CODI Compass Diversified

 Compass Diversified (NYSE: CODI) (“CODI” or the “Company”), an owner of leading middle market businesses, announced today its consolidated operating results for the three and twelve months ended December 31, 2021.

“Our momentum continued in the fourth quarter as CODI delivered a fourth consecutive quarter of record results and the best year-end results in our history,” said Elias Sabo, CEO of Compass Diversified. “Our consumer business again delivered solid results, driven by continued strong performance at our most recent acquisitions, and our niche industrial business experienced increased demand for their products during the fourth quarter. We continued to deploy capital into our existing subsidiaries in the fourth quarter acquiring Lizard Skins and Plymouth Foam as strategic add-ons to Marucci Sports and Altor Solutions, respectively, demonstrating our sustainable investing philosophy and continued commitment to deploying capital to enhance value at a subsidiary level.”

Mr. Sabo continued, “Looking ahead, we enter 2022 with a strong balance sheet, substantial liquidity and remain confident in our ability to generate long term shareholder value in the years ahead through the continued deployment of capital into accretive platform and add-on acquisitions and subsidiary growth opportunities.”

Fourth Quarter and Full Year 2021 Highlights

• Reported net sales of $536.6 million for the fourth quarter 2021 and $1.842 billion for the full year 2021;
• Reported a net income of $25.9 million for the fourth quarter 2021 and net income of $126.8 million for the full year 2021;
• Reported Adjusted Earnings, a new non-GAAP financial measure, of $32.5 million for the fourth quarter of 2021 and $117.7 million for the full year of 2021;
• Reported non-GAAP Adjusted EBITDA of $88.9 million for the fourth quarter 2021 and $327.3 million for the full year 2021;
• Reported Cash Used in Operating Activities of $(13.1) million for the fourth quarter 2021 and Provided by Operating Activities of $134.1 million for the full year 2021, and non-GAAP Cash Flow Available for Distribution and Reinvestment ("CAD") of $42.1 million for the fourth quarter 2021 and $177.4 million for the full year 2021;
• Paid a fourth quarter 2021 cash distribution of $0.25 per share on CODI's common shares in January 2022; and
• Paid 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 payable on January 30, 2022.

Operating Results

Net sales for the quarter ended December 31, 2021 were $536.6 million, as compared to $421.6 million for the quarter ended December 31, 2020. Net sales were $1.842 billion for the year ended December 31, 2021, as compared to $1.360 billion for the year ended December 31, 2020.

Net income for the quarter ended December 31, 2021 was $25.9 million, as compared to net income of $8.8 million for the quarter ended December 31, 2020. For the year ended December 31, 2021, CODI reported net income of $126.8 million compared to net income of $27.2 million for the year ended December 31, 2020.   The increase in net income for the year ended December 31, 2021 as compared to the prior year was primarily related to the gain on the sale of Liberty Safe.

Adjusted Earnings (see "Note Regarding Use of Non-GAAP Financial Measures" below) for the quarter ended December 31, 2021 was $32.5 million, as compared to $22.7 million for the quarter ended December 31, 2020. Adjusted Earnings for the year ended December 31, 2021 was $117.7 million, as compared to $55.0 million for the year ended December 31, 2020.   Adjusted EBITDA (see "Note Regarding Use of Non-GAAP Financial Measures" below) for the quarter ended December 31, 2021 was $88.9 million, as compared to $69.3 million for the quarter ended December 31, 2020. Adjusted EBITDA for the year ended December 31, 2021 was $327.3 million, as compared to $203.9 million for the year ended December 31, 2020.   The increase in Adjusted Earnings and Adjusted EBITDA for the fourth quarter and full year 2021, as compared to prior year periods, was primarily a result of our 2020 acquisitions of BOA and Marucci, and our 2021 acquisition of Lugano Diamonds, as well as strong performance in the other branded consumer companies. In addition, the prior year results were negatively impacted by the effects of the COVID-19 pandemic.

Liquidity and Capital Resources

For the quarter ended December 31, 2021, CODI reported Cash Used in Operating Activities of $(13.1) million, as compared to Cash Provided by Operating Activities of $35.8 million for the quarter ended December 31, 2020. The decline in cash provided by operating activities during the fourth quarter of 2021 as compared to the prior year was a result of an increase in working capital at certain subsidiaries, primarily in inventory, to satisfy near term sales demand.

CODI reported CAD (see "Note Regarding Use of Non-GAAP Financial Measures" below) of $42.1 million for the quarter ended December 31, 2021, as compared to $36.0 million for the prior year's comparable quarter.

CODI's weighted average number of shares outstanding for the quarter ended December 31, 2021 was 66.6 million, and for the quarter ended December 31, 2020 was 64.9 million.

As of December 31, 2021, CODI had approximately $157.1 million in cash and cash equivalents, $0 million outstanding on its revolving credit facility, $1 billion outstanding in 5.25% Senior Notes due 2029 and $300 million outstanding in 5.00% Senior Notes due 2032.

The Company has no significant debt maturities until 2029 and had net borrowing availability of approximately $600 million at December 31, 2021 under its revolving credit facility.

Fourth Quarter 2021 Distributions

On January 3, 2022, CODI's Board of Directors (the “Board”) declared a fourth quarter distribution of $0.25 per share on the Company's common shares. The cash distribution was paid on January 20, 2022 to all holders of record of common shares as of January 13, 2022. As previously announced and disclosed by CODI, the reduction in the fourth quarter common distribution is a result of the Company’s tax reclassification which became effective on September 1, 2021 and the assumption of corporate tax liability.

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 covered the period from, and including, October 30, 2021, up to, but excluding, January 30, 2022. The distribution for such period was payable on January 30, 2022 to all holders of record of Series A Preferred Shares as of January 15, 2022. The payment occurred on January 31, 2022, 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 covered the period from, and including, October 30, 2021, up to, but excluding, January 30, 2022. The distribution for such period was payable on January 30, 2022 to all holders of record of Series B Preferred Shares as of January 15, 2022. The payment occurred on January 31, 2022, 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 covered the period from, and including, October 30, 2021, up to, but excluding, January 30, 2022. The distribution for such period was payable on January 30, 2022 to all holders of record of Series C Preferred Shares as of January 15, 2022. The payment occurred on January 31, 2022, the next business day following the payment date.

2022 Guidance

The Company expects to produce consolidated Adjusted EBITDA in 2022 of between $400 million and $420 million. The Adjusted EBITDA estimate is based on the summation of our expectations for our current subsidiaries in 2022, including ACI, absent additional acquisitions or divestitures.   In addition, the Company expects to produce Adjusted Earnings in 2022 of between $110 million and $125 million. The Adjusted Earnings estimate is based on the summation of our expectations for our current subsidiaries in 2022, excluding ACI, absent additional acquisitions or divestitures.  

5.11 Initial Public Offering Update

The Company has decided to postpone its proposed initial public offering of 5.11 due to adverse market conditions.

Conference Call

Management will host a conference call on Thursday, February 24, 2022 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 091769. 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 Thursday, March 3, 2022. 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 019320.

Note Regarding Use of Non-GAAP Financial Measures

Adjusted EBITDA and Adjusted Earnings are non-GAAP measures used by the Company to assess its performance. We have reconciled Adjusted EBITDA to Net Income (Loss) from Continuing Operations and Adjusted Earnings to Net Income (Loss) on the attached schedules. We consider Net Income (Loss) from Continuing Operations to be the most directly comparable GAAP financial measure to Adjusted EBITDA and Net Income (Loss) to be the most directly comparable GAAP financial measure to Adjusted Earnings. We believe that Adjusted EBITDA and Adjusted Earnings 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) and Net Income (Loss) from Continuing Operations, Adjusted EBITDA and Adjusted Earnings, respectively, are each limited in that they do 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. The presentation of Adjusted EBITDA 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. The presentation of Adjusted Earnings provides insight into our operating results and provides a measure for evaluating earnings from continuing operations available to common shareholders.   We believe Adjusted EBITDA and Adjusted Earnings are 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) on the attached schedules. We consider Net Income (Loss) 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.

In reliance on the unreasonable efforts exception provided under Item 10(e)(1)(i)(B) of Regulation S-K, we have not reconciled 2022 Adjusted EBITDA or 2022 Adjusted Earnings to their comparable GAAP measure because we do not provide guidance on Net Income (Loss) 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. Accordingly, undue reliance should not be placed on these estimates.

None of Adjusted Earnings, Adjusted EBITDA nor CAD 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).

On October 13, 2021, we, as the representative of the holders of stock and options of Advanced Circuits, entered into a definitive plan of merger to sell all of the outstanding securities of Advanced Circuits. Advanced Circuits has been classified as held for sale at December 31, 2021.

Forward Looking Statements

Certain statements in this press release may be deemed 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 and financial condition, our 2022 Adjusted EBITDA, our 2022 Adjusted Earnings, our pending acquisitions and divestitures, and other statements with regard to the future performance of CODI. We may use words such as “plans,” “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; disruption in the global supply chain, labor shortages and high labor costs; our business prospects and the prospects of our subsidiaries; 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 subsidiaries 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 subsidiaries; 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 Balance Sheets

	December 31, 2021				December 31, 2020
(in thousands)
Assets
Current assets
Cash and cash equivalents	$	157,125			$	60,023
Accounts receivable, net		268,262				206,728
Inventories, net		562,084				350,594
Prepaid expenses and other current assets		56,575				40,381
Current assets held-for-sale		99,423				17,136
Current assets of discontinued operations		—				33,505
Total current assets		1,143,469				708,367
Property, plant and equipment, net		178,393				153,653
Goodwill and intangible assets, net		1,688,082				1,500,589
Other non-current assets		134,317				97,309
Non-current assets held-for-sale		—				84,728
Non-current assets of discontinued operations		—				53,872
Total assets	$	3,144,261			$	2,598,518
Liabilities and stockholders’ equity
Current liabilities
Accounts payable and accrued expenses	$	295,206			$	225,919
Due to related party		11,705				10,012
Other current liabilities		45,490				34,381
Current liabilities held-for-sale		29,127				9,169
Current liabilities of discontinued operations		—				15,230
Total current liabilities		381,528				294,711
Deferred income taxes		84,344				67,836
Long-term debt		1,284,826				899,460
Other non-current liabilities		109,033				83,693
Non-current liabilities held-for-sale		—				21,535
Non-current liabilities of discontinued operations		—				11,135
Total liabilities		1,859,731				1,378,370
Stockholders' equity
Total stockholders' equity attributable to Holdings		1,111,816				1,100,024
Noncontrolling interest		175,328				123,463
Noncontrolling interest held-for-sale		(2,614	)			(7,175	)
Noncontrolling interest of discontinued operations		—				3,836
Total stockholders' equity		1,284,530				1,220,148
Total liabilities and stockholders’ equity	$	3,144,261			$	2,598,518

 

Compass Diversified HoldingsConsolidated Statements of Operations

	Three months ended December 31,								Year ended December 31,
(in thousands, except per share data)		2021				2020				2021				2020
Net sales	$	536,612			$	421,609			$	1,841,668			$	1,359,567
Cost of sales		334,202				265,902				1,115,711				864,602
Gross profit		202,410				155,707				725,957				494,965
Operating expenses:
Selling, general and administrative expense		132,788				103,459				459,204				344,418
Management fees		12,814				11,063				46,943				33,749
Amortization expense		23,835				18,399				80,307				61,682
Operating income		32,973				22,786				139,503				55,116
Other income (expense):
Interest expense, net		(16,232	)			(13,647	)			(58,839	)			(45,769	)
Amortization of debt issuance costs		(812	)			(659	)			(2,979	)			(2,454	)
Loss on debt extinguishment		—				—				(33,305	)			—
Other income (expense), net		600				(406	)			(1,184	)			(2,459	)
Net income before income taxes		16,529				8,074				43,196				4,434
Provision (benefit) for income taxes		(3,777	)			6,933				18,337				10,175
Income (loss) from continuing operations		20,306				1,141				24,859				(5,741	)
Income from discontinued operations, net of income tax		5,577				7,639				29,180				32,838
Gain on sale of discontinued operations		25				—				72,770				100
Net income		25,908				8,780				126,809				27,197
Less: Net income (loss) attributable to noncontrolling interest		2,745				(492	)			7,740				(480	)
Less: Net income from discontinued operations attributable to noncontrolling interest		1,075				906				4,517				4,897
Net income attributable to Holdings	$	22,088			$	8,366			$	114,552			$	22,780
Basic income (loss) per common share attributable to Holdings
Continuing operations	$	(0.14	)		$	(0.15	)		$	(0.76	)		$	(0.72	)
Discontinued operations		0.06				0.09				1.49				0.38
	$	(0.08	)		$	(0.06	)		$	0.73			$	(0.34	)
Basic weighted average number of common shares outstanding		66,623				64,900				65,362				63,151
Cash distributions declared per Trust common share	$	0.25			$	0.36			$	2.21			$	1.44

Compass Diversified HoldingsNet Income (Loss) to Non-GAAP Adjusted Earnings - 2021(Unaudited)

	Three months ended																Year ended
(in thousands)	March 31, 2021				June 30, 2021				September 30, 2021				December 31, 2021				December 31, 2021
Net income (loss)	$	21,996			$	(11,251	)		$	90,156			$	25,908			$	126,809
Gain on sale of discontinued operations, net of tax		—				—				72,745				25				72,770
Income from discontinued operations, net of tax		8,914				10,357				4,332				5,577				29,180
Net income (loss) from continuing operations	$	13,082			$	(21,608	)		$	13,079			$	20,306			$	24,859
Less: income from continuing operations attributable to noncontrolling interest		1,903				1,967				1,125				2,745				7,740
Net income (loss) attributable to Holdings - continuing operations	$	11,179			$	(23,575	)		$	11,954			$	17,561			$	17,119
Less: Distributions paid - Preferred Shares		(6,045	)			(6,046	)			(6,045	)			(6,045	)			(24,181	)
Less: Held-for-sale corporate tax impact		—				—				—				(12,119	)			(12,119	)
Add: Amortization expense - intangibles and inventory step-up		18,589				18,837				19,047				26,596				83,069
Add: Loss on debt extinguishment		—				33,305				—				—				33,305
Add: Stock compensation expense		2,640				2,716				2,768				2,817				10,941
Add: Acquisition expenses		299				11				1,866				1,415				3,591
Add: Integration services fees		1,600				1,600				1,100				563				4,863
Add (less): Other		(2,101	)			1,032				460				1,709				1,100
Adjusted earnings	$	26,161			$	27,880			$	31,150			$	32,497			$	117,688

Compass Diversified HoldingsNet Income (Loss) to Non-GAAP Adjusted Earnings - 2020(Unaudited)

	Three months ended																Year ended
(in thousands)	March 31, 2020				June 30, 2020				September 30, 2020				December 31, 2020				December 31, 2020
Net income (loss)	$	4,880			$	(7,366	)		$	20,903			$	8,780			$	27,197
Gain on sale of discontinued operations, net of tax		—				—				100				—				100
Income from discontinued operations, net of tax		6,916				8,715				9,568				7,639				32,838
Net income (loss) from continuing operations	$	(2,036	)		$	(16,081	)		$	11,235			$	1,141			$	(5,741	)
Less: income (loss) from continuing operations attributable to noncontrolling interest		211				(468	)			269				(492	)			(480	)
Net income (loss) attributable to Holdings - continuing operations	$	(2,247	)		$	(15,613	)		$	10,966			$	1,633			$	(5,261	)
Less: Distributions paid - Preferred Shares		(5,542	)			(6,045	)			(6,046	)			(6,045	)			(23,678	)
Add: Amortization expense - intangibles and inventory step-up		13,421				17,710				16,533				19,881				67,545
Add: Loss on debt extinguishment		—				—				—				—				—
Add: Stock compensation expense		1,924				1,760				2,038				2,749				8,471
Add: Acquisition expenses		—				2,042				273				2,517				4,832
Add: Integration services fees		—				—				500				1,625				2,125
Add (less): Other		—				595				—				326				921
Adjusted earnings	$	7,556			$	449			$	24,264			$	22,686			$	54,955

Compass Diversified HoldingsAdjusted Earnings to Adjusted EBITDA(Unaudited)

	Three months ended																Year ended
(in thousands)	March 31, 2021				June 30, 2021				September 30, 2021				December 31, 2021				December 31, 2021
Adjusted earnings	$	26,161			$	27,880			$	31,150			$	32,497			$	117,688
Add:
Depreciation		8,557				8,945				9,854				9,980				37,336
Income taxes		5,308				8,344				8,462				(3,777	)			18,337
Held-for-sale tax impact - corporate		—				—				—				12,119				12,119
Interest expense, net		13,805				14,947				13,855				16,232				58,839
Amortization of debt issuance		686				722				759				812				2,979
Management fees		10,798				11,058				12,273				12,814				46,943
Noncontrolling interest		1,903				1,967				1,125				2,745				7,740
Preferred distributions		6,045				6,046				6,045				6,045				24,181
Other expense (income)		2,228				642				(1,086	)			(600	)			1,184
Adjusted EBITDA	$	75,491			$	80,551			$	82,437			$	88,867			$	327,346

	Three months ended																Year ended
(in thousands)	March 31, 2020				June 30, 2020				September 30, 2020				December 31, 2020				December 31, 2020
Adjusted earnings	$	7,556			$	449			$	24,264			$	22,686			$	54,955
Add:
Depreciation		7,334				7,628				7,852				8,317				31,131
Income taxes		(1,744	)			5,648				(662	)			6,933				10,175
Interest expense, net		8,597				11,174				12,351				13,647				45,769
Amortization of debt issuance		525				610				660				659				2,454
Management fees		8,369				4,909				9,408				11,063				33,749
Noncontrolling interest		211				(468	)			269				(492	)			(480	)
Preferred distributions		5,542				6,045				6,046				6,045				23,678
Other expense (income)		(661	)			2,373				341				406				2,459
Adjusted EBITDA	$	35,729			$	38,368			$	60,529			$	69,264			$	203,890

Compass Diversified HoldingsNet Income (Loss) from Continuing Operations to Non-GAAP Consolidated EBITDA ReconciliationYear ended December 31, 2021(Unaudited)

		Corporate					5.11		BOA			Ergo			Lugano			Marucci Sports				Velocity Outdoor				Altor Solutions				Arnold			Sterno				Consolidated
Net income from continuing operations (1)		$	(72,624	)		$	20,152		$	21,178		$	5,079		$	5,239		$	10,232			$	23,035			$	7,871			$	5,013		$	(316	)		$	24,859
Adjusted for:
Provision for income taxes			(12,119	)			6,905			3,559			2,018			2,094			3,070				6,237				2,619				1,345			2,609				18,337
Interest expense, net			58,639				16			—			—			9			5				165				(1	)			6			—				58,839
Intercompany interest			(66,765	)			11,868			8,581			1,960			2,450			3,110				7,461				7,558				5,455			18,322				—
Loss on debt extinguishment			33,305				—			—			—			—			—				—				—				—			—				33,305
Depreciation and amortization			1,025				22,355			20,279			8,435			4,757			8,634				12,704				12,938				8,888			23,369				123,384
EBITDA			(58,539	)			61,296			53,597			17,492			14,549			25,051				49,602				30,985				20,707			43,984				258,724
Other (income) expense			(284	)			125			377			—			16			(119	)			2,573				(323	)			8			(1,189	)			1,184
Non-controlling shareholder compensation			—				2,428			2,194			1,693			190			1,101				1,020				1,035				38			1,242				10,941
Acquisition expenses			39				—			—			—			1,827			971				—				444				310			—				3,591
Integration services fee			—				—			3,300			—			563			1,000				—				—				—			—				4,863
Other			1,132				273			—			—			—			1,000				(2,300	)			—				—			995				1,100
Management fees			41,505				1,000			1,000			500			188			500				500				750				500			500				46,943
Adjusted EBITDA		$	(16,147	)		$	65,122		$	60,468		$	19,685		$	17,333		$	29,504			$	51,395			$	32,891			$	21,563		$	45,532			$	327,346

(1) Net income from continuing operations does not include income from discontinued operations for the twelve months ended December 31, 2021.

Compass Diversified HoldingsNet Income (Loss) from Continuing Operations to Non-GAAP Consolidated EBITDA ReconciliationYear ended December 31, 2020(Unaudited)

		Corporate					5.11		BOA				Ergo			Marucci Sports				Velocity Outdoor			Altor Solutions				Arnold				Sterno			Consolidated
Net income (loss) from continuing operations (1)		$	(28,931	)		$	12,356		$	(2,640	)		$	725			(4,785	)		$	11,161		$	6,092			$	(3,539	)		$	3,820		$	(5,741	)
Adjusted for:
Provision (benefit) for income taxes			—				1,808			(535	)			2,033			(1,390	)			3,560			2,554				(198	)			2,343			10,175
Interest expense, net			45,610				19			—				—			7				131			—				—				1			45,768
Intercompany interest			(61,123	)			14,085			2,043				2,405			1,843				8,915			7,084				5,730				19,018			—
Depreciation and amortization			838				21,483			5,589				8,199			10,203				12,781			12,722				6,805				22,510			101,130
EBITDA			(43,606	)			49,751			4,457				13,362			5,878				36,548			28,452				8,798				47,692			151,332
Other (income) expense			—				1,420			39				—			(42	)			931			(38	)			9				140			2,459
Non-controlling shareholder compensation			—				2,489			469				1,156			634				1,549			1,028				(20	)			1,166			8,471
Acquisition expenses			—				—			2,517				—			2,042				—			273				—				—			4,832
Integration services fees			—				—			1,125				—			1,000				—			—				—				—			2,125
Other			324				—			—				598			—				—			—				—				—			922
Management fees			29,402				1,000			250				500			347				500			750				500				500			33,749
Adjusted EBITDA (2)		$	(13,880	)		$	54,660		$	8,857			$	15,616		$	9,859			$	39,528		$	30,465			$	9,287			$	49,498		$	203,890

(1) Net income (loss) from continuing operations does not include income from discontinued operations for the twelve months ended December 31, 2020.

(2) As a result of the sale of Liberty Safe in August 2021, and the classification of ACI as Held for Sale at December 31, 2021, Adjusted EBITDA for the twelve months ended December 31, 2020 does not include $19.0 million in Adjusted EBITDA from Liberty and $26.3 million in Adjusted EBITDA from ACI.

Compass Diversified HoldingsAdjusted EBITDA(Unaudited)

		Three months ended December 31,								Year ended December 31,
(in thousands)			2021				2020				2021				2020
Branded Consumer
5.11		$	17,787			$	18,336			$	65,122			$	54,660
BOA (1)			14,147				8,857				60,468				8,857
Ergobaby			5,750				1,823				19,685				15,616
Lugano (2)			13,823				—				17,333				—
Marucci Sports (3)			5,745				5,244				29,504				9,859
Velocity Outdoor			10,194				14,489				51,395				39,528
Total Branded Consumer		$	67,446			$	48,749			$	243,507			$	128,520
Niche Industrial
Altor Solutions			9,101				8,454				32,891				30,465
Arnold Magnetics			5,057				1,314				21,563				9,287
Sterno			12,842				14,654				45,532				49,498
Total Niche Industrial		$	27,000			$	24,422			$	99,986			$	89,250
Corporate expense			(5,578	)			(3,907	)			(16,147	)			(13,880	)
Total Adjusted EBITDA		$	88,867			$	69,264			$	327,346			$	203,890

(1	)		The above results for BOA do not include management's estimate of Adjusted EBITDA, before our ownership, of $0.3 million and $24.5 million, respectively, for the three and twelve months ended December 31, 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 $24.1 million for the twelve months ended December 31, 2021, and $7.3 million and $21.3 million, respectively, for the three and twelve months ended December 31, 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 twelve months ended December 31, 2020. Marucci Sports was acquired on April 20, 2020.

Compass Diversified HoldingsNet Sales to Pro Forma Net Sales Reconciliation(unaudited)

		Three months ended December 31,								Year ended December 31,
(in thousands)			2021				2020				2021				2020
Net Sales		$	536,612			$	421,609			$	1,841,668			$	1,359,567
Acquisitions (1)			—				25,050				71,058				170,807
Pro Forma Net Sales		$	536,612			$	446,659			$	1,912,726			$	1,530,374

(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 HoldingsSubsidiary Pro Forma Net Sales(unaudited)

		Three months ended December 31,								Year ended December 31,
(in thousands)			2021				2020				2021				2020
Branded Consumer
5.11		$	123,954			$	119,284			$	444,963			$	401,106
BOA (1)			45,117				29,192				165,150				106,365
Ergobaby			24,531				15,557				93,631				74,728
Lugano (1)			43,224				21,137				125,105				67,221
Marucci Sports (1)			31,838				18,633				118,166				65,941
Velocity Outdoor			64,535				67,756				270,426				215,996
Total Branded Consumer		$	333,199			$	271,559			$	1,217,441			$	931,357
Niche Industrial
Altor Solutions		$	57,635			$	40,708			$	180,217			$	130,046
Arnold Magnetics			38,048				22,543				139,941				98,990
Sterno			107,730				111,849				375,127				369,981
Total Niche Industrial		$	203,413			$	175,100			$	695,285			$	599,017
Total Subsidiary Net Sales		$	536,612			$	446,659			$	1,912,726			$	1,530,374

(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 HoldingsCondensed Consolidated Cash Flows

		Three months ended December 31,								Year ended December 31,
(in thousands)			2021				2020				2021				2020
Net cash provided by (used in) operating activities		$	(13,097	)		$	35,753			$	134,051			$	148,625
Net cash used in investing activities			(115,067	)			(464,332	)			(317,496	)			(700,834	)
Net cash provided by financing activities			218,334				321,330				273,206				521,725
Foreign currency impact on cash			324				1,174				228				914
Net increase (decrease) in cash and cash equivalents			90,494				(106,075	)			89,989				(29,570	)
Cash and cash equivalents - beginning of the period (1)			70,239				176,819				70,744				100,314
Cash and cash equivalents - end of the period		$	160,733			$	70,744			$	160,733			$	70,744

(1) Includes cash from discontinued operations of $10.7 million at January 1, 2021 and $6.9 million at January 1, 2020, and cash from discontinued operations of $3.5 million at October 1, 2021 and $8.2 million at October 1, 2020.

Compass Diversified Holding
Selected Financial Data - Cash Flows
		Three months ended December 31,								Year ended December 31,
(in thousands)			2021				2020				2021				2020
Changes in operating assets and liabilities		$	(63,882	)		$	(6,147	)		$	(80,990	)		$	2,420
Purchases of property and equipment		$	(12,473	)		$	(9,977	)		$	(39,880	)		$	(28,812	)
Distributions paid - common shares		$	(23,742	)		$	(23,364	)		$	(150,946	)		$	(89,856	)
Distributions paid - preferred shares		$	(6,045	)		$	(6,045	)		$	(24,181	)		$	(23,678	)

Compass Diversified HoldingsNet Income to Adjusted EBITDA and Cash Flow Available for Distribution and Reinvestment(unaudited)

	Three months ended December 31,								Year ended December 31,
(in thousands)		2021				2020				2021				2020
Net income	$	25,908			$	8,780			$	126,809			$	27,197
Income from discontinued operations		5,577				7,639				29,180				32,838
Gain on sale of discontinued operations		25				—				72,770				100
Income (loss) from continuing operations	$	20,306			$	1,141			$	24,859			$	(5,741	)
Provision (benefit) for income taxes		(3,777	)			6,933				18,337				10,175
Income from continuing operations before income taxes	$	16,529			$	8,074			$	43,196			$	4,434
Other income (expense), net		(600	)			406				1,184				2,459
Amortization of debt issuance costs		812				659				2,979				2,454
Loss on debt extinguishment		—				—				33,305				—
Interest expense, net		16,232				13,647				58,839				45,769
Operating income	$	32,973			$	22,786			$	139,503			$	55,116
Adjusted For:
Depreciation		9,980				8,316				37,337				31,131
Amortization		26,596				19,882				83,068				67,545
Noncontrolling shareholder compensation		2,817				2,749				10,941				8,471
Acquisition expenses		1,415				2,517				3,591				4,832
Integration services fees		563				1,625				4,863				2,125
Management fees		12,814				11,063				46,943				33,749
Other		1,709				326				1,100				922
Adjusted EBITDA	$	88,867			$	69,264			$	327,346			$	203,891
Interest at Corporate, net of unused fee (1)		(15,840	)			(13,491	)			(57,323	)			(44,604	)
Management fees		(12,814	)			(11,063	)			(46,943	)			(33,749	)
Capital expenditures (maintenance)		(8,447	)			(6,212	)			(26,780	)			(15,786	)
Current tax expense (cash taxes) (2)		(8,508	)			(2,469	)			(27,795	)			(9,510	)
Preferred share distributions		(6,045	)			(6,045	)			(24,181	)			(23,678	)
Discontinued operations		6,090				6,386				35,049				34,854
Miscellaneous items		(1,215	)			(377	)			(1,973	)			(772	)
Cash Flow Available for Distribution and Reinvestment ("CAD")	$	42,088			$	35,993			$	177,400			$	110,646

(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.

 

Investor Relations:	Media Contact:
The IGB Group	Joele Frank, Wilkinson Brimmer Katcher
Leon Berman	Jon Keehner/ Kate Thompson/ Lyle Weston
212-477-8438	212-355-4449
lberman@igbir.com