Compass Diversified Holdings reported revenue for the third quarter ended September 30 of $448.7 million, up 38.5 percent from $324 million a year ago and beating Wall Street estimates by $39.2 million.

The company’s net income was $5.8 million as compared to net income of $8.4 million for the quarter ended September 30, 2017.

“We continued to generate revenue and cash flow growth in the third quarter, led by the strong performance of our industrial businesses,” said Elias Sabo, CEO of Compass Diversified Holdings. “We also continued to provide stable and sizeable distributions to shareholders, highlighting the benefit of our proven model of owning diverse and uncorrelated leading middle market businesses.”

Sabo continued, “During the nine-month 2018 period, CODI has completed six accretive acquisitions, capitalizing on a compelling opportunity to acquire Foam Fabricators while reinvesting in a number of our leading subsidiaries. During the third quarter, we are pleased to have added Ravin Crossbows, one of the most recognizable brands amongst crossbow enthusiasts, to the Velocity Outdoor portfolio of leading hunting, shooting and outdoor brands. Looking ahead, we will continue to draw upon our strong financial position to seek opportunities to further implement our disciplined investment strategy aimed at creating long-term shareholder value.”

Third Quarter 2018 Highlights

  • Generated cash provided by operating activities of $23.5 million for the third quarter of 2018 and cash flow available for distribution and reinvestment of $26.4 million for the third quarter of 2018;
  • Reported net income of $5.8 million for the third quarter of 2018;
  • Announced add-on acquisition of Ravin Crossbows LLC by CODI’s subsidiary, Velocity Outdoor Inc.;
  • Paid a third quarter 2018 cash distribution of $0.36 per share on CODI’s common shares in October 2018, bringing cumulative distributions paid to $17.1552 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 percent Series A Preferred Shares in October 2018;
  • Paid a quarterly cash distribution of $0.4921875 per share on the company’s 7.875 percent Series B Preferred Shares in October 2018.

Operating Results
For the quarter ended September 30, 2018, CODI generated Cash Provided by Operating Activities of $23.5 million, as compared to Cash Provided by Operating Activities of $23.4 million for the quarter ended September 30, 2017. CODI reported Cash Flow (see Note Regarding Use of Non-GAAP Financial Measures below) of $26.4 million for the quarter ended September 30, 2018, as compared to $26.2 million for the prior year’s comparable quarter. CODI’s weighted average number of shares outstanding for the quarters ended September 30, 2018 and September 30, 2017 were 59.9 million.

Cash Flow for the third quarter of 2018 reflects year-over-year earnings increases at the company’s Advanced Circuits, Arnold Magnetics, Clean Earth, Sterno Products and 5.11 businesses offset by declines at the company’s Liberty, ErgoBaby and Manitoba Harvest businesses.

CODI’s Cash Flow is calculated after taking into account all interest expense, cash taxes paid, preferred share distributions and maintenance capital expenditures and includes the operating results of each of the company’s businesses for the periods during which CODI owned them. However, Cash Flow excludes the gains from monetizing interests in CODI’s subsidiaries which have totaled over $770 million since going public in 2006.

Liquidity and Capital Resources
As of September 30, 2018, CODI had approximately $36.2 million in cash and cash equivalents, $497.5 million outstanding on its term loan facility, $400 million in Senior Notes and $233.0 million in outstanding borrowings under its revolving credit facility.

The company has no significant debt maturities until 2023 and had net borrowing availability of approximately $367 million at September 30, 2018 under its revolving credit facility.

Third Quarter 2018 Distributions
On October 4, 2018, CODI’s board of directors declared a third quarter distribution of $0.36 per share on the company’s common shares (the “Common Shares”). The cash distribution was paid on October 25, 2018 to all holders of common shares as of October 18, 2018. Since its IPO in May of 2006, CODI has paid a cumulative distribution of $17.1552 per common share.

The board declared a quarterly cash distribution of $0.453125 per share on the company’s 7.250 percent Series A Preferred Shares (the “Preferred Shares”). The distribution on the Preferred Shares covered the period from and including July 30, 2018, up to, but excluding, October 30, 2018. The distribution for such period was paid on October 30, 2018 to all holders of record of Preferred Shares as of October 15, 2018.

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 covered the period from and including July 30, 2018, up to, but excluding, October 30, 2018. The distribution for such period was paid on October 30, 2018 to all holders of record of the Series B Preferred Shares as of October 15, 2018.

Photo courtesy 5.11