Columbia Sportswear 2010 Annual Report Download - page 17

integrate business acquisitions. These business initiatives involve many risks and uncertainties that, if not
managed effectively, may have a material adverse effect on our financial condition, results of operations or cash
flows.
Our business strategies and related increased expenditures could also cause our operating margin to decline
if we are unable to offset our increased spending with increased sales or gross margins, or comparable reductions
in other operating costs. If our sales or gross margins decline or fail to grow as planned and we fail to sufficiently
leverage our operating expenses, our profitability will decline. This could result in a decision to delay, reduce,
modify or terminate our strategic business initiatives, which could have a material adverse effect on our financial
condition, results of operations or cash flows.
We Depend on Independent Factories
Our products are produced by independent factories worldwide. We do not own or operate any production
facilities. Although we enter into purchase order commitments with these independent factories each season, we
generally do not maintain long-term manufacturing commitments with them. Without long-term or reserve
commitments, in a capacity-constrained environment, there is no assurance that we will be able to secure
adequate or timely production capacity or favorable pricing if growth or product demand differs from our
forecasts. Independent factories may fail to perform as expected or our competitors may obtain production
capacities that effectively limit or eliminate the availability of these resources to us. If an independent
manufacturer fails to ship orders in a timely manner or to meet our standards or if we are unable to obtain
necessary capacities, we may miss delivery deadlines or incur additional costs, which may result in cancellation
of orders, refusal to accept deliveries, a reduction in purchase prices or increased costs, any of which could have
a material adverse effect on our financial condition, results of operations or cash flows.
Reliance on independent factories also creates quality control risks. In a capacity-constrained environment,
we may need to use sub-contracted manufacturers to fulfill demand and these manufacturers may have less
experience producing our products or lower overall capabilities, which could result in compromised quality of
our products. A failure in our quality control program may result in diminished product quality, which in turn
could result in increased order cancellations and returns, decreased consumer demand for our products, or
product recalls (or other regulatory actions), any of which could have a material adverse effect on our financial
condition, results of operations or cash flows.
If an independent manufacturer violates labor or other laws, or engages in practices that are not generally
accepted as ethical in our key markets, we may be subject to production disruptions or significant negative
publicity that could result in long-term damage to our brand images, consumer demand for our products may
decrease, and in some circumstances parties may attempt to assert that we are liable for the independent
manufacturer’s practices, any of which could have a material adverse effect on our financial condition, results of
operations or cash flows.
We May be Adversely Affected by Volatility in Global Production and Transportation Costs and Capacity
Our product costs are subject to substantial fluctuation based on:
• Availability and quality of raw materials;
• The prices of oil, cotton and other raw materials whose prices are determined by global commodity
markets and can be very volatile;
• Changes in labor markets and wage rates paid by our independent factory partners, which are often
mandated by centralized governments in the countries where our products are manufactured,
particularly in China and Vietnam;
• Interest rates and currency exchange rates;
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