5.11, the tactical brand owned by Compass Diversified Holdings LLC (CODI), posted its second consecutive quarter of double-digit revenue growth and fourth consecutive quarter of double-digit EBITDA growth to headline CODI’s Q4 and 2019 results.
The parent company on Wednesday reported the following results from the fourth quarter and full-year:
- Reported net sales of $387 million for the fourth quarter of 2019 and $1.5 billion for the full-year 2019;
- Reported net income of $5.4 million for the fourth quarter of 2019 and $307.1 million for the full-year 2019;
- Reported non-GAAP Adjusted EBITDA of $61.7 million for the fourth quarter of 2019 and $226.1 million for the full-year 2019;
- Reported Cash Provided by Operating Activities of $53 million for the fourth quarter of 2019 and $84.6 million for the full-year 2019, and non-GAAP Cash Flow Available for Distribution and Reinvestment (“CAD”) of $30 million for the fourth quarter of 2019 and $104 million for the full-year 2019;
- Completed offering of 4,600,000 shares of 7.875 percent Series C Preferred Shares;
- Paid off the remaining $298.8 million of Term Loans;
- Paid a fourth-quarter 2019 cash distribution of $0.36 per share on CODI’s common shares in January 2020 bringing cumulative distributions paid to $18.9552 per common share since CODI’s IPO in May of 2006; and
- Paid a quarterly cash distribution of $0.453125 per share on the company’s 7.250 percent Series A Preferred Shares, $0.4921875 per share on the company’s 7.875 percent Series B Preferred Shares and $0.38281 per share on the company’s 7.875 percent Series C Preferred Shares in January 2020.
“Our success in 2019, both in strengthening our diversified group of leading middle-market businesses and unlocking significant value for shareholders, underscores the benefits of CODI’s permanent capital structure as well as our team’s deep expertise investing across the niche industrial and branded consumer sectors,” said Elias Sabo, CEO of Compass Group Diversified Holdings LLC. “During the year, we generated strong cash flow and the highest full-year CAD since going public and achieved fourth-quarter revenue and EBITDA growth that exceeded expectations. Notably, we have begun to realize accelerated value creation from investments in our subsidiaries, highlighted by 5.11’s second consecutive quarter of double-digit revenue growth and fourth consecutive quarter of double-digit EBITDA growth.”
Operating Results
Net sales for the quarter ended December 31, 2019 were $387 million, as compared to $370.9 million for the quarter ended December 31, 2018. Net sales were $1.5 billion for the year ended December 31, 2019, as compared to $1.4 billion for the year ended December 31, 2018. Net sales for the year ended December 31, 2018 do not include net sales attributable to Ravin prior to CODI’s ownership.
Net income for the quarter ended December 31, 2019 was $5.4 million, as compared to a net loss of $6.5 million for the quarter ended December 31, 2018. For the year ended December 31, 2019, CODI reported a net income of $307.1 million, which included $331 million in gains from sales of Clean Earth and Manitoba Harvest. This compared to a net loss of $1.8 million for the year ended December 31, 2018.
Adjusted EBITDA (see “Note Regarding Use of Non-GAAP Financial Measures” below) for the quarter ended December 31, 2019 was $61.7 million, as compared to $56.5 million for the quarter ended December 31, 2018. Adjusted EBITDA for the year ended December 31, 2019 was $226.1 million, as compared to $202.1 million for the year ended December 31, 2018. Adjusted EBITDA for the year ended December 31, 2018 does not include the results of Ravin prior to CODI’s ownership.
Liquidity and Capital Resources
For the quarter ended December 31, 2019, CODI reported Cash Provided by Operating Activities of $53 million, as compared to Cash Provided by Operating Activities of $55.7 million for the quarter ended December 31, 2018. CODI’s weighted average number of shares outstanding for the quarter ended December 31, 2019, and December 31, 2018, were 59.9 million.
For the year ended December 31, 2019, CODI generated Cash Provided by Operating Activities of $84.6 million, as compared to Cash Provided by Operating Activities of $114.5 million for the year ended December 31, 2018. CODI’s weighted average number of shares outstanding for the twelve-month periods ended December 31, 2019, and December 31, 2018, were 59.9 million.
As of December 31, 2019, CODI had approximately $100.3 million in cash and cash equivalents, $400 million outstanding in 8.00 percent Senior Notes due 2026 and no outstanding borrowings under its revolving credit facility. The company repaid $193.8 million of its 2018 Term Loan in July 2019 and repaid the remaining $298.8 million due under the 2018 Term Loan in November 2019.
The company has no significant debt maturities until 2026 and had net borrowing availability of $596.4 million at December 31, 2019 under its revolving credit facility.
Fourth Quarter 2019 Distributions
On January 6, 2020, 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 23, 2020 to all holders of record of common shares as of January 16, 2020. Since its IPO in 2006, CODI has paid a cumulative distribution of $18.9552 per common share.
The Board also declared a quarterly cash distribution of $0.453125 per share on the company’s 7.250 percent 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, 2019, up to, but excluding, January 30, 2020. The distribution for such period was paid on January 30, 2020 to all holders of record of Series A Preferred Shares as of January 15, 2020.
The Board also declared a quarterly cash distribution of $0.4921875 per share on the company’s 7.875 percent 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, 2019, up to, but excluding, January 30, 2020. The distribution for such period was paid on January 30, 2020 to all holders of record of Series B Preferred Shares as of January 15, 2020.
The Board also declared a quarterly cash distribution of $0.38281 per share on the company’s 7.875 percent Series C Preferred Shares. The distribution on the Series C Preferred Shares covers the period from, and including, November 20, 2019, the original issue date of the Series C Preferred Shares, up to, but excluding, January 30, 2020. The distribution for such period was paid on January 30, 2020 to all holders of record of Series C Preferred Shares as of January 15, 2020.
2020 Guidance
The company expects its current subsidiaries to produce consolidated Adjusted EBITDA in 2020 of between $238 million and $258 million.
Photo courtesy 5.11 Tactical