pass Diversified LLC(US:CODI)2024-10-30 20:18Acquisition and Strategic Growth - The Company recorded a total enterprise value of $380 million for the acquisition of The Honey Pot Co. on January 31, 2024[195]. - The Honey Pot Co. is expected to enhance the Company's portfolio in the healthcare sector, which is identified as a high-growth area[175]. - The Company is actively pursuing strategic acquisitions and rigorous integration processes to enhance growth opportunities[193]. - The Honey Pot Co. contributed $75.9 million in net revenues in 2024 post-acquisition[217]. - Amortization expense for the three months ended September 30, 2024 increased by $2.8 million due to the acquisition of The Honey Pot Co.[210]. - Amortization expense increased by $8.6 million for the nine months ended September 30, 2024, due to intangibles recognized from the acquisition of The Honey Pot Co.[223]. - Acquisition expenses recorded are $3,479,000, indicating ongoing strategic investments[372]. Financial Performance - Consolidated net revenues for the three months ended September 30, 2024 increased by approximately $61.6 million, or 11.8%, compared to the same period in 2023[203]. - Net revenues for the nine months ended September 30, 2024 increased by approximately $157.6 million, or 10.6%, compared to the same period in 2023[217]. - Operating income for the three months ended September 30, 2024 was $70.3 million, compared to $17.4 million for the same period in 2023[202]. - Gross profit as a percentage of net revenues was approximately 47.1% for the three months ended September 30, 2024, compared to 43.2% for the same period in 2023[207]. - Gross profit for the nine months ended September 30, 2024 was $208.1 million, an increase of $4.9 million from $203.2 million in the same period of 2023, with gross profit as a percentage of net sales at 53.7%[238]. - Segment operating income increased to $120.5 million for the nine months ended September 30, 2024, compared to $64.9 million in the same period of 2023[268]. - Adjusted EBITDA for the nine months ended September 30, 2024, is $314,308,000, with significant contributions from various subsidiaries[372]. - The overall EBITDA across all subsidiaries is reported at $257,958,000, highlighting operational performance[372]. Expenses and Costs - Consolidated selling, general and administrative expenses increased by approximately $25.8 million during the three months ended September 30, 2024, compared to the same period in 2023[208]. - Selling, general and administrative expenses increased by approximately $64.0 million during the nine months ended September 30, 2024, with significant increases at Lugano ($22.6 million) and BOA ($7.6 million)[221]. - Interest expense totaled $27.4 million for the three months ended September 30, 2024, compared to $27.6 million for the same period in 2023[213]. - Interest expense for the nine months ended September 30, 2024, totaled $77.5 million, slightly down from $80.4 million in the same period of 2023[360]. - Selling, general and administrative expenses for the nine months ended September 30, 2024, were $167.1 million, representing 43.1% of net sales, compared to $164.2 million or 42.6% of net sales in the same period of 2023[239]. - Selling, general and administrative expenses for the nine months ended September 30, 2024 were $30.7 million, or 35.5% of net sales, compared to $28.4 million, or 34.5% in the prior year[289]. - The total impairment expense recognized is $8,182,000, reflecting non-recurring charges[372]. Market Conditions and Challenges - Inflationary pressures and rising labor costs are expected to impact margins for the remainder of 2024 and into early 2025[189]. - The Company plans to raise prices on goods when appropriate to preserve operating margins due to rising input costs[190]. - The effective tax rate for the quarter ended September 30, 2024 was 25.5%, compared to an effective tax rate of (37.8)% during the same period in 2023[216]. - The effective tax rate for the nine months ended September 30, 2024, was 67.0%, compared to 118.2% in the same period of 2023, influenced by various recurring and discrete items[230]. Cash Flow and Financing - Cash flows used in operating activities for the nine months ended September 30, 2024 totaled approximately $77.6 million, a $134.6 million increase in cash use compared to the same period in 2023[338]. - Cash flows used in investing activities for the nine months ended September 30, 2024 totaled $352.3 million, compared to cash provided by investing activities of $104.3 million in the same period of 2023[339]. - Cash flows provided by financing activities totaled approximately $50.9 million during the nine months ended September 30, 2024, compared to cash flows used of $157.9 million in the same period of 2023[340]. - Total intercompany debt as of September 30, 2024, amounted to $1,523.8 million, with significant balances in subsidiaries such as Lugano ($589.2 million) and PrimaLoft ($156.8 million)[350]. - The company had $486.6 million in net availability under the 2022 Revolving Credit Facility as of September 30, 2024[353]. - The 2022 Credit Facility allows for revolving loans and term loans up to a maximum aggregate amount of $600 million, with a maturity date of July 12, 2027[352]. - The company expects to continue funding Lugano to support profitable sales growth through amendments to its intercompany credit agreement[343]. Segment Performance - Net sales for the three months ended September 30, 2024 were $45.6 million, an increase of $8.3 million, or 22.3%, compared to the same period in 2023[242]. - Lugano's net sales for the three months ended September 30, 2024 increased by approximately $39.8 million, or 50.6%, to $118.6 million compared to the same period in 2023[260]. - Segment operating income for Lugano increased to $48.0 million for the three months ended September 30, 2024, compared to $28.0 million in the same period in 2023[264]. - Net sales for Altor Solutions for the three months ended September 30, 2024 were $52.1 million, a decrease of $7.1 million or 12.0% compared to the same period in 2023, attributed to shifting market conditions[307]. - Segment operating income for Altor Solutions was $6.0 million in the three months ended September 30, 2024, a decrease of $2.7 million compared to the same period in 2023[310].