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Columbia Sportswear Company Reports Second Quarter Results; Updates Full Year 2013 Sales And Earnings Outlook

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.

A more detailed version of the company’s financial outlook can be found in the “ CFO Commentary on Second Quarter 2013 Financial Results and 2013 Outlook”, available beginning at approximately 4:15 p.m. EDT today on the company’s investor relations website: http://investor.columbia.com/results.cfm.

Dividend

The board of directors authorized a third quarter dividend of $0.22 per share, payable on August 29, 2013 to shareholders of record on August 15, 2013.

CFO’s Second Quarter Financial Commentary Available Online

At approximately 4:15 p.m. EDT today, a commentary by Tom Cusick, senior vice president and chief financial officer, reviewing the company’s second quarter 2013 financial results and third quarter and full year 2013 financial outlook will be furnished to the SEC on Form 8-K and published on the company’s website at http://investor.columbia.com/results.cfm. Analysts and investors are encouraged to review this commentary prior to participating in the conference call.

Conference Call

The company will host a conference call on Thursday, July 25, 2013 at 5:00 p.m. EDT to review its second quarter financial results and full year 2013 financial outlook. Dial 877-407-9205 to participate. The call will also be webcast live on the Investor Relations section of the Company’s website at http://investor.columbia.com where it will remain available until July 25, 2014.

Third Quarter 2013 Reporting Schedule

Columbia Sportswear plans to report financial results for third quarter 2013 on Thursday, October 24, 2013 at approximately 4:00 p.m. EDT. Following issuance of the earnings release, a commentary reviewing the company’s third quarter financial results and full year 2013 financial outlook will be furnished to the SEC on Form 8-K and published on the investor relations section of the company’s website at http://investor.columbia.com/results.cfm. A public webcast of Columbia’s earnings conference call will follow at 5:00 p.m. EDT at www.columbia.com.

About Columbia Sportswear

Columbia Sportswear Company is a leading innovator in the global outdoor apparel, footwear, accessories and equipment industry. Founded in 1938 in Portland, Oregon, Columbia products are sold in approximately 100 countries and have earned an international reputation for innovation, quality and performance. Columbia products feature innovative technologies and designs that protect outdoor enthusiasts from the elements, increase comfort, and make outdoor activities more enjoyable. In addition to the Columbia® brand, Columbia Sportswear Company also owns outdoor brands Mountain Hardwear®, Sorel®, Montrail® and OutDry®. To learn more, please visit the company's websites at www.columbia.com, www.mountainhardwear.com, www.sorel.com, www.montrail.com and www.outdry.com.

Forward-Looking Statements

This document contains forward-looking statements within the meaning of the federal securities laws, including statements regarding anticipated results, net sales, gross margins, operating costs, operating margins, SG&A and other expenses, effects of changes in foreign currency exchange rates, licensing income, product innovations, joint venture results, tax rates, and cost containment measures in future periods. Actual results could differ materially from those projected in these and other forward-looking statements. The company’s expectations, beliefs and projections are expressed in good faith and are believed to have a reasonable basis; however, each forward-looking statement involves a number of risks and uncertainties, including those set forth in this document, those described in the company’s Annual Report on Form 10-K for the year ended December 31, 2012 under the heading “Risk Factors,” and other risks and uncertainties that have been or may be described from time to time in other reports filed by the company, including reports on Form 8-K, Form 10-Q and Form 10-K. Potential risks and uncertainties that may affect our future revenues, earnings and performance and 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 in this document include: unfavorable economic conditions generally and weakness in consumer confidence and spending rates; our ability to effectively and timely implement our IT infrastructure, data management and business process initiatives, failure of which could result in material unanticipated expenses and/or disruptions to our business; the operations of our computer systems and third party computer systems; changes in international, federal and/or state tax policies and rates, which we expect to increase; international risks, including changes in import limitations and tariffs or other duties, political instability in foreign markets, exchange rate fluctuations, and trade disruptions; our ability to attract and retain key employees; the financial health of our customers and their continued ability to access credit markets to fund their ongoing operations; higher than expected rates of order cancellations; increased consolidation of our retail customers; our ability to effectively source and deliver our products to customers in a timely manner, the failure of which could lead to increased costs and/or order cancellations; unforeseen increases and volatility in input costs, such as cotton and/or oil; our reliance on product acceptance by consumers; our reliance on product innovations, which may involve greater regulatory and manufacturing complexity and could pose greater risks of quality issues or supply disruptions; the effects of unseasonable weather (including, for example, warm weather in the winter and cold weather in the spring), which affects consumer demand for the company’s products; our dependence on independent manufacturers and suppliers; our ability to source finished products and components at competitive prices from independent manufacturers in foreign countries that may experience unexpected periods of inflation, labor and materials shortages or other manufacturing disruptions; the effectiveness of our sales and marketing efforts; intense competition in the industry; business disruptions and acts of terrorism or military activities around the globe; and our ability to establish and protect our intellectual property. The company cautions that forward-looking statements are inherently less reliable than historical information. The company does not undertake any duty to update any of the forward-looking statements after the date of this document to conform them to actual results or to reflect changes in events, circumstances or its expectations. New factors emerge from time to time and it is not possible for the company to predict all such factors, nor can it assess the impact of each such factor or the extent to which any factor, or combination of factors, may cause results to differ materially from those contained in any forward-looking statement.

 
COLUMBIA SPORTSWEAR COMPANY CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands) (Unaudited)
  June 30,
2013   2012
Current Assets:
Cash and cash equivalents $ 340,428 $ 193,245
Short-term investments 90,181 35,266
Accounts receivable, net 180,937 203,157
Inventories, net 423,765 523,078
Deferred income taxes 47,884 52,180
Prepaid expenses and other current assets 47,074 45,446
Total current assets 1,130,269 1,052,372
 
Property, plant and equipment, net 273,016 253,009
Intangibles and other non-current assets 73,749 80,714
Total assets $ 1,477,034 $ 1,386,095
 
Current Liabilities:
Accounts payable $ 185,984 $ 196,478
Accrued liabilities 84,878 84,242
Income taxes payable 3,895 5,020
Deferred income taxes 18 941
Total current liabilities 274,775 286,681
 
Other long-term liabilities 42,803 40,696
Shareholders' equity 1,151,631 1,058,718
Noncontrolling interest 7,825 -
Total liabilities and equity $ 1,477,034 $ 1,386,095
 
 
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 )
Weighted average shares outstanding:
Basic 34,353 33,780 34,260 33,743
Diluted 34,353 33,780 34,561 33,743
 
 
COLUMBIA SPORTSWEAR COMPANY CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (In thousands) (Unaudited)
 
  Six Months Ended June 30,
2013   2012
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income (loss) $ 2,772 $ (4,003 )
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization 19,891 21,044
Loss on disposal or impairment of property, plant and equipment 299 186
Deferred income taxes 3,185 777
Stock-based compensation 4,282 4,303
Excess tax benefit from employee stock plans (925 ) (270 )
Changes in operating assets and liabilities:
Accounts receivable 153,383 147,995
Inventories (60,449 ) (160,057 )
Prepaid expenses and other current assets (8,446 ) (9,287 )
Other assets 116 (89 )
Accounts payable and accrued liabilities 19,928 25,949
Income taxes payable 1,017 (9,681 )
Other liabilities 650   1,832  
Net cash provided by operating activities 135,703   18,699  
 
CASH FLOWS FROM INVESTING ACTIVITIES:
Net purchases of short-term investments (44,849 ) (32,313 )
Capital expenditures (31,502 ) (21,400 )
Proceeds from sale of property, plant, and equipment 45   -  
Net cash used in investing activities (76,306 ) (53,713 )
 
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from credit facilities 4,075 8,304
Repayments on credit facilities (4,231 ) (8,304 )
Proceeds from issuance of common stock under employee stock plans 11,050 4,199
Tax payments related to restricted stock unit issuances (2,019 ) (1,197 )
Excess tax benefit from employee stock plans 925 270
Repurchases of common stock - (206 )
Capital contribution from noncontrolling interest 8,000 -
Cash dividends paid (15,081 ) (14,849 )
Net cash provided by (used in) financing activities 2,719  

 

 

(11,783 )
 
NET EFFECT OF EXCHANGE RATE CHANGES ON CASH (12,469 ) (992 )
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 49,647 (47,789 )
 
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 290,781   241,034  
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 340,428   $ 193,245  
 
SUPPLEMENTAL DISCLOSURES OF NON-CASH INVESTING ACTIVITIES:
Capital expenditures incurred but not yet paid $ 3,885 $ 1,972
 
 
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 %
 




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