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Original Source: FD (FAIR DISCLOSURE) WIRE
. David Kiser, Columbia Sportswear Co., Director, IR . Gert Boyle, Columbia Sportswear Co., Chairwoman . Tim Boyle, Columbia Sportswear Co., President & CEO . Bryan Timm, Columbia Sportswear Co., CFO
COLM reported 4Q04 diluted EPS of $0.97 and 2004 EPS of $3.40. The Co.'s 4Q04 sales grew by a strong 17.2% YoverY to $301.8m, a 4Q record. During 4Q04, the Co. repurchased approx. 145,000 shares in an aggregate purchase price of $7.9m. The Co. expects 1Q05 consolidated revenue growth to be approx. 15%, and is using 40.7m shares for purposes of 1Q05 EPS calculations. Q&A Focus: Fall programs, cancellations, and inventory.
A. Key Data From Call 1. 4Q04 sales = $301.8m. 2. 4Q04 net income = $39.4m. 3. 4Q04 diluted EPS = $0.97. 4. 4Q04 consolidated GM = 44.5%. 5. 4Q04 SG&A = $75m or 24.9% of sales. 6. 4Q04 D&A = $4.4m.
7. 4Q04 CapEx = $6m. 8. 2004 CapEx = $44.5m. 9. 2004 sales = nearly $1.1b. 10. 2004 net income = $138.6m. 11. 2004 diluted EPS = $3.40. 12. 2004 consolidated GM = 45.5%. 13. 2004 SG&A = 26.5% of sales. 14. 2004 D&A = $18m. 15. Cash and cash equivalents at 12/31/04 = $290.2m. 16. Consolidated inventories at 12/31/04 = $165.4m.
17. 1Q05 SG&A guidance = 31.3-31.5% of estimated sales.
S1. Significant Developments (T.B.) 1. Highlights: 1. 4Q04 sales grew by a strong 17.2% YoverY to $301.8m, a 4Q record. 1. Excluding changes in currency exchange rates, consolidated sales increased by 14.6%. 2. 4Q04 net income was a record $39.4m, a 22.4% YoverY increase. 3. 4Q04 diluted EPS came in at $0.97 vs. $0.79 for 4Q03. 2. 2004 sales were nearly $1.1b, a 15.1% YoverY increase. 1. 2004 net income increased a strong 15.4% to $138.6m.
2. 2004 diluted EPS came in at $3.40 vs. $2.96 for 2003. 3. These results were driven by outstanding sales growth of sportswear and footwear products in North America and strong sales of outerwear, sportswear and footwear products in international markets. 2. Updates: 1. Kentucky Distribution Center: 1. The Co. has completed construction and testing of its new footwear distribution center in Robards, Kentucky. 1. Earlier this month, the Co. successfully started shipping footwear products from the facility. 2. The launch has gone smoothly, and the Co. is very pleased with the progress. 3. Anticipates that this distribution center will support
continued growth in the footwear category. 2. Licensing:
1. Net licensing income increased 50% to nearly $1m in 4Q04 with growth in home furnishings, socks, leather accessories, eyewear, and watches. 2. For the full year, net licensing income increased 122.2% to $4m, driven by the continued maturity of the Co.'s licensee
programs across multiple categories. 1. In 2004, the Co. saw strong growth in socks, eyewear and watches, as well as the newer camping and home furnishing licensees. 3. The Co. announced new agreements for fishing waiters and ankle fit boots, insulated coolers and outdoor accessories. 1. These new licensees will begin shipping products in 2005. 3. Sorel: 1. 4Q04 sales were $18.8m, a 19% increase over 4Q03. 2. 2004 sales were $42.8m, a 28.1% increase over 2003 results. 1. Growth for the year was the result of new account openings
and improved productivity in existing doors, primarily in cold weather footwear products in the US and Canada. 3. Sales growth of Sorel's apparel lines was healthy, particularly in Canada.
4. The Co. believes that it has a strong team in place at Sorel
that is committed to re-establishing the brand as a dominant cold weather footwear resource in North American markets. 4. Hardware:
1. 4Q04 sales were $11.2m, a 33.3% increase over 4Q03. 2. 2004 sales were $45.9m with strong growth in US and international markets. 3. US sell-through was mixed in 4Q04 with strong sales in the West and Southeast, and slower in the Midwest and Northeast
due to warmer than normal weather conditions. 4. Despite the unseasonable weather in many parts of the country, Mountain Hardware's fall 2005 product lines have been well received. 5. Mountain Hardware team will continue to develop technical outerwear and sportswear products for the specialty dealer base, and focus on expanding distribution in international markets with particular emphasis on European markets.
6. Mike Wallenfels assumed the position of President of Mountain Hardware, succeeding Jack Gilbert. 1. Mike Wallenfels has been with Mountain Hardware from its founding, and has served most recently as VP of Sales and Marketing.
S2. Financial Results (B.T.) 1. 4Q04 Income Statement: 1. Net sales were $301.8m, an increase of 17.2% over the $257.4m of net sales in 4Q03. 1. Growth in consolidated net sales was driven by strong gains in the sportswear and footwear product categories in the US and outerwear in the major international markets. 2. Excluding changes in currency exchange rates, consolidated net sales increased 14.6% in 4Q04. 2. Consolidated GM contracted by 230 BP to 44.5% vs. 46.8% during 4Q03. 1. This contraction was primarily the result of: 1. An increased volume of closeout product sales at lower margins. 2. A sales mix shift between product categories. 3. An increase in sales from the lower margin international distributor business. 2. These decreases in the GM were partially offset by the favorable impact from changes in currency exchange rates.
3. SG&A increased by 7% or $4.9m on an absolute basis to $75m or
24.9% of sales for 4Q04 vs. $70.1m or 27.2% of sales for 4Q03.
1. Selling expenses increased on an absolute basis, but decreased as a percentage of net sales due to the additional advertising and promotional spending during 4Q03. 4. OpEx increased primarily due to additional personnel-related costs, offset by a decrease in depreciation expense. 5. D&A totaled $4.4m vs. $5.6m in 4Q03, as the Co. experienced some depreciation roll-off this year.
6. Net licensing income increased $0.5m or 50% to nearly $1m.
7. Net interest income increased to $0.6m from $0.3m in 4Q03 due
to: 1. The strong cash position. 2. Increased capitalized interest related to the Kentucky distribution project. 8. The higher interest rate environment. 9. Effective tax rate was 35.5% vs. 37% in 2003, due primarily to increasing revenues in jurisdictions with the overall lower tax rates. 10. Net income was $39.4m or $0.97 per share vs. net income of $32.2m or $0.79 per share for 4Q03 based on a diluted share count of 40.6m and 40.9m, respectively. 2. Full-Year 2004 Operations: 1. Net sales were $1,095.3m, an increase of 15.1% over the $951.8m of net sales for 2003. 1. Growth in consolidated net sales was primarily the result of: 1. The continued strength of the sportswear and footwear
product categories. 2. Expansion of the international operations. 3. Associated foreign currency benefits. 2. Excluding changes in currency exchange rates, consolidated net sales increased 12.1% for the year. 2. Consolidated GM contracted by 80 BP to 45.5% vs. 46.3% during 2003. 1. This contraction was due to the higher mix of sportswear and footwear sales which have lower GM than outerwear, shifts in product mix within each of the product categories, partially offset by appreciation of foreign currencies. 3. SG&A remained constant as a percentage of sales at 26.5%. 1. On an absolute dollar basis, SG&A increased by 15.1% to $290.5m vs. $252.3m for 2003. 2. Selling expenses were slightly ahead of last year as a percentage of sales as the Co. made additional investments in promotional activities. 4. OpEx was down slightly as a percentage of sales as the Co. made investment in personnel to support the continued growth of the footwear and sportswear product categories, partially offset by decreases in depreciation expense.
5. D&A totaled $18m, a decrease of $4.8m vs. 2003. 6. Net licensing income increased $2.2m or 122.2% to $4m for the full year, driven by the continued maturity of the licensee programs. 7. Net interest income was $3.5m or $0.5m last year due to: 1. The strong cash position. 2. Increased capitalized interest related to Kentucky
distribution project. 3. The higher interest rate environment.
8. Effective tax rate was 35.5% vs. 37% in 2003, due primarily to increasing revenues in jurisdictions with overall lower tax
rates. 9. Net income was $138.6m or $3.40 per share vs. net income of $120.1m or $2.96 per share for 2003, based on a diluted share count of 40.8m and 40.6m, respectively. 3. Balance Sheet (12/31/04 vs. 12/31/03): 1. The balance sheet remains very strong. 2. Cash and cash equivalents totaled $290.2m vs. $264.6m.
3. Consolidated AR at 12/31/04 was $267.7m vs. $206m. 1. The increase is more than a 17.2% quarterly sales increase, due primarily to the appreciation of foreign currencies, as well as the significant growth in Dec. net sales. 4. Consolidated inventories were $165.4m vs. $126.8m, a 30.4% increase. 1. Increased inventory is attributable to: 1. The higher speculative inventory position that the Co. took for fall 2004. 2. An unplanned increase in net cancellations of US orders due to unfavorable weather conditions. 3. Increased 2005 raw materials and work-in-process inventory in China. 4. The Co.'s current outlook for spring growth. 5. CapEx was $6m for 4Q04, the majority of which were to increase the distribution capacity. 1. Total CapEx was $44.5m in 2004, consisting of approx. $12.3m in maintenance CapEx and $32.2m in distribution project CapEx, primarily related to the Kentucky distribution project.
6. In April 2004, COLM's Board of Directors authorized a purchase
of up to $100m of common stock. 1. During 4Q04, the Co. repurchased approx. 145,000 shares in an aggregate purchase price of $7.9m. 2. The Co. has repurchased a total of approx. 885,000 shares at an aggregate purchase price of $47.6m since the inception of this program. 4. Guidance: 1. Based on the current outlook and reported spring backlog, and taking into account increased sales of closeout products at lower margins, the Co. currently anticipates: 1. 1Q05 consolidated revenue growth to be approx. 15% vs. 1Q04. 2. 1Q05 GM contraction of approx. 170 BP, placing the Co. between 43.6-43.8% of estimated sales. 3. Current SG&A target as a percentage of estimated sales for 1Q05 is 31.3-31.5%.
4. The Co. anticipates SG&A expense will increase as a percentage of net sales, primarily through the: 1. Operating costs associated with the new distribution center in Kentucky. 2. Incremental personnel costs needed to support the …