COLUMBIA SPORTSWEAR CO 10-Q

ITEM 1. FINANCIAL STATEMENTS CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (in thousands) September 30, 2022 December 31, 2021 September 30, 2021 ASSETS Current Assets: Cash and cash equivalents $ 159,221 $ 763,404 $ 599,479 Short-term investments 972 131,145 1,132 Accounts receivable, net of allowance of $5,822, $8,893 and $ 10,847 , respectively 600,457 487,803 500,451 Inventories, net 1,056,905 645,379 720,865 Prepaid expenses and other current assets 142,055 86,306 98,146 Total current assets 1,959,610 2,114,037 1,920,073 Property, plant and equipment, net of accumulated depreciation of $ 608,522 , $ 602,660 and $ 591,795 , respectively 287,338 291,088 293,725 Operating lease right-of-use assets 328,893 330,928 344,876 Intangible assets, net 100,672 101,908 102,321 Goodwill 68,594 68,594 68,594 Deferred income taxes 76,899 92,121 92,493 Other non-current assets 68,146 68,452 67,277 Total assets $ 2,890,152 $ 3,067,128 $ 2,889,359 LIABILITIES AND EQUITY Current Liabilities: Short-term borrowings $ 4,441 $ — $ — Accounts payable 336,782 283,349 241,119 Accrued liabilities 279,226 316,485 273,590 Operating lease liabilities 65,866 67,429 67,055 Income taxes payable 10,341 13,127 8,955 Total current liabilities 696,656 680,390 590,719 Non-current operating lease liabilities 314,565 317,666 330,765 Income taxes payable 33,215 44,541 49,392 Deferred income taxes — — 1 Other long-term liabilities 30,913 35,279 38,165 Total liabilities 1,075,349 1,077,876 1,009,042 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; 62,105 , 65,164 and 65,501 issued and outstanding, respectively 5,803 — — Retained earnings 1,846,570 1,993,628 1,883,343 Accumulated other comprehensive income (loss) ( 37,570 ) ( 4,376 ) ( 3,026 ) Total shareholders' equity 1,814,803 1,989,252 1,880,317 Total liabilities and shareholders' equity $ 2,890,152 $ 3,067,128 $ 2,889,359 See accompanying notes to unaudited 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 September 30, Nine Months Ended September 30, (in thousands, except per share amounts) 2022 2021 2022 2021 Net sales $ 955,059 $ 804,706 $ 2,294,632 $ 1,996,682 Cost of sales 496,564 396,346 1,173,530 974,403 Gross profit 458,495 408,360 1,121,102 1,022,279 Selling, general and administrative expenses 318,957 280,121 899,301 796,276 Net licensing income 5,723 5,222 15,899 12,933 Operating income 145,261 133,461 237,700 238,936 Interest income, net 765 196 1,659 1,072 Other non-operating income (expense), net ( 269 ) 201 ( 1,660 ) ( 397 ) Income before income tax 145,757 133,858 237,699 239,611 Income tax expense ( 34,007 ) ( 33,295 ) ( 51,949 ) ( 42,464 ) Net income $ 111,750 $ 100,563 $ 185,750 $ 197,147 Earnings per share: Basic $ 1.80 $ 1.53 $ 2.95 $ 2.98 Diluted $ 1.80 $ 1.52 $ 2.94 $ 2.96 Weighted average shares outstanding: Basic 62,098 65,862 62,967 66,182 Diluted 62,210 66,266 63,178 66,673 See accompanying notes to unaudited 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 September 30, Nine Months Ended September 30, (in thousands) 2022 2021 2022 2021 Net income $ 111,750 $ 100,563 $ 185,750 $ 197,147 Other comprehensive income (loss): Unrealized gains on derivative transactions (net of tax effects of $( 4,856 ), $( 3,602 ), $( 9,944 ) and $( 5,787 ), respectively) 14,221 10,552 27,938 15,564 Foreign currency translation adjustments (net of tax effects of $ 126 , $ 66 , $ 1,123 and $ 215 , respectively) ( 30,058 ) ( 11,422 ) ( 61,132 ) ( 19,396 ) Other comprehensive income (loss) ( 15,837 ) ( 870 ) ( 33,194 ) ( 3,832 ) Comprehensive income $ 95,913 $ 99,693 $ 152,556 $ 193,315 See accompanying notes to unaudited 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) Nine Months Ended September 30, (in thousands) 2022 2021 Cash flows from operating activities: Net income $ 185,750 $ 197,147 Adjustments to reconcile net income to net cash used in operating activities: Depreciation, amortization, and non-cash lease expense 86,569 84,509 Provision for uncollectible accounts receivable ( 1,745 ) ( 9,088 ) Loss on disposal or impairment of investments, property, plant and equipment, and right-of-use assets 2,455 366 Deferred income taxes 1,712 ( 8,731 ) Stock-based compensation 16,071 14,487 Changes in operating assets and liabilities: Accounts receivable ( 129,251 ) ( 44,500 ) Inventories, net ( 443,194 ) ( 173,761 ) Prepaid expenses and other current assets ( 27,535 ) ( 40,957 ) Other assets 2,260 148 Accounts payable 63,868 22,014 Accrued liabilities ( 18,409 ) 24,813 Income taxes payable ( 14,299 ) ( 14,621 ) Operating lease assets and liabilities ( 49,159 ) ( 68,823 ) Other liabilities ( 3,182 ) 1,359 Net cash used in operating activities ( 328,089 ) ( 15,638 ) Cash flows from investing activities: Purchases of short-term investments ( 44,876 ) — Sales and maturities of short-term investments 175,827 1,184 Capital expenditures ( 42,489 ) ( 20,413 ) Net cash provided by (used in) investing activities 88,462 ( 19,229 ) Cash flows from financing activities: Proceeds from credit facilities 12,660 29,508 Repayments on credit facilities ( 8,133 ) ( 29,313 ) Payment of line of credit issuance fees ( 604 ) — Proceeds from issuance of common stock related to stock-based compensation 4,598 24,329 Tax payments related to stock-based compensation ( 4,178 ) ( 5,715 ) Repurchase of common stock ( 287,443 ) ( 118,580 ) Cash dividends paid ( 56,556 ) ( 51,662 ) Net cash used in financing activities ( 339,656 ) ( 151,433 ) Net effect of exchange rate changes on cash ( 24,900 ) ( 4,946 ) Net decrease in cash and cash equivalents ( 604,183 ) ( 191,246 ) Cash and cash equivalents, beginning of period 763,404 790,725 Cash and cash equivalents, end of period $ 159,221 $ 599,479 Supplemental disclosures of cash flow information: Cash paid during the year for income taxes $ 59,584 $ 87,709 Supplemental disclosures of non-cash investing and financing activities: Property, plant and equipment acquired through increase in liabilities $ 7,502 $ 8,277 Repurchases of common stock not settled $ — $ 8,628 See accompanying notes to unaudited 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, June 30, 2022 62,091 $ — $ 1,753,450 $ ( 21,733 ) $ 1,731,717 Net income — — 111,750 — 111,750 Other comprehensive income (loss): Unrealized gains on derivative transactions, net — — — 14,221 14,221 Foreign currency translation adjustment, net — — — ( 30,058 ) ( 30,058 ) Cash dividends ($ 0.30 per share) — — ( 18,630 ) — ( 18,630 ) Issuance of common stock related to stock-based compensation, net 14 368 — — 368 Stock-based compensation expense — 5,435 — — 5,435 Balance, September 30, 2022 62,105 $ 5,803 $ 1,846,570 $ ( 37,570 ) $ 1,814,803 (in thousands, except per share amounts) Common Stock Retained Earnings Accumulated Other Comprehensive Income (Loss) Total Shares Outstanding Amount Balance, June 30, 2021 66,148 $ — $ 1,863,813 $ ( 2,156 ) $ 1,861,657 Net income — — 100,563 — 100,563 Other comprehensive income (loss): Unrealized gains on derivative transactions, net — — — 10,552 10,552 Foreign currency translation adjustment, net — — — ( 11,422 ) ( 11,422 ) Cash dividends ($ 0.26 per share) — — ( 17,122 ) — ( 17,122 ) Issuance of common stock related to stock-based compensation, net 79 3,767 — — 3,767 Stock-based compensation expense — 4,664 — — 4,664 Repurchase of common stock ( 726 ) ( 8,431 ) ( 63,911 ) — ( 72,342 ) Balance, September 30, 2021 65,501 $ — $ 1,883,343 $ ( 3,026 ) $ 1,880,317 (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 — — 185,750 — 185,750 Other comprehensive income (loss): Unrealized gains on derivative transactions, net — — — 27,938 27,938 Foreign currency translation adjustment, net — — — ( 61,132 ) ( 61,132 ) Cash dividends ($ 0.90 per share) — — ( 56,556 ) — ( 56,556 ) Issuance of common stock related to stock-based compensation, net 176 420 — — 420 Stock-based compensation expense — 16,071 — — 16,071 Repurchase of common stock ( 3,235 ) ( 10,688 ) ( 276,252 ) — ( 286,940 ) Balance, September 30, 2022 62,105 $ 5,803 $ 1,846,570 $ ( 37,570 ) $ 1,814,803 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 — — 197,147 — 197,147 Other comprehensive income (loss): Unrealized gains on derivative transactions, net — — — 15,564 15,564 Foreign currency translation adjustment, net — — — ( 19,396 ) ( 19,396 ) Cash dividends ($ 0.78 per share) — — ( 51,662 ) — ( 51,662 ) Issuance of common stock related to stock-based compensation, net 503 18,614 — — 18,614 Stock-based compensation expense — 14,487 — — 14,487 Repurchase of common stock ( 1,254 ) ( 53,266 ) ( 73,942 ) — ( 127,208 ) Balance, September 30, 2021 65,501 $ — $ 1,883,343 $ ( 3,026 ) $ 1,880,317 See accompanying notes to unaudited 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 12 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 September 30, 2022 , December 31, 2021 and September 30, 2021, the results of operations for the three and nine months ended September 30, 2022 and 2021, and cash flows for the nine months ended September 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 nine months ended September 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 September 30, 2022 (in thousands) U.S. LAAP EMEA Canada Total Product category net sales Apparel, Accessories and Equipment $ 473,066 $ 84,769 $ 112,817 $ 55,690 $ 726,342 Footwear 134,008 30,559 40,713 23,437 228,717 Total $ 607,074 $ 115,328 $ 153,530 $ 79,127 $ 955,059 Channel net sales Wholesale $ 368,040 $ 76,829 $ 139,027 $ 61,133 $ 645,029 Direct-to-consumer 239,034 38,499 14,503 17,994 310,030 Total $ 607,074 $ 115,328 $ 153,530 $ 79,127 $ 955,059 Three Months Ended September 30, 2021 (in thousands) U.S. LAAP EMEA Canada Total Product category net sales Apparel, Accessories and Equipment $ 406,187 $ 78,160 $ 75,399 $ 61,409 $ 621,155 Footwear 104,299 24,594 33,751 20,907 183,551 Total $ 510,486 $ 102,754 $ 109,150 $ 82,316 $ 804,706 Channel net sales Wholesale $ 292,357 $ 66,070 $ 93,899 $ 65,810 $ 518,136 Direct-to-consumer 218,129 36,684 15,251 16,506 286,570 Total $ 510,486 $ 102,754 $ 109,150 $ 82,316 $ 804,706 Nine Months Ended September 30, 2022 (in thousands) U.S. LAAP EMEA Canada Total Product category net sales Apparel, Accessories and Equipment $ 1,206,886 $ 225,073 $ 213,628 $ 115,016 $ 1,760,603 Footwear 314,567 84,823 92,161 42,478 534,029 Total $ 1,521,453 $ 309,896 $ 305,789 $ 157,494 $ 2,294,632 Channel net sales Wholesale $ 817,429 $ 165,075 $ 261,580 $ 109,065 $ 1,353,149 Direct-to-consumer 704,024 144,821 44,209 48,429 941,483 Total $ 1,521,453 $ 309,896 $ 305,789 $ 157,494 $ 2,294,632 COLUMBIA SPORTSWEAR COMPANY | 2022 FORM 10-Q | 9 Table of Contents Notes to Condensed Consolidated Financial Statements (Unaudited) Nine Months Ended September 30, 2021 (in thousands) U.S. LAAP EMEA Canada Total Product category net sales Apparel, Accessories and Equipment $ 1,040,432 $ 212,921 $ 186,213 $ 103,549 $ 1,543,115 Footwear 257,781 79,785 82,276 33,725 453,567 Total $ 1,298,213 $ 292,706 $ 268,489 $ 137,274 $ 1,996,682 Channel net sales Wholesale $ 669,425 $ 153,689 $ 232,215 $ 100,523 $ 1,155,852 Direct-to-consumer 628,788 139,017 36,274 36,751 840,830 Total $ 1,298,213 $ 292,706 $ 268,489 $ 137,274 $ 1,996,682 PERFORMANCE OBLIGATIONS For the three and nine months ended September 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 September 30, 2022, December 31, 2021 and September 30, 2021, the Company did not have contract assets and had an immaterial amount of contract liabilities included in Accrued liabilities on the unaudited Condensed Consolidated Balance Sheets. NOTE 3 — INTANGIBLE ASSETS, NET AND GOODWILL Intangible assets, net consisted of the following: (in thousands) September 30, 2022 December 31, 2021 September 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 ( 20,249 ) ( 19,013 ) ( 18,600 ) Accumulated amortization ( 34,447 ) ( 33,211 ) ( 32,798 ) Net carrying amount 2,751 3,987 4,400 Intangible assets with indefinite lives 97,921 97,921 97,921 Intangible assets, net $ 100,672 $ 101,908 $ 102,321 Amortization expense for intangible assets subject to amortization was $ 0.4 million for the three months ended September 30, 2022 and 2021, and was $ 1.2 million for the nine months ended September 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 $ 413 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 In July 2022, the Company terminated its unsecured, committed revolving credit agreement, maturing on December 30, 2025, which provided for funding up to $ 500.0 million (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, generally 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. A commitment fee ranging from 0.10% to 0.20% based on the Company's funded debt ratio is paid quarterly on the average daily unused commitment amount of the Credit Facility. 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. As of September 30, 2022 , the Company was in compliance with all associated covenants and there was no balance outstanding under the Credit Facility. In October 2022, the Company borrowed $25.0 million from the Credit Facility. These borrowings accrue interest at a rate of 4.14% per annum. OTHER SHORT-TERM BORROWINGS AND CREDIT LINES As of September 30, 2022 , there was €4.5 million (approximately US$4.4 million) of borrowings outstanding under an overdraft facility utilized by the Company's European subsidiary, which was guaranteed by the Company. These borrowings accrued interest at a rate of 3.75% per annum and were repaid in October 2022. In October 2022, the Company borrowed €15.0 million (approximately US$15.0 million) from an unsecured, uncommitted credit facility utilized by the Company's European subsidiary, which is guaranteed by the Company. These borrowings accrue interest at a rate of 2.10% per annum . COLUMBIA SPORTSWEAR COMPANY | 2022 FORM 10-Q | 11 Table of Contents Notes to Condensed Consolidated Financial Statements (Unaudited) 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. NOTE 6 — SHAREHOLDERS' EQUITY Since the inception of the Company's stock repurchase plan in 2004 through September 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 September 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 nine months ended September 30, 2022 , the Company repurchased an aggregate of $ 286.9 million of the Company's common stock under this program. The Company did not repurchase common stock during the three months ended September 30, 2022 . 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 September 30, Nine Months Ended September 30, (in thousands) 2022 2021 2022 2021 Stock options $ 2,018 $ 1,500 $ 5,853 $ 5,271 Restricted stock units 3,417 3,164 10,218 9,216 Total $ 5,435 $ 4,664 $ 16,071 $ 14,487 STOCK OPTIONS During the nine months ended September 30, 2022 , the Company granted a total of 551,134 stock options at a weighted average grant date fair value of $ 18.29 per option. As of September 30, 2022 , unrecognized costs related to outstanding stock options totaled $ 14.9 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 2.42 years. RESTRICTED STOCK UNITS During the nine months ended September 30, 2022 , the Company granted 246,031 restricted stock units at a weighted average grant date fair value of $ 85.29 per restricted stock unit. As of September 30, 2022 , unrecognized costs related to outstanding restricted stock units totaled $ 25.3 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 2.49 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 September 30, Nine Months Ended September 30, (in thousands, except per share amounts) 2022 2021 2022 2021 Weighted average common shares outstanding, used in computing basic earnings per share 62,098 65,862 62,967 66,182 Effect of dilutive stock options and restricted stock units 112 404 211 491 Weighted average common shares outstanding, used in computing diluted earnings per share 62,210 66,266 63,178 66,673 Earnings per share: Basic $ 1.80 $ 1.53 $ 2.95 $ 2.98 Diluted $ 1.80 $ 1.52 $ 2.94 $ 2.96 Stock options, service-based restricted stock units, and performance-based restricted stock units representing 2,174,505 and 652,317 shares of common stock for the three months ended September 30, 2022 and 2021, respectively, and 1,738,354 and 810,092 shares of common stock for the nine months ended September 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 derivative transactions Foreign currency translation adjustments Total Balance as of June 30, 2022 $ 23,631 $ ( 45,364 ) $ ( 21,733 ) Other comprehensive income (loss) before reclassifications 17,191 ( 30,058 ) ( 12,867 ) Amounts reclassified from accumulated other comprehensive income (loss) (1) ( 2,970 ) — ( 2,970 ) Net other comprehensive income (loss) during the year 14,221 ( 30,058 ) ( 15,837 ) Balance as of September 30, 2022 $ 37,852 $ ( 75,422 ) $ ( 37,570 ) (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. 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 June 30, 2021 $ ( 4,357 ) $ 2,201 $ ( 2,156 ) Other comprehensive income (loss) before reclassifications 8,170 ( 11,422 ) ( 3,252 ) Amounts reclassified from accumulated other comprehensive income (loss) (1) 2,382 — 2,382 Net other comprehensive income (loss) during the year 10,552 ( 11,422 ) ( 870 ) Balance as of September 30, 2021 $ 6,195 $ ( 9,221 ) $ ( 3,026 ) (1) Amounts reclassified are recorded in Net sales, Cost of sales, or Other non-operating income (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 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 ) 31,780 ( 61,132 ) ( 29,803 ) Amounts reclassified from accumulated other comprehensive income (loss) (1) 451 ( 3,842 ) — ( 3,391 ) Net other comprehensive income (loss) during the year — 27,938 ( 61,132 ) ( 33,194 ) Balance as of September 30, 2022 $ — $ 37,852 $ ( 75,422 ) $ ( 37,570 ) (1) Amounts reclassified are recorded in Net sales , Cost of sales , or Other non-operating income (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 13,547 ( 19,396 ) ( 5,849 ) Amounts reclassified from accumulated other comprehensive income (loss) (1) 2,017 — 2,017 Net other comprehensive income (loss) during the year 15,564 ( 19,396 ) ( 3,832 ) Balance as of September 30, 2021 $ 6,195 $ ( 9,221 ) $ ( 3,026 ) (1) Amounts reclassified are recorded in Net sales , Cost of sales , or Other non-operating income (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 September 30, Nine Months Ended September 30, (in thousands) 2022 2021 2022 2021 Net sales to unrelated entities: U.S. $ 607,074 $ 510,486 $ 1,521,453 $ 1,298,213 LAAP 115,328 102,754 309,896 292,706 EMEA 153,530 109,150 305,789 268,489 Canada 79,127 82,316 157,494 137,274 $ 955,059 $ 804,706 $ 2,294,632 $ 1,996,682 Segment operating income U.S. $ 145,268 $ 139,101 $ 325,790 $ 320,819 LAAP 11,771 7,628 21,712 16,347 EMEA 35,567 26,215 51,036 47,809 Canada 20,237 22,849 31,913 29,710 Total segment operating income 212,843 195,793 430,451 414,685 Unallocated corporate expenses ( 67,582 ) ( 62,332 ) ( 192,751 ) ( 175,749 ) Interest income, net 765 196 1,659 1,072 Other non-operating income (expense), net ( 269 ) 201 ( 1,660 ) ( 397 ) Income before income tax $ 145,757 $ 133,858 $ 237,699 $ 239,611 CONCENTRATIONS The Company did not have any customer that accounted for 10% or more of Accounts receivable, net as of September 30, 2022 . The Company had one customer that accounted for approximately 14.3 % and 10.4 % of Accounts receivable, net as of December 31, 2021 and September 30, 2021, respectively. The Company did not have any customer that accounted for 10% or more of Net sales for the three and nine months ended September 30, 2022 and September 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 COLUMBIA SPORTSWEAR COMPANY | 2022 FORM 10-Q | 15 Table of Contents Notes to Condensed Consolidated Financial Statements (Unaudited) have non-functional currency denominated sales for which the Company hedges the Canadian dollar and British pound. The Company seeks 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 income (expense), net by the gains and losses generated from the remeasurement of the non-functional currency denominated monetary assets and liabilities. The following table presents the gross notional amount of outstanding derivative instruments: (in thousands) September 30, 2022 December 31, 2021 September 30, 2021 Derivative instruments designated as cash flow hedges: Currency forward contracts $ 459,189 $ 485,083 $ 471,250 Derivative instruments not designated as hedges: Currency forward contracts 287,825 267,982 247,134 As of September 30, 2022 , $ 30.4 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 income (expense), net 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 income (expense), net 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 September 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 $ 13.1 million as of September 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 September 30, 2022 December 31, 2021 September 30, 2021 Derivative instruments designated as cash flow hedges: Derivative instruments in asset positions: Currency forward contracts Prepaid expenses and other current assets $ 32,289 $ 7,927 $ 5,500 Currency forward contracts Other non-current assets 13,919 10,142 8,723 Derivative instruments in liability positions: Currency forward contracts Accrued liabilities — 2,545 2,164 Currency forward contracts Other long-term liabilities 436 318 449 Derivative instruments not designated as cash flow hedges: Derivative instruments in asset positions: Currency forward contracts Prepaid expenses and other current assets 2,912 1,470 1,633 Currency forward contracts Other non-current assets — — 109 Derivative instruments in liability positions: Currency forward contracts Accrued liabilities 1,514 1,027 251 Currency forward contracts Other long-term liabilities — — 17 The following table presents the statement of operations effect and classification of derivative instruments: Statement Of Operations Classification Three Months Ended September 30, Nine Months Ended September 30, (in thousands) 2022 2021 2022 2021 Currency Forward Contracts: Derivative instruments designated as cash flow hedges: Gain recognized in other comprehensive income (loss), net of tax — $ 17,191 $ 8,170 $ 31,780 $ 13,547 Loss reclassified from accumulated other comprehensive income (loss) to income for the effective portion Net sales ( 28 ) ( 170 ) ( 204 ) ( 182 ) Gain (loss) reclassified from accumulated other comprehensive income (loss) to income for the effective portion Cost of sales 4,114 ( 3,257 ) 5,373 ( 2,833 ) Gain reclassified from accumulated other comprehensive income (loss) to income as a result of cash flow hedge discontinuance Other non-operating income (expense), net — 345 222 451 Derivative instruments not designated as cash flow hedges: Gain recognized in income Other non-operating income (expense), net 1,341 1,077 2,638 355 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 September 30, 2022 are as follows: (in thousands) Level 1 Level 2 Level 3 Total Assets: Short-term investments: Money market funds $ 79 $ — $ — $ 79 Mutual fund shares 893 — — 893 Other current assets: Derivative financial instruments — 35,201 — 35,201 Non-current assets: Money market funds 1,201 — — 1,201 Mutual fund shares 17,332 — — 17,332 Derivative financial instruments — 13,919 — 13,919 Total assets measured at fair value $ 19,505 $ 49,120 $ — $ 68,625 Liabilities: Accrued liabilities: Derivative financial instruments $ — $ 1,514 $ — $ 1,514 Other long-term liabilities: Derivative financial instruments — 436 — 436 Total liabilities measured at fair value $ — $ 1,950 $ — $ 1,950 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 September 30, 2021 are as follows: (in thousands) Level 1 Level 2 Level 3 Total Assets: Cash equivalents: Money market funds $ 2,903 $ — $ — $ 2,903 Short-term investments: Money market funds 67 — — 67 Mutual fund shares 1,065 — — 1,065 Other current assets: Derivative financial instruments — 7,133 — 7,133 Non-current assets: Money market funds 3,397 — — 3,397 Mutual fund shares 17,209 — — 17,209 Derivative financial instruments — 8,832 — 8,832 Total assets measured at fair value $ 24,641 $ 15,965 $ — $ 40,606 Liabilities: Accrued liabilities: Derivative financial instruments $ — $ 2,415 $ — $ 2,415 Other long-term liabilities: Derivative financial instruments — 466 — 466 Total liabilities measured at fair value $ — $ 2,881 $ — $ 2,881 COLUMBIA SPORTSWEAR COMPANY | 2022 FORM 10-Q | 20 Table of Contents