Compass Diversified Holdings Reports Fourth Quarter and Full Year 2012 Financial Results

Wed Mar 6, 2013 4:05pm EST

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Generates Cash Flow Available for Distribution and Reinvestment of $14.9 Million
for Fourth Quarter Ended December 31, 2012 and $77.7 Million for Full Year 2012
WESTPORT, Conn.,  March 6, 2013  /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
twelve months ended  December 31, 2012.

Fourth Quarter 2012 Highlights

* Generated Cash Flow Available for Distribution and Reinvestment ("CAD" or
"Cash Flow") of  $14.9 million  for the fourth quarter of 2012 and  $77.7
million  for the full year 2012;  
* Reported a net loss of  $5.2 million  for the fourth quarter of 2012 and net
income of  $4.3 million  for the full year 2012; and  
* Paid a fourth quarter 2012 cash distribution of  $0.36  per share in  January
2013, bringing cumulative distributions paid to  $8.8752  per share since CODI's
IPO in May of 2006.

Alan Offenberg, CEO of Compass Group Diversified Holdings LLC, stated, "We are
pleased to post strong operating results for the fourth quarter and full year
2012. CODI's Cash Flow for the three and twelve months ended  December 31, 2012 
increased year-over-year by 38.6% and 12.6%, respectively. The success we
achieved throughout the year in leveraging the leadership position and
comparative financial strength of our subsidiaries led to strong revenue and
earnings growth, particularly in our branded product businesses consisting of
CamelBak, ERGObaby, Fox and  Liberty Safe. We also benefited from our newest
platform business, Arnold Magnetic, which we acquired in March of 2012. As we
maintain our focus on acquiring new businesses that are accretive to CAD, we
continue to reinvest in our existing family of businesses. In 2012, capital
expenditures totaled approximately  $18.5 million, enhancing our ability to
ensure the long-term health of our niche market leaders and drive future
performance. With a strong balance sheet, we remain committed to capitalizing on
both organic and acquisition-related growth opportunities while providing
attractive cash distributions for our owners 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  $14.9 million  for the quarter ended  December 31, 2012, as compared
to  $10.7 million  for the prior year comparable quarter. CODI's Cash Flow for
the year ended  December 31, 2012  was  $77.7 million  as compared to  $69.0
million  for the prior year period. CODI's weighted average number of shares
outstanding for both the quarter and twelve months ended  December 31, 2012  was
approximately 48.3 million, as compared to 48.3 million and 47.3 million for the
quarter and twelve months ended  December 31, 2011, respectively.

The improvement in Cash Flow for the fourth quarter and full year 2012 as
compared to the corresponding year-earlier periods was primarily due to 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 fourth
quarter and full year 2012 was positively impacted by the inclusion of operating
results from the Company's Arnold Magnetic subsidiary, which was acquired on 
March 5, 2012. Partially offsetting these factors, Cash Flow for the fourth
quarter and full year 2012 excluded the results from the Company's Staffmark
subsidiary, which was sold on  October 17, 2011. Additionally, Cash Flow for the
second half of 2012 excluded the seasonally strong operating results from the
Company's HALO subsidiary, which was sold on  May 1, 2012.  

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.  

The net loss for the quarter ended  December 31, 2012  was  $5.2 million, as
compared to net income of  $58.6 million  for the quarter ended  December 31,
2011.  CODI recorded approximately  $3.9 million  in higher non-cash
supplemental put expense in the 2012 fourth quarter as compared to the
corresponding previous quarter. This expense is based on the periodic review of
current cash flow generation of its subsidiaries, as well as anticipated market
multiples for those businesses in the event they were to be sold in the current
environment. During the fourth quarter ended  December 31, 2011, CODI recorded
an  $88.6 million  gain on the sale of Staffmark, partially offset by a  $20.1
million  non-cash impairment charge for the Company's American Furniture
Manufacturing subsidiary.

For the twelve months ended  December 31, 2012, CODI reported net income of 
$4.3 million, as compared to net income of  $72.8 million  for the twelve months
ended  December 31, 2011, which included the previously mentioned  $88.6 million
 gain on the sale of Staffmark.  

Liquidity and Capital Resources
As of  December 31, 2012, CODI had approximately  $18.2 million  in cash and
cash equivalents,  $252.5 million  outstanding on its term loan facility and 
$24.0 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  $264 million  at  December 31, 2012 
under its revolving credit facility.

Fourth Quarter 2012 Distribution
On  January 10, 2013, CODI's Board of Directors declared a fourth quarter
distribution of  $0.36  per share. The cash distribution was paid on  January
31, 2013  to all holders of record as of  January 25, 2013. Since its IPO in May
of 2006, CODI has paid a cumulative distribution of  $8.8752  per share.  

Conference Call
Management will host a conference call on  Thursday, March 7, 2013  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 (866) 307-3343 and the dial-in number
for international callers is (678) 894-3054. The access code for all callers is
92499964. 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 14, 2013. 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 92499964.  

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 subsidiaries 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, 2012 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)                                                              December 31,    December 31,  
                                                                             2012            2011          
                                                                                                           
 Assets                                                                                                    
 Current assets:                                                                                           
 Cash and cash equivalents                                                   $ 18,241        $ 131,973     
 Accounts receivable, less allowance of $3,049 and $2,420                    100,647         69,114        
 Inventories                                                                 127,283         96,312        
 Prepaid expenses and other current assets                                   21,488          22,758        
 Current assets of discontinued operations                                   -               40,064        
                                                                                                           
 Total current assets                                                        267,659         360,221       
                                                                                                           
 Property, plant and equipment, net                                          68,488          43,579        
 Goodwill                                                                    257,527         205,567       
 Intangible assets, net                                                      340,666         328,070       
 Deferred debt issuance costs, net                                           8,238           6,942         
 Other non-current assets                                                    12,623          13,889        
 Non-current assets of discontinued operations                               -               71,638        
                                                                                                           
 Total assets                                                                $ 955,201       $ 1,029,906   
                                                                                                           
 Liabilities and stockholders' equity                                                                      
 Current liabilities:                                                                                      
 Accounts payable and accrued expenses                                       $ 100,346       $ 72,998      
 Due to related party                                                        3,765           4,239         
 Current portion of supplemental put obligation                              5,185           13,675        
 Current portion, long-term debt                                             2,550           2,250         
 Other current liabilities                                                   1,953           1,694         
 Current liabilities of discontinued operations                              -               23,306        
                                                                                                           
 Total current liabilities                                                   113,799         118,162       
                                                                                                           
 Long-term debt                                                              267,008         214,000       
 Supplemental put obligation                                                 46,413          35,814        
 Deferred income taxes                                                       63,982          49,088        
 Other non-current liabilities                                               7,787           2,875         
 Non-current liabilities of discontinued operations                          -               13,489        
                                                                                                           
 Total liabilities                                                           498,989         433,428       
                                                                                                           
 Stockholders' equity                                                                                      
 Trust shares, no par value, 500,000 authorized; 48,300 shares issued and    650,043         658,361       
 outstanding at 12/31/12 and 12/31/11                                                                      
 Accumulated other comprehensive loss                                        (132)           -             
 Accumulated deficit                                                         (235,283)       (160,852)     
 Total stockholders' equity attributable to Holdings                         414,628         497,509       
 Noncontrolling interests                                                    41,584          95,257        
 Noncontrolling interests of discontinued operations                         -               3,712         
 Total stockholders' equity                                                  456,212         596,478       
 Total liabilities and stockholders' equity                                  $ 955,201       $ 1,029,906   
                                                                                                           


 Compass Diversified Holdings                                                                                                                                                                                                                
 Condensed Consolidated Statements of Operations                                                                                                                                                                                             
                                                                                                                                                                                                                                     
                                                                                                                                                                                                                                     
                                                                                                     Three Months                      Three Months                    Year                             Year                         
                                                                                                     Ended                             Ended                           Ended                            Ended                        
 (in thousands, except per share data)                                                               December 31, 2012                 December 31, 2011               December 31, 2012                December 31, 2011            
                                                                                                                                                                                                                                     
 Net sales                                                                                           $                   218,150       $                 160,193       $                 884,721        $                606,644     
 Cost of sales                                                                                       150,831                           116,332                         605,867                          427,500                      
 Gross profit                                                                                        67,319                            43,861                          278,854                          179,144                      
 Operating expenses:                                                                                                                                                                                                                 
 Selling, general and administrative expense                                                         41,385                            32,684                          161,141                          110,031                      
 Supplemental put expense                                                                            9,604                             5,688                           15,995                           11,783                       
 Management fees                                                                                     4,339                             4,576                           17,633                           16,283                       
 Amortization expense                                                                                7,629                             7,129                           30,268                           22,072                       
 Impairment expense                                                                                  -                                 20,069                          -                                27,769                       
 Operating income (loss)                                                                             4,362                             (26,285)                        53,817                           (8,794)                      
                                                                                                                                                                                                                                     
 Other income (expense):                                                                                                                                                                                                             
 Interest income                                                                                     3                                 29                              54                               33                           
 Interest expense                                                                                    (5,395)                           (6,538)                         (25,055)                         (12,643)                     
 Amortization of debt issuance costs                                                                 (485)                             (408)                           (1,811)                          (1,951)                      
 Loss on debt extinguishment                                                                         -                                 (2,636)                         -                                (2,636)                      
 Other income, net                                                                                   40                                127                             (183)                            49                           
 Income (loss) from continuing operations before income taxes                                         (1,475)                           (35,711)                        26,822                           (25,942)                     
 Provision (benefit) for income taxes                                                                3,950                             (2,521)                         21,069                           6,859                        
 Income (loss) from continuing operations                                                            (5,425)                           (33,190)                        5,753                            (32,801)                     
 Income (loss) from discontinued operations, net of income tax                                       -                                 3,241                           (1,168)                          17,021                       
 Gain (loss) on sale of discontinued operations, net of income tax                                   219                               88,592                          (245)                            88,592                       
 Net income (loss)                                                                                   (5,206)                           58,643                          4,340                            72,812                       
 Net income from continuing operations attributable to                                                                                                                                                                               
 noncontrolling interest                                                                             1,512                             998                             8,508                            5,641                        
 Net income (loss) from discontinued operations attributable to                                                                                                                                                                      
 noncontrolling interest                                                                             -                                 186                             (226)                            2,212                        
 Net income (loss) attributable to Holdings                                                          $                     (6,718)     $                   57,459      $                    (3,942)     $                  64,959    
                                                                                                                                                                                                                                     
 Basic and fully diluted net income (loss) per share                                                 $                       (0.14)    $                       1.19    $                      (0.08)    $                      1.37  
                                                                                                                                                                                                                                     
 Basic and fully diluted weighted average number of                                                                                                                                                                                  
 shares outstanding                                                                                  48,300                            48,300                          48,300                           47,286                       
                                                                                                                                                                                                                                     
 Cash distributions declared per share                                                               $                         0.36    $                       0.36    $                       1.44     $                      1.44  
                                                                                                                                                                                                                                     


 Compass Diversified Holdings                                                                                                                        
 Condensed Consolidated Statements of Cash Flows                                                                                                     
                                                                                                                                                 
                                                                                      Year                           Year                        
                                                                                      Ended                          Ended                       
 (in thousands)                                                                       December 31, 2012              December 31, 2011           
                                                                                                                                                 
 Cash flows from operating activities:                                                                                                           
 Net income                                                                           $                     4,340    $                   72,812  
 Adjustments to reconcile net income to net cash provided by operating activities:                                                               
 Gain on sale of Staffmark                                                            (219)                          (88,592)                    
 Loss on sale of HALO                                                                 464                            -                           
 Depreciation and amortization expense                                                49,450                         49,109                      
 Unrealized loss on interest rate swap                                                2,175                          1,822                       
 Loss on debt extinguishment                                                          -                              2,636                       
 Amortization of debt issuance costs and original issue discount                      4,169                          2,201                       
 Impairment expense                                                                   -                              27,769                      
 Supplemental put expense                                                             15,995                         11,783                      
 Noncontrolling stockholders charges and other                                        4,236                          4,270                       
 Deferred taxes                                                                       (2,060)                        (17,858)                    
 Other                                                                                986                            421                         
                                                                                                                                                 
 Changes in operating assets and liabilities, net of acquisition:                                                                                
 Increase in accounts receivable                                                      (2,137)                        (7,517)                     
 (Increase) decrease in inventories                                                   (13,703)                       5,056                       
 (Increase) decrease in prepaid expenses and other current assets                     (1,580)                        7,864                       
 Payment of profit allocation                                                         (13,886)                       (6,892)                     
 Increase in accounts payable and accrued expenses                                    4,336                          26,490                      
 Net cash provided by operating activities                                            52,566                         91,374                      
                                                                                                                                                 
 Cash flows from investing activities:                                                                                                           
 Acquisition of businesses, net of cash acquired                                      (126,412)                      (277,980)                   
 Purchases of property and equipment                                                  (18,546)                       (21,868)                    
 Proceeds from dispositions                                                           66,709                         217,249                     
 Purchase of noncontrolling interests                                                 (15,423)                       (4,032)                     
 Proceeds released from escrows related to Staffmark sale                             8,355                          -                           
 Other investing activities                                                           891                            11                          
 Net cash used in investing activities                                                (84,426)                       (86,620)                    
                                                                                                                                                 
 Cash flows from financing activities:                                                                                                           
 Net borrowing of debt                                                                50,995                         129,000                     
 Proceeds from the issuance of trust shares, net                                      -                              19,598                      
 Proceeds from issuance (redemption) of CamelBak preferred stock                      (48,022)                       45,000                      
 Debt issuance costs                                                                  (3,154)                        (16,720)                    
 Distributions paid                                                                   (69,552)                       (66,916)                    
 Net proceeds provided by noncontrolling interest                                     12,061                         4,500                       
 Net proceeds paid to noncontrolling interest                                         (30,038)                       -                           
 Excess tax benefit on stock based compensation, and other                            5,478                          (382)                       
 Net cash provided by (used in) financing activities                                  (82,232)                       114,080                     
 Foreign currency impact on cash                                                      (37)                           -                           
 Net increase (decrease)  in cash and cash equivalents                                (114,129)                      118,834                     
 Cash and cash equivalents - beginning of period                                      132,370                        13,536                      
 Cash and cash equivalents - end of period                                            $                   18,241     $                 132,370   
                                                                                                                                                     


 Compass Diversified Holdings                                                                                                                                                                                                                                                 
 Condensed Consolidated Table of Cash Flows Available for Distribution and Reinvestment ("CAD")                                                                                                                                                                               
 (unaudited)                                                                                                                                                                                                                                                                  
                                                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                                                      
                                                                                                  Three Months Ended                                    Three Months ended                                   Year ended                    Year ended                 
 (in thousands)                                                                                   December 31, 2012                                     December 31, 2011                                    December 31, 2012             December 31, 2011          
                                                                                                                                                                                                                                                                      
 Net income (loss)                                                                                $                      (5,206)                        $                       58,643                       $                    4,340    $                  72,812  
 Adjustment to reconcile net income (loss) to cash provided by                                                                                                                                                                                                        
 operating activities:                                                                                                                                                                                                                                                
 Depreciation and amortization                                                                    11,577                                                15,756                                               49,450                        49,109                     
 Impairment expense                                                                               -                                                     20,069                                               -                             27,769                     
 Gain on sale of Staffmark                                                                        (219)                                                 (88,592)                                             (219)                         (88,592)                   
 Loss on sale of HALO                                                                             -                                                     -                                                    464                           -                          
 Amortization of debt issuance costs                                                              531                                                   408                                                  1,857                         1,951                      
 Unrealized loss on interest rate swap                                                            67                                                    1,822                                                2,175                         1,822                      
 Loss on debt repayment                                                                           -                                                     2,636                                                -                             2,636                      
 Amortization of original issue discount                                                          361                                                   250                                                  2,312                         250                        
 Supplemental put expense                                                                         9,604                                                 5,688                                                15,995                        11,783                     
 Noncontrolling stockholders charges                                                              986                                                   2,060                                                4,236                         4,270                      
 Other                                                                                            51                                                    (615)                                                986                           421                        
 Deferred taxes                                                                                   255                                                   (12,171)                                             (2,060)                       (17,858)                   
 Changes in operating assets and liabilities                                                      13,179                                                27,623                                               (26,970)                      25,001                     
 Net cash provided by operating activities                                                        31,186                                                33,577                                               52,566                        91,374                     
 Plus:                                                                                                                                                                                                                                                                
 Unused fee on revolving credit facility (1)                                                      682                                                   665                                                  2,666                         2,706                      
 Successful acquisition expense (2)                                                               (10)                                                  461                                                  5,201                         4,658                      
 Sale related expenses (3)                                                                        -                                                     6,434                                                1,976                         6,434                      
 Other                                                                                            -                                                     930                                                  -                             -                          
 Changes in operating assets and liabilities                                                      -                                                     -                                                    26,970                        -                          
 Less:                                                                                                                                                                                                                                                                
 Maintenance capital expenditures (4)                                                             3,722                                                 3,702                                                10,998                        11,169                     
 Other                                                                                            71                                                    -                                                    668                           -                          
 Changes in operating assets and liabilities                                                      13,179                                                27,623                                               -                             25,001                     
                                                                                                                                                                                                                                                                      
 Estimated cash flow available for distribution and reinvestment                                   $                      14,886                         $                       10,742                       $                  77,713     $                  69,002  
                                                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                                                      
 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                     
 Distribution paid in January 2013/2012                                                           $                      17,388                         $                       17,388                       17,388                        17,388                     
                                                                                                  $                      17,388                         $                       17,388                       $                  69,552     $                  68,418  
                                                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                                                      
 (1) Represents the commitment fees 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 Staffmark or HALO, net of the related income tax benefit.                                                                                                                                                 
                                                                                                                                                                                                                                                                      
 (4) Excludes growth capital expenditures of approximately $5.4 million and $3.0 million for the three months ended December 31, 2012 and  December 31, 2011,                                                                                                                 
 respectively, and $7.5 million and $10.6 million for the years ended December 31, 2012 and December 31, 2011, respectively.                                                                                                                                                
                                                                                                                                                                                                                                                                      


SOURCE  Compass Diversified Holdings


Compass Diversified Holdings, James J. Bottiglieri, Chief Financial Officer,
+1-203-221-1703, jbottiglieri@compassdiversifiedholdings.com; Investor Relations
and Media Contacts, The IGB Group, Leon Berman, +1-212-477-8438,
lberman@igbir.com, or Michael Cimini,  +1-212-477-8261, mcimini@igbir.com

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