Compass Diversified Holdings Reports Third Quarter 2012 Financial Results
Generates Cash Flow Available for Distribution and Reinvestment of $22.8 Million
WESTPORT, Conn., Nov. 7, 2012 /PRNewswire/ -- 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, 2012.
Third Quarter 2012 Highlights
- Generated Cash Flow Available for Distribution and Reinvestment ("CAD" or "Cash Flow") of $22.8 million for the third quarter of 2012;
- Reported net income of $6.4 million for the third quarter of 2012; and
- Paid a third quarter 2012 cash distribution of $0.36 per share in October 2012, bringing cumulative distributions paid to $8.5152 per share since CODI's IPO in May of 2006;
"We are pleased with our financial results for the third quarter of 2012, which were consistent with management's expectations," said Alan Offenberg, CEO of Compass Group Diversified Holdings LLC. "During the quarter, our leading branded product businesses, consisting of our CamelBak Products, ERGObaby, Fox and Liberty Safe subsidiaries, posted on a combined basis strong revenue and earnings growth. We also maintained stable performance in our combined niche industrial businesses, which include our Advanced Circuits, American Furniture Manufacturing, Tridien Medical and Arnold Magnetic Technologies subsidiaries. Based on the strength of CODI's current group of subsidiaries, we paid a cash distribution of $0.36 per share, increasing the cumulative distribution paid to approximately $8.52 per share since our IPO in 2006. As we maintain our commitment to provide shareholders with attractive cash distributions, we remain focused on leveraging our balance sheet strength to drive future performance. With substantial liquidity totaling more than $275 million, we are 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."
Operating Results
CODI reported Cash Flow (see note regarding use of Non-GAAP Financial Measures below) of $22.8 million for the quarter ended September 30, 2012, as compared to $25.5 million for the prior year comparable quarter. CODI's weighted average number of shares outstanding for the quarter ended September 30, 2012 and September 30, 2011 was approximately 48.3 million and 47.4 million, respectively.
CODI's Cash Flow for the third quarter 2012 was lower as compared to the corresponding year-earlier period due to the exclusion of the seasonally strong operating results from the Company's Staffmark subsidiary, which was sold on October 17, 2011, and the Company's HALO subsidiary, which was sold on May 1, 2012. Partially offsetting these factors, Cash Flow for the third quarter 2012 was positively impacted by the full inclusion of operating results from the Company's CamelBak subsidiary, which was acquired by CODI on August 24, 2011. In addition, Cash Flow for the third quarter of 2012 included the operating results of the Company's Arnold Magnetic subsidiary, which was acquired on March 5, 2012.
For the nine month period ended September 30, 2012, CODI reported Cash Flow of $62.8 million, as compared to $58.3 million for the nine months ended September 30, 2011, representing an increase of 7.8%. CODI's weighted average number of shares outstanding for the nine month period ended September 30, 2012 and September 30, 2011 was approximately 48.3 million and 46.9 million, respectively.
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, which have totaled approximately $198 million since 2007.
Net income for the quarter ended September 30, 2012 was $6.4 million, as compared to net income of $12.5 million for the quarter ended September 30, 2011. During the quarter ended September 30, 2012, CODI recorded higher interest expense of approximately $3.8 million as compared to the prior year period due in large part to higher average debt balances, amortization of original issue discount and changes in the fair value of interest rate swaps. CODI also recorded an approximate $3.8 million higher non-cash supplemental put accrual in the current quarter as compared to the corresponding previous quarter. This accrual is based on the periodic review of current cash flow generation level of its subsidiaries, as well as anticipated market multiples for those businesses in the event they were to be sold in the current environment. For the nine month period ended September 30, 2012, CODI reported net income of $9.5 million, as compared to net income of $14.2 million for the nine months ended September 30, 2011.
Liquidity and Capital Resources
As of September 30, 2012, CODI had approximately $20.0 million in cash and cash equivalents, $253.2 million outstanding on its term loan facility and $19.0 million outstanding under its $290 million revolving credit facility. The Company has no significant debt maturities until October 2016 and had borrowing availability of approximately $270 million at September 30, 2012 under its revolving credit facility.
Third Quarter 2012 Distribution
On October 9, 2012, CODI's Board of Directors declared a third quarter distribution of $0.36 per share. The cash distribution was paid on October 31, 2012 to all holders of record as of October 24, 2012. Since its IPO in May of 2006, CODI has paid a cumulative distribution of $8.5152 per share.
Conference Call
Management will host a conference call on Thursday, November 8, 2012 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 (888) 427-9376 and the dial-in number for international callers is (719) 325-2452. The access code for all callers is 5285947. 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 15, 2012. 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 5285947.
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 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.
Our 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.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.ergobabycarriers.com);
- The design, manufacture and marketing of premium suspension products for mountain bikes and powered off-road vehicles (FOX, www.ridefox.com);
- 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, 2011 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, |
December 31, |
||
| 2012 |
2011 |
|||
| (unaudited) |
||||
| Assets |
||||
| Current assets: |
||||
| Cash and cash equivalents |
$ 19,989 |
$ 131,973 |
||
| Accounts receivable, less allowance of $3,588 and $2,420 |
119,532 |
69,114 |
||
| Inventories |
135,499 |
96,312 |
||
| Prepaid expenses and other current assets |
20,949 |
22,758 |
||
| Current assets of discontinued operations |
- |
40,064 |
||
| Total current assets |
295,969 |
360,221 |
||
| Property, plant and equipment, net |
63,733 |
43,579 |
||
| Goodwill |
257,014 |
205,567 |
||
| Intangible assets, net |
348,218 |
328,070 |
||
| Deferred debt issuance costs, net |
8,748 |
6,942 |
||
| Other non-current assets |
16,129 |
13,889 |
||
| Non-current assets of discontinued operations |
- |
71,638 |
||
| Total assets |
$ 989,811 |
$ 1,029,906 |
||
| Liabilities and stockholders' equity |
||||
| Current liabilities: |
||||
| Accounts payable and accrued expenses |
$ 114,214 |
$ 72,998 |
||
| Due to related party |
3,950 |
4,239 |
||
| Current portion of supplemental put obligation |
5,200 |
13,675 |
||
| Current portion, long-term debt |
2,550 |
2,250 |
||
| Other current liabilities |
1,955 |
1,694 |
||
| Current liabilities of discontinued operations |
- |
23,306 |
||
| Total current liabilities |
127,869 |
118,162 |
||
| Long-term debt |
262,285 |
214,000 |
||
| Supplemental put obligation |
37,005 |
35,814 |
||
| Deferred income taxes |
63,723 |
49,088 |
||
| Other non-current liabilities |
7,536 |
2,875 |
||
| Non-current liabilities of discontinued operations |
- |
13,489 |
||
| Total liabilities |
498,418 |
433,428 |
||
| Stockholders' equity |
||||
| Trust shares, no par value, 500,000 authorized; 48,300 shares issued and |
648,036 |
658,361 |
||
| outstanding at 9/30/12 and 12/31/11 |
||||
| Accumulated other comprehensive loss |
(363) |
- |
||
| Accumulated deficit |
(211,177) |
(160,852) |
||
| Total stockholders' equity attributable to Holdings |
436,496 |
497,509 |
||
| Noncontrolling interests |
54,897 |
95,257 |
||
| Noncontrolling interests of discontinued operations |
- |
3,712 |
||
| Total stockholders' equity |
491,393 |
596,478 |
||
| Total liabilities and stockholders' equity |
$ 989,811 |
$ 1,029,906 |
||
| Compass Diversified Holdings |
||||||||
| Condensed Consolidated Statements of Operations |
||||||||
| (unaudited) |
||||||||
| Three Months |
Three Months |
Nine Months |
Nine Months |
|||||
| Ended |
Ended |
Ended |
Ended |
|||||
| (in thousands, except per share data) |
September 30, 2012 |
September 30, 2011 |
September 30, 2012 |
September 30, 2011 |
||||
| Net sales |
$ 241,228 |
$ 168,667 |
$ 666,571 |
$ 446,451 |
||||
| Cost of sales |
164,281 |
117,837 |
455,036 |
311,168 |
||||
| Gross profit |
76,947 |
50,830 |
211,535 |
135,283 |
||||
| Operating expenses: |
||||||||
| Selling, general and administrative expense |
39,422 |
30,395 |
119,756 |
77,347 |
||||
| Supplemental put expense |
5,029 |
1,200 |
6,391 |
6,095 |
||||
| Management fees |
4,429 |
4,792 |
13,294 |
11,707 |
||||
| Amortization expense |
7,699 |
5,509 |
22,639 |
14,943 |
||||
| Impairment expense |
- |
- |
- |
7,700 |
||||
| Operating income |
20,368 |
8,934 |
49,455 |
17,491 |
||||
| Other income (expense): |
||||||||
| Interest income |
8 |
2 |
51 |
4 |
||||
| Interest expense |
(5,924) |
(2,156) |
(19,660) |
(6,105) |
||||
| Amortization of debt issuance costs |
(485) |
(542) |
(1,326) |
(1,543) |
||||
| Other income, net |
173 |
(78) |
(223) |
(78) |
||||
| Income from continuing operations before income taxes |
14,140 |
6,160 |
28,297 |
9,769 |
||||
| Provision for income taxes |
7,361 |
3,090 |
17,119 |
9,380 |
||||
| Income from continuing operations |
6,779 |
3,070 |
11,178 |
389 |
||||
| Income (loss) from discontinued operations, net of income tax |
- |
9,400 |
(1,168) |
13,780 |
||||
| Loss on sale of discontinued operations, net of income tax |
(334) |
- |
(464) |
- |
||||
| Net income |
6,445 |
12,470 |
9,546 |
14,169 |
||||
| Net income from continuing operations attributable to |
||||||||
| noncontrolling interest |
2,959 |
2,587 |
6,996 |
4,643 |
||||
| Net income (loss) from discontinued operations attributable to |
||||||||
| noncontrolling interest |
- |
1,787 |
(226) |
2,026 |
||||
| Net income attributable to Holdings |
$ 3,486 |
$ 8,096 |
$ 2,776 |
$ 7,500 |
||||
| Basic and fully diluted net income per share |
$ 0.07 |
$ 0.17 |
$ 0.06 |
$ 0.16 |
||||
| Basic and fully diluted weighted average number of |
||||||||
| shares outstanding |
48,300 |
47,376 |
48,300 |
46,944 |
||||
| Cash distributions declared per share |
$ 0.36 |
$ 0.36 |
$ 1.08 |
$ 1.08 |
||||
| Compass Diversified Holdings |
||||
| Condensed Consolidated Statements of Cash Flows |
||||
| (unaudited) |
||||
| Nine Months |
Nine Months |
|||
| Ended |
Ended |
|||
| (in thousands) |
September 30, 2012 |
September 30, 2011 |
||
| Cash flows from operating activities: |
||||
| Net income |
$ 9,546 |
$ 14,169 |
||
| Adjustments to reconcile net income to net cash provided by operating activities: |
||||
| Depreciation and amortization expense |
39,199 |
34,896 |
||
| Unrealized loss on interest rate swap |
2,108 |
- |
||
| Amortization of original issue discount |
1,951 |
- |
||
| Impairment expense |
- |
7,700 |
||
| Supplemental put expense |
6,391 |
6,095 |
||
| Noncontrolling stockholders charges and other |
3,250 |
2,210 |
||
| Deferred taxes |
(2,315) |
(5,687) |
||
| Other |
1,399 |
1,036 |
||
| Changes in operating assets and liabilities, net of acquisition: |
||||
| Increase in accounts receivable |
(22,898) |
(23,229) |
||
| Increase in inventories |
(22,563) |
(146) |
||
| Increase in prepaid expenses and other current assets |
(1,674) |
(806) |
||
| Payment of profit allocation |
(13,675) |
(6,892) |
||
| Increase in accounts payable and accrued expenses |
20,661 |
28,451 |
||
| Net cash provided by operating activities |
21,380 |
57,797 |
||
| Cash flows from investing activities: |
||||
| Acquisition of businesses, net of cash acquired |
(125,434) |
(258,559) |
||
| Purchases of property and equipment |
(9,718) |
(15,099) |
||
| Proceeds from dispositions |
66,473 |
- |
||
| Purchase of noncontrolling interests |
(15,128) |
- |
||
| Proceeds released from escrow related to Staffmark sale |
5,045 |
- |
||
| Other investing activities |
974 |
140 |
||
| Net cash used in investing activities |
(77,788) |
(273,518) |
||
| Cash flows from financing activities: |
||||
| Net borrowing of debt |
46,633 |
196,500 |
||
| Proceeds from the issuance of trust shares, net |
- |
19,684 |
||
| Proceeds from issuance (redemption) of CamelBak preferred stock |
(48,022) |
45,000 |
||
| Debt issuance costs |
(3,154) |
(593) |
||
| Distributions paid |
(52,164) |
(49,529) |
||
| Net payments related to noncontrolling interest |
(4,456) |
2,016 |
||
| Excess tax benefit on stock based compensation, and other |
5,389 |
(329) |
||
| Net cash provided by (used in) financing activities |
(55,774) |
212,749 |
||
| Foreign currency impact on cash |
(199) |
- |
||
| Net decrease in cash and cash equivalents |
(112,381) |
(2,972) |
||
| Cash and cash equivalents — beginning of period |
132,370 |
13,536 |
||
| Cash and cash equivalents — end of period |
$ 19,989 |
$ 10,564 |
||
| Compass Diversified Holdings |
||||||||
| Condensed Consolidated Table of Cash Flows Available for Distribution and Reinvestment ("CAD") |
||||||||
| (unaudited) |
||||||||
| Three Months Ended |
Three Months ended |
Nine Months Ended |
Nine Months Ended |
|||||
| (in thousands) |
September 30, 2012 |
September 30, 2011 |
September 30, 2012 |
September 30, 2011 |
||||
| Net income |
$ 6,445 |
$ 12,470 |
$ 9,546 |
$ 14,169 |
||||
| Adjustment to reconcile net income to cash provided by |
||||||||
| operating activities: |
||||||||
| Depreciation and amortization |
11,430 |
12,553 |
37,873 |
33,353 |
||||
| Impairment expense |
- |
- |
- |
7,700 |
||||
| Amortization of debt issuance costs |
485 |
542 |
1,326 |
1,543 |
||||
| Unrealized loss on interest rate swap |
515 |
- |
2,108 |
- |
||||
| Amortization of original issue discount |
360 |
- |
1,951 |
- |
||||
| Supplemental put expense |
5,029 |
1,200 |
6,391 |
6,095 |
||||
| Noncontrolling stockholders charges |
918 |
995 |
3,250 |
2,210 |
||||
| Other |
554 |
949 |
1,399 |
1,036 |
||||
| Deferred taxes |
(1,826) |
(3,761) |
(2,315) |
(5,687) |
||||
| Changes in operating assets and liabilities |
2,441 |
(15,635) |
(40,149) |
(2,622) |
||||
| Net cash provided by operating activities |
26,351 |
9,313 |
21,380 |
57,797 |
||||
| Plus: |
||||||||
| Unused fee on revolving credit facility (1) |
664 |
499 |
1,984 |
2,041 |
||||
| Successful acquisition expense (2) |
391 |
3,347 |
5,211 |
4,197 |
||||
| HALO sale related expenses (3) |
- |
- |
1,976 |
- |
||||
| Changes in operating assets and liabilities |
- |
15,635 |
40,149 |
2,622 |
||||
| Less: |
||||||||
| Maintenance capital expenditures (4) |
1,961 |
2,343 |
7,276 |
7,467 |
||||
| Other |
158 |
930 |
597 |
930 |
||||
| Changes in operating assets and liabilities |
2,441 |
- |
- |
- |
||||
| Estimated cash flow available for distribution and reinvestment |
$ 22,846 |
$ 25,521 |
$ 62,827 |
$ 58,260 |
||||
| Distribution paid in April 2012 and March 2011 |
$ 17,388 |
$ 16,821 |
||||||
| Distribution paid in July 2012/2011 |
17,388 |
16,821 |
||||||
| Distribution paid in October 2012/2011 |
$ 17,388 |
$ 17,388 |
17,388 |
17,388 |
||||
| $ 17,388 |
$ 17,388 |
$ 52,164 |
$ 51,030 |
|||||
| (1) Represents the commitment fee on the unused portion of the Revolving Credit Facility and the Prior Revolving Credit Facility. |
||||||||
| (2) Represents transaction costs for successful acquisitions that were expensed during the period. |
||||||||
| (3) Represents transaction costs incurred related to the sale of HALO, net of the related income tax benefit. |
||||||||
| (4) Excludes growth capital expenditures of approximately $0.7 million and $1.4 million for the three months ended September 30, 2012 and September 30, 2011, |
||||||||
| respectively and $2.1 million and $7.6 million for the nine months ended September 30, 2012 and September 30, 2011, respectively. |
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SOURCE Compass Diversified Holdings
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