Kontoor(US:KTB)2025-02-25 21:21Financial Performance - Net revenues for the year ended December 2024 were $2.6 billion, flat compared to the year ended December 2023[185]. - U.S. Wholesale revenues increased by 1% and represented 73% of total revenues, while Non-U.S. Wholesale revenues decreased by 7%[185]. - Direct-to-Consumer revenues increased by 4%, accounting for 12% of total revenues[185]. - Gross margin improved by 280 basis points to 44.5% compared to the previous year[185]. - Operating income rose by 7% to $342.3 million, while net income increased by 6% to $245.8 million[185]. - Total reportable segment profit increased by 12.4% to $456.0 million in 2024[201]. - Cash provided by operating activities was $368.2 million, up from $356.5 million in 2023[220]. Segment Performance - Wrangler segment revenues increased by 3% to $1.8 billion, with segment profit rising by 19.1% to $366.3 million[194]. - Wrangler brand global revenues increased by 3%, driven by growth in U.S. Wholesale and Direct-to-Consumer channels[195]. - Operating margin for Wrangler improved to 20.3% from 17.5% in 2023, mainly due to lower product costs and reduced distribution expenses[195]. - Lee brand global revenues decreased by 6%, with declines across all regions and channels[197]. - Operating margin for Lee decreased to 11.3% from 11.6% in 2023, impacted by lower pricing and higher incentive compensation[197]. - Revenues in the Americas region decreased by 6%, primarily due to declines in wholesale and direct-to-consumer businesses[199]. Expenses and Charges - The Company incurred total restructuring and transformation charges of $38.3 million during 2024, with $25.2 million related to Project Jeanius[180]. - Selling, general and administrative expenses as a percentage of revenues increased to 31.4% from 29.5% in the previous year[185]. Tax and Valuation - The effective income tax rate for 2024 was 18.5%, up from 15.0% in 2023[190]. - The company has $65.5 million in gross deferred income tax assets related to income tax credit carryforwards and $33.3 million related to operating loss carryforwards[244]. - Valuation allowances of $61.1 million for income tax credit carryforwards and $17.4 million for operating loss carryforwards have been recorded, indicating a likelihood of more than 50% that some deferred tax assets will not be realized[244]. Acquisitions and Investments - The Company entered into an agreement to acquire Helly Hansen for approximately $900 million, expected to close in the second fiscal quarter of 2025[177][178]. - Capital expenditures are expected to be approximately $35.0 million in 2025, focusing on manufacturing and technology[217]. - The company intends to continue paying cash dividends, having paid $112.1 million in 2024[214]. - The company reported $334.1 million in cash and cash equivalents at the end of 2024[252]. - The company repurchased 1.2 million shares for $85.0 million under the 2023 Repurchase Program[212]. Risk Management - A hypothetical 1% increase in interest rates would decrease reported net income by approximately $2.6 million[254]. - Approximately 20% of the company's net revenues in 2024 were generated in international markets, exposing it to foreign currency fluctuations[255]. - A hypothetical 10% change in foreign currency exchange rates could result in a change in fair value of cash flow hedging contracts of approximately $20.8 million[258]. - The company uses derivative financial instruments to mitigate exposure to interest rate volatility[254]. - The company actively manages its net foreign currency market exposures and may enter into derivative contracts to hedge foreign currency transactions[256]. - The company is exposed to credit-related losses due to nonperformance by counterparties to derivative hedging instruments[259]. - Counterparty credit guidelines are established, only engaging with financial institutions that have 'A minus/A3' investment grade credit ratings or better[259]. - The company monitors the credit rating of counterparties and limits the amount hedged with each[259]. - The company negotiates prices in advance to manage risks associated with commodity price changes[260]. - Historically, the company has not used derivative instruments to manage commodity price exposures[260]. Asset Management - The company performs impairment testing for long-lived assets at least annually, with potential impairment charges recorded if carrying values exceed estimated fair values[232]. - Goodwill is evaluated for impairment annually, with quantitative testing required if qualitative assessments indicate potential impairment[236].