As Of               Filer                 Filing    For·On·As Docs:Size             Issuer                      Filing Agent

 6/24/19  OneWater Marine Inc.              DRSLTR¶     3/06/20    1:92K                                    Broadridge Fin’l So… Inc

Document/Exhibit                   Description                      Pages   Size 

 1: DRSLTR      Comment-Response or Draft-Registration-Statement    HTML     81K 
                Letter to the SEC                                                

RESPONSE: We acknowledge the Staff’s comment and have revised the Registration Statement accordingly to delete the estimate of Adjusted EBITDA that could be contributed by our pipeline of acquisitions. Please see pages 7 and 90 of Submission No. 2.

RESPONSE: We acknowledge the Staff’s comment and have revised the Registration Statement accordingly to depict that certain Legacy Holders will also hold shares of Class A Common Stock after the offering. Please see page 10 of Submission No. 2.

RESPONSE: We acknowledge the Staff’s comment and advise the Staff that the numerator in our calculation of pro forma per share data excludes the redeemable preferred interest and the change in fair value of warrant liability, as we expect to redeem the Opco Preferred Units and expect the holders of the LLC Warrants to exercise such LLC Warrants in connection with this offering and our corporate reorganization. We have therefore excluded such amounts from our calculation of pro forma per share data. We have revised the Registration Statement accordingly to clarify this calculation. Please see pages 18 and 57 of Submission No. 2.

RESPONSE: We acknowledge the Staff’s comment and have revised the Registration Statement accordingly to include line items for the LLC Warrants and Opco Preferred Units in the Capitalization table. Please see page 53 of Submission No. 2.

RESPONSE: We acknowledge the Staff’s comment and respectfully advise the Staff that we completed an assessment of our operations based on the business activities in which we generate revenue, the operating results reviewed by our chief operating decision maker (“CODM”), who is our Chief Executive Officer, Austin Singleton, and the availability of discrete financial information. Our CODM currently reviews financial information and operates our business as one marine retail unit, and we have concluded that we have one operating segment and one reporting unit. Accordingly, our CODM determined that aggregation of multiple operating segments was not applicable. For additional information, please see our response to Comment No. 24 below.

RESPONSE: We acknowledge the Staff’s comment and have revised the Registration Statement accordingly to include additional disclosure regarding our fair value measurements. Please see page 61 of Submission No. 2.

RESPONSE: We acknowledge the Staff’s comment and have revised the Registration Statement accordingly to quantify the increase in revenue from same-store sales. Please see pages 66 and 69 of Submission No. 2. Additionally, we respectfully advise the Staff that we are unable to calculate same-store sales data by product line and are therefore unable to quantify the extent to which increases in product line revenue are attributable to same-store sales.

RESPONSE: We acknowledge the Staff’s comment and have revised the Registration Statement accordingly to include a discussion on the calculation of gross profit and the nature of costs included in cost of sales. Please see page 62 of Submission No. 2.

We calculate gross profit as revenue less cost of sales. Cost of sales consists of actual amounts paid for products, costs of services (primarily labor), transportation costs from manufacturers to our retail stores, and vendor consideration.  We supplementally advise the Staff that we acquire products from various manufacturers, which are sent directly to our retail stores and resold directly to end customers. We include the cost to purchase goods, plus related transportation costs and vendor consideration received, within cost of sales. Additionally, we provide repair and maintenance services to our customers and include the labor costs to complete those services within cost of sales.

Our gross profit calculation excludes any depreciation and amortization, which is presented separately in our Consolidated Statement of Operations. Additionally, we supplementally advise the Staff that our overall depreciation and amortization expense comprises only 0.3% of our revenue. We do not manufacture the products we sell, nor do we maintain distribution centers for our products that would generate significant depreciation and amortization attributable to cost of sales. The majority of our retail stores are leased, and we have low capital expenditures related to our facilities. Moreover, we generally store inventory on the lots at our retail locations, which have a corresponding asset of land with no associated depreciation. Our buildings, furniture and equipment are generally designated for the sales process, and related depreciation and amortization are excluded as a selling expense. While inventory may transition in and out of a building for a period of time and we do have a minimal amount of land improvements capitalized, only a very immaterial amount of our depreciation or amortization expense could be attributable to cost of sales.

RESPONSE: We acknowledge the Staff’s comment and have revised the Registration Statement accordingly to further quantify the impact of each material factor that affected each expense line item. Please see pages  67, 68, 71, and 72 of Submission No. 2.

RESPONSE: We acknowledge the Staff’s comment and have revised the Registration Statement accordingly to clarify our status as a holding company and to describe dividend restrictions. Please see pages 74, 75, 77 and 78 of Submission No. 2.

RESPONSE: We acknowledge the Staff’s comment and respectfully advise the Staff that we may refinance or enter into additional financing agreements to repay any remaining amounts due under the GS/BIP Credit Facility, after application of proceeds from this offering. Should we repay the remaining amounts due under, and subsequently terminate, the GS/BIP Credit Facility, we anticipate entering into additional financing arrangements to replace the source of capital provided by the GS/BIP Credit Facility to make additional acquisitions. To date, we have not formalized any such financing agreements but anticipate doing so prior to completion of this offering. To the extent we finalize any new financing agreements prior to the effectiveness of the Registration Statement, we will revise the Registration Statement to include a description of such agreements, including restrictions on dividends or distributions.

RESPONSE: We acknowledge the Staff’s comment and have revised the Registration Statement to include additional disclosure stating that (i) we generally expect OneWater LLC to fund distributions related to payments due by the Company under the Tax Receivable Agreement out of available cash and (ii) in the event that payments under the Tax Receivable Agreement are accelerated, where applicable, we generally expect to fund such accelerated payments out of the proceeds of the change of control transaction giving rise to such acceleration. In addition, we have revised the Registration Statement to discuss the effects of the Tax Receivable Agreement on our liquidity. Please see pages 36, 45 and 80 of Submission No. 2.

RESPONSE: We acknowledge the Staff’s comment and have revised the Registration Statement accordingly to include an estimate of the tax benefits to be realized by the Company, based on certain assumptions detailed in the Registration Statement, including a redemption of all of the outstanding OneWater LLC Units (other than those held by the Company) immediately after this offering. Please see page 111 of Submission No. 2. We respectfully advise the Staff that the Registration Statement includes an estimate of the payments to be made to the Unit Holders who are parties to the Tax Receivable Agreement, assuming an early termination of the Tax Receivable Agreement immediately after this offering (including both the discounted and undiscounted liability). Please see pages 44 and 112 of Submission No. 2. 

RESPONSE: We acknowledge the Staff’s comment and respectfully advise the Staff that we were an early stage development company when we began operations in fiscal year 2014, with growth driven primarily by acquisitions rather than same-store organic growth.  As a result, inclusion of earlier fiscal year financial information in the charts on pages 6 and 89 of the Registration Statement would reflect growth rates in the metrics presented that are higher than the growth rates we expect to achieve in the future and could potentially be misleading to investors. Additionally, as an emerging growth company, we are not required to present more than two full fiscal years of audited financial statements in the Registration Statement or present selected financial data for any period prior to the earliest audited period presented in the Registration Statement. We have not audited the financial information for any fiscal year prior to 2017 in accordance with the standards set forth by the Public Company Accounting Oversight Board. Accordingly, we have elected not to provide certain financial metrics, such as revenue, gross profit and Adjusted EBITDA, for any fiscal years prior to 2017; however, we advise the Staff that we are currently evaluating whether disclosure of same-store sales growth for fiscal year 2017, which would include certain fiscal year 2016 same-store sales information in the year-over-year comparison, would be helpful to investors. If we conclude that such metric would be helpful to investors, we will include such information in future amendments to our Registration Statement.

RESPONSE: We acknowledge the Staff’s comment and have revised the Registration Statement accordingly. Please see page 90 of Submission No. 2. Additionally, we supplementally advise the Staff that under certain circumstances, we enter into post-acquisition agreements with former owners, including customary employment agreements, leases for dealerships and other agreements in the ordinary course. The terms of these customary employment agreements are typically for three years with salaries that are commensurate with their new positions. Because we retain the original store names and brands of the dealer groups we acquire, former owners are incentivized to stay involved as their name and reputation remain “on the door,” even if no formal employment agreement is maintained.

RESPONSE: We acknowledge the Staff’s comment and respectfully advise the Staff that we have historically made cash distributions to common members proportional to their allocated taxable income as indicated on each member’s respective Schedule K-1 tax forms. All distributions made in fiscal year 2018 were paid to the holders of common units of OneWater LLC. Currently, there is a significant difference between book and taxable income related to the change in fair value of the warrant liability. While this is a book charge, it is not deductible for tax purposes, resulting in significant taxable income to the common unit holders of OneWater LLC. We are basing the distributions on the various subsidiaries’ Schedule K-1s prepared on a separate return basis. We expect the LLC Warrants to be exercised simultaneously with this offering, and after such exercise, there will not be additional changes in fair value of the warrant liability. Additionally, we have revised the Registration Statement to add a pro forma basic and diluted net loss per common unit holder that reflects the additional shares required to generate proceeds sufficient to pay the dividend in excess of current period losses. We will also include an additional note to our consolidated financial statements that includes the computations necessary to calculate pro forma net loss per basic and diluted interests. Please see pages F-3, F-22, F-26 and F-49 of Submission No. 2.

RESPONSE: We acknowledge the Staff’s comment and have revised the Registration Statement accordingly to include additional disclosure regarding restrictions on the payment of dividends. Please see page F-45 of Submission No. 2.

RESPONSE: We acknowledge the Staff’s comment and supplementally advise the Staff that currently, there are certain restrictions for loans or advances between OneWater LLC and its operating subsidiaries, in addition to the restrictions on dividend payments as discussed in our response to Comment No. 17 above. The GS/BIP Credit Facility, permits intercompany indebtedness, provided that such indebtedness is unsecured and subordinate to the obligations under the GS/BIP Credit Facility. Pursuant to the Inventory Financing Agreement, certain of our subsidiaries designated as “Dealers” under the Inventory Financing Agreement are generally restricted from incurring indebtedness, including certain restrictions on intercompany loans or advances. We supplementally advise the Staff that, in connection with the offering, we plan to refinance the GS/BIP Credit Facility and anticipate amending or replacing the Inventory Financing Agreement, and we have therefore excluded a discussion of restrictions on intercompany loans or advances in Submission No. 2. To the extent we finalize any new financing agreements prior to the effectiveness of the Registration Statement, we will revise the Registration Statement to include a description of such agreements, including restrictions on dividends, distributions and intercompany loans and advances, if any.

Additionally, we considered if the amount of restricted net assets or associated additional disclosures were necessary as contemplated in Rule 5-04 of Regulation S-X. We determined that additional disclosures were not necessary as the restricted assets are less than 25% of total net assets.

RESPONSE: We acknowledge the Staff’s comment and have revised the consolidated financial statements to use the defined term “OneWater LLC.”

RESPONSE: We acknowledge the Staff’s comment and have revised the Registration Statement accordingly to include additional disclosure regarding our accounting policy for operating leases. Please see page F-27 of Submission No. 2.

RESPONSE: We acknowledge the Staff’s comment and have revised the Registration Statement accordingly. Please see page F-27 of Submission No. 2.

RESPONSE: We acknowledge the Staff’s comment and respectfully advise the Staff that we do not currently maintain finance, insurance and extended warranty contract chargeback reserves, as these amounts would be de minimis, approximately $125,000. We will continue to monitor the need for a chargeback reserve and record one in the future should the amounts become more significant. Additionally, we have also revised the Registration Statement to include additional disclosure regarding reserves. Please see page F-29 of Submission No. 2.

RESPONSE: We acknowledge the Staff’s comment and have revised the Registration Statement accordingly. Please see page F-28 of Submission No. 2.

RESPONSE: We acknowledge the Staff’s comment and respectfully advise the Staff that we completed an assessment of our operating segments based on the guidance prescribed by ASC 280 – Segment Reporting. ASC 280 defines an operating segment as a component of a business entity that has each of the three following characteristics:

The Company is comprised of boat dealerships. A boat dealership may consist of one or more retail locations within a geographic area, and each retail location may consist of one or more buildings.  A dealership typically has revenue, expenses, customers and a manager, although some managers cover more than one dealership.

Our CODM, is our Chief Executive Officer, Austin Singleton.  Mr. Singleton is responsible for assessing the performance of the business of the Company.  He has the authority over the approval of capital expenditures, budgets, and assessing performance against metrics as well as determining the compensation of executive officers and managers.  Mr. Singleton has the ultimate authority to allocate resources, and his involvement and level of authority is evidenced by the following decision-making responsibilities:

Our CODM reviews financial results and other information at the marine retail level. Our CODM receives financial information on a consolidated company-level (representing the marine retail level) operations each month, quarter and year-to-date, which forms the basis for our financial results presented to our Board of Directors and outside equity holders.  The CODM makes decisions on allocations of resources and corporate strategy based on this information at the marine retail level. When issues or questions arise the CODM asks or instructs the Chief Operating Officer to investigate issues and report the resolution of the issues to the CODM.  For example, the Chief Operating Officer regularly interacts with individual dealership managers and holds video conferences to discuss financial performance and results in detail, but the Chief Executive Officer does not participate in such meetings and discussions.

We also considered whether discrete financial information was available beyond the Company’s consolidated results. Management considered whether discrete financial information by product line was available and reviewed. Management noted that our Consolidated Statements of Operations do not identify expenses by product line. We maintain reports and metrics on new boat sales, pre-owned boat sales, finance and insurance (“F&I”) products and service, parts & other sales, but we do not maintain by product line our primary metrics for assessing performance, which include same-store sales, Adjusted EBITDA and net profit margin. We do not maintain complete financial information for each product line, including a means to track assets by product line. We have not developed these means to track and report information because that is not how the CODM manages the business. We therefore concluded that discrete financial information does not exist at the product line level since we are unable to calculate the Company’s key metrics used by the CODM to assess performance and allocate resources. Furthermore, the financial information provided to the CODM does not contain, by product line, our primary metrics of same-store sales, Adjusted EBITDA or net profit margin. In light of these factors, we determined the product lines do not qualify as operating segments.

As discussed above, our CODM does not review our primary metrics by product line. Additionally, these metrics are not currently available by product line. The CODM has not asked the Company to gather the information or develop the accounting records necessary to report these metrics by product line. Management also believes that in assessing performance, the financial information for the product lines must be reviewed in totality, as a single boat sale involves revenue from several streams.  For example, we may offer a new boat sale discount in order to sell F&I products, preventing the transaction from reflecting the true performance of the new boat sales product line. Additionally, many expenses cannot be broken down by product line as they target getting customers into dealerships. For example, a customer may have received marketing material for a pre-owned boat but may end up buying a new boat, or the customer may not buy a boat but may instead purchase maintenance and repair services to update his or her existing boat.  Finally, since our personnel operate across product lines, we are not able to determine the proper amount of expense that should be allocated to each. While allocations could be created based on various methodologies, our CODM has not asked us to prepare these allocations because that is not how he manages the business; further emphasizing that product lines do not qualify as operating segments.

ASC 280-10-50-7 states that “generally, an operating segment has a segment manager who is directly accountable to and maintains regular contact with the CODM to discuss operating activities, financial results, forecasts, or plans for the segment.  The term segment manager identifies a function, not necessarily a manager with a specific title.”

The Chief Operating Officer of OneWater LLC, Anthony Aisquith, is deemed to be a segment manager who is accountable to and maintains regular contact with the CODM. He reviews operating activities, financial results, forecasts and plans for the marine retail segment. The Chief Operating Officer interacts with the dealership and operations managers who oversee sales, marketing, inventory fixed operations and real estate. There are no regional or mid-level managers between the Chief Operating Officer and the dealerships. These dealership and operations managers support the Chief Operating Officer and their respective dealerships to help them to run a better business. They do not regularly meet with, report to or interact with the CODM.

There are other corporate personnel who report directly to the CODM, including the Chief Financial Officer and Vice President of Corporate Development.  These individuals do not represent segment managers, as they manage corporate functions and do not engage in business activities that generate revenue.

Based upon the criteria set forth in ASC 280, particularly focusing on our CODM’s regular review of information at the consolidated marine retail level, we have concluded that only one operating segment, the marine retail segment, exists and that the segment manager is the Chief Operating Officer.

We have modified the disclosure in Submission No. 2 to clarify that the operating segment which is a reporting unit is also a reportable segment. Please see page F-30 of Submission No. 2.

RESPONSE: We acknowledge the Staff’s comment and respectfully advise the Staff that in connection with the acquisitions of Bosun’s Marine, Inc. and South Shore Marine Services, Inc., we and the respective sellers mutually agreed upon a purchase price for the assets and operations to be acquired.  This agreed upon purchase price was considered the fair value of the assets and operations as this was a transaction between willing unrelated parties.  The former owners requested, and we agreed as part of the negotiation process, to receive equity in addition to cash as consideration for the assets sold.  Approximately 75% of the purchase price was paid to the former owners in cash and approximately 25% of the purchase price was paid to the former owners in equity shares of the respective operating subsidiaries,  Bosun’s Assets and Operations and South Shore Assets and Operations.  The equity interests portion of the purchase price to the former owners was described in the Registration Statement as “reinvested” in the respective subsidiaries.

The purchase transactions were accounted for in accordance with ASC 805 – Business Combinations. As a result of the transactions, such former owners hold equity interests in certain of our subsidiaries.  The interests of the former owners in the subsidiaries are accounted for as non-controlling interests in accordance with ASC 810-10-45-15, and we initially measured the non-controlling interests at an amount that approximates fair value, per ASC 805-20-30-7. The non-controlling interest holders do not have voting rights or the benefit of control over the respective subsidiaries.

We have modified the disclosure in the Registration Statement to remove the term “reinvestment in” and to refer to such transaction as the “non-controlling interest in” for clarification. Please see pages F-34, F-36 and F-37 of Submission No. 2.

RESPONSE: We acknowledge the Staff’s comment and respectfully advise the Staff that the OWMH Preferred Interest, which we have renamed the “OneWater LLC preferred distribution” in Submission No. 2 for clarity, originated from the execution of an amendment to the Limited Liability Company Agreement of OneWater LLC during the year ended September 30, 2015. In the amended Limited Liability Company Agreement of OneWater LLC a founding common member would be paid a preferred distribution of a fixed amount of $3,752,108 prior to any distributions to the common members (including the founding common member that will receive the preferred distribution) if and when a distribution is declared by the Company’s Board of Directors. Accordingly, the OneWater LLC preferred distribution is a preferential right to dividends if and when declared by the Company’s Board of Directors or upon liquidation of the Company.

Effective March 1, 2017, the Amended Limited Liability Company Agreement of One Water LLC was further amended (Third Amended & Restated Limited Liability Company Agreement of One Water LLC) to include a five percent per annum cumulative return on this preferred dividend. We have accounted for this right to receive the preferred dividend by a common member as a preferred right separate from that common member’s right to participate in the residual earnings of the Company. We acknowledge that separate presentation of this preferred right is not required but we had separated this due to the quantitative and qualitative immateriality of the amount. We propose to combine the preferred right with common interest going forward with appropriate footnote disclosure as illustrated in the Capitalization table on page 53 of the second submission. The guidance in ASC 505 requires that dividends should generally not be recognized as a liability (with an offset to retained earnings) until declared, even if the dividends are cumulative.

The five percent per annum cumulative return on the OneWater LLC preferred distribution of $184,402 and $175,606 in fiscal years 2017 and 2018, respectively, was paid during 2017 and 2018 and was recorded as interest expense in the Company’s Consolidated Statement of Operations These amounts should more appropriately have been recorded as dividend distributions rather than an expense but the Company chose to classify these amounts as expense due to the immateriality of the amounts.  The Company is proposing appropriately accounting for this cumulative return as a dividend distribution moving forward.

Additionally, we advise the staff that the net loss attributable to common interest holders on page F-4 of Submission No. 2 has been modified to include the OneWater LLC preferred distribution payments in calculating net loss attributable to common interest holders. We have also modified Footnote No. 13 on page F-17 of Submission No. 2 to clarify the nature of the OneWater LLC preferred distribution.

RESPONSE: We acknowledge the Staff’s comment and supplementally advise the Staff that these legal proceedings are in the normal course of business and that no liability is required to be recorded in accordance with the accounting standards since the likelihood of an unfavorable outcome is not probable and the amount of any loss is not reasonably estimable. We have accordingly revised the Registration Statement to note that in the opinion of management, it is not reasonably probable that the pending litigation, disputes or claims against the Company, if decided adversely, will have a material adverse effect on our financial condition, results of operations or cash flows. Please see page F-46 of Submission No. 2.

RESPONSE: We are supplementally providing the Staff a copy of the presentation confidentially provided to potential investors in reliance on Section 5(d) of the Securities Act and undertake to provide to the Staff a copy of any written communications that we or anyone authorized to do so on our behalf presents to potential investors in reliance on Section 5(d) of the Securities Act.