View:
Download DOC
Download PDF
Download XLS
Document


 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
 
 
FORM 8-K
 
 
 
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): July 31, 2019
 
 
 
COMPASS DIVERSIFIED HOLDINGS
(Exact name of registrant as specified in its charter)
 
 
 
Delaware
 
001-34927
 
57-6218917
(State or other jurisdiction
of incorporation)
 
(Commission
File Number)
 
(I.R.S. Employer
Identification No.)
 
 
 
COMPASS GROUP DIVERSIFIED HOLDINGS LLC
(Exact name of registrant as specified in its charter)
 
 
 
Delaware
 
001-34926
 
20-3812051
(State or other jurisdiction
of incorporation)
 
(Commission
File Number)
 
(I.R.S. Employer
Identification No.)
301 Riverside Avenue, Second Floor, Westport, CT 06880
(Address of principal executive offices and zip code)
Registrant’s telephone number, including area code: (203) 221-1703
 
 
 
Check the appropriate box below if the Form 8-K is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
o
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
 
 
o
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
 
 
o
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
 
 
o
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class
 
Trading Symbol(s)
 
Name of Each Exchange on Which Registered
Shares representing beneficial interests in Compass Diversified Holdings
 
CODI
 
New York Stock Exchange
Series A Preferred Shares representing Series A Trust Preferred Interest in Compass Diversified Holdings
 
CODI PR A
 
New York Stock Exchange
Series B Preferred Shares representing Series B Trust Preferred Interest in Compass Diversified Holdings
 
CODI PR B
 
New York Stock Exchange
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
 
 
 
 
Emerging growth company
o
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o




Section 2     Financial Information
Item 2.02    Results of Operations and Financial Condition

On July 31, 2019, Compass Diversified Holdings and Compass Group Diversified Holdings LLC (NYSE: CODI) (collectively “CODI”) issued a press release announcing its consolidated operating results for the three and six months ended June 30, 2019. A copy of the press release is furnished within this report as Exhibit 99.1.


Section 9     Financial Statements and Exhibits
Item 9.01    Financial Statements and Exhibits
(d)    Exhibits.
99.1 Press Release of CODI dated July 31, 2019





SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

Date: July 31, 2019
COMPASS DIVERSIFIED HOLDINGS
 
 
 
 
By:
 
/s/ Ryan J. Faulkingham
 
 
 
 
 
 
Ryan J. Faulkingham
 
 
 
Regular Trustee
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

Date: July 31, 2019
COMPASS GROUP DIVERSIFIED HOLDINGS LLC
 
 
 
 
By:
 
/s/ Ryan J. Faulkingham
 
 
 
 
 
 
Ryan J. Faulkingham
 
 
 
Chief Financial Officer



Exhibit


Exhibit 99.1
https://cdn.kscope.io/0c62ab92754e5e075c9071e76f8753d1-codilogof2a30.jpg

Compass Diversified Holdings
Ryan J. Faulkingham
Chief Financial Officer
203.221.1703
ryan@compassequity.com 
Investor Relations and Media Contact:
The IGB Group
Leon Berman
212.477.8438
lberman@igbir.com
Compass Diversified Holdings Reports Second Quarter 2019 Financial Results

Generates Consolidated Operating Performance In-Line with Management Expectations and Sizeable Distributions to Shareholders

Increases Total Realized Gains to Shareholders to Over $1 Billion from Opportunistic Divestitures
Westport, Conn., July 31, 2019 - Compass Diversified Holdings (NYSE: CODI) (“CODI,” “we,” “our” or the “Company”), an owner of leading middle market businesses, announced today its consolidated operating results for the three months ended June 30, 2019.

Second Quarter 2019 Highlights
•
Reported net sales of $336.1 million;
•
Reported net income of $218.2 million;
•
Reported non-GAAP Adjusted EBITDA of $52.1 million;
•
Reported Cash Provided by Operating Activities of $17.6 million, and non-GAAP Generated Cash Flow Available for Distribution and Reinvestment (“CAD”) of $26.2 million for the second quarter of 2019;
•
Paid a second quarter 2019 cash distribution of $0.36 per share on CODI’s common shares in July 2019, bringing cumulative distributions paid to $18.2352 per common share since CODI’s IPO in May of 2006;
•
Paid a quarterly cash distribution of $0.453125 per share on the Company’s 7.250% Series A Preferred Shares and $0.4921875 per share on the Company's 7.875% Series B Preferred Shares in July 2019;
•
Promoted Pat Maciariello to newly created position of Chief Operating Officer;
•
Completed the sale of our Clean Earth subsidiary for a gain of $206.3 million;
•
Compass Group Management volunteered to waive the management fee on cash balances held at CODI, commencing with the management fee due for the quarter ending June 30, 2019 and continuing until the quarter during which the Company next borrows under its revolving credit facility.
“The first half of 2019 was important for CODI, as we unlocked significant value for shareholders with the opportunistic and attractive divestitures of two subsidiaries, enabling us to significantly strengthen our balance sheet, while Compass Group Management waived the management fee on cash balances held at CODI,” said Elias Sabo, CEO of Compass Diversified Holdings. “For the six-month 2019 period, our leading




branded consumer and niche industrial businesses also generated consolidated operating performance in-line with management expectations and sizable distributions to shareholders.”

Mr. Sabo continued, “We are pleased with CODI’s ongoing investments in our subsidiaries, highlighted by our success monetizing Manitoba Harvest and Clean Earth at attractive valuations, resulting in realized gains for shareholders of over $325 million year-to-date 2019 and over $1 billion since our IPO. Our previous investments in our 5.11 Tactical subsidiary are also evident, as 5.11 generated strong and markedly improved results thus far in 2019. Moving forward, we will continue to work with our world-class management companies to unlock value for shareholders, while implementing our proven and disciplined acquisition strategy and providing annual distributions of $1.44 per share.

Operating Results
Net sales for the quarter ended June 30, 2019 were $336.1 million, as compared to $340.0 million for the quarter ended June 30, 2018. The June 30, 2018 net sales do not include Ravin net sales prior to CODI’s ownership.

Net income for the quarter ended June 30, 2019 was $218.2 million, as compared to net income of $0.5 million for the quarter ended June 30, 2018. Current quarter net income includes the $206.5 million gain on the sale of Clean Earth.

Adjusted EBITDA (see Note Regarding Use of Non-GAAP Financial Measures below) for the quarter ended June 30, 2019 was $52.1 million, as compared to $51.2 million for the quarter ended June 30, 2018. Adjusted EBITDA does not include the results of Ravin prior to CODI’s ownership.

CODI reported CAD (see Note Regarding Use of Non-GAAP Financial Measures below) of $26.2 million for the quarter ended June 30, 2019, as compared to $30.3 million for the prior year’s comparable quarter. CODI’s 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. However, CAD excludes the gains from monetizing interests in CODI’s subsidiaries, which have totaled over $1 billion since going public in 2006. The decrease in CAD versus the prior year quarter is primarily the result of increased financing cost associated with the debt refinancing in April 2018 and the Series B Preferred Share issuance in March 2018.
  
Liquidity and Capital Resources
For the quarter ended June 30, 2019, CODI reported Cash Provided by Operating Activities of $17.6 million, as compared to Cash Provided by Operating Activities of $28.7 million for the quarter ended June 30, 2018.

CODI’s weighted average number of shares outstanding for the quarters ended June 30, 2019 and June 30, 2018 were 59.9 million.

As of June 30, 2019, CODI had approximately $485.9 million in cash and cash equivalents, $493.8 million outstanding on its term loan facility, $400 million outstanding in Senior Notes and no outstanding borrowings under its revolving credit facility. Subsequent to the end of the quarter, CODI prepaid $193.8 million on its term loan facility.

The Company has no significant debt maturities until 2023 and had net borrowing availability of $600 million at June 30, 2019 under its revolving credit facility.





Second Quarter 2019 Distributions
On July 3, 2019, CODI’s Board of Directors (the “Board”) declared a second quarter distribution of $0.36 per share on the Company’s common shares. The cash distribution was paid on July 25, 2019 to all holders of record of common shares as of July 18, 2019. Since its IPO in May of 2006, CODI has paid a cumulative distribution of $18.2352 per common share.
The Board also declared a quarterly cash distribution of $0.453125 per share on the Company’s 7.250% Series A Preferred Shares (the “Series A Preferred Shares”). The distribution on the Series A Preferred Shares covered the period from and including April 30, 2019, up to, but excluding, July 30, 2019. The distribution for such period was paid on July 30, 2019 to all holders of record of Series A Preferred Shares as of July 15, 2019.
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 April 30, 2019, up to, but excluding, July 30, 2019. The distribution for such period was paid on July 30, 2019 to all holders of record of Series B Preferred Shares as of July 15, 2019.

Conference Call
Management will host a conference call on Thursday, August 1, 2019 at 9:00 a.m. ET to discuss the latest corporate developments and financial results. The dial-in number for callers in the U.S. is (855) 212-2368 and the dial-in number for international callers is (315) 625-6886. The access code for all callers is 7355967. A live webcast will also be available on the Company's website at www.compassdiversifiedholdings.com.

A replay of the call will be available through August 8, 2019. To access the replay, please dial (855) 859-2056 in the U.S. and (404) 537-3406 outside the U.S., and then enter the access code 7355967.

Note Regarding Use of Non-GAAP Financial Measures
Adjusted EBITDA is a non-GAAP measure used by the Company to assess its performance. We have reconciled Adjusted EBITDA to Net Income (Loss) on the attached schedules. We consider Net Income (Loss) to be the most directly comparable GAAP financial measure to Adjusted EBITDA. We believe that Adjusted EBITDA provides useful information to investors and reflects important financial measures as it excludes the effects of items which reflect the impact of long-term investment decisions, rather than the performance of near term operations. When compared to Net Income (Loss), Adjusted EBITDA is limited in that it does not reflect the periodic costs of certain capital assets used in generating revenues of our businesses or the non-cash charges associated with impairments, as well as certain cash charges. This presentation also allows investors to view the performance of our businesses in a manner similar to the methods used by us and the management of our businesses, provides additional insight into our operating results and provides a measure for evaluating targeted businesses for acquisition. We believe Adjusted EBITDA is also useful in measuring our ability to service debt and other payment obligations.
CAD is a non-GAAP measure used by the Company to assess its performance, as well as its ability to sustain quarterly distributions. We have reconciled CAD to Net Income (Loss) and Cash Flow from Operating Activities on the attached schedules. We consider Net Income (Loss) and Cash Flow from Operating Activities to be the most directly comparable GAAP financial measures to CAD.
CAD is calculated after taking into account all interest expense, cash taxes paid and maintenance capital expenditures, and includes the operating results of each of our businesses for the periods during which CODI owned them. We believe that CAD provides investors additional information to enable them to evaluate our performance and ability to make anticipated quarterly distributions.
Neither of 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 Holdings (“CODI”)
CODI owns and manages a diverse family of established North American middle market businesses. Each of its current subsidiaries is a leader in its niche market.
CODI maintains controlling ownership interests in each of its subsidiaries in order to maximize its ability to impact long term cash flow generation and value. The Company provides both debt and equity capital for its subsidiaries, contributing to their financial and operating flexibility. CODI utilizes the cash flows generated by its subsidiaries to invest in the long-term growth of the Company and to make cash distributions to its shareholders.

Our eight majority-owned subsidiaries are engaged in the following lines of business:
•
The design and marketing of purpose-built tactical apparel and gear serving a wide range of global customers (5.11);
•
The manufacture of quick-turn, small-run and production rigid printed circuit boards (Advanced Circuits);
•
The manufacture of engineered magnetic solutions for a wide range of specialty applications and end-markets (Arnold Magnetic Technologies);
•
The design and marketing of wearable baby carriers, strollers and related products (Ergobaby);
•
The design and manufacture of custom molded protective foam solutions and OE components (Foam Fabricators);
•
The design and manufacture of premium home and gun safes (Liberty Safe);
•
The manufacture and marketing of portable food warming fuels for the hospitality and consumer markets, flameless candles and house and garden lighting for the home decor market, and wickless candle products used for home decor and fragrance systems (The Sterno Group); and
•
The design, manufacture and marketing of airguns, archery products, optics and related accessories (Velocity Outdoor)

This press release may contain certain forward-looking statements, including statements with regard to the future performance of CODI. Words such as "believes," "expects," "projects," and "future" or similar expressions, are intended to identify forward-looking statements. These forward-looking statements are subject to the inherent uncertainties in predicting future results and conditions. Certain factors could cause actual results to differ materially from those projected in these forward-looking statements, and some of these factors are enumerated in the risk factor discussion in the Form 10-K filed by CODI with the SEC for the year ended December 31, 2018 and other filings with the SEC. Except as required by law, CODI undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.







Compass Diversified Holdings
Condensed Consolidated Statements of Operations
(unaudited)


 
 
 
 
 
 
 
 
 
Three months ended June 30,
 
Six months ended June 30,
(in thousands, except per share data)
2019
 
2018
 
2019
 
2018
Net sales
$
336,084

 
$
339,989

 
$
674,941

 
$
626,119

Cost of sales
213,521

 
221,510

 
432,823

 
403,753

Gross profit
122,563

 
118,479

 
242,118

 
222,366

Operating expenses:
 
 
 
 
 
 
 
Selling, general and administrative expense
80,312

 
81,513

 
161,709

 
161,676

Management fees
8,521

 
10,799

 
19,478

 
21,436

Amortization expense
13,522

 
14,465

 
27,112

 
22,745

Operating income
20,208

 
11,702

 
33,819

 
16,509

Other income (expense):
 
 
 
 
 
 
 
Interest expense, net
(18,445
)
 
(13,474
)
 
(36,899
)
 
(19,592
)
Amortization of debt issuance costs
(928
)
 
(953
)
 
(1,855
)
 
(2,051
)
Loss on sale of Tilray securities
—

 
—

 
(5,300
)
 
—

Other expense, net
(90
)
 
(2,207
)
 
(524
)
 
(3,540
)
Income (loss) from continuing operations before income taxes
745

 
(4,932
)
 
(10,759
)
 
(8,674
)
Provision for income taxes
4,551

 
3,330

 
5,975

 
2,087

Loss from continuing operations
(3,806
)
 
(8,262
)
 
(16,734
)
 
(10,761
)
Income from discontinued operations, net of tax
15,474

 
7,630

 
16,901

 
8,508

Gain on sale of discontinued operations, net of tax
206,505

 
1,165

 
328,164

 
1,165

Net income (loss)
218,173

 
533

 
328,331

 
(1,088
)
Less: Income from continuing operations attributable to noncontrolling interest
1,387

 
1,486

 
2,755

 
1,787

Less: Income (loss) from discontinued operations attributable to noncontrolling interest
252

 
(45
)
 
(266
)
 
374

Net income (loss) attributable to Holdings
$
216,534

 
$
(908
)
 
$
325,842

 
$
(3,249
)
 
 
 
 
 
 
 
 
Basic income (loss) per common share attributable to Holdings
 
 
 
 
 
 
Continuing operations
$
(0.32
)
 
$
(0.25
)
 
$
(0.64
)
 
$
(0.34
)
Discontinued operations
3.70

 
0.14

 
5.77

 
0.16

 
$
3.38

 
$
(0.11
)
 
$
5.13

 
$
(0.18
)
 
 
 
 
 
 
 
 
Basic weighted average number of common shares outstanding
59,900

 
59,900

 
59,900

 
59,900

 
 
 
 
 
 
 
 
Cash distributions declared per Trust common share
$
0.36

 
$
0.36

 
$
0.72

 
$
0.72

 
 
 
 
 
 
 
 






Compass Diversified Holdings
Net Sales to Pro Forma Net Sales Reconciliation
(unaudited)
 
 
 
 
 
 
 
 
 
 
 
Three months ended June 30,
 
Six months ended June 30,
 
 
2019
 
2018
 
2019
 
2018
 
 
 
 
 
 
 
 
 
Net Sales
 
$
336,084

 
$
339,989

 
$
674,941

 
$
626,119

Acquisitions (1)
 
—

 
—

 
—

 
39,828

Pro Forma Net Sales
 
$
336,084

 
$
339,989

 
$
674,941

 
$
665,947

 
 
 
 
 
 
 
 
 
(1)
 
Net sales of Foam Fabricators and Rimports (Sterno Group add-on) as if those businesses were acquired January 1, 2018.
Compass Diversified Holdings
Subsidiary Pro Forma Net Sales
(unaudited)
 
 
 
 
 
 
 
 
 
Three months ended June 30,
 
Six months ended June 30,
(in thousands)
 
2019
 
2018
 
2019
 
2018
 
 
 
 
 
 
 
 
 
Branded Consumer
 
 
 
 
 
 
 
 
5.11 Tactical
 
$
92,836

 
$
84,723

 
$
180,925

 
$
168,680

Ergobaby
 
22,971

 
23,954

 
45,423

 
46,116

Liberty
 
20,633

 
20,416

 
42,837

 
43,869

Velocity Outdoor (2)
 
29,611

 
35,570

 
60,748

 
59,977

Total Branded Consumer
 
$
166,051

 
$
164,663

 
$
329,933

 
$
318,642

 
 
 
 
 
 
 
 
 
Niche Industrial
 
 
 
 
 
 
 
 
Advanced Circuits
 
$
22,439

 
$
22,967

 
$
45,508

 
$
45,030

Arnold Magnetics
 
29,481

 
31,196

 
59,509

 
60,595

Foam Fabricators (1)
 
31,648

 
33,194

 
62,330

 
63,684

Sterno Group (1)
 
86,465

 
87,969

 
177,661

 
177,996

Total Niche Industrial
 
$
170,033

 
$
175,326

 
$
345,008

 
$
347,305

 
 
 
 
 
 
 
 
 
 
 
$
336,084

 
$
339,989

 
$
674,941

 
$
665,947


(1)
 
Foam Fabricators and Rimports (Sterno Group add-on) are proforma as if those businesses were acquired January 1, 2018.
 
 
 
(2)
 
The above 2018 results exclude management's estimate of net sales of $10.7 million and $21.6 million for the three and six months ended June 30, 2018, respectively, at Ravin before our ownership. Ravin was acquired by Velocity Outdoor in August 2018.





Compass Diversified Holdings
Net Income to Adjusted EBITDA and Cash flow Available for Distribution and Reinvestment
(Unaudited)
 
 
 
 
 
 
 
 
 
Three months ended June 30,
 
Six months ended June 30,
(in thousands)
2019
 
2018
 
2019
 
2018
Net income (loss)
$
218,173

 
$
533

 
$
328,331

 
$
(1,088
)
Income from discontinued operations, net of income tax
15,474

 
7,630

 
16,901

 
8,508

Gain on sale of discontinued operations
206,505

 
1,165

 
328,164

 
1,165

Loss from continuing operations
$
(3,806
)
 
$
(8,262
)
 
$
(16,734
)
 
$
(10,761
)
Provision for income taxes
4,551

 
3,330

 
5,975

 
2,087

Income (loss) from continuing operations before income taxes
$
745

 
$
(4,932
)
 
$
(10,759
)
 
$
(8,674
)
Other expense, net
(90
)
 
(2,207
)
 
(524
)
 
(3,540
)
Amortization of debt issuance costs
(928
)
 
(953
)
 
(1,855
)
 
(2,051
)
Loss on sale of securities
—

 
—

 
(5,300
)
 
—

Interest expense, net
(18,445
)
 
(13,474
)
 
(36,899
)
 
(19,592
)
Operating Income
$
20,208

 
$
11,702

 
$
33,819

 
$
16,509

Adjusted For:
 
 
 
 
 
 
 
Depreciation
8,230

 
7,951

 
16,225

 
14,909

Amortization
13,522

 
19,084

 
27,112

 
27,978

Non-controlling shareholder compensation
1,601

 
2,047

 
3,329

 
3,999

Acquisition expenses
—

 
—

 
—

 
2,189

Integration services fees
—

 
938

 
281

 
1,594

Management fees
8,521

 
10,799

 
19,478

 
21,436

Other
(1
)
 
(1,278
)
 
324

 
(905
)
Adjusted EBITDA
$
52,081

 
$
51,243

 
$
100,568

 
$
87,709

Interest at Corporate, net of unused fee (1)
(15,550
)
 
(13,911
)
 
(32,365
)
 
(22,243
)
Swap payment
(209
)
 
(380
)
 
(303
)
 
(1,086
)
Management fees
(8,521
)
 
(10,799
)
 
(19,478
)
 
(21,435
)
Capital expenditures (maintenance)
(4,362
)
 
(6,069
)
 
(8,009
)
 
(10,698
)
Current tax expense (cash taxes) (2)
(2,555
)
 
(1,372
)
 
(6,010
)
 
(3,139
)
Preferred share distributions
(3,782
)
 
(1,812
)
 
(7,563
)
 
(3,625
)
Discontinued operations
9,076

 
12,396

 
16,987

 
18,361

Miscellaneous items
—

 
999

 
—

 
469

Cash Flow Available for Distribution or Reinvestment ('CAD')
$
26,178

 
$
30,295

 
$
43,827

 
$
44,313

 
 
 
(1)
 
Interest expense at Corporate reflects consolidated interest expense less non-cash components such as, unrealized gains and losses on our swap and original issue discount amortization. We include the cash component of our swap payment above in our reconciliation to CAD.
 
 
 
(2)
 
Current tax expense is calculated by deducting the change in deferred tax from the statement of cash flows from the income tax provision on the statement of operations





Compass Diversified Holdings
Adjusted EBITDA (1)
(unaudited)
 
 
 
 
 
 
 
 
 
 
 
Three months ended June 30,
 
Six months ended June 30,
(in thousands)
 
2019
 
2018
 
2019
 
2018
 
 
 
 
 
 
 
 
 
Branded Consumer
 
 
 
 
 
 
 
 
5.11 Tactical
 
$
11,256

 
$
7,862

 
$
19,561

 
$
13,758

Ergobaby
 
5,220

 
6,137

 
10,817

 
10,835

Liberty
 
2,195

 
2,136

 
4,417

 
5,482

Velocity Outdoor (2)
 
3,734

 
5,919

 
7,721

 
9,066

Total Branded Consumer
 
$
22,405

 
$
22,054

 
$
42,516

 
$
39,141

 
 
 
 
 
 
 
 
 
Niche Industrial
 
 
 
 
 
 
 
 
Advanced Circuits
 
$
7,172

 
$
7,211

 
$
14,511

 
$
14,076

Arnold Magnetics
 
3,953

 
4,682

 
7,163

 
8,080

Foam Fabricators (2)
 
7,820

 
7,885

 
15,046

 
11,388

Sterno Group (2)
 
13,840

 
14,120

 
27,740

 
23,028

Total Niche Industrial
 
$
32,785

 
$
33,898

 
$
64,460

 
$
56,572

 
 
 
 
 
 
 
 
 
Corporate expense (3)
 
(3,109
)
 
(4,709
)
 
(6,408
)
 
(8,004
)
Total Adjusted EBITDA
 
$
52,081

 
$
51,243

 
$
100,568

 
$
87,709

(1)
 
Please refer to our recently filed 10-Q for detail on subsidiary pro forma adjusted EBITDA, and reconciliation to net income.
 
 
 
(2)
 
The above 2018 results exclude management's estimate of adjusted EBITDA, before our ownership, of $5.5 million at Rimports, $2.8 million at Foam Fabricators and $6.1 million at Ravin for the six months ended June 30th, and $3.2 million at Ravin for the three months ended June 30th.
 
 
 
(3)
 
Please refer to the recently filed 10-Q for a reconciliation of our Corporate expense to Net Income.





Compass Diversified Holdings
Summarized Statement of Cash Flows
(unaudited)



 
 
 
 
 
Six months ended June 30,
(in thousands)
2019
 
2018
Net cash provided by operating activities
$
8,654

 
$
35,312

Net cash provided by (used in) investing activities
718,000

 
(454,715
)
Net cash (used in) provided by financing activities
(292,750
)
 
415,358

Effect of foreign currency on cash
(1,366
)
 
1,616

Net increase (decrease) in cash and cash equivalents
432,538

 
(2,429
)
Cash and cash equivalents — beginning of period (1)
53,326

 
39,885

Cash and cash equivalents — end of period
$
485,864

 
$
37,456

 
 
 
 


(1) Includes cash from discontinued operations of $4.6 million at January 1, 2019 and $4.2 million at January 1, 2018.





Compass Diversified Holdings
Condensed Consolidated Table of Cash Flow Available for Distribution and Reinvestment
(unaudited)
 
Three months ended June 30,
 
Six months ended June 30,
(in thousands)
2019
 
2018
 
2019
 
2018
Net income (loss)
$
218,173

 
$
533

 
$
328,331

 
$
(1,088
)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
 
 
 
 
 
 
 
Depreciation and amortization
27,853

 
34,198

 
56,491

 
57,131

Gain on sale of business
(206,505
)
 
(1,165
)
 
(328,164
)
 
(1,165
)
Amortization of debt issuance costs and original issue discount
1,080

 
971

 
2,159

 
2,324

Unrealized (gain) loss on derivatives
2,251

 
(999
)
 
3,350

 
(3,900
)
Noncontrolling stockholder charges
3,063

 
2,614

 
5,268

 
5,165

Provision for loss on receivables
49

 
(230
)
 
745

 
98

Other
162

 
312

 
496

 
135

Deferred taxes
(10,043
)
 
1,069

 
(12,366
)
 
(3,242
)
Changes in operating assets and liabilities
(18,493
)
 
(8,634
)
 
(47,656
)
 
(20,146
)
Net cash provided by operating activities
17,590

 
28,669

 
8,654

 
35,312

Plus:
 
 
 
 
 
 
 
Unused fee on revolving credit facility
495

 
403

 
882

 
855

Successful acquisition costs
230

 
158

 
596

 
1,594

Integration services fee (1)
—

 
938

 
281

 
2,347

Realized loss from foreign currency effect (2)
—

 
908

 
363

 
2,247

Changes in operating assets and liabilities
18,493

 
8,634

 
47,656

 
20,146

Loss on sale of Tilray securities
—

 
—

 
5,300

 
—

Other
—

 
1,073

 
—

 
791

Less:
 
 
 
 
 
 
 
Maintenance capital expenditures (3)
6,507

 
8,296

 
11,504

 
14,268

Payment of interest rate swap
209

 
380

 
303

 
1,086

Preferred share distributions
3,782

 
1,812

 
7,563

 
3,625

Other
132

 
—

 
535

 
—

CAD
$
26,178

 
$
30,295

 
$
43,827

 
$
44,313

 
 
 
 
 
 
 
 
Distribution paid in April 2019/ 2018
$
—

 
$
—

 
$
21,564

 
$
21,564

Distribution paid in July 2019/ 2018
21,564

 
21,564

 
21,564

 
21,564

 
$
21,564

 
$
21,564

 
$
43,128

 
$
43,128


(1)
Represents fees paid by newly acquired companies to the Manager for integration services performed during the first year of ownership, payable quarterly.
(2)
Reflects the foreign currency transaction gain/ loss resulting from the Canadian dollar intercompany loans issued to Manitoba Harvest.
(3) 
Excludes growth capital expenditures of approximately $3.9 million and $8.3 million for the three months ended June 30, 2019 and 2018, respectively, and $6.4 million and $14.5 million for the six months ended June 30, 2019 and 2018, respectively.





Compass Diversified Holdings
Maintenance Capital Expenditures
(unaudited)
 
 
 
 
 
 
 
 
 
Three months ended June 30,
 
Six months ended June 30,
(in thousands)
 
2019
 
2018
 
2019
 
2018
Niche Industrial
 
 
 
 
 
 
 
 
Advanced Circuits
 
$
938

 
$
426

 
$
1,126

 
$
523

Arnold Magnetics
 
694

 
871

 
1,806

 
2,123

Foam Fabricators
 
438

 
542

 
936

 
940

Sterno Group
 
769

 
658

 
1,221

 
1,042

Total Niche Industrial
 
$
2,839

 
$
2,497

 
$
5,089

 
$
4,628

 
 
 
 
 
 
 
 
 
Branded Consumer
 
 
 
 
 
 
 
 
5.11 Tactical
 
$
1,124

 
$
1,067

 
$
1,336

 
$
2,429

Ergobaby
 
166

 
119

 
237

 
407

Liberty
 
181

 
874

 
307

 
935

Velocity Outdoor
 
52

 
1,512

 
1,040

 
2,299

Total Branded Consumer
 
$
1,523

 
$
3,572

 
$
2,920

 
$
6,070

 
 
 
 
 
 
 
 
 
Total maintenance capital expenditures
 
$
4,362

 
$
6,069

 
$
8,009

 
$
10,698






Compass Diversified Holdings
Condensed Consolidated Balance Sheets
 
 
 
 
 
June 30, 2019
 
December 31, 2018
(in thousands)
(unaudited)
 
 
Assets
 
 
 
Current assets
 
 
 
Cash and cash equivalents
$
485,864

 
$
48,771

Accounts receivable, net
187,321

 
205,545

Inventories
327,657

 
307,437

Prepaid expenses and other current assets
85,280

 
29,670

Current assets of discontinued operations
—

 
89,762

Total current assets
1,086,122

 
681,185

Property, plant and equipment, net
143,313

 
146,601

Goodwill and intangible assets, net
1,060,018

 
1,086,707

Other non-current assets
96,538

 
8,378

Non-current assets of discontinued operations
—

 
449,464

Total assets
$
2,385,991

 
$
2,372,335

 
 
 
 
Liabilities and stockholders’ equity
 
 
 
Current liabilities
 
 
 
Accounts payable and accrued expenses
$
178,966

 
$
183,781

Due to related party
8,045

 
11,093

Current portion, long-term debt
5,000

 
5,000

Other current liabilities
26,650

 
6,912

Current liabilities of discontinued operations
—

 
52,494

Total current liabilities
218,661

 
259,280

Deferred income taxes
33,813

 
33,984

Long-term debt
869,918

 
1,098,871

Other non-current liabilities
86,818

 
12,615

Non-current liabilities of discontinued operations
—

 
48,243

Total liabilities
1,209,210

 
1,452,993

Stockholders' equity
 
 
 
Total stockholders' equity attributable to Holdings
1,130,804

 
859,372

Noncontrolling interest
45,977

 
39,922

Noncontrolling interest of discontinued operations
—

 
20,048

Total stockholders' equity
1,176,781

 
919,342

Total liabilities and stockholders’ equity
$
2,385,991

 
$
2,372,335