Black Diamond, Inc., a leading global provider of outdoor recreation equipment and active lifestyle products, reported financial results for the fourth quarter and full year ended December 31, 2011.
Fourth Quarter 2011 Financial Highlights
- Sales increased 6% to $36.3 million;
- Gross margin increased 100 basis points to 39.2%; and
- Net income totaled $3.5 million or $0.16 per diluted share.
Fourth Quarter 2011 Financial Results
Total sales in the fourth quarter of 2011 increased 6% to $36.3 million, compared to $34.2 million in the fourth quarter of 2010. The growth in sales was attributable to the release of a number of innovative products, as well as consistent execution in the sales and marketing efforts of existing products.
Gross margin in the fourth quarter of 2011 increased to 39.2%, compared to an adjusted gross margin of 38.2% in the year-ago quarter. The 100 basis point increase in gross margin was primarily due to a shift in mix toward higher margin products.
Net income in the fourth quarter of 2011 was $3.5 million or $0.16 per diluted share, compared to a net loss of $0.5 million or $(0.02) per diluted share in the year-ago quarter. Net income in the fourth quarter of 2011 included a $3.0 million benefit related to the release of the Company’s valuation allowance on its net operating loss (“NOL”) carryforwards set to expire in 2011 and $1.8 million of non-cash items. Excluding these items, adjusted net income before non-cash items in the fourth quarter of 2011 was $2.3 million or $0.10 per diluted share.
Adjusted EBITDA (earnings before interest, taxes, other income, depreciation, amortization, non-cash equity compensation and restructuring charges) in the fourth quarter of 2011 increased 6% to $2.8 million, compared to $2.6 million in the year-ago quarter. Adjusted EBITDA in the fourth quarter of 2011 excluded $0.6 million of non-cash equity compensation from EBITDA.
At December 31, 2011, cash and cash equivalents totaled $2.4 million, compared to $2.8 million at December 31, 2010. Total long-term debt including the current portion of long-term debt was $38.1 million at December 31, 2011, which included $22.4 million outstanding on the Company’s $35 million line of credit. The level of usage of the Company’s line of credit is primarily driven by seasonality and working capital needs.
Stockholders’ equity was $172.2 million or $7.90 per share based on 21.8 million shares of common stock outstanding as of December 31, 2011.
On February 22, 2012, the Company closed a public offering for 8.9 million shares of its common stock, realizing net proceeds of $63.4 million. Black Diamond plans to use the proceeds for general corporate purposes, including repayment of debt, capital expenditures and potential acquisitions. On February 22, 2012, the Company reduced its outstanding balance on its revolving credit facility with Zions Bank to $0, leaving $35.0 million of available capacity. After reducing its credit facility, the Company has approximately $34.5 million in cash with approximately 30.7 million shares of common stock outstanding.
Full Year 2011 Financial Results
Total sales in 2011 increased 17% to $145.8 million, compared to pro forma sales of $125.0 million for the full year 2010. The pro forma prior year sales include the results of Black Diamond Equipment and Gregory Mountain Products prior to their acquisitions by the Company on May 28, 2010. The growth in sales was supported by the introduction of new and innovative products and consistent execution in sales and marketing of existing products, as previously mentioned.
Gross margin in 2011 increased to 38.7%, compared to pro forma adjusted gross margin of 38.6% reported in 2010. The 10 basis point increase in gross margin was primarily due to a shift in mix toward higher margin products, as previously discussed.
Net income in 2011 was $4.9 million or $0.22 per diluted share, which includes the $3.0 million tax accounting benefit as previously discussed, compared to net income of $51.2 million or $2.56 per diluted share in 2010, which included a $65 million benefit related to a partial release of the Company’s valuation allowance on its NOL carryforwards. Net income in 2011 included $6.0 million of non-cash items and $1.0 million in restructuring charges related primarily to the relocation of Gregory Mountain Products to the Company’s headquarters in Salt Lake City. Excluding these items, adjusted net income before non-cash items in 2011 was $11.9 million or $0.54 per diluted share.
Adjusted EBITDA in 2011 was $13.6 million, which excluded $3.1 million of non-cash equity compensation and $1.0 million of restructuring charges.
“Our diverse collection of new and innovative outdoor performance and lifestyle products helped deliver another year of record results,” said Peter Metcalf, president and CEO of Black Diamond. “These results were also supported by solid execution in sales and marketing and the investment in our global operational platform. We believe Black Diamond is a brand leader in nearly every category of hard goods and accessories in which we compete and the operational investments we plan to continue making in 2012 will allow our brand awareness and market share to expand globally.
“As we move through 2012, we believe we are in a strong position to sustain our organic growth through product innovation and further capture macro active lifestyle trends currently working in our favor. In addition, the February 2012 closing of our $63.4 million common stock offering is the first incremental equity capital that Black Diamond has raised since its Predecessor was created in 1989, and we plan to deploy it thoughtfully toward our strategic objectives, including our expected fall 2013 apparel launch and acquisition strategy. We are certainly optimistic about our prospects for the future and believe the steps we have taken in 2011 and early in 2012 further positions Black Diamond as the ‘acquirer of choice’ in the outdoor performance products market.”
As previously disclosed on the Company’s fourth quarter and full year 2011 pre-announcement press release issued and effective February 6, 2012, Black Diamond expects fiscal year 2012 sales to range between $160-$165 million, which does not include new category launches or the impact from possible strategic acquisitions. The Company expects gross margins for fiscal year 2012 to be consistent with fiscal year 2011. The Company also expects its first half 2012 sales to range between $76-$79 million, which represents an increase in sales between 13%-17% over the same year-ago period.
Net Operating Loss (NOL)
The Company estimates that it has available net operating loss (“NOL”) carryforwards for U.S. federal income tax purposes of approximately $217.1 million. The Company’s common stock is subject to a Rights Agreement dated February 7, 2008, intended to assist in limiting the number of 5% or more owners and thus 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. There is no guaranty, however, that the Rights Agreement will achieve the objective of preserving the value of the NOLs.