8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the

Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): November 18, 2011

COMPASS DIVERSIFIED HOLDINGS

(Exact name of registrant as specified in its charter)

Delaware	0-51937	57-6218917
(State or other jurisdiction of incorporation)	(Commission File Number)	(I.R.S. Employer Identification No.)

COMPASS GROUP DIVERSIFIED

HOLDINGS LLC

(Exact name of registrant as specified in its charter)

Delaware	0-51938	20-3812051
(State or other jurisdiction of incorporation)	(Commission File Number)	(I.R.S. Employer Identification No.)

Sixty One Wilton Road

Second Floor

Westport, CT 06880

(Address of principal executive offices and zip code)

Registrant’s telephone number, including area code: (203) 221-1703

Check the appropriate box below if the Form 8-K is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Section 8 Other Events

Item 8.01 Other Events

As previously disclosed by Compass Group Diversified Holdings LLC (the “Company”) and Compass Diversified Holdings (“Holdings” and, together with the Company, collectively “CODI,” “us” or “we”) in a Current Report on Form 8-K filed with the Securities and Exchange Commission on October 18, 2011, the Company entered into a Stock Purchase Agreement, dated as of October 17, 2011, with Recruit Co., LTD. and RGF Staffing USA, Inc. (collectively “Recruit”), pursuant to which the Company and all other shareholders of the Company’s subsidiary business, Staffmark Holdings, Inc. (“Staffmark”), sold all of the issued and outstanding capital stock of Staffmark to Recruit (the “Divestiture”).

This Current Report on Form 8-K updates the pro forma financial statements of CODI to include the Unaudited Condensed Combined Pro Forma Balance Sheet of Compass Diversified Holdings at September 30, 2011 and notes thereto and the Unaudited Condensed Combined Pro Forma Statement of Operations for the nine months ended September 30, 2011 and notes thereto (collectively, the “Pro Forma Financial Statements”). The Unaudited Condensed Combined Pro Forma Statements of Operations for the years ended December 31, 2008, 2009 and 2010 previously disclosed in the Form 8-K filed with the Securities and Exchange Commission on October 18, 2011, are included in Exhibit 99.1 for ease of reference. The Pro Forma Financial Statements are filed as Exhibit 99.1 hereto and incorporated by reference herein.

Section 9 Financial Statements and Exhibits

Item 9.01 Financial Statements and Exhibits

(d) Exhibits.

99.1 Unaudited Condensed Combined Pro Forma Balance Sheet of Compass Diversified Holdings at September 30, 2011 and notes thereto and Unaudited Condensed Combined Pro Forma Statements of Operations for the years ended December 31, 2008, 2009 and 2010 and the nine months ended September 30, 2011 and notes thereto

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

Date: November 18, 2011	COMPASS DIVERSIFIED HOLDINGS
	By:	/s/ James J. Bottiglieri
		James J. Bottiglieri
		Regular Trustee

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

Date: November 18, 2011	COMPASS GROUP DIVERSIFIED HOLDINGS LLC
	By:	/s/ James J. Bottiglieri
		James J. Bottiglieri
		Chief Financial Officer

3

EX-99.1

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 the Current Report on Form 8-K dated October 18, 2011, as filed with the Securities and Exchange Commission (the “October 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 nine months ended September 30, 2011 are based on the assumption that the Staffmark Disposition was completed on January 1, 2008. The pro forma balance sheet as of September 30, 2011 is based on the assumption that the Staffmark Disposition was completed on September 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 September 30, 2011 and for the nine months ended September 30, 2011, as filed on Form 10-Q dated November 8, 2011.

The unaudited pro forma financial information is for informational purposes only and does not purport to present what the Company’s results would actually have been had this transaction actually occurred on the dates presented or to project the 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 Stock Purchase Agreement related to the Staffmark Disposition filed as an exhibit to the October 8-K, 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 Staffmark Disposition 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 September 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	$	10,564	$	(15	)	$	—		$	10,549
Accounts receivable, net		253,541		(136,880	)		—			116,661
Inventories		108,970		—			—			108,970
Prepaid expenses and other current assets		32,464		(6,244	)		6,474	(a)		32,694
Total current assets		405,539		(143,139	)		6,474			268,874
Property, plant and equipment, net		50,329		(4,943	)		—			45,386
Goodwill		325,312		(88,637	)		—			236,675
Intangible assets, net		437,015		(66,838	)		—			370,177
Deferred debt issuance costs, net		2,865		—			—			2,865
Other non-current assets		31,052		(23,718	)		3,007	(b)		10,341
Total assets	$	1,252,112	$	(327,275	)	$	9,481		$	934,318
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable and accrued expenses	$	160,820	$	(61,272	)	$	—		$	99,548
Due to related party		4,839		—			—			4,839
Current portion, long-term debt		2,000		—			—			2,000
Current portion of workers’ compensation liability		18,775		(18,775	)		—			—
Other current liabilities		977		—			—			977
Total current liabilities		187,411		(80,047	)		—			107,364
Supplemental put obligation		43,801		—			—			43,801
Deferred income taxes		76,328		(11,096	)		—			65,232
Long-term debt		290,500		—			(219,519	) (c)		70,981
Workers’ compensation liability		42,126		(42,126	)		—			—
Other non-current liabilities		1,162		—			—			1,162
Total liabilities		641,328		(133,269	)		(219,519	)		288,540
Stockholders’ equity
Stockholders’ equity		458,795		—			89,606	(d)		548,401
Noncontrolling interest		151,989		(54,612	)		—			97,377
Total stockholders’ equity		610,784		(54,612	)		89,606			645,778
Total liabilities and stockholders’ equity	$	1,252,112	$	(187,881	)	$	(129,913	)	$	934,318

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	)		—			—
Total revenues		1,538,473			(1,006,346	)		—			532,127
Cost of sales		363,675			—			—			363,675
Cost of services		832,531			(832,531	)		—			—
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		—			—			—			—
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
Income (loss) before income taxes		10,343			(12,882	)		286			(2,253	)
Provision for income taxes		6,526			542			—			7,068
Net income (loss)		3,817			(13,424	)		286			(9,321	)
Net income attributable to noncontrolling interest		3,493			(1,774	)		—			1,719
Net income (loss) attributable to Holdings	$	324		$	(11,650	)	$	286		$	(11,040	)
Basic and fully diluted income per share attributable to Holdings	$	0.01								$	(0.35	)

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
(in thousands, except per share data)
Net sales	$	503,400		$	—		$	—		$	503,400
Service revenues		745,340			(745,340	)		—			—
Total revenues		1,248,740			(745,340	)		—			503,400
Cost of sales		344,191			—			—			344,191
Cost of services		632,800			(632,800	)		—			—
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	)		—			—
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
Income (loss) before income taxes		(60,926	)		71,961			(776	)		10,259
Provision (benefit) for income taxes		(21,281	)		31,057			—			9,776
Net income (loss)		(39,645	)		40,904			(776	)		483
Net income (loss) attributable to noncontrolling interest		(13,375	)		15,701			—			2,326
Net loss attributable to Holdings	$	(26,270	)	$	25,203		$	(776	)	$	(1,843	)
Basic and fully diluted loss per share attributable to Holdings	$	(0.76	)							$	(0.05	)

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
(in thousands, except per share data)
Net sales	$	655,098		$	—		$	—		$	655,098
Service revenues		1,002,511			(1,002,511	)		—			—
Total revenues		1,657,609			(1,002,511	)		—			655,098
Cost of sales		447,504			—			—			447,504
Cost of services		854,698			(854,698	)		—			—
Gross profit		355,407			(147,813	)		—			207,594
Operating expenses:
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
Operating loss		(21,040	)		(20,565	)		—			(41,605	)
Other income (expense):
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	)
Income (loss) before income taxes		(33,635	)		(19,620	)		109			(53,146	)
Provision for income taxes		11,135			(1,736	)		—			9,399
Net loss		(44,770	)		(17,884	)		109			(62,545	)
Net income attributable to noncontrolling interest		3,987			(2,939	)		—			1,048
Net income (loss) attributable to Holdings	$	(48,757	)	$	(14,945	)	$	109		$	(63,593	)
Basic and fully diluted loss per share attributable to Holdings	$	(1.19	)							$	(1.55	)

Compass Diversified Holdings

Condensed Combined Pro Forma Statement of Operations

for the nine months ended September 30, 2011

(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	$	562,084		$	—		$	—		$	562,084
Service revenues		780,080			(780,080	)		—			—
Total revenues		1,342,164			(780,080	)		—			562,084
Cost of sales		376,696			—			—			376,696
Cost of services		670,415			(670,415	)		—			—
Gross profit		295,053			(109,665	)		—			185,388
Operating expenses:
Staffing expense		65,379			(65,379	)		—			—
Selling, general and administrative expense		145,840			(25,491	)		—			120,349
Supplemental put expense		6,095			—			—			6,095
Management fees		13,033			—			—			13,033
Amortization expense		23,863			(7,109	)		—			16,754
Impairment expense		7,700			—			—			7,700
Operating income		33,143			(11,686	)		—			21,457
Other income (expense):
Interest income		4			—			—			4
Interest expense		(7,510	)		1,405			(214	) (A)		(6,319	)
Amortization of debt issuance costs		(1,543	)		—						(1,543	)
Other income (expense), net		813			(835	)		—			(22	)
Income before income taxes		24,907			(11,116	)		(214	)		13,577
Provision for income taxes		10,738			(390	)		—			10,348
Net income		14,169			(10,726	)		(214	)		3,229
Net income attributable to noncontrolling interest		6,669			(1,774	)		—			4,895
Net income (loss) attributable to Holdings	$	7,500		$	(8,952	)	$	(214	)	$	(1,666	)
Basic and fully diluted income (loss) per share attributable to Holdings	$	0.16								$	(0.04	)

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 transactions, 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 for each period presented.

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 September 30, 2011:

(a) This adjustment reflects short term receivables related to certain customary escrow receipts that we expect to receive.

(b) This adjustment reflects long term receivables related to certain customary escrow receipts that we expect to receive.

(c) This adjustment reflects paying down $219.5 million of 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 $219.5 million.

(d) This adjustment reflects the gain on the Staffmark Disposition as if the sale had occurred on September 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 down $219.5 million of revolver debt outstanding during the respective periods with proceeds from the sale. The effect of paying off this 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.