Compass Diversified Holdings, an owner of leading middle market businesses, announced today its cons
Compass Diversified Holdings, an owner of leading middle market businesses, announced today its consolidated operating results for the three and twelve months ended December 31, 2011.
Fourth Quarter 2011 Highlights
Generated Cash Flow Available for Distribution and Reinvestment ("CAD" or "Cash Flow") of $10.7 million for the fourth quarter of 2011 and $69.0 million for the full year 2011
Reported net income of $58.6 million for the fourth quarter of 2011, which includes a $20.1 million non-cash impairment charge and a $88.6 million gain on the sale of our Staffmark subsidiary, and net income of $72.8 million for the full year 2011
Paid a fourth quarter 2011 cash distribution of $0.36 per share in January 2012, bringing cumulative distributions paid to $7.4352 per share since CODI's IPO in May of 2006
Executed a new credit facility for $515 million
Completed the sale of our Staffmark subsidiary and
Consummated the acquisition of Orbit Baby, Inc. ("Orbit Baby") by the Company's ERGObaby subsidiary.
Commenting on the year, Alan Offenberg, CEO of Compass Group Diversified Holdings LLC, stated, "During 2011, in addition to generating Cash Flow of $69.0 million for the year, the Company accomplished several important strategic objectives which strengthen our future prospects. Firstly, we actively grew our family of businesses, including the acquisition of CamelBak Products, a company that fits very nicely within our criteria for subsidiary businesses, and the addition of Orbit Baby to our existing ERGObaby subsidiary. Secondly, we made the decision to sell our longstanding subsidiary, Staffmark, in October 2011. The attractive valuation we received allowed us to significantly strengthen our balance sheet, while also substantially reducing our earnings and cash flow volatility over the long run. Thirdly, we made significant investments in capital expenditures, totaling $21.8 million in 2011, to provide for the long-term sustained growth of our subsidiary companies. Finally, we refinanced our long-term debt, increasing our financial flexibility and capability to further grow our business. And while the combination of these strategic initiatives had an adverse impact on our fourth quarter financial results, nearly all of our diverse businesses continue to meet or exceed our expectations and we remain confident that our efforts will allow CODI to continue to deliver superior shareholder returns over the long term."
Mr. Offenberg added, "Consistent with our strategy to regularly add profitable companies to our family of businesses which have a real reason to exist, we also recently purchased Arnold Magnetic Technologies, a leading global manufacturer of engineered magnetic solutions for a wide range of specialty applications and end-markets. Arnold Magnetic is immediately accretive to CAD, and represents our fourth acquisition of a new platform business in the past two years and increases our current family of subsidiary companies to nine. Going forward, CODI is in a strong position to drive future performance, as we remain committed to drawing upon our substantial liquidity to capitalize on organic and acquisition-related growth opportunities that create value for our owners."
CODI reported Cash Flow (see note regarding use of Non-GAAP Financial Measures below) of $10.7 million for the quarter ended December 31, 2011, as compared to $21.4 million for the prior year comparable quarter. CODI's Cash Flow for the year ended December 31, 2011 was $69.0 million as compared to $71.3 million for the prior year period. CODI's weighted average number of shares outstanding for the quarter and twelve months ended December 31, 2011 was approximately 48.3 million and 47.3 million, respectively, as compared to 44.1 million and 40.9 million for the quarter and twelve months ended December 31, 2010, respectively.
CODI's Cash Flow for the fourth quarter and full year 2011 was lower as compared to the corresponding year-earlier periods as Staffmark's results were only partially reflected in 2011 as a result of the sale on October 17, 2011. In addition, in the fourth quarter of 2011, CODI recorded an inventory obsolescence charge of $1.7 million at its American Furniture Manufacturing subsidiary ("AFM"), largely reflecting the discontinuation of certain SKUs at this subsidiary. Based on the proactive measures taken to date aimed at reducing AFM's cost structure and working capital requirements, CODI expects this subsidiary to generate positive Cash Flow in 2012. CODI's total maintenance capital expenditures were approximately $4.0 million and $1.3 million higher for the year and quarter ended December 31, 2011, respectively, when compared to the corresponding prior year periods, as the Company took advantage of certain tax bonus depreciation incentives available in 2011. Partially offsetting these factors, CAD for the full year 2011 was positively impacted by the strong performance at a majority of CODI's existing subsidiaries as well as the full inclusion of operating results from Liberty Safe and ERGObaby, two platform businesses acquired by CODI on March 31, 2010 and September 16, 2010, respectively. CODI also benefitted in 2011 from the partial inclusion of results from CamelBak, a platform business acquired by CODI on August 24, 2011.
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. For the quarter ended December 31, 2011, CODI recorded a gain of $88.6 million from the sale of Staffmark. Including Staffmark, CODI has realized approximately $198 million in gains since 2007.
Net income for the quarter ended December 31, 2011 was $58.6 million, as compared to net income of $0.7 million for the quarter ended December 31, 2010. Net income for the three months ended December 31, 2011 includes the aforementioned gain on the sale of Staffmark, partially offset by a $20.1 million non-cash impairment charge for the Company's AFM subsidiary, reflecting a decline in the estimated current fair market value for this subsidiary due to the continued soft retail environment in the promotional furniture market. For the full year ended December 31, 2011, CODI reported net income of $72.8 million as compared to a net loss of $44.8 million for the prior year period. During 2010, CODI recorded a $38.8 million non-cash impairment charge for the Company's American Furniture Manufacturing subsidiary.
Liquidity and Capital Resources
As of December 31, 2011, CODI had $132.4 million in cash and cash equivalents, $225 million outstanding on its term loan facility and no borrowings outstanding under its $290 million revolving credit facility. The Company has no significant debt maturities until October 2016 and had borrowing availability of approximately $287 million at December 31, 2011 under its revolving credit facility.
On October 17, 2011, CODI completed the sale of Staffmark whereby the Company received approximately $217 million of total proceeds from the sale at closing. The proceeds were used to repay substantially all of the outstanding debt under CODI's previous revolving credit facility
On October 27, 2011, CODI executed a new credit facility, which includes a revolving credit facility totaling $290 million and a term loan facility in the amount of $225 million. The two facilities combined for $515 million in new debt financing and replaced the Company's previous revolving credit facility and term loan facility.
Fourth Quarter 2011 Distribution
On January 5, 2012, CODI's Board of Directors declared a fourth quarter distribution of $0.36 per share. The cash distribution was paid on January 30, 2012 to all holders of record as of January 23, 2012. Since its IPO in May of 2006, CODI has paid a cumulative distribution of $7.4352 per share.