Columbia Reports Record Q1 2019 Financial Results; Raises Full Year 2019 Financial Outlook

Columbia Sportswear Company has announced first quarter 2019 financial results for the period ended March 31, 2019.

First Quarter 2019 Highlights

• Net sales increased 8 percent (10 percent constant-currency) to a record $654.6 million.
• Gross margin expanded 210 basis points to a record 51.4 percent of net sales, compared to first quarter 2018 gross margin of 49.3 percent of net sales.
• Operating income increased 48 percent to a record $88.0 million and operating margin expanded 360 basis points to 13.4 percent of net sales, compared to first quarter 2018 operating income of $59.3 million, or 9.8 percent of net sales. Compared to non-GAAP first quarter 2018 operating income of $70.3 million, or 11.6 percent of net sales, operating income increased 25 percent and operating margin expanded 180 basis points.
• Earnings per diluted share increased 67 percent to a record $1.07, compared to first quarter 2018 earnings per diluted share of $0.64. Compared to non-GAAP first quarter 2018 earnings per diluted share of $0.77, earnings per diluted share increased 39 percent.

Full Year 2019 Financial Outlook
(Guidance details can be found in the "Supplemental Financial Information" section and CFO Commentary document).

• Net sales of $2.98 to $3.04 billion (prior $2.97 to $3.03 billion), representing net sales growth of 6.5 to 8.5 percent (prior 6.0 to 8.0 percent). Net sales guidance includes a foreign currency translation impact that is anticipated to reduce net sales growth by approximately 70 basis points.
• Operating income of $378 to $391 million (prior $369 to $382 million), representing operating margin of 12.7 to 12.9 percent (prior 12.4 to 12.6 percent).
• Diluted earnings per share of $4.40 to $4.55 (prior $4.30 to $4.45).

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.

President and Chief Executive Officer Tim Boyle commented, "It is encouraging to see the momentum we created in 2018 continue into this year, with record first quarter net sales, gross margin, operating income, net income and earnings per diluted share. During the quarter, we experienced a strong finish to the Fall 2018 sales season as well as excellent early season sell-through of our Spring 2019 assortment. The Columbia brand generated double-digit growth in the U.S. across both direct-to-consumer and wholesale distribution channels and the SOREL brand grew an impressive 28 percent globally. We are also delivering on the financial value capture of Project CONNECT, which helped to fuel 210 basis points of gross margin expansion."

"Above plan first quarter 2019 results as well as favorable advance Fall 2019 orders give us confidence to increase our full year financial outlook. It is important to note that we are delivering this profitable growth while at the same time making substantial investments to build on our strengths as a brand-led consumer-focused organization."

“Our profitable growth trajectory and fortress balance sheet, with cash and short-term investments of over $700 million and no long-term debt, 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 enable sustainable long-term profitable growth, make us a more efficient company, and drive market share capture across our brand portfolio and geographic regions."

CFO's Commentary Available Online

For a detailed review of the Company's first quarter 2019 financial results and full year 2019 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 first quarter 2018 exclude $11.0 million in Project CONNECT expenses and discrete costs ($8.4 million net of tax) and $1.0 million in incremental income tax expense related to the Tax Cuts and Jobs Act (“TCJA”). These exclusions were not applicable in first quarter 2019.

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

Net sales increased 8 percent (10 percent constant-currency) to $654.6 million, from $607.3 million for the comparable period in 2018.

Gross margin expanded 210 basis points to 51.4 percent of net sales, from 49.3 percent for the comparable period in 2018.

SG&A expenses increased $8.4 million, or 3 percent, to $251.8 million, or 38.5 percent of net sales, from $243.4 million, or 40.1 percent of net sales, for the comparable period in 2018. SG&A expenses increased $19.4 million, or 8 percent, from non-GAAP SG&A expenses of $232.4 million for the comparable period in 2018.

Operating income increased 48 percent to $88.0 million, or 13.4 percent of net sales, from $59.3 million, or 9.8 percent of net sales, for the comparable period in 2018. Operating income increased $17.6 million, or 25 percent, from non-GAAP operating income of $70.3 million for the comparable period in 2018.

Net income increased 64 percent to $74.2 million, or $1.07 per diluted share, from $45.1 million, or $0.64 per diluted share, for the comparable period in 2018. Net income increased 36 percent from non-GAAP net income of $54.5 million, or $0.77 per diluted share for the comparable period in 2018. First quarter 2019 net income includes the benefit of full ownership of our China business, which became a wholly owned subsidiary effective January 2019. In the first quarter of 2018 the non-controlling interest share of net income was $3.6 million, or $0.05 per diluted share.

Balance Sheet as of March 31, 2019

Cash, cash equivalents and short-term investments totaled $703.1 million, compared to $808.2 million at March 31, 2018.

Inventories increased 28 percent to $520.6 million, compared to $406.0 million at March 31, 2018.

Share Repurchases for the Three Months Ended March 31, 2019

The Company repurchased 195,681 shares of common stock for an aggregate of $19.1 million, or $97.47 average price per share.

Regular Quarterly Cash Dividend

At its regular board meeting on April 19, 2019, the board of directors authorized a regular quarterly cash dividend of $0.24 per share, payable on May 30, 2019 to shareholders of record on May 16, 2019.