Significant risks and uncertainties

Amer Sports Corporation’s short-term risks are particularly associated with consumer demand in North America and Europe, subcontractors’ ability to manufacture and deliver sourced products on a timely basis and on acceptable terms, and continued successful execution of the company’s cost reduction and efficiency improvement measures.

For example, the following risks can potentially have an impact on the company’s development:

• The United States represents 40% of the world-wide sporting goods market and approximately 40% of Amer Sports’ sales. There is a correlation between the demand for sporting goods and the development of US retail sales. Therefore, a change in overall US retail sales can have an impact on Amer Sports’ business.

• Winter sports equipment represents 24% of Amer Sports’ sales. Weather conditions can have an impact on the company’s results. Historically, however, poor snow conditions in one region are compensated for by good snow conditions in another region.

• A change in the euro’s value vis-à-vis other currencies has an impact on Amer Sports’ results. The impact, however, is limited due to the fact that the company’s euro–US dollar position is relatively balanced.

• Despite extensive testing of its products before market launch, the company cannot completely rule out the risk of product recalls and legal actions related to product liability. Amer Sports has standard insurance cover against the financial consequences of product recalls and product liability cases. Product quality issues could harm Amer Sports’ reputation and, as a result, could have an adverse effect on its sales.

• Losing a significant client would affect Amer Sports’ sales. However, this risk is limited because Amer Sports’ client base is diversified, with the five largest clients accounting for less than 10% of the company’s annual sales.

• Amer Sports uses steel, rubber, and oil-based raw materials and components in its products. Price increases affecting these materials can have a negative impact on product costs. Amer Sports typically introduces new products every year, which can, depending on the market situation, offset the impact of material cost increases.

• A large part of Amer Sports’ production is outsourced. The aim is to minimize the supply, quality, and price risks associated with purchasing. Although the business areas audit their subcontractors regularly, possible delivery problems or breaches of contract by subcontractors may have an impact on Amer Sports’ operations.

• Amer Sports’ most important production facilities are the Winter Sports Equipment factories in Austria and Bulgaria, Precor’s factory in the United States, and Suunto factory in Finland. In addition, Amer Sports has major factories in Eastern Europe, which are owned by subcontractors. Amer Sports’ most important distribution centers are located in Germany, Austria, the United States, and France. Any unexpected production or delivery breaks in these units would have a negative impact on the company’s business.

• A characteristic feature of the sporting goods industry is the need to protect intellectual property rights and disputes connected with them. The material impacts on Amer Sports’ financial position and operational result arising from pending litigation affecting the business areas and decisions of the authorities are assessed regularly, and current estimates are presented publicly when necessary.

• Amer Sports has goodwill and intangible assets with indefinite useful lives of EUR 453 million on its balance sheet, as at December 31, 2009, which is 62% of the company’s net equity. The valuation of goodwill and intangible assets on Amer Sports’ consolidated balance sheet is, to a significant degree, dependent on management estimates of the future cash generation capacity of those assets. Management reviews the carrying amounts of its goodwill and intangible assets annually to determine whether there is any indication of impairment. The company undertook goodwill and intangible asset impairment testing during the fourth quarter of 2009 and did not recognize any impairment in its 2009 financial statements.

• Amer Sports sources a significant portion of its products from subcontractors located throughout Asia, which exposes it to the political, economic, and regulatory conditions in that area, and to a variety of local business and labor practice issues. The violation of labor laws, regulations or standards by Amer Sports’ subcontractors, or the divergence of those subcontractors’ labor practices from those generally accepted as ethical in the European Union or the international community, could have a material adverse effect on Amer Sports’ public image and the reputation of its brands.

• Amer Sports relies on data communications to operate its business, and it is in the process of integrating its IT platform globally and implementing further applications to better control its supply chain. System failures and service interruptions may occur as the result of a number of factors. Any of these factors could have a material adverse affect on Amer Sports’ business.