WESTPORT, Conn., May 3, 2017 /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
March 31, 2017.
First Quarter 2017 Highlights
- Reported Cash Used in Operating Activities of $1.4 million for the first quarter of 2017, and
Cash Flow Available for Distribution and Reinvestment ("CAD" or
"Cash Flow") of $14.9 million for the
first quarter of 2017;
- Reported net loss of $21.1
million for the first quarter of 2017;
- Paid a first quarter 2017 cash distribution of $0.36 per share in April
2017, bringing cumulative distributions paid to $14.9952 per share since CODI's IPO in May of
2006;
- Appointed Sally McCoy to the
Company's Board of Directors;
- Sold a total of 5,108,718 shares of Fox Factory Holding Corp.
("FOX") common stock, with total net proceeds of approximately
$136.1 million; and
- Completed the accretive add-on acquisition of AERC Recycling
Solutions ("AERC") by CODI's subsidiary Clean Earth, Inc. ("Clean
Earth").
"During the first quarter, our leading middle market businesses
generated stable operating results that were consistent with
management's expectations," stated Alan
Offenberg, CEO of Compass Diversified Holdings. "These
results reflect strong performances at our Clean Earth, Sterno
Products, ERGObaby and 5.11 subsidiaries, with each reporting
year-over-year, double-digit revenue increases."
Mr. Offenberg added, "We continued to reinvest in our current
subsidiaries during the quarter with the accretive add-on
acquisition of AERC, which expands Clean Earth's waste processing
capabilities and creates new cross-selling opportunities.
Complementing this, we strengthened our balance sheet by monetizing
our remaining investment in FOX, increasing gains we have realized
for shareholders to over $770
million. With our substantial liquidity, CODI is well
positioned to pursue both platform and add-on acquisitions that
build long-term value and support cash distributions for our
shareholders."
Operating Results
For the quarter ended March 31,
2017, CODI reported Cash Used in Operating Activities of
$1.4 million, as compared to Cash
Provided by Operating Activities of $6.0
million for the quarter ended March
31, 2016. CODI reported Cash Flow (see Note Regarding Use of
Non-GAAP Financial Measures below) of $14.9
million for the quarter ended March
31, 2017, as compared to $13.6
million for the prior year's comparable quarter. CODI's
weighted average number of shares outstanding for the quarters
ended March 31, 2017 and March 31, 2016 were 59.9 million and 54.3
million, respectively.
Cash Flow for the first quarter of 2017 reflects year-over-year
earnings growth in the Company's Clean Earth, Sterno Products,
ERGObaby and 5.11 businesses, offset by declines at the Company's
other businesses.
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 over $770
million since going public in 2006.
Net loss for the quarter ended March 31,
2017 was $21.1 million, as
compared to net loss of $15.0 million
for the quarter ended March 31, 2016.
During the first quarter of 2017, CODI finalized the goodwill
impairment testing at its Arnold subsidiary that had been recorded
on a preliminary basis in the fourth quarter of 2016, and recorded
an additional $8.9 million goodwill
impairment expense.
Liquidity and Capital Resources
As of March 31, 2017, CODI had
approximately $115.3 million in cash
and cash equivalents, $564.2 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
$546.1 million at March 31, 2017 under its revolving credit
facility.
During the first quarter of 2017, the Company sold its remaining
shares in its former subsidiary FOX in a secondary public offering
for total net proceeds of approximately $136.1 million. Including this divestiture, CODI
has realized approximately $525
million in proceeds from its investment in FOX.
First Quarter 2017 Distribution
On April 6, 2017, CODI's Board of
Directors declared a first quarter distribution of $0.36 per share. The cash distribution was paid
on April 27, 2017 to all holders of
record as of April 20, 2017. Since
its IPO in May of 2006, CODI has paid a cumulative distribution of
$14.9952 per share.
Conference Call
Management will host a conference call on Thursday, May 4, 2017 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 4981969. 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 May 11, 2017. 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 4981969.
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 from Operating Activities on
the attached schedules. We consider Net Income and Cash Flow from
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 eight majority-owned subsidiaries are engaged in the
following lines of business:
- The design and marketing of purpose-built tactical apparel and
gear serving a wide range of global customers (5.11);
- The manufacture of quick-turn, small-run and production rigid
printed circuit boards (Advanced Circuits);
- 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 fuels
and creative ambience solutions for the hospitality and consumer
markets (Sterno Products).
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, 2016 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
|
|
|
|
|
|
March
31,
|
|
December
31,
|
|
2017
|
|
2016
|
(in
thousands)
|
(unaudited)
|
|
|
Assets
|
|
|
|
Current
assets
|
|
|
|
Cash and cash
equivalents
|
$
|
115,281
|
|
|
$
|
39,772
|
|
Accounts receivable,
net
|
172,885
|
|
|
181,191
|
|
Inventories
|
208,326
|
|
|
212,984
|
|
Prepaid expenses and
other current assets
|
18,234
|
|
|
18,872
|
|
Total current
assets
|
514,726
|
|
|
452,819
|
|
Property, plant and
equipment, net
|
143,172
|
|
|
142,370
|
|
Investment in
FOX
|
—
|
|
|
141,767
|
|
Goodwill and
intangible assets, net
|
1,019,456
|
|
|
1,030,848
|
|
Other non-current
assets
|
9,153
|
|
|
9,351
|
|
Total
assets
|
$
|
1,686,507
|
|
|
$
|
1,777,155
|
|
|
|
|
|
Liabilities and
stockholders' equity
|
|
|
|
Current
liabilities
|
|
|
|
Accounts payable and
accrued expenses
|
$
|
147,565
|
|
|
$
|
152,553
|
|
Due to related
party
|
542
|
|
|
20,848
|
|
Current portion,
long-term debt
|
5,685
|
|
|
5,685
|
|
Other current
liabilities
|
13,013
|
|
|
23,435
|
|
Total current
liabilities
|
166,805
|
|
|
202,521
|
|
Deferred income
taxes
|
103,232
|
|
|
110,838
|
|
Long-term
debt
|
545,536
|
|
|
551,652
|
|
Other non-current
liabilities
|
16,500
|
|
|
17,600
|
|
Total
liabilities
|
832,073
|
|
|
882,611
|
|
Stockholders'
equity
|
|
|
|
Total stockholders'
equity attributable to Holdings
|
814,323
|
|
|
856,405
|
|
Noncontrolling
interests
|
40,111
|
|
|
38,139
|
|
Total stockholders'
equity
|
854,434
|
|
|
894,544
|
|
Total liabilities
and stockholders' equity
|
$
|
1,686,507
|
|
|
$
|
1,777,155
|
|
Compass
Diversified Holdings
Condensed
Consolidated Statements of Operations
(unaudited)
|
|
|
|
|
|
Three Months
Ended
|
(in thousands,
except per share data)
|
March 31,
2017
|
|
March 31,
2016
|
|
|
|
|
Net sales
|
$
|
289,992
|
|
|
$
|
193,287
|
|
Cost of
sales
|
195,659
|
|
|
129,168
|
|
Gross
profit
|
94,333
|
|
|
64,119
|
|
Operating
expenses:
|
|
|
|
Selling, general and
administrative expense
|
78,723
|
|
|
42,287
|
|
Management
fees
|
7,848
|
|
|
6,371
|
|
Amortization
expense
|
10,310
|
|
|
7,380
|
|
Impairment
expense
|
8,864
|
|
|
—
|
|
Operating income
(loss)
|
(11,412)
|
|
|
8,081
|
|
Other income
(expense):
|
|
|
|
Interest expense,
net
|
(7,136)
|
|
|
(11,462)
|
|
Loss on
investment
|
(5,620)
|
|
|
(10,623)
|
|
Amortization of debt
issuance costs
|
(933)
|
|
|
(570)
|
|
Other income
(expense), net
|
(22)
|
|
|
3,256
|
|
Loss from continuing
operations before income taxes
|
(25,123)
|
|
|
(11,318)
|
|
Provision (benefit)
for income taxes
|
(3,648)
|
|
|
3,296
|
|
Net loss from
continuing operations
|
(21,475)
|
|
|
(14,614)
|
|
Loss from
discontinued operations, net of income tax
|
—
|
|
|
(413)
|
|
Gain on sale of
discontinued operations, net of tax
|
340
|
|
|
—
|
|
Net loss
|
(21,135)
|
|
|
(15,027)
|
|
Less: Income from
continuing operations attributable to noncontrolling
interest
|
470
|
|
|
1,137
|
|
Less: Income (loss)
from discontinued operations attributable to noncontrolling
interest
|
—
|
|
|
(141)
|
|
Net loss attributable
to Holdings
|
$
|
(21,605)
|
|
|
$
|
(16,023)
|
|
|
|
|
|
Basic and fully
diluted income (loss) per share
|
|
|
|
Continuing
operations
|
$
|
(0.61)
|
|
|
$
|
(0.31)
|
|
Discontinued
operations
|
0.01
|
|
|
—
|
|
|
$
|
(0.60)
|
|
|
$
|
(0.31)
|
|
|
|
|
|
Basic and fully
diluted weighted average number of shares outstanding
|
59,900
|
|
|
54,300
|
|
|
|
|
|
Cash distributions
declared per share
|
$
|
0.36
|
|
|
$
|
0.36
|
|
Compass
Diversified Holdings
Summarized
Statement of Cash Flows
(unaudited)
|
|
|
|
|
|
Three Months
Ended
|
(in
thousands)
|
March 31,
2017
|
|
March 31,
2016
|
Net cash (used in)
provided by operating activities
|
$
|
(1,414)
|
|
|
$
|
6,025
|
|
Net cash provided by
investing activities
|
120,015
|
|
|
5,847
|
|
Net cash used in
financing activities
|
(42,896)
|
|
|
(22,141)
|
|
Effect of foreign
currency on cash
|
(196)
|
|
|
(3,033)
|
|
Net increase
(decrease) in cash and cash equivalents
|
75,509
|
|
|
(13,302)
|
|
Cash and cash
equivalents — beginning of period
|
39,772
|
|
|
85,869
|
|
Cash and cash
equivalents — end of period
|
$
|
115,281
|
|
|
$
|
72,567
|
|
Compass
Diversified Holdings
Condensed
Consolidated Table of Cash Flows Available for Distribution and
Reinvestment
(unaudited)
|
|
Three Months
Ended
|
(in
thousands)
|
March 31,
2017
|
|
March 31,
2016
|
Net loss
|
$
|
(21,135)
|
|
|
$
|
(15,027)
|
|
Adjustments to
reconcile net loss to net cash provided by operating
activities:
|
|
|
|
Depreciation and
amortization
|
31,395
|
|
|
14,908
|
|
Impairment
expense
|
8,864
|
|
|
—
|
|
Gain on sale of
businesses, net
|
(340)
|
|
|
—
|
|
Amortization of debt
issuance costs and original issue discount
|
1,199
|
|
|
738
|
|
Unrealized (gain) loss
on derivatives
|
(229)
|
|
|
7,228
|
|
Loss on investment in
FOX
|
5,620
|
|
|
10,623
|
|
Noncontrolling
stockholders charges
|
1,452
|
|
|
1,189
|
|
Provision for loss on
receivables
|
3,318
|
|
|
130
|
|
Other
|
318
|
|
|
(191)
|
|
Deferred
taxes
|
(7,634)
|
|
|
214
|
|
Changes in operating
assets and liabilities
|
(24,242)
|
|
|
(13,787)
|
|
Net cash (used in)
provided by operating activities
|
(1,414)
|
|
|
6,025
|
|
Plus:
|
|
|
|
Unused fee on
revolving credit facility
|
777
|
|
|
500
|
|
Successful acquisition
costs
|
—
|
|
|
489
|
|
Integration services
fee (1)
|
875
|
|
|
250
|
|
Changes in operating
assets and liabilities
|
24,242
|
|
|
13,787
|
|
Less:
|
|
|
|
Maintenance capital
expenditures (2)
|
4,731
|
|
|
3,684
|
|
Payment on
swap
|
1,089
|
|
|
500
|
|
Realized gain from
foreign currency effect (3)
|
390
|
|
|
3,079
|
|
Other
(4)
|
3,356
|
|
|
187
|
|
Estimated cash
flow available for distribution and reinvestment
|
$
|
14,914
|
|
|
$
|
13,601
|
|
|
|
|
|
Distribution paid in
April 2017/2016
|
$
|
21,564
|
|
|
$
|
19,548
|
|
(1)
Represents fees paid by newly acquired companies
to the Manager for integration services performed during the first
year of ownership, payable quarterly.
|
(2)
Excludes growth capital expenditures of approximately
$3.9 million and $0.7 million for the three months ended March 31,
2017 and 2016, respectively.
|
(3) Reflects the
foreign currency transaction gain/ loss resulting from the Canadian
dollar intercompany loans issued to Manitoba Harvest.
|
(4) Includes
amounts for the establishment of accounts receivable reserves
related to a retail customer who filed bankruptcy during the first
quarter of 2017.
|
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visit:http://www.prnewswire.com/news-releases/compass-diversified-holdings-reports-first-quarter-2017-financial-results-300450854.html
SOURCE Compass Diversified Holdings