Compass Diversified Holdings Reports Second Quarter 2010 Financial Results

WESTPORT, Conn., Aug. 9 /PRNewswire-FirstCall/ -- Compass Diversified Holdings (Nasdaq: CODI) ("CODI" or the "Company"), an owner of leading middle market businesses, announced today its consolidated operating results for the three and six months ended June 30, 2010.

Second Quarter 2010 Highlights

• Generated Cash Flow Available for Distribution and Reinvestment ("CAD" or "Cash Flow") of $14.8 million for the second quarter of 2010;
• Reported  a net loss of $0.7 million for the second quarter of 2010;
• Paid a second quarter 2010 cash distribution of $0.34 per share in July 2010, bringing cumulative distributions paid to $5.3152 per share since CODI's IPO in May of 2006;
• Announced the platform acquisition of Liberty Safe and Security Products, Inc. ("Liberty Safe"); and
• Completed a primary offering of 5.25 million shares.

CODI reported Cash Flow (see note regarding use of Non-GAAP Financial Measures below) of $14.8 million for the quarter ended June 30, 2010, as compared to $7.8 million for the prior year comparable quarter. CODI's weighted average number of shares outstanding for the quarter ended June 30, 2010 and June 30, 2009 was approximately 41.0 million and 32.8 million, respectively.

The significant improvement in Cash Flow for the second quarter of 2010 compared to the year-earlier period was due to strengthening revenue trends at a number of CODI's subsidiaries, combined with a continued focus on cost containment. In addition, the second quarter of 2010 included results from the add-on acquisition of Circuit Express on March 11, 2010 as well as the platform acquisition of Liberty Safe on March 31, 2010.

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 June 30, 2010 was $0.7 million, as compared to a net loss of $0.2 million for the quarter ended June 30, 2009. This was primarily due to the recording of a non-cash supplemental put expense of $2.6 million for the current quarter, as compared to an accrual reversal of $0.3 million for the comparable prior year quarter.

As of June 30, 2010, CODI had $15.1 million in cash and cash equivalents on hand, $75.0 million outstanding on its term debt facility and $13.2 million outstanding under its $340 million revolving credit facility. The Company has no significant debt maturities until 2013.

In April 2010, CODI completed a public offering of 6,575,000 trust shares, representing a primary offering of 5,250,000 trust shares by CODI and a secondary offering of 1,325,000 trust shares by a selling shareholder. CODI raised approximately $75.0 million of net proceeds from its portion of the offering and did not receive any proceeds from the secondary offering. CODI used $70 million of the proceeds to repay outstanding borrowings under its revolving credit facility.

On July 8, 2010, CODI's Board of Directors declared a distribution of $0.34 per share. The distribution was paid on July 30, 2010 to all holders of record as of July 23, 2010.

Commenting on the quarter, Joe Massoud, CEO of Compass Diversified Holdings, said, "We are pleased that our results for the second quarter of 2010 exceeded our expectations, as we experienced year over year increases in revenue and Cash Flow of 40.6% and 90.4%, respectively. These results were driven by efforts at our subsidiary companies to expand relevant market shares during the recent economic downturn, as well as the maintenance of tight operating cost controls during this expansion phase to create operating leverage.  Our results were also positively impacted by the accretive acquisitions of Circuit Express, a strategic add-on for our Advanced Circuits subsidiary, and Liberty Safe, our newest platform company. With a strong balance sheet, including approximately $200 million in available liquidity, we remain optimistic in our outlook for the acquisition of additional companies to our platform."

Conference Call

Management will host a conference call today at 5:00 p.m. ET to discuss the latest corporate developments and financial results. The dial-in number for callers in the U.S. is (888) 500-6974 and the dial-in number for international callers is (719) 457-1529. The access code for all callers is 7694467. 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 August 16, 2010. 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 7694467.

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 seven 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's success is driven by its disciplined approach in identifying and evaluating potential acquisition opportunities, proactive and consistent engagement with subsidiary management teams and, in certain cases, the monetization of its subsidiaries when it believes that doing so will maximize shareholder returns. 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 Subsidiary Businesses

Each of our companies is a leader in their respective market niche.  

Based in Ecru, MS, American Furniture Manufacturing is a manufacturer of promotionally priced upholstered furniture.  Visit www.americanfurn.net.

Based in Coral Springs, FL, Anodyne Medical Device (also doing business and known as Tridien Medical) is a designer and manufacturer of medical therapeutic support surfaces and other wound treatment devices.  Visit www.anodynemedicaldevice.com.

Based in Aurora, CO, Advanced Circuits is a manufacturer of quick-turn, prototype and production rigid printed circuit boards ("PCBs").  Visit www.advancedcircuits.com.

Based in Watsonville, CA, Fox Racing Shox is a designer, manufacturer and marketer of suspension products for mountain bikes and powered off-road vehicles.  Visit www.foxracingshox.com.

Based in Sterling, IL, Halo Lee Wayne is a one-stop resource for design, sourcing and fulfillment of promotional products.  Visit www.haloleewayne.com.

Based in Payson, UT, Liberty Safe is a designer and manufacturer of premium home and gun safes.  Visit www.libertysafe.com.

Based in Cincinnati, OH, Staffmark is a provider of temporary staffing services, operating approximately 300 locations in 29 states.  Visit 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, 2009 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.

SOURCE Compass Diversified Holdings