Columbia Sportswear 2002 Annual Report Download

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2002฀ANNUAL฀REPORT
Gert฀Boyle,฀Chairman

Table of contents

  • Page 1
    Gert฀Boyle,฀Chairman 2002฀ANNUAL฀REPORT

  • Page 2
    ... image. This facility underscores our commitment to capitalizing on the European opportunity and our dedication to customer service. The new facility, which is approximately 269,000 square feet, will ultimately distribute Columbia's apparel and footwear lines into each of the major European markets...

  • Page 3
    ... for the design, manufacture and marketing of men's, women's and children's leather coats. July฀16,฀2002 Former Eastern Mountain Sports CEO Joins Columbia's Executive Management Team January฀25,฀2002 Columbia Sportswear Company® Sponsored Athlete Reggie Crist Takes Gold at Winter X Games...

  • Page 4
    ..., in Dublin, Ireland. All 1300 Team USA athletes and the 350 Team USA coaches will wear Columbia Sportswear from head to toe. Columbia Sportswear Company® today officially opened its new European distribution facility in Cambrai, France. This 269,000 square foot distribution center underscores the...

  • Page 5
    ... Chief Executive Officer Western Wireless Corporation Chairman T-Mobile USA Director since 1997 Corporate฀Headquarters 14375 NW Science Park Drive Portland, OR 97229 Stephen฀Babson Principal Endeavour Capital Director since 2002 NASDAQ฀Listing The common stock of Columbia Sportswear Company...

  • Page 6
    ... (IRS Employer Identification Number) 14375 NW Science Park Drive Portland, Oregon (503) 985-4000 97229 (Zip Code) (Address of principal executive offices) (Registrant's telephone number, including area code) (Former name, former address and former fiscal year, if changed since last report...

  • Page 7
    ... Vote of Security Holders ...9 Executive Officers and Key Employees of the Registrant ...10 PART II Item 5. Item 6. Item 7. Item 7(a). Item 8. Item 9. Market for Registrant's Common Equity and Related Stockholder Matters ...Selected Financial Data ...Management's Discussion and Analysis of Financial...

  • Page 8
    ... 1. 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 in the world and the...

  • Page 9
    ...our sportswear product offering. Our sportswear line is made up of outdoor sportswear and GRT® (Gear for Rugged Trekking and Travel). The outdoor sportswear product line, consisting primarily of hiking shorts, water sport trunks, fleece and pile products, sweaters, chinos, knit shirts, woven shirts...

  • Page 10
    ... brand casual and outdoor socks, packs and adventure travel bags, small personal leather goods and accessories, thermal tops and bottoms, shoe care products, watches, leather outerwear and sport knives. We also entered into a global licensing agreement for Columbia brand eyewear and a European...

  • Page 11
    ... of style and utility that compete with high-end garments in our market. Our outerwear features include the Columbia Interchange System®, Radial Venting System™, Radial Sleeve™, Stretch Panels, the performance storm hood, and packable and reversible options. The GRT® line offers the Radial Leg...

  • Page 12
    ...compliance with Columbia's Standards of Manufacturing Practices. Our policies require that every factory 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 designed to...

  • Page 13
    ... sales agencies that work with retail accounts varying in size from single specialty store operations to large chains made up of many stores in several locations. Our flagship store in Portland, Oregon is designed to create a distinctive "Columbia" environment, reinforcing the active and outdoor...

  • Page 14
    ... in Strathroy, Ontario. In some instances, we arrange to have products shipped directly from the independent manufacturers to a customer-designated facility. Europe We have European sales offices in France, Germany, and the United Kingdom, with our European headquarters office located in Zurich...

  • Page 15
    ..., our licensees operate in very competitive markets (such as those for watches, leather outerwear, adventure travel bags and socks). We encounter substantial competition in the active outerwear and sportswear business from, among others, The North Face, Inc., (VF Corporation), Marmot Mountain...

  • Page 16
    ... or leased by us. Corporate Headquarters: Portland, Oregon (1 location) - owned Canadian Operation (1): Strathroy, Ontario (1 location) - leased U.S. Distribution Facility: Portland, Oregon (1 location) - owned Europe Distribution Facility (2): Cambrai, France (1 location) - owned (1) Lease expires...

  • Page 17
    ... - Outerwear Merchandising (1) Vice President of Manufacturing and Operations (1) General Manager - Sportswear Merchandising General Manager - Hunting, Fishing and Accessories Merchandising General Manager - Footwear Merchandising (1) These individuals are considered Executive Officers of Columbia...

  • Page 18
    ... Outerwear Merchandising. From 1977 to 1984, Mr. Prentice worked as a sales representative for Gerry Outdoor Products, a skiwear company based in Colorado. Rick D. Carpenter joined Columbia in October 1988 as Inventory Planner and held various management positions in planning and customer operations...

  • Page 19
    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, 2003, there were approximately 193 holders of record and approximately 7,400 beneficial shareholders. ...

  • Page 20
    ... related Notes that appear elsewhere in this Annual Report and Management's Discussion and Analysis of Financial Condition and Results of Operations set forth in Item 7. 2002 Year ended December 31, 2001 2000 1999 (In thousands, except per share amounts) 1998 Statement of Operations Data: Net sales...

  • Page 21
    ... States and Europe, though all geographic markets experienced an increase in both outerwear and sportswear sales. In constant dollar terms, Canadian sales increased 8.1%, European direct sales increased 12.4% and net international sales, excluding Canadian sales and European direct sales, increased...

  • Page 22
    ... of the Columbia brand within the existing customer base in all markets as well as the introduction of Sorel branded footwear, primarily in North America, in fall 2001. Specifically, domestic department store sales increased to approximately 35.2% in 2001 from approximately 30.5% in 2000. By product...

  • Page 23
    ..., France and approximately $11.1 million for other North American distribution related projects as well as maintenance capital requirements. In 2001 our major capital expenditures consisted of the expansion and retrofit of our United States distribution center, the development of our new corporate...

  • Page 24
    from the timing of shipments to wholesale customers for the fall outerwear season. As our sportswear and footwear product lines mature, we expect an increasing impact on seasonal shipments and corresponding working capital requirements. We believe that our liquidity requirements for at least the ...

  • Page 25
    ... In these cases, we estimate the date of receipt by the customer based upon historical and expected delivery times by geographic location. Upon shipment, we also provide for estimated sales returns and miscellaneous claims from customers as reductions to revenues. We base our estimates on historical...

  • Page 26
    ... financial statements about the method of accounting for stock-based employee compensation and the effect of the method used on reported results. We have chosen to continue to account for stock-based compensation using the intrinsic value method prescribed in APB 25 and related interpretations...

  • Page 27
    ... in domestic 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; and financing...

  • Page 28
    ... limited growth opportunities in recent years, and a slowing economy in the United States in 2002 has created additional uncertainties as to our customers and our business. In addition, recent volatility in the global oil markets has resulted in rising fuel prices, which many shipping companies are...

  • Page 29
    ...condition. We Operate in Very Competitive Markets The markets 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 significant competition from global and regional branded apparel and footwear...

  • Page 30
    ...Portland, Oregon; in Canada, we rely primarily on our distribution center in Strathoy, Ontario; and in Europe we distribute our products through two different distribution centers: one in The Netherlands that is owned and operated by an independent logistics company, and the other in Cambrai, France...

  • Page 31
    ... these vendors or their labor practices. If a manufacturer violates labor or other laws, or engages in practices that are not generally accepted as ethical in our key markets, it could have a material adverse effect on our results of operations and financial condition. We Depend on Key Suppliers for...

  • Page 32
    ... to attract and retain key managers, designers, sales people and others. We face intense competition for such individuals worldwide, and there is a significant concentration of well-funded apparel and footwear competitors in and around Portland, Oregon (including NIKE and Adidas). We may not be...

  • Page 33
    ... in the circumstances and include some amounts based on our best estimates and judgments. Other financial information in this report is consistent with these financial statements. Our accounting systems include controls designed to reasonably assure that assets are safeguarded from unauthorized use...

  • Page 34
    ... 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, 2002 and 2001, and the related consolidated statements of operations, shareholders...

  • Page 35
    COLUMBIA SPORTSWEAR COMPANY CONSOLIDATED BALANCE SHEETS (In thousands) December 31, 2002 2001 ASSETS ...comprehensive loss ...Unearned portion of restricted stock issued for future services (Note 11) ...Total shareholders' equity ...Total liabilities and shareholders' equity ...- 159,996 315,243...

  • Page 36
    COLUMBIA SPORTSWEAR COMPANY CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share amounts) Year Ended December 31, 2002 2001 2000 Net sales ...Cost of sales ...Gross profit ...Selling, general, and administrative ...Income from operations ...Interest income ...Interest expense ......

  • Page 37
    COLUMBIA SPORTSWEAR COMPANY CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) Year Ended December 31, 2002 2001 2000 Cash provided by (used in) operating activities: Net income ...$102,518 $ 88,824 $ 58,611 Adjustments to reconcile net income to net cash provided by operating activities: ...

  • Page 38
    COLUMBIA SPORTSWEAR COMPANY CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (In thousands) Unearned Portion of Accumulated Restricted Other Stock Issued Retained Comprehensive For Future Comprehensive Earnings Income (Loss) Services Income $(3,770) $(3,410) $ 58,611 (1,127) (1,023) (1,127) (1,023) $...

  • Page 39
    ... CONSOLIDATED FINANCIAL STATEMENTS NOTE 1-BASIS OF PRESENTATION AND ORGANIZATION Nature of the business: Columbia Sportswear Company is a global leader in the design, manufacture, marketing and distribution of active outdoor apparel, including outerwear, sportswear, footwear, and related accessories...

  • Page 40
    COLUMBIA SPORTSWEAR COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) Inventories: Inventories are carried at the lower of cost or market. Cost is determined using the first-in, first-out method. The Company periodically reviews its inventories for excess, close-out or slow moving items...

  • Page 41
    COLUMBIA SPORTSWEAR COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) Revenue Recognition: The Company records wholesale and licensed product revenues when title passes and the risks and rewards of ownership have passed to the customer, based on the terms of sale. Title generally passes...

  • Page 42
    ... prior to the related advertisement being run. Advertising expense was $36,273,000, $35,011,000 and $27,343,000 for the years ended December 31, 2002, 2001, and 2000, respectively. Product warranty: The Company's outerwear and Sorel products carry lifetime limited warranty provisions for defects...

  • Page 43
    ... statements about the method of accounting for stock-based employee compensation and the effect of the method used on reported results. The Company has chosen to continue to account for stock-based compensation using the intrinsic value method prescribed in APB 25 and related interpretations...

  • Page 44
    COLUMBIA SPORTSWEAR COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) guarantor's obligation should be applied on a prospective basis to guarantees issued after December 31, 2002. The Company does not believe that the provisions of FIN 45 will have a material effect on its financial ...

  • Page 45
    COLUMBIA SPORTSWEAR COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) NOTE 5-SHORT-TERM BORROWINGS AND CREDIT LINES The Company has available an unsecured and committed operating line of credit providing for borrowings in an aggregate amount not to exceed at any time outstanding (1) $50...

  • Page 46
    ...expansion of the Company's distribution center in Portland, Oregon. The Senior Promissory Notes require the Company to comply with certain ratios related...8-SHAREHOLDERS' EQUITY On May 16, 2002, the shareholders of the Company approved an increase in the number of authorized shares of common stock ...

  • Page 47
    COLUMBIA SPORTSWEAR COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) On June 9, 1999, the shareholders of the Company approved the 1999 Employee Stock Purchase Plan ("ESPP"). There are 750,000 shares of common stock authorized for issuance under the ESPP, which allows qualified ...

  • Page 48
    COLUMBIA SPORTSWEAR COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) The following is a reconciliation of the normal expected statutory federal income tax rate to the effective rate reported in the financial statements: Year ended December 31 2002 2001 2000 (percent of income) ...

  • Page 49
    COLUMBIA SPORTSWEAR COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) amortized to compensation expense as shares are earned during the vesting period. Compensation expense related to the Participation Plan and the 1996 conversion totaled $682,000 for each of the years ended December 31...

  • Page 50
    COLUMBIA SPORTSWEAR COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) The following table summarizes the stock option activity under the Company's option plan: Outstanding Weighted Average Number of Exercise Shares Price Exercisable Weighted Average Number of Exercise Shares Price ...

  • Page 51
    COLUMBIA SPORTSWEAR COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) The following table summarizes information about stock options outstanding at December 31, 2002: Options Outstanding Weighted Average Remaining Contractual Life Number of Shares (yrs) Options Exercisable Range of ...

  • Page 52
    ...STATEMENTS-(Continued) NOTE 15-SEGMENT INFORMATION The Company 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...

  • Page 53
    ...movements. The Company manages a portion of these exposures with short-term strategies after giving consideration to market conditions, contractual agreements, anticipated sale and purchase transactions, and other factors. Firmly committed and anticipated transactions and the related receivables and...

  • Page 54
    ...22 0.16 1.24 0.61 Earnings per share have been restated to reflect 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. Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE...

  • Page 55
    ... shareholders (the "2003 Proxy Statement") to be filed with the Securities and Exchange no later than 120 days after the end of our fiscal year ended December 31, 2002. See Item 4(a) of this Annual Report on Form 10-K for information regarding our executive officers. Item 11. EXECUTIVE COMPENSATION...

  • Page 56
    ...COLUMBIA SPORTSWEAR COMPANY By: /s/ BRYAN L. TIMM Bryan L. Timm Chief Financial Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report... Executive Officer and Director (Principal Executive Officer) Chief Financial Officer (Principal Financial and Accounting Officer)...

  • Page 57
    ...certify that: 1. 2. I have reviewed this Annual Report on Form 10-K of Columbia Sportswear Company; Based on my knowledge, this Annual Report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances...

  • Page 58
    ...certify that: 1. 2. I have reviewed this Annual Report on Form 10-K of Columbia Sportswear Company; Based on my knowledge, this Annual Report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances...

  • Page 59
    ... Agreement Form of Executive Stock Option Agreement (incorporated by reference to exhibit 10.3 (a) to the Company's Annual Report on Form 10-K for the year ended December 31, 2000) Credit Agreement between the Hong Kong and Shanghai Banking Corporation Limited and the Company dated September 17...

  • Page 60
    Exhibit Index 10.12(a) Lease Amending Agreement between B.A.R.K. Holdings, Inc. and Columbia Sportswear Canada Limited, dated January 1, 2002 (incorporated by reference to exhibit 10.12(a) to the Company's Annual Report on Form 10-K for the year ended December 31, 2001) Indemnity Agreement between...

  • Page 61
    14375 NW Science Park Drive Portland, OR 97229-5418 Phone 503.985.4000 Facsimile 503.985.5800 Toll Free 1.800.547.8066 columbia.com 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 (...