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Compass Diversified Holdings Reports Third Quarter 2008 Financial Results
Cash Flow Available for Distribution and Reinvestment Expands 22.5% to $15.7 million
By: PR Newswire
Nov. 10, 2008 07:00 AM
2008 Third Quarter Highlights -- Generated Cash Flow Available for Distribution and Reinvestment ("Cash
Flow" or "CAD") of -- Increased third quarter cash distribution by 5% to CODI increased its Cash Flow (see note regarding use of Non-GAAP Financial
Measures below) to 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 for each of our subsidiaries for the periods during
which CODI owned them. However, Cash Flow excludes the gains from sales of
businesses which have totaled over Net income for the quarter ended As of On Mr. Massoud continued, "Going forward, with a diverse mix of leading niche businesses and considerable financial flexibility, we believe CODI remains well positioned over the long term. While near term macroeconomic conditions are challenging and will impact certain subsidiary businesses, our overall portfolio remains strong, and will continue to generate Cash Flow that will allow us to both pay sizeable distributions to our shareholders and reinvest in our business. We also plan to take advantage of our substantial available capital and extremely healthy liquidity position. In accomplishing this important objective, we intend to use our financial strength to enhance the market positions of our subsidiaries and actively pursue attractive new platform business opportunities that meet our strict valuation and diligence requirements." Conference Call Management will host a conference call this morning at A replay of the call will be available through Note Regarding Use of Non-GAAP Financial Measures CAD or Cash Flow, are non-GAAP measures 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, with the first quarter typically being the slowest of the year. 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 was formed to acquire and manage a group of middle market businesses
that are headquartered in 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. Subsidiary Businesses AFM Holdings Corporation and its consolidated subsidiaries, referred to as
American Furniture, is a low-cost manufacturer of upholstered stationary and
motion furniture with the ability to ship any product in its line within 48
hours of receiving an order. American Furniture is based in Anodyne Medical Device, Inc. and its consolidated subsidiaries, referred
to as AMD, is a 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 CBS Personnel Holdings, Inc. and its consolidated subsidiaries, referred
to as CBS Personnel, is a provider of temporary staffing services in Compass AC Holdings, Inc. and its consolidated subsidiaries, referred to
as Advanced Circuits, is a manufacturer of low-volume quick-turn and prototype
rigid printed circuit boards ("PCBs"). Advanced Circuits is based in Fox Factory Holding Corp. and its consolidated subsidiaries, referred to
as Fox, is a designer, manufacturer and marketer of high-end suspension
products for mountain bikes, all terrain vehicles, snowmobiles and other off-
road vehicles. Fox is based in Halo Lee Wayne LLC and its consolidated subsidiaries, referred to as Halo,
is a distributor of customized promotional products and serves more than
30,000 customers as a one-stop-shop resource for design, sourcing, management
and fulfillment across all categories of its customers' promotional products
needs. Halo is based in 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 A copy of this press release, and of past press releases, is available on the Compass Diversified Holdings website located at
www.compassdiversifiedholdings.com.
Compass Diversified Holdings
James J. Bottiglieri
Chief Financial Officer
203.221.1703
jim@compassequity.com
Investor Relations and Media Contacts:
The IGB Group
Leon Berman / Tyler Wilson
212.477.8438 / 646.673.9701
lberman@igbir.com / twilson@igbir.com
Compass Diversified Holdings
Condensed Consolidated Balance Sheets
(unaudited)
(in thousands) September 30, December 31,
2008 2007
Assets
Current assets:
Cash and cash equivalents $89,676 $115,500
Accounts receivable, less allowances
of $6,190 and $3,204 192,907 111,718
Inventories 50,418 35,492
Prepaid expenses and other current assets 25,037 11,088
Current assets of discontinued
operations - 25,443
Total current assets 358,038 299,241
Property, plant and equipment, net 29,804 20,437
Goodwill 314,346 218,817
Intangible assets, net 255,684 163,378
Deferred debt issuance costs, net 8,722 9,613
Other non-current assets 17,926 17,549
Assets of discontinued operations - 98,967
Total assets $984,520 $828,002
Liabilities and stockholders' equity
Current liabilities:
Accounts payable and accrued expenses $152,024 $75,716
Due to related party 689 814
Current portion of long-term debt 2,000 2,000
Current liabilities of discontinued
operations - 28,083
Total current liabilities 154,713 106,613
Long-term debt 151,500 148,000
Supplemental put obligation 12,858 21,976
Deferred income taxes 63,043 59,478
Other non-current liabilities 45,290 21,419
Non-current liabilities of
discontinued operations - 15,799
Total liabilities 427,404 373,285
Minority interests 77,510 21,867
Stockholders' equity
Trust shares, no par value, 500,000
authorized; 31,525 shares issued and
outstanding 412,969 443,705
Accumulated other comprehensive income 426 -
Accumulated earnings (deficit) 66,211 (10,855)
Total stockholders' equity 479,606 432,850
Total liabilities and stockholders' equity $984,520 $828,002
Compass Diversified Holdings
Condensed Consolidated Statements of Operations
(unaudited)
Three Months Ended Nine Months Ended
(in thousands, except September September September September
per share data) 30, 2008 30, 2007 30, 2008 30, 2007
Net sales $413,601 $215,476 $1,163,646 $578,404
Cost of sales 322,606 161,868 909,982 440,777
Gross profit 90,995 53,608 253,664 137,627
Operating expenses:
Staffing expense 25,872 13,440 78,412 41,922
Selling, general and
administrative expenses 42,597 24,818 121,121 61,642
Supplemental put expense (765) 2,174 5,829 4,591
Fees to manager 3,758 2,479 10,953 6,921
Amortization expense 6,171 3,324 18,432 8,912
Operating income 13,362 7,373 18,917 13,639
Other income (expense):
Interest income 559 568 1,140 1,895
Interest expense (4,199) (1,184) (13,545) (4,215)
Amortization of debt
issuance costs (491) (305) (1,473) (858)
Other income, net 48 247 405 248
Income (loss) from
continuing operations
before income taxes
and minority
interest 9,279 6,699 5,444 10,709
Provision for income taxes 3,067 2,706 3,622 5,381
Minority interest in net income
(loss) 1,590 538 2,295 439
Income (loss) from
continuing operations 4,622 3,455 (473) 4,889
Income from discontinued
operations, net of income tax - 900 4,607 2,881
Gain on sale of discontinued
operations, net of income tax 636 - 72,932 36,038
Net income $5,258 $4,355 $77,066 $43,808
Basic and fully diluted net
income per share $0.17 $0.14 $2.44 $1.67
Weighted average number of
shares outstanding - basic and
fully diluted 31,525 31,525 31,525 26,316
Cash distributions declared per
share $0.34 $0.325 $0.99 $0.925
Compass Diversified Holdings
Condensed Consolidated Statements of Cash Flows
(unaudited)
Nine Months Nine Months
Ended Ended
September 30, September 30,
(in thousands) 2008 2007
Cash flows from operating activities:
Net income $77,066 $43,808
Adjustments to reconcile net income
to net cash provided by operating
activities:
Gain on sale of 2008 dispositions (72,932) -
Gain on sale of 2007 disposition - (36,038)
Depreciation and amortization expense 26,580 17,988
Amortization of debt issuance costs 1,445 857
Supplemental put expense 5,829 4,591
Minority interests 2,844 869
Stockholder notes and option costs 1,943 226
Deferred taxes (7,010) (2,373)
Other 296 -
Changes in operating assets and
liabilities, net of acquisition:
Increase in accounts receivable (310) (14,511)
(Increase) decrease in inventories 93 (787)
(Increase) decrease in prepaid
expenses and other current assets (8,672) 2,433
Increase in accounts payable and
accrued expenses 13,631 12,386
Decrease in supplemental put
obligation (14,947) (7,880)
Net cash provided by
operating activities 25,856 21,569
Cash flows from investing activities:
Acquisition of businesses, net
of cash acquired (173,561) (224,799)
Proceeds from 2008 dispositions 153,439 -
Proceeds from 2007 disposition - 119,856
Purchases of property and
equipment (8,587) (4,969)
Other (328) -
Net cash used in investing
activities (29,037) (109,912)
Cash flows from financing activities:
Proceeds from issuance of Trust
shares, net - 168,673
Net borrowing (repayment) of
revolving line of credit borrowings 2,968 (60,733)
Debt issuance costs (551) (1,079)
Distributions paid (30,736) (21,728)
Other 1,898 2,655
Net cash provided by
financing activities (26,421) 87,788
Net decrease in cash and cash
equivalents (29,602) (555)
Foreign currency adjustment (80) (54)
Cash and cash equivalents -
beginning of period 119,358 7,006
Cash and cash equivalents -
end of period $89,676 $6,397
Compass Diversified HoldingsCondensed Consolidated Table of Cash Flows Available for Distribution and Reinvestment ("CAD")
(unaudited)
Three Months Ended Nine Months Ended
September September September September
(in thousands) 30, 2008 30, 2007 30, 2008 30, 2007
Net income $5,258 $4,355 $77,066 $43,808
Adjustment to reconcile net
income to cash provided by
operating activities:
Gain on sale of businesses (636) - (72,932) (36,038)
Depreciation and amortization 8,362 6,448 26,580 17,988
Amortization of debt issuance
costs 463 308 1,445 857
Supplemental put expense (765) 2,174 5,829 4,591
Stockholder notes and other 809 706 1,943 589
Minority interest 1,590 620 2,844 869
Deferred taxes (1,249) (1,217) (7,010) (2,373)
Other 458 (364) 296 (364)
Changes in operating assets
and liabilities (13,488) 2,837 (10,205) (8,359)
Net cash provided by operating
activities 802 15,867 25,856 21,568
Plus:
Unused fee on credit
facilities (1) 863 864 2,255 1,915
Staffmark integration and
restructuring expenses 2,018 - 6,476 -
Changes in operating assets
and liabilities 13,488 (2,837) 10,205 8,359
Less:
Maintenance capital
expenditures (2) 1,507 1,109 5,396 3,256
Estimated cash flow available for
distribution $15,664 $12,785 $39,396 $28,586
Distribution paid in
April 2008/2007 $10,246 $6,135
Distribution paid in
July 2008/2007 10,246 9,458
Distribution paid in
October 2008/2007 $10,719 $10,246 10,719 10,246
$10,719 $10,246 $31,211 $25,839
(1) Represents the commitment fee on the unused portion of the Credit
Facilities.
(2) Represents maintenance capital expenditures that were funded from
operating cash flow and excludes approximately $3.2 million and $1.7
million of growth capital expenditures for the nine months ended Sept.
30, 2008 and Sept. 30, 2007, respectively.
SOURCE Compass Diversified Holdings
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