This Annual Report, including Item 1 of Part I and Items 7 and 7A of Part II, contains forward-looking statements. Forward-looking statements include any statements related to our expectations regarding future performance or market position, including any statements regarding anticipated sales across markets, distribution channels and product categories, access to raw materials and factory capacity, and financing and working capital requirements and resources.

These forward-looking statements, and others we make from time to time, are subject to a number of risks and uncertainties. Many factors may cause actual results to differ materially from those projected in forward-looking statements, including the risks described above in Item 1A, Risk Factors. We do not undertake any duty to either update forward-looking statements after the date they are made or 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, develop, market and distribute active outdoor apparel, footwear and related accessories and equipment under the Columbia, Mountain Hardwear, Sorel, Montrail, and Pacific Trail brands. Each of our brands is distributed through a mix of wholesale distribution channels, independent distributors, our own retail stores and licensees.

As a consumer products company, the popularity of outdoor activities and changing design trends affect the desirability of our products. Therefore, we seek to influence, 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 by creating persuasive and memorable marketing communications to drive consumer awareness and demand. Failure to respond to consumer needs and preferences in a timely and adequate manner could have a material adverse effect on our sales and profitability.

Strategy and Outlook

Our business, like other branded consumer product companies, is heavily dependent upon discretionary consumer spending patterns. Our net sales volumes have been negatively affected by the volatility of the global economy and its impact on consumer purchasing behavior, and retailers' behavior related to advance orders, order cancellations and seasonal reorders. The current macro-economic environment has caused tightening of credit for some of our wholesale customers, independent distributors and consumers and a significant slowing of retail sales. This has resulted in, and could continue to cause, a more cautious approach by many of our wholesale customers and independent distributors when placing advance orders for seasonal products and reducing, delaying delivery of, or cancelling advance orders placed in earlier periods. In addition, the effects of foreign currency exchange rates may amplify potential net sales decline if the U.S. dollar continues to strengthen compared to foreign currencies in our direct markets. We expect our retail revenues to partially offset some of this anticipated wholesale revenue decline.

We believe that we have appropriately factored into our plans our historical experiences, incremental sales from our new retail stores, and the estimated effect of changes in foreign currency exchange rates. However, unfavorable and unprecedented macro-economic conditions have increased the uncertainty of our planning and forecasts. In this challenging economic environment, we are also mindful of our reliance on the overall financial health of our wholesale customers and their ability to continue to access credit markets to fund their purchases and day-to-day operations.

Strategic Growth Initiatives

Our goal is 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. Specifically, our growth strategies include:

• designing authentic, innovative products that address activity-specific performance needs of active outdoor enthusiasts. Our goal is to help consumers of every ability enjoy their outdoor lifestyles and activities more comfortably for longer periods;

• expanding our direct-to-consumer business by building a network of branded retail stores in key metropolitan cities, expanding our network of outlet retail stores in the United States, Europe and Canada, and establishing an e-commerce platform. We expect our branded retail stores and e-commerce platform to increase brand awareness and demand for our products by creating compelling retail environments that communicate key marketing initiatives and product innovation, and offering a larger breadth of product assortments than are available in any of our wholesale customers' stores. In addition, the goal of opening additional outlet retail stores in outlet centers in the United States, Europe and Canada is to support our brands by allowing us to liquidate end-of-season products with less reliance on traditional wholesale and discount channels. We expect this strategy to require significant long-term lease obligations, capital investments in leasehold improvements, information systems, additional personnel and other operating expenses.

• creating and delivering targeted brand-enhancing advertising and marketing programs that communicate distinct, inspiring brand positions for each of our outdoor brands, differentiate our brands from other branded competitors as well as from the private label brands developed and marketed by many of our large retail customers, and result in increasing demand and strong emotional connections with consumers;

• expanding our global footwear business by building a footwear organization with proven skills in designing, developing and marketing innovative, performance-driven products and by expanding distribution into leading footwear retail channels in key markets;

• increasing demand in our European business by offering product assortments and marketing programs that are consistent with our global focus on innovative products, compelling retail presentation and brand-enhancing communications.

Overview

The following discussion of our results of operations and liquidity and capital resources, including known trends and uncertainties identified by management, should be read in conjunction with the Consolidated Financial Statements and accompanying Notes that appear elsewhere in this annual report.

In 2007, we reclassified our geographical net sales and segment reporting to reflect changes in our internal management and oversight structure as well as growth of the international distributor business. Net sales to international distributors, previously included as part of "Other International," were regrouped into either the Europe, Middle-East and Africa ("EMEA") or Latin America and Asia Pacific ("LAAP") region, in accordance with the markets in which each distributor operates. Previously reported geographical net sales information for fiscal year 2006 has been reclassified to reflect this change.

All references to years relate to the calendar year ended December 31. Highlights for the year ended December 31, 2008 include the following:

• Net sales decreased $38.2 million, or 3%, to $1,317.8 million in 2008 from $1,356.0 million in 2007. Changes in foreign currency exchange rates compared to 2007 contributed one percentage point of

• Our backlog for the spring 2009 selling season, reported as of September 30, 2008, decreased $43.5 million, or 10.5%, to $370.9 million from $414.4 million as of September 30, 2007. Changes in foreign currency exchange rates compared to 2007 contributed less than one percentage point of benefit to the spring 2009 backlog comparison. The decrease in our spring backlog was the result of a decline in orders in the United States, EMEA and Canada driven primarily by a decline in orders of Columbia-branded sportswear. Although we cannot predict with certainty any future results, our reported backlog is one indicator of our anticipated net sales for the spring 2009 selling season. Many factors, however, could cause actual sales to differ materially from reported order backlog, including cancellation of orders by customers, changes in foreign currency exchange rates and continued deterioration of macroeconomic conditions. We expect that incremental sales through our expanded base of branded and outlet retail stores will partially offset some of the anticipated wholesale sales decline for the spring 2009 season. Moreover, our spring 2009 backlog should not be used in forecasting sales beyond the spring 2009 selling season.

• Gross profit increased 30 basis points to 43.1% in 2008 from 42.8% in 2007. Gross profit margins expanded as a result of a lower volume of close-out product sales and an increase in average selling prices, partially offset by the negative effects of an increased mix of sales to distributors, which carry lower margins than wholesale customers, and the effects of changes in foreign currency exchange rates.

• Selling, general and administrative expense increased $44.6 million, or 12%, to $430.4 million in 2008 from $385.8 million in 2007. This increase was primarily due to our planned investment in incremental marketing activities in 2008 to drive consumer demand for our brands, together with initial investment and incremental operating costs of our new retail stores.

• A non-cash pre-tax charge of $24.7 million, or $0.46 per diluted share after-tax, was incurred in the fourth quarter of 2008 for the write-down of acquired intangible assets related to our acquisitions of the Pacific Trail and Montrail brands in 2006. The impairment charge related primarily to goodwill and trademarks and resulted from our annual evaluation of intangible asset values.

• Net income decreased 34% to $95.0 million in 2008 from $144.5 million in 2007, and diluted earnings per share decreased to $2.74 in 2008, including a $0.46 per diluted share after-tax impairment charge, compared to $3.96 in 2007. 2008 net income was unfavorably affected by reduced revenues, increased selling, general and administrative expenses and the non-cash pre-tax impairment charge, partially offset by a lower effective tax rate in 2008 compared to 2007. Our effective tax rate was 24.7% in 2008 compared to 30.6% in 2007. The reduced 2008 tax rate resulted primarily from a higher proportion of our income being generated in foreign jurisdictions with lower overall tax rates, increased foreign tax credits and the favorable conclusion of a European tax examination.

• Since the inception of our stock repurchase plan in 2004 through December 31, 2008, our Board of Directors has authorized the repurchase of $500 million of our common stock. As of December 31, 2008, we have repurchased 8,694,657 shares under this program at an aggregate purchase price of approximately $400 million. Shares of our common stock may be purchased in the open market or through privately negotiated transactions, subject to market conditions. The repurchase program does not obligate us to acquire any specific number of shares or to acquire shares over any specified period of time.

                                                                 Year Ended December 31,
                                                       2008                2007              % Change
                                                       (In millions, except for percentage changes)
Geographical Net Sales to Unrelated Entities:
United States                                     $         727.7     $         767.2                 (5 )%
EMEA                                                        267.2               287.0                 (7 )%
LAAP                                                        198.2               175.7                 13 %
Canada                                                      124.7               126.1                 (1 )%

                                                  $       1,317.8     $       1,356.0                 (3 )%
Categorical Net Sales to Unrelated Entities:
Sportswear                                        $         540.9     $         565.6                 (4 )%
Outerwear                                                   491.7               497.6                 (1 )%
Footwear                                                    217.2               227.4                 (4 )%
Accessories and Equipment                                    68.0                65.4                  4 %

                                                  $       1,317.8     $       1,356.0                 (3 )%
Brand Net Sales to Unrelated Entities:
Columbia                                          $       1,162.0     $       1,211.2                 (4 )%
Mountain Hardwear                                            95.0                82.6                 15 %
Sorel                                                        48.1                45.6                  5 %
Montrail                                                     10.2                12.7                (20 )%
Pacific Trail                                                 2.5                 3.9                (36 )%

                                                  $       1,317.8     $       1,356.0                 (3 )%

Although we cannot predict future results with certainty and despite current global economic conditions, we are committed to our demand creation and retail expansion strategies to stimulate increased consumer demand and improve inventory management with minimal disruption to our wholesale distribution channels. With our commitment to investment in these strategies, a well-developed sourcing and distribution infrastructure and a proven design and product development team, we believe that we are well positioned to establish sustainable platforms that will support long-term growth and profitability.

Results of Operations

Net income decreased $49.5 million, or 34%, to $95.0 million in 2008 from $144.5 million in 2007. Diluted earnings per share decreased to $2.74 in 2008, including a $0.46 per diluted share after-tax impairment charge, from $3.96 in 2007. Net income increased $21.5 million, or 17%, to $144.5 million in 2007 from $123.0 million in 2006. Diluted earnings per share increased to $3.96 in 2007 from $3.36 in 2006.

The following table sets forth, for the periods indicated, the percentage relationship to net sales of specified items in our Consolidated Statements of Operations:

                                                      2008      2007      2006
        Net sales                                     100.0 %   100.0 %   100.0 %
        Cost of sales                                  56.9      57.2      58.0

        Gross profit                                   43.1      42.8      42.0
        Selling, general and administrative expense    32.7      28.5      28.5
        Impairment of acquired intangible assets        1.9        -         -
        Net licensing income                            0.5       0.4       0.5

        Income from operations                          9.0      14.7      14.0
        Interest income, net                            0.6       0.6       0.4

        Income before income tax                        9.6      15.3      14.4
        Income tax expense                             (2.4 )    (4.6 )    (4.8 )

        Net income                                      7.2 %    10.7 %     9.6 %

Year Ended December 31, 2008 Compared to Year Ended December 31, 2007

Net Sales: Consolidated net sales decreased $38.2 million, or 3%, to $1,317.8 million in 2008 from $1,356.0 million in 2007. Changes in foreign currency exchange rates compared to 2007 contributed one percentage point of benefit to the consolidated net sales comparison. The decrease in net sales was led by the United States, followed by the EMEA region and Canada, partially offset by increased net sales in the LAAP region. By product category, the reduction in net sales was led by sportswear, followed by footwear and outerwear, partially offset by increased net sales of accessories and equipment.

Sales by Product Category

Net sales of sportswear decreased $24.7 million, or 4%, to $540.9 million in 2008 from $565.6 million in 2007. The decrease in sportswear net sales was predominantly the result of decreased net sales in the United States, followed by the EMEA region, offset by increased net sales in the LAAP region and Canada. The sportswear net sales decrease was led by the United States wholesale business for the Columbia brand, partially offset by incremental net sales through our expanded base of branded and outlet retail stores. We primarily attribute the decrease in wholesale net sales of sportswear to the lower initial order volumes and the weak U.S. retail environment resulting from difficult macro-economic conditions.

Net sales of outerwear decreased $5.9 million, or 1%, to $491.7 million in 2008 from $497.6 million in 2007. The decrease in outerwear net sales was led by the United States, followed by the EMEA region and Canada, partially offset by an increase in the LAAP region. The decrease in outerwear net sales was predominantly the result of decreased sales of the Columbia brand in the United States wholesale and EMEA direct businesses. The decrease in both regions was primarily the result of lower initial order volumes for the spring and fall 2008 seasons as well as the weak retail environment resulting from difficult macro-economic conditions. The decrease in sales of Columbia-branded outerwear was partially offset by increased sales of Mountain Hardwear-branded outerwear.

Net sales of footwear decreased $10.2 million, or 4%, to $217.2 million in 2008 from $227.4 million in 2007. The decrease in footwear net sales was led by the EMEA region, followed by Canada, partially offset by increased net sales of footwear in the LAAP region and the United States. The decrease in footwear net sales in the EMEA region was led by EMEA direct footwear net sales, followed by EMEA distributor net sales. The decrease in EMEA direct footwear net sales was primarily the result of lower initial order volumes due to continued product assortment and marketing challenges, coupled with economic uncertainty in that region. The decrease in EMEA distributor footwear net sales was primarily a result of earlier shipments of spring 2008 product that occurred in the fourth quarter of 2007.

Net sales of accessories and equipment increased $2.6 million, or 4%, to $68.0 million in 2008 from $65.4 million in 2007. Accessories and equipment sales growth was led by the LAAP region, followed by Canada, partially offset by a decrease in net sales in the United States, while net sales of accessories and equipment remained flat in the EMEA region.

Sales by Geographic Region

Net sales in the United States decreased $39.5 million, or 5%, to $727.7 million in 2008 from $767.2 million in 2007. The reduction in net sales in the United States was led by sportswear, followed by outerwear and accessories and equipment, while sales of footwear remained essentially flat. The net sales decrease was led by the wholesale business for the Columbia brand, partially offset by increased net sales through our expanded base of branded and outlet retail stores. During 2008 we opened 15 new outlet retail stores and 5 branded retail stores in the United States, ending the year with 28 outlet retail stores and 8 branded retail stores in the United States.

Net sales in the EMEA region decreased $19.8 million, or 7%, to $267.2 million in 2008 from $287.0 million in 2007. Changes in foreign currency exchange rates contributed five percentage points of benefit to

EMEA net sales compared to 2007. The decrease in net sales in the EMEA region was led by footwear, followed by outerwear and sportswear, while net sales of accessories and equipment remained essentially flat. The decrease in net sales in the EMEA region included a decrease in EMEA direct net sales, partially offset by an increase in net sales to EMEA distributors. The decrease in EMEA direct net sales was the result of lower initial order volumes for the spring and fall 2008 seasons due to continued product assortment and marketing challenges, coupled with economic uncertainty in the region. The increase in net sales to EMEA distributors primarily reflects increased Columbia-branded outerwear and sportswear net sales to our largest distributor in the region.

Net sales in the LAAP region increased $22.5 million, or 13%, to $198.2 million in 2008 from $175.7 million in 2007. Changes in foreign currency exchange rates contributed less than one percentage point of benefit to LAAP net sales compared to 2007. Sales growth in the LAAP region was led by our Japan business, which benefited from foreign currency exchange rates, followed by our LAAP distributor business, while net sales in Korea remained essentially flat, including a negative impact from foreign currency exchange rates. The increase in Japan net sales was primarily the result of growth in our retail business as well as continued expansion with key wholesale partners, particularly in the sports chain channel.

Net sales in Canada decreased $1.4 million, or 1%, to $124.7 million in 2008 from $126.1 million in 2007. Changes in foreign currency exchange rates contributed two percentage points of benefit to Canada net sales compared to 2007. The decrease in net sales in Canada was led by outerwear, followed by footwear, partially offset by increased net sales of sportswear and accessories and equipment. The decrease in outerwear was primarily attributable to lower initial order volumes of Columbia-branded products for the fall 2008 season, partially offset by incremental sales of Mountain Hardwear-branded products that were previously sold through third party distributors.

Gross Profit: Gross profit as a percentage of net sales increased to 43.1% in 2008 from 42.8% in 2007. Gross profit margins expanded in all of our product categories primarily due to a lower volume of close-out product sales and an increase in average selling prices, partially offset by the negative effects of an increased mix of sales to distributors, which carry lower margins than wholesale customers, and the effects of changes in foreign currency exchange rates.

A decrease in 2008 close-out product sales at slightly lower gross margins compared to 2007 had a favorable affect on our consolidated gross profits. We primarily attribute this decrease to earlier close-out sales of fall 2007 product in the fourth quarter of 2007.

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. We, like others, have chosen to include these expenses as a component of selling, general and administrative expense.

Selling, General and Administrative Expense: Selling, general and administrative expense ("SG&A") includes all costs associated with our design, merchandising, marketing, distribution and corporate functions including related depreciation and amortization.

SG&A expense increased $44.6 million, or 12%, to $430.4 million in 2008 from $385.8 million in 2007. Selling expenses increased $8.2 million, or 7%, while general and administrative expenses increased $36.4 million, or 13%. As a percentage of net sales, SG&A expense increased to 32.7% of net sales in 2008 from 28.5% of net sales in 2007.

Selling expenses, including commissions and advertising, increased to 9.2% of net sales in 2008 from 8.3% of net sales in 2007. We attribute the increase in selling expenses as a percentage of net sales to our increased marketing investments to drive consumer demand for our brands, which was amplified by a decrease in consolidated net sales in 2008 compared with the same period in 2007.

The increase in general and administrative expenses primarily resulted from the start-up and operational costs of our new retail stores. Depreciation and amortization included in SG&A expense totaled $30.1 million for 2008, compared to $29.3 million for the same period in 2007. We expect SG&A to continue to increase as we pursue our retail expansion strategies.

Impairment of Acquired Intangible Assets: We incurred a $24.7 million non-cash pre-tax charge, or approximately $0.46 per diluted share after tax, for the write-down of acquired intangible assets related to our acquisitions of the Pacific Trail and Montrail brands in 2006. The impairment charge related primarily to goodwill and trademarks and resulted from our annual evaluation of intangible asset values. These brands have not achieved our sales and profitability objectives and the deterioration in the macro-economic environment and resulting effect on consumer demand have decreased the probability of realizing these objectives in the near future. Going forward we remain committed to marketing and distributing Montrail-branded footwear through the outdoor specialty, running specialty and sporting goods channels. Beginning in 2009, Pacific Trail products will be sold solely through licensing arrangements.

Net Licensing Income: Net licensing income increased $0.8 million, or 15%, to $6.0 million in 2008 from $5.2 million in 2007. In 2008, licensing income was led by Columbia-branded leather accessories, followed by Columbia-branded socks, eyewear, insulated products including soft-sided coolers, and camping gear.

Interest Income, Net: Interest income was $7.6 million in 2008 compared to $9.0 million in 2007. The decrease in interest income was primarily due to lower average investment yields compared with the same period in 2007. Interest expense was nominal in 2008 and 2007.

Income Tax Expense: Our provision for income taxes decreased to $31.2 million in 2008 from $63.6 million in 2007. This decrease resulted from lower income before tax combined with a decrease in our effective income tax rate to 24.7% in 2008 compared to 30.6% in 2007. The decrease in our tax rate resulted primarily from generating a higher proportion of our income in foreign jurisdictions with lower overall tax rates, increased foreign tax credits and the favorable conclusion of a European tax examination.

Year Ended December 31, 2007 Compared to Year Ended December 31, 2006

Net Sales: Consolidated net sales increased $68.3 million, or 5%, to $1,356.0 million in 2007 from $1,287.7 million in 2006. Changes in foreign currency exchange rates compared with 2006 contributed two percentage points of consolidated net sales growth. Increased net sales were realized in each major geographic region in which we operate, led by LAAP, followed by the United States, EMEA and Canada. By product category, increased net sales were led by sportswear, followed by footwear, accessories and equipment, while sales of . . .