Compass Diversified Holdings (CODI) called out its Fox mountain biking and Liberty gun safe businesses as big contributors to strong financial results that exceeded management expectations for the second quarter.
Cost of sales for the three months ended June 30, 2012 were approximately $23.3 million compared to approximately $26.6 million in the same period of 2011. Gross profit as a percentage of sales increased to 47.3% for the quarter ended June 30, 2012 compared to 39.3% in the quarter ended June 30, 2011. The increase is attributable to: a favorable sales mix during the quarter ended June 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 June 30, 2012 increased to approximately $9.6 million or 21.6% of net sales compared to $8.1 million or 18.4% of net sales for the same period of 2011. The $1.5 million increase in selling, general and administrative expenses incurred during the three months ended June 30, 2012 compared to the same period in 2011 is attributable to; (i) increases in sales commissions ($0.3 million); and (ii) increases in compensation expense ($0.7 million) due in part to costs associated with CamelBak’s deferred compensation plan, with the balance of the increase due principally to increased infrastructure costs, including personnel costs and benefits, and general overhead necessary to support expansion in connection with growth initiatives.
Income from operations for the three months ended June 30, 2012 was approximately $8.9 million, an increase of $2.2 million when compared to the same period in 2011, principally based on the factors described above.
Cost of sales for the three months ended June 30, 2012 increased approximately $11.2 million, or 33.9%, 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 June 30, 2012 compared to the same period of 2011. Gross profit as a percentage of sales was approximately 27.1% for the three months ended June 30, 2012 compared to 27.9% for the same period in 2011. The 0.8% 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 expedited freight costs resulting from the significant increase in orders during the second quarter of 2012.
Selling, general and administrative expense increased approximately $1.3 million during the three months ended June 30, 2012 compared to the same period in 2011. This increase is primarily the result of increases in payroll costs, principally associated with new hires to support company growth during the three months ended June 30, 2012 compared to the same period in 2011, and costs incurred in connection with a debt recapitalization ($0.8 million) which occurred during June 2012.
Income from operations for the three months ended June 30, 2012 increased approximately $2.3 million to $6.9 million compared to the corresponding period in 2011, based principally on the increase in net sales, offset in part by the increases in selling, general and administrative costs, all as described above.
Cost of sales for the three months ended June 30, 2012 increased approximately $3.0 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 25.6% and 26.1% of net sales for the three month periods ended June 30, 2012 and June 30, 2011, respectively. The decrease in gross profit as a percentage of sales for the three months ended June 30, 2012 compared to 2011 is attributable to manufacturing variances associated with the increase in production lines to meet strong customer demand, offset in part by a Dealer price increase during the second quarter of 2012.
Selling, general and administrative expense for the three months ended June 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, both related to the significant increase in sales.