UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549



FORM 10-Q



QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the quarterly period ended March 31, 2021
or
 
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the transition period from ___________ to ___________
 
Commission file number: 001-39213
 
OneWater Marine Inc.
 (Exact name of registrant as specified in its charter)
 
Delaware
(State or other jurisdiction of incorporation or organization)
 
83-4330138
(IRS Employer Identification No.)
     
6275 Lanier Islands Parkway
Buford, Georgia
(Address of principal executive offices)
 
30518
(Zip code)

(Registrant’s telephone number, including area code): (678) 541-6300
 

Securities registered pursuant to Section 12(b) of the Exchange Act:
 
Title of Each Class
 
Trading Symbol(s)
 
Name of Each Exchange on Which Registered
Class A common stock, par value $0.01 per share
 
ONEW
 
The Nasdaq Global Market
 
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.☒ Yes ☐ No
 
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☒ Yes ☐ No
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, 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
Smaller reporting company ☒
   
Emerging growth company ☒
 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes ☒ No
 
The registrant had 10,968,152 shares of Class A common stock, par value $0.01 per share, and 4,070,872 shares of Class B common stock, par value $0.01 per share, outstanding as of April 26, 2021.



ONEWATER MARINE INC.
FORM 10-Q
FOR THE QUARTER ENDED MARCH 31, 2021
 
TABLE OF CONTENTS
 
 
Page
   
3
   
5
   
Item 1.
5
     
  5
     
  6
     
  7
     
  9
     
  10
     
Item 2.
23
     
Item 3.
39
     
Item 4.
39
     
40
   
Item 1.
40
     
Item 1A.
40
     
Item 2.
40
     
Item 3.
40
     
Item 4.
40
     
Item 5.
40
     
Item 6.
41
 
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
 
The information in this Quarterly Report on Form 10-Q includes “forward-looking statements.” All statements, other than statements of historical fact included in this Quarterly Report on Form 10-Q, regarding our strategy, future operations, financial position, estimated revenues and losses, projected costs, prospects, plans and objectives of management are forward-looking statements. When used in this Quarterly Report on Form 10-Q, the words “could,” “believe,” “anticipate,” “intend,” “estimate,” “expect,” “project” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain such identifying words. These forward-looking statements are based on our current expectations and assumptions about future events and are based on currently available information as to the outcome and timing of future events. When considering forward-looking statements, you should keep in mind the risk factors and other cautionary statements described under the headings “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Business” included in our Annual Report on Form 10-K for the year ended September 30, 2020, filed with the U.S. Securities and Exchange Commission (the “SEC”) on December 3, 2020, and under the headings “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this Quarterly Report on Form 10-Q. These forward-looking statements are based on management’s current belief, based on currently available information, as to the outcome and timing of future events.
 
Forward-looking statements may include statements about:
 

the impact of COVID-19 on our business and results of operations;
 

general economic conditions, including changes in employment levels, consumer demand, preferences and confidence levels, fuel prices, levels of discretionary income, consumer spending patterns, and uncertainty regarding the timing, pace and extent of an economic recovery in the United States;
 

economic conditions in certain geographic regions in which we primarily generate our revenue;
 

credit markets and the availability and cost of borrowed funds;
 

our business strategy, including acquisitions and same-store growth;
 

our ability to integrate acquired dealer groups;
 

our ability to maintain our relationships with manufacturers, including meeting the requirements of our dealer agreements and receiving the benefits of certain manufacturer incentives;
 

our ability to finance working capital and capital expenditures;
 

general domestic and international political and regulatory conditions, including changes in tax or fiscal policy and the effects of current restrictions on various commercial and economic activities in response to the COVID-19 pandemic;
 

global public health concerns, including the COVID-19 pandemic;
 

demand for our products and our ability to maintain acceptable pricing for our products and services, including financing, insurance and extended service contracts;
 

our operating cash flows, the availability of capital and our liquidity;
 

our future revenue, same-store sales, income, financial condition, and operating performance;
 

our ability to sustain and improve our utilization, revenue and margins;
 

competition;
 

seasonality and inclement weather such as hurricanes, severe storms, fire and floods, generally and in certain geographic regions in which we primarily generate our revenue;
 
 
effects of industry-wide supply chain challenges and our ability to manage our inventory;
 
 
our ability to retain key personnel;
 

environmental conditions and real or perceived human health or safety risks;
 

any potential tax savings we may realize as a result of our organizational structure;
 

uncertainty regarding our future operating results and profitability;
 

other risks associated with the COVID-19 pandemic including, among others, the ability to safely operate our stores, access to inventory and customer demand; and
 

plans, objectives, expectations and intentions contained in this Quarterly Report on Form 10-Q that are not historical.
 
We caution you that these forward-looking statements are subject to all of the risks and uncertainties, most of which are difficult to predict and many of which are beyond our control. Should one or more of the risks or uncertainties occur, or should underlying assumptions prove incorrect, our actual results and plans could differ materially from those expressed in any forward-looking statements. These risks include, but are not limited to, decline in demand for our products and services, the effects of the COVID-19 pandemic on the Company’s business, the seasonality and volatility of the boat industry, our acquisition strategies, the inability to comply with the financial and other covenants and metrics in our Credit Facilities, cash flow and access to capital, the timing of development expenditures and the other risks described under “Risk Factors” and discussed elsewhere in our Annual Report on Form 10-K for the year ended September 30, 2020 and in subsequent Quarterly Reports on Form 10-Q.
 
All forward-looking statements, expressed or implied, included in this Quarterly Report on Form 10-Q are expressly qualified in their entirety by this cautionary statement. This cautionary statement should also be considered in connection with any subsequent written or oral forward-looking statements that we or persons acting on our behalf may issue.
 
Any forward-looking statement that we make in this Quarterly Report on Form 10-Q speaks only as of the date of such statement. Except as otherwise required by applicable law, we disclaim any duty to update any forward-looking statements, all of which are expressly qualified by the statements in this section, to reflect events or circumstances after the date of this Quarterly Report on Form 10-Q.
 
PART I – FINANCIAL INFORMATION
 
Item 1.
Condensed Consolidated Financial Statements (Unaudited)

ONEWATER MARINE INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
($ in thousands, except par value and share data)
(Unaudited)

   
March 31,
2021
   
September 30,
2020
 
Assets
     
Current assets:
           
Cash
 
$
76,713
   
$
66,087
 
Restricted cash
   
10,769
     
2,066
 
Accounts receivable, net
   
41,005
     
18,479
 
Inventories
   
186,089
     
150,124
 
Prepaid expenses and other current assets
   
14,324
     
15,302
 
Total current assets
   
328,900
     
252,058
 
                 
Property and equipment, net
   
64,612
     
18,442
 
                 
Other assets:
               
Deposits
   
478
     
350
 
Deferred tax asset
   
13,113
     
12,854
 
Identifiable intangible assets
   
74,004
     
61,304
 
Goodwill
   
151,417
     
113,059
 
Total other assets
   
239,012
     
187,567
 
Total assets
 
$
632,524
   
$
458,067
 
                 
Liabilities and Stockholders’ Equity
               
Current liabilities:
               
Accounts payable
 
$
25,931
   
$
12,781
 
Other payables and accrued expenses
   
22,276
     
24,221
 
Customer deposits
   
39,395
     
17,280
 
Notes payable – floor plan
   
183,802
     
124,035
 
Current portion of long-term debt
   
13,995
     
7,419
 
Current portion of tax receivable agreement liability
   
306
     
-
 
Total current liabilities
   
285,705
     
185,736
 
                 
Long-term Liabilities:
               
Other long-term liabilities
   
8,634
     
1,482
 
Tax receivable agreement liability, net of current portion
   
17,560
     
15,585
 
Long-term debt, net of current portion and unamortized debt issuance costs
   
105,079
     
81,977
 
Total liabilities
   
416,978
     
284,780
 
                 
Stockholders’ Equity:
               
Preferred stock, $0.01 par value, 1,000,000 shares authorized, none issued and outstanding as of March 31, 2021 and September 30, 2020
   
-
     
-
 
Class A common stock, $0.01 par value, 40,000,000 shares authorized, 10,968,152 shares issued and outstanding as of March 31, 2021 and 10,391,661 issued and outstanding as of September 30, 2020
   
110
     
104
 
Class B common stock, $0.01 par value, 10,000,000 shares authorized, 4,070,872 shares issued and outstanding as of March 31, 2021 and 4,583,637 issued and outstanding as of September 30, 2020
   
41
     
46
 
Additional paid-in capital
   
113,088
     
105,947
 
Retained earnings
   
44,959
     
16,757
 
Total stockholders’ equity attributable to OneWater Marine Inc.
   
158,198
     
122,854
 
Equity attributable to non-controlling interests
   
57,348
     
50,433
 
Total stockholders’ equity
   
215,546
     
173,287
 
Total liabilities and stockholders’ equity
 
$
632,524
   
$
458,067
 

ONEWATER MARINE INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
($ in thousands except per share data)
(Unaudited)

   
Three Months Ended
March 31,
   
Six Months Ended
March 31,
 
   
2021
   
2020
   
2021
   
2020
 
Revenues
                 
New boat
 
$
239,654
   
$
132,719
   
$
391,482
   
$
235,571
 
Pre-owned boat
   
56,082
     
38,186
     
94,662
     
71,257
 
Finance & insurance income
   
11,789
     
8,083
     
17,752
     
12,408
 
Service, parts & other
   
22,086
     
10,975
     
39,798
     
24,425
 
Total revenues
   
329,611
     
189,963
     
543,694
     
343,661
 
                                 
Cost of sales (exclusive of depreciation and amortization shown separately below)
                               
New boat
   
187,147
     
108,254
     
309,679
     
194,209
 
Pre-owned boat
   
42,548
     
31,343
     
73,000
     
59,209
 
Service, parts & other
   
11,130
     
5,782
     
19,793
     
13,470
 
Total cost of sales
   
240,825
     
145,379
     
402,472
     
266,888
 
                                 
Selling, general and administrative expenses
   
48,348
     
32,383
     
83,208
     
60,688
 
Depreciation and amortization
   
1,378
     
791
     
2,341
     
1,551
 
Transaction costs
   
368
     
2,925
     
568
     
3,362
 
Loss on contingent consideration
   
-
     
-
     
377
     
-
 
Income from operations
   
38,692
     
8,485
     
54,728
     
11,172
 
                                 
Other expense (income)
                               
Interest expense – floor plan
   
330
     
2,525
     
1,250
     
5,184
 
Interest expense – other
   
1,215
     
2,457
     
2,139
     
4,310
 
Change in fair value of warrant liability
   
-
     
-
     
-
     
(771
)
Other expense (income), net
   
5
     
52
     
(89
)
   
65
 
Total other expense, net
   
1,550
     
5,034
     
3,300
     
8,788
 
Income before income tax expense
   
37,142
     
3,451
     
51,428
     
2,384
 
Income tax expense
   
6,550
     
472
     
9,061
     
472
 
Net income
   
30,592
     
2,979
     
42,367
     
1,912
 
Less: Net income attributable to non-controlling interests
           
103
             
350
 
Less: Net income attributable to non-controlling interests of One Water Marine Holdings, LLC
   
10,117
     
1,791
     
14,104
     
477
 
Net income attributable to OneWater Marine Inc
 
$
20,475
   
$
1,085
   
$
28,263
   
$
1,085
 
                                 
Earnings per share of Class A common stock – basic
 
$
1.88
   
$
0.18
   
$
2.61
   
$
0.18
 
Earnings per share of Class A common stock – diluted
 
$
1.83
   
$
0.18
   
$
2.55
   
$
0.18
 
                                 
Basic weighted-average shares of Class A common stock outstanding
   
10,901
     
6,088
     
10,838
     
6,088
 
Diluted weighted-average shares of Class A common stock outstanding
   
11,171
     
6,088
     
11,083
     
6,088
 

ONEWATER MARINE INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ AND MEMBERS’ EQUITY
($ in thousands)
(Unaudited)

Six Months Ended March 31, 2021     Stockholders’ and Members’ Equity  
               
Class A Common Stock
   
Class B Common Stock
                         
   
Redeemable Preferred Interest in Subsidiary
   
Members’ Equity
   
Shares
   
Amount
   
Shares
   
Amount
   
Additional Paid-in Capital
   
Retained Earnings
   
Non-
controlling Interest
   
Total
Stockholders’
and Members’
Equity
 
Balance at September 30, 2020
 
$
-
   
$
-
     
10,392
   
$
104
     
4,583
   
$
46
   
$
105,947
   
$
16,757
   
$
50,433
   
$
173,287
 
Net income
   
-
     
-
     
-
     
-
     
-
     
-
     
-
     
7,788
     
3,987
     
11,775
 
Distributions to members
   
-
     
-
     
-
     
-
     
-
     
-
     
-
     
-
     
(1,319
)
   
(1,319
)
Effect of September offering, including underwriter exercise of option to purchase shares
   
-
     
-
     
387
     
4
     
(387
)
   
(4
)
   
4,146
     
-
     
(4,256
)
   
(110
)
Exchange of B shares for A shares
   
-
     
-
     
88
     
1
     
(88
)
   
(1
)
   
916
     
-
     
(916
)
   
-
 
Establishment of liabilities under tax receivable agreement and related changes to deferred tax assets associated with increases in tax basis
   
-
     
-
     
-
     
-
     
-
     
-
     
(228
)
   
-
     
-
     
(228
)
Equity-based compensation
   
-
     
-
     
-
     
-
     
-
     
-
     
1,078
     
-
     
-
     
1,078
 
Balance at December 31, 2020
   
-
     
-
     
10,867
   
$
109
     
4,108
   
$
41
   
$
111,859
   
$
24,545
   
$
47,929
   
$
184,483
 
Net income
   
-
     
-
     
-
     
-
     
-
     
-
     
-
     
20,475
     
10,117
     
30,592
 
Distributions to members
   
-
     
-
     
-
     
-
     
-
     
-
     
-
     
(61
)
   
(140
)
   
(201
)
Exchange of B shares for A shares
   
-
     
-
     
37
     
-
     
(37
)
   
-
     
558
     
-
     
(558
)
   
-
 
Establishment of liabilities under tax receivable agreement and related changes to deferred tax assets associated with increases in tax basis
   
-
     
-
     
-
     
-
     
-
     
-
     
(6
)
   
-
     
-
     
(6
)
Equity-based compensation
   
-
     
-
     
-
     
-
     
-
     
-
     
1,127
     
-
     
-
     
1,127
 
Shares issued upon vesting of equity-based awards, net of tax withholding
   
-
     
-
     
64
     
1
     
-
     
-
     
(450
)
   
-
     
-
     
(449
)
Balance at March 31, 2021
 
$
-
   
$
-
     
10,968
   
$
110
     
4,071
   
$
41
   
$
113,088
   
$
44,959
   
$
57,348
   
$
215,546
 

ONEWATER MARINE INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ AND MEMBERS’ EQUITY
($ in thousands)
(Unaudited)
 
Six Months Ended March 31, 2020     Stockholders’ and Members’ Equity  
               
Class A Common Stock
   
Class B Common Stock
                         
   
Redeemable Preferred Interest in Subsidiary
   
Members’ Equity
   
Shares
   
Amount
   
Shares
   
Amount
   
Additional Paid-in Capital
   
Retained Earnings
   
Non-
controlling Interest
   
Total
Stockholders’
and Members’
Equity
 
Balance at September 30, 2019
 
$
86,018
   
$
31,770
     
-
   
$
-
     
-
   
$
-
   
$
-
   
$
-
   
$
6,199
   
$
37,969
 
Net (loss) income
   
-
     
(1,314
)
   
-
     
-
     
-
     
-
     
-
     
-
     
247
     
(1,067
)
Distributions to members
   
(1,310
)
   
(189
)
   
-
     
-
     
-
     
-
     
-
     
-
     
(732
)
   
(921
)
Accumulated unpaid preferred returns
   
2,183
     
(2,183
)
   
-
     
-
     
-
     
-
     
-
     
-
     
-
     
(2,183
)
Accretion of redeemable preferred and issuance costs
   
162
     
(162
)
   
-
     
-
     
-
     
-
     
-
     
-
     
-
     
(162
)
Equity based compensation
   
-
     
39
     
-
     
-
     
-
     
-
     
-
     
-
     
-
     
39
 
Balance at December 31, 2019
   
87,053
     
27,961
     
-
     
-
     
-
     
-
     
-
     
-
     
5,714
     
33,675
 
Net (loss) income prior to organizational transactions
   
-
     
(81
)
   
-
     
-
     
-
     
-
     
-
     
-
     
103
     
22
 
Distributions to members prior to organizational transactions
   
-
     
(120
)
   
-
     
-
     
-
     
-
     
-
     
-
     
(1
)
   
(121
)
Accumulated unpaid preferred returns
   
1,004
     
(1,004
)
   
-
     
-
     
-
     
-
     
-
     
-
     
-
     
(1,004
)
Accretion of redeemable preferred and issuance costs
   
74
     
(74
)
   
-
     
-
     
-
     
-
     
-
     
-
     
-
     
(74
)
Equity-based compensation prior to organizational transactions
   
-
     
616
     
-
     
-
     
-
     
-
     
-
     
-
     
-
     
616
 
Effect of organizational transactions
   
(88,131
)
   
(27,298
)
   
6,088
     
61
     
8,462
     
85
     
56,567
     
-
     
73,018
     
102,433
 
Equity-based compensation subsequent to organizational transactions
   
-
     
-
     
-
     
-
     
-
     
-
     
163
     
-
     
-
     
163
 
Net income subsequent to  organizational transactions
   
-
     
-
     
-
     
-
     
-
     
-
     
-
     
1,085
     
1,872
     
2,957
 
Balance at March 31, 2020
 
$
-
   
$
-
     
6,088
   
$
61
     
8,462
   
$
85
   
$
56,730
   
$
1,085
   
$
80,706
   
$
138,667
 

ONEWATER MARINE INC.
CONDENSED CONSOLIDATED STATEMENTS of CASH FLOWS
($ in thousands)
(Unaudited)

For the Six Months Ended March 31
 
2021
   
2020
 
       
Cash flows from operating activities
     
Net income
 
$
42,367
   
$
1,912
 
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
               
Depreciation and amortization
   
2,341
     
1,551
 
Equity-based awards
   
2,205
     
818
 
(Gain) loss on asset disposals
   
(136
)
   
90
 
Change in fair value of long-term warrant liability
   
-
     
(771
)
Non-cash interest expense
   
393
     
3,307
 
Deferred income tax provision
   
1,787
     
-
 
Payment of acquisition contingent consideration
   
(5,520
)
   
-
 
(Increase) decrease in assets:
               
Accounts receivable
   
(22,417
)
   
(4,547
)
Inventories
   
(30,551
)
   
(56,039
)
Prepaid expenses and other current assets
   
997
     
(4,495
)
Deposits
   
(128
)
   
(19
)
Increase (decrease) in liabilities:
               
Accounts payable
   
12,971
     
2,273
 
Other payables and accrued expenses
   
5,480
     
251
 
Customer deposits
   
20,792
     
8,589
 
Net cash provided by (used in) operating activities
   
30,581
     
(47,080
)
                 
Cash flows from investing activities
               
Purchases of property and equipment and construction in progress
   
(5,126
)
   
(3,392
)
Proceeds from disposal of property and equipment
   
118
     
1,574
 
Cash used in acquisitions
   
(85,499
)
   
-
 
Net cash used in investing activities
   
(90,507
)
   
(1,818
)
Cash flows from financing activities
               
Net borrowings from floor plan
   
55,751
     
68,886
 
Proceeds from long-term debt
   
30,000
     
35,155
 
Payments on long-term debt
   
(3,334
)
   
(4,155
)
Payments of debt issuance costs
   
(653
)
   
(791
)
Payments of initial public offering costs
   
-
     
(3,789
)
Payments of September offering costs
   
(540
)
   
-
 
Payment of acquisition contingent consideration
   
-
     
(1,457
)
Distributions to redeemable preferred interest members
   
-
     
(90,503
)
Proceeds from issuance of Class A common stock sold in initial public offering, net of underwriting discounts and commissions
   
-
     
59,234
 
Payments of tax withholdings for equity-based awards
   
(449
)
       
Distributions to members
   
(1,520
)
   
(4,206
)
Net cash provided by financing activities
   
79,255
     
58,374
 
Net change in cash
   
19,329
     
9,476
 
Cash and restricted cash at beginning of period
   
68,153
     
11,492
 
Cash and restricted cash at end of period
 
$
87,482
   
$
20,968
 
                 
Supplemental cash flow disclosures
               
Cash paid for interest
 
$
2,996
   
$
6,187
 
Cash paid for income taxes
   
7,480
     
-
 
                 
Noncash items
               
Acquisition purchase price funded by seller notes payable
 
$
2,056
   
$
-
 
Acquisition purchase price funded by contingent consideration
   
5,482
     
-
 
Purchase of property and equipment funded by long-term debt
   
1,280
     
625
 
Offering costs, accrued not yet paid
   
-
     
600
 

OneWater Marine Inc. and Subsidiaries
Notes to the Condensed Consolidated Financial Statements
(Unaudited)

1.
Description of Company and Basis of Presentation
 
Description of the Business

OneWater Marine Inc. (“OneWater Inc.”) was incorporated in Delaware on April 3, 2019 and was a wholly-owned subsidiary of One Water Marine Holdings, LLC (“OneWater LLC”). Pursuant to a reorganization on February 11, 2020 into a holding company structure for the purpose of facilitating an initial public offering (the “Offering”) and related transactions in order to carry on the business of OneWater LLC and its subsidiaries (together with OneWater Marine Inc., the “Company”), OneWater Inc. is the holding company and its sole material asset is the equity interest in OneWater LLC. OneWater LLC was organized as a limited liability company under the law of the State of Delaware in 2014 and is the parent company of One Water Assets & Operations (“OWAO”), and its wholly-owned subsidiaries.
 
The Company is one of the largest recreational boat retailers in the United States. The Company engages primarily in the retail sale, brokerage, and service of new and pre-owned boats, motors, trailers, marine parts and accessories, and offers slip and storage accommodations in certain locations. The Company also arranges related boat financing, insurance, and extended service contracts for customers with third-party lenders and insurance companies. As of March 31, 2021, the Company operated a total of 69 stores in ten states, consisting of Alabama, Florida, Georgia, Kentucky, Maryland, Massachusetts, North Carolina, Ohio, South Carolina, and Texas.
 
Operating results are generally subject to seasonal variations. Demand for products is generally highest during the third and fourth quarters of the fiscal year and, accordingly, revenues are generally expected to be higher during these periods. General economic conditions and consumer spending patterns can negatively impact the Company’s operating results. Unfavorable local, regional, national, or global economic developments, global public health concerns, including the COVID-19 pandemic, or uncertainties could reduce consumer spending and adversely affect the Company’s business. Consumer spending on discretionary goods may also decline as a result of lower consumer confidence levels, even if prevailing economic conditions are otherwise favorable. Economic conditions in areas in which the Company operates stores, particularly in the Southeast, can have a major impact on the Company’s overall results of operations. Local influences such as corporate downsizing, inclement weather such as hurricanes and other storms, environmental conditions, and other events could adversely affect the Company’s operations in certain markets and in certain periods. Any extended period of adverse economic conditions or low consumer confidence is likely to have a negative effect on the Company’s business.
 
Sales of new boats from the Company’s top ten brands represent approximately 41.1% and 42.6% of total sales for the three months ended March 31, 2021 and 2020, respectively, and 39.8% and 37.6% of total sales for the six months ended March 31, 2021 and 2020, respectively, making them major suppliers of the Company. Of this amount, Malibu Boats, Inc., including its brands Malibu, Axis, Cobalt, Pursuit, Maverick, Hewes, Cobia and Pathfinder accounted for 17.0% and 16.9% of consolidated revenue for the three months ended March 31, 2021 and 2020, respectively, and 15.7% and 16.2% of consolidated revenue for the six months ended March 31, 2021 and 2020, respectively. As is typical in the industry, the Company contracts with most manufacturers under renewable annual dealer agreements, each of which provides the right to sell various makes and models of boats within a given geographic region. Any change or termination of these agreements, or the agreements discussed above, for any reason, or changes in competitive, regulatory, or marketing practices, including rebate or incentive programs, could adversely affect results of operations. Pre-owned boats are usually trade-ins from retail customers who are purchasing a boat from the Company.
 
Principles of Consolidation
 
As the sole managing member of OneWater LLC, OneWater Inc. operates and controls all of the businesses and affairs of OneWater LLC, and through OneWater LLC and its subsidiaries One Water Assets and Operations, South Shore Assets and Operations, Bosun’s Assets and Operations, Singleton Assets and Operations, Legendary Assets and Operations, South Florida Assets and Operations and Midwest Assets and Operations (collectively, the “Subsidiaries”), conducts its business. As a result, OneWater Inc. consolidates the financial results of OneWater LLC and its subsidiaries and reports non-controlling interests related to the portion of units of OneWater LLC (the “OneWater LLC Units”) not owned by OneWater Inc., which will reduce net income (loss) attributable to OneWater Inc.’s Class A stockholders. As of March 31, 2021, OneWater Inc. owned 72.9% of the economic interest of OneWater LLC.
 
Basis of Financial Statement Preparation
 
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial statements, which do not include all the information and notes required by such accounting principles for annual financial statements. The unaudited condensed consolidated financial statements should be read in conjunction with OneWater Inc.’s Annual Report on Form 10-K for the year ended September 30, 2020. All adjustments, consisting of only normal recurring adjustments considered necessary for fair presentation, have been reflected in these unaudited condensed consolidated financial statements.

All intercompany transactions have been eliminated in consolidation. In addition, certain reclassifications of amounts previously reported have been made to the accompanying unaudited condensed consolidated financial statements in order to conform to current presentation. The Company operates on a fiscal year basis with the first day of the fiscal year being October 1, and the last day of the year ending on September 30. Additionally, since there are no differences between net income and comprehensive income, all references to comprehensive income have been excluded from the accompanying unaudited condensed consolidated financial statements.
 
As discussed above, the Company is the sole managing member for OneWater LLC and consolidates OneWater LLC and its subsidiaries. The financial statements for periods prior to the Offering have been adjusted to combine the previously separate entities for presentation purposes. Thus, for periods prior to the completion of the Offering, the accompanying unaudited interim condensed consolidated financial statements include the historical financial position and results of operations of OneWater LLC and its subsidiaries. For periods after the completion of the Offering, the financial position and results of operations include those of the Company and the Subsidiaries and report non-controlling interest related to the portion of OneWater LLC Units not owned by OneWater Inc.
 
COVID-19 Pandemic
 
In the last two weeks of March 2020, the Company began seeing the impact of the COVID-19 global pandemic on its business. Based on the guidance of local governments and health officials, we temporarily closed or reduced staffing at certain departments and locations during portions of the fiscal year ended September 30, 2020. The Company has implemented cleaning and social distancing techniques at each of its locations. In light of the current environment, the Company’s sales team members are providing certain customers with virtual walkthroughs of inventory and/or private, at home or on water showings. The duration and related impact on the Company’s consolidated financial statements is currently uncertain, and it is possible that the pandemic, including the resurgence of COVID-19 in certain geographic areas, may negatively impact the Company’s future results of operations. The Company is monitoring and assessing the situation and preparing for implications to the business, including the ability to safely operate its stores, access to inventory and customer demand.

2.
Summary of Significant Accounting Policies

Fair Value of Financial Instruments
 
The Company’s financial instruments include cash, accounts receivable, accounts payable, other payables and accrued expenses and debt. The carrying values of cash, accounts receivable, accounts payable and other payables and accrued expenses approximate their fair values due to their short-term nature. The carrying value of debt approximates its fair value due to the debt agreements bearing interest at rates that approximate current market rates for debt agreements with similar maturities and credit quality.
 
Inventories
 
Inventories are stated at the lower of cost or net realizable value. The cost of the new and pre-owned boat inventory is determined using the specific identification method. In assessing lower of cost or net realizable value, the Company considers the aging of the boats, historical sales of a brand and current market conditions. The cost of parts and accessories is determined using the weighted average cost method.
 
Goodwill and Other Identifiable Intangible Assets
 
Goodwill and intangible assets are accounted for in accordance with the Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") 350, ‘‘Intangibles - Goodwill and Other’’ (‘‘ASC 350’’), which provides that the excess of cost over the fair value of the net assets of businesses acquired, including other identifiable intangible assets, is recorded as goodwill. Goodwill is an asset representing operational synergies and future economic benefits arising from other assets acquired in a business combination that are not individually identified and separately recognized.
 
Identifiable intangible assets consist of trade names related to the acquisitions the Company has completed. The Company has determined that trade names have an indefinite life, as there is no economic, contractual or other factors that limit their useful lives and they are expected to generate value as long as the trade name is utilized by the dealer group, and therefore, are not subject to amortization.
 
Sales Tax
 
The Company collects sales tax on all of the Company’s sales to nonexempt customers and remits the entire amount to the states that imposed the sales tax on and concurrent with specific sales transactions. The Company’s accounting policy is to exclude the tax collected and remitted to the states from revenues and cost of sales.
 
Revenue Recognition
 
Revenue is recognized from the sale of products and commissions earned on new and pre-owned boats (including used, brokerage, consignment and wholesale) when ownership is transferred to the customer, which is generally upon acceptance or delivery to the customer. At the time of acceptance or delivery, the customer is able to direct the use of, and obtain substantially all of the benefits at such time. We are the principal with respect to revenue from new, used, consignment and wholesale sales and such revenue is recorded at the gross sales price. With respect to brokerage transactions, we are acting as an agent in the transaction, therefore the fee or commission is recorded on a net basis.

Revenue from parts and service operations (boat maintenance and repairs) are recorded over time as services are performed. Satisfaction of this performance obligation creates an asset with no alternative use for which an enforceable right to payment for performance to date exists within our contractual agreements. Each boat maintenance and repair service is a single performance obligation that includes both the parts and labor associated with the service. Payment for boat maintenance and repairs is typically due upon the completion of the service, which is generally completed within a period of one year or less from contract inception. The Company recorded contract assets in prepaid expenses and other current assets of $3.7 and $1.5 million as of March 31, 2021 and September 30, 2020, respectively. Contract assets related to the repair and maintenance services are transferred to receivables when a repair order is completed and invoiced to the customer.
 
Deferred revenue from storage and marina operations is recognized on a straight-line basis over the term of the contract as services are completed. Revenue from arranging financing, insurance and extended warranty contracts to customers through various third-party financial institutions and insurance companies is recognized when the related boats are sold. We do not directly finance our customers’ boat, motor or trailer purchases. We are acting as an agent in the transaction, therefore the commission is recorded on a net basis. Subject to our agreements and in the event of early cancellation, prepayment or default of such loans or insurance contracts by the customer, we may be assessed a charge back for a portion of the transaction price by the third-party financial institutions and insurance companies. We reserve for these chargebacks based on our historical experience with repayments or defaults. Chargebacks were not material to the unaudited condensed consolidated financial statements as of March 31, 2021.
 
Contract liabilities consist of deferred revenues from marina and storage operations and customer deposits and are classified in customer deposits in the Company’s unaudited condensed consolidated balance sheets. Deposits received from customers are recorded as a liability until the related sales orders have been fulfilled by us and control of the vessel is transferred to the customer. The activity in customer deposits for the three and six months ended March 31, 2021 is as follows:
 
($ in thousands)
 
Three Months
Ended March
31, 2021
   
Six Months
Ended March
31, 2021
 
Beginning contract liability
 
$
23,386
   
$
17,280
 
Revenue recognized from contract liabilities included in the beginning balance
   
(14,844
)
   
(16,300
)
Increases due to cash received, net of amounts recognized in revenue during the period
   
30,853
     
38,415
 
Ending contract liability
 
$
39,395
   
$
39,395
 
 
The following tables set forth percentages on the timing of revenue recognition for the three and six months ended March 31, 2021 and the three and six months ended March 31 2020.

   
Three
Months
Ended March
31, 2021
   
Three
Months
Ended March
31, 2020
 
Goods and services transferred at a point in time
   
94.5
%
   
95.3
%
Goods and services transferred over time
   
5.5
%
   
4.7
%
Total Revenue
   
100.0
%
   
100.0
%

   
Six Months
Ended March
31, 2021
   
Six Months
Ended March
31, 2020
 
Goods and services transferred at a point in time
   
93.9
%
   
94.1
%
Goods and services transferred over time
   
6.1
%
   
5.9
%
Total Revenue
   
100.0
%
   
100.0
%

Income Taxes
 
OneWater Inc. is a corporation and as a result, is subject to U.S. federal, state and local income taxes. We account for income taxes under the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events included in the consolidated financial statements. Under this method, we determine deferred tax assets and liabilities on the basis of the differences between the book value and tax bases of assets and liabilities by using enacted tax rates in effect for the year in which the differences are expected to reverse. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period in which the enactment date occurs. We recognize deferred tax assets to the extent we believe these assets are more-likely-than-not to be realized. In making such a determination, we consider all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax planning strategies and recent results of operations.
 
OneWater LLC is treated as a partnership for U.S. federal income tax purposes and therefore does not pay U.S. federal income tax on its taxable income. Instead, the OneWater LLC members are liable for U.S. federal income tax on their respective shares of the Company’s taxable income reported on the members’ U.S. federal income tax returns.

When there are situations with uncertainty as to the timing of the deduction, the amount of the deduction, or the validity of the deduction, the Company adjusts the financial statements to reflect only those tax positions that are more-likely-than-not to be sustained. Positions that meet this criterion are measured using the largest benefit that is more than 50% likely to be realized. Interest and penalties related to income taxes are included in the benefit (provision) for income taxes in the consolidated statements of operations.

Vendor Consideration Received
 
Consideration received from vendors is accounted for in accordance with FASB Accounting Standards Codification 330, ‘‘Inventory’’ (‘‘ASC 330’’). Pursuant to ASC 330, manufacturer incentives based upon cumulative volume of sales and purchases are recorded as a reduction of inventory cost and related cost of sales when the amounts are probable and reasonably estimable.
 
Use of Estimates
 
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosures of contingent assets and liabilities as of the date of the financial statements, and the reported amounts of revenues and expenses during the periods presented. Actual results could differ materially from these estimates. Estimates and assumptions are reviewed periodically, and the effects of any revisions are reflected in the consolidated financial statements in the period they are determined to be necessary. Significant estimates made in the accompanying unaudited condensed consolidated financial statements include, but are not limited to, those relating to inventory mark downs, certain assumptions related to intangible and long-lived assets and accruals for expenses relating to business operations.
 
Segment Information
 
As of March 31, 2021 and September 30, 2020, the Company had one operating segment, marine retail. The marine retail segment consists of retail boat dealerships offering the sale of new and pre-owned boats, arrangement of finance and insurance products, performance of repair and maintenance services and offering marine related parts and accessories. The marine retail business has discrete financial information and is regularly reviewed by the Company’s chief operating decision maker (“CODM”) to assess performance and allocate resources. The Company has identified its Chief Executive Officer as its CODM. The Company has determined its marine retail operating segment is its reporting unit and is also the reportable segment.
 
3.
New Accounting Pronouncements
 
As an ‘‘emerging growth company’’ (‘‘EGC’’), the Jumpstart Our Business Startups Act (‘‘JOBS Act’’) allows the Company to delay adoption of new or revised accounting pronouncements applicable to public companies until such pronouncements are made applicable to private companies. The Company has elected to use this extended transition period under the JOBS Act. The adoption dates discussed below reflect this election.
 
In February 2016, the FASB issued ASU 2016-02, ‘‘Leases (Topic 842)’’ (‘‘ASU 2016-02’’). This update requires organizations to recognize lease assets and lease liabilities on the balance sheet and disclose key information about leasing arrangements. ASU 2016-02 is effective for a public company’s annual reporting periods beginning after December 15, 2018, and interim periods within those annual periods. As an EGC, the Company has elected to adopt ASU 2016-02 following the effective dates for private companies beginning with annual reporting periods beginning after December 15, 2021, and interim periods within fiscal years beginning after December 15, 2022. The Company is currently in the process of evaluating the effects of this pronouncement on its consolidated financial statements, related disclosures and internal controls over financial reporting. The Company plans to adopt ASU 2016-02 in fiscal year 2023 and expects the adoption of ASU 2016-02 to have a significant and material impact on the consolidated balance sheet given the current lease agreements for the Company’s stores. Based on the current assessment, it is expected that most of the operating lease commitments will be subject to the new guidance and recognized as operating lease liabilities and right-of use assets upon adoption, resulting in a material increase in the assets and liabilities recorded on the consolidated balance sheet. The Company is continuing its assessment, which may identify additional impacts this standard will have on the consolidated financial statements and related disclosures and internal control over financial reporting.
 
In June 2016, the FASB issued ASU 2016-13, ‘‘Financial instruments — Credit Losses’’ (“ASU 2016-13”). ASU 2016-13 requires entities to report ‘‘expected’’ credit losses on financial instruments and other commitments to extend credit rather than the current ‘‘incurred loss’’ model. These expected credit losses for financial assets held at the reporting date are to be based on historical experience, current conditions, and reasonable and supportable forecasts. This ASU will also require enhanced disclosures relating to significant estimates and judgments used in estimating credit losses, as well as the credit quality. ASU 2016-13 is effective for a public company’s annual reporting periods beginning after December 15, 2019, and interim periods within those annual periods. As an EGC, the Company has elected to adopt ASU 2016-13 following the effective date for private companies beginning with annual reporting periods beginning after December 15, 2022, including interim periods within those annual periods. The Company is currently evaluating the impact that this standard will have on the consolidated financial statements. The Company plans to adopt ASU 2016-13 in fiscal year 2024.
 
In December 2019, the FASB issued ASU 2019-12, “Income Taxes (Topic 740) – Simplifying the Accounting for Income Taxes”. The pronouncement is effective for a public company’s annual reporting periods beginning after December 15, 2020, and interim periods within those annual periods. As an EGC, the Company has elected to adopt the pronouncement following the effective date for private companies beginning with annual reporting periods beginning after December 15, 2021, and interim periods within fiscal years beginning after December 15, 2022. The Company is currently evaluating the impact that this standard will have on the consolidated financial statements. The Company plans to adopt the pronouncement in fiscal year 2023.

In March 2020, the FASB issued ASU No. 2020-04, “Reference Rate Reform”, which provides temporary optional guidance to companies impacted by the transition away from the London Inter-Bank Offered Rate (“LIBOR”). The guidance provides certain expedients and exceptions to applying GAAP in order to lessen the potential accounting burden when contracts, hedging relationships, and other transactions that reference LIBOR as a benchmark rate are modified. The guidance is effective upon issuance and expires on December 31, 2022. The Company is currently assessing the impact of the LIBOR transition and this ASU on the Company’s financial statements.
 
4.
Acquisitions
 
The results of operations of acquisitions are included in the accompanying unaudited condensed consolidated financial statements from the acquisition date. The purchase price of acquisitions was allocated to identifiable tangible assets and intangible assets acquired based on their estimated fair values at the acquisition date, with the excess being allocated to goodwill. Under the acquisition method of accounting, the purchase price is allocated to the tangible and intangible assets acquired and liabilities assumed based on information currently available. The valuation of tangible assets and assumed liabilities is preliminary as the acquisitions are subject to certain customary closing and post-closing adjustments.

Tom George Yacht Group Acquisition
 
On December 1, 2020, we acquired substantially all of the assets of Tom George Yacht Group (“TGYG”) with two locations in Florida. TGYG enhances the Company’s presence on the west coast of Florida and expands new and pre-owned boat sales, as well as yacht brokerage, service and parts. The purchase price was $10.2 million with $8.2 million paid at closing and $2.1 million financed through a note payable to the seller bearing interest at a rate of 5.5% per year. The note is payable in one lump sum three years from the closing date, with interest payments due quarterly.
 
The table below summarizes the preliminary estimated fair values of the assets acquired and liabilities assumed at the acquisition date, including the goodwill recorded as a result of the transaction:
 
Summary of Assets Acquired and Liabilities Assumed
 
($ in thousands)
 
Tangible assets
 
$
5,794
 
Identifiable intangible assets
   
2,940
 
Goodwill
   
6,854
 
Liabilities assumed
   
(5,341
)
Total purchase price
 
$
10,247
 
 
Walker Marine Group Acquisition
 
On December 31, 2020, we acquired substantially all of the assets of Walker Marine Group (“Walker”) with five locations in Florida. The acquisition enhances the Company’s presence on the southwest coast of Florida and expands new and pre-owned boat sales, as well as finance and insurance services, service and parts. The purchase price was $37.2 million with $31.8 million paid at closing and an estimated payment of contingent consideration of $5.5 million. The estimated contingent consideration is part of an earnout subject to achievement of certain post-acquisition increases in adjusted EBITDA. The acquisition contingent consideration was determined using weighted average projections for the estimated post-acquisition adjusted EBITDA and was based on the Company’s historical experience with acquisitions as well as current forecasts for the industry. The minimum payout due on the acquisition contingent consideration is $0.2 million. The maximum amount of the earnout is unlimited.
 
The table below summarizes the preliminary estimated fair values of the assets acquired at the acquisition date, including the goodwill recorded as a result of the transactions:
 
Summary of Assets Acquired
 
($ in thousands)
 
Tangible assets
 
$
503
 
Identifiable intangible assets
   
8,230
 
Goodwill
   
28,511
 
Total purchase price
 
$
37,244
 

Roscioli Yachting Center Acquisition
 
On December 31, 2020, we acquired substantially all of the assets of Roscioli Yachting Center (“Roscioli”) with one location in southeast Florida. The acquisition expands the Company’s presence in the yacht category and amplifies the Company’s service and repair offerings. As part of the acquisition, we acquired the related real estate and in-water slips. The purchase price was $45.5 million, paid at closing.

The table below summarizes the preliminary estimated fair values of the assets acquired and liabilities assumed at the acquisition date, including the goodwill recorded as a result of the transactions:
 
Summary of Assets Acquired and Liabilities Assumed
 
($ in thousands)
 
Property and equipment
 
$
41,300
 
Other tangible assets
   
88
 
Identifiable intangible assets
   
1,530
 
Goodwill
   
2,993
 
Liabilities assumed
   
(365
)
Total purchase price
 
$
45,546
 

Included in our results for the three and six months ended March 31, 2021, the acquisitions contributed $30.7 and $32.8 million to our consolidated revenue and $3.3 and $3.4 million to our income before income tax expense, respectively. Costs related to acquisitions are included in transaction costs and primarily relate to legal, accounting, valuation and other fees, which are charged directly to operations in the accompanying consolidated statements of operations as incurred in the amount of $0.4 million and $0.6 million for the three and six months ended March 31, 2021, respectively.
 
The following unaudited pro forma summary presents consolidated information for the three and six months ended March 31, 2020 and the six months ended March 31, 2021, as if all acquisitions had occurred on October 1, 2019:

   
Three Months Ended
March 31, 2020
 
   
($ in thousands)
 
   
(Unaudited)
 
Pro forma revenue
 
$
218,884
 
Pro forma net income
 
$
5,653
 
 
   
Six Months Ended
March 31, 2021
   
Six Months Ended
March 31, 2020
 
   
($ in thousands)
 
   
(Unaudited)
 
Pro forma revenue
 
$
585,943
   
$
404,519
 
Pro forma net income
 
$
47,542
   
$
4,666
 

Fair values of trade names are estimated using Level 3 inputs by discounting expected future cash flows of the dealer group. The forecasted cash flows contain certain inherent uncertainties, including significant estimates and assumptions, which include revenue growth rates and future operating margins used to calculate projected cash flows, capital expenditures, weighted average costs of capital, future economic and market conditions, and other marketplace data the Company believes to be reasonable.
 
We expect substantially all of the goodwill related to completed acquisitions to be deductible for federal income tax purposes.

5.
Inventories
 
Inventories consisted of the following at:

($ in thousands)
 
March 31,
2021
   
September 30,
2020
 
New vessels
 
$
157,380
   
$
120,012
 
Pre-owned vessels
   
16,615
     
21,262
 
Work in process, parts and accessories
   
12,094
     
8,850
 
   
$
186,089
   
$
150,124
 

6.
Goodwill and Other Identifiable Intangible Assets
 
The Company reviews goodwill for impairment annually in the fiscal fourth quarter, or more often if events or circumstances indicate that impairment may have occurred. In evaluating goodwill for impairment, if the fair value of a reporting unit is less than its carrying value, the difference would represent the amount of required goodwill impairment. To the extent the reporting unit’s earnings decline significantly or there are changes in one or more of these inputs that would result in a lower valuation, it could cause the carrying value of the reporting unit to exceed its fair value and thus require the Company to record goodwill impairment. As of March 31, 2021, and based upon our most recent analysis, we determined through our qualitative assessment that it is not “more likely than not” that the fair value of our reporting unit is less than its carrying value. As a result, we were not required to perform a quantitative goodwill impairment test.

($ in thousands)
 
Goodwill
 
Balance as of September 30, 2020
 
$
113,059
 
Acquired goodwill during the six months ended March 31, 2021
   
38,358
 
Balance as of March 31, 2021
 
$
151,417
 
 
Identifiable intangible assets consist of trade names related to the acquisitions the Company has completed. The Company has determined that trade names have an indefinite life, as there is no economic, contractual or other factors that limit their useful lives and they are expected to generate value as long as the trade name is utilized by the dealer group, and therefore, are not subject to amortization. Financial statement risk exists to the extent identifiable intangibles become impaired due to the decrease in the fair value of the identifiable assets. As of March 31, 2021, and based upon our most recent analysis, we determined through our qualitative assessment that it is not “more likely than not” that the fair values of our identifiable intangible assets are less than their carrying values. As a result, we were not required to perform a quantitative identifiable intangible assets impairment test.
 
($ in thousands)
 
Identifiable
Intangible Assets
 
Balance as of September 30, 2020
 
$
61,304
 
Acquired identifiable intangible assets during the six months ended March 31, 2021
   
12,700
 
Balance as of March 31, 2021
 
$
74,004
 
 
7.
Notes Payable — Floor Plan
 
The Company maintains an ongoing wholesale marine products inventory financing program with a syndicate of banks. The program is administered by Wells Fargo Commercial Distribution Finance, LLC (“Wells Fargo”). On December 10, 2020, the Company entered into the Second Amendment to the Sixth Amended and Restated Inventory Financing Agreement (the “Inventory Financing Facility”) to change certain compliance reporting from weekly to monthly. The maximum borrowing amount available, interest rates and the termination date of the agreement remained unchanged. The Inventory Financing Facility is used to purchase new and pre-owned inventory (boats, engines, and trailers). The outstanding balance of the facility was $183.8 million and $124.0 million, as of March 31, 2021 and September 30, 2020, respectively.
 
Interest on new boats and for rental units is calculated using the one month London Inter-Bank Offered Rate (“LIBOR”) plus an applicable margin of 2.75% to 5.00% depending on the age of the inventory. If LIBOR is less than 2.96%, 25 basis points are added when calculating the interest rate. Interest on pre-owned boats is calculated at the new boat rate plus 0.25%. Wells Fargo will finance 100.0% of the vendor invoice price for new boats, engines and trailers. As of March 31, 2021 the interest rate on the Inventory Financing Facility ranged from 3.11% to 5.36% for new inventory and 3.36% to 5.61% for pre-owned inventory. As of September 30, 2020 the interest rate on the Inventory Financing Facility ranged from 3.15% to 5.40% for new inventory and 3.40% to 5.65% for pre-owned inventory. Borrowing capacity available at March 31, 2021 and September 30, 2020 was $208.7 million and $268.5 million, respectively.
 
The Inventory Financing Facility has certain financial and non-financial covenants as specified in the agreement. The financial covenants include requirements to comply with a maximum Funded Debt to EBITDA Ratio (as defined in the Inventory Financing Facility) as well as a minimum Fixed Charge Coverage Ratio (as defined in the Inventory Financing Facility). In addition, certain non-financial covenants could restrict the Company’s ability to sell assets (excluding inventory in the normal course of business), engage in certain mergers and acquisitions, incur additional debt and pay cash dividends or distributions, among others. The Company was in compliance with all covenants at March 31, 2021.
 
The collateral for the Inventory Financing Facility consists primarily of our inventory that is financed through the Inventory Financing Facility and related assets, including accounts receivable, bank accounts and proceeds of the foregoing, and excludes the collateral that underlies the term note payable to Truist Bank.

8.
Long-term Debt and Line of Credit

Long-term debt consisted of the following at:

($ in thousands)
 
March 31, 2021
   
September 30, 2020
 
Term note payable to Truist Bank, secured and bearing interest at 2.75% at March 31, 2021 and 3.0% September 30, 2020. The note requires quarterly principal payments commencing on March 31, 2021 and maturing with a full repayment on July 22, 2025
 
$
108,625
   
$
80,000
 
Revolving note payable for an amount up to $30.0 million to Truist Bank
   
-
     
-
 
Note payable to commercial vehicle lenders secured by the value of the vehicles bearing interest at rates ranging from 0.0% to 8.9% per annum. The note requires monthly installment payments of principal and interest ranging from $100 to $5,600 through March 2027
   
3,275
     
2,454
 
Note payable to Central Marine Services, Inc., unsecured and bearing interest at 5.5% per annum. The note requires monthly interest payments, with a balloon payment of principal due on February 1, 2022
   
2,164
     
2,164
 
Note payable to Tom George Yacht Sales, Inc., unsecured and bearing interest at 5.5% per annum. The note requires quarterly interest payments, with a balloon payment of principal due on December 1, 2023
   
2,056
     
-
 
Note payable to Ocean Blue Yacht Sales, unsecured and bearing interest at 5.0% per annum. The note requires quarterly interest payments, with a balloon payment of principal due on February 1, 2022
   
1,920
     
1,920
 
Note payable to Slalom Shop, LLC, unsecured and bearing interest at 5.0% per annum. The note requires quarterly interest payments, with a balloon payment of principal due on December 1, 2021
   
1,271
     
1,271
 
Note payable to Bosun's Marine, Inc., unsecured and bearing interest at 4.5% per annum. The note requires annual interest payments with a balloon payment due on June 1, 2021
   
1,227
     
1,227
 
Note payable to Rebo, Inc., unsecured and bearing interest at 5.5% per annum. The note requires annual interest payments with a balloon payment due on April 1, 2021
   
1,000
     
1,000
 
Note payable to Lab Marine, Inc., unsecured and bearing interest at 6.0% per annum. The note was repaid in full
   
-
     
1,500
 
Total debt outstanding
   
121,538
     
91,536
 
Less current portion
   
(13,995
)
   
(7,419
)
Less unamortized portion of debt issuance costs
   
(2,464
)
   
(2,140
)
Long-term debt, net of current portion of unamortized debt issuance costs
 
$
105,079
   
$
81,977
 

The term note payable to Truist Bank is collateralized by certain real and personal property (including certain capital stock) of the Company and its subsidiaries. The collateral does not include inventory and certain other assets of the Company’s subsidiaries financed under the Inventory Financing Facility. The credit agreement is subject to certain financial covenants related to the maintenance of a minimum fixed charge coverage ratio and a maximum consolidated leverage ratio. The credit agreement also contains non-financial covenants and restrictive provisions that, among other things, limit the ability of the Company to incur additional debt, transfer or dispose of all of its assets, make certain investments, loans or payments and engage in certain transactions with affiliates. The Company was in compliance with all covenants at March 31, 2021.
 
9.
Stockholders’ and Members’ Equity
 
Equity-Based Compensation

We maintain the OneWater Marine Inc. Omnibus Incentive Plan (the “LTIP”) to incentivize individuals providing services to OneWater Inc. and its subsidiaries and affiliates. The LTIP provides for the grant, from time to time, at the discretion of the board of directors of OneWater Marine Inc. (the “Board”) or a committee thereof, of (1) stock options, (2) stock appreciation rights, (3) restricted stock, (4) restricted stock units, (5) stock awards, (6) dividend equivalents, (7) other stock-based awards, (8) cash awards, (9) substitute awards and (10) performance awards. The total number of shares reserved for issuance under the LTIP that may be issued pursuant to incentive stock options (which generally are stock options that meet the requirements of Section 422 of the Code) is 1,503,902. The LTIP is and will continue to be administered by the Board, except to the extent the Board elects a committee of directors to administer the LTIP. Class A common stock subject to an award that expires or is cancelled, forfeited, exchanged, settled in cash or otherwise terminated without delivery of shares (including forfeiture of restricted stock awards) and shares withheld to pay the exercise price of, or to satisfy the withholding obligations with respect to, an award will again be available for delivery pursuant to other awards under the LTIP.
 
During the six months ended March 31, 2021, the Board approved the grant of 58,566 performance-based restricted stock units, which represents 100% of the target award. Performance-based restricted stock units provide an opportunity for the recipient to receive a number of shares of our common stock based on our performance during fiscal year 2021 as measured against objective performance goals as determined by the Board. The actual number of units earned may range from 0% to 200% of the target number of units depending upon achievement of the performance goals. Performance-based restricted stock units vest in three equal annual installments, commencing on October 1, 2022. Upon vesting, each performance-based restricted stock unit equals one share of common stock of the Company. Compensation cost for performance-based restricted stock units is based on the closing price of our common stock on the date immediately preceding the grant and the Company’s assessment of the probability and level of performance achievement, and is recognized on a graded basis over the three-year vesting period. As of March 31, 2021, the Company estimated achievement of the performance targets at 150% and therefore $0.2 million and $0.3 million of expense related to the performance awards was recorded in the three and six months ended March 31, 2021, respectively.
 
During the six months ended March 31, 2021, the Board approved the grant of 114,665 time-based restricted stock units. 25,622 restricted stock units fully vest on October 1, 2021 and the remaining 89,043 restricted stock units vest in four equal annual installments commencing on September 30, 2021.
 
The following table further summarizes activity related to restricted stock units for the six months ended March 31, 2021:
 
   
Restricted Stock Unit Awards
 
   
Number of Shares
   
Weighted Average
Grant Date Fair Value
($)
 
Unvested at September 30, 2020
   
301,643
   
$
15.78
 
Awarded
   
202,514
     
23.43
 
Vested
   
(75,895
)
   
15.70
 
Forfeited
   
-
     
-
 
Unvested at March 31, 2021
   
428,262
   
$
19.41
 

Compensation cost for restricted stock units is based on the closing price of our common stock on the date immediately preceding the grant and is recognized on a straight-line basis over the applicable vesting periods. For the three and six months ended March 31, 2021, the Company recognized $1.1 million and $2.2 million of compensation expense, respectively. As of March 31, 2021, the total unrecognized compensation expense related to outstanding equity awards was $5.7 million, which the Company expects to recognize over a weighted-average period of 1.6 years.
 
We issue shares of our Class A common stock upon the vesting of performance-based restricted stock units and time-based restricted stock units. These shares are issued from our authorized and not outstanding common stock. In addition, in connection with the vesting of restricted stock units, we repurchase a portion of shares issued equal to the amount of employee income tax withholding.
 
Investor Voting Warrants
 
On October 28, 2016, the Company issued 25,000 OneWater LLC common unit warrants in exchange for $1.0 million. The common unit warrants had a ten-year life from the date of issuance and provided the holders with a put right after five years, or potentially earlier, under certain circumstances. The holders of the warrants maintained full voting rights in OneWater LLC. As the common unit warrants could be settled in cash at the election of the holder, the fair value of the common unit warrants was included in warrant liability. In connection with the Offering, Goldman Sachs & Co. LLC and certain of its affiliates (“Goldman”) and The Beekman Group (“Beekman”) received 2,148,806 OneWater LLC units upon exercise of the warrants.

The Company engaged a third-party valuation specialist to assist management in performing a valuation of the fair value of the common unit warrants. Accordingly, the warrant liability was accounted for based on inputs that were unobservable and significant to the overall fair value measurement (Level 3). The valuation considered both a market and a discounted cash flows approach in arriving at the fair value of the common unit warrants. As previously noted, the common unit warrants were exercised in connection with the Offering for common units of OneWater LLC and therefore no warrant liability existed as of September 30, 2020 and March 31, 2021. The Company recognized income of $0.8 million for the six months ended March 31, 2020, and this change in the fair value was recorded as a change in the fair value of warrant liability in the accompanying unaudited condensed consolidated statements of operations.
 
Non-Controlling Interest
 
In connection with the Offering, the former owners of Bosun’s Assets and Operations and South Shore Assets and Operations received 290,466 and 306,199 shares of Class A common stock, respectively, for the surrender of their respective 25.0% ownership interests. Accordingly, the former owners’ minority interests have been recorded as a non-controlling interest from October 1, 2019 through February 10, 2020, the period prior to the Offering.
 
As discussed in Note 1, OneWater Inc. consolidates the financial results of OneWater LLC and its subsidiaries and reports a non-controlling interest related to the portion of OneWater LLC owned by the holders of OneWater LLC Units (the “OneWater Unit Holders”). Changes in ownership interest in OneWater LLC, while OneWater Inc. retains its controlling interest, will be accounted for as equity transactions. Future direct exchanges of OneWater LLC units will result in a change in ownership and reduce the amount recorded as a non-controlling interest and increase additional paid-in-capital. As of March 31, 2021, OneWater Inc. owned 72.9% of the economic interest of OneWater LLC with the OneWater Unit Holders owning the remaining 27.1%.
 
Distributions
 
During the six months ended March 31, 2021, the Company made distributions to OneWater Unit Holders for certain permitted tax payments.
 
Earnings Per Share
 
Basic and diluted earnings per share of Class A common stock is computed by dividing net income attributable to OneWater Inc. by the weighted-average number of Class A common stock outstanding during the period. For the three and six months ended March 31, 2020, earnings per share is calculated for the period from February 11, 2020 through March 31, 2020, the period following the Offering. Diluted earnings per share is computed by giving effect to all potentially dilutive shares.
 
There were no shares of Class A or Class B common stock outstanding prior to February 11, 2020, therefore no earnings per share information has been presented for any period prior to that date.
 
The following table sets forth the calculation of earnings per share for the three months ended March 31, 2021 and 2020 (in thousands, except per share data):

Earnings per share:
 
Three Months
 Ended March 31,
2021
   
Three Months
Ended March 31,
2020
 
Numerator:
           
Net income attributable to OneWater Inc
 
$
20,475
   
$
1,085
 
                 
Denominator:
               
Weighted-average number of unrestricted outstanding common shares used to calculate basic net income per share
   
10,901
     
6,088
 
Effect of dilutive securities:
               
Restricted stock units
   
270
     
-
 
Diluted weighted-average shares of Class A common stock outstanding used to calculate diluted earnings per share
   
11,171
     
6,088
 
                 
Earnings per share of Class A common stock – basic
 
$
1.88
   
$
0.18
 
Earnings per share of Class A common stock – diluted
 
$
1.83
   
$
0.18
 

The following table sets forth the calculation of earnings per share for the six months ended March 31, 2021 and 2020 (in thousands, except per share data):

Earnings per share:
 
Six Months Ended
March 31, 2021
   
Six Months Ended
March 31, 2020
 
Numerator:
           
Net income attributable to OneWater Inc
 
$
28,263
   
$
1,085
 
                 
Denominator:
               
Weighted-average number of unrestricted outstanding common shares used to calculate basic net income per share
   
10,838
     
6,088
 
Effect of dilutive securities:
               
Restricted stock units
   
245
     
-
 
Diluted weighted-average shares of Class A common stock outstanding used to calculate diluted earnings per share
   
11,083
     
6,088
 
                 
Earnings per share of Class A common stock – basic
 
$
2.61
   
$
0.18
 
Earnings per share of Class A common stock – diluted
 
$
2.55
   
$
0.18
 
 
Shares of Class B common stock do not share in the income (losses) of the Company and are therefore not participating securities. As such, separate presentation of basic and diluted earnings per share of Class B common stock under the two-class method has not been presented.
 
The following number of weighted-average potentially dilutive shares were excluded from the calculation of diluted earnings per share because the effect of including such potentially dilutive shares would have been antidilutive upon conversion (in thousands):
 
   
Three Months Ended
March 31, 2021
   
Three Months Ended
March 31, 2020
 
Class B common stock
   
4,108
     
8,462
 
Restricted Stock Units
   
143
     
127
 
     
4,251
     
8,589
 

   
Six Months Ended
March 31, 2021
   
Six Months Ended
March 31, 2020
 
Class B common stock
   
4,154
     
8,462
 
Restricted Stock Units
   
173
     
127
 
     
4,327
     
8,589
 
 
Employee Stock Purchase Plan
 
At the Company's 2021 Annual Meeting of Stockholders (the "Annual Meeting"), held on February 23, 2021, the Company’s stockholders approved the OneWater Marine Inc. 2021 Employee Stock Purchase Plan (the “ESPP”), which was approved and adopted by the Board as of January 13, 2021 (the “Adoption Date”), subject to stockholder approval at the Annual Meeting. The effective date of the ESPP is February 23, 2021, and, unless earlier terminated, the ESPP will expire on the twentieth anniversary of the Adoption Date. The ESPP will be administered by the Board or by one or more committees to which the Board delegates such administration.
 
The ESPP enables eligible employees to purchase shares of the Company’s Class A common stock at a discount through participation in discrete offering periods. The ESPP is intended to qualify as an employee stock purchase plan under section 423 of the Internal Revenue Code of 1986, as amended. Up to a maximum of 299,505 shares of the Company’s Class A common stock may be issued under the ESPP, subject to certain adjustments as set forth in the ESPP. On the first day of each fiscal year during the term of the ESPP, beginning on October 1, and ending on (and including) September 30, the number of shares of Class A common stock that may be issued under the ESPP will increase by a number of shares equal to the least of (i) 1% of the outstanding shares on the Adoption Date, or (ii) such lesser number of shares (including zero) that the administrator determines for purposes of the annual increase for that fiscal year. The number of shares of Class A common stock that may be granted to any single participant in any single option period will be subject to certain limitations set forth in the plan. As of March 31, 2021, there has not yet been an offering period under the ESPP.
 
10.
Redeemable Preferred Interest in Subsidiary

On September 1, 2016, the Company organized OWAO. As of September 30, 2016, OWAO was not funded. In conjunction with Goldman and Beekman, OneWater LLC contributed a majority of its assets, including subsidiaries operating all of its retail operations, to OWAO in return for 100,000 common units. Additionally, as a part of the transaction, OWAO issued 68,000 preferred units in OWAO to Goldman and Beekman. The preferred interest had a stated 10.0% rate of return and there was no allocation of profits in excess of the stated return. The preferred interests were not convertible but may have been redeemed by the holder after five years or upon certain triggering events at face value plus accrued interest.

The Company had classified the redeemable preferred interest as temporary equity in the consolidated balance sheets. The discount on the issuance of the redeemable preferred interest was being accreted to retained common interests as a dividend from the date of issuance through the fifth anniversary of the issuance date. On February 11, 2020, in connection with the Offering, OWAO used $89.2 million in cash to fully redeem the preferred interest in subsidiary held by Goldman and Beekman. For the three months ended March 31, 2020, the Company recorded $1.1 million in accretion of the discount and amortization of the issuance costs associated with redeemable preferred interest in subsidiary, which includes an acceleration of the remaining discount and issuance costs balances outstanding at the redemption date.

11.
Income Taxes

The Company is a corporation and, as a result is subject to U.S. federal, state and local income taxes. OneWater LLC is treated as a pass-through entity for U.S. federal tax purposes and in most state and local jurisdictions. As such, OneWater LLC’s members, including the Company, are liable for federal and state income taxes on their respective shares of OneWater LLC’s taxable income.

Our effective tax rate of 17.6% for each of the three and six months ending March 31, 2021 differs from statutory rates primarily due to earnings allocated to non-controlling interests.

The Company recognizes deferred tax assets to the extent it believes these assets are more-likely-than-not to be realized. In making such a determination, the Company considers all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax planning strategies and recent results of operations. Based on our cumulative earnings history and forecasted future sources of taxable income, we believe that we will fully realize our deferred tax asset in the future. The Company has not recorded a valuation allowance.

As of March 31, 2021, the Company had not recognized any uncertain tax positions, penalties, or interest as management has concluded that no such positions exist. The Company is not currently subject to income tax audits in any U.S. or state jurisdiction for any tax year.

Tax Receivable Agreement
 
In connection with the Offering, the Company entered into a tax receivable agreement (the “Tax Receivable Agreement”) with certain of the owners of OneWater LLC. As of March 31, 2021 and September 30, 2020, our liability under the Tax Receivable Agreement was $17.9 million and $15.6 million, respectively, representing 85% of the calculated net cash savings in U.S. federal, state and local income tax and franchise tax that OneWater Inc. anticipates realizing in future years from the result of certain increases in tax basis and certain tax benefits attributable to imputed interest as a result of OneWater Inc.’s acquisition of OneWater LLC Units pursuant to an exercise of the Redemption Right or the Call Right (each as defined in the amended and restated limited liability company agreement of OneWater LLC (the “OneWater LLC Agreement”)).
 
The projection of future taxable income involves significant judgment. Actual taxable income may differ from our estimates, which could significantly impact our ability under the Tax Receivable Agreement. We have determined it is more-likely-than-not that we will be able to utilize all of our deferred tax assets subject to the Tax Receivable Agreement; therefore, we have recorded a liability under the Tax Receivable Agreement related to the tax savings we may realize from certain increases in tax basis and certain tax benefits attributable to imputed interest as a result of OneWater Inc.’s acquisition of OneWater LLC Units pursuant to an exercise of the Redemption Right or Call Right (each as defined in the OneWater LLC Agreement). If we determine the utilization of these deferred tax assets is not more-likely-than-not in the future, our estimate of amounts to be paid under the Tax Receivable Agreement would be reduced. In this scenario, the reduction of the liability under the Tax Receivable Agreement would result in a benefit to our consolidated statements of operations.

12.
Contingencies and Commitments
 
Operating Leases
 
The Company recorded rent expense of $3.9 million and $3.1 million during the three months ended March 31, 2021 and 2020, respectively, and $7.0 million and $6.1 million during the six months ended March 31, 2021 and 2020, respectively. The Company leases certain facilities and equipment under noncancelable operating lease agreements having terms in excess of one year, which expire at various dates through 2037.

Acquisition Contingent Consideration
 
As of March 31, 2021, the Company has recorded an estimate of contingent consideration for a fiscal year 2021 acquisition in the amount of $5.5 million. The acquisition contingent consideration liability is accounted for based on inputs that are unobservable and significant to the overall fair value measurement (Level 3). The estimated contingent consideration balance at March 31, 2021 is recorded in other long-term liabilities in the unaudited condensed consolidated balance sheets.
 
As of September 30, 2020, the Company recorded an estimate of contingent consideration for a fiscal year 2019 acquisition in the amount of $5.5 million. The acquisition contingent consideration liability had been accounted for based on inputs that were unobservable and significant to the overall fair value measurement (Level 3). The contingency period closed on December 1, 2020 and a final payout in the amount of $5.9 million was made on December 29, 2020. The estimated contingent consideration balance at September 30, 2020 was recorded in Other payables and accrued expenses in the unaudited condensed consolidated balance sheets. For the six months ended March 31, 2021, a $0.4 million expense is recorded in the unaudited condensed consolidated statements of operations for the adjustment to the contingent consideration.
 
Claims and Litigation
 
The Company is involved in various legal proceedings as either the defendant or plaintiff. Due to their nature, such legal proceedings involve inherent uncertainties including, but not limited to, court rulings, negotiations between the affected parties and other actions. Management assesses the probability of losses or gains for such contingencies and accrues a liability and/or discloses the relevant circumstances as appropriate. In the opinion of management, it is not reasonably probable that the pending litigation, disputes or claims against the Company, if decided adversely, will have a material adverse effect on its financial condition, results of operations or cash flows. Additionally, based on the Company’s review of the various types of claims currently known, there is no indication of a material reasonably possible loss in excess of amounts accrued. The Company currently does not anticipate that any known claim will materially adversely affect our financial condition, liquidity, or results of operations. However, the outcome of any matter cannot be predicted with certainty, and an unfavorable resolution of one or more matters presently known or arising in the future could have a material adverse effect on the Company’s financial condition, liquidity or results of operations.

13.
Related Party Transactions
 
In accordance with agreements approved by the Board, we purchased inventory, in conjunction with our retail sale of the products, from certain entities affiliated with common members of the Company. Total purchases incurred under these arrangements were $21.3 million and $8.7 million for the three months ended March 31, 2021 and 2020, respectively, and $36.4 million and $19.5 million for the six months ended March 31, 2021 and 2020, respectively.
 
In accordance with agreements approved by the Board, certain entities affiliated with common members of the Company receive fees for rent of commercial property. Total expenses incurred under these arrangements were $0.5 million and $0.4 million for the three months ended March 31, 2021 and 2020, respectively, and $1.1 million and $1.0 million for the six months ended March 31, 2021 and 2020, respectively.
 
In accordance with agreements approved by the Board, the Company received fees from certain entities and individuals affiliated with common members of the Company for goods and services. Total fees recorded under these arrangements were $1.3 million and $0.3 million for the three months ended March 31, 2021 and 2020, respectively, and $1.4 million and $0.4 million for the six months ended March 31, 2021 and 2020, respectively.
 
In accordance with agreements approved by the Board, the Company made payments to certain entities and individuals affiliated with common members of the Company for goods and services. Total payments recorded under these arrangements were $0.1 million and $0.2 million for the three months ended March 31, 2021 and 2020, respectively, and $0.1 million and $0.4 million for the six months ended March 31, 2021 and 2020, respectively. Included in these amounts and in connection with our notes payable floor plan financing, our Chief Executive Officer was paid a guarantee fee of $0.1 and $0.3 million for the three and six months ended March 31, 2020, respectively, for his personal guarantee associated with this arrangement.
 
In connection with transactions noted above, the Company was due $5,851 and $0.1 million as recorded within accounts receivable as of March 31, 2021 and September 30, 2020, respectively.
Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
 AND RESULTS OF OPERATIONS
 
Unless the context requires otherwise, references in this report to the "Company," "we," "us," and "our" refer to OneWater Marine Inc. and its consolidated subsidiaries. The following discussion and analysis should be read in conjunction with the accompanying financial statements and related notes. The following discussion contains forward-looking statements that reflect our future plans, estimates, beliefs and expected performance. The forward-looking statements are dependent upon events, risks and uncertainties that may be outside our control. Our actual results could differ materially from those discussed in these forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those factors discussed above in “Cautionary Statement Regarding Forward-Looking Statements” and described under the heading “Risk Factors” included in our Annual Report on Form 10-K for the year ended September 30, 2020, filed with the U.S. Securities and Exchange Commission (the “SEC”) on December 3, 2020, all of which are difficult to predict. In light of these risks, uncertainties and assumptions, the forward-looking events discussed may not occur. We do not undertake any obligation to publicly update any forward-looking statements except as otherwise required by applicable law.
 
Overview
 
We believe that we are one of the largest and fastest-growing premium recreational boat retailers in the United States with 69 stores comprising 24 dealer groups in 10 states. Our dealer groups are located in highly attractive markets throughout the Southeast, Gulf Coast, Mid-Atlantic and Northeast, including Texas, Florida, Alabama, North Carolina, South Carolina, Georgia and Ohio, which collectively comprise seven of the top twenty states for marine retail expenditures. We believe that we are a market leader by volume in sales of premium boats in 12 out of the 15 markets in which we operate. In fiscal year 2020, we sold over 10,100 new and pre-owned boats, of which we believe approximately 40% were sold to customers who had a trade-in or with whom we had otherwise established relationships. The combination of our significant scale, diverse inventory, access to premium boat brands and meaningful dealer group brand equity enable us to provide a consistently professional experience as reflected in the number of our repeat customers and same-store sales growth.
 
We were formed in 2014 as One Water Marine Holdings, LLC (“OneWater LLC”) through the combination of Singleton Marine and Legendary Marine, which created a marine retail platform that collectively owned and operated 19 stores. Since the combination in 2014, we have acquired a total of 49 additional stores through 20 acquisitions. Our portfolio as of March 31, 2021 consisted of 24 different local and regional dealer groups. Because of this, we believe we are one of the largest and fastest-growing premium recreational boat retailers in the United States based on number of stores and total boats sold. While we have opportunistically opened new stores in select markets, we believe that it is generally more effective economically and operationally to acquire existing stores with experienced staff and established reputations.
 
The boat dealer market is highly fragmented and is comprised of over 4,000 stores nationwide. Most competing boat retailers are operated by local business owners who own three or fewer stores. Despite our size, we comprise less than 2% of total industry sales. Our scale and business model allow us to leverage our extensive inventory to provide consumers with the ability to find a boat that matches their preferences (e.g., make, model, color, configuration and other options) and to deliver the boat within days while providing a personalized sales experience. We are able to operate with a comparatively higher degree of profitability than other independent retailers because we allocate support resources across our store base, focus on high-margin products and services, utilize floor plan financing and provide core back-office functions on a scale that many independent retailers are unable to match. We seek to be the leading boat retailer by total market share within each boating market and within the product segments in which we participate. To the extent that we are not, we will evaluate acquiring other local retailers in order to increase our sales, to add additional brands or to provide us with additional high-quality personnel.

Impact of COVID-19
 
The COVID-19 pandemic and its related effects, including restraints on U.S. economic and leisure activities, have had and may continue to have a significant impact on our operations and financial condition. We place the utmost importance on the safety and well-being of our employees and in compliance with guidelines issued by the World Health Organization (WHO), the Centers for Disease Control and Prevention (CDC) and federal, state or local authorities, we closed or reduced staffing at certain locations during portions of the fiscal year ended September 30, 2020. We have implemented cleaning and social distancing techniques at each of our locations. In light of the current environment, our sales team members are fully engaged with customers and are providing them with virtual walkthroughs of inventory and/or private, at home or on water, showings, while our service departments are working hard to deliver boats and keep customers on the water.
 
The COVID-19 pandemic and its related effects may continue to interfere with the ability of our employees, contractors, customers, suppliers, and other business partners to perform our and their respective responsibilities and obligations with respect to the operation of our business. To date, we have not experienced any significant shortages of inventory, but due to the COVID-19 pandemic and increased sales generally across the industry, there has been industry-wide supply chain constraints. It is possible that a significant shortage could occur as a result of the COVID-19 pandemic and its effects on, among other things, supply chains, operations and consumer demand.
 
On April 1, 2020, our executive management team elected to undertake salary cuts in response to the impacts of COVID-19. Additionally, the Board elected to forgo their cash compensation for a period of six months. However, given trends in demand, the cash compensation and salaries of our directors and executive management team, as applicable, were restored to their pre-COVID levels as of July 3, 2020, and our directors and executive management team received a one-time cash payment equal to their reduction in compensation.

While we continue to monitor the impact of the COVID-19 pandemic on our business and operations, our financial results for the three and six months ended March 31, 2021 suggest that spending in all our regions and across product lines has proven remarkably resilient despite the challenges posed by the pandemic as families have increasingly focused on socially-distanced, outdoor recreation, driving a material increase in sales.
 
Though the COVID-19 pandemic did not adversely affect our financial position for the three and six months ended March 31, 2021 relative to the three and six months ended March 31, 2020, the ultimate impact of the COVID-19 pandemic on our business remains uncertain and dependent on various factors, including the existence and extent of a prolonged economic downturn, the resurgence of COVID19 in certain geographic areas, emergence of new strain variants thereof, consumer demand and the ability to safely and legally operate our stores.

Trends and Other Factors Impacting Our Performance
 
Acquisitions
 
We are a highly acquisitive company. Since the combination of Singleton Marine and Legendary Marine in 2014, we have acquired 49 additional stores through 20 dealer group acquisitions. Our team remains focused on expanding our dealership in regions with strong boating cultures, enhancing the customer experience, and generating value for our shareholders.
 
We have an extensive acquisition track record within the boating industry and believe we have developed a reputation for treating sellers and their staff in an honest and fair manner. We typically retain the management team and name of the acquired dealerships. We believe this practice preserves the acquired dealer’s customer relationships and goodwill in the local marketplace. We believe our reputation and scale have positioned us as a buyer of choice for boat dealers who want to sell their businesses. To date, 100% of our acquisitions have been sourced from inbound inquiries, and the number of annual inquiries we receive has consistently increased over time. Our strategy is to acquire stores at attractive EBITDA multiples and then grow same-store sales while benefitting from cost-reducing synergies. Historically, we have typically acquired dealer groups for less than 4.0x EBITDA on a trailing twelve-month basis and believe that we will be able to continue to make attractive acquisitions within this range.
 
In the six months ended March 31, 2021, we completed the following transactions:


On December 1, 2020, Tom George Yacht Group with two locations in Florida

On December 31, 2020, Walker Marine Group with five locations in Florida

On December 31, 2020, Roscioli Yachting Center with one location in Florida

Total purchase price of the acquisitions during the six months ended March 31, 2021 was $93.0 million and was paid with $85.5 million in cash, and the remaining $7.5 million was financed with $5.5 million estimated acquisition contingent consideration and a $2.1 million seller notes payable. The acquisitions contributed $30.7 million to our consolidated revenue and $3.3 million to our income before income tax expense for the three months ended March 31, 2021. Included in our results for the six months ended March 31, 2021, the acquisitions contributed $32.8 million to our consolidated revenue and $3.4 million to our income before income tax expense. Costs related to acquisitions are included in transaction costs and primarily relate to legal, accounting, and valuation fees, which are charged directly to operations in the consolidated statements of operations as incurred in the amount of $0.4 million and $0.6 million for the three and six months ended March 31, 2021, respectively.

General Economic Conditions
 
General economic conditions and consumer spending patterns can negatively impact our operating results. Unfavorable local, regional, national, or global economic developments or uncertainties, including the adverse economic effects of the COVID-19 pandemic or a prolonged economic downturn, could reduce consumer spending and adversely affect our business. Consumer spending on discretionary goods may also decline as a result of lower consumer confidence levels, even if prevailing economic conditions are otherwise favorable. Economic conditions in areas in which we operate stores, particularly in the Southeast, can have a major impact on our overall results of operations. Local influences, such as corporate downsizing and inclement weather such as hurricanes and other storms, environmental conditions, global public health concerns and events could adversely affect our operations in certain markets and in certain periods. Any extended period of adverse economic conditions or low consumer confidence is likely to have a negative effect on our business.
 
Our business was significantly impacted during the recessionary period that began in 2007. This period of weakness in consumer spending and depressed economic conditions had a substantial negative effect on our operating results. In response to these conditions we reduced our inventory purchases, closed certain stores and reduced headcount. Additionally, in an effort to counteract the downturn, we increased our focus on pre-owned sales, parts and repair services, and finance and insurance services. As a result, we surpassed our pre-recession sales levels in less than 24 months. While we believe the measures we took significantly reduced the impact of the downturn on the business, we cannot guarantee similar results in the event of a future downturn. Additionally, we cannot predict the timing or length of unfavorable economic or industry conditions, including the downturn as a result of the COVID-19 pandemic, or the extent to which they could adversely affect our operating results.

Although past economic conditions have adversely affected our operating results, we believe we are capable of responding in a manner that allows us to substantially outperform the industry and gain market share. We believe our ability to capture such market share enables us to align our retail strategies with the desires of customers. We expect our core strengths, including retail and acquisition strategies, will allow us to capitalize on growth opportunities as they occur, despite market conditions.
 
How We Evaluate Our Operations
 
Revenue
 
We have a diversified revenue profile that is comprised of new boat sales, pre-owned boat sales, F&I products, repair and maintenance services, and parts and accessories. Although non-boat sales contributed approximately 10.3% and 10.0% to revenue in the three months ended March 31, 2021 and 2020, respectively, and 10.6% and 10.7% in the six months ended March 31, 2021 and 2020, respectively, due to the higher gross margin on these product and service lines, non-boat sales contributed 25.6% and 29.8% to gross profit in the three months ended March 31, 2021 and 2020, respectively, and 26.7% and 30.4% to gross profit in the six months ended March 31, 2021 and 2020, respectively. During different phases of the economic cycle, consumer behavior may shift away from new boats; however, we are well-positioned to benefit from revenue from pre-owned boats, repair and maintenance services, and parts and accessories, which have all historically increased during periods of economic uncertainty. We generate pre-owned sales from boats traded-in for new and pre-owned boats, boats purchased from consumers, brokerage transactions, consignment sales and wholesale sales. We have also diversified our business across geographies and dealership types (e.g., fresh water and salt water) in order to reduce the effects of seasonality. In addition to seasonality, revenue and operating results may also be significantly affected by quarter-to-quarter changes in economic conditions, manufacturer incentive programs, adverse weather conditions and other developments outside of our control.

Gross Profit
 
We calculate gross profit as revenue less cost of sales. Cost of sales consists of actual amounts paid for products, costs of services (primarily labor), transportation costs from manufacturers to our retail stores and vendor consideration. Gross profit excludes depreciation and amortization, which is presented separately in our consolidated statements of operations.
 
Gross Profit Margin
 
Our overall gross profit margin varies with our revenue mix. Sales of new and pre-owned boats, which have comparable margins, generally result in a lower gross profit margin than our non-boat sales. As a result, when revenue from non-boat sales increases as a percentage of total revenue, we expect our overall gross profit margin to increase.
 
Selling, General and Administrative Expenses
 
Selling, general, and administrative (‘‘SG&A’’) expenses consist primarily of salaries and incentive-based compensation, advertising, rent, insurance, utilities, and other customary operating expenses. A portion of our cost structure is variable (such as sales commissions and incentive compensation), or controllable (such as advertising), which we believe allows us to adapt to changes in the retail environment over the long term. We typically evaluate our variable expenses, selling expenses and all other SG&A expenses in the aggregate as a percentage of total revenue.
 
Same-Store Sales
 
We assess the organic growth of our revenue on a same-store basis. We believe that our assessment on a same-store basis represents an important indicator of comparative financial results and provides relevant information to assess our performance. New and acquired stores become eligible for inclusion in the comparable store base at the end of the store’s thirteenth month of operations under our ownership and revenues are only included for identical months in the same-store base periods. Stores relocated within an existing market remain in the comparable store base for all periods. Additionally, amounts related to closed stores are excluded from each comparative base period. Because same-store sales may be defined differently by other companies in our industry, our definition of this measure may not be comparable to similarly titled measures of other companies, thereby diminishing its utility.
 
Adjusted EBITDA
 
We define Adjusted EBITDA as net income before interest expense – other, income tax expense, depreciation and amortization and other (income) expense, further adjusted to eliminate the effects of items such as the change in fair value of warrant liability, loss on contingent consideration, loss on extinguishment of debt and transaction costs. See ‘‘—Comparison of Non-GAAP Financial Measure’’ for more information and a reconciliation of Adjusted EBITDA to net income, the most directly comparable financial measure calculated and presented in accordance with GAAP.
 
Summary of Acquisitions
 
The comparability of our results of operations between the periods discussed below is naturally affected by the acquisitions we have completed during such periods. We are also continuously evaluating and pursuing acquisitions on an ongoing basis, and such acquisitions, if completed, will continue to impact the comparability of our financial results. While we expect continued growth and strategic acquisitions in the future, our acquisitions may have materially different characteristics than our historical results, and such differences in economics may impact the comparability of our future results of operations to our historical results.

Fiscal Year 2021 Acquisitions
 

Effective December 1, 2020, we acquired Tom George Yacht Sales, Inc., a full-service marine retailer based in Florida with two stores.
 

Effective December 31, 2020, we acquired Walker Marine Group, Inc., a full-service marine retailer based in Florida with five stores.
 

Effective December 31, 2020, we acquired Roscioli Yachting Center, Inc., a full-service marina and yachting facility located in Florida, including the related real estate and in-water slips.
 
We refer to the fiscal year 2021 acquisitions described above collectively as the ‘‘2021 Acquisitions.’’ The 2021 acquisitions are reflected in our unaudited Condensed Consolidated Statements of Operations for the three and six months ended March 31, 2021 from the date of acquisition forward.

Other Factors Affecting Comparability of Our Future Results of Operations to Our Historical Results of Operations
 
Our historical financial results discussed below may not be comparable to our future financial results for the reasons described below.
 

OneWater Inc. is subject to U.S. federal, state and local income taxes as a corporation. Our accounting predecessor, OneWater LLC, was and is treated as a partnership for U.S. federal income tax purposes, and as such, was generally not subject to U.S. federal income tax at the entity level. Rather, the tax liability with respect to its taxable income is passed through to its members. Accordingly, the financial data attributable to our predecessor contains no provision for U.S. federal income taxes or income taxes in any state or locality. OneWater Inc. was subject to U.S. federal, state and local taxes at an estimated blended statutory rate of 24.1% for the six months ended March 31, 2021. OneWater Inc. was subject to U.S. federal, state and local taxes at an estimated blended statutory rate of 24.3% from February 11, 2020 through March 31, 2020, the period following the Offering.
 

As we further implement controls, processes and infrastructure applicable to companies with publicly traded equity securities, it is likely that we will incur additional SG&A expenses relative to historical periods. See ‘‘—Post-Offering Taxation and Public Company Costs.’’
 
Our future results will depend on our ability to efficiently manage our combined operations and execute our business strategy.

Results of Operations
 
Three Months Ended March 31, 2021, Compared to Three Months Ended March 31, 2020
 
   
For the Three Months
Ended March 31, 2021
   
For the Three Months
Ended March 31, 2020
             
   
Amount
   
% of Revenue
   
Amount
   
% of Revenue
   
$ Change
   
% Change
 
   
($ in thousands)
 
Revenues
                                   
New boat
 
$
239,654
     
72.7
%
 
$
132,719
     
69.9
%
 
$
106,935
     
80.6
%
Pre-owned boat
   
56,082
     
17.0
%
   
38,186
     
20.1
%
   
17,896
     
46.9
%
Finance & insurance income
   
11,789
     
3.6
%
   
8,083
     
4.3
%
   
3,706
     
45.8
%
Service, parts and other
   
22,086
     
6.7
%
   
10,975
     
5.8
%
   
11,111
     
101.2
%
Total revenues
   
329,611
     
100.0
%
   
189,963
     
100.0
%
   
139,648
     
73.5
%
                                                 
Gross Profit
                                               
New boat
   
52,507
     
15.9
%
   
24,465
     
12.9
%
   
28,042
     
114.6
%
Pre-owned boat
   
13,534
     
4.1
%
   
6,843
     
3.6
%
   
6,691
     
97.8
%
Finance & insurance
   
11,789
     
3.6
%
   
8,083
     
4.3
%
   
3,706
     
45.8
%
Service, parts & other
   
10,956
     
3.3
%
   
5,193
     
2.7
%
   
5,763
     
111.0
%
Total gross profit
   
88,786
     
26.9
%
   
44,584
     
23.5
%
   
44,202
     
99.1
%
                                                 
Selling, general and administrative expenses
   
48,348
     
14.7
%
   
32,383
     
17.0
%
   
15,965
     
49.3
%
Depreciation and amortization
   
1,378
     
0.4
%
   
791
     
0.4
%
   
587
     
74.2
%
Transaction costs
   
368
     
0.1
%
   
2,925
     
1.5
%
   
(2,557
)
   
-87.4
%
                                                 
Income from operations
   
38,692
     
11.7
%
   
8,485
     
4.5
%
   
30,207
     
356.0
%
                                                 
Interest expense - floor plan
   
330
     
0.1
%
   
2,525
     
1.3
%
   
(2,195
)
   
-86.9
%
Interest expense - other
   
1,215
     
0.4
%
   
2,457
     
1.3
%
   
(1,242
)
   
-50.5
%
Other expense (income), net
   
5
     
0.0
%
   
52
     
0.0
%
   
(47
)
   
-90.4
%
Income before income tax expense
   
37,142
     
11.3
%
   
3,451
     
1.8
%
   
33,691
     
976.3
%
Income tax expense
   
6,550
     
2.0
%
   
472
     
0.2
%
   
6,078
     
1287.7
%
Net income
   
30,592
     
9.3
%
   
2,979
     
1.6
%
   
27,613
     
926.9
%
Less: Net income attributable to non-controlling interest
   
-
             
103
             
(103
)
   
-100.0
%
Less: Net income attributable to non-controlling interests of One Water Marine Holdings, LLC
   
10,117
             
1,791
             
8,326
     
464.9
%
Net income attributable to One Water Marine Inc.
 
$
20,475
           
$
1,085
           
$
19,390
     
1787.1
%
 
Revenue
 
Overall, revenue increased by $139.6 million, or 73.5%, to $329.6 million for the three months ended March 31, 2021 from $190.0 million for the three months ended March 31, 2020. Revenue generated from same-store sales increased 57.4% for the three months ended March 31, 2021 as compared to the three months ended March 31, 2020, driven by an increase in sales across all boating categories and higher finance & insurance and service, parts and other sales. The increase in revenue was primarily driven by an increase in both the number of boats sold and the average selling price of new and pre-owned boats. Overall revenue increased by $139.6 million as a result of a $108.3 million increase in same-store sales and a $31.4 million increase from stores not eligible for inclusion in the same-store sales base. New and acquired stores become eligible for inclusion in the comparable store base at the end of the store’s thirteenth month of operations under our ownership and revenues are only included for identical months in the same-store base periods. As of March 31, 2021, we had acquired eight stores in fiscal year 2021. We did not make any acquisitions in fiscal year 2020.
 
New Boat
 
New boat revenue increased by $106.9 million, or 80.6%, to $239.7 million for the three months ended March 31, 2021 from $132.7 for the three months ended March 31, 2020. The increase was primarily attributable to our robust same-store sales growth. During the three months ended March 31, 2021 we experienced an increase in unit sales of approximately 26.4% and an increase in average unit prices of approximately 42.9% over the three months ended March 31, 2020. We believe the increase in units sold was primarily due to the shift towards outdoor leisure activity during the COVID-19 pandemic as well as the continued execution of operational improvements on previously acquired dealers. The increase in average sales price was due in part to the mix of boat brands and models sold and product improvements in the functionality and technology of boats, which continues to be a driver of consumer demand, as well as supply and demand forces as manufacturer replenishments have been slowed by the COVID-19 pandemic providing us increased leverage in the sales cycle.
 
Pre-owned Boat
 
Pre-owned boat revenue increased by $17.9 million, or 46.9%, to $56.1 million for the three months ended March 31, 2021 from $38.2 million for the three months ended March 31, 2020. We sell a wide range of brands and sizes of pre-owned boats under different types of sales arrangements (e.g., trade-ins, brokerage, consigned and wholesale), which causes periodic and seasonal fluctuations in the average sales price. Pre-owned boat sales for the three months ended March 31, 2021 experienced a 2.7% decrease in the number of units sold due to industry-wide supply constraints. We benefited from a 39.4% increase in average unit price largely due to the mix of pre-owned products, the composition of the brands and models sold during the period as well as the industry-wide supply restrictions driving prices higher.

Finance & Insurance Income
 
We generate revenue from arranging finance & insurance products, including financing, insurance and extended warranty contracts, to customers through various third-party financial institutions and insurance companies. Finance & insurance income increased by $3.7 million, or 45.8%, to $11.8 million for the three months ended March 31, 2021 from $8.1 million for the three months ended March 31, 2020. The increase was primarily due to the additional new and pre-owned boat revenues, which were primarily attributable to our same-store sales growth and the 2021 Acquisitions. We remain very focused on improving sales of finance & insurance products throughout our dealer network and implementing best practices at acquired dealer groups and existing stores. Finance & insurance products decreased as a percentage of total revenue to 3.6% in the three months ended March 31, 2021 from 4.3% for the three months ended March 31, 2020, primarily due to the 2021 Acquisitions as well as the increase in service, parts and other revenue as a portion of our total revenue. Since finance & insurance income is fee-based, we do not incur any related cost of sale. Finance & insurance income is recorded net of related fees, including fees charged back due to any early cancellation of loan or insurance contracts by a customer.
 
Service, Parts & Other
 
Service, parts & other revenue increased by $11.1 million, or 101.2%, to $22.1 million for the three months ended March 31, 2021 from $11.0 million for the three months ended March 31, 2020. This increase in service, parts & other revenue is primarily due to ancillary sales generated from our increase in new and pre-owned boat sales, sales attributable to our same-store sales growth and the impact of the 2021 Acquisitions.
 
Gross Profit
 
Overall, gross profit increased by $44.2 million, or 99.1%, to $88.8 million for the three months ended March 31, 2021 from $44.6 million for the three months ended March 31, 2020. This increase was primarily due to our overall increase in same-store sales, a shift in the mix and size of boat models sold, the Company’s focus on dynamic pricing, an increase in service, parts & other sales, finance & insurance, and the emphasis on meeting customer demand. Overall gross margins increased 340 basis points to 26.9% for the three months ended March 31, 2021 from 23.5% for the three months ended March 31, 2020 due to the factors noted below.
 
New Boat
 
New boat gross profit increased by $28.0 million, or 114.6%, to $52.5 million for the three months ended March 31, 2021 from $24.5 million for the three months ended March 31, 2020. New boat gross profit as a percentage of new boat revenue was 21.9% for the three months ended March 31, 2021 as compared to 18.4% in the three months ended March 31, 2020. The increase in new boat gross profit and gross profit margin is due primarily to a shift in the mix and size of boat models sold, the margin profile of recently acquired locations and the expansion of new boat gross profit margins created by a lower supply of new boat inventory in the three months ended March 31, 2021.
 
Pre-owned Boat
 
Pre-owned boat gross profit increased by $6.7 million, or 97.8%, to $13.5 million for the three months ended March 31, 2021 from $6.8 million for the three months ended March 31, 2020. The increase in pre-owned gross profit was driven by the increase in pre-owned revenue primarily as a result of our same-store sales growth and the 2021 Acquisitions. Pre-owned boat gross profit as a percentage of pre-owned boat revenue was 24.1% and 17.9% for the three months ended March 31, 2021 and 2020, respectively. We sell a wide range of brands and sizes of pre-owned boats under different types of sales arrangements (e.g., trade-ins, brokerage, consignment and wholesale), which may cause periodic and seasonal fluctuations in pre-owned boat gross profit as a percentage of revenue. In the three months ended March 31, 2021 as compared to the three months ended March 31, 2020, we experienced an increase in our gross profit on pre-owned sales for each of the different sales arrangements. Margins were also driven higher by a lower supply of pre-owned inventory in the market for the three months ended March 31, 2021.
 
Finance & Insurance
 
Finance & insurance gross profit increased by $3.7 million, or 45.8%, to $11.8 million for the three months ended March 31, 2021 from $8.1 million for the three months ended March 31, 2020. Finance & insurance income is fee-based revenue for which we do not recognize incremental cost of sale.
 
Service, Parts & Other
 
Service, parts & other gross profit increased by $5.8 million, or 111.0%, to $11.0 million for the three months ended March 31, 2021 from $5.2 million for the three months ended March 31, 2020. The increase in service, parts & other gross profit was primarily driven by our same-store sales growth as well as the impact of the 2021 Acquisitions. Service, parts & other gross profit as a percentage of service, parts & other revenue was 49.6% and 47.3% for the three months ended March 31, 2021 and 2020, respectively. This increase was the result of the mix of products sold and services provided as the gross profit shifted more towards service work, which has a higher margin. Additionally, due to the increased demand, we experienced an increase in utilization of our service technicians which drove margins higher.
 
Selling, General & Administrative Expenses
 
Selling, general & administrative expenses increased by $16.0 million, or 49.3%, to $48.3 million for the three months ended March 31, 2021 from $32.4 million for the three months ended March 31, 2020. This increase was primarily due to expenses incurred to support the overall increase in revenues and gross profit. Selling, general & administrative expenses experienced a  $15.3 million increase in personnel expenses, a $0.5 million decrease in selling and administrative expenses and a $1.2 million increase in fixed expenses. Selling, general & administrative expenses as a percentage of revenue decreased to 14.7% from 17.0% for the three months ended March 31, 2021 and 2020, respectively. The reduction in selling, general & administrative expenses as a percentage of revenue was primarily due to the Company’s ability to leverage its existing expense structure to support the increase in revenue, as well as a reduction in selling expenses related to the cancellation of boat shows.

Depreciation and Amortization
 
Depreciation and amortization expense increased $0.6 million, or 74.2%, to $1.4 million for the three months ended March 31, 2021 compared to $0.8 million for the three months ended March 31, 2020. The increase in depreciation and amortization expense for the three months ended March 31, 2021 compared to the three months ended March 31, 2020 was primarily attributable to an increase in property and equipment from our 2021 Acquisitions.

Transaction Costs
 
The decrease in transaction costs of $2.6 million, or 87.4%, to $0.4 million for the three months ended March 31, 2021 compared to $2.9 million for the three months ended March 31, 2020 was primarily attributable to $2.3 million of expenses recognized in conjunction with the Offering that were not able to be capitalized for the three months ended March 31, 2020.
 
Income from Operations
 
Income from operations increased $30.2 million, or 356.0%, to $38.7 million for the three months ended March 31, 2021 compared to $8.5 million for the three months ended March 31, 2020. The increase was primarily attributable to the $44.2 million increase in gross profit for the three months ended March 31, 2021 as compared to the three months ended March 31, 2020, partially offset by a $16.0 million increase in selling, general & administrative expenses during the same periods.
 
Interest Expense – Floor Plan
 
Interest expense – floor plan decreased $2.2 million, or 86.9%, to $0.3 million for the three months ended March 31, 2021 compared to $2.5 million for the three months ended March 31, 2020. This decrease was primarily attributable to falling interest rates, an increase in interest assistance received from our manufacturers and bank, as well as a $110.5 million decrease in the outstanding borrowings on our Sixth Amended and Restated Inventory Financing Agreement (the “Inventory Financing Facility”) as of March 31, 2021 compared to March 31, 2020.
 
Interest Expense – Other
 
The decrease in interest expense – other of $1.2 million, or 50.5%, to $1.2 million for the three months ended March 31, 2021 compared to $2.5 million for the three months ended March 31, 2020 was primarily attributable to the July 22, 2020 payoff of our Term and Revolver Credit Facility (as defined below) and entry into the Refinanced Credit Facility (as defined below), which offers a more favorable interest rate.
 
Other Expense (Income), Net
 
Other expense decreased to $4,881 during the three months ended March 31, 2021 as compared to $51,492 for the three months ended March 31, 2020.

Income Tax Expense
 
The $6.1 million increase in income tax expense for the three months ended March 31, 2021 as compared to the three months ended March 31, 2020 was primarily the result of the $33.7 million increase in income before income tax expense, the Offering and the taxability of OneWater Inc. as a corporation for the full three months ended March 31, 2021 versus only the period subsequent to the Offering for the three months ended March 31, 2020. Additionally, as Class B common stock was exchanged for Class A common stock (in accordance with the terms of the OneWater LLC Agreement), the proportion of consolidated income before income tax expense allocated to OneWater Inc. increased, yielding higher income tax expense.
 
Net Income
 
Net income increased by $27.6 million to $30.6 million for the three months ended March 31, 2021 compared to a $3.0 million for the three months ended March 31, 2020. The increase was primarily attributable to the $44.2 million increase in gross profit for the three months ended March 31, 2021 compared to March 31, 2020. The increase was partially offset by the $16.0 million increase in selling, general & administrative expenses and the $6.1 million increase in income tax expense for the three months ended March 31, 2021 compared to the three months ended March 31, 2020.

Six Months Ended March 31, 2021, Compared to Six Months Ended March 31, 2020
 
   
For the Six Months
Ended March 31, 2021
   
For the Six Months
Ended March 31, 2020
             
   
Amount
   
% of Revenue
   
Amount
   
% of Revenue
   
$ Change
   
% Change
 
   
($ in thousands)
 
Revenues
                                   
New boat
 
$
391,482
     
72.0
%
 
$
235,571
     
68.5
%
 
$
155,911
     
66.2
%
Pre-owned boat
   
94,662
     
17.4
%
   
71,257
     
20.7
%
   
23,405
     
32.8
%
Finance & insurance income
   
17,752