Black Diamond, Inc. reported the launch of its spring apparel line and strong results at its POC ski helmet business helped push sales up 7 percent to $54.5 million in the first quarter ended March 31. The company remains on track to meet its revenue and gross margin forecasts for the full year, executives said. 


 

Gross margin in the first quarter of 2014 increased 70 basis points to 38.4 percent compared to 37.7 percent in the year-ago quarter. The increase was primarily due to a favorable product and geographic mix and contribution from higher margin products by POC, PIEPS and Black Diamond apparel, partially offset by an 80 basis point impact from foreign exchange fluctuations.
 

Selling, general and administrative expenses in the first quarter increased 8 percent to $22.6 million compared to $20.9 million in the year-ago quarter, primarily driven by further investment in Black Diamond apparel and POC.
 

Net loss in the first quarter of 2014 improved to $1.3 million, or $(0.04) per diluted share, compared to a net loss of $3.0 million, or $(0.10) per diluted share, in the year-ago quarter.
 

Net loss in the first quarter of 2014 included $0.5 million of non-cash items and $0.3 million in transaction-related costs compared to $2.4 million of non-cash items, $0.2 million in restructuring costs, $0.1 million in transaction costs and $0.1 million in merger and integration costs in the year-ago quarter. Excluding these items, adjusted net loss before non-cash items in the first quarter of 2014 was $0.5 million, or $(0.02) per diluted share, compared to a net loss of $0.3 million, or $(0.01) per diluted share, in the first quarter of 2013.
 

At March 31, 2014, cash totaled $4.4 million compared to $4.1 million at March 31, 2013. Total debt was $45.4 million at March 31, 2014, which included $17.5 million outstanding on the company's $30.0 million line of credit, leaving $12.5 million available. This compares to total debt of $41.5 million at March 31, 2013.
 

Management commentary
“Black Diamond's first quarter results are a reflection of our product variety and seasonal diversity, as well as our global distribution platform,” said Peter Metcalf, president and CEO of Black Diamond. “In spite of some extreme dry weather conditions in different parts of the world, our first quarter sales increased more than 8 percent in constant currency and approximately 7 percent in real terms. Black Diamond also grew in all of our major geographies.”
 

“The majority of our spring 2014 apparel line was shipped in the first quarter,” continued Metcalf. “Sell-through is both on track with our internal plan and based upon selected retailer response, the line is trending ahead of our fall 2014 launch. Early retail and trade feedback for POC's road bike collection suggests it is well positioned for the core cyclist, and we expect the majority of the line to ship in the second quarter.
 

“We expect our strategic pivot to be largely complete by the end of 2014, positioning Black Diamond for faster growth and profitability and helping to further evolve our direct-to-consumer channel strategy. Therefore, we continue to expect double-digit sales growth during 2014.”
 

2014 outlook
Black Diamond's guidance for fiscal year 2014 remains on track with sales expected to be between $235 million and $240 million, which would represent an increase of approximately 16 percent to 18 percent from 2013. The company also expects gross margin in 2014 to range between 39.5 percent and 40.5 percent. Black Diamond's guidance for the first half of fiscal 2014 also remains on track with sales expected to range between $95 million and $100 million. For the second half of 2014, the company expects total sales to range between $135 million and $145 million.


 
Net operating Loss (NOL)
The company estimates that it has available NOL carryforwards for U.S. federal income tax purposes of approximately $210.4 million. The company's common stock is subject to a Rights Agreement dated Feb. 7, 2008, intended to assist in limiting the number of 5 percent 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.


 
Black Diamond and KPMG, its independent accounting firm, are in the process of finalizing their review of the company's valuation allowance assigned to the company's NOL carryforwards. For this reason, this press release excludes the company's condensed consolidated balance sheets. Black Diamond anticipates filing its first quarter Form 10-Q on or before the filing deadline of Monday, May 12, 2014.

 

 























































































































































BLACK DIAMOND, INC.


CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS


(Unaudited)


(In thousands, except per share amounts)


Three Months Ended

March 31, 2014 March 31, 2013

Sales

Domestic sales $ 20,698 $ 20,110
International sales 33,841 30,890
Total sales 54,539 51,000

Cost of goods sold 33,614 31,784
Gross profit 20,925 19,216

Operating expenses

Selling, general and administrative 22,632 20,878
Restructuring charge — 175
Merger and integration — 143
Transaction costs 355 54

Total operating expenses 22,987 21,250

Operating loss (2,062) (2,034)

Other expense

Interest expense, net (895) (826)
Other, net (147) (395)

Total other expense, net (1,042) (1,221)

Loss before income tax (3,104) (3,255)
Income tax benefit (1,777) (223)
Net loss $ (1,327) $ (3,032)

Loss per share:

Basic $ (0.04) $ (0.10)
Diluted (0.04) (0.10)