Chronicle Journal: Finance

Compass Diversified Trust Reports 2007 Second Quarter Financial Results

WESTPORT, Conn., Aug. 10 /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 three and six months ended June 30, 2007.

The Trust reported cash flow available for distribution of $9.4 million for the quarter ended June 30, 2007. For the period from its initial public offering on May 16, 2006 through June 30, 2007, the Trust reported cash flow available for distribution of $39.5 million and a coverage ratio of 1.3x on all distributions paid though July 27, 2007.

On July 10, 2007, the Trust's Board of Directors declared a distribution of $0.30 per share, which was paid on July 27, 2007 to all Trust shareholders of record as of July 25, 2007. The Trust intends to continue to declare and pay regular quarterly cash distributions on all outstanding shares.

Commenting on the quarter, Joe Massoud, CEO of Compass Diversified Trust, stated "During the second quarter, Compass Diversified Trust and its subsidiary companies performed within our expectations. Second quarter deal flow also remained robust as we continued to review a number of interesting acquisition candidates. It is worth repeating our belief that a tightening in the debt markets plays to our advantage, given our non-reliance on transaction specific financing and our ability to consummate acquisitions quickly."

As previously announced, the Trust amended its credit facility in the second quarter with a group of lenders led by Madison Capital Funding LLC to increase the revolving loan commitment by $45 million. The expanded credit facility now provides for $300 million in revolving loans, subject to borrowing base restrictions.

During the June quarter, the Trust also completed a follow-on equity offering and concurrent private placement for a combined total of 11,075,000 shares at $16.00 per share, including the exercise of the underwriters' over- allotment option, raising a total of approximately $168.7 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.

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 (800) 289-0533 and the dial-in number for international callers is (913) 981-5525. The access code for all callers is 2097841. 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 August 24, 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 2097841.

About Compass Diversified Trust

CODI was formed to acquire and manage a group of 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.

Cautionary and Forward-Looking Statements

The overview of Compass Diversified Trust's results 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.

This press release may contain certain forward-looking statements, including statements with regard to the future performance of CODI. 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, September 30, 2006 and March 31, 2007 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        Investor Relations Contact:
    James J. Bottiglieri             KCSA Worldwide
    Chief Financial Officer          Jeffrey Goldberger / Garth Russell
    203.221.1703                     212.896.1249 / 212.896.1250
    jbottiglieri@compasstrust.com    jgoldberger@kcsa.com / grussell@kcsa.com



                          Compass Diversified Trust
                          Consolidated Balance Sheet
                                (in thousands)

                                                         June 30,
                                                           2007
                                                       (unaudited)

    Assets
    Current assets:
     Cash and cash equivalents                            $73,228
     Accounts receivable, less allowance of $3,426        104,230
     Inventories                                           10,910
     Prepaid expenses and other current assets             16,176

        Total current assets                              204,544

     Property, plant and equipment, net                    21,838
     Goodwill                                             225,717
     Intangible assets, net                               177,343
     Deferred debt issuance costs, net                      5,306
     Other non-current assets                              17,974

    Total assets                                         $652,722


    Liabilities and stockholders' equity
    Current liabilities:
     Accounts payable and accrued expenses                $78,332
     Due to related party                                     817
     Current portion of long-term debt                      2,655

        Total current liabilities                          81,804

    Supplemental put obligation                            16,993
    Deferred income taxes                                  56,638
    Other non-current liabilities                          17,838

    Total liabilities                                     173,273

    Minority interests                                     27,883

    Total stockholders' equity
    Trust shares, no par value, 500,000
     authorized; 31,525 shares issued and outstanding     443,633
    Accumulated earnings                                    7,933
        Total stockholders' equity                        451,566
    Total liabilities and stockholders' equity           $652,722



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

                                                Three Months       Six Months
                                                   Ended             Ended
                                               June 30, 2007     June 30, 2007
                                                (unaudited)       (unaudited)

    Net sales                                     $218,219          $394,538
    Cost of sales                                  160,044           293,747
               Gross profit                         58,175           100,791
    Operating expenses:
         Staffing expense                           14,470            28,482
         Selling, general and
          administrative expenses                   28,989            46,779
         Supplemental put expense                    1,024             2,417
         Fees to manager                             2,601             4,785
         Amortization expense                        5,582             9,413
               Operating income                      5,509             8,915

    Other income (expense):
         Interest income                               729             1,329
         Interest expense                           (1,583)           (3,069)
         Amortization of debt issuance
          costs                                       (283)             (553)
         Other income, net                              18                30

               Income from continuing
                operations before income
                taxes and minority
                interests                            4,390             6,652
    Provision for income taxes                       1,651             2,988
    Minority interest                                  207               249

               Income from continuing
                operations                           2,532             3,415
    Gain on sale of discontinued
     operations, net of income taxes                     -            36,038

               Net income                           $2,532           $39,453

    Basic and fully diluted income per
     share                                           $0.09             $1.67

    Weighted average number of shares of
     trust stock outstanding - basic and
     fully diluted                                  26,837            23,661

    Cash dividends declared per share                $0.30             $0.60



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

                                                       Six Months
                                                          Ended
                                                     June 30, 2007
                                                       (unaudited)

    Cash flows from operating activities:
    Net income                                          $39,453
    Adjustments to reconcile net income
     to net cash provided by operating
     activities:
       Gain on sale of Crosman                          (36,038)
       Depreciation and amortization
        expense                                          11,540
       Amortization of debt issuance
        costs                                               549
       Supplemental put expense                           2,417
       Minority interests                                   249
       Stockholder notes and other                         (117)
       Deferred taxes                                    (1,156)

    Changes in operating assets and
     liabilities, net of acquisition:
       Increase in accounts receivable                   (2,666)
       Increase in inventories                             (806)
       Decrease in prepaid expenses and
        other current assets                                522
       Decrease in accounts payable and
        accrued expenses                                   (366)
       Decrease in supplemental put
        obligation                                       (7,880)
              Net cash provided by
               operating activities                       5,701

    Cash flows from investing activities:
          Acquisition of businesses, net
           of cash acquired                            (127,937)
          Crosman disposition                           119,856
          Purchases of property and
           equipment                                     (3,835)
              Net cash used in investing activities     (11,916)

    Cash flows from financing activities:
          Proceeds from issuance of trust shares, net   168,672
          Repayment of revolving lines of
           credit borrowings                            (84,964)
          Debt issuance costs                              (860)
          Other                                           1,911
          Distributions paid                            (12,270)
              Net cash provided by financing activities  72,489

    Net increase in cash and cash equivalents            66,274
    Foreign currency adjustment                             (52)
    Cash and cash equivalents - beginning of period       7,006
    Cash and cash equivalents - end of period           $73,228



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

                                           Three Months Ended Six Months Ended
                                            June 30, 2007      June 30, 2007
                                              (unaudited)        (unaudited)

    Net income                                      $2,532            $39,453
       Adjustment to reconcile net income
        to cash provided by operating
        activities:
          Gain on sale of Crosman                      -              (36,038)
          Depreciation and amortization              6,795             11,540
          Amortization of debt issuance costs          283                549
          Supplemental put expense                   1,024              2,417
          Stockholder notes                            451               (117)
          Minority interest                            207                249
          Deferred taxes                              (620)            (1,156)
          Other                                        (68)                 -
          Changes in operating assets and
           liabilities                              (3,420)           (11,196)
    Net cash provided by operating activities        7,184              5,701
    Plus:
          Unused fee on revolving credit
           facility (1)                                563              1,051
          Changes in operating assets and
           liabilities                               3,420             11,196
    Less:
          Maintenance capital
           expenditures (2)                          1,787              2,147

    Estimated  cash flow available for
     distribution                                   $9,380            $15,801


    Distribution paid in April 2007                                    $6,135
    Distribution paid in July 2007                  $9,458             $9,458

    (1) Represents the 1% 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 $1.2 million and $1.6
        million of growth capital expenditures for the three and six months
        ended June 30, 2007.

Source: Compass Diversified Trust

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