Search the web
Welcome, Guest
[Sign Out, My Account]
EDGAR_Online

Quotes & Info
Enter Symbol(s):
e.g. YHOO, ^DJI
Symbol Lookup | Financial Search
BDE > SEC Filings for BDE > Form 10-Q on 8-May-2014All Recent SEC Filings

Show all filings for BLACK DIAMOND, INC.

Form 10-Q for BLACK DIAMOND, INC.


8-May-2014

Quarterly Report


MANAGEMENT DISCUSSION AND ANALYSIS

(in thousands, except per share amounts)

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Forward-Looking Statements

Please note that in this Quarterly Report on Form 10-Q 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 Quarterly Report on Form 10-Q 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 growth strategy, including its ability to organically grow each of its historical product lines, its new apparel line and its recently acquired businesses; the Company's ability to successfully integrate and grow acquisitions; the Company's exposure to product liability of product warranty claims and other loss contingencies; stability of the Company's manufacturing facilities and foreign suppliers; the Company's ability to protect trademarks and other intellectual property rights; fluctuations in the price, availability and quality of raw materials and contracted products; 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 Quarterly Report on Form 10-Q are based upon information available to the Company as of the date of this Quarterly Report on Form 10-Q, and speak only as the date hereof. We assume no obligation to update any forward-looking statements to reflect events or circumstances after the date of this Quarterly Report on Form 10-Q.

Overview

Black Diamond, Inc. (which may be referred to as "Black Diamond," "Company," "we," "our" or "us") is a global leader in designing, manufacturing, and marketing innovative active outdoor performance equipment and apparel for climbing, mountaineering, backpacking, skiing, cycling, and a wide range of other year-round outdoor recreation activities. Our principal brands include Black Diamond®, Gregory™, POC™, and PIEPS™ and are targeted not only to the demanding requirements of core climbers, skiers and cyclists, but also to the more general outdoor performance enthusiasts and consumers interested in outdoor-inspired gear for their backcountry and urban activities. Our Black Diamond®, Gregory™, POC™ and PIEPS™ brands are iconic in the active outdoor, ski and cycling industries and linked intrinsically with the modern history of the sports we serve. We believe our brands are synonymous with the performance, innovation, durability and safety that the outdoor and action sports communities rely on and embrace in their active lifestyle.

We offer a broad range of products including: high performance apparel (such as jackets, shells, pants and bibs) rock-climbing equipment (such as carabiners, protection devices, harnesses, belay devices, helmets, and ice-climbing gear); technical backpacks and high-end day packs; travel luggage; lifestyle packs; tents; trekking poles; headlamps and lanterns; and gloves and mittens. We also offer advanced design helmets, body armor, and goggles for skiing, mountain and road cycling, eyewear, skis, ski poles, ski bindings, ski boots, ski skins, and ski safety products, including avalanche transceivers, shovels, and probes.

Critical Accounting Policies and Use of Estimates

Management's discussion of our financial condition and results of operations is based on the consolidated financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles ("GAAP"). The preparation of the consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities at the date of the consolidated financial statements. Estimates also affect the reported amounts of revenues and expenses during the reporting periods. We continually evaluate our estimates and assumptions including those related to derivatives, revenue recognition, income taxes and valuation of long-lived assets, goodwill and other intangible assets. We base our estimates on historical experience and other assumptions that are believed to be reasonable under the circumstances. Actual results could differ from these estimates.

BLACK DIAMOND, INC.

MANAGEMENT DISCUSSION AND ANALYSIS

(in thousands, except per share amounts)

There have been no significant changes to our critical accounting policies as described in our Annual Report on Form 10-K for the year ended December 31, 2013.

Recent Accounting Pronouncements

See "Recent Accounting Pronouncements" in Note 1 to the notes to the unaudited condensed consolidated financial statements.

Results of Operations



Consolidated Three Months Ended March 31, 2014 Compared to Consolidated Three
Months Ended March 31, 2013



The following presents a discussion of consolidated operations for the three
months ended March 31, 2014, compared with the consolidated three months ended
March 31, 2013.



                                               Three Months Ended
                                       March 31, 2014      March 31, 2013

Sales
Domestic sales                        $         20,698     $        20,110
International sales                             33,841              30,890
Total sales                                     54,539              51,000

Cost of goods sold                              33,614              31,784
Gross profit                                    20,925              19,216

Operating expenses
Selling, general and administrative             22,632              20,878
Restructuring charge                                 -                 175
Merger and integration                               -                 143
Transaction costs                                  355                  54

Total operating expenses                        22,987              21,250

Operating loss                                  (2,062 )            (2,034 )

Other expense
Interest expense, net                             (895 )              (826 )
Other, net                                        (147 )              (395 )

Total other expense, net                        (1,042 )            (1,221 )

Loss before income tax                          (3,104 )            (3,255 )
Income tax benefit                              (1,777 )              (223 )
Net loss                              $         (1,327 )   $        (3,032 )

Sales

Consolidated sales increased $3,539, or 6.9%, to $54,539 during the three months ended March 31, 2014, compared to consolidated sales of $51,000 during the three months ended March 31, 2013. The increase in sales was primarily attributable to the addition of apparel sold by Black Diamond Equipment and an increase in the quantity and average sales price of new and existing ski products sold during the period. We also experienced a decrease in sales of $696 due to the weakening of foreign currencies against the U.S. dollar.

BLACK DIAMOND, INC.

MANAGEMENT DISCUSSION AND ANALYSIS

(in thousands, except per share amounts)

Consolidated domestic sales increased $588, or 2.9%, to $20,698 during the three months ended March 31, 2014, compared to consolidated domestic sales of $20,110 during the three months ended March 31, 2013. The increase in domestic sales was primarily attributable to the addition of apparel sold by Black Diamond Equipment and an increase in the quantity and average sales price of new and existing ski products sold during the period, partially off-set by a decline in the quantity of mountain products being sold.

Consolidated international sales increased $2,951, or 9.6%, to $33,841 during the three months ended March 31, 2014, compared to consolidated international sales of $30,890 during the three months ended March 31, 2013. The increase in international sales was primarily attributable to an increase in the quantity and average sales price of new and existing ski products and the addition of apparel sold by Black Diamond Equipment. We also experienced a decrease in sales of $696 due to the weakening of foreign currencies against the U.S. dollar.

Cost of Goods Sold

Consolidated cost of goods sold increased $1,830, or 5.8%, to $33,614 during the three months ended March 31, 2014, compared to consolidated cost of goods sold of $31,784 during the three months ended March 31, 2013. The increase in cost of goods sold was primarily attributable to an increase in sales.

Gross Profit

Consolidated gross profit increased $1,709, or 8.9%, to $20,925 during the three months ended March 31, 2014, compared to consolidated gross profit of $19,216 during the three months ended March 31, 2013. Consolidated gross margin was 38.4% during the three months ended March 31, 2014, compared to a consolidated gross margin of 37.7% during the three months ended March 31, 2013. Consolidated gross margin during the three months ended March 31, 2014, increased compared to the prior year due to a favorable product mix in higher margin products and channel distribution. The strengthening of the US dollar compared to certain foreign currencies had a negative impact on both sales and gross margin.

Selling, General and Administrative

Consolidated selling, general and administrative expenses increased $1,754, or 8.4%, to $22,632 during the three months ended March 31, 2014, compared to consolidated selling, general and administrative expenses of $20,878 during the three months ended March 31, 2013. The increase in selling, general and administrative expenses was primarily attributable to the Company's investments in its strategic initiatives, such as Black Diamond Equipment apparel, the transition of certain distributors into our in-house operations at POC Sweden AB and its subsidiaries (collectively, "POC"), and the launch of POC's road bike collection.

Restructuring Charges

Consolidated restructuring expense decreased to $0 during the three months ended March 31, 2014, compared to consolidated restructuring expense of $175 during the same period in 2013. The restructuring expenses incurred during the three months ended March 31, 2013, relate to the relocation of POC's Portsmouth, NH facility to the Company's U.S. distribution facilities in Salt Lake City, UT.

Merger and Integration Costs

Consolidated merger and integration expense decreased to $0 during the three months ended March 31, 2014, compared to consolidated merger and integration expense of $143 during the same period in 2013, which consisted of expenses related to the integration of POC and PIEPS Holding GmbH and its subsidiaries (collectively, "PIEPS").

Transaction Costs

Consolidated transaction expense increased $301, or 557.4%, to $355 during the three months ended March 31, 2014, compared to consolidated transaction expense of $54 during the three months ended March 31, 2013. The increase in transaction expense was attributable to professional fees incurred related to the exploration of strategic alternatives for our Gregory Mountain Products, Inc. ("Gregory") business. The transactions expense incurred during the three months ended March 31, 2013, related to professional accounting fees related to the Company's acquisitions of POC and PIEPS.

BLACK DIAMOND, INC.

MANAGEMENT DISCUSSION AND ANALYSIS

(in thousands, except per share amounts)

Interest Expense, net

Consolidated interest expense increased $69, or 8.4%, to $895 during the three months ended March 31, 2014, compared to consolidated interest expense of $826 during the three months ended March 31, 2013. The increase in interest expense was primarily attributable to higher average outstanding debt amounts during the three months ended March 31, 2014, compared to the same period in 2013.

Other, net

Consolidated other, net, decreased to expense of $147 during the three months ended March 31, 2014, compared to a consolidated other, net expense of $395 during the three months ended March 31, 2013. The decrease in other, net, was primarily attributable to the remeasurement gains recognized on the Company's foreign denominated accounts receivable and accounts payable partially off-set by losses on mark-to-market adjustments on non-hedged foreign currency contracts.

Income Taxes

Consolidated income tax benefit increased $1,554, or 696.9%, to a benefit of $1,777 during the three months ended March 31, 2014, compared to a consolidated income tax benefit of $223 during the same period in 2013. The increase in tax benefit is due to the increase in the effective income tax rate recorded during the three months ended March 31, 2014, compared to the same period in 2013.

Our effective income tax rate was 57.2% for the three months ended March 31, 2014, compared to 6.9% for the same period in 2013. Factors that could cause our annual effective tax rate to differ materially from our quarterly effective tax rates include changes in the geographic mix of taxable income and discrete events that may occur in various quarters. There were no meaningful discrete events recorded in the Company's effective income tax rate calculation for the three months ended March 31, 2014.

Liquidity and Capital Resources

Consolidated Three months ended March 31, 2014 Compared to Consolidated Three months ended March 31, 2013

The following presents a discussion of cash flows for the consolidated three months ended March 31, 2014, compared with the consolidated three months ended March 31, 2013. Our primary ongoing funding requirements are for working capital, expansion of our operations and general corporate needs, as well as investing activities associated with the expansion into new product categories. We plan to fund our future expansion of operations and investing activities through a combination of our future operating cash flows and revolving credit facilities. We believe that our liquidity requirements for at least the next 12 months will be adequately covered by existing cash, cash provided by operations and our existing revolving credit facilities. At March 31, 2014, we had total cash of $4,385, compared with a cash balance of $4,478 at December 31, 2013, which was substantially all controlled by the Company's U.S. entities. At March 31, 2014, the Company had $1,423 of the $4,385 in cash held by foreign entities; however, this cash is available for repatriation without significant tax consequence.

                                                                      Three Months Ended
                                                              March 31, 2014      March 31, 2013

Net cash (used in) provided by operating activities          $         (7,114 )   $             2
Net cash used in investing activities                                    (660 )            (1,889 )
Net cash provided by financing activities                               7,281                 648
Effect of foreign exchange rates on cash                                  400                 255
Change in cash                                                            (93 )              (984 )
Cash, beginning of period                                               4,478               5,111
Cash, end of period                                          $          4,385     $         4,127

BLACK DIAMOND, INC.

MANAGEMENT DISCUSSION AND ANALYSIS

(in thousands, except per share amounts)

Net Cash From Operating Activities

Consolidated net cash used in operating activities was $7,114 during the three months ended March 31, 2014, compared to consolidated net cash provided by operating activities of $2 during the three months ended March 31, 2013. The decrease in net cash provided by operating activities during 2014 is primarily due to timing differences of when accounts payable were paid and changes in inventory during the three months ended March 31, 2014, compared to the same period in 2013.

Free cash flow, defined as net cash (used in) provided by operating activities less capital expenditures, was free cash flows used of $7,774 during the three months ended March 31, 2014 compared to free cash flows used of $1,137 during the same period in 2013. The Company believes that the non-GAAP measure, free cash flow, provides an understanding of the capital required by the Company to expand its asset base. A reconciliation of free cash flows to comparable GAAP financial measures is set forth below:

                                                                      Three Months Ended
                                                              March 31, 2014      March 31, 2013

Net cash (used in) provided by operating activities          $         (7,114 )   $             2
Purchase of property and equipment                                       (660 )            (1,139 )
Free cash flow                                               $         (7,774 )   $        (1,137 )

Net Cash From Investing Activities

Consolidated net cash used in investing activities decreased by $1,229 to $660 during the three months ended March 31, 2014, compared to $1,889 during the three months ended March 31, 2013. Investing activities during the three months ended March 31, 2013 included the Company's acquisition of Gregory's Japanese distribution assets from Kabushiki Kaisha A&F, the prior distributor of Gregory's products in Japan, for $750. The absence of this activity, as well as a decrease in capital expenditures generated a decrease in net cash used in investing activities compared to the three months ended March 31, 2013.

Net Cash From Financing Activities

Consolidated net cash provided by financing activities increased by $6,633 to $7,281 during the three months ended March 31, 2014, compared to consolidated cash provided by financing activities of $648 during the three months ended March 31, 2013. The increase is primarily a result of net borrowing on the revolving line of credit of $7,258 during the three months ended March 31, 2014, compared to net payment on the revolving line of credit of $9,431 and the absence of $10,141 in proceeds on the issuance of long-term debt during the same period in 2013.

Net Operating Loss

As of December 31, 2013, the Company had net operating loss, research and experimentation credit, and alternative minimum tax credit carryforwards for U.S. federal income tax purposes of $215,562 ($5,154 relates to stock compensation deductions for tax in excess of financial reporting expense, which will not be recorded until they result in cash tax savings), $2,270 and $315, respectively. The Company believes its U.S. Federal net operating loss ("NOL") will substantially offset its future U.S. Federal income taxes, excluding the amount subject to U.S. Federal Alternative Minimum Tax ("AMT"). AMT is calculated as 20% of AMT income. For purposes of AMT, a maximum of 90% of income is offset by available NOLs. The majority of the Company's pre-tax income is currently earned and expected to be earned in the U.S., or taxed in the U.S., as Subpart F. income and will be offset with the NOL. $210,408 of net operating losses available to offset taxable income does not expire until 2020 or later, subject to compliance with Section 382 of the Internal Revenue Code of 1986, as amended.

As of December 31, 2013, the Company's gross deferred tax asset was $92,598. The Company has recorded a valuation allowance of $17,120, resulting in a net deferred tax asset of $75,478, before deferred tax liabilities of $28,911. Management has provided a valuation allowance against a portion of the net deferred income tax assets as of December 31, 2013, because the ultimate realization of those assets does not meet the more likely than not criteria. The ultimate realization of recorded deferred tax assets is dependent upon the generation of approximately $187,000 of future U.S. taxable income during the periods in which those temporary differences become deductible and net operating loss and credit carryforwards expire; approximately $163,000 of future U.S. taxable income must be generated by 2022 to realize the net recorded deferred tax asset for net operating loss carryforwards.

Revolving Credit Facility

On February 28, 2014, the Company, together with its direct and indirect domestic subsidiaries, entered into a first amendment (the "Amendment") to the amended and restated loan agreement dated March 8, 2013 (the "Loan Agreement"), with Zions First National Bank (the "Lender"), to reduce its existing Term Facility from $15,000 to $10,000 pursuant to an amended and restated term loan promissory note (the "Amended and Restated Term Loan Promissory Note"). Also pursuant to the Amendment, the Company terminated its outstanding Acquisition Facility which previously allowed the Company to borrow up to $10,000 to fund permitted acquisitions.

BLACK DIAMOND, INC.

MANAGEMENT DISCUSSION AND ANALYSIS

(in thousands, except per share amounts)

Under the Loan Agreement, the Company has an existing $30,000 Revolving Line of Credit for funding general corporate needs. In addition to the Revolving Line of Credit, the Company obtained a Term Facility from the Lender. Under the Amended and Restated Term Loan Promissory Note, the Lender has made available $10,000 for funding permanent working capital. The Term Facility is due and payable in monthly payments of principal and interest with all principal and interest due March 8, 2023. Interest on all facilities is based on the one-month LIBOR rate plus an applicable margin as determined by the ratio of Total Senior Debt (as calculated in the Loan Agreement) to Trailing Twelve Month EBITDA (as calculated in the Loan Agreement).

5% Senior Subordinated Notes due May 28, 2017

As part of the consideration payable to the stockholders of Gregory when the Company acquired Gregory, the Company issued $14,517, $7,539, and $554 in 5% Unsecured Subordinated Notes due May 28, 2017 (the "Merger Consideration Subordinated Notes") to Kanders GMP Holdings, LLC, Schiller Gregory Investment Company, LLC, and five former employees of Gregory, respectively. Mr. Warren B. Kanders, the Company's Executive Chairman and a member of its Board of Directors, is a majority member and a trustee of the manager of Kanders GMP Holdings, LLC. The sole manager of Schiller Gregory Investment Company, LLC is Mr. Robert R. Schiller, the Company's Executive Vice Chairman and a member of its Board of Directors. The principal terms of the Merger Consideration Subordinated Notes are as follows: (i) the principal amount is due and payable on May 28, 2017 and is prepayable by the Company at anytime; (ii) interest will accrue on the principal amount at the rate of 5% per annum and shall be payable quarterly in cash; (iii) the default interest rate shall accrue at the rate of 10% per annum during the occurrence of an event of default; and (iv) events of default, which can only be triggered with the consent of Kanders GMP Holdings, LLC, are: (a) the default by the Company on any payment due under a Merger Consideration Subordinated Note; (b) the Company's failure to perform or observe any other material covenant or agreement contained in the Merger Consideration Subordinated Notes; or (c) the Company's instituting or becoming subject to a proceeding under the Bankruptcy Code (as defined in the Merger Consideration Subordinated Notes). The Merger Consideration Subordinated Notes are junior to all senior indebtedness of the Company, except that payments of interest continue to be made under the Merger Consideration Subordinated Notes as long as no event of default exists under any senior indebtedness.

Given the below market interest rate for comparably secured notes and the relative illiquidity of the Merger Consideration Subordinated Notes, we have discounted the notes to $8,640, $4,487 and $316, respectively, at the date of acquisition. We are accreting the discount on the Merger Consideration Subordinated Notes to interest expense using the effective interest method over the term of the Merger Consideration Subordinated Notes.

On April 7, 2011, Schiller Gregory Investment Company, LLC transferred its Merger Consideration Subordinated Note in equal amounts to the Robert R. Schiller Cornerstone Trust and the Deborah Schiller 2005 Revocable Trust. On June 24, 2013, the Robert R. Schiller Cornerstone Trust dated September 9, 2010 transferred its Merger Consideration Note in the amount of $3,769 to the Robert R. Schiller 2013 Cornerstone Trust dated June 24, 2013. During the three months ended March 31, 2014, $181 in interest was paid to Kanders GMP Holdings, LLC, and $94 in interest was paid to the Robert R. Schiller 2013 Cornerstone Trust and the Deborah Schiller 2005 Revocable Trust pursuant to the outstanding Merger Consideration Subordinated Notes.

On May 29, 2012 and August 13, 2012, five former employees of Gregory exercised certain sales rights and sold the Company's outstanding 5% Unsecured Subordinated Notes due May 28, 2017 (the "Gregory Subordinated Notes") in the aggregate principal amount of approximately $365 to Kanders GMP Holdings, LLC and in the aggregate principal amount of approximately $189 to Schiller Gregory Investment Company, LLC. During the three months ended March 31, 2014, $5 in interest was paid to Kanders GMP Holdings, LLC, and $2 in interest was paid to Schiller Gregory Investment Company, LLC, pursuant to the outstanding Gregory Subordinated Notes.

Shelf Registration Statements

On February 1, 2011, our shelf registration statement on Form S-3 (File No. 333-171164) (the "Form S-3") filed with the Securities and Exchange Commission (the "Commission") was declared effective whereby we may offer, issue and sell, from time to time, in one or more offerings and series, together or separately, shares of common stock, shares of preferred stock, debt securities or guarantees of debt securities up to an aggregate amount of $250,000. The proceeds of any offering are anticipated to be used in the strategic development and growth of our business, both organically and through acquisitions. On February 22, 2012, we consummated the closing of a public offering (the "Offering") of 7,750 shares of the Company's common stock, plus an additional 1,163 shares of common stock to cover an over-allotment option granted to the underwriters, at a price to the public of $7.50 per share (the "Offering Price"). Included in the total number . . .

  Add BDE to Portfolio     Set Alert         Email to a Friend  
Get SEC Filings for Another Symbol: Symbol Lookup
Quotes & Info for BDE - All Recent SEC Filings
Copyright © 2014 Yahoo! Inc. All rights reserved. Privacy Policy - Terms of Service
SEC Filing data and information provided by EDGAR Online, Inc. (1-800-416-6651). All information provided "as is" for informational purposes only, not intended for trading purposes or advice. Neither Yahoo! nor any of independent providers is liable for any informational errors, incompleteness, or delays, or for any actions taken in reliance on information contained herein. By accessing the Yahoo! site, you agree not to redistribute the information found therein.