Chronicle Journal: Finance

Compass Diversified Trust Reports 2007 First Quarter Financial Results

WESTPORT, Conn., May 14 /PRNewswire-FirstCall/ -- Compass Diversified Trust (NASDAQ:CODI) and Compass Group Diversified Holdings LLC (collectively, the "Trust" or "CODI" or the "Company") announced today the consolidated results of operations for the quarter ended March 31, 2007. These results for the first quarter are summarized in the following paragraphs. However, the limited information that follows in this press release may not be adequate for making an informed investment judgment. Investors are urged to read CODI's 10-Q, which will be posted at www.compassdiversifiedtrust.com, as well as to take into consideration the seasonal nature of certain of the Company's subsidiary businesses and their results.

For the quarter ended March 31, 2007, the Trust reported cash flow available for distribution of $6.4 million. For the period from its initial public offering on May 16, 2006 through March 31, 2007, the Trust reported cash flow available for distribution of $30.1 million and a coverage ratio of 1.5x on all distributions paid though April 24, 2007.

On April 5, 2007, the Trust's Board of Directors declared a distribution of $0.30 per share which was paid on April 24, 2007 to all Trust shareholders of record as of April 20, 2007. The Trust intends to continue to declare and pay regular quarterly cash distributions on all outstanding shares.

On March 1, 2007, the Trust announced definitive agreements to acquire controlling interests in two new subsidiary companies, Halo Branded Solutions, Inc. and Aeroglide Corporation. The total combined consideration for both purchases was based on an aggregate total enterprise value of approximately $119 million. Results for the quarter reflect only 31 days of operations for these businesses.

On May 2, 2007 the Trust priced a follow-on offering and concurrent private placement for a combined total of 9,875,000 shares at $16.00 per share raising a total of approximately $149 million in net proceeds. The Trust utilized the proceeds from the offering to pay down debt under its revolving credit facility and intends to use the remaining proceeds to fund future acquisitions of both platform and add-on's to existing subsidiary businesses. Citigroup Global Markets Inc. acted as sole bookrunning manager of the offering. Ferris Baker Watts, Incorporated acted as co-lead manager of the offering, and A.G. Edwards; BB&T Capital Markets, a division of Scott & Stringfellow, Inc.; Morgan Keegan & Company, Inc.; and SMH CAPITAL Inc. acted as co-managers of the offering.

Commenting on the quarter, Joe Massoud, CEO of Compass Diversified Trust, stated, "We are extremely pleased with our start in 2007. During the first quarter, our businesses met our expectations. In addition, we successfully sold our interest in Crosman at a substantial gain to our shareholders and closed on the acquisition of two new platform businesses, Halo Branded Solutions, Inc. and Aeroglide Corporation. For the remainder of the year, we will continue to focus on working with our management teams to improve the operations and profitability of each of our subsidiary businesses, as well as identifying and consummating accretive add-on and platform acquisitions. I would also like to welcome our new shareholders who participated in our follow-on offering earlier this month. We are confident this offering will provide us with additional financial flexibility and capacity as we continue to grow our company."

Conference Call

Management will host a conference call this morning 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) 290-0882 and the dial-in number for international callers is (913) 312-6672. The access code for all callers is 9317478. A live webcast will also be available on the Trust's website at www.compassdiversifiedtrust.com.

A replay of the call will be available through May 28, 2007. 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 9317478.

About Compass Diversified Trust

CODI was formed to acquire and manage a group of profitable middle market businesses that are headquartered in North America. CODI provides public investors with an opportunity to participate in the ownership and growth of companies which have historically been owned by private equity firms or wealthy individuals or families. CODI's disciplined approach to its target market provides opportunities to methodically purchase attractive businesses at values that are accretive to its shareholders. For sellers of businesses, CODI's unique structure allows CODI to acquire businesses efficiently with no financing contingencies and, following acquisition, to provide its companies with substantial access to growth capital.

Upon acquisition, CODI works with the executive teams of its subsidiary companies to identify and capitalize on opportunities to grow those companies' earnings and cash flows. These cash flows support distributions to CODI shareholders, which are intended to be steady and growing over the long term.

Subsidiary Businesses

Aeroglide Holdings, Inc. and its consolidated subsidiaries, referred to as Aeroglide, is a designer and manufacturer of industrial drying and cooling equipment, primarily used in the production of a variety of human foods, animal and pet feeds, and industrial products. Aeroglide is based in Cary, NC and was founded in 1940.

Anodyne Medical Device, Inc. and its consolidated subsidiaries, referred to as AMD, is a manufacturer of medical support surfaces and patient positioning devices, primarily used for the prevention and treatment of pressure wounds experienced by patients with limited or no mobility. AMD is based in Los Angeles, CA and was founded in 2005.

CBS Personnel Holdings, Inc. and its consolidated subsidiaries, referred to as CBS Personnel, is a provider of temporary staffing services in the United States. CBS Personnel is headquartered in Cincinnati, OH, operates 144 branch locations in 18 states and was founded in 1970.

Compass AC Holdings, Inc. and its consolidated subsidiary, 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 and was founded in 1989.

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 and was founded in 1952.

Silvue Technologies Group, Inc. and its consolidated subsidiaries, referred to as Silvue, is a developer and manufacturer of proprietary, high- performance coating systems for polycarbonate, glass, acrylic, metals and other substrate materials used in the premium eyewear, aerospace, automotive and industrial markets. Silvue is based in Anaheim, CA and was founded in 1986.

To find out more about Compass Diversified Trust, please visit www.compassdiversifiedtrust.com.

This press release may contain certain forward-looking statements, including statements with regard to the future performance of the Trust. 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 10K filed by CODI with the Securities and Exchange Commission for the year ended December 31, 2006 and the Form 10Qs filed by CODI for the quarters ended March 31, 2006 June 30, 2006 and September 30, 2006 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 Trust
                            Consolidated Balance Sheet
                                  (in thousands)

                                                                     March 31,
                                                                        2007

    Assets
    Current assets:
      Cash and cash equivalents                                        $8,692
      Accounts receivable, less allowances of $3,411                   98,484
      Inventories                                                       9,216
      Prepaid expenses and other current assets                        17,050

        Total current assets                                          133,442

      Property, plant and equipment, net                               19,710
      Goodwill                                                        218,652
      Intangible assets, net                                          180,311
      Deferred debt issuance costs, less accumulated
       amortization of $114                                             5,041
      Other non-current assets                                         17,181

    Total assets                                                     $574,337

    Liabilities and stockholders' equity
    Current liabilities:
      Accounts payable and accrued expenses                           $74,102
      Due to related party                                                509
      Revolving credit facility                                        98,351

        Total current liabilities                                     172,962

    Supplemental put obligation                                        15,969
    Deferred income taxes                                              56,946
    Other non-current liabilities                                      17,103

    Total liabilities                                                 262,980

    Minority interests                                                 24,860

    Total stockholders' equity
    Trust shares, no par value, 500,000 authorized;
     20,450 shares issued and outstanding                             268,826
    Accumulated earnings                                               17,671
        Total stockholders' equity                                    286,497
    Total liabilities and stockholders' equity                       $574,337



                            Compass Diversified Trust
                       Consolidated Statement of Operation
                      (in thousands, except per share data)

                                                            Three Months Ended
                                                                March 31, 2007

    Net sales                                                        $176,319
    Cost of sales                                                     133,703
               Gross profit                                            42,616
    Operating expenses:
         Staffing expense                                              14,012
         Selling, general and administrative expenses                  17,790
         Supplemental put expense                                       1,393
         Fees to Manager                                                2,184
         Amortization expense                                           3,831
               Operating income                                         3,406

    Other income (expense):
         Interest income                                                  600
         Interest expense                                              (1,486)
         Amortization of debt issuance costs                             (270)
         Other income, net                                                 12

               Income from continuing operations before income
                taxes and minority interests                            2,262
    Provision for income taxes                                          1,337
    Minority interest                                                      42

               Income from continuing operations                          883
    Gain on sale of discontinued operations, net of income taxes       36,038

               Net income                                             $36,921

    Basic and fully diluted income per share                            $1.81

    Weighted average number of shares of Trust stock outstanding -
     basic and fully diluted                                           20,450

    Cash dividends paid per share                                       $0.30



                            Compass Diversified Trust
                       Consolidated Statement of Cash Flows
                                  (in thousands)

                                                                   Year Ended
                                                                March 31, 2007

    Cash flows from operating activities:
    Net income                                                        $36,921
    Adjustments to reconcile net loss to net cash provided
     by operating activities:
       Gain on sale of Crosman                                        (36,038)
       Depreciation and amortization expense                            4,745
       Amortization of debt issuance costs                                255
       Supplemental put expense                                         1,393
       Minority interests                                                  42
       Stockholder notes                                                 (568)
       Deferred taxes                                                    (536)
       Other                                                               79

    Changes in operating assets and liabilities, net of acquisition:
       Decrease in accounts receivable                                  3,829
       Decrease in inventories                                            409
       Decrease in prepaid expenses and other current assets              793
       Decrease in accounts payable and accrued expenses               (4,927)
       Decrease in supplemental put obligation                         (7,880)
              Net cash used in operating activities                    (1,483)

    Cash flows from investing activities:
          Acquisition of businesses, net of cash acquired            (120,045)
          Crosman disposition                                         119,856
          Purchases of property and equipment                            (823)
              Net cash used in investing activities                    (1,012)

    Cash flows from financing activities:
          Proceeds from revolving lines of credit borrowings           10,740
          Debt issuance costs                                            (277)
          Distributions paid                                           (6,135)
              Net cash provided by financing activities                 4,328

    Net increase in cash and cash equivalents                           1,833
    Foreign currency adjustment                                          (147)
    Cash and cash equivalents - beginning of period                     7,006
    Cash and cash equivalents - end of period                          $8,692



                            Compass Diversified Trust
       Consolidated Table of Cash Flows Available for Distribution ("CAD")
                               (in thousands)

                                                                Quarter Ended
                                                                March 31, 2007

    Net income                                                        $36,921
       Adjustment to reconcile net income to cash provided
        by operating activities:
          Gain on sale of Crosman                                     (36,038)
          Depreciation and amortization                                 5,000
          Supplemental put expense                                      1,393
          Stockholder notes                                              (568)
          Minority interest                                                42
          Deferred taxes                                                 (536)
          Other                                                            79
          Changes in operating assets and
           liabilities                                                 (7,776)
    Net cash provided by operating
     activities                                                        (1,483)
    Plus:
          Unused fee on revolving credit
           facilitity (1)                                                 488
          Changes in operating assets and
           liabilities                                                  7,776
    Less:
          Maintenance capital
           expenditures (2)                                               360

    Estimated cash flow available for distribution                     $6,421


    Distribution declared in April 2007                                $6,135


    (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 $0.5 million of growth
        capital expenditures for the three months ended March 31, 2007.


    Compass Diversified Trust
    James J. Bottiglieri
    Chief Financial Officer
    203.221.1703
    jbottiglieri@compasstrust.com

    Investor Relations Contact: KCSA Worldwide
    Jeffrey Goldberger / Garth Russell
    212.896.1249 / 212.896.1250
    jgoldberger@kcsa.com / grussell@kcsa.com

Source: Compass Diversified Trust

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