Compass Diversified Holdings (NYSE: CODI) (“CODI,” “we,” “our” or
the “Company”), an owner of leading middle market businesses,
announced today its consolidated operating results for the three
months ended June 30, 2019.
Second Quarter 2019
Highlights
- Reported net sales of $336.1 million;
- Reported net income of $218.2 million;
- Reported non-GAAP Adjusted EBITDA of $52.1 million;
- Reported Cash Provided by Operating Activities of $17.6
million, and non-GAAP Generated Cash Flow Available for
Distribution and Reinvestment (“CAD”) of $26.2 million for the
second quarter of 2019;
- Paid a second quarter 2019 cash distribution of $0.36 per share
on CODI’s common shares in July 2019, bringing cumulative
distributions paid to $18.2352 per common share since CODI’s IPO in
May of 2006;
- Paid a quarterly cash distribution of $0.453125 per share on
the Company’s 7.250% Series A Preferred Shares and $0.4921875 per
share on the Company's 7.875% Series B Preferred Shares in July
2019;
- Promoted Pat Maciariello to newly created position of Chief
Operating Officer;
- Completed the sale of our Clean Earth subsidiary for a gain of
$206.3 million;
- Compass Group Management volunteered to waive the management
fee on cash balances held at CODI, commencing with the management
fee due for the quarter ending June 30, 2019 and continuing until
the quarter during which the Company next borrows under its
revolving credit facility.
“The first half of 2019 was important for CODI,
as we unlocked significant value for shareholders with the
opportunistic and attractive divestitures of two subsidiaries,
enabling us to significantly strengthen our balance sheet, while
Compass Group Management waived the management fee on cash balances
held at CODI,” said Elias Sabo, CEO of Compass Diversified
Holdings. “For the six-month 2019 period, our leading branded
consumer and niche industrial businesses also generated
consolidated operating performance in-line with management
expectations and sizable distributions to shareholders.”
Mr. Sabo continued, “We are pleased with CODI’s
ongoing investments in our subsidiaries, highlighted by our success
monetizing Manitoba Harvest and Clean Earth at attractive
valuations, resulting in realized gains for shareholders of over
$325 million year-to-date 2019 and over $1 billion since our IPO.
Our previous investments in our 5.11 Tactical subsidiary are also
evident, as 5.11 generated strong and markedly improved results
thus far in 2019. Moving forward, we will continue to work
with our world-class management companies to unlock value for
shareholders, while implementing our proven and disciplined
acquisition strategy and providing annual distributions of $1.44
per share.
Operating Results
Net sales for the quarter ended June 30, 2019
were $336.1 million, as compared to $340.0 million for the quarter
ended June 30, 2018. The June 30, 2018 net sales do not include
Ravin net sales prior to CODI’s ownership.
Net income for the quarter ended June 30, 2019
was $218.2 million, as compared to net income of $0.5 million for
the quarter ended June 30, 2018. Current quarter net income
includes the $206.5 million gain on the sale of Clean Earth.
Adjusted EBITDA (see Note Regarding Use of
Non-GAAP Financial Measures below) for the quarter ended June 30,
2019 was $52.1 million, as compared to $51.2 million for the
quarter ended June 30, 2018. Adjusted EBITDA does not include the
results of Ravin prior to CODI’s ownership.
CODI reported CAD (see Note Regarding Use of
Non-GAAP Financial Measures below) of $26.2 million for the quarter
ended June 30, 2019, as compared to $30.3 million for the prior
year’s comparable quarter. CODI’s CAD is calculated after
taking into account all interest expense, cash taxes paid and
maintenance capital expenditures, and includes the operating
results of each of our businesses for the periods during which CODI
owned them. However, CAD excludes the gains from monetizing
interests in CODI’s subsidiaries, which have totaled over $1
billion since going public in 2006. The decrease in CAD
versus the prior year quarter is primarily the result of increased
financing cost associated with the debt refinancing in April 2018
and the Series B Preferred Share issuance in March 2018.
Liquidity and Capital
Resources
For the quarter ended June 30, 2019, CODI
reported Cash Provided by Operating Activities of $17.6 million, as
compared to Cash Provided by Operating Activities of $28.7 million
for the quarter ended June 30, 2018.
CODI’s weighted average number of shares
outstanding for the quarters ended June 30, 2019 and June 30, 2018
were 59.9 million.
As of June 30, 2019, CODI had approximately
$485.9 million in cash and cash equivalents, $493.8 million
outstanding on its term loan facility, $400 million outstanding in
Senior Notes and no outstanding borrowings under its revolving
credit facility. Subsequent to the end of the quarter, CODI
prepaid $193.8 million on its term loan facility.
The Company has no significant debt maturities
until 2023 and had net borrowing availability of $600 million at
June 30, 2019 under its revolving credit facility.
Second Quarter 2019
Distributions
On July 3, 2019, CODI’s Board of Directors (the
“Board”) declared a second quarter distribution of $0.36 per share
on the Company’s common shares. The cash distribution was paid on
July 25, 2019 to all holders of record of common shares as of July
18, 2019. Since its IPO in May of 2006, CODI has paid a cumulative
distribution of $18.2352 per common share.
The Board also declared a quarterly cash
distribution of $0.453125 per share on the Company’s 7.250% Series
A Preferred Shares (the “Series A Preferred Shares”). The
distribution on the Series A Preferred Shares covered the period
from and including April 30, 2019, up to, but excluding, July 30,
2019. The distribution for such period was paid on July 30, 2019 to
all holders of record of Series A Preferred Shares as of July 15,
2019.
The Board also declared a quarterly cash
distribution of $0.4921875 per share on the Company's 7.875% Series
B Preferred Shares (the "Series B Preferred Shares"). The
distribution on the Series B Preferred Shares covered the period
from and including April 30, 2019, up to, but excluding, July 30,
2019. The distribution for such period was paid on July 30, 2019 to
all holders of record of Series B Preferred Shares as of July 15,
2019.
Conference Call
Management will host a conference call on
Thursday, August 1, 2019 at 9:00 a.m. ET to discuss the latest
corporate developments and financial results. The dial-in number
for callers in the U.S. is (855) 212-2368 and the dial-in number
for international callers is (315) 625-6886. The access code for
all callers is 7355967. A live webcast will also be available on
the Company's website at www.compassdiversifiedholdings.com.
A replay of the call will be available through
August 8, 2019. To access the replay, please dial (855) 859-2056 in
the U.S. and (404) 537-3406 outside the U.S., and then enter the
access code 7355967.
Note Regarding Use of Non-GAAP Financial
Measures
Adjusted EBITDA is a non-GAAP measure used by
the Company to assess its performance. We have reconciled
Adjusted EBITDA to Net Income (Loss) on the attached schedules. We
consider Net Income (Loss) to be the most directly comparable GAAP
financial measure to Adjusted EBITDA. We believe that Adjusted
EBITDA provides useful information to investors and reflects
important financial measures as it excludes the effects of items
which reflect the impact of long-term investment decisions, rather
than the performance of near term operations. When compared to Net
Income (Loss), Adjusted EBITDA is limited in that it does not
reflect the periodic costs of certain capital assets used in
generating revenues of our businesses or the non-cash charges
associated with impairments, as well as certain cash charges. This
presentation also allows investors to view the performance of our
businesses in a manner similar to the methods used by us and the
management of our businesses, provides additional insight into our
operating results and provides a measure for evaluating targeted
businesses for acquisition. We believe Adjusted EBITDA is also
useful in measuring our ability to service debt and other payment
obligations.
CAD is a non-GAAP measure used by the Company to
assess its performance, as well as its ability to sustain quarterly
distributions. We have reconciled CAD to Net Income (Loss)
and Cash Flow from Operating Activities on the attached schedules.
We consider Net Income (Loss) and Cash Flow from Operating
Activities to be the most directly comparable GAAP financial
measures to CAD.
CAD is calculated after taking into account all
interest expense, cash taxes paid and maintenance capital
expenditures, and includes the operating results of each of our
businesses for the periods during which CODI owned them. We
believe that CAD provides investors additional information to
enable them to evaluate our performance and ability to make
anticipated quarterly distributions.
Neither of Adjusted EBITDA nor CAD is meant to
be a substitute for GAAP measures and may be different from or
otherwise inconsistent with non-GAAP financial measures used by
other companies.
About Compass Diversified Holdings
(“CODI”)
CODI owns and manages a diverse family of
established North American middle market businesses. Each of its
current subsidiaries is a leader in its niche market.
CODI maintains controlling ownership interests
in each of its subsidiaries in order to maximize its ability to
impact long term cash flow generation and value. The Company
provides both debt and equity capital for its subsidiaries,
contributing to their financial and operating flexibility. CODI
utilizes the cash flows generated by its subsidiaries to invest in
the long-term growth of the Company and to make cash distributions
to its shareholders.
Our eight majority-owned subsidiaries are
engaged in the following lines of business:
- The design and marketing of purpose-built tactical apparel and
gear serving a wide range of global customers
(5.11);
- The manufacture of quick-turn, small-run and production rigid
printed circuit boards (Advanced Circuits);
- The manufacture of engineered magnetic solutions for a wide
range of specialty applications and end-markets (Arnold
Magnetic Technologies);
- The design and marketing of wearable baby carriers, strollers
and related products (Ergobaby);
- The design and manufacture of custom molded protective foam
solutions and OE components (Foam
Fabricators);
- The design and manufacture of premium home and gun safes
(Liberty Safe);
- The manufacture and marketing of portable food warming fuels
for the hospitality and consumer markets, flameless candles and
house and garden lighting for the home decor market, and wickless
candle products used for home decor and fragrance systems
(The Sterno Group); and
- The design, manufacture and marketing of airguns, archery
products, optics and related accessories (Velocity
Outdoor)
This press release may contain certain
forward-looking statements, including statements with regard to the
future performance of CODI. Words such as "believes," "expects,"
"projects," and "future" or similar expressions, are intended to
identify forward-looking statements. These forward-looking
statements are subject to the inherent uncertainties in predicting
future results and conditions. Certain factors could cause actual
results to differ materially from those projected in these
forward-looking statements, and some of these factors are
enumerated in the risk factor discussion in the Form 10-K filed by
CODI with the SEC for the year ended December 31, 2018 and other
filings with the SEC. Except as required by law, CODI undertakes no
obligation to publicly update or revise any forward-looking
statements, whether as a result of new information, future events
or otherwise.
Compass Diversified HoldingsCondensed
Consolidated Statements of
Operations(unaudited) |
|
|
|
|
|
|
|
|
|
Three months ended June 30, |
|
Six months ended June 30, |
(in thousands, except per
share data) |
2019 |
|
2018 |
|
2019 |
|
2018 |
Net sales |
$ |
336,084 |
|
|
$ |
339,989 |
|
|
$ |
674,941 |
|
|
$ |
626,119 |
|
Cost of sales |
213,521 |
|
|
221,510 |
|
|
432,823 |
|
|
403,753 |
|
Gross
profit |
122,563 |
|
|
118,479 |
|
|
242,118 |
|
|
222,366 |
|
Operating expenses: |
|
|
|
|
|
|
|
Selling, general and administrative expense |
80,312 |
|
|
81,513 |
|
|
161,709 |
|
|
161,676 |
|
Management fees |
8,521 |
|
|
10,799 |
|
|
19,478 |
|
|
21,436 |
|
Amortization expense |
13,522 |
|
|
14,465 |
|
|
27,112 |
|
|
22,745 |
|
Operating
income |
20,208 |
|
|
11,702 |
|
|
33,819 |
|
|
16,509 |
|
Other income (expense): |
|
|
|
|
|
|
|
Interest expense, net |
(18,445 |
) |
|
(13,474 |
) |
|
(36,899 |
) |
|
(19,592 |
) |
Amortization of debt issuance costs |
(928 |
) |
|
(953 |
) |
|
(1,855 |
) |
|
(2,051 |
) |
Loss on sale of Tilray securities |
— |
|
|
— |
|
|
(5,300 |
) |
|
— |
|
Other expense, net |
(90 |
) |
|
(2,207 |
) |
|
(524 |
) |
|
(3,540 |
) |
Income (loss) from
continuing operations before income taxes |
745 |
|
|
(4,932 |
) |
|
(10,759 |
) |
|
(8,674 |
) |
Provision for income taxes |
4,551 |
|
|
3,330 |
|
|
5,975 |
|
|
2,087 |
|
Loss from continuing
operations |
(3,806 |
) |
|
(8,262 |
) |
|
(16,734 |
) |
|
(10,761 |
) |
Income from discontinued operations, net of tax |
15,474 |
|
|
7,630 |
|
|
16,901 |
|
|
8,508 |
|
Gain on sale of discontinued operations, net of tax |
206,505 |
|
|
1,165 |
|
|
328,164 |
|
|
1,165 |
|
Net income
(loss) |
218,173 |
|
|
533 |
|
|
328,331 |
|
|
(1,088 |
) |
Less: Income from continuing operations attributable to
noncontrolling interest |
1,387 |
|
|
1,486 |
|
|
2,755 |
|
|
1,787 |
|
Less: Income (loss) from discontinued operations attributable to
noncontrolling interest |
252 |
|
|
(45 |
) |
|
(266 |
) |
|
374 |
|
Net income (loss)
attributable to Holdings |
$ |
216,534 |
|
|
$ |
(908 |
) |
|
$ |
325,842 |
|
|
$ |
(3,249 |
) |
|
|
|
|
|
|
|
|
Basic income (loss) per common share attributable
to Holdings |
|
|
|
|
|
|
Continuing operations |
$ |
(0.32 |
) |
|
$ |
(0.25 |
) |
|
$ |
(0.64 |
) |
|
$ |
(0.34 |
) |
Discontinued operations |
3.70 |
|
|
0.14 |
|
|
5.77 |
|
|
0.16 |
|
|
$ |
3.38 |
|
|
$ |
(0.11 |
) |
|
$ |
5.13 |
|
|
$ |
(0.18 |
) |
|
|
|
|
|
|
|
|
Basic weighted average number of common shares outstanding |
59,900 |
|
|
59,900 |
|
|
59,900 |
|
|
59,900 |
|
|
|
|
|
|
|
|
|
Cash distributions declared per Trust common share |
$ |
0.36 |
|
|
$ |
0.36 |
|
|
$ |
0.72 |
|
|
$ |
0.72 |
|
|
|
|
|
|
|
|
|
Compass Diversified Holdings |
Net Sales to Pro Forma Net Sales
Reconciliation |
(unaudited) |
|
|
|
|
|
|
|
|
|
Three months ended June 30, |
|
Six months ended June 30, |
|
2019 |
|
2018 |
|
2019 |
|
2018 |
|
|
|
|
|
|
|
|
Net Sales |
$ |
336,084 |
|
|
$ |
339,989 |
|
|
$ |
674,941 |
|
|
$ |
626,119 |
|
Acquisitions (1) |
— |
|
|
— |
|
|
|
|
39,828 |
|
Pro Forma Net Sales |
$ |
336,084 |
|
|
$ |
339,989 |
|
|
$ |
674,941 |
|
|
$ |
665,947 |
|
|
|
|
|
|
|
|
|
(1 |
) |
|
Net sales of Foam Fabricators and Rimports (Sterno Group add-on) as
if those businesses were acquired January 1, 2018. |
Compass Diversified Holdings |
Subsidiary Pro Forma Net Sales |
(unaudited) |
|
|
|
|
|
|
|
Three months ended June 30, |
|
Six months ended June 30, |
(in thousands) |
2019 |
|
2018 |
|
2019 |
|
2018 |
|
|
|
|
|
|
|
|
Branded
Consumer |
|
|
|
|
|
|
|
5.11 Tactical |
$ |
92,836 |
|
|
$ |
84,723 |
|
|
$ |
180,925 |
|
|
$ |
168,680 |
|
Ergobaby |
22,971 |
|
|
23,954 |
|
|
45,423 |
|
|
46,116 |
|
Liberty |
20,633 |
|
|
20,416 |
|
|
42,837 |
|
|
43,869 |
|
Velocity Outdoor
(2) |
29,611 |
|
|
35,570 |
|
|
60,748 |
|
|
59,977 |
|
Total Branded Consumer |
$ |
166,051 |
|
|
$ |
164,663 |
|
|
$ |
329,933 |
|
|
$ |
318,642 |
|
|
|
|
|
|
|
|
|
Niche
Industrial |
|
|
|
|
|
|
|
Advanced Circuits |
$ |
22,439 |
|
|
$ |
22,967 |
|
|
$ |
45,508 |
|
|
$ |
45,030 |
|
Arnold Magnetics |
29,481 |
|
|
31,196 |
|
|
59,509 |
|
|
60,595 |
|
Foam Fabricators
(1) |
31,648 |
|
|
33,194 |
|
|
62,330 |
|
|
63,684 |
|
Sterno Group
(1) |
86,465 |
|
|
87,969 |
|
|
177,661 |
|
|
177,996 |
|
Total Niche Industrial |
$ |
170,033 |
|
|
$ |
175,326 |
|
|
$ |
345,008 |
|
|
$ |
347,305 |
|
|
|
|
|
|
|
|
|
|
$ |
336,084 |
|
|
$ |
339,989 |
|
|
$ |
674,941 |
|
|
$ |
665,947 |
|
(1 |
) |
|
Foam Fabricators and Rimports (Sterno Group add-on) are proforma as
if those businesses were acquired January 1, 2018. |
|
|
|
(2 |
) |
|
The above 2018 results exclude management's estimate of net sales
of $10.7 million and $21.6 million for the three and six months
ended June 30, 2018, respectively, at Ravin before our
ownership. Ravin was acquired by Velocity Outdoor in August
2018. |
Compass Diversified Holdings |
Net Income to Adjusted EBITDA and Cash flow Available for
Distribution and Reinvestment |
(Unaudited) |
|
|
|
|
|
|
|
|
|
Three months ended June 30, |
|
Six months ended June 30, |
(in thousands) |
2019 |
|
2018 |
|
2019 |
|
2018 |
Net income (loss) |
$ |
218,173 |
|
|
$ |
533 |
|
|
$ |
328,331 |
|
|
$ |
(1,088 |
) |
Income from discontinued operations, net of income tax |
15,474 |
|
|
7,630 |
|
|
16,901 |
|
|
8,508 |
|
Gain on sale of discontinued operations |
206,505 |
|
|
1,165 |
|
|
328,164 |
|
|
1,165 |
|
Loss from continuing
operations |
$ |
(3,806 |
) |
|
$ |
(8,262 |
) |
|
$ |
(16,734 |
) |
|
$ |
(10,761 |
) |
Provision for income taxes |
4,551 |
|
|
3,330 |
|
|
5,975 |
|
|
2,087 |
|
Income (loss) from
continuing operations before income taxes |
$ |
745 |
|
|
$ |
(4,932 |
) |
|
$ |
(10,759 |
) |
|
$ |
(8,674 |
) |
Other expense, net |
(90 |
) |
|
(2,207 |
) |
|
(524 |
) |
|
(3,540 |
) |
Amortization of debt issuance costs |
(928 |
) |
|
(953 |
) |
|
(1,855 |
) |
|
(2,051 |
) |
Loss on sale of securities |
— |
|
|
— |
|
|
(5,300 |
) |
|
— |
|
Interest expense, net |
(18,445 |
) |
|
(13,474 |
) |
|
(36,899 |
) |
|
(19,592 |
) |
Operating
Income |
$ |
20,208 |
|
|
$ |
11,702 |
|
|
$ |
33,819 |
|
|
$ |
16,509 |
|
Adjusted
For: |
|
|
|
|
|
|
|
Depreciation |
8,230 |
|
|
7,951 |
|
|
16,225 |
|
|
14,909 |
|
Amortization |
13,522 |
|
|
19,084 |
|
|
27,112 |
|
|
27,978 |
|
Non-controlling shareholder compensation |
1,601 |
|
|
2,047 |
|
|
3,329 |
|
|
3,999 |
|
Acquisition expenses |
— |
|
|
— |
|
|
— |
|
|
2,189 |
|
Integration services fees |
— |
|
|
938 |
|
|
281 |
|
|
1,594 |
|
Management fees |
8,521 |
|
|
10,799 |
|
|
19,478 |
|
|
21,436 |
|
Other |
(1 |
) |
|
(1,278 |
) |
|
324 |
|
|
(905 |
) |
Adjusted
EBITDA |
$ |
52,081 |
|
|
$ |
51,243 |
|
|
$ |
100,568 |
|
|
$ |
87,709 |
|
Interest at Corporate, net of unused fee (1) |
(15,550 |
) |
|
(13,911 |
) |
|
(32,365 |
) |
|
(22,243 |
) |
Swap payment |
(209 |
) |
|
(380 |
) |
|
(303 |
) |
|
(1,086 |
) |
Management fees |
(8,521 |
) |
|
(10,799 |
) |
|
(19,478 |
) |
|
(21,435 |
) |
Capital expenditures (maintenance) |
(4,362 |
) |
|
(6,069 |
) |
|
(8,009 |
) |
|
(10,698 |
) |
Current tax expense (cash taxes) (2) |
(2,555 |
) |
|
(1,372 |
) |
|
(6,010 |
) |
|
(3,139 |
) |
Preferred share distributions |
(3,782 |
) |
|
(1,812 |
) |
|
(7,563 |
) |
|
(3,625 |
) |
Discontinued operations |
9,076 |
|
|
12,396 |
|
|
16,987 |
|
|
18,361 |
|
Miscellaneous items |
— |
|
|
999 |
|
|
— |
|
|
469 |
|
Cash Flow Available
for Distribution or Reinvestment ('CAD') |
$ |
26,178 |
|
|
$ |
30,295 |
|
|
$ |
43,827 |
|
|
$ |
44,313 |
|
|
|
|
(1 |
) |
|
Interest expense at Corporate reflects consolidated interest
expense less non-cash components such as, unrealized gains and
losses on our swap and original issue discount amortization.
We include the cash component of our swap payment above in our
reconciliation to CAD. |
|
|
|
(2 |
) |
|
Current tax expense is calculated by deducting the change in
deferred tax from the statement of cash flows from the income tax
provision on the statement of operations |
Compass Diversified Holdings |
Adjusted EBITDA (1) |
(unaudited) |
|
|
|
|
|
|
|
|
|
Three months ended June 30, |
|
Six months ended June 30, |
(in thousands) |
2019 |
|
2018 |
|
2019 |
|
2018 |
|
|
|
|
|
|
|
|
Branded
Consumer |
|
|
|
|
|
|
|
5.11 Tactical |
$ |
11,256 |
|
|
$ |
7,862 |
|
|
$ |
19,561 |
|
|
$ |
13,758 |
|
Ergobaby |
5,220 |
|
|
6,137 |
|
|
10,817 |
|
|
10,835 |
|
Liberty |
2,195 |
|
|
2,136 |
|
|
4,417 |
|
|
5,482 |
|
Velocity Outdoor
(2) |
3,734 |
|
|
5,919 |
|
|
7,721 |
|
|
9,066 |
|
Total Branded Consumer |
$ |
22,405 |
|
|
$ |
22,054 |
|
|
$ |
42,516 |
|
|
$ |
39,141 |
|
|
|
|
|
|
|
|
|
Niche
Industrial |
|
|
|
|
|
|
|
Advanced Circuits |
$ |
7,172 |
|
|
$ |
7,211 |
|
|
$ |
14,511 |
|
|
$ |
14,076 |
|
Arnold Magnetics |
3,953 |
|
|
4,682 |
|
|
7,163 |
|
|
8,080 |
|
Foam Fabricators
(2) |
7,820 |
|
|
7,885 |
|
|
15,046 |
|
|
11,388 |
|
Sterno Group
(2) |
13,840 |
|
|
14,120 |
|
|
27,740 |
|
|
23,028 |
|
Total Niche Industrial |
$ |
32,785 |
|
|
$ |
33,898 |
|
|
$ |
64,460 |
|
|
$ |
56,572 |
|
|
|
|
|
|
|
|
|
Corporate expense (3) |
(3,109 |
) |
|
(4,709 |
) |
|
(6,408 |
) |
|
(8,004 |
) |
Total Adjusted EBITDA |
$ |
52,081 |
|
|
$ |
51,243 |
|
|
$ |
100,568 |
|
|
$ |
87,709 |
|
(1 |
) |
|
Please refer to our recently filed 10-Q for detail on subsidiary
pro forma adjusted EBITDA, and reconciliation to net income. |
|
|
|
(2 |
) |
|
The above 2018 results exclude management's estimate of adjusted
EBITDA, before our ownership, of $5.5 million at Rimports, $2.8
million at Foam Fabricators and $6.1 million at Ravin for the six
months ended June 30th, and $3.2 million at Ravin for the three
months ended June 30th. |
|
|
|
(3 |
) |
|
Please refer to the recently
filed 10-Q for a reconciliation of our Corporate expense to Net
Income. |
Compass Diversified HoldingsSummarized
Statement of Cash Flows(unaudited) |
|
|
|
|
|
Six months ended June 30, |
(in thousands) |
2019 |
|
2018 |
Net cash provided by operating activities |
$ |
8,654 |
|
|
$ |
35,312 |
|
Net cash provided by (used in) investing activities |
718,000 |
|
|
(454,715 |
) |
Net cash (used in) provided by financing activities |
(292,750 |
) |
|
415,358 |
|
Effect of foreign currency on cash |
(1,366 |
) |
|
1,616 |
|
Net increase (decrease) in
cash and cash equivalents |
432,538 |
|
|
(2,429 |
) |
Cash and cash equivalents —
beginning of period (1) |
53,326 |
|
|
39,885 |
|
Cash and cash equivalents —
end of period |
$ |
485,864 |
|
|
$ |
37,456 |
|
|
|
|
|
(1 |
) |
|
Includes cash from discontinued operations of $4.6 million at
January 1, 2019 and $4.2 million at January 1, 2018. |
Compass Diversified HoldingsCondensed
Consolidated Table of Cash Flow Available for Distribution and
Reinvestment(unaudited) |
|
|
Three months ended June 30, |
|
Six months ended June 30, |
(in thousands) |
2019 |
|
2018 |
|
2019 |
|
2018 |
Net income (loss) |
$ |
218,173 |
|
|
$ |
533 |
|
|
$ |
328,331 |
|
|
$ |
(1,088 |
) |
Adjustments to reconcile net income (loss) to net cash provided
by operating activities: |
|
|
|
|
|
|
|
Depreciation and amortization |
27,853 |
|
|
34,198 |
|
|
56,491 |
|
|
57,131 |
|
Gain on sale of business |
(206,505 |
) |
|
(1,165 |
) |
|
(328,164 |
) |
|
(1,165 |
) |
Amortization of debt issuance costs and original issue
discount |
1,080 |
|
|
971 |
|
|
2,159 |
|
|
2,324 |
|
Unrealized (gain) loss on derivatives |
2,251 |
|
|
(999 |
) |
|
3,350 |
|
|
(3,900 |
) |
Noncontrolling stockholder charges |
3,063 |
|
|
2,614 |
|
|
5,268 |
|
|
5,165 |
|
Provision for loss on receivables |
49 |
|
|
(230 |
) |
|
745 |
|
|
98 |
|
Other |
162 |
|
|
312 |
|
|
496 |
|
|
135 |
|
Deferred taxes |
(10,043 |
) |
|
1,069 |
|
|
(12,366 |
) |
|
(3,242 |
) |
Changes in operating assets and liabilities |
(18,493 |
) |
|
(8,634 |
) |
|
(47,656 |
) |
|
(20,146 |
) |
Net cash provided by operating activities |
17,590 |
|
|
28,669 |
|
|
8,654 |
|
|
35,312 |
|
Plus: |
|
|
|
|
|
|
|
Unused fee on revolving credit facility |
495 |
|
|
403 |
|
|
882 |
|
|
855 |
|
Successful acquisition costs |
230 |
|
|
158 |
|
|
596 |
|
|
1,594 |
|
Integration services fee (1) |
— |
|
|
938 |
|
|
281 |
|
|
2,347 |
|
Realized loss from foreign currency effect (2) |
— |
|
|
908 |
|
|
363 |
|
|
2,247 |
|
Changes in operating assets and liabilities |
18,493 |
|
|
8,634 |
|
|
47,656 |
|
|
20,146 |
|
Loss on sale of Tilray securities |
— |
|
|
— |
|
|
5,300 |
|
|
— |
|
Less: |
|
|
|
|
|
|
|
Maintenance capital expenditures (3) |
6,507 |
|
|
8,296 |
|
|
11,504 |
|
|
14,268 |
|
Payment of interest rate swap |
209 |
|
|
380 |
|
|
303 |
|
|
1,086 |
|
Preferred share distributions |
3,782 |
|
|
1,812 |
|
|
7,563 |
|
|
3,625 |
|
Other |
132 |
|
|
— |
|
|
535 |
|
|
— |
|
CAD |
$ |
26,178 |
|
|
$ |
30,295 |
|
|
$ |
43,827 |
|
|
$ |
44,313 |
|
|
|
|
|
|
|
|
|
Distribution paid in April
2019/ 2018 |
$ |
— |
|
|
$ |
— |
|
|
$ |
21,564 |
|
|
$ |
21,564 |
|
Distribution paid in July
2019/ 2018 |
21,564 |
|
|
21,564 |
|
|
21,564 |
|
|
21,564 |
|
|
$ |
21,564 |
|
|
$ |
21,564 |
|
|
$ |
43,128 |
|
|
$ |
43,128 |
|
(1 |
) |
|
Represents fees paid by newly acquired companies to the Manager for
integration services performed during the first year of ownership,
payable quarterly. |
|
|
|
(2 |
) |
|
Reflects the foreign currency transaction gain/ loss resulting from
the Canadian dollar intercompany loans issued to Manitoba
Harvest. |
|
|
|
(3 |
) |
|
Excludes growth capital
expenditures of approximately $3.9 million and $8.3 million for the
three months ended June 30, 2019 and 2018, respectively, and $6.4
million and $14.5 million for the six months ended June 30, 2019
and 2018, respectively. |
Compass Diversified Holdings |
Maintenance Capital Expenditures |
(unaudited) |
|
|
|
|
|
|
|
Three months ended June 30, |
|
Six months ended June 30, |
(in thousands) |
2019 |
|
2018 |
|
2019 |
|
2018 |
Niche
Industrial |
|
|
|
|
|
|
|
Advanced Circuits |
$ |
938 |
|
|
$ |
426 |
|
|
$ |
1,126 |
|
|
$ |
523 |
|
Arnold Magnetics |
694 |
|
|
871 |
|
|
1,806 |
|
|
2,123 |
|
Foam Fabricators |
438 |
|
|
542 |
|
|
936 |
|
|
940 |
|
Sterno Group |
769 |
|
|
658 |
|
|
1,221 |
|
|
1,042 |
|
Total Niche Industrial |
$ |
2,839 |
|
|
$ |
2,497 |
|
|
$ |
5,089 |
|
|
$ |
4,628 |
|
|
|
|
|
|
|
|
|
Branded
Consumer |
|
|
|
|
|
|
|
5.11 Tactical |
$ |
1,124 |
|
|
$ |
1,067 |
|
|
$ |
1,336 |
|
|
$ |
2,429 |
|
Ergobaby |
166 |
|
|
119 |
|
|
237 |
|
|
407 |
|
Liberty |
181 |
|
|
874 |
|
|
307 |
|
|
935 |
|
Velocity Outdoor |
52 |
|
|
1,512 |
|
|
1,040 |
|
|
2,299 |
|
Total Branded Consumer |
$ |
1,523 |
|
|
$ |
3,572 |
|
|
$ |
2,920 |
|
|
$ |
6,070 |
|
|
|
|
|
|
|
|
|
Total maintenance capital
expenditures |
$ |
4,362 |
|
|
$ |
6,069 |
|
|
$ |
8,009 |
|
|
$ |
10,698 |
|
Compass Diversified HoldingsCondensed
Consolidated Balance Sheets |
|
|
|
|
|
June 30, 2019 |
|
December 31, 2018 |
(in thousands) |
(unaudited) |
|
|
Assets |
|
|
|
Current assets |
|
|
|
Cash and cash equivalents |
$ |
485,864 |
|
|
$ |
48,771 |
|
Accounts receivable, net |
187,321 |
|
|
205,545 |
|
Inventories |
327,657 |
|
|
307,437 |
|
Prepaid expenses and other current assets |
85,280 |
|
|
29,670 |
|
Current assets of discontinued operations |
— |
|
|
89,762 |
|
Total current assets |
1,086,122 |
|
|
681,185 |
|
Property, plant and equipment,
net |
143,313 |
|
|
146,601 |
|
Goodwill and intangible
assets, net |
1,060,018 |
|
|
1,086,707 |
|
Other non-current assets |
96,538 |
|
|
8,378 |
|
Non-current assets of
discontinued operations |
— |
|
|
449,464 |
|
Total
assets |
$ |
2,385,991 |
|
|
$ |
2,372,335 |
|
|
|
|
|
Liabilities and
stockholders’ equity |
|
|
|
Current liabilities |
|
|
|
Accounts payable and accrued expenses |
$ |
178,966 |
|
|
$ |
183,781 |
|
Due to related party |
8,045 |
|
|
11,093 |
|
Current portion, long-term debt |
5,000 |
|
|
5,000 |
|
Other current liabilities |
26,650 |
|
|
6,912 |
|
Current liabilities of discontinued operations |
— |
|
|
52,494 |
|
Total current liabilities |
218,661 |
|
|
259,280 |
|
Deferred income taxes |
33,813 |
|
|
33,984 |
|
Long-term debt |
869,918 |
|
|
1,098,871 |
|
Other non-current
liabilities |
86,818 |
|
|
12,615 |
|
Non-current liabilities of
discontinued operations |
— |
|
|
48,243 |
|
Total liabilities |
1,209,210 |
|
|
1,452,993 |
|
Stockholders'
equity |
|
|
|
Total stockholders' equity
attributable to Holdings |
1,130,804 |
|
|
859,372 |
|
Noncontrolling interest |
45,977 |
|
|
39,922 |
|
Noncontrolling interest of discontinued operations |
— |
|
|
20,048 |
|
Total stockholders' equity |
1,176,781 |
|
|
919,342 |
|
Total liabilities and
stockholders’ equity |
$ |
2,385,991 |
|
|
$ |
2,372,335 |
|
|
|
|
|
Compass Diversified HoldingsRyan J. FaulkinghamChief Financial
Officer203.221.1703ryan@compassequity.com |
Investor Relations and Media Contact:The IGB GroupLeon
Berman212.477.8438lberman@igbir.com |
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