Greetings and welcome to the Columbia Sportswear Company First Quarter 2017 Financial Results Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions]. We have said all questioners to limit themselves to one question and one follow-up, and then get back in the queue to allow time for all questions to be addressed within the hour. 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 and Corporate Communications. Thank you, Mr. Parham. You may begin.

All right. Thanks Bob. Good afternoon and thanks for joining us to discuss Columbia Sportswear Company's record first quarter results and updated 2017 outlook. In addition to the earnings release, we furnished an 8-K containing a detailed CFO commentary explaining our results and the assumptions behind our full-year outlook. The CFO commentary is also available on our Investor Relations website. With me today on the call are Chairman of the Board, Gert Boyle; Chief Executive Officer, Tim Boyle; President and Chief Operating Officer, Bryan Timm; Executive Vice President of Finance and Chief Financial Officer, Tom Cusick; and Executive Vice President and Chief Administrative Officer, Peter Bragdon. Gert will start us off covering the Safe Harbor reminder.

Thank you. This conference call will contain forward-looking statements regarding Columbia's business opportunities and anticipated results of operation. 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 and subsequent filing with the SEC. Forward-looking statement in this conference call are based on the 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 change in our expectation.

Thanks, Gert. I'd also point out that during the call we may reference constant currency net sales growth which is a non-GAAP financial measure, a reconciliation of constant currency net sales, the net sales as reported under U.S. GAAP can be found in the supplemental financial tables accompanying our press release along with management's rationale for including this non-GAAP measure. Following our prepared remarks as our operator indicated we will host a Q&A period during which we will limit each caller to one question and a follow-up, so we can get everyone end by the end of the hour. Now I'll turn the call over to Tim.

Thanks, Ron. Welcome everyone and thanks for joining us this afternoon. Our record first quarter results represent a good start to 2017 against an environment that presents many challenges especially in U.S. wholesale channels where several more of our customers announced store closures, bankruptcies, or plans to restructure or liquidate. Despite these headwinds, in the U.S. we believe global consumers will continue to be drawn to strong innovative brands. While each of our brands is effective to varying degrees by these structural changes, our strategies for addressing them are consistent and include partnering with strong wholesale customers and distributors in each geographic region, who are also committed to our brands and our growth strategies. Segmenting our assortments and managing inventory carefully to maintain a healthy market reducing the need for in-season promotional activity. Working with our customers to ensure our brands are presented and displayed in compelling in-store environments, driving consumer demand through continued product innovation, and effective marketing, and expanding our multichannel platform to serve the needs of consumers, who choose to purchase directly from our brands and this includes brick-and-mortar, stores, and enhanced e-commerce capabilities that service effective marketing channels as well as profitable selling channels. These strategies are fueled by our strong balance sheet which enables us to invest strategic in our brands, our people, and our operations to drive growth, improve our competitive position, diversify to become less weather sensitive, and drive greater return on invested capital. Our first quarter results and our outlook for the full-year illustrate the power of our multi-brand, multichannel diversified global business model. Our Europe direct business continued to produce outstanding sales growth during the first quarter posting another strong quarter of mid-teens growth led by the Columbia brand. This growth was spread across our largest markets and included double-digit growth…

Ladies and gentlemen, we will now be conducting a question-and-answer session. [Operator Instructions]. Our first question comes from the line of Bob Drbul with Guggenheim Securities. Please proceed with your question.

Tim, I was wondering if you could just elaborate a little bit about the change in revenue, the retailer response, and do you think that that's a competitive issue or do you think that most of your peers have felt that same amount of pressure or just reduction over the last few months in terms of orders? And then second question is essentially as you look at your DTC business, the components of it and in the plan over the remaining quarters do you just talk about how you have that planned more on a comp store sales basis and profits in the guidance that you provided the updated guidance today?

Certainly. Well you know as we said during the scripted comments, we've lost about 800 doors that sell Columbia products in the U.S. and the remaining customers have become stronger in many cases but cautious in terms of how they're approaching specifically winter merchandise. So I don't think we're in fact I know we're gaining market share across our customer base in the U.S. but our retailers are cautious they've all seen traffic reductions and diminished traffic, put traffic in the stores and they are all taking a very cautious approach to the business as are we. We keep a very strong thumb on our customer base to know how they're performing and we were not -- but we want to make sure that we don't promise growth that would require us to make bold and may be inappropriate credit extension decisions in terms of how we go forward on the wholesale business. So we've been cautious -- we're being strongly supportive of our strong customers using our balance sheet but we don't want to -- we don't want to be having to make crazy decisions as it relates to credit extension. As it relates to DTC and as you remember we're not a retail business, we are primarily a wholesale business and we don't report typical metrics that a retailer would promote, would provide but we do feel comfortable that we've got the metrics in place to be able to fulfill the guidance that we gave you today.

And Bob this is Tom, may be just to add a little more color the U.S. DTC business has pointed to drive a majority of our growth this year. And if you break that business down between e-commerce and our brick-and-mortar business, we're playing e-commerce growth rate at a lower rate this year than we did last. And if you we added seven on the brick-and-mortar side, we added seven stores to the business last year and we're planning for 13 this year, we've got all but one of those leases signed. And when you look at just the breakdown at brick-and-mortar business, the new store growth is outpacing the comp store contribution to growth in a significant way like three to one. So hopefully that provides some color on level of conservativeness or aggressiveness how do you perceive that relative to our DTC projections.

Thank you. Our next question comes from the line of Camilo Lyon with Canaccord Genuity. Please proceed with your question.

Thanks. Good afternoon everyone. Just going back to the U.S. wholesale piece as you have gotten more information and more color about the closures that are unfolding, are you seeing any of that that consumer demand flow to the remaining stronger partners in the channel and if you could just speak to which channels you're feeling that the biggest brunt of that caution?

Certainly. Well we have a quite broad business in the U.S. with customers running the gamut from specialty stores all the way to hit the department stores and other retailers or so apparel especially winter apparel. And I would say that most of the customers are slightly cautious about how winter has dealt them the business cards for the last couple of years as well as the reduced traffic that they're seeing foot traffic in the stores and competition from online retailers et cetera. So I think in general that the cautious manner is sort of spread across all these point of sales.

Okay. So it's more a function of how the prior winters have proceeded versus incremental door closures, I'm just trying to isolate what's the biggest change here from 90 days ago?

Well I would say the expectation frankly we have that we were going to have more customers in business versus 90 days ago. So we've had some bankruptcies announced that weren't contemplated in our business plan for this year and so that's been the primary reason. So I would say that's the primarily. There is caution from brick-and-mortar retailers in terms of how their traffic patterns are being impacted by online retailers of all types of products.

And then just a follow-up on that point on the bankruptcies, are there others that you are anticipating becoming bigger that may be haven't been spoken out in the press?

Well we don't want to specifically target any one of our customers but we also don't want to be in a position where we have to make crazy credit decisions because we told you that we are going to be irresponsible. So we feel that we do a great job of extending credit, we want to make sure that we continue that reputation.

Thank you. Our next question comes from the line of Lindsay Drucker-Mann with Goldman Sachs. Please proceed with your question.

I wanted to start with just two quick kind of housekeeping questions. The first is how much did the timing shift, I think you called that China impact revenue and the second is whether you can tell us how much shifting e-commerce in-house, I think you said that was for EMEA what kind of revenue or profit impact that might have?

Yes, I would say, Lindsay this is Tom on a combined basis, we’re talking a mid-single-digit millions of dollars type of number combined for those two businesses in the quarter.

That was the impact of the timing shift ahead of ERP?

In the ERP for -- in China yes and did you also have a question with regard to the e-com coming in-house in Europe?

Yes, so maybe could you separate that Tom.

Yes, that was in our plan, so that really didn't have any significant impact on top-line or earnings relative to our plan 90 days ago.

Yes, Lindsay just to follow on Tom's comments specifically as it relates to the EMEA e-com business coming in-house, I mean we have an enormous investment in infrastructure in Europe and this will allow us to leverage that, the prior third-party facility has taken a high commission rate and we couldn't utilize our own distribution center nor the call center space that we have in Strasburg. So this gives us really an opportunity to leverage the business. And then as we've said many times before we become e-com is a tremendous asset for the business as it relates to not only providing revenue and profitability but also great marketing messages for those visitors that come and look at the site and get a great marketing message and then hopefully buy the products somewhere else or at another time. So I think e-com over the long-term in Europe will be a very strong asset for the company.

Got it. And then just shifting over to inventories exiting 2015 with the disappointing weather there were some inventory imbalances and you guys had some product that you were holding on your -- on your balance sheet it's nice to see inventories come down year-over-year. But I know there's probably some noise in the base, so I was wondering if you could talk first of all about may be characterizing your inventory position today? And then secondly as we look to the back half of the year now that you're dealing with a weaker wholesale orders than what you had planned how are you thinking about managing inventories to keep product clean, keep positioning clean exiting the 2017 winter season. In other words should we be thinking about accelerated markdowns kind of earlier in the season since you probably ordered ahead of what end demand might look like?

Hi Lindsay this is Tom, I will start with this and then I'll let Tim to talk about the liquidation side of the equation as it relates to the second half. But looking at inventories down 3% exiting March, we're expecting inventory to carve down in Q2 and Q3 of this year, we thought relatively tight for the fall. Our turns are where we want them to be as 2.4 times. So we've got -- we've got inventory to the extent more demand comes and we've got plan to service some of that demand but relatively speaking our inventories are in pretty good shape relative to where they've been at this time a year or two ago.

Yes Lindsay and if you remember coming out of 2016, we carried our inventories over to utilizing our factory outlet business that gives us a much higher yield frankly than we would get in the off price channel especially the last year where the off price channel was much more fully bought than they are this year. But we get zero return for all tentative purposes on our cash, so we'd rather have the heavy asset and inventory to allow us to keep the stores full. So when we look at 2017, and let's assume we have a normal weather to even hopefully the possibility of a better weather year. We may not have a significantly higher top-line but our gross margin yield on the inventory will be much higher.

But I guess just to clarify so then under normal weather would that then imply that your wholesale sales in the U.S. are ahead of what your guidance is because as of last quarter you were looking for wholesale revenues up low-single now you're looking for them down mid single, that's a pretty big change and that's I guess on my question should we be thinking about excess inventory exiting this winter since you probably bought to higher demand. Are you saying that under a normal, under normal weather we should do better than that down mid single?

No I think you'll see our inventories comp down in June and September, so we bought relatively tight and we are buying every couple of weeks. So as the forecast compressed, we were adjusting our buy plans throughout the quarter.

Thank you. Our next question comes from the line of Susan Anderson with FBR. Please proceed with your question.

Hi thanks so much for taking my questions and may be just to get some more color on the footwear business some nice growth there, it looks like SOREL had some good growth was a lot of that coming mainly from U.S. and the SOREL brand or also international maybe if you could just parcel that out. Thanks.

Yes, it was a combination, I mean SOREL we pointed out because the focus really is to try and de-winterize that brand as much as possible so we had a successful really launch for all tentative purposes on our spring business. And we wanted to make sure that we emphasize the importance there but we also had closeout inventory that flow through the quarter for SOREL and then we had good solid performance through our international business on the Columbia side.

Got it. So you saw a pretty good response from the new SOREL spring footwear alignment?

Yes I mean for a brand that just a few years ago was considered a men's work wear brand and is closing only, what is used only has been quite dramatic in terms of how we -- the SOREL team has been able to really convert that into a very fashionable women's footwear line that's been successful in the spring.

Got it. And then on the price increases that you guys mentioned is that still just related to international and just trying to offset FX there or you're also taking some select price increases in the U.S?

I would say that's probably more may be weighted to the international businesses and then there is another component there that's really a function of average unit retail growing at a faster rate than average unit cost. So you look at the aggregate product mix there's that component as well.

Thank you. Our next question comes from the line of Mitch Kummetz with B. Riley. Please proceed with your question.

Yes, thanks. Tom first question I may have missed this in your CFO commentary that you guys put out but are you updating your 2017 sales guidance by brand?

Was that my commentary?

Well I didn't see it in the commentary I know that when you guys reported the fourth quarter you gave sales guidance by region and brand. But I didn't see anything by brand this time around; I'm just wondering something's changed.

Yes, Mitch it's actually in there.

It is, okay I'm sorry. And then on the -- I think in the past, you have talked in particular about kind of assuming normal weather, I'm guessing that still holds when you think about that from a kind of a reorder slash cancellation standpoint, I would guess that 2016 was unfavorable like what kind of pickup has assumed there if we have normal weather, I mean is there any way you could kind of quantify that in terms of percentage or a dollar just to give us kind of a gauge as to kind of what you're looking for?

So I will answer your first question first and then come back to your second question. So your assumption is correct that the net cancel actualized for fall 2016 was unfavorable to normal times and that our 2017 plan contemplates normal winter weather pattern. So we're planning -- our lower next cancellations then what actually actualized in 2016 and then in terms of quantifying what that upside is that that's -- that's pretty difficult to do, I would ask you to go back and look at what Q4 results look like in prior periods relative to our outlooks getting back to 2011 and even 2012.

Thank you. Our next question comes from the line of Jon Komp with Robert W. Baird. Please proceed with your question.

Yes, hi thanks. I want to ask about the SG&A outlook and I think you implied in the guidance is lower SG&A dollar growth in the back half. I think previously you had pointed to more deleverage in the first half than the second half but it was more tied to the revenue growth and now revenue growth is assumed similar for both the first half and second half. So could you just talk about maybe the cadence of the SG&A growth and then relatively on the review of the business, clearly you must think there's some opportunity there and with the review having started could you just may be give a little more detail on what's being looked at and may be timeline on when you think there might be some results?

Yes. So I'll take the first part of that as it relates to the first half, back half SG&A cadence. I'd say we'll continue to manage the cost side of the equation, very diligently so that's factored in and then we've got slightly more currency translation benefit in the second half than we do in the first half. Just based on currency assumptions and where those costs are incurred around the world.

Yes. And then just Jon just to finish up by that just based on our discussion about our project we have ongoing, the company by almost any measure is enormously successful and has built a very, very strong balance sheet. We believe that we've got terrific opportunities in front of us -- for really for every brand we that we currently own and the intention is to make sure that we're structured properly to be able to take advantage of what we know is available to us. So we have legacy costs built out through the business that, that need to be observed and -- and right sized and then put that that money towards increased demand creation as well as increase profitability. So we're not far enough into it to be able to give you any kind of delineated numbers but clearly we believe the significant opportunity for the company on the go-forward basis.

And may be just to be clear on that so there's no cost or benefits that are included in our outlook associated with any of those activities.

Thank you. Our next question comes from the line of Jay Sole with Morgan Stanley. Please proceed with your question.

Great. Thanks so much. Can you talk about as you look into the second half of the year what's coming from a product standpoint that as you excited is there any new technologies like Omni-Heat or Powder Down that's coming or any other platforms that you'll deepen into retail.

You're talking about fall 2017 right. So I have to have to rewind because we are in the process of beginning to sell fall 2018 so we're -- I have to rewind. But yes basically I would say the leading candidate for exciting potential lift is how we've expanded the use of our outdrive stream technology into multiple kinds of products including hand wear, gloves and footwear. And then it's really a revolutionary product that it was -- it was noted in recent edition of Outside Magazine as one of the top 40 products everything made in the last 40 years. We were right there up with duct tape and Swiss Army Knife. So we're excited about it and that's I think going to be probably the leading new innovation that's going to be spread across our product lines it may not be the highest single volume item but it's certainly going to separate us from -- from our competitors in terms of how to stay warm, dry, cool, and protected.

Okay, great. And then may be if I ask about the rewards program. I just maybe just on social media, I see more of if you just talk about what percentage of customers are on the program right now and what kind of growth you've seen in rewards program, over the last stretch of time.

Right. Well the rewards program is loyalty program for customers to visit our sites and our repeat purchasers. And again we don't consider ourselves to be a retailer so, we don't report on the typical measurement points that a retailer would tell investors. But I can tell you it's been successful and we think there's more opportunity there for us.

Thank you. Our next question comes from the line of Laurent Vasilescu with Macquarie. Please proceed with your question.

Good afternoon. Thanks for taking my question. In the CFO commentary it outlines the annual sales will be more heavily weighted to the fall season factoring this comment the first quarter revenue result of 4% and the full-year guide 3% growth is it fair to assume that the second quarter revenues could be flat to slightly up 1%.

Yes, we're trying to stay away from we're kind of stay away from specific quarterly guidance but we are planning for the Q2 revenue to be to be positive. And Q2 is our seasonally our lowest volume quarter of the year representing 15% or 16% of sales and our distributor shipments straddle, from mid June to mid July so they straddle that quarter that and can impact growth rates one way or the other in that Q2. But as we see quarter today we're planning for growth in the second quarter.

Okay, very helpful. And then as a follow-up, it sounds like the majority of your global revenue growth will come from the U.S. DTC business this year, with less visibility in DTC business as opposed to wholesale business, what gives you the confidence that the U.S. DTC business will grow low-double-digits year-over-year outlined in the CFO commentary versus the first quarter mid-single-digit growth you saw this channel.

Well as we said that the company has a collection of very powerful brands that are in demand by consumers. And so we want to make sure that those are available to consumers wherever they shop. Our preference Matthew would be that, to have that product sold through our wholesale partners and as we said the bulk of it is but the demand will be there we believe based on the comprehensive marketing plans that we've laid out for the balance of the year and the strength of the brands themselves.

And Laurent, this is Tom. And what in Q1, 2017 we're comping against what I believe was a high teen between U.S. DTC growth rate in the first quarter of 2016. So it's clearly that most difficult comparison quarter we're going to have this year.

Thank you. Our next question comes from the line of Christian Buss with Credit Suisse. Please proceed with your question.

Yes. I was wondering if you could talk a little bit more big picture about how you're thinking about the evolution of your business in light of the challenges that some of your brick-and-mortar partners are seeing, what's the solution to that challenge over the long-term.

Okay. I missed one word out of your questions so what I think you're asking is, is how do we expect the business over the long-term to change there?

Looking specifically at the brick-and-mortar partners that you currently have and the challenges that they're facing what's the response that's allowed you to grow in a healthy way.

Well clearly the -- the reduction in the total number of doors in the U.S. and by the way I think this is our discussions here have been primarily talking about the U.S. businesses we don't see the kind of dramatic changes in other geographies. But speaking specifically in the U.S. which by many measures have been overstored the stronger retailers brick-and-mortar retailers who have strong balance sheets and run great operations are going to at least reaping the awards of the reduced competition frankly. So there will be competition for brick-and-mortar stores by online retailers. But the bulk of our strong brick-and-mortar stores also have if not launched plans then plans to being become stronger in the e-com business. So I'm convinced that the strong retailers are going to be thriving in the U.S. but then they'll also have to their mission that they adapt to the -- to the changing consumer demand.

Can I ask a follow-up questions about Mountain Hardwear could you give us some understanding of what the timeline is for changes within that business given the leadership change.

Sure. Well as we said Joe Vernachio who is a really an industry veteran he's worked in the outdoor business in very large companies as well as small more niche companies. He is laid out a timeline that we've discussed and basically approved which is going to take some period of time. It's not an overnight change we have to win back dealers who have disappointed with the company's product not with the brands reputations but with the company's products over the last several seasons. So that will take some time but frankly I'm expecting a real change as soon as fall 2018 in terms of the product offering, whether or we get uptick from dealers and whether we convince them right away that will be to be seen but I know the line will improve by fall 2018.

Thank you. Our next question comes from the line of Andrew Burns with D.A. Davidson. Please proceed with your question.

Hey guys. As you look at the updated guidance by region and brand, a couple of questions prAna seems to be the one with a large -- brand with a large downtick in growth guidance, is that just a function of what doors are closing within the wholesale partners or is there anything brand specific related to that revision? And then the EMEA outlook actually improved is that what you've seen so far this year or does the order book perhaps come in a bit ahead, what was fundamental driver there? Thanks.

Well yes speaking specifically about prAna, if you remember this is primarily USA business and the much more -- was much more impacted than the other brands by the store closures. So as it relates to Q1 that was the biggest single impact. When you’re asking about the EMEA or you talking about prAna EMEA or Columbia?

The region, total growth guidance went from low single, I think this time it was -- I think it's mid single?

Yes our Europe direct business frankly is one of the shining stars for the company as you might remember the company struggled there over the past several years and our team there led by Franco Fogliato and his folks there have really been diligent about the control of the costs about expanding the distribution of the product to large focused retailers. And I think together with the increase in our e-commerce reach and breadth because we do it ourselves, will allow us to really start to begin to get that business fully formatted. We still have long ways to go to get it to average of the business profitability but there is a distinct path forward that we are working on.

Thank you. Our next question comes from the line of John Kernan with Cowen & Company. Please proceed with your question.

This is Krista Zuber on for behalf of John. Thank you for taking our questions. First ever since you don’t like to address the quarterly guide but you are wrapping a pretty impressive gross margin performance in Q2 last year, you think you benefit from the channel mix DTC selective pricing among other factors. And those factors are kind of continuing to benefit you now, so do you think you could see further gross margin expansion in Q2.

Yes Q2 again given that it's the smallest quarter of the year; it's the most volatile quarter of the year. And I think if you look at our first half, second half implied guidance and the fact that we're actually planning the operating income down upwards of $5 million for the first half of the year, some of that will come in the form of gross margin compression. So I would anticipate some gross margin compression in Q2 not a lot and that's really a function of channel mix again it's the quarter that we've set -- we shipped a significant amount of our distributor sales in both EMEA and LAAP distributors for fall 2017 are planned up. And so I would expect to see some compression and that's predominant from channel mix.

Okay great. And then as my follow-up with respect to your cash flow, your CapEx as a percent of sales was around 2.4% will say for fiscal 2017, how should we think about that run rate going forward, are there any systems enhancing projects anticipated in out years that we should be aware of. Thank you.

Yes, so we're really not guiding beyond 2017, I think if you look at our recent historical CapEx spend over the last few years that's probably a pretty good indicator based on how we're thinking about the future sitting here today.

Thank you. Our next question comes from the line of Christopher Svezia with Wedbush. Please proceed with your question.

Thank you for taking my questions, I guess just a first one sets in two parts Tim for you, when you think about channel inventories rather retail right now, where do they stand right now versus last year and may be where they stood call it 65 days ago when you gave the initial guidance? And then the second question report to that is now that your order book is completed and for the most part locked in, I guess the only real risk is you could potentially see to the back half is a) if you see cancellations or b) if direct consumer doesn't play out as you plan because of maybe we don't get to winter. Am I thinking about that correctly in terms of the thought process?

Yes, I think you basically have a right. Let me speak to the channel inventories, I think they are improved over this period in 2016, we've had a poor weather year prior to Christmas. But I think since Christmas is on though it's been a tough weather for those who needed winter boots it was good, if you're selling winter boots and so our customers I think that much cleaner and we've also had less promotion, less liquidation activity in the -- by manufacturers to the off-price channel. So I think if I characterize the channel being all the way from existing retailers that sell this kind of merchandise weather sensitive merchandize to the off-price channel, I think everybody is in better shape than they were last year at this time. And I would say looking forward retailers were very cautious in terms of how they approached these weather sensitive categories of merchandise, so that that was also a drag on our order book. So I would expect assuming we get typical cancel rates and typical reorder rates which tend to basically bounce themselves out maybe really will be a function of how early the weather shows up for the balance of the year.

Thank you. Our next question comes from the line of Steve Marotta with CL King & Associates. Please proceed with your question.

Good evening everybody. Just going back to SOREL being up a strong as it was in the first quarter, was there any pull-through at all from the second quarter, can we expect positive sales comparisons in each of the quarters for the balance of the year?

No, I think the results of SOREL in Q1 were really a function of the spring business and then also close-out merchandise that flowed through the business in Q1. There wasn't any movement of any significance in for the quarter. We're expecting that business to continue to perform well and in the brand as I said earlier in the fall, as you look customers from Ian and his team have converted men’s winter workwear food brand to a fashionable women's brand.

Again just to reiterate and positive revenue comparisons in each of the quarters would be expected from now to the balance of the year?

Yes I think this is Tom, again we're not providing quarterly guidance. Q1 was the launch of the expanded assortment for SOREL, we have planned that, we've commented on that in the commentary back in February, so this was planned. And relative to specific quarterly guidance for SOREL, we are not prepared to provide that level of detail here today.

I understand. The follow-up question is when you expect Korea to stabilize?

Well so we have got a couple of things going on in Korea frankly the outdoor business in general which was enormously strong and became the world's outdoor brands all moved to Korea simultaneously, it seemed or expanded quite dramatically. And then that that kind of business became less popular, those kinds of products especially every insulated products became less popular and then we have the issue with a neighbor to the north impacting consumer mood there. We have be issue of the political stabilization of the ruling government there as well as Chinese prohibition of tourism travel to South Korea. So there's a -- there's a number of things going on there but virtually all of them are outside our control so it's a strong economy in but we just have to make sure that this is another reason for have a strong balance sheet is we have issues like this that that are outside the company's control at least the balance sheet will be able to keep us in the business and be a survivor.

Thank you. Ladies and gentlemen we have a follow-up question coming from Lindsay Drucker-Mann with Goldman Sachs. Please proceed with your question.

Thank you so much for squeezing me in. I wanted to ask on historically you have been opportunistic with M&A and given some of the dislocation in the market more recently I was curious how you were thinking about the pipeline of deals and what your approach is going forward.

Well, thanks because I want to make sure we answered all the questions. I wasn't sure that we got every one of you. So well as you know we never really comment on M&A activity and I guess I would answer it in the standard method that we have made acquisitions in the past we believe that least risk highest return for the company is to continue to improve what we already have and focus on continued continuous improvement all of it the consultant study that we have ongoing in the business today. That having been said we have a balance sheet you get phone calls and so I guess I would leave it at that.

How would you -- how would you rate the pipeline today versus a year or two ago.

Well, I guess the way I'd answer that is to say; we've never considered ourselves to be an acquisitive company. We've made acquisitions but companies in our space that's, that suggested that's what they do have not made any acquisitions so I guess that's how I'd answer that.

Thank you. [Operator Instructions]. There are no further questions at this time. I'd like to turn the floor back to management for closing comments.

Well, great we thank you all for listening in. We appreciate it and we look forward to talking to you in about 90 days.