ANNUAL REPORT
TO SHAREHOLDERS2017
2017 WAS ANOTHER RECORD
YEAR FOR COLUMBIA
SPORTSWEAR COMPANY
Dear Fellow Shareholders:
2017 was another record year for Columbia Sportswear
Company’s portfolio of brands. Net sales increased 4
percent to $2.47 billion and non-GAAP operating income
increased 8 percent to a record $277.8 million. Non-
GAAP operating margin expanded by 50 basis points to
11.3 percent. Non-GAAP net income grew by 10 percent
to $210.1 million, or $2.98 per diluted share, compared
with $191.9 million, or $2.72 per diluted share, in the
prior year. We exited the year with record cash and
short-term investment balances of $768.1 million, and
delivered record operating cash flow of $341.1 million.
Non-GAAP financial measures exclude Project CONNECT
program expenses and discrete costs of approximately
$14.9 million, $9.4 million net of tax, or $0.13 per diluted
share, and Tax Cuts and Jobs Act-related income tax
expense of $95.6 million, or $1.36 per diluted share.
Amid significant industry challenges, over the past five
years we have expanded our non-GAAP operating
margin by more than 300 basis points. This is a
testament to disciplined management of the business
across our organization, and a validation of our
strategies to drive long-term, sustainable growth.
Exceptional execution in a rapidly changing consumer
landscape remains the foundation of Columbia Sportswear
Company as we celebrate our 80th anniversary and
our 20th year as a public company this year.
We are incredibly proud of our over 7,000 full and
part-time global employees who have sustained our
performance in 2017 with relentless focus on high-
quality sales and operating income growth. It is with this
disciplined execution that we are working to accelerate
market-share capture across our geographies and
brands by investing in our strategic priorities to:
• Drive global brand awareness and sales growth through
increased, focused demand creation investments;
• Enhance consumer experience and digital
capabilities in all of our channels and geographies;
• Expand and improve global Direct-to-Consumer (“DTC”)
operations with supporting processes and systems; and
• Invest in our people and optimize our
organization across our portfolio of brands.
2017 BRAND & CATEGORY
PERFORMANCE
TWELVE MONTHS ENDED DECEMBER 30,2017
( GROWTH CONSTANT-CURRENCY )
$1.99 BILLION
$229 MILLION
+4%
+6%
$141 MILLION
$102 MILLION
+1%
-3%
$1.93 BILLION
$538 MILLION
+3%
+5%
APPAREL, ACCESSORIES & EQUIPMENT
FOOTWEAR
Our marketing campaigns are also being
increasingly tied directly to calls to action.
The launch of the Star Wars Empire Strikes Back
Collection in December sold out in stores and online
in minutes in the United States. While driving traffic
to our stores and our website, the campaign also
generated significant coverage in the media resulting
in more than 650 million consumer impressions.
In addition, pieces from the Columbia collaboration with
New York-based fashion retailers Opening Ceremony
and Kith earned significant attention in 2017 and were
included in multiple print and holiday gift guides.
Our success has not been limited to our product
collaborations. PGA Athlete Brian Harman was wearing
Columbia golf product in his PGA tour win at the
Wells Fargo Championship over the summer.
Columbia brand net sales increased 4 percent to $1.99
billion in 2017. The Columbia brand consumer promise is
simple: Columbia’s products will keep people warm, dry,
cool, and protected so that they can enjoy the outdoors
longer. This promise resonates with consumers and
with our key retail partners, helping drive a significant
improvement in engagement for the Columbia brand.
The Columbia brand continues to invest in innovative
technologies and differentiated product, with 2017 led
by the expansion of the award winning OutDry Extreme
technology into multiple products, including gloves and
footwear, continued development of our market-leading
PFG fishing product and growth of the TurboDown
and Titanium lines of premium performance products.
Under brand president Joe Boyle our marketing efforts
emphasized the “Tested Tough” brand platform,
now in its third year following a global rollout.
In 2017 we expanded the scope of the campaign to
include co-marketing campaigns with Dick’s Sporting
Goods and the newly combined Bass Pro/Cabela’s.
In the fall of 2017 we launched a new seasonal campaign
titled “Columbia Warm” that exposed consumers to a
consistent global story across TV, digital, print, out-of-
home, email, and social media, and included new “micro-
campaigns” across digital channels that were updated
regularly to maintain an “Always On” marketing presence.
The effort kicked off in September with a campaign focused
on our partnership and outfitting deal with the UK National
Parks system, followed by a partnership featuring actor
and celebrity Zac Efron and his brother Dylan that has
already driven over 400 million consumer impressions.
SOREL brand net sales grew 7 percent (6 percent constant-
currency) to $228.8 million in 2017. Over the past five years
we have increased SOREL brand net sales by approximately
$100 million as brand president Mark Nenow’s initiatives to
position SOREL as the most fashionable brand in outdoor,
and the most outdoor brand in fashion have taken hold.
In 2017, the SOREL brand team executed on the limited-
edition boot collaboration with renowned Paris-based
luxury design house Chloé. The product launched at 14
of Chloé’s premium global wholesale partners, including
Nordstrom, Galleries Lafayette, Barneys, and Holt Renfrew.
The collaboration sold out within two weeks on Chloe.com.
SOREL’s 2017 line was supported by the brand’s new
“Defy” marketing campaign that reinforced SOREL’s
fashion position. The campaign was anchored by
street-level window executions across New York City,
as well as by an extensive social media campaign that
featured eight up-and-coming fashion influencers.
The brand made significant headway in diversifying its
product portfolio to expand the selling season, with the
2017 product offering emphasizing lightweight fall/winter
product and expanded spring/summer styles including the
successful After Hours and Lea wedges and the Joanie and
Ella sandals. This product line is resonating with consumers
who already love the SOREL brand and want more
opportunities to wear it throughout the year, building on
the success of the iconic Joan of Arctic and Caribou boots.
awards in the marketplace. We are encouraged by a
return to growth in the brand’s Fall 2018 order book.
Response to new product has been favorable, with the
brand recapturing floor space in several key accounts.
R E G I O N A L
P E R F O R M A N C E
2017 REGIONAL
GROWTH HIGHLIGHTS
TWELVE MONTHS ENDED DECEMBER 30,2017
( GROWTH CONSTANT-CURRENCY )
US
+1%
CANADA
+4%
EMEA
+14%
LAAP
+6%
AS REPORTED ( $US )
US
+1%
CANADA
+8%
EMEA
+16%
LAAP
+5%
United States net sales grew 1 percent in 2017 to $1.52
billion. We continued to experience challenges related
to United States market conditions in which wholesale
customers’ bankruptcies and store closures led to a mid-
single-digit percent sales decline in wholesale net sales
for 2017, with nearly two-thirds of the decrease resulting
from the impact of retail bankruptcies. However, in the
fourth quarter the United States wholesale channel played
a significant role, contributing to our topline improvement
relative to our October outlook, aided by improved order
conversion. Fourth quarter net sales within the United States
wholesale channel increased 6 percent, compared to the
prior year, driven largely by a shift in the timing of wholesale
shipments from the third quarter into the fourth quarter.
We’ve accelerated investment in our United States
DTC operations, which grew at a high-single-digit
percent rate for 2017. In 2017, the company opened
11 stores in the United States, exiting the year with 129
retail stores (105 outlet; 24 branded) and 4 branded
e-commerce sites. We saw improved productivity in
our brick & mortar stores, and modest e-commerce
prAna’s net sales grew 1 percent to $140.9 million in
2017. Over the past five years, sales at prAna have
more than doubled, demonstrating the power of
the brand’s message of sustainability and healthy,
active, free-spirited lifestyles with consumers.
In the third quarter of 2017, we promoted Russ
Hopcus, Columbia’s former SVP of North American
Sales, to prAna brand president. Russ and his team are
working to amplify prAna’s voice in the marketplace
with exceptional product and a focus on sustainability.
prAna continues to provide access to complementary
consumer segments, particularly women, and
reduces dependence on cold-weather products.
prAna’s team demonstrated its flexibility in 2017,
employing consumer insights to develop a targeted range
of activewear products in only 60 days in response to an
unexpected market opportunity with a major customer.
The brand continues to see success with its women’s
product including the Halle pant and Kara jean as well as an
expanded swimwear line. The brand is also gaining traction
with men, driven by innovative products like the stretch
Zion pant and the quick-drying sun-protecting Calder shirt.
Mountain Hardwear brand net sales declined by 2
percent (3 percent decline constant-currency) to $101.6
million in 2017. New brand president Joe Vernacchio is
executing on the brand turnaround strategy, building
out the new product team that is working to create a
compelling, high-performance product line focused on
the historical core of the brand, the climbing community.
The innovative StretchDown product that provides
exceptional freedom of movement and ultra-lightweight
Ghost Whisperer line of down jackets continue to win
growth, reflecting the strategic decision to reduce
promotional activity during the holiday period.
Outside the United States, our results for 2017
demonstrate the power of our global business with total
international net sales increasing 9 percent to $946.1
million. International operations generated 38 percent
of total revenue in 2017, led by the Columbia brand.
Our international net sales growth was led by Europe/
Middle East/Africa (EMEA), with growth of 16 percent (14
percent constant-currency) to $293.7 million, the second
year in a row of double-digit constant-currency growth.
Europe-direct net sales increased low-20 percent (high-
teens percent constant-currency), driven by increased
advance wholesale orders for both Spring 2017 and
Fall 2017 and increased DTC net sales. This represents
the third consecutive year of double-digit percent
constant-currency net sales growth in Europe-direct.
After achieving break-even profitability in 2016, Europe-
direct returned to a meaningful level of profitability in
2017. Our team in Europe has done an outstanding
job over the last three years, and we have plenty of
opportunity to drive continued growth and expand
profitability in that important market in the years ahead.
In June, we asked the architect of our European
turnaround – Franco Fogliato – to relocate to Portland
to support the increased focus on our United States
and Canadian markets and promoted Matthieu
Schegg to serve as European general manager to
continue driving our momentum in Europe.
EMEA distributor net sales increased mid-single-digit
percent driven by improving sales conditions in Russia.
Latin America and Asia Pacific (LAAP) net
sales were up 5 percent (6 percent constant-
currency) to $475.1 million in 2017.
LAAP distributor net sales increased mid-20 percent,
driven by shipments of increased advance orders for
both Spring 2017 and Fall 2017, as well as a favorable
shift in timing of both Spring 2017 and Spring
2018 advance orders relative to the prior year.
China net sales increased low-single-digit percent (mid-
single-digit percent constant-currency) driven by continued
net sales growth in e-commerce, partially offset by net
sales declines from brick & mortar stores and wholesale.
Wholesale net sales were affected by the strategic decision
to transition our Beijing wholesale business to new dealers
in order to revitalize growth in the Beijing market.
Japan net sales increased low-single-digit percent (mid-
single-digit percent constant-currency) driven by growth in
DTC, partially offset by net sales declines in wholesale.
Korea net sales were essentially flat (low-single-
digit percent decline constant-currency).
Canada net sales increased 8 percent (4 percent constant-
currency) to $177.3 million for the year driven by high-
teens growth in DTC (high-single-digit percent constant-
currency) and a mid-single-digit increase in wholesale net
sales (down low-single-digit percent constant-currency).
Our Global DTC operations remained a bright spot.
DTC net sales increased 10 percent, and represented
approximately 40 percent of consolidated net sales,
including approximately 9 percent of net sales from
e-commerce. Global wholesale and international distributor
net sales were flat, affected by the comparative effects
of sales to United States wholesale customers who have
undergone bankruptcies, liquidations and store closures.
During the second quarter of 2017, we commenced
investment in our consumer-first initiative (referred to as
“C1”), which encompasses a global retail ERP platform
and IT systems infrastructure to support the growth and
continued development of our omnichannel capabilities.
The objective of this initiative is to deliver an enhanced
consumer experience and to modernize and standardize
our processes and systems to enable us to better anticipate
and deliver against the needs of our consumers.
Looking ahead, our strong balance sheet enables
us to invest strategically in our portfolio of
brands, even as dramatic changes continue to
alter the North American retail landscape.
In light of these industry changes, we initiated Project
CONNECT, a comprehensive assessment of our operating
model aimed at aligning our resources to accelerate
execution on our strategic priorities. In 2017, we completed
the operational assessment phase of this project, which
included a shift in the company’s operating model, executive
organization structure and decision rights to enable a
brand-led and consumer-first organization. We have also
identified and scoped key, operational improvements and
investment in new capabilities in order to support the
realigned organization and drive meaningful financial value.
During the second half of 2017, the company began
implementation of these operational improvements
throughout the business. Project CONNECT
includes initiatives to drive revenue, capture cost
of sales efficiencies through design and assortment
optimization, generate SG&A savings, and improve
our marketing effectiveness. As these improvements
begin to be realized, we intend to reallocate resources
and investments to our strategic priorities.
It is from this position of strength and confidence that
we are moving steadily forward. We believe that the
combination of our global, multi-brand, multi-channel
business, our sound strategic plan and our teammates
around the world form a solid foundation that will enable
us to drive growth, expand our profitability and increase
total return to shareholders in the years ahead.
Thank you for your continued confidence and support.
Sincerely,
Timothy P. Boyle
President and Chief Executive Officer
This letter contains forward-looking statements. Actual results may differ
materially from those projected in these forward-looking statements as a
result of a number of risks and uncertainties, including those descripted in
the Company’s Annual Report on Form-10K for the year ended December 31,
2017, and subsequent periodic reports, under the heading “Risk Factors.”
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
——————————————
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2017
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE EXCHANGE
ACT OF 1934
For the transition period from_______to_______
Commission file number 0-23939
—————————————
COLUMBIA SPORTSWEAR COMPANY
(Exact name of registrant as specified in its charter)
—————————————
Oregon
(State or other jurisdiction of incorporation or organization)
14375 Northwest Science Park Drive Portland, Oregon
(Address of principal executive offices)
93-0498284
(IRS Employer Identification Number)
97229
(Zip Code)
(503) 985-4000
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Common Stock
Name of each exchange on which registered
The NASDAQ Stock Market LLC
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes
No
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes
No
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days.
No
Yes
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate web site, if any, every
Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for
such short period that the registrant was required to submit and post such files).
No
Yes
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will
not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III
of this Form 10-K or any amendment to this Form 10-K.
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller
reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer", "smaller reporting
company" and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer
Accelerated filer
Non-accelerated filer
(Do not check if a smaller reporting company)
Smaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for
complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
No
The aggregate market value of the voting common stock held by non-affiliates of the registrant as of June 30, 2017, the last business
day of the registrant's most recently completed second fiscal quarter, was $1,713,522,574 based on the last reported sale price of the
Company's common stock as reported by the NASDAQ Global Select Market System on that day.
The number of shares of common stock outstanding on February 9, 2018 was 70,016,897.
Part III is incorporated by reference from the registrant's proxy statement for its 2018 annual meeting of shareholders to be filed
with the Commission within 120 days of December 31, 2017.
COLUMBIA SPORTSWEAR COMPANY
DECEMBER 31, 2017
TABLE OF CONTENTS
Item
Item 1.
Item 1A.
Item 1B.
Item 2.
Item 3.
Item 4.
Item 4A.
Item 5.
Item 6.
Item 7.
Item 7A.
Item 8.
Item 9.
Item 9A.
Item 9B.
Item 10.
Item 11.
Item 12.
Business
Risk Factors
Unresolved Staff Comments
Properties
Legal Proceedings
Mine Safety Disclosures
Executive Officers of the Registrant
PART I
PART II
Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of
Equity Securities
Selected Financial Data
Management's Discussion and Analysis of Financial Condition and Results of Operations
Quantitative and Qualitative Disclosures about Market Risk
Financial Statements and Supplementary Data
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Controls and Procedures
Other Information
PART III
Directors, Executive Officers and Corporate Governance
Executive Compensation
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters
Item 13.
Item 14.
Certain Relationships and Related Transactions, and Director Independence
Principal Accountant Fees and Services
Item 15.
Signatures
Exhibits and Financial Statement Schedules
.
PART IV
Page
2
9
21
22
22
22
22
24
26
27
40
40
74
74
77
78
78
78
78
78
79
83
Item 1. BUSINESS
General
PART I
Founded in 1938 in Portland, Oregon, as a small, family-owned, regional hat distributor and incorporated in 1961,
Columbia Sportswear Company has grown to become a global leader in designing, sourcing, marketing, and distributing
outdoor and active lifestyle apparel, footwear, accessories, and equipment. Unless the context indicates otherwise, the terms
"we", "us", "our", "the Company," and "Columbia" refer to Columbia Sportswear Company, together with its wholly owned
subsidiaries and entities in which it maintains a controlling financial interest.
As one of the largest outdoor and active lifestyle apparel and footwear companies in the world, our products have
earned an international reputation for innovation, quality and performance. We design, source, market, and distribute outdoor
and active lifestyle apparel, footwear, accessories, and equipment under four primary brands, which complement each other
to address the diverse needs of consumers:
Columbia®
The Columbia brand is our largest brand, offering performance and casual products, including apparel, footwear,
accessories, and equipment. The durability and functionality of our Columbia brand products make them ideal for a wide
range of outdoor and active lifestyle activities, serving a broad population of consumers, including skiers, snowboarders,
mountain climbers, outdoor enthusiasts, hikers, hunting and fishing enthusiasts, endurance trail runners, golfers and outdoor-
inspired consumers.
SOREL®
Acquired in 2000, our SOREL brand primarily offers premium, durable and design-driven footwear products to a
market of fashion forward and brand savvy female consumers. The SOREL brand also offers a collection of premium men’s
and youth utility footwear.
Mountain Hardwear®
Acquired in 2003, the Mountain Hardwear brand, headquartered in Richmond, California, offers premium apparel,
accessories and equipment primarily for the high performance needs of mountaineering enthusiasts and other outdoor
athletes, as well as for consumers who are inspired by the outdoor lifestyle.
prAna®
Acquired in 2014, the prAna brand, headquartered in Carlsbad, California, offers stylish and versatile active lifestyle
apparel and accessories designed and manufactured with an emphasis on sustainable materials and processes. Our prAna
brand apparel products focus on consumers whose active lifestyles include activities such as rock climbing, yoga, outdoor
watersports, hiking, and adventure travel.
Other Brands
The OutDry® brand, acquired in 2010, holds various patents pertaining to processes for manufacturing waterproof
and breathable apparel, footwear, accessories, and equipment. We have incorporated the OutDry technology in select
Columbia, Mountain Hardwear and SOREL products, and also license the technology to third parties.
The Pacific Trail® brand, acquired in 2006, is licensed to third parties across a range of apparel, footwear, accessories,
and equipment.
We distribute our products through a mix of wholesale distribution channels, our own direct-to-consumer channels
(retail stores and e-commerce), independent international distributors, and licensees. In 2017, our products were sold in
approximately 90 countries. Substantially all of our products are manufactured by contract manufacturers located outside
the United States.
2
Consumer desire for our products is affected by many variables, including the popularity of outdoor activities and
active lifestyles, changing design trends, consumer adoption of innovative performance technologies, variations in seasonal
weather, and the availability and desirability of competitor alternatives. Therefore, we seek to drive, anticipate and respond
to trends and shifts in consumer preferences by developing new products with innovative performance features and designs,
creating persuasive and memorable marketing communications to generate consumer awareness, demand and retention,
and adjusting the mix and price points of available product offerings. 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.
Our business is subject to many risks and uncertainties that may have a material adverse effect on our financial
condition, results of operations or cash flows. Some of these risks and uncertainties are described below under Item 1A,
Risk Factors.
Seasonality and Variability of Business
Our business is affected by the general seasonal trends common to the industry, including 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. In 2017, approximately 60% of our net sales and approximately 90% of our operating income were 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. The expansion of our direct-to-consumer operations has increased the proportion of
sales, profits and cash flows that we generate in the second half of the year.
Results of operations in any period should not be considered indicative of the results to be expected for any future
period, particularly in light of disruptions in wholesale channels of distribution, changes in consumer purchasing behavior,
persistent volatility in global economic and geopolitical conditions, volatility of foreign currency exchange rates, and
inflationary or volatile input costs, each of which reduces the predictability of our business.
For further discussion regarding the effects of the macro-economic environment on our business, see Part II, Item 7,
Management's Discussion and Analysis of Financial Condition and Results of Operations.
Products
We develop and manage our merchandise in two principal categories: (1) apparel, accessories and equipment and (2)
footwear. The following table presents the net sales and approximate percentages of net sales attributable to each of our
principal product categories for each of the last three years ended December 31 (dollars in millions).
2017
2016
2015
Net Sales
% of Sales
Net Sales
% of Sales
Net Sales
% of Sales
Apparel, accessories and equipment
$ 1,928.0
78.2% $ 1,865.4
78.5% $ 1,821.2
538.1
21.8
511.6
21.5
505.0
$ 2,466.1
100.0% $ 2,377.0
100.0% $ 2,326.2
100.0%
78.3%
21.7
Footwear
Total
Apparel, accessories and equipment
We design, develop, market, and distribute apparel, accessories and equipment for men and women under our Columbia,
Mountain Hardwear, SOREL, and prAna brands, and for youth under our Columbia brand. Our products incorporate the
cumulative design, fabrication, fit, and construction technologies that we have pioneered over several decades and that we
continue to innovate. Our apparel, accessories and equipment are designed to be used during a wide variety of outdoor
activities, such as skiing, snowboarding, hiking, climbing, mountaineering, camping, hunting, fishing, trail running, water
sports, yoga, golf, and adventure travel.
Footwear
We design, develop, market, and distribute footwear products for men, women and youth under our Columbia and
SOREL brands. Our footwear products include durable, lightweight hiking boots, trail running shoes, rugged cold weather
boots for activities on snow and ice, sandals and shoes for use in water activities, and casual shoes for everyday use. Our
3
Columbia brand footwear products seek to address the needs of both the casual consumer and outdoor consumers who
participate in activities that typically involve challenging or unusual terrain in a variety of weather and trail conditions. Our
SOREL brand products offer premium casual and cold weather footwear for all ages and genders, with a focus on young,
fashion-conscious female consumers.
Product Design and Innovation
We are committed to designing innovative and functional products for consumers who participate in a wide range of
outdoor activities, enabling them to enjoy those activities longer and in greater comfort by keeping them warm or cool, dry
and protected. We also place significant value on product design and fit (the overall appearance and image of our products)
that, along with technical performance features, distinguish our products in the marketplace.
Our research and development efforts are led by an internal team of specialists who work closely with independent
suppliers to conceive, develop and commercialize innovative technologies and products that provide the unique performance
benefits desired by consumers during outdoor activities. We have also established working relationships with specialists in
the fields of chemistry, biochemistry, engineering, industrial design, materials research, and graphic design, and in other
related fields. We utilize these relationships, along with consumer feedback, to develop and test innovative performance
products, processes, packaging, and displays. We believe that these efforts, coupled with our technical innovation efforts,
represent key factors in the past and future success of our products.
Intellectual Property
We own many trademarks, including Columbia Sportswear Company®, Columbia®, SOREL®, Mountain Hard Wear®,
prAna®, OutDry®, Pacific Trail®, the Columbia diamond shaped logo, the Mountain Hardwear nut logo, the SOREL polar
bear logo, and the prAna sitting pose logo, as well as many other trademarks relating to our brands, products, styles, and
technologies. We believe that our trademarks are an important factor in creating a market for our products, in identifying
our Company, and in differentiating our products from competitors' products. We have design, process and utility patents,
which expire at various times, as well as pending patent applications in the United States and other countries. We file
applications for United States and foreign patents for inventions, designs and improvements that we believe have commercial
value; however, these patents may or may not ultimately be issued, enforceable or used in our business. The technologies,
processes and designs described in our patents are incorporated into many of our most important products. We believe our
success primarily depends on our ability to continue offering innovative solutions to match consumer needs through design,
research, development, and production advancements, rather than our ability to secure patents. We vigorously protect these
proprietary rights against counterfeit reproductions and other infringing activities. Additionally, we license some of our
trademarks across a range of apparel, footwear, accessories, equipment, and home products.
Sales and Distribution
We sell our products through a mix of wholesale distribution channels, our own direct-to-consumer channels,
independent international distributors, and licensees. The majority of our sales are generated through wholesale channels,
which include small, independently operated specialty outdoor and sporting goods stores, regional, national and international
sporting goods chains, large regional, national and international department store chains and, internet retailers. We sell our
products to distributors in various countries where we generally do not have direct sales and marketing operations. We also
sell a wide range of apparel, footwear, accessories, equipment, and home products through licensing arrangements with
third party manufacturers. In addition, we market Columbia brand apparel and accessories under licensing arrangements
with various collegiate and professional sports organizations and entertainment companies.
We also sell our products directly to consumers in each of our geographic segments through our own network of
branded and outlet retail stores and online. In addition, we have concession-based arrangements with third-parties at branded,
outlet and shop-in-shop retail locations in our Asia Pacific and Europe regions, where the Company retains ownership of
inventory and control over certain aspects of operations. Our direct-to-consumer businesses are designed to elevate consumer
perception of our brands, increase consumer and retailer awareness of and demand for our products, model compelling
retail environments for our products and strengthen emotional connections between consumers and our brands over time.
Our branded retail stores and e-commerce sites allow us to showcase a broad selection of products and to support the brand's
positioning with fixtures and imagery that may then be replicated and offered for use by our wholesale and distributor
customers. These stores and sites provide high visibility for our brands and products and help us to monitor the needs and
4
preferences of consumers. In addition, we operate outlet stores, which serve a role in our overall inventory management by
enabling us to profitably liquidate excess, discontinued and out-of-season products while maintaining the integrity of our
brands in wholesale and distributor channels.
We operate in four geographic segments: (1) the United States, (2) Latin America and Asia Pacific ("LAAP"), (3)
Europe, Middle East and Africa ("EMEA"), and (4) Canada, which are reflective of our internal organization, management
and oversight structure. Each geographic segment operates predominantly in one industry: the design, development,
marketing, and distribution of outdoor and active lifestyle apparel, footwear, accessories, and equipment. The following
table presents net sales to unrelated entities and approximate percentages of net sales by geographic segment for each of
the last three years ended December 31 (dollars in millions):
2017
2016
2015
Net Sales
% of Sales
Net Sales
% of Sales
Net Sales
% of Sales
$ 1,520.0
61.6% $ 1,505.2
63.3% $ 1,455.2
62.6%
475.1
293.7
177.3
19.3
11.9
7.2
453.7
253.5
164.6
19.1
10.7
6.9
469.2
233.2
168.6
20.2
10.0
7.2
$ 2,466.1
100.0% $ 2,377.0
100.0% $ 2,326.2
100.0%
United States
LAAP
EMEA
Canada
Total
United States
The United States accounted for 61.6% of our net sales for 2017. We sell our products in the United States to
approximately 3,100 wholesale customers and through our own direct-to-consumer channels. As of December 31, 2017,
our United States direct-to-consumer businesses consisted of 105 outlet retail stores and 24 branded retail stores. We also
sell our products through brand-specific e-commerce websites in the United States. In addition, we earn licensing income
in the United States based on our licensees' sale of licensed products.
We distribute the majority of our products sold in the United States from distribution centers that we own and operate
in Portland, Oregon and Robards, Kentucky. In some instances, we arrange to have products shipped from contract
manufacturers through third-party logistics companies or directly to wholesale customer-designated facilities in the United
States.
LAAP
The LAAP region accounted for 19.3% of our net sales for 2017. We sell our products in the LAAP region through a
combination of wholesale and direct-to-consumer channels in China, Japan and Korea and to independent international
distributors across the LAAP region.
In Japan and Korea, we sell to approximately 250 wholesale customers. In addition, as of December 31, 2017, there
were 119 and 162 concession-based, branded, outlet and shop-in-shop locations in Japan and Korea, respectively. We also
sell our products through brand-specific e-commerce websites in Japan and Korea. We distribute our products in Japan and
Korea through third-party logistics companies that operate warehouses near Tokyo and Seoul, respectively.
In 2014, we commenced operations of a majority-owned joint venture with Swire Resources Limited ("Swire") for
purposes of continuing the development of our business in China. The joint venture operates 86 retail store locations in
China. In addition, the joint venture sells its products through brand-specific e-commerce websites in China across multiple
platforms and has distribution relationships with approximately 50 wholesale dealers that operate approximately 750 retail
locations. As a 60% majority-owned entity that we control, the joint venture's operations are included in our consolidated
financial results. The joint venture distributes our products to wholesale customers, our own retail stores and e-commerce
customers in China through third-party logistics companies with warehouses in Shanghai.
We sell to 19 international independent distributors that sell to approximately 600 wholesale customers in locations
throughout the LAAP region. The majority of sales to our LAAP distributors are shipped directly from the contract
manufacturers from which we source our products.
EMEA
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Sales in our EMEA region accounted for 11.9% of our net sales for 2017. We sell our products in the EMEA region
to approximately 3,500 wholesale customers and to 26 independent international distributors that sell to approximately 750
wholesale customers in locations throughout the EMEA region. In addition, as of December 31, 2017, we operated 24 outlet,
shop-in-shop and concession-based locations and 1 branded retail store in various locations in Western Europe. We also
sell products through brand-specific e-commerce websites in Austria, Belgium, Finland, France, Germany, Ireland, Italy,
the Netherlands, Spain, and the United Kingdom.
We distribute the majority of our products sold in the EMEA region through a distribution center that we own and
operate in Cambrai, France. The majority of sales to our EMEA distributors are shipped directly from the contract
manufacturers from which we source our products.
Canada
Sales in Canada accounted for 7.2% of our net sales for 2017. We sell our products in Canada to approximately 1,000
wholesale customers. In addition, as of December 31, 2017, we operated 6 outlet retail stores in Canada. We also sell products
through brand-specific e-commerce websites in Canada.
We distribute the majority of our products sold in Canada from a distribution center that we own in London, Ontario.
Marketing
Our portfolio of brands enables us to target a wide range of consumers across the globe with differentiated products.
Marketing supports and enhances our competitive position in the marketplace, drives global alignment through seasonal
initiatives, builds brand equity, raises global brand relevance and awareness, infuses our brands with excitement, and, most
important, stimulates consumer demand for our products worldwide. During 2017, we invested approximately 5% of our
net sales in marketing programs.
Our integrated marketing efforts deliver consistent messages about the performance benefits, features and styling of
our products within each of our brands. Our target audiences vary by brand and we utilize a variety of means to deliver our
marketing messages, including online advertising and social media, television and print publications, experiential events,
branded retail stores in select high-profile locations, enhanced product displays in partnership with various wholesale
customers and independent international distributors, and consumer focused public relations efforts.
We work closely with our key wholesale customers to reinforce our brand messages through cooperative online,
television, radio, and print advertising campaigns, as well as in stores using branded visual merchandising display tools.
We also utilize our own employees or contractors to visit our customers' retail locations in major cities around the world to
facilitate favorable in-store presentation of our products.
We operate branded e-commerce websites or marketing websites in North America, Europe, Japan, Korea, and China,
and maintain a presence on a variety of global social media platforms to connect with consumers. In addition, we authorize
many of our wholesale customers and distributors to operate e-commerce or marketing websites or both and to maintain a
presence on social media platforms, which help to reinforce our brand messages. Through digital media, consumers are
able to interact with content created to inform and connect them with our brands and products, to be directed to nearby
retailers, and to purchase our products directly. Use of digital marketing and social media has become increasingly important
within each of our brands' global efforts to build strong emotional connections with consumers through consistent, brand-
enhancing content.
Working Capital Utilization
We design, develop, market, and distribute our products, but do not own or operate manufacturing facilities. As a
result, most of our capital is invested in short-term working capital assets, including cash and cash equivalents, short-term
investments, accounts receivable from customers, and finished goods inventory. At December 31, 2017, working capital
assets accounted for approximately 75% of total assets. Accordingly, the degree to which we efficiently utilize our working
capital assets can have a significant effect on our profitability, cash flows and return on invested capital. The overall goals
of our working capital management efforts are to maintain the minimum level of inventory necessary to deliver goods on
time to our customers to satisfy end consumer demand and to minimize the cycle time from the purchase of inventory from
our suppliers to the collection of accounts receivable balances from our customers.
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Demand Planning and Inventory Management
As a branded consumer products company, inventory represents one of the largest and riskiest capital commitments
in our business model. We begin designing and developing our seasonal product lines approximately 12 months prior to
soliciting advance orders from our wholesale customers and approximately 18 months prior to the products' availability to
consumers in retail stores. As a result, our ability to forecast and produce an assortment of product styles that matches
ultimate seasonal wholesale customer and end-consumer demand and to deliver products to our customers in a timely and
cost-effective manner can significantly affect our sales, gross margins and profitability. For this reason, we maintain and
continue to make substantial investments in information systems, processes and personnel that support our ongoing demand
planning efforts. The goals of our demand planning efforts are to develop a collaborative forecast that drives the timely
purchase of an adequate amount of inventory to satisfy demand, to minimize transportation and expediting costs necessary
to deliver products to customers by their requested delivery dates and to minimize excess inventory to avoid liquidating
excess, end-of-season goods at discounted prices. Failure to achieve our demand planning goals could reduce our revenues
or increase our costs or both, which would negatively affect our gross margins and profitability and could affect our brand
strength.
In order to manage inventory risk, we use incentive discounts to encourage our wholesale customers to place orders
at least six months in advance of scheduled delivery. We generally solicit orders from wholesale customers and independent
international 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 use those advance orders, together with forecasted demand from our direct-to-consumer businesses, market trends,
historical data, customer and sales feedback, and other important factors to estimate the volumes of each product to purchase
from our suppliers around the world. From the time of initial order through production, receipt and delivery, we attempt to
manage our inventory to reduce risk. We generally ship the majority of our advance spring season orders to customers
beginning in January and continuing through June. Similarly, we typically ship the majority of our advance fall season
orders to customers beginning in July and continuing through December. Generally, orders are subject to cancellation prior
to the date of shipment.
Our inventory management efforts cannot entirely eliminate inventory risk due to the inherently unpredictable nature
of unseasonable weather, consumer demand, the ability of customers to cancel their advance orders prior to shipment, and
other variables that affect our customers' ability to take delivery of their advance orders when originally scheduled. To
minimize our purchasing costs, the time necessary to fill customer orders and the risk of non-delivery, we place a significant
amount of orders for our products with contract manufacturers prior to receiving our customers' advance orders and we
maintain an inventory of select products that we anticipate will be in greatest demand. In addition, we build calculated
amounts of inventory to support estimated at-once orders from customers and auto-replenishment orders on certain long-
lived styles.
Credit and Collection
We extend credit to our wholesale customers and distributors based on an assessment of each customer's financial
condition, generally without requiring collateral. To assist us in scheduling production with our suppliers and delivering
seasonal products to our customers on time, we may offer customers discounts for placing early advance orders and extended
payment terms for taking delivery before peak seasonal shipping periods. These extended payment terms increase our
exposure to the risk of uncollectable receivables. In order to manage the inherent risks of customer receivables, we maintain
and continue to invest in information systems, processes and personnel skilled in credit, risk analysis and collections. In
some markets and with some customers we use credit insurance, customer deposits or standby letters of credit to minimize
our risk of credit loss.
Sourcing and Manufacturing
We do not own or operate manufacturing facilities. Virtually all of our products are manufactured to our specifications
by contract manufacturers located outside the United States. We seek to establish and maintain long-term relationships with
key manufacturing partners, but generally do not maintain formal long-term manufacturing volume commitments. We
believe that the use of contract manufacturers enables us to substantially limit our invested capital and to avoid the costs
and risks associated with owning and operating large production facilities and managing large labor forces. We also believe
that the use of contract manufacturers greatly increases our production capacity, maximizes our flexibility and improves
7
our product pricing. We manage our supply chain from a global and regional perspective and adjust as needed to changes
in the global production environment, including political risks, factory capacity, import limitations and costs, raw material
costs, availability and cost of labor, and transportation costs. Without long-term commitments, there is no assurance that
we will be able to secure adequate or timely production capacity or favorable pricing terms.
Our apparel, accessories and equipment are manufactured in 19 countries, with Vietnam and China accounting for
approximately 64% of our 2017 apparel, accessories and equipment production. Our footwear is manufactured in five
countries, with China and Vietnam accounting for substantially all of our 2017 footwear production.
Our five largest apparel, accessories and equipment factory groups accounted for approximately 29% of 2017 global
apparel, accessories and equipment production, with the largest factory group accounting for approximately 10% of 2017
global apparel, accessories and equipment production. Our five largest footwear factory groups accounted for approximately
75% of 2017 global footwear production, with the largest factory group accounting for approximately 34% of 2017 global
footwear production. Most of our largest suppliers have multiple factory locations, thus reducing the risk that unfavorable
conditions at a single factory or location will have a material adverse effect on our business.
We maintain 10 manufacturing liaison offices in a total of seven Asian countries. Personnel in these manufacturing
liaison offices are direct employees of Columbia and are responsible for overseeing production at our contract manufacturers.
We believe that having employees physically located in these regions enhances our ability to monitor factories for compliance
with our policies, procedures and standards related to quality, delivery, pricing, and labor practices. Our quality assurance
process is designed to ensure that our products meet our quality standards. We believe that our quality assurance process is
an important and effective means of maintaining the quality and reputation of our products. In addition, independent
contractors that manufacture products for us are subject to standards of manufacturing practices ("SMP"). Columbia sources
products around the world and values legal, ethical and fair treatment of people involved in manufacturing our products.
Each factory producing products for us is monitored regularly against these standards. Additional information about our
SMP and corporate responsibility programs may be found at www.columbia.com and www.prana.com. The content on our
websites is not incorporated by reference in this Form 10-K unless expressly noted.
Competition
The markets for outdoor and active lifestyle apparel, footwear, accessories, and equipment are highly competitive.
We believe that the primary competitive factors in the end-use markets are brand strength, product innovation, design,
functionality, durability, price, effectiveness of marketing efforts, and speed of product delivery to meet consumer
expectations.
In each of our geographic markets, our brands face significant competition from numerous competitors, some of which
are larger than we are and have greater financial, marketing and operational resources with which to compete, and others
that are smaller with fewer resources but that may be deeply entrenched in local markets. The markets in Japan, China and
Korea have attracted a large number of competitive local and global brands. In other markets, such as Europe, we face
competition from brands that hold significant market share in one or several European markets but are not significant
competitors in other key markets. Some of our large wholesale customers also market competitive apparel, footwear,
accessories, and equipment under their own private label brand names. In addition, our direct-to-consumer businesses expose
us to branded competitors and wholesale customers who operate retail stores in key markets and who sell competitive
products online. Our independent international distributors and licensees also operate in very competitive markets and
compete against a variety of local and global brands.
In addition to competing for end-consumer and wholesale market share, we also compete for manufacturing capacity
of independent factory groups, primarily in Asia, for retail store locations in key markets and for experienced management,
staff and suppliers to lead, operate and support our global business processes. Each of these areas of competition requires
distinct operational and relational capabilities and expertise in order to create and maintain long-term competitive advantages.
Government Regulation
Many of our international shipments are subject to existing or potential governmental tariff and non-tariff barriers to
trade, such as import duties and potential safeguard measures that may limit the quantity of various types of goods that may
be imported into the United States and other countries. These trade barriers often represent a material portion of the cost to
manufacture and import our products. Our products are also subject to domestic and foreign product safety and environmental
8
standards, laws and other regulations, which are increasingly restrictive and complex. As we strive to achieve technical
innovations, we face a greater risk of compliance issues with regulations applicable to products with complex technical
features. Although we diligently monitor these standards and restrictions, a state, federal or foreign government may impose
new or adjusted quotas, duties, safety requirements, material restrictions, or other restrictions or regulations, any of which
could have a material adverse effect on our financial condition, results of operations or cash flows.
Employees
At December 31, 2017, we had 6,188 full-time equivalent employees.
Available Information
We file with the Securities and Exchange Commission ("SEC") our annual report on Form 10-K, quarterly reports on
Form 10-Q, current reports on Form 8-K and any amendments to those reports, proxy statements, and registration statements.
You may read and copy any material we file with the SEC at the SEC's Public Reference Room at 100 F Street, NE,
Washington, D.C. 20549. You may also obtain information on the operation of the Public Reference Room by calling the
SEC at 1-800-SEC-0330. In addition, the SEC maintains an internet site at http://www.sec.gov that contains reports, proxy
and information statements, and other information regarding issuers, including us, that file electronically. We make available
free of charge on or through our website at www.columbia.com our proxy statements, annual reports on Form 10-K, quarterly
reports on Form 10-Q, current reports on Form 8-K, and amendments to these reports filed or furnished pursuant to Section
13(a) or 15(d) of the Exchange Act as soon as reasonably practicable after we file these materials with the SEC.
Item 1A. RISK FACTORS
In addition to the other information contained in this Form 10-K, the following risk factors should be considered
carefully in evaluating our business. Our business, financial condition, results of operations, or cash flows may be materially
adversely affected by these and other risks. Please note that additional risks not presently known to us or that we currently
deem immaterial may also impair our business and operations.
We Face Many Challenges Executing Growth Strategies
Our business strategies aim to achieve sustainable, profitable growth by creating innovative products at competitive
prices, focusing on product design, utilizing innovations to differentiate our brands from competitors, working to ensure
that our products are sold through strong distribution partners capable of effectively presenting our brands to consumers,
increasing the impact of consumer communications to drive demand for our brands and sell-through of our products, making
sure our products are merchandised and displayed appropriately in retail environments, expanding our presence in key
markets around the world, and continuing to build brand-enhancing direct-to-consumer businesses. We intend to pursue
these strategies across our portfolio of brands, product categories and geographic markets. Our failure to successfully
implement our business strategies, including those identified in connection with the Company's operating model assessment,
referred to as Project CONNECT, could have a material adverse effect on our financial condition, results of operations or
cash flows.
To implement our business strategies and initiatives, including those that may result from Project CONNECT, we
must continue to modify and fund various aspects of our business, to maintain and enhance our information systems and
supply chain operations to improve efficiencies and to attract, retain and manage qualified personnel. These efforts, coupled
with cost containment measures, place increasing strain on management, information technology, financial, product design,
marketing, distribution, supply chain, and other resources, and we may have operating difficulties as a result. For example,
in support of our business strategies, we are making significant investments in our business processes and information
technology infrastructure that require significant management attention and corporate resources. These changes may make
it increasingly difficult to pursue acquisitions or to adapt our information technology systems and business processes to
integrate an acquired business. These integration challenges may also be present as we continue to fully integrate operations
of prAna, which we acquired in May 2014. Our business strategies involve many risks and uncertainties that, if not managed
effectively, may have a material adverse effect on our financial condition, results of operations or cash flows.
Our business strategies and related initiatives and increased expenditures could also cause our operating margin to
decline if we are unable to offset our increased spending with increased sales or gross profit or comparable reductions in
other operating costs. If our sales or gross profit decline or fail to grow as planned and we fail to sufficiently leverage our
9
operating expenses, our profitability will decline. This could result in a decision to delay, reduce, modify, or terminate our
business strategies and initiatives, which could limit our ability to invest in and grow our business and could have a material
adverse effect on our financial condition, results of operations or cash flows.
Initiatives to Upgrade Our Business Processes and Information Technology Infrastructure Involve Many Risks Which
Could Result in, Among Other Things, Business Interruptions and Higher Costs
We regularly implement business process improvement and information technology initiatives to optimize our
operational and financial performance. Our current initiatives include an initiative to invest in a global retail platform, which
encompasses our information technology systems infrastructure to support the growth and expansion of our direct-to-
consumer businesses, as well as continued implementation of and upgrades to our integrated global enterprise resource
planning ("ERP") software solutions and other complementary information technology systems, which support our supply
chain, go-to-market strategies, and direct-to-consumer strategies and operations. Implementation of and upgrades to these
solutions and systems are highly dependent on coordination of numerous employees, contractors and software and system
providers. The interdependence of these solutions and systems is a significant risk to the successful completion of these
initiatives, and the failure of any one contractor or system could have a material adverse effect on the implementation of
our overall information technology infrastructure. We may experience difficulties as we transition to these new or upgraded
systems and processes, including loss or corruption of data, delayed shipments, interruptions of direct-to-consumer
operations, decreases in productivity as our personnel implement and become familiar with new systems, increased costs,
and lost revenues. In addition, transitioning to these new or upgraded systems requires significant capital investments and
personnel resources. Difficulties in implementing new or upgraded information systems or significant system failures,
including system outages and loss of system availability, could disrupt our operations and have a material adverse effect
on our financial condition, results of operations or cash flows.
These implementations have a pervasive effect on our business processes and information systems across a significant
portion of our operations. As a result, we are undergoing significant changes in our operational processes and internal
controls as our implementations progress, which in turn require significant change management, including training of and
testing by our personnel. If we are unable to successfully manage these changes as we implement these systems, including
harmonizing our systems, data, processes and reporting analytics, our ability to conduct, manage and control routine business
functions could be negatively affected and significant disruptions to our business could occur. In addition, we could incur
material unanticipated expenses, including additional costs of implementation or costs of conducting business. These risks
could result in significant business disruptions or divert management's attention from key strategic initiatives and have a
material adverse effect on our financial condition, results of operations or cash flows.
We Rely on Our Highly Customized Information Management Systems
Our business is increasingly reliant on information technology. Information systems are used across our supply chain
and retail operations, from design to distribution and sales, and are used as a method of communication among employees,
with our subsidiaries and liaison offices overseas and with our customers, vendors and retail stores. We also rely on our
information systems to allocate resources, pay vendors, collect from customers, manage product data, develop demand and
supply plans, forecast and report operating results, and meet regulatory requirements.
Our legacy ERP, product development, retail point-of-sale and other systems, on which we continue to manage a
substantial portion of our business activities, are highly customized. As a result, the availability of internal and external
resources with the expertise to maintain these systems is limited. Our legacy systems may not support desired functionality
for our operations and may inhibit our ability to operate efficiently, which could have an adverse effect on our financial
condition, results of operations or cash flows. As we continue to transition from our legacy ERP and supporting systems to
our new ERP and supporting systems and as we initiate our global retail platform initiative, certain functionality and
information from our legacy systems, including that of third party systems that interface with our legacy systems, may not
be fully compatible with the new systems. As a result, temporary processes or solutions may be required, including manual
operations, which could significantly increase the risk of loss or corruption of data and information used by the business or
result in business disruptions, which could have a material adverse effect on our financial condition, results of operations
or cash flows.
10
A Breach in the Security of Our Systems, Exposure of Personal or Confidential Information or Increased Government
Regulation Relating to Handling of Personal Data, Could, Among Other Things, Disrupt Our Operations or Cause
Us to Incur Substantial Costs
We manage and store various types of proprietary information and sensitive and confidential data relating to our
business, including personally identifiable information. Our information systems, or those of certain key partners whose
information systems we may rely on, are subject to an increasing threat of continually evolving cybersecurity risks.
Unauthorized parties may attempt to gain access to our systems or information through fraud or other means of deceiving
our employees or third-party service providers. Hardware, software or applications we develop or obtain from third parties
may contain defects in design or manufacture or other problems that could unexpectedly compromise information security.
The methods used to obtain unauthorized access, disable or degrade service, or sabotage systems are constantly changing
and evolving, and may be difficult to anticipate or detect for long periods of time. We have implemented and regularly
review and update processes and procedures to protect against unauthorized access to or use of secured data and to prevent
data loss. However, the ever-evolving threats mean we must continually evaluate and adapt our systems and processes, and
there is no guarantee that they will be adequate to safeguard against all data security breaches or misuses of data. For
example, in February 2017, we reported the discovery of a cybersecurity incident involving our prAna.com e-commerce
website, for which a number of responsive actions were taken, including notification of potentially affected prAna customers.
In addition, any future breaches of our security measures, or the accidental loss, inadvertent disclosure or unapproved
or non-compliant dissemination of proprietary information or sensitive and confidential data about us, our customers, our
suppliers, or our employees, could expose us, our customers, our suppliers, our employees, or other individuals that may
be affected to a risk of loss or misuse of this information, result in litigation and potential liability for us, damage our
reputation, or otherwise harm our business and could have a material adverse effect on our financial condition, results of
operations or cash flows. In addition, as the regulatory environment related to information security, data collection and use
and privacy becomes increasingly rigorous, with new and constantly changing requirements applicable to our business,
compliance with those requirements could also result in additional costs. For example, the European Union adopted a new
regulation that becomes effective May 25, 2018, called the General Data Protection Regulation (“GDPR”), which requires
companies to meet additional requirements regarding the handling of personal data, including its use, protection and the
ability of persons whose data is stored to exercise certain individual rights with respect to their personal data. The GDPR
calls for privacy and process enhancements, accompanied by a commitment of resources and other expenditures in support
of compliance. Violations of the GDPR could result in significant penalties.
We Depend on Contract Manufacturers
Our products are manufactured by contract manufacturers worldwide. Although we enter into purchase order
commitments with these contract manufacturers each season, we generally do not maintain long-term manufacturing
commitments with them. Without long-term or reserve commitments, there is no assurance that we will be able to secure
adequate or timely production capacity or favorable pricing if growth or product demand differs from our forecasts. Contract
manufacturers may fail to perform as expected or our competitors may obtain production capacities that effectively limit
or eliminate the availability of these resources to us. If a contract manufacturer fails to ship orders in a timely manner or to
meet our standards or if we are unable to obtain necessary capacities, we could experience supply disruptions that would
hinder our ability to satisfy demand through our direct-to-consumer businesses and we may miss delivery deadlines or incur
additional costs, which may cause our wholesale or distributor customers to cancel their orders, refuse to accept deliveries
or demand a reduction in purchase prices, any of which could have a material adverse effect on our financial condition,
results of operations or cash flows.
Reliance on contract manufacturers also creates quality control risks. Contract manufacturers may need to use sub-
contracted manufacturers to fulfill demand and these manufacturers may have less experience producing our products or
possess lower overall capabilities, which could result in compromised quality of our products. A failure in our quality control
program, or a failure of our contract manufacturers or their contractors to meet our quality control standards, may result in
diminished product quality, which in turn could result in increased order cancellations, price concessions and returns,
decreased consumer demand for our products, non-compliance with our product standards or regulatory requirements, or
product recalls (or other regulatory actions), any of which may have a material adverse effect on our financial condition,
results of operations or cash flows.
11
We also have license agreements that permit unaffiliated parties to manufacture or contract to manufacture products
using our trademarks. We impose standards of manufacturing practices on our contract manufacturers and licensees for the
benefit of workers and require compliance with our restricted substances list and product safety and other applicable
environmental, health and safety laws. We also require our contract manufacturers and licensees to impose these practices,
standards and laws on their contractors. If a contract manufacturer, licensee or subcontractor violates labor or other laws
or engages in practices that are not generally accepted as safe or ethical, the manufacturer, licensee or subcontractor or its
respective employees may suffer serious injury due to industrial accidents, the manufacturer may suffer disruptions to its
operations due to work stoppages or employee protests and we may experience production disruptions, lost sales or significant
negative publicity that could result in long-term damage to our reputation. In some circumstances, parties may assert that
we are liable for our independent manufacturers', licensees' or subcontractors' labor and operational practices, which could
have a material adverse effect on our brand image and our financial condition, results of operations or cash flows, in particular
if such assertions are successful.
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, for example in China and Vietnam;
Disruption to shipping and transportation channels utilized to bring our products to market;
Interest rates and currency exchange rates;
Availability of skilled labor and production capacity at contract manufacturers; 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, many of our products are manufactured outside of our principal sales markets, which requires these
products to be transported by third parties, sometimes over large geographical distances. Shortages in ocean or air freight
capacity and volatile fuel costs can result in rapidly changing transportation costs. Similarly, disruption to shipping and
transportation channels due to labor disputes could cause us to rely more heavily on alternative modes of transportation 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 and retail traffic
patterns. Purchasing patterns of our wholesale customers can vary year to year as they attempt to forecast and match their
seasonal advance orders, in-season replenishment and at-once orders to eventual seasonal consumer demand. In addition,
as we have expanded our direct-to-consumer businesses, 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.
We May Be Adversely Affected by the Financial Health of Our Customers
12
In recent periods, 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 reduced their store fleet,
filed or may file for protection under bankruptcy laws, restructured, or ceased operations, which may in turn have a material
adverse effect on our financial condition, results of operations or cash flows. 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. In addition, we
face increased risk of order reduction and cancellation and 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 international independent distributors have liquidated or reorganized, while others have had financial
difficulties in the past or have experienced tightened credit markets, sales declines and reduced profitability, which in turn
have had an adverse effect on our business. Future customer liquidations or reorganizations could have a material adverse
effect on our financial condition, results of operations or cash flows. We may choose to limit our credit risk by reducing
our level of business with customers experiencing financial difficulties and may not be able to replace those revenues with
other customers or through our direct-to-consumer businesses within a reasonable period, which could have a material
adverse effect on our financial condition, results of operations or cash flows.
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 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 Currency Exchange Rate Fluctuations
We derive a significant portion of our net sales from markets outside the United States, comprised of sales to wholesale
customers and directly to consumers by our consolidated subsidiaries in Europe, Korea, Japan, and Canada, our China joint
venture, and sales to independent international distributors who operate within the EMEA and LAAP regions. Sales and
related operational expenses of our foreign subsidiaries and China joint venture, as well as their respective assets and
liabilities, are denominated in currencies other than the U.S. dollar and translated into U.S. dollars for periodic reporting
purposes using the exchange rates in effect during each period. If the U.S. dollar strengthens against the foreign subsidiary's
functional currency, translated revenues and expenses will decline on a relative basis.
The majority of our purchases of finished goods inventory from contract manufacturers are denominated in U.S.
dollars, including purchases by our foreign subsidiaries and China joint venture. The cost of these products may be affected
by relative changes in the value of the local currencies of these subsidiaries and the joint venture in relation to the U.S.
dollar and in relation to the local currencies of our manufacturing vendors. In order to facilitate solicitation of advance
orders from wholesale customers and distributors for the spring and fall seasons, we establish local-currency-denominated
wholesale and retail price lists in each of our foreign subsidiaries approximately six to nine months prior to U.S. dollar-
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denominated seasonal inventory purchases. As a result, our consolidated results are directly exposed to transactional foreign
currency exchange risk to the extent that the U.S. dollar strengthens during the six to nine months between when we establish
seasonal local-currency prices and when we purchase inventory.
We employ several tactics in an effort to mitigate this transactional currency risk, including the use of currency forward
and option contracts. We may also implement local-currency wholesale and retail price increases in our subsidiary and joint
venture markets in an effort to mitigate the effects of currency exchange rate fluctuations on inventory costs. There is no
assurance that our use of currency forward and option contracts and implementation of price increases, in combination with
other tactics, will succeed in fully mitigating the negative effects of adverse foreign currency exchange rate fluctuations on
the cost of our finished goods in a given period or that price increases will be accepted by our wholesale customers, distributors
or consumers. Our gross margins are adversely affected whenever we are not able to offset the full extent of finished goods
cost increases caused by adverse fluctuations in foreign currency exchange rates.
We enter into foreign currency forward exchange contracts to manage currency exposures for monetary assets and
liabilities denominated in a currency other than an entity’s functional currency. As a result, any foreign currency
remeasurement gains and losses recorded in other income (expense) are generally offset with gains and losses on the foreign
currency forward exchange contracts in the same reporting period.
In addition to the direct currency exchange rate exposures described above, our business is indirectly exposed to
currency exchange rate risks. For example, all of the EMEA and LAAP distributors to whom we sell purchase their inventory
from us in U.S. dollars. Weakening of a distributor's functional currency relative to the U.S. dollar makes it more expensive
for it to purchase finished goods inventory from us. In order to make those purchases and pay us on a timely basis, our
distributors must exchange sufficient quantities of their functional currency for U.S. dollars through the financial markets.
Some of our distributors have experienced periods during which they have been unable to obtain U.S. dollars in sufficient
amounts to complete their purchase of finished goods inventory or to pay amounts owed for past purchases. Although each
distributor bears the full risk of fluctuations in the value of its currency against the U.S. dollar, our business can be indirectly
affected when adverse fluctuations cause a distributor to cancel portions of prior advance orders or significantly reduce its
future purchases or both. In addition, price increases that our distributors implement in an effort to offset higher product
costs may make our products less price-competitive in those markets and reduce consumer demand for our products.
Currency exchange rate fluctuations may also create indirect risk to our business by disrupting the business of
independent finished goods manufacturers from which we purchase our products. When their functional currencies weaken
in relation to other currencies, the raw materials they purchase on global commodities markets become more expensive and
more difficult to finance. Although each manufacturer bears the full risk of fluctuations in the value of its currency against
other currencies, our business can be indirectly affected when adverse fluctuations cause a manufacturer to raise the prices
of goods it produces for us, disrupt the manufacturer's ability to purchase the necessary raw materials on a timely basis or
disrupt the manufacturer's ability to function as an ongoing business.
Primarily for each of the reasons described above, currency fluctuations and disruptions in currency exchange markets
may have a material adverse effect on our financial condition, results of operations or cash flows.
Our Orders from Customers Are Subject to Cancellation
We do not have long-term contracts with any of our wholesale customers. We do have contracts with our independent
international distributors; however, although these contracts may have annual purchase minimums which must be met in
order to retain distribution rights, the distributors are not otherwise obligated to purchase product. Sales to our wholesale
customers and distributors are generally on an order-by-order basis and are subject to rights of cancellation and rescheduling.
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 distributors, experience a significant downturn in business or fail
to remain committed to our products or brands, these customers could postpone, reduce, cancel, or discontinue purchases
from us. As a result, we could experience a decline in sales or gross profit, write-downs of excess inventory, increased
discounts, extended credit terms to our customers, or uncollectable accounts receivable, which could have a material adverse
effect on our financial condition, results of operations or cash flows.
We May Not Realize Returns on Our Investments in Our Direct-to-Consumer Businesses
In recent years, our direct-to-consumer businesses have grown substantially and we anticipate continued growth in
the future. Accordingly, we continue to make significant investments in our online platforms and physical retail locations,
including the investment in our global retail platform, system upgrades, entering into long-term store leases, constructing
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leasehold improvements, purchasing fixtures and equipment, and investing in inventory and personnel. Since many of the
costs of our direct-to-consumer businesses are fixed, we may be unable to reduce expenses in order to avoid losses or
negative cash flows if we have insufficient sales. Our direct-to-consumer businesses are dependent upon our ability to
operate in an increasingly complex and evolving marketplace and the results of these businesses are highly dependent on
retail traffic patterns in our physical locations and our on-line platforms where our products are sold, as well as the spending
patterns of our consumers. If we are unable to effectively navigate the direct-to-consumer marketplace or anticipate consumer
buying patterns, our ability to generate sales through our direct-to-consumer businesses may be adversely affected, which
in turn could have a material adverse effect on our financial condition, results of operations or cash flows.
Labor costs and labor-related benefits are primary components in the cost of our retail operations and are affected by
various federal, state and foreign laws governing matters such as minimum wage rates, overtime compensation and other
requirements. For example, we have seen significant political pressure and legislative actions to increase the minimum wage
rate in many of the jurisdictions within which our stores are located. If we are unable to operate profitable stores or if we
close stores, we may experience significant reductions in sales and income or incur significant write-downs of inventory,
severance costs, lease termination costs, impairment losses on long-lived assets, or loss of working capital, which could
have a material adverse effect on our financial condition, results of operations or cash flows.
In addition, from time to time we license the right to operate retail stores for our brands to third parties, primarily to
our independent international distributors. We provide training to support these stores and set operational standards. However,
these third parties may not operate the stores in a manner consistent with our standards, which could cause reputational
damage to our brands or harm these third parties' sales and as a result harm our financial condition, results of operations or
cash flows.
Our Results of Operations Could Be Materially Harmed If We Are Unable to Accurately Match Supply Forecast
with Consumer Demand for Our Products
Many factors may significantly affect demand for our products, including, among other things, economic conditions,
fashion trends, the financial condition of our independent international distributors and wholesale customers, consumer and
customer preferences, and weather, making it difficult to accurately forecast demand for our products and our future results
of operations. To minimize our purchasing costs, the time necessary to fill customer orders and the risk of non-delivery, we
place a significant amount of orders for our products with contract manufacturers prior to receiving orders from our customers,
and we maintain an inventory of various products that we anticipate will be in greatest demand. In addition, customers are
generally allowed to cancel orders prior to shipment.
Factors that could affect our ability to accurately forecast demand for our products include:
•
•
•
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Unseasonable weather conditions;
Our reliance, for certain demand and supply planning functions, on manual processes and judgments that are
subject to human error;
Consumer acceptance of our products or changes in consumer demand for products of our competitors, which
could increase pressure on our product development cycle;
Unanticipated changes in general market conditions or other factors, which may result in lower advance orders
from wholesale customers and distributors, cancellations of advance orders or a reduction or increase in the rate
of reorders placed by retailers; and
• Weak economic conditions or consumer confidence, which could reduce demand for discretionary items such
as our products.
In some cases, we may produce quantities of product that exceed actual demand, which could result in higher inventory
levels that we need to liquidate at discounted prices. During periods of unseasonable weather conditions, weak economic
conditions, unfavorable currency fluctuations, or unfavorable geopolitical conditions in key markets, we may experience a
significant increase in the volume of order cancellations by our customers, including cancellations resulting from the
bankruptcy, liquidation or contraction of some customers' operations. We may not be able to sell all of the products we have
ordered from contract manufacturers or that we have in our inventory. Inventory levels in excess of customer demand may
result in inventory write-downs and the sale of excess inventory at discounted prices through our owned outlet stores or
third-party liquidation channels, which could have a material adverse effect on our brand image, financial condition, results
of operations, or cash flows.
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Conversely, if we underestimate demand for our products or if our contract manufacturers are unable to supply products
when we need them, we may experience inventory shortages. Inventory shortages may prevent us from fulfilling customer
orders, delay shipments to customers, negatively affect customer relationships, result in increased costs to expedite
production and delivery, and diminish our ability to build brand loyalty. Shipments delayed due to limited factory capacity,
transportation or port disruption or other factors could result in order cancellations by our customers, which could have a
material adverse effect on our financial condition, results of operations or cash flows.
We Face Risks Associated with Consumer Preferences and Fashion Trends
Changes in consumer preferences, consumer purchasing behavior or consumer interest in outdoor activities may have
a material adverse effect on our business and changes in fashion trends may have a greater effect than in the past as we
expand our offerings to include more product categories in more geographic areas that are generally more sensitive to fashion
trends. We also face risks because our success depends on our and our customers' abilities to anticipate consumer preferences
and buying patterns, including the growth of e-commerce off-price retailing, and respond to changes in a timely manner.
Lead times for many of our products may make it more difficult for us to respond rapidly to new or changing product trends
or consumer preferences. In addition, our decisions about product designs often are made far in advance of consumer
acceptance. Although we try to manage our inventory risk by soliciting advance order commitments from customers, we
generally place a significant portion of our seasonal production orders with our contract manufacturers before we have
received all of a season's advance orders from customers, and orders may be canceled by customers before shipment. If we
or our customers fail to anticipate and respond to consumer preferences or fail to respond in a timely manner or if we or
our customers are unable to effectively navigate a transforming retail marketplace, we could suffer reputational damage to
our brands and we may experience lower sales, excess inventories and lower profit margins in current and future periods,
any of which could have a material adverse effect on our financial condition, results of operations or cash flows.
We May Be Adversely Affected by Weather Conditions, Including Global Climate Change Trends
Our business is adversely affected by unseasonable weather conditions. A significant portion of the sales of our
products is dependent in part on the weather and likely to decline in years in which weather conditions do not stimulate
demand for our products. Periods of unseasonably warm weather in the fall or winter or unseasonably cold weather in the
spring and summer may have a material adverse effect on our financial condition, results of operations or cash flows.
Unintended inventory accumulation by our wholesale customers resulting from unseasonable weather in one season generally
negatively affects orders in future seasons, which may have a material adverse effect on our financial condition, results of
operations or cash flows.
A significant portion of our business is highly dependent on cold-weather seasons and patterns to generate consumer
demand for our cold-weather apparel and footwear. Consumer demand for our cold-weather apparel and footwear may be
negatively affected to the extent global weather patterns trend warmer, reducing typical patterns of cold-weather events or
increasing weather volatility, which could have a material adverse effect on our financial condition, results of operations
or cash flows.
Acquisitions Are Subject to Many Risks
From time to time, we may pursue growth through strategic acquisitions of assets or companies. Acquisitions, such
as our acquisition of prAna in May 2014, are subject to many risks, including potential loss of significant customers or key
personnel of the acquired business as a result of the change in ownership, difficulty integrating the operations of the acquired
business or achieving targeted efficiencies, the incurrence of substantial costs and expenses related to the acquisition effort,
and diversion of management's attention from other aspects of our business operations.
Acquisitions may also cause us to incur debt or result in dilutive issuances of our equity securities. Our acquisitions
may cause large one-time expenses or create goodwill or other intangible assets that could result in significant impairment
charges in the future. We also make various estimates and assumptions in order to determine purchase price allocation and
estimate the fair value of assets acquired and liabilities assumed. If our estimates or assumptions used to value these assets
and liabilities vary from actual or future projected results, we may be exposed to losses, including impairment losses, that
could be material.
We do not provide any assurance that we will be able to successfully integrate the operations of any acquired businesses
into our operations or achieve the expected benefits of any acquisitions. The failure to successfully integrate newly acquired
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businesses or achieve the expected benefits of strategic acquisitions in the future could have an adverse effect on our financial
condition, results of operations or cash flows. We may not complete a potential acquisition for a variety of reasons, but we
may nonetheless incur material costs in the preliminary stages of evaluating and pursuing such an acquisition that we cannot
recover.
We May Not Realize All of the Anticipated Benefits of Our Joint Venture in China
Effective January 2014, our joint venture in China with Swire began operations. The joint venture, in which we hold
a 60% interest, is subject to a number of risks and uncertainties. For example, because our joint venture partner has protective
voting rights with respect to specified major business decisions of the joint venture, we may experience difficulty reaching
agreement as to implementation of various changes to the joint venture's business. For this reason, or as a result of other
factors, we may not realize all of the anticipated benefits of the joint venture, and our results of operations could be adversely
affected.
Global Regulation and Economic and Political Conditions, as well as Potential Changes in Regulations, Legislation
and Government Policy, May Negatively Affect Our Business
We are subject to risks generally associated with doing business internationally. These risks include the effects of
foreign and domestic laws and regulations, foreign or domestic government fiscal and political crises, political and economic
disputes and sanctions, changes in diverse consumer preferences, foreign currency exchange rate fluctuations, managing a
diverse and widespread workforce, political unrest, terrorist acts, military operations, disruptions or delays in shipments,
disease outbreaks, natural disasters, and changes in economic conditions in countries in which we manufacture or sell
products. These factors, among others, may affect our ability to sell products in certain markets, our ability to collect accounts
receivable, our ability to manufacture products or procure materials, and our cost of doing business.
For example, in the past, political and economic turmoil in certain South American distributor markets have resulted
in currency and import restrictions, limiting our ability to sell products in some countries in this region. Also, Russia
constitutes a significant portion of our non-U.S. sales and operating income and a significant change in conditions in that
market has had an adverse effect on our results of operations in the past. The United Kingdom's June 23, 2016 referendum,
in which voters approved its exit from the European Union (commonly referred to as "Brexit"), has created economic
uncertainty and volatility in currency exchange rates, and the potential adverse effects of changes to the legal and regulatory
framework that apply to the United Kingdom and its relationship with the European Union, and the associated effects on
our European operations, are unknown. If any of these or other factors make the conduct of business in a particular country,
or region, undesirable or impractical, our business may be materially and adversely affected.
In the U.S., the current administration has publicly supported potential trade proposals, including import tariffs,
modifications to international trade policy, and other changes that may affect U.S. trade relations with other countries, any
of which may require us to significantly modify our current business practices or may otherwise materially and adversely
affect our business.
In addition, many of our imported products are subject to duties, tariffs or other import limitations that affect the cost
and quantity of various types of goods imported into the United States and other markets. Any country in which our products
are produced or sold may eliminate, adjust or impose new import limitations, duties, anti-dumping penalties, or other charges
or restrictions, any of which could have a material adverse effect on our financial condition, results of operations or cash
flows.
We May Have Additional Tax Liabilities or Experience Increased Volatility in Our Effective Tax Rate
As a global company, we determine our income tax liability in various tax jurisdictions based on an analysis and
interpretation of local tax laws and regulations. This analysis requires a significant amount of judgment and estimation and
is often based on various assumptions about the future actions of the local tax authorities. These determinations are the
subject of periodic domestic and foreign tax audits. Although we accrue for uncertain tax positions, our accruals may be
insufficient to satisfy unfavorable findings. Unfavorable audit findings and tax rulings may result in payment of taxes, fines
and penalties for prior periods and higher tax rates in future periods, which may have a material adverse effect on our
financial condition, results of operations or cash flows.
On December 22, 2017, the U.S. Government enacted comprehensive tax legislation, commonly referred to as the
Tax Cuts and Jobs Act ("TCJA"). The TCJA makes broad and complex changes to the U.S. tax code. Implementation of
the TCJA legislation required us to record incremental provisional tax expense in 2017, which significantly increased our
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2017 effective tax rate. In addition, the TCJA may also materially affect our 2018 effective tax rate and our financial
condition, results of operations or cash flows. The actual amounts may differ from these provisional estimates due to, among
other factors, a change in interpretation of the applicable revisions to the U.S. tax code and related tax accounting guidance,
changes in assumptions made in developing these estimates, and regulatory guidance that may be issued with respect to the
applicable revisions to the U.S. tax code, and state tax implications.
Other changes in the tax laws of the jurisdictions where we do business, including an increase in tax rates or an adverse
change in the treatment of an item of income or expense, could result in a material increase in our tax expense. For example,
changes in the tax laws of foreign jurisdictions could arise as a result of the Base Erosion and Profit Shifting (BEPS) project
undertaken by the Organization for Economic Co-operation and Development (OECD). The OECD, which represents a
coalition of member countries, has recommended changes to numerous long-standing tax principles. As these changes are
adopted by countries, tax uncertainty could increase and may adversely affect our provision for income taxes.
We Operate in Highly Competitive Markets
The markets for apparel, footwear, accessories, and equipment are highly competitive, as are the markets for our
licensed products. In each of our geographic markets, we face significant competition from global and regional branded
apparel, footwear, accessories, and equipment companies, including competition from companies with significantly greater
resources than ours.
Retailers who are our customers often pose our most significant competitive threat by designing and marketing apparel,
footwear, accessories, and equipment under their own private labels. For example, in the United States and Europe, several
of our largest customers have developed significant private label brands that compete directly with our products. These
retailers have assumed an increasing degree of inventory risk in their private label products and, as a result, may first cancel
advance orders with us in order to manage their own inventory levels downward during periods of unseasonable weather
or weak economic cycles. As our direct-to-consumer businesses grow, we also experience direct competition from retailers
that are our customers, some of which primarily operate e-commerce operations and employ aggressive pricing strategies.
We also compete with other companies for the production capacity of contract manufacturers from which we source our
products and for import capacity. Many of our competitors are significantly larger than we are and have substantially greater
financial, distribution, marketing, and other resources, more stable manufacturing resources and greater brand strength than
we have. In addition, when our competitors combine operations through mergers, acquisitions or other transactions, their
competitive strengths may increase.
Increased competition may result in reduced access to production capacity, challenges in obtaining favorable locations
for our retail stores, reductions in display areas in retail locations, reductions in sales, or reductions in our profit margins,
any of which may 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. 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, we could suffer reputational damage to our brands and
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 features or components. In addition, technical
innovations often involve more complex manufacturing processes, which may lead to higher instances of quality issues,
and if we experience problems with the quality of our products, we may incur substantial expense to address the problems
and any associated product risks. Failure to successfully bring to market innovations in our product lines could have a
material adverse effect on our financial condition, results of operations or cash flows.
Our Success Depends on Our Use and Protection of Intellectual Property Rights
Our registered and common law trademarks and our patented or patent-pending designs and technologies have
significant value and are important to our ability to differentiate our products from those of our competitors and to create
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and sustain demand for our products. We also place significant value on our trade dress, the overall appearance and image
of our products. We regularly discover products that are counterfeit reproductions of our products or that otherwise infringe
on our proprietary rights. Counterfeiting activities typically increase as brand recognition increases, especially in markets
outside the United States. Increased instances of counterfeit manufacture and sales may adversely affect our sales and the
reputation of our brands and result in a shift of consumer preference away from our products. The actions we take to establish
and protect trademarks and other proprietary rights may not be adequate to prevent imitation of our products by others or
to prevent others from seeking to block sales of our products as violations of proprietary rights. In markets outside of the
United States, it may be more difficult for us to establish our proprietary rights and to successfully challenge use of those
rights by other parties. We also license our proprietary rights to third parties. We could suffer reputational damage to our
brands if we fail to choose appropriate licensees and licensed product categories. In addition to our own intellectual property
rights, many of the intellectual property rights in the technology, fabrics and processes used to manufacture our products
are generally owned or controlled by our suppliers and are generally not unique to us. In those cases, we may not be able
to adequately protect our products or differentiate their performance characteristics and fabrications from those of our
competitors. The management of our intellectual property portfolio may affect the strength of our brands, which may in
turn have a material adverse effect on our financial condition, results of operations or cash flows.
Although we have not been materially inhibited from selling products in connection with patent, trademark and trade
dress disputes, as we focus on innovation in our product lines, extend our brands into new product categories and expand
the geographic scope of our marketing, we may become subject to litigation based on allegations of infringement or other
improper use of intellectual property rights of third parties, including third party trademark, copyright and patent rights. An
increasing number of our products include technologies or designs for which we have obtained or applied for patent
protection. Failure to successfully obtain and maintain patents on these innovations could negatively affect our ability to
market and sell our products. Litigation is often necessary to defend against claims of infringement or to enforce and protect
our intellectual property rights. As we utilize e-commerce and social media to a greater degree in our sales and marketing
efforts, we face an increasing risk of patent infringement claims from non-operating entities and others covering broad
functional aspects of internet operations. 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.
In addition, as we continue to operate globally, expand the geographic scope of our business, and adopt new
technologies and product categories, intellectual property disputes may increase, making it more expensive and challenging
to establish and protect our intellectual property rights and to defend against claims of infringement by others, which could
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, as well as the facilities of our third-party
logistics companies, the development or expansion of additional distribution capabilities and services, such as the transition
of value-added services functions from contract manufacturers to our distribution centers, 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 facility in London, Ontario; in Europe, we rely primarily on our distribution center in Cambrai, France;
in Japan, Korea, and China, we rely primarily on third-party logistics companies near Tokyo, Seoul, and Shanghai,
respectively.
Our primary distribution facilities in the United States, France and Canada 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 direct-to-consumer businesses in the United States, Canada and Europe. 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.
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The fixed costs associated with owning, operating and maintaining these large, highly automated distribution centers
during a period of economic weakness or declining sales can result in lower operating efficiencies, financial deleverage and
potential impairment in the recorded value of distribution assets. This has occurred in recent years in Europe, where our
distribution center is underutilized. This fixed cost structure may make it difficult for us to achieve or maintain profitability
if sales volumes decline for an extended period of time and could have material adverse effects on our financial condition,
results of operations or cash flows.
Our distribution facilities may also be interrupted by natural disasters, such as earthquakes, floods, damaging winds,
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.
Our Investment Securities May Be Adversely Affected by Market Conditions
Our investment portfolio is subject to a number of risks and uncertainties. Changes in market conditions, such as
those that accompany an economic downturn or economic uncertainty, may negatively affect the value and liquidity of our
investment portfolio, perhaps significantly. Our ability to find diversified investments that are both safe and liquid and that
provide a reasonable return may be impaired, potentially resulting in lower interest income, less diversification, longer
investment maturities, or other-than-temporary impairments.
We May Be Adversely Affected by Labor Disruptions, Changes in Labor Laws and Other Labor Issues
Our business depends on our ability to source and distribute products in a timely manner. While a majority of our
own operations are not subject to organized labor agreements, our relationship with our Cambrai distribution center
employees is governed by French law, which includes a formal representation of employees by a Works Council and the
application of a collective bargaining agreement. Labor disputes at contract manufacturers where our goods are produced,
shipping ports, transportation carriers, retail stores, or distribution centers create significant risks for our business, particularly
if these disputes result in work slowdowns, lockouts, strikes, or other disruptions during our peak manufacturing, shipping
and selling seasons. For example, work slowdowns and stoppages at ports on the west coast of the United States have, in
the past, resulted in product delays and increased costs. Labor disruptions may have a material adverse effect on our business,
potentially resulting in canceled orders by customers, unanticipated inventory accumulation and reduced revenues and
earnings.
Our ability to meet our labor needs at our distribution centers, retail stores, corporate headquarters, and regional
subsidiaries, including our ability to find qualified employees while controlling wage and related labor costs, is generally
subject to numerous external factors, including the availability of a sufficient number of qualified persons in the work force
of the markets in which our operations are located, unemployment levels within those markets, prevailing and minimum
wage rates, changing demographics, health and other insurance costs, and adoption of new or revised employment and labor
laws and regulations. If we are unable to locate, attract or retain qualified employees, our ability to source, distribute and
sell products in a timely and cost-effective manner may be negatively affected, which could have a material adverse effect
on our financial condition, results of operations or cash flows.
We Depend on Key Suppliers
Some of the materials that we use may be available from only one source or a very limited number of sources. For
example, some specialty fabrics are manufactured to our specification by one source or a few sources, and a single vendor
supplies the majority of the zippers used in our products. From time to time, we have difficulty satisfying our raw material
and finished goods requirements. Although we believe that we can identify and qualify additional contract manufacturers
to produce these materials as necessary, there are no guarantees that additional contract manufacturers will be available. In
addition, depending on the timing, any changes in sources or materials may result in increased costs or production delays,
which may have a material adverse effect on our financial condition, results of operations or cash flows.
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We Depend on Key Personnel
Our future success will depend in part on the continued service of key personnel and our ability to attract, retain and
develop key managers, designers, sales and information technology professionals, and others. We face intense competition
for these individuals worldwide, and there is a significant concentration of well-funded apparel and footwear competitors
near our headquarters in Portland, Oregon. We may not be able to attract qualified new employees or retain existing
employees, which may have a material adverse effect on our financial condition, results of operations or cash flows.
Our Business Is Affected by Seasonality
Our business is affected by the general seasonal trends common to the outdoor industry. Our products are marketed
on a seasonal basis and our annual net sales are weighted heavily toward the fall/winter season, while our operating expenses
are more equally distributed throughout the year. As a result, the majority, and sometimes all, of our operating profits are
generated in the second half of the year. The expansion of our direct-to-consumer businesses and sales growth in our winter
footwear business has increased the proportion of sales and profits that we generate in the fourth calendar quarter. This
seasonality, along with other factors that are beyond our control and that are discussed elsewhere in this section, may
adversely affect our business and cause our results of operations to fluctuate. As a result, our profitability may be materially
affected if management is not able to timely adjust expenses in reaction to adverse events such as unfavorable weather,
weak consumer spending patterns or unanticipated levels of order cancellations. Results of operations in any period should
not be considered indicative of the results to be expected for any future period.
Our Products Are Subject to Increasing Product Regulations and We Face Risks of Product Liability and Warranty
Claims
Our products are subject to increasingly stringent and complex domestic and foreign product labeling and performance
and safety standards, laws and other regulations. These requirements could result in greater expense associated with
compliance efforts, and failure to comply with these regulations could result in a delay, non-delivery, recall, or destruction
of inventory shipments during key seasons or in other financial penalties. Significant or continuing noncompliance with
these standards and laws could disrupt our business and harm our reputation and, as a result, could have a material adverse
effect on our financial condition, results of operations or cash flows.
Our products are used in outdoor activities, sometimes in severe conditions. Product recalls or product liability claims
resulting from the failure, or alleged failure, of our products could have a material adverse effect on the reputation of our
brands, our financial condition, results of operations, or cash flows. Most of our products carry limited warranties for defects
in quality and workmanship. We maintain a warranty reserve for estimated future warranty claims, but the actual costs of
servicing future warranty claims may exceed the reserve, which may also have a material adverse effect on our financial
condition, results of operations or cash flows.
Our Common Stock Price May Be Volatile
The price of our common stock has fluctuated substantially since our initial public offering. Our common stock is
traded on the NASDAQ Global Select Market. Factors such as general market conditions, actions by institutional investors
to rapidly accumulate or divest of a substantial number of our shares, fluctuations in financial results, variances from financial
market expectations, changes in earnings estimates or recommendations by analysts, or announcements by us or our
competitors may cause the market price of our common stock to fluctuate, perhaps substantially.
Insiders Control a Majority of Our Common Stock and May Sell Shares
Five related shareholders, Gertrude Boyle, Sarah Bany, Timothy Boyle, Joseph Boyle, and Molly Boyle, beneficially
own a majority of our common stock. As a result, if acting together, they can effectively control matters requiring shareholder
approval without the cooperation of other shareholders. Shares held by these five shareholders are available for resale,
subject to the requirements of, and the rules under, the Securities Act of 1933 and the Securities Exchange Act of 1934. The
sale or the prospect of the sale of a substantial number of these shares may have an adverse effect on the market price of
our common stock.
Item 1B. UNRESOLVED STAFF COMMENTS
None.
21
Item 2.
PROPERTIES
Following is a summary of principal properties owned or leased by us:
Corporate Headquarters:
Portland, Oregon (1 location)—owned
U.S. Distribution Facilities:
Portland, Oregon (1 location)—owned
Robards, Kentucky (1 location)—owned
Canadian Operation and Distribution Facility:
London, Ontario (1 location)—owned
—————
(1)Lease expires in June 2020
Europe Headquarters:
Geneva, Switzerland (1 location)—leased (1)
Europe Administrative Operation:
Strasbourg, France (1 location)—owned
Europe Distribution Facility:
Cambrai, France (1 location)—owned
In addition, as of December 31, 2017, we leased approximately 290 locations globally for the operation of our branded
and outlet retail stores. We also have several leases globally for office space, warehouse facilities, storage space, vehicles,
and equipment, among other things. Refer to Note 13 of Notes to Consolidated Financial Statements for further lease-related
disclosures.
Item 3.
LEGAL PROCEEDINGS
We are involved in litigation and various legal matters arising in the normal course of business, including matters
related to employment, retail, intellectual property, contractual agreements, and various regulatory compliance activities.
We have considered facts related to legal and regulatory matters and opinions of counsel handling these matters and do not
believe the ultimate resolution of these proceedings will have a material adverse effect on our financial condition, results
of operations or cash flows.
Item 4. MINE SAFETY DISCLOSURES
Not applicable.
Item 4A. EXECUTIVE OFFICERS OF THE REGISTRANT
The following table sets forth information about our executive officers. All information is as of the date of the filing
of this report.
Name
Gertrude Boyle
Timothy P. Boyle
Joseph P. Boyle
Peter J. Bragdon
Thomas B. Cusick
Franco Fogliato
Douglas H. Morse
Jim A. Swanson
Age
93
68
37
55
50
48
51
43
Position
Chairman of the Board
President and Chief Executive Officer, Director
Executive Vice President, Columbia Brand President
Executive Vice President, Chief Administrative Officer, and General Counsel
Executive Vice President, Chief Operating Officer
Executive Vice President, Americas General Manager
Senior Vice President, Emerging Brands and APAC
Senior Vice President, Chief Financial Officer
Gertrude Boyle has served as Chairman of the Board of Directors since 1970. Columbia was founded by her parents
in 1938 and managed by her husband, Neal Boyle, from 1964 until his death in 1970. Mrs. Boyle also served as Columbia's
President from 1970 to 1988. Mrs. Boyle is Timothy P. Boyle's and Columbia director Sarah A. Bany's mother and Joseph
P. Boyle's grandmother.
Timothy P. Boyle joined Columbia in 1971 as General Manager, served as Columbia's President from 1988 to 2015
and reassumed the role in 2017. Mr. Boyle has served as Chief Executive Officer since 1988. He has been a member of the
Board of Directors since 1978. Mr. Boyle is also a member of the Board of Directors of Northwest Natural Gas Company
and Craft Brew Alliance, Inc. Mr. Boyle is Gertrude Boyle's son, Columbia director Sarah A. Bany's brother and Joseph P.
Boyle's father.
22
Joseph P. Boyle joined Columbia in 2005 and has served in a variety of capacities of increasing leadership and
responsibility, including brand management, sales, planning, General Merchandising Manager of Outerwear, Accessories,
Equipment, Collegiate and Licensing, Vice President of Apparel Merchandising, and Senior Vice President of Columbia
Brand Merchandising & Design. He was promoted to Executive Vice President, Columbia Brand President in 2017. From
2003 to 2005, Mr. Boyle served in a business development role for Robert Trent Jones II Golf Course Architects. Mr. Boyle
is a fourth-generation member of Columbia's founding Boyle family, the son of Columbia President and CEO Timothy P.
Boyle, the grandson of Gertrude Boyle and nephew of Columbia director Sarah A. Bany.
Peter J. Bragdon joined Columbia in 1999 and served as Senior Counsel and Director of Intellectual Property until
January 2003. Mr. Bragdon became Vice President, General Counsel and Secretary of Columbia in 2004, was named Senior
Vice President of Legal and Corporate Affairs, General Counsel and Secretary in 2010 and Executive Vice President, Chief
Administrative Officer, General Counsel and Secretary in 2015. In 2017, he assumed oversight of the Company's international
distributor business and currently serves as Executive Vice President, Chief Administrative Officer and General Counsel.
Mr. Bragdon served as Chief of Staff in the Oregon Governor's office from 2003 through 2004. From 1993 to 1999, Mr.
Bragdon was an attorney in the corporate securities and finance group at Stoel Rives LLP. Mr. Bragdon served as Special
Assistant Attorney General for the Oregon Department of Justice for seven months in 1996.
Thomas B. Cusick joined Columbia in 2002 as Corporate Controller, was named Vice President and Corporate
Controller in 2006 and was named Vice President and Chief Accounting Officer in 2008. He was promoted to Vice President,
Chief Financial Officer and Treasurer in 2009, was named Senior Vice President of Finance, Chief Financial Officer and
Treasurer in 2010, and Executive Vice President of Finance and Chief Financial Officer in 2015. He was promoted to
Executive Vice President and Chief Operating Officer in 2017. From 1995 to 2002, Mr. Cusick worked for Cadence Design
Systems (and OrCAD, a company acquired by Cadence in 1999), which operates in the electronic design automation industry,
in various financial management positions. From 1990 to 1995, Mr. Cusick was an accountant with KPMG LLP. Mr. Cusick
is a member of the board of directors of Barrett Business Services, Inc.
Franco Fogliato joined Columbia in 2013 as Senior Vice President and General Manager EMEA Direct Sales. He
was promoted to Senior Vice President and General Manager of EMEA in 2016 and to Executive Vice President, Americas
General Manager in 2017. Prior to joining Columbia, Mr. Fogliato served as general manager of the Billabong Group in
Europe from 2004 to 2013 and as a member of that company's executive board. From 1997 through 2003, Mr. Fogliato held
various European leadership positions with The North Face brand culminating as general manager of Western Europe.
Douglas H. Morse joined Columbia Sportswear in 1995 and has served in numerous roles of increasing responsibility
during his tenure, including Director of U.S. Customer Operations, Director of Footwear Operations, General Manager of
our Canadian subsidiary, Interim General Manager of our Europe-direct business, Chief Business Development Officer and
Vice President and General Manager of LAAP Distributors. He was promoted to Senior Vice President, Emerging Brands
and APAC in 2017.
Jim A. Swanson joined Columbia Sportswear in 2003 as Global Senior Financial Analyst and has served in numerous
roles of increasing responsibility during his tenure, being named Vice President of Finance in 2015 and most recently
promoted to Senior Vice President, Chief Financial Officer in 2017. Prior to joining Columbia, Mr. Swanson served in a
variety of financial planning and analysis, tax, and accounting roles, including senior financial analyst at Freightliner
Corporation and at Tality Corporation – a wholly-owned subsidiary of Cadence Design Systems, and as a senior tax and
business advisory associate at Arthur Andersen.
23
PART II
Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND
ISSUER PURCHASES OF EQUITY SECURITIES
Our common stock is listed on the NASDAQ Global Select Market and trades under the symbol "COLM." At
February 9, 2018, we had approximately 280 shareholders of record, although there is a much larger number of beneficial
owners.
Following are the quarterly high and low sale prices for our common stock for the years ended December 31, 2017
and 2016:
2017
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
2016
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
HIGH
LOW
DIVIDENDS
DECLARED
$60.91
$60.00
$62.09
$72.54
$62.32
$62.95
$61.98
$63.55
$51.76
$51.56
$54.89
$59.06
$43.94
$51.70
$52.97
$53.00
$0.18
$0.18
$0.18
$0.19
$0.17
$0.17
$0.17
$0.18
Our current dividend policy is dependent on our earnings, capital requirements, financial condition, restrictions
imposed by our credit agreements, and other factors considered relevant by our Board of Directors. For various restrictions
on our ability to pay dividends, refer to Note 8 of Notes to Consolidated Financial Statements.
Performance Graph
The line graph below compares the cumulative total shareholder return of our common stock with the cumulative
total return of the Standard & Poor's ("S&P") 400 Mid-Cap Index and the Russell 3000 Textiles Apparel Manufacturers for
the period beginning December 31, 2012 and ending December 31, 2017. The graph assumes that $100 was invested on
December 31, 2012, and that any dividends were reinvested.
Historical stock price performance should not be relied on as indicative of future stock price performance.
24
Columbia Sportswear Company
Stock Price Performance
December 31, 2012—December 31, 2017
Total Return Analysis
Columbia Sportswear Co.
S&P 400 Mid-Cap Index
Russell 3000 Textiles Apparel Mfrs.
12/31/2012
$100.00
$100.00
$100.00
12/31/2013
$149.82
$133.50
$147.05
12/31/2014
$171.82
$146.54
$163.51
12/31/2015
$190.20
$143.35
$159.99
12/31/2016
$230.18
$173.08
$141.39
12/31/2017
$287.41
$201.20
$175.19
Issuer Purchases of Equity Securities
Since the inception of our stock repurchase plan in 2004 through December 31, 2017, our Board of Directors has
authorized the repurchase of up to $700,000,000 of our common stock. As of December 31, 2017, we had repurchased
21,658,035 shares under this program for an aggregate purchase price of approximately $562,064,000. Shares of our common
stock may be purchased in the open market or through privately negotiated transactions, subject to market conditions. The
repurchase program does not obligate us to acquire any specific number of shares or to acquire shares over any specified
period of time.
We did not repurchase any equity securities during the three months ended December 31, 2017.
25
Item 6.
SELECTED FINANCIAL DATA
Selected Consolidated Financial Data
The selected consolidated financial data presented below for, and as of the end of, each of the years in the five-year
period ended December 31, 2017 have been derived from our audited consolidated financial statements. The consolidated
financial data should be read in conjunction with the Consolidated Financial Statements and accompanying Notes that
appear in Item 8 and Management's Discussion and Analysis of Financial Condition and Results of Operations set forth in
Item 7. All references below to share or per share amounts have been retroactively adjusted to reflect our September 26,
2014 two-for-one stock split.
Statement of Operations Data:
Net sales
Net income attributable to Columbia
Sportswear Company
Per Share of Common Stock Data:
Earnings per share attributable to
Columbia Sportswear Company:
Basic
Diluted
Cash dividends per share
Weighted average shares outstanding:
Basic
Diluted
Balance Sheet Data:
Total assets
Note payable to related party
Year Ended December 31,
2017
2016
2014
2015
(In thousands, except per share amounts)
2013
$ 2,466,105
$ 2,377,045
$ 2,326,180
$ 2,100,590
$ 1,684,996
105,123
191,898
174,337
137,173
94,341
$
$
1.51
1.49
0.73
$
2.75
2.72
0.69
$
2.48
2.45
0.62
$
1.97
1.94
0.57
1.37
1.36
0.46
69,759
70,453
69,683
70,632
70,162
71,064
69,807
70,681
68,756
69,434
2017
2016
2015
2014
2013
December 31,
$ 2,212,902
—
$ 2,013,894
14,053
$ 1,846,153
15,030
$ 1,792,209
15,728
$ 1,605,588
—
26
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, profitability and the effect of
specified factors on profitability for 2018, expenses, sourcing 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
operating model assessment referred to as Project CONNECT, intellectual property disputes, our direct-to-consumer channels
and other capital expenditures, including planned store additions, access to raw materials and factory capacity, financing and
working capital requirements and resources, effects of the TCJA, income 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.
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 primarily under the Columbia, SOREL,
prAna, and Mountain Hardwear brands. Our products are sold through a mix of wholesale distribution channels, our own direct-
to-consumer channels and independent international distributors. In addition, we license some of our trademarks across a range
of apparel, footwear, accessories, equipment, and home products.
The popularity of outdoor activities and active lifestyles, changing design trends, consumer adoption of innovative
performance technologies, variations in seasonal weather, 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 developing new products with innovative performance features and designs, creating persuasive and memorable marketing
communications to generate consumer awareness, demand and retention, and adjusting the mix, price points and selling channels
of available product offerings. 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, including 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. In 2017, approximately 60% of our net sales and approximately 90% of our operating income 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. The expansion of our direct-to-consumer channels has increased the proportion of sales, profits
and cash flows that we generate in the second half of the year.
We generally solicit orders from wholesale customers and independent international 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 spring season orders to customers beginning in January and continuing through
June. Similarly, we typically ship the majority of our advance fall season orders to customers beginning in July and continuing
through December. Generally, orders are subject to cancellation prior to the date of shipment.
Results of operations in any period should not be considered indicative of the results to be expected for any future period,
particularly in light of persistent volatility in global economic and geopolitical conditions and volatility of foreign currency
exchange rates which, when combined with seasonal weather patterns and inflationary or volatile sourcing costs, reduce the
predictability of our business.
Business Outlook
The global business climate continues to present us with a great deal of uncertainty, making it difficult to predict future
results. Consistent with the historical seasonality of the business, we anticipate 2018 profitability to be heavily concentrated
in the second half of the year. Factors that could significantly affect our full year 2018 financial results include:
•
Performance and profitability of our global direct-to-consumer operations;
27
• Unseasonable weather conditions or other unforeseen factors affecting consumer demand and the resulting effect on
cancellations of advance wholesale orders, sales returns, wholesale customer accommodations, replenishment orders
and reorders, direct-to-consumer sales, changes in mix and volume of full price sales in relation to promotional and
closeout product sales, and suppressed wholesale and end-consumer demand in subsequent seasons;
•
Industry trends affecting consumer traffic and spending in brick and mortar retail channels, which are creating
uncertainty regarding the long-term financial health of several of our U.S. wholesale customers;
• The effects of changes in foreign currency exchange rates on sales, gross margin, operating income, and net income;
• Difficult economic and competitive environments in certain key markets within our Latin America and Asia Pacific
("LAAP") region, in particular, Korea;
• Continued sales growth and profitability contributed by our Europe, Middle East and Africa ("EMEA") region;
•
Performance of our Mountain Hardwear business as we work to re-invigorate that brand in the marketplace;
• The financial impact of activities associated with and resulting from Project CONNECT;
•
Further refinement of our 2017 TCJA provisional income tax estimates; and
• The financial impact of executing our Consumer-First platform.
These factors and others may have a material effect on our financial condition, results of operations or cash flows,
particularly with respect to quarterly comparisons.
Strategic Priorities
As part of our commitment to driving sustainable and profitable growth and relentless improvement, we remain focused
on investment in our strategic priorities, including:
• Driving brand awareness and sales growth through increased, focused demand creation investments;
• Enhancing consumer experience and digital capabilities in all of our channels and geographies;
• Expanding and improving global direct-to-consumer operations with supporting processes and systems; and
•
Investing in our people and optimizing our organization across our portfolio of brands.
Ultimately, we expect our investments to accelerate market share capture across all brands, expand gross margin, improve
selling, general and administrative ("SG&A") expense efficiency, and drive improved operating margin.
Consumer-First Platform
During the second quarter of 2017, we commenced an initiative to invest in our Consumer-First platform, which
encompasses our retail ERP systems infrastructure, to support the growth and continued development of our global direct-to-
consumer operations. The objective of this initiative is consistent with our strategic priorities to deliver an enhanced consumer
experience, omnichannel capabilities, and to modernize and standardize our processes and systems to enable us to better
anticipate and deliver against the needs of our consumers. This multi-year global initiative is currently in the design phase,
targeting regional implementations beginning in the first half of 2019.
Ongoing Global ERP Implementation
We are continuing to invest in our multi-year global ERP implementation, which has been executed in the majority of
our operations to date. We implemented the ERP system in our China joint venture in the second quarter of 2017. We plan to
transition our Europe-direct business onto the system in mid-2018, at which point we will have completed the major components
of our global rollout.
Project CONNECT
Project CONNECT is a comprehensive assessment of our operating model aimed at aligning our resources to accelerate
execution on our strategic priorities. In 2017, we completed the operational assessment phase of Project CONNECT, which
included a shift in our operating model, executive organization structure and decision rights to enable a brand-led and consumer-
focused organization. We have also identified and scoped key business processes requiring modification, operational
improvements, and investment in new capabilities in order to support the realigned organization and drive meaningful financial
value.
28
During the second half of 2017, we began implementation of operational improvements throughout the business. Project
CONNECT includes initiatives intended to drive revenue, capture cost of sales efficiencies, generate SG&A expense savings,
and improve our marketing effectiveness.
A few of these initiatives will be among the first to be implemented. Examples include initiatives in the area of e-commerce
optimization, indirect procurement, marketing effectiveness, and refining the promotional cadence in our direct-to-consumer
channels. Other initiatives generally will be implemented following further development, particularly those pertaining to product
creation such as assortment optimization and intensifying our emphasis on designing products with the features and functions
that consumers value most.
As these improvements begin to be realized, we intend to reallocate resources to our strategic priorities, including
incremental demand creation spend and other investments to drive growth across our distribution channels. Our 2018 financial
outlook contemplates modest financial benefits attributable to the execution of these initiatives while we anticipate more
meaningful financial value beginning in 2019.
Results of Operations
The following discussion of our results of operations and liquidity and capital resources should be read in conjunction
with the Consolidated Financial Statements and accompanying Notes in Item 8 of this annual report. To supplement financial
information reported in accordance with accounting principles generally accepted in the United States ("GAAP"), we disclose
constant-currency net sales information, which is a non-GAAP financial measure, to provide a framework to assess how the
business performed excluding the effects of changes in the exchange rates used to translate net sales generated in foreign
currencies into U.S. dollars. Management believes that this non-GAAP financial measure reflects an additional and useful way
of viewing an aspect of our operations that, when viewed in conjunction with our GAAP results, provides a more comprehensive
understanding of our business and operations. In particular, investors may find the non-GAAP measures useful by reviewing
our net sales results without the significant volatility of foreign currency exchange rates. This non-GAAP financial measure
also facilitates management's internal comparisons to our historical net sales results and comparisons to competitors' net sales
results. Constant-currency financial measures should be viewed in addition to, and not in lieu of or superior to, our financial
measures presented in accordance with GAAP. The following discussion includes references to constant-currency net sales,
and we provide a reconciliation of this non-GAAP measure to the most directly comparable financial measure presented in
accordance with GAAP. All references to years relate to the calendar year ended December 31.
Additionally, we reference other non-GAAP financial measures in our fourth quarter and year-to-date 2017 financial
results and 2018 financial outlook earnings release, located in the investor relations section of our website at http://
investor.columbia.com/results.cfm. A reconciliation of these non-GAAP financial measures to comparable measures reported
under GAAP can be found in the supplemental financial tables that accompany our earnings release, along with an explanation
of management’s rationale for referencing these non-GAAP financial measures.
Highlights of the Year Ended December 31, 2017
• Net sales increased $89.1 million, or 4%, to $2,466.1 million from $2,377.0 million in 2016.
• Gross profit as a percentage of net sales increased to 47.0% from 46.7% in 2016.
•
•
Income from operations increased $6.5 million, or 3%, to $263.0 million from $256.5 million in 2016.
Income tax expense increased to $154.4 million, including provisional amounts of $95.6 million in incremental tax
expense related to the TCJA, compared to $58.5 million in 2016.
• Net income attributable to Columbia Sportswear Company decreased $86.8 million, or 45%, to $105.1 million, or
$1.49 per diluted share, largely affected by additional provisional tax expense related to the TCJA, compared to net
income of $191.9 million, or $2.72 per diluted share, in 2016.
• Operating cash flow increased $65.9 million, or 24.0%, to $341.1 million, compared to $275.2 million in 2016.
• We paid cash dividends totaling $50.9 million, or $0.73 per share.
The following table sets forth, for the years indicated, the percentage relationship to net sales of specified items in our
Consolidated Statements of Operations:
29
Net sales
Cost of sales
Gross profit
Selling, general and administrative expenses
Net licensing income
Income from operations
Interest income, net
Other non-operating expense
Income before income tax
Income tax expense
Net income
Net income attributable to non-controlling interest
Net income attributable to Columbia Sportswear Company
Year Ended December 31,
2017
100.0%
53.0
47.0
36.9
0.6
10.7
0.2
—
10.9
(6.3)
4.6
0.3
4.3%
2016
100.0%
53.3
46.7
36.4
0.5
10.8
—
—
10.8
(2.5)
8.3
0.2
8.1%
2015
100.0%
53.9
46.1
35.8
0.4
10.7
—
(0.1)
10.6
(2.9)
7.7
0.2
7.5%
Year Ended December 31, 2017 Compared to Year Ended December 31, 2016
Net Sales: Consolidated net sales increased $89.1 million, or 4%, to $2,466.1 million in 2017 from $2,377.0 million
in 2016.
Sales by Geographic Region
Net sales by geographic region are summarized in the following table:
Year Ended December 31,
Reported
Net Sales
2017
Adjust for
Foreign
Currency
Translation
Constant-
currency
Net Sales
2017(1)
Reported
Net Sales
2016
Constant-
currency
Net Sales
Reported
Net Sales
% Change % Change(1)
United States
LAAP
EMEA
Canada
$ 1,520.0
475.1
293.7
177.3
$ 2,466.1
$
$
(In millions, except for percentage changes)
— $ 1,520.0
481.4
6.3
288.8
(4.9)
(5.6)
171.7
(4.2) $ 2,461.9
$ 1,505.2
453.7
253.5
164.6
$ 2,377.0
1%
5%
16%
8%
4%
1%
6%
14%
4%
4%
(1) Constant-currency net sales information is a non-GAAP financial measure, which excludes the effect of changes in foreign currency exchange rates
against the U.S. dollar between comparable reporting periods. We calculate constant-currency net sales by translating net sales in foreign currencies for the
current period into U.S. dollars at the exchange rates that were in effect during the comparable period of the prior year.
Net sales in the United States increased $14.8 million, or 1%, to $1,520.0 million in 2017 from $1,505.2 million in 2016.
The increase in net sales in the United States was attributed to an increase in net sales in our direct-to-consumer business,
partially offset by a net sales decrease in our wholesale business. The net sales increase in our direct-to-consumer business
primarily consisted of a net sales increase from our retail stores, followed by increased e-commerce net sales. At December
31, 2017, we operated 129 retail stores, compared with 118 stores at December 31, 2016. The net sales decrease in our wholesale
business resulted primarily from the comparative effects of sales to U.S. wholesale customers who have gone through
bankruptcies, liquidations and store closures.
Net sales in the LAAP region increased $21.4 million, or 5% (6% constant-currency), to $475.1 million in 2017 from
$453.7 million in 2016. The net sales increase in the LAAP region was concentrated in the Columbia brand and attributed to
net sales increases in our LAAP distributor business, China and Japan. The net sales increase in our LAAP distributor business
reflected a shift in timing of shipments of increased spring 2017 advance orders, from the fourth quarter of 2016 to the first
quarter of 2017 and a shift in timing of increased spring 2018 advance orders, from the first quarter of 2018 into the fourth
quarter of 2017. The net sales increase in China consisted of a net sales increase in our direct-to-consumer business, partially
offset by decreased net sales from our wholesale business. The net sales increase in Japan consisted of a net sales increase in
our direct-to-consumer business, partially offset by decreased net sales from our wholesale business.
30
Net sales in the EMEA region increased $40.2 million, or 16% (14% constant-currency), to $293.7 million in 2017 from
$253.5 million in 2016. The EMEA region net sales increase consisted of an increase in our Europe-direct business, followed
by a net sales increase in our EMEA distributor business. The net sales increase in our Europe-direct business was led by the
Columbia brand, followed by the SOREL brand, reflecting shipments of increased spring and fall 2017 advance wholesale
orders and increased net sales in our direct-to-consumer businesses. The net sales increase in our EMEA distributor business
was driven by increased shipments to our Russian distributor.
Net sales in Canada increased $12.7 million, or 8% (4% constant-currency), to $177.3 million in 2017 from $164.6
million in 2016. The net sales increase in Canada was led by a net sales increase in our wholesale business, followed by a net
sales increase in our direct-to-consumer business.
Sales by Brand
Net sales by brand are summarized in the following table:
Year Ended December 31,
Reported
Net Sales
2017
Adjust for
Foreign
Currency
Translation
Constant-
currency
Net Sales
2017
Reported
Net Sales
2016
Reported
Net Sales
% Change
Columbia
SOREL
prAna
Mountain Hardwear
Other
$ 1,990.3
228.8
140.9
101.6
4.5
$ 2,466.1
$
$
(In millions, except for percentage changes)
(1.4) $ 1,988.9
226.2
(2.6)
140.9
—
101.3
(0.3)
4.6
0.1
(4.2) $ 2,461.9
$ 1,910.1
213.0
139.9
104.0
10.0
$ 2,377.0
4%
7%
1%
(2)%
(55)%
4%
Constant-
currency
Net Sales
% Change
4%
6%
1%
(3)%
(54)%
4%
Columbia brand net sales increased $80.2 million, or 4%, to $1,990.3 million, driven by increased net sales in the
United States direct-to-consumer business, the EMEA region, the LAAP region and Canada, partially offset by a net sales
decrease in the United States wholesale business.
SOREL brand net sales increased $15.8 million, or 7% (6% constant-currency) to $228.8 million, driven by increased
net sales in the EMEA region, the United States and Canada.
prAna brand net sales increased $1.0 million, or 1%, to $140.9 million, primarily reflecting a net sales increase in the
United States direct-to-consumer business, partially offset by a net sales decrease in the United States wholesale business.
Mountain Hardwear brand net sales decreased $2.4 million, or 2% (3% constant-currency), to $101.6 million, driven
by net sales decreases in the United States wholesale business and the LAAP region, partially offset by increased net sales in
the United States direct-to-consumer business and Canada.
Sales by Product Category
Net sales by product category are summarized in the following table:
Year Ended December 31,
Apparel, Accessories and Equipment
Footwear
Reported
Net Sales
2017
$ 1,928.0
538.1
$ 2,466.1
Reported
Net Sales
2016
Constant-
Adjust for
currency
Foreign
Net Sales
Currency
2017
Translation
(In millions, except for percentage changes)
$ 1,865.4
$
511.6
$ 2,377.0
(2.5) $ 1,925.5
(1.7)
536.4
(4.2) $ 2,461.9
$
Reported
Net Sales
% Change
Constant-
currency
Net Sales
% Change
3%
5%
4%
3%
5%
4%
Net sales of apparel, accessories and equipment increased $62.6 million, or 3%, to $1,928.0 million in 2017 from $1,865.4
million in 2016. The increase in apparel, accessories and equipment net sales was concentrated in the Columbia brand, partially
offset by lower Mountain Hardwear brand net sales. Apparel, accessories and equipment net sales increased across all regions,
led by the EMEA region, followed by the LAAP region, the United States and Canada.
31
Net sales of footwear increased $26.5 million, or 5%, to $538.1 million in 2017 from $511.6 million in 2016. The increase
in footwear net sales was led by the SOREL brand, followed by the Columbia brand. Footwear net sales increased across all
regions, led by the EMEA region, followed by Canada, the United States and the LAAP region.
Gross Profit: Gross profit as a percentage of net sales increased to 47.0% in 2017 from 46.7% in 2016. Gross margin
expansion was primarily due to:
• A favorable sourcing environment resulting in lower product input costs;
• Lower provisions for aged and excess inventory;
• A higher proportion of direct-to-consumer net sales, which generally carry higher gross margins; and
•
Slightly favorable foreign currency hedge rates;
partially offset by;
• A higher volume of closeout product sales, which generally carry lower gross margins.
Our gross profit may not be comparable to other companies in our industry because some of these companies include all
of the costs related to their distribution network in cost of sales while we, like many others, include these expenses as a
component of SG&A expense.
Selling, General and Administrative Expenses: SG&A expense includes all costs associated with our design,
merchandising, marketing, distribution, and corporate functions, including related depreciation and amortization.
SG&A expense increased $46.8 million, or 5%, to $910.9 million, or 36.9% of net sales, in 2017 including
program expenses and discrete costs of approximately $14.9 million related to Project CONNECT, from $864.1 million, or
36.4% of net sales, in 2016. The SG&A expense increase was primarily due to:
•
•
•
•
Increased costs to support our expanding global direct-to-consumer operations;
Program expenses and discrete costs related to Project CONNECT;
Increased personnel costs and incentive compensation to support strategic initiatives and business growth; and
Increased demand creation spending.
Depreciation and amortization included in SG&A expense totaled $59.1 million in 2017, compared to $59.2 million in
2016.
Net Licensing Income: Net licensing income increased $3.7 million to $13.9 million in 2017, compared to $10.2
million in 2016. The increase in net licensing income was driven by growth in newer licensing partners.
Interest Income, Net: Interest income increased $2.5 million to $4.5 million in 2017, compared to $2.0 million in 2016.
The increase in interest income was primarily driven by higher average cash and investment balances, followed by higher
average interest rates during 2017 compared to 2016.
Income Tax Expense: Income tax expense increased to $154.4 million in 2017, including provisional amounts of $95.6
million in additional tax expense related to the TCJA, from $58.5 million in 2016. Our effective income tax rate increased to
57.9% from 22.8% in 2016. Refer to Note 10 of the Consolidated Financial Statements for further information.
Net Income Attributable to Columbia Sportswear Company: Net income decreased $86.8 million, or 45%, to $105.1
million in 2017, including $9.4 million, net of tax, or $0.13 per diluted share, in expense related to Project CONNECT, and
$95.6 million of income tax expense, or $1.36 per diluted share, related to the TCJA, from $191.9 million in 2016. Diluted
earnings per share was $1.49 in 2017 compared to $2.72 in 2016.
Year Ended December 31, 2016 Compared to Year Ended December 31, 2015
Net Sales: Consolidated net sales increased $50.8 million, or 2% (2% constant-currency), to $2,377.0 million in 2016
from $2,326.2 million in 2015.
Sales by Geographic Region
Net sales by geographic region are summarized in the following table:
32
Year Ended December 31,
Reported
Net Sales
2016
Adjust for
Foreign
Currency
Translation
Constant-
currency
Net Sales
2016
Reported
Net Sales
2015
Reported
Net Sales
% Change
United States
LAAP
EMEA
Canada
$ 1,505.2
453.7
253.5
164.6
$ 2,377.0
$
$
(In millions, except for percentage changes)
— $ 1,505.2
450.1
255.9
170.3
$ 2,381.5
$ 1,455.2
469.2
233.2
168.6
$ 2,326.2
(3.6)
2.4
5.7
4.5
3%
(3)%
9%
(2)%
2%
Constant-
currency
Net Sales
% Change
3%
(4)%
10%
1%
2%
Net sales in the United States increased $50.0 million, or 3%, to $1,505.2 million in 2016 from $1,455.2 million in 2015.
The increase in net sales in the United States was led by an increase in net sales in our direct-to-consumer business, partially
offset by a decrease in our wholesale business. The increase in our direct-to-consumer business was led by increased net sales
from our retail stores, followed by increased e-commerce net sales. At December 31, 2016, we operated 118 retail stores,
compared with 111 stores at December 31, 2015. The net sales decrease in our wholesale business was primarily driven by the
impact of U.S. wholesale customer bankruptcies during 2016.
Net sales in the LAAP region decreased $15.5 million, or 3% (4% constant-currency), to $453.7 million in 2016 from
$469.2 million in 2015. The net sales decrease in the LAAP region was led by net sales decreases in Korea and our LAAP
distributor business, partially offset by net sales increases in Japan and China. The net sales decrease in Korea reflected a
change in consumer preferences in that country away from the outdoor category that has created an industry-wide excess of
inventory in that market. The net sales decrease in our LAAP distributor business primarily reflected a shift in timing of
shipments of spring advance orders. The net sales increase in Japan was driven by the positive effects of foreign exchange
rates, as nets sales in local currency were essentially unchanged.
Net sales in the EMEA region increased $20.3 million, or 9% (10% constant-currency), to $253.5 million in 2016 from
$233.2 million in 2015. The EMEA net sales increase consisted of an increase in our Europe-direct business, partially offset
by a net sales decrease in our EMEA distributor business, reflecting a decline in net sales to our Russian distributor, due to the
macroeconomic challenges in that region.
Net sales in Canada decreased $4.0 million, or 2% (increased 1% constant-currency), to $164.6 million in 2016 from
$168.6 million in 2015. The net sales decrease in Canada reflected a net sales decrease in our wholesale business, partially
offset by a net sales increase in our direct-to-consumer business.
Sales by Brand
Net sales by brand are summarized in the following table:
Year Ended December 31,
Reported
Net Sales
2016
Adjust for
Foreign
Currency
Translation
Constant-
currency
Net Sales
2016
Reported
Net Sales
2015
Reported
Net Sales
% Change
Columbia
SOREL
prAna
Mountain Hardwear
Other
$ 1,910.1
213.0
139.9
104.0
10.0
$ 2,377.0
$
$
(In millions, except for percentage changes)
5.3
(0.8)
—
0.1
(0.1)
4.5
$ 1,915.4
212.2
139.9
104.1
9.9
$ 2,381.5
$ 1,864.7
209.2
125.3
116.3
10.7
$ 2,326.2
2%
2%
12%
(11)%
(7)%
2%
Constant-
currency
Net Sales
% Change
3%
1%
12%
(10)%
(7)%
2%
The net sales increase in 2016 compared to 2015 was led by the Columbia brand, followed by the prAna brand and the
SOREL brand, partially offset by lower Mountain Hardwear net sales. The Columbia brand net sales increase was led by the
United States, followed by the EMEA region and Canada, partially offset by a net sales decrease in the LAAP region.
Sales by Product Category
33
Net sales by product category are summarized in the following table:
Year Ended December 31,
Apparel, Accessories and Equipment
Footwear
Reported
Net Sales
2016
$ 1,865.4
511.6
$ 2,377.0
Reported
Net Sales
2015
Constant-
Adjust for
currency
Foreign
Net Sales
Currency
Translation
2016
(In millions, except for percentage changes)
$ 1,821.2
$ 1,869.5
$
505.0
512.0
$ 2,326.2
$ 2,381.5
4.1
0.4
4.5
$
Reported
Net Sales
% Change
Constant-
currency
Net Sales
% Change
2%
1%
2%
3%
1%
2%
Net sales of apparel, accessories and equipment increased $44.2 million, or 2% (3% constant-currency), to $1,865.4
million in 2016 from $1,821.2 million in 2015. The increase in apparel, accessories and equipment net sales was led by a net
sales increase in the Columbia brand, followed the prAna brand and the SOREL brand, partially offset by lower Mountain
Hardwear brand net sales. The apparel, accessories and equipment net sales increase was led by the United States, followed
by the EMEA region and Canada, partially offset by lower net sales in the LAAP region.
Net sales of footwear increased $6.6 million, or 1%, to $511.6 million in 2016 from $505.0 million in 2015. The increase
in footwear net sales was led by the Columbia brand, followed by the SOREL brand. The footwear net sales increase was led
by the United States, followed by the EMEA region, partially offset by lower net sales in Canada and the LAAP region.
Gross Profit: Gross profit as a percentage of net sales increased to 46.7% in 2016 from 46.1% in 2015. Gross margin
expansion was primarily due to:
•
Favorable changes in channel mix with a higher proportion of direct-to-consumer net sales and a lower proportion
of net sales to independent international distributors, which generally carry lower gross margins than wholesale and
direct-to-consumer channels;
• A favorable mix of full-price versus close-out product net sales;
•
Selective price increases; and
• A favorable sourcing environment;
partially offset by:
• An unfavorable impact from foreign currency rates in Canada, China, Europe, and Japan.
Selling, General and Administrative Expense: SG&A expense increased $32.1 million, or 4%, to $864.1 million, or
36.4% of net sales, in 2016, from $832.0 million, or 35.8% of net sales, in 2015. The SG&A expense increase was primarily
due to:
•
•
•
Increased costs to support our expanding global direct-to-consumer operations;
Increased personnel costs to support strategic initiatives and business growth; and
Increased information technology investments;
partially offset by:
• Lower incentive compensation expenses;
• Cost containment measures that have been implemented throughout the year; and
• Lower demand creation expenses.
Depreciation and amortization included in SG&A expense totaled $59.2 million in 2016, compared to $55.5 million in
2015.
Net Licensing Income: Net licensing income increased $2.0 million to $10.2 million in 2016, compared to $8.2 million
in 2015. The increase in net licensing income was primarily due to increased licensing income from accessories and equipment
in the United States.
Other Non-Operating Expense: Other non-operating expense totaled $0.6 million in 2016, compared to $2.8 million in
2015. The $2.2 million decrease in other non-operating expense was attributed to lower net losses incurred on the revaluation
of foreign currency denominated assets and liabilities, the change in fair value of foreign currency contracts not designated as
cash flow hedges and the settlement of foreign-currency denominated transactions.
34
Income Tax Expense: Income tax expense decreased to $58.5 million in 2016 from $67.5 million in 2015. Our effective
income tax rate decreased to 22.8% from 27.3% in 2015. The decrease in our effective income tax rate was due to a higher
proportion of taxable income in foreign jurisdictions where tax rates are generally lower than the United States, an increased
income tax benefit from the utilization of foreign tax credits and an income tax benefit recognized as a result of the Company's
early adoption of ASU No. 2016-09, Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment
Accounting. Refer to Note 1 of Notes to Consolidated Financial Statements under Changes affecting comparability for further
discussion regarding the adoption of ASU No. 2016-09. These comparative income tax benefits were partially offset by a tax
benefit that was recognized in 2015 from the utilization of net operating loss carry-forwards and the release of associated
valuation allowances in certain international tax jurisdictions.
Net Income Attributable to Columbia Sportswear Company: Net income increased $17.6 million, or 10%, to $191.9
million in 2016 from $174.3 million in 2015. Diluted earnings per share was $2.72 in 2016 compared to $2.45 in 2015.
Liquidity and Capital Resources
Our primary ongoing funding requirements are for working capital, investing activities associated with our global
direct-to-consumer expansion, strategic business initiatives and complementary systems implementations, general corporate
needs, and the expansion of our global operations. At December 31, 2017, we had total cash and cash equivalents of $673.2
million, compared to $551.4 million at December 31, 2016. In addition, we had short-term investments of $95.0 million at
December 31, 2017, compared to $0.5 million at December 31, 2016. At December 31, 2017, approximately 49% of our
cash, cash equivalents and short-term investments were held by our foreign subsidiaries. As a result of the enactment of
TCJA and the resulting change to a territorial system of taxation, we no longer intend to permanently reinvest offshore
earnings of our foreign subsidiaries accumulated through December 31, 2017.
2017 compared to 2016
Net cash provided by operating activities was $341.1 million in 2017, compared to $275.2 million in 2016. The
increase in cash provided by operating activities was primarily driven by a reduction of inventory levels and an increase in
accounts payable, partially offset by an increase in accounts receivable during 2017 compared to a decrease in 2016. A
significant decline in net income in 2017 relating to incremental non-cash provisional tax expense resulting from the TCJA
was offset by corresponding changes in deferred income taxes and taxes payable.
Net cash used in investing activities was $147.8 million in 2017, compared to $49.9 million in 2016. For 2017, net
cash used in investing activities primarily consisted of $94.7 million in net purchases of short-term investments and $53.4
million for capital expenditures. For 2016, net cash used in investing activities primarily consisted of $50.0 million for
capital expenditures.
Net cash used in financing activities was $84.4 million in 2017, compared to $42.0 million in 2016. For 2017, net
cash used in financing activities primarily consisted of dividend payments of $50.9 million, the repurchase of common
stock at an aggregate purchase price of $35.5 million and payment of a related-party note payable of $14.2 million, partially
offset by net proceeds of $16.3 million from the issuance of common stock related to our stock compensation programs.
For 2016, net cash used in financing activities primarily consisted of dividend payments of $48.1 million, partially offset
by net proceeds of $8.1 million from the issuance of common stock related to our stock compensation programs.
2016 compared to 2015
Net cash provided by operating activities was $275.2 million in 2016, compared to $95.1 million in 2015. The increase
in cash provided by operating activities was primarily driven by a lower increase in inventory levels, a reduction in accounts
receivable and an increase in net income during 2016 compared to 2015.
Net cash used in investing activities was $49.9 million in 2016, compared to $43.0 million in 2015. For 2016, net
cash used in investing activities primarily consisted of $50.0 million for capital expenditures. For 2015, net cash used in
investing activities primarily consisted of $69.9 million for capital expenditures, partially offset by $26.8 million in net
sales of short-term investments.
Net cash used in financing activities was $42.0 million in 2016, compared to $91.2 million in 2015. For 2016, net
cash used in financing activities primarily consisted of dividend payments of $48.1 million, partially offset by net proceeds
of $8.1 million from the issuance of common stock related to our stock compensation programs. For 2015, net cash used
in financing activities primarily consisted of the repurchase of common stock at an aggregate price of $70.1 million and
35
dividend payments of $43.5 million, partially offset by net proceeds of $12.5 million from the issuance of common stock
related to our stock compensation programs.
Short-term borrowings and credit lines
We have an unsecured, committed revolving line of credit available to fund our domestic working capital requirements.
Monthly variable commitments available for funding average $100.0 million over the course of a calendar year. At December
31, 2017, no balance was outstanding under this line of credit and we were in compliance with all associated covenants.
Internationally, our subsidiaries have operating lines of credit in place guaranteed by the parent company with a combined
limit of approximately $90.3 million at December 31, 2017. At December 31, 2017, no balance was outstanding under these
lines of credit.
We expect to fund our future working capital expenditures with existing cash, operating cash flows and credit facilities.
If the need arises, 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.
Our operations and cash flows are affected by seasonal trends typical in the outdoor apparel and footwear industry
and have historically resulted in higher sales and profits in the third and fourth calendar quarters. This pattern has resulted
primarily from the timing of shipments of fall season products to wholesale customers in the third and fourth quarters and
proportionally higher sales in our direct-to-consumer channels in the fourth quarter, combined with proportionally higher
inventory purchases in the second and third calendar quarters and an expense base that is more consistent throughout the
year. We believe that our liquidity requirements for at least the next 12 months will be adequately covered by existing cash,
cash provided by operations and existing short-term borrowing arrangements. We plan to fund future cash dividends and
share repurchases with cash generated from operating activities.
Contractual obligations
The following table presents our estimated significant contractual commitments (in thousands):
Inventory purchase obligations (1)
Operating lease obligations (2)
TCJA transition tax obligations (3)
2018
$266,507
68,686
3,996
2019
2020
2021
2022
Thereafter
Total
$
— $
— $
— $
— $
— $266,507
58,286
3,996
49,148
3,996
42,041
3,996
38,416
113,961
370,538
3,996
29,967
49,947
Year ended December 31,
—————
(1)
(2)
(3)
Refer to Inventory Purchase Obligations in Note 13 of Notes to Consolidated Financial Statements.
Refer to Operating Leases in Note 13 of Notes to Consolidated Financial Statements.
Refer to Income Taxes in Note 10 of Notes to Consolidated Financial Statements.
We have recorded long-term liabilities for net unrecognized tax benefits related to income tax uncertainties in our
Consolidated Balance Sheet at December 31, 2017 of approximately $12.2 million; however, these long-term liabilities
have not been included in the table above because we are uncertain about whether or when these amounts may be settled.
Refer to Note 10 of Notes to Consolidated Financial Statements.
Quantitative and Qualitative Disclosures About Market Risk
In the normal course of business, our financial position and results of operations are subject to a variety of risks,
including risks associated with global financial and capital markets, primarily currency exchange rate risk and, to a lesser
extent, interest rate risk and equity market risk. We regularly assess these risks and have established policies and business
practices designed to mitigate their effects. We do not engage in speculative trading in any financial or capital market.
Our primary currency exchange rate risk management objective is to mitigate the uncertainty of anticipated cash flows
attributable to changes in exchange rates. We focus on mitigating changes in functional currency equivalent cash flows
resulting from anticipated U.S. dollar denominated inventory purchases by subsidiaries that use European euros, Canadian
dollars, Japanese yen, or Chinese renminbi as their functional currency. We manage this risk primarily by using currency
36
forward contracts. Additionally, we hedge net balance sheet exposures related primarily to non-functional currency
denominated monetary assets and liabilities using foreign currency forward contracts in euros, yen, Canadian dollars, and
Swiss francs. Non-functional currency denominated monetary assets and liabilities consist primarily of cash and cash
equivalents, short-term investments, payables, and intercompany loans.
The net fair value of our derivative contracts was unfavorable by approximately $11.7 million at December 31, 2017.
A 10% unfavorable exchange rate change in the euro, franc, Canadian dollar, yen, and renminbi against the U.S. dollar
would have resulted in the net fair value declining by approximately $53.2 million at December 31, 2017. Changes in fair
value of derivative contracts resulting from foreign exchange rate fluctuations would be substantially offset by the change
in value of the underlying hedged transactions.
Our negotiated credit facilities generally charge interest based on a benchmark rate such as the London Interbank
Offered Rate ("LIBOR"). Fluctuations in short-term interest rates cause interest payments on drawn amounts to increase
or decrease. At December 31, 2017, no balance was outstanding under our credit facilities.
Critical Accounting Policies and Estimates
Management's discussion and analysis of our financial condition and results of operations are based on our Consolidated
Financial Statements, which have been prepared in accordance with accounting principles generally accepted in the United
States of America. The preparation of these financial statements requires us to make various estimates and assumptions that
affect reported amounts of assets and liabilities and related disclosure of contingent assets and liabilities at the date of the
Consolidated Financial Statements and the reported amounts of revenue and expenses during the reporting period. We
believe that the estimates and assumptions involved in the accounting policies described below have the greatest potential
impact on our financial statements, so we consider these to be our critical accounting policies and estimates. Because of
the uncertainty inherent in these matters, actual results may differ from the estimates we use in applying these critical
accounting policies. We base our ongoing estimates on historical experience and various other assumptions that we believe
to be important in the circumstances. Many of these critical accounting policies affect working capital account balances,
including the policy for revenue recognition, the allowance for doubtful accounts, the provision for potential excess, closeout
and slow moving inventory, product warranty, income taxes, and stock-based compensation.
Management regularly discusses with our Audit Committee each of our critical accounting estimates, the development
and selection of these accounting estimates, and the disclosure about each estimate in Management's Discussion and Analysis
of Financial Condition and Results of Operations. These discussions typically occur at our quarterly Audit Committee
meetings and include the basis and methodology used in developing and selecting these estimates, the trends in and amounts
of these estimates, specific matters affecting the amount of and changes in these estimates, and any other relevant matters
related to these estimates, including significant issues concerning accounting principles and financial statement presentation.
Revenue Recognition
We record wholesale, distributor, e-commerce and licensed product revenues when title passes and the risks and
rewards of ownership have passed to the customer. Title generally passes upon shipment to or upon receipt by the customer
depending on the applicable terms of sale with the customer. Retail store revenues are recorded at the time of sale. Revenue
is recorded net of sales taxes, value added taxes or similar taxes, which are collected on behalf of local taxing authorities.
Where title passes upon receipt by the customer, predominantly in our European wholesale business, Japan and in
certain of our direct ship and e-commerce transactions, precise information regarding the date of receipt by the customer
is not readily available. In these cases, we estimate the date of receipt by the customer based on historical and expected
delivery times by geographic location. We periodically test the accuracy of these estimates based on actual transactions.
Delivery times vary by geographic location, generally from one to seven days. To date, we have found these estimates to
be materially accurate.
At the time of revenue recognition, we also provide for estimated sales returns and miscellaneous claims from customers
as reductions to revenues. The estimates are based on historical rates of product returns and claims, as well as events and
circumstances that indicate changes to historical rates of returns and claims. However, actual returns and claims in any
future period are inherently uncertain and thus may differ from the estimates. If actual or expected future returns and claims
are significantly greater or lower than the reserves that we have established, we will record a reduction or increase to net
revenues in the period in which we make such a determination.
37
Allowance for Uncollectable Accounts Receivable
We make ongoing estimates of the collectability of our accounts receivable and maintain an allowance for estimated
losses resulting from the inability of our customers to make required payments. In determining the amount of the allowance,
we consider our historical level of credit losses, and we make judgments about the creditworthiness of customers based on
ongoing credit evaluations. We analyze specific customer accounts, customer concentrations, credit insurance coverage,
standby letters of credit, and other forms of collateral, current economic trends, and changes in customer payment terms.
Continued uncertainty in credit and market conditions may slow our collection efforts if customers experience difficulty
accessing credit and paying their obligations, leading to higher than normal accounts receivable and increased bad debt
expense. Because we cannot predict future changes in the financial stability of our customers, actual future losses from
uncollectable accounts may differ from our estimates and may have a material effect on our consolidated financial position,
results of operations or cash flows. If the financial condition of our customers deteriorates and results in their inability to
make payments, a larger allowance may be required. If we determine that a smaller or larger allowance is appropriate, we
will record a credit or a charge to SG&A expense in the period in which we make such a determination.
Excess, Close-Out and Slow Moving Inventory
We make ongoing estimates of potential excess, close-out or slow moving inventory. We evaluate our inventory on
hand considering our purchase commitments, sales forecasts and historical liquidation experience to identify excess, close-
out or slow moving inventory and make provisions as necessary to properly reflect inventory value at the lower of cost or
estimated market value. If we determine that a smaller or larger reserve is appropriate, we will record a credit or a charge
to cost of sales in the period in which we make such a determination.
Product Warranty
We make ongoing estimates of potential future product warranty costs. When we evaluate our reserve for warranty
costs, we consider our product warranty policies, historical claim rates by season, product category and mix, current warranty
claim trends, and the historical cost to repair, replace or refund the original sale. If we determine that a smaller or larger
reserve is appropriate, we will record a credit or a charge to cost of sales in the period in which we make such a determination.
Impairment of Long-Lived Assets, Intangible Assets and Goodwill
Long-lived assets, which include property, plant and equipment and intangible assets with finite lives, are amortized
over their estimated useful lives and are measured for impairment only when events or circumstances indicate the carrying
value may be impaired. In these cases, we estimate the future undiscounted cash flows to be derived from the asset or asset
group to determine whether a potential impairment exists. If the sum of the estimated undiscounted cash flows is less than
the carrying value of the asset, we recognize an impairment loss, measured as the amount by which the carrying value
exceeds the estimated fair value of the asset. For the years ended December 31, 2017, 2016 and 2015, we recorded impairment
charges for certain underperforming retail stores of $1.4 million, $4.3 million and $4.2 million, respectively.
We review and test our intangible assets with indefinite useful lives and goodwill for impairment in the fourth quarter
of each year and when events or changes in circumstances indicate that the carrying amount of such assets may be impaired.
Our intangible assets with indefinite lives consist of trademarks and trade names. Substantially all of our goodwill is recorded
in the United States segment and impairment testing for goodwill is performed at the reporting unit level. In the impairment
test for goodwill, the two-step process first compares the estimated fair value of the reporting unit with the carrying amount
of that reporting unit. We estimate the fair value of our reporting units using a combination of discounted cash flow analysis
and market-based valuation methods, as appropriate. If step one indicates impairment, step two compares the estimated fair
value of the reporting unit to the estimated fair value of all reporting unit assets and liabilities, except goodwill, to determine
the implied fair value of goodwill. We calculate impairment as the excess of carrying amount of goodwill over the implied
fair value of goodwill. In the impairment tests for trademarks and trade names, we compare the estimated fair value of each
asset to its carrying amount. The fair values of trademarks and trade names are generally estimated using a relief from
royalty method under the income approach. If the carrying amount of a trademark or trade name exceeds its estimated fair
value, we calculate impairment as the excess of carrying amount over the estimate of fair value.
Our impairment tests and related fair value estimates are based on a number of factors, including assumptions and
estimates for projected sales, income, cash flows, discount rates, market-based multiples, remaining useful lives, and
other operating performance measures. Changes in estimates or the application of alternative assumptions could produce
38
significantly different results. These assumptions and estimates may change in the future due to changes in economic
conditions, changes in our ability to meet sales and profitability objectives or changes in our business operations or
strategic direction.
Our 2017 impairment tests of goodwill and intangible assets with indefinite lives indicated that the estimated fair
value of all reporting units and intangible assets with indefinite lives exceeded their respective carrying values by more
than 20%.
Income Taxes
We use the asset and liability method of accounting for income taxes. Under this method, we recognize income tax
expense for the amount of taxes payable or refundable for the current year and for the amount of deferred tax liabilities and
assets for the future tax consequences of events that have been recognized in our financial statements or tax returns. We
make assumptions, judgments and estimates to determine our current provision for income taxes, our deferred tax assets
and liabilities and our uncertain tax positions. Our judgments, assumptions and estimates relative to the current provision
for income tax take into account current tax laws, our interpretation of current tax laws and possible outcomes of current
and future audits conducted by foreign and domestic tax authorities. Changes in tax law or our interpretation of tax laws
and the resolution of current and future tax audits could significantly affect the amounts provided for income taxes in our
Consolidated Financial Statements. Our assumptions, judgments and estimates relative to the value of a deferred tax asset
take into account predictions of the amount and category of future taxable income. Actual operating results and the underlying
amount and category of income in future years could cause our current assumptions, judgments and estimates of recoverable
net deferred taxes to be inaccurate. Changes in any of the assumptions, judgments and estimates mentioned above could
cause our actual income tax obligations to differ from our estimates, which could materially affect our financial position,
results of operations or cash flows.
Our tax provision for interim periods is determined using an estimate of our annual effective tax rate, adjusted for
discrete items, if any, that are taken into account in the relevant period. As the calendar year progresses, we periodically
refine our estimate based on actual events and earnings by jurisdiction. This ongoing estimation process can result in changes
to our expected effective tax rate for the full calendar year. When this occurs, we adjust the income tax provision during
the quarter in which the change in estimate occurs so that our year-to-date provision equals our expected annual effective
tax rate.
Stock-Based Compensation
Stock-based compensation cost is estimated at the grant date based on the award's fair value and is recognized as
expense over the requisite service period using the straight-line attribution method. We estimate stock-based compensation
for stock awards granted using the Black-Scholes option pricing model, which requires various subjective assumptions,
including volatility and expected option life. Further, we estimate forfeitures for stock-based awards granted, but which are
not expected to vest. If any of these inputs or assumptions changes significantly, stock-based compensation expense may
differ materially in the future from that recorded in the current period.
Recent Accounting Pronouncements
Refer to "Recent Accounting Pronouncements" in Note 2 of Notes to Consolidated Financial Statements.
39
Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The information required by this item is included in Management's Discussion and Analysis of Financial Condition
and Results of Operations and is incorporated herein by this reference.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Our management is responsible for the information and representations contained in this report. The financial
statements have been prepared in conformity with accounting principles generally accepted in the United States, which we
consider appropriate in the circumstances and include some amounts based on our best estimates and judgments. Other
financial information in this report is consistent with these financial statements.
Our accounting systems include controls designed to reasonably ensure that assets are safeguarded from unauthorized
use or disposition and which provide for the preparation of financial statements in conformity with accounting principles
generally accepted in the United States. These systems are supplemented by the selection and training of qualified financial
personnel and an organizational structure providing for appropriate segregation of duties.
The Audit Committee is responsible for appointing the independent registered public accounting firm and reviews
with the independent registered public accounting firm and management the scope and the results of the annual examination,
the effectiveness of the accounting control system and other matters relating to our financial affairs as they deem appropriate.
40
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Shareholders
Columbia Sportswear Company
Portland, Oregon
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Columbia Sportswear Company and subsidiaries
(the "Company") as of December 31, 2017 and 2016, the related consolidated statements of operations, comprehensive
income, equity, and cash flows for each of the three years in the period ended December 31, 2017, and the related notes
and the schedule listed in the Index at Item 15 (collectively referred to as the "financial statements"). In our opinion, the
financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2017
and 2016, and the results of its operations and its cash flows for each of the three years in the period ended December 31,
2017, in conformity with accounting principles generally accepted in the United States of America.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United
States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2017, based on criteria
established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of
the Treadway Commission and our report dated February 22, 2018, expressed an unqualified opinion on the Company's
internal control over financial reporting.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an
opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the
PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws
and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement,
whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of
the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures
included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits
also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating
the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
/s/ DELOITTE & TOUCHE LLP
Portland, Oregon
February 22, 2018
We have served as the Company’s auditor since at least 1994; however, the specific year has not been determined.
41
COLUMBIA SPORTSWEAR COMPANY
CONSOLIDATED BALANCE SHEETS
(In thousands)
ASSETS
Current Assets:
Cash and cash equivalents (Note 20)
Short-term investments (Note 20)
Accounts receivable, net (Note 5)
Inventories
Prepaid expenses and other current assets
Total current assets
Property, plant, and equipment, net (Note 6)
Intangible assets, net (Note 7)
Goodwill (Note 7)
Deferred income taxes (Note 10)
Other non-current assets
Total assets
LIABILITIES AND EQUITY
Current Liabilities:
Accounts payable
Accrued liabilities (Note 9)
Income taxes payable (Note 10)
Total current liabilities
Note payable to related party (Note 21)
Other long-term liabilities (Notes 11, 12)
Income taxes payable (Note 10)
Deferred income taxes (Note 10)
Total liabilities
Commitments and contingencies (Note 13)
Shareholders' Equity:
December 31,
2017
2016
$
673,166
$
551,389
94,983
364,862
457,927
58,559
472
333,678
487,997
38,487
1,649,497
1,412,023
281,394
129,555
68,594
56,804
27,058
279,650
133,438
68,594
92,494
27,695
$ 2,212,902
$ 2,013,894
$
252,301
$
215,048
182,228
19,107
453,636
—
48,735
58,104
168
142,158
5,645
362,851
14,053
42,622
12,710
147
560,643
432,383
Preferred stock; 10,000 shares authorized; none issued and outstanding
—
—
Common stock (no par value); 125,000 shares authorized; 69,995 and 69,873 issued
and outstanding (Note 14)
Retained earnings
Accumulated other comprehensive loss (Note 17)
Total Columbia Sportswear Company shareholders' equity
Non-controlling interest (Note 4)
Total equity
Total liabilities and equity
45,829
53,801
1,585,009
(8,887)
1,621,951
1,529,636
(22,617)
1,560,820
30,308
20,691
1,652,259
1,581,511
$ 2,212,902
$ 2,013,894
See accompanying notes to consolidated financial statements
42
COLUMBIA SPORTSWEAR COMPANY
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
Net sales
Cost of sales
Gross profit
Selling, general and administrative expenses
Net licensing income
Income from operations
Interest income, net
Interest expense on note payable to related party (Note 21)
Other non-operating expense
Income before income tax
Income tax expense (Note 10)
Net income
Net income attributable to non-controlling interest
Year Ended December 31,
2017
2016
2015
$ 2,466,105
$ 2,377,045
$ 2,326,180
1,306,143
1,266,697
1,252,680
1,159,962
1,110,348
1,073,500
910,894
13,901
262,969
4,515
(429)
(321)
266,734
(154,419)
112,315
7,192
864,084
10,244
256,508
2,003
(1,041)
(572)
256,898
(58,459)
198,439
6,541
831,971
8,192
249,721
1,531
(1,099)
(2,834)
247,319
(67,468)
179,851
5,514
Net income attributable to Columbia Sportswear Company
$
105,123
$
191,898
$
174,337
Earnings per share attributable to Columbia Sportswear Company (Note
16):
Basic
Diluted
Weighted average shares outstanding (Note 16):
Basic
Diluted
$
$
1.51
1.49
$
2.75
2.72
2.48
2.45
69,759
70,453
69,683
70,632
70,162
71,064
See accompanying notes to consolidated financial statements
43
COLUMBIA SPORTSWEAR COMPANY
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In thousands)
Net income
Other comprehensive income (loss):
Unrealized holding losses on available-for-sale securities (net of tax
effects of $0, $0, and ($3), respectively)
Unrealized gains (losses) on derivative transactions (net of tax effects
of $8,176, ($1,922) and ($849), respectively)
Foreign currency translation adjustments (net of tax effects of $4,
($347) and ($760), respectively)
Other comprehensive income (loss)
Comprehensive income
Comprehensive income attributable to non-controlling interest
Year Ended December 31,
2017
2016
2015
$
112,315
$
198,439
$
179,851
—
(2)
(6)
(18,005)
843
(2,908)
34,160
16,155
128,470
9,617
(4,485)
(3,644)
194,795
4,678
(34,887)
(37,801)
142,050
4,382
Comprehensive income attributable to Columbia Sportswear Company
$
118,853
$
190,117
$
137,668
See accompanying notes to consolidated financial statements
44
COLUMBIA SPORTSWEAR COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
Cash flows from operating activities:
Net income
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization
Loss on disposal or impairment of property, plant, and equipment
Deferred income taxes
Stock-based compensation
Excess tax benefit from employee stock plans
Changes in operating assets and liabilities:
Accounts receivable
Inventories
Prepaid expenses and other current assets
Other assets
Accounts payable
Accrued liabilities
Income taxes payable
Other liabilities
Net cash provided by operating activities
Cash flows from investing activities:
Purchases of short-term investments
Sales of short-term investments
Capital expenditures
Proceeds from sale of property, plant, and equipment
Net cash used in investing activities
Cash flows from financing activities:
Proceeds from credit facilities
Repayments on credit facilities
Proceeds from issuance of common stock under employee stock plans
Tax payments related to restricted stock unit issuances
Excess tax benefit from employee stock plans
Repurchase of common stock
Cash dividends paid
Payment of related party note payable
Net cash used in financing activities
Net effect of exchange rate changes on cash
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents, beginning of year
Cash and cash equivalents, end of year
Supplemental disclosures of cash flow information:
Cash paid during the year for income taxes
Cash paid during the year for interest on note payable to related party
Supplemental disclosures of non-cash investing activities:
Capital expenditures incurred but not yet paid
Year Ended December 31,
2017
2016
2015
$
112,315
$
198,439
$
179,851
59,945
1,927
44,851
11,286
—
(24,197)
46,662
(19,241)
931
30,568
11,581
58,702
5,798
341,128
(130,993)
36,282
(53,352)
279
(147,784)
3,374
(3,374)
19,946
(3,662)
—
(35,542)
(50,909)
(14,236)
(84,403)
12,836
121,777
551,389
673,166
81,045
685
$
$
60,016
4,805
(19,178)
10,986
—
36,710
(18,777)
(5,452)
(5,948)
1,483
4,847
4,768
2,468
275,167
(21,263)
21,263
(49,987)
97
(49,890)
62,885
(64,825)
13,167
(5,117)
—
(11)
(48,122)
—
(42,023)
(1,635)
181,619
369,770
551,389
70,424
1,049
$
$
56,521
5,098
(11,709)
11,672
(7,873)
(40,419)
(103,296)
4,411
(2,524)
11,418
(2,017)
(10,994)
4,966
95,105
(38,208)
64,980
(69,917)
144
(43,001)
53,429
(51,479)
17,442
(4,895)
7,873
(70,068)
(43,547)
—
(91,245)
(4,647)
(43,788)
413,558
369,770
87,350
1,115
3,188
2,710
4,698
$
$
See accompanying notes to consolidated financial statements
45
COLUMBIA SPORTSWEAR COMPANY
CONSOLIDATED STATEMENTS OF EQUITY
(In thousands)
BALANCE, JANUARY 1, 2015
Net income
Other comprehensive loss:
Unrealized holding losses on available-for-
sale securities, net
Unrealized holding losses on derivative
transactions, net
Foreign currency translation adjustment, net
Cash dividends ($0.62 per share)
Issuance of common stock under employee stock
plans, net
Tax adjustment from stock plans
Stock-based compensation expense
Repurchase of common stock
BALANCE, DECEMBER 31, 2015
Net income
Other comprehensive income (loss):
Unrealized holding losses on available-for-
sale securities, net
Unrealized holding gains on derivative
transactions, net
Foreign currency translation adjustment, net
Cash dividends ($0.69 per share)
Issuance of common stock under employee stock
plans, net
Stock-based compensation expense
Repurchase of common stock
BALANCE, DECEMBER 31, 2016
Net income
Other comprehensive income (loss):
Unrealized holding losses on derivative
transactions, net
Foreign currency translation adjustment, net
Cash dividends ($0.73 per share)
Issuance of common stock under employee stock
plans, net
Stock-based compensation expense
Repurchase of common stock
Columbia Sportswear Company Shareholders' Equity
Common Stock
Shares
Outstanding
Amount
Retained
Earnings
Accumulated
Other
Comprehensive
Income (Loss)
Non-
Controlling
Interest
Total
69,828
$ 72,700
$1,255,070
$
15,833
$
11,631
$ 1,355,234
—
174,337
—
5,514
179,851
—
—
—
—
—
—
—
—
—
—
596
—
—
—
—
—
—
—
—
—
—
—
—
—
(43,547)
835
12,547
—
—
(1,386)
7,925
11,672
(70,068)
—
—
—
—
(6)
(2,908)
(33,755)
—
—
—
—
—
—
—
(1,132)
—
—
—
—
—
(6)
(2,908)
(34,887)
(43,547)
12,547
7,925
11,672
(70,068)
69,277
34,776
1,385,860
(20,836)
—
191,898
—
16,013
6,541
1,415,813
198,439
—
—
—
—
8,050
10,986
(11)
—
—
—
(48,122)
—
—
—
(2)
—
(2)
686
(2,465)
—
157
(2,020)
—
—
—
—
—
—
—
843
(4,485)
(48,122)
8,050
10,986
(11)
69,873
53,801
1,529,636
(22,617)
—
105,123
—
20,691
7,192
1,581,511
112,315
—
—
—
1,159
—
(50,909)
787
—
(665)
16,284
11,286
(35,542)
—
—
—
(17,489)
31,219
—
—
—
—
(516)
2,941
—
—
—
—
(16,846)
34,160
(50,909)
16,284
11,286
(35,542)
BALANCE, DECEMBER 31, 2017
69,995
$ 45,829
$1,585,009
$
(8,887) $
30,308
$ 1,652,259
See accompanying notes to consolidated financial statements
46
COLUMBIA SPORTSWEAR COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1—BASIS OF PRESENTATION AND ORGANIZATION
Nature of the business:
Columbia Sportswear Company is a global leader in the design, sourcing, marketing, and distribution of outdoor and
active lifestyle apparel, footwear, accessories, and equipment.
Principles of consolidation:
The Consolidated Financial Statements include the accounts of Columbia Sportswear Company, its wholly owned
subsidiaries and entities in which it maintains a controlling financial interest (the "Company"). All intercompany balances
and transactions have been eliminated in consolidation.
Estimates and assumptions:
The preparation of financial statements in conformity with accounting principles generally accepted in the United
States of America (U.S. GAAP) requires management to make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets and liabilities at the date of the Consolidated Financial Statements
and the reported amounts of revenues and expenses during the reporting period. Actual results may differ from these estimates
and assumptions. Some of these more significant estimates relate to revenue recognition, including sales returns and claims
from customers, allowance for doubtful accounts, excess, slow-moving and close-out inventories, product warranty, long-
lived and intangible assets, goodwill, income taxes, and stock-based compensation.
Changes affecting comparability:
Effective January 1, 2016, the Company early-adopted Accounting Standards Update ("ASU") No. 2016-09, Stock
Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting, which simplified how several
aspects of share-based payments are accounted for and presented in the financial statements. Under previous guidance,
excess tax benefits and deficiencies from stock-based compensation arrangements were recorded in equity when the awards
vested or were settled. ASU 2016-09 requires prospective recognition of excess tax benefits and deficiencies in the
Consolidated Statements of Operations, resulting in the recognition of excess tax benefits of $6,082,000 and $5,499,000 in
income tax expense, rather than in paid-in capital, for the years ended December 31, 2017 and 2016, respectively. If we had
retrospectively adopted this guidance, we would have recognized excess tax benefits of $7,925,000 in income tax expense,
rather than in paid-in capital, for the year ended December 31, 2015.
In addition, under ASU 2016-09, excess income tax benefits from stock-based compensation arrangements are
classified as cash flow from operations, rather than as cash flow from financing activities. The Company elected to apply
the cash flow classification guidance of ASU 2016-09 prospectively, resulting in an increase to operating cash flow of
$6,227,000 and $5,538,000 for the years ended December 31, 2017 and 2016, respectively, and the year ended December
31, 2015 has not been adjusted.
The Company elected to continue to estimate the number of stock-based awards expected to vest, as permitted by
ASU 2016-09, rather than electing to account for forfeitures as they occur.
ASU 2016-09 requires excess tax benefits and deficiencies to be prospectively excluded from assumed future proceeds
in the calculation of diluted shares, resulting in an increase in diluted weighted average shares outstanding of 159,387 and
240,016 shares for the years ended December 31, 2017 and 2016, respectively.
NOTE 2—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Cash and cash equivalents:
Cash and cash equivalents are stated at fair value or at cost, which approximates fair value, and include investments
with original maturities of 90 days or less at the date of acquisition. At December 31, 2017, cash and cash equivalents
consisted of cash, money market funds, time deposits, U.S. government treasury bills, and U.S. government -backed
municipal bonds. At December 31, 2016, cash and cash equivalents consisted of cash, money market funds and time deposits.
47
COLUMBIA SPORTSWEAR COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Investments:
At December 31, 2017, short-term investments consisted of U.S. government treasury bills and U.S. government-
backed municipal bonds, as well as mutual fund share investments held as part of the Company's deferred compensation
plan expected to be distributed in the next twelve months. The U.S. government treasury bills and U.S. government-backed
municipal bonds are classified as available-for-sale securities and are recorded at fair value with any unrealized gains and
losses reported, net of tax, in other comprehensive income. Investments held as part of the Company's deferred compensation
plan are classified as trading securities and are recorded at fair value with any unrealized gains and losses reported in
operating income. Realized gains or losses are determined based on the specific identification method. At December 31,
2016, short-term investments consisted of mutual fund share investments held as part of the Company's deferred
compensation plan expected to be distributed in the next twelve months.
At December 31, 2017 and 2016, long-term investments included in other non-current assets consisted of mutual fund
shares held to offset liabilities to participants in the Company's deferred compensation plan. The investments are classified
as long-term because the related deferred compensation liabilities are not expected to be paid within the next year. These
investments are classified as trading securities and are recorded at fair value with unrealized gains and losses reported as a
component of operating income.
Accounts receivable:
Accounts receivable have been reduced by an allowance for doubtful accounts. The Company makes ongoing estimates
of the collectability of accounts receivable and maintains an allowance for estimated losses resulting from the inability of
the Company's customers to make required payments.
Inventories:
Inventories consist primarily of finished goods and are carried at the lower of cost or market. Cost is determined using
the first-in, first-out method. The Company periodically reviews its inventories for excess, close-out or slow moving items
and makes provisions as necessary to properly reflect inventory value.
Property, plant and equipment:
Property, plant and equipment are stated at cost, net of accumulated depreciation. Depreciation is provided using the
straight-line method over the estimated useful lives of the assets. The principal estimated useful lives are: land improvements,
15 years; buildings and building improvements, 15-30 years; furniture and fixtures, 3-10 years; and machinery, software
and equipment, 3-10 years. Leasehold improvements are depreciated over the lesser of the estimated useful life of the
improvement, which is most commonly 7 years, or the remaining term of the underlying lease.
Improvements to property, plant and equipment that substantially extend the useful life of the asset are capitalized.
Repair and maintenance costs are expensed as incurred. Internal and external costs directly related to the development of
internal-use software during the application development stage, including costs incurred for third party contractors and
employee compensation, are capitalized and depreciated over a 3-10 year estimated useful life.
Impairment of long-lived assets:
Long-lived assets are amortized over their estimated useful lives and are measured for impairment only when events
or circumstances indicate the carrying value may be impaired. In these cases, the Company estimates the future undiscounted
cash flows to be derived from the asset or asset group to determine whether a potential impairment exists. If the sum of the
estimated undiscounted cash flows is less than the carrying value of the asset, the Company recognizes an impairment loss,
measured as the amount by which the carrying value exceeds the estimated fair value of the asset. Impairment charges for
long-lived assets are included in SG&A expense and were $1,401,000, $4,310,000 and $4,171,000 for the years ended
December 31, 2017, 2016 and 2015, respectively. Charges during the years ended December 31, 2017, 2016 and 2015 were
recorded in the United States and LAAP regions for certain underperforming retail stores.
Intangible assets and goodwill:
48
COLUMBIA SPORTSWEAR COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Intangible assets with indefinite useful lives and goodwill are not amortized but are periodically evaluated for
impairment. Intangible assets that are determined to have finite lives are amortized using the straight-line method over their
estimated useful lives and are measured for impairment only when events or circumstances indicate the carrying value may
be impaired.
Impairment of intangible assets and goodwill:
The Company reviews and tests its intangible assets with indefinite useful lives and goodwill for impairment in the
fourth quarter of each year and when events or changes in circumstances indicate that the carrying amount of such assets
may be impaired. The Company's intangible assets with indefinite lives consist of trademarks and trade names. Substantially
all of the Company's goodwill is recorded in the United States segment and impairment testing for goodwill is performed
at the reporting unit level. In the impairment test for goodwill, the two-step process first compares the estimated fair value
of the reporting unit with the carrying amount of that reporting unit. The Company estimates the fair value of its reporting
units using a combination of discounted cash flow analysis, comparisons with the market values of similar publicly traded
companies and other operating performance based valuation methods, as necessary. If step one indicates impairment, step
two compares the estimated fair value of the reporting unit to the estimated fair value of all reporting unit assets and liabilities,
except goodwill, to determine the implied fair value of goodwill. The Company calculates impairment as the excess of
carrying amount of goodwill over the implied fair value of goodwill. In the impairment tests for trademarks and trade names,
the Company compares the estimated fair value of each asset to its carrying amount. The fair values of trademarks and trade
names are generally estimated using a relief from royalty method under the income approach. If the carrying amount of a
trademark or trade name exceeds its estimated fair value, the Company calculates impairment as the excess of carrying
amount over the estimate of fair value.
If events or circumstances indicate the carrying value of intangible assets with finite lives may be impaired, the
Company estimates the future undiscounted cash flows to be derived from the asset or asset group to determine whether a
potential impairment exists. If the sum of the estimated undiscounted cash flows is less than the carrying value of the asset
the Company recognizes an impairment loss, measured as the amount by which the carrying value exceeds the estimated
fair value of the asset.
Impairment charges, if any, are classified as a component of SG&A expense. The impairment tests and related fair
value estimates are based on a number of factors, including assumptions and estimates for projected sales, income, cash
flows, discount rates, remaining useful lives, and other operating performance measures. Changes in estimates or the
application of alternative assumptions could produce significantly different results. These assumptions and estimates may
change in the future due to changes in economic conditions, changes in the Company's ability to meet sales and profitability
objectives or changes in the Company's business operations or strategic direction.
Our 2017 impairment tests of goodwill and intangible assets with indefinite lives indicated that the estimated fair
value of all reporting units and intangible assets with indefinite lives exceeded their respective carrying values by more
than 20%.
Income taxes:
Income taxes are provided on financial statement earnings for financial reporting purposes. Income taxes are based
on amounts of taxes payable or refundable in the current year and on expected future tax consequences of events that are
recognized in the financial statements in different periods than they are recognized in tax returns. As a result of timing of
recognition and measurement differences between financial accounting standards and income tax laws, temporary differences
arise between amounts of pre-tax financial statement income and taxable income and between reported amounts of assets
and liabilities in the Consolidated Balance Sheets and their respective tax bases. Deferred income tax assets and liabilities
reported in the Consolidated Balance Sheets reflect estimated future tax effects attributable to these temporary differences
and to net operating loss and net capital loss carryforwards, based on tax rates expected to be in effect for years in which
the differences are expected to be settled or realized. Realization of deferred tax assets is dependent on future taxable income
in specific jurisdictions. Valuation allowances are used to reduce deferred tax assets to amounts considered likely to be
realized.
49
COLUMBIA SPORTSWEAR COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Accrued income taxes in the Consolidated Balance Sheets include unrecognized income tax benefits relating to
uncertain tax positions, including related interest and penalties, appropriately classified as current or noncurrent. The
Company recognizes the tax benefit from an uncertain tax position if it is more likely than not that the tax position will be
sustained on examination by the relevant taxing authority based on the technical merits of the position. The tax benefits
recognized in the financial statements from such positions are then measured based on the largest benefit that has a greater
than 50% likelihood of being realized upon ultimate settlement with the relevant tax authority. In making this determination,
the Company assumes that the taxing authority will examine the position and that it will have full knowledge of all relevant
information. The provision for income taxes also includes estimates of interest and penalties related to uncertain tax positions.
Derivatives:
The effective portion of changes in fair values of outstanding cash flow hedges is recorded in other comprehensive
income until earnings are affected by the hedged transaction, and any ineffective portion is included in current income. In
most cases amounts recorded in other comprehensive income will be released to earnings after maturity of the related
derivative. The Consolidated Statements of Operations classification of effective hedge results is the same as that of the
underlying exposure. Results of hedges of product costs are recorded in cost of sales when the underlying hedged transactions
affect earnings. Results of hedges of revenue are recorded in net sales when the underlying hedged transactions affect
earnings. Unrealized derivative gains and losses, which are recorded in assets and liabilities, respectively, are non-cash
items and therefore are taken into account in the preparation of the Consolidated Statements of Cash Flows based on their
respective balance sheet classifications. Refer to Note 19 for more information on derivatives and risk management.
Foreign currency translation:
The assets and liabilities of the Company's foreign subsidiaries have been translated into U.S. dollars using the exchange
rates in effect at period end, and the net sales and expenses have been translated into U.S. dollars using average exchange
rates in effect during the period. The foreign currency translation adjustments are included as a separate component of
accumulated other comprehensive income in shareholders' equity.
Revenue recognition:
The Company records wholesale, distributor, e-commerce and licensed product revenues when title passes and the
risks and rewards of ownership have passed to the customer. Title generally passes upon shipment to, or upon receipt by,
the customer depending on the terms of sale with the customer. Retail store revenues are recorded at the time of sale. Revenue
is recorded net of sales taxes, value added taxes or similar taxes which are collected on behalf of local taxing authorities.
Where title passes upon receipt by the customer, predominantly in the Company's European wholesale business, Japan
and in certain of our direct ship and e-commerce transactions, precise information regarding the date of receipt by the
customer is not readily available. In these cases, the Company estimates the date of receipt by the customer based on
historical and expected delivery times by geographic location. The Company periodically tests the accuracy of these estimates
based on actual transactions. Delivery times vary by geographic location, generally from one to seven days. To date, the
Company has found these estimates to be materially accurate.
At the time of revenue recognition, the Company also provides for estimated sales returns and miscellaneous claims
from customers as reductions to revenues. The estimates are based on historical rates of product returns and claims as well
as events and circumstances that indicate changes to historical rates of returns and claims. However, actual returns and
claims in any future period are inherently uncertain and thus may differ from the estimates. If actual or expected future
returns and claims are significantly greater or lower than the reserves that have been established, the Company would record
a reduction or increase to net revenues in the period in which it made such determination.
Cost of sales:
The expenses that are included in cost of sales include all direct product costs related to shipping, duties and importation.
Specific provisions for excess, close-out or slow moving inventory are also included in cost of sales. In addition, some of
the Company's products carry limited warranty provisions for defects in quality and workmanship. A warranty reserve is
50
COLUMBIA SPORTSWEAR COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
established at the time of sale to cover estimated costs based on the Company's history of warranty repairs and replacements
and is recorded in cost of sales.
Selling, general and administrative expense:
SG&A expense consists of personnel-related costs, advertising, depreciation, occupancy, and other selling and general
operating expenses related to the Company's business functions, including planning, receiving finished goods, warehousing,
distribution, retail operations and information technology.
Shipping and handling costs:
Shipping and handling fees billed to customers and consumers are recorded as revenue. The direct costs associated
with shipping goods to customers and consumers are recorded as cost of sales. Inventory planning, receiving, storing and
handling costs are recorded as a component of SG&A expenses and were $73,880,000, $65,757,000 and $61,338,000 for
the years ended December 31, 2017, 2016 and 2015, respectively.
Stock-based compensation:
Stock-based compensation cost is estimated at the grant date based on the award's fair value and is recognized as
expense over the requisite service period using the straight-line attribution method. The Company estimates stock-based
compensation for stock options granted using the Black-Scholes option pricing model, which requires various subjective
assumptions, including volatility and expected option life. Further, the Company estimates forfeitures for stock-based awards
granted which are not expected to vest. For restricted stock unit awards subject to performance conditions, the amount of
compensation expense recorded in a given period reflects the Company's assessment of the probability of achieving its
performance targets. If any of these inputs or assumptions changes significantly, stock-based compensation expense may
differ materially in the future from that recorded in the current period. Assumptions are evaluated and revised as necessary
to reflect changes in market conditions and the Company's experience. Estimates of fair value are not intended to predict
actual future events or the value ultimately realized by people who receive equity awards. The fair value of service-based
and performance-based restricted stock units is discounted by the present value of the estimated future stream of dividends
over the vesting period using the Black-Scholes model.
Advertising costs:
Advertising costs are expensed in the period incurred and are included in SG&A expenses. Total advertising expense,
including cooperative advertising costs, was $121,839,000, $118,663,000 and $120,764,000 for the years ended December
31, 2017, 2016 and 2015, respectively.
Through cooperative advertising programs, the Company reimburses its wholesale customers for some of their costs
of advertising the Company's products based on various criteria, including the value of purchases from the Company and
various advertising specifications. Cooperative advertising costs are included in expenses because the Company receives
an identifiable benefit in exchange for the cost, the advertising may be obtained from a party other than the customer, and
the fair value of the advertising benefit can be reasonably estimated. Cooperative advertising costs were $6,555,000,
$8,699,000 and $10,008,000 for the years ended December 31, 2017, 2016 and 2015, respectively.
Recent accounting pronouncements:
In May 2014, the Financial Accounting Standards Board ("FASB") issued ASU No. 2014-09, Revenue from Contracts
with Customers Topic 606, outlining a single comprehensive model for entities to use in accounting for revenue arising
from contracts with customers that supersedes most current revenue recognition guidance. The updated guidance, and
subsequent clarifications, require an entity to recognize revenue when it transfers control of promised goods or services to
customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods
or services. In addition, the guidance requires disclosure of the nature, amount, timing and uncertainty of revenue and cash
flows arising from contracts with customers. The Company is adopting this standard effective January 1, 2018, utilizing
the modified retrospective approach, with the immaterial cumulative effect of initially applying the new standard recognized
in retained earnings.
51
COLUMBIA SPORTSWEAR COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
The new standard primarily impacts the following areas: fees paid to or retained by third parties in conjunction with
certain concession-based retail arrangements, historically comprising approximately 2% of net sales, will be classified as
a component of SG&A expenses; wholesale sales returns reserves, estimated chargebacks and markdowns, and other
provisions for customer refunds will be presented as accrued liabilities rather than netted within accounts receivable; and
the estimated cost of inventory associated with sales returns reserves will be presented within other current assets rather
than inventories. The Company expects the timing of revenue recognition for its significant revenue streams to remain
substantially unchanged, with no material effect on net sales.
In January 2016, the FASB issued ASU No. 2016-01, Financial Instruments - Overall (Subtopic 825-10): Recognition
and Measurement of Financial Assets and Financial Liabilities, an update to its accounting guidance related to the recognition
and measurement of certain financial instruments. This standard requires equity investments that are not accounted for under
the equity method of accounting to be measured at fair value with changes recognized in net income and also updates certain
presentation and disclosure requirements. The Company is adopting this standard effective January 1, 2018, and does not
anticipate a material effect on the Company's financial position, results of operations or cash flows.
In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842), in order to increase transparency and
comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet for most leases
previously classified as operating leases. This standard is effective beginning in the first quarter of 2019, with early adoption
permitted. The Company is evaluating the impact of this guidance and expects the adoption will result in a material increase
in the assets and liabilities on the Company's consolidated balance sheets and is not expected to have a material impact on
the Company's consolidated statements of operations or cash flows.
In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement
of Credit Losses on Financial Instruments. The pronouncement changes the impairment model for most financial assets
and will require the use of an "expected loss" model for instruments measured at amortized cost. Under this model, entities
will be required to estimate the lifetime expected credit loss on such instruments and record an allowance to offset the
amortized cost basis of the financial asset, resulting in a net presentation of the amount expected to be collected on the
financial asset. This standard is effective beginning in the first quarter of 2020. The adoption of ASU 2016-13 is not expected
to have a material effect on the Company's financial position, results of operations or cash flows.
In October 2016, the FASB issued ASU No. 2016-16, Income Taxes (Topic 740): Intra-Entity Transfer of Assets Other
than Inventory, which requires the recognition of the income tax effects of an intra-entity transfer of an asset, other than
inventory, when the transfer occurs, eliminating an exception under current GAAP in which the tax effects of intra-entity
asset transfers are deferred until the transferred asset is sold to a third party or otherwise recovered through use. Income tax
effects of intra-entity transfers of inventory will continue to be deferred until the inventory has been sold to a third party.
The Company is adopting this standard effective January 1, 2018 by applying the required modified retrospective approach
with an initial estimated cumulative-effect adjustment to retained earnings of certain previously deferred tax benefits of
$11,181,000, which is subject to change as the Company finalizes its accounting for the effects of the enactment of the
TCJA described in Note 10. The Company anticipates the adoption of this standard will result in increased volatility in its
future effective income tax rate.
In January 2017, the FASB issued ASU No. 2017-04, Intangibles-Goodwill and Other (Topic 350): Simplifying the
Test for Goodwill Impairment, which simplifies the accounting for goodwill impairments by eliminating step two from the
goodwill impairment test. Under this guidance, if the carrying amount of a reporting unit exceeds its estimated fair value,
an impairment charge shall be recognized in an amount equal to that excess, limited to the total amount of goodwill allocated
to that reporting unit. This standard is effective beginning in the first quarter of 2019, with early adoption permitted. The
Company is evaluating the impact and expects the adoption of ASU 2017-04 to affect the amount and timing of future
goodwill impairment charges, if any.
In August 2017, the FASB issued ASU No. 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements
to Accounting for Hedging Activities, which simplifies the application of hedge accounting guidance to better portray the
economic results of risk management activities in the financial statements. The guidance aligns the recognition and
presentation of the effects of hedging instruments and hedged items in the financial statements, and includes certain targeted
improvements to ease the application of current guidance related to the assessment of hedge effectiveness. The Company
is early-adopting the standard utilizing the required modified retrospective transition method effective January 1, 2018. The
adoption of this standard will not have a material effect on the Company's financial position, results of operations or cash
flows.
52
COLUMBIA SPORTSWEAR COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
In February 2018, the FASB issued ASU No. 2018-02, Reclassification of Certain Tax Effects from Accumulated
Other Comprehensive Income (Subtopic 220), that permits a reclassification from accumulated other comprehensive
income (loss) to retained earnings of the stranded tax effects resulting from application of the new federal corporate
income tax rate. The Company early adopted this new standard during the fourth quarter of 2017 utilizing the portfolio
approach, which resulted in an increase to retained earnings and corresponding decrease to accumulated other
comprehensive income (loss) of $1,159,000 due to a change in the U.S. federal income tax rate from 35% to 21% as a
result of the TCJA.
NOTE 3—CONCENTRATIONS
Trade receivables
The Company had one customer that accounted for approximately 12.3% and 15.9% of consolidated accounts
receivable at December 31, 2017 and 2016, respectively. No single customer accounted for 10% or more of consolidated
revenues for any of the years ended December 31, 2017, 2016 or 2015.
Derivatives
The Company uses derivative instruments to hedge the currency exchange rate risk of anticipated transactions
denominated in non-functional currencies that are designated and qualify as cash flow hedges. The Company also uses
derivative instruments to economically hedge the currency exchange rate risk of certain investment positions, to hedge
balance sheet re-measurement risk and to hedge other anticipated transactions that do not qualify as cash flow hedges. At
December 31, 2017, the Company's derivative contracts had remaining maturities of less than three years. The maximum
net exposure to any single counterparty, which is generally limited to the aggregate unrealized gain of all contracts with
that counterparty, was less than $2,000,000 at December 31, 2017. All of the Company's derivative counterparties have
investment grade credit ratings. Refer to Note 19 for further disclosures concerning derivatives.
Country and supplier concentrations
The Company's products are produced by contract manufacturers located outside the United States, principally in
Southeast Asia. Apparel is manufactured in approximately 19 countries, with Vietnam and China together accounting for
approximately 64% of 2017 global apparel production. Footwear is manufactured in five countries, with China and Vietnam
accounting for substantially all of 2017 global footwear production. The five largest apparel factory groups accounted for
approximately 29% of 2017 global apparel production, with the largest factory group accounting for 10% of 2017 global
apparel production. The five largest footwear factory groups accounted for approximately 75% of 2017 global footwear
production, with the largest factory group accounting for 34% of 2017 global footwear production. These companies have
multiple factory locations, many of which are in different countries, thus reducing the risk that unfavorable conditions at a
single factory or location will have a material adverse effect on the Company.
NOTE 4—NON-CONTROLLING INTEREST
The Company owns a 60% controlling interest in a joint venture formed with Swire Resources, Limited ("Swire"),
which began operations on January 1, 2014, to support the development and operation of the Company's business in China.
The accounts and operations of the joint venture are included in the Consolidated Financial Statements for the years ended
December 31, 2017, 2016 and 2015. Swire's share of the net income of the joint venture is included in net income attributable
to non-controlling interest in the Consolidated Statements of Operations. The non-controlling equity interest in the joint
venture is presented separately in the Consolidated Balance Sheets and Consolidated Statements of Equity.
NOTE 5—ACCOUNTS RECEIVABLE, NET
Accounts receivable, net, is as follows (in thousands):
53
COLUMBIA SPORTSWEAR COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Trade accounts receivable
Allowance for doubtful accounts
Accounts receivable, net
NOTE 6—PROPERTY, PLANT AND EQUIPMENT, NET
Property, plant and equipment consisted of the following (in thousands):
Land and improvements
Buildings and improvements
Machinery, software and equipment
Furniture and fixtures
Leasehold improvements
Construction in progress
Less accumulated depreciation
December 31,
2017
373,905
(9,043)
364,862
$
$
2016
342,234
(8,556)
333,678
$
$
December 31,
2017
2016
$
21,065
$
20,862
173,919
322,032
83,613
121,949
14,627
165,746
301,566
79,103
107,574
13,475
737,205
(455,811)
281,394
$
688,326
(408,676)
279,650
$
NOTE 7—INTANGIBLE ASSETS, NET AND GOODWILL
Intangible assets that are determined to have finite lives include patents, purchased technology and customer
relationships and are amortized over their estimated useful lives, which range from approximately 3 to 10 years, and are
measured for impairment only when events or circumstances indicate the carrying value may be impaired. Goodwill and
intangible assets with indefinite useful lives, including trademarks and trade names, are not amortized but are periodically
evaluated for impairment. At December 31, 2017 and 2016, the Company determined that its goodwill and intangible assets
were not impaired.
Intangible assets
The following table summarizes the Company's identifiable intangible assets balance (in thousands):
Intangible assets subject to amortization:
Patents and purchased technology
Customer relationships
Gross carrying amount
Accumulated amortization:
Patents and purchased technology
Customer relationships
Accumulated amortization
Net carrying amount
Intangible assets not subject to amortization
Intangible assets, net
54
December 31,
2017
2016
$
14,198
$
23,000
37,198
(10,651)
(12,413)
(23,064)
14,134
14,198
23,000
37,198
(9,321)
(9,860)
(19,181)
18,017
115,421
115,421
$
129,555
$
133,438
COLUMBIA SPORTSWEAR COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Amortization expense was $3,883,000 for the year ended December 31, 2017, and was $5,146,000 for both of the
years ended December 31, 2016 and 2015.
Annual amortization expense is estimated to be as follows for the years 2018 through 2022 (in thousands):
2018
2019
2020
2021
2022
$
2,980
2,980
2,537
1,650
1,650
NOTE 8—SHORT-TERM BORROWINGS AND CREDIT LINES
The Company has an unsecured, committed revolving line of credit with monthly variable commitments available for
funding that average $100,000,000. The maturity date of this agreement is July 1, 2021. Interest, payable monthly, is based
on the Company's applicable funded debt ratio, which could range from USD LIBOR plus 87.5 basis points to USD LIBOR
plus 162.5 basis points. This line of credit requires the Company to comply with certain financial covenants covering net
income, funded debt ratio, fixed charge coverage ratio, and borrowing basis. If the Company is in default, it is prohibited
from paying dividends or repurchasing common stock. At December 31, 2017, the Company was in compliance with all
associated covenants. At December 31, 2017 and 2016, no balance was outstanding under this line of credit.
The Company's Canadian subsidiary has available an unsecured and uncommitted line of credit guaranteed by the
parent company providing for borrowing up to a maximum of CAD$30,000,000 (US$23,866,000) at December 31, 2017.
The revolving line accrues interest at the bank's Canadian prime rate. At December 31, 2017 and 2016 no balance was
outstanding under this line of credit.
The Company's European subsidiary has available two separate unsecured and uncommitted lines of credit guaranteed
by the parent company providing for borrowing up to a maximum of €25,800,000 and €5,000,000 , respectively (combined
US$36,784,000), at December 31, 2017. These lines accrue interest based on the European Central Bank refinancing rate
plus 100 basis points and the Euro Overnight Index Average plus 75 basis points, respectively. There was no balance
outstanding under either line at December 31, 2017 or 2016.
The Company's Japanese subsidiary has two separate unsecured and uncommitted lines of credit guaranteed by the
parent company providing for borrowing up to a maximum of US$7,000,000 and ¥300,000,000, respectively (combined
US$9,658,000), at December 31, 2017. These lines accrue interest at JPY LIBOR plus 100 basis points and the Bank of
Tokyo Prime Rate, respectively. There was no balance outstanding under either line at December 31, 2017 or 2016.
The Company's Korean subsidiary has available an unsecured and uncommitted line of credit guaranteed by the parent
company providing for borrowing up to a maximum of US$20,000,000. The revolving line accrues interest at the Korean
three-month CD rate plus 220 basis points. There was no balance outstanding under this line at December 31, 2017 or 2016.
NOTE 9—ACCRUED LIABILITIES
Accrued liabilities consisted of the following (in thousands):
Accrued salaries, bonus, paid time off and other benefits
Accrued import duties
Product warranties
Other
55
December 31,
2017
79,457
12,420
12,339
78,012
182,228
$
$
2016
66,227
14,366
11,455
50,110
142,158
$
$
COLUMBIA SPORTSWEAR COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
A reconciliation of product warranties is as follows (in thousands):
Balance at beginning of year
Provision for warranty claims
Warranty claims
Other
Balance at end of year
NOTE 10—INCOME TAXES
$
$
$
Year Ended December 31,
2016
11,487
3,802
(3,726)
(108)
11,455
2017
11,455
4,538
(4,210)
556
12,339
$
$
$
2015
11,148
4,560
(3,708)
(513)
11,487
On December 22, 2017, the U.S. Government enacted comprehensive tax legislation, commonly referred to as the
Tax Cuts and Jobs Act ("TCJA"). The TCJA makes broad and complex changes to the U.S. tax code, including, but not
limited to:
•
•
•
•
•
•
•
•
•
reducing the U.S. federal corporate tax rate from 35% to 21%;
requiring companies to pay a one-time transition tax on certain unrepatriated earnings of foreign subsidiaries;
generally eliminating U.S. federal income taxes on dividends from foreign subsidiaries;
requiring a current inclusion in U.S. federal taxable income of certain earnings of controlled foreign corporations;
eliminating the corporate alternative minimum tax ("AMT") and changing how existing AMT credits can be
realized;
creating the base erosion anti-abuse tax;
a new provision designed to tax global intangible low-taxed income ("GILTI");
creating a new limitation on deductible interest expense; and
changing rules related to uses and limitations of net operating loss carryforwards created in tax years beginning
after December 31, 2017.
In conjunction with the enactment of the TCJA, the SEC staff issued Staff Accounting Bulletin 118 ("SAB 118"),
which provides guidance on accounting for the tax effects of the TCJA. SAB 118 provides a measurement period that should
not extend beyond one year from the TCJA enactment date for companies to complete the accounting for the effects of the
TCJA. In accordance with SAB 118, a company must reflect the income tax effects of those aspects of the TCJA for which
the accounting is complete. To the extent that a company’s accounting for certain income tax effects of the TCJA is incomplete
but it is able to determine a reasonable estimate, it must record a provisional estimate in the financial statements. If a company
cannot determine a provisional estimate to be included in the financial statements, it should continue to apply its accounting
on the basis of the provisions of the tax laws that were in effect immediately before the enactment of the TCJA.
In connection with the Company's initial analysis of the impact of the TCJA, the Company recorded an incremental
provisional net tax expense of $95,610,000 during the year ended December 31, 2017. For various reasons that are discussed
more fully below, the Company has not completed all of the accounting for the income tax effects of certain elements of
the TCJA. In cases where the Company was able to make reasonable estimates of the effects of elements for which the
analysis is not yet complete, it recorded provisional amounts for those specific tax affects. The Company has not recorded
any adjustments related to those elements for which a reasonable estimate of the tax affects cannot be made, and has continued
accounting for those elements on the basis of the tax laws in effect before the TCJA.
The Company's accounting for the following elements of the TCJA is incomplete. However, the Company was able
to determine reasonable estimates of certain effects and, therefore, recorded provisional amounts as follows:
Reduction of U.S. federal corporate tax rate:
The TCJA reduces the U.S. federal corporate tax rate from 35% to 21%, effective January 1, 2018. For certain of the
Company's deferred tax assets and liabilities, the Company has recorded a provisional decrease to net deferred tax assets
56
COLUMBIA SPORTSWEAR COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
of $15,017,000, with a corresponding charge to deferred income tax expense of $15,017,000 for the year ended December
31, 2017. While the Company is able to make a reasonable estimate of the impact of the reduction in the U.S. corporate
rate, it may be affected by other analyses related to the TCJA, including, but not limited to, the Company's calculation of
deemed repatriation of foreign income and the state tax effect of adjustments made to federal temporary differences.
Transition tax on foreign earnings:
The Deemed Repatriation Transition Tax ("Transition Tax") is a U.S. tax on previously untaxed accumulated and
current earnings and profits ("E&P") of certain of the Company's foreign subsidiaries. To determine the amount of the
Transition Tax, the Company must determine, in addition to other factors, the amount of post-1986 E&P of the relevant
subsidiaries, as well as the amount of non-U.S. income taxes paid on such earnings. The Company is able to make a reasonable
estimate of the Transition Tax and recorded a provisional Transition Tax obligation of $49,947,000. However, the Company
is continuing to gather additional information to more precisely compute the amount of the Transition Tax, including a
detailed analysis of E&P data of relevant subsidiaries. The Transition Tax will be paid over an eight year period.
Deferred tax liability associated with future repatriations:
The Company has recorded a provisional estimate of $23,690,000 related to potential withholding tax on future
repatriations of foreign earnings. The amount is provisional until additional analysis of the effect of the TCJA has been
completed and the Company has further analyzed its applicable foreign earnings.
Disallowance of foreign tax credits:
The Company recorded dividends in 2017 from its foreign subsidiaries for which certain foreign tax credits are no
longer allowable under the TCJA. As a result, the Company recorded an additional provisional $6,956,000 of income tax
expense, which could be affected by further analysis of the TCJA.
The Company's accounting for the following elements of the TCJA is incomplete and the Company was not able to
determine reasonable estimates of certain effects and, therefore, did not record any provisional adjustments:
Global intangible low-taxed income tax:
An estimate has not been recorded related to the new GILTI tax under the TCJA because of the complexity of the new
tax rules and the lack of clarity surrounding the application of the relevant accounting guidance. The Company's selection
of an accounting policy with respect to the GILTI tax rules will depend, in part, on analyzing the Company's global income
to determine whether the Company expects to have future U.S. inclusions in taxable income related to GILTI and, if so,
what the impact is expected to be. As a result, the Company is not yet able to reasonably estimate the effect of this provision
of the TCJA and has not made an accounting policy election or recorded any amounts related to potential GILTI tax in the
Company's financial statements.
Consolidated income from continuing operations before income taxes consisted of the following (in thousands):
U.S. operations
Foreign operations
Income before income tax
$
$
57
Year Ended December 31,
2016
173,798
83,100
256,898
2017
167,380
99,354
266,734
$
$
$
$
2015
173,966
73,353
247,319
COLUMBIA SPORTSWEAR COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
The components of the provision (benefit) for income taxes consisted of the following (in thousands):
Current:
Federal
State and local
Non-U.S.
Deferred:
Federal
State and local
Non-U.S.
Income tax expense
Year Ended December 31,
2016
2017
2015
$
$
87,386
443
28,708
116,537
$
53,840
6,370
18,708
78,918
61,211
6,520
21,014
88,745
47,087
4,990
(14,195)
37,882
(12,921)
(2,166)
(5,372)
(20,459)
(8,883)
(906)
(11,488)
(21,277)
$
154,419
$
58,459
$
67,468
The following is a reconciliation of the statutory federal income tax rate to the effective rate reported in the financial
statements:
Provision for federal income taxes at the statutory rate
State and local income taxes, net of federal benefit
Non-U.S. income taxed at different rates
Foreign tax credits
Foreign deferred tax asset
Reduction of unrecognized tax benefits
Research credits
Reduction of valuation allowance
Excess tax benefits from stock plans
Other
Actual provision for income taxes, pre-TCJA
Effects of the TCJA:
Reduction of U.S. federal corporate tax rate
Transition tax on foreign earnings
Deferred tax liability associated with future repatriations
Foreign tax credits
Provision for income taxes related to the TCJA
2017
Year Ended December 31,
2016
(percent of income)
2015
35.0%
0.4
(7.8)
(0.1)
(3.0)
—
(0.7)
—
(2.3)
0.5
22.0
5.6
18.7
8.9
2.7
35.9
35.0%
1.5
(5.8)
(3.0)
(2.5)
—
(0.8)
—
(2.1)
0.5
22.8
—
—
—
—
—
35.0%
2.2
(3.9)
(1.7)
—
(0.8)
(0.9)
(2.7)
—
0.1
27.3
—
—
—
—
—
Actual provision for income taxes
57.9%
22.8%
27.3%
58
COLUMBIA SPORTSWEAR COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Significant components of the Company's deferred taxes consisted of the following (in thousands):
Deferred tax assets:
Accruals and allowances
Capitalized inventory costs
Stock compensation
Net operating loss carryforwards
Depreciation and amortization
Tax credits
Foreign currency gain
Other
Gross deferred tax assets
Valuation allowance
Net deferred tax assets
Deferred tax liabilities:
Depreciation and amortization
Prepaid expenses
Deferred tax liability associated with future repatriations
Foreign currency loss
Other
Gross deferred tax liabilities
Total net deferred taxes
$
December 31,
2017
2016
$
37,971
21,625
3,867
20,085
25,020
31
5,657
276
114,532
(16,428)
98,104
(15,395)
(2,383)
(23,690)
—
—
(41,468)
51,724
39,661
6,476
3,637
19,313
443
—
263
121,517
(1,323)
120,194
(25,703)
—
—
(667)
(1,477)
(27,847)
$
56,636
$
92,347
The Company records net deferred tax assets to the extent it believes these assets will more likely than not be realized.
In making such a determination, the Company considers all available positive and negative evidence, including future
reversals of existing taxable temporary differences, projected future taxable income, tax-planning strategies, and results of
recent operations. The Company has foreign net operating loss carryforwards of $72,297,000 as of December 31, 2017, of
which $59,943,000 have an unlimited carryforward period and $15,354,000 expire between 2025 and 2027. The net operating
losses result in deferred tax assets of $20,085,000 and $3,637,000 at December 31, 2017 and 2016, respectively. These
deferred tax assets were subject to a valuation allowance of $16,152,000 and $1,060,000 at December 31, 2017 and 2016,
respectively.
At December 31, 2016, the unremitted earnings of foreign subsidiaries outside of the United States for which deferred
taxes had not been provided were approximately $422,940,000. Under the transition tax described above, a provisional
estimate of $49,947,000 has been recorded for the amount of the tax due on untaxed foreign earnings and profits as of
December 31, 2017. While the provisional transition tax may eliminate, in part or in whole, the need for U.S. federal deferred
taxes on previously untaxed net foreign earnings and profits, it has not eliminated the potential need for deferred taxes
related to the associated future foreign withholding and state taxes. As of December 31, 2017, the Company has recorded
provisional deferred tax liabilities of $23,690,000 related to estimated foreign withholding taxes on future repatriations of
previously untaxed net foreign earnings and profits.
The Company conducts business globally, and, as a result, the Company or one or more of its subsidiaries files income
tax returns in the U.S. federal jurisdiction and various state and foreign jurisdictions. The Company is subject to examination
by taxing authorities throughout the world, including such major jurisdictions as Canada, China, France, Japan, South Korea,
Switzerland, and the United States. The Company has effectively settled Canadian tax examinations of all years through
2012, U.S. tax examinations of all years through 2013, Japanese tax examinations of all years through 2012, France tax
examinations of all years through 2014, and Swiss tax examinations of all years through 2013. The Company's transfer
pricing policies are currently under review by the Chinese tax authorities for all tax years after 2013. The Korean National
Tax Service concluded an audit of the Company's 2009 through 2013 corporate income tax returns in 2014, and an audit of
59
COLUMBIA SPORTSWEAR COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
the Company's 2014 corporate income tax return in 2016. Due to the nature of the findings in both of these audits, the
Company has invoked the Mutual Agreement Procedures outlined in the U.S.-Korean income tax treaty. The Company does
not anticipate that adjustments relative to this dispute, or any other ongoing tax audits, will result in material changes to its
financial condition, results of operations or cash flows. Other than the dispute previously noted, the Company is not currently
under examination in any major jurisdiction.
A reconciliation of the beginning and ending amount of gross unrecognized tax benefits is as follows (in thousands):
Balance at beginning of year
Increases related to prior year tax positions
Decreases related to prior year tax positions
Increases related to current year tax positions
Expiration of statute of limitations
Balance at end of year
2017
9,998
858
(2,895)
2,714
(163)
10,512
$
$
$
December 31,
2016
11,187
2,514
(5,119)
1,599
(183)
9,998
$
2015
6,630
365
(2,019)
6,564
(353)
11,187
$
$
Due to the potential for resolution of income tax audits currently in progress, and the expiration of various statutes of
limitation, it is reasonably possible that the unrecognized tax benefits balance may change within the twelve months following
December 31, 2017 by a range of zero to $2,066,000. Open tax years, including those previously mentioned, contain matters
that could be subject to differing interpretations of applicable tax laws and regulations as they relate to the amount, timing,
or inclusion of revenue and expenses or the sustainability of income tax credits for a given examination cycle.
Unrecognized tax benefits of $6,892,000 and $7,723,000 would affect the effective tax rate if recognized at December
31, 2017 and 2016, respectively.
The Company recognizes interest expense and penalties related to income tax matters in income tax expense. The
Company recognized a net reversal of accrued interest and penalties of $1,402,000 in 2017, and a net increase of accrued
interest and penalties of $637,000 in 2016 and a net reversal of accrued interest and penalties of $356,000 in 2015, all of
which related to uncertain tax positions. The Company had $1,640,000 and $3,042,000 of accrued interest and penalties
related to uncertain tax positions at December 31, 2017 and 2016, respectively.
NOTE 11—OTHER LONG-TERM LIABILITIES
Other long-term liabilities consisted of the following (in thousands):
Straight-line and deferred rent liabilities (Note 13)
Asset retirement obligations
Deferred compensation plan liability (Note 12)
Derivative financial instruments (Note 19)
NOTE 12—RETIREMENT SAVINGS PLANS
401(k) Profit-Sharing Plan
December 31,
2017
31,016
4,580
9,319
3,820
48,735
$
$
2016
30,869
3,342
8,411
—
42,622
$
$
The Company has a 401(k) profit-sharing plan, which covers substantially all U.S. employees. Participation begins
the first day of the quarter following completion of 30 days of service. The Company may elect to make discretionary
matching or non-matching contributions. All Company contributions to the plan as determined by the Board of Directors
totaled $7,666,000, $7,754,000 and $6,981,000 for the years ended December 31, 2017, 2016 and 2015, respectively.
Deferred Compensation Plan
60
COLUMBIA SPORTSWEAR COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
The Company sponsors a nonqualified retirement savings plan for certain senior management employees whose
contributions to the tax qualified 401(k) plan would be limited by provisions of the Internal Revenue Code. This plan allows
participants to defer receipt of a portion of their salary and incentive compensation and to receive matching contributions
for a portion of the deferred amounts. Company matching contributions to the plan totaled $210,000, $200,000 and $180,000
for the years ended December 31, 2017, 2016 and 2015, respectively. Participants earn a return on their deferred compensation
based on investment earnings of participant-selected mutual funds. Deferred compensation, including accumulated earnings
on the participant-directed investment selections, is distributable in cash at participant-specified dates or upon retirement,
death, disability, or termination of employment.
The Company has purchased specific mutual funds in the same amounts as the participant-directed investment
selections underlying the deferred compensation liabilities. These investment securities and earnings thereon, held in an
irrevocable trust, are intended to provide a source of funds to meet the deferred compensation obligations, subject to claims
of creditors in the event of the Company's insolvency. Changes in the market value of the participants' investment selections
are recorded as an adjustment to the investments and as unrealized gains and losses in SG&A expense. A corresponding
adjustment of an equal amount is made to the deferred compensation liabilities and compensation expense, which is included
in SG&A expense.
At December 31, 2017 and 2016, the long-term portion of the liability to participants under this plan was $9,319,000
and $8,411,000, respectively, and was recorded in other long-term liabilities. At December 31, 2017 and 2016, the current
portion of the participant liability was $1,437,000 and $472,000, respectively, and was recorded in accrued liabilities. At
December 31, 2017 and 2016, the fair value of the long-term portion of the mutual fund investments related to this plan
was $9,319,000 and $8,411,000, respectively, and was recorded in other non-current assets. At December 31, 2017 and
2016, the current portion of the mutual fund investments related to this plan was $1,437,000 and $472,000, respectively,
and was recorded in short-term investments.
NOTE 13—COMMITMENTS AND CONTINGENCIES
Operating Leases
The Company leases, among other things, retail space, office space, warehouse facilities, storage space, vehicles, and
equipment. Generally, the base lease terms are between 5 and 10 years. Certain lease agreements contain scheduled rent
escalation clauses in their future minimum lease payments. Future minimum lease payments are recognized on a straight-
line basis over the minimum lease term and the pro rata portion of scheduled rent escalations is included in other long-term
liabilities. Certain retail space lease agreements provide for additional rents based on a percentage of annual sales in excess
of stipulated minimums ("percentage rent"). Certain lease agreements require the Company to pay real estate taxes, insurance,
common area maintenance ("CAM"), and other costs, collectively referred to as operating costs, in addition to base rent.
Percentage rent and operating costs are recognized as incurred in SG&A expense in the Consolidated Statements of
Operations. Certain lease agreements also contain lease incentives, such as tenant improvement allowances and rent holidays.
The Company recognizes the benefits related to the lease incentives on a straight-line basis over the applicable lease term.
Rent expense, including percentage rent but excluding operating costs for which the Company is obligated, consisted
of the following (in thousands):
Rent expense included in SG&A expense
Rent expense included in Cost of sales
$
$
Year Ended December 31,
2016
75,457
1,626
77,083
2017
84,564
1,557
86,121
$
$
$
$
2015
67,881
1,689
69,570
Operating lease obligations listed below do not include percentage rent, real estate taxes, insurance, CAM, and other
costs for which the Company is obligated. These operating lease commitments are not reflected on the Consolidated Balance
Sheets. Approximate future minimum payments, including rent escalation clauses and committed leases for stores that are
not yet open, on all lease obligations at December 31, 2017, are as follows (in thousands):
61
COLUMBIA SPORTSWEAR COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
2018
2019
2020
2021
2022
Thereafter
$
$
68,686
58,286
49,148
42,041
38,416
113,961
370,538
Inventory Purchase Obligations
Inventory purchase obligations consist of open production purchase orders for sourced apparel, footwear, accessories,
and equipment, and raw material commitments not included in open production purchase orders. At December 31, 2017,
inventory purchase obligations were $266,507,000.
Litigation
The Company is involved in litigation and various legal matters arising in the normal course of business, including
matters related to employment, retail, intellectual property, contractual agreements, and various regulatory compliance
activities. Management has considered facts related to legal and regulatory matters and opinions of counsel handling these
matters, and does not believe the ultimate resolution of these proceedings will have a material adverse effect on the Company's
financial position, results of operations or cash flows.
Indemnities and Guarantees
During its normal course of business, the Company has made certain indemnities, commitments and guarantees under
which it may be required to make payments in relation to certain transactions. These include (i) intellectual property
indemnities to the Company's customers and licensees in connection with the use, sale or license of Company products,
(ii) indemnities to various lessors in connection with facility leases for certain claims arising from such facility or lease,
(iii) indemnities to customers, vendors and service providers pertaining to claims based on the negligence or willful
misconduct of the Company, (iv) executive severance arrangements, and (v) indemnities involving the accuracy of
representations and warranties in certain contracts. The duration of these indemnities, commitments and guarantees varies,
and in certain cases, may be indefinite. The majority of these indemnities, commitments and guarantees do not provide for
any limitation of the maximum potential for future payments the Company could be obligated to make. The Company has
not recorded any liability for these indemnities, commitments and guarantees in the accompanying Consolidated Balance
Sheets.
NOTE 14—SHAREHOLDERS' EQUITY
Since the inception of the Company's stock repurchase plan in 2004 through December 31, 2017, the Company's Board
of Directors has authorized the repurchase of $700,000,000 of the Company's common stock. As of December 31, 2017,
the Company had repurchased 21,658,035 shares under this program at an aggregate purchase price of approximately
$562,064,000. During the year ended December 31, 2017, the Company purchased an aggregate of $35,542,000 of common
stock under the stock repurchase plan. Shares of the Company's common stock may be purchased in the open market or
through privately negotiated transactions, subject to market conditions. The repurchase program does not obligate the
Company to acquire any specific number of shares or to acquire shares over any specified period of time.
NOTE 15—STOCK-BASED COMPENSATION
The Company's stock incentive plan (the "Plan") provides for issuance of up to 20,800,000 shares of the Company's
common stock, of which 2,701,396 shares were available for future grants under the Plan at December 31, 2017. The Plan
allows for grants of incentive stock options, non-statutory stock options, restricted stock awards, restricted stock units, and
other stock-based or cash-based awards. The Company uses original issuance shares to satisfy share-based payments.
Stock-based compensation expense consisted of the following (in thousands):
62
COLUMBIA SPORTSWEAR COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Cost of sales
SG&A expense
Pre-tax stock-based compensation expense
Income tax benefits
Total stock-based compensation expense, net of tax
Year Ended December 31,
2016
2017
2015
$
$
243
11,043
11,286
(1,778)
9,508
$
$
233
10,753
10,986
(3,969)
7,017
$
$
326
11,346
11,672
(4,044)
7,628
The Company realized a tax benefit for the deduction from stock-based award transactions of $10,463,000, $9,576,000
and $11,872,000 for the years ended December 31, 2017, 2016 and 2015, respectively.
Stock Options
Options to purchase the Company's common stock are granted at exercise prices equal to or greater than the fair market
value of the Company's common stock on the date of grant. Options generally vest and become exercisable ratably on an
annual basis over a period of four years and expire ten years from the date of the grant.
The Company estimates the fair value of stock options using the Black-Scholes model. Key inputs and assumptions
used to estimate the fair value of stock options include the exercise price of the award, the expected option term, expected
volatility of the Company's stock over the option's expected term, the risk-free interest rate over the option's expected term,
and the Company's expected annual dividend yield. The option's expected term is derived from historical option exercise
behavior and the option's terms and conditions, which the Company believes provide a reasonable basis for estimating an
expected term. The expected volatility is estimated based on observations of the Company's historical volatility over the
most recent term commensurate with the expected term. The risk-free interest rate is based on the U.S. Treasury yield
approximating the expected term. The dividend yield is based on the expected cash dividend payouts. Assumptions are
evaluated and revised as necessary to reflect changes in market conditions and the Company's experience. Estimates of fair
value are not intended to predict actual future events or the value ultimately realized by people who receive equity awards.
The following table presents the weighted average assumptions for the years ended December 31:
Expected term
Expected stock price volatility
Risk-free interest rate
Expected dividend yield
Weighted average grant date fair value
2017
2016
2015
4.54 years
4.63 years
4.60 years
28.91%
29.79%
26.57%
1.73%
1.29%
$13.11
1.17%
1.20%
$13.38
1.20%
1.26%
$10.36
63
COLUMBIA SPORTSWEAR COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
The following table summarizes stock option activity under the Plan:
Options outstanding at January 1, 2015
Granted
Cancelled
Exercised
Options outstanding at December 31, 2015
Granted
Cancelled
Exercised
Options outstanding at December 31, 2016
Granted
Cancelled
Exercised
Options outstanding at December 31, 2017
Options vested and expected to vest at December 31, 2017
Options exercisable at December 31, 2017
Weighted
Average
Exercise
Price
Weighted
Average
Remaining
Contractual
Life
Aggregate
Intrinsic Value
(in thousands)
28.00
48.46
34.59
25.63
32.69
56.63
47.33
29.25
37.40
55.90
50.62
29.52
44.22
43.77
34.17
6.50
$
43,682
6.50
38,209
6.39
45,253
6.69
6.61
4.95
$
$
$
48,962
47,904
33,016
Number of
Shares
2,640,785
$
500,761
(172,018)
(680,658)
2,288,870
430,544
(117,699)
(450,173)
2,151,542
540,537
(246,450)
(675,742)
1,769,887
1,704,394
875,433
$
$
$
The aggregate intrinsic value in the table above represents pre-tax intrinsic value that would have been realized if all
options had been exercised on the last business day of the period indicated, based on the Company's closing stock price on
that day.
Total stock option compensation expense for the years ended December 31, 2017, 2016 and 2015 was $3,843,000,
$3,896,000 and $3,637,000, respectively. At December 31, 2017, unrecognized costs related to stock options totaled
approximately $7,166,000, before any related tax benefit. The unrecognized costs related to stock options are being amortized
over the related vesting period using the straight-line attribution method. Unrecognized costs related to stock options at
December 31, 2017 are expected to be recognized over a weighted average period of 2.35 years. The aggregate intrinsic
value of stock options exercised was $19,836,000, $12,976,000 and $20,400,000 for the years ended December 31, 2017,
2016 and 2015, respectively. The total cash received as a result of stock option exercises for the years ended December 31,
2017, 2016 and 2015 was $19,946,000, $13,167,000 and $17,442,000, respectively.
Restricted Stock Units
Service-based restricted stock units are granted at no cost to key employees and generally vest over a period of four
years. Performance-based restricted stock units are granted at no cost to certain members of the Company's senior executive
team, excluding the Chairman of the Board of Directors and the Chief Executive Officer. Performance-based restricted
stock units granted after 2009 generally vest over a performance period of between two and three years. Restricted stock
units vest in accordance with the terms and conditions established by the Compensation Committee of the Board of Directors,
and are based on continued service and, in some instances, on individual performance or Company performance or both.
For the majority of restricted stock units granted, the number of shares issued on the date the restricted stock units vest is
net of the minimum statutory withholding requirements that the Company pays in cash to the appropriate taxing authorities
on behalf of its employees. For the years ended December 31, 2017, 2016 and 2015, the Company withheld 65,437, 88,335
and 90,355 shares, respectively, to satisfy $3,662,000, $5,127,000 and $4,895,000 of employees' tax obligations, respectively.
The fair value of service-based and performance-based restricted stock units is discounted by the present value of the
estimated future stream of dividends over the vesting period using the Black-Scholes model. The relevant inputs and
64
COLUMBIA SPORTSWEAR COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
assumptions used in the Black-Scholes model to compute the discount are the vesting period, expected annual dividend
yield and closing price of the Company's common stock on the date of grant.
The following table presents the weighted average assumptions for the years ended December 31:
Vesting period
Expected dividend yield
Estimated average fair value per restricted stock unit granted
2017
2016
2015
3.87 years
3.57 years
3.82 years
1.30%
$52.45
1.08%
$55.93
1.14%
$51.07
The following table summarizes the restricted stock unit activity under the Plan:
Restricted stock units outstanding at January 1, 2015
Granted
Vested
Forfeited
Restricted stock units outstanding at December 31, 2015
Granted
Vested
Forfeited
Restricted stock units outstanding at December 31, 2016
Granted
Vested
Forfeited
Restricted stock units outstanding at December 31, 2017
Number of
Shares
658,760
207,040
(243,765)
(68,746)
553,289
205,734
(235,059)
(57,489)
466,475
270,169
(176,654)
(110,515)
449,475
Weighted Average
Grant Date Fair
Value Per Share
31.03
$
51.07
28.09
34.57
38.85
55.93
33.98
46.35
47.23
52.45
42.32
48.13
52.07
$
Restricted stock unit compensation expense for the years ended December 31, 2017, 2016 and 2015 was $7,443,000,
$7,090,000 and $8,035,000, respectively. At December 31, 2017, unrecognized costs related to restricted stock units totaled
approximately $14,174,000, before any related tax benefit. The unrecognized costs related to restricted stock units are being
amortized over the related vesting period using the straight-line attribution method. These unrecognized costs at December
31, 2017 are expected to be recognized over a weighted average period of 2.24 years. The total grant date fair value of
restricted stock units vested during the years ended December 31, 2017, 2016 and 2015 was $7,477,000, $7,988,000 and
$6,848,000, respectively.
NOTE 16—EARNINGS PER SHARE
Earnings per share ("EPS") is presented on both a basic and diluted basis. Basic EPS is based on the weighted average
number of common shares outstanding. Diluted EPS reflects the potential dilution that could occur if outstanding securities
or other contracts to issue common stock were exercised or converted into common stock. For the calculation of diluted
EPS, the basic weighted average number of shares is increased by the dilutive effect of stock options and restricted stock
units determined using the treasury stock method.
65
COLUMBIA SPORTSWEAR COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
A reconciliation of the common shares used in the denominator for computing basic and diluted EPS is as follows (in
thousands, except per share amounts):
Weighted average common shares outstanding, used in computing basic
earnings per share
Effect of dilutive stock options and restricted stock units
Weighted-average common shares outstanding, used in computing diluted
earnings per share
Earnings per share of common stock attributable to Columbia Sportswear
Company:
Basic
Diluted
Year Ended December 31,
2017
2016
2015
69,759
694
69,683
949
70,162
902
70,453
70,632
71,064
$
$
1.51
1.49
$
2.75
2.72
2.48
2.45
Stock options and service-based restricted stock units representing 887,595, 517,654 and 154,170 shares of common
stock for the years ended December 31, 2017, 2016 and 2015, respectively, were outstanding but were excluded in the
computation of diluted EPS because their effect would be anti-dilutive as a result of applying the treasury stock method. In
addition, performance-based restricted stock units representing 40,848, 63,430 and 122,858 shares for the years ended
December 31, 2017, 2016 and 2015, respectively, were outstanding but were excluded from the computation of diluted EPS
because these shares were subject to performance conditions that had not been met.
NOTE 17—ACCUMULATED OTHER COMPREHENSIVE LOSS
Accumulated other comprehensive loss, net of applicable taxes, reported on the Company's Consolidated Balance
Sheets consists of unrealized gains and losses on available-for-sale securities, unrealized gains and losses on derivative
transactions and foreign currency translation adjustments. The following table sets forth the changes in accumulated other
comprehensive income (loss) attributable to Columbia Sportswear Company, net of related tax effects, for the years ended
December 31, 2017, 2016 and 2015 (in thousands):
Unrealized
losses on
available for
sale securities
Unrealized holding
gains (losses) on
derivative
transactions
Foreign
currency
translation
adjustments
Total
Balance at January 1, 2015
Other comprehensive income (loss) before reclassifications
Amounts reclassified from other comprehensive income
Net other comprehensive income (loss) during the year
Balance at December 31, 2015
Other comprehensive income (loss) before reclassifications
Amounts reclassified from other comprehensive income
Net other comprehensive income (loss) during the year
Balance at December 31, 2016
Other comprehensive income (loss) before reclassifications
Amounts reclassified from other comprehensive income
Net other comprehensive income (loss) during the year
Balance at December 31, 2017
$
$
$
4
(6)
—
(6)
(2)
(2)
—
(2)
(4)
—
—
—
(4) $
$
8,995
9,791
(12,699)
(2,908)
6,087
420
266
686
6,773
(15,559)
(1,930)
(17,489)
(10,716) $
6,834
(33,755)
$ 15,833
(23,970)
— (12,699)
(36,669)
(20,836)
(2,047)
266
(1,781)
(22,617)
15,660
(1,930)
13,730
$ (8,887)
(33,755)
(26,921)
(2,465)
—
(2,465)
(29,386)
31,219
—
31,219
1,833
All reclassification adjustments related to derivative transactions are recorded in Cost of sales on the Consolidated
Statements of Operations. Refer to Note 19 for further information regarding derivative instrument reclassification
adjustments.
66
COLUMBIA SPORTSWEAR COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
NOTE 18—SEGMENT INFORMATION
The Company has aggregated its operating segments into four reportable geographic segments: (1) the United States,
(2) Latin America and Asia Pacific ("LAAP"), (3) Europe, Middle East and Africa ("EMEA"), and (4) Canada, which are
reflective of the Company's internal organization, management and oversight structure. Each geographic segment operates
predominantly in one industry: the design, development, marketing, and distribution of outdoor and active lifestyle apparel,
footwear, accessories, and equipment. Intersegment net sales and intersegment profits, which are recorded at a negotiated
mark-up and eliminated in consolidation, are not material. Unallocated corporate expenses consist of expenses incurred by
centrally-managed departments, including global information systems, finance, human resources and legal, executive
compensation, unallocated benefit program expense, and other miscellaneous costs.
The geographic distribution of the Company's net sales, income from operations, interest income (expense), income
tax (expense) benefit, and depreciation and amortization expense are summarized in the following tables (in thousands) for
the years ended December 31, 2017, 2016 and 2015 and for accounts receivable, net, inventories and property, plant and
equipment, net, at December 31, 2017 and 2016.
Net sales to unrelated entities:
United States
LAAP
EMEA
Canada
Segment income from operations:
United States
LAAP
EMEA
Canada
Total segment income from operations
Unallocated corporate expenses
Interest income, net
Interest expense on note payable to related party
Other non-operating expense
Income before income tax
Interest income (expense), net:
United States
LAAP
EMEA
Canada
Income tax (expense) benefit:
United States
LAAP
67
2017
2016
2015
$ 1,520,026
$ 1,505,302
$ 1,455,283
475,128
293,700
177,251
453,686
253,487
164,570
469,140
233,226
168,531
$ 2,466,105
$ 2,377,045
$ 2,326,180
$ 334,207
$ 331,706
$ 309,162
73,748
11,897
26,427
61,994
8,403
19,010
65,846
8,664
23,772
446,279
(183,310)
4,515
(429)
(321)
$ 266,734
421,113
(164,605)
2,003
(1,041)
(572)
$ 256,898
407,444
(157,723)
1,531
(1,099)
(2,834)
$ 247,319
$
2,573
$
289
7,072
(5,419)
4,515
$
$
2,334
(216)
2,663
(2,778)
2,003
$
$
4,765
(555)
152
(2,831)
1,531
$ (129,194) $
(14,935)
(45,584) $
(12,345)
(58,487)
(10,058)
COLUMBIA SPORTSWEAR COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
EMEA
Canada
Depreciation and amortization expense:
United States
LAAP
EMEA
Canada
Unallocated corporate expense
Accounts receivable, net:
United States
LAAP
EMEA
Canada
Inventories:
United States
LAAP
EMEA
Canada
Property, plant and equipment, net:
United States
Canada
All other countries
Net sales by product category:
Apparel, accessories and equipment
Footwear
(4,716)
(5,574)
$ (154,419) $
1,507
(2,037)
(58,459) $
5,305
(4,228)
(67,468)
$
24,662
$
24,920
$
25,490
6,495
4,043
2,831
6,392
3,189
2,912
21,914
22,603
$
59,945
$
60,016
$
5,437
2,419
3,020
20,155
56,521
$ 180,742
$ 162,017
95,765
42,659
45,696
84,947
42,195
44,519
$ 364,862
$ 333,678
$ 285,481
$ 308,721
84,149
57,055
31,242
95,033
51,226
33,017
$ 457,927
$ 487,997
$ 206,172
$ 211,572
30,318
44,904
28,159
39,919
$ 281,394
$ 279,650
$ 1,927,957
$ 1,865,449
$ 1,821,182
538,148
511,596
504,998
$ 2,466,105
$ 2,377,045
$ 2,326,180
NOTE 19—FINANCIAL INSTRUMENTS AND RISK MANAGEMENT
In the normal course of business, the Company's financial position, results of operations and cash flows are routinely
subject to a variety of risks. These risks include risks associated with financial markets, primarily currency exchange rate
risk and, to a lesser extent, interest rate risk and equity market risk. The Company regularly assesses these risks and has
established policies and business practices designed to mitigate them. The Company does not engage in speculative trading
in any financial market.
68
COLUMBIA SPORTSWEAR COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
The Company actively manages the risk of changes in functional currency equivalent cash flows resulting from
anticipated non-functional currency denominated purchases and sales. Our subsidiaries and joint venture that use European
euros, Canadian dollars, Japanese yen, or Chinese renminbi as their functional currency are primarily exposed to changes
in functional currency equivalent cash flows from anticipated U.S. dollar inventory purchases. The Company's prAna
subsidiary uses U.S. dollars as its functional currency and is exposed to anticipated Canadian dollar denominated sales. The
Company manages these risks by using currency forward contracts formally designated and effective as cash flow hedges.
Hedge effectiveness is generally determined by evaluating the ability of a hedging instrument's cumulative change in fair
value to offset the cumulative change in the present value of expected cash flows on the underlying exposures. For forward
contracts, the change in fair value attributable to changes in forward points is excluded from the determination of hedge
effectiveness and included in current cost of sales for hedges of anticipated U.S. dollar inventory purchases and in net sales
for hedges of anticipated Canadian dollar sales. Hedge ineffectiveness was not material during the years ended December
31, 2017, 2016 and 2015.
The Company also uses foreign currency forward contracts not formally designated as hedges using euros, yen,
Canadian dollars, British pounds and Swiss francs to manage the consolidated currency exchange risk associated with the
remeasurement of non-functional currency denominated monetary assets and liabilities. Non-functional currency
denominated monetary assets and liabilities consist primarily of cash and cash equivalents, short-term investments, payables,
and intercompany loans. The gains and losses generated on these currency forward contracts not formally designated as
hedges are expected to be largely offset in other non-operating income (expense), net by the gains and losses generated
from the remeasurement of the non-functional currency denominated monetary assets and liabilities.
The following table presents the gross notional amount of outstanding derivative instruments (in thousands):
Derivative instruments designated as cash flow hedges:
Currency forward contracts
Derivative instruments not designated as hedges:
Currency forward contracts
December 31,
2017
2016
$ 448,448
$ 206,000
231,161
184,940
At December 31, 2017, approximately $10,261,000 of deferred net losses on both outstanding and matured derivatives
accumulated in other comprehensive income are expected to be reclassified to income before tax during the next twelve
months as a result of underlying hedged transactions also being recorded in net income. Actual amounts ultimately reclassified
to net income are dependent on U.S. dollar exchange rates in effect against the euro, Canadian dollar, yen, and renminbi
when outstanding derivative contracts mature.
At December 31, 2017, the Company's derivative contracts had remaining maturities of less than three years. The
maximum net exposure to any single counterparty, which is generally limited to the aggregate unrealized gain of all contracts
with that counterparty, was less than $2,000,000 at December 31, 2017. All of the Company's derivative counterparties have
investment grade credit ratings. The Company is a party to master netting arrangements that contain features that allow
counterparties to net settle amounts arising from multiple separate derivative transactions or net settle in the case of certain
triggering events such as a bankruptcy or major default of one of the counterparties to the transaction. Finally, the Company
has not pledged assets or posted collateral as a requirement for entering into or maintaining derivative positions.
69
COLUMBIA SPORTSWEAR COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
The following table presents the balance sheet classification and fair value of derivative instruments (in thousands):
Balance Sheet Classification
2017
2016
December 31,
Derivative instruments designated as cash flow
hedges:
Derivative instruments in asset positions:
Currency forward contracts
Currency forward contracts
Prepaid expenses and other current assets
$
1,648
$
9,805
Other non-current assets
335
1,969
Derivative instruments in liability positions:
Currency forward contracts
Currency forward contracts
Accrued liabilities
Other long-term liabilities
9,336
3,820
106
—
Derivative instruments not designated as hedges:
Derivative instruments in asset positions:
Currency forward contracts
Prepaid expenses and other current assets
683
1,361
Derivative instruments in liability positions:
Currency forward contracts
Accrued liabilities
1,229
180
70
COLUMBIA SPORTSWEAR COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
The following table presents the effect and classification of derivative instruments for the years ended December 31,
2017, 2016 and 2015 (in thousands):
Currency Forward Contracts:
Derivative instruments designated as cash flow
hedges:
Gain (loss) recognized in other
comprehensive income, net of tax
Gain (loss) reclassified from accumulated
other comprehensive income to income
for the effective portion
Loss reclassified from accumulated other
comprehensive income to income as a
result of cash flow hedge discontinuance
Gain reclassified from accumulated other
comprehensive income to income for the
effective portion
Gain (loss) recognized in income for
amount excluded from effectiveness
testing and for the ineffective portion
Loss reclassified from accumulated other
comprehensive income to income as a
result of cash flow hedge discontinuance
Gain recognized in income for amount
excluded from effectiveness testing and
for the ineffective portion
Derivative instruments not designated as
hedges:
Statement Of Operations
Classification
2017
2016
2015
For the Year Ended
December 31,
—
$ (15,862) $
583
$
9,791
Cost of sales
1,195
(724)
15,446
Cost of sales
—
(24)
—
Net sales
144
115
385
Cost of sales
2,843
1,240
(209)
Other non-operating
expense
Net sales
(178)
6
—
1
—
(30)
Gain (loss) recognized in income
Other non-operating
expense
(3,943)
2,739
2,838
NOTE 20—FAIR VALUE MEASURES
Certain assets and liabilities are reported at fair value on either a recurring or nonrecurring basis. Fair value is defined
as an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly
transaction between market participants, under a three-tier fair value hierarchy that prioritizes the inputs used in measuring
fair value as follows:
Level 1 – observable inputs such as quoted prices for identical assets or liabilities in active liquid markets;
Level 2 – inputs, other than the quoted market prices in active markets, that are observable, either directly or
indirectly; or observable market prices in markets with insufficient volume or infrequent transactions;
and
Level 3 – unobservable inputs for which there is little or no market data available, that require the reporting entity
to develop its own assumptions.
Assets and liabilities measured at fair value on a recurring basis as of December 31, 2017 are as follows (in thousands):
71
COLUMBIA SPORTSWEAR COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Assets:
Cash equivalents:
Money market funds
Time deposits
U.S. Government treasury bills
U.S. Government-backed municipal bonds
Available-for-sale short-term investments
U.S. Government treasury bills
U.S. Government-backed municipal bonds
Other short-term investments:
Mutual fund shares
Other current assets:
Level 1
Level 2
Level 3
Total
$
$
282,860
52,808
—
—
— $
—
4,995
25,338
— $
—
—
—
282,860
52,808
4,995
25,338
—
—
19,963
73,582
1,438
—
—
—
—
—
19,963
73,582
1,438
2,331
Derivative financial instruments (Note 19)
—
2,331
Non-current assets:
Derivative financial instruments (Note 19)
Mutual fund shares
Total assets measured at fair value
Liabilities:
Accrued liabilities:
Derivative financial instruments (Note 19)
Other long-term liabilities
Derivative financial instruments (Note 19)
Total liabilities measured at fair value
$
$
$
—
9,319
346,425
$
335
—
126,544
$
—
—
— $
335
9,319
472,969
— $
10,565
$
— $
10,565
—
— $
3,820
14,385
$
—
— $
3,820
14,385
Assets and liabilities measured at fair value on a recurring basis at December 31, 2016 are as follows (in thousands):
Level 1
Level 2
Level 3
Total
Assets:
Cash equivalents:
Money market funds
Time deposits
Other short-term investments:
Mutual fund shares
Other current assets:
Derivative financial instruments (Note 19)
Non-current assets:
Derivative financial instruments (Note 19)
Mutual fund shares
Total assets measured at fair value
Liabilities:
Accrued liabilities:
Derivative financial instruments (Note 19)
Total liabilities measured at fair value
$
$
$
$
299,769
73,127
$
— $
—
—
$
$
$
472
—
—
8,411
381,779
$
11,166
1,969
—
13,135
— $
— $
286
286
— $
—
299,769
73,127
—
—
472
11,166
—
—
— $
1,969
8,411
394,914
— $
— $
286
286
Level 1 instrument valuations are obtained from real-time quotes for transactions in active exchange markets involving
identical assets. Level 2 instrument valuations are obtained from inputs, other than quoted market prices in active markets,
that are directly or indirectly observable in the marketplace and quoted prices in markets with limited volume or infrequent
transactions.
72
COLUMBIA SPORTSWEAR COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
There were no material assets and liabilities measured at fair value on a nonrecurring basis at December 31, 2017 or
2016.
NOTE 21—RELATED PARTY TRANSACTIONS
The Company owns a 60% controlling interest in a joint venture formed with Swire. The joint venture arrangement
involves Transition Services Agreements ("TSAs") with Swire, under which Swire provides administrative and information
technology services to the joint venture. The Company continues to reduce its costs under the TSAs as it internalizes the
back-office functions and related personnel, including the transition of the joint venture's systems to the Company's platform
in the second quarter of 2017. The joint venture incurred service fees, valued under these TSAs at Swire's cost of $1,006,000,
$3,294,000 and $5,974,000 for the years ended December 31, 2017, 2016 and 2015, respectively. These fees are included
in SG&A expenses on the Consolidated Statements of Operations. In addition, the joint venture pays Swire sourcing fees
related to the purchase of certain inventory. These sourcing fees are capitalized into inventories and charged to cost of sales
as the inventories are sold. For the years ended December 31, 2017, 2016 and 2015, the joint venture incurred sourcing fees
of $21,000, $71,000 and $396,000, respectively.
In 2014, both the Company and Swire funded long-term loans to the joint venture. The Company's loan has been
eliminated in consolidation, while the Swire loan is reflected as a note payable to related party in the Consolidated Balance
Sheets as of December 31, 2016. In June 2017, the Company repaid these loans, including the note with Swire in the principal
amount of RMB 97,600,000 (USD 14,236,000), and as such, the balance on the Consolidated Balance Sheets is zero at
December 31, 2017. Interest expense related to this note was $429,000, $1,041,000 and $1,099,000 for the years ended
December 31, 2017, 2016 and 2015, respectively.
As of December 31, 2017 and 2016, payables to Swire for service fees and interest expense totaled $89,000 and
$707,000, respectively, and were included in accounts payable on the Consolidated Balance Sheets.
Swire is also a third-party distributor of the Company's brands in certain regions outside of mainland China and
purchases products from the Company under the Company's normal third-party distributor terms and pricing.
73
SUPPLEMENTARY DATA—QUARTERLY FINANCIAL DATA (Unaudited)
The following table summarizes the Company's quarterly financial data for the past two years ended December 31,
2017 (in thousands, except per share amounts):
2017
Net sales
Gross profit
Net income (loss) attributable to Columbia Sportswear
Company (1)
Earnings (loss) per share attributable to Columbia
Sportswear Company
Basic
Diluted
$
$
First
Quarter
Second
Quarter
Third
Quarter
Fourth
Quarter
543,793
258,467
$
398,904
180,862
$
747,367
349,190
$
776,041
371,443
36,006
(11,535)
87,724
(7,072)
$
0.52
0.51
(0.17) $
(0.17)
$
1.26
1.25
(0.10)
(0.10)
(1) Fourth quarter net loss included incremental provisional income tax expenses of $95.6 million related to the effects of the TCJA.
Refer to Note 10 of the Consolidated Financial Statements for further information.
2016
Net sales
Gross profit
Net income (loss) attributable to Columbia Sportswear
Company
Earnings (loss) per share attributable to Columbia
Sportswear Company
First
Quarter
Second
Quarter
Third
Quarter
Fourth
Quarter
$
525,136
247,377
$
388,745
179,584
$
745,714
345,712
$
717,450
337,675
31,770
(8,172)
83,585
84,715
Basic
Diluted
$
$
0.46
0.45
(0.12) $
(0.12)
$
1.20
1.18
1.21
1.20
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
None.
Item 9A. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
Our management has evaluated, under the supervision and with the participation of our Chief Executive Officer and
Chief Financial Officer, the effectiveness of our disclosure controls and procedures as of the end of the period covered by
this report pursuant to Rule 13a-15(b) under the Securities Exchange Act of 1934 (the "Exchange Act"). Based on that
evaluation, our chief executive officer and chief financial officer have concluded that, as of the end of the period covered
by this report, our disclosure controls and procedures were effective in ensuring that information required to be disclosed
in our Exchange Act reports is (1) recorded, processed, summarized, and reported in a timely manner and (2) accumulated
and communicated to our management, including our chief executive officer and chief financial officer, as appropriate to
allow timely decisions regarding required disclosure.
Design and Evaluation of Internal Control Over Financial Reporting
Report of Management
Our management is responsible for establishing and maintaining adequate internal control over financial reporting.
All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems
determined to be effective can provide only reasonable assurance with respect to financial statement preparation and
presentation.
74
Under the supervision and with the participation of our management, the Company assessed the effectiveness of our
internal control over financial reporting as of December 31, 2017. In making this assessment, the Company used the criteria
set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control - Integrated
Framework (2013). Based on our assessment the Company believe that, as of December 31, 2017, the Company's internal
control over financial reporting is effective based on those criteria.
We are implementing an ERP system and complementary systems that support our operations and financial reporting.
This implementation is occurring in phases globally over several years, and has been executed in the majority of our
operations to date. Each implementation phase involves changes to the processes that constitute our internal control over
financial reporting. We are taking steps to monitor and maintain appropriate internal control over financial reporting and
will continue to evaluate these controls for effectiveness.
There were no other changes in our internal control over financial reporting that occurred during the quarter ended
December 31, 2017 that have materially affected, or are reasonably likely to materially affect, our internal control over
financial reporting.
Our independent auditors have issued an audit report on the effectiveness of our internal control over financial reporting
as of December 31, 2017, which is included herein.
75
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Shareholders
Columbia Sportswear Company
Portland, Oregon
Opinion on Internal Control over Financial Reporting
We have audited the internal control over financial reporting of Columbia Sportswear Company and subsidiaries
(the “Company”) as of December 31, 2017, based on criteria established in Internal Control - Integrated Framework (2013)
issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the Company
maintained, in all material respects, effective internal control over financial reporting as of December 31, 2017, based on
criteria established in Internal Control - Integrated Framework (2013) issued by COSO.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United
States) (PCAOB), the consolidated financial statements as of and for the year ended December 31, 2017, of the Company
and our report dated February 22, 2018, expressed an unqualified opinion on those financial statements.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and
for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Report of
Management. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based
on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect
to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities
and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was
maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting,
assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal
control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances.
We believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies
and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the
transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded
as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and
that receipts and expenditures of the company are being made only in accordance with authorizations of management and
directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.
Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ DELOITTE & TOUCHE LLP
Portland, Oregon
February 22, 2018
76
Item 9B. OTHER INFORMATION
None.
77
PART III
Item 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
The sections of our 2018 Proxy Statement entitled "Election of Directors," "Corporate Governance - Code of Business
Conduct and Ethics," "Corporate Governance - Board Committees," "Corporate Governance - Director Nomination Policy,"
and "Section 16(a) Beneficial Ownership Reporting Compliance" are incorporated herein by reference.
See Item 4A of this Annual Report on Form 10-K for information regarding our executive officers.
Item 11. EXECUTIVE COMPENSATION
The sections of our 2018 Proxy Statement entitled "Executive Compensation," "Director Compensation," "Corporate
Governance - Compensation Committee Interlocks and Insider Participation" and "Compensation Committee Report" are
incorporated herein by reference.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
STOCKHOLDER MATTERS
The sections of our 2018 Proxy Statement entitled "Security Ownership of Certain Beneficial Owners and
Management" and "Equity Compensation Plan Information" are incorporated herein by reference.
Item 13. CERTAIN RELATIONSHIPS, RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE
The sections of our 2018 Proxy Statement entitled "Corporate Governance - Certain Relationships and Related Person
Transactions," "Corporate Governance - Related Person Transactions Approval Process," and "Corporate Governance -
Independence" are incorporated herein by reference.
Item 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
The sections of our 2018 Proxy Statement entitled "Ratification of Selection of Independent Registered Public
Accounting Firm - Principal Accountant Fees and Services" and "Pre-Approval Policy" are incorporated herein by reference.
78
PART IV
Item 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a)(1) and (a)(2) Financial Statements. The Financial Statements of Columbia and Supplementary Data filed as part
of this Annual Report on Form 10-K are on pages 42 to 74 of this Annual Report. The financial statement schedule required
to be filed by Item 8 and paragraph (b) of this Item 15 is included below.
(a)(3) See Exhibit Index below for a description of the documents that are filed as Exhibits to this Annual Report on
Form 10-K or incorporated herein by reference.
Schedule II
Valuation and Qualifying Accounts
(in thousands)
Description
Year Ended December 31, 2017:
Balance at
Beginning
of Period
Charged to
Costs and
Expenses
Deductions
(a)
Other
(b)
Balance at
End of
Period
Allowance for doubtful accounts
Allowance for sales returns and miscellaneous claims
Year Ended December 31, 2016:
Allowance for doubtful accounts
Allowance for sales returns and miscellaneous claims
Year Ended December 31, 2015:
Allowance for doubtful accounts
Allowance for sales returns and miscellaneous claims
$
$
$
8,556
39,768
9,928
40,510
8,943
27,379
$
$
$
3,296
80,116
$ (3,174) $
(75,066)
365
1,488
$ 9,043
46,306
2,037
49,822
$ (3,406) $
(50,548)
(3) $ 8,556
39,768
(16)
2,788
54,017
$ (1,239) $
(40,022)
(564) $ 9,928
40,510
(864)
—————
(a) Charges to the accounts included in this column are for the purposes for which the reserves were created.
(b) Amounts included in this column primarily relate to foreign currency translation.
79
EXHIBIT INDEX
In reviewing the agreements included as exhibits to this Annual Report on Form 10-K, please remember they are
included to provide you with information regarding their terms and are not intended to provide any other factual or
disclosure information about Columbia or the other parties to the agreements. The agreements may contain representations
and warranties by each of the parties to the applicable agreement. These representations and warranties have been made
solely for the benefit of the other party or parties to the applicable agreement and:
•
•
•
•
should not in all instances be treated as categorical statements of fact, but rather as a means of allocating the
risk to one of the parties if those statements prove to be inaccurate;
may have been qualified by disclosures that were made to the other party or parties in connection with the
negotiation of the applicable agreement, which disclosures are not necessarily reflected in the agreement;
may apply standards of materiality in a manner that is different from what may be viewed as material to you
or other investors; and
were made only as of the date of the applicable agreement or other date or dates that may be specified in the
agreement and are subject to more recent developments.
Accordingly, these representations and warranties may not describe the actual state of affairs as of the date they were
made or at any other time. Additional information about Columbia may be found elsewhere in this Annual Report on Form
10-K and Columbia's other public filings, which are available without charge through the SEC's website at http://
www.sec.gov.
Exhibit No.
Exhibit Name
3.1
3.2
3.3
3.4
3.5
3.6
4.1
+ 10.1
† 10.1(a)
Third Restated Articles of Incorporation (incorporated by reference to exhibit 3.1 to the Company's
Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2000) (File No. 000-23939)
Amendment to Third Restated Articles of Incorporation (incorporated by reference to exhibit 3.1 to the
Company's Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2002) (File No.
0-23939)
2000 Restated Bylaws, as amended (incorporated by reference to exhibit 3.2 to the Company's
Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2011) (File No. 000-23939)
Amendment to 2000 Restated Bylaws of Columbia Sportswear Company, as amended, effective
October 24, 2014 (incorporated by reference to exhibit 3.2 to the Company's Form 8-K filed on October
30, 2014) (File No. 0-23939)
Amendment to 2000 Restated Bylaws of Columbia Sportswear Company, as amended, effective March
19, 2015 (incorporated by reference to exhibit 3.2 to the Company's Form 8-K filed on March 23, 2015)
File No. 000-23939)
Amendment to 2000 Restated Bylaws of Columbia Sportswear Company, as amended, effective July
24, 2015 (incorporated by reference to exhibit 3.2 to the Company's Form 8-K filed on July 29, 2015)
File No. 000-23939)
See Article II of Exhibit 3.1, as amended by Exhibit 3.2, and Article I of Exhibit 3.3
Columbia Sportswear Company 1997 Stock Incentive Plan, as amended (incorporated by reference to
exhibit 10.2 to the Company's Quarterly Report on Form 10-Q for the quarterly period ended June 30,
2017) (File No. 000-23939)
Subscription and Shareholders' Agreement, dated August 6, 2012, by and among CSMM Hong Kong
Limited, SCCH Limited, Columbia Sportswear Company and Swire Resources Limited (incorporated
by reference to exhibit 10.1 of the Company's Quarterly Report on Form 10-Q for the quarterly period
ended September 30, 2012) (File No. 000-23939)
10.1(b)
Share purchase agreement, dated April 28, 2014, by and among Columbia Sportswear Company, prAna
Living, LLC, the Shareholders of prAna Living, LLC and Steelpoint Capital Advisors, LLC as the
shareholder representative (incorporated by reference to exhibit 10.1 to the Company's Quarterly Report
on Form 10-Q for the quarterly period ended June 30, 2014) (File No. 000-23939)
+ 10.1(c)
Employment Offer Letter from Columbia Sportswear Company to Franco Fogliato (incorporated by
reference to exhibit 10.1 to the Company's Quarterly Report on Form 10-Q for the quarterly period
ended September 30, 2017) (File No. 000-23939)
80
Exhibit No.
Exhibit Name
+ 10.2
+ 10.2(a)
+ 10.2(b)
+ 10.2(c)
+ 10.2(d)
+ 10.2(e)
+ 10.2(f)
+ 10.2(g)
+ 10.2(h)
+ 10.2(i)
+ 10.2(j)
+ 10.2(k)
Form of Nonstatutory Stock Option Agreement for stock options granted prior to July 20, 2006
(incorporated by reference to exhibit 10.3 to the Company's Registration Statement Filed on Form S-1
filed on December 24, 1997) (File No. 333-43199)
Form of Nonstatutory Stock Option Agreement for stock options granted on or after July 20, 2006 and
before January 23, 2009 (incorporated by reference to exhibit 99.1 to the Company's Form 8-K filed on
July 26, 2006)
Form of Nonstatutory Stock Option Agreement for stock options granted on or after January 23, 2009
(incorporated by reference to exhibit 10.2 (e) to the Company's Annual Report on Form 10-K for the
year ended December 31, 2008) (File No. 000-23939)
Form of Executive Stock Option Agreement (incorporated by reference to exhibit 10.3 (a) to the
Company's Annual Report on Form 10-K for the year ended December 31, 2000) (File No. 000-23939)
Form of Restricted Stock Unit Award Agreement for awards granted on or after January 23, 2009
(incorporated by reference to exhibit 10.2(f) to the Company's Annual Report on Form 10-K for the
year ended December 31, 2008) (File No. 000-23939)
Form of Performance-based Restricted Stock Unit Award Agreement for performance-based restricted
stock units granted on or after March 29, 2010 (incorporated by reference to exhibit 10.1 to the
Company's Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2011) (File No.
000-23939)
Columbia Sportswear Company 401(k) Excess Plan (incorporated by reference to exhibit 10.2 to the
Company's Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2009) (File No.
000-23939)
Form of Restricted Stock Unit Award Agreement for restricted stock units granted on or after June 7,
2012 (incorporated by reference to exhibit 10.2 to the Company's Quarterly Report on Form 10-Q for
the quarterly period ended June 30, 2012) (File No. 000-23939)
Form of Nonstatutory Stock Option Agreement for stock options granted on or after June 7, 2012
(incorporated by reference to exhibit 10.3 to the Company's Quarterly Report on Form 10-Q for the
quarterly period ended June 30, 2012) (File No. 000-23939)
Form of Performance-based Restricted Stock Unit Award Agreement for performance-based restricted
stock units granted on or after December 17, 2013 (incorporated by reference to exhibit 10.2(l) to the
Company's Annual Report on Form 10-K for the year ended December 31, 2013) (File No. 000-23939)
Form of Long-Term Incentive Cash Award Agreement for cash awards granted on or after December 17,
2013 (incorporated by reference to exhibit 10.2(m) to the Company's Annual Report on Form 10-K for
the year ended December 31, 2013) (File No. 000-23939)
Long-Term Cash Incentive Plan of Columbia Sportswear Company, effective as of March 1, 2015
(incorporated by reference to exhibit 10.2(k) to the Company's Annual Report on Form 10-K for the
year ended December 31, 2016) (File No. 000-23939)
+ 10.2(l)
Form of Restricted Stock Unit Award Agreement for restricted stock units granted on or after July 20,
2017
+ 10.2(m)
Form of Nonstatutory Stock Option Agreement for stock options granted on or after July 20, 2017
+ 10.4
Columbia Sportswear Company Change in Control Severance Plan (incorporated by reference to exhibit
10.1 to the Company's Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2013)
(File No. 000-23939)
10.5
10.5(a)
10.5(b)
10.5(c)
Credit Agreement between the Company and Wells Fargo Bank National Association dated June 15,
2010 (incorporated by reference to the Company's Form 8-K filed on June 18, 2010) (File No. 0-23939)
First Amendment to Credit Agreement between the Company and Wells Fargo Bank National
Association dated December 16, 2010 (incorporated by reference to the Company's Form 8-K filed on
December 17, 2010) (File No. 0-23939)
Second Amendment to Credit Agreement between the Company and Wells Fargo Bank National
Association dated September 20, 2011 (incorporated by reference to the Company's Form 8-K filed on
September 21, 2011) (File No. 0-23939)
Third amendment to Credit Agreement between the Company and Wells Fargo Bank National
Association dated June 18, 2013 (incorporated by reference to the Company's Form 8-K filed on June
19, 2013) (File No. 0-23939)
81
Exhibit No.
Exhibit Name
10.5(d)
10.5(e)
10.5(f)
10.5(g)
10.5(h)
10.5(i)
* 10.9
+ 10.10
+ 10.11
+ 10.12
21.1
23.1
31.1
31.2
32.1
32.2
Fourth amendment to Credit Agreement between the Company and Wells Fargo Bank National
Association dated September 27, 2013 (incorporated by reference to the Company's Form 8-K filed on
September 30, 2013) (File No. 0-23939)
Fifth amendment to Credit Agreement dated September 26, 2014 among Columbia Sportswear Company,
Wells Fargo Bank, National Association, as the administrator for the lenders and as a lender, and Bank of
America, N.A., as a lender (incorporated by reference to the Company's Form 8-K filed on September 30,
2014) (File No. 0-23939)
Sixth amendment to Credit Agreement dated August 31, 2015 among Columbia Sportswear Company,
Wells Fargo Bank, National Association, as the administrator for the lenders and as a lender, and Bank
of America, N.A., as a lender (incorporated by reference to the Company's Form 8-K filed on
September 2, 2015) (File No. 0-23939)
Seventh amendment to Credit Agreement dated September 29, 2015 among Columbia Sportswear
Company, Wells Fargo Bank, National Association, as the administrator for the lenders and as a lender,
and Bank of America, N.A., as a lender (incorporated by reference to the Company's Form 8-K filed on
October 2, 2015) (File No. 0-23939)
Eighth amendment to Credit Agreement effective as of June 30, 2016 among Columbia Sportswear
Company, Wells Fargo Bank, National Association, as the administrator for the lenders and as a lender,
and Bank of America, N.A., as a lender (incorporated by reference to the Company's Form 8-K filed on
August 2, 2016) (File No. 0-23939)
Ninth amendment to Credit Agreement dated May 26, 2017 among Columbia Sportswear
Company,Wells Fargo Bank, National Association, as the administrator for the lenders and as a lender,
and Bank of America, N.A., as a lender (incorporated by reference to the Company's Form 8-K filed on
May 30, 2017) (File No. 0-23939)
Form of Indemnity Agreement for Directors (incorporated by reference to exhibit 10.17 to the
Company's Registration Statement Filed on Form S-1 filed on December 24, 1997) (File No.
333-43199)
1999 Employee Stock Purchase Plan, as amended (incorporated by reference to exhibit 10.21 to the
Company's Annual Report on Form 10-K for the year ended December 31, 2001) (File No. 000-23939)
Executive Incentive Compensation Plan, as amended (incorporated by reference to exhibit 10.1 to the
Company's Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2013) (File No.
000-23939)
Form of Indemnity Agreement for Directors and Executive Officers (incorporated by reference to
exhibit 10.23 to the Company's Annual Report on Form 10-K for the year ended December 31, 2004)
Subsidiaries of the Company
Consent of Deloitte & Touche LLP
Rule 13a-14(a) Certification of Timothy P. Boyle, President and Chief Executive Officer
Rule 13a-14(a) Certification of Jim A. Swanson, Senior Vice President and Chief Financial Officer
Section 1350 Certification of Timothy P. Boyle, President and Chief Executive Officer
Section 1350 Certification of Jim A. Swanson, Senior Vice President and Chief Financial Officer
101.INS XBRL Instance Document
101.SCH XBRL Taxonomy Extension Schema Document
101.CAL XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF XBRL Taxonomy Extension Definition Linkbase Document
101.LAB XBRL Taxonomy Extension Label Linkbase Document
101.PRE XBRL Taxonomy Extension Presentation Linkbase Document
——————
+ Management Contract or Compensatory Plan
†
Confidential treatment has been granted for certain portions omitted from this exhibit pursuant to Rule 24b-2 under
the Securities Exchange Act of 1934, as amended. Confidential portions of this exhibit have been separately filed
with the Securities and Exchange Commission.
Incorporated by reference to the Company's Registration Statement on Form S-1 (Reg. No. 333-43199).
*
82
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly
caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
SIGNATURES
COLUMBIA SPORTSWEAR COMPANY
By:
/s/ JIM A. SWANSON
Jim A. Swanson
Senior Vice President, Chief Financial Officer
Date: February 22, 2018
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following
persons on behalf of the registrant and in the capacities and on the date indicated.
/s/
/s/
/s/
/s/
/s/
/s/
/s/
/s/
/s/
/s/
/s/
Signatures
TIMOTHY P. BOYLE
Timothy P. Boyle
JIM A. SWANSON
Jim A. Swanson
GERTRUDE BOYLE
Gertrude Boyle
SARAH A. BANY
Sarah A. Bany
EDWARD S. GEORGE
Edward S. George
MURREY R. ALBERS
Murrey R. Albers
WALTER T. KLENZ
Walter T. Klenz
STEPHEN E. BABSON
Stephen E. Babson
ANDY D. BRYANT
Andy D. Bryant
RONALD E. NELSON
Ronald E. Nelson
MALIA H. WASSON
Malia H. Wasson
Date: February 22, 2018
Title
President, Chief Executive Officer and Director
(Principal Executive Officer)
Senior Vice President, Chief Financial Officer (Duly
Authorized Officer and Principal Financial and
Accounting Officer)
Chairman of the Board of Directors
Director
Director
Director
Director
Director
Director
Director
Director
83