WESTPORT, CT - Compass Diversified Holdings (NYSE: CODI), an owner of leading middle market businesses, announced today its consolidated operating results for the three and twelve months ended December 31, 2014.

Fourth Quarter 2014 Highlights

  • Generated Cash Flow Available for Distribution and Reinvestment ("CAD" or "Cash Flow") of $17.5 million for the fourth quarter of 2014 and $58.0 million for the full year 2014; 
  • Reported net income of $8.9 million for the fourth quarter of 2014 and net income of $291.2 million for the full year 2014, which includes a third quarter $264.3 million gain on deconsolidation of the Fox Factory Holding Corp. ("FOX") subsidiary;
  • Paid a fourth quarter 2014 cash distribution of $0.36 per share in January 2015, bringing cumulative distributions paid to $11.7552 per share since CODI's IPO in May of 2006;
  • Consummated the platform acquisition of Candle Lamp Company, LLC ("SternoCandleLamp");
  • Consummated the acquisition of American Environmental Services, Inc. ("AES") by the Company's Clean Earth subsidiary; and
  • Completed a 6.0 million share offering in November 2014.

"We generated strong operating results for the fourth quarter and full year 2014 as we benefitted from the leadership positions and financial strength of our niche industrial and branded consumer businesses," stated Alan Offenberg, CEO of Compass Diversified Holdings. "During a time when we capitalized on attractive growth opportunities, we achieved full year 2014 Cash Flow of $58.0 million. Our 2014 results reflect solid contributions from Ergobaby, Camelbak and American Furniture Manufacturing as well as strong performance from our latest platform acquisitions of Clean Earth and SternoCandleLamp."

Mr. Offenberg added, "During 2014, we made significant progress on key initiatives to strengthen the company from both a strategic and financial perspective. Specifically, we acquired two leading middle market businesses that meet our strict criteria and enhance our earnings potential. We further improved our financial position by completing a 6.0 million share offering, generating proceeds of approximately $100 million, and obtaining $725 million in new debt financing under attractive terms. Additionally, we generated approximately $65.5 million in net proceeds from a partial divestiture of our interest in FOX, while maintaining approximately 41% ownership. Looking ahead, our solid balance sheet and financial flexibility enable us to continue reinvesting in our current subsidiaries while taking advantage of accretive platform and add-on acquisitions that enhance our future prospects and add value for our shareholders."

Operating Results
CODI reported Cash Flow (see Note Regarding Use of Non-GAAP Financial Measures below) of $17.5 million for the quarter ended December 31, 2014, as compared to $9.9 million for the prior year's comparable quarter. CODI's weighted average number of shares outstanding for the quarter ended December 31, 2014 was approximately 51.4 million as compared to approximately 48.3 million for the quarter ended December 31, 2013.

Cash Flow for the fourth quarter of 2014 reflects year-over-year growth in the Company's Ergobaby, Camelbak, American Furniture Manufacturing and Advanced Circuits businesses as well as positive contributions from the Company's recent acquisitions of Clean Earth and SternoCandleLamp, offset by a decline at the Company's Liberty Safe and Arnold Magnetics businesses. Cash Flow for the fourth quarter of 2014 included contributions from SternoCandleLamp from the date of acquisition.

For the year ended December 31, 2014, CODI reported Cash Flow of $58.0 million, as compared to $73.5 million for the year ended December 31, 2013. CODI's weighted average number of shares outstanding for the twelve month period ended December 31, 2014 was approximately 49.1 million as compared to approximately 48.3 million for the twelve month period ended December 31, 2013.

CODI's Cash Flow is calculated after taking into account all interest expense, cash taxes paid and maintenance capital expenditures, and includes the operating results of each of our businesses for the periods during which CODI owned them. However, Cash Flow excludes the gains from monetizing interests in CODI's subsidiaries, which have totaled approximately $340 million since going public in 2006.

Net income for the quarter ended December 31, 2014 was $8.9 million, as compared to a net loss of $5.1 million for the quarter ended December 31, 2013. During the fourth quarter ended December 31, 2013, CODI recorded a $12.0 million non-cash impairment charge for the Company's Tridien Medical subsidiary.

For the year ended December 31, 2014, CODI reported net income of $291.2 million, which included a one-time accounting gain of approximately $264.3 million as a result of the deconsolidation of FOX that occurred in the third quarter. For the year ended December 31, 2013, CODI reported net income of $78.8 million, which included a $61.3 million supplemental put expense reversal in connection with the previously announced termination of the Supplemental Put Agreement in July 2013.

Liquidity and Capital Resources
As of December 31, 2014, CODI had approximately $23.7 million in cash and cash equivalents, $323 million outstanding on its term loan facility and $170 million of borrowings under its revolving credit facility. The Company has no significant debt maturities until 2019 and had borrowing availability of approximately $226 million at December 31, 2014 under its revolving credit facility.  In addition, the Company's equity investment in FOX is valued at $245 million.

In November 2014, CODI completed a public offering of 6.0 million trust shares. CODI raised approximately $100.0 million of net proceeds from the offering, which was used to repay a portion of the outstanding balance of its revolving credit facility.

Fourth Quarter 2014 Distribution
On January 8, 2015, CODI's Board of Directors declared a fourth quarter distribution of $0.36 per share. The cash distribution was paid on January 29, 2015 to all holders of record as of January 22, 2015. Since its IPO in May of 2006, CODI has paid a cumulative distribution of $11.7552 per share.

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 current subsidiaries is a leader in its niche market.

CODI maintains controlling ownership interests in each of its subsidiaries in order to maximize its ability to impact long-term cash flow generation and value. The Company provides both debt and equity capital for its subsidiaries, contributing to their financial and operating flexibility. CODI utilizes the cash flows generated by its subsidiaries to invest in the long-term growth of the Company and to make cash distributions to its shareholders.

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

  • The manufacture of quick-turn, small-run and production rigid printed circuit boards (Advanced Circuits);
  • The design and manufacture of promotionally priced upholstered furniture (American Furniture Manufacturing);
  • The design and manufacture of medical therapeutic support surfaces and other wound treatment devices (Anodyne Medical Device, also doing business and known as Tridien Medical);
  • The manufacture of engineered magnetic solutions for a wide range of specialty applications and end-markets (Arnold Magnetic Technologies);
  • The design and manufacture of personal hydration products for outdoor, recreation and military use (CamelBak Products);
  • Environmental services for a variety of contaminated materials including soils, dredged material, hazardous waste and drill cuttings (Clean Earth);
  • The design and marketing of wearable baby carriers, strollers and related products (Ergobaby);
  • The design and manufacture of premium home and gun safes (Liberty Safe); and
  • The manufacture and marketing of portable food warming fuel and creative table lighting solutions for the foodservice industry (SternoCandleLamp).

In addition, we own approximately 41% of the common stock of Fox Factory Holding Corp. ("FOX", Nasdaq: FOXF), a former subsidiary business that completed its initial public offering in August 2013. FOX designs and manufactures high-performance suspension products primarily for mountain bikes, side-by-side vehicles, on-road and off-road vehicles and trucks, all-terrain vehicles, snowmobiles, specialty vehicles and applications, and motorcycles. 

To find out more about Compass Diversified Holdings, please visit www.compassdiversifiedholdings.com.

 

Compass Diversified Holdings

Condensed Consolidated Balance Sheets

December 31,

December 31,

(in thousands)

2014

2013

Assets

Current assets

Cash and cash equivalents

$

23,703

$

113,229

Accounts receivable, less allowance of $5,200 and $3,424

157,535

111,736

Inventories

111,214

152,948

Prepaid expenses and other current assets

28,347

21,220

Total current assets

320,799

399,133

Property, plant and equipment, net

115,871

68,059

Equity method investment

245,214

Goodwill and intangible assets, net

846,400

556,970

Other non-current assets

19,146

20,751

Total assets

$

1,547,430

$

1,044,913

Liabilities and stockholders' equity

Current liabilities

Accounts payable and accrued expenses

$

125,356

$

118,129

Due to related party

6,193

4,528

Current portion, long-term debt

3,250

2,850

Other current liabilities

6,311

4,623

Total current liabilities

141,110

130,130

Deferred income taxes

97,582

60,024

Long-term debt

485,547

280,389

Other non-current liabilities

14,857

5,435

Total liabilities

739,096

475,978

Stockholders' equity

Total stockholders' equity attributable to Holdings

767,431

473,385

Noncontrolling interests

40,903

95,550

Total stockholders' equity

808,334

568,935

Total liabilities and stockholders' equity

$

1,547,430

$

1,044,913

 

Compass Diversified Holdings

Condensed Consolidated Statements of Operations

Three Months Ended

Twelve Months Ended

(in thousands, except per share data)

December 31,
2014

December 31,
2013

December 31,
2014

December 31,
2013

Net sales

$

264,028

$

232,685

$

982,300

$

985,539

Cost of sales

191,303

163,056

688,631

679,708

Gross profit

72,725

69,629

293,669

305,831

Operating expenses:

Selling, general and administrative expense

47,744

43,067

181,683

167,738

Supplemental put expense

(45,995)

Management fees

7,088

4,990

22,722

18,632

Amortization expense

11,811

7,248

33,606

29,632

Impairment expense

12,018

12,918

Operating income

6,082

2,306

55,658

122,906

Other income (expense):

Interest expense, net

(10,626)

(4,771)

(27,068)

(19,376)

Amortization of debt issuance costs

(545)

(570)

(2,243)

(2,123)

Loss on debt extinguishment

(2,143)

(1,785)

Gain on deconsolidation of subsidiary

264,325

Gain on equity method investment

11,029

11,029

Other income (expense), net

(447)

14

(139)

(77)

Income (loss) before income taxes

5,493

(3,021)

299,419

99,545

Provision (benefit) for income taxes

(3,440)

2,041

8,264

20,729

Net income (loss)

8,933

(5,062)

291,155

78,816

Less: Net income attributable to noncontrolling interest

1,574

1,286

12,320

10,752

Net income (loss) attributable to Holdings

$

7,359

$

(6,348)

$

278,835

$

68,064

Basic and fully diluted income (loss) per share

$

0.13

$

(0.47)

$

5.38

$

1.05

Basic and fully diluted weighted average number of shares outstanding

51,430

48,300

49,089

48,300

Cash distributions declared per share

$

0.36

$

0.36

$

1.44

$

1.44

 

Compass Diversified Holdings

Summarized Statement of Cash Flows

Year Ended

(in thousands)

December 31, 2014

December 31, 2013

Net cash provided by operating activities

70,695

72,374

Net cash (used in) provided by investing activities

(424,753)

66,286

Net cash provided by (used in) financing activities

265,487

(44,122)

Effect of foreign currency on cash

(955)

450

Net increase (decrease) in cash and cash equivalents

(89,526)

94,988

Cash and cash equivalents — beginning of period

113,229

18,241

Cash and cash equivalents — end of period

$

23,703

$

113,229

 

Compass Diversified Holdings

Condensed Consolidated Table of Cash Flows Available for Distribution and Reinvestment

(unaudited)

Three Months Ended

Twelve Months Ended

(in thousands)

December 31,
2014

December 31,
2013

December 31,
2014

December 31,
2013

Net income (loss)

$

8,933

$

(5,062)

$

291,155

$

78,816

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

Depreciation and amortization

19,812

11,557

55,696

46,227

Impairment expense

12,018

12,918

Amortization of debt issuance costs and original issue discount

713

877

3,125

3,366

Unrealized loss on derivatives

4,913

62

7,722

130

Loss on debt extinguishment

2,143

1,785

Excess tax benefit from subsidiary stock options (1)

(1,662)

Supplemental put expense

(45,995)

Gain on deconsolidation of subsidiary

(264,325)

Gain on equity method investment

(11,029)

(11,029)

Noncontrolling stockholders charges

1,152

1,316

4,744

4,683

Other

1,081

(276)

1,442

(87)

Deferred taxes

(6,657)

(3,136)

(8,601)

(5,257)

Changes in operating assets and liabilities

5,617

979

(9,715)

(24,212)

Net cash provided by operating activities

24,535

18,335

70,695

72,374

Plus:

Unused fee on revolving credit facility (2)

279

611

1,914

2,349

Excess tax benefit from subsidiary stock options (1)

1,662

Successful acquisition costs

2,814

4,844

Integration services fee (5)

1,000

1,000

Changes in operating assets and liabilities

9,715

24,212

Other

51

Less:

Maintenance capital expenditures (3)

4,636

4,251

13,637

14,208

FOX CAD (4)

3,845

15,716

11,189

Payment on swap

506

2,008

Changes in operating assets and liabilities

5,617

979

Other

399

528

Estimated cash flow available for distribution and reinvestment

$

17,470

$

9,871

$

57,992

$

73,538

Distribution paid in April 2014/2013

$

17,388

$

17,388

Distribution paid in July 2014/2013

17,388

17,388

Distribution paid in October 2014/2013

17,388

17,388

Distribution paid in January 2015/2014

$

19,548

$

17,388

19,548

17,388

$

19,548

$

17,388

$

71,712

$

69,552

(1) Represents the non-cash excess tax benefit at FOX related to the exercise of stock options.

(2) Represents the commitment fee on the unused portion of the revolving credit facility.

(3) Excludes growth capital expenditures of approximately $0.6 million and $1.5 million for the three months ended December 31, 2014 and 2013, respectively, and $1.6 million and $6.2 million for the year ended December 31, 2014 and 2013, respectively.

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

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

 

Source: Compass Diversified Holdings

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