Compass Diversified Holdings Reports Fourth Quarter and Full Year 2012 Financial Results
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For best results when printing this announcement, please click on the link below: http://pdf.reuters.com/pdfnews/pdfnews.asp?i=43059c3bf0e37541&u=urn:newsml:reuters.com:20130306:nPnNY72293 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, firstname.lastname@example.org; Investor Relations and Media Contacts, The IGB Group, Leon Berman, +1-212-477-8438, email@example.com, or Michael Cimini, +1-212-477-8261, firstname.lastname@example.org
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