Confluence Holdings Corporation

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Confluence Holdings Corporation

111 Kayaker Way
Easley, South Carolina 29642
U.S.A.
Telephone: (864) 859-7518
Toll Free: (800) 59-KAYAK
Fax: (864) 855-5995
Web site: http://www.confluencewatersports.com

Private Company
Incorporated: 1998
Employees: 300
Sales: $60 million (2005 est.)
NAIC: 336612 Boat Building; 339920 Sporting and Athletic Goods Manufacturing

Confluence Holdings Corporation, which trades as Confluence Watersports Company, is one of the leading producers of canoes and kayaks in the world. Confluence addresses various segments of the paddlesports market through its various brands: Wilderness Systems, Mad River Canoe, Voyageur, Wave Sport, Watermark, Perception, Dagger, and Mainstream. Formed from the amalgamation of numerous smaller companies around the United States, the company has consolidated its manufacturing near Greenville, South Carolina, the home turf of industry builder Perception, Inc., which was considered the first to successfully sell rotomolded plastic kayaks.

Wilderness Systems Origins

Andy Zimmerman and John Sheppard formed kayak manufacturer Wilderness Systems, Inc., in 1986. According to Nation's Business, they had both worked at Casa Bique, a furniture business in High Point, North Carolina owned by Zimmerman's family but wanted to try their hand at something a little less pedestrian. They began in a shed in Zimmerman's backyard, making boats—and selling them—one at a time. The two managed sales of $160,000 the first year.

Ten years later, the company was Canoe & Kayak magazine's favorite kayak manufacturer, employing 100 people at a 60,000 square foot plant. Annual sales reached $10 million in the mid-1990s as the kayak industry experienced dramatic growth. In 1996, the governor of North Carolina pronounced it "Entrepreneurial Company of the Year."

After beginning with fiberglass, or composite, kayaks, around 1992 Wilderness Systems began using plastics to create inexpensive kayaks that prompted many new users to take the plunge into paddlesports. In the late 1990s, the company came out with a polyethylene plastic-hulled trimaran for salt water sailing.

Confluence Formed in 1998

Wilderness Systems merged with Mad River Canoe in June 1998; Confluence Holdings Corporation was created as a holding company, while the two brands continued to operate as separate entities. Westbury Partners of New York became its largest investor. American Capital Strategies Ltd., a publicly traded buyout and mezzanine fund based in Maryland, began providing financing in September 1998; it later converted debt to equity.

Mad River had been formed in Vermont in 1971 by Jim and Kay Henry and then employed about five dozen people. Mad River's high-end canoe business complemented Wilderness Systems' kayaks. Mad River brought with it Voyager Ltd., a producer of paddles and accessories.

In the winter of 1999/2000, Mad River moved its administrative headquarters to North Carolina. Wilderness was adding 30,000 square feet to its Trinity, North Carolina facility for a total of about 150,000 square feet. Mad River's manufacturing operation, which employed 40 people making 5,000 canoes a year, remained at two factories in Waitsfield, Vermont for another year or two. Wilderness invested $500,000 in the Vermont plants in an effort to turn them around.

Confluence acquired another kayak maker, Wave Sport, in 1999. Like other companies in its peer group, Wave Sport had been launched out of its founder's residence. Chan Zwanzig had started the business in the small town of Oak Creek, Colorado in 1987. Wave Sport specialized in stubby, maneuverable kayaks called "rodeo boats" intended for whitewater. Confluence relo-cated its production to North Carolina. Wave Sport was making about 5,500 kayaks a year.

By 2000, Confluence was the world's third largest canoe and kayak manufacturer, with annual sales of $30 million and 200 employees. It had a 200,000 square foot facility in Randolph County, North Carolina, but the next year nearly doubled its space through an expansion. Confluence's new CEO Bill Medlin told the Greensboro News & Record the US kayak market, which sold 500,000 units a year, had plenty of room to grow. However, by 2002 the company was cutting the number of employees from about 270 to less than 200 as sales stalled in a slowing economy. A debt burden from its merger was also a factor. The Mad River plant in Vermont, which had been making about 35 percent of Confluence's total production of 10,000 boats a year, was closed. Savings were earmarked to develop new products.

By mid-2003, Confluence was hiring again and ramping up production to three shifts due to unprecedented demand. The company had already taken on yet another CEO, John Bergeron. Confluence was on its way to making 77,000 canoes during the year, up 28 percent from the previous year, Bergeron told the Greensboro News & Record. Independent stores accounted for three-quarters of sales.

Confluence Acquires Watermark in 2005

Confluence took a quantum leap forward by buying industry leader Watermark Paddlesports Inc. in 2005. American Capital invested another $19 million in Confluence Holdings to support the acquisition. This brought American Capital's total investment in Confluence to $61 million. Confluence also made a divestment during the year, selling its WindRider line of trimarans to the newly formed Windrider, LLC of Minnesota. Like Confluence, Watermark was itself an assemblage of a number of pioneering watersports companies, including Dagger, Perception, and Mainstream kayaks; Harmony accessories; and AT (Adventure Technology) paddles. It had been formed in Atlanta in the late 1990s.

Dagger Canoe Company was formed in 1988 by a group of four whitewater paddlers led by Joe Pulliam. By the mid-1990s, the fast growing enterprise had about 60 employees and was expanding its Midtown, Tennessee, facilities for a second time, to more than 50,000 square feet. Its product line of two dozen plastic watercraft was distributed as far as Europe, Australia, and Japan. Towards the end of 1994, Dagger acquired Maryland's Valley Mill Boats, the leading producer of advanced whitewater racing boats using advanced composites technology. It had been formed by whitewater canoeing champion Andy Bridge.

Dagger itself was acquired by Watermark in 1998. Its founder, Joe Pulliam, remained president. Watermark had also acquired Perception, Inc., one of Dagger's main rivals. Perception, based in Easley, South Carolina, had been formed in the early 1970s by Bill Masters, who had worked summers as a river guide while studying at nearby Clemson University. He began making his own kayaks while still a student, beginning with a $50 investment in supplies.

Perception was credited with expanding the kayaking market by pioneering the production of low-cost, rotational molded plastic kayaks in 1977. In 1984, he started another company, Aquaterra, to produce touring kayaks, but this was eventually merged into Perception, Inc. Masters received a number of accolades for his entrepreneurship and innovation. Jim Clark became Perception's president after it was acquired by Watermark, while founder Bill Masters remained on board as an advisor. At the time, Perception was selling 50,000 boats a year.

In 2001, most of Dagger's business was relocated to Watermark Inc.'s facility in Easley, South Carolina (a small composite manufacturing operation remained in Tennessee). By this time, Watermark had added Islander sit-on-top kayaks and Mainstream, a value-priced line, to its holdings.

Watermark also diversified, acquiring the Yakima and Rhode Gear brands of vehicle racks for bicycles, skis, and other recreational equipment, including kayaks. Yakima, then based in San Diego, California, had once supplied Perception with kayak hardware.

Company Perspectives:

Confluence Watersports today may be the industry's most influential company. But our size does not undercut what we have always been: passionate outdoors enthusiasts who can't cross a bridge without checking the conditions of the water below, paddlers who can't sit through a meeting without daydreaming about favorite escapes, advocates who want to bring more people into this wonderful sport. Those values haven't changed. Never will.

Key Dates:

1977:: Bill Masters of SC's Perception, Inc., applies rotational molding technique to kayak production.
1971:: Jim and Kay Henry launch Vermont's Mad River Canoe.
1986:: Andy Zimmerman and John Sheppard form Wilderness Systems to make kayaks in High Point, North Carolina.
1988:: Dagger Canoe Company is formed by Joe Pulliam in Tennessee.
1998:: Wilderness Systems merges with Mad River Canoe, renamed as Confluence Watersports Company; Watermark formed, acquires Dagger, Perception brands.
1999:: Confluence acquires Colorado's Wave Sport.
2000:: Confluence is world's third largest canoe and kayak manufacturer with sales exceeding $30 million.

Another couple businesses were acquired in 2001: snowshoe manufacturer SnoWalkers and the Sospenders floatation device. Watermark in the following two years to bring its disparate brands together. In the process, 18 of its 450 US employees were let go. An executive told Bicycle Retailer the company was concerned with streamlining operations in an uncertain economy. At the same time, its Perception brand was bringing its revolutionary new Airalite technology to the market. It offered composite-type performance with the durability of plastics.

The brands were divided into Watermark Boat and Watermark Gear. After its boat business was acquired by Confluence in 2005, Watermark relocated the rest of its operations from California to Oregon; the company was then renamed Yakima Products, Inc.

The merger of Confluence and Watermark's paddlesports unit in 2005 formed probably the largest producer of canoes and kayaks in the world. Its closest rival was the watercraft business of Johnson Outdoor, Inc., which included Old Towne Canoe Company and a handful of other brands.