WESTPORT, Conn., Nov. 8, 2017 /PRNewswire/ -- 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
September 30, 2017.
Third Quarter 2017 Highlights
- Generated Cash Provided by Operating Activities of $23.4 million, and Cash Flow Available for
Distribution and Reinvestment ("CAD" or "Cash Flow") of
$26.2 million for the third quarter
of 2017;
- Reported net income of $8.4
million for the third quarter of 2017;
- Paid a third quarter 2017 cash distribution of $0.36 per share on CODI's common shares in
October 2017, bringing cumulative
distributions paid to $15.7152 per
common share since CODI's IPO in May of 2006;
- Paid a quarterly cash distribution of $0.61423611 per share on the Company's 7.250%
Series A Preferred Shares in October
2017;
- Consummated the accretive add-on acquisition of the Commercial
business of LaserMax, Inc. ("LaserMax") by CODI's subsidiary
Crosman Corporation ("Crosman"); and
- Completed the accretive add-on acquisition of sevenOKs, Inc.
("sevenOKs") by CODI's subsidiary Sterno Products, LLC ("Sterno
Products").
"During the third quarter, our middle market businesses
generated stable cash flow levels that were consistent with
management's expectations," stated Alan
Offenberg, CEO of Compass Diversified Holdings. "This
included year-over-year EBITDA growth at our Advanced Circuits,
Arnold Magnetic and Clean Earth subsidiaries."
Mr. Offenberg added, "CODI also continued to reinvest in our
subsidiaries' continued growth with two accretive add-on
acquisitions. This included Crosman's acquisition of LaserMax's
Commercial business, which extends Crosman's reach into new retail
categories and creates new cross-selling opportunities with current
big box retail and international customers. Additionally, our
Sterno Products subsidiary completed the acquisition of sevenOKs,
strengthening the company's product offering for the foodservice
market. With our strong balance sheet, CODI is well positioned to
continue pursuing future acquisitions that build long-term
shareholder value and support our ability to provide stable cash
distributions."
Operating Results
For the quarter ended September 30,
2017, CODI generated Cash Provided by Operating Activities
of $23.4 million, as compared to Cash
Provided by Operating Activities of $15.1
million for the quarter ended September 30, 2016. CODI reported Cash Flow (see
Note Regarding Use of Non-GAAP Financial Measures below) of
$26.2 million for the quarter ended
September 30, 2017, as compared to
$22.6 million for the prior year's
comparable quarter. CODI's weighted average number of shares
outstanding for the quarters ended September
30, 2017 and September 30,
2016 were 59.9 million and 54.3 million, respectively.
Cash Flow for the third quarter of 2017 reflects year-over-year
earnings growth in the Company's Advanced Circuits, Arnold Magnetic
and Clean Earth businesses, offset by declines at the Company's
other businesses.
CODI's Cash Flow 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,
Cash Flow excludes the gains from monetizing interests in CODI's
subsidiaries, which have totaled over $770
million since going public in 2006.
Net income for the quarter ended September 30, 2017 was $8.4 million, as compared to net income of
$50.2 million for the quarter ended
September 30, 2016. During the third
quarter of 2016, CODI realized a net gain of $50.4 million related to its equity investment in
its former subsidiary Fox Factory Holding Corp. ("FOX"). During the
first quarter of 2017, the Company sold its remaining shares in FOX
in a secondary public offering.
Liquidity and Capital Resources
As of September 30, 2017, CODI had
approximately $41.5 million in cash
and cash equivalents, $561.4 million
outstanding on its term loan facility and $25.5 million in outstanding borrowings under its
revolving credit facility. The Company has no significant debt
maturities until 2019 and had net borrowing availability of
$523.2 million at September 30, 2017 under its revolving credit
facility.
Third Quarter 2017 Distributions
On October 5, 2017, CODI's Board
of Directors (the "Board") declared a third quarter distribution of
$0.36 per share on the Company's
common shares (the "Common Shares"). The cash distribution was paid
on October 26, 2017 to all holders of
record of Common Shares as of October 19,
2017. Since its IPO in May of 2006, CODI has paid a
cumulative distribution of $15.7152
per common share.
The Board also declared a quarterly cash distribution of
$0.61423611 per share on the
Company's 7.250% Series A Preferred Shares (the "Preferred
Shares"). The distribution on the Preferred Shares covered the
period from and including June 28,
2017, the original issue date of the Preferred Shares, up
to, but excluding, October 30, 2017.
The distribution for such period was paid on October 30, 2017 to all holders of record of
Preferred Shares as of October 15,
2017.
Conference Call
Management will host a conference call on Thursday, November 9, 2017 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 9897729. 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 November 16, 2017. 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 9897729.
Note Regarding Use of Non-GAAP Financial Measures
CAD, or Cash Flow, is a non-GAAP measure used by the Company to
assess its performance, as well as its ability to sustain and
increase quarterly distributions. A number of CODI's businesses
have seasonal earnings patterns. Accordingly, the Company believes
that the most appropriate measure of its performance is over a
trailing or expected 12-month period. We have reconciled CAD, or
Cash Flow, to Net Income and Cash Flow from Operating Activities on
the attached schedules. We consider Net Income and Cash Flow from
Operating Activities to be the most directly comparable GAAP
financial measures to CAD, or Cash Flow.
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 nine 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);
- Environmental services for a variety of contaminated materials
including soils, dredged material, hazardous waste and drill
cuttings (Clean Earth);
- The design, manufacture and marketing of airguns, archery
products, optics and related accessories (Crosman);
- The design and marketing of wearable baby carriers, strollers
and related products (Ergobaby);
- The design and manufacture of premium home and gun safes
(Liberty Safe);
- The manufacture and marketing of branded, hemp-based food
products (Manitoba Harvest); and
- The manufacture and marketing of portable food warming fuels
and creative ambience solutions for the hospitality and consumer
markets (Sterno Products).
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, 2016 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 Holdings
Condensed
Consolidated Balance Sheets
|
|
|
|
|
|
September
30,
|
|
December
31,
|
|
2017
|
|
2016
|
(in
thousands)
|
(unaudited)
|
|
|
Assets
|
|
|
|
Current
assets
|
|
|
|
Cash and cash
equivalents
|
$
|
41,487
|
|
|
$
|
39,772
|
|
Accounts receivable,
net
|
198,111
|
|
|
181,191
|
|
Inventories
|
242,817
|
|
|
212,984
|
|
Prepaid expenses and
other current assets
|
27,145
|
|
|
18,872
|
|
Total current assets
|
509,560
|
|
|
452,819
|
|
Property, plant and
equipment, net
|
170,827
|
|
|
142,370
|
|
Investment in
FOX
|
—
|
|
|
141,767
|
|
Goodwill and
intangible assets, net
|
1,131,803
|
|
|
1,030,848
|
|
Other non-current
assets
|
8,616
|
|
|
9,351
|
|
Total
assets
|
$
|
1,820,806
|
|
|
$
|
1,777,155
|
|
|
|
|
|
Liabilities and
stockholders' equity
|
|
|
|
Current
liabilities
|
|
|
|
Accounts payable and
accrued expenses
|
$
|
182,475
|
|
|
$
|
152,553
|
|
Due to related
party
|
7,553
|
|
|
20,848
|
|
Current portion,
long-term debt
|
5,685
|
|
|
5,685
|
|
Other current
liabilities
|
15,493
|
|
|
23,435
|
|
Total current liabilities
|
211,206
|
|
|
202,521
|
|
Deferred income
taxes
|
122,033
|
|
|
110,838
|
|
Long-term
debt
|
569,755
|
|
|
551,652
|
|
Other non-current
liabilities
|
18,570
|
|
|
17,600
|
|
Total
liabilities
|
921,564
|
|
|
882,611
|
|
Stockholders'
equity
|
|
|
|
Total stockholders'
equity attributable to Holdings
|
851,616
|
|
|
856,405
|
|
Noncontrolling
interests
|
47,626
|
|
|
38,139
|
|
Total stockholders'
equity
|
899,242
|
|
|
894,544
|
|
Total liabilities
and stockholders' equity
|
$
|
1,820,806
|
|
|
$
|
1,777,155
|
|
|
|
|
|
Compass
Diversified Holdings
Condensed
Consolidated Statements of Operations
(unaudited)
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
|
|
Nine Months
Ended
|
(in thousands,
except per share data)
|
September 30,
2017
|
|
September 30,
2016
|
|
September 30,
2017
|
|
September 30,
2016
|
Net sales
|
$
|
323,957
|
|
|
$
|
252,285
|
|
|
$
|
921,330
|
|
|
$
|
659,748
|
|
Cost of
sales
|
206,232
|
|
|
169,870
|
|
|
599,552
|
|
|
436,544
|
|
Gross
profit
|
117,725
|
|
|
82,415
|
|
|
321,778
|
|
|
223,204
|
|
Operating
expenses:
|
|
|
|
|
|
|
|
Selling, general and
administrative expense
|
80,804
|
|
|
53,648
|
|
|
239,102
|
|
|
140,702
|
|
Management
fees
|
8,277
|
|
|
8,435
|
|
|
24,308
|
|
|
21,394
|
|
Amortization
expense
|
14,167
|
|
|
8,423
|
|
|
39,256
|
|
|
23,966
|
|
Impairment expense/
Loss on disposal of assets
|
—
|
|
|
551
|
|
|
8,864
|
|
|
7,214
|
|
Operating
income
|
14,477
|
|
|
11,358
|
|
|
10,248
|
|
|
29,928
|
|
Other income
(expense):
|
|
|
|
|
|
|
|
Interest expense,
net
|
(6,945)
|
|
|
(4,376)
|
|
|
(22,499)
|
|
|
(23,204)
|
|
Gain (loss) on
investment
|
—
|
|
|
50,414
|
|
|
(5,620)
|
|
|
58,680
|
|
Amortization of debt
issuance costs
|
(1,004)
|
|
|
(687)
|
|
|
(2,940)
|
|
|
(1,827)
|
|
Other income (expense),
net
|
2,020
|
|
|
(3,271)
|
|
|
2,950
|
|
|
(1,852)
|
|
Income
(loss) from continuing operations before income taxes
|
8,548
|
|
|
53,438
|
|
|
(17,861)
|
|
|
61,725
|
|
Provision (benefit) for income
taxes
|
192
|
|
|
4,894
|
|
|
(2,002)
|
|
|
9,778
|
|
Net
income (loss) from continuing operations
|
8,356
|
|
|
48,544
|
|
|
(15,859)
|
|
|
51,947
|
|
Income
(loss) from discontinued operations, net of income tax
|
—
|
|
|
(455)
|
|
|
—
|
|
|
473
|
|
Gain on
sale of discontinued operations, net of tax
|
—
|
|
|
2,134
|
|
|
340
|
|
|
2,134
|
|
Net income
(loss)
|
8,356
|
|
|
50,223
|
|
|
(15,519)
|
|
|
54,554
|
|
Less:
Income from continuing operations attributable to
noncontrolling interest
|
650
|
|
|
682
|
|
|
2,492
|
|
|
1,749
|
|
Less:
Loss from discontinued operations attributable to
noncontrolling interest
|
—
|
|
|
(164)
|
|
|
—
|
|
|
(116)
|
|
Net
income (loss) attributable to Holdings
|
$
|
7,706
|
|
|
$
|
49,705
|
|
|
$
|
(18,011)
|
|
|
$
|
52,921
|
|
|
|
|
|
|
|
|
|
Basic and fully
diluted income (loss) per share
|
|
|
|
|
|
|
|
Continuing operations
|
$
|
0.10
|
|
|
$
|
0.72
|
|
|
$
|
(1.03)
|
|
|
$
|
0.59
|
|
Discontinued operations
|
—
|
|
|
0.03
|
|
|
0.01
|
|
|
0.05
|
|
|
$
|
0.10
|
|
|
$
|
0.75
|
|
|
$
|
(1.02)
|
|
|
$
|
0.64
|
|
|
|
|
|
|
|
|
|
Basic and fully
diluted weighted average number of shares outstanding
|
59,900
|
|
|
54,300
|
|
|
59,900
|
|
|
54,300
|
|
|
|
|
|
|
|
|
|
Cash distributions
declared per share
|
$
|
0.36
|
|
|
$
|
0.36
|
|
|
$
|
1.08
|
|
|
$
|
1.08
|
|
|
|
|
|
|
|
|
|
Compass
Diversified Holdings
Summarized
Statement of Cash Flows
(unaudited)
|
|
|
|
|
|
Nine Months
Ended
|
(in
thousands)
|
September 30,
2017
|
|
September 30,
2016
|
Net cash provided by
operating activities
|
$
|
59,236
|
|
|
$
|
60,594
|
|
Net cash used in
investing activities
|
(62,956)
|
|
|
(417,284)
|
|
Net cash provided by
financing activities
|
7,862
|
|
|
300,407
|
|
Effect of foreign
currency on cash
|
(2,427)
|
|
|
(3,197)
|
|
Net increase
(decrease) in cash and cash equivalents
|
1,715
|
|
|
(59,480)
|
|
Cash and cash
equivalents — beginning of period
|
39,772
|
|
|
85,869
|
|
Cash and cash
equivalents — end of period
|
$
|
41,487
|
|
|
$
|
26,389
|
|
|
|
|
|
Compass
Diversified Holdings
Condensed
Consolidated Table of Cash Flows Available for Distribution and
Reinvestment
(unaudited)
|
|
Three Months
Ended
|
|
Nine Months
Ended
|
(in
thousands)
|
September 30,
2017
|
|
September 30,
2016
|
|
September 30,
2017
|
|
September 30,
2016
|
Net income
(loss)
|
$
|
8,356
|
|
|
$
|
50,223
|
|
|
$
|
(15,519)
|
|
|
$
|
54,554
|
|
Adjustments to
reconcile net income (loss) to net cash provided
by operating activities:
|
|
|
|
|
|
|
|
Depreciation and
amortization
|
26,077
|
|
|
24,052
|
|
|
88,659
|
|
|
53,972
|
|
Impairment expense/
loss on disposal of assets
|
—
|
|
|
551
|
|
|
8,864
|
|
|
7,214
|
|
Gain on sale of
businesses, net
|
—
|
|
|
(2,134)
|
|
|
(340)
|
|
|
(2,134)
|
|
Amortization of debt
issuance costs and original issue discount
|
1,261
|
|
|
888
|
|
|
3,721
|
|
|
2,363
|
|
Unrealized loss on
derivatives
|
(90)
|
|
|
(1,661)
|
|
|
1,178
|
|
|
8,322
|
|
(Gain) loss on
investment in FOX
|
—
|
|
|
(50,414)
|
|
|
5,620
|
|
|
(58,680)
|
|
Noncontrolling
stockholders charges
|
1,702
|
|
|
964
|
|
|
4,952
|
|
|
3,012
|
|
Excess tax benefit on
stock compensation
|
(417)
|
|
|
—
|
|
|
(417)
|
|
|
(366)
|
|
Provision for loss on
receivables
|
983
|
|
|
(144)
|
|
|
4,310
|
|
|
59
|
|
Other
|
(209)
|
|
|
271
|
|
|
494
|
|
|
349
|
|
Deferred
taxes
|
(5,997)
|
|
|
1,712
|
|
|
(17,937)
|
|
|
(4,280)
|
|
Changes in operating
assets and liabilities
|
(8,298)
|
|
|
(9,246)
|
|
|
(24,349)
|
|
|
(3,791)
|
|
Net cash provided
by operating activities
|
23,368
|
|
|
15,062
|
|
|
59,236
|
|
|
60,594
|
|
Plus:
|
|
|
|
|
|
|
|
Unused fee on revolving
credit facility
|
670
|
|
|
418
|
|
|
2,143
|
|
|
1,355
|
|
Successful acquisition
costs
|
363
|
|
|
2,161
|
|
|
1,836
|
|
|
3,888
|
|
Integration services
fee (1)
|
958
|
|
|
292
|
|
|
2,708
|
|
|
792
|
|
Realized loss from
foreign currency effect (2)
|
—
|
|
|
662
|
|
|
—
|
|
|
—
|
|
Excess tax benefit on
stock compensation
|
417
|
|
|
—
|
|
|
417
|
|
|
366
|
|
Changes in operating
assets and liabilities
|
8,298
|
|
|
9,246
|
|
|
24,349
|
|
|
3,791
|
|
Other
|
—
|
|
|
117
|
|
|
—
|
|
|
245
|
|
Less:
|
|
|
|
|
|
|
|
Maintenance capital
expenditures (3)
|
4,346
|
|
|
4,079
|
|
|
13,415
|
|
|
13,744
|
|
Payment on
swap
|
935
|
|
|
1,320
|
|
|
3,050
|
|
|
3,114
|
|
Realized gain from
foreign currency effect (2)
|
1,933
|
|
|
—
|
|
|
3,583
|
|
|
2,396
|
|
Other
(4)
|
616
|
|
|
—
|
|
|
3,980
|
|
|
—
|
|
Estimated cash
flow available for distribution and reinvestment
|
$
|
26,244
|
|
|
$
|
22,559
|
|
|
$
|
66,661
|
|
|
$
|
51,777
|
|
|
|
|
|
|
|
|
|
Distribution paid in
April 2017/2016
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
21,564
|
|
|
$
|
19,548
|
|
Distribution paid in
July 2017/ 2016
|
—
|
|
|
—
|
|
|
21,564
|
|
|
19,548
|
|
Distribution paid in
October 2017/ 2016
|
21,564
|
|
|
19,548
|
|
|
21,564
|
|
|
19,548
|
|
|
$
|
21,564
|
|
|
$
|
19,548
|
|
|
$
|
64,692
|
|
|
$
|
58,644
|
|
|
|
(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 $7.1 million and $0.1 million
for the three months ended September 30, 2017 and 2016, and $17.5
million and $1.6 million for the nine months ended September 30,
2017 and 2016, respectively.
|
(4)
|
Includes amounts for
the establishment of accounts receivable reserves related to two
retail customers who filed bankruptcy during the first and third
quarter of 2017.
|
View original
content:http://www.prnewswire.com/news-releases/compass-diversified-holdings-reports-third-quarter-2017-financial-results-300552200.html
SOURCE Compass Diversified Holdings