Columbia Sportswear 2003 Annual Report Download - page 2

Dear฀Fellow฀Shareholders,
We completed our fifth anniversary as a publicly traded company during 2003, our 68th year in business.
During the past five years, in both good and poor economic conditions, we have articulated and executed
consistent growth strategies. These strategies include enhancing retail productivity for our customers,
developing further our sportswear and footwear product categories, leveraging our brands in international
markets, broadening our retail distribution selectively and expanding the global awareness of our brands
through profitable license agreements.
Our consistent execution of these growth strategies has resulted in exceptional financial results. Since our
initial public offering, net sales have more than doubled to $951.8 million in 2003, while operating margins
have expanded 7.2 percentage points since 1999 to an exceptional 20.0 percent. When compared to the prior year, net sales increased
16.6 percent and net income by 17.2 percent to a company record $120.1 million during 2003. We generated $121.1 million in
operating cash flow and committed more than $17.1 million of capital expenditures to new distribution and maintenance projects
during the year. Our balance sheet at the end of the year was solid, with $264.6 million or $6.57 per share in cash and cash
equivalents, and 2.5 percent in long-term debt to equity.
Our strategy of diversifying revenues by developing our sportswear and footwear product categories was a key growth driver in
2003, and further established Columbia as a complete outdoor lifestyle brand. Deep and broad distribution of key sportswear
styles, particularly in men’s and women’s pants, enhanced strong growth across this category, with sales surging 27.0 percent to
$311.3 million. I am particularly pleased with the renewed strength of our footwear product category, which increased 35.1 percent
to $148.6 million in 2003. We made significant strides toward becoming a year-round resource for our customers by introducing
expanded spring product lines in categories such as sandals, light hikers, trail running and lifestyle casual shoes. I believe that the
footwear category may provide the largest product opportunity for our company long term.
During 2003, we began construction of a new distribution center in Henderson County, Kentucky, to improve proximity to the
majority of our footwear customers, facilitating shorter shipping times and reducing customer shipping costs. While focused on
footwear distribution, the new approximate 450,000 sq. ft. facility will be engineered to handle all product categories and is expected
to be operational in 2005.
International expansion was another key growth driver during 2003. International sales, strengthened by foreign currency
valuations, were strong in all product categories. I believe that Europe is our most important growth opportunity among
international markets for the foreseeable future, and I am encouraged by the level of acceptance our brands have experienced in
this market. 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 as we continue to expand our European market share.
Significant strides in executing our other key growth strategies were made during 2003. We selectively broadened our retail
distribution in the department store channel by opening and further expanding new regional department stores, both in the U.S.
and internationally. Substantial investments in concept shops and point of purchase displays were made to enhance sell through of
our products at higher margins for the retailer. We also extended our brands to complementary product lines by signing three new
licensing agreements during the year.
While not a growth strategy, our balance sheet and cash position provide the financial strength to make opportunistic acquisitions.
During 2003, we acquired Mountain Hardwear, Inc., a premier apparel and equipment brand distributed primarily through specialty
ski and outdoor retailers. Mountain Hardwear will remain keenly focused on designing and marketing innovative, technical,
high-end products for this channel, both domestically and internationally, while leveraging Columbia’s financial strength and
sourcing and distribution infrastructure. Our acquisition of Mountain Hardwear and the continued development of our
Sorel brand provide significant opportunities to broach additional markets and distribution channels.
In closing, I remain committed to consistent execution of our growth strategies, as we continue to develop as a global leader in the
design and distribution of high quality outdoor apparel and footwear. I am appreciative of the efforts of our dedicated employees
for their hard work throughout the year. Thank you for your continued support, and I look forward to updating you on Columbia
Sportswear’s progress during 2004 in next year’s report.
Sincerely,
Timothy P. Boyle
President and Chief Executive Officer