Black Diamond, Inc.’s Peter Metcalf used the company’s fourth quarter earnings call with analysts to plug the economic value of America’s public lands and the outdoor recreation industry they support. 


On the Monday call Metcalf noted that “the outdoor industry is a large, vibrant, growing and stable contributor to the American economy to the tune of some $8 billion in annual state and federal tax revenue and 6.5 million American jobs. Americans alone spend $46 billion each year on active outdoor equipment, apparel footwear and services and an additional $43 billion on outdoor excursions.


He added that the outdoor industry depends on the country's iconic and unique wilderness and that the country’s “natural systems are priceless in value and nearly impossible to replace, but they are cheap to maintain.”


Metcalf’s comments come as state and federal lawmakers debate steep cuts in government spending on conservation and the development and management of parks and other outdoor recreation assets. Next month, a delegation of outdoor industry CEOs will take the message articulated by Metcalf to Congress as part of Capitol Summit, the annual lobbying trip organized by Outdoor Industry Association.


Black Diamond Inc. went public last May, when it combined with the public shell company Clarus Corp. and acquired Gregory Mountain Products in a simultaneous transaction that left it with tens of millions of dollars in tax loss carry-forwards.


In the fourth quarter ended Dec. 31, 2010, the combined company generated consolidated sales $34.2 million, up 13.6% compared to pro forma sales of $30.1 million in the prior-year quarter, according to audited financial statements released Monday. The company said sales growth occurred across North America, Europe and elsewhere and is expected to continue throughout the first and second quarters based on its order books, acceptance of new products and heightened activity at retail.  Domestic sales were up 20.3% to $48.7 million.  International revenues grew 30.4% to $62.1 million in the fourth quarter.

 

In the fourth quarter, BDE’s consolidated gross margin reached 36.2% of sales and would have been 38.3% if not for a one-time, non-cash adjustment of approximately $700,000 to reflect a step up in the value of inventory acquired in the May 28, 2010 combination of Gregory Mountain Products, LLC. Accounting rules governing such purchases require companies to revalue inventory at the time of acquisition. Without the step-up in value of inventory, adjusted gross margin would have improved approximately 40 basis points compared to the year-ago quarter's pro forma gross margin of 37.8% of sales.


CFO Robert Peay said BDE did not have to do any heavy discounting during the quarter. He noted that financial benefits associated with combining and integrating Gregory and Black Diamond Equipment did not kick in until mid-January after Gregory’s relocation to Salt Lake City.
Charges related to last year’s transaction also caused BDE to report a consolidated net loss of $500,000, or 2 cents per share, for the fourth quarter. The loss included $1.7 million of non-cash items as well as restructuring and integration charges of $800,000 related to the merger. This reflected the relocation of Clarus and Gregory headquarters and Gregory’s U.S. distribution operations to Black Diamond’s Salt Lake City campus. Excluding these items, BDE had adjusted cash earnings per diluted share of $2.0 million or 9 cents per share in the fourth quarter.


Pro forma sales for the twelve months ended Dec. 31, 2010 were $125.0 million, an increase of 10.1% versus pro forma sales of $113.5 million for the full year of 2009. Growth in the company's full year pro forma revenues was, similar to the fourth quarter, broad based, with increases in each category and each geographic region of its business. Gross margin for the full fiscal year was 31.3% of sales.


Pro forma net income for the year reached $51.2 million, or $2.56 per diluted share, including a $65 million benefit related to a partial release of the company's valuation allowance on its net operating loss carry-forwards.


Metcalf called out new headlamps, hot forged carbiners and three-section “Z-Pole” trekking poles as selling in particularly well. The one soft spot is snow sports sales in Europe, where warm and dry weather since early February and has led to disappointing sell-through that could hamper Fall/Winter 2011-12 pre-season sales. Much of that product, however, will carry over from this winter season to next.
For the three-months ending March 31, BDE is forecasting sales in the range of $37.0 million to $38.5 million. The company also affirmed its Feb. 7 guidance for fiscal 2011 sales of $135 million to $140 million, not including the effect of new category launches or possible acquisitions. Gross margin for 2011 is expected to be between 36% and 39% of sales.