Compass Diversified (CODI) reported 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, representing a gain of 22.7 percent.
CODI’s business holdings include 5.11, Liberty Safe, Boa Technology, Marucci Sports and Velocity Outdoor in the active lifestyle space. Other businesses include Advanced Circuits, Arnold Magnetic Technologies, Ergobaby, Foam Fabricators, and Sterno.
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 a net income of $27.2 million compared to a 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 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.
“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.”
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 (cash available for distribution) 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 percent 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 declared a fourth-quarter distribution of 36 cents 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 percent 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 percent 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 percent Series C Preferred Shares.
Guidance Update
The company expects its current subsidiaries to produce consolidated Adjusted EBITDA in 2021 of between $305 million and $325 million. This estimate is based on the summation of its expectations for the current subsidiaries in 2021, absent additional acquisitions or divestitures and excludes corporate expenses such as interest expense, management fees and corporate overhead. In addition, the Payout Ratio, defined as the prior year’s annual distribution to common shareholders divided by 2021 estimate for CAD, is anticipated to be between 80 percent and 70 percent.
Photo courtesy CODI