparison of our operating performance on a consistent basis from period to period that, when viewed in combination with our results prepared in accordance with GAAP, provides a more complete understanding of factors and trends affecting our business than GAAP measures alone. We believe Adjusted Fully Distributed Net Income assists our board of directors, management and investors in comparing our net income on a consistent basis from period to period because it removes non-cash or non-recurring items, and eliminates the variability of non-controlling interest as a result of member owner exchanges of LLC units into shares of Class A Common Stock. In addition, because Adjusted Fully Distributed Net Income is susceptible to varying calculations, the Adjusted Fully Distributed Net Income measures, as presented in this release, may differ from and may, therefore, not be comparable to similarly titled measures used by other companies.

A reconciliation of our net income as determined in accordance with GAAP to Adjusted EBITDA and Adjusted EBITDA Margin, and the numerator and denominator for our net income available to Class A Common Stock per share to Adjusted Fully Distributed Net Income per share of Class A Common Stock is provided under "Reconciliation of Non-GAAP Financial Measures".

Investor Contacts                                                      

Malibu Boats, Inc.
Wayne Wilson
Chief Financial Officer
(865) 458-5478
InvestorRelations@MalibuBoats.com

MALIBU BOATS, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) (Unaudited)
(In thousands, except share and per share data)

  Three Months Ended December 31,   Six Months Ended December 31,
 
  2019   2018   2019   2018
 
Net sales $  180,112     $  165,793   $    352,192   $    289,276
Cost of sales 140,244     127,478     272,323     220,460  
Gross profit 39,868     38,315     79,869     68,816  
Operating expenses:              
Selling and marketing 4,666     4,601     9,732     8,099  
General and administrative 10,078     11,232     20,746     20,203  
Amortization 1,537     1,538     3,121     2,818  
Operating income 23,587     20,944     46,270     37,696  
Other (income) expense, net:              
Other income, net (9 )   (17 )   (19 )   (34 )
Interest expense 957     1,844     2,124     3,015  
Other expense, net 948     1,827     2,105     2,981  
Income before provision for income taxes 22,639     19,117     44,165     34,715  
Provision for income taxes 5,041     4,119     9,885     7,702  
Net income 17,598     14,998     34,280     27,013  
Net income attributable to non-controlling interest 876     741     1,699     1,458  
Net income attributable to Malibu Boats, Inc. $ 16,722     $ 14,257     $ 32,581     $ 25,555  
               
Comprehensive income:              
Net income $ 17,598     $ 14,998     $ 34,280     $ 27,013  
Other comprehensive income (loss), net of tax:              
Change in cumulative translation adjustment 615     (367 )   (8 )   (771 )
Other comprehensive loss, net of tax 615     (367 )   (8 )   (771 )
Comprehensive income, net of tax 18,213     14,631     34,272     26,242  
Less: comprehensive income attributable to non-controlling interest, net of tax 907     723     1,699     1,416  
Comprehensive income attributable to Malibu Boats, Inc., net of tax $ 17,306     $ 13,908     $ 32,573     $ 24,826  
               
Weighted average shares outstanding used in computing net income per share:              
Basic 20,591,241     20,875,243     20,710,681     20,758,095  
Diluted 20,701,473     20,990,313     20,816,830     20,883,868  
Net income available to Class A Common Stock per share:              
Basic $ 0.81     $ 0.68     $ 1.57     $ 1.23  
Diluted $ 0.81     $ 0.68     $ 1.57     $ 1.22  

MALIBU BOATS, INC. AND SUBSIDIARIES

Condensed Consolidated Balance Sheets (Unaudited)
(In thousands, except share data)

  December 31, 2019   June 30, 2019
Assets
     
Current assets      
Cash $ 27,707     $ 27,392  
Trade receivables, net 15,637     27,961  
Inventories, net 76,783     67,768  
Prepaid expenses and other current assets 5,989     4,530  
Total current assets 126,116     127,651  
Property, plant and equipment, net 81,368     65,756  
Goodwill 51,396     51,404  
Other intangible assets, net 142,934     146,061  
Deferred tax asset 57,586     60,407  
Other assets 15,305     35  
Total assets $ 474,705     $ 451,314  
Liabilities      
Current liabilities      
Accounts payable $ 24,774     $ 21,174  
Accrued expenses 52,596     49,097  
Income taxes and tax distribution payable 494     1,469  
Payable pursuant to tax receivable agreement, current portion 3,592     3,592  
Total current liabilities 81,456     75,332  
Deferred tax liabilities 117     145  
Other liabilities 16,772     1,689  
Payable pursuant to tax receivable agreement, less current portion 50,162     50,162  
Long-term debt 93,837     113,633  
Total liabilities 242,344     240,961  
       
Stockholders' Equity      
Class A Common Stock, par value $0.01 per share, 100,000,000 shares authorized; 20,583,449 shares issued and outstanding as of December 31, 2019; 20,852,640 issued and outstanding as of June 30, 2019 204     207  
Class B Common Stock, par value $0.01 per share, 25,000,000 shares authorized; 15 shares issued and outstanding as of December 31, 2019; 15 shares issued and outstanding as of June 30, 2019      
Preferred Stock, par value $0.01 per share; 25,000,000 shares authorized; no shares issued and outstanding as of December 31, 2019 and June 30, 2019      
Additional paid in capital 103,291     113,004  
Accumulated other comprehensive loss (2,836 )   (2,828 )
Accumulated earnings 124,730     93,852  
Total stockholders' equity attributable to Malibu Boats, Inc. 225,389     204,235  
Non-controlling interest 6,972     6,118  
Total stockholders’ equity 232,361     210,353  
Total liabilities and stockholders' equity $ 474,705     $ 451,314  

MALIBU BOATS, INC. AND SUBSIDIARIES

Reconciliation of Non-GAAP Financial Measures

Reconciliation of Net Income to Non-GAAP Adjusted EBITDA and Adjusted EBITDA Margin (Unaudited):

The following table sets forth a reconciliation of net income as determined in accordance with GAAP to Adjusted EBITDA and Adjusted EBITDA Margin for the periods indicated (dollars in thousands):   

  Three Months Ended December 31,   Six Months Ended December 31,
 
  2019   2018   2019   2018
Net income $  17,598   $    14,998   $    34,280   $    27,013
Provision for income taxes 1 5,041     4,119     9,885     7,702  
Interest expense 957     1,844     2,124     3,015  
Depreciation 3,005     2,495     6,102     4,358  
Amortization 1,537     1,538     3,121     2,818  
Professional fees 2 41     383     376     383  
Acquisition and integration related expenses 3     2,552         3,909  
Stock-based compensation expense 4 813     655     1,490     1,131  
Engine development 5     787         1,939  
UAW strike impact 6 1,687         1,687      
Adjusted EBITDA $ 30,679     $ 29,371     $ 59,065     $ 52,268  
Adjusted EBITDA margin 17.0 %   17.7 %   16.8 %   18.1 %


(1 ) Provision for income taxes for the three months and six months ended December 31, 2019 reflects an increase to income tax expense of$0.9 million and $2.2 million, respectively, primarily due to increased consolidated earnings, driven by the Malibu segment.
(2 ) Represents legal and advisory fees related to our litigation with Skier's Choice, Inc.
(3 ) For the three months and six months ended December 31, 2018, represents legal and advisory fees incurred in connection with our acquisition of Pursuit on October 15, 2018 and integration costs related to our acquisitions of Pursuit and Cobalt. Integration related expenses for the three and six months ended December 31, 2018 include post-acquisition adjustments to cost of goods sold of $0.9 million for the fair value step up of Pursuit inventory acquired, most of which was sold during the second quarter of fiscal 2019.
(4 ) Represents equity-based incentives awarded to key employees under the Malibu Boats, Inc. Long-Term Incentive Plan and profit interests issued under the previously existing limited liability company agreement of the LLC.
(5 ) Represents costs incurred in connection with our vertical integration of engines including product development costs and supplier transition performance incentives.
(6 ) For the three and six months ended December 31, 2019, represents costs incurred in connection with interruption to our engine supply during the UAW strike against General Motors. We purchase engines from General Motors LLC that we then prepare for marine use for our Malibu and Axis boats. During the UAW strike, General Motors suspended delivery of engine blocks to us and we incurred costs by entering into purchase agreements with two suppliers for additional engines to supplement our inventory of engine blocks for Malibu and Axis boats.

Reconciliation of Non-GAAP Adjusted Fully Distributed Net Income (Unaudited):

The following table shows the reconciliation of the numerator and denominator for net income available to Class A Common Stock per share to Adjusted Fully Distributed Net Income per Share of Class A Common Stock for the periods presented (in thousands except share and per share data):

    Three Months Ended December 31,   Six Months Ended December 31,
 
  2019   2018   2019   2018
Reconciliation of numerator for net income available to Class A Common Stock per share to Adjusted Fully Distributed Net Income per Share of Class A Common Stock:
               
Net income attributable to Malibu Boats, Inc.   $ 16,722     $ 14,257     $ 32,581     $ 25,555  
Provision for income taxes 1   5,041     4,119     9,885     7,702  
Professional fees 2   41     383     376     383  
Acquisition and integration related expenses 3   1,074     3,688     2,147     5,798  
Fair market value adjustment for interest rate swap 4   20     129     58     132  
Stock-based compensation expense 5   813     655     1,490     1,131  
Engine development 6       787         1,939  
UAW strike impact 7   1,687         1,687      
Net income attributable to non-controlling interest 8   876     741     1,699     1,458  
Fully distributed net income before income taxes   26,274     24,759     49,923     44,098  
Income tax expense on fully distributed income before income taxes 9   6,174     5,967     11,732     10,628  
Adjusted fully distributed net income   $ 20,100     $ 18,792     $ 38,191     $ 33,470  


    Three Months Ended December 31,   Six Months Ended December 31,
    2019   2018   2019   2018
Reconciliation of denominator for net income available to Class A Common Stock per share to Adjusted Fully Distributed Net Income per Share of Class A Common Stock:                
Weighted average shares outstanding of Class A Common Stock used for basic net income per share:   20,591,241     20,875,243     20,710,681     20,758,095  
Adjustments to weighted average shares of Class A Common Stock:                
Weighted-average LLC units held by non-controlling unit holders 10   830,152     844,652     830,152     925,963  
Weighted-average unvested restricted stock awards issued to management 11   133,185     125,378     129,850     128,491  
Adjusted weighted average shares of Class A Common Stock outstanding used in computing Adjusted Fully Distributed Net Income per Share of Class A Common Stock:   21,554,578     21,845,273     21,670,683     21,812,549  

The following table shows the reconciliation of net income available to Class A Common Stock per share to Adjusted Fully Distributed Net Income per Share of Class A Common Stock for the periods presented:

    Three Months Ended December 31,   Six Months Ended December 31,
 
  2019   2018   2019   2018
Net income available to Class A Common Stock per share $    0.81   $    0.68   $    1.57   $    1.23
Impact of adjustments:                
Provision for income taxes 1   0.25     0.20     0.48     0.37  
Professional fees 2       0.02     0.02     0.02  
Acquisition and integration related expenses 3   0.05     0.18     0.10     0.28  
Fair market value adjustment for interest rate swap 4       0.01         0.01  
Stock-based compensation expense 5   0.04     0.03     0.07     0.05  
Engine development 6       0.04         0.09  
UAW strike impact 7   0.08         0.08      
Net income attributable to non-controlling interest 8   0.04     0.04     0.08     0.07  
Fully distributed net income per share before income taxes   1.27     1.20     2.40     2.12  
Impact of income tax expense on fully distributed income before income taxes 9   (0.30 )   (0.29 )   (0.57 )   (0.51 )
Impact of increased share count 12   (0.04 )   (0.05 )   (0.07 )   (0.08 )
Adjusted Fully Distributed Net Income per Share of Class A Common Stock   $ 0.93     $ 0.86     $ 1.76     $ 1.53  


(1 ) Provision for income taxes for the three months and six months ended December 31, 2019 reflects an increase to income tax expense of $0.9 million and $2.2 million, respectively, primarily due to increased consolidated earnings, driven by the Malibu segment.
(2 ) Represents legal and advisory fees related to our litigation with Skier's Choice, Inc.
(3 ) For the three months and six months ended December 31, 2019, represents amortization of intangibles acquired in connection with the acquisition of Pursuit and Cobalt. For the three and six months ended December 31, 2018, represents legal and advisory fees incurred in connection with our acquisition of Pursuit on October 15, 2018 and integration costs related to our acquisitions of Pursuit and Cobalt. Integration related expenses for the three and six months ended December 31, 2018 include post-acquisition adjustments to cost of goods sold of $0.9 million for the fair value step up of inventory acquired at Pursuit, most of which was sold during the second quarter of fiscal 2019. In addition, for the three and six months ended December 31, 2018, integration related expenses includes $0.4 million in depreciation and amortization associated with our fair value step up of property, plant and equipment and intangibles acquired in connection with the acquisition of Pursuit. Also, for the three and six months ended December 31, 2018, integration related expenses includes $0.7 million and $1.5 million, respectively, in amortization associated with our fair value step up of intangibles acquired in connection with the acquisition of Cobalt.
(4 ) Represents the change in the fair value of our interest rate swap entered into on July 1, 2015.
(5 ) Represents equity-based incentives awarded to certain of our employees under the Malibu Boats, Inc. Long-Term Incentive Plan and profit interests issued under the previously existing limited liability company agreement of the LLC.
(6 ) Represents costs incurred in connection with our vertical integration of engines including product development costs and supplier transition performance incentives.
(7 ) For the three and six months ended December 31, 2019, represents costs incurred in connection with interruption to our engine supply during the UAW strike against General Motors. We purchase engines from General Motors LLC that we then prepare for marine use for our Malibu and Axis boats. During the UAW strike, General Motors suspended delivery of engine blocks to us and we incurred costs by entering into purchase agreements with two suppliers for additional engines to supplement our inventory of engine blocks for Malibu and Axis boats.
(8 ) Reflects the elimination of the non-controlling interest in the LLC as if all LLC members had fully exchanged their LLC Units for shares of Class A Common Stock.
(9 ) Reflects income tax expense at an estimated normalized annual effective income tax rate of 23.5% and 24.1% of income before income taxes for the three months and six months ended December 31, 2019 and 2018, respectively, assuming the conversion of all LLC Units into shares of Class A Common Stock. The estimated normalized annual effective income tax rate for fiscal year 2020 is based on the federal statutory rate plus a blended state rate adjusted for the research and development tax credit, the foreign derived intangible income deduction, and foreign income taxes attributable to our Australian subsidiary.
(10 ) Represents the weighted average shares outstanding of LLC Units held by non-controlling interests assuming they were exchanged into Class A Common Stock on a one-for-one basis.
(11 ) Represents the weighted average unvested restricted stock awards included in outstanding shares during the applicable period that were convertible into Class A Common Stock and granted to members of management.
(12 ) Reflects impact of increased share counts assuming the exchange of all weighted average shares outstanding of LLC Units into shares of Class A Common Stock and the conversion of all weighted average unvested restricted stock awards included in outstanding shares granted to members of management.

 

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Source: Malibu Boats, Inc.

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