Compass Diversified Holdings Reports Third Quarter 2009 Financial Results
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WESTPORT, Conn., Nov. 9 /PRNewswire-FirstCall/ -- Compass Diversified Holdings (Nasdaq: CODI) ("CODI" or the "Company"), a leading acquirer and manager of middle market businesses, announced today its consolidated operating results for the three months ended September 30, 2009.
Third Quarter 2009 Highlights
- Generated Cash Flow Available for Distribution and Reinvestment ("Cash Flow" or "CAD") of $11.7 million for the third quarter of 2009;
- Reported net income of $2.8 million for the third quarter of 2009; and
- Paid third quarter 2009 cash distribution of $0.34 per share, bringing cumulative distributions paid to $4.2952 per share since CODI's IPO in May of 2006
CODI reported Cash Flow (see note regarding use of Non-GAAP Financial Measures below) of $11.7 million for the quarter ended September 30, 2009, as compared to $15.7 million for the prior year period. CODI's Cash Flow decline for the third quarter compared to the prior year quarter was largely attributable to the negative impact of the economy on the Company's Staffmark subsidiary. CODI's weighted average number of shares for the quarter ending September 30, 2009 was approximately 36.6 million.
Cash Flow for the third quarter of 2009 was an improvement over the $7.8 million of Cash Flow reported for the second quarter of 2009. This improvement was due to the impact of a variety of cost containment measures across CODI's subsidiaries, as well as both strengthening revenue trends and the impact of seasonality at a number of the businesses.
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 over $109 million since CODI's initial public offering.
Net income for the quarter ended September 30, 2009 was $2.8 million, as compared to net income of $6.8 million for the quarter ended September 30, 2008.
As of September 30, 2009, CODI had $47.0 million in cash and cash equivalents on hand, $76.5 million outstanding on its term debt facility and $156 million of borrowing availability under its $340 million revolving credit facility. The Company has no significant debt maturities until 2013.
On October 7, 2009, CODI's Board of Directors declared a distribution of $0.34 per share. The distribution was paid on October 29, 2009 to all holders of record as of October 23, 2009.
Commenting on the quarter, Joe Massoud, CEO of Compass Diversified Holdings, said, "We are pleased with our third quarter performance. Our subsidiary management teams continue to do an excellent job of managing costs, while our strategy to use our leading market positions and balance sheet strength to increase relative market shares during this economic downturn has been successful at a number of our companies, yielding improved top-line metrics. These efforts not only contributed to our cash flow generation in the current period; more importantly, they position our companies to emerge from the current economic environment as even stronger participants in their respective market niches. Based on our improved prospects and our generation of Cash Flow thus far this year, we believe that we are well positioned to surpass our previously announced guidance for the full year 2009 and to achieve year over year growth in Cash Flow for 2010."
Mr. Massoud concluded, "In addition to this expectation for growth within our current family of businesses, management continues to aggressively pursue acquisitions of new platform businesses. With significant access to capital, we believe these opportunities are significant and attractive, although we remain committed to a disciplined approach to valuation and diligence."
Conference Call
Management will host a conference call this afternoon at 1:00 p.m. ET to discuss the latest corporate developments and financial results. The dial-in number for callers in the U.S. is (888) 740-6142 and the dial-in number for international callers is (913) 312-1517. The access code for all callers is 6521490. 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 November 16, 2009. 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 6521490.
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, with the first quarter typically being the slowest of the year. Accordingly, the Company believes that the most appropriate measure of its performance is over a trailing or expected 12-month period. We have reconciled CAD, or Cash Flow, to Net Income and Cash Flow Provided by Operating Activities on the Attached Schedules. We consider Net Income and Cash Flow Provided by Operating Activities to be the most directly comparable GAAP financial measures to CAD, or Cash Flow.
About Compass Diversified Holdings ("CODI")
Compass Diversified Holdings ("CODI") was formed to acquire and manage a group of middle market businesses that are headquartered in North America. Its subsidiaries are a diverse group of businesses with highly defensible market positions.
CODI's structure involves acquisition of controlling ownership interests in its subsidiaries in order to maximize its ability to impact each subsidiary's performance. The Company provides both debt and equity capital for its subsidiaries, contributing to their financial and operating flexibility. CODI's model involves discipline in identifying and valuing businesses, proactive engagement with the management teams of the companies it acquires and the monetization of its subsidiaries when it believes that doing so will maximize shareholder value. The Company seeks to provide a high level of transparency in financial reporting and governance processes for the benefit of its shareholders. CODI currently has six subsidiaries operating in distinct market niches. The cash flows generated by these businesses are utilized in pursuit of CODI's dual objectives of investing in the long-term growth of the Company and making distributions of cash to its shareholders.
Subsidiary Businesses
AFM Holdings Corporation and its consolidated subsidiaries, referred to as American Furniture, is a low-cost manufacturer of upholstered stationary and motion furniture with the ability to ship any product in its line within 48 hours of receiving an order. American Furniture is based in Ecru, MS.
Anodyne Medical Device, Inc. and its consolidated subsidiaries, referred to as AMD, is a manufacturer of medical support surfaces and patient positioning devices, which are primarily used for the prevention and treatment of pressure wounds experienced by patients with limited to no mobility. AMD is based in Coral Springs, FL.
CBS Personnel Holdings, Inc. and its consolidated subsidiaries, referred to as Staffmark, is a provider of temporary staffing services in the United States. Staffmark is headquartered in Cincinnati, OH and operates over 300 locations in 29 states.
Compass AC Holdings, Inc. and its consolidated subsidiaries, referred to as Advanced Circuits, is a manufacturer of low-volume, quick-turn and prototype rigid printed circuit boards ("PCBs"). Advanced Circuits is based in Aurora, CO.
Fox Factory Holding Corp. and its consolidated subsidiaries, referred to as Fox, is a designer, manufacturer and marketer of high-end suspension products for mountain bikes, all-terrain vehicles, snowmobiles and other off-road vehicles. Fox is based in Watsonville, CA.
Halo Lee Wayne LLC and its consolidated subsidiaries, referred to as Halo, is a distributor of customized promotional products and serves more than 30,000 customers as a one-stop-shop resource for design, sourcing, management and fulfillment across all categories of its customers' promotional products needs. Halo is based in Sterling, IL.
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, 2008 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.
A copy of this press release, and of past press releases, is available on Compass Diversified Holdings' website located at www.compassdiversifiedholdings.com.
Compass Diversified Holdings
Condensed Consolidated Balance Sheets
(in thousands) September 30, December 31,
2009 2008
------------ -----------
(unaudited)
Assets
Current assets:
Cash and cash equivalents $46,997 $97,473
Accounts receivable, less
allowance of $5,599 and $4,824 159,539 164,035
Inventories 53,583 50,909
Prepaid expenses and other current assets 27,459 22,784
------ ------
Total current assets 287,578 335,201
Property, plant and equipment, net 26,353 30,763
Goodwill 288,272 339,095
Intangible assets, net 222,987 249,489
Deferred debt issuance costs, net 5,774 8,251
Other non-current assets 19,712 21,537
------ ------
Total assets $850,676 $984,336
======== ========
Liabilities and stockholders' equity
Current liabilities:
Accounts payable and accrued expenses $104,509 $105,808
Due to related party 3,118 604
Current portion, long-term debt 2,500 2,000
Current portion of workers' compensation
liability 36,208 26,916
Other current liabilities 2,667 4,042
----- -----
Total current liabilities 149,002 139,370
Long-term debt 74,500 151,000
Supplemental put obligation 4,893 13,411
Deferred income taxes 59,529 86,138
Workers' compensation liability 36,154 40,852
Other non-current liabilities 7,127 9,687
----- -----
Total liabilities 331,205 440,458
Stockholders' equity
Trust shares, no par value, 500,000
authorized; 36,625 and 31,525 shares
issued and outstanding at 9/30/09 and 12/31/08 485,790 443,705
Accumulated other comprehensive loss (2,349) (5,242)
Accumulated earnings (deficit) (32,495) 25,984
------- ------
Total stockholders' equity
attributable to Holdings 450,946 464,447
Noncontrolling interests 68,525 79,431
------ ------
Total stockholders' equity 519,471 543,878
------- -------
Total liabilities and
stockholders' equity $850,676 $984,336
======== ========
Compass Diversified Holdings
Condensed Consolidated Statements of Operations
(unaudited)
Three Months Three Months Nine Months Nine Months
Ended Ended Ended Ended
(in thousands, September 30, September 30, September 30, September 30,
except per 2009 2008 2009 2008
share data) ------------ ------------ ------------ ------------
Net sales $324,239 $413,601 $886,681 $1,163,646
Cost of sales 253,175 322,606 693,842 909,982
------- ------- ------- -------
Gross profit 71,064 90,995 192,839 253,664
Operating expenses:
Staffing expense 17,665 25,872 56,144 78,412
Selling, general
and
administrative
expense 36,099 42,597 108,093 121,121
Supplemental put
expense
(reversal) (101) (765) (8,518) 5,829
Management fees 3,331 3,758 9,825 10,953
Amortization
expense 6,168 6,171 18,614 18,432
Impairment expense - - 59,800 -
------- ------- ------- -------
Operating
income (loss) 7,902 13,362 (51,119) 18,917
Other income (expense):
Interest income 34 559 111 1,140
Interest expense (2,681) (4,199) (8,918) (13,545)
Amortization
of debt issuance
costs (433) (491) (1,343) (1,473)
Loss on debt
repayment - - (3,652) -
Other income
(expense), net 96 48 (594) 405
------- ------- ------- -------
Income (loss) from
continuing
operations
before income taxes 4,918 9,279 (65,515) 5,444
Income tax expense
(benefit) 2,130 3,067 (25,920) 3,622
------- ------- ------- -------
Income (loss) from
continuing
operations 2,788 6,212 (39,595) 1,822
Income from
discontinued
operations, net
of income tax - - - 4,607
Gain on sale of
discontinued
operations, net
of income tax - 636 - 72,932
------- ------- ------- -------
Net income (loss) 2,788 6,848 (39,595) 79,361
Net income (loss)
attributable to
noncontrolling
interest 687 1,590 (15,005) 2,295
------- ------- ------- -------
Net income (loss)
attributable
to Holdings $2,101 $5,258 $(24,590) $77,066
======= ======= ======== =======
Basic and fully
diluted net income
(loss) per share $0.06 $0.17 $(0.73) $2.44
======= ======= ======== =======
Weighted average
number of shares
outstanding
- basic and
fully diluted 36,625 31,525 33,655 31,525
======= ======= ======== =======
Cash distributions
declared per share $0.34 $0.34 $1.02 $0.99
======= ======= ======== =======
Compass Diversified Holdings
Condensed Consolidated Statements of Cash Flows
(unaudited)
Nine Months Nine Months
Ended Ended
September 30, September 30,
(in thousands) 2009 2008
------------- -------------
Cash flows from operating activities:
Net income (loss) $(39,595) $79,361
Adjustments to reconcile net income
(loss) to net cash provided by
operating activities:
Gain on sale of businesses - (72,932)
Depreciation and
amortization expense 26,332 28,025
Impairment expense 59,800 -
Supplemental put expense (reversal) (8,518) 5,829
Noncontrolling interests
and noncontrolling
stockholders charges 1,378 2,492
Loss on debt repayment 3,652 -
Deferred taxes (28,107) (7,010)
Other (254) 296
Changes in operating assets and
liabilities, net of acquisition:
Decrease (increase) in
accounts receivable 6,054 (310)
Decrease (increase) in inventories (2,413) 93
Increase in prepaid expenses and
other current assets (2,757) (8,672)
Increase in accounts payable and
accrued expenses 5,862 13,631
Payment of supplemental put obligation - (14,947)
------- -------
Net cash provided by
operating activities 21,434 25,856
------- -------
Cash flows from investing
activities:
Acquisition of businesses,
net of cash acquired (1,435) (173,561)
Proceeds from dispositions - 153,439
Purchases of property
and equipment (2,365) (8,587)
Other 185 (328)
------- -------
Net cash used in investing
activities (3,615) (29,037)
------- -------
Cash flows from financing
activities:
Proceeds from issuance of
Trust shares, net 42,085 -
Net borrowing
(repayment) of debt (76,000) 2,968
Swap termination fee (2,517) -
Debt issuance costs - (551)
Distributions paid (33,889) (30,736)
Net proceeds related to
noncontrolling interest 2,450 423
Other (424) 1,475
------- -------
Net cash used in financing
activities (68,295) (26,421)
------- -------
Foreign currency adjustment - (80)
------- -------
Net decrease in cash and cash
equivalents (50,476) (29,682)
Cash and cash equivalents -
beginning of period 97,473 119,358
------- -------
Cash and cash equivalents -
end of period $46,997 $89,676
======= =======
Compass Diversified Holdings
Condensed Consolidated Table of Cash Flows Available for Distribution
and Reinvestment ("CAD")
(unaudited)
Three Months Three Months Nine Months Nine Months
Ended Ended Ended Ended
September 30, September 30, September 30, September 30,
(in thousands) 2009 2008 2009 2008
------------ ------------ ------------ ------------
Net income (loss) $2,788 $6,848 $(39,595) $79,361
Adjustment to
reconcile net
income (loss)
to cash
provided by
operating
activities:
Gain on sale
of businesses - (636) - (72,932)
Depreciation
and
amortization 8,230 8,334 24,989 26,552
Impairment
expense - - 59,800 -
Amortization of
debt issuance
costs 433 491 1,343 1,473
Supplemental
put expense
(reversal) (101) (765) (8,518) 5,829
Noncontrolling
interests and
noncontrolling
stockholders
charges 918 809 1,378 2,492
Loss on
debt
repayment - - 3,652 -
Other (33) 458 (254) 296
Deferred
taxes (1,618) (1,249) (28,107) (7,010)
Changes in
operating
assets and
liabilities (5,955) (13,488) 6,746 (10,205)
------ ------- ----- -------
Net cash
provided by
operating
activities 4,662 802 21,434 25,856
Plus:
Unused fee
on revolving
credit
facility (1) 871 863 2,581 2,255
Staffmark
integration and
restructuring
expenses 780 2,018 4,022 6,476
Changes in
operating
assets and
liabilities 5,955 13,488 - 10,205
Less:
Maintenance
capital
expenditures (2) 571 1,507 2,181 5,396
Changes in
operating
assets and
liabilities - - 6,746 -
------ ------- ----- -------
Estimated cash
flow available
for distribution
and reinvestment $11,697 $15,664 $19,110 $39,396
======= ======= ======= =======
Distribution
paid in April
2009/2008 $10,719 $10,246
Distribution
paid in July
2009/2008 12,452 10,246
Distribution paid
in Oct 2009/2008 $12,452 $10,719 12,452 10,719
------- ------- ------ ------
$12,452 $10,719 $35,623 $31,211
======= ======= ======= =======
(1) Represents the commitment fee on the unused portion of the Revolving
Credit Facility.
(2) Represents maintenance capital expenditures that were funded from
operating cash flow and excludes approximately $3.2 million of growth
capital expenditures for the nine months ended September 30, 2008.
SOURCE Compass Diversified Holdings
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