Form 10-Q

Large accelerated filer

Accelerated filer

Non-accelerated filer

¨ (Do not check if a smaller reporting company)

Smaller reporting company

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2011

¨	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 Northwest Science Park Drive Portland, Oregon		97229
(Address of principal executive offices)		(Zip Code)

(503) 985-4000

(Registrant’s telephone number, including area code)

Indicate by check mark whether 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 x 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 shorter period that the registrant was required to submit and post such files). Yes x No ¨

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.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x

The number of shares of Common Stock outstanding on July 22, 2011 was 34,002,251.

COLUMBIA SPORTSWEAR COMPANY

JUNE 30, 2011

INDEX TO FORM 10-Q


	PAGE NO.
PART I. FINANCIAL INFORMATION

Item 1 – Financial Statements – Columbia Sportswear Company (Unaudited)

Condensed Consolidated Balance Sheets		2

Condensed Consolidated Statements of Operations		3

Condensed Consolidated Statements of Cash Flows		4

Notes to Condensed Consolidated Financial Statements		5

Item 2 – Management’s Discussion and Analysis of Financial Condition and Results of Operations		14

Item 3 – Quantitative and Qualitative Disclosures About Market Risk		23

Item 4 – Controls and Procedures		23

PART II. OTHER INFORMATION

Item 1 – Legal Proceedings		24

Item 1A – Risk Factors		24

Item 2 – Unregistered Sales of Equity Securities and Use of Proceeds		33

Item 6 – Exhibits		33

Signature		34

PART I. FINANCIAL INFORMATION

Item 1 – FINANCIAL STATEMENTS

COLUMBIA SPORTSWEAR COMPANY

C ONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands)

(Unaudited)


	June 30, 2011		December 31, 2010		June 30, 2010
ASSETS
Current Assets:
Cash and cash equivalents	$	207,429	$	234,257	$	346,643
Short-term investments		90,842		68,812		51,686
Accounts receivable, net of allowance of $6,718, $7,098 and $6,549, respectively		174,822		300,181		145,463
Inventories, net (Note 3)		422,004		314,298		310,520
Deferred income taxes		45,069		45,091		30,801
Prepaid expenses and other current assets		60,242		28,241		47,628

Total current assets		1,000,408		990,880		932,741
Property, plant and equipment, at cost, net of accumulated depreciation of $264,615, $250,999 and $233,151, respectively		230,363		221,813		224,865
Intangible assets, net (Note 4)		39,721		40,423		27,072
Goodwill		14,438		14,470		12,659
Other non-current assets		27,921		27,168		14,670

Total assets	$	1,312,851	$	1,294,754	$	1,212,007

LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities:
Accounts payable	$	159,292	$	130,626	$	120,134
Accrued liabilities (Note 5)		81,624		102,810		63,916
Income taxes payable		9,541		16,037		6,181
Deferred income taxes		2,161		2,153		2,414

Total current liabilities		252,618		251,626		192,645
Income taxes payable		19,187		19,698		21,344
Other long-term liabilities		25,088		21,456		17,182

Total liabilities		296,893		292,780		231,171
Commitments and contingencies (Note 11)
Shareholders’ Equity:
Preferred stock; 10,000 shares authorized; none issued and outstanding		0		0		0
Common stock (no par value); 125,000 shares authorized; 34,001, 33,683 and 33,823 issued and outstanding, respectively (Note 8)		17,801		5,052		6,712
Retained earnings		935,182		950,207		937,461
Accumulated other comprehensive income (Note 7)		62,975		46,715		36,663

Total shareholders’ equity		1,015,958		1,001,974		980,836

Total liabilities and shareholders’ equity	$	1,312,851	$	1,294,754	$	1,212,007

See accompanying notes to condensed consolidated financial statements.

COLUMBIA SPORTSWEAR COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share amounts)

(Unaudited)


	Three Months Ended June 30,						Six Months Ended June 30,
	2011			2010			2011			2010
Net sales	$	268,030		$	221,831		$	601,116		$	522,237
Cost of sales		155,617			124,909			339,167			298,011

Gross profit		112,413			96,922			261,949			224,226
Selling, general and administrative expenses		134,512			113,458			268,659			228,997
Net licensing income		3,459			1,819			5,990			2,544

Loss from operations		(18,640	)		(14,717	)		(720	)		(2,227	)
Interest income, net		461			392			784			926

Income (loss) before income tax		(18,179	)		(14,325	)		64			(1,301	)
Income tax benefit (expense)		4,621			3,721			(852	)		(75	)

Net loss	$	(13,558	)	$	(10,604	)	$	(788	)	$	(1,376	)


Loss per share (Note 8):
Basic	$	(0.40	)	$	(0.31	)	$	(0.02	)	$	(0.04	)
Diluted		(0.40	)		(0.31	)		(0.02	)		(0.04	)

Cash dividends per share	$	0.22		$	0.18		$	0.42		$	0.36

Weighted average shares outstanding (Note 8):
Basic		33,956			33,800			33,878			33,767
Diluted		33,956			33,800			33,878			33,767

See accompanying notes to condensed consolidated financial statements.

COLUMBIA SPORTSWEAR COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)


	Six Months Ended June 30,
	2011			2010
Cash flows from operating activities:
Net loss	$	(788	)	$	(1,376	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization		21,063			18,490
Loss on disposal or impairment of property, plant, and equipment		149			258
Deferred income taxes		3,961			553
Stock-based compensation		3,804			3,272
Excess tax benefit from employee stock plans		(1,780	)		(419	)
Changes in operating assets and liabilities:
Accounts receivable		129,918			77,931
Inventories		(102,427	)		(93,208	)
Prepaid expenses and other current assets		(31,290	)		(16,712	)
Other assets		(926	)		(198	)
Accounts payable		24,702			18,708
Accrued liabilities		(28,895	)		6,750
Income taxes payable		(7,395	)		293
Other liabilities		1,873			2,122

Net cash provided by operating activities		11,969			16,464


Cash flows from investing activities:
Purchases of short-term investments		(45,816	)		(30,116	)
Sales of short-term investments		23,997			1,083
Capital expenditures		(22,639	)		(14,362	)
Proceeds from sale of property, plant, and equipment		159			0

Net cash used in investing activities		(44,299	)		(43,395	)


Cash flows from financing activities:
Proceeds from credit facilities		17,142			11,304
Repayments on credit facilities		(17,142	)		(11,304	)
Proceeds from issuance of common stock under employee stock plans		9,764			4,942
Tax payments related to restricted stock unit issuances		(2,851	)		(781	)
Excess tax benefit from employee stock plans		1,780			419
Repurchase of common stock		0			(3,838	)
Cash dividends paid		(14,237	)		(12,151	)

Net cash used in financing activities		(5,544	)		(11,409	)


Net effect of exchange rate changes on cash		11,046			(1,681	)


Net decrease in cash and cash equivalents		(26,828	)		(40,021	)
Cash and cash equivalents, beginning of period		234,257			386,664

Cash and cash equivalents, end of period	$	207,429		$	346,643


Supplemental disclosures of cash flow information:
Cash paid during the period for interest	$	70		$	20
Cash paid during the period for income taxes		25,274			7,516

Supplemental disclosures of non-cash investing and financing activities:
Capital expenditures incurred but not yet paid	$	1,802		$	2,119

See accompanying notes to condensed consolidated financial statements.

COLUMBIA SPORTSWEAR COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 1 – BASIS OF PRESENTATION AND ORGANIZATION

The accompanying unaudited condensed consolidated financial statements have been prepared by the management of Columbia Sportswear Company (the “Company”) and in the opinion of management include all material adjustments, consisting only of normal recurring adjustments, necessary to present fairly the Company’s financial position as of June 30, 2011 and 2010, the results of operations for the three and six months ended June 30, 2011 and 2010 and cash flows for the six months ended June 30, 2011 and 2010. The December 31, 2010 financial information was derived from the Company’s audited financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2010. A significant part of the Company’s business is of a seasonal nature; therefore, results of operations for the three and six months ended June 30, 2011 are not necessarily indicative of results to be expected for the full year.

Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“generally accepted accounting principles”) have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission. The Company, however, believes that the disclosures contained in this report comply with the requirements of Section 13(a) of the Securities Exchange Act of 1934 for a Quarterly Report on Form 10-Q and are adequate to make the information presented not misleading. These unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2010.

Estimates and assumptions:

The preparation of financial statements in conformity with generally accepted accounting principles 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, allowance for doubtful accounts, inventory obsolescence, product warranty, long-lived and intangible assets, income taxes and stock-based compensation.

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

There have been no significant changes to the Company’s significant accounting policies as described in the Company’s Annual Report on Form 10-K for the year ended December 31, 2010.

Recent Accounting Pronouncements:

In April 2011, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2011-04, Fair Value Measurement (Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs. This ASU was issued concurrently with International Financial Reporting Standards (“IFRS”) 13 Fair Value Measurements, to provide largely identical guidance about fair value measurement and disclosure requirements. The new standards do not extend the use of fair value but, rather, provide guidance about how fair value should be applied where it already is required or permitted under IFRS or U.S. GAAP. This standard is effective prospectively for interim and annual periods beginning after December 15, 2011. The Company does not expect the adoption of this standard to have a material effect on the Company’s consolidated financial position, results of operations or cash flows.

In May 2011, the FASB issued ASU No. 2011-05, Comprehensive Income (Topic 220): Presentation of Comprehensive Income. This ASU increases the prominence of other comprehensive income in financial statements while eliminating the option in U.S. GAAP to present other comprehensive income in the statement of changes in equity. Under this ASU, an entity will have the option to present the components of net income and comprehensive income in either one or two consecutive financial statements. This ASU is effective for fiscal years, and interim periods within those years, beginning after December 15, 2011. The Company does not expect the adoption of this standard to have a material effect on the Company’s consolidated financial position, results of operations or cash flows.

COLUMBIA SPORTSWEAR COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(Unaudited)

NOTE 3 – INVENTORIES, NET

Inventories are carried at the lower of cost or market. Cost is determined using the first-in, first-out method. The Company periodically reviews its inventory for excess, close-out and slow moving items and makes provisions as necessary to properly reflect inventory value.

Inventories, net, consisted of the following (in thousands):


	June 30, 2011		December 31, 2010		June 30, 2010
Raw materials	$	2,038	$	1,096	$	1,073
Work in process		704		659		744
Finished goods		419,262		312,543		308,703

	$	422,004	$	314,298	$	310,520

NOTE 4 – INTANGIBLE ASSETS, NET

Intangible assets that are determined to have finite lives include patents and purchased technology and are amortized over their estimated useful lives. Intangible assets with indefinite useful lives include trademarks and tradenames and are not amortized but are periodically evaluated for impairment.

The following table summarizes the Company’s identifiable intangible assets balance (in thousands):


	June 30, 2011			December 31, 2010			June 30, 2010
Intangible assets subject to amortization
Gross carrying amount	$	14,198		$	14,198		$	898
Accumulated amortization		(1,898	)		(1,196	)		(698	)

Net carrying amount		12,300			13,002			200
Intangible assets not subject to amortization		27,421			27,421			26,872

Intangible assets, net	$	39,721		$	40,423		$	27,072

Annual amortization expense for intangible assets subject to amortization is estimated to be $1,402,000 per year in both 2011 and 2012, and $1,330,000 per year in 2013 through 2015.

NOTE 5 – PRODUCT WARRANTY

Some of the Company’s products carry limited warranty provisions for defects in quality and workmanship. A warranty reserve is 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. The warranty reserve is included in accrued liabilities in the Condensed Consolidated Balance Sheets. A summary of accrued warranties is as follows (in thousands):


	Three Months Ended June 30,						Six Months Ended June 30,
	2011			2010			2011			2010
Balance at beginning of period	$	9,982		$	11,977		$	10,256		$	12,112
Charged to costs and expenses		814			411			2,685			1,572
Claims settled		(1,080	)		(916	)		(3,370	)		(2,085	)
Other		61			(414	)		206			(541	)

Balance at end of period	$	9,777		$	11,058		$	9,777		$	11,058

COLUMBIA SPORTSWEAR COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(Unaudited)

NOTE 6 – STOCK-BASED COMPENSATION

1997 Stock Incentive Plan

The Company’s 1997 Stock Incentive Plan (the “Plan”) allows for grants of incentive stock options, non-statutory stock options, restricted stock awards, restricted stock units and other stock-based awards. The majority of all stock option and restricted stock unit grants outstanding under the 1997 Stock Incentive Plan were granted in the first quarter of each fiscal year.

The following table summarizes the Company’s total stock-based compensation expense (in thousands):


	Three Months Ended June 30,				Six Months Ended June 30,
	2011		2010		2011		2010
Stock options	$	885	$	859	$	1,727	$	1,652
Restricted stock units		1,106		868		2,077		1,620

Total	$	1,991	$	1,727	$	3,804	$	3,272

Stock Options

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, the 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 estimated annual dividend yield.

The following table shows the weighted average assumptions:


	Three Months Ended June 30,		Six Months Ended June 30,
	2011	2010	2011⁽¹⁾	2010
Expected term	7.27 years	6.40 years	5.13 years	4.53 years
Expected stock price volatility	29.08%	29.26%	30.75%	28.79%
Risk-free interest rate	2.24%	2.27%	1.85%	1.91%
Expected dividend yield	1.34%	1.46%	1.31%	1.64%
Weighted average grant date fair value	$19.44	$13.79	$16.12	$10.08

⁽¹⁾

During the six months ended June 30, 2011, the Company granted two stock option awards totaling 53,720 shares that vest 100% on the fifth anniversary of the grant date. Given that the Company did not have sufficient historical exercise data to provide a reasonable basis upon which to estimate the expected term for these grants, the Company utilized the simplified method in developing an estimate of the expected term of these options.

During the six months ended June 30, 2011 and 2010, the Company granted a total of 337,237 and 385,924 stock options, respectively. At June 30, 2011, unrecognized costs related to outstanding stock options totaled approximately $7,636,000, before any related tax benefit. The unrecognized costs related to stock options are amortized over the related vesting period using the straight-line attribution method. Unrecognized costs related to stock options at June 30, 2011 are expected to be recognized over a weighted average period of 2.70 years.

Restricted Stock Units

The Company estimates the fair value of service-based and performance-based restricted stock units using the Black-Scholes model. Key inputs and assumptions used to estimate the fair value of restricted stock units include the vesting period, dividend yield and closing price of the Company’s common stock on the date of grant.

The following table presents the weighted average assumptions:


	Three Months Ended June 30,		Six Months Ended June 30,
	2011	2010	2011	2010
Vesting period	3.33 years	3.10 years	3.96 years	3.74 years
Expected dividend yield	1.31%	1.49%	1.30%	1.57%
Estimated average grant date fair value per restricted stock unit	$64.06	$46.17	$59.06	$43.56

COLUMBIA SPORTSWEAR COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(Unaudited)

During the six months ended June 30, 2011 and 2010, the Company granted 138,720 and 124,344 restricted stock units, respectively. At June 30, 2011, unrecognized costs related to outstanding restricted stock units totaled approximately $10,587,000, before any related tax benefit. The unrecognized costs related to restricted stock units are amortized over the related vesting period using the straight-line attribution method. Unrecognized costs at June 30, 2011 are expected to be recognized over a weighted average period of 2.64 years.

NOTE 7 – COMPREHENSIVE INCOME (LOSS)

Accumulated other comprehensive income, net of applicable taxes, reported on the Company’s Condensed Consolidated Balance Sheets consists of unrealized holding gains and losses on available-for-sale securities, unrealized holding gains and losses on certain derivative transactions and foreign currency translation adjustments. A summary of comprehensive income (loss), net of related tax effects, is as follows (in thousands):


	Three Months Ended June 30,						Six Months Ended June 30,
	2011			2010			2011			2010
Net loss	$	(13,558	)	$	(10,604	)	$	(788	)	$	(1,376	)
Other comprehensive income (loss):
Unrealized holding gains (losses) on available-for-sale securities		60			17			118			(5	)
Unrealized derivative holding gains (losses) arising during period		(2,651	)		4,285			(5,594	)		5,154
Reclassification to net income or loss of previously deferred losses on derivative transactions		328			260			528			1,429
Foreign currency translation adjustments		8,114			(12,854	)		21,208			(13,359	)

Other comprehensive income (loss)		5,851			(8,292	)		16,260			(6,781	)

Comprehensive income (loss)	$	(7,707	)	$	(18,896	)	$	15,472		$	(8,157	)

Accumulated other comprehensive income, net of related tax effects, consisted of the following (in thousands):


	June 30, 2011			December 31, 2010			June 30, 2010
Unrealized holding gains on available-for-sale securities	$	154		$	36		$	59
Unrealized holding gains (losses) on derivative transactions		(6,737	)		(1,671	)		5,425
Foreign currency translation adjustments		69,558			48,350			31,179

Accumulated other comprehensive income	$	62,975		$	46,715		$	36,663

NOTE 8 – 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.

A reconciliation of common shares used in the denominator for computing basic and diluted EPS is as follows (in thousands, except per share amounts):


	Three Months Ended June 30,						Six Months Ended June 30,
	2011			2010			2011			2010
Weighted average shares of common stock outstanding, used in computing basic loss per share		33,956			33,800			33,878			33,767
Effect of dilutive stock options and restricted stock units		—			—			—			—

Weighted-average shares of common stock outstanding, used in computing diluted loss per share		33,956			33,800			33,878			33,767

Loss per share of common stock:
Basic	$	(0.40	)	$	(0.31	)	$	(0.02	)	$	(0.04	)
Diluted		(0.40	)		(0.31	)		(0.02	)		(0.04	)

COLUMBIA SPORTSWEAR COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(Unaudited)

Stock options and service-based restricted stock units representing 2,248,443 and 2,237,832 shares of common stock outstanding for the three months ended June 30, 2011 and 2010, respectively, and 2,250,631 and 2,208,577 shares of common stock for the six months ended June 30, 2011 and 2010, respectively, were excluded from the computation of diluted EPS because their effect would be anti-dilutive due to a net loss in the period. In addition, performance-based restricted stock units representing 35,735 and 48,477 shares for the three months ended June 30, 2011 and 2010, respectively, and 30,222 and 42,895 shares of common stock for the six months ended June 30, 2011 and 2010, respectively, were excluded from the computation of diluted EPS because these shares were subject to performance conditions that had not been met.

Since the inception of the Company’s stock repurchase plan in 2004 through June 30, 2011, the Company’s Board of Directors has authorized the repurchase of $500,000,000 of the Company’s common stock. As of June 30, 2011, the Company had repurchased 9,190,890 shares under this program at an aggregate purchase price of approximately $421,237,000. During the six months ended June 30, 2011, the Company did not repurchase any shares of the Company’s common stock. During the six months ended June 30, 2010, the Company repurchased an aggregate of $3,838,000 of the Company’s common stock. 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 9 – SEGMENT INFORMATION

The Company operates in four geographic segments: (1) 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 active outdoor apparel, including outerwear and sportswear, footwear and accessories and equipment.

The geographic distribution of the Company’s net sales and income (loss) before income tax are summarized in the following tables (in thousands). Inter-segment net sales, which are recorded at a negotiated mark-up and eliminated in consolidation, are not material.


	Three Months Ended June 30,						Six Months Ended June 30,
	2011			2010			2011			2010
Net sales to unrelated entities:
United States	$	129,080		$	123,644		$	321,537		$	296,892
LAAP		76,566			51,898			143,901			107,951
EMEA		53,611			38,662			97,967			85,521
Canada		8,773			7,627			37,711			31,873

	$	268,030		$	221,831		$	601,116		$	522,237

Income (loss) before income tax:
United States	$	(16,279	)	$	(16,235	)	$	(7,650	)	$	(11,408	)
LAAP		6,544			6,489			15,041			13,275
EMEA		(5,397	)		(2,058	)		(8,572	)		(2,697	)
Canada		(3,508	)		(2,913	)		461			(1,397	)
Interest income, net		461			392			784			926

	$	(18,179	)	$	(14,325	)	$	64		$	(1,301	)

COLUMBIA SPORTSWEAR COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(Unaudited)

NOTE 10 – FINANCIAL INSTRUMENTS AND RISK MANAGEMENT

In the normal course of business, the Company’s financial position and results of operations are routinely subject to a variety of risks. These risks include risks associated with global financial and capital markets, primarily 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 result in an appropriate level of protection against an adverse effect of these risks. The Company does not engage in speculative trading in any capital market.

The Company’s primary exchange rate risk management objective is to mitigate the uncertainty of anticipated functional currency equivalent cash flows attributable to changes in exchange rates. The Company primarily focuses 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 Korean won as their functional currency. The Company manages this risk primarily by using currency forward and option contracts. If the anticipated transactions are deemed probable, the resulting relationships are formally designated as cash flow hedges. The Company also uses foreign currency forward and option contracts to hedge net balance sheet exposures related primarily to intercompany loan agreements and payables.

The effective change in fair value of financial instruments formally designated in cash flow hedging relationships is initially offset to accumulated other comprehensive income and any ineffective portion is offset to current income. Amounts accumulated in other comprehensive income are subsequently reclassified to cost of sales when the underlying transaction is included in income. Hedge effectiveness is 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 are excluded from the determination of hedge effectiveness and included in current cost of sales. For option contracts, the hedging relationship is assumed to have no ineffectiveness if the critical terms of the option contract match the hedged transaction’s terms, the strike price, or prices, match the specified levels beyond or within that of the exposure being hedged, the option’s cash flows completely offset the hedged item’s cash flow at maturity and the option can only be exercised on a specified date. Hedge ineffectiveness was not material during the three and six months ended June 30, 2011 and 2010.

The classification in the Condensed Consolidated Statements of Operations 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 transaction affects income. Unrealized derivative gains and losses, which are recorded in current assets and liabilities, respectively, are non-cash items and therefore are taken into account in the preparation of the Condensed Consolidated Statements of Cash Flows based on their respective balance sheet classifications.

The Company uses derivative instruments not formally designated as hedges to manage the exchange rate risk associated with both the remeasurement of monetary assets and liabilities and anticipated transactions that do not qualify as the hedged items in cash flow hedging relationships. The change in fair value of these instruments is recognized immediately in selling, general and administrative expense (“SG&A”), depending on the underlying exposure.

The following table presents the gross notional amount of outstanding derivative instruments (in thousands):


	June 30, 2011		December 31, 2010		June 30, 2010
Derivative instruments designated as cash flow hedges:
Currency forward contracts	$	157,725	$	86,260	$	85,725
Currency option contracts		—		4,500		9,000
Derivative instruments not designated as cash flow hedges:
Currency forward contracts		73,625		179,382		53,322
Currency option contracts		—		—		25,384

At June 30, 2011, approximately $6,100,000 of deferred net losses on both outstanding and matured derivatives accumulated in other comprehensive income are expected to be reclassified to net income 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 European euro, Canadian dollar, Japanese yen and Korean won when outstanding derivative contracts mature.

COLUMBIA SPORTSWEAR COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(Unaudited)

At June 30, 2011, the Company’s derivative contracts had a remaining maturity of approximately two years or less. All the counterparties to these transactions had both long-term and short-term investment grade credit ratings and, as a result, neither the Company nor its counterparties are required to post collateral to facilitate transactions. The maximum net exposure to any single counterparty, which is generally limited to the aggregate unrealized gain of all contracts with that counterparty, was not material at June 30, 2011. The Company does not hold derivatives featuring credit-related contingent terms, is not a party to any derivative master agreement featuring credit-related contingent terms and has not pledged assets or posted collateral as a requirement for entering into or maintaining derivative positions.

The following table presents the balance sheet classification and fair value of derivative instruments (in thousands):


	Balance Sheet Classification	June 30, 2011		December 31, 2010		June 30, 2010
Derivative instruments designated as cash flow hedges:
Derivative instruments in asset positions:
Currency forward contracts	Prepaid expenses and other current assets	$	108	$	362	$	4,773
Currency option contracts	Prepaid expenses and other current assets		—		15		344
Derivative instruments in liability positions:
Currency forward contracts	Accrued liabilities		5,750		2,732		445
Currency option contracts	Accrued liabilities		—		102		90

	Balance Sheet Classification	June 30, 2011		December 31, 2010		June 30, 2010
Derivative instruments not designated as cash flow hedges:
Derivative instruments in asset positions:
Currency forward contracts	Prepaid expenses and other current assets	$	110	$	789	$	1,812
Currency option contracts	Prepaid expenses and other current assets		—		—		34
Derivative instruments in liability positions:
Currency forward contracts	Accrued liabilities		1,931		4,169		204
Currency option contracts	Accrued liabilities		—		—		364

The following table presents the effect and classification of derivative instruments (in thousands):


	Statement Of Operations Classification	Three Months Ended June 30,						Six Months Ended June 30,
	Statement Of Operations Classification	2011			2010			2011			2010
Currency Forward Contracts:
Derivative instruments designated as cash flow hedges:
Gain (Loss) recognized in other comprehensive income or loss, net of tax	—	$	(2,651	)	$	4,285		$	(5,594	)	$	5,154
Loss reclassified from accumulated other comprehensive income or loss to income or loss for the effective portion	Cost of sales		(500	)		(283	)		(868	)		(1,440	)
Loss recognized in income or loss for amount excluded from effectiveness testing and for the ineffective portion	Cost of sales		(457	)		(75	)		(646	)		(96	)
Derivative instruments not designated as cash flow hedges:
Gain recognized in income or loss	Cost of Sales		—			944			—			1,071
Gain recognized in income or loss	SG&A		97			1,757			4,759			4,314

COLUMBIA SPORTSWEAR COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(Unaudited)

NOTE 11 – COMMITMENTS AND CONTINGENCIES

Inventory Purchase Obligations

Product purchase obligations for open production purchase orders for sourced apparel, footwear, accessories and equipment, and raw materials used to manufacture apparel were $394,255,000 at June 30, 2011.

NOTE 12 – 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 which prioritizes the inputs used in measuring fair value as follows:


Level 1 –		observable inputs such as quoted prices in active liquid markets;

Level 2 –		inputs, other than the quoted market prices in active markets, which are observable, either directly or indirectly; or observable market prices in markets with insufficient volume and/or infrequent transactions; and

Level 3 –		unobservable inputs for which there is little or no market data available, which require the reporting entity to develop its own assumptions.

Assets and liabilities measured at fair value on a recurring basis at June 30, 2011 are as follows (in thousands):


	Level 1		Level 2		Level 3		Total
Assets:
Cash equivalents
Money market funds	$	136,840	$	—	$	—	$	136,840
Time deposits		21,659		—		—		21,659
Available-for-sale short-term investments⁽¹⁾
Short-term municipal bond fund		25,864		—		—		25,864
Time deposits		2,856		—		—		2,856
U.S. Government-backed municipal bonds		—		62,122		—		62,122
Other current assets
Derivative financial instruments (Note 10)		—		218		—		218
Non-current assets
Mutual fund shares		2,480		—		—		2,480

Total assets measured at fair value	$	189,699	$	62,340	$	—	$	252,039

Liabilities:
Accrued liabilities
Derivative financial instruments (Note 10)	$	—	$	7,681	$	—	$	7,681

Total liabilities measured at fair value	$	—	$	7,681	$	—	$	7,681

COLUMBIA SPORTSWEAR COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(Unaudited)

Assets and liabilities measured at fair value on a recurring basis at December 31, 2010 are as follows (in thousands):


	Level 1		Level 2		Level 3		Total
Assets:
Cash equivalents
Money market funds	$	177,104	$	—	$	—	$	177,104
Time deposits		7,510		—		—		7,510
U.S. Government-backed municipal bonds		—		5,560		—		5,560
Available-for-sale short-term investments ⁽¹⁾
Short-term municipal bond fund		15,624		—		—		15,624
U.S. Government-backed municipal bonds		—		53,188		—		53,188
Other current assets
Derivative financial instruments (Note 10)		—		1,166		—		1,166
Non-current assets
Mutual fund shares		1,670		—		—		1,670

Total assets measured at fair value	$	201,908	$	59,914	$	—	$	261,822

Liabilities:
Accrued liabilities
Derivative financial instruments (Note 10)	$	—	$	7,003	$	—	$	7,003

Total liabilities measured at fair value	$	—	$	7,003	$	—	$	7,003

Assets and liabilities measured at fair value on a recurring basis at June 30, 2010 are as follows (in thousands):


	Level 1		Level 2		Level 3		Total
Assets:
Cash equivalents
Money market funds	$	276,216	$	—	$	—	$	276,216
Time deposits		9,822		—		—		9,822
U.S. Government-backed municipal bonds		—		10,750		—		10,750
Available-for-sale short-term investments ⁽¹⁾
Short-term municipal bond fund		25,421		—		—		25,421
Time deposits		2,320		—		—		2,320
U.S. Government-backed municipal bonds		—		23,945		—		23,945
Other current assets
Derivative financial instruments (Note 10)		—		6,963		—		6,963
Non-current assets
Mutual fund shares		1,221		—		—		1,221

Total assets measured at fair value	$	315,000	$	41,658	$	—	$	356,658

Liabilities:
Accrued liabilities
Derivative financial instruments (Note 10)	$	—	$	1,103	$	—	$	1,103

Total liabilities measured at fair value	$	—	$	1,103	$	—	$	1,103

⁽¹⁾	Investments have original maturities greater than three months but less than two years and are available for use in current operations.

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.

There were no assets and liabilities measured at fair value on a nonrecurring basis as of June 30, 2011, December 31, 2010, or June 30, 2010.

Item 2 – MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This quarterly report 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 across markets, distribution channels and product categories, access to raw materials and factory capacity, financing and working capital requirements and resources 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 below in Part II, Item 1A, Risk Factors. We do not undertake any duty 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 apparel and footwear companies in the world, we design, source, market and distribute active outdoor apparel, footwear, accessories and equipment under the Columbia, Mountain Hardwear, Sorel and Montrail brands. Our products are sold through a mix of wholesale distribution channels, independent distributors, our own direct-to-consumer channels and licensees.

The popularity of outdoor activities, changing design trends and consumer adoption of innovative performance technologies affect consumer desire for our products. Therefore, we seek to drive, anticipate and respond to trends and shifts in consumer preferences by adjusting the mix of available product offerings, developing new products with innovative performance features and designs, and creating persuasive and memorable marketing communications to generate consumer awareness and demand. 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 outdoor industry and is heavily dependent upon discretionary consumer spending patterns. Our products are marketed on a seasonal basis and our product mix is weighted substantially toward the fall season, while our operating costs are more equally distributed throughout the year. The expansion of our direct-to-consumer operations since 2008 has increased the proportion of sales and profits that we generate in the fourth calendar quarter. As a result, our sales and profits tend to be highest in the third and fourth calendar quarters. In 2010, approximately 65 percent of our net sales and all of our profitability 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.

Our quarterly net sales comparisons often vary significantly due to shifts in the timing of fall season shipments to international distributors that occur late in the second quarter or early in the third quarter and shifts in the timing of spring season shipments to international distributors that occur late in the fourth quarter or early in the first quarter. In addition, as our Sorel and Columbia winter footwear and direct-to-consumer businesses grow, a greater proportion of net sales and operating income will occur in the fourth quarter.

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 economic conditions. Sales of our products are subject to substantial cyclical fluctuation, the effects of unseasonable weather conditions, and the continued popularity of outdoor activities as part of an active lifestyle in key markets. The current economic environment in key markets, coupled with inflationary cost pressures, has reduced the predictability of our business.

Business Outlook

The business climate continues to present us with a great deal of uncertainty, with a number of variables that we rely on for planning purposes moving in opposing directions making it more difficult to predict future results. Factors that could significantly affect our 2011 outlook include:

•

Unseasonable weather conditions or other unforeseen factors affecting consumer demand and the resulting effect on order cancellations and reorders;

•

Changes in mix and volume of full price sales in contrast with closeout product sales;

•

Manufacturing and/or transportation capacity constraints;

•

Volatile input costs across our supply chain, including transportation costs;

•

Increased fixed costs to support growth and our multi-year business process, supply chain and information technology infrastructure investments and projects;

•

Costs of expedited transportation;

•

Lower relative volume of department store sales in the United States;

•

Incremental sales through our expanding direct-to-consumer operations, which are not included in backlog;

•

Changes in consumer spending activity and sales fluctuations in our own retail stores; and

•

Fluctuating currency exchange rates.

Like other branded consumer product companies, our business is heavily dependent upon discretionary consumer spending patterns. Continuing high levels of unemployment and concerns about increasing consumer inflation rates in our key markets continue to pose significant challenges and risks.

Over the past two years we have made significant investments in our go-to-market process to position us for growth. Among other things we have:

•

Sharpened our focus on product innovation;

•

Built a multi-channel direct-to-consumer platform, including expanded retail store and e-commerce operations;

•

Refocused our marketing efforts behind new brand campaigns and media strategies for each of our major brands; and

•

Restructured our sales organizations to build relationships with new partners and strengthen those with existing accounts.

As a result of these continuing efforts, we expect our selling, general and administrative (“SG&A”) expenses in 2011 to increase compared to 2010. In addition, we have begun to make improvements to our operational processes, involving significant investments in initiatives to improve our information technology infrastructure and our enterprise data and information management across our organization, which is designed to improve operational flexibility and performance across our supply chain. These investments are the foundation for a multi-year implementation of a new global enterprise resource planning, or ERP, system that began in late 2010 and will accelerate in 2011 and beyond.

As our business model and strategies have evolved, management expects certain trends to continue to affect our business and operating results, including:

•

A higher amount of fixed operating expenses to support, among other things, direct-to-consumer and direct sales activities;

•

A lower relative volume of U.S. department store sales;

•

An increasing percentage of growth from markets outside the U.S.; and

•

Increasing product input cost pressure.

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.

Results of Operations

The following discussion of our results of operations and liquidity and capital resources should be read in conjunction with the Condensed Consolidated Financial Statements and accompanying Notes that appear elsewhere in this quarterly report. All references to quarters relate to the quarter ended June 30 of the particular year.

The second quarter is our smallest revenue quarter, historically accounting for approximately 15 percent of annual net sales. As a result, geographic, product category and brand net sales results often produce large percentage variances when compared with the prior year’s comparable period due to the small base of comparison and because of shifts in the timing of shipments. Seasonal shipments to our international distributors may occur late in the second quarter or early in the third quarter.

Highlights of the Second Quarter of 2011

•

Net sales for the second quarter of 2011 increased $46.2 million, or 21%, to $268.0 million from $221.8 million for the second quarter of 2010, including approximately a three percentage point benefit from changes in foreign currency exchange rates.

•

Net loss for the second quarter of 2011 increased 28% to $13.6 million, or $0.40 per diluted share, compared to $10.6 million, or $0.31 per diluted share, for the second quarter of 2010.

•

We paid quarterly cash dividends of $0.22 per share, or $7.5 million, in the second quarter of 2011, a 10% increase over the quarterly dividends of $0.20 per share paid in the first quarter of 2011.

The following table sets forth, for the periods indicated, the percentage relationship to net sales of specified items in our condensed consolidated statements of operations:


	Three Months Ended June 30,						Six Months Ended June 30,
	2011			2010			2011			2010
Net sales		100.0	%		100.0	%		100.0	%		100.0	%
Cost of sales		58.1			56.3			56.4			57.1

Gross profit		41.9			43.7			43.6			42.9
Selling, general and administrative expense		50.2			51.1			44.7			43.8
Net licensing income		1.3			0.8			1.0			0.5

Loss from operations		(7.0	)		(6.6	)		(0.1	)		(0.4	)
Interest income, net		0.2			0.1			0.1			0.2

Income (loss) before income tax		(6.8	)		(6.5	)		0.0			(0.2	)
Income tax benefit (expense)		1.7			1.7			(0.1	)		(0.1	)

Net loss		(5.1	)%		(4.8	)%		(0.1	)%		(0.3	)%

Quarter Ended June 30, 2011 Compared to Quarter Ended June 30, 2010

Net Sales: Consolidated net sales increased $46.2 million, or 21%, to $268.0 million for the second quarter of 2011 from $221.8 million for the comparable period in 2010. Net sales increased across all four of our major brands, all geographic regions and all product categories. Changes in foreign currency exchange rates compared with the second quarter of 2010 contributed approximately a three percentage point benefit to the consolidated net sales comparison.

Sales by Brand

Net sales by brand are summarized in the following table:


	Three Months Ended June 30,
	2011		2010		% Change
	(In millions, except for percentage changes)
Columbia	$	239.1	$	199.4	20%
Mountain Hardwear		22.7		18.3	24%
Sorel		3.7		1.8	106%
Other		2.5		2.3	9%

	$	268.0	$	221.8	21%

The net sales increase for the second quarter of 2011 compared to the second quarter of 2010 was primarily concentrated in the Columbia brand. The Columbia brand net sales increase was led by the LAAP region, followed by the EMEA region, the United States and Canada.

Sales by Geographic Region

Net sales by geographical region are summarized in the following table:


	Three Months Ended June 30,
	2011		2010		% Change
	(In millions, except for percentage changes)
United States	$	129.0	$	123.7	4%
LAAP		76.6		51.8	48%
EMEA		53.6		38.6	39%
Canada		8.8		7.7	14%

	$	268.0	$	221.8	21%

Net sales in the United States increased $5.3 million, or 4%, to $129.0 million for the second quarter of 2011 from $123.7 million for the comparable period in 2010. The increase in net sales in the United States by product category was led by outerwear, followed by footwear and sportswear, partially offset by a net sales decrease in accessories and equipment. The net sales increase by channel consisted of a net sales increase 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 was driven by increased sales within our retail stores, increased sales through our Columbia and Sorel brand e-commerce sites and incremental sales from our Mountain Hardwear brand e-commerce site which was launched in the third quarter of 2010. The net sales decrease in our wholesale business was the result of a planned shift in the timing of shipments of fall 2011 advance orders compared with fall 2010, combined with fewer reorders and greater cancellations due primarily to unseasonable spring weather.

Net sales in the LAAP region increased $24.8 million, or 48%, to $76.6 million for the second quarter of 2011 from $51.8 million for the comparable period in 2010. Changes in foreign currency exchange rates compared with the second quarter of 2010 contributed approximately a nine percentage point benefit to the LAAP net sales comparison. The net sales increase in the LAAP region by product category was led by sportswear, followed by outerwear, footwear and accessories and equipment. The LAAP net sales increase was primarily concentrated in the Columbia brand and was led by our LAAP distributor business, followed by Korea and Japan. The net sales increase to our LAAP distributors primarily reflected earlier shipments of fall 2011 advance orders made possible by more timely production. The increase in Korea net sales was primarily due to increased retail sales of the Columbia and Mountain Hardwear brands. The increase in Japan net sales was primarily the result of the market’s steady recovery from the earthquake and tsunami events of March 11, 2011 and the favorable effect of foreign currency exchange rates.

Net sales in the EMEA region increased $15.0 million, or 39%, to $53.6 million for the second quarter of 2011 from $38.6 million for the comparable period in 2010. Changes in foreign currency exchange rates compared with the second quarter of 2010 contributed approximately a five percentage point benefit to the EMEA net sales comparison. The net sales increase in the EMEA region by product category was led by outerwear, followed by sportswear and footwear, partially offset by a net sales decrease in accessories and equipment. The EMEA net sales increase was primarily concentrated in the Columbia brand in our EMEA distributor business. The net sales increase to our EMEA distributors primarily reflected earlier shipments of fall 2011 advance orders made possible by more timely production.

Net sales in Canada increased $1.1 million, or 14%, to $8.8 million for the second quarter of 2011 from $7.7 million for the comparable period in 2010. Changes in foreign currency exchange rates compared with 2010 contributed approximately a six percentage point benefit to the Canada net sales comparison. The increase in net sales was led by the Columbia brand, followed by Mountain Hardwear and Sorel. By product category, the increase in net sales was led by footwear, followed by outerwear, sportswear and accessories and equipment.

Sales by Product Category

Net sales by product category are summarized in the following table:


	Three Months Ended June 30,
	2011		2010		% Change
	(In millions, except for percentage changes)
Outerwear	$	62.1	$	43.4	43%
Sportswear		136.2		121.9	12%
Footwear		50.0		38.7	29%
Accessories and Equipment		19.7		17.8	11%

	$	268.0	$	221.8	21%

Net sales of outerwear increased $18.7 million, or 43%, to $62.1 million for the second quarter of 2011 from $43.4 million for the comparable period in 2010. The increase in outerwear net sales was primarily concentrated in the Columbia brand and was led by the EMEA region, followed by the LAAP region, the United States and Canada. The net sales increase in outerwear in the EMEA region consisted of a net sales increase in our distributor business, partially offset by a net sales decrease in our direct business. The outerwear net sales increase in the LAAP region was led by our LAAP distributor business, followed by Japan and Korea.

Net sales of sportswear increased $14.3 million, or 12%, to $136.2 million for the second quarter of 2011 from $121.9 million for the comparable period in 2010. The increase in sportswear net sales was primarily concentrated in the Columbia brand and was led by the LAAP region, followed by the EMEA region, the United States and Canada. The sportswear net sales increase in the LAAP region was led by Korea, followed by our LAAP distributor business and Japan.

Net sales of footwear increased $11.3 million, or 29%, to $50.0 million for the second quarter of 2011 from $38.7 million for the comparable period in 2010. The increase in footwear net sales was primarily concentrated in the Columbia brand and was led by the LAAP region, followed by the EMEA region, the United States and Canada. The net sales increase in footwear in the LAAP region was led by Korea, followed by Japan and our LAAP distributor business. The footwear net sales increase in the EMEA region was led by our distributor business, followed by our direct business.

Net sales of accessories and equipment increased $1.9 million, or 11%, to $19.7 million for the second quarter of 2011 from $17.8 million for the comparable period in 2010. The increase in accessories and equipment net sales was primarily concentrated in the Columbia brand and was led by the LAAP region, followed by Canada, partially offset by a net sales decrease in the United States and the EMEA region.

Gross Profit: Gross profit, as a percentage of net sales, decreased to 41.9% for the second quarter of 2011 from 43.7% for the comparable period in 2010. Gross profit contraction was primarily due to:

•

A higher proportion of shipments to EMEA and LAAP distributors which carry lower gross margins than direct wholesale and direct-to-consumer sales; and

•

A higher proportion of close-out product sales at lower gross margins;

partially offset by:

•

Increased direct-to-consumer sales at higher gross margins;

•

Lower airfreight costs; and

•

Favorable foreign currency hedge rates.

Our gross profits may not be comparable to those of other companies in our industry because some 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.

Selling, General and Administrative Expense: 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 $21.0 million, or 19%, to $134.5 million for the second quarter of 2011 from $113.5 million for the comparable period in 2010. The SG&A expense increase was primarily due to:

•

The unfavorable effect of foreign currency translation;

•

Expansion of direct-to-consumer operations globally;

•

Information technology initiatives, including our ERP implementation; and

•

Additions to staff to support business initiatives and growth.

SG&A expense decreased to 50.2% of net sales for the second quarter of 2011 from 51.1% of net sales for the comparable period in 2010. Depreciation and amortization included in SG&A expense totaled $10.4 million for the second quarter of 2011, compared to $9.2 million for the same period in 2010.

Net Licensing Income: Net licensing income increased $1.7 million to $3.5 million for the second quarter of 2011 from $1.8 million for the same period in 2010, primarily due to increased apparel and footwear licensing income in the LAAP region.

Interest Income, Net: Net interest income was $0.5 million for the second quarter of 2011 compared to $0.4 million for the same period in 2010. Interest income increased due to higher average interest rates on cash equivalents and short-term investments compared to the same period in 2010. Interest expense was nominal for the second quarter of 2011 and for the comparable period in 2010.

Income Tax Benefit: The income tax benefit increased to $4.6 million for the second quarter of 2011 from $3.7 million for the comparable period in 2010. This increase primarily resulted from a larger loss before income taxes for the quarter. Our effective income tax rate was 25.4% for the second quarter of 2011, compared to 26.0% for the same period in 2010. Many factors could cause our annual effective tax rate to differ materially from our quarterly effective tax rates, including changes in the geographic mix of taxable income and discrete events in future periods.

Net Loss: Net loss increased $3.0 million, or 28%, to $13.6 million for the second quarter of 2011 from $10.6 million for the comparable period in 2010. Diluted loss per share was $0.40 for the second quarter of 2011, compared to $0.31 for the second quarter of 2010.

Six Months Ended June 30, 2011 Compared to Six Months Ended June 30, 2010

Net Sales: Consolidated net sales increased $78.9 million, or 15%, to $601.1 million for the six months ended June 30, 2011 from $522.2 million for the comparable period in 2010. Net sales increased across all four of our major brands, all geographic regions and all product categories. Changes in foreign currency exchange rates, compared with the six months ended June 30, 2010, contributed approximately a two percentage point benefit to the consolidated net sales comparison.

Sales by Brand

Net sales by brand are summarized in the following table:


	Six Months Ended June 30,
	2011		2010		% Change
	(In millions, except for percentage changes)
Columbia	$	527.2	$	467.1	13%
Mountain Hardwear		54.4		43.9	24%
Sorel		14.0		5.8	141%
Other		5.5		5.4	2%

	$	601.1	$	522.2	15%

The net sales increase for the six months ended June 30, 2011 compared to the six months ended June 30, 2010 was primarily concentrated in the Columbia brand. The Columbia brand net sales increase was led by the LAAP region, followed by the United States, the EMEA region and Canada.

Sales by Geographic Region

Net sales by geographical region are summarized in the following table:


	Six Months Ended June 30,
	2011		2010		% Change
	(In millions, except for percentage changes)
United States	$	321.5	$	296.9	8%
LAAP		143.9		107.9	33%
EMEA		98.0		85.5	15%
Canada		37.7		31.9	18%

	$	601.1	$	522.2	15%

Net sales in the United States increased $24.6 million, or 8%, to $321.5 million for the six months ended June 30, 2011 from $296.9 million for the comparable period in 2010. The increase in net sales in the United States by product category was led by footwear, followed by outerwear, sportswear and accessories and equipment. The net sales increase by channel consisted of a net sales increase 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 was driven by increased sales within our retail stores, increased sales through our Columbia and Sorel brand e-commerce sites, and incremental sales from our Mountain Hardwear brand e-commerce site which was launched in the third quarter of 2010.

Net sales in the LAAP region increased $36.0 million, or 33%, to $143.9 million for the six months ended June 30, 2011 from $107.9 million for the comparable period in 2010. Changes in foreign currency exchange rates compared with the six months ended June 30, 2010, contributed approximately a seven percentage point benefit to the LAAP net sales comparison. The net sales increase in the LAAP region by product category was led by outerwear, followed by sportswear, footwear and accessories and equipment. The LAAP net sales increase was primarily concentrated in the Columbia brand and was led by Korea, followed by our LAAP distributor business and Japan. The increase in Korea net sales was primarily due to increased sales from existing stores, followed by a greater number of retail stores operating at June 30, 2011 than at June 30, 2010. The increase in Japan net sales was primarily the result of the favorable effect of foreign currency exchange rates and increased wholesale net sales in the sports chain channel. The net sales increase to our LAAP distributors primarily reflected earlier shipments of fall 2011 advance orders made possible by more timely production.

Net sales in the EMEA region increased $12.5 million, or 15%, to $98.0 million for the six months ended June 30, 2011 from $85.5 million for the comparable period in 2010. Changes in foreign currency exchange rates compared with the six months ended June 30, 2010 contributed approximately a two percentage point benefit to the EMEA net sales comparison. By product category, the increase in net sales was led by outerwear, followed by footwear and sportswear, partially offset by a net sales decrease in accessories and equipment. The EMEA net sales increase was primarily concentrated in the Columbia brand and was concentrated in our EMEA distributor business. The net sales increase to our EMEA distributors primarily reflected earlier shipments of fall 2011 advance orders made possible by more timely production.

Net sales in Canada increased $5.8 million, or 18%, to $37.7 million for the six months ended June 30, 2011 from $31.9 million for the comparable period in 2010. Changes in foreign currency exchange rates compared with 2010 contributed approximately a seven percentage point benefit to the Canada net sales comparison. The increase in net sales was led by the Columbia brand, followed by Mountain Hardwear and Sorel. By product category, the increase in net sales was led by sportswear, followed by outerwear, footwear and accessories and equipment.

Sales by Product Category

Net sales by product category are summarized in the following table:


	Six Months Ended June 30,
	2011		2010		% Change
	(In millions, except for percentage changes)
Outerwear	$	160.9	$	131.0	23%
Sportswear		290.4		268.3	8%
Footwear		104.4		84.8	23%
Accessories and Equipment		45.4		38.1	19%

	$	601.1	$	522.2	15%

Net sales of outerwear increased $29.9 million, or 23%, to $160.9 million for the six months ended June 30, 2011 from $131.0 million for the comparable period in 2010. The increase in outerwear net sales was primarily concentrated in the Columbia brand and was led by the LAAP region, followed by the United States, the EMEA region and Canada. The outerwear net sales increase in the LAAP region was led by our LAAP distributor business, followed by Japan and Korea. The net sales increase in outerwear in the United States consisted of a net sales increase in our direct-to-consumer business, partially offset by a net sales decrease in our wholesale business.

Net sales of sportswear increased $22.1 million, or 8%, to $290.4 million for the six months ended June 30, 2011 from $268.3 million for the comparable period in 2010. The increase in sportswear net sales was primarily concentrated in the Columbia brand and was led by the LAAP region, followed by the United States, the EMEA region and Canada. The sportswear net sales increase in the LAAP region was led by Korea, followed by our LAAP distributor business and Japan. The net sales increase in sportswear in the United States consisted of a net sales increase in our direct-to-consumer business, partially offset by a net sales decrease in our wholesale business.

Net sales of footwear increased $19.6 million, or 23%, to $104.4 million for the six months ended June 30, 2011 from $84.8 million for the comparable period in 2010. The increase in footwear net sales was primarily concentrated in the Columbia and Sorel brands and was led by the United States, followed by the LAAP region, the EMEA region and Canada. The net sales increase in footwear in the United States was led by our wholesale business, followed by our direct-to-consumer business. The footwear net sales increase in the LAAP region was led by Korea, followed by Japan and our LAAP distributor business.

Net sales of accessories and equipment increased $7.3 million, or 19%, to $45.4 million for the six months ended June 30, 2011 from $38.1 million for the comparable period in 2010. The increase in accessories and equipment net sales was primarily concentrated in the Columbia brand and was led by the LAAP region, followed by the United States and Canada, partially offset by a net sales decrease in the EMEA region.

Gross Profit: Gross profit, as a percentage of net sales, increased to 43.6% for the six months ended June 30, 2011 from 42.9% for the comparable period in 2010. Gross profit expansion was primarily due to:

•

Lower airfreight costs;

•

A lower proportion of close-out product sales;

•

Favorable foreign currency hedge rates; and

•

Increased direct-to-consumer sales at higher gross margins, due primarily to a higher proportion of e-commerce sales and more targeted promotions within our retail stores;

partially offset by:

•

A higher proportion of shipments to EMEA and LAAP distributors which carry lower gross margins than direct wholesale and direct-to-consumer sales.

Selling, General and Administrative Expense: SG&A expense increased $39.7 million, or 17%, to $268.7 million for the six months ended June 30, 2011 from $229.0 million for the comparable period in 2010. The SG&A expense increase was primarily due to:

•

Expansion of direct-to-consumer operations globally;

•

Information technology initiatives, including our ERP implementation;

•

The unfavorable effect of foreign currency translation; and

•

Additions to staff to support business initiatives and growth.

SG&A expense increased to 44.7% of net sales for the six months ended June 30, 2011 from 43.8% of net sales for the comparable period in 2010. Depreciation and amortization included in SG&A expense totaled $20.8 million for the six months ended June 30, 2011, compared to $18.2 million for the same period in 2010.

Net Licensing Income: Net licensing income increased $3.5 million to $6.0 million for the six months ended June 30, 2011 from $2.5 million for the same period in 2010, primarily due to increased apparel and footwear licensing income in the LAAP region.

Interest Income, Net: Net interest income was $0.8 million for the six months ended June 30, 2011 compared to $0.9 million for the same period in 2010. Interest income decreased due to lower average balances compared to the same period in 2010. Interest expense was nominal for the six months ended June 30, 2011 and for the comparable period in 2010.

Income Tax Expense: The provision for income taxes increased to $0.9 million for the six months ended June 30, 2011 from $0.1 million for the comparable period in 2010. Income tax expense increased primarily due to the impact of discrete tax expense items as well as the fact that we recognized net income for the six months ended June 30, 2011 while we recognized a net loss for the comparable period in 2010.

Net Loss: Net loss decreased $0.6 million, or 43%, to $0.8 million for the six months ended June 30, 2011 from $1.4 million for the comparable period in 2010. Diluted loss per share was $0.02 for the six months ended June 30, 2011, compared to $0.04 for comparable period in 2010.

Liquidity and Capital Resources

Our primary ongoing funding requirements are for working capital, investing activities associated with the expansion of our global operations and general corporate needs. At June 30, 2011, we had total cash and cash equivalents of $207.4 million compared to $234.3 million at December 31, 2010 and $346.6 million at June 30, 2010. In addition, we had short-term investments of $90.8 million at June 30, 2011, compared to $68.8 million at December 31, 2010 and $51.7 million at June 30, 2010.

Net cash provided by operating activities was $12.0 million for the six months ended June 30, 2011, compared to $16.5 million for the same period in 2010. The decrease in cash provided by operating activities for the six months ended June 30, 2011, compared to the same period in 2010 was primarily due to decreases in working capital liabilities and increased inventory, partially offset by increased collection of accounts receivable compared with the same period in 2010.

Net cash used in investing activities was $44.3 million for the six months ended June 30, 2011, compared to $43.4 million for the comparable period in 2010. For the 2011 period, net cash used in investing activities primarily consisted of $22.6 million for capital expenditures and $21.8 million for net purchases of short-term investments. For the 2010 period, net cash used in investing activities primarily consisted of $29.0 million for purchases of short-term investments and $14.4 million for capital expenditures.

Net cash used in financing activities was $5.5 million for the six months ended June 30, 2011, compared to $11.4 million for the comparable period in 2010. For the 2011 period, net cash used in financing activities primarily consisted of dividend payments of $14.2 million, partially offset by net proceeds from stock plan activity of $6.9 million. For the 2010 period, net cash used in financing activities primarily consisted of dividend payments of $12.2 million and the repurchase of common stock at an aggregate price of $3.8 million, partially offset by net proceeds from issuance of common stock of $4.2 million.

To fund our domestic working capital requirements, we have an unsecured, committed $125.0 million revolving line of credit available. At June 30, 2011 no balance was outstanding under this line of credit and we were in compliance with all associated covenants. Internationally, our subsidiaries have local currency operating lines in place guaranteed by us with a combined limit of approximately $86.9 million at June 30, 2011, of which $3.6 million is designated as a European customs guarantee. At June 30, 2011, no balance was outstanding under these lines of credit.

We expect to fund our future 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 are affected by seasonal trends typical in the outdoor apparel 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 and proportionally higher sales from our direct-to-consumer operations in the fourth quarter. 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.

Off-Balance Sheet Arrangements

We have arrangements in place to facilitate the import and purchase of inventory through import letters of credit. We maintain unsecured and uncommitted import lines of credit with a combined limit of $25.0 million at June 30, 2011, available for issuing documentary letters of credit. At June 30, 2011, no balance was outstanding under these letters of credit.

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. The preparation of these financial statements requires us to make various estimates and judgments that affect reported amounts of assets, liabilities, sales, cost of sales and expenses and related disclosure of contingent assets and liabilities. We believe that the estimates, assumptions and judgments involved in the accounting policies referred to in our Annual Report on Form 10-K for the year ended December 31, 2010 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 could differ from the estimates we use in applying the critical accounting policies. We base our ongoing estimates on historical experience and other various assumptions that we believe to be reasonable under 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, close-out 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.

There have been no significant changes to our critical accounting policies as described in our Annual Report on Form 10-K for the year ended December 31, 2010.

Recent Accounting Pronouncements

See “Recent Accounting Pronouncements” in Note 2 to the notes to the consolidated financial statements.

Item 3 – QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

There has not been any material change in the market risk disclosure contained in our Annual Report on Form 10-K for the year ended December 31, 2010.

Item 4 – 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 are 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, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

There has been no change in our internal control over financial reporting that occurred during our fiscal quarter ended June 30, 2011 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

Item 1.

LEGAL PROCEEDINGS

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 and various regulatory compliance activities. The Company has considered facts related to legal and regulatory matters and opinions of counsel handling these matters, and does not believe the ultimate resolution of such proceedings will have a material adverse effect on the Company’s financial position, results of operations or cash flows.

Item 1A.

RISK FACTORS

In addition to the other information contained in this Form 10-Q, 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 any of these risks. Please note that additional risks not presently known to us or that we currently deem immaterial may also impair our business and operations. The following risk factors include changes to and supersede the description of the risk factors associated with our business previously disclosed in Part I, Item 1A of our Annual Report on Form 10-K for the fiscal year ended December 31, 2010.

Our Success Depends on Our Business Strategies

Our business strategies are to achieve sustainable, profitable growth by creating innovative products, elevating consumer perception of our brands, increasing consumer and retailer awareness and demand for our products, creating compelling retail environments, and building stronger emotional brand connections with consumers over time. We intend to pursue these strategies across our portfolio of brands, product categories and geographic markets. We face many challenges in implementing our business strategies. For example, our focus on innovation depends on our ongoing ability to identify, develop or secure rights to product improvements or developments through internal research, joint developments, acquisitions or licenses. However, these innovations and developments may not be profitable or have the desired effect of increasing demand for our products. The failure to implement our business strategies successfully could have a material adverse effect on our financial condition, results of operations or cash flows.

To implement our business strategies, we must continue to modify various aspects of our business, to maintain and enhance our information systems and supply chain operations to respond to increased demand and to attract, retain and manage qualified personnel. Changes in our business may place an increasing strain on management, 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 strategic initiatives, we are making significant investments in our business processes and information technology infrastructure that require significant management attention and corporate resources. In addition, we may need to adapt our information technology systems and business processes to integrate business acquisitions. These business initiatives 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 increased expenditures could also cause our operating margin to decline if we are unable to offset our increased spending with increased sales or gross margins, or comparable reductions in other operating costs. If our sales or gross margins decline or fail to grow as planned and we fail to sufficiently leverage our operating expenses, our profitability will decline. This could result in a decision to delay, reduce, modify or terminate our strategic business initiatives, which could have a material adverse effect on our financial condition, results of operations or cash flows.

In addition, an increasing percentage of our anticipated sales growth is being driven by our winter footwear business (both Sorel and Columbia brands) and the majority of these advance orders typically schedule to ship in the fourth quarter. Combined with the anticipated growth of our direct-to-consumer business, this growth is expected to result in our net sales and operating income being more heavily weighted toward the fourth quarter compared with prior years. 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.

We Depend on Independent Factories

Our products are produced by independent factories worldwide. We do not own or operate any production facilities. Although we enter into purchase order commitments with these independent factories each season, we generally do not maintain long-term manufacturing commitments with them. Without long-term or reserve commitments, in a capacity-constrained environment, 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. Independent factories 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 an independent manufacturer fails to ship orders in a timely manner or to meet our standards or if we are unable to obtain necessary capacities, we may miss delivery deadlines or incur additional costs, which may result in cancellation of orders, refusal to accept deliveries, a reduction in purchase prices or increased costs, any of which could have a material adverse effect on our financial condition, results of operations or cash flows.

Reliance on independent factories also creates quality control risks. In a capacity-constrained environment, we may need to use sub-contracted manufacturers to fulfill demand and these manufacturers may have less experience producing our products or lower overall capabilities, which could result in compromised quality of our products. A failure in our quality control program

may result in diminished product quality, which in turn could result in increased order cancellations and returns, decreased consumer demand for our products, or product recalls (or other regulatory actions), any of which could have a material adverse effect on our financial condition, results of operations or cash flows.

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 and other environmental, health and safety standards for the benefit of workers and for compliance with product safety and other laws on our contractors. We also require our independent factories and licensees to impose these practices, standards and laws on their contractors. However, if an independent manufacturer or licensee violates labor or other laws, or engages in practices that are not generally accepted as ethical in our key markets, we may be subject to production disruptions or significant negative publicity that could result in long-term damage to our brand images, consumer demand for our products may decrease, and in some circumstances parties may attempt to assert that we are liable for the independent manufacturer’s or licensee’s practices, 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 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, 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 centralized governments in the countries where our products are manufactured, particularly in China and Vietnam;

•

Interest rates and currency exchange rates;

•

Availability of skilled labor and production capacity at independent factories; and

•

General economic conditions.

Following a long period of generally stable-to-declining input costs, the apparel and footwear industry appears to be entering what may become a prolonged period of inflationary pressure on some or all of these input costs, resulting in increased costs to produce our products.

In addition, since the majority of our products are manufactured outside of our principal sales markets, our products must be transported by third parties over large geographical distances. Shortages in ocean freight capacity, airfreight capacity and volatile fuel costs can result in rapidly changing transportation costs. For example, during 2010, shortages of sourcing and transportation capacity, combined with later-than-optimal production of advance orders, caused us to rely more heavily on airfreight to achieve timely delivery to our customers, resulting in significantly higher freight costs. Because we price our products in advance and the external cost changes 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.

Our Sales and Profitability May be Adversely Affected by Increased Product Costs and Reduced Selling Prices

The apparel industry is subject to significant pressures on pricing and input costs caused by many factors, including intense competition, constrained sourcing capacity and related inflationary pressures, consolidation in the retail industry, pressure from retailers to reduce the costs of products and changes in consumer demand. These factors may cause us to experience increased costs, reduce our sales prices to retailers and consumers or experience reduced sales in response to increased prices, any of which could cause our operating margin to decline if we are unable to offset these factors with reductions in operating costs and could have a material adverse effect on our financial condition, results of operations or cash flows.

Attracting superior retail channel partners and improving the sales productivity of our customers each depend on various factors, including the strength of our brand names, our ability to design and source innovative products, competitive conditions, the

availability of desirable locations and the negotiation of terms with customers. Future terms with customers may be less favorable to us than those under which we now operate. Large wholesale customers in particular increasingly seek to transfer various costs of business to their vendors, such as the cost of lost profits from promotional activity and product price markdowns, which could cause our gross margins to decline if we are unable to offset price reductions with comparable reductions in operating costs.

We May be Adversely Affected by Volatile Economic Conditions

We are a consumer products company and are highly dependent on consumer discretionary spending patterns and the purchasing patterns of our wholesale customers as they attempt to match their seasonal purchase volumes to volatile consumer demand. In addition, as we have expanded our direct-to-consumer operations, we have increased our exposure to the risks associated with volatile and unpredictable consumer discretionary spending patterns. As global economic conditions continue to be volatile or economic uncertainty remains, trends in consumer discretionary spending also remain unpredictable and subject to reductions due to credit constraints and uncertainties about the future. Consumer demand for our products may not reach our sales targets, or may decline, when there is an economic downturn or economic uncertainty in our key markets, particularly markets in North America and the EMEA region. 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 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 and retail stores. We also rely on our information systems to allocate resources, manage product data, develop demand and supply plans and forecast operating results. System failures, breaches of confidential information or service interruptions may occur as the result of a number of factors, including computer viruses, programming errors, hacking or other unlawful activities by third parties and disasters, or our failure to properly maintain systems redundancy or to protect, repair, maintain or upgrade our systems. Any breach or interruption of critical business information systems could have a material adverse effect on our financial condition, results of operations or cash flows.

Our existing ERP system is highly customized to our business. As a result, the availability of internal and external resources with the expertise to maintain our current ERP system is limited. As we plan for future growth, our current customized ERP system may inhibit our ability to operate efficiently, which could have an adverse effect on our financial condition, results of operations or cash flows. For example, our current ERP system may not be compatible with other systems that support desired functionality for our operations.

Initiatives to Upgrade Our Information Technology Infrastructure Involve Many Risks Which Could Result In, Among Other Things, Business Interruptions and Higher Costs

We regularly implement business process improvement initiatives to optimize our performance. Our current business process initiatives include, but are not limited to, plans to improve business results through standardization of business processes and technology that support our supply chain and go-to-market strategies through implementation of an integrated ERP software solution over the next few years. We may experience difficulties when we transition to new or upgraded systems and processes, including loss of data and decreases in productivity as our personnel become familiar with new systems. In addition, transitioning to new or upgraded systems requires significant capital investments and personnel resources. Difficulties in implementing new or upgraded information systems or significant system failures could disrupt our operations and have a material adverse effect on our financial condition, results of operations or cash flows.

We expect implementation of this new information technology infrastructure to have a pervasive impact on our business processes and information systems across a significant portion of our operations, including our finance operations. As a result, we will experience significant changes in our internal controls over financial reporting as our implementation progresses. If we are unable to successfully implement this system, including harmonizing our systems, data and processes, our ability to process transactions accurately and efficiently may be affected, and any unsuccessful implementation could have a material adverse effect on our capital resources, 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, consumer 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 independent factories prior to receiving all of our customers’ orders, and we maintain an inventory of various products that we anticipate will be in greater demand. In addition, customers are generally allowed to cancel orders prior to shipment with sufficient notice.

Factors that could affect our ability to accurately forecast demand for our products include:

•

An increase or decrease in consumer demand for our products or for products of our competitors;

•

Our reliance, for certain demand and supply planning functions, on manual processes and judgment that are subject to human error;

•

Our failure to accurately forecast customer acceptance of new products;

•

New product introductions by competitors;

•

Unanticipated changes in general market conditions or other factors, which may result in cancellations of 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, our production orders may not match actual demand, which could result in our inability to deliver product in a timely manner, higher transportation costs to expedite delivery and higher inventory levels. During periods of weak economic conditions 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 certain customers’ operations. We may not be able to sell all of the products we have ordered from independent factories 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 discount direct-to-consumer channels, which could have a material adverse effect on our brand image, financial condition, results of operations or cash flows.

Conversely, if we underestimate demand for our products or if our independent factories 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 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 May be Adversely Affected by Weather Conditions

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 may decline in years in which weather conditions do not favor the use of these products. Periods of unseasonably warm weather in the fall or winter or unseasonably cold or wet weather in the spring and summer may have a material adverse effect on our financial condition, results of operations or cash flows. Inventory accumulation by our wholesale customers resulting from unseasonable weather in one season may negatively affect orders in future seasons, which may have a material adverse effect on our financial condition, results of operations or cash flows.

Our International Operations Involve Many Risks

We are subject to the risks generally associated with doing business internationally. These risks include the effects of foreign laws and regulations, changes in consumer preferences, foreign currency fluctuations, 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 international markets, our ability to manufacture products or procure materials, and our cost of doing business. If any of these or other factors make the conduct of business in a particular country undesirable or impractical, our business may be materially and adversely affected. As we expand our operations in geographic scope and product categories, we anticipate intellectual property disputes will increase, making it more expensive and challenging to establish and protect our intellectual property rights and to defend against claims of infringement by others.

As a global company, we determine our income tax liability in various competing tax jurisdictions based on a careful 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 accrual may be insufficient to satisfy unfavorable findings, which by their nature cannot be predicted with certainty. 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. 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.

Moreover, if we encounter a significant need for liquidity domestically or at a particular location that we cannot fulfill through borrowings, equity offerings or other internal or external sources, we may experience unfavorable tax and earnings consequences as a result of cash transfers. These adverse consequences would occur, for example, if the transfer of cash into the United States is taxed and no offsetting foreign tax credit is available to offset the U.S. tax liability, resulting in lower earnings. Furthermore, foreign exchange ceilings imposed by local governments and the sometimes lengthy approval processes that foreign governments require for international cash transfers may delay our internal cash transfers from time to time.

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 or into our other sales markets. Any country in which our products are produced or sold may eliminate, adjust or impose new import limitations, duties, tariffs, 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 Operate in Very Competitive Markets

The markets for outerwear, sportswear, 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.

Retailers who are our customers often pose our most significant competitive threat by marketing apparel, footwear and equipment under their own private labels. For example, in the United States, several of our largest customers have developed significant private label brands during the past decade 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 weak economic cycles.

We also compete with other companies for the production capacity of independent factories that manufacture 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 strength may increase.

Increased competition may result in reduced access to production capacity, 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 May be Adversely Affected by the Financial Health of our Customers

Sluggish economies and consumer uncertainty regarding future economic prospects in our key markets have had an adverse effect on the financial health of our customers, some of whom have filed or may file for protection under bankruptcy laws, which may in turn have a material adverse effect on our results of operations and financial condition. We extend credit to our customers

based on an assessment of the customer’s financial condition, generally without requiring collateral. To assist in the scheduling of production and the shipping of seasonal products, we offer customers discounts for placing advance orders and extended payment terms for taking delivery before the peak shipping season. These extended payment terms increase our exposure to the risk of uncollectible receivables. In addition, we face increased risk of order reduction or cancellation or reduced availability of credit insurance coverage when dealing with financially ailing retailers or retailers struggling with economic uncertainty. Some of our significant wholesale customers have liquidated or reorganized, while others have had financial difficulties in the past and have recently experienced tightened credit markets and sales declines and reduced profitability, which in turn has an adverse effect on our business. We may reduce our level of business with customers experiencing financial difficulties and may not be able to replace that business with other customers, which could have a material adverse effect on our financial condition, results of operations or cash flows.

We May be Adversely Affected by Global Credit Market Conditions

Economic downturns and economic uncertainty generally affect global credit markets. Our vendors, customers and other participants in our supply chain may require access to credit markets in order to do business. Credit market conditions may slow our collection efforts as customers find it more difficult to obtain necessary financing, leading to higher than normal accounts receivable. This could result in greater expense associated with collection efforts and increased bad debt expense. Credit conditions may impair our vendors’ ability to finance the purchase of raw materials or general working capital needs to support our production requirements, resulting in a delay or non-receipt of inventory shipments during key seasons.

Historically we have limited our reliance on debt to finance our working capital, capital expenditures and investing activity requirements. We expect to fund our future capital expenditures with existing cash, expected operating cash flows and credit facilities, but if the need arises to finance additional expenditures, we may need to seek additional funding. Our ability to obtain additional financing will depend on many factors, including prevailing market conditions, our financial condition, and our ability to negotiate favorable terms and conditions. Financing may not be available on terms that are acceptable or favorable to us, if at all.

We May be Adversely Affected by Retailer Consolidation

When our wholesale customers combine their operations through mergers, acquisitions, or other transactions, their consolidated order volume may decrease while their bargaining power and the competitive threat they pose by marketing products under their own private labels may increase. Some of our significant customers have consolidated their operations in the past, which in turn has had a negative effect on our business. Future retailer consolidations could have a material adverse effect on our financial condition, results of operations or cash flows.

We Rely on Technical Innovation and Functional Design to Compete in the Market for our Products

Technical innovation and functional design is essential to distinguish our products in the marketplace and achieve commercial success. Research and development plays a key role in technical innovation. We rely upon specialists in the fields of chemistry, biochemistry, engineering, industrial design, electronics and related fields, guided by consumer feedback, to develop and test innovative performance products. Although we are committed to designing innovative and functional products that deliver relevant performance benefits to consumers who participate in a wide range of competitive and recreational outdoor activities, if we fail to introduce technical innovation in our products that address consumers’ performance expectations, demand for our products could decline.

As we strive to achieve technical innovations, we face a greater risk of inadvertent infringements of third party rights or compliance issues with regulations applicable to products with technical innovations such as electrical components. In addition, technical innovations often involve more complex manufacturing processes. More complex manufacturing processes 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 remedy the problems. Failure to successfully bring to market technical innovations in our product lines 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 or consumer interest in outdoor activities may have a material adverse effect on our business. In addition, changes in fashion trends may have a greater impact than in the past as we expand our offerings to include more product categories in more geographic areas. We also face risks because our business requires us and our customers to anticipate consumer preferences. Our decisions about product designs often are made far in advance of consumer acceptance.

Although we try to manage our inventory risk through early order commitments by retailers, we must generally place a significant portion of our seasonal production orders with our independent factories before we have received all of a season’s orders, and orders may be cancelled by customers before shipment. If we or our customers fail to anticipate and respond to consumer preferences, we may have lower sales, excess inventories and lower profit margins, any of which 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 our competitors’ and to create and sustain demand for our products. We also place significant value on our trade dress, the overall appearance and image of our products. From time to time, we 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 our brand 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. Failure to choose appropriate licensees and licensed product categories may dilute or harm our brand image. 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 the performance characteristics and fabrications from those of our competitors. Actions or decisions in 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 of intellectual property rights of third parties, including third party trademark, copyright and patent rights. An increasing number of our products include technologies and/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. Future litigation also may be necessary to defend against such claims or to enforce and protect our intellectual property rights. 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.

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, the development or expansion of additional distribution capabilities 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 facilities in Strathroy, Ontario; in Europe, we rely primarily on our distribution center in Cambrai, France; in Japan, we rely primarily on a third-party logistics distribution provider, in Tokyo; and in Korea, we rely primarily on leased distribution facilities near Seoul, that we manage and operate.

Our distribution facilities in the United States and France 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 new e-commerce sales in the United States. 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.

The fixed costs associated with owning, operating and maintaining these large, highly-automated distribution centers in the United States and France during a period of economic weakness or declining sales could result in lower operating efficiencies and financial deleverage. This fixed cost structure may make it difficult for us to maintain profitability if sales volumes decline for an extended period of time and could have a material adverse effect on our financial condition, results of operations or cash flows.

Our distribution facilities may also be interrupted by disasters, such as earthquakes (which are known to occur in the Northwestern United States and Japan), tornadoes 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.

We May be Adversely Affected by Currency Exchange Rate Fluctuations

Although the majority of our product purchases are denominated in U.S. dollars, the cost of these products may be affected by the relative changes in the value of the local currency of the manufacturer. Price increases caused by currency exchange rate fluctuations may make our products less competitive or have an adverse effect on our margins. Our international revenues and expenses generally are derived from sales and operations in currencies other than the U.S. dollar. Because the functional currency of many of our subsidiaries is not the U.S. dollar, we are exposed to potentially material gains or losses from the remeasurement of U.S. dollar monetary transactions into the respective functional currencies. Currency exchange rate fluctuations may also disrupt the business of the independent factories that produce our products by making their purchases of raw materials more expensive and more difficult to finance. As a result, currency fluctuations may have a material adverse effect on our financial condition, results of operations or cash flows.

Our Investments 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, resulting in lower interest income, less diversification, longer investment maturities and/or higher other-than-temporary impairments.

We May be Adversely Affected by Labor Disruptions

Our business depends on our ability to source and distribute products in a timely manner. Labor disputes at independent factories 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 and importing seasons, and may have a material adverse effect on our business, potentially resulting in cancelled orders by customers, unanticipated inventory accumulation, and reduced revenues and earnings.

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 substantially all 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 independent factories to produce these materials as necessary, there are no guarantees that additional independent factories will be available. In addition, depending on the timing, any changes 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.

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 people and others. We face intense competition for these individuals worldwide, and there is a significant concentration of well-funded apparel and footwear competitors in and around 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 product mix is weighted substantially toward the fall season. Our annual net sales are weighted more 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 operations 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. 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 or mandated recall or destruction of inventory shipments during key seasons or in other financial penalties. Significant or continuing noncompliance with these standards and laws could 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 in the future, resulting from the alleged failure of our products, could have a material adverse effect on our financial condition, results of operations or cash flows. Some of our products carry warranties for defects in quality and workmanship. We maintain a warranty reserve for 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, fluctuations in financial results, variances from financial market expectations, changes in earnings estimates 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

Three related shareholders, Timothy Boyle, Gertrude Boyle and Sarah Bany, 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 three insiders 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 2 – UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

The Board of Directors has authorized the repurchase of $500,000,000 of the Company’s common stock. As of June 30, 2011, the Company had repurchased 9,190,890 shares under this program at an aggregate purchase price of approximately $421,237,000. 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.

The Company did not repurchase any equity securities during the three months ended June 30, 2011.

Item 6 – EXHIBITS

(a)

Exhibits



10.1		Form of Performance-based Restricted Stock Unit Award Agreement for performance-based restricted stock units granted on or after March 29, 2010.

31.1		Rule 13a-14(a) Certification of Timothy P. Boyle, President and Chief Executive Officer

31.2		Rule 13a-14(a) Certification of Thomas B. Cusick, Senior Vice President, Chief Financial Officer and Treasurer

32.1		Section 1350 Certification of Timothy P. Boyle, President and Chief Executive Officer

32.2		Section 1350 Certification of Thomas B. Cusick, Senior Vice President, Chief Financial Officer and Treasurer

101. INS XBRL Instance Document *

101. SCH XBRL Taxonomy Extension Schema Document *

101. CAL XBRL Taxonomy Extension Calculation Linkbase Document *

101. LAB XBRL Taxonomy Extension Label Linkbase Document *

101. PRE XBRL Taxonomy Extension Presentation Linkbase Document *

Pursuant to Rule 406T of Regulation S-T, these interactive data files are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, or Section 18 of the Securities and Exchange Act of 1934, as amended and otherwise are not subject to liability under those sections.

SIGNATURE

Pursuant to the requirements 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.


				COLUMBIA SPORTSWEAR COMPANY

Date: August 5, 2011				/s/ THOMAS B. CUSICK
				Thomas B. Cusick
				Senior Vice President, Chief Financial Officer and Treasurer (Principal Financial and Accounting Officer)