Market Overview

Columbia Sportswear Company Reports First Quarter 2018 Financial Results; Raises Full Year 2018 Financial Outlook

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Columbia Sportswear Company (NASDAQ:COLM):

Throughout this press release, references to non-GAAP financial
measures in the first quarter of 2018 exclude $8.3 million in net sales,
gross profit and
selling, general and administrative ("SG&A")
expenses associated with adoption of Accounting Standards Codification -
ASC 606 (hereinafter referred to as the "new revenue accounting
standard"), $11.0 million in Project CONNECT program expenses and
discrete costs ($8.4 million net of tax), and $1.0 million in
incremental provisional income tax expense related to the Tax Cuts and
Jobs Act (the "TCJA"). References to non-GAAP financial measures in the
first quarter of 2017 exclude $1.3 million in Project CONNECT program
expenses and discrete costs ($0.9 million net of tax).

First Quarter 2018 GAAP Highlights:

  • Net sales increased 12 percent (8 percent constant-currency) to a
    record $607.3 million.
  • Gross margin increased 180 basis points to a record 49.3 percent.
  • Operating income increased 24 percent to a record $59.3 million,
    representing 100 basis points of operating margin expansion to 9.8
    percent of net sales.
  • Net income increased 25 percent to a record $45.1 million, or $0.64
    per diluted share.
  • Inventories increased 2 percent to $406.0 million.
  • Cash and short-term investments totaled $808.2 million at March 31,
    2018.
  • The company repatriated $219.6 million of foreign cash to the United
    States in early April 2018.
  • The board of directors approved a regular quarterly dividend
    of $0.22 per share.

First Quarter 2018 non-GAAP Highlights:

  • Non-GAAP net sales increased 10 percent (7 percent constant-currency)
    to $599.0 million.
  • Non-GAAP gross margin increased 110 basis points to 48.6 percent.
  • Non-GAAP operating income increased 43 percent to $70.3 million,
    representing 260 basis points of operating margin expansion to 11.7
    percent of net sales.
  • Non-GAAP net income increased 48 percent to $54.5 million, or $0.77
    per diluted share.

Updated Full Year 2018 Financial Outlook Summary

 
      Full Year 2018 (U.S. Dollar)
GAAP   Non-GAAP*
Net sales growth

8.0% to 10.0%
(prior 5.5% to 7.5%)

6.5% to 8.5%
(prior 4.0% to 6.0%)

Gross margin expansion up to 140 bps up to 60 bps
SG&A expense deleverage

150 bps to 170 bps
(prior 170 bps to 190 bps)

30 bps to 50 bps
(prior 40 bps to 50 bps)

Income from operations

$275 to $285 million
(prior $263 to $273 million)

$299 to $308 million
(prior $290 to $300 million)

Operating margin

10.3% to 10.5%
(prior 10.1% to 10.3%)

11.4% to 11.5%
(prior 11.3% to 11.5%)

Licensing Income

up to $14.0 million
(prior up to $13.5 million)

up to $14.0 million
(prior up to $13.5 million)

Effective income tax rate approximately 22%** approximately 22%**
Net income

$213 to $220 million
(prior $203 to $211 million)

$231 to $238 million
(prior $224 to $231 million)

Diluted earnings per share

$3.01 to $3.11
(prior $2.88 to $2.98)

$3.27 to $3.37
(prior $3.17 to $3.27)

 

* Our updated full year 2018 non-GAAP financial outlook excludes net
sales of approximately $40 million, with an offsetting increase in SG&A
expenses of approximately $40 million associated with the new revenue
accounting standard, as well as Project CONNECT program expenses and
discrete costs of approximately $23 million, $18 million net of tax,
or $0.25 per diluted share (prior $27 million, $21 million net of tax,
or $0.29 per diluted share).

** Our updated full year 2018 financial outlook anticipates an estimated
full-year effective income tax rate of approximately 22 percent, which
may be affected by further refinement of our 2017 provisional TCJA
estimates, as well as changes in our geographic mix of pre-tax income
and other discrete events that may occur during the year. In the first
quarter of 2018, we incurred $1.0 million, or $0.01 per diluted share,
in incremental provisional income tax expense related to the TCJA.

For more information on our non-GAAP financial measures and a
reconciliation of GAAP to non-GAAP measures, please refer to the
"Supplemental Financial Information" tables provided in this press
release.

Columbia Sportswear Company (NASDAQ:COLM) today announced record net
sales of $607.3 million for the quarter ended March 31, 2018, an
increase of 12 percent (8 percent constant-currency), compared with net
sales of $543.8 million for the first quarter of 2017. Non-GAAP net
sales of $599.0 million increased 10 percent (7 percent
constant-currency).

First quarter 2018 net income increased 25 percent to a record $45.1
million, or $0.64 per diluted share, compared with first quarter 2017
net income of $36.0 million, or $0.51 per diluted share. Non-GAAP first
quarter 2018 net income increased 48 percent to $54.5 million, or $0.77
per diluted share, compared with non-GAAP first quarter 2017 net income
of $36.9 million, or $0.52 per diluted share.

President and Chief Executive Officer Tim Boyle commented, "We are
pleased to report better than expected first quarter net sales and
profitability led by strength in our direct-to-consumer ("DTC")
businesses, growth in our wholesale businesses, including a return to
growth in U.S. wholesale, and the favorable effect of strengthening
foreign currencies relative to the U.S. dollar. Gross margin exceeded
expectations, and we maintained SG&A discipline while continuing to
invest in our strategic priorities."

"We are also pleased to increase our full year 2018 financial outlook as
a result of better than expected first quarter net sales and
profitability, higher than initially planned Fall 2018 advance wholesale
orders, including continued improvement in U.S. wholesale net sales
across all of our brands, and the favorable effect of strengthening
foreign currencies relative to the U.S. dollar. When considering our
plans for the balance of the year, we have made the decision to
accelerate investment in our strategic priorities."

"First quarter 2018 net sales and earnings results, as well as healthy
advance orders for Fall 2018 across our regions demonstrate the power of
our global brands and our initiatives to become a more brand-led and
consumer-focused organization. Our powerful balance sheet, with $808.2
million in cash and short-term investments, and no long-term debt,
provides the flexibility to invest in the business as our major markets
evolve. It is from this position of strength and confidence that we are
accelerating investment in our strategic priorities to:

  • drive brand awareness and sales growth through increased, focused
    demand creation investments;
  • enhance consumer experience and digital capabilities in all our
    channels and geographies;
  • expand and improve global direct-to-consumer operations with
    supporting processes and systems; and
  • invest in our people and optimize our organization across our
    portfolio of brands."

First Quarter 2018 Financial Results

(All comparisons are between first quarter 2018 and first quarter 2017,
unless otherwise noted).

Net Sales

First quarter 2018 consolidated net sales increased 12 percent (8
percent constant-currency) to a record $607.3 million. Non-GAAP net
sales increased 10 percent (7 percent constant-currency) to $599.0
million.

Geographies (See "Geographical Net Sales" table below)

  • U.S. net sales increased 9 percent, attributable to high-teens percent
    growth in DTC and low-single-digit percent growth in wholesale. The
    company operated 130 U.S. retail stores at March 31, 2018 compared
    with 120 at the same time last year.
  • Latin America Asia Pacific ("LAAP") net sales increased 11 percent (5
    percent constant-currency) primarily due to the effect of the new
    revenue accounting standard. LAAP non-GAAP net sales increased 4
    percent (2 percent decrease constant-currency) driven by growth in
    Japan, China, and Korea, partially offset by declines in LAAP
    distributor net sales.
  • Europe Middle East and Africa ("EMEA") net sales increased 30 percent
    (15 percent constant-currency) primarily driven by low-30 percent
    growth (mid-teens percent constant-currency) in Europe-direct and
    modest growth with EMEA distributors.
  • Canada net sales increased 11 percent (6 percent constant-currency),
    largely driven by DTC.

Brands (See "Brand Net Sales" table below)

  • Columbia brand net sales increased 13 percent (10 percent
    constant-currency) to $508.8 million.
  • SOREL brand net sales increased 13 percent (10 percent
    constant-currency) to $30.8 million.
  • prAna brand net sales increased 9 percent to $42.3 million.
  • Mountain Hardwear brand net sales decreased 12 percent (14 percent
    decrease constant-currency) to $24.4 million.

Product Categories (See "Product Category Net Sales" table below)

  • Apparel, Accessories and Equipment net sales increased 11 percent (9
    percent constant-currency) to $490.0 million.
  • Footwear net sales increased 13 percent (8 percent constant-currency)
    to $117.3 million.

Channels (See "Channel Net Sales" table below)

  • Wholesale net sales increased 5 percent (1 percent constant-currency)
    to $343.9 million.
  • DTC net sales increased 23 percent (20 percent constant-currency) to
    $263.4 million.

Profitability

Record first quarter 2018 operating income of $59.3 million, or 9.8
percent of net sales, increased 24 percent compared to operating income
of $48.0 million, or 8.8 percent of net sales, in the first quarter of
2017. Non-GAAP first quarter 2018 operating income increased 43 percent
to $70.3 million, or 11.7 percent of net sales, compared to non-GAAP
operating income of $49.3 million, or 9.1 percent of net sales, in the
first quarter of 2017.

Record first quarter 2018 net income increased 25 percent to $45.1
million, or $0.64 per diluted share, compared with net income of $36.0
million, or $0.51 per diluted share, in the first quarter of 2017.
Non-GAAP first quarter 2018 net income increased 48 percent to $54.5
million, or $0.77 per diluted share, compared with non-GAAP net income
of $36.9 million, or $0.52 per diluted share, in the first quarter of
2017.

Taxes

First quarter 2018 income tax expense was $12.6 million, resulting in an
effective income tax rate of 20.6 percent, compared to $9.8 million, or
20.1 percent, in the first quarter of 2017.

Excluding a $2.6 million income tax benefit associated with Project
CONNECT and $1.0 million in provisional income tax expense associated
with the TCJA, non-GAAP first quarter 2018 income tax expense was $14.2
million, resulting in an effective income tax rate of 19.6 percent.

Excluding a $0.4 million income tax benefit associated with Project
CONNECT, first quarter 2017 non-GAAP income tax expense was $10.2
million, resulting in an effective income tax rate of 20.4 percent.

Balance Sheet

At March 31, 2018, cash and short-term investments totaled $808.2
million, compared to $590.5 million at March 31, 2017.

The enactment of the TCJA and the resulting change to a territorial
taxation system provides us with significantly more flexibility to
repatriate foreign cash, and as a result we were able to repatriate
$219.6 million of foreign cash to the United States in early April 2018.

Consolidated inventories increased 2 percent to $406.0
million at March 31, 2018 compared to $398.8 million at March 31, 2017,
including an $18.2 million decrease driven by a balance sheet
reclassification of the estimated cost of inventory associated with
sales returns into prepaid and other current assets under the new
revenue accounting standard. Excluding the impact of this classification
change, consolidated inventories increased 6 percent compared to March
31, 2017.

Cash Flow, Share Repurchases and Dividends

Operating cash flow for the three months ended March 31, 2018 was $77.4
million, compared to $88.2 million in the three months ended March 31,
2017.

Capital expenditures totaled $12.3 million in the quarter ended March
31, 2018, compared to $11.3 million in the quarter ended March 31, 2017.

During the first quarter of 2018, the company repurchased 235,497 shares
of common stock for $18.1 million, or an average of $76.84 per share,
and paid $15.5 million in dividends.

At March 31, 2018, approximately $119.8 million remained available under
the current stock 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.

The board of directors authorized a regular quarterly cash dividend
of $0.22 per share, payable on May 31, 2018 to shareholders of record
on May 17, 2018.

Updated Full Year 2018 Financial Outlook

All projections related to anticipated future results are
forward-looking in nature and are subject to risks and uncertainties
which may cause actual results to differ, perhaps materially.
Projections are predicated on normal seasonal weather globally. In
addition, our updated full year 2018 financial outlook assumes that
current macroeconomic and market conditions in key markets do not worsen.

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 year.

The company currently expects 2018 net sales growth of approximately 8.0
to 10.0 percent (prior 5.5 to 7.5 percent), compared with 2017 net sales
of $2.47 billion. The company expects non-GAAP net sales growth of
approximately 6.5 to 8.5 percent (prior 4.0 to 6.0 percent) which
excludes approximately $40 million in net sales associated with the new
revenue accounting standard.

The company expects full year 2018 gross margin to improve by up to 140
basis points and non-GAAP gross margin to improve by up to 60 basis
points, excluding an approximately $40 million benefit to gross profit
associated with the new revenue accounting standard.

The company expects SG&A expenses to increase at a rate faster than net
sales, resulting in approximately 150 to 170 basis points of SG&A
expense deleverage (prior 170 to 190 basis points), and non-GAAP SG&A
expense deleverage of approximately 30 to 50 basis points (prior 40 to
50 basis points), excluding approximately $40 million in SG&A expenses
associated with the new revenue accounting standard, and approximately
$23 million (prior $27 million) in Project CONNECT program expenses and
discrete costs.

Based on the above assumptions, the company expects 2018 operating
income between approximately $275 million and $285 million (prior
between $263 million and $273 million), and non-GAAP operating income
between approximately $299 million and $308 million (prior between $290
million and $300 million), resulting in operating margin between
approximately 10.3 and 10.5 percent (prior between 10.1 and 10.3
percent), and non-GAAP operating margin between approximately 11.4 and
11.5 percent (prior between 11.3 and 11.5 percent).

The changes in revenue and expense classification associated with the
new revenue accounting standard are expected to have a 15 to 20 basis
point negative effect on reported operating margin rate for 2018, but no
effect on reported operating income.

The company expects an estimated full-year effective income tax rate of
approximately 22 percent, which reflects a lower U.S. federal statutory
income tax rate as a result of the TCJA and may be materially affected
by further refinement of the company's 2017 TCJA provisional estimates
as well as changes in the company's geographic mix of pre-tax income and
other discrete events that may occur during the year.

The company expects 2018 net income between approximately $213 million
and $220 million (prior between $203 million and $211 million), and
non-GAAP net income between approximately $231 million and $238 million
(prior between $224 million and $231 million), or diluted earnings per
share between approximately $3.01 and $3.11 (prior between $2.88 and
$2.98), and non-GAAP diluted earnings per share between $3.27 and $3.37
(prior between $3.17 and $3.27).

With respect to our 2018 financial outlook, non-GAAP financial measures
exclude net sales of approximately $40 million, with an offsetting
increase in SG&A expenses of approximately $40 million associated with
the new revenue accounting standard, as well as Project CONNECT program
expenses and discrete costs of approximately $23 million, $18 million
net of tax, or $0.25 per diluted share (prior $27 million, $21 million
net of tax, or $0.29 per diluted share). In the first quarter of 2018,
we incurred $1.0 million, or $0.01 per diluted share, in incremental
provisional income tax expense related to the TCJA.

CFO's Commentary on First Quarter 2018
Financial Results and Updated Full Year 2018 Financial Outlook Available
Online

At approximately 4:15 p.m. ET today, a commentary by Jim Swanson, Senior
Vice President and Chief Financial Officer, reviewing the company's
first quarter 2018 financial results and updated full year 2018
financial outlook will be furnished to the Securities and Exchange
Commission (The "SEC") on Form 8-K and published on the company's
website at http://investor.columbia.com/results.cfm.
Analysts and investors are encouraged to review this commentary prior to
participating in the conference call.

Conference Call

The company will host a conference call on Thursday, April 26, 2018 at
5:00 p.m. ET to review its first quarter 2018 financial results and
updated full year 2018 financial outlook. Dial 877-407-9205 to
participate. The call will also be webcast live on the investor
relations section of the company's website at http://investor.columbia.com.

Second Quarter 2018 Reporting Schedule

Columbia Sportswear Company plans to report financial results for the
second quarter on Thursday, July 26, 2018 at approximately 4:00 p.m. ET.
Following issuance of the earnings release, a commentary reviewing the
company's second quarter and year to date financial results will be
furnished to the SEC on Form 8-K and published on the investor relations
section of the company's website at http://investor.columbia.com/results.cfm.
A public webcast of Columbia's earnings conference call will follow at
5:00 p.m. ET at www.columbia.com.

Supplemental Financial Information

Since Columbia Sportswear Company is a global company, the comparability
of its operating results reported in U.S. dollars is affected by foreign
currency exchange rate fluctuations because the underlying currencies in
which it transacts change in value over time compared to the U.S.
dollar. To supplement financial information reported in accordance with
GAAP, the company discloses constant-currency net sales information,
which is a non-GAAP financial measure, to provide a framework to assess
how the business performed excluding the effects of changes in the
exchange rates used to translate net sales generated in foreign
currencies into U.S. dollars. The company calculates constant-currency
net sales by translating net sales in foreign currencies for the current
period into U.S. dollars at the exchange rates that were in effect
during the comparable period of the prior year. Management believes that
this non-GAAP financial measure reflects an additional and useful way of
viewing an aspect of our operations that, when viewed in conjunction
with our GAAP results, provides a more comprehensive understanding of
our business and operations. In particular, investors may find the
non-GAAP measures useful by reviewing our net sales results without the
volatility in foreign currency exchange rates. This non-GAAP financial
measure also facilitates management's internal comparisons to our
historical net sales results and comparisons to competitors' net sales
results.

Additionally, this document includes references to other non-GAAP
financial measures that exclude increased net sales and gross profit,
and offsetting increased SG&A expenses, associated with the new revenue
accounting standard, as well as program expenses, discrete costs and
associated tax effects related to Project CONNECT and TCJA-related
income tax expense. The related tax effects of program expenses and
discrete costs related to Project CONNECT were calculated using the
respective statutory tax rates for applicable jurisdictions. Management
believes that these non-GAAP financial measures enable useful and
meaningful comparisons of our operating performance from period to
period because they exclude the effects of the aforementioned items
above that may not be indicative of our core operating results.

These non-GAAP financial measures, including constant-currency net
sales, should be viewed in addition to, and not in lieu of or superior
to, our financial measures calculated in accordance with GAAP. The
company provides a reconciliation of non-GAAP measures to the most
directly comparable financial measure calculated in accordance with
GAAP. See "Supplemental Financial Information" tables included below.
The non-GAAP financial measures and constant-currency information
presented may not be comparable to similarly titled measures reported by
other companies.

Forward-Looking Statements

This document contains forward-looking statements within the meaning of
the federal securities laws, including statements regarding anticipated
results, net sales and net sales growth, gross margin, operating
expenses, licensing income, operating income, operating margins, net
income, earnings per share, income tax rates and the effects of tax
reform (including the TCJA), SG&A expenses, including deleverage and
SG&A expenses associated with the new revenue accounting standard, and
Project CONNECT program expenses and discrete costs, projected growth or
decline in specific geographies, channels, products, and brands, the
effect of changes associated with the new revenue accounting standard on
our financial results, the effects of foreign currency, inventory
growth, share repurchase activity, capital expenditures, investment
activity, operating cash flow, the performance of our China joint
venture and investments in our business in China, including the planned
buyout of the 40 percent non-controlling interest in the joint venture,
and our ability to adapt our business and realize the anticipated
benefits of our investments in our strategic priorities. Forward-looking
statements often use words such as "will", "anticipate", "estimate",
"expect", "should", "may" and other words and terms of similar meaning
or reference future dates. The company's expectations, beliefs and
projections are expressed in good faith and are believed to have a
reasonable basis; however, each forward-looking statement involves a
number of risks and uncertainties, including those set forth in this
document, those described in the company's Annual Report on Form 10-K
and Quarterly Reports on Form 10-Q under the heading "Risk Factors," and
those that have been or may be described in other reports filed by the
company, including reports on Form 8-K. Potential risks and
uncertainties that may affect our future revenues, earnings and
performance and could cause the actual results of operations or
financial condition of the company to differ materially from the
anticipated results expressed or implied by forward-looking statements
in this document include: loss of key customer accounts; our ability to
effectively implement IT infrastructure and business process initiatives
and to maintain the strength and security of our IT systems; the effects
of unseasonable weather, including global climate change; trends
affecting consumer traffic and spending in DTC; our ability to implement
our growth strategy; unfavorable economic conditions generally, the
financial health of our customers and changes in the level of consumer
spending, apparel preferences and fashion trends; changes in
international, federal or state tax, labor and other laws and
regulations that affect our business, including changes in corporate tax
rates, tariffs, international trade policy, or increasing wage rates;
the effects of the TCJA, including related changes to our tax
obligations and effective tax rate in future periods, as well as future
changes to related provisional tax expense recorded in 2017; volatility
in global production and transportation costs and capacity; risks
inherent in doing business in foreign markets, including fluctuations in
currency exchange rates; our ability to attract and retain key
personnel; risks associated with our joint venture, including the
planned buyout of the non-controlling 40 percent interest in the joint
venture; higher than expected rates of order cancellations; increased
consolidation of our wholesale customers; our ability to effectively
source and deliver our products to customers in a timely manner; our
dependence on independent manufacturers and suppliers and our ability to
source finished products and components at competitive prices from them;
the effectiveness of our sales and marketing efforts; intense
competition in the industry; business disruptions and acts of terrorism,
cyber-attacks or military activities around the globe; our ability to
establish and protect our intellectual property; the seasonality of our
business; and our ability to develop innovative products. The company
cautions that forward-looking statements are inherently less reliable
than historical information. The company does not undertake any duty to
update any of the forward-looking statements after the date of this
document to conform them to actual results or to reflect changes in
events, circumstances or its expectations. New factors emerge from time
to time and it is not possible for the company to predict or assess the
effects of all such factors or the extent to which any factor, or
combination of factors, may cause results to differ materially from
those contained in any forward-looking statement.

About Columbia Sportswear Company

Columbia Sportswear Company has assembled a portfolio of brands for
active lives, making it a leader in the global active lifestyle apparel,
footwear, accessories, and equipment industry. Founded in 1938 in
Portland, Oregon, the company's brands are today sold in approximately
90 countries. In addition to the Columbia® brand, Columbia Sportswear
Company also owns the Mountain Hardwear®, SOREL®, and prAna® brands. To
learn more, please visit the company's websites at www.columbia.com,
www.mountainhardwear.com,
www.sorel.com,
and www.prana.com.

 

COLUMBIA SPORTSWEAR COMPANY
CONDENSED CONSOLIDATED
BALANCE SHEETS

(In thousands)
(Unaudited)

 
      March 31,
2018   2017
Current Assets:
Cash and cash equivalents $ 717,216 $ 556,006
Short-term investments 90,978 34,470
Accounts receivable, net(1) 316,415 260,456
Inventories(2) 405,971 398,842
Prepaid expenses and other current assets(2) 72,788   40,863
Total current assets 1,603,368 1,290,637
 
Property, plant, and equipment, net 281,213 279,730
Intangible assets, net 128,810 132,151
Goodwill 68,594 68,594
Deferred income taxes 77,043 90,109
Other non-current assets 29,656     26,853
Total assets $ 2,188,684   $ 1,888,074
 
Current Liabilities:
Accounts payable 167,328 95,253
Accrued liabilities(1) 206,145 126,866
Income taxes payable 10,261   5,798
Total current liabilities 383,734 227,917
Note payable to related party 14,171
Other long-term liabilities 51,888 42,872
Income taxes payable 61,538 10,948
Deferred income taxes 171   149
Total liabilities 497,331 296,057
 
Equity:
Columbia Sportswear Company shareholders' equity 1,656,520 1,568,271
Non-controlling interest 34,833   23,746
Total equity 1,691,353 1,592,017
   
Total liabilities and equity $ 2,188,684   $ 1,888,074
 

(1) As of January 1, 2018, the company adopted a new revenue
accounting standard, Accounting Standards Codification Topic 606 (ASC
606), which requires wholesale sales returns reserves, estimated
chargebacks and markdowns, and other provisions for customer refunds to
be presented as accrued liabilities on the balance sheet rather than
netted within accounts receivable. As such, the March 31, 2018 accounts
receivable and accrued liabilities balances include a gross-up of
$56,768 reflecting this change.

(2) In conjunction with the adoption of ASC 606, the
estimated cost of inventory associated with sales returns reserves is
now presented within prepaid expenses and other current assets rather
than Inventories. As a result, the March 31, 2018 balance sheet reflects
a decrease of $18,175 in inventories and a directly offsetting increase
of $18,175 in prepaid expenses and other current assets.

 

COLUMBIA SPORTSWEAR COMPANY
CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS

(In thousands, except per
share amounts)

(Unaudited)

 
      Three Months Ended March 31,
2018   2017
Net sales $ 607,308 $ 543,793
Cost of sales 307,870   285,326  
Gross profit 299,438 258,467
49.3 % 47.5 %
 
Selling, general and administrative expenses 243,368 212,815
Net licensing income 3,251   2,353  
Income from operations 59,321 48,005
Interest income, net 2,296 955
Interest expense on note payable to related party (249 )
Other non-operating expense, net (268 ) (53 )
Income before income tax 61,349 48,658
Income tax expense (12,620 ) (9,773 )
Net income 48,729 38,885
Net income attributable to non-controlling interest 3,622   2,879  
Net income attributable to Columbia Sportswear Company $ 45,107   $ 36,006  
 
Earnings per share attributable to Columbia Sportswear Company:
Basic $ 0.64 $ 0.52
Diluted $ 0.64 $ 0.51
Weighted average shares outstanding:
Basic 70,080 69,606
Diluted 70,843 70,414
 
 

COLUMBIA SPORTSWEAR COMPANY
CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS

(In thousands)
(Unaudited)

 
      Three Months Ended March 31,
2018   2017
Cash flows from operating activities:
Net income $ 48,729 $ 38,885
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization 14,536 14,940
Loss on disposal and impairment of property, plant, and equipment 20 160
Deferred income taxes 3,252 4,426
Stock-based compensation 3,113 2,941
Changes in operating assets and liabilities:
Accounts receivable 115,414 76,619
Inventories 32,133 94,487
Prepaid expenses and other current assets (1,912 ) (2,139 )
Other assets (2,340 ) 1,336
Accounts payable (87,492 ) (122,824 )
Accrued liabilities (45,000 ) (18,961 )
Income taxes payable (6,038 ) (1,738 )
Other liabilities 2,937   97  
Net cash provided by operating activities 77,352   88,229  
 
Cash flows from investing activities:
Purchases of short-term investments (33,178 ) (33,813 )
Sales of short-term investments 37,121 0
Capital expenditures (12,290 ) (11,275 )
Proceeds from sale of property, plant, and equipment 19   27  
Net cash used in investing activities (8,328 ) (45,061 )
 
Cash flows from financing activities:
Proceeds from credit facilities 400
Repayments on credit facilities (400 )
Proceeds from issuance of common stock under employee stock plans 9,380 7,791
Tax payments related to restricted stock unit issuances (4,033 ) (3,513 )
Repurchase of common stock (18,099 ) (33,000 )
Cash dividends paid (15,452 ) (12,499 )
Net cash used in financing activities (28,204 ) (41,221 )
 
Net effect of exchange rate changes on cash 3,230   2,670  
Net increase in cash and cash equivalents 44,050 4,617
 
Cash and cash equivalents, beginning of period 673,166   551,389  
Cash and cash equivalents, end of period $ 717,216   $ 556,006  
 
Supplemental disclosures of non-cash investing and financing
activities
:
Capital expenditures incurred but not yet paid $ 4,000 $ 4,206
 
 

COLUMBIA SPORTSWEAR COMPANY
Supplemental Financial
Information

Reconciliation of GAAP to Non-GAAP
Financial Measures

(In thousands, except per share
amounts)

(Unaudited)

 
      Three Months Ended March 31, 2018

GAAP
Measures
(As Reported)

 

Adjust for
Project
CONNECT
Costs
(1)

 

Adjust for
Effects of
ASC 606 (2)

 

Adjust for
Effects of the
TCJA
(3)

 

Non-GAAP
Measures

Net sales $ 607,308 $ $ (8,257 ) $ $ 599,051
Cost of sales 307,870         307,870  
Gross profit 299,438 (8,257 ) 291,181
Selling, general and administrative expenses 243,368 (10,994 ) (8,257 ) 224,117
Net licensing income 3,251         3,251  
Income from operations 59,321 10,994 70,315
Non-operating income, net 2,028         2,028  
Income before income tax 61,349 10,994 72,343
Income tax expense (12,620 ) (2,617 )   1,043   (14,194 )
Net income 48,729 8,377 1,043 58,149
Net income attributable to non-controlling interest 3,622         3,622  
Net income attributable to Columbia Sportswear Company $ 45,107   $ 8,377   $   $ 1,043   $ 54,527  
Earnings per share attributable to Columbia Sportswear Company:
Basic $ 0.64 $ 0.78
Diluted 0.64 0.77
Weighted average shares outstanding:
Basic 70,080 70,080
Diluted 70,843 70,843
 

(1) Amounts reflect professional fees, severance and other
program expenses related to Project CONNECT that the company believes
are incremental to the company's ongoing operations. The related tax
effects of these charges were calculated using the respective statutory
tax rates for applicable jurisdictions.

(2) On January 1, 2018, the company adopted a new revenue
accounting standard, ASC 606, which changes the presentation of fees
paid to third parties in conjunction with certain concession-based
retail arrangements. These fees have historically been recognized in net
sales, and are now classified as a component of selling, general and
administrative expenses. As such, the company's non-GAAP measures
exclude the resulting revenue gross-up and offsetting increase in
selling, general and administrative expenses resulting from the adoption
ASC 606 to enable meaningful comparisons of our operating performance
compared to fiscal year 2017.

(3) Amounts reflect an incremental provisional TCJA-related
tax expense of $1.0 million, resulting from the issuance of additional
clarifying guidance, which drove further refinement of the company's
provisional estimates that were recorded in the fourth quarter of 2017.

 

COLUMBIA SPORTSWEAR COMPANY
Supplemental Financial
Information
Reconciliation of GAAP to Non-GAAP Financial
Measures
(In thousands, except per share amounts)
(Unaudited)

 
      Three Months Ended March 31, 2017

GAAP
Measures
(As Reported)

 

Adjust for
Project
CONNECT
Costs
(1)

 

Non-GAAP
Measures

Net sales $ 543,793 $ $ 543,793
Cost of sales 285,326     285,326  
Gross profit 258,467 258,467
Selling, general and administrative expenses 212,815 (1,293 ) 211,522
Net licensing income 2,353     2,353  
Income from operations 48,005 1,293 49,298
Non-operating income, net 653     653  
Income before income tax 48,658 1,293 49,951
Income tax expense (9,773 ) (434 ) (10,207 )
Net income 38,885 859 39,744
Net income attributable to non-controlling interest 2,879     2,879  
Net income attributable to Columbia Sportswear Company $ 36,006   $ 859   $ 36,865  
Earnings per share attributable to Columbia Sportswear Company:
Basic $ 0.52 $ 0.53
Diluted 0.51 0.52
Weighted average shares outstanding:
Basic 69,606 69,606
Diluted 70,414 70,414
 

(1)Amounts reflect professional fees and other program
expenses related to Project CONNECT that the company believes are
incremental to our ongoing operations. The related tax effects of these
charges were calculated using the respective statutory tax rates for
applicable jurisdictions.

 

COLUMBIA SPORTSWEAR COMPANY
Supplemental Financial
Information

Reconciliation of GAAP to Non-GAAP Updated
Full Year 2018 Financial Outlook


(In thousands,
except per share amounts)

(Unaudited)

 
      Updated Full Year 2018 Financial Outlook
 
GAAP Measures  

Adjust for Project
CONNECT Costs(1)

 

Adjust for Effects of
ASC 606(2)

 

Adjust for Effect of the
TCJA (3)

  Non-GAAP Measures
Net sales growth 8.0% to 10.0% ($40) million 6.5% to 8.5%
Gross margin expansion up to 140 bps ($40) million up to 60 bps
SG&A expense deleverage 150 bps to 170 bps ($23) million ($40) million 30 bps to 50 bps
Income from operations $275 to $285 million $23 million $299 to $308 million
Operating margin 10.3% to 10.5% 11.4% to 11.5%
Licensing Income up to $14.0 million up to $14.0 million
Effective income tax rate approximately 22%(3) approximately 22%(3)
Net income $213 to $220 million $18 million $1 million $231 to $238 million
Diluted earnings per share $3.01 to $3.11 $0.25 $0.01 $3.27 to $3.37
 

(1) Amounts reflect professional fees, severance and other
program expenses related to Project CONNECT that the company believes
are incremental to our ongoing operations. The related tax effects of
these charges were calculated using the respective statutory tax rates
for applicable jurisdictions.

(2) On January 1, 2018, the company adopted a new revenue
accounting standard, ASC 606, which changes the presentation of fees
paid to third parties in conjunction with certain concession-based
retail arrangements. These fees have historically been recognized in net
sales, and are now classified as a component of selling, general and
administrative expenses. As a result, the company's non-GAAP updated
full year 2018 financial outlook adjusts for the approximate $40 million
revenue gross-up and offsetting $40 million increase in selling, general
and administrative expenses resulting from the adoption ASC 606 to
enable meaningful comparisons of our operating performance compared to
fiscal year 2017.

(3) The company's updated full year 2018 financial outlook
anticipates an estimated full year effective income tax rate of
approximately 22 percent, which may be affected by further refinement of
the company's 2017 provisional TCJA estimates as well as changes in the
company's geographic mix of pre-tax income and other discrete events
that may occur during the year.

 

COLUMBIA SPORTSWEAR COMPANY
Supplemental Financial
Information

Net Sales Growth - Constant-currency Basis
(In
millions, except percentage changes)

(Unaudited)

 
      Three Months Ended March 31,
Reported
Net Sales
2018
  Adjust for
Foreign
Currency
Translation
  Constant-
currency
Net Sales
2018(1)
  Reported
Net Sales
2017
  Reported
Net Sales
% Change
  Constant-
currency
Net Sales
%
Change
(1)
Geographical Net Sales:
United States $ 362.8 $ $ 362.8 $ 333.2 9% 9%
LAAP(2) 131.6 (7.5 ) 124.1 118.3 11% 5%
EMEA 71.8 (8.2 ) 63.6 55.4 30% 15%
Canada 41.1   (2.0 ) 39.1   36.9   11% 6%
Total $ 607.3   $ (17.7 ) $ 589.6   $ 543.8   12% 8%
 
Brand Net Sales:
Columbia $ 508.8 $ (16.1 ) $ 492.7 $ 449.1 13% 10%
SOREL 30.8 (0.9 ) 29.9 27.2 13% 10%
prAna 42.3 42.3 38.7 9% 9%
Mountain Hardwear 24.4 (0.7 ) 23.7 27.7 (12)% (14)%
Other 1.0     1.0   1.1   (9)% (9)%
Total $ 607.3   $ (17.7 ) $ 589.6   $ 543.8   12% 8%
 
Product Category Net Sales:
Apparel, Accessories and Equipment $ 490.0 $ (12.3 ) $ 477.7 $ 440.0 11% 9%
Footwear 117.3   (5.4 ) 111.9   103.8   13% 8%
Total $ 607.3   $ (17.7 ) $ 589.6   $ 543.8   12% 8%
 
Channel Net Sales:
Wholesale $ 343.9 $ (11.5 ) $ 332.4 $ 328.9 5% 1%
DTC 263.4   (6.2 ) 257.2   214.9   23% 20%
Total $ 607.3   $ (17.7 ) $ 589.6   $ 543.8   12% 8%
 

(1) Constant-currency net sales information is a non-GAAP
financial measure, which excludes the effect of changes in foreign
currency exchange rates against the U.S. dollar between comparable
reporting periods. The company calculates constant-currency net sales by
translating net sales in foreign currencies for the current period into
U.S. dollars at the average exchange rates that were in effect during
the comparable period of the prior year.

(2) Net sales within the LAAP region increased 4% on a
reported basis and decreased 2% on a non-GAAP constant-currency basis,
excluding $8.3 million and $7.6 million, respectively, related to the
gross-up associated with the new revenue accounting standard.

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