Columbia Sportswear announced net sales of $409.8 million for the quarter ended September 30, 2005, a decrease of 1.4% from net sales of $415.8 million for the same period last year. The company concluded various income tax audits of several tax years that resulted in a non- recurring $5.6 million reduction in third quarter accrued income taxes. Net income for the third quarter was $66.5 million, a 3.1% decrease compared to net income of $68.6 million for the same period of 2004. Earnings per share for the third quarter of 2005 were $1.74 (diluted) on 38.1 million weighted average shares, compared to earnings per share of $1.68 (diluted) for the third quarter of 2004 on 40.9 million weighted average shares.
Compared to the third quarter of 2004, Other International sales increased 16.5% to $50.2 million, European sales increased 5.6% to $62.1 million, Canadian sales increased 6.3% to $52.6 million, and U.S. sales decreased 7.4% to $244.9 million for the third quarter of 2005.
Excluding changes in currency exchange rates, Other International sales increased 15.0%, European sales increased 4.7%, and Canadian sales decreased 3.0% for the third quarter of 2005. Consolidated net sales for the third quarter of 2005 decreased 2.8%, excluding changes in currency exchange rates, compared to the same period of last year.
For the third quarter of 2005, sportswear sales increased 16.0% to $125.7 million, footwear sales increased 1.8% to $63.8 million, equipment sales increased 5.9% to $1.8 million, accessories sales decreased 8.1% to $17.1 million, and outerwear sales decreased 10.2% to $201.4 million compared to the third quarter of 2004.
Tim Boyle, Columbia's president and chief executive officer, commented, “As expected from the fall sales order backlog reported last April, third quarter outerwear and footwear sales were disappointing, offset by increases in sportswear. The competitive environment in our core U.S. outerwear business is intense, and U.S. retail consolidation continues to impact our business. Also as expected, third quarter European sales were weak in our German and Scandinavian markets. We are making investments in these areas to strengthen the core Columbia brand and improve our performance in these key markets.”
Backlog
The company reported that as of September 30, 2005, spring backlog increased 5.8% to $359.3 million, compared to spring backlog of $339.5 million at September 30, 2004. Consolidated product backlog at September 30, 2005 was $588.8 million, an increase of 0.5% compared to consolidated product backlog of $586.0 million on September 30, 2004.
Mr. Boyle commented, “Orders for spring products increased in all geographic regions, but growth did not meet our expectations. Footwear orders in the U.S. and Europe were the biggest disappointment in the spring order book. While the timing of the receipt of some orders crossed into the fourth quarter, footwear orders were primarily impacted by intense competition. To meet the competitive challenge, our new Vice President of Footwear and his team are focused on designing, merchandising and developing creative, outdoor- inspired footwear products and styles. We believe these product initiatives will support sales growth in this key category in future seasons.”
Share Repurchase
The Board of Directors of Columbia has authorized the repurchase of up to an additional $200 million of Columbia common stock in market or negotiated transactions, in addition to the $35.9 million that remains available for repurchase pursuant to previous authorizations. The repurchase program does not obligate the company to acquire any specific number of shares or acquire shares over any specified period of time.
Guidance
Mr. Boyle continued, “As we look to the fourth quarter, we see continued gross margin challenges due to decreased sales of higher margin outerwear products and isolated supply chain issues. We currently anticipate fourth quarter 2005 revenue growth of approximately 1% and net income decline of approximately 18% to 21% compared to the fourth quarter of 2004. For the full year 2005, we reaffirm our prior guidance and continue to expect net sales growth of approximately 5%, and net income decline of approximately 9% to 10% compared to 2004.”
Mr. Boyle concluded, “Based in part on the reported spring backlog, we expect revenue growth for the first quarter of 2006 of approximately 4% and net income decline of approximately 17% (approximately 7% excluding stock options expense) compared to the first quarter of 2005. As a reminder, spring accounts for a relatively small percentage of our overall business; the bulk of our revenues and profits historically come in the second half of the year. Further out, it is difficult for us to gauge revenue and profitability levels until we gain more visibility into the fall 2006 season. We will provide full year 2006 financial guidance when we report our fall backlog results in April 2006. Please note that 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 Nine Months Ended
September 30, September 30,
2005 2004 2005 2004
Net sales $409,757 $415,759 $841,694 $793,531
Cost of sales 221,383 219,371 472,524 430,029
Gross profit 188,374 196,388 369,170 363,502
46.0% 47.2% 43.9% 45.8%
Selling, general, and
administrative 97,450 92,689 240,360 215,545
Net licensing income (1,163) (1,594) (2,786) (3,072)
Income from operations 92,087 105,293 131,596 151,029
Interest (income) expense, net (989) (1,022) (3,694) (2,873)
Income before income tax 93,076 106,315 135,290 153,902
Income tax provision 26,620 37,742 41,184 54,635
Net income $66,456 $68,573 $94,106 $99,267
Net income per share:
Basic $1.76 $1.70 $2.42 $2.46
Diluted 1.74 1.68 2.39 2.42
