Columbia Sportswear 2003 Annual Report Download

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Table of contents

  • Page 1

  • Page 2
    ...Our new 269,000 sq. ft. distribution center in Cambrai, France began operating in January 2003, and we are currently providing an exceptional level of service to our customers in direct markets in Europe from this facility. Columbia is rapidly becoming a dominant pan-European outdoor lifestyle brand...

  • Page 3
    ...the design, manufacture and marketing of camping tents, sleeping bags and innovative screened gazebos. The collection will debut in a select number of sporting goods stores for the 2004 spring season. Columbia Sportswear Company, a global leader in the active outdoor apparel and footwear industries...

  • Page 4
    ... marketing of men's, women's and children's socks. The Sorel branded sock collection will be available for fall 2004. Columbia Sportswear Company, a global leader in the active outdoor apparel and footwear industries, today announced record third quarter net sales of $373.4 million for the quarter...

  • Page 5
    ... (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 6
    COLUMBIA SPORTSWEAR COMPANY DECEMBER 31, 2003 TABLE OF CONTENTS Item Page PART I Item 1. Item 2. Item 3. Item 4. Item 4(a). Business ...Properties ...Legal Proceedings ...Submission of Matters to a Vote of Security Holders ...Executive Officers and Key Employees of the Registrant ...PART II Item 5....

  • Page 7
    ... I Item 1. General Founded in 1938 in Portland, Oregon, as a small family-owned, regional hat distributor, Columbia Sportswear Company has grown to become a global leader in design, sourcing, marketing and distribution of active outdoor apparel and footwear, with operations in North America, Europe...

  • Page 8
    ... elite mountaineering athletes around the globe. Hunting and fishing products constitute one of our longest running product lines in the outerwear category. These merchandise offerings include apparel for the serious sportsman engaged in hunting and fishing activities. Parkas, shells, vests, liners...

  • Page 9
    ...majority of our sportswear sales are to sporting goods and specialty outdoor stores, department stores are becoming an increasingly important part of our distribution chain. In 2003, our Sorel brand launched a traditional workwear apparel line designed for work and extended outdoor wear applications...

  • Page 10
    ... Columbia brand tent and sleeping bag licensee will begin shipping these products in spring 2004 to locations across North America. We expect the new home furnishing collection to begin shipping in the fall of 2004. Advertising, Marketing, and Promotion Columbia's unique, global advertising campaign...

  • Page 11
    ...of speculative inventory into our business model. Moreover, 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, athletes and consumers to...

  • Page 12
    ... apparel distributors. By having Columbia employees in regions where we source our products, we enhance our ability to monitor factories to ensure their compliance with Columbia's Standards of Manufacturing Practices. Our policies require that every factory comply with a code of conduct relating...

  • Page 13
    ... companies that feature high end outdoor equipment and apparel. In Canada, Mountain Hardwear products are sold through an independent distributor in Canada. Our flagship store in Portland, Oregon is designed to create a distinctive "Columbia" environment, reinforcing the active and outdoor image...

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

  • Page 15
    ... 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 Ltd., Woolrich Woolen...

  • Page 16
    ... factors in the market for activewear are price, brand name, functionality, durability and style and that our product offerings are well positioned within the market. Mountain Hardwear equipment (tents and sleeping bags) compete directly with such companies as The North Face, Inc., Sierra Designs...

  • Page 17
    ... President of Mountain Hardwear, Inc. General Manager - Hunting, Fishing and Accessories Merchandising General Manager - Sportswear Merchandising (1) These individuals are considered Executive Officers of Columbia Sportswear. Gertrude Boyle has served as Chairman of the Board of Directors...

  • Page 18
    ... of Sales and Marketing and a member of the Board of Directors of The North Face, Inc. David W. Robinson joined Columbia in March 1995 as Senior Merchandiser of Hunting, Fishing and Accessories within Outerwear Merchandising and in December 1999 was named General Manager - Hunting, Fishing, and...

  • Page 19
    ...AND RELATED STOCKHOLDER MATTERS Our Common Stock is listed on the Nasdaq National Market and trades under the symbol "COLM." At February 20, 2004, there were approximately 213 holders of record and approximately 14,000 beneficial shareholders. Following are the quarterly high and low closing prices...

  • Page 20
    ... in this annual report and Management's Discussion and Analysis of Financial Condition and Results of Operations set forth in Item 7. 2003 Year ended December 31, 2002 2001 2000 (In thousands, except per share amounts) 1999 Statement of Operations Data: Net sales ...Cost of sales ...Gross profit...

  • Page 21
    ...committed to our four-pronged growth strategy of enhancing the retail productivity of our customers, leveraging the Columbia brand in international markets, further developing our existing merchandise categories and selectively broadening our retail distribution. With our well developed sourcing and...

  • Page 22
    ... line will offer new products at better value for the consumer, with input from our retailers to enhance the line. We opened a European distribution center in Cambrai, France in 2003 to support our international growth. The distribution center operated effectively in each of our two major shipping...

  • Page 23
    ... during 2003. Net sales from equipment, a new product category resulting from our acquisition of Mountain Hardwear, represented $4.7 million of our total net sales during 2003. The equipment product category consists primarily of tents and sleeping bags. Net sales in the United States increased...

  • Page 24
    ... the introduction of new limited-production "Columbia Edition" Jeep vehicles, to provide broad brand exposure for Columbia in the United States and Canada. Through the program, we received national media exposure expanding Columbia brand awareness. The increase in general and administrative expenses...

  • Page 25
    ... for the increased net sales of outerwear was the expansion of our business and the acceptance of our products in international markets. To a lesser degree, the introduction of new product styles also contributed to increased sales of outerwear units. Sportswear net sales increased 5.3% to $245...

  • Page 26
    ... factor driving the improved gross margin for 2002. To a lesser degree, effective inventory management and favorable weather conditions in the northeastern U.S. allowed for the timely shipping of full-priced fall products and improved margins on off-price selling activities. Selling, General and...

  • Page 27
    ...acquisition of Mountain Hardwear, net of cash acquired, and $17.1 million for capital expenditures including approximately $10.4 million related to the initial phase of construction of a distribution center in Henderson County, Kentucky. Cash used in financing activities was $5.3 million in 2003 and...

  • Page 28
    ...generally accepted in the United States. Quantitative and Qualitative Disclosures About Market Risk We are exposed to market risks from fluctuations of foreign currency exchange rates and interest rates as a result of our international sales, production and funding requirements. Our policy is to use...

  • Page 29
    ... sale. Title generally passes upon shipment or upon receipt by the customer depending on the country of the sale and the agreement with the customer. Retail store revenues are recorded at the time of sale. In some countries outside of the U.S., predominantly where we sell directly in Western Europe...

  • Page 30
    ..., "Accounting for Derivative Instruments and Hedging Activities." SFAS No. 149 is effective for contracts and hedging transactions executed or modified after June 30, 2003. The adoption of this statement has not had a material effect on our financial position, results of operations or cash flows. 25

  • Page 31
    ... international markets; sales 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 and working...

  • Page 32
    ... example, has limited growth opportunities in recent years, and a slower economy in the United States in 2002 and 2003 has created additional uncertainties for our customers and our business. In addition, continued volatility in the global oil markets has resulted in rising fuel prices, which many...

  • Page 33
    ... outerwear, sportswear, rugged footwear, tents and sleeping bags are highly competitive, as are the markets for our licensed products. In each of our geographic markets, we face significant competition from global and regional branded apparel and footwear companies. In many instances, retailers who...

  • Page 34
    ...timely performance of services by third parties (including those involved in shipping product to and from our distribution facilities). In the United States, we rely primarily on our distribution center in Portland, Oregon; in Canada, we rely primarily on our distribution center in Strathoy, Ontario...

  • Page 35
    ... condition. Labor Disruptions at Ports May Adversely Affect Our Business Our business depends on our ability to source and distribute products in a timely manner. As a result, we rely on the free flow of goods through open and operational ports worldwide, particularly in the western United States...

  • Page 36
    ...operations and financial condition. 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 Officer, and Gertrude Boyle, our Chairman and widely recognized advertising spokesperson. Our...

  • Page 37
    ... this reference. Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA Our management is responsible for the information and representations contained in this report. The financial statements have been prepared in conformity with accounting principles generally accepted in the United States, which we...

  • Page 38
    ... 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 (the "Company") as of December 31, 2003 and 2002, and the related consolidated statements of...

  • Page 39
    COLUMBIA SPORTSWEAR COMPANY CONSOLIDATED BALANCE SHEETS (In thousands) December 31, 2003 2002 ASSETS Current Assets: Cash and cash equivalents ...Accounts receivable, net (Note 2) ...Inventories, net (Note 4) ...Deferred tax asset (Note 10) ...Prepaid expenses and other current ...

  • Page 40
    COLUMBIA SPORTSWEAR COMPANY CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share amounts) Year Ended December 31, 2003 2002 2001 Net sales ...Cost of sales ...Gross profit ...Selling, general, and administrative ...Net licensing income ...Income from operations ...Interest income ...

  • Page 41
    COLUMBIA SPORTSWEAR COMPANY CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) Year Ended December 31, 2003 2002 2001 Cash provided by (used in) operating activities: Net income ...$120,121 $102,518 $ 88,824 Adjustments to reconcile net income to net cash provided by operating activities: ...

  • Page 42
    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 $ (5,920) $(2,728) Common Stock Shares Outstanding Amount ...

  • Page 43
    ... 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. Basis of presentation: The consolidated financial statements include the...

  • Page 44
    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 45
    ... it made such determination. Cost of sales: The expenses that are included in cost of sales include all direct product and conversion-related costs, and costs related to shipping, duties and importation. Product warranty costs and specific provisions for excess, closeout or slow moving inventory are...

  • Page 46
    COLUMBIA SPORTSWEAR COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) Selling, general and administrative expense: Selling, general and administrative expense consists of commissions, advertising, other selling costs, personnel related costs, planning, receiving finished goods, ...

  • Page 47
    COLUMBIA SPORTSWEAR COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) Stock-based compensation: The Company has elected to follow the accounting provisions of Accounting Principles Board Opinion No. 25 ("APB 25"), "Accounting for Stock Issued to Employees", for stock-based compensation ...

  • Page 48
    COLUMBIA SPORTSWEAR COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) Recent Accounting Pronouncements: In November 2002, the Financial Accounting Standards Board ("FASB") issued FASB Interpretation No. 45, "Guarantor's Accounting and Disclosure Requirements for Guarantees, Including ...

  • Page 49
    COLUMBIA SPORTSWEAR COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) technically advanced equipment and apparel for outdoor enthusiasts and professionals. The acquisition was accounted for under the purchase method of accounting and the results of operations of Mountain Hardwear have ...

  • Page 50
    ...of $83,005,000 for firm purchase orders placed under the import line of credit facility. The Company also has available an unsecured and uncommitted $125,000,000 import letter of credit line subject to annual renewal. At December 31, 2003, the Company had outstanding letters of credit of $27,089,000...

  • Page 51
    ... maturing August 11, 2008. Proceeds from the notes were used to finance 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 before interest, taxes, depreciation and...

  • Page 52
    ... number of authorized shares of common stock from 50,000,000 shares to 125,000,000 shares. At December 31, 2003 and 2002, 40,253,235 and 39,737,065 shares of common stock were issued and outstanding, respectively. On June 9, 1999, the Company's shareholders approved the 1999 Employee Stock Purchase...

  • Page 53
    COLUMBIA SPORTSWEAR COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) In 2003, the Company reduced accrued income taxes by approximately $2,000,000 due to a reduction in accrued income taxes related to favorable outcomes of various federal, state and international income tax audits ...

  • Page 54
    ... liabilities in the consolidated balance sheet at December 31, 2003. NOTE 11-PROFIT SHARING PLAN The Company has a 401(k) profit-sharing plan, which covers substantially all employees with more than ninety days of service. The Company may elect to make discretionary matching and/or non-matching...

  • Page 55
    ... generally become exercisable over a period of four years beginning one year after the date of grant and expire ten years from the date of the grant. The following table summarizes the stock option activity under the Company's option plan: Outstanding Weighted Average Number of Exercise Shares Price...

  • Page 56
    COLUMBIA SPORTSWEAR COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) The Company has computed, for pro forma disclosure purposes, the value of all stock options granted during 2003, 2002 and 2001 using the Black-Scholes option pricing model as prescribed by SFAS No. 123 using the ...

  • Page 57
    COLUMBIA SPORTSWEAR COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) Earnings per share and weighted average shares outstanding above have been restated to reflect the threefor-two stock split that was distributed on June 4, 2001, to all shareholders of record at the close of business ...

  • Page 58
    COLUMBIA SPORTSWEAR COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) NOTE 16-SEGMENT INFORMATION The Company operates predominantly in one industry segment: the design, production, marketing and selling of active outdoor apparel, including outerwear, sportswear, footwear, related ...

  • Page 59
    ...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 60
    ...to our management, including our chief executive officer and chief financial officer, as appropriate to allow timely decisions regarding required disclosure. There has been no change in our internal control over financial reporting that occurred during our fiscal quarter ended December 31, 2003 that...

  • Page 61
    ... 2004 Proxy Statement entitled "Executive Compensation" is incorporated herein by reference. See Item 5 of this Annual Report on Form 10-K for information concerning our equity compensation plans. Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS...

  • Page 62
    ... the undersigned, thereunto duly authorized, as of March 3, 2004. COLUMBIA SPORTSWEAR COMPANY By: /s/ BRYAN L. TIMM Bryan L. Timm Vice President and Chief Financial Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons on...

  • Page 63
    ...Other Accounts Deductions (a) Balance at End of Period Description Year Ended December 31, 2003: Allowance for doubtful accounts ...Product warranty ...Year Ended December 31, 2002: Allowance for doubtful accounts ...Product warranty ...Year Ended December 31, 2001: Allowance for doubtful accounts...

  • Page 64
    ... 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 65
    ...B.A.R.K. Holdings, Inc. and Columbia Sportswear Canada Limited, dated January 3, 1994 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...

  • Page 66
    ... Executive Officer Western Wireless Corporation Chairman T-Mobile USA Director since 1997 Corporate฀Headquarters 14375 NW Science Park Drive Portland, OR 97229 Stephen฀E.฀Babson Principal Endeavour Capital Director since 2002 2,3 NASDAQ฀Listing The common stock of Columbia Sportswear...

  • Page 67
    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 other statements made from time to time by Columbia Sportswear's management) contain forward-looking statements that are ...