Attached files
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| 8-K - FORM 8-K - Compass Group Diversified Holdings LLC | d252028d8k.htm |
Exhibit 99.1
| Compass Diversified Holdings James J. Bottiglieri Chief Financial Officer 203.221.1703 jbottiglieri@compassdiversifiedholdings.com |
Investor Relations and Media Contacts: The IGB Group Leon Berman / Michael Cimini 212.477.8438 / 212.477.8261 lberman@igbir.com / mcimini@igbir.com |
Compass Diversified Holdings Reports Third Quarter 2011 Financial Results
Generates Cash Flow Available for Distribution and Reinvestment of $25.5 Million
Westport, Conn., November 8, 2011 – 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 and nine months ended September 30, 2011.
Third Quarter 2011 Highlights
| • | Generated Cash Flow Available for Distribution and Reinvestment (“CAD” or “Cash Flow”) of $25.5 million for the third quarter of 2011; |
| • | Reported net income of $12.5 million for the third quarter of 2011; |
| • | Paid a third quarter 2011 cash distribution of $0.36 per share in October 2011, bringing cumulative distributions paid to $7.0752 per share since CODI’s IPO in May of 2006; and |
| • | Acquired a majority interest in CamelBak Products, LLC (“CamelBak”) on August 24, 2011. |
CODI reported Cash Flow (see note regarding use of Non-GAAP Financial Measures below) of $25.5 million for the quarter ended September 30, 2011, as compared to $23.8 million for the comparable quarter of the prior year. CODI’s weighted average number of shares outstanding for the quarter ended September 30, 2011 and September 30, 2010 was approximately 47.4 million and 41.9 million, respectively.
The improvement in Cash Flow for the third quarter of 2011 compared to the year-earlier period reflects solid performance at a majority of CODI’s subsidiaries. In addition, the third quarter of 2011 was positively impacted by the full inclusion of results from ERGOBaby, a platform business acquired by CODI on September 16, 2010, as well as the partial inclusion of results from CamelBak, a platform business acquired by CODI on August 24, 2011.
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 subsidiary for the periods during which CODI owned them. However, Cash Flow excludes the gains from sales of businesses.
Net income for the quarter ended September 30, 2011 was $12.5 million, as compared to a net loss of $29.4 million for the quarter ended September 30, 2010. During the third quarter of 2010, CODI recorded a $42.4 million non-cash impairment charge for the Company’s American Furniture Manufacturing subsidiary.
On October 10, 2011, CODI’s Board of Directors declared a third quarter distribution of $0.36 per share. The distribution was paid on October 31, 2011 to all holders of record as of October 25, 2011.
On October 17, 2011, CODI announced the sale of Staffmark whereby it received approximately $220 million of total proceeds from the sale at closing. The proceeds were used to repay substantially all of the outstanding debt under the Company’s prior revolving credit facility. The Company anticipates recording a gain on the sale of Staffmark ranging between $75 million and $90 million for the quarter ended December 31, 2011.
CODI announced on October 27, 2011 it signed a credit agreement for a revolving credit facility totaling $290 million and a term loan facility in the amount of $225 million. The two facilities combine for $515 million in new debt financing and replace the Company’s previous revolving credit facility and term loan facility. Upon closing, CODI had borrowing availability of approximately $287.1 million under its new revolving credit facility and no significant debt maturities until October 2016.
Commenting on the quarter, Alan Offenberg, CEO of Compass Group Diversified Holdings LLC, said, “Our strong results for the third quarter of 2011 were consistent with management’s expectations, as Cash Flow increased more than 7% compared to the year-earlier period. We continue to benefit from the leadership position and comparative financial strength of our niche businesses. We also realized contributions from our newest platform company, CamelBak, which we acquired during the third quarter. CamelBak is an exciting addition to our family of subsidiary companies based on its market leadership, history of stable cash flows, proven management and attractive growth potential.”
Mr. Offenberg added, “As we continue to pursue additional growth opportunities that create significant value for our owners, we recently took steps to further strengthen our financial flexibility. Specifically, during October we secured $515 million in new debt financing, which we used to refinance our existing debt and improve our mix of debt to equity within our capital structure. In addition, the opportunistic sale of Staffmark, one of the initial subsidiaries at the time of CODI’s IPO, generated approximately $220 million of total proceeds in a highly profitable transaction for our Company. With substantial liquidity, we are in a strong position to invest in high-return organic growth initiatives and capitalize on accretive acquisitions of companies with a real reason to exist as we have consistently done in the past.”
Conference Call
Management will host a conference call on Wednesday, November 9, 2011 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 (877) 879-6209 and the dial-in number for international callers is (719) 325-4783. The access code for all callers is 4404832. 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 16, 2011. 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 4404832.
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, with the first quarter typically being the slowest of the year. 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”)
Compass Diversified Holdings (“CODI”) owns and manages a diverse family of established North American middle market businesses. Each of its eight subsidiaries is a leader in their 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 owners.
CODI’s 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.anodynemedicaldevice.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 and related products (ERGObaby, www.ergobabycarriers.com); |
| • | The design, manufacture and marketing of premium suspension products for mountain bikes and powered off-road vehicles (Fox Racing Shox, www.foxracingshox.com); |
| • | The design, sourcing and fulfillment of logo based promotional products (HALO Branded Solutions, www.halo.com); and |
| • | 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, 2010 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) | September 30, 2011 |
December 31, 2010 |
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| (unaudited) | ||||||||
| Assets |
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| Current assets: |
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| Cash and cash equivalents |
$ | 10,564 | $ | 13,536 | ||||
| Accounts receivable, less allowance of $4,893 and $5,481 |
253,541 | 208,487 | ||||||
| Inventories |
108,970 | 77,412 | ||||||
| Prepaid expenses and other current assets |
32,464 | 33,904 | ||||||
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| Total current assets |
405,539 | 333,339 | ||||||
| Property, plant and equipment, net |
50,329 | 33,484 | ||||||
| Goodwill |
325,312 | 325,851 | ||||||
| Intangible assets, net |
437,015 | 269,672 | ||||||
| Deferred debt issuance costs, net |
2,865 | 3,822 | ||||||
| Other non-current assets |
31,052 | 17,873 | ||||||
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| Total assets |
$ | 1,252,112 | $ | 984,041 | ||||
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| Liabilities and stockholders’ equity |
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| Current liabilities: |
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| Accounts payable and accrued expenses |
$ | 160,820 | $ | 127,499 | ||||
| Due to related party |
4,839 | 2,692 | ||||||
| Current portion, long-term debt |
2,000 | 2,000 | ||||||
| Current portion of workers’ compensation liability |
18,775 | 18,170 | ||||||
| Other current liabilities |
977 | 1,043 | ||||||
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| Total current liabilities |
187,411 | 151,404 | ||||||
| Long-term debt |
290,500 | 94,000 | ||||||
| Supplemental put obligation |
43,801 | 44,598 | ||||||
| Deferred income taxes |
76,328 | 74,457 | ||||||
| Workers’ compensation liability |
42,126 | 40,588 | ||||||
| Other non-current liabilities |
1,162 | 3,084 | ||||||
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| Total liabilities |
641,328 | 408,131 | ||||||
| Stockholders’ equity |
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| Trust shares, no par value, 500,000 authorized; 48,300 and 46,725 shares issued and outstanding at 9/30/11 and 12/31/10, respectively |
658,447 | 638,763 | ||||||
| Accumulated other comprehensive loss |
— | (143 | ) | |||||
| Accumulated deficit |
(199,652 | ) | (150,550 | ) | ||||
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| Total stockholders’ equity attributable to Holdings |
458,795 | 488,070 | ||||||
| Noncontrolling interests |
151,989 | 87,840 | ||||||
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| Total stockholders’ equity |
610,784 | 575,910 | ||||||
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| Total liabilities and stockholders’ equity |
$ | 1,252,112 | $ | 984,041 | ||||
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Compass Diversified Holdings
Condensed Consolidated Statements of Operations
(unaudited)
| (in thousands, except per share data) | Three Months Ended September 30, 2011 |
Three Months Ended September 30, 2010 |
Nine Months Ended September 30, 2011 |
Nine Months Ended September 30, 2010 |
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| Net sales |
$ | 489,955 | $ | 460,767 | $ | 1,342,164 | $ | 1,218,708 | ||||||||
| Cost of sales |
378,755 | 361,236 | 1,047,111 | 962,459 | ||||||||||||
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| Gross profit |
111,200 | 99,531 | 295,053 | 256,249 | ||||||||||||
| Operating expenses: |
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| Staffing expense |
21,659 | 21,089 | 65,379 | 60,996 | ||||||||||||
| Selling, general and administrative expense |
54,676 | 44,101 | 145,840 | 129,037 | ||||||||||||
| Supplemental put expense |
1,200 | 1,639 | 6,095 | 18,630 | ||||||||||||
| Management fees |
5,255 | 4,010 | 13,033 | 11,383 | ||||||||||||
| Amortization expense |
8,472 | 7,469 | 23,863 | 21,069 | ||||||||||||
| Impairment expense |
— | 42,435 | 7,700 | 42,435 | ||||||||||||
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| Operating income (loss) |
19,938 | (21,212 | ) | 33,143 | (27,301 | ) | ||||||||||
| Other income (expense): |
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| Interest income |
2 | 1 | 4 | 18 | ||||||||||||
| Interest expense |
(2,631 | ) | (2,926 | ) | (7,510 | ) | (8,487 | ) | ||||||||
| Amortization of debt issuance costs |
(542 | ) | (493 | ) | (1,543 | ) | (1,329 | ) | ||||||||
| Other income, net |
222 | 361 | 813 | 752 | ||||||||||||
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| Income (loss) before income taxes |
16,989 | (24,269 | ) | 24,907 | (36,347 | ) | ||||||||||
| Income tax expense |
4,519 | 5,148 | 10,738 | 9,100 | ||||||||||||
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| Net income (loss) |
12,470 | (29,417 | ) | 14,169 | (45,447 | ) | ||||||||||
| Net income attributable to noncontrolling interest |
4,374 | 642 | 6,669 | 2,041 | ||||||||||||
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| Net income (loss) attributable to Holdings |
$ | 8,096 | $ | (30,059 | ) | $ | 7,500 | $ | (47,488 | ) | ||||||
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| Basic and fully diluted net income (loss) per share |
$ | 0.17 | $ | (0.72 | ) | $ | 0.16 | $ | (1.19 | ) | ||||||
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| Weighted average number of shares outstanding — basic and fully diluted |
47,376 | 41,875 | 46,944 | 39,852 | ||||||||||||
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| Cash distributions declared per share |
$ | 0.36 | $ | 0.34 | $ | 1.08 | $ | 1.02 | ||||||||
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Compass Diversified Holdings
Condensed Consolidated Statements of Cash Flows
(unaudited)
| (in thousands) | Nine Months Ended September 30, 2011 |
Nine Months Ended September 30, 2010 |
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| Cash flows from operating activities: |
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| Net income (loss) |
$ | 14,169 | $ | (45,447 | ) | |||
| Adjustments to reconcile net income (loss) to net cash provided by operating activities: |
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| Depreciation and amortization expense |
34,896 | 29,313 | ||||||
| Impairment expense |
7,700 | 42,435 | ||||||
| Supplemental put expense |
6,095 | 18,630 | ||||||
| Noncontrolling interests and noncontrolling stockholders charges |
2,210 | 8,209 | ||||||
| Deferred taxes |
(5,687 | ) | (5,115 | ) | ||||
| Other |
1,036 | 245 | ||||||
| Changes in operating assets and liabilities, net of acquisition: |
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| Increase in accounts receivable |
(23,229 | ) | (44,692 | ) | ||||
| Increase in inventories |
(146 | ) | (18,983 | ) | ||||
| Increase in prepaid expenses and other current assets |
(806 | ) | (3,793 | ) | ||||
| Increase in accounts payable and accrued expenses |
21,559 | 48,025 | ||||||
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| Net cash provided by operating activities |
57,797 | 28,827 | ||||||
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| Cash flows from investing activities: |
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| Acquisition of businesses, net of cash acquired |
(258,559 | ) | (173,689 | ) | ||||
| Purchases of property and equipment |
(15,099 | ) | (4,703 | ) | ||||
| Other |
140 | 7 | ||||||
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| Net cash used in investing activities |
(273,518 | ) | (178,385 | ) | ||||
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| Cash flows from financing activities: |
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| Proceeds from issuance of Trust shares, net |
19,684 | 74,977 | ||||||
| Net borrowing (repayment) of debt |
196,500 | 99,300 | ||||||
| Debt issuance costs |
(593 | ) | (259 | ) | ||||
| Distributions paid |
(49,529 | ) | (40,928 | ) | ||||
| Net proceeds related to noncontrolling interest |
47,016 | 9,485 | ||||||
| Other |
(329 | ) | (44 | ) | ||||
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| Net cash provided by financing activities |
212,749 | 142,531 | ||||||
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| Net decrease in cash and cash equivalents |
(2,972 | ) | (7,027 | ) | ||||
| Cash and cash equivalents — beginning of period |
13,536 | 31,495 | ||||||
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| Cash and cash equivalents — end of period |
$ | 10,564 | $ | 24,468 | ||||
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Compass Diversified Holdings
Condensed Consolidated Table of Cash Flows Available for Distribution and Reinvestment (“CAD”)
(unaudited)
| (in thousands) | Three
Months Ended September 30, 2011 |
Three Months ended September 30, 2010 |
Nine Months Ended September 30, 2011 |
Nine Months Ended September 30, 2010 |
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| Net income (loss) |
$ | 12,470 | $ | (29,417 | ) | $ | 14,169 | $ | (45,447 | ) | ||||||
| Adjustment to reconcile net income (loss) to cash provided by operating activities: |
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| Depreciation and amortization |
12,553 | 10,254 | 33,353 | 27,984 | ||||||||||||
| Impairment expense |
— | 42,435 | 7,700 | 42,435 | ||||||||||||
| Amortization of debt issuance costs |
542 | 493 | 1,543 | 1,329 | ||||||||||||
| Supplemental put expense |
1,200 | 1,639 | 6,095 | 18,630 | ||||||||||||
| Noncontrolling interests and noncontrolling stockholders charges |
995 | 768 | 2,210 | 8,209 | ||||||||||||
| Other |
949 | 405 | 1,036 | 245 | ||||||||||||
| Deferred taxes |
(3,761 | ) | (3,053 | ) | (5,687 | ) | (5,115 | ) | ||||||||
| Changes in operating assets and liabilities |
(15,635 | ) | (2,266 | ) | (2,622 | ) | (19,443 | ) | ||||||||
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| Net cash provided by operating activities |
9,313 | 21,258 | 57,797 | 28,827 | ||||||||||||
| Plus: |
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| Unused fee on revolving credit facility (1) |
499 | 749 | 2,041 | 2,378 | ||||||||||||
| Successful acquisition expense (2) |
3,347 | 2,046 | 4,197 | 3,970 | ||||||||||||
| Changes in operating assets and liabilities |
15,635 | 2,266 | 2,622 | 19,443 | ||||||||||||
| Less: |
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| Maintenance capital expenditures (3) |
2,343 | 2,522 | 7,467 | 4,703 | ||||||||||||
| Other |
930 | — | 930 | — | ||||||||||||
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| Estimated cash flow available for distribution and reinvestment |
$ | 25,521 | $ | 23,797 | $ | 58,260 | $ | 49,915 | ||||||||
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| Distribution paid in March 2011 and April 2010 |
$ | 16,821 | $ | 14,238 | ||||||||||||
| Distribution paid in July 2011/2010 |
16,821 | 14,238 | ||||||||||||||
| Distribution paid in October 2011/2010 |
$ | 17,388 | $ | 14,238 | 17,388 | 14,238 | ||||||||||
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| $ | 17,388 | $ | 14,238 | $ | 51,030 | $ | 42,714 | |||||||||
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| (1) | Represents the commitment fee on the unused portion of the Revolving Credit Facility. |
| (2) | Represents transaction costs for successful acquisitions that were expensed during the period. |
| (3) | Excludes growth capital expenditures of approximately $1.4 million for the three months ended September 30, 2011 and $7.6 million for the nine months ended Sept. 30, 2011. |