Peter Metcalf - Chief Executive Officer Aaron Kuehne - Chief Financial Officer, Treasurer, Secretary Cody Slach - Investor Relations.

Analysts:.

Good afternoon, everyone. Thank you for participating in today's conference call to discuss Black Diamond Incorporated Financial Results for the Second Quarter ended June 30, 2015. Joining us today are Black Diamond CEO, Mr. Peter Metcalf, the company's CFO, Mr. Aaron Kuehne, and the company's Investor Relations Advisor, Mr. Cody Slach.

Before we go further, I would like to turn the call over to Mr. Slach, as he reads the company's Safe Harbor statement within the meaning of the Private Securities Litigation Reform Act of 1995 that provides important cautions regarding forward-looking statements. Cody, please go ahead..

Thanks, Melisa. Please note that during this conference call, the company 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 the company's expectations and beliefs concerning future events impacting the company, and therefore, involve a number of risks and uncertainties.

The company cautions you that forward-looking statements are not guarantees and that actual result 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 used in this conference call include, but are not limited to, the overall level of consumer spending on the company's 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 results of the company's review of strategic alternatives, the company's ability to successfully integrate and grow acquisitions; the company's exposure to product liability or product warranty claims and other loss contingencies, the 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, foreign currency fluctuations, the company's ability to utilize its net operating loss carry-forwards, 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 Reports on Form 10-K, quarterly reports on Form 10-Q, and current reports on Form 8-K.

All forward-looking statements included in this call are based upon information available to the company as of the date of this conference call and speak only as the date hereof. The company assumes no obligation to update any forward-looking statements to reflect events or circumstances after the date of this conference call.

I would like to remind everyone that this call will be available for replay through May 25, 2015, starting at 8:000 PM Eastern tonight, A webcast replay will also be available via the link provided in today's press release as well as on the company's website, at blackdiamond-inc.com.

Any redistribution, retranslation or rebroadcast of this call in any way without the expressed written consent of Black Diamond is strictly prohibited. Now, I would like to turn the call over to the CEO of Black Diamond, Mr. Peter Metcalf.

Peter?.

Thank you, Cody. Good afternoon, everyone. Second quarter reflects the company's initiatives to grow sales and gross margin while controlling expenses and improving cash flow.

We are please by 7% organic sales growth on a consent currency basis, despite continued headwinds in parts of Europe and Asia and 360 basis point currency-neutral gross margin expansions. We completed the quarter with $44.3 million in cash, generating $4.2 million in free cash flow in the first half of 2015.

Today's result are being driven by POC's successful road bike product line and the addition of women's sportswear for spring '15, making for a more complete seasonal collection of Black Diamond apparel.

Our Black Diamond equipment business also continues to gain market share, driven by double-digit sales growth both, in the quarter and year-to-date in North America, our largest market We expect momentum in this market along with our fast-growing POC brand and solid double-digit gains in both POC and BD's direct to consumer channels to drive record sales in 2015.

Before I comment further, Aaron Kuehne our CFO, will discuss our financial results for the second quarter..

Thanks Peter. Good afternoon, everyone. Sales in the second quarter of 2015 increased to $35.1 million compared to $34.4 million in the same year ago quarter. The increase was driven by growth in Black Diamond Apparel and the continued rollout of POC cycling products, including its new spring 2015, Race Day line and expanded assortment of eyewear.

Due to net weakening of foreign currencies against the U.S. dollar, on a consolidated level second-quarter sales were negatively impacted by approximately 500 basis points or $1.7 million. Again, on a constant currency basis, Q2 sales increased 7%.

Consolidated gross margin in the second quarter increased 80 basis points to 36.7% compared to 35.9% in the same period last year. This was in spite of a 280 basis points headwind from foreign currency. On a constant currency basis, gross margin would have been a healthy 39.5%, an increase of 360 basis points.

The improvement was due to unfavorable mix of higher-margin products and channel next and reflects the margin enhancing initiatives contained in our strategic pivot on the back of the Gregory Mountain Products. Second quarter SG&A, which excludes restructuring, merger and integration and transaction cost was essentially unchanged at $18.1 million.

However, during the quarter, we recognized approximately $700,000 in termination benefits provided to the company's former President Ms.

Zeena Freeman, excluding these costs SG&A was down due to the actions outlined in our strategic pivot, the realignment of redundant operating platform resources following the celebratory as well as general optimization efforts across the organization.

During Q2, we incurred restructuring charges of $1.4 million related to the continued realignment of resources, including the repatriation of manufacturing activity from Asia to the U.S. We also encourage $689,000 in transaction costs related to the exploration of strategic alternatives.

Adjusted net income from continuing operations increased significantly to $200,000 or income of once $0.01 per diluted share in the second quarter 2015 compared to adjusted net loss from continuing operations of $3.7 million or loss of $0.11 per diluted share in the second quarter 2014.

At June 30, 2015, cash and available for sale marketable securities totaled $44.3 million, compared to $40.9 million at December 31, 2014 Year-to-date free cash flow totaled $4.2 million compared to $9.1 million cash outflow during the same period last year.

Positive changes in free cash flow driven by a $14.8 million decrease in working capital all while carrying approximately $10 million of incremental inventory that is necessary for a pivoted initiatives.

As we indicated last quarter, we are purposely carried higher levels of inventory through the first three quarters of 2015 to avoid disruption associated with the transition of our manufacturing activities from Asia to the U.S. as well as the early build out a JetForce inventory in advance of moving that activity to a Tier 1 supplier 2016.

All of these activities are ahead of our internal schedules and we expect the business to return to standard levels of inventory in the company's free cash flow to benefit during the first quarter of 2016.

Total debt was $22 million at June 30, 2015, which includes a $19.2 million of 5% subordinated notes due in 2017 and 2.6 million in a foreign seasonal working capital credit facility for Park, compared to $22.4 million at December 31, 2014. Our outlook for the year ending December 31, 2015 remains unchanged.

We anticipate sales to increase 11% on a constant currency basis. Also on a constant currency basis, we are forecasting consolidated gross margins for fiscal 2015 to be approximately 40%. This concludes my prepared remarks. Now, I will turn to call back over to Peter.

Peter?.

Thank you, Aaron. As in the past, I will make some comments about our performance by region and then dive into our key growth initiatives. Our consolidated North American business continued to realize solid double-digit growth, driven by both Black Diamond and Park [ph].

In fact, year-to-date, this region is up over 20%, which far exceeds the growth of the industry. T This is drive by Park's road line as well as strong growth in core Black Diamond climbing in mountain gear as retail is [ph] purchases and bo0ught deep with key brand partners in foundational equipment businesses like climbing, lighting and tracking.

Operationally, this region benefitted from the restructured sales organization as well. We promoted Glenn Ritter to Vice President of Sales and Supply chain to improve global wholesale sales and inventory planning.

Keith [ph] Christiansen, return to out some pet [ph as a director of sales of North America, and we promoted several long time employees into key sales management and other customer service roles. Europe continues to be a challenging market due to economic uncertainty, foreign currency headwinds and generally software consumer spending.

Despite these challenges, this region benefitted from BD's spring 15' apparel and the delivery of POC's road cycling line. Eastern Europe, Scandinavia and the U.K. represent the strongest region within this market. Year-to-date, this region has grown mid-single digits, where we would characterize our overall European market is being flat down.

Given the macroeconomic environment in the region, we are pleased with our results in this region and we remain optimistic about the market long-term, particularly Central Europe. Outside of Europe, our international business continues to be challenged by softness in Japan, Russia, and to a lesser extent Korea.

As we mentioned at the end of 2014, BD has a strong presence in Japan and the country is experiencing both, consolidation and stabilization after a three growth sport. Hence, 2015, is about aligning inventories with our flat demand, career too was going through a somewhat similar, but less acute version of what is happening in Japan.

Finally, Russia's retail sector has been badly buffeted by a combination of economic sanctions and the sudden and rapid decline in ruble making all dollars [ph] substantially more expensive right at the time that consumer spending was rapidly declining.

We remain pleased to see our strategic pivot continuing to manifest itself not only in sales growth, but also in margin expansion, cost reduction and cash generation. The repatriation of certain manufacturing activities from China to the U.S. is materially complete.

We expect this strategy to provide working capital improvements as well competitive benefits through a fast to refresh cycle and greater speed to market. Now, I would like to speak in more depth about our brands several accomplishments and the growth drivers.

Starting with POC, our fustiest growing brand POC, continues to market share after substantial investment and surpassing our one-year anniversary. We are very pleased if [ph] rollout of this road cycle, including a launch of race day, which performed very well at retail and generated strong ASAP orders.

POP also benefitted from strong direct-to-consumer sales, especially within the wheel product. These results were offset, but foreign exchange headwinds, especially in Europe. Nevertheless, Q2 is becoming more important for the brand because of our cycling giving the uptick in ASAP business that we had experienced.

At the end of the second quarter, we launched the team [ph] helmet, a nice product which we shipped in late June for in-store for in-source sale date of July 3rd in order to capitalize in the twitter fronts. Selling this product also drove ASAP business for other park products that I just referenced.

With regard to a deep and resting, we were sold that of majority of cycle products for the first half of this year and recorded a significant growth in POC's 15 cycling revenue, driven by both increasing the number of skews and production quantity today is deep line as well as increase to the number of global carrying the line.

We introduced 14 new styles and 43 new skews, at approximately double the door current 2015. In addition, we launched our second collection of cycling apparel and gear for smoke his team which we have labeled an appropriately positioned as quote race day. Race day has approximately 34 new styles including helpmates and 135 new SKUs.

As we anticipated, these initiatives have more than doubled POC's road product sales in just one year since the launch. POC'S road line has gone at a huge amount of media attention in and around this year's Tour de France, the world's largest sporting event.

Last year, we partnered with now Cannondale-Garmin racing team to be their official helmet and sunglass sponsor and we couldn't be more pleased with POC's brand exposure over the cost of this relationship.

Furthermore, we just wrapped our full '15 preseason selling program and POC's ski and equipment bookings were very strong, further driving the brand's momentum. The new helmet for park and pipe users has had tremendous selling with great protection, ventilation and comfort.

The complementary phobia goggles have been extremely embraced with our most attractive priced goggle at $140. With this launch, we are following our strategy to increase [ph] sales one-to-one in units. We have also boosted our glove story and earned our first award at ESPO, with the super prom [ph].

The USP team is wearing our POC gloves for the first time and our Julia increase our signature version is selling well. Looking to spring '16, we expect to continue to build upon the road category by adding to the deep and race day collections, while launching a new line called Grand Fundo.

Features of this line include more approachable fits that appeal to the cycle enthusiast as opposed to an elite cycling athlete. Fondo is giving us the ability to sell through a wider audience, but still having a premium quality and reiterating our brand positioning.

With the media and brand momentum I just discussed, we believe the time for a more universal line is now. We also launch two brand new helmets, Techtel and [ph]. The Techtel had mountain bike helmet is developed for all mountain and trail riders and have increased levels of ventilation and protection compared to the ever successful trade back helmet.

The [ph] downhill mountain bike is a new generation downhill helmets with a new and unique composite shell material are from lower rate and better resilience in traditional high-end carbon shells.

We also launched the resistance series of mountain bike clothing, where customized solutions are from protection to get impacts, friction, abrasion and penetration have been integrated into the garments.

Now turning to Black Diamond, we continue to make positive strides executing upon our four strategic pillars, building brand awareness, driving emergent channels, marketing category expansion.

As discussed last quarter, to commemorate Tommy Caldwell and Kevin Jorgenson first free incentive at Dawn Wall our captain, we partnered with RAI [ph] to place a branded display in five of their flagship stores. For the next 60 days, all five stores experienced strong double-digit sales in the wake of this branding initiative.

This is a major step in reinforcing Black Diamond's brand presence in this key retail partner and the double-digit listed in sell-through within these stores is causing RAI to think about expanding this sort of program. We will have similar in-store marketing program partnerships with other key retailers.

For example, we have a shop in shop installation in Tucson, Arizona, summer hut, scheduled for September. We have branded gym partnerships with the cliffs climbing in Long Island City slated for this fall and the BD TV film tours scheduled for six films tour starts in the U.S. and two in Canada this October, November.

BD TV is a branded constant channel for the Black Diamond brand to showcase stores that are authentic, engaging and representative of the cultures of climbing in back of '15. The launch will occur in conjunction with events and parties at key BD retail partners around North America, like EVO in Portland and Escape Route in Whistler.

Speaking of brand awareness, we have increased year-over-year social media follower and engagement growth through the second quarter. Nearly all forms of social media grew in solid double-digit with Instagram follower growth up nearly 300% and engagement growth of up nearly 70%.

The spring launch of our global [ph] program to support social media and content creation is also driving brand awareness and a key contributor to our social media growth. In partnership with Access Fund, we kicked off 2015 ROCK project tour with successful sold out stops in San Francisco, Salt Lake City and New York City.

ROCK project is designed to educate and inspire the growing population of Gym-to- Crag climbers, the fastest-growing climbing demographic, to embrace the responsible habits and behaviors when they make the transition outside. We have received a tremendous amount of mainstream and social media attention from this initiative.

We also believe women are focal to this trend and our women's' spring line caters nicely to both outdoor and indoor climbing environment and everything in between.

Our merging direct-to-consumer channels continues to be our fastest growing business globally, first half growth of strong double-digit with apparel growing triple digits, in fact, apparel is the fastest-growing portion of the B2C channel. During the quarter, we made the decision to recall a JetForce product.

Recalls an extraordinary the industry and from time-to-time certain product may sales to the strict quality standards we instill at Black Diamond. The recall involved a potential glitch that we discovered in the product software. That all in cost us approximately $141,000.

In the future, as a result of plan product upgrades and our new relationship with the Tier I supplier 2016, we expect further firmware update to this nature be handled by the consumer in the field.

We received positive consumer reaction to our proactive and precautionary handling of the recall and we remain equally bullish on our opportunity in this market for years to come.

Q2 apparel sales were up substantially across all channels and geographies led by spring technical outerwear and women's rock climbing sportswear as well as the profitable movement of some discontinued merchandise.

Some of the key pieces of the women's line to help drive the growth include Sister Superior Tank, Alpinestars Hoodie and the Levitation Capris, which is a piece that provides a reliable comfort in the gym, at the balder or under the harness.

We have and we are continued to invest in gym-to-crag similar technical apparel and remain well-positioned in this up-and-coming category. Looking forward to full '15, we are re-launching our ski category with a focus in back country skiing and snow safety. Other highlights include the first full season of JetForce delivery.

Second full season of carbon skies the first apparel Ski collection and the launch of the BD TV's branded content channel.

Looking for spring '16, we just included the tradeshow season in Europe and United States and like diamond highlight to these events include the launch of our gym-to-crag initiative, which is focused in developing our brand with the next-generation climber and the launch of our spring collection of athletic apparel.

We highlighted innovative new ultralight Camalot, which are 25% lighter than the prior generation in design as well as developed and manufactured here at our Salt Lake City facility.

I should note that we expect that spring '16 climbing equipment to be the first complete season of product manufactured or assembled completely in our SLC facility as a result of our decision to repatriate out of China. We also expect new lighting for spring '16 to be a key sales driver with improved performance and beautiful new designs.

I would like to conclude my remarks by commenting on our March '16 announcement. The Black Diamond engaged the financial advisory firm, Rothschild Inc. and Robert W.

Baird & Company to lead the exploration of a full range of strategic alternatives including a sale of the entire company and the potential sales for the company Black Diamond Equipment, inclusive of PIEPs and POC brands in two separate transactions.

At this point, it is too early to discuss the details of any of the companies' alternatives other than to say that one possible outcome is the sale of some of the company's assets to monetize a small portion of the company's NOL and a redeployment of the proceeds to unrelated and diversifying investments.

We currently plan to complete our strategic review process by the time the company reports its third quarter results in early November 2015. We do not intend to comment further regarding the strategic review process unless or until a specific transaction is approved by Board of Directors to shareholders.

The strategic review process included or it is otherwise determined that further disclosure is appropriate or required by law. The company provides no assurance that the strategic review process will result in any completed transaction.

Consistent with our past two earnings calls and due to the confidential nature of the activities that we are currently involved in, we are not going to entertain any questions following our prepared remarks this afternoon. We remain committed to our mission and dedicated to serving our customers and communities views.

At this time, I would like to turn the call over to our operator, Melissa..

Ladies and gentlemen, this concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation..