Attached files
| file | filename |
|---|---|
| 8-K - FORM 8-K - Compass Group Diversified Holdings LLC | d244486d8k.htm |
| EX-2.1 - STOCK PURCHASE AGREEMENT - Compass Group Diversified Holdings LLC | d244486dex21.htm |
| EX-99.2 - PRESS RELEASE - Compass Group Diversified Holdings LLC | d244486dex992.htm |
Exhibit 99.1
Compass Diversified Holdings
PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
(Unaudited)
The following unaudited pro forma condensed combined financial statements are presented to show the effect on the historical condensed combined financial statements of Compass Diversified Holdings (the “Company”) of the sale (the “Staffmark Disposition”) of the Company’s majority owned subsidiary, Staffmark Holdings, Inc. (“Staffmark”) for a total enterprise value of $295 million, and estimated net proceeds of approximately $220 million at closing, which does not include an additional approximately $9 million of customary working capital and other escrow proceeds that the Company expects to receive in the future. The Staffmark Disposition is further described in Item 2.01 of this Current Report on Form 8-K.
The following unaudited condensed combined pro forma statements of operations for the years ended December 31, 2008, 2009 and 2010, and for the six months ended June 30, 2011, are based on the assumption that the Staffmark Disposition was completed on January 1, 2008. The pro forma balance sheet as of June 30, 2011 is based on the assumption that the Staffmark Disposition was completed on June 30, 2011.
The “as reported” financial information for both Compass Diversified Holdings and Staffmark are derived from the audited financial statements of the Company for the years ended December 31, 2010 and 2009 as filed on Form 10-K dated March 11, 2011 and March 9, 2010, respectively, the audited financial statements of the Company for the year ended December 31, 2008 as filed on Form 10-K/A dated April 9, 2009, and the unaudited financial statements of the Company as of June 30, 2011 and for the six months ended June 30, 2011, as filed on Form 10-Q dated August 9, 2011.
The unaudited pro forma financial information is for informational purposes only and does not purport to present what our results would actually have been had this transaction actually occurred on the dates presented or to project our results of operations or financial position for any future period. The pro forma adjustments are based upon available information and certain assumptions that we believe are reasonable. You should read these unaudited pro forma condensed combined financial statements in conjunction with the accompanying notes, the attached Staffmark Purchase Agreement, and the consolidated financial statements for the Company, including the notes thereto as previously filed.
The unaudited pro forma financial information is prepared in accordance with Article 11 of Regulation S-X. The pro forma adjustments are described in the accompanying notes and are based upon information and assumptions available at the time of the filing of this Current Report on Form 8-K.
The pro forma adjustments to the statements of operations for all periods presented do not include the following:
| • | The non-recurring gain on the Staffmark Disposition and the related tax effect. The gain will be included in the Company’s results for the three and twelve month periods ended December 31, 2011; |
| • | Certain non-recurring transaction costs and Staffmark stock option payments on closing of the sale estimated to be approximately $20.5 million; |
| • | The supplemental put expense (reversal) due to the inability to meaningfully or accurately reflect the impact on the supplemental put liability for the Staffmark Disposition using historical assumptions and estimates; and |
| • | Management fee adjustments due to the Company’s adjusted net assets not materially impacted by the sale of Staffmark as the proceeds from the sale approximate the adjusted net assets disposed of which were used in the calculation of the management fee. |
Compass Diversified Holdings
Condensed Combined Pro Forma Balance Sheet
at June 30, 2011
(unaudited)
| (in thousands) | Staffmark Disposition | |||||||||||||||
| Compass Diversified Holdings as Reported |
Less: Staffmark as Reported |
Staffmark Pro Forma Adjustments |
Pro Forma Combined Compass Diversified Holdings |
|||||||||||||
| Assets |
||||||||||||||||
| Current assets: |
||||||||||||||||
| Cash and cash equivalents |
$ | 9,241 | $ | (15 | ) | $ | 204,519 | (a) | $ | 213,745 | ||||||
| Accounts receivable, net |
208,151 | (125,985 | ) | — | 82,166 | |||||||||||
| Inventories |
88,235 | — | — | 88,235 | ||||||||||||
| Prepaid expenses and other current assets |
28,840 | (6,797 | ) | 6,474 | (b) | 28,517 | ||||||||||
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| Total current assets |
334,467 | (132,797 | ) | 210,993 | 412,663 | |||||||||||
| Property, plant and equipment, net |
39,633 | (5,020 | ) | — | 34,613 | |||||||||||
| Goodwill |
319,766 | (88,637 | ) | — | 231,129 | |||||||||||
| Intangible assets, net |
252,487 | (68,646 | ) | — | 183,841 | |||||||||||
| Deferred debt issuance costs, net |
3,412 | — | — | 3,412 | ||||||||||||
| Other non-current assets |
26,603 | (24,044 | ) | 3,007 | (c) | 5,566 | ||||||||||
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| Total assets |
$ | 976,368 | $ | (319,144 | ) | $ | 214,000 | $ | 871,224 | |||||||
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| Liabilities and stockholders’ equity |
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| Current liabilities: |
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| Accounts payable and accrued expenses |
$ | 150,845 | $ | (64,845 | ) | $ | — | $ | 86,000 | |||||||
| Due to related party |
3,500 | — | — | 3,500 | ||||||||||||
| Current portion, long-term debt |
2,000 | — | — | 2,000 | ||||||||||||
| Current portion of supplemental put obligation |
6,891 | — | — | 6,891 | ||||||||||||
| Current portion of workers’ compensation liability |
18,366 | (18,366 | ) | — | — | |||||||||||
| Other current liabilities |
869 | — | — | 869 | ||||||||||||
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| Total current liabilities |
182,471 | (83,211 | ) | — | 99,260 | |||||||||||
| Supplemental put obligation |
42,602 | — | — | 42,602 | ||||||||||||
| Deferred income taxes |
75,178 | (11,568 | ) | — | 63,610 | |||||||||||
| Long-term debt |
86,000 | — | (15,000 | )(d) | 71,000 | |||||||||||
| Workers’ compensation liability |
41,457 | (41,457 | ) | — | — | |||||||||||
| Other non-current liabilities |
1,214 | — | — | 1,214 | ||||||||||||
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| Total liabilities |
428,922 | (136,236 | ) | (15,000 | ) | 277,686 | ||||||||||
| Stockholders’ equity |
||||||||||||||||
| Stockholders’ equity |
454,905 | — | 98,654 | (e) | 553,559 | |||||||||||
| Noncontrolling interest |
92,541 | (52,562 | ) | — | 39,979 | |||||||||||
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| Total stockholders’ equity |
547,446 | (52,562 | ) | 98,654 | 593,538 | |||||||||||
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| Total liabilities and stockholders’ equity |
$ | 976,368 | $ | (188,798 | ) | $ | 83,654 | $ | 871,224 | |||||||
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Compass Diversified Holdings
Condensed Combined Pro Forma Statement of Operations
for the year ended December 31, 2008
(unaudited)
| Staffmark Disposition | ||||||||||||||||
| Compass Diversified Holdings as Reported |
Less: Staffmark as Reported |
Staffmark Pro Forma Adjustments |
Pro Forma Combined Compass Diversified Holdings |
|||||||||||||
| (in thousands, except per share data) | ||||||||||||||||
| Net sales |
$ | 532,127 | $ | — | $ | — | $ | 532,127 | ||||||||
| Service revenues |
1,006,346 | (1,006,346 | ) | — | — | |||||||||||
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| Total revenues |
1,538,473 | (1,006,346 | ) | — | 532,127 | |||||||||||
| Cost of sales |
363,675 | — | — | 363,675 | ||||||||||||
| Cost of services |
832,531 | (832,531 | ) | — | — | |||||||||||
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| Gross profit |
342,267 | (173,815 | ) | — | 168,452 | |||||||||||
| Operating expenses: |
||||||||||||||||
| Staffing expense |
102,438 | (102,438 | ) | — | — | |||||||||||
| Selling, general and administrative expense |
165,768 | (48,067 | ) | — | 117,701 | |||||||||||
| Supplemental put expense |
6,382 | — | — | 6,382 | ||||||||||||
| Management fees |
15,205 | — | — | 15,205 | ||||||||||||
| Amortization expense |
24,605 | (9,476 | ) | — | 15,129 | |||||||||||
| Impairment expense |
— | — | — | — | ||||||||||||
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| Operating income |
27,869 | (13,834 | ) | — | 14,035 | |||||||||||
| Other income (expense): |
||||||||||||||||
| Interest income |
1,377 | — | — | 1,377 | ||||||||||||
| Interest expense |
(17,828 | ) | 1,693 | 286 | (A) | (15,849 | ) | |||||||||
| Amortization of debt issuance costs |
(1,969 | ) | — | — | (1,969 | ) | ||||||||||
| Other income, net |
894 | (741 | ) | — | 153 | |||||||||||
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| Income (loss) before income taxes |
10,343 | (12,882 | ) | 286 | (2,253 | ) | ||||||||||
| Provision for income taxes |
6,526 | 542 | — | 7,068 | ||||||||||||
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| Net income (loss) |
3,817 | (13,424 | ) | 286 | (9,321 | ) | ||||||||||
| Net income attributable to noncontrolling interest |
3,493 | (1,774 | ) | — | 1,719 | |||||||||||
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| Net income (loss) attributable to Holdings |
$ | 324 | $ | (11,650 | ) | $ | 286 | $ | (11,040 | ) | ||||||
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| Basic and fully diluted income per share attributable to Holdings |
$ | 0.01 | $ | (0.35 | ) | |||||||||||
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Compass Diversified Holdings
Condensed Combined Pro Forma Statement of Operations
for the year ended December 31, 2009
(unaudited)
| Staffmark Disposition | ||||||||||||||||
| Compass Diversified Holdings as Reported |
Less: Staffmark as Reported |
Staffmark Pro Forma Adjustments |
Pro Forma Combined Compass Diversified Holdings |
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| (in thousands, except per share data) | ||||||||||||||||
| Net sales |
$ | 503,400 | $ | — | $ | — | $ | 503,400 | ||||||||
| Service revenues |
745,340 | (745,340 | ) | — | — | |||||||||||
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| Total revenues |
1,248,740 | (745,340 | ) | — | 503,400 | |||||||||||
| Cost of sales |
344,191 | — | — | 344,191 | ||||||||||||
| Cost of services |
632,800 | (632,800 | ) | — | — | |||||||||||
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| Gross profit |
271,749 | (112,540 | ) | — | 159,209 | |||||||||||
| Operating expenses: |
||||||||||||||||
| Staffing expense |
74,279 | (74,279 | ) | — | — | |||||||||||
| Selling, general and administrative expense |
145,948 | (38,349 | ) | — | 107,599 | |||||||||||
| Supplemental put expense (reversal) |
(1,329 | ) | — | — | (1,329 | ) | ||||||||||
| Management fees |
13,100 | — | — | 13,100 | ||||||||||||
| Amortization expense |
24,609 | (9,822 | ) | — | 14,787 | |||||||||||
| Impairment expense |
59,800 | (59,800 | ) | — | — | |||||||||||
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| Operating income (loss) |
(44,658 | ) | 69,710 | — | 25,052 | |||||||||||
| Other income (expense): |
||||||||||||||||
| Interest income |
1,178 | — | — | 1,178 | ||||||||||||
| Interest expense |
(11,736 | ) | 1,846 | (776 | )(A) | (10,666 | ) | |||||||||
| Amortization of debt issuance costs |
(1,776 | ) | — | — | (1,776 | ) | ||||||||||
| Loss on debt extinguishment |
(3,652 | ) | — | — | (3,652 | ) | ||||||||||
| Other income (expense), net |
(282 | ) | 405 | — | 123 | |||||||||||
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| Income (loss) before income taxes |
(60,926 | ) | 71,961 | (776 | ) | 10,259 | ||||||||||
| Provision (benefit) for income taxes |
(21,281 | ) | 31,057 | — | 9,776 | |||||||||||
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| Net income (loss) |
(39,645 | ) | 40,904 | (776 | ) | 483 | ||||||||||
| Net income (loss) attributable to noncontrolling interest |
(13,375 | ) | 15,701 | — | 2,326 | |||||||||||
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| Net loss attributable to Holdings |
$ | (26,270 | ) | $ | 25,203 | $ | (776 | ) | $ | (1,843 | ) | |||||
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| Basic and fully diluted loss per share attributable to Holdings |
$ | (0.76 | ) | $ | (0.05 | ) | ||||||||||
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Compass Diversified Holdings
Condensed Combined Pro Forma Statement of Operations
for the year ended December 31, 2010
(unaudited)
| Staffmark Disposition | ||||||||||||||||
| Compass Diversified Holdings as Reported |
Less: Staffmark as Reported |
Staffmark Pro Forma Adjustments |
Pro Forma Combined Compass Diversified Holdings |
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| (in thousands, except per share data) | ||||||||||||||||
| Net sales |
$ | 655,098 | $ | — | $ | — | $ | 655,098 | ||||||||
| Service revenues |
1,002,511 | (1,002,511 | ) | — | — | |||||||||||
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| Total revenues |
1,657,609 | (1,002,511 | ) | — | 655,098 | |||||||||||
| Cost of sales |
447,504 | — | — | 447,504 | ||||||||||||
| Cost of services |
854,698 | (854,698 | ) | — | — | |||||||||||
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| Gross profit |
355,407 | (147,813 | ) | — | 207,594 | |||||||||||
| Operating expenses: |
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| Staffing expense |
81,250 | (81,250 | ) | — | — | |||||||||||
| Selling, general and administrative expense |
179,154 | (36,128 | ) | — | 143,026 | |||||||||||
| Supplemental put expense |
32,516 | — | — | 32,516 | ||||||||||||
| Management fees |
15,380 | — | — | 15,380 | ||||||||||||
| Amortization expense |
29,312 | (9,870 | ) | — | 19,442 | |||||||||||
| Impairment expense |
38,835 | — | — | 38,835 | ||||||||||||
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| Operating loss |
(21,040 | ) | (20,565 | ) | — | (41,605 | ) | |||||||||
| Other income (expense): |
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| Interest income |
20 | — | — | 20 | ||||||||||||
| Interest expense |
(11,544 | ) | 1,849 | 109 | (A) | (9,586 | ) | |||||||||
| Amortization of debt issuance costs |
(1,789 | ) | — | — | (1,789 | ) | ||||||||||
| Other income (expense), net |
718 | (904 | ) | — | (186 | ) | ||||||||||
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| Income (loss) before income taxes |
(33,635 | ) | (19,620 | ) | 109 | (53,146 | ) | |||||||||
| Provision for income taxes |
11,135 | (1,736 | ) | — | 9,399 | |||||||||||
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| Net loss |
(44,770 | ) | (17,884 | ) | 109 | (62,545 | ) | |||||||||
| Net income attributable to noncontrolling interest |
3,987 | (2,939 | ) | — | 1,048 | |||||||||||
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| Net income (loss) attributable to Holdings |
$ | (48,757 | ) | $ | (14,945 | ) | $ | 109 | $ | (63,593 | ) | |||||
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| Basic and fully diluted loss per share attributable to Holdings |
$ | (1.19 | ) | $ | (1.55 | ) | ||||||||||
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Compass Diversified Holdings
Condensed Combined Pro Forma Statement of Operations
for the six months ended June 30, 2011
(unaudited)
| Staffmark Disposition | ||||||||||||||||
| Compass Diversified Holdings as Reported |
Less: Staffmark as Reported |
Staffmark Pro Forma Adjustments |
Pro Forma Combined Compass Diversified Holdings |
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| (in thousands, except per share data) | ||||||||||||||||
| Net sales |
$ | 349,766 | $ | — | $ | — | $ | 349,766 | ||||||||
| Service revenues |
502,443 | (502,443 | ) | — | — | |||||||||||
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| Total revenues |
852,209 | (502,443 | ) | — | 349,766 | |||||||||||
| Cost of sales |
233,850 | — | — | 233,850 | ||||||||||||
| Cost of services |
434,506 | (434,506 | ) | — | — | |||||||||||
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| Gross profit |
183,853 | (67,937 | ) | — | 115,916 | |||||||||||
| Operating expenses: |
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| Staffing expense |
43,720 | (43,720 | ) | — | — | |||||||||||
| Selling, general and administrative expense |
91,164 | (16,643 | ) | — | 74,521 | |||||||||||
| Supplemental put expense |
4,895 | — | — | 4,895 | ||||||||||||
| Management fees |
7,778 | — | — | 7,778 | ||||||||||||
| Amortization expense |
15,391 | (4,743 | ) | — | 10,648 | |||||||||||
| Impairment expense |
7,700 | — | — | 7,700 | ||||||||||||
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| Operating income |
13,205 | (2,831 | ) | — | 10,374 | |||||||||||
| Other income (expense): |
||||||||||||||||
| Interest income |
2 | — | — | 2 | ||||||||||||
| Interest expense |
(4,879 | ) | 458 | 98 | (A) | (4,323 | ) | |||||||||
| Amortization of debt issuance costs |
(1,001 | ) | — | (1,001 | ) | |||||||||||
| Other income (expense), net |
591 | (535 | ) | — | 56 | |||||||||||
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| Income before income taxes |
7,918 | (2,908 | ) | 98 | 5,108 | |||||||||||
| Provision for income taxes |
6,219 | 322 | — | 6,541 | ||||||||||||
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| Net income (loss) |
1,699 | (3,230 | ) | 98 | (1,433 | ) | ||||||||||
| Net income attributable to noncontrolling interest |
2,295 | (120 | ) | — | 2,175 | |||||||||||
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| Net income (loss) attributable to Holdings |
$ | (596 | ) | $ | (3,110 | ) | $ | 98 | $ | (3,608 | ) | |||||
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| Basic and fully diluted loss per share attributable to Holdings |
$ | (0.01 | ) | $ | (0.08 | ) | ||||||||||
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Notes to Pro Forma Condensed Combined Financial Statements
(Unaudited)
Pro forma information is intended to reflect the impact of the Staffmark Disposition on the Company’s historical financial position and results of operations through adjustments that are directly attributable to the transaction, that are factually supportable and, with respect to the pro forma statements of operations that are expected to have a continuing impact. In order to accomplish this, the Company eliminated the historical results of Staffmark from the Company’s historical financial position and results of operations. Staffmark’s historical operations, for current and prior periods, including the gain on the sale, will be presented as discontinued operations for financial reporting purposes beginning with the Company’s Annual Report on Form 10-K for the year ended December 31, 2011.
This information in Note 1 provides a description of the pro forma adjustments from each line item in the pro forma condensed combined financial statements together with information explaining how the adjustments were derived or calculated. All amounts are in thousands of dollars ($000).
Note 1. Pro Forma Adjustments
Balance Sheet
The following adjustments correspond to those included in the unaudited condensed combined pro forma balance sheet as of June 30, 2011:
| (a) | This adjustment reflects the cash proceeds from the Staffmark Disposition, net of the assumed debt payoff as discussed in footnote (d) below. |
| (b) | This adjustment reflects short term receivables related to certain customary escrow receipts that we expect to receive. |
| (c) | This adjustment reflects long term receivables related to certain customary escrow receipts that we expect to receive. |
| (d) | This adjustment reflects the payoff of all revolver debt. The Company did not reflect the payoff of term debt. The effect of this revolver debt payoff on the next five years of debt maturity payments is to reduce the fiscal year 2012 debt maturity payment by $15,000. |
| (e) | This adjustment reflects the gain on the Staffmark Disposition as if the sale had occurred on June 30, 2011. This gain may not be representative of what will actually be recorded during the three and twelve month periods ended December 31, 2011. |
Statements of Operations
The following adjustments correspond to those included in the unaudited condensed combined pro forma statements of operations for all periods presented:
| (A) | These adjustments reflect the effect of paying off all revolver debt outstanding during the respective periods with proceeds from the sale. The effect of paying off all revolver debt was to reduce interest expense on the revolver debt for all periods presented and increase commitment (unused) fees associated with the revolver debt for all periods presented. |