Compass Diversified Holdings 8-K/A, filed Sep 26, 2022

Compass Diversified Holdings (CODI)

8-K/A 2022-09-26 For: 2022-07-12

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Added on April 10, 2026

About this 8-K/A

Compass Diversified Holdings filed this 8-K/A on September 26, 2022, reporting on events of July 12, 2022.

Items reported

Item 9.01: Financial statements and exhibits

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o			Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o			Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o			Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o			Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))


23.1						Consent of RSM US LLP

99.1						Audited consolidated financial statements of PrimaLoft as of and for the year ended December 31, 2021

99.2						Unaudited interim condensed consolidated financial statements of PrimaLoft as of and for the six months ended June 30, 2022 and 2021

99.3						Unaudited P ro F orma condensed combined Balance Sheet of Compass Diversified Holdings at June 30, 2022 and notes thereto, and u naudited Pro Forma condensed combined Statements of Operations for the year ended December 31, 2021 and the six months ended June 30, 2022, and notes thereto

104						Cover Page Interactive Data File (embedded within the Inline XBRL document)


Date: September 26, 2022	COMPASS DIVERSIFIED HOLDINGS

	By:	/s/ Ryan J. Faulkingham

		Ryan J. Faulkingham
		Regular Trustee


Date: September 26, 2022	COMPASS GROUP DIVERSIFIED HOLDINGS LLC

	By:	/s/ Ryan J. Faulkingham

		Ryan J. Faulkingham
		Chief Financial Officer


Contents

	Independent auditor's report	1-2

	Financial statements

	Consolidated balance sheets	3

	Consolidated statements of income	4

	Consolidated statements of changes in stockholder's (deficit) equity	5

	Consolidated statements of cash flows	6

	Notes to consolidated financial statements	7-17


		2021		2020
Assets

Current assets:
	Cash	$	6,946	$	4,167
	Accounts receivable, net of allowance f or doubtful accounts of	1,909		1,752
	$66 and $65, respectively
	Other receivables	427		175
	Inventories	1,328		1,086
	Prepaid expenses and other current assets	3,214		1,757
	Total current assets	13,824		8,937

	Property and equipment, net	696		700
	Intangible assets, net	43,441		48,089
	Goodwill	61,872		61,872
	Other assets	113		150
	Total assets	$	119,946	$	119,748

Liabilities and Stockholder's (Deficit) Equity

Current liabilities:
	Line of credit	$	5,500	$	—
	Current maturities of long-term debt	470		676
	Accounts payable and accrued expenses	10,179		3,580
	Total current liabilities	16,149		4,256

Long-term liabilities:
	Long-term debt, less current portion	100,030		65,319
	Deferred income taxes	7,944		8,263
	Total liabilities	124,123		77,838

Commitments and contingencies

Stockholder's equity:
	Common stock, $.01 par value; 3,000 shares authorized, issued and outstanding	$	—	$	—
	Additional paid-in-capital	59,028		58,426
	Accumulated deficit	(63,205)		(16,516)
	Total stockholder’s equity	(4,177)		41,910
	Total liabilities and stockholder’s equity	$	119,946	$	119,748


	2021		2020

Net sales	$	65,882	$	49,113

Cost of goods sold	25,729		21,230
Gross profit	40,153		27,883

Selling, general and administrative expenses	21,456		19,304
Income from operations	18,697		8,579

Interest expense	4,534		4,460
Income before income taxes	14,163		4,119

Income tax expense	2,310		454
Net income	$	11,853	$	3,665


	Common Stock
	Units	Amount		Additional Paid-In Capital		Accumulated (Deficit)		Total Stockholder’s (Deficit) Equity
Balance, December 31, 2019	3,000	$	—	$	58,012	$	(20,181)	$	37,831
Equity-based compensation expense	—	—		414		—		414
Net income	—	—		—		3,665		3,665
Balance, December 31, 2020	3,000	$	—	$	58,426	$	(16,516)	$	41,910
Dividends	—	—		—		(58,542)		(58,542)
Equity-based compensation expense	—	—		602		—		602
Net income	—	—		—		11,853		11,853
Balance, December 31, 2021	3,000	$	—	$	59,028	$	(63,205)	$	(4,177)


			2021		2020
Cash flows from operating activities:
	Net income		$	11,853	$	3,665
	Adjustments to reconcile net income to net cash provided by operating activities:
		Depreciation and amortization	4,910		4,893
		Deferred financing amortization	387		251
		Allowance for bad debt expense	1		—
		Deferred income taxes	(319)		1
		Equity-based compensation expense	602		414
		Changes in assets and liabilities affecting operating cash flows:
		Accounts receivable	(158)		(509)
		Other receivables	(252)		19
		Inventories	(242)		724
		Prepaid expenses and other current assets	(1,456)		638
		Other assets	—		13
		Accounts payable and accrued expenses	6,599		(3,334)
		Net cash provided by operating activities	21,925		6,775

Cash flows from investing activities:
	Capital expenditures		(258)		(118)
		Net cash used in investing activities	(258)		(118)

Cash flows from financing activities:
	Proceeds from term loan—credit agreement		47,000		—
	Repayments of term loan—credit agreement		(12,185)		(4,210)
	Net proceeds on revolving line of credit		5,500		(1,500)
	Dividends		(58,542)		—
	Deferred financing costs		(661)		—
		Net cash used in financing activities	(18,888)		(5,710)

		Net increase in cash	2,779		947

Cash
	Beginning		4,167		3,220
	Ending		$	6,946	$	4,167

Supplemental disclosures of cash flow information:
Cash paid during the year for:
		Interest	$	4,122	$	4,288
		Taxes	$	3,306	$	346


	2021		2020
Product revenue	$	65,882	$	48,649
Royalty revenue	—		464
	$	65,882	$	49,113


	2021		2020
Raw materials	$	726	$	1,079
Finished goods	828		350
	1,554		1,429
Less reserve for obsolescence	(226)		(343)
	$	1,328	$	1,086


	2021		2020		Estimated Useful Life
Machinery and equipment	$	919	$	678	1-7 years
Computer equipment	231		202		1-5 years
Office furniture	84		96		1-7 years
Leasehold improvements	522		522		Lesser of the life of lease or estimated useful life
	1,756		1,498
Less: accumulated depreciation and amortization	(1,060)		(798)
	$	696	$	700


Years ending December 31:
2022	$	4,648
2023	4,648
2024	4,648
2025	4,270
2026	3,137
Thereafter	22,090
	$	43,441


	2021		2020
Outstanding term loans	$	101,605	$	66,790
Less unamortized deferred financing cost, net	1,105		795
Total debt less unamortized deferred financing costs	100,500		65,995
Less current maturities	470		676
Long-term debt, net of current maturities	100,030		65,319


		2021		2020
Current tax expense (benefit)
Federal		$	1,198	$	(92)
State and local		18		13
Foreign		1,413		532
	Total current tax expense	2,629		453
Deferred tax expense (benefit)
Federal		(290)		51
State and local		(29)		(50)
	Total deferred tax expense (benefit)	(319)		1
	Income tax expense	$	2,310	$	454


	2021		2020		Estimated Useful Life
Trade name	$	16,200	$	16,200	20 years
Customer relationships	34,900		34,900		15 years
Technology	12,100		12,100		8 years
	63,200		63,200
Less accumulated amortization	(19,759)		(15,111)
	$	43,441	$	48,089


2022	$	457
2023	402
2024	126
	$	985


	2022		2021
Product revenue	$	52,719	$	39,520
Royalty revenue	509		417
	$	53,228	$	39,937


	2022		2021
Raw materials	$	789	$	743
Finished Goods	777		347
	1,566		1,090
Less reserve for obsolescence	(220)		(326)
	$	1,346	$	764


	2021		2020
Deferred tax assets:
Accounts receivable	$	14	$	14
Inventories	84		73
Deferred rent	1		54
Accrued expenses	109		58
Other	30		73
Total deferred tax assets	238		272
Deferred tax liabilities:
Amortization of goodwill and intangible assets and transaction costs	(8,067)		(8,437)
Depreciation and amortization of property and equipment	(89)		(90)
Other	(26)		(8)
Total deferred tax liabilities	(8,182)		(8,535)
Net deferred income taxes	$	(7,944)	$	(8,263)


Outstanding Incentive Units as of December 31, 2019						2,830,000
Incentive Units Granted						—
Incentive Units Forfeited						(284,800)
Outstanding Incentive Units as of December 31, 2020						2,545,200
Incentive Units Granted						320,000
Incentive Units Forfeited						(40,000)
Outstanding Incentive Units as of December 31, 2021						2,825,200


Contents


Unaudited financial statements

	Consolidated balance sheets	3

	Consolidated statements of income	4

	Consolidated statements of changes in stockholder's equity	5

	Consolidated statements of cash flows	6

	Notes to consolidated financial statements	7-15


	Common Stock
	Shares	Amount		Additional Paid-In Capital		Accumulated Deficit		Total Stockholder’s Equity
Balance, December 31, 2020	3,000	$	—	$	58,426	$	(16,516)	$	41,910
Equity-based compensation expense	—	—		276		—		276
Net income	—	—		—		9,704		9,704
Balance, June 30, 2021	3,000	$	—	$	58,702	$	(6,812)	$	51,890

Balance, December 31, 2021	3,000	$	—	$	59,028	$	(63,205)	$	(4,177)
Equity-based compensation expense	—	—		321		—		321
Net income	—	—		—		12,522		12,522
Balance, June 30, 2022	3,000	$	—	$	59,349	$	(50,683)	$	8,666


(in thousands)	Compass Diversified Holdings as Reported		PrimaLoft as Reported		Pro Forma Adjustments			Pro Forma Combined Compass Diversified Holdings
Assets
Current assets:
Cash and cash equivalents	$	102,709	$	7,977	$	—		$	110,686
Accounts receivable, net	268,530		2,465		—			270,995
Inventories	695,687		1,346		630		A	697,663
Prepaid expenses and other current assets	66,530		2,062		—			68,592
Current assets held for sale	96,227		—					96,227
Total current assets	1,229,683		13,850		630			1,244,163
Property, plant and equipment, net	182,989		1,073		—			184,062
Goodwill	788,913		61,872		252,721		A	1,103,506
Intangible assets, net	860,261		41,116		219,084		A	1,120,461
Other non-current assets	141,487		239		872		D	142,598
Total assets	$	3,203,333	$	118,150	$	473,307		$	3,794,790
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	110,680	$	—	$	—		$	110,680
Accrued expenses	181,598		10,684		3,315		E	195,597
Due to related party	13,501		—		—			13,501
Other current liabilities	32,286		—		515		D	32,801
Current liabilities held for sale	27,270							27,270
Total current liabilities	365,335		10,684		3,830			379,849
Deferred income taxes	79,357		7,270		54,775		A	141,402
Long-term debt	1,285,747		91,530		393,428		B	1,770,705
Other non-current liabilities	118,048		—		357		D	118,405
Total liabilities	1,848,487		109,484		452,390			2,410,361

Stockholders’ equity
Trust preferred shares, no par value	303,918		—		—			303,918
Trust common shares, no par value	1,185,348		—		—			1,185,348
Accumulated other comprehensive income (loss)	(665)		—		—			(665)
Accumulated deficit	(311,092)		8,666		(14,346)		C, E	(316,772)
Total stockholders’ equity attributable to Holdings	1,177,509		8,666		(14,346)			1,171,829
Noncontrolling interest	177,707		—		35,263		A	212,970
Noncontrolling interest held for sale	(370)				—			(370)
Total stockholders’ equity	1,354,846		8,666		20,917			1,384,429
Total liabilities and stockholders’ equity	$	3,203,333	$	118,150	$	473,307		$	3,794,790



(in thousands, except per share data)	Compass Diversified Holdings as Reported		PrimaLoft as Reported		Pro Forma Adjustments			Pro Forma Combined Compass Diversified Holdings
Net revenues	$	1,841,668	$	65,882	$	—		$	1,907,550
Cost of revenues	1,115,711		25,729		630		F	1,142,070
Gross Profit	725,957		40,153		(630)			765,480

Operating expenses:
Selling, general and administrative expense	459,204		16,808		—			476,012
Management fees	46,943		—		5,300		G	52,243
Amortization expense	80,307		4,648		12,577		H	97,532
Operating income	139,503		18,697		(18,507)			139,693

Other income (expense):
Interest income (expense), net	(58,839)		(4,534)		(4,807)		I	(68,180)
Amortization of debt issuance costs	(2,979)		—		—			(2,979)
Loss on debt extinguishment	(33,305)		—		—			(33,305)
Other income (expense), net	(1,184)		—		—			(1,184)
Income (loss) from continuing operations before income taxes	43,196		14,163		(23,314)			34,045
Provision for income taxes	18,337		2,310		—			20,647
Income (loss) from continuing operations	24,859		11,853		(23,314)			13,398
Less: Income from continuing operations attributable to noncontrolling interest	7,740		—		1,104		J	8,844
Net income (loss) attributable to Holdings from continuing operations	$	17,119	$	11,853	$	(24,418)		$	4,554

Basic and fully diluted loss per share attributable to Holdings from continuing operations	$	(0.76)						$	(0.95)

Weighted average number of shares	65,362							65,362


Acquisition Consideration

Gross purchase price	$	530,000
Working capital adjustment - preliminary	2,257
Cash acquired - preliminary estimate	7,319
Purchase consideration	$	539,576


	Amounts recognized as of the acquisition date
(in thousands)	Preliminary
Purchase Consideration	$	539,576

Fair value of identified assets acquired:
Cash	$	6,951
Accounts receivable, net	2,992
Inventory, net	1,991
Property, plant and equipment	1,042
Intangible assets	260,200
Other current and non-current assets	3,581
Total identifiable assets	276,757

Fair value of liabilities assumed:
Current liabilities	10,947
Other liabilities	875
Deferred tax liabilities	62,735
Total liabilities assumed	74,557

Net identifiable assets acquired	$	202,200

Goodwill	$	337,376

Transaction costs incurred	$	5,680


(in thousands)	June 30, 2022
Inventory	$	630
Intangible assets	219,084
Goodwill	252,721
Deferred tax liability	(54,775)
Noncontrolling interest	(35,263)
	$	382,397


(in thousands)	PrimaLoft Acquisition
Term loan	$	400,000
Revolving credit facility	84,958
Total CODI acquisition financing	484,958
Redemption of PrimaLoft debt	(91,530)
	$	393,428


(in thousands)	PrimaLoft
Common stock	$	—
Additional-paid-in-capital	59,349
Retained earnings	(50,683)
Total Stockholders' equity	$	8,666


(in thousands)	June 30, 2022
Right-of-use-asset	$	872

Lease liability - current	$	515
Lease liability - non-current	357
	$	872


(in thousands)	June 30, 2022
Elimination of seller transaction costs	$	(2,365)
Buyer transaction costs	5,680
Transaction costs - net	$	3,315


(in thousands)	For the year ended December 31, 2021
Amortization of inventory step-up	$	630


(in thousands)	For the year ended December 31, 2021		For the six months ended June 30, 2022
Management Fee	$	5,300	$	2,650


(in thousands)
Term loan borrowings	$	400,000
	1.97		%
Annual interest expense - term loan	$	7,880

Revolver borrowings	$	84,958
	1.97		%
	1,674
Less: Commitment fee	$	84,958
	0.25		%
	212
Annual interest expense - revolver	$	1,462


(in thousands)	Year ended		Six months ended
	December 31, 2021		June 30, 2022
Pro forma net income (loss) from continuing operations attributable to Holdings	$	4,554	$	33,820
Less: Distributions paid - Allocation Interests	34,058		—
Less: Distributions paid - Preferred Shares	24,181		12,091
Less: Accrued distributions - Preferred Shares	2,869		2,869
Pro forma net loss from continuing operations attributable to Holdings	$	(56,554)	$	18,860