Columbia sportswear company reports second quarter and first half 2020 financial results and provides covid-19 impacts and response update
Portland, ore.--(business wire)--columbia sportswear company (nasdaq: colm, the "company"), a leading innovator in active outdoor lifestyle apparel, footwear, accessories and equipment, today announced second quarter 2020 financial results for the period ended june 30, 2020 and updates regarding covid-19 impacts and the company's response. chairman, president and chief executive officer tim boyle commented, "i'm extremely proud of our team of global employees who swiftly adapted to altered work environments while maintaining efficient and productive business operations during these challenging times. second quarter sales and profitability declines clearly reflect the global effects of the ongoing pandemic. a highlight was our outstanding e-commerce growth, which increased 72 percent year-over-year. our financial position remains strong with $476 million in cash and short-term investments. taken together with available credit capacity, total liquidity was greater than $1 billion exiting the quarter. it is clear that consumer interest in the outdoors has surged during the pandemic and we are well positioned to equip these adventurers with innovative products as they recreate responsibly.” “as of today, nearly all of our global store fleet is open. we remain acutely focused on cost containment while also continuing to invest in our strategic priorities. i’m confident our global team of employees, powerful brand portfolio, strong financial position and operating discipline will all contribute to columbia sportswear emerging from this crisis in a stronger competitive position. although uncertainty remains unprecedented, we expect sales volume to remain below prior year levels for the balance of the year. absent further deterioration in trends due to the ongoing pandemic, we anticipate the second quarter will prove to be the steepest year-over-year quarterly percent decline in net sales of the year.” “our long-term commitment to driving sustainable and profitable growth has not changed and our strategic priorities remain 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." cfo's commentary available online for a detailed review of the company's second quarter 2020 financial results and additional updates relating to the covid-19 pandemic, please refer to the cfo commentary exhibit furnished to the securities and exchange commission (the "sec") on a current report on form 8-k and published on the investor relations section of the company's website at http://investor.columbia.com/results.cfm at approximately 4:15 p.m. et today. analysts and investors are encouraged to review this commentary prior to participating in our conference call. covid-19 update entering the second quarter, the vast majority of owned stores across the u.s., europe, japan and canada were closed due to the pandemic, in addition to many of the company's wholesale customers’ and international distributors' doors. store reopening timelines in these markets varied by region and predominately occurred within the may and june timeframe. exiting the quarter, nearly all of the company's owned stores were open globally. based on cost-containment actions and lower variable expenses, the company remains on track to lower 2020 operating expenses by more than $100 million, in comparison to last year, before any related one-time costs. the company continues to evaluate further actions to right size the ongoing expense structure in 2021 and beyond. although uncertainty remains unprecedented, the company expects sales volume to stay below prior year levels for the balance of the year. absent further deterioration in trends due to the ongoing pandemic, the second quarter is expected to be the steepest year-over-year quarterly percent decline in net sales of the year. please reference the cfo commentary exhibit for a detailed review of covid-19 pandemic related issues. second quarter 2020 financial results (all comparisons are between second quarter 2020 and second quarter 2019, unless otherwise noted.) net sales decreased 40 percent to $316.6 million, from $526.2 million for the comparable period in 2019. gross margin contracted 200 basis points to 46.2 percent of net sales, from 48.2 percent of net sales for the comparable period in 2019. sg&a expenses decreased 10 percent to $217.7 million, or 68.7 percent of net sales, from $240.8 million, or 45.8 percent of net sales, for the comparable period in 2019. loss from operations of $70.3 million, or (22.2) percent of net sales, from operating income of $16.4 million, or 3.1 percent of net sales, for the comparable period in 2019. net loss of $50.7 million, or $(0.77) per share, from net income of $23.0 million, or $0.34 per diluted share, for the comparable period in 2019. first half 2020 financial results (all comparisons are between first half 2020 and first half 2019, unless otherwise noted.) net sales decreased 25 percent to $884.8 million, from $1,180.8 million for the comparable period in 2019. gross margin contracted 280 basis points to 47.2 percent of net sales, from 50.0 percent of net sales for the comparable period in 2019. sg&a expenses were essentially flat at $494.5 million, or 55.9 percent of net sales, compared to $492.5 million, or 41.7 percent of net sales, for the comparable period in 2019. loss from operations was $72.3 million, or (8.2) percent of net sales, from operating income of $104.3 million, or 8.8 percent of net sales, for the comparable period in 2019. net loss of $50.5 million, or $(0.76) per share, compared to net income of $97.2 million, or $1.41 per diluted share, for the comparable period in 2019. balance sheet as of june 30, 2020 cash, cash equivalents and short-term investments totaled $475.8 million, compared to $524.3 million at june 30, 2019. short-term borrowings totaled $2.8 million. there were no short-term borrowings at june 30, 2019. including cash, cash equivalents and short-term investments and available credit capacity, total liquidity exceeded $1 billion at quarter-end. inventories increased 7 percent to $806.9 million, compared to $756.4 million at june 30, 2019. share repurchases for the six months ended june 30, 2020 in first quarter 2020, the company repurchased 1,557,184 shares of common stock for an aggregate of $132.9 million, or an average price per share of $85.34. the company did not repurchase shares during second quarter 2020. at june 30, 2020, $82.2 million remained available under the current stock repurchase authorization. as previously announced, the company has suspended share repurchases as part of a broader capital preservation effort resulting from the pandemic. management may resume share repurchases in the future at any time, depending upon market conditions, the company's capital needs and other factors. quarterly cash dividend as previously announced, the company’s board of directors has suspended quarterly cash dividends as part of a broader capital preservation effort resulting from the pandemic. the company's board of directors will continue to evaluate potential for future dividend distributions. conference call the company will hold its second quarter 2020 conference call at 5:00 p.m. et today. 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. third quarter 2020 reporting date columbia sportswear company plans to report third quarter 2020 financial results on thursday, october 29, 2020 at approximately 4:00 p.m. et. supplemental financial information since columbia sportswear company is a global company, the comparability of its operating results reported in united states 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 united states 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 united states dollars. the company calculates constant-currency net sales by translating net sales in foreign currencies for the current period into united states dollars at the average 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 financial measure 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. the non-gaap 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 non-gaap measures to the most directly comparable financial measure calculated in accordance with gaap. see the "reconciliation of gaap to non-gaap financial measures" table included herein. the non-gaap financial measures 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 the company’s expectations, anticipations or beliefs about sales volumes and net sales for fiscal year 2020. 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 include those relating to the spread of covid-19, the severity of the disease, the duration of the covid-19 pandemic and any spikes, actions that may be taken to contain the pandemic or to treat its impact, and economic slowdowns that have and may continue to result from the pandemic. 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 outdoor 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 (unaudited) june 30, (in thousands) 2020 2019 assets current assets: cash and cash equivalents $ 474,793 $ 386,150 short-term investments 975 138,198 accounts receivable, net 217,536 280,641 inventories 806,887 756,378 prepaid expenses and other current assets 102,574 100,800 total current assets 1,602,765 1,662,167 property, plant, and equipment, net 328,904 312,948 operating lease right-of-use assets 365,521 368,856 intangible assets, net 122,105 125,085 goodwill 68,594 68,594 deferred income taxes 73,395 82,418 other non-current assets 61,113 42,379 total assets $ 2,622,397 $ 2,662,447 liabilities and equity current liabilities: short-term borrowings $ 2,789 $ — accounts payable 255,702 309,945 accrued liabilities 203,827 200,816 operating lease liabilities 70,916 60,804 income taxes payable 2,594 6,416 total current liabilities 535,828 577,981 non-current operating lease liabilities 347,967 345,063 income taxes payable 48,863 53,216 deferred income taxes 7,942 8,518 other long-term liabilities 28,968 22,475 total liabilities 969,568 1,007,253 shareholders' equity 1,652,829 1,655,194 total liabilities and shareholders' equity $ 2,622,397 $ 2,662,447 columbia sportswear company condensed consolidated statements of operations (unaudited) three months ended june 30, six months ended june 30, (in thousands, except per share amounts) 2020 2019 2020 2019 net sales $ 316,611 $ 526,210 $ 884,839 $ 1,180,818 cost of sales 170,381 272,619 466,895 590,498 gross profit 146,230 253,591 417,944 590,320 46.2 % 48.2 % 47.2 % 50.0 % selling, general and administrative expenses 217,652 240,763 494,472 492,518 net licensing income 1,122 3,537 4,241 6,521 income (loss) from operations (70,300) 16,365 (72,287) 104,323 interest income (expense), net (805) 2,571 1,008 5,971 other non-operating income, net 935 1,032 2,673 1,478 income (loss) before income tax (70,170) 19,968 (68,606) 111,772 income tax benefit (expense) 19,463 3,061 18,112 (14,566) net income (loss) $ (50,707) $ 23,029 $ (50,494) $ 97,206 earnings (loss) per share: basic $ (0.77) $ 0.34 $ (0.76) $ 1.43 diluted $ (0.77) $ 0.34 $ (0.76) $ 1.41 weighted average shares outstanding: basic 66,135 67,930 66,553 68,109 diluted 66,135 68,560 66,553 68,825 columbia sportswear company condensed consolidated statements of cash flows (unaudited) six months ended june 30, (in thousands) 2020 2019 cash flows from operating activities: net income (loss) $ (50,494) $ 97,206 adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: depreciation, amortization and non-cash lease expense 65,924 57,487 provision for uncollectible accounts receivable 22,815 (2,146) loss on disposal or impairment of property, plant, and equipment, and right-of-use assets 8,800 1,599 deferred income taxes 4,362 (4,338) stock-based compensation 7,712 8,781 changes in operating assets and liabilities: accounts receivable 244,112 171,777 inventories (202,646) (232,117) prepaid expenses and other current assets (3,199) (21,815) other assets (14,596) (4,830) accounts payable 3,397 41,469 accrued liabilities (89,323) (75,360) income taxes payable (12,633) (13,967) operating lease assets and liabilities (26,264) (27,068) other liabilities 4,757 5,919 net cash provided by (used in) operating activities (37,276) 2,597 cash flows from investing activities: purchases of short-term investments (35,045) (181,257) sales and maturities of short-term investments 36,631 308,501 capital expenditures (20,959) (50,800) net cash provided by (used in) investing activities (19,373) 76,444 cash flows from financing activities: proceeds from credit facilities 375,759 23,208 repayments on credit facilities (373,390) (23,208) payment of line of credit issuance fees (1,674) — proceeds from issuance of common stock related to stock-based compensation 1,987 11,286 tax payments related to stock-based compensation (4,304) (5,589) repurchase of common stock (132,889) (100,293) purchase of non-controlling interest — (17,880) cash dividends paid (17,195) (32,686) net cash used in financing activities (151,706) (145,162) net effect of exchange rate changes on cash (2,861) 476 net decrease in cash and cash equivalents (211,216) (65,645) cash and cash equivalents, beginning of period 686,009 451,795 cash and cash equivalents, end of period $ 474,793 $ 386,150 supplemental disclosures of non-cash investing and financing activities: property, plant and equipment acquired through increase in liabilities $ 2,414 $ 9,524 columbia sportswear company reconciliation of gaap to non-gaap financial measures net sales growth - constant-currency basis (unaudited) three months ended june 30, reported net sales adjust for foreign currency constant-currency net sales reported net sales reported net sales constant-currency net sales (in millions, except percentage changes) 2020 translation 2020(1) 2019 % change % change(1) geographical net sales: united states $ 183.2 $ — $ 183.2 $ 315.5 (42)% (42)% laap 67.4 1.9 69.3 101.6 (34)% (32)% emea 58.3 0.5 58.8 91.6 (36)% (36)% canada 7.7 0.4 8.1 17.5 (56)% (54)% total $ 316.6 $ 2.8 $ 319.4 $ 526.2 (40)% (39)% brand net sales: columbia $ 265.8 $ 2.5 $ 268.3 $ 454.9 (42)% (41)% sorel 13.3 0.1 13.4 15.1 (12)% (11)% prana 27.7 — 27.7 38.7 (28)% (28)% mountain hardwear 9.8 0.2 10.0 17.5 (44)% (43)% total $ 316.6 $ 2.8 $ 319.4 $ 526.2 (40)% (39)% product category net sales: apparel, accessories and equipment $ 243.8 $ 2.0 $ 245.8 $ 432.2 (44)% (43)% footwear 72.8 0.8 73.6 94.0 (23)% (22)% total $ 316.6 $ 2.8 $ 319.4 $ 526.2 (40)% (39)% channel net sales: wholesale $ 159.9 $ 1.3 $ 161.2 $ 296.2 (46)% (46)% dtc 156.7 1.5 158.2 230.0 (32)% (31)% total $ 316.6 $ 2.8 $ 319.4 $ 526.2 (40)% (39)% (1) constant-currency net sales information is a non-gaap financial measure that excludes the effect of changes in foreign currency exchange rates against the united states dollar between comparable reporting periods. the company calculates constant-currency net sales by translating net sales in foreign currencies for the current period into united states dollars at the average exchange rates that were in effect during the comparable period of the prior year. columbia sportswear company reconciliation of gaap to non-gaap financial measures net sales growth - constant-currency basis (unaudited) six months ended june 30, reported net sales adjust for foreign currency constant-currency net sales reported net sales reported net sales constant-currency net sales (in millions, except percentage changes) 2020 translation 2020(1) 2019 % change % change(1) geographical net sales: united states $ 559.1 $ — $ 559.1 $ 727.7 (23)% (23)% laap 170.0 3.3 173.3 234.5 (28)% (26)% emea 114.1 1.9 116.0 162.9 (30)% (29)% canada 41.6 (0.1) 41.5 55.7 (25)% (25)% total $ 884.8 $ 5.1 $ 889.9 $ 1,180.8 (25)% (25)% brand net sales: columbia $ 737.5 $ 4.8 $ 742.3 $ 1,007.1 (27)% (26)% sorel 52.0 0.1 52.1 54.6 (5)% (5)% prana 64.2 — 64.2 79.9 (20)% (20)% mountain hardwear 31.1 0.2 31.3 39.2 (21)% (20)% total $ 884.8 $ 5.1 $ 889.9 $ 1,180.8 (25)% (25)% product category net sales: apparel, accessories and equipment $ 696.0 $ 3.6 $ 699.6 $ 958.2 (27)% (27)% footwear 188.8 1.5 190.3 222.6 (15)% (15)% total $ 884.8 $ 5.1 $ 889.9 $ 1,180.8 (25)% (25)% channel net sales: wholesale $ 485.8 $ 2.6 $ 488.4 $ 659.4 (26)% (26)% dtc 399.0 2.5 401.5 521.4 (23)% (23)% total $ 884.8 $ 5.1 $ 889.9 $ 1,180.8 (25)% (25)% (1) constant-currency net sales information is a non-gaap financial measure that excludes the effect of changes in foreign currency exchange rates against the united states dollar between comparable reporting periods. the company calculates constant-currency net sales by translating net sales in foreign currencies for the current period into united states dollars at the average exchange rates that were in effect during the comparable period of the prior year.
