COLUMBIA SPORTSWEAR CO 10-Q

ITEM 1. FINANCIAL STATEMENTS CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (in thousands) June 30, 2022 December 31, 2021 June 30, 2021 ASSETS Current Assets: Cash and cash equivalents $ 413,110 $ 763,404 $ 819,806 Short-term investments 1,108 131,145 1,138 Accounts receivable, net of allowance of $ 4,405 , $ 8,893 and $ 10,734 , respectively 296,636 487,803 279,763 Inventories, net 962,875 645,379 676,009 Prepaid expenses and other current assets 121,404 86,306 102,003 Total current assets 1,795,133 2,114,037 1,878,719 Property, plant and equipment, net of accumulated depreciation of $ 604,233 , $ 602,660 and $ 585,104 , respectively 288,199 291,088 297,237 Operating lease right-of-use assets 325,871 330,928 350,798 Intangible assets, net 101,083 101,908 102,733 Goodwill 68,594 68,594 68,594 Deferred income taxes 81,263 92,121 97,746 Other non-current assets 66,645 68,452 67,472 Total assets $ 2,726,788 $ 3,067,128 $ 2,863,299 LIABILITIES AND EQUITY Current Liabilities: Accounts payable $ 312,353 $ 283,349 $ 267,677 Accrued liabilities 239,181 316,485 227,209 Operating lease liabilities 65,668 67,429 71,149 Income taxes payable 1,242 13,127 1,565 Total current liabilities 618,444 680,390 567,600 Non-current operating lease liabilities 312,043 317,666 344,216 Income taxes payable 32,504 44,541 48,805 Deferred income taxes — — 151 Other long-term liabilities 32,080 35,279 40,870 Total liabilities 995,071 1,077,876 1,001,642 Commitments and contingencies (Note 5) Shareholders' Equity: Preferred stock; 10,000 shares authorized; none issued and outstanding — — — Common stock (no par value); 250,000 shares authorized; 62,091 , 65,164 and 66,148 issued and outstanding, respectively — — — Retained earnings 1,753,450 1,993,628 1,863,813 Accumulated other comprehensive income (loss) ( 21,733 ) ( 4,376 ) ( 2,156 ) Total shareholders' equity 1,731,717 1,989,252 1,861,657 Total liabilities and shareholders' equity $ 2,726,788 $ 3,067,128 $ 2,863,299 See accompanying notes to condensed consolidated financial statements. COLUMBIA SPORTSWEAR COMPANY | 2022 FORM 10-Q | 1 Table of Contents Notes to Condensed Consolidated Financial Statements (Unaudited) CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) Three Months Ended June 30, Six Months Ended June 30, (in thousands, except per share amounts) 2022 2021 2022 2021 Net sales $ 578,063 $ 566,370 $ 1,339,573 $ 1,191,976 Cost of sales 293,903 273,853 676,966 578,057 Gross profit 284,160 292,517 662,607 613,919 Selling, general and administrative expenses 281,258 261,766 580,344 516,155 Net licensing income 5,871 4,244 10,176 7,711 Operating income 8,773 34,995 92,439 105,475 Interest income, net 499 598 894 876 Other non-operating expense, net ( 1,435 ) ( 294 ) ( 1,391 ) ( 598 ) Income before income tax 7,837 35,299 91,942 105,753 Income tax benefit (expense) ( 674 ) 5,385 ( 17,942 ) ( 9,169 ) Net income $ 7,163 $ 40,684 $ 74,000 $ 96,584 Earnings per share: Basic $ 0.11 $ 0.61 $ 1.17 $ 1.46 Diluted $ 0.11 $ 0.61 $ 1.16 $ 1.44 Weighted average shares outstanding: Basic 62,554 66,327 63,409 66,345 Diluted 62,695 66,787 63,654 66,858 See accompanying notes to condensed consolidated financial statements. COLUMBIA SPORTSWEAR COMPANY | 2022 FORM 10-Q | 2 Table of Contents Notes to Condensed Consolidated Financial Statements (Unaudited) CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited) Three Months Ended June 30, Six Months Ended June 30, (in thousands) 2022 2021 2022 2021 Net income $ 7,163 $ 40,684 $ 74,000 $ 96,584 Other comprehensive income (loss): Unrealized gains on available-for-sale securities (net of tax effects of $( 146 )) 451 — — — Unrealized gains (losses) on derivative transactions (net of tax effects of $( 5,744 ), $ 1,183 , $( 5,088 ) and $( 2,185 ), respectively) 15,808 ( 3,551 ) 13,717 5,012 Foreign currency translation adjustments (net of tax effects of $ 147 , $( 265 ), $ 997 and $ 149 , respectively) ( 28,818 ) 5,230 ( 31,074 ) ( 7,974 ) Other comprehensive income (loss) ( 12,559 ) 1,679 ( 17,357 ) ( 2,962 ) Comprehensive income (loss) $ ( 5,396 ) $ 42,363 $ 56,643 $ 93,622 See accompanying notes to condensed consolidated financial statements. COLUMBIA SPORTSWEAR COMPANY | 2022 FORM 10-Q | 3 Table of Contents Notes to Condensed Consolidated Financial Statements (Unaudited) CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) Six Months Ended June 30, (in thousands) 2022 2021 Cash flows from operating activities: Net income $ 74,000 $ 96,584 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation, amortization, and non-cash lease expense 58,537 60,962 Provision for uncollectible accounts receivable ( 4,047 ) ( 9,757 ) Loss on disposal or impairment of investments, property, plant and equipment, and right-of-use assets 2,418 201 Deferred income taxes 3,750 ( 9,667 ) Stock-based compensation 10,636 9,823 Changes in operating assets and liabilities: Accounts receivable 186,364 180,456 Inventories, net ( 332,225 ) ( 123,737 ) Prepaid expenses and other current assets ( 23,226 ) ( 48,160 ) Other assets 3,018 ( 337 ) Accounts payable 35,754 59,085 Accrued liabilities ( 67,199 ) ( 30,130 ) Income taxes payable ( 23,807 ) ( 22,652 ) Operating lease assets and liabilities ( 34,478 ) ( 47,436 ) Other liabilities ( 2,163 ) 1,927 Net cash provided by (used in) operating activities ( 112,668 ) 117,162 Cash flows from investing activities: Purchases of short-term investments ( 44,877 ) — Sales and maturities of short-term investments 175,725 1,184 Capital expenditures ( 28,983 ) ( 12,387 ) Net cash provided by (used in) investing activities 101,865 ( 11,203 ) Cash flows from financing activities: Proceeds from credit facilities — 19,888 Repayments on credit facilities — ( 19,683 ) Proceeds from issuance of common stock related to stock-based compensation 4,076 20,287 Tax payments related to stock-based compensation ( 4,024 ) ( 5,440 ) Repurchase of common stock ( 287,443 ) ( 54,500 ) Cash dividends paid ( 37,926 ) ( 34,540 ) Net cash used in financing activities ( 325,317 ) ( 73,988 ) Net effect of exchange rate changes on cash ( 14,174 ) ( 2,890 ) Net increase (decrease) in cash and cash equivalents ( 350,294 ) 29,081 Cash and cash equivalents, beginning of period 763,404 790,725 Cash and cash equivalents, end of period $ 413,110 $ 819,806 Supplemental disclosures of cash flow information: Cash paid during the year for income taxes $ 47,846 $ 81,497 Supplemental disclosures of non-cash investing and financing activities: Property, plant and equipment acquired through increase in liabilities $ 5,334 $ 4,268 See accompanying notes to condensed consolidated financial statements. COLUMBIA SPORTSWEAR COMPANY | 2022 FORM 10-Q | 4 Table of Contents Notes to Condensed Consolidated Financial Statements (Unaudited) CONDENSED CONSOLIDATED STATEMENTS OF EQUITY (Unaudited) (in thousands, except per share amounts) Common Stock Retained Earnings Accumulated Other Comprehensive Income (Loss) Total Shares Outstanding Amount Balance, March 31, 2022 62,948 $ — $ 1,828,074 $ ( 9,174 ) $ 1,818,900 Net income — — 7,163 — 7,163 Other comprehensive income (loss): Unrealized gains on available-for-sale securities, net — — — 451 451 Unrealized gains on derivative transactions, net — — — 15,808 15,808 Foreign currency translation adjustment, net — — — ( 28,818 ) ( 28,818 ) Cash dividends ($0.30 per share) — — ( 18,775 ) — ( 18,775 ) Issuance of common stock related to stock-based compensation, net 49 1,498 — — 1,498 Stock-based compensation expense — 5,133 — — 5,133 Repurchase of common stock ( 906 ) ( 6,631 ) ( 63,012 ) — ( 69,643 ) Balance, June 30, 2022 62,091 $ — $ 1,753,450 $ ( 21,733 ) $ 1,731,717 (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 — — 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 (in thousands, except per share amounts) Common Stock Retained Earnings Accumulated Other Comprehensive Income (Loss) Total Shares Outstanding Amount Balance, December 31, 2021 65,164 $ — $ 1,993,628 $ ( 4,376 ) $ 1,989,252 Net income — — 74,000 — 74,000 Other comprehensive income (loss): Unrealized gains on derivative transactions, net — — — 13,717 13,717 Foreign currency translation adjustment, net — — — ( 31,074 ) ( 31,074 ) Cash dividends ($ 0.60 per share) — — ( 37,926 ) — ( 37,926 ) Issuance of common stock related to stock-based compensation, net 162 52 — — 52 Stock-based compensation expense — 10,636 — — 10,636 Repurchase of common stock ( 3,235 ) ( 10,688 ) ( 276,252 ) — ( 286,940 ) Balance, June 30, 2022 62,091 $ — $ 1,753,450 $ ( 21,733 ) $ 1,731,717 COLUMBIA SPORTSWEAR COMPANY | 2022 FORM 10-Q | 5 Table of Contents Notes to Condensed Consolidated Financial Statements (Unaudited) (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 — — 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 See accompanying notes to condensed consolidated financial statements. COLUMBIA SPORTSWEAR COMPANY | 2022 FORM 10-Q | 6 Table of Contents Notes to Condensed Consolidated Financial Statements (Unaudited) NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) NOTE PAGE Note 1 Basis of Presentation and Organization 8 Note 2 Revenues 9 Note 3 Intangible Assets, Net and Goodwill 10 Note 4 Short-Term Borrowings and Credit Lines 11 Note 5 Commitments and Contingencies 11 Note 6 Shareholders' Equity 12 Note 7 Stock-Based Compensation 12 Note 8 Earnings Per Share 13 Note 9 Accumulated Other Comprehensive Income (Loss) 13 Note 10 Segment Information 15 Note 11 Financial Instruments and Risk Management 15 Note 12 Fair Value Measures 18 COLUMBIA SPORTSWEAR COMPANY | 2022 FORM 10-Q | 7 Table of Contents Notes to Condensed Consolidated Financial Statements (Unaudited) 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, 2022, December 31, 2021 and June 30, 2021, the results of operations for the three and six months ended June 30, 2022 and 2021, and cash flows for the six months ended June 30, 2022 and 2021. The December 31, 2021 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, 2021. 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, 2022 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, 2021. PRINCIPLES OF CONSOLIDATION The unaudited condensed consolidated financial statements include the accounts of the Company. All significant 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 unaudited 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. The Company's significant estimates relate to 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. RECENTLY ADOPTED ACCOUNTING PRONOUNCEMENTS None. RECENT ACCOUNTING PRONOUNCEMENTS NOT YET ADOPTED In November 2021, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2021-10 (“ASU 2021-10”), Government Assistance (Topic 832): Disclosures by Business Entities about Government Assistance, to increase transparency of government assistance including the disclosure of (1) the types of assistance, (2) an entity’s accounting for the assistance, and (3) the effect of the assistance on an entity’s financial statements. ASU 2021-10 is effective for annual periods beginning after December 15, 2021. Early adoption is permitted. The impact of this new standard will depend on the amount of future government assistance received, if any. COLUMBIA SPORTSWEAR COMPANY | 2022 FORM 10-Q | 8 Table of Contents Notes to Condensed Consolidated Financial Statements (Unaudited) NOTE 2 — REVENUES DISAGGREGATED REVENUE As disclosed below in Note 10, 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, 2022 (in thousands) U.S. LAAP EMEA Canada Total Product category net sales Apparel, Accessories and Equipment $ 348,592 $ 54,379 $ 37,542 $ 27,805 $ 468,318 Footwear 63,893 18,446 20,000 7,406 109,745 Total $ 412,485 $ 72,825 $ 57,542 $ 35,211 $ 578,063 Channel net sales Wholesale $ 201,880 $ 28,308 $ 47,259 $ 22,449 $ 299,896 Direct-to-consumer 210,605 44,517 10,283 12,762 278,167 Total $ 412,485 $ 72,825 $ 57,542 $ 35,211 $ 578,063 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 Six Months Ended June 30, 2022 (in thousands) U.S. LAAP EMEA Canada Total Product category net sales Apparel, Accessories and Equipment $ 733,820 $ 140,304 $ 100,811 $ 59,326 $ 1,034,261 Footwear 180,559 54,264 51,448 19,041 305,312 Total $ 914,379 $ 194,568 $ 152,259 $ 78,367 $ 1,339,573 Channel net sales Wholesale $ 449,389 $ 88,246 $ 122,553 $ 47,932 $ 708,120 Direct-to-consumer 464,990 106,322 29,706 30,435 631,453 Total $ 914,379 $ 194,568 $ 152,259 $ 78,367 $ 1,339,573 COLUMBIA SPORTSWEAR COMPANY | 2022 FORM 10-Q | 9 Table of Contents Notes to Condensed Consolidated Financial Statements (Unaudited) 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 PERFORMANCE OBLIGATIONS For the three and six months ended June 30, 2022 and 2021, 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 is not material. CONTRACT BALANCES As of June 30, 2022, December 31, 2021 and June 30, 2021, contract liabilities included in Accrued liabilities on the unaudited 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 AND GOODWILL Intangible assets, net consisted of the following: (in thousands) June 30, 2022 December 31, 2021 June 30, 2021 Intangible assets with definite lives: 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 ) ( 14,198 ) Customer relationships ( 19,838 ) ( 19,013 ) ( 18,188 ) Accumulated amortization ( 34,036 ) ( 33,211 ) ( 32,386 ) Net carrying amount 3,162 3,987 4,812 Intangible assets with indefinite lives 97,921 97,921 97,921 Intangible assets, net $ 101,083 $ 101,908 $ 102,733 Amortization expense for intangible assets subject to amortization was $ 0.4 million for the three months ended June 30, 2022 and 2021, and was $ 0.8 million for the six months ended June 30, 2022 and 2021. COLUMBIA SPORTSWEAR COMPANY | 2022 FORM 10-Q | 10 Table of Contents Notes to Condensed Consolidated Financial Statements (Unaudited) The following table presents the remaining estimated annual amortization expense for the years 2022 through 2027: (in thousands) 2022 $ 824 2023 1,650 2024 688 2025 — 2026 — 2027 — 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, 2021. DOMESTIC CREDIT FACILITY As of June 30, 2022, the Company had an unsecured, committed revolving credit agreement, maturing on December 30, 2025, which provided for funding up to $ 500.0 million (the "Prior Domestic Credit Agreement"). As of June 30, 2022, the Company was in compliance with all associated covenants and there was no balance outstanding under the facility. In July 2022, the Company terminated the Prior Domestic Credit Agreement and, simultaneously, entered into a new credit agreement (the “Domestic Credit Agreement”). The Domestic Credit Agreement provides for up to $500.0 million of borrowings pursuant to an unsecured, committed revolving credit facility (the “Credit Facility”), which is available for working capital and general corporate purposes, including a sublimit for the issuance of letters of credit. This Credit Facility matures on July 12, 2027. Interest, payable monthly, is based on the Company's option of either the secured overnight financing rate (“SOFR”) 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 overnight bank funding rate set by the Federal Reserve Bank of New York, plus 0.50%; or • the one-month SOFR plus 1.00%. The applicable margin for SOFR loans will range from 1.00% to 1.50% based on the Company’s funded debt ratio. The applicable margin for base rate loans will range from 0.00% to 0.50% based on the Company’s funded debt ratio. The Domestic Credit Agreement requires the Company to comply with a financial covenant to maintain a certain funded debt ratio. In addition, the Domestic Credit Agreement 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 the amount of certain payments, including dividends and share buybacks in the event the Company's funded debt ratio is greater than a set amount. NOTE 5 — COMMITMENTS AND CONTINGENCIES LITIGATION 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, 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. COLUMBIA SPORTSWEAR COMPANY | 2022 FORM 10-Q | 11 Table of Contents Notes to Condensed Consolidated Financial Statements (Unaudited) NOTE 6 — SHAREHOLDERS' EQUITY Since the inception of the Company's stock repurchase plan in 2004 through June 30, 2022, the Company's Board of Directors has authorized the repurchase of $ 2.0 billion of the Company's common stock, including an additional $500 million approved by the Company’s Board of Directors at its regular board meeting in April 2022. 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, 2022, the Company had repurchased 31.7 million shares at an aggregate purchase price of $ 1,470.6 million and had $ 529.4 million remaining available. During the three and six months ended June 30, 2022, the Company repurchased an aggregate of $69.6 million and $ 286.9 million, respectively, of the Company's common stock under this program. NOTE 7 — 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. The Company uses original issuance shares to satisfy share-based payments. STOCK-BASED COMPENSATION EXPENSE Stock-based compensation expense consisted of the following: Three Months Ended June 30, Six Months Ended June 30, (in thousands) 2022 2021 2022 2021 Stock options $ 1,939 $ 1,861 $ 3,835 $ 3,771 Restricted stock units 3,194 3,088 6,801 6,052 Total $ 5,133 $ 4,949 $ 10,636 $ 9,823 STOCK OPTIONS During the six months ended June 30, 2022, the Company granted a total of 546,681 stock options at a weighted average grant date fair value of $ 18.33 per option. As of June 30, 2022, unrecognized costs related to outstanding stock options totaled $ 16.9 million, before any related tax benefit. These unrecognized costs related to stock options are expected to be recognized over a weighted average remaining period of 2.66 years. RESTRICTED STOCK UNITS During the six months ended June 30, 2022, the Company granted 239,309 restricted stock units at a weighted average grant date fair value of $ 85.82 per restricted stock unit. As of June 30, 2022, unrecognized costs related to outstanding restricted stock units totaled $ 28.6 million, before any related tax benefit. These unrecognized costs related to restricted stock units are expected to be recognized over a weighted average remaining period of 2.73 years. COLUMBIA SPORTSWEAR COMPANY | 2022 FORM 10-Q | 12 Table of Contents Notes to Condensed Consolidated Financial Statements (Unaudited) NOTE 8 — EARNINGS PER SHARE Earnings per share ("EPS") is presented on both a basic and diluted basis. Basic EPS is based on the weighted average number of common shares outstanding. Diluted EPS reflects the potential dilution that could occur if outstanding securities or other contracts to issue common stock were exercised or converted into common stock. 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) 2022 2021 2022 2021 Weighted average common shares outstanding, used in computing basic earnings per share 62,554 66,327 63,409 66,345 Effect of dilutive stock options and restricted stock units 141 460 245 513 Weighted average common shares outstanding, used in computing diluted earnings per share 62,695 66,787 63,654 66,858 Earnings per share: Basic $ 0.11 $ 0.61 $ 1.17 $ 1.46 Diluted $ 0.11 $ 0.61 $ 1.16 $ 1.44 Stock options, service-based restricted stock units, and performance-based restricted stock units representing 2,060,703 and 611,143 shares of common stock for the three months ended June 30, 2022 and 2021, respectively, and 1,709,085 and 793,051 shares of common stock for the six months ended June 30, 2022 and 2021, respectively, were outstanding but were excluded from the computation of diluted EPS because their effect would be anti-dilutive under the treasury stock method or because the shares were subject to performance conditions that had not been met. NOTE 9 — ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) Accumulated other comprehensive income (loss) on the unaudited Condensed Consolidated Balance Sheets is net of applicable taxes, and consists of unrealized gains and losses on available-for-sale securities, unrealized gains and losses on certain derivative transactions and foreign currency translation adjustments. The following tables set forth the changes in Accumulated other comprehensive income (loss) : (in thousands) Unrealized gains (losses) on available-for-sale securities Unrealized gains (losses) on derivative transactions Foreign currency translation adjustments Total Balance as of March 31, 2022 $ ( 451 ) $ 7,823 $ ( 16,546 ) $ ( 9,174 ) Other comprehensive income (loss) before reclassifications — 16,453 ( 28,818 ) ( 12,365 ) Amounts reclassified from accumulated other comprehensive income (loss) (1) 451 ( 645 ) — ( 194 ) Net other comprehensive income (loss) during the year 451 15,808 ( 28,818 ) ( 12,559 ) Balance as of June 30, 2022 $ — $ 23,631 $ ( 45,364 ) $ ( 21,733 ) (1) Amounts reclassified are recorded in Net sales, Cost of sales or Other non-operating expense, net on the unaudited Condensed Consolidated Statements of Operations. Refer to Note 11 for further information regarding reclassifications. COLUMBIA SPORTSWEAR COMPANY | 2022 FORM 10-Q | 13 Table of Contents Notes to Condensed Consolidated Financial Statements (Unaudited) (in thousands) Unrealized gains (losses) on derivative transactions Foreign currency translation adjustments Total Balance as of 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 as of June 30, 2021 $ ( 4,357 ) $ 2,201 $ ( 2,156 ) (1) Amounts reclassified are recorded in Net sales or Cost of sales on the unaudited Condensed Consolidated Statements of Operations. Refer to Note 11 for further information regarding reclassifications. (in thousands) Unrealized gains (losses) on available-for-sale securities Unrealized gains (losses) on derivative transactions Foreign currency translation adjustments Total Balance as of December 31, 2021 $ — $ 9,914 $ ( 14,290 ) $ ( 4,376 ) Other comprehensive income (loss) before reclassifications ( 451 ) 14,589 ( 31,074 ) ( 16,936 ) Amounts reclassified from accumulated other comprehensive income (loss) (1) 451 ( 872 ) — ( 421 ) Net other comprehensive income (loss) during the year — 13,717 ( 31,074 ) ( 17,357 ) Balance as of June 30, 2022 $ — $ 23,631 $ ( 45,364 ) $ ( 21,733 ) (1) Amounts reclassified are recorded in Net sales , Cost of sales , or Other non-operating expense, net on the unaudited Condensed Consolidated Statements of Operations. Refer to Note 11 for further information regarding reclassifications. (in thousands) Unrealized gains (losses) on derivative transactions Foreign currency translation adjustments Total Balance as of 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 as of June 30, 2021 $ ( 4,357 ) $ 2,201 $ ( 2,156 ) (1) Amounts reclassified are recorded in Net sales , Cost of sales , or Other non-operating expense, net on the unaudited Condensed Consolidated Statements of Operations. Refer to Note 11 for further information regarding reclassifications. COLUMBIA SPORTSWEAR COMPANY | 2022 FORM 10-Q | 14 Table of Contents Notes to Condensed Consolidated Financial Statements (Unaudited) NOTE 10 — 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 lifestyle products, including apparel, footwear, accessories, and equipment. 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, certain supply chain functions, 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) 2022 2021 2022 2021 Net sales to unrelated entities: U.S. $ 412,485 $ 379,065 $ 914,379 $ 787,727 LAAP 72,825 77,975 194,568 189,952 EMEA 57,542 88,574 152,259 159,339 Canada 35,211 20,756 78,367 54,958 $ 578,063 $ 566,370 $ 1,339,573 $ 1,191,976 Segment operating income (loss) U.S. $ 67,346 $ 82,057 $ 180,522 $ 181,718 LAAP ( 3,061 ) ( 999 ) 9,941 8,719 EMEA ( 1,030 ) 11,532 15,469 21,594 Canada 3,535 633 11,676 6,861 Total segment operating income 66,790 93,223 217,608 218,892 Unallocated corporate expenses ( 58,017 ) ( 58,228 ) ( 125,169 ) ( 113,417 ) Interest income, net 499 598 894 876 Other non-operating expense, net ( 1,435 ) ( 294 ) ( 1,391 ) ( 598 ) Income before income tax $ 7,837 $ 35,299 $ 91,942 $ 105,753 CONCENTRATIONS The Company had one customer that accounted for approximately 12.3 %, 14.3 % and 12.5 % of Accounts receivable, net as of June 30, 2022, December 31, 2021, and June 30, 2021, respectively. The Company did not have a customer that accounted for 10% or more of Net sales for the three and six months ended June 30, 2022 and June 30, 2021. NOTE 11 — 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 European 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 seeks COLUMBIA SPORTSWEAR COMPANY | 2022 FORM 10-Q | 15 Table of Contents Notes to Condensed Consolidated Financial Statements (Unaudited) to manage 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. Time value components ("forward points") for forward contracts are included in the fair value of the cash flow hedge. These costs or benefits will be 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 . 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 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, 2022 December 31, 2021 June 30, 2021 Derivative instruments designated as cash flow hedges: Currency forward contracts $ 542,879 $ 485,083 $ 530,840 Derivative instruments not designated as hedges: Currency forward contracts 239,676 267,982 258,377 As of June 30, 2022, $ 17.4 million of deferred net gains on both outstanding and matured derivatives recorded in Accumulated other comprehensive income (loss) are expected to be reclassified to Net income during the next twelve months as a result of underlying hedged transactions also being recorded in Net sa les, Cost of sales, or Other non-operating expense in the unaudited Condensed Consolidated Statements of Operations. When outstanding derivative contracts mature, actual amounts ultimately reclassified to Net sa les, Cost of sales, or Other non-operating expense in the unaudited Condensed Consolidated Statements of Operations are dependent on United States dollar exchange rates in effect against the euro, pound sterling, renminbi, Canadian dollar, and yen as well as the euro exchange rate in effect against the pound sterling. As of June 30, 2022, the Company's derivative contracts had a remaining maturity of less than three 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 $ 9.4 million as of June 30, 2022. 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. COLUMBIA SPORTSWEAR COMPANY | 2022 FORM 10-Q | 16 Table of Contents Notes to Condensed Consolidated Financial Statements (Unaudited) The following table presents the balance sheet classification and fair value of derivative instruments: (in thousands) Balance Sheet Classification June 30, 2022 December 31, 2021 June 30, 2021 Derivative instruments designated as cash flow hedges: Derivative instruments in asset positions: Currency forward contracts Prepaid expenses and other current assets $ 18,212 $ 7,927 $ 1,850 Currency forward contracts Other non-current assets 13,158 10,142 6,772 Derivative instruments in liability positions: Currency forward contracts Accrued liabilities 444 2,545 7,351 Currency forward contracts Other long-term liabilities 261 318 2,396 Derivative instruments not designated as cash flow hedges: Derivative instruments in asset positions: Currency forward contracts Prepaid expenses and other current assets 4,085 1,470 1,578 Derivative instruments in liability positions: Currency forward contracts Accrued liabilities 1,410 1,027 1,830 The following table presents the statement of operations effect and classification of derivative instruments: Statement Of Operations Classification Three Months Ended June 30, Six Months Ended June 30, (in thousands) 2022 2021 2022 2021 Currency Forward Contracts: Derivative instruments designated as cash flow hedges: Gain (loss) recognized in other comprehensive income (loss), net of tax — $ 16,453 $ ( 3,903 ) $ 14,589 $ 5,376 Loss reclassified from accumulated other comprehensive income (loss) to income for the effective portion Net sales ( 40 ) ( 111 ) ( 176 ) ( 11 ) Gain (loss) reclassified from accumulated other comprehensive income (loss) to income for the effective portion Cost of sales 948 ( 348 ) 1,259 424 Gain reclassified from accumulated other comprehensive income (loss) to income as a result of cash flow hedge discontinuance Other non-operating expense, net — — 222 106 Derivative instruments not designated as cash flow hedges: Gain (loss) recognized in income Other non-operating expense, net 707 ( 1,619 ) 1,297 ( 722 ) COLUMBIA SPORTSWEAR COMPANY | 2022 FORM 10-Q | 17 Table of Contents Notes to Condensed Consolidated Financial Statements (Unaudited) NOTE 12 — 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, 2022 are as follows: (in thousands) Level 1 Level 2 Level 3 Total Assets: Cash equivalents: Money market funds $ 30,141 $ — $ — $ 30,141 Short-term investments: Money market funds 81 — — 81 Mutual fund shares 1,027 — — 1,027 Other current assets: Derivative financial instruments — 22,297 — 22,297 Non-current assets: Money market funds 1,208 — — 1,208 Mutual fund shares 17,826 — — 17,826 Derivative financial instruments — 13,158 — 13,158 Total assets measured at fair value $ 50,283 $ 35,455 $ — $ 85,738 Liabilities: Accrued liabilities: Derivative financial instruments $ — $ 1,854 $ — $ 1,854 Other long-term liabilities: Derivative financial instruments — 261 — 261 Total liabilities measured at fair value $ — $ 2,115 $ — $ 2,115 COLUMBIA SPORTSWEAR COMPANY | 2022 FORM 10-Q | 18 Table of Contents Notes to Condensed Consolidated Financial Statements (Unaudited) Assets and liabilities measured at fair value on a recurring basis as of December 31, 2021 are as follows: (in thousands) Level 1 Level 2 Level 3 Total Assets: Cash equivalents: Money market funds $ 2,677 $ — $ — $ 2,677 Available-for-sale short-term investments: (1) U.S. Government treasury bills — 130,168 — 130,168 Other short-term investments: Money market funds 73 — — 73 Mutual fund shares 904 — — 904 Other current assets: Derivative financial instruments — 9,397 — 9,397 Non-current assets: Money market funds 2,219 — — 2,219 Mutual fund shares 19,606 — — 19,606 Derivative financial instruments — 10,142 — 10,142 Total assets measured at fair value $ 25,479 $ 149,707 $ — $ 175,186 Liabilities: Accrued liabilities: Derivative financial instruments $ — $ 3,572 $ — $ 3,572 Other long-term liabilities: Derivative financial instruments — 318 — 318 Total liabilities measured at fair value $ — $ 3,890 $ — $ 3,890 (1) Available-for-sale short-term investments have remaining maturities of less than one year. COLUMBIA SPORTSWEAR COMPANY | 2022 FORM 10-Q | 19 Table of Contents Notes to Condensed Consolidated Financial Statements (Unaudited) 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 COLUMBIA SPORTSWEAR COMPANY | 2022 FORM 10-Q | 20 Table of Contents