Compass Diversified Holdings (NYSE: CODI) (“CODI” or the Company”),
an owner of leading middle market businesses, today issued a letter
to its shareholders providing a business update amid the novel
coronavirus (“COVID-19”) pandemic.
Dear Fellow Shareholders,
In this truly unprecedented time, we hope this
letter finds you and your families safe and healthy.
Like so many of you, we have been closely
monitoring developments related to the spread of the novel
coronavirus (“COVID-19”). While pandemic-fueled volatility has sent
financial markets on wild swings, we are carefully monitoring how
businesses, governments and health organizations around the world
take measures that would have seemed unimaginable just months ago
to contain the virus and keep our communities safe. Although we are
still in the early days of understanding and assessing the impact
to the global economy, we wanted to provide an interim update on
our business as well as what we are seeing in the market now.
At CODI, we have always managed our business for
the long-term. Our unique permanent capital structure, disciplined
approach to investing and diversified group of companies give us
flexibility to take the unexpected in stride. While others were
accumulating assets at record high prices throughout 2019, our
long-term, balanced risk approach ensured that we were defensively
positioned and had the systems readiness in place to operate in the
current environment. Importantly, the actions we took in 2019 –
including opportunistically divesting two companies, issuing equity
capital in November and substantially de-risking our balance sheet
– will allow us to continue identifying and executing on compelling
opportunities as the current dislocation begins to settle.
Today our Board of Directors authorized the
regularly scheduled distributions on the Series A Preferred Shares,
Series B Preferred Shares, Series C Preferred Shares, and our
Common Shares. This marks the 37th consecutive quarter that we have
paid our Common Stock distribution at a rate of $1.44 per share
annualized.
We were prepared to operate in today’s
market and have implemented robust precautions.
We have a detailed crisis preparedness plan in
place, allowing us to migrate to a remote working structure with
all systems and operations functioning seamlessly. The health of
our team and various stakeholders is our highest priority, and we
are taking all appropriate measures to ensure they are safe and
supported.
We are continually working with our management
teams at each subsidiary to evaluate business-specific risks and
support them as they make decisions about contingency planning.
With a large portion of the country under some form of a
“stay-at-home” order, we anticipate downward revenue pressure on
certain subsidiaries as a result of the abrupt halt to large
segments of the economy. However, our group of companies are
strategically diverse, serving a broad range of end markets,
distribution channels and customers. Many of our consumer
brands stand for readiness and we believe these readiness-focused
brands will have enhanced appeal to a broader group of potential
customers and therefore emerge with stronger growth prospects.
We are in regular contact with our subsidiary
teams to assist in managing any financial or operational
disruptions that may occur. With a clear focus on maintaining
operations to the full extent possible, we have flexibility to
temporarily cut discretionary spending, freeze new hires, defer
capital expenditures and postpone growth initiatives to ensure that
our subsidiaries remain viable. We will continue to make decisions
in real time and re-evaluate on a day-to-day basis.
We believe we have sufficient liquidity
and are positioned to generate future shareholder
value.
We currently have significant levels of capital
available, and our net leverage remains at only 1.5 times. Last
year, we further strengthened our balance sheet through the
divestiture of two subsidiaries and the issuance of our 7.875%
Series C Preferred Shares, taking steps to defensively position the
company.
As previously disclosed, as of December 31,
2019, we had approximately $100.3 million in cash and cash
equivalents, $400.0 million outstanding in 8.00% Senior Notes due
2026 with no outstanding borrowings under our revolving credit
facility. In an abundance of caution, and as a proactive measure,
in late March 2020, we elected to draw down $200 million from our
revolving credit facility. Following the recent drawdowns, we have
more than $245 million cash on hand at the corporate level,
exclusive of cash held on hand at our subsidiary companies (which
was approximately $35 million as of December 31, 2019). Subsequent
to the expected close of Marucci Sports LLC, and including our
ability to upsize our revolving credit facility by $250 million, we
expect to have more than $650 million of liquidity available to
support our business.
We continue to identify and execute on
compelling opportunities.
With our permanent capital structure, strong
liquidity position and operational preparedness, CODI is not only
navigating the current environment, we are also continuing to
execute on compelling opportunities while under no pressure to
divest of assets in an unfavorable market.
Last month we announced the acquisition of
Marucci Sports, a fast growing, authentic consumer products company
operating in the baseball industry. We believe this transaction has
tremendous upside for shareholders and is one that other investment
firms may not have been able to close in such volatile markets.
Despite the challenges ahead, we believe that we
are positioned to succeed in a time of market dislocation and look
forward to continuing to find unique opportunities to acquire,
manage and opportunistically divest leading middle market
businesses on your behalf.
In closing, as difficult as this period is, we
believe that the companies that successfully manage through this
turmoil will be stronger and more valuable on the other end. We are
taking every step that we can to prepare for the impact and we are
well positioned to continue to generate shareholder value in the
years to come. As we have done through other challenging moments in
time, we are confident that we have the right strategy, an
excellent team in place and a strong group of subsidiaries to not
only persevere but also find stronger footing on the other
side.
Thank you for your dedication to CODI. We will continue to be
transparent about the expected impact and will keep you updated
moving forward.
Best,
Elias J. Sabo |
Ryan J. Faulkingham |
Chief Executive Officer |
Chief Financial Officer |
Compass Group Diversified Holdings, LLC
|
Compass Group Diversified Holdings, LLC |
About Compass Diversified Holdings
(“CODI” or the “Company”)
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 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 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. Forward-looking statements involve risks and
uncertainties, including, but not limited to, statements as to our
future operating results; our business prospects and the prospects
of our portfolio companies; the impact of investments that we
expect to make; our contractual arrangements and relationships with
third parties; 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” 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 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 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 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.
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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