Columbia Sportswear 2004 Annual Report Download - page 12

have approved, at prices and on terms negotiated by either the manufacturer or by us. A substantial portion of our
merchandise is manufactured under this arrangement. In the second method, sometimes referred to as “cut, make,
pack, and quota” and used principally for production in China, we directly purchase the raw materials from
suppliers, assure that the independent manufacturers have the necessary availability of import quotas, and ship
the materials in a “kit,” together with patterns, samples, and most of the other necessary items, to the independent
manufacturer to produce the finished garment. Although this second arrangement advances the timing for
inventory purchases and exposes us to additional risks before a garment is manufactured, we believe that it
further increases our manufacturing flexibility and frequently provides us with a cost advantage over other
production methods.
We transact business on an order-by-order basis without exclusive commitments or arrangements to
purchase from any single vendor. We believe, however, that long term relationships with our vendors will help to
ensure that adequate sources are available to produce a sufficient supply of goods in a timely manner and on
satisfactory economic terms in the future.
By sourcing the bulk of our products outside the United States, we are subject to risks of doing business
abroad. These risks include governmental restrictions, political or labor disturbances and foreign exchange rate
fluctuations. In particular, we must continually monitor import requirements and transfer production as necessary
to lessen the potential impact from increased tariffs or quota restrictions that may be periodically imposed.
We have from time to time experienced difficulty satisfying our raw material and finished goods
requirements, and any similar future difficulties could adversely affect our business operations. Our four largest
factory groups accounted for approximately 17% of our total global production for 2004, and a single vendor
supplies substantially all of the zippers used in our products. These companies, however, have multiple factory
locations, many of which are in different countries, which reduces the risk that unfavorable conditions at a single
factory or location will have a material adverse effect on our business.
Sales and Distribution
Our products are sold to approximately 12,000 specialty and department store retailers throughout the
world. Our strategy for continued growth is to focus on:
• enhancing the productivity of existing retailers;
• expanding distribution in international markets;
• further developing the existing merchandise categories; and
• increasing our penetration into the department store and specialty footwear channels.
The following table presents net sales to unrelated entities and approximate percentages of net sales by
geographic region for each of the last three years (dollars in millions):
2004 2003 2002
Net Sales % of Sales Net Sales % of Sales Net Sales % of Sales
United States ........................... $ 666.7 60.9% $596.8 62.7% $557.5 68.3%
Canada................................ 116.9 10.7 106.7 11.2 86.7 10.6
Europe ................................ 170.3 15.5 135.2 14.2 95.9 11.8
Other international (1) .................... 141.4 12.9 113.1 11.9 76.2 9.3
Total ............................. $1,095.3 100.0% $951.8 100.0% $816.3 100.0%
(1) Includes direct sales in Japan, Korea and to third-party distributors in Europe and elsewhere.
See Note 16 of Notes to Consolidated Financial Statements for net sales, income before income tax,
identifiable assets, interest expense, and depreciation and amortization by geographic segment.
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