Compass Diversified Holdings reported growth in sales of CamelBak bottles, Fox Factory mountain biking suspension components and Liberty Safe guns saves in the third quarter.
The decrease in Glove sales during the three months ended Sept. 30, 2012 compared to the same period in 2011 is due to decreased demand from the U.S. military, resulting principally from a drawdown of U.S. combat troops during the period and the absence of sales from a direct contract with the U.S. Military that was not in effect in 2012. The increase in Bottle sales is principally due to the expansion of offerings in Bottles, such as the introduction of eddy and the continued expansion in its customer base, including new and existing customers.
Hydration Systems and Bottles represented approximately 86 percent of gross sales for the three months ended Sept. 30, 2012 compared to 74 percent for the same period in 2011. This increase is due in large part to the significant decrease in Glove sales. Military sales represented approximately 38 percent of gross sales for the three months ended Sept. 30, 2012 compared to 45 percent for the same period in 2011. International sales represented approximately 14 percent of gross sales for the three months ended Sept. 30, 2012 compared to 16 percent for the same period in 2011.
Cost of sales for the three months ended Sept. 30, 2012 were approximately $20.1 million compared to approximately $22.8 million in the same period of 2011. The decrease of $2.7 million is due principally to the corresponding decrease in net sales and the significant decrease in Glove sales. Gross profit as a percentage of sales increased to 45.3 percent for the quarter ended Sept. 30, 2012 compared to 40.6 percent in the quarter ended Sept. 30, 2011. The increase is attributable to a favorable sales mix during the quarter ended Sept. 30, 2012 compared to last year’s quarter, and the decrease in Glove sales as a percentage of total sales. Gloves carry a lower gross profit margin than CamelBak’s other product lines.
Selling, general and administrative expense for the three months ended Sept. 30, 2012 increased to approximately $9.1 million or 24.7 percent of net sales compared to $7.3 million or 19.1 percent of net sales for the same period of 2011. The $1.8 million increase in selling, general and administrative expense incurred during the three months ended Sept. 30, 2012 compared to the same period in 2011 is attributable to: (i) increases in compensation expense ($0.8 million), (ii) increases in marketing costs ($0.4 million) and (iii) an increase in bad debt expense totaling $0.2 million, with the balance of the increase due principally to increased infrastructure costs and general overhead, which together with the increases noted above were necessary to support expansion in connection with growth initiatives.
Income from operations for the three months ended Sept. 30, 2012 was $5.1 million, a decrease of $0.9 million when compared to the same period in 2011, principally based on the factors described above.
Fox Factory Revenues surge on OEM orders
Fox Factory reported net sales for the three months ended Sept. 30, 2012 increased approximately $11.2 million, or 18.1 percent, compared to the corresponding period in 2011. Sales growth was driven by sales to OEM which increased $9.6 million to $60.2 million during the three months ended Sept. 30, 2012 compared to $50.6 million for the same period in 2011. The increase in net sales is largely driven by increased spec with our customers. The remaining increase in net sales totaling $1.6 million reflects increased sales to Aftermarket customers in the third fiscal quarter of 2012 compared to the same period in 2011.
Cost of sales for the three months ended Sept. 30, 2012 increased approximately $9.9 million compared to the corresponding period in 2011. The increase in cost of sales is primarily due to increased net sales during the three months ended Sept. 30, 2012 compared to the same period of 2011. Gross profit as a percentage of sales was approximately 27.6 percent for the three months ended Sept. 30, 2012 compared to 30.6 percent for the same period in 2011. The 300 point decrease in gross profit as a percentage of sales during 2012 is largely attributable to the increased overhead costs associated with consolidating our Watsonville operations, increased costs associated with expanding our Taiwanese operations and increased warranty costs and expedited freight costs incurred during the third quarter of 2012 compared to the same period of 2011.
Selling, general and administrative expense increased approximately $0.2 million during the three months ended Sept. 30, 2012 compared to the same period in 2011. This increase is primarily the result of increases in employee related costs to support company growth during the three months ended Sept. 30, 2012.
Liberty Safe reported net sales for the three months ended Sept. 30, 2012 increased approximately $1.6 million, or 7.3 percent, over the corresponding three months ended Sept. 30, 2011. Non-Dealer sales, or sales through sporting goods and home improvement retail outlets, were approximately $12.6 million in the three months ended Sept. 30, 2012 compared to $13.9 million in the same period in 2011 representing a decrease of $1.3 million or 9.4 percent. Dealer sales, or sales through specialty gun dealers, totaled approximately $10.8 million in the three months ended Sept. 30, 2012 compared to $7.9 million in the same period in 2011 representing an increase of $2.9 million or 37.6 percent.
Cost of sales for the three months ended Sept. 30, 2012 increased approximately $0.7 million. The increase in cost of sales is primarily attributable to the increase in net sales for the same period. Gross profit as a percentage of net sales totaled approximately 26.8 percent and 24.9 percent of net sales for the three month periods ended Sept. 30, 2012 and Sept. 30, 2011, respectively. The increase in gross profit as a percentage of sales for the three months ended Sept. 30, 2012 compared to 2011 is principally attributable to Dealer and Non-Dealer price increases enacted during the second and third quarter of 2012, and a favorable sales mix.
Selling, general and administrative expense for the three months ended Sept. 30, 2012, increased approximately $0.3 million compared to the same period in 2011. This increase is largely the result of increased direct commission expense and co-op advertising costs, both related to growth initiatives and the increase in sales.
Income from operations was approximately $2.1 million for the three months ended Sept. 30, 2012, representing an increase of $0.6 million compared to the same period in 2011. The improved operating results are principally due to the factors described above, particularly the increase in net sales.
