Compass Diversified Holdings - 10-Q filing on 2016-11-02

Acquisition (Tables)

9 Months Ended

Sep. 30, 2016

The following unaudited pro forma data for the three and nine months ended September 30, 2016 and September 30, 2015 gives effect to the acquisition of Manitoba Harvest and 5.11 Tactical, as described above, as if the acquisitions had been completed as of January 1, 2015, and the sale of CamelBak, AFM and Tridien as if the dispositions had been completed on January 1, 2015. The pro forma data gives effect to historical operating results with adjustments to interest expense, amortization and depreciation expense, management fees and related tax effects. The information is provided for illustrative purposes only and is not necessarily indicative of the operating results that would have occurred if the transaction had been consummated on the date indicated, nor is it necessarily indicative of future operating results of the consolidated companies, and should not be construed as representing results for any future period.



	Three months ended				Nine months ended
(in thousands)	September 30, 2016		September 30, 2015		September 30, 2016		September 30, 2015
Net sales	$	299,737	$	271,488	$	845,212	$	766,929
Operating income	11,769		20,913		29,603		42,755
Net income (loss)	46,468		9,284		38,989		(1,163		)
Net income (loss) attributable to Holdings	45,795		8,033		37,271		(5,515		)
Basic and fully diluted net income (loss) per share attributable to Holdings	$	0.68	$	0.13	$	0.40	$	(0.15	)

5.11 Tactical

Business Acquisition [Line Items]

Schedule of Business Acquisitions

The table below provides the preliminary recording of assets acquired and liabilities assumed as of the acquisition date.



5.11 Tactical
(in thousands)
Amounts recognized as of the acquisition date
Assets:
Cash	$	12,581
Accounts receivable ⁽¹⁾	38,323
Inventory ⁽²⁾	163,507
Property, plant and equipment ⁽³⁾	22,723
Intangible assets	127,706
Goodwill	76,186
Other current and noncurrent assets	5,316
Total assets	446,342




Liabilities and noncontrolling interest:
Current liabilities	$	38,229
Other liabilities	180,231
Deferred tax liabilities	—
Noncontrolling interest	5,568
Total liabilities and noncontrolling interest	224,028

Net assets acquired	222,314
Noncontrolling interest	5,568
Intercompany loans to business	179,237
	$	407,119

Acquisition Consideration
Purchase price	$	400,000
Working capital adjustment	(910		)
Cash	8,029
Total purchase consideration	$	407,119
Less: Transaction costs	2,063
Purchase price, net	$	405,056

⁽¹⁾ Includes $40.1 million of gross contractual accounts receivable of which $1.7 million was not expected to be collected. The fair value of accounts receivable approximated book value acquired.

⁽²⁾ Includes $42.3 million in inventory basis step-up, which will be charged to cost of goods sold over the inventory turns of the acquired entity.

⁽³⁾ Includes $7.6 million of property, plant and equipment basis step-up.

Schedule of Intangible Assets Recorded as Part of Acquisition

The intangible assets recorded related to the 5.11 acquisition are as follows (in thousands):



Intangible assets	Amount		Estimated Useful Life
Trade name	$	48,665	20 years
Customer relationships	74,343		10 - 15 years
Technology	4,698		10 years
	$	127,706

Manitoba Harvest

Business Acquisition [Line Items]

Schedule of Business Acquisitions

The table below provides the recording of assets acquired and liabilities assumed as of the acquisition date.



Manitoba Harvest
(in thousands)
Amounts recognized as of the acquisition date
Assets:
Cash	$	164
Accounts receivable	3,787
Inventory ⁽¹⁾	8,743
Property, plant and equipment	8,203
Goodwill	37,882
Intangible assets	63,687
Other current and noncurrent assets	986
Total assets	$	123,452

Liabilities and noncontrolling interest:
Current liabilities	$	3,267
Deferred tax liabilities	16,593
Other liabilities	23,332
Noncontrolling interest	7,638
Total liabilities and noncontrolling interest	$	50,830

Net assets acquired	$	72,622
Noncontrolling interest	7,638
Intercompany loans to business	23,593
	$	103,853



Acquisition Consideration
Purchase price	$	104,437
Working capital adjustment	(584		)
Total purchase consideration	$	103,853
Less: Transaction costs	1,145
Purchase price, net	$	102,708

⁽¹⁾ Includes $3.1 million of step-up in the basis of inventory.

Schedule of Intangible Assets Recorded as Part of Acquisition

The intangible assets recorded in connection with the Manitoba Harvest acquisition are as follows (in thousands):



Intangible assets	Amount		Estimated Useful Life
Tradename (unamortizable)	$	13,005	N/A
Technology and processes	9,616		10 years
Customer relationships	41,066		15 years
	$	63,687