Black Diamond Inc. Posts Strong Double-Digit Organic Sales Growth in First Quarter

The Utah-based maker of backcountry gear also said it had completed its integration with Gregory Mountain Products and added more than six directors to provide the brand management, research and development, product design and sourcing capabilities it will need to reach its goal of sustained 12.5 percent compounded organic revenue growth.

BDE reported sales reached $39.1 million in the quarter ended March 31, an increase of 18 percent from pro forma $33.1 million in the prior-year quarter. The pro forma prior-year sales include the results of Black Diamond Equipment and Gregory Mountain Products prior to their acquisitions by the company in May 2010. Sales were strong across a majority of categories and geographies, although snowsports sales in Europe fell off due to warm, dry weather.

Excluding the added Gregory Mountain Products (GMP) business, Black Diamond Equipment  (BDEL) product sales increased 36.3 percent for the quarter to $28.7 million.  Domestic sales for BDEL increased 31.1 percent to $12.1 million and International sales for BDEL jumped 40.1 percent to $16.6 million in the first quarter.
Net income totaled $1.2 million, or 5 cents per share, including $2.5 million in non-cash items as well as $800,000 in restructuring charges related to the relocation of Gregory Mountain Products office and warehouse, and the company’s U.S. distribution facilities to a new location in Salt Lake City. Gross margins slipped 100 basis points to 38.6% from the prior year quarter as unfavorable foreign exchange rates related to the company’s European sales more than offset sales growth on a constant currency basis.

Total operating expenses were $13.1 million, which includes $774,000 of final restructuring charges associated with the integration of Gregory Mountain Products into Black Diamond’s Salt Lake City Headquarters. The company added more than six director level positions and began using a new 77,000-square foot distribution facility during the quarter. CFO Robert Peay said he does not foresee any additional integration costs hitting the companys P&L going forward.

BDEs brands performed particularly well at the two largest outdoor specialty chains. Gregory is the top brand in six, and Black Diamond seven core summer categories at REI and Eastern Mountain Sports, based on comments by CEO Peter Metcalf. Sales of Gregorys newest line of large backpacks-the Altera and Deva backpacks – rose 17 percent over the year earlier quarter.
Metcalf said BDE has been able to mitigate rising commodity, materials, labor and shipping costs by widening its supplier base, implementing lean manufacturing practices, raising prices and running higher volumes through its Asian distribution center.

 

But the quarter was more about building capacity to reach the companys five-year growth targets than cutting costs.  Hires in the first quarter included Gregorys first brand manager for Europe, who is now hiring reps and planning sales meetings for the brand. On May 6, BDE announced it had hired a former Patagonia executive to guide its Fall 2013 launch of a technical apparel line. The company is currently searching for a sales director to oversee direct-to-consumer sales, which now account for less than 5 percent of sales.

BDE ended the quarter with $5.2 million in cash and $32.9 million inventory, up 85.7 percent and down 6.0 percent respectively since Dec. 31, 2010. Total, long-term debt stood at $33.5 million. 
On the acquisition front, BDE now has two people, including its former CFO, working fulltime to evaluate potential acquisitions, which will be needed to help the company reach $500 million in sales by 2015.