Compass Diversified Holdings Reports First Quarter 2013 Financial Results

  Compass Diversified Holdings Reports First Quarter 2013 Financial Results

Generates Cash Flow Available for Distribution and Reinvestment of $20.8
Million

PR Newswire

WESTPORT, Conn., May 7, 2013

WESTPORT, Conn., May 7, 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
months ended March 31, 2013.

First Quarter 2013 Highlights

  oGenerated Cash Flow Available for Distribution and Reinvestment ("CAD" or
    "Cash Flow") of $20.8 million for the first quarter of 2013;
  oReported net income of $3.6 million for the first quarter of 2013; and
  oPaid a first quarter 2013 cash distribution of $0.36 per share in April
    2013, bringing cumulative distributions paid to $9.2352 per share since
    CODI's IPO in May of 2006.

"Our strong results for the first quarter of 2013 exceeded management's
expectations, as Cash Flow increased 25.2% compared to the year-earlier
period," stated Alan Offenberg, CEO of Compass Group Diversified Holdings LLC.
"We continue to achieve considerable revenue and earnings growth on a combined
basis across our branded products businesses consisting of CamelBak, ERGObaby,
Fox and Liberty Safe. We also maintained relative stability in the performance
of our four niche industrial businesses comprised of Advanced Circuits,
American Furniture, Tridien Medical and Arnold Magnetic. Based on the
continued application of our business model, we paid a first quarter
distribution of $0.36 per share. As we continue to provide attractive cash
distributions, we remain focused on leveraging our balance sheet strength to
drive future performance. Our substantial liquidity bodes well for CODI to be
able to continue to reinvest in our current family of leading middle market
businesses while pursuing accretive acquisition opportunities that create
significant value for our owners."

Operating Results
CODI reported Cash Flow (see note regarding use of Non-GAAP Financial Measures
below) of $20.8 million for the quarter ended March 31, 2013, as compared to
$16.6 million for the prior year comparable quarter. CODI's weighted average
number of shares outstanding for both the quarter ended March 31, 2013 and
March 31, 2012 was approximately 48.3 million.

The improvement in Cash Flow for the first quarter 2013 as compared to the
corresponding year-earlier period was largely attributable to the
year-over-year growth in the Company's CamelBak, ERGObaby, Fox and Liberty
Safe businesses. In addition, Cash Flow for the first quarter 2013 was
positively impacted by the full 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 first quarter 2013
excluded 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 of our businesses 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 March 31, 2013 was $3.6 million, as compared
to net income of $0.9 million for the quarter ended March 31, 2012. The
year-over-year increase in the Company's net income reflects double-digit
growth in each of net sales, gross profit and operating income. During the
quarter ended March 31, 2013, CODI recorded a non-cash supplemental put
accrual expense of $6.4 million based on the periodic review of current cash
flow generation levels of its businesses as well as anticipated market
multiples for those businesses in the event they were to be sold in the
current environment. During the quarter ended March 31, 2012, the Company
reversed approximately $1.5 million of its non-cash supplemental put accrual
and expensed approximately $4.3 million of transaction costs related to its
acquisition of Arnold Magnetic Technologies.

Liquidity and Capital Resources
As of March 31, 2013, CODI had $16.5 million in cash and cash equivalents,
$251.9 million outstanding on its term loan facility and $27.0 million
outstanding under its $290 million revolving credit facility. The Company has
no significant debt maturities until 2017 and had borrowing availability of
approximately $261 million at March 31, 2013 under its revolving credit
facility.

On April 3, 2013, CODI exercised an option under its credit agreement, dated
as of October 27, 2011, to expand its term loan facility by $30 million, which
increased the Company's aggregate outstanding term loan borrowings under the
facility to $281.9 million. The net proceeds of the incremental term loan were
used to repay outstanding borrowings under the Company's revolving credit
facility. 

CODI also amended the pricing terms of both its term loan facility and
revolving credit facility. Under the terms of the amendments, the interest
rate for the term loan facility was reduced by 1.25% and the interest rate for
the revolving credit facility was reduced by 0.50%. In addition, the unused
fee for the revolving credit facility was reduced by 0.25% when leverage is
lower than a defined ratio and the maturity date for the revolving credit
facility was extended to April 2017. All other terms of the credit agreement
remain unchanged.

First Quarter 2013 Distribution
On April 9, 2013, CODI's Board of Directors declared a first quarter
distribution of $0.36 per share. The cash distribution was paid on April 30,
2013 to all holders of record as of April 23, 2013. Since its IPO in May of
2006, CODI has paid a cumulative distribution of $9.2352 per share.

Conference Call
Management will host a conference call on Wednesday, May 8, 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 (888) 466-4462 and the dial-in
number for international callers is (719) 457-2727. The access code for all
callers is 5197923. 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 May 15, 2013. 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 5197923.

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 businesses is a leader in their
niche market.

CODI maintains controlling ownership interests in each of its businesses 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 businesses,
contributing to their financial and operating flexibility. CODI utilizes the
cash flows generated by its businesses to invest in the long-term growth of
the Company and to make cash distributions to its owners.

Our businesses are engaged in the following lines of business:

  oThe manufacture of quick-turn, prototype and production rigid printed
    circuit boards (Advanced Circuits, www.advancedcircuits.com);
  oThe design and manufacture of promotionally priced upholstered furniture
    (American Furniture Manufacturing, www.americanfurn.net);
  oThe 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);
  oThe manufacture of engineered magnetic solutions for a wide range of
    specialty applications and end-markets (Arnold Magnetic Technologies,
    www.arnoldmagnetics.com);
  oThe design and manufacture of personal hydration products for outdoor,
    recreation and military use (CamelBak Products, www.camelbak.com);
  oThe design and marketing of wearable baby carriers, strollers and related
    products (ERGObaby, www.ergobaby.com);
  oThe design, manufacture and marketing of premium suspension products for
    mountain bikes and powered off-road vehicles (FOX, www.ridefox.com);
  oThe 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)                            March 31,         December 31,
                                          2013              2012
                                          (unaudited)
Assets
Current assets:
Cash and cash equivalents                 $   16,500     $    18,241
Accounts receivable, less allowance of    119,354           100,647
$3,130 and $3,049
Inventories                               129,247           127,283
Prepaid expenses and other current        20,488            21,488
assets
 Total current assets                  285,589           267,659
Property, plant and equipment, net        67,504            68,488
Goodwill                                  257,527           257,527
Intangible assets, net                    333,099           340,666
Deferred debt issuance costs, net         7,744             8,238
Other non-current assets                  14,035            12,623
Total assets                              $    965,498  $     955,201
Liabilities and stockholders' equity
Current liabilities:
Accounts payable and accrued expenses     $  118,612      $   100,346
Due to related party                      3,825             3,765
Current portion of long-term debt         2,550             2,550
Current portion of supplemental put       5,603             5,185
obligation
Other liabilities                         2,055             1,953
 Total current liabilities             132,645           113,799
Long-term debt                            269,731           267,008
Supplemental put obligation               52,391            46,413
Deferred income taxes                     63,679            63,982
Other non-current liabilities             7,109             7,787
Total liabilities                         525,555           498,989
Stockholders' equity
Trust shares, no par value, 500,000       650,043           650,043
authorized; 48,300 shares issued and
 outstanding at 3/31/13 and 12/31/12
Accumulated other comprehensive loss      (850)             (132)
Accumulated deficit                       (251,077)         (235,283)
Total stockholders' equity attributable   398,116           414,628
to Holdings
Noncontrolling interests                  41,827            41,584
 Total stockholders' equity            439,943           456,212
Total liabilities and stockholders'       $    965,498  $     955,201
equity



Compass Diversified Holdings
Condensed Consolidated Statements of Operations
(unaudited)
                                        Three Months        Three Months
                                        Ended                Ended
(in thousands, except per share data)  March 31, 2013       March 31, 2012
Net sales                               $           $        
                                        241,567              195,327
Cost of sales                           165,194              133,640
 Gross profit                 76,373               61,687
Operating expenses:
 Selling, general and               41,209               40,433
administrative expense
 Supplemental put expense           6,396                (1,540)
(reversal)
 Management fees                    4,316                4,532
 Amortization expense               7,630                7,176
 Operating income           16,822               11,086
Other income (expense):
 Interest income                    2                    33
 Interest expense                   (5,341)              (6,029)
 Amortization of debt issuance      (485)                (356)
costs
 Other, net                         327                  (268)
 Income from continuing       11,325               4,466
operations before income taxes
Provision for income taxes              7,699                4,099
 Income from continuing        3,626                367
operations
Income from discontinued operations,    -                    522
net of income tax benefit
 Net income                   3,626                889
Net income from continuing operations
attributable to noncontrolling          2,032                1,676
interest
Net loss from discontinued operations
attributable to noncontrolling          -                    (1)
interest
 Net income (loss)            $           $        
attributable to Holdings                  1,594              (786)
Basic and fully diluted income (loss)   $           $        
per share                                  0.03             (0.02)
Weighted average number of shares       48,300               48,300
outstanding – basic and fully diluted
Cash distributions declared per share   $           $        
                                           0.36              0.36



Compass Diversified Holdings
Condensed Consolidated Statements of Cash Flows
(unaudited)
                                      Three Months        Three Months
                                      Ended               Ended
(in thousands)                        March 31, 2013       March 31, 2012
Cash flows from operating
activities:
Net income                            $           $         
                                      3,626                 889
Adjustments to reconcile net income
to net cash provided by
 (used in) operating
activities
 Depreciation and amortization      11,611               13,090
expense
 Amortization of debt issuance      845                  731
costs and original issue discount
 Supplemental put expense           6,396                (1,540)
(reversal)
 Noncontrolling stockholder notes   1,301                791
and other
 Deferred taxes                     (857)                (49)
 Unrealized (gain) loss on
interest rate and foreign currency    (385)                345
derivatives
 Other                              (71)                 830
Changes in operating assets and
liabilities, net of acquisition:
 Increase in accounts receivable    (18,130)             (1,874)
 Increase in inventories            (2,010)              (5,107)
 Increase in prepaid expenses and   (187)                (629)
other current assets
 Increase in accounts payable and   17,987               1,392
accrued expenses
 Payment of profit allocation       -                    (13,675)
 Net cash provided by (used  20,126               (4,806)
in) operating activities
Cash flows from investing
activities:
 Acquisition of businesses, net  -                    (123,575)
of cash acquired
 Purchases of property and       (3,328)              (3,405)
equipment
 Proceeds released from escrow   93                   5,045
related to Staffmark and HALO sales
 Purchase of Fox common stock    -                    (1,466)
 Other investing activities      -                    268
 Net cash used in investing  (3,235)              (123,133)
activities
Cash flows from financing
activities:
 Net borrowing of debt           2,363                79,438
 (Payments to) proceeds from     (3,090)              4,628
noncontrolling equity issuances
 Redemption of CamelBak          -                    (48,022)
preferred stock
 Debt issuance costs             -                    (638)
 Other                           (22)                 (106)
 Distributions paid              (17,388)             (17,388)
 Net cash provided by (used  (18,137)             17,912
in) financing activities
Foreign currency adjustment           (495)                20
Net decrease in cash and cash         (1,741)              (110,007)
equivalents
Cash and cash equivalents —           18,241               132,370
beginning of period
Cash and cash equivalents — end of    $            $         
period                                16,500              22,363



Compass Diversified Holdings
Condensed Consolidated Table of Cash Flows Available for Distribution and
Reinvestment ("CAD")
(unaudited)
                                         Three Months         Three Months
                                         Ended                Ended
(in thousands)                      March 31, 2013       March 31, 2012
Net income                              $            $       
                                         3,626                 889
 Adjustment to reconcile net
income to cash provided by (used
in)
 operating activities
 Depreciation and amortization     11,611               13,090
 Amortization of debt issuance      845                  731
costs and original issue discount
 Supplemental put expense           6,396                (1,540)
(reversal)
 Noncontrolling stockholder         1,301                791
notes and other
 Deferred taxes                   (857)                (49)
 Unrealized (gain) loss on
interest rate and foreign currency       (385)                345
derivatives
 Other                              (71)                 830
 Changes in operating assets        (2,340)              (19,893)
and liabilities
Net cash provided by (used in)           20,126               (4,806)
operating activities
Plus:
 Unused fee on revolving credit     645                  660
facilities (1)
 Successful acquisition expense     -                    4,325
(2)
 Changes in operating assets        2,340                19,893
and liabilities
 Other                              71                   -
Less:
 Maintenance capital                2,346                2,594
expenditures (3)
 Other                              -                    830
Estimated cash flow available for        $             $      
distribution and reinvestment           20,836               16,648
Distribution paid in April 2013/2012     $             $      
                                         17,388               17,388
(1) Represents the commitment fee on the unused portion of the Revolving
Credit Facilities.
(2) Represents transaction costs for successful acquisitions that were
expensed during the period.
(3) Represents maintenance capital expenditures that were funded from
operating cash flow. Excludes $1.0 million and $0.8million of expenditures
considered growth capital expenditures for the three months ended March 31,
2013 and 2012,respectively.



SOURCE Compass Diversified Holdings

Website: http://www.compassdiversifiedholdings.com
Contact: Compass Diversified Holdings: James J. Bottiglieri, Chief Financial
Officer, 203.221.1703, jbottiglieri@compassdiversifiedholdings.com; Investor
Relations and Media Contacts: The IGB Group: Leon Berman, 212.477.8438,
lberman@igbir.com, or Michael Cimini, 212.477.8261, mcimini@igbir.com
 
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