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Compass Diversified Holdings, an owner of leading middle market businesses, announced today its consolidated operating results for the three months ended June 30, 2015.
Second Quarter 2015 Highlights
- Generated Cash Flow Available for Distribution and Reinvestment ("CAD" or "Cash Flow") of $27.0 million for the second quarter of 2015;
- Reported net income of $26.6 million for the second quarter of 2015;
- Paid a second quarter 2015 cash distribution of $0.36 per share in July 2015, bringing cumulative distributions paid to $12.4752 per share since CODI's IPO in May of 2006;
- Consummated the platform acquisition of Fresh Hemp Foods Ltd. ("Manitoba Harvest") subsequent to the quarter end; and
- Completed the sale of our CamelBak Products, LLC ("CamelBak") subsidiary subsequent to the quarter end.
"During the second quarter, we generated strong results that demonstrate the leadership position and comparative financial strength of our middle market businesses," said Alan Offenberg, CEO of Compass Diversified Holdings. "Our performance exceeded management's expectations as Cash Flow, which benefitted from our recent acquisitions, more than doubled compared to the year ago period and covered our distribution. Our branded consumer and niche industrial businesses combined to produce solid revenue and earnings growth, underscoring our efforts to expand their relative market share."
Offenberg added, "We continued to take advantage of market opportunities by completing two transactions subsequent to the end of the second quarter. First, we acquired Manitoba Harvest, a pioneer and global leader in branded, hemp-based foods. With a business operating in a large and expanding marketplace, growing cash flow levels and an experienced management team, Manitoba Harvest possesses several qualities that meet our acquisition criteria. And second, following a successful partnership, we consummated the sale of our CamelBak subsidiary at an attractive valuation that significantly strengthened our liquidity position and provided value to our shareholders. With our strong balance sheet, we remain disciplined in pursuing future acquisitions while reinvesting in our current subsidiaries to drive future performance."
Operating Results CODI reported Cash Flow (see Note Regarding Use of Non-GAAP Financial Measures below) of $27.0 million for the quarter ended June 30, 2015, as compared to $12.5 million for the prior year's comparable quarter. CODI's weighted average number of shares outstanding for the quarters ended June 30, 2015 and June 30, 2014 were 54.3 million and 48.3 million, respectively.
Cash Flow for the second quarter of 2015 reflects year-over-year growth in the Company's Ergobaby, American Furniture Manufacturing, Advanced Circuits, Liberty Safe, Tridien, and CamelBak businesses, partially offset by a decline at the Company's Arnold Magnetics business. In addition, the year-over-year growth includes the results from SternoCandleLamp and Clean Earth, each acquired during the second half of 2014.
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 of our businesses for the periods during which CODI owned them. However, Cash Flow excludes the gains from monetizing interests in CODI's subsidiaries, which have totaled approximately $340 million since going public in 2006. Subsequent to the quarter end, CODI anticipates recording a gain ranging between $150 million and $170 million from the sale of CamelBak.
Net income for the quarter ended June 30, 2015 was $26.6 million, as compared to net income of $12.3 million for the quarter ended June 30, 2014. During the second quarter of 2015, CODI's equity method investment in Fox Factory Holding Corp. ("FOX", Nasdaq: FOXF) increased $11.2 million. The net income during the quarter ended June 30, 2014 included results of FOX which was deconsolidated from the financial statements in July 2014.
For the six month period ended June 30, 2015, CODI reported net income of $1.3 million, as compared to net income of $19.7 million for the six months ended June 30, 2014, which included results from FOX until its deconsolidation in July 2014.
Liquidity and Capital Resources As of June 30, 2015, CODI had approximately $25.4 million in cash and cash equivalents, $322 million outstanding on its term loan facility and $189 million of borrowings under its revolving credit facility. The Company has no significant debt maturities until 2019 and had net borrowing availability of approximately $206 million at June 30, 2015 under its revolving credit facility. Subsequent to the acquisition of Manitoba Harvest and the sale of CamelBak, the Company expects to have no outstanding borrowings under its $400 million revolving credit facility. In addition, the Company's equity investment in its former subsidiary FOX is valued at $243 million at June 30, 2015.
Second Quarter 2015 Distribution On July 9, 2015, CODI's Board of Directors declared a second quarter distribution of $0.36 per share. The cash distribution was paid on July 29, 2015 to all holders of record as of July 22, 2015. Since its IPO in May of 2006, CODI has paid a cumulative distribution of $12.4752 per share.
Conference Call Management will host a conference call on Thursday, August 6, 2015 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 (855) 212-2368(855) 212-2368 and the dial-in number for international callers is (315) 625-6886(315) 625-6886. The access code for all callers is 72682762. A live webcast will also be available on the Company's website atwww.compassdiversifiedholdings.com.
A replay of the call will be available through August 13, 2015. To access the replay, please dial (855) 859-2056(855) 859-2056 in the U.S. and (404) 537-3406(404) 537-3406 outside the U.S., and then enter the access code 72682762.
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. 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 owns and manages a diverse family of established North American middle market businesses. Each of its current subsidiaries is a leader in its 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 shareholders.
As of August 5, 2015, our nine majority-owned subsidiaries are engaged in the following lines of business:
- The manufacture of quick-turn, small-run and production rigid printed circuit boards (Advanced Circuits);
- The design and manufacture of promotionally priced upholstered furniture (American Furniture Manufacturing);
- 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);
- The manufacture of engineered magnetic solutions for a wide range of specialty applications and end-markets (Arnold Magnetic Technologies);
- Environmental services for a variety of contaminated materials including soils, dredged material, hazardous waste and drill cuttings (Clean Earth);
- The design and marketing of wearable baby carriers, strollers and related products (Ergobaby);
- The design and manufacture of premium home and gun safes (Liberty Safe);
- The manufacture and marketing of branded, hemp-based food products (Manitoba Harvest Hemp Foods); and
- The manufacture and marketing of portable food warming fuel and creative table lighting solutions for the foodservice industry (SternoCandleLamp).