Compass Diversified (CODI) Q2 2014 Earnings Report, Transcript and Summary

Good morning, and welcome to Compass Diversified Holdings' 2014 Second Quarter Conference Call. Today's call is being recorded. [Operator Instructions] At this time, I would like to turn the conference over to Mr. Leon Berman of The IGB Group for introductions and the reading of the Safe Harbor statement. Please go ahead, sir.

Thank you, and welcome to Compass Diversified Holdings' Second Quarter 2014 Conference Call. Representing the company today are Alan Offenberg, CEO; Ryan Faulkingham, CFO; and Elias Sabo, a founding partner of Compass Group Management. Before we begin, I would like to point out that the Q2 press release, including the financial tables and non-GAAP reconciliations, is available on the company's website at www.compassdiversifiedholdings.com. The company also filed its Form 10-Q with the SEC last night. Please note that throughout this call, we will refer to the Compass Diversified Holdings as CODI or the company. Now allow me to read the following Safe Harbor statement. During this conference call, we may make certain forward-looking statements, including statements with regard to the future performance of CODI. 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 on a material basis from those projected in these forward-looking statements, and some of these factors are enumerated in the Risk Factor discussion in the Form 10-K as filed with the Securities and Exchange Commission for the year ended December 31, 2013, as well as in other SEC filings. In particular, the domestic and global economic environment has a significant impact on our subsidiary companies. CODI undertakes no obligation to publicly update or revise any forward-looking statements whether as a result of new information, future events or otherwise. At this time, I would like to turn the call over to Alan Offenberg.

Good morning. Thank you, all, for your time, and welcome to our second quarter 2014 earnings conference call. During the second quarter, our diverse family of leading middle-market businesses continue to focus on increasing market share in their respective industries by taking advantage of their relative operating and financial strengths. For the 3 months ended June 30, 2014, CODI generated cash flow available for distribution and reinvestment, which we refer to as cash flow or CAD of $12.5 million. Overall, both our niche industrial businesses and our branded consumer businesses continue to generate predictable and strong free cash flow. For the 6 months ended June 30, 2014, our niche industrial businesses posted a combined revenue increase of approximately 8.1% as compared to the 6 months ended June 30, 2013, although EBITDA declined slightly by approximately 1% as compared to the corresponding period in the previous year. In addition, this business has produced a lower combined EBITDA margin of 13.1% as compared to 14.3% for the 6 months ended June 30, 2013. Our leading branded consumer businesses achieved a combined revenue increase of approximately 4.2% for the 6 months ended June 30, 2014. EBITDA, however, declined in a combined basis for these businesses by approximately 5.3% when compared to the first half of 2013, and the EBITDA margin on a combined basis during the 6 months ended June 30, 2014, was approximately 18.3% versus 20.1% for the 6 months ended June 30, 2013. Going forward, as a result of our sale of FOX shares in July, the results for Fox will not be consolidated with the results of our other subsidiaries since our ownership percentage in this business has recently dropped below a controlling interest. For the second quarter, we paid cash distribution of $0.36 per share, representing a current yield of approximately 8.1%. Since going public in May of 2006, CODI has paid cumulative distributions of approximately $11.04 per share. Although our cash flow per share has been reduced to a level below our current distribution per share following the 2013 IPO by FOX, which we expected, our strong liquidity position provides for the continuity of CODI's current distribution as determined by our board. Additionally, we have realized gains of more than $340 million from the monetization of our interest in CODI subsidiaries, including our FOX secondary sale in July, which have never been included in our calculation of CAD. We remain focused on leveraging CODI's substantial liquidity and conservative balance sheet to drive future performance and to provide shareholders with a steady stream of cash distributions. During the second quarter, we further strengthened our financial position and liquidity. Specifically, we refinanced our debt, which lowered our borrowing cost, extended our maturities and increased our total debt capacity by approximately $120 million. In addition, FOX closed last month on a secondary share offering in which CODI participated. As a selling shareholder, we sold approximately 4.5 million shares and received total net proceeds of approximately $65.5 million. With these proceeds, combined with the debt and equity proceeds from FOX's IPO in August 2013, CODI has now generated total proceeds to date of over $200 million while maintaining a 41% ownership in FOX. As a reminder, CODI acquired a controlling interest in FOX in January 2008 for approximately $80 million. As a result of these transactions, CODI remains well positioned to continue to invest in high return organic growth initiatives, while aggressively pursuing select platform and add-on acquisition opportunities that are accretive to CAD. Currently, the M&A environment for middle-market businesses remains competitive due to the continued availability of low-cost debt capital, combined with the prevalence of well-capitalized buyers actively seeking to deploy their capital. Although valuation levels remain relatively high, we have experienced an increase in deal flow for higher-quality companies since the end of last year and are cautiously optimistic that this deal flow will continue to increase. We remain committed to acquiring new platform businesses and add-on acquisitions to our existing subsidiaries, utilizing our disciplined approach to valuation and diligence and appreciate the patience of our shareholders and our pursuit to add profitable companies to our family of businesses which have a real reason to exist. I'll now turn the call over to Elias to review the quarterly performance of our current group of subsidiaries.

Thank you, Alan. I will begin by reviewing our niche industrial businesses. As Alan mentioned, these businesses continue to generate strong and predicable free cash flow. We are pleased to have produced combined revenue increase of approximately 11.6% during the second quarter of 2014 as compared to the year earlier period, representing the fifth consecutive quarter these businesses reported year-over-year top line growth. EBITDA, on a combined basis, declined year-over-year, however, by approximately 2.7% and the combined EBITDA margin was 13.3% for the quarter ended June 30, 2014, versus 15.3% for the quarter ended June 30, 2013. Sequentially, the combined revenue for our niche industrial businesses was flat. In addition, EBITDA, on a combined basis for the second quarter of 2014, rose approximately 5.7%, and the EBITDA margin increased 60 basis points as compared to the first quarter of 2014. The Advanced Circuits performed in line with our expectations for the second quarter. Although the company's financial results declined as compared to the year earlier period, revenue on a sequential basis increased approximately 2% due continued growth in our assembly business. Margins were impacted in the second quarter as our overall production volumes decreased. We remain focused on taking advantage of our core prototype and quick-turn capabilities and superior customer service to increase market share, while pursuing attractive opportunities to further consolidate the industry. Arnold Magnetic posted second quarter results that met our expectation. Revenue for the quarter was flat as compared to the year earlier period and EBITDA declined year-over-year, primarily due to its FlexMag division completing a one-time high-margin project in Q2 2013 that was not replicated in 2014. On a sequential basis, both revenue and EBITDA increased 6.8% and 33.1%, respectively. We continue to build Arnold's infrastructure to support its long-term growth objectives and remain excited by the company's future prospects. At Tridien, revenue increased year-over-year by approximately 10% and EBITDA declined approximately 11%. Margins in the quarter were impacted by higher sales of non-powered products. Tridien also incurred higher research and development expense and administrative costs in anticipation of new product launches scheduled for late in the fourth quarter. Finally, at AFM, this business continues to exceed our expectations as revenue in the second quarter increased 47% compared to the year earlier period, representing the fourth consecutive quarter that sales have posted double-digit growth on a year-over-year basis, and the sixth consecutive quarter that sales have increased year-over-year. During the second quarter, AFM benefited from the fulfillment of a large proportional sales order from an existing customer that was completed in June 2014. In addition to AFM's positive sales momentum, this business has now generated positive cash flow for 3 consecutive quarters. We remain encouraged by the progress this business has achieved, gaining market share during a challenging retail environment in the furniture industry while benefiting from a more efficient cost structure. Next, I will turn to our branded consumer businesses. During the second quarter, our branded consumer businesses produced both revenue and EBITDA growth on a combined basis of approximately 8.2% and 3%, respectively, over the year earlier period. The combined EBITDA margin, however, declined to 18.3% for the quarter ended June 30, 2014, from 19.2% for the quarter ended June 30, 2013, for these 4 subsidiaries on a combined basis. Sequentially, the combined revenue for our branded consumer businesses increased approximately 15.6%. In addition, EBITDA on a combined basis for the second quarter of 2014 increased approximately 15.2%, and the EBITDA margin was the same as compared to the first quarter of 2014. For the second quarter, ERGObaby delivered another strong performance in terms of both sales and profitability, posting revenue and EBITDA growth of approximately 19% and 23%, respectively. Including Q2, this business has now posted double-digit earnings growth on a year-over-year basis for 7 out of the past 8 quarters. We continue to benefit from the strong demand for ERGObaby's premier child mobility and transport products, including new product launches. At Liberty, this business posted second quarter results below our expectations. As we stated on our previous call, the demand for the company's premium gun and home safe began softening towards the end of last year, which contributed to a decline in revenue of approximately 40% for the second quarter of 2014 versus the year earlier period. In addition, this business recorded an inventory charge of $1.6 million reflecting a reduced pricing for import safes, resulting in an operating loss for the second quarter. Management has taken significant proactive measures to rightsize this business in line with the current demand environment. Specifically, SG&A cost in the second quarter decreased over 15% as compared to the year earlier period. In addition, we reduced direct and indirect labor costs as a result of Liberty's lower manufacturing volumes in the second quarter relative to the prior year. While we expect to improve operating efficiencies going forward, we now anticipate Liberty to generate EBITDA in the range of $5 million to $7 million for the full year of 2014. At FOX, both revenue and EBITDA increased year-over-year by approximately 23%. As Alan mentioned earlier, Fox's results will no longer be consolidated with the results of our other subsidiary given CODI's ownership percentage has recently dropped below a controlling interest. We continue to be the largest shareholder of FOX and remain excited by the company's future growth prospect. And lastly, CamelBak exceeded our expectations in the second quarter as revenue and EBITDA increased approximately 18% and 32%, respectively, compared to the same period last year. During the second quarter, CamelBak expanded its international presence and increased penetration levels among new and existing customers as we continue to leverage company's leading reputation for providing innovative, personal hydration products and strengthening global distribution network. I would now like to turn the call over to Ryan to add his comments on our financial results.

Thank you, Elias. Today, I will discuss our consolidated financial results for the quarter ended June 30, 2014. I'll limit my comments largely to the overall results for our company since individual subsidiary results are detailed in our Form 10-Q for the quarter that was filed with the SEC yesterday. On a consolidated basis, revenue for the quarter ended June 30, 2014, was $269.1 million as compared to $245.8 million for the prior year period. This year-over-year increase was mainly attributable to meaningful revenue growth at ERGObaby, CamelBak and AFM, partially offset by the decrease in revenue of Liberty. Net income for the quarter was $12.3 million as compared to net income of $2 million in the year earlier period. For the prior year quarter, we recorded an expense of $8.9 million related to CODI's Supplemental Put Agreement, which was subsequently terminated in July 2013. Cash flow for the quarter ended June 30, 2014, was $12.5 million as compared to $23.5 million for the prior year period. Cash flow for the second quarter of 2014 reflects the year-over-year growth in our ERGObaby and CamelBak subsidiary businesses, as well as positive contributions from AFM, offset by lower results at Liberty, as well as the adverse impact on cash flow from the IPO of FOX. Turning now to the balance sheet. We had $115.3 million in cash and cash equivalents and networking capital of $315.1 million as of June 30, 2014. We also had $325 million outstanding on our term debt facility and no borrowings outstanding under our revolving credit facility as of June 30, 2014, as well as no significant debt maturities until June 2019. In addition, we have borrowing availability of approximately $388 million under our revolving credit facility at June 30, 2014. This data information excludes the FOX credit facility. As previously announced on June 9, we signed a credit agreement for a revolving credit facility totaling $400 million and a term loan facility in the amount of $325 million. The 2 facilities, led by Bank of America Merrill Lynch, SunTrust Robinson Humphrey, TD Securities and U.S. Bank National, combined for $725 million in new debt financing and replaced our previous revolving credit facility and term loan facility. With this agreement, we have refinanced our existing debt under attractive terms and pricing and increased our overall debt capacity. The issuance of the $325 million of term debt was used to repay the then existing $279 million of term debt with the excess proceeds received in cash. We appreciate the support of our banking group, which underscores CODI's future prospects. Subsequent to the quarter ended June 30, 2014, CODI sold approximately 4.5 million shares of FOX common stock in connection with a secondary offering of shares held by certain FOX shareholders at a price of $15.50 per share. Upon completion of the offering, CODI received total net proceeds of approximately $65.5 million and its ownership in FOX has lowered from approximately 53% to 41%, or approximately 15.1 million shares to Fox's common stock. We will be deconsolidating FOX beginning in the quarter ending September 30, 2014, consistent with our intention to streamline CODI's consolidated financial reporting. During the second quarter of 2014, we incurred $3.5 million of maintenance capital expenditures as compared to maintenance CapEx of $3.2 million for the prior year period. Although maintenance CapEx increased year-over-year, we came in below our expected spend by approximately $2.5 million during the first 6 months of 2014 due to the timing of certain expenditures on a consolidated basis, which are expected to take effect during the second half of the year. For the full year 2014, we expect to incur maintenance CapEx between $10 million and $12 million, excluding FOX, as we continue to invest in the long-term health of our subsidiaries. We also incurred $500,000 of growth CapEx during the second quarter as compared to growth CapEx of $1 million in the prior year period. For the full year 2014, we have lowered our expected growth CapEx spend to between $2 million and $3 million. This growth CapEx spend will be primarily for initiatives at our CamelBak subsidiary and also excludes FOX. I would now turn the call back over to Alan.

Thank you, Ryan. The steady performance across our family of niche market leaders, combined with our considerable financial strength, positions CODI well for the future. Our focus remains on leveraging CODI's significant access to capital and conservative balance sheet to reinvest in our current subsidiaries and enhance their future performance, while actively pursuing accretive acquisitions that create long-term value for shareholders. We also intend to maintain our strong track record in delivering a steady stream of attractive cash distributions as we have consistently done since going public. This concludes our opening remarks, and we'll be happy to take any questions you may have. Operator, please open the phone lines.

[Operator Instructions] Our first question comes from Larry Solow of CJS Securities.

I wonder if you could just give us a little more color on the pretty strong performance at CamelBak. I know it's been under some pressure and I believe I guess some of the military contracts have now been lapped, and I think last year there was also some tough spring. So maybe weather impacted you last year or so. Just sort of was it some of an aberration and timing this quarter? I'm not saying we're not going to get this rapid 20% growth, but do you think we're back to some mid-single digit or some type of growth mode in that range?

Well, I think the last comment you made is a fair one, Larry, with respect to expected both at CamelBak. I think that they had obviously a better weather pattern this year, which certainly was helpful. But I think most notably, they've had some real success internationally as noted with their distribution. I think we've talked about in years past, actually the company's effort to develop a strategy designed to better penetrate international markets and they've worked tirelessly to do that and setting up distribution channels across the globe, and I think they're now starting to see some of the benefits of those efforts. So I would really point to that though is the most notable element of their improved performance in the quarter.

Okay, great. And then just on ERGObaby, another great quarter. I think as you stated, 7 out of 8 quarters double-digit growth and I know you had a several new products come out in the last couple of quarters, so that's perhaps helping -- I'm sure helping growth. What's the outlook? Does it refer towards some mean and what is that sort of mean for the next year-on-year, but say next 2 to 5 -- 3 to 5 years? What do you think that, that hyper growth can be on a top and a bottom line basis?

Yes, Larry, so ERGObaby did have another great quarter. I want to shy away from giving specific kind of growth targets and top and bottom line. What I would say is kind of the current level of growth, which is pushing high-teens to low-20s over the last few quarters. That's probably not a sustainable long-term growth rate just given the company, as the base gets larger, as the large numbers start to kick-in, even though large numbers we're talking about in absolute terms. But it does get harder to grow those rates. But we're very optimistic about the future of this business. So let's say, as we look out over all of our subsidiaries today, we think this is -- has the prospect to be one of our faster growing or amongst the fastest growing of our subsidiaries over a long term period. So the penetration levels for the company globally are still only moderate, so the industry still has the ability for us to take market share. Baby wearing domestically continues to grow. And so we think there's some strong tailwinds with that as well. And as you mentioned, we've been successful in launching new products. The last quarter benefited from that, but we have an intense focus on creating new innovative products that we can bring to market in adjacencies to the areas where we operate in. So the combination of that leads us to be pretty optimistic about the future for this business?

Got it. And then on just the M&A environment, obviously, very competitive. Have you guys -- I mean, you may have, the answer may be yes, but has the focus on adding tuck-in acquisitions where you may have more of an advantage strategically, have you increased focus on that? Any comments there would be great.

Sure. Larry, we really always focus on that with all the companies where that is an appropriate strategy. I think that as you alluded -- I mean, in this market it is something that does deserve great attention, but I'd like to think we're giving that the same level of attention that we always have. So I can assure you that we're appropriate. We are -- we, along with our management team at the subsidiary level are chasing down those opportunities as aggressively as we can, and certainly hope to be successful in those efforts. But I think that as it goes company by company, those efforts are ongoing and I wouldn't say really fluctuate in terms of the intensity of those efforts based on market conditions. But we are certainty trying to focus on it as we always would.

Our next question comes from Troy Ward of KBW. Troy L. Ward - Keefe, Bruyette, & Woods, Inc., Research Division: Alan, can you just give us a little more color on the expectations for Liberty? I mean, clearly, there a lot of things lined up in the past to just to have some sales and margins really off the chart. But I was really surprised that maybe we didn't -- we, obviously, saw some top line, but maybe not quite an inventory charge and talk about rightsizing the business. Could you just give us more color on what's going on there and the ability to have a variable cost production model?

Yes, absolutely. Troy, I would say that the rapid erosion of Liberty after its strongest year in the company's history, probably got a lot of us off guard. It happened -- it was not a soft landing, to use a term that's come up in the past. We found that the demand level at retail remains reasonably strong, but the inventory levels at retail are very high, and that led to a decrease in order rate of the new product. And what we found is that inventory needs to really work its way through the system prior to order rates coming back to a level really consistent with current levels of consumer demand. And I think that while we certainly knew in the company and the management team knew that the past year was one of extraordinary demand led by some extraordinary events and that a pull back to a more normalized level was inevitable, I think we probably commented on that during those robust times. It just happened a lot faster than any of us anticipated and I think that we have taken very quickly the type of corrective actions that are appropriate given the current level of production. We believe the company is poised to bounce back in the future years, given our expected levels of demand and given the sizing of the business that margin should come back, as well as greater levels of revenue. But I think it was simply a company that was -- had staffed up and built its infrastructure to support the current level of demand, and then saw that level of demand come down meaningfully and they had to make the adjustments. With respect to the inventories specifically, one of the things the company had to do in order to support the level of demand in 2013, in addition to its domestically produced product, it needed to import products to satisfy customer demand. And with the lead times associated with the ordering of those products, we ordered based on certain level of demand considering current market condition and the delivery of that product obviously came through and it was -- some of that coincided with softening of the market, such that we were left with a larger level of imported inventory than current market demand would support. Thus, we were in a situation that led to the inventory charge needing to reduce costs, prices I should say, on that inventory in order to process it through our system and monetize it in a way that we think will best position the company for future growth and performance. So there's a -- there's an element this year of the company having to swallow some tough medicine. Undoubtedly, I'm very proud of the efforts of the management team to take the actions that they had to take it. It was a not an easy period of time. And I think that as we look forward, I would be -- I would expect 2015 to be a much better year, obviously, for Liberty Safe in one that would be more consistent with, not 2013 performance, but not 2014 performance or either. If you were to go back even further and look at the type of performance you saw at Liberty Safe, I think that would be, as we sit here today, indicative of the type of expectations we have for the company in 2015 and beyond. Troy L. Ward - Keefe, Bruyette, & Woods, Inc., Research Division: So obviously, some of the revenue from the very strong 2013 is obviously taking away now, but would you say there's been any other structural changes in their business, meaning is there a new competitor? Are they retaining market share -- losing market share? Or are they just may be retaining just a much smaller market? Has there been a switch to lower margin products? And then also speak to the capacity of the domestic manufacturing. I mean, obviously, you're not having to import now, but I believe you built a pretty sizable plant for the increased demands. So can you speak to the capacity of that new facility?

Yes, absolutely. I don't believe there's been any structural shift in the market. I think what you're seeing with Liberty is indicative of the safe market domestically. Those will benefit the company going forward. The new line really does focus though on some of the smaller safes in Liberty's product assortment, and those smaller states safes are at lower price points than some of our larger, more expensive safes. Those safes do in fact compete with some imported product. And that is a very price-sensitive market. So I will say at the entry-level price points for safe is a market that remains competitive and remains competitive with imported product, which is -- it's a decent product. We'd like to think that our product is better, and we know that made in America does resonate with many of Liberty's customers. And so we believe that both the quantity of our product and the domestic manufacturing of our products across all price points resonates with the core Liberty customer. With respect to capacity, I think that obviously, the company is performing, right now, with excess capacity. But I would say that depending on product mix that the current domestic capacity probably could support approximately $120 million or so in revenues is probably the best way for me to phrase it. Troy L. Ward - Keefe, Bruyette, & Woods, Inc., Research Division: Okay. And then real quick, switching gears over to the niche industrial side. You talked about lower EBITDA margins year-over-year and that Arnold, I think, played into that based on some product mix or project they had last year. Is there anything else in the margins on the industrial side that -- can you provide some color there?

Yes, I think Advanced Circuits and Tridien both had some margin pressure that was referenced in our prepared remarks in addition to your noting of Arnold. I think those really all contributed to some pressure on margins in the group. Troy L. Ward - Keefe, Bruyette, & Woods, Inc., Research Division: That reminds me, on Tridien, you talked about new products, R&D products coming online in late 4Q. I'm assuming you mean later this year. It seems like over the last year, we've been waiting for the beginning of 2014 for new products to come out. So can you talk about where Tridien is in the cycle of new products, and how the new products are doing? And we're already back in R&D mode, I don't think we've seen maybe the pickup that we would've expected?

Yes, so, Troy, we've been talking about some new product launches and those have been getting pushed out. I think your point is spot on in that the product launches have been pushed out over the course of this year. There were just some engineering delays that ended up occurring, but they're on track. We are spending some more money, which is why you saw some EBITDA degradation. It was actually really nice sales growth in the quarter, which continued on sales growth and built on momentum that we had in the first quarter. So given the absent some of the new product launches that we have, the business is picking up revenue growth and so we feel very good about the increasing revenue, and it's partly some share that we're gaining and it's partly the industry, which has good tailwinds. I think we are entering the last push here on a couple of major product launches. That should have nice tailwinds going into 2015 in terms of some revenue lift with pretty decent margin. But there is some cost in getting these programs launched, and we would have hoped that those costs that have already been incurred by -- there's been some delays and any of these products can be pretty technical and have a lot of complexity to them. And it's not an excuse, we just, unfortunately, had these lag a little bit from what our expectations have been.

Our next question comes from Fin O'Shea of Raymond James.

Could you walk me through quickly on Advanced Circuits? I jotted down that revenue was up, but production and margins down for the quarter, am I right there and can you help verify?

Yes, Elias, I think will answer that question for you.

Yes, so revenue was actually -- in our prepared remarks so we said revenue was actually up on a sequential basis by 2%. Year-over-year, revenues did actually decline still. And so both revenue and EBITDA was down on a year-over-year basis. And just the color and I think we talked about this with advances, it's been a very difficult environment for circuit board manufacturers domestically with sequestration. What's occurred is that, call it, 300 plus or minus, companies that operate in the states domestically, a lot of them had a component of their business which was connected to defense. Clearly as that defense business has contracted dramatically, not only has it caused problems within that part of the industry, and which Advanced Circuits participates pretty materially, but then it's created a lot of additional capacity just in the domestic footprint and manufacturers are being very aggressive whether it's on price decline, just trying to buy business. So it has been a challenging environment. Sequestration has, I think, really done a -- had a more significant impact than what, I think, people would've thought when it was first contemplated here. We are seeing the business and one of the reasons we wanted to point to a sequential growth is that we are seeing the business have more stability from Q1 to Q2 and early into Q3, and so we wanted to point that out. But the year-over-year trends in going into Q2 were still negative.

Okay. For American Furniture, you mentioned the onetime order. I'm sorry, I'm not familiar with that. If you could give us any color on how big it was? What kind of buyer, and maybe what we can look for going forward in the sales in that area that would help?

Yes. I don't know that -- I would tell you, it's a large natural retailer, it's a longtime customer of American Furniture that made a large order of motion product that American Furniture sells. So it's a recurring customer that just had a uniquely large order at this period of time. I don't believe we are prepared to disclose more detail than that. I will say that American, in the normal course of their business, will get large orders from time to time, but it's notable that the performance on the quarter was impacted beyond our expectations due to this order shipping, primarily during that period of time. And so it's a customer that we'll continue to do business with and done business with for a longtime, a large customer of American Furniture's and we're pleased that it was in the motion side of the business, which is an area of focus for the company and one where they continue to make really good strides in this market.

[Operator Instructions] I'm showing no further questions. At this time, I'd like to turn the call back over to management for any closing remarks.

I would like to thank everyone again for joining us on today's call and following the CODI story. We look forward to sharing our progress with you in the future. Thanks a lot.

Ladies and gentlemen, thank you for participating in today's conference. This does conclude the program, and you may all disconnect. Everyone, have a great day.