Columbia Sportswear 2014 Annual Report Download - page 33

29
Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
This annual report, including Item 1 of Part I and Item 7 of Part II, contains forward-looking statements. Forward-
looking statements include any statements related to our expectations regarding future performance or market position,
including any statements regarding anticipated sales, gross margins and operating margins across markets, including from
the operations of our China joint venture and prAna subsidiary, profitability and the effect of specified factors on profitability
for 2015, expenses, input costs, effects of unseasonable weather on our results of operations, inventory levels, investments
in our business, investments in and implementation of our information technology systems, our direct-to-consumer channels
and other capital expenditures, access to raw materials and factory capacity, financing and working capital requirements
and resources, tax rates and pre-tax income, and our exposure to market risk associated with interest rates and foreign
currency exchange rates.
These forward-looking statements, and others we make from time to time, are subject to a number of risks and
uncertainties. Many factors may cause actual results to differ materially from those projected in forward-looking statements,
including the risks described above in Item 1A, Risk Factors. We do not undertake any duty either to update forward-
looking statements after the date they are made or to conform them to actual results or to changes in circumstances or
expectations.
On September 26th, 2014, we completed a two-for-one stock split in the form of a 100% stock dividend. All references
made to share or per share amounts have been retroactively adjusted to reflect the stock split.
Our Business
As one of the largest outdoor and active lifestyle apparel and footwear companies in the world, we design, source,
market and distribute outdoor and active lifestyle apparel, footwear, accessories and equipment under the Columbia,
Mountain Hardwear, Sorel, prAna and Montrail brands. Our products are sold through a mix of wholesale distribution
channels, independent distributors, and our own direct-to-consumer channels. In addition, we license some of our trademarks
across a range of apparel, footwear, accessories and equipment.
The popularity of outdoor activities, weather, changing design trends, consumer adoption of innovative performance
technologies and the availability and desirability of competitor alternatives affect consumer desire for our products.
Therefore, we seek to drive, anticipate and respond to trends and shifts in consumer preferences by adjusting the mix and
price points of available product offerings, developing new products with innovative performance features and designs, and
creating persuasive and memorable marketing communications to generate consumer awareness, demand and retention.
Failure to anticipate or respond to consumer needs and preferences in a timely and adequate manner could have a material
adverse effect on our sales and profitability.
Seasonality and Variability of Business
Our business is affected by the general seasonal trends common to the industry and is heavily dependent upon seasonal
weather and discretionary consumer shopping and spending patterns. Our products are marketed on a seasonal basis and
our sales are weighted substantially toward the third and fourth quarters, while our operating costs are more equally distributed
throughout the year. The expansion of our direct-to-consumer operations has increased the proportion of sales, profits and
cash flows that we generate in the fourth calendar quarter. As a result, our sales and profits tend to be highest in the third
and fourth calendar quarters. In 2014, approximately 60 percent of our net sales and approximately 90 percent of our
profitability was realized in the second half of the year, illustrating our dependence upon sales results in the second half of
the year, as well as the less seasonal nature of our operating costs.
We generally solicit orders from wholesale customers and independent distributors for the fall and spring seasons
based on seasonal ordering deadlines that we establish to aid our efforts to plan manufacturing volumes to meet demand.
We typically ship the majority of our advance fall season orders to customers beginning in July and continuing through
December. Similarly, the majority of our advance spring season orders ship to customers beginning in January and continuing
through June. Generally, orders are subject to cancellation prior to the date of shipment.