Industry Analysis Purpose: To help you understand and compare the performance of two companies in the same industry. Go to the Columbia Sportswear Company Annual Report located in Appendix A. Now access the 2016 Annual Report for Under Armour, Inc. For instructions on how to access the report online, see the Industry Analysis in Chapter 1. Requirement 1. By reviewing the financial statements of both companies, can you determine which basis of accounting, cash or accrual, each of the companies used? How did you determine this? If one of the companies used the cash basis and the other used the accrual basis, would it affect your ability to compare the two companies? Explain your answer. Appendix A CONSOLIDATED BALANCE SHEETS thousands) Current Assets: ASSETS December 31, 2015 2016 Cash and cash equivalents... Short-term investments. Accounts receivable, net (Note 5).. Inventories. Prepaid expenses and other current assets. Total current assets.. $ 551,389 $ 369,770 472 629 333,678 371,953 487.997 473,637 38,487 33,400 1,412,023 1,249,389 Property, plant, and equipment, net (Note 6). 279,650 291,687 Intangible assets, net (Note 7) 133,438 138,584 Goodwill (Note 7)... 68,594 68,594 Deferred income taxes (Note 10). 92,494 76,181 Other non-current assets. 27,695 21,718 Total assets... $2,013,894 $ 1,846,153 LIABILITIES AND EQUITY Current Liabilities: Short-term borrowings (Note 8) Accounts payable.. Accrued liabilities (Note 9). Income taxes payable (Note 10) Total current liabilities... Note payable to related party (Note 22) Other long-term liabilities (Notes 11, 12) Income taxes payable (Note 10) Deferred income taxes (Note 10) 1,940 215,048 217,230 142,158 141,862 5,645 5,038 362,851 366,070 14,053 15,030 42,622 40,172 12,710 8,839 147 220 C Deferred income taxes (Note 10). Other non-current assets. Total assets. LIABILITIES AND EQUITY Current Liabilities: Short-term borrowings (Note 8). Accounts payable.. Accrued liabilities (Note 9)... Income taxes payable (Note 10) Total current liabilities.. Note payable to related party (Note 22) Other long-term liabilities (Notes 11, 12). Income taxes payable (Note 10) Deferred income taxes (Note 10) Total liabilities...... Commitments and contingencies (Note 13) Shareholders' Equity: Preferred stock; 10,000 shares authorized; none issued and outstanding.. Common stock (no par value): 250,000 shares authorized; 69,873 and 69,277 issued and outstanding (Note 14). Retained earnings Accumulated other comprehensive loss (Note 17).. Total Columbia Sportswear Company shareholders' equity Non-controlling interest (Note 4).. Total equity... Total liabilities and equity See accompanying notes to consolidated financial statements 92,494 76,181 27.695 21,718 $2,013,894 S 1,846,153 S 1,940 215,048 217,230 142,158 141,862 5,645 5,038 362,851 366,070 14,053 15,030 42,622 40,172 12,710 8,839 147 229 432,383 430,340 53,801 34,776 1,529,636 1,385,860 (22,617) (20,836) 1,560,820 1,399,800 20,691 1,581,511 16,013 1,415,813 $ 2,013,894 $ 1,846,153 Appendix A See accompanying notes to consolidated financial statements CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share amounts) 2016 Year Ended December 31, 2015 2014 Net sales Cost of sales Gross profit. Selling, general and administrative expenses Net licensing income. $ 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 Income from operations 256,508 249,721 198,844 Interest income, net... 2,003 1,531 1,004 Interest expense on note payable to related party (Note 22). (1,041) (1,099) (1,053) Other non-operating expense (572) (2,834) (274) Income before income tax.. 256,898 247,319 198,521 Income tax expense (Note 10) (58,459) (67,468) (56,662) 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): $ 191,898 $ 174,337 S 137,173 198,439 179,851 141,859 6,541 5,514 4,686 Basic. Diluted Weighted average shares outstanding (Note 16): Basic Diluted S 2.75 $ 2.48 S 2.72 1.97 2.45 1.94 69,683 70,162 69,807 70,632 71,064 70,681 Diluted See accompanying notes to consolidated financial statements CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (In thousands) 70,681 Net income Other comprehensive loss: Unrealized holding gains (losses) on available-for-sale securities (net of tax effects of $0, ($3), and ($5), respectively). 2016 Year Ended December 31, 2015 2014 $ 198,439 $ 179,851 $ 141,859 (2) (6) 10 Unrealized gains (losses) on derivative transactions (net of tax effects of ($1,922), ($849) and ($1,507), respectively).. 843. (2,908) 7.751 Foreign currency translation adjustments (net of tax effects of ($347), ($760) and $1,023, respectively) Other comprehensive loss.... Comprehensive income.. Comprehensive income attributable to non-controlling interest. Comprehensive income attributable to Columbia Sportswear Company. $ 190,117 S 137,668 $117,646 (4,485) (34,887) (27,789) (3,644) (37,801) (20,028) 194,795 142,050 121,831 4,678 4,382 4,185 See accompanying notes to co statements 566 9ca2d03f57e095a-P7001014419000 Appendix A 000001AD72?locale=null&key=32184 CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) Year Ended December 31, 2016 2015 2014 Cash flows from operating activities: Net income. S 198,439 $ 179,851 S 141,859 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization. 60,016 56,521 54,017 Loss on disposal or impairment of property, plant, and equipment.... 4,805 5,098 481 Deferred income taxes (19,178) (11,709) (6.978) Stock-based compensation... 10,986 11,672 11,120 Excess tax benefit from employee stock plans. (7,873) (4,927) Changes in operating assets and liabilities: Accounts receivable. 36,710 (40,419) (31,478) Inventories (18,777) (103,296) (62,086) Prepaid expenses and other current assets (5,452) 4,411 (4,869) Other assets... (5,948) (2,524) 4.291 Accounts payable 1,483 11,418 41,941 Accrued liabilities. 4,847 (2,017) 35,051 Income taxes payable 4,768 (10,994) 1,166 Other liabilities. 2,468 4,966 6,195 Net cash provided by operating activities. 275,167 95,105 185,783 Cash flows from investing activities: Acquisition of business, net of cash acquired (188,467) Purchases of short-term investments. (21,263) (38,208) (48,243) Sales of short-term investments... 21,263 64,980 112,895 Capital expenditures.... (49,987) (69,917) (60,283) Proceeds from sale of property, plant, and equipment.. 97 144 71 Net cash used in investing activities. (49,890) (43,001) (184,027) Cash flows from financing activities: Proceeds from credit facilities.. 62,885 53,429 $2,356 Repayments on credit facilities (64,825) (51.479) (52,205)