WESTPORT, Conn., Aug. 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 six months ended June 30, 2012.
Second Quarter 2012 Highlights
- Generated Cash Flow Available for Distribution and Reinvestment
("CAD" or "Cash Flow") of $23.3
million for the second quarter of 2012;
- Reported net income of $2.2
million for the second quarter of 2012;
- Paid a second quarter 2012 cash distribution of $0.36 per share in July
2012, bringing cumulative distributions paid to $8.1552 per share since CODI's IPO in May of
2006;
- Exercised option to expand term loan facility and amended
pricing terms; and
- Completed the sale of our majority-owned subsidiary, HALO
Holding Corporation ("HALO").
Alan Offenberg, CEO of Compass
Group Diversified Holdings LLC, commented, "During the second
quarter, CODI delivered strong financial results that exceeded
management's expectations with an increase in Cash Flow of 26.6%
compared to the year-earlier period. We continue to leverage the
leadership position and comparative financial strength of our
subsidiaries to expand their relative market share with
particularly strong results at Fox and Liberty where we posted
double-digit revenue growth. Our results for the quarter also
reflect notable contributions from our newest platform businesses,
Arnold Magnetic and CamelBak, both of which were acquired less than
a year ago."
Mr. Offenberg added, "As we maintain our focus on taking
advantage of organic and acquisition-related growth opportunities,
we further enhanced our financial flexibility in the quarter.
Specifically, we expanded the size of our term loan facility by
$30 million and reduced the interest
rate by 1.25%. In addition, we consummated the sale of our HALO
subsidiary. With a strong balance sheet including approximately
$285 million in total liquidity at
the end of the second quarter, CODI is in a strong position to
capitalize on additional acquisitions under favorable valuations
and terms as we have in the past. We also intend to continue to
reinvest in our current subsidiaries to drive future performance
while providing attractive cash distributions on behalf of our
owners."
Operating Results
CODI reported Cash Flow (see note regarding use of Non-GAAP
Financial Measures below) of $23.3
million for the quarter ended June
30, 2012, as compared to $18.4
million for the prior year comparable quarter. CODI's
weighted average number of shares outstanding for the quarter ended
June 30, 2012 and June 30, 2011 was approximately 48.3 million and
46.7 million, respectively.
The improvement in Cash Flow for the second quarter 2012 as
compared to the year-earlier period was largely due to the
inclusion of operating results from CamelBak and Arnold Magnetic,
two platform businesses acquired by CODI on August 24, 2011 and March
5, 2012, respectively. Partially offsetting these factors,
Cash Flow for the second quarter 2012 excluded results from the
Company's Staffmark subsidiary, which was sold on October 17, 2011. In addition, results from the
Company's HALO subsidiary were only partially reflected in the
second quarter 2012 due to the sale of this platform business 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.
Net income for the quarter ended June 30,
2012 was $2.2 million, as
compared to net income of $8.3
million for the quarter ended June
30, 2011. During the quarter ended June 30, 2012, CODI recorded a loss from
discontinued operations of $1.7
million, consisting primarily of transaction-related costs
from the sale of HALO. The Company also recorded higher interest
expense for the second quarter of 2012 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.
Liquidity and Capital Resources
As of June 30, 2012, CODI had
$16.0 million in cash and cash
equivalents, $253.8 million
outstanding on its term loan facility and $19.5 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
June 30, 2012 under its revolving
credit facility.
On April 2, 2012, CODI exercised
an option under its credit agreement, dated as of October 27, 2011, to increase its term loan
facility by $30 million. The
Company's aggregate outstanding borrowings under its term loan
facility increased to approximately $254.4
million after this borrowing. The net proceeds of the
borrowing were used to repay existing borrowings under the
Company's revolving credit facility. Concurrent with this increased
term loan borrowing, CODI amended the pricing terms of its term
loan facility. Under the terms of the amendment, amounts borrowed
bear interest at LIBOR plus a margin of 5.00%, as compared to the
previous margin of 6.00%, and the LIBOR floor was reduced to 1.25%
from 1.50%. All other terms of the credit agreement remain
unchanged.
On May 1, 2012, CODI completed the
sale of its majority owned subsidiary, HALO, whereby the Company
received approximately $66.4 million
of total proceeds from the sale at closing. The proceeds were used
to repay borrowings under the Company's revolving credit
facility.
Second Quarter 2012 Distribution
On July 10, 2012, CODI's Board of
Directors declared a second quarter distribution of $0.36 per share. The cash distribution was paid
on July 31, 2012 to all holders of
record as of July 24, 2012. Since its
IPO in May of 2006, CODI has paid a cumulative distribution of
$8.1552 per share.
Conference Call
Management will host a conference call on Wednesday, August 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 (800) 259-2693 and the dial-in number for
international callers is (913) 312-1269. The access code for all
callers is 4321346. 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 August 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 4321346.
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:
- The manufacture of quick-turn, prototype and production rigid
printed circuit boards (Advanced Circuits,
www.advancedcircuits.com);
- The design and manufacture of promotionally priced upholstered
furniture (American Furniture Manufacturing,
www.americanfurn.net);
- 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);
- The manufacture of engineered magnetic solutions for a wide
range of specialty applications and end-markets (Arnold Magnetic
Technologies, www.arnoldmagnetics.com);
- The design and manufacture of personal hydration products for
outdoor, recreation and military use (CamelBak
Products, www.camelbak.com);
- The design and marketing of wearable baby carriers, strollers
and related products (ERGObaby,
www.ergobabycarriers.com);
- The design, manufacture and marketing of premium suspension
products for mountain bikes and powered off-road vehicles
(FOX, www.ridefox.com);
- 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)
|
|
June
30,
|
|
December 31,
|
|
|
2012
|
|
2011
|
|
|
(unaudited)
|
|
|
Assets
|
|
|
|
|
Current
assets:
|
|
|
|
|
Cash and
cash equivalents
|
|
$
16,017
|
|
$
131,973
|
Accounts
receivable, less allowance of $3,587 and $2,420
|
|
118,449
|
|
69,114
|
Inventories
|
|
139,162
|
|
96,312
|
Prepaid
expenses and other current assets
|
|
27,898
|
|
22,758
|
Current
assets of discontinued operations
|
|
-
|
|
40,064
|
|
|
|
|
|
Total
current assets
|
|
301,526
|
|
360,221
|
|
|
|
|
|
Property,
plant and equipment, net
|
|
64,612
|
|
43,579
|
Goodwill
|
|
259,248
|
|
205,567
|
Intangible
assets, net
|
|
355,787
|
|
328,070
|
Deferred
debt issuance costs, net
|
|
9,241
|
|
6,942
|
Other
non-current assets
|
|
13,810
|
|
13,889
|
Non-current assets of discontinued
operations
|
|
-
|
|
71,638
|
|
|
|
|
|
Total
assets
|
|
$
1,004,224
|
|
$
1,029,906
|
|
|
|
|
|
Liabilities and stockholders' equity
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
Accounts
payable and accrued expenses
|
|
$120,511
|
|
$
72,998
|
Due to
related party
|
|
4,000
|
|
4,239
|
Current
portion of supplemental put obligation
|
|
4,500
|
|
13,675
|
Current
portion, long-term debt
|
|
2,550
|
|
2,250
|
Other
current liabilities
|
|
1,571
|
|
1,694
|
Current
liabilities of discontinued operations
|
|
-
|
|
23,306
|
|
|
|
|
|
Total
current liabilities
|
|
133,132
|
|
118,162
|
|
|
|
|
|
Long-term
debt
|
|
263,062
|
|
214,000
|
Supplemental put obligation
|
|
32,676
|
|
35,814
|
Deferred
income taxes
|
|
66,239
|
|
49,088
|
Other
non-current liabilities
|
|
6,464
|
|
2,875
|
Non-current liabilities of discontinued
operations
|
|
-
|
|
13,489
|
|
|
|
|
|
Total
liabilities
|
|
501,573
|
|
433,428
|
|
|
|
|
|
Stockholders' equity
|
|
|
|
|
Trust
shares, no par value, 500,000 authorized; 48,300 shares issued and
|
|
648,036
|
|
658,361
|
outstanding at 6/30/12 and 12/31/11
|
|
|
|
|
Accumulated other comprehensive loss
|
|
(787)
|
|
-
|
Accumulated deficit
|
|
(197,275)
|
|
(160,852)
|
Total
stockholders' equity attributable to Holdings
|
|
449,974
|
|
497,509
|
Noncontrolling interests
|
|
52,677
|
|
95,257
|
Noncontrolling interests of discontinued
operations
|
|
-
|
|
3,712
|
Total
stockholders' equity
|
|
502,651
|
|
596,478
|
Total
liabilities and stockholders' equity
|
|
$
1,004,224
|
|
$
1,029,906
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Compass
Diversified Holdings
|
Condensed
Consolidated Statements of Operations
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three
Months
|
|
Three
Months
|
|
Six
Months
|
|
Six
Months
|
|
|
Ended
|
|
Ended
|
|
Ended
|
|
Ended
|
(in
thousands, except per share data)
|
|
June
30, 2012
|
|
June
30, 2011
|
|
June
30, 2012
|
|
June
30, 2011
|
|
|
|
|
|
|
|
|
|
Net
sales
|
|
$
230,016
|
|
$
133,144
|
|
$
425,343
|
|
$
277,784
|
Cost of
sales
|
|
157,115
|
|
92,045
|
|
290,755
|
|
193,331
|
Gross profit
|
|
72,901
|
|
41,099
|
|
134,588
|
|
84,453
|
Operating
expenses:
|
|
|
|
|
|
|
|
|
Selling, general and
administrative expense
|
|
39,901
|
|
23,294
|
|
80,334
|
|
46,952
|
Supplemental put
expense
|
|
2,902
|
|
1,667
|
|
1,362
|
|
4,895
|
Management
fees
|
|
4,333
|
|
3,496
|
|
8,865
|
|
6,915
|
Amortization
expense
|
|
7,764
|
|
4,719
|
|
14,940
|
|
9,434
|
Impairment
expense
|
|
-
|
|
-
|
|
-
|
|
7,700
|
Operating income
|
|
18,001
|
|
7,923
|
|
29,087
|
|
8,557
|
|
|
|
|
|
|
|
|
|
Other
income (expense):
|
|
|
|
|
|
|
|
|
Interest
income
|
|
10
|
|
-
|
|
43
|
|
2
|
Interest
expense
|
|
(7,707)
|
|
(1,869)
|
|
(13,736)
|
|
(3,949)
|
Amortization of debt
issuance costs
|
|
(485)
|
|
(542)
|
|
(841)
|
|
(1,001)
|
Other income,
net
|
|
(128)
|
|
13
|
|
(396)
|
|
-
|
Income from continuing operations before income taxes
|
|
9,691
|
|
5,525
|
|
14,157
|
|
3,609
|
Provision
for income taxes
|
|
5,659
|
|
2,923
|
|
9,758
|
|
6,290
|
Income (loss) from continuing operations
|
|
4,032
|
|
2,602
|
|
4,399
|
|
(2,681)
|
Income
(loss) from discontinued operations, net of income tax
|
|
(1,690)
|
|
5,664
|
|
(1,168)
|
|
4,380
|
Loss on
sale of discontinued operations, net of income tax
|
|
(130)
|
|
-
|
|
(130)
|
|
-
|
Net income
|
|
2,212
|
|
8,266
|
|
3,101
|
|
1,699
|
Net income
from continuing operations attributable to
|
|
|
|
|
|
|
|
|
noncontrolling interest
|
|
2,361
|
|
1,096
|
|
4,037
|
|
2,056
|
Net income
(loss) from discontinued operations attributable to
|
|
|
|
|
|
|
|
|
noncontrolling interest
|
|
(225)
|
|
792
|
|
(226)
|
|
239
|
Net income (loss) attributable to Holdings
|
|
$
76
|
|
$
6,378
|
|
$
(710)
|
|
$
(596)
|
|
|
|
|
|
|
|
|
|
Basic and
fully diluted net income (loss) per share
|
|
$
0.00
|
|
$
0.14
|
|
$
(0.01)
|
|
$
(0.01)
|
|
|
|
|
|
|
|
|
|
Basic and
fully diluted weighted average number of
|
|
|
|
|
|
|
|
|
shares outstanding
|
|
48,300
|
|
46,725
|
|
48,300
|
|
46,725
|
|
|
|
|
|
|
|
|
|
Cash
distributions declared per share
|
|
$
0.36
|
|
$
0.36
|
|
$
0.72
|
|
$
0.72
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Compass
Diversified Holdings
|
Condensed
Consolidated Statements of Cash Flows
|
(unaudited)
|
|
|
|
|
|
|
|
Six
Months
|
|
Six
Months
|
|
|
Ended
|
|
Ended
|
(in
thousands)
|
|
June
30, 2012
|
|
June
30, 2011
|
|
|
|
|
|
Cash
flows from operating activities:
|
|
|
|
|
Net
income
|
|
$
3,101
|
|
$
1,699
|
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
|
|
|
|
|
Depreciation and amortization expense
|
|
27,284
|
|
21,801
|
Unrealized loss on interest rate swap
|
|
1,593
|
|
-
|
Amortization of original issue discount
|
|
1,591
|
|
-
|
Impairment expense
|
|
-
|
|
7,700
|
Supplemental put expense
|
|
1,362
|
|
4,895
|
Noncontrolling interests and noncontrolling stockholders
charges
|
|
2,332
|
|
1,215
|
Deferred taxes
|
|
(489)
|
|
(1,926)
|
Other
|
|
845
|
|
87
|
|
|
|
|
|
Changes in
operating assets and liabilities, net of acquisition:
|
|
|
|
|
(Increase) decrease in accounts receivable
|
|
(21,560)
|
|
1,627
|
Increase in inventories
|
|
(26,423)
|
|
(11,282)
|
Increase in prepaid expenses and other current assets
|
|
(3,441)
|
|
(3,305)
|
Payment
of profit allocation
|
|
(13,675)
|
|
-
|
Increase in accounts payable and accrued expenses
|
|
22,509
|
|
25,973
|
Net cash provided by (used in) operating activities
|
|
(4,971)
|
|
48,484
|
|
|
|
|
|
Cash
flows from investing activities:
|
|
|
|
|
Acquisition of
businesses, net of cash acquired
|
|
(125,390)
|
|
-
|
Purchases of
property and equipment
|
|
(6,944)
|
|
(11,367)
|
Proceeds from
dispositions
|
|
66,142
|
|
-
|
Purchase of Fox
common stock
|
|
(13,234)
|
|
-
|
Proceeds
released from escrow related to Staffmark sale
|
|
5,045
|
|
-
|
Other
|
|
1,082
|
|
150
|
Net cash used in investing activities
|
|
(73,299)
|
|
(11,217)
|
|
|
|
|
|
Cash
flows from financing activities:
|
|
|
|
|
Net borrowing
(repayment) of debt
|
|
47,771
|
|
(8,000)
|
Redemption of
CamelBak preferred stock
|
|
(48,022)
|
|
-
|
Debt issuance
costs
|
|
(3,154)
|
|
(593)
|
Distributions
paid
|
|
(34,776)
|
|
(32,708)
|
Net payments
related to noncontrolling interest
|
|
(4,456)
|
|
-
|
Excess tax
benefit on stock based compensation and other
|
|
5,147
|
|
(261)
|
Net cash used in financing activities
|
|
(37,490)
|
|
(41,562)
|
Foreign
currency impact on cash
|
|
(593)
|
|
-
|
Net
decrease in cash and cash equivalents
|
|
(116,353)
|
|
(4,295)
|
Cash and
cash equivalents — beginning of period
|
|
132,370
|
|
13,536
|
Cash and
cash equivalents — end of period
|
|
$
16,017
|
|
$
9,241
|
|
|
|
|
|
|
|
|
|
|
|
Compass
Diversified Holdings
|
|
Condensed
Consolidated Table of Cash Flows Available for Distribution and
Reinvestment ("CAD")
|
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three
Months Ended
|
|
Three
Months ended
|
|
Six
Months Ended
|
|
Six
Months Ended
|
(in
thousands)
|
|
|
June
30, 2012
|
|
June
30, 2011
|
|
June
30, 2012
|
|
June
30, 2011
|
|
|
|
|
|
|
|
|
|
|
Net
income
|
|
|
$
2,212
|
|
$
8,266
|
|
$
3,101
|
|
$
1,699
|
Adjustment to reconcile net income to cash provided by
|
|
|
|
|
|
|
|
|
|
(used in) operating activities:
|
|
|
|
|
|
|
|
|
|
Depreciation
and amortization
|
|
|
13,353
|
|
10,486
|
|
26,443
|
|
20,800
|
Impairment
expense
|
|
|
-
|
|
-
|
|
-
|
|
7,700
|
Amortization of
debt issuance costs
|
|
|
485
|
|
542
|
|
841
|
|
1,001
|
Unrealized loss
on interest rate swap
|
|
|
1,248
|
|
-
|
|
1,593
|
|
-
|
Amortization of
original issue discount
|
|
|
1,216
|
|
-
|
|
1,591
|
|
-
|
Supplemental
put expense
|
|
|
2,902
|
|
1,667
|
|
1,362
|
|
4,895
|
Noncontrolling
stockholders charges
|
|
|
1,541
|
|
363
|
|
2,332
|
|
1,215
|
Other
|
|
|
15
|
|
(205)
|
|
845
|
|
87
|
Deferred
taxes
|
|
|
(440)
|
|
(933)
|
|
(489)
|
|
(1,926)
|
Changes in
operating assets and liabilities
|
|
|
(22,697)
|
|
(11,460)
|
|
(42,590)
|
|
13,013
|
Net cash
provided by (used in) operating activities
|
|
|
(165)
|
|
8,726
|
|
(4,971)
|
|
48,484
|
Plus:
|
|
|
|
|
|
|
|
|
|
Unused fee on
revolving credit facility (1)
|
|
|
660
|
|
766
|
|
1,320
|
|
1,542
|
Successful
acquisition expense (2)
|
|
|
495
|
|
350
|
|
4,820
|
|
850
|
HALO sale
related expenses (3)
|
|
|
1,976
|
|
-
|
|
1,976
|
|
-
|
Changes in
operating assets and liabilities
|
|
|
22,697
|
|
11,460
|
|
42,590
|
|
-
|
Less:
|
|
|
|
|
|
|
|
|
|
Maintenance
capital expenditures (4)
|
|
|
2,721
|
|
2,857
|
|
5,315
|
|
5,124
|
Other
|
|
|
(391)
|
|
-
|
|
439
|
|
-
|
Changes in
operating assets and liabilities
|
|
|
-
|
|
-
|
|
-
|
|
13,013
|
|
|
|
|
|
|
|
|
|
|
Estimated cash flow available for distribution and
reinvestment
|
|
|
$23,333
|
|
$18,445
|
|
$39,981
|
|
$32,739
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Distribution paid in April 2012 and March
2011
|
|
|
|
|
|
|
$
17,388
|
|
$
16,821
|
Distribution paid in July 2012/2011
|
|
|
$
17,388
|
|
$
16,821
|
|
17,388
|
|
16,821
|
|
|
|
$
17,388
|
|
$
16,821
|
|
$
34,776
|
|
$
33,642
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(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.
|
|
|
|
|
|
|
|
|
|
|
(4)
Excludes growth capital expenditures of approximately $0.6 million
and $4.0 million for the three months ended June 30, 2012 and June
30, 2011, respectively and $1.4
million and $6.2 million for the six months ended June 30, 2012 and
June 30, 2011, respectively.
|
SOURCE Compass Diversified Holdings