WESTPORT, Conn., Aug. 1, 2018 /PRNewswire/ -- Compass Diversified
Holdings (NYSE: CODI) ("CODI," "we," "our" or the "Company"), an
owner of leading middle market businesses, announced today its
consolidated operating results for the three months ended
June 30, 2018.
Second Quarter 2018 Highlights
- Generated Cash Provided by Operating Activities of $28.7 million for the second quarter of 2018, and
Cash Flow Available for Distribution and Reinvestment ("CAD" or
"Cash Flow") of $30.3 million for the
second quarter of 2018;
- Reported net income of $0.5
million for the second quarter of 2018;
- Announced the add-on acquisitions of ESMI Companies ("ESMI")
and MKC Enterprises, Inc. ("MKC") by CODI's subsidiary, Clean
Earth, Inc. ("Clean Earth");
- Signed a credit agreement for a revolving credit facility
totaling $600 million and a term loan
facility in the amount of $500
million; and completed a private offering of $400 million of 8.000% senior unsecured notes due
2026;
- Paid a second quarter 2018 cash distribution of $0.36 per share on CODI's common shares in
April 2018, bringing cumulative
distributions paid to $16.7952 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 in April
2018.
"During the second quarter, our leading industrial and branded
consumer businesses generated strong results," said Elias Sabo, CEO of Compass Diversified Holdings.
"We are pleased to have grown revenues at nine of our subsidiaries,
while providing shareholders with solid and growing cash flows and
a sizeable distribution."
Mr. Sabo continued, "During the first six months of 2018, we
continued to capitalize on compelling market opportunities, while
reinvesting in our leading middle market businesses and
implementing important measures aimed at further strengthening
CODI's long-term growth potential. Complementing this success, we
enhanced our liquidity position and capital structure under
favorable terms and remain in a strong position to implement our
proven and disciplined investment strategy."
Operating Results
For the quarter ended June 30, 2018, CODI generated Cash Provided by
Operating Activities of $28.7
million, as compared to Cash Provided by Operating
Activities of $37.3 million for the
quarter ended June 30, 2017. CODI
reported Cash Flow (see Note Regarding Use of Non-GAAP Financial
Measures below) of $30.3 million for
the quarter ended June 30, 2018, as
compared to $25.5 million for the
prior year's comparable quarter. CODI's weighted average number of
shares outstanding for the quarters ended June 30, 2018 and June 30,
2017 were 59.9 million.
Cash Flow for the second quarter of 2018 reflects year-over-year
earnings increases at the Company's Advanced Circuits, Arnold
Magnetics, Clean Earth and Manitoba Harvest businesses, offset by
declines at the Company's Liberty, ErgoBaby and 5.11
businesses.
CODI's Cash Flow is calculated after taking into account all
interest expense, cash taxes paid, preferred share distributions
and maintenance capital expenditures, and includes the operating
results of each of our businesses for the periods during which CODI
owned them. However, Cash Flow excludes the gains from monetizing
interests in CODI's subsidiaries, which have totaled over
$770 million since going public in
2006.
Net income for the quarter ended June 30,
2018 was $0.5 million, as
compared to net loss of $2.7 million
for the quarter ended June 30,
2017.
Liquidity and Capital Resources
As of June 30, 2018, CODI had approximately
$37.5 million in cash and cash
equivalents, $498.8 million
outstanding on its term loan facility, $400
million in Senior Notes and $92.0
million in outstanding borrowings under its revolving credit
facility.
In April 2018, the Company signed
a credit agreement for a revolving credit facility totaling
$600 million and a term loan facility
in the amount of $500 million. Under
the terms of the credit agreement, CODI extended the maturities of
its revolver and term loan to 2023 and 2025, respectively. In
April 2018, the Company also
completed a private offering of $400
million of 8.000% senior unsecured notes due 2026. The
Company has approximately $508
million in net borrowing availability under its revolver as
of June 30, 2018.
Second Quarter 2018 Distributions
On July 5, 2018, CODI's Board of Directors (the
"Board") declared a second quarter distribution of $0.36 per share on the Company's common shares
(the "Common Shares"). The cash distribution was paid on
July 26, 2018 to all holders of
common shares as of July 19, 2018.
Since its IPO in May of 2006, CODI has paid a cumulative
distribution of $16.7952 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 "Preferred Shares"). The
distribution on the Preferred Shares covered the period from and
including April 30, 2018, up to, but
excluding, July 30, 2018. The
distribution for such period was paid on July 30, 2018 to all holders of record of
Preferred Shares as of July 15,
2018.
The Board also declared a quarterly cash distribution of
$0.74 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 March 13, 2018,
the original issue date of the Series B Preferred Shares, up to,
but excluding, July 30, 2018. The
distribution for such period was paid on July 30, 2018 to all holders of record of the
Series B Preferred Shares as of July 15,
2018.
Conference Call
Management will host a conference call
on Thursday, August 2, 2018 at
9:00 a.m. ET to discuss the latest
corporate developments and financial results. The dial-in number
for callers in the U.S. is (855) 212-2368 and the dial-in number
for international callers is (315) 625-6886. The access code for
all callers is 7092917. A live webcast will also be available on
the Company's website at www.compassdiversifiedholdings.com.
A replay of the call will be available through August 9, 2018. 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 7092917.
Note Regarding Use of Non-GAAP Financial Measures
CAD,
or Cash Flow, is a non-GAAP measure used by the Company to assess
its performance, as well as its ability to sustain and increase
quarterly distributions. A number of CODI's businesses have
seasonal earnings patterns. Accordingly, the Company believes that
the most appropriate measure of its performance is over a trailing
or expected 12-month period. We have reconciled CAD, or Cash Flow,
to Net Income and Cash Flow from Operating Activities on the
attached schedules. We consider Net Income and Cash Flow from
Operating Activities to be the most directly comparable GAAP
financial measures to CAD, or Cash Flow.
About Compass Diversified Holdings ("CODI")
CODI owns
and manages a diverse family of established North American middle
market businesses. Each of its current subsidiaries is a leader in
its niche market.
CODI maintains controlling ownership interests in each of its
subsidiaries in order to maximize its ability to impact long term
cash flow generation and value. The Company provides both debt and
equity capital for its subsidiaries, contributing to their
financial and operating flexibility. CODI utilizes the cash flows
generated by its subsidiaries to invest in the long-term growth of
the Company and to make cash distributions to its shareholders.
Our ten majority-owned subsidiaries are engaged in the following
lines of business:
- The design and marketing of purpose-built tactical apparel and
gear serving a wide range of global customers (5.11);
- The manufacture of quick-turn, small-run and production rigid
printed circuit boards (Advanced Circuits);
- The manufacture of engineered magnetic solutions for a wide
range of specialty applications and end-markets (Arnold Magnetic
Technologies);
- Environmental services for a variety of contaminated materials
including soils, dredged material, hazardous waste and drill
cuttings (Clean Earth);
- The design, manufacture and marketing of airguns, archery
products, optics and related accessories (Crosman);
- The design and marketing of wearable baby carriers, strollers
and related products (Ergobaby);
- The design and manufacture of custom molded protective foam
solutions and OEM components (Foam Fabricators);
- The design and manufacture of premium home and gun safes
(Liberty Safe);
- The manufacture and marketing of branded, hemp-based food
products (Manitoba Harvest); and
- The manufacture and marketing of portable food warming fuels
and creative ambience solutions for the hospitality and consumer
markets (Sterno Products).
This press release may contain certain forward-looking
statements, including statements with regard to the future
performance of CODI. Words such as "believes," "expects,"
"projects," and "future" or similar expressions, are intended to
identify forward-looking statements. These forward-looking
statements are subject to the inherent uncertainties in predicting
future results and conditions. Certain factors could cause actual
results to differ materially from those projected in these
forward-looking statements, and some of these factors are
enumerated in the risk factor discussion in the Form 10-K filed by
CODI with the SEC for the year ended December 31, 2017 and other filings with the SEC.
Except as required by law, CODI undertakes no obligation to
publicly update or revise any forward-looking statements, whether
as a result of new information, future events or
otherwise.
Compass
Diversified Holdings
Condensed
Consolidated Balance Sheets
|
|
|
|
|
|
June 30,
2018
|
|
December 31,
2017
|
(in
thousands)
|
(Unaudited)
|
|
|
Assets
|
|
|
|
Current
assets
|
|
|
|
Cash and cash
equivalents
|
$
|
37,456
|
|
|
$
|
39,885
|
|
Accounts receivable,
net
|
272,707
|
|
|
215,108
|
|
Inventories
|
300,263
|
|
|
246,928
|
|
Prepaid expenses and
other current assets
|
37,656
|
|
|
24,897
|
|
Total current
assets
|
648,082
|
|
|
526,818
|
|
Property, plant and
equipment, net
|
212,610
|
|
|
173,081
|
|
Goodwill and
intangible assets, net
|
1,398,312
|
|
|
1,112,206
|
|
Other non-current
assets
|
12,292
|
|
|
8,198
|
|
Total
assets
|
$
|
2,271,296
|
|
|
$
|
1,820,303
|
|
|
|
|
|
Liabilities and
stockholders' equity
|
|
|
|
Current
liabilities
|
|
|
|
Accounts payable and
accrued expenses
|
$
|
221,844
|
|
|
$
|
191,411
|
|
Due to related
party
|
10,247
|
|
|
7,796
|
|
Current portion,
long-term debt
|
5,000
|
|
|
5,685
|
|
Other current
liabilities
|
4,749
|
|
|
7,301
|
|
Total current
liabilities
|
241,840
|
|
|
212,193
|
|
Deferred income
taxes
|
77,263
|
|
|
81,049
|
|
Long-term
debt
|
963,851
|
|
|
584,347
|
|
Other non-current
liabilities
|
18,310
|
|
|
16,715
|
|
Total
liabilities
|
1,301,264
|
|
|
894,304
|
|
Stockholders'
equity
|
|
|
|
Total stockholders'
equity attributable to Holdings
|
916,292
|
|
|
873,208
|
|
Noncontrolling
interest
|
53,740
|
|
|
52,791
|
|
Total stockholders'
equity
|
970,032
|
|
|
925,999
|
|
Total liabilities
and stockholders' equity
|
$
|
2,271,296
|
|
|
$
|
1,820,303
|
|
|
|
|
|
Compass
Diversified Holdings
Condensed
Consolidated Statements of Operations
(Unaudited)
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
|
|
Six Months
Ended
|
(in thousands,
except per share data)
|
June 30,
2018
|
|
June 30,
2017
|
|
June 30,
2018
|
|
June 30,
2017
|
Net sales
|
$
|
429,757
|
|
|
$
|
307,381
|
|
|
$
|
790,450
|
|
|
$
|
597,373
|
|
Cost of
sales
|
279,075
|
|
|
197,661
|
|
|
513,657
|
|
|
393,320
|
|
Gross
profit
|
150,682
|
|
|
109,720
|
|
|
276,793
|
|
|
204,053
|
|
Operating
expenses:
|
|
|
|
|
|
|
|
Selling, general and
administrative expense
|
100,407
|
|
|
79,575
|
|
|
198,272
|
|
|
158,298
|
|
Management
fees
|
11,011
|
|
|
8,183
|
|
|
21,860
|
|
|
16,031
|
|
Amortization
expense
|
19,019
|
|
|
14,779
|
|
|
31,718
|
|
|
25,089
|
|
Impairment
expense
|
—
|
|
|
—
|
|
|
—
|
|
|
8,864
|
|
Operating income
(loss)
|
20,245
|
|
|
7,183
|
|
|
24,943
|
|
|
(4,229)
|
|
Other income
(expense):
|
|
|
|
|
|
|
|
Interest expense,
net
|
(13,580)
|
|
|
(8,418)
|
|
|
(19,766)
|
|
|
(15,554)
|
|
Loss on
investment
|
—
|
|
|
—
|
|
|
—
|
|
|
(5,620)
|
|
Amortization of debt
issuance costs
|
(953)
|
|
|
(1,003)
|
|
|
(2,051)
|
|
|
(1,936)
|
|
Other income
(expense), net
|
(2,205)
|
|
|
952
|
|
|
(3,586)
|
|
|
930
|
|
Income (loss) from
continuing operations before income
taxes
|
3,507
|
|
|
(1,286)
|
|
|
(460)
|
|
|
(26,409)
|
|
Provision (benefit)
for income taxes
|
4,139
|
|
|
1,454
|
|
|
1,793
|
|
|
(2,194)
|
|
Net loss from
continuing operations
|
(632)
|
|
|
(2,740)
|
|
|
(2,253)
|
|
|
(24,215)
|
|
Gain on sale of
discontinued operations, net of tax
|
1,165
|
|
|
—
|
|
|
1,165
|
|
|
340
|
|
Net income
(loss)
|
533
|
|
|
(2,740)
|
|
|
(1,088)
|
|
|
(23,875)
|
|
Less: Income from
continuing operations attributable to noncontrolling
interest
|
1,441
|
|
|
1,372
|
|
|
2,161
|
|
|
1,842
|
|
Net loss attributable
to Holdings
|
$
|
(908)
|
|
|
$
|
(4,112)
|
|
|
$
|
(3,249)
|
|
|
$
|
(25,717)
|
|
|
|
|
|
|
|
|
|
Basic income (loss)
per common share attributable to Holdings
|
|
|
|
|
|
|
|
Continuing
operations
|
$
|
(0.12)
|
|
|
$
|
(0.53)
|
|
|
$
|
(0.20)
|
|
|
$
|
(1.14)
|
|
Discontinued
operations
|
0.02
|
|
|
—
|
|
|
0.02
|
|
|
0.01
|
|
|
$
|
(0.10)
|
|
|
$
|
(0.53)
|
|
|
$
|
(0.18)
|
|
|
$
|
(1.13)
|
|
|
|
|
|
|
|
|
|
Basic weighted
average number of common shares outstanding
|
59,900
|
|
|
59,900
|
|
|
59,900
|
|
|
59,900
|
|
|
|
|
|
|
|
|
|
Cash distributions
declared per Trust common share
|
$
|
0.36
|
|
|
$
|
0.36
|
|
|
$
|
0.72
|
|
|
$
|
0.72
|
|
|
|
|
|
|
|
|
|
Compass
Diversified Holdings
Summarized
Statement of Cash Flows
(Unaudited)
|
|
|
|
|
|
Six Months
Ended
|
(in
thousands)
|
June 30,
2018
|
|
June 30,
2017
|
Net cash provided by
operating activities
|
$
|
35,312
|
|
|
$
|
35,868
|
|
Net cash used in
investing activities
|
(454,715)
|
|
|
(44,386)
|
|
Net cash provided by
financing activities
|
415,358
|
|
|
8,532
|
|
Effect of foreign
currency on cash
|
1,616
|
|
|
(499)
|
|
Net decrease in cash
and cash equivalents
|
(2,429)
|
|
|
(485)
|
|
Cash and cash
equivalents — beginning of period
|
39,885
|
|
|
39,772
|
|
Cash and cash
equivalents — end of period
|
$
|
37,456
|
|
|
$
|
39,287
|
|
|
|
|
|
Compass
Diversified Holdings
Condensed
Consolidated Table of Cash Flows Available for Distribution and
Reinvestment
(unaudited)
|
|
Three Months
Ended
|
|
Six Months
Ended
|
(in
thousands)
|
June 30,
2018
|
|
June 30,
2017
|
|
June 30,
2018
|
|
June 30,
2017
|
Net income
(loss)
|
$
|
533
|
|
|
$
|
(2,740)
|
|
|
$
|
(1,088)
|
|
|
$
|
(23,875)
|
|
Adjustments to
reconcile net income (loss) to net cash provided by operating
activities:
|
|
|
|
|
|
|
|
Depreciation and
amortization
|
34,198
|
|
|
31,187
|
|
|
57,131
|
|
|
62,582
|
|
Impairment
expense
|
—
|
|
|
—
|
|
|
—
|
|
|
8,864
|
|
Gain on sale of
businesses, net
|
(1,165)
|
|
|
—
|
|
|
(1,165)
|
|
|
(340)
|
|
Amortization of debt
issuance costs and original issue
discount
|
971
|
|
|
1,261
|
|
|
2,324
|
|
|
2,460
|
|
Unrealized (gain) loss
on derivatives
|
(999)
|
|
|
1,497
|
|
|
(3,900)
|
|
|
1,268
|
|
Loss on investment in
FOX
|
—
|
|
|
—
|
|
|
—
|
|
|
5,620
|
|
Noncontrolling
stockholder charges
|
2,614
|
|
|
1,798
|
|
|
5,165
|
|
|
3,250
|
|
Provision for loss on
receivables
|
(230)
|
|
|
9
|
|
|
98
|
|
|
3,327
|
|
Other
|
312
|
|
|
384
|
|
|
135
|
|
|
704
|
|
Deferred
taxes
|
1,069
|
|
|
(4,305)
|
|
|
(3,242)
|
|
|
(11,940)
|
|
Changes in operating
assets and liabilities
|
(8,634)
|
|
|
8,191
|
|
|
(20,146)
|
|
|
(16,052)
|
|
Net cash provided
by (used in) operating activities
|
28,669
|
|
|
37,282
|
|
|
35,312
|
|
|
35,868
|
|
Plus:
|
|
|
|
|
|
|
|
Unused fee on
revolving credit facility
|
403
|
|
|
696
|
|
|
855
|
|
|
1,473
|
|
Successful acquisition
costs
|
158
|
|
|
1,473
|
|
|
2,347
|
|
|
1,473
|
|
Integration services
fee (1)
|
938
|
|
|
875
|
|
|
1,594
|
|
|
1,750
|
|
Realized loss from
foreign currency effect (2)
|
908
|
|
|
—
|
|
|
2,247
|
|
|
—
|
|
Changes in operating
assets and liabilities
|
8,634
|
|
|
—
|
|
|
20,146
|
|
|
16,052
|
|
Other
|
1,073
|
|
|
—
|
|
|
791
|
|
|
—
|
|
Less:
|
|
|
|
|
|
|
|
Maintenance capital
expenditures (3)
|
8,296
|
|
|
4,338
|
|
|
14,268
|
|
|
9,068
|
|
Payment of interest
rate swap
|
380
|
|
|
1,026
|
|
|
1,086
|
|
|
2,115
|
|
Changes in operating
assets and liabilities
|
—
|
|
|
8,191
|
|
|
—
|
|
|
—
|
|
Realized gain from
foreign currency effect (2)
|
—
|
|
|
1,260
|
|
|
—
|
|
|
1,650
|
|
Preferred share
distributions
|
1,812
|
|
|
—
|
|
|
3,625
|
|
|
—
|
|
Other
(4)
|
—
|
|
|
8
|
|
|
—
|
|
|
3,366
|
|
Estimated cash
flow available for distribution and reinvestment
|
$
|
30,295
|
|
|
$
|
25,503
|
|
|
$
|
44,313
|
|
|
$
|
40,417
|
|
|
|
|
|
|
|
|
|
Distribution paid in
April 2018/ 2017
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
21,564
|
|
|
$
|
21,564
|
|
Distribution paid in
July 2018/ 2017
|
21,564
|
|
|
21,564
|
|
|
21,564
|
|
|
21,564
|
|
|
$
|
21,564
|
|
|
$
|
21,564
|
|
|
$
|
43,128
|
|
|
$
|
43,128
|
|
|
|
|
|
(1)
|
Represents fees paid
by newly acquired companies to the Manager for integration services
performed during the first year of ownership, payable
quarterly.
|
(2)
|
Reflects the foreign
currency transaction gain/ loss resulting from the Canadian dollar
intercompany loans issued to Manitoba Harvest.
|
(3)
|
Excludes growth
capital expenditures of approximately $8.3 million and $6.5 million
for the three months ended June 30, 2018 and 2017, and $14.5
million and $10.4 million for the six months ended June 30, 2018
and 2017, respectively.
|
(4)
|
Includes amounts for
the establishment of additional accounts receivable reserves
related to a retail customer who filed bankruptcy during the first
and third quarter of 2017.
|
View original
content:http://www.prnewswire.com/news-releases/compass-diversified-holdings-reports-second-quarter-2018-financial-results-300690524.html
SOURCE Compass Diversified Holdings