Columbia Sportswear 2001 Annual Report Download

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Outdoor Active Authentic American Value
Gert Boyle, Chairman
ANNUAL REPORT
January-December 2001
Shareholder letter / Year in review / Form 10-K
Columbia
Sportswear:
Contents:
Date:

Table of contents

  • Page 1
    Outdoor Active Authentic American Value Gert Boyle, Chairman Columbia Sportswear: Contents: Date: ANNUAL REPORT Shareholder letter / Year in review / Form 10-K January-December 2001

  • Page 2
    ... of the Company's management and employees to see that Columbia Sportswear continues to grow as a global leader in the design and distribution of high quality outdoor apparel and footwear. Once again, I want to thank everyone for their continued support and I look forward to reporting on our...

  • Page 3
    ...Columbia Sportswear Company Announces Expansion of Rivergate Distribution Center ® February 2001 Columbia Sportswear Company Announces Plans for Construction of New European Distribution Facility ® Columbia Sportswear Company Signs License Agreement with L'Amy for Eyewear ® Columbia Sportswear...

  • Page 4
    ..., manufacture and market an extensive line of wrist watches and watch fobs for men, women and children. Chairman "Ma Boyle" hosts a party for employees and friends of Columbia to celebrate the grand opening of the Company's new headquarters. January 2002 Columbia Sportswear Company Reports Record...

  • Page 5
    ... to COLUMBIA SPORTSWEAR COMPANY (Exact name of registrant as speciÃ'ed in its charter) Oregon (State or other jurisdiction of incorporation or organization) 0-23939 (Commission File Number) 93-0498284 (IRS Employer IdentiÃ'cation Number) 14375 NW Science Park Drive, Portland, Oregon (Address of...

  • Page 6
    COLUMBIA SPORTSWEAR COMPANY December 31, 2001 TABLE OF CONTENTS Item Page PART I Item Item Item Item Item 1. 2. 3. 4. 4(a). Business Properties Legal Proceedings Submission of Matters to a Vote of Security Holders Executive OÇcers and Key Employees of the Registrant PART II Item 5. Item 6. ...

  • Page 7
    PART I Item 1. Business General Founded in 1938 in Portland, Oregon, Columbia Sportswear Company» is a global leader in design, sourcing, marketing and distribution of active outdoor apparel and footwear, with operations in North America, Europe and Asia. As one of the largest outerwear companies ...

  • Page 8
    ...our net sales for 2001. Our sportswear line is made up of outdoor sportswear and GRT»(Gear for Rugged Trekking, Travel and Training). The outdoor sportswear product line, consisting primarily of hiking shorts, water sport trunks, Ã-eece and pile products, sweaters, chinos, knit shirts, woven shirts...

  • Page 9
    ... and outdoor socks, packs and adventure travel bags, small personal leather goods and accessories, thermal tops and bottoms, shoe care products, watches and sports knives. We also entered into a global agreement for Columbia brand eyewear and a European license for socks. Our United States sock...

  • Page 10
    ... into our business model. Additionally, customer orders are subject to cancellation prior to shipment. Product Design Our experienced in-house merchandising and design teams work closely with internal sales and production teams as well as with retailers and consumers to produce products which are...

  • Page 11
    ... ensure their compliance with Columbia's Standards of Manufacturing Practices. Our policies require every factory to comply with a code of conduct relating to factory working conditions and the treatment of workers involved in the production of Columbia brand products. Our quality control program is...

  • Page 12
    ... North America. These outlet stores are designed to sell excess and distressed inventory without adversely aÃ...ecting our retail accounts. We inspect, sort, pack and ship substantially all of our products to United States retailers from our Rivergate Distribution Center located in Portland, Oregon...

  • Page 13
    ... Our oÇces in Tokyo and Seoul coordinate sales and marketing eÃ...orts in Asia. In several other countries throughout the world, we sell our products to independent distributors. These distributors service retail customers in locations such as Australia, New Zealand, South America, Europe, Russia and...

  • Page 14
    ... operate in very competitive markets (such as those for watches, adventure travel bags and hosiery). We encounter substantial competition in the active outerwear and sportswear business from, among others, The North Face, Inc., which was recently acquired by the VF Corporation, Marmot Mountain Ltd...

  • Page 15
    ... us. Corporate Headquarters: Portland, Oregon (1 location) Ì owned Canadian Operation(1): Strathroy, Ontario (1 location) Ì leased (1) Lease expires at the end of 2011. (2) Facility is currently under construction and anticipated to be operational for the spring 2003 shipping season. Item 3. Legal...

  • Page 16
    .... In May 2001, Mr. Carpenter was named Vice President of Manufacturing and Operations. Prior to joining Columbia, Mr. Carpenter held warehouse management positions for Modern Merchandising. Mark J. Sandquist joined Columbia in March 1995 as Senior Merchandiser of Men's and Women's Sportswear and in...

  • Page 17
    PART II Item 5. Market for Registrant's Common Equity and Related Stockholder Matters Our Common Stock is listed on the Nasdaq National Market and trades under the symbol ""COLM.'' At February 28, 2002, there were approximately 180 holders of record and approximately 6,300 beneÃ'cial shareholders. ...

  • Page 18
    ... to reÃ-ect the three-fortwo stock split that was distributed on June 4, 2001, to all shareholders of record at the close of business on May 17, 2001. Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations All references to years relate to the Ã'scal year ended...

  • Page 19
    ... store sales increased to approximately 35.2% in 2001 from approximately 30.5% in 2000. By product category, the growth is attributable to increased sales of outerwear and footwear units, including Sorel, predominantly in the United States, Canada and Europe as well as increased sales of sportswear...

  • Page 20
    ... 31, 2001, our major capital expenditures consisted of approximately $15 million for the expansion and retroÃ't of our United States distribution center, approximately $8 million to develop our new corporate headquarters, and $8 million for the construction of our European distribution facility. 14

  • Page 21
    ... in the outdoor apparel industry, which have historically resulted in higher sales and proÃ'ts in the third calendar quarter. This pattern has resulted primarily from the timing of shipments to wholesale customers for the fall outerwear season. As our sportswear and footwear product lines mature...

  • Page 22
    ... consideration our historical return rates by season, product sales mix, current economic trends, and the historical costs to repair, replace, or refund the original sale. Material diÃ...erences in estimates of excess and obsolete inventory and product warranty costs may result in diÃ...erences of the...

  • Page 23
    ... and international markets, growth in merchandise categories, increased sales to department stores and footwear specialty shops, implementation and performance of new management information systems and distribution facilities, access to raw materials and factory capacity, Ã'nancing and working...

  • Page 24
    ...for outerwear, sportswear and rugged footwear are highly competitive, as are the markets for our licensees' products. In each of our geographic markets, we face signiÃ'cant competition from global and regional branded apparel and footwear companies. In many instances, retailers who are our customers...

  • Page 25
    ... Strategy or Manage Growth Successfully We face many challenges in implementing our growth strategies. For example, our expansion into international markets involves countries where we have little sales or distribution experience and where our brand is not yet widely known. Expanding our product...

  • Page 26
    ... 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 speci...

  • Page 27
    ... and image of our products. In markets outside the United States, it may be more diÇcult for us to establish our proprietary rights and to challenge successfully use of those rights by other parties. We will also face additional challenges as we extend our brand into new product categories, in part...

  • Page 28
    ... shareholders. Shares held by these three insiders are available for resale, subject to the limitations of Rule 144 under the Securities Act of 1933. The sale or prospect of the sale of a substantial number of these shares could have an adverse aÃ...ect on the market price of our Common Stock. Item...

  • Page 29
    ... AUDITORS' REPORT The Board of Directors and Shareholders of Columbia Sportswear Company: We have audited the accompanying consolidated balance sheets of Columbia Sportswear Company and subsidiaries as of December 31, 2001 and 2000, and the related consolidated statements of operations, shareholders...

  • Page 30
    COLUMBIA SPORTSWEAR COMPANY CONSOLIDATED BALANCE SHEETS (In thousands) ASSETS December 31, 2001 2000 Current Assets: Cash and cash ...loss Unearned portion of restricted stock issued for future services (Note 11 Total shareholders' equity Total liabilities and shareholders' equity $ 79,082...

  • Page 31
    COLUMBIA SPORTSWEAR COMPANY CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share amounts) 2001 Year Ended December 31, 2000 1999 Net sales Cost of sales Gross proÃ't Selling, general, and administrative Income from operations Interest expense, net Income before income tax ...

  • Page 32
    COLUMBIA SPORTSWEAR COMPANY CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) 2001...compensation Loss (gain) on disposal of property, plant, and equipment ÏÏÏÏÏ Deferred income tax provision Tax beneÃ't from employee stock...from sale of property, plant, and equipment Purchase of trademarks ...

  • Page 33
    COLUMBIA SPORTSWEAR COMPANY CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (In thousands) Unearned Portion of Restricted Stock Issued For Future Services Common Stock Shares Outstanding Amount Retained Earnings Accumulated Other Comprehensive Income (Loss) Comprehensive Income Total Balance, ...

  • Page 34
    .... Dependence on key suppliers: The Company's products are produced by independent manufacturers worldwide. For 2001 the Company sourced approximately 97% (by dollar volume) of its products outside the United States, principally in the Far East. Three major factory groups accounted for approximately...

  • Page 35
    ...was $792,000, $145,000 and $281,000 in 2001, 2000 and 1999, respectively. Intangibles and other assets: In September 2000, the Company acquired the Sorel trademark rights, associated brand names and other related intellectual property rights for $7,967,000 in cash. The acquired intangible assets are...

  • Page 36
    ... all of the Company's 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 the Company's history of warranty repairs and replacements. Warranty expense was approximately...

  • Page 37
    ... $100,000,000 import letter of credit line subject to annual renewal. At December 31, 2001, the Company had $46,844,000 of Ã'rm purchase orders placed under this facility. The Company is party to certain Buying Agency Agreements that serve to facilitate the short-term Ã'nancing and importation...

  • Page 38
    ..., bearing an interest rate of 6.68% and maturing August 11, 2008. Proceeds from the notes were used to Ã'nance the expansion of the Company's distribution center in Portland, Oregon. The Senior Promissory Notes require the Company to comply with certain ratios related to indebtedness to earnings 32

  • Page 39
    ...amounts above have been restated to reÃ-ect the three-for-two stock split that was distributed on June 4, 2001, to all shareholders of record at the close of business on May 17, 2001. Note 9 ÃŒ Income Taxes The Company applies an asset and liability approach that requires the recognition of deferred...

  • Page 40
    COLUMBIA SPORTSWEAR COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ÃŒ (Continued) stock issued at the time of exercise and the option price, tax eÃ...ected. These beneÃ'ts were credited directly to shareholders' equity. The components of the provision (beneÃ't) for income taxes consist of the ...

  • Page 41
    COLUMBIA SPORTSWEAR COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ÃŒ (Continued) Note 10 ÃŒ ProÃ't Sharing Plan The Company has a 401(k) proÃ't-sharing plan, which covers substantially all employees with more than ninety days of service. The Company may elect to make discretionary matching and/...

  • Page 42
    ...oÃ...ering of common stock on April 1, 1998, the Company elected to be treated as an ""S'' corporation under provision of the Internal Revenue Code of 1986. Accordingly, payment of federal and most state taxes on income earned in the United States was the responsibility of the shareholders rather than...

  • Page 43
    ... operates predominantly in one industry segment: the design, production, marketing and selling of active outdoor apparel, including outerwear, sportswear, rugged footwear and related accessories. The geographic distribution of the Company's net sales, income before income tax, identiÃ'able assets...

  • Page 44
    ... net sales, which are recorded at a negotiated mark-up and eliminated in consolidation, are not material. 2001 2000 1999 Net sales to unrelated entities: United States Canada Europe Other International Income (loss) before income tax: United States Canada Europe Other International Less...

  • Page 45
    ...for-two stock split that was distributed on June 4, 2001, to all shareholders of record at the close of business on May 17, 2001. Options ...Company manages a portion of these exposures with short-term strategies after giving consideration to market conditions, contractual agreements, anticipated sale...

  • Page 46
    ... 38,218 $ 1.00 0.96 $161,887 73,702 13,503 $ 0.35 0.34 Earnings per share have been restated to reÃ-ect the three-for-two stock split that was distributed on June 4, 2001, to all shareholders of record at the close of business on May 17...

  • Page 47
    ... to be Ã'led no later than 120 days after the end of our Ã'scal year ended December 31, 2001. Information with respect to executive oÇcers is included under Item 4(a) of Part I of this report. Item 11. Executive Compensation There is incorporated herein by reference the information required by this...

  • Page 48
    PART IV Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K (a)(1) and (a)(2) Financial Statements. The Financial Statements of the Company Ã'led as part of this Annual Report on Form 10-K are on pages 22 to 40 of this Annual Report. (a)(3) Exhibits Exhibit Number Description ...

  • Page 49
    ... Inc. and Columbia Sportswear Canada Limited, dated January 1, 2002 Indemnity Agreement between Columbia Sportswear Company and B.A.R.K. Holdings, Inc., dated January 1, 2002 Deferred Compensation Conversion Agreement between the Company and Don Santorufo, dated December 31, 1996 Form of Tax Indemni...

  • Page 50
    ... March 28, 2002. COLUMBIA SPORTSWEAR COMPANY By: PATRICK D. ANDERSON Patrick D. Anderson Vice President of Finance and Administration, Chief Financial OÇcer, Treasurer and Assistant Secretary /s/ Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by...

  • Page 51
    ..., Portland, Oregon Executive Officers Gertrude Boyle Chairman of the Board legal counsel Stoel Rives LLP, Portland, Oregon Timothy P. Boyle President, Chief Executive Officer Transfer Agent and Registrar Mellon Investor Services LLC 85 Challenger Rd., Overpeck Centre Ridgefield Park, New Jersey...

  • Page 52
    ...5800 Toll Free 1.800.547.8066 www.columbia.com ©2002 Columbia Sportswear Company All Rights Reserved ®Ż Forward-Looking Statements Timothy Boyle's Letter to Shareholders, and Item 1 of Part 1 and Items 7 and 7(a) of Part II of the enclosed Annual Report on Form 10-K (as well as statements made...