Oregon | 000-23939 | 93-0498284 | ||
(State or other jurisdiction of incorporation) | (Commission File Number) | (I.R.S. Employer Identification No.) |
¨ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
¨ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
¨ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
99.1 | Press Release, dated February 11, 2016 (furnished pursuant to Items 2.02 and 7.01 hereof). | |
99.2 | Commentary by Thomas B. Cusick, Executive Vice President of Finance and Chief Financial Officer of Columbia Sportswear Company, dated February 11, 2016 (furnished pursuant to Items 2.02 and 7.01 hereof). |
COLUMBIA SPORTSWEAR COMPANY | ||
Dated: February 11, 2016 | By: | /S/ THOMAS B. CUSICK |
Thomas B. Cusick | ||
Executive Vice President of Finance and Chief Financial Officer |
Exhibit | Description | |
99.1 | Press Release, dated February 11, 2016 (furnished pursuant to Items 2.02 and 7.01 hereof). | |
99.2 | Commentary by Thomas B. Cusick, Executive Vice President of Finance and Chief Financial Officer of Columbia Sportswear Company, dated February 11, 2016 (furnished pursuant to Items 2.02 and 7.01 hereof). |
• | Net sales increased 3 percent (7 percent constant-currency) to a fourth-quarter record $699.4 million. |
• | Operating income hit a fourth-quarter record of $82.3 million, or 11.8 percent of net sales. |
• | Net income increased 14 percent to a fourth-quarter record $63.4 million, or $0.90 per diluted share. |
• | Repurchased $55.5 million of the company’s common stock. |
• | The board of directors approved a regular quarterly dividend of $0.17 per share, payable March 17, 2016 to shareholders of record on March 4, 2016. |
• | Net sales increased $225.6 million, or 11 percent (15 percent constant-currency), to a record $2.33 billion. |
• | Operating income increased 26 percent to a record $249.7 million, or 10.7 percent of net sales. |
• | Net income increased 27 percent to a record $174.3 million, or $2.45 per diluted share. |
• | Repurchased $70.1 million of the company’s common stock and paid $43.5 million in dividends. |
• | Mid-single-digit net sales growth, including approximately 1 percentage point negative effect from changes in currency exchange rates. |
• | Operating income of between $257 million and $267 million, representing operating margin of up to 10.8 percent of net sales. |
• | Net income of between $179 million and $186 million, or approximately $2.55 to $2.65 per diluted share. |
• | a 15 percent net sales decline (6 percent constant-currency) in the Europe/Middle East/Africa (EMEA) region to $58.2 million, including mid-teen constant-currency net sales growth in the company’s Europe-direct business (flat in U.S. dollars) that was more than offset by a decline of more than 30 percent in net sales to EMEA distributors; |
• | a 4 percent net sales decline (2 percent growth constant-currency) in the Latin America/Asia Pacific (LAAP) region to $149.7 million, including net sales growth of more than 40 percent to LAAP distributors that was more than offset by net sales declines in the company’s Asian markets, although Japan and China posted net sales growth on a constant-dollar basis; and |
• | a 7 percent net sales decline (10 percent growth in constant-currency) in Canada. |
• | 21 percent growth in U.S. net sales, to $1.46 billion, including five months of incremental prAna net sales of approximately $48.5 million. Organic U.S. net sales increased 17 percent. |
• | 11 percent net sales growth in Canada (30 percent constant-currency) to $168.6 million. |
• | A 10 percent net sales decline in the EMEA region (flat constant-currency) to $233.2 million, reflecting a low single-digit net sales increase (low 20-percent constant-currency) in the company’s Europe-direct markets, more than offset by a mid-20-percent decline in net sales to EMEA distributors. |
• | A 5 percent net sales decline in the LAAP region (2 percent growth constant-currency) to $469.2 million, reflecting mid-20-percent growth in net sales to LAAP distributors, more than offset by lower sales in Korea and Japan although, on a constant-currency basis, Japan posted net sales growth. Net sales in China were essentially flat (2 percent growth constant-currency). (See “Geographical Net Sales” table below.) |
December 31, | ||||||||
2015 | 2014 | |||||||
Current Assets: | ||||||||
Cash and cash equivalents | $ | 369,770 | $ | 413,558 | ||||
Short-term investments | 629 | 27,267 | ||||||
Accounts receivable, net | 371,953 | 344,390 | ||||||
Inventories | 473,637 | 384,650 | ||||||
Deferred income taxes | — | 57,001 | ||||||
Prepaid expenses and other current assets | 33,400 | 39,175 | ||||||
Total current assets | 1,249,389 | 1,266,041 | ||||||
Property, plant, and equipment, net | 291,687 | 291,563 | ||||||
Intangible and other non-current assets | 305,077 | 234,605 | ||||||
Total assets | $ | 1,846,153 | $ | 1,792,209 | ||||
Current Liabilities: | ||||||||
Short-term borrowings | $ | 1,940 | $ | — | ||||
Accounts payable | 217,230 | 214,275 | ||||||
Accrued liabilities | 141,862 | 144,288 | ||||||
Income taxes payable | 5,038 | 14,388 | ||||||
Deferred income taxes | — | 169 | ||||||
Total current liabilities | 366,070 | 373,120 | ||||||
Note payable to related party | 15,030 | 15,728 | ||||||
Other long-term liabilities | 49,240 | 48,127 | ||||||
Equity: | ||||||||
Columbia Sportswear Company shareholders' equity | 1,399,800 | 1,343,603 | ||||||
Non-controlling interest | 16,013 | 11,631 | ||||||
Total equity | 1,415,813 | 1,355,234 | ||||||
Total liabilities and equity | $ | 1,846,153 | $ | 1,792,209 |
Three Months Ended December 31, | Twelve Months Ended December 31, | ||||||||||||||
2015 | 2014 | 2015 | 2014 | ||||||||||||
Net sales | $ | 699,414 | $ | 676,964 | $ | 2,326,180 | $ | 2,100,590 | |||||||
Cost of sales | 382,466 | 369,905 | 1,252,680 | 1,145,639 | |||||||||||
Gross profit | 316,948 | 307,059 | 1,073,500 | 954,951 | |||||||||||
45.3 | % | 45.4 | % | 46.1 | % | 45.5 | % | ||||||||
Selling, general and administrative expenses | 237,188 | 226,849 | 831,971 | 763,063 | |||||||||||
Net licensing income | 2,533 | 1,890 | 8,192 | 6,956 | |||||||||||
Income from operations | 82,293 | 82,100 | 249,721 | 198,844 | |||||||||||
Interest income, net | 272 | 143 | 1,531 | 1,004 | |||||||||||
Interest expense on note payable to related party | (273 | ) | (284 | ) | (1,099 | ) | (1,053 | ) | |||||||
Other non-operating income (expense) | 453 | (435 | ) | (2,834 | ) | (274 | ) | ||||||||
Income before income tax | 82,745 | 81,524 | 247,319 | 198,521 | |||||||||||
Income tax expense | (17,949 | ) | (24,535 | ) | (67,468 | ) | (56,662 | ) | |||||||
Net income | 64,796 | 56,989 | 179,851 | 141,859 | |||||||||||
Net income attributable to non-controlling interest | 1,446 | 1,386 | 5,514 | 4,686 | |||||||||||
Net income attributable to Columbia Sportswear Company | $ | 63,350 | $ | 55,603 | $ | 174,337 | $ | 137,173 | |||||||
Earnings per share attributable to Columbia Sportswear Company: | |||||||||||||||
Basic | $ | 0.91 | $ | 0.80 | $ | 2.48 | $ | 1.97 | |||||||
Diluted | 0.90 | 0.79 | 2.45 | 1.94 | |||||||||||
Weighted average shares outstanding: | |||||||||||||||
Basic | 69,884 | 69,795 | 70,162 | 69,807 | |||||||||||
Diluted | 70,616 | 70,592 | 71,064 | 70,681 |
Twelve Months Ended December 31, | ||||||||
2015 | 2014 | |||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
Net income | $ | 179,851 | $ | 141,859 | ||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
Depreciation and amortization | 56,521 | 54,017 | ||||||
Loss on disposal or impairment of property, plant, and equipment | 5,098 | 481 | ||||||
Deferred income taxes | (11,709 | ) | (6,978 | ) | ||||
Stock-based compensation | 11,672 | 11,120 | ||||||
Excess tax benefit from employee stock plans | (7,873 | ) | (4,927 | ) | ||||
Changes in operating assets and liabilities: | ||||||||
Accounts receivable | (40,419 | ) | (31,478 | ) | ||||
Inventories | (103,296 | ) | (62,086 | ) | ||||
Prepaid expenses and other current assets | 4,411 | (4,869 | ) | |||||
Other assets | (2,524 | ) | 4,291 | |||||
Accounts payable | 11,418 | 41,941 | ||||||
Accrued liabilities | (2,017 | ) | 35,051 | |||||
Income taxes payable | (10,994 | ) | 1,166 | |||||
Other liabilities | 4,966 | 6,195 | ||||||
Net cash provided by operating activities | 95,105 | 185,783 | ||||||
CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||
Acquisition of business, net of cash acquired | — | (188,467 | ) | |||||
Purchases of short-term investments | (38,208 | ) | (48,243 | ) | ||||
Sales of short-term investments | 64,980 | 112,895 | ||||||
Capital expenditures | (69,917 | ) | (60,283 | ) | ||||
Proceeds from sale of property, plant, and equipment | 144 | 71 | ||||||
Net cash used in investing activities | (43,001 | ) | (184,027 | ) | ||||
CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
Proceeds from credit facilities | 53,429 | 52,356 | ||||||
Repayments on credit facilities | (51,479 | ) | (52,205 | ) | ||||
Proceeds from issuance of common stock under employee stock plans | 17,442 | 22,277 | ||||||
Tax payments related to restricted stock unit issuances | (4,895 | ) | (3,141 | ) | ||||
Excess tax benefit from employee stock plans | 7,873 | 4,927 | ||||||
Repurchase of common stock | (70,068 | ) | (15,000 | ) | ||||
Cash dividends paid | (43,547 | ) | (39,836 | ) | ||||
Proceeds from note payable to related party | — | 16,072 | ||||||
Net cash used in financing activities | (91,245 | ) | (14,550 | ) | ||||
NET EFFECT OF EXCHANGE RATE CHANGES ON CASH | (4,647 | ) | (11,137 | ) | ||||
NET DECREASE IN CASH AND CASH EQUIVALENTS | (43,788 | ) | (23,931 | ) | ||||
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR | 413,558 | 437,489 | ||||||
CASH AND CASH EQUIVALENTS, END OF YEAR | $ | 369,770 | $ | 413,558 | ||||
SUPPLEMENTAL DISCLOSURES OF NON-CASH INVESTING ACTIVITIES: | ||||||||
Capital expenditures incurred but not yet paid | $ | 4,698 | $ | 7,196 |
Three Months Ended December 31, | |||||||||||||||||||
Adjust for | Constant- | Constant- | |||||||||||||||||
Reported | Foreign | currency | Reported | Reported | currency | ||||||||||||||
Net Sales | Currency | Net Sales | Net Sales | Net Sales | Net Sales | ||||||||||||||
2015 | Translation | 2015(1) | 2014 | % Change | % Change(1) | ||||||||||||||
Geographical Net Sales: | |||||||||||||||||||
United States | $ | 446.2 | $ | — | $ | 446.2 | $ | 404.6 | 10% | 10% | |||||||||
LAAP | 149.7 | 9.1 | 158.8 | 155.2 | (4)% | 2% | |||||||||||||
EMEA | 58.2 | 5.9 | 64.1 | 68.3 | (15)% | (6)% | |||||||||||||
Canada | 45.3 | 8.6 | 53.9 | 48.9 | (7)% | 10% | |||||||||||||
Total | $ | 699.4 | $ | 23.6 | $ | 723.0 | $ | 677.0 | 3% | 7% | |||||||||
Brand Net Sales: | |||||||||||||||||||
Columbia | $ | 528.9 | $ | 16.5 | $ | 545.4 | $ | 527.9 | —% | 3% | |||||||||
Sorel | 105.3 | 6.0 | 111.3 | 92.1 | 14% | 21% | |||||||||||||
prAna | 27.7 | — | 27.7 | 20.0 | 39% | 39% | |||||||||||||
Mountain Hardwear | 35.2 | 1.1 | 36.3 | 34.6 | 2% | 5% | |||||||||||||
Other | 2.3 | — | 2.3 | 2.4 | (4)% | (4)% | |||||||||||||
Total | $ | 699.4 | $ | 23.6 | $ | 723.0 | $ | 677.0 | 3% | 7% | |||||||||
Categorical Net Sales: | |||||||||||||||||||
Apparel, Accessories and Equipment | $ | 515.6 | $ | 14.4 | $ | 529.9 | $ | 510.1 | 1% | 4% | |||||||||
Footwear | 183.8 | 9.2 | 193.1 | 166.9 | 10% | 16% | |||||||||||||
Total | $ | 699.4 | $ | 23.6 | $ | 723.0 | $ | 677.0 | 3% | 7% |
Twelve Months Ended December 31, | |||||||||||||||||||
Adjust for | Constant- | Constant- | |||||||||||||||||
Reported | Foreign | currency | Reported | Reported | currency | ||||||||||||||
Net Sales | Currency | Net Sales | Net Sales | Net Sales | Net Sales | ||||||||||||||
2015 | Translation | 2015 | 2014 | % Change | % Change | ||||||||||||||
Geographical Net Sales: | |||||||||||||||||||
United States | $ | 1,455.2 | $ | — | $ | 1,455.2 | $ | 1,198.4 | 21% | 21% | |||||||||
LAAP | 469.2 | 29.8 | 499.0 | 491.6 | (5)% | 2% | |||||||||||||
EMEA | 233.2 | 26.1 | 259.3 | 259.2 | (10)% | —% | |||||||||||||
Canada | 168.6 | 28.1 | 196.7 | 151.4 | 11% | 30% | |||||||||||||
Total | $ | 2,326.2 | $ | 84.0 | $ | 2,410.2 | $ | 2,100.6 | 11% | 15% | |||||||||
Brand Net Sales: | |||||||||||||||||||
Columbia | $ | 1,864.7 | $ | 65.9 | $ | 1,930.6 | $ | 1,750.3 | 7% | 10% | |||||||||
Sorel | 209.2 | 13.2 | 222.4 | 166.2 | 26% | 34% | |||||||||||||
prAna | 125.3 | — | 125.3 | 53.7 | 133% | 133% | |||||||||||||
Mountain Hardwear | 116.3 | 4.3 | 120.6 | 119.8 | (3)% | 1% | |||||||||||||
Other | 10.7 | 0.6 | 11.3 | 10.6 | 1% | 7% | |||||||||||||
Total | $ | 2,326.2 | $ | 84.0 | $ | 2,410.2 | $ | 2,100.6 | 11% | 15% | |||||||||
Categorical Net Sales: | |||||||||||||||||||
Apparel, Accessories and Equipment | $ | 1,821.2 | $ | 53.9 | $ | 1,875.1 | $ | 1,676.2 | 9% | 12% | |||||||||
Footwear | 505.0 | 30.1 | 535.1 | 424.4 | 19% | 26% | |||||||||||||
Total | $ | 2,326.2 | $ | 84.0 | $ | 2,410.2 | $ | 2,100.6 | 11% | 15% |
• | Mid-single-digit percent net sales increase compared with 2015 net sales of $2.33 billion, including approximately 1 percentage point negative effect from changes in currency exchange rates; |
• | operating income of $257 million to $267 million, representing operating margin of up to 10.8 percent; and |
• | net income of between approximately $179 million and $186 million, or $2.55 to $2.65 per diluted share. |
• | U.S. net sales increased $41.6 million, or 10 percent, to $446.2 million. The increase in U.S. net sales reflected increased direct-to-consumer (DTC) sales and shipments of higher Fall 2015 advance orders to wholesale customers. During the fourth quarter of 2015, the company operated 109 U.S. retail stores (85 outlet; 24 branded) and 5 branded ecommerce sites, compared with 93 stores (74 outlet, 19 branded) and 5 branded ecommerce sites during the same period in 2014. |
• | Net sales in the LAAP region declined $5.5 million, or 4 percent, (increased 2 percent constant-currency) to $149.7 million, primarily reflecting a low-twenty percent net sales decline in Korea (mid-single-digit constant-currency) reflecting the extremely competitive nature of the outdoor sector in that country, a mid-single-digit net sales decline in Japan (mid-single-digit growth in constant-currency), and a low single-digit net sales decrease in China (low single-digit increase in constant-currency). These declines were partially offset by growth of more than 40 percent in net sales to independent distributors driven by shifts in the timing of shipments of Fall 2015 and Spring 2016 advance orders. |
• | Net sales in the Europe, Middle East, Africa (EMEA) region declined $10.1 million, or 15 percent, (declined 6 percent constant-currency) to $58.2 million. Europe-direct net sales were essentially unchanged, but increased 16 percent on a constant-currency basis, reflecting increased advance orders from European wholesale customers. These results were more than offset by a decline in net sales to EMEA distributors, primarily reflecting lower net sales to the company’s Russian distributor amid macroeconomic challenges in that region. |
• | Net sales in Canada declined $3.6 million, or 7 percent, to $45.3 million, (increased 10 percent constant-currency), reflecting lower wholesale net sales, partially offset by higher DTC net sales. |
• | Columbia global brand net sales increased $1.0 million, or less than 1 percent, (increased 3 percent constant-currency), to $528.9 million, primarily reflecting increased U.S. DTC and wholesale net sales, and increased net sales to LAAP distributors, partially offset by lower net sales in all other regions. |
• | Sorel global brand net sales increased $13.2 million, or 14 percent (21 percent constant-currency), to $105.3 million, driven primarily by increased wholesale and DTC net sales in the U.S. |
• | prAna global brand net sales increased $7.7 million, or 39 percent (39 percent constant-currency), to $27.7 million, primarily reflecting growth in North America. |
• | Mountain Hardwear global brand net sales increased less than $1.0 million, or 2 percent (5 percent constant-currency), to $35.2 million, primarily reflecting growth in the U.S., China and LAAP distributor markets, partially offset by lower net sales in Korea and the EMEA region. |
• | Global Apparel, Accessories & Equipment net sales increased $5.5 million, or 1 percent (4 percent constant-currency), to $515.6 million, primarily driven by increased prAna brand net sales, partially offset by a decline of less than one percent in Columbia brand net sales. |
• | Global Footwear net sales increased $16.9 million, or 10 percent (16 percent constant-currency), to $183.8 million, reflecting growth from the Sorel and Columbia brands. |
• | a higher volume of lower margin close-out product sales, and |
• | unfavorable foreign currency hedge rates in Canada, Europe and Japan; |
• | lower inventory provisions primarily in Korea, and |
• | a higher proportion of direct-to-consumer sales. |
• | expenses related to the company’s expanding global DTC operations, |
• | information technology costs, and |
• | personnel costs to support strategic initiatives and business growth; |
• | favorable foreign currency translation effects. |
• | Organic growth of approximately 8 percent (12 percent constant-currency), and |
• | incremental net sales for the first five months of 2015 of approximately $56.0 million from the prAna brand, which the company acquired in May 2014. |
• | Net sales through the company’s global DTC channels represented approximately 34 percent of consolidated net sales, and grew at a slightly faster rate compared to the company’s global wholesale channels. |
• | Mid-twenty-percent growth in net sales to LAAP distributors was more than offset by mid-twenty-percent declines in net sales to EMEA distributors, primarily reflecting the challenging macroeconomic conditions in Russia. |
• | U.S. net sales increased $256.8 million, or 21 percent, to $1.46 billion. The increase in U.S. net sales primarily reflected nearly equal percentage growth in DTC and wholesale channels, including approximately $48.5 million of incremental prAna net sales from the first five months of 2015. The DTC sales growth reflected the addition of 16 stores, incremental sales contributed by stores opened in 2014, and growth in ecommerce sales. The wholesale growth included increases from all major channels of distribution. |
• | Net sales in the LAAP region declined $22.4 million, or 5 percent (increased 2 percent constant-currency), to $469.2 million, primarily due to a mid-twenty percent net sales decline in Korea, reflecting the extremely competitive nature of the outdoor sector in that country, and a high single-digit percent decline in net sales in Japan (high single-digit increase in constant-currency). These declines were partially offset by a mid-twenty percent increase in net sales to LAAP distributors, driven by increased advance orders and favorable shifts in the timing of shipments. Net sales in China were essentially flat (low single-digit percent increase in constant-currency). |
• | Net sales in the EMEA region declined $26.0 million, or 10 percent (flat in constant-currency). Net sales in our Europe-direct markets increased low single-digit percent (low twenty percent constant-currency), offset by a mid-twenty percent decrease in sales to EMEA distributors due to the challenging macroeconomic conditions in Russia. |
• | Net sales in Canada increased $17.2 million, or 11 percent (30 percent constant-currency), to $168.6 million, reflecting increased wholesale and DTC net sales. |
• | Columbia global brand net sales increased $114.4 million, or 7 percent (10 percent constant-currency), to $1.86 billion, driven by growth in the U.S., LAAP distributor markets, and Europe-direct markets, partially offset by declines in EMEA distributor markets, Korea and Japan. |
• | Sorel global brand net sales exceeded $200 million for the first time, increasing $43.0 million, or 26 percent (34 percent constant-currency) to $209.2 million, driven primarily by increased wholesale and DTC net sales in North America. |
• | prAna global brand net sales increased $71.6 million, or 133 percent, primarily reflecting growth in North America, and included incremental net sales of approximately $56.0 million during the first five months of 2015. |
• | Mountain Hardwear global brand net sales decreased $3.5 million, or 3 percent (increased 1 percent constant-currency), to $116.3 million, reflecting lower net sales in Korea and the EMEA region, partially offset by growth in the U.S. |
• | Global Apparel, Accessories & Equipment net sales increased $145.0 million, or 9 percent (12 percent constant-currency), to $1.82 billion, primarily driven by the Columbia and prAna brands. |
• | Global Footwear net sales exceeded $500 million for the first time, increasing $80.6 million, or 19 percent (26 percent constant-currency), to $505.0 million, including growth from the Sorel and Columbia brands. |
• | lower provisions for slow-moving inventory, |
• | a more favorable channel mix comprising a higher proportion of direct-to-consumer net sales and a lower proportion of sales to international distributors, which generally carry lower relative gross margins than wholesale and direct-to-consumer channels; |
• | unfavorable foreign currency hedge rates, and |
• | lower margin on close-out product sales. |
• | personnel costs to support strategic initiatives and business growth, |
• | expenses related to the company’s expanding global DTC operations, |
• | expenses from a full year of prAna SG&A expense, and |
• | demand-creation investments; |
• | a benefit from foreign currency translation. |
• | mid-single-digit percent global net sales growth compared to 2015, including approximately 1 percentage point negative effect from changes in foreign currency exchange rates); |
• | operating income of $257 million to $267 million, representing operating margin up to approximately 10.8 percent; and |
• | net income of between approximately $179 million and $186 million, or $2.55 - $2.65 per diluted share, compared with net income of $174.3 million, or $2.45 per diluted share, in 2015. |
• | Mid-single-digit percent net sales growth from the Columbia brand, low-double-digit percent net sales growth from the Sorel brand, and mid-twenty percent net sales growth from the prAna brand. Mountain Hardwear brand sales are expected to decrease at a low-single-digit percent rate. |
• | Low-double-digit percent net sales growth in the U.S. business with DTC growth, particularly e-commerce, outpacing wholesale growth. |
• | Low-single-digit percent net sales growth from the EMEA region with the Europe-direct business contributing mid-teen growth, largely offset by declines in the EMEA Distributor business due to the continued impact of macroeconomic challenges in Russia. |
• | Low-single-digit percent net sales growth from the LAAP region driven by growth in Japan and China, partially offset by declines in Korea and LAAP Distributors. |
• | Low-single-digit percent net sales decrease in Canada (mid-single-digit percent increase constant-currency). |
• | Gross margin expansion of approximately 40 basis points compared with 2015, reflecting: |
◦ | a higher proportion of DTC net sales, with a corresponding lower proportion of lower-gross margin distributor and wholesale net sales; |
◦ | selective price increases in our non-U.S. subsidiaries to partially offset the unfavorable effects of foreign currency pressures; and |
◦ | a favorable sourcing environment; |
◦ | unfavorable foreign currency hedge rates. |
• | SG&A expense growth rate slightly higher than anticipated consolidated net sales growth, resulting in approximately 40 basis points of SG&A expense deleverage. The increase in projected SG&A expenses consists primarily of: |
◦ | increased personnel expenses to support strategic initiative and business growth; |
◦ | increased expenses to support continued global DTC expansion and operations; |
◦ | increased demand creation spending, which is anticipated to increase to approximately 5.4 percent of 2016 net sales compared with 5.2 percent of 2015 net sales; and |
◦ | increased expenses related to ongoing information technology initiatives; |
◦ | a benefit from foreign currency translation. |
• | Licensing income of approximately $11.0 million. |
• | An estimated full-year effective income tax rate of approximately 27.5 percent, comparable to the effective income tax rate of 27.3 percent in 2015. The actual rate could differ based on the geographic mix of pre-tax income and other discrete events that may occur during the year. |
• | An unfavorable impact of approximately $(0.28) on full year 2016 earnings per share, compared to an estimated unfavorable impact of $(0.10) per share in 2015, due to changes in currency exchange rates, comprising lower gross margins within many of our foreign subsidiaries as a result of increased costs of inventory, and to a lesser degree, the translation of net income, revaluation of foreign-currency denominated assets and liabilities, and net losses on the settlement of intercompany transactions. |
• | Capital expenditures of approximately $70 million, comprising investments in DTC business expansion, information technology, and project-based and maintenance capital. |
• | a lower net sales growth rate in the first half of the year than in the second half; |
• | a more pronounced negative impact from currency on first- and third-quarter gross margins as we ship a higher percentage of international wholesale advance orders for spring and fall, respectively, in those quarters; and |
• | more pronounced SG&A deleverage in the first half of the year, given the lower anticipated net sales growth rate and the fixed cost structure of the business. |