Clarus Corp (CLAR) 2013 Q4 法說會逐字稿

Good afternoon, everyone, and thank you for participating in today's conference call to discuss Black Diamond's financial results for the fourth quarter and full year ended December 31, 2013. Joining us today are Black Diamond's President and CEO, Mr. Peter Metcalf; and the Company's CFO, Mr. Aaron Kuehne.

Following their remarks, we'll open the call for your questions. Before we go further, I would like to take a moment to read the Company's Safe Harbor statement within the meaning of the Private Securities Litigation Reform Act of 1995 that provides important cautions regarding forward-looking statements. Please note that during the conference call the Company may use words such as appears, anticipates, believes, plans, expects, intends, future and similar expressions which constitute forward-looking within the meaning of the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995.

Forward-looking statements are made based on the Company's expectations and beliefs concerning the future events impacting the Company and therefore involve a number of risks and uncertainties. The Company cautions you that forward-looking statements are not guarantees and the actual results could differ materially from the expressed or implied in the forward-looking statements.

Potential risks and uncertainties that could cause the actual results of operations or financial condition of the Company to differ materially from those expressed or implied by forward-looking statements used in this conference call include, but are not limited to: the overall level of consumer spending on the Company's products; general economic conditions and other factors affecting consumer confidence; disruption of volatility in the global capital and credit markets; the financial strength of the Company's customers, and the Company's ability to implement its growth strategy; the Company's ability to organically grow our historical product lines, our new apparel line in our recently acquired businesses; the Company's abilities to successfully integrate and grow acquisitions; the timing and results of the Company's exploration of strategic alternatives to minimize its Gregory Mountain Products businesses; the Company's exposure to product liability or product warranty, claims and other loss contingencies; the stability of the Company's manufacturing facilities and foreign suppliers; the Company's ability to protect trademarks and other intellectual property rights; fluctuation in the price; availability and quality of raw materials; contracted products; foreign currency fluctuations; the Company's ability to utilize its operating loss carry-forwards; and legal, regulatory, political and economic risks in the international markets. More information on reports potential factors that could affect the Company's financial results is included from time to time in the Company's public reports filed with the Securities and Exchange Commission, including the Company's annual report on Form 10-K, quarterly reports on Form 10-Q and current reports on forms 8K.

All forward-looking statements included in this conference call are based upon information available to the Company as of the date of this conference call and speak only as of the date hereof. The Company assumes no obligation to update any forward-looking statements to reflect events or circumstances after the date of this conference call.

I would like to remind everyone that this call will be available for replay through March 17, 2014, starting at 8:00 PM Eastern time tonight. A webcast replay will also be available via the link provided in today's press release as well as on the Company's website at www.BlackDiamond-inc.com. Any redistribution, retransmission or rebroadcast of this call in any way without the express written consent of Black Diamond Incorporated is strictly prohibited.

Now I would like to turn the call over to Chief Executive Officer of Black Diamond, Mr. Peter Metcalf. Sir, please go ahead.

Thank you, Colin, and good afternoon, everyone. As many of you are aware, just three weeks ago on February 11, we held a conference call to discuss our outlook for 2014. And while our 2013 audit was not complete at that time, we provided full-year 2013 revenue and gross margin estimates to use as the baseline to model our 2014 expectations.

At the close of the market today, we issued a press release announcing our actual financial results for the fourth quarter and full year ended December 31, 2013. These results were right in line with the estimates provided in our February 11 call.

In today's call we plan to briefly discuss actual fourth-quarter financial results and provide some limited first-half 2014 guidance. In 2015 we will plan to hold one conference call in late February or early March 2015, to discuss our full-year 2014 actual results and our outlook for 2015.

At this time I will hand the call over to Aaron Kuehne to discuss our fourth-quarter performance and our first-half 2014 guidance. Following Aaron's remarks, I will speak briefly and open the call for questions. Aaron?

Thanks, Peter, and good afternoon, everyone. Black Diamond's consolidated total sales in the fourth quarter of 2013 increased 24% to $60.4 million compared to $48.8 million during the same year-ago quarter. This increase was spread across the entire Black Diamond portfolio as we experienced healthy double-digit organic growth across all of our brands and major geographies.

Sales benefited from the fall launch of BD apparel, as well as increases in Gregory's sales in Japan, due to a step-up in pricing from the transition of the distribution assets from our former Japanese distributor to our own in-house operations in Yokohama, Japan. Almost every quarter, foreign exchange markets contribute some level of volatility to Black Diamond's financial results due to activities across multiple currencies, primarily the US dollar, the euro, the yen and Swiss franc.

Due to net strengthening of foreign currencies against the US dollar, on a consolidated level fourth-quarter sales were positively impacted by approximately 90 basis points or 0.9%. Fourth-quarter gross margin was 38% compared to 36.3% in the same period last year.

Although gross margin increased compared to the same period last year, there are several offsetting factors to consider. For comparative purposes, cost of goods sold in the fourth quarter of 2012 included $1.2 million or 240 basis points for inventory fair value of purchase accounting adjustments related to the acquisitions of POC and PIEPS.

Fourth-quarter 2013 profit included a 120 basis-point negative impact from discontinued merchandise or DM, and a negative 310 basis points due to unfavorable production and shipping variances, as well as inventory adjustments associated with older, discontinued winter seasonal product. This was partially offset by a 70 basis-point net benefit from foreign exchange. Taken together, these factors lowered our fourth-quarter gross margins in 2013 by approximately 360 basis points.

Fourth-quarter SG&A, excluding restructuring and merger and integration costs, was $21.5 million compared to $19.1 million in the year-ago quarter. Increased SG&A in the fourth quarter was primarily related to ongoing investment in our apparel infrastructure and other variable costs associated with the 24% increase in total sales. We also incurred approximately $149,000 in costs associated with what we believe will be the final integration expenses related to POC and PIEPS.

As a percentage of sales, fourth-quarter SG&A decreased to 36% compared to 39% in the same year-ago quarter. As we mentioned in our February 11 call, we expect to realize increasing operating leverage in the business in 2014 and beyond. And plan to continue to lower our operating expenses as a percentage of sales over time.

Fourth-quarter adjusted net income before non-cash items, a non-GAAP term, increased to $3.6 million or $0.11 per diluted share. Compared to $1.6 million or $0.05 per diluted share, in the fourth quarter of 2012.

We continue to de pleased by our working capital requirements, primarily for more efficient sourcing and better inventory management. While total sales for the 12 months ended 2013 grew 15%, total inventory actually decreased by approximately $6.6 million or 11% to $54.1 million. For the full 12 months ended 2013, the Company generated $3.1 million in free cash flow compared to an $8.9 million decrease in free cash flow for the 12 months ended December 31, 2012.

At December 31, 2013, we had $10.3 million outstanding on our $30 million revolving credit line with Zions Bank compared to $20 million at December 31, 2012. Total debt stood at $38 million, which includes $17.2 million of 5% subordinated notes due in 2017. This compares to total debt of $40.5 million at December 31, 2012.

On Friday, February 28, we amended our loan agreement with Zion's Bank to lower our cost and decrease the total size of our facility from $55 million to $40 million. This amendment is consistent with our recent strategic pivot toward organic growth and away from acquisition-led growth.

The original facility contained a $30 million revolving credit, a $15 million term facility and a $10 million unused acquisition facility, the revolving credit remains in place. The term facility has been reduced to $10 million, which is the amount currently drawn on the term note and the acquisition facility has been terminated.

We will no longer pay unused fees on $15 million of available capital that we currently view as unnecessary. The term of these facilities remains unchanged, with the revolving credit having a maturity date of March 8, 2016, and the term facility maturing on March 8, 2023.

You may be aware that on our February 11, 2014 conference call we provided 2014 sales and margin guidance, as well as insights into our strategic direction for 2015 and beyond. To reiterate that guidance, we expect FY14 sales to range between $235 million to $240 million, which would represent an increase of 16% to 18% from our 2013 sales.

For the first half of 2014, the six months ending June 30, 2014, we expect sales to range between $95 million and $100 million, which represents an increase of between 6% and 11% over the same time last year. For the second half of 2014, the six months ending December 31, 2014, we expect total sales to range between $135 million and $145 million, an increase of between 19% and 28% over the second half of 2013.

Finally, recognizing that we view and operate our business in two six-month seasons, and while we have not historically provided quarterly revenue guidance, we expect to realize roughly 55% of our first-half revenue in the first quarter and approximately 45% in the second quarter of 2014. There are a couple of different business activities, such as shipments from factories, warehouses and pre-season start dates that can shift a week or two of business from one quarter to another. However, we believe these will not have a material impact on the spring-summer season or first half.

This first-half guidance reflects currently mild winter weather in places like the Western United States and parts of Northern and Central Europe And the fact that our current seasonal balance is weighted more heavily towards fall-winter than it was in 2013. a larger fall-winter seasonal balance in 2014 is a reflection of our fastest-growing businesses, POC and Black Diamond apparel, which are more heavily fall-winter weighted.

We expect that as POC's road bike line launches and grows and as our spring apparel business becomes larger over time, our seasonal diversification will return to more historical trends. Keep in mind that our spring introduction of POC's road bike line is a limited launch with a scarcity strategy similar to BD apparel last fall.

On a constant-currency basis we are forecasting consolidated gross margins for FY14 to be approximately 39.5% to 40.5%. As you know, BD apparel and POC are both among our fastest-growing and higher gross margin businesses.

As a result over time, we expect these segments of our business to drive higher year over year gross margins for the next five years. As we mentioned on our February 11 call, we expect investments in the form of SG&A to increase up to $12 million during 2014, of which approximately 80% is brand-specific investments and about 20% represents investments in our operating platforms.

At the same time we are planning to invest in approximately $5 million in capital spending across the business, of which approximately 50% is expected to be dedicated to BD apparel and POC, approximately 30% is expected to be reinvested in our operating platform and the balance in maintenance CapEx across the other brands. For context, this level of investment is consistent with the anticipated built-in style and SKU counts planned for 2014, which we discussed in our third-quarter call. Our fall 2013 launch encompassed approximately 25 styles and 440 SKUs, which was on the shelves of approximately 240 of our best retail doors.

Our spring 2014 collection builds the line to approximately 50 styles and 608 SKUs, and will be available in approximately 400 retail doors. Our fall 2014 line raises our total expected commitment to 119 styles and 1,945 SKUs, which we expect to be sold through approximately 800 retail doors. Finally, we are expecting 2014 BD apparel revenue to be about three and a half times our actual 2013 apparel revenue.

This concludes my prepared remarks. Now I'll turn the call back over to Peter. Peter?

Thank you, Aaron. 2013 was an investment year and a year of significant strategic accomplishments, which included the launch of Black Diamond apparel, the establishment of our own distribution business in Japan and the final integration steps for both POC and PIEPS. We expect 2014 a year highlighted by continuing growth and a strategic shift toward our fastest-growing businesses.

We are incredibly proud of everything Black Diamond has accomplished in its first three and a half years as a publicly-owned enterprise. Today both Black Diamond and POC are gaining market share, achieving tremendous public attention and visibility, and in our opinion, poised for compelling multi-year and multi-channel growth stories.

On a constant-currency basis we attributed the positioning in growth opportunity to our continuing ability to design, develop and bring to market innovative new products, and organizational skill sets cultivated over many decades of growth, dating back to our origins more than 50 years ago. We believe we exited 2013 with our healthiest inventory levels in several years and our early spring 2014 bookings are strong. Our lineup of new products for 2014 is highlighted by the spring launch of POC's road bike collection, continued expansion of apparel, and our new JetForce Avalanche technology, which we plan to make available this fall across each of the Black Diamond, POC and PIEPS brands.

We hope those who watched the Winter Olympics in Sochi were as gratified as we were by the incredible media exposure of our POC brand. 134 athletes wore our POC helmets and goggles. Bode Miller, Julia Mancuso and the Swedish ski team are POC-sponsored athletes.

The balance of those athletes chose to wear POC helmets for the safety, design and performance characteristics. We believe that the halo effect from this event will be beneficial to POC for a long period of time. This summer we expect to see significantly more POC exposure due to the Garmin-Sharp pro racing team at the Tour de France, which may be the most widely-viewed worldwide event after the World Cup.

During our February 11 conference call we talked about our strategic pivot. With apparel launch, the POC and PEEPS integration substantially complete and business position for double-digit compounding growth rates over the next several years, we provided several of our important strategic conclusions.

These include, first, Black Diamond apparel and POC independently represent the Company's most significant long-term opportunities for compounded multi-channel, multi-year revenue growth and profitability. Secondly, we prefer to invest our capital resources in the growth and development of our fastest-growing assets rather than acquiring additional brands in a seller's marketplace.

Thirdly, over time e-commerce, direct-to-consumer and some form of still to be defined strategic retail distribution model will play a meaningful role in the development and distribution of all of our brands. Fourth, a long term equipment to BD gear and equipment that we believe and our customers perceive to be brand-defining.

These conclusions form the foundation for a strategic pivot that is already under way. And we believe that when we look back on 2014, will have served as a paradigm changing series of decisions.

We are also in the midst of focussing resources of brand-defining products and categories that we believe will result in long-term operating margin objectives. Secondly, working with Herbert Mines, we are in the early stages of interviewing candidates for a new senior leadership position. We expect this candidate to be hired in 2014.

Thirdly, we remain committed to our specialty retail partners globally. But we believe strongly that our own e-commerce and direct-to-consumer distribution will be an important growth components of our business today in the future. We expect 2014 to be the year in which we define the role of retail within our strategy.

Four, we're prepared to fund retail and e-commerce investments from our existing balance sheet and from our existing operations. We are also exploring strategic alternatives for our Gregory Mountain Products business. Through Rothschild, we have received substantial global interest in the brand.

We believe that this particular initiative has the potential to meaning fully augment our balance sheet with growth capital. We hope to be in a position to tell you more when we report the first quarter of 2014 in early May. In summary, we are excited about the possibility of accelerating Black Diamond's long term growth rates in excess of 20% through incremental investment in our fastest-growth brands.

At this time, Aaron and I would like to open the call for a 30-minute question-and-answer session. Okay, operator?

Thank you, sir. Ladies and gentlemen, we will now begin the question-and-answer session.

(Operator Instructions)

Our first question comes from the line of Sean Naughton with Piper Jaffray. Please go ahead.

Hi, good afternoon. Can you talk a little bit about POC and the success that you obviously, we all saw, with the Winter Olympic athletes? But can you talk a little bit more about where you are in the distribution with that particular brand?

I believe part of the opportunity was some distribution expansion potentially in North America. And then how that brand is performing in Europe versus North America today.

Hi, Sean, this is Peter. Thanks for the question. Let me preface it by saying that we're not, at this point in time, segmenting the businesses up and reporting by business.

That said, I will share with you that, yes, we have been expanding doors both for ski accounts in North America, as well as now with the road bike launch. We had targeted somewhere between 100 and 200 premiere road bike shops, racing shops, worldwide to place the new AVIP line in this spring. Those goals have been achieved.

So doors are expanding. Growth is solid. And the number of doors being opened has expanded in both skiing and in bike.

Okay. That's great. And then on the core Black Diamond business, on the hard goods side, excluding apparel.

I'm not talking about POC and PIEPS, but how do you expect that business to grow in 2014? And just for modeling purposes, how should we think about the growth of that hard goods category at Black Diamond over time?

Okay, Sean, BD has grown its business at -- I think at the time we did this deal in and since seeing you, we've talked about our historical CAGR. And that at the time that we went public BD had had a CAGR that was in the neighborhood of 12.5%, 13%, for the 20 years previously. And we remain quite bullish on BD gear and equipment's growth prospects on a global basis.

It's not always consistent season to season, just depending in part upon what are the products we are launching, little bit on how weather is, and where we're investing into our various businesses. But we remain, as I said, in my remarks, we remain very committed to BD, as BD gear and equipment, as a both a vibrant platform for apparel, as well as a steady growth driver for the business.

Okay. And then lastly a clarifying question. How much of a benefit, Aaron, do you think you'll get from the unused acquisition facility with Zion in 2014? How much did that cost you in 2013?

Yes, good question, Sean. We've got to map that out a little bit more closely, but, obviously, that was reflected in our interest expense for the overall year. We incurred unused credit fees about 40 basis points to 60 basis points, and so right around $100,000 or so.

Okay. Thank you.

Thank you. Our next question comes from the line of Dave King with Roth Capital Partners. Please go ahead.

Hi, good afternoon, gentlemen. This is Joe Bess for Dave.

First question is on the SG&A line, as we think about the $12 million investment going forward, can you attribute what percentage of that increase will be from R&D investments? And how does that differ year over year?

Yes, so the way that we've talked about this is that 80% of that incremental investment will be dedicated to the brands. Now that is going to manifest itself in a variety different ways, whether it be R&D, marketing, sales efforts, et cetera. It is really focussed on continuing to enhance the overall brand awareness and continue with our overall growth initiatives.

Great. And then thinking about, how has sell-through been thus far? I know that we've talked just a few weeks ago, but any sort of a update as to how things have gone over the last couple of weeks would be nice.

Yes, we don't take the temperature of retailers on a day-to-day or even a week-to-week basis. But what I will say relative to apparel is that we sold out the fall 2013 line.

Our customers are selling through the product now. And we're very pleased with how we have ended up. We're shifting spring 2014 right now. We know the product is beginning to move.

That is the first feedback, though it is early, the first reports are very good. And we believe that what's in the marketplace is down to a pretty modest amount at this point in time.

So that's what we know. But not until the winter is really over could we give you a clearer report. As you know, it's dumping right now in the northeast and hopefully there is a little bit here left for those who need it.

Okay, great. Thank you for that. The last question is, it sounds like you have some exciting things in the pipeline for your e-commerce business.

Is there any sort of milestones that we should be looking for in 2014 as you guys start to invest there? Anything along that lines would be helpful as well. Thanks.

I don't think there is anything specific to point out. As you know, we made significant investments in 2013 in our e-commerce platform.

So that it was a new dynamic platform with demand wear, a new skin for BD, a new skin for Gregory. Dynamic multi-lingual, multi-currency. And we got BD, BD apparel and Gregory on to that.

I think that's where we're focused now. Is now that this is up and running, it is working well for us. We saw good double-digit growth on it last year. We're going to continue to drive it forward in the same manner in 2014.

Okay, great. And should we be expecting the e-com business sales growth to be outpacing your organic growth rate that you see for 2014? Is that a safe assumption?

Yes. This is Aaron.

Obviously BD apparel and POC continue to be our primary focuses. But e-commerce will definitely help in terms of overall growth rates. That is an opportunity for us to continue to grow the business.

Okay, great. Thanks for the color.

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

Good afternoon, guys. Thanks for the question. Peter, I wanted to ask you on the strategic pivot.

Looking into the multiple avenues that could unfold over the next few months and quarters, what, assuming some of these assets sold, let's assume it's Gregory, what would you use that cash for? What are your plans on the reallocation of those funds that you had received from a purchase of that magnitude? I'm sorry, a sale of that magnitude.

Sure, great question. To elaborate a little bit on the remarks I made here, that both direct-to-consumer in the online space and retail, are both two channels that, as you know, can soak up and take a fair amount of investment, and also give you a very nice return on that.

But those are the two areas that, should we successfully monetize at a good price some or all of Gregory's assets, those are specifically the two areas, more than any, that we would focus those resources on. There could be some others, but those are the two I think we should highlight.

I assume that you're going to be investing in them anyway, so would incremental capital to devote to those two areas, call it D to C for simplicity, would that fast-forward some of your capabilities? Would that enable you to do things at a quicker pace than you would have expected?

I'm trying to understand what the advantage would be to you that you would get from the sale. Is it a timing thing? Is it ability to have more points of display at retail sooner? I'm really trying to see what the benefit and the upside is of having the sale consummated.

Yes, I appreciate the question, good question.

What we have been guiding for, is right now we're saying that as we look forward with this business, we have been talking about a 15% to 20% CAGR for the business as we look forward. This year we're talking about 16% to 18%. But 15% to 20% is the range.

As I shared today, if we could monetize some or all of Gregory's assets, we believe that we could take that growth rate up over 20%. It would be done by investing at a higher level and a quicker cadence into especially D to C and retail.

Again, there would be other places within both POC and BD apparel. I think we could certainly make good use of those investments. That's why we are sharing that we believe we could take the growth rate up over 20% if we were successful in doing that.

And the timing of that bump up in the growth rate, would that be a 2015 event? Or 2016 and beyond?

I think, at this point, we're going to have to see if we are successful in monetizing some or all of Gregory's assets. When does that happen? And at that point, we can give you better color on that.

But until if and when that happens, I think it is just too academic to be attempting to put a time frame on that. Because, if and when it happens, we'll have a great impact as to when we would begin to see the results of that.

Fair enough. Final question, for Aaron. You mentioned on the SG&A expenditure, the incremental SG&A this year, up to $12 million.

What's the bottom range of that up to $12 million? Are we thinking, is it $6 million to $12 million? What's prohibiting or what is the swing factor on the deltas between the top and the bottom of the range?

There's a couple of different dynamics at play. I guess it comes back to, once again, concerning that 80% of this investment will be going towards the brands, I just want to make sure that we continue to remind ourselves that is where our focus is.

It will be focused on marketing, sales force, R&D, e-com and furthering our distribution channels. For a range standpoint, I'd call it anywhere from $10 million to $12 million. Call it around that range.

Okay. That's very helpful. Thanks, guys, and good luck.

Thank you. Our next question comes from the line of Andrew Burns with DA Davidson. Please go ahead.

Thanks and good afternoon.

I understand how direct-to-consumer will be an important part of your growth strategy in the coming years. I was curious if you see this strategic pivot as a manifestation of your apparel strategy? Or is it also a function of your core equipment business? And if that equipment business is part of that decision, could you discuss how that side of the business is evolving? Thank you.

Hi, Andrew, it is Peter here. I'll answer that. Let me put it this way. Clearly apparel, more than anything, is the catalyst to really invest in the direct-to-consumer business.

With apparel it is rare that you get -- it is almost impossible to get a single retailer to take that whole line in and highlight it and show it in the way that you want. With gear and equipment, you're often in a better position to get a large segment, and sometimes all of your line, on to somebody's website.

But with apparel, in having multiple seasons, wanting to show it in the way that we want to show it and tell our brand story, which is at more important to apparel than it is to gear and equipment, that is why we are so committed to the direct-to-consumer component of this. And building up a pretty robust business there, because we believe it is integral to the vibrant future of apparel.

At the same time, as we've seen this year, certainly the gear and equipment business benefits from that. But my point is, and our point is, we wouldn't have made this level of investment for just the gear and equipment.

We have strong retail partners may even do a good job with gear and equipment. So we would not have been able to rationalize the investment.

Once you put on apparel to that, as well as our other brands are all -- Gregory is now beginning to benefit from that. And we do intend to get our other brands up on that.

We do sell direct-to-consumer with POC. We have seen growth on that. It is a more basic site. We have not put them on the site yet.

But we do intend to do that in the not too distant future. Again, the driver first and foremost is apparel. And then the gear and equipment benefits in a meaningful way.

Okay, that is helpful, thanks.

I hoping you could speak at a high level around the potential products that could emerge from POC's collaboration with Volvo. Is the idea of an electronic device for cars for cyclist detection something that could happen within a three-year time horizon? Any color would be helpful. Thanks.

Andrew, great question.

You're talking about the right kind of products, as to why we are working together with Volvo. But until we're ready to make a specific announcement with those guys, I'm going to have to refrain from saying anything more than you're certainly talking about the right kind of products.

That's where we believe there are opportunities. But we're not ready, yet, to give a specific product launch date or product.

Okay. Thanks.

Yes.

Thank you. And our next question comes from the line of Mark Smith with Feltl and Company. Please go ahead.

Good afternoon, guys.

Quickly can you just give us any more insight into PIEPS, in how you feel about current results in that business? And then plans on what's being done to improve results here over the next year or two?

Hi, Mark, Peter. We feel very good at this point about PIEPS. With any acquisition you do, there is always a significant amount of effort involved in the integration part to that acquisition.

You come across some things, at times, that you weren't overly enthusiastic about, as of the Vector, which we've already talked about. But PIEPS ended the fourth quarter very strong.

If you look at any market data out of Europe, they continue to be one of the leaders in avalanche transceiver technology. We certainly were able to accelerate the growth of PIEPS here in North America.

The DSP and DSP Pro, the two new products that launched, did really well. We believe, in 2014, we're going to see very nice growth out of PIEPS, primarily in avalanche transceiver technology, and that will be throughout the world.

The product has good margin. Obviously it is not a large business. You know what it was when we acquired it. But it is integrated now, it's running on all six cylinders. It's got good orders coming in for fall 2014.

And I think as important, if not even more important, was the very critical role that PIEPS played in partnering the Black Diamond R&D team onto electronics and compliance components of the JetForce air bag, which we have gotten just an incredible response around the world to. It is really the next paradigm.

And we wouldn't be here as a global set of Companies, POC, PIEPS, Black Diamond, if it had just been Black Diamond on its own. It really needed the partnership of PIEPS. And having all three brands now selling it and getting a strong response has been very gratifying.

It is not on the scale of a POC or a scale of a Gregory. But from the standpoint of growth, profitability, providing good technology, and also very strong relationships into the professional user community in the Austrian-German markets where it is dominant, that's all been very gratifying.

We're pleased where we're at with it. We believe it was a super-worthwhile acquisition for us to do. And we've got a year of big investment of time and effort behind us in 2013.

Thank you.

Thank you. And our next question comes from Joseph Altobello with Oppenheimer. Please go ahead.

This is Morey in for Joe.

My first question is, you talked about the 80% of the $12 million being invested in brands. Of that 80%, would you be able to tell me about how much is going to go into apparel?

This is Aaron.

No. Similar to how we don't break out the different business results of our brand at the revenue line, we also don't break that out in terms of investment or SG&A spend.

Okay. My next question is, what do you expect FX to be on the top and bottom line for 2014?

Sorry, can you say that again?

Yes. What do you expect FX to be on the top and bottom line for this upcoming year.

The guidance that we provided you with was based off of a constant-currency basis. Obviously as we go throughout the year, and as FX changes up or down, that will have its impacts. But our guidance is based off a constant currency view.

Okay. My next question is, what was CapEx for this year? And then what do you expect it to be for next year?

CapEx this year was right around $4.4 million and our guidance for 2014 CapEx is $5 million.

Thanks. My last question is, and I may have missed this, but now that you've launched your BD apparel line, how has your view of the opportunity, the growth or the profitability, with this business changed?

Not at all, other than it's been very affirming that the retail base embraced it. That the consumers who acquire it have given us back great kudos and accolades.

That the spring line was over sold. The fall 2014 has been expanded to nearly 800 doors. That the line was very well received by both consumers who saw it, pros who got to see it, as well as the trade.

And we are as upbeat and positive about the opportunities for apparel as we have ever been. I will just leave it at that. We think it is a great opportunity for the business and it's proving to be.

Okay. Thank you. Appreciate your time.

(Operator Instructions)

And our next question comes from the line of Molly Iarocci with Stifel. Please go ahead.

Hi, guys. This is Molly in for Jim.

Just wondering if you can give us any color on POC apparel? And when you're considering a launch?

Sure, hi, Molly, Peter here.

The POC apparel actually is launching for spring 2014. I do not believe it's been shipped yet. I believe we start shipping around April 1. That is within a couple of weeks of what we had planned.

And it consists of -- it's technical apparel for serious road riders. Everything from water-proof garments to bibs to just pants, to various tops, et cetera.

All following the strategic positioning of a AVIP, attention visibility interaction and protection. Trying to provide a higher level of visibility and protection for a rider to avoid the number one cause of injury in bike riding, which is getting hit by cars.

So we're about a month out from -- around a month out from shipping that. But pretty excited about it. And as mentioned earlier in this call, the response globally has been very good to the launch of the full AVIP line, which is the apparel, the helmet and the electronics device.

Are you guys planning anything for the fall with the POC brand?

With the POC brand.

Apparel.

We're always planning stuff for each season. POC is absolutely a two-season brand, being both in cycle and snow.

And we haven't yet announced what is -- excuse me -- in the fall line we just came out of the trade shows. We've got new race helmets, we've got new gloves, we've got new goggles. There is a really beautiful new line of POC for fall 2014 that has been unveiled both at the SIA show in Denver and ISPO in Munich, Germany. Very well received, beautiful.

All of our brands, POC, PIEPS, Gregory, Black Diamond, they're always going to be driven by, first and foremost, innovative new products based on a higher level of engineering, and beautiful design. Those will always drive the brands supported by very strong marketing and solid sales.

All right. Thanks.

And then couple of housekeeping items for you, Aaron. Wondering if you can quantify the benefit to the fourth quarter from the transition of the Japanese distributor?

That benefit that we've received from the conversion of the Japanese distributor in-house has been benefiting us all year and has been part of our overall operations. But consistent with our brands and how we discussed the overall operations, we're not going to break that down specifically related to that transition.

Okay. And then I'm also curious how you guys are modeling stock-based compensation for FY14.

Yes, it's going to be more consistent with what you saw in 2012.

Okay.

Yes.

That is what I was wondering, okay. Great, thank you.

Thank you, Molly.

At this time, this concludes our question-and-answer session. I would now like to turn the call back over to Mr. Metcalf for closing remarks.

All right. Thank you. We look forward to addressing you next on our first-quarter call, which we expect in early May. Thanks, everyone, for joining us today.

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