Columbia Sportswear 2011 Annual Report Download - page 22

necessary to defend against such claims or to enforce and protect our intellectual property rights. Intellectual
property litigation may be costly and may divert management’s attention from the operation of our business.
Adverse determinations in any litigation may result in the loss of our proprietary rights, subject us to significant
liabilities or require us to seek licenses from third parties, which may not be available on commercially
reasonable terms, if at all. Any of these outcomes may have a material adverse effect on our financial condition,
results of operations or cash flows.
Our Success Depends on Our Distribution Facilities
Our ability to meet customer expectations, manage inventory, complete sales and achieve objectives for
operating efficiencies depends on the proper operation of our existing distribution facilities, the development or
expansion of additional distribution capabilities and the timely performance of services by third parties, including
those involved in shipping product to and from our distribution facilities. In the United States, we rely primarily
on our distribution centers in Portland, Oregon and Robards, Kentucky; in Canada, we rely primarily on our
distribution facilities in Strathroy, Ontario; in Europe, we rely primarily on our distribution center in Cambrai,
France; in Japan, we rely primarily on a third-party logistics distribution provider in Tokyo; and in Korea, we
rely primarily on leased distribution facilities near Seoul that we manage and operate.
Our distribution facilities in the United States and France are highly automated, which means that their
operations are complicated and may be subject to a number of risks related to computer viruses, the proper
operation of software and hardware, electronic or power interruptions, and other system failures. Risks associated
with upgrading or expanding these facilities may significantly disrupt or increase the cost of our operations. For
example, in addition to supporting our traditional wholesale business, our existing distribution facilities have
been modified to enable them to also support our new e-commerce sales in the United States. Failure to
successfully maintain and update these modifications could disrupt our wholesale and e-commerce shipments
and may have a material adverse effect on our financial condition, results of operations or cash flows.
The fixed costs associated with owning, operating and maintaining these large, highly-automated
distribution centers in the United States and France during a period of economic weakness or declining sales
could result in lower operating efficiencies and financial deleverage. This fixed cost structure may make it
difficult for us to maintain profitability if sales volumes decline for an extended period of time and could have a
material adverse effect on our financial condition, results of operations or cash flows.
Our distribution facilities may also be interrupted by disasters, such as earthquakes (which are known to
occur in the Northwestern United States and Japan), tornadoes or fires. We maintain business interruption
insurance, but it may not adequately protect us from the adverse effect that may be caused by significant
disruptions in our distribution facilities.
We May be Adversely Affected by Currency Exchange Rate Fluctuations
Although the majority of our product purchases are denominated in U.S. dollars, the cost of these products
may be affected by the relative changes in the value of the local currency of the manufacturer. Price increases
caused by currency exchange rate fluctuations may make our products less competitive or have an adverse effect
on our margins. Our international revenues and expenses generally are derived from sales and operations in
currencies other than the U.S. dollar. Because the functional currency of many of our subsidiaries is not the U.S.
dollar, we are exposed to potentially material gains or losses from the remeasurement of U.S. dollar monetary
transactions into the respective functional currencies. Currency exchange rate fluctuations may also disrupt the
business of the independent factories that produce our products by making their purchases of raw materials more
expensive and more difficult to finance. As a result, currency fluctuations may have a material adverse effect on
our financial condition, results of operations or cash flows.
17