Compass Diversified Holdings Reports First Quarter 2011 Financial Results

WESTPORT, Conn., May 9, 2011 /PRNewswire/ -- Compass Diversified Holdings (NYSE: CODI) ("CODI" or the "Company"), an owner of leading middle market businesses, announced today its consolidated operating results for the three months ended March 31, 2011.

First Quarter 2011 Highlights

• Generated Cash Flow Available for Distribution and Reinvestment ("CAD" or "Cash Flow") of $14.3 million for the first quarter of 2011;

• Reported a net loss of $6.6 million for the first quarter of 2011, which includes a $7.7 million non-cash impairment charge and a $3.2 million non-cash supplemental put accrual expense;

• Paid a first quarter 2011 cash distribution of $0.36 per share in April 2011, an approximate 6% increase from the previous quarterly distribution, bringing cumulative distributions paid to $6.3552 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 $14.3 million for the quarter ended March 31, 2011, as compared to $11.3 million for the comparable quarter of the prior year. CODI's weighted average number of shares outstanding for the quarter ended March 31, 2011 and March 31, 2010 was approximately 46.7 million and 36.6 million, respectively.

The improvement in Cash Flow for the first quarter 2011 as compared to the year-earlier period was due to higher revenue levels at a number of our businesses, which also resulted in greater operating leverage. In addition, the first quarter of 2011 was positively impacted by the inclusion of results from Circuit Express for the full period, which was acquired by our subsidiary, Advanced Circuits, on March 11, 2010, as well as the inclusion of results from Liberty Safe and ERGObaby, two new CODI platform businesses acquired on March 31, 2010 and September 16, 2010, respectively.

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 2007.

The net loss for the quarter ended March 31, 2011 was $6.6 million, as compared to a net loss of $15.3 million for the quarter ended March 31, 2010. During the quarter ended March 31, 2011, CODI recorded a $7.7 million non-cash impairment charge related to its ownership of American Furniture Manufacturing, which reflects a decline in the estimated current fair market value for this subsidiary due to the continued soft retail environment in the promotional furniture market. CODI also recorded a $3.2 million non-cash supplemental put accrual expense during the quarter ended March 31, 2011, based on the periodic review of current cash flow generation levels of its subsidiaries, as well as anticipated market multiples for those businesses in the event they were to be sold in the current environment. During the first quarter of 2010, the Company recorded a non-cash supplemental put accrual expense of $14.4 million.

As of March 31, 2011, CODI had $17.1 million in cash and cash equivalents on hand, $73.5 million outstanding on its term loan facility and $7.0 million outstanding under its $340 million revolving credit facility. The Company has no significant debt maturities until late 2012 and had borrowing availability of approximately $253 million at March 31, 2011 under its revolving credit facility.

On March 8, 2011, CODI's Board of Directors declared a first quarter distribution of $0.36 per share. The distribution was paid on April 12, 2011 to all holders of record as of March 29, 2011.

Commenting on the quarter, Alan Offenberg, CEO of Compass Diversified Holdings, said, "We are pleased to report strong operating results for the first quarter of 2011, which exceeded management's expectations.  During the quarter, CAD increased 26.7% to $14.3 million as we continue to expand the relative market share across our diverse family of niche businesses and generate significant operating leverage. We also benefitted from our accretive acquisitions in 2010. Based on our strong results combined with our future prospects, we paid a first quarter distribution of $0.36 per share, representing an increase of approximately 6% from our previous quarterly payout and the fourth distribution increase since CODI's IPO. As we maintain our focus on providing shareholders with attractive cash distributions, we intend to utilize our balance sheet strength to consummate favorable platform and add-on acquisitions while reinvesting in our current subsidiaries to maximize their long-term intrinsic value."

Conference Call

Management will host a conference call today 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) 874-1563 and the dial-in number for international callers is (719) 325-4814. The access code for all callers is 2083227. 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, 2011. 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 2083227.  

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") owns and manages a diverse family of established North American middle market businesses. Each of its eight subsidiaries is a leader in their niche market.  

CODI maintains controlling ownership interests in each of its subsidiaries 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 subsidiaries, contributing to their financial and operating flexibility.  CODI utilizes the cash flows generated by its subsidiaries to invest in the long-term growth of the Company and to make cash distributions to its owners.

Our subsidiaries 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.anodynemedicaldevice.com);

• The design and marketing of wearable baby carriers and related products (ERGObaby, www.ergobabycarriers.com);

• The design, manufacture and marketing of premium suspension products for mountain bikes and powered off-road vehicles (Fox Racing Shox, www.foxracingshox.com);

• The design, sourcing and fulfillment of logo based promotional products (Halo Lee Wayne, www.haloleewayne.com);

• The design and manufacture of premium home and gun safes (Liberty Safe, www.libertysafe.com); and

• The provision of temporary staffing services, operating approximately 300 locations in 29 states (Staffmark, www.staffmark.com).

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, 2010 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.

SOURCE Compass Diversified Holdings