Columbia Sportswear 2003 Annual Report Download - page 47

COLUMBIA SPORTSWEAR COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Stock-based compensation:
The Company has elected to follow the accounting provisions of Accounting Principles Board Opinion No. 25
(“APB 25”), “Accounting for Stock Issued to Employees”, for stock-based compensation and to furnish the pro forma
disclosures required under SFAS No. 148, “Accounting for Stock-Based Compensation – Transition and Disclosure.”
No stock-based employee compensation cost is reflected in net income because all options granted under those plans
had an exercise price equal to the market value of the underlying common stock on the date of the grant.
The following table illustrates the effect on net income and earnings per share if the Company had applied
the fair value recognition provisions of SFAS No. 123 to stock-based compensation (in thousands, except per
share amounts):
2003 2002 2001
Net income, as reported ............................................ $120,121 $102,518 $88,824
Add: Stock-based employee compensation expense included in reported
netincome,netoftax ........................................ — — —
Deduct: Total stock-based employee compensation expense determined
under fair value based method for all awards, net of tax ............. 8,585 6,611 3,852
Proformanetincome .............................................. $111,536 $ 95,907 $84,972
Earnings per share—basic
As reported .................................................. $ 3.01 $ 2.60 $ 2.27
Proforma ................................................... 2.79 2.43 2.18
Earnings per share—diluted
As reported .................................................. $ 2.96 $ 2.56 $ 2.23
Proforma ................................................... 2.75 2.39 2.13
The effects of applying SFAS No. 123 in this pro forma disclosure are not necessarily indicative of future
amounts.
Advertising costs:
Advertising costs are expensed as incurred and are included in selling, general and administrative expenses.
Total advertising expense, including cooperative advertising costs, was $43,221,000, $36,273,000 and
$35,011,000 for the years ended December 31, 2003, 2002 and 2001, respectively.
Through cooperative advertising programs, the Company reimburses its wholesale customers for some of
their costs of advertising the Company’s products based on various criteria, including the value of purchases
from the Company and various advertising specifications. Cooperative advertising costs were $9,328,000,
$7,866,000 and $8,870,000 for the years ended December 31, 2003, 2002 and 2001, respectively.
Product warranty:
Some of our products carry limited warranty provisions for defects in quality and workmanship. A reserve is
established at the time of sale to cover estimated warranty costs based on the Company’s history of warranty
repairs and replacements and is recorded in cost of sales. A summary of accrued warranties for the years ended
December 31 is as follows (in thousands):
2003 2002 2001
Balance at beginning of period ....................... $7,800 $7,475 $5,780
Chargedtocostsandexpenses ........................ 3,834 2,783 4,094
Claims settled ..................................... (2,992) (2,458) (2,399)
Balance at end of period ............................. $8,642 $7,800 $7,475
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