Branded Consumer Performance and Rebounding Industrials Drive Record Fourth Quarter and Full Year Operating Results

Accelerates Portfolio Transformation and Strengthens Capital Structure

Permanent Capital Advantage Positioned CODI to Opportunistically Acquire Platform Business and Complete Strategic Add-Ons in 2021

WESTPORT, Conn., Feb. 24, 2022 (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 and twelve months ended December 31, 2021.

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

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

Fourth Quarter and Full Year 2021 Highlights

  • Reported net sales of $536.6 million for the fourth quarter 2021 and $1.842 billion for the full year 2021;
  • Reported a net income of $25.9 million for the fourth quarter 2021 and net income of $126.8 million for the full year 2021;
  • Reported Adjusted Earnings, a new non-GAAP financial measure, of $32.5 million for the fourth quarter of 2021 and $117.7 million for the full year of 2021;
  • Reported non-GAAP Adjusted EBITDA of $88.9 million for the fourth quarter 2021 and $327.3 million for the full year 2021;
  • Reported Cash Used in Operating Activities of $(13.1) million for the fourth quarter 2021 and Provided by Operating Activities of $134.1 million for the full year 2021, and non-GAAP Cash Flow Available for Distribution and Reinvestment ("CAD") of $42.1 million for the fourth quarter 2021 and $177.4 million for the full year 2021;
  • Paid a fourth quarter 2021 cash distribution of $0.25 per share on CODI's common shares in January 2022; and
  • Paid quarterly cash distributions of $0.453125 per share on the Company's 7.250% Series A Preferred Shares, $0.4921875 per share on the Company's 7.875% Series B Preferred Shares, and $0.4921875 per share on the Company's 7.875% Series C Preferred Shares payable on January 30, 2022.

Operating Results

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

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

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

Liquidity and Capital Resources

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

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

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

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

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

Fourth Quarter 2021 Distributions

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

The Board also declared a quarterly cash distribution of $0.453125 per share on the Company’s 7.250% Series A Preferred Shares (the “Series A Preferred Shares”). The distribution on the Series A Preferred Shares covered the period from, and including, October 30, 2021, up to, but excluding, January 30, 2022. The distribution for such period was payable on January 30, 2022 to all holders of record of Series A Preferred Shares as of January 15, 2022. The payment occurred on January 31, 2022, the next business day following the payment date.

The Board also declared a quarterly cash distribution of $0.4921875 per share on the Company’s 7.875% Series B Preferred Shares (the “Series B Preferred Shares”). The distribution on the Series B Preferred Shares covered the period from, and including, October 30, 2021, up to, but excluding, January 30, 2022. The distribution for such period was payable on January 30, 2022 to all holders of record of Series B Preferred Shares as of January 15, 2022. The payment occurred on January 31, 2022, the next business day following the payment date.

The Board also declared a quarterly cash distribution of $0.4921875 per share on the Company’s 7.875% Series C Preferred Shares (the “Series C Preferred Shares”). The distribution on the Series C Preferred Shares covered the period from, and including, October 30, 2021, up to, but excluding, January 30, 2022. The distribution for such period was payable on January 30, 2022 to all holders of record of Series C Preferred Shares as of January 15, 2022. The payment occurred on January 31, 2022, the next business day following the payment date.

2022 Guidance

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

5.11 Initial Public Offering Update

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

Conference Call

Management will host a conference call on Thursday, February 24, 2022 at 5:00 p.m. ET to discuss the latest corporate developments and financial results. The dial-in number for callers in the U.S. is (844) 200-6205 and the dial-in number for international callers is + 1 929 526-1599. The access code for all callers is 091769. A live webcast will also be available on the Company's website at https://www.compassdiversified.com.

A replay of the call will be available through Thursday, March 3, 2022. To access the replay, please dial (929) 458-6194 in the U.S. and + 44 204 525 0658 outside the U.S., and then enter the access code 019320.

Note Regarding Use of Non-GAAP Financial Measures

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

CAD is a non-GAAP measure used by the Company to assess its performance, as well as its ability to sustain quarterly distributions. We have reconciled CAD to Net Income (Loss) on the attached schedules. We consider Net Income (Loss) to be the most directly comparable GAAP financial measures to CAD.   CAD is calculated after taking into account all interest expense, cash taxes paid and maintenance capital expenditures, and includes the operating results of each of our businesses for the periods during which CODI owned them.

In reliance on the unreasonable efforts exception provided under Item 10(e)(1)(i)(B) of Regulation S-K, we have not reconciled 2022 Adjusted EBITDA or 2022 Adjusted Earnings to their comparable GAAP measure because we do not provide guidance on Net Income (Loss) or the applicable reconciling items as a result of the uncertainty regarding, and the potential variability of, these items. For the same reasons, we are unable to address the probable significance of the unavailable information, which could be material to future results. Accordingly, undue reliance should not be placed on these estimates.

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

About Compass Diversified (“CODI”)

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

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

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

 • The design and marketing of purpose-built technical apparel and gear serving a wide range of global customers (5.11);
    
 • The manufacture of quick-turn, small-run and production rigid printed circuit boards (Advanced Circuits);
    
 • The design and manufacture of custom packaging, insulation and componentry (Altor Solutions);
    
 • The manufacture of engineered magnetic solutions for a wide range of specialty applications and end-markets (Arnold Magnetic Technologies);
    
 • The design, engineering and marketing of dial based fit systems delivering a scientifically proven performance advantage for athletes (BOA Technology);
    
 • The design and marketing of wearable baby carriers, strollers and related products (Ergobaby)
    
 • The design, manufacture, and marketing of high-end, one-of-a kind jewelry (Lugano Diamonds);
    
 • The design and manufacture of baseball and softball equipment and apparel (Marucci Sports);
    
 • The manufacture and marketing of portable food warming systems used in the foodservice industry, creative indoor and outdoor lighting, and home fragrance solutions for the consumer markets (Sterno); and
    
 • The design, manufacture and marketing of airguns, archery products, optics and related accessories (Velocity Outdoor).

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

Forward Looking Statements

Certain statements in this press release may be deemed forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.   Forward-looking statements include, but are not limited to, statements as to our future performance or liquidity, such as expectations regarding our results of operations and financial condition, our 2022 Adjusted EBITDA, our 2022 Adjusted Earnings, our pending acquisitions and divestitures, and other statements with regard to the future performance of CODI. We may use words such as “plans,” “anticipate,” “believe,” “expect,” “intend,” “will,” “should,” “may,” “seek,” “look,” and similar expressions to identify forward-looking statements. The forward-looking statements contained in this press release involve risks and uncertainties. Actual results could differ materially from those implied or expressed in the forward-looking statements for any reason, including the factors set forth in “Risk Factors” and elsewhere in CODI’s annual report on Form 10-K and its quarterly reports on Form 10-Q. Other factors that could cause actual results to differ materially include: changes in the economy, financial markets and political environment; risks associated with possible disruption in CODI’s operations or the economy generally due to terrorism, natural disasters, social, civil and political unrest or the COVID-19 pandemic; future changes in laws or regulations (including the interpretation of these laws and regulations by regulatory authorities); general considerations associated with the COVID-19 pandemic and its impact on the markets in which we operate; disruption in the global supply chain, labor shortages and high labor costs; our business prospects and the prospects of our subsidiaries; the impact of, and ability to successfully complete and integrate, investments that we make or expect to make; the dependence of our future success on the general economy and its impact on the industries in which we operate; the ability of our subsidiaries to achieve their objectives; the adequacy of our cash resources and working capital; the timing of cash flows, if any, from the operations of our subsidiaries; and other considerations that may be disclosed from time to time in CODI’s publicly disseminated documents and filings. Undue reliance should not be placed on such forward-looking statements as such statements speak only as of the date on which they are made. Although, except as required by law, CODI undertakes no obligation to revise or update any forward-looking statements, whether as a result of new information, future events or otherwise, you are advised to consult any additional disclosures that CODI may make directly to you or through reports that it in the future may file with the SEC, including annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K.

Compass Diversified Holdings
Condensed Consolidated Balance Sheets

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


 

Compass Diversified Holdings
Consolidated Statements of Operations

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

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

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

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

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

Compass Diversified Holdings
Adjusted Earnings to Adjusted EBITDA
(Unaudited)

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


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

Compass Diversified Holdings
Net Income (Loss) from Continuing Operations to Non-GAAP Consolidated EBITDA Reconciliation
Year ended December 31, 2021
(Unaudited)

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

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

Compass Diversified Holdings
Net Income (Loss) from Continuing Operations to Non-GAAP Consolidated EBITDA Reconciliation
Year ended December 31, 2020
(Unaudited)

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

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

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

Compass Diversified Holdings
Adjusted EBITDA
(Unaudited)

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


(1) The above results for BOA do not include management's estimate of Adjusted EBITDA, before our ownership, of $0.3 million and $24.5 million, respectively, for the three and twelve months ended December 31, 2020. BOA was acquired on October 16, 2020.
   
(2) The above results for Lugano do not include management's estimate of Adjusted EBITDA, before our ownership, of $24.1 million for the twelve months ended December 31, 2021, and $7.3 million and $21.3 million, respectively, for the three and twelve months ended December 31, 2020. Lugano was acquired on September 3, 2021.
   
(3) The above results for Marucci Sports do not include management's estimate of Adjusted EBITDA, before our ownership, of $3.9 million for the twelve months ended December 31, 2020. Marucci Sports was acquired on April 20, 2020.

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

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

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

Compass Diversified Holdings
Subsidiary Pro Forma Net Sales
(unaudited)

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

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

Compass Diversified Holdings
Condensed Consolidated Cash Flows

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

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

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

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

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


   
(1) Interest expense at Corporate reflects consolidated interest expense less non-cash components such as the amortization of our bond premium.
   
(2) Current tax expense is calculated by deducting the change in deferred tax from the statement of cash flows from the income tax provision on the statement of operations.

 

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



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Source: Compass Diversified Holdings

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