Black Diamond to focus on organic growth in 2013, but tuck-in acquisitions possible

Black Diamond Inc. will take a break from its recent shopping spree — at least of large ticket items. SNEWS looks at what the company has planned ahead for 2013.

Black Diamond Inc. (Nasdaq:BDE) will take a break from its recent shopping spree — at least of large ticket items.

With $15 million still available in credit along with $5.1 million in cash, Black Diamond CEO Peter Metcalf told investors Monday the company could still consider “selective and opportunistic tuck-in [smaller] acquisitions.”

But after acquiring Poc Sports and Pieps brands along with Gregory’s Japanese distribution business and establishing its own ski manufacturing facility in China in 2012, Metcalf said the company will shift to focus to integrate and organically grow the business in 2013, without needing to raise any additional equity capital. The internal growth includes the launch of Black Diamond’s first line of apparel in stores this fall.

Company officials have been mum on specific short-term sales targets for apparel — it’s rolling out at select specialty retailers — but they expect the category to bring in about $250 million in annual sales by 2020, Metcalf said.

For the entire company, Metcalf said he is committed to five-year organic, compounded revenue growth of between 15-20 percent. Poc and BD apparel will be the “high growth drivers,” he said, while the company’s traditional Black Diamond and Gregory hardgoods business is expected to grow globally at low double-digit rates.

Thanks to its acquisitions, Black Diamond closed out 2012 with a 34 percent increase in fourth-quarter revenue to $48.8 million. Quarterly net income slipped to $544,000, versus $3.5 million a year ago, due to transaction, merger and restructuring costs, officials said. For the full-year 2012, Black Diamond sales climbed 21 percent to $175.9 million. Full-year net income was $2 million, versus $4.9 million a year ago.

Officials did not release comparative financial figures excluding the acquisitions making for a tough fair comparison for Wall Street. Still, investors cheered the overall earnings news along with Metcalf’s comments that he thought the stock was undervalued. Black Diamond stock rose more than 7 percent on Tuesday.

Metcalf acknowledged that a second straight weak start to winter led to higher some higher inventory levels, but noted that the recent cold and snowy weather in North America and Europe was helping whittle inventory down with a rise in ASAP orders, along with the company “aggressively moving some discounted and discontinued merchandise into the global channels.”

In some encouraging news for the industry, Metcalf said: “In many areas, our dealers appear to be more confident in their ability to move inventory, and we believe they are reasonably positioned to bring in new products. If this trend continues, we believe it should help consumer sentiment when the fall/winter 2013/14 season begins. Either way, it appears to us that the global overhang of inventory at retail has improved.”

For 2013, Black Diamond expects annual revenue to rise between 23-26 percent to $216-$221 million.

Click here
to see Black Diamond’s fourth-quarter and full-year 2012 earnings report, and click here for a transcript of the earnings conference call.

--David Clucas



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