Columbia Sportswear 2013 Annual Report Download - page 16

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for our independent manufacturers', licensees' or subcontractors' labor and operational practices, 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, leather, natural down, 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 governments in the countries where our products are manufactured, particularly in China and Vietnam;
• Interest rates and currency exchange rates;
• Availability of skilled labor and production capacity at independent factories; and
• General economic conditions.
Prolonged periods of inflationary pressure on some or all input costs will result in increased costs to produce our
products that may result in reduced gross profit or necessitate price increases for our products that could adversely affect
consumer demand for our products.
In addition, since the majority of our products are manufactured outside of our principal sales markets, our products
must be transported by third parties over large geographical distances. Shortages in ocean freight capacity, airfreight capacity
and volatile fuel costs can result in rapidly changing transportation costs. For example, in previous years, shortages of
sourcing and transportation capacity, combined with later-than-optimal production of advance orders, caused us to rely
more heavily on airfreight to achieve timely delivery to our customers, resulting in significantly higher freight costs. Because
we price our products in advance and changes in transportation and other costs may be difficult to predict, we may not be
able to pass all or any portion of these higher costs on to our customers or adjust our pricing structure in a timely manner
in order to remain competitive, either of which could have a material adverse effect on our financial condition, results of
operations or cash flows.
We May be Adversely Affected by Volatile Economic Conditions
We are a consumer products company and are highly dependent on consumer discretionary spending patterns and the
purchasing patterns of our wholesale customers as they attempt to match their seasonal purchase volumes to volatile consumer
demand. In addition, as we have expanded our direct-to-consumer operations, we have increased our direct exposure to the
risks associated with volatile and unpredictable consumer discretionary spending patterns. Consumer discretionary spending
behavior is inherently unpredictable and consumer demand for our products may not reach our sales targets, or may decline,
especially during periods of heightened economic uncertainty in our key markets. Our sensitivity to economic cycles and
any related fluctuation in consumer demand may have a material adverse effect on our financial condition, results of
operations or cash flows.
In the EMEA region, our business includes direct-to-consumer, wholesale and distributor sales. Prolonged economic
weakness in Europe hampered our ongoing efforts to revitalize sales of our brands in key European markets, and continued
erosion of business in these markets could have a continued material adverse effect on our business.
Our Sales Are Subject to Cancellation
We currently do not have long-term contracts with any of our wholesale customers. We do have contracts with our
distributors, typically with terms ranging up to five years; however, while these contracts may have annual purchase
minimums which must be met in order to retain the distribution rights, the distributors are not otherwise obligated to purchase
product. Sales to our retailers and distributors are generally on an order-by-order basis and are subject to right of cancellation
and rescheduling by our wholesale customers. We consider the timing of delivery dates in our wholesale customer orders
when we forecast our sales and earnings for future periods. If any of our major customers, including independent distributors,
experience a significant downturn in business or fail to remain committed to our products or brands, these customers could