Columbia Sportswear’s Q4 Earnings Handily Top Estimates

Columbia Sportswear Co. reported fourth-quarter sales increased 1% to $358.3 million from $354.9 million a year ago, including a 3 percentage point benefit from changes in foreign currency exchange rates. Earnings reached $23.1 million, or 68 cents per share, below year-ago results excluding charges but well above Wall Street's consensus estimate of 39 cents a share.

In the year-ago period, Columbia earned $18.6 million, or 55 cents, a year agom after a pre-tax impairment charge of approximately $24.7 million, or 46 cents per share after tax. For the latest quarter, Wall Street's consensus estimate had been

The company said it expects first quarter 2010 net sales to increase approximately 4% to 5%, including an estimated four percentage points of foreign currency benefit, and first quarter 2010 operating margin to decrease approximately 100 to 200 basis points, compared with first quarter 2009

“Fourth quarter results were significantly better than our October outlook, primarily due to stronger than expected demand in our U.S. and international wholesale businesses, as well as in our expanded direct-to-consumer operations,” said Tim Boyle, Columbia's president and chief executive officer. “We are encouraged that our full year 2009 U.S. sales increased 1%, thanks to growth from our direct-to-consumer operations, which more than offset declines in our U.S. wholesale business. Cash flow from operations during 2009 was a record $214.4 million. We believe our results demonstrate the strengthening of each of our major brands and consumers' renewed appreciation for the great value and performance that our products consistently deliver.”

Boyle continued, “We have managed our balance sheet extremely well through this difficult economic cycle, ending the year with record cash and short-term investments of over $400 million, a substantially improved working capital position, and zero long term debt. Our renewed focus on product innovation driven by consumer insights is elevating each of our major brands and, together with our strong balance sheet, positions us well for growth as we enter the new decade.”

Fourth Quarter 2009 Results

The 1% increase in fourth quarter 2009 net sales consisted of a 5% increase in U.S. net sales to $215.5 million and 16% growth in LAAP region net sales to $72.9 million, including an 11 percentage point benefit from foreign currency exchange rates, compared with the fourth quarter of 2008. These increases were partially offset by a 23% decline in EMEA region net sales to $46.2 million, including a 5 percentge point benefit from changes in foreign currency exchange rates, and a 12% decline in Canada net sales to $23.7 million, including a 5 percentage point benefit from foreign currency.

Compared with the fourth quarter of 2008, fourth quarter 2009 footwear net sales increased 19% to $70.9 million, accessories and equipment net sales increased 38% to $22.9 million, and outerwear net sales were essentially equal at $171.5 million, while sportswear net sales declined 13% to $93.0 million.

Compared with the fourth quarter of 2008, fourth quarter 2009 Sorel brand sales increased 27% to $29.0 million and Mountain Hardwear brand sales increased 19% to $28.9 million, while Columbia brand net sales declined 2% to $298.6 million. Combined, net sales of Montrail and Pacific Trail brand products did not comprise a significant%age of sales in the fourth quarter of either year.

The company ended the year with $409.4 million in cash and short-term investments, compared with $253.1 million at Dec. 31, 2008. Accounts receivable at Dec. 31, 2009 of $226.5 million were down $73.1 million, or 24%, compared with $299.6 million at Dec. 31, 2008. Inventories at Dec. 31, 2009 totaled $222.2 million, down $34.1 million, or 13%, compared with Dec. 31, 2008, and down $79.3 million, or 26%, compared with September 30, 2009.

Fiscal 2009 Results

2009 net sales totaled $1.24 billion, a decrease of 6% from net sales of $1.32 billion for 2008, including a 1 pecentage point negative effect from changes in foreign currency exchange rates.

Net income for 2009 totaled $67.0 million, or $1.97 per diluted share, compared to net income of $95.0 million, or $2.74 per diluted share, for 2008, which included a pre-tax, non-cash impairment charge of approximately $24.7 million, or 46 cents per share after tax.

2009 EMEA net sales decreased 26%, to $197.4 million, including a 3 percentage point negative effect from changes in foreign currency exchange rates, compared with 2008; Canada net sales decreased 15%, to $106.5 million, including a 7 percentage point negative currency effect. U.S. net sales increased 1%, to $736.9 million, and LAAP net sales increased 3%, to $203.2 million, including a 2 percentage point benefit from foreign currencies, compared with 2008.

Compared with 2008, fiscal year 2009 sportswear net sales declined 13% to $472.5 million, outerwear net sales declined 2% to $482.5 million, and footwear net sales decreased 1% to $214.6 million, while equipment and accessories net sales increased 9% to $74.4 million.

2009 Columbia brand net sales decreased 8%, to $1.07 billion, while Sorel net sales increased 26% to $60.6 million and Mountain Hardwear net sales increased 6% to $100.5 million, compared with 2008. Combined Montrail and Pacific Trail net sales decreased 18% to $10.4 million, compared with 2008.

Q1 2010 Outlook

Anticipated incremental direct-to-consumer sales, partially offset by the 5% decline in Spring wholesale backlog that we announced in October 2009, leads us to expect a 4 to 5% increase in consolidated net sales for the first quarter of 2010 compared with net sales of $272.0 million for the first quarter of 2009. This anticipated sales increase includes approximately 4 percentage points of foreign currency benefit.

2010 first quarter gross margins are expected to improve by approximately 2 percentage points compared with first quarter 2009 due to a smaller proportion of low-margin sales of excess Fall inventory.

                       COLUMBIA SPORTSWEAR COMPANY
             CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                 (In thousands, except per share amounts)
                               (Unaudited)


                                Three Months          Twelve Months
                             Ended December 31,    Ended December 31,
                             ——————  ———————-

                               2009      2008       2009        2008
                             ——–  ——–  ———-  ———-

  Net sales                  $358,316  $354,910  $1,244,023  $1,317,835
  Cost of sales               207,639   205,472     719,945     750,024
                             ——–  ——–  ———-  ———-
  Gross profit                150,677   149,438     524,078     567,811
                                42.1%     42.1%       42.1%       43.1%

  Selling, general, and
   administrative expenses    126,276   114,358     444,715     430,350
  Impairment of acquired
   intangible assets               —    24,742          —      24,742

  Net licensing income          3,116     2,084       8,399       5,987
                             ——–  ——–  ———-  ———-
  Income from operations       27,517    12,422      87,762     118,706


  Interest income, net            289     1,147       2,088       7,537
                             ——–  ——–  ———-  ———-
  Income before income tax     27,806    13,569      89,850     126,243

  Income tax benefit
   (expense)                  (4,720)     4,988    (22,829)    (31,196)
                             ——–  ——–  ———-  ———-

  Net income                  $23,086   $18,557     $67,021     $95,047
                             ========  ========  ==========  ==========

  Earnings per share:
  Basic                         $0.68     $0.55       $1.98       $2.75
  Diluted                        0.68      0.55        1.97        2.74
  Weighted average shares
   outstanding:
  Basic                        33,759    33,866      33,846      34,610
  Diluted                      33,942    33,960      33,981      34,711