Compass Diversified Holdings, doing business as Compass Diversified
(NYSE: CODI) ("CODI" or the "Company"), an owner of leading middle
market businesses, announced today its consolidated operating
results for the three months ended June 30, 2020.
Second Quarter 2020
Highlights
- Reported net sales of $333.6 million;
- Reported net loss of $7.4 million;
- Reported non-GAAP Adjusted EBITDA of $49.5 million;
- Reported Cash Provided by Operating Activities of $54.3 million
and non-GAAP Cash Flow Available for Distribution and Reinvestment
("CAD") of $13.5 million;
- Completed the acquisition of the Marucci Sports platform;
- Completed an offering of 5,000,000 common shares;
- Completed a private add-on offering of $200 million of the
Company’s 8.000% Senior Notes due 2026;
- Paid a second quarter 2020 cash distribution of $0.36 per share
on CODI's common shares in July 2020, bringing cumulative
distributions paid to $19.6752 per common share since CODI's IPO in
May of 2006;
- Declared a quarterly cash distribution of $0.453125 per share
on the Company's 7.250% Series A Preferred Shares, $0.4921875 per
share on the Company's 7.875% Series B Preferred Shares, and
$0.4921875 per share on the Company's 7.875% Series C Preferred
Shares payable on July 30, 2020;
- Received abatement of $5.2 million in management fees; and
- Subsequent to the end of the quarter, completed the accretive
add-on acquisition of Polyfoam Corp by CODI’s subsidiary Foam
Fabricators.
“Our strong performance over the second quarter
underscores the continued benefits of our unique model, including
the advantage of having a diverse, uncorrelated group of
subsidiaries,” said Elias Sabo, CEO of Compass Diversified. “Since
our founding, CODI’s permanent capital structure has allowed us the
flexibility to capitalize on new opportunities throughout economic
cycles and enabled us to take a patient and disciplined approach to
executing our growth priorities. This quarter was no different and
our solid balance sheet and strategic capital allocation meant that
we were well-situated to partner with our subsidiaries to maintain
momentum across their businesses and continue to deliver value to
our shareholders.”
Mr. Sabo continued, “While we entered the second
quarter with significant uncertainty around the ongoing impact of
the global response to COVID-19, we are incredibly proud of how our
teams focused on positioning our subsidiaries for long-term success
during such a dynamic period. Together, we reduced spending and
monetized working capital to maximize cash flow, which helped us to
maintain our long history of paying distributions to our
shareholders, even during the pandemic.”
“Our branded consumer businesses benefited
significantly from increased consumer demand in outdoor categories,
and 5.11, Velocity Outdoor and Liberty Safe all exceeded
expectations for the quarter, contributing to our outperformance.
Despite the continued uncertainty in the markets, we are confident
in our ability to carefully manage our diversified set of
subsidiaries and make our $1.44 per common share annual
distribution, while we seek out select investment opportunities and
look to opportunistically deploy the significant amount of capital
at our disposal.”
Operating Results
Net sales for the quarter ended June 30, 2020
were $333.6 million, as compared to $336.1 million for the quarter
ended June 30, 2019.
Net loss for the quarter ended June 30, 2020 was
$7.4 million, as compared to net income of $218.2 million for the
quarter ended June 30, 2019, which included a $206.5 million gain
on the sale of our Clean Earth subsidiary.
Adjusted EBITDA (see "Note Regarding Use of
Non-GAAP Financial Measures" below) for the quarter ended June 30,
2020 was $49.5 million, as compared to $52.1 million for the
quarter ended June 30, 2019.
CODI reported CAD (see "Note Regarding Use of
Non-GAAP Financial Measures" below) of $13.5 million for the
quarter ended June 30, 2020, as compared to $26.2 million for the
prior year's comparable quarter. The prior year’s CAD included cash
flow from Clean Earth which was divested on June 30, 2019. CODI's
CAD is calculated after taking into account all interest expenses,
cash taxes paid, preferred distributions 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 $1.0 billion since going
public in 2006.
Temporary Abatement of Management Fees
in Response to Impact from Global Crisis
As announced last quarter, Compass Group
Management LLC (“CGM”) waived 50% of its management fee calculated
as of June 30, 2020 and due in July 2020, saving CODI $5.2 million.
This followed CGM’s waiver of the portion of its management fee
attributable to CODI’s cash balances held as of March 31, 2020,
which produced cash savings of approximately $1.2 million.
Liquidity and Capital
Resources
For the quarter ended June 30, 2020, CODI
reported Cash Provided by Operating Activities of $54.3 million, as
compared to Cash Provided by Operating Activities of $17.6 million
for the quarter ended June 30, 2019.
CODI's weighted average number of shares
outstanding for the quarter ended June 30, 2020 was 62.8 million,
and for the quarter ended June 30, 2019 was 59.9 million.
As of June 30, 2020, CODI had approximately
$205.2 million in cash and cash equivalents, $600 million
outstanding in 8.00% Senior Notes due 2026 and no outstanding
borrowings under its revolving credit facility.
The Company has no significant debt maturities
until 2026 and had net borrowing availability of $599 million at
June 30, 2020 under its revolving credit facility.
In May 2020, the Company completed a public
offering of 5.0 million of its common shares. CODI raised $83.9
million of net proceeds from the offering. Additionally, CODI
completed a private add-on offering of $200 million of 8.000%
Senior Notes due 2026 at an issue price of 101.000%.
CODI used the net proceeds from the common share
offering and the sale of the 8.000% Senior Notes due 2026 to repay
the $200 million outstanding balance on the Company’s existing
revolving credit facility, and the remaining $90 million of cash
provides the Company with additional liquidity, which can be used
opportunistically to pursue future acquisitions and for general
corporate purposes.
Second Quarter 2020
Distributions
On July 2, 2020, 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 23, 2020 to all holders of record of common shares as of July
16, 2020. Since its IPO in 2006, CODI has paid a cumulative
distribution of $19.6752 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 covers the period
from, and including, April 30, 2020, up to, but excluding, July 30,
2020. The distribution for such period is payable on July 30, 2020
to all holders of record of Series A Preferred Shares as of July
15, 2020.
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 covers the period
from, and including, April 30, 2020, up to, but excluding, July 30,
2020. The distribution for such period is payable on July 30, 2020
to all holders of record of Series B Preferred Shares as of July
15, 2020.
The Board also declared a quarterly cash
distribution of $0.4921875 per share on the Company’s 7.875% Series
C Preferred Shares (the “Series C Preferred Shares”). The
distribution on the Series C Preferred Shares covers the period
from, and including, April 30, 2020, up to, but excluding, July 30,
2020. The distribution for such period is payable on July 30, 2020
to all holders of record of Series C Preferred Shares as of July
15, 2020.
Guidance Update
The Company anticipates that COVID-19 will have
a continued negative impact on its operations, financial condition
and cash flows for the second half of 2020. The Company estimates
its full year 2020 consolidated subsidiary Adjusted EBITDA, before
deducting Corporate expense, and including Marucci as if it was
acquired January 1, 2020, will be between $210 million and $240
million. In addition, the Company estimates its full year 2020
Payout Ratio, defined as our prior year’s annual distribution to
common shareholders divided by our 2020 full year estimate for CAD,
will be between 140% and 120%.
The Company believes that it currently has
adequate liquidity and capital resources to meet its existing
obligations and quarterly distributions to its shareholders, if
approved by the Board of Directors over the next twelve months. The
ultimate impact of COVID-19 on the Company’s business is dependent
on future developments, including the duration of the pandemic and
the related length of its impact on the global economy, which are
highly uncertain and cannot be accurately predicted at this time.
As detailed in our Form 10-Q for the period ending June 30, 2020,
the Company’s results of operations, financial condition and cash
flow could be impacted more dramatically than currently anticipated
and as a result, the Company’s liquidity and capital resources
could become more constrained than expected.
Conference Call
Management will host a conference call on
Wednesday, July 29, 2020 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 2237435. A live webcast will also be available on
the Company's website at https://www.compassdiversified.com.
A replay of the call will be available through
Friday, August 5, 2020. 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 2237435.
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.
Payout Ratio is a non-GAAP measure defined as
our prior year's annual distribution to common shareholders divided
by our CAD. We believe the Payout Ratio provides investors
additional information to enable them to evaluate our performance
and our ability to sustain quarterly distributions.
In reliance on the unreasonable efforts
exception provided under Item 10(e)(1)(i)(B) of Regulation S-K, we
have not reconciled 2020 Adjusted EBITDA or 2020 Payout Ratio
(which requires an estimate of 2020 CAD) to their comparable GAAP
measure because we do not provide guidance on Net Income (Loss),
Cash Flow Provided by Operating Activities or the applicable
reconciling items as a result of the uncertainty regarding, and the
potential variability of, these items. For the same reasons, we are
unable to address the probable significance of the unavailable
information, which could be material to future results.
None of Adjusted EBITDA, CAD nor Payout Ratio 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
(“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 technical 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 design and manufacture of baseball and softball equipment
and apparel (Marucci Sports);
- The manufacture and marketing of portable food warming systems,
creative indoor and outdoor lighting, and home fragrance solutions
for the foodservice industry and consumer markets
(Sterno); and
- The design, manufacture and marketing of airguns, archery
products, optics and related accessories (Velocity
Outdoor).
Forward Looking Statements
This press release contains forward-looking
statements within the meaning of the Private Securities Litigation
Reform Act of 1995, including expectations regarding our results of
operations, financial condition and cash flows for the second half
of 2020, our 2020 Total Adjusted EBITDA, 2020 Payout Ratio and 2020
CAD and our liquidity, capital resources and ability to meet
existing obligations and quarterly distributions as well as other
statements with regard to the future performance of CODI.
Forward-looking statements involve risks and uncertainties,
including, but not limited to, statements as to our future
operating results; the impact, in the near, medium and long-term,
of the COVID-19 pandemic or social or political unrest on our
business, results of operations, financial position, liquidity,
cash flows or ability to make distributions; our business prospects
and the prospects of our portfolio companies; the impact of
investments that we make or expect to make; the dependence of our
future success on the general economy and its impact on the
industries in which we operate; the ability of our portfolio
companies to achieve their objectives; the adequacy of our cash
resources and working capital; and the timing of cash flows, if
any, from the operations of our portfolio companies.
We may use words such as “anticipates,”
“believes,” “expects,” “intends,” “will,” “should,” “may,” “seek,”
“look,” and similar expressions to identify forward-looking
statements. The forward-looking statements contained in this press
release involve risks and uncertainties. Actual results could
differ materially from those implied or expressed in the
forward-looking statements for any reason, including the factors
set forth in “Risk Factors” and elsewhere in CODI’s annual report
on Form 10-K and its quarterly reports on Form 10-Q. Other factors
that could cause actual results to differ materially include:
changes in the economy, financial markets and political
environment; risks associated with possible disruption in CODI’s
operations or the economy generally due to terrorism, natural
disasters, social, civil and political unrest or the COVID-19
pandemic; future changes in laws or regulations (including the
interpretation of these laws and regulations by regulatory
authorities); general considerations associated with the COVID-19
pandemic and its impact on the markets in which we operate; and
other considerations that may be disclosed from time to time in
CODI’s publicly disseminated documents and filings. Undue reliance
should not be placed on such forward-looking statements as such
statements speak only as of the date on which they are made.
Although, except as required by law, CODI undertakes no obligation
to revise or update any forward-looking statements, whether as a
result of new information, future events or otherwise, you are
advised to consult any additional disclosures that CODI may make
directly to you or through reports that it in the future may file
with the SEC, including annual reports on Form 10-K, quarterly
reports on Form 10-Q and current reports on Form 8-K.
|
Compass Diversified Condensed Consolidated
Statements of Operations(unaudited) |
| |
|
|
|
|
|
|
|
| |
Three months
ended June 30, |
|
Six months
ended June 30, |
| (in thousands, except per
share data) |
2020 |
|
2019 |
|
2020 |
|
2019 |
|
Net sales |
$ |
333,627 |
|
|
$ |
336,084 |
|
|
$ |
667,076 |
|
|
$ |
674,941 |
|
| Cost of sales |
216,224 |
|
|
213,521 |
|
|
430,185 |
|
|
432,823 |
|
| Gross
profit |
117,403 |
|
|
122,563 |
|
|
236,891 |
|
|
242,118 |
|
| Operating expenses: |
|
|
|
|
|
|
|
|
Selling, general and administrative expense |
84,014 |
|
|
80,312 |
|
|
167,814 |
|
|
161,709 |
|
|
Management fees |
5,157 |
|
|
8,521 |
|
|
13,777 |
|
|
19,478 |
|
|
Amortization expense |
14,779 |
|
|
13,522 |
|
|
28,284 |
|
|
27,112 |
|
| Operating
income |
13,453 |
|
|
20,208 |
|
|
27,016 |
|
|
33,819 |
|
| Other income (expense): |
|
|
|
|
|
|
|
|
Interest expense, net |
(11,174 |
) |
|
(18,445 |
) |
|
(19,771 |
) |
|
(36,899 |
) |
|
Amortization of debt issuance costs |
(610 |
) |
|
(928 |
) |
|
(1,135 |
) |
|
(1,855 |
) |
|
Loss on sale of Tilray securities |
— |
|
|
— |
|
|
— |
|
|
(5,300 |
) |
|
Other income (expense), net |
(2,386 |
) |
|
(90 |
) |
|
(1,725 |
) |
|
(524 |
) |
| Income (loss) from
continuing operations before income taxes |
(717 |
) |
|
745 |
|
|
4,385 |
|
|
(10,759 |
) |
|
Provision for income taxes |
6,649 |
|
|
4,551 |
|
|
6,871 |
|
|
5,975 |
|
| Loss from continuing
operations |
(7,366 |
) |
|
(3,806 |
) |
|
(2,486 |
) |
|
(16,734 |
) |
|
Income from discontinued operations, net of income tax |
— |
|
|
15,474 |
|
|
— |
|
|
16,901 |
|
|
Gain on sale of discontinued operations |
— |
|
|
206,505 |
|
|
— |
|
|
328,164 |
|
| Net income
(loss) |
(7,366 |
) |
|
218,173 |
|
|
(2,486 |
) |
|
328,331 |
|
|
Less: Income from continuing operations attributable to
noncontrolling interest |
1,071 |
|
|
1,387 |
|
|
2,286 |
|
|
2,755 |
|
|
Less: Income (loss) from discontinued operations attributable to
noncontrolling interest |
— |
|
|
252 |
|
|
— |
|
|
(266 |
) |
| Net income (loss)
attributable to Holdings |
$ |
(8,437 |
) |
|
$ |
216,534 |
|
|
$ |
(4,772 |
) |
|
$ |
325,842 |
|
| |
|
|
|
|
|
|
|
| Basic income (loss) per common share attributable
to Holdings |
|
|
|
|
|
|
|
Continuing operations |
$ |
(0.30 |
) |
|
$ |
(0.32 |
) |
|
$ |
(0.50 |
) |
|
$ |
(0.64 |
) |
|
Discontinued operations |
— |
|
|
3.70 |
|
|
— |
|
|
5.77 |
|
| |
$ |
(0.30 |
) |
|
$ |
3.38 |
|
|
$ |
(0.50 |
) |
|
$ |
5.13 |
|
| |
|
|
|
|
|
|
|
| Basic weighted average number of common shares outstanding |
62,844 |
|
|
59,900 |
|
|
61,364 |
|
|
59,900 |
|
| |
|
|
|
|
|
|
|
| Cash distributions declared per Trust common share |
$ |
0.36 |
|
|
$ |
0.36 |
|
|
$ |
0.72 |
|
|
$ |
0.72 |
|
| |
|
|
|
|
|
|
|
|
Compass Diversified |
|
Net Sales to Pro Forma Net Sales
Reconciliation |
|
(unaudited) |
| |
|
|
|
|
|
|
|
|
| |
|
Three months ended June 30, |
|
Six months ended June 30, |
| (in thousands) |
|
2020 |
|
2019 |
|
2020 |
|
2019 |
| |
|
|
|
|
|
|
|
|
|
Net Sales |
|
$ |
333,627 |
|
|
$ |
336,084 |
|
|
$ |
667,076 |
|
|
$ |
674,941 |
|
|
Acquisitions (1) |
|
265 |
|
|
13,675 |
|
|
22,500 |
|
|
35,041 |
|
| Pro Forma Net Sales |
|
$ |
333,892 |
|
|
$ |
349,759 |
|
|
$ |
689,576 |
|
|
$ |
709,982 |
|
(1) Acquisitions reflects the
net sales for Marucci on a pro forma basis as if we had acquired
this business on January 1, 2019.
|
Compass Diversified |
|
Subsidiary Net Sales |
|
(unaudited) |
| |
|
|
|
|
|
|
| |
|
Three months ended June 30, |
|
Six months ended June 30, |
| (in thousands) |
|
2020 |
|
2019 |
|
2020 |
|
2019 |
| |
|
|
|
|
|
|
|
|
| Branded
Consumer |
|
|
|
|
|
|
|
|
|
5.11 Tactical |
|
$ |
87,635 |
|
|
$ |
92,836 |
|
|
$ |
183,416 |
|
|
$ |
180,925 |
|
| Ergobaby |
|
20,044 |
|
|
22,971 |
|
|
39,693 |
|
|
45,423 |
|
| Liberty |
|
24,453 |
|
|
20,633 |
|
|
49,413 |
|
|
42,837 |
|
| Marucci Sports
(1) |
|
5,521 |
|
|
13,675 |
|
|
27,756 |
|
|
35,041 |
|
| Velocity Outdoor |
|
47,221 |
|
|
29,611 |
|
|
77,611 |
|
|
60,748 |
|
|
Total Branded Consumer |
|
$ |
184,874 |
|
|
$ |
179,726 |
|
|
$ |
377,889 |
|
|
$ |
364,974 |
|
| |
|
|
|
|
|
|
|
|
| Niche
Industrial |
|
|
|
|
|
|
|
|
| Advanced Circuits |
|
$ |
22,956 |
|
|
$ |
22,439 |
|
|
$ |
44,652 |
|
|
$ |
45,508 |
|
| Arnold Magnetics |
|
24,270 |
|
|
29,481 |
|
|
53,828 |
|
|
59,509 |
|
| Foam Fabricators |
|
24,429 |
|
|
31,648 |
|
|
52,812 |
|
|
62,330 |
|
| Sterno |
|
77,363 |
|
|
86,465 |
|
|
160,395 |
|
|
177,661 |
|
|
Total Niche Industrial |
|
$ |
149,018 |
|
|
$ |
170,033 |
|
|
$ |
311,687 |
|
|
$ |
345,008 |
|
| |
|
|
|
|
|
|
|
|
| Total Subsidiary Net
Sales |
|
$ |
333,892 |
|
|
$ |
349,759 |
|
|
$ |
689,576 |
|
|
$ |
709,982 |
|
(1) Net sales for Marucci Sports are pro forma
as if we had acquired this business on January 1, 2019.
|
Compass Diversified |
|
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) |
2020 |
|
2019 |
|
2020 |
|
2019 |
|
Net income (loss) |
$ |
(7,366 |
) |
|
$ |
218,173 |
|
|
$ |
(2,486 |
) |
|
$ |
328,331 |
|
|
Income from discontinued operations, net of income tax |
— |
|
|
15,474 |
|
|
— |
|
|
16,901 |
|
|
Gain on sale of discontinued operations |
— |
|
|
206,505 |
|
|
— |
|
|
328,164 |
|
| Loss from continuing
operations |
$ |
(7,366 |
) |
|
$ |
(3,806 |
) |
|
$ |
(2,486 |
) |
|
$ |
(16,734 |
) |
|
Provision for income taxes |
6,649 |
|
|
4,551 |
|
|
6,871 |
|
|
5,975 |
|
| Income (loss) from
continuing operations before income taxes |
$ |
(717 |
) |
|
$ |
745 |
|
|
$ |
4,385 |
|
|
$ |
(10,759 |
) |
|
Other income (expense), net |
(2,386 |
) |
|
(90 |
) |
|
(1,725 |
) |
|
(524 |
) |
|
Amortization of debt issuance costs |
(610 |
) |
|
(928 |
) |
|
(1,135 |
) |
|
(1,855 |
) |
|
Loss on sale of Tilray securities |
— |
|
|
— |
|
|
— |
|
|
(5,300 |
) |
|
Interest expense, net |
(11,174 |
) |
|
(18,445 |
) |
|
(19,771 |
) |
|
(36,899 |
) |
| Operating
income |
$ |
13,453 |
|
|
$ |
20,208 |
|
|
$ |
27,016 |
|
|
$ |
33,819 |
|
| Adjusted
For: |
|
|
|
|
|
|
|
|
Depreciation |
8,601 |
|
|
8,230 |
|
|
16,902 |
|
|
16,225 |
|
|
Amortization |
17,779 |
|
|
13,522 |
|
|
31,284 |
|
|
27,112 |
|
|
Noncontrolling shareholder compensation |
1,890 |
|
|
1,601 |
|
|
3,945 |
|
|
3,329 |
|
|
Acquisition expenses |
2,042 |
|
|
— |
|
|
2,042 |
|
|
|
|
Integration services fees |
— |
|
|
— |
|
|
— |
|
|
281 |
|
|
Management fees |
5,157 |
|
|
8,521 |
|
|
13,777 |
|
|
19,478 |
|
|
Other |
598 |
|
|
(1 |
) |
|
598 |
|
|
324 |
|
| Adjusted
EBITDA |
$ |
49,520 |
|
|
$ |
52,081 |
|
|
$ |
95,564 |
|
|
$ |
100,568 |
|
|
Interest at Corporate, net of unused fee (1) |
(10,901 |
) |
|
(15,551 |
) |
|
(19,098 |
) |
|
(32,365 |
) |
|
Swap payment |
— |
|
|
(209 |
) |
|
— |
|
|
(303 |
) |
|
Management fees |
(5,157 |
) |
|
(8,521 |
) |
|
(13,777 |
) |
|
(19,478 |
) |
|
Capital expenditures (maintenance) |
(3,277 |
) |
|
(4,362 |
) |
|
(6,537 |
) |
|
(8,009 |
) |
|
Current tax expense (cash taxes) (2) |
(9,890 |
) |
|
(2,555 |
) |
|
(12,804 |
) |
|
(6,010 |
) |
|
Preferred share distributions |
(6,045 |
) |
|
(3,782 |
) |
|
(11,587 |
) |
|
(7,563 |
) |
|
Discontinued operations |
— |
|
|
9,077 |
|
|
— |
|
|
16,987 |
|
|
Miscellaneous items |
(715 |
) |
|
— |
|
|
(569 |
) |
|
— |
|
| Cash Flow Available
for Distribution and Reinvestment ("CAD") |
$ |
13,535 |
|
|
$ |
26,178 |
|
|
$ |
31,192 |
|
|
$ |
43,827 |
|
| |
|
|
|
(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 |
|
Adjusted EBITDA (1) |
|
(unaudited) |
| |
|
|
|
|
|
|
|
|
| |
|
Three months
ended June 30, |
|
Six months
ended June 30, |
| (in thousands) |
|
2020 |
|
2019 |
|
2020 |
|
2019 |
| |
|
|
|
|
|
|
|
|
| Branded
Consumer |
|
|
|
|
|
|
|
|
|
5.11 Tactical |
|
$ |
10,876 |
|
|
$ |
11,256 |
|
|
$ |
21,379 |
|
|
$ |
19,561 |
|
| Ergobaby |
|
4,998 |
|
|
5,220 |
|
|
8,937 |
|
|
10,817 |
|
| Liberty |
|
3,949 |
|
|
2,195 |
|
|
7,631 |
|
|
4,417 |
|
| Marucci Sports (2) |
|
(827 |
) |
|
— |
|
|
(827 |
) |
|
— |
|
| Velocity Outdoor |
|
7,631 |
|
|
3,734 |
|
|
10,490 |
|
|
7,721 |
|
|
Total Branded Consumer |
|
$ |
26,627 |
|
|
$ |
22,405 |
|
|
$ |
47,610 |
|
|
$ |
42,516 |
|
| |
|
|
|
|
|
|
|
|
| Niche
Industrial |
|
|
|
|
|
|
|
|
| Advanced Circuits |
|
$ |
7,202 |
|
|
$ |
7,172 |
|
|
$ |
13,835 |
|
|
$ |
14,511 |
|
| Arnold Magnetics |
|
3,229 |
|
|
3,953 |
|
|
6,654 |
|
|
7,163 |
|
| Foam Fabricators |
|
6,226 |
|
|
7,820 |
|
|
13,231 |
|
|
15,046 |
|
| Sterno |
|
9,876 |
|
|
13,840 |
|
|
21,171 |
|
|
27,740 |
|
|
Total Niche Industrial |
|
$ |
26,533 |
|
|
$ |
32,785 |
|
|
$ |
54,891 |
|
|
$ |
64,460 |
|
| Corporate expense (3) |
|
(3,640 |
) |
|
(3,109 |
) |
|
(6,937 |
) |
|
(6,408 |
) |
|
Total Adjusted EBITDA |
|
$ |
49,520 |
|
|
$ |
52,081 |
|
|
$ |
95,564 |
|
|
$ |
100,568 |
|
|
(1 |
) |
|
Please refer to the recently filed Form 10-Q for detail on
subsidiary Adjusted EBITDA and reconciliation to net income. |
| |
|
|
|
(2 |
) |
|
The above results for Marucci Sports does not include management's
estimate of adjusted EBITDA, before our ownership, of $(1.6)
million and $3.9 million, respectively, for the three and six
months ended June 30, 2020, and $0.9 million and $4.9 million,
respectively, for the three and six months ended June 30, 2019.
Marucci Sports was acquired on April 20, 2020. |
| |
|
|
|
(3 |
) |
|
Please refer to the recently
filed Form 10-Q for a reconciliation of our Corporate expense to
Net Income. |
|
Compass Diversified Summarized Statement
of Cash Flows(unaudited) |
| |
|
|
|
| |
Six months ended June 30, |
| (in thousands) |
2020 |
|
2019 |
|
Net cash provided by operating activities |
$ |
88,330 |
|
|
$ |
8,654 |
|
|
Net cash (used in) provided by investing activities |
(212,990 |
) |
|
718,000 |
|
|
Net cash provided by (used in) financing activities |
230,595 |
|
|
(292,750 |
) |
| Effect of foreign currency on cash |
(1,021 |
) |
|
(1,366 |
) |
| Net increase in cash and cash
equivalents |
104,914 |
|
|
432,538 |
|
| Cash and cash equivalents —
beginning of period (1) |
100,314 |
|
|
53,326 |
|
| Cash and cash equivalents —
end of period |
$ |
205,228 |
|
|
$ |
485,864 |
|
| |
|
|
|
(1) Includes cash from discontinued
operations of $4.6 million at January 1, 2019.
|
Compass Diversified Condensed Consolidated
Table of Cash Flow Available for Distribution and
Reinvestment(unaudited) |
| |
|
|
|
|
|
|
|
| |
Three months
ended June 30, |
|
Six months
ended June 30, |
| (in thousands) |
2020 |
|
2019 |
|
2020 |
|
2019 |
|
Net income (loss) |
$ |
(7,366 |
) |
|
$ |
218,173 |
|
|
$ |
(2,486 |
) |
|
$ |
328,331 |
|
| Adjustments to reconcile net income (loss) to net cash provided
by operating activities: |
|
|
|
|
|
|
|
|
Depreciation and amortization |
26,380 |
|
|
27,853 |
|
|
48,186 |
|
|
56,491 |
|
|
Gain on sale of business |
— |
|
|
(206,505 |
) |
|
— |
|
|
(328,164 |
) |
|
Amortization of debt issuance costs and original issue
discount |
554 |
|
|
1,080 |
|
|
1,079 |
|
|
2,159 |
|
|
Unrealized loss on interest rate hedge |
— |
|
|
2,251 |
|
|
— |
|
|
3,350 |
|
|
Noncontrolling stockholder charges |
1,890 |
|
|
3,063 |
|
|
3,945 |
|
|
5,268 |
|
|
Provision for loss on receivables |
1,636 |
|
|
49 |
|
|
2,519 |
|
|
745 |
|
|
Other |
1,670 |
|
|
162 |
|
|
1,155 |
|
|
496 |
|
|
Deferred taxes |
(3,241 |
) |
|
(10,043 |
) |
|
(5,933 |
) |
|
(12,366 |
) |
|
Changes in operating assets and liabilities |
32,821 |
|
|
(18,493 |
) |
|
39,865 |
|
|
(47,656 |
) |
| Net cash provided by operating activities |
54,344 |
|
|
17,590 |
|
|
88,330 |
|
|
8,654 |
|
| Plus: |
|
|
|
|
|
|
|
|
Unused fee on revolving credit facility |
328 |
|
|
495 |
|
|
728 |
|
|
882 |
|
|
Successful acquisition costs |
2,042 |
|
|
230 |
|
|
2,042 |
|
|
596 |
|
|
Integration services fee (1) |
— |
|
|
— |
|
|
— |
|
|
281 |
|
|
Realized loss from foreign currency effect (2) |
— |
|
|
— |
|
|
— |
|
|
363 |
|
|
Changes in operating assets and liabilities |
— |
|
|
18,493 |
|
|
— |
|
|
47,656 |
|
|
Loss on sale of Tilray securities |
— |
|
|
— |
|
|
— |
|
|
5,300 |
|
| Less: |
|
|
|
|
|
|
|
|
Maintenance capital expenditures (3) |
3,277 |
|
|
6,507 |
|
|
6,537 |
|
|
11,504 |
|
|
Payment of interest rate swap |
— |
|
|
209 |
|
|
— |
|
|
303 |
|
|
Changes in operating assets and liabilities |
32,821 |
|
|
— |
|
|
39,865 |
|
|
— |
|
|
Preferred share distributions |
6,045 |
|
|
3,782 |
|
|
11,587 |
|
|
7,563 |
|
|
Other (4) |
1,036 |
|
|
132 |
|
|
1,919 |
|
|
535 |
|
| CAD |
$ |
13,535 |
|
|
$ |
26,178 |
|
|
$ |
31,192 |
|
|
$ |
43,827 |
|
| |
|
|
|
|
|
|
|
| Distribution paid in April
2020/ 2019 |
$ |
— |
|
|
$ |
— |
|
|
$ |
21,564 |
|
|
$ |
21,564 |
|
| Distribution paid in July
2020/ 2019 |
23,364 |
|
|
21,564 |
|
|
23,364 |
|
|
21,564 |
|
| |
$ |
23,364 |
|
|
$ |
21,564 |
|
|
$ |
44,928 |
|
|
$ |
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) |
Represents maintenance capital expenditures that were funded from
operating cash flow, net of proceeds from the sale of property,
plant and equipment, and excludes growth capital expenditures of
approximately $3.1 million and $6.0 million, respectively, for the
three months ended June 30, 2020 and 2019, and $5.6 million and
$8.5 million, respectively, for the six months ended June 30, 2020
and 2019. |
|
|
|
|
(4) |
Represents the effect on earnings of reserves for inventory and
accounts receivable. |
|
Compass Diversified |
|
Maintenance Capital Expenditures |
|
(unaudited) |
| |
|
|
|
|
|
|
| |
|
Three months
ended June 30, |
|
Six months
ended June 30, |
| (in thousands) |
|
2020 |
|
2019 |
|
2020 |
|
2019 |
| Branded
Consumer |
|
|
|
|
|
|
|
|
|
5.11 Tactical |
|
$ |
610 |
|
|
$ |
1,124 |
|
|
$ |
784 |
|
|
$ |
1,336 |
|
| Ergobaby |
|
26 |
|
|
166 |
|
|
124 |
|
|
237 |
|
| Liberty |
|
106 |
|
|
181 |
|
|
292 |
|
|
307 |
|
| Marucci Sports |
|
51 |
|
|
— |
|
|
51 |
|
|
— |
|
| Velocity Outdoor |
|
800 |
|
|
52 |
|
|
1,673 |
|
|
1,040 |
|
|
Total Branded Consumer |
|
$ |
1,593 |
|
|
$ |
1,523 |
|
|
$ |
2,924 |
|
|
$ |
2,920 |
|
| |
|
|
|
|
|
|
|
|
| Niche
Industrial |
|
|
|
|
|
|
|
|
| Advanced Circuits |
|
$ |
76 |
|
|
$ |
938 |
|
|
$ |
93 |
|
|
$ |
1,126 |
|
| Arnold Magnetics |
|
570 |
|
|
694 |
|
|
1,630 |
|
|
1,806 |
|
| Foam Fabricators |
|
449 |
|
|
438 |
|
|
975 |
|
|
936 |
|
| Sterno Group |
|
589 |
|
|
769 |
|
|
915 |
|
|
1,221 |
|
|
Total Niche Industrial |
|
$ |
1,684 |
|
|
$ |
2,839 |
|
|
$ |
3,613 |
|
|
$ |
5,089 |
|
| |
|
|
|
|
|
|
|
|
| Total maintenance capital
expenditures |
|
$ |
3,277 |
|
|
$ |
4,362 |
|
|
$ |
6,537 |
|
|
$ |
8,009 |
|
|
Compass Diversified Condensed Consolidated
Balance Sheets |
| |
|
|
|
| |
June 30, 2020 |
|
December 31, 2019 |
| (in thousands) |
(unaudited) |
|
|
| Assets |
|
|
|
| Current assets |
|
|
|
|
Cash and cash equivalents |
$ |
205,228 |
|
|
$ |
100,314 |
|
|
Accounts receivable, net |
192,177 |
|
|
191,405 |
|
|
Inventories |
317,301 |
|
|
317,306 |
|
|
Prepaid expenses and other current assets |
33,281 |
|
|
35,247 |
|
|
Total current assets |
747,987 |
|
|
644,272 |
|
| Property, plant and equipment,
net |
150,229 |
|
|
146,428 |
|
| Goodwill and intangible
assets, net |
1,139,583 |
|
|
1,000,465 |
|
| Other non-current assets |
103,725 |
|
|
100,727 |
|
| Total
assets |
$ |
2,141,524 |
|
|
$ |
1,891,892 |
|
| |
|
|
|
| Liabilities and
stockholders’ equity |
|
|
|
| Current liabilities |
|
|
|
|
Accounts payable and accrued expenses |
$ |
202,630 |
|
|
$ |
178,857 |
|
|
Due to related party |
4,186 |
|
|
8,049 |
|
|
Current portion, long-term debt |
— |
|
|
— |
|
|
Other current liabilities |
24,006 |
|
|
22,573 |
|
|
Total current liabilities |
230,822 |
|
|
209,479 |
|
| Deferred income taxes |
28,342 |
|
|
33,039 |
|
| Long-term debt |
591,787 |
|
|
394,445 |
|
| Other non-current
liabilities |
93,691 |
|
|
89,054 |
|
|
Total liabilities |
944,642 |
|
|
726,017 |
|
| Stockholders'
equity |
|
|
|
| Total stockholders' equity
attributable to Holdings |
1,129,066 |
|
|
1,115,327 |
|
| Noncontrolling interest |
67,816 |
|
|
50,548 |
|
|
Total stockholders' equity |
1,196,882 |
|
|
1,165,875 |
|
| Total liabilities and
stockholders’ equity |
$ |
2,141,524 |
|
|
$ |
1,891,892 |
|
| |
|
|
|
|
Investor Relations:The IGB Group Leon Berman 212-477-8438
lberman@igbir.com |
Media Contact:Joele Frank, Wilkinson Brimmer KatcherJon Keehner /
Julie Oakes / Kate Thompson212-355-4449 |
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