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Black Diamond, Inc. Reports Third Quarter 2015 Results

- Mark Ritchie Appointed President of Black Diamond Equipment -

- Board of Directors Amends Stock Repurchase Program to $30 Million -

SALT LAKE CITY, Nov. 09, 2015 (GLOBE NEWSWIRE) -- Black Diamond, Inc. (NASDAQ:BDE) (the “Company”), a global leader of innovative active outdoor performance equipment and apparel, under the brand name Black Diamond, reported financial results for the third quarter ended September 30, 2015.

Reported results are from continuing operations, excluding the results of POC Sweden AB and POC USA, LLC (collectively, “POC”) for all periods presented. The assets and liabilities of POC are reported as held for sale as of September 30, 2015 and December 31, 2014, and the results are reported as discontinued operations for all periods presented.

Third Quarter 2015 Financial Summary vs. Same Year-Ago Quarter

  • Sales of $39.3 million, down 11% (down 5% in constant currency)
  • Gross margin of 36.0%, down 340 basis points (up 40 basis points constant currency)
  • Selling, general and administrative expenses down 11% to $14.2 million
  • Adjusted net income before non-cash items increased 10% to $2.6 million or $0.08 per diluted share, compared to $2.3 million or $0.07 per diluted share

Third Quarter 2015 Financial Results

Sales in the third quarter of 2015 decreased 11% to $39.3 million compared to $44.1 million in the same year-ago quarter. The decrease was driven by the weakening of foreign currencies against the U.S. dollar and lower product volume in parts of Europe and Japan. Excluding the impact of foreign exchange, sales decreased by 5%.

Gross margin in the third quarter of 2015 was 36.0% compared to 39.4% in the year-ago quarter due to a 375 basis point headwind from foreign currency. Excluding the impact of foreign exchange, gross margin increased 40 basis points. The increase was due to a favorable mix of higher margin products and higher margin channel mix, reflecting the Company’s continued focus on margin-enhancing activities.

Selling, general and administrative expenses in the third quarter of 2015 decreased 11% to $14.2 million compared to $15.9 million in the year-ago quarter. The decline was due to the realization of savings from the restructuring plan Black Diamond Equipment implemented in 2014 to realign resources within the organization.

Loss from continuing operations in the third quarter of 2015 was $49.2 million or $(1.50) per diluted share, compared to a loss of $1.2 million or $(0.04) per diluted share in the year-ago quarter. Net loss from continuing operations in the third quarter of 2015 included $51.1 million of non-cash items and $0.7 million in restructuring costs. The $51.1 million of non-cash items included a discrete charge to income tax expense of $48.3 million related to an increase in the Company’s valuation allowance on deferred tax assets.

Adjusted net income from continuing operations, which excludes these non-cash items, increased 10% to $2.6 million or $0.08 per diluted share in the third quarter of 2015, compared to adjusted net income from continuing operations of $2.3 million or $0.07 per diluted share in the third quarter of 2014.

At September 30, 2015, cash and available-for-sale marketable securities totaled $35.5 million compared to $39.7 million at December 31, 2014. Total debt was $19.7 million at September 30, 2015 compared to $18.6 million at December 31, 2014.

Management Commentary

"While third quarter sales were impacted by continued headwinds in parts of Europe and Asia, as well as unfavorable foreign exchange, we continued to execute upon our initiatives to increase gross margin while controlling expenses," said Warren B. Kanders, the Company’s executive chairman. "In fact, currency-neutral gross margin was up 40 basis points to nearly 40%, reflecting the margin-enhancing activities of our strategic pivot following the sale of Gregory Mountain Products. Despite the weakness in some of our international markets, our core North American business remains strong, with 12% sales growth year-to-date.

“After a robust seven-month global process, in October 2015 we closed the sale of POC, a business that we had acquired in July 2012 for approximately $44.9 million. We sold it for $64.6 million, or 1.9x 2014 sales, and realized net proceeds of approximately $60.0 million. We believe the sale, which completed our strategic review process, realized a strong result for POC on a revenue-multiple basis. Led by our board, we now plan to maximize shareholder value by focusing our attention on the profitability of both Black Diamond Equipment and PIEPS, while redeploying the proceeds of the sale to potentially unrelated and diversifying investments.

“In connection with driving value in our Company, our board of directors has amended our 10% stock repurchase program, replacing it with a $30.0 million plan. While we strongly prefer to invest our capital in diversifying assets, we are prepared to be opportunistic in our own shares if appropriate.

“Over the past five years, Black Diamond Equipment has slowly built what are now redundant operating platform costs to support POC, Gregory and future development. We have already begun to right size and reform Black Diamond Equipment to its historical levels of profitability. To help lead this reformation, we have appointed Mark Ritchie as the president of Black Diamond Equipment. With over 20 years at the Company in a variety of operational management functions, and most recently serving as our COO, we are confident in his ability to lead Black Diamond Equipment during its next phase of growth. The founder of Black Diamond Equipment and our current CEO, Peter Metcalf, will be retiring from the Company at the end of 2015.

“We have challenged Mark and his team to build the number one climbing brand in the world and to return Black Diamond Equipment to its 2011 cost structure, or roughly a 10% EBITDA margin run-rate excluding corporate costs, during 2016. With the reformation in progress and the sale of POC complete, we believe we are well positioned to redeploy our approximately $100.0 million in pro forma cash. We expect to invest in assets unrelated to outdoor equipment and have retained Rothschild to assist us in our search.

“In closing, on behalf of our board of directors, shareholders and employees, I would like to thank Peter Metcalf personally for his decades of service and leadership to Black Diamond Equipment, both as its founder and chief executive officer. Peter tirelessly led Black Diamond Equipment from its creation to where it is today and we wish him great success in his future endeavors. We expect that Peter will continue as an advocate for the Black Diamond Equipment brand, and serve as a beacon for issues of great importance to our customers, end users and the sports we serve.”

2015 Outlook

The Company’s guidance for fiscal 2015 has been revised to reflect the sale of POC in October 2015. The Company now expects constant currency sales in 2015 to be approximately $160.0 million compared to $158.3 million in 2014. Also, on a constant currency basis, the Company expects gross margin in fiscal 2015 to increase 160 basis points to approximately 38.0% compared to 36.4% in 2014.

Net Operating Loss (NOL)

The Company estimates that it has available NOL carryforwards for U.S. federal income tax purposes of approximately $167 million. The Company’s common stock is subject to a rights agreement dated February 7, 2008 that is intended to limit the number of 5% or more owners and therefore 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. However, there is no guaranty that the rights agreement will achieve the objective of preserving the value of the NOLs.

Conference Call

The Company will hold a conference call today at 5:00 p.m. Eastern time to discuss its third quarter 2015 results.

Date: Monday, November 9, 2015

Time: 5:00 p.m. Eastern time (3:00 p.m. Mountain time)
Toll-free dial-in number: 1-888-663-2260
International dial-in number: 1-913-312-0386
Conference ID: 4255620

Please call the conference telephone number 5-10 minutes prior to the start time. An operator will register your name and organization. If you have any difficulty connecting with the conference call, please contact Liolios at 1-949-574-3860.

The conference call will be broadcast live and available for replay at http://public.viavid.com/index.php?id=116532 and via the investor relations section of the Company’s website at www.blackdiamond-inc.com.

A replay of the conference call will be available after 8:00 p.m. Eastern time on the same day through November 23, 2015.

Toll-free replay number: 1-877-870-5176
International replay number: 1-858-384-5517
Replay ID: 4255620

About Black Diamond, Inc.

Black Diamond, Inc., through its ownership of Black Diamond Equipment, is a global leader in designing, manufacturing and marketing innovative active outdoor performance equipment and apparel for climbing, mountaineering, backpacking, skiing and a wide range of other year-round outdoor recreation activities. Our principal brands, Black Diamond® and PIEPS™, are iconic in the active outdoor and ski industries, and linked intrinsically with the modern history of these sports. Black Diamond Equipment is synonymous with performance, innovation, durability and safety that the outdoor and action sport communities rely on and embrace in their active lifestyle. Headquartered in Salt Lake City at the base of the Wasatch Mountains, our products are created and tested on some of the best alpine peaks, slopes, crags, and trails in the world. These close connections to the Black Diamond Equipment lifestyle enhance the authenticity of our brands, inspire product innovation and strengthen customer loyalty. Black Diamond Equipment's products are sold in approximately 50 countries around the world. For additional information, please visit our corporate website at www.blackdiamond-inc.com, as well as www.blackdiamondequipment.com or www.pieps.com.

Use of Non-GAAP Measures

The Company reports its financial results in accordance with U.S. generally accepted accounting principles (“GAAP”). This press release contains the non-GAAP measures: (i) net income (loss) from continuing operations before non-cash items and related income (loss) per diluted share, and adjusted net income (loss) from continuing operations before non-cash items and related income (loss) per diluted share, and (ii) earnings before interest, taxes, other income, depreciation and amortization (“EBITDA”), and adjusted EBITDA. The Company also believes that the presentation of certain non-GAAP measures, i.e.: (i) net income (loss) from continuing operations before non-cash items and related income (loss) per diluted share, and adjusted net income (loss) from continuing operations before non-cash items and related income (loss) per diluted share, and (ii) EBITDA and adjusted EBITDA, provide useful information for the understanding of its ongoing operations and enables investors to focus on period-over-period operating performance, and thereby enhances the user's overall understanding of the Company's current financial performance relative to past performance and provides, along with the nearest GAAP measures, a baseline for modeling future earnings expectations. Non-GAAP measures are reconciled to comparable GAAP financial measures in the financial tables within this press release. The Company cautions that non-GAAP measures should be considered in addition to, but not as a substitute for, the Company's reported GAAP results. Additionally, the Company notes that there can be no assurance that the above referenced non-GAAP financial measures are comparable to similarly titled financial measures used by other publicly traded companies.

Forward-Looking Statements

Please note that in this press release we may use words such as “appears,” “anticipates,” “believes,” “plans,” “expects,” “intends,” “future,” and similar expressions which constitute forward-looking statements within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are made based on our expectations and beliefs concerning future events impacting the Company and therefore involve a number of risks and uncertainties. We caution that forward-looking statements are not guarantees and that actual results could differ materially from those expressed or implied in the forward-looking statements. Potential risks and uncertainties that could cause the actual results of operations or financial condition of the Company to differ materially from those expressed or implied by forward-looking statements in this release include, but are not limited to, the overall level of consumer spending on our products; general economic conditions and other factors affecting consumer confidence; disruption and volatility in the global capital and credit markets; the financial strength of the Company's customers; the Company's ability to implement its reformation and growth strategy, including its ability to organically grow each of its historical product lines, the ability of the Company to identify potential acquisition or investment opportunities as part of its redeployment and diversification strategy; the Company’s ability to successfully redeploy its capital into diversifying assets or that any such redeployment will result in the Company’s future profitability; the Company’s exposure to product liability or product warranty claims and other loss contingencies; stability of the Company's manufacturing facilities and foreign suppliers; the Company's ability to protect patents, trademarks and other intellectual property rights; fluctuations in the price, availability and quality of raw materials and contracted products as well as foreign currency fluctuations; our ability to utilize our net operating loss carryforwards; and legal, regulatory, political and economic risks in international markets. More information on potential factors that could affect the Company's financial results is included from time to time in the Company's public reports filed with the Securities and Exchange Commission, including the Company's Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, and Current Reports on Form 8-K. All forward-looking statements included in this press release are based upon information available to the Company as of the date of this press release, and speak only as of the date hereof. We assume no obligation to update any forward-looking statements to reflect events or circumstances after the date of this press release.

BLACK DIAMOND, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In thousands, except per share amounts)
September 30, 2015 December 31, 2014
Assets
Current assets
Cash$ 26,273 $ 29,788
Marketable securities 9,235 9,902
Accounts receivable, less allowance for doubtful
accounts of $250 and $461, respectively 30,115 27,754
Inventories 54,280 56,789
Prepaid and other current assets 4,956 5,274
Income tax receivable 1,786 5,323
Deferred income taxes 2 2,482
Assets held for sale 60,105 21,248
Total current assets 186,752 158,560
Property and equipment, net 11,626 12,235
Other intangible assets, net 11,296 12,558
Indefinite lived intangible assets 22,738 22,993
Goodwill 29,327 29,628
Deferred income taxes 41 37,904
Other long-term assets 2,276 2,732
Non-current assets held for sale - 38,930
Total assets$ 264,056 $ 315,540
Liabilities and Stockholders' Equity
Current liabilities
Accounts payable and accrued liabilities$ 21,576 $ 24,672
Deferred income taxes 77 26
Liabilities held for sale 16,734 7,842
Total current liabilities 38,387 32,540
Long-term debt 19,731 18,559
Deferred income taxes 5,973 -
Other long-term liabilities 2,412 2,142
Non-current liabilities held for sale - 5,106
Total liabilities 66,503 58,347
Stockholders' Equity
Preferred stock, $.0001 par value; 5,000
shares authorized; none issued - -
Common stock, $.0001 par value; 100,000 shares authorized;
32,884 and 32,801 issued and 32,788 and 32,704 outstanding 3 3
Additional paid in capital 484,478 482,985
Accumulated deficit (278,438) (223,197)
Treasury stock, at cost (186) (186)
Accumulated other comprehensive loss (8,304) (2,412)
Total stockholders' equity 197,553 257,193
Total liabilities and stockholders' equity$ 264,056 $ 315,540

BLACK DIAMOND, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands, except per share amounts)
Three Months Ended
September 30, 2015 September 30, 2014
Sales
Domestic sales$ 17,185 $ 17,640
International sales 22,071 26,430
Total sales 39,256 44,070
Cost of goods sold 25,113 26,728
Gross profit 14,143 17,342
Operating expenses
Selling, general and administrative 14,243 15,945
Restructuring charge 696 2,180
Transaction costs 39 -
Total operating expenses 14,978 18,125
Operating loss (835) (783)
Other (expense) income
Interest expense, net (705) (650)
Other, net 696 (774)
Total other expense, net (9) (1,424)
Loss before income tax (844) (2,207)
Income tax expense (benefit) 48,382 (1,045)
Loss from continuing operations (49,226) (1,162)
Discontinued operations, net of tax 1,107 21,565
Net (loss) income$ (48,119) $ 20,403
Loss from continuing operations per share:
Basic$ (1.50) $ (0.04)
Diluted (1.50) (0.04)
Net (loss) income per share:
Basic$ (1.47) $ 0.63
Diluted (1.47) 0.63
Weighted average shares outstanding:
Basic 32,776 32,585
Diluted 32,776 32,585

BLACK DIAMOND, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands, except per share amounts)
Nine Months Ended
September 30, 2015 September 30, 2014
Sales
Domestic sales$ 51,992 $ 46,176
International sales 59,198 66,168
Total sales 111,190 112,344
Cost of goods sold 71,711 70,834
Gross profit 39,479 41,510
Operating expenses
Selling, general and administrative 43,470 46,488
Restructuring charge 2,572 2,590
Transaction costs 446 -
Total operating expenses 46,488 49,078
Operating loss (7,009) (7,568)
Other (expense) income
Interest expense, net (2,073) (1,808)
Other, net 346 (626)
Total other expense, net (1,727) (2,434)
Loss before income tax (8,736) (10,002)
Income tax expense (benefit) 46,075 (3,503)
Loss from continuing operations (54,811) (6,499)
Discontinued operations, net of tax (430) 20,592
Net (loss) income$ (55,241) $ 14,093
Loss from continuing operations per share:
Basic$ (1.67) $ (0.20)
Diluted (1.67) (0.20)
Net (loss) income per share:
Basic$ (1.69) $ 0.43
Diluted (1.69) 0.43
Weighted average shares outstanding:
Basic 32,735 32,525
Diluted 32,735 32,525

BLACK DIAMOND, INC.
RECONCILIATION FROM NET LOSS FROM CONTINUING OPERATIONS TO NET INCOME FROM CONTINUING OPERATIONS BEFORE NON-CASH
ITEMS, ADJUSTED NET INCOME FROM CONTINUING OPERATIONS BEFORE NON-CASH ITEMS AND RELATED EARNINGS PER DILUTED SHARE
(In thousands, except per share amounts)
Three Months Ended
Per Diluted Per Diluted
September 30, 2015 Share September 30, 2014 Share
Net loss from continuing operations$ (49,226) $ (1.50) $ (1,162) $ (0.04)
Amortization of intangibles 319 0.01 352 0.01
Depreciation 709 0.02 1,118 0.03
Accretion of note discount 391 0.01 340 0.01
Stock-based compensation 126 0.00 715 0.02
Gain from removal of accumulated translation adjustment (606) (0.02) - -
Income tax expense (benefit) 48,382 1.48 (1,045) (0.03)
Cash received (paid) for income taxes 1,790 0.05 (44) (0.00)
Net income from continuing operations before non-cash items$ 1,885 $ 0.06 $ 274 $ 0.01
Restructuring charge 696 0.02 2,180 0.07
Transaction costs 39 0.00 - -
State cash taxes on adjustments (26) (0.00) (65) (0.00)
AMT cash taxes on adjustments (14) (0.00) (42) (0.00)
Adjusted net income from continuing operations before non-cash items$ 2,580 $ 0.08 $ 2,347 $ 0.07

BLACK DIAMOND, INC.
RECONCILIATION FROM NET LOSS FROM CONTINUING OPERATIONS TO NET INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE NON-CASH ITEMS,
ADJUSTED NET INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE NON-CASH ITEMS AND RELATED EARNINGS PER DILUTED SHARE
(In thousands, except per share amounts)
Nine Months Ended
Per Diluted Per Diluted
September 30, 2015 Share September 30, 2014 Share
Net loss from continuing operations $ (54,811) $ (1.67) $ (6,499) $ (0.20)
Amortization of intangibles 977 0.03 1,065 0.03
Depreciation 2,316 0.07 2,917 0.09
Accretion of note discount 1,133 0.03 985 0.03
Stock-based compensation 1,028 0.03 1,038 0.03
Gain from removal of accumulated translation adjustment (606) (0.02) - -
Income tax expense (benefit) 46,075 1.41 (3,503) (0.11)
Cash received (paid) for income taxes 5,151 0.16 (186) (0.01)
Net income (loss) from continuing operations before non-cash items $ 1,263 $ 0.04 $ (4,183) $ (0.13)
Restructuring charge 2,572 0.08 2,590 0.08
Transaction costs 446 0.01 - -
State cash taxes on adjustments (106) (0.00) (78) (0.00)
AMT cash taxes on adjustments (58) (0.00) (50) (0.00)
Adjusted net income (loss) from continuing operations before non-cash items $ 4,117 $ 0.13 $ (1,721) $ (0.05)

BLACK DIAMOND, INC.
RECONCILIATION FROM NET LOSS FROM CONTINUING OPERATIONS TO EARNINGS BEFORE
INTEREST, TAXES, DEPRECIATION, AND AMORTIZATION (EBITDA), AND ADJUSTED EBITDA
(In thousands)
Three Months Ended
September 30, 2015 September 30, 2014
Net loss from continuing operations$ (49,226) $(1,162)
Income tax expense (benefit) 48,382 (1,045)
Other, net (696) 774
Interest expense, net 705 650
Operating loss (835) (783)
Depreciation 709 1,118
Amortization of intangibles 319 352
EBITDA$ 193 $687
Restructuring charge 696 2,180
Transaction costs 39 -
Stock-based compensation 126 715
Adjusted EBITDA$ 1,054 $3,582

BLACK DIAMOND, INC.
RECONCILIATION FROM NET LOSS FROM CONTINUING OPERATIONS TO EARNINGS BEFORE
INTEREST, TAXES, DEPRECIATION, AND AMORTIZATION (EBITDA), AND ADJUSTED EBITDA
(In thousands)
Nine Months Ended
September 30, 2015 September 30, 2014
Net loss from continuing operations$ (54,811) $ (6,499)
Income tax expense (benefit) 46,075 (3,503)
Other, net (346) 626
Interest expense, net 2,073 1,808
Operating loss (7,009) (7,568)
Depreciation 2,316 2,917
Amortization of intangibles 977 1,065
EBITDA$ (3,716) $ (3,586)
Restructuring charge 2,572 2,590
Transaction costs 446 -
Stock-based compensation 1,028 1,038
Adjusted EBITDA$ 330 $ 42


Company Contact: Warren B. Kanders Executive Chairman Tel 1-203-428-2000 warren.kanders@bdel.com or Peter Metcalf CEO Tel 1-801-278-5552 peter.metcalf@bdel.com Investor Relations: Liolios Cody Slach Tel 1-949-574-3860 BDE@liolios.com

Source:Black Diamond, Inc.