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Table of Contents Letter to Shareholders Form 10-K Part I Item 1. Business. Item 1A. Risk Factors Item 1B. Unresolved Staff Comments Item 2. Properties Item 3. Legal Proceedings Item 4. [RESERVED] Item 4A. Executive Officers and Key Employees of the Registrant Part II Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Item 6. Selected Financial Data Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations Item 7A. Quantitative and Qualitative Disclosures about Market Risk Item 8. Financial Statements and Supplementary Data Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure Item 9A. Controls and Procedures Item 9B. Other Information Part III Item 10. Directors, Executive Officers and Corporate Governance Item 11. Executive Compensation Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters Item 13. Certain Relationships and Related Transactions, and Director Independence Item 14. Principal Accounting Fees and Services Part IV Item 15. Exhibits and Financial Statement Schedules Signatures 2010 ANNUAL REPORT TO SHAREHOLDERS Dear Fellow Shareholders: WE'RE GETTING WARMER. In 2010, Columbia Sportswear Company's net sales grew 19% to a new record of nearly $1.5 billion. Wholesale and consumer demand rebounded sharply in the second half of the year and consumers responded enthusiastically to our innovative technologies and enhanced designs. I could focus this letter on the double-digit growth we generated in 2010 in each region: U.S. net sales up 20% to $881 million; LAAP (Latin America/Asia Pacific) solidifying its position as the company's second-largest region, growing net sales by 30 percent to $263 million; our EMEA (Europe, Middle East, Africa) region producing a 13 percent increase to $222 million, returning to growth after several years of decline; and Canada contributing 10 percent growth, to $117 million. Or I could focus on the double-digit growth we generated in 2010 in every product category: Outerwear net sales up 16 percent to $561 million, Sportswear up 18 percent to $556 million, Footwear growing 26 percent to $270 million, and Accessories & Equipment surging 30 percent to $97 million. However, the real fabric of our story is found in our four major brands, each coming off a year of solid performance in 2010, and each with potential for global expansion. Within our portfolio, the Columbia brand is positioned to address the broadest consumer population. We've reconnected with Columbia's rich heritage of innovation, constructing a strategic platform of technologies in apparel, footwear, equipment and accessories that has re-energized brand perceptions among customers and consumers alike. As a result, 2010 Columbia brand sales grew $190 million, or 18 percent, to $1.26 billion, fueled by similar growth rates in apparel and footwear. Columbia's renewed focus on innovation is also re-energizing the entire outdoor market, dislodging it from a pattern of reliance on outdated, commoditized solutions. Over the past 20 years, consumers have adopted a multitude of technologies that represented new solutions to age-old problems. Why, Columbia asked, should consumers have to rely on 20-year-old solutions to stay warm, dry, cool and protected in the outdoors? We have committed ourselves to finding new and better solutions that, if successful, may obsolete every piece of outdoor clothing in consumers' closets today. THE HIGHLIGHT OF 2010 was the global launch of our patent-pending Omni-Heat suite of warmth technologies - a better solution to keeping consumers warm. Supported by the largest and most comprehensive integrated global marketing campaign in our history, Omni-Heat produced outstanding sell-throughs for our wholesale customers in every region. During its first season in the market, Omni-Heat styles dominated the best-sellers list in our direct-to-consumer channels in every region of the world. For Fall 2011, we are expanding our Omni-Heat offering, adding a Baselayer assortment featuring Omni-Heat Reflective technology, and expanding Omni-Heat Electric beyond footwear - where we launched the technology in 2009 - into a tightly focused assortment of Columbia jackets and gloves. With consumers now more aware of Columbia as an innovator, we have an opportunity to better acquaint them with our head-to-toe spectrum of performance technologies, enhanced styling and engaging brand marketing. If the Columbia brand is our flagship, Sorel is proving to be our diamond in the rough. Since we purchased this brand ten years ago, we had kept it focused as a rugged, men's, bone-cold winter, wilderness brand. In 2009, we refocused Sorel on young, fashion-forward female consumers, while staying true to Sorel's performance heritage. This provocative change in position, reinforced with equally provocative consumer marketing, has captured the imagination of female consumers around the world and earned the support of leading premium footwear retailers in every region. Retailers such as The Tannery, Gorsuch, Holt Renfrew, Browns and Ron White in North America; Collette of Paris, Harrods of London and Jades in Germany; The Galleria and Lane Crawford in Korea; Isetan and Takeshimaya in Japan, to name just a few, have embraced the new Sorel within the past 12-18 months. And in August, 2010 we launched www.sorel.com to serve growing ecommerce demand for the brand in the U.S. Sorel brand sales grew 48 percent in 2010 to $90 million on their way to what we believe is much greater potential. To help us pursue that potential, we have begun investing in a separate sales and marketing organization focused exclusively on Sorel's global growth opportunities. Those opportunities include further expansion with leading fashion footwear retailers in the critical Winter season, as well as deciphering the code to translate Sorel's classic elements into Spring, Summer and Fall products for a year-round presence on retail shelves. Our Mountain Hardwear brand is positioned to serve the high-performance needs of alpinists, mountaineers and all who aspire to find and test the edges of their human potential. During the past year, we set in motion a series of strategic changes designed to prepare Mountain Hardwear to test the edges of its global potential. We installed new executive leadership with extensive global experience growing outdoor brands. We created an in-house product design and development organization, implemented disciplined seasonal go-to-market processes and fortified planning and inventory management to improve delivery performance to wholesale customers. We also began to move beyond outdated licensed technologies, introducing Dry.Q, an innovative waterproof/breathable fabric system with superior air-permeability compared to other traditional waterproof/breathable systems. Mountain Hardwear sales totaled $122 million in 2010, up 21 percent over 2009. Although Mountain Hardwear products are sold in 58 countries, more than 70 percent of 2010 sales were generated in North America. We will continue to maintain a very disciplined wholesale distribution strategy for the brand, aggressively presenting new and existing specialty customers with Mountain Hardwear's latest innovations. In addition, in September 2010, we launched www.mountainhardwear.com to fulfill the growing demand for Mountain Hardwear products in the U.S. and to educate and inspire consumers around the world. Montrail is focused solely on running. Our patent-pending FluidPost midsole cushioning and stability system, together with improved styling, is earning this brand increasing accolades from the running community. Montrail sales grew 5 percent in 2010, to $9 million, and the brand is poised to increase penetration in leading specialty retailers that cater to the unique performance needs of trail and ultra-distance runners. To educate more consumers and address unmet U.S. consumer demand, we launched www.montrail.com in March 2011. The site promotes a strong online running community with information and news about Montrail athletes, upcoming events and exciting new Montrail products and technologies. d www.outdry.com i Investing to fuel and support profitable growth across our brand portfolio. In September 2010, we acquired Italy-based OutDry Technologies S.r.l., securing the intellectual property rights behind OutDry's proprietary construction methods for producing waterproof, breathable footwear and gloves. This acquisition reinforces our strategy to build a portfolio of innovative technologies that deliver clear consumer benefits. Beginning in Fall 2011, a select assortment of footwear and gloves within our Columbia, Mountain Hardwear and Montrail brands will feature OutDry technology. As we have been expanding our intellectual property portfolio and positioning each of our brands for growth, we have also made strategic operational investments to support that growth: Expanded our retail store base in North America and Europe, Launched e-commerce sites for each of our four primary brands, Increased our annual marketing investments, Transitioned to predominantly in-house sales teams in North America and Europe, Attracted experienced industry talent across all operational areas of the business, and Invested in IT infrastructure and enterprise data management systems in preparation for a multi-year implementation of a new enterprise resource planning (ERP) platform. Between 2007 and 2010, while our revenues increased $128 million, or 9 percent, the above investments added approximately $150 million, or 39 percent, to our annual operating expenses, with $90 million of that increase occurring in 2010 alone. As a result, 2010 operating margin was 7 percent, virtually equal to 2009 despite a 19 percent increase in sales, and well below the mid- to high-teen percentage operating margins we generated from 2001 to 2007. We can, and must, do better. This management team is committed to achieving and sustaining operating margins befitting our strong portfolio of global outdoor brands. We intend to accomplish this through continuous innovation and compelling marketing to drive demand, together with operational excellence and disciplined expense management. Each of these ingredients takes on even more significance as we adapt to the new reality of inflationary manufacturing and transportation costs, reversing the deflationary environment that this industry and its consumers have grown comfortably accustomed to over the past 20 years. Despite these uncertainties, we remain committed to our core strategies and are staying focused on what we can control. Strong brands that are synonymous with innovation within their industry tend to outperform over time. We believe our brands and our innovations are only now beginning to achieve critical mass in the form of consumer awareness and adoption. Consumers are beginning to feel the warmth. And they like it. We believe our competitors are beginning to feel the heat. And we like that. 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 described in the Company's Annual Report on Form 10-K for the year ended December 31, 2010, under the heading \"Risk Factors.\" 2010 Annual Report to Shareholders 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, 2010 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 93-0498284 (State or other jurisdiction of incorporation or organization) (IRS Employer Identification Number) 14375 NW Science Park Drive Portland, Oregon 97229 (Address of principal executive offices) (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 Name of each exchange on which registered Common Stock 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. Yes No ' 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). Yes ' No ' 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, or a smaller reporting company. See the definitions of \"large accelerated filer,\" \"accelerated filer\" and \"smaller reporting 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 ' 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, 2010, the last business day of the registrant's most recently completed second fiscal quarter, was $540,147,000 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 25, 2011 was 33,827,350. Part III is incorporated by reference from the registrant's proxy statement for its 2011 annual meeting of shareholders to be filed with the Commission within 120 days of December 31, 2010. COLUMBIA SPORTSWEAR COMPANY DECEMBER 31, 2010 TABLE OF CONTENTS Item Page PART I Item 1. Item 1A. Item 1B. Item 2. Item 3. Item 4. Item 4A. Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Unresolved Staff Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . [RESERVED] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Executive Officers and Key Employees of the Registrant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 10 20 20 21 21 21 PART II Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Item 6. Selected Financial Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations . . . . Item 7A. Quantitative and Qualitative Disclosures about Market Risk . . . . . . . . . . . . . . . . . . . . . . . . . . . . Item 8. Financial Statements and Supplementary Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure . . . . Item 9A. Controls and Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Item 9B. Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 26 27 41 41 73 73 75 PART III Item 10. Item 11. Item 12. Item 13. Item 14. Directors, Executive Officers and Corporate Governance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Certain Relationships and Related Transactions, and Director Independence . . . . . . . . . . . . . . . . Principal Accountant Fees and Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76 76 76 77 77 PART IV Item 15. Exhibits and Financial Statement Schedule . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78 79 PART I Item 1. BUSINESS General 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 the design, sourcing, marketing and distribution of active outdoor apparel, footwear, accessories and equipment. Unless the context indicates otherwise, the terms \"we\Acc 230 - Final Project Template Instructions 1 2 3 Use this template to complete the "Financial Analysis" assignment located on Page 708 of Chapter 12 of the "Financial Accounting" textbook by Kemp & Waybright. You may also create your own separate documents to complete this assignment. Please be sure to keep a copy for your records. A spreadsheet should be used for each requirement and is shown as worksheet tabs. Certain information is given. Please calculate trends and ratios where indicated. Acc 230 - Final Project Template Requirement #1 Columbia Sportswear Financial Analysis (Instructions: Please calculate the percentage trends in the table below): Consolidated Results of Operations (in thousands) Net Sales Cost of Sales Gross Profit Selling, general and administrative expenses Impairment of acquired intangible assets Net licensing income Income from opeartions Interest income, net Income before income tax Income tax expense Net income 2010 % 2009 % 100% $1,244,023 719,945 524,078 100% $1,317,835 750,024 567,811 534,068 444,715 430,350 7,991 103,327 1,564 104,891 (27,854) $77,037 8,399 87,762 2,088 89,850 (22,829) $67,021 24,742 5,987 118,706 7,537 126,243 (31,196) $95,047 Provide analytical comments here: Consolidated Statements of Financial Position (Instructions: Please calculate net changes in the table below): Change (in thousands) Current Assets: Cash and cash equivalents Short-term investments Accounts receivable, net Inventories Deferred income taxes Prepaid expenses and other current assets Total current assets Property, plan and equipment (net) Intangible assets Goodwill Other non-current assets Total assets Current Liabilities: Accounts payable Accrued liabilities Income taxes payable Deferred income taxes Total current liabilities Income taxes payable Deferred income taxes Other long-term liabilities Total liabilities Stockholder's Equity: Preferred stock Common stock Retained earnings Accumulated other comprehensive income Total shareholders' equity Total liabilities and shareholders equity Provide analytical comments here: 2008 $1,483,524 854,120 629,404 2010 $234,257 68,812 300,181 314,298 45,091 28,241 2009 $ % $386,664 22,759 226,548 222,161 31,550 32,030 990,880 921,712 221,813 235,440 40,423 27,127 14,470 12,659 27,168 15,945 $1,294,754 $1,212,883 - $130,626 102,810 16,037 2,153 251,626 19,698 21,456 292,780 $102,494 67,312 6,884 2,597 179,287 19,830 1,494 15,044 215,655 5,052 950,207 836 952,948 46,715 1,001,974 43,444 997,228 - $1,294,754 $1,212,883 - - % 100% Acc 230 - Final Project Template Requirement #2 Please answer the questions asked in the textbook for requirement #2 in the lines below: Acc 230 - Final Project Template Requirement #3 Please compute the ratios for requirement #3 here and show your calculations. Answer the questions asked in the assignment: Acc 230 - Final Project Template Requirement #4 Please compute the ratios for requirement #4 here and show your calculations. Answer the questions asked in the assignment