Columbia Sportswear Company (COLM)

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Columbia Sportswear Company (COLM)

F1Q09 Earnings Call

April 23, 2009 at 5:00 pm ET


Gertrude Boyle - Chairman of the Board

Timothy Boyle -President and CEO

Thomas B. Cusick - Vice President of Finance and Chief Financial Officer

Peter J. Bragdon - Vice President and General Counsel

Ron Parham - Director of Investor Relations


Robert Drbul - Barclays Capital

Michelle Tan - Goldman Sachs

Kevin Kim - Robert W. Baird

[Bill Gazelum - Tiet & Capital Management]

Steven Martin - Slater Capital

Kenneth Stumphauzer - Sterne, Agee & Leach

Sarah Hasan - McAdams Wright Ragen

[Sarah Geary] - RBC Capital Market



Good afternoon. My name is Ashley and I will be your conference operator today. At this time, I would like to welcome everyone to the first quarter 2009 earnings release conference call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question and answer session. (Operator Instructions)

I would now like to turn the conference call over to Ron Parham, Director of Investor Relations. Sir, you may begin your conference.

Ron Parham

Thanks Ashley. Good afternoon and thanks for joining us on today’s call. Earlier this afternoon we issued an earnings release and financial schedules covering the results of our first quarter of 2009. With me today to discuss the results and answer your questions are Columbia’s Chairman, Gert Boyle, President and CEO, Tim Boyle, Vice President of Finance and Chief Financial Officer Tom Cusick, and Vice President and General Counsel Peter Bragdon.

Before we begin, our Chairman Gert Boyle has an important reminder.

Gertrude Boyle

Good afternoon. I would like to remind everyone that this conference call will contain forward-looking statements regarding Columbia’s business opportunities and anticipated results of operations. Please bear in mind that forward-looking information is subject to many risks and uncertainties and actual results may differ materially from what is projected.

Many of these risks and uncertainties are described in Columbia’s annual report on Form 10-K for the year ending December 31, 2008 and subsequent filing with the SEC. Forward-looking statements in this conference call are based on our current expectations and beliefs and we do not undertake any duty to update any of the forward-looking statements after the date of this conference call to conform the forward-looking statements to actual results or changes in our expectations.

Ron Parham

Thank you, Gert. I will hand the call over to Tim.

Timothy Boyle

Thanks, Ron. For those of you who have listened to our calls in the past, you will recognize Bryan Timm is not with us today. He is traveling in Asia with the members of his team as it is his role as Chief Operating Officer. So, welcome everyone and thanks for joining us this afternoon to discuss the results of our first quarter and how we see 2009 playing out based on fall backlog and our current assessment of a very unpredictable market.

I will start by saying that we were pleased with how we managed our business in the first quarter producing operating income of $10.4 million and earnings per share of $0.27 which is $0.14 per share above the midpoint of the outlook we have provided in January. Tom will go into detail in what drove that performance but I want to focus my comments on the conditions of the external retail environment and on the progress we believe we are making internally to return the growth.

Looking at the external environment, I am not telling you anything you do not already know when I say that business remains challenging and that those challenges have spread well beyond the US over the past several months. While the first quarter got us up to a slightly better start than we anticipated, the fall backlog decline of 15% that we reported with today's Q1 results suggests that we will continue to see deterioration in our top line over the remainder of the year. As a category, apparel continues to be one of the weakest discretionary consumer spending sectors in the economy and we are working closely with our retail partners to plan our business under the assumption that things will remain challenging throughout 2009.

In addition, within the apparel segment, department stores especially those that are mall based have been the weakest channel for more than 12 months. Over the past five to seven years, department stores have grown to represent approximately 30% of our US wholesale revenue base. Consequently, this channel has presented the biggest challenge for us as they have taken steps to significantly reduce inventories and to raise cash to mitigate the effects of tight credit markets.

So far, none of our large national department store partners has been forced into bankruptcy or liquidation but a few of our large and longest running regional retail chain partners have not faired as well over the past couple of months. We are working very closely with a number of retailers around the world to manage their credit limits and plan their payments and shipments very carefully in order to keep our products on their shelves and available to consumers without incurring undue credit risks.

What is happening in the US is also playing out in key markets across Europe, some of which had been among our best growth markets over the past decade. In addition, several economies in our distributor based business are under severe stress suffering stead declines and consumer spending, currency evaluation and even more troubled credit markets that is here in the US. As a result, we have seen significant declines in many of these markets. Canada's credit market seems to be at better shape than the US but consumers there have caught a bit of the US consumers spending contagion as the Canadian dollar has weakened against the US dollar by roughly 20% over the past six months.

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