Columbia Sportswear Company (NASDAQ: COLM):
Throughout this press release, references to non-GAAP financial
measures in the third quarter of 2018 exclude $6.9 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"), a $4.3
million benefit from a recovery in connection with an insurance
claim ($3.3 million net of tax), $1.5 million in incremental
provisional tax expense related to the Tax Cuts and Jobs Act
("TCJA") and $1.2 million in Project CONNECT expenses ($0.9 million
net of tax). References to non-GAAP financial measures in the third
quarter of 2017 exclude $3.3 million in Project CONNECT expenses
($2.1 million net of tax). References to non-GAAP financial
measures for the first nine months of 2018 exclude $22.7 million in
net sales, gross profit and SG&A expenses associated with
adoption of the new revenue accounting standard, $14.1 million in
Project CONNECT program expenses and discrete costs ($10.7 million
net of tax), a $4.3 million benefit from a recovery in connection
with an insurance claim ($3.3 million net of tax) and $2.7 million
in incremental provisional income tax expense related to the TCJA.
References to non-GAAP financial measures in year-to-date 2017
results exclude $8.6 million in Project CONNECT program expenses
and discrete costs ($5.5 million net of tax).
Third Quarter and Year-to-Date 2018
Highlights:
- Third quarter reported net sales
increased 6 percent (7 percent constant-currency) to a record
$795.8 million.
- Third quarter reported operating income
increased 5 percent to $129.1 million, representing 16.2 percent of
net sales.
- Third quarter reported net income
increased 14 percent to a record $100.2 million, or $1.42 per
diluted share.
- Year-to-date reported net sales
increased 12 percent (10 percent constant-currency) to a record
$1,884.7 million.
- Year-to-date reported net income
increased 38 percent to a record $155.0 million, or $2.19 per
diluted share.
- Inventories increased 10 percent to
$617.2 million.
- Cash and short-term investments totaled
$451.5 million at September 30, 2018.
- In October 2018, the board of directors
approved a 9 percent increase in the company's regular quarterly
dividend to $0.24 per share.
Third Quarter and Year-to-Date 2018
Non-GAAP Highlights:
- Non-GAAP third quarter net sales
increased 6 percent to $788.9 million.
- Non-GAAP third quarter operating income
was essentially flat at $126.0 million, representing 16.0 percent
of net sales.
- Non-GAAP third quarter net income
increased 11 percent to $99.3 million, or $1.41 per diluted
share.
- Non-GAAP year-to-date net sales
increased 10 percent (9 percent constant-currency) to $1,862.1
million.
- Non-GAAP year-to-date net income
increased 40 percent to $165.1 million, or $2.34 per diluted
share.
Updated Full Year 2018 Financial
Outlook Summary
Full Year 2018 (U.S. Dollar) GAAP
Non-GAAP* Net sales growth 11.0% to 11.5% 9.5% to 10.0%
Gross margin expansion up to 165 bps up to 90 bps SG&A expense
deleverage 100 bps to 110 bps 25 bps to 35 bps Licensing income up
to $16 million up to $16 million Income from operations $308 to
$312 million $319 to $324 million Operating margin 11.2% to 11.3%
11.8% to 11.9% Effective income tax rate approximately 22%**
approximately 22%** Net income $240 to $244 million $252 to $255
million Diluted earnings per share $3.41 to $3.46 $3.57 to $3.62
* Our updated full year 2018 non-GAAP financial outlook excludes
net sales and gross profit of approximately $40 million, with an
offsetting increase in SG&A expenses of approximately $40
million associated with the new revenue accounting standard,
Project CONNECT program expenses and discrete costs of
approximately $16 million, $12 million net of tax,
or $0.17 per diluted share (prior $19 million, $15 million net
of tax, or $0.21 per diluted share) as well as an
insurance claim recovery benefit of $4 million, $3 million net of
tax, or $0.04 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 nine months of 2018, we incurred $2.7
million, or $0.04 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 net
sales of $795.8 million for the quarter ended September 30,
2018, an increase of 6 percent (7 percent constant-currency),
compared with net sales of $747.4 million for the third quarter of
2017. Non-GAAP net sales of $788.9 million increased 6 percent.
Third quarter 2018 net income increased 14 percent to $100.2
million, or $1.42 per diluted share, compared to third quarter 2017
net income of $87.7 million, or $1.25 per diluted share. Non-GAAP
third quarter 2018 net income increased 11 percent to $99.3
million, or $1.41 per diluted share, compared with non-GAAP third
quarter 2017 net income of $89.8 million, or $1.28 per diluted
share.
Through the first nine months of 2018, net sales grew $194.6
million, or 12 percent (10 percent constant-currency), to $1,884.7
million, compared to $1,690.1 million for the same period in 2017.
Non-GAAP net sales through the first nine months of 2018 grew
$172.0 million, or 10 percent (9 percent constant-currency), to
$1,862.1 million, compared to $1,690.1 million for the same period
in 2017. Year-to-date net income increased 38 percent to $155.0
million, or $2.19 per diluted share, compared to $112.2 million, or
$1.59 per diluted share, for the same period in 2017. Year-to-date
2018 non-GAAP net income increased 40 percent to $165.1 million, or
$2.34 per diluted share, compared to $117.7 million, or $1.67 per
diluted share, for the same period in 2017.
President and Chief Executive Officer Tim Boyle commented, "As
we celebrate our company's 80th anniversary, I’m delighted to mark
this milestone with the strongest quarterly and year-to-date
results in our company’s history. While this reflects broad
momentum across our brand portfolio and regions, it is exciting to
see the Columbia brand U.S. business leading the way. Our robust
direct-to-consumer performance, across both our brick & mortar
and e-commerce channels, is a testament to brand strength and
demonstrates that consumers are responding positively to our
innovative product line. In wholesale, the positive momentum we
experienced with our Spring 2018 assortment has continued with
excellent early season sell-through of our Fall 2018 product line.
With better than expected quarterly and record year-to-date
results, we are pleased to increase our full year outlook."
"These results and updated outlook demonstrate that our shift to
become a more brand-led and consumer-focused organization is
working. Our powerful balance sheet, with $451 million in cash and
short-term investments, and no long-term debt, provides the
flexibility to invest in our growth initiatives as our major
markets continue to evolve. It is from this position of strength
and confidence that we are investing in our four 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."
"We have very strong momentum heading into the important holiday
sales season and look forward to updating investors on fourth
quarter results when we report next February."
Third Quarter 2018 Financial
Results
(All comparisons are between third quarter of 2018 and third
quarter of 2017, unless otherwise noted).
Net Sales
Third quarter 2018 consolidated net sales increased 6 percent (7
percent constant-currency) to $795.8 million. Non-GAAP net sales
increased 6 percent to $788.9 million.
Geographies (See "Geographical Net Sales" table
below)
- U.S. net sales increased 9 percent,
attributable to low-20 percent growth in direct-to-consumer ("DTC")
and low-single-digit percent growth in wholesale. The company
operated 135 U.S. retail stores at September 30, 2018 compared with
127 at the same time last year.
- Reported Latin America Asia Pacific
("LAAP") net sales decreased 4 percent (3 percent decrease
constant-currency). LAAP non-GAAP net sales decreased 9 percent
driven by declines in our LAAP distributor business and China,
partially offset by growth in Japan and Korea.
- Europe Middle East and Africa ("EMEA")
net sales increased 15 percent, led by high-teens percent
Europe-direct growth while EMEA distributors net sales were
flat.
- Canada net sales were flat (3 percent
increase constant-currency), reflecting strong DTC net sales
performance and flat wholesale net sales.
Brands (See "Brand Net Sales" table below)
- Columbia brand net sales increased 7
percent (8 percent constant-currency) to $640.9 million.
- SOREL brand net sales increased 12
percent (13 percent constant-currency) to $91.2 million.
- prAna brand net sales increased 8
percent to $39.9 million.
- Mountain Hardwear brand net sales
decreased 22 percent (21 percent decrease constant-currency) to
$23.0 million.
Product Categories (See "Product Category Net Sales"
table below)
- Apparel, Accessories and Equipment net
sales increased 6 percent (7 percent constant-currency) to $617.6
million.
- Footwear net sales increased 6 percent
(7 percent constant-currency) to $178.2 million.
Channels (See "Channel Net Sales" table below)
- Wholesale net sales were essentially
flat (1 percent increase constant-currency) at $544.8 million.
- DTC net sales increased 23 percent to
$251.0 million.
Profitability
Third quarter 2018 operating income of $129.1 million, or 16.2
percent of net sales, increased 5 percent compared to operating
income of $122.9 million, or 16.4 percent of net sales, in the
third quarter of 2017. Non-GAAP third quarter 2018 operating income
of $126.0 million, or 16.0 percent of net sales, was essentially
flat compared to non-GAAP operating income of $126.2 million, or
16.9 percent of net sales, in the third quarter of 2017.
Third quarter 2018 net income increased to $100.2 million, or
$1.42 per diluted share, a 14 percent increase compared to net
income of $87.7 million, or $1.25 per diluted share, in the third
quarter of 2017. Non-GAAP third quarter net income of $99.3
million, or $1.41 per diluted share, increased 11 percent compared
to non-GAAP net income of $89.8 million, or $1.28 per diluted
share, in the third quarter of 2017.
Taxes
Third quarter 2018 income tax expense was $30.0 million,
resulting in an effective income tax rate of 22.7 percent compared
to an income tax expense of $32.7 million, or 26.4 percent, in the
third quarter of 2017. Our effective tax rate decreased compared to
the prior year primarily due to the change in the U.S. federal tax
rate for the current year.
Non-GAAP income tax expense was $27.8 million, resulting in an
effective income tax rate of 21.5 percent, compared to a non-GAAP
income tax expense of $33.9 million, or 26.7 percent, for the same
period last year.
Balance Sheet
At September 30, 2018, cash and short-term investments
totaled $451.5 million, compared to $430.3 million
at September 30, 2017. In addition to cash and short-term
investments, the company had $14.0 million in restricted cash as of
September 30, 2018, related to consideration placed in escrow
as a portion of the funds needed to complete the buyout of the
remaining 40 percent non-controlling interest in the company's
China joint venture in early 2019.
Consolidated inventories increased 10 percent to $617.2
million at September 30, 2018 compared to
$558.6 million at September 30, 2017, including a $16.0
million decrease due to 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 13 percent compared to
September 30, 2017.
Year-to-Date Cash Flow, Share Repurchases and
Dividends
Net cash used in operating activities for the first nine months
of 2018 was $98.1 million, compared to $12.4 million used in the
first nine months of 2017.
Capital expenditures totaled $45.2 million in the first nine
months of 2018, compared to $41.8 million for the same period last
year.
Through the nine months ended September 30, 2018, the
company repurchased 1,260,186 shares of common stock for $107.2
million, or $85.08 per share, and paid $46.2 million in dividends
to shareholders and $20.0 million in dividends to the
non-controlling interest in our China joint venture.
At September 30, 2018, approximately $230.7 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 9 percent increase in the
company's regular quarterly cash dividend to $0.24 per
share, payable on November 29, 2018 to shareholders of
record on November 15, 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 11.0 to 11.5 percent (prior 9.0 to 10.5 percent),
compared with 2017 net sales of $2.47 billion. The company expects
non-GAAP net sales growth of approximately 9.5 to 10.0 percent
(prior 7.5 to 9.0 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 165 basis points (prior up to 140 basis points) and non-GAAP
gross margin to improve by up to 90 basis points (prior up to 60
basis points), excluding approximately $40 million of 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 100 to 110 basis
points of SG&A expense deleverage (prior 120 to 140 basis
points), and non-GAAP SG&A expense deleverage of approximately
25 to 35 basis points (prior 20 to 40 basis points), excluding
approximately $40 million in SG&A expenses associated with the
new revenue accounting standard, approximately $16 million (prior
$19 million) in Project CONNECT program expenses and discrete costs
and a $4 million benefit from a recovery in connection with an
insurance claim.
Based on the above assumptions, the company expects 2018
operating income between approximately $308 million and $312
million (prior between $286 million and $295 million), and non-GAAP
operating income between approximately $319 million and $324
million (prior between $306 million and $315 million), resulting in
operating margin between approximately 11.2 and 11.3 percent (prior
between 10.6 and 10.8 percent), and non-GAAP operating margin
between approximately 11.8 and 11.9 percent (prior between 11.5 and
11.7 percent).
The changes in revenue and expense classification associated
with the new revenue accounting standard are expected to have an
approximately 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. The tax rate may be 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 $240
million and $244 million (prior between $223 million and $230
million), and non-GAAP net income between approximately $252
million and $255 million (prior between $239 million and $246
million), or diluted earnings per share between approximately $3.41
and $3.46 (prior between $3.15 and $3.25), and non-GAAP diluted
earnings per share between $3.57 and $3.62 (prior between $3.37 and
$3.47).
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 $16 million, $12 million net of tax,
or $0.17 per diluted share (prior $19 million, $15 million net
of tax, or $0.21 per diluted share) and a $4 million, $3
million net of tax, or $0.04 per diluted share, benefit from a
recovery in connection with an insurance claim. In the first nine
months of 2018, we incurred $2.7 million, or $0.04 per diluted
share, in incremental provisional income tax expense related to the
TCJA.
Preliminary 2019
Commentary
Our initial 2019 commentary assumes normal weather conditions,
current foreign currency exchange rates and no significant changes
to the current macro-economic, geopolitical or competitive
environment. Additionally, this financial outlook assumes no
additional tariffs beyond those that have been announced and are
scheduled to be implemented. These and other factors present a
material risk to results if conditions change.
In light of our better than expected growth in 2018, the
meaningful financial value capture related to Project CONNECT, and
ongoing decisions to significantly invest in our strategic growth
priorities, the company is providing limited commentary regarding
current planning efforts for 2019.
- The company is currently planning
high-single-digit percent net sales growth for 2019, compared to
our expected 2018 reported GAAP net sales; and
- low-double-digit percent net income
growth for 2019, compared to our expected 2018 non-GAAP net
income.
Based on favorable initial Fall 2018 sell-through, advance
wholesale and distributor orders for the Spring 2019 season, early
feedback from customers regarding our Fall 2019 product line, and
plans for continued growth in our global DTC businesses, we
currently believe we can achieve high-single-digit percent net
sales growth in 2019, compared to expected 2018 GAAP net sales.
We continue to expect meaningful financial value capture related
to Project CONNECT in 2019. These financial benefits will be most
evident in our planned gross margin and enable us to continue
significantly investing in the business to support our strategic
priorities.
It is also important to note that once we conclude the buyout of
the remaining 40 percent non-controlling interest in our China
joint venture, which is expected to occur in early 2019, we will no
longer record a non-controlling interest share of net income. This
non-controlling minority interest share of net income was $7.2
million in 2017 and $6.6 million in the first nine months of
2018.
We will provide additional 2019 guidance detail when we announce
financial results for the fourth quarter and full year 2018,
currently scheduled for February 7, 2019.
CFO's Commentary on Third Quarter and
Year-to-Date 2018 Financial Results, Updated Full Year 2018
Financial Outlook, and Preliminary 2019 Commentary 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 third quarter and year-to-date 2018
financial results, updated full year 2018 financial outlook and
preliminary 2019 commentary, 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 at 5:00 p.m. ET today to
review its third quarter and year-to-date 2018 financial results,
updated full year 2018 financial outlook, and preliminary 2019
commentary. 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.
Fourth Quarter 2018 Reporting
Schedule
Columbia Sportswear Company plans to report fourth quarter and
year-to-date 2018 financial results on Thursday, February 7, 2019
at approximately 4:00 p.m. ET. Following issuance of the earnings
release, a commentary reviewing the company's fourth quarter and
year-to-date 2018 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.investor.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, a recovery in
connection with an insurance claim and associated tax effects,
program expenses, discrete costs and associated tax effects related
to Project CONNECT and TCJA-related income tax expense. The related
tax effects of the insurance claim recovery benefit and 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, expected broad based revenue
growth, increased demand creation spending and continued investment
in our strategic priorities, and our ability to adapt our business
and realize the anticipated benefits of our investments in our
strategic priorities, including Project CONNECT. 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)
September 30, 2018 2017 Current Assets:
Cash and cash equivalents $ 182,175 $ 411,805 Restricted cash
13,970 — Short-term investments 269,313 18,469 Accounts receivable,
net(1) 552,442 466,852 Inventories(2) 617,194 558,558 Prepaid
expenses and other current assets(2) 77,763 36,113 Total
current assets 1,712,857 1,491,797 Property, plant, and
equipment, net 284,744 285,582 Intangible assets, net 127,320
130,300 Goodwill 68,594 68,594 Deferred income taxes 68,913 98,062
Other non-current assets 36,911 26,479 Total assets $
2,299,339 $ 2,100,814 Current Liabilities: Short-term
borrowings $ 8,311 $ — Accounts payable 237,344 190,634 Accrued
liabilities(1) 255,682 170,909 Income taxes payable 8,247
22,921 Total current liabilities 509,584 384,464 Other long-term
liabilities 46,056 47,129 Income taxes payable 62,090 10,647
Deferred income taxes 13 154 Total liabilities 617,743
442,394 Equity: Columbia Sportswear Company shareholders'
equity 1,665,365 1,629,292 Non-controlling interest 16,231
29,128 Total equity 1,681,596 1,658,420 Total
liabilities and equity $ 2,299,339 $ 2,100,814 (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
September 30, 2018 accounts receivable and accrued liabilities
balances include a gross-up of $59,921 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 September 30, 2018 balance sheet
reflects a decrease of $16,012 in inventories and a directly
offsetting increase of $16,012 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 September 30, Nine Months Ended
September 30, 2018 2017 2018
2017 Net sales $ 795,801 $ 747,367 $ 1,884,728 $
1,690,064 Cost of sales 412,098 398,177
972,966 901,545 Gross profit 383,703 349,190 911,762
788,519 48.2 % 46.7 % 48.4 % 46.7 % Selling, general and
administrative expenses 259,267 230,446 724,827 643,859 Net
licensing income 4,708 4,143 11,279
8,947 Income from operations 129,144 122,887 198,214 153,607
Interest income, net 2,524 1,035 7,748 3,240 Interest expense on
note payable to related party — — — (429 ) Other non-operating
income (expense), net 736 (104 ) 372 203
Income before income tax 132,404 123,818 206,334 156,621
Income tax expense (30,029 ) (32,716 ) (44,735 ) (37,950 )
Net income 102,375 91,102 161,599 118,671 Net income attributable
to non-controlling interest 2,223 3,378 6,603
6,476 Net income attributable to Columbia Sportswear
Company $ 100,152 $ 87,724 $ 154,996 $
112,195 Earnings per share attributable to Columbia
Sportswear Company: Basic $ 1.44 $ 1.26 $ 2.22 $ 1.61 Diluted $
1.42 $ 1.25 $ 2.19 $ 1.59 Weighted average shares outstanding:
Basic 69,589 69,815 69,895 69,698 Diluted 70,357 70,389 70,685
70,390
COLUMBIA SPORTSWEAR COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In
thousands) (Unaudited) Nine Months Ended
September 30, 2018 2017 Cash flows from
operating activities: Net income $ 161,599 $ 118,671
Adjustments to reconcile net income to net cash provided by
operating activities: Depreciation and amortization 43,544 44,660
Loss on disposal and impairment of property, plant, and equipment
1,979 970 Deferred income taxes 2,103 3,871 Stock-based
compensation 10,247 8,277 Changes in operating assets and
liabilities: Accounts receivable (125,433 ) (127,003 ) Inventories
(188,544 ) (56,576 ) Prepaid expenses and other current assets
(7,968 ) 2,959 Other assets (9,782 ) 1,567 Accounts payable (14,263
) (30,716 ) Accrued liabilities 38,193 1,595 Income taxes payable
(7,200 ) 15,063 Other liabilities (2,541 ) 4,231 Net cash
used in operating activities (98,066 ) (12,431 )
Cash
flows from investing activities: Purchases of short-term
investments (426,278 ) (50,697 ) Sales of short-term investments
252,727 32,878 Capital expenditures (45,189 ) (41,791 ) Proceeds
from sale of property, plant, and equipment 18 239
Net cash used in investing activities (218,722 ) (59,371 )
Cash flows from financing activities: Proceeds from credit
facilities 36,051 3,374 Repayments on credit facilities (27,740 )
(3,374 ) Proceeds from issuance of common stock under employee
stock plans 16,508 16,056 Tax payments related to restricted stock
unit issuances (4,221 ) (3,585 ) Repurchase of common stock
(107,222 ) (35,542 ) Cash dividends paid (46,160 ) (37,617 ) Cash
dividends paid to non-controlling interest (19,949 ) — Payment of
related party note payable — (14,236 ) Net cash used in
financing activities (152,733 ) (74,924 )
Net effect of
exchange rate changes on cash (7,500 ) 7,142
Net
decrease in cash, cash equivalents and restricted cash (477,021
) (139,584 )
Cash, cash equivalents and restricted cash,
beginning of period 673,166 551,389
Cash, cash
equivalents and restricted cash, end of period $ 196,145
$ 411,805
Supplemental disclosures of non-cash
investing and financing activities: Capital expenditures
incurred but not yet paid $ 7,380 $ 3,682
COLUMBIA
SPORTSWEAR COMPANY Supplemental Financial Information
Reconciliation of GAAP to Non-GAAP Financial Measures (In
thousands, except per share amounts) (Unaudited)
Three Months Ended September 30, 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)
Adjust for Effects of Insurance
Recovery (4)
Non-GAAP Measures Net sales $ 795,801 $ — $ (6,913 )
$ — $ — $ 788,888 Cost of sales 412,098 — —
— — 412,098 Gross profit 383,703
— (6,913 ) — — 376,790 Selling, general and administrative expenses
259,267 (1,190 ) (6,913 ) — 4,317 255,481 Net licensing income
4,708 — — — — 4,708
Income from operations 129,144 1,190 — — (4,317 ) 126,017
Non-operating income, net 3,260 — — — —
3,260 Income before income tax 132,404 1,190 —
— (4,317 ) 129,277 Income tax expense (30,029 ) (283 ) —
1,493 1,027 (27,792 ) Net income 102,375 907 —
1,493 (3,290 ) 101,485 Net income attributable to non-controlling
interest 2,223 — — — —
2,223 Net income attributable to Columbia Sportswear Company
$ 100,152 $ 907 $ — $ 1,493 $ (3,290 )
$ 99,262 Earnings per share attributable to Columbia
Sportswear Company: Basic $ 1.44 $ 1.43 Diluted $ 1.42 $ 1.41
Weighted average shares outstanding: Basic 69,589 69,589 Diluted
70,357 70,357 (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, primarily driven by refinement in the
calculation of withholding taxes on our deferred tax liabilities,
which drove further refinement of the company's provisional
estimates that were recorded in the fourth quarter of 2017. (4)
Amounts reflect a benefit from a recovery in connection with an
insurance claim received in the third quarter of 2018 that the
company believes is incremental to the company's ongoing
operations.
COLUMBIA SPORTSWEAR COMPANY
Supplemental Financial Information Reconciliation of GAAP
to Non-GAAP Financial Measures (In thousands, except per
share amounts) (Unaudited) Nine Months Ended
September 30, 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)
Adjust for Effects of Insurance
Recovery (4)
Non-GAAP Measures Net sales $ 1,884,728 $ — $ (22,657
) $ — $ — $ 1,862,071 Cost of sales 972,966 — —
— — 972,966 Gross profit 911,762 —
(22,657 ) — — 889,105 Selling, general and administrative expenses
724,827 (14,068 ) (22,657 ) — 4,317 692,419 Net licensing income
11,279 — — — — 11,279
Income from operations 198,214 14,068 — — (4,317 ) 207,965
Non-operating income, net 8,120 — — — —
8,120 Income before income tax 206,334 14,068 — —
(4,317 ) 216,085 Income tax expense (44,735 ) (3,348 ) —
2,672 1,027 (44,384 ) Net income 161,599 10,720 —
2,672 (3,290 ) 171,701 Net income attributable to non-controlling
interest 6,603 — — — — 6,603
Net income attributable to Columbia Sportswear Company $
154,996 $ 10,720 $ — $ 2,672 $ (3,290 )
$ 165,098 Earnings per share attributable to Columbia
Sportswear Company: Basic $ 2.22 $ 2.36 Diluted $ 2.19 $ 2.34
Weighted average shares outstanding: Basic 69,895 69,895 Diluted
70,685 70,685 (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, primarily driven by refinement in the
calculation of withholding taxes on our deferred tax liabilities,
which drove further refinement of the company's provisional
estimates that were recorded in the fourth quarter of 2017. (4)
Amounts reflect a benefit from a recovery in connection with an
insurance claim received in the third quarter of 2018 that the
company believes is incremental to the company's ongoing
operations.
COLUMBIA SPORTSWEAR COMPANY
Supplemental Financial Information Reconciliation of GAAP
to Non-GAAP Financial Measures (In thousands, except per
share amounts) (Unaudited) Three Months Ended
September 30, 2017 GAAP Measures (As Reported)
Adjust for Project CONNECT Costs (1)
Non-GAAP Measures Net sales $ 747,367 $ — $ 747,367 Cost of
sales 398,177 — 398,177 Gross profit 349,190 —
349,190 Selling, general and administrative expenses 230,446 (3,268
) 227,178 Net licensing income 4,143 — 4,143
Income from operations 122,887 3,268 126,155 Non-operating income,
net 931 — 931 Income before income tax 123,818
3,268 127,086 Income tax expense (32,716 ) (1,209 ) (33,925 ) Net
income 91,102 2,059 93,161 Net income attributable to
non-controlling interest 3,378 — 3,378 Net
income attributable to Columbia Sportswear Company $ 87,724
$ 2,059 $ 89,783 Earnings per share attributable to
Columbia Sportswear Company: Basic $ 1.26 $ 1.29 Diluted $ 1.25 $
1.28 Weighted average shares outstanding: Basic 69,815 69,815
Diluted 70,389 70,389 (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 Financial
Measures (In thousands, except per share amounts)
(Unaudited) Nine Months Ended September 30,
2017 GAAP Measures (As Reported) Adjust for
Project CONNECT Costs (1) Non-GAAP
Measures Net sales $ 1,690,064 $ — $ 1,690,064 Cost of sales
901,545 — 901,545 Gross profit 788,519 —
788,519 Selling, general and administrative expenses 643,859 (8,613
) 635,246 Net licensing income 8,947 — 8,947
Income from operations 153,607 8,613 162,220 Non-operating income,
net 3,014 — 3,014 Income before income tax
156,621 8,613 165,234 Income tax expense (37,950 ) (3,125 ) (41,075
) Net income 118,671 5,488 124,159 Net income attributable to
non-controlling interest 6,476 — 6,476 Net
income attributable to Columbia Sportswear Company $ 112,195
$ 5,488 $ 117,683 Earnings per share attributable to
Columbia Sportswear Company: Basic $ 1.61 $ 1.69 Diluted $ 1.59 $
1.67 Weighted average shares outstanding: Basic 69,698 69,698
Diluted 70,390 70,390 (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) Adjust
for Effect of Insurance Recovery (4)
Non-GAAP Measures Net sales growth 11.0% to 11.5% — ($40)
million — — 9.5% to 10.0% Gross margin expansion up
to 165 bps — ($40) million — — up to 90 bps SG&A expense
deleverage 100 bps to 110 bps ($16) million ($40) million — $4
million 25 bps to 35 bps Licensing income up to $16 million — — — —
up to $16 million Income from operations $308 to $312 million $16
million — — — $319 to $324 million Operating margin 11.2% to 11.3%
— — — — 11.8% to 11.9% Effective income tax rate approximately
22%(3) — — — — approximately 22%(3) Net income $240 to $244 million
$12 million — $2.7 million ($3) million $252 to $255 million
Diluted earnings per share $3.41 to $3.46 $0.17 — $0.04
$(0.04)
$3.57 to $3.62 (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. In the first nine months of 2018, we incurred $2.7 million in
incremental provisional income tax expense related to the TCJA. (4)
Amounts reflect a benefit from a recovery in connection with an
insurance claim received in the third quarter of 2018 that the
company believes is incremental to the company's ongoing
operations.
COLUMBIA SPORTSWEAR COMPANY
Supplemental Financial Information Net Sales Growth -
Constant-currency Basis (In millions, except percentage
changes) (Unaudited) Three Months Ended
September 30, Adjust for Constant-
Constant- Reported
Foreign currency Reported Reported
currency Net Sales Currency Net Sales
Net Sales Net Sales Net Sales 2018
Translation
2018(1)
2017 % Change % Change(1)
Geographical Net Sales: United States $ 496.2 $ — $ 496.2 $
456.0 9 % 9 % LAAP(2) 118.4 0.7 119.1 123.0 (4 )% (3 )% EMEA 100.3
0.7 101.0 87.5 15 % 15 % Canada 80.9 2.7 83.6
80.9 — % 3 % Total $ 795.8 $ 4.1 $ 799.9
$ 747.4 6 % 7 %
Brand Net Sales:
Columbia $ 640.9 $ 3.0 $ 643.9 $ 598.3 7 % 8 % SOREL 91.2 1.0 92.2
81.7 12 % 13 % prAna 39.9 — 39.9 36.8 8 % 8 % Mountain Hardwear
23.0 0.1 23.1 29.4 (22 )% (21 )% Other 0.8 — 0.8
1.2 (33 )% (33 )% Total $ 795.8 $ 4.1 $
799.9 $ 747.4 6 % 7 %
Product Category Net
Sales: Apparel, Accessories and Equipment $ 617.6 $ 2.7 $ 620.3
$ 580.0 6 % 7 % Footwear 178.2 1.4 179.6 167.4
6 % 7 % Total $ 795.8 $ 4.1 $ 799.9 $
747.4 6 % 7 %
Channel Net Sales: Wholesale $
544.8 $ 3.9 $ 548.7 $ 543.8 — % 1 % DTC 251.0 0.2
251.2 203.6 23 % 23 % Total $ 795.8 $ 4.1
$ 799.9 $ 747.4 6 % 7 % (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 decreased 4% on a reported basis and
decreased 9% on a non-GAAP basis, excluding $6.9 million related to
the gross-up associated with the new revenue accounting standard.
COLUMBIA SPORTSWEAR COMPANY Supplemental
Financial Information Net Sales Growth - Constant-currency
Basis (In millions, except percentage changes)
(Unaudited) Nine Months Ended September 30,
Adjust for Constant-
Constant- Reported Foreign
currency Reported Reported currency
Net Sales Currency Net Sales Net Sales
Net Sales Net Sales 2018 Translation
2018(1)
2017 % Change % Change(1)
Geographical Net Sales: United States $ 1,139.2 $ — $
1,139.2 $ 1,027.4 11 % 11 % LAAP(2) 350.8 (10.5 ) 340.3 320.8 9 % 6
% EMEA 257.1 (10.8 ) 246.3 210.2 22 % 17 % Canada 137.6 —
137.6 131.7 4 % 4 % Total $ 1,884.7 $
(21.3 ) $ 1,863.4 $ 1,690.1 12 % 10 %
Brand
Net Sales: Columbia $ 1,564.5 $ (20.2 ) $ 1,544.3 $ 1,387.9 13
% 11 % SOREL 133.4 (0.2 ) 133.2 114.9 16 % 16 % prAna 120.3 — 120.3
110.5 9 % 9 % Mountain Hardwear 63.4 (0.7 ) 62.7 73.2 (13 )% (14 )%
Other 3.1 (0.2 ) 2.9 3.6 (14 )% (19 )% Total $
1,884.7 $ (21.3 ) $ 1,863.4 $ 1,690.1 12 % 10
%
Product Category Net Sales: Apparel, Accessories
and Equipment $ 1,502.2 $ (14.6 ) $ 1,487.6 $ 1,349.7 11 % 10 %
Footwear 382.5 (6.7 ) 375.8 340.4 12 % 10 %
Total $ 1,884.7 $ (21.3 ) $ 1,863.4 $ 1,690.1
12 % 10 %
Channel Net Sales: Wholesale $ 1,149.9 $
(11.9 ) $ 1,138.0 $ 1,084.2 6 % 5 % DTC 734.8 (9.4 ) 725.4
605.9 21 % 20 % Total $ 1,884.7 $ (21.3 ) $
1,863.4 $ 1,690.1 12 % 10 % (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 9% on a reported basis and
increased 2% on a non-GAAP basis, excluding $22.7 million related
to the gross-up associated with the new revenue accounting
standard.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20181025005879/en/
Columbia Sportswear CompanyAndrew Burns, Director of Investor
Relations503-985-4112aburns@columbia.com
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