EX-99.1 2 w26925exv99w1.htm EXHIBIT 99.1 exv99w1
 

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EXHIBIT 99.1
Compass Diversified Trust   Investor Relations Contact:
Jim Bottiglieri   KCSA Worldwide
Chief Financial Officer   Jeffrey Goldberger / Garth Russell
203.221.1703   212.896.1249 / 212.896.1250
jbottiglieri@compasstrust.com   jgoldberger@kcsa.com / grussell@kcsa.com
Compass Diversified Trust Reports
Third Quarter and Nine Month 2006 Financial Results
WESTPORT, CT, November 8, 2006 – Compass Diversified Trust (NASDAQ: CODI) and Compass Group Diversified Holdings LLC (collectively, the “Trust” or “CODI”) announced today the consolidated results of operations for the three and nine months ended September 30, 2006.
For the quarter ended September 30, 2006, Compass Diversified Trust reported cash flow available for distribution of $7.9 million. For the nine months ended September 30, 2006, Compass Diversified Trust reported cash flow available for distribution of $13.9 million. For the nine month period, the Trust’s results only reflect 46 days of activity for its initial businesses in the second quarter and the complete results of operations for the third quarter.
On September 29, 2006, the Trust’s Board of Directors declared a distribution of $0.2625 per share payable on October 19, 2006 to all Trust shareholders of record as of October 13, 2006. The Trust intends to continue to declare and pay regular quarterly cash distributions on all outstanding shares.
Based upon the Trust’s reported cash flow available for distribution for the quarter ended September 30, 2006 of $7.9 million, the coverage ratio of cash available for distribution to declared distributions for the October 19, 2006 distribution was approximately 1.5x. For the nine month period, that same coverage ratio for the combined July 18, 2006 distribution of $0.1327 per share and the October 19, 2006 distribution was approximately 1.7x.
The quarter ended September 30, 2006 was the first for which the Trust reported a non-cash expense of $8.0 million associated with the Supplemental Put Agreement (the “SPA”) between its subsidiary, Compass Group Diversified Holdings LLC (the “Company”) and Compass Group Management, LLC (the “Manager”). Upon termination of the Company’s Management Services Agreement with the Manager, the Company is obligated to purchase the allocation interests owned by the Manager for a price (its “fair value”) to be determined in accordance with the SPA. The Trust is required each quarter for accounting purposes to record the change in fair value of the obligation associated with the SPA in its earnings. This supplemental put accrual does not affect the Trust’s cash flows or the calculation of cash flow available for distribution, but results in the recognition of a supplemental put expense in our income statement.
             
 
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In commenting on the quarter, I. Joseph Massoud, CEO of the Company noted, “The third quarter represented our first full quarter of ownership and management of our subsidiary businesses. During the quarter, results of operations from these businesses met our expectations. We are extremely encouraged by the growth in cash flows for our company as a whole, and the coverage that this cash flow provides for our shareholder distributions. Regarding the Supplemental Put Agreement, the accrual associated therewith primarily represents the portion of the estimated increase in the value of our businesses over the Company’s book value in those businesses to which the Manager would be entitled if the Management Services Agreement were terminated. Importantly, it should be noted that this particular non-cash expense may fluctuate significantly in future reporting periods as changes in subsidiary operating performance and other factors could significantly impact this estimate.”
On August 1, 2006, the Company announced its acquisition of a controlling interest in Anodyne Medical Device, Inc. (“AMD”), a leading manufacturer of medical support surfaces and patient positioning devices. Total consideration for the transaction was approximately $31.0 million. On September 18, 2006, the Company further announced that AMD had executed a definitive purchase agreement to acquire Anatomic Concepts, Inc. from Anatomic Global, Inc. Total consideration for the transaction, which was completed on October 5, 2006, was $9.2 million.
About Compass Diversified Trust
Compass Diversified Trust (“CODI”) was formed to acquire and manage a group of profitable middle market businesses that are headquartered in North America. CODI provides public investors with an opportunity to participate in the ownership and growth of companies which have historically been owned by private equity firms or wealthy individuals or families. CODI’s disciplined approach to its target market provides opportunities to methodically purchase attractive businesses at values that are accretive to its shareholders. For sellers of businesses, CODI’s’ unique structure allows CODI to acquire businesses efficiently with no financing contingencies and, following acquisition, to provide its companies with substantial access to growth capital.
Upon acquisition, CODI works with the executive teams of its subsidiary companies to identify and capitalize on opportunities to grow those companies’ earnings and cash flows. These cash flows support distributions to CODI shareholders, which are intended to be steady and growing over the long term.
Subsidiary Businesses
  •   CBS Personnel Holdings, Inc. and its consolidated subsidiaries, referred to as CBS Personnel, is a provider of temporary staffing services in the United States. CBS Personnel is headquartered in Cincinnati, OH, operates 132 branch locations in 16 states and was founded in 1970.
 
  •   Crosman Acquisition Corporation and its consolidated subsidiaries, referred to as Crosman, is a leading manufacturer of recreational airgun and paintball products (through Game Face). Crossman is headquartered in East Bloomfield, NY and was originally founded in 1923.
             
 
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  •   Compass AC Holdings, Inc. and its consolidated subsidiary, referred to as Advanced Circuits, is a manufacturer of low-volume quick-turn and prototype rigid printed circuit boards (“PCBs”). The Company is based in Aurora, CO and was founded in 1989.
 
  •   Silvue Technologies Group, Inc. and its consolidated subsidiaries, referred to as Silvue, is a developer and manufacturer of proprietary, high-performance coating systems for polycarbonate, glass, acrylic, metals and other substrate materials used in the premium eyewear, aerospace, automotive and industrial markets. Silvue is based in Anaheim, CA and was founded in 1986.
 
  •   Anodyne Medical Device, Inc. and its consolidated subsidiaries, referred to as AMD, is a leading manufacturer of medical support surfaces and patient positioning devices, primarily used for the prevention and treatment of pressure wounds experienced by patients with limited or no mobility. AMD is based in Los Angeles, CA and was founded in 2005.
To find out more about Compass Diversified Trust, please visit www.compassdiversifiedtrust.com.
This press release may contain certain forward-looking statements, including statements with regard to the future performance of the Trust. 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 10Qs filed by CODI with the Securities and Exchange Commission for the quarters ended March 31,2006 and June 30, 2006 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.
Tables Below
             
 
  800 Second Avenue   Tel 212 682 6300   E-mail pr@kcsa.com
 
  New York, NY 10017   Fax 212 697 0910   www.kcsa.com

 

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Compass Diversified Trust
Condensed Consolidated Balance Sheets
(in thousands)
                 
    September 30,     December 31,  
    2006     2005  
    (Unaudited)          
Assets
                
Current assets:
                
Cash and cash equivalents
   $ 13,049     $ 100  
Accounts receivable, less allowances of $4,738 at September 30, 2006
     91,142       —  
Inventories
     22,162       —  
Prepaid expenses and other current assets
     10,140       3,308  
Current assets of discontinued operations
     542       —  
 
            
 
                
Total current assets
     137,035       3,408  
 
                
Property, plant and equipment, net
     22,110       —  
Goodwill
     189,448       —  
Intangible assets, net
     143,678       —  
Deferred debt issuance costs, net
     5,834       —  
Other non-current assets
     12,401       —  
Assets of discontinued operations
     466       —  
 
            
 
                
Total assets
   $ 510,972     $ 3,408  
 
            
 
                
Liabilities and stockholders’ equity (deficit)
                
Current liabilities:
                
Accounts payable and accrued expenses
   $ 65,074     $ 1  
Distributions payable
     5,368       —  
Due to related party
     531       3,308  
Working capital facility
     11,697       —  
Current liabilities of discontinued operations
     625       —  
 
            
 
                
Total current liabilities
     83,295       3,309  
 
                
Supplemental put obligation
     8,016       —  
Long-term debt less current portion
     60,000       —  
Deferred income taxes
     42,842       —  
Other non-current liabilities
     17,544       —  
 
            
 
                
Total liabilities
     211,697       3,309  
 
                
Minority interests
     25,956       100  
 
                
Total stockholders’ equity (deficit)
     273,319       (1 )
 
            
 
                
Total liabilities and stockholders’ equity (deficit)
   $ 510,972     $ 3,408  
 
            
             
 
  800 Second Avenue   Tel 212 682 6300   E-mail pr@kcsa.com
 
  New York, NY 10017   Fax 212 697 0910   www.kcsa.com

 

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Compass Diversified Trust
Condensed Consolidated Statement of Operations
(in thousands, except per share data, unaudited)
                 
    Three Months     Nine Months  
    Ended     Ended  
    September 30, 2006     September 30, 2006  
Net sales
   $ 183,837     $ 278,520  
Cost of sales
     138,875       209,752  
 
            
Gross profit
     44,962       68,768  
Operating expenses:
                
Staffing expense
     13,468       20,439  
Selling, general and administrative expenses
     15,563       23,911  
Supplemental Put obligation
     8,016       8,016  
Fees to manager
     1,928       2,814  
Research and development expense
     279       1,553  
Amortization expense
     2,865       4,156  
 
            
Operating income
     2,843       7,879  
 
                
Other income (expense):
                
Interest income
     353       447  
Interest expense
     (2,340 )     (3,414 )
Amortization of debt issuance costs
     (321 )     (479 )
Other income, net
     205       594  
 
            
 
                
Income from continuing operations before income taxes and minority interests
     740       5,027  
Provision for income taxes
     3,582       5,163  
Minority interest
     1,187       1,896  
 
            
 
                
Loss from continuing operations
     (4,029 )     (2,032 )
Income from discontinued operations, net of income taxes
     145       260  
 
            
 
                
Net loss
   $ (3,884 )   $ (1,772 )
 
            
 
                
Basic and fully diluted loss per share
   $ (0.19 )   $ (0.18 )
 
            
 
                
Weighted average number of shares of trust stock outstanding – basic and fully diluted
     20,120       10,031  
 
            
 
                
Cash dividends declared per share
   $ 0.2625     $ 0.3952  
 
            
             
 
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  New York, NY 10017   Fax 212 697 0910   www.kcsa.com

 

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Compass Diversified Trust
Condensed Consolidated Statement of Cash Flows
(in thousands, unaudited)
         
    Nine Months  
    Ended  
    September 30, 2006  
Cash flows from operating activities:
        
Net loss from continuing operations
   $ (2,032 )
Adjustments to reconcile net loss to net cash provided by operating activities:
        
Depreciation of property and equipment
     1,526  
Amortization of intangible assets
     4,156  
Amortization of debt issuance costs
     479  
Supplemental put obligation
     8,016  
Minority interests
     1,896  
Loan forgiveness accrual
     1,072  
Deferred taxes
     (624 )
In process research and development charge
     1,120  
Other
     (389 )
 
        
Changes in operating assets and liabilities, net of acquisition:
        
Increase in accounts receivable
     (4,357 )
Increase in inventories
     (8,323 )
Decrease in prepaid expenses and other current assets
     408  
Increase in accounts payable and accrued expenses
     10,319  
Decrease in due to related party
     (3,308 )
Decrease in net assets of discontinued operations
     338  
 
      
Net cash provided by operating activities
     10,297  
 
      
 
        
Cash flows from investing activities:
        
Acquisition of initial businesses, net of cash acquired
     (310,759 )
Purchases of property and equipment
     (4,031 )
Anodyne acquisition
     (31,050 )
 
      
Net cash used in investing activities
     (345,840 )
 
      
 
        
Cash flows from financing activities:
        
Proceeds from the issuance of debt
     71,574  
Proceeds from the issuance of trust shares, net
     284,962  
Debt issuance costs
     (6,307 )
Distributions paid
     (2,587 )
Other
     756  
 
      
Net cash provided by financing activities
     348,398  
 
      
 
        
Net increase in cash and cash equivalents
     12,855  
Foreign currency adjustment
     94  
Cash and cash equivalents — beginning of period
     100  
 
      
Cash and cash equivalents — end of period
   $ 13,049  
 
      
             
 
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7

Compass Diversified Trust
Condensed Consolidated Table of Cash Flows Available for Distribution (“CAD”)
(in thousands, unaudited)
                 
    Three Months     Nine Months  
    Ended     Ended  
    September 30, 2006     September 30, 2006  
Net loss
   $ (3,884 )   $ (1,772 )
Adjustment to reconcile net loss to cash provided by operating activities:
                
Depreciation and amortization
     4,134       6,161  
Supplemental put expense
     8,016       8,016  
Silvue’s in process R&D expensed at acquisition date
     —       1,120  
Advanced Circuit’s loan forgiveness accrual
     536       1,072  
Minority interest
     1,187       1,896  
Deferred taxes
     (652 )     (624 )
Other
     (205 )     (311 )
Changes in operating assets and liabilities
     (7,444 )     (5,261 )
 
            
 
     1,688       10,297  
Add:
                
Unused fee on delayed term loan
     554       842  
Changes in operating assets and liabilities
     7,444       5,261  
Less:
                
Maintenance capital expenditures
                
CODI
     51       70  
CBS Personnel
     255       291  
Crosman
     892       1,477  
Advanced Circuits
     253       323  
Silvue
     196       199  
Anodyne
     157       157  
 
            
 
                
Estimated cash flow available for distribution
   $ 7,882     $ 13,883  
 
            
 
                
Distribution declared in September 2006
   $ (5,368 )   $ (5,368 )
Distribution paid in July 2006
     —       (2,547 )
 
            
Total distributions
   $ (5,368 )   $ (7,915 )
 
            
             
 
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