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Compass Diversified Holdings Reports Second Quarter 2012 Financial Results

Compass Diversified Holdings Reports Second Quarter 2012 Financial Results

Cash Flow Available for Distribution and Reinvestment Increases 26.6% to $23.3 Million

Compass Diversified has announced today its consolidated operating results for the three and six months ended June 30, 2012.

Second Quarter 2012 Highlights

Generated Cash Flow Available for Distribution and Reinvestment ("CAD" or "Cash Flow") of $23.3 million for the second quarter of 2012

Reported net income of $2.2 million for the second quarter of 2012

Paid a second quarter 2012 cash distribution of $0.36 per share in July 2012, bringing cumulative distributions paid to $8.1552 per share since CODI's IPO in May of 2006

Exercised option to expand term loan facility and amended pricing terms and

Completed the sale of our majority-owned subsidiary, HALO Holding Corporation ("HALO").

Alan Offenberg, CEO of Compass Group Diversified Holdings LLC, commented, "During the second quarter, CODI delivered strong financial results that exceeded management's expectations with an increase in Cash Flow of 26.6% compared to the year-earlier period. We continue to leverage the leadership position and comparative financial strength of our subsidiaries to expand their relative market share with particularly strong results at Fox and Liberty where we posted double-digit revenue growth. Our results for the quarter also reflect notable contributions from our newest platform businesses, Arnold Magnetic and CamelBak, both of which were acquired less than a year ago."

Mr. Offenberg added, "As we maintain our focus on taking advantage of organic and acquisition-related growth opportunities, we further enhanced our financial flexibility in the quarter. Specifically, we expanded the size of our term loan facility by $30 million and reduced the interest rate by 1.25%. In addition, we consummated the sale of our HALO subsidiary. With a strong balance sheet including approximately $285 million in total liquidity at the end of the second quarter, CODI is in a strong position to capitalize on additional acquisitions under favorable valuations and terms as we have in the past. We also intend to continue to reinvest in our current subsidiaries to drive future performance while providing attractive cash distributions on behalf of our owners."

Operating Results

CODI reported Cash Flow (see note regarding use of Non-GAAP Financial Measures below) of $23.3 million for the quarter ended June 30, 2012, as compared to $18.4 million for the prior year comparable quarter. CODI's weighted average number of shares outstanding for the quarter ended June 30, 2012 and June 30, 2011 was approximately 48.3 million and 46.7 million, respectively.

The improvement in Cash Flow for the second quarter 2012 as compared to the year-earlier period was largely due to the inclusion of operating results from CamelBak and Arnold Magnetic, two platform businesses acquired by CODI on August 24, 2011 and March 5, 2012, respectively. Partially offsetting these factors, Cash Flow for the second quarter 2012 excluded results from the Company's Staffmark subsidiary, which was sold on October 17, 2011. In addition, results from the Company's HALO subsidiary were only partially reflected in the second quarter 2012 due to the sale of this platform business on May 1, 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 June 30, 2012 was $2.2 million, as compared to net income of $8.3 million for the quarter ended June 30, 2011. During the quarter ended June 30, 2012, CODI recorded a loss from discontinued operations of $1.7 million, consisting primarily of transaction-related costs from the sale of HALO. The Company also recorded higher interest expense for the second quarter of 2012 as compared to the prior year period due in large part to higher average debt balances, amortization of original issue discount and changes in the fair value of interest rate swaps.

Liquidity and Capital Resources

As of June 30, 2012, CODI had $16.0 million in cash and cash equivalents, $253.8 million outstanding on its term loan facility and $19.5 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 $270 million at June 30, 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 its 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%, and 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, whereby the Company received approximately $66.4 million of total proceeds from the sale at closing. The proceeds were used to repay borrowings under the Company's revolving credit facility.

Ochre House and Pinstripe create Strategic Workforce Planning Roadmap

As HR professionals look to be more strategic in a tough economy, there are still barriers to implementing Strategic Workforce Planning (SWP), according to leading international talent management and RPO firm, Ochre House.

In a series of global think tanks held in London, Holland, Germany, Singapore and San Francisco, Ochre House and its American partner Pinstripe brought together senior HRD’s of leading global organisations to discuss the success criteria for effective SWP.

With involvement from organisations including Arcelor Mittal, Barclays Wealth, Xerox, Gilead, BAE, Nokia, Shell, T-mobile, BT, Vodafone and Siemans, Ochre House and Pinstripe have developed a roadmap to SWP.

This framework – outlined in the whitepaper A Blueprint for Effective Strategic Workforce Planning – consists of seven key stages:

Create a vision for success that aligns talent with the strategic direction of the organisation

Engage stakeholders to build support for your vision

Start simple. It doesn’t need to be overly complicated

Define your deliverables in the early stages to give you clear goals to aim for

Identify the right internal talent to help execute your plan and achieve your vision

Leverage market intelligence and internal data

Iterate. SWP is a continuous process that must evolve so always leverage feedback

“As HR professionals we’ve long been talking about Strategic Workforce Planning, but with so many barriers to overcome and a lack of examples, there has been no clear guidance on how to implement it.” According to Sue Brooks, Managing Director at Ochre House. “Whilst there will never be a one-size-fits-all solution, we hope these seven pillars to success will give HR departments the guidance they need to develop a structured and fully strategic workforce plan.”


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