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
- Generated Cash Flow Available for Distribution and Reinvestment
("CAD" or "Cash Flow") of $19.4
million for the third quarter of 2013;
- Reported 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;
- Paid 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;
- Exercised option to expand revolving credit facility; and
- Generated 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:
- 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.ergobaby.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, 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 and $3,049
|
|
129,011
|
|
100,647
|
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; 48,300 shares issued and
|
|
650,043
|
|
650,043
|
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
Holdings
|
|
512,547
|
|
414,628
|
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
Months
|
|
Nine
Months
|
|
Nine
Months
|
|
|
Ended
|
|
Ended
|
|
Ended
|
|
Ended
|
(in thousands,
except
per share data)
|
|
September 30,
2013
|
|
September 30,
2012
|
|
September 30,
2013
|
|
September 30,
2012
|
|
|
|
|
|
|
|
|
|
Net sales
|
|
$
265,512
|
|
$
241,228
|
|
$
752,854
|
|
$
666,571
|
Cost of
sales
|
|
183,040
|
|
164,281
|
|
516,652
|
|
455,036
|
Gross profit
|
|
82,472
|
|
76,947
|
|
236,202
|
|
211,535
|
Operating
expenses:
|
|
|
|
|
|
|
|
|
Selling, general and
administrative expense
|
|
42,468
|
|
39,422
|
|
124,671
|
|
119,756
|
Supplemental put expense
(reversal)
|
|
(61,303)
|
|
5,029
|
|
(45,995)
|
|
6,391
|
Management fees
|
|
4,892
|
|
4,429
|
|
13,642
|
|
13,294
|
Amortization
expense
|
|
7,310
|
|
7,699
|
|
22,384
|
|
22,639
|
Impairment
expense
|
|
-
|
|
-
|
|
900
|
|
-
|
Operating income
|
|
89,105
|
|
20,368
|
|
120,600
|
|
49,455
|
|
|
|
|
|
|
|
|
|
Other income
(expense):
|
|
|
|
|
|
|
|
|
Interest income
|
|
2
|
|
8
|
|
35
|
|
51
|
Interest expense
|
|
(5,080)
|
|
(5,068)
|
|
(14,640)
|
|
(18,804)
|
Amortization of debt
issuance costs
|
|
(542)
|
|
(485)
|
|
(1,553)
|
|
(1,326)
|
Loss on debt
extinguishment
|
|
-
|
|
(856)
|
|
(1,785)
|
|
(856)
|
Other income, net
|
|
(75)
|
|
173
|
|
(91)
|
|
(223)
|
Income from continuing operations before income
taxes
|
83,410
|
|
14,140
|
|
102,566
|
|
28,297
|
Provision for income
taxes
|
|
5,114
|
|
7,361
|
|
18,688
|
|
17,119
|
Income from continuing operations
|
|
78,296
|
|
6,779
|
|
83,878
|
|
11,178
|
Loss from
discontinued operations, net of income tax
|
|
-
|
|
-
|
|
-
|
|
(1,168)
|
Loss on sale of
discontinued operations, net of income tax
|
|
-
|
|
(334)
|
|
-
|
|
(464)
|
Net income
|
|
78,296
|
|
6,445
|
|
83,878
|
|
9,546
|
Net income from continuing operations attributable
to noncontrolling interest
|
|
4,909
|
|
2,959
|
|
9,466
|
|
6,996
|
Net loss from discontinued operations attributable
to noncontrolling interest
|
|
-
|
|
-
|
|
-
|
|
(226)
|
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 average number of shares outstanding
|
|
48,300
|
|
48,300
|
|
48,300
|
|
48,300
|
|
|
|
|
|
|
|
|
|
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 expense
|
|
34,670
|
|
37,873
|
Impairment expense
|
|
900
|
|
-
|
Unrealized loss on interest rate and foreign currency
derivatives
|
|
68
|
|
2,108
|
Loss on extinguishment of debt
|
|
1,785
|
|
856
|
Amortization of debt issuance costs
|
|
1,540
|
|
1,326
|
Amortization of original issue discount
|
|
949
|
|
1,095
|
Supplemental put expense (reversal)
|
|
(45,995)
|
|
6,391
|
Noncontrolling interests and noncontrolling stockholders
charges
|
|
3,367
|
|
3,250
|
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 other current assets
|
|
(668)
|
|
(1,674)
|
Increase
in accounts payable and accrued expenses
|
|
26,044
|
|
20,661
|
Payment
of profit allocation
|
|
(5,603)
|
|
(13,675)
|
Net cash provided by operating activities
|
|
54,039
|
|
21,380
|
|
|
|
|
|
Cash flows from
investing activities:
|
|
|
|
|
Acquisition of
businesses, net of cash acquired
|
|
-
|
|
(125,434)
|
Purchases of property
and equipment
|
|
(14,673)
|
|
(9,718)
|
Proceeds from
dispositions
|
|
82,157
|
|
66,473
|
Purchase of Fox common
stock
|
|
-
|
|
(15,128)
|
Proceeds from sale
leaseback transaction
|
|
4,372
|
|
-
|
Proceeds released from
escrow related to Staffmark sale
|
|
-
|
|
5,045
|
Other
|
|
260
|
|
974
|
Net cash provided by (used in) investing activities
|
|
72,116
|
|
(77,788)
|
|
|
|
|
|
Cash flows from
financing activities:
|
|
|
|
|
Net borrowing of
debt
|
|
28,438
|
|
46,633
|
Redemption of CamelBak
preferred stock
|
|
-
|
|
(48,022)
|
Proceeds from
noncontrolling equity issuance
|
|
36,122
|
|
-
|
Debt issuance
costs
|
|
(2,697)
|
|
(3,154)
|
Distributions
paid
|
|
(52,164)
|
|
(52,164)
|
Net payments related
to noncontrolling interest
|
|
(3,090)
|
|
(4,456)
|
Excess tax benefit on
stock based compensation and other
|
|
(103)
|
|
5,389
|
Net cash provided by (used in) financing activities
|
|
6,506
|
|
(55,774)
|
Foreign currency
impact on cash
|
|
261
|
|
(199)
|
Net increase
(decrease) in cash and cash equivalents
|
|
132,922
|
|
(112,381)
|
Cash and cash
equivalents — beginning of period
|
|
18,241
|
|
132,370
|
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 Months
Ended
|
|
Three Months
Ended
|
|
Nine Months
Ended
|
|
Nine Months
Ended
|
(in
thousands)
|
|
September 30,
2013
|
|
September 30,
2012
|
|
September 30,
2013
|
|
September 30,
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
amortization
|
|
11,546
|
|
11,430
|
|
34,670
|
|
37,873
|
Impairment
expense
|
|
-
|
|
-
|
|
900
|
|
-
|
Amortization of debt
issuance costs
|
|
529
|
|
485
|
|
1,540
|
|
1,326
|
Unrealized (gain) loss
on derivatives
|
|
549
|
|
515
|
|
68
|
|
2,108
|
Loss on extinguishment
of debt
|
|
-
|
|
-
|
|
1,785
|
|
856
|
Amortization of
original issue discount
|
|
294
|
|
360
|
|
949
|
|
1,095
|
Supplemental put
expense (reversal)
|
|
(61,303)
|
|
5,029
|
|
(45,995)
|
|
6,391
|
Noncontrolling
stockholders charges
|
|
1,055
|
|
918
|
|
3,367
|
|
3,250
|
Other
|
|
143
|
|
554
|
|
189
|
|
1,399
|
Deferred
taxes
|
|
(548)
|
|
(1,826)
|
|
(2,121)
|
|
(2,315)
|
Changes in operating
assets and liabilities
|
|
1,079
|
|
2,441
|
|
(25,191)
|
|
(40,149)
|
Net cash provided by
(used in) operating activities
|
|
31,640
|
|
26,351
|
|
54,039
|
|
21,380
|
Plus:
|
|
|
|
|
|
|
|
|
Unused fee on
revolving credit facility (1)
|
|
564
|
|
664
|
|
1,738
|
|
1,984
|
Successful acquisition
expense (2)
|
|
-
|
|
391
|
|
-
|
|
5,211
|
HALO sale related
expenses (3)
|
|
-
|
|
-
|
|
-
|
|
1,976
|
Changes in operating
assets and liabilities
|
|
-
|
|
-
|
|
25,191
|
|
40,149
|
Less:
|
|
|
|
|
|
|
|
|
Maintenance capital
expenditures (4)
|
|
4,421
|
|
1,961
|
|
9,957
|
|
7,276
|
FOX CAD (5)
|
|
7,344
|
|
-
|
|
7,344
|
|
-
|
Other
|
|
-
|
|
158
|
|
-
|
|
597
|
Changes in operating
assets and liabilities
|
|
1,079
|
|
2,441
|
|
-
|
|
-
|
|
|
|
|
|
|
|
|
|
Estimated cash
flow available for distribution and
reinvestment
|
$
19,360
|
|
$
22,846
|
|
$
63,667
|
|
$
62,827
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Distribution paid in
April 2013/2012
|
|
|
|
|
|
$
17,388
|
|
$
17,388
|
Distribution paid in
July 2013/2012
|
|
|
|
|
|
17,388
|
|
17,388
|
Distributions paid in
October 2013/ 2012
|
|
$
17,388
|
|
$
17,388
|
|
17,388
|
|
17,388
|
|
|
$
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