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 September
30, 2020.
Third Quarter 2020
Highlights
- Reported net sales of $418.9
million;
- Reported net income of $20.9
million;
- Reported non-GAAP Adjusted EBITDA
of $73.9 million;
- Reported Cash Provided by Operating
Activities of $24.5 million and non-GAAP Cash Flow Available for
Distribution and Reinvestment ("CAD") of $43.5 million;
- Announced platform acquisition of
BOA Technology Inc., which closed in October;
- Appointed Katie Melzer as Managing
Director and Head of Business Development;
- Completed the accretive add-on
acquisition of Polyfoam Corp by CODI’s subsidiary Foam
Fabricators;
- Paid a third quarter 2020 cash
distribution of $0.36 per share on CODI's common shares in October
2020, bringing cumulative distributions paid to $20.0352 per common
share since CODI's IPO in May of 2006; and
- 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 October 30,
2020;
"The competitive advantage gained through our
permanent capital structure has never been more apparent,” said
Elias Sabo, CEO of Compass Diversified. “CODI’s strong performance
in the third quarter is a testament to our differentiated model and
the outperformance of our branded consumer businesses. Our team
continues to execute on our acquisition strategy amid heightened
uncertainty, and we are pleased to have completed the acquisition
of another growing and aspirational brand, BOA Technology. As we
continue to transform our portfolio, BOA joins a strong lineup of
branded consumer business, including Marucci, 5.11, Velocity
Outdoor and Liberty Safe. As a whole, our branded consumer
businesses exceeded expectations again this quarter, benefiting
from ongoing consumer demand in outdoor categories.”
Mr. Sabo continued, “CODI’s unique model has
proven resilient and looking ahead, we are poised to continue
creating long-term shareholder value by executing on our strategy
and returning substantial capital with our $1.44 per common share
annual distribution. We are pleased to have achieved an important
milestone in the third quarter, as our cumulative distributions
increased to more than $20 per share, representing our strong track
record of paying consistent and sizeable distributions since CODI's
IPO in May of 2006.”
Mr. Sabo concluded, “As we approach year end, we
remain incredibly proud of all that our team has accomplished in
managing the uncertainty of the pandemic. We have positioned our
diverse set of subsidiary companies for continued long-term success
and we are eager to build upon this momentum in the quarters and
years to come.”
Operating Results
Net sales for the quarter ended September 30,
2020 were $418.9 million, as compared to $388.3 million for the
quarter ended September 30, 2019.
Net income for the quarter ended September 30, 2020 was $20.9
million, as compared to net loss of $26.5 million for the quarter
ended September 30, 2019. CODI recorded a $33.4
million impairment at its 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, 2020 was $73.9 million, as compared to $63.8 million for the
quarter ended September 30, 2019.
Liquidity and Capital
Resources
For the quarter ended September 30, 2020, CODI
reported Cash Provided by Operating Activities of $24.5 million, as
compared to Cash Provided by Operating Activities of $22.9 million
for the quarter ended September 30, 2019.
CODI reported CAD (see "Note Regarding Use of
Non-GAAP Financial Measures" below) of $43.5 million for the
quarter ended September 30, 2020, as compared to $30.2 million for
the prior year's comparable quarter. 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.
CODI's weighted average number of shares
outstanding for the quarter ended September 30, 2020 was 64.9
million, and for the quarter ended September 30, 2019 was 59.9
million.
As of September 30, 2020, CODI had approximately
$176.8 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
September 30, 2020 under its revolving credit facility.
Subsequent to the end of the quarter, CODI
completed the acquisition of BOA for a total purchase price of $454
million (excluding working capital and certain other adjustments
upon closing, and transaction costs). CODI funded the acquisition
of BOA with cash on hand and a $300 million draw on its revolving
credit facility. BOA’s minority shareholders invested $61.5mm for
an 18% noncontrolling interest in the equity of BOA.
For the third quarter of 2020, Compass Group
Management LLC (“CGM”) volunteered to waive the management fee on
cash balances held at CODI as of September 30, 2020. This followed
CGM’s waiver of 50% of its management fee calculated as of June 30,
2020, which produced cash savings of approximately $5.2
million.
Third Quarter 2020
Distributions
On October 1, 2020, 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 22, 2020 to all holders of record of common shares
as of October 15, 2020. Since its IPO in 2006, CODI has paid a
cumulative distribution of $20.0352 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, July 30, 2020, up to, but excluding, October
30, 2020. The distribution for such period is payable on October
30, 2020 to all holders of record of Series A Preferred Shares as
of October 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, July 30, 2020, up to, but excluding, October
30, 2020. The distribution for such period is payable on October
30, 2020 to all holders of record of Series B Preferred Shares as
of October 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, July 30, 2020, up to, but excluding, October
30, 2020. The distribution for such period is payable on October
30, 2020 to all holders of record of Series C Preferred Shares as
of October 15, 2020.
Guidance Update
The Company estimates its full year 2020
consolidated subsidiary Adjusted EBITDA, before deducting corporate
expense, and including Marucci and BOA as if they were acquired
January 1, 2020, will be between $270 million and $280 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 90% and 100%.
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 September 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, October 28, 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 (833) 900-1532 and the dial-in number
for international callers is (236) 712-2273. The access code for
all callers is 5056636. 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
Wednesday, November 4, 2020. To access the replay, please dial
(800) 585-8367 in the U.S. and (416) 621-4642 outside the U.S., and
then enter the access code 5056636.
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. For more information, visit
compassdiversified.com.
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 ten 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 dial-based closure systems that
deliver performance fit across footwear, headwear and medical
bracing products (BOA Technology);
- 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
used in the foodservice industry, creative indoor and outdoor
lighting, and home fragrance solutions for the 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. Forward-looking statements include, but are not
limited to, statements as to our future performance or liquidity,
such as expectations regarding our results of operations, financial
condition and cash flows for the full year of 2020, our 2020 Total
Adjusted EBITDA, 2020 Payout Ratio and 2020 CAD and our 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, 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 “anticipate,”
“believe,” “expect,” “intend,” “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 HoldingsCondensed
Consolidated Statements of
Operations(unaudited) |
|
|
|
|
|
|
|
|
|
Three months ended September 30, |
|
Nine months ended September 30, |
(in thousands, except per
share data) |
2020 |
|
2019 |
|
2020 |
|
2019 |
Net sales |
$ |
418,903 |
|
|
$ |
388,313 |
|
|
$ |
1,085,979 |
|
|
$ |
1,063,254 |
|
Cost of sales |
265,119 |
|
|
251,778 |
|
|
695,304 |
|
|
684,601 |
|
Gross
profit |
153,784 |
|
|
136,535 |
|
|
390,675 |
|
|
378,653 |
|
Operating expenses: |
|
|
|
|
|
|
|
Selling, general and administrative expense |
93,036 |
|
|
82,027 |
|
|
260,850 |
|
|
243,736 |
|
Management fees |
9,659 |
|
|
8,874 |
|
|
23,436 |
|
|
28,352 |
|
Amortization expense |
15,222 |
|
|
13,520 |
|
|
43,506 |
|
|
40,632 |
|
Impairment expense |
— |
|
|
33,381 |
|
|
— |
|
|
33,381 |
|
Operating income
(loss) |
35,867 |
|
|
(1,267 |
) |
|
62,883 |
|
|
32,552 |
|
Other income (expense): |
|
|
|
|
|
|
|
Interest expense, net |
(12,351 |
) |
|
(11,525 |
) |
|
(32,122 |
) |
|
(48,424 |
) |
Amortization of debt issuance costs |
(660 |
) |
|
(770 |
) |
|
(1,795 |
) |
|
(2,625 |
) |
Loss on paydown of debt |
— |
|
|
(5,038 |
) |
|
— |
|
|
(5,038 |
) |
Loss on sale of Tilray securities |
— |
|
|
(4,893 |
) |
|
— |
|
|
(10,193 |
) |
Other income (expense), net |
(447 |
) |
|
(689 |
) |
|
(2,172 |
) |
|
(1,213 |
) |
Income (loss) from
continuing operations before income taxes |
22,409 |
|
|
(24,182 |
) |
|
26,794 |
|
|
(34,941 |
) |
Provision for income taxes |
1,606 |
|
|
4,400 |
|
|
8,477 |
|
|
10,375 |
|
Income (loss) from
continuing operations |
20,803 |
|
|
(28,582 |
) |
|
18,317 |
|
|
(45,316 |
) |
Income from discontinued operations, net of income tax |
— |
|
|
— |
|
|
— |
|
|
16,901 |
|
Gain on sale of discontinued operations |
100 |
|
|
2,039 |
|
|
100 |
|
|
330,203 |
|
Net income
(loss) |
20,903 |
|
|
(26,543 |
) |
|
18,417 |
|
|
301,788 |
|
Less: Income from continuing operations attributable to
noncontrolling interest |
1,717 |
|
|
1,242 |
|
|
4,003 |
|
|
3,997 |
|
Less: Loss from discontinued operations attributable to
noncontrolling interest |
— |
|
|
— |
|
|
— |
|
|
(266 |
) |
Net income (loss)
attributable to Holdings |
$ |
19,186 |
|
|
$ |
(27,785 |
) |
|
$ |
14,414 |
|
|
$ |
298,057 |
|
|
|
|
|
|
|
|
|
Basic income
(loss) per common share attributable to Holdings |
|
|
|
|
|
|
Continuing operations |
$ |
0.08 |
|
|
$ |
(1.33 |
) |
|
$ |
(0.33 |
) |
|
$ |
(1.95 |
) |
Discontinued operations |
— |
|
|
0.03 |
|
|
— |
|
|
5.80 |
|
|
$ |
0.08 |
|
|
$ |
(1.30 |
) |
|
$ |
(0.33 |
) |
|
$ |
3.85 |
|
|
|
|
|
|
|
|
|
Basic weighted average number
of common shares outstanding |
64,900 |
|
|
59,900 |
|
|
62,556 |
|
|
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, |
(in thousands) |
|
2020 |
|
2019 |
|
2020 |
|
2019 |
|
|
|
|
|
|
|
|
|
Net Sales |
|
$ |
418,903 |
|
|
$ |
388,313 |
|
|
$ |
1,085,979 |
|
|
$ |
1,063,254 |
|
Acquisitions (1) |
|
— |
|
|
14,946 |
|
|
22,500 |
|
|
49,987 |
|
Pro Forma Net Sales |
|
$ |
418,903 |
|
|
$ |
403,259 |
|
|
$ |
1,108,479 |
|
|
$ |
1,113,241 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(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 Holdings |
Subsidiary Net Sales |
(unaudited) |
|
|
|
|
|
|
|
|
|
Three months ended September
30, |
|
Nine months ended September 30, |
(in thousands) |
|
2020 |
|
2019 |
|
2020 |
|
2019 |
|
|
|
|
|
|
|
|
|
Branded
Consumer |
|
|
|
|
|
|
|
|
5.11 Tactical |
|
$ |
98,406 |
|
|
$ |
98,053 |
|
|
$ |
281,822 |
|
|
$ |
278,978 |
|
Ergobaby |
|
19,478 |
|
|
23,318 |
|
|
59,171 |
|
|
68,741 |
|
Liberty |
|
31,186 |
|
|
24,729 |
|
|
80,599 |
|
|
67,566 |
|
Marucci Sports
(1) |
|
19,551 |
|
|
14,946 |
|
|
47,307 |
|
|
49,987 |
|
Velocity Outdoor |
|
70,629 |
|
|
46,647 |
|
|
148,240 |
|
|
107,395 |
|
Total Branded Consumer |
|
$ |
239,250 |
|
|
$ |
207,693 |
|
|
$ |
617,139 |
|
|
$ |
572,667 |
|
|
|
|
|
|
|
|
|
|
Niche
Industrial |
|
|
|
|
|
|
|
|
Advanced Circuits |
|
$ |
22,771 |
|
|
$ |
21,897 |
|
|
$ |
67,423 |
|
|
$ |
67,405 |
|
Arnold Magnetics |
|
22,619 |
|
|
30,895 |
|
|
76,447 |
|
|
90,404 |
|
Foam Fabricators |
|
36,526 |
|
|
31,304 |
|
|
89,338 |
|
|
93,634 |
|
Sterno |
|
97,737 |
|
|
111,470 |
|
|
258,132 |
|
|
289,131 |
|
Total Niche Industrial |
|
$ |
179,653 |
|
|
$ |
195,566 |
|
|
$ |
491,340 |
|
|
$ |
540,574 |
|
|
|
|
|
|
|
|
|
|
Total Subsidiary Net
Sales |
|
$ |
418,903 |
|
|
$ |
403,259 |
|
|
$ |
1,108,479 |
|
|
$ |
1,113,241 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Net sales for Marucci Sports are pro forma
as if we had acquired this business on January 1, 2019.
|
|
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) |
2020 |
|
2019 |
|
2020 |
|
2019 |
Net income (loss) |
$ |
20,903 |
|
|
$ |
(26,543 |
) |
|
$ |
18,417 |
|
|
$ |
301,788 |
|
Income from discontinued operations, net of income tax |
— |
|
|
— |
|
|
— |
|
|
16,901 |
|
Gain on sale of discontinued operations |
100 |
|
|
2,039 |
|
|
100 |
|
|
330,203 |
|
Income (loss) from
continuing operations |
$ |
20,803 |
|
|
$ |
(28,582 |
) |
|
$ |
18,317 |
|
|
$ |
(45,316 |
) |
Provision for income taxes |
1,606 |
|
|
4,400 |
|
|
8,477 |
|
|
10,375 |
|
Income (loss) from
continuing operations before income taxes |
$ |
22,409 |
|
|
$ |
(24,182 |
) |
|
$ |
26,794 |
|
|
$ |
(34,941 |
) |
Other expense, net |
(447 |
) |
|
(5,727 |
) |
|
(2,172 |
) |
|
(6,251 |
) |
Amortization of debt issuance costs |
(660 |
) |
|
(770 |
) |
|
(1,795 |
) |
|
(2,625 |
) |
Loss on sale of Tilray securities |
— |
|
|
(4,893 |
) |
|
— |
|
|
(10,193 |
) |
Interest expense, net |
(12,351 |
) |
|
(11,525 |
) |
|
(32,122 |
) |
|
(48,424 |
) |
Operating
income |
$ |
35,867 |
|
|
$ |
(1,267 |
) |
|
$ |
62,883 |
|
|
$ |
32,552 |
|
Adjusted
For: |
|
|
|
|
|
|
|
Depreciation |
8,790 |
|
|
8,402 |
|
|
25,692 |
|
|
24,627 |
|
Amortization |
16,602 |
|
|
13,520 |
|
|
47,886 |
|
|
40,632 |
|
Noncontrolling shareholder compensation |
2,171 |
|
|
936 |
|
|
6,116 |
|
|
4,265 |
|
Acquisition expenses |
273 |
|
|
— |
|
|
2,315 |
|
|
|
Integration services fees |
500 |
|
|
— |
|
|
500 |
|
|
281 |
|
Management fees |
9,659 |
|
|
8,874 |
|
|
23,436 |
|
|
28,352 |
|
Other |
(1 |
) |
|
— |
|
|
597 |
|
|
324 |
|
Adjusted
EBITDA |
$ |
73,861 |
|
|
$ |
63,846 |
|
|
$ |
169,425 |
|
|
$ |
164,414 |
|
Interest at Corporate, net of unused fee (1) |
(12,015 |
) |
|
(10,772 |
) |
|
(31,113 |
) |
|
(43,137 |
) |
Swap payment |
— |
|
|
(372 |
) |
|
— |
|
|
(675 |
) |
Management fees |
(9,659 |
) |
|
(8,874 |
) |
|
(23,436 |
) |
|
(28,352 |
) |
Capital expenditures (maintenance) |
(3,828 |
) |
|
(3,256 |
) |
|
(10,366 |
) |
|
(11,265 |
) |
Current tax expense (cash taxes) (2) |
975 |
|
|
(6,572 |
) |
|
(11,829 |
) |
|
(12,582 |
) |
Preferred share distributions |
(6,046 |
) |
|
(3,781 |
) |
|
(17,633 |
) |
|
(11,344 |
) |
Discontinued operations |
— |
|
|
— |
|
|
— |
|
|
16,987 |
|
Miscellaneous items |
173 |
|
|
— |
|
|
(395 |
) |
|
— |
|
Cash Flow Available
for Distribution and Reinvestment ("CAD") |
$ |
43,461 |
|
|
$ |
30,219 |
|
|
$ |
74,653 |
|
|
$ |
74,046 |
|
(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) |
|
2020 |
|
2019 |
|
2020 |
|
2019 |
|
|
|
|
|
|
|
|
|
Branded
Consumer |
|
|
|
|
|
|
|
|
5.11 Tactical |
|
$ |
14,945 |
|
|
$ |
12,049 |
|
|
$ |
36,324 |
|
|
$ |
31,610 |
|
Ergobaby |
|
4,856 |
|
|
5,872 |
|
|
13,793 |
|
|
16,689 |
|
Liberty |
|
6,280 |
|
|
3,207 |
|
|
13,911 |
|
|
7,624 |
|
Marucci Sports (2) |
|
5,442 |
|
|
— |
|
|
4,615 |
|
|
— |
|
Velocity Outdoor |
|
14,549 |
|
|
8,243 |
|
|
25,039 |
|
|
15,964 |
|
Total Branded Consumer |
|
$ |
46,072 |
|
|
$ |
29,371 |
|
|
$ |
93,682 |
|
|
$ |
71,887 |
|
|
|
|
|
|
|
|
|
|
Niche
Industrial |
|
|
|
|
|
|
|
|
Advanced Circuits |
|
$ |
7,052 |
|
|
$ |
6,894 |
|
|
$ |
20,887 |
|
|
$ |
21,405 |
|
Arnold Magnetics |
|
1,319 |
|
|
4,447 |
|
|
7,973 |
|
|
11,610 |
|
Foam Fabricators |
|
8,780 |
|
|
7,629 |
|
|
22,011 |
|
|
22,675 |
|
Sterno |
|
13,673 |
|
|
18,779 |
|
|
34,844 |
|
|
46,519 |
|
Total Niche Industrial |
|
$ |
30,824 |
|
|
$ |
37,749 |
|
|
$ |
85,715 |
|
|
$ |
102,209 |
|
Corporate expense (3) |
|
(3,035 |
) |
|
(3,274 |
) |
|
(9,972 |
) |
|
(9,681 |
) |
Total Adjusted EBITDA |
|
$ |
73,861 |
|
|
$ |
63,846 |
|
|
$ |
169,425 |
|
|
$ |
164,415 |
|
(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 $3.9 million
for the nine months ended September 30, 2020, and $3.0 million and
$7.9 million, respectively, for the three and nine months ended
September 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 HoldingsSummarized
Statement of Cash Flows(unaudited) |
|
|
|
|
|
Nine months ended September 30, |
(in thousands) |
2020 |
|
2019 |
Net cash provided by operating activities |
$ |
112,872 |
|
|
$ |
31,584 |
|
Net cash (used in) provided by investing activities |
(236,502 |
) |
|
760,148 |
|
Net cash provided by (used in) financing activities |
200,395 |
|
|
(557,118 |
) |
Effect of foreign currency on
cash |
(260 |
) |
|
(2,102 |
) |
Net increase in cash and cash
equivalents |
76,505 |
|
|
232,512 |
|
Cash and cash equivalents —
beginning of period (1) |
100,314 |
|
|
53,326 |
|
Cash and cash equivalents —
end of period |
$ |
176,819 |
|
|
$ |
285,838 |
|
|
|
|
|
(1) Includes cash from discontinued
operations of $4.6 million at January 1, 2019.
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) |
2020 |
|
2019 |
|
2020 |
|
2019 |
Net income (loss) |
$ |
20,903 |
|
|
$ |
(26,543 |
) |
|
$ |
18,417 |
|
|
$ |
301,788 |
|
Adjustments to reconcile net
income (loss) to net cash provided by operating activities: |
|
|
|
|
|
|
|
Depreciation and amortization |
25,392 |
|
|
21,922 |
|
|
73,578 |
|
|
78,413 |
|
Gain on sale of business |
(100 |
) |
|
(2,039 |
) |
|
(100 |
) |
|
(330,203 |
) |
Impairment expense |
— |
|
|
33,381 |
|
|
— |
|
|
33,381 |
|
Amortization of debt issuance costs and original issue
discount |
577 |
|
|
863 |
|
|
1,656 |
|
|
3,022 |
|
Unrealized loss on interest rate hedge |
— |
|
|
136 |
|
|
— |
|
|
3,486 |
|
Noncontrolling stockholder charges |
2,171 |
|
|
936 |
|
|
6,116 |
|
|
6,204 |
|
Provision for loss on receivables |
1,855 |
|
|
2,041 |
|
|
4,374 |
|
|
2,786 |
|
Other |
621 |
|
|
5,465 |
|
|
1,776 |
|
|
5,961 |
|
Deferred taxes |
2,581 |
|
|
(2,172 |
) |
|
(3,352 |
) |
|
(14,538 |
) |
Changes in operating assets and liabilities |
(29,458 |
) |
|
(11,060 |
) |
|
10,407 |
|
|
(58,716 |
) |
Net cash provided by
operating activities |
24,542 |
|
|
22,930 |
|
|
112,872 |
|
|
31,584 |
|
Plus: |
|
|
|
|
|
|
|
Unused fee on revolving credit facility |
420 |
|
|
511 |
|
|
1,148 |
|
|
1,393 |
|
Successful acquisition costs |
273 |
|
|
— |
|
|
2,315 |
|
|
596 |
|
Integration services fee (1) |
500 |
|
|
— |
|
|
500 |
|
|
281 |
|
Realized loss from foreign currency effect (2) |
— |
|
|
— |
|
|
— |
|
|
363 |
|
Changes in operating assets and liabilities |
29,458 |
|
|
11,060 |
|
|
— |
|
|
58,716 |
|
Loss on sale of Tilray securities |
— |
|
|
4,893 |
|
|
— |
|
|
10,193 |
|
Less: |
|
|
|
|
|
|
|
Maintenance capital expenditures (3) |
3,829 |
|
|
3,256 |
|
|
10,366 |
|
|
14,760 |
|
Payment of interest rate swap |
— |
|
|
372 |
|
|
— |
|
|
675 |
|
Changes in operating assets and liabilities |
— |
|
|
— |
|
|
10,407 |
|
|
— |
|
Preferred share distributions |
6,046 |
|
|
3,781 |
|
|
17,633 |
|
|
11,344 |
|
Other (4) |
1,857 |
|
|
1,766 |
|
|
3,776 |
|
|
2,301 |
|
CAD |
$ |
43,461 |
|
|
$ |
30,219 |
|
|
$ |
74,653 |
|
|
$ |
74,046 |
|
|
|
|
|
|
|
|
|
Distribution paid in April
2020/ 2019 |
$ |
— |
|
|
$ |
— |
|
|
$ |
21,564 |
|
|
$ |
21,564 |
|
Distribution paid in July
2020/ 2019 |
— |
|
|
— |
|
|
23,364 |
|
|
21,564 |
|
Distribution paid in October
2020/ 2019 |
23,364 |
|
|
21,564 |
|
|
23,364 |
|
|
21,564 |
|
|
$ |
23,364 |
|
|
$ |
21,564 |
|
|
$ |
68,292 |
|
|
$ |
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) 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 $4.1 million
and $4.3 million, respectively, for the three months ended
September 30, 2020 and 2019, and $9.7 million and $10.7 million,
respectively, for the nine months ended September 30, 2020 and
2019.
(4) Represents the effect
on earnings of reserves for inventory and accounts receivable.
Compass Diversified Holdings |
Maintenance Capital Expenditures |
(unaudited) |
|
|
|
|
|
|
|
|
|
Three months ended September 30, |
|
Nine months ended September 30, |
(in thousands) |
|
2020 |
|
2019 |
|
2020 |
|
2019 |
Branded
Consumer |
|
|
|
|
|
|
|
|
5.11 Tactical |
|
$ |
113 |
|
|
$ |
211 |
|
|
$ |
897 |
|
|
$ |
1,547 |
|
Ergobaby |
|
250 |
|
|
346 |
|
|
374 |
|
|
583 |
|
Liberty |
|
146 |
|
|
413 |
|
|
438 |
|
|
720 |
|
Marucci Sports |
|
169 |
|
|
— |
|
|
220 |
|
|
— |
|
Velocity Outdoor |
|
1,070 |
|
|
1,056 |
|
|
2,743 |
|
|
2,096 |
|
Total Branded Consumer |
|
$ |
1,748 |
|
|
$ |
2,026 |
|
|
$ |
4,672 |
|
|
$ |
4,946 |
|
|
|
|
|
|
|
|
|
|
Niche
Industrial |
|
|
|
|
|
|
|
|
Advanced Circuits |
|
$ |
261 |
|
|
$ |
— |
|
|
$ |
354 |
|
|
$ |
1,126 |
|
Arnold Magnetics |
|
1,131 |
|
|
1,068 |
|
|
2,761 |
|
|
2,874 |
|
Foam Fabricators |
|
543 |
|
|
451 |
|
|
1,518 |
|
|
1,387 |
|
Sterno Group |
|
146 |
|
|
(289 |
) |
|
1,061 |
|
|
932 |
|
Total Niche Industrial |
|
$ |
2,081 |
|
|
$ |
1,230 |
|
|
$ |
5,694 |
|
|
$ |
6,319 |
|
|
|
|
|
|
|
|
|
|
Total maintenance capital
expenditures |
|
$ |
3,829 |
|
|
$ |
3,256 |
|
|
$ |
10,366 |
|
|
$ |
11,265 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Compass Diversified HoldingsCondensed
Consolidated Balance Sheets |
|
|
|
|
|
September 30, 2020 |
|
December 31, 2019 |
(in thousands) |
(unaudited) |
|
|
Assets |
|
|
|
Current assets |
|
|
|
Cash and cash equivalents |
$ |
176,819 |
|
|
$ |
100,314 |
|
Accounts receivable, net |
242,947 |
|
|
191,405 |
|
Inventories |
344,036 |
|
|
317,306 |
|
Prepaid expenses and other current assets |
36,873 |
|
|
35,247 |
|
Total current assets |
800,675 |
|
|
644,272 |
|
Property, plant and equipment,
net |
155,601 |
|
|
146,428 |
|
Goodwill and intangible
assets, net |
1,128,389 |
|
|
1,000,465 |
|
Other non-current assets |
107,319 |
|
|
100,727 |
|
Total
assets |
$ |
2,191,984 |
|
|
$ |
1,891,892 |
|
|
|
|
|
Liabilities and
stockholders’ equity |
|
|
|
Current liabilities |
|
|
|
Accounts payable and accrued expenses |
$ |
249,471 |
|
|
$ |
178,857 |
|
Due to related party |
9,283 |
|
|
8,049 |
|
Current portion, long-term debt |
— |
|
|
— |
|
Other current liabilities |
25,022 |
|
|
22,573 |
|
Total current liabilities |
283,776 |
|
|
209,479 |
|
Deferred income taxes |
30,854 |
|
|
33,039 |
|
Long-term debt |
592,107 |
|
|
394,445 |
|
Other non-current
liabilities |
94,554 |
|
|
89,054 |
|
Total liabilities |
1,001,291 |
|
|
726,017 |
|
Stockholders'
equity |
|
|
|
Total stockholders' equity
attributable to Holdings |
1,119,899 |
|
|
1,115,327 |
|
Noncontrolling interest |
70,794 |
|
|
50,548 |
|
Total stockholders' equity |
1,190,693 |
|
|
1,165,875 |
|
Total liabilities and
stockholders’ equity |
$ |
2,191,984 |
|
|
$ |
1,891,892 |
|
|
|
|
|
Investor
Relations: |
Media
Contact: |
The IGB
Group |
Joele Frank,
Wilkinson Brimmer Katcher |
Leon
Berman |
Jon Keehner
/ Kate Thompson / Julia Sottosanti |
212-477-8438 |
212-355-4449 |
lberman@igbir.com |
|
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