Black Diamond Inc. Sales Rise 13 Percent in First Quarter

Black Diamond Inc. reported sales in the first quarter of 2015 increased 13 percent to $50.3 million compared to $44.4 million in the same year-ago quarter, driven by increases across all product categories and geographic regions, which included growth of Black Diamond Apparel and the continued roll out of POC's cycling product, including its new spring 2015 “Race Day” line and expanded assortment of eyewear. Excluding the impact of foreign exchange, sales grew 18 percent.

Gross margin in the first quarter of 2015 increased 30 basis points to 37.8 percent compared to 37.5 percent in the year-ago quarter, in spite of a 260 basis point headwind from foreign currency. Excluding the impact of foreign exchange, gross margin increased 290 basis points. The increase was due to both a favorable mix of higher margin products and higher margin channel mix, and reflects the margin enhancing activities contained in the company's strategic pivot following the sale of Gregory Mountain Products.

Selling, general and administrative expenses in the first quarter of 2015 decreased 8 percent to $19.2 million compared to $20.8 million in the year-ago quarter. The decrease is also attributable to actions outlined in the company's strategic pivot and the re-alignment of redundant operating platform resources following the sale of Gregory Mountain Products, as well as general optimization efforts across the organization.

Adjusted EBITDA in the first quarter of 2015 increased significantly to $1.9 million compared to a loss of $2.2 million in the year-ago quarter.

Net loss from continuing operations in the first quarter of 2015 was $1.7 million or $(0.05) per diluted share, compared to a loss $3.4 million or $(0.10) per diluted share in the year-ago quarter. Net loss from continuing operations in the first quarter of 2015 included $1.9 million of non-cash items, $0.5 million in restructuring costs and $0.3 million in transaction costs, compared to $0.8 million of non-cash items in the year-ago quarter.

Adjusted net income from continuing operations, which excludes these non-cash items, increased significantly to $1.0 million, or $0.03 per diluted share, in the first quarter of 2015, compared to an adjusted net loss from continuing operations of $2.6 million, or $(0.08) per diluted share, in the first quarter of 2014.

At March 31, 2015, cash and available-for-sale marketable securities totaled $36.8 million compared to $40.9 million at Dec. 31, 2014. Total debt was $22.0 million at March 31, 2015, which includes $18.9 million of 5 percent subordinated notes due in 2017 and $3.0 million in a foreign seasonal working capital credit facility for POC, compared to $22.4 million at December 31, 2014.

Management commentary

“Following a strong finish to 2014, our first quarter was highlighted by another quarter of double-digit sales growth, expanded gross margin and lower operating costs,” said Peter Metcalf, CEO of Black Diamond. “In fact, the first quarter marks the fourth consecutive quarter of double-digit currency neutral sales growth and third straight quarter of gross margin expansion. Black Diamond also grew in all of our major geographies.

“These results continue to be driven by the momentum in our Black Diamond Apparel and POC brands. Specifically, our apparel business benefited from a more complete seasonal collection, including the spring 2015 launch of our women's line. POC continues to grow at a healthy double-digit rate, driven by strong at-once orders for both the snow and road bike product lines. We anticipate these fast-growing brands contributing significantly to our results in 2015.”

Exploration of strategic alternatives

As previously announced on March 16, 2015, Black Diamond has engaged the financial advisory firms Rothschild Inc. and Robert W. Baird & Co. to lead the exploration of a full range of strategic alternatives, including the sale of the company's Black Diamond Equipment (including PIEPS) and POC brands in two separate transactions. The company has received a number of non-binding indications of interest with respect to each of its brands.

The company anticipates that the results of the strategic review process will be known during the third quarter of 2015. Black Diamond does not intend to comment further regarding the strategic review process unless or until a specific transaction is approved by its board of directors or shareholders, the strategic review process is concluded, or it is otherwise determined that further disclosure is appropriate or required by law. The company provides no assurance that the strategic review process will result in any completed transaction.

2015 outlook

Black Diamond's guidance for fiscal 2015 remains on track with sales expected to be approximately $208 million, which would represent an increase of approximately 8 percent from 2014 sales (an increase of 11 percent on a constant currency basis). The company also expects gross margin in fiscal year 2015 to be approximately 40 percent.