• Compass Diversified Reports Fourth Quarter and Full Year 2023 Financial Results

    ソース: Nasdaq GlobeNewswire / 28 2 2024 15:15:01   America/Chicago

    WESTPORT, Conn., Feb. 28, 2024 (GLOBE NEWSWIRE) -- Compass Diversified (NYSE: CODI) (“CODI” or the “Company”), an owner of leading middle market branded consumer and industrial businesses, announced today its consolidated operating results for the three and twelve months ended December 31, 2023.

    “Our fourth quarter results exceeded our expectations and demonstrate that owning premium businesses with defensible competitive moats drives strong financial performance,” said Elias Sabo, CEO of Compass Diversified. “At a consolidated level, our business saw strong revenue, net income, and Subsidiary Adjusted EBITDA growth in the fourth quarter led by Lugano Diamonds. While the economic backdrop remains uncertain for many, our diversified business model continues to shine, and has us feeling optimistic that we will provide a strong shareholder return in the coming year.”

    Sabo continued: “Our differentiated competitive advantage of a permanent capital structure and a lower cost of capital enabled our opportunistic sale of Marucci Sports in November and our acquisition of The Honey Pot Company in early 2024. Inclusive of The Honey Pot Company acquisition, we expect to see above trend growth in consolidated financial performance in 2024, on a pro forma basis.”

    Fourth Quarter and Full Year 2023 Financial Summary vs. Same Year-Ago Period (where applicable)

    • Net sales in the fourth quarter up 7% to $567.0 million. For the full year 2023, net sales up 2% to $2.1 billion, and roughly flat on a pro forma basis.
    • Branded consumer net sales in the fourth quarter up 13% to $371.9 million. For the full year 2023, branded consumer pro forma net sales up 3% to $1.3 billion.
    • Industrial net sales in the fourth quarter down 3% to $195.1 million. For the full year 2023, industrial net sales down 5% to $728.5 million.
    • Net income in the fourth quarter of $139.4 million vs. $8.7 million last year. For the full year 2023, net income of $262.4 million vs. $51.4 million. The increase in both periods was primarily due to the $179.5 million gain on the sale of Marucci Sports in November 2023 and the $98.0 million gain on the sale of Advanced Circuits in February 2023.
    • Loss from continuing operations in the fourth quarter of $36.4 million vs. $4.6 million in the prior year period. For the full year 2023, loss from continuing operations of $38.7 million vs. income from continuing operations of $3.7 million for full year 2022. The increases in net loss from continuing operations were primarily due to non-cash impairment charges associated with PrimaLoft and Velocity Outdoor.
    • Adjusted Earnings, a non-GAAP financial measure, in the fourth quarter was $38.1 million vs. $16.3 million for the fourth quarter of 2022. For the full year 2023, Adjusted Earnings was $116.7 million vs. $110.2 million in the prior year.
    • Adjusted EBITDA, a non-GAAP financial measure, in the fourth quarter was up 35% to $94.8 million. For the full year 2023, Adjusted EBITDA was up 11% to $340.9 million.
    • Paid a fourth quarter 2023 cash distribution of $0.25 per share on CODI's common shares in January 2024.

    Recent Business Highlights

    • On February 1, 2024, CODI announced the completion of its partnership with The Honey Pot Company, a leading “better-for-you” feminine care brand, for an enterprise value of $380 million.
    • On January 17, 2024, CODI hosted an Investor Day in Newport Beach, California, showcasing its Lugano Diamonds and 5.11 subsidiaries. A replay of the Lugano Diamonds and Compass Diversified presentations has been made available on the Investor Relations page of the Company’s website at compassdiversified.com.
    • On December 21, 2023, CODI announced the completion of a private placement of approximately 3.6 million of its common shares to a mutual fund managed by Allspring Global Investments, LLC for $21.18 per share, or an aggregate sale price of approximately $75.2 million, before commissions and expenses.
    • On December 19, 2023, PrimaLoft Inc., a subsidiary of CODI and a leading provider of branded, high-performance synthetic insulation and materials used primarily in consumer outerwear and accessories, announced the appointment of Anne Cavassa as CEO.
    • On November 15, 2023, CODI announced the completion of the sale of Marucci Sports to Fox Factory Holding Corp. (Nasdaq: FOXF) for an enterprise value of $572 million. CODI realized a $179.5 million gain on the sale of Marucci Sports.

    Fourth Quarter and Full Year 2023 Financial Results

    Net sales in the fourth quarter of 2023 were $567.0 million, up 7% compared to $529.7 million in the fourth quarter of 2022. For the full year 2023, net sales were $2.1 billion, up 2% compared to $2.0 billion a year ago. This was driven by a 63% increase in Lugano net sales, somewhat offset by lower net sales at PrimaLoft and Velocity Outdoor due to inventory destocking headwinds and reduced wholesale demand. On a pro forma basis, assuming CODI had acquired PrimaLoft on January 1, 2022, net sales were roughly flat in the full year 2023.

    Branded consumer net sales increased 13% in the fourth quarter of 2023 to $371.9 million compared to the fourth quarter of 2022. On a pro forma basis, branded consumer net sales increased 3% to $1.3 billion in the full year 2023 compared to a year ago.

    Industrial net sales decreased 3% in the fourth quarter of 2023 to $195.1 million compared to the fourth quarter of 2022, and decreased 5% to $728.5 million in the full year 2023 compared to a year ago.

    Operating loss for the fourth quarter of 2023 was $4.0 million compared to operating income of $26.8 million in the fourth quarter of 2022. For the full year 2023, operating income decreased 31% to $90.1 million compared to $130.8 million a year ago. The decline was primarily due to a $56.8 million non-cash impairment expense associated with PrimaLoft in the fourth quarter of 2023.

    Net income in the fourth quarter of 2023 was $139.4 million compared to net income of $8.7 million in the fourth quarter of 2022. For the full year 2023, net income was $262.4 million compared to $51.4 million a year ago. The increases in net income were due primarily to the $179.5 million gain on the sale of Marucci Sports in November 2023 and the $98.0 million gain on the sale of Advanced Circuits in February 2023.

    Loss from continuing operations in the fourth quarter of 2023 was $36.4 million compared to $4.6 million in the fourth quarter of 2022. For the full year 2023, loss from continuing operations was $38.7 million compared to income from continuing operations of $3.7 million a year ago. The increases in net loss from continuing operations were primarily due to the non-cash impairment expenses associated with PrimaLoft and Velocity Outdoor.

    Adjusted Earnings (see “Note Regarding Use of Non-GAAP Financial Measures” below) for the fourth quarter of 2023 was $38.1 million compared to $16.3 million a year ago. For the full year 2023, Adjusted Earnings was $116.7 million compared to $110.2 million a year ago. CODI's weighted average number of shares outstanding in the fourth quarter of 2023 was 72.43 million compared to 72.20 million in the prior year fourth quarter. For the full year 2023, CODI’s weighted average number of shares outstanding was 72.11 million compared to 70.72 million in 2022.

    Adjusted EBITDA (see “Note Regarding Use of Non-GAAP Financial Measures” below) in the fourth quarter of 2023 was $94.8 million, up 35% compared to $70.0 million in the fourth quarter of 2022. For the full year 2023, Adjusted EBITDA was $340.9 million, up 11% compared to $306.0 million a year ago. The increases were primarily due to strong results at Lugano and the Company’s Industrial subsidiaries. The Company no longer adds back management fees in its calculation of Adjusted EBITDA. Management fees incurred during the fourth quarter and full year were $16.9 million and $68.4 million, respectively.

    Liquidity and Capital Resources

    As of December 31, 2023, CODI had approximately $450.5 million in cash and cash equivalents, $2.2 million outstanding on its revolver, $385.0 million outstanding in term loans, $1.0 billion outstanding in 5.250% Senior Notes due 2029 and $300.0 million outstanding in 5.000% Senior Notes due 2032.

    As of December 31, 2023, the Company had no significant debt maturities until 2027 and had net borrowing availability of approximately $598 million under its revolving credit facility.

    Fourth Quarter 2023 Distributions

    On January 4, 2024, CODI’s Board declared a fourth quarter distribution of $0.25 per share on the Company's common shares. The cash distribution was paid on January 25, 2024, to all holders of record of common shares as of January 18, 2024.

    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, 2023, up to, but excluding, January 30, 2024. The distribution for such period was payable on January 30, 2024, to all holders of record of Series A Preferred Shares as of January 15, 2024.

    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, 2023, up to, but excluding, January 30, 2024. The distribution for such period was payable on January 30, 2024, to all holders of record of Series B Preferred Shares as of January 15, 2024.

    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, 2023, up to, but excluding, January 30, 2024. The distribution for such period was payable on January 30, 2024, to all holders of record of Series C Preferred Shares as of January 15, 2024.

    2024 Outlook

    CODI expects its current subsidiaries, inclusive of The Honey Pot Company as if we owned it from January 1, 2024, to produce consolidated Subsidiary Adjusted EBITDA (see “Note Regarding Use of Non-GAAP Financial Measures” below) for the full year 2024 of between $480 million and $520 million. Of this range, CODI expects its Branded Consumer vertical to produce $355 million to $385 million and its Industrial vertical to produce $125 million to $135 million. This estimate is based on the summation of the Company’s expectations for its current subsidiaries in 2024, and is absent additional acquisitions or divestitures, and excludes corporate expenses such as interest expense, management fees paid by CODI and corporate overhead.

    CODI is now providing guidance for Adjusted EBITDA (see “Note Regarding Use of Non-GAAP Financial Measures” below) including management fees and corporate expenses, and expects to earn between $390 million and $430 million for the full year 2024. Adjusted EBITDA only includes results from The Honey Pot Company from the date of acquisition.

    In addition, the Company expects to earn between $145 million and $160 million in Adjusted Earnings (see “Note Regarding Use of Non-GAAP Financial Measures” below) for the full year 2024.

    In reliance on the unreasonable efforts exception provided under Item 10(e)(1)(i)(B) of Regulation S-K, CODI has not reconciled 2024 consolidated Subsidiary Adjusted EBITDA, 2024 Adjusted EBITDA or 2024 Adjusted Earnings to their comparable GAAP measure because it does not provide guidance on Income (Loss) from Continuing Operations or Net Income (Loss) or the applicable reconciling items as a result of the uncertainty regarding, and the potential variability of, these items. For the same reasons, CODI is unable to address the probable significance of the unavailable information, which could be material to future results.

    Conference Call

    Management will host a conference call on Wednesday, February 28, 2024, 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 (888) 259-6580 and the dial-in number for international callers is (416) 764-8624. The Conference ID is 60782779. The conference call will also be available via a live listen-only webcast and can be accessed through the Investor Relations section of CODI's website. An online replay of the webcast will be available on the same website following the call. Please allow extra time prior to the call to visit the site and download any necessary software that may be needed to listen to the Internet broadcast. A replay of the call will be available through Wednesday, March 6, 2024. To access the replay, please dial (877) 674-7070 in the U.S. and (416) 764-8692 outside the U.S.

    Note Regarding Use of Non-GAAP Financial Measures

    Adjusted EBITDA and Adjusted Earnings are non-GAAP measures used by the Company to assess its performance. We have reconciled Adjusted EBITDA to Income (Loss) from Continuing Operations and Adjusted Earnings to Net Income (Loss) on the attached schedules. We consider Income (Loss) from Continuing Operations to be the most directly comparable GAAP financial measure to Adjusted EBITDA and Net Income (Loss) to be the most directly comparable GAAP financial measure to Adjusted Earnings. We believe that Adjusted EBITDA and Adjusted Earnings provides useful information to investors and reflect important financial measures as each 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) and Income (Loss) from Continuing Operations, Adjusted Earnings and Adjusted EBITDA, respectively, are each limited in that they do 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. The presentation of Adjusted EBITDA 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. The presentation of Adjusted Earnings provides insight into our operating results and provides a measure for evaluating earnings from continuing operations available to common shareholders.

    Pro forma net sales is defined as net sales including the historical net sales relating to the pre-acquisition periods of PrimaLoft, assuming that the Company acquired PrimaLoft on January 1, 2022. We have reconciled pro forma net sales to net sales, the most directly comparable GAAP financial measure, on the attached schedules. We believe that pro forma net sales is useful information for investors as it provides a better understanding of sales performance, and relative changes thereto, on a comparable basis. Pro forma net sales is not necessarily indicative of what the actual results would have been if the acquisition had in fact occurred on the date or for the periods indicated nor does it purport to project net sales for any future periods or as of any date.

    In reliance on the unreasonable efforts exception provided under Item 10(e)(1)(i)(B) of Regulation S-K, we have not reconciled 2024 consolidated Subsidiary Adjusted EBITDA, 2024 Adjusted EBITDA or 2024 Adjusted Earnings to their comparable GAAP measures because we do not provide guidance on Net Income (Loss) from Continuing Operations or Net Income (Loss) 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.

    Adjusted EBITDA, Adjusted Earnings and pro forma net sales are not 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

    Since its founding in 1998 and IPO in 2006, CODI has consistently executed on its strategy of owning and managing a diverse set of highly defensible, middle-market businesses across the industrial, branded consumer, and healthcare sectors. The Company leverages its permanent capital base, long-term disciplined approach, and actionable expertise to maintain 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. For more information, please visit compassdiversified.com.

    Forward Looking Statements

    Certain statements in this press release may be deemed 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 and financial condition, our 2024 consolidated Subsidiary Adjusted EBITDA, our 2024 Adjusted EBITDA, our 2024 Adjusted Earnings, our pending acquisitions and divestitures, and other statements with regard to the future performance of CODI. We may use words such as “plans,” “anticipate,” “believe,” “expect,” “intend,” “will,” “should,” “may,” “seek,” “look,” and similar expressions to identify forward-looking statements. The forward-looking statements contained in this press release involve risks and uncertainties. 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. Other factors that could cause actual results to differ materially include: changes in the economy, financial markets and political environment, including changes in inflation and interest rates; risks associated with possible disruption in CODI’s operations or the economy generally due to terrorism, war, natural disasters, social, civil and political unrest or the COVID-19 pandemic; future changes in laws or regulations (including the interpretation of these laws and regulations by regulatory authorities); environmental risks affecting the business or operations of our subsidiaries; disruption in the global supply chain, labor shortages and high labor costs; our business prospects and the prospects of our subsidiaries; the impact of, and ability to successfully complete and integrate, acquisitions that we may make; the ability to successfully complete when we’ve executed divestitures agreements; the dependence of our future success on the general economy and its impact on the industries in which we operate; the ability of our subsidiaries 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 subsidiaries; 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
    irinquiry@compassdiversified.com

    Gateway Group
    Cody Slach
    949.574.3860
    CODI@gateway-grp.com

    Media Relations
    Mediainquiry@compassdiversified.com

    The IGB Group
    Leon Berman
    212.477.8438
    lberman@igbir.com

     
    Compass Diversified Holdings
    Condensed Consolidated Balance Sheets
         
    (in thousands) December 31, 2023 December 31, 2022
         
    Assets    
    Current assets    
    Cash and cash equivalents $450,477  $56,599 
    Accounts receivable, net  318,241   297,722 
    Inventories, net  740,387   680,545 
    Prepaid expenses and other current assets  94,715   73,200 
    Current assets of discontinued operations     102,119 
    Total current assets  1,603,820   1,210,185 
    Property, plant and equipment, net  192,562   184,501 
    Goodwill  901,428   991,007 
    Intangible assets, net  923,905   1,015,497 
    Other non-current assets  195,266   162,392 
    Non-current assets of discontinued operations     286,049 
    Total assets $3,816,981  $3,849,631 
         
    Liabilities and stockholders’ equity    
    Current liabilities    
    Accounts payable $93,412  $82,942 
    Accrued expenses  150,725   177,245 
    Deferred revenue  6,731   7,093 
    Due to related parties  16,025   15,495 
    Current portion, long-term debt  10,000   10,000 
    Other current liabilities  35,465   35,286 
    Current liabilities of discontinued operations     31,771 
    Total current liabilities  312,358   359,832 
    Deferred income taxes  120,131   142,627 
    Long-term debt  1,661,879   1,824,468 
    Other non-current liabilities  203,232   139,267 
    Non-current liabilities of discontinued operations     21,475 
    Total liabilities  2,297,600   2,487,669 
    Stockholders' equity    
    Total stockholders' equity attributable to Holdings  1,326,750   1,136,920 
    Noncontrolling interest  192,631   203,464 
    Noncontrolling interest of discontinued operations     21,578 
    Total stockholders' equity  1,519,381   1,361,962 
    Total liabilities and stockholders’ equity $3,816,981  $3,849,631 


    Compass Diversified Holdings
    Consolidated Statements of Operations
             
      Three months ended December 31, Year ended December 31,
    (in thousands, except per share data)  2023   2022   2023   2022 
    Net revenues $566,989  $529,682  $2,058,876  $2,009,130 
    Cost of revenues  320,682   327,934   1,165,553   1,226,078 
    Gross profit  246,307   201,748   893,323   783,052 
    Operating expenses:        
    Selling, general and administrative expense  152,626   132,969   549,589   484,369 
    Management fees  16,909   17,050   68,445   62,604 
    Amortization expense  23,914   24,886   95,820   84,689 
    Impairment expense  56,832      89,400   20,552 
    Operating income (loss)  (3,974)  26,843   90,069   130,838 
    Other income (expense):        
    Interest expense, net  (24,826)  (25,768)  (105,179)  (83,492)
    Amortization of debt issuance costs  (1,004)  (1,005)  (4,038)  (3,740)
    Loss on debt extinguishment           (534)
    Other income (expense), net  (357)  (1,349)  1,743   (2,321)
    Net income (loss) before income taxes  (30,161)  (1,279)  (17,405)  40,751 
    Provision (benefit) for income taxes  6,254   3,313   21,331   37,093 
    Income (loss) from continuing operations  (36,415)  (4,592)  (38,736)  3,658 
    Income (loss) from discontinued operations, net of income tax  (3,674)  10,800   18,116   38,387 
    Gain on sale of discontinued operations  179,530   2,500   283,025   9,393 
    Net income  139,441   8,708   262,405   51,438 
    Less: Net income (loss) attributable to noncontrolling interest  2,555   (1,131)  15,945   10,367 
    Less: Net income (loss) from discontinued operations attributable to noncontrolling interest  (551)  1,255   174   4,684 
    Net income attributable to Holdings $137,437  $8,584  $246,286  $36,387 
             
    Basic income (loss) per common share attributable to Holdings        
    Continuing operations $(0.74) $(0.50) $(1.71) $(0.66)
    Discontinued operations  2.44   0.16   4.17   0.56 
      $1.70  $(0.34) $2.46  $(0.10)
             
    Basic weighted average number of common shares outstanding  72,429   72,203   72,105   70,715 
             
    Cash distributions declared per Trust common share $0.25  $0.25  $1.00  $1.00 


    Compass Diversified Holdings
    Net Income to Non-GAAP Adjusted Earnings and Non-GAAP Adjusted EBITDA - 2023
    (Unaudited)
         
      Three months ended Year ended
    (in thousands) March 31, 2023 June 30, 2023 September 30, 2023 December 31, 2023 December 31, 2023
    Net income (loss) $109,601  $17,123  $(3,760) $139,441  $262,405 
    Gain on sale of discontinued operations, net of tax  97,989   4,232   1,274   179,530   283,025 
    Income (loss) from discontinued operations, net of tax  10,000   2,840   8,950   (3,674)  18,116 
    Net income (loss) from continuing operations $1,612  $10,051  $(13,984) $(36,415) $(38,736)
    Less: income from continuing operations attributable to noncontrolling interest  4,171   3,498   5,721   2,555   15,945 
    Net income (loss) attributable to Holdings - continuing operations $(2,559) $6,553  $(19,705) $(38,970) $(54,681)
    Adjustments:          
    Distributions paid - preferred shares  (6,045)  (6,046)  (6,045)  (6,045)  (24,181)
    Amortization expense - intangible assets and inventory step-up  25,148   23,977   23,956   23,914   96,995 
    Impairment expense        32,568   56,832   89,400 
    Tax effect - impairment expense        (4,308)  978   (3,330)
    Non-controlling interest - impairment expense           (5,382)  (5,382)
    Non-controlling shareholder compensation  1,641   3,207   2,750   3,067   10,665 
    Acquisition expense           321   321 
    Integration services fee  1,187   1,188         2,375 
    Other  432   348   349   3,377   4,506 
    Adjusted earnings $19,804  $29,227  $29,565  $38,092  $116,688 
    Plus (less):          
    Depreciation expense  11,155   12,107   11,994   11,291   46,547 
    Income tax provision  6,920   4,320   3,837   6,254   21,331 
    Interest expense  26,180   26,613   27,560   24,826   105,179 
    Amortization of debt issuance costs  1,005   1,024   1,005   1,004   4,038 
    Income from continuing operations attributable to noncontrolling interest  4,171   3,498   5,721   2,555   15,945 
    Distributions paid - preferred shares  6,045   6,046   6,045   6,045   24,181 
    Tax effect - impairment expense        4,308   (978)  3,330 
    Non-controlling interest - impairment expense           5,382   5,382 
    Other  (1,160)  105   (1,045)  357   (1,743)
    Adjusted EBITDA $74,120  $82,940  $88,990  $94,828  $340,878 


    Compass Diversified Holdings
    Net Income (Loss) to Non-GAAP Adjusted Earnings and Non-GAAP Adjusted EBITDA - 2022
    (Unaudited)
               
      Three months ended Year ended
    (in thousands) March 31, 2022 June 30, 2022 September 30, 2022 December 31, 2022 December 31, 2022
    Net income (loss) $29,740  $30,957  $2,585  $(11,844) $51,438 
    Gain (loss) on sale of discontinued operations, net of tax  5,993   (579)  1,479   2,500   9,393 
    Income from discontinued operations, net of tax  13,059   4,371   10,157   10,800   38,387 
    Net income (loss) from continuing operations $10,688  $27,165  $(9,051) $(25,144) $3,658 
    Less: income (loss) from continuing operations attributable to noncontrolling interest  4,388   3,813   3,297   (1,131)  10,367 
    Net income (loss) attributable to Holdings - continuing operations $6,300  $23,352  $(12,348) $(24,013) $(6,709)
    Adjustments:          
    Distributions paid - preferred shares  (6,045)  (6,046)  (6,045)  (6,045)  (24,181)
    Amortization expense - intangible assets and inventory step-up  19,691   20,258   24,400   26,454   90,803 
    Impairment expense           20,552   20,552 
    Tax effect - impairment expense           (3,557)  (3,557)
    Non-controlling interest - impairment expense           (3,120)  (3,120)
    Loss on debt extinguishment        534      534 
    Non-controlling shareholder compensation  2,405   2,404   2,581   4,608   11,998 
    Acquisition expense  216      5,902      6,118 
    Integration services fee  563   563   1,625   1,312   4,063 
    Corporate tax effect     (4,338)  16,457      12,119 
    Other     1,027   434   119   1,580 
    Adjusted earnings $23,130  $37,220  $33,540  $16,310  $110,200 
    Plus (less):          
    Depreciation expense  9,450   9,741   10,149   10,690   40,030 
    Income tax provision  7,970   6,926   18,884   3,313   37,093 
    Corporate tax effect     4,338   (16,457)     (12,119)
    Tax effect - impairment expense           3,557   3,557 
    Non-controlling interest - impairment expense           3,120   3,120 
    Interest expense  17,419   17,509   22,796   25,768   83,492 
    Amortization of debt issuance costs  866   865   1,004   1,005   3,740 
    Income from continuing operations attributable to noncontrolling interest  4,388   3,813   3,297   (1,131)  10,367 
    Distributions paid - preferred shares  6,045   6,046   6,045   6,045   24,181 
    Other  (226)  (718)  1,916   1,349   2,321 
    Adjusted EBITDA $69,042  $85,740  $81,174  $70,026  $305,982 


    Compass Diversified Holdings
    Net Income (Loss) from Continuing Operations to Non-GAAP Consolidated Adjusted EBITDA Reconciliation
    Three Months Ended December 31, 2023
    (Unaudited)
                           
    (in thousands) Corporate  5.11  BOA Ergo Lugano PrimaLoft Velocity Outdoor Altor Solutions Arnold Sterno Consolidated
    Net income (loss) from continuing operations $(10,847) $9,840  $1,345  $(1,487) $20,847  $(64,383) $(3,183) $4,260  $3,523  $3,670  $(36,415)
    Adjusted for:                      
    Provision (benefit) for income taxes  301   1,004   639   (37)  4,293   (2,549)  289   1,797   921   (406)  6,252 
    Interest expense, net  24,732   (4)  (9)        (2)  120      (11)     24,826 
    Intercompany interest  (35,402)  4,546   2,548   2,111   10,177   4,780   3,440   2,303   1,728   3,769    
    Depreciation and amortization  342   6,143   5,496   1,998   2,258   5,394   3,259   4,183   2,193   4,943   36,209 
    EBITDA  (20,874)  21,529   10,019   2,585   37,575   (56,760)  3,925   12,543   8,354   11,976   30,872 
    Other (income) expense     (412)  (19)  7   (75)  (66)  (31)  1,239   (4)  (280)  359 
    Non-controlling shareholder compensation     203   950   278   162   761   228   186   1   298   3,067 
    Impairment expense                 57,810   (978)           56,832 
    Acquisition expenses           321                     321 
    Other        3,072                     305   3,377 
    Adjusted EBITDA $(20,874) $21,320  $14,022  $3,191  $37,662  $1,745  $3,144  $13,968  $8,351  $12,299  $94,828 


    Compass Diversified Holdings
    Net Income (Loss) from Continuing Operations to Non-GAAP Consolidated Adjusted EBITDA Reconciliation
    Three Months Ended December 31, 2022
    (Unaudited)
                           
    (in thousands) Corporate  5.11  BOA Ergo Lugano PrimaLoft Velocity Outdoor Altor Solutions Arnold Sterno Consolidated
    Net income (loss) from continuing operations $(16,856) $7,093  $5,491  $(18,035) $6,063  $(9,249) $(3,699) $2,513  $466  $1,069  $(25,144)
    Adjusted for:                      
    Provision (benefit) for income taxes     2,126   (292)  (4,706)  6,026   (308)  (810)  267   561   449   3,313 
    Interest expense, net  25,684   (12)  (6)  8   4   (3)  87      6      25,768 
    Intercompany interest  (29,950)  4,260   1,776   2,026   4,932   4,261   3,295   2,898   1,571   4,931    
    Depreciation and amortization  342   6,168   5,648   2,033   3,148   6,271   3,393   4,149   1,976   5,021   38,149 
    EBITDA  (20,780)  19,635   12,617   (18,674)  20,173   972   2,266   9,827   4,580   11,470   42,086 
    Other (income) expense  15   (310)  545   2      (148)  1,263   547   (20)  (545)  1,349 
    Non-controlling shareholder compensation     301   622   325   379   2,142   229   411   2   197   4,608 
    Impairment expense           20,552                     20,552 
    Integration services fee                 1,313               1,313 
    Other                             119   119 
    Adjusted EBITDA $(20,765) $19,626  $13,784  $2,205  $20,552  $4,279  $3,758  $10,785  $4,562  $11,241  $70,027 


    Compass Diversified Holdings
    Net Income (Loss) from Continuing Operations to Non-GAAP Consolidated Adjusted EBITDA Reconciliation
    Year ended December 31, 2023
    (Unaudited)
                           
    (in thousands) Corporate  5.11  BOA Ergo Lugano PrimaLoft Velocity Outdoor Altor Solutions Arnold Sterno Consolidated
    Net income (loss) from continuing operations $(51,761) $21,690  $16,496  $(2,601) $52,315  $(69,883) $(40,045) $16,504  $10,434  $8,115  $(38,736)
    Adjusted for:                      
    Provision (benefit) for income taxes  301   4,994   2,863   (1,309)  14,589   (5,672)  (5,616)  5,890   4,185   1,106   21,331 
    Interest expense, net  104,855   (8)  (18)     4   (11)  352      5      105,179 
    Intercompany interest  (134,835)  20,244   7,580   8,595   32,837   18,123   13,510   10,486   6,806   16,654    
    Loss on debt extinguishment                                 
    Depreciation and amortization  1,399   26,009   22,932   8,110   9,229   21,478   13,282   16,741   8,441   19,959   147,580 
    EBITDA  (80,041)  72,929   49,853   12,795   108,974   (35,965)  (18,517)  49,621   29,871   45,834   235,354 
    Other (income) expense  (128)  (515)  98   36   (80)  62   (1,210)  1,440   (5)  (1,441)  (1,743)
    Non-controlling shareholder compensation     1,191   3,019   1,214   1,474   980   914   986   27   860   10,665 
    Impairment expense                 57,810   31,590            89,400 
    Acquisition expenses           321                     321 
    Integration services fee                 2,375               2,375 
    Other        3,072                     1,434   4,506 
    Adjusted EBITDA $(80,169) $73,605  $56,042  $14,366  $110,368  $25,262  $12,777  $52,047  $29,893  $46,687  $340,878 


    Compass Diversified Holdings
    Net Income (Loss) from Continuing Operations to Non-GAAP Consolidated Adjusted EBITDA Reconciliation
    Year ended December 31, 2022
    (Unaudited)
                           
    (in thousands) Corporate  5.11  BOA Ergo Lugano PrimaLoft Velocity Outdoor Altor Solutions Arnold Sterno Consolidated
    Net income (loss) from continuing operations $(77,990) $22,633  $42,613  $(18,669) $27,934  $(17,741) $4,127  $9,662  $7,683  $3,406  $3,658 
    Adjusted for:                      
    Provision (benefit) for income taxes  12,119   7,125   6,527   (4,274)  11,889   (3,878)  1,562   3,174   3,329   (480)  37,093 
    Interest expense, net  83,243      (25)  10   16   (7)  229      26      83,492 
    Intercompany interest  (92,177)  13,761   7,410   6,026   12,773   7,512   10,282   10,742   5,518   18,153    
    Loss on debt extinguishment  534                              534 
    Depreciation and amortization  1,405   22,972   21,993   8,094   11,533   10,465   13,374   16,403   8,041   20,293   134,573 
    EBITDA  (72,866)  66,491   78,518   (8,813)  64,145   (3,649)  29,574   39,981   24,597   41,372   259,350 
    Other (income) expense  (58)  (217)  1,043   6   2   112   2,417   766   (20)  (1,730)  2,321 
    Non-controlling shareholder compensation     1,511   2,511   1,479   1,179   2,142   971   1,321   40   844   11,998 
    Impairment expense           20,552                     20,552 
    Acquisition expenses                 5,680   222   216         6,118 
    Integration services fee              1,688   2,375               4,063 
    Other           250                  1,330   1,580 
    Adjusted EBITDA $(72,924) $67,785  $82,072  $13,474  $67,014  $6,660  $33,184  $42,284  $24,617  $41,816  $305,982 


    Compass Diversified Holdings
    Adjusted EBITDA
    (Unaudited)
             
      Three months ended December 31, Year ended December 31,
    (in thousands)  2023   2022   2023   2022 
             
    Branded Consumer        
    5.11 $21,320  $19,626  $73,605  $67,785 
    BOA  14,022   13,784   56,042   82,072 
    Ergobaby  3,191   2,205   14,366   13,474 
    Lugano  37,662   20,552   110,368   67,014 
    PrimaLoft (1)  1,745   4,279   25,262   6,660 
    Velocity Outdoor  3,144   3,758   12,777   33,184 
    Total Branded Consumer $81,084  $64,204  $292,420  $270,189 
             
    Industrial        
    Altor Solutions $13,968  $10,785  $52,047  $42,284 
    Arnold Magnetics  8,351   4,562   29,893   24,617 
    Sterno  12,299   11,241   46,687   41,816 
    Total Industrial $34,618  $26,588  $128,627  $108,717 
    Corporate expense  (20,874)  (20,765)  (80,169)  (72,924)
    Total Adjusted EBITDA $94,828  $70,027  $340,878  $305,982 
     
    (1) The above results for PrimaLoft do not include management's estimate of Adjusted EBITDA, before our ownership, of $24.3 million for the twelve months ended December 31, 2022. PrimaLoft was acquired on July 12, 2022.


    Compass Diversified Holdings
    Net Sales to Pro Forma Net Sales Reconciliation
    (unaudited)
             
      Three months ended December 31, Year ended December 31,
    (in thousands)  2023   2022   2023   2022 
             
    Net Sales $566,989  $529,682  $2,058,876  $2,009,130 
    Acquisitions (1)           55,185 
    Pro Forma Net Sales $566,989  $529,682  $2,058,876  $2,064,315 
     
    (1) Acquisitions reflects the net sales for PrimaLoft on a proforma basis as if we had acquired this business on January 1, 2022.


    Compass Diversified Holdings
    Subsidiary Pro Forma Net Sales
    (unaudited)
           
      Three months ended December 31, Year ended December 31,
    (in thousands)  2023   2022   2023   2022 
             
    Branded Consumer        
    5.11 $147,394  $135,605  $533,089  $486,213 
    BOA  42,435   42,473   155,825   208,688 
    Ergobaby  22,074   20,179   93,859   88,435 
    Lugano  104,750   64,278   308,321   201,507 
    PrimaLoft (1)  9,434   14,032   67,053   79,929 
    Velocity Outdoor  45,842   51,464   172,190   232,238 
    Total Branded Consumer $371,929  $328,031  $1,330,337  $1,297,010 
             
    Industrial        
    Altor Solutions  56,417   61,748   238,030   261,338 
    Arnold Magnetics  44,632   37,496   166,679   153,815 
    Sterno  94,011   102,407   323,830   352,152 
    Total Industrial $195,060  $201,651  $728,539  $767,305 
             
    Total Subsidiary Net Sales $566,989  $529,682  $2,058,876  $2,064,315 
     
    (1) Net sales for PrimaLoft are pro forma as if we had acquired this business on January 1, 2022. Historical net sales for PrimaLoft prior to acquisition on July 12, 2022, were $55.2 million for the twelve months ended December 31, 2022.


    Compass Diversified Holdings
    Condensed Consolidated Cash Flows
         
      Three months ended December 31, Year ended December 31,
    (in thousands)  2023   2022   2023   2022 
             
    Net cash provided by (used in) operating activities $21,128  $11,632  $78,080  $(28,291)
    Net cash provided by (used in) investing activities  466,213   (27,774)  570,503   (626,725)
    Net cash provided by (used in) financing activities  (102,236)  14,757   (260,163)  556,885 
    Foreign currency impact on cash  636   1,404   786   (1,331)
    Net increase (decrease) in cash and cash equivalents  385,741   19   389,206   (99,462)
    Cash and cash equivalents - beginning of the period (1)  64,736   61,252   61,271   160,733 
    Cash and cash equivalents - end of the period $450,477  $61,271  $450,477  $61,271 
     
    (1) Includes cash from discontinued operations of $4.7 million at January 1, 2023 and $3.6 million at January 1, 2022.


    Compass Diversified Holding
    Selected Financial Data - Cash Flows
             
      Three months ended December 31, Year ended December 31,
    (in thousands)  2023   2022   2023   2022 
             
    Changes in operating assets and liabilities $(24,390) $(27,722) $(153,310) $(224,587)
    Purchases of property and equipment $(17,239) $(23,726) $(55,776) $(60,989)
    Distributions paid - common shares $(17,955) $(18,051) $(71,967) $(70,845)
    Distributions paid - preferred shares $(6,045) $(6,045) $(24,181) $(24,181)

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