Hu Shen
ACCT301A TuTh2:30-3:45
Writing Assignment
Professor: Hung-Yuan Lu
12/20/2014
COLM and CRI MD&A section Comparison and Analysis
Background
COLM is Symbol of Columbia Sportswear Company in New York Stock Exchange (NYSE). It is a United States company that manufactures and distributes outerwear and sportswear would-wide. It was founded in 1938 by Paul Lamfrom. The company is headquartered in Cedar Mill, Oregon, an unincorporated part of Washington County, Oregon, in the Portland metropolitan area near Beaverton. Columbia Sportswear also produces footwear, headgear, camping equipment, skiwear, and outerwear accessories.

CRI is Symbol of Carter's, Inc.in NYSE. They are the largest branded marketer in the U.S. of apparel exclusively for babies and young children. It was founded in 1865 by William Carter. Previously, the company also made underwear for adults. Carters acquired competitor OshKosh B'Gosh in 2005.

Both of the two companies are Manufacture Company for clothes and footwear. The difference is CRI is more focus on the children market and the COLM is more focus on the audit market. Another difference is COLM is would–wide company there market include Asian, Europe and Canada. CRI is more like a National company. Their markets more focus on U.S.

A comparison of the two MD&As

MD&A Items comparison | Columbia | | Carter's | | Items | Pages | Items | Pages | Business | 2 | Business | 1 | Results of Operations | 7 | Result of Operations | 7 | Liquidity and Capital Resources | 1 | Financial Condition, Capital Resources, and Liquidity | 1 | Quantitative and Qualitative Disclosures About Market Risk | 1 | Effects of Inflation and Deflation | 1 | Critical Accounting Policies and Estimates | 1 | Seasonality | 1 | | | Critical Accounting Policies and Estimates | 2 | | | Forward-Looking Statements | 1 |

The form above has a general review about the content in MD&A section. From the form it indicates both these two company emphasis Results of Operations section. Because it is the manager’s most important responsibility operate this company. This section can show the expectation of the manager want to the reader or the investor to know. So both of the two companies use more pages explains operating result in this issue.

Compared to Columbia, Carter's has two more items in the big framework: Effects of Inflation and Deflation, and Seasonality. In Columbia’s section they did not explain more about the inflation and deflation, but they have more about the currency exchange. In terms of the seasonality, Columbia explains this section in the business section. The same situation as Carter's, Columbia has big business season in third and fourth quarter. In Columbia Results of Operations they highlight the net sale increase, net income attributable by different brand and the divided paid. Since Columbia is a worldwide company it’s net sale and net gross analysis based on the geography. Beside the geography Columbia also focuses on the brand analysis.it compared the difference between 2013, 2012 and 2011. It concludes the reason why it increase and what is the reason result in the decrease. It explained consist of the Selling, General and Administrative Expense (SG&A).it future explain the change of the interest tax and net income attributable to Columbia Sportswear Company. In its MD&A it did not explain the goodwill.

In Carter's Results of Operations section, it also indicated the sale and sale increase. But it separates it to wholesale and retail sales. It also separates the two brands OshKosh and Carter’s. Since the Carter is not a worldwide company like Columbia so it does not emphases the geography regional. They only use 200 words to explain the international business. Carter’s use almost one page to explain the SG&A section

| | | | | | | | | | | | Year Ended December 31, | | 2013 | | 2012 | | % Change | | (In millions, except for percentage changes) | United States | $ | 971.3 | | | $ | 946.7 | | | 3% | LAAP | 354.4 | | | 377.6 | | | (6)% | EMEA | 240.7 | | | 230.6 | | | 4% | Canada | 118.6 | | | 114.7 | | | 3% | | $ | 1,685.0 | | | $ | 1,669.6 | | | 1% |
Based on the analysis the analyses of Columbia like to compare the geography regional and the previous year’s date. In term of Carter’s is more focus on the current years. It explains how this year’s happen

Conjecture on why those two companies choose to report different information (the tone, the amount, the level of detail, or the type) in their MD&As.

Net sales by geographic region are summarized in the following table:

This data is from the Columbia 10-K. MD&A section. It shows the manager analysis the difference by the region. First of all, the company has difference business geography regional, so it result the big difference about the analysis. Because for the Columbia over 40% of the sale from other country. This is important for the manager to show the net sale form difference country.

Beside the region it also shows the Sales by Brand. This is another perspective for the investor to know their income. In the Columbia MD&A it likes to tell you the net income from the various perspectives. And it not include in the goodwill and implementation in this section they many think this is not the manager’s major responsible. Or another reason is Columbia has already a famous international outdoor brand

In Carter it shows a special item Fiscal Year. Under its explanation, this year it is resulting in an additional week of results every five or six years. This is important for them to say part of the increase is due to the one more week business operating.

Because Carter’s segment is about the Carter's wholesale, Carter's retail, OshKosh retail, OshKosh wholesale, and international so it analysis is based on those segments. The retail store played a very important role in their business. So they make a lot analyze on this part. Since the Carter’s is only 10% net sale from the international so it not a more focus on the region. They only make analysis on the US sale.

Carter’s also made a lot of analysis in the expense section. Carter’s analysis a lot of contingency, this shows Carter’s management style is more conservative. Because Carter’s conservation, they would like to show the risk to their investor.

Since they have change in the pension. Carter’s made a analysis on their pension obligation. Because it is long term liability, so it is really important for the investor to know the future liability.

So the difference between can be concluding as:

1. The business region require the they should have difference presentation on the analysis 2. The management style decide what they want to investor know. Columbia is more aggressive and Carter’s is more conservative 3. The development plan decided how they can analysis in this section.

Information redundant and information valuable.
From my point of view, this section is important for the manager. Since the investor are not involved the operating. They don’t know what happened in the company. The only way they can know is the accounting information. So based on the data, they can only know the data is increase or decrease. But in this section, they can know what the manager wants to know, such why the increase happen or what expense increase significant.

Columbia
In its MD&A it shows Net sales in the United States increased $24.6 million in 2013. The increase in net sales in the United States consisted of a net sales increase in its direct-to-consumer channel across all brands and both product categories, partially offset by a net sales decrease in our wholesale business across all brands and both product categories. This is important for the investor to know they have the new business model and they want to find a new way to develop their business. Because it is the new model so it is not use for the whole business region. So we can guess if this is the model they may want to use it to the other country. So the future expense may probable happened.

It also explains the reason why they have a decrease in the Asian market. The main reason is distributor’s problem in Japan and Korea and the Changes in EMEA market is increase and foreign currency exchange rates contributed approximately two percentage points of benefit to the EMEA net sales comparison. It shows the nonbusiness related increase should disclose to the investor. Otherwise it will hard for the future year’s analysis. And especially for the international company it is normal for the currency gain.

Beside the revenue, it also analyses expense. They analyses how the inventory change, how the SG&A change, and tax change. Those explanations help the investor evaluate the income quality. It can help investor decided whether those items happen this year will still happen next years.

Beside the analyst above another valuable information include in Columbia is Inventory purchase obligations, Operating leases. All those information help investor decided the future liability.

However, form my point of view; Columbia compared the date by using 2013 and 2011. Since it is not the consecutive data, it is not important in for the investor to read. And almost the consist is same as 2013 with 2012. It just emphasizes one more time the same idea. And the situation is change a lot since pass 2 years. It not important to compared it again. And for the Columbia, 2012 10K they should have the same analysis. So I don’t think it is very useful information for the investor. Carter’s
In Carter’s analysis it base on Segments: the Carter's wholesale, Carter's retail, OshKosh retail, OshKosh wholesale, and international. When they explain the increase the net sale, they explain increase was driven by incremental sales of $79.1 million generated by new store openings. Form this; the investor can know they focus more and more on the international market.

Also the valuable information still include the revenue recognition and the inventory they provide reserves for slow-moving inventory equal to the difference between the cost of inventory and the estimated market value based upon assumptions about future demand and market conditions. If actual market conditions are less favorable than we project, additional write-downs may be required. It shows the inventory measurement. It is important in the company how they measure the inventory.

Beside the information above, other valuable information is goodwill, Accrued expenses for workers’ compensation and loss contingencies.

However, I guess the same thing as Columbia they all compared with 2011 data. This MD&A include a lot of expense incurred in 2011 I though it not that important as the investor want to know. So I classify it as less valuable information.

In conclude, since this section is unaudited, when we use it we should get the analyzing of the fundamentals, and we understand management and management style. In addition we still need critical thinking to get the information from this section.