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, 2019.
Third Quarter 2019
Highlights
- Reported net sales of $388.3 million;
- Reported net loss of $26.5 million inclusive of $33.4 million
non-cash impairment charge at Velocity and $4.9 million loss on the
sale of Tilray shares;
- Reported non-GAAP Adjusted EBITDA of $63.8 million;
- Reported Cash Provided by Operating Activities of $22.9
million, and Generated non-GAAP Cash Flow Available for
Distribution and Reinvestment (“CAD”) of $30.2 million for the
third quarter of 2019;
- Paid a third quarter 2019 cash distribution of $0.36 per share
on CODI’s common shares in October 2019, bringing cumulative
distributions paid to $18.5952 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 October
2019;
- Received approximately C$64 million of deferred consideration
from the sale of Manitoba Harvest, comprised of cash and Tilray
shares.
“During the third quarter our group of leading
and diversified businesses generated solid revenue and cash flow,
exceeding our expectations,” said Elias Sabo, CEO of Compass
Diversified Holdings. “We are especially pleased with the
performance of our branded consumer businesses, driven by 5.11
Tactical’s double digit revenue and EBITDA growth. 5.11 continues
to exceed our expectations, as the company successfully expands
into a consumer lifestyle apparel business. During the third
quarter, 5.11 continued to invest in its omni channel consumer
strategy, adding experiential retail stores and enhancing its
online capabilities. We are pleased with 5.11’s progress and
believe in its transformational potential for CODI, as 5.11 expands
to meet the needs of its passionate and highly engaged customer
base.”
Mr. Sabo continued, “Following the two
opportunistic divestitures in the first half of 2019, we received
C$64 million in deferred consideration from the sale of Manitoba
Harvest in the third quarter of 2019. During the third
quarter, we sold all of our shares in Tilray received as part of
the consideration, and have now successfully monetized all of the
proceeds from the Manitoba Harvest sale and realized a gain of
$121.7 million on our investment. The sales of Manitoba Harvest and
Clean Earth in 2019 have resulted in significantly less financial
leverage and greatly enhanced liquidity, positioning CODI with the
strongest balance sheet in our history. Since going public in 2006,
we have now realized gains for our shareholders in excess of $1
billion, and we have paid a sizeable and consistent distribution to
our common shareholders, now reaching nearly $18.60, or 124% of our
IPO price. Based on the strength of our third quarter
financial results, we now expect our fourth quarter results to
exceed our original expectations.”
Operating Results
Net sales for the quarter ended September 30,
2019 were $388.3 million, as compared to $360.3 million for the
quarter ended September 30, 2018. The September 30, 2018 net sales
do not include net sales attributable to Ravin prior to CODI’s
ownership.
Net loss for the quarter ended September 30,
2019 was $26.5 million, as compared to net income of $5.8 million
for the quarter ended September 30, 2018. CODI recorded a
$33.4 million impairment at our Velocity Outdoor subsidiary during
the quarter ended September 30, 2019.
Adjusted EBITDA (see Note Regarding Use of
Non-GAAP Financial Measures below) for the quarter ended September
30, 2019 was $63.8 million, as compared to $57.9 million for the
quarter ended September 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 $30.2 million for the quarter
ended September 30, 2019, as compared to $26.4 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 increase in CAD over the
prior year quarter is primarily the result of 5.11 Tactical’s
improved operating performance, lower maintenance capital
expenditures at our existing businesses, offset by the loss of cash
flow from our two divestitures in the first half of 2019.
Liquidity and Capital
Resources
For the quarter ended September 30, 2019, CODI
reported Cash Provided by Operating Activities of $22.9 million, as
compared to Cash Provided by Operating Activities of $23.5 million
for the quarter ended September 30, 2018.
CODI’s weighted average number of shares
outstanding for the quarters ended September 30, 2019 and September
30, 2018 were 59.9 million.
As of September 30, 2019, CODI had approximately
$285.8 million in cash and cash equivalents, $298.8 million
outstanding on its term loan facility, $400 million outstanding in
8.00% Senior Notes due 2026 and no outstanding borrowings under its
revolving credit facility. In July 2019, CODI repaid $193.8
million on its term loan facility.
The Company has no significant debt maturities
until 2023 and had net borrowing availability of $596.4 million at
September 30, 2019 under its revolving credit facility.
Concurrent with the June 2019 sale of Clean
Earth, Compass Group Management volunteered to waive the management
fee on cash balances held at CODI, commencing with the management
fee due for the quarter ended June 30, 2019 and continuing until
the quarter during which the Company next borrows under its
revolving credit facility.
Third Quarter 2019
Distributions
On October 3, 2019, CODI’s Board of Directors
(the “Board”) declared a third quarter distribution of $0.36 per
share on the Company’s common shares. The cash distribution was
paid on October 24, 2019 to all holders of record of common shares
as of October 17, 2019. Since its IPO in May of 2006, CODI has paid
a cumulative distribution of $18.5952 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 July 30, 2019, up to, but excluding, October 30,
2019. The distribution for such period was paid on October 30, 2019
to all holders of record of Series A Preferred Shares as of October
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 July 30, 2019, up to, but excluding, October 30,
2019. The distribution for such period was paid on October 30, 2019
to all holders of record of Series B Preferred Shares as of October
15, 2019.
Conference Call
Management will host a conference call on
Wednesday, October 30, 2019 at 5:00 p.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 3219678. A live webcast will also be available on
the Company's website at https://www.compassequity.com/.
A replay of the call will be available through
November 6, 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 3219678.
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 expectations for our fourth
quarter results and other 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 HoldingsRyan J. FaulkinghamChief Financial
Officer203.221.1703ryan@compassequity.com |
Investor Relations and Media Contact:The IGB GroupLeon
Berman212.477.8438lberman@igbir.com |
Compass Diversified HoldingsCondensed
Consolidated Statements of
Operations(unaudited) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended September 30, |
|
Nine months ended September 30, |
(in thousands, except per
share data) |
2019 |
|
2018 |
|
2019 |
|
2018 |
Net sales |
$ |
388,313 |
|
|
$ |
360,284 |
|
|
$ |
1,063,254 |
|
|
$ |
986,402 |
|
Cost of sales |
251,778 |
|
|
236,286 |
|
|
684,601 |
|
|
640,039 |
|
Gross
profit |
136,535 |
|
|
123,998 |
|
|
378,653 |
|
|
346,363 |
|
Operating expenses: |
|
|
|
|
|
|
|
Selling, general and administrative expense |
82,027 |
|
|
79,578 |
|
|
243,736 |
|
|
241,253 |
|
Management fees |
8,874 |
|
|
10,768 |
|
|
28,352 |
|
|
32,204 |
|
Amortization expense |
13,520 |
|
|
12,788 |
|
|
40,632 |
|
|
35,533 |
|
Impairment expense |
33,381 |
|
|
— |
|
|
33,381 |
|
|
— |
|
Operating income
(loss) |
(1,267 |
) |
|
20,864 |
|
|
32,552 |
|
|
37,373 |
|
Other income (expense): |
|
|
|
|
|
|
|
Interest expense, net |
(11,525 |
) |
|
(15,635 |
) |
|
(48,424 |
) |
|
(35,227 |
) |
Amortization of debt issuance costs |
(770 |
) |
|
(927 |
) |
|
(2,625 |
) |
|
(2,978 |
) |
Loss on paydown of debt |
(5,038 |
) |
|
— |
|
|
(5,038 |
) |
|
(744 |
) |
Loss on sale of Tilray securities |
(4,893 |
) |
|
— |
|
|
(10,193 |
) |
|
— |
|
Other income (expense), net |
(689 |
) |
|
511 |
|
|
(1,213 |
) |
|
(2,285 |
) |
Income (loss) from
continuing operations before income taxes |
(24,182 |
) |
|
4,813 |
|
|
(34,941 |
) |
|
(3,861 |
) |
Provision for income taxes |
4,400 |
|
|
5,470 |
|
|
10,375 |
|
|
7,557 |
|
Income (loss) from
continuing operations |
(28,582 |
) |
|
(657 |
) |
|
(45,316 |
) |
|
(11,418 |
) |
Income from discontinued operations, net of income tax |
— |
|
|
6,423 |
|
|
16,901 |
|
|
14,931 |
|
Gain on sale of discontinued operations |
2,039 |
|
|
— |
|
|
330,203 |
|
|
1,165 |
|
Net income
(loss) |
(26,543 |
) |
|
5,766 |
|
|
301,788 |
|
|
4,678 |
|
Less: Income from continuing operations attributable to
noncontrolling interest |
1,242 |
|
|
688 |
|
|
3,997 |
|
|
2,475 |
|
Less: Income (loss) from discontinued operations attributable to
noncontrolling interest |
— |
|
|
352 |
|
|
(266 |
) |
|
726 |
|
Net income (loss)
attributable to Holdings |
$ |
(27,785 |
) |
|
$ |
4,726 |
|
|
$ |
298,057 |
|
|
$ |
1,477 |
|
|
|
|
|
|
|
|
|
Basic income (loss) per common share attributable
to Holdings |
|
|
|
|
|
|
Continuing operations |
$ |
(1.33 |
) |
|
$ |
(0.16 |
) |
|
$ |
(1.95 |
) |
|
$ |
(0.45 |
) |
Discontinued operations |
0.03 |
|
|
0.09 |
|
|
5.80 |
|
|
0.25 |
|
|
$ |
(1.30 |
) |
|
$ |
(0.07 |
) |
|
$ |
3.85 |
|
|
$ |
(0.20 |
) |
|
|
|
|
|
|
|
|
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 |
|
|
$ |
1.08 |
|
|
$ |
1.08 |
|
|
|
|
|
|
|
|
|
Compass Diversified Holdings |
Net Sales to Pro Forma Net Sales
Reconciliation |
(unaudited) |
|
|
|
|
|
|
|
|
|
|
|
Three months ended September 30, |
|
Nine months ended September 30, |
|
|
2019 |
|
2018 |
|
2019 |
|
2018 |
|
|
|
|
|
|
|
|
|
Net Sales |
|
$ |
388,313 |
|
|
$ |
360,284 |
|
|
$ |
1,063,254 |
|
|
$ |
986,402 |
|
Acquisitions (1) |
|
— |
|
|
— |
|
|
— |
|
|
39,828 |
|
Pro Forma Net Sales |
|
$ |
388,313 |
|
|
$ |
360,284 |
|
|
$ |
1,063,254 |
|
|
$ |
1,026,230 |
|
|
|
|
|
|
|
|
|
|
(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 September 30, |
|
Nine months ended September 30, |
(in thousands) |
|
2019 |
|
2018 |
|
2019 |
|
2018 |
|
|
|
|
|
|
|
|
|
Branded
Consumer |
|
|
|
|
|
|
|
|
5.11 Tactical |
|
$ |
98,053 |
|
|
$ |
83,342 |
|
|
$ |
278,978 |
|
|
$ |
252,022 |
|
Ergobaby |
|
23,318 |
|
|
24,260 |
|
|
68,741 |
|
|
70,376 |
|
Liberty |
|
24,729 |
|
|
17,872 |
|
|
67,566 |
|
|
61,741 |
|
Velocity Outdoor
(2) |
|
46,647 |
|
|
34,289 |
|
|
107,395 |
|
|
94,266 |
|
Total Branded Consumer |
|
$ |
192,747 |
|
|
$ |
159,763 |
|
|
$ |
522,680 |
|
|
$ |
478,405 |
|
|
|
|
|
|
|
|
|
|
Niche
Industrial |
|
|
|
|
|
|
|
|
Advanced Circuits |
|
$ |
21,897 |
|
|
$ |
23,424 |
|
|
$ |
67,405 |
|
|
$ |
68,454 |
|
Arnold Magnetics |
|
30,895 |
|
|
29,891 |
|
|
90,404 |
|
|
90,486 |
|
Foam Fabricators
(1) |
|
31,304 |
|
|
33,336 |
|
|
93,634 |
|
|
97,022 |
|
Sterno Group
(1) |
|
111,470 |
|
|
113,870 |
|
|
289,131 |
|
|
291,863 |
|
Total Niche Industrial |
|
$ |
195,566 |
|
|
$ |
200,521 |
|
|
$ |
540,574 |
|
|
$ |
547,825 |
|
|
|
|
|
|
|
|
|
|
|
|
$ |
388,313 |
|
|
$ |
360,284 |
|
|
$ |
1,063,254 |
|
|
$ |
1,026,230 |
|
(1 |
) |
|
Foam Fabricators and Rimports (Sterno Group add-on) are pro forma
as if those businesses were acquired January 1, 2018. |
|
|
|
(2 |
) |
|
The above 2018 results exclude management's estimate of net sales
of $11.9 million and $33.5 million for the three and nine months
ended September 30, 2018, respectively, at Ravin before our
ownership. Ravin was acquired by Velocity Outdoor in
September 2018. |
Compass Diversified Holdings |
Net Income to Adjusted EBITDA and Cash Flow Available for
Distribution and Reinvestment |
(Unaudited) |
|
|
|
|
|
|
|
|
|
Three months ended September 30, |
|
Nine months ended September 30, |
(in thousands) |
2019 |
|
2018 |
|
2019 |
|
2018 |
Net income
(loss) |
$ |
(26,543 |
) |
|
$ |
5,766 |
|
|
$ |
301,788 |
|
|
$ |
4,678 |
|
Income from discontinued operations, net of income tax |
— |
|
|
6,423 |
|
|
16,901 |
|
|
14,931 |
|
Gain on sale of discontinued operations |
2,039 |
|
|
— |
|
|
330,203 |
|
|
1,165 |
|
Income (loss) from
continuing operations |
$ |
(28,582 |
) |
|
$ |
(657 |
) |
|
$ |
(45,316 |
) |
|
$ |
(11,418 |
) |
Provision for income taxes |
4,400 |
|
|
5,470 |
|
|
10,375 |
|
|
7,557 |
|
Income (loss) from
continuing operations before income taxes |
$ |
(24,182 |
) |
|
$ |
4,813 |
|
|
$ |
(34,941 |
) |
|
$ |
(3,861 |
) |
Other income (expense), net |
(5,727 |
) |
|
511 |
|
|
(6,251 |
) |
|
(3,029 |
) |
Amortization of debt issuance costs |
(770 |
) |
|
(927 |
) |
|
(2,625 |
) |
|
(2,978 |
) |
Loss on sale of Tilray securities |
(4,893 |
) |
|
— |
|
|
(10,193 |
) |
|
— |
|
Interest expense, net |
(11,525 |
) |
|
(15,635 |
) |
|
(48,424 |
) |
|
(35,227 |
) |
Operating income
(loss) |
$ |
(1,267 |
) |
|
$ |
20,864 |
|
|
$ |
32,552 |
|
|
$ |
37,373 |
|
Adjusted
For: |
|
|
|
|
|
|
|
Depreciation |
8,402 |
|
|
8,016 |
|
|
24,628 |
|
|
22,925 |
|
Amortization |
13,520 |
|
|
14,783 |
|
|
40,632 |
|
|
42,761 |
|
Non-controlling shareholder compensation |
936 |
|
|
1,973 |
|
|
4,265 |
|
|
5,972 |
|
Acquisition expenses |
— |
|
|
1,362 |
|
|
— |
|
|
2,156 |
|
Integration services fees |
— |
|
|
562 |
|
|
281 |
|
|
3,551 |
|
Management fees |
8,874 |
|
|
10,768 |
|
|
28,352 |
|
|
32,204 |
|
Impairment expense |
33,381 |
|
|
— |
|
|
33,381 |
|
|
— |
|
Other |
— |
|
|
(415 |
) |
|
324 |
|
|
(1,320 |
) |
Adjusted
EBITDA |
$ |
63,846 |
|
|
$ |
57,913 |
|
|
$ |
164,415 |
|
|
$ |
145,622 |
|
Interest at Corporate, net of unused fee (1) |
(10,772 |
) |
|
(15,931 |
) |
|
(43,137 |
) |
|
(38,174 |
) |
Swap payment |
(372 |
) |
|
(358 |
) |
|
(675 |
) |
|
(1,444 |
) |
Management fees |
(8,874 |
) |
|
(10,768 |
) |
|
(28,352 |
) |
|
(32,204 |
) |
Capital expenditures (maintenance) |
(3,256 |
) |
|
(4,783 |
) |
|
(11,265 |
) |
|
(15,481 |
) |
Current tax expense (cash taxes) (2) |
(6,572 |
) |
|
(4,441 |
) |
|
(12,582 |
) |
|
(7,580 |
) |
Preferred share distributions |
(3,781 |
) |
|
(4,773 |
) |
|
(11,344 |
) |
|
(8,398 |
) |
Discontinued operations |
— |
|
|
9,054 |
|
|
16,986 |
|
|
27,415 |
|
Miscellaneous items |
— |
|
|
515 |
|
|
— |
|
|
985 |
|
Cash Flow Available
for Distribution and Reinvestment ('CAD') |
$ |
30,219 |
|
|
$ |
26,428 |
|
|
$ |
74,046 |
|
|
$ |
70,741 |
|
(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 September 30, |
|
Nine months ended September 30, |
(in thousands) |
|
2019 |
|
2018 |
|
2019 |
|
2018 |
|
|
|
|
|
|
|
|
|
Branded
Consumer |
|
|
|
|
|
|
|
|
5.11 Tactical |
|
$ |
12,049 |
|
|
$ |
7,556 |
|
|
$ |
31,610 |
|
|
$ |
21,314 |
|
Ergobaby |
|
5,872 |
|
|
6,579 |
|
|
16,689 |
|
|
17,414 |
|
Liberty |
|
3,207 |
|
|
1,020 |
|
|
7,624 |
|
|
6,502 |
|
Velocity Outdoor
(2) |
|
8,243 |
|
|
5,713 |
|
|
15,964 |
|
|
14,779 |
|
Total Branded Consumer |
|
$ |
29,371 |
|
|
$ |
20,868 |
|
|
$ |
71,887 |
|
|
$ |
60,009 |
|
|
|
|
|
|
|
|
|
|
Niche
Industrial |
|
|
|
|
|
|
|
|
Advanced Circuits |
|
$ |
6,894 |
|
|
$ |
7,853 |
|
|
$ |
21,405 |
|
|
$ |
21,929 |
|
Arnold Magnetics |
|
4,447 |
|
|
4,025 |
|
|
11,610 |
|
|
12,105 |
|
Foam Fabricators
(2) |
|
7,629 |
|
|
7,735 |
|
|
22,675 |
|
|
19,123 |
|
Sterno Group
(2) |
|
18,779 |
|
|
19,996 |
|
|
46,519 |
|
|
43,024 |
|
Total Niche Industrial |
|
$ |
37,749 |
|
|
$ |
39,609 |
|
|
$ |
102,209 |
|
|
$ |
96,181 |
|
|
|
|
|
|
|
|
|
|
Corporate expense (3) |
|
(3,274 |
) |
|
(2,564 |
) |
|
(9,681 |
) |
|
(10,565 |
) |
Total Adjusted EBITDA |
|
$ |
63,846 |
|
|
$ |
57,913 |
|
|
$ |
164,415 |
|
|
$ |
145,625 |
|
(1 |
) |
|
Please refer to our recently filed Form 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 $10.8 million at Ravin for the nine
months ended September 30th, and $4.7 million at Ravin for the
three months ended September 30th. |
|
|
|
(3 |
) |
|
Please refer to the recently
filed Form 10-Q for a reconciliation of our Corporate expense to
Net Income. |
Compass Diversified HoldingsSummarized
Statement of Cash Flows(unaudited) |
|
|
|
|
|
Nine months ended September 30, |
(in thousands) |
2019 |
|
2018 |
Net cash provided by operating activities |
$ |
31,584 |
|
|
$ |
58,772 |
|
Net cash provided by (used in) investing activities |
760,148 |
|
|
(594,705 |
) |
Net cash (used in) provided by financing activities |
(557,118 |
) |
|
531,288 |
|
Effect of foreign currency on cash |
(2,102 |
) |
|
916 |
|
Net increase (decrease) in
cash and cash equivalents |
232,512 |
|
|
(3,729 |
) |
Cash and cash equivalents —
beginning of period (1) |
53,326 |
|
|
39,885 |
|
Cash and cash equivalents —
end of period |
$ |
285,838 |
|
|
$ |
36,156 |
|
|
|
|
|
(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 September 30, |
|
Nine months ended September 30, |
(in thousands) |
2019 |
|
2018 |
|
2019 |
|
2018 |
Net income |
$ |
(26,543 |
) |
|
$ |
5,766 |
|
|
$ |
301,788 |
|
|
$ |
4,678 |
|
Adjustments to reconcile net income to net cash provided by
operating activities: |
|
|
|
|
|
|
|
Depreciation and amortization |
21,922 |
|
|
30,747 |
|
|
78,413 |
|
|
87,878 |
|
Gain on sale of business |
(2,039 |
) |
|
— |
|
|
(330,203 |
) |
|
(1,165 |
) |
Impairment expense |
33,381 |
|
|
— |
|
|
33,381 |
|
|
— |
|
Amortization of debt issuance costs and original issue
discount |
863 |
|
|
1,079 |
|
|
3,022 |
|
|
3,403 |
|
Unrealized (gain) loss on derivatives |
136 |
|
|
(749 |
) |
|
3,486 |
|
|
(4,649 |
) |
Noncontrolling stockholder charges |
936 |
|
|
2,529 |
|
|
6,204 |
|
|
7,694 |
|
Provision for loss on receivables |
2,041 |
|
|
361 |
|
|
2,786 |
|
|
459 |
|
Other |
5,465 |
|
|
(90 |
) |
|
5,961 |
|
|
46 |
|
Deferred taxes |
(2,172 |
) |
|
(3,380 |
) |
|
(14,538 |
) |
|
(6,622 |
) |
Changes in operating assets and liabilities |
(11,060 |
) |
|
(12,803 |
) |
|
(58,716 |
) |
|
(32,950 |
) |
Net cash provided by operating activities |
22,930 |
|
|
23,460 |
|
|
31,584 |
|
|
58,772 |
|
Plus: |
|
|
|
|
|
|
|
Unused fee on revolving credit facility |
511 |
|
|
427 |
|
|
1,393 |
|
|
1,282 |
|
Successful acquisition costs |
— |
|
|
2,648 |
|
|
596 |
|
|
4,995 |
|
Integration services fee (1) |
— |
|
|
562 |
|
|
281 |
|
|
2,156 |
|
Realized loss from foreign currency effect (2) |
— |
|
|
— |
|
|
363 |
|
|
1,364 |
|
Changes in operating assets and liabilities |
11,060 |
|
|
12,803 |
|
|
58,716 |
|
|
32,950 |
|
Loss on sale of Tilray securities |
4,893 |
|
|
— |
|
|
10,193 |
|
|
— |
|
Other |
— |
|
|
95 |
|
|
— |
|
|
885 |
|
Less: |
|
|
|
|
|
|
|
Maintenance capital expenditures (3) |
3,256 |
|
|
7,553 |
|
|
14,760 |
|
|
21,821 |
|
Payment of interest rate swap |
372 |
|
|
358 |
|
|
675 |
|
|
1,444 |
|
Realized gain from foreign currency effect (2) |
— |
|
|
883 |
|
|
— |
|
|
— |
|
Preferred share distributions |
3,781 |
|
|
4,773 |
|
|
11,344 |
|
|
8,398 |
|
Other |
1,766 |
|
|
— |
|
|
2,301 |
|
|
— |
|
CAD |
$ |
30,219 |
|
|
$ |
26,428 |
|
|
$ |
74,046 |
|
|
$ |
70,741 |
|
|
|
|
|
|
|
|
|
Distribution paid in April
2019/ 2018 |
$ |
— |
|
|
$ |
— |
|
|
$ |
21,564 |
|
|
$ |
21,564 |
|
Distribution paid in July
2019/ 2018 |
— |
|
|
— |
|
|
21,564 |
|
|
21,564 |
|
Distribution paid in October
2019/2018 |
21,564 |
|
|
21,564 |
|
|
21,564 |
|
|
21,564 |
|
|
$ |
21,564 |
|
|
$ |
21,564 |
|
|
$ |
64,692 |
|
|
$ |
64,692 |
|
(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 $4.3 million
and $4.7 million for the three months ended September 30, 2019 and
2018, respectively, and $10.7 million and $17.5 million for the
nine months ended September 30, 2019 and 2018, respectively.
Compass Diversified Holdings |
Maintenance Capital Expenditures |
(unaudited) |
|
|
|
|
|
|
|
|
|
Three months ended September 30, |
|
Nine months ended September 30, |
(in thousands) |
|
2019 |
|
2018 |
|
2019 |
|
2018 |
Branded
Consumer |
|
|
|
|
|
|
|
|
5.11 Tactical |
|
$ |
211 |
|
|
$ |
200 |
|
|
$ |
1,547 |
|
|
$ |
2,629 |
|
Ergobaby |
|
346 |
|
|
239 |
|
|
583 |
|
|
646 |
|
Liberty |
|
413 |
|
|
104 |
|
|
720 |
|
|
1,039 |
|
Velocity Outdoor |
|
1,056 |
|
|
764 |
|
|
2,096 |
|
|
3,063 |
|
Total Branded Consumer |
|
$ |
2,026 |
|
|
$ |
1,307 |
|
|
$ |
4,946 |
|
|
$ |
7,377 |
|
|
|
|
|
|
|
|
|
|
Niche
Industrial |
|
|
|
|
|
|
|
|
Advanced Circuits |
|
$ |
— |
|
|
$ |
646 |
|
|
$ |
1,126 |
|
|
$ |
1,169 |
|
Arnold Magnetics |
|
1,068 |
|
|
1,037 |
|
|
2,874 |
|
|
3,160 |
|
Foam Fabricators |
|
451 |
|
|
515 |
|
|
1,387 |
|
|
1,455 |
|
Sterno Group |
|
(289 |
) |
|
1,278 |
|
|
932 |
|
|
2,320 |
|
Total Niche Industrial |
|
$ |
1,230 |
|
|
$ |
3,476 |
|
|
$ |
6,319 |
|
|
$ |
8,104 |
|
|
|
|
|
|
|
|
|
|
Total maintenance capital
expenditures |
|
$ |
3,256 |
|
|
$ |
3,476 |
|
|
$ |
6,319 |
|
|
$ |
8,104 |
|
Compass Diversified HoldingsCondensed
Consolidated Balance Sheets |
|
|
|
|
|
September 30, 2019 |
|
December 31, 2018 |
(in thousands) |
(unaudited) |
|
|
Assets |
|
|
|
Current assets |
|
|
|
Cash and cash equivalents |
$ |
285,838 |
|
|
$ |
48,771 |
|
Accounts receivable, net |
221,423 |
|
|
205,545 |
|
Inventories |
332,221 |
|
|
307,437 |
|
Prepaid expenses and other current assets |
41,975 |
|
|
29,670 |
|
Current assets of discontinued operations |
— |
|
|
89,762 |
|
Total current assets |
881,457 |
|
|
681,185 |
|
Property, plant and equipment,
net |
142,291 |
|
|
146,601 |
|
Goodwill and intangible
assets, net |
1,013,373 |
|
|
1,086,707 |
|
Other non-current assets |
97,099 |
|
|
8,378 |
|
Non-current assets of
discontinued operations |
— |
|
|
449,464 |
|
Total
assets |
$ |
2,134,220 |
|
|
$ |
2,372,335 |
|
|
|
|
|
Liabilities and
stockholders’ equity |
|
|
|
Current liabilities |
|
|
|
Accounts payable and accrued expenses |
$ |
210,960 |
|
|
$ |
183,781 |
|
Due to related party |
8,142 |
|
|
11,093 |
|
Current portion, long-term debt |
5,000 |
|
|
5,000 |
|
Other current liabilities |
30,648 |
|
|
6,912 |
|
Current liabilities of discontinued operations |
— |
|
|
52,494 |
|
Total current liabilities |
254,750 |
|
|
259,280 |
|
Deferred income taxes |
31,275 |
|
|
33,984 |
|
Long-term debt |
680,513 |
|
|
1,098,871 |
|
Other non-current
liabilities |
87,427 |
|
|
12,615 |
|
Non-current liabilities of
discontinued operations |
— |
|
|
48,243 |
|
Total liabilities |
1,053,965 |
|
|
1,452,993 |
|
Stockholders'
equity |
|
|
|
Total stockholders' equity
attributable to Holdings |
1,032,810 |
|
|
859,372 |
|
Noncontrolling interest |
47,445 |
|
|
39,922 |
|
Noncontrolling interest of discontinued operations |
— |
|
|
20,048 |
|
Total stockholders' equity |
1,080,255 |
|
|
919,342 |
|
Total liabilities and
stockholders’ equity |
$ |
2,134,220 |
|
|
$ |
2,372,335 |
|
|
|
|
|
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