Compass Diversified Studies Fourth Quarter and Full Yr 2020 Monetary Outcomes NYSE:CODI

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Compass Diversified Reports Fourth Quarter and Full Year 2020 Financial Results NYSE:CODI

Branded Consumer Performance Drives Strong Fourth Quarter Operating Results, Increasing Revenue from Prior Year and Beating Management’s Expectations

Permanent Capital Advantage Positioned CODI to Acquire Two Platform Businesses and Complete Strategic Add-Ons in 2020

Full-Year Results Demonstrate Benefits of Diversified Model in Navigating Volatility

WESTPORT, Conn., Feb. 24, 2021 (GLOBE NEWSWIRE) — Compass Diversified (NYSE: CODI) (“CODI” or the “Company”), an owner of leading middle market businesses, announced today its consolidated operating results for the three and twelve months ended December 31, 2020.

Fourth Quarter and Full Year 2020 Highlights

  • Reported net sales of $474.8 million for the fourth quarter 2020 and $1.561 billion for the full year 2020;
  • Reported net income of $8.8 million for the fourth quarter 2020 and $27.2 million for the full year 2020;
  • Reported non-GAAP Adjusted EBITDA of $79.8 million for the fourth quarter 2020 and $249.2 million for the full year 2020;
  • Reported Cash Provided by Operating Activities of $35.8 million for the fourth quarter 2020 and $148.6 million for the full year 2020, and non-GAAP Cash Flow Available for Distribution and Reinvestment (“CAD”) of $36.0 million for the fourth quarter 2020 and $110.6 million for the full year 2020;
  • Paid a fourth quarter 2020 cash distribution of $0.36 per share on CODI’s common shares in January 2021; 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, 2021.

“I am incredibly proud of our strong fourth quarter and full year results, which underscore how CODI’s differentiated model has continued to perform across economic cycles,” said Elias Sabo, CEO of Compass Diversified. “We drove impressive organic growth year-over-year and our permanent capital strategy enabled us to take advantage of multiple exciting opportunities in the market. At a time when uncertainty and unprecedented volatility paralyzed many market participants, we acquired Marucci and BOA, two highly aspirational and rapidly growing consumer businesses, and we have already begun to see the impact of these strong brands.”

Mr. Sabo continued, “Our performance in 2020 is also a testament to the strategic diversification across our portfolio and the high quality of our subsidiary companies. We look forward to continuing to partner with our leading niche brands to enhance value for shareholders in the year to come.”

Operating Results

Net sales for the quarter ended December 31, 2020 were $474.8 million, as compared to $387.0 million for the quarter ended December 31, 2019. Net sales were $1.561 billion for the year ended December 31, 2020, as compared to $1.450 billion for the year ended December 31, 2019.

Net income for the quarter ended December 31, 2020 was $8.8 million, as compared to $5.4 million for the quarter ended December 31, 2019. For the year ended December 31, 2020, CODI reported net income of $27.2 million compared to net income of $307.1 million, which included $331.0 million in gains from sales of Clean Earth and Manitoba Harvest, for the year ended December 31, 2019.

Adjusted EBITDA (see “Note Regarding Use of Non-GAAP Financial Measures” below) for the quarter ended December 31, 2020 was $79.8 million, as compared to $61.7 million for the quarter ended December 31, 2019. Adjusted EBITDA for the year ended December 31, 2020 was $249.2 million, as compared to $226.1 million for the year ended December 31, 2019. The year-over-year increase in Adjusted EBITDA for the fourth quarter and full year 2020 was primarily a result of our 2020 acquisitions of BOA and Marucci, as well as strong performance in the branded consumer companies.

Liquidity and Capital Resources

For the quarter ended December 31, 2020, CODI reported Cash Provided by Operating Activities of $35.8 million, as compared to Cash Provided by Operating Activities of $53.0 million for the quarter ended December 31, 2019.

CODI reported CAD (see “Note Regarding Use of Non-GAAP Financial Measures” below) of $36.0 million for the quarter ended December 31, 2020, as compared to $30.0 million for the prior year’s comparable quarter. CODI’s CAD is calculated after taking into account all interest expenses, cash taxes paid, preferred distributions and maintenance capital expenditures, and includes the operating results of each of our businesses for the periods during which CODI owned them. However, CAD excludes the gains from monetizing interests in CODI’s subsidiaries, which have totaled over $1.0 billion since going public in 2006.

CODI’s weighted average number of shares outstanding for the quarter ended December 31, 2020 was 64.9 million, and for the quarter ended December 31, 2019 was 59.9 million.

As of December 31, 2020, CODI had approximately $70.7 million in cash and cash equivalents, $307 million outstanding on its revolver and $600 million outstanding in 8.00% Senior Notes due 2026.

The Company has no significant debt maturities until 2026 and had net borrowing availability of $292 million at December 31, 2020 under its revolving credit facility.

Fourth Quarter 2020 Distributions

On January 4, 2021, CODI’s Board of Directors (the “Board”) declared a fourth quarter distribution of $0.36 per share on the Company’s common shares. The cash distribution was paid on January 22, 2021 to all holders of record of common shares as of January 15, 2021. Since its IPO in 2006, CODI has paid a cumulative distribution of $20.3952 per common share.

The Board also declared a quarterly cash distribution of $0.453125 per share on the Company’s 7.250% Series A Preferred Shares (the “Series A Preferred Shares”). The distribution on the Series A Preferred Shares covers the period from, and including, October 30, 2020, up to, but excluding, January 30, 2021. The distribution for such period was payable on January 30, 2021 to all holders of record of Series A Preferred Shares as of January 15, 2021. The payment occurred on February 1, 2021, the next business day following the payment date.

The Board also declared a quarterly cash distribution of $0.4921875 per share on the Company’s 7.875% Series B Preferred Shares (the “Series B Preferred Shares”). The distribution on the Series B Preferred Shares covers the period from, and including, October 30, 2020, up to, but excluding, January 30, 2021. The distribution for such period was payable on January 30, 2021 to all holders of record of Series B Preferred Shares as of January 15, 2021. The payment occurred on February 1, 2021, the next business day following the payment date.

The Board also declared a quarterly cash distribution of $0.4921875 per share on the Company’s 7.875% Series C Preferred Shares (the “Series C Preferred Shares”). The distribution on the Series C Preferred Shares covers the period from, and including, October 30, 2020, up to, but excluding, January 30, 2021. The distribution for such period was payable on January 30, 2021 to all holders of record of Series C Preferred Shares as of January 15, 2021. The payment occurred on February 1, 2021, the next business day following the payment date.

Guidance Update

The Company expects its current subsidiaries to produce consolidated Adjusted EBITDA (see “Note Regarding Use of Non-GAAP Financial Measures” below) in 2021 of between $305 million and $325 million. This estimate is based on the summation of our expectations for our current subsidiaries in 2021, absent additional acquisitions or divestitures, and excludes corporate expense such as interest expense, management fees and corporate overhead. In addition, our Payout Ratio (see “Note Regarding Use of Non-GAAP Financial Measures” below), defined as our prior year’s annual distribution to common shareholders divided by our 2021 estimate for CAD, is anticipated to be between 80% and 70%.  

Corporate Structure

The Company is exploring a change in its tax structure, including the possibility of electing to be taxed as a C corporation. The Company is evaluating the costs and benefits of such a change, as well as the implications of current and future tax law, corporate law, and the potential impacts of such a change to the Company’s access to the capital markets, distribution policy, corporate debt ratings, cost of capital, amongst many other considerations. The Company expects to provide updates on this process as appropriate.

Conference Call

Management will host a conference call on Wednesday, February 24, 2021 at 5:00 p.m. ET to discuss the latest corporate developments and financial results. The dial-in number for callers in the U.S. is (833) 900-1532 and the dial-in number for international callers is (236) 712-2273. The access code for all callers is 1291438. 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 March 3, 2021. To access the replay, please dial (800) 585-8367 in the U.S. and (416) 621-4642 outside the U.S., and then enter the access code 1291438.

Note Regarding Use of Non-GAAP Financial Measures

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

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

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

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

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

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

About Compass Diversified (“CODI”)

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

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

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

  • The design and marketing of purpose-built technical apparel and gear serving a wide range of global customers (5.11);
  • The manufacture of quick-turn, small-run and production rigid printed circuit boards (Advanced Circuits);
  • The design and manufacture of custom packaging, insulation and componentry (Altor Solutions);
  • The manufacture of engineered magnetic solutions for a wide range of specialty applications and end-markets (Arnold Magnetic Technologies);
  • The design and marketing of dial-based fit systems that deliver performance fit across footwear, headwear and medical bracing products (BOA Technology);
  • The design and marketing of wearable baby carriers, strollers and related products (Ergobaby);
  • The design and manufacture of premium home and gun safes (Liberty Safe);
  • The design and manufacture of baseball and softball equipment and apparel (Marucci Sports);
  • The manufacture and marketing of portable food warming systems used in the foodservice industry, creative indoor and outdoor lighting, and home fragrance solutions for the consumer markets (Sterno); and
  • The design, manufacture and marketing of airguns, archery products, optics and related accessories (Velocity Outdoor).

Forward Looking Statements

This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include, but are not limited to, statements as to our future performance or liquidity, such as expectations regarding our results of operations, financial condition and cash flows for the full year of 2021, our 2021 Total Adjusted EBITDA, 2021 Payout Ratio and 2021 CAD and our ability to meet existing obligations as well as other statements with regard to the future performance of CODI. We may use words such as “anticipate,” “believe,” “expect,” “intend,” “will,” “should,” “may,” “seek,” “look,” and similar expressions to identify forward-looking statements. 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. Forward-looking statements involve risks and uncertainties, including, but not limited to, changes in the economy, financial markets and political environment, including the impact, in the near, medium and long-term, of the COVID-19 pandemic or social or political unrest on our business, results of operations, financial position, liquidity, cash flows or ability to make distributions; our business prospects and the prospects of our portfolio companies; risks associated with possible disruption in CODI’s operations or the economy generally due to terrorism and natural disasters; future changes in laws or regulations (including the interpretation of these laws and regulations by regulatory authorities); the impact of investments that we make or expect to make; the dependence of our future success on the general economy and its impact on the industries in which we operate; the ability of our portfolio companies to achieve their objectives; the adequacy of our cash resources and working capital; the timing of cash flows, if any, from the operations of our portfolio companies; whether a change in tax structure will be made, and if made, the timing, terms or benefits of such change; 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:
The IGB Group
Leon Berman
212-477-8438
lberman@igbir.com 
Media Contact:
Joele Frank, Wilkinson Brimmer Katcher
Jon Keehner / Kate Thompson / Lyle Weston
212-355-4449

Compass Diversified Holdings
Consolidated Statements of Operations

               
  Three months ended December 31,   Twelve months ended December 31,
(in thousands, except per share data) 2020   2019   2020   2019
Net sales $ 474,778     $ 386,999     $ 1,560,757     $ 1,450,253  
Cost of sales 302,672     246,209     997,976     930,810  
Gross profit 172,106     140,790     562,781     519,443  
Operating expenses:              
Selling, general and administrative expense 110,414     91,445     371,264     335,181  
Management fees 11,313     8,678     34,749     37,030  
Amortization expense 18,429     13,523     61,935     54,155  
Impairment expense     (500 )       32,881  
Operating income 31,950     27,644     94,833     60,196  
Other income (expense):              
Interest expense, net (13,646 )   (9,792 )   (45,768 )   (58,216 )
Amortization of debt issuance costs (659 )   (689 )   (2,454 )   (3,314 )
Loss on paydown of debt     (7,281 )       (12,319 )
Loss on sale of Tilray securities             (10,193 )
Other expense, net (448 )   (972 )   (2,620 )   (2,185 )
Income (loss) from continuing operations before income taxes 17,197     8,910     43,991     (26,031 )
Provision for income taxes 8,417     4,367     16,894     14,742  
Income (loss) from continuing operations 8,780     4,543     27,097     (40,773 )
Income from discontinued operations, net of income tax             16,901  
Gain on sale of discontinued operations     810     100     331,013  
Net income 8,780     5,353     27,197     307,141  
Less: Income from continuing operations attributable to noncontrolling interest 414     1,545     4,417     5,542  
Less: Loss from discontinued operations attributable to noncontrolling interest             (266 )
Net income attributable to Holdings $ 8,366     $ 3,808     $ 22,780     $ 301,865  
               
Basic income (loss) per common share attributable to Holdings            
Continuing operations $ (0.06 )   $ (0.79 )   $ (0.34 )   $ (2.17 )
Discontinued operations     0.01         5.81  
  $ (0.06 )   $ (0.78 )   $ (0.34 )   $ 3.64  
               
Basic weighted average number of common shares outstanding 64,900     59,900     63,151     59,900  
               
Cash distributions declared per Trust common share $ 0.36     $ 0.36     $ 1.44     $ 1.44  
Compass Diversified Holdings
Net Sales to Pro Forma Net Sales Reconciliation
(unaudited)
                 
    Three months ended December 31,   Twelve months ended December 31,
(in thousands)   2020   2019   2020   2019
                 
Net Sales   $ 474,778     $ 386,999     $ 1,560,757     $ 1,450,253  
Acquisitions (1)   3,913     44,977     103,587     172,800  
Pro Forma Net Sales   $ 478,691     $ 431,976     $ 1,664,344     $ 1,623,053  

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

Compass Diversified Holdings
Subsidiary Net Sales
(unaudited)
             
    Three months ended December 31,   Twelve months ended December 31,
(in thousands)   2020   2019   2020   2019
                 
Branded Consumer                
5.11   $ 119,284     $ 109,667     $ 401,106     $ 388,645  
BOA (1)   29,193     28,440     106,365     106,276  
Ergobaby   15,557     21,253     74,728     89,995  
Liberty   32,516     28,598     113,115     96,164  
Marucci Sports (1)   18,633     16,537     65,942     66,524  
Velocity Outdoor   67,756     40,449     215,996     147,842  
Total Branded Consumer   $ 282,939     $ 244,944     $ 977,252     $ 895,446  
                 
Niche Industrial                
Advanced Circuits   $ 20,652     $ 23,386     $ 88,075     $ 90,791  
Arnold Magnetics   22,543     29,544     98,990     119,948  
Foam Fabricators   40,708     27,790     130,046     121,424  
Sterno   111,849     106,312     369,981     395,444  
Total Niche Industrial   $ 195,752     $ 187,032     $ 687,092     $ 727,607  
                 
Total Subsidiary Net Sales   $ 478,691     $ 431,976     $ 1,664,344     $ 1,623,053  

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

Compass Diversified Holdings
Net Income to Adjusted EBITDA and Cash Flow Available for Distribution and Reinvestment
(Unaudited)
               
  Three months ended December 31,   Twelve months ended December 31,
(in thousands) 2020   2019   2020   2019
Net income $ 8,780     $ 5,353     $ 27,197     $ 307,141  
Income from discontinued operations, net of income tax             16,901  
Gain on sale of discontinued operations     810     100     331,013  
Income (loss) from continuing operations $ 8,780     $ 4,543     $ 27,097     $ (40,773 )
Provision for income taxes 8,417     4,367     16,894     14,742  
Income (loss) from continuing operations before income taxes $ 17,197     $ 8,910     $ 43,991     $ (26,031 )
Other expense, net (448 )   (8,253 )   (2,620 )   (14,504 )
Amortization of debt issuance costs (659 )   (689 )   (2,454 )   (3,314 )
Loss on sale of Tilray securities             (10,193 )
Interest expense, net (13,646 )   (9,792 )   (45,768 )   (58,216 )
Operating income $ 31,950     $ 27,644     $ 94,833     $ 60,196  
Adjusted For:              
Depreciation 9,262     8,526     34,954     33,153  
Amortization 19,912     13,523     67,798     54,155  
Noncontrolling shareholder compensation 2,879     1,789     8,995     6,054  
Acquisition expenses 2,517         4,832      
Integration services fees 1,625         2,125     281  
Management fees 11,313     8,678     34,749     37,030  
Impairment expense     (500 )       32,881  
Earnout provision adjustment     2,022         2,022  
Other 325         922     324  
Adjusted EBITDA $ 79,783     $ 61,682     $ 249,208     $ 226,096  
Interest at Corporate, net of unused fee (1) (13,491 )   (9,281 )   (44,604 )   (52,417 )
Swap payment             (675 )
Management fees (11,313 )   (8,678 )   (34,749 )   (37,030 )
Capital expenditures (maintenance) (6,717 )   (7,244 )   (17,084 )   (18,510 )
Current tax expense (cash taxes) (2) (5,846 )   (2,706 )   (17,675 )   (15,288 )
Preferred share distributions (6,045 )   (3,781 )   (23,678 )   (15,125 )
Discontinued operations             16,987  
Miscellaneous items (378 )       (772 )    
Cash Flow Available for Distribution and Reinvestment (“CAD”) $ 35,993     $ 29,992     $ 110,646     $ 104,038  
(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
(Unaudited)
Year ended December 31, 2020
    Corporate   5.11   BOA   Ergobaby   Liberty   Marucci Sports   Velocity Outdoor   ACI   Arnold   Foam Fabricators   Sterno   Consolidated
Net income (loss)   $ (19,065 )   $ 12,356     $ (2,640 )   $ 725     $ 9,902     $ (4,785 )   $ 11,161     $ 13,170     $ (3,539 )   $ 6,092     $ 3,820     $ 27,197  
Adjusted for:                                                
Provision (benefit) for income taxes       1,808     (535 )   2,033     3,288     (1,390 )   3,560     3,431     (198 )   2,554     2,343     16,894  
Interest expense, net   45,610     19                 7     131                 1     45,768  
Intercompany interest   (70,449 )   14,085     2,043     2,405     3,548     1,843     8,915     5,778     5,730     7,084     19,018      
Depreciation and amortization   399     21,483     5,589     8,199     1,742     10,203     12,781     2,773     6,805     12,722     22,510     105,206  
EBITDA   (43,505 )   49,751     4,457     13,362     18,480     5,878     36,548     25,152     8,798     28,452     47,692     195,065  
Gain on sale of business   (100 )                                           (100 )
Other (income) expense       1,420     39         7     (42 )   931     154     9     (38 )   140     2,620  
Non-controlling shareholder compensation       2,489     469     1,156     29     634     1,549     495     (20 )   1,028     1,166     8,995  
Acquisition expenses           2,517             2,042                 273         4,832  
Integration services fee           1,125             1,000                         2,125  
Other   324             598                                 922  
Management fees   29,402     1,000     250     500     500     347     500     500     500     750     500     34,749  
Adjusted EBITDA   $ (13,879 )   $ 54,660     $ 8,857     $ 15,616     $ 19,016     $ 9,859     $ 39,528     $ 26,301     $ 9,287     $ 30,465     $ 49,498     $ 249,208  
Compass Diversified Holdings
Adjusted EBITDA
(Unaudited)
Year ended December 31, 2019
    Corporate   5.11   Ergobaby   Liberty   Velocity Outdoor   ACI   Arnold   Foam Fabricators   Sterno   Consolidated
Net income (loss) (1)   $ 282,240     $ 2,059     $ 4,793     $ 3,130     $ (36,982 )   $ 14,970     $ 700     $ 2,883     $ 16,447     $ 290,240  
Adjusted for:                                        
Provision (benefit) for income taxes       2,520     2,250     932     (2,782 )   3,896     1,280     1,258     5,388     14,742  
Interest expense, net   57,980     (24 )   17         242     (2 )   (1 )       4     58,216  
Intercompany interest   (80,556 )   17,567     3,325     4,364     11,194     6,543     6,295     8,635     22,633      
Loss on debt extinguishment   12,319                                     12,319  
Depreciation and amortization   1,598     21,540     8,561     1,667     13,222     2,551     6,545     12,452     22,486     90,622  
EBITDA   273,581     43,662     18,946     10,093     (15,106 )   27,958     14,819     25,228     66,958     466,139  
Gain on sale of business   (331,013 )                                   (331,013 )
(Gain) loss on sale of fixed assets   92     (122 )   (11 )   16     952     122     1     1,247     (112 )   2,185  
Non-controlling shareholder compensation       2,360     828     (8 )   322     288     56     1,025     1,183     6,054  
Impairment expense                   32,881                     32,881  
Inventory adjustment                               281         281  
Adjustment to earnout provision                   2,022                     2,022  
(Gain) loss on foreign currency transaction and other   10,193                                     10,193  
Integration services fee               266         58                 324  
Management fees   32,280     1,000     500     500     500     500     500     750     500     37,030  
Adjusted EBITDA   $ (14,867 )   $ 46,900     $ 20,263     $ 10,867     $ 21,571     $ 28,926     $ 15,376     $ 28,531     $ 68,529     $ 226,096  
Compass Diversified Holdings
Adjusted EBITDA
(unaudited)
                 
    Three months ended December 31,   Twelve months ended December 31,
(in thousands)   2020   2019   2020   2019
                 
Branded Consumer                
5.11   $ 18,336     $ 15,290     $ 54,660     $ 46,900  
BOA (1)   8,857         8,857      
Ergobaby   1,823     3,574     15,616     20,263  
Liberty   5,105     3,243     19,016     10,867  
Marucci Sports (2)   5,244         9,859      
Velocity Outdoor   14,489     5,607     39,528     21,571  
Total Branded Consumer   $ 53,854     $ 27,714     $ 147,536     $ 99,601  
                 
Niche Industrial                
Advanced Circuits   $ 5,414     $ 7,521     $ 26,301     $ 28,926  
Arnold Magnetics   1,314     3,766     9,287     15,376  
Foam Fabricators   8,454     5,856     30,465     28,531  
Sterno   14,654     22,010     49,498     68,529  
Total Niche Industrial   $ 29,836     $ 39,153     $ 115,551     $ 141,362  
Corporate expense (3)   (3,907 )   (5,185 )   (13,879 )   (14,867 )
Total Adjusted EBITDA   $ 79,783     $ 61,682     $ 249,208     $ 226,096  
(1 )   The above results for BOA does not include management’s estimate of Adjusted EBITDA, before our ownership, of $0.3 million and $24.5 million, respectively, for the three months and twelve months ended December 31, 2020, and $7.1 million and $30.2 million, respectively, for the three and twelve months ended December 31, 2019. BOA was acquired on October 16, 2020.
     
(2 )   The above results for Marucci Sports does not include management’s estimate of Adjusted EBITDA, before our ownership, of $3.9 million for the twelve months ended December 31, 2020, and $3.2 million and $14.2 million, respectively, for the three and twelve months ended December 31, 2019. Marucci Sports was acquired on April 20, 2020.
     
(3 )   Please refer to the recently filed Form 10-K for a reconciliation of our Corporate expense to Net Income.

Compass Diversified Holdings
Summarized Statement of Cash Flows
(unaudited)

       
  Twelve months ended December 31,
(in thousands) 2020   2019
Net cash provided by operating activities $ 148,625     $ 84,562  
Net cash (used in) provided by investing activities (700,834 )   743,126  
Net cash provided by (used in) financing activities 521,725     (779,522 )
Effect of foreign currency on cash 914     (1,178 )
Net increase (decrease) in cash and cash equivalents (29,570 )   46,988  
Cash and cash equivalents — beginning of period (1) 100,314     53,326  
Cash and cash equivalents — end of period $ 70,744     $ 100,314  
       

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

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

  Three months ended December 31,   Twelve months ended December 31,
(in thousands) 2020   2019   2020   2019
Net income (loss) $ 8,780     $ 5,353     $ 27,197     $ 307,141  
Adjustments to reconcile net income (loss) to net cash provided by operating activities:              
Depreciation and amortization 29,174     22,049     102,752     100,462  
Gain on sale of business     (810 )   (100 )   (331,013 )
Impairment expense     (500 )       32,881  
Amortization of debt issuance costs and premium/ discount 576     751     2,232     3,773  
Unrealized loss on interest rate hedge     14         3,500  
Noncontrolling stockholder charges 2,879     1,789     8,995     7,993  
Provision for reserves (1,565 )   770     2,809     3,556  
Other 396     8,478     2,172     14,438  
Deferred taxes 2,571     1,662     (781 )   (12,876 )
Changes in operating assets and liabilities (7,058 )   13,423     3,349     (45,293 )
Net cash provided by operating activities 35,753     52,979     148,625     84,562  
Plus:              
Unused fee on revolving credit facility 238     458     1,386     1,851  
Successful acquisition costs 2,517         4,832     596  
Integration services fee (1) 1,625         2,125     281  
Realized loss from foreign currency effect (2)             363  
Changes in operating assets and liabilities 7,058             45,293  
Loss on sale of Tilray securities             10,193  
Earnout provision adjustment     2,022         2,022  
Less:              
Maintenance capital expenditures (3) 6,718     7,245     17,084     22,005  
Payment of interest rate swap             675  
Changes in operating assets and liabilities     13,423     3,349      
Preferred share distributions 6,045     3,781     23,678     15,125  
Other (4) (1,565 )   1,018     2,211     3,318  
CAD $ 35,993     $ 29,992     $ 110,646     $ 104,038  
               
Distribution paid in April 2020/ 2019 $     $     $ 21,564     $ 21,564  
Distribution paid in July 2020/ 2019         23,364     21,564  
Distribution paid in October 2020/ 2019         23,364     21,564  
Distribution paid in January 2021/ 2020 23,364     21,564     23,364     21,564  
  $ 23,364     $ 21,564     $ 91,656     $ 86,256  

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

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

(3) Represents maintenance capital expenditures that were funded from operating cash flow, net of proceeds from the sale of property, plant and equipment, and excludes growth capital expenditures of approximately $4.0 million and $5.7 million, respectively, for the three months ended December 31, 2020 and 2019, and $13.7 million and $16.4 million, respectively, for the twelve months ended December 31, 2020 and 2019.

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

Compass Diversified Holdings
Maintenance Capital Expenditures
(unaudited)
             
    Three months ended December 31,   Twelve months ended December 31,
(in thousands)   2020   2019   2020   2019
Branded Consumer                
5.11   $ 365     $ 696       $ 1,262     $ 2,243  
Boa   794           794      
Ergobaby   108     22       482     605  
Liberty   266     (186 )     704     534  
Marucci Sports   629           849      
Velocity Outdoor   1,108     803       3,851     2,899  
Total Branded Consumer   $ 3,270     $ 1,335       $ 7,942     $ 6,281  
                 
Niche Industrial                
Advanced Circuits   $ 240     $ 3,663       $ 594     $ 4,790  
Arnold Magnetics   2,123     988       4,884     3,862  
Foam Fabricators   769     359       2,287     1,746  
Sterno Group   316     899       1,377     1,831  
Total Niche Industrial   $ 3,448     $ 5,909       $ 9,142     $ 12,229  
                 
Total maintenance capital expenditures   $ 6,718     $ 7,244       $ 17,084     $ 18,510  

Compass Diversified Holdings
Condensed Consolidated Balance Sheets

       
  December 31, 2020   December 31, 2019
(in thousands)      
Assets      
Current assets      
Cash and cash equivalents $ 70,744     $ 100,314  
Accounts receivable, net 232,507     191,405  
Inventories 363,373     317,306  
Prepaid expenses and other current assets 41,743     35,247  
Total current assets 708,367     644,272  
Property, plant and equipment, net 172,669     146,428  
Goodwill and intangible assets, net 1,603,168     1,000,465  
Other non-current assets 114,314     100,727  
Total assets $ 2,598,518     $ 1,891,892  
       
Liabilities and stockholders’ equity      
Current liabilities      
Accounts payable and accrued expenses $ 253,798     $ 178,857  
Due to related party 10,238     8,049  
Current portion, long-term debt      
Other current liabilities 30,679     22,573  
Total current liabilities 294,715     209,479  
Deferred income taxes 83,541     33,039  
Long-term debt 899,460     394,445  
Other non-current liabilities 100,654     89,054  
Total liabilities 1,378,370     726,017  
Stockholders’ equity      
Total stockholders’ equity attributable to Holdings 1,100,024     1,115,327  
Noncontrolling interest 120,124     50,548  
Total stockholders’ equity 1,220,148     1,165,875  
Total liabilities and stockholders’ equity $ 2,598,518     $ 1,891,892