Your answer is correct. Based on the information in these financial statements, compute the 2018 return on common stockholders' equity, debt to assets ratio, and return on assets for each company. (Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45). Round answers to 1 decimal places, e.g. 15.2%.) Columbia Sportswear Company Under Armour, Inc. Return on common stockholders' equity 16.5 % -2.3 % Debt to assets 28.6 % 52.5 % Return on assets 12 % -1.1 % Compute the payout ratio for each company. (Do not leave any answer field blank. Enter O for amounts. Round answers to 1 decimal places, e.g. 15.2%.) Columbia Sportswear Company Under Armour, Inc. Payout ratio % % Which pays out a higher percentage of its earnings? pays out a higher percentage of its earnings. Under Armour, Inc. Columbia Sportswear Company Columbia Sportswear Company Under Armour, Inc. Return on common stockholders' equity 16.5% (2.3%) Debt to assets 28.6% 52.5% Return on assets 12.0% (1.1%) What conclusions concerning the companies' profitability can be drawn from these ratios? Which company relies more on debt to boost its return to common shareholders? 9,876 COLUMBIA SPORTSWEAR COMPANY CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share amounts) Year Ended December 31, 2018 2017 2016 Net sales $2,802,326 $2,466,105 $2,377,045 Cost of sales 1,415,978 1,306,143 1,266,697 Gross profit 1,386,348 1,159,962 1,110,348 Selling, general and administrative expenses 1,051,152 910,894 864,084 Net licensing income 15,786 13,901 10,244 Income from operations 350,982 262,969 256,508 Interest income, net 4,515 2,003 Interest expense on note payable to related party (Note 22) (429) (1,041) Other non-operating expense (141) (321) (572) Income before income tax 360,717 266,734 256,898 Income tax expense (Note 11) (85,769) (154,419) (58,459) Net income 274,948 112,315 198,439 Net income attributable to non-controlling interest 6,692 7,192 Net income attributable to Columbia Sportswear Company $ 268,256 $ 105,123 $ 191,898 Earnings per share attributable to Columbia Sportswear Company (Note 17): Basic $ 3.85 S 1.51 $ 2.75 Diluted 3.81 1.49 2.72 Weighted average shares outstanding (Note 17): Basic 69,614 69,759 69,683 Diluted 70,401 70,453 70,632 6,541 IASPORIS WEAR COMPANY CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (In thousands) Year Ended December 31, 2018 2017 2016 $274,948 $112,315 $198,439 (2) 843 Net income Other comprehensive income (loss): Unrealized holding losses on available-for-sale securities (net of tax effects of $17, $o, and $o, respectively) Unrealized gains (losses) on derivative transactions (net of tax effects of $(7,782), $8,176, and ($1,922), respectively) Foreign currency translation adjustments (net of tax effects of $1,557, $(4), and $347, respectively) Other comprehensive income (loss) Comprehensive income Comprehensive income attributable to non-controlling interest Comprehensive income attributable to Columbia Sportswear Company (56) 24,262 (18,079) 6,127 281,075 7,480 $273,596 (18,005) 34,160 16,155 128,470 9,617 $118,853 (4,485) (3,644) 194,795 4,678 $190,117 COLUMBIA SPORTWEAR COMPANY CONSOLIDATED BALANCE SHEETS (In thousands) December 31, 2018 2017 $ 437,825 $ 73,166 ASSETS Current Assets: Cash and cash equivalents (Note 21) Restricted cash (Note 22) Short-term investments (Note 21) Accounts receivable, net (Note 6) Inventories Prepaid expenses and other current assets Total current assets Property, plant, and equipment, net (Note 7) Intangible assets, net (Note 8) Goodwill (Note 8) Deferred income taxes (Note 11) ) Other non-current assets Total assets LIABILITIES AND EQUITY Current Liabilities: Accounts payable Accrued liabilities (Note 10) Income taxes payable (Note 11) Total current liabilities 13,970 262,802 449,382 521,827 79,500 1,765,306 291,596 126,575 68,594 78,155 38,495 $2,368,721 94,983 364,862 457,927 58,559 1,649,497 281,394 129,555 68.594 56,804 27,058 $2,212,902 $ 274,435 275,684 22.763 572,882 $ 252-301 182,228 19,107 453,636 572,882 45,214 50,791 453,636 48,735 58,104 168 560,643 9,521 678,408 Total current liabilities Other long-term liabilities (Notes 12, 13) Income taxes payable (Note 11) Deferred income taxes (Note 11) Total liabilities Commitment and contingencies (Note 14) Shareholders' Equity: Preferred stock; 10,000 shares authorized; none issued and outstanding Common stock (no par value); 250,000 shares authorized; 68,246 and 69,995 issued and outstanding (Note 15) Retained earnings Accumulated other comprehensive loss (Note 18) Total Columbia Sportswear Company shareholders' equity Non-controlling interest (Note 5) Total equity Total liabilities and equity 1,677,920 (4,063) 1,673,857 16,456 1,690,313 $2,368,721 45,829 1,585,009 (8,887) 1,621,951 30,308 1,652,259 $2,212,902 COLUMBIA SPOR VEAR COMPAN CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) Year Ended December 31, 2018 2017 2016 Cash flows from operating activities: Net income $274,948 $112,315 $198,439 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 58,230 59,945 60,016 Loss on disposal or impairment of property, plant, and equipment 4,208 1,927 4,805 Deferred income taxes 1,462 44,851 (19,178) Stock-based compensation 14,291 11,286 10,986 Changes in operating assets and liabilities: Accounts receivable (25,601) (24,197) 36,710 Inventories (94.716) 46,662 (18,777) Prepaid expenses and other current assets (9,771) (19,241) (5,452) Other assets (12,421) 931 (5,948) Accounts payable 19,384 30,568 1,483 Accrued liabilities 11,581 4,847 Income taxes payable (3,958) 58,702 Other liabilities (3,387) 5,798 2,468 Net cash provided by operating activities 289,569 275,167 Cash flows from investing activities: Purchases of short-term investments (518,755) (130,993) (21,263) Sales and maturities of short-term investments 352,127 36,282 21,263 Capital expenditures (65,622) (53,352) (49,987) 86,900 4,768 341,128 (518,755) 352,127 (65,622) 19 (232,231) (130,993) 36,282 (53,352) 279 (147,784) (21,263) 21,263 (49.987) 97 (49,890) Cash flows from investing activities: Purchases of short-term investments Sales and maturities of short-term investments Capital expenditures Proceeds from sale of property, plant, and equipment Net cash used in investing activities Cash flows from financing activities: Proceeds from credit facilities Repayments on credit facilities Proceeds from issuance of common stock related to stock-based compensation Tax payments related to stock-based compensation Repurchase of common stock Cash dividends paid Cash dividends paid to non-controlling interest Payment of related party note payable Net cash used in financing activities Net effect of exchange rate changes on cash Net (decrease) increase in cash, cash equivalents and restricted cash Cash, cash equivalents and restricted cash, beginning of period Cash, cash equivalents and restricted cash, end of period Supplemental disclosures of cash flow information: Cash paid during the year for income taxes Cash paid during the year for interest on note payable to related party Supplemental disclosures of non-cash investing activities: Capital expenditures incurred but not yet paid 70,576 (70,576) 18,484 (4,285) (201,600) (62,664) (19,949) 3,374 (3,374) 19,946 (3,662) (35,542) (50,909) 62,885 (64,825) 13,167 (5,117) (11) (48,122) (270,014) (8,695) (221,371) 673,166 $451,795 (14,236) (84,403) 12,836 121,777 551,389 $673,166 (42,023) (1,635) 181,619 369,770 $551,389 $ 77,408 $ 81,045 685 $ 70,424 1,049 11,831 3,188 2,710 COLUMBLA SPORTSWEAR COMPANY CONSOLIDATED STATEMENTS OF EQUITY (In thousands) Columbia Sportswear Company Shareholders Equity Common Stock Shares Outstanding 69,277 Accumulated Other Comprehensive Income (Loss) $(20,836) Related Earnings $1,385,860 191,898 Amount $34.776 Non- Controlling Interest $16,013 6,541 Total $1,415,813 198,439 (2) (2) 686 (2,465) 157 (2,020) BALANCE, JANUARY 1, 2016 , Net income Other comprehensive income (loss): Unrealized holding losses on available-for-sale securities, net Unrealized holding gains on derivative transactions, net Foreign currency translation adjustment, net Cash dividends ($0.69 per share) Issuance of common stock related to stock-based compensation, net Stock-based compensation expense Repurchase of common stock BALANCE, DECEMBER 31, 2016 Net income Other comprehensive income (loss): Unrealized holding gains (losses) on derivative transactions, net 843 (14,485) (48,122) (48,122) 596 LI 8,050 10,986 (11) 53,801 8,050 10,986 (11) 1,581,511 112,315 69,873 (22,617) 1,529,636 105,123 20,691 7,192 1,159 (17,489) (516) (16,846) 1,159 (17,489) (516) 31,219 2.941 (16,846) 34,160 (50,909) (50,909) 787 11 16,284 11,286 (35,542) 45,829 (665) 69.995 16,284 11,286 (35.542) 1,652,259 274.948 (8,887) 1,585,009 268,256 30,308 6,692 Other comprehensive income (loss): Unrealized holding gains (losses) on derivative transactions, net Foreign currency translation adjustment, net Cash dividends ($0.73 per share) Issuance of common stock related to stock-based compensation, net Stock-based compensation expense Repurchase of common stock BALANCE, DECEMBER 31, 2017 Net income Other comprehensive income (loss): Unrealized holding losses on available-for-sale securities, net Unrealized holding gains on derivative transactions, net Foreign currency translation adjustment, net Cash dividends ($0.90 per share) Dividends to non-controlling interest Adoption of new accounting standards Issuance of common stock related to stock-based compensation, net Stock-based compensation expense Repurchase of common stock BALANCE, DECEMBER 31, 2018 - (56) (56) 23,195 (17,800) 1,067 (279) (62,664) 24,262 (18,079) (62,664) (21,332) 14,085 (21,332) 14,600 (515) 600 14,199 14,291 (74,319) $ 14,199 14,291 (201,600) $1,690,313 (2,349) 68,246 (127,281) $1,677,920 $(4,063) $16,456 Under Armour, Inc. and Subsidiaries Consolidated Balance Sheets (In thousands, except share data) December 31, 2018 December 31, 2017 Assets Current assets Cash and cash equivalents Accounts receivable, net Inventories Prepaid expenses and other current assets Total current assets Property and equipment, net Goodwill Intangible assets, net Deferred income taxes Other long term assets Total assets Liabilities and Stockholders' Equity Current liabilities Revolving credit facility, current Accounts payable Accrued expenses Customer refund liability Current maturities of long terin debt Other current liabilities Total current liabilities $ 557.403 652,546 1,019,496 364,183 2,593,628 826,868 546,494 41,793 112,420 123,819 S4,245,022 $ 312,483 609,670 1,158,548 256,978 2,337,679 885,774 555,674 46,995 82,801 97,444 $4,006,367 S $ 125,000 561,108 296,841 580,884 340,415 301,421 25,000 88,257 1,315,977 27,000 50,426 1,060,375 1,315,977 703,834 208,340 2,228,151 1,060,375 765,046 162,304 1,987,725 62 61 Total current liabilities Long term debt, net of current maturities Other long term liabilities Total liabilities Commitments and contingencies (see Note 7) Stockholders' equity Class A Common Stock, $0.0003 1/3 par value; 400,000,000 shares authorized as of December 31, 2018, and 2017; 187,710,319 shares issued and outstanding as of December 31, 2018, and 185,257,423 shares issued and outstanding as of December 31, 2017. Class B Convertible Common Stock, $0.0003 1/3 par value; 34,450,000 shares authorized, issued and outstanding as of December 31, 2018, and 2017. Class C Common Stock, $0.0003 1/3 par value; 400,000,000 shares authorized as of December 31, 2018 and 2017; 226,421,963 shares issued and outstanding as of December 31, 2018, and 222,375,079 shares issued and outstanding as of December 31, 2017. Additional paid-in capital Retained earnings Accumulated other comprehensive loss Total stockholders' equity Total liabilities and stockholders' equity 11 11 75 916,628 1,139,082 (38,987) 2,016,871 $4,245,022 74 872,266 1,184,441 (38,211) 2,018,642 $4,006,367 Under Armour, Inc. and Subsidiaries Consolidated Statements of Operations (In thousands, except per share amounts) Year Ended December 31, 2017 2016 $4,833.338 2,584,724 2,248,614 1,831,143 2018 $5,193,185 2,852,714 2,340,471 2,182,339 183,149 (25,017) (33,568) (9,203) (67.788) (20,552) 934 (46,302) $4,989,244 2,737,830 2,251,414 2,099,522 124,049 27,843 (34,538) (3,614) (10,309) 37,951 Net revenues Cost of goods sold Gross profit Selling, general and administrative expenses Restructuring and impairment charges Income (loss) from operations Interest expense, net Other expense, net Income (loss) before income taxes Income tax expense (benefit) Income from equity method investment Net income (loss) Adjustment payment to Class C capital stockholders Net income (loss) available to all stockholders Basic net income (loss) per share of Class A and B common stock Basic net income (loss) per share of Class C common stock Diluted net income (loss) per share of Class A and B common stock Diluted net income (loss) per share of Class C common stock Weighted average common shares outstanding Class A and Basic Diluted 417,471 (26,434) (2.755) 388,282 131,303 (48,260) $ $ (46,302) $ (0.10) $ (0.10) $ (0.10) $ (0.10) $ 256,979 59,000 197,979 0.45 0.72 $ (48,260) $ (0.11) $ (0.11) $ (0.11) $ (0.11) $ S 0.45 $ 0.71 common stock 221,001 219,254 219,254 217.707 221,944 221,001 (In thousands, except per share amounts) 2018 Year Ended December 31, 2017 2016 $4,989,244 $4,833,338 2,737,830 2,584,724 2,251,414 2,248,614 2,099,522 1,831,143 124,049 27,843 417,471 (34,538) (26,434) (3,614) (2,755) (10,309) 388,282 37,951 131,303 $5,193,185 2,852,714 2,340,471 2,182,339 183,149 (25,017) (33,568) (9,203) (67.788) (20,552) 934 (46,302) Net revenues Cost of goods sold Gross profit Selling, general and administrative expenses Restructuring and impairment charges Income (loss) from operations Interest expense, net Other expense, net Income (loss) before income taxes Income tax expense (benefit) Income from equity method investment Net income (loss) Adjustment payment to Class C capital stockholders Net income (loss) available to all stockholders Basic net income (loss) per share of Class A and B common stock Basic net income (loss) per share of Class C common stock Diluted net income (loss) per share of Class A and B common stock Diluted net income (loss) per share of Class C common stock Weighted average common shares outstanding Class A and B common stock Basic Diluted Weighted average common shares outstanding Class C common stock Basic Diluted (48,260) $ $ (46,302) S (0.10) S (0.10) S (0.10) S (0.10) $ 256,979 59,000 197,979 0.45 0.72 $ (48,260) $ (0.11) $ (0.11) $ (0.11) $ (0.11) $ $ 0.45 0.71 $ 221,001 219,254 219,254 217,707 221,944 221,001 224,814 224,814 221,475 221,475 218,623 222,904 Under Armour, Inc. and Subsidiaries Consolidated Statements of Comprehensive Income (Loss) (In thousands) Year Ended December 31, 2018 2017 $(48,260) 2016 $256,979 $(46,302) (18,535) 23,357 (13,798) Net income (loss) Other comprehensive income (loss): Foreign currency translation adjustment Unrealized gain (loss) on cash flow hedge, net of tax benefit (expense) of $(7,936), $5,668 and $(3,346) for the years ended December 31, 2018, 2017, and 2016, respectively. Gain (loss) on intra-entity foreign currency transactions Total other comprehensive income (loss) Comprehensive income (loss) (16,624) 7,199 22,800 (5,041) (776) $(47,078) 9,084 (2,416) (7,130) $249,849 13,932 $(34,328) Under Armour, Inc. and Subsidiaries Consolidated Statements of Stockholders' Equity (In thousands) Class B Convertible Additional Common Stock Class C Common Stock part-in . Shares Amount Shares Amount Capital Class A Common Stock Shares Amount Retained Karnings Accumulated Other Comprehensive Income Total Equity $61 34-450 $11 72 $1,076.53 $(45.013) 181,630 792 216,080 971 $636.558 $ 6,203 $1,688,209 6,203 (199) (276) (15,098) (15,098) 1,592 7,884 7,884 1,852 1.547 25.834 56,073 25.835 (2,927) (59,000) 46,149 46,149 Balance as of December 31, 2015 lixercise of stock options Shares withheld in consideration of employee lax, obligations relative to stock- based compensation illingernents Issuance of Class A Common Stock, net forfeitures Issuance of class C Common Stock, net forfeitures Issuance of class C dividend Stock-based compensation expenses Net excess tax benefits from stock-based compensation illingernents Comprehensive income (loss) Balance as of 12/31/2016 Exercise of stock options Shares withheld in consideration of employee tax obligations relative to stock based expensation arrangements Issuance of Clans A Common Stock, net of forfeitures Issuance of Class Common Stock, net of forfeitures Impact of adoption of accounting standard updates Stock-based compensation expanse 44,783 256,979 1,259,414 151 (7.130) (52,143) 44.783 249.849 2.030.900 3,664 61 34-450 11 183.815 609 73 220.174 556 821.484 3,664 (78) (2.781) (2.781) 896 III 1.723 7.852 7,853 (2,686) (23.932) (26,596) 39.932 39.932 | - - - 7,853 | - - 11 T1 13.982 (38,211) 11 - | 2.08 - | || 16 - - - - - - Balance as of December (776) $138.952 187.710 $62 34.450 226,422 Under Armour, Inc. and Subsidiaries Consolidated Statements of Cash Flows (In thousands) Year Ended December 31, 2017 2018 2016 $ (46,302) $ (48,260) $ 256,979 144.770 12,627 181,768 14,023 9,893 254 4,256 41,783 173,747 (29,247) 71,378 254 2,313 39,932 (75) 55,910 108,757 1,580 46,149 44.783 (43,004) 70,188 (38,544) (234,998) Cash flows from operating activities Net income (loss) Adjustments to reconcile net income (loss) to net cash provided by operating activities Depreciation and amortization Unrealized foreign currency exchange rate (gains) losses Impairment charges Amortization of bond premium Loss on disposal of property and equipment Stock-based compensation Excess tax benefit (loss) from stock-based compensation arrangements Deferred income taxes Changes in reserves and allowances Changes in operating assets and liabilities: Accounts receivable Inventories Prepaid expenses and other assets Accounts payable Accrued expenses and other liabilities Customer refund liability Income taxes payable and receivable Net cash provided by operating activities Cash flows from investing activities Purchases of property and equipment Sale of property and equipment Purchases of property and equipment from related parties Purchase of equity method investment Purchases of available-for-sale securities Sales of available-for-sale securities Purchases of other assets Net cash used in investing activities 186,834 109,919 (107,855) 26,413 134,594 305,141 41,051 628,230 (79,106) (222,391) (52,106) 145,695 109,823 (249,853) (148,055) (23,029) 202,446 67,754 (39,164) 237,460 (16,712) 366,623 (281,339) (316,458) (170,385) 11,285 (70,288) (39,207) (24,230) 30,712 (875) (381,139) (4,597) (202,904) (1,648) (282,987) (202,904) (282,987) (381,139) 505,000 (695,000) (2,743) 2,580 306 (11) 763,000 (665,000) (2,781) 11,540 1,327,601 (1,170,750) (15,098) 15,485 Net cash used in investing activities Cash flows from financing activities Proceeds from long term debt and revolving credit facility Payments on long term debt and revolving credit facility Employee taxes paid for shares withheld for income taxes Proceeds from exercise of stock options and other stock issuances Other financing fees Payments of debt financing costs Cash dividends paid Contingent consideration payments for acquisitions Net cash provided by (used in) financing activities Effect of exchange rate changes on cash, cash equivalents and restricted cash Net increase in cash, cash equivalents and restricted cash Cash, cash equivalents and restricted cash Beginning of period End of period Non-cash investing and financing activities Change in accrual for property and equipment Non-cash dividends Other supplemental information Cash paid for income taxes, net of refunds Cash paid for interest, net of capitalized interest See accompanying notes. (6,692) (2,927) (1,505) 146,114 (8,725) 122,873 (189,868) 12,467 106,759 4,178 65,410 247,925 318,135 $ 566,060 252,725 $ 318,315 129,852 $ 252,725 $(14,611) $10,580 $16,973 (56,073) 36,921 135,959 (16,738) 28,586 29,750 21,412