WESTPORT, Conn., Nov. 02, 2023 (GLOBE NEWSWIRE) -- 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, 2023.
“Our third quarter results were remarkably strong, driven by Lugano’s continued outperformance and the majority of our companies performing above expectations,” said Elias Sabo, CEO of Compass Diversified. “The consistent resilience of our results against a challenging economic backdrop reflects not only the diversification of our subsidiaries, but our ability to find strong businesses that produce above-trend growth. Given our strong performance, we remain confident that our diversified group of subsidiaries will continue to drive value for our shareholders in 2023 and beyond.”
Mr. Sabo continued: “As announced today, we have made the strategic decision to sell Marucci to Fox Factory Holding Corp. We purchased the business in 2020 for $200 million and after approximately $70 million in add-on acquisitions, have agreed to sell the brand for $572 million. Our ability to sell this business for a large premium in the current consumer discretionary market further underscores the strength of our brands, as well as our ability to drive uncorrelated market returns. Ultimately, this fuels our lower cost of capital, deepens our economic moat, and provides us the greater ability to increase shareholder returns.”
Third Quarter 2023 Financial Summary vs. Same Year-Ago Period (where applicable)
- Net sales down 1% and down 1% on a pro forma basis to $569.6 million.
- Branded consumer pro forma net sales up 2% to $388.3 million.
- Niche industrial net sales down 8% to $181.2 million.
- Net loss of $3.8 million vs. net income of $2.6 million primarily due to a $32.6 million non-cash impairment expense associated with the Company’s Velocity Outdoor subsidiary and higher interest expense.
- Loss from continuing operations of $5.0 million vs. $3.0 million.
- Adjusted Earnings, a non-GAAP financial measure, was $41.0 million vs. $41.6 million.
- Adjusted EBITDA, a non-GAAP financial measure, was up 13% to $103.9 million.
- Paid a third quarter 2023 cash distribution of $0.25 per share on CODI's common shares in October 2023.
Recent Business Highlights
- Today, CODI announced the sale of Marucci Sports to Fox Factory Holding Corp. (Nasdaq: FOXF) for an enterprise value of $572 million.
- On July 5, 2023, CODI announced that Mr. C. Sean Day retired from the Board of Directors (the “Board”) of Compass Group Diversified Holdings LLC, effective June 30, 2023. The Board elected Ms. Heidi Locke Simon to fill the vacancy resulting from Mr. Day’s departure from the Board. Ms. Locke Simon’s election became effective as of July 5, 2023.
- On July 17, 2023, The Sterno Group, a subsidiary of CODI and manufacturer and marketer of portable food warming systems, creative indoor and outdoor lighting, and home fragrance solutions for the foodservice industry and consumer markets, announced the appointment of Geoffrey Feil as CEO.
Third Quarter 2023 Financial Results
Net sales in the third quarter of 2023 were $569.6 million, down 1% compared to $575.8 million in the third quarter of 2022. Strong performance at Lugano and Marucci roughly offset lower sales at BOA due to inventory destocking in the footwear industry and lower sales at Velocity Outdoor in the third quarter of 2023. On a pro forma basis, assuming CODI had acquired PrimaLoft on January 1, 2022, net sales were down 1% in the third quarter of 2023 as compared to the prior year.
Branded consumer net sales, pro forma for the PrimaLoft acquisition, increased 2% in the third quarter of 2023 to $388.3 million compared to the third quarter of 2022. Niche industrial net sales decreased 8% in the third quarter of 2023 to $181.2 million compared to the third quarter of 2022.
Operating income for the third quarter of 2023 was $28.4 million compared to $43.8 million in the third quarter of 2022. The decline was due primarily to a $32.6 million non-cash impairment expense associated with the Company’s Velocity Outdoor subsidiary in the third quarter of 2023. Net loss in the third quarter of 2023 was $3.8 million compared to net income of $2.6 million in the third quarter of 2022. Net loss from continuing operations in the third quarter of 2023 was $5.0 million compared to $3.0 million in the third quarter of 2022. The increases in net loss and net loss from continuing operations are due to the non-cash impairment expense, as well as higher interest expense.
Adjusted Earnings (see “Note Regarding Use of Non-GAAP Financial Measures” below) for the third quarter of 2023 was $41.0 million compared to $41.6 million a year ago. CODI's weighted average number of shares outstanding in the third quarter of 2023 was 71.88 million compared to 71.91 million in the prior year third quarter.
Adjusted EBITDA (see “Note Regarding Use of Non-GAAP Financial Measures” below) in the third quarter of 2023 was $103.9 million, up 13% compared to $91.9 million in the third quarter of 2022. The increase was primarily due to strong results at Lugano, Marucci, Sterno and Altor. The Company no longer adds back management fees in its calculation of Adjusted EBITDA. Management fees incurred during the third quarter of 2023 were $18.6 million.
Liquidity and Capital Resources
As of September 30, 2023, CODI had approximately $64.7 million in cash and cash equivalents, $112.0 million outstanding on its revolver, $387.5 million outstanding in term loans, $1.0 billion outstanding in 5.250% Senior Notes due 2029 and $300.0 million outstanding in 5.000% Senior Notes due 2032.
As of September 30, 2023, the Company had no significant debt maturities until 2027 and had net borrowing availability of approximately $486 million under its revolving credit facility.
Third Quarter 2023 Distributions
On October 3, 2023, CODI’s Board declared a third quarter distribution of $0.25 per share on the Company's common shares. The cash distribution was paid on October 26, 2023, to all holders of record of common shares as of October 19, 2023.
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, 2023, up to, but excluding, October 30, 2023. The distribution for such period was payable on October 30, 2023, to all holders of record of Series A Preferred Shares as of October 15, 2023.
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, 2023, up to, but excluding, October 30, 2023. The distribution for such period was payable on October 30, 2023, to all holders of record of Series B Preferred Shares as of October 15, 2023.
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, 2023, up to, but excluding, October 30, 2023. The distribution for such period was payable on October 30, 2023, to all holders of record of Series C Preferred Shares as of October 15, 2023.
2023 Outlook
As a result of CODI’s strong financial performance in the third quarter, the Company is raising its Adjusted EBITDA and Adjusted Earnings outlook (see “Note Regarding Use of Non-GAAP Financial Measures” below). For the full year 2023, CODI now expects consolidated subsidiary Adjusted EBITDA of between $450 million and $465 million. This estimate is based on the summation of the Company’s expectations for its current subsidiaries in 2023, including Marucci, and is absent additional acquisitions or divestitures, and excludes corporate expenses such as interest expense, management fees paid by CODI and corporate overhead. For the full year 2023, including Marucci, CODI now expects to earn between $130 million and $140 million in Adjusted Earnings (see “Note Regarding Use of Non-GAAP Financial Measures” below).
In reliance on the unreasonable efforts exception provided under Item 10(e)(1)(i)(B) of Regulation S-K, CODI has not reconciled 2023 Adjusted EBITDA or 2023 Adjusted Earnings to their comparable GAAP measure because it does not provide guidance on Income (Loss) from Continuing Operations or 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, CODI is unable to address the probable significance of the unavailable information, which could be material to future results.
Conference Call
Management will host a conference call on Thursday, November 2, 2023, 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 (888) 259-6580 and the dial-in number for international callers is (416) 764-8624. The Conference ID is 90701822. The conference call will also be available via a live listen-only webcast and can be accessed through the Investor Relations section of CODI's website. An online replay of the webcast will be available on the same website following the call. Please allow extra time prior to the call to visit the site and download any necessary software that may be needed to listen to the Internet broadcast. A replay of the call will be available through Thursday, November 9, 2023. To access the replay, please dial (877) 674-7070 in the U.S. and (416) 764-8692 outside the U.S.
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 Income (Loss) from Continuing Operations and Adjusted Earnings to Net Income (Loss) on the attached schedules. We consider 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 reflect important financial measures as each 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 Income (Loss) from Continuing Operations, Adjusted Earnings and Adjusted EBITDA, 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.
Pro forma net sales is defined as net sales including the historical net sales relating to the pre-acquisition periods of PrimaLoft, assuming that the Company acquired PrimaLoft on January 1, 2022. We have reconciled pro forma net sales to net sales, the most directly comparable GAAP financial measure, on the attached schedules. We believe that pro forma net sales is useful information for investors as it provides a better understanding of sales performance, and relative changes thereto, on a comparable basis. Pro forma net sales is not necessarily indicative of what the actual results would have been if the acquisition had in fact occurred on the date or for the periods indicated nor does it purport to project net sales for any future periods or as of any date.
In reliance on the unreasonable efforts exception provided under Item 10(e)(1)(i)(B) of Regulation S-K, we have not reconciled 2023 Adjusted EBITDA or 2023 Adjusted Earnings to their comparable GAAP measures because we do not provide guidance on Net Income (Loss) from Continuing Operations or 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.
Adjusted EBITDA, Adjusted Earnings and pro forma net sales are not 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
Since its founding in 1998, and IPO in 2006, CODI has consistently executed on its strategy of owning and managing a diverse set of highly defensible, middle-market businesses across the niche industrial, branded consumer and healthcare sectors. The Company leverages its permanent capital base, long-term disciplined approach, and actionable expertise to maintain 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. For more information, please visit compassdiversified.com.
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 2023 Adjusted EBITDA, our 2023 Adjusted Earnings, our pending divestiture of Marucci, 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, including changes in inflation and interest rates; 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; environmental risks affecting the business or operations of our subsidiaries; 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, acquisitions that we may make; the ability to successfully complete divestitures (including the divestiture of Marucci) when we’ve executed divestitures agreements; 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.
| Investor Relations: irinquiry@compassdiversified.com Cody Slach Gateway Group 949.574.3860 | Media Contact: The IGB Group Leon Berman 212.477.8438 lberman@igbir.com |
| CODI@gateway-grp.com |
| Compass Diversified Holdings Condensed Consolidated Balance Sheets | |||||
| September 30, 2023 | December 31, 2022 | ||||
| (in thousands) | (Unaudited) | ||||
| Assets | |||||
| Current assets | |||||
| Cash and cash equivalents | $ | 64,737 | $ | 57,880 | |
| Accounts receivable, net | 349,839 | 331,396 | |||
| Inventories, net | 801,887 | 728,083 | |||
| Prepaid expenses and other current assets | 98,974 | 74,700 | |||
| Current assets of discontinued operations | — | 18,126 | |||
| Total current assets | 1,315,437 | 1,210,185 | |||
| Property, plant and equipment, net | 203,512 | 198,525 | |||
| Goodwill | 1,041,469 | 1,066,726 | |||
| Intangible assets, net | 1,069,995 | 1,127,936 | |||
| Other non-current assets | 180,399 | 166,412 | |||
| Non-current assets of discontinued operations | — | 79,847 | |||
| Total assets | $ | 3,810,812 | $ | 3,849,631 | |
| Liabilities and stockholders’ equity | |||||
| Current liabilities | |||||
| Accounts payable and accrued expenses | $ | 291,294 | $ | 286,643 | |
| Due to related party | 17,230 | 15,495 | |||
| Current portion, long-term debt | 10,000 | 10,000 | |||
| Other current liabilities | 35,795 | 36,545 | |||
| Current liabilities of discontinued operations | — | 11,148 | |||
| Total current liabilities | 354,319 | 359,831 | |||
| Deferred income taxes | 133,118 | 145,643 | |||
| Long-term debt | 1,775,776 | 1,824,468 | |||
| Other non-current liabilities | 157,850 | 141,535 | |||
| Non-current liabilities of discontinued operations | — | 16,192 | |||
| Total liabilities | 2,421,063 | 2,487,669 | |||
| Stockholders' equity | |||||
| Total stockholders' equity attributable to Holdings | 1,139,580 | 1,136,920 | |||
| Noncontrolling interest | 250,169 | 223,509 | |||
| Noncontrolling interest of discontinued operations | — | 1,533 | |||
| Total stockholders' equity | 1,389,749 | 1,361,962 | |||
| Total liabilities and stockholders’ equity | $ | 3,810,812 | $ | 3,849,631 | |
| Compass Diversified Holdings Consolidated Statements of Operations (Unaudited) | |||||||||||||||
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
| (in thousands, except per share data) | 2023 | 2022 | 2023 | 2022 | |||||||||||
| Net sales | $ | 569,565 | $ | 575,819 | $ | 1,635,952 | $ | 1,601,929 | |||||||
| Cost of sales | 315,347 | 346,260 | 907,013 | 959,798 | |||||||||||
| Gross profit | 254,218 | 229,559 | 728,939 | 642,131 | |||||||||||
| Operating expenses: | |||||||||||||||
| Selling, general and administrative expense | 147,962 | 144,040 | 442,345 | 390,336 | |||||||||||
| Management fees | 18,596 | 16,592 | 51,911 | 45,929 | |||||||||||
| Amortization expense | 26,657 | 25,152 | 79,708 | 67,178 | |||||||||||
| Impairment expense | 32,568 | — | 32,568 | — | |||||||||||
| Operating income | 28,435 | 43,775 | 122,407 | 138,688 | |||||||||||
| Other income (expense): | |||||||||||||||
| Interest expense, net | (27,560 | ) | (22,799 | ) | (80,355 | ) | (57,737 | ) | |||||||
| Amortization of debt issuance costs | (1,005 | ) | (1,004 | ) | (3,034 | ) | (2,735 | ) | |||||||
| Loss on debt extinguishment | — | (534 | ) | — | (534 | ) | |||||||||
| Other income (expense), net | 1,043 | (1,917 | ) | 2,069 | 856 | ||||||||||
| Net income from continuing operations before income taxes | 913 | 17,521 | 41,087 | 78,538 | |||||||||||
| Provision for income taxes | 5,947 | 20,493 | 20,227 | 36,601 | |||||||||||
| Income (loss) from continuing operations | (5,034 | ) | (2,972 | ) | 20,860 | 41,937 | |||||||||
| Income (loss) from discontinued operations, net of income tax | — | 4,078 | (1,391 | ) | 14,452 | ||||||||||
| Gain on sale of discontinued operations | 1,274 | 1,479 | 103,495 | 6,893 | |||||||||||
| Net income (loss) | (3,760 | ) | 2,585 | 122,964 | 63,282 | ||||||||||
| Less: Net income from continuing operations attributable to noncontrolling interest | 6,394 | 3,675 | 14,892 | 12,247 | |||||||||||
| Less: Net income (loss) from discontinued operations attributable to noncontrolling interest | — | 684 | (777 | ) | 2,680 | ||||||||||
| Net income (loss) attributable to Holdings | $ | (10,154 | ) | $ | (1,774 | ) | $ | 108,849 | $ | 48,355 | |||||
| Amounts attributable to Holdings | |||||||||||||||
| Income (loss) from continuing operations | $ | (11,428 | ) | $ | (6,647 | ) | $ | 5,968 | $ | 29,690 | |||||
| Income (loss) from discontinued operations | — | 3,394 | (614 | ) | 11,772 | ||||||||||
| Gain on sale of discontinued operations, net of income tax | 1,274 | 1,479 | 103,495 | 6,893 | |||||||||||
| Net income (loss) attributable to Holdings | $ | (10,154 | ) | $ | (1,774 | ) | $ | 108,849 | $ | 48,355 | |||||
| Basic income (loss) per common share attributable to Holdings | |||||||||||||||
| Continuing operations | $ | (0.35 | ) | $ | (0.27 | ) | $ | (0.74 | ) | $ | (0.04 | ) | |||
| Discontinued operations | 0.02 | 0.06 | 1.43 | 0.24 | |||||||||||
| $ | (0.33 | ) | $ | (0.21 | ) | $ | 0.69 | $ | 0.20 | ||||||
| Basic weighted average number of common shares outstanding | 71,881 | 71,910 | 71,996 | 70,514 | |||||||||||
| Cash distributions declared per Trust common share | $ | 0.25 | $ | 0.25 | $ | 0.75 | $ | 0.75 | |||||||
| Compass Diversified Holdings Net Income (Loss) to Non-GAAP Adjusted Earnings and Non-GAAP Adjusted EBITDA (Unaudited) | |||||||||||||||
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
| (in thousands) | 2023 | 2022 | 2023 | 2022 | |||||||||||
| Net income (loss) | $ | (3,760 | ) | $ | 2,585 | $ | 122,964 | $ | 63,282 | ||||||
| Income (loss) from discontinued operations, net of tax | — | 1,479 | (1,391 | ) | 6,893 | ||||||||||
| Gain on sale of discontinued operations, net of tax | 1,274 | 4,078 | 103,495 | 14,452 | |||||||||||
| Income (loss) from continuing operations | $ | (5,034 | ) | $ | (2,972 | ) | $ | 20,860 | $ | 41,937 | |||||
| Less: income from continuing operations attributable to noncontrolling interest | 6,394 | 3,675 | 14,892 | 12,247 | |||||||||||
| Net income (loss) attributable to Holdings - continuing operations | $ | (11,428 | ) | $ | (6,647 | ) | $ | 5,968 | $ | 29,690 | |||||
| Adjustments: | |||||||||||||||
| Distributions paid - preferred shares | (6,045 | ) | (6,045 | ) | (18,136 | ) | (18,136 | ) | |||||||
| Amortization expense - intangibles and inventory step up | 26,658 | 26,241 | 80,843 | 72,078 | |||||||||||
| Impairment expense | 32,568 | — | 32,568 | — | |||||||||||
| Tax effect - impairment expense | (4,308 | ) | — | (4,308 | ) | — | |||||||||
| Loss on debt extinguishment | — | 534 | — | 534 | |||||||||||
| Stock compensation | 3,174 | 3,118 | 8,885 | 8,479 | |||||||||||
| Acquisition expenses | 28 | 5,902 | 392 | 6,118 | |||||||||||
| Integration services fee | — | 1,626 | 2,375 | 2,751 | |||||||||||
| Held for sale corporate tax impact | — | 16,457 | — | 12,119 | |||||||||||
| Other | 349 | 434 | 1,129 | 3,263 | |||||||||||
| Adjusted Earnings | $ | 40,996 | $ | 41,620 | $ | 109,716 | $ | 116,896 | |||||||
| Plus (less): | |||||||||||||||
| Depreciation expense | 12,690 | 10,776 | 37,264 | 31,058 | |||||||||||
| Income tax provision | 5,947 | 20,493 | 20,227 | 36,601 | |||||||||||
| Held for sale corporate tax impact | — | (16,457 | ) | — | (12,119 | ) | |||||||||
| Interest expense | 27,560 | 22,799 | 80,355 | 57,737 | |||||||||||
| Amortization of debt issuance costs | 1,005 | 1,004 | 3,034 | 2,735 | |||||||||||
| Tax effect - impairment expense | 4,308 | — | 4,308 | — | |||||||||||
| Income from continuing operations attributable to noncontrolling interest | 6,394 | 3,675 | 14,892 | 12,247 | |||||||||||
| Distributions paid - preferred shares | 6,045 | 6,045 | 18,136 | 18,136 | |||||||||||
| Other (income) expense | (1,043 | ) | 1,917 | (2,069 | ) | (856 | ) | ||||||||
| Adjusted EBITDA | $ | 103,902 | $ | 91,872 | $ | 285,863 | $ | 262,435 | |||||||
| Compass Diversified Holdings Net Income (Loss) from Continuing Operations to Non-GAAP Consolidated Adjusted EBITDA Reconciliation Three Months Ended September 30, 2023 (Unaudited) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Corporate | 5.11 | BOA | Ergobaby | Lugano | Marucci Sports | PrimaLoft | Velocity Outdoor | Altor | Arnold | Sterno | Consolidated | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Income (loss) from continuing operations | $ | (11,506 | ) | $ | 5,834 | $ | 4,257 | $ | (261 | ) | $ | 14,584 | $ | 6,706 | $ | (4,893 | ) | $ | (28,881 | ) | $ | 5,042 | $ | 2,103 | $ | 1,981 | $ | (5,034 | ) | ||||||||||||||||||||||||||||||||||||||||
| Adjusted for: | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Provision (benefit) for income taxes | — | 1,920 | 865 | (620 | ) | 4,210 | 2,110 | (2,566 | ) | (2,951 | ) | 1,460 | 876 | 643 | 5,947 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Interest expense, net | 27,524 | (2 | ) | (4 | ) | — | — | 1 | (3 | ) | 38 | — | 6 | — | 27,560 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Intercompany interest | (36,908 | ) | 5,477 | 1,571 | 2,144 | 8,930 | 2,200 | 4,635 | 3,633 | 2,549 | 1,706 | 4,063 | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Loss on debt extinguishment | — | — | — | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Depreciation and amortization | 335 | 6,573 | 5,930 | 2,033 | 2,081 | 3,443 | 5,361 | 3,272 | 4,215 | 2,126 | 4,984 | 40,353 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| EBITDA | (20,555 | ) | 19,802 | 12,619 | 3,296 | 29,805 | 14,460 | 2,534 | (24,889 | ) | 13,266 | 6,817 | 11,671 | 68,826 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Other (income) expense | 2 | 98 | (63 | ) | — | 71 | — | (9 | ) | (425 | ) | (362 | ) | 8 | (363 | ) | (1,043 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Non-controlling shareholder compensation | — | 258 | 736 | 312 | 472 | 424 | 262 | 228 | 234 | 8 | 240 | 3,174 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Impairment expense | — | — | — | — | — | — | — | 32,568 | — | — | — | 32,568 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Acquisition expenses | — | — | — | — | — | 28 | — | — | — | — | — | 28 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Other | — | — | — | — | — | — | — | — | — | — | 349 | 349 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Adjusted EBITDA | $ | (20,553 | ) | $ | 20,158 | $ | 13,292 | $ | 3,608 | $ | 30,348 | $ | 14,912 | $ | 2,787 | $ | 7,482 | $ | 13,138 | $ | 6,833 | $ | 11,897 | $ | 103,902 | ||||||||||||||||||||||||||||||||||||||||||||
| Compass Diversified Holdings Net Income (Loss) from Continuing Operations to Non-GAAP Consolidated Adjusted EBITDA Reconciliation Three Months Ended September 30, 2022 (Unaudited) | |||||||||||||||||||||||||||||||||||||||||||
| Corporate | 5.11 | BOA | Ergobaby | Lugano | Marucci Sports | PrimaLoft | Velocity Outdoor | Altor | Arnold | Sterno | Consolidated | ||||||||||||||||||||||||||||||||
| Income (loss) from continuing operations | $ | (31,602 | ) | $ | 5,905 | $ | 8,935 | $ | (759 | ) | $ | 8,095 | $ | 4,230 | $ | (8,492 | ) | $ | 4,679 | $ | 2,765 | $ | 3,475 | $ | (203 | ) | $ | (2,972 | ) | ||||||||||||||
| Adjusted for: | |||||||||||||||||||||||||||||||||||||||||||
| Provision (benefit) for income taxes | 16,457 | 1,906 | 1,776 | (410 | ) | 1,166 | 1,609 | (3,570 | ) | 1,416 | 805 | 537 | (1,199 | ) | 20,493 | ||||||||||||||||||||||||||||
| Interest expense, net | 22,725 | 2 | (7 | ) | — | 3 | 3 | (4 | ) | 70 | — | 7 | — | 22,799 | |||||||||||||||||||||||||||||
| Intercompany interest | (27,141 | ) | 3,503 | 1,808 | 1,737 | 3,263 | 1,812 | 3,251 | 2,997 | 2,821 | 1,402 | 4,547 | — | ||||||||||||||||||||||||||||||
| Loss on debt extinguishment | 534 | — | — | — | — | — | — | — | — | — | — | 534 | |||||||||||||||||||||||||||||||
| Depreciation and amortization | 315 | 5,766 | 5,577 | 2,033 | 3,083 | 2,504 | 4,194 | 3,420 | 4,124 | 1,936 | 5,069 | 38,021 | |||||||||||||||||||||||||||||||
| EBITDA | (18,712 | ) | 17,082 | 18,089 | 2,601 | 15,610 | 10,158 | (4,621 | ) | 12,582 | 10,515 | 7,357 | 8,214 | 78,875 | |||||||||||||||||||||||||||||
| Other (income) expense | (72 | ) | 709 | 403 | — | — | (1 | ) | 260 | 971 | 110 | — | (463 | ) | 1,917 | ||||||||||||||||||||||||||||
| Non-controlling shareholder compensation | — | 381 | 621 | 362 | 356 | 537 | — | 240 | 375 | 13 | 232 | 3,117 | |||||||||||||||||||||||||||||||
| Acquisition expenses | — | — | — | — | — | — | 5,680 | 222 | — | — | — | 5,902 | |||||||||||||||||||||||||||||||
| Integration services fee | — | — | — | — | 563 | — | 1,063 | — | — | — | — | 1,626 | |||||||||||||||||||||||||||||||
| Other | — | — | — | — | — | — | — | — | — | — | 434 | 434 | |||||||||||||||||||||||||||||||
| Adjusted EBITDA | $ | (18,784 | ) | $ | 18,172 | $ | 19,113 | $ | 2,963 | $ | 16,529 | $ | 10,694 | $ | 2,382 | $ | 14,015 | $ | 11,000 | $ | 7,370 | $ | 8,417 | $ | 91,871 | ||||||||||||||||||
| Compass Diversified Holdings Net Income (Loss) from Continuing Operations to Non-GAAP Consolidated Adjusted EBITDA Reconciliation Nine Months Ended September 30, 2023 (Unaudited) | ||||||||||||||||||||||||||||||||||||||||||||||
| Corporate | 5.11 | BOA | Ergobaby | Lugano | Marucci Sports | PrimaLoft | Velocity Outdoor | Altor | Arnold | Sterno | Consolidated | |||||||||||||||||||||||||||||||||||
| Income (loss) from continuing operations | $ | (33,858 | ) | $ | 11,850 | $ | 15,151 | $ | (1,114 | ) | $ | 31,468 | $ | 16,125 | $ | (5,500 | ) | $ | (36,862 | ) | $ | 12,244 | $ | 6,911 | $ | 4,445 | $ | 20,860 | ||||||||||||||||||
| Adjusted for: | ||||||||||||||||||||||||||||||||||||||||||||||
| Provision (benefit) for income taxes | — | 3,990 | 2,224 | (1,272 | ) | 10,295 | 5,150 | (3,125 | ) | (5,905 | ) | 4,094 | 3,264 | 1,512 | 20,227 | |||||||||||||||||||||||||||||||
| Interest expense, net | 80,122 | (4 | ) | (9 | ) | — | 4 | 3 | (9 | ) | 232 | — | 16 | — | 80,355 | |||||||||||||||||||||||||||||||
| Intercompany interest | (106,361 | ) | 15,698 | 5,032 | 6,484 | 22,660 | 6,928 | 13,343 | 10,070 | 8,183 | 5,078 | 12,885 | — | |||||||||||||||||||||||||||||||||
| Depreciation and amortization | 929 | 19,866 | 17,436 | 6,112 | 6,971 | 9,898 | 16,084 | 10,023 | 12,558 | 6,248 | 15,016 | 121,141 | ||||||||||||||||||||||||||||||||||
| EBITDA | (59,168 | ) | 51,400 | 39,834 | 10,210 | 71,398 | 38,104 | 20,793 | (22,442 | ) | 37,079 | 21,517 | 33,858 | 242,583 | ||||||||||||||||||||||||||||||||
| Other (income) expense | (126 | ) | (103 | ) | 117 | 29 | (5 | ) | 29 | 130 | (1,179 | ) | 201 | (1 | ) | (1,161 | ) | (2,069 | ) | |||||||||||||||||||||||||||
| Non-controlling shareholder compensation | — | 988 | 2,069 | 936 | 1,312 | 1,287 | 219 | 686 | 800 | 26 | 562 | 8,885 | ||||||||||||||||||||||||||||||||||
| Impairment expense | — | — | — | — | — | — | — | 32,568 | — | — | — | 32,568 | ||||||||||||||||||||||||||||||||||
| Acquisition expenses | — | — | — | — | — | 392 | — | — | — | — | — | 392 | ||||||||||||||||||||||||||||||||||
| Integration services fee | — | — | — | — | — | — | 2,375 | — | — | — | — | 2,375 | ||||||||||||||||||||||||||||||||||
| Other | — | — | — | — | — | — | — | — | — | — | 1,129 | 1,129 | ||||||||||||||||||||||||||||||||||
| Adjusted EBITDA | $ | (59,294 | ) | $ | 52,285 | $ | 42,020 | $ | 11,175 | $ | 72,705 | $ | 39,812 | $ | 23,517 | $ | 9,633 | $ | 38,080 | $ | 21,542 | $ | 34,388 | $ | 285,863 | |||||||||||||||||||||
| Compass Diversified Holdings Net Income (Loss) from Continuing Operations to Non-GAAP Consolidated Adjusted EBITDA Reconciliation Nine Months Ended September 30, 2022 (Unaudited) | |||||||||||||||||||||||||||||||||||||||||||
| Corporate | 5.11 | BOA | Ergobaby | Lugano | Marucci Sports | PrimaLoft | Velocity Outdoor | Altor | Arnold | Sterno | Consolidated | ||||||||||||||||||||||||||||||||
| Income (loss) from continuing operations | $ | (56,373 | ) | $ | 15,540 | $ | 37,122 | $ | (634 | ) | $ | 21,871 | $ | 8,374 | $ | (8,492 | ) | $ | 7,826 | $ | 7,149 | $ | 7,217 | $ | 2,337 | $ | 41,937 | ||||||||||||||||
| Adjusted for: | |||||||||||||||||||||||||||||||||||||||||||
| Provision (benefit) for income taxes | 12,119 | 4,999 | 6,819 | 432 | 5,863 | 2,821 | (3,570 | ) | 2,372 | 2,907 | 2,768 | (929 | ) | 36,601 | |||||||||||||||||||||||||||||
| Interest expense, net | 57,559 | 12 | (19 | ) | 2 | 12 | 13 | (4 | ) | 142 | — | 20 | — | 57,737 | |||||||||||||||||||||||||||||
| Intercompany interest | (66,876 | ) | 9,501 | 5,634 | 4,000 | 7,841 | 4,649 | 3,251 | 6,987 | 7,844 | 3,947 | 13,222 | — | ||||||||||||||||||||||||||||||
| Loss on debt extinguishment | 534 | — | — | — | — | — | — | — | — | — | — | 534 | |||||||||||||||||||||||||||||||
| Depreciation and amortization | 952 | 16,804 | 16,345 | 6,061 | 8,385 | 9,558 | 4,194 | 9,981 | 12,254 | 6,065 | 15,272 | 105,871 | |||||||||||||||||||||||||||||||
| EBITDA | (52,085 | ) | 46,856 | 65,901 | 9,861 | 43,972 | 25,415 | (4,621 | ) | 27,308 | 30,154 | 20,017 | 29,902 | 242,680 | |||||||||||||||||||||||||||||
| Other (income) expense | (72 | ) | 93 | 498 | 4 | 2 | (1,829 | ) | 260 | 1,154 | 219 | — | (1,185 | ) | (856 | ) | |||||||||||||||||||||||||||
| Non-controlling shareholder compensation | — | 1,210 | 1,889 | 1,154 | 800 | 1,089 | — | 742 | 910 | 38 | 647 | 8,479 | |||||||||||||||||||||||||||||||
| Acquisition expenses | — | — | — | — | — | — | 5,680 | 222 | 216 | — | — | 6,118 | |||||||||||||||||||||||||||||||
| Integration services fee | — | — | — | — | 1,688 | — | 1,063 | — | — | — | — | 2,751 | |||||||||||||||||||||||||||||||
| Other | — | — | — | 250 | — | 1,802 | — | — | — | — | 1,211 | 3,263 | |||||||||||||||||||||||||||||||
| Adjusted EBITDA | $ | (52,157 | ) | $ | 48,159 | $ | 68,288 | $ | 11,269 | $ | 46,462 | $ | 26,477 | $ | 2,382 | $ | 29,426 | $ | 31,499 | $ | 20,055 | $ | 30,575 | $ | 262,435 | ||||||||||||||||||
| Compass Diversified Holdings Non-GAAP Adjusted EBITDA (Unaudited) | |||||||||||||||
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
| (in thousands) | 2023 | 2022 | 2023 | 2022 | |||||||||||
| Branded Consumer | |||||||||||||||
| 5.11 | $ | 20,158 | $ | 18,172 | $ | 52,285 | $ | 48,159 | |||||||
| BOA | 13,292 | 19,113 | 42,020 | 68,288 | |||||||||||
| Ergobaby | 3,608 | 2,963 | 11,175 | 11,269 | |||||||||||
| Lugano | 30,348 | 16,529 | 72,705 | 46,462 | |||||||||||
| Marucci Sports | 14,912 | 10,694 | 39,812 | 26,477 | |||||||||||
| PrimaLoft (1) | 2,787 | 2,382 | 23,517 | 2,382 | |||||||||||
| Velocity Outdoor | 7,482 | 14,015 | 9,633 | 29,426 | |||||||||||
| Total Branded Consumer | $ | 92,587 | $ | 83,868 | $ | 251,147 | $ | 232,463 | |||||||
| Niche Industrial | |||||||||||||||
| Altor Solutions | 13,138 | 11,000 | 38,080 | 31,499 | |||||||||||
| Arnold Magnetics | 6,833 | 7,370 | 21,542 | 20,055 | |||||||||||
| Sterno | 11,897 | 8,417 | 34,388 | 30,575 | |||||||||||
| Total Niche Industrial | $ | 31,868 | $ | 26,787 | $ | 94,010 | $ | 82,129 | |||||||
| Corporate expense | (20,553 | ) | (18,784 | ) | (59,294 | ) | (52,157 | ) | |||||||
| Total Adjusted EBITDA | $ | 103,902 | $ | 91,871 | $ | 285,863 | $ | 262,435 | |||||||
| (1) | The above results for PrimaLoft do not include management's estimate of Adjusted EBITDA, before the Company's ownership, of $1.4 million and $24.8 million, respectively, for the three and nine months ended September 30, 2022. PrimaLoft was acquired on July 12, 2022. |
| Compass Diversified Holdings Net Sales to Pro Forma Net Sales Reconciliation (unaudited) | |||||||||||||||
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
| (in thousands) | 2023 | 2022 | 2023 | 2022 | |||||||||||
| Net Sales | $ | 569,565 | $ | 575,819 | $ | 1,635,952 | $ | 1,601,929 | |||||||
| Acquisitions (1) | — | 2,319 | — | 55,185 | |||||||||||
| Pro Forma Net Sales | $ | 569,565 | $ | 578,138 | $ | 1,635,952 | $ | 1,657,114 | |||||||
| (1) | Acquisitions reflects the net sales for PrimaLoft on a pro forma basis as if the Company had acquired PrimaLoft on January 1, 2022. |
| Compass Diversified Holdings Subsidiary Pro Forma Net Sales (unaudited) | |||||||||||||||
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
| (in thousands) | 2023 | 2022 | 2023 | 2022 | |||||||||||
| Branded Consumer | |||||||||||||||
| 5.11 | $ | 135,213 | $ | 126,537 | $ | 385,695 | $ | 350,608 | |||||||
| BOA | 37,281 | 50,019 | 113,390 | 166,215 | |||||||||||
| Ergobaby | 23,218 | 21,540 | 71,785 | 68,256 | |||||||||||
| Lugano | 78,735 | 51,145 | 203,571 | 137,229 | |||||||||||
| Marucci Sports | 48,500 | 42,753 | 144,065 | 122,481 | |||||||||||
| PrimaLoft (1) | 10,930 | 13,031 | 57,619 | 65,897 | |||||||||||
| Velocity Outdoor | 54,469 | 75,482 | 126,348 | 180,774 | |||||||||||
| Total Branded Consumer | $ | 388,346 | $ | 380,507 | $ | 1,102,473 | $ | 1,091,460 | |||||||
| Niche Industrial | |||||||||||||||
| Altor Solutions | 59,215 | 69,618 | 181,613 | 199,590 | |||||||||||
| Arnold Magnetics | 41,819 | 39,377 | 122,047 | 116,319 | |||||||||||
| Sterno | 80,185 | 88,636 | 229,819 | 249,745 | |||||||||||
| Total Niche Industrial | $ | 181,219 | $ | 197,631 | $ | 533,479 | $ | 565,654 | |||||||
| Total Subsidiary Net Sales | $ | 569,565 | $ | 578,138 | $ | 1,635,952 | $ | 1,657,114 | |||||||
| (1) | Net sales for PrimaLoft are pro forma as if the Company had acquired this business on January 1, 2022. |
| Compass Diversified Holdings Condensed Consolidated Cash Flows (unaudited) | |||||||||||||||
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
| (in thousands) | 2023 | 2022 | 2023 | 2022 | |||||||||||
| Net cash provided by (used in) operating activities | $ | 19,713 | $ | (4,586 | ) | $ | 56,952 | $ | (39,923 | ) | |||||
| Net cash provided by (used in) investing activities | (13,538 | ) | (576,713 | ) | 104,291 | (598,951 | ) | ||||||||
| Net cash provided by (used in) financing activities | (8,308 | ) | 538,531 | (157,927 | ) | 542,128 | |||||||||
| Foreign currency impact on cash | (484 | ) | (1,603 | ) | 150 | (2,735 | ) | ||||||||
| Net increase (decrease) in cash and cash equivalents | (2,617 | ) | (44,371 | ) | 3,466 | (99,481 | ) | ||||||||
| Cash and cash equivalents - beginning of the period | 67,354 | 105,623 | 61,271 | 160,733 | |||||||||||
| Cash and cash equivalents - end of the period | $ | 64,737 | $ | 61,252 | $ | 64,737 | $ | 61,252 | |||||||
| Compass Diversified Holding | |||||||||||||||
| Selected Financial Data - Cash Flows | |||||||||||||||
| (unaudited) | |||||||||||||||
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
| (in thousands) | 2023 | 2022 | 2023 | 2022 | |||||||||||
| Changes in operating assets and liabilities | $ | (48,685 | ) | $ | (62,803 | ) | $ | (113,882 | ) | $ | (221,998 | ) | |||
| Purchases of property and equipment | $ | (12,108 | ) | $ | (15,036 | ) | $ | (43,648 | ) | $ | (39,471 | ) | |||
| Distributions paid - common shares | $ | (17,974 | ) | $ | (17,931 | ) | $ | (54,012 | ) | $ | (52,794 | ) | |||
| Distributions paid - preferred shares | $ | (6,045 | ) | $ | (6,045 | ) | $ | (18,136 | ) | $ | (18,136 | ) | |||
