Columbia Reports Fourth Quarter And Record Full Year 2019 Financial Results; Provides 2020 Financial Outlook

Columbia Sportswear Company (NASDAQ: COLM), a leading innovator in active outdoor apparel, footwear, accessories and equipment, today announced fourth quarter 2019 financial results for the period ended December 31, 2019.

Fourth Quarter 2019 Highlights

• Net sales increased 4 percent compared to fourth quarter 2018, to a record $954.9 million.

• Operating income decreased 9 percent to $138.6 million and operating margin declined 210 basis points to 14.5 percent of net sales, compared to fourth quarter 2018 operating income of $152.8 million, or 16.6 percent of net sales. Compared to non-GAAP fourth quarter 2018 operating income of $154.5 million, or 16.8 percent of net sales, operating income decreased 10 percent and operating margin declined 230 basis points.

• Diluted earnings per share increased 2 percent to $1.67, compared to fourth quarter 2018 diluted earnings per share of $1.63. Fourth quarter 2019 diluted earnings per share includes $0.09 of discrete tax benefits. Compared to non-GAAP fourth quarter 2018 diluted earnings per share of $1.68, diluted earnings per share decreased 1 percent.

• The board of directors approved an 8 percent increase in the company's regular quarterly dividend to $0.26 per share.

Full Year 2019 Highlights

• Net sales increased 9 percent (10 percent constant-currency) compared to 2018, to a record $3,042.5 million.

• Operating income increased 13 percent to a record $395.0 million and operating margin expanded 50 basis points to 13.0 percent of net sales, compared to 2018 operating income of $351.0 million, or 12.5 percent of net sales. Compared to non-GAAP 2018 operating income of $362.4 million, or 12.9 percent of net sales, operating income increased 9 percent and operating margin expanded 10 basis points.

• Diluted earnings per share increased 27 percent to a record $4.83, compared to 2018 diluted earnings per share of $3.81. Compared to non-GAAP 2018 diluted earnings per share of $4.01, diluted earnings per share increased 20 percent.

Full Year 2020 Financial Outlook
(Financial outlook details can be found in the Full Year 2020 Financial Outlook section below and the CFO Commentary document.)

For 2020, management currently expects:

• Net sales of $3.18 to $3.23 billion, representing net sales growth of 4.5 to 6.0 percent.

• Operating income of $399 to $412 million, representing operating margin of 12.6 to 12.8 percent.

• Diluted earnings per share of $4.75 to $4.90.

Throughout this press release, amounts stated to be non-GAAP exclude items described in the "Non-GAAP Financial Measures" section below. Additionally, constant-currency net sales, a non-GAAP financial measure, is referenced throughout this press release. Please see the "Supplemental Financial Information" section and financial tables included below for a more detailed description of this and other non-GAAP financial measures.

Chairman, President and Chief Executive Officer Tim Boyle commented, “2019 was a record year for Columbia Sportswear Company, with sales surpassing the $3 billion mark for the first time in our company’s history. I’d like to congratulate and thank our employees around the world whose hard work and dedication enable our success. While we celebrate these financial results, 2019 was also a year of remembrance as we lost our 'One Tough Mother' Chairman and matriarch Gert Boyle, whose strength and character guided this company for nearly 50 years. Her mantra ‘It’s Perfect, Now Make it Better’ drives our culture of relentless improvement, and her image and likeness will remain an integral part of our branding.”

“In the fourth quarter, a challenging retail environment, particularly in outerwear, impacted sell-through performance and led to higher levels of promotional activity. In this environment, we delivered results generally in-line with our guidance, including continued exceptional growth for the SOREL brand.”

“As we begin 2020, our unique brand portfolio, diversified business model and fortress balance sheet provide a foundation of strength and confidence from which we will continue investing in our strategic priorities to:

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

"We are making these investments to build on our strengths as a brand-led, consumer-focused organization and to enable sustainable long-term profitable growth."

CFO's Commentary Available Online

For a detailed review of the Company's fourth quarter and full year 2019 financial results and full year 2020 financial outlook, 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 the conference call.

Non-GAAP Financial Measures

Throughout this press release, non-GAAP amounts in fourth quarter 2018 exclude $2.4 million in incremental provisional income tax expense related to the Tax Cuts and Jobs Act (“TCJA”) and $1.7 million in Project CONNECT expenses and discrete costs ($1.3 million net of tax). References to non-GAAP financial measures for full year 2018 exclude $15.8 million in Project CONNECT program expenses and discrete costs ($12.0 million net of tax), $5.1 million in incremental provisional income tax expense related to the TCJA and a $4.3 million benefit in connection with an insurance claim recovery ($3.3 million net of tax). These excluded items were not applicable to fourth quarter and full year 2019 results.

Fourth Quarter 2019 Financial Results
(All comparisons are between fourth quarter 2019 and fourth quarter 2018, unless otherwise noted.)

Net sales increased 4 percent to $954.9 million, from $917.6 million for the comparable period in 2018.

Gross margin declined 160 basis points to 50.1 percent of net sales from 51.7 percent of net sales for the comparable period in 2018.

SG&A expenses increased 6 percent to $344.4 million, or 36.1 percent of net sales, from $326.3 million, or 35.6 percent of net sales, for the comparable period in 2018. SG&A expenses increased 6 percent from non-GAAP SG&A expenses of $324.6 million, or 35.4 percent of net sales, for the comparable period in 2018.

Operating income decreased 9 percent to $138.6 million, or 14.5 percent of net sales, from $152.8 million, or 16.6 percent of net sales, for the comparable period in 2018. Operating income decreased 10 percent from non-GAAP operating income of $154.5 million, or 16.8 percent of net sales, for the comparable period in 2018.

Income tax expense was $26.8 million, resulting in an effective income tax rate of 19.0 percent, compared to income tax expense of $41.0 million, or an effective income tax rate of 26.6 percent, for the comparable period in 2018. Non-GAAP fourth quarter 2018 income tax expense was $39.0 million, which resulted in a non-GAAP effective income tax rate of 25.0 percent.

Net income increased 1 percent to $114.0 million, or $1.67 per diluted share, from $113.3 million, or $1.63 per diluted share, for the comparable period in 2018. Net income decreased 2 percent from non-GAAP net income of $116.9 million, or $1.68 per diluted share for the comparable period in 2018. Fourth quarter 2019 net income includes the benefit of full ownership of our China business, which became a wholly-owned subsidiary effective January 2019. In fourth quarter 2018, the non-controlling interest share of net income was $0.1 million, or less than $0.01 per diluted share.

Full Year 2019 Financial Results
(All comparisons are between full year 2019 and full year 2018, unless otherwise noted).

Net sales increased 9 percent (10 percent constant-currency) to $3,042.5 million, from $2,802.3 million in 2018.

Gross margin expanded 30 basis points to 49.8 percent of net sales, from 49.5 percent of net sales in 2018.

SG&A expenses increased 8 percent to $1,136.2 million, or 37.3 percent of net sales, from $1,051.2 million, or 37.5 percent of net sales, in 2018. SG&A expenses increased 9 percent from non-GAAP SG&A expenses of $1,039.7 million, or 37.1 percent of net sales, in 2018.

Operating income increased 13 percent to $395.0 million, or 13.0 percent of net sales, from operating income of $351.0 million, or 12.5 percent of net sales, in 2018. Operating income increased 9 percent from non-GAAP operating income of $362.4 million, or 12.9 percent of net sales, in 2018.

Income tax expense was $74.9 million, resulting in an effective income tax rate of 18.5 percent, compared to income tax expense of $85.8 million, or an effective income tax rate of 23.8 percent, in 2018. Non-GAAP 2018 income tax expense was $83.4 million, which resulted in a non-GAAP effective income tax rate of 22.4 percent.

Net income increased 23 percent to $330.5 million, or $4.83 per diluted share, from $268.3 million, or $3.81 per diluted share, in 2018. Net income increased 17 percent from non-GAAP net income of $282.0 million, or $4.01 per diluted share in 2018. 2019 diluted earnings per share includes the benefit of full ownership of our China business. In 2018, the non-controlling interest share of net income was $6.7 million, or $0.10 per diluted share.

Balance Sheet as of December 31, 2019

Cash, cash equivalents and short-term investments totaled $687.7 million, compared to $700.6 million at December 31, 2018.

Inventories increased 16 percent to $606.0 million, compared to $521.8 million at December 31, 2018.

Share Repurchases for the Twelve Months Ended December 31, 2019

The Company repurchased 1,243,872 shares of common stock for an aggregate of $121.2 million, or an average price per share of $97.46.

Regular Quarterly Cash Dividend

At its board meeting on February 3, 2020, the board of directors authorized an 8 percent increase to the Company's regular quarterly cash dividend to $0.26 per share, payable on March 23, 2020 to shareholders of record on March 10, 2020.

Full Year 2020 Financial Outlook

The Company’s 2020 Financial Outlook is forward-looking in nature and actual results may differ materially from projections as a result of, among other things, the factors described under “Forward-Looking Statements” below. The projections in the Company’s 2020 Financial Outlook are predicated on certain assumptions including, but not limited to, normal seasonal weather globally and that current macroeconomic, geopolitical and market conditions in key markets do not worsen. Projections do not include the potential financial impact of the coronavirus outbreak, the effect of which is unable to be predicted with any degree of certainty at this time. With respect to the coronavirus outbreak, our first priority has been to take appropriate measures to ensure the health and safety of our employees and customers in this evolving environment. As a result, we have closed stores in China, implemented strategies designed to mitigate the impact on our employees in China and put in place company-wide travel limitations. The potential impacts of the outbreak are broad-reaching including impacts to our DTC and wholesale businesses. We are already experiencing lower store traffic at stores that remain open in China and stores outside of China that benefit from Chinese tourism. In addition, there are potential operational impacts across our supply chain.