COLUMBIA SPORTSWEAR CO 10-Q

ITEM 1. FINANCIAL STATEMENTS CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (in thousands) June 30, 2023 December 31, 2022 June 30, 2022 ASSETS Current Assets: Cash and cash equivalents $ 231,571 $ 430,241 $ 413,110 Short-term investments 71,225 722 1,108 Accounts receivable, net of allowance of $ 4,979 , $ 5,443 and $ 4,405 , respectively 343,835 547,561 296,636 Inventories 1,162,519 1,028,545 962,875 Prepaid expenses and other current assets 91,990 129,872 121,404 Total current assets 1,901,140 2,136,941 1,795,133 Property, plant and equipment, net of accumulated depreciation of $ 644,585 , $ 623,911 and $ 604,233 , respectively 280,578 291,214 288,199 Operating lease right-of-use assets 313,698 324,409 325,871 Intangible assets, net 80,733 81,558 101,083 Goodwill 51,694 51,694 68,594 Deferred income taxes 94,671 94,162 81,263 Other non-current assets 67,290 71,568 66,645 Total assets $ 2,789,804 $ 3,051,546 $ 2,726,788 LIABILITIES AND EQUITY Current Liabilities: Accounts payable $ 247,416 $ 322,472 $ 312,353 Accrued liabilities 238,988 328,759 239,181 Operating lease liabilities 69,784 68,685 65,668 Income taxes payable 1,080 18,802 1,242 Total current liabilities 557,268 738,718 618,444 Non-current operating lease liabilities 298,062 310,625 312,043 Income taxes payable 23,452 33,251 32,504 Deferred income taxes — 143 — Other long-term liabilities 36,364 33,020 32,080 Total liabilities 915,146 1,115,757 995,071 Commitments and contingencies (Note 4) Shareholders' Equity: Preferred stock; 10,000 shares authorized; none issued and outstanding — — — Common stock (no par value); 250,000 shares authorized; 61,358 , 62,139 and 62,091 issued and outstanding, respectively — 12,692 — Retained earnings 1,915,990 1,953,734 1,753,450 Accumulated other comprehensive income (loss) ( 41,332 ) ( 30,637 ) ( 21,733 ) Total shareholders' equity 1,874,658 1,935,789 1,731,717 Total liabilities and shareholders' equity $ 2,789,804 $ 3,051,546 $ 2,726,788 See accompanying notes to unaudited condensed consolidated financial statements. COLUMBIA SPORTSWEAR COMPANY | Q2 2023 FORM 10-Q | 1 Table of Contents Notes to unaudited Condensed Consolidated Financial Statements CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) Three Months Ended June 30, Six Months Ended June 30, (in thousands, except per share amounts) 2023 2022 2023 2022 Net sales $ 620,933 $ 578,063 $ 1,441,526 $ 1,339,573 Cost of sales 306,888 293,903 727,981 676,966 Gross profit 314,045 284,160 713,545 662,607 Selling, general and administrative expenses 312,529 281,258 659,927 580,344 Net licensing income 4,713 5,871 9,038 10,176 Operating income 6,229 8,773 62,656 92,439 Interest income, net 3,506 499 6,789 894 Other non-operating income (expense), net ( 185 ) ( 1,435 ) 665 ( 1,391 ) Income before income tax 9,550 7,837 70,110 91,942 Income tax expense 1,200 674 15,558 17,942 Net income $ 8,350 $ 7,163 $ 54,552 $ 74,000 Earnings per share: Basic $ 0.14 $ 0.11 $ 0.88 $ 1.17 Diluted $ 0.14 $ 0.11 $ 0.88 $ 1.16 Weighted average shares outstanding: Basic 61,655 62,554 61,893 63,409 Diluted 61,781 62,695 62,122 63,654 See accompanying notes to unaudited condensed consolidated financial statements. COLUMBIA SPORTSWEAR COMPANY | Q2 2023 FORM 10-Q | 2 Table of Contents Notes to unaudited Condensed Consolidated Financial Statements CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited) Three Months Ended June 30, Six Months Ended June 30, (in thousands) 2023 2022 2023 2022 Net income $ 8,350 $ 7,163 $ 54,552 $ 74,000 Other comprehensive income (loss): Change in available-for-sale securities (net of tax effect of $( 146 )) — 451 — — Change in derivative transactions (net of tax effects of $( 611 ), $( 5,744 ),$ 2,099 , and $( 5,088 ), respectively) ( 726 ) 15,808 ( 6,147 ) 13,717 Foreign currency translation adjustments (net of tax effects of $ 35 , $ 147 , $( 43 ) and $ 997 , respectively) ( 6,028 ) ( 28,818 ) ( 4,548 ) ( 31,074 ) Other comprehensive income (loss) ( 6,754 ) ( 12,559 ) ( 10,695 ) ( 17,357 ) Comprehensive income (loss) $ 1,596 $ ( 5,396 ) $ 43,857 $ 56,643 See accompanying notes to unaudited condensed consolidated financial statements. COLUMBIA SPORTSWEAR COMPANY | Q2 2023 FORM 10-Q | 3 Table of Contents Notes to unaudited Condensed Consolidated Financial Statements CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) Six Months Ended June 30, (in thousands) 2023 2022 Cash flows from operating activities: Net income $ 54,552 $ 74,000 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation, amortization, and non-cash lease expense 61,540 58,537 Provision for uncollectible accounts receivable 145 ( 4,047 ) Loss on disposal or impairment of property, plant and equipment, and right-of-use assets 491 2,418 Deferred income taxes 488 3,750 Stock-based compensation 11,208 10,636 Changes in operating assets and liabilities: Accounts receivable 203,846 186,364 Inventories ( 135,251 ) ( 332,225 ) Prepaid expenses and other current assets 30,396 ( 23,226 ) Other assets 366 3,018 Accounts payable ( 69,305 ) 35,754 Accrued liabilities ( 90,759 ) ( 67,199 ) Income taxes payable ( 27,303 ) ( 23,807 ) Operating lease assets and liabilities ( 34,317 ) ( 34,478 ) Other liabilities 3,611 ( 2,163 ) Net cash provided by (used in) operating activities 9,708 ( 112,668 ) Cash flows from investing activities: Purchases of short-term investments ( 117,877 ) ( 44,877 ) Sales and maturities of short-term investments 50,747 175,725 Capital expenditures ( 22,803 ) ( 28,983 ) Net cash provided by (used in) investing activities ( 89,933 ) 101,865 Cash flows from financing activities: Proceeds from credit facilities 837 — Repayments on credit facilities ( 837 ) — Proceeds from issuance of common stock related to stock-based compensation 4,624 4,076 Tax payments related to stock-based compensation ( 4,400 ) ( 4,024 ) Repurchase of common stock ( 78,319 ) ( 287,443 ) Cash dividends paid ( 37,099 ) ( 37,926 ) Net cash used in financing activities ( 115,194 ) ( 325,317 ) Net effect of exchange rate changes on cash ( 3,251 ) ( 14,174 ) Net decrease in cash and cash equivalents ( 198,670 ) ( 350,294 ) Cash and cash equivalents, beginning of period 430,241 763,404 Cash and cash equivalents, end of period $ 231,571 $ 413,110 Supplemental disclosures of cash flow information: Cash paid during the period for income taxes $ 61,131 $ 47,846 Supplemental disclosures of non-cash investing and financing activities: Property, plant and equipment acquired through increase in liabilities $ 5,982 $ 5,334 See accompanying notes to unaudited condensed consolidated financial statements. COLUMBIA SPORTSWEAR COMPANY | Q2 2023 FORM 10-Q | 4 Table of Contents Notes to unaudited Condensed Consolidated Financial Statements CONDENSED CONSOLIDATED STATEMENTS OF EQUITY (Unaudited) (in thousands, except per share amounts) Common Stock Retained Earnings Accumulated Other Comprehensive Income (Loss) Total Shares Outstanding Amount Balance, March 31, 2023 62,076 $ 1,076 $ 1,981,287 $ ( 34,578 ) $ 1,947,785 Net income — — 8,350 — 8,350 Other comprehensive income (loss) — — — ( 6,754 ) ( 6,754 ) Cash dividends ($ 0.30 per share) — — ( 18,450 ) — ( 18,450 ) Issuance of common stock related to stock-based compensation, net 57 1,843 — — 1,843 Stock-based compensation expense — 5,400 — — 5,400 Repurchase of common stock ( 775 ) ( 7,740 ) ( 55,197 ) — ( 62,937 ) Excise taxes related to repurchase of common stock — ( 579 ) — — ( 579 ) Balance, June 30, 2023 61,358 $ — $ 1,915,990 $ ( 41,332 ) $ 1,874,658 (in thousands, except per share amounts) Common Stock Retained Earnings Accumulated Other Comprehensive Income (Loss) Total Shares Outstanding Amount Balance, March 31, 2022 62,948 $ — $ 1,828,074 $ ( 9,174 ) $ 1,818,900 Net income — — 7,163 — 7,163 Other comprehensive income (loss) — — — ( 12,559 ) ( 12,559 ) Cash dividends ($ 0.30 per share) — — ( 18,775 ) — ( 18,775 ) Issuance of common stock related to stock-based compensation, net 49 1,498 — — 1,498 Stock-based compensation expense — 5,133 — — 5,133 Repurchase of common stock ( 906 ) ( 6,631 ) ( 63,012 ) — ( 69,643 ) Balance, June 30, 2022 62,091 $ — $ 1,753,450 $ ( 21,733 ) $ 1,731,717 (in thousands, except per share amounts) Common Stock Retained Earnings Accumulated Other Comprehensive Income (Loss) Total Shares Outstanding Amount Balance, December 31, 2022 62,139 $ 12,692 $ 1,953,734 $ ( 30,637 ) $ 1,935,789 Net income — — 54,552 — 54,552 Other comprehensive income (loss) — — — ( 10,695 ) ( 10,695 ) Cash dividends ($ 0.60 per share) — — ( 37,099 ) — ( 37,099 ) Issuance of common stock related to stock-based compensation, net 173 224 — — 224 Stock-based compensation expense — 11,208 — — 11,208 Repurchase of common stock ( 954 ) ( 23,493 ) ( 55,197 ) — ( 78,690 ) Excise taxes related to repurchase of common stock — ( 631 ) — — ( 631 ) Balance, June 30, 2023 61,358 $ — $ 1,915,990 $ ( 41,332 ) $ 1,874,658 COLUMBIA SPORTSWEAR COMPANY | Q2 2023 FORM 10-Q | 5 Table of Contents Notes to unaudited Condensed Consolidated Financial Statements (in thousands, except per share amounts) Common Stock Retained Earnings Accumulated Other Comprehensive Income (Loss) Total Shares Outstanding Amount Balance, December 31, 2021 65,164 $ — $ 1,993,628 $ ( 4,376 ) $ 1,989,252 Net income — — 74,000 — 74,000 Other comprehensive income (loss) — — — ( 17,357 ) ( 17,357 ) Cash dividends ($ 0.60 per share) — — ( 37,926 ) — ( 37,926 ) Issuance of common stock related to stock-based compensation, net 162 52 — — 52 Stock-based compensation expense — 10,636 — — 10,636 Repurchase of common stock ( 3,235 ) ( 10,688 ) ( 276,252 ) — ( 286,940 ) Balance, June 30, 2022 62,091 $ — $ 1,753,450 $ ( 21,733 ) $ 1,731,717 See accompanying notes to unaudited condensed consolidated financial statements. COLUMBIA SPORTSWEAR COMPANY | Q2 2023 FORM 10-Q | 6 Table of Contents Notes to unaudited Condensed Consolidated Financial Statements 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 Commitments and Contingencies 11 Note 5 Shareholders' Equity 11 Note 6 Stock-Based Compensation 12 Note 7 Earnings Per Share 13 Note 8 Accumulated Other Comprehensive Income (Loss) 13 Note 9 Segment Information 14 Note 10 Financial Instruments and Risk Management 15 Note 11 Fair Value Measures 18 COLUMBIA SPORTSWEAR COMPANY | Q2 2023 FORM 10-Q | 7 Table of Contents Notes to unaudited Condensed Consolidated Financial Statements NOTE 1 — BASIS OF PRESENTATION AND ORGANIZATION The accompanying unaudited condensed consolidated financial statements have been prepared by the management of Columbia Sportswear Company (together with its wholly owned subsidiaries, the "Company") and, in the opinion of management, include all normal recurring material adjustments necessary to present fairly the Company's financial position as of June 30, 2023, December 31, 2022 and June 30, 2022, the results of operations for the three and six months ended June 30, 2023 and 2022, and cash flows for the six months ended June 30, 2023 and 2022. The December 31, 2022 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, 2022. A significant part of the Company's business is of a seasonal nature; therefore, results of operations for the three and six months ended June 30, 2023 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, 2022. 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. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS NOT YET ADOPTED None. COLUMBIA SPORTSWEAR COMPANY | Q2 2023 FORM 10-Q | 8 Table of Contents Notes to unaudited Condensed Consolidated Financial Statements NOTE 2 — REVENUES DISAGGREGATED REVENUE As disclosed below in Note 9, 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 reportable segment Net sales by product category and channel, which the Company believes provides a meaningful depiction of how the nature, timing, and uncertainty of Net sales are affected by economic factors: Three Months Ended June 30, 2023 (in thousands) U.S. LAAP EMEA Canada Total Product category net sales Apparel, Accessories and Equipment $ 325,525 $ 68,662 $ 72,271 $ 22,507 $ 488,965 Footwear 73,584 24,667 28,583 5,134 131,968 Total $ 399,109 $ 93,329 $ 100,854 $ 27,641 $ 620,933 Channel net sales Wholesale $ 185,352 $ 41,663 $ 87,634 $ 13,633 $ 328,282 Direct-to-consumer 213,757 51,666 13,220 14,008 292,651 Total $ 399,109 $ 93,329 $ 100,854 $ 27,641 $ 620,933 Three Months Ended June 30, 2022 (in thousands) U.S. LAAP EMEA Canada Total Product category net sales Apparel, Accessories and Equipment $ 348,592 $ 54,379 $ 37,542 $ 27,805 $ 468,318 Footwear 63,893 18,446 20,000 7,406 109,745 Total $ 412,485 $ 72,825 $ 57,542 $ 35,211 $ 578,063 Channel net sales Wholesale $ 201,880 $ 28,308 $ 47,259 $ 22,449 $ 299,896 Direct-to-consumer 210,605 44,517 10,283 12,762 278,167 Total $ 412,485 $ 72,825 $ 57,542 $ 35,211 $ 578,063 Six Months Ended June 30, 2023 (in thousands) U.S. LAAP EMEA Canada Total Product category net sales Apparel, Accessories and Equipment $ 741,453 $ 169,083 $ 144,228 $ 66,803 $ 1,121,567 Footwear 175,131 60,659 64,915 19,254 319,959 Total $ 916,584 $ 229,742 $ 209,143 $ 86,057 $ 1,441,526 Channel net sales Wholesale $ 444,702 $ 112,825 $ 172,212 $ 51,031 $ 780,770 Direct-to-consumer 471,882 116,917 36,931 35,026 660,756 Total $ 916,584 $ 229,742 $ 209,143 $ 86,057 $ 1,441,526 COLUMBIA SPORTSWEAR COMPANY | Q2 2023 FORM 10-Q | 9 Table of Contents Notes to unaudited Condensed Consolidated Financial Statements Six Months Ended June 30, 2022 (in thousands) U.S. LAAP EMEA Canada Total Product category net sales Apparel, Accessories and Equipment $ 733,820 $ 140,304 $ 100,811 $ 59,326 $ 1,034,261 Footwear 180,559 54,264 51,448 19,041 305,312 Total $ 914,379 $ 194,568 $ 152,259 $ 78,367 $ 1,339,573 Channel net sales Wholesale $ 449,389 $ 88,246 $ 122,553 $ 47,932 $ 708,120 Direct-to-consumer 464,990 106,322 29,706 30,435 631,453 Total $ 914,379 $ 194,568 $ 152,259 $ 78,367 $ 1,339,573 PERFORMANCE OBLIGATIONS For the three and six months ended June 30, 2023 and 2022, Net sales recognized from performance obligations related to prior periods were not material. Net sales expected to be recognized in any future period related to remaining performance obligations is not material. CONTRACT BALANCES As of June 30, 2023, December 31, 2022 and June 30, 2022, 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 Intangible assets, net consisted of the following: (in thousands) June 30, 2023 December 31, 2022 June 30, 2022 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 ( 21,488 ) ( 20,663 ) ( 19,838 ) Accumulated amortization ( 35,686 ) ( 34,861 ) ( 34,036 ) Net carrying amount 1,512 2,337 3,162 Intangible assets with indefinite lives 79,221 79,221 97,921 Intangible assets, net $ 80,733 $ 81,558 $ 101,083 Amortization expense for intangible assets subject to amortization was $ 0.4 million for the three months ended June 30, 2023 and 2022, and was $ 0.8 million for the six months ended June 30, 2023 and 2022. COLUMBIA SPORTSWEAR COMPANY | Q2 2023 FORM 10-Q | 10 Table of Contents Notes to unaudited Condensed Consolidated Financial Statements The following table presents the remaining estimated annual amortization expense of intangible assets with definite lives for the years 2023 through 2028: (in thousands) 2023 $ 825 2024 687 2025 — 2026 — 2027 — 2028 — GOODWILL There have been no changes to the Company's goodwill as described in Note 6 in Part II, Item 8 of the Company's Annual Report on Form 10-K for the year ended December 31, 2022. NOTE 4 — 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 5 — SHAREHOLDERS' EQUITY Since the inception of the Company's stock repurchase plan in 2004 through June 30, 2023, the Company's Board of Directors has authorized the repurchase of $ 2.0 billion of the Company's common stock, excluding excise tax. Shares of the Company's common stock may be purchased in the open market or through privately negotiated transactions, subject to market conditions, and generally settle subsequent to the trade date. The repurchase program does not obligate the Company to acquire any specific number of shares or to acquire shares over any specified period of time. Under this program as of June 30, 2023, the Company had repurchased 32.7 million shares at an aggregate purchase price of $ 1,549.3 million and had $ 450.7 million remaining available, excluding excise tax. During the three and six months ended June 30, 2023, the Company repurchased an aggregate of $ 62.9 million and $ 78.7 million, respectively, of common stock under this program, excluding excise tax. COLUMBIA SPORTSWEAR COMPANY | Q2 2023 FORM 10-Q | 11 Table of Contents Notes to unaudited Condensed Consolidated Financial Statements NOTE 6 — STOCK-BASED COMPENSATION The Company's Stock Incentive Plan allows for grants of incentive stock options, non-statutory stock options, restricted stock awards, restricted stock units, and other stock-based or cash-based awards. The Company uses original issuance shares to satisfy share-based payments. STOCK-BASED COMPENSATION EXPENSE Stock-based compensation expense consisted of the following: Three Months Ended June 30, Six Months Ended June 30, (in thousands) 2023 2022 2023 2022 Stock options $ 1,898 $ 1,939 $ 3,936 $ 3,835 Restricted stock units 3,502 3,194 7,272 6,801 Total $ 5,400 $ 5,133 $ 11,208 $ 10,636 STOCK OPTIONS During the six months ended June 30, 2023, the Company granted a total of 485,806 stock options at a weighted average grant date fair value of $ 22.71 per option. As of June 30, 2023, unrecognized costs related to outstanding stock options totaled $ 16.8 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 2.51 years. RESTRICTED STOCK UNITS During the six months ended June 30, 2023, the Company granted 281,154 restricted stock units at a weighted average grant date fair value of $ 82.81 per restricted stock unit. As of June 30, 2023, unrecognized costs related to outstanding restricted stock units totaled $ 32.6 million, before any related tax benefit. These unrecognized costs related to restricted stock units are expected to be recognized over a weighted average remaining period of 2.81 years. COLUMBIA SPORTSWEAR COMPANY | Q2 2023 FORM 10-Q | 12 Table of Contents Notes to unaudited Condensed Consolidated Financial Statements NOTE 7 — EARNINGS PER SHARE Earnings per share ("EPS") is presented on both a basic and diluted basis. Basic EPS is based on the weighted average number of common shares outstanding. Diluted EPS reflects the potential dilution that could occur if outstanding securities or other contracts to issue common stock were exercised or converted into common stock. A reconciliation of the common shares used in the denominator for computing basic and diluted EPS is as follows: Three Months Ended June 30, Six Months Ended June 30, (in thousands, except per share amounts) 2023 2022 2023 2022 Weighted average common shares outstanding, used in computing basic earnings per share 61,655 62,554 61,893 63,409 Effect of dilutive stock options and restricted stock units 126 141 229 245 Weighted average common shares outstanding, used in computing diluted earnings per share 61,781 62,695 62,122 63,654 Earnings per share: Basic $ 0.14 $ 0.11 $ 0.88 $ 1.17 Diluted $ 0.14 $ 0.11 $ 0.88 $ 1.16 Anti-dilutive common shares (1) 2,213 2,061 1,789 1,709 (1) Common stock related to stock options and service-based restricted stock units, and performance-based restricted stock 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 8 — 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) Derivative transactions Foreign currency translation adjustments Total Balance as of March 31, 2023 $ 16,369 $ ( 50,947 ) $ ( 34,578 ) Other comprehensive income (loss) before reclassifications 2,404 ( 6,028 ) ( 3,624 ) Amounts reclassified from accumulated other comprehensive income (loss) (1) ( 3,130 ) — ( 3,130 ) Net other comprehensive income (loss) during the period ( 726 ) ( 6,028 ) ( 6,754 ) Balance as of June 30, 2023 $ 15,643 $ ( 56,975 ) $ ( 41,332 ) (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 10 for further information regarding reclassifications. COLUMBIA SPORTSWEAR COMPANY | Q2 2023 FORM 10-Q | 13 Table of Contents Notes to unaudited Condensed Consolidated Financial Statements (in thousands) Available-for-sale securities Derivative transactions Foreign currency translation adjustments Total Balance as of March 31, 2022 $ ( 451 ) $ 7,823 $ ( 16,546 ) $ ( 9,174 ) Other comprehensive income (loss) before reclassifications — 16,453 ( 28,818 ) ( 12,365 ) Amounts reclassified from accumulated other comprehensive income (loss) (1) 451 ( 645 ) — ( 194 ) Net other comprehensive income (loss) during the period 451 15,808 ( 28,818 ) ( 12,559 ) Balance as of June 30, 2022 $ — $ 23,631 $ ( 45,364 ) $ ( 21,733 ) (1) Amounts reclassified are recorded in Net sales, Cost of sales, or Other non-operating income (expense), net on the unaudited Condensed Consolidated Statements of Operations. Refer to Note 10 for further information regarding reclassifications. (in thousands) Derivative transactions Foreign currency translation adjustments Total Balance as of December 31, 2022 $ 21,790 $ ( 52,427 ) $ ( 30,637 ) Other comprehensive income (loss) before reclassifications 726 ( 4,548 ) ( 3,822 ) Amounts reclassified from accumulated other comprehensive income (loss) (1) ( 6,873 ) — ( 6,873 ) Net other comprehensive income (loss) during the period ( 6,147 ) ( 4,548 ) ( 10,695 ) Balance as of June 30, 2023 $ 15,643 $ ( 56,975 ) $ ( 41,332 ) (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 10 for further information regarding reclassifications . (in thousands) Available-for- sale securities Derivative transactions Foreign currency translation adjustments Total Balance as of December 31, 2021 $ — $ 9,914 $ ( 14,290 ) $ ( 4,376 ) Other comprehensive income (loss) before reclassifications ( 451 ) 14,589 ( 31,074 ) ( 16,936 ) Amounts reclassified from accumulated other comprehensive income (loss) (1) 451 ( 872 ) — ( 421 ) Net other comprehensive income (loss) during the period — 13,717 ( 31,074 ) ( 17,357 ) Balance as of June 30, 2022 $ — $ 23,631 $ ( 45,364 ) $ ( 21,733 ) (1) Amounts reclassified are recorded in Net sales , Cost of sales , or Other non-operating income (expense), net on the unaudited Condensed Consolidated Statements of Operations. Refer to Note 10 for further information regarding reclassifications. NOTE 9 — 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 departmental functions, including consumer digital technology, certain supply chain functions, finance, human resources and legal, as well as executive compensation, unallocated benefit program expense, and other miscellaneous costs. COLUMBIA SPORTSWEAR COMPANY | Q2 2023 FORM 10-Q | 14 Table of Contents Notes to unaudited Condensed Consolidated Financial Statements The following tables present financial information for the Company's reportable segments: Three Months Ended June 30, Six Months Ended June 30, (in thousands) 2023 2022 2023 2022 Net sales to unrelated entities: U.S. $ 399,109 $ 412,485 $ 916,584 $ 914,379 LAAP 93,329 72,825 229,742 194,568 EMEA 100,854 57,542 209,143 152,259 Canada 27,641 35,211 86,057 78,367 $ 620,933 $ 578,063 $ 1,441,526 $ 1,339,573 Segment operating income (loss): U.S. $ 55,058 $ 67,346 $ 136,658 $ 180,522 LAAP 4,097 ( 3,061 ) 22,423 9,941 EMEA 15,041 ( 1,030 ) 35,395 15,469 Canada 114 3,535 10,915 11,676 Total segment operating income 74,310 66,790 205,391 217,608 Unallocated corporate expenses ( 68,081 ) ( 58,017 ) ( 142,735 ) ( 125,169 ) Interest income, net 3,506 499 6,789 894 Other non-operating income (expense), net ( 185 ) ( 1,435 ) 665 ( 1,391 ) Income before income tax $ 9,550 $ 7,837 $ 70,110 $ 91,942 CONCENTRATIONS The Company had one customer that accounted for approximately 14.6 %, 13.8 % and 12.3 % of Accounts receivable, net as of June 30, 2023, December 31, 2022 and June 30, 2022, respectively. The Company did not have any customer that accounted for 10% or more of Net sales for the three and six months ended June 30, 2023 and June 30, 2022. NOTE 10 — FINANCIAL INSTRUMENTS AND RISK MANAGEMENT In the normal course of business, the Company's financial position, results of operations and cash flows are routinely subject to a variety of risks. These risks include risks associated with financial markets, primarily currency exchange rate risk and, to a lesser extent, interest rate risk and equity market risk. The Company regularly assesses these risks and has established policies and business practices designed to mitigate them. The Company does not engage in speculative trading in any financial market. The Company actively manages the risk of changes in functional currency equivalent cash flows resulting from anticipated non-functional currency denominated purchases and sales. Subsidiaries that use European euros, Canadian dollars, Japanese yen, Chinese renminbi, or Korean won as their functional currency are primarily exposed to changes in functional currency equivalent cash flows from anticipated United States dollar inventory purchases. Subsidiaries that use United States dollars and euros as their functional currency also have non-functional currency denominated sales for which the Company hedges the Canadian dollar and British pound sterling. 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, renminbi, or won as their functional currency. Non-functional currency denominated monetary assets and liabilities consists of cash and cash equivalents, short-term investments, receivables, payables, deferred income taxes, COLUMBIA SPORTSWEAR COMPANY | Q2 2023 FORM 10-Q | 15 Table of Contents Notes to unaudited Condensed Consolidated Financial Statements and intercompany loans and dividends. The gains and losses generated on these currency forward contracts not formally designated as hedges are expected to be largely offset in Other non-operating income (expense), net by the gains and losses generated from the remeasurement of the non-functional currency denominated monetary assets and liabilities. The following table presents the gross notional amount of outstanding derivative instruments: (in thousands) June 30, 2023 December 31, 2022 June 30, 2022 Derivative instruments designated as cash flow hedges: Currency forward contracts $ 598,621 $ 514,365 $ 542,879 Derivative instruments not designated as hedges: Currency forward contracts $ 465,182 $ 448,838 $ 239,676 As of June 30, 2023, $ 18.1 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, won, and yen as well as the euro exchange rate in effect against the pound sterling. As of June 30, 2023, 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 $ 7.1 million as of June 30, 2023. 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. The following table presents the balance sheet classification and fair value of derivative instruments: (in thousands) Balance Sheet Classification June 30, 2023 December 31, 2022 June 30, 2022 Derivative instruments designated as cash flow hedges: Derivative instruments in asset positions: Currency forward contracts Prepaid expenses and other current assets $ 13,448 $ 20,306 $ 18,212 Currency forward contracts Other non-current assets 3,535 7,153 13,158 Derivative instruments in liability positions: Currency forward contracts Accrued liabilities 3,229 1,249 444 Currency forward contracts Other long-term liabilities 1,532 1,770 261 Derivative instruments not designated as cash flow hedges: Derivative instruments in asset positions: Currency forward contracts Prepaid expenses and other current assets 5,860 3,027 4,085 Derivative instruments in liability positions: Currency forward contracts Accrued liabilities 1,936 2,533 1,410 COLUMBIA SPORTSWEAR COMPANY | Q2 2023 FORM 10-Q | 16 Table of Contents Notes to unaudited Condensed Consolidated Financial Statements The following table presents the statement of operations effect and classification of derivative instruments: Statement Of Operations Classification Three Months Ended June 30, Six Months Ended June 30, (in thousands) 2023 2022 2023 2022 Currency Forward Contracts: Derivative instruments designated as cash flow hedges: Gain recognized in other comprehensive income (loss), net of tax — $ 2,404 $ 16,453 $ 726 $ 14,589 Gain (loss) reclassified from accumulated other comprehensive income (loss) to income for the effective portion Net sales 55 ( 40 ) 246 ( 176 ) Gain reclassified from accumulated other comprehensive income (loss) to income for the effective portion Cost of sales 3,513 948 9,275 1,259 Gain (loss) reclassified from accumulated other comprehensive income (loss) to income as a result of cash flow hedge discontinuance Other non-operating income (expense), net 5 — ( 2 ) 222 Derivative instruments not designated as cash flow hedges: Gain (loss) recognized in income Other non-operating income (expense), net ( 93 ) 707 ( 1,280 ) 1,297 COLUMBIA SPORTSWEAR COMPANY | Q2 2023 FORM 10-Q | 17 Table of Contents Notes to unaudited Condensed Consolidated Financial Statements NOTE 11 — FAIR VALUE MEASURES Certain assets and liabilities are reported at fair value on either a recurring or nonrecurring basis. Fair value is defined as an exit price, representing the amount that the Company would receive to sell an asset or pay to transfer a liability in an orderly transaction between market participants, under a three-tier fair value hierarchy that prioritizes the inputs used in measuring fair value as follows: Level 1 — observable inputs such as quoted prices for identical assets or liabilities in active liquid markets; Level 2 — inputs, other than the quoted market prices in active markets, that are observable, either directly or indirectly; or observable market prices in markets with insufficient volume or infrequent transactions; and Level 3 — unobservable inputs for which there is little or no market data available, that require the reporting entity to develop its own assumptions. The Company's assets and liabilities measured at fair value are categorized as Level 1 or Level 2 instruments. Level 1 instrument valuations are obtained from real-time quotes for transactions in active exchange markets involving identical assets. Level 2 instrument valuations are obtained from inputs, other than quoted market prices in active markets, that are directly or indirectly observable in the marketplace and quoted prices in markets with limited volume or infrequent transactions. Assets and liabilities measured at fair value on a recurring basis as of June 30, 2023 are as follows: (in thousands) Level 1 Level 2 Level 3 Total Assets: Cash equivalents: Money market funds $ 60,565 $ — $ — $ 60,565 Short-term investments: Available-for-sale short-term investments: (1) U.S. Government treasury bills — 69,751 — 69,751 Other short-term investments: Money market funds 287 — — 287 Mutual fund shares 1,187 — — 1,187 Prepaid expenses and other current assets: Derivative financial instruments — 19,308 — 19,308 Other non-current assets: Money market funds 1,688 — — 1,688 Mutual fund shares 22,137 — — 22,137 Derivative financial instruments — 3,535 — 3,535 Total assets measured at fair value $ 85,864 $ 92,594 $ — $ 178,458 Liabilities: Accrued liabilities: Derivative financial instruments $ — $ 5,165 $ — $ 5,165 Other long-term liabilities: Derivative financial instruments — 1,532 — 1,532 Total liabilities measured at fair value $ — $ 6,697 $ — $ 6,697 (1) Available-for-sale short-term investments have remaining maturities of less than one year. COLUMBIA SPORTSWEAR COMPANY | Q2 2023 FORM 10-Q | 18 Table of Contents Notes to unaudited Condensed Consolidated Financial Statements Assets and liabilities measured at fair value on a recurring basis as of December 31, 2022 are as follows: (in thousands) Level 1 Level 2 Level 3 Total Assets: Cash equivalents: Money market funds $ 120,481 $ — $ — $ 120,481 Short-term investments: Money market funds 80 — — 80 Mutual fund shares 642 — — 642 Prepaid expenses and other current assets: Derivative financial instruments — 23,333 — 23,333 Other non-current assets: Money market funds 1,456 — — 1,456 Mutual fund shares 19,026 — — 19,026 Derivative financial instruments — 7,153 — 7,153 Total assets measured at fair value $ 141,685 $ 30,486 $ — $ 172,171 Liabilities: Accrued liabilities: Derivative financial instruments $ — $ 3,782 $ — $ 3,782 Other long-term liabilities: Derivative financial instruments — 1,770 — 1,770 Total liabilities measured at fair value $ — $ 5,552 $ — $ 5,552 COLUMBIA SPORTSWEAR COMPANY | Q2 2023 FORM 10-Q | 19 Table of Contents Notes to unaudited Condensed Consolidated Financial Statements Assets and liabilities measured at fair value on a recurring basis as of June 30, 2022 are as follows: (in thousands) Level 1 Level 2 Level 3 Total Assets: Cash equivalents: Money market funds $ 30,141 $ — $ — $ 30,141 Short-term investments: Money market funds 81 — — 81 Mutual fund shares 1,027 — — 1,027 Prepaid expenses and other current assets: Derivative financial instruments — 22,297 — 22,297 Other non-current assets: Money market funds 1,208 — — 1,208 Mutual fund shares 17,826 — — 17,826 Derivative financial instruments — 13,158 — 13,158 Total assets measured at fair value $ 50,283 $ 35,455 $ — $ 85,738 Liabilities: Accrued liabilities: Derivative financial instruments $ — $ 1,854 $ — $ 1,854 Other long-term liabilities: Derivative financial instruments — 261 — 261 Total liabilities measured at fair value $ — $ 2,115 $ — $ 2,115 NON-RECURRING FAIR VALUE MEASUREMENTS The Company measured the fair value of certain retail store long-lived assets consisting of property, plant and equipment, certain trademark intangible assets and goodwill, and lease ROU assets as part of impairment testing for the year ended December 31, 2022. The inputs used to measure the fair value of these assets are primarily unobservable inputs and, as such, considered Level 3 fair value measurements. Refer to Notes 5, 6 and 9 in Part II, Item 8 in the Annual Report on Form 10-K for discussion of impairment charges. COLUMBIA SPORTSWEAR COMPANY | Q2 2023 FORM 10-Q | 20 Table of Contents