Attached files
| file | filename |
|---|---|
| 8-K - FORM 8-K - Compass Group Diversified Holdings LLC | d342432d8k.htm |
| EX-2.1 - STOCK PURCHASE AGREEMENT - Compass Group Diversified Holdings LLC | d342432dex21.htm |
| EX-99.2 - PRESS RELEASE - Compass Group Diversified Holdings LLC | d342432dex992.htm |
Exhibit 99.1
Compass Diversified Holdings
PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
(Unaudited)
The following unaudited pro forma condensed combined financial statements are presented to show the effect on the historical condensed combined financial statements of Compass Diversified Holdings’ (the “Company”) of the sale (the “HALO Disposition”) of the Company’s majority owned subsidiary, HALO Holding Corporation (“HALO”) for a total enterprise value of $76.5 million, and estimated net proceeds of approximately $66.4 million at closing, adjusted for noncontrolling shareholders’ portion of the proceeds of $3.9 million, transaction and sale related costs of $4.0 million, a working capital adjustment of $1.3 million and customary escrow amounts. The net proceeds due to the Company do not reflect an additional approximately $0.9 million of the Company’s share of tax proceeds and an additional $0.7 million of proceeds being held in escrow, both of which the Company expects to receive in the future. The HALO Disposition is further described in Item 2.01 of this Current Report on Form 8-K.
The following unaudited condensed combined pro forma statements of operations for the years ended December 31, 2011, 2010 and 2009 and notes thereto are based on the assumption that the HALO Disposition was completed on January 1, 2009. The pro forma balance sheet as of December 31, 2011 and notes thereto are based on the assumption that the HALO Disposition was completed on December 31, 2011.
The “as reported” financial information for both Compass Diversified Holdings and HALO are derived from the audited financial statements of the Company for the years ended December 31, 2011, 2010 and 2009 as filed on Form 10-K dated March 7, 2012, March 11, 2011 and March 9, 2010, respectively.
The unaudited pro forma financial information is for informational purposes only and does not purport to present what the Company’s results would actually have been had this transaction occurred on the dates presented or to project the results of operations or financial position for any future period. The pro forma adjustments are based upon available information and certain assumptions that we believe are reasonable. You should read these unaudited pro forma condensed combined financial statements in conjunction with the accompanying notes, the attached HALO Purchase Agreement, and the consolidated financial statements for the Company, including the notes thereto as previously filed.
The unaudited pro forma financial information is prepared in accordance with Article 11 of Regulation S-X. The pro forma adjustments are described in the accompanying notes and are based upon information and assumptions available at the time of the filing of this Current Report on Form 8-K.
The pro forma adjustments to the statements of operations for all periods presented do not include the following:
| • | The non-recurring gain or loss on the HALO Disposition and the related tax effect. The gain or loss will be included in the Company’s results for the three and six month periods ended June 30, 2012; |
| • | Certain non-recurring transaction costs on closing of the sale estimated to be approximately $4.0 million; |
| • | The supplemental put expense (reversal) due to the inability to meaningfully or accurately reflect the impact on the supplemental put liability for the HALO Disposition using historical assumptions and estimates; and |
| • | Management fee adjustments due to the Company’s adjusted net assets not having been materially impacted by the HALO Disposition as the proceeds from the sale approximate the adjusted net assets disposed of which were used in the calculation of the management fee. |
| Compass Diversified Holdings Condensed Combined Pro Forma Balance Sheet at December 31, 2011 (unaudited) |
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| (in thousands) | HALO Disposition | |||||||||||||||
| Compass Diversified Holdings as Reported |
Less: HALO as Reported |
HALO Pro Forma Adjustments |
Pro Forma Combined Compass Diversified Holdings |
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| Assets |
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| Current assets: |
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| Cash and cash equivalents |
$ | 132,370 | $ | (397 | ) | $ | 66,433 | (a) | $ | 198,406 | ||||||
| Accounts receivable, net |
99,389 | (30,274 | ) | — | 69,115 | |||||||||||
| Inventories |
101,021 | (4,710 | ) | — | 96,311 | |||||||||||
| Prepaid expenses and other current assets |
27,441 | (4,683 | ) | 1,533 | (b) | 24,291 | ||||||||||
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| Total current assets |
360,221 | (40,064 | ) | 67,966 | 388,123 | |||||||||||
| Property, plant and equipment, net |
45,235 | (1,656 | ) | — | 43,579 | |||||||||||
| Goodwill |
245,340 | (39,773 | ) | — | 205,567 | |||||||||||
| Intangible assets, net |
358,104 | (30,034 | ) | — | 328,070 | |||||||||||
| Deferred debt issuance costs, net |
6,942 | — | — | 6,942 | ||||||||||||
| Other non-current assets |
14,064 | (175 | ) | — | 13,889 | |||||||||||
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| Total assets |
$ | 1,029,906 | $ | (111,702 | ) | $ | 67,966 | $ | 986,170 | |||||||
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| Liabilities and stockholders’ equity |
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| Current liabilities: |
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| Accounts payable and accrued expenses |
$ | 96,319 | $ | (23,419 | ) | $ | — | $ | 72,900 | |||||||
| Due to related party |
4,239 | — | — | 4,239 | ||||||||||||
| Current portion, long-term debt |
2,250 | — | — | 2,250 | ||||||||||||
| Current portion of supplemental put obligation |
13,675 | — | — | 13,675 | ||||||||||||
| Other current liabilities |
1,679 | — | — | 1,679 | ||||||||||||
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| Total current liabilities |
118,162 | (23,419 | ) | — | 94,743 | |||||||||||
| Supplemental put obligation |
35,814 | — | — | 35,814 | ||||||||||||
| Deferred income taxes |
62,484 | (13,396 | ) | — | 49,088 | |||||||||||
| Long-term debt |
214,000 | — | — | 214,000 | ||||||||||||
| Other non-current liabilities |
2,968 | — | — | 2,968 | ||||||||||||
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| Total liabilities |
433,428 | (36,815 | ) | — | 396,613 | |||||||||||
| Stockholders’ equity |
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| Stockholders’ equity |
497,509 | — | (3,209 | )(c) | 494,300 | |||||||||||
| Noncontrolling interest |
98,969 | (3,712 | ) | — | 95,257 | |||||||||||
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| Total stockholders’ equity |
596,478 | (3,712 | ) | (3,209 | ) | 589,557 | ||||||||||
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| Total liabilities and stockholders’ equity |
$ | 1,029,906 | $ | (40,527 | ) | $ | (3,209 | ) | $ | 986,170 | ||||||
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| Compass Diversified Holdings Condensed Combined Pro Forma Statement of Operations for the year ended December 31, 2011 (unaudited) |
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| Compass Diversified Holdings as Reported |
Less: HALO as Reported |
Pro Forma Combined Compass Diversified Holdings |
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| (in thousands, except per share data) | ||||||||||||
| Net sales |
$ | 777,538 | $ | (170,894 | ) | $ | 606,644 | |||||
| Cost of sales |
523,967 | (103,095 | ) | 420,872 | ||||||||
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| Gross profit |
253,571 | (67,799 | ) | 185,772 | ||||||||
| Operating expenses: |
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| Selling, general and administrative expense |
172,489 | (55,830 | ) | 116,659 | ||||||||
| Supplemental put expense |
11,783 | — | 11,783 | |||||||||
| Management fees |
16,783 | — | 16,783 | |||||||||
| Amortization expense |
24,507 | (2,435 | ) | 22,072 | ||||||||
| Impairment expense |
27,769 | — | 27,769 | |||||||||
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| Operating income |
240 | (9,534 | ) | (9,294 | ) | |||||||
| Other income (expense): |
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| Interest income |
33 | — | 33 | |||||||||
| Interest expense |
(12,643 | ) | — | (12,643 | ) | |||||||
| Amortization of debt issuance costs |
(1,951 | ) | — | (1,951 | ) | |||||||
| Loss on debt extinguishment |
(2,636 | ) | — | (2,636 | ) | |||||||
| Other income (expense), net |
106 | (57 | ) | 49 | ||||||||
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| Income (loss) from continuing operations before income taxes |
(16,851 | ) | (9,591 | ) | (26,442 | ) | ||||||
| Provision for income taxes |
9,123 | (2,264 | ) | 6,859 | ||||||||
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| Income (loss) from continuing operations |
(25,974 | ) | (7,327 | ) | (33,301 | ) | ||||||
| Income from discontinued operations, net of income tax |
10,194 | — | 10,194 | |||||||||
| Gain on sale of discontinued operations, net of income tax |
88,592 | — | 88,592 | |||||||||
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| Net income |
72,812 | (7,327 | ) | 65,485 | ||||||||
| Less: Income from continuing operations attributable to noncontrolling interest |
6,142 | (501 | ) | 5,641 | ||||||||
| Less: Income from discontinued operations attributable to noncontrolling interest |
1,711 | — | 1,711 | |||||||||
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| Net income attributable to Holdings |
$ | 64,959 | $ | (6,826 | ) | $ | 58,133 | |||||
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| Amounts attributable to Holdings: |
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| Income (loss) from continuing operations |
$ | (32,116 | ) | $ | (6,826 | ) | $ | (38,942 | ) | |||
| Income from discontinued operations, net of income tax |
8,483 | — | 8,483 | |||||||||
| Gain on sale of discontinued operations, net of income tax |
88,592 | — | 88,592 | |||||||||
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| Net income attributable to Holdings |
$ | 64,959 | $ | (6,826 | ) | $ | 58,133 | |||||
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| Basic and fully diluted income (loss) per share attributable to Holdings |
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| Continuing operations |
$ | (0.68 | ) | $ | (0.14 | ) | $ | (0.82 | ) | |||
| Discontinued operations |
2.05 | — | 2.05 | |||||||||
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| $ | 1.37 | $ | (0.14 | ) | $ | 1.23 | ||||||
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| Compass Diversified Holdings Condensed Combined Pro Forma Statement of Operations for the year ended December 31, 2010 (unaudited) |
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| Compass Diversified Holdings as Reported |
Less: HALO as Reported |
Pro Forma Combined Compass Diversified Holdings |
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| (in thousands, except per share data) | ||||||||||||
| Net sales |
$ | 664,599 | $ | (159,940 | ) | $ | 504,659 | |||||
| Cost of sales |
463,560 | (97,263 | ) | 366,297 | ||||||||
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| Gross profit |
201,039 | (62,677 | ) | 138,362 | ||||||||
| Operating expenses: |
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| Selling, general and administrative expense |
136,472 | (54,889 | ) | 81,583 | ||||||||
| Supplemental put expense |
32,516 | — | 32,516 | |||||||||
| Management fees |
15,076 | — | 15,076 | |||||||||
| Amortization expense |
19,442 | (2,419 | ) | 17,023 | ||||||||
| Impairment expense |
38,835 | — | 38,835 | |||||||||
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| Operating income |
(41,302 | ) | (5,369 | ) | (46,671 | ) | ||||||
| Other income (expense): |
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| Interest income |
20 | — | 20 | |||||||||
| Interest expense |
(9,695 | ) | — | (9,695 | ) | |||||||
| Amortization of debt issuance costs |
(1,789 | ) | — | (1,789 | ) | |||||||
| Other income (expense), net |
(186 | ) | 18 | (168 | ) | |||||||
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| Income (loss) from continuing operations before income taxes |
(52,952 | ) | (5,351 | ) | (58,303 | ) | ||||||
| Provision for income taxes |
9,400 | (881 | ) | 8,519 | ||||||||
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| Income (loss) from continuing operations |
(62,352 | ) | (4,470 | ) | (66,822 | ) | ||||||
| Income from discontinued operations, net of income tax |
17,582 | — | 17,582 | |||||||||
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| Net income (loss) |
(44,770 | ) | (4,470 | ) | (49,240 | ) | ||||||
| Less: Income from continuing operations attributable to noncontrolling interest |
1,048 | (146 | ) | 902 | ||||||||
| Less: Income from discontinued operations attributable to noncontrolling interest |
2,939 | — | 2,939 | |||||||||
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| Net income (loss) attributable to Holdings |
$ | (48,757 | ) | $ | (4,324 | ) | $ | (53,081 | ) | |||
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| Amounts attributable to Holdings: |
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| Income (loss) from continuing operations |
$ | (63,400 | ) | $ | (4,324 | ) | $ | (67,724 | ) | |||
| Income from discontinued operations, net of income tax |
14,643 | — | 14,643 | |||||||||
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| Net income (loss) attributable to Holdings |
$ | (48,757 | ) | $ | (4,324 | ) | $ | (53,081 | ) | |||
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| Basic and fully diluted income (loss) per share attributable to Holdings |
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| Continuing operations |
$ | (1.55 | ) | $ | (0.11 | ) | $ | (1.66 | ) | |||
| Discontinued operations |
0.36 | — | 0.36 | |||||||||
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| $ | (1.19 | ) | $ | (0.11 | ) | $ | (1.30 | ) | ||||
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| Compass Diversified Holdings Condensed Combined Pro Forma Statement of Operations for the year ended December 31, 2009 (unaudited) |
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| Compass Diversified Holdings as Reported |
Less: HALO as Reported |
Pro Forma Combined Compass Diversified Holdings |
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| (in thousands, except per share data) | ||||||||||||
| Net sales |
$ | 503,400 | $ | (139,317 | ) | $ | 364,083 | |||||
| Cost of sales |
351,335 | (84,884 | ) | 266,451 | ||||||||
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| Gross profit |
152,065 | (54,433 | ) | 97,632 | ||||||||
| Operating expenses: |
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| Selling, general and administrative expense |
100,453 | (48,713 | ) | 51,740 | ||||||||
| Supplemental put reversal |
(1,329 | ) | — | (1,329 | ) | |||||||
| Management fees |
12,441 | — | 12,441 | |||||||||
| Amortization expense |
14,788 | (2,498 | ) | 12,290 | ||||||||
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| Operating income |
25,712 | (3,222 | ) | 22,490 | ||||||||
| Other income (expense): |
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| Interest income |
1,178 | — | 1,178 | |||||||||
| Interest expense |
(9,891 | ) | — | (9,891 | ) | |||||||
| Amortization of debt issuance costs |
(1,761 | ) | — | (1,761 | ) | |||||||
| Loss on debt extinguishment |
(3,652 | ) | — | (3,652 | ) | |||||||
| Other income (expense), net |
123 | 56 | 179 | |||||||||
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| Income from continuing operations before income taxes |
11,709 | (3,166 | ) | 8,543 | ||||||||
| Provision for income taxes |
9,776 | (201 | ) | 9,575 | ||||||||
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| Income (loss) from continuing operations |
1,933 | (2,965 | ) | (1,032 | ) | |||||||
| Loss from discontinued operations, net of income tax |
(41,578 | ) | — | (41,578 | ) | |||||||
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| Net income (loss) |
(39,645 | ) | (2,965 | ) | (42,610 | ) | ||||||
| Less: Income (loss) from continuing operations attributable to noncontrolling interest |
2,334 | 44 | 2,378 | |||||||||
| Less: Loss from discontinued operations attributable to noncontrolling interest |
(15,709 | ) | — | (15,709 | ) | |||||||
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| Net income (loss) attributable to Holdings |
$ | (26,270 | ) | $ | (3,009 | ) | $ | (29,279 | ) | |||
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| Amounts attributable to Holdings: |
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| Income (loss) from continuing operations |
$ | (401 | ) | $ | (3,009 | ) | $ | (3,410 | ) | |||
| Loss from discontinued operations, net of income tax |
(25,869 | ) | — | (25,869 | ) | |||||||
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| Net income (loss) attributable to Holdings |
$ | (26,270 | ) | $ | (3,009 | ) | $ | (29,279 | ) | |||
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| Basic and fully diluted income (loss) per share attributable to Holdings |
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| Continuing operations |
$ | (0.01 | ) | $ | (0.09 | ) | $ | (0.10 | ) | |||
| Discontinued operations |
(0.75 | ) | — | (0.75 | ) | |||||||
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| $ | (0.76 | ) | $ | (0.09 | ) | $ | (0.85 | ) | ||||
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Notes to Pro Forma Condensed Combined Financial Statements
(Unaudited)
Pro forma information is intended to reflect the impact of the HALO Disposition on the Company’s historical financial position and results of operations through adjustments that are directly attributable to the transactions, that are factually supportable and, with respect to the pro forma statements of operations that are expected to have a continuing impact. In order to accomplish this, the Company eliminated the historical results of HALO from the Company’s historical financial position and results of operations. HALO’s historical operations, for current and prior periods, including the gain or loss on the sale, will be presented as discontinued operations for financial reporting purposes beginning with the Company’s Quarterly Report on Form 10-Q for the three and six months ended June 30, 2012.
This information in Note 1 provides a description of the pro forma adjustments from each line item in the pro forma condensed combined financial statements together with information explaining how the adjustments were derived or calculated for each period presented.
Note 1. Pro Forma Adjustments
Balance Sheet
The following adjustments correspond to those included in the unaudited condensed combined pro forma balance sheet as of December 31, 2011:
| (a) | This adjustment reflects the cash received at closing as a result of the HALO disposition. |
| (b) | This adjustment reflects the short term income tax receivable and escrow funds that we expect to receive. |
| (c) | This adjustment primarily reflects the transaction and sale related costs that would have reduced shareholders’ equity if the sale had occurred on December 31, 2011. |
Statements of Operations
There were no pro forma adjustments to the statements of operations for all periods presented.