Compass Diversified Holdings Reports Fourth Quarter and Full Year 2015 Financial Results

Generates Cash Flow Available for Distribution and Reinvestment of $16.1 Million for Fourth Quarter and $82.4 Million for Full Year 2015

News provided by

Compass Diversified Holdings

Feb 29, 2016, 04:15 ET

WESTPORT, Conn., Feb. 29, 2016 /PRNewswire/ -- 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 and twelve months ended December 31, 2015.

Fourth Quarter 2015 Highlights

  • Generated Cash Flow Available for Distribution and Reinvestment ("CAD" or "Cash Flow") of $16.1 million for the fourth quarter of 2015 and $82.4 million for the full year 2015;
  • Reported net loss of $1.5 million for the fourth quarter of 2015 and net income of $165.8 million for the full year 2015;
  • Paid a fourth quarter 2015 cash distribution of $0.36 per share in January 2016, bringing cumulative distributions paid to $13.1952 per share since CODI's IPO in May of 2006; and
  • Completed the add-on acquisition of Hemp Oil Canada, Inc. ("HOCI") by the Company's subsidiary Fresh Hemp Foods Ltd. ("Manitoba Harvest").

"We generated solid operating results for the fourth quarter 2015 and achieved a 42% increase in Cash Flow for the full-year 2015," stated Alan Offenberg, CEO of Compass Diversified Holdings. "Our fourth quarter performance reflects the continued strength of our middle market niche industrial and branded consumer businesses, including robust cash flow contributions from Clean Earth, Sterno Products, Liberty Safe and Ergobaby."

Mr. Offenberg added, "Reinvesting in the growth of our subsidiaries remains a core part of our strategy and we are pleased to have completed an accretive add-on acquisition for our Manitoba Harvest subsidiary in the fourth quarter, which will further drive the Company's already strong growth trajectory. In addition, we completed an add-on acquisition at Sterno Products subsequent to year end. We also completed the sale of American Furniture, realizing approximately $23.5 million of proceeds from the sale. Going forward, our emphasis remains on identifying attractive platform and add-on acquisition opportunities in leading niche businesses, as we seek to further grow our cash flows and provide attractive cash distributions to our shareholders."

Operating Results
CODI reported Cash Flow (see Note Regarding Use of Non-GAAP Financial Measures below) of $16.1 million for the quarter ended December 31, 2015, as compared to $17.5 million for the prior year's comparable quarter. CODI's weighted average number of shares outstanding for the quarters ended December 31, 2015 and December 31, 2014 were 54.3 million and 51.4 million, respectively.

Cash Flow for the fourth quarter of 2015 reflects year-over-year growth in the Company's Clean Earth, Liberty Safe, Ergobaby, Sterno Products and Arnold Magnetic businesses, partially offset by a decline at the Company's Tridien and Advanced Circuits businesses. Cash flow for the fourth quarter of 2015 included contributions from HOCI from the date of acquisition.

For the year ended December 31, 2015, CODI reported Cash Flow of $82.4 million, as compared to $58.0 million for the year ended December 31, 2014. CODI's weighted average number of shares outstanding for the twelve month period ended December 31, 2015 was approximately 54.3 million, as compared to approximately 49.1 million for the twelve month period ended December 31, 2014.

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 approximately $480 million since going public in 2006.

Net loss for the quarter ended December 31, 2015 was $1.5 million, as compared to net income of $8.9 million for the quarter ended December 31, 2014. During the fourth quarter of 2015, CODI reduced the previously recorded gain on the sale of CamelBak by $1.3 million as a result of a working capital adjustment. In addition, during the fourth quarter of 2015, CODI's equity method investment in Fox Factory Holding Corp. ("FOX", Nasdaq: FOXF) decreased $5.0 million. During the fourth quarter of 2014, CODI's equity method investment in FOX increased $11.0 million.

For the year ended December 31, 2015, CODI reported net income of $165.8 million, primarily as a result of the gain on the sale of CamelBak. This compared to net income of $291.2 million for the year ended December 31, 2014, which included a one-time accounting gain of approximately $264.3 million as a result of the deconsolidation of FOX, and results from FOX until its deconsolidation in July 2014.

Liquidity and Capital Resources
As of December 31, 2015, CODI had approximately $85.9 million in cash and cash equivalents, $320 million outstanding on its term loan facility and no outstanding borrowings under its revolving credit facility. The Company has no significant debt maturities until 2019 and had net borrowing availability of approximately $396 million at December 31, 2015 under its revolving credit facility. In addition, the Company's equity investment in its former subsidiary FOX is valued at $249.7 million at December 31, 2015.

Fourth Quarter 2015 Distribution
On January 7, 2016, CODI's Board of Directors declared a fourth quarter distribution of $0.36 per share. The cash distribution was paid on January 28, 2016 to all holders of record as of January 21, 2016. Since its IPO in May of 2006, CODI has paid a cumulative distribution of $13.1952 per share.

Conference Call
Management will host a conference call on Tuesday, March 1, 2016 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 47935087. 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 March 9, 2016. 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 47935087.

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 owns and manages a diverse family of established North American middle market businesses. Each of its current subsidiaries is a leader in its 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 shareholders.

Our eight majority-owned subsidiaries are engaged in the following lines of business:

  • The manufacture of quick-turn, small-run and production rigid printed circuit boards (Advanced Circuits);
  • 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);
  • The manufacture of engineered magnetic solutions for a wide range of specialty applications and end-markets (Arnold Magnetic Technologies);
  • Environmental services for a variety of contaminated materials including soils, dredged material, hazardous waste and drill cuttings (Clean Earth); 
  • The design and marketing of wearable baby carriers, strollers and related products (Ergobaby); 
  • The design and manufacture of premium home and gun safes (Liberty Safe); 
  • The manufacture and marketing of branded, hemp-based food products (Manitoba Harvest); and 
  • The manufacture and marketing of portable food warming fuels and creative ambience solutions for the hospitality and consumer industries (Sterno Products).

In addition, we own approximately 41% of the common stock of Fox Factory Holding Corp. ("FOX", Nasdaq: FOXF), a former subsidiary business that completed its initial public offering in August 2013. FOX designs and manufactures 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. 

This press release may contain certain forward-looking statements, including statements with regard to the future performance of CODI. 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 SEC for the year ended December 31, 2015 and other filings with the SEC. Except as required by law, 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





December 31,

December 31,

2015

2014

(in thousands)


Assets


Current assets


Cash and cash equivalents

$

85,869

$

21,946

Accounts receivable, net

114,320

118,852

Inventories

68,371

58,308

Prepaid expenses and other current assets

22,803

23,357

Current assets of discontinued operations

—

98,336

Total current assets

291,363

320,799

Property, plant and equipment, net

118,050

106,981

Equity method investment

249,747

245,214

Goodwill and intangible assets, net

751,892

677,725

Other non-current assets

14,593

16,884

Non-current assets of discontinued operations

—

179,827

Total assets

$

1,425,645

$

1,547,430




Liabilities and stockholders' equity


Current liabilities


Accounts payable and accrued expenses

$

98,362

$

101,229

Due to related party

5,863

6,068

Current portion, long-term debt

3,250

3,250

Other current liabilities

9,004

6,311

Current liabilities of discontinued operations

—

24,373

Total current liabilities

116,479

141,231

Deferred income taxes

103,745

91,616

Long-term debt

313,242

485,547

Other non-current liabilities

18,960

14,039

Non-current liabilities of discontinued operations

—

6,663

Total liabilities

552,426

739,096

Stockholders' equity


Total stockholders' equity attributable to Holdings

826,084

767,431

Noncontrolling interests of continuing operations

47,135

25,711

Noncontrolling interests of discontinued operations

—

15,192

Total stockholders' equity

873,219

808,334

Total liabilities and stockholders' equity

$

1,425,645

$

1,547,430

Compass Diversified Holdings

Condensed Consolidated Statements of Operations











Three Months Ended

Year Ended

(in thousands, except per share data)

December 31,

2015

December 31,

2014

December 31,

2015

December 31,

2014












Net sales

$

218,086

$

194,644

$

805,384

$

703,929

Cost of sales

148,979

139,701

551,511

484,749

Gross profit

69,107

54,943

253,873

219,180

Operating expenses:






Selling, general and administrative expense

41,011

36,797

146,957

138,032

Management fees

6,148

6,963

26,008

22,222

Amortization expense

7,752

9,620

30,529

24,842

Impairment expense

—

—

9,165

—

Operating income

14,196

1,563

41,214

34,084

Other income (expense):






Interest expense, net

(1,877)

(10,625)

(25,924)

(27,061)

Gain (loss) on equity method investment

(4,985)

11,029

4,533

11,029

Gain on deconsolidation of subsidiary

—

—

—

264,325

Amortization of debt issuance costs

(561)

(545)

(2,212)

(2,243)

Loss on debt extinguishment

—

—

—

(2,143)

Other expense, net

(1,332)

(417)

(2,315)

(594)

Income from continuing operations before income taxes

5,441

1,005

15,296

277,397

Provision (benefit) for income taxes

5,700

(3,393)

14,974

5,092

Net income (loss) from continuing operations

(259)

4,398

322

272,305

Income from discontinued operations, net of tax

—

4,535

15,650

18,850

Gain (loss) on sale of discontinued operations, net of tax

(1,277)

—

149,798

—

Net income (loss)

(1,536)

8,933

165,770

291,155

Less: Income from continuing operations attributable to noncontrolling interest

681

1,489

3,303

11,853

Less: Income from discontinued operations attributable to noncontrolling interest

—

85

629

467

Net income (loss) attributable to Holdings

$

(2,217)

$

7,359

$

161,838

$

278,835








Basic and fully diluted income (loss) per share






Continuing operations

$

(0.37)

$

0.05

$

(0.43)

$

5.01

Discontinued operations

(0.02)

0.09

3.04

0.37

$

(0.39)

$

0.14

$

2.61

$

5.38








Basic and fully diluted weighted average number of shares outstanding

54,300

51,430

54,300

49,089








Cash distributions declared per share

$

0.36

$

0.36

$

1.44

$

1.44

Compass Diversified Holdings

Summarized Statement of Cash Flows







Year ended

(in thousands)

December 31, 2015

December 31, 2014

Net cash provided by operating activities

$

84,548

$

70,695

Net cash provided by (used in) investing activities

233,880

(424,753)

Net cash (used in) provided by financing activities

(254,357)

265,487

Effect of foreign currency on cash

(1,905)

(955)

Net increase (decrease) in cash and cash equivalents

62,166

(89,526)

Cash and cash equivalents — beginning of period

23,703

113,229

Cash and cash equivalents — end of period

$

85,869

$

23,703

Compass Diversified Holdings

Condensed Consolidated Table of Cash Flows Available for Distribution and Reinvestment

(unaudited)

Three Months Ended

Year Ended

(in thousands)

December 31,

2015

December 31,

2014

December 31,

2015

December 31,

2014

Net income (loss)

$

(1,536)

$

8,933

$

165,770

$

291,155

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






Depreciation and amortization

13,329

19,812

63,072

55,696

Impairment expense

—

—

9,165

—

(Gain) loss on sale of businesses, net

1,277

—

(149,798)

—

Amortization of debt issuance costs and original issue discount

729

713

2,883

3,125

Unrealized (gain) loss on derivatives

(2,382)

4,913

5,662

7,722

Loss on debt extinguishment

—

—

—

2,143

Excess tax benefit from subsidiary stock options (1)

—

—

—

(1,662)

Gain (loss) on equity method investment

4,985

(11,029)

(4,533)

(11,029)

Gain on deconsolidation of subsidiary

—

—

—

(264,325)

Noncontrolling stockholders charges

1,110

1,152

3,737

4,744

Other

(290)

1,081

34

1,442

Deferred taxes

732

(6,657)

(3,131)

(8,601)

Changes in operating assets and liabilities

20,123

5,617

(8,313)

(9,715)

Net cash provided by operating activities

38,077

24,535

84,548

70,695

Plus:






Unused fee on revolving credit facility (2)

550

279

1,612

1,914

Excess tax benefit from subsidiary stock options (1)

—

—

—

1,662

Successful acquisition costs

700

2,814

1,826

4,844

Integration services fee (3)

250

1,000

3,500

1,000

Realized loss from foreign currency effect (4)

1,264

—

2,561

—

Changes in operating assets and liabilities

—

—

8,313

9,715

Other

409

—

200

51

Less:






Maintenance capital expenditures (5)

4,509

4,636

18,194

13,637

FOX CAD (6)

—

—

—

15,716

Payment on swap

505

506

2,007

2,008

Changes in operating assets and liabilities

20,123

5,617

—

—

Other

—

399

—

528

Estimated cash flow available for distribution and reinvestment

$

16,113

$

17,470

$

82,359

$

57,992

Distribution paid in April 2015/2014



$

19,548

$

17,388

Distribution paid in July 2015/ 2014



19,548

17,388

Distribution paid in October 2015/2014



19,548

17,388

Distribution paid in January 2016/2015

$

19,548

$

19,548

19,548

19,548

$

19,548

$

19,548

$

78,192

$

71,712

(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)

Represents fees paid by newly acquired companies to the Manager for integration services performed during the first year of ownership, payable quarterly.

(4)

Reflects the foreign currency transaction loss resulting from the Canadian dollar intercompany loans issued to Manitoba Harvest.

(5)

Excludes growth capital expenditures of approximately $0.6 million for the three months ended December 31, 2014, and $1.0 million and $1.6 million for the year ended December 31, 2015 and 2014.

(6)

Represents FOX CAD subsequent to IPO date. For the twelve months ended December 31, 2014, the amount includes approximately $24.2 million of EBITDA, less: $3.8 million of cash taxes, $1.9 million of management fees, $2.4 million of maintenance capital expenditures and $0.4 million of interest expense.

SOURCE Compass Diversified Holdings

Related Links

http://www.compassdiversifiedholdings.com

WANT YOUR COMPANY'S NEWS FEATURED ON PRNEWSWIRE.COM?

icon3
440k+
Newsrooms &
Influencers
icon1
9k+
Digital Media
Outlets
icon2
270k+
Journalists
Opted In
GET STARTED