Net Sales Growth of 22% Drives Record Quarterly Results

Raises 2022 Outlook Given Continued Strong Performance

WESTPORT, Conn., Nov. 03, 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 months ended September 30, 2022.

“Our third quarter results yet again demonstrate the quality of CODI’s subsidiary businesses, as we delivered another consecutive quarter of record financial performance,” said Elias Sabo, CEO of Compass Diversified. “Our subsidiaries on a combined basis continue to deliver excellent results despite inflationary pressures impacting consumer discretionary spending. End market demand for our core consumer products remains strong, and with many of our consumer businesses taking market share, we believe our businesses can outperform the general market and deliver strong financial results.”

Third Quarter 2022 Financial Highlights vs. Same Year-Ago Quarter (where applicable)

  • Net sales up 22% to $597.6 million, and up 15% on a pro forma basis.
  • Branded consumer net sales up 34% to $378.2 million, and up 21% on a pro forma basis.
  • Niche industrial net sales up 7% to $219.4 million.
  • Operating income up 16% to $48.7 million.
  • Net income down to $2.6 million vs. $90.2 million in the elevated year-ago period, primarily a result of the $72.7 million gain on the sale of Liberty Safe in August 2021.
  • Adjusted Earnings, a non-GAAP financial measure, up 28% to $46.0 million.
  • Adjusted EBITDA, a non-GAAP financial measure, up 27% to $98.3 million.
  • Paid a third quarter 2022 cash distribution of $0.25 per share on CODI's common shares in October 2022.

Third Quarter 2022 Business Highlights

  • Appointed Mr. Larry L. Enterline as Chairman of the Board of Directors effective July 2, 2022. Additionally, Ms. Teri R. Shaffer was appointed to the Board and designated as a member of the Board’s Audit Committee.
  • On July 12, 2022, CODI completed the acquisition of PrimaLoft Technologies Holdings, Inc., the parent company of PrimaLoft, Inc. ("PrimaLoft"), a leading provider of branded, high-performance synthetic insulation and materials used primarily in outerwear and accessories.
  • 5.11 Tactical subsidiary announced the opening of its 100th retail store location, continuing the execution of expanding its retail footprint.

Third Quarter 2022 Financial Results

Net sales in the third quarter of 2022 were $597.6 million, up 22% compared to $488.2 million in the third quarter of 2021. The increase was due to strong performance at its branded consumer and niche industrial subsidiaries. On a pro forma basis, assuming CODI had acquired Lugano and PrimaLoft on January 1, 2021, net sales were up 15% compared to the prior year period.

Branded consumer net sales, pro forma for the Lugano and PrimaLoft acquisitions, increased 21% in the third quarter of 2022 to $380.5 million compared to $314.8 million in the third quarter of 2021. Niche industrial net sales increased 7% in the third quarter of 2022 to $219.4 million compared to $205.0 million in the third quarter of 2021.

Net income for the third quarter of 2022 decreased to $2.6 million compared to net income of $90.2 million in the third quarter of 2021. Income from continuing operations for the third quarter of 2022 decreased to $1.1 million compared to $18.7 million in the third quarter of 2021. The decreases in net income and income from continuing operations were a result of higher interest expense related to the funding of the acquisitions of PrimaLoft and Lugano and provisions for income tax primarily as a result of the reclassification of Advanced Circuits to continuing operations. Additionally, the Company’s net income in the year-ago period included a $72.7 million gain from the sale of Liberty Safe in August 2021. Operating income for the third quarter of 2022 increased 16% to $48.7 million compared to $41.9 million in the third quarter of 2021.

Adjusted Earnings (see “Note Regarding Use of Non-GAAP Financial Measures” below) for the third quarter of 2022 increased 28% to $46.0 million compared to $35.8 million in the third quarter of 2021. CODI's weighted average number of shares outstanding for the quarter ended September 30, 2022, was 71.9 million and, for the quarter ended September 30, 2021, was 64.9 million.

Adjusted EBITDA (see "Note Regarding Use of Non-GAAP Financial Measures" below) in the third quarter of 2022 was $98.3 million, up 27% compared to $77.6 million in the third quarter of 2021. The increase was primarily due to the strong performance across the branded consumer and niche industrial businesses on a combined basis and the impact of the PrimaLoft and Lugano acquisitions. The Company no longer adds back management fees in its calculation of Adjusted EBITDA. Management fees incurred during the third quarter were $16.7 million.

Liquidity and Capital Resources

As of September 30, 2022, CODI had approximately $61.3 million in cash and cash equivalents, $113 million outstanding on its revolver, $397.5 million outstanding in term loans, $1.0 billion outstanding in 5.250% Senior Notes due 2029 and $300 million outstanding in 5.000% Senior Notes due 2032.

As of September 30, 2022, the Company had no significant debt maturities until 2027 and had net borrowing availability of approximately $485 million under its revolving credit facility.

Third Quarter 2022 Distributions

On October 4, 2022, CODI's Board of Directors (the “Board”) declared a third quarter distribution of $0.25 per share on the Company's common shares. The cash distribution was paid on October 27, 2022, to all holders of record of common shares as of October 20, 2022.

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

Increases 2022 Outlook

As a result of CODI’s strong financial performance in the third quarter, its expectations for the remainder of 2022 and its current view of the economy, the Company is raising its outlook. CODI expects its current subsidiaries to produce consolidated subsidiary Adjusted EBITDA for the full year 2022 of between $460 million and $470 million. This estimate is based on the summation of the Company’s expectations for its current subsidiaries in 2022, absent additional acquisitions or divestitures, includes a reduction for management fees paid at the subsidiaries of approximately $7.5 million and excludes corporate expenses such as interest expense, management fees paid at CODI and corporate overhead. In addition, the Company expects to earn between $145 million and $155 million in Adjusted Earnings for the full year 2022.

Conference Call

Management will host a conference call on Thursday, November 3, 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 (888) 396-8049 and the dial-in number for international callers is (416) 764-8646. The Conference ID is 66435663. The conference call will also be available via a live listen-only webcast and can be accessed through the Investor Relations section of CODI's website. An online replay of the webcast will be available on the same website following the call. Please allow extra time prior to the call to visit the site and download any necessary software that may be needed to listen to the Internet broadcast. A replay of the call will be available through Thursday, November 10, 2022. To access the replay, please dial (877) 674-7070 in the U.S. and (416) 764-8692 outside the U.S.

Note Regarding Use of Non-GAAP Financial Measures

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

Pro forma net sales is defined as net sales including the historical net sales relating to the pre-acquisition periods of Lugano and PrimaLoft, assuming that the Company acquired Lugano and PrimaLoft on January 1, 2021. We have reconciled pro forma net sales to net sales, the most directly comparable GAAP financial measure, on the attached schedules. We believe that pro forma net sales is useful information for investors as it provides a better understanding of sales performance, and relative changes thereto, on a comparable basis. Pro forma net sales is not necessarily indicative of what the actual results would have been if the acquisition had in fact occurred on the date or for the periods indicated nor does it purport to project net sales for any future periods or as of any date.

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

Adjusted EBITDA, Adjusted Earnings and pro forma net sales are not meant to be a substitute for GAAP measures and may be different from or otherwise inconsistent with non-GAAP financial measures used by other companies.

About Compass Diversified (“CODI”)

Since its founding in 1998, CODI has consistently executed on its strategy of owning and managing a diverse set of highly defensible, middle-market businesses across the niche industrial, branded consumer and healthcare sectors. The Company leverages its permanent capital base, long-term disciplined approach, and actionable expertise to maintain controlling ownership interests in each of its subsidiaries, maximizing its ability to impact long-term cash flow generation and value creation. The Company provides both debt and equity capital for its subsidiaries, contributing to their financial and operating flexibility. CODI utilizes the cash flows generated by its subsidiaries to invest in the long-term growth of the Company and has consistently generated strong returns through its culture of transparency, alignment and accountability. For more information, please visit compassdiversified.com.

Forward Looking Statements

Certain statements in this press release may be deemed forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include, but are not limited to, statements as to our future performance or liquidity, such as expectations regarding our results of operations and financial condition, our 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, acquisitions that we may make; the ability to successfully complete divestitures when we’ve executed divestitures agreements; the dependence of our future success on the general economy and its impact on the industries in which we operate; the ability of our subsidiaries to achieve their objectives; the adequacy of our cash resources and working capital; the timing of cash flows, if any, from the operations of our subsidiaries; and other considerations that may be disclosed from time to time in CODI’s publicly disseminated documents and filings. Undue reliance should not be placed on such forward-looking statements as such statements speak only as of the date on which they are made. Although, except as required by law, CODI undertakes no obligation to revise or update any forward-looking statements, whether as a result of new information, future events or otherwise, you are advised to consult any additional disclosures that CODI may make directly to you or through reports that it in the future may file with the SEC, including annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K.

Investor Relations:Media Contact:
irinquiry@compassdiversified.com The IGB Group
 Leon Berman
Cody Slach212.477.8438
Gateway Grouplberman@igbir.com 
949.574.3860 
CODI@gatewayir.com  

 


Compass Diversified Holdings
Condensed Consolidated Balance Sheets

    
 September 30, 2022 December 31, 2021
(in thousands)(Unaudited)  
Assets   
Current assets   
Cash and cash equivalents$61,252 $160,733
Accounts receivable, net 326,266  277,710
Inventories, net 725,902  565,743
Prepaid expenses and other current assets 81,130  57,006
Total current assets 1,194,550  1,061,192
Property, plant and equipment, net 193,749  186,477
Goodwill 1,194,251  882,083
Intangible assets, net 1,096,020  872,690
Other non-current assets 162,727  141,819
Total assets$3,841,297 $3,144,261
    
Liabilities and stockholders’ equity   
Current liabilities   
Accounts payable$100,511 $124,203
Accrued expenses 211,633  190,348
Due to related party 15,368  12,802
Current portion, long-term debt 10,000  —
Other current liabilities 39,378  34,269
Total current liabilities 376,890  361,622
Deferred income taxes 153,202  97,763
Long-term debt 1,784,365  1,284,826
Other non-current liabilities 134,857  115,520
Total liabilities 2,449,314  1,859,731
Stockholders' equity   
Total stockholders' equity attributable to Holdings 1,171,565  1,111,816
Noncontrolling interest 220,418  172,714
Total stockholders' equity 1,391,983  1,284,530
Total liabilities and stockholders’ equity$3,841,297 $3,144,261
    

Compass Diversified Holdings
Consolidated Statements of Operations
(Unaudited)

 Three months ended Nine months ended
 September 30, September 30,
(in thousands, except per share data) 2022   2021   2022   2021 
Net sales$597,607  $488,158  $1,669,123  $1,372,266 
Cost of sales 358,291   296,027   996,210   818,307 
Gross profit 239,316   192,131   672,913   553,959 
Operating expenses:       
Selling, general and administrative expense 148,700   118,818   403,428   337,815 
Management fees 16,717   12,398   46,304   34,504 
Amortization expense 25,152   19,056   67,191   56,502 
Operating income 48,747   41,859   155,990   125,138 
Other income (expense):       
Interest expense, net (22,799)  (13,855)  (57,737)  (42,607)
Amortization of debt issuance costs (1,004)  (759)  (2,735)  (2,167)
Loss on debt extinguishment (534)  —   (534)  (33,305)
Other income (expense), net (2,141)  1,031   606   (1,906)
Net income from continuing operations before income taxes 22,269   28,276   95,590   45,153 
Provision for income taxes 21,163   9,556   39,201   24,662 
Income from continuing operations 1,106   18,720   56,389   20,491 
Income (loss) from discontinued operations, net of income tax —   (1,309)  —   7,665 
Gain on sale of discontinued operations 1,479   72,745   6,893   72,745 
Net income 2,585   90,156   63,282   100,901 
Less: Net income from continuing operations attributable to noncontrolling interest 4,359   2,201   14,927   7,915 
Less: Net income (loss) from discontinued operations attributable to noncontrolling interest —   (145)  —   522 
Net income (loss) attributable to Holdings$(1,774) $88,100  $48,355  $92,464 
        
Amounts attributable to Holdings       
Income (loss) from continuing operations (3,253)  16,519   41,462   12,576 
Income (loss) from discontinued operations —   (1,164)  —   7,143 
Gain on sale of discontinued operations, net of income tax 1,479   72,745   6,893   72,745 
Net income (loss) attributable to Holdings$(1,774) $88,100  $48,355  $92,464 
        
Basic income (loss) per common share attributable to Holdings       
Continuing operations$(0.23) $(0.13) $0.10  $(0.46)
Discontinued operations 0.02   1.10   0.10   1.23 
 $(0.21) $0.97  $0.20  $0.77 
        
Basic weighted average number of common shares outstanding 71,910   65,008   70,514   64,936 
        
Cash distributions declared per Trust common share$0.25  $1.24  $0.75  $1.96 

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

 Three months ended Nine months ended
 September 30, September 30,
(in thousands) 2022   2021   2022   2021 
Net income$2,585  $90,156  $63,282  $100,901 
Gain on sale of discontinued operations 1,479   72,745   6,893   72,745 
Income (loss) from discontinued operations, net of tax —   (1,309)  —   7,665 
Income from continuing operations$1,106  $18,720  $56,389  $20,491 
Less: income from continuing operations attributable to noncontrolling interest 4,359   2,201   14,927   7,915 
Net income (loss) attributable to Holdings - continuing operations$(3,253) $16,519  $41,462  $12,576 
Adjustments:       
Distributions paid - Preferred Shares (6,045)  (6,045)  (18,136)  (18,136)
Amortization expense - intangibles and inventory step up 26,241   19,056   72,092   56,502 
Loss on debt extinguishment 534   —   534   33,305 
Stock compensation 3,242   2,892   8,851   8,496 
Acquisition expenses 5,902   1,866   6,118   2,176 
Integration Services Fee 1,625   1,100   2,750   4,300 
Held-for-sale tax impact - corporate 16,457   —   12,119   — 
Other 1,287   460   4,116   (609)
Adjusted Earnings$45,990  $35,848  $129,906  $98,610 
Plus (less):       
Depreciation 11,284   10,372   32,589   28,896 
Income taxes 21,163   9,556   39,201   24,662 
Held-for-sale tax impact - corporate (16,457)  —   (12,119)  — 
Interest expense, net 22,799   13,855   57,737   42,607 
Amortization of debt issuance 1,004   759   2,735   2,167 
Noncontrolling interest 4,359   2,201   14,927   7,915 
Preferred distributions 6,045   6,045   18,136   18,136 
Other expense (income) 2,139   (1,032)  (606)  1,906 
Adjusted EBITDA$98,326  $77,604  $282,506  $224,899 

Compass Diversified Holdings
Net Income (Loss) from Continuing Operations to Non-GAAP Consolidated Adjusted EBITDA Reconciliation
Three months ended September 30, 2022
(Unaudited)

                           
  Corporate  5.11 BOA Ergo Lugano Marucci Sports PrimaLoft Velocity Outdoor ACI Altor Solutions Arnold Sterno Consolidated
Income (loss) from continuing operations $(29,950) $5,905 $8,935  $(759) $8,095 $4,230  $(8,492) $4,679 $2,426 $2,765 $3,475 $(203) $1,106
Adjusted for:                          
Provision (benefit) for income taxes  16,457   1,906  1,776   (410)  1,166  1,609   (3,570)  1,416  671  805  537  (1,200)  21,163
Interest expense, net  22,725   2  (7)  —   3  3   (4)  70  —  —  7  —   22,799
Intercompany interest  (28,762)  3,503  1,808   1,737   3,263  1,812   3,251   2,997  1,621  2,821  1,402  4,547   —
Loss on debt extinguishment  534   —  —   —   —  —   —   —  —  —  —  —   534
Depreciation and amortization expense  285   5,766  5,577   2,033   3,083  2,504   4,194   3,420  538  4,124  1,936  5,069   38,529
EBITDA  (18,711)  17,082  18,089   2,601   15,610  10,158   (4,621)  12,582  5,256  10,515  7,357  8,213   84,131
Other (income) expense  (73)  709  403   —   —  (1)  260   971  224  110  —  (463)  2,140
Non-controlling shareholder compensation  —   381  621   362   356  537   —   240  124  375  13  232   3,241
Acquisition expenses  —   —  —   —   —  —   5,680   222  —  —  —  —   5,902
Integration services fee  —   —  —   —   562  —   1,063   —  —  —  —  —   1,625
Other  —   —  —   —   —  —   —   —  853  —  —  434   1,287
Adjusted EBITDA $(18,784) $18,172 $19,113  $2,963  $16,528 $10,694  $2,382  $14,015 $6,457 $11,000 $7,370 $8,416  $98,326

Compass Diversified Holdings
Net Income (Loss) from Continuing Operations to Non-GAAP Consolidated Adjusted EBITDA Reconciliation
Three months ended September 30, 2021
(Unaudited)

                       
 Corporate  5.11  BOA Ergo LuganoMarucci Sports Velocity Outdoor ACI Altor Solutions Arnold Sterno Consolidated
Income (loss) from continuing operations$(10,553) $5,223  $4,256 $(531) $681$2,235  $8,568  $3,821 $2,594  $2,245  $181  $18,720 
Adjusted for:                      
Provision (benefit) for income taxes —   1,830   700  329   304 631   2,334   1,093  1,336   1,058   (58)  9,557 
Interest expense, net 13,813   1   —  —   — 1   35   —  —   5   —   13,855 
Intercompany interest (17,717)  2,960   1,958  441   548 697   1,902   1,792  1,657   1,313   4,449   — 
Depreciation and amortization 243   5,868   5,149  2,050   70 2,155   3,161   557  3,206   2,005   5,722   30,186 
EBITDA (14,214)  15,882   12,063  2,289   1,603 5,719   16,000   7,263  8,793   6,626   10,294   72,318 
Other (income) expense (433)  (2)  110  —   22 (11)  (2)  55  (267)  (51)  (453)  (1,032)
Non-controlling shareholder compensation —   639   572  434   — 275   253   124  257   8   330   2,892 
Acquisition expenses 39   —   —  —   1,827 —   —   —  —   —   —   1,866 
Integration services fees —   —   1,100  —   — —   —   —  —   —   —   1,100 
Other 187   273   —  —   — —   —   —  —   —   —   460 
Adjusted EBITDA(1)$(14,421) $16,792  $13,845 $2,723  $3,452$5,983  $16,251  $7,442 $8,783  $6,583  $10,171  $77,604 

(1) As a result of the sale of Liberty Safe in August 2021, Adjusted EBITDA for the three months ended September 30, 2021 does not include $0.2 million in Adjusted EBITDA from Liberty.

Compass Diversified Holdings
Net Income (Loss) from Continuing Operations to Non-GAAP Consolidated Adjusted EBITDA Reconciliation
Nine months ended September 30, 2022
(Unaudited)

                          
 Corporate  5.11 BOA Ergo Lugano Marucci Sports PrimaLoft Velocity Outdoor ACI Altor Solutions Arnold Sterno Consolidated
Income (loss) from continuing operations$(51,431) $15,540 $37,122  $(634) $21,871 $8,374  $(8,492) $7,826 $9,510 $7,149 $7,217 $2,337  $56,389 
Adjusted for:                         
Provision (benefit) for income taxes 12,119   4,999  6,819   432   5,863  2,821   (3,570)  2,372  2,600  2,907  2,768  (929)  39,201 
Interest expense, net 57,559   12  (19)  2   12  13   (4)  142  —  —  20  —   57,737 
Intercompany interest (71,727)  9,501  5,634   4,000   7,841  4,649   3,251   6,987  4,851  7,844  3,947  13,222   — 
Loss on debt extinguishment 534   —  —   —   —  —   —   —  —  —  —  —   534 
Depreciation and amortization expense 862   16,804  16,345   6,061   8,385  9,558   4,194   9,981  1,634  12,254  6,065  15,272   107,415 
EBITDA (52,084)  46,856  65,901   9,861   43,972  25,415   (4,621)  27,308  18,595  30,154  20,017  29,902   261,276 
Other (income) expense (73)  93  498   4   2  (1,829)  260   1,154  251  219  —  (1,185)  (606)
Non-controlling shareholder compensation —   1,210  1,889   1,154   800  1,089   —   742  372  910  38  647   8,851 
Acquisition expenses —   —  —   —   —  —   5,680   222  —  216  —  —   6,118 
Integration services fee —   —  —   —   1,688  —   1,063   —  —  —  —  —   2,751 
Other —   —  —   250   —  1,802   —   —  853  —  —  1,211   4,116 
Adjusted EBITDA$(52,157) $48,159 $68,288  $11,269  $46,462 $26,477  $2,382  $29,426 $20,071 $31,499 $20,055 $30,575  $282,506 

Compass Diversified Holdings
Net Income (Loss) from Continuing Operations to Non-GAAP Consolidated Adjusted EBITDA Reconciliation
Nine months ended September 30, 2021
(Unaudited)

                        
 Corporate  5.11  BOA Ergo Lugano Marucci Sports Velocity Outdoor ACI Altor Solutions Arnold Sterno Consolidated
Income (loss) from continuing operations$(64,717) $14,318  $16,908 $3,071 $681 $9,485 $19,157   10,366 $5,892  $3,839  $1,491  $20,491 
Adjusted for:                       
Provision (benefit) for income taxes —   4,857   2,165  1,357  304  2,920  5,381   2,547  2,867   2,062   202   24,662 
Interest expense, net 42,464   8   —  —  —  5  125   —  —   5   —   42,607 
Intercompany interest (53,234)  8,743   6,320  1,514  548  1,890  5,586   5,484  5,075   4,128   13,946   — 
Loss on debt extinguishment 33,305   —   —  —  —  —  —   —  —   —   —   33,305 
Depreciation and amortization 642   16,762   15,033  6,377  70  6,377  9,489   1,658  9,022   5,822   16,313   87,565 
EBITDA (41,540)  44,688   40,426  12,319  1,603  20,677  39,738   20,055  22,856   15,856   31,952   208,630 
Other (income) expense (286)  (302)  190  —  22  881  2,611   123  (399)  (51)  (883)  1,906 
Non-controlling shareholder compensation —   1,926   1,655  1,241  —  826  777   372  770   16   913   8,496 
Acquisition expenses 39   —   —  —  1,827  —  —   —  —   310   —   2,176 
Integration services fees —   —   3,300  —  —  1,000  —   —  —   —   —   4,300 
Other 1,085   273   —  —  —    (2,300)  —  —   —   333   (609)
Adjusted EBITDA(1)$(40,702) $46,585  $45,571 $13,560 $3,452 $23,384 $40,826  $20,550 $23,227  $16,131  $32,315  $224,899 

(1) As a result of the sale of Liberty Safe in August 2021, Adjusted EBITDA for the nine months ended September 30, 2021 does not include $12.7 million in Adjusted EBITDA from Liberty.

Compass Diversified Holdings
Non-GAAP Adjusted EBITDA
(Unaudited)

  Three months ended September 30, Nine months ended September 30,
(in thousands)  2022   2021   2022   2021 
         
Branded Consumer        
5.11 $18,172  $16,792  $48,159  $46,585 
BOA  19,113   13,845   68,288   45,571 
Ergobaby  2,963   2,723   11,269   13,560 
Lugano(1)  16,528   3,452   46,462   3,452 
Marucci Sports  10,694   5,983   26,477   23,384 
PrimaLoft(2)  2,382   —   2,382   — 
Velocity Outdoor  14,015   16,251   29,426   40,826 
Total Branded Consumer $83,867  $59,046  $232,463  $173,378 
         
Niche Industrial        
Advanced Circuits $6,457  $7,442  $20,071  $20,550 
Altor Solutions  11,000   8,783   31,499   23,227 
Arnold Magnetics  7,370   6,583   20,055   16,131 
Sterno  8,416   10,171   30,575   32,315 
Total Niche Industrial $33,243  $32,979  $102,200  $92,223 
Corporate expense  (18,784)  (14,421)  (52,157)  (40,702)
Total Adjusted EBITDA $98,326  $77,604  $282,506  $224,899 


(1) The above results for Lugano do not include management's estimate of Adjusted EBITDA, before the Company's ownership, of $5.5 million and $24.1 million, respectively, for the three and nine months ended September 30, 2021. Lugano was acquired on September 3, 2021.
   
(2) The above results for PrimaLoft do not include management's estimate of Adjusted EBITDA, before the Company's ownership, of $1.4 million and $24.8 million, respectively, for the three and nine months ended September 30, 2022, and $4.2 million and $20.1 million, respectively, for the three and nine months ended September 30, 2021. PrimaLoft was acquired on July 12, 2022.

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

         
  Three months ended September 30, Nine months ended September 30,
(in thousands)  2022  2021  2022  2021
         
Net Sales $597,607 $488,158 $1,669,123 $1,372,266
Acquisitions (1)  2,319  31,581  55,185  123,446
Pro Forma Net Sales $599,926 $519,739 $1,724,308 $1,495,712

(1) Acquisitions reflects the net sales for Lugano and PrimaLoft on a pro forma basis as if the Company had acquired these businesses on January 1, 2021.

Compass Diversified Holdings
Subsidiary Pro Forma Net Sales
(unaudited)

       
  Three months ended September 30, Nine months ended September 30,
(in thousands)  2022  2021  2022  2021
         
Branded Consumer        
5.11 $126,537 $111,099 $350,608 $321,009
BOA  50,019  39,496  166,215  120,033
Ergobaby  21,540  19,816  68,256  69,100
Lugano(1)  51,145  29,498  137,229  81,881
Marucci Sports  42,753  25,040  122,481  86,328
PrimaLoft(1)  13,031  12,906  65,897  52,388
Velocity Outdoor  75,482  76,901  180,774  205,891
Total Branded Consumer $380,507 $314,756 $1,091,460 $936,630
         
Niche Industrial        
Advanced Circuits $21,788 $23,182 $67,194 $67,209
Altor Solutions  69,618  44,122  199,590  122,582
Arnold Magnetics  39,377  36,852  116,319  101,893
Sterno  88,636  100,827  249,745  267,398
Total Niche Industrial $219,419 $204,983 $632,848 $559,082
         
Total Subsidiary Net Sales $599,926 $519,739 $1,724,308 $1,495,712

(1) Net sales for Lugano and PrimaLoft are pro forma as if the Company had acquired these businesses on January 1, 2021. Historical net sales for Lugano prior to acquisition on September 3, 2021 were $18.7 million and $71.2 million, respectively, for the three and nine months ended September 30, 2021. Historical net sales for PrimaLoft prior to acquisition on July 12, 2022 were $2.3 million and $55.2 million, respectively, for the three and nine months ended September 30, 2022, and $12.9 million and $52.4 million, respectively, for the three and nine months ended September 30, 2021.

Compass Diversified Holdings
Condensed Consolidated Cash Flows
(unaudited)

 Three months ended September 30, Nine months ended September 30,
(in thousands) 2022   2021   2022   2021 
        
Net cash provided by (used in) operating activities$(4,585) $37,714  $(39,923) $147,148 
Net cash used in investing activities (576,713)  (149,733)  (598,951)  (202,429)
Net cash provided by financing activities 538,531   72,195   542,128   54,872 
Foreign currency impact on cash (1,603)  (104)  (2,735)  (96)
Net decrease in cash and cash equivalents (44,370)  (39,928)  (99,481)  (505)
Cash and cash equivalents - beginning of the period 105,622   110,167   160,733   70,744 
Cash and cash equivalents - end of the period$61,252  $70,239  $61,252  $70,239 


Compass Diversified Holding
Selected Financial Data - Cash Flows
(unaudited)
         
  Three months ended September 30, Nine months ended September 30,
(in thousands)  2022   2021   2022   2021 
         
Changes in operating assets and liabilities $(63,998) $(11,566) $(223,164) $(14,720)
Purchases of property and equipment $(15,086) $(11,423) $(39,683) $(28,001)
Distributions paid - common shares $(17,931) $(80,476) $(52,794) $(127,204)
Distributions paid - preferred shares $(6,045) $(6,045) $(18,136) $(18,136)

 


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Source: Compass Diversified Holdings

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