OneWater Marine Inc 8-K/A, filed Feb 18, 2022
OneWater Marine Inc. (ONEW)
8-K/A
2022-02-18
For: 2021-11-30
View Original
Added on
April 08, 2026
About this 8-K/A
OneWater Marine Inc filed this 8-K/A on February 18, 2022, reporting on events of November 30, 2021.
Items reported
- Item 9.01: Financial statements and exhibits
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
(Amendment No. 1)
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of report (Date of earliest event reported): November 30, 2021
(Exact name of registrant as specified in its charter)
|
|
|
|
|
(State or other jurisdiction of incorporation)
|
(Commission File Number)
|
(IRS Employer Identification No.)
|
|
|
|
|
|
(Address of principal executive offices)
|
(Zip Code)
|
Registrant’s Telephone Number, including Area Code: (678 )
541-6300
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
|
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
|
|
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
|
|
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
|
|
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
|
Securities registered pursuant to Section 12(b) of the Securities Exchange Act of 1934:
|
Title of each class
|
Trading Symbol(s)
|
Name of each exchange on which registered
|
|
|
|
|
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of
the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
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. ☐
Introductory Note
As previously disclosed, OneWater Marine Inc. (the “Company”) entered into an Equity Purchase Agreement (the “Purchase Agreement”)
with THMS Holdings, LLC, a Delaware limited liability company (“Seller”), THMS Inc., a Delaware corporation (“THMS Corp.”), and T-H Marine Supplies, LLC, a Delaware limited liability company (“T-H Marine,” and collectively with THMS Corp, the “Target
Companies”), pursuant to which the Company agreed to acquire all the outstanding equity interests of the Target Companies (the “T-H Acquisition”).
This Amendment No. 1 to the Current Report on Form 8-K filed by the Company on December 2, 2021 (the “Initial Form 8-K”) amends the Initial Form 8-K to
include the financial statements required by Item 9.01(a) and the pro forma financial information required by Item 9.01(b). Except as provided herein, the disclosures made in the Initial Form 8-K remain unchanged.
| Item 9.01 |
Financial Statements and Exhibits.
|
(a) Financial Statements of Businesses Acquired.
The audited consolidated balance sheet of T-H Marine Supplies, LLC and its subsidiaries as of December 31, 2020, the related consolidated statements of
operations, equity and cash flows of T-H Marine Supplies, LLC and its subsidiaries for the year ended December 31, 2020, and the notes related thereto, together with the report thereon of Baker Tilly US, LLP included in the audited consolidated
financial statements, are filed as Exhibit 99.1 hereto and are incorporated herein by reference.
The unaudited condensed consolidated balance sheet of T-H Marine Supplies, LLC and its subsidiaries as of September 30, 2021, the related condensed
consolidated statements of operations, equity and cash flows for the nine-months ended September 30, 2021, and the notes related thereto are filed as Exhibit 99.2 hereto and are incorporated herein by reference.
(b) Pro Forma Financial Information.
The unaudited pro forma condensed combined statements of operations of OneWater Marine Inc. for the year ended September 30, 2021, the unaudited pro
forma condensed combined balance sheet of OneWater Marine Inc. as of September 30, 2021, and the notes related thereto are filed as Exhibit 99.3 hereto and are incorporated herein by reference.
|
(d)
|
Exhibits.
|
|
Exhibit
Number
|
Description
|
||
|
Consent of Baker Tilly US, LLP.
|
|||
|
Audited Condensed Consolidated Financial Statements of T-H Marine Supplies, LLC and its subsidiaries as of and for the year ended December 31, 2020.
|
|||
|
Unaudited Condensed Consolidated Financial Statements of T-H Marine Supplies, LLC and its subsidiaries as of and for the nine months ended September 30, 2021.
|
|||
|
Unaudited Pro Forma Condensed Combined Statements of Operations of OneWater Marine Inc. for the year ended September 30, 2020 and Unaudited Pro Forma Condensed Combined Balance Sheet of OneWater
Marine Inc. as of September 30, 2021.
|
|||
|
104
|
Cover Page Interactive Data File (embedded within the Inline XBRL document).
|
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
|
ONEWATER MARINE INC.
|
||
|
By:
|
/s/ Jack Ezzell
|
|
|
Name:
|
Jack Ezzell
|
|
|
Title:
|
Chief Financial Officer
|
|
|
Dated: February 18, 2022
|
||
Exhibit 23.1
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
Exhibit 99.1
|
Page
|
|
|
1
|
|
|
Consolidated Financial Statements
|
|
|
3
|
|
|
4
|
|
|
5
|
|
|
6
|
|
|
7
|
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
|
ASSETS
|
||||||||
|
2020
|
2019
|
|||||||
|
CURRENT ASSETS
|
||||||||
|
Cash and cash equivalents
|
$
|
1,226,434
|
$
|
252,039
|
||||
|
Accounts receivable, net
|
7,737,716
|
4,242,946
|
||||||
|
Inventories, net
|
11,928,769
|
13,400,998
|
||||||
|
Note receivable
|
37,839
|
-
|
||||||
|
Prepaid expenses and other current assets
|
883,671
|
494,629
|
||||||
|
Total current assets
|
21,814,429
|
18,390,612
|
||||||
|
NON-CURRENT ASSETS
|
||||||||
|
Property and equipment, net
|
3,084,820
|
3,119,224
|
||||||
|
Intangibles, net
|
30,579,829
|
31,088,034
|
||||||
|
Goodwill
|
14,533,362
|
14,236,559
|
||||||
|
Other assets
|
509,244
|
43,211
|
||||||
|
Total non-current assets
|
48,707,256
|
48,487,028
|
||||||
|
TOTAL ASSETS
|
$
|
70,521,685
|
$
|
66,877,640
|
||||
|
LIABILITIES AND MEMBERS' EQUITY
|
||||||||
|
CURRENT LIABILITIES
|
||||||||
|
Accounts payable and accrued liabilites
|
$
|
4,902,698
|
$
|
1,711,949
|
||||
|
Line of credit
|
-
|
1,369,263
|
||||||
|
Current portion of long-term debt
|
1,891,406
|
1,513,125
|
||||||
|
Total current liabilities
|
6,794,104
|
4,594,337
|
||||||
|
NON-CURRENT LIABILITES
|
||||||||
|
Interest rate swap contract
|
442,365
|
243,935
|
||||||
|
Long-term debt, net of current portion
|
15,256,018
|
17,118,147
|
||||||
|
Subordinated notes payable
|
9,959,213
|
9,922,485
|
||||||
|
Total non-current liabilities
|
25,657,595.82
|
27,284,567
|
||||||
|
TOTAL LIABILITIES
|
32,451,700
|
31,878,904
|
||||||
|
MEMBERS' EQUITY
|
||||||||
|
Members' Interest
|
39,745,000
|
39,495,000
|
||||||
|
Accumulated deficit
|
(1,675,015
|
)
|
(4,496,264
|
)
|
||||
|
Members' equity
|
38,069,985
|
34,998,736
|
||||||
|
TOTAL LIABILITIES AND MEMBERS' EQUITY
|
$
|
70,521,685
|
$
|
66,877,640
|
||||
The accompanying notes are an integral part of these consolidated financial statements.
THMS HOLDINGS, LLC AND SUBSIDIARIES
Year Ended December 31, 2020 and Period
from April 30, 2019 (Inception) to December 31, 2019
|
2020
|
2019
|
|||||||
|
REVENUES, net
|
$
|
69,072,709
|
$
|
30,310,196
|
||||
|
COST OF SALES (exclusive of depreciation shown separately below)
|
45,181,836
|
20,127,331
|
||||||
|
GROSS PROFIT
|
23,890,873
|
10,182,865
|
||||||
|
OPERATING EXPENSES
|
||||||||
|
Selling, general, and administrative
|
17,291,473
|
9,987,390
|
||||||
|
Depreciation
|
638,084
|
370,887
|
||||||
|
Business acquisition transaction costs
|
281,603
|
2,146,844
|
||||||
|
Total operating expenses
|
18,211,160
|
12,505,121
|
||||||
|
INCOME (LOSS) FROM OPERATIONS
|
5,679,714
|
(2,322,256
|
)
|
|||||
|
OTHER INCOME (EXPENSES)
|
||||||||
|
Interest income
|
1,968
|
8,551
|
||||||
|
Interest expense
|
(2,860,433
|
)
|
(2,182,559
|
)
|
||||
|
Total other expenses
|
(2,858,465
|
)
|
(2,174,008
|
)
|
||||
|
NET INCOME (LOSS)
|
$
|
2,821,249
|
$
|
(4,496,264
|
)
|
|||
The accompanying notes are an integral part of these consolidated financial statements.
THMS HOLDINGS, LLC AND SUBSIDIARIES
Year Ended December 31, 2020 and Period
from April 30, 2019 (Inception) to December 31, 2019
|
Members'
Interest
|
Accumulated
Deficit
|
Total
Members'
Equity
|
||||||||||
|
Balance at April 30, 2019
|
$
|
-
|
$
|
-
|
$
|
-
|
||||||
|
Contributions from members
|
39,495,000
|
-
|
39,495,000
|
|||||||||
|
Net loss
|
-
|
(4,496,264
|
)
|
(4,496,264
|
)
|
|||||||
|
Balance at December 31, 2019
|
39,495,000
|
(4,496,264
|
)
|
34,998,736
|
||||||||
|
Class AA units rollover
|
250,000
|
-
|
250,000
|
|||||||||
|
Net income
|
-
|
2,821,249
|
2,821,249
|
|||||||||
|
Balance at December 31, 2020
|
$
|
39,745,000
|
$
|
(1,675,015
|
)
|
$
|
38,069,985
|
|||||
The accompanying notes are an integral part of these consolidated financial statements.
THMS HOLDINGS, LLC AND SUBSIDIARIES
Year Ended December 31, 2020 and Period
from April 30, 2019 (Inception) to December 31, 2019
|
2020
|
2019
|
|||||||
|
CASH FLOWS FROM OPERATING ACTIVITIES:
|
||||||||
|
Net income (loss)
|
$
|
2,821,249
|
$
|
(4,496,264
|
)
|
|||
|
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
|
||||||||
|
Depreciation
|
638,084
|
370,887
|
||||||
|
Amortization of intangibles
|
2,568,205
|
1,611,966
|
||||||
|
Amortization of debt issuance cost
|
131,086
|
87,390
|
||||||
|
Change in fair value of interest rate swap contract
|
198,430
|
243,935
|
||||||
|
Bad debt expense
|
17,337
|
26,515
|
||||||
|
Changes in operating assets and liabilities:
|
||||||||
|
Accounts receivable
|
(3,512,107
|
)
|
1,120,651
|
|||||
|
Inventories
|
1,670,839
|
900,919
|
||||||
|
Prepaid expenses and other current assets
|
(389,042
|
)
|
(5,932
|
)
|
||||
|
Other assets
|
(503,872
|
)
|
(40,600
|
)
|
||||
|
Accounts payable and accrued liabilites
|
3,190,749
|
(832,293
|
)
|
|||||
|
Net cash provided by (used in) operating activities
|
6,830,957
|
(1,012,826
|
)
|
|||||
|
CASH FLOWS FROM INVESTING ACTIVITIES:
|
||||||||
|
Purchases of property and equipment
|
(347,693
|
)
|
(210,321
|
)
|
||||
|
Business acquisition, net of cash acquired
|
(2,561,400
|
)
|
(67,855,444
|
)
|
||||
|
Net cash used in investing activities
|
(2,909,093
|
)
|
(68,065,765
|
)
|
||||
|
CASH FLOWS FROM FINANCING ACTIVITIES:
|
||||||||
|
Borrowings on line of credit
|
-
|
1,669,263
|
||||||
|
Payments on line of credit
|
(1,369,263
|
)
|
(300,000
|
)
|
||||
|
Borrowings on long-term debt
|
-
|
30,275,000
|
||||||
|
Payments on long-term debt
|
(1,578,206
|
)
|
(1,134,844
|
)
|
||||
|
Loan issuance costs
|
-
|
(673,789
|
)
|
|||||
|
Contributions from members
|
-
|
39,495,000
|
||||||
|
Net cash provided by (used in) financing activities
|
(2,947,469
|
)
|
69,330,630
|
|||||
|
Net increase in cash and cash equivalents
|
974,395
|
252,039
|
||||||
|
Cash and cash equivalents at beginning of period
|
252,039
|
-
|
||||||
|
Cash and cash equivalents at end of period
|
$
|
1,226,434
|
$
|
252,039
|
||||
|
SUPPLEMENTAL INFORMATION:
|
||||||||
|
Cash paid for interest
|
$
|
2,860,433
|
$
|
2,095,169
|
||||
|
NON-CASH INVESTING ACTIVITES
|
||||||||
|
Class AA units issued in acquistition (Note 2)
|
$
|
250,000
|
$
|
-
|
||||
The accompanying notes are an integral part of these consolidated financial statements.
THMS HOLDINGS, LLC AND SUBSIDIARIES
December 31, 2020 and 2019
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 Company has recorded a change in accounting principle as of and for the year
ended December 31, 2020, as the Company now meets the definition of a public business entity based on Accounting Standards Update (“ASU”) No. 2013-12 since the financial statements will be included in a 8-K filing of OneWater Marine, Inc. and
therefore, must be prepared in accordance with Regulation S-X requirements. The consolidated financial statements have been updated to reverse prior elections to apply certain private company guidance related to business combinations and the
separation of customer related intangibles and the amortization of goodwill. The consolidated statements of operations were also revised to separately state depreciation expense. The following
summarizes the impact on the financial statement amounts.
The following illustrates the impact on the consolidated balance sheet:
|
As of December 31, 2020
|
||||||||||||
|
As previously reported
|
Adjustment
|
Restated
|
||||||||||
|
Goodwill
|
$
|
32,592,761
|
$
|
(18,059,399
|
)
|
$
|
14,533,362
|
|||||
|
Intangible assets, net
|
9,191,111
|
21,388,718
|
30,579,829
|
|||||||||
|
Accumulated deficit
|
(5,004,334
|
)
|
3,329,319
|
(1,675,015
|
)
|
|||||||
|
Members' equity
|
34,740,666
|
3,329,319
|
38,069,985
|
|||||||||
The following illustrates the impact on the consolidated statement of operations:
|
For the Year Ended December 31, 2020
|
||||||||||||
|
As previously reported
|
Adjustment
|
Restated
|
||||||||||
|
Selling, general, and administrative
|
$
|
19,952,849
|
$
|
(2,661,376
|
)
|
$
|
17,291,473
|
|||||
|
Depreciation
|
-
|
638,084
|
638,084
|
|||||||||
|
Total operating expenses
|
20,234,452
|
(2,023,292
|
)
|
18,211,160
|
||||||||
|
Income from operations
|
3,656,422
|
2,023,292
|
5,679,714
|
|||||||||
|
Net income
|
797,957
|
2,023,292
|
2,821,249
|
|||||||||
The following illustrates the impact on the consolidated statement of changes in members’ equity:
|
For the Year Ended December 31, 2020
|
||||||||||||
|
As previously reported
|
Adjustment
|
Restated
|
||||||||||
|
Net income
|
$
|
797,957
|
$
|
2,023,292
|
$
|
2,821,249
|
||||||
THMS HOLDINGS, LLC AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2020 and 2019
2. CHANGE IN ACCOUNTING PRINCIPLE (CONTINUED)
The following illustrates the impact on the consolidated statement of cash flows:
|
For the Year Ended December 31, 2020
|
||||||||||||
|
As previously reported
|
Adjustment
|
Restated
|
||||||||||
|
Amortization of intangibles
|
$
|
686,667
|
$
|
1,881,538
|
$
|
2,568,205
|
||||||
|
Amortization of goodwill
|
3,904,830
|
(3,904,830
|
)
|
-
|
||||||||
|
Net income
|
797,957
|
2,023,292
|
2,821,249
|
|||||||||
3. ACQUISITIONS
First Source Marine
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:
|
Assets:
|
||||
|
Inventory
|
$
|
198,610
|
||
|
Property and equipment
|
255,987
|
|||
|
Trademarks
|
800,000
|
|||
|
Customer relations
|
1,260,000
|
|||
|
Goodwill
|
296,803
|
|||
|
|
||||
|
Assets acquired
|
$
|
2,811,400
|
||
THMS HOLDINGS, LLC AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2020 and 2019
3. ACQUISITION (CONTINUED)
T-H Marine Supplies
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.
|
Assets:
|
||||
|
Cash
|
$
|
763,187
|
||
|
Accounts receivable
|
5,390,112
|
|||
|
Inventory
|
14,301,917
|
|||
|
Prepaids and other current assets
|
488,697
|
|||
|
Property and equipment
|
3,279,790
|
|||
|
Other assets
|
2,611
|
|||
|
Trademark
|
9,500,000
|
|||
|
Customer relations
|
23,200,000
|
|||
|
Goodwill
|
14,236,559
|
|||
|
Total assets acquired
|
71,162,873
|
|||
|
Liabilities:
|
||||
|
Accounts payable
|
1,676,185
|
|||
|
Accrued liabilities and other payables
|
868,057
|
|||
|
Total liabilities assumed
|
2,544,242
|
|||
|
Net assets acquired
|
$
|
68,618,631
|
||
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.
Information needed to report pro-forma revenue and earnings of the combined entity as though the business combination occurred as of the beginning of the
year is impracticable and is therefore not included.
THMS HOLDINGS, LLC AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2020 and 2019
4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The accompanying consolidated financial statements include the accounts of THMS Holdings, LLC and its wholly-owned subsidiary, T-H Marine Supplies, LLC, and its
wholly-owned subsidiaries, Innovative Plastics, LLC, and CMC Marine, LLC. All intercompany transactions have been eliminated upon consolidation.
Basis of Presentation
These consolidated financial statements are presented on the accrual basis of accounting in accordance with U.S. GAAP.
Use of Estimates and Assumptions
The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the consolidated financial statements, and the reported revenues and expenses during the reporting period. The Company believes the estimates
and assumptions utilized are reasonable; however, actual results could differ from these estimates.
Recent Account Pronouncements
In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-02, Leases (Topic 842). The standard increases transparency and comparability among organizations by recognizing lease assets and lease liabilities in the consolidated balance sheets and disclosing key information about lease
agreements. In June 2020, the FASB issued ASU 2020-05 delaying the effective date for Topic 842 to years beginning after December 15, 2021 and interim reporting periods beginning after December 15, 2022. The Company is currently evaluating the
effect the provisions of this ASU will have on the consolidated financial statements.
In January 2017, the FASB issued ASU No. 2017-04, Simplifying the Test for Goodwill Impairment. ASU No.
2017-04 simplifies how an entity is required to test goodwill for impairment by eliminating Step 2 from the goodwill impairment test. ASU No. 2017-04 (as amended) is effective for interim or annual goodwill impairment tests in fiscal years
beginning after December 15, 2022. Early adoption is permitted for interim or annual impairment tests performed on testing dates after January 1, 2017. The Company is currently assessing the effect that ASU No. 2017-04 (as amended) will have on
its consolidated financial statements.
In June 2016, the FASB issued ASU 2016-13, Financial Instruments – Measurement of Credit Losses on Financial
Instruments, which requires measurement and recognition of expected credit losses for financial assets held. ASU 2016-13 is effective for the Company beginning January 1, 2023 and is required to be applied prospectively. The Company is
currently assessing the effect that ASU 2016-13 will have on its consolidated financial statements.
Cash and Cash Equivalents
The Company considers all highly-liquid instruments with original maturities of three months or less to be cash equivalents. The Company maintains cash balances in
bank accounts that may, at times, exceed federally insured limits. At December 31, 2020, the Company had approximately $1,082,000 of uninsured cash balances. There were no uninsured balances as of December 31, 2019. Management periodically
assesses the financial condition of these institutions for the purpose of assessing credit risk. The Company has not experienced any losses and believes it is not exposed to any significant credit risk on cash and cash equivalents.
THMS HOLDINGS, LLC AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2020 and 2019
4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Accounts Receivable
The Company's accounts receivable is recorded when billed or accrued and is stated at the amount management expects to collect from outstanding balances. The Company
performs credit evaluations of its customers' financial condition and generally does not require collateral from its customers. The Company maintains an allowance for doubtful accounts for estimated losses resulting from the inability or
unwillingness of its customers to make required payments, which is based on various factors, including accounts receivable aging, customer creditworthiness, type of customer and historical bad debts. These evaluations require significant judgment
and additional allowances may be required if the financial condition of the customers deteriorates and results in their inability to make payments. Past-due receivable balances are written off when the Company's collection efforts have been
unsuccessful in collecting the amount due. The allowance for doubtful accounts was $255,126 and $299,081 as of December 31, 2020 and 2019, respectively.
The Company records an allowance for doubtful accounts to cover both current and anticipated future losses. Uncollectible amounts are charged against the allowance
account. For the year ended December 31, 2020 and the period from April 30, 2019 (inception) to December 31, 2019, the Company recognized bad debt expense of $17,337 and $26,515, respectively, on its accounts receivable arising from contracts with
customers.
Inventories
The Company's inventories are stated at the lower of cost or net realizable value. Cost is determined on a standard cost basis using the first-in, first-out method.
Net realizable value is calculated based on estimated selling price less costs of completion, disposal, and transportation. Appropriate consideration is given to obsolescence, excessive levels, deterioration, and other factors in evaluating net
realizable value.
Property and Equipment
Property and equipment are recorded at cost and depreciated using the straight-line method and accelerated methods over the estimated useful lives of the assets as
follows:
|
Machinery and equipment
|
5-7 years
|
|
Vehicles
|
5 years
|
Leasehold improvements are amortized over the shorter of the lease term or the economic life of the asset. Major additions and improvements are capitalized, while
replacements, maintenance and repairs, which do not improve or extend the life of the respective assets, are expensed as incurred.
Goodwill and Intangible Assets
Goodwill represents the excess of the purchase price over the fair value of the net assets acquired. Goodwill is accounted for in accordance with
FASB Accounting Standards Codification (“ASC”) Topic 350, Intangibles-Goodwill and Other. The Company does not amortize goodwill but tests for impairment on an annual basis and whenever
events and circustances indicate that the carrying amount may not be recoverable. For the year ended December 31, 2020 and the period from April 30, 2019 (inception) to December 31, 2019, there was no impairment of goodwill.
Intangible assets with estimable useful lives are amortized over their respective estimated useful lives to their estimated residual values, and reviewed for
impairment in accordance with ASC Topic 360-10, Impairment or Disposal of Long-lived Assets. The Company determined that its intangible assets were not impaired as of December 31, 2020 and
2019.
THMS HOLDINGS, LLC AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2020 and 2019
4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Impairment of Long-Lived Assets
In accordance with ASC Topic 360-10, Impairment or Disposal of Long-lived Assets, the Company periodically
reviews the carrying value of its long-lived assets, such as property and equipment and intangible assets, to test whether current events or circumstances indicate that such carrying value may not be recoverable. If the tests indicate that the
carrying value of the asset is greater than the expected cash flows to be generated by such assets, then an impairment adjustment is recognized for the excess of the carrying value over fair value. There was no impairment of property and equipment
during the year ended December 31, 2020 and the period from April 30, 2019 (inception) to December 31, 2019.
Fair Value of Financial Instruments
In accordance with the reporting requirements of ASC Topic 825-10-50, Disclosures about Fair Value of Financial
Instruments, the Company calculates the fair value of its assets and liabilities which qualify as financial instruments under this statement and includes this additional information in the notes to consolidated financial statements when
the fair value is different than the carrying value of those financial instruments. The estimated fair values of accounts receivable are based on management’s assessment of net realizable value. The estimated fair value of accounts payable
approximates their carrying value due to the short maturity of these liabilities. The estimated fair value of the notes payable also approximates its carrying value because the terms are comparable to similar lending arrangements in the
marketplace.
Debt Issuance Costs
Loan origination fees are deferred and amortized on a straight-line basis, which approximates the effective interest method, over the term of the loan and are reported
as a direct reduction of the carrying amount of the related debt. Amortization of debt issuance costs is reported as a component of interest expense.
Revenue Recognition
The Company has analyzed the provisions of FASB ASC Topic 606, Revenue from Contracts with Customers, and
has concluded that no changes are necessary to conform with the new standard. The Company's sales primarily contain only one delivery element. The Company records sales from its product when the control of these items is transferred to the
customer, which is normally upon shipment. Revenue is recognized when orders leave the warehouse or its retail location. The Company's payment terms are typically 30 days. The Company recognizes revenue from its sales in the amount it expects to
be entitled, net of rebates, allowances and returns.
Shipping and handling costs associated with outbound freight, after control over a product has transferred to a customer, are accounted for as a fulfillment cost and
are included in cost of sales when the related revenue is recognized.
Sales taxes assessed by governmental authorities that are both imposed on and concurrent with a specific revenue producing transaction, and are collected by the
Company from a customer, are excluded from revenues and cost of sales in the consolidated statement of operations.
THMS HOLDINGS, LLC AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2020 and 2019
Advertising Costs
Advertising and other marketing costs are expensed when incurred and totaled $1,253,669 and $1,117,705 for the year ended December 31, 2020 and the period from April
30, 2019 (inception) to December 31, 2019, respectively. These costs are included in the consolidated statements of operations as selling, general, and administrative expenses.
Share-based Compensation
The Company recognizes share-based compensation expense by measuring the cost of services to be rendered based on the grant-date fair value of the equity award. For
stock-based compensation for which restrictions lapse with the passage of time, compensation cost is recognized on a straight-line basis over the period between the issue date and the date that the restrictions lapse. Compensation expense is
recognized for restricted shares with performance measures when the performance measure is probable of being achieved.
Income Taxes
As a limited liability company, the Company is not subject to federal or state income taxes. Instead, the members are liable for federal and state income taxes on the
Company's taxable income. The Company accounts for interest and penalties relating to uncertain tax positions in the current statement operations within income taxes, if necessary. The Company has evaluated its tax positions and determined it has
no uncertain income tax positions as of December 31, 2020.
Derivative and Hedging Activities
The Company uses derivative instruments (interest rate swap agreements) to manage its interest rate risk. They are not used for trading or speculative purposes. The
interest rate swap is designed as cash flow hedges that is utilized to convert the variable interest rate on the Company's note payable to Cadence Bank to a fixed rate.
Fair Value of Financial Instruments
The Company values its financial assets and liabilities based on the price that would be received to sell an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement date. In order to increase consistency and comparability in fair value measurements, a fair value hierarchy that prioritizes observable and unobservable inputs is used to measure fair
value into three broad levels, which are described below:
| 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.
|
THMS HOLDINGS, LLC AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2020 and 2019
Fair Value of Financial Instruments - continued
In determining fair value, the Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the
extent possible as well as considers counterparty credit risk in its assessment of fair value.
The interest rate swap derivative liability, a financial liability is carried at fair value at December 31, 2020 and is classified as Level 2 as described above.
The fair value of the interest rate swap is determined using observable market inputs such as current interest rates, and considers nonperformance risk of the Company
and that of its counterparties.
5. INVENTORIES
Inventories consisted of the following at December 31:
|
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
|
||||
6. PROPERTY AND EQUIPMENT
Property and equipment consisted of the following at December 31:
|
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
|
||||
Depreciation expense for the year ended December 31, 2020 and the period from April 30, 2019 (inception) to December 31, 2019, was $638,084 and $370,887, respectively.
Depreciation expense is included in operating expenses in the accompanying consolidated statement of operations
THMS HOLDINGS, LLC AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2020 and 2019
At December 31, 2020 customer relations and trademark consist of the following:
|
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
|
|||||
For the year ended December 31, 2020 and the period from April 30, 2019 (inception) to December 31, 2019, amortization expense of intangible assets was $2,568,205 and
$1,611,966, respectively.
Future amortization expense of intangible assets as of December 31, 2020 is as follows:
|
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
|
8. NOTES PAYABLE
Credit Agreement
On April 30, 2019, the Company entered into a credit agreement with Cadence Bank (the "Credit Agreement"). The Credit Agreement includes a term loan of $20,175,000
(the "Term Loan") and a revolving credit facility with availability up to $6,000,000 (the "Revolving Credit Facility"). The Credit Agreement matures on April 30, 2024. The Company used the proceeds from the Term Loan and borrowings of $1,669,263
from the Revolving Credit Facility to fund a portion of the consideration paid for the business acquisition described in Note 2.
The Revolving Credit Facility includes a $2,000,000 letter of credit facility. The Company can borrow against the Revolving Credit Facility through April 30, 2024.
There was $1,369,263 of borrowings against the Revolving Credit Facility at December 31, 2019. There were no borrowings under the Revolving Credit Facility at December 31, 2020.
The Term Loan is payable in quarterly principal installments of $378,281 through March 31, 2021 increasing to $504,375 through March 31, 2023 and $756,563 through
March 31, 2024. The Company can make optional prepayments of principal at any time. The Company is required to make mandatory prepayments of principal in the event of certain transactions including raising proceeds from equity agreements.
Further, the Company is required to make principal payments equal to 50% of excess cash flow, as defined, or 25% of excess cash flow in the event that the Company is not in default and the total leverage ratio, as defined, is less than 1.5 to 1.0.
THMS HOLDINGS, LLC AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2020 and 2019
Credit Agreement - continued
The Credit Agreement bears interest, at the Company's option, at the lessor of the maximum rate or the applicable rate, as defined. In the event of a default, the
applicable interest rate will be increased by 2.0%. The interest rate in effect at December 31, 2020 and 2019 was 4.00% and 2.38% per annum, respectively.
The Company incurred debt issuance costs of $471,789 associated with the Credit Agreement. The debt issuance costs are being amortized to interest expense over the
term of the Credit Agreement. The Company recognized amortization expense of $94,357 and $62,905 for the year ended December 31, 2020 and the period from April 30, 2019 (inception) to December 31, 2019, respectively.
The Credit Agreement is subject to certain financial covenants of which the Company was in compliance at December 31, 2020 and 2019. The Credit Agreement is secured
by substantially all of the Company's assets.
In May 2019, the Company entered into an interest rate swap contract relating to the interest payable on the Term Loan. The Company has elected not to designate the
interest rate swap contract as a cash flow hedge and therefore, gains and losses on the contract as well as the other offsetting gains or losses on the hedge items attributable to the hedged risk are recognized in current earnings. The interest
rate swap contract term is through April 2024 with the first repayment in May 2019, and descending balances following the amortization schedule of the Term Loan. Under the interest rate swap contract, the Company pays interest at fixed rates and
receives interest at the one-month LIBOR. The swap is designed to hedge the risk of changes in interest payments on the Term Loan caused by changes in LIBOR.
ASC 815-10, Derivatives and Hedging, require derivative instruments to be measured at fair value and
recorded on the balance sheet as either an asset or liability. As of December 31, 2020 and 2019 a liability of $442,365 and $243,935 was recorded, respectively. The change in the fair value of the interest rate swap contract is included in
interest expense in the consolidated statement of operations for the year ended December 31, 2020 and period from April 30, 2019 (inception) to December 31, 2019.
The following summarizes the interest rate swap in effect at December 31, 2020:
|
|
Interest rate
|
|
||||||||||||
|
|
Paid
|
Received
|
Amount
Outstanding
|
Fair value
|
Maturity date
|
|||||||||
|
Term loan
|
4.00
|
%
|
LIBOR
|
$
|
17,461,951
|
$
|
(442,365
|
)
|
4/30/2024
|
|||||
Subordinated Debt
On April 30, 2019, the Company entered into a promissory note agreement in the amount of $2,600,000 with the principal Class A Unit holder and a related company and a
promissory note agreement in the amount of $7,500,000 with a Class A Unit holder (the "Subordinated Debt"), the proceeds of which were used as a portion of the consideration paid for the business acquisition described in Note 2. The Subordinated
Debt bears interest at 14% per annum, which is payable quarterly. The principal balance is due on October 30, 2024. The Subordinated Debt is subordinated to the Credit Agreement.
THMS HOLDINGS, LLC AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2020 and 2019
Subordinated Debt, continued
The Company incurred debt issuance costs of $202,000 associated with the Subordinated Debt. The debt issuance costs are being amortized to interest expense over the
term of the Subordinated Debt. At December 31, 2020 and 2019, the Company recognized amortization expense of $36,728 and $24,485, respectively.
The Subordinated Debt is subject to certain covenants including, but not limited to, a fixed charge coverage ratio and a total leverage ratio of which the Company was
in compliance with at December 31, 2020 and 2019. The Subordinated Debt is secured by substantially all of the Company's assets.
The following summarizes the carrying amounts of the Company's long term debt as of December 31, 2020:
|
|
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
|
|||||||||
Future maturities of long-term debt for the five years subsequent to December 31, 2020 are as follows:
|
2021
|
$
|
1,891,406
|
||
|
2022
|
2,017,500
|
|||
|
2023
|
2,774,063
|
|||
|
2024
|
20,878,982
|
|||
|
|
$
|
27,561,951
|
9. MEMBERS’ EQUITY
The Company is governed by a Board of Mangers (“Board”), which is authorized to exercise all powers of the Company. The Company is authorized to issue Class A units,
Class AA units, Class P-1 units and Class P-2 units. Net income or loss is allocated among the members in accordance with the operating agreement unless otherwise required under the Internal Revenue Code or the applicable Treasury Regulations.
The Class A units are entitled to a preferred return of 8% per annum which compounds annually on the sum of any unreturned capital plus any unpaid preferred return.
The accumulated preferred return totaled $5,405,211 and $2,079,269 as of December 31, 2020 and 2019 respectively.
Outstanding and issued membership units as of December 31, 2020 follows:
|
Class A Units
|
39,450
|
|||
|
Class AA Units
|
500
|
|||
|
Class P-1 Units
|
832
|
|||
|
Class P-2 Units
|
832
|
THMS HOLDINGS, LLC AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2020 and 2019
On April 30, 2019, the Company adopted the THMS Holdings, LLC Profits Interest Plan. During 2019, the Company issued 832 Class P-1 profits units and 832 Class P-2
profits units to a member of management. On that date, the Class P-1 units vested immediately. The Class P-2 units vest upon continuing service through the date that the Class A unit holders receive accumulated distributions equal to 250% of
their initial capital amounts. The value of the Class P Units granted in 2019 was not material.
10. COMMITMENTS AND CONTINGENCIES
Operating Leases
The Company leases its facilities under non-cancelable operating leases. All such leases have varying minimum terms, but all minimum terms expire by August 2025. For
the year ended December 31, 2020 and the period from April 30, 2019 (inception) to December 31, 2019, lease expense under operating leases totaled $1,041,412 and $660,031, respectively.
Future minimum lease payments under non-cancelable operating leases as of December 31, 2020 were as follows:
|
2021
|
$
|
908,771
|
||
|
2022
|
882,639
|
|||
|
2023
|
735,164
|
|||
|
2024
|
297,332
|
|||
|
2025
|
8,000
|
|||
|
|
||||
|
|
$
|
2,831,906
|
Litigation
The Company is involved in various legal proceedings which arise from time to time in the normal course of business. While the ultimate results of such matters
generally cannot be predicted with certainty, management does not expect any such matters to have a material adverse effect on the consolidated financial position and results of operations of the Company.
11. RETIREMENT PLAN
The Company has a 401(k) plan for substantially all employees who have been employed for greater than one year. Employees can make voluntary contributions up to
federally designated limits. The Company matches up to 3% of eligible employee contributions. The Company's 401(k) expenses for the year ended December 31, 2020 and the period from April 30, 2019 (inception) to December 31, 2019 was $183,882 and
$113,071, respectively.
12. RELATED PARTY
The Company has management services agreements with certain members that hold 80% of the Company's outstanding Class A membership units. Under these agreements, the
members will provide management consulting services to the Company through the date that the members no longer have an equity ownership in the Company or through a date that the members and the Company agree to terminate the agreements. The
Company pays an aggregate annual fee equal to the greater of $400,000 or approximately 4% of earnings before interest, taxes, depreciation and amortization, as defined. The Company is also charged for certain expenses. Total management fees for
the year ended December 31, 2020 and the period from April 30, 2019 (inception) to December 31, 2019 were $359,307 and $200,410, respectively.
THMS HOLDINGS, LLC AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2020 and 2019
In accordance with ASC Topic 855, Subsequent Events, the Company has evaluated events and transactions
occurring after December 31, 2020, the consolidated balance sheet date, through April 28, 2021, the date the consolidated financial statements were available to be issued, and determined that there were no such events or transactions which would
require recognition or disclosure in the accompanying consolidated financial statements other than that described below.
On January 28, 2021, the Company acquired BHP Marine for total estimated consideration of $583,990. BHP Marine has a proprietary product line and is an online retailer
of marine anchoring and mooring products. The Company is in the process of accounting for this transaction.
Exhibit 99.2
THMS HOLDINGS, LLC and SUBSIDIARY
Condensed Consolidated Interim Balance Sheet
(Unaudited)
|
ASSETS
|
||||
|
September 30, 2021
|
||||
|
CURRENT ASSETS
|
||||
|
Cash and cash equivalents
|
$
|
86,024
|
||
|
Accounts receivable, net
|
10,160,711
|
|||
|
Inventories, net
|
17,602,871
|
|||
|
Note receivable
|
-
|
|||
|
Prepaid expenses and other current assets
|
2,282,180
|
|||
|
Total current assets
|
30,131,786
|
|||
|
NON-CURRENT ASSETS
|
||||
|
Property and equipment, net
|
4,014,433
|
|||
|
Intangibles, net
|
38,076,983
|
|||
|
Goodwill
|
17,797,419
|
|||
|
Other assets
|
20,011
|
|||
|
Total non-current assets
|
59,908,846
|
|||
|
TOTAL ASSETS
|
$
|
90,040,632
|
||
|
LIABILITIES AND MEMBERS' EQUITY
|
||||
|
CURRENT LIABILITIES
|
||||
|
Accounts payable and accrued liabilities
|
$
|
6,205,519
|
||
|
Line of credit
|
34,994
|
|||
|
Current portion of long-term debt
|
3,173,122
|
|||
|
Total current liabilities
|
9,413,635
|
|||
|
NON-CURRENT LIABILITIES
|
||||
|
Interest rate swap contract
|
297,977
|
|||
|
Long-term debt, net of current portion
|
28,256,313
|
|||
|
Other long-term payable
|
200,000
|
|||
|
Subordinated notes payable
|
9,986,758
|
|||
|
Total non-current liabilities
|
38,741,048
|
|||
|
TOTAL LIABILITIES
|
48,154,683
|
|||
|
MEMBERS' EQUITY
|
||||
|
Members' Interest
|
39,745,000
|
|||
|
Accumulated deficit
|
2,140,949
|
|||
|
Members' equity
|
41,885,949
|
|||
|
TOTAL LIABILITIES AND MEMBERS' EQUITY
|
$
|
90,040,632
|
||
The accompanying notes are an integral part of these consolidated financial statements.
1
THMS HOLDINGS, LLC and SUBSIDIARY
Condensed Consolidated Interim Statement of Operations
(Unaudited)
|
Nine Months Ended September 30,
2021 |
||||
|
REVENUES, net
|
$
|
75,017,181
|
||
|
COST OF SALES (exclusive of depreciation shown separately below)
|
48,708,061
|
|||
|
GROSS PROFIT
|
26,309,120
|
|||
|
OPERATING EXPENSES
|
||||
|
Selling, general, and administrative
|
16,380,641
|
|||
|
Depreciation
|
583,554
|
|||
|
Amortization
|
1,982,846
|
|||
|
Business acquisition transaction costs
|
-
|
|||
|
Total operating expenses
|
18,947,041
|
|||
|
INCOME (LOSS) FROM OPERATIONS
|
7,362,079
|
|||
|
OTHER INCOME (EXPENSES)
|
||||
|
Interest income
|
-
|
|||
|
Interest expense
|
(1,697,356
|
)
|
||
|
Total other expenses
|
(1,697,356
|
)
|
||
|
NET INCOME
|
$
|
5,664,723
|
||
The accompanying notes are an integral part of these consolidated financial statements.
2
THMS HOLDINGS, LLC and SUBSIDIARY
Condensed Consolidated Interim Statements of Changes in Members' Equity
(Unaudited)
|
Members'
Interest |
Accumulated
Deficit |
Total
Members' |
||||||||||
|
Balance at December 31, 2020
|
$
|
39,745,000
|
$
|
(1,675,016
|
)
|
$
|
38,069,984
|
|||||
|
Distributions
|
-
|
(1,848,758
|
)
|
(1,848,758
|
)
|
|||||||
|
Net income
|
-
|
5,664,723
|
5,664,723
|
|||||||||
|
Balance at September 30, 2021
|
$
|
39,745,000
|
$
|
2,140,949
|
$
|
41,885,949
|
||||||
The accompanying notes are an integral part of these consolidated financial statements.
3
THMS HOLDINGS, LLC and SUBSIDIARY
Condensed Consolidated Interim Statement of Cash Flows
(Unaudited)
|
Nine Months Ended September 30,
2021 |
||||
|
CASH FLOWS FROM OPERATING ACTIVITIES:
|
||||
|
Net income
|
$
|
5,664,723
|
||
|
Adjustments to reconcile net income to net cash provided by operating activities:
|
||||
|
Depreciation
|
583,554
|
|||
|
Amortization of intangibles
|
1,982,846
|
|||
|
Amortization of debt issuance costs
|
98,314
|
|||
|
Change in fair value of interest rate swap contract
|
(144,388
|
)
|
||
|
Changes in operating assets and liabilities:
|
||||
|
Accounts receivable
|
(1,353,672
|
)
|
||
|
Inventories
|
(3,825,941
|
)
|
||
|
Prepaid expenses and other current assets
|
(1,359,684
|
)
|
||
|
Other assets
|
527,073
|
|||
|
Accounts payable and accrued liabilites
|
1,227,468
|
|||
|
Net cash provided by operating activities
|
3,400,293
|
|||
|
CASH FLOWS FROM INVESTING ACTIVITIES:
|
||||
|
Purchases of property and equipment
|
(1,437,666
|
)
|
||
|
Business acquisition, net of cash acquired
|
(15,700,515
|
)
|
||
|
Net cash used in investing activities
|
(17,138,181
|
)
|
||
|
CASH FLOWS FROM FINANCING ACTIVITIES:
|
||||
|
Borrowings on line of credit
|
34,994
|
|||
|
Payments on line of credit
|
-
|
|||
|
Borrowings on long-term debt
|
16,000,000
|
|||
|
Payments on long-term debt
|
(1,588,758
|
)
|
||
|
Distributions to members
|
(1,848,758
|
)
|
||
|
Net cash provided by financing activities
|
12,597,478
|
|||
|
Net decrease in cash and cash equivalents
|
(1,140,410
|
)
|
||
|
Cash and cash equivalents at beginning of period
|
1,226,434
|
|||
|
Cash and cash equivalents at end of period
|
$
|
86,024
|
||
The accompanying notes are an integral part of these consolidated financial statements.
4
THMS HOLDINGS, LLC AND SUBSIDIARIES
Notes to Condensed Consolidated Interim Financial Statements
Nine months ended September 30, 2021 (Unaudited)
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. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accounting policies applied by the Company in these condensed interim financial statements are the same as those applied by the Company in its financial
statements as of and for the year ended December 31, 2020. These unaudited condensed interim financial statements should be read in conjunction with the audited financial statements and notes thereto as of and for the year ended December 31,
2020.
Principles of Consolidation
The accompanying condensed consolidated interim financial statements include the accounts of THMS Holdings, LLC and its wholly-owned subsidiary, T-H Marine
Supplies, LLC, and its wholly-owned subsidiaries, Innovative Plastics, LLC, and CMC Marine, LLC. All intercompany transactions have been eliminated upon consolidation.
Basis of Presentation
These condensed consolidated interim financial statements are presented on the accrual basis of accounting in accordance with U.S. generally accepted accounting
principles (“GAAP”).
Use of Estimates and Assumptions
The preparation of condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements, and the reported revenues and expenses during the reporting period. The Company
believes the estimates and assumptions utilized are reasonable; however, actual results could differ from these estimates.
Recent Accounting Pronouncements
In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-02, Leases (Topic 842). The standard increases transparency and comparability among organizations by recognizing lease assets and lease liabilities in the consolidated balance sheets and
disclosing key information about lease agreements. In June 2020, the FASB issued ASU 2020-05 delaying the effective date for Topic 842 to years beginning after December 15, 2021 and interim reporting periods beginning after December 15, 2022.
The Company is currently evaluating the effect the provisions of this ASU will have on the condensed consolidated financial statements.
In January 2017, the FASB issued ASU No. 2017-04, Simplifying the Test for
Goodwill Impairment. ASU No. 2017-04 simplifies how an entity is required to test goodwill for impairment by eliminating Step 2 from the goodwill impairment test. ASU No. 2017-04 (as amended) is effective for interim or annual
goodwill impairment tests in fiscal years beginning after December 15, 2022. Early adoption is permitted for interim or annual impairment tests performed on testing dates after January 1, 2017. The Company is currently assessing the effect
that ASU No. 2017-04 (as amended) will have on its condensed consolidated financial statements.
5
THMS HOLDINGS, LLC AND SUBSIDIARIES
Notes to Condensed Consolidated Interim Financial Statements
Nine months ended September 30, 2021 (Unaudited)
In June 2016, the FASB issued ASU 2016-13, Financial Instruments – Measurement
of Credit Losses on Financial Instruments, which requires measurement and recognition of expected credit losses for financial assets held. ASU 2016-13 is effective for the Company beginning January 1, 2023 and is required to be
applied prospectively. The Company is currently assessing the effect that ASU 2016-13 will have on its condensed consolidated financial statements.
3. ACQUISITIONS
Heartland Global Services, LLC
Effective August 31, 2021, the Company purchased a majority of the assets of Heartland Global Services, LLC (“Heartland”). The total purchase consideration was
$11,277,746 paid with cash. In connection with the acquisition, the Company incurred $70,043 of acquisition costs that were expensed as incurred. These acquisition costs are included in the accompanying condensed consolidated interim
statement of operations for the nine months ended September 30, 2021.
The acquisition was accounted for using the acquisition method of accounting and, accordingly, the accompanying condensed consolidated interim statement of
operations for the nine months ended September 30, 2021 includes the results of operations of Heartland beginning September 1, 2021. The acquisition of Heartland 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 $1,665,800. 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 Heartland was allocated to the net assets acquired as follows:
|
Assets:
|
||||
|
Accounts receivable
|
$
|
939,611
|
||
|
Inventory
|
1,646,281
|
|||
|
Property and equipment
|
39,056
|
|||
|
Other assets
|
19,200
|
|||
|
Trademark
|
1,500,000
|
|||
|
Customer relations
|
5,100,000
|
|||
|
Noncompete
|
400,000
|
|||
|
Goodwill
|
1,665,800
|
|||
|
Total assets acquired
|
11,309,948
|
|||
|
Liabilities:
|
||||
|
Accounts payable
|
32,202
|
|||
|
Total liabilities assumed
|
32,202
|
|||
|
Net assets acquired
|
$
|
11,277,746
|
||
6
THMS HOLDINGS, LLC AND SUBSIDIARIES
Notes to Condensed Consolidated Interim Financial Statements
Nine months ended September 30, 2021 (Unaudited)
Gator Guards
On September 3, 2021, the Company entered into an Asset Purchase agreement to acquire substantially all of the assets of Gator Guards. Total consideration was
$3,968,202 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.
|
Assets:
|
||||
|
Accounts receivable
|
$
|
129,714
|
||
|
Inventory
|
201,880
|
|||
|
Property and equipment
|
51,500
|
|||
|
Other assets
|
-
|
|||
|
Trademark
|
400,000
|
|||
|
Customer relations
|
1,690,000
|
|||
|
Noncompete
|
390,000
|
|||
|
Goodwill
|
1,148,257
|
|||
|
Total assets acquired
|
4,011,351
|
|||
|
Liabilities:
|
||||
|
Accounts payable
|
43,149
|
|||
|
Total liabilities assumed
|
43,149
|
|||
|
Net assets acquired
|
$
|
3,968,202
|
||
The Company incurred transaction related expenses of $73,224 that were expensed as incurred. These acquisition costs are included in the accompanying consolidated
statement of operations for the nine month ended September 30, 2021.
4. NOTES PAYABLE
Credit Agreement
In August, 2021 the Company’s credit agreement with Cadence Bank (the “Credit Agreement”) was amend to extend a delayed draw term note to the Company with
availability of $21,000,000. The Company drew down $15,800,000. Payment of all accrued and unpaid interest is due quarterly. Principal payments are due quarterly and are 2.5% of the outstanding principal until March,2023 and then 3.75% until
maturity at which unpaid principal and interest is due.
5. SUBSEQUENT EVENTS
On October 20, 2021, the Company entered into a definitive agreement to be acquired by One Water Assets & Operations, LLC. The transaction closed on November
30, 2021.
7
Exhibit 99.3
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
|
Assets
|
OneWater Marine Inc.
Historical
|
T-H Marine Supplies LLC
Historical
|
Pro Forma Adjustments
|
OneWater Marine Inc.
Pro Forma as Adjusted
|
|||||||||||||||
|
Current Assets:
|
|||||||||||||||||||
|
Cash
|
$
|
62,606
|
$
|
87
|
$
|
16,766
|
(1)
|
|
$
|
79,459
|
|||||||||
|
Restricted cash
|
11,343
|
-
|
-
|
11,343
|
|||||||||||||||
|
Accounts receivable, net
|
28,529
|
10,161
|
(1,206
|
)
|
(1)
|
|
37,484
|
||||||||||||
|
Inventories
|
143,880
|
17,603
|
2,253
|
(1)
|
|
163,736
|
|||||||||||||
|
Prepaid expenses and other current assets
|
34,580
|
2,282
|
(735
|
)
|
(1)
|
|
36,127
|
||||||||||||
|
Total current assets
|
280,938
|
30,133
|
17,078
|
328,149
|
|||||||||||||||
|
Property and equipment, net
|
67,114
|
3,981
|
(85
|
)
|
(1)
|
|
71,010
|
||||||||||||
|
Operating lease right-of-use assets
|
89,141
|
-
|
6,100
|
(4)
|
|
95,241
|
|||||||||||||
|
Other Assets:
|
|||||||||||||||||||
|
Deposits
|
526
|
20
|
(20
|
)
|
526
|
||||||||||||||
|
Deferred tax asset
|
29,110
|
-
|
-
|
29,110
|
|||||||||||||||
|
Identifiable intangible assets
|
85,294
|
38,561
|
(38,561
|
)
|
(1)
|
|
85,294
|
||||||||||||
|
Goodwill
|
168,491
|
17,347
|
140,020
|
(1)
|
|
325,858
|
|||||||||||||
|
Total other assets
|
283,421
|
55,928
|
101,439
|
440,788
|
|||||||||||||||
|
Total assets
|
$
|
720,614
|
$
|
90,042
|
$
|
124,532
|
$
|
935,188
|
|||||||||||
|
Liabilities and Stockholders' Equity / Members' Equity
|
|||||||||||||||||||
|
Current Liabilities:
|
|||||||||||||||||||
|
Accounts payable
|
$
|
18,114
|
$
|
3,602
|
$
|
676
|
(1)(3)
|
|
$
|
22,392
|
|||||||||
|
Other payables and accrued expenses
|
27,665
|
2,252
|
1,754
|
(1)(2)
|
|
31,671
|
|||||||||||||
|
Customer deposits
|
46,610
|
352
|
42
|
(1)
|
|
47,004
|
|||||||||||||
|
Note payable - floor plan
|
114,234
|
-
|
-
|
114,234
|
|||||||||||||||
|
Current portion of operating lease liabilities
|
9,159
|
-
|
841
|
(4)
|
|
10,000
|
|||||||||||||
|
Current portion of long-term debt
|
11,366
|
17,726
|
(17,726
|
)
|
(1)
|
|
11,366
|
||||||||||||
|
Current portion of tax receivable agreeement liability
|
482
|
-
|
-
|
482
|
|||||||||||||||
|
Total current liabilities
|
227,630
|
23,932
|
(14,413
|
)
|
237,149
|
||||||||||||||
|
Long-term Liabilities:
|
|||||||||||||||||||
|
Other long-term liabilities
|
14,991
|
298
|
(298
|
)
|
(1)
|
|
14,991
|
||||||||||||
|
Tax receivable agreement liability
|
39,622
|
-
|
-
|
39,622
|
|||||||||||||||
|
Noncurrent operating lease liabilities
|
80,464
|
-
|
5,259
|
(4)
|
|
85,723
|
|||||||||||||
|
Long-term debt, net of current portion and unamortized debt issuance costs
|
103,074
|
23,925
|
171,575
|
(1)
|
|
298,574
|
|||||||||||||
|
Total Liabilities
|
465,781
|
48,155
|
162,123
|
676,059
|
|||||||||||||||
|
Stockholders' Equity / Members Equity:
|
|||||||||||||||||||
|
Preferred stock, $0.01 par value, 1,000,000 shares authorized, none issued and outstanding as
of September 30, 2021
|
-
|
-
|
-
|
-
|
|||||||||||||||
|
Class A common stock, $0.01 par value, 40,000,000 shares authorized, 13,276,538 shares issued
and outstanding as of September 30, 2021
|
133
|
-
|
1
|
(1)
|
|
134
|
|||||||||||||
|
Class B common stock, $0.01 par value, 10,000,000 shares authorized, 1,819,112 shares issued
and outstanding as of September 30, 2021
|
18
|
-
|
-
|
18
|
|||||||||||||||
|
Members' equity
|
-
|
41,887
|
(41,887
|
)
|
(1)
|
|
-
|
||||||||||||
|
Additional paid-in capital
|
150,825
|
-
|
6,833
|
(1)
|
|
157,658
|
|||||||||||||
|
Retained earnings
|
74,952
|
-
|
(2,538
|
)
|
(1)(2)(3)
|
|
|
72,414
|
|||||||||||
|
Total stockholders' equity attributable to OneWater Marine Inc.
|
225,928
|
41,887
|
(37,591
|
)
|
230,224
|
||||||||||||||
|
Equity attributable to non-controlling interests
|
28,905
|
-
|
-
|
28,905
|
|||||||||||||||
|
Total stockholders' equity / members equity
|
254,833
|
41,887
|
(37,591
|
)
|
259,129
|
||||||||||||||
|
Total liabilities and stockholders' equity / members' equity
|
$
|
720,614
|
$
|
90,042
|
$
|
124,532
|
$
|
935,188
|
|||||||||||
ONEWATER MARINE INC. AND SUBSIDIARIES
UNAUDITED PROFORMA COMBINED STATEMENTS OF OPERATIONS
($ in thousands except per share data)
|
OneWater Marine Inc. for
the year ended September
30, 2021
|
T-H Marine Supplies LLC for
the 12 months ended
September 30, 2021
|
Pro Forma Adjustments
|
OneWater Marine Inc. Pro
Forma as Adjusted for the 12
months ended September 30,
2021
|
||||||||||||||||
|
Revenues
|
|||||||||||||||||||
|
New Boat
|
872,680
|
-
|
-
|
872,680
|
|||||||||||||||
|
Pre-owned boat
|
216,416
|
-
|
-
|
216,416
|
|||||||||||||||
|
Finance & insurance income
|
42,668
|
-
|
-
|
42,668
|
|||||||||||||||
|
Service, parts & other
|
96,442
|
93,376
|
-
|
189,818
|
|||||||||||||||
|
Total revenues
|
1,228,206
|
93,376
|
-
|
1,321,582
|
|||||||||||||||
|
Cost of sales (exclusive of depreciation and amoritization shown
seperately below)
|
|||||||||||||||||||
|
New Boat
|
661,764
|
-
|
-
|
661,764
|
|||||||||||||||
|
Pre-owned boat
|
162,278
|
-
|
-
|
162,278
|
|||||||||||||||
|
Service, parts & other
|
46,709
|
61,501
|
-
|
108,210
|
|||||||||||||||
|
Total cost of sales
|
870,751
|
61,501
|
-
|
932,252
|
|||||||||||||||
|
Selling, general and administrative expenses
|
199,049
|
19,325
|
-
|
218,374
|
|||||||||||||||
|
Depreciation and amortization
|
5,411
|
3,367
|
-
|
8,778
|
|||||||||||||||
|
Transaction costs
|
869
|
1,344
|
-
|
2,213
|
|||||||||||||||
|
Change in fair value of contingent consideration
|
3,249
|
-
|
-
|
3,249
|
|||||||||||||||
|
INCOME FROM OPERATIONS
|
148,877
|
7,839
|
-
|
156,716
|
|||||||||||||||
|
Other expense (income)
|
|||||||||||||||||||
|
Interest expense - floor plan
|
2,566
|
-
|
-
|
2,566
|
|||||||||||||||
|
Interest expense - other
|
4,344
|
2,275
|
3,725
|
(6)(7)
|
|
10,344
|
|||||||||||||
|
Other (income) expense, net
|
(248
|
)
|
312
|
(378
|
)
|
(5)
|
|
(314
|
)
|
||||||||||
|
Total other expense (income), net
|
6,662
|
2,587
|
3,347
|
12,596
|
|||||||||||||||
|
Income before income tax expense
|
142,215
|
5,252
|
(3,347
|
)
|
144,120
|
||||||||||||||
|
Income tax expense
|
25,802
|
-
|
402
|
(9)
|
|
26,204
|
|||||||||||||
|
Net income
|
116,413
|
5,252
|
(3,749
|
)
|
117,916
|
||||||||||||||
|
Less: Net income attributable to non-controlling interests of One Water Marine Holdings, LLC
|
37,354
|
-
|
230
|
(8)
|
|
37,584
|
|||||||||||||
|
Net income attributable to OneWater Marine Inc.
|
$
|
79,059
|
$
|
5,252
|
$
|
(3,979
|
)
|
$
|
80,332
|
||||||||||
|
Proforma weighted average shares of Class A common stock outstanding:
|
|||||||||||||||||||
|
Basic
|
11,087
|
-
|
134
|
(10)
|
|
11,221
|
|||||||||||||
|
Diluted
|
11,359
|
-
|
134
|
(10)
|
|
11,493
|
|||||||||||||
|
Proforma income per Class A common stock per share:
|
|||||||||||||||||||
|
Basic
|
$
|
7.13
|
$
|
7.16
|
|||||||||||||||
|
Diluted
|
$
|
6.96
|
$
|
6.99
|
|||||||||||||||
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):
|
Accounts receivable, net
|
$
|
8,955
|
||
|
Inventories
|
19,856
|
|||
|
Prepaid expenses and other current assets
|
1,547
|
|||
|
Property and equipment
|
3,896
|
|||
|
Operating lease right-of-use assets
|
5,960
|
|||
|
Goodwill
|
157,367
|
|||
|
Accounts payable
|
3,876
|
|||
|
Other payables and accrued expenses
|
1,870
|
|||
|
Customer deposits
|
394
|
|||
|
Operating lease liabilities
|
5,960
|
|||
|
Total consideration
|
$
|
185,481
|
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
| 1) |
Reflects the following adjustments related to OneWater’s acquisition of THMS:
|
| a. |
Receipt of $195.5 million in proceeds, net of expenses for OneWater’s expansion of its credit facility, with $178.6 million used to fund the acquisition and $16.9
million available for general corporate purposes.
|
| b. |
To reflect the 133,531 shares of Class A common stock, par value $0.01 per share, of the Company, with a value of $6.8 million issued as part of the purchase price of
THMS.
|
| c. |
Adjustment to account balances to reflect the preliminary purchase price allocation which has been used to prepare the transaction accounting 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 transaction accounting adjustments.
|
| 2) |
To record $2.1 million in transaction costs related to OneWater’s acquisition of THMS.
|
| 3) |
Following the acquisition, the earnings of THMS will be subject to U.S. federal income taxes, in addition to state and local taxes, which will result in higher income
taxes than during THMS history as a limited liability company. As a result, the corresponding pro forma adjustment establishes an income tax payable related to their income for the 12 months ended September 30, 2021, reflecting the tax status
of OneWater subsequent to the acquisition.
|
| 4) |
Reflects THMS adoption of ASC 842 which requires organizations to recognize right-of use assets and lease liabilities on the balance sheet and disclose key information
about leasing arrangements.
|
Note 5 – Proforma adjustments to the Unaudited Pro Forma Combined Statements of Operations
| 5) |
Reflects the elimination of a management agreement THMS had with its private equity sponsor.
|
| 6) |
Reflects the elimination of the interest expense associated with debt on the balance sheet of THMS as of September 30, 2021, that was paid off in full as of the
acquisition date.
|
| 7) |
Reflects the addition of the interest expense at the Company’s current variable rate of 3% applied to the $200 million in incremental borrowings by OneWater to finance
the acquisition.
|
| 8) |
To allocate a portion of THMS pretax income to the non-controlling interests of One Water Marine Holdings LLC, net of an allocation to the non-controlling interest for
the prorated amount of pro forma entries #5 through #7.
|
| 9) |
Following the acquisition, the earnings of THMS will be subject to U.S. federal income taxes, in addition to state and local taxes, which will result in higher income
taxes than during THMS history as a limited liability company. As a result, the corresponding pro forma adjustment establishes an income tax expense, reflecting the tax status of OneWater subsequent to the acquisition, related to their income
for the 12 months ended September 30, 2021, and for the pro forma entries #5 through #8 noted above. The pro forma adjustment has been recorded at OneWater’s current statutory rate of 24.0%.
|
| 10) |
To reflect the 133,531 shares of Class A common stock, par value $0.01 per share, of the Company, with a value of $6.8 million issued as part of the purchase price of
THMS.
|