Compass Diversified Holdings, the parent of CamelBak, Liberty Safe and Fox Factory, reported net income in the third quarter of $78.3 million, or $1.52 per share, benefiting from a non-recurring gain.
The quarter included a $61.3 million supplemental put expense reversal in connection
with the previously announced termination of the Supplemental Put
Agreement on July 1, 2013.
Other highlights of the quarter:
- Generated Cash Flow Available for
Distribution and Reinvestment (“CAD” or “Cash Flow”) of $19.4 million
for the third quarter of 2013;
a third quarter 2013 cash distribution of $0.36 per share in October
2013, bringing cumulative distributions paid to $9.9552 per share since
CODI's IPO in May of 2006;
- Exercised option to expand revolving credit facility; and
debt and equity proceeds totaling approximately $142.4 million from the
initial public offering (IPO) of CODI's subsidiary, Fox Factory Holding
Corp. (“FOX”), while maintaining a majority ownership in FOX.
financial results for the third quarter of 2013 were consistent with
management's expectations as we continue to capitalize on the relative
operating and financial strength of our leading middle market
businesses,” stated Alan Offenberg, CEO of Compass Group Diversified
Holdings LLC. “During the quarter, our Liberty subsidiary delivered
another record performance, increasing both revenue and profitability
for the third consecutive quarter. In addition, our FOX subsidiary
completed its IPO, a major milestone for our Company. CODI generated
total net proceeds, including the repayment of intercompany debt, of
approximately $142.4 million from the offering. Importantly, we continue
to hold a majority interest in FOX, enabling CODI to participate in the
company's future success. Although Cash Flow for the third quarter was
reduced as a result of FOX's successful IPO, this transaction
demonstrates the considerable strength of CODI's business model and
highlights our ability to unlock significant value for shareholders.
With a strong balance sheet, we intend to continue to invest in
high-return organic growth initiatives and pursue attractive platform
and add-on acquisitions under favorable valuations and terms that are
accretive to Cash Flow.”
CODI reported Cash Flow (see note regarding use of Non-GAAP Financial Measures below) of $19.4 million for the quarter ended September 30, 2013, as compared to $22.8 million for the prior year comparable quarter. CODI's weighted average number of shares outstanding for both the quarter ended September 30, 2013 and September 30, 2012 was approximately 48.3 million.
Cash Flow for the third quarter of 2013 reflects year-over-year growth in the Company's Liberty Safe and Arnold Magnetic businesses, offset by the impact on Cash Flow from the IPO of CODI's FOX subsidiary business completed on August 13, 2013. Subsequent to the IPO, FOX generated Cash Flow of $7.3 million, which was excluded in CODI's calculation of CAD for the quarter ended September 30, 2013. In connection with the offering, CODI sold an aggregate of 5,800,238 shares of FOX's common stock, generating net proceeds from equity of approximately $80.9 million while maintaining a majority ownership in FOX upon completion of the IPO. In addition, FOX repaid in full the outstanding balance of approximately $61.5 million under its previous credit facility with CODI.
For the nine month period ended September 30, 2013, CODI's Cash Flow increased to $63.7 million, as compared to $62.8 million for the nine months ended September 30, 2012. CODI's weighted average number of shares outstanding for the nine month periods ended September 30, 2013 and September 30, 2012 was approximately 48.3 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 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 more than $270 million since going public in 2006.
Net income for the quarter ended September 30, 2013 was $78.3 million, as compared to net income of $6.4 million for the quarter ended September 30, 2012. CODI reversed approximately $61.3 million of supplemental put expense in connection with the termination of the Supplemental Put Agreement on July 1, 2013.
For the nine month period ended September 30, 2013, CODI reported net income of $83.9 million, as compared to net income of $9.5 million for the nine months ended September 30, 2012.
Liquidity and Capital Resources
As of September 30, 2013, CODI had approximately $151.2 million in cash and cash equivalents, $280.5 million outstanding on its term loan facility and no outstanding borrowings under its $320 million revolving credit facility. The Company has no significant debt maturities until 2017 and had borrowing availability of approximately $318 million at September 30, 2013 under its revolving credit facility.
On August 6, 2013, CODI exercised an option under its credit agreement to expand its revolving credit facility by $30 million, increasing the total amount available under the facility to $320 million subject to borrowing base restrictions. The Company intends to utilize the incremental borrowing capacity under the revolving credit facility to fund future growth opportunities and provide for working capital and general corporate purposes.
On August 13, 2013, CODI's FOX subsidiary closed its initial public offering of an aggregate of 9,857,143 shares of common stock, which included the exercise in full of the underwriters' over-allotment option, at an initial offering price of $15.00 per share. As a selling stockholder in this offering, CODI generated net proceeds from equity of approximately $80.9 million. In addition, FOX repaid in full the outstanding balance of approximately $61.5 million under its previous credit facility with CODI. Based on the Company's debt and equity interests in FOX, CODI generated total proceeds of approximately $142.4 million from the FOX IPO and continues to maintain a majority ownership in FOX.
Third Quarter 2013 Distribution
On October 10, 2013, CODI's Board of Directors declared a third quarter distribution of $0.36 per share. The cash distribution was paid on October 30, 2013 to all holders of record as of October 23, 2013. Since its IPO in May of 2006, CODI has paid a cumulative distribution of $9.9552 per share.
CODI'S is 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.tridien.com);
- The manufacture of engineered magnetic solutions for a wide range of specialty applications and end-markets (Arnold Magnetic Technologies, www.arnoldmagnetics.com);
- The design and manufacture of personal hydration products for outdoor, recreation and military use (CamelBak Products, www.camelbak.com);
- The design and marketing of wearable baby carriers, strollers and related products (Ergobaby, www.ergobaby.com);
- The design, manufacture and marketing of premium suspension products for mountain bikes and powered off-road vehicles (FOX, www.ridefox.com);
- The design and manufacture of premium home and gun safes (Liberty Safe, www.libertysafe.com).