Black Diamond Inc. (Nasdaq:BDE) significantly trimmed its third-quarter 2016 losses, but that was largely due to reduced expenses, as gross margins from its climbing, winter sports and outdoor gear also dipped.
Sales in the third quarter rose slightly to $39.4 million compared to $39.3 million in the same year-ago quarter. Excluding the impact of foreign exchange, sales were up 3 percent due to strong climb and mountain equipment product growth, officials said.
“The third quarter was once again highlighted by healthy demand for our climbing and mountain equipment products across all geographic regions,” said John Walbrecht, Black Diamond Equipment’s new brand president. “The quarter was also characterized by stability within our independent global distributor business, solid execution of pre-season orders, improved fulfillment rates and healthier inventory levels, which drove strong at-once orders.
“Our third quarter was also impacted by a weaker Euro and higher costs associated with manufacturing we repatriated from China back to our U.S. headquarters. However, the Company made steady improvements during the quarter in efficiency, quality and output, and we believe that the repatriation has us well-positioned to achieve higher gross margins in 2017 and beyond, along with improved levels of service to our customers and better working capital management.”
Gross margin in the third quarter was 31.3 percent compared to 36 percent in the year-ago quarter. Foreign currency headwinds accounted for 190 basis points of this decline. Excluding the impact of foreign exchange, gross margin was 33.2 percent. Gross margin was also negatively impacted by a combination of an unfavorable mix of lower margin products and additional costs associated with the continued ramp of Black Diamond’s recently repatriated manufacturing activities from Asia to the U.S.
Selling, general and administrative expenses in the third quarter of 2016 decreased 19 percent to $11.5 million compared to $14.2 million in the year-ago quarter. The decline was due to the company’s realization of savings from its restructuring plan implemented in 2015 to realign resources within the organization.
Net loss from continuing operations in the third quarter was $400,000, or down 1 cent per diluted share, compared to a net loss from continuing operations of $50.8 million, or a loss of $1.55 per diluted share in the year-ago quarter. Net loss from continuing operations in the third quarter of 2016 included $1.9 million of non-cash items and $300,000 in restructuring costs.
Adjusted net income from continuing operations, which excludes the non-cash items and restructuring costs, increased to $1.7 million or 6 cents per diluted share in the third quarter of 2016, compared to an adjusted net income from continuing operations before non-cash items of $0.7 million, or 2 cents per diluted share, in the third quarter of 2015.
Adjusted EBITDA increased 61 percent to $1.7 million compared to $1.1 million in the third quarter of 2015, primarily due to the aforementioned reduction in selling, general and administrative expenses.
At September 30, 2016, cash totaled $96.0 million compared to cash and marketable securities of $98.2 million at December 31, 2015. Total debt was $21.4 million compared to $20.1 million at December 31, 2015. Stockholders’ equity was $162.7 million or approximately $5.42 per share based on 30 million shares of common stock outstanding as of September 30, 2016.
Company officials re-iterated a note from November 2015 that the Black Diamond Inc. is seeking to redeploy its cash balances. “The company expects to invest in high-quality, durable, cash flow-producing assets potentially unrelated to the outdoor industry in order to diversify its business and potentially monetize its substantial net operating losses,” officials said. “The company intends to focus its search primarily in the United States, while also evaluating international investment opportunities should it find such opportunities attractive.”
During the third quarter, the company also repurchased a total of 277,656 shares of its common stock for a total cost of approximately $1.3 million or $4.52 per share.
Black Diamond Inc. reaffirmed its fiscal year 2016 sales expectation of approximately $145 million-$150 million compared to $155.3 million in 2015. On a constant currency basis, the company expects sales of approximately$155 million-$160 million, or flat to up 3 percent compared to 2015. As a result of the higher costs due to the repatriation of the company’s Chinese manufacturing assets and ramp-up in Salt Lake City, UT during 2016, the company expects gross margin in fiscal 2016 to be approximately 30 percent compared to 34.9 percent in 2015. On a constant-currency basis, the company expects gross margin of approximately 33.5 percent.
Photo courtesy Black Diamond
