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Compass Diversified Holdings Reports First Quarter 2012 Financial Results

Compass Diversified Holdings Reports First Quarter 2012 Financial Results

Generates Cash Flow Available for Distribution and Reinvestment of $16.6 Million

Compass Diversified Holdings has announced its consolidated operating results for the three months ended March 31, 2012.

First Quarter 2012 Highlights

•              Generated Cash Flow Available for Distribution and Reinvestment ("CAD" or "Cash Flow") of $16.6 million for the first quarter of 2012

•              Reported net income of $0.9 million for the first quarter of 2012

•              Paid a first quarter 2012 cash distribution of $0.36 per share in April 2012, bringing cumulative distributions paid to $7.7952 per share since CODI's IPO in May of 2006 and

•              Consummated the platform acquisition of Arnold Magnetic Technologies Holdings Corporation ("Arnold").

"We are pleased to report strong financial results for the first quarter of 2012 as CAD increased approximately 16% compared to the year-earlier period," stated Alan Offenberg, CEO of Compass Group Diversified Holdings LLC. "During the quarter, we maintained our focus on taking advantage of the relative operating and financial strength of our subsidiaries to increase market share. In particular, we are pleased by the performance at our CamelBak subsidiary, which reported strong sales following the acquisition of this business less than a year ago. We also realized contributions from Arnold, our newest platform company acquired during the first quarter. Arnold is an exciting addition to the CODI family and represents our fourth platform acquisition over the past two years."

Mr. Offenberg added, "The success we have achieved in acquiring companies with strong and defensible market positions under favorable valuations and terms has significantly strengthened CODI's growth prospects. With substantial liquidity, we are poised to further expand our diverse mix of niche leading businesses utilizing our disciplined approach while reinvesting in our current subsidiaries to enhance their future performance."

Operating Results

CODI reported Cash Flow (see note regarding use of Non-GAAP Financial Measures below) of $16.6 million for the quarter ended March 31, 2012, as compared to $14.3 million for the prior year comparable quarter. CODI's weighted average number of shares outstanding for the quarter ended March 31, 2012 and March 31, 2011 was approximately 48.3 million and 46.7 million, respectively.

The improvement in Cash Flow for the first quarter 2012 as compared to the year-earlier period was largely due to the inclusion of results from CamelBak, a platform businesses acquired by CODI on August 24, 2011, partially offset by the exclusion of results from the Company's Staffmark subsidiary, which was sold on October 17, 2011. CODI also benefitted from the partial inclusion of results from Arnold, a platform business acquired by CODI on March 5, 2012.

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 approximately $198 million since 2007.

Net income for the quarter ended March 31, 2012 was $0.9 million, as compared to a net loss of $6.6 million for the quarter ended March 31, 2011. During the quarter ended March 31, 2012, CODI expensed approximately $4.3 million of transaction costs related to its acquisition of Arnold and reversed approximately $1.5 million of its non-cash supplemental put accrual. During the first quarter of 2011, CODI recorded a non-cash supplemental put accrual expense of $3.2 million as well as a non-cash impairment charge of $7.7 million related to the Company's American Furniture Manufacturing subsidiary.

Liquidity and Capital Resources

As of March 31, 2012, CODI had $22.4 million in cash and cash equivalents, $224.4 million outstanding on its term loan facility and $80 million outstanding under its $290 million revolving credit facility. The Company has no significant debt maturities until October 2016 and had borrowing availability of approximately $209 million at March 31, 2012 under its revolving credit facility.

On April 2, 2012, CODI exercised an option under its credit agreement, dated as of October 27, 2011, to increase the Term Loan Facility by $30 million. The Company's aggregate outstanding borrowings under its term loan facility increased to approximately $254.4 million after this borrowing. The net proceeds of the borrowing were used to repay existing borrowings under the Company's revolving credit facility. Concurrent with this increased term loan borrowing, CODI amended the pricing terms of its term loan facility. Under the terms of the amendment, amounts borrowed bear interest at LIBOR plus a margin of 5.00%, as compared to the previous margin of 6.00%. In addition, the LIBOR floor was reduced to 1.25% from 1.50%. All other terms of the credit agreement remain unchanged.

On May 1, 2012, CODI completed the sale of its majority owned subsidiary, HALO Branded Solutions, whereby the Company received approximately $66.5 million of total proceeds from the sale at closing. The proceeds were used to repay borrowings under the Company's revolving credit facility and left only $2.5 million of revolver borrowings outstanding after the sale.


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