Columbia Sportswear 2011 Annual Report Download - page 20

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 have
had 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 sales
declines and reduced profitability, 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 condition, 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 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.
We May be Adversely Affected by Retailer Consolidation
When our wholesale customers combine their operations through mergers, acquisitions, or other
transactions, their consolidated order volume may decrease while their bargaining power and the competitive
threat they pose by marketing products under their own private labels may increase. Some of our significant
customers have consolidated their operations in the past, which in turn has had a negative effect on our business.
Future retailer consolidations could have a material adverse effect on our financial condition, results of
operations or cash flows.
We Rely on Technical Innovation and Functional Design to Compete in the Market for our Products
Technical innovation and functional design is essential to distinguish our products in the marketplace and
achieve commercial success. Research and development plays a key role in technical innovation. We rely upon
specialists in the fields of chemistry, biochemistry, engineering, industrial design, electronics and related fields,
guided by consumer feedback, to develop and test innovative performance products. Although we are committed
to designing innovative and functional products that deliver relevant performance benefits to consumers who
participate in a wide range of competitive and recreational outdoor activities, if we fail to introduce technical
innovation in our products that address consumers’ performance expectations, demand for our products could
decline.
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