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Black Diamond, Inc. Reports Second Quarter 2017 Results

SALT LAKE CITY, Aug. 07, 2017 (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 second quarter ended June 30, 2017.

Second Quarter 2017 Financial Summary vs. Same Year-Ago Quarter

  • Sales of $30.7 million, up 5%.
  • Gross margin up 90 basis points to 29.5%.
  • Net loss was $3.7 million or $(0.12) per share, compared to a net loss of $3.2 million or $(0.10) per share. Net loss in the year-ago quarter benefited from a $2.0 million arbitral award for certain claims against the former owner of PIEPS associated with the voluntary recall of all of the PIEPS VECTOR transceivers during 2013.
  • Adjusted net loss before non-cash items was $3.4 million or $(0.11) per share, compared to a loss of $2.5 million or $(0.08) per share.


Second Quarter 2017 Financial Results

Sales in the second quarter of 2017 increased 5% to $30.7 million compared to $29.1 million in the same year-ago quarter. The increase was due to strong growth in the climb and ski categories. On a constant currency basis, sales were up 6%.

Gross margin increased 90 basis points to 29.5% compared to 28.6% in the year-ago quarter. The increase was primarily due to a favorable mix of higher margin products and channel distribution.

Selling, general and administrative expenses in the second quarter increased 11% to $12.9 million compared to $11.6 million in the year-ago quarter. The increase was driven by strategic initiatives to increase brand equity and drive new product introductions.

Net loss in the second quarter was $3.7 million or $(0.12) per diluted share, compared to a net loss of $3.2 million or $(0.10) per diluted share. Net loss in the second quarter of 2017 included $0.2 million of non-cash items and $0.1 million in restructuring charges, compared to $2.0 million of non-cash items, $0.5 million in restructuring costs, $0.1 million in transaction costs, partially offset by a $2.0 million cash arbitration award for the PIEPS VECTOR recall in the second quarter of 2016.

Adjusted net loss, which excludes the non-cash items, as well as restructuring and transaction costs and the arbitral award, was $3.4 million or $(0.11) per diluted share, compared to an adjusted net loss of $2.5 million or $(0.08) per diluted share in the second quarter of 2016.

Adjusted EBITDA was $(2.7) million compared to $(2.3) million in the second quarter of 2016.

At June 30, 2017, cash and cash equivalents totaled $63.4 million compared to $94.7 million at December 31, 2016. The Company carried zero debt compared to debt of $21.9 million at the end of 2016. Stockholders’ equity was $156.3 million or approximately $5.21 per share based on approximately 30.0 million shares of the Company’s common stock outstanding as of June 30, 2017.

Management Commentary

“In the second quarter, our strategy to refocus on our core customer while innovating in current and adjacent product categories continued to gain momentum,” said John Walbrecht, president of Black Diamond Equipment. “We grew sales in all of our major geographic markets and across all distribution channels, including strong double-digit growth in our distributor and direct-to-consumer businesses. Products that drove this growth included the launch of Black Diamond climbing shoes, our new ropes line—a category we introduced last fall—as well as updates to our harness, carabiner and helmet lines.

“Given our progress, we accelerated the timing of various sales and marketing initiatives to further bolster what we expect to be robust fall 2017 and spring 2018 selling seasons. This strategy, along with our increased focus on product development, is being well-received by our retail partners and is anticipated to further strengthen the Black Diamond brand.”

2017 Outlook

The Company continues to anticipate its fiscal year 2017 sales to grow between 3%-7% to approximately $153 to $158 million compared to $148.2 million in 2016. On a constant currency basis, the Company expects sales to range between $154 to $159 million, or up 4%-7% compared to 2016.

The Company continues to expect gross margin in fiscal 2017 to increase approximately 300 to 400 basis points and range between 32.5%-33.5% compared to 29.5% in 2016.

The Company also continues to expect selling, general and administrative costs, including approximately $4.5 million of cash corporate overhead expenditures, to be approximately $50.5 million compared to $49.9 million in 2016. The Company expects approximately $2.5 million in capital expenditures in 2017.

Redeployment and Diversification Strategy

On November 9, 2015, the Company announced that it is seeking to redeploy its significant cash and cash equivalent 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. The Company intends to focus its search primarily in the United States, while also evaluating international investment opportunities should it find such opportunities attractive.

Net Operating Loss (NOL)

The Company estimates that it has available NOL carryforwards for U.S. federal income tax purposes of approximately $172 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 Internal Revenue Code of 1986, as amended. 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 second quarter 2017 results.

Date: Monday, August 7, 2017
Time: 5:00 p.m. Eastern time (3:00 p.m. Mountain time)
Toll-free dial-in number: 1-800-474-8920
International dial-in number: 1-913-312-0867
Conference ID: 4391431

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 here 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 August 21, 2017.

Toll-free replay number: 1-844-512-2921
International replay number: 1-412-317-6671
Replay ID: 4391431

About Black Diamond, Inc.

The Company is a publicly-traded (NASDAQ:BDE) holding company which seeks opportunities to acquire and grow businesses that can generate durable free cash flows and attractive returns. The Company has substantial cash balances and net operating tax loss carryforwards which it is seeking to redeploy to maximize shareholder value in a diverse array of businesses. Currently, Black Diamond Equipment, Ltd. is its only operating subsidiary. Black Diamond Equipment, Ltd. is a manufacturer of active outdoor equipment and clothing for the climbing, skiing and mountain sports markets. For additional information, please visit our corporate website at www.blackdiamond-inc.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) before non-cash items and related income (loss) per diluted share, and adjusted net income (loss) before non-cash items and related income (loss) per diluted share, and (ii) earnings before interest, taxes, other income or expense, depreciation and amortization (“EBITDA”), and adjusted EBITDA. The Company believes that the presentation of certain non-GAAP measures, i.e.: (i) net income (loss) before non-cash items and related income (loss) per diluted share, and adjusted net income (loss) 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)
June 30, 2017 December 31, 2016
Assets
Current assets
Cash and cash equivalents $ 63,433 $ 94,738
Accounts receivable, less allowance for doubtful
accounts of $399 and $399, respectively 22,780 23,232
Inventories 54,812 45,410
Prepaid and other current assets 2,021 3,480
Income tax receivable 34 85
Total current assets 143,080 166,945
Property and equipment, net 11,081 11,055
Other intangible assets, net 9,449 9,769
Indefinite lived intangible assets 22,788 22,541
Other long-term assets 32 147
Total assets $ 186,430 $ 210,457
Liabilities and Stockholders' Equity
Current liabilities
Accounts payable and accrued liabilities $ 20,862 $ 17,740
Income tax payable 186 969
Current portion of long-term debt - 21,898
Total current liabilities 21,048 40,607
Deferred income taxes 8,978 8,966
Other long-term liabilities 137 76
Total liabilities 30,163 49,649
Stockholders' Equity
Preferred stock, $.0001 par value; 5,000
shares authorized; none issued - -
Common stock, $.0001 par value; 100,000 shares authorized;
32,888 and 32,888 issued and 30,013 and 30,016 outstanding, respectively 3 3
Additional paid in capital 484,267 483,925
Accumulated deficit (314,826) (309,717)
Treasury stock, at cost (12,415) (12,398)
Accumulated other comprehensive loss (762) (1,005)
Total stockholders' equity 156,267 160,808
Total liabilities and stockholders' equity $ 186,430 $ 210,457

BLACK DIAMOND, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands, except per share amounts)
Three Months Ended
June 30, 2017 June 30, 2016
Sales
Domestic sales $ 16,996 $ 16,634
International sales 13,684 12,508
Total sales 30,680 29,142
Cost of goods sold 21,642 20,797
Gross profit 9,038 8,345
Operating expenses
Selling, general and administrative 12,860 11,599
Restructuring charge 42 531
Transaction costs - 133
Arbitration award - (1,967)
Total operating expenses 12,902 10,296
Operating loss (3,864) (1,951)
Other income (expense)
Interest income (expense), net 106 (709)
Other, net 208 (32)
Total other income (expense), net 314 (741)
Loss before income tax (3,550) (2,692)
Income tax expense 104 479
Net loss $ (3,654) $ (3,171)
Net loss per share:
Basic $ (0.12) $ (0.10)
Diluted (0.12) (0.10)
Weighted average shares outstanding:
Basic 30,013 30,617
Diluted 30,013 30,617

BLACK DIAMOND, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands, except per share amounts)
Six Months Ended
June 30, 2017 June 30, 2016
Sales
Domestic sales $ 38,333 $ 36,251
International sales 33,903 31,098
Total sales 72,236 67,349
Cost of goods sold 50,898 48,050
Gross profit 21,338 19,299
Operating expenses
Selling, general and administrative 25,395 25,828
Restructuring charge 83 993
Transaction costs - 269
Arbitration award - (1,967)
Total operating expenses 25,478 25,123
Operating loss (4,140) (5,824)
Other (expense) income
Interest expense, net (877) (1,423)
Other, net 222 404
Total other expense, net (655) (1,019)
Loss before income tax (4,795) (6,843)
Income tax expense 314 341
Net loss $ (5,109) $ (7,184)
Net loss per share:
Basic $ (0.17) $ (0.23)
Diluted (0.17) (0.23)
Weighted average shares outstanding:
Basic 30,014 30,758
Diluted 30,014 30,758

BLACK DIAMOND, INC.
RECONCILIATION FROM NET LOSS TO NET LOSS BEFORE NON-CASH ITEMS, ADJUSTED
NET LOSS BEFORE NON-CASH ITEMS AND RELATED EARNINGS PER DILUTED SHARE
(In thousands, except per share amounts)
Three Months Ended
Per Diluted Per Diluted
June 30, 2017 Share June 30, 2016 Share
Net loss $ (3,654) $ (0.12) $ (3,171) $ (0.10)
Amortization of intangibles 269 0.01 270 0.01
Depreciation 547 0.02 558 0.02
Accretion of note discount - - 452 0.01
Stock-based compensation 309 0.01 115 0.00
Gain from removal of accumulated translation adjustment (61) (0.00) 117 0.00
Income tax expense 104 0.00 479 0.02
Cash (paid) received for income taxes (943) (0.03) 27 0.00
Net loss before non-cash items $ (3,429) $ (0.11) $ (1,153) $ (0.04)
Restructuring charge 42 0.00 531 0.02
Transaction costs - - 133 0.00
Arbitration award - - (1,967) (0.06)
State cash taxes on adjustments (2) (0.00) (19) (0.00)
AMT cash taxes on adjustments (1) (0.00) (13) (0.00)
Adjusted net loss before non-cash items $ (3,390) $ (0.11) $ (2,488) $ (0.08)

BLACK DIAMOND, INC.
RECONCILIATION FROM NET LOSS TO NET LOSS BEFORE NON-CASH ITEMS, ADJUSTED
NET LOSS BEFORE NON-CASH ITEMS AND RELATED EARNINGS PER DILUTED SHARE
(In thousands, except per share amounts)
Six Months Ended
Per Diluted Per Diluted
June 30, 2017 Share June 30, 2016 Share
Net loss $ (5,109) $ (0.17) $ (7,184) $ (0.23)
Amortization of intangibles 535 0.02 539 0.02
Depreciation 1,105 0.04 1,176 0.04
Accretion of note discount 833 0.03 889 0.03
Stock-based compensation 342 0.01 151 0.00
Gain from removal of accumulated translation adjustment (81) (0.00) 95 0.00
Income tax expense 314 0.01 341 0.01
Cash (paid) received for income taxes (890) (0.03) 43 0.00
Net loss before non-cash items $ (2,951) $ (0.10) $ (3,950) $ (0.13)
Restructuring charge 83 0.00 993 0.03
Transaction costs - - 269 0.01
Arbitration award - - (1,967) (0.06)
State cash taxes on adjustments (3) (0.00) (36) (0.00)
AMT cash taxes on adjustments (2) (0.00) (25) (0.00)
Adjusted net loss before non-cash items $ (2,873) $ (0.10) $ (4,716) $ (0.15)

BLACK DIAMOND, INC.
RECONCILIATION FROM NET LOSS TO EARNINGS BEFORE INTEREST, TAXES, DEPRECIATION, AND AMORTIZATION (EBITDA), AND ADJUSTED EBITDA
(In thousands)
Three Months Ended
June 30, 2017 June 30, 2016
Net loss $ (3,654) $ (3,171)
Income tax expense 104 479
Other, net (208) 32
Interest (income) expense, net (106) 709
Operating loss (3,864) (1,951)
Depreciation 547 558
Amortization of intangibles 269 270
EBITDA $ (3,048) $ (1,123)
Restructuring charge 42 531
Transaction costs - 133
Arbitration award - (1,967)
Stock-based compensation 309 115
Adjusted EBITDA $ (2,697) $ (2,311)

BLACK DIAMOND, INC.
RECONCILIATION FROM NET LOSS TO EARNINGS BEFORE INTEREST, TAXES, DEPRECIATION, AND AMORTIZATION (EBITDA), AND ADJUSTED EBITDA
(In thousands)
Six Months Ended
June 30, 2017 June 30, 2016
Net loss $ (5,109) $ (7,184)
Income tax expense 314 341
Other, net (222) (404)
Interest expense, net 877 1,423
Operating loss (4,140) (5,824)
Depreciation 1,105 1,176
Amortization of intangibles 535 539
EBITDA $ (2,500) $ (4,109)
Restructuring charge 83 993
Transaction costs - 269
Arbitration award - (1,967)
Stock-based compensation 342 151
Adjusted EBITDA $ (2,075) $ (4,663)



Company Contact: Warren B. Kanders Executive Chairman Tel 1-203-428-2000 warren.kanders@bdel.com or Aaron Kuehne Chief Administrative Officer and Chief Financial Officer Tel 1-801-993-1364 aaron.kuehne@bdel.com or Radhika Ray VP of Strategy & Investor Relations Tel 1-646-290-0805 radhika.ray@bdel.com Investor Relations: Liolios Cody Slach Tel 1-949-574-3860 BDE@liolios.com

Source:Black Diamond, Inc.