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Compass Diversified Reports Second Quarter 2020 Financial Results

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Compass Diversified Holdings
·26 min read
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Strong Performance Drives Increased Branded Consumer Revenue and EBITDA from Prior Year

Generates Solid Cash Flow Provided by Operating Activities and Pays Sizable Distributions to Shareholders

Completes Strategic Capital Raise and Adds $290 Million in Gross Proceeds, Further Positioning CODI to Opportunistically Pursue Future Acquisitions

WESTPORT, Conn., July 29, 2020 (GLOBE NEWSWIRE) -- Compass Diversified Holdings, doing business as 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 June 30, 2020.

Second Quarter 2020 Highlights

  • Reported net sales of $333.6 million;

  • Reported net loss of $7.4 million;

  • Reported non-GAAP Adjusted EBITDA of $49.5 million;

  • Reported Cash Provided by Operating Activities of $54.3 million and non-GAAP Cash Flow Available for Distribution and Reinvestment ("CAD") of $13.5 million;

  • Completed the acquisition of the Marucci Sports platform;

  • Completed an offering of 5,000,000 common shares;

  • Completed a private add-on offering of $200 million of the Company’s 8.000% Senior Notes due 2026;

  • Paid a second quarter 2020 cash distribution of $0.36 per share on CODI's common shares in July 2020, bringing cumulative distributions paid to $19.6752 per common share since CODI's IPO in May of 2006;

  • Declared a quarterly cash distribution 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 July 30, 2020;

  • Received abatement of $5.2 million in management fees; and

  • Subsequent to the end of the quarter, completed the accretive add-on acquisition of Polyfoam Corp by CODI’s subsidiary Foam Fabricators.

“Our strong performance over the second quarter underscores the continued benefits of our unique model, including the advantage of having a diverse, uncorrelated group of subsidiaries,” said Elias Sabo, CEO of Compass Diversified. “Since our founding, CODI’s permanent capital structure has allowed us the flexibility to capitalize on new opportunities throughout economic cycles and enabled us to take a patient and disciplined approach to executing our growth priorities. This quarter was no different and our solid balance sheet and strategic capital allocation meant that we were well-situated to partner with our subsidiaries to maintain momentum across their businesses and continue to deliver value to our shareholders.”

Mr. Sabo continued, “While we entered the second quarter with significant uncertainty around the ongoing impact of the global response to COVID-19, we are incredibly proud of how our teams focused on positioning our subsidiaries for long-term success during such a dynamic period. Together, we reduced spending and monetized working capital to maximize cash flow, which helped us to maintain our long history of paying distributions to our shareholders, even during the pandemic.”

“Our branded consumer businesses benefited significantly from increased consumer demand in outdoor categories, and 5.11, Velocity Outdoor and Liberty Safe all exceeded expectations for the quarter, contributing to our outperformance. Despite the continued uncertainty in the markets, we are confident in our ability to carefully manage our diversified set of subsidiaries and make our $1.44 per common share annual distribution, while we seek out select investment opportunities and look to opportunistically deploy the significant amount of capital at our disposal.”

Operating Results

Net sales for the quarter ended June 30, 2020 were $333.6 million, as compared to $336.1 million for the quarter ended June 30, 2019.

Net loss for the quarter ended June 30, 2020 was $7.4 million, as compared to net income of $218.2 million for the quarter ended June 30, 2019, which included a $206.5 million gain on the sale of our Clean Earth subsidiary.

Adjusted EBITDA (see "Note Regarding Use of Non-GAAP Financial Measures" below) for the quarter ended June 30, 2020 was $49.5 million, as compared to $52.1 million for the quarter ended June 30, 2019.

CODI reported CAD (see "Note Regarding Use of Non-GAAP Financial Measures" below) of $13.5 million for the quarter ended June 30, 2020, as compared to $26.2 million for the prior year's comparable quarter. The prior year’s CAD included cash flow from Clean Earth which was divested on June 30, 2019. 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 $1.0 billion since going public in 2006.

Temporary Abatement of Management Fees in Response to Impact from Global Crisis

As announced last quarter, Compass Group Management LLC (“CGM”) waived 50% of its management fee calculated as of June 30, 2020 and due in July 2020, saving CODI $5.2 million. This followed CGM’s waiver of the portion of its management fee attributable to CODI’s cash balances held as of March 31, 2020, which produced cash savings of approximately $1.2 million.

Liquidity and Capital Resources

For the quarter ended June 30, 2020, CODI reported Cash Provided by Operating Activities of $54.3 million, as compared to Cash Provided by Operating Activities of $17.6 million for the quarter ended June 30, 2019.

CODI's weighted average number of shares outstanding for the quarter ended June 30, 2020 was 62.8 million, and for the quarter ended June 30, 2019 was 59.9 million.

As of June 30, 2020, CODI had approximately $205.2 million in cash and cash equivalents, $600 million outstanding in 8.00% Senior Notes due 2026 and no outstanding borrowings under its revolving credit facility.

The Company has no significant debt maturities until 2026 and had net borrowing availability of $599 million at June 30, 2020 under its revolving credit facility.

In May 2020, the Company completed a public offering of 5.0 million of its common shares. CODI raised $83.9 million of net proceeds from the offering. Additionally, CODI completed a private add-on offering of $200 million of 8.000% Senior Notes due 2026 at an issue price of 101.000%.

CODI used the net proceeds from the common share offering and the sale of the 8.000% Senior Notes due 2026 to repay the $200 million outstanding balance on the Company’s existing revolving credit facility, and the remaining $90 million of cash provides the Company with additional liquidity, which can be used opportunistically to pursue future acquisitions and for general corporate purposes.

Second Quarter 2020 Distributions

On July 2, 2020, CODI's Board of Directors (the "Board") declared a second quarter distribution of $0.36 per share on the Company's common shares. The cash distribution was paid on July 23, 2020 to all holders of record of common shares as of July 16, 2020. Since its IPO in 2006, CODI has paid a cumulative distribution of $19.6752 per common share.

The Board also declared a quarterly cash distribution of $0.453125 per share on the Company’s 7.250% Series A Preferred Shares (the “Series A Preferred Shares”). The distribution on the Series A Preferred Shares covers the period from, and including, April 30, 2020, up to, but excluding, July 30, 2020. The distribution for such period is payable on July 30, 2020 to all holders of record of Series A Preferred Shares as of July 15, 2020.

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, April 30, 2020, up to, but excluding, July 30, 2020. The distribution for such period is payable on July 30, 2020 to all holders of record of Series B Preferred Shares as of July 15, 2020.

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, April 30, 2020, up to, but excluding, July 30, 2020. The distribution for such period is payable on July 30, 2020 to all holders of record of Series C Preferred Shares as of July 15, 2020.

Guidance Update

The Company anticipates that COVID-19 will have a continued negative impact on its operations, financial condition and cash flows for the second half of 2020. The Company estimates its full year 2020 consolidated subsidiary Adjusted EBITDA, before deducting Corporate expense, and including Marucci as if it was acquired January 1, 2020, will be between $210 million and $240 million. In addition, the Company estimates its full year 2020 Payout Ratio, defined as our prior year’s annual distribution to common shareholders divided by our 2020 full year estimate for CAD, will be between 140% and 120%.

The Company believes that it currently has adequate liquidity and capital resources to meet its existing obligations and quarterly distributions to its shareholders, if approved by the Board of Directors over the next twelve months. The ultimate impact of COVID-19 on the Company’s business is dependent on future developments, including the duration of the pandemic and the related length of its impact on the global economy, which are highly uncertain and cannot be accurately predicted at this time. As detailed in our Form 10-Q for the period ending June 30, 2020, the Company’s results of operations, financial condition and cash flow could be impacted more dramatically than currently anticipated and as a result, the Company’s liquidity and capital resources could become more constrained than expected.

Conference Call

Management will host a conference call on Wednesday, July 29, 2020 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 (855) 212-2368 and the dial-in number for international callers is (315) 625-6886. The access code for all callers is 2237435. 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 Friday, August 5, 2020. To access the replay, please dial (855) 859-2056 in the U.S. and (404) 537-3406 outside the U.S., and then enter the access code 2237435.

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 from Operating Activities on the attached schedules. We consider Net Income (Loss) and Cash Flow from 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 2020 Adjusted EBITDA or 2020 Payout Ratio (which requires an estimate of 2020 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 family of established North American middle market businesses. Each of its current subsidiaries is a leader in its niche market.

CODI maintains controlling ownership interests in each of its subsidiaries in order to maximize its ability to impact long-term cash flow generation and value. The Company provides both debt and equity capital for its subsidiaries, contributing to their financial and operating flexibility. CODI utilizes the cash flows generated by its subsidiaries to invest in the long-term growth of the Company and to make cash distributions to its shareholders.

Our nine majority-owned subsidiaries are engaged in the following lines of business:

  • The design and marketing of purpose-built technical apparel and gear serving a wide range of global customers (5.11);

  • The manufacture of quick-turn, small-run and production rigid printed circuit boards (Advanced Circuits);

  • The manufacture of engineered magnetic solutions for a wide range of specialty applications and end-markets (Arnold Magnetic Technologies);

  • The design and marketing of wearable baby carriers, strollers and related products (Ergobaby);

  • The design and manufacture of custom molded protective foam solutions and OE components (Foam Fabricators);

  • The design and manufacture of premium home and gun safes (Liberty Safe);

  • The design and manufacture of baseball and softball equipment and apparel (Marucci Sports);

  • The manufacture and marketing of portable food warming systems, creative indoor and outdoor lighting, and home fragrance solutions for the foodservice industry and consumer markets (Sterno); and

  • The design, manufacture and marketing of airguns, archery products, optics and related accessories (Velocity Outdoor).

Forward Looking Statements

This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including expectations regarding our results of operations, financial condition and cash flows for the second half of 2020, our 2020 Total Adjusted EBITDA, 2020 Payout Ratio and 2020 CAD and our liquidity, capital resources and ability to meet existing obligations and quarterly distributions as well as other statements with regard to the future performance of CODI. Forward-looking statements involve risks and uncertainties, including, but not limited to, statements as to our future operating results; 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; our business prospects and the prospects of our portfolio companies; the impact of 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; and the timing of cash flows, if any, from the operations of our portfolio companies.

We may use words such as “anticipates,” “believes,” “expects,” “intends,” “will,” “should,” “may,” “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; 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
Condensed Consolidated Statements of Operations
(unaudited)

Three months ended June 30,

Six months ended June 30,

(in thousands, except per share data)

2020

2019

2020

2019

Net sales

$

333,627

$

336,084

$

667,076

$

674,941

Cost of sales

216,224

213,521

430,185

432,823

Gross profit

117,403

122,563

236,891

242,118

Operating expenses:

Selling, general and administrative expense

84,014

80,312

167,814

161,709

Management fees

5,157

8,521

13,777

19,478

Amortization expense

14,779

13,522

28,284

27,112

Operating income

13,453

20,208

27,016

33,819

Other income (expense):

Interest expense, net

(11,174

)

(18,445

)

(19,771

)

(36,899

)

Amortization of debt issuance costs

(610

)

(928

)

(1,135

)

(1,855

)

Loss on sale of Tilray securities

(5,300

)

Other income (expense), net

(2,386

)

(90

)

(1,725

)

(524

)

Income (loss) from continuing operations before income taxes

(717

)

745

4,385

(10,759

)

Provision for income taxes

6,649

4,551

6,871

5,975

Loss from continuing operations

(7,366

)

(3,806

)

(2,486

)

(16,734

)

Income from discontinued operations, net of income tax

15,474

16,901

Gain on sale of discontinued operations

206,505

328,164

Net income (loss)

(7,366

)

218,173

(2,486

)

328,331

Less: Income from continuing operations attributable to noncontrolling interest

1,071

1,387

2,286

2,755

Less: Income (loss) from discontinued operations attributable to noncontrolling interest

252

(266

)

Net income (loss) attributable to Holdings

$

(8,437

)

$

216,534

$

(4,772

)

$

325,842

Basic income (loss) per common share attributable to Holdings

Continuing operations

$

(0.30

)

$

(0.32

)

$

(0.50

)

$

(0.64

)

Discontinued operations

3.70

5.77

$

(0.30

)

$

3.38

$

(0.50

)

$

5.13

Basic weighted average number of common shares outstanding

62,844

59,900

61,364

59,900

Cash distributions declared per Trust common share

$

0.36

$

0.36

$

0.72

$

0.72


Compass Diversified

Net Sales to Pro Forma Net Sales Reconciliation

(unaudited)

Three months ended June 30,

Six months ended June 30,

(in thousands)

2020

2019

2020

2019

Net Sales

$

333,627

$

336,084

$

667,076

$

674,941

Acquisitions (1)

265

13,675

22,500

35,041

Pro Forma Net Sales

$

333,892

$

349,759

$

689,576

$

709,982

(1) Acquisitions reflects the net sales for Marucci on a pro forma basis as if we had acquired this business on January 1, 2019.

Compass Diversified

Subsidiary Net Sales

(unaudited)

Three months ended June 30,

Six months ended June 30,

(in thousands)

2020

2019

2020

2019

Branded Consumer

5.11 Tactical

$

87,635

$

92,836

$

183,416

$

180,925

Ergobaby

20,044

22,971

39,693

45,423

Liberty

24,453

20,633

49,413

42,837

Marucci Sports (1)

5,521

13,675

27,756

35,041

Velocity Outdoor

47,221

29,611

77,611

60,748

Total Branded Consumer

$

184,874

$

179,726

$

377,889

$

364,974

Niche Industrial

Advanced Circuits

$

22,956

$

22,439

$

44,652

$

45,508

Arnold Magnetics

24,270

29,481

53,828

59,509

Foam Fabricators

24,429

31,648

52,812

62,330

Sterno

77,363

86,465

160,395

177,661

Total Niche Industrial

$

149,018

$

170,033

$

311,687

$

345,008

Total Subsidiary Net Sales

$

333,892

$

349,759

$

689,576

$

709,982

(1) Net sales for Marucci Sports are pro forma as if we had acquired this business on January 1, 2019.


Compass Diversified

Net Income to Adjusted EBITDA and Cash Flow Available for Distribution and Reinvestment

(Unaudited)

Three months ended June 30,

Six months ended June 30,

(in thousands)

2020

2019

2020

2019

Net income (loss)

$

(7,366

)

$

218,173

$

(2,486

)

$

328,331

Income from discontinued operations, net of income tax

15,474

16,901

Gain on sale of discontinued operations

206,505

328,164

Loss from continuing operations

$

(7,366

)

$

(3,806

)

$

(2,486

)

$

(16,734

)

Provision for income taxes

6,649

4,551

6,871

5,975

Income (loss) from continuing operations before income taxes

$

(717

)

$

745

$

4,385

$

(10,759

)

Other income (expense), net

(2,386

)

(90

)

(1,725

)

(524

)

Amortization of debt issuance costs

(610

)

(928

)

(1,135

)

(1,855

)

Loss on sale of Tilray securities

(5,300

)

Interest expense, net

(11,174

)

(18,445

)

(19,771

)

(36,899

)

Operating income

$

13,453

$

20,208

$

27,016

$

33,819

Adjusted For:

Depreciation

8,601

8,230

16,902

16,225

Amortization

17,779

13,522

31,284

27,112

Noncontrolling shareholder compensation

1,890

1,601

3,945

3,329

Acquisition expenses

2,042

2,042

Integration services fees

281

Management fees

5,157

8,521

13,777

19,478

Other

598

(1

)

598

324

Adjusted EBITDA

$

49,520

$

52,081

$

95,564

$

100,568

Interest at Corporate, net of unused fee (1)

(10,901

)

(15,551

)

(19,098

)

(32,365

)

Swap payment

(209

)

(303

)

Management fees

(5,157

)

(8,521

)

(13,777

)

(19,478

)

Capital expenditures (maintenance)

(3,277

)

(4,362

)

(6,537

)

(8,009

)

Current tax expense (cash taxes) (2)

(9,890

)

(2,555

)

(12,804

)

(6,010

)

Preferred share distributions

(6,045

)

(3,782

)

(11,587

)

(7,563

)

Discontinued operations

9,077

16,987

Miscellaneous items

(715

)

(569

)

Cash Flow Available for Distribution and Reinvestment ("CAD")

$

13,535

$

26,178

$

31,192

$

43,827


(1

)

Interest expense at Corporate reflects consolidated interest expense less non-cash components such as, unrealized gains and losses on our swap and original issue discount amortization. We include the cash component of our swap payment above in our reconciliation to CAD.

(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

Adjusted EBITDA (1)

(unaudited)

Three months ended June 30,

Six months ended June 30,

(in thousands)

2020

2019

2020

2019

Branded Consumer

5.11 Tactical

$

10,876

$

11,256

$

21,379

$

19,561

Ergobaby

4,998

5,220

8,937

10,817

Liberty

3,949

2,195

7,631

4,417

Marucci Sports (2)

(827

)

(827

)

Velocity Outdoor

7,631

3,734

10,490

7,721

Total Branded Consumer

$

26,627

$

22,405

$

47,610

$

42,516

Niche Industrial

Advanced Circuits

$

7,202

$

7,172

$

13,835

$

14,511

Arnold Magnetics

3,229

3,953

6,654

7,163

Foam Fabricators

6,226

7,820

13,231

15,046

Sterno

9,876

13,840

21,171

27,740

Total Niche Industrial

$

26,533

$

32,785

$

54,891

$

64,460

Corporate expense (3)

(3,640

)

(3,109

)

(6,937

)

(6,408

)

Total Adjusted EBITDA

$

49,520

$

52,081

$

95,564

$

100,568


(1

)

Please refer to the recently filed Form 10-Q for detail on subsidiary Adjusted EBITDA and reconciliation to net income.

(2

)

The above results for Marucci Sports does not include management's estimate of adjusted EBITDA, before our ownership, of $(1.6) million and $3.9 million, respectively, for the three and six months ended June 30, 2020, and $0.9 million and $4.9 million, respectively, for the three and six months ended June 30, 2019. Marucci Sports was acquired on April 20, 2020.

(3

)

Please refer to the recently filed Form 10-Q for a reconciliation of our Corporate expense to Net Income.


Compass Diversified
Summarized Statement of Cash Flows
(unaudited)

Six months ended June 30,

(in thousands)

2020

2019

Net cash provided by operating activities

$

88,330

$

8,654

Net cash (used in) provided by investing activities

(212,990

)

718,000

Net cash provided by (used in) financing activities

230,595

(292,750

)

Effect of foreign currency on cash

(1,021

)

(1,366

)

Net increase in cash and cash equivalents

104,914

432,538

Cash and cash equivalents — beginning of period (1)

100,314

53,326

Cash and cash equivalents — end of period

$

205,228

$

485,864

(1) Includes cash from discontinued operations of $4.6 million at January 1, 2019.

Compass Diversified
Condensed Consolidated Table of Cash Flow Available for Distribution and Reinvestment
(unaudited)

Three months ended June 30,

Six months ended June 30,

(in thousands)

2020

2019

2020

2019

Net income (loss)

$

(7,366

)

$

218,173

$

(2,486

)

$

328,331

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

Depreciation and amortization

26,380

27,853

48,186

56,491

Gain on sale of business

(206,505

)

(328,164

)

Amortization of debt issuance costs and original issue discount

554

1,080

1,079

2,159

Unrealized loss on interest rate hedge

2,251

3,350

Noncontrolling stockholder charges

1,890

3,063

3,945

5,268

Provision for loss on receivables

1,636

49

2,519

745

Other

1,670

162

1,155

496

Deferred taxes

(3,241

)

(10,043

)

(5,933

)

(12,366

)

Changes in operating assets and liabilities

32,821

(18,493

)

39,865

(47,656

)

Net cash provided by operating activities

54,344

17,590

88,330

8,654

Plus:

Unused fee on revolving credit facility

328

495

728

882

Successful acquisition costs

2,042

230

2,042

596

Integration services fee (1)

281

Realized loss from foreign currency effect (2)

363

Changes in operating assets and liabilities

18,493

47,656

Loss on sale of Tilray securities

5,300

Less:

Maintenance capital expenditures (3)

3,277

6,507

6,537

11,504

Payment of interest rate swap

209

303

Changes in operating assets and liabilities

32,821

39,865

Preferred share distributions

6,045

3,782

11,587

7,563

Other (4)

1,036

132

1,919

535

CAD

$

13,535

$

26,178

$

31,192

$

43,827

Distribution paid in April 2020/ 2019

$

$

$

21,564

$

21,564

Distribution paid in July 2020/ 2019

23,364

21,564

23,364

21,564

$

23,364

$

21,564

$

44,928

$

43,128


(1)

Represents fees paid by newly acquired companies to the Manager for integration services performed during the first year of ownership, payable quarterly.

(2)

Reflects the foreign currency transaction gain/ loss resulting from the Canadian dollar intercompany loans issued to Manitoba Harvest.

(3)

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 $3.1 million and $6.0 million, respectively, for the three months ended June 30, 2020 and 2019, and $5.6 million and $8.5 million, respectively, for the six months ended June 30, 2020 and 2019.

(4)

Represents the effect on earnings of reserves for inventory and accounts receivable.


Compass Diversified

Maintenance Capital Expenditures

(unaudited)

Three months ended June 30,

Six months ended June 30,

(in thousands)

2020

2019

2020

2019

Branded Consumer

5.11 Tactical

$

610

$

1,124

$

784

$

1,336

Ergobaby

26

166

124

237

Liberty

106

181

292

307

Marucci Sports

51

51

Velocity Outdoor

800

52

1,673

1,040

Total Branded Consumer

$

1,593

$

1,523

$

2,924

$

2,920

Niche Industrial

Advanced Circuits

$

76

$

938

$

93

$

1,126

Arnold Magnetics

570

694

1,630

1,806

Foam Fabricators

449

438

975

936

Sterno Group

589

769

915

1,221

Total Niche Industrial

$

1,684

$

2,839

$

3,613

$

5,089

Total maintenance capital expenditures

$

3,277

$

4,362

$

6,537

$

8,009


Compass Diversified
Condensed Consolidated Balance Sheets

June 30, 2020

December 31, 2019

(in thousands)

(unaudited)

Assets

Current assets

Cash and cash equivalents

$

205,228

$

100,314

Accounts receivable, net

192,177

191,405

Inventories

317,301

317,306

Prepaid expenses and other current assets

33,281

35,247

Total current assets

747,987

644,272

Property, plant and equipment, net

150,229

146,428

Goodwill and intangible assets, net

1,139,583

1,000,465

Other non-current assets

103,725

100,727

Total assets

$

2,141,524

$

1,891,892

Liabilities and stockholders’ equity

Current liabilities

Accounts payable and accrued expenses

$

202,630

$

178,857

Due to related party

4,186

8,049

Current portion, long-term debt

Other current liabilities

24,006

22,573

Total current liabilities

230,822

209,479

Deferred income taxes

28,342

33,039

Long-term debt

591,787

394,445

Other non-current liabilities

93,691

89,054

Total liabilities

944,642

726,017

Stockholders' equity

Total stockholders' equity attributable to Holdings

1,129,066

1,115,327

Noncontrolling interest

67,816

50,548

Total stockholders' equity

1,196,882

1,165,875

Total liabilities and stockholders’ equity

$

2,141,524

$

1,891,892


Investor Relations:
The IGB Group
Leon Berman
212-477-8438
lberman@igbir.com

Media Contact:
Joele Frank, Wilkinson Brimmer Katcher
Jon Keehner / Julie Oakes / Kate Thompson
212-355-4449