Columbia Sportswear Company posted first quarter net sales of $260.2 million, an increase of 5.9% over net sales of $245.7 million for the same period of 2005. The company reported net income for the first quarter of $19.5 million, an 8.5% decrease compared to net income of $21.3 million for the same period of 2005. Diluted earnings per share for the first quarter of 2006 were 52 cents on 37.3 million weighted average shares, compared to diluted earnings per share of 52 cents for the first quarter of 2005 on 40.7 million weighted average shares. The decrease in weighted average shares outstanding is the result of the company's repurchase of shares over the past year.
Compared to the first quarter of 2005, U.S. sales increased 5.9% to $144.4 million, Other International sales increased 12.2% to $41.4 million, European sales increased 3.0% to $48.0 million, and Canadian sales increased 1.9% to $26.4 million for the first quarter of 2006.
Excluding changes in currency exchange rates, consolidated net sales increased 7.7%, U.S. sales increased 5.9%, European sales increased 13.7%, Other International sales increased 15.8%, and Canadian sales decreased 5.4% for the first quarter of 2006, compared to the same period of 2005.
For the first quarter of 2006, sportswear sales increased 7.3% to $141.8 million, outerwear sales increased 7.8% to $55.2 million, equipment sales increased 52.9% to $5.2 million, footwear sales increased 1.8% to $50.7 million and accessories sales decreased 19.8% to $7.3 million, compared to the first quarter of 2005.
Tim Boyle, Columbia's president and chief executive officer, commented, “First quarter sales were consistent with our expectations. Sales were driven by Columbia and Mountain Hardwear spring sportswear shipments in the U.S. and Japan, and were benefited by incremental footwear sales from our newly acquired Montrail brand. Improved gross margins of fall closeout products in the U.S. favorably impacted global gross margins, but contracting European margins and the unfavorable impact of recording the Montrail inventory at fair value in purchase accounting more than offset the domestic gross margin increase. Gross margins in Europe decreased due to a challenging competitive environment, foreign currency hedge rates and costs associated with certain promotional campaigns. Consolidated selling and operating expenses were managed well, but increased $8.0 million, primarily due to additional personnel costs, including $3.1 million of incremental stock-based compensation expense. EPS results were benefited by the shares that we repurchased over the past year.”
Backlog
The Company reported that as of March 31, 2006, consolidated backlog increased 11.9% to $848.9 million compared to consolidated backlog of $758.9 million at March 31, 2005. Of this total, fall product backlog at March 31, 2006 was $720.7 million, an 11.6% increase over fall product backlog of $645.6 million at March 31, 2005. Excluding changes in currency exchange rates, consolidated backlog increased 13.1%, and fall product backlog increased 12.7%, compared to the prior year.
Organic consolidated backlog (backlog excluding orders for Montrail and Pacific Trail-brand products) increased 8.1%, and organic fall product backlog increased 7.6%. Excluding changes in currency exchange rates, organic consolidated backlog increased 9.3%, and organic fall product backlog increased 8.7%.
Boyle continued, “Organic domestic fall orders increased low double digits, driven by continued strength in our U.S. sportswear business and a modest rebound in domestic outerwear orders. Organic Other International backlog also increased low double digits in U.S. dollars, driven by strong growth in Japan, while Europe and Canada were essentially flat. Sportswear orders were strong in the U.S. and other key markets globally, but global outerwear orders only increased low single digits, due to weakness in Europe and Canada. Global fall footwear orders also increased low single digits on an organic basis, hampered by warm winter weather conditions in key cold weather footwear markets.”
“The current global markets for our products are very competitive, and while we have made changes in our business to address these challenges, including acquiring brands to address new distribution channels, these initiatives have not yet gained significant traction. While we continue to execute these growth initiatives, we will also focus on diligent expense management to assure that our capital is deployed strategically. We will continue to focus on developing compelling products that provide retailers and consumers with exceptional value at all price points, which is the core of our business,” commented Boyle.
Guidance
Mr. Boyle continued, “Considering the backlog we released today, we currently anticipate second quarter 2006 revenue growth of 10 to 12 percent and diluted earnings per share of approximately $0.03, including approximately $0.05 in stock-based compensation expense. For the full year 2006, we anticipate net sales growth of approximately 10 percent, and diluted earnings per share of approximately $3.18, including $0.20 in stock-based compensation expense, compared to 2005. These projections are forward-looking in nature, and are based on backlog and forecasts, which may change, perhaps significantly.”
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
(Unaudited)
Three Months Ended March 31,
2006 2005
Net sales $260,211 $245,706
Cost of sales 148,574 138,463
Gross profit 111,637 107,243
42.9% 43.6%
Selling, general, and administrative 84,819 76,791
Net licensing income (1,005) (716)
Income from operations 27,823 31,168
Interest (income) expense, net (1,898) (1,407)
Income before income tax 29,721 32,575
Income tax provision 10,254 11,238
Net income $19,467 $21,337
Net income per share:
Basic $0.53 $0.53
Diluted 0.52 0.52
Weighted average shares outstanding:
Basic 36,900 40,143
Diluted 37,339 40,659
