Acquisitions

3 Months Ended

Dec. 31, 2021

4.	Acquisitions

The results of operations of acquisitions are included in the accompanying unaudited condensed consolidated financial statements from the acquisition date. The purchase price of acquisitions is allocated to identifiable tangible assets and intangible assets acquired based on their estimated fair values at the acquisition date, with the excess being allocated to goodwill. Under the acquisition method of accounting, the purchase price is allocated to the tangible and intangible assets acquired and liabilities assumed based on information currently available. For the fiscal first quarter 2022 acquisitions, the valuation of tangible assets, assumed liabilities and identifiable intangible assets are preliminary as the acquisitions are subject to certain customary closing and post-closing adjustments and certain valuations are not complete. Any changes to the value of identifiable intangible assets will be reclassified from goodwill upon the completion of the valuations.

Fiscal First Quarter 2022

For the three months ended December 31, 2021, the Company completed the following transactions:

•	On October 1, 2021, Naples Boat Mart with one location in Florida

•	On November 30, 2021, T-H Marine, a leading provider of branded marine parts and accessories, with locations in Alabama, Florida, Illinois, Indiana, Oklahoma and Texas

•	On December 1, 2021, Norfolk Marine Company with one location in Virginia

•	On December 31, 2021, a majority interest in Quality Boats with three locations in Florida. The sellers retained a 20% economic interest in Quality Boats. The Company has the exclusive right, but not obligation, to acquire the remaining 20% interest at any time before January 1, 2027.

Consideration paid for the acquisitions was $302.1 million with $278.8 million paid at closing (net of cash acquired), $1.1 million financed through a note payable to the sellers bearing interest at a rate of 4.0% per year, estimated payments of $10.0 million in contingent consideration, $5.4 million in accrued purchase consideration and the remaining $6.8 million with the issuance of shares of Class A common stock. The notes are payable in one lump sum on December 1, 2024, with interest payments due quarterly. The estimated payments of contingent consideration are part of multiple earnouts varying from the achievement of certain post-acquisition increases in adjusted EBITDA of the Company to the generation of acquisition leads for the Company. The acquisition contingent consideration was developed using weighted average projections based on the Company’s historical experience, current forecasts for the industry and current expectations of the ability to generate viable acquisition leads. There are no minimum payouts on the acquisition contingent consideration and the maximum payout is $18.8 million.

The table below summarizes the preliminary fair values of the assets acquired and liabilities assumed at the acquisition date, including the goodwill recorded as a result of the transaction:

Summary of Assets Acquired and Liabilities Assumed
($ in thousands)	T-H Marine			Quality Boats			Other Acquisitions			Total Acquisitions
Accounts receivable	$	8,955		$	-		$	399		$	9,354
Inventories		19,856			5,937			6,879			32,672
Prepaid expenses		1,547			187			56			1,790
Property and equipment		3,896			803			916			5,615
Operating lease right-of-use assets		5,960			428			-			6,388
Identifiable intangible assets		-			31,700			4,250			35,950
Goodwill		157,367			78,682			15,135			251,184
Accounts payable		(3,876	)		(2,108	)		(219	)		(6,203	)
Accrued expenses		(1,870	)		-			(483	)		(2,353	)
Customer deposits		(394	)		(3,997	)		(2,227	)		(6,618	)
Operating lease liabilities		(5,960	)		(428	)		-			(6,388	)
Aggregate acquisition date fair value	$	185,481		$	111,204		$	24,706		$	321,391

Consideration transferred	$	185,481		$	91,893		$	24,706		$	302,080
Fair value of non-controlling interests		-			19,311			-			19,311
Aggregate acquisition date fair value	$	185,481		$	111,204		$	24,706		$	321,391

Included in our results for the three months ended December 31, 2021, the acquisitions contributed $14.2 million to our consolidated revenue and $1.1 to our income before income tax expense, respectively. Costs related to acquisitions are included in transaction costs and primarily relate to legal, accounting, valuation and other fees, which are charged directly to operations in the accompanying consolidated statements of operations as incurred in the amount of $3.0 for the three months ended December 31, 2021. Comparatively, we recorded $0.2 million in acquisition related transaction costs for the three months ended December 31, 2020.

The following unaudited pro forma summary presents consolidated information as if all acquisitions in the three month periods ended December 31, 2021 and 2020, had occurred on October 1, 2020:

	Three Months Ended December 31, 2021		Three Months Ended December 31, 2020
	($ in thousands)
	(Unaudited)
Pro forma revenue	$	374,940	$	318,198
Pro forma net income	$	23,949	$	17,803

The amounts have been calculated by applying our accounting policies and estimates. The results of the acquired stores have been adjusted to reflect the following: the reversal of goodwill amortization under the Private Company Council accounting alternative and the payment of management fees. Certain acquired entities completed acquisitions during the periods presented, prior to our acquisition of the business. Their acquisitions are included in the results of their operations from the acquisition date forward but were not included on a pro forma basis. Pro forma net income has been tax affected based on the Company’s effective tax rate in the historical periods presented.

We expect substantially all of the goodwill related to completed acquisitions to be deductible for federal income tax purposes.