Columbia Sportswear Company

Good afternoon.

and thanks for joining us to discuss Columbia Sportswear Company's first quarter results. In addition to the earnings release, we furnished an 8K containing a detailed CFO commentary explaining our results and updates relating to the COVID-19 pandemic. The CFO commentary is also available on our investor relations website, investor.columbia.com. With me on the call today are Chairman, President and Chief Executive Officer Tim Boyle, Executive Vice President and Chief Operating Officer Tom Cusick, Senior Vice President and Chief Financial Officer Jim Swanson, and Executive Vice President and Chief Administrative Officer Peter Bragdon. This conference call will contain forward-looking statements regarding Columbia's expectations, anticipations, or beliefs about the future. These statements are expressed in good faith and are believed to have a reasonable basis. However, each forward-looking statement 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 SEC filings. We caution that forward-looking statements are inherently less reliable than historical information. We do not undertake any duty to update any of these forward-looking statements after the date of this conference call to conform the forward-looking statements to actual results or to changes in our expectations. I'd also like to point out that during the call we may reference certain non-GAAP financial measures, including constant currency net sales. For further information about non-GAAP financial measures and results, including a reconciliation of GAAP to non-GAAP measures, and the explanation of management's rationale for referencing these non-GAAP financial measures. Please refer to the supplemental financial information section in the financial tables included in our first quarter 2020 earnings release. Following the prepared remarks, we will host a Q&A period during which we will limit each caller to two questions so we can get to everyone by the end of the hour. Now, I'll turn the call over to Tim.

Thanks, Andrew. Good afternoon, everyone. A lot has changed since our last earnings call on February 6th. I hope that everyone is staying safe and healthy. In recent weeks, I've been frequently asked if this is the toughest environment Columbia Sportswear has ever had to navigate. I can safely say that we faced bigger challenges when we were less prepared and we persevered. In 1970, following my father's sudden passing, Gert and I were thrust into managing a business we knew nothing about. I was a senior journalism student at the University of Oregon and Gert's previous visits to the Columbia Sportswear office had been limited to dropping in to saying hi. It goes without saying that the leadership team left room for improvement in those first few years. We faced insurmountable challenges across all aspects of the business. Interest rates were over 20% and you couldn't buy gasoline at any price. That first year, we managed to take a company with $1 million in annual sales and turn it into a company with $500,000 in annual sales. We eventually found our path and built a global brand portfolio company you see today. Given the COVID-19 pandemic, this call will have a different format than usual. I'd like to provide an update on how the pandemic is impacting our business The actions we've taken to mitigate the financial impact and our strategy for the balance of the year. We'll then quickly review the quarterly results and open the call for questions. As we dive into the details of this unprecedented global health and economic crisis, it's important to discuss our starting point. We entered into this crisis in a position of strength. Columbia Sportswear has been in business for over 80 years, and during our 20 years as a public company, We've achieved a 10% net sales and 12% compound annual growth in earnings. We have a unique brand portfolio that includes one of the largest global outdoor brands, Columbia, that consumers around the world recognize for its highly differentiated innovations and extraordinary value. We also entered this crisis in a position of financial strength exiting the fourth quarter We had a fortress balance sheet of $688 million in cash and short-term investments and no long-term debt. Our 13% operating margin in 2019 was top quartile in our industry. While we are proud of our history and financial strength, we know that these are unprecedented times. Even well-built fortresses can be penetrated, and we're taking steps to strengthen liquidity, preserve capital, and reduce costs as we prepare for a prolonged downturn of unknown duration. We are keenly focused on emerging from this crisis in a stronger competitive position. Before discussing the actions we're taking, I'd like to provide some details about the current operating environment and status of our stores. Prior to the outbreak, the first quarter was a continuation of trends we experienced in the fourth quarter. An unseasonably warm winter across most of the world was creating a challenging and promotional environment, particularly in outerwear and winter footwear. We have managed a weather-dependent seasonal business for decades, so we were prepared to handle this type of environment. By late January, we began feeling the impact of the COVID-19 outbreak in China. This quickly expanded throughout Asia with reduced store traffic and store closures and many more. In early March, we began to experience reduced store traffic across North America and Europe before closing all of our own stores in these markets in mid-March. Most of our retailer partners and distributor stores across the world followed similar store closure timelines. As of the date of this call, the vast majority of Columbia stores in China and Korea have reopened although many still operate with reduced store hours. In these markets, retail traffic trends have been improving but remain well below pre-pandemic levels. Japan had experienced a similar recovery trend to the rest of Asia until early April when a spike of new cases prompted an increase in store closures. Across North America and most of Europe, our owned stores remain closed as well as the vast majority of our wholesale partner stores.