EX-99.1 2 d725915dex991.htm EX-99.1 EX-99.1

Exhibit 99.1

 

Compass Diversified Holdings

Ryan J. Faulkingham

Chief Financial Officer

203.221.1703

ryan@compassequity.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

 

LOGO

Compass Diversified Holdings Reports First Quarter 2014

Financial Results

Generates Cash Flow Available for Distribution and Reinvestment of $14.6 Million

Westport, Conn., May 7, 2014 – Compass Diversified Holdings (NYSE: CODI) (“CODI,” “we,” “our” or the “Company”), an owner of leading middle market businesses, announced today its consolidated operating results for the three months ended March 31, 2014.

First Quarter 2014 Highlights

 

    Generated Cash Flow Available for Distribution and Reinvestment (“CAD” or “Cash Flow”) of $14.6 million for the first quarter of 2014;

 

    Reported net income of $7.4 million for the first quarter of 2014; and

 

    Paid a first quarter 2014 cash distribution of $0.36 per share in April 2014, bringing cumulative distributions paid to $10.6752 per share since CODI’s IPO in May of 2006.

“We are pleased to report financial results for the first quarter of 2014 that exceeded management’s expectations,” stated Alan Offenberg, CEO of Compass Diversified Holdings. “During the quarter, we continued to benefit from the relative operating and financial strength of our leading middle market businesses with a particularly strong performance at Ergobaby, which posted double-digit revenue and earnings growth. We also generated stable Cash Flow across our niche industrial businesses in the quarter. With significant liquidity and a conservative balance sheet, we remain well positioned to


continue to invest in high-return organic growth initiatives and pursue favorable platform and add-on acquisitions that are accretive to Cash Flow. Complementing our approach to capitalizing on organic and acquisition-related growth opportunities that create long-term value for our shareholders, we remain committed to providing a steady stream of cash distributions as we have consistently done in the past.”

Operating Results

CODI reported Cash Flow (see note regarding use of Non-GAAP Financial Measures below) of $14.6 million for the quarter ended March 31, 2014, as compared to $20.8 million for the prior year comparable quarter. CODI’s weighted average number of shares outstanding for both the quarter ended March 31, 2014 and March 31, 2013 was approximately 48.3 million.

Cash Flow for the first quarter of 2014 reflects year-over-year growth in the Company’s Ergobaby and American Furniture Manufacturing businesses, offset by the Company’s CamelBak business. The year-over-year comparison of CamelBak’s performance for the quarter ended March 31, 2014 was adversely affected by the fulfillment of a contract with the U.S. Marine Corps that was completed in the first quarter of 2013. Additionally, Cash Flow for the first quarter of 2014 excluded results from the Company’s FOX subsidiary, which completed its initial public offering (“IPO”) on August 13, 2013. As a result of this offering, FOX is no longer included in CODI’s calculation of CAD. Based on the Company’s debt and equity interests in FOX, CODI generated total net proceeds of approximately $142.4 million from the IPO and continues to hold majority ownership in FOX.

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 monetizing interests in CODI’s subsidiaries, which have totaled more than $270 million since going public in 2006.

Net income for the quarter ended March 31, 2014 was $7.4 million, as compared to net income of $3.6 million for the quarter ended March 31, 2013. During the first quarter of 2014, CODI recorded lower interest expense of approximately $0.8 million as compared to the prior year period due to a reduction in borrowing costs and changes in the fair value of interest rate swaps, offset by higher selling, general and administrative expense. In addition, for the quarter ended March 31, 2013, CODI recorded a non-cash expense of $6.4 million related to the Company’s Supplemental Put Agreement, which was terminated in July 2013.

Liquidity and Capital Resources

As of March 31, 2014, CODI had approximately $86.6 million in cash and cash equivalents, $279 million outstanding on its term loan facility and no outstanding borrowings under its $320 million revolving credit facility. The Company’s FOX subsidiary has $50 million outstanding on its term loan facility and no outstanding borrowings on its $60 million revolving credit facility. The Company has no significant debt maturities until 2017 and had borrowing availability of approximately $318 million at March 31, 2014 under its revolving credit facility.


First Quarter 2014 Distribution

On April 10, 2014, CODI’s Board of Directors declared a first quarter distribution of $0.36 per share. The cash distribution was paid on April 30, 2014 to all holders of record as of April 23, 2014. Since its IPO in May of 2006, CODI has paid a cumulative distribution of $10.6752 per share.

Conference Call

Management will host a conference call on Thursday, May 8, 2014 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 (855) 212-2368 and the dial-in number for international callers is (315) 625-6886. The access code for all callers is 33613108. 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, 2014. To access the replay, please dial (855) 859-2056 in the U.S. and (404) 537-3406 outside the U.S., and then enter the access code 33613108.

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 its 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 shareholders.

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 and manufacture of high-performance suspension products primarily for mountain bikes, side-by-side vehicles, on-road and off-road vehicles and trucks, all-terrain vehicles, snowmobiles, specialty vehicles and applications, and motorcycles (FOX, www.ridefox.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, 2013 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,
2014
    December 31,
2013
 
     (unaudited)        

Assets

    

Current assets:

    

Cash and cash equivalents

   $ 86,622      $ 113,229   

Accounts receivable, less allowance of $3,758 and $3,424

     129,563        111,736   

Inventories

     168,598        152,948   

Prepaid expenses and other current assets

     22,630        21,220   
  

 

 

   

 

 

 

Total current assets

     407,413        399,133   

Property, plant and equipment, net

     71,477        68,059   

Goodwill

     259,982        246,611   

Intangible assets, net

     336,334        310,359   

Deferred debt issuance costs, net

     7,918        8,217   

Other non-current assets

     13,058        12,534   
  

 

 

   

 

 

 

Total assets

   $ 1,096,182      $ 1,044,913   
  

 

 

   

 

 

 

Liabilities and stockholders’ equity

    

Current liabilities:

    

Accounts payable and accrued expenses

   $ 117,468      $ 118,129   

Due to related party

     4,330        4,528   

Current portion, long-term debt

     5,350        2,850   

Other current liabilities

     4,050        4,623   
  

 

 

   

 

 

 

Total current liabilities

     131,198        130,130   

Long-term debt

     319,471        280,389   

Deferred income taxes

     59,192        60,024   

Other non-current liabilities

     23,831        5,435   
  

 

 

   

 

 

 

Total liabilities

     533,692        475,978   

Stockholders’ equity

    

Trust shares, no par value, 500,000 authorized; 48,300 shares issued and outstanding at 3/31/14 and 12/31/13

     725,453        725,453   

Accumulated other comprehensive income

     684        693   

Accumulated deficit

     (265,333     (252,761
  

 

 

   

 

 

 

Total stockholders’ equity attributable to Holdings

     460,804        473,385   

Noncontrolling interests

     101,686        95,550   
  

 

 

   

 

 

 

Total stockholders’ equity

     562,490        568,935   
  

 

 

   

 

 

 

Total liabilities and stockholders’ equity

   $ 1,096,182      $ 1,044,913   
  

 

 

   

 

 

 


Compass Diversified Holdings

Condensed Consolidated Statements of Operations

(unaudited)

 

(in thousands, except per share data)    Three Months
Ended
March 31, 2014
    Three Months
Ended
March 31, 2013
 

Net sales

   $ 246,048      $ 241,567   

Cost of sales

     169,696        165,194   
  

 

 

   

 

 

 

Gross profit

     76,352        76,373   

Operating expenses:

    

Selling, general and administrative expense

     46,173        41,209   

Supplemental put expense

     —          6,396   

Management fees

     4,735        4,316   

Amortization expense

     7,349        7,630   
  

 

 

   

 

 

 

Operating income

     18,095        16,822   

Other income (expense):

    

Interest income

     9        2   

Interest expense

     (4,581     (5,341

Amortization of debt issuance costs

     (570     (485

Other income, net

     184        327   
  

 

 

   

 

 

 

Income before income taxes

     13,137        11,325   

Provision for income taxes

     5,764        7,699   
  

 

 

   

 

 

 

Net income

     7,373        3,626   

Less: Net income attributable to noncontrolling interest

     2,714        2,032   
  

 

 

   

 

 

 

Net income attributable to Holdings

   $ 4,659      $ 1,594   
  

 

 

   

 

 

 

Basic and fully diluted net income per share

   $ 0.08      $ 0.03   
  

 

 

   

 

 

 

Basic and fully diluted weighted average number of shares outstanding

     48,300        48,300   
  

 

 

   

 

 

 

Cash distributions declared per share

   $ 0.36      $ 0.36   
  

 

 

   

 

 

 


Compass Diversified Holdings

Condensed Consolidated Statements of Cash Flows

(unaudited)

 

(in thousands)    Three Months
Ended
March 31, 2014
    Three Months
Ended
March 31, 2013
 

Cash flows from operating activities:

    

Net income

   $ 7,373      $ 3,626   

Adjustments to reconcile net income to net cash provided by operating activities:

    

Depreciation and amortization expense

     11,985        11,611   

Unrealized (gain) loss on interest rate and foreign currency derivatives

     92        (385

Amortization of debt issuance costs and original issue discount

     864        845   

Supplemental put expense

     —          6,396   

Noncontrolling stockholders charges

     1,365        1,301   

Excess tax benefit on stock-based compensation

     (1,061     —     

Deferred taxes

     (594     (857

Other

     (53     (71

Changes in operating assets and liabilities, net of acquisition:

    

Increase in accounts receivable

     (15,652     (18,130

Increase in inventories

     (7,063     (2,010

Increase in prepaid expenses and other current assets

     (3,274     (187

Increase (decrease) in accounts payable and accrued expenses

     (22     17,987   
  

 

 

   

 

 

 

Net cash (used in) provided by operating activities

     (6,040     20,126   
  

 

 

   

 

 

 

Cash flows from investing activities:

    

Acquisition of businesses, net of cash acquired

     (42,297     —     

Purchases of property and equipment

     (3,631     (3,328

Payment of interest rate swap

     (495     —     

Proceeds released from escrow related to Staffmark sale

     —          93   

Other investing activities

     7        —     
  

 

 

   

 

 

 

Net cash used in investing activities

     (46,416     (3,235
  

 

 

   

 

 

 

Cash flows from financing activities:

    

Net borrowing of debt

     41,287        2,363   

Distributions paid

     (17,388     (17,388

Net payments related to noncontrolling interest

     1,156        (3,090

Debt issuance costs

     (278     —     

Excess tax benefit on stock-based compensation

     1,061        —     

Other

     —          (22
  

 

 

   

 

 

 

Net cash provided by (used in) financing activities

     25,838        (18,137
  

 

 

   

 

 

 

Foreign currency impact on cash

     11        (495

Net decrease in cash and cash equivalents

     (26,607     (1,741

Cash and cash equivalents — beginning of period

     113,229        18,241   
  

 

 

   

 

 

 

Cash and cash equivalents — end of period

   $ 86,622      $ 16,500   
  

 

 

   

 

 

 


Compass Diversified Holdings

Condensed Consolidated Table of Cash Flows Available for Distribution and Reinvestment (“CAD”)

(unaudited)

 

(in thousands)    Three Months
Ended
March 31, 2014
    Three Months
Ended
March 31, 2013
 

Net income (loss)

   $ 7,373      $ 3,626   

Adjustment to reconcile net income (loss) to cash provided by operating activities:

    

Depreciation and amortization

     11,985        11,611   

Amortization of debt issuance costs and original issue discount

     864        845   

Unrealized loss on derivatives

     92        (385

Excess tax benefit from subsidiary stock options (1)

     (1,061     —     

Supplemental put expense

     —          6,396   

Noncontrolling stockholders charges

     1,365        1,301   

Other

     (53     (71

Deferred taxes

     (594     (857

Changes in operating assets and liabilities

     (26,011     (2,340
  

 

 

   

 

 

 

Net cash provided by operating activities

     (6,040     20,126   

Plus:

    

Unused fee on revolving credit facility (2)

     600        645   

Excess tax benefit from subsidiary stock options (1)

     1,061        —     

Other

     53        71   

Changes in operating assets and liabilities

     26,011        2,340   

Less:

    

Maintenance capital expenditures (3)

     3,104        2,346   

FOX CAD (4)

     3,494        —     

Payment on swap

     495        —     
  

 

 

   

 

 

 

Estimated cash flow available for distribution and reinvestment

   $ 14,592      $ 20,836   
  

 

 

   

 

 

 

    

    
  

 

 

   

 

 

 

Distribution paid in April 2014/2013

   $ 17,388      $ 17,388   
  

 

 

   

 

 

 

 

(1) Represents the non-cash excess tax benefit at FOX related to the exercise of stock options.
(2) Represents the commitment fee on the unused portion of the Revolving Credit Facility.
(3) Excludes growth capital expenditures of approximately $0.5 million and $1.0 million for the three months ended March 31, 2014 and March 31, 2013, respectively.
(4) Represents FOX CAD subsequent to IPO date. For the quarter ended March 31, 2014, the amount includes approximately $7.6 million of EBITDA, less: $2.2 million of cash taxes, $0.9 million of management fees and $0.9 million of maintenance capital expenditures.