Columbia Sportswear Company reported net sales of $523.1 million for
the quarter ended Sept. 30, a 4 percent decrease compared with net
sales of $545.0 million for the same period in 2012, including a 1
percentage point negative effect from changes in currency exchange
rates.
Third quarter net income totaled $54.6 million, or $1.57 per
diluted share, compared with net income of $64.4 million, or $1.88 per
diluted share, for the same period in 2012. A higher effective tax rate
in the current quarter accounted for $2.2 million, or $0.06 per diluted
share, of the decline.
“Our third quarter results benefited from strong performance across
our direct-to-consumer platform while we continue to focus on
reinvigorating growth in our wholesale channels globally,” said Tim
Boyle, Columbia’s president and chief executive officer. “A 14 percent
decline in inventory levels and our continued focus on managing
discretionary spending also contributed to better-than-expected
profitability and cash flow during the quarter, leading us to raise our
financial outlook for 2013.
“These trends are encouraging and we’re very focused on several
initiatives to return to growth in 2014, beginning with improved
seasonal product assortments,” Boyle continued. “We also expect to
generate growth through our new joint venture in China, grow and expand
our direct-to-consumer operations, generate growth in our North American
and European wholesale businesses, and grow in key international
markets served by independent distributors. We also expect to implement
our new global ERP platform in the U.S. in order to improve our business
processes and financial performance.
With the above factors in mind,
the board of directors approved a 14 percent increase in the company’s
quarterly dividend, bringing it to $0.25 per share from the prior $0.22
per share rate.”
Third quarter results
(All comparisons are between third quarter 2013 and third quarter 2012, unless otherwise noted.)
Net sales in the U.S. declined 7 percent to $323.1 million; Latin
America/Asia Pacific (LAAP) region net sales decreased 15 percent to
$72.0 million, including a 9 percentage point negative effect from
changes in currency exchange rates; Europe/Middle East/Africa (EMEA)
region net sales increased 29 percent to $78.1 million, including a 4
percentage point benefit from changes in currency exchange rates; net
sales in Canada decreased 4 percent to $49.9 million, including a 3
percentage point negative effect from changes in currency exchange
rates.
Apparel, Accessories & Equipment net sales of $428.6 million were
essentially unchanged, down less than 1 percent. Footwear net sales of
$94.5 million declined 18 percent.
Columbia brand net sales
decreased 1 percent to $431.5 million, Sorel brand net sales declined 23
percent to $47.4 million, and Mountain Hardwear net sales declined 9
percent to $40.6 million. (See “Brand Net Sales” table below.)
Balance sheet
The company ended the third quarter with $303.2 million in cash and
short-term investments, compared with $96.3 million at Sept. 30, 2013.
Approximately 47 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 $410.1 million at Sept. 30, 2013, a
reduction of $65.6 million, or 14 percent, compared with $475.7 million
at Sept. 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, improved inventory
management, and lower Fall 2013 advance wholesale orders.
Upward revised full year 2013 financial outlook
The company expects 2013 net sales to decline up to 1.5 percent
compared to 2012, including an approximate 2 percentage point negative
effect from anticipated changes in foreign currency exchange rates.
Full year 2013 gross margin is expected to improve by approximately 50 basis points compared to 2012.
Full year 2013 selling, general and administrative expenses are
expected to increase approximately 2.0 percent, including approximately
$3.7 million in pre-operating expenses related to the China joint
venture and pre-tax restructuring charges of approximately $5.2 million,
resulting in approximately 125 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 $3.5 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 7.25 percent. Full year 2013 operating margin is expected
to be approximately 8.1 percent if the following items are excluded:
approximately $5.2 million in restructuring charges, the deferral of
approximately $2.1 million of gross profit and $3.5 million of licensing
income into 2014 and pre-operating costs of approximately $3.7 million
related to the China joint venture.
The company is modeling a full year effective tax rate of 27.5
percent; however, the actual rate could differ 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.
Fourth quarter 2013 financial outlook
The company expects fourth quarter net sales to decline up to 2.0
percent compared with the fourth quarter of 2012. Fourth quarter
operating margins are expected to contract approximately 220 basis
points compared with the fourth quarter of 2012, consisting of
approximately 290 basis points of SG&A deleverage and lower
licensing income due to the deferral of approximately $2.0 million in
licensing income related to the China JV transition, partially offset by
anticipated gross margin expansion of approximately 90 basis points.
Excluding a total of approximately $5.3 million of anticipated
pre-operating costs and deferral of gross profit and licensing income
related to the China joint venture, fourth quarter 2013 operating margin
is expected to contract approximately 120 basis points. The company is
modeling a fourth quarter effective tax rate of 27.0 percent.
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.
Dividend
The board of directors authorized a 14 percent increase in the
company’s regular quarterly dividend to $0.25 per share from the prior
$0.22 per share, payable on December 2, 2013 to shareholders of record
on November 14, 2013.
| COLUMBIA SPORTSWEAR COMPANY |
| CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS |
| (In thousands, except per share amounts) |
| (Unaudited) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
|
|
2013 |
|
|
2012 |
|
|
2013 |
|
|
2012 |
|
| Net sales |
|
$ |
523,084 |
|
|
$ |
545,005 |
|
|
$ |
1,151,886 |
|
|
$ |
1,168,503 |
|
| Cost of sales |
|
|
290,735 |
|
|
|
301,320 |
|
|
|
645,949 |
|
|
|
659,014 |
|
| Gross profit |
|
|
232,349 |
|
|
|
243,685 |
|
|
|
505,937 |
|
|
|
509,489 |
|
|
|
|
44.4 |
% |
|
|
44.7 |
% |
|
|
43.9 |
% |
|
|
43.6 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
| Selling, general and administrative expenses |
|
|
162,951 |
|
|
|
160,154 |
|
|
|
437,789 |
|
|
|
437,881 |
|
| Net licensing income |
|
|
7,501 |
|
|
|
4,287 |
|
|
|
11,482 |
|
|
|
10,817 |
|
| Income from operations |
|
|
76,899 |
|
|
|
87,818 |
|
|
|
79,630 |
|
|
|
82,425 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Interest income (expense), net |
|
|
56 |
|
|
|
(17 |
) |
|
|
403 |
|
|
|
421 |
|
| Other non-operating income (expense) |
|
|
417 |
|
|
|
- |
|
|
|
(686 |
) |
|
|
- |
|
| Income before income tax |
|
|
77,372 |
|
|
|
87,801 |
|
|
|
79,347 |
|
|
|
82,846 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Income tax expense |
|
|
(22,822 |
) |
|
|
(23,426 |
) |
|
|
(22,025 |
) |
|
|
(22,474 |
) |
| Net income |
|
|
54,550 |
|
|
|
64,375 |
|
|
|
57,322 |
|
|
|
60,372 |
|
| Net loss attributable to non-controlling interest |
|
|
(36 |
) |
|
|
- |
|
|
|
(289 |
) |
|
|
- |
|
| Net income attributable to |
|
|
|
|
|
|
|
|
|
|
|
|
| Columbia Sportswear Company |
|
$ |
54,586 |
|
|
$ |
64,375 |
|
|
$ |
57,611 |
|
|
$ |
60,372 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Earnings per share attributable to Columbia |
|
|
|
|
|
|
|
|
|
|
|
| Sportswear Company: |
|
|
|
|
|
|
|
|
|
|
|
|
| Basic |
|
$ |
1.58 |
|
|
$ |
1.90 |
|
|
$ |
1.68 |
|
|
$ |
1.79 |
|
| Diluted |
|
|
1.57 |
|
|
|
1.88 |
|
|
|
1.66 |
|
|
|
1.77 |
|
| Weighted average shares outstanding: |
|
|
|
|
|
|
|
|
|
|
|
| Basic |
|
|
34,452 |
|
|
|
33,872 |
|
|
|
34,325 |
|
|
|
33,761 |
|
| Diluted |
|
|
34,753 |
|
|
|
34,155 |
|
|
|
34,640 |
|
|
|
34,035 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| COLUMBIA SPORTSWEAR COMPANY |
| (In millions, except percentage changes) |
| (Unaudited) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
|
|
|
|
|
2013 |
|
|
2012 |
|
% Change |
|
|
2013 |
|
|
2012 |
|
% Change |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Geographical Net Sales: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
United States |
|
|
$ |
323.1 |
|
$ |
347.8 |
|
(7 |
)% |
|
$ |
663.4 |
|
$ |
672.9 |
|
(1 |
)% |
|
Latin America & Asia Pacific |
|
|
|
72.0 |
|
|
84.7 |
|
(15 |
)% |
|
|
236.3 |
|
|
245.6 |
|
(4 |
)% |
|
Europe, Middle East, & Africa |
|
|
|
78.1 |
|
|
60.5 |
|
29 |
% |
|
|
172.1 |
|
|
168.6 |
|
2 |
% |
|
Canada |
|
|
|
49.9 |
|
|
52.0 |
|
(4 |
)% |
|
|
80.1 |
|
|
81.4 |
|
(2 |
)% |
|
Total |
|
|
$ |
523.1 |
|
$ |
545.0 |
|
(4 |
)% |
|
$ |
1,151.9 |
|
$ |
1,168.5 |
|
(1 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Categorical Net Sales: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Apparel, Accessories and Equipment |
|
|
$ |
428.6 |
|
$ |
429.5 |
|
- |
|
|
$ |
958.6 |
|
$ |
954.7 |
|
- |
|
|
Footwear |
|
|
|
94.5 |
|
|
115.5 |
|
(18 |
)% |
|
|
193.3 |
|
|
213.8 |
|
(10 |
)% |
|
Total |
|
|
$ |
523.1 |
|
$ |
545.0 |
|
(4 |
)% |
|
$ |
1,151.9 |
|
$ |
1,168.5 |
|
(1 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Brand Net Sales: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Columbia |
|
|
$ |
431.5 |
|
$ |
436.8 |
|
(1 |
)% |
|
$ |
985.1 |
|
$ |
990.6 |
|
(1 |
)% |
|
Mountain Hardwear |
|
|
|
40.6 |
|
|
44.4 |
|
(9 |
)% |
|
|
95.2 |
|
|
98.8 |
|
(4 |
)% |
|
Sorel |
|
|
|
47.4 |
|
|
61.2 |
|
(23 |
)% |
|
|
62.7 |
|
|
70.5 |
|
(11 |
)% |
|
Other |
|
|
|
3.6 |
|
|
2.6 |
|
38 |
% |
|
|
8.9 |
|
|
8.6 |
|
3 |
% |
|
Total |
|
|
$ |
523.1 |
|
$ |
545.0 |
|
(4 |
)% |
|
$ |
1,151.9 |
|
$ |
1,168.5 |
|
(1 |
)% |
By press release
