Market Newsdesk

MANISTIQUE, Mich., April 29, 2021 (GLOBE NEWSWIRE) — Mackinac Financial Corporation (Nasdaq: MFNC) (“we”, or the “Corporation”) the bank holding company for mBank (“the Bank”) today announced 2021 first quarter net income of $3.88 million, or $.37 per share, compared to 2020 first quarter net income of $3.05 million, or $.28 per share. Weighted average shares outstanding for the first quarter of 2021 were 10,522,899 compared to 10,717,967 for the same period of 2020.

Total assets of the Corporation at March 31, 2021 were $1.51 billion, compared to $1.36 billion at March 31, 2020. Shareholders’ equity at March 31, 2021 totaled $170.18 million, compared to $160.06 million at March 31, 2020. Book value per share outstanding equated to $16.13 at the end of the first quarter 2021, compared to $14.93 per share outstanding a year ago. Tangible book value at quarter-end was $146.40 million, or $13.88 per share outstanding, compared to $135.61 million, or $12.87 per share outstanding at the end of the first quarter 2020.

Additional notes:

• mBank, the Corporation’s primary asset, recorded net income of $4.26 million for the first quarter of 2021.
• The Bank funded approximately $53 million of Paycheck Protection Program (PPP) loans in the first quarter of 2021 with origination fees totaling approximately $2.78 million. These loans continue to support small businesses throughout our footprint with the majority of recipients residing in the Upper Peninsula and Northern Michigan.  
• Non-interest income was very solid for the quarter including secondary market mortgage fees and gains on sale of $1.30 million and premiums on the sale of Small Business Administration (SBA) guaranteed loans of $433 thousand.
• The residential mortgage pipeline resides at robust levels and we expect strong output from this line of business as we look to upcoming quarters.
• Core operating margin, which is net of accretion from acquired loans and PPP fees that were subject to purchase accounting adjustments, was 4.14%.  
• On April 12, 2021 the Board of Directors of MFNC announced the signing of a definitive agreement for Nicolet Bankshares (Green Bay, WI) to acquire the Corporation. The transaction is expected to close in the third quarter of 2021. Specific information regarding the transaction can be found at www.bankmbank.com.

Revenue & PPP Recognition

Total revenue of the Corporation for first quarter 2021 was $17.29 million, compared to $17.60 million for the first quarter of 2020. Total interest income for the first three months of 2021 was $14.89 million, compared to $15.67 million for the same period in 2020. The 2021 first quarter interest income included accretive yield of $237 thousand from combined credit mark accretion associated with acquisitions, compared to $818 thousand in the same period of 2020.  

The first quarter 2021 interest income was also positively impacted by recognition of a portion of the PPP loan origination fees that were earned during the quarter:

• The bank originated approximately $53 million of PPP loans in the first quarter.
• The origination efforts resulted in fees earned of $2.78 million, which are subject to FASB accounting guidance for recognition.
• In accordance with applicable accounting guidance, the bank recognized $826 thousand in pre-tax fee revenue that offset ASC 310-20 eligible origination costs.
• This recognition resulted in $1.95 million of fees remaining to be accreted over the expected life of the PPP loan pool, which will initially be 12-months unless acceleration occurs due to the loans being paid off or forgiven before maturity.
• The amount accreted during the second quarter was $296 thousand.
• The total amount of PPP fees that were recognized in the second quarter was $1.12 million, leaving $1.66 million to be accreted or accelerated upon payoff.

Loan Production and Portfolio Mix

Total balance sheet loans at March 31, 2021 were $1.06 billion, compared to March 31, 2020 balances of $1.04 billion. Total loans under management reside at $1.31 billion, which includes $244.14 million of service retained loans. Overall loan production for the first three months of 2021 was $133.56 million, which included $53.73 million of PPP loans. The remaining $79.8 million was inclusive of $35.1 million of secondary market loans, compared to total production of $66.9 million in the first quarter 2020, which was inclusive of $19.0 million of secondary market production.  

Overall Quarterly Loan Production is available at https://www.globenewswire.com/NewsRoom/AttachmentNg/4f450277-ef09-4a10-8450-2f908fce2b32 

Credit Quality

Nonperforming loans totaled $5.02 million, or .47% of total loans (.53% when excluding PPP loans) at March 31, 2021, compared to $6.42 million, or .61% of total loans at March 31, 2020. Total loan delinquencies greater than 30 days resided at .43% (.48% when excluding PPP loans), compared to 1.23% in 2020. The nonperforming assets to total assets ratio resided at .45% (.48 when excluding PPP loans) for the first quarter of 2021, compared to .64% for the first quarter of 2020. The Corporation currently has no commercial loans in full payment deferral and a nominal $5.3 million that remain in the interest- only portion of their COVID-19 loan modification period. These loans are expected to return to normal principal and interest payments over the next quarter. There are $300 thousand of consumer loans that remain in full payment deferral. Total loans in some type of COVID-19 payment modification are a minimal .59% of total loans. There remains no sign of any adverse systemic issues or deterioration in the loan portfolio and we expect good payment performance as we look to our stronger commerce months ahead.  

Margin Analysis, Funding and Liquidity

Net interest income for first quarter 2021 was $13.78 million, resulting in a Net Interest Margin (NIM) of 4.52%, compared to $13.40 million in the first quarter 2020 and a NIM of 4.60%. Core operating margin, which is net of accretion from acquired loans that were subject to purchase accounting adjustments (as well as PPP impact for the 2021 period), was 4.14% for the first quarter of 2021, compared to 4.32% for the same period of 2020.

Margin Analysis Per Quarter is available at https://www.globenewswire.com/NewsRoom/AttachmentNg/6792bddd-857d-40a7-affe-d09627009945 

Total bank deposits (excluding brokered deposits) have increased by approximately $261 million year-over-year from $999.09 million at March 31, 2020 to $1.26 billion at first quarter-end 2021. Total brokered deposits have decreased significantly and were $13.35 million at March 31, 2021, compared to $96.29 million at March 31, 2020, a decrease of 86%. FHLB (Federal Home Loan Bank) borrowings have also decreased from $64.12 million at March 31, 2020 to $53.46 million at March 31, 2021. The company plans to retire an additional $25 million of FHLB borrowings in June 2021. Overall access to short-term functional liquidity remains very strong through multiple sources, if needed.

Noninterest Income / Expense

First quarter 2021 Noninterest Income was $2.40 million, compared to $1.94 million for the same period of 2020. The significant year-over-year improvement is mainly due to the increase of secondary market mortgage sales. Noninterest Expense for the first quarter of 2021 was $11.85 million, compared to $11.37 million for the same period of 2020. The expense variance was largely a result of PPP related expenses.

Assets and Capital

Total assets of the Corporation at March 31, 2021 were $1.51 billion, compared to $1.36 billion at March 31, 2020. Shareholders’ equity at March 31, 2021 totaled $170.18 million, compared to $160.06 million at March 31, 2020. Book value per share outstanding equated to $16.13 at the end of the first quarter 2021, compared to $14.93 per share outstanding a year ago. Tangible book value at quarter-end was $146.40 million, or $13.88 per share outstanding, compared to $135.61 million, or $12.87 per share outstanding at the end of the first quarter 2020.

Both the Corporation and the Bank are “well-capitalized” with total risk-based capital to risk-weighted assets of 15.34% and 14.62% and tier 1 capital to total tier 1 average assets at the Corporation of 9.63% and at the bank of 9.16%. The leverage ratio is calculated inclusive of PPP loan balances.

Paul D. Tobias, Chairman and Chief Executive Officer of the Corporation and Chairman of mBank concluded, “As we move toward closing of the Nicolet transaction, the company continues to work on behalf of all constituencies to make the transition as smooth as possible while maintaining best-in-class service to our valued clients. We know that with our experience on the buy-side and Nicolet being an active acquirer, we have two dedicated teams that will complete this process in the best manner possible.”

Mackinac Financial Corporation is a registered bank holding company formed under the Bank Holding Company Act of 1956 with assets in excess of $1.5 billion and whose common stock is traded on the NASDAQ stock market as “MFNC.” The principal subsidiary of the Corporation is mBank. Headquartered in Manistique, Michigan, mBank has 28 branch locations: ten in the Upper Peninsula, ten in the Northern Lower Peninsula, one in Oakland County, Michigan, and seven in Northern Wisconsin. The Corporation’s banking services include commercial lending and treasury management products and services geared toward small to mid-sized businesses, as well as a full array of personal and business deposit products and consumer loans.

Forward-Looking Statements

This release contains certain forward-looking statements. Words such as “anticipates,” “believes,” “estimates,” “expects,” “intends,” “should,” “will,” and variations of such words and similar expressions are intended to identify forward-looking statements: as defined by the Private Securities Litigation Reform Act of 1995. These statements reflect management’s current beliefs as to expected outcomes of future events and are not guarantees of future performance. These statements involve certain risks, uncertainties and assumptions that are difficult to predict with regard to timing, extent, likelihood, and degree of occurrence. Therefore, actual results and outcomes may materially differ from what may be expressed or forecasted in such forward-looking statements. Factors that could cause a difference include among others: risks that the Company’s proposed merger with Nicolet Bankshares, Inc. (“Nicolet”) will not be consummated due to inability to obtain shareholder or regulatory approval or to satisfy certain closing conditions, or if consummated, the possibility that any of the anticipated benefits of the proposed merger will not be realized; changes in the national and local economies or market conditions; changes in interest rates and banking regulations; the impact of competition from traditional or new sources; and the possibility that anticipated cost savings and revenue enhancements from mergers and acquisitions, bank consolidations, and other sources may not be fully realized at all or within specified time frames as well as other risks and uncertainties including but not limited to those detailed from time to time in filings of the Company with the Securities and Exchange Commission. These and other factors may cause decisions and actual results to differ materially from current expectations. Mackinac Financial Corporation undertakes no obligation to revise, update, or clarify forward-looking statements to reflect events or conditions after the date of this release.

Important Information and Where to Find It

Certain communications in this release relate to the proposed merger transaction involving Nicolet and Mackinac. In connection with the proposed merger, Nicolet and Mackinac will file a joint proxy statement/‌prospectus on Form S-4 and other relevant documents concerning the merger with the Securities and Exchange Commission (the “SEC”).

BEFORE MAKING ANY VOTING OR INVESTMENT DECISION, INVESTORS ARE URGED TO READ THE JOINT PROXY STATEMENT/‌PROSPECTUS AND ANY OTHER DOCUMENTS TO BE FILED WITH THE SEC IN CONNECTION WITH THE PROPOSED MERGER OR INCORPORATED BY REFERENCE IN THE JOINT PROXY STATEMENT/‌PROSPECTUS BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT NICOLET, MACKINAC AND THE PROPOSED MERGER.

When available, the joint proxy statement/

‌

prospectus will be delivered to shareholders of Nicolet and Mackinac. Investors may obtain copies of the joint proxy statement/prospectus and other relevant documents (as they become available) free of charge at the SEC’s website 

(www.sec.gov)

. Copies of the documents filed with the SEC by Nicolet will be available free of charge on Nicolet’s website at 

www.nicoletbank.com

. Copies of the documents filed with the SEC by Mackinac will be available free of charge on Mackinac’s website at
www.bankmbank.com
.

Nicolet, Mackinac and certain of their directors, executive officers and other members of management and employees may be deemed to be participants in the solicitation of proxies from the shareholders of Nicolet and the shareholders of Mackinac in connection with the proposed merger. Information about the directors and executive officers of Nicolet and Mackinac will be included in the joint proxy statement/

‌

prospectus for the proposed transaction filed with the SEC. Information about the directors and executive officers of Nicolet is also included in the proxy statement for its 2021 annual meeting of shareholders, which was filed with the SEC on March 2, 2021. Information about the directors and executive officers of Mackinac is also included in the proxy statement for its 2021 annual meeting of shareholders, which was filed with the SEC on April 22, 2021. Additional information regarding the interests of such participants and other persons who may be deemed participants in the transaction will be included in the joint proxy statement/prospectus and the other relevant documents filed with the SEC when they become available.

MACKINAC FINANCIAL CORPORATION AND SUBSIDIARIES

SELECTED FINANCIAL HIGHLIGHTS

						As of and For the			As of and For the			As of and For the
						Period Ending			Year Ending			Period Ending
						March 31,			December 31,			March 31,
(Dollars in thousands, except per share data)						2021			2020			2020
						(Unaudited)						(Unaudited)
Selected Financial Condition Data (at end of period) :
Assets						$	1,508,248		$	1,501,730		$	1,356,381
Loans							1,063,756			1,077,592			1,044,177
Investment securities							109,414			111,836			114,734
Deposits							1,273,279			1,258,776			1,095,381
Borrowings							53,459			63,479			67,120
Shareholders’ equity							170,176			167,864			160,060
Selected Statements of Income Data (three months and year ended)
Net interest income						$	13,778		$	54,806		$	13,397
Income before taxes							4,278			17,056			3,862
Net income							3,880			13,473			3,051
Income per common share – Basic							0.37			1.27			0.28
Income per common share – Diluted							0.37			1.27			0.28
Weighted average shares outstanding – Basic							10,522,899			10,580,044			10,717,967
Weighted average shares outstanding- Diluted							10,522,899			10,580,044			10,817,470
Selected Financial Ratios and Other Data:
Performance Ratios:
Net interest margin							4.52	%		4.37	%		4.60	%
Efficiency ratio							73.19			71.84			73.78
Return on average assets							1.04			0.92			0.93
Return on average equity							9.31			8.19			7.54
Average total assets						$	1,512,496		$	1,464,674		$	1,321,134
Average total shareholders’ equity							169,023			164,505			162,661
Average loans to average deposits ratio							84.26	%		93.34	%		97.30	%
Common Share Data at end of period:
Market price per common share						$	14.02		$	12.76		$	10.45
Book value per common share							16.13			15.99			15.20
Tangible book value per share							13.88			13.71			12.87
Dividends paid per share, annualized							0.56			0.56			0.56
Common shares outstanding							10,550,393			10,500,758			10,533,589
Other Data at end of period:
Allowance for loan losses						$	5,842		$	5,816		$	5,292
Non-performing assets							6,716			7,210			8,644
Allowance for loan losses to total loans							0.55	%		0.54	%		0.51	%
Non-performing assets to total assets							0.45	%		0.48	%		0.64	%
Texas ratio							4.41	%		4.82	%		6.13	%
Number of:
Branch locations							28			28			29
FTE Employees							310			315			316

MACKINAC FINANCIAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

		March 31,				December 31,				March 31,
		2021				2020				2020
		(Unaudited)								(Unaudited)
ASSETS
Cash and due from banks		$	239,831			$	218,901			$	97,041
Federal funds sold			3,661				76				31
Cash and cash equivalents			243,492				218,977				97,072
Interest-bearing deposits in other financial institutions			2,427				2,917				8,825
Securities available for sale			109,414				111,836				114,734
Federal Home Loan Bank stock			4,924				4,924				4,924
Loans:
Commercial			818,584				819,907				760,357
Mortgage			226,780				238,705				263,445
Consumer			18,392				18,980				20,375
Total Loans			1,063,756				1,077,592				1,044,177
Allowance for loan losses			(5,842	)			(5,816	)			(5,292	)
Net loans			1,057,914				1,071,776				1,038,885
Premises and equipment			25,010				25,518				24,522
Other real estate held for sale			1,692				1,752				2,228
Deferred tax asset			2,492				3,303				3,154
Deposit based intangibles			4,200				4,368				4,874
Goodwill			19,574				19,574				19,574
Other assets			37,109				36,785				37,589
TOTAL ASSETS		$	1,508,248			$	1,501,730			$	1,356,381
LIABILITIES AND SHAREHOLDERS’ EQUITY
LIABILITIES:
Deposits:
Noninterest bearing deposits		$	443,956			$	414,804			$	278,191
NOW, money market, interest checking			478,181				450,556				369,003
Savings			137,134				130,755				109,818
CDs<$250,000			190,320				202,266				227,924
CDs>$250,000			10,337				15,224				14,152
Brokered			13,351				45,171				96,293
Total deposits			1,273,279				1,258,776				1,095,381
Federal funds purchased											22,790
Borrowings			53,459				63,479				67,120
Other liabilities			11,334				11,611				11,030
Total liabilities			1,338,072				1,333,866				1,196,321
SHAREHOLDERS’ EQUITY:
Common stock and additional paid in capital – No par value Authorized – 18,000,000 shares Issued and outstanding – 10,550,393; 10,500,758 and 10,533,589 respectively			127,397				127,164				127,003
Retained earnings			41,721				39,318				33,316
Accumulated other comprehensive income (loss)
Unrealized (losses) gains on available for sale securities			1,641				1,965				151
Minimum pension liability			(583	)			(583	)			(410	)
Total shareholders’ equity			170,176				167,864				160,060
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY		$	1,508,248			$	1,501,730			$	1,356,381

MACKINAC FINANCIAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

		For the Three Months Ended
		March 31,
			2021				2020
		(Unaudited)
INTEREST INCOME:
Interest and fees on loans:
Taxable		$	14,122			$	14,613
Tax-exempt			20				74
Interest on securities:
Taxable			524				621
Tax-exempt			142				87
Other interest income			84				270
Total interest income			14,892				15,665
INTEREST EXPENSE:
Deposits			889				1,927
Borrowings			225				341
Total interest expense			1,114				2,268
Net interest income			13,778				13,397
Provision for loan losses			50				100
Net interest income after provision for loan losses			13,728				13,297
OTHER INCOME:
Deposit service fees			257				403
Income from loans sold on the secondary market			1,302				538
SBA/USDA loan sale gains			433				710
Mortgage servicing amortization			241				189
Net security gains			36				–
Other			129				97
Total other income			2,398				1,937
OTHER EXPENSE:
Salaries and employee benefits			6,824				6,051
Occupancy			1,183				1,124
Furniture and equipment			842				802
Data processing			770				825
Advertising			113				212
Professional service fees			498				498
Loan origination expenses and deposit and card related fees			450				381
Writedowns and losses on other real estate held for sale			(52	)			3
FDIC insurance assessment			140				150
Communications expense			241				213
Other			839				1,113
Total other expenses			11,848				11,372
Income before provision for income taxes			4,278				3,862
Provision for income taxes			398				811
NET INCOME AVAILABLE TO COMMON SHAREHOLDERS		$	3,880			$	3,051
INCOME PER COMMON SHARE:
Basic		$	0.37			$	0.28
Diluted		$	0.37			$	0.28

MACKINAC FINANCIAL CORPORATION AND SUBSIDIARIES

LOAN PORTFOLIO AND CREDIT QUALITY

(Dollars in thousands)

Loan Portfolio Balances (at end of period):

	March 31,			December 31,			March 31,
	2021			2020			2020
	(Unaudited)			(Audited)			(Unaudited)
Commercial Loans:
Real estate – operators of nonresidential buildings	$	137,356		$	138,992		$	136,477
Hospitality and tourism		105,077			100,237			94,734
Lessors of residential buildings		51,288			52,035			48,529
Gasoline stations and convenience stores		27,562			29,046			26,495
Logging		16,756			18,651			21,380
Commercial construction		49,240			47,698			29,971
Other		431,305			433,248			402,771
Total Commercial Loans		818,584			819,907			760,357
1-4 family residential real estate		214,034			227,044			244,059
Consumer		18,392			18,980			20,375
Consumer construction		12,746			11,661			19,386
Total Loans	$	1,063,756		$	1,077,592		$	1,044,177

Credit Quality (at end of period):

	March 31,			December 31,			March 31,
	2021			2020			2020
	(Unaudited)			(Audited)			(Unaudited)
Nonperforming Assets :
Nonaccrual loans	$	5,024		$	5,458		$	6,416
Loans past due 90 days or more		–			–			–
Restructured loans		–			–			–
Total nonperforming loans		5,024			5,458			6,416
Other real estate owned		1,692			1,752			2,228
Total nonperforming assets	$	6,716		$	7,210		$	8,644
Nonperforming loans as a % of loans		0.47	%		0.51	%		0.61	%
Nonperforming assets as a % of assets		0.45	%		0.48	%		0.64	%
Reserve for Loan Losses:
At period end	$	5,842		$	5,816		$	5,292
As a % of outstanding loans		0.55	%		0.54	%		0.51	%
As a % of nonperforming loans		116.28	%		106.56	%		82.48	%
As a % of nonaccrual loans		116.28	%		106.56	%		82.48	%
Texas Ratio		4.41	%		4.82	%		6.13	%
Charge-off Information (year to date):
Average loans	$	1,078,022		$	1,117,132		$	1,047,144
Net charge-offs (recoveries)	$	24		$	492		$	116
Charge-offs as a % of average
loans, annualized		0.01	%		0.04	%		0.04	%

MACKINAC FINANCIAL CORPORATION AND SUBSIDIARIES QUARTERLY FINANCIAL HIGHLIGHTS

	QUARTER ENDED
	(Unaudited)
	March 31,				December 31,				September 30,				June, 30				March 31,
		2021				2020				2020				2020				2020
BALANCE SHEET (Dollars in thousands)
Total loans	$	1,063,756			$	1,077,592			$	1,144,325			$	1,153,790			$	1,044,177
Allowance for loan losses		(5,842	)			(5,816	)			(5,832	)			(5,355	)			(5,292	)
Total loans, net		1,057,914				1,071,776				1,138,493				1,148,435				1,038,885
Total assets		1,508,248				1,501,730				1,522,917				1,518,473				1,356,381
Core deposits		1,249,591				1,198,381				1,195,062				1,122,582				984,936
Noncore deposits		23,688				60,395				85,825				104,970				110,445
Total deposits		1,273,279				1,258,776				1,280,887				1,227,552				1,095,381
Total borrowings		53,459				63,479				63,505				114,466				67,120
Total shareholders’ equity		170,176				167,864				166,168				164,157				160,060
Total tangible equity		146,402				143,922				142,057				139,877				135,612
Total shares outstanding		10,550,393				10,500,758				10,533,589				10,533,589				10,533,589
Weighted average shares outstanding		10,522,899				10,536,023				10,533,589				10,533,589				10,717,967
AVERAGE BALANCES (Dollars in thousands)
Assets	$	1,512,496			$	1,505,869			$	1,536,128			$	1,501,423			$	1,321,134
Earning assets		1,235,235				1,252,038				1,303,102				1,290,012				1,171,551
Loans		1,078,022				1,118,665				1,154,670				1,147,620				1,047,144
Noninterest bearing deposits		426,890				422,081				422,134				346,180				284,677
Deposits		1,279,362				1,255,669				1,269,658				1,211,694				1,076,206
Equity		169,023				167,459				165,450				161,811				162,661
INCOME STATEMENT (Dollars in thousands)
Net interest income	$	13,778			$	13,898			$	13,052			$	14,458			$	13,397
Provision for loan losses		50				400				400				100				100
Net interest income after provision		13,728				13,498				12,652				14,358				13,297
Total noninterest income		2,398				2,779				3,116				2,367				1,937
Total noninterest expense		11,848				11,663				11,561				12,352				11,372
Income before taxes		4,278				4,614				4,207				4,373				3,862
Provision for income taxes		398				970				883				919				811
Net income available to common shareholders	$	3,880			$	3,644			$	3,324			$	3,454			$	3,051
Income pre-tax, pre-provision	$	4,328			$	5,014			$	4,607			$	4,473			$	3,962
PER SHARE DATA
Earnings per common share	$	0.37			$	0.35			$	0.32			$	0.33			$	0.28
Book value per common share		16.13				15.99				15.78				15.58				15.20
Tangible book value per share		13.88				13.71				13.49				13.28				12.87
Market value, closing price		14.02				12.76				9.65				10.37				10.45
Dividends per share		0.14				0.14				0.14				0.14				0.14
ASSET QUALITY RATIOS
Nonperforming loans/total loans		0.47	%			0.51	%			0.47	%			0.53	%			0.61	%
Nonperforming assets/total assets		0.45				0.48				0.48				0.55				0.64
Allowance for loan losses/total loans		0.55				0.54				0.51				0.46				0.51
Allowance for loan losses/nonperforming loans		116.28				106.56				107.72				87.44				82.48
Texas ratio		4.41				4.82				4.91				4.22				6.13
PROFITABILITY RATIOS
Return on average assets		1.04	%			0.96	%			0.86	%			0.93	%			0.93	%
Return on average equity		9.31				8.66				7.99				8.58				7.54
Net interest margin		4.52				4.42				3.98				4.51				4.60
Average loans/average deposits		84.26				89.09				90.94				94.71				97.30
CAPITAL ADEQUACY RATIOS
Tier 1 leverage ratio		9.63	%			9.63	%			9.20	%			9.45	%			10.20	%
Tier 1 capital to risk weighted assets		14.74				14.48				13.91				13.27				12.89
Total capital to risk weighted assets		15.34				15.07				14.49				13.79				13.41
Average equity/average assets (for the quarter)		11.18				11.12				10.77				10.78				12.31

Contact:        Jesse A. Deering, EVP & Chief Financial Officer (248) 290-5906 /[email protected]
Website:        www.bankmbank.com

SAN JOSE, Calif., April 29, 2021 (GLOBE NEWSWIRE) — Firsthand Technology Value Fund, Inc. (NASDAQ: SVVC) (the “Fund”), a publicly traded venture capital fund that invests in technology and cleantech companies, disclosed today that its preliminary NAV, as of March 31, 2021, was $16.31. The Fund further announced that its top five holdings as of March 31, 2021, were Pivotal Systems, IntraOp Medical, Wrightspeed, Revasum, and Hera Systems.

1. Pivotal Systems Corp. (ASX: PVS) provides monitoring and process control technologies for the semiconductor manufacturing industry. As of March 31, 2021, the Fund’s investment in Pivotal consisted of 31,089,506 shares of common stock equivalents (CDI’s) and represented approximately 27.3% of the Fund’s preliminary net assets.

2. IntraOp Medical Corp. is the manufacturer of the Mobetron, a medical device that is used to deliver electron-based radiation to cancer patients. As of March 31, 2021, the Fund’s investment in IntraOp consisted of 26,856,187 shares of preferred stock plus debt securities and represented approximately 25.7% of the Fund’s preliminary net assets.

3. Wrightspeed, Inc. is a supplier of electric drivetrains for heavy-duty trucks. As of March 31, 2021, the Fund’s investment in Wrightspeed consisted of 60,802,795 shares of preferred and common stock plus debt securities and warrants to purchase additional shares and represented approximately 23.6% of the Fund’s preliminary net assets.

4. Revasum, Inc. (ASX: RVS) is a provider of chemical-mechanical planarization (CMP) and grinding tools to the semiconductor industry. As of March 31, 2021, the Fund’s investment in Revasum consisted of 46,834,340 shares of common stock equivalents (CDI’s) and represented approximately 11.2% of the Fund’s preliminary net assets.

5. Hera Systems, Inc. is developing micro satellites with imaging and communication capabilities for launch into low Earth orbit. As of March 31, 2021, the Fund’s investment in Hera consisted of 13,331,527 shares of preferred stock plus debt securities and warrants to purchase additional shares and represented approximately 3.3% of the Fund’s preliminary net assets.

The Fund’s preliminary net assets as of March 31, 2021, include cash and cash equivalents of approximately $0.07 per share. Preliminary total investments as of March 31, 2021 were $111.2 million, or approximately $16.14 per share. As of March 31, 2021, the Fund’s top five holdings constituted 91.1% of the Fund’s preliminary net assets, and 91.7% of our preliminary total investments. The Fund’s NAV for March 31, 2021, as well as complete financial statements and a detailed schedule of investments, will be made available with the Fund’s quarterly report filing on Form 10-Q in May 2021.

About Firsthand Technology Value Fund

Firsthand Technology Value Fund, Inc. is a publicly traded venture capital fund that invests in technology and cleantech companies. More information about the Fund and its holdings can be found online at www.firsthandtvf.com.

The Fund is a non-diversified, closed-end investment company that elected to be treated as a business development company under the Investment Company Act of 1940. The Fund’s investment objective is to seek long-term growth of capital. Under normal circumstances, the Fund will invest at least 80% of its total assets for investment purposes in technology and cleantech companies. An investment in the Fund involves substantial risks, some of which are highlighted below. Please see the Fund’s public filings for more information about fees, expenses and risk. Past investment results do not provide any assurances about future results.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS: This press release contains “forward-looking statements” as defined under the U.S. federal securities laws. Generally, the words “believe,” “expect,” “intend,” “estimate,” “anticipate,” “project,” “will,” and similar expressions identify forward-looking statements, which generally are not historical in nature. Forward-looking statements are subject to certain risks and uncertainties that could cause actual results to materially differ from the Fund’s historical experience and its present expectations or projections indicated in any forward-looking statement. These risks include, but are not limited to, changes in economic and political conditions, regulatory and legal changes, technology and cleantech industry risk, valuation risk, non-diversification risk, interest rate risk, tax risk, and other risks discussed in the Fund’s filings with the SEC. You should not place undue reliance on forward-looking statements, which speak only as of the date they are made. The Fund undertakes no obligation to publicly update or revise any forward-looking statements made herein. There is no assurance that the Fund’s investment objectives will be attained. We acknowledge that, notwithstanding the foregoing, the safe harbor for forward-looking statements under the Private Securities Litigation Reform Act of 1995 does not apply to investment companies such as us.

Contact:

Phil Mosakowski
Firsthand Capital Management, Inc.
(408) 624-9526
[email protected]

Branded Consumer Performance Continues to Drive Record First Quarter Operating Results

Raises Full Year Guidance

Provides Update on Potential Change in Tax Classification

WESTPORT, Conn., April 29, 2021 (GLOBE NEWSWIRE) — Compass Diversified (NYSE: CODI) (“CODI” or the “Company”), an owner of leading middle market businesses, announced today its consolidated operating results for the three months ended March 31, 2021.

First Quarter 2021 Highlights

• Reported net sales of $461.6 million for the first quarter 2021;
• Reported net income of $22.0 million for the first quarter 2021;
• Reported non-GAAP Adjusted EBITDA of $88.0 million for the first quarter 2021;
• Reported Cash Provided by Operating Activities of $36.4 million for the first quarter 2021, and non-GAAP Cash Flow Available for Distribution and Reinvestment (“CAD’) of $46.2 million for the first quarter 2021;
• Completed a refinancing of its credit facilities concurrent with the issuance of $1.0 billion of 5.250% senior unsecured notes due 2029;
• Paid a first quarter 2021 cash distribution of $0.36 per share on CODI’s common shares in April 2021; and
• Declared quarterly cash distributions of $0.453125 per share on the Company’s 7.250% Series A Preferred Shares, $0.4921875 per share on the Company’s 7.875% Series B Preferred Shares, and $0.4921875 per share on the Company’s 7.875% Series C Preferred Shares (the “Preferred Distributions”). The Preferred Distributions are payable on April 30, 2021.

“CODI’s outstanding performance in the first quarter, highlighted by record CAD and strong cash flow growth, was driven by impressive results from our branded consumer businesses, as we increased revenue and earnings across all of our consumer subsidiaries,” said Elias Sabo, CEO of Compass Diversified. “Last year’s acquisitions of two rapidly growing businesses, Marucci and BOA, underscore our success capitalizing on periods of market dislocations and have served to offset typical first quarter seasonality in our portfolio. We have once again increased our annual guidance and continue to take steps to further position our leading and diversified group of consumer and industrial businesses for long-term success.”

Mr. Sabo continued, “With our permanent capital structure, we will remain both disciplined and opportunistic in our capital deployment as we partner with, invest in and grow leading middle market businesses capable of performing through economic cycles. In addition, as part of our ongoing efforts to lower our cost of capital and unlock shareholder value, we are continuing to explore a potential tax reclassification where we may elect to be taxed as a corporation, rather than a partnership. We believe this important change would simplify our structure and enable a broader set of both institutional and retail shareholders to invest in CODI.”

Operating Results

Net sales for the quarter ended March 31, 2021 was $461.6 million, as compared to $333.4 million for the quarter ended March 31, 2020.

Net income for the quarter ended March 31, 2021 was $22.0 million, as compared to $4.9 million for the quarter ended March 31, 2020.

Adjusted EBITDA (see “Note Regarding Use of Non-GAAP Financial Measures” below) for the quarter ended March 31, 2021 was $88.0 million, as compared to $46.0 million for the quarter ended March 31, 2020. The increase in Adjusted EBITDA for the first quarter 2021, as compared to prior year periods, was primarily a result of our 2020 acquisitions of BOA and Marucci, as well as strong performance by our branded consumer companies.

Liquidity and Capital Resources

For the quarter ended March 31, 2021, CODI reported Cash Provided by Operating Activities of $36.4 million, as compared to Cash Provided by Operating Activities of $34.0 million for the quarter ended March 31, 2020.

CODI reported CAD (see “Note Regarding Use of Non-GAAP Financial Measures” below) of $46.2 million for the quarter ended March 31, 2021, as compared to $17.7 million for the prior year’s comparable quarter. CODI’s CAD is calculated after taking into account all interest expenses, cash taxes paid, preferred distributions 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 $1.0 billion since going public in 2006.

CODI’s weighted average number of shares outstanding for the quarter ended March 31, 2021 was 64.9 million, and for the quarter ended March 31, 2020 was 59.9 million.

As of March 31, 2021, CODI had approximately $63.2 million in cash and cash equivalents, $5 million outstanding on its revolver and $1.0 billion outstanding in 5.250% Senior Notes due 2029.

As of March 31, 2021, CODI had proceeds deposited with a trustee of $647.7 million and $600.0 million of current portion of long-term debt. These balances relate to the redemption of the 8.000% Senior Notes due 2026 which occurred on April 1, 2021.

The Company has no significant debt maturities until 2029 and had net borrowing availability of $593.7 million on March 31, 2021 under its revolving credit facility.

First Quarter 2021 Distributions

On April 1, 2021, CODI’s Board of Directors (the “Board”) declared a first quarter distribution of $0.36 per share on the Company’s common shares. The cash distribution was paid on April 22, 2021 to all holders of record of common shares as of April 15, 2021. Since its IPO in 2006, CODI has paid a cumulative distribution of $20.7552 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 covers the period from, and including, January 30, 2021, up to, but excluding, April 30, 2021. The distribution for such period will be paid on April 30, 2021 to all holders of record of Series A Preferred Shares as of April 15, 2021.

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, January 30, 2021, up to, but excluding, April 30, 2021. The distribution for such period will be paid on April 30, 2021 to all holders of record of Series B Preferred Shares as of April 15, 2021.

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, January 30, 2021, up to, but excluding, April 30, 2021. The distribution for such period will be paid on April 30, 2021 to all holders of record of Series C Preferred Shares as of April 15, 2021.

Guidance Update

As a result of the strong financial performance in the first quarter, as well as the Company’s expectations for the remainder of 2021, the Company expects its current subsidiaries to produce consolidated Adjusted EBITDA (see “Note Regarding Use of Non-GAAP Financial Measures” below) for the full calendar year of 2021 of between $325 million and $345 million. This estimate is based on the summation of our expectations for our current subsidiaries in 2021, absent additional acquisitions or divestitures, and excludes corporate expenses such as interest expense, management fees and corporate overhead. In addition, our Payout Ratio (see “Note Regarding Use of Non-GAAP Financial Measures” below), defined as our prior year’s annual distribution to common shareholders divided by our 2021 estimate for CAD, is anticipated to be between 60% and 70%.  

Tax Structure Update

The Company continues to analyze a potential change in its tax classification, including potentially “checking-the-box” to elect to be taxed as a C-Corporation instead of a partnership. If undertaken in 2021, this election would likely result in taxable capital gain income that would be passed through to shareholders which would create current tax liability for the 2021 tax year that shareholders would see on a final IRS Schedule K-1 sent out in 2022. This taxable capital gain would also provide shareholders the benefit of increasing their basis in the Company’s stock, effectively reducing their future taxable gain by a similar amount, when they sell the Company’s shares. In light of this additional current tax burden to shareholders, the Company would expect to pay a special distribution of approximately $0.88 per share should CODI effectuate this tax election in 2021. This special distribution, along with the Company’s other regular quarterly distributions, CODI expects, would more than offset shareholder 2021 current tax liability absent any significant capital gain tax if the Company divests a subsidiary. This taxable capital gain to shareholders should provide a substantial tax benefit to the Company under C-Corporation taxation as CODI expects it would allow us to step up the basis in our interests in our subsidiaries, by this same amount, which would reduce future capital gain tax at the C-Corporation when the Company potentially opportunistically divests our subsidiaries in the future.

While CODI’s Board of Directors sets our distribution amount quarterly and will continue to do so after this potential tax classification change, the Company expects to adjust our distribution policy if CODI undertakes this tax classification change. In the event the Company elects to be treated as C-Corporation for tax purposes, CODI will no longer pass through income to shareholders and, instead, CODI would pay tax to the IRS. As a result of CODI’s assumption of tax liability, CODI currently estimates that the Company would recommend that our Board of Directors reduce the Company’s annual distribution from $1.44 per share per year to approximately $1.00 per share per year. Management expects that its recommendation to CODI’s Board of Directors would be that CODI’s payment remain at $0.36 per share for any declared quarterly distributions to be paid in each of July and October, and thereafter to be reduced to approximately $0.25 per share for any declared distributions to be paid commencing in January of 2022. After the potential tax classification change, CODI believes any quarterly payments will generally be treated as qualified dividends, for each shareholder that has met the requisite holding period requirements, to the extent CODI has earnings and profits.

The Company is continuing to analyze certain elements of this potential transaction, which is subject to a number of contingencies and is subject to change. In addition to final approval by CODI’s Board of Directors, the Company will need special shareholder approval to effectuate this tax classification change. If CODI finally decides to move forward with this change, the Company expects to hold the special meeting and, assuming CODI receives all necessary approvals, could check-the-box to be taxed as a C-Corporation sometime late in the third quarter of 2021. 

Conference Call

Management will host a conference call on Thursday, April 29, 2021 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 (833) 900-1532 and the dial-in number for international callers is (236) 712-2273. The access code for all callers is 6372395. A live webcast will also be available on the Company’s website at https://www.compassdiversified.com.

A replay of the call will be available through Saturday, June 5, 2021. To access the replay, please dial (800) 585-8367 in the U.S. and (416) 621-4642 outside the U.S., and then enter the access code 6372395.

Note Regarding Use of Non-GAAP Financial Measures

Adjusted EBITDA is a non-GAAP measure used by the Company to assess its performance. We have reconciled Adjusted EBITDA to Net Income (Loss) on the attached schedules. We consider Net Income (Loss) to be the most directly comparable GAAP financial measure to Adjusted EBITDA. We believe that Adjusted EBITDA provides useful information to investors and reflects important financial measures as it 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), Adjusted EBITDA is limited in that it does 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. This presentation also 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. We believe Adjusted EBITDA is also useful in measuring our ability to service debt and other payment obligations.

CAD is a non-GAAP measure used by the Company to assess its performance, as well as its ability to sustain quarterly distributions. We have reconciled CAD to Net Income (Loss) and Cash Flow from Operating Activities on the attached schedules. We consider Net Income (Loss) and Cash Flow from Operating Activities to be the most directly comparable GAAP financial measures to CAD.

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. We believe that CAD provides investors additional information to enable them to evaluate our performance and ability to make anticipated quarterly distributions.

Payout Ratio is a non-GAAP measure defined as our prior year’s annual distribution to common shareholders divided by our CAD. We believe the Payout Ratio provides investors additional information to enable them to evaluate our performance and our ability to sustain quarterly distributions.

In reliance on the unreasonable efforts exception provided under Item 10(e)(1)(i)(B) of Regulation S-K, we have not reconciled 2021 Adjusted EBITDA or 2021 Payout Ratio (which requires an estimate of 2021 CAD) to their comparable GAAP measure because we do not provide guidance on Net Income (Loss), Cash Flow Provided by Operating Activities 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.

None of Adjusted EBITDA, CAD nor Payout Ratio is 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 (“CODI”)

CODI owns and manages a diverse set of highly defensible North American middle market businesses. Each of its current subsidiaries is a leader in its niche market. For more information, visit compassdiversified.com.

Leveraging its permanent capital base, long-term disciplined approach and actionable expertise, CODI maintains 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.

Our ten majority-owned subsidiaries are engaged in the following lines of business:

• The design and marketing of purpose-built technical apparel and gear serving a wide range of global customers (5.11);
• The manufacture of quick-turn, small-run and production rigid printed circuit boards (Advanced Circuits);
• The design and manufacture of custom packaging, insulation and componentry (Altor Solutions);
• The manufacture of engineered magnetic solutions for a wide range of specialty applications and end-markets (Arnold Magnetic Technologies);
• The design and marketing of dial-based fit systems that deliver performance fit across footwear, headwear and medical bracing products (BOA Technology);
• The design and marketing of wearable baby carriers, strollers and related products (Ergobaby);
• The design and manufacture of premium home and gun safes (Liberty Safe);
• The design and manufacture of baseball and softball equipment and apparel (Marucci Sports);
• The manufacture and marketing of portable food warming systems used in the foodservice industry, creative indoor and outdoor lighting, and home fragrance solutions for the consumer markets (Sterno); and
• The design, manufacture and marketing of airguns, archery products, optics and related accessories (Velocity Outdoor).

Forward Looking Statements

This press release contains 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, financial condition and cash flows for the full year of 2021, our 2021 Total Adjusted EBITDA, 2021 Payout Ratio and 2021 CAD and our ability to meet existing obligations and quarterly distributions as well as other statements with regard to the future performance of CODI and any potential change in structure or tax classification. Forward-looking statements involve risks and uncertainties, including, but not limited to, the impact, in the near, medium and long-term, of the COVID-19 pandemic or social or political unrest on our business, results of operations, financial position, liquidity, cash flows or ability to make distributions; our business prospects and the prospects of our portfolio companies; the impact of investments that we make or expect to make; the dependence of our future success on the general economy and its impact on the industries in which we operate; the ability of our portfolio companies to achieve their objectives; the adequacy of our cash resources and working capital; and the timing of cash flows, if any, from the operations of our portfolio companies.

We may use words such as “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, its quarterly reports on Form 10-Q and in other filings made with the Securities and Exchange Commission (the “SEC”). Other factors that could cause actual results to differ materially include: changes in the economy, financial markets and political environment; risks associated with possible disruption in CODI’s operations or the economy generally due to terrorism, 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); general considerations associated with the COVID-19 pandemic and its impact on the markets in which we operate; 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, current reports on Form 8-K, proxy statements and other filings with the SEC.

Investor Relations: The IGB Group Leon Berman 212-477-8438 [email protected]

Media Contact: Joele Frank, Wilkinson Brimmer Katcher Jon Keehner / Kate Thompson / Lyle Weston 212-355-4449

Compass Diversified Holdings

Consolidated Statements of Operations

(unaudited)

	Three months ended March 31,
(in thousands, except per share data)	2021				2020
Net sales	$	461,596			$	333,449
Cost of sales	274,747				213,961
Gross profit	186,849				119,488
Operating expenses:
Selling, general and administrative expense	110,968				83,800
Management fees	11,048				8,620
Amortization expense	18,599				13,505
Operating income	46,234				13,563
Other income (expense):
Interest expense, net	(13,805		)		(8,597		)
Amortization of debt issuance costs	(686		)		(525		)
Other income (expense), net	(2,227		)		661
Net income before income taxes	29,516				5,102
Provision for income taxes	7,520				222
Net income	21,996				4,880
Less: Net income attributable to noncontrolling interest	3,002				1,215
Net income attributable to Holdings	$	18,994			$	3,665
Basic income (loss) per common share attributable to Holdings	$	0.01			$	(0.26	)
Basic weighted average number of common shares outstanding	64,900				59,900
Cash distributions declared per Trust common share	$	0.36			$	0.36

Compass Diversified Holdings
Net Sales to Pro Forma Net Sales Reconciliation
(unaudited)
		Three months ended March 31,
(in thousands)		2021				2020
Net Sales		$	461,596			$	333,449
Acquisitions (1)		—				48,744
Pro Forma Net Sales		$	461,596			$	382,193

⁽¹⁾
Acquisitions reflects the net sales for Marucci Sports and BOA on a pro forma basis as if we had acquired these businesses on January 1, 2020.

Compass Diversified Holdings
Subsidiary Net Sales
(unaudited)
		Three months ended March 31,
(in thousands)		2021				2020
Branded Consumer
5.11		$	99,877			$	95,781
BOA (1)		36,452				26,508
Ergobaby		22,328				19,649
Liberty		31,478				24,960
Marucci Sports (1)		36,648				22,236
Velocity Outdoor		65,632				30,390
Total Branded Consumer		$	292,415			$	219,524
Niche Industrial
Advanced Circuits		$	21,562			$	21,696
Altor Solutions		37,820				28,383
Arnold Magnetics		32,485				29,558
Sterno		77,314				83,032
Total Niche Industrial		$	169,181			$	162,669
Total Subsidiary Net Sales		$	461,596			$	382,193

⁽¹⁾
Net sales for Marucci Sports and BOA are pro forma as if we had acquired these businesses on January 1, 2020.

Compass Diversified Holdings
Net Income to Adjusted EBITDA and Cash Flow Available for Distribution and Reinvestment
(Unaudited)
	Three months ended March 31,
(in thousands)	2021				2020
Net income	$	21,996			$	4,880
Provision for income taxes	7,520				222
Income from continuing operations before income taxes	$	29,516			$	5,102
Other expense, net	(2,227		)		661
Amortization of debt issuance costs	(686		)		(525		)
Interest expense, net	(13,805		)		(8,597		)
Operating income	$	46,234			$	13,563
Adjusted For:
Depreciation	9,505				8,301
Amortization	18,599				13,505
Noncontrolling shareholder compensation	2,771				2,055
Acquisition expenses	299				—
Integration services fees	1,600				—
Management fees	11,048				8,620
Other	(2,101		)		(1		)
Adjusted EBITDA	$	87,955			$	46,043
Interest at Corporate, net of unused fee (1)	(13,665		)		(8,197		)
Management fees	(11,048		)		(8,620		)
Capital expenditures (maintenance)	(4,879		)		(3,260		)
Current tax expense (cash taxes) (2)	(5,959		)		(2,914		)
Preferred share distributions	(6,045		)		(5,542		)
Miscellaneous items	(115		)		147
Cash Flow Available for Distribution and Reinvestment (“CAD”)	$	46,244			$	17,657

(1	)	Interest expense at Corporate reflects consolidated interest expense less non-cash components such as the amortization of our bond premium.
(2	)	Current tax expense is calculated by deducting the change in deferred tax from the statement of cash flows from the income tax provision on the statement of operations.

Compass Diversified Holdings
Consolidated EBITDA
Three months ended March 31, 2021
(Unaudited)
		Corporate				5.11				BOA				Ergo			Liberty				Marucci				Velocity				ACI			Altor Solutions				Arnold			Sterno				Consolidated
Net income (loss)		$	(8,781	)		$	1,999			$	5,544			$	1,043		$	3,475			$	7,528			$	5,225			$	2,813		$	2,215			$	958		$	(23	)		$	21,996
Adjusted for:
Provision (benefit) for income taxes		—				768				(707		)		347			1,441				2,398				1,506				771			935				536			(475		)		7,520
Interest expense, net		13,759				—				—				—			—				2				44				—			—				—			—				13,805
Intercompany interest		(18,707		)		2,984				2,286				566			699				552				1,818				1,877			1,738				1,462			4,725				—
Depreciation and amortization		156				5,455				4,967				2,225			461				2,169				3,128				547			2,623				1,761			5,298				28,790
EBITDA		(13,573		)		11,206				12,090				4,181			6,076				12,649				11,721				6,008			7,511				4,717			9,525				72,111
Other income (expense)		121				(12		)		55				—			(6		)		(2		)		2,386				4			(264		)		—			(55		)		2,227
Non-controlling shareholder compensation		—				628				560				404			7				275				262				124			257				—			254				2,771
Acquisition expenses		—				—				—				—			—				—				—				—			—				299			—				299
Integration services fee		—				—				1,100				—			—				500				—				—			—				—			—				1,600
Other		199				—				—				—			—								(2,300		)		—			—				—			—				(2,101		)
Management fees		9,485				250				250				125			125				125				125				125			188				125			125				11,048
Adjusted EBITDA		$	(3,768	)		$	12,072			$	14,055			$	4,710		$	6,202			$	13,547			$	12,194			$	6,261		$	7,692			$	5,141		$	9,849			$	87,955

Compass Diversified Holdings
Consolidated EBITDA
Three months ended March 31, 2020
(Unaudited)
		Corporate				5.11				Ergo				Liberty				Velocity				ACI			Altor Solutions				Arnold				Sterno				Consolidated
Net income (loss)		$	(1,635	)		$	2,133			$	903			$	1,608			$	(3,302	)		$	2,821		$	1,369			$	616			$	367			$	4,880
Adjusted for:
Provision (benefit) for income taxes		—				(1,864		)		(7		)		538				(453		)		1,427			1,032				(454		)		3				222
Interest expense, net		8,536				26				—				—				35				—			—				—				—				8,597
Intercompany interest		(17,732		)		3,820				650				982				2,517				1,447			1,838				1,467				5,011				—
Depreciation and amortization		101				5,253				2,061				426				3,305				684			3,110				1,655				5,736				22,331
EBITDA		(10,730		)		9,368				3,607				3,554				2,102				6,379			7,349				3,284				11,117				36,030
Other income (expense)		—				370				—				(4		)		(18		)		5			(790		)		—				(225		)		(662		)
Non-controlling shareholder compensation		—				515				207				7				650				124			258				16				278				2,055
Management fees		7,432				250				125				125				125				125			188				125				125				8,620
Adjusted EBITDA		$	(3,298	)		$	10,503			$	3,939			$	3,682			$	2,859			$	6,633		$	7,005			$	3,425			$	11,295			$	46,043

Compass Diversified Holdings
Adjusted EBITDA
(unaudited)
		Three months ended March 31,
(in thousands)		2021				2020
Branded Consumer
5.11		$	12,072			$	10,503
BOA (1)		14,055				—
Ergobaby		4,710				3,939
Liberty		6,202				3,682
Marucci Sports (2)		13,547				—
Velocity Outdoor		12,194				2,859
Total Branded Consumer		$	62,780			$	20,983
Niche Industrial
Advanced Circuits		$	6,261			$	6,633
Altor Solutions		7,692				7,005
Arnold Magnetics		5,141				3,425
Sterno		9,849				11,295
Total Niche Industrial		$	28,943			$	28,358
Corporate expense (3)		(3,768		)		(3,298		)
Total Adjusted EBITDA		$	87,955			$	46,043

(1	)	The above results for BOA do not include management’s estimate of Adjusted EBITDA, before our ownership, of $7.9 million for the three months ended March 31, 2020. BOA was acquired on October 16, 2020.
(2	)	The above results for Marucci Sports do not include management’s estimate of Adjusted EBITDA, before our ownership, of $5.5 million for the three months ended March 31, 2020. Marucci Sports was acquired on April 20, 2020.
(3	)	Please refer to the recently filed Form 10-Q for a reconciliation of our Corporate expense to Net Income.

Compass Diversified Holdings

Summarized Statement of Cash Flows

(unaudited)

	Three months ended March 31,
(in thousands)	2021				2020
Net cash provided by operating activities	$	36,391			$	33,986
Net cash used in investing activities	(42,267		)		(6,646		)
Net cash (used in) provided by financing activities	(1,493		)		164,385
Effect of foreign currency on cash	(182		)		(1,026		)
Net (decrease) increase in cash and cash equivalents	(7,551		)		190,699
Cash and cash equivalents — beginning of period	70,744				100,314
Cash and cash equivalents — end of period	$	63,193			$	291,013

Compass Diversified Holdings

Consolidated Table of Cash Flow Available for Distribution and Reinvestment

(unaudited)

	Three months ended March 31,
(in thousands)	2021				2020
Net income	$	21,996			$	4,880
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	28,104				21,806
Amortization of debt issuance costs	603				525
Noncontrolling stockholder charges	2,771				2,055
Provision for reserves	3,501				883
Other	11				(515		)
Deferred taxes	1,561				(2,692		)
Changes in operating assets and liabilities	(22,156		)		7,044
Net cash provided by operating activities	36,391				33,986
Plus:
Unused fee on revolving credit facility	223				400
Successful acquisition costs	299				—
Integration services fee (1)	1,600				—
Changes in operating assets and liabilities	22,156				—
Less:
Maintenance capital expenditures (2)	4,879				3,260
Changes in operating assets and liabilities	—				7,044
Preferred share distributions	6,045				5,542
Other (3)	3,501				883
CAD	$	46,244			$	17,657
Distribution paid in April 2021/ 2020	$	23,364			$	21,564

⁽¹⁾ 
Represents fees paid by newly acquired companies to the Manager for integration services performed during the first year of ownership, payable quarterly.

⁽²⁾ 
Represents maintenance capital expenditures that were funded from operating cash flow, net of proceeds from the sale of property, plant and equipment, and excludes growth capital expenditures of approximately $2.8 million and $3.3 million, respectively, for the three months ended March 31, 2021 and March 31, 2020.

⁽³⁾
 Represents the effect on earnings of reserves for inventory and accounts receivable.

Compass Diversified Holdings
Maintenance Capital Expenditures
(unaudited)
		Three months ended March 31,
(in thousands)		2021				2020
Branded Consumer
5.11		$	499			$	174
Boa		221				—
Ergobaby		—				98
Liberty		47				186
Marucci Sports		614				—
Velocity Outdoor		876				873
Total Branded Consumer		$	2,257			$	1,331
Niche Industrial
Advanced Circuits		$	155			$	17
Altor Solutions		582				526
Arnold Magnetics		1,001				1,060
Sterno Group		884				326
Total Niche Industrial		$	2,622			$	1,929
Total maintenance capital expenditures		$	4,879			$	3,260

Compass Diversified Holdings

Condensed Consolidated Balance Sheets

	March 31, 2021				December 31, 2020
(in thousands)	(unaudited)
Assets
Current assets
Cash and cash equivalents	$	63,193			$	70,744
Proceeds deposited with Trustee	647,688				—
Accounts receivable, net	242,471				232,507
Inventories	384,300				363,373
Prepaid expenses and other current assets	43,344				41,743
Total current assets	1,380,996				708,367
Property, plant and equipment, net	177,307				172,669
Goodwill and intangible assets, net	1,607,003				1,603,168
Other non-current assets	125,858				114,314
Total assets	$	3,291,164			$	2,598,518
Liabilities and stockholders’ equity
Current liabilities
Accounts payable and accrued expenses	$	261,928			$	253,798
Due to related party	10,548				10,238
Current portion, long-term debt	600,000				—
Other current liabilities	31,941				30,679
Total current liabilities	904,417				294,715
Deferred income taxes	85,256				83,541
Long-term debt	986,059				899,460
Other non-current liabilities	104,588				100,654
Total liabilities	2,080,320				1,378,370
Stockholders’ equity
Total stockholders’ equity attributable to Holdings	1,084,877				1,100,024
Noncontrolling interest	125,967				120,124
Total stockholders’ equity	1,210,844				1,220,148
Total liabilities and stockholders’ equity	$	3,291,164			$	2,598,518