Columbia Sportswear 2012 Annual Report Download - page 19

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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 uncollectable 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 and distributors 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 and distributors 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 customer consolidations could have a material
adverse effect on our financial condition, results of operations or cash flows.
We Rely on Innovation to Compete in the Market for our Products
To distinguish our products in the marketplace and achieve commercial success, we rely on product innovations,
including new or exclusive technologies, inventive and appealing design, or other differentiating features. 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.
As we strive to achieve product innovations, we face a greater risk of inadvertent infringements of third party rights
or compliance issues with regulations applicable to products with technical innovations such as electrical heating
components. In addition, technical innovations often involve more complex manufacturing processes, which may lead to