COLUMBIA SPORTSWEAR CO 10-Q

Item 1. FINANCIAL STATEMENTS COLUMBIA SPORTSWEAR COMPANY CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (in thousands) March 31, 2021 December 31, 2020 March 31, 2020 ASSETS Current Assets: Cash and cash equivalents $ 873,641 $ 790,725 $ 671,108 Short-term investments 920 1,224 35,828 Accounts receivable, net of allowance of $ 13,480 , $ 21,810 , and $ 27,579 , respectively 338,787 452,945 312,951 Inventories, net 525,704 556,530 577,124 Prepaid expenses and other current assets 66,173 54,197 113,726 Total current assets 1,805,225 1,855,621 1,710,737 Property, plant and equipment, at cost, net of accumulated depreciation of $ 576,597 , $ 574,247 , and $ 530,329 , respectively 300,063 309,792 332,997 Operating lease right-of-use assets 363,652 339,244 387,984 Intangible assets, net 103,146 103,558 122,850 Goodwill 68,594 68,594 68,594 Deferred income taxes 86,825 96,126 73,827 Other non-current assets 66,401 63,636 54,498 Total assets $ 2,793,906 $ 2,836,571 $ 2,751,487 LIABILITIES AND EQUITY Current Liabilities: Short-term borrowings $ — $ — $ 174,443 Accounts payable 165,555 206,697 150,971 Accrued liabilities 224,674 257,278 214,044 Operating lease liabilities 81,308 65,466 64,456 Income taxes payable 3,431 23,181 6,441 Total current liabilities 474,968 552,622 610,355 Non-current operating lease liabilities 356,766 353,181 364,300 Income taxes payable 50,285 49,922 48,320 Deferred income taxes 4,406 5,205 8,944 Other long-term liabilities 38,671 42,870 22,977 Total liabilities 925,096 1,003,800 1,054,896 Commitments and contingencies (Note 6) Shareholders' Equity: Preferred stock; 10,000 shares authorized; no ne issued and outstanding — — — Common stock (no par value); 250,000 shares authorized; 66,457 , 66,252 , and 66,116 , issued and outstanding, respectively 22,230 20,165 565 Retained earnings 1,850,415 1,811,800 1,704,000 Accumulated other comprehensive income (loss) ( 3,835 ) 806 ( 7,974 ) Total shareholders' equity 1,868,810 1,832,771 1,696,591 Total liabilities and shareholders' equity $ 2,793,906 $ 2,836,571 $ 2,751,487 See accompanying notes to condensed consolidated financial statements 1 Table of Contents COLUMBIA SPORTSWEAR COMPANY CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) Three Months Ended March 31, (in thousands, except per share amounts) 2021 2020 Net sales $ 625,606 $ 568,228 Cost of sales 304,204 296,514 Gross profit 321,402 271,714 Selling, general and administrative expenses 254,389 276,820 Net licensing income 3,467 3,119 Income (loss) from operations 70,480 ( 1,987 ) Interest income, net 278 1,813 Other non-operating income (expense), net ( 304 ) 1,738 Income before income tax 70,454 1,564 Income tax expense ( 14,554 ) ( 1,351 ) Net income 55,900 213 Earnings per share: Basic $ 0.84 $ — Diluted $ 0.84 $ — Weighted average shares outstanding: Basic 66,363 66,970 Diluted 66,885 67,412 See accompanying notes to condensed consolidated financial statements 2 Table of Contents COLUMBIA SPORTSWEAR COMPANY CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (Unaudited) Three Months Ended March 31, (in thousands) 2021 2020 Net income $ 55,900 $ 213 Other comprehensive loss: Unrealized gains on derivative transactions (net of tax effects of $( 3,368 ) and $( 4,145 ), respectively) 8,563 11,525 Foreign currency translation adjustments (net of tax effects of $ 414 and $ 497 , respectively) ( 13,204 ) ( 15,074 ) Other comprehensive loss ( 4,641 ) ( 3,549 ) Comprehensive income (loss) $ 51,259 $ ( 3,336 ) See accompanying notes to condensed consolidated financial statements 3 Table of Contents COLUMBIA SPORTSWEAR COMPANY CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) Three Months Ended March 31, (in thousands) 2021 2020 Cash flows from operating activities: Net income $ 55,900 $ 213 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation, amortization, and non-cash lease expense 30,459 32,994 Provision for uncollectible accounts receivable ( 7,849 ) 19,229 Loss on disposal or impairment of property, plant and equipment 131 2,138 Deferred income taxes 4,577 3,802 Stock-based compensation 4,874 3,675 Changes in operating assets and liabilities: Accounts receivable 117,818 150,687 Inventories, net 25,117 23,510 Prepaid expenses and other current assets ( 11,150 ) ( 11,922 ) Other assets 51 ( 5,873 ) Accounts payable ( 41,194 ) ( 100,402 ) Accrued liabilities ( 27,253 ) ( 77,861 ) Income taxes payable ( 19,291 ) ( 9,429 ) Operating lease assets and liabilities ( 21,273 ) ( 16,807 ) Other liabilities ( 18 ) ( 1,200 ) Net cash provided by operating activities 110,899 12,754 Cash flows from investing activities: Purchases of short-term investments — ( 35,044 ) Sales and maturities of short-term investments 1,054 1,631 Capital expenditures ( 3,896 ) ( 9,452 ) Net cash used in investing activities ( 2,842 ) ( 42,865 ) Cash flows from financing activities: Proceeds from credit facilities 7,753 175,719 Repayments on credit facilities ( 7,532 ) ( 1,054 ) Proceeds from issuance of common stock related to stock-based compensation 13,772 1,096 Tax payments related to stock-based compensation ( 5,358 ) ( 4,207 ) Repurchase of common stock ( 11,223 ) ( 132,889 ) Cash dividends paid ( 17,285 ) ( 17,195 ) Net cash provided by (used in) financing activities ( 19,873 ) 21,470 Net effect of exchange rate changes on cash ( 5,268 ) ( 6,260 ) Net increase (decrease) in cash and cash equivalents 82,916 ( 14,901 ) Cash and cash equivalents, beginning of period 790,725 686,009 Cash and cash equivalents, end of period $ 873,641 $ 671,108 Supplemental disclosures of cash flow information: Cash paid during the year for income taxes $ 37,534 $ 19,953 Supplemental disclosures of non-cash investing and financing activities: Property, plant and equipment acquired through increase in liabilities $ 2,832 $ 2,503 See accompanying notes to condensed consolidated financial statements 4 Table of Contents COLUMBIA SPORTSWEAR COMPANY CONDENSED CONSOLIDATED STATEMENTS OF EQUITY (Unaudited) Three Months Ended March 31, 2021 (in thousands, except per share amounts) Common Stock Retained Earnings Accumulated Other Comprehensive Income (Loss) Total Shares Outstanding Amount BALANCE, DECEMBER 31, 2020 66,252 $ 20,165 $ 1,811,800 $ 806 $ 1,832,771 Net income — — 55,900 — 55,900 Other comprehensive loss: Unrealized gains on derivative transactions, net — — — 8,563 8,563 Foreign currency translation adjustment, net — — — ( 13,204 ) ( 13,204 ) Cash dividends ($ 0.26 per share) — — ( 17,285 ) — ( 17,285 ) Issuance of common stock related to stock-based compensation, net 314 8,414 — — 8,414 Stock-based compensation expense — 4,874 — — 4,874 Repurchase of common stock ( 109 ) ( 11,223 ) — — ( 11,223 ) BALANCE, MARCH 31, 2021 66,457 $ 22,230 $ 1,850,415 $ ( 3,835 ) $ 1,868,810 Three Months Ended March 31, 2020 (in thousands, except per share amounts) Common Stock Retained Earnings Accumulated Other Comprehensive Income (Loss) Total Shares Outstanding Amount BALANCE, DECEMBER 31, 2019 67,561 $ 4,937 $ 1,848,935 $ ( 4,425 ) $ 1,849,447 Net income — — 213 — 213 Other comprehensive loss: Unrealized gains on derivative transactions, net — — — 11,525 11,525 Foreign currency translation adjustment, net — — — ( 15,074 ) ( 15,074 ) Cash dividends ($ 0.26 per share) — — ( 17,195 ) — ( 17,195 ) Issuance of common stock related to stock-based compensation, net 112 ( 3,111 ) — — ( 3,111 ) Stock-based compensation expense — 3,675 — — 3,675 Repurchase of common stock ( 1,557 ) ( 4,936 ) ( 127,953 ) — ( 132,889 ) BALANCE, MARCH 31, 2020 66,116 $ 565 $ 1,704,000 $ ( 7,974 ) $ 1,696,591 See accompanying notes to condensed consolidated financial statements 5 Table of Contents COLUMBIA SPORTSWEAR COMPANY INDEX TO NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS NOTE PAGE Note 1 Basis of Presentation and Organization 7 Note 2 Revenues 8 Note 3 Intangible Assets, Net 9 Note 4 Short-Term Borrowings and Credit Lines 9 Note 5 Income Taxes 9 Note 6 Commitments and Contingencies 10 Note 7 Shareholders' Equity 10 Note 8 Stock-Based Compensation 10 Note 9 Earnings Per Share 10 Note 10 Accumulated Other Comprehensive Income (Loss) 11 Note 11 Segment Information 12 Note 12 Financial Instruments and Risk Management 12 Note 13 Fair Value Measures 14 6 Table of Contents Index to Notes to Consolidated Financial Statements COLUMBIA SPORTSWEAR COMPANY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS NOTE 1—BASIS OF PRESENTATION AND ORGANIZATION The accompanying unaudited condensed consolidated financial statements have been prepared by the management of Columbia Sportswear Company (together with its wholly owned subsidiaries, the "Company") and, in the opinion of management, include all normal recurring material adjustments necessary to present fairly the Company's financial position as of March 31, 2021, December 31, 2020 and March 31, 2020, and the results of operations and cash flows for the three months ended March 31, 2021 and 2020. The December 31, 2020 financial information was derived from the Company's audited consolidated financial statements included in the Company's Annual Report on Form 10-K for the year ended December 31, 2020. A significant part of the Company's business is of a seasonal nature; therefore, results of operations for the three months ended March 31, 2021 are not necessarily indicative of results to be expected for other quarterly periods or for the full year. Certain information and disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") 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, as amended, 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 audited consolidated financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 2020. Principles of Consolidation The condensed consolidated financial statements include the accounts of Columbia Sportswear Company and its wholly owned subsidiaries. Intercompany balances and transactions have been eliminated in consolidation. Estimates and Assumptions The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed 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 the more significant estimates relate to revenue recognition; allowance for uncollectible accounts receivable; obsolescence reserves for excess, close-out and slow moving inventory; impairment of long-lived assets, intangible assets and goodwill; and income taxes. Recently Adopted Accounting Pronouncements Effective January 1, 2021, the Company adopted Accounting Standards Update ("ASU") No. 2019-12 , Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, which, among other things, removes specific exceptions for recognizing deferred taxes for investments, performing intraperiod allocation and calculating income taxes in interim periods, as well as targeted impacts to the accounting for taxes under hybrid tax regimes. At adoption, there was not a material impact to the Company's financial position, results of operations or cash flows. Recent Accounting Pronouncements Not Yet Adopted None. 7 Table of Contents Index to Notes to Consolidated Financial Statements COLUMBIA SPORTSWEAR COMPANY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued) NOTE 2—REVENUES Disaggregated Revenue As disclosed in Note 11, the Company has four geographic reportable segments: United States ("U.S."), Latin America and Asia Pacific ("LAAP"), Europe, Middle East and Africa ("EMEA") and Canada. The following tables disaggregate the Company's operating segment Net sales by product category and channel, which the Company believes provides a meaningful depiction of how the nature, timing, and uncertainty of Net sales are affected by economic factors: Three Months Ended March 31, 2021 (in thousands) U.S. LAAP EMEA Canada Total Product category net sales Apparel, Accessories and Equipment $ 317,349 $ 78,723 $ 46,296 $ 26,542 $ 468,910 Footwear 91,313 33,254 24,469 7,660 156,696 Total $ 408,662 $ 111,977 $ 70,765 $ 34,202 $ 625,606 Channel net sales Wholesale $ 200,881 $ 55,550 $ 57,764 $ 21,218 $ 335,413 Direct-to-consumer 207,781 56,427 13,001 12,984 290,193 Total $ 408,662 $ 111,977 $ 70,765 $ 34,202 $ 625,606 Three Months Ended March 31, 2020 (in thousands) U.S. LAAP EMEA Canada Total Product category net sales Apparel, Accessories and Equipment $ 309,677 $ 75,913 $ 39,930 $ 26,649 $ 452,169 Footwear 66,191 26,738 15,918 7,212 116,059 Total $ 375,868 $ 102,651 $ 55,848 $ 33,861 $ 568,228 Channel net sales Wholesale $ 202,868 $ 57,374 $ 42,256 $ 23,462 $ 325,960 Direct-to-consumer 173,000 45,277 13,592 10,399 242,268 Total $ 375,868 $ 102,651 $ 55,848 $ 33,861 $ 568,228 Performance Obligations For the three months ended March 31, 2021 and 2020, Net sales recognized from performance obligations related to prior periods were not material. Net sales expected to be recognized in any future period related to remaining performance obligations are not material. Contract Balances As of March 31, 2021, December 31, 2020 and March 31, 2020, contract liabilities included in Accrued liabilities on the Condensed Consolidated Balance Sheets, which consisted of obligations associated with the Company's gift card and customer loyalty programs, were not material. 8 Table of Contents Index to Notes to Consolidated Financial Statements COLUMBIA SPORTSWEAR COMPANY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued) NOTE 3—INTANGIBLE ASSETS, NET Intangible assets, net consisted of the following: (in thousands) March 31, 2021 December 31, 2020 March 31, 2020 Intangible assets subject to amortization: Patents and purchased technology $ 14,198 $ 14,198 14,198 Customer relationships 23,000 23,000 23,000 Gross carrying amount 37,198 37,198 37,198 Accumulated amortization: Patents and purchased technology ( 14,198 ) ( 14,198 ) ( 13,644 ) Customer relationships ( 17,775 ) ( 17,363 ) ( 16,125 ) Accumulated amortization ( 31,973 ) ( 31,561 ) ( 29,769 ) Net carrying amount 5,225 5,637 7,429 Intangible assets not subject to amortization 97,921 97,921 115,421 Intangible assets, net $ 103,146 $ 103,558 $ 122,850 Amortization expense for intangible assets subject to amortization was $ 0.4 million and $ 0.7 million for the three months ended March 31, 2021 and 2020, respectively. The following table presents the estimated annual amortization expense for the years 2021 through 2025: (in thousands) 2021 $ 1,650 2022 1,650 2023 1,650 2024 688 2025 — NOTE 4—SHORT-TERM BORROWINGS AND CREDIT LINES Except as disclosed below, there have been no significant changes to the Company's short-term borrowings and credit lines as described in Note 7 in the Company's Annual Report on Form 10-K for the year ended December 31, 2020. At the beginning of 2021 the Company's Japanese subsidiary had two separate unsecured and uncommitted overdraft facilities guaranteed by the Company providing for borrowings up to a maximum of ¥ 1.5 billion and US$ 7.0 million. In March 2021, the Company's Japanese subsidiary entered into an agreement to establish an unsecured and uncommitted overdraft facility providing for borrowings up to a maximum of ¥ 400.0 million. The combined available borrowings of the three lines was approximately US$ 24.2 million at March 31, 2021. Borrowings under the ¥ 1.5 billion and ¥ 400.0 million overdraft facilities accrue interest at the Tokyo Interbank Offered Rate plus 50 basis points and borrowings under the US$ 7.0 million overdraft facility accrue interest at 150 basis points. As of March 31, 2021, there was no balance outstanding under these facilities. NOTE 5—INCOME TAXES For the three months ended March 31, 2021 and 2020, the Company's effective income tax rates were 20.7 % and 86.4 %, respectively. The decrease in the effective income tax rate for the three months ended March 31, 2021 compared to the three months ended March 31, 2020 was primarily driven by a change in the mix of book income or loss among jurisdictions and the recording of a foreign jurisdiction valuation allowance during the prior year period. 9 Table of Contents Index to Notes to Consolidated Financial Statements COLUMBIA SPORTSWEAR COMPANY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued) NOTE 6—COMMITMENTS AND CONTINGENCIES The Company is involved in litigation and various legal matters arising in the normal course of business, including matters related to employment, retail, intellectual property, contractual agreements, lease agreements, and various regulatory compliance activities. Management has considered facts related to legal and regulatory matters and opinions of counsel handling these matters, and does not believe the ultimate resolution of these proceedings will have a material adverse effect on the Company's financial position, results of operations or cash flows. NOTE 7—SHAREHOLDERS' EQUITY Since the inception of the Company's stock repurchase plan in 2004 through March 31, 2021, the Company's Board of Directors has authorized the repurchase of $ 1.5 billion 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, and generally settle subsequent to the trade date. 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. Under this program as of March 31, 2021, the Company had repurchased 26.9 million shares at an aggregate purchase price of $ 1,029.0 million and has $ 471.0 million remaining available. During the three months ended March 31, 2021, the Company purchased an aggregate of $ 11.2 million of the Company's common stock under this program. NOTE 8—STOCK-BASED COMPENSATION The Company's Stock Incentive Plan allows for grants of incentive stock options, non-statutory stock options, restricted stock awards, restricted stock units, and other stock-based or cash-based awards. Stock-Based Compensation Expense Stock-based compensation expense consisted of the following: Three Months Ended March 31, (in thousands) 2021 2020 Stock options $ 1,910 $ 1,704 Restricted stock units 2,964 1,971 Total $ 4,874 $ 3,675 Stock Options During the three months ended March 31, 2021, the Company granted a total of 496,609 stock options at a weighted average grant date fair value of $ 17.26 per share. As of March 31, 2021, unrecognized costs related to outstanding stock options totaled $ 17.0 million, before any related tax benefit. As of March 31, 2021, unrecognized costs related to stock options are expected to be recognized over a weighted average period of 2.92 years. Restricted Stock Units During the three months ended March 31, 2021, the Company granted 150,912 restricted stock units at a weighted average grant date fair value of $ 95.39 per share. As of March 31, 2021, unrecognized costs related to outstanding restricted stock units totaled $ 27.7 million, before any related tax benefit. As of March 31, 2021, unrecognized costs related to restricted stock units are expected to be recognized over a weighted average period of 2.74 years. NOTE 9—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. 10 Table of Contents Index to Notes to Consolidated Financial Statements COLUMBIA SPORTSWEAR COMPANY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued) A reconciliation of the common shares used in the denominator for computing basic and diluted EPS is as follows: Three Months Ended March 31, (in thousands, except per share amounts) 2021 2020 Weighted average common shares outstanding, used in computing basic earnings per share 66,363 66,970 Effect of dilutive stock options and restricted stock units 522 442 Weighted average common shares outstanding, used in computing diluted earnings per share 66,885 67,412 Earnings per share of common stock: Basic $ 0.84 $ 0.00 Diluted $ 0.84 $ 0.00 Stock options, service-based restricted stock units, and performance-based restricted stock representing 693,403 and 937,523 shares of common stock for the three months ended March 31, 2021 and 2020, respectively, were outstanding but were excluded from the computation of diluted EPS because their effect would have been anti-dilutive under the treasury stock method or because the shares were subject to performance conditions that had not been met. NOTE 10—ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) Accumulated other comprehensive income (loss) on the Condensed Consolidated Balance Sheets is net of applicable taxes, and consists of unrealized holding gains and losses on available-for-sale securities, unrealized gains and losses on certain derivative transactions and foreign currency translation adjustments. The following table sets forth the changes in Accumulated other comprehensive income (loss) for the three months ended March 31, 2021: (in thousands) Unrealized holding gains (losses) on derivative transactions Foreign currency translation adjustments Total Balance at December 31, 2020 $ ( 9,369 ) $ 10,175 $ 806 Other comprehensive income (loss) before reclassifications 9,279 ( 13,204 ) ( 3,925 ) Amounts reclassified from accumulated other comprehensive income (loss) (1) ( 716 ) — ( 716 ) Net other comprehensive income (loss) during the year 8,563 ( 13,204 ) ( 4,641 ) Balance at March 31, 2021 $ ( 806 ) $ ( 3,029 ) $ ( 3,835 ) (1) Amounts reclassified are recorded in Net sales, Cost of sales, or Other non-operating income (expense), net on the Condensed Consolidated Statements of Operations. Refer to Note 12 for further information regarding reclassifications. The following table sets forth the changes in Accumulated other comprehensive income (loss) for the three months ended March 31, 2020: (in thousands) Unrealized gains (losses) on available for sale securities Unrealized holding gains (losses) on derivative transactions Foreign currency translation adjustments Total Balance at December 31, 2019 $ ( 4 ) $ 9,482 $ ( 13,903 ) $ ( 4,425 ) Other comprehensive income (loss) before reclassifications — 14,362 ( 15,074 ) ( 712 ) Amounts reclassified from accumulated other comprehensive income (loss) (1) — ( 2,837 ) — ( 2,837 ) Net other comprehensive income (loss) during the year — 11,525 ( 15,074 ) ( 3,549 ) Balance at March 31, 2020 $ ( 4 ) $ 21,007 $ ( 28,977 ) $ ( 7,974 ) (1) Amounts reclassified are recorded in Net sales, Cost of sales, or Other non-operating income (expense), net on the Condensed Consolidated Statements of Operations. Refer to Note 12 for further information regarding reclassifications. 11 Table of Contents Index to Notes to Consolidated Financial Statements COLUMBIA SPORTSWEAR COMPANY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued) NOTE 11—SEGMENT INFORMATION The Company has four reportable geographic segments: U.S., LAAP, EMEA, and Canada, which are reflective of the Company's internal organization, management and oversight structure. Each geographic segment operates predominantly in one industry: the design, development, marketing, and distribution of outdoor, active and everyday lifestyle apparel, footwear, accessories, and equipment products. Intersegment net sales and intersegment profits, which are recorded at a negotiated mark-up and eliminated in consolidation, are not material. Unallocated corporate expenses consist of expenses incurred by centrally-managed departments, including global information services, finance, human resources and legal, as well as executive compensation, unallocated benefit program expense, and other miscellaneous costs. The following table presents financial information for the Company's reportable segments: Three Months Ended March 31, (in thousands) 2021 2020 Net sales to unrelated entities: U.S. $ 408,662 $ 375,868 LAAP 111,977 102,651 EMEA 70,765 55,848 Canada 34,202 33,861 $ 625,606 $ 568,228 Segment income (loss) from operations U.S. $ 99,661 $ 40,032 LAAP 9,718 6,138 EMEA 10,062 ( 66 ) Canada 6,228 4,151 Total segment income from operations 125,669 50,255 Unallocated corporate expenses ( 55,189 ) ( 52,242 ) Interest income, net 278 1,813 Other non-operating income (expense), net ( 304 ) 1,738 Income before income tax $ 70,454 $ 1,564 Concentrations The Company had one customer that accounted for 10.2% and 14.3% of Accounts receivable, net on the Condensed Consolidated Balance Sheets as of March 31, 2021, and December 31, 2020, respectively. No single customer accounted for 10% or more of Accounts receivable, net as of March 31, 2020. No single customer accounted for 10% or more of Net sales in the Condensed Consolidated Statement of Operations for the three months ended March 31, 2021 or 2020. NOTE 12—FINANCIAL INSTRUMENTS AND RISK MANAGEMENT In the normal course of business, the Company's financial position, results of operations and cash flows are routinely subject to a variety of risks. These risks include risks associated with financial markets, primarily currency exchange rate risk and, to a lesser extent, interest rate risk and equity market risk. The Company regularly assesses these risks and has established policies and business practices designed to mitigate them. The Company does not engage in speculative trading in any financial market. The Company actively manages the risk of changes in functional currency equivalent cash flows resulting from anticipated non-functional currency denominated purchases and sales. Subsidiaries that use European euros, Canadian dollars, Japanese yen, Chinese renminbi, or Korean won as their functional currency are primarily exposed to changes in functional currency equivalent cash flows from anticipated United States dollar inventory purchases. Subsidiaries that use United States dollars and euros as their functional currency also have non-functional currency denominated sales for which the Company hedges the Canadian dollar and British pound. The Company manages these risks by using currency forward contracts formally designated and effective as cash flow hedges. Hedge effectiveness is generally determined by evaluating the ability of a hedging instrument's cumulative change in fair value to offset the cumulative change in the present value of expected cash flows on the underlying exposures. For forward contracts, forward points are included in the fair value of the cash flow hedge on a prospective basis. These costs or benefits are included in 12 Table of Contents Index to Notes to Consolidated Financial Statements COLUMBIA SPORTSWEAR COMPANY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued) Accumulated other comprehensive income (loss) until the underlying hedge transaction is recognized in either Net sales or Cost of sales , at which time, the forward points will also be recognized as a component of Net income . The Company also uses currency forward contracts not formally designated as hedges to manage the consolidated currency exchange rate risk associated with the remeasurement of non-functional currency denominated monetary assets and liabilities by subsidiaries that use United States dollars, euros, Canadian dollars, yen, won, or renminbi as their functional currency. Non-functional currency denominated monetary assets and liabilities consist primarily of cash and cash equivalents, short-term investments, receivables, payables, deferred income taxes, and intercompany loans. The gains and losses generated on these currency forward contracts not formally designated as hedges are expected to be largely offset in Other non-operating income (expense), net by the gains and losses generated from the remeasurement of the non-functional currency denominated monetary assets and liabilities. The following table presents the gross notional amount of outstanding derivative instruments: (in thousands) March 31, 2021 December 31, 2020 March 31, 2020 Derivative instruments designated as cash flow hedges: Currency forward contracts $ 484,176 $ 417,707 $ 458,823 Derivative instruments not designated as cash flow hedges: Currency forward contracts 219,961 326,280 205,030 At March 31, 2021, $ 3.2 million of deferred net losses on both outstanding and matured derivatives recorded in Other comprehensive loss 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 sa les or Cost of sales in the Condensed Consolidated Statements of Operations. Actual amounts ultimately reclassified to Net sa les or Cost of sales in the Condensed Consolidated Statements of Comprehensive Income (Loss) are dependent on United States dollar exchange rates in effect against the euro, pound sterling, renminbi, Canadian dollar, and yen when outstanding derivative contracts mature. At March 31, 2021, the Company's derivative contracts had a remaining maturity of less than four years . The maximum net exposure to any single counterparty, which is generally limited to the aggregate unrealized gain of all contracts with that counterparty, was $ 2.7 million at March 31, 2021. All of the Company's derivative counterparties have credit ratings that are investment grade or higher. The Company is a party to master netting arrangements that contain features that allow counterparties to net settle amounts arising from multiple separate derivative transactions or net settle in the case of certain triggering events such as a bankruptcy or major default of one of the counterparties to the transaction. The Company 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 March 31, 2021 December 31, 2020 March 31, 2020 Derivative instruments designated as cash flow hedges: Derivative instruments in asset positions: Currency forward contracts Prepaid expenses and other current assets $ 2,438 $ 947 $ 18,945 Currency forward contracts Other non-current assets 6,159 1,126 10,520 Derivative instruments in liability positions: Currency forward contracts Accrued liabilities 4,908 7,573 231 Currency forward contracts Other long-term liabilities 2,337 6,590 — Derivative instruments not designated as cash flow hedges: Derivative instruments in asset positions: Currency forward contracts Prepaid expenses and other current assets 1,759 1,650 4,449 Derivative instruments in liability positions: Currency forward contracts Accrued liabilities 1,793 2,268 978 13 Table of Contents Index to Notes to Consolidated Financial Statements COLUMBIA SPORTSWEAR COMPANY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued) The following table presents the statement of operations effect and classification of derivative instruments: Three Months Ended March 31, (in thousands) Statement Of Operations Classification 2021 2020 Currency Forward Contracts: Derivative instruments designated as cash flow hedges: Gain recognized in other comprehensive loss, net of tax — $ 9,279 $ 14,362 Gain (loss) reclassified from accumulated other comprehensive income (loss) to income for the effective portion Net sales 100 ( 122 ) Gain reclassified from accumulated other comprehensive income (loss) to income for the effective portion Cost of sales 772 2,795 Gain reclassified from accumulated other comprehensive income (loss) to income as a result of cash flow hedge discontinuance Other non-operating income (expense), net 106 1,111 Derivative instruments not designated as cash flow hedges: Gain recognized in income Other non-operating income (expense), net 897 1,649 NOTE 13—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 the Company would receive to sell an asset or pay to transfer a liability in an orderly transaction between market participants, under a three-tier fair value hierarchy that prioritizes the inputs used in measuring fair value as follows: Level 1 — observable inputs such as quoted prices for identical assets or liabilities in active liquid markets; Level 2 — inputs, other than the quoted market prices in active markets, that are observable, either directly or indirectly; or observable market prices in markets with insufficient volume or infrequent transactions; and Level 3 — unobservable inputs for which there is little or no market data available, that require the reporting entity to develop its own assumptions. The Company's assets and liabilities measured at fair value are categorized as Level 1 or Level 2 instruments. 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. 14 Table of Contents Index to Notes to Consolidated Financial Statements COLUMBIA SPORTSWEAR COMPANY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued) Assets and liabilities measured at fair value on a recurring basis as of March 31, 2021 are as follows: (in thousands) Level 1 Level 2 Level 3 Total Assets: Cash equivalents: Money market funds $ 344,886 $ — $ — $ 344,886 United States government treasury bills — 45,000 — 45,000 Short-term investments: Money market funds 99 — — 99 Mutual fund shares 821 — — 821 Other current assets: Derivative financial instruments — 4,197 — 4,197 Non-current assets: Money market funds 3,667 — — 3,667 Mutual fund shares 15,376 — — 15,376 Derivative financial instruments — 6,159 — 6,159 Total assets measured at fair value $ 364,849 $ 55,356 $ — $ 420,205 Liabilities: Accrued liabilities: Derivative financial instruments $ — $ 6,701 $ — $ 6,701 Other long-term liabilities: Derivative financial instruments — 2,337 — 2,337 Total liabilities measured at fair value $ — $ 9,038 $ — $ 9,038 15 Table of Contents Index to Notes to Consolidated Financial Statements COLUMBIA SPORTSWEAR COMPANY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued) Assets and liabilities measured at fair value on a recurring basis at December 31, 2020 are as follows: (in thousands) Level 1 Level 2 Level 3 Total Assets: Cash equivalents: Money market funds $ 119,378 $ — $ — $ 119,378 United States government treasury bills — 234,982 — 234,982 Short-term investments: Money market funds 105 — — 105 Mutual fund shares 1,119 — — 1,119 Other current assets: Derivative financial instruments — 2,597 — 2,597 Non-current assets: Money market funds 4,059 — — 4,059 Mutual fund shares 14,657 — — 14,657 Derivative financial instruments — 1,126 — 1,126 Total assets measured at fair value $ 139,318 $ 238,705 $ — $ 378,023 Liabilities: Accrued liabilities: Derivative financial instruments $ — $ 9,841 $ — $ 9,841 Other long-term liabilities: Derivative financial instruments — 6,590 — 6,590 Total liabilities measured at fair value $ — $ 16,431 $ — $ 16,431 16 Table of Contents Index to Notes to Consolidated Financial Statements COLUMBIA SPORTSWEAR COMPANY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued) Assets and liabilities measured at fair value on a recurring basis at March 31, 2020 are as follows: (in thousands) Level 1 Level 2 Level 3 Total Assets: Cash equivalents: Money market funds $ 128,488 $ — $ — $ 128,488 United States government treasury bills — 44,973 — 44,973 Available-for-sale short-term investments: (1) United States government treasury bills — 35,032 — 35,032 Other short-term investments: Money market funds 14 — — 14 Mutual fund shares 782 — — 782 Other current assets: Derivative financial instruments — 23,394 — 23,394 Non-current assets: Money market funds 3,674 — — 3,674 Mutual fund shares 9,329 — — 9,329 Derivative financial instruments — 10,520 — 10,520 Total assets measured at fair value $ 142,287 $ 113,919 $ — $ 256,206 Liabilities: Accrued liabilities: Derivative financial instruments $ — $ 1,209 $ — $ 1,209 Total liabilities measured at fair value $ — $ 1,209 $ — $ 1,209 (1) Investments have remaining maturities of less than one year. 17 Table of Contents