Black Diamond, Inc. reported sales from continuing operations of $38.2 million for the first quarter ended March 31, down 9 percent from the year earlier quarter. As we increasing hear when company’s report loses, BD says the decrease was driven by the weakening of foreign currencies against the U.S. dollar, as well as a decrease in ski product sold in Europe due to poor winter conditions.
Excluding the impact of foreign exchange, sales were down 4 percent.
Gross margin fell to 28.7 percent due primarily to currency headwinds, the ramp up of a recently repatriated manufacturing activities from Asia to the U.S., and the write-off of inventory shipped to North American retailers that filed bankruptcy during the quarter, said BD executives. Excluding the impact of foreign exchange, gross margin was 32.5 percent.
Selling, general and administrative expenses in the first quarter of 2016 decreased 6 percent to $14.2 million compared to $15.1 million in the year-ago quarter. The company said the decline was due to the realization of savings from its restructuring plan implemented during 2015 to realign resources within the organization, partially offset by certain transition costs that did not qualify as restructuring charges.
Net loss from continuing operations in the first quarter of 2016 was $4.0 million or $(0.13) per diluted share, compared to a loss of $1.7 million or $(0.05) per diluted share in the year-ago quarter. Net loss from continuing operations in the first quarter of 2016 included $1.2 million of non-cash items, $0.5 million in restructuring costs and $0.1 million in transaction costs.
Adjusted net loss from continuing operations, which excludes these non-cash items as well as restructuring and transaction costs, was $2.2 million or $(0.07) per diluted share in the first quarter of 2016, compared to adjusted net income from continuing operations before non-cash items of $0.1 million or $0.00 per diluted share in the first quarter of 2015.
Adjusted EBITDA was $(2.4) million compared to $1.2 million in the first quarter of 2015, primarily driven by the aforementioned reduction in sales and gross margin.
“During the first quarter, sales in our North American business remained strong, particularly in our core climb and mountain categories,” said Mark Ritchie, Black Diamond Equipment’s brand president. “On a consolidated basis, however, we continue to confront foreign exchange challenges, particularly with the Euro, which impacted both revenue and gross margin in the quarter by 510 basis points and 380 basis points, respectively.
“In addition, the manufacturing operations that we repatriated from China back to Salt Lake City are currently operating at higher costs comparatively and impacting our gross margin while these activities ramp. In the long run, we believe the strategic relocation of these activities will result in higher currency-neutral gross margin, lower overhead and reduced response time to our customers as we progress through 2016. Excluding the impacts of foreign exchange, gross margin in the first quarter would have been approximately 32.5 percent.
“We continued to make steady progress on our reformation initiatives during the first quarter, including the transition of Black Diamond Europe from Basel, Switzerland to the more affordable Euro-based economy of Innsbruck, Austria. This new headquarters and its surroundings is also an attractive recruiting tool for our employees who will have immediate access to the mountains in the summer and winter. We expect to be fully operational in Innsbruck by June 30th. We also believe we remain well positioned to redeploy our nearly $100 million in cash and marketable securities into diversifying assets potentially outside of outdoor equipment—a strategy we expect will maximize shareholder value.”
Black Diamond reaffirms its fiscal year 2016 sales expectation of approximately $145-$150 million compared to $155.3 million in 2015.