Compass Group Diversified 8-K Pro Forma Condensed Combined Financial Statements

Exhibit 99.1

Compass Diversified Holdings

PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS

(Unaudited)

The following unaudited pro forma condensed combined financial statements are presented to show the effect on the historical condensed combined financial statements of Compass Diversified Holdings (the “Company”) of the sale (the “Staffmark Disposition”) of the Company’s majority owned subsidiary, Staffmark Holdings, Inc. (“Staffmark”) for a total enterprise value of $295 million, and estimated net proceeds of approximately $220 million at closing, which does not include an additional approximately $9 million of customary working capital and other escrow proceeds that the Company expects to receive in the future. The Staffmark Disposition is further described in Item 2.01 of this Current Report on Form 8-K.

The following unaudited condensed combined pro forma statements of operations for the years ended December 31, 2008, 2009 and 2010, and for the six months ended June 30, 2011, are based on the assumption that the Staffmark Disposition was completed on January 1, 2008. The pro forma balance sheet as of June 30, 2011 is based on the assumption that the Staffmark Disposition was completed on June 30, 2011.

The “as reported” financial information for both Compass Diversified Holdings and Staffmark are derived from the audited financial statements of the Company for the years ended December 31, 2010 and 2009 as filed on Form 10-K dated March 11, 2011 and March 9, 2010, respectively, the audited financial statements of the Company for the year ended December 31, 2008 as filed on Form 10-K/A dated April 9, 2009, and the unaudited financial statements of the Company as of June 30, 2011 and for the six months ended June 30, 2011, as filed on Form 10-Q dated August 9, 2011.

The unaudited pro forma financial information is for informational purposes only and does not purport to present what our results would actually have been had this transaction actually occurred on the dates presented or to project our results of operations or financial position for any future period. The pro forma adjustments are based upon available information and certain assumptions that we believe are reasonable. You should read these unaudited pro forma condensed combined financial statements in conjunction with the accompanying notes, the attached Staffmark Purchase Agreement, and the consolidated financial statements for the Company, including the notes thereto as previously filed.

The unaudited pro forma financial information is prepared in accordance with Article 11 of Regulation S-X. The pro forma adjustments are described in the accompanying notes and are based upon information and assumptions available at the time of the filing of this Current Report on Form 8-K.

The pro forma adjustments to the statements of operations for all periods presented do not include the following:

• The non-recurring gain on the Staffmark Disposition and the related tax effect. The gain will be included in the Company’s results for the three and twelve month periods ended December 31, 2011;

• Certain non-recurring transaction costs and Staffmark stock option payments on closing of the sale estimated to be approximately $20.5 million;

• The supplemental put expense (reversal) due to the inability to meaningfully or accurately reflect the impact on the supplemental put liability for the Staffmark Disposition using historical assumptions and estimates; and

• Management fee adjustments due to the Company’s adjusted net assets not materially impacted by the sale of Staffmark as the proceeds from the sale approximate the adjusted net assets disposed of which were used in the calculation of the management fee.

Compass Diversified Holdings

Condensed Combined Pro Forma Balance Sheet

at June 30, 2011

(unaudited)

(in thousands)			Staffmark Disposition
	Compass Diversified Holdings as Reported		Less: Staffmark as Reported			Staffmark Pro Forma Adjustments			Pro Forma Combined Compass Diversified Holdings
Assets
Current assets:
Cash and cash equivalents	$	9,241	$	(15	)	$	204,519	(a)	$	213,745
Accounts receivable, net		208,151		(125,985	)		—			82,166
Inventories		88,235		—			—			88,235
Prepaid expenses and other current assets		28,840		(6,797	)		6,474	(b)		28,517
Total current assets		334,467		(132,797	)		210,993			412,663
Property, plant and equipment, net		39,633		(5,020	)		—			34,613
Goodwill		319,766		(88,637	)		—			231,129
Intangible assets, net		252,487		(68,646	)		—			183,841
Deferred debt issuance costs, net		3,412		—			—			3,412
Other non-current assets		26,603		(24,044	)		3,007	(c)		5,566
Total assets	$	976,368	$	(319,144	)	$	214,000		$	871,224
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable and accrued expenses	$	150,845	$	(64,845	)	$	—		$	86,000
Due to related party		3,500		—			—			3,500
Current portion, long-term debt		2,000		—			—			2,000
Current portion of supplemental put obligation		6,891		—			—			6,891
Current portion of workers’ compensation liability		18,366		(18,366	)		—			—
Other current liabilities		869		—			—			869
Total current liabilities		182,471		(83,211	)		—			99,260
Supplemental put obligation		42,602		—			—			42,602
Deferred income taxes		75,178		(11,568	)		—			63,610
Long-term debt		86,000		—			(15,000	)(d)		71,000
Workers’ compensation liability		41,457		(41,457	)		—			—
Other non-current liabilities		1,214		—			—			1,214
Total liabilities		428,922		(136,236	)		(15,000	)		277,686
Stockholders’ equity
Stockholders’ equity		454,905		—			98,654	(e)		553,559
Noncontrolling interest		92,541		(52,562	)		—			39,979
Total stockholders’ equity		547,446		(52,562	)		98,654			593,538
Total liabilities and stockholders’ equity	$	976,368	$	(188,798	)	$	83,654		$	871,224

Compass Diversified Holdings

Condensed Combined Pro Forma Statement of Operations

for the year ended December 31, 2008

(unaudited)

				Staffmark Disposition
	Compass Diversified Holdings as Reported			Less: Staffmark as Reported			Staffmark Pro Forma Adjustments			Pro Forma Combined Compass Diversified Holdings
(in thousands, except per share data)
Net sales	$	532,127		$	—		$	—		$	532,127
Service revenues		1,006,346			(1,006,346	)		—			—
Total revenues		1,538,473			(1,006,346	)		—			532,127
Cost of sales		363,675			—			—			363,675
Cost of services		832,531			(832,531	)		—			—
Gross profit		342,267			(173,815	)		—			168,452
Operating expenses:
Staffing expense		102,438			(102,438	)		—			—
Selling, general and administrative expense		165,768			(48,067	)		—			117,701
Supplemental put expense		6,382			—			—			6,382
Management fees		15,205			—			—			15,205
Amortization expense		24,605			(9,476	)		—			15,129
Impairment expense		—			—			—			—
Operating income		27,869			(13,834	)		—			14,035
Other income (expense):
Interest income		1,377			—			—			1,377
Interest expense		(17,828	)		1,693			286	(A)		(15,849	)
Amortization of debt issuance costs		(1,969	)		—			—			(1,969	)
Other income, net		894			(741	)		—			153
Income (loss) before income taxes		10,343			(12,882	)		286			(2,253	)
Provision for income taxes		6,526			542			—			7,068
Net income (loss)		3,817			(13,424	)		286			(9,321	)
Net income attributable to noncontrolling interest		3,493			(1,774	)		—			1,719
Net income (loss) attributable to Holdings	$	324		$	(11,650	)	$	286		$	(11,040	)
Basic and fully diluted income per share attributable to Holdings	$	0.01								$	(0.35	)

Compass Diversified Holdings

Condensed Combined Pro Forma Statement of Operations

for the year ended December 31, 2009

(unaudited)

				Staffmark Disposition
	Compass Diversified Holdings as Reported			Less: Staffmark as Reported			Staffmark Pro Forma Adjustments			Pro Forma Combined Compass Diversified Holdings
(in thousands, except per share data)
Net sales	$	503,400		$	—		$	—		$	503,400
Service revenues		745,340			(745,340	)		—			—
Total revenues		1,248,740			(745,340	)		—			503,400
Cost of sales		344,191			—			—			344,191
Cost of services		632,800			(632,800	)		—			—
Gross profit		271,749			(112,540	)		—			159,209
Operating expenses:
Staffing expense		74,279			(74,279	)		—			—
Selling, general and administrative expense		145,948			(38,349	)		—			107,599
Supplemental put expense (reversal)		(1,329	)		—			—			(1,329	)
Management fees		13,100			—			—			13,100
Amortization expense		24,609			(9,822	)		—			14,787
Impairment expense		59,800			(59,800	)		—			—
Operating income (loss)		(44,658	)		69,710			—			25,052
Other income (expense):
Interest income		1,178			—			—			1,178
Interest expense		(11,736	)		1,846			(776	)(A)		(10,666	)
Amortization of debt issuance costs		(1,776	)		—			—			(1,776	)
Loss on debt extinguishment		(3,652	)		—			—			(3,652	)
Other income (expense), net		(282	)		405			—			123
Income (loss) before income taxes		(60,926	)		71,961			(776	)		10,259
Provision (benefit) for income taxes		(21,281	)		31,057			—			9,776
Net income (loss)		(39,645	)		40,904			(776	)		483
Net income (loss) attributable to noncontrolling interest		(13,375	)		15,701			—			2,326
Net loss attributable to Holdings	$	(26,270	)	$	25,203		$	(776	)	$	(1,843	)
Basic and fully diluted loss per share attributable to Holdings	$	(0.76	)							$	(0.05	)

Compass Diversified Holdings

Condensed Combined Pro Forma Statement of Operations

for the year ended December 31, 2010

(unaudited)

				Staffmark Disposition
	Compass Diversified Holdings as Reported			Less: Staffmark as Reported			Staffmark Pro Forma Adjustments			Pro Forma Combined Compass Diversified Holdings
(in thousands, except per share data)
Net sales	$	655,098		$	—		$	—		$	655,098
Service revenues		1,002,511			(1,002,511	)		—			—
Total revenues		1,657,609			(1,002,511	)		—			655,098
Cost of sales		447,504			—			—			447,504
Cost of services		854,698			(854,698	)		—			—
Gross profit		355,407			(147,813	)		—			207,594
Operating expenses:
Staffing expense		81,250			(81,250	)		—			—
Selling, general and administrative expense		179,154			(36,128	)		—			143,026
Supplemental put expense		32,516			—			—			32,516
Management fees		15,380			—			—			15,380
Amortization expense		29,312			(9,870	)		—			19,442
Impairment expense		38,835			—			—			38,835
Operating loss		(21,040	)		(20,565	)		—			(41,605	)
Other income (expense):
Interest income		20			—			—			20
Interest expense		(11,544	)		1,849			109	(A)		(9,586	)
Amortization of debt issuance costs		(1,789	)		—			—			(1,789	)
Other income (expense), net		718			(904	)		—			(186	)
Income (loss) before income taxes		(33,635	)		(19,620	)		109			(53,146	)
Provision for income taxes		11,135			(1,736	)		—			9,399
Net loss		(44,770	)		(17,884	)		109			(62,545	)
Net income attributable to noncontrolling interest		3,987			(2,939	)		—			1,048
Net income (loss) attributable to Holdings	$	(48,757	)	$	(14,945	)	$	109		$	(63,593	)
Basic and fully diluted loss per share attributable to Holdings	$	(1.19	)							$	(1.55	)

Compass Diversified Holdings

Condensed Combined Pro Forma Statement of Operations

for the six months ended June 30, 2011

(unaudited)

				Staffmark Disposition
	Compass Diversified Holdings as Reported			Less: Staffmark as Reported			Staffmark Pro Forma Adjustments			Pro Forma Combined Compass Diversified Holdings
(in thousands, except per share data)
Net sales	$	349,766		$	—		$	—		$	349,766
Service revenues		502,443			(502,443	)		—			—
Total revenues		852,209			(502,443	)		—			349,766
Cost of sales		233,850			—			—			233,850
Cost of services		434,506			(434,506	)		—			—
Gross profit		183,853			(67,937	)		—			115,916
Operating expenses:
Staffing expense		43,720			(43,720	)		—			—
Selling, general and administrative expense		91,164			(16,643	)		—			74,521
Supplemental put expense		4,895			—			—			4,895
Management fees		7,778			—			—			7,778
Amortization expense		15,391			(4,743	)		—			10,648
Impairment expense		7,700			—			—			7,700
Operating income		13,205			(2,831	)		—			10,374
Other income (expense):
Interest income		2			—			—			2
Interest expense		(4,879	)		458			98	(A)		(4,323	)
Amortization of debt issuance costs		(1,001	)		—						(1,001	)
Other income (expense), net		591			(535	)		—			56
Income before income taxes		7,918			(2,908	)		98			5,108
Provision for income taxes		6,219			322			—			6,541
Net income (loss)		1,699			(3,230	)		98			(1,433	)
Net income attributable to noncontrolling interest		2,295			(120	)		—			2,175
Net income (loss) attributable to Holdings	$	(596	)	$	(3,110	)	$	98		$	(3,608	)
Basic and fully diluted loss per share attributable to Holdings	$	(0.01	)							$	(0.08	)

Notes to Pro Forma Condensed Combined Financial Statements

(Unaudited)

Pro forma information is intended to reflect the impact of the Staffmark Disposition on the Company’s historical financial position and results of operations through adjustments that are directly attributable to the transaction, that are factually supportable and, with respect to the pro forma statements of operations that are expected to have a continuing impact. In order to accomplish this, the Company eliminated the historical results of Staffmark from the Company’s historical financial position and results of operations. Staffmark’s historical operations, for current and prior periods, including the gain on the sale, will be presented as discontinued operations for financial reporting purposes beginning with the Company’s Annual Report on Form 10-K for the year ended December 31, 2011.

This information in Note 1 provides a description of the pro forma adjustments from each line item in the pro forma condensed combined financial statements together with information explaining how the adjustments were derived or calculated. All amounts are in thousands of dollars ($000).

Note 1. Pro Forma Adjustments

Balance Sheet

The following adjustments correspond to those included in the unaudited condensed combined pro forma balance sheet as of June 30, 2011:

(a) This adjustment reflects the cash proceeds from the Staffmark Disposition, net of the assumed debt payoff as discussed in footnote (d) below.

(b) This adjustment reflects short term receivables related to certain customary escrow receipts that we expect to receive.

(c) This adjustment reflects long term receivables related to certain customary escrow receipts that we expect to receive.

(d) This adjustment reflects the payoff of all revolver debt. The Company did not reflect the payoff of term debt. The effect of this revolver debt payoff on the next five years of debt maturity payments is to reduce the fiscal year 2012 debt maturity payment by $15,000.

(e) This adjustment reflects the gain on the Staffmark Disposition as if the sale had occurred on June 30, 2011. This gain may not be representative of what will actually be recorded during the three and twelve month periods ended December 31, 2011.

Statements of Operations

The following adjustments correspond to those included in the unaudited condensed combined pro forma statements of operations for all periods presented:

(A) These adjustments reflect the effect of paying off all revolver debt outstanding during the respective periods with proceeds from the sale. The effect of paying off all revolver debt was to reduce interest expense on the revolver debt for all periods presented and increase commitment (unused) fees associated with the revolver debt for all periods presented.