Compass Diversified Holdings Inc. (CODI) on Wednesday reported net sales for the quarter ended June 30 of $336.1 million, down from $340 million for the prior-year quarter. 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 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 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.
“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.”
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.
CODI reported CAD 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, 2019under 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.