29/07/2013

Business news : Columbia Sportswear Narrows Q2 Loss; U.S. Posts Gains

Columbia Sportswear Company announced net sales of $280.5 million for the quarter ended June 30, down 3 percent compared with net sales of $290.4 million for the same period in 2012, including a 1 percentage point negative effect from changes in currency exchange rates.

Second quarter net loss improved 10 percent to $7.1 million, or 21 cents per diluted share, compared with net loss of $7.9 million, or 23 cents per diluted share, for the same period in 2012.

“During the second quarter, we successfully launched our Omni-Freeze Zero and Cool.Q Zero active cooling technology,” said Tim Boyle, Columbia’s president and chief executive officer, commented. “Sell-through of our spring season products improved as our marketing programs drove consumer awareness and warm weather arrived in key markets. Operationally, we improved our inventory flow and continued to demonstrate focused expense management.”

Boyle continued, “We also recently announced three important additions to our senior leadership team, bringing on seasoned veterans to refine and expand our global direct-to-consumer business, re-energize our North American wholesale business, and to lead our new China joint venture expected to commence in January, 2014. Each of these areas is of strategic importance in our efforts to achieve renewed sales growth from our portfolio of brands and improve profitability over the long term.”

Second Quarter Results

he second quarter is the company’s smallest revenue quarter, historically accounting for approximately 15 percent of annual net sales. As a result, regional, category and brand net sales results often produce large percentage variances in relation to the prior year’s comparable period due to the small base of comparison and shifts in the timing of shipments.

Net sales in the U.S. increased $7.7 million, or 6 percent, to $139.8 million; Latin America/Asia Pacific (LAAP) region net sales decreased $2.9 million, or 3 percent, to $81.2 million, including a 5 percentage point negative effect from changes in currency exchange rates; Europe/Middle East/Africa (EMEA) region net sales declined $16.9 million, or 24 percent, to $53.1 million, including a less-than-1-percent negative effect from changes in currency exchanges rates; net sales in Canada, increased $2.2 million, or 52 percent, to $6.4 million, including a 6 percentage point negative effect from changes in currency exchanges rates.

Apparel, Accessories & Equipment net sales decreased $5.2 million, or 2 percent, to $235.7 million. Footwear net sales of $44.8 million were down $4.7 million, or 9 percent.


Columbia brand net sales decreased $8.2 million, or 3 percent, to $252.5 million, and Mountain Hardwear net sales declined $1.2 million, or 5 percent, to $22.5 million.

The company ended the second quarter with $430.6 million in cash and short-term investments, compared with $228.5 million at June 30, 2012. Approximately 43 percent of cash and short-term investments were held in foreign jurisdictions where a repatriation of those funds to the United States would likely result in a significant tax cost to the company.

Consolidated inventories totaled $423.8 million at June 30, 2013, a reduction of $99.3 million, or 19 percent, compared with $523.1 million at June 30, 2012. Reduced inventory purchases, primarily reflecting the planned later receipt of Fall inventory to be more aligned with delivery dates requested by wholesale customers, and lower Fall 2013 advance wholesale orders, combined with lower end-of-season Spring inventory, accounted for the vast majority of the favorable decline.


Updated Full Year 2013 Financial Outlook

The company expects 2013 net sales to decline up to 2.5 percent compared to 2012, including an approximate 2 percentage point negative effect of anticipated changes in foreign currency exchange rates.

Full year 2013 gross margin is expected to improve by up to 10 basis points compared to 2012, including the effect of deferring approximately $2.3 million of gross profit into 2014 as a result of the previously announced plan to transition to a joint venture in China, effective Jan. 1, 2014, from the current independent distributor arrangement.

Full year 2013 selling, general and administrative expenses are expected to increase approximately 1.5 percent, including approximately $3.5 million in pre-operating expenses related to the China joint venture and pre-tax restructuring charges of approximately $4.8 million, resulting in approximately 140 basis points of SG&A expense deleverage.

Full year 2013 licensing income is expected to be comparable to 2012, including the effect of deferring approximately $3.9 million of licensing income into 2014 in conjunction with the transition to the China joint venture.


As a result, full year 2013 operating margin is expected to be approximately 6.8 percent. Full year 2013 operating margin is expected to be approximately 7.6 percent if the following items are excluded: the anticipated $4.8 million in restructuring charges, the deferral of approximately $2.3 million of gross profit and $3.9 million of licensing income into 2014 and pre-operating costs of approximately $3.5 million related to the China joint venture.

The company is modeling a full year effective tax rate of 26 percent; however, the actual rate could differ, perhaps significantly, based on the status of tax uncertainties, the geographic mix of pre-tax income, as well as other discrete events that may occur during the year.

Third Quarter 2013 Financial Outlook

The company expects third quarter net sales to decline up to 6.5 percent compared with the third quarter of 2012, driven by lower wholesale sales in the U.S. and Europe, due primarily to a slight shift in customers’ requested delivery dates and lower advance orders, and lower sales to LAAP distributors, due primarily to import restrictions and currency constraints in key South American distributor markets and the transition to a new distributor in Australia. These declines are expected to be partially offset by a timing shift of shipments of EMEA distributors’ Fall 2013 advance orders, and increased direct-to-consumer sales in North America.

An expected decline in third quarter gross margin of approximately 100 basis points and an anticipated 3 percent increase in SG&A expense, partially offset by increased license income, are expected to result in third quarter operating margin contraction of approximately 310 to 320 basis points compared with the third quarter of 2012. Excluding a total of approximately $1.6 million of anticipated pre-operating costs and deferral of gross profit and licensing income related to the China joint venture, third quarter 2013 operating margin is expected to contract approximately 280 to 290 basis points.

The company’s annual net sales are weighted more heavily toward the second half of the fiscal year, while operating expenses are more equally distributed, resulting in a highly seasonal profitability pattern weighted toward the second half. All projections related to anticipated future results are forward-looking in nature and are subject to risks and uncertainties which may cause actual results to differ, perhaps significantly.
 
COLUMBIA SPORTSWEAR COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
(Unaudited)



Three Months Ended June 30,
Six Months Ended June 30,


2013
2012
2013
2012
Net sales
$ 280,495

$ 290,357

$ 628,802

$ 623,498
Cost of sales

160,211


172,489


355,214


357,694
Gross profit


120,284


117,868


273,588


265,804



42.9 %

40.6 %

43.5 %

42.6 %













Selling, general, and administrative expenses

131,935


133,171


274,838


277,727
Net licensing income

1,654


4,555


3,981


6,530
Income (loss) from operations

(9,997 )

(10,748 )

2,731


(5,393 )













Interest income, net

215


191


347


438
Other nonoperating expense

(473 )

-


(1,103 )

-
Income (loss) before income tax

(10,255 )

(10,557 )

1,975


(4,955 )













Income tax benefit

2,925


2,656


797


952
Net income (loss)

(7,330 )

(7,901 )

2,772


(4,003 )
Net loss attributable to noncontrolling interest

(253 )

-


(253 )

-
Net income (loss) attributable to Columbia Sportswear Company

$ (7,077 )
$ (7,901 )
$ 3,025

$ (4,003 )













Earnings (loss) per share:











Basic
$ (0.21 )
$ (0.23 )
$ 0.09

$ (0.12 )
Diluted

(0.21 )

(0.23 )

0.09


(0.12 )
COLUMBIA SPORTSWEAR COMPANY
(In millions, except percentage changes)
(Unaudited)



Three Months Ended June 30,

Six Months Ended June 30,


2013

2012

% Change


2013

2012

% Change














Geographical Net Sales:












United States
$ 139.8
$ 132.1
6 %

$ 340.3
$ 325.1
5 %
Latin America & Asia Pacific

81.2

84.1
(3 )%


164.3

160.9
2 %
Europe, Middle East, & Africa

53.1

70.0
(24 )%


94.0

108.1
(13 )%
Canada

6.4

4.2
52 %


30.2

29.4
3 %
Total
$ 280.5
$ 290.4
(3 )%

$ 628.8
$ 623.5
1 %














Categorical Net Sales:












Apparel, Accessories and Equipment
$ 235.7
$ 240.9
(2 )%

$ 530.0
$ 525.2
1 %
Footwear

44.8

49.5
(9 )%


98.8

98.3
1 %
Total
$ 280.5
$ 290.4
(3 )%

$ 628.8
$ 623.5
1 %














Brand Net Sales:












Columbia
$ 252.5
$ 260.7
(3 )%

$ 553.6
$ 553.8
-
Mountain Hardwear

22.5

23.7
(5 )%


54.6

54.4
-
Sorel

2.9

2.9
-



15.3

9.3
65 %
Other

2.6

3.1
(16 )%


5.3

6.0
(12 )%
Total
$ 280.5
$ 290.4
(3 )%

$ 628.8
$ 623.5
1 %

By press release

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