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, firstname.lastname@example.org; or Investor Relations and Media, The IGB Group, Leon Berman / Michael Cimini, 212.477.8438 / 212.477.8261, email@example.com / firstname.lastname@example.org
Compass Diversified Holdings Reports Third Quarter 2013 Financial Results
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