Compass Diversified Holdings Reports Fourth Quarter and Full Year 2012 Financial Results

    Compass Diversified Holdings Reports Fourth Quarter and Full Year 2012
                              Financial Results

Generates Cash Flow Available for Distribution and Reinvestment of $14.9
Million for Fourth Quarter Ended December 31, 2012 and $77.7 Million for Full
Year 2012

PR Newswire

WESTPORT, Conn., March 6, 2013

WESTPORT, Conn., March 6, 2013 /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 twelve months ended December 31, 2012.

Fourth Quarter 2012 Highlights

  o Generated Cash Flow Available for Distribution and Reinvestment ("CAD" or
    "Cash Flow") of $14.9 million for the fourth quarter of 2012 and $77.7
    million for the full year 2012;
  o Reported a net loss of $5.2 million for the fourth quarter of 2012 and net
    income of $4.3 million for the full year 2012; and
  o Paid a fourth quarter 2012 cash distribution of $0.36 per share in January
    2013, bringing cumulative distributions paid to $8.8752 per share since
    CODI's IPO in May of 2006.

Alan Offenberg, CEO of Compass Group Diversified Holdings LLC, stated, "We are
pleased to post strong operating results for the fourth quarter and full year
2012. CODI's Cash Flow for the three and twelve months ended December 31, 2012
increased year-over-year by 38.6% and 12.6%, respectively. The success we
achieved throughout the year in leveraging the leadership position and
comparative financial strength of our subsidiaries led to strong revenue and
earnings growth, particularly in our branded product businesses consisting of
CamelBak, ERGObaby, Fox and Liberty Safe. We also benefited from our newest
platform business, Arnold Magnetic, which we acquired in March of 2012. As we
maintain our focus on acquiring new businesses that are accretive to CAD, we
continue to reinvest in our existing family of businesses. In 2012, capital
expenditures totaled approximately $18.5 million, enhancing our ability to
ensure the long-term health of our niche market leaders and drive future
performance. With a strong balance sheet, we remain committed to capitalizing
on both organic and acquisition-related growth opportunities while providing
attractive cash distributions for our owners as we have consistently done in
the past."

Operating Results
CODI reported Cash Flow (see note regarding use of Non-GAAP Financial Measures
below) of $14.9 million for the quarter ended December 31, 2012, as compared
to $10.7 million for the prior year comparable quarter. CODI's Cash Flow for
the year ended December 31, 2012 was $77.7 million as compared to $69.0
million for the prior year period. CODI's weighted average number of shares
outstanding for both the quarter and twelve months ended December 31, 2012 was
approximately 48.3 million, as compared to 48.3 million and 47.3 million for
the quarter and twelve months ended December 31, 2011, respectively.

The improvement in Cash Flow for the fourth quarter and full year 2012 as
compared to the corresponding year-earlier periods was primarily due to 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
fourth quarter and full year 2012 was positively impacted by the inclusion of
operating results from the Company's Arnold Magnetic subsidiary, which was
acquired on March 5, 2012. Partially offsetting these factors, Cash Flow for
the fourth quarter and full year 2012 excluded the results from the Company's
Staffmark subsidiary, which was sold on October 17, 2011. Additionally, Cash
Flow for the second half of 2012 excluded the seasonally strong operating
results from the Company's HALO subsidiary, which was sold on May 1, 2012.

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.

The net loss for the quarter ended December 31, 2012 was $5.2 million, as
compared to net income of $58.6 million for the quarter ended December 31,
2011.  CODI recorded approximately $3.9 million in higher non-cash
supplemental put expense in the 2012 fourth quarter as compared to the
corresponding previous quarter. This expense is based on the periodic review
of current cash flow generation of its subsidiaries, as well as anticipated
market multiples for those businesses in the event they were to be sold in the
current environment. During the fourth quarter ended December 31, 2011, CODI
recorded an $88.6 million gain on the sale of Staffmark, partially offset by a
$20.1 million non-cash impairment charge for the Company's American Furniture
Manufacturing subsidiary.

For the twelve months ended December 31, 2012, CODI reported net income of
$4.3 million, as compared to net income of $72.8 million for the twelve months
ended December 31, 2011, which included the previously mentioned $88.6 million
gain on the sale of Staffmark.

Liquidity and Capital Resources
As of December 31, 2012, CODI had approximately $18.2 million in cash and cash
equivalents, $252.5 million outstanding on its term loan facility and $24.0
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 $264 million at December 31, 2012
under its revolving credit facility.

Fourth Quarter 2012 Distribution
On January 10, 2013, CODI's Board of Directors declared a fourth quarter
distribution of $0.36 per share. The cash distribution was paid on January 31,
2013 to all holders of record as of January 25, 2013. Since its IPO in May of
2006, CODI has paid a cumulative distribution of $8.8752 per share.

Conference Call
Management will host a conference call on Thursday, March 7, 2013 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 (866) 307-3343 and the dial-in
number for international callers is (678) 894-3054. The access code for all
callers is 92499964. 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 March 14, 2013. To access the
replay, please dial (855) 859-2056 in the U.S. and (404) 537-3406 outside the
U.S., and then enter the access code 92499964.

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 subsidiaries 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, 2012 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)                                      December 31,  December 31,
                                                    2012          2011
Assets
Current assets:
Cash and cash equivalents                           $ 18,241      $ 131,973
Accounts receivable, less allowance of $3,049 and   100,647       69,114
$2,420
Inventories                                         127,283       96,312
Prepaid expenses and other current assets           21,488        22,758
Current assets of discontinued operations           -             40,064
Total current assets                                267,659       360,221
Property, plant and equipment, net                  68,488        43,579
Goodwill                                            257,527       205,567
Intangible assets, net                              340,666       328,070
Deferred debt issuance costs, net                   8,238         6,942
Other non-current assets                            12,623        13,889
Non-current assets of discontinued operations       -             71,638
Total assets                                        $ 955,201     $ 1,029,906
Liabilities and stockholders' equity
Current liabilities:
Accounts payable and accrued expenses               $ 100,346     $ 72,998
Due to related party                                3,765         4,239
Current portion of supplemental put obligation      5,185         13,675
Current portion, long-term debt                     2,550         2,250
Other current liabilities                           1,953         1,694
Current liabilities of discontinued operations      -             23,306
Total current liabilities                           113,799       118,162
Long-term debt                                      267,008       214,000
Supplemental put obligation                         46,413        35,814
Deferred income taxes                               63,982        49,088
Other non-current liabilities                       7,787         2,875
Non-current liabilities of discontinued operations  -             13,489
Total liabilities                                   498,989       433,428
Stockholders' equity
Trust shares, no par value, 500,000 authorized;     650,043       658,361
48,300 shares issued and
outstanding at 12/31/12 and 12/31/11
Accumulated other comprehensive loss                (132)         -
Accumulated deficit                                 (235,283)     (160,852)
Total stockholders' equity attributable to          414,628       497,509
Holdings
Noncontrolling interests                            41,584        95,257
Noncontrolling interests of discontinued            -             3,712
operations
Total stockholders' equity                          456,212       596,478
Total liabilities and stockholders' equity          $ 955,201     $ 1,029,906

 

Compass Diversified Holdings
Condensed Consolidated Statements of Operations
                          Three         Three         Year         Year 
                          Months        Months 
                          Ended         Ended         Ended        Ended
(in thousands, except     December 31,  December 31,  December     December
per share data)           2012          2011          31, 2012     31, 2011
                          $             $             $            $          
Net sales                                                             
                          218,150       160,193       884,721       606,644
Cost of sales             150,831       116,332       605,867      427,500
           Gross profit   67,319        43,861        278,854      179,144
Operating expenses:
     Selling, general
and administrative        41,385        32,684        161,141      110,031
expense
     Supplemental put     9,604         5,688         15,995       11,783
expense 
     Management fees      4,339         4,576         17,633       16,283
     Amortization         7,629         7,129         30,268       22,072
expense
     Impairment expense   -             20,069        -            27,769
           Operating      4,362         (26,285)      53,817       (8,794)
income (loss)
Other income (expense):
     Interest income      3             29            54           33
     Interest expense     (5,395)       (6,538)       (25,055)     (12,643)
     Amortization of      (485)         (408)         (1,811)      (1,951)
debt issuance costs
     Loss on debt         -             (2,636)       -            (2,636)
extinguishment
     Other income, net    40            127           (183)        49
           Income (loss)
from continuing           (1,475)       (35,711)      26,822       (25,942)
operations before income
taxes  
Provision (benefit) for   3,950         (2,521)       21,069       6,859
income taxes
           Income
(loss) from continuing    (5,425)       (33,190)      5,753        (32,801)
operations
Income (loss) from
discontinued              -             3,241         (1,168)      17,021
operations, net of
income tax
Gain (loss) on sale of
discontinued              219           88,592        (245)        88,592
operations, net of
income tax
          Net income      (5,206)       58,643        4,340        72,812
(loss) 
Net income from
continuing operations
attributable to 
        noncontrolling    1,512         998           8,508        5,641
interest
Net income (loss) from
discontinued operations
attributable to 
        noncontrolling    -             186           (226)        2,212
interest
          Net income      $             $             $            $          
(loss) attributable to                                                  
Holdings                  (6,718)       57,459         (3,942)      64,959
Basic and fully diluted   $             $             $            $          
net income (loss) per                                                       
share                     (0.14)        1.19           (0.08)       1.37
Basic and fully diluted
weighted average number
of
        shares            48,300        48,300        48,300       47,286
outstanding
Cash distributions        $             $             $            $          
declared per share                                                          
                            0.36        0.36          1.44          1.44

Compass Diversified Holdings
Condensed Consolidated Statements of Cash Flows
                                      Year                 Year
                                      Ended                Ended
(in thousands)                        December 31, 2012    December 31, 2011
Cash flows from operating
activities:
Net income                            $                    $                  
                                        4,340              72,812
Adjustments to reconcile net income
to net cash provided by operating
activities:
   Gain on sale of Staffmark          (219)                (88,592)
   Loss on sale of HALO               464                  -
   Depreciation and amortization      49,450               49,109
expense
   Unrealized loss on interest rate   2,175                1,822
swap
   Loss on debt extinguishment        -                    2,636
   Amortization of debt issuance      4,169                2,201
costs and original issue discount
   Impairment expense                 -                    27,769
   Supplemental put expense           15,995               11,783
   Noncontrolling stockholders        4,236                4,270
charges and other
   Deferred taxes                     (2,060)              (17,858)
   Other                              986                  421
Changes in operating assets and
liabilities, net of acquisition:
   Increase in accounts receivable    (2,137)              (7,517)
   (Increase) decrease in             (13,703)             5,056
inventories
   (Increase) decrease in prepaid     (1,580)              7,864
expenses and other current assets
   Payment of profit allocation       (13,886)             (6,892)
   Increase in accounts payable and   4,336                26,490
accrued expenses
          Net cash provided by        52,566               91,374
operating activities
Cash flows from investing
activities:
      Acquisition of businesses, net  (126,412)            (277,980)
of cash acquired
      Purchases of property and       (18,546)             (21,868)
equipment
      Proceeds from dispositions      66,709               217,249
      Purchase of noncontrolling      (15,423)             (4,032)
interests
      Proceeds released from escrows  8,355                -
related to Staffmark sale
      Other investing activities      891                  11
          Net cash used in investing  (84,426)             (86,620)
activities
Cash flows from financing
activities:
      Net borrowing of debt           50,995               129,000
      Proceeds from the issuance of   -                    19,598
trust shares, net
      Proceeds from issuance
(redemption) of CamelBak preferred    (48,022)             45,000
stock
      Debt issuance costs             (3,154)              (16,720)
      Distributions paid              (69,552)             (66,916)
      Net proceeds provided by        12,061               4,500
noncontrolling interest
      Net proceeds paid to            (30,038)             -
noncontrolling interest
      Excess tax benefit on stock     5,478                (382)
based compensation, and other
          Net cash provided by (used  (82,232)             114,080
in) financing activities
Foreign currency impact on cash       (37)                 -
         Net increase (decrease)  in  (114,129)            118,834
cash and cash equivalents
Cash and cash equivalents —           132,370              13,536
beginning of period
Cash and cash equivalents — end of    $                    $                
period                                18,241               132,370

 

 

Compass Diversified Holdings
Condensed Consolidated Table of Cash Flows Available for Distribution and
Reinvestment ("CAD")
(unaudited)
                        Three Months   Three Months  Year ended    Year ended
                        Ended          ended
(in thousands)          December 31,   December 31,  December 31,  December
                        2012           2011          2012          31, 2011
                        $              $             $             $          
Net income (loss)                                                       
                         (5,206)       58,643         4,340         72,812
   Adjustment to
reconcile net income
(loss) to cash
provided by 
   operating
activities:
      Depreciation and  11,577         15,756        49,450        49,109
amortization 
      Impairment        -              20,069        -             27,769
expense
      Gain on sale of   (219)          (88,592)      (219)         (88,592)
Staffmark
      Loss on sale of   -              -             464           -
HALO 
      Amortization of   531            408           1,857         1,951
debt issuance costs
      Unrealized loss   67             1,822         2,175         1,822
on interest rate swap
      Loss on debt      -              2,636         -             2,636
repayment
      Amortization of
original issue          361            250           2,312         250
discount
      Supplemental put  9,604          5,688         15,995        11,783
expense
      Noncontrolling    986            2,060         4,236         4,270
stockholders charges 
      Other             51             (615)         986           421
      Deferred taxes    255            (12,171)      (2,060)       (17,858)
      Changes in
operating assets and    13,179         27,623        (26,970)      25,001
liabilities  
Net cash provided by    31,186         33,577        52,566        91,374
operating activities
Plus:
      Unused fee on
revolving credit        682            665           2,666         2,706
facility (1)
      Successful
acquisition expense     (10)           461           5,201         4,658
(2)
      Sale related      -              6,434         1,976         6,434
expenses (3)
      Other             -              930           -             -
      Changes in
operating assets and    -              -             26,970        -
liabilities 
Less:
      Maintenance
capital expenditures    3,722          3,702         10,998        11,169
(4)
      Other             71             -             668           -
      Changes in
operating assets and    13,179         27,623        -             25,001
liabilities 
Estimated cash flow     $              $             $             $          
available for                                                           
distribution and         14,886        10,742         77,713        69,002
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                                 17,388        17,388
October 2012/2011
Distribution paid in    $              $          
January 2013/2012                                    17,388        17,388
                         17,388        17,388
                        $              $             $             $          
                                                                        
                         17,388        17,388         69,552        68,418
(1) Represents the commitment fees 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
Staffmark or HALO, net of the related income tax benefit.
(4) Excludes growth capital expenditures of approximately $5.4 million and
$3.0 million for the three months ended December 31, 2012 and  December 31,
2011,
      respectively, and $7.5 million and $10.6 million for the
years ended December 31, 2012 and December 31, 2011,
respectively.

  

SOURCE Compass Diversified Holdings

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