WESTPORT, Conn., May 8 /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 March 31, 2009.
First Quarter 2009 Highlights
- Generated a Cash Flow Available for Distribution and Reinvestment ("Cash Flow" or "CAD") loss of $0.4 million for the first quarter of 2009. Cash Flow was a positive $40.3 million for the trailing twelve months ended March 31, 2009;
- Repaid $75 million of debt, reducing outstanding debt at quarter end to $77.5 million, with no significant maturity until December of 2013;
- Paid first quarter 2009 cash distribution of $0.34 per share; and
- Reported a net loss of $27.3 million for the first quarter of 2009, including a $16.4 million negative impact of one-time non-cash items.
CODI reported Cash Flow (see note regarding use of Non-GAAP Financial Measures below) of negative $0.4 million for the quarter ended March 31, 2009, as compared to $9.9 million for the prior year period, a period during which CODI owned two additional businesses, both of which were sold in June 2008, for a cumulative gain of over $73 million. On a trailing twelve month basis, CODI generated Cash Flow of $40.3 million.
CODI's Cash Flow decline for the first quarter as compared to the prior year quarter was largely attributable to the impact of the economy on the Company's Staffmark subsidiary, as well as to the absence of the two business segments referenced above, which were sold after the first quarter of 2008. CODI's weighted average number of shares for the quarter ending March 31, 2009 and for the trailing twelve months was approximately 31.5 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 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.
As of March 31, 2009, CODI had $77.5 million outstanding on its long-term debt facility, $32.4 million in cash and cash equivalents and a $340 million revolving acquisition and working capital credit facility that had no borrowing outstanding on the facility. The Company has no significant debt maturities until 2013.
On April 8, 2009, CODI's Board of Directors declared a distribution of $0.34 per share. The distribution was paid on April 30, 2009 to all holders of record as of April 23, 2009.
Commenting on the quarter, Joe Massoud, CEO of Compass Diversified Holdings, said, "Overall, CODI's diverse family of businesses performed in line with our expectations in this challenging economic environment, during a quarter that has historically been our weakest in terms of cash flow generation due to seasonality issues. Each of our management teams has responded to the economic environment in a proactive manner that combines both an effort to manage materials and operating costs and a view on the long-term health and growth of their individual companies. We remain committed to utilizing our substantial financial liquidity to improve the competitive position of each of our subsidiaries in their markets, and are seeing evidence of such market share gains in a number of our businesses. During the quarter, we paid a $0.34 per share distribution, reflecting our continuing commitment to paying our shareholders a distribution based on the normalized cash flow generation capacity of our businesses. Due to the substantial excess of CAD over distributions paid since our initial public offering, as well as the over $109 million in realized gains we have achieved since that time, we currently remain in a position to continue paying distributions at the current rate to our shareholders."
Mr. Massoud continued, "Furthermore, due to the strength of our subsidiaries' operations, as well as the highly profitable and timely monetization of our interests in certain subsidiaries, we continue to maintain significant liquidity. As a result, CODI is well positioned to acquire new platform subsidiaries or add-on businesses for our existing subsidiaries. We are beginning to see an increase in opportunities for such acquisitions, and as valuations come down and cash flow levels begin to stabilize, we expect to be acquisitive."
The Company recorded a net loss for the quarter ended March 31, 2009 of $27.3 million, as compared to a net loss of $0.8 million for the quarter ended March 31, 2008. The increase in the net loss largely resulted from the recording of a $59.8 million non-cash impairment expense for the Company's Staffmark subsidiary, partially offset by the associated tax benefit of $22.5 million, $12.7 million for the minority shareholders portion of this impairment expense and an $8.2 million supplemental put reversal.
Commenting on the significant non-cash charges for the past quarter, Jim Bottiglieri, CFO of Compass Diversified Holdings, said, "In the first quarter of 2009, the Company conducted its annual impairment test of goodwill and other intangible assets, which is required under GAAP. As a result, we took an impairment charge on our ownership of Staffmark, reflecting a GAAP based decrease in our holding value for that entity. However, in spite of the impairment charge, our favorable opinion of Staffmark's long-term outlook and value as well as the subsidiary's ability to strengthen its competitive position remains intact and unchanged. Additionally, our periodic supplemental put accrual expense or reversal is driven by the current cash flow generation levels of our subsidiaries, as well as anticipated market multiples for those business were they to be sold in the current environment. The estimated total liability as of March 31, 2009 was less than as of December 31, 2008, resulting in a non-cash reduction in supplemental put expense."
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 (877) 795-3647 and the dial-in number for international callers is (719) 325-4816. The access code for all callers is 8750714. 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 May 15, 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 8750714.
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 an extraordinarily 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.
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 Los Angeles, CA.
CBS Personnel Holdings, Inc. and its consolidated subsidiaries, referred to as Staffmark, is a provider of temporary staffing services in the United States. CBS Personnel 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) March 31, December 31, 2009 2008 ---- ---- (unaudited) Assets Current assets: Cash and cash equivalents $32,420 $97,473 Accounts receivable, less allowance of $4,958 and $4,824 119,917 164,035 Inventories 47,639 50,909 Prepaid expenses and other current assets 25,536 22,784 ------ ------ Total current assets 225,512 335,201 Property, plant and equipment, net 29,316 30,763 Goodwill 288,669 339,095 Intangible assets, net 234,684 249,489 Deferred debt issuance costs, net 6,653 8,251 Other non-current assets 21,254 21,537 ------ ------ Total assets $806,088 $984,336 ======== ======== Liabilities and stockholders' equity Current liabilities: Accounts payable and accrued expenses $86,316 $105,808 Due to related party 462 604 Current portion of long-term debt 2,000 2,000 Current portion of workers' compensation liability 27,386 26,916 Other liabilities 3,303 4,042 ----- ----- Total current liabilities 119,467 139,370 Long-term debt 75,500 151,000 Supplemental put obligation 5,252 13,411 Deferred income taxes 61,048 86,138 Workers' compensation liability 42,350 40,852 Other non-current liabilities 8,317 9,687 ----- ----- Total liabilities 311,934 440,458 Stockholders' equity Trust shares, no par value, 500,000 authorized; 31,525 shares issued and outstanding at 3/31/09 and 12/31/08 443,705 443,705 Accumulated other comprehensive loss (2,596) (5,242) Noncontrolling interests 65,098 79,431 Accumulated earnings (deficit) (12,053) 25,984 ------- ------ Total stockholders' equity 494,154 543,878 ------- ------- Total liabilities and stockholders' equity $806,088 $984,336 ======== ======== Compass Diversified Holdings Condensed Consolidated Statements of Operations (unaudited) Three Months Three Months Ended Ended (in thousands, except per share data) March 31, 2009 March 31, 2008 -------------- -------------- Net sales $274,914 $351,134 Cost of sales 217,305 276,326 ------- ------- Gross profit 57,609 74,808 Operating expenses: Staffing expense 20,940 25,070 Selling, general and administrative expense 37,755 36,683 Supplemental put expense (8,159) 2,318 Management fees 3,072 3,651 Amortization expense 6,196 6,130 Impairment expense 59,800 - ------ - Operating income (loss) (61,995) 956 Other income (expense): Interest income 61 315 Interest expense (3,542) (4,672) Amortization of debt issuance costs (470) (485) Loss on debt repayment (3,652) - Other income (expense), net (79) 255 --- --- Loss from continuing operations before income taxes and noncontrolling interest (69,677) (3,631) Income tax benefit (27,444) (293) ------- ---- Loss from continuing operations before noncontrolling interest (42,233) (3,338) Income from discontinued operations, net of income tax - 2,030 --- ----- Net loss before noncontrolling interest (42,233) (1,308) Net loss attributable to noncontrolling interest (14,915) (513) ------- ---- Net loss attributable to Holdings $(27,318) $(795) ======== ===== Basic and fully diluted loss per share $(0.87) $(0.03) ====== ====== Weighted average number of shares outstanding - basic and fully diluted 31,525 31,525 ====== ====== Cash distributions declared per share $0.34 $0.325 ===== ====== Compass Diversified Holdings Condensed Consolidated Statements of Cash Flows (unaudited) Three Months Three Months Ended Ended (in thousands) March 31, 2009 March 31, 2008 -------------- -------------- Cash flows from operating activities: Net loss attributable to Holdings $(27,318) $(795) Adjustments to reconcile net loss to net cash provided by operating activities: Depreciation and amortization expense 8,870 9,676 Impairment expense 59,800 - Supplemental put expense (8,159) 2,318 Loss on debt repayment 3,652 - Noncontrolling interests (14,915) (290) Noncontrolling stockholder notes and other 901 527 Deferred taxes (24,780) (1,445) Other (61) - Changes in operating assets and liabilities, net of acquisition: Decrease in accounts receivable 45,651 19,623 Decrease in inventories 3,292 812 Increase in prepaid expenses and other current assets (2,290) (18,296) Increase (decrease) in accounts payable and accrued expenses (18,819) 18,032 ------- ------ Net cash provided by operating activities 25,824 30,162 ------ ------ Cash flows from investing activities: Acquisition of businesses, net of cash acquired (1,327) (164,221) Purchases of property and equipment (1,114) (4,764) Other investing activities 72 - -- --- Net cash used in investing activities (2,369) (168,985) ------ -------- Cash flows from financing activities: Net borrowing (repayment) of debt (75,500) 44,307 Swap termination payment (2,517) - Debt issuance costs - (327) Other 228 (66) Distributions paid (10,719) (10,246) ------- ------- Net cash (used in) provided by financing activities (88,508) 33,668 ------- ------ Net decrease in cash and cash equivalents (65,053) (105,155) Foreign currency adjustment - (170) Cash and cash equivalents - beginning of period 97,473 119,358 ------ ------- Cash and cash equivalents - end of period $32,420 $14,033 ======= ======= Compass Diversified Holdings Condensed Consolidated Table of Cash Flows Available for Distribution and Reinvestment ("CAD") (unaudited) Three Months Three Months Ended Ended (in thousands) March 31, 2009 March 31, 2008 -------------- -------------- Net loss $(27,318) $(795) Adjustment to reconcile net loss to cash provided by operating activities: Depreciation and amortization 8,400 9,191 Amortization of debt issuance costs 470 486 Impairment expense 59,800 - Supplemental put expense (8,159) 2,318 Loss on debt repayment 3,652 - Noncontrolling stockholder notes and other 840 525 Noncontrolling interest (14,915) (290) Deferred taxes (24,780) (1,445) Changes in operating assets and liabilities 27,834 20,170 ------ ------ Net cash provided by operating activities 25,824 30,160 Plus: Unused fee on revolving credit facilities (1) 855 729 Staffmark integration and restructuring expenses 1,891 1,575 Changes in operating assets and liabilities (27,834) (20,170) Less: Maintenance capital expenditures (2) 1,114 2,416 ----- ----- Estimated cash flow available for distribution $(378) $9,878 ===== ====== Distribution paid in April 2009/2008 $10,719 $10,246 ======= ======= (1) Represents the commitment fee on the unused portion of the Revolving Credit Facilities. (2) Represents maintenance capital expenditures that were funded from operating cash flow and excludes approximately $2.3 million of growth capital expenditures for the quarter ended Mar. 31, 2008.
SOURCE Compass Diversified Holdings