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.


CODI’s portofolio includes companies that make CamelBak hydration products, ERGObaby infant carriers, Fox Factory suspension parts for mountain bikes and motorsports and Liberty gun safes. The company also owns businesses that manufacture printed circuit boards, furniture, medical devices and magnetic products. Results included:

 

CamelBak 


 

CamelBack reported net sales for the three months ended June 30, 2012 were approximately $44.3 million, an increase of $0.5 million, or 1.2%, compared to the same period in 2011. The increase in gross sales is a result of increased sales in Hydration Systems ($3.0 million) and Bottles ($2.6 million) offset in part by a decrease in sales in Gloves ($3.2 million) and Accessories ($0.1 million).

 

The increased sales during the three months ended June 30, 2012 compared to the same period in 2011 is attributable to the continued success of “Antidote”, CamelBak’s new reservoir for the recreational Hydration Systems line, introduced in 2011, the expansion of offerings in Bottles such as the introduction of eddyTM, and the continued expansion in its customer base, including new and existing customers, for all product lines. The decrease in Glove sales is due to decreased demand from the U.S. military, resulting in part from a drawdown of U.S. combat troops.

 

Sales of Hydration Systems and Bottles represented approximately 83% of gross sales for the three months ended June 30, 2012 compared to 75% for the same period in 2011. Military sales represented approximately 39% of gross sales for the three months ended June 30, 2012 compared to 42% for the same period in 2011. International sales represented approximately 15% of gross sales for the three months ended June 30, 2012 compared to 20% for the same period in 2011.
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.


 

Fox Factory


 

Fox Factory, which sells to more than 160 OEM and 7,600 Aftermarket customers across its market segments, reported net sales for the three months ended June 30, 2012 increased approximately $14.8 million, or 32.3%, compared to the corresponding period in 2011. Sales growth was driven by sales to OEM which increased $12.3 million to $47.3 million during the three months ended June 30, 2012 compared to $35.0 million for the same period in 2011. The increase in net sales is largely driven by increased spec with our customers and to a lesser degree by increased demand for carryover product. The remaining increase in net sales reflects increased sales to Aftermarket customers in the current quarter.



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.

 

Liberty Safe



Liberty Safe reported net sales for the three months ended June 30, 2012 increased approximately $3.8 million, or 20.6%, over the corresponding three months ended June 30, 2011. Non-Dealer sales were approximately $13.1 million in the three months ended June 30, 2012 compared to $10.4 million in the same period in 2011 representing an increase of $2.7 million or 26.0%. Dealer sales totaled approximately $9.4 million in the three months ended June 30, 2012 compared to $8.2 million in the same period in 2011 representing an increase of $1.2 million or 14.6%. The increase in Non-Dealer sales in 2012 is due in large part to increased sales in the sporting goods channel.

 

Liberty began domestic production in the first quarter of 2012 for product that was previously being imported. A majority of the domestic production that was previously imported is reflected in non-dealer sales. Management believes that the increased sales at the Dealer and Non-Dealer level are also due to sales generated by its national advertising campaign in conjunction with those accounts that maintain consistent Liberty Safe product advertising at the local level.


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.

Income from operations was approximately $1.6 million for the three months ended June 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.