Compass Diversified Holdings, Inc.’s (CODI) growing investment in outdoor recreation products paid off in the second quarter as rising demand for mountain bicycles, gun safe and hydration reservoirs fueled sales at its Fox Factory, Liberty Safe and CamelBak businesses.
Sales soared 32.3 percent at Fox Factory in the second quarter as mountain bike manufacturers renewed buying the company’s suspension and other components after several quarters of working through inventory carried over from the previous year. OEM sales increased 35.1 percent to $47.3 million while sales to aftermarket customers reached $13.4 million. Gross margins slipped 80 basis points (b.p.) to 27.1 percent due largely to costs incurred consolidating the company’s Watsonville, CA operations, expanding its Taiwanese operations and rising use of expedited freight to accommodate the significant increase of orders in the second quarter. Income from operations increased 50 percent to $6.9 million. Account receivable increased 88.2 percent to $35.0 million.
Liberty Safe reported net sales increase 20.6 percent to $22.5 million thanks largely to growth in sales of its gun safes to U.S. sporting goods retailers. Dealer sales rose 14.6 percent to $9.4 million, while non-dealer sales grew 26.0 percent to $13.1 million. Gross margin slipped 50 b.p. to 25.6 percent, but income from operations rose $600,000 to $1.6 million on higher volume.
At CamelBak, gross margin soared 800 (b.p.) on a 1.2 percent increase in revenues in as sales of less profitable gloves to U.S. combat troops fell off. CamelBak reported net sales for the three months ended June 30, 2012 reached $44.3 million, up just $500,000, as sales of hydration systems increased $3.0 million and sales of bottles increased $2.6 million. Those sales were offset in part by a $3.2 million decline in sales of gloves and $100,000 decline in sales of accessories. CODI attributed the growth to the continued success of the Antidote, the new reservoir for company’s hydration packs introduced in 2011 and new bottles such as the eddy. The decrease in Glove sales was due to decreased demand from the U.S. military, resulting in part from a drawdown of U.S. combat troops. Accounts receivable increased 67.3 percent to $28.6 million.
Sales of hydration systems and bottles grew to 83 percent of sales, up from 75 percent a year earlier, while military sales fell to 39 percent, down 300 b.p. from the same period in 2011. International sales represented approximately 15 percent of gross sales, down 500 b.p. SG&A expense increased to 21.6 percent of net sales, up 320 b.p., due to increases in sales commissions ($300,000) and other compensation and overhead. Income from operations reached $8.9 million, up 32.8 percent from the same period in 2011.
Finally, sales at Ergobaby, which makes wearable infant carriers, reached $13.3 million, up 18.8 percent. Operating profit fell 8.4 percent to $2.0 million. Accounts receivable more than doubled to $6.0 million.
