CODI - Compass Diversified Holdings

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Compass Diversified Holdings Reports 2008 Second Quarter Financial ResultsAugust 11, 2008 6:00 AM ET


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Net Income Increased to $72.6 million, from $2.5 million for the Prior Year Period

WESTPORT, Conn., Aug. 11 /PRNewswire-FirstCall/ -- Compass Diversified Holdings CODI ("CODI" or the "Company"), a leading acquirer and manager of middle market businesses, announced today its consolidated operating results for the three and six months ended June 30, 2008.

2008 Second Quarter Highlights include:

-- Increase in Net Income in the current year quarter to $72.6 million from $2.5 million for the comparable prior year period, driven by the successful sale of two subsidiary companies for a combined gain to CODI of approximately $72.3 million;

-- Generation of Cash Flow Available for Distribution and Reinvestment ("Cash Flow" or "CAD") of $13.9 million, up from $9.4 million in the prior year quarter, a 47.7 % increase;

-- Acquisition of more than 200,000 shares of CODI in the open market by the Company's Board of Directors and management team since May 15, 2008; and

-- Declaration of cash distribution of $0.325 per share for the second quarter.

CODI increased its Cash Flow (see note regarding use of Non-GAAP Financial Measures below) to $13.9 million for the quarter ended June 30, 2008, as compared to $9.4 million for the prior year period. On a trailing twelve month basis, CODI's Cash Flow for the period ending June 30, 2008 was $54.3 million. CODI's weighted average number of shares for the quarter ending June 30, 2008, the quarter ending June 30, 2007 and the twelve months ending June 30, 2008 were approximately 31.5 million, 26.8 million and 31.5 million, respectively.

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 for each of our subsidiaries for the periods during which CODI owned them. However, Cash Flow excludes the gains from sales of businesses.

Net income for the quarter ended June 30, 2008 was $72.6 million, as compared to $2.5 million for the quarter ended June 30, 2007. This increase primarily was due to the sale of two subsidiary businesses, Silvue Technologies Group, Inc. ("Silvue") and Aeroglide Holdings Inc. ("Aeroglide"), in June of 2008, which collectively produced $72.3 million in gains.

As of June 30, 2008, CODI had approximately $100.2 million in cash and cash equivalents and approximately $300 million in availability under its revolving credit facility. The Company has no significant debt maturities until 2012.

Based on the strength of the Company's performance, on July 10, 2008, CODI's Board of Directors declared a distribution of $0.325 per share, which was paid on July 29, 2008 to all CODI shareholders of record as of July 24, 2008.

Commenting on the quarter, Joe Massoud, CEO of Compass Diversified Holdings, said, "As a whole, our current family of subsidiary companies performed very well in the second quarter of 2008. We are pleased with the 47.7% growth in Cash Flow as compared to the prior year, despite a difficult economic environment. For the full year, given how we currently see our businesses responding to the economy, we expect our company to produce between $51 million and $56 million of Cash Flow. These estimates assume retention of the substantial cash on our balance sheet and no additional deployment of this significant capital capacity prior to the end of the year. Should we be able to consummate an accretive acquisition this year, which we hope to do, 2008 Cash Flow would be higher."

Massoud continued, "From a shareholder point of view, we are currently valued at less than seven times the midpoint of our 2008 estimate for Cash Flow. We consider this an attractive valuation for a business with our demonstrated track record and prospects for growth. We also pay our shareholders a current yield of approximately 11%, while reinvesting the substantial remainder of our Cash Flow into our business on behalf of our shareholders. In addition, we provide an extraordinarily high level of reporting transparency, allowing shareholders to clearly understand our earnings and cash flow, as well as our ability to continue to pay and grow these distributions."

"In the second quarter, we completed the sale of two subsidiary companies, Aeroglide and Silvue. In combination with our sale of Crosman in early 2007, we have now proven the value of our underlying businesses through the generation of over $100 million in gains for our shareholders in just over two years. In addition, these sales provide substantial liquidity for us at a time when the environment provides us ample opportunities to take advantage of our unique financing model. Our current experience is that we are virtually without competitors in terms of our ability to make attractive acquisitions without dependence on the credit markets. We hope to acquire at least one additional platform subsidiary in 2008," concluded Massoud.