Columbia Sportswear Co. reported net income increased 38 percent to $12.8 million, or 37 cents per share, compared to net income of $9.2 million, or 27 cents, for the first quarter of 2010. Sales increased 11 percent to $333.1 million from $300.4 million a year ago.

The overall sales gain includes a 2 percentage point positive effect from changes in foreign currency exchange rates.

As of Mar. 31, 2011, Fall 2011 wholesale backlog was a record $860.8 million, 19 percent higher than Fall 2010 wholesale backlog of $725.3 million, including a 2 percentage point positive effect from changes in foreign currency exchange rates.

Tim Boyle, Columbia’s president and chief executive officer, commented, “Our strong first quarter results and record Fall 2011 wholesale backlog clearly indicate that the innovations, enhanced designs and compelling marketing communications behind each of our major brands are resonating with customers and consumers around the world.”

Boyle continued, “Fall 2011 wholesale backlog growth of $135.5 million included increases in each of our four major brands, geographic regions and product categories, and showed a favorable shift toward our innovative products. The Columbia brand’s Fall wholesale backlog grew low double-digits as advance orders for Omni-Heat styles more than doubled from Fall 2010 and Columbia footwear contributed high-teens percentage growth. In addition, the Sorel brand continued to expand with existing wholesale customers while also adding hundreds of high-quality specialty footwear customers around the world, causing Sorel’s Fall wholesale backlog to jump more than 80 percent.

“Fall 2011 wholesale backlog in our Europe, Middle East, Africa (EMEA) region grew more than 50 percent as our brands gain momentum in this key region. U.S. backlog increased low double-digits, driven by growth in the Sorel and Columbia brands. The Latin America & Asia Pacific (LAAP) region backlog increased more than 30 percent, including growth in Japan. Although we have tempered our FY2011 outlook in response to Japan’s March 11 disasters, the response of our Japan management team has been commendable and we remain cautiously optimistic that the LAAP region will produce growth for the full year.”

Boyle concluded, “These results are strong evidence of the increasing strength of our portfolio of global outdoor brands.”

First Quarter 2011 Results

First quarter net sales increased 11 percent, driven by 8 percent growth in Columbia brand net sales to $288.1 million, 158 percent growth in Sorel brand net sales to $10.3 million and a 24 percent increase in Mountain Hardwear brand net sales to $31.7 million.

First quarter U.S. net sales grew 11 percent to $192.5 million, driven primarily by increased direct-to-consumer sales. The LAAP region net sales grew 20 percent to $67.3 million, including a 7 percentage point benefit from changes in foreign currency exchange rates. Canada net sales increased 19 percent to $28.9 million, including an 8 percentage point benefit from changes in exchange rates. These increases were partially offset by a 5 percent decline in EMEA region net sales to $44.4 million, including a 1 percentage point negative effect from changes in exchange rates. As referenced in the company’s fourth quarter 2010 results reported in January 2011, the decline in first quarter EMEA net sales reflected more timely production of Spring 2011 advance orders, which enabled a higher proportion of those orders to be shipped to independent distributors in the fourth quarter of 2010, compared with a higher proportion of shipments of Spring 2010 advance orders shipped in the first quarter of 2010.

First quarter 2011 sportswear net sales increased 5 percent to $154.2 million, outerwear net sales increased 13 percent to $98.8 million, footwear net sales increased 18 percent to $54.4 million, and accessories and equipment net sales increased 27 percent to $25.7 million.

Balance Sheet

The company ended the quarter with $335.3 million in cash and short-term investments, compared with $303.1 million at December 31, 2010 and $415.8 million at March 31, 2010.

Consolidated inventories increased 36 percent to $303.1 million at March 31, 2011, compared with $222.7 million at March 31, 2010. This increase was anticipated due to the following factors previously disclosed in January, 2011:

    * a larger volume of excess Fall 2010 season inventory designated for sale primarily through the company’s retail outlet stores during the second half of 2011,
    * higher Spring 2011 inventory compared to Spring 2010, reflecting the increased Spring 2011 wholesale backlog, and
    * incremental inventory to support increased direct-to-consumer sales.

Fall 2011 Wholesale Backlog

As of March 31, 2011, Fall 2011 wholesale backlog increased $135.5 million to a record $860.8 million, 19 percent higher than Fall 2010 wholesale backlog of $725.3 million, including a 2 percentage point positive effect from changes in foreign currency exchange rates.

Each of the company’s four major brands contributed to the backlog growth. The Columbia and Sorel brands were the largest contributors, posting increases of low double-digits and more than 80 percent, respectively. The Mountain Hardwear and Montrail brands grew high single-digits and more than 70 percent, respectively.

EMEA region Fall wholesale backlog increased more than 50 percent, including a mid single-digit percentage benefit from exchange rates. U.S. Fall wholesale backlog increased low double digits. LAAP region Fall wholesale backlog increased mid-thirty percent, including growth from Japan and a high single-digit percentage point benefit from changes in foreign currency exchange rates. Canada Fall wholesale backlog contributed a mid single-digit percentage increase, primarily reflecting changes in exchange rates.

Global Fall footwear wholesale backlog increased more than 50 percent. All three of the company’s footwear brands contributed to the growth, led by the more than 80 percent growth in Sorel brand backlog and high-teens growth from the Columbia brand. Global Fall apparel, accessories and equipment wholesale backlog increased low double-digits, driven primarily by the Columbia brand.

Consolidated wholesale backlog, which includes both global Spring and Fall orders at March 31, 2011, was $990.3 million, an increase of $118.2 million, or 14 percent, including a 3 percentage point benefit from changes in foreign currency exchange rates, compared to 2010 consolidated wholesale backlog of $872.1 million.

2011 Financial Outlook

The company anticipates improved operating margins in fiscal 2011 compared with fiscal 2010, driven by:

    * an expected net sales increase of 14 to 16 percent compared with 2010, based primarily on actual first quarter results, the 19 percent increase in Fall 2011 order backlog, anticipated incremental direct-to-consumer sales, and the estimated effect of changes in foreign currency exchange rates;
    * an approximate 100 basis point increase in gross margins compared to 2010 gross margins of 42.4 percent, due primarily to lower anticipated costs to airfreight Fall orders, and an increased proportion of direct-to-consumer sales, partially offset by lower product margins reflecting higher manufacturing costs not fully absorbed through increased prices; and
    * increased licensing income; partially offset by
    * an estimated 50 basis point increase in selling, general and administrative expenses (SG&A) as a percentage of sales due to incremental costs related to various information technology initiatives, including costs for the company’s multi-year ERP implementation, the anniversary effect of actual 2010 and anticipated 2011 personnel investments to support business initiatives and growth, and the translation effect of foreign currencies, partially offset by reduced selling expenses as a percentage of net sales.

As a result, full year 2011 operating margin is expected to increase approximately 50 to 70 basis points compared with 2010 operating margin of 7.0 percent. The company is currently planning for a full-year income tax rate of approximately 27 percent.

The company’s annual net sales are weighted more heavily toward the fall/winter season, while operating expenses are more equally distributed throughout the year, resulting in a highly seasonal profitability pattern weighted toward the second half of the fiscal year. This seasonality is expected to result in operating margin deleverage during the first half of 2011, more than offset by operating margin leverage in the second half of 2011.

The second quarter is the company’s lowest volume quarter of the year, which amplifies the effect on income of changes in the timing of shipments and the incremental fixed costs of the company’s operations. Consequently, the company expects to incur a higher operating loss in the second quarter of 2011 compared to the second quarter of 2010.

For the second quarter of 2011, the company expects a mid- to high-teens percentage increase in net sales compared with second quarter 2010, reflecting the previously disclosed 12 percent increase in Spring 2011 wholesale backlog, anticipated favorable timing shifts of shipments of Fall 2011 advance orders due to more timely production, and increased direct-to-consumer sales.

The company expects second quarter 2011 operating loss of approximately $22 million to $24 million, with a 200 basis point contraction of gross margins, and up to 100 basis points of SG&A expense expansion as a percentage of net sales, partially offset by an increase in licensing income. The expected contraction in second quarter gross margin is due to an expected higher proportion of distributor shipments, which carry lower gross margins, product mix shift, and a higher proportion of closeout product sales at lower gross margins, compared to the second quarter of 2010.

All projections related to anticipated future results are forward-looking in nature and are based on existing and anticipated backlog and forecasts, which may change, perhaps significantly.

Dividend

The board of directors authorized an increase in the quarterly dividend of $0.02 per share, or 10 percent, to $0.22 per share, payable on June 2, 2011 to shareholders of record on May 19, 2011.

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

           

 








Three Months Ended March 31,







  2011  
  2010  











 
Net sales





$ 333,086

$ 300,406
Cost of sales






183,550  

173,102  
Gross profit






149,536


127,304








44.9 %

42.4 %











 
Selling, general, and administrative expenses





134,147


115,539
Net licensing income






2,531  

725  
Income from operations






17,920


12,490











 
Interest income, net






323  

534  
Income before income tax






18,243


13,024











 
Income tax expense






(5,473 )

(3,796 )
Net income





$ 12,770  
$ 9,228  











 
Earnings per share:










Basic





$ 0.38

$ 0.27
Diluted






0.37


0.27
Weighted average shares outstanding:










Basic






33,799


33,733
Diluted






34,288


33,990