Fourth Quarter 2013 Highlights
- Generated Cash Flow Available for Distribution and Reinvestment ("CAD" or "Cash Flow") of $9.9 million for the fourth quarter of 2013 and $73.5 million for the full year 2013;
- Reported a net loss of $5.1 million for the fourth quarter of 2013 and net income of $78.8 million for the full year 2013; and
- Paid a fourth quarter 2013 cash distribution of $0.36 per share in January 2014, bringing cumulative distributions paid to $10.3152 per share since CODI's IPO in May of 2006.
"We are pleased by the record full year results posted by our Liberty Safe and Ergobaby subsidiaries. Although Cash Flow for the fourth quarter and full year 2013 was reduced due in large part to the exclusion of the results from our FOX subsidiary upon completion of its IPO in the third quarter, CODI generated substantial debt and equity proceeds from this offering while maintaining a majority interest in FOX, further strengthening our liquidity position. Additionally, we continued to reinvest in the long-term performance of our existing family of businesses as capital expenditures for 2013 increased year-over-year by more than 10% to $20.4 million."
Mr. Offenberg added, "Going forward, with considerable cash on hand, availability under our revolving credit facility and a significant remaining ownership position in FOX, we will continue to actively pursue acquisitions of new platform companies utilizing our disciplined approach to valuation and diligence.
Management is committed to capitalizing on both organic and acquisition-related growth opportunities that create value for our owners while delivering a steady stream of cash distributions as we have consistently done since going public. With the underlying fundamentals and future prospects intact for our diverse mix of leading middle market businesses combined with a strong balance sheet, CODI remains well positioned for 2014, and beyond."
Operating Results
CODI reported Cash Flow (see note regarding use of Non-GAAP Financial Measures below) of $9.9 million for the quarter ended December 31, 2013, as compared to $14.9 million for the prior year comparable quarter. CODI's weighted average number of shares outstanding for both the quarter ended December 31, 2013 and December 31, 2012 was approximately 48.3 million.
Cash Flow for the fourth quarter of 2013 reflects year-over-year growth in the Company's Ergobaby and Arnold Magnetic businesses, offset by the Company's CamelBak business. The year-over-year comparison of CamelBak's performance for the quarter ended December 31, 2013 was adversely affected by the fulfillment of a contract with the U.S. Marine Corps that was completed in the first quarter of 2013 as well as reduced demand from the U.S. Military resulting from the continued drawdown of combat troops.
Additionally, Cash Flow for the fourth quarter of 2013 excluded results from the Company's FOX subsidiary, which completed its initial public offering (IPO) on August 13, 2013. As a result of this offering, FOX is no longer included in CODI's calculation of CAD. Based on the Company's debt and equity interests in FOX, CODI generated total net proceeds of approximately $142.4 million from the IPO and continues to hold a majority ownership in FOX.
For the year ended December 31, 2013, CODI reported Cash Flow of $73.5 million, as compared to $77.7 million for the year ended December 31, 2012. CODI's weighted average number of shares outstanding for the twelve month periods ended December 31, 2013 and December 31, 2012 was approximately 48.3 million.
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 more than $270 million since going public in 2006.
The net loss for the quarter ended December 31, 2013 was $5.1 million, as compared to a net loss of $5.2 million for the quarter ended December 31, 2012. 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, reflecting a decline in the estimated current fair market value for this subsidiary.
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. For the year ended December 31, 2012, CODI reported net income of $4.3 million.
Liquidity and Capital Resources
As of December 31, 2013, CODI had approximately $113.2 million in cash and cash equivalents, $279.8 million outstanding on its term loan facility and no outstanding borrowings under its $320 million revolving credit facility. The Company has no significant debt maturities until 2017 and had borrowing availability of approximately $318 million at December 31, 2013 under its revolving credit facility.
Fourth Quarter 2013 Distribution
On January 9, 2014, CODI's Board of Directors declared a fourth quarter distribution of $0.36 per share. The cash distribution was paid on January 30, 2014 to all holders of record as of January 23, 2014. Since its IPO in May of 2006, CODI has paid a cumulative distribution of $10.3152 per share.
Conference Call
Management will host a conference call on Wednesday, March 12, 2014 at 9:00 a.m. ET to discuss the latest corporate developments and financial results. The dial-in number for callers in the U.S. is (888) 576-4387 and the dial-in number for international callers is (719) 325-2429. The access code for all callers is 2720511.
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 19, 2014. To access the replay, please dial (888) 203-1112 in the U.S. and (719) 457-0820 outside the U.S., and then enter the access code 2720511.
Note Regarding Use of Non-GAAP Financial Measures
CAD, or Cash Flow, is a non-GAAP measure used by the Company to assess its performance, as well as its ability to sustain and increase quarterly distributions. A number of CODI's businesses have seasonal earnings patterns. Accordingly, the Company believes that the most appropriate measure of its performance is over a trailing or expected 12-month period. We have reconciled CAD, or Cash Flow, to Net Income and Cash Flow Provided by Operating Activities on the Attached Schedules. We consider Net Income and Cash Flow Provided by Operating Activities to be the most directly comparable GAAP financial measures to CAD, or Cash Flow.
About Compass Diversified Holdings ("CODI")
CODI owns and manages a diverse family of established North American middle market businesses. Each of its eight current businesses is a leader in their niche market.
CODI maintains controlling ownership interests in each of its businesses 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 businesses, contributing to their financial and operating flexibility. CODI utilizes the cash flows generated by its businesses to invest in the long-term growth of the Company and to make cash distributions to its owners.
Our businesses 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.ergobaby.com);
- The design and manufacture of 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 (FOX, www.ridefox.com);
- The design and manufacture of premium home and gun safes (Liberty Safe, www.libertysafe.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, 2013 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
| ||||
|
December 31,
|
December 31,
| |||
|
(in thousands)
|
2013
|
2012
| ||
|
Assets
|
||||
|
Current assets:
|
||||
|
Cash and cash equivalents
|
$ 113,229
|
$ 18,241
| ||
|
Accounts receivable, less allowance of $3,424 and $3,049
|
111,736
|
100,647
| ||
|
Inventories
|
152,948
|
127,283
| ||
|
Prepaid expenses and other current assets
|
21,220
|
21,488
| ||
|
Total current assets
|
399,133
|
267,659
| ||
|
Property, plant and equipment, net
|
68,059
|
68,488
| ||
|
Goodwill
|
246,611
|
257,527
| ||
|
Intangible assets, net
|
310,359
|
340,666
| ||
|
Deferred debt issuance costs, net
|
8,217
|
8,238
| ||
|
Other non-current assets
|
12,534
|
12,623
| ||
|
Total assets
|
$ 1,044,913
|
$ 955,201
| ||
|
Liabilities and stockholders' equity
|
||||
|
Current liabilities:
|
||||
|
Accounts payable and accrued expenses
|
$ 118,129
|
$ 100,346
| ||
|
Due to related party
|
4,528
|
3,765
| ||
|
Current portion of supplemental put obligation
|
-
|
5,185
| ||
|
Current portion, long-term debt
|
2,850
|
2,550
| ||
|
Other current liabilities
|
4,623
|
1,953
| ||
|
Total current liabilities
|
130,130
|
113,799
| ||
|
Long-term debt
|
280,389
|
267,008
| ||
|
Supplemental put obligation
|
-
|
46,413
| ||
|
Deferred income taxes
|
60,024
|
63,982
| ||
|
Other non-current liabilities
|
5,435
|
7,787
| ||
|
Total liabilities
|
475,978
|
498,989
| ||
|
Stockholders' equity
|
||||
|
Trust shares, no par value, 500,000 authorized; 48,300 shares issued and
|
725,453
|
650,043
| ||
|
outstanding at 12/31/13 and 12/31/12
|
||||
|
Accumulated other comprehensive income (loss)
|
693
|
(132)
| ||
|
Accumulated deficit
|
(252,761)
|
(235,283)
| ||
|
Total stockholders' equity attributable to Holdings
|
473,385
|
414,628
| ||
|
Noncontrolling interests
|
95,550
|
41,584
| ||
|
Total stockholders' equity
|
568,935
|
456,212
| ||
|
Total liabilities and stockholders' equity
|
$ 1,044,913
|
$ 955,201
| ||
|
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, 2013
|
December 31, 2012
|
December 31, 2013
|
December 31, 2012
| ||||
|
Net sales
|
$ 232,685
|
$ 218,150
|
$ 985,539
|
$ 884,721
| ||||
|
Cost of sales
|
163,056
|
150,831
|
679,708
|
605,867
| ||||
|
Gross profit
|
69,629
|
67,319
|
305,831
|
278,854
| ||||
|
Operating expenses:
|
||||||||
|
Selling, general and administrative expense
|
43,067
|
41,385
|
167,738
|
161,141
| ||||
|
Supplemental put expense (reversal)
|
-
|
9,604
|
(45,995)
|
15,995
| ||||
|
Management fees
|
4,990
|
4,339
|
18,632
|
17,633
| ||||
|
Amortization expense
|
7,248
|
7,629
|
29,632
|
30,268
| ||||
|
Impairment expense
|
12,018
|
-
|
12,918
|
-
| ||||
|
Operating income
|
2,306
|
4,362
|
122,906
|
53,817
| ||||
|
Other income (expense):
|
||||||||
|
Interest income
|
4
|
3
|
39
|
54
| ||||
|
Interest expense
|
(4,775)
|
(5,395)
|
(19,415)
|
(25,055)
| ||||
|
Amortization of debt issuance costs
|
(570)
|
(485)
|
(2,123)
|
(1,811)
| ||||
|
Loss on debt extinguishment
|
-
|
-
|
(1,785)
|
-
| ||||
|
Other income (expense), net
|
14
|
40
|
(77)
|
(183)
| ||||
|
Income (loss) from continuing operations before income taxes
|
(3,021)
|
(1,475)
|
99,545
|
26,822
| ||||
|
Provision for income taxes
|
2,041
|
3,950
|
20,729
|
21,069
| ||||
|
Income (loss) from continuing operations
|
(5,062)
|
(5,425)
|
78,816
|
5,753
| ||||
|
Loss from discontinued operations, net of income tax
|
-
|
-
|
-
|
(1,168)
| ||||
|
Gain (loss) on sale of discontinued operations, net of income tax
|
-
|
219
|
-
|
(245)
| ||||
|
Net income (loss)
|
(5,062)
|
(5,206)
|
78,816
|
4,340
| ||||
|
Net income from continuing operations attributable to
|
-
|
|||||||
|
noncontrolling interest
|
1,286
|
1,512
|
10,752
|
8,508
| ||||
|
Loss from discontinued operations attributable to
|
||||||||
|
noncontrolling interest
|
-
|
-
|
-
|
(226)
| ||||
|
Net income (loss) attributable to Holdings
|
$ (6,348)
|
$ (6,718)
|
$ 68,064
|
$ (3,942)
| ||||
|
Basic and diluted net income (loss) per share
|
$ (0.47)
|
$ (0.14)
|
$ 1.05
|
$ (0.08)
| ||||
|
Basic and fully diluted weighted average number of
|
||||||||
|
shares outstanding
|
48,300
|
48,300
|
48,300
|
48,300
| ||||
|
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, 2013
|
December 31, 2012
| ||
|
Cash flows from operating activities:
|
||||
|
Net income
|
$ 78,816
|
$ 4,340
| ||
|
Adjustments to reconcile net income to net cash provided by operating activities:
|
||||
|
Gain on sale of Staffmark
|
-
|
(219)
| ||
|
Loss on sale of Halo
|
-
|
464
| ||
|
Depreciation and amortization expense
|
46,227
|
49,450
| ||
|
Impairment expense
|
12,918
|
-
| ||
|
Unrealized loss on interest rate and foreign currency derivatives
|
130
|
2,175
| ||
|
Loss on extinguishment of debt
|
1,785
|
-
| ||
|
Amortization of debt issuance costs and original issue discount
|
3,366
|
4,169
| ||
|
Supplemental put expense (reversal)
|
(45,995)
|
15,995
| ||
|
Noncontrolling interests and noncontrolling stockholders charges
|
4,683
|
4,236
| ||
|
Deferred taxes
|
(5,257)
|
(2,060)
| ||
|
Other
|
(87)
|
986
| ||
|
Changes in operating assets and liabilities, net of acquisition:
|
||||
|
Increase in accounts receivable
|
(10,988)
|
(2,137)
| ||
|
Increase in inventories
|
(24,454)
|
(13,703)
| ||
|
Increase in prepaid expenses and other current assets
|
(413)
|
(1,580)
| ||
|
Increase in accounts payable and accrued expenses
|
17,246
|
4,336
| ||
|
Payment of profit allocation
|
(5,603)
|
(13,886)
| ||
|
Net cash provided by operating activities
|
72,374
|
52,566
| ||
|
Cash flows from investing activities:
|
||||
|
Acquisition of businesses, net of cash acquired
|
(1,117)
|
(126,412)
| ||
|
Purchases of property and equipment
|
(20,410)
|
(18,546)
| ||
|
Proceeds from the FOX IPO
|
80,913
|
-
| ||
|
Proceeds from dispositions
|
2,760
|
66,709
| ||
|
Purchase of FOX common stock
|
-
|
(15,423)
| ||
|
Proceeds from sale leaseback transaction
|
4,108
|
-
| ||
|
Proceeds released from escrow related to Staffmark sale
|
-
|
8,355
| ||
|
Other
|
32
|
891
| ||
|
Net cash provided by (used in) investing activities
|
66,286
|
(84,426)
| ||
|
Cash flows from financing activities:
|
||||
|
Net borrowing of debt
|
11,225
|
50,995
| ||
|
Redemption of CamelBak preferred stock
|
-
|
(48,022)
| ||
|
Debt issuance costs
|
(2,697)
|
(3,154)
| ||
|
Distributions paid
|
(69,552)
|
(69,552)
| ||
|
Net proceeds provided by noncontrolling interest
|
36,122
|
12,061
| ||
|
Net payments related to noncontrolling interest
|
(19,081)
|
(30,038)
| ||
|
Other
|
(139)
|
5,478
| ||
|
Net cash used in financing activities
|
(44,122)
|
(82,232)
| ||
|
Foreign currency impact on cash
|
450
|
(37)
| ||
|
Net increase (decrease) in cash and cash equivalents
|
94,988
|
(114,129)
| ||
|
Cash and cash equivalents — beginning of period
|
18,241
|
132,370
| ||
|
Cash and cash equivalents — end of period
|
$ 113,229
|
$ 18,241
| ||
|
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, 2013
|
December 31, 2012
|
December 31, 2013
|
December 31, 2012
|
|||||
|
Net income (loss)
|
$ (5,062)
|
$ (5,206)
|
$ 78,816
|
$ 4,340
|
|||||
|
Adjustment to reconcile net income (loss) to cash provided by
|
|||||||||
|
operating activities:
|
|||||||||
|
Depreciation and amortization
|
11,557
|
11,577
|
46,227
|
49,450
|
|||||
|
Impairment expense
|
12,018
|
-
|
12,918
|
-
|
|||||
|
Gain on sale of Staffmark
|
-
|
(219)
|
-
|
(219)
|
|||||
|
Loss on sale of Halo
|
-
|
-
|
-
|
464
|
|||||
|
Amortization of debt issuance costs
|
583
|
531
|
2,123
|
1,857
|
|||||
|
Unrealized loss on derivatives
|
62
|
67
|
130
|
2,175
|
|||||
|
Loss on extinguishment of debt
|
-
|
-
|
1,785
|
-
|
|||||
|
Amortization of original issue discount
|
294
|
361
|
1,243
|
2,312
|
|||||
|
Supplemental put expense (reversal)
|
-
|
9,604
|
(45,995)
|
15,995
|
|||||
|
Noncontrolling stockholders charges
|
1,316
|
986
|
4,683
|
4,236
|
|||||
|
Other
|
(276)
|
51
|
(87)
|
986
|
|||||
|
Deferred taxes
|
(3,136)
|
255
|
(5,257)
|
(2,060)
|
|||||
|
Changes in operating assets and liabilities
|
979
|
13,179
|
(24,212)
|
(26,970)
|
|||||
|
Net cash provided by operating activities
|
18,335
|
31,186
|
72,374
|
52,566
|
|||||
|
Plus:
|
|||||||||
|
Unused fee on revolving credit facility (1)
|
611
|
682
|
2,349
|
2,666
|
|||||
|
Successful acquisition expense (2)
|
-
|
(10)
|
-
|
5,201
|
|||||
|
HALO sale related expenses (3)
|
-
|
-
|
-
|
1,976
|
|||||
|
Changes in operating assets and liabilities
|
-
|
-
|
24,212
|
26,970
|
|||||
|
Less:
|
|||||||||
|
Maintenance capital expenditures (4)
|
4,251
|
3,722
|
14,208
|
10,998
|
|||||
|
FOX CAD (5)
|
3,845
|
-
|
11,189
|
-
|
|||||
|
Other
|
-
|
71
|
-
|
668
|
|||||
|
Changes in operating assets and liabilities
|
979
|
13,179
|
-
|
-
|
|||||
|
Estimated cash flow available for distribution and reinvestment
|
$ 9,871
|
$ 14,886
|
$ 73,538
|
$ 77,713
|
|||||
|
Distribution paid in April 2013/2012
|
$ 17,388
|
$ 17,388
|
|||||||
|
Distribution paid in July 2013/2012
|
17,388
|
17,388
|
|||||||
|
Distributions paid in October 2013/ 2012
|
17,388
|
17,388
|
|||||||
|
Distributions paid in January 2014/ 2013
|
$ 17,388
|
$ 17,388
|
17,388
|
17,388
|
|||||
|
$ 17,388
|
$ 17,388
|
$ 69,552
|
$ 69,552
|
||||||
|
(1) Represents the commitment fee on the unused portion of the Revolving Credit Facility.
|
|||||||||
|
(2) Represents transaction costs for successful acquisitions that were expensed during the period.
|
|||||||||
|
(3) Represents transaction costs incurred related to the sale of HALO, net of the related income tax benefit.
|
|||||||||
|
(4) Excludes growth capital expenditures of approximately $1.5 million and $5.4 million for the three months ended December 31, 2013 and December 31, 2012, respectively
| |||||||||
|
and $6.2 million and $7.5 million for the year ended December 31, 2013 and December 31, 2012, respectively.
|
|||||||||
|
(5) Represents FOX CAD subsequent to IPO date. For the year ended December 31, 2013, the amount includes approximately $20.9 million of EBITDA,
|
|||||||||
|
less: $6.7 million of cash taxes, $0.9 million of management fees and $1.8 million of maintenance capital expenditures. For the quarter ended December 31, 2013,
| |||||||||
|
the amount includes approximately $10.6 million of EBITDA, less: $4.5 million of cash taxes, $0.6 million of management fees and $1.5 million
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of maintenance capital expenditures.
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By press release
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