Black Diamond, Inc. reported sales reached $39.1 million in its first quarter, an increase of 18 percent from pro forma $33.1 million in the prior year quarter. Net income totaled $1.2 million or 5 cents per share while adjusted net income before non-cash items totaled $4.4 million or 20 cents per diluted share.
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. The growth was attributable to increased sales of the company’s products globally.
Gross margin in the first quarter was 38.6%, compared to pro forma gross margin of 39.6% in the prior year quarter. The decline in gross margin was primarily attributed to unfavorable foreign exchange rates related to the company’s European sales, despite sales growth on a constant currency basis.
Net income in the first quarter was $1.2 million, or 5 cents per diluted share. The company noted this income included $2.5 million of 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. Excluding these items, the company had adjusted net income before non-cash items of $4.4 million or 20 cents per diluted share.
Adjusted EBITDA (earnings before interest, taxes, other income, depreciation, amortization, non-cash equity compensation and restructuring charges) in the first quarter of 2011 was $4.6 million, which excludes $900,000 of non-cash equity compensation and $800,000 of restructuring charges (as described above) from EBITDA.
At March 31, 2011, cash and cash equivalents totaled $5.2 million, compared to $2.8 million at Dec. 31, 2010. The increase is primarily due to net borrowings on the company’s line of credit. Total long-term debt including the current portion of long-term debt was $33.5 million at March 31, 2011, which included $18.3 million outstanding on the company’s $35.0 million line of credit, and a discounted value of $14.3 million on the company’s 5% subordinated notes, as well as $900,000 in other debt. The face value of the 5 percent subordinated notes is $22.6 million.
Stockholders equity was $165.2 million or approximately $7.60 per share based on 21.7 million shares of common stock outstanding as of March 31, 2011.
“Though we are pleased to have begun 2011 with such a robust first quarter of growth, we are most proud of the style in which we achieved these results, which was through a combination of truly innovative and award winning products, further cultivating our strong relationships with key retailers, and our nationally-recognized leadership with public policy issues of great importance to our customers,” said Peter Metcalf, chief executive officer. “Together these actions are resulting in the continued rise of our brands as the quintessence of the sports themselves. Our sales growth is affirmation that our strategy is on track. For that matter, within the online core summer categories at REI and Eastern Mountains Sports, our Gregory and Black Diamond brands were the top performing brands in six and seven of 13 categories, respectively.”
“With the integration of Gregory Mountain Products and Black Diamond Equipment now complete,” continued Metcalf, “our new 77,000-square-foot Salt Lake City, UT Distribution Center is now fully operational and meeting the demands of accelerating sales at retail and on-line. In addition, over half a dozen director-level management and designer positions were created and have been filled, and we have made solid progress on interviewing for another handful of new manager and director level positions. We are enthusiastically moving forward on our compelling strategy to leverage our global operational platform, and grow our business both organically and acquisitively into one of the world’s most respected and leading active outdoor equipment and lifestyle corporations. This past quarter’s results exceeded our internal expectations and positions us strongly for what we believe to be continued solid growth through continued innovative product launches, sport intimacy, insightful marketing and retail partnering.”
Net Operating Loss
The company estimates that it has available net operating loss carryforwards for U.S. federal income tax purposes of approximately $225.8 million, after application of the limitation under Section 382 of the Internal Revenue Code. The company’s common stock is subject to a Rights Agreement dated Feb. 7, 2008, designed to assist in limiting the number of 5 percent or more owners and thus reduce the risk of a possible “change of ownership” under Section 382 of the Internal Revenue Code of 1986. Any such “change of ownership” under these rules would limit or eliminate the ability of the company to use its existing NOLs for federal income tax purposes. There is no guaranty, however, that the Rights Agreement will achieve the objective of preserving the value of the NOLs.
BLACK DIAMOND, INC.
CONDENSED CONSOLIDATED COMBINED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
|THREE MONTHS |
|THREE MONTHS |
March 31, 2011
|March 31, 2010||Predecessor |
March 31, 2010
March 31, 2010
|Domestic sales||$ 15,830||$ —||$ 9,819||$ 9,819|
|Cost of goods sold||23,987||—||14,537||14,537|
|Selling, general and administrative||12,329||868||7,315||8,183|
|Total operating expenses||13,103||2,377||7,315||9,692|
|Operating income (loss)||1,968||(2,377)||1,805||(572)|
|Other (expense) income|
|Total other (expense) income, net||(300)||22||179||201|
|Income (loss) before income tax||1,668||(2,355)||1,984||(371)|
|Income tax provision||500||—||584||584|
|Net income (loss)||$ 1,168||$ (2,355)||$ 1,400||$ (955)|