Columbia Sportswear Company reported net sales grew 27.0 percent to a record $677.0 million in the fourth quarter, as sales from Prana and its new joint venture in China padded 15 percent organic sales growth.
Fourth quarter 2014 net income totaled $55.6 million, or $0.79 per diluted share, a 51 percent increase compared with fourth quarter 2013 net income of $36.7 million, or $0.53 per diluted share.
Full year 2014 net sales increased $415.6 million, or 25 percent, to $2.1 billion and operating income increased 51 percent to $198.8 million, representing operating margin of 9.5 percent compared with operating margin of 7.8 percent in 2013. Full year 2014 net income increased 45 percent to $137.2 million, or $1.94 per diluted share, compared with full year 2013 net income of $94.3 million, or $1.36 per diluted share.
“2014 was an outstanding year for Columbia Sportswear Company, reflecting strong momentum in North America in the Columbia, Sorel and Prana brands,” said Tim Boyle, Columbia’s president and chief executive officer. “In addition, despite mild winter weather, we produced 10 percent growth in the Columbia brand in our Europe-direct markets, led by strong sales of trail footwear and outerwear.
“Net sales growth of 25 percent, operating income growth of 51 percent, a healthy 170 basis point improvement in operating margin, and a 45 percent increase in net income are validation of the strategies we are executing to drive growth and improved profitability through our portfolio of brands for active lives. What I am most proud of is that the Columbia and Sorel brands drove double-digit top-line growth and accounted for virtually all of our operating income growth in 2014.
The company reaffirmed its preliminary net sales outlook for 2015 first issued last October. It still expects the Columbia, Sorel and Prana brands to be the primary drivers of sales growth, concentrated in North America and Europe-direct markets, offsetting the anticipated effects of a stronger U.S. dollar on other international businesses. Operating profit is expected to grow at a rate faster than sales growth and earnings per share to increase to between $2.10 and $2.20.
“Although recent macro-economic trends, geo-political issues, West Coast port disruptions, and a stronger U.S. dollar pose near-term challenges, we enter 2015 with excellent momentum behind our brands, fueling our expectations that 2015 will be another year of record net sales, and also a record year for net income,” Boyle said.
Fourth quarter results
Consolidated net sales increased $143.9 million, or 27 percent, to $677.0 million compared with net sales of $533.1 million for the same period in 2013. Organic growth equated to approximately $79.8 million, or 15 percent, while incremental net sales of approximately $44.1 million from the company’s China joint venture (JV) and approximately $20.0 million from the newly-acquired Prana brand contributed the remainder of the fourth quarter net sales growth. Changes in currency exchange rates had a 2 percentage point negative effect on the net sales comparison.
U.S. net sales increased $96.7 million, or 31 percent, including $20.0 million of incremental Prana net sales. Latin America/Asia Pacific (LAAP) region net sales increased 31 percent to $155.2 million, including $44.1 million of incremental sales from the company’s new China JV and a 5 percentage point negative effect from changes in currency exchange rates. Europe/Middle East/Africa (EMEA) region net sales were essentially unchanged from the same period in 2013, including a 2 percentage point negative effect from changes in foreign currency exchange rates. Net sales in Canada increased $10.4 million, or 27 percent, including a 9 percentage point negative effect from changes in currency exchange rates. (See “Geographical Net Sales” table below.)
Columbia brand net sales increased $100.1 million, or 23 percent, to $527.9 million. Sorel brand net sales grew $26.1 million, or 40 percent, to $92.1 million. The newly-acquired Prana brand contributed $20.0 million of incremental net sales. These increases were partially offset by a $2.7 million, or 7 percent, decline in Mountain Hardwear net sales to $34.6 million. (See “Brand Net Sales” table below.)
Apparel, Accessories & Equipment net sales increased $94.1 million, or 23 percent, to $510.1 million. Footwear net sales increased $49.8 million, or 43 percent, to $166.9 million. (See “Categorical Net Sales” table below.)
Fourth quarter income from operations increased 57 percent to $82.1 million, representing 12.1 percent of net sales, including approximately $2.1 million of amortization of certain acquired assets and other integration costs related to the Prana acquisition. Excluding Prana’s operating results and the $2.1 million of expenses related to the Prana acquisition, adjusted operating income totaled $85.2 million, or 13.0 percent of net sales, compared with $52.2 million, or 9.8 percent of net sales, for the same period in 2013.
Fourth quarter net income increased 51 percent to $55.6 million, or $0.79 per diluted share. Net income for same period in 2013 totaled $36.7 million, or $0.53 per diluted share.
Fiscal Year 2014 results
Consolidated 2014 net sales increased $415.6 million, or 25 percent, to $2.1 billion, compared with 2013 net sales of $1.68 billion. Organic growth equated to approximately $200.5 million, or 12 percent, while incremental net sales of approximately $161.4 million from the company’s China JV and approximately $53.7 million from the newly-acquired Prana brand contributed the remainder of the year’s net sales growth. Changes in currency exchange rates had a 1 percentage point negative effect on the net sales comparison.
U.S. net sales increased $227.1 million, or 23 percent, to $1.2 billion, including $53.7 million of incremental Prana net sales. LAAP region net sales increased $137.2 million, or 39 percent, to $491.6 million, including $161.4 million of incremental sales from the company’s new China joint venture and a 2 percentage point negative effect from changes in currency exchange rates. EMEA region net sales increased $18.5 million, or 8 percent, including a 1 percentage point benefit from changes in foreign currency exchange rates. Net sales in Canada increased $32.8 million, or 28 percent, including an 8 percentage point negative effect from changes in currency exchange rates. (See “Geographical Net Sales” table below.)
Columbia brand net sales increased $337.4 million, or 24 percent, to $1.75 billion. The newly-acquired Prana brand contributed $53.7 million of incremental net sales. Sorel brand net sales grew $37.5 million, or 29 percent, to $166.2 million. These increases were partially offset by a $12.7 million, or 10 percent, decline in Mountain Hardwear net sales to $119.8 million. (See “Brand Net Sales” table below.)
Apparel, Accessories & Equipment net sales increased $301.6 million, or 22 percent, to $1.68 billion. Footwear net sales increased $114.0 million, or 37 percent, to $424.4 million. (See “Categorical Net Sales” table below.)
Full year 2014 income from operations increased 51 percent to $198.8 million, or 9.5 percent of net sales, including approximately $3.4 million of transaction costs and $7.6 million of amortization of certain acquired assets, costs associated with the step-up in acquired inventory, and other integration costs related to the Prana acquisition.
Full year 2014 net income totaled $137.2 million, or $1.94 per diluted share, an increase of 45 percent compared with 2013 net income of $94.3 million, or $1.36 per diluted share.
Balance sheet and cash flow
During the year ended Dec. 31, 2014, the company generated $185.8 million in operating cash flow, paid $188.5 million in cash to acquire the Prana brand, invested $60.3 million in capital expenditures, and returned $54.8 million to shareholders through dividends and share repurchases, ending the year with $440.8 million in cash and short-term investments, compared with $529.2 million at Dec. 31, 2013. Approximately 43 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.
Outlook
The company currently expects high single-digit 2015 net sales growth (low double-digit growth on a constant-dollar basis) compared to 2014 net sales of $2.1 billion. The company expects fiscal year 2015 gross margins to improve by approximately 20 basis points, and for selling, general and administrative expenses to increase at a rate comparable to anticipated sales growth.
Based on the above assumptions, the company expects low double-digit growth in operating income, resulting in 2015 operating margin of approximately 9.7 percent, and net income after non-controlling interest of approximately $150 million to $157 million, or approximately $2.10 to $2.20 per diluted share. The per-share amounts are based on outstanding shares that reflect the two-for-one stock split which took effect after the close of business on September 26, 2014.
Columbia estimates that the strengthening of the U.S. dollar will have an unfavorable impact of approximately $0.13 on full year 2015 earnings per share, comprising increased costs of inventory for our foreign subsidiaries and the resulting effect on gross margin, and to a lesser degree the translation of net income.
| COLUMBIA SPORTSWEAR COMPANY | |||||||||||||||||||
| (In millions, except percentage changes) | |||||||||||||||||||
| (Unaudited) | |||||||||||||||||||
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Three Months Ended December 31, | Twelve Months Ended December 31, | |||||||||||||||
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2014 |
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2013 |
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% Change |
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2014 |
|
2013 |
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% Change | ||||||
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| Geographical Net Sales: |
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United States |
|
$ |
404.6 |
|
$ |
307.9 |
|
31 |
% |
|
$ |
1,198.4 |
|
$ |
971.3 |
|
23 |
% |
|
|
Latin America & Asia Pacific |
|
|
155.2 |
|
|
118.1 |
|
31 |
% |
|
|
491.6 |
|
|
354.4 |
|
39 |
% |
|
|
Europe, Middle East, & Africa |
|
|
68.3 |
|
|
68.6 |
|
– |
|
|
|
259.2 |
|
|
240.7 |
|
8 |
% |
|
|
Canada |
|
48.9 |
|
38.5 |
|
27 |
% |
|
151.4 |
|
118.6 |
|
28 |
% |
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|
|
Total |
|
$ |
677.0 |
|
$ |
533.1 |
|
27 |
% |
|
$ |
2,100.6 |
|
$ |
1,685.0 |
|
25 |
% |
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| Brand Net Sales: |
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Columbia |
|
$ |
527.9 |
|
$ |
427.8 |
|
23 |
% |
|
$ |
1,750.3 |
|
$ |
1,412.9 |
|
24 |
% |
|
|
Sorel |
|
|
92.1 |
|
|
66.0 |
|
40 |
% |
|
|
166.2 |
|
|
128.7 |
|
29 |
% |
|
|
Mountain Hardwear |
|
|
34.6 |
|
|
37.3 |
|
(7 |
)% |
|
|
119.8 |
|
|
132.5 |
|
(10 |
)% |
|
|
prAna |
|
|
20.0 |
|
|
– |
|
– |
|
|
|
53.7 |
|
|
– |
|
– |
|
|
|
Other |
|
2.4 |
|
2.0 |
|
20 |
% |
|
10.6 |
|
10.9 |
|
(3 |
)% |
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|
|
Total |
|
$ |
677.0 |
|
$ |
533.1 |
|
27 |
% |
|
$ |
2,100.6 |
|
$ |
1,685.0 |
|
25 |
% |
|
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