Columbia Sportswear 2004 Annual Report Download - page 49

COLUMBIA SPORTSWEAR COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
In December 2004, the FASB issued FASB Staff Position (“FSP”) No. 109-1, “Application of FASB
Statement No. 109, Accounting for Income Taxes, to the Tax Deduction on Qualified Production Activities
Provided by the American Jobs Creation Act of 2004,” and FSP No. 109-2, “Accounting and Disclosure
Guidance for the Foreign Earnings Repatriation Provision within the American Jobs Creation Act of 2004.”
These staff positions provide accounting guidance on how companies should account for the effects of the
American Jobs Creation Act of 2004 (the “Act”) that was signed into law on October 22, 2004. FSP No. 109-1
states that tax relief (special tax deduction for domestic manufacturing) from this legislation should be accounted
for as a special deduction instead of a tax rate reduction. FSP 109-2 gives a company additional time to evaluate
the effects of the legislation on any plan for reinvestment or repatriation of foreign earnings for purposes of
applying SFAS No. 109. The Company is evaluating all U.S. Treasury guidance as well as awaiting anticipated
further guidance. The Company expects to complete this evaluation within a reasonable amount of time after
additional guidance is published. The Company estimates that the range of possible amounts considered for
repatriation under this provision is between $0 and $150 million. The potential range of income tax is subject to
various factors and will become determinable once further guidance has been issued.
In November 2004, the FASB issued SFAS No. 151, “Inventory Costs—An Amendment of Accounting
Research Bulletin (“ARB”) No. 43, Chapter 4.” SFAS No. 151 requires abnormal amounts of inventory costs
related to idle facility, freight, handling costs and wasted material (spoilage) expenses to be recognized as current
period charges. In addition, SFAS No. 151 requires that the allocation of fixed production overheads to the costs
of conversion be based on the normal capacity of the production facilities. SFAS No. 151 is effective for the
fiscal years beginning after June 15, 2005. The Company believes that the adoption of this statement will not
have a material impact on its financial position, results of operations or cash flows.
NOTE 3—ACQUISITION
On March 31, 2003, the Company acquired Mountain Hardwear, Inc. (“Mountain Hardwear”) for aggregate
consideration of approximately $36 million, including approximately $30 million in cash and $6 million of debt
assumption. Mountain Hardwear, which is based in Richmond, California, designs, develops and markets
technically advanced equipment and apparel for outdoor enthusiasts and professionals. The acquisition was
accounted for under the purchase method of accounting and the results of operations of Mountain Hardwear have
been recorded in the Company’s consolidated financial statements beginning on April 1, 2003. The cost of the
acquisition was allocated on the basis of the estimated fair value of the assets acquired and the liabilities
assumed. The fair values of assets and liabilities acquired are presented below (in thousands):
Cash .............................................................................. $ 370
Accounts receivable .................................................................. 6,236
Inventory .......................................................................... 8,600
Prepaids and other assets .............................................................. 19
Property, plant and equipment .......................................................... 440
Intangible assets ..................................................................... 28,357
Total assets acquired ............................................................. 44,022
Accounts payable and accrued liabilities .................................................. 1,181
Deferred tax liabilities ................................................................ 6,193
Debt .............................................................................. 6,413
Total liabilities assumed ........................................................... 13,787
Net assets acquired ............................................................... $30,235
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