WESTPORT, Conn., Nov. 4, 2015 /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
September 30, 2015.
Third Quarter 2015 Highlights
- Generated Cash Flow Available for Distribution and Reinvestment
("CAD" or "Cash Flow") of $23.8
million for the third quarter of 2015;
- Reported net income of $166.0
million for the third quarter of 2015;
- Paid a third quarter 2015 cash distribution of $0.36 per share in October
2015, bringing cumulative distributions paid to $12.8352 per share since CODI's IPO in May of
2006;
- Consummated the platform acquisition of Fresh Hemp Foods Ltd.
("Manitoba Harvest"); and
- Completed the sale of our CamelBak Products, LLC ("CamelBak")
subsidiary.
"We generated strong operating results during the quarter, which
both exceeded our expectations and significantly covered our
distribution," stated Alan
Offenberg, CEO of Compass Diversified Holdings. "Our third
quarter performance reflects strong cash flow contributions from
Liberty Safe, SternoCandleLamp and
Ergobaby, underscoring the leadership and financial strength of our
niche industrial and branded consumer businesses."
Mr. Offenberg added, "During the third quarter, we closed on our
acquisition of Manitoba Harvest, highlighting our success adding
niche leading businesses with a strong market leadership, proven
management, a passionate consumer following and compelling
expansion opportunities. We also completed the sale of CamelBak,
unlocking significant value and increasing the gains we have
realized for shareholders to over $480
million since our IPO. We continue to benefit from a strong
balance sheet, positioning CODI to capitalize on compelling
acquisition opportunities as well as reinvest in its current
subsidiaries to further drive future cash flow growth."
Operating Results
CODI reported Cash Flow (see Note
Regarding Use of Non-GAAP Financial Measures below) of $23.8 million for the quarter ended September 30, 2015, as compared to $13.4 million for the prior year's comparable
quarter. CODI's weighted average number of shares outstanding for
the quarters ended September 30, 2015
and September 30, 2014 were 54.3
million and 48.3 million, respectively.
Cash Flow for the third quarter of 2015 reflects year-over-year
growth in the Company's Liberty
Safe, SternoCandleLamp, Ergobaby, American Furniture
Manufacturing, and Tridien businesses, partially offset by a
decline at the Company's Advanced Circuits and Clean Earth
businesses. Cash flow for the third quarter of 2015 included
contributions from Manitoba Harvest from the date of acquisition
and CamelBak through the date of sale.
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 $480 million since going public in 2006,
including a $165 million gain from
the sale of CamelBak recorded in the third quarter.
Net income for the quarter ended September 30, 2015 was $166.0 million, as compared to net income of
$262.5 million for the quarter ended
September 30, 2014. During the third
quarter of 2015, CODI recorded a gain on the sale of CamelBak of
$165.3 million and a loss on the
classification of AFM as held for sale of $14.3 million. In addition, during the
third quarter of 2015, CODI's equity method investment in Fox
Factory Holding Corp. ("FOX", Nasdaq: FOXF) increased $11.8 million. During the third quarter of 2014,
CODI recorded a one-time accounting gain of approximately
$264.3 million as a result of the
deconsolidation of FOX.
For the nine month period ended September
30, 2015, CODI reported net income of $167.3 million, as compared to net income of
$282.2 million for the nine months
ended September 30, 2014, which
included results from FOX until its deconsolidation in July 2014.
Liquidity and Capital Resources
As of September 30, 2015, CODI had approximately
$88.7 million in cash and cash
equivalents, $321 million outstanding
on its term loan facility and no outstanding borrowings under its
revolving credit facility. The Company has no significant debt
maturities until 2019 and had net borrowing availability of
approximately $395 million at
September 30, 2015 under its
revolving credit facility. In addition, the Company's equity
investment in its former subsidiary FOX is valued at $254.7 million at September 30, 2015. Subsequent to the
quarter end, the Company sold American Furniture Manufacturing and
received net proceeds of $23.5
million.
Third Quarter 2015 Distribution
On October 7, 2015, CODI's Board of Directors
declared a third quarter distribution of $0.36 per share. The cash distribution was paid
on October 29, 2015 to all holders of
record as of October 22, 2015. Since
its IPO in May of 2006, CODI has paid a cumulative distribution of
$12.8352 per share.
Conference Call
Management will host a conference
call on Thursday, November 5, 2015 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 51916531. 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 12, 2015. 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 51916531.
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 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.
As of November 4, 2015, our eight
majority-owned subsidiaries are engaged in the following lines of
business:
- The manufacture of quick-turn, small-run and production rigid
printed circuit boards (Advanced Circuits);
- 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);
- The manufacture of engineered magnetic solutions for a wide
range of specialty applications and end-markets (Arnold Magnetic
Technologies);
- Environmental services for a variety of contaminated materials
including soils, dredged material, hazardous waste and drill
cuttings (Clean Earth);
- The design and marketing of wearable baby carriers, strollers
and related products (Ergobaby);
- The design and manufacture of premium home and gun safes
(Liberty Safe);
- The manufacture and marketing of branded, hemp-based food
products (Manitoba Harvest); and
- The manufacture and marketing of portable food warming fuel and
creative table lighting solutions for the foodservice industry
(SternoCandleLamp).
In addition, we own approximately 41% of the common stock
of FOX, a former subsidiary business that completed its
initial public offering in August 2013. FOX 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.
This press release may contain certain forward-looking
statements, including statements with regard to the future
performance of CODI. 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 SEC for the year ended December 31, 2014 and other filings with the SEC.
Except as required by law, 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
|
|
|
|
|
|
September
30,
|
|
December
31,
|
|
2015
|
|
2014
|
(in
thousands)
|
(unaudited)
|
|
|
Assets
|
|
|
|
Current
assets
|
|
|
|
Cash and cash
equivalents
|
$
|
88,725
|
|
|
$
|
21,946
|
|
Accounts receivable,
net
|
124,240
|
|
|
118,852
|
|
Inventories
|
74,296
|
|
|
58,308
|
|
Prepaid expenses and
other current assets
|
24,363
|
|
|
23,357
|
|
Current assets held
for sale
|
46,097
|
|
|
98,336
|
|
Total current
assets
|
357,721
|
|
|
320,799
|
|
Property, plant and
equipment, net
|
109,640
|
|
|
106,981
|
|
Equity method
investment
|
254,733
|
|
|
245,214
|
|
Goodwill and
intangible assets, net
|
737,724
|
|
|
677,725
|
|
Other non-current
assets
|
16,318
|
|
|
16,884
|
|
Non-current assets
held for sale
|
—
|
|
|
179,827
|
|
Total
assets
|
$
|
1,476,136
|
|
|
$
|
1,547,430
|
|
|
|
|
|
Liabilities and
stockholders' equity
|
|
|
|
Current
liabilities
|
|
|
|
Accounts payable and
accrued expenses
|
$
|
96,504
|
|
|
$
|
101,229
|
|
Due to related
party
|
6,374
|
|
|
6,068
|
|
Current portion,
long-term debt
|
3,250
|
|
|
3,250
|
|
Other current
liabilities
|
6,268
|
|
|
6,311
|
|
Current liabilities
held for sale
|
22,396
|
|
|
24,373
|
|
Total current
liabilities
|
134,792
|
|
|
141,231
|
|
Deferred income
taxes
|
101,067
|
|
|
91,616
|
|
Long-term
debt
|
313,888
|
|
|
485,547
|
|
Other non-current
liabilities
|
21,354
|
|
|
14,039
|
|
Non-current
liabilities held for sale
|
—
|
|
|
6,663
|
|
Total
liabilities
|
571,101
|
|
|
739,096
|
|
Stockholders'
equity
|
|
|
|
Total stockholders'
equity attributable to Holdings
|
868,411
|
|
|
767,431
|
|
Noncontrolling
interests of continuing operations
|
36,624
|
|
|
25,711
|
|
Noncontrolling
interests of discontinued operations
|
—
|
|
|
15,192
|
|
Total stockholders'
equity
|
905,035
|
|
|
808,334
|
|
Total liabilities
and stockholders' equity
|
$
|
1,476,136
|
|
|
$
|
1,547,430
|
|
Compass
Diversified Holdings
Condensed
Consolidated Statements of Operations
(unaudited)
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
|
|
Nine Months
Ended
|
(in thousands,
except per share data)
|
September 30,
2015
|
|
September 30,
2014
|
|
September 30,
2015
|
|
September 30,
2014
|
|
|
|
|
|
|
|
|
Net sales
|
$
|
208,148
|
|
|
$
|
141,293
|
|
|
$
|
587,298
|
|
|
$
|
509,285
|
|
Cost of
sales
|
139,169
|
|
|
95,253
|
|
|
402,532
|
|
|
345,048
|
|
Gross
profit
|
68,979
|
|
|
46,040
|
|
|
184,766
|
|
|
164,237
|
|
Operating
expenses:
|
|
|
|
|
|
|
|
Selling, general and
administrative expense
|
38,975
|
|
|
29,227
|
|
|
105,946
|
|
|
101,235
|
|
Management
fees
|
6,461
|
|
|
5,751
|
|
|
19,860
|
|
|
15,259
|
|
Amortization
expense
|
7,731
|
|
|
4,577
|
|
|
22,777
|
|
|
15,222
|
|
Impairment
expense
|
—
|
|
|
—
|
|
|
9,165
|
|
|
—
|
|
Operating
income
|
15,812
|
|
|
6,485
|
|
|
27,018
|
|
|
32,521
|
|
Other income
(expense):
|
|
|
|
|
|
|
|
Interest expense,
net
|
(11,205)
|
|
|
(7,059)
|
|
|
(24,047)
|
|
|
(16,436)
|
|
Gain on equity method
investment
|
11,784
|
|
|
—
|
|
|
9,518
|
|
|
—
|
|
Gain on
deconsolidation of subsidiary
|
—
|
|
|
264,325
|
|
|
—
|
|
|
264,325
|
|
Amortization of debt
issuance costs
|
(561)
|
|
|
(545)
|
|
|
(1,651)
|
|
|
(1,698)
|
|
Loss on debt
extinguishment
|
—
|
|
|
—
|
|
|
—
|
|
|
(2,143)
|
|
Other expense,
net
|
(950)
|
|
|
(425)
|
|
|
(983)
|
|
|
(177)
|
|
Income from continuing
operations before income taxes
|
14,880
|
|
|
262,781
|
|
|
9,855
|
|
|
276,392
|
|
Provision for income
taxes
|
3,756
|
|
|
3,676
|
|
|
9,274
|
|
|
8,485
|
|
Net income from
continuing operations
|
11,124
|
|
|
259,105
|
|
|
581
|
|
|
267,907
|
|
Income from
discontinued operations, net of tax
|
3,819
|
|
|
3,425
|
|
|
15,650
|
|
|
14,315
|
|
Gain on sale of
discontinued operations, net of tax
|
151,075
|
|
|
—
|
|
|
151,075
|
|
|
—
|
|
Net income
|
166,018
|
|
|
262,530
|
|
|
167,306
|
|
|
282,222
|
|
Less: Income from
continuing operations attributable to noncontrolling
interest
|
1,428
|
|
|
1,388
|
|
|
2,622
|
|
|
10,364
|
|
Less: Income from
discontinued operations attributable to noncontrolling
interest
|
90
|
|
|
44
|
|
|
629
|
|
|
382
|
|
Net income
attributable to Holdings
|
$
|
164,500
|
|
|
$
|
261,098
|
|
|
$
|
164,055
|
|
|
$
|
271,476
|
|
|
|
|
|
|
|
|
|
Basic and fully
diluted income (loss) per share
|
|
|
|
|
|
|
|
Continuing
operations
|
$
|
0.16
|
|
|
$
|
5.08
|
|
|
$
|
(0.09)
|
|
|
$
|
5.05
|
|
Discontinued
operations
|
2.85
|
|
|
0.07
|
|
|
3.06
|
|
|
0.29
|
|
|
$
|
3.01
|
|
|
$
|
5.15
|
|
|
$
|
2.97
|
|
|
$
|
5.34
|
|
|
|
|
|
|
|
|
|
Basic and fully
diluted weighted average number of shares outstanding
|
54,300
|
|
|
48,300
|
|
|
54,300
|
|
|
48,300
|
|
|
|
|
|
|
|
|
|
Cash distributions
declared per share
|
$
|
0.36
|
|
|
$
|
0.36
|
|
|
$
|
1.08
|
|
|
$
|
1.08
|
|
Compass
Diversified Holdings
Summarized
Statement of Cash Flows
(unaudited)
|
|
|
|
|
|
Nine months
ended
|
(in
thousands)
|
September 30,
2015
|
|
September 30,
2014
|
Net cash provided by
operating activities
|
$
|
46,471
|
|
|
$
|
46,160
|
|
Net cash provided by
(used in) investing activities
|
246,594
|
|
|
(237,899)
|
|
Net cash (used in)
provided by financing activities
|
(225,450)
|
|
|
102,331
|
|
Effect of foreign
currency on cash
|
(2,593)
|
|
|
(552)
|
|
Net increase
(decrease) in cash and cash equivalents
|
65,022
|
|
|
(89,960)
|
|
Cash and cash
equivalents — beginning of period
|
23,703
|
|
|
113,229
|
|
Cash and cash
equivalents — end of period
|
$
|
88,725
|
|
|
$
|
23,269
|
|
Compass
Diversified Holdings
Condensed
Consolidated Table of Cash Flows Available for Distribution and
Reinvestment
(unaudited)
|
|
|
Three Months
Ended
|
|
Nine Months
Ended
|
(in
thousands)
|
September 30,
2015
|
|
September 30,
2014
|
|
September 30,
2015
|
|
September 30,
2014
|
Net income
|
$
|
166,018
|
|
|
$
|
262,530
|
|
|
$
|
167,306
|
|
|
$
|
282,222
|
|
Adjustments to
reconcile net income to net cash provided by operating
activities:
|
|
|
|
|
|
|
|
Depreciation and
amortization
|
17,498
|
|
|
11,350
|
|
|
49,743
|
|
|
35,884
|
|
Impairment
expense
|
—
|
|
|
—
|
|
|
9,165
|
|
|
—
|
|
Gain on sale of
CamelBak
|
(165,337)
|
|
|
—
|
|
|
(165,337)
|
|
|
—
|
|
Loss on sale of
American Furniture
|
14,262
|
|
|
—
|
|
|
14,262
|
|
|
—
|
|
Amortization of debt
issuance costs and original issue discount
|
729
|
|
|
713
|
|
|
2,154
|
|
|
2,412
|
|
Unrealized loss on
derivatives
|
6,177
|
|
|
2,536
|
|
|
8,044
|
|
|
2,809
|
|
Loss on debt
extinguishment
|
—
|
|
|
—
|
|
|
—
|
|
|
2,143
|
|
Excess tax benefit
from subsidiary stock options (1)
|
—
|
|
|
—
|
|
|
—
|
|
|
(1,662)
|
|
Gain on equity method
investment
|
(11,784)
|
|
|
—
|
|
|
(9,518)
|
|
|
—
|
|
Gain on
deconsolidation of subsidiary
|
—
|
|
|
(264,325)
|
|
|
—
|
|
|
(264,325)
|
|
Noncontrolling
stockholders charges
|
744
|
|
|
623
|
|
|
2,627
|
|
|
3,592
|
|
Other
|
(175)
|
|
|
133
|
|
|
324
|
|
|
361
|
|
Deferred
taxes
|
(2,606)
|
|
|
991
|
|
|
(3,863)
|
|
|
(1,944)
|
|
Changes in operating
assets and liabilities
|
(11,321)
|
|
|
20,289
|
|
|
(28,436)
|
|
|
(15,332)
|
|
Net cash provided
by operating activities
|
14,205
|
|
|
34,840
|
|
|
46,471
|
|
|
46,160
|
|
Plus:
|
|
|
|
|
|
|
|
Unused fee on
revolving credit facility (2)
|
456
|
|
|
461
|
|
|
1,062
|
|
|
1,635
|
|
Excess tax benefit
from subsidiary stock options (1)
|
—
|
|
|
—
|
|
|
—
|
|
|
1,662
|
|
Successful acquisition
costs
|
1,126
|
|
|
1,935
|
|
|
1,126
|
|
|
2,030
|
|
Integration services
fee (3)
|
1,250
|
|
|
—
|
|
|
3,250
|
|
|
—
|
|
Realized loss from
foreign currency effect (4)
|
1,297
|
|
|
—
|
|
|
1,297
|
|
|
—
|
|
Changes in operating
assets and liabilities
|
11,321
|
|
|
—
|
|
|
28,436
|
|
|
15,332
|
|
Other
|
132
|
|
|
122
|
|
|
—
|
|
|
123
|
|
Less:
|
|
|
|
|
|
|
|
Maintenance capital
expenditures (5)
|
5,506
|
|
|
2,358
|
|
|
13,685
|
|
|
9,001
|
|
FOX CAD
(6)
|
—
|
|
|
677
|
|
|
—
|
|
|
15,716
|
|
Payment on
swap
|
507
|
|
|
506
|
|
|
1,502
|
|
|
1,502
|
|
Changes in operating
assets and liabilities
|
—
|
|
|
20,289
|
|
|
—
|
|
|
—
|
|
Other
|
—
|
|
|
131
|
|
|
209
|
|
|
201
|
|
Estimated cash
flow available for distribution and reinvestment
|
$
|
23,774
|
|
|
$
|
13,397
|
|
|
$
|
66,246
|
|
|
$
|
40,522
|
|
Distribution paid in
April 2015/2014
|
|
|
|
|
$
|
19,548
|
|
|
$
|
17,388
|
|
Distribution paid in
July 2015/ 2014
|
|
|
|
|
19,548
|
|
|
17,388
|
|
Distribution paid in
October 2015/2014
|
$
|
19,548
|
|
|
$
|
17,388
|
|
|
19,548
|
|
|
17,388
|
|
|
$
|
19,548
|
|
|
$
|
17,388
|
|
|
$
|
58,644
|
|
|
$
|
52,164
|
|
(1)
|
Represents the
non-cash excess tax benefit at FOX related to the exercise of stock
options.
|
(2)
|
Represents the
commitment fee on the unused portion of the Revolving Credit
Facility.
|
(3)
|
Represents fees paid
by newly acquired companies to the Manager for integration services
performed during the first year of ownership, payable
quarterly.
|
(4)
|
Reflects the foreign
currency transaction loss resulting from the Canadian dollar
intercompany loans issued to Manitoba Harvest.
|
(5)
|
Excludes growth
capital expenditures of approximately $0.1 million and $0.2 million
for the three months ended September 30, 2015 and 2014, and $1.0
million and $1.2 million for the nine months ended September 30,
2015 and 2014.
|
(6)
|
Represents FOX CAD
subsequent to IPO date. For the nine months ended September
30, 2014, the amount includes approximately $24.2 million of
EBITDA, less: $3.8 million of cash taxes, $1.9 million of
management fees, $2.4 million of maintenance capital expenditures
and $0.4 million of interest expense.
|
To view the original version on PR Newswire,
visit:http://www.prnewswire.com/news-releases/compass-diversified-holdings-reports-third-quarter-2015-financial-results-300172697.html
SOURCE Compass Diversified Holdings