Compass Diversified Holdings Inc., reported flat sales at its branded products segment in the first quarter as rapid growth of the Ergobaby and Fox Factory brands offset expected declines at Camelbak and Liberty Safe.


 

Combined revenue for the four companies was flat with the first quarter of 2013 at $143.4 million, but EBITDA declined 13.5 percent and EBIDTA margin fell 280 basis points to 18.4 percent.

 

Ergobaby continued to set the pace for sales growth. Net sales increased 20.8 percent driven by shipments of its new Ergobaby 360 wearable carrier to overseas distributors as well as domestic shipments of its new Orbit Baby G3 carrier. While Ergobaby sells primarily through specialty juvenile stores, a handful of outdoor specialty retailers such as REI carry its wearable carriers. The company has recorded doubled-digit sales growth in six of the last seven quarter and CODI

 

 

In an unrelated development, Ergobaby identified itself Thursday as the company that had sued the Consumer Safety Product Commission to prevent it from publishing a complaint linking an infant’s 2011 death to one of its wearable carriers. In a video and open letter published on the company’s website Thursday, Ergobaby CEO Margaret Hardin explained the company decided to step forward after a federal appeals court ordered a Maryland court unseal the case.

 

The Maryland court sealed court records of the case after a forensic pathologist and a judge concluded the child choked on an unknown object that was in no way related to the carrier. The case gained notoriety when Public Citizen, Consumers Union and other consumer advocates appealed to unseal the records to reveal the identity of “Company Doe.”

“I would say we still view this as having very strong growth prospects and amongst our portfolio, this would be in the higher category of growth companies as we look out into the future,” said CODI Partner Elias Sabo.

 

Fox Factory, a manufacturer of suspension systems for mountain bikes and powered vehicle that went public last year, also reported strong growth. (See related article.)


Sales fell by nearly $4 million, or 9.3 percent, at Camelbak as a decline in Hydrations Systems sales (-$6.5 million) and Accessories (-$1.2 million) more than offset higher Bottle (+$2.8 million) and Glove (+$800,000) sales. The lapse of a U.S. Marine Corps contract accounted for nearly all of the decline, reducing Camelbak’s military sales to 20 from 35 percent of its revenue.

“When you eliminate USMC contract they continue to do quite well on recreational side of the business,” said CODI CEO Alan Offenberg, who added that CODI has always known Camelbak’s sales would decline alongside US troop deployments.  Offenburg said he expects strong performance from Camelbak this year thanks to new products, including the Relay filtration pitcher it launched in the first quarter.

“We believe it will provide entre into the home channel for Camelbak and be a brand expander,” Offenberg said.
At Liberty Safe, sales dipped 2.8 percent as a 7.1 percent decline in sales to Lowe’s and other non-gun dealers more than offset a 4.2 percent increase in sales to gun dealers, where enthusiasts, whose fears over gun control legislation leading up to the 2012 presidential election fueled a boom in gun and ammos sales that only subsided last last year. The drop in sales pushed down gross margins 490 basis points to 20.8 percent.

Offenberg said CODI, which owns controlling stakes in four industrial companies, has seen more deal flow in recent quarters and has plenty of liquidity, including more than $300 million in borrowing capacity. However,  he said competition for quality, mid-market companies in CODIs verticals remains robust thanks to an abundance of well capitalized buyers and increased availability of low cost debt financing for private equity deals.