Columbia Sportswear 2001 Annual Report Download - page 27

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.
Our Success Depends on our Proprietary Rights
We believe our registered and common law trademarks have signiÑcant value and are important to our
ability to create and sustain demand for our products. We also place signiÑcant value on our trade dress, the
overall appearance 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 through our
licensing program. Although we have not been materially inhibited from selling products in connection with
trademark or trade dress disputes, we could encounter more obstacles as we expand our product line and the
geographic scope of our marketing. From time to time, we discover products that are counterfeit reproductions
of our products or design ""knock oÅs.'' If we are unsuccessful in challenging a party's products on the basis of
trademark or design infringement, continued sales of these products could adversely impact our sales and our
brand and result in the shift of consumer preference away from our products. The actions we take to establish
and protect trademarks and other proprietary rights may not be adequate to prevent imitation of our products
by others or to prevent others from seeking to block sales of our products as violations of proprietary rights. In
addition, we could incur substantial costs in legal actions relating to our use of intellectual property or the use
of our intellectual property rights by others.
We Depend on Key Personnel
Our future success will depend in part on the continued service of key personnel, particularly Timothy
Boyle, our President and Chief Executive OÇcer, and Gert Boyle, our Chairman and widely recognized
advertising spokesman. Our future success will also depend on our ability to attract and retain key managers,
designers, sales people and others. We face intense competition for such individuals worldwide, and there is a
signiÑcant concentration of well-funded apparel and footwear competitors in and around Portland, Oregon
(including Nike and Adidas). We may not be able to attract or retain such employees, and our failure to do so
could have a material adverse aÅect on our business.
Our Business Is AÅected by Seasonality and Fluctuations in Operating Results
Our results of operations have Öuctuated and are likely to Öuctuate signiÑcantly from period to period.
Our products are marketed on a seasonal basis, with a product mix now weighted substantially toward the fall
season. Our results of operations for the quarter ending September 30 in the past have been much stronger
than the results for the other quarters. This seasonality, along with other factors that are beyond our control,
including general economic conditions, changes in consumer behavior, weather conditions, availability of
import quotas and currency exchange rate Öuctuations, could adversely aÅect our business and cause our
results of operations to Öuctuate. Results of operations in any period should not be considered indicative of the
results to be expected for any future period.
We Face Risks of Product Liability and Warranty Claims
Our products are used in outdoor activities, sometimes in severe conditions. Although we have not
experienced any signiÑcant expense as the result of product recalls or product liability claims, this could occur
in the future and have a material adverse aÅect on our business. A majority of our products are backed by a
lifetime limited warranty for defects in quality and workmanship. We maintain a warranty reserve for future
warranty claims, but the actual costs of servicing future warranty claims could exceed the reserve and have a
material adverse aÅect on us.
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