What changed in this filing

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Item 2. Management’s Discussion and Analysis

2022-05-05 compared with 2021-11-04 · 241 added, 277 removed, 76 unchanged (87% of the section changed)

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Special Note Regarding Forward Looking Statements

This quarterly report contains forward-looking statements within the meaning of federal securities laws.

Forward-looking statements often use words such as "will", "anticipate", "estimate", "expect", "should", "may" and other words and terms of similar meaning or reference future dates.

Forward-looking statements include any statements related to our expectations regarding future performance or market position, including any statements regarding the impacts of the COVID-19 pandemic, store traffic, supply chain disruptions, constraints and costs, inventory receipts and deliveries, net sales and gross margin, profitability, return on investments, inflationary pressures and related price increases, performance obligations, unrecognized costs, derivative instruments, inventory purchase obligations, income tax rates, materiality of legal matters, our ability to meet our liquidity needs, amortization expenses and maturities of liabilities.

These forward-looking statements, and others we make from time to time expressed in good faith, are believed to have a reasonable basis;

however, each forward-looking statement involves risks and uncertainties.

Many factors may cause actual results to differ materially from projected results in forward-looking statements, including the risks described in Item 1A of this quarterly report.

Forward-looking statements are inherently less reliable than historical information.

Except as required by law, we do not undertake any duty to update forward-looking statements after the date they are made or to conform them to actual results or to changes in circumstances or to reflect changes in events, circumstances or expectations.

New factors emerge from time to time and it is not possible for us to predict or assess the effects of all such factors or the extent to which any factor, or combination of factors, may cause results to differ materially from those contained in any forward-looking statement.

We connect active people with their passions through our four well-known brands, Columbia, SOREL, Mountain Hardwear, and prAna, by designing, developing, marketing, and distributing our outdoor, active and everyday lifestyle apparel, footwear, accessories and equipment products to meet the diverse needs of our customers and consumers.

Our products are sold through a mix of wholesale distribution channels, our own direct-to-consumer ("DTC") businesses and independent international distributors.

In addition, we license some of our trademarks across a range of apparel, footwear, accessories, equipment and home products.

The popularity of outdoor activities, active and everyday lifestyles, changing design trends, consumer adoption of innovative performance technologies, variations in seasonal weather, and the availability and desirability of competitor alternatives affect consumer desire for our products.

Therefore, we seek to drive, anticipate and respond to trends and shifts in consumer preferences by developing new products and innovative performance features and designs, creating persuasive and memorable marketing communications to generate consumer awareness, demand and retention, and adjusting the mix, price points and selling channels of available product offerings.

Our production cycle from the design to the delivery of our products requires significant inventory commitment.

We generally solicit orders from wholesale customers and independent international distributors for the fall and spring seasons based on seasonal ordering deadlines that we establish to aid our efforts to plan manufacturing volumes to meet demand.

We typically ship the majority of our advance spring season orders to customers beginning in January and continuing through June.

Similarly, we typically ship the majority of our advance fall season orders to customers beginning in July and continuing through December.

Subsequent to advance order placements, wholesale customers may request replenishment orders for various products as consumer demand increases.

Generally, orders are subject to cancellation prior to the date of shipment.

Our business is affected by the general seasonal trends common to the industry, including seasonal weather and discretionary consumer shopping and spending patterns.

Our products are marketed on a seasonal basis, and our sales are weighted substantially toward the third and fourth quarters, while our operating costs are more equally distributed throughout the year.

In 2020, approximately 65% of our net sales and the majority of our operating income were realized in the second half of the year.

Although impacts from the ongoing COVID-19 pandemic exacerbated seasonal net sales and profitability patterns, this still illustrates our dependence upon sales results in the second half of the year, as well as the less seasonal nature of our operating costs.

Results of operations in any period should not be considered indicative of the results to be expected for any future period.

COVID-19 and Supply Chain Update

The COVID-19 pandemic continues to impact the global economy.

In response to this pandemic, many regional and local governments worldwide continue to implement travel restrictions, business shutdowns or slowdowns, and shelter-in-place or stay-at-home orders.

In the first nine months of 2021, the majority of our stores remained open.

For most of the first quarter of 2021, government mandated lockdowns impacted our stores in Europe, Canada and Japan.

At varying times during the second quarter of 2021, government mandated lockdowns, including pandemic-related temporary store closures or reduced store operating hours, impacted stores in Japan, China, Europe and Canada.

At varying times during the third quarter of 2021, government mandated lockdowns, including pandemic-related temporary store closures or reduced store operating hours, impacted stores in Japan and China.

Overall, our store retail traffic trends improved in the first nine months of 2021, but remained below pre-pandemic levels.

Stores in destination locations and tourist-dependent markets were some of the most impacted stores within our fleet.

In addition, certain of our wholesale customers and international distributors experienced a similar timeline and closed stores or reduced operating hours.

Despite these impacts, consumer demand accelerated in the first nine months of 2021 and we did not realize significant wholesale order cancellations or customer accommodations.

We, our third party partners and our customers continue to be impacted by the supply chain environment, including freight capacity, port congestion, production factory closures, and other logistics constraints.

In the first nine months of 2021, these disruptions and constraints resulted in later timing of Fall 2021 inventory receipts and shipments, as well as higher freight and logistics costs.

We expect these supply chain disruptions, constraints and increases in costs to continue through the balance of this year and into 2022.

In addition, during the third quarter of 2021, government mandated factory closures in Vietnam disrupted our manufacturing partners' operations and impacted production of Fall 2021 and Spring 2022 product.

Factories in Vietnam began to reopen as of October 1, 2021 at less than full capacity.

As a result of these supply chain disruptions and temporary factory closures, we anticipate later than expected Fall 2021 and Spring 2022 inventory receipts and shipments to our wholesale customers and inventory availability for our DTC businesses, resulting in impacts to our future net sales and gross margin.

Business Outlook

The ongoing business disruption and uncertainty surrounding the COVID-19 pandemic and the global supply chain make it difficult to predict our future results.

Consistent with the seasonality and variability of our business, we anticipate 2021 profitability to be weighted toward the second half of the year.

Our full year 2021 financial results are being, or could be, significantly impacted by the following factors:

• the ability of third-party logistics providers to service the demands of our business and the retail industry generally, which may result in cancellations of advance wholesale and distributor orders and reduced availability of inventory to support our DTC business;

• increasing operating costs associated with a constrained supply chain, including increased ocean freight and other logistics related costs;

• unseasonable weather conditions or other unforeseen factors affecting consumer demand and the resulting effect on cancellations of advance wholesale and distributor orders, sales returns, customer accommodations, replenishment orders and reorders, DTC sales, changes in mix and volume of full price sales in relation to promotional and close-out product sales, and suppressed customer and end-consumer demand in subsequent seasons;

• our ability to staff and operate our U.S.

distribution centers, retail stores, and consumer call center during the peak holiday season amid U,S.

labor shortages;

• our ability to secure production capacity with our contract manufacturers, and their ability to maintain operations as pandemic-related outbreaks impact less vaccinated countries/regions;

• changes in consumer demand as a result of ongoing effects from the COVID-19 pandemic and/or related governmental actions and regulations, and any potential incremental cost that may be associated with a U.S.

government vaccine mandate or related testing protocol;

• growth, performance and profitability of our global DTC operations, including depressed consumer traffic in our retail stores and elevated DTC e-commerce growth trends;

• increasing consumer expectations and competitive pressure related to various aspects of our e-commerce business, including speed of product delivery, shipping charges, return privileges and other evolving expectations;

• our ability to effectively manage our inventory, including liquidating excess inventory timely and profitably through close-out sales in our wholesale and DTC businesses;

• difficult economic, geopolitical and competitive environments in certain key markets globally, coupled with global economic uncertainty.

We expect many of these factors to continue into 2022.

In addition, we expect inflationary pressures to continue to build across our business beyond 2021.

We are implementing price increases beginning with our Spring 2022 season and, to a greater extent, our Fall 2022 season to mitigate these higher costs, to the

extent possible, while attempting to minimize potential risks to dampening consumer demand.

We do not expect planned price increases will fully offset these gross margin pressures.

Strategic Priorities

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with "Special Note Regarding Forward Looking Statements", Part I, Item 1 and Part II, Item 1A of this Quarterly Report on Form 10-Q.

In addition, refer to Item 7 in our Annual Report on Form 10-K for the year ended December 31, 2021 for our discussion and analysis comparing financial condition and results of operations from 2021 to 2020.

We connect active people with their passions.

We are a global leader in designing, developing, marketing, and distributing outdoor, active and everyday lifestyle products.

We manage these products in two categories:

apparel, accessories, and equipment products and footwear products.

We provide our products through our four well-known brands:

Columbia, SOREL, Mountain Hardwear, and prAna.

Apparel, accessories, and equipment products are provided by our Columbia, Mountain Hardwear and prAna brands.

Footwear products are provided by our Columbia and SOREL brands.

We sell our products in approximately 90 countries and operate in four geographic segments:

U.S., LAAP, EMEA, and Canada.

We are committed to driving sustainable and profitable long-term growth and investing in our strategic priorities to:

• drive global brand awareness and sales growth through increased, focused demand creation investments;

• drive brand awareness and sales growth through increased, focused demand creation investments;

• enhance consumer experience and digital capabilities in all of our channels and geographies;

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• invest in our people and optimize our organization across our portfolio of brands.

COLUMBIA SPORTSWEAR COMPANY | 2022 FORM 10-Q | 17

Notes to Condensed Consolidated Financial Statements (Unaudited)

Ultimately, we expect our investments to enable market share capture across our brand portfolio, expand gross margin, improve selling, general and administrative expense efficiency, and drive improved operating margin over the long-term.

Business Environment and Trends

Increased Outdoor Participation by Consumers | The COVID-19 pandemic drew a record number of individuals in the United States to spend an increased amount of time outside, including participating in outdoor recreational activities.

While outdoor participation rates may not be maintained, we believe that our addressable consumer base worldwide has been expanded and expect outdoor participation to remain elevated in comparison to pre-pandemic levels.

Casualization of the Apparel and Footwear Market | During the COVID-19 pandemic, we saw a move to casualization by consumers.

Our products provide comfort and function in diverse environments.

We believe we have benefited from this trend and expect it to continue to be a tailwind moving forward.

Decreased Promotional Environment | In the first quarter of 2022, we operated in a low promotional environment and experienced fewer order cancellations, sales returns and customer accommodations than historically experienced.

We expect these trends to remain favorable in early 2022 and expect a gradual return to a more normalized promotional environment and transition towards more normalized trading terms.

For 2022, we do not expect these metrics to return to levels experienced in 2019 and prior years.

Lean Inventory Across the Marketplace | Consumer demand acceleration coupled with supply chain constraints in 2021 resulted in lower inventory in the marketplace at the start of 2022.

Given ongoing supply chain disruptions and the imbalance between global supply and demand, we expect marketplace inventories to remain low until supply chain constraints ease.

In addition, retailers may choose to carry less inventory than pre-pandemic levels and instead rely on replenishments, to the extent possible.

Changes in Consumer Spending Ability and Preferences | We believe government stimulus and unemployment benefits increased consumers’ discretionary spending ability in 2021 and 2020.

In addition, we believe we benefited as consumers shifted from service-based to product-based spending due to their limited ability to travel, attend entertainment-based experiences or purchase certain services.

For 2022, we have experienced and expect to continue to experience a reduction of these tailwinds.

Decreased Direct-to-Consumer Store Traffic | For the first quarter of 2022, the majority of our stores remained open.

At varying times, government efforts to control the spread of COVID-19 impacted our stores in China.

Overall, our global store retail traffic trends continue to improve, with our U.S.

retail store traffic recovering to pre-pandemic levels in the first quarter of 2022.

While store traffic is improving, we expect it to continue to remain uneven across our store fleet by region, depending on regional impacts of the virus and government efforts.

Increased Freight Charges | In the first quarter of 2022, we experienced elevated ocean freight charges as a result of an imbalance of supply and demand for steamship and ocean container capacity and changes in our ocean freight sourcing practices.

We expect our ocean freight charges to be reduced in the latter part of 2022.

However, the imbalance in the marketplace persists and ocean freight costs will remain elevated compared to historical norms.

Additionally, recent increases in oil prices have resulted in fuel surcharges from certain of our freight carriers that deliver product to our retail stores and to consumers.

Later Inventory Receipts | During the third quarter of 2021, several weeks of government mandated factory closures in Vietnam disrupted our manufacturing partners' operations and impacted production of Fall 2021 and Spring 2022 product.

In addition, port congestion and shortages in transportation and labor further slowed the transportation of our inventory.

As a result of these supply chain disruptions, we received Fall 2021 inventory later than expected, and continue to receive Spring 2022 inventory later than originally planned.

We expect the supply chain transit time to modestly improve by late 2022.

However, we continue to anticipate longer than historical transit times for inventory receipts and shipments to our wholesale customers and inventory available for our DTC businesses in 2022, potentially resulting in impacts to future net sales and gross margin.

Manufacturing Capacity Constraints | In 2021, we experienced footwear manufacturing capacity constraints which prevented us from securing footwear product to fully meet demand.

Although we are growing footwear manufacturing capacity in 2022, we again expect demand to outstrip capacity due to anticipated footwear sales growth rates.

We anticipate being able to meet footwear demand with appropriate supply in 2023.

Continued Labor Shortages | Labor shortages continue to be prevalent in the U.S.

and labor costs have risen in an effort to compete for employees.

We have made certain wage adjustments in an effort to be more competitive in the current environment and have diminished the effects of current labor shortages on our operations at this time.

However, we anticipate rising costs and labor shortages to continue in 2022 resulting from the continued competition for talent.

COLUMBIA SPORTSWEAR COMPANY | 2022 FORM 10-Q | 18

Notes to Condensed Consolidated Financial Statements (Unaudited)

Increased Inflationary Pressures | Inflationary pressures, including increased inbound freight costs, impacted our results in the first quarter of 2022.

In addition to increased inbound freight costs, we expect increased product input costs, including higher wages and raw materials costs, to impact our results throughout 2022.

We implemented product price increases for our Spring 2022 season and, to a greater extent, for our Fall 2022 season.

We do not expect planned price increases will fully offset gross margin pressure, particularly the effect of increased inbound freight costs.

Price increases varied by market and product category.

In the U.S., on average, we increased pricing by a mid-single digit percent for our Spring 2022 product line and by a high-single to low-double-digit percent for our Fall 2022 product line.

Over time, we anticipate ocean freight and raw material cost inflation will moderate, while wage inflation will be more permanent.

Changing Geopolitical Environment | The macro-geopolitical environment has rapidly changed as a result of the invasion of Ukraine by Russian forces.

We do not have any direct operations in Russia and historically have operated in that market through a contract with a third-party international distributor on an advance order basis.

As a result of the conflict in Ukraine, we paused taking any new orders from this distributor.

The impact of the invasion is being felt not only in our relationship with our third-party international distributor, but also in political relationships throughout the globe.

These political tensions have the potential to manifest themselves in certain regions where we directly operate.

Changing Consumer Expectations | Consumer behavior continues to fluctuate.

Consumer expectations and the related competitive pressures have increased and continue to increase relative to various aspects of our e-commerce business, including speed of product delivery, shipping charges, return privileges and other evolving expectations.

We maintain and continue to make substantial investments in information systems, processes and personnel to support our ongoing demand planning efforts to provide forecasting of optimal inventory to meet customer and consumer demands.

Seasonality | Our business is affected by the general seasonal trends common to the industry, including seasonal weather and discretionary consumer shopping and spending patterns.

In 2021, over 60% of our net sales and over 75% of our operating income were realized in the second half of the year.

RESULTS OF OPERATIONS

The following discussion of our results of operations and liquidity and capital resources should be read in conjunction with the condensed consolidated financial statements and accompanying Notes that appear in Part 1, Item 1, Financial Statements in this quarterly report.

All references to quarters relate to the quarter ended September 30 of the particular year.

To supplement financial information reported in accordance with accounting principles generally accepted in the United States ("GAAP"), we disclose constant-currency net sales information, which is a non-GAAP financial measure, to provide a framework to assess how the business performed excluding the effects of changes in the exchange rates used to translate net sales generated in foreign currencies into United States dollars.

The following discussion of our results of operations and liquidity and capital resources should be read in conjunction with Item 1 of this Quarterly Report on Form 10-Q.

All references to quarters relate to the quarter ended March 31 of that particular year.

Non-GAAP Financial Measure

To supplement financial information reported in accordance with accounting principles generally accepted in the United States ("GAAP"), we disclose constant-currency net sales information, which is a non-GAAP financial measure, to provide a framework to assess how the business performed excluding the effects of changes in foreign currency exchange rates against the United States dollar between comparable reporting periods.

We calculate constant-currency net sales by translating net sales in foreign currencies for the current period into United States dollars at the exchange rates that were in effect during the comparable period of the prior year.

Management believes that this non-GAAP financial measure reflects an additional and useful way of viewing an aspect of our operations that, when viewed in conjunction with our GAAP results, provides a more comprehensive understanding of our business and operations.

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The following discussion includes references to constant-currency net sales, and we provide a reconciliation of this non-GAAP measure to the most directly comparable financial measure calculated in accordance with GAAP below.

Highlights of the Third Quarter of 2021

• Net sales increased $103.6 million, or 15%, to $804.7 million, from $701.1 million in the third quarter of 2020.

• Gross profit as a percentage of net sales expanded to 50.7% from 48.9% in the third quarter of 2020.

• Operating income increased $47.9 million to $133.5 million from $85.6 million in the third quarter of 2020.

• Income tax expense increased $11.2 million to $33.3 million from $22.1 million in the third quarter of 2020.

• Net income increased $37.8 million to $100.6 million, or $1.52 per diluted share, from $62.8 million, or $0.94 per diluted share, in the third quarter of 2020.

• Net cash used in operating activities for the nine months ended September 30, 2021 decreased $182.3 million to $15.6 million, compared to net cash used in operating activities of $198.0 million for the comparable period in 2020.

• We paid cash dividends to shareholders totaling $17.1 million, or $0.26 per share.

The following table presents the items in our Condensed Consolidated Statements of Operations as a percentage of net sales:

Three Months Ended September 30, Nine Months Ended September 30,

2021 2020 2021 2020

COLUMBIA SPORTSWEAR COMPANY | 2022 FORM 10-Q | 19

Notes to Condensed Consolidated Financial Statements (Unaudited)

Results of Operations — Consolidated

Three Months Ended March 31, 2022 Compared to Three Months Ended March 31, 2021

The following table presents the items in our unaudited Condensed Consolidated Statements of Operations, both in dollars and as a percentage of net sales:

Three Months Ended March 31,

(in millions, except for percentage of net sales and per share amounts) 2022 2021

Net sales $ 761.5 100.0 % $ 625.6 100.0 %

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Operating income 83.7 11.0 % 70.5 11.3 %

Interest income (expense), net — — — 0.1

Interest income, net 0.4 — % 0.3 — %

Other non-operating income (expense), net — — % (0.3) — %

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Net income $ 66.8 8.8 % $ 55.9 8.9 %

Results of Operations — Consolidated

Quarter Ended September 30, 2021 Compared to Quarter Ended September 30, 2020

Consolidated net sales increased $103.6 million, or 15%, to $804.7 million for the third quarter 2021 from $701.1 million for the comparable period in 2020.

The increase primarily reflects higher consumer demand and economic recovery from the ongoing COVID-19 pandemic.

This increase was constrained by supply chain disruptions that resulted in later inventory receipts and lower than expected wholesale shipments during the quarter.

Net sales increased across all regions, primarily driven by increased Columbia brand net sales in our U.S.

DTC, Canada, LAAP and Europe businesses.

Our global DTC e-commerce business grew 6% and represented 11% of our global net sales for the third quarter 2021, compared to 12% of our global net sales for the same period in 2020.

Diluted earnings per share $ 1.03 $ 0.84

Net sales by brand, product category and channel are summarized in the following table:

Three Months Ended September 30,

(in millions, except for percentage changes) Reported

Three Months Ended March 31,

(in millions, except for percentages) Reported

Adjust for Foreign Currency Translation Constant-currency

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Total $ 761.5 $ 11.3 $ 772.8 $ 625.6 22% 24%

(1) Constant-currency net sales information is a non-GAAP financial measure, which excludes the effect of changes in foreign currency exchange rates against the United States dollar between comparable reporting periods.

(1) Constant-currency net sales is a non-GAAP financial measure.

See "Non-GAAP Financial Measure" above for further information.

COLUMBIA SPORTSWEAR COMPANY | 2022 FORM 10-Q | 20

Notes to Condensed Consolidated Financial Statements (Unaudited)

Overall, our global net sales increase reflects shipments of higher Spring 2022 orders and DTC growth, partially constrained by supply chain disruptions that resulted in lower-than-expected wholesale shipments.

In addition, Columbia and SOREL brand net sales benefited from favorable late season cold weather product sales, as well as improved manufacturing partner capacities that contributed to increased footwear net sales.

Our global DTC e-commence business grew 21% and represented 20% of our global net sales for the first quarter of 2022, compared to growth of 35% and represented 20% of global net sales for the comparable period in 2021.

Gross Profit.

Gross profit as a percentage of net sales expanded to 50.7% for the third quarter 2021 from 48.9% for the comparable period in 2020, primarily reflecting:

• an approximate 290 basis points increase in channel profitability, including favorable DTC product margin driven by lower promotional levels, increased wholesale product margin driven by strong retail sell-through performance resulting in lower customer accommodations and, to a lesser extent, favorable full-price sales mix, and unfavorable impacts from higher inbound freight costs due to supply chain capacity constraints;

partially offset by

• a decrease resulting from the non-recurrence of inventory provision activity that benefited gross margin performance in the third quarter of 2020;

• a decrease driven by an unfavorable sales mix as sales shifted to channels which carry lower margins, including regional net sales shifts to wholesale from DTC channels and higher net sales in stores within the DTC channel.

Selling, General and Administrative Expense:

SG&A expense increased $18.9 million, or 7%, to $280.1 million, or 34.8% of net sales, for the third quarter of 2021, from $261.2 million, or 37.3% of net sales, for the comparable period in 2020.

The SG&A expense increase was primarily due to:

• higher global retail expenses relative to prior year temporary store closures;

• higher incentive compensation;

• increased demand creation spending driven by higher variable spending with sales growth and incremental strategic investment;

• higher personnel expenses to support business growth, annual merit increases, and wage increases to mitigate workforce shortages;

partially offset by

• the benefit of $7.0 million from the completion of a lease termination and settlement of liabilities related to a prior year store closure;

• the non-recurrence of prior year COVID-19 related expenses.

The benefit of $7.0 million from the completion of a lease termination and settlement of liabilities discussed above relates to a portion of the $16.5 million of accelerated amortization of lease right-of-use assets for stores that permanently closed in 2020 for which the related lease liabilities had not been extinguished as of December 31, 2020 due to ongoing negotiations with the landlords as disclosed in our 2020 Annual Report.

Operating Income:

Operating income increased $47.9 million to $133.5 million, or 16.6% of net sales, for the third quarter of 2021, from $85.6 million, or 12.2% of net sales, for the comparable period in 2020.

Income Tax Expense :

Income tax expense increased to $33.3 million for the third quarter of 2021 from $22.1 million for the comparable period in 2020.

Our effective income tax rate was 24.9% compared to 26.1% for the third quarter of 2020.

Our effective income tax rate for the third quarter of 2021 decreased compared to the third quarter of 2020 primarily driven by the mix of book income or loss among jurisdictions.

Net income increased $37.8 million to $100.6 million, or $1.52 per diluted share, for the third quarter of 2021, from $62.8 million, or $0.94 per diluted share, for the comparable period in 2020.

Nine Months Ended September 30, 2021 Compared to Nine Months Ended September 30, 2020

Consolidated net sales increased $410.8 million, or 26%, to $1,996.7 million for the nine months ended September 30, 2021 from $1,585.9 million for the comparable period in 2020.

The increase primarily reflects higher consumer demand and an accelerated economic recovery compared to the same period in 2020, which was impacted by wholesale order cancellations, temporary store closures and lower consumer demand.

Net sales increased across all regions, product categories, and brands, primarily driven by increased Columbia brand net sales in the U.S.

DTC and wholesale businesses.

In addition, our DTC e-commerce business grew 16% and represented 15% of our global net sales for the nine months ended September 30, 2021, compared to 17% of our global net sales for the same period in 2020.

Net sales by brand, product category and channel are summarized in the following table:

Nine Months Ended September 30,

(in millions, except for percentage changes) Reported

Adjust for Foreign Currency Translation Constant-currency

% Change Constant-currency

Brand Net Sales:

Columbia $ 1,663.2 $ (27.8) $ 1,635.4 $ 1,297.2 28% 26%

SOREL 157.5 (1.8) 155.7 143.5 10% 9%

prAna 107.6 — 107.6 94.7 14% 14%

Mountain Hardwear 68.4 (0.6) 67.8 50.5 35% 34%

Total $ 1,996.7 $ (30.2) $ 1,966.5 $ 1,585.9 26% 24%

Product Category Net Sales:

Apparel, Accessories and Equipment $ 1,543.1 $ (21.0) $ 1,522.1 $ 1,206.2 28% 26%

Footwear 453.6 (9.2) 444.4 379.7 19% 17%

Total $ 1,996.7 $ (30.2) $ 1,966.5 $ 1,585.9 26% 24%

Channel Net Sales:

Wholesale $ 1,155.9 $ (19.2) $ 1,136.7 $ 957.3 21% 19%

DTC 840.8 (11.0) 829.8 628.6 34% 32%

Total $ 1,996.7 $ (30.2) $ 1,966.5 $ 1,585.9 26% 24%

Our gross profit may not be comparable to other companies in our industry as some companies may include all costs related to their distribution network in Cost of sales, while we include these expenses in SG&A expenses .

Gross profit is summarized in the following table:

Three Months Ended March 31,

(in millions, except for percentages and basis points) 2022 2021 Change

Gross profit $ 378.4 $ 321.4 $ 57.0 18 %

Gross profit as a percentage of net sales expanded to 51.2% for the nine months ended September 30, 2021 from 48.0% for the comparable period in 2020, primarily reflecting:

• an approximate 230 basis points increase in channel profitability, including favorable DTC product margin driven by lower promotional levels and unfavorable impacts from higher inbound freight costs due to supply chain capacity constraints;

• an approximate 110 basis points increase primarily resulting from decreased inventory reserve provisions.

Selling, General and Administrative Expense:

SG&A expense increased $40.6 million, or 5%, to $796.3 million, or 39.9% of net sales, for the nine months ended September 30, 2021, from $755.7 million, or 47.6% of net sales, for the comparable period in 2020.

The increase in SG&A expenses primarily reflects the variable component of our SG&A expense structure, which correlates with changes in sales volume.

The SG&A expense increase was primarily due to:

• higher personnel expenses of $26.9 million to support business growth and annual merit increases;

• higher global retail expenses of $26.0 million relative to prior year temporary store closures;

• increased demand creation spending of $23.8 million, driven by higher variable spending with sales growth and incremental strategic investment;

• higher incentive compensation;

Gross margin 49.7 % 51.4 % -170 bps

Gross margin contracted primarily due to the following factors:

• an approximate 240 bps decrease related to supply chain capacity constraints that resulted in higher inbound freight costs;

• unfavorable year-over-year changes in inventory provisions, as first quarter 2022 inventory reserves reflected less of a decline compared to first quarter 2021, largely due to incremental inventory reserves established in 2020 resulting from the heightened risk related to the COVID-19 pandemic;

• unfavorable regional net sales shifts;

partially offset by

• lower bad debt expenses of $33.8 million;

• the non-recurrence of prior year COVID-19 related expenses of $21.7 million;

• the benefit of $8.6 million from the completion of lease terminations and settlements of liabilities related to prior year store closures.

The decrease in bad debt expenses was driven by incremental COVID-19 pandemic related bad debt reserve provisions in the first nine months of 2020, compared to a reduction in bad debt reserves in the same period in 2021 reflecting the continued recovery of the market and a healthier wholesale customer base.

The benefit of $8.6 million from the completion of a lease termination and settlement of liabilities discussed above relates to a portion of the $16.5 million of accelerated amortization of lease right-of-use assets for stores that permanently closed in 2020 for which the related lease liabilities had not been extinguished as of December 31, 2020 due to ongoing negotiations with the landlords as disclosed in our 2020 Annual Report.

Operating Income:

Operating income increased $225.6 million to $238.9 million, or 12.0% of net sales, for the nine months ended September 30, 2021, from $13.4 million, or 0.8% of net sales, for the comparable period in 2020.

• increased channel profitability due to higher DTC product margins driven by lower promotional levels, partially offset by lower wholesale margins which reflected the net impact of higher footwear sales mix, input cost pressure, price increases and a higher proportion of full price vs off price sales.

Selling, General and Administrative Expenses.

SG&A expenses includes all costs associated with our design, merchandising, marketing, distribution, and corporate functions, including related depreciation and amortization.

SG&A expenses is summarized in the following table:

Three Months Ended March 31,

(in millions, except for percentages and basis points) 2022 2021 Change

Selling, general and administrative expenses $ 299.1 $ 254.4 $ 44.7 18 %

Selling, general and administrative expenses as percent of net sales 39.3 % 40.7 % -140 bps

The SG&A expenses increase was primarily due to expenses incurred to support the growth of our business and investments to drive our brand-led consumer-focused strategy.

Factors primarily contributing to the increase of SG&A expenses included:

• increased demand creation spend of $10.1 million, including higher spending with sales growth and incremental strategic investment spend;

• higher global retail expenses associated with sales growth and new stores;

• higher personnel expenses, reflecting increased headcount to support business growth, as well as annual merit and other wage rate increases;

• unfavorable year-over-year changes in bad debt provisions, as first quarter 2022 bad debt reserves reflected less of a decline compared to first quarter 2021, largely due to incremental bad debt reserves established in 2020 resulting from the heightened accounts receivable risk related to the COVID-19 pandemic.

COLUMBIA SPORTSWEAR COMPANY | 2022 FORM 10-Q | 21

Notes to Condensed Consolidated Financial Statements (Unaudited)

Income Tax Expense.

Income tax expense was $42.5 million for the nine months ended September 30, 2021, compared to $4.0 million for the comparable period in 2020.

Our effective income tax rate was 17.7% for the nine months ended September 30, 2021 compared to 24.8% for the comparable period in 2020.

The change in our effective income tax rate for the nine months ended September 30, 2021 compared to the same period in 2020 was primarily driven by the non-recurring decrease in accrued foreign withholding taxes and the mix of book income or loss among jurisdictions.

Net income increased $184.9 million to $197.1 million, or $2.96 per diluted share, for the nine months ended September 30, 2021, from $12.3 million, or $0.18 per diluted share, for the comparable period in 2020.

Income tax expense and the related effective income tax rate is summarized in the following table:

Three Months Ended March 31,

(in millions, except for percentages) 2022 2021 Change

Income tax expense $ (17.3) $ (14.6) $ 2.7 18 %

Effective income tax rate 20.5 % 20.7 %

Our effective income tax rates for the three months ended March 31, 2022 and 2021 were impacted by discrete tax items, which lowered the effective tax rate each period.

Our effective income tax rate for the three months ended March 31, 2022 includes the non-recurring benefit related to the finalization of U.S.

and foreign audits.

Our effective income tax rate for the three months ended March 31, 2021 includes a non-recurring benefit related to common stock benefits.

Results of Operations — Segment

Quarter Ended September 30, 2021 Compared to Quarter Ended September 30, 2020

Net sales by geographic segment are summarized in the following table:

Three Months Ended September 30,

(in millions, except for percentage changes) Reported

Adjust for Foreign Currency Translation Constant-currency

% Change Constant-currency

$ 510.5 $ — $ 510.5 $ 445.6 15% 15%

LAAP 102.7 (2.3) 100.4 90.9 13% 10%

EMEA 109.2 (1.3) 107.9 99.2 10% 9%

Canada 82.3 (5.0) 77.3 65.4 26% 18%

$ 804.7 $ (8.6) $ 796.1 $ 701.1 15% 14%

Operating income (loss) for each reportable segments and unallocated corporate expenses are summarized in the following table:

Three Months Ended September 30,

(in millions) 2021 2020 Change ($)

$ 139.1 $ 96.6 $ 42.5

LAAP 7.6 4.7 2.9

EMEA 26.2 19.0 7.2

Canada 22.8 19.7 3.1

Total segment operating income 195.7 140.0 55.7

Unallocated corporate expenses (62.2) (54.4) (7.8)

Operating income $ 133.5 $ 85.6 $ 47.9

Unless otherwise noted below, segment net sales and operating income within all regions increased due to the result of unfavorable COVID-19 pandemic impacts realized in the comparable period in 2020, which led to economic lockdowns, including temporary store closures and lower consumer demand.

operating income increased $42.5 million to $139.1 million, or 27.2% of net sales, for the third quarter of 2021 from $96.6 million, or 21.7% of net sales, for the comparable period in 2020.

The increase was driven primarily by increased net sales combined with increased gross margin.

net sales increased $64.9 million, or 15%, for the third quarter of 2021 compared to same period in 2020, driven by increased net sales primarily in our U.S.

DTC business and to a lesser extent our U.S.

wholesale business.

wholesale net sales increased due to higher Fall 2021 order shipments, but were constrained by supply chain disruptions that resulted in later inventory receipts and later than expected wholesale shipments during the quarter.

SG&A expense decreased as a percentage of net sales to 25.2% for the three months ended September 30, 2021 compared to 28.5% for the comparable period in 2020.

SG&A expense for the third quarter of 2020 included non-recurring COVID-19 related expenses.

LAAP operating income of $7.6 million, or 7.4% of net sales, for the third quarter of 2021 increased $2.9 million from $4.7 million, or 5.2% of net sales, for the comparable period in 2020.

The increase was driven primarily by increased net sales combined with increased gross margin.

LAAP net sales increased $11.8 million, or 13% (10% constant-currency) for the third quarter of 2021 compared to the same period in 2020, primarily driven by increased net sales in our China business.

LAAP net sales increased due to higher Fall 2021 wholesale order shipments, partially offset by lower consumer demand due to COVID-19 related provincial and government mandated restrictions to prevent the spread of the virus.

LAAP SG&A expense increased as a percentage of net sales to 46.9% for the third quarter of 2021 compared to 46.6% for the comparable period in 2020.

EMEA operating income increased $7.2 million to $26.2 million, or 24.0% of net sales, for the third quarter of 2021 from $19.0 million, or 19.1% of net sales, for the comparable period in 2020.

The increase was driven by increased net sales combined with increased gross margin and SG&A expense leverage.

EMEA net sales increased $10.0 million, or 10% (9% constant-currency), for the third quarter of 2021 compared to the same period in 2020.

EMEA net sales increased primarily in our Europe-direct business, and to a lesser extent our EMEA distributor business.

Europe-direct net sales increased primarily due to higher Fall 2021 wholesale order shipments.

EMEA SG&A expense decreased as a percentage of net sales to 22.6% for the third quarter of 2021 compared to 26.3% for the same period in 2020 driven by leveraging of fixed operating expenses.

Canada operating income of $22.8 million, or 27.8% of net sales, for the third quarter of 2021 increased $3.1 million from $19.8 million, or 30.2% of net sales, for the comparable period in 2020.

The increase primarily resulted from increased net sales.

Canada net sales increased $16.9 million, or 26% (18% constant-currency), for the third quarter of 2021 compared to the same period in 2020.

Canada net sales increased primarily due to higher Fall 2021 wholesale order shipments.

Canada SG&A expense increased as a percentage of net sales to 20.1% for the third quarter of 2021 compared to 17.5% for the comparable period in 2020.

Unallocated corporate expenses increased by $7.8 million to $62.3 million for the third quarter of 2021, from $54.4 million for the comparable period in 2020, primarily driven by higher incentive compensation and personnel expenses.

Nine Months Ended September 30, 2021 Compared to Nine Months Ended September 30, 2020

Three Months Ended March 31, 2022 Compared to Three Months Ended March 31, 2021

Segment operating income includes net sales, cost of sales, SG&A expenses, and net licensing income for each of our four reportable geographic segments.

Operating income as a percentage of net sales in the U.S.

is typically higher than the other segments primarily due to scale efficiencies associated with the larger base of net sales in the U.S.

and, to a lesser extent, incremental licensing income.

We anticipate this trend to continue until other segments achieve scale efficiencies from higher levels of net sales volume relative to the fixed cost structure necessary to operate the business.

Net sales by geographic segment are summarized in the following table:

Nine Months Ended September 30,

Three Months Ended March 31,

(in millions, except for percentage changes) Reported

6 unchanged sentences

$ 761.5 $ 11.3 $ 772.8 $ 625.6 22% 24%

(1) Constant-currency net sales is a non-GAAP financial measure.

See "Non-GAAP Financial Measure" above for further information.

Operating income for each reportable segments and unallocated corporate expenses are summarized in the following table:

Nine Months Ended September 30,

Three Months Ended March 31,

(in millions) 2022 2021 Change

6 unchanged sentences

Operating income $ 83.7 $ 70.5 $ 13.2

operating income increased $202.3 million to $320.8 million, or 24.7% of net sales, for the nine months ended September 30, 2021 from $118.5 million, or 11.8% of net sales, for the comparable period in 2020.

The increase was driven primarily by increased net sales combined with increased gross margin, as well as a reduction in bad debt expense.

net sales increased $293.5 million, or 29%, for the nine months ended September 30, 2021 compared to the same period in 2020, driven by increased net sales in our U.S.

DTC retail stores, wholesale and, to a lesser extent, DTC e-commerce businesses.

The reduction in bad debt reserves reflected the continued recovery of the market and a healthier wholesale customer base.

SG&A expenses decreased as a percentage of net sales to 28.2% for the nine months ended September 30, 2021 compared to 37.3% for the comparable period in 2020, primarily driven by leveraging of fixed operating expenses, a reduction in bad debt expense, and the non-recurrence of prior year COVID-19 related expenses.

LAAP operating income increased $7.6 million to $16.3 million, or 5.6% of net sales, for the nine months ended September 30, 2021 from $8.7 million, or 3.3% of net sales, for the comparable period in 2020.

The increase was driven primarily by increased net sales combined with increased gross margin.

LAAP net sales increased $31.8 million, or 12% (8% constant-currency) for the nine months ended September 30, 2021 compared to the same period in 2020, primarily driven by increased net sales in our China business and to a lesser extent our Korea and Japan businesses, partially offset by decreased net sales in our LAAP

distributor businesses.

LAAP SG&A expense increased as a percentage of net sales to 50.3% for the nine months ended September 30, 2021 compared to 48.5% for the comparable period in 2020, primarily driven by increased investment in demand creation and the non-recurrence of prior year COVID-19 government subsidies received.

EMEA operating income increased $28.8 million to $47.8 million, or 17.8% of net sales, for the nine months ended September 30, 2021 from $19.0 million, or 8.9% of net sales, for the comparable period in 2020.

COLUMBIA SPORTSWEAR COMPANY | 2022 FORM 10-Q | 22

Notes to Condensed Consolidated Financial Statements (Unaudited)

operating income increased $13.5 million to $113.2 million, or 22.5% of net sales, for the first quarter of 2022 from $99.7 million, or, 24.4% of net sales, for the comparable period in 2021.

The increase was driven primarily by increased net sales partially offset by contracted gross margin.

net sales increased $93.3 million, or 23%, for the first quarter of 2022, compared to the same period in 2021.

net sales increased across all channels and product categories, largely driven by increased net sales for our Columbia brand and, to a lesser extent, our SOREL brand.

Increased U.S.

wholesale net sales were driven by increased consumer demand, shipment of higher Spring 2022 orders and favorable late season cold weather product sales.

U.S DTC net sales increased from net sales growth generated from our e-commerce business and retail stores.

As of March 31, 2022, our U.S.

business operated 143 retail stores, compared to 132 stores as of March 31, 2021.

SG&A expenses decreased slightly as a percentage of net sales to 27.5% for the first quarter of 2022 compared to 27.7% for the same period in 2021.

LAAP operating income increased $3.3 million to $13.0 million, or 10.7% of net sales, for the first quarter of 2022 from $9.7 million, or 8.7% of net sales, for the comparable period in 2021.

The increase was driven primarily by increased net sales combined with increased gross margin.

EMEA net sales increased $55.2 million to $268.5 million, or 26% (21% constant-currency), for the nine months ended September 30, 2021 compared to the same period in 2020.

EMEA net sales increased in both our Europe-direct and EMEA distributors businesses.

SG&A expense decreased as a percentage of net sales to 26.6% for the nine months ended September 30, 2021 compared to 33.6% for the same period in 2020 driven by leveraging of fixed operating expenses, the non-recurrence of prior year COVID-19 related expenses and lower reserve provisions for bad debt.

Canada operating income increased $14.6 million to $29.7 million, or 21.6% of net sales, for the nine months ended September 30, 2021 from $15.1 million, or 14.2% of net sales, for the comparable period in 2020.

The increase primarily resulted from increased net sales combined with increased gross margin.

Canada net sales increased $30.3 million, or 28% (20% constant-currency), for the nine months ended September 30, 2021 compared to the same period in 2020.

Canada SG&A expense decreased as a percentage of net sales to 26.3% for the nine months ended September 30, 2021 compared to 32.6% for the comparable period in 2020, primarily driven by leveraging of fixed operating expenses, a reduction in bad debt expense and the non-recurrence of prior year COVID-19 government subsidies received.

Unallocated corporate expenses increased by $27.8 million to $175.7 million for the nine months ended September 30, 2021, from $148.0 million for the comparable period in 2020, primarily driven by higher incentive compensation and personnel expenses.

LAAP net sales increased $9.7 million, or 9% (14% constant-currency), for the first quarter of 2022, compared to the same period in 2021, led by increased net sales in our LAAP distributor business, followed by our Korea, Japan and China businesses.

LAAP SG&A expense decreased as a percentage of net sales to 46.6% for the first quarter of 2022 compared to 47.7% for the same period in 2021.

EMEA operating income increased $6.4 million to $16.5 million, or 17.4% of net sales, for the first quarter of 2022 from $10.1 million, or 14.2% of net sales, for the comparable period in 2021.

The increase was driven primarily by increased net sales, partially offset by decreased gross margin.

EMEA net sales increased $23.9 million, or 34% (42% constant-currency), for the first quarter of 2022, compared to the same period in 2021.

EMEA net sales increased primarily in our Europe-direct business, and to a lesser extent our EMEA distributor business.

EMEA SG&A expense decreased as a percentage of net sales to 26.3% for the first quarter of 2022 compared to 31.1% in 2021, driven by leveraging of fixed operating expenses.

Canada operating income increased $1.9 million to $8.1 million, or 18.9% of net sales, for the first quarter of 2022 from $6.2 million, or 18.2% of net sales, for the comparable period in 2021.

The increase primarily resulted from increased net sales partially offset by decreased gross margin.

Canada net sales increased $9.0 million, or 26% (27% constant-currency), for the first quarter of 2022, compared to the same period in 2021, primarily driven by increased net sales in our Canada DTC and wholesale businesses.

Canada SG&A expense decreased as a percentage of net sales to 28.5% for the first quarter of 2022 compared to 30.6% for the same period in 2021 driven by leveraging of fixed operating expenses.

Unallocated corporate expenses increased by $11.9 million to $67.1 million in 2022, from $55.2 million in 2021, largely driven by higher personnel expenses and technology related expenses.

LIQUIDITY AND CAPITAL RESOURCES

At September 30, 2021, we had total cash and cash equivalents of $599.5 million, compared to $790.7 million at December 31, 2020 and $313.4 million at September 30, 2020.

Our primary ongoing cash needs are for working capital and capital expenditures, including investment in our DTC operations, including new stores, and investment in digital and supply chain capabilities to support our strategic priorities.

We have planned 2021 capital expenditures of approximately $45 million to $50 million.

Our actual 2021 capital expenditures may differ from the planned amounts depending on factors such as the timing of new store acquisitions and related construction as well as the availability of capital assets from suppliers.

We expect to meet our cash needs for the next twelve months with cash flows from operations.

Our business is affected by the general seasonal trends common to the industry.

Including cash, cash equivalents, short-term investments and available committed credit lines, we had over $1 billion in total liquidity as of March 31, 2022.

Our liquidity may be affected by the general seasonal trends common to the industry.

Our products are marketed on a seasonal basis and our sales are weighted substantially toward the third and fourth quarters, while our operating costs are more equally distributed throughout the year.

Our cash and cash equivalents and short-term investments balances generally are at their lowest level at the end of the third quarter and increase during the fourth quarter from collection of wholesale business receivables and fourth quarter DTC sales.

Short-term borrowings and credit lines

Refer to Note 4 in Item 1 of this quarterly report for additional information regarding our lines of credit and overdraft facilities in place.

At September 30, 2021, we had a $500.0 million committed revolving line of credit available domestically under our credit agreement and, internationally, our subsidiaries had approximately $118.0 million in committed and uncommitted lines of credit and overdraft facilities in place, some of which were guaranteed by Columbia Sportswear Company.

At September 30, 2021, there was no balance outstanding under these lines of credit and overdraft facilities.

At the time of this filing, we are in compliance with all financial covenants necessary as a condition for borrowing under the domestic credit agreement.

This trough cash position is impacted by the amount of product we order from our contract manufacturers in anticipation of customer demand and is more heavily impacted in advance of periods of expected high demand.

COLUMBIA SPORTSWEAR COMPANY | 2022 FORM 10-Q | 23

Notes to Condensed Consolidated Financial Statements (Unaudited)

Cash Flow Activities

Net cash used in operating activities was $15.6 million for the nine months ended September 30, 2021 compared to net cash used in operating activities of $198.0 million for the comparable period in 2020.

The change in operating cash flow was driven by a $113.4 million increase in operating cash flow provided by net income and non-cash adjustments, and a $68.9 million decrease in cash used in changes in assets and liabilities.

The most significant comparative changes included Accounts receivable , Prepaid expenses and other current assets , Accounts payable , Accrued liabilities , and Operating lease assets and liabilities .

The increase in cash used by Accounts receivable was driven by higher wholesale net sales, partially offset by higher collections of accounts receivable in 2021.

The increase in cash used by Prepaid expenses and other current assets was primarily driven by changes in US inventory prepayments and US prepaid income taxes.

The increase in cash provided by Accounts payable primarily reflects the effects of higher receipts of inventory in the third quarter of 2021 compared to the third quarter of 2020 due to stronger customer demand and increased in-transit inventory.

The increase in cash provided by A ccrued liabilities was primarily driven by changes in accruals for incentive compensation, wholesale refund liabilities, and wholesale and retail sales return liabilities.

The increase in cash used by Operating lease assets and liabilities includes the payment of deferred rents.

Net cash used in investing activities was $19.2 million for the nine months ended September 30, 2021 compared to net cash used in investing activities of $23.6 million for the comparable period in 2020.

For the 2021 period, net cash used in investing activities primarily consisted of $20.4 million for capital expenditures, partially offset by $1.2 million in sales and maturities of short-term investments.

For the same period in 2020, net cash used in investing activities primarily consisted of $25.2 million for capital expenditures, partially offset by $1.6 million in net sales and maturities of short-term investments.

Net cash used in financing activities was $151.4 million for the nine months ended September 30, 2021 compared to net cash used in financing activities of $152.3 million for the comparable period in 2020.

For the 2021 period, net cash used in financing activities primarily consisted of repurchases of common stock of $118.6 million and dividend payments to our shareholders of $51.7 million, partially offset by proceeds from the issuance of common stock related to stock-based compensation of $24.3 million.

Cash flows are summarized in the following table:

Three Months Ended March 31,

(in millions) 2022 2021 Change

Net cash provided by (used in):

Operating activities $ (33.8) $ 110.9 $ (144.7)

Investing activities (56.8) (2.8) (54.0)

Financing activities (237.9) (19.9) (218.0)

Net effect of exchange rate changes on cash 0.3 (5.3) 5.6

Net increase (decrease) in cash and cash equivalents $ (328.2) $ 82.9 $ (411.1)

The change in cash flows used in operating activities was driven by a $160.5 million increase in cash used in changes in assets and liabilities, partially offset by a $15.8 million increase in net income and non-cash adjustments.

The most significant comparative changes included Inventories, net, Accrued liabilities, Accounts receivable, net and Accounts payable.

The $96.2 million increase in cash used in Inventories, net was mainly driven by an increase in inventory purchases, reflecting strong consumer demand and increased wholesale customer orders.

The $54.1 million increase in cash used in Accrued liabilities was primarily driven by changes in accruals for compensation as well as taxes.

The $36.6 million decrease in cash provided by Accounts receivable, net was driven by higher wholesale net sales, partially offset by higher collections of accounts receivable.

The decrease of $20.4 million in cash used in Accounts payable primarily reflects the effects of higher in-transit inventory and higher accruals.

Net cash used in investing activities was $56.8 million for the three months ended March 31, 2022 compared to $2.8 million for the same period in 2021.

For the 2022 period, net cash used in investing activities consisted of $43.9 million in net purchases of short-term investments and $12.9 million for capital expenditures.

For the 2021 period, net cash used in investing activities primarily consisted of $3.9 million for capital expenditures, offset by $1.1 million in sales of short-term investments.

Net cash used in financing activities was $237.9 million for the three months ended March 31, 2022 compared to $19.9 million for the same period in 2021.

For the 2022 period, net cash used in financing activities primarily consisted of repurchases of common stock of $217.3 million and dividend payments to our shareholders of $19.2 million.

Contractual obligations

Our inventory purchase obligations increased to $542.8 million at September 30, 2021 compared to $305.7 million at December 31, 2020.

There have been no other material changes to the estimated contractual commitments contained in Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2020.

For the 2021 period, net cash used in financing activities primarily consisted of dividend payments to our shareholders of $17.3 million and repurchases of common stock of $11.2 million, partially offset by proceeds from issuance of common stock related to share-based compensation of $13.8 million.

Sources of Liquidity

Cash and cash equivalents and short-term investments

As of March 31, 2022, we had cash and cash equivalents of $435.2 million and short-term investments of $175.0 million, compared to $763.4 million and $131.1 million, respectively, as of December 31, 2021 and $873.6 million and $0.9 million, respectively, as of March 31, 2021.

Domestic Credit Facility

We have available an unsecured, committed revolving credit facility that provides for funding up to $500.0 million.

This credit agreement matures on December 30, 2025.

Interest, payable monthly, is based on the Company's option of either LIBOR plus an applicable margin or a base rate.

Base rate is defined as the highest of the following, plus an applicable margin:

• the administrative agent's prime rate;

• the higher of the federal funds rate or the overnight bank funding rate set by the Federal Reserve Bank of New York, plus 0.50%;

• the one-month LIBOR plus 1.00%.

This credit agreement requires the Company to comply with certain financial covenants covering the Company's funded debt ratio and asset coverage ratio.

The credit agreement also includes customary covenants that, among other things, limit or restrict the ability of the Company and its subsidiaries to incur additional indebtedness and liens, engage in mergers, acquisitions and dispositions, and engage in transactions with affiliates, as well as restrict certain payments, including dividends and share buybacks.

COLUMBIA SPORTSWEAR COMPANY | 2022 FORM 10-Q | 24

Notes to Condensed Consolidated Financial Statements (Unaudited)

As of March 31, 2022, there was no balance outstanding under our credit facility.

At the time of this filing, we are in compliance with all financial covenants necessary as a condition for borrowing under the credit agreement.

International Credit Facilities

Our European subsidiary has available an unsecured, committed line of credit, which is guaranteed by the Company and provides for borrowing up to €4.4 million (approximately US$4.9 million).

Borrowings accrue interest at a base rate plus 75 basis points.

In addition, collectively, our international subsidiaries have available approximately US$110.7 million in unsecured and uncommitted lines of credit and overdraft facilities.

As of March 31, 2022, there was no balance outstanding under our international subsidiaries' lines of credit and overdraft facilities.

Capital Requirements

Our expected short-term and long-term cash needs are primarily for working capital and capital expenditures.

We expect to meet these short-term and long-term cash needs primarily with cash flows from operations and, if needed, borrowings from our existing credit facilities.

Our working capital management goals include maintaining an optimal level of inventory necessary to deliver goods on time to our customers and our retail stores to satisfy end consumer demand, alleviating manufacturing capacity constraints, and driving efficiencies to minimize the cycle time from the purchase of inventory from our suppliers to the collections of accounts receivable balances from our customers.

Inventory balances may be elevated in advance of periods of expected high demand.

We maintain and continue to make substantial investments in information systems, processes and personnel to support our ongoing demand planning efforts to meet our working capital management goals.

We have planned 2022 capital expenditures of approximately $80 to $100 million.

This includes investments in our digital and supply chain capabilities to support our strategic priorities and our DTC operations, including new stores.

Our actual capital expenditures may differ from the planned amounts depending on factors such as the timing of system implementations and new store openings and related construction as well as the availability of capital assets from suppliers.

Our long-term goal is to maintain a strong balance sheet and a disciplined approach to capital allocation.

Dependent upon market conditions and our strategic priorities, our capital allocation approach includes:

• investing in organic growth opportunities to drive long-term profitable growth;

• returning 40% of free cash flow to shareholders through dividends and share repurchases;

• considering opportunistic mergers and acquisitions.

Free cash flow is a non-GAAP financial measure.

Free cash flow is calculated by reducing net cash flow from operating activities by capital expenditures.

Management believes free cash flow provides investors with an important perspective on the cash available for shareholders and acquisitions after making the capital investments required to support ongoing business operations and long-term value creation.

Free cash flow does not represent the residual cash flow available for discretionary expenditures as it excludes certain mandatory expenditures.

Management uses free cash flow as a measure to assess both business performance and overall liquidity.

Other cash commitments

Our inventory purchase obligations increased to $876.3 million as of March 31, 2022, compared to $656.5 million and $635.8 million as of December 31, 2021 and March 31, 2021, respectively.

There have been no other significant changes to our other cash commitments as described in Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2021.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

Management's discussion and analysis of our financial condition and results of operations are based on our unaudited condensed consolidated financial statements, which have been prepared in accordance with GAAP.

The preparation of these financial statements requires us to make various estimates and judgments that affect reported amounts of assets, liabilities, sales, cost of sales, and expenses and related disclosure of contingent assets and liabilities.

We believe that the estimates, assumptions and judgments involved in the accounting policies referred to in Part II, Item 7 in our Annual Report on Form 10-K for the year ended December 31, 2020 have the greatest potential effect on our financial statements, so we consider these to be our critical accounting policies and estimates.

Because of the uncertainty inherent in these matters, actual results may differ from the estimates we use in applying these critical accounting policies.

The preparation of these financial statements requires us to make various estimates and judgments that affect reported amounts of assets, liabilities, sales, cost of sales, and expenses

COLUMBIA SPORTSWEAR COMPANY | 2022 FORM 10-Q | 25

Notes to Condensed Consolidated Financial Statements (Unaudited)

and related disclosure of contingent assets and liabilities.

We believe that the estimates, assumptions and judgments involved in the accounting for sales reserves, allowance for uncollectible accounts receivable, excess, close-out and slow-moving inventory, impairment of long-lived assets, intangible assets and goodwill, and income taxes have the greatest potential effect on our financial statements, so we consider these to be our critical accounting policies and estimates.

Because of the uncertainty inherent in these matters, actual results may differ from the estimates we use in applying these critical accounting policies and estimates.

We base our ongoing estimates on historical experience and other assumptions that we believe to be reasonable in the circumstances.

Our critical accounting policies 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.

Refer to Item 7 in our Annual Report on Form 10-K for the year ended December 31, 2021 for additional information regarding our critical accounting policies and estimates.

Management regularly discusses with our audit committee each of our critical accounting estimates, the development and selection of these accounting estimates, and the disclosure about each estimate in this quarterly report.

These discussions typically occur at our quarterly audit committee meetings and include the basis and methodology used in developing and selecting these estimates, the trends in and amounts of these estimates, specific matters affecting the amount of and changes in these estimates, and any other relevant matters related to these estimates, including significant issues concerning accounting principles and financial statement presentation.

Except as disclosed in Note 1 in Item 1 of this quarterly report, pertaining to our adoption of new accounting pronouncements, there have been no significant changes to the Company's significant accounting policies as described in the Company's Annual Report on Form 10-K for the year ended December 31, 2020.

There have been no significant changes to the Company's significant accounting policies described at Note 2 in Item 8 of our Annual Report on Form 10-K for the year ended December 31, 2021.

RECENT ACCOUNTING PRONOUNCEMENTS

Refer to Note 1 in Item 1 of this Quarterly Report on Form 10-Q.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

1 unchanged sentence

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What changed 10-Q

Item 2. Management’s Discussion and Analysis