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, 2021.
Third Quarter 2021
Highlights
- Reported net sales of $488.2
million;
- Reported net income of $90.2
million;
- Reported non-GAAP Adjusted EBITDA
of $90.0 million;
- Reported Cash Provided by Operating
Activities of $37.7 million, and non-GAAP Cash Flow Available for
Distribution and Reinvestment (“CAD’) of $42.5 million;
- Completed the election to treat
Compass Diversified Holdings as a corporation for U.S. federal
income tax purposes, effective September 1, 2021 (the
“Election”);
- Completed the sale of Liberty Safe
for an enterprise value of $147.5 million and recorded a gain on
the sale of $72.7 million;
- Closed on the acquisition of Lugano
Diamonds and Jewelry, Inc. (“Lugano Diamonds”) for an enterprise
value of $256 million;
- Paid a cash distribution of $0.36
per share on CODI's common shares in October 2021;
- Paid a special cash distribution of
$0.88 per share on CODI’s common shares in September 2021 to
partially cover the taxable income incurred by shareholders in
connection with the Election; and
- Declared quarterly cash
distributions 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 (the “Preferred
Distributions”). The Preferred Distributions are payable on October
30, 2021. The payment will occur on November 1, 2021, the next
business day following the payment date.
“CODI’s strong momentum continued in the third quarter as we
generated outstanding results primarily due to heightened demand at
our leading consumer brands,” said Elias Sabo, CEO of Compass
Diversified. “With our permanent capital structure giving us
flexibility through economic cycles, we have remained focused on
building businesses for the future and supporting the brands we
own. We are proud of our subsidiary teams, who have worked
diligently to expertly navigate this current inflationary period by
adeptly managing supply chains and prioritizing our customers, and
believe they continue to be well positioned to grow.”
Mr. Sabo continued, “Recently, we announced a series of
compelling transactions, including the strategic divestment of
Liberty Safe in August 2021, the anticipated sale of Advanced
Circuits, and the acquisition of luxury goods brand Lugano
Diamonds. We also acquired Plymouth Foam and Lizard Skins as
complementary add-ons to our strong Altor and Marucci subsidiaries,
respectively. We continue to succeed at identifying, acquiring and
investing in a diversified group of leading consumer and industrial
businesses, which we believe will drive sustainable, long-term
value for our shareholders.”
Operating Results
Net sales for the quarter ended September 30,
2021, was $488.2 million, as compared to $387.7 million for the
quarter ended September 30, 2020.
Net income for the quarter ended September 30, 2021, was $90.2
million, as compared to $20.9 million for the quarter ended
September 30, 2020. The increase in net income was primarily a
result of the gain on the sale of Liberty Safe of $72.7
million.
Adjusted EBITDA (see “Note Regarding Use of
Non-GAAP Financial Measures” below) for the quarter ended September
30, 2021, was $90.0 million, as compared to $67.6 million for the
quarter ended September 30, 2020. The increase in Adjusted EBITDA
for the third quarter of 2021, as compared to prior year period,
was primarily a result of our 2020 acquisition of BOA, as well as
strong performance by our branded consumer companies.
Liquidity and Capital
Resources
For the quarter ended September 30, 2021, CODI
reported Cash Provided by Operating Activities of $37.7 million, as
compared to Cash Provided by Operating Activities of $24.5 million
for the quarter ended September 30, 2020.
CODI reported CAD (see “Note Regarding Use of
Non-GAAP Financial Measures” below) of $42.5 million for the
quarter ended September 30, 2021, as compared to $43.5 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 $1.1 billion since going public in 2006.
CODI's weighted average number of shares
outstanding for the quarter ended September 30, 2021 was 65.0
million, and for the quarter ended September 30, 2020 was 64.9
million.
As of September 30, 2021, CODI had approximately
$70.2 million in cash and cash equivalents, $134.0 million
outstanding on its revolver and $1.0 billion outstanding in 5.250%
Senior Notes due 2029.
The Company has no significant debt maturities
until 2026 and had net borrowing availability of $465.0 million on
September 30, 2021 under its revolving credit facility.
Third Quarter 2021
Distributions
On October 5, 2021, 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, 2021 to all holders of record of common shares
as of October 15, 2021.
Additionally, CODI’s Board of Directors declared
a Special Distribution of $0.88 per share on the Trust’s common
shares paid on September 7, 2021 to all holders of record of Common
Shares as of the close of business on August 31, 2021 which was
intended to partially cover the taxable income incurred by those
shareholders in connection with the Election.
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, 2021, up to, but excluding, October
30, 2021. The distribution for such period is payable on October
30, 2021 to all holders of record of Series A Preferred Shares as
of October 15, 2021. The payment will occur on November 1, 2021,
the next business day following the payment date.
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, 2021, up to, but excluding, October
30, 2021. The distribution for such period is payable on October
30, 2021 to all holders of record of Series B Preferred Shares as
of October 15, 2021. The payment will occur on November 1, 2021,
the next business day following the payment date.
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, 2021, up to, but excluding, October
30, 2021. The distribution for such period is payable on October
30, 2021 to all holders of record of Series C Preferred Shares as
of October 15, 2021. The payment will occur on November 1, 2021,
the next business day following the payment date.
Guidance Update
As a result of the strong financial performance
in the first nine months of the year, as well as the Company’s
expectations for the remainder of 2021, the Company expects its
current subsidiaries to produce consolidated Adjusted EBITDA (see
“Note Regarding Use of Non-GAAP Financial Measures” below) for the
full calendar year of 2021 of between $380 million and $390 million
pro forma for the sale of Liberty Safe and the acquisition of
Lugano Diamonds. This estimate is based on the summation of our
expectations for our current subsidiaries in 2021, absent
additional acquisitions or divestitures, and excludes corporate
expenses such as interest expense, management fees and corporate
overhead. In addition, our Payout Ratio (see “Note Regarding Use of
Non-GAAP Financial Measures” below), defined as our prior year's
annual distribution to common shareholders, excluding the special
distribution paid in September 2021 as a result of the tax
reclassification, divided by our 2021 estimate for CAD, is
anticipated to improve from the previous range and be better than
55%.
Conference Call
Management will host a conference call on
Thursday, October 28, 2021 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 (844) 200-6205 and the dial-in number
for international callers is +1 929 526 1599. The access code for
all callers is 209658. 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
November 4, 2021. To access the replay, please dial (929) 458-6194
in the U.S. and +44 204 525 0658 outside the U.S., and then enter
the access code 702041.
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 Provided by Operating Activities on the attached schedules. We
consider Net Income (Loss) and Cash Flow Provided by 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 2021 Adjusted EBITDA or 2021 Payout Ratio
(which requires an estimate of 2021 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 set of highly defensible North
American middle market businesses. Each of its current subsidiaries
is a leader in its niche market. For more information, visit
compassdiversified.com.
Leveraging its permanent capital base, long-term disciplined
approach and actionable expertise, CODI maintains controlling
ownership interests in each of its subsidiaries, maximizing its
ability to impact long-term cash flow generation and value
creation. 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
has consistently generated strong returns through its culture of
transparency, alignment and accountability.
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 design and manufacture of custom packaging, insulation and
componentry (Altor Solutions);
- The manufacture of engineered magnetic solutions for a wide
range of specialty applications and end-markets (Arnold
Magnetic Technologies);
- The design, engineering and marketing of dial based fit systems
delivering a scientifically proven performance advantage for
athletes (BOA Technology);
- The design and marketing of wearable baby carriers, strollers
and related products (Ergobaby);
- The design, manufacture, and marketing of high-end,
one-of-a-kind jewelry (Lugano Diamonds);
- 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 2021, our 2021 Total
Adjusted EBITDA, 2021 Payout Ratio and 2021 CAD, our pending
acquisitions and divestitures, and our ability to meet existing
obligations and quarterly distributions as well as other statements
with regard to the future performance of CODI and the impact of our
change in tax classification. 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, its quarterly reports on Form 10-Q and in
other filings made with the Securities and Exchange Commission (the
“SEC”). Other factors that could cause actual results to differ
materially include, but are not limited to, 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; 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; future
changes in laws or regulations (including the interpretation of
these laws and regulations by regulatory authorities); disruption
in the global supply chain, labor shortages and high labor costs;
our business prospects and the prospects of our portfolio
companies; the impact of, and ability to successfully complete and
integrate, 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; the timing of cash flows,
if any, from the operations of our portfolio companies; and other
considerations that may be disclosed from time to time in CODI’s
publicly disseminated documents and filings.
We may use words such as “anticipate,”
“believe,” “expect,” “intend,” “will,” “should,” “may,” “seek,”
“look,” and similar expressions to identify forward-looking
statements. 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, current reports on Form 8-K, proxy statements and other
filings with the SEC.
Investor Relations:The IGB Group
Leon Berman 212-477-8438 lberman@igbir.com |
Media Contact:Joele Frank,
Wilkinson Brimmer KatcherJon Keehner / Kate Thompson / Lyle
Weston212-355-4449 |
Compass Diversified
HoldingsConsolidated Statements of
Operations(Unaudited)
|
|
|
|
|
|
|
|
|
Three months ended September 30, |
|
Nine months ended September 30, |
(in thousands, except per
share data) |
2021 |
|
2020 |
|
2021 |
|
2020 |
Net sales |
$ |
488,158 |
|
|
$ |
387,717 |
|
|
$ |
1,372,266 |
|
|
$ |
1,005,380 |
|
Cost of sales |
296,027 |
|
|
242,045 |
|
|
818,307 |
|
|
635,763 |
|
Gross
profit |
192,131 |
|
|
145,672 |
|
|
553,959 |
|
|
369,617 |
|
Operating expenses: |
|
|
|
|
|
|
|
Selling, general and administrative expense |
118,818 |
|
|
90,785 |
|
|
337,815 |
|
|
252,448 |
|
Management fees |
12,398 |
|
|
9,534 |
|
|
34,504 |
|
|
23,061 |
|
Amortization expense |
19,056 |
|
|
15,222 |
|
|
56,502 |
|
|
43,506 |
|
Operating
income |
41,859 |
|
|
30,131 |
|
|
125,138 |
|
|
50,602 |
|
Other income (expense): |
|
|
|
|
|
|
|
Interest expense, net |
(13,855 |
) |
|
(12,351 |
) |
|
(42,607 |
) |
|
(32,122 |
) |
Amortization of debt issuance costs |
(759 |
) |
|
(660 |
) |
|
(2,167 |
) |
|
(1,795 |
) |
Loss on debt extinguishment |
— |
|
|
— |
|
|
(33,305 |
) |
|
— |
|
Other income (expense), net |
1,031 |
|
|
(450 |
) |
|
(1,906 |
) |
|
(2,178 |
) |
Net income before
income taxes |
28,276 |
|
|
16,670 |
|
|
45,153 |
|
|
14,507 |
|
Provision for income taxes |
9,556 |
|
|
396 |
|
|
24,662 |
|
|
6,120 |
|
Income from continuing
operations |
18,720 |
|
|
16,274 |
|
|
20,491 |
|
|
8,387 |
|
Income (loss) from discontinued operations, net of income tax |
(1,309 |
) |
|
4,529 |
|
|
7,665 |
|
|
9,930 |
|
Gain on sale of discontinued operations |
72,745 |
|
|
100 |
|
|
72,745 |
|
|
100 |
|
Net
income |
90,156 |
|
|
20,903 |
|
|
100,901 |
|
|
18,417 |
|
Less: Net income attributable to noncontrolling interest |
2,201 |
|
|
1,395 |
|
|
7,915 |
|
|
3,377 |
|
Less: Net income (loss) from discontinued operations attributable
to noncontrolling interest |
(145 |
) |
|
322 |
|
|
522 |
|
|
626 |
|
Net income
attributable to Holdings |
$ |
88,100 |
|
|
$ |
19,186 |
|
|
$ |
92,464 |
|
|
$ |
14,414 |
|
|
|
|
|
|
|
|
|
Basic income (loss) per common
share attributable to Holdings |
|
|
|
|
|
|
|
Continuing operations |
$ |
(0.13 |
) |
|
$ |
0.02 |
|
|
$ |
(0.46 |
) |
|
$ |
(0.46 |
) |
Discontinued operations |
1.10 |
|
|
0.06 |
|
|
1.23 |
|
|
0.13 |
|
|
$ |
0.97 |
|
|
$ |
0.08 |
|
|
$ |
0.77 |
|
|
$ |
(0.33 |
) |
|
|
|
|
|
|
|
|
Basic weighted average number
of common shares outstanding |
65,008 |
|
|
64,900 |
|
|
64,936 |
|
|
62,556 |
|
|
|
|
|
|
|
|
|
Cash distributions declared
per Trust common share |
$ |
1.24 |
|
|
$ |
0.36 |
|
|
$ |
1.96 |
|
|
$ |
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) |
|
2021 |
|
2020 |
|
2021 |
|
2020 |
|
|
|
|
|
|
|
|
|
Net Sales |
|
$ |
488,158 |
|
|
$ |
387,717 |
|
|
$ |
1,372,266 |
|
|
$ |
1,005,380 |
|
Acquisitions (1) |
|
18,676 |
|
|
41,024 |
|
|
71,058 |
|
|
145,757 |
|
Pro Forma Net Sales |
|
$ |
506,834 |
|
|
$ |
428,741 |
|
|
$ |
1,443,324 |
|
|
$ |
1,151,137 |
|
(1) Acquisitions reflects the
net sales for BOA, Lugano, and Marucci Sports and BOA on a pro
forma basis as if we had acquired these businesses on January 1,
2020.
Compass Diversified Holdings |
Subsidiary Net Sales |
(unaudited) |
|
|
|
|
|
|
|
|
|
Three months ended September 30, |
|
Nine months ended September 30, |
(in thousands) |
|
2021 |
|
2020 |
|
2021 |
|
2020 |
|
|
|
|
|
|
|
|
|
Branded
Consumer |
|
|
|
|
|
|
|
|
5.11 |
|
$ |
111,099 |
|
|
$ |
98,406 |
|
|
$ |
321,009 |
|
|
$ |
281,822 |
|
BOA (1) |
|
39,496 |
|
|
26,141 |
|
|
120,033 |
|
|
77,173 |
|
Ergobaby |
|
19,816 |
|
|
19,478 |
|
|
69,100 |
|
|
59,171 |
|
Lugano
(1) |
|
29,499 |
|
|
14,883 |
|
|
81,881 |
|
|
46,084 |
|
Marucci Sports
(1) |
|
25,040 |
|
|
19,551 |
|
|
86,328 |
|
|
47,307 |
|
Velocity Outdoor |
|
76,901 |
|
|
70,629 |
|
|
205,891 |
|
|
148,240 |
|
Total Branded Consumer |
|
$ |
301,851 |
|
|
$ |
249,088 |
|
|
$ |
884,242 |
|
|
$ |
659,797 |
|
|
|
|
|
|
|
|
|
|
Niche
Industrial |
|
|
|
|
|
|
|
|
Advanced Circuits |
|
$ |
23,182 |
|
|
$ |
22,771 |
|
|
$ |
67,209 |
|
|
$ |
67,423 |
|
Altor Solutions |
|
44,122 |
|
|
36,526 |
|
|
122,582 |
|
|
89,338 |
|
Arnold Magnetics |
|
36,852 |
|
|
22,619 |
|
|
101,893 |
|
|
76,447 |
|
Sterno |
|
100,827 |
|
|
97,737 |
|
|
267,398 |
|
|
258,132 |
|
Total Niche Industrial |
|
$ |
204,983 |
|
|
$ |
179,653 |
|
|
$ |
559,082 |
|
|
$ |
491,340 |
|
|
|
|
|
|
|
|
|
|
Total Subsidiary Net
Sales |
|
$ |
506,834 |
|
|
$ |
428,741 |
|
|
$ |
1,443,324 |
|
|
$ |
1,151,137 |
|
(1) Net sales for BOA, Lugano and Marucci
Sports are pro forma as if we had acquired these businesses on
January 1, 2020.
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) |
2021 |
|
2020 |
|
2021 |
|
2020 |
Net income |
$ |
90,156 |
|
|
$ |
20,903 |
|
|
$ |
100,901 |
|
|
$ |
18,417 |
|
Income (loss) from discontinued operations |
(1,309 |
) |
|
4,529 |
|
|
7,665 |
|
|
9,930 |
|
Gain on sale of discontinued operations |
72,745 |
|
|
100 |
|
|
72,745 |
|
|
100 |
|
Income from continuing
operations |
$ |
18,720 |
|
|
$ |
16,274 |
|
|
$ |
20,491 |
|
|
$ |
8,387 |
|
Provision for income taxes |
9,556 |
|
|
396 |
|
|
24,662 |
|
|
6,120 |
|
Income from continuing
operations before income taxes |
$ |
28,276 |
|
|
$ |
16,670 |
|
|
$ |
45,153 |
|
|
$ |
14,507 |
|
Other expense, net |
(1,031 |
) |
|
450 |
|
|
1,906 |
|
|
2,178 |
|
Amortization of debt issuance costs |
759 |
|
|
660 |
|
|
2,167 |
|
|
1,795 |
|
Loss on debt extinguishment |
— |
|
|
— |
|
|
33,305 |
|
|
— |
|
Interest expense, net |
13,855 |
|
|
12,351 |
|
|
42,607 |
|
|
32,122 |
|
Operating
income |
$ |
41,859 |
|
|
$ |
30,131 |
|
|
$ |
125,138 |
|
|
$ |
50,602 |
|
Adjusted
For: |
|
|
|
|
|
|
|
Depreciation |
10,371 |
|
|
8,378 |
|
|
28,896 |
|
|
24,459 |
|
Amortization |
19,056 |
|
|
16,602 |
|
|
56,502 |
|
|
47,886 |
|
Noncontrolling shareholder compensation |
2,893 |
|
|
2,164 |
|
|
8,496 |
|
|
6,094 |
|
Acquisition expenses |
1,866 |
|
|
273 |
|
|
2,176 |
|
|
2,315 |
|
Integration services fees |
1,100 |
|
|
500 |
|
|
4,300 |
|
|
500 |
|
Management fees |
12,398 |
|
|
9,534 |
|
|
34,504 |
|
|
23,061 |
|
Other |
459 |
|
|
(1 |
) |
|
(609 |
) |
|
597 |
|
Adjusted
EBITDA |
$ |
90,002 |
|
|
$ |
67,581 |
|
|
$ |
259,403 |
|
|
$ |
155,514 |
|
Interest at Corporate, net of unused fee (1) |
(13,391 |
) |
|
(12,015 |
) |
|
(41,483 |
) |
|
(31,113 |
) |
Management fees |
(12,398 |
) |
|
(9,534 |
) |
|
(34,504 |
) |
|
(23,061 |
) |
Capital expenditures (maintenance) |
(8,062 |
) |
|
(3,683 |
) |
|
(18,926 |
) |
|
(9,928 |
) |
Current tax expense (cash taxes) (2) |
(8,684 |
) |
|
2,182 |
|
|
(22,074 |
) |
|
(9,474 |
) |
Preferred share distributions |
(6,045 |
) |
|
(6,046 |
) |
|
(18,136 |
) |
|
(17,633 |
) |
Discontinued operations |
2,035 |
|
|
4,802 |
|
|
11,790 |
|
|
10,743 |
|
Miscellaneous items |
(968 |
) |
|
174 |
|
|
(759 |
) |
|
(395 |
) |
Cash Flow Available
for Distribution and Reinvestment ("CAD") |
$ |
42,489 |
|
|
$ |
43,461 |
|
|
$ |
135,311 |
|
|
$ |
74,653 |
|
|
|
|
(1 |
) |
|
Interest expense at Corporate reflects consolidated interest
expense less non-cash components such as the amortization of our
bond premium. |
|
|
|
(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 |
Consolidated EBITDA |
Nine months ended September 30, 2021 |
(Unaudited) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate |
|
5.11 |
|
BOA |
|
Ergo |
|
Lugano |
|
Marucci Sports |
|
Velocity Outdoor |
|
ACI |
|
Altor Solutions |
|
Arnold |
|
Sterno |
|
Consolidated |
Net income (1) |
|
$ |
8,028 |
|
|
$ |
14,318 |
|
|
$ |
16,908 |
|
|
$ |
3,071 |
|
|
$ |
681 |
|
|
$ |
9,485 |
|
|
$ |
19,157 |
|
|
$ |
10,366 |
|
|
$ |
5,892 |
|
|
$ |
3,839 |
|
|
$ |
1,491 |
|
|
$ |
93,236 |
|
Adjusted for: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for income taxes |
|
— |
|
|
4,857 |
|
|
2,165 |
|
|
1,357 |
|
|
304 |
|
|
2,920 |
|
|
5,381 |
|
|
2,547 |
|
|
2,867 |
|
|
2,062 |
|
|
202 |
|
|
24,662 |
|
Interest expense, net |
|
42,464 |
|
|
8 |
|
|
— |
|
|
— |
|
|
— |
|
|
5 |
|
|
125 |
|
|
— |
|
|
— |
|
|
5 |
|
|
— |
|
|
42,607 |
|
Intercompany interest |
|
(53,234 |
) |
|
8,743 |
|
|
6,320 |
|
|
1,514 |
|
|
548 |
|
|
1,890 |
|
|
5,586 |
|
|
5,484 |
|
|
5,075 |
|
|
4,128 |
|
|
13,946 |
|
|
— |
|
Loss on debt extinguishment |
|
33,305 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
33,305 |
|
Depreciation and amortization |
|
642 |
|
|
16,762 |
|
|
15,033 |
|
|
6,377 |
|
|
70 |
|
|
6,377 |
|
|
9,489 |
|
|
1,658 |
|
|
9,022 |
|
|
5,822 |
|
|
16,313 |
|
|
87,565 |
|
EBITDA |
|
31,205 |
|
|
44,688 |
|
|
40,426 |
|
|
12,319 |
|
|
1,603 |
|
|
20,677 |
|
|
39,738 |
|
|
20,055 |
|
|
22,856 |
|
|
15,856 |
|
|
31,952 |
|
|
281,375 |
|
Gain on sale of business |
|
(72,745 |
) |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(72,745 |
) |
Other (income) expense |
|
(286 |
) |
|
(302 |
) |
|
190 |
|
|
— |
|
|
22 |
|
|
881 |
|
|
2,611 |
|
|
123 |
|
|
(399 |
) |
|
(51 |
) |
|
(883 |
) |
|
1,906 |
|
Non-controlling shareholder compensation |
|
— |
|
|
1,926 |
|
|
1,655 |
|
|
1,241 |
|
|
— |
|
|
826 |
|
|
777 |
|
|
372 |
|
|
770 |
|
|
16 |
|
|
913 |
|
|
8,496 |
|
Acquisition expenses |
|
39 |
|
|
— |
|
|
— |
|
|
— |
|
|
1,827 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
310 |
|
|
— |
|
|
2,176 |
|
Integration services fee |
|
— |
|
|
— |
|
|
3,300 |
|
|
— |
|
|
— |
|
|
1,000 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
4,300 |
|
Other |
|
1,085 |
|
|
273 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(2,300 |
) |
|
— |
|
|
— |
|
|
— |
|
|
333 |
|
|
(609 |
) |
Management fees |
|
30,133 |
|
|
750 |
|
|
750 |
|
|
375 |
|
|
58 |
|
|
375 |
|
|
375 |
|
|
375 |
|
|
563 |
|
|
375 |
|
|
375 |
|
|
34,504 |
|
Adjusted
EBITDA |
|
$ |
(10,569 |
) |
|
$ |
47,335 |
|
|
$ |
46,321 |
|
|
$ |
13,935 |
|
|
$ |
3,510 |
|
|
$ |
23,759 |
|
|
$ |
41,201 |
|
|
$ |
20,925 |
|
|
$ |
23,790 |
|
|
$ |
16,506 |
|
|
$ |
32,690 |
|
|
$ |
259,403 |
|
(1) Net income does not include income from
discontinued operations for the nine months ended September 30,
2021.
Compass Diversified Holdings |
Consolidated EBITDA |
Nine months ended September 30, 2020 |
(Unaudited) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate |
|
5.11 |
|
Ergo |
|
Marucci Sports |
|
Velocity Outdoor |
|
ACI |
|
Altor Solutions |
|
Arnold |
|
Sterno |
|
Consolidated |
Net income (loss) (1) |
|
$ |
(13,346 |
) |
|
$ |
5,515 |
|
|
$ |
1,837 |
|
|
(5,344 |
) |
|
$ |
4,245 |
|
|
$ |
10,980 |
|
|
$ |
4,188 |
|
|
$ |
(1,719 |
) |
|
$ |
2,131 |
|
|
$ |
8,487 |
|
Adjusted for: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision (benefit) for income taxes |
|
— |
|
|
(55 |
) |
|
2,265 |
|
|
(2,351 |
) |
|
1,386 |
|
|
2,878 |
|
|
1,891 |
|
|
(56 |
) |
|
162 |
|
|
6,120 |
|
Interest expense, net |
|
31,971 |
|
|
43 |
|
|
— |
|
|
6 |
|
|
102 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
32,122 |
|
Intercompany interest |
|
(48,681 |
) |
|
10,770 |
|
|
1,818 |
|
|
1,194 |
|
|
6,945 |
|
|
4,176 |
|
|
5,290 |
|
|
4,300 |
|
|
14,188 |
|
|
— |
|
Depreciation and amortization |
|
530 |
|
|
16,033 |
|
|
6,152 |
|
|
8,031 |
|
|
9,651 |
|
|
1,980 |
|
|
9,473 |
|
|
5,040 |
|
|
17,251 |
|
|
74,141 |
|
EBITDA |
|
(29,526 |
) |
|
32,306 |
|
|
12,072 |
|
|
1,536 |
|
|
22,329 |
|
|
20,014 |
|
|
20,842 |
|
|
7,565 |
|
|
33,732 |
|
|
120,870 |
|
Gain on sale of business |
|
(100 |
) |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(100 |
) |
Other (income) expense |
|
3 |
|
|
1,398 |
|
|
— |
|
|
(46 |
) |
|
1,048 |
|
|
126 |
|
|
(438 |
) |
|
(1 |
) |
|
86 |
|
|
2,176 |
|
Non-controlling shareholder compensation |
|
— |
|
|
1,870 |
|
|
748 |
|
|
361 |
|
|
1,287 |
|
|
372 |
|
|
771 |
|
|
34 |
|
|
651 |
|
|
6,094 |
|
Acquisition expenses |
|
— |
|
|
— |
|
|
— |
|
|
2,042 |
|
|
— |
|
|
— |
|
|
273 |
|
|
— |
|
|
— |
|
|
2,315 |
|
Integration services fees |
|
— |
|
|
— |
|
|
— |
|
|
500 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
500 |
|
Other |
|
— |
|
|
— |
|
|
598 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
598 |
|
Management fees |
|
19,651 |
|
|
750 |
|
|
375 |
|
|
222 |
|
|
375 |
|
|
375 |
|
|
563 |
|
|
375 |
|
|
375 |
|
|
23,061 |
|
Adjusted EBITDA (2) |
|
$ |
(9,972 |
) |
|
$ |
36,324 |
|
|
$ |
13,793 |
|
|
$ |
4,615 |
|
|
$ |
25,039 |
|
|
$ |
20,887 |
|
|
$ |
22,011 |
|
|
$ |
7,973 |
|
|
$ |
34,844 |
|
|
$ |
155,514 |
|
(1) Net income (loss) does not
include income from discontinued operations for the nine months
ended September 30, 2020.
(2) As a result of the sale of
Liberty Safe in August 2021, Adjusted EBITDA for the nine months
ended September 30, 2020 does not include $13.9 million in Adjusted
EBITDA from Liberty.
Compass Diversified Holdings |
Adjusted EBITDA |
(unaudited) |
|
|
|
|
|
|
|
|
|
|
|
Three months ended September 30, |
|
Nine months ended September 30, |
(in thousands) |
|
2021 |
|
2020 |
|
2021 |
|
2020 |
|
|
|
|
|
|
|
|
|
Branded
Consumer |
|
|
|
|
|
|
|
|
5.11 |
|
$ |
17,043 |
|
|
$ |
14,945 |
|
|
$ |
47,335 |
|
|
$ |
36,324 |
|
BOA (1) |
|
14,095 |
|
|
— |
|
|
46,321 |
|
|
— |
|
Ergobaby |
|
2,848 |
|
|
4,856 |
|
|
13,935 |
|
|
13,793 |
|
Lugano
(2) |
|
3,510 |
|
|
— |
|
|
3,510 |
|
|
— |
|
Marucci Sports
(3) |
|
6,108 |
|
|
5,442 |
|
|
23,759 |
|
|
4,615 |
|
Velocity Outdoor |
|
16,376 |
|
|
14,549 |
|
|
41,201 |
|
|
25,039 |
|
Total Branded Consumer |
|
$ |
59,980 |
|
|
$ |
39,792 |
|
|
$ |
176,061 |
|
|
$ |
79,771 |
|
|
|
|
|
|
|
|
|
|
Niche
Industrial |
|
|
|
|
|
|
|
|
Advanced Circuits |
|
$ |
7,567 |
|
|
$ |
7,052 |
|
|
$ |
20,925 |
|
|
$ |
20,887 |
|
Altor Solutions |
|
8,972 |
|
|
8,780 |
|
|
23,790 |
|
|
22,011 |
|
Arnold Magnetics |
|
6,708 |
|
|
1,319 |
|
|
16,506 |
|
|
7,973 |
|
Sterno |
|
10,296 |
|
|
13,673 |
|
|
32,690 |
|
|
34,844 |
|
Total Niche Industrial |
|
$ |
33,543 |
|
|
$ |
30,824 |
|
|
$ |
93,911 |
|
|
$ |
85,715 |
|
Corporate expense
(4) |
|
(3,520 |
) |
|
(3,035 |
) |
|
(10,569 |
) |
|
(9,972 |
) |
Total Adjusted EBITDA |
|
$ |
90,002 |
|
|
$ |
67,581 |
|
|
$ |
259,403 |
|
|
$ |
155,514 |
|
(1 |
) |
|
The above results for BOA do not include management's estimate of
Adjusted EBITDA, before our ownership, of $8.4 million and $24.5
million, respectively, for the three and nine months ended
September 30, 2020. BOA was acquired on October 16, 2020. |
|
|
|
(2 |
) |
|
The above results for Lugano do not include management's estimate
of Adjusted EBITDA, before our ownership, of $5.5 million and $24.1
million, respectively, for the three and nine months ended
September 30, 2021, and $4.6 million and $14.0 million,
respectively, for the three and nine months ended September 30,
2020. Lugano was acquired on September 3, 2021. |
|
|
|
(3 |
) |
|
The above results for Marucci Sports do not include management's
estimate of Adjusted EBITDA, before our ownership, of $3.9 million
for the nine months ended September 30, 2020. Marucci Sports was
acquired on April 20, 2020. |
|
|
|
(4 |
) |
|
Please refer to the recently
filed Form 10-Q for a reconciliation of our Corporate expense to
Net Income. |
Compass Diversified Holdings
Summarized Statement of Cash
Flows(unaudited)
|
|
|
|
|
Nine months ended September 30, |
(in thousands) |
2021 |
|
2020 |
Net cash provided by operating activities |
$ |
147,148 |
|
|
$ |
112,872 |
|
Net cash used in investing activities |
(202,429 |
) |
|
(236,502 |
) |
Net cash provided by financing activities |
54,872 |
|
|
200,395 |
|
Effect of foreign currency on
cash |
(96 |
) |
|
(260 |
) |
Net (decrease) increase in
cash and cash equivalents |
(505 |
) |
|
76,505 |
|
Cash and cash equivalents —
beginning of period |
70,744 |
|
|
100,314 |
|
Cash and cash equivalents —
end of period |
$ |
70,239 |
|
|
$ |
176,819 |
|
|
|
|
|
Compass Diversified
HoldingsConsolidated Table of Cash Flow Available
for Distribution and
Reinvestment(unaudited)
|
Three months ended September 30, |
|
Nine months ended September 30, |
(in thousands) |
2021 |
|
2020 |
|
2021 |
|
2020 |
Net income |
$ |
90,156 |
|
|
$ |
20,903 |
|
|
$ |
100,901 |
|
|
$ |
18,417 |
|
Adjustments to reconcile net
income to net cash provided by operating activities: |
|
|
|
|
|
|
|
Depreciation and amortization |
29,595 |
|
|
25,392 |
|
|
86,474 |
|
|
73,578 |
|
Gain on sale of business |
(72,745 |
) |
|
(100 |
) |
|
(72,745 |
) |
|
(100 |
) |
Amortization of debt issuance costs and premium |
759 |
|
|
577 |
|
|
2,084 |
|
|
1,656 |
|
Loss on debt extinguishment |
— |
|
|
— |
|
|
33,305 |
|
|
— |
|
Noncontrolling stockholder charges |
2,895 |
|
|
2,171 |
|
|
8,513 |
|
|
6,116 |
|
Provision for reserves |
1,083 |
|
|
1,855 |
|
|
4,609 |
|
|
4,374 |
|
Other |
(1,489 |
) |
|
621 |
|
|
541 |
|
|
1,776 |
|
Deferred taxes |
541 |
|
|
2,581 |
|
|
2,256 |
|
|
(3,352 |
) |
Changes in operating assets and liabilities |
(13,081 |
) |
|
(29,458 |
) |
|
(18,790 |
) |
|
10,407 |
|
Net cash provided by
operating activities |
37,714 |
|
|
24,542 |
|
|
147,148 |
|
|
112,872 |
|
Plus: |
|
|
|
|
|
|
|
Unused fee on revolving credit facility |
464 |
|
|
420 |
|
|
1,207 |
|
|
1,148 |
|
Successful acquisition costs |
1,866 |
|
|
273 |
|
|
2,176 |
|
|
2,315 |
|
Integration services fee (1) |
1,100 |
|
|
500 |
|
|
4,300 |
|
|
500 |
|
Changes in operating assets and liabilities |
13,081 |
|
|
29,458 |
|
|
18,790 |
|
|
— |
|
Other (3) |
2,415 |
|
|
— |
|
|
— |
|
|
— |
Less: |
|
|
|
|
|
|
|
Maintenance capital expenditures (2) |
8,106 |
|
|
3,829 |
|
|
19,063 |
|
|
10,366 |
|
Changes in operating assets and liabilities |
— |
|
|
— |
|
|
— |
|
|
10,407 |
|
Preferred share distributions |
6,045 |
|
|
6,046 |
|
|
18,136 |
|
|
17,633 |
|
Other (3) |
— |
|
|
1,857 |
|
|
1,111 |
|
|
3,776 |
|
CAD |
$ |
42,489 |
|
|
$ |
43,461 |
|
|
$ |
135,311 |
|
|
$ |
74,653 |
|
|
|
|
|
|
|
|
|
Distribution paid in April
2021/ 2020 |
$ |
— |
|
|
$ |
— |
|
|
$ |
23,364 |
|
|
$ |
21,564 |
|
Distribution paid in July
2021/ 2020 |
— |
|
|
— |
|
|
23,364 |
|
|
23,364 |
|
Distribution paid in October
2021/ 2020 (4) |
23,742 |
|
|
23,364 |
|
|
23,742 |
|
|
23,364 |
|
|
$ |
23,742 |
|
|
$ |
23,364 |
|
|
$ |
70,470 |
|
|
$ |
68,292 |
|
(1) Represents fees paid by
newly acquired companies to the Manager for integration services
performed during the first year of ownership, payable
quarterly.
(2) 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 $3.2 million
and $4.1 million, respectively, for the three months ended
September 30, 2021 and 2020, and $10.1 million and $9.7 million,
respectively, for the nine months ended September 30, 2021 and
2020.
(3) Represents the effect
on earnings of reserves for inventory and accounts receivable.
(4) The Company paid a
special distribution of $57.1 million to Trust common shareholders
of record on August 31, 2021 related to the tax reclassification of
the Trust.
Compass Diversified Holdings |
Maintenance Capital Expenditures |
(unaudited) |
|
|
|
|
|
|
|
|
|
Three months ended September 30, |
|
Nine months ended September 30, |
(in thousands) |
|
2021 |
|
2020 |
|
2021 |
|
2020 |
Branded
Consumer |
|
|
|
|
|
|
|
|
5.11 |
|
$ |
1,032 |
|
|
$ |
113 |
|
|
$ |
1,900 |
|
|
$ |
897 |
|
BOA |
|
242 |
|
|
— |
|
|
835 |
|
|
— |
|
Ergobaby |
|
— |
|
|
250 |
|
|
— |
|
|
374 |
|
Liberty
(1) |
|
43 |
|
|
146 |
|
|
137 |
|
|
438 |
|
Lugano |
|
32 |
|
|
— |
|
|
32 |
|
|
— |
|
Marucci Sports |
|
2,292 |
|
|
169 |
|
|
4,096 |
|
|
220 |
|
Velocity Outdoor |
|
1,059 |
|
|
1,070 |
|
|
3,146 |
|
|
2,743 |
|
Total Branded Consumer |
|
$ |
4,700 |
|
|
$ |
1,748 |
|
|
$ |
10,146 |
|
|
$ |
4,672 |
|
|
|
|
|
|
|
|
|
|
Niche
Industrial |
|
|
|
|
|
|
|
|
Advanced Circuits |
|
$ |
112 |
|
|
$ |
261 |
|
|
$ |
594 |
|
|
$ |
354 |
|
Altor Solutions |
|
859 |
|
|
543 |
|
|
2,112 |
|
|
1,518 |
|
Arnold Magnetics |
|
1,996 |
|
|
1,131 |
|
|
4,217 |
|
|
2,761 |
|
Sterno Group |
|
439 |
|
|
146 |
|
|
1,994 |
|
|
1,061 |
|
Total Niche Industrial |
|
$ |
3,406 |
|
|
$ |
2,081 |
|
|
$ |
8,917 |
|
|
$ |
5,694 |
|
|
|
|
|
|
|
|
|
|
Total maintenance capital
expenditures |
|
$ |
8,106 |
|
|
$ |
3,829 |
|
|
$ |
19,063 |
|
|
$ |
10,366 |
|
(1) Through the date of sale, August 2, 2021.
Compass Diversified
HoldingsCondensed Consolidated Balance
Sheets
|
|
|
|
|
September 30, 2021 |
|
December 31, 2020 |
(in thousands) |
(unaudited) |
|
|
Assets |
|
|
|
Current assets |
|
|
|
Cash and cash equivalents |
$ |
70,239 |
|
|
$ |
66,402 |
|
Accounts receivable, net |
258,941 |
|
|
213,695 |
|
Inventories |
486,596 |
|
|
353,967 |
|
Prepaid expenses and other current assets |
48,585 |
|
|
40,798 |
|
Current assets of discontinued operations |
— |
|
|
33,505 |
|
Total current assets |
864,361 |
|
|
708,367 |
|
Property, plant and equipment,
net |
169,507 |
|
|
163,118 |
|
Goodwill and intangible
assets, net |
1,692,543 |
|
|
1,567,320 |
|
Other non-current assets |
113,882 |
|
|
105,840 |
|
Non-current assets of
discontinued operations |
— |
|
|
53,873 |
|
Total
assets |
$ |
2,840,293 |
|
|
$ |
2,598,518 |
|
|
|
|
|
Liabilities and
stockholders’ equity |
|
|
|
Current liabilities |
|
|
|
Accounts payable and accrued expenses |
$ |
298,081 |
|
|
$ |
241,392 |
|
Due to related party |
11,771 |
|
|
10,137 |
|
Other current liabilities |
33,976 |
|
|
27,956 |
|
Current liabilities of discontinued operations |
— |
|
|
15,230 |
|
Total current liabilities |
343,828 |
|
|
294,715 |
|
Deferred income taxes |
84,613 |
|
|
81,726 |
|
Long-term debt |
1,122,721 |
|
|
899,460 |
|
Other non-current
liabilities |
90,415 |
|
|
91,334 |
|
Non-current liabilities of
discontinued operations |
— |
|
|
11,135 |
|
Total liabilities |
1,641,577 |
|
|
1,378,370 |
|
Stockholders'
equity |
|
|
|
Total stockholders' equity
attributable to Holdings |
1,039,900 |
|
|
1,100,024 |
|
Noncontrolling interest |
158,816 |
|
|
116,288 |
|
Noncontrolling interest of
discontinued operations |
— |
|
|
3,836 |
|
Total stockholders' equity |
1,198,716 |
|
|
1,220,148 |
|
Total liabilities and
stockholders’ equity |
$ |
2,840,293 |
|
|
$ |
2,598,518 |
|
|
|
|
|
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