Sales at Clarus Corp., parent of Black Diamond Equipment (BDE) and Gregory Mountain Products (GMP), rose 9.7% to $33.9 million on a pro forma basis in the third quarter ended Sept. 30. The results, greatly complicated by a reverse merger in May, broke down to sales growth of 16.6% at GMP, where sales reached $6.28 million and sales growth of 8.6% at BDE, where sales reached $27.7 million.


Clarus Corp. combined BDE and GMP in a complex reverse merger in late May that new Clarus CEO Peter Metcalf said creates a global platform that will enable the company to dramatically expanding into the apparel and footwear business and acquire and grow other outdoor brands. Calling 2010 a transition year loaded with one-time acquisition and integration costs, Metcalf said the benefits of the deal will become more apparent in 2011 in the form of higher operating profitability.


In the third quarter, merger and integration costs reached $1.2 million, down from $5.4 million in the second quarter. The recent quarter’s charge included the cost of moving Clarus and GMP headquarters and a GMP warehouse to Black Diamond’s headquarters in Salt Lake City. 

“We expect to complete the Gregory integration early in the first

quarter of 2011 and be well positioned to continue down the acquisition trail in 2011,” Metcalf said. “We're making investments in people and infrastructure necessary to achieve our $500 million annual revenue target by 2015.”


Metcalf, who was CEO of Black Diamond before the merger deal, said the company’s new status as a publicly traded company has enhanced its executive recruiting more than expected. He noted that that Black Diamond hired former Nike executive Casey Jarvis to spearhead the brand’s expansion in footwear and former Spyder Active Sports executive Phil Shettig to spearhead the expansion into apparel. At Gregory, meanwhile, new executives are working to penetrate the European market using BDE’s distribution network.


“We are tracking to our target of between $120 million to $125 million of pro forma revenue for the 12 months ended December 31, 2010 and we remain committed to a long-term goal of $500 million in annual revenue by 2015,” said Metcalf.


Consolidated gross profit and gross profit margins for the third quarter of 2010 were $9.5 million and 28.1% of sales, respectively. On a pro forma basis, however, gross margins and consolidated adjusted gross profits were 37.4% of sales and $12.7 million respectively, compared to 38.3% of sales and $11.8 million in the same period in 2009. The decline in gross margin was primarily due to the negative impact of exchange rates between the U.S. dollars, the Swiss France and the euro.


The consolidated net loss for the quarter was $3.3 million, or a loss of 15 cents per share. Excluding non-cash items of $4.3 million, consolidated net income reached $1.0 million, or 5 cents per diluted share. Excluding transaction, restructuring, and merger and integration costs of $1.1 million, net of related taxes, consolidated adjusted net income before non-cash items was $2.1 million, or 10 cents per diluted share.


In a conference call with analysts, Metcalf emphasized repeatedly how apparel and footwear would become major drivers of growth for the company within five years. Clarus could use the untapped portion of its $35 million revolving line of credit – ranging from $9 million to $15 million per quarter– and issue up to 40 million shares of stock to pay for acquisitions, said CFO Robert Peay.