Columbia Sportswear 2014 Annual Report Download - page 58

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COLUMBIA SPORTSWEAR COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
54
Shipping and handling costs:
Shipping and handling fees billed to customers and consumers are recorded as revenue. The direct costs associated
with shipping goods to customers and consumers are recorded as cost of sales. Inventory planning, receiving and handling
costs are recorded as a component of SG&A expenses and were $59,561,000, $56,891,000 and $59,212,000 for the years
ended December 31, 2014, 2013 and 2012, respectively.
Stock-based compensation:
Stock-based compensation cost is estimated at the grant date based on the award’s fair value and is recognized as
expense over the requisite service period using the straight-line attribution method. The Company estimates stock-based
compensation for stock options granted using the Black-Scholes option pricing model, which requires various highly
subjective assumptions, including volatility and expected option life. Further, the Company estimates forfeitures for stock-
based awards granted which are not expected to vest. For restricted stock unit awards subject to performance conditions,
the amount of compensation expense recorded in a given period reflects the Company's assessment of the probability of
achieving its performance targets. If any of these inputs or assumptions changes significantly, stock-based compensation
expense may differ materially in the future from that recorded in the current period. Assumptions are evaluated and revised
as necessary to reflect changes in market conditions and the Company’s experience. Estimates of fair value are not intended
to predict actual future events or the value ultimately realized by people who receive equity awards. The fair value of
service-based and performance-based restricted stock units is discounted by the present value of the estimated future stream
of dividends over the vesting period using the Black-Scholes model.
Advertising costs:
Advertising costs are expensed in the period incurred and are included in SG&A expenses. Total advertising expense,
including cooperative advertising costs, was $110,109,000, $78,095,000 and $76,714,000 for the years ended December
31, 2014, 2013 and 2012, 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 are included in expenses because the Company receives
an identifiable benefit in exchange for the cost, the advertising may be obtained from a party other than the customer, and
the fair value of the advertising benefit can be reasonably estimated. Cooperative advertising costs were $8,056,000,
$6,032,000 and $7,851,000 for the years ended December 31, 2014, 2013 and 2012, respectively.
Recent Accounting Pronouncement:
In May 2014, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No.
2014-09, Revenue from Contracts with Customers: Topic 606. This ASU outlines a single comprehensive model for entities
to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition
guidance. This accounting standard is effective for annual reporting periods beginning after December 15, 2016, including
interim reporting periods within that reporting period. Early adoption is not permitted. The Company is currently evaluating
the impact this accounting standard will have on the Company's financial position, results of operations or cash flows.
NOTE 3—BUSINESS ACQUISITION
On May 30, 2014, the Company purchased 100% of the equity interest in prAna Living LLC (“prAna”) for
$188,467,000, net of acquired cash of$4,946,000. PrAna is a lifestyle apparel brand sold through approximately 1,400
select specialty and online retailers across North America, as well as through five company-owned retail stores, an e-
commerce site and direct-mail catalogs. The acquisition of prAna strengthens and diversifies the Company's brand portfolio
and generally offsets some of the more seasonal sales effects found within existing Columbia brands. The acquisition was
funded with cash on hand.