UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported):
October 29, 2015
COLUMBIA SPORTSWEAR COMPANY
(Exact name of registrant as specified in its charter)
Oregon |
|
000-23939 |
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93-0498284 |
(State or other jurisdiction of incorporation) |
|
(Commission File Number) |
|
(I.R.S. Employer |
14375 Northwest Science Park Drive
Portland, Oregon 97229
(Address of principal executive offices) (Zip code)
(503) 985-4000
(Registrant’s telephone number, including area code)
No Change
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
¨ |
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
¨ |
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
¨ |
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
¨ |
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
ITEM 2.02 RESULTS OF OPERATIONS AND FINANCIAL CONDITION
On October 29, 2015, Columbia Sportswear Company (the “Company”) issued a press release reporting its third quarter and year-to-date 2015 financial results and revised financial outlook for fiscal year 2015. A copy of the Company’s press release is attached hereto as Exhibit 99.1 and is incorporated herein by reference. The information in this report shall not be treated as filed for purposes of the Securities Exchange Act of 1934, as amended.
Attached hereto as Exhibit 99.2 and incorporated by reference herein is financial information and commentary by Thomas B. Cusick, Executive Vice President of Finance and Chief Financial Officer of Columbia Sportswear Company, for the third quarter and first nine months of 2015 and forward-looking statements relating to the revised fiscal year 2015 financial outlook as posted on the Company’s investor relations website, http://investor.columbia.com, on October 29, 2015. The information in this report shall not be treated as filed for purposes of the Securities Exchange Act of 1934, as amended.
ITEM 7.01 REGULATION FD DISCLOSURE
In its October 29, 2015 press release, the Company also announced that its Board of Directors approved a cash dividend of $0.17 per share of common stock to be paid on December 3, 2015 to its shareholders of record on November 19, 2015.
ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS
(d) Exhibits
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99.1 |
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Press Release, dated October 29, 2015 (furnished pursuant to Items 2.02 and 7.01 hereof). |
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99.2 |
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Commentary by Thomas B. Cusick, Executive Vice President of Finance and Chief Financial Officer of Columbia Sportswear Company dated October 29, 2015 (furnished pursuant to Items 2.02 and 7.01 hereof). |
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
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COLUMBIA SPORTSWEAR COMPANY |
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Dated: October 29, 2015 |
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By: |
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/S/THOMAS B. CUSICK |
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Thomas B. Cusick |
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Executive Vice President of Finance and Chief Financial Officer |
Exhibit |
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Description |
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99.1 |
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Press Release, dated October 29, 2015 (furnished pursuant to Items 2.02 and 7.01 hereof). |
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99.2 |
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Commentary by Thomas B. Cusick, Executive Vice President of Finance and Chief Financial Officer of Columbia Sportswear Company dated October 29, 2015 (furnished pursuant to Items 2.02 and 7.01 hereof). |
Exhibit 99.1
Contact:
Ron Parham
Sr. Director of Investor Relations
& Corporate Communications
Columbia Sportswear Company
(503) 985-4584
rparham@columbia.com
COLUMBIA SPORTSWEAR COMPANY ANNOUNCES
RECORD QUARTERLY AND YEAR-TO-DATE RESULTS;
RAISES FULL YEAR EARNINGS OUTLOOK
Third Quarter 2015 Highlights:
|
· |
Net sales increased 14 percent (18 percent constant-currency) to a record $767.6 million. |
|
· |
Gross margin expanded 100 basis points to 46.4 percent. |
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· |
Operating income increased 35 percent to a record $132.3 million, or 17.2 percent of net sales. |
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· |
Net income increased 39 percent to a record $91.1 million, or $1.28 per diluted share. |
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· |
The Board of Directors approved a 13 percent increase in the quarterly dividend to $0.17 per share. |
Fiscal Year 2015 Outlook Raised to Anticipate:
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· |
Approximately 10.5 percent net sales growth (14.5 percent constant-currency). |
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· |
Approximately 20 percent to 23 percent growth in operating income, generating operating margin of approximately 10.4 percent to 10.5 percent of net sales. |
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· |
Net income between $165 million and $169 million, or $2.32 to $2.37 per diluted share, 20 percent to 23 percent higher than 2014 net income of $137.2 million, or $1.94 per diluted share. |
PORTLAND, Ore. — October 29, 2015 — Columbia Sportswear Company (NASDAQ: COLM) today announced record net sales of $767.6 million for the quarter ended September 30, 2015, an increase of 14 percent (18 percent constant-currency), compared with net sales of $675.3 million for the same period in 2014. This growth included double-digit net sales increases from each of the company’s brands, 25 percent growth in North America and high-teen constant-currency percentage growth in Europe-direct markets.
Net sales through the first nine months of 2015 increased 14 percent (19 percent constant-currency), to a record $1,626.8 million.
Third quarter operating income increased 35 percent to a record $132.3 million, or 17.2 percent of net sales, and net income grew 39 percent to a record $91.1 million, or $1.28 per diluted share.
Operating income through the first nine months of 2015 increased 43 percent to $167.4 million, compared with operating income of $116.7 million for the same period last year.
Net income through the first nine months of 2015, including incremental profit from the prAna brand, increased 36 percent to a record $111.0 million, or $1.56 per diluted share, compared to net income of $81.6 million, or $1.15 per diluted share for the comparable 2014 period.
Net income for the first nine months of 2015 included a non-recurring tax benefit of $6.3 million, or $0.09 per diluted share. Net income for the comparable period of 2014 included a non-recurring tax benefit of $5.6 million, or $0.08 per diluted share, and acquisition costs totaling approximately $2.1 million net of tax, or $(0.03) per diluted share, related to the acquisition of prAna Living, LLC.
Tim Boyle, Columbia’s chief executive officer, commented, “During the third quarter, the Columbia, Sorel and prAna brands combined to generate 26 percent net sales growth across North America. Better supply chain execution resulted in more timely delivery of wholesale customers’ Fall advance orders, which has enabled them to benefit from increased sell-through volumes thus far in the season. The Columbia brand also continued to demonstrate its resurgence in Europe-direct markets, posting mid-twenty-percent constant-currency growth in that important region during the quarter.
“On October 9 we launched the largest integrated global marketing campaign in the Columbia brand’s history. The “Tested Tough” brand platform is a global initiative designed to strengthen emotional connections with consumers and drive sell-through in key markets. Our expanded gross margins are enabling us to increase our demand creation investments by 13 percent this year, while driving significantly improved operating margins.
“Our record third quarter and year-to-date results illustrate the increasing earnings power of our brand portfolio. We believe we are only beginning to unlock the long-term potential of our portfolio of brands,” Boyle concluded.
Third Quarter Results
(All comparisons are between third quarter 2015 and third quarter 2014, unless otherwise noted.)
Third quarter consolidated net sales growth of $92.3 million, or 14 percent, (18 percent constant-currency) included:
|
· |
U.S. net sales growth of 26 percent, reflecting growth from each of the company’s brands, led by Columbia and Sorel, including the effects of more timely delivery of increased Fall 2015 wholesale advance orders, compared with shipments of Fall 2014 advance orders; and |
|
· |
Net sales growth of 16 percent in Canada (39 percent constant-currency), led by the Sorel and Columbia brands; |
partially offset by
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· |
An 11 percent net sales decline (5 percent constant-currency) in the Latin America/Asia Pacific (LAAP) region, concentrated in the Columbia brand in the company’s Asian markets; and |
2
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than offset by a net sales decline of more than 30 percent to EMEA distributors, primarily related to Russia. (See “Geographical Net Sales” table below.) |
Global Columbia brand net sales increased 10 percent (14 percent constant-currency) to $609.7 million. Global Sorel brand net sales increased 48 percent (59 percent constant-currency) to $86.2 million. Global prAna brand net sales increased 22 percent (22 percent constant-currency) to $34.4 million, and global Mountain Hardwear brand net sales increased 12 percent (17 percent constant-currency) to $34.8 million. (See “Brand Net Sales” table below.)
Global Apparel, Accessories & Equipment net sales increased 9 percent (12 percent constant-currency) to $596.1 million, and Footwear net sales increased 36 percent (46 percent constant-currency) to $171.5 million. (See “Categorical Net Sales” table below.)
Third quarter gross margins expanded 100 basis points to 46.4 percent, compared to 45.4 percent for the third quarter of 2014.
Third quarter income from operations increased 35 percent to $132.3 million, or 17.2 percent of net sales, compared with $98.3 million, or 14.6 percent of net sales, for the same period in 2014.
The effective income tax rate for the third quarter was 28.9%, compared to 31.3%, for the comparable period in 2014. The lower tax rate reflected a non-recurring $6.3 million tax benefit related to a decrease in the valuation allowance associated with net operating losses in certain international tax jurisdictions, partially offset by the effects of generating a higher proportion of pre-tax income in the United States, where tax rates are generally higher than in international tax jurisdictions.
Third quarter net income increased 39 percent, to a record $91.1 million, or $1.28 per diluted share, compared with net income of $65.6 million, or $0.93 per diluted share, for the same period in 2014.
Balance Sheet and Cash Flow
The company ended the third quarter with $174.0 million in cash and short-term investments, compared to $185.8 million at September 30, 2014. Approximately 86 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 $546.7 million at September 30, 2015, approximately 10 percent higher than the $494.8 million balance at September 30, 2014.
Dividend
The board of directors authorized a 13 percent increase in the company’s regular quarterly dividend to $0.17 per share from the prior $0.15 per share, payable on December 3, 2015 to shareholders of record on November 19, 2015.
Upward-Revised 2015 Financial Outlook
All projections related to anticipated future results are forward-looking in nature and are subject to risks and uncertainties that may cause actual results to differ, perhaps materially. The company’s annual net sales are weighted more heavily toward the second half of the fiscal year, while operating expenses are more equally distributed throughout the year, resulting in a highly seasonal profitability pattern weighted toward the second half of the fiscal year.
3
The company expects 2015 net sales growth of approximately 10.5 percent (14.5 percent constant-currency) to more than $2.3 billion, compared to 2014 net sales of $2.1 billion.
The company expects fiscal year 2015 gross margins to improve by approximately 75 basis points and also expects approximately 30 basis points of operating expense leverage, resulting in projected operating margin expansion of approximately 90 to 100 basis points.
Based on the above assumptions, the company expects:
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· |
approximately 20 percent to 23 percent growth in operating income to between approximately $239 million and $244 million, representing operating margin of approximately 10.4 percent to 10.5 percent, compared with operating income of $198.8 million and operating margin of 9.5 percent in 2014; |
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· |
an effective income tax rate of approximately 28.0 percent; and |
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· |
net income after non-controlling interest of approximately $165 million to $169 million, or approximately $2.32 to $2.37 per diluted share, an increase of approximately 20 percent to 23 percent compared with net income of $137.2 million, or $1.94 per diluted share, in 2014. |
The above full year outlook includes an estimated unfavorable impact of approximately $0.14 per diluted share from the stronger U.S. Dollar, resulting primarily from lower gross margins within our foreign subsidiaries as a result of increased costs of inventory, net losses incurred on the revaluation of foreign-currency denominated assets and liabilities and on the settlement of foreign-currency denominated intercompany transactions and, to a lesser degree, the translation of net income.
A more detailed version of the company’s 2015 financial outlook and preliminary 2015 indications can be found in the “CFO Commentary on Third Quarter and Year-to-Date 2015 Financial Results and Upward-Revised 2015 Outlook” available on the company’s investor relations website: http://investor.columbia.com/results.cfm.
CFO’s Third Quarter Financial Commentary Available Online
At approximately 4:15 p.m. ET today, a commentary by Tom Cusick, executive vice president of finance and chief financial officer, reviewing the company’s third quarter and year-to-date 2015 financial results and full year 2015 financial outlook will be furnished to 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, October 29, 2015 at 5:00 p.m. ET to review its third quarter and year-to-date financial results and full year 2015 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 where it will remain available until October 26, 2016.
4
Fourth Quarter and Full Year 2015 Reporting Schedule
Columbia Sportswear plans to report fourth quarter and full year 2015 financial results on Thursday, February 11, 2016 at approximately 4:05 p.m. ET. Following issuance of the earnings release, a commentary reviewing the 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. To receive email notification of future announcements, please visit http://investor.columbia.com/events.cfm and register for E-Mail Alerts.
Supplemental Constant-currency Financial Information
The company reports its financial information in accordance with accounting principles generally accepted in the United States (“GAAP”). During periods of significant foreign currency exchange rate volatility, 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 significant 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. Constant-currency financial measures 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 this non-GAAP measure to the most directly comparable financial measure calculated in accordance with GAAP. (See “Supplemental Financial Information - Constant-currency Basis” tables below.) The constant-currency information presented may not be comparable to similarly titled measures reported by other companies.
About Columbia Sportswear
Columbia Sportswear Company has assembled a portfolio of brands that connect active people with their passions, 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 100 countries. In addition to the Columbia® brand, Columbia Sportswear Company also owns the Sorel®, Mountain Hardwear®, prAna®, Montrail® and OutDry® brands. To learn more, please visit the company’s websites at www.columbia.com, www.mountainhardwear.com, www.sorel.com, www.prana.com, www.montrail.com, and www.outdry.com.
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 margins, operating expenses and leverage, operating income, operating margins, income tax rates, inventory costs, impact of a stronger U.S. dollar, and net income. Forward-looking statements often use words such as “will,” “anticipate,” “estimate,” “expect,” “should,” and “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
5
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; the effects of unseasonable weather; macroeconomic trends affecting consumer traffic and spending in brick and mortar retail channels; 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 and apparel preferences; changes in international, federal or state tax policies and rates; risks inherent in doing business in foreign markets, including fluctuations in currency exchange rates; our ability to attract and retain key personnel; higher than expected rates of order cancellations; increased consolidation of our retail 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, cyberattacks, or military activities around the globe; and our ability to establish and protect our intellectual property. 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 impact 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.
- Financial tables follow-
###
6
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
|
September 30, |
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|||||
|
2015 |
|
|
2014 |
|
||
Current Assets: |
|
|
|
|
|
|
|
Cash and cash equivalents |
$ |
173,410 |
|
|
$ |
185,247 |
|
Short-term investments |
|
629 |
|
|
|
537 |
|
Accounts receivable, net |
|
529,844 |
|
|
|
458,844 |
|
Inventories |
|
546,685 |
|
|
|
494,795 |
|
Deferred income taxes |
|
62,888 |
|
|
|
50,710 |
|
Prepaid expenses and other current assets |
|
35,140 |
|
|
|
42,916 |
|
Total current assets |
|
1,348,596 |
|
|
|
1,233,049 |
|
|
|
|
|
|
|
|
|
Property, plant and equipment, net |
|
294,926 |
|
|
|
289,480 |
|
Intangibles and other non-current assets |
|
233,354 |
|
|
|
239,348 |
|
Total assets |
$ |
1,876,876 |
|
|
$ |
1,761,877 |
|
|
|
|
|
|
|
|
|
Current Liabilities: |
|
|
|
|
|
|
|
Short-term borrowings |
$ |
21,045 |
|
|
$ |
2,185 |
|
Accounts payable |
|
170,168 |
|
|
|
218,804 |
|
Accrued liabilities |
|
163,897 |
|
|
|
140,660 |
|
Income taxes payable |
|
30,515 |
|
|
|
18,922 |
|
Deferred income taxes |
|
126 |
|
|
|
39 |
|
Total current liabilities |
|
385,751 |
|
|
|
380,610 |
|
|
|
|
|
|
|
|
|
Note payable to related party |
|
15,356 |
|
|
|
15,897 |
|
Other long-term liabilities |
|
54,245 |
|
|
|
38,835 |
|
|
|
|
|
|
|
|
|
Equity: |
|
|
|
|
|
|
|
Columbia Sportswear Company shareholder’ equity |
|
1,406,397 |
|
|
|
1,316,059 |
|
Non-controlling interest |
|
15,127 |
|
|
|
10,476 |
|
Total equity |
|
1,421,524 |
|
|
|
1,326,535 |
|
|
|
|
|
|
|
|
|
Total liabilities and equity |
$ |
1,876,876 |
|
|
$ |
1,761,877 |
|
7
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
(Unaudited)
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
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||||||||||
|
2015 |
|
|
2014 |
|
|
2015 |
|
|
2014 |
|
||||
Net sales |
$ |
767,550 |
|
|
$ |
675,296 |
|
|
$ |
1,626,766 |
|
|
$ |
1,423,626 |
|
Cost of sales |
|
411,090 |
|
|
|
368,515 |
|
|
|
870,214 |
|
|
|
775,734 |
|
Gross profit |
|
356,460 |
|
|
|
306,781 |
|
|
|
756,552 |
|
|
|
647,892 |
|
|
|
46.4 |
% |
|
|
45.4 |
% |
|
|
46.5 |
% |
|
|
45.5 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general and administrative expenses |
|
226,778 |
|
|
|
210,659 |
|
|
|
594,782 |
|
|
|
536,214 |
|
Net licensing income |
|
2,587 |
|
|
|
2,160 |
|
|
|
5,659 |
|
|
|
5,066 |
|
Income from operations |
|
132,269 |
|
|
|
98,282 |
|
|
|
167,429 |
|
|
|
116,744 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income, net |
|
309 |
|
|
|
238 |
|
|
|
1,260 |
|
|
|
861 |
|
Interest expense on note payable to related party |
|
(275 |
) |
|
|
(282 |
) |
|
|
(827 |
) |
|
|
(769 |
) |
Other non-operating income (expense) |
|
(1,558 |
) |
|
|
666 |
|
|
|
(3,287 |
) |
|
|
161 |
|
Income before income tax |
|
130,745 |
|
|
|
98,904 |
|
|
|
164,575 |
|
|
|
116,997 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax expense |
|
(37,805 |
) |
|
|
(30,972 |
) |
|
|
(49,520 |
) |
|
|
(32,127 |
) |
Net income |
|
92,940 |
|
|
|
67,932 |
|
|
|
115,055 |
|
|
|
84,870 |
|
Net income attributable to non-controlling interest |
|
1,879 |
|
|
|
2,288 |
|
|
|
4,068 |
|
|
|
3,300 |
|
Net income attributable to Columbia Sportswear Company |
$ |
91,061 |
|
|
$ |
65,644 |
|
|
$ |
110,987 |
|
|
$ |
81,570 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share attributable to Columbia Sportswear Company: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
$ |
1.29 |
|
|
$ |
0.94 |
|
|
$ |
1.58 |
|
|
$ |
1.17 |
|
Diluted |
|
1.28 |
|
|
|
0.93 |
|
|
|
1.56 |
|
|
|
1.15 |
|
Weighted average shares outstanding: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
70,338 |
|
|
|
70,093 |
|
|
|
70,253 |
|
|
|
69,811 |
|
Diluted |
|
71,239 |
|
|
|
70,818 |
|
|
|
71,201 |
|
|
|
70,693 |
|
8
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(In thousands)
(Unaudited)
|
Nine Months Ended September 30, |
|
|||||
|
2015 |
|
|
2014 |
|
||
CASH FLOWS FROM OPERATING ACTIVITIES: |
|
|
|
|
|
|
|
Net Income |
$ |
115,055 |
|
|
$ |
84,870 |
|
Adjustments to reconcile net income to net cash used in operating activities: |
|
|
|
|
|
|
|
Depreciation and amortization |
|
41,921 |
|
|
|
38,625 |
|
Loss on disposal or impairment of property, plant and equipment |
|
679 |
|
|
|
350 |
|
Deferred income taxes |
|
3,181 |
|
|
|
82 |
|
Stock-based compensation |
|
8,731 |
|
|
|
8,136 |
|
Excess tax benefit from employee stock plans |
|
(7,642 |
) |
|
|
(4,029 |
) |
Changes in operating assets and liabilities: |
|
|
|
|
|
|
|
Accounts receivable |
|
(195,018 |
) |
|
|
(139,578 |
) |
Inventories |
|
(173,444 |
) |
|
|
(163,874 |
) |
Prepaid expenses and other current assets |
|
2,762 |
|
|
|
(7,990 |
) |
Other assets |
|
(2,676 |
) |
|
|
303 |
|
Accounts payable |
|
(41,327 |
) |
|
|
44,775 |
|
Accrued liabilities |
|
16,747 |
|
|
|
23,957 |
|
Income taxes payable |
|
16,799 |
|
|
|
1,846 |
|
Other liabilities |
|
3,367 |
|
|
|
3,998 |
|
Net cash used in operating activities |
|
(210,865 |
) |
|
|
(108,529 |
) |
|
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING ACTIVITIES: |
|
|
|
|
|
|
|
Acquisition of business, net of cash acquired |
|
- |
|
|
|
(188,467 |
) |
Purchases of short-term investments |
|
(38,208 |
) |
|
|
(21,471 |
) |
Sales of short-term investments |
|
64,980 |
|
|
|
112,895 |
|
Capital expenditures |
|
(47,796 |
) |
|
|
(42,843 |
) |
Proceeds from sale of property, plant, and equipment |
|
126 |
|
|
|
58 |
|
Net cash used in investing activities |
|
(20,898 |
) |
|
|
(139,828 |
) |
|
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES: |
|
|
|
|
|
|
|
Proceeds from credit facilities |
|
36,519 |
|
|
|
15,287 |
|
Repayments on credit facilities |
|
(15,343 |
) |
|
|
(12,999 |
) |
Proceeds from issuance of common stock under employee stock plans |
|
16,901 |
|
|
|
19,293 |
|
Tax payments related to restricted stock unit issuances |
|
(4,633 |
) |
|
|
(2,969 |
) |
Excess tax benefit from employee stock plans |
|
7,642 |
|
|
|
4,029 |
|
Repurchases of common stock |
|
(14,525 |
) |
|
|
(7 |
) |
Proceeds from note payable to related party |
|
- |
|
|
|
16,072 |
|
Cash dividends paid |
|
(31,667 |
) |
|
|
(29,369 |
) |
Net cash provided by (used in) financing activities |
|
(5,106 |
) |
|
|
9,337 |
|
|
|
|
|
|
|
|
|
NET EFFECT OF EXCHANGE RATE CHANGES ON CASH |
|
(3,279 |
) |
|
|
(13,222 |
) |
NET DECREASE IN CASH AND CASH EQUIVALENTS |
|
(240,148 |
) |
|
|
(252,242 |
) |
|
|
|
|
|
|
|
|
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD |
|
413,558 |
|
|
|
437,489 |
|
CASH AND CASH EQUIVALENTS, END OF PERIOD |
$ |
173,410 |
|
|
$ |
185,247 |
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL DISCLOSURES OF NON-CASH INVESTING ACTIVITIES: |
|
|
|
|
|
|
|
Capital expenditures incurred but not yet paid |
$ |
9,150 |
|
|
$ |
5,796 |
|
9
Supplemental Financial Information
Net Sales Growth – Constant-currency Basis
(In millions, except percentage changes)
(Unaudited)
|
Three Months Ended September 30, |
|
|
|||||||||||||||||||||
|
Reported Net Sales 2015 |
|
|
Adjust for Foreign Currency Translation |
|
|
Constant-currency Net Sales 2015(1) |
|
|
Reported Net Sales 2014 |
|
|
Reported Net Sales % Change |
|
|
Constant-currency Net Sales % Change (1) |
|
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Geographical Net Sales: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
United States |
$ |
513.1 |
|
|
$ |
- |
|
|
$ |
513.1 |
|
|
$ |
406.3 |
|
|
|
26 |
% |
|
|
26 |
% |
|
LAAP |
|
109.4 |
|
|
|
8.4 |
|
|
|
117.8 |
|
|
|
123.5 |
|
|
|
(11 |
)% |
|
|
(5 |
)% |
|
EMEA |
|
67.4 |
|
|
|
9.2 |
|
|
|
76.6 |
|
|
|
78.8 |
|
|
|
(14 |
)% |
|
|
(3 |
)% |
|
Canada |
|
77.7 |
|
|
|
14.8 |
|
|
|
92.5 |
|
|
|
66.7 |
|
|
|
16 |
% |
|
|
39 |
% |
|
Total |
$ |
767.6 |
|
|
$ |
32.4 |
|
|
$ |
800.0 |
|
|
$ |
675.3 |
|
|
|
14 |
% |
|
|
18 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Brand Net Sales: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Columbia |
$ |
609.7 |
|
|
$ |
24.0 |
|
|
$ |
633.7 |
|
|
$ |
555.4 |
|
|
|
10 |
% |
|
|
14 |
% |
|
Sorel |
|
86.2 |
|
|
|
6.6 |
|
|
|
92.8 |
|
|
|
58.2 |
|
|
|
48 |
% |
|
|
59 |
% |
|
Mountain Hardwear |
|
34.8 |
|
|
|
1.5 |
|
|
|
36.3 |
|
|
|
31.0 |
|
|
|
12 |
% |
|
|
17 |
% |
|
prAna |
|
34.4 |
|
|
|
- |
|
|
|
34.4 |
|
|
|
28.2 |
|
|
|
22 |
% |
|
|
22 |
% |
|
Other |
|
2.5 |
|
|
|
0.3 |
|
|
|
2.8 |
|
|
|
2.5 |
|
|
|
- |
|
|
|
12 |
% |
|
Total |
$ |
767.6 |
|
|
$ |
32.4 |
|
|
$ |
800.0 |
|
|
$ |
675.3 |
|
|
|
14 |
% |
|
|
18 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Categorical Net Sales: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Apparel, Accessories and Equipment |
$ |
596.1 |
|
|
$ |
19.9 |
|
|
$ |
616.0 |
|
|
$ |
549.4 |
|
|
|
9 |
% |
|
|
12 |
% |
|
Footwear |
|
171.5 |
|
|
|
12.5 |
|
|
|
184.0 |
|
|
|
125.9 |
|
|
|
36 |
% |
|
|
46 |
% |
|
Total |
$ |
767.6 |
|
|
$ |
32.4 |
|
|
$ |
800.0 |
|
|
$ |
675.3 |
|
|
|
14 |
% |
|
|
18 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Constant-currency net sales information is a non-GAAP financial measure, which excludes the effect of changes in foreign currency exchange rates vs. 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 exchange rates that were in effect during the comparable period of the prior year. |
10
Supplemental Financial Information
Net Sales Growth – Constant-currency Basis
(In millions, except percentage changes)
(Unaudited)
|
Nine Months Ended September 30, |
|
|||||||||||||||||||||
|
Reported Net Sales 2015 |
|
|
Adjust for Foreign Currency Translation |
|
|
Constant-currency Net Sales 2015 |
|
|
Reported Net Sales 2014 |
|
|
Reported Net Sales % Change |
|
|
Constant-currency Net Sales % Change |
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Geographical Net Sales: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
United States |
$ |
1,009.0 |
|
|
$ |
- |
|
|
$ |
1,009.0 |
|
|
$ |
793.8 |
|
|
|
27 |
% |
|
|
27 |
% |
LAAP |
|
319.5 |
|
|
|
20.7 |
|
|
|
340.2 |
|
|
|
336.4 |
|
|
|
(5 |
)% |
|
|
1 |
% |
EMEA |
|
175.0 |
|
|
|
20.2 |
|
|
|
195.2 |
|
|
|
190.9 |
|
|
|
(8 |
)% |
|
|
2 |
% |
Canada |
|
123.3 |
|
|
|
19.5 |
|
|
|
142.8 |
|
|
|
102.5 |
|
|
|
20 |
% |
|
|
39 |
% |
Total |
$ |
1,626.8 |
|
|
$ |
60.4 |
|
|
$ |
1,687.2 |
|
|
$ |
1,423.6 |
|
|
|
14 |
% |
|
|
19 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Brand Net Sales: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Columbia |
$ |
1,335.8 |
|
|
$ |
49.4 |
|
|
$ |
1,385.2 |
|
|
$ |
1,222.4 |
|
|
|
9 |
% |
|
|
13 |
% |
Sorel |
|
103.9 |
|
|
|
7.2 |
|
|
|
111.1 |
|
|
|
74.1 |
|
|
|
40 |
% |
|
|
50 |
% |
Mountain Hardwear |
|
81.1 |
|
|
|
3.2 |
|
|
|
84.3 |
|
|
|
85.2 |
|
|
|
(5 |
)% |
|
|
(1 |
)% |
prAna |
|
97.6 |
|
|
|
0.1 |
|
|
|
97.7 |
|
|
|
33.7 |
|
|
|
190 |
% |
|
|
190 |
% |
Other |
|
8.4 |
|
|
|
0.5 |
|
|
|
8.9 |
|
|
|
8.2 |
|
|
|
2 |
% |
|
|
9 |
% |
Total |
$ |
1,626.8 |
|
|
$ |
60.4 |
|
|
$ |
1,687.2 |
|
|
$ |
1,423.6 |
|
|
|
14 |
% |
|
|
19 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Categorical Net Sales: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Apparel, Accessories and Equipment |
$ |
1,305.6 |
|
|
$ |
39.7 |
|
|
$ |
1,345.3 |
|
|
$ |
1,166.1 |
|
|
|
12 |
% |
|
|
15 |
% |
Footwear |
|
321.2 |
|
|
|
20.7 |
|
|
|
341.9 |
|
|
|
257.5 |
|
|
|
25 |
% |
|
|
33 |
% |
Total |
$ |
1,626.8 |
|
|
$ |
60.4 |
|
|
$ |
1,687.2 |
|
|
$ |
1,423.6 |
|
|
|
14 |
% |
|
|
19 |
% |
11
Exhibit 99.2
14375 NW Science Park Drive
Portland, OR 97229
October 30, 2015
CFO Commentary on Third Quarter and Year-to-Date 2015 Financial Results
and Upward-Revised 2015 Financial Outlook
Related Information
Please reference accompanying financial information in the corresponding quarterly earnings release at http://investor.columbia.com/results.cfm.
Conference Call
The company will host a conference call on Thursday, October 29, 2015 at 5:00 p.m. ET to review third quarter results and its upward-revised FY2015 financial outlook. To participate, please dial (877) 407-9205 in the U.S. The call will be webcast live on the Investor Relations section of the company’s website http://investor.columbia.com where it will remain available until October 26, 2016.
Summary
Third quarter consolidated net sales increased $92.3 million, or 14 percent (18 percent constant-currency), to a record $767.6 million, compared with net sales of $675.3 million for the third quarter of 2014.
Gross margin expanded approximately 100 basis points to 46.4 percent of net sales. Selling, general and administrative (SG&A) expenses increased $16.1 million, or 8 percent, and represented 29.5 percent of net sales, producing 170 basis points of operating expense leverage versus the comparable 2014 period.
Third quarter 2015 operating income increased 35 percent to a record $132.3 million, compared to operating income of $98.3 million in last year’s third quarter.
The effective income tax rate for the third quarter of 2015 was 28.9 percent, compared to 31.3 percent for the third quarter of 2014.
Net income increased 39 percent to a record $91.1 million, or $1.28 per diluted share, compared to third quarter 2014 net income of $65.6 million, or $0.93 per diluted share.
Our upward-revised 2015 financial outlook anticipates:
|
· |
approximately 10.5 percent growth in net sales (14.5 percent constant-currency); |
|
· |
approximately 20 percent to 23 percent increase in operating income, to between approximately $239 million and $244 million, representing operating margin of approximately 10.4 percent to 10.5 percent; |
|
· |
an effective income tax rate of approximately 28.0 percent; and |
|
· |
net income of approximately $165.0 million to $169.0 million, or $2.32 to $2.37 per diluted share, representing an approximate 20 percent to 23 percent increase over 2014 net income. |
|
· |
The above outlook includes a projected unfavorable impact of approximately $(0.14) on full year 2015 earnings per share due to changes in foreign currency exchange rates. |
The Updated 2015 Financial Outlook section beginning on page 5 below contains a more detailed discussion of the factors contributing to this outlook and includes comparisons of anticipated 2015 and actual 2014 operating results.
Third Quarter & Year-to-Date Financial Results
(All comparisons are between third quarter 2015 and third quarter 2014, unless otherwise noted.)
Net Sales
Consolidated net sales increased $92.3 million, or 14 percent (18 percent constant-currency) to a record $767.6 million, compared with $675.3 million, reflecting double-digit net sales growth from each of the company’s brands. Consolidated net sales through the first nine months of 2015 increased 14 percent (19 percent constant-currency), to a record $1,626.8 million.
Regions
|
· |
U.S. net sales increased $106.8 million, or 26 percent, to $513.1 million, reflecting shipment of increased Fall 2015 advance wholesale orders for the Columbia and Sorel brands, and increased direct-to-consumer (DTC) net sales. U.S. wholesale sales were also favorably affected by better supply chain execution that enabled more timely delivery of wholesale customers’ increased Fall 2015 advance orders compared with the timing of Fall 2014 shipments. During the third quarter of 2015, the company operated 100 U.S. retail stores (80 outlet and 20 branded), compared with 84 stores (71 outlet and 13 branded) during the same period in 2014, plus 5 branded ecommerce sites. |
|
· |
Net sales in the Latin America/Asia Pacific (LAAP) region decreased $14.1 million, or 11 percent (5 percent constant-currency), to $109.4 million, reflecting net sales declines in Korea, China and Japan. Those declines were partially offset by increased net sales to LAAP distributors, reflecting increased Fall 2015 advance orders. Although net sales in Japan decreased at a low double-digit rate on a GAAP basis, they grew at a high-single-digit rate on a constant-currency basis. |
|
· |
Net sales in the Europe, Middle East, Africa (EMEA) region decreased $11.4 million, or 14 percent, (3 percent constant-currency) to $67.4 million. A decline in net sales to EMEA distributors primarily reflected lower net sales to the company’s Russian distributor. Europe-direct net sales decreased at a low-single-digit rate on a GAAP basis, and increased at a high-teen rate on a constant-currency basis, reflecting the unfavorable impact of changes in currency exchange rates on shipments of increased advance Fall 2015 wholesale orders for the Columbia brand. |
|
· |
Net sales in Canada increased $11.0 million, or 16 percent (39 percent constant-currency), to $77.7 million, primarily reflecting increased wholesale net sales. |
2
|
· |
Columbia global brand net sales increased $54.3 million, or 10 percent (14 percent constant-currency), to $609.7 million, reflecting shipment of increased Fall 2015 North American advance wholesale orders and more timely delivery compared with the timing of Fall 2014 shipments; increased DTC net sales in North America; and increased net sales to LAAP distributors; partially offset by lower net sales in Korea, EMEA distributor markets, China and Japan. |
|
· |
Sorel global brand net sales increased $28.0 million, or 48 percent (59 percent constant-currency), to $86.2 million, primarily driven by more timely delivery of increased Fall 2015 North American advance wholesale orders compared with the timing of Fall 2014 shipments, and increased DTC net sales. |
|
· |
prAna global brand net sales increased $6.2 million, or 22 percent (22 percent constant-currency), to $34.4 million, primarily reflecting growth in North America. |
|
· |
Mountain Hardwear global brand net sales increased $3.8 million, or 12 percent (17 percent constant-currency), to $34.8 million, primarily reflecting growth in the U.S. and the LAAP region. |
Global Product Categories
|
· |
Global Apparel, Accessories & Equipment net sales increased $46.7 million, or 9 percent (12 percent constant-currency), to $596.1 million, primarily reflecting increased net sales of the Columbia, prAna and Mountain Hardwear brands. |
|
· |
Global Footwear net sales increased $45.6 million, or 36 percent (46 percent constant-currency), to $171.5 million, consisting primarily of higher Sorel and Columbia brand net sales. |
Gross Margin
Third quarter 2015 gross margins expanded 100 basis points to 46.4 percent, primarily reflecting:
|
· |
increased direct-to-consumer gross margins, driven by net sales growth and gross margin expansion within the ecommerce channel, and |
|
· |
a favorable channel mix shift comprising increased wholesale net sales and reduced shipments to international distributors, which carry lower gross margins, |
partially offset by:
|
· |
unfavorable foreign currency hedge rates. |
Selling, General and Administrative (SG&A) Expense
Third quarter 2015 SG&A expense increased $16.1 million, or 8 percent, to $226.8 million, or 29.5 percent of net sales, representing 170 basis points of leverage compared with last year’s third quarter.
The increase included:
|
· |
increased expenses related to the company’s expanding global DTC operations, |
|
· |
increased personnel expenses to support business growth and strategic initiatives, and |
|
· |
increased demand creation expenses, |
partially offset by:
|
· |
the benefit of a stronger U.S. dollar on translation of non-U.S. operating expenses. |
3
Operating income increased 35 percent, to a record $132.3 million, or 17.2 percent of net sales, compared with third quarter 2014 operating income of $98.3 million, or 14.6 percent of net sales.
Operating income through the first nine months of 2015 increased 43 percent to $167.4 million, or 10.3 percent of net sales, compared to operating income of $116.7 million, or 8.2 percent of net sales, for the same period last year.
Other Non-operating Income (Expense)
Other non-operating expense totaled $1.6 million for the third quarter of 2015 compared to other non-operating income of $0.7 million for the third quarter of 2014. The increase in expense reflects net losses incurred on the revaluation of foreign-currency denominated assets and liabilities and on the settlement of foreign-currency denominated intercompany transactions.
Income Tax Expense
The effective income tax rate for the third quarter of 2015 was 28.9 percent, compared to 31.3 percent for the third quarter of 2014. The lower tax rate reflected a non-recurring $6.3 million tax benefit related to a decrease in the valuation allowance associated with net operating losses in certain international tax jurisdictions, partially offset by the effects of generating a higher proportion of pre-tax income in the United States, where tax rates are generally higher than in international tax jurisdictions.
Net Income
Consolidated net income increased 39 percent to a record $91.1 million, or $1.28 per diluted share, compared with net income of $65.6 million, or $0.93 per diluted share, in the third quarter of 2014.
Through the first nine months of fiscal year 2015, consolidated net income, including incremental profit from the prAna brand, increased 36 percent to a record $111.0 million, or $1.56 per diluted share, compared to net income of $81.6 million, or $1.15 per diluted share for the comparable 2014 period.
Net income for first nine months of 2015 included the non-recurring tax benefit of $6.3 million, or $0.09 per diluted share, described above. Net income for the nine month period ended September 30, 2014 included a non-recurring tax benefit of $5.6 million, or $0.08 per diluted share, and acquisition costs totaling approximately $2.1 million net of tax, or $(0.03) per diluted share, related to the purchase of prAna Living, LLC.
Balance Sheet
At September 30, 2015, cash and short-term investments totaled $174.0 million, compared to $185.8 million at the same time last year. At September 30, 2015, approximately 86 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 accounts receivable at September 30, 2015 totaled $529.8 million, a 15 percent increase on 14 percent net sales growth. Consolidated Days Sales Outstanding (DSO) at September 30, 2015 stood at 62 days, compared with 61 days at September 30, 2014.
4
Consolidated inventory of $546.7 million at September 30, 2015 increased $51.9 million, or 10 percent, compared to September 30, 2014.
Year-to-Date 2015 Cash Flow
Net cash used in operations through the first nine months of 2015 was $210.9 million, compared to $108.5 million in the first nine months of 2014.
Capital expenditures through the first nine months of 2015 totaled $47.8 million, compared to $42.8 million in the first nine months of 2014. Capital expenditures were concentrated in the company’s expanded DTC operations, corporate facilities projects, and investments in the company’s ongoing global ERP system implementation and related projects.
The company paid regular quarterly cash dividends of $31.7 million during the first nine months of 2015 and repurchased approximately 259,000 shares of common stock for an aggregate purchase price of approximately $14.5 million. At September 30, 2015, approximately $229.0 million remained available 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.
Regular Quarterly Cash Dividend
At its regular board meeting on October 23, 2015, the board of directors authorized a 13 percent increase in the company’s regular quarterly cash dividend, to $0.17 per share, payable on December 3, 2015 to shareholders of record on November 19, 2015.
Updated 2015 Financial Outlook
Our objective in providing a forward-looking financial outlook is to help investors understand our business and the variables that we consider when planning our business and evaluating our own performance.
All projections related to anticipated future results are forward-looking in nature and may change, perhaps significantly. Our 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 net sales and profitability pattern weighted toward the second half of the fiscal year.
Fall season advance wholesale orders typically drive a significant portion of our annual net sales and are one of several significant factors we use to formulate our full year outlook. However, among many risks inherent in our global business, our projected full year net sales and profitability may be materially affected by unfavorable weather patterns and other factors that affect consumer demand and lead to higher-than-anticipated order cancellations and lower reorders by our wholesale customers and/or lower-than-projected net sales through our DTC channels, particularly during the fourth quarter.
We are facing macro-economic, competitive, and/or geopolitical uncertainty in certain markets, most notably in Russia, Korea, China, and other emerging markets, making it more difficult to forecast our net sales and profitability in those markets. In addition, the U.S. dollar has
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strengthened significantly during the past year against the Ruble, Canadian dollar, Yen, Euro, and the currencies of several other emerging markets.
Our improved U.S. wholesale delivery performance in the third quarter of 2015 will naturally result in a lower U.S. wholesale growth rate in the fourth quarter. In addition, the fourth quarter of 2014 included organic net sales growth of 15 percent and benefited from favorable seasonal weather patterns in North America, creating potentially difficult comparisons for the fourth quarter of 2015, particularly for our U.S. DTC business, which is inherently less predictable than our wholesale business.
Taking the above factors into consideration, and assuming macro and market conditions in key markets do not worsen, our upward-revised fiscal year 2015 outlook assumes:
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approximately 10.5 percent growth in global net sales compared to 2014 (14.5 percent growth on a constant-currency basis), including approximately $56.0 million of incremental prAna net sales recognized during the January – May period. |
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approximately 20 percent to 23 percent growth in operating income to between approximately $239.0 million and $244.0 million, representing operating margin of approximately 10.4 percent to 10.5 percent, compared with operating income of $198.8 million, and operating margin of 9.5 percent, in 2014. |
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net income after non-controlling interest of approximately $165.0 million to $169.0 million, or approximately $2.32 to $2.37 per diluted share, representing an increase of approximately 20 percent to 23 percent compared with net income of $137.2 million, or $1.94 per diluted share, in 2014. |
The above projections are based on the following expectations:
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low-to-mid-twenty percent net sales growth in the U.S. business, driven by organic net sales growth in the Columbia and Sorel brands, plus incremental contributions and net sales growth in the prAna brand; |
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high-twenty percent constant-currency net sales growth in Canada translating into low double-digit percentage growth in U.S. dollars, driven by the Columbia and Sorel brands, plus incremental contributions and net sales growth in the prAna brand; |
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low-double-digit percentage net sales declines in the EMEA region, consisting of approximately 20 percent constant-currency net sales growth in our European-direct markets translating into low-single-digit percentage net sales growth in U.S. dollars, more than offset by reduced orders primarily from our Russian distributor in response to severe currency devaluation and adverse economic conditions in that country; and |
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mid-single-digit percentage net sales declines in the LAAP region, consisting of a high-teen percentage constant-currency net sales decline in Korea translating into a low-twenties percentage net sales decline in U.S. dollars, high-single-digit percentage constant-currency net sales growth in Japan translating into a high-single-digit percentage net sales decline in U.S. dollars, high 20-percent net sales growth in our LAAP distributor business, and a low single-digit constant-currency increase in China net sales. |
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Gross margin expansion of approximately 75 basis points compared with 2014, reflecting: |
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increased direct-to-consumer gross margins, reflecting net sales growth and gross margin expansion within our ecommerce channel; and |
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a higher proportion of DTC and wholesale net sales, with a corresponding lower proportion of lower-gross margin distributor net sales; |
partially offset by:
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unfavorable foreign currency hedge rates. |
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SG&A expense growth rate slightly lower than anticipated consolidated net sales growth, resulting in approximately 30 basis points of SG&A expense leverage. The increase in projected SG&A expenses consists primarily of: |
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increased personnel expenses; |
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increased expenses to support continued global DTC expansion and operations; |
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incremental SG&A expenses related to a full year of prAna’s operations; |
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increased demand creation spending, which is anticipated to increase to approximately 5.4 percent of 2015 net sales compared with 5.2 percent of 2014 net sales; and |
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increased expenses related to ongoing information technology initiatives; |
partially offset by:
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favorable foreign currency exchange translation, resulting from a stronger U.S. dollar. |
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Licensing income of approximately $8.0 million. |
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Non-operating expense of approximately $3.0 million primarily related to net losses incurred on the revaluation of foreign-currency denominated assets and liabilities and on the settlement of foreign-currency denominated intercompany transactions. |
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An estimated full-year effective income tax rate of approximately 28.0 percent. The actual rate could differ based on the geographic mix of pre-tax income, and other discrete events that may occur during the year. |
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An unfavorable impact of approximately $(0.14) on full year 2015 earnings per share due to changes in currency exchange rates, comprising lower gross margins within our foreign subsidiaries as a result of increased costs of inventory, revaluation of foreign-currency denominated assets and liabilities, net losses on the settlement of intercompany transactions, and to a lesser degree the translation of net income. |
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2015 capital expenditures of approximately $70.0 million, comprising investments in DTC business expansion, project-based and maintenance capital, information technology, and corporate facilities. |
Constant-currency Financial Information
The company reports its financial information in accordance with accounting principles generally accepted in the United States (“GAAP”). During periods of significant foreign currency exchange rate volatility, 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
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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 significant 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. Constant-currency financial measures 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 this non-GAAP measure to the most directly comparable financial measure calculated in accordance with GAAP. (See “Supplemental Financial Information - Constant-currency Basis” tables included in the earnings release announcing third quarter and year-to-date financial results located on the investor relations section of the company’s website at http://investor.columbia.com/results.cfm) The 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 margins, operating expenses and leverage, licensing income, non-operating expenses, net losses, operating income, operating margins, earnings per share, anticipated acquisition effects (including projected net sales), income tax rates, projected growth in global direct-to-consumer and wholesale businesses, projected growth or decline in specific geographies, countries and brands, inventory, capital expenditures, volatility of foreign currency exchange rates, and net income. Forward-looking statements often use words such as “will,” “anticipate,” “estimate,” “expect,” “should,” and “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: our ability to realize the forecasted benefits of the prAna acquisition; loss of key customer accounts; our ability to effectively implement IT infrastructure and business process initiatives; the effects of unseasonable weather; macroeconomic trends affecting consumer traffic and spending in brick and mortar retail channels; 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 and apparel preferences; changes in international, federal or state tax policies and rates; risks inherent in doing business in foreign markets, including fluctuations in currency exchange rates; our ability to attract and retain key personnel; higher than expected rates of order cancellations; increased consolidation of our retail customers; our ability to effectively source and deliver our products to customers in a timely manner; our dependence on independent
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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, cyberattacks, or military activities around the globe; and our ability to establish and protect our intellectual property. 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 impact 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.
©Columbia Sportswear Company 2015
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