Columbia sportswear company reports first quarter 2020 financial results and provides updates on response to covid-19
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 first quarter 2020 financial results for the period ended march 31, 2020 and updates regarding the company's response to the covid-19 pandemic. chairman, president and chief executive officer tim boyle commented, "our focus remains on the health and safety of our employees, their families, our customers and our communities. i'm proud of the strength and resilience of our global employees, whose dedication, focus and responsiveness are vital to successfully navigating this unprecedented global health and economic crisis. first quarter results largely reflect the impact of the covid-19 pandemic, which escalated throughout the quarter as the global effort to contain the pandemic unfolded. it is important to note that we entered into this crisis in a position of strength, with a fortress balance sheet and top quartile operating margin performance in our industry in 2019. as consumers look to make every dollar they spend count within this challenging economic environment, we believe the columbia brand’s differentiated innovation and exceptional value are as important as ever. "it is impossible to predict when this crisis will pass, but we have weathered many storms during columbia’s long history, which spans more than 80 years, and i am confident that we will get through this one as well. we have quickly taken steps to enhance liquidity, preserve capital, contain costs and manage inventory to mitigate the financial impact of the pandemic, and we are keenly focused on emerging in a stronger competitive position. "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 first 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 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 in first quarter 2020, lower consumer demand related to the covid-19 pandemic began to impact financial performance in china in late january, korea and japan in early february and north america and europe in march. retail traffic trends declined across north america and europe in early march, prior to store closures which began in mid-march. in light of the current and anticipated environment, the company has taken several actions to mitigate the financial impacts of the covid-19 pandemic including financial liquidity enhancements, capital preservation actions including suspending dividends and share repurchases, cost containment measures and actions to manage inventory. please reference the cfo commentary exhibit for a detailed review of covid-19 pandemic related issues impacting the company and key actions taken up to the date of this release. first quarter 2020 financial results (all comparisons are between first quarter 2020 and first quarter 2019, unless otherwise noted.) net sales decreased 13 percent to $568.2 million, from $654.6 million for the comparable period in 2019. gross margin contracted 360 basis points to 47.8 percent of net sales from 51.4 percent of net sales for the comparable period in 2019. sg&a expenses increased 10 percent to $276.8 million, or 48.7 percent of net sales, from $251.8 million, or 38.5 percent of net sales, for the comparable period in 2019. loss from operations of $(2.0) million, or (0.3) percent of net sales, compared to operating income of $88.0 million, or 13.4 percent of net sales, for the comparable period in 2019. first quarter 2020 loss from operations include a $21.5 million year-over-year increase in bad debt expense and a $9.2 million year-over-year increase in inventory obsolescence provisions. net income decreased 100 percent to $0.2 million, or $0.00 per diluted share, from $74.2 million, or $1.07 per diluted share, for the comparable period in 2019. balance sheet as of march 31, 2020 cash, cash equivalents and short-term investments totaled $706.9 million, compared to $703.1 million at march 31, 2019. short-term borrowings totaled $174.4 million. there were no short-term borrowings at march 31, 2019. inventories increased 11 percent to $577.1 million, compared to $520.6 million at march 31, 2019. share repurchases for the three months ended march 31, 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, under a previously established written plan. at march 31, 2020, $82.2 million remained available under the current stock repurchase authorization. as part of a broader capital preservation effort during the ongoing covid-19 pandemic, the company has suspended share repurchases. quarterly cash dividend as part of a broader capital preservation effort during the ongoing covid-19 pandemic, subsequent to payment of the dividend declared and paid earlier in the first quarter of 2020, the company’s board of directors suspended future quarterly cash dividends. conference call the company will hold its first 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. second quarter 2020 reporting date columbia sportswear company plans to report second quarter 2020 financial results on thursday, july 30, 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 the future and its ability to weather the covid-19 crisis. 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, actions that may be taken by governmental authorities 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. - financial tables follow - columbia sportswear company condensed consolidated balance sheets (unaudited) march 31, (in thousands) 2020 2019 assets current assets: cash and cash equivalents $ 671,108 $ 430,447 short-term investments 35,828 272,603 accounts receivable, net 312,951 341,136 inventories 577,124 520,614 prepaid expenses and other current assets 113,726 73,850 total current assets 1,710,737 1,638,650 property, plant, and equipment, net 332,997 298,379 operating lease right-of-use assets 387,984 362,568 intangible assets, net 122,850 125,830 goodwill 68,594 68,594 deferred income taxes 73,827 77,760 other non-current assets 54,498 41,928 total assets $ 2,751,487 $ 2,613,709 liabilities and equity current liabilities: short-term borrowings $ 174,443 $ — accounts payable 150,971 186,943 accrued liabilities 214,044 224,385 operating lease liabilities 64,456 59,214 income taxes payable 6,441 9,302 total current liabilities 610,355 479,844 non-current operating lease liabilities 364,300 337,832 income taxes payable 48,320 50,610 deferred income taxes 8,944 9,112 other long-term liabilities 22,977 15,662 total liabilities 1,054,896 893,060 shareholders' equity 1,696,591 1,720,649 total liabilities and equity $ 2,751,487 $ 2,613,709 columbia sportswear company condensed consolidated statements of operations (unaudited) three months ended march 31, (in thousands, except per share amounts) 2020 2019 net sales $ 568,228 $ 654,608 cost of sales 296,514 317,879 gross profit 271,714 336,729 47.8 % 51.4 % selling, general and administrative expenses 276,820 251,755 net licensing income 3,119 2,984 income (loss) from operations (1,987 ) 87,958 interest income, net 1,813 3,400 other non-operating income, net 1,738 446 income before income tax 1,564 91,804 income tax expense (1,351 ) (17,627 ) net income $ 213 $ 74,177 earnings per share: basic $ 0.00 $ 1.09 diluted $ 0.00 $ 1.07 weighted average shares outstanding: basic 66,970 68,290 diluted 67,412 69,052 columbia sportswear company condensed consolidated statements of cash flows (unaudited) three months ended march 31, (in thousands) 2020 2019 cash flows from operating activities: net income $ 213 $ 74,177 adjustments to reconcile net income to net cash provided by operating activities: depreciation, amortization and non-cash lease expense 32,994 28,998 provision for uncollectible accounts 19,229 (2,317 ) loss on disposal or impairment of property, plant, and equipment 2,138 958 deferred income taxes 3,802 191 stock-based compensation 3,675 4,215 changes in operating assets and liabilities: accounts receivable 150,687 110,954 inventories 23,510 862 prepaid expenses and other current assets (11,922 ) 6,952 other assets (5,873 ) (3,394 ) accounts payable (100,402 ) (81,242 ) accrued liabilities (77,861 ) (54,723 ) income taxes payable (9,429 ) (13,761 ) operating lease assets and liabilities (16,807 ) (14,721 ) other liabilities (1,200 ) 1,495 net cash provided by operating activities 12,754 58,644 cash flows from investing activities: purchases of short-term investments (35,044 ) (136,257 ) sales and maturities of short-term investments 1,631 128,000 capital expenditures (9,452 ) (25,199 ) net cash used in investing activities (42,865 ) (33,456 ) cash flows from financing activities: proceeds from credit facilities 175,719 21,942 repayments on credit facilities (1,054 ) (21,942 ) proceeds from issuance of common stock related to stock-based compensation 1,096 8,579 tax payments related to stock-based compensation (4,207 ) (5,432 ) repurchase of common stock (132,889 ) (18,845 ) purchase of non-controlling interest — (13,970 ) cash dividends paid (17,195 ) (16,418 ) net cash provided by (used in) financing activities 21,470 (46,086 ) net effect of exchange rate changes on cash (6,260 ) (450 ) net decrease in cash and cash equivalents (14,901 ) (21,348 ) cash and cash equivalents, beginning of period 686,009 451,795 cash and cash equivalents, end of period $ 671,108 $ 430,447 supplemental disclosures of non-cash investing and financing activities: property, plant and equipment acquired through increase in liabilities $ 2,503 $ 8,177 columbia sportswear company reconciliation of gaap to non-gaap financial measures net sales growth - constant-currency basis (unaudited) three months ended march 31, (in millions, except percentage changes) reported net sales adjust for foreign currency constant- currency net sales reported net sales reported net sales constant- currency net sales 2020 translation 2019(1) 2019 % change % change(1) geographical net sales: united states $ 375.9 $ — $ 375.9 $ 412.2 (9)% (9)% laap 102.6 1.4 104.0 132.9 (23)% (22)% emea 55.8 1.4 57.2 71.3 (22)% (20)% canada 33.9 (0.5 ) 33.4 38.2 (11)% (13)% total $ 568.2 $ 2.3 $ 570.5 $ 654.6 (13)% (13)% brand net sales: columbia $ 471.7 $ 2.3 $ 474.0 $ 552.2 (15)% (14)% sorel 38.7 — 38.7 39.5 (2)% (2)% prana 36.5 — 36.5 41.2 (11)% (11)% mountain hardwear 21.3 — 21.3 21.7 (2)% (2)% total $ 568.2 $ 2.3 $ 570.5 $ 654.6 (13)% (13)% product category net sales: apparel, accessories and equipment $ 452.2 $ 1.6 $ 453.8 $ 526.0 (14)% (14)% footwear 116.0 0.7 116.7 128.6 (10)% (9)% total $ 568.2 $ 2.3 $ 570.5 $ 654.6 (13)% (13)% channel net sales: wholesale $ 325.9 $ 1.3 $ 327.2 $ 363.2 (10)% (10)% dtc 242.3 1.0 243.3 291.4 (17)% (17)% total $ 568.2 $ 2.3 $ 570.5 $ 654.6 (13)% (13)% (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.
