Question

Columbia Sportswear Company’s financial statements are presented in Appendix B.


Financial statements of VF Corporation are presented in Appendix C.


(b)

What conclusions concerning the management of cash can be drawn from the free cash flow data?

COLUMBIA SPORTSWEAR COMPANY CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share amounts) Year Ended December 31, 2016 2015 2014 $ 2.377,045 $ 2,326,180 $ 2,100,590 1,266,697 1,252,680 1,145,639 1,110,348 1,073,500 954,951 864,084 831,971 763,063 10,244 8,192 6,956 256,508 249,721 198,844 2,003 1,531 1,004 (1,041) (1,099) (1,053) (572) (2,834) (274) 256,898 247,319 198,521 (58,459) (67,468) (56,662) 198,439 179,851 141,859 6,541 5,514 4,686 $ 191,898 $ 174,337 $ 137,173 ............. Net sales ......... Cost of sales .......... Gross profit ............... Selling, general and administrative expenses .. Net licensing income........ Income from operations .. Interest income, net. Interest expense on note payable to related party (Note 22). ........ ... Other non-operating expense ..... Income before income tax Income tax expense (Note 10) ........ Net income ... Net income attributable to non-controlling interest .. Net income attributable to Columbia Sportswear Company Earnings per share attributable to Columbia Sportswear Company (Note 16): $ $ $ 2.75 2. 72 2.48 .45 1.97 1.94 2 Basic..... ....... Diluted ................................................... Weighted average shares outstanding (Note 16): Basic........ Diluted ......... 69,683 70,632 70,162 71,064 6 9,807 70,681 See accompanying notes to consolidated financial statements

Answer 1

Complete Cash flow Analysis of Columbia Sportswear Company and VF Corporation .

As per Data provided in the Columbia Financial Report , Company is doing excellent in term of Operating Margin , revenue growth and managing cash flow and generating +ve internal cash flow . As compared with 2015 , Cash balance increased by 49% . Also company reduced Account receivable balance significantly reduced by 10% . concern is Inventory balance is increased but not impacted overall Working capital block

Another good point is company clear short term borrowing amount in 2016 .

As per Cash flow point – Company keep on paying dividend , which is really good one . Also company completely manage Long term loan . As per cash flow , company proceeds from credit facility and almost paid same amount . This represents that company is completely managing working capital and maintained good amount paid towards Dividend.

Company also manage to reduced Interest expenses in PNL

Also important point to note that company generating in house cag with help of reduction in Account receivable balance and utilised money to for further enhancement – capex . This prove that company having enough Free cash flow to maintain payment of Dividend , capex , manage working capital . Also Company during the year almost same amount of money raised through Shot term Investment as well as pay of also almost same amount of money.

After all movement of Operating , Investment and financial cash , closing balance of cash and cash equivalent of company in Year 2016 $ 551389 k , Where as 2015 it was $ 369770 k

Complete cash flow analysis VF Corporation – VFO corporation is slightly lose / down in revenue in 2016 as compared to 2015 ( down by $ 13 k ) . This shortfall in revenue impacted bottom line of the company . Also company is overburden with “ Interest cost in 2016 . Interest expenses has been increased by 7% , this is mainly due to High depended on Long term loan .

On Balance Sheet – Working Capital position – Inder current asset , company definitely reduced significant balance in Account receivable as well as significant reduction in short term borrowing . Definitely above points are interesting but also noticed that Long term loan amount has increased significantly .

As per cash flow position ,ion current year , company made huge amount of purchase relates to “ Purchase of Treasury Stock” .

Purchase of treasury stock is always good for company because they try to reduce less dependent on Bank borrowing .

Good point is that company managing internal fund as well as outside fund and with help of this fund management , company keep on paying dividend also . This is really good point for company as well as their stakeholders .

Overall basis , Company closing cash balance $1227 k in 2016 vs $ 945k in 2015 .

But VF corporation still managing with their long term loan manage and they are trying to avoid dependency on Bank with help of majo repurchase of Stock .

From profitability point of VF is still down with revenue as well as margin pressure .