Columbia Sportswear 2002 Annual Report Download - page 42

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COLUMBIA SPORTSWEAR COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
cost of sales when the underlying hedged transaction affects earnings. Unrealized derivative gains and losses
recorded in current and non-current assets and liabilities and amounts recorded in other comprehensive income
are non-cash items and therefore are taken into account in the preparation of the consolidated statement of cash
flows based on their respective balance sheet classifications.
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, as 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):
2002 2001 2000
Net income, as reported ............................................. $102,518 $88,824 $58,611
Adjustment to net earnings for:
Pro forma stock-based compensation expense, net of tax ................. 6,611 3,852 2,176
Proformanetincome ............................................... $ 95,907 $84,972 $56,435
Earnings per share—basic
As reported ..................................................... $ 2.60 $ 2.27 $ 1.52
Proforma ...................................................... 2.43 2.18 1.46
Earnings per share—diluted
As reported ..................................................... $ 2.56 $ 2.23 $ 1.48
Proforma ...................................................... 2.39 2.13 1.42
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. Through cooperative advertising programs, the Company
reimburses its retail customers for some of their costs of advertising the Company’s products. The Company
records these costs in selling, general and administrative expense at the time when it is obligated to its customers
for the costs. This obligation may arise prior to the related advertisement being run. Advertising expense was
$36,273,000, $35,011,000 and $27,343,000 for the years ended December 31, 2002, 2001, and 2000,
respectively.
Product warranty:
The Company’s outerwear and Sorel products carry lifetime 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
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