leading businesses. solid financial structure....
TRANSCRIPT
Leading Businesses. Solid Financial Structure. Transparency.
2 Leading Businesses. Solid Financial Structure. Transparency
Legal Disclaimer
� This presentation contains certain forward-looking statements within the meaning of the federal securities laws. These statements may be made a part of this presentation or by reference to other documents we file with the SEC.
� Some of the forward-looking statements can be identified by the use of forward-looking words. Statements that are not historical in nature, including the words “anticipate,” “may,” “estimate,” “should,” “seek,” “expect,” “plan,” “believe,” “intend,” and similar words, or the negatives of those words, are intended to identify forward-looking statements. Certain statements regarding the following particularly are forward-looking in nature:Future financial performance, market forecasts or projections, projected capital expenditures;Our business strategy.
� All forward-looking statements are based on our management’s beliefs, assumptions and expectations of our future economic performance, taking into account the information currently available to it. These statements are not statements of historical fact. Forward-looking statements are subject to a number of factors, risks and uncertainties, some of which are not currently known to us, that may cause our actual results, performance or financial condition to be materially different from the expectations of future results, performance or financial position. Our actual results may differ materially from the results discussed in forward-looking statements. Factors that might cause such a difference include, but are not limited to the risks set forth in “Risk Factors” included in our SEC filings.
� In addition, our discussion may include references to EBITDA, cash flow, CAD or other non-GAAP measure. A reconciliation of the most directly comparable GAAP financial measures to such non-GAAP financial measures is included in our annual and quarterly reports in Forms 10-K and 10-Q filed with the SEC.
3 Leading Businesses. Solid Financial Structure. Transparency
Overview
Compass Diversified Holdings (CODI):� An acquirer, owner and manager of high cash flow, niche leading middle market
businesses operating in attractive industries
� Family of eight operating subsidiaries - 2/3rd branded products / 1/3rd niche industrial
� Four rapidly growing branded products businesses
� Four high free cash flow, predictable niche industrial businesses
� Defensible market positions with strong “reason to exist”
� Strong consolidated financial performance in fiscal 2012
� Revenues: 2011 : $606.6 million 2012 : $884.7 million 45.8%
� Cash Flow Available for Distribution and Reinvestment (CAD):
2011 : $69.0 million 2012 : $77.7 million 12.6%
� Experienced acquirer and manager of middle market businesses
� 27 professionals at the holding company employing consistent investment style since 1998
� Realized gains of $198 million through 5 company sales
4 Leading Businesses. Solid Financial Structure. Transparency
Overview
Compass Diversified Holdings (CODI):� Substantial outperformance of indices since May 2006 public offering
� Consistent distributions
� Current distribution of $0.36 per quarter, $1.44 annually, approximate 8.5% yield
� Cumulative distributions of approximately $9.24 since IPO
� Have NEVER reduced distribution, even in 2009
� Unprecedented transparency
� Public filings include segment reporting on ALL 8 subsidiaries
TotalReturn
CODIOutperformance
AnnualizedReturn
CODIOutperformance
CODI 103.7% NA 10.9% NA
S&P 500 37.9% +65.8% 4.8% 6.1%
Nasdaq 49.9% +53.8% 6.1% 4.8%
DJIA 57.6% +46.1% 6.8% 4.1%
5 Leading Businesses. Solid Financial Structure. Transparency
Growth Strategy
� 8 industry leading niche businesses with strong “reasons to exist”
� Attractive end markets served
� Positioned to take market share
� Scalable infrastructure
Organic Growth
Three Pronged Strategy to Drive Long Term Above Average Growth Rates
� High free cash flow subsidiaries
� Pursue high ROI growth capital expenditure opportunities
� Consummate add-on acquisitions
Reinvest Free Cash Flow
� Typically accretive to Cash Flow in first year
� 9 acquisitions consummated since May 2006
PlatformAcquisitions
6 Leading Businesses. Solid Financial Structure. Transparency
Branded Products
($ millions)
Year-Ended
’12
Year-Ended
’11Change
QTR 2013
QTR 2012 Change
Revenue $549.2 $465.5 +18.0% $143.6 $120.7 +19.0%
EBITDA $105.9 $85.2 +24.3% $30.4 $22.8 +33.1%
Margin 19.3% 18.3% +1.0% 21.2% 18.9% +2.3%
� Four branded products companies
� Camelbak, Ergobaby, Fox Racing Shox, Liberty Safe
� Represents approximately two-thirds of subsidiary EBITDA
� Lifestyle brands with aspirational appeal
� Taking market share
� Extendable into adjacent categories
� Maintain pricing power in all economic environments
� Robust financial performance
� Revenues: 19.0% ( 3/31/13 vs. 3/31/12)
� EBITDA: 33.1% ( 3/31/13 vs. 3/31/12)
� EBITDA margin: 230 basis points increase
� High free cash flow
� Maintenance Capital Expenditure leakage of only 6.4% of 2012 annual EBITDA
37.8%
34.0%
15.2%
13.0%
Year-Ended December 31, 2012
EBITDA
Camelbak
Fox
Liberty
Ergobaby
7 Leading Businesses. Solid Financial Structure. Transparency
Niche Industrial� Four niche industrial companies
� Advanced Circuits, American Furniture Manufacturing, Arnold Magnetic, Tridien Medical
� Represents approximately one-third of subsidiary EBITDA
� Defensible niche industry leaders
� Best in class manufacturing capabilities
� Diversified end markets
� Low capital expenditure requirements
� Steady consistent financial performance
� Pro forma Revenues flat (3/31/13 vs. 3/31/12)
� EBITDA consistent with expectations
� High free cash flow
� Maintenance Capital Expenditure leakage of only 7.6% of 2012 annual EBITDA
57.0%32.0%
12.0%
Year-Ended December 31, 2012
EBITDA
ACI
AFM
Arnold
Tridien
($ millions)
Year-Ended
’12
Year-Ended
’11Change
QTR 2013
QTR 2012 Change
Revenue $358.8 $376.1 -4.6% $98.0 $97.9 -
EBITDA $51.9 $`52.5 -1.0% $13.0 $14.0 -7.1%
Margin 14.5% 13.9% +0.6% 13.3 14.3 -1.0%
8 Leading Businesses. Solid Financial Structure. Transparency
Value Creation Model
� 5 businesses sold at an approximate $198mm gain� In each case, cash flows had increased significantl y vs. acquisition
AND substantial multiple accretion was achieved vs. purchase
� Grow revenues and improve operations� Proactive approach to measurement and management (A LIGNMENT)� Sourcing, production strategy, customer acquisition , branding,
geographic or product markets, MIS, compensation � Highly accretive add-on acquisitions
� Disciplined investing criteria� Valuation is critical to success – no taking back va luation
� Target characteristics� Leading market position with solid ‘reasons to exis t’� Competitive advantage enabling market share gains� High free cash flow generation
� 9 acquisitions with attractive end markets served c onsummated since May 2006
Acquisition of Platform
Businesses
Management of Subsidiary Companies
Opportunistic Divestitures
Maximize cash flow returned to shareholders and reinvested in the business
9 Leading Businesses. Solid Financial Structure. Transparency
Current Environment
Optimal structure for ownership � No forced investment or exit pace
• Disciplined approach to acquisitions – not forced to compromise on valuation or target company characteristics
� Extremely transparent financial reporting enables shareholders to understand health of underlying businesses during ownership period
We control and actively manage each of our businesses� Not subordinate to or dependent on others
� Experienced in managing and winning through economic cycles
� Diversity proving its benefit in this cycle
Ability to make acquisitions without third party financing� Acquisitions consummated with cash/committed facility
� Absence of financial contingences provides greater “certainty to close” for sellers
� Intermediary’s best friend
10 Leading Businesses. Solid Financial Structure. Transparency
Outperformance since IPO
Compass Diversified Holdings (CODI):� Substantial outperformance of indices since May 2006 public offering
� Consistent distributions
� Current distribution of $0.36 per quarter, $1.44 annually, approximate 8.5% yield
� Cumulative distributions of $9.24 since IPO
� Have NEVER reduced distribution, even in 2009
Totalreturn
CODIOutperformance
AnnualizedReturn
CODIOutperformance
CODI 103.7% NA 10.9% NA
S&P 500 37.9% +65.8% 4.8% 6.1%
Nasdaq 49.9% +53.8% 6.1% 4.8%
DJIA 57.6% +46.1% 6.8% 4.1%
11 Leading Businesses. Solid Financial Structure. Transparency
Liquidity
Strong Balance Sheet with:
� Liquidity position improved by $198mm in realized gains since IPO in May 2006
� Total debt of $272.3 million at 3/31/13 is less than 2x TTM subsidiary EBITDA
� $16.5 million of cash on balance sheet as of 3/31/13
� No significant maturities until late 2017
12 Leading Businesses. Solid Financial Structure. Transparency
Liquidity
Current Assets:Cash and cash equivalents 16,500$ Other current assets 269,089
Total current assets 285,589 Property, plant and equipment 67,504 Goodwill, intangibles and other assets 612,405
Total assets 965,498$ Current Liabilities:
Current portion of debt 2,550$ Other current liabilities 130,095
Total current liabilities 132,645 Long-term debt 269,731 Other liabilities 123,179
Total liabilities 525,555
Stockholder Equity:Non-controlling interest 41,827 Controlling interest 398,116
Total stockholders' equity 439,943 Total liabilities and stockholders' equity 965,498$
March 31, 2013 CONDENSED BALANCE SHEET (000's)
13 Leading Businesses. Solid Financial Structure. Transparency
Appendix: Current SubsidiariesEBITDA contribution
Based on Year Ended 12/31/12 (pro forma for acquisi tion of Arnold and sale of Halo) $157.9mm in total
Advanced Circuits, 19%
American Furniture, -1%
Tridien, 4%
CamelBak, 25%
Arnold, 11%
Fox Racing Shox, 23%
Liberty, 9%
ERGO, 10%
CODI Investor Day PresentationSALLY MCCOY | CEO
OUR STORYOUR STORY
TO CONTINUOUSLY REINVENT AND FOREVER CHANGE THE WAY PEOPLE HYDRATE AND PERFORM
MISSIONMISSION
REPLACE BOTTLED WATER AS THE MOST COMMON WAY TO HYDRATE
VISIONVISION
VALUESVALUES
WE ARE OBSESSIVELY INNOVATIVE.
IF WE BUILD IT , WE’LL BAK ITIF WE BUILD IT , WE’LL BAK IT
The Got Your Bak™ Lifetime Guarantee covers all reservoirs, backpacks, bottles and accessories from manufacturing defects in materials and workmanship for the lifetime of the product.
COMPANY HIGHLIGHTSCOMPANY HIGHLIGHTS
CREATED HANDS-FREE HYDRATION CATEGORY
CONTINUE TO DOMINATE CONSUMER AND MILITARY
MARKET SHARE
STRONG HISTORY OF PRODUCT INNOVATION
STRONG BRAND IDENTITY
PROVEN AND EXPERIENCED
MANAGEMENT TEAM
STRONG FREE CASH FLOW GENERATION
EXCEPTIONAL MANAGEMENT TEAMEXCEPTIONAL MANAGEMENT TEAMJeremy Galten—VP Research & DevelopmentJeremy joined CamelBak as an engineering manager in 2001 and has led the R&D team since 2008. His prior experience includes development in medical and consumer product design.
Kerri Tuuri—VP HR and AdministrationKerri joined CamelBak in March 2006 after directing North American operations at IsoTis OrthoBiologics.
Mike Crook—VP OperationsMike joined CamelBak in May 2006. Prior to CamelBak, he worked at Motorolla and Dell.
Nick Allen—VP Government ContractWith CamelBak since 2007, Nick spent 19 years at WL Gore, and 20 years as an officer in the United States Marine Corps.
Sally McCoy—Chief Executive OfficerSally assumed the role of President and CEO in October 2006 after 25 years of operations experience in the outdoor lifestyle space and 3 years as an M&A banker.
Jason Frame—Chief Financial OfficerJason joined CamelBak in February 2008 with previous tenure as an operating partner with Irving Place Capital and Director at AlixPartners.
Layne Rigney—SVP of Global SalesLayne joined CamelBak in June 2005. His background includes marketing and sale experience at PowerBar/Nestle, RockShox and Franklin Resource Group.
Chris Strain—CMO, VP of Product DevelopmentChris brings over 20 years of marketing and branding experience with Pepsi, Mountain Dewand Vans.
MOUNTAINBIKERS
MOUNTAINBIKERS
MOUNTAINBIKERS
RUNNERSRUNNERSRUNNERS SNOW SPORTSSNOW SPORTSSNOW SPORTS
ROAD CYCLISTS
ROAD CYCLISTS
ROAD CYCLISTS
LOHAS CONSUMERS
LOHAS CONSUMERS
LOHAS CONSUMERS
NEXTGENERATION
NEXTGENERATION
NEXTGENERATION
HIKERSHIKERSHIKERS
CAMELBAK CONSUMERSCAMELBAK CONSUMERS
MILLENNIALSMILLENNIALSMILLENNIALS
CAMELBAK CONSUMERSCAMELBAK CONSUMERS
FIREFIGHTERSFIREFIGHTERSFIREFIGHTERS ARMYARMYARMY ASTRONAUTASTRONAUTASTRONAUTSPECIALFORCESSPECIALFORCESSPECIALFORCES
HOWEVER YOU HYDRATE, WE’VE GOT YOUR BAK ™
FOR ANY ACTIVITY, CAMELBAK OFFERS RESPONSIBLE HYDRATION SOLUTIONS FOR A GROWING MOVEMENT OF SUSTAINABILITY
Retouch Image
WHY PEOPLE DRINK BOTTLED WATER?WHY PEOPLE DRINK BOTTLED WATER?
TASTETASTE
TEMPERATURETEMPERATURE
CONVENIENCECONVENIENCE
SAFETYSAFETY
BOTTLED WATER: THE IMPACTBOTTLED WATER: THE IMPACT
Producing plastic bottles for American consumption requires the equivalent of more than 17 million barrels of oil, not including the energy for transportation. (Source: National Geographic: “Drinking Water “2011)
That’s enough oil to power 1 million cars for 1 year. (Source: Pacific Institute, December 2007)
90% of the environmental impact has already happened before you even purchase a bottle of water. (Source: http://greenupgrader.com/3258/plastic-bottle-facts-make-you-think-before-you-drink)
COMPANY PERFORMANCE($ MILLIONS)COMPANY PERFORMANCE($ MILLIONS)
SALES BREAKDOWNSALES BREAKDOWN
PACKS PACKS
BIKEBIKEBIKE HIKEHIKEHIKE
PADDLEPADDLEPADDLESNOWSPORTSSNOWSPORTSSNOWSPORTS RUNRUNRUN
INDUSTRYINDUSTRYINDUSTRYMILITARYMILITARYMILITARY
BOTTLES BOTTLES
EVERYDAYEVERYDAYEVERYDAY KIDSKIDSKIDS INSULATEDINSULATEDINSULATED BIKE/SPORTBIKE/SPORTBIKE/SPORT
FILTRATION/PURIFICATIONFILTRATION/PURIFICATION
GROOVE®GROOVE®GROOVE® ALL CLEARALL CLEARALL CLEAR
DISTRIBUTION DISTRIBUTION
With 64 distributors worldwide, CamelBak has a distribution network to fulfill product and our Got Your Bak guarantee across the globe
OUR PARTNERSOUR PARTNERS
LEED CERTIFIEDHEADQUARTERS – PETALUMA, CA
THANK YOU!THANK YOU!
Growth. Leadership. Transparency.
BRANDED COMPANIES
37 Leading Businesses. Solid Financial Structure. Transparency
Industry : Mountain bike and off-road suspension products
Competitive Strengths :
� Leading market position in premium mountain bike segment, significant market share in other segments
� Strong IP portfolio
� Significant brand equity
Compass Value Added :
� Working with management to reduce cost of production and to build brand image
Financials:
REARSHOCKS
FRONTFORKS
SNOWMOBILE& ATV
SUSPENSIONS
www.foxracingshox.com
Year-Ended Year-Ended Quarter-Ended Quarter-Ended
12/31/2012 12/31/2011 3/31/2013 3/31/2012
Revenue $235.9 $197.7 $54.9 $45.7
EBITDA $36.0 $30.8 $8.8 $6.4
Industry : Premium designer and manufacturer of soft structured baby carriers, stroller travel systems, as well as complimentary juvenile products
Competitive Strengths :
� Carrier endorsed as “one of the 20 best products in the last 20 years” by Parenting Magazine
� Superior design resulting in improved comfort for both parent and child
� Since introduction in 2004, company has achieved estimated 20% market share in US and estimated top market share in Korea & Japan
� Passionate and enthusiastic customer base
� Reduced cyclicality industry with low elasticity of price due to importance of product to purchaser
Compass Value Added:
� Recruited senior management team. Working with management to improve product distribution globally, and to identify related brand products to sell into passionate customer base
Financials:
www.ergobaby.com
38 Leading Businesses. Solid Financial Structure. Transparency
Year-Ended Year-Ended Quarter-Ended Quarter-Ended
12/31/2012 12/31/2011 3/31/2013 3/31/2012
Revenue $64.0 $44.3 $16.2 $13.7
EBITDA $16.1 $11.7 $3.9 $3.3
39 Leading Businesses. Solid Financial Structure. Transparency
Industry : Premium home and gun safe manufacturing
Competitive Strengths :
� Market share leader
� Well-known brand names
� Category management capabilities for customers
� Low cost domestic manufacturer
Compass Value Added :
� Working with management to expand manufacturing capabilities, develop national marketing efforts and to pursue organic growth initiatives
Financials:
www.libertysafe.com
Year-Ended Year-Ended Quarter-Ended Quarter-Ended
12/31/2012 12/31/2011 3/31/2013 3/31/2012
Revenue $91.6 $82.2 $29.7 $21.2
EBITDA $13.8 $11.6 $4.8 $2.6
Growth. Leadership. Transparency.
NICHE INDUSTRIAL COMPANIES
41 Leading Businesses. Solid Financial Structure. Transparency
Industry : Quick-turn production and prototype printed circuit board (“PCB”) manufacturing
Competitive Strengths :
� Insulated from Asian manufacturing due to small, customized order size and requirements for rapid turnaround
� Largest quick turn manufacturer in the US; 300+ unique daily orders received
� Manufacturing scale produces high margins
� Completed accretive acquisitions of Circuit Express and UCI
� Diverse customer base – 10,000 current customers
� Approximate 40% EBITDA margins
Compass Value Added :
� Working with management to identify and consummate acquisitions and entered into complementary quick turn assembly business
Financials:
www.4pcb.com
Year-Ended Year-Ended Quarter-Ended Quarter-Ended
12/31/2012 12/31/2011 3/31/2013 3/31/2012
Revenue $84.1 $78.5 $21.8 $19.4
EBITDA $29.8 $31.7 $7.2 $7.5
42 Leading Businesses. Solid Financial Structure. Transparency
Industry : Engineered permanent magnet and magnetic assemblies manufacturer
Competitive Strengths :
� Market share leader
� Attractive and diverse end-markets
� Engineering and product development capabilities
� Stable blue chip customer base – 2,000+ customers globally
� Global manufacturing footprint
Compass Value Added :
� Working with management in the pursuit of acquisitions, the development of its strategic plan, organic growth initiatives and sourcing program
Financials:
www.arnoldmagnetics.com
Pro-FormaYear-Ended Year-Ended Quarter-Ended
Pro- Forma Quarter-Ended
12/31/2012 12/31/2011 3/31/2013 3/31/2012
Revenue $127.4 $136.3 $30.4 $34.5
EBITDA $16.8 $17.1 $3.7 $4.6
43 Leading Businesses. Solid Financial Structure. Transparency
Industry : Medical support surfaces product line includes specialty beds, mattress replacements, overlays, and patient positioning devices
Competitive Strengths :
� Cost savings through scale purchasing and operational improvements
� Full product line consisting of foam, air, gel and combination surfaces
� Significant intellectual property; FDA approvals
Compass Value Added :
� Working with management on research and development opportunities for new products.
Financials:
www.tridien.com
Year-Ended Year-Ended Quarter-Ended Quarter-Ended
12/31/2012 12/31/2011 3/31/2013 3/31/2012
Revenue $55.9 $55.9 $15.0 $13.6
EBITDA $6.4 $7.8 $1.4 $1.6
44 Leading Businesses. Solid Financial Structure. Transparency
Industry : Promotionally priced upholstered furniture manufacturing product line includes stationary and motion sofas, loveseats, sectionals, and recliners
Competitive Strengths :
� Low cost domestic manufacturer; ability to ship most product in its product line within 48 hours
� Insulated from foreign imports due to transportation economics and customer demands
Compass Value Added :
� Working with new management team to rationalize infrastructure, optimize margins, improve product costing information, and expand sales force.
Financials:
Year-Ended Year-Ended Quarter-Ended Quarter-Ended
12/31/2012 12/31/2011 3/31/2013 3/31/2012
Revenue $91.5 $105.3 $30.8 $30.3
EBITDA $(1.1) $(4.2) $0.6 $0.4
45 Leading Businesses. Solid Financial Structure. Transparency
Summary
Compass Diversified Holdings (CODI)
� An acquirer, owner and manager of high cash flow, niche leading middle market businesses operating in attractive industries
� Diversified family of rapidly growing branded product and niche industrial companies
� Experienced acquirer and manager of middle market businesses
� Committed to responsibly returning money to shareholders
� Unprecedented transparency
Leading Companies, Solid Financial Structure And Transparency.
47 Leading Businesses. Solid Financial Structure. Transparency
Appendix: CODI Structure
Eight Subsidiary Businesses
Public Shareholders
Distributions
Cash Flows
Debt FacilityCompass Diversified Holdings
(“CODI”)
48 Leading Businesses. Solid Financial Structure. Transparency
Appendix: CODI Structure (cont.)Subsidiary Cash Flows to CODI
� CODI uses cash on hand and its debt facility to acquire businesses� Significant advantage versus other potential acquirers� Particularly appealing to our target sellers – families and corporate
conglomerates
� CODI is both the SOLE lender to and majority equity holder in each of these businesses
� Management of subsidiaries is a material investor in EVERY case in the subsidiary companies
� Cash flows from subsidiaries first as interest on CODI loans
� Remainder of cash is utilized to amortize CODI loan – effect is to sweep 100% of cash to CODI while providing long term benefit to subsidiary management
� CODI is a tax partnership
� 2012 K1s available February 28, 2013
� Simplified reporting of interest income, interest expense and capital gain
49 Leading Businesses. Solid Financial Structure. Transparency
Appendix: CODI Structure (cont.)
CODI Management / Compensation Structure
� Compass Group Management, LLC (CGM) is retained as a manager at the will of the independent Board of Directors via a Management Services Agreement
� Board audit, compensation and governance committees composed solely of independent members
� Fully SOX compliant
� Alan Offenberg seconded as CEO & Jim Bottiglieri seconded as CFO from CGM
� CODI is CGM’s sole vehicle for continuation of its long and successful track record on behalf of the Kattegat Trust.
� CGM is paid 2% of book value as a management fee� Ensures that investors bear no hidden expenses� No mark to market to increase fee level as value of businesses increases
� In lieu of options, CGM also receives 20% of realized gains after a 7% hurdle, high water mark, and recognition of any impairments to the value of owned subsidiaries