COLUMBIA SPORTSWEAR CO 10-Q

Item 1. FINANCIAL STATEMENTS COLUMBIA SPORTSWEAR COMPANY CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (in thousands) June 30, 2021 December 31, 2020 June 30, 2020 ASSETS Current Assets: Cash and cash equivalents $ 819,806 $ 790,725 $ 474,793 Short-term investments 1,138 1,224 975 Accounts receivable, net of allowance of $ 10,734 , $ 21,810 , and $ 28,783 , respectively 279,763 452,945 217,536 Inventories, net 676,009 556,530 806,887 Prepaid expenses and other current assets 102,003 54,197 102,574 Total current assets 1,878,719 1,855,621 1,602,765 Property, plant and equipment, at cost, net of accumulated depreciation of $ 585,104 , $ 574,247 , and $ 546,397 , respectively 297,237 309,792 328,904 Operating lease right-of-use assets 350,798 339,244 365,521 Intangible assets, net 102,733 103,558 122,105 Goodwill 68,594 68,594 68,594 Deferred income taxes 97,746 96,126 73,395 Other non-current assets 67,472 63,636 61,113 Total assets $ 2,863,299 $ 2,836,571 $ 2,622,397 LIABILITIES AND EQUITY Current Liabilities: Short-term borrowings $ — $ — $ 2,789 Accounts payable 267,677 206,697 255,702 Accrued liabilities 227,209 257,278 203,827 Operating lease liabilities 71,149 65,466 70,916 Income taxes payable 1,565 23,181 2,594 Total current liabilities 567,600 552,622 535,828 Non-current operating lease liabilities 344,216 353,181 347,967 Income taxes payable 48,805 49,922 48,863 Deferred income taxes 151 5,205 7,942 Other long-term liabilities 40,870 42,870 28,968 Total liabilities 1,001,642 1,003,800 969,568 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; 66,148 , 66,252 , and 66,148 , issued and outstanding, respectively — 20,165 5,396 Retained earnings 1,863,813 1,811,800 1,653,293 Accumulated other comprehensive income (loss) ( 2,156 ) 806 ( 5,860 ) Total shareholders' equity 1,861,657 1,832,771 1,652,829 Total liabilities and shareholders' equity $ 2,863,299 $ 2,836,571 $ 2,622,397 See accompanying notes to condensed consolidated financial statements 1 Table of Contents COLUMBIA SPORTSWEAR COMPANY CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) Three Months Ended June 30, Six Months Ended June 30, (in thousands, except per share amounts) 2021 2020 2021 2020 Net sales $ 566,370 $ 316,611 $ 1,191,976 $ 884,839 Cost of sales 273,853 170,381 578,057 466,895 Gross profit 292,517 146,230 613,919 417,944 Selling, general and administrative expenses 261,766 217,652 516,155 494,472 Net licensing income 4,244 1,122 7,711 4,241 Operating income (loss) 34,995 ( 70,300 ) 105,475 ( 72,287 ) Interest income (expense), net 598 ( 805 ) 876 1,008 Other non-operating income (expense), net ( 294 ) 935 ( 598 ) 2,673 Income (loss) before income tax 35,299 ( 70,170 ) 105,753 ( 68,606 ) Income tax benefit (expense) 5,385 19,463 ( 9,169 ) 18,112 Net income (loss) $ 40,684 $ ( 50,707 ) $ 96,584 $ ( 50,494 ) Earnings (loss) per share: Basic $ 0.61 $ ( 0.77 ) $ 1.46 $ ( 0.76 ) Diluted $ 0.61 $ ( 0.77 ) $ 1.44 $ ( 0.76 ) Weighted average shares outstanding: Basic 66,327 66,135 66,345 66,553 Diluted 66,787 66,135 66,858 66,553 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 June 30, Six Months Ended June 30, (in thousands) 2021 2020 2021 2020 Net income (loss) $ 40,684 $ ( 50,707 ) $ 96,584 $ ( 50,494 ) Other comprehensive income (loss): Unrealized gains (losses) on derivative transactions (net of tax effects of $ 1,183 , $ 1,521 , $( 2,185 ) and $( 2,624 ), respectively) ( 3,551 ) ( 4,862 ) 5,012 6,663 Foreign currency translation adjustments (net of tax effects of $( 265 ), $( 460 ), $ 149 and $ 37 , respectively) 5,230 6,976 ( 7,974 ) ( 8,098 ) Other comprehensive income (loss) 1,679 2,114 ( 2,962 ) ( 1,435 ) Comprehensive income (loss) $ 42,363 $ ( 48,593 ) $ 93,622 $ ( 51,929 ) See accompanying notes to condensed consolidated financial statements 3 Table of Contents COLUMBIA SPORTSWEAR COMPANY CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) Six Months Ended June 30, (in thousands) 2021 2020 Cash flows from operating activities: Net income (loss) $ 96,584 $ ( 50,494 ) Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation, amortization, and non-cash lease expense 60,962 65,924 Provision for uncollectible accounts receivable ( 9,757 ) 22,815 Loss on disposal or impairment of property, plant and equipment and right-of-use assets 201 8,800 Deferred income taxes ( 9,667 ) 4,362 Stock-based compensation 9,823 7,712 Changes in operating assets and liabilities: Accounts receivable 180,456 244,112 Inventories, net ( 123,737 ) ( 202,646 ) Prepaid expenses and other current assets ( 48,160 ) ( 3,199 ) Other assets ( 337 ) ( 14,596 ) Accounts payable 59,085 3,397 Accrued liabilities ( 30,130 ) ( 89,323 ) Income taxes payable ( 22,652 ) ( 12,633 ) Operating lease assets and liabilities ( 47,436 ) ( 26,264 ) Other liabilities 1,927 4,757 Net cash provided by (used in) operating activities 117,162 ( 37,276 ) Cash flows from investing activities: Purchases of short-term investments — ( 35,045 ) Sales and maturities of short-term investments 1,184 36,631 Capital expenditures ( 12,387 ) ( 20,959 ) Net cash used in investing activities ( 11,203 ) ( 19,373 ) Cash flows from financing activities: Proceeds from credit facilities 19,888 375,759 Repayments on credit facilities ( 19,683 ) ( 373,390 ) Payment of line of credit issuance fees — ( 1,674 ) Proceeds from issuance of common stock related to stock-based compensation 20,287 1,987 Tax payments related to stock-based compensation ( 5,440 ) ( 4,304 ) Repurchase of common stock ( 54,500 ) ( 132,889 ) Cash dividends paid ( 34,540 ) ( 17,195 ) Net cash used in financing activities ( 73,988 ) ( 151,706 ) Net effect of exchange rate changes on cash ( 2,890 ) ( 2,861 ) Net increase (decrease) in cash and cash equivalents 29,081 ( 211,216 ) Cash and cash equivalents, beginning of period 790,725 686,009 Cash and cash equivalents, end of period $ 819,806 $ 474,793 Supplemental disclosures of cash flow information: Cash paid during the year for income taxes $ 81,497 $ 13,294 Supplemental disclosures of non-cash investing and financing activities: Property, plant and equipment acquired through increase in liabilities $ 4,268 $ 2,414 See accompanying notes to condensed consolidated financial statements 4 Table of Contents COLUMBIA SPORTSWEAR COMPANY CONDENSED CONSOLIDATED STATEMENTS OF EQUITY (Unaudited) Three Months Ended June 30, 2021 (in thousands, except per share amounts) Common Stock Retained Earnings Accumulated Other Comprehensive Income (Loss) Total Shares Outstanding Amount BALANCE, MARCH 31, 2021 66,457 $ 22,230 $ 1,850,415 $ ( 3,835 ) $ 1,868,810 Net income (loss) — — 40,684 — 40,684 Other comprehensive income (loss): Unrealized losses on derivative transactions, net — — — ( 3,551 ) ( 3,551 ) Foreign currency translation adjustment, net — — — 5,230 5,230 Cash dividends ($ 0.26 per share) — — ( 17,255 ) — ( 17,255 ) Issuance of common stock related to stock-based compensation, net 110 6,433 — — 6,433 Stock-based compensation expense — 4,949 — — 4,949 Repurchase of common stock ( 419 ) ( 33,612 ) ( 10,031 ) — ( 43,643 ) BALANCE, JUNE 30, 2021 66,148 $ — $ 1,863,813 $ ( 2,156 ) $ 1,861,657 Three Months Ended June 30, 2020 (in thousands, except per share amounts) Common Stock Retained Earnings Accumulated Other Comprehensive Income (Loss) Total Shares Outstanding Amount BALANCE, MARCH 31, 2020 66,116 $ 565 $ 1,704,000 $ ( 7,974 ) $ 1,696,591 Net income (loss) — — ( 50,707 ) — ( 50,707 ) Other comprehensive income (loss): Unrealized losses on derivative transactions, net — — — ( 4,862 ) ( 4,862 ) Foreign currency translation adjustment, net — — — 6,976 6,976 Issuance of common stock related to stock-based compensation, net 32 794 — — 794 Stock-based compensation expense — 4,037 — — 4,037 BALANCE, JUNE 30, 2020 66,148 $ 5,396 $ 1,653,293 $ ( 5,860 ) $ 1,652,829 See accompanying notes to condensed consolidated financial statements 5 Table of Contents COLUMBIA SPORTSWEAR COMPANY CONDENSED CONSOLIDATED STATEMENTS OF EQUITY (Unaudited) Six Months Ended June 30, 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 (loss) — — 96,584 — 96,584 Other comprehensive income (loss): Unrealized gains on derivative transactions, net — — — 5,012 5,012 Foreign currency translation adjustment, net — — — ( 7,974 ) ( 7,974 ) Cash dividends ($ 0.52 per share) — — ( 34,540 ) — ( 34,540 ) Issuance of common stock related to stock-based compensation, net 424 14,847 — — 14,847 Stock-based compensation expense — 9,823 — — 9,823 Repurchase of common stock ( 528 ) ( 44,835 ) ( 10,031 ) — ( 54,866 ) BALANCE, JUNE 30, 2021 66,148 $ — $ 1,863,813 $ ( 2,156 ) $ 1,861,657 Six Months Ended June 30, 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 (loss) — — ( 50,494 ) — ( 50,494 ) Other comprehensive income (loss): Unrealized gains on derivative transactions, net — — — 6,663 6,663 Foreign currency translation adjustment, net — — — ( 8,098 ) ( 8,098 ) Cash dividends ($ 0.26 per share) — — ( 17,195 ) — ( 17,195 ) Issuance of common stock related to stock-based compensation, net 144 ( 2,317 ) — — ( 2,317 ) Stock-based compensation expense — 7,712 — — 7,712 Repurchase of common stock ( 1,557 ) ( 4,936 ) ( 127,953 ) — ( 132,889 ) BALANCE, JUNE 30, 2020 66,148 $ 5,396 $ 1,653,293 $ ( 5,860 ) $ 1,652,829 See accompanying notes to condensed consolidated financial statements 6 Table of Contents COLUMBIA SPORTSWEAR COMPANY INDEX TO NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS NOTE PAGE Note 1 Basis of Presentation and Organization 8 Note 2 Revenues 9 Note 3 Intangible Assets, Net 10 Note 4 Short-Term Borrowings and Credit Lines 11 Note 5 Income Taxes 11 Note 6 Commitments and Contingencies 11 Note 7 Shareholders' Equity 11 Note 8 Stock-Based Compensation 11 Note 9 Earnings (Loss) Per Share 12 Note 10 Accumulated Other Comprehensive Income (Loss) 12 Note 11 Segment Information 14 Note 12 Financial Instruments and Risk Management 15 Note 13 Fair Value Measures 17 7 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 June 30, 2021, December 31, 2020 and June 30, 2020, the results of operations for the three and six months ended June 30, 2021 and 2020, and cash flows for the six months ended June 30, 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 and six months ended June 30, 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 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. 8 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 June 30, 2021 (in thousands) U.S. LAAP EMEA Canada Total Product category net sales Apparel, Accessories and Equipment $ 316,896 $ 56,038 $ 64,518 $ 15,598 $ 453,050 Footwear 62,169 21,937 24,056 5,158 113,320 Total $ 379,065 $ 77,975 $ 88,574 $ 20,756 $ 566,370 Channel net sales Wholesale $ 176,187 $ 32,069 $ 80,552 $ 13,495 $ 302,303 Direct-to-consumer 202,878 45,906 8,022 7,261 264,067 Total $ 379,065 $ 77,975 $ 88,574 $ 20,756 $ 566,370 Three Months Ended June 30, 2020 (in thousands) U.S. LAAP EMEA Canada Total Product category net sales Apparel, Accessories and Equipment $ 151,456 $ 47,876 $ 39,010 $ 5,575 $ 243,917 Footwear 31,789 19,434 19,281 2,190 72,694 Total $ 183,245 $ 67,310 $ 58,291 $ 7,765 $ 316,611 Channel net sales Wholesale $ 73,334 $ 31,219 $ 53,086 $ 2,264 $ 159,903 Direct-to-consumer 109,911 36,091 5,205 5,501 156,708 Total $ 183,245 $ 67,310 $ 58,291 $ 7,765 $ 316,611 Six Months Ended June 30, 2021 (in thousands) U.S. LAAP EMEA Canada Total Product category net sales Apparel, Accessories and Equipment $ 634,245 $ 134,761 $ 110,814 $ 42,140 $ 921,960 Footwear 153,482 55,191 48,525 12,818 270,016 Total $ 787,727 $ 189,952 $ 159,339 $ 54,958 $ 1,191,976 Channel net sales Wholesale $ 377,068 $ 87,619 $ 138,316 $ 34,713 $ 637,716 Direct-to-consumer 410,659 102,333 21,023 20,245 554,260 Total $ 787,727 $ 189,952 $ 159,339 $ 54,958 $ 1,191,976 9 Table of Contents Index to Notes to Consolidated Financial Statements COLUMBIA SPORTSWEAR COMPANY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued) Six Months Ended June 30, 2020 (in thousands) U.S. LAAP EMEA Canada Total Product category net sales Apparel, Accessories and Equipment $ 461,133 $ 123,789 $ 78,940 $ 32,224 $ 696,086 Footwear 97,980 46,172 35,199 9,402 188,753 Total $ 559,113 $ 169,961 $ 114,139 $ 41,626 $ 884,839 Channel net sales Wholesale $ 276,202 $ 88,593 $ 95,342 $ 25,726 $ 485,863 Direct-to-consumer 282,911 81,368 18,797 15,900 398,976 Total $ 559,113 $ 169,961 $ 114,139 $ 41,626 $ 884,839 Performance Obligations For the three and six months ended June 30, 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 June 30, 2021, December 31, 2020 and June 30, 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. NOTE 3—INTANGIBLE ASSETS, NET Intangible assets, net consisted of the following: (in thousands) June 30, 2021 December 31, 2020 June 30, 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 ) ( 13,976 ) Customer relationships ( 18,188 ) ( 17,363 ) ( 16,538 ) Accumulated amortization ( 32,386 ) ( 31,561 ) ( 30,514 ) Net carrying amount 4,812 5,637 6,684 Intangible assets not subject to amortization 97,921 97,921 115,421 Intangible assets, net $ 102,733 $ 103,558 $ 122,105 Amortization expense for intangible assets subject to amortization was $ 0.4 million and $ 0.7 million for the three months ended June 30, 2021 and 2020, respectively, and was $ 0.8 million and $ 1.5 million for the six months ended June 30, 2021, and 2020, respectively. The following table presents the estimated annual amortization expense for the years ending 2021 through 2025: (in thousands) 2021 $ 1,650 2022 1,650 2023 1,650 2024 688 2025 — 10 Table of Contents Index to Notes to Consolidated Financial Statements COLUMBIA SPORTSWEAR COMPANY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued) 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 June 30, 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 June 30, 2021, there was no balance outstanding under these facilities. NOTE 5—INCOME TAXES For the three months ended June 30, 2021 and 2020, the Company's effective income tax rates were negative 15.3 % and 27.7 %, respectively. For the six months ended June 30, 2021 and 2020, the Company's effective income tax rates were 8.7 % and 26.4 %, respectively. The decrease in the effective income tax rate for the three and six months ended June 30, 2021 was primarily due to a non-recurring decrease in accrued foreign withholding taxes. 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 June 30, 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 June 30, 2021, the Company had repurchased 27.3 million shares at an aggregate purchase price of $ 1,072.6 million and has $ 427.4 million remaining available. During the three and six months ended June 30, 2021, the Company purchased an aggregate of $ 43.6 million and $ 54.9 million, respectively, 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 June 30, Six Months Ended June 30, (in thousands) 2021 2020 2021 2020 Stock options $ 1,861 $ 1,755 $ 3,771 $ 3,459 Restricted stock units 3,088 2,282 6,052 4,253 Total $ 4,949 $ 4,037 $ 9,823 $ 7,712 Stock Options During the six months ended June 30, 2021, the Company granted a total of 533,105 stock options at a weighted average grant date fair value of $ 17.52 per share. As of June 30, 2021, unrecognized costs related to outstanding stock options totaled $ 15.6 million, 11 Table of Contents Index to Notes to Consolidated Financial Statements COLUMBIA SPORTSWEAR COMPANY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued) before any related tax benefit. As of June 30, 2021, unrecognized costs related to stock options are expected to be recognized over a weighted average period of 2.77 years. Restricted Stock Units During the six months ended June 30, 2021, the Company granted 171,773 restricted stock units at a weighted average grant date fair value of $ 96.16 per share. As of June 30, 2021, unrecognized costs related to outstanding restricted stock units totaled $ 26.3 million, before any related tax benefit. As of June 30, 2021, unrecognized costs related to restricted stock units are expected to be recognized over a weighted average period of 2.53 years. NOTE 9—EARNINGS (LOSS) PER SHARE Earnings (loss) 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. A reconciliation of the common shares used in the denominator for computing basic and diluted EPS is as follows: Three Months Ended June 30, Six Months Ended June 30, (in thousands, except per share amounts) 2021 2020 2021 2020 Weighted average common shares outstanding, used in computing basic earnings (loss) per share 66,327 66,135 66,345 66,553 Effect of dilutive stock options and restricted stock units 460 — 513 — Weighted average common shares outstanding, used in computing diluted earnings (loss) per share 66,787 66,135 66,858 66,553 Earnings (loss) per share of common stock: Basic $ 0.61 $ ( 0.77 ) $ 1.46 $ ( 0.76 ) Diluted $ 0.61 $ ( 0.77 ) $ 1.44 $ ( 0.76 ) Stock options, service-based restricted stock units, and performance-based restricted stock representing 611,143 and 793,051 shares of common stock for the three and six months ended June 30, 2021, 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. Stock options, service-based restricted stock units, and performance-based restricted stock representing 2,468,516 and 2,334,223 shares of common stock for the three and six months ended June 30, 2020, respectively, were outstanding but were excluded from the computation of diluted EPS because their effect would have been anti-dilutive due to a net loss in the period 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. 12 Table of Contents Index to Notes to Consolidated Financial Statements COLUMBIA SPORTSWEAR COMPANY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued) The following table sets forth the changes in Accumulated other comprehensive income (loss) for the three months ended June 30, 2021: (in thousands) Unrealized holding gains (losses) on derivative transactions Foreign currency translation adjustments Total Balance at March 31, 2021 $ ( 806 ) $ ( 3,029 ) $ ( 3,835 ) Other comprehensive income (loss) before reclassifications ( 3,903 ) 5,230 1,327 Amounts reclassified from accumulated other comprehensive income (loss) (1) 352 — 352 Net other comprehensive income (loss) during the year ( 3,551 ) 5,230 1,679 Balance at June 30, 2021 $ ( 4,357 ) $ 2,201 $ ( 2,156 ) (1) Amounts reclassified are recorded in Net sales or Cost of sales 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 June 30, 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 March 31, 2020 $ ( 4 ) $ 21,007 $ ( 28,977 ) $ ( 7,974 ) Other comprehensive income (loss) before reclassifications — ( 3,347 ) 6,976 3,629 Amounts reclassified from accumulated other comprehensive income (loss) (1) — ( 1,515 ) — ( 1,515 ) Net other comprehensive income (loss) during the year — ( 4,862 ) 6,976 2,114 Balance at June 30, 2020 $ ( 4 ) $ 16,145 $ ( 22,001 ) $ ( 5,860 ) (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 six months ended June 30, 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 5,376 ( 7,974 ) ( 2,598 ) Amounts reclassified from accumulated other comprehensive income (loss) (1) ( 364 ) — ( 364 ) Net other comprehensive income (loss) during the year 5,012 ( 7,974 ) ( 2,962 ) Balance at June 30, 2021 $ ( 4,357 ) $ 2,201 $ ( 2,156 ) (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. 13 Table of Contents Index to Notes to Consolidated Financial Statements COLUMBIA SPORTSWEAR COMPANY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued) The following table sets forth the changes in Accumulated other comprehensive income (loss) for the six months ended June 30, 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 — 11,015 ( 8,098 ) 2,917 Amounts reclassified from accumulated other comprehensive income (loss) (1) — ( 4,352 ) — ( 4,352 ) Net other comprehensive income (loss) during the year — 6,663 ( 8,098 ) ( 1,435 ) Balance at June 30, 2020 $ ( 4 ) $ 16,145 $ ( 22,001 ) $ ( 5,860 ) (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. 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 June 30, Six Months Ended June 30, (in thousands) 2021 2020 2021 2020 Net sales to unrelated entities: U.S. $ 379,065 $ 183,245 $ 787,727 $ 559,113 LAAP 77,975 67,310 189,952 169,961 EMEA 88,574 58,291 159,339 114,139 Canada 20,756 7,765 54,958 41,626 $ 566,370 $ 316,611 $ 1,191,976 $ 884,839 Segment operating income (loss): U.S. $ 82,057 $ ( 18,155 ) $ 181,718 $ 21,877 LAAP ( 999 ) ( 2,184 ) 8,719 3,954 EMEA 11,532 139 21,594 73 Canada 633 ( 8,776 ) 6,861 ( 4,625 ) Total segment operating income (loss) 93,223 ( 28,976 ) 218,892 21,279 Unallocated corporate expenses ( 58,228 ) ( 41,324 ) ( 113,417 ) ( 93,566 ) Interest income (expense), net 598 ( 805 ) 876 1,008 Other non-operating income (expense), net ( 294 ) 935 ( 598 ) 2,673 Income (loss) before income tax $ 35,299 $ ( 70,170 ) $ 105,753 $ ( 68,606 ) 14 Table of Contents Index to Notes to Consolidated Financial Statements COLUMBIA SPORTSWEAR COMPANY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued) Concentrations The Company had one customer that accounted for 12.5 % and 14.3 % of Accounts receivable, net on the Condensed Consolidated Balance Sheets as of June 30, 2021, and December 31, 2020, respectively. The Company had two customers that accounted for 13.3 % and 12.9 % of Accounts receivable, net as of June 30, 2020. No single customer accounted for 10% or more of Net sales in the Condensed Consolidated Statement of Operations for the three and six months ended June 30, 2021 and 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. These costs or benefits are included in 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 (loss) . 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) June 30, 2021 December 31, 2020 June 30, 2020 Derivative instruments designated as cash flow hedges: Currency forward contracts $ 530,840 $ 417,707 $ 381,599 Derivative instruments not designated as cash flow hedges: Currency forward contracts 258,377 326,280 223,500 At June 30, 2021, $ 5.0 million of deferred net losses on both outstanding and matured derivatives recorded in Other comprehensive income (loss) are expected to be reclassified to Net income (loss) 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 June 30, 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 $ 2.4 million at June 30, 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. 15 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 balance sheet classification and fair value of derivative instruments: (in thousands) Balance Sheet Classification June 30, 2021 December 31, 2020 June 30, 2020 Derivative instruments designated as cash flow hedges: Derivative instruments in asset positions: Currency forward contracts Prepaid expenses and other current assets $ 1,850 $ 947 $ 10,839 Currency forward contracts Other non-current assets 6,772 1,126 6,775 Derivative instruments in liability positions: Currency forward contracts Accrued liabilities 7,351 7,573 80 Currency forward contracts Other long-term liabilities 2,396 6,590 — Derivative instruments not designated as cash flow hedges: Derivative instruments in asset positions: Currency forward contracts Prepaid expenses and other current assets 1,578 1,650 4,641 Derivative instruments in liability positions: Currency forward contracts Accrued liabilities 1,830 2,268 524 The following table presents the statement of operations effect and classification of derivative instruments: Three Months Ended June 30, Six Months Ended June 30, (in thousands) Statement Of Operations Classification 2021 2020 2021 2020 Currency Forward Contracts: Derivative instruments designated as cash flow hedges: Gain (loss) recognized in other comprehensive income (loss), net of tax — $ ( 3,903 ) $ ( 3,347 ) $ 5,376 $ 11,015 Gain (loss) reclassified from accumulated other comprehensive income (loss) to income for the effective portion Net sales ( 111 ) 165 ( 11 ) 43 Gain (loss) reclassified from accumulated other comprehensive income (loss) to income for the effective portion Cost of sales ( 348 ) 1,826 424 4,621 Gain reclassified from accumulated other comprehensive income (loss) to income as a result of cash flow hedge discontinuance Other non-operating income (expense), net — 6 106 1,117 Derivative instruments not designated as cash flow hedges: Gain (loss) recognized in income Other non-operating income (expense), net ( 1,619 ) ( 319 ) ( 722 ) 1,330 16 Table of Contents Index to Notes to Consolidated Financial Statements COLUMBIA SPORTSWEAR COMPANY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued) 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. Assets and liabilities measured at fair value on a recurring basis as of June 30, 2021 are as follows: (in thousands) Level 1 Level 2 Level 3 Total Assets: Cash equivalents: Money market funds $ 159,897 $ — $ — $ 159,897 Short-term investments: Money market funds 162 — — 162 Mutual fund shares 976 — — 976 Other current assets: Derivative financial instruments — 3,428 — 3,428 Non-current assets: Money market funds 3,120 — — 3,120 Mutual fund shares 17,390 — — 17,390 Derivative financial instruments — 6,772 — 6,772 Total assets measured at fair value $ 181,545 $ 10,200 $ — $ 191,745 Liabilities: Accrued liabilities: Derivative financial instruments $ — $ 9,181 $ — $ 9,181 Other long-term liabilities: Derivative financial instruments — 2,396 — 2,396 Total liabilities measured at fair value $ — $ 11,577 $ — $ 11,577 17 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 Assets and liabilities measured at fair value on a recurring basis at June 30, 2020 are as follows: (in thousands) Level 1 Level 2 Level 3 Total Assets: Cash equivalents: Money market funds $ 151,823 $ — $ — $ 151,823 Short-term investments: Money market funds 51 — — 51 Mutual fund shares 924 — — 924 Other current assets: Derivative financial instruments — 15,480 — 15,480 Non-current assets: Money market funds 4,173 — — 4,173 Mutual fund shares 11,425 — — 11,425 Derivative financial instruments — 6,775 — 6,775 Total assets measured at fair value $ 168,396 $ 22,255 $ — $ 190,651 Liabilities: Accrued liabilities: Derivative financial instruments $ — $ 604 $ — $ 604 Total liabilities measured at fair value $ — $ 604 $ — $ 604 18 Table of Contents