WESTPORT, Conn., May 7, 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 months ended
March 31, 2013.
First Quarter 2013 Highlights
- Generated Cash Flow Available for Distribution and Reinvestment
("CAD" or "Cash Flow") of $20.8
million for the first quarter of 2013;
- Reported net income of $3.6
million for the first quarter of 2013; and
- Paid a first quarter 2013 cash distribution of $0.36 per share in April
2013, bringing cumulative distributions paid to $9.2352 per share since CODI's IPO in May of
2006.
"Our strong results for the first quarter of 2013 exceeded
management's expectations, as Cash Flow increased 25.2% compared to
the year-earlier period," stated Alan
Offenberg, CEO of Compass Group Diversified Holdings LLC.
"We continue to achieve considerable revenue and earnings growth on
a combined basis across our branded products businesses consisting
of CamelBak, ERGObaby, Fox and Liberty
Safe. We also maintained relative stability in the
performance of our four niche industrial businesses comprised of
Advanced Circuits, American Furniture, Tridien Medical and Arnold
Magnetic. Based on the continued application of our business model,
we paid a first quarter distribution of $0.36 per share. As we continue to provide
attractive cash distributions, we remain focused on leveraging our
balance sheet strength to drive future performance. Our substantial
liquidity bodes well for CODI to be able to continue to reinvest in
our current family of leading middle market businesses while
pursuing accretive acquisition opportunities that create
significant value for our owners."
Operating Results
CODI reported Cash Flow (see note
regarding use of Non-GAAP Financial Measures below) of $20.8 million for the quarter ended March 31, 2013, as compared to $16.6 million for the prior year comparable
quarter. CODI's weighted average number of shares outstanding for
both the quarter ended March 31, 2013
and March 31, 2012 was approximately
48.3 million.
The improvement in Cash Flow for the first quarter 2013 as
compared to the corresponding year-earlier period was largely
attributable to the year-over-year growth in the Company's
CamelBak, ERGObaby, Fox and Liberty
Safe businesses. In addition, Cash Flow for the first
quarter 2013 was positively impacted by the full inclusion of
operating results from the Company's Arnold Magnetic subsidiary,
which was acquired on March 5, 2012.
Partially offsetting these factors, Cash Flow for the first quarter
2013 excluded results from the Company's HALO subsidiary, which was
sold 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 of our
businesses 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 March
31, 2013 was $3.6 million, as
compared to net income of $0.9
million for the quarter ended March
31, 2012. The year-over-year increase in the Company's net
income reflects double-digit growth in each of net sales, gross
profit and operating income. During the quarter ended March 31, 2013, CODI recorded a non-cash
supplemental put accrual expense of $6.4
million based on the periodic review of current cash flow
generation levels of its businesses as well as anticipated market
multiples for those businesses in the event they were to be sold in
the current environment. During the quarter ended March 31, 2012, the Company reversed
approximately $1.5 million of its
non-cash supplemental put accrual and expensed approximately
$4.3 million of transaction costs
related to its acquisition of Arnold Magnetic Technologies.
Liquidity and Capital Resources
As of March 31, 2013, CODI had $16.5 million in cash and cash equivalents,
$251.9 million outstanding on its
term loan facility and $27.0 million
outstanding under its $290 million
revolving credit facility. The Company has no significant debt
maturities until 2017 and had borrowing availability of
approximately $261 million at
March 31, 2013 under its revolving
credit facility.
On April 3, 2013, CODI exercised
an option under its credit agreement, dated as of October 27, 2011, to expand its term loan
facility by $30 million, which
increased the Company's aggregate outstanding term loan borrowings
under the facility to $281.9 million.
The net proceeds of the incremental term loan were used to repay
outstanding borrowings under the Company's revolving credit
facility.
CODI also amended the pricing terms of both its term loan
facility and revolving credit facility. Under the terms of the
amendments, the interest rate for the term loan facility was
reduced by 1.25% and the interest rate for the revolving credit
facility was reduced by 0.50%. In addition, the unused fee for the
revolving credit facility was reduced by 0.25% when leverage is
lower than a defined ratio and the maturity date for the revolving
credit facility was extended to April
2017. All other terms of the credit agreement remain
unchanged.
First Quarter 2013 Distribution
On April 9, 2013, CODI's Board of Directors declared
a first quarter distribution of $0.36
per share. The cash distribution was paid on April 30, 2013 to all holders of record as of
April 23, 2013. Since its IPO in May
of 2006, CODI has paid a cumulative distribution of $9.2352 per share.
Conference Call
Management will host a conference
call on Wednesday, May 8, 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) 466-4462 and the dial-in number
for international callers is (719) 457-2727. The access code for
all callers is 5197923. 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 15, 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 5197923.
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)
|
|
March
31,
|
|
December 31,
|
|
|
2013
|
|
2012
|
|
|
(unaudited)
|
|
|
Assets
|
|
|
|
|
Current
assets:
|
|
|
|
|
Cash and
cash equivalents
|
|
$
16,500
|
|
$
18,241
|
Accounts
receivable, less allowance of $3,130 and $3,049
|
|
119,354
|
|
100,647
|
Inventories
|
|
129,247
|
|
127,283
|
Prepaid
expenses and other current assets
|
|
20,488
|
|
21,488
|
|
|
|
|
|
Total current assets
|
|
285,589
|
|
267,659
|
|
|
|
|
|
Property,
plant and equipment, net
|
|
67,504
|
|
68,488
|
Goodwill
|
|
257,527
|
|
257,527
|
Intangible
assets, net
|
|
333,099
|
|
340,666
|
Deferred
debt issuance costs, net
|
|
7,744
|
|
8,238
|
Other
non-current assets
|
|
14,035
|
|
12,623
|
|
|
|
|
|
Total
assets
|
|
$
965,498
|
|
$
955,201
|
|
|
|
|
|
|
|
|
|
|
Liabilities and stockholders'
equity
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
Accounts
payable and accrued expenses
|
|
$
118,612
|
|
$
100,346
|
Due to
related party
|
|
3,825
|
|
3,765
|
Current
portion of long-term debt
|
|
2,550
|
|
2,550
|
Current
portion of supplemental put obligation
|
|
5,603
|
|
5,185
|
Other
liabilities
|
|
2,055
|
|
1,953
|
|
|
|
|
|
Total current
liabilities
|
|
132,645
|
|
113,799
|
|
|
|
|
|
Long-term
debt
|
|
269,731
|
|
267,008
|
Supplemental put obligation
|
|
52,391
|
|
46,413
|
Deferred
income taxes
|
|
63,679
|
|
63,982
|
Other
non-current liabilities
|
|
7,109
|
|
7,787
|
|
|
|
|
|
Total
liabilities
|
|
525,555
|
|
498,989
|
|
|
|
|
|
Stockholders' equity
|
|
|
|
|
Trust
shares, no par value, 500,000 authorized; 48,300 shares issued
and
|
|
650,043
|
|
650,043
|
outstanding at 3/31/13 and
12/31/12
|
|
|
|
|
Accumulated other comprehensive loss
|
|
(850)
|
|
(132)
|
Accumulated deficit
|
|
(251,077)
|
|
(235,283)
|
Total
stockholders' equity attributable to Holdings
|
|
398,116
|
|
414,628
|
Noncontrolling interests
|
|
41,827
|
|
41,584
|
Total stockholders'
equity
|
|
439,943
|
|
456,212
|
Total
liabilities and stockholders' equity
|
|
$
965,498
|
|
$
955,201
|
Compass
Diversified Holdings
|
Condensed
Consolidated Statements of Operations
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three
Months
|
|
Three
Months
|
|
|
Ended
|
|
Ended
|
(in
thousands, except per share data)
|
|
March
31, 2013
|
|
March
31, 2012
|
|
|
|
|
|
Net
sales
|
|
$
241,567
|
|
$
195,327
|
Cost of
sales
|
|
165,194
|
|
133,640
|
Gross profit
|
|
76,373
|
|
61,687
|
Operating
expenses:
|
|
|
|
|
Selling, general and
administrative expense
|
|
41,209
|
|
40,433
|
Supplemental put expense
(reversal)
|
|
6,396
|
|
(1,540)
|
Management fees
|
|
4,316
|
|
4,532
|
Amortization
expense
|
|
7,630
|
|
7,176
|
Operating income
|
|
16,822
|
|
11,086
|
|
|
|
|
|
Other
income (expense):
|
|
|
|
|
Interest income
|
|
2
|
|
33
|
Interest expense
|
|
(5,341)
|
|
(6,029)
|
Amortization of debt
issuance costs
|
|
(485)
|
|
(356)
|
Other, net
|
|
327
|
|
(268)
|
Income from continuing operations before income
taxes
|
|
11,325
|
|
4,466
|
Provision
for income taxes
|
|
7,699
|
|
4,099
|
Income from continuing operations
|
|
3,626
|
|
367
|
Income
from discontinued operations, net of income tax benefit
|
|
-
|
|
522
|
Net income
|
|
3,626
|
|
889
|
Net income
from continuing operations attributable to noncontrolling
interest
|
|
2,032
|
|
1,676
|
Net loss
from discontinued operations attributable to noncontrolling
interest
|
|
-
|
|
(1)
|
Net income (loss) attributable to Holdings
|
|
$
1,594
|
|
$
(786)
|
|
|
|
|
|
Basic and
fully diluted income (loss) per share
|
|
$
0.03
|
|
$
(0.02)
|
|
|
|
|
|
Weighted
average number of shares outstanding – basic and fully
diluted
|
|
48,300
|
|
48,300
|
|
|
|
|
|
Cash
distributions declared per share
|
|
$
0.36
|
|
$
0.36
|
Compass
Diversified Holdings
|
Condensed
Consolidated Statements of Cash Flows
|
(unaudited)
|
|
|
|
|
|
|
|
Three
Months
|
|
Three
Months
|
|
|
Ended
|
|
Ended
|
(in
thousands)
|
|
March
31, 2013
|
|
March
31, 2012
|
|
|
|
|
|
Cash
flows from operating activities:
|
|
|
|
|
Net
income
|
|
$
3,626
|
|
$
889
|
Adjustments to reconcile net income to net cash
provided by
|
|
|
|
|
(used in) operating activities
|
|
|
|
|
Depreciation and amortization
expense
|
|
11,611
|
|
13,090
|
Amortization of debt issuance costs and
original issue discount
|
|
845
|
|
731
|
Supplemental put expense
(reversal)
|
|
6,396
|
|
(1,540)
|
Noncontrolling stockholder notes and
other
|
|
1,301
|
|
791
|
Deferred taxes
|
|
(857)
|
|
(49)
|
Unrealized (gain) loss on interest rate
and foreign currency derivatives
|
|
(385)
|
|
345
|
Other
|
|
(71)
|
|
830
|
|
|
|
|
|
Changes in
operating assets and liabilities, net of acquisition:
|
|
|
|
|
Increase in accounts
receivable
|
|
(18,130)
|
|
(1,874)
|
Increase in inventories
|
|
(2,010)
|
|
(5,107)
|
Increase in prepaid expenses and other
current assets
|
|
(187)
|
|
(629)
|
Increase in accounts payable and accrued
expenses
|
|
17,987
|
|
1,392
|
Payment of profit allocation
|
|
-
|
|
(13,675)
|
Net cash provided by (used in) operating activities
|
|
20,126
|
|
(4,806)
|
|
|
|
|
|
Cash
flows from investing activities:
|
|
|
|
|
Acquisition of
businesses, net of cash acquired
|
|
-
|
|
(123,575)
|
Purchases of property
and equipment
|
|
(3,328)
|
|
(3,405)
|
Proceeds released from
escrow related to Staffmark and HALO sales
|
|
93
|
|
5,045
|
Purchase of Fox common
stock
|
|
-
|
|
(1,466)
|
Other investing
activities
|
|
-
|
|
268
|
Net cash used in investing activities
|
|
(3,235)
|
|
(123,133)
|
|
|
|
|
|
Cash
flows from financing activities:
|
|
|
|
|
Net borrowing of
debt
|
|
2,363
|
|
79,438
|
(Payments to) proceeds
from noncontrolling equity issuances
|
|
(3,090)
|
|
4,628
|
Redemption of CamelBak
preferred stock
|
|
-
|
|
(48,022)
|
Debt issuance
costs
|
|
-
|
|
(638)
|
Other
|
|
(22)
|
|
(106)
|
Distributions
paid
|
|
(17,388)
|
|
(17,388)
|
Net cash provided by (used in) financing activities
|
|
(18,137)
|
|
17,912
|
|
|
|
|
|
Foreign
currency adjustment
|
|
(495)
|
|
20
|
Net
decrease in cash and cash equivalents
|
|
(1,741)
|
|
(110,007)
|
Cash and
cash equivalents — beginning of period
|
|
18,241
|
|
132,370
|
Cash and
cash equivalents — end of period
|
|
$
16,500
|
|
$
22,363
|
Compass
Diversified Holdings
|
Condensed
Consolidated Table of Cash Flows Available for Distribution and
Reinvestment ("CAD")
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
Three
Months Ended
|
|
Three
Months Ended
|
(in
thousands)
|
|
March
31, 2013
|
|
March
31, 2012
|
|
|
|
|
|
Net
income
|
|
$
3,626
|
|
$
889
|
Adjustment to reconcile net income to
cash provided by (used in)
|
|
|
|
|
operating activities
|
|
|
|
|
Depreciation and
amortization
|
|
11,611
|
|
13,090
|
Amortization of debt
issuance costs and original issue discount
|
|
845
|
|
731
|
Supplemental put
expense (reversal)
|
|
6,396
|
|
(1,540)
|
Noncontrolling
stockholder notes and other
|
|
1,301
|
|
791
|
Deferred
taxes
|
|
(857)
|
|
(49)
|
Unrealized (gain) loss
on interest rate and foreign currency derivatives
|
|
(385)
|
|
345
|
Other
|
|
(71)
|
|
830
|
Changes in operating
assets and liabilities
|
|
(2,340)
|
|
(19,893)
|
Net cash
provided by (used in) operating activities
|
|
20,126
|
|
(4,806)
|
Plus:
|
|
|
|
|
Unused fee on
revolving credit facilities (1)
|
|
645
|
|
660
|
Successful acquisition
expense (2)
|
|
-
|
|
4,325
|
Changes in operating
assets and liabilities
|
|
2,340
|
|
19,893
|
Other
|
|
71
|
|
-
|
Less:
|
|
|
|
|
Maintenance capital
expenditures (3)
|
|
2,346
|
|
2,594
|
Other
|
|
-
|
|
830
|
|
|
|
|
|
Estimated cash flow available for distribution and
reinvestment
|
|
$
20,836
|
|
$
16,648
|
|
|
|
|
|
|
|
|
|
|
Distribution paid in April 2013/2012
|
|
$
17,388
|
|
$
17,388
|
|
|
|
|
|
|
|
|
|
|
(1)
Represents the commitment fee on the unused portion of the
Revolving Credit Facilities.
|
|
|
|
|
|
(2)
Represents transaction costs for successful acquisitions that were
expensed during the period.
|
|
|
|
|
|
(3)
Represents maintenance capital expenditures that were funded from
operating cash flow. Excludes $1.0 million and
$0.8 million of expenditures considered growth
capital expenditures for the three months ended March 31, 2013 and
2012, respectively.
|
SOURCE Compass Diversified Holdings