Compass Diversified Holdings Reports Third Quarter 2013 Financial Results

  Compass Diversified Holdings Reports Third Quarter 2013 Financial Results

Generates Cash Flow Available for Distribution and Reinvestment of $19.4
Million

PR Newswire

WESTPORT, Conn., Nov. 6, 2013

WESTPORT, Conn., Nov. 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 nine months ended September 30, 2013.

Third Quarter 2013 Highlights

  oGenerated Cash Flow Available for Distribution and Reinvestment ("CAD" or
    "Cash Flow") of $19.4 million for the third quarter of 2013;
  oReported net income of $78.3 million for the third quarter of 2013, which
    includes a $61.3 million supplemental put expense reversal in connection
    with the previously announced termination of the Supplemental Put
    Agreement on July 1, 2013;
  oPaid a third quarter 2013 cash distribution of $0.36 per share in October
    2013, bringing cumulative distributions paid to $9.9552 per share since
    CODI's IPO in May of 2006;
  oExercised option to expand revolving credit facility; and
  oGenerated debt and equity proceeds totaling approximately $142.4 million
    from the initial public offering (IPO) of CODI's subsidiary, Fox Factory
    Holding Corp. ("FOX"), while maintaining a majority ownership in FOX.

"Our financial results for the third quarter of 2013 were consistent with
management's expectations as we continue to capitalize on the relative
operating and financial strength of our leading middle market businesses,"
stated Alan Offenberg, CEO of Compass Group Diversified Holdings LLC. "During
the quarter, our Liberty subsidiary delivered another record performance,
increasing both revenue and profitability for the third consecutive quarter.
In addition, our FOX subsidiary completed its IPO, a major milestone for our
Company. CODI generated total net proceeds, including the repayment of
intercompany debt, of approximately $142.4 million from the offering.
Importantly, we continue to hold a majority interest in FOX, enabling CODI to
participate in the company's future success. Although Cash Flow for the third
quarter was reduced as a result of FOX's successful IPO, this transaction
demonstrates the considerable strength of CODI's business model and highlights
our ability to unlock significant value for shareholders. With a strong
balance sheet, we intend to continue to invest in high-return organic growth
initiatives and pursue attractive platform and add-on acquisitions under
favorable valuations and terms that are accretive to Cash Flow."

Operating Results
CODI reported Cash Flow (see note regarding use of Non-GAAP Financial Measures
below) of $19.4 million for the quarter ended September 30, 2013, as compared
to $22.8 million for the prior year comparable quarter. CODI's weighted
average number of shares outstanding for both the quarter ended September 30,
2013 and September 30, 2012 was approximately 48.3 million.

Cash Flow for the third quarter of 2013 reflects year-over-year growth in the
Company's Liberty Safe and Arnold Magnetic businesses, offset by the impact on
Cash Flow from the IPO of CODI's FOX subsidiary business completed on August
13, 2013. Subsequent to the IPO, FOX generated Cash Flow of $7.3 million,
which was excluded in CODI's calculation of CAD for the quarter ended
September 30, 2013. In connection with the offering, CODI sold an aggregate of
5,800,238 shares of FOX's common stock, generating net proceeds from equity of
approximately $80.9 million while maintaining a majority ownership in FOX upon
completion of the IPO. In addition, FOX repaid in full the outstanding balance
of approximately $61.5 million under its previous credit facility with CODI.

For the nine month period ended September 30, 2013, CODI's Cash Flow increased
to $63.7 million, as compared to $62.8 million for the nine months ended
September 30, 2012. CODI's weighted average number of shares outstanding for
the nine month periods ended September 30, 2013 and September 30, 2012 was
approximately 48.3 million.

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 monetizing interests in
CODI's subsidiaries, which have totaled more than $270 million since going
public in 2006.

Net income for the quarter ended September 30, 2013 was $78.3 million, as
compared to net income of $6.4 million for the quarter ended September 30,
2012. CODI reversed approximately $61.3 million of supplemental put expense in
connection with the termination of the Supplemental Put Agreement on July 1,
2013.

For the nine month period ended September 30, 2013, CODI reported net income
of $83.9 million, as compared to net income of $9.5 million for the nine
months ended September 30, 2012.

Liquidity and Capital Resources
As of September 30, 2013, CODI had approximately $151.2 million in cash and
cash equivalents, $280.5 million outstanding on its term loan facility and no
outstanding borrowings under its $320 million revolving credit facility. The
Company has no significant debt maturities until 2017 and had borrowing
availability of approximately $318 million at September 30, 2013 under its
revolving credit facility.

On August 6, 2013, CODI exercised an option under its credit agreement to
expand its revolving credit facility by $30 million, increasing the total
amount available under the facility to $320 million subject to borrowing base
restrictions. The Company intends to utilize the incremental borrowing
capacity under the revolving credit facility to fund future growth
opportunities and provide for working capital and general corporate purposes.

On August 13, 2013, CODI's FOX subsidiary closed its initial public offering
of an aggregate of 9,857,143 shares of common stock, which included the
exercise in full of the underwriters' over-allotment option, at an initial
offering price of $15.00 per share. As a selling stockholder in this offering,
CODI generated net proceeds from equity of approximately $80.9 million. In
addition, FOX repaid in full the outstanding balance of approximately $61.5
million under its previous credit facility with CODI. Based on the Company's
debt and equity interests in FOX, CODI generated total proceeds of
approximately $142.4 million from the FOX IPO and continues to maintain a
majority ownership in FOX.

Third Quarter 2013 Distribution
On October 10, 2013, CODI's Board of Directors declared a third quarter
distribution of $0.36 per share. The cash distribution was paid on October 30,
2013 to all holders of record as of October 23, 2013. Since its IPO in May of
2006, CODI has paid a cumulative distribution of $9.9552 per share.

Conference Call
Management will host a conference call on Thursday, November 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 (888) 337-8169 and the dial-in
number for international callers is (719) 325-2281. The access code for all
callers is 7181781. 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 14, 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 7181781.

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)                                     September 30,  December 31,
                                                   2013           2012
                                                   (unaudited)
Assets
Current assets:
Cash and cash equivalents                         $ 151,163      $ 18,241
Accounts receivable, less allowance of $3,634     129,011        100,647
and $3,049
Inventories                                       143,982        127,283
Prepaid expenses and other current assets         19,704         21,488
 Total current assets                           443,860        267,659
Property, plant and equipment, net                66,382         68,488
Goodwill                                          257,527        257,527
Intangible assets, net                            317,557        340,666
Deferred debt issuance costs, net                 8,775          8,238
Other non-current assets                          13,580         12,623
Total assets                                       $ 1,107,681    $ 955,201
Liabilities and stockholders' equity
Current liabilities:
Accounts payable and accrued expenses             $ 125,680      $ 100,346
Due to related party                              4,225          3,765
Current portion of supplemental put obligation    -              5,185
Current portion, long-term debt                   2,850          2,550
Other current liabilities                         4,184          1,953
 Total current liabilities                       136,939        113,799
Long-term debt                                     297,307        267,008
Supplemental put obligation                        -              46,413
Deferred income taxes                              62,200         63,982
Other non-current liabilities                      5,740          7,787
Total liabilities                                  502,186        498,989
Stockholders' equity
Trust shares, no par value, 500,000 authorized;    650,043        650,043
48,300 shares issued and
outstanding at 9/30/13 and 12/31/12
Accumulated other comprehensive income (loss)      129            (132)
Accumulated deficit                                (137,625)      (235,283)
 Total stockholders' equity attributable to     512,547        414,628
Holdings
Noncontrolling interests                           92,948         41,584
 Total stockholders' equity                       605,495        456,212
Total liabilities and stockholders' equity         $ 1,107,681    $ 955,201



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)        2013           30,          30,           30,
                                       2012         2013          2012
                        $        $       $        $     
Net sales                  265,512                         666,571
                                       241,228      752,854
Cost of sales           183,040        164,281      516,652       455,036
 Gross        82,472         76,947       236,202       211,535
profit
Operating expenses:
 Selling, general
and administrative      42,468         39,422       124,671       119,756
expense
 Supplemental put   (61,303)       5,029        (45,995)      6,391
expense (reversal)
 Management fees    4,892          4,429        13,642        13,294
 Amortization       7,310          7,699        22,384        22,639
expense
 Impairment         -              -            900           -
expense
 Operating    89,105         20,368       120,600       49,455
income
Other income
(expense):
 Interest income    2              8            35            51
 Interest expense   (5,080)        (5,068)      (14,640)      (18,804)
 Amortization of    (542)          (485)        (1,553)       (1,326)
debt issuance costs
 Loss on debt       -              (856)        (1,785)       (856)
extinguishment
 Other income, net  (75)           173          (91)          (223)
 Income from
continuing operations   83,410         14,140       102,566       28,297
before income taxes
Provision for income    5,114          7,361        18,688        17,119
taxes
 Income from  78,296         6,779        83,878        11,178
continuing operations
Loss from discontinued
operations, net of      -              -            -             (1,168)
income tax
Loss on sale of
discontinued            -              (334)        -             (464)
operations, net of
income tax
 Net income   78,296         6,445        83,878        9,546
Net income from
continuing operations
attributable to         4,909          2,959        9,466         6,996
noncontrolling
interest
Net loss from
discontinued
operations              -              -            -             (226)
attributable to
noncontrolling
interest
 Net income    $        $       $        $     
attributable to                                         
Holdings                73,387         3,486        74,412        2,776
Basic and fully         $        $       $        $     
diluted net income per                              
share                   1.52           0.07         1.54          0.06
Basic and fully
diluted weighted        48,300         48,300       48,300        48,300
average number of
shares 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, 2013   September 30, 2012
Cash flows from operating
activities:
Net income                          $           $         
                                      83,878                9,546
Adjustments to reconcile net income
to net cash provided by operating
activities:
 Depreciation and amortization      34,670               37,873
expense
 Impairment expense                 900                  -
 Unrealized loss on interest rate   68                   2,108
and foreign currency derivatives
 Loss on extinguishment of debt    1,785                856
 Amortization of debt issuance      1,540                1,326
costs
 Amortization of original issue     949                  1,095
discount
 Supplemental put expense           (45,995)             6,391
(reversal)
 Noncontrolling interests and       3,367                3,250
noncontrolling stockholders charges
 Deferred taxes                     (2,121)              (2,315)
 Other                              189                  1,399
Changes in operating assets and
liabilities, net of acquisition:
 Increase in accounts receivable    (28,244)             (22,898)
 Increase in inventories            (16,720)             (22,563)
 Increase in prepaid expenses and   (668)                (1,674)
other current assets
 Increase in accounts payable and   26,044               20,661
accrued expenses
 Payment of profit allocation       (5,603)              (13,675)
 Net cash provided by        54,039               21,380
operating activities
Cash flows from investing
activities:
 Acquisition of businesses, net  -                    (125,434)
of cash acquired
 Purchases of property and       (14,673)             (9,718)
equipment
 Proceeds from dispositions      82,157               66,473
 Purchase of Fox common stock    -                    (15,128)
 Proceeds from sale leaseback    4,372                -
transaction
 Proceeds released from escrow   -                    5,045
related to Staffmark sale
 Other                           260                  974
 Net cash provided by (used  72,116               (77,788)
in) investing activities
Cash flows from financing
activities:
 Net borrowing of debt           28,438               46,633
 Redemption of CamelBak          -                    (48,022)
preferred stock
 Proceeds from noncontrolling    36,122               -
equity issuance
 Debt issuance costs             (2,697)              (3,154)
 Distributions paid              (52,164)             (52,164)
 Net payments related to         (3,090)              (4,456)
noncontrolling interest
 Excess tax benefit on stock     (103)                5,389
based compensation and other
 Net cash provided by (used  6,506                (55,774)
in) financing activities
Foreign currency impact on cash       261                  (199)
Net increase (decrease) in cash and   132,922              (112,381)
cash equivalents
Cash and cash equivalents —           18,241               132,370
beginning of period
Cash and cash equivalents — end of    $            $         
period                                151,163              19,989



Compass Diversified Holdings
Condensed Consolidated Table of Cash Flows Available for Distribution and
Reinvestment ("CAD")
(unaudited)
                           Three          Three        Nine Months  Nine
                           Months         Months       Ended        Months
                           Ended          Ended                     Ended
                           September      September    September    September
(in thousands)        30,            30,          30,          30,
                           2013           2012         2013         2012
Net income                $ 78,296      $  6,445    $ 83,878    $  9,546
 Adjustment to
reconcile net income to
cash provided by (used
in) operating
activities:
 Depreciation and     11,546         11,430       34,670       37,873
amortization
 Impairment          -              -            900          -
expense
 Amortization of      529            485          1,540        1,326
debt issuance costs
 Unrealized (gain)    549            515          68           2,108
loss on derivatives
 Loss on              -              -            1,785        856
extinguishment of debt
 Amortization of      294            360          949          1,095
original issue discount
 Supplemental put     (61,303)       5,029        (45,995)     6,391
expense (reversal)
 Noncontrolling       1,055          918          3,367        3,250
stockholders charges
 Other              143            554          189          1,399
 Deferred taxes     (548)          (1,826)      (2,121)      (2,315)
 Changes in
operating assets and       1,079          2,441        (25,191)     (40,149)
liabilities
Net cash provided by
(used in) operating        31,640         26,351       54,039       21,380
activities
Plus:
 Unused fee on
revolving credit           564            664          1,738        1,984
facility (1)
 Successful           -              391          -            5,211
acquisition expense (2)
 HALO sale related    -              -            -            1,976
expenses (3)
 Changes in
operating assets and       -              -            25,191       40,149
liabilities
Less:
 Maintenance
capital expenditures       4,421          1,961        9,957        7,276
(4)
 FOX CAD (5)          7,344          -            7,344        -
 Other              -              158          -            597
 Changes in
operating assets and       1,079          2,441        -            -
liabilities
Estimated cash flow
available for distribution $ 19,360      $ 22,846    $  63,667   $ 62,827
and reinvestment
Distribution paid in                                   $  17,388   $ 17,388
April 2013/2012
Distribution paid in                                   17,388       17,388
July 2013/2012
Distributions paid in      $ 17,388      $ 17,388    17,388       17,388
October 2013/ 2012
                           $ 17,388      $ 17,388    $ 52,164    $ 52,164
(1) Represents the commitment fee on the unused portion of the 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 $1.2 million and
$0.7 million for the three months ended September 30, 2013 and September 30,
2012, respectively and $4.7 million and $2.1 million for the nine months ended
September 30, 2013 and September 30, 2012, respectively.
(5) Represents FOX CAD subsequent to IPO date. Includes approximately $10.2
million of EBITDA, less: $2.3 million of cash taxes, $0.3 million of
management fees and $0.3 million of maintenance capital expenditures.

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; or
Investor Relations and Media, The IGB Group, Leon Berman / Michael Cimini,
212.477.8438 / 212.477.8261, lberman@igbir.com / mcimini@igbir.com
 
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