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Compass Diversified Reports Third Quarter 2021 Financial Results

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  • CODI
  • CODI-PA
  • CODI-PB
  • CODI-PC

Branded Consumer Performance Continues to Drive Strong Third Quarter Operating Results

Raises Full Year Guidance

WESTPORT, Conn., Oct. 28, 2021 (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, 2021.

Third Quarter 2021 Highlights

  • Reported net sales of $488.2 million;

  • Reported net income of $90.2 million;

  • Reported non-GAAP Adjusted EBITDA of $90.0 million;

  • Reported Cash Provided by Operating Activities of $37.7 million, and non-GAAP Cash Flow Available for Distribution and Reinvestment (“CAD’) of $42.5 million;

  • Completed the election to treat Compass Diversified Holdings as a corporation for U.S. federal income tax purposes, effective September 1, 2021 (the “Election”);

  • Completed the sale of Liberty Safe for an enterprise value of $147.5 million and recorded a gain on the sale of $72.7 million;

  • Closed on the acquisition of Lugano Diamonds and Jewelry, Inc. (“Lugano Diamonds”) for an enterprise value of $256 million;

  • Paid a cash distribution of $0.36 per share on CODI's common shares in October 2021;

  • Paid a special cash distribution of $0.88 per share on CODI’s common shares in September 2021 to partially cover the taxable income incurred by shareholders in connection with the Election; and

  • Declared quarterly cash distributions of $0.453125 per share on the Company's 7.250% Series A Preferred Shares, $0.4921875 per share on the Company's 7.875% Series B Preferred Shares, and $0.4921875 per share on the Company's 7.875% Series C Preferred Shares (the “Preferred Distributions”). The Preferred Distributions are payable on October 30, 2021. The payment will occur on November 1, 2021, the next business day following the payment date.

“CODI’s strong momentum continued in the third quarter as we generated outstanding results primarily due to heightened demand at our leading consumer brands,” said Elias Sabo, CEO of Compass Diversified. “With our permanent capital structure giving us flexibility through economic cycles, we have remained focused on building businesses for the future and supporting the brands we own. We are proud of our subsidiary teams, who have worked diligently to expertly navigate this current inflationary period by adeptly managing supply chains and prioritizing our customers, and believe they continue to be well positioned to grow.”

Mr. Sabo continued, “Recently, we announced a series of compelling transactions, including the strategic divestment of Liberty Safe in August 2021, the anticipated sale of Advanced Circuits, and the acquisition of luxury goods brand Lugano Diamonds. We also acquired Plymouth Foam and Lizard Skins as complementary add-ons to our strong Altor and Marucci subsidiaries, respectively. We continue to succeed at identifying, acquiring and investing in a diversified group of leading consumer and industrial businesses, which we believe will drive sustainable, long-term value for our shareholders.”

Operating Results

Net sales for the quarter ended September 30, 2021, was $488.2 million, as compared to $387.7 million for the quarter ended September 30, 2020.

Net income for the quarter ended September 30, 2021, was $90.2 million, as compared to $20.9 million for the quarter ended September 30, 2020. The increase in net income was primarily a result of the gain on the sale of Liberty Safe of $72.7 million.

Adjusted EBITDA (see “Note Regarding Use of Non-GAAP Financial Measures” below) for the quarter ended September 30, 2021, was $90.0 million, as compared to $67.6 million for the quarter ended September 30, 2020. The increase in Adjusted EBITDA for the third quarter of 2021, as compared to prior year period, was primarily a result of our 2020 acquisition of BOA, as well as strong performance by our branded consumer companies.

Liquidity and Capital Resources

For the quarter ended September 30, 2021, CODI reported Cash Provided by Operating Activities of $37.7 million, as compared to Cash Provided by Operating Activities of $24.5 million for the quarter ended September 30, 2020.

CODI reported CAD (see “Note Regarding Use of Non-GAAP Financial Measures” below) of $42.5 million for the quarter ended September 30, 2021, as compared to $43.5 million for the prior year's comparable quarter. CODI's CAD is calculated after taking into account all interest expenses, cash taxes paid, preferred distributions and maintenance capital expenditures, and includes the operating results of each of our businesses for the periods during which CODI owned them. However, CAD excludes the gains from monetizing interests in CODI's subsidiaries, which have totaled over $1.1 billion since going public in 2006.

CODI's weighted average number of shares outstanding for the quarter ended September 30, 2021 was 65.0 million, and for the quarter ended September 30, 2020 was 64.9 million.

As of September 30, 2021, CODI had approximately $70.2 million in cash and cash equivalents, $134.0 million outstanding on its revolver and $1.0 billion outstanding in 5.250% Senior Notes due 2029.

The Company has no significant debt maturities until 2026 and had net borrowing availability of $465.0 million on September 30, 2021 under its revolving credit facility.

Third Quarter 2021 Distributions

On October 5, 2021, CODI's Board of Directors (the “Board”) declared a third quarter distribution of $0.36 per share on the Company's common shares. The cash distribution was paid on October 22, 2021 to all holders of record of common shares as of October 15, 2021.

Additionally, CODI’s Board of Directors declared a Special Distribution of $0.88 per share on the Trust’s common shares paid on September 7, 2021 to all holders of record of Common Shares as of the close of business on August 31, 2021 which was intended to partially cover the taxable income incurred by those shareholders in connection with the Election.

The Board also declared a quarterly cash distribution of $0.453125 per share on the Company’s 7.250% Series A Preferred Shares (the “Series A Preferred Shares”). The distribution on the Series A Preferred Shares covers the period from, and including, July 30, 2021, up to, but excluding, October 30, 2021. The distribution for such period is payable on October 30, 2021 to all holders of record of Series A Preferred Shares as of October 15, 2021. The payment will occur on November 1, 2021, the next business day following the payment date.

The Board also declared a quarterly cash distribution of $0.4921875 per share on the Company’s 7.875% Series B Preferred Shares (the “Series B Preferred Shares”). The distribution on the Series B Preferred Shares covers the period from, and including, July 30, 2021, up to, but excluding, October 30, 2021. The distribution for such period is payable on October 30, 2021 to all holders of record of Series B Preferred Shares as of October 15, 2021. The payment will occur on November 1, 2021, the next business day following the payment date.

The Board also declared a quarterly cash distribution of $0.4921875 per share on the Company’s 7.875% Series C Preferred Shares (the “Series C Preferred Shares”). The distribution on the Series C Preferred Shares covers the period from, and including, July 30, 2021, up to, but excluding, October 30, 2021. The distribution for such period is payable on October 30, 2021 to all holders of record of Series C Preferred Shares as of October 15, 2021. The payment will occur on November 1, 2021, the next business day following the payment date.

Guidance Update

As a result of the strong financial performance in the first nine months of the year, as well as the Company’s expectations for the remainder of 2021, the Company expects its current subsidiaries to produce consolidated Adjusted EBITDA (see “Note Regarding Use of Non-GAAP Financial Measures” below) for the full calendar year of 2021 of between $380 million and $390 million pro forma for the sale of Liberty Safe and the acquisition of Lugano Diamonds. This estimate is based on the summation of our expectations for our current subsidiaries in 2021, absent additional acquisitions or divestitures, and excludes corporate expenses such as interest expense, management fees and corporate overhead. In addition, our Payout Ratio (see “Note Regarding Use of Non-GAAP Financial Measures” below), defined as our prior year's annual distribution to common shareholders, excluding the special distribution paid in September 2021 as a result of the tax reclassification, divided by our 2021 estimate for CAD, is anticipated to improve from the previous range and be better than 55%.

Conference Call

Management will host a conference call on Thursday, October 28, 2021 at 5:00 p.m. ET to discuss the latest corporate developments and financial results. The dial-in number for callers in the U.S. is (844) 200-6205 and the dial-in number for international callers is +1 929 526 1599. The access code for all callers is 209658. A live webcast will also be available on the Company's website at https://www.compassdiversified.com.

A replay of the call will be available through November 4, 2021. To access the replay, please dial (929) 458-6194 in the U.S. and +44 204 525 0658 outside the U.S., and then enter the access code 702041.

Note Regarding Use of Non-GAAP Financial Measures

Adjusted EBITDA is a non-GAAP measure used by the Company to assess its performance. We have reconciled Adjusted EBITDA to Net Income (Loss) on the attached schedules. We consider Net Income (Loss) to be the most directly comparable GAAP financial measure to Adjusted EBITDA. We believe that Adjusted EBITDA provides useful information to investors and reflects important financial measures as it excludes the effects of items which reflect the impact of long-term investment decisions, rather than the performance of near-term operations. When compared to Net Income (Loss), Adjusted EBITDA is limited in that it does not reflect the periodic costs of certain capital assets used in generating revenues of our businesses or the non-cash charges associated with impairments, as well as certain cash charges. This presentation also allows investors to view the performance of our businesses in a manner similar to the methods used by us and the management of our businesses, provides additional insight into our operating results and provides a measure for evaluating targeted businesses for acquisition. We believe Adjusted EBITDA is also useful in measuring our ability to service debt and other payment obligations.

CAD is a non-GAAP measure used by the Company to assess its performance, as well as its ability to sustain quarterly distributions. We have reconciled CAD to Net Income (Loss) and Cash Flow Provided by Operating Activities on the attached schedules. We consider Net Income (Loss) and Cash Flow Provided by Operating Activities to be the most directly comparable GAAP financial measures to CAD.

CAD is calculated after taking into account all interest expense, cash taxes paid and maintenance capital expenditures, and includes the operating results of each of our businesses for the periods during which CODI owned them. We believe that CAD provides investors additional information to enable them to evaluate our performance and ability to make anticipated quarterly distributions.

Payout Ratio is a non-GAAP measure defined as our prior year's annual distribution to common shareholders divided by our CAD. We believe the Payout Ratio provides investors additional information to enable them to evaluate our performance and our ability to sustain quarterly distributions.

In reliance on the unreasonable efforts exception provided under Item 10(e)(1)(i)(B) of Regulation S-K, we have not reconciled 2021 Adjusted EBITDA or 2021 Payout Ratio (which requires an estimate of 2021 CAD) to their comparable GAAP measure because we do not provide guidance on Net Income (Loss), Cash Flow Provided by Operating Activities or the applicable reconciling items as a result of the uncertainty regarding, and the potential variability of, these items. For the same reasons, we are unable to address the probable significance of the unavailable information, which could be material to future results.

None of Adjusted EBITDA, CAD nor Payout Ratio is meant to be a substitute for GAAP measures and may be different from or otherwise inconsistent with non-GAAP financial measures used by other companies.

About Compass Diversified (“CODI”)

CODI owns and manages a diverse set of highly defensible North American middle market businesses. Each of its current subsidiaries is a leader in its niche market. For more information, visit compassdiversified.com.

Leveraging its permanent capital base, long-term disciplined approach and actionable expertise, CODI maintains controlling ownership interests in each of its subsidiaries, maximizing its ability to impact long-term cash flow generation and value creation. The Company provides both debt and equity capital for its subsidiaries, contributing to their financial and operating flexibility. CODI utilizes the cash flows generated by its subsidiaries to invest in the long-term growth of the Company and has consistently generated strong returns through its culture of transparency, alignment and accountability.

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

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

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

  • The design and manufacture of custom packaging, insulation and componentry (Altor Solutions);

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

  • The design, engineering and marketing of dial based fit systems delivering a scientifically proven performance advantage for athletes (BOA Technology);

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

  • The design, manufacture, and marketing of high-end, one-of-a-kind jewelry (Lugano Diamonds);

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

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

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

Forward Looking Statements

This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include, but are not limited to, statements as to our future performance or liquidity, such as expectations regarding our results of operations, financial condition and cash flows for the full year of 2021, our 2021 Total Adjusted EBITDA, 2021 Payout Ratio and 2021 CAD, our pending acquisitions and divestitures, and our ability to meet existing obligations and quarterly distributions as well as other statements with regard to the future performance of CODI and the impact of our change in tax classification. Forward-looking statements contained in this press release involve risks and uncertainties. Actual results could differ materially from those implied or expressed in the forward-looking statements for any reason, including the factors set forth in “Risk Factors” and elsewhere in CODI’s annual report on Form 10-K, its quarterly reports on Form 10-Q and in other filings made with the Securities and Exchange Commission (the “SEC”). Other factors that could cause actual results to differ materially include, but are not limited to, changes in the economy, financial markets and political environment; risks associated with possible disruption in CODI’s operations or the economy generally due to terrorism, natural disasters, social, civil and political unrest or the COVID-19 pandemic; the impact, in the near, medium and long-term, of the COVID-19 pandemic or social or political unrest on our business, results of operations, financial position, liquidity, cash flows or ability to make distributions; future changes in laws or regulations (including the interpretation of these laws and regulations by regulatory authorities); disruption in the global supply chain, labor shortages and high labor costs; our business prospects and the prospects of our portfolio companies; the impact of, and ability to successfully complete and integrate, investments that we make or expect to make; the dependence of our future success on the general economy and its impact on the industries in which we operate; the ability of our portfolio companies to achieve their objectives; the adequacy of our cash resources and working capital; the timing of cash flows, if any, from the operations of our portfolio companies; and other considerations that may be disclosed from time to time in CODI’s publicly disseminated documents and filings.

We may use words such as “anticipate,” “believe,” “expect,” “intend,” “will,” “should,” “may,” “seek,” “look,” and similar expressions to identify forward-looking statements. Undue reliance should not be placed on such forward-looking statements as such statements speak only as of the date on which they are made. Although, except as required by law, CODI undertakes no obligation to revise or update any forward-looking statements, whether as a result of new information, future events or otherwise, you are advised to consult any additional disclosures that CODI may make directly to you or through reports that it in the future may file with the SEC, including annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, proxy statements and other filings with the SEC.

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

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



Compass Diversified Holdings
Consolidated Statements of Operations
(Unaudited)

Three months ended September 30,

Nine months ended September 30,

(in thousands, except per share data)

2021

2020

2021

2020

Net sales

$

488,158

$

387,717

$

1,372,266

$

1,005,380

Cost of sales

296,027

242,045

818,307

635,763

Gross profit

192,131

145,672

553,959

369,617

Operating expenses:

Selling, general and administrative expense

118,818

90,785

337,815

252,448

Management fees

12,398

9,534

34,504

23,061

Amortization expense

19,056

15,222

56,502

43,506

Operating income

41,859

30,131

125,138

50,602

Other income (expense):

Interest expense, net

(13,855

)

(12,351

)

(42,607

)

(32,122

)

Amortization of debt issuance costs

(759

)

(660

)

(2,167

)

(1,795

)

Loss on debt extinguishment

(33,305

)

Other income (expense), net

1,031

(450

)

(1,906

)

(2,178

)

Net income before income taxes

28,276

16,670

45,153

14,507

Provision for income taxes

9,556

396

24,662

6,120

Income from continuing operations

18,720

16,274

20,491

8,387

Income (loss) from discontinued operations, net of income tax

(1,309

)

4,529

7,665

9,930

Gain on sale of discontinued operations

72,745

100

72,745

100

Net income

90,156

20,903

100,901

18,417

Less: Net income attributable to noncontrolling interest

2,201

1,395

7,915

3,377

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

(145

)

322

522

626

Net income attributable to Holdings

$

88,100

$

19,186

$

92,464

$

14,414

Basic income (loss) per common share attributable to Holdings

Continuing operations

$

(0.13

)

$

0.02

$

(0.46

)

$

(0.46

)

Discontinued operations

1.10

0.06

1.23

0.13

$

0.97

$

0.08

$

0.77

$

(0.33

)

Basic weighted average number of common shares outstanding

65,008

64,900

64,936

62,556

Cash distributions declared per Trust common share

$

1.24

$

0.36

$

1.96

$

1.08


Compass Diversified Holdings

Net Sales to Pro Forma Net Sales Reconciliation

(unaudited)

Three months ended September 30,

Nine months ended September 30,

(in thousands)

2021

2020

2021

2020

Net Sales

$

488,158

$

387,717

$

1,372,266

$

1,005,380

Acquisitions (1)

18,676

41,024

71,058

145,757

Pro Forma Net Sales

$

506,834

$

428,741

$

1,443,324

$

1,151,137

(1) Acquisitions reflects the net sales for BOA, Lugano, and Marucci Sports and BOA on a pro forma basis as if we had acquired these businesses on January 1, 2020.

Compass Diversified Holdings

Subsidiary Net Sales

(unaudited)

Three months ended September 30,

Nine months ended September 30,

(in thousands)

2021

2020

2021

2020

Branded Consumer

5.11

$

111,099

$

98,406

$

321,009

$

281,822

BOA (1)

39,496

26,141

120,033

77,173

Ergobaby

19,816

19,478

69,100

59,171

Lugano (1)

29,499

14,883

81,881

46,084

Marucci Sports (1)

25,040

19,551

86,328

47,307

Velocity Outdoor

76,901

70,629

205,891

148,240

Total Branded Consumer

$

301,851

$

249,088

$

884,242

$

659,797

Niche Industrial

Advanced Circuits

$

23,182

$

22,771

$

67,209

$

67,423

Altor Solutions

44,122

36,526

122,582

89,338

Arnold Magnetics

36,852

22,619

101,893

76,447

Sterno

100,827

97,737

267,398

258,132

Total Niche Industrial

$

204,983

$

179,653

$

559,082

$

491,340

Total Subsidiary Net Sales

$

506,834

$

428,741

$

1,443,324

$

1,151,137

(1) Net sales for BOA, Lugano and Marucci Sports are pro forma as if we had acquired these businesses on January 1, 2020.

Compass Diversified Holdings

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

(Unaudited)

Three months ended September 30,

Nine months ended September 30,

(in thousands)

2021

2020

2021

2020

Net income

$

90,156

$

20,903

$

100,901

$

18,417

Income (loss) from discontinued operations

(1,309

)

4,529

7,665

9,930

Gain on sale of discontinued operations

72,745

100

72,745

100

Income from continuing operations

$

18,720

$

16,274

$

20,491

$

8,387

Provision for income taxes

9,556

396

24,662

6,120

Income from continuing operations before income taxes

$

28,276

$

16,670

$

45,153

$

14,507

Other expense, net

(1,031

)

450

1,906

2,178

Amortization of debt issuance costs

759

660

2,167

1,795

Loss on debt extinguishment

33,305

Interest expense, net

13,855

12,351

42,607

32,122

Operating income

$

41,859

$

30,131

$

125,138

$

50,602

Adjusted For:

Depreciation

10,371

8,378

28,896

24,459

Amortization

19,056

16,602

56,502

47,886

Noncontrolling shareholder compensation

2,893

2,164

8,496

6,094

Acquisition expenses

1,866

273

2,176

2,315

Integration services fees

1,100

500

4,300

500

Management fees

12,398

9,534

34,504

23,061

Other

459

(1

)

(609

)

597

Adjusted EBITDA

$

90,002

$

67,581

$

259,403

$

155,514

Interest at Corporate, net of unused fee (1)

(13,391

)

(12,015

)

(41,483

)

(31,113

)

Management fees

(12,398

)

(9,534

)

(34,504

)

(23,061

)

Capital expenditures (maintenance)

(8,062

)

(3,683

)

(18,926

)

(9,928

)

Current tax expense (cash taxes) (2)

(8,684

)

2,182

(22,074

)

(9,474

)

Preferred share distributions

(6,045

)

(6,046

)

(18,136

)

(17,633

)

Discontinued operations

2,035

4,802

11,790

10,743

Miscellaneous items

(968

)

174

(759

)

(395

)

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

$

42,489

$

43,461

$

135,311

$

74,653


(1

)

Interest expense at Corporate reflects consolidated interest expense less non-cash components such as the amortization of our bond premium.

(2

)

Current tax expense is calculated by deducting the change in deferred tax from the statement of cash flows from the income tax provision on the statement of operations.


Compass Diversified Holdings

Consolidated EBITDA

Nine months ended September 30, 2021

(Unaudited)

Corporate

5.11

BOA

Ergo

Lugano

Marucci Sports

Velocity Outdoor

ACI

Altor Solutions

Arnold

Sterno

Consolidated

Net income (1)

$

8,028

$

14,318

$

16,908

$

3,071

$

681

$

9,485

$

19,157

$

10,366

$

5,892

$

3,839

$

1,491

$

93,236

Adjusted for:

Provision for income taxes

4,857

2,165

1,357

304

2,920

5,381

2,547

2,867

2,062

202

24,662

Interest expense, net

42,464

8

5

125

5

42,607

Intercompany interest

(53,234

)

8,743

6,320

1,514

548

1,890

5,586

5,484

5,075

4,128

13,946

Loss on debt extinguishment

33,305

33,305

Depreciation and amortization

642

16,762

15,033

6,377

70

6,377

9,489

1,658

9,022

5,822

16,313

87,565

EBITDA

31,205

44,688

40,426

12,319

1,603

20,677

39,738

20,055

22,856

15,856

31,952

281,375

Gain on sale of business

(72,745

)

(72,745

)

Other (income) expense

(286

)

(302

)

190

22

881

2,611

123

(399

)

(51

)

(883

)

1,906

Non-controlling shareholder compensation

1,926

1,655

1,241

826

777

372

770

16

913

8,496

Acquisition expenses

39

1,827

310

2,176

Integration services fee

3,300

1,000

4,300

Other

1,085

273

(2,300

)

333

(609

)

Management fees

30,133

750

750

375

58

375

375

375

563

375

375

34,504

Adjusted EBITDA

$

(10,569

)

$

47,335

$

46,321

$

13,935

$

3,510

$

23,759

$

41,201

$

20,925

$

23,790

$

16,506

$

32,690

$

259,403

(1) Net income does not include income from discontinued operations for the nine months ended September 30, 2021.

Compass Diversified Holdings

Consolidated EBITDA

Nine months ended September 30, 2020

(Unaudited)

Corporate

5.11

Ergo

Marucci Sports

Velocity Outdoor

ACI

Altor Solutions

Arnold

Sterno

Consolidated

Net income (loss) (1)

$

(13,346

)

$

5,515

$

1,837

(5,344

)

$

4,245

$

10,980

$

4,188

$

(1,719

)

$

2,131

$

8,487

Adjusted for:

Provision (benefit) for income taxes

(55

)

2,265

(2,351

)

1,386

2,878

1,891

(56

)

162

6,120

Interest expense, net

31,971

43

6

102

32,122

Intercompany interest

(48,681

)

10,770

1,818

1,194

6,945

4,176

5,290

4,300

14,188

Depreciation and amortization

530

16,033

6,152

8,031

9,651

1,980

9,473

5,040

17,251

74,141

EBITDA

(29,526

)

32,306

12,072

1,536

22,329

20,014

20,842

7,565

33,732

120,870

Gain on sale of business

(100

)

(100

)

Other (income) expense

3

1,398

(46

)

1,048

126

(438

)

(1

)

86

2,176

Non-controlling shareholder compensation

1,870

748

361

1,287

372

771

34

651

6,094

Acquisition expenses

2,042

273

2,315

Integration services fees

500

500

Other

598

598

Management fees

19,651

750

375

222

375

375

563

375

375

23,061

Adjusted EBITDA (2)

$

(9,972

)

$

36,324

$

13,793

$

4,615

$

25,039

$

20,887

$

22,011

$

7,973

$

34,844

$

155,514

(1) Net income (loss) does not include income from discontinued operations for the nine months ended September 30, 2020.

(2) As a result of the sale of Liberty Safe in August 2021, Adjusted EBITDA for the nine months ended September 30, 2020 does not include $13.9 million in Adjusted EBITDA from Liberty.

Compass Diversified Holdings

Adjusted EBITDA

(unaudited)

Three months ended September 30,

Nine months ended September 30,

(in thousands)

2021

2020

2021

2020

Branded Consumer

5.11

$

17,043

$

14,945

$

47,335

$

36,324

BOA (1)

14,095

46,321

Ergobaby

2,848

4,856

13,935

13,793

Lugano (2)

3,510

3,510

Marucci Sports (3)

6,108

5,442

23,759

4,615

Velocity Outdoor

16,376

14,549

41,201

25,039

Total Branded Consumer

$

59,980

$

39,792

$

176,061

$

79,771

Niche Industrial

Advanced Circuits

$

7,567

$

7,052

$

20,925

$

20,887

Altor Solutions

8,972

8,780

23,790

22,011

Arnold Magnetics

6,708

1,319

16,506

7,973

Sterno

10,296

13,673

32,690

34,844

Total Niche Industrial

$

33,543

$

30,824

$

93,911

$

85,715

Corporate expense (4)

(3,520

)

(3,035

)

(10,569

)

(9,972

)

Total Adjusted EBITDA

$

90,002

$

67,581

$

259,403

$

155,514


(1

)

The above results for BOA do not include management's estimate of Adjusted EBITDA, before our ownership, of $8.4 million and $24.5 million, respectively, for the three and nine months ended September 30, 2020. BOA was acquired on October 16, 2020.

(2

)

The above results for Lugano do not include management's estimate of Adjusted EBITDA, before our ownership, of $5.5 million and $24.1 million, respectively, for the three and nine months ended September 30, 2021, and $4.6 million and $14.0 million, respectively, for the three and nine months ended September 30, 2020. Lugano was acquired on September 3, 2021.

(3

)

The above results for Marucci Sports do not include management's estimate of Adjusted EBITDA, before our ownership, of $3.9 million for the nine months ended September 30, 2020. Marucci Sports was acquired on April 20, 2020.

(4

)

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

Compass Diversified Holdings
Summarized Statement of Cash Flows
(unaudited)

Nine months ended September 30,

(in thousands)

2021

2020

Net cash provided by operating activities

$

147,148

$

112,872

Net cash used in investing activities

(202,429

)

(236,502

)

Net cash provided by financing activities

54,872

200,395

Effect of foreign currency on cash

(96

)

(260

)

Net (decrease) increase in cash and cash equivalents

(505

)

76,505

Cash and cash equivalents — beginning of period

70,744

100,314

Cash and cash equivalents — end of period

$

70,239

$

176,819

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

Three months ended September 30,

Nine months ended September 30,

(in thousands)

2021

2020

2021

2020

Net income

$

90,156

$

20,903

$

100,901

$

18,417

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization

29,595

25,392

86,474

73,578

Gain on sale of business

(72,745

)

(100

)

(72,745

)

(100

)

Amortization of debt issuance costs and premium

759

577

2,084

1,656

Loss on debt extinguishment

33,305

Noncontrolling stockholder charges

2,895

2,171

8,513

6,116

Provision for reserves

1,083

1,855

4,609

4,374

Other

(1,489

)

621

541

1,776

Deferred taxes

541

2,581

2,256

(3,352

)

Changes in operating assets and liabilities

(13,081

)

(29,458

)

(18,790

)

10,407

Net cash provided by operating activities

37,714

24,542

147,148

112,872

Plus:

Unused fee on revolving credit facility

464

420

1,207

1,148

Successful acquisition costs

1,866

273

2,176

2,315

Integration services fee (1)

1,100

500

4,300

500

Changes in operating assets and liabilities

13,081

29,458

18,790

Other (3)

2,415

Less:

Maintenance capital expenditures (2)

8,106

3,829

19,063

10,366

Changes in operating assets and liabilities

10,407

Preferred share distributions

6,045

6,046

18,136

17,633

Other (3)

1,857

1,111

3,776

CAD

$

42,489

$

43,461

$

135,311

$

74,653

Distribution paid in April 2021/ 2020

$

$

$

23,364

$

21,564

Distribution paid in July 2021/ 2020

23,364

23,364

Distribution paid in October 2021/ 2020 (4)

23,742

23,364

23,742

23,364

$

23,742

$

23,364

$

70,470

$

68,292

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

(2) Represents maintenance capital expenditures that were funded from operating cash flow, net of proceeds from the sale of property, plant and equipment, and excludes growth capital expenditures of approximately $3.2 million and $4.1 million, respectively, for the three months ended September 30, 2021 and 2020, and $10.1 million and $9.7 million, respectively, for the nine months ended September 30, 2021 and 2020.

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

(4) The Company paid a special distribution of $57.1 million to Trust common shareholders of record on August 31, 2021 related to the tax reclassification of the Trust.

Compass Diversified Holdings

Maintenance Capital Expenditures

(unaudited)

Three months ended September 30,

Nine months ended September 30,

(in thousands)

2021

2020

2021

2020

Branded Consumer

5.11

$

1,032

$

113

$

1,900

$

897

BOA

242

835

Ergobaby

250

374

Liberty (1)

43

146

137

438

Lugano

32

32

Marucci Sports

2,292

169

4,096

220

Velocity Outdoor

1,059

1,070

3,146

2,743

Total Branded Consumer

$

4,700

$

1,748

$

10,146

$

4,672

Niche Industrial

Advanced Circuits

$

112

$

261

$

594

$

354

Altor Solutions

859

543

2,112

1,518

Arnold Magnetics

1,996

1,131

4,217

2,761

Sterno Group

439

146

1,994

1,061

Total Niche Industrial

$

3,406

$

2,081

$

8,917

$

5,694

Total maintenance capital expenditures

$

8,106

$

3,829

$

19,063

$

10,366

(1) Through the date of sale, August 2, 2021.

Compass Diversified Holdings
Condensed Consolidated Balance Sheets

September 30, 2021

December 31, 2020

(in thousands)

(unaudited)

Assets

Current assets

Cash and cash equivalents

$

70,239

$

66,402

Accounts receivable, net

258,941

213,695

Inventories

486,596

353,967

Prepaid expenses and other current assets

48,585

40,798

Current assets of discontinued operations

33,505

Total current assets

864,361

708,367

Property, plant and equipment, net

169,507

163,118

Goodwill and intangible assets, net

1,692,543

1,567,320

Other non-current assets

113,882

105,840

Non-current assets of discontinued operations

53,873

Total assets

$

2,840,293

$

2,598,518

Liabilities and stockholders’ equity

Current liabilities

Accounts payable and accrued expenses

$

298,081

$

241,392

Due to related party

11,771

10,137

Other current liabilities

33,976

27,956

Current liabilities of discontinued operations

15,230

Total current liabilities

343,828

294,715

Deferred income taxes

84,613

81,726

Long-term debt

1,122,721

899,460

Other non-current liabilities

90,415

91,334

Non-current liabilities of discontinued operations

11,135

Total liabilities

1,641,577

1,378,370

Stockholders' equity

Total stockholders' equity attributable to Holdings

1,039,900

1,100,024

Noncontrolling interest

158,816

116,288

Noncontrolling interest of discontinued operations

3,836

Total stockholders' equity

1,198,716

1,220,148

Total liabilities and stockholders’ equity

$

2,840,293

$

2,598,518