What changed in this filing

/stocks — the workspaceLOADING

Item 7. Management’s Discussion and Analysis

2023-02-23 compared with 2022-02-24 · 207 added, 203 removed, 203 unchanged (67% of the section changed)

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

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", Item 1, Item 1A, and Item 8 of this Annual Report on Form 10-K.

In addition, refer to Item 7 in our Annual Report on Form 10-K for the year ended December 31, 2020 for our discussion and analysis comparing financial condition and results of operations from 2020 to 2019.

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 Item 1A of this Annual Report on Form 10-K.

In addition, refer to Part II, 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 are a global leader in designing, developing, marketing, and distributing outdoor, active and 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.

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.

2 unchanged sentences

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

COLUMBIA SPORTSWEAR COMPANY | 2021 FORM 10-K | 21

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

• 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;

• expand and improve global DTC operations with supporting processes and systems;

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

We are investing in our strategic priorities to:

• accelerate profitable growth;

• create iconic products that are differentiated, functional and innovative;

• drive brand engagement through increased, focused demand creation investments;

• enhance consumer experiences by investing in capabilities to delight and retain consumers;

• amplify marketplace excellence, with digitally-led, omni-channel, global distribution;

• empower talent that is driven by our core values through a diverse and inclusive workplace.

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.

COLUMBIA SPORTSWEAR COMPANY | 2022 FORM 10-K | 20

Business Environment and Trends

Economic Environment Impacting Consumer Spending Ability and Preferences | In 2022, we believe inflationary pressures, rising interest rates and recessionary fears began to impact wholesale customer behavior.

We expect consumer discretionary spending to be under pressure in 2023 and are preparing for the potential of a mild recession in the second half of 2023.

Elevated Inflationary Pressures | Inflationary pressures, including inbound and outbound freight, raw materials, labor, and product input costs, impacted our 2022 results.

We implemented product price increases for our Spring 2022 season and, to a greater extent, for our Fall 2022 and Spring 2023 seasons.

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, by a high-single to low-double-digit percent for our Fall 2022 product line, and by a high-single to low double-digit percent for our Spring 2023 product line.

Although price increases were not expected to fully offset gross margin pressure in 2022, in the fourth quarter of 2022, we began to experience lower inbound freight costs which we expect will benefit gross margin beginning in 2023.

We do not expect to implement meaningful product price increases as we begin to see the benefit of these lower costs.

Strengthening U.S.

Dollar | The rapid strengthening of the U.S.

dollar relative to major foreign currencies unfavorably impacted our results in 2022.

The impact of unfavorable foreign currency translation is anticipated to continue to unfavorably impact net sales and profitability through at least the first half of 2023 before shifting to a favorable impact in the second half of 2023.

Heightened Geopolitical Environment | Geopolitical tensions throughout the globe escalated in 2022 as a result of the invasion of Ukraine by Russia and other actions.

We believe these geopolitical tensions will remain elevated and have the potential to manifest themselves in certain regions where we directly operate.

Increased Freight Charges | In the first nine months of 2022, we experienced elevated ocean freight costs as a result of price increases stemming from an imbalance of supply and demand for steamship and ocean container capacity.

As a result, these costs have had a substantially unfavorable impact on our gross margin.

In the fourth quarter of 2022, we experienced significant declines in ocean freight prices.

We anticipate these lower ocean freight prices to persist into 2023.

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 product.

As a result of these and other supply chain disruptions that impacted the market, we received Fall 2021, Spring 2022 and Fall 2022 inventory later than expected and realized much higher than normal cancellations of Spring 2022 and Fall 2022 orders from our wholesale customers.

Spring 2023 inventory production and logistics transit times are improving markedly and are expected to be more in-line with our historical experience, assuming no material downturn in port and railroad labor relations.

COVID-19 Impacts in China | Throughout 2022, the efforts to control the spread of COVID-19 in China severely impacted the operations of our business in China.

For most of the second quarter of 2022, government efforts to control the spread of COVID-19 in China disrupted our distribution center's operations, which resulted in an inability to fulfill e-commerce, wholesale and owned DTC stores orders in China.

In the third and fourth quarter of 2022, similar restrictions impacted various aspects of our business, including the operation of DTC stores in China, as well as stores operated by our wholesale customers.

Upon the change in China's zero-COVID policy in early December 2022, increased COVID-19 infections negatively impacted business performance.

However, these impacts eased quickly and our business in China is rebounding.

Elevated Inventories | Strong consumer demand in 2021 and the first quarter of 2022 coupled with ongoing supply chain constraints resulted in a shortage of inventory in the marketplace.

By the end of the second quarter of 2022, the arrival of long-delayed orders at retailers and a slowing of consumer demand resulted in excess inventory in the marketplace.

With higher marketplace inventories and a rapidly changing economic environment, retailers rationalized their inventory needs and demonstrated a more conservative approach to inventory management.

As a result of the foregoing and the later inventory receipts previously discussed, we experienced increased order cancellations for Spring 2022 and Fall 2022 orders.

Due to our elevated inventory positions, we have adjusted future inventory purchases and are utilizing our outlet stores to profitability sell a portion of our excess inventory.

We expect our inventory position to normalize in the latter half of 2023.

Increased U.S.

Distribution Center Capacity Pressure | Elevated inventory levels combined with uneven flow of inventory receipts and shipments are resulting in storage and process capacity pressures within our U.S.

distribution centers and third-party logistics operations.

We began to experience these pressures as we received Fall 2022 inventory and expect this trend to continue well into 2023.

We expect to incur

COLUMBIA SPORTSWEAR COMPANY | 2022 FORM 10-K | 21

additional inventory carrying costs in 2023 as a result of additional costs for outside storage, and other inventory related holding costs, as we look to normalize our inventory position.

Talent Market and Wage Rate Pressures | Labor costs have risen in an effort to retain and compete for employees.

We have made certain wage adjustments in an effort to be more competitive in the current environment.

However, we anticipate rising costs to continue into 2023 resulting from the continued competition for talent.

Changes in Promotional Environment | In the first half of 2022, we operated in a low promotional environment and experienced fewer sales returns and customer accommodations than we have historically.

Near the end of the third quarter of 2022, an increase in promotional activity began to unfavorably impact our DTC product margins compared to the same period in the prior year in which promotions were exceptionally low.

With elevated marketplace inventory, we anticipate the promotional environment and less favorable trading terms to continue into 2023.

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 2021, we operated in an extremely 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 a potential 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 accelerated in 2021 resulting in lower inventory in the marketplace.

Lower marketplace inventories contributed to a full price selling environment resulting in lower promotional activity and higher gross margins for our business in 2021.

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 and retailers are able to replenish diminished inventory levels.

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 the limited ability to travel, attend entertainment-based experiences or purchase certain services increased consumers' savings levels.

As we move into 2022, we expect these tailwinds to diminish.

However, we expect growth in wages will enable consumer spending, to the extent it more than offsets inflationary pressures.

Decreased Direct-to-Consumer Store Traffic | During 2021, the majority of our stores remained open.

At varying times during the year, government efforts to control the spread of COVID-19 impacted our stores in various regions.

Our stores in Europe and Canada were impacted by these government efforts for most of the first quarter and at varying times in the second quarter of 2021.

Declared states of emergency impacted our stores in Japan in the first, second and third quarters.

Our stores in China were also impacted by these government efforts at varying times during 2021.

Overall, our store retail traffic trends improved during 2021, but remained below pre-pandemic levels.

Certain stores in tourist-dependent locations continue to be impacted by limited international tourism.

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 Ocean Freight Charges | In 2021, 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.

Later Inventory Receipts | 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.

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 anticipate similar delays for Spring 2022 inventory.

We do not expect the supply chain to normalize in 2022 and continue to anticipate later than expected inventory receipts and shipments to our wholesale customers and inventory available for our DTC businesses in 2022, resulting in impacts to future net sales and gross margin.

COLUMBIA SPORTSWEAR COMPANY | 2021 FORM 10-K | 22

Manufacturing Capacity Constraints | In 2021, we experienced footwear manufacturing capacity constraints which prevented us from securing footwear product to 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 | We have and continue to experience U.S.

labor shortages, affecting our ability to staff and operate our U.S.

distribution centers, retail stores and consumer call centers, as well as find qualified employees for our corporate offices and regional subsidiaries.

In addition, labor costs have risen recently as a result of competition to attract and retain qualified talent in an environment in which there is low unemployment and strong demand for employees.

We anticipate these rising costs and labor shortages to continue in 2022.

Increased Inflationary Pressures | Inflationary pressures, including increased inbound freight costs, impacted our results in 2021.

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

We are implementing product 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 of dampening consumer demand.

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 a high-single to low-double-digit percent for our Fall 2022 product line.

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

Looking beyond 2022, we anticipate ocean freight and raw material cost inflation will be transitory, while wage inflation will be more permanent.

Changing Consumer Expectations | Consumer behavior continues to fluctuate.

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

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.

3 unchanged sentences

RESULTS OF OPERATIONS

The following discussion of our results of operations and liquidity and capital resources should be read in conjunction with Item 8 of this Annual Report on Form 10-K.

All references to years relate to the fiscal year ended December 31.

The following discussion of our results of operations and liquidity and capital resources should be read in conjunction with Part II, Item 8 of this Annual Report on Form 10-K.

Non-GAAP Financial Measure

8 unchanged sentences

Results of Operations — Consolidated

Year Ended December 31, 2021 Compared to Year Ended December 31, 2020

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

5 unchanged sentences

Selling, general and administrative expenses 1,304.4 37.7 1,180.3 37.8

Impairment of goodwill and intangible assets 35.6 1.1 — —

Net licensing income 22.0 0.7 18.3 0.6

6 unchanged sentences

Diluted earnings per share $ 4.95 $ 5.33

Year Ended December 31, 2022 Compared to Year Ended December 31, 2021

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

15 unchanged sentences

Wholesale $ 1,867.7 $ 57.8 $ 1,925.5 $ 1,660.4 12% 16%

DTC 1,466.0 (9.8) 1,456.2 1,098.3 33% 33%

Direct-to-consumer 1,596.5 47.2 1,643.7 1,466.0 9% 12%

Total $ 3,464.2 $ 105.0 $ 3,569.2 $ 3,126.4 11% 14%

2 unchanged sentences

COLUMBIA SPORTSWEAR COMPANY | 2022 FORM 10-K | 23

Overall, our global net sales increase reflects the higher consumer demand and economic recovery from the ongoing COVID-19 pandemic.

This increase was constrained by supply chain disruptions that limited factory capacities for footwear products and resulted in later inventory receipts and lower than expected wholesale shipments.

Net sales increased across all regions, primarily driven by increased Columbia brand net sales which benefited from robust consumer demand, lapping of 2020 DTC store closures, and increased orders from wholesale customers following lower sales volumes in 2020 due to order cancellations in response to the COVID-19 pandemic.

During 2021, our global DTC e-commerce business grew 20% and represented 18% of our global net sales, including fourth quarter 2021 growth of 25% year-over-year and represented 23% of our global net sales.

In 2020, our global DTC e-commerce business grew 39% and represented 19% of global net sales.

Overall, our global net sales increase reflected higher shipments of Spring 2022 and Fall 2022 wholesale orders and higher consumer demand in our DTC business.

Retailers generally exited 2021 with lower than optimal inventory levels which contributed to the increased Spring 2022 and Fall 2022 wholesale demand to replenish inventory and fulfill anticipated consumer demand.

In addition, consumer demand in our DTC business remained healthy throughout the year as consumer traffic levels recovered in our DTC stores and positive e-commerce trends were sustained.

In 2022, our global DTC e-commerce net sales grew 8% and represented 18% of our global net sales.

In 2021, DTC e-commerce net sales grew 20% and represented 18% of our global net sales.

Columbia and SOREL brand net sales benefited from favorable late season cold weather product sales in the first quarter of 2022.

Columbia brand net sales continued to experience broad-based growth across all channels, product categories, and regions.

In the fourth quarter of 2022, SOREL, Mountain Hardwear and prAna net sales were unfavorably impacted from wholesale order cancellations resulting from supply chain disruptions and retailer cautiousness, as well as lower consumer demand.

Our global net sales increase was tempered by unfavorable impacts from changes in foreign currency exchange rates.

Gross Profit.

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 expense .

Gross profit is summarized in the following table:

3 unchanged sentences

Gross margin 49.4 % 51.6 % -220 bps

Gross profit as a percentage of net sales expanded primarily due to:

• an approximate 230 bps increase in channel profitability substantially due to higher DTC product margins reflecting lower promotional levels and, to a lesser extent, higher wholesale product margin driven by strong retail sell-through performance resulting in a higher proportion of full price vs off price sales mix and lower customer accommodations, partially offset by unfavorable impacts from higher inbound freight costs due to supply chain constraints;

• favorable impacts from lower year-over-year inventory provisions.

Gross margin contracted primarily due to the following factors:

• an approximate 180 bps decrease related to elevated inbound freight costs;

• unfavorable channel and regional net sales shifts primarily due to a higher mix of wholesale sales which typically carry a lower margin compared to DTC 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:

3 unchanged sentences

Selling, general and administrative expenses as percent of net sales 37.7 % 37.8 % -10 bps

The SG&A expenses increase was primarily due to expenses incurred to support the growth of our business and its recovery from the COVID-19 impacts from 2020.

During 2021, we spent approximately 5.9% of our net sales for demand creation, compared to 5.7% in 2020.

In addition, depreciation and amortization included in SG&A expenses totaled $55.5 million, compared to $63.0 million in 2020.

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

• higher global retail expenses of $51.8 million relative to prior year temporary store closures;

• increased demand creation spend of $43.6 million;

• higher personnel expenses of $37.6 million to support business growth as well as annual merit and other wage rate increases;

• higher incentive compensation of $31.1 million;

• higher professional fees and insurance;

SG&A expense growth reflects expenses to support the growth of our business, inflationary pressures, and investments to drive our brand-led consumer-focused strategies.

SG&A expenses increased primarily due to the following factors:

• higher personnel expenses of $39.8 million, reflecting increased headcount to support business growth, as well as annual merit and other wage rate increases;

• increased demand creation spending of $21.0 million, including higher spending aligned with sales growth;

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

• higher information technology related expenses;

• higher outside storage and third-party logistics expenses;

partially offset by

• decreased retail impairments and store closures charges of $37.4 million, reflecting the non-recurrence of prior year retail impairments and store closure charges of $28.8 million and the 2021 benefit of $8.6 million from the completion of lease terminations and settlements related to certain of those closures;

• decreased bad debt expenses of $29.7 million, which primarily reflected the non-recurrence of a 2020 bad debt expense increase of $19.7 million resulting from the COVID-19 pandemic;

• lower incentive compensation expense.

Impairment of Goodwill and Intangible Assets.

For the year ended December 31, 2022, we recognized $35.6 million of impairment charges related to the prAna brand as a result of our annual fourth quarter impairment testing.

These charges consisted of an $18.7 million impairment charge related to prAna's trademark, an indefinite-lived intangible asset, and a $16.9 million impairment charge related to the goodwill attributable to the prAna business.

For the year ended December 31, 2021, there were no impairment charges recorded for goodwill and intangible assets with indefinite lives.

COLUMBIA SPORTSWEAR COMPANY | 2022 FORM 10-K | 24

• the non-recurrence of prior year expenses of $18.9 million related to the COVID-19 pandemic;

• the non-recurrence of prior year prAna brand trademark impairment charge of $17.5 million.

Refer to our Critical Accounting Policies and Estimates below for further information regarding impairments.

Income Tax Expense.

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

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

Year Ended December 31,

2 unchanged sentences

Effective income tax rate 21.6 % 21.6 %

Our effective income tax rates for the years ended December 31, 2021 and 2020 were impacted by discrete tax items, which lowered the effective tax rate each year.

Our effective income tax rate for the year ended December 31, 2021 decreased, compared to 2020, primarily due to the non-recurring benefit of a decrease in accrued foreign withholding taxes as well as the change in mix of book income or loss among jurisdictions.

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

For the year ended December 31, 2022, our effective income tax rate was primarily impacted by a non-recurring benefit related to the finalization of U.S.

and foreign tax audits, a non-recurring benefit related to a decrease in accrued foreign withholding taxes and a non-recurring benefit related to a foreign currency loss resulting from an intercompany transaction.

For the year ended December 31, 2021, our effective income tax rate was primarily impacted by a decrease in accrued foreign withholding taxes and a non-recurring benefit related to common stock benefits.

Results of Operations — Segment

Year Ended December 31, 2021 Compared to Year Ended December 31, 2020

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

Income from operations as a percentage of net sales in the U.S.

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.

1 unchanged sentence

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.

Year Ended December 31, 2022 Compared to Year Ended December 31, 2021

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

10 unchanged sentences

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:

COLUMBIA SPORTSWEAR COMPANY | 2022 FORM 10-K | 25

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

Year Ended December 31,

7 unchanged sentences

Operating income $ 393.1 $ 450.5 $ (57.4)

operating income decreased $16.7 million to $519.8 million, or 22.6% of net sales, in 2022 from $536.5 million, or 26.0% of net sales, in 2021.

The decrease was driven primarily by increased net sales, more than offset by decreased gross margin.

net sales increased $241.9 million, or 12%, in 2022, compared to 2021.

net sales increased across all channels, product categories, and most brands, led by increased net sales for our Columbia and SOREL brands.

Increased U.S.

wholesale net sales were driven by increased consumer demand and shipment of higher Spring 2022 and Fall 2022 orders compared to shipment of 2021 season orders in the prior year, partially offset by increased order cancellations in the second half of 2022.

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

gross margin decreased primarily due to elevated inbound freight costs.

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

business operated 156 retail stores, compared to 142 stores as of December 31, 2021.

SG&A expenses increased as a percentage of net sales to 27.7% in 2022 compared to 26.7% for 2021.

LAAP operating income increased $5.0 million to $47.0 million, or 9.9% of net sales, in 2022 from $42.0 million, or 9.0% of net sales, in 2021.

The increase was driven primarily by increased net sales.

LAAP net sales increased $8.4 million, or 2% (13% constant-currency), in 2022, compared to 2021, primarily in our LAAP distributor business.

LAAP net sales increased due to higher shipment of Fall 2022 orders compared to shipment of Fall 2021 orders, earlier shipment of Spring 2023 orders compared to shipment of Spring 2022 orders, and higher consumer demand as we lapped prior year restrictions to prevent the spread of COVID-19 in Japan.

These increases were partially offset by unfavorable impacts from changes in foreign currency exchange rates and government efforts to control the spread of COVID-19 in China.

LAAP SG&A expenses decreased as a percentage of net sales to 46.0% in 2022 compared to 48.3% in 2021.

EMEA operating income increased $14.7 million to $80.2 million, or 18.3% of net sales, in 2022 from $65.5 million, or 17.1% of net sales, in 2021.

The increase was driven primarily by increased net sales.

EMEA net sales increased $56.5 million, or 15% (26% constant-currency), in 2022, compared to 2021, driven by increased net sales in our Europe-direct and EMEA distributor businesses.

Europe-direct net sales increased primarily due to higher consumer demand, partially offset by unfavorable impacts from changes in foreign currency exchange rates.

EMEA distributor net sales increased primarily due to higher shipments of Fall 2022 orders compared to shipment of Fall 2021 orders and earlier shipment of Spring 2023 orders compared to shipment of Spring 2022 orders.

EMEA SG&A expenses decreased as a percentage of net sales to 26.1% in 2022 compared to 28.0% in 2021.

Canada operating income increased $0.3 million to $53.0 million, or 21.2% of net sales, in 2022 from $52.7 million, or 24.1% of net sales in 2021.

The increase primarily resulted from increased net sales.

Canada net sales increased $31.0 million, or 14% (19% constant-currency), in 2022, compared to 2021, primarily driven by increased net sales in our Canada DTC and wholesale businesses.

Canada SG&A expenses increased as a percentage of net sales to 25.0% in 2022, compared to 24.0% in 2021.

COLUMBIA SPORTSWEAR COMPANY | 2022 FORM 10-K | 26

Unless otherwise noted below, segment net sales and operating income within all regions increased due to higher consumer demand and the recovery from the COVID-19 pandemic impacts from 2020.

In 2020, unfavorable COVID-19 pandemic impacts led to economic lockdowns, including temporary store closures and lower consumer demand.

income from operations increased $286.0 million to $536.5 million, or 26.0% of net sales, in 2021 from $250.5 million, or 15.6% of net sales, in 2020.

The increase was driven primarily by increased net sales, increased gross margins, and the non-recurrence of prior year retail impairments and store closure charges of $28.8 million and the 2021 benefit of $8.6 million from settlements related to those closures.

net sales increased $456.5 million, or 28% in 2021 compared to $1,603.8 million in 2020.

net sales increased in our DTC and wholesale businesses.

U.S DTC net sales increased largely from net sales growth generated from retail stores, and to a lesser extent, our e-commerce business.

At December 31, 2021, our U.S.

business operated 142 retail stores, compared to 132 stores at December 31, 2020.

SG&A expenses decreased as a percentage of net sales to 26.7% in 2021 compared to 33.8% in 2020 largely due to the impact of net sales increases, and the non-recurrence of prior year retail impairments, other store closure charges and COVID-19 related expenses.

LAAP income from operations increased $6.1 million to $42.0 million, or 9.0% of net sales, in 2021 from $35.9 million, or 8.5% of net sales, in 2020.

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

LAAP net sales increased $41.0 million, or 10% (8% constant-currency) in 2021 compared to $424.5 million in 2020, driven largely by increased net sales in our China business, and to a lesser extent, our Korea business, partially offset by decreased net sales in our LAAP distributors and Japan businesses.

LAAP SG&A expense increased as a percentage of net sales to 48.3% in 2021 compared to 45.7% in 2020 largely due to incremental demand creation expense, partially offset by the impact of net sales increases.

EMEA income from operations increased $34.3 million to $65.5 million, or 17.1% of net sales, in 2021 from $31.2 million, or 10.4% of net sales, in 2020.

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

EMEA net sales increased $83.2 million, or 28% (25% constant-currency) in 2021 compared to $298.9 million in 2020.

EMEA net sales increased primarily in our Europe-direct business, followed by our EMEA distributor business.

EMEA SG&A expense decreased as a percentage of net sales to 28.0% in 2021 compared to 33.4% in 2020 largely due to the impact of net sales increases and the non-recurrence of prior year COVID-19 related expenses.

Canada income from operations increased $15.1 million to $52.7 million, or 24.1% of net sales, in 2021 from $37.6 million, or 21.6% of net sales, in 2020.

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

Canada net sales increased $44.1 million, or 25% (18% constant-currency) in 2021 compared to $174.4 million in 2020, primarily driven by increased net sales in our Canada wholesale business, followed by our Canada DTC businesses.

Canada SG&A expense decreased as a percentage of net sales to 24.0% in 2021 compared to 25.6% for 2020 largely due to the impact of net sales increases and the non-recurrence of prior year COVID-19 related expenses.

Unallocated corporate expenses increased by $28.0 million to $246.2 million in 2021, from $218.2 million in 2020, largely driven by higher incentive compensation and personnel expenses, partially offset by the non-recurrence of the 2020 prAna brand trademark impairment charge of $17.5 million.

Unallocated Corporate Expenses

Unallocated corporate expenses increased by $60.7 million to $306.9 million in 2022 from $246.2 million in 2021, largely driven by prAna impairment charges of $35.6 million, higher personnel expenses and technology related expenses, partially offset by lower incentive compensation.

LIQUIDITY AND CAPITAL RESOURCES

Including cash, cash equivalents, short-term investments and available committed and uncommitted credit lines, we had more than $1.5 billion in total liquidity at December 31, 2021.

Including cash, cash equivalents, short-term investments and available committed credit lines, we had approximately $935 million in total liquidity as of December 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.

COLUMBIA SPORTSWEAR COMPANY | 2021 FORM 10-K | 27

Our cash and cash equivalents and short-term investments balances generally are at their lowest level just prior to the start of the U.S.

holiday season and increase during the fourth quarter from collection of wholesale business receivables and fourth quarter DTC sales.

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.

Cash Flow Activities

Cash flows from continuing operations are summarized in the following table:

Cash flows are summarized in the following table:

Year Ended December 31,

(in millions) 2022 2021 Change

Cash and cash equivalents $ 763.4 $ 790.7 $ (27.3)

Net cash provided by (used in):

3 unchanged sentences

Net effect of exchange rate changes on cash (19.8) (7.0) (12.8)

Net increase (decrease) in cash and cash equivalents $ (27.3) $ 104.7 $ (132.0)

The change in cash flows provided by operating activities was driven by a $157.8 million increase in net income and non-cash adjustments, partially offset by a $79.5 million increase in cash used in changes in assets and liabilities.

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

The $165.1 million increase in cash used in Inventories, net was mainly driven by an increase in inventory purchases reflecting strong consumer demand.

The $124.8 million increase in cash provided by Accounts payable primarily reflects the effects of higher receipts of inventory in the fourth quarter of 2021 compared to the fourth quarter of 2020 due to stronger customer demand and increased in-transit inventory.

The $118.6 million increase in cash provided by Accrued liabilities was primarily driven by changes in accruals for incentive compensation as well as DTC return liabilities.

The $58.6 million increase in cash used in Prepaid expenses and other assets was primarily driven by changes in inventory prepayments and U.S.

prepaid income taxes.

The $54.5 million increase in cash used in Accounts receivable was driven by higher wholesale net sales, partially offset by higher collections in 2021.

The $33.1 million increase in cash used in Operating lease assets and liabilities was primarily due to payment of deferred rents and lease termination fees.

Net cash used in investing activities was $163.8 million for 2021 compared to $27.2 million for 2020.

Net decrease in cash and cash equivalents $ (333.1) $ (27.3) $ (305.8)

The change in cash flows used in operating activities was driven by a $388.1 million increase in cash used in changes in assets and liabilities, partially offset by a $8.5 million increase in cash provided by net income and non-cash adjustments.

The most significant comparative changes in assets and liabilities included Inventories, and to a lesser extent, Accrued liabilities, Accounts payable, Accounts receivable, net , and Operating lease assets and liabilities .

The $299.6 million increase in cash used in Inventories was driven by an increase in inventory purchases in anticipation of sales growth, temporary store closures due to government efforts to control the spread of COVID-19 in China, supply chain disruptions, and higher than initially planned wholesale order cancellations.

The $45.8 million decrease in cash provided by Accrued liabilities was primarily driven by changes in accruals for incentive compensation.

The $35.1 million decrease in cash provided by Accounts payable primarily resulting from the effects of reduced in-transit inventory compared to 2021.

The $32.9 million increase in cash used in Accounts receivable, net was primarily driven by growth in wholesale sales, partially offset by an increase in collections.

These amounts were partially offset by the $22.4 million decrease in cash used in Operating lease assets and liabilities , which was primarily due to payment of non-recurring deferred rents and lease termination fees in 2021.

Net cash provided by investing activities was $72.7 million for 2022, compared to net cash used in investing activities of $163.8 million for 2021.

For 2022, net cash provided by investing activities consisted of $131.2 million in net sales and maturities of short-term investments, partially offset by $58.5 million in cash used for capital expenditures.

For 2021, net cash used in investing activities consisted of $129.1 million in net purchases of short-term investments and $34.7 million for capital expenditures.

For 2020, net cash used in investing activities primarily consisted of $28.8 million for capital expenditures.

Net cash used in financing activities was $210.9 million for the 2021 compared to $151.7 million for 2020.

For 2021, net cash used in financing activities primarily consisted of repurchases of common stock of $165.4 million and dividend payments to our shareholders of $68.6 million, partially offset by net proceeds from the issuance of common stock related to stock-based compensation of $23.0 million.

Net cash used in financing activities was $360.8 million for 2022 compared to $210.9 million for 2021.

For 2022, net cash used in financing activities primarily consisted of repurchases of common stock of $287.4 million and dividend payments to our shareholders of $75.1 million.

COLUMBIA SPORTSWEAR COMPANY | 2022 FORM 10-K | 27

Sources of Liquidity

Cash and cash equivalents and short-term investments

At December 31, 2021, we had cash and cash equivalents of $763.4 million and short-term investments of $131.1 million, compared to $790.7 million and $1.2 million, respectively, at December 31, 2020.

As of December 31, 2022, we had cash and cash equivalents of $430.2 million and short-term investments of $0.7 million, compared to $763.4 million and $131.1 million, respectively, as of December 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%.

COLUMBIA SPORTSWEAR COMPANY | 2021 FORM 10-K | 28

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.

At December 31, 2021, 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 Columbia Sportswear Company 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$5.0 million).

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

In addition, collectively, our international subsidiaries have available approximately US$111.7 million in unsecured and uncommitted lines of credit and overdraft facilities.

At December 31, 2021, there was no balance outstanding under our international subsidiaries' lines of credit and overdraft facilities.

Refer to Note 7 in Part II, Item 8 of this Annual Report on Form 10-K for further information regarding the domestic credit facility.

As of December 31, 2022, we had available an unsecured, committed revolving credit facility, which provides for borrowings up to $500.0 million.

We were in compliance with all associated covenants and there was no balance outstanding under the facility.

International Credit Facility

As of December 31, 2022, our European subsidiary had available an unsecured, committed line of credit, which is guaranteed by the Company and provides for borrowings up to €4.4 million (approximately US$4.7 million).

There was no balance outstanding under the facility.

Other Sources

As of December 31, 2022, collectively, our international subsidiaries had unsecured, uncommitted lines of credit, credit facilities and overdraft facilities, providing for borrowings up to approximately US$106.1 million.

There was no balance outstanding under these 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 domestic credit facility.

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.

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 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 collection of accounts receivable balances from our customers.

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

As of December 31, 2022, our inventory balance increased to $1,028.5 million, compared to $645.4 million as of December 31, 2021.

Unrealized projected sales growth for Fall 2022 and earlier receipts of Spring 2023 product resulted in higher inventory levels.

We believe older season inventories represent a manageable portion of our total inventory mix.

To align inventory levels more closely with anticipated demand, we have adjusted future inventory purchases and we are leveraging our outlet stores to sell excess merchandise.

We expect inventory to remain elevated into the second half of 2023 as we carry forward inventory into future seasons, balancing reducing inventory levels with maintaining profitability.

We have planned 2023 capital expenditures of approximately $70 to $90 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 planned 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.

This includes investments in our DTC operations, including new stores, U.S.

distribution projects to increase efficiency and expand storage, and digital and supply chain capabilities to support our strategic priorities.

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.

1 unchanged sentence

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

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

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

• considering opportunistic mergers and acquisitions.

2 unchanged sentences

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.

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

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

COLUMBIA SPORTSWEAR COMPANY | 2022 FORM 10-K | 28

Other cash commitments

Our non-current Income taxes payable on the Consolidated Balance Sheet at December 31, 2021 includes approximately $13.7 million of net unrecognized tax benefits.

Our non-current Income taxes payable on the Consolidated Balance Sheet as of December 31, 2022 includes approximately $9.3 million of net unrecognized tax benefits.

We are uncertain about whether or when these amounts may be settled.

Refer to Note 10 in Item 8 of this Annual Report on Form 10-K for additional information.

COLUMBIA SPORTSWEAR COMPANY | 2021 FORM 10-K | 29

Refer to Note 10 in Part II, Item 8 of this Annual Report on Form 10-K for additional information.

The following table presents our estimated significant contractual commitments that will require use of funds:

7 unchanged sentences

7.7 10.6 13.3 — — — 31.6

(1) Refer to Operating Leases in Note 9 in Item 8 of this Annual Report on Form 10-K.

(2) Refer to Income Taxes in Note 10 in Item 8 of this Annual Report on Form 10-K.

(1) Refer to Operating Leases in Note 9 in Part II, Item 8 of this Annual Report on Form 10-K.

(2) Refer to Income Taxes in Note 10 in Part II, Item 8 of this Annual Report on Form 10-K.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

1 unchanged sentence

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.

Refer to Note 2 in Item 8 of this Annual Report on Form 10-K for additional information regarding the significant accounting policies and methods used in the preparation of our consolidated financial statements.

Refer to Note 2 in Part II, Item 8 of this Annual Report on Form 10-K for additional information regarding the significant accounting policies and methods used in the preparation of our consolidated financial statements.

We believe that the estimates, assumptions and judgments involved in the accounting policies described below have the greatest potential effect on our financial statements, so we consider these to be our critical accounting policies and estimates.

2 unchanged sentences

Our critical accounting policies and 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.

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 annual 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.

2 unchanged sentences

When we give our customers the right to return products or provide other accommodations such as chargebacks and markdowns, we estimate the expected sales returns and miscellaneous claims from customers and record sales reserves to reduce Net sales.

At December 31, 2021, our sales related reserves were $99.0 million compared to $83.2 million at December 31, 2020.

As of December 31, 2022, our sales-related reserves were $115.4 million compared to $99.0 million as of December 31, 2021.

The most significant variable affecting these reserve balances is net sales levels.

As a percent of Net sales , the sales reserves balances were 3.2% at December 31, 2021 compared to 3.3% at December 31, 2020.

The reserve for returns from customers or consumers is the most susceptible to estimation uncertainty.

As a percentage of Net sales , the sales reserves balances were 3.3% as of December 31, 2022 compared to 3.2% as of December 31, 2021.

The reserve for returns from customers or consumers is the most susceptible component of our sales related to reserves to estimation uncertainty.

These estimates are based on 1) historical rates of product returns and claims;

and 2) events and circumstances that indicate changes to such historical rates, such as our customers' net inventory positions and their anticipated sell-through rates.

However, actual returns and claims in any future period are inherently uncertain and thus may differ from the estimates.

However, actual returns and claims in any future period are inherently uncertain and thus may differ from our estimates.

As a result, we adjust our estimates of revenue at the earlier of when the most likely amount of consideration we expect to receive changes or when the amount of consideration becomes fixed.

If actual or expected future returns and claims are significantly different than the sales reserve established, we record an adjustment to Net sales in the period in which such determination was made.

If actual or expected future returns and claims are significantly different than the sales reserves established, we record an adjustment to Net sales in the period in which such determination was made.

COLUMBIA SPORTSWEAR COMPANY | 2022 FORM 10-K | 29

Allowance for Uncollectible Accounts Receivable

We make ongoing estimates of the collectability of our accounts receivable and maintain an allowance for estimated credit losses resulting from the inability of our customers to make required payments.

The allowance represents the current estimate of lifetime expected credit losses over the remaining duration of existing accounts receivable considering current market conditions and supportable forecasts when appropriate.

The allowance represents our current estimate of lifetime expected credit losses over the remaining duration of existing accounts receivable considering current market conditions and supportable forecasts when appropriate.

In determining the amount of the allowance, we consider our historical level of credit losses, as well as our judgments about the creditworthiness of customers based on ongoing credit evaluations.

We analyze specific customer accounts, including aged receivables,

COLUMBIA SPORTSWEAR COMPANY | 2021 FORM 10-K | 30

customer concentrations, credit insurance coverage, standby letters of credit, and other forms of collateral, current economic trends, and changes in customer payment terms.

Our allowance for uncollectible accounts receivable decreased to $8.9 million at December 31, 2021 compared to $21.8 million at December 31, 2020.

The balance at December 31, 2021 compared to the prior year reflects an improving credit environment with wholesale customers during 2021 and economic recovery of the retail sector through the ongoing COVID-19 pandemic.

Continued uncertainty in credit and market conditions may slow our collection efforts if customers experience difficulty accessing credit and paying their obligations, leading to higher than normal accounts receivable and increased bad debt risk.

We analyze specific customer accounts, including aged receivables, customer concentrations, credit insurance coverage, standby letters of credit, and other forms of collateral, current economic trends, and changes in customer payment terms.

Our allowance for uncollectible accounts receivable decreased to $5.4 million as of December 31, 2022 compared to $8.9 million as of December 31, 2021.

Because future changes in the financial stability of our customers is difficult to estimate, actual future losses from uncollectible accounts may differ from our estimates and may have a material effect on our financial position, results of operations or cash flows.

If the financial condition of our customers deteriorates and results in their inability to make payments, a larger allowance may be required.

If we determine that a smaller or larger allowance is appropriate, we will record an adjustment to SG&A expense in the period in which we make such a determination.

If we determine that a smaller or larger allowance is appropriate, we will record an adjustment to SG&A expenses in the period in which we make such a determination.

Excess, Close-Out and Slow-Moving Inventory

We make ongoing estimates of potential excess, close-out or slow-moving inventory.

We evaluate our inventory on hand to identify excess, close-out or slow-moving inventory by contemplating our 1) purchase commitments;

We evaluate our inventory on hand to identify excess, close-out or slow-moving inventory by contemplating our 1) purchasing plans;

2) sales forecasts;

3) historical liquidation experience;

and 4) the level of inventory from current and prior seasons that remains unsold and establish provisions as necessary to properly reflect inventory value at the lower of cost or net realizable value.

and 4) the level and composition of inventory from current and prior seasons that remains unsold and establish provisions as necessary to properly reflect inventory value at the lower of cost or net realizable value.

Provisions are established when necessary in the period in which we make such a determination.

At December 31, 2021, our inventory reserve offset gross inventory by $19.9 million compared to $29.5 million at December 31, 2020.

Although Inventories, net increased 16% from December 31, 2020 to December 31, 2021, the level of estimated excess inventory at December 31, 2021 declined reflecting strong consumer demand resulting in a lower inventory reserve.

As of December 31, 2022, our inventory provisions reduced gross inventory by $29.4 million compared to $19.9 million as of December 31, 2021.

The level of estimated excess inventory as of December 31, 2022 increased reflecting both higher total inventory and unsold inventory levels partially offset by an improvement in the aging of unsold inventory.

Impairment of Long-Lived Assets, Intangible Assets and Goodwill

6 unchanged sentences

During 2022 we tested certain long-lived assets consisting of property, plant, and equipment and lease ROU assets for impairment at certain underperforming retail locations.

For the year ended December 31, 2021, impairment charges from underperforming retail stores were not material.

For the years ended December 31, 2022 and 2021, impairment charges from underperforming retail stores were not material.

Further declines in projected future performance may adversely affect the recovery of retail locations assets.

For the year ended December 31, 2020, impairment charges from underperforming retail stores were $7.0 million for lease ROU assets and $5.0 million for property, plant and equipment.

We review and test our intangible assets with indefinite lives and goodwill for impairment in the fourth quarter of each year and when events or changes in circumstances indicate that the carrying amount of such assets may be impaired.

Our intangible assets with indefinite lives consist of trademarks and trade names.

We review and test our intangible assets with indefinite lives and goodwill for impairment in the fourth quarter of each year and when events or changes in circumstances indicate that it is more likely than not that the fair value of the asset or reporting unit is less than its carrying amount.

Our intangible assets with indefinite lives consist of trademarks and trade names (collectively "trademarks").

Substantially all of our goodwill is recorded in the U.S.

segment and impairment testing for goodwill is performed at the reporting unit level.

Our 2021 impairment tests of intangible assets with indefinite lives and goodwill indicated the fair value of all reporting units and intangible assets with indefinite lives exceeded their respective carrying values.

In the impairment tests for trademarks and trade names, we compare the estimated fair value of each asset to its carrying amount.

The fair values of trademarks and trade names are estimated using a relief from royalty method under the income approach.

If the carrying amount of a trademark or trade name exceeds its estimated fair value, we calculate impairment as the excess of carrying amount over the estimate of fair value.

At December 31, 2021, the carrying value of indefinite-lived intangible assets was $97.9 million, of which $70.5 million was attributed to prAna’s trademark.

In our 2021 impairment test, the fair value of prAna’s trademark exceeded its carrying value by approximately 26% as of the measurement date and, therefore, no impairment was recognized.

As part of our evaluation, we performed sensitivity analysis on the trademark impairment model.

A 10% decrease in estimated net sales for each of the next five years did not cause the fair value of the trademark to decline below its carrying value.

Separately, a 100 basis point increase in the assumed discount rate did not cause the fair value of the trademark to decline below its carrying value.

In 2020, our impairment test of prAna’s trademark resulted in a $17.5 million impairment charge.

Key assumptions used in the discounted cash flow models are cash flow projections and the discount rate.

Cash flow projections are developed in part from our annual planning process.

The discount rate is based on the estimated weighted-average costs of capital of the reporting unit from a market-participant perspective.

When we include market-based valuation methods to estimate fair value of our reporting units as part of the goodwill impairment testing, we utilize market multiples for guideline public companies.

In the impairment tests for trademarks, we compare the estimated fair value of each asset to its carrying amount.

The fair values of trademarks are estimated using a relief from royalty method under the income approach.

If the carrying amount of a trademark exceeds its estimated fair value, we calculate impairment as the excess of carrying amount over the estimate of fair value.

In our 2022 impairment test, we determined that the prAna brand’s trademark was impaired and we recognized an $18.7 million impairment charge for the year ended December 31, 2022 reducing the carrying value to $51.8 million.

The decline in estimated fair value from the fourth-quarter 2021 impairment

COLUMBIA SPORTSWEAR COMPANY | 2022 FORM 10-K | 30

test reflects a decline in forecasted revenue, a lower estimated royalty rate, and a slightly higher discount rate.

As part of our 2020 annual impairment test, we previously re cognized a $17.5 million impairment of p rAna’s trademark.

In the impairment test for goodwill, we compare the estimated fair value of the reporting unit with the carrying amount of that reporting unit.

1 unchanged sentence

We estimate the fair value of our reporting units using a combination of discounted cash flow analysis and market-based valuation methods, as appropriate.

Key assumptions used in the discounted cash flow models are cash flow projections and the discount rate.

Cash flow projections are developed in part from our annual planning process.

The discount rate is the estimated weighted-average costs of capital of the reporting unit from a market-participant perspective.

When we include market-based valuation methods to estimate fair value of our reporting units, we utilize market multiples for guideline public companies.

The goodwill balance was $68.6 million at December 31, 2021, of which $54.2 million was allocated to the prAna reporting unit.

In our 2021 impairment test, the fair value of the prAna reporting unit exceeded its carrying value by approximately 39% as of the measurement date and, therefore, no impairment was recognized.

In our 2022 impairment test, we determined that prAna goodwill was impaired and we recognized a $16.9 million impairment charge for the year ended December 31, 2022, reducing the carrying value of prAna's goodwill to $37.3 million.

The decline in estimated fair value from the fourth quarter 2021 impairment test reflects lower assumed revenue and operating income lev els, w hile the weighted average costs of capital used in the discounted cash flow model remained relatively unchanged.

Our impairment tests and related fair value estimates are based on a number of factors, including assumptions and estimates for projected sales, income, cash flows, discount rates, market-based multiples, and other operating performance measures.

14 unchanged sentences

RECENT ACCOUNTING PRONOUNCEMENTS

Refer to Note 2 in Item 8 of this Annual Report on Form 10-K.

Refer to Note 2 in Part II, Item 8 of this Annual Report on Form 10-K.

COLUMBIA SPORTSWEAR COMPANY | 2022 FORM 10-K | 31

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis