Consent of Independent Registered Public Accounting Firm

 

We consent to the incorporation by reference in the Registration Statements on Form S-3 (File No. 333-259345) and Form S-8 (File No. 333-236362 and 333-255907) of OneWater Marine, Inc. (the “Company”) of our report dated April 28, 2021, except for the effects of the change in accounting principle as described in Note 2, Note 3, the Goodwill and Intangible Assets section of Note 4, and Note 7 to the consolidated financial statements as to which the date is February 17, 2022, relating to the consolidated financial statements of THMS Holdings, LLC as of and for the year ended December 31, 2020 filed with the Form 8-K/A report of the Company filed on February 18, 2022.

 

/s/ Baker Tilly US, LLP

Plano, TX

February 18, 2022

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To the Managing Member of

THMS Holdings, LLC and Subsidiaries:

 

We have audited the accompanying consolidated financial statements of THMS Holdings, LLC (a Delaware limited liability company) and Subsidiaries, which comprise the consolidated balance sheet as of December 31, 2020, and the related consolidated statements of operations, changes in members’ equity, and cash flows for the year then ended, and the related notes to consolidated financial statements.

 

Management’s Responsibility for the Consolidated Financial Statements

 

Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

 

Auditors’ Responsibility

 

Our responsibility is to express an opinion on these consolidated financial statements based on our audit.  We conducted our audit in accordance with auditing standards generally accepted in the United States of America.  Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement.

 

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements.  The procedures selected depend on the auditors’ judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error.  In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control.  Accordingly, we express no such opinion.  An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

 

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

 

Opinion

 

In our opinion, the 2020 consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of THMS Holdings, LLC and Subsidiaries as of December 31, 2020, and the consolidated results of their operations and their cash flows for the year then ended in accordance with accounting principles generally accepted in the United States of America.

 

Prior Period Consolidated Financial Statements

 

The 2019 consolidated financial statements of THMS Holdings, LLC and Subsidiaries, were audited by other auditors whose report dated April 15, 2020 except for the effects of the change in accounting principle which are dated February 4, 2022, expressed an unmodified opinion on those statements.

 

 Emphasis of Matter

 

As discussed in Note 2 to the consolidated financial statements, the Company has recorded a change in accounting principle in relation to the Company’s business combinations and related goodwill and intangible assets as the Company is now considered to be a public business entity based on Accounting Standards Update No. 2013-12. Our opinion is not modified with respect to that matter.

 

/s/ Baker Tilly US, LLP

Plano, Texas

April 28, 2021, except for the effects of the change in accounting principle as described in Note 2, Note 3, the Goodwill and Intangible Assets section of Note 4, and Note 7 to the consolidated financial statements as to which the date is February 17, 2022

 

1. ORGANIZATION

THMS Holdings, LLC and Subsidiaries (collectively, the “Company”), is a Delaware limited liability company established on April 30, 2019.  The Company is in the business of manufacturing, designing, assembling, packaging and shipping boating equipment and accessories.  The Company sells to retail wholesalers in addition to operating a physical storefront.  The Company also manufacturers metal and plastic moldings which are used in further production of marine supply equipment.

2. CHANGE IN ACCOUNTING PRINCIPLE

The following illustrates the impact on the consolidated balance sheet:

The following illustrates the impact on the consolidated statement of operations:

The following illustrates the impact on the consolidated statement of changes in members’ equity:

2. CHANGE IN ACCOUNTING PRINCIPLE (CONTINUED)

The following illustrates the impact on the consolidated statement of cash flows:

3. ACQUISITIONS

Effective January 17, 2020, the Company purchased a majority of the assets of First Source Marine (“First Source”).  The total purchase consideration was $2,811,400, and consisted of $2,561,400 of cash and $250,000 rollover equity of Class AA shares.  In connection with the acquisition, the Company incurred $281,603 of acquisition costs that were expensed as incurred.  These acquisition costs are included in the accompanying consolidated statement of operations for the year ended December 31, 2020.

The acquisition was accounted for using the acquisition method of accounting and, accordingly, the accompanying consolidated statement of operations for the year ended December 31, 2020 includes the results of operations of First Source beginning January 17, 2020.  The acquisition of First Source was recorded by allocating the total purchase consideration to the fair value of the net assets acquired, including intangible assets.  The purchase consideration exceeded the fair value of the assets resulting in goodwill of $296,803. The goodwill recorded as part of the acquisition primarily reflects the expectation of opportunities from the market that have potential for growth. The Company does expect to deduct goodwill for tax purposes in future years.

The purchase consideration for First Source was allocated to the net assets acquired as follows:

3. ACQUISITION (CONTINUED)

On April 30, 2019, the Company entered into an Asset Purchase and Contribution Agreement to acquire substantially all of the assets of T-H Marine Supplies, Inc.  Total consideration was $68,618,631 paid with cash.  The following table summarizes the allocation of the purchase price to the assets acquired and liabilities assumed based on their fair values.  The excess of the purchase price over the fair value of assets acquired and liabilities assumed was recorded as goodwill. The goodwill recorded as part of the acquisition primarily reflects the expectation of opportunities from the market that have potential for growth. The Company does not expect to deduct goodwill for tax purposes in future years.

The estimated fair value of accounts receivable approximates their contract value.  The fair value of trademark was based on a relief from royalty method using a three-year average of non-licensed sales, a royalty rate of 2.5% and a discount rate of 16%. The fair value of the customer relations was based on a multi-period excess earnings method using projected discounted cash flows over a 20-year period, a discount rate of 17.6% and a net customer attrition rate of 5.0%

The Company incurred transaction related expenses of $2,146,844 that were expensed as incurred. These acquisition costs are included in the accompanying consolidated statement of operations for the period from April 30, 2019 (inception) to December 31, 2019.

Machinery and equipment	5-7 years
Vehicles	5 years

Level 1:

Quoted prices (unadjusted) in active markets that are accessible at the measurement date for identical assets or liabilities.  The fair value hierarchy gives the highest priority to Level 1 inputs.

Level 2:

Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities, quoted prices in inactive markets or model-derived valuations in which all significant inputs are observable or can be derived principally from or corroborated with observable market data.

Level 3:

Unobservable inputs are used when little or no market data is available.  The fair value hierarchy gives the lowest priority to Level 3 inputs.

		2020				2019
Raw materials		$	7,309,809			$	7,925,744
Work-in-process			533,384				245,503
Finished goods			4,085,576				5,229,751
Inventories, net		$	11,928,769			$	13,400,998

		2020				2019
Machinery and equipment		$	3,798,366			$	3,288,625
Vehicles			79,000				76,000
Leasehold improvements			216,425				125,486
			4,093,791				3,490,111
Less: accumulated depreciation			(1,008,971	)			(370,887	)
Property and equipment, net		$	3,084,820			$	3,119,224

	Estimated Useful Life		Amount				Accumulated Amortization				Net Intangible Assets
Customer relations	13 years		$	24,460,000			$	(3,071,282	)		$	21,388,718
Trademarks	15 years			10,300,000				(1,108,889	)			9,191,111
			$	34,760,000			$	(4,180,171	)		$	30,579,829

2021		$	2,568,205
2022			2,568,205
2023			2,568,205
2024			2,568,205
2025			2,568,205
Thereafter			17,738,804
		$	30,579,829

		Interest rate
		Paid			Received		Amount Outstanding				Fair value			Maturity date
Term loan			4.00	%	LIBOR		$	17,461,951			$	(442,365	)	4/30/2024

		Current portion				Long-term portion				Debt issuance costs, net				Long-term portion, net				Total
Credit agreement		$	1,891,406			$	15,570,545			$	(314,527	)		$	15,256,018			$	17,147,424
Subordinated debt			-				10,100,000				(140,787	)			9,959,213				9,959,213
		$	1,891,406			$	25,670,545			$	(455,314	)		$	25,215,231			$	27,106,637

2021		$	1,891,406
2022			2,017,500
2023			2,774,063
2024			20,878,982
		$	27,561,951

Class A Units			39,450
Class AA Units			500
Class P-1 Units			832
Class P-2 Units			832

2021		$	908,771
2022			882,639
2023			735,164
2024			297,332
2025			8,000
		$	2,831,906

Exhibit 99.2

THMS HOLDINGS, LLC and SUBSIDIARY

Condensed Consolidated Interim Balance Sheet

(Unaudited)

THMS HOLDINGS, LLC and SUBSIDIARY

Condensed Consolidated Interim Statement of Operations

(Unaudited)

THMS HOLDINGS, LLC and SUBSIDIARY

Condensed Consolidated Interim Statements of Changes in Members' Equity

(Unaudited)

THMS HOLDINGS, LLC and SUBSIDIARY

Condensed Consolidated Interim Statement of Cash Flows

(Unaudited)

UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION

 

On October 21, 2021, OneWater Marine Inc., a Delaware corporation and subsidiaries (the “Company” or “OneWater”) entered into an Equity Purchase Agreement with THMS Holdings, LLC, a Delaware limited liability company and subsidiaries (“THMS”), pursuant to which the Company agreed to acquire all the outstanding equity interests of THMS. On November 30, 2021, the Company completed the acquisition of THMS for approximately $178.6 million in cash consideration and 133,531 shares of Class A common stock, par value $0.01 per share, of the Company, with a value of approximately $6.8 million. The aggregate consideration is subject to customary post-closing adjustments.

 

To finance the transaction, OneWater entered into the Second Amendment to its Term Loan Credit Agreement to, among other things, provide for an incremental term loan with an aggregate principal amount equal to $200 million, which will be added to, and constitute a part of, the existing $110.0 million term loan. The incremental term loan will increase the existing term loan and will be on the same terms applicable to the existing term loan under the Credit Agreement and the other loan documents.

 

The following unaudited pro forma combined statements as of and for the twelve months ended September 30, 2021 represents OneWater’s fiscal year ended and THMS 12-months ended September 30, 2021. The unaudited pro forma combined financial information presents our results after giving effect to (i) the acquisition of THMS, (ii) the use of the estimated net proceeds to us from the Second Amendment to the Term Loan Facility, (iii) the adoption of ASC 842 recognizing right-of-use assets and lease liabilities for THMS and (iv) a provision for corporate income taxes on the income of THMS attributable to OneWater Inc. at a statutory rate of 24.0% for the period ended September 30, 2021, inclusive of all U.S. federal, state and local income taxes (collectively, the “pro forma adjustments”). Pro forma adjustments to the unaudited pro forma combined balance sheet give effect to the pro forma adjustments as if they had occurred on September 30, 2021. Pro forma adjustments to the unaudited pro forma combined statements of operations give effect to the pro forma adjustments as if they had occurred on October 1, 2020.

 

We have derived the unaudited pro forma combined financial information for the year ended September 30, 2021 from the audited historical financial statements of OneWater and the trailing twelve month ended September 30, 2021 unaudited historical financial statements of THMS which has a December 31 fiscal year end. The unaudited pro forma financial information should be read in conjunction with the historical financial statements which can be found in OneWater’s Form 10-K for the fiscal year ended September 30, 2021, as filed with the Securities and Exchange Commission (“SEC”) on December 17, 2021.

 

The pro forma adjustments are based on currently available information and certain estimates and assumptions. Therefore, the actual adjustments may differ from the pro forma adjustments. However, management believes that the assumptions provide a reasonable basis for presenting the significant effects of the transactions described herein and that the pro forma adjustments give appropriate effect to those assumptions and are properly applied in the unaudited pro forma combined financial statements. The assumptions underlying the pro forma adjustments are described in the accompanying notes, which should be read in conjunction with these unaudited pro forma combined financial statements.

 

The unaudited pro forma combined financial information and related notes are presented for illustrative purposes only. The pro forma adjustments are based upon available information and methodologies that are factually supportable and directly related to the described transactions. The historical financial information has been adjusted in the unaudited pro forma condensed combined financial statements to give effect to pro forma events that are related and/or directly attributable to the transactions, are factually supportable and, in the case of the statements of operations, are expected to have a continuing impact on our operating results. The unaudited pro forma combined financial information includes various estimates which are subject to material change and may not be indicative of what our operations or financial position would have been had the described transactions, taken place on the dates indicated, or that may be expected to occur in the future. In addition, future results may vary significantly from the results reflected in the unaudited pro forma combined financial statements and should not be relied on as an indication of our results after the consummation of this transactions. The pro forma financial information is qualified in its entirety by reference to, and should be read in conjunction with, “Basis of Presentation,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and the related notes which can be found in OneWater’s Form 10-K for the fiscal year ended September 30, 2021, as filed with the SEC.

 

ONEWATER MARINE INC. AND SUBSIDIARIES

UNAUDITED PRO FORMA COMBINED BALANCE SHEET

AS OF SEPTEMBER 30, 2021

 

ONEWATER MARINE INC. AND SUBSIDIARIES

UNAUDITED PROFORMA COMBINED STATEMENTS OF OPERATIONS

($ in thousands except per share data)

Notes to the Unaudited Pro Forma Combined Financial Information

 

NOTE 1 – Basis of presentation

 

The historical consolidated financial statements of OneWater have been adjusted in the pro forma combined financial statements to give effect to the acquisition of THMS, which was completed on November 30, 2021. Additionally, we have adjusted for pro forma events that are (1) directly attributable to the acquisition, (2) factually supportable and (3) with respect to the pro forma combined statements of operations, expected to have a continuing impact on the combined results following the acquisition.

 

The business combination was accounted for under the acquisition method of accounting in accordance with ASC Topic 805, Business Combinations. As the acquiror for accounting purposes, OneWater has estimated the fair value of THMS’s assets acquired and liabilities assumed and conformed the accounting policies of THMS to its own accounting policies.

 

The pro forma combined financial statements do not necessarily reflect what the combined company’s financial condition or results of operations would have been had the acquisition occurred on the dates indicated. They also may not be useful in predicting the future financial condition and results of operations of the combined company. The actual financial position and results of operations may differ significantly from the pro forma amounts reflected herein due to a variety of factors. The combined pro forma financial information does not reflect the realization of any expected cost savings or other synergies from the acquisition of THMS.

 

Note 2 – Preliminary purchase price allocation

 

OneWater has performed a preliminary analysis of the fair market value of THMS’s assets and liabilities. The following table summarizes the preliminary allocation of the purchase price as of the acquisition date (in thousands):

 

This preliminary purchase price allocation has been used to prepare pro forma adjustments in the pro forma balance sheet and income statement. The final purchase price allocation will be determined when the Company has completed the detailed valuations and necessary calculations. The final allocation could differ materially from the preliminary allocation used in the pro forma adjustments. The final allocation may include changes in fair values of assets and liabilities and changes in allocations to intangible assets such as trade names, customer relationships and goodwill.

 

Note 3 – Term loan facility

 

The Company completed the acquisition of THMS for approximately $178.6 million in cash consideration and 133,531 shares of Class A common stock, par value $0.01 per share, of the Company, with a value of approximately $6.8 million. The Company financed the cash consideration by expanding its Term Loan facility by $200 million, net of $4.5 million in debt issuance costs. The Company’s variable interest rate on the Term Facility was 3.0% after the closing of the acquisition on November 30, 2021. As a result of the financing, the Company also increased its cash position by $16.9 million to be used for general corporate purposes.

 

Note 4 – Proforma adjustments to the Unaudited Pro Forma Combined Balance Sheet

 

 

 

Note 5 – Proforma adjustments to the Unaudited Pro Forma Combined Statements of Operations

 

 

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