Inside the outdoor industry

Tax breaks boost Compass Holdings

New Federal tax system generates $38.7m

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Compass Diversified Holdings, owner of US outdoor brand 5.11 Tactical, has announced its fourth quarter and year end results for the period ended 31st December 2017.

For the quarter ended 31st December 2017, CODI generated Cash Provided by Operating Activities of $22.5 million, as compared to Cash Provided by Operating Activities of $50.8 million for the same quarter in 2016. It reported Cash Flow of $25.6 million for Q4 2017, as compared to $24.6 million for the prior year’s comparable quarter.

For the year ended 31st December 2017, CODI generated Cash Provided by Operating Activities of $81.8 million, as compared to Cash Provided by Operating Activities of $111.4 million for the year ended 31st December 2016. Cash Flow was $92.2 million for the year ended 31st December, 2017, as compared to $76.4 million for the prior year.

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

Net income for the quarter ended 31st December 2017 was $49.1 million, as compared to net income of $2 million for the quarter ended 31st December 2016. During the fourth quarter of 2017, the firm recorded an income tax benefit of $38.7 million primarily related to the enactment of the Tax Cuts and Jobs Act in December 2017 which lowered the US federal corporate income tax rate from 35 per cent to 21 per cent. During the fourth quarter of 2016, it realised a net gain of $15.8 million related to its equity investment in its former subsidiary Fox Factory Holding Corp. During the first quarter of 2017, the Company sold its remaining shares in Fox in a secondary public offering.

For the full year CODI reported net income of $33.6 million. This compared to net income of $56.5 million for the year ended 31st December 2016, primarily as a result of a $74.5 million gain on CODI’s investment in Fox.

“During 2017 we continued to successfully execute our proven investment strategy, generate strong cash flow and provide sizable distributions to our shareholders,” said Alan Offenberg, CEO of Compass Diversified Holdings. “We consummated the accretive platform acquisition of Crosman Corporation, expanding our branded consumer businesses, while continuing to reinvest in our subsidiaries by completing three attractive add-on acquisitions. Complementing this success, we monetised our remaining interest in Fox Factory Holding Corp., which increased CODI’s realised gains to over $770 million.”

Elias Sabo, CODI’s CEO-elect, added: “We commenced 2018 by completing the platform acquisition of Foam Fabricators, a leading designer and manufacturer of custom moulded protective foam solutions that has a strong management team, a diversified customer base, strong free cash flow, and attractive growth prospects. This accretive platform acquisition, combined with our add-on acquisition of Rimports for Sterno Products, strengthens our family of niche leading businesses and positions CODI to continue growing cash flow to a level that meaningfully covers our distribution. Going forward, we will continue to use our considerable financial strength for compelling platform acquisitions as well as add-on acquisitions to accelerate the growth of our subsidiaries.”

 

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