Compass Diversified Holdings (NYSE: CODI)

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08/07/06
Compass Diversified Trust Reports Second Quarter 2006 Financial Results
Compass Diversified Trust Reports Second Quarter 2006 Financial Results

WESTPORT, Conn., Aug 07, 2006 /PRNewswire-FirstCall via COMTEX News Network/ -- Compass Diversified Trust (Nasdaq: CODI) (the "Trust") announced today the consolidated results from operations for the three and six month periods ended June 30, 2006. The Trust completed its initial public offering (IPO), concurrent private placement and the acquisition of its initial businesses on May 16, 2006. Consequently, the Trust's results only reflect 46 days of activity for its initial businesses.

Initial Public Offering

Compass Diversified Trust completed its initial public offering of 19,500,000 shares at an offering price of $15.00 per share, which included 6,000,000 shares issued in connection with the concurrent private placements. Total net proceeds from the offering, after deducting the underwriters' discounts, commissions and financial advisory fee and other offering costs, totaled approximately $269.9 million.

Distribution

On June 26, 2006, the Trust's Board of Directors declared a distribution of $0.1327 per share payable on July 18, 2006 to all Trust shareholders of record as of July 11, 2006. This reflects a quarterly distribution rate of $0.2625 per share, prorated for the period May 16, 2006, the date of the Trust's initial public offering, to June 30, 2006. The Trust intends to declare and pay regular quarterly cash distributions on all outstanding shares.

For the quarter ended June 30, 2006, the Trust had cash flow available for distribution of $6.0 million, which represents an approximate 2.3x coverage ratio for the distribution paid in July.

Initial Businesses

The Trust used approximately $318.9 million of the net proceeds from its offering and concurrent private placement transactions, and initial borrowings from a third party credit facility, to acquire controlling interests in and provide debt financing to its initial four businesses.

    The Trust's initial businesses as of June 30, 2006 include:

    * CBS Personnel Holdings, Inc. and its consolidated subsidiaries, referred
      to as CBS Personnel, is a provider of temporary staffing services in the
      United States.  Headquartered in Cincinnati, OH, CBS Personnel operates
      132 branch locations in 16 states.

    * Crosman Acquisition Corporation and its consolidated subsidiaries,
      referred to as Crosman, is a leading manufacturer of recreational airgun
      and paintball products (through Game Face). Crosman is headquartered in
      East Bloomfield, NY and was originally founded in 1923.

    * Compass AC Holdings, Inc. and its consolidated subsidiary, referred to
      as Advanced Circuits, is a manufacturer of low-volume quick-turn and
      prototype rigid printed circuit boards ("PCBs"). The Company is based in
      Aurora, CO and was founded in 1989.

    * Silvue Technologies Group, Inc. and its consolidated subsidiaries,
      referred to as Silvue, is a developer and manufacturer of proprietary,
      high-performance coating systems for polycarbonate, glass, acrylic,
      metals and other substrate materials used in the premium eyewear,
      aerospace, automotive and industrial markets.

    Anodyne Medical Device

On August 1, 2006, the Trust announced that its subsidiary, Compass Group Diversified Holdings, LLC had acquired a controlling interest in Anodyne Medical Device, Inc. ("AMD"), a leading manufacturer of medical support surfaces and patient positioning devices headquartered in Los Angeles, California. Medical support surfaces and patient positioning devices are used for the prevention and treatment of pressure wounds experienced by patients with limited or no mobility. Total consideration for the transaction, which included the acquisition of a controlling equity interest in and loans made to AMD, was approximately $30.4 million, and included cash and the issuance of 950,000 shares of the Trust.

Business Strategy

The Trust's strategy is to acquire controlling interest in and actively manage middle market businesses. Once acquired, these businesses are managed for consistency and growth in long term cash flow. The Trust believes its approach to its target market provides opportunities to methodically purchase attractive businesses at values that are accretive to its shareholders. Historically, the management team has found that significant opportunities may also exist to enhance the performance of these businesses upon their acquisition.

Management Structure

The Trust is managed by Compass Group Management LLC ("the manager"), which is controlled by I. Joseph Massoud, the Trust's CEO. The manager oversees and supports the management teams of the Trust's portfolio companies, as well as pursues additional acquisition opportunities on behalf of the Trust. The Trust pays the manager a management fee equal to 2.0% of the Trust's adjusted net assets annually. In lieu of any other equity compensation, the manager also receives an equity incentive of 20% of the Trust's profit allocation if the Trust's profits exceed an annualized hurdle rate of 7%.

The management fee for the quarter was approximately $886,000, prorated for the period from May 16 until June 30, 2006.

In commenting on the quarter, Mr. Massoud, noted, "We are pleased by the events of this quarter. Following the successful completion of our initial public offering, we acquired our four initial businesses, which are managed by highly accomplished teams and provide a solid foundation from which to grow the Trust. More recently, we acquired Anodyne Medical Device, Inc. in a transaction that is consistent with our business model. Perhaps most importantly, each of our businesses performed well in the quarter and met our expectations.

Our plan is to work with the management teams of our businesses to continue to improve their performance and to leverage our access to capital and our historical relationships to consummate additional accretive acquisitions. We believe our unique structure provides an exceptional opportunity for public investors to participate in the ownership and growth of a diverse group of middle market businesses, an asset class which traditionally has been limited to large institutional and high-net worth individual investors through investments made in private equity firms."

About Compass Diversified Trust

Compass Diversified Trust and its subsidiary, Compass Group Diversified Holdings LLC, (collectively, "Compass") were formed to acquire and manage a group of small to middle market businesses that are headquartered in the United States. In addition to the recently acquired Anodyne Medical Device, Inc., Compass has controlling interests in four businesses: CBS Personnel Holdings, Inc., a human resources outsourcing firm; Crosman Acquisition Corporation, a recreational products company; Compass AC Holdings, Inc., an electronic components manufacturer; and Silvue Technologies Group, Inc., a global chemical hardcoatings manufacturer. Compass works with the management teams of North American based small to middle market businesses to identify and capitalize on diverse acquisition opportunities that satisfy Compass' acquisition criteria. Compass seeks to acquire controlling interest in businesses that have stable and growing cash flows, maintain strong niche market presences and have positive macroeconomic outlooks.

To find out more about Compass Diversified Trust (Nasdaq: CODI), visit the Company's websites at www.compassdiversifiedtrust.com.

This press release may contain certain forward-looking statements, including statements with regard to the future performance of Compass and each of the four initial businesses. Words such as "believes," "expects," "projects," and "future" or similar expressions are intended to identify forward-looking statements. These forward-looking statements are subject to the inherent uncertainties in predicting future results and conditions. Certain factors could cause actual results to differ materially from those projected in these forward-looking statements, and some of these factors are enumerated in the risk factor discussion in the Form 10Q filed by Compass with the Securities and Exchange Commission for the quarter ended March 31,2006 and other filings with the Securities and Exchange Commission. Compass undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.


    Compass Diversified Trust
    Jim Bottiglieri
    Chief Financial Officer
    203.221.1703
    jbottiglieri@compasstrust.com

    Investor Relations Contact:
    KCSA Worldwide
    Jeffrey Goldberger / Michael Cimini
    212.896.1249 / 212.896.1233
    jgoldberger@kcsa.com / mcimini@kcsa.com



                          Compass Diversified Trust
                    Condensed Consolidated Balance Sheets
                                (in thousands)

                                                     June 30,     December 31,
                                                       2006           2005
                                                   (Unaudited)
    Assets
    Current assets:
      Cash and cash equivalents                      $16,113           $100
      Accounts receivable, less allowances of
       $4,857 at June 30, 2006                        84,062              -
      Inventories                                     11,667              -
      Prepaid expenses and other current assets       10,019          3,308
      Current assets of discontinued operations          597              -

        Total current assets                         122,458          3,408

      Property, plant and equipment, net              19,451              -
      Goodwill                                       167,981              -
      Intangible assets, net                         135,692              -
      Deferred debt issuance costs, net                6,149              -
      Other non-current assets                         6,208              -
      Assets of discontinued operations                  488              -

    Total assets                                    $458,427         $3,408


    Liabilities and stockholders' equity (deficit)
    Current liabilities:
      Accounts payable and accrued expenses          $59,565             $1
      Distribution payable                             2,587              -
      Due to related party                             1,017          3,308
      Working capital facility                         2,260              -
      Current liabilities of discontinued operations     635              -

      Total current liabilities                       66,064          3,309

    Long-term debt                                    50,000              -
    Deferred income taxes                             41,969              -
    Other non-current liabilities                     16,400              -

      Total liabilities                              174,433          3,309

    Minority interests                                14,523            100

    Total stockholders' equity (deficit)             269,471             (1)

    Total liabilities and stockholders'
     equity (deficit)                               $458,427         $3,408



                          Compass Diversified Trust
                Condensed Consolidated Statement of Operations
               (in thousands, except per share data, unaudited)

                                                  Three Months     Six Months
                                                      Ended          Ended
                                                 June 30, 2006   June 30, 2006

    Net sales                                       $ 94,683       $ 94,683
    Cost of sales                                     70,877         70,877
        Gross profit                                  23,806         23,806

    Operating expenses:
      Staffing expense                                 6,971          6,971
      Selling, general and administrative expenses     8,348          8,348
      Fees to manager                                    886            886
      Research and development expense                 1,273          1,273
      Amortization expense                             1,291          1,291
        Operating income                               5,037          5,037

    Other income (expense):
      Interest income                                    139            139
      Interest expense                                (1,073)        (1,073)
      Other income, net                                  184            184

        Income from continuing operations before
         income taxes and minority interests           4,287          4,287

    Provision for income taxes                         1,581          1,581
    Minority interest                                    709            709

        Income from continuing operations              1,997          1,997
    Income from discontinued operations,
     net of income taxes                                 115            115

        Net income                                    $2,112         $2,112

    Basic and fully diluted income per share           $0.21          $0.43

    Weighted average number of shares of trust stock
     outstanding - basic and fully diluted             9,857          4,956




                          Compass Diversified Trust
                Condensed Consolidated Statement of Cash Flows
                          (in thousands, unaudited)

                                                          Six Months
                                                            Ended
                                                        June 30, 2006

    Cash flows from operating activities:
    Net income from continuing operations                   $1,997
    Adjustments to reconcile net income to net
     cash provided by operating activities:
      Depreciation of property and equipment                   578
      Amortization of intangible assets                      1,291
      Amortization of deferred debt costs                      158
      Minority interests                                       709
      Deferred taxes                                            28
      In process research and development charge             1,120
      Other                                                    421

    Changes in operating assets and liabilities,
     net of acquisition:
      Increase in accounts receivable                         (122)
      Increase in inventories                                 (785)
      Increase in prepaid expenses and other current assets   (235)
      Increase in accounts payable and accrued expenses      6,633
      Decrease in due to related party                      (3,308)
      Decrease in net assets of discontinued operations        124
        Net cash provided by operating activities            8,609

    Cash flows from investing activities:
      Acquisition of initial businesses,
       net of cash acquired                               (310,649)
      Purchases of property and equipment                   (2,113)
        Net cash used in investing activities             (312,762)

    Cash flows from financing activities:
      Proceeds from the issuance of debt                    52,438
      Proceeds from the issuance of trust stock, net       273,269
      Increase in deferred debt issuance costs              (6,401)
      Other                                                    870
        Net cash provided by financing activities          320,176

    Net increase in cash and cash equivalents               16,023
    Foreign currency adjustment                                (10)
    Cash and cash equivalents - beginning of period            100
    Cash and cash equivalents - end of period              $16,113



                          Compass Diversified Trust
Condensed Consolidated Table of Cash Flows Available for Distribution ("CFAD")
                          (in thousands, unaudited)

                                                        Six Months
                                                           Ended
                                                       June 30, 2006

    Net income as reported                                $2,112
      Adjustment to reconcile net income to cash
       provided by operating activities:
        Depreciation and amortization                      2,027
        Adjustment to add back Silvue's in process R&D
         expensed at acquisition date                      1,120
        Advanced Circuit's loan forgiveness accrual          536
        Minority interest                                    709
        Deferred taxes                                        28
        Other                                               (106)
        Changes in operating assets and liabilities        2,183
          Net cash provided by operating activities        8,609
    Add:
      Unused fee on delayed term loan                        288
    Less:
      Changes in operating assets and liabilities          2,183
      Maintenance capital expenditures for the six months
       ended June 30, 2006
        Compass Group Diversified Holdings LLC                19
        CBS Personnel                                         36
        Crosman                                              585
        Advanced Circuits                                     70
        Silvue                                                 3

    Estimated cash flow available for distribution        $6,001



                          Compass Diversified Trust
                            Operating Segment Data
                          (in thousands, unaudited)

                                Three-months ended         Six-months ended
                               June 30,     June 30,     June 30,     June 30,
                                 2006         2005         2006         2005
    Revenues:
        CBS                   $137,141     $135,000     $269,548     $266,583
        Crosman                 25,034       18,929       48,783       31,826
        ACI                     12,278       10,641       24,001       20,781
        Silvue                   5,516        4,412       10,254        7,390

      Total                   $179,969     $168,982     $352,586     $326,580

    Income from operations:
        CBS                     $4,919       $3,619       $8,036       $5,761
        Crosman                  4,517        1,134        8,483        1,970
        ACI                      3,963        3,849        7,008        7,556
        Silvue                   1,506        1,054        2,270        1,736

      Total                    $14,905       $9,656      $25,797      $17,023

SOURCE Compass Diversified Trust

Jim Bottiglieri, Chief Financial Officer of Compass Diversified Trust,
+1-203-221-1703, jbottiglieri@compasstrust.com; or Investor Relations, Jeffrey
Goldberger, +1-212-896-1249, jgoldberger@kcsa.com, or Michael Cimini,
+1-212-896-1233, mcimini@kcsa.com, both of KCSA Worldwide for Compass Diversified
Trust
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