Columbia Sportswear 2009 Annual Report Download - page 18

We May be Adversely Affected by the Financial Health of our Customers
Sluggish economies and consumer uncertainty regarding future economic prospects in our key markets are
having an adverse effect on the financial health of our customers, some of whom have filed or may file for
protection under bankruptcy laws, which may in turn have a material adverse effect on our results of operations
and financial condition. We extend credit to our customers based on an assessment of the customer’s financial
condition, generally without requiring collateral. To assist in the scheduling of production and the shipping of
seasonal products, we offer customers discounts for placing advance orders and extended payment terms for
taking delivery before the peak shipping season. These extended payment terms increase our exposure to the risk
of uncollectible receivables. In addition, we face increased risk of order reduction or cancellation or reduced
availability of credit insurance coverage when dealing with financially ailing retailers or retailers struggling with
economic uncertainty. Some of our significant wholesale customers have liquidated or reorganized, while others
have had financial difficulties in the past and have recently experienced tightened credit markets and declining
sales and profitability on a comparable store basis, which in turn has an adverse effect on our business. We may
reduce our level of business with customers experiencing financial difficulties and may not be able to replace that
business with other customers, which could have a material adverse effect on our financial position, results of
operations or cash flows.
We May be Adversely Affected by Global Credit Market Conditions
Economic downturns and economic uncertainty generally affect global credit markets. Our vendors,
customers and other participants in our supply chain may require access to credit markets in order to do
business. Credit market conditions may slow our collection efforts as customers find it more difficult to obtain
necessary financing, leading to higher than normal accounts receivable. This could result in greater expense
associated with collection efforts and increased bad debt expense. Credit conditions may impair our vendors’
ability to finance the purchase of raw materials or general working capital needs to support our production
requirements, resulting in a delay or non-receipt of inventory shipments during key seasons.
Historically we have limited our reliance on long-term debt to finance our working capital, capital
expenditures and investing activity requirements. We expect to fund our future capital expenditures with existing
cash, expected operating cash flows and credit facilities, but if the need arises to finance additional expenditures,
we may need to seek additional funding. Our ability to obtain additional financing will depend on many factors,
including prevailing market conditions, our financial condition, and our ability to negotiate favorable terms and
conditions. Financing may not be available on terms that are acceptable or favorable to us, if at all.
Our Results of Operations Could be Materially Harmed If We Are Unable to Accurately Forecast Demand
for Our Products
Many factors may significantly affect demand for our products, including, among other things, economic
conditions, fashion trends, consumer preferences and weather, making it difficult to accurately forecast demand
for our products and our future results of operations. To minimize our purchasing costs, the time necessary to fill
customer orders and the risk of non-delivery, we place some orders for our products with independent factories
prior to receiving all of our customers’ orders and we maintain an inventory of various products that we
anticipate will be in greater demand. In addition, customers are generally allowed to cancel orders prior to
shipment with sufficient notice. During periods of weak economic conditions we may experience a significant
increase in the volume of order cancellations by our customers, including cancellations resulting from the
bankruptcy, liquidation or contraction of certain customers’ operations. Particularly in light of current economic
conditions, we may not be able to sell all of the products we have ordered from independent factories or that we
have in our inventory. Inventory levels in excess of customer demand may result in inventory write-downs and
the sale of excess inventory at discounted prices through discount retail channels, which could have a material
adverse effect on our brand image, financial condition, results of operations or cash flows. For certain demand
planning functions, we rely on manual processes and judgment that are difficult to control and are subject to
human error.
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