CODI Compass Diversified

WESTPORT, Conn., Aug. 6, 2014 /PRNewswire/ -- Compass Diversified Holdings (NYSE: CODI) ("CODI," "we," "our" or the "Company"), an owner of leading middle market businesses, announced today its consolidated operating results for the three months ended June 30, 2014.

Second Quarter 2014 Highlights

• Generated Cash Flow Available for Distribution and Reinvestment ("CAD" or "Cash Flow") of $12.5 million for the second quarter of 2014;
  
  
• Reported net income of $12.3 million for the second quarter of 2014;
  
  
• Paid a second quarter 2014 cash distribution of $0.36 per share in July 2014, bringing cumulative distributions paid to $11.0352 per share since CODI's IPO in May of 2006; and
  
  
• Executed a credit agreement for $725 million in new debt financing.

"During the second quarter, we continued to generate predictable and strong free cash flow across both our niche industrial businesses and our branded consumer businesses," stated Alan Offenberg, CEO of Compass Diversified Holdings. "In particular, Ergobaby and CamelBak each reported double-digit revenue and operating income growth in the second quarter. Additionally, American Furniture maintained its positive sales momentum, having now posted double-digit revenue growth in each of the past four quarters."

Mr. Offenberg added, "As we leveraged the leadership position and comparative financial strength of our subsidiaries to increase their relative market share, we further enhanced our financing flexibility. Specifically, we secured $725 million in new debt financing in the quarter, expanding our overall debt capacity under favorable terms and pricing. We also partially divested our interest in FOX last month through a public share offering that generated net proceeds for CODI of approximately $65.5 million. Importantly, we have maintained the potential for additional upside due to our continuing ownership in FOX. Going forward, we remain focused on utilizing our substantial liquidity to reinvest in our current subsidiaries and enhance their future performance while aggressively pursuing select platform and add-on acquisition opportunities that are accretive to Cash Flow."

Operating Results
CODI reported Cash Flow (see note regarding use of Non-GAAP Financial Measures below) of $12.5 million for the quarter ended June 30, 2014, as compared to $23.5 million for the prior year comparable quarter. CODI's weighted average number of shares outstanding for both the quarter ended June 30, 2014 and June 30, 2013 was approximately 48.3 million.  

Cash Flow for the second quarter of 2014 reflects year-over-year growth in the Company's Ergobaby and CamelBak businesses as well as positive contributions from the Company's American Furniture Manufacturing business, offset by the Company's Liberty Safe business. Cash Flow for the second quarter of 2014 excluded results from the Company's FOX subsidiary, which completed its initial public offering ("IPO") on August 13, 2013.

For the six month period ended June 30, 2014, CODI reported Cash Flow of $27.1 million, as compared to $44.3 million for the six months ended June 30, 2013. CODI's weighted average number of shares outstanding for the six month periods ended June 30, 2014 and June 30, 2013 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 June 30, 2014 was $12.3 million, as compared to net income of $2.0 million for the quarter ended June 30, 2013. During the second quarter of 2013, CODI recorded a non-cash expense of $8.9 million related to the Company's Supplemental Put Agreement, which was terminated in July 2013.

For the six month period ended June 30, 2014, CODI reported net income of $19.7 million, as compared to net income of $5.6 million for the six months ended June 30, 2013.

Liquidity and Capital Resources
As of June 30, 2014, CODI had approximately $115.3 million in cash and cash equivalents, $325 million outstanding on its term loan facility and no outstanding borrowings under its revolving credit facility. The Company's FOX subsidiary had $45.4 million outstanding on its term loan facility and no outstanding borrowings on its $60 million revolving credit facility.  The Company has no significant debt maturities until 2019 and had borrowing availability of approximately $388 million at June 30, 2014 under its revolving credit facility.

On June 6, 2014, CODI signed a credit agreement for a revolving credit facility totaling $400 million and a term loan facility in the amount of $325 million. The two facilities combined for $725 million in new debt financing and replaced the Company's previous revolving credit facility and term loan facility.

Subsequent to the quarter ended June 30, 2014, CODI sold a total of 4,466,569 shares of FOX common stock in a public offering of shares held by CODI and certain other FOX shareholders at a price of $15.50 per share. Upon completion of the offering, CODI received total net proceeds of approximately $65.5 million and its ownership in FOX was lowered from approximately 53% to a non-controlling interest of 41%, or 15,108,718 shares of FOX's common stock. As a result of this offering, CODI expects to deconsolidate FOX from its consolidated financial reporting beginning in the quarter ending September 30, 2014.

Second Quarter 2014 Distribution
On July 10, 2014, CODI's Board of Directors declared a second quarter distribution of $0.36 per share. The cash distribution was paid on July 30, 2014 to all holders of record as of July 23, 2014. Since its IPO in May of 2006, CODI has paid a cumulative distribution of $11.0352 per share.

Conference Call
Management will host a conference call on Thursday, August 7, 2014 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 (855) 212-2368 and the dial-in number for international callers is (315) 625-6886. The access code for all callers is 75588632. 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 14, 2014. To access the replay, please dial (855) 859-2056 in the U.S. and (404) 537-3406 outside the U.S., and then enter the access code 75588632.

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 current subsidiaries is a leader in its 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 shareholders.

Our seven majority-owned 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.ergobaby.com); and
  
  
• The design and manufacture of premium home and gun safes (Liberty Safe, www.libertysafe.com).

In addition, we own approximately 41% of the common stock of Fox Factory Holding Corp. ("FOX", Nasdaq: FOXF), a former subsidiary business that completed its initial public offering in August 2013. FOX, www.ridefox.com, designs and manufactures high-performance suspension products primarily for mountain bikes, side-by-side vehicles, on-road and off-road vehicles and trucks, all-terrain vehicles, snowmobiles, specialty vehicles and applications, and motorcycles.

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, 2013 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.

SOURCE Compass Diversified Holdings