Market Overview

Black Diamond Reports Record Third Quarter 2012 Results

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SALT LAKE CITY, Nov. 5, 2012 (GLOBE NEWSWIRE) -- Black Diamond, Inc. (Nasdaq: BDE) (the "Company" or "Black Diamond"), a leading global provider of aspirational outdoor recreation equipment and active lifestyle products, reported financial results for the third quarter ended September 30, 2012.

Third Quarter 2012 Financial Highlights:

  • Sales up 16% to $48.7 million versus Q3 2011;
  • Adjusted gross margin improved 200 basis points to 40.1% from gross margin of 38.1% in Q3 2011;
  • Adjusted net income before non-cash items increased 37% to $5.5 million, compared to $4.0 million in Q3 2011;
  • Completed the acquisition of POC Sweden AB ("POC") for a total consideration of approximately $44.9 million; and
  • Agreed to acquire PIEPS Holding GmbH and its subsidiaries ("PIEPS"), a leading Austrian designer and marketer of avalanche beacons and snow safety products, for approximately $10.3 million in cash.

Third Quarter 2012 Financial Results

Total sales in the third quarter of 2012 increased 16% to $48.7 million, compared to $42.0 million in the third quarter of 2011. The growth in sales was primarily attributed to the Company's acquisition of POC in July 2012, partially offset by the impact of foreign exchange rates as well as the impact of the estimated amount of inventory that is expected to be repurchased from Black Diamond's Gregory Mountain Products ("Gregory") Japanese distributor, Kabushiki Kaisha A&F ("A&F"), as part of the A&F distribution agreement, for which revenue is not able to be recognized.

Gross margin in the third quarter of 2012 was 37.9%, compared to 38.1% in the year-ago quarter. Gross margin in the third quarter of 2012 includes $1.1 million for inventory fair value of purchase accounting adjustments related to the acquisition of POC. Excluding this amount, adjusted gross margin in the third quarter of 2012 was 40.1%, a 200 basis point improvement compared to the year-ago quarter, due to a favorable mix in higher margin products and channel distribution as well as the inclusion of POC.

Net income in the third quarter of 2012 was $0.7 million or $0.02 per diluted share, compared to $1.0 million or $0.05 per diluted share in the year-ago quarter. Net income in the third quarter of 2012 included $4.2 million of non-cash items, $0.4 million in transaction-related costs, $0.1 million in restructuring costs and $0.1 million in merger and integration costs. Excluding these items, adjusted net income before non-cash items in the third quarter of 2012 increased 37% to $5.5 million, compared to $4.0 million in the third quarter of 2011. On a per share basis, adjusted net income before non-cash items decreased $0.01 to $0.17 per diluted share compared to $0.18 per diluted share in the same year-ago period, reflecting the shares issued in February 2012 in connection with the Company's public offering.

Adjusted EBITDA (earnings before interest, taxes, other income, depreciation, amortization, stock-based compensation, inventory fair value of purchase accounting, and transaction, merger and integration, and restructuring costs) in the third quarter of 2012 increased 9% to $5.6 million, compared to $5.2 million in the year-ago quarter. Adjusted EBITDA in the third quarter of 2012 excluded $0.5 million of stock-based compensation, $1.1 million of inventory fair value of purchase accounting adjustments, and the aforementioned $0.4 million in transaction-related costs, $0.1 million in restructuring costs and $0.1 million in merger and integration costs.

At September 30, 2012, cash and cash equivalents totaled $14.3 million, compared to $2.4 million at December 31, 2011. Total debt was $42.3 million at September 30, 2012, which included $22.8 million outstanding on the Company's $35.0 million line of credit, leaving $12.2 million available, less outstanding letters of credit.

On October 1, 2012, the Company completed the acquisition of PIEPS for a total consideration valued at approximately $10.3 million in cash and assumed approximately $2.7 million in debt.

In addition, on September 28, 2012, Black Diamond signed a definitive agreement to acquire the Japanese distribution assets of Gregory from A&F, the exclusive distributor for Gregory in Japan. Beginning January 1, 2013, Gregory intends to assume all of its own sales, marketing and distribution functions in Japan. Under the terms of the agreement, Black Diamond will acquire its Gregory Japanese distribution assets from A&F for $750,000, comprising of a $500,000 payment in January 2013 and $250,000 in December 2013.

Management Commentary

"During the third quarter, Black Diamond grew sales 16% to a record $48.7 million, which is in-line with our expectations for the second half of 2012," said Peter Metcalf, President and CEO of Black Diamond. "More importantly, we reached several key milestones in our overall long-term strategic plan. This includes the acquisition of POC, which effectively marked the beginning of our acquisition initiative. We agreed to acquire PIEPS which brings us valuable intellectual property and supports our focus on developing our electronic product portfolio. We subsequently closed the transaction and expect the 49% gross margin that PIEPS generated in their most recent fiscal year to augment our overall gross margin."

"At the end of the quarter," continued Metcalf, "we entered into a contract with A&F to purchase Gregory's Japanese distribution assets and have established a seasoned management team to prepare for the strategic transition in this important market. Most recently, we unveiled our apparel project to Black Diamond's major trading partners and opened our 43,000 square foot, state-of-the-art ski manufacturing factory. These investments represent the culmination of many months of strategic planning and resource commitment which, collectively, we expect to drive significant long-term growth and value for our shareholders.

"For the remainder of 2012, we plan to continue our investment in Black Diamond's operational platform, preparing it to support a much larger and more mature organization. Thanks to our strong team in the U.S. and Europe, we are making substantial progress on the POC integration. It is progressing according to our expectations and we have been especially pleased with our initial steps in completing the integration of PIEPS. Our achievements so far in 2012 provide us with great confidence that our growth strategy is well on track, driving shareholder value and advancing Black Diamond as one of the most respected and leading active outdoor equipment companies in the world."

Net Operating Loss (NOL)

The Company estimates that it has available net operating loss ("NOL") carryforwards for U.S. federal income tax purposes of approximately $217.1 million. The Company's common stock is subject to a Rights Agreement dated February 7, 2008, intended to assist in limiting the number of 5% or more owners and thus reduce the risk of a possible "change of ownership" under Section 382 of the Code. Any such "change of ownership" under these rules would limit or eliminate the ability of the Company to use its existing NOLs for federal income tax purposes. There is no guaranty, however, that the Rights Agreement will achieve the objective of preserving the value of the NOLs.

Conference Call

Black Diamond will hold a conference call today at 5:00 p.m. Eastern time to discuss its third quarter 2012 results. The Company's President and CEO Peter Metcalf and CFO Robert Peay will host the conference call, followed by a question and answer period.

Date: Monday, November 5, 2012
Time: 5:00 p.m. Eastern time (3:00 p.m. Mountain time)
Dial-In Number: 1-877-941-1427
International: 1-480-629-9664
Conference ID#: 4569247

Please call the conference telephone number 5-10 minutes prior to the start time. An operator will register your name and organization. If you have any difficulty connecting with the conference call, please contact Liolios Group at 1-949-574-3860.

The conference call will be broadcast live and available for replay at http://public.viavid.com/index.php?id=102055 via the investor relations section at www.blackdiamond-inc.com.

A replay of the conference call will be available after 7:30 p.m. Eastern time on the same day through November 19, 2012.

Toll-free replay number: 1-877-870-5176
International replay number: 1-858-384-5517
Replay pin number: 4569247

About Black Diamond, Inc.

Black Diamond, Inc. is a global leader in the design, manufacturing and marketing of innovative active outdoor performance products for climbing, mountaineering, backpacking, skiing, cycling and other outdoor recreation activities for a wide range of year-round use. The Company's principal brands, Black Diamond®, Gregory™, POC™ and Pieps™, are iconic in the active outdoor industry and linked intrinsically with the modern history of these sports. Black Diamond is synonymous with performance, innovation, durability and safety that the outdoor and action sport communities rely on and embrace in their active lifestyle. Headquartered in Salt Lake City at the base of the Wasatch Mountains, the Company's products are created and tested on some of the best alpine peaks, slopes, crags, roads and trails in the world. These close connections to the Black Diamond lifestyle enhance the authenticity of the Company's brands, inspire product innovation and strengthen customer loyalty. The Company's products are sold by leading specialty retailers in the U.S. and 50 countries around the world. For additional information, please visit the Company's websites at www.blackdiamond-inc.com, www.blackdiamondequipment.com, www.gregorypacks.com, www.pocsports.com or www.pieps.com.

Use of Non-GAAP Measures

The Company reports its financial results in accordance with U.S. generally accepted accounting principles ("GAAP"). This press release contains the non-GAAP measures: (i) adjusted gross profit and gross margin, (ii) net income before non-cash items and related earnings per diluted share, and adjusted net income before non-cash items and related earnings per diluted share, and (iii) earnings before interest, taxes, other income, depreciation and amortization ("EBITDA") and adjusted EBITDA. The Company also believes that presentation of certain non-GAAP measures, i.e.: (i) adjusted gross profit and gross margin, (ii) net income before non-cash items and related earnings per diluted share, and adjusted net income before non-cash items and related earnings per diluted share, and (iii) EBITDA and adjusted EBITDA, provide useful information for the understanding of its ongoing operations and enables investors to focus on period-over-period operating performance, and thereby enhances the user's overall understanding of the Company's current financial performance relative to past performance and provides, to the nearest GAAP measures, a better baseline for modeling future earnings expectations. Non-GAAP measures are reconciled to comparable GAAP financial measures in the financial tables within this press release. The Company cautions that non-GAAP measures should be considered in addition to, but not as a substitute for, the Company's reported GAAP results. Additionally, the Company notes that there can be no assurance that the above referenced non-GAAP financial measures are comparable to similarly titled financial measures used by other publicly traded companies.

Forward-Looking Statements

Please note that in this press release we may use words such as "appears," "anticipates," "believes," "plans," "expects," "intends," "future," and similar expressions which constitute forward-looking statements within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are made based on our expectations and beliefs concerning future events impacting the Company and therefore involve a number of risks and uncertainties. We caution that forward-looking statements are not guarantees and that actual results could differ materially from those expressed or implied in the forward-looking statements. Potential risks and uncertainties that could cause the actual results of operations or financial condition of the Company to differ materially from those expressed or implied by forward-looking statements in this release include, but are not limited to, the overall level of consumer spending on our products; general economic conditions and other factors affecting consumer confidence; disruption and volatility in the global capital and credit markets; the financial strength of the Company's customers; the Company's ability to implement its growth strategy; the Company's ability to successfully integrate and grow acquisitions; the Company's ability to maintain the strength and security of its information technology systems; stability of the Company's manufacturing facilities and foreign suppliers; the Company's ability to protect trademarks and other intellectual property rights; fluctuations in the price, availability and quality of raw materials and contracted products; foreign currency fluctuations; our ability to utilize our net operating loss carryforwards; and legal, regulatory, political and economic risks in international markets. More information on potential factors that could affect the Company's financial results is included from time to time in the Company's public reports filed with the Securities and Exchange Commission, including the Company's Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, and Current Reports on Form 8-K. All forward-looking statements included in this press release are based upon information available to the Company as of the date of this press release, and speak only as of the date hereof. We assume no obligation to update any forward-looking statements to reflect events or circumstances after the date of this press release.

BLACK DIAMOND, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
     
  September 30, 2012 December 31, 2011
  (Unaudited)  
Assets    
Current Assets    
Cash and cash equivalents  $14,287 $2,400
Accounts receivable, less allowance for doubtful accounts of $551 and $326, respectively  33,932  22,718
Inventories  65,038  47,137
Prepaid and other current assets  2,246  2,472
Income tax receivable  492  -- 
Deferred income taxes  2,270  2,270
Total Current Assets  118,265  76,997
     
Property and equipment, net  16,159  14,019
Definite lived intangible assets, net  33,478  16,108
Indefinite lived intangible assets  47,629  32,650
Goodwill  54,214  38,226
Deferred income taxes  39,645  48,429
Other long-term assets  1,747  1,298
TOTAL ASSETS  $311,137  $227,727
     
Liabilities and Stockholders' Equity    
Current Liabilities    
Accounts payable and accrued liabilities  $23,355  $16,090
Income tax payable  --   254
Current portion of long-term debt   26,016  673
Total Current Liabilities  49,371  17,017
     
Long-term debt   16,328  37,397
Other long-term liabilities  1,780  1,139
TOTAL LIABILITIES  67,479  55,553
     
Stockholders' Equity    
Preferred stock, $.0001 par value; 5,000 shares authorized; none issued  --   -- 
Common stock, $.0001 par value; 100,000 shares authorized; 31,428 and 21,839 issued and 31,353 and 21,764 outstanding  3  2
Additional paid in capital  470,951  402,716
Accumulated deficit  (231,878)  (233,286)
Treasury stock, at cost  (2)  (2)
Accumulated other comprehensive income  4,584  2,744
TOTAL STOCKHOLDERS' EQUITY  243,658  172,174
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY  $311,137  $227,727
 
 
BLACK DIAMOND, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
 
  THREE MONTHS ENDED
  September 30, 2012 September 30, 2011
     
Sales    
Domestic sales  $19,128  $15,868
International sales  29,614  26,172
Total sales  48,742  42,040
     
Cost of goods sold  30,283  26,043
Gross profit  18,459  15,997
     
Operating expenses    
Selling, general and administrative  16,347  12,824
Restructuring charge  86  219
Merger and integration  76  -- 
Transaction costs  415  -- 
     
Total operating expenses  16,924  13,043
     
Operating income  1,535  2,954
     
Other (expense) income    
Interest expense  (722)  (720)
Interest income  9  5
Other, net  521  (702)
     
Total other expense, net  (192)  (1,417)
     
Income before income tax  1,343  1,537
Income tax expense  617  530
Net income  $726  $1,007
     
Earnings per share:    
Basic  $0.02  $0.05
Diluted  0.02  0.05
     
Weighted average shares outstanding:    
Basic 31,329 21,855
Diluted 31,710 22,101
 
 
BLACK DIAMOND, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
     
   NINE MONTHS ENDED 
  September 30, 2012 September 30, 2011
     
Sales    
Domestic sales  $53,569  $44,670
International sales  73,507  64,766
Total sales  127,076  109,436
     
Cost of goods sold  77,535  67,333
Gross profit  49,541  42,103
     
Operating expenses    
Selling, general and administrative  43,441  37,084
Restructuring charge  86  993
Merger and integration  76  -- 
Transaction costs  1,665  -- 
     
Total operating expenses  45,268  38,077
     
Operating income  4,273  4,026
     
Other (expense) income    
Interest expense  (2,068)  (2,157)
Interest income  43  31
Other, net  616  145
     
Total other expense, net  (1,409)  (1,981)
     
Income before income tax  2,864  2,045
Income tax expense  1,456  681
Net income  $1,408  $1,364
     
Earnings per share:    
Basic  $0.05  $0.06
Diluted  0.05  0.06
     
Weighted average shares outstanding:    
Basic 29,281 21,841
Diluted 29,631 22,033
 
 
BLACK DIAMOND, INC.
RECONCILIATION FROM GROSS PROFIT TO ADJUSTED GROSS PROFIT
AND ADJUSTED GROSS MARGIN
       
THREE MONTHS ENDED
   
  September 30, 2012   September 30, 2011
       
Gross profit as reported  $ 18,459    
Plus inventory fair value of purchase accounting  1,094    
Adjusted gross profit  $ 19,553 Gross profit as reported  $ 15,997
       
Gross margin 37.9%    
       
Adjusted gross margin 40.1% Gross margin as reported 38.1%
       
NINE MONTHS ENDED
       
  September 30, 2012   September 30, 2011
       
Gross profit as reported  $ 49,541    
Plus inventory fair value of purchase accounting  1,094    
Adjusted gross profit  $ 50,635 Gross profit as reported  $ 42,103
       
Gross margin 39.0%    
       
Adjusted gross margin 39.8% Gross margin as reported 38.5%
 
 
BLACK DIAMOND, INC
RECONCILIATION FROM NET INCOME TO NET INCOME BEFORE NON-CASH ITEMS, ADJUSTED
NET INCOME BEFORE NON-CASH ITEMS AND RELATED EARNINGS PER SHARE
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
         
   THREE MONTHS ENDED 
     Per Diluted     Per Diluted 
  September 30, 2012 Share September 30, 2011 Share
         
         
Net income  $726  $0.02  $1,007  $0.05
         
Amortization of intangibles  732  0.02  333  0.02
Depreciation   1,167  0.04  1,027  0.05
Accretion of note discount  258  0.01  231  0.01
Stock-based compensation  526  0.02  641  0.03
Inventory fair value of purchase accounting  1,094  0.03  --   -- 
Income tax provision  617  0.02  530  0.02
Cash paid for income taxes  (204)  (0.01)  (4)  (0.00)
         
Net income before non-cash items  $4,916  $0.16  $3,765  $0.17
         
Restructuring charge  86  0.00  219  0.01
Merger and integration  76  0.00  --   -- 
Transaction costs  415  0.01  --   -- 
State cash taxes on adjustments  (29)  (0.00)  (11)  (0.00)
AMT cash taxes on adjustments  (11)  (0.00)  (4)  (0.00)
         
Adjusted net income before non-cash items  $5,453  $0.17  $3,969  $0.18
 
 
BLACK DIAMOND, INC
RECONCILIATION FROM NET INCOME TO NET INCOME BEFORE NON-CASH ITEMS, ADJUSTED
NET INCOME BEFORE NON-CASH ITEMS AND RELATED EARNINGS PER SHARE
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
         
   NINE MONTHS ENDED 
     Per Diluted     Per Diluted 
  September 30, 2012 Share September 30, 2011 Share
         
         
Net income  $1,408  $0.05  $1,364  $0.06
         
Amortization of intangibles  1,397  0.05  998  0.05
Depreciation   2,695  0.09  2,358  0.11
Accretion of note discount  758  0.03  755  0.03
Stock-based compensation  1,314  0.04  2,503  0.11
Inventory fair value of purchase accounting  1,094  0.04  --   -- 
Income tax provision  1,456  0.05  681  0.03
Cash (paid) received for income taxes  (843)  (0.03)  46  0.00
         
Net income before non-cash items  $9,279  $0.31  $8,705  $0.40
         
Restructuring charge  86  0.00  993  0.05
Merger and integration  76  0.00  --   -- 
Transaction costs  1,665  0.06  --   -- 
State cash taxes on adjustments  (91)  (0.00)  (50)  (0.00)
AMT cash taxes on adjustments  (35)  (0.00)  (19)  (0.00)
         
Adjusted net income before non-cash items  $10,980  $0.37  $9,629  $0.44
 
 
BLACK DIAMOND, INC.
RECONCILIATION FROM NET INCOME TO EARNINGS BEFORE INTEREST, TAXES, DEPRECIATION, 
AND AMORTIZATION (EBITDA), AND ADJUSTED EBITDA
(IN THOUSANDS)
     
   THREE MONTHS ENDED 
  September 30, 2012 September 30, 2011
     
     
Net income  $726  $1,007
     
Income tax provision  617  530
Other, net  (521)  702
Interest income  (9)  (5)
Interest expense  722  720
     
Operating income  1,535  2,954
     
Depreciation   1,167  1,027
Amortization of intangibles  732  333
     
EBITDA  $3,434  $4,314
     
Restructuring charge  86  219
Merger and integration  76  -- 
Transaction costs  415  -- 
Inventory fair value of purchase accounting  1,094  -- 
Stock-based compensation  526  641
     
Adjusted EBITDA  $5,631  $5,174
 
 
BLACK DIAMOND, INC.
RECONCILIATION FROM NET INCOME TO EARNINGS BEFORE INTEREST, TAXES, DEPRECIATION, 
AND AMORTIZATION (EBITDA), AND ADJUSTED EBITDA
(IN THOUSANDS)
     
   NINE MONTHS ENDED
  September 30, 2012 September 30, 2011
     
     
Net income  $1,408  $1,364
     
Income tax provision  1,456  681
Other, net  (616)  (145)
Interest income  (43)  (31)
Interest expense  2,068  2,157
     
Operating income  4,273  4,026
     
Depreciation   2,695  2,358
Amortization of intangibles  1,397  998
     
EBITDA  $8,365  $7,382
     
Restructuring charge  86  993
Merger and integration  76  -- 
Transaction costs  1,665  -- 
Inventory fair value of purchase accounting  1,094  -- 
Stock-based compensation  1,314  2,503
     
Adjusted EBITDA  $12,600  $10,878
CONTACT: Company Contact: Warren B. Kanders Executive Chairman Tel 1-203-428-2000 warren.kanders@bdel.com or Peter Metcalf Chief Executive Officer Tel 1-801-278-5552 peter.metcalf@bdel.com Investor Relations: Liolios Group, Inc. Scott Liolios or Cody Slach Tel 1-949-574-3860 BDE@liolios.com

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