Greetings, and welcome to the Columbia Sportswear Company Second Quarter 2014 Financial Results Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Mr. Ron Parham, Senior Director of Investor Relations. Thank you. Mr. Parham, you may begin.

All right, thanks, Manny. Good afternoon, and thanks for joining us today. Earlier this afternoon, we announced second quarter financial results and updated our full year 2014 financial outlook to reflect the company's strong first half performance and the anticipated effects of our acquisition of the prAna brand, which closed at the end of May. In keeping with our standard practice, shortly after the press release crossed the wire, we furnished an 8-K containing a detailed CFO commentary discussing the quarterly results and the assumptions behind our upward revised outlook. We also posted a CFO commentary to our Investor Relations website. With me today to discuss the news and answer your questions are our President and CEO, Tim Boyle; Senior Vice President and Chief Financial Officer, Tom Cusick; Executive Vice President and Chief Operating Officer, Bryan Timm; and Senior Vice President and General Counsel, Peter Bragdon. I'll ask our Chairman, Gert Boyle, to cover the Safe Harbor language.

Good afternoon. 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, 2013, and subsequent filings with the SEC. Forward-looking statement 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 to the change in our expectations.

Thanks, Gert. And now I'll turn the call over to Tim.

Thanks, Ron. Welcome, everyone, and thanks for joining us this afternoon. 2014 is off to a very strong start. During the first half of 2014, we launched a new joint venture in China. We added an exciting new brand to our portfolio. We transitioned our North American wholesale business and the majority of our global supply chain operations to a more robust ERP platform. We grew our sales by 19%, with improved profitability, and further strengthened our balance sheet. Compared with last year's first half, we improved income from operations sevenfold, and net income fivefold, making this our most profitable first half since 2008, even with a $4.7 million of acquisition costs and purchase accounting amortization related to the prAna acquisition, which closed on May 30. Second quarter sales grew 16%, completing the first half, which sales grew 19% or $120 million. The second quarter is always the smallest quarter for our business and not a great indicator of trends, so I'm going to discuss both second quarter and first half results. About 60% of first half growth came from the addition of our China joint venture and 1 month of incremental prAna sales. The remaining first half growth was generated organically, primarily via the Columbia brand in North America, where we grew 12%; and in the EMEA region where we grew 19%, including 20% growth in our Europe-direct markets in the second quarter. Our Europe-direct business has begun to improve as we focus on our product assortments and our larger customers who are best positioned to support and grow the Columbia brand in key markets. Columbia Footwear has been a standout in Europe business for the first half, led by several of our trail and hiking styles. We anticipate continued growth from Footwear during the second half. Based on…

[Operator Instructions] Our first question is from Bob Drbul of Nomura.

Tim, I guess the first question is, over the last few months, with the retail environment as it's been, can you just talk a little bit about how your order book has materialized? Have you -- has it gotten stronger? Have you seen cancellations? Or just give us an idea, like how retailers' mindsets have changed just given the environment that's out there right now, the U.S. specifically.

Yes, I would say that we've had virtually no change in our order book over the last several months. We receive cancels and new orders every day, but there's really been no significant change in the order book, for that matter, in any of our markets. So our anticipations we've got baked into our guidance that we gave you today is that -- just continued robust demand for our products.

Okay. And on the commentary you made around China, how long do you think it takes to work through some of those challenges in the marketplace? And they're not specifically Columbia-branded products, right? It's much more of the industry. Can you just talk a little bit more about what you're seeing there in that market, please?

Well, we believe that the market has got enormous potential for our company. So we're very committed. It's hard to know exactly how long these kinds of adjustments will take in the market, but we take great confidence in the fact that we're partnered with a firm that's been doing business in China since the 1700s. They're highly established in China in a number of businesses, including real estate, transportation, food. So we just take a lot of confidence in the fact that we're with a group that has the kind of experience in China that's rarely seen. And frankly, in China, as you know, the long term is several centuries, and so we take the view that we're going to be here for a long time and be a significant player. And we know that, that isn't the case with some of our other competitors.

Okay. And then can I just have one more question? As you look to sort of fall and holiday, the upcoming winter season, on the inventory levels, with your [ph] inventories but more specifically with your own sort of retail component, direct-to-consumer having become a sizable piece of the business, how have you planned it from an inventory perspective as it relates to the strong season that you had last year? And how should we think about those assumptions in the full year guidance that you've provided?

Well, as you know, we really consider ourselves to be a wholesale business primarily. And so we do have a retail component. And it's there to help us, in situations where we might have excess inventory, to keep the market clean. I would say that we realize we're up against tough -- the tough comps that the winter of 2013 and early '14 gave us. So we are not planning for those types of weather conditions to reappear, and we believe that we've got the appropriate order review as it relates to the inventories. That give us comfort in the guidance we gave today.

The next question is from Christian Buss of Crédit Suisse. Christian Buss - Crédit Suisse AG, Research Division: I was wondering if you could provide some color on how you're thinking about the Chinese business developing. Joint venture has gotten a nice start. We're hearing a little bit about some challenges in that marketplace from some of the competitors. How do you think about the organic growth prospects once we get through this first year?

Well, as -- you might remember that our Chinese distributor is our current partner in the JV. And they've been in the business not only with our brand but basically retail apparel for many, many years prior to joining our JV. So again, we take a lot of comfort in the fact that we've got an experienced partner. And if we think about the penetration of the Columbia brand in China, it's really only in the top-tier and second-tier cities. There's lots of opportunity in the third- and fourth-tier cities that are growing and becoming more sophisticated. So I think, frankly, the market could be the largest market for the company over time, but it has to be with the appropriate cadence and with profitability focused. So I think there's some slowing today, but frankly, we think we've got an opportunity over the long term to do very well in China. And perhaps have it be the biggest market we serve. Christian Buss - Crédit Suisse AG, Research Division: That's great. And could you talk a little bit about the integration of prAna? How is that going to operate from a sales standpoint? How are you going to coordinate the prAna business with the Columbia women's business and the Mountain Hardwear women's business that already exists?

Certainly. Well, we're less than 60 days into the integration plans, but today, at a very high level, the plan is to make sure that prAna has a different personality and different voice and characteristics in the marketplace from both Columbia and Mountain Hardwear. So we didn't buy them to be another sub-brand of ours. We want them to be distinctly different. And we believe that the management there is capable of taking that brand and that personality to a much bigger place. We do believe, obviously, that there are some synergies. And it might over time include helping international expansion, where we have a much greater experience than they do and we can help them provide that kind of introductions and connections with existing and maybe future partners of Columbia's. But at the end of the day, we really want them to be uniquely different. And obviously, the company's balance sheet and infrastructure can help them, sourcing and just guidance to become a much bigger company and really to get the full potential of that brand. Christian Buss - Crédit Suisse AG, Research Division: That's very helpful. And if I could ask a final question, about how you think about the growth algorithm for the company going forward as a whole as you integrate some higher-growing businesses. What is the organic growth rate that you could think about as a long-term target for the company, if that's something you're willing to talk about?

Certainly. Well, if we go back in the company's history, we always thought we could grow in the high teens. Or I would -- I should say that's -- my personal goals have been to grow in the high teens. We're now back on that cadence. And I think, frankly, the opportunities are enormous for us to continue with that kind of late -- rate. We just see lots of opportunities with all the brands that we have, especially those that have existing footwear businesses which can grow much more rapidly than high teens. And the intention is, as the company improves its design and branding capabilities across all of its brands, we can utilize the balance sheet, which is among the strongest in the industry, to get us to growing again at that kind of rate.

The next question is from Jim Duffy of Stifel. Jim Duffy - Stifel, Nicolaus & Company, Incorporated, Research Division: Tim, I guess, a nice segue from your answer to Christian's last question: I'm hoping you can speak in more detail around your thoughts on the Footwear business. SOREL seems to have great momentum into the back half. Within the Columbia brand, what's working for you? What needs to be realigned? Where do you see the most opportunities for improvement?

Certainly. Well, yes, SOREL is really -- is doing very well. And the focus with Mark Nenow and his team on SOREL has been on women's, as you know, and primarily in the fall season. So the goal is to get ourselves away from that 90-day winter demand period to the kinds of impactful businesses that can be not only important in North America but more broadly across a climactic region that we think there's real opportunities. And so the early reads on the pre-lines we've had on future seasons are actually quite encouraging from the SOREL brand. On the Columbia, frankly, our business in Europe is being led by our growth there in Footwear. We've had just some spectacular results in the light hiking category, which at the end of the day is where all of this business is done. We're really thought of mostly as a winter footwear brand as it relates to Columbia, but with the light-hiking product acceptance and the PFG product that we've got in the market this spring and growing in next spring, I just think that we really have an opportunity to grow rapidly and really utilize the brand to carry the power. So we're very excited about that. Jim Duffy - Stifel, Nicolaus & Company, Incorporated, Research Division: Good to hear. And then with the perspective of spring/summer '14 performance at retail, any preliminary thoughts on what orders for the industry might look like into next spring? And then thoughts on how the Columbia brand might be positioned relative to that.

Well, we don't -- I guess I would have to temper my views on the industry specifically. We get so myopic here on how we're doing that we really don't spend a bunch of time on the industry. I can tell you we haven't talked at all about guidance for any months in 2015, so I better not start today. But I think our expectation is that the kinds of robust excitement that we're seeing will definitely carry us into '15. Jim Duffy - Stifel, Nicolaus & Company, Incorporated, Research Division: Fair enough. And then a parting question, relative to prAna, is it realistic to expect that you could bring that brand and accelerate the growth in some of the international regions where you currently have a footprint in '15? Or is that too early -- would that be too difficult to achieve in that time frame?

No, I think there's opportunities in '15. And we've got teams traveling globally today to make sure that we can start as soon as possible on the international expansion.

[Operator Instructions] And the next question is from Rafe Jadrosich of Bank of America Merrill Lynch.

So just on the gross margin. Just the guidance in the back half kind of implies a flattish outlook. And kind of given the strength in the first half and the inventory levels are really clean, how come we shouldn't expect that to move up more in the back half...

Rafe, this is Tom. Yes, we planned that the second half margins essentially flat. We're going up against fairly difficult comps in gross margin in the back half of next year. If I recall correctly, I think our gross margins were up about 140 bps in the second half last year, plus we've got some headwinds in FX in the back half. And we've planned for a normal winter pattern. So if winter's anything like it was last year, there's probably some upside. If not, there's certainly some downside risk.

That's helpful. And then just you guys kind of mentioned that you have a lot of opportunity on operating margins. And so can you just talk about sort of where you see the most opportunities? Is it in gross margin, or SG&A? And how should we think about that longer term?

Well, I think -- if you'll -- we're critical of ourselves here in terms of how -- the kinds of operating margin performance we've had over the last several years, which have been not as good as we want and not even equal to the average of the industry. So we believe that it's going to be a combination of many things that we have to do, including growing the top line, improving our gross margins and really constraining our operating margins to utilize the existing infrastructure we have, which is significant to grow the business. We also know we'll need to add, we believe, to -- some marketing funds. So it'll be a daunting challenge for us, but we think we're -- we've certainly got the plans to get ourselves in the right position.

And for us to really get back to that peer group average, I would say it's fairly equal contributions from both gross margin expansion and SG&A leverage. So it will be a combination of both of those factors, coupled with reasonable rates of revenue growth.

And then just last question here. Can you just talk about a few of the key product drivers for the back half? Is it -- should we expect Turbo Down to be a big part of your wear offering?

Well, yes. I mean it's -- we've continued to focus on innovation being a differentiator for the company, and that's going to be continued. We think Turbo Down is going to be a great differentiator for us. And that's going to receive the lion's share of our marketing funds for fall of '14. SOREL, just continued momentum there, as well as the Columbia Footwear business. So there's lots of opportunities.

[Operator Instructions] And the next question is from Andrew Burns of D.A. Davidson. Andrew Burns - D.A. Davidson & Co., Research Division: Was hoping that you could spend a little more time discussing the challenges in Korea, sort of the near-term, it seems like, inventory issues; and long-term competitive issues; and how big of an impact that could be to that business.

Certainly. Well, we've been established in Korea both as a sourcing operation there probably for over 20 years and certainly selling there for the better part of the last 15 years. We have a good knowledge of the marketplace. And frankly, it's one of the largest outdoor markets in the world. And it has a very active consumer base and one that's quite knowledgeable about the products that they buy. So our brand has been present there and well thought of, but there are just so many brands that have entered the market either from European companies or Japanese companies or American companies, as well as homegrown brands or even brands that have been in the casual apparel business and now have entered the outdoor market, that it's quite crowded. And the inventory levels have been elevated. Again, this is where we focus on the company's balance sheet and structure globally to allow us significant comfort in terms of weathering the storms there. The business is profitable and we believe there's opportunities to grow there with all of our brands, but it's going to be a little bit challenging in the near term. Andrew Burns - D.A. Davidson & Co., Research Division: And how big is that business, revenue?

Yes, we -- that business is part of our LAAP business. And we haven't historically break -- broken that out separately, but it's a relatively significant part of our business. And its profitability levels historically have been well above the corporate average. Andrew Burns - D.A. Davidson & Co., Research Division: Okay. And then just a quick clarification just looking at the operating margin guidance improvement. Excluding prAna, it looks like a better outlook for both gross margin and SG&A. And there's a lot of puts and takes. If I was to sort of condense that, it looks like the gross margin improvement in -- guidance improvement is largely a mix -- a change in your forecast for the mix, and then the SG&A is lower ERP expenses. Is that...

Yes, I think that's a pretty fair way to look at it on the gross -- or on the SG&A side, a big piece of that $5 million reduction in the outlook is IT related. We were able to start the phase 3 of the ERP sooner in Q2 than we had anticipated. So that's really a function of both lower gross IT spend and a higher capitalization rate on the project. And then the gross margin pickup is really a function of Q2 gross margin coming in better than we had planned internally, mostly from a U.S. wholesale and a U.S. retail perspective in the second quarter.

Thank you. We have no further questions in the queue at this time. I would like to turn the floor back over to management for any closing remarks.

Well, thank you. We're very excited about the results we discussed today and the future for the business in 2014, so we look forward to talking to you again at the next quarterly call.

Thank you. Ladies and gentlemen, this does conclude today's teleconference. You may disconnect your lines at this time, and thank you for your participation.