UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2001
----------------------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE EXCHANGE ACT
OF 1934
For the transition period from ______________ to ______________
COLUMBIA SPORTSWEAR COMPANY
(Exact name of registrant as specified in its charter)
Oregon 0-23939 93-0498284
- --------------------------------------------------------------------------------
(State or other jurisdiction of (Commission File (IRS Employer
incorporation or organization) Number) Identification Number)
6600 North Baltimore Portland, Oregon 97203
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(503) 286-3676
- --------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
Not Applicable
- --------------------------------------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether registrant (1) has filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES [X] NO [ ]
The number of shares of Common Stock outstanding on April 30, 2001, was
25,940,618.
COLUMBIA SPORTSWEAR COMPANY
MARCH 31, 2001
INDEX TO FORM 10-Q
PAGE NO.
PART I. FINANCIAL INFORMATION
ITEM 1 -- Financial Statements - Columbia Sportswear Company (Unaudited)
Condensed Consolidated Balance Sheets ..................................... 2
Condensed Consolidated Statements of Operations ........................... 3
Condensed Consolidated Statements of Cash Flows ........................... 4
Notes to Condensed Consolidated Financial Statements ...................... 5
ITEM 2 -- Management's Discussion and Analysis of Financial
Condition and Results of Operations ............................. 8
ITEM 3 -- Quantitative and Qualitative Disclosures About Market Risk .......... 10
PART II. OTHER INFORMATION
ITEM 6 -- Exhibits and Reports on Form 8-K ..................................... 11
SIGNATURES ..................................................................... 12
1
ITEM 1 -- FINANCIAL STATEMENTS
COLUMBIA SPORTSWEAR COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
(UNAUDITED)
MARCH 31, 2001 DECEMBER 31, 2000
-------------- -----------------
ASSETS
Current Assets:
Cash and cash equivalents $ 40,479 $ 35,464
Accounts receivable, net of allowance of $6,076 and
$5,826, respectively 97,174 129,539
Inventories (Note 2) 127,717 105,288
Deferred tax asset 12,129 13,347
Prepaid expenses and other current assets 4,939 5,610
--------- ---------
Total current assets 282,438 289,248
Property, plant, and equipment, net 81,653 76,662
Intangibles and other assets 8,861 9,176
--------- ---------
Total assets $ 372,952 $ 375,086
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Notes payable $ 24,261 $ 23,987
Accounts payable 36,313 45,047
Accrued liabilities 21,071 28,294
Current portion of long-term debt 314 308
--------- ---------
Total current liabilities 81,959 97,636
Long-term debt 25,919 26,000
Deferred tax liability 2,468 2,461
--------- ---------
Total liabilities 110,346 126,097
Commitments and contingencies -- --
Shareholders' Equity:
Preferred stock; 10,000 shares authorized; none
issued and outstanding -- --
Common stock; 50,000 shares authorized; 25,885 and
25,709 issued and outstanding 138,666 133,736
Retained earnings 132,509 123,901
Accumulated other comprehensive loss (6,012) (5,920)
Unearned portion of restricted stock issued for
future services (2,557) (2,728)
--------- ---------
Total shareholders' equity 262,606 248,989
--------- ---------
Total liabilities and shareholders' equity $ 372,952 $ 375,086
========= =========
See accompanying notes to condensed consolidated financial statements
2
COLUMBIA SPORTSWEAR COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
THREE MONTHS ENDED
MARCH 31,
-------------------------
2001 2000
-------- --------
Net sales $138,083 $108,437
Cost of sales 78,882 61,899
-------- --------
Gross profit 59,201 46,538
Selling, general, and administrative 44,893 40,378
-------- --------
Income from operations 14,308 6,160
Interest expense, net 80 684
-------- --------
Income before income tax 14,228 5,476
Income tax expense 5,620 2,204
-------- --------
Net income (Note 3) $ 8,608 $ 3,272
======== ========
Net income per share (Note 4):
Basic $ 0.33 $ 0.13
Diluted $ 0.32 $ 0.13
Weighted average shares outstanding :
Basic 25,798 25,373
Diluted 26,530 25,780
See accompanying notes to condensed consolidated financial statements
3
COLUMBIA SPORTSWEAR COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
THREE MONTHS ENDED MARCH 31,
--------------------------
2001 2000
-------- --------
CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES:
Net income $ 8,608 $ 3,272
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization 3,642 3,283
Non-cash compensation 171 170
Loss on disposal of property, plant, and equipment 29 8
Deferred income tax provision 1,155 333
Changes in operating assets and liabilities:
Accounts receivable 29,560 36,300
Inventories (24,205) (5,448)
Prepaid expenses and other current assets 639 (1,146)
Intangibles and other assets 28 60
Accounts payable (4,354) (8,842)
Accrued liabilities (5,993) (4,712)
-------- --------
Net cash provided by operating activities 9,280 23,278
-------- --------
CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES:
Additions to property, plant, and equipment (8,732) (1,234)
Proceeds from sale of property, plant, and equipment 15 22
-------- --------
Net cash used in investing activities (8,717) (1,212)
-------- --------
CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES:
Net proceeds from (repayments on) notes payable 2,312 (9,447)
Repayment on long-term debt (75) (60)
Proceeds from issuance of common stock 2,909 302
-------- --------
Net cash provided by (used in) financing activities 5,146 (9,205)
--------
NET EFFECT OF EXCHANGE RATE CHANGES ON CASH (694) 345
-------- --------
NET INCREASE IN CASH AND CASH EQUIVALENTS 5,015 13,206
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 35,464 14,622
======== ========
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 40,479 $ 27,828
======== ========
See accompanying notes to condensed consolidated financial statements
4
COLUMBIA SPORTSWEAR COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1. BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements have been
prepared by the management of Columbia Sportswear Company (the "Company") and in
the opinion of management contain all adjustments, consisting only of normal
recurring adjustments, necessary to present fairly the Company's financial
position as of March 31, 2001, and the results of operations for the three
months ended March 31, 2001 and 2000 and cash flows for the three months ended
March 31, 2001 and 2000. It should be understood that accounting measurements at
interim dates inherently involve greater reliance on estimates than at year end.
The results of operations for the three months ended March 31, 2001 are not
necessarily indicative of the results to be expected for the full year.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with accounting principles generally accepted
in the United States of America have been condensed or omitted pursuant to the
rules and regulations of the Securities and Exchange Commission. It is suggested
that these condensed consolidated financial statements be read in conjunction
with the financial statements and notes thereto included in the Company's Annual
Report on Form 10-K for the fiscal year ended December 31, 2000.
Certain reclassifications of amounts reported in the prior period financial
statements have been made to conform to classifications used in the current
period financial statements.
NOTE 2. INVENTORIES
Inventories are carried at the lower of cost or market. Cost is determined using
the first-in, first-out method.
Inventories consist of the following (in thousands):
March 31, 2001 December 31, 2000
-------------- -----------------
Raw materials $ 5,678 $ 4,298
Work in process 16,364 9,217
Finished goods 109,946 94,828
--------- ---------
131,988 108,343
Less inventory valuation allowance (4,271) (3,055)
--------- ---------
$ 127,717 $ 105,288
========= =========
NOTE 3. COMPREHENSIVE INCOME
Comprehensive income and its components, net of tax, are as follows:
Three Months Ended
March 31,
------------------------
2001 2000
------- -------
Net income $ 8,608 $ 3,272
Foreign currency translation adjustments (1,945) 13
Unrealized gain (loss) on derivative transactions (net
of tax expense, $563 and $0, respectively) 1,853 (230)
------- -------
Comprehensive income $ 8,516 $ 3,055
======= =======
5
NOTE 4. NET INCOME PER SHARE
Statement of Financial Accounting Standards ("SFAS") No. 128, "Earnings Per
Share," requires dual presentation of basic and diluted earnings per share
("EPS"). Basic EPS is based on the weighted average number of common shares
outstanding. Diluted EPS reflects the potential dilution that could occur if
securities or other contracts to issue common stock were exercised or converted
into common stock.
There were no adjustments to net income in computing diluted net income per
share for the three months ended March 31, 2001 and 2000. A reconciliation of
the common shares used in the denominator for computing basic and diluted net
income per share is as follows:
Three Months Ended
March 31,
---------------------
2001 2000
------ ------
Weighted average common shares outstanding, used in
computing basic net income per share 25,798 25,373
Effect of dilutive stock options 732 407
------ ------
Weighted-average common shares outstanding, used in
computing diluted net income per share 26,530 25,780
====== ======
Net income per share of common stock:
Basic $ 0.33 $ 0.13
Diluted $ 0.32 $ 0.13
Subsequent to March 31, 2001, the Company announced a three-for-two stock split
of its common stock. The stock split will be distributed on June 4th, 2001 to
all shareholders of record at the close of business on May 17th, 2001.
Shareholders will receive one additional share of Columbia common stock for
every two shares owned, the new shares to be payable in the form of a stock
dividend.
NOTE 5. SEGMENT INFORMATION
The Company operates in one industry segment: the design, production, marketing
and selling of active outdoor apparel, including outerwear, sportswear, rugged
footwear, and accessories. The geographic distribution of the Company's net
sales, income before income tax, and identifiable assets are summarized in the
following table (in thousands). Inter-geographic net sales, which are recorded
at a negotiated mark-up and eliminated in consolidation, are not material.
Three Months Ended
March 31,
-------------------------
2001 2000
-------- --------
Net sales to unrelated entities:
United States $ 86,396 $ 68,901
Canada 13,467 10,471
Other International 38,220 29,065
-------- --------
$138,083 $108,437
======== ========
Income before income tax:
United States $ 9,164 $ 1,993
Canada 2,174 1,093
Other International 2,795 2,178
Less interest and other income
(expense) and eliminations 95 212
-------- --------
$ 14,228 $ 5,476
======== ========
6
March 31, December 31,
2001 2000
--------- ------------
Total assets:
United States $ 350,684 $ 351,270
Canada 29,860 31,645
Other international 59,199 56,059
--------- ---------
439,743 438,974
Eliminations (66,791) (63,888)
========= =========
Total assets $ 372,952 $ 375,086
========= =========
NOTE 6. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT
As part of the Company's risk management programs, the Company uses a variety of
financial instruments, including foreign currency option and forward exchange
contracts. The Company does not hold or issue derivative financial instruments
for trading purposes.
The Company uses a combination of foreign currency option and forward exchange
contracts to hedge against the currency risk associated with Japanese yen,
Canadian dollar and European Euro denominated, firmly committed and anticipated
transactions for the next twelve months.
The Company accounts for these instruments as cash flow hedges. In accordance
with Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting
for Derivative Instruments and Hedging Activity," such financial instruments are
marked-to-market with the offset to shareholders' equity and then subsequently
recognized as a component of gross margin when the underlying transaction is
recognized. The Company measures hedge effectiveness of foreign currency option
and forward exchange contracts based on the forward price of the underlying
commodity. Hedge ineffectiveness was not material during the three months ended
March 31, 2001 and 2000.
7
ITEM 2 -- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
FORWARD LOOKING STATEMENTS
The statements in this report concerning future financing and working capital
requirements and the impact of Euro implementation on our business constitute
forward-looking statements that are subject to risks and uncertainties. Many
factors could cause actual results to differ materially from those projected in
such forward looking statements, including risks described in our annual report
on form 10-K for the year ended December 31, 2000 under the heading "Factors
That May Affect Our Business". Factors that could adversely affect future
financing and working capital needs include, but are not limited to, increased
competitive factors (including increased competition, new product offerings by
competitors and price pressures); changes in consumer preferences; an inability
to increase sales to department stores or to open and operate new concept shops
on favorable terms; a failure to manage growth effectively; unavailability of
independent manufacturing, labor or supplies at reasonable prices; unfavorable
business conditions, disruptions in the outerwear, sportswear and rugged
footwear industries; the inability to obtain additional financing on acceptable
terms; delays or disruptions in our capital projects; and our ability to
negotiate favorable terms for construction of our proposed European distribution
facility. Factors that could cause the implementation of the Euro to have an
adverse affect on our business include operational disruptions that could result
from the systems conversion required for the Euro implementation. The Company
does not undertake any obligations to update this forward-looking information to
conform it to changes in circumstances or expectations.
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, selected income
statement data expressed as a percentage of net sales.
Quarter Ended March 31,
-----------------------
2001 2000
----- -----
Net sales 100.0% 100.0%
Cost of sales 57.1 57.1
Gross profit 42.9 42.9
Selling, general and
administrative 32.5 37.2
Income from operations 10.4 5.7
Interest expense, net 0.1 0.6
Income before income tax 10.3 5.1
Income tax expense 4.1 2.1
Net income 6.2% 3.0%
THREE MONTHS ENDED MARCH 31, 2001 COMPARED TO THREE MONTHS ENDED MARCH 31, 2000
NET SALES: Net sales increased 27.4% to $138.1 million for the three month
period ended March 31, 2001 from $108.4 million for the comparable period in
2000. Domestic sales increased 25.4% to $86.4 million for the three month period
ended March 31, 2001 from $68.9 million for the comparable period in 2000. Net
international sales, excluding Canada, increased 31.3% to $38.2 million for the
three month period ended March 31, 2001 from $29.1 million for the comparable
period in 2000. Canadian sales increased 29.8% to $13.5 million for the three
month period ended March 31, 2001 from $10.4 million for the same period in
2000. The domestic and European increases were primarily attributable to
increased sales of outerwear, footwear and sportswear units in the United States
and sportswear units in Europe.
8
GROSS PROFIT: Gross profit as a percentage of net sales was 42.9% for both the
three months ended March 31, 2001 and 2000. The gross margin for the three
months ended March 31, 2001 reflects continued strength in the full priced
product margins across all product categories in the United States, the shift in
product mix to a greater percent of high margin spring outerwear and the
reduction of close-out product shipments during the period. This was partially
offset by the decline in the value of the Euro, which affected our European
margins for the quarter.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSE: Selling, general, and
administrative expense increased 11.1% to $44.9 million for the three months
ended March 31, 2001 from $40.4 million for the comparable period in 2000,
primarily as a result of an increase in variable selling and operating expenses
to support the higher level of sales. As a percentage of sales, selling,
general, and administrative expenses decreased to 32.5% for the three months
ended March 31, 2001 from 37.2% for the comparable period in 2000. The decrease
in selling, general and administrative expenses as a percentage of sales was
primarily due to strong sales growth coupled with operating efficiencies for
the three months ended March 31, 2001.
INTEREST EXPENSE: Interest expense decreased by 88.3% for the three months ended
March 31, 2001 from the comparable period in 2000. This decrease was
attributable to our increased cash position for the three months ended March 31,
2001 when compared to the same period in 2000.
SEASONALITY OF BUSINESS
Our business is affected by the general seasonal trends common to the outdoor
apparel industry, with sales and profits highest in the third calendar quarter.
Our products are marketed on a seasonal basis, with a product mix weighted
substantially toward the fall season. Results of operations in any period should
not be considered indicative of the results to be expected for any future
period. The sale of our products is subject to substantial cyclical fluctuation
or impact from unseasonal weather conditions. Sales tend to decline in periods
of recession or uncertainty regarding future economic prospects that affect
consumer spending, particularly on discretionary items. This cyclicality and any
related fluctuation in consumer demand could have a material adverse effect on
the Company's results of operations, cash flows and financial position.
LIQUIDITY AND CAPITAL RESOURCES
Our primary ongoing funding requirements are to finance working capital and
continued growth of the business. At March 31, 2001, we had total cash
equivalents of $40.5 million compared to $27.8 million at March 31, 2000. Cash
provided by operating activities was $9.3 million for the three months ended
March 31, 2001 and $23.3 million for the comparable period in 2000. This
decrease was primarily due to an increase in inventory required to support
higher sales levels.
Our primary capital requirements are for working capital, investing activities
associated with the expansion of our domestic and international operations and
general corporate needs. Net cash used in investing activities was $8.7 million
for the three months ended March 31, 2001 and $1.2 million for the comparable
period in 2000. This increase was primarily due to expenditures related to the
expansion of our domestic distribution center.
Cash provided by financing activities was $5.1 million for the three months
ended March 31, 2001 compared to cash used in financing activities of $9.2
million for the comparable period in 2000. The increase in net cash provided by
financing activities was primarily due to reduced repayments of notes payable,
partially offset by proceeds from employee stock plans.
9
To fund our working capital requirements, we have available unsecured revolving
lines of credit with aggregate seasonal limits ranging from approximately $35 to
$75 million, of which $10 million to $50 million is committed. As of March 31,
2001, $24.3 million was outstanding under these lines of credit. Additionally,
we maintain credit agreements in order to provide us with unsecured import lines
of credit with a combined limit of approximately $135 million available for
issuing documentary letters of credit. Internationally, our subsidiaries have
local currency operating lines in place guaranteed by our domestic operations.
We have recently announced capital expenditures to support our continued growth,
including the expansion of our United States distribution center, remodeling of
our recently purchased corporate headquarters and construction of a European
distribution facility. We anticipate the capital expenditures associated with
these projects as well as our maintenance capital will be approximately $40
million in 2001 and will be funded by existing cash and cash provided by
operations. However, if the need for additional financing arises, our ability to
obtain additional credit facilities will depend on prevailing market conditions,
our financial condition, and our ability to negotiate favorable terms and
conditions.
EURO CURRENCY CONVERSION
On January 1, 1999, the Euro was adopted as the national currency of the
participating countries - Austria, Belgium, Finland, France, Germany, Ireland,
Italy, Luxembourg, Netherlands, Portugal and Spain. Greece adopted the Euro on
January 1, 2001. Initially, the Euro will be used for non-cash transactions.
Legacy currencies of the participating member states will remain legal tender
until January 1, 2002. On this date, Euro-denominated bills and coins will be
issued for use in cash transactions.
The introduction of the Euro is a significant event with potential implications
for our existing operations within the participating countries. As such, we have
committed resources to conduct risk assessments and to take corrective actions,
where required, to ensure that we are prepared for the introduction of the Euro.
Progress regarding Euro implementation is reported periodically to management.
We have not experienced any significant operational disruptions to date and do
not expect the continued implementation of the Euro to cause any significant
operational disruptions. In addition, we have not incurred and do not expect to
incur any significant costs from the continued implementation of the Euro,
including any additional currency risk, which could materially affect our
liquidity or capital resources.
ITEM 3 -- QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
There has not been any material change in the market risk disclosure contained
in the Company's Annual Report on Form 10-K for the fiscal year ended December
31, 2000.
10
PART II. OTHER INFORMATION
ITEM 6 -- EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
None.
(b) Reports on Form 8-K
None.
11
SIGNATURES
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 thereunto duly authorized.
COLUMBIA SPORTSWEAR COMPANY
Date: May 15, 2001 /s/ PATRICK D. ANDERSON
----------------------------- ------------------------------------
Patrick D. Anderson
Chief Financial Officer and
Authorized Officer
12