Columbia Sportswear Company reported record net sales of $675.3 million for the quarter ended September 30, 2014, an increase of $152.2 million, or 29 percent, compared with net sales of $523.1 million for the same period in 2013. Third quarter operating income increased 28 percent to $98.3 million and net income grew 20 percent to $65.6 million, or $0.93 per diluted share.
“Im thrilled to announce these outstanding third quarter results which reflect strong performance by our Columbia and Sorel brands in North American wholesale and direct-to-consumer channels,” said Tim Boyle, Columbia’s president and chief executive officer. “In addition, strengthening of the Columbia brand in our Europe-direct markets and incremental sales from our new China JV and newly-acquired prAna brand further bolstered top-line growth.”
“In response to our strong year-to-date performance, we raised our full year 2014 financial outlook to anticipate consolidated net sales growth of approximately 22 percent and a 35 percent increase in net income. In addition, we raised our quarterly dividend for the second time this year, bringing the cumulative increase in the dividend during 2014 to 20 percent.
“We see solid momentum continuing into 2015, assuming seasonal weather prevails in key global markets. Our confidence is based on strong early Fall 2014 sell-through, coupled with growth in Spring 2015 advance wholesale orders, and our plans for continued growth in our direct-to-consumer channels.”
Boyle concluded, “The efforts of our global teams over the last several years to deliver meaningful innovation, performance and compelling styling through our products, while increasing our investments in demand creation, are resonating with wholesale customers and, more importantly, with consumers, positioning us to generate double-digit net sales growth again in 2015, and to make further progress toward our goal of mid-teen operating margin.”
Third Quarter Results
(All comparisons are between third quarter 2014 and third quarter 2013, unless otherwise noted.)
Third quarter consolidated net sales growth of $152.2 million included organic growth of approximately $73.3 million, or 14 percent, coupled with incremental net sales of approximately $50.7 million from the company’s China joint venture (JV) and approximately $28.2 million from the newly-acquired prAna brand. Changes in currency exchange rates negatively affected the year-over-year net sales comparison by less than 1 percentage point.
Net sales in the U.S. increased 26 percent to $406.3 million, including $28.2 million of incremental prAna net sales; Latin America/Asia Pacific (LAAP) region net sales increased 72 percent to $123.5 million, including $50.7 million of incremental sales from the company’s new China joint venture and a 1 percentage point benefit from changes in currency exchange rates; Europe/Middle East/Africa (EMEA) region net sales increased 1 percent to $78.8 million, including a 1 percentage point benefit from changes in currency exchange rates; and net sales in Canada increased 34 percent to $66.7 million, including a 6 percentage point negative effect from changes in currency exchange rates. (See “Geographical Net Sales” table below.)
Apparel, Accessories & Equipment net sales grew 28 percent to $549.4 million. Footwear net sales increased 33 percent to $125.9 million. (See “Categorical Net Sales” table below.)
Columbia brand net sales increased 29 percent to $555.4 million, Sorel brand net sales increased 23 percent to $58.2 million, and the newly-acquired prAna brand contributed $28.2 million of incremental net sales. Those increases were partially offset by a 24 percent decline in Mountain Hardwear net sales to $31.0 million. (See “Brand Net Sales” table below.)
Third quarter income from operations increased 28 percent to $98.3 million, or 14.6 percent of sales, including approximately $3.9 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. Excluding prAna’s operating results and the $3.9 million of expenses related to the prAna acquisition, adjusted operating income increased to 15.1 percent of net sales, compared with $76.9 million, or 14.7 percent of net sales, for the same period in 2013.
Third quarter net income increased 20 percent, to $65.6 million, or $0.93 per diluted share, compared with net income of $54.6 million, or $0.79 per diluted share, for the same period in 2013.
Balance Sheet and Cash Flow
The company ended the third quarter with $185.8 million in cash and short-term investments, compared with $303.2 million at September 30, 2013. Approximately 76 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.
Consolidated inventory totaled $494.8 million at September 30, 2014, approximately 21 percent higher than the $410.1 million balance at September 30, 2013. Excluding incremental inventory of the China JV and newly-acquired prAna, inventory was 9 percent higher than one year ago.
During the third quarter and through October 20, 2014, the company repurchased approximately 420,500 shares of common stock at an aggregate purchase price of approximately $15.0 million, including 54,600 shares ($2.0 million) purchased during the third quarter. Approximately $43.6 million remains under the current repurchase authorization, which does not obligate the company to acquire any specific number of shares or to acquire shares over any specified period of time.
Dividend
The board of directors authorized a 7 percent increase in the company’s regular quarterly dividend to $0.15 per share from the prior $0.14 per share, payable on December 4, 2014 to shareholders of record on November 20, 2014, bringing the cumulative increase in the dividend during 2014 to 20 percent.
Consolidated FY2014 Financial Outlook
Including prAna’s anticipated operating results for the June through December period, as well as non-recurring transaction costs of $3.4 million, and a total of approximately $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, we expect full year 2014 financial results to include:
- global net sales of approximately $2.06 billion, representing 22 percent growth over 2013 net sales of $1.68 billion.
- gross margin expansion of up to 130 basis points compared with 2013;
- SG&A expense leverage of up to 15 basis points compared with 2013;
- licensing income of approximately $6 million;
- operating margin of approximately 8.7 percent, compared with 2013 operating margin of 7.8 percent;
- a full year tax rate of approximately 27.0 percent;
- net income after non-controlling interest of approximately $127 million, or approximately $1.80 per diluted share, representing an increase of approximately 35 percent compared to $94.3 million, or $1.36 per diluted share, in 2013.
Preliminary FY2015 Financial Indications
We currently expect 2015 net sales to grow at a double-digit rate compared with our current 2014 net sales outlook of approximately $2.06 billion, and are planning the business to realize further improvement toward our long-term goal of returning to a mid-teen operating margin.
These expectations are based on the following preliminary factors, and assume that normal seasonal weather patterns prevail during the 2014 fall/winter season, and that macro and market conditions in key markets do not worsen materially:
- encouraging early Fall 2014 sell-through across our North American wholesale channels;
- increased advance wholesale and distributor orders for Spring 2015;
- our internal plans for continued expansion and growth in our global direct-to-consumer businesses;
- encouraging initial discussions about Fall 2015 purchasing plans of our wholesale partners and many of our international distributors.
| COLUMBIA SPORTSWEAR COMPANY | |||||||||||||||
|
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS |
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|
(In thousands, except per share amounts) |
|||||||||||||||
|
(Unaudited) |
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|
|
|
|
|
|
|
|
|
|
|
|
|
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|
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
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|
|
|
2014 |
|
|
|
2013 |
|
|
|
2014 |
|
|
|
2013 |
|
|
Net sales
|
$
|
675,296
|
|
|
$
|
523,084
|
|
|
$
|
1,423,626
|
|
|
$
|
1,151,886
|
|
|
Cost of sales
|
|
368,515
|
|
|
|
290,735
|
|
|
|
775,734
|
|
|
|
645,949
|
|
|
Gross profit
|
|
306,781
|
|
|
|
232,349
|
|
|
|
647,892
|
|
|
|
505,937
|
|
|
|
|
45.4
|
%
|
|
|
44.4
|
%
|
|
|
45.5
|
%
|
|
|
43.9
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Selling, general and administrative expenses
|
|
210,659
|
|
|
|
162,951
|
|
|
|
536,214
|
|
|
|
437,789
|
|
|
Net licensing income
|
|
2,160
|
|
|
|
7,501
|
|
|
|
5,066
|
|
|
|
11,482
|
|
|
Income from operations
|
|
98,282
|
|
|
|
76,899
|
|
|
|
116,744
|
|
|
|
79,630
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Interest income, net
|
|
238
|
|
|
|
56
|
|
|
|
861
|
|
|
|
403
|
|
|
Interest expense on note payable to related party
|
(282
|
)
|
|
|
–
|
|
|
|
(769
|
)
|
|
|
–
|
|
|
|
Other non-operating income (expense)
|
|
666
|
|
|
|
417
|
|
|
|
161
|
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