Columbia Sportswear 2000 Annual Report Download - page 31

and therefore our business could be materially adversely aÅected by adverse conditions in China or adverse
changes in China's trading status with the U.S. or with other sales markets.
Currency Exchange Rate Fluctuations May AÅect our Business
We generally purchase products in U.S. dollars. However, the cost of these products sourced overseas
may be aÅected by changes in the value of the relevant currencies. Price increases caused by currency
exchange rate Öuctuations could make our products less competitive or have an adverse aÅect on our margins.
Our international revenue and expense generally is derived from sales and operations in foreign currencies, and
this revenue and expense could be materially aÅected by currency Öuctuations, including amounts recorded in
foreign currencies and translated into U.S. dollars for consolidated Ñnancial reporting. Currency exchange rate
Öuctuations could also disrupt the business of the independent manufacturers that produce our products by
making their purchases of raw materials more expensive and more diÇcult to Ñnance. We conduct a program
to hedge against our exposure to currency exchange rate Öuctuations. We may not, however, be successful and
foreign currency Öuctuations could have a material adverse aÅect on us.
We Depend on Independent Manufacturers to Make Our Products and Meet Customer Expectations
Our products are produced by independent manufacturers worldwide. Although we enter into a number
of purchase order commitments each season, we do not have long-term contracts with any manufacturer. We
do not operate any production facilities. We therefore face risks that manufacturing operations will fail to
perform as expected, or that our competitors will gain production or quota capacities that we need for our
business. If a manufacturer fails to ship orders in a timely manner or to meet our standards, it could cause us
to miss delivery requirements, which could result in cancellation of orders, refusal to accept deliveries or a
reduction in purchase prices, any of which could have a material adverse aÅect on our business. If a
manufacturer violates labor or other laws, or engages in practices that are not generally accepted as ethical in
our key markets, this could result in adverse publicity for us and have a material adverse aÅect on our
business. In an eÅort to ensure that our independent manufacturers operate with safe, ethical and humane
working conditions, we monitor factories and we require that each agree to comply with our Standards of
Manufacturing Practices and applicable laws and regulations, but we do not control these vendors or their
labor practices.
We Depend on Key Suppliers for Some Specialty Fabrics
Some of the materials that we use may be available, in the short-term, from only one or a very limited
number of sources. For example, some specialty fabrics are manufactured to our speciÑcation by one or a few
sources, and three major factory groups accounted for approximately 18% of our 2000 global production. From
time to time, we have experienced diÇculty satisfying our raw material and Ñnished goods requirements.
Although we believe we could identify and qualify additional factories to produce these materials, the
unavailability of some existing manufacturers for supply of these materials could have a material adverse
aÅect on our business.
Our Advance Purchases of Products May Result in Excess Inventories
To minimize our purchasing costs, the time necessary to Ñll customer orders and the risk of non-delivery,
we place orders for our products with manufacturers prior to receiving all of our customers' orders and
maintain an inventory of certain products that we anticipate will be in greater demand. We may not be able to
sell the products we have ordered from manufacturers or that we have in our inventory. Customer orders,
moreover, are generally cancelable by the customer prior to the date of the shipment. Inventory levels in
excess of customer demand may result in inventory write-downs and the sale of excess inventory at discounted
prices, which could have a material adverse eÅect on our business.
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