UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): September 3, 2024
(Exact name of registrant as specified in its charter)
| (State or other jurisdiction of incorporation) | (Commission File Number) | (I.R.S. Employer Identification No.) | ||||||||||||
COMPASS GROUP DIVERSIFIED HOLDINGS LLC
(Exact name of registrant as specified in its charter)
| Delaware | 001-34926 | 20-3812051 | ||||||||||||
| (State or other jurisdiction of incorporation) | (Commission File Number) | (I.R.S. Employer Identification No.) | ||||||||||||
(Address of principal executive offices and zip code)
Registrant’s telephone number, including area code: (203 ) 221-1703
Check the appropriate box below if the Form 8-K is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
| Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) | |||||
| Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) | |||||
| Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) | |||||
| Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) | |||||
Securities registered pursuant to Section 12(b) of the Act:
| Title of Each Class | Trading Symbol(s) | Name of Each Exchange on Which Registered | ||||||||||||
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
| Emerging growth company | |||||||||||||||||
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
Section 8 Other Events
Item 8.01 Other Events
As previously disclosed in the Current Report on Form 8-K filed on February 1, 2024 (the "Original Report"), Compass Group Diversified Holdings LLC (the “Company” and, together with Compass Diversified, “CODI”), through its newly formed acquisition subsidiaries, THP Topco, Inc., a Delaware corporation (“Topco”) and THP Intermediate, Inc., a Delaware corporation (“Buyer”), acquired The Honey Pot Company Holdings, LLC (“THP”) and certain of its affiliated entities pursuant to a Merger and Stock Purchase Agreement (the “Purchase Agreement”) by and among Buyer, THP, VMG Honey Pot Blocker, Inc. (“Blocker I”), NVB1, Inc. (“Blocker II”), VMG Tax-Exempt IV, L.P. (“Blocker I Seller”), New Voices Fund, LP (“Blocker II Seller”), THP Merger Sub, LLC (“Merger Sub”), VMG Honey Pot Holdings, LLC, as the Sellers’ Representative, and certain remaining equity holders of THP (the “THP Sellers”, together with Blocker I Seller and Blocker II Seller, each a “Seller” and collectively, the “Sellers”). Pursuant to the Purchase Agreement, subsequent to certain internal reorganizations, Buyer acquired all of the issued and outstanding equity of Blocker I and Blocker II and, thereafter, Merger Sub merged with and into THP (the “Merger”), with THP surviving such that the separate existence of Merger Sub ceased, with THP surviving the Merger as a wholly-owned, indirect subsidiary of the Topco. THP is the parent company of The Honey Pot Company (DE), LLC.
On April 10, 2024, we filed a form 8-K/A to amend the Original Report to provide certain historical financial statements of THP and pro forma financial information of CODI in accordance with item 9.01 of Form 8-K. We are filing this Current Report on Form 8-K to provide additional pro forma financial information of CODI related to the Merger.
Section 9 Financial Statements and Exhibits
Item 9.01 Financial Statements and Exhibits
(b) Pro Forma Financial Information.
The following unaudited pro forma financial information of CODI is attached hereto as Exhibit 99.1 and is incorporated by reference into this Item 9.01(b) and made a part hereof: unaudited pro forma condensed combined statement of operations for the six months ended June 30, 2024 and notes thereto.
(d) Exhibits.
| 99.1 | ||||||||
| 104 | Cover Page Interactive Data File (embedded with the Inline XBRL document) | |||||||
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| Date: September 3, 2024 | COMPASS DIVERSIFIED HOLDINGS | ||||||||||
| By: | /s/ Stephen Keller | ||||||||||
| Stephen Keller | |||||||||||
| Regular Trustee | |||||||||||
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| Date: September 3, 2024 | COMPASS GROUP DIVERSIFIED HOLDINGS LLC | ||||||||||
| By: | /s/ Stephen Keller | ||||||||||
| Stephen Keller | |||||||||||
| Chief Financial Officer | |||||||||||
Exhibit 99.1
COMPASS DIVERSIFIED HOLDINGS
PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
(UNAUDITED)
The following pro forma condensed combined financial statements give effect to the acquisition of The Honey Pot Company Holdings, LLC ("The Honey Pot" or "THP") with a total purchase price of approximately $380.1 million, as further described on the Form 8-K that we filed on February 1, 2024.
The following pro forma condensed combined statement of operations for the six months ended June 30, 2024 gives effect to the acquisition of THP as if the acquisition had occurred on January 1, 2024.
The "pre-Merger" financial information of THP is derived from the unaudited historical financial statements The Honey Pot Company Holdings, LLC for the period from January 1, 2024 through January 30, 2024, The "as reported" financial information for Compass Diversified Holdings (the "Company" or "Holdings") is derived from the unaudited financial statements of the Company for the six months ended June 30, 2024 as filed on Form 10-Q dated July 31, 2024. The "as reported" of the Company for the six months ended June 30, 2024 includes the results of operations of THP from the date of acquisition, January 31, 2024, through June 30, 2024.
Assumptions underlying the pro forma adjustments necessary to reasonably present this unaudited pro forma condensed combined financial information are described in the accompanying notes. The pro forma adjustments described in the accompanying notes have been made based on the available information and, in the opinion of management, are reasonable. The unaudited pro forma condensed combined statement of operations reflects the adjustments to the historical consolidated results of operations that are expected to have a continuing effect. The unaudited pro forma condensed combined statement of operations does not include certain items such as transaction costs related to the acquisition.
The historical consolidated financial information has been adjusted to give effect to estimated pro forma events that are directly attributable to the acquisition, factually supportable and, with respect to the unaudited pro forma condensed combined statement of operations, expected to have a continuing impact on the consolidated results of operations. The unaudited pro forma condensed combined financial information should not be considered indicative of actual results that would have been achieved had the acquisition occurred on the date indicated and do not purport to indicate results of operations for any future period.
You should read these unaudited pro forma condensed combined financial statements in conjunction with the accompanying notes, and the consolidated financial statements of the Company, including the notes thereto as previously filed.
Compass Diversified Holdings
Pro Forma Condensed Combined Statement of Operations
for the six months ended June 30, 2024
(unaudited)
| (in thousands, except per share data) | Compass Diversified Holdings as Reported (unaudited) | THP pre-Merger (unaudited) | Pro Forma Adjustments | Pro Forma Combined Compass Diversified Holdings | ||||||||||||||||||||||
| Net revenues | $ | 1,066,885 | $ | 10,671 | $ | — | $ | 1,077,556 | ||||||||||||||||||
| Cost of revenues | 565,944 | 4,337 | — | 570,281 | ||||||||||||||||||||||
| Gross Profit | 500,941 | 6,334 | — | 507,275 | ||||||||||||||||||||||
| Operating expenses: | ||||||||||||||||||||||||||
| Selling, general and administrative expense | 302,160 | 2,536 | 250 | (a) | 304,946 | |||||||||||||||||||||
| Management fees | 36,931 | — | 1,900 | (b) | 38,831 | |||||||||||||||||||||
| Amortization expense | 53,749 | — | 1,339 | (c) | 55,088 | |||||||||||||||||||||
| 8,182 | — | — | 8,182 | |||||||||||||||||||||||
| Operating income | 99,919 | 3,798 | (3,489) | 100,228 | ||||||||||||||||||||||
| Other income (expense): | ||||||||||||||||||||||||||
| Interest income (expense), net | (50,136) | (21) | 21 | (d) | (50,136) | |||||||||||||||||||||
| Amortization of debt issuance cost | (2,009) | — | — | (2,009) | ||||||||||||||||||||||
| Loss on sale of Crosman | (24,606) | — | — | (24,606) | ||||||||||||||||||||||
| Other income (expense), net | (4,249) | — | — | (4,249) | ||||||||||||||||||||||
| Income (loss) from continuing operations before income taxes | 18,919 | 3,777 | (3,468) | 19,228 | ||||||||||||||||||||||
| Provision for income taxes | 30,206 | — | 481 | (e) | 30,687 | |||||||||||||||||||||
| Net income from continuing operations | (11,287) | 3,777 | (3,949) | (11,459) | ||||||||||||||||||||||
| Less: Net income from continuing operations attributable to noncontrolling interest | 13,235 | — | 221 | (f) | 13,456 | |||||||||||||||||||||
| Net income (loss) attributable to Holdings from continuing operations | (24,522) | 3,777 | (4,170) | (24,915) | ||||||||||||||||||||||
| Basic and fully diluted loss per share attributable to Holdings | $ | (1.30) | $ | (1.31) | ||||||||||||||||||||||
| Weighted average number of shares | 75,332 | 75,332 | ||||||||||||||||||||||||
See accompanying Notes to the Unaudited Pro Forma Condensed Combined Financial Information.
Compass Diversified Holdings
Notes to Pro Forma Condensed Combined Financial Statements
(Unaudited)
Pro forma information is intended to reflect the impact of the acquisition of THP on the Company’s results of operations through adjustments that are directly attributable to the transaction, that are factually supportable and, with respect to the pro forma condensed combined statements of operations that are expected to have a continuing impact. This information in Note 1 provides a description of each of the pro forma adjustments from each line item in the pro forma condensed combined financial statement together with information explaining how the adjustments were derived or calculated, and represents the effects of the acquisition of THP as if the Company had acquired THP on January 1, 2024.
Note 1. Pro Forma Adjustments
Statement of Operations
The following adjustments correspond to those included in the unaudited pro forma condensed combined statement of operations for the period presented:
(a) Stock compensation expense
To record the adjustment to stock compensation expense included in selling, general and administrative expense for the revised stock compensation amount associated with the preliminary allocation of the purchase price of THP (in thousands):
| Selling, general and administrative expense | For the six months ended June 30, 2024 | |||||||
| Historical stock compensation expense | $ | (40) | ||||||
| Revised stock compensation expense | 290 | |||||||
| $ | 250 | |||||||
(b) Management fee
To record the annual management fee payable to Compass Group Management (our Manager) calculated as 2% of the aggregate purchase price of THP.
| (in thousands) | For the six months ended June 30, 2024 | |||||||
| Management Fee | $ | 1,900 | ||||||
(c) To record the adjustment to amortization expense for the intangible assets associated with the preliminary allocation of the purchase price of THP.
| (in thousands) | For the six months ended June 30, 2024 | |||||||
| Historical amortization expense | $ | — | ||||||
| Revised amortization expense | 1,339 | |||||||
| $ | 1,339 | |||||||
(d) To record the elimination of interest expense associated with THP for the period presented. The acquisition of THP was financed with cash on hand.
| (in thousands) | For the six months ended June 30, 2024 | |||||||
| Historical interest expense | $ | (41) | ||||||
| Revised interest expense | 41 | |||||||
| $ | — | |||||||
(e) To record the provision for income taxes associated with THP for the period presented.
| (in thousands) | For the six months ended June 30, 2024 | |||||||
| Historical income tax expense | $ | — | ||||||
| Revised income tax expense | 481 | |||||||
| $ | 481 | |||||||
(f) To record the noncontrolling interest associated with THP's net income for the period presented.
| (in thousands) | For the six months ended June 30, 2024 | |||||||
| THP Net Income | $ | 1,457 | ||||||
| Noncontrolling interest ownership percentage | 15.2 | % | ||||||
| $ | 221 | |||||||
Note 2. Earnings Per Share
Basic and fully diluted earnings per Trust common share is computed using the two-class method which requires companies to allocate participating securities that have rights to earnings that otherwise would have been available to common shareholders as a separate class of securities in calculating earnings per share. The Company has granted Allocation Interests that contain participating rights to receive profit allocations upon the occurrence of certain events, and has issued preferred shares that have rights to distributions when, and if, declared by the Company's Board of Directors. The calculation of basic and fully diluted earnings per Trust common share is computed by dividing income available to common shareholders by the weighted average number of Trust common shares outstanding during the period. Earnings per common share reflects the effect of distributions that were declared and paid to holders of the Allocation Interests, and distributions that were paid or cumulative on preferred shares during the period.
Reconciliation of pro forma net income (loss) from continuing operations available to common shares of Holdings
The following table reconciles net income (loss) attributable to the common shares of Holdings:
| (in thousands) | For the six months ended June 30, 2024 | |||||||
| Pro forma net income from continuing operations attributable to Holdings | $ | (24,951) | ||||||
| Less: Distributions paid - Allocation Interests | 48,941 | |||||||
| Less: Distributions paid - Preferred Shares | 12,146 | |||||||
| Less: Accrued distributions - Preferred Shares | 2,991 | |||||||
| Pro forma net loss from continuing operations attributable to Holdings | $ | (89,029) | ||||||
Pro forma earnings per share - continuing operations
| For the six months ended June 30, 2024 | ||||||||
| (in thousands, except per share data) | ||||||||
| Pro forma net loss from continuing operations attributable to Holdings | $ | (89,029) | ||||||
| Less: Effect of Contribution based profit - Holding Event | 9,502 | |||||||
| Pro forma loss from Holdings attributable to common shares | $ | (98,531) | ||||||
| Basic and fully diluted weighted average common shares of Holdings | 75,332 | |||||||
| Basic and fully diluted pro forma loss per share attributable to Holdings | ||||||||
| Continuing operations | $ | (1.31) | ||||||