The increase was primarily attributed to the contribution of POC Sweden AB ("POC") and PIEPS Holding GmbH ("PIEPS") and their respective subsidiaries, which were acquired in the second half of 2012. Total sales were offset by $400,000 of inventory repurchased and not recognized as revenue from Gregory Mountain Products' Japanese distributor, Kabushiki Kaisha A&F("A&F"), as part of the A&F distribution agreement.
For the year ended Dec. 31, 2012, Black Diamond expects to report total sales of approximately $175.5 million, up approximately 20 percent from $145.8 million in 2011. The growth in sales was supported by the introduction of new and innovative products, as well as the addition of POC and PIEPS. Total sales were offset by $1.0 million of inventory repurchased as part of the previously mentioned A&F distribution agreement.
Gross margin in the fourth quarter of 2012 is expected to be around 36.0 percent compared to 39.2 percent in the year-ago quarter. Gross margin in the fourth quarter of 2012 includes approximately $1.2 million (or 2.5 percent of expected total sales) for inventory fair value of purchase accounting adjustments related to the acquisitions of POC and PIEPS. In connection with the company's conference call announcing actual results for the fourth quarter and full year 2012, the company expects to present a reconciliation table of adjusted gross margin excluding these purchase accounting adjustments from its fourth quarter of 2012 financial results, and anticipates adjusted gross margin to experience a small decline from the year-ago quarter, primarily due to a higher level of discount activity in response to a challenging start to the 2012 winter season.
Gross margin for the full year of 2012 is expected to be around 38.0 percent compared to 38.7 percent in 2011. Gross margin in 2012 includes approximately $2.3 million (or 1.3 percent of expected total sales) for the previously mentioned purchase accounting adjustments. In connection with the company's conference call announcing actual results for the fourth quarter and full year 2012, the company expects to present a reconciliation table of adjusted gross margin excluding these purchase accounting adjustments from its full year 2012 financial results, and anticipates adjusted gross margin will reflect an improvement from 2011 primarily attributed to the shift in mix toward higher margin products as well as the inclusion of both POC and PIEPS.
"2012 was a milestone year for Black Diamond as we initiated our acquisition strategy, successfully introduced our new apparel line to the trade and assumed greater control over our manufacturing and distribution," said Peter Metcalf, president and CEO of Black Diamond. "While we achieved record sales, they were affected by the mild winter weather in North America during the holiday shopping season, adding to existing economic uncertainties in both the U.S. and Europe that made for a more cautious consumer.
"Despite these macro headwinds, Black Diamond gained market share in a majority of our product categories, which reflects the proactive investments we've been making in our infrastructure and professional talent. Towards the end of 2012, the North American winter returned to more typical conditions, and similarly, the consumer has returned to purchase more of our seasonal products. Meanwhile, our early spring 2013 bookings have been strong.
"In 2013," concluded Metcalf, "we will continue to invest in our strategic growth initiatives. This includes the next two seasonal launches of our apparel line and further development of our new ski manufacturing facility. These initiatives, among others, are designed to support substantially greater revenue, which we believe will increase our operating leverage and accelerate earnings in the coming years. As one of the most respected and leading outdoor equipment companies in the world, we remain on track to achieve our long-term growth targets."
Management will provide complete fourth quarter and full year 2012 results in a press release and conference call, which will be announced at a later date.
2013 outlook
Black Diamond expects fiscal year 2013 sales to range between $216 million to $221 million, which would represent an increase of approximately 23 percent to 26 percent from the expected 2012 sales. The company also expects gross margin in fiscal year 2013 to range between 40.0 percent and 41.0 percent.
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