Compass Diversified Holdings Reports Third Quarter 2012 Financial Results

  Compass Diversified Holdings Reports Third Quarter 2012 Financial Results

Generates Cash Flow Available for Distribution and Reinvestment of $22.8
Million

PR Newswire

WESTPORT, Conn., Nov. 7, 2012

WESTPORT, Conn., Nov. 7, 2012 /PRNewswire/ -- Compass Diversified Holdings
(NYSE: CODI) ("CODI" or the "Company"), an owner of leading middle market
businesses, announced today its consolidated operating results for the three
and nine months ended September 30, 2012.

Third Quarter 2012 Highlights

  o Generated Cash Flow Available for Distribution and Reinvestment ("CAD" or
    "Cash Flow") of $22.8 million for the third quarter of 2012;
  o Reported net income of $6.4 million for the third quarter of 2012; and
  o Paid a third quarter 2012 cash distribution of $0.36 per share in October
    2012, bringing cumulative distributions paid to $8.5152 per share since
    CODI's IPO in May of 2006;

"We are pleased with our financial results for the third quarter of 2012,
which were consistent with management's expectations," said Alan Offenberg,
CEO of Compass Group Diversified Holdings LLC. "During the quarter, our
leading branded product businesses, consisting of our CamelBak Products,
ERGObaby, Fox and Liberty Safe subsidiaries, posted on a combined basis strong
revenue and earnings growth. We also maintained stable performance in our
combined niche industrial businesses, which include our Advanced Circuits,
American Furniture Manufacturing, Tridien Medical and Arnold Magnetic
Technologies subsidiaries. Based on the strength of CODI's current group of
subsidiaries, we paid a cash distribution of $0.36 per share, increasing the
cumulative distribution paid to approximately $8.52 per share since our IPO in
2006. As we maintain our commitment to provide shareholders with attractive
cash distributions, we remain focused on leveraging our balance sheet strength
to drive future performance. With substantial liquidity totaling more than
$275 million, we are well positioned to continue to invest in high-return
organic growth initiatives and pursue favorable platform and add-on
acquisitions that are accretive to Cash Flow."

Operating Results
CODI reported Cash Flow (see note regarding use of Non-GAAP Financial Measures
below) of $22.8 million for the quarter ended September 30, 2012, as compared
to $25.5 million for the prior year comparable quarter. CODI's weighted
average number of shares outstanding for the quarter ended September 30, 2012
and September 30, 2011 was approximately 48.3 million and 47.4 million,
respectively.

CODI's Cash Flow for the third quarter 2012 was lower as compared to the
corresponding year-earlier period due to the exclusion of the seasonally
strong operating results from the Company's Staffmark subsidiary, which was
sold on October 17, 2011, and the Company's HALO subsidiary, which was sold on
May 1, 2012. Partially offsetting these factors, Cash Flow for the third
quarter 2012 was positively impacted by the full inclusion of operating
results from the Company's CamelBak subsidiary, which was acquired by CODI on
August 24, 2011. In addition, Cash Flow for the third quarter of 2012 included
the operating results of the Company's Arnold Magnetic subsidiary, which was
acquired on March 5, 2012.

For the nine month period ended September 30, 2012, CODI reported Cash Flow of
$62.8 million, as compared to $58.3 million for the nine months ended
September 30, 2011, representing an increase of 7.8%. CODI's weighted average
number of shares outstanding for the nine month period ended September 30,
2012 and September 30, 2011 was approximately 48.3 million and 46.9 million,
respectively.

CODI's 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 subsidiary for the periods during which CODI owned
them. However, Cash Flow excludes the gains from sales of businesses, which
have totaled approximately $198 million since 2007.

Net income for the quarter ended September 30, 2012 was $6.4 million, as
compared to net income of $12.5 million for the quarter ended September 30,
2011. During the quarter ended September 30, 2012, CODI recorded higher
interest expense of approximately $3.8 million as compared to the prior year
period due in large part to higher average debt balances, amortization of
original issue discount and changes in the fair value of interest rate swaps.
CODI also recorded an approximate $3.8 million higher non-cash supplemental
put accrual in the current quarter as compared to the corresponding previous
quarter. This accrual is based on the periodic review of current cash flow
generation level of its subsidiaries, as well as anticipated market multiples
for those businesses in the event they were to be sold in the current
environment. For the nine month period ended September 30, 2012, CODI reported
net income of $9.5 million, as compared to net income of $14.2 million for the
nine months ended September 30, 2011.

Liquidity and Capital Resources
As of September 30, 2012, CODI had approximately $20.0 million in cash and
cash equivalents, $253.2 million outstanding on its term loan facility and
$19.0 million outstanding under its $290 million revolving credit facility.
The Company has no significant debt maturities until October 2016 and had
borrowing availability of approximately $270 million at September 30, 2012
under its revolving credit facility.

Third Quarter 2012 Distribution
On October 9, 2012, CODI's Board of Directors declared a third quarter
distribution of $0.36 per share. The cash distribution was paid on October 31,
2012 to all holders of record as of October 24, 2012. Since its IPO in May of
2006, CODI has paid a cumulative distribution of $8.5152 per share.

Conference Call
Management will host a conference call on Thursday, November 8, 2012 at 9:00
a.m. ET to discuss the latest corporate developments and financial results.
The dial-in number for callers in the U.S. is (888) 427-9376 and the dial-in
number for international callers is (719) 325-2452. The access code for all
callers is 5285947. A live webcast will also be available on the Company's
website at www.compassdiversifiedholdings.com.   

A replay of the call will be available through November 15, 2012. To access
the replay, please dial (888) 203-1112 in the U.S. and (719) 457-0820 outside
the U.S., and then enter the access code 5285947.

Note Regarding Use of Non-GAAP Financial Measures
CAD, or Cash Flow, is a non-GAAP measure used by the Company to assess its
performance, as well as its ability to sustain and increase quarterly
distributions. A number of CODI's businesses have seasonal earnings patterns.
Accordingly, the Company believes that the most appropriate measure of its
performance is over a trailing or expected 12-month period. We have reconciled
CAD, or Cash Flow, to Net Income and Cash Flow Provided by Operating
Activities on the Attached Schedules. We consider Net Income and Cash Flow
Provided by Operating Activities to be the most directly comparable GAAP
financial measures to CAD, or Cash Flow.

About Compass Diversified Holdings ("CODI")
CODI owns and manages a diverse family of established North American middle
market businesses. Each of its eight current subsidiaries is a leader in their
niche market. 

CODI maintains controlling ownership interests in each of its subsidiaries in
order to maximize its ability to impact long term cash flow generation and
value. 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 to make cash distributions to its owners.

Our subsidiaries are engaged in the following lines of business:

  o The manufacture of quick-turn, prototype and production rigid printed
    circuit boards (Advanced Circuits, www.advancedcircuits.com);
  o The design and manufacture of promotionally priced upholstered furniture
    (American Furniture Manufacturing, www.americanfurn.net);
  o The design and manufacture of medical therapeutic support surfaces and
    other wound treatment devices (Anodyne Medical Device, also doing business
    and known as Tridien Medical, www.tridien.com);
  o The manufacture of engineered magnetic solutions for a wide range of
    specialty applications and end-markets (Arnold Magnetic Technologies,
    www.arnoldmagnetics.com);
  o The design and manufacture of personal hydration products for outdoor,
    recreation and military use   (CamelBak Products, www.camelbak.com);
  o The design and marketing of wearable baby carriers, strollers and related
    products (ERGObaby, www.ergobabycarriers.com);
  o The design, manufacture and marketing of premium suspension products for
    mountain bikes and powered off-road vehicles (FOX, www.ridefox.com);
  o The design and manufacture of premium home and gun safes (Liberty Safe,
    www.libertysafe.com).

To find out more about Compass Diversified Holdings, please visit
www.compassdiversifiedholdings.com.

This press release may contain certain forward-looking statements, including
statements with regard to the future performance of the Company. Words such as
"believes," "expects," "projects," and "future" or similar expressions, are
intended to identify forward-looking statements. These forward-looking
statements are subject to the inherent uncertainties in predicting future
results and conditions. Certain factors could cause actual results to differ
materially from those projected in these forward-looking statements, and some
of these factors are enumerated in the risk factor discussion in the Form 10-K
filed by CODI with the Securities and Exchange Commission for the year ended
December 31, 2011 and other filings with the Securities and Exchange
Commission. CODI undertakes no obligation to publicly update or revise any
forward-looking statements, whether as a result of new information, future
events or otherwise.

 

Compass Diversified Holdings
Condensed Consolidated Balance Sheets
(in thousands)                                     September 30,  December 31,
                                                   2012           2011
                                                   (unaudited)
Assets
Current assets:
Cash and cash equivalents                          $ 19,989       $ 131,973
Accounts receivable, less allowance of $3,588 and  119,532        69,114
$2,420
Inventories                                        135,499        96,312
Prepaid expenses and other current assets          20,949         22,758
Current assets of discontinued operations          -              40,064
Total current assets                               295,969        360,221
Property, plant and equipment, net                 63,733         43,579
Goodwill                                           257,014        205,567
Intangible assets, net                             348,218        328,070
Deferred debt issuance costs, net                  8,748          6,942
Other non-current assets                           16,129         13,889
Non-current assets of discontinued operations      -              71,638
Total assets                                       $ 989,811      $ 1,029,906
Liabilities and stockholders' equity
Current liabilities:
Accounts payable and accrued expenses              $ 114,214      $ 72,998
Due to related party                               3,950          4,239
Current portion of supplemental put obligation     5,200          13,675
Current portion, long-term debt                    2,550          2,250
Other current liabilities                          1,955          1,694
Current liabilities of discontinued operations     -              23,306
Total current liabilities                          127,869        118,162
Long-term debt                                     262,285        214,000
Supplemental put obligation                        37,005         35,814
Deferred income taxes                              63,723         49,088
Other non-current liabilities                      7,536          2,875
Non-current liabilities of discontinued            -              13,489
operations
Total liabilities                                  498,418        433,428
Stockholders' equity
Trust shares, no par value, 500,000 authorized;    648,036        658,361
48,300 shares issued and
outstanding at 9/30/12 and 12/31/11
Accumulated other comprehensive loss               (363)          -
Accumulated deficit                                (211,177)      (160,852)
Total stockholders' equity attributable to         436,496        497,509
Holdings
Noncontrolling interests                           54,897         95,257
Noncontrolling interests of discontinued           -              3,712
operations
Total stockholders' equity                         491,393        596,478
Total liabilities and stockholders' equity         $ 989,811      $ 1,029,906

   

Compass Diversified Holdings
Condensed Consolidated Statements of Operations
(unaudited)
                        Three Months   Three        Nine Months   Nine Months 
                                       Months 
                        Ended          Ended        Ended         Ended
(in thousands, except   September 30,  September    September     September
per share data)         2012           30, 2011     30, 2012      30, 2011
                        $              $            $             $          
Net sales                     241,228                                  446,451
                                       168,667      666,571
Cost of sales           164,281        117,837      455,036       311,168
           Gross        76,947         50,830       211,535       135,283
profit
Operating expenses:
     Selling, general
and administrative      39,422         30,395       119,756       77,347
expense
     Supplemental put   5,029          1,200        6,391         6,095
expense 
     Management fees    4,429          4,792        13,294        11,707
     Amortization       7,699          5,509        22,639        14,943
expense
     Impairment         -              -            -             7,700
expense
           Operating    20,368         8,934        49,455        17,491
income 
Other income
(expense):
     Interest income    8              2            51            4
     Interest expense   (5,924)        (2,156)      (19,660)      (6,105)
     Amortization of    (485)          (542)        (1,326)       (1,543)
debt issuance costs
     Other income, net  173            (78)         (223)         (78)
           Income from
continuing operations   14,140         6,160        28,297        9,769
before income taxes  
Provision for income    7,361          3,090        17,119        9,380
taxes
           Income from  6,779          3,070        11,178        389
continuing operations
Income (loss) from
discontinued            -              9,400        (1,168)       13,780
operations, net of
income tax
Loss on sale of
discontinued            (334)          -            (464)         -
operations, net of
income tax
          Net income    6,445          12,470       9,546         14,169
Net income from
continuing operations
attributable to 
        noncontrolling  2,959          2,587        6,996         4,643
interest
Net income (loss) from
discontinued
operations
attributable to 
        noncontrolling  -              1,787        (226)         2,026
interest
          Net income    $              $            $             $          
attributable to                                                          
Holdings                3,486          8,096        2,776          7,500
Basic and fully         $              $            $             $          
diluted net income per                                                     
share                   0.07           0.17         0.06           0.16
Basic and fully
diluted weighted
average number of
        shares          48,300         47,376       48,300        46,944
outstanding
Cash distributions      $              $            $             $          
declared per share                                                         
                        0.36           0.36         1.08           1.08

 

 

Compass Diversified Holdings
Condensed Consolidated Statements of Cash Flows
(unaudited)
                                      Nine Months          Nine Months 
                                      Ended                Ended
(in thousands)                        September 30, 2012   September 30, 2011
Cash flows from operating
activities:
Net income                            $                    $                  
                                        9,546              14,169
Adjustments to reconcile net income
to net cash provided by operating
activities:
   Depreciation and amortization      39,199               34,896
expense
   Unrealized loss on interest rate   2,108                -
swap
   Amortization of original issue     1,951                -
discount
   Impairment expense                 -                    7,700
   Supplemental put expense           6,391                6,095
   Noncontrolling stockholders        3,250                2,210
charges and other
   Deferred taxes                     (2,315)              (5,687)
   Other                              1,399                1,036
Changes in operating assets and
liabilities, net of acquisition:
   Increase in accounts receivable    (22,898)             (23,229)
   Increase in inventories            (22,563)             (146)
   Increase in prepaid expenses and   (1,674)              (806)
other current assets
   Payment of profit allocation       (13,675)             (6,892)
   Increase in accounts payable and   20,661               28,451
accrued expenses
          Net cash provided by        21,380               57,797
operating activities
Cash flows from investing
activities:
      Acquisition of businesses, net  (125,434)            (258,559)
of cash acquired
      Purchases of property and       (9,718)              (15,099)
equipment
      Proceeds from dispositions      66,473               -
      Purchase of noncontrolling      (15,128)             -
interests
      Proceeds released from escrow   5,045                -
related to Staffmark sale
      Other investing activities      974                  140
          Net cash used in investing  (77,788)             (273,518)
activities
Cash flows from financing
activities:
      Net borrowing of debt           46,633               196,500
      Proceeds from the issuance of   -                    19,684
trust shares, net
      Proceeds from issuance
(redemption) of CamelBak preferred    (48,022)             45,000
stock
      Debt issuance costs             (3,154)              (593)
      Distributions paid              (52,164)             (49,529)
      Net payments related to         (4,456)              2,016
noncontrolling interest
      Excess tax benefit on stock     5,389                (329)
based compensation, and other
          Net cash provided by (used  (55,774)             212,749
in) financing activities
Foreign currency impact on cash       (199)                -
         Net decrease in cash and     (112,381)            (2,972)
cash equivalents
Cash and cash equivalents —           132,370              13,536
beginning of period
Cash and cash equivalents — end of    $                    $                  
period                                19,989               10,564

 

Compass Diversified Holdings
Condensed Consolidated Table of Cash Flows Available for Distribution and
Reinvestment ("CAD")
(unaudited)
                          Three Months  Three Months  Nine Months  Nine Months
                          Ended         ended         Ended        Ended
(in thousands)            September     September     September    September
                          30, 2012      30, 2011      30, 2012     30, 2011
                          $             $             $            $          
Net income                                                              
                           6,445        12,470         9,546        14,169
   Adjustment to
reconcile net income to
cash provided by 
   operating
activities:
      Depreciation and    11,430        12,553        37,873       33,353
amortization 
      Impairment          -             -             -            7,700
expense
      Amortization of     485           542           1,326        1,543
debt issuance costs
      Unrealized loss     515           -             2,108        -
on interest rate swap
      Amortization of     360           -             1,951        -
original issue discount
      Supplemental put    5,029         1,200         6,391        6,095
expense
      Noncontrolling      918           995           3,250        2,210
stockholders charges 
      Other               554           949           1,399        1,036
      Deferred taxes      (1,826)       (3,761)       (2,315)      (5,687)
      Changes in
operating assets and      2,441         (15,635)      (40,149)     (2,622)
liabilities  
Net cash provided by      26,351        9,313         21,380       57,797
operating activities
Plus:
      Unused fee on
revolving credit          664           499           1,984        2,041
facility (1)
      Successful          391           3,347         5,211        4,197
acquisition expense (2)
      HALO sale related   -             -             1,976        -
expenses (3)
      Changes in
operating assets and      -             15,635        40,149       2,622
liabilities 
Less:
      Maintenance
capital expenditures      1,961         2,343         7,276        7,467
(4)
      Other               158           930           597          930
      Changes in
operating assets and      2,441         -             -            -
liabilities 
Estimated cash flow       $             $             $            $          
available for                                                           
distribution and           22,846       25,521         62,827       58,260
reinvestment  
Distribution paid in                                  $            $          
April 2012 and March                                                    
2011                                                   17,388       16,821
Distribution paid in                                  17,388       16,821
July 2012/2011
Distribution paid in      $             $          
October 2012/2011                                     17,388       17,388
                           17,388       17,388
                          $             $             $            $          
                                                                        
                           17,388       17,388         52,164       51,030
(1) Represents the commitment fee on the unused portion of the Revolving
Credit Facility and the Prior Revolving Credit Facility.
(2) Represents transaction costs for successful acquisitions that were
expensed during the period.
(3) Represents transaction costs incurred related to the sale of HALO, net of
the related income tax benefit.
(4) Excludes growth capital expenditures of approximately $0.7 million and
$1.4 million for the three months ended September 30, 2012 and  September 30,
2011,
 respectively and $2.1 million and $7.6 million for the nine months ended
September 30, 2012 and September 30, 2011, respectively.

 

SOURCE Compass Diversified Holdings

Website: http://www.compassdiversifiedholdings.com
Contact: James J. Bottiglieri, Chief Financial Officer, Compass Diversified
Holdings, +1-203-221-1703, jbottiglieri@compassdiversifiedholdings.com;
Investor Relations and Media, Leon Berman, +1-212-477-8438, lberman@igbir.com,
or Michael Cimini, +1-212-477-8261, mcimini@igbir.com, both of The IGB Group