COLUMBIA SPORTSWEAR CO 10-Q

ITEM 1. FINANCIAL STATEMENTS CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (in thousands) September 30, 2023 December 31, 2022 September 30, 2022 ASSETS Current Assets: Cash and cash equivalents $ 213,282 $ 430,241 $ 159,221 Short-term investments 1,474 722 972 Accounts receivable, net of allowance of $ 6,659 , $ 5,443 and $ 5,822 , respectively 686,821 547,561 600,457 Inventories 885,163 1,028,545 1,056,905 Prepaid expenses and other current assets 96,016 129,872 142,055 Total current assets 1,882,756 2,136,941 1,959,610 Property, plant and equipment, net of accumulated depreciation of $ 653,545 , $ 623,911 and $ 608,522 , respectively 283,095 291,214 287,338 Operating lease right-of-use assets 339,538 324,409 328,893 Intangible assets, net 80,321 81,558 100,672 Goodwill 51,694 51,694 68,594 Deferred income taxes 89,801 94,162 76,899 Other non-current assets 71,738 71,568 68,146 Total assets $ 2,798,943 $ 3,051,546 $ 2,890,152 LIABILITIES AND EQUITY Current Liabilities: Short-term borrowings $ — $ — $ 4,441 Accounts payable 162,222 322,472 336,782 Accrued liabilities 283,799 328,759 279,226 Operating lease liabilities 72,685 68,685 65,866 Income taxes payable 7,254 18,802 10,341 Total current liabilities 525,960 738,718 696,656 Non-current operating lease liabilities 323,508 310,625 314,565 Income taxes payable 24,218 33,251 33,215 Deferred income taxes — 143 — Other long-term liabilities 29,946 33,020 30,913 Total liabilities 903,632 1,115,757 1,075,349 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; 60,526 , 62,139 and 62,105 issued and outstanding, respectively — 12,692 5,803 Retained earnings 1,942,709 1,953,734 1,846,570 Accumulated other comprehensive income (loss) ( 47,398 ) ( 30,637 ) ( 37,570 ) Total shareholders' equity 1,895,311 1,935,789 1,814,803 Total liabilities and shareholders' equity $ 2,798,943 $ 3,051,546 $ 2,890,152 See accompanying notes to unaudited condensed consolidated financial statements. COLUMBIA SPORTSWEAR COMPANY | Q3 2023 FORM 10-Q | 1 Table of Contents Notes to unaudited Condensed Consolidated Financial Statements CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) Three Months Ended September 30, Nine Months Ended September 30, (in thousands, except per share amounts) 2023 2022 2023 2022 Net sales $ 985,683 $ 955,059 $ 2,427,209 $ 2,294,632 Cost of sales 505,486 496,564 1,233,467 1,173,530 Gross profit 480,197 458,495 1,193,742 1,121,102 Selling, general and administrative expenses 351,563 318,957 1,011,490 899,301 Net licensing income 5,920 5,723 14,958 15,899 Operating income 134,554 145,261 197,210 237,700 Interest income, net 1,870 765 8,659 1,659 Other non-operating income (expense), net ( 311 ) ( 269 ) 354 ( 1,660 ) Income before income tax 136,113 145,757 206,223 237,699 Income tax expense 32,605 34,007 48,163 51,949 Net income $ 103,508 $ 111,750 $ 158,060 $ 185,750 Earnings per share: Basic $ 1.70 $ 1.80 $ 2.57 $ 2.95 Diluted $ 1.70 $ 1.80 $ 2.56 $ 2.94 Weighted average shares outstanding: Basic 60,844 62,098 61,575 62,967 Diluted 60,932 62,210 61,775 63,178 See accompanying notes to unaudited condensed consolidated financial statements. COLUMBIA SPORTSWEAR COMPANY | Q3 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 September 30, Nine Months Ended September 30, (in thousands) 2023 2022 2023 2022 Net income $ 103,508 $ 111,750 $ 158,060 $ 185,750 Other comprehensive income (loss): Change in derivative transactions (net of tax effects of $( 960 ), $( 4,856 ), $ 1,139 , and $( 9,944 ), respectively) 3,593 14,221 ( 2,554 ) 27,938 Foreign currency translation adjustments (net of tax effects of $ 325 , $ 126 , $ 282 and $ 1,123 , respectively) ( 9,659 ) ( 30,058 ) ( 14,207 ) ( 61,132 ) Other comprehensive income (loss) ( 6,066 ) ( 15,837 ) ( 16,761 ) ( 33,194 ) Comprehensive income $ 97,442 $ 95,913 $ 141,299 $ 152,556 See accompanying notes to unaudited condensed consolidated financial statements. COLUMBIA SPORTSWEAR COMPANY | Q3 2023 FORM 10-Q | 3 Table of Contents Notes to unaudited Condensed Consolidated Financial Statements CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) Nine Months Ended September 30, (in thousands) 2023 2022 Cash flows from operating activities: Net income $ 158,060 $ 185,750 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation, amortization, and non-cash lease expense 93,365 86,569 Provision for uncollectible accounts receivable 2,010 ( 1,745 ) Loss on disposal or impairment of property, plant and equipment, and right-of-use assets 568 2,455 Deferred income taxes 4,236 1,712 Stock-based compensation 17,026 16,071 Changes in operating assets and liabilities: Accounts receivable ( 146,139 ) ( 129,251 ) Inventories 135,417 ( 443,194 ) Prepaid expenses and other current assets 26,809 ( 27,535 ) Other assets ( 3,106 ) 2,260 Accounts payable ( 152,168 ) 63,868 Accrued liabilities ( 42,251 ) ( 18,409 ) Income taxes payable ( 20,434 ) ( 14,299 ) Operating lease assets and liabilities ( 49,322 ) ( 49,159 ) Other liabilities ( 1,897 ) ( 3,182 ) Net cash provided by (used in) operating activities 22,174 ( 328,089 ) Cash flows from investing activities: Purchases of short-term investments ( 117,877 ) ( 44,876 ) Sales and maturities of short-term investments 120,747 175,827 Capital expenditures ( 41,355 ) ( 42,489 ) Net cash provided by (used in) investing activities ( 38,485 ) 88,462 Cash flows from financing activities: Proceeds from credit facilities 837 12,660 Repayments on credit facilities ( 837 ) ( 8,133 ) Payment of line of credit issuance fees — ( 604 ) Proceeds from issuance of common stock related to stock-based compensation 7,081 4,598 Tax payments related to stock-based compensation ( 4,620 ) ( 4,178 ) Repurchase of common stock ( 144,633 ) ( 287,443 ) Cash dividends paid ( 55,379 ) ( 56,556 ) Net cash used in financing activities ( 197,551 ) ( 339,656 ) Net effect of exchange rate changes on cash ( 3,097 ) ( 24,900 ) Net decrease in cash and cash equivalents ( 216,959 ) ( 604,183 ) Cash and cash equivalents, beginning of period 430,241 763,404 Cash and cash equivalents, end of period $ 213,282 $ 159,221 Supplemental disclosures of cash flow information: Cash paid during the period for income taxes $ 66,580 $ 59,584 Supplemental disclosures of non-cash investing and financing activities: Property, plant and equipment acquired through increase in liabilities $ 5,389 $ 7,502 See accompanying notes to unaudited condensed consolidated financial statements. COLUMBIA SPORTSWEAR COMPANY | Q3 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, June 30, 2023 61,358 $ — $ 1,915,990 $ ( 41,332 ) $ 1,874,658 Net income — — 103,508 — 103,508 Other comprehensive income (loss) — — — ( 6,066 ) ( 6,066 ) Cash dividends ($ 0.30 per share) — — ( 18,280 ) — ( 18,280 ) Issuance of common stock related to stock-based compensation, net 55 2,237 — — 2,237 Stock-based compensation expense — 5,818 — — 5,818 Repurchase of common stock ( 887 ) ( 7,435 ) ( 58,509 ) — ( 65,944 ) Excise taxes related to repurchase of common stock — ( 620 ) — — ( 620 ) Balance, September 30, 2023 60,526 $ — $ 1,942,709 $ ( 47,398 ) $ 1,895,311 (in thousands, except per share amounts) Common Stock Retained Earnings Accumulated Other Comprehensive Income (Loss) Total Shares Outstanding Amount Balance, June 30, 2022 62,091 $ — $ 1,753,450 $ ( 21,733 ) $ 1,731,717 Net income — — 111,750 — 111,750 Other comprehensive income (loss) — — — ( 15,837 ) ( 15,837 ) Cash dividends ($ 0.30 per share) — — ( 18,630 ) — ( 18,630 ) Issuance of common stock related to stock-based compensation, net 14 368 — — 368 Stock-based compensation expense — 5,435 — — 5,435 Balance, September 30, 2022 62,105 $ 5,803 $ 1,846,570 $ ( 37,570 ) $ 1,814,803 (in thousands, except per share amounts) Common Stock Retained Earnings Accumulated Other Comprehensive Income (Loss) Total Shares Outstanding Amount Balance, December 31, 2022 62,139 $ 12,692 $ 1,953,734 $ ( 30,637 ) $ 1,935,789 Net income — — 158,060 — 158,060 Other comprehensive income (loss) — — — ( 16,761 ) ( 16,761 ) Cash dividends ($ 0.90 per share) — — ( 55,379 ) — ( 55,379 ) Issuance of common stock related to stock-based compensation, net 228 2,461 — — 2,461 Stock-based compensation expense — 17,026 — — 17,026 Repurchase of common stock ( 1,841 ) ( 30,928 ) ( 113,706 ) — ( 144,634 ) Excise taxes related to repurchase of common stock — ( 1,251 ) — — ( 1,251 ) Balance, September 30, 2023 60,526 $ — $ 1,942,709 $ ( 47,398 ) $ 1,895,311 COLUMBIA SPORTSWEAR COMPANY | Q3 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 — — 185,750 — 185,750 Other comprehensive income (loss) — — — ( 33,194 ) ( 33,194 ) Cash dividends ($ 0.90 per share) — — ( 56,556 ) — ( 56,556 ) Issuance of common stock related to stock-based compensation, net 176 420 — — 420 Stock-based compensation expense — 16,071 — — 16,071 Repurchase of common stock ( 3,235 ) ( 10,688 ) ( 276,252 ) — ( 286,940 ) Balance, September 30, 2022 62,105 $ 5,803 $ 1,846,570 $ ( 37,570 ) $ 1,814,803 See accompanying notes to unaudited condensed consolidated financial statements. COLUMBIA SPORTSWEAR COMPANY | Q3 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 | Q3 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 September 30, 2023, December 31, 2022 and September 30, 2022, the results of operations for the three and nine months ended September 30, 2023 and 2022, and cash flows for the nine months ended September 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 nine months ended September 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 | Q3 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 September 30, 2023 (in thousands) U.S. LAAP EMEA Canada Total Product category net sales Apparel, Accessories and Equipment $ 487,596 $ 88,362 $ 85,051 $ 70,656 $ 731,665 Footwear 147,817 26,995 44,300 34,906 254,018 Total $ 635,413 $ 115,357 $ 129,351 $ 105,562 $ 985,683 Channel net sales Wholesale $ 391,892 $ 75,814 $ 110,608 $ 86,046 $ 664,360 Direct-to-consumer 243,521 39,543 18,743 19,516 321,323 Total $ 635,413 $ 115,357 $ 129,351 $ 105,562 $ 985,683 Three Months Ended September 30, 2022 (in thousands) U.S. LAAP EMEA Canada Total Product category net sales Apparel, Accessories and Equipment $ 473,066 $ 84,769 $ 112,817 $ 55,690 $ 726,342 Footwear 134,008 30,559 40,713 23,437 228,717 Total $ 607,074 $ 115,328 $ 153,530 $ 79,127 $ 955,059 Channel net sales Wholesale $ 368,040 $ 76,829 $ 139,027 $ 61,133 $ 645,029 Direct-to-consumer 239,034 38,499 14,503 17,994 310,030 Total $ 607,074 $ 115,328 $ 153,530 $ 79,127 $ 955,059 Nine Months Ended September 30, 2023 (in thousands) U.S. LAAP EMEA Canada Total Product category net sales Apparel, Accessories and Equipment $ 1,229,049 $ 257,445 $ 229,279 $ 137,459 $ 1,853,232 Footwear 322,948 87,654 109,215 54,160 573,977 Total $ 1,551,997 $ 345,099 $ 338,494 $ 191,619 $ 2,427,209 Channel net sales Wholesale $ 836,594 $ 188,639 $ 282,820 $ 137,077 $ 1,445,130 Direct-to-consumer 715,403 156,460 55,674 54,542 982,079 Total $ 1,551,997 $ 345,099 $ 338,494 $ 191,619 $ 2,427,209 COLUMBIA SPORTSWEAR COMPANY | Q3 2023 FORM 10-Q | 9 Table of Contents Notes to unaudited Condensed Consolidated Financial Statements Nine Months Ended September 30, 2022 (in thousands) U.S. LAAP EMEA Canada Total Product category net sales Apparel, Accessories and Equipment $ 1,206,886 $ 225,073 $ 213,628 $ 115,016 $ 1,760,603 Footwear 314,567 84,823 92,161 42,478 534,029 Total $ 1,521,453 $ 309,896 $ 305,789 $ 157,494 $ 2,294,632 Channel net sales Wholesale $ 817,429 $ 165,075 $ 261,580 $ 109,065 $ 1,353,149 Direct-to-consumer 704,024 144,821 44,209 48,429 941,483 Total $ 1,521,453 $ 309,896 $ 305,789 $ 157,494 $ 2,294,632 PERFORMANCE OBLIGATIONS For the three and nine months ended September 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 September 30, 2023, December 31, 2022 and September 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) September 30, 2023 December 31, 2022 September 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 ( 21,900 ) ( 20,663 ) ( 20,249 ) Accumulated amortization ( 36,098 ) ( 34,861 ) ( 34,447 ) Net carrying amount 1,100 2,337 2,751 Intangible assets with indefinite lives 79,221 79,221 97,921 Intangible assets, net $ 80,321 $ 81,558 $ 100,672 Amortization expense for intangible assets subject to amortization was $ 0.4 million for the three months ended September 30, 2023 and 2022, and was $ 1.2 million for the nine months ended September 30, 2023 and 2022. COLUMBIA SPORTSWEAR COMPANY | Q3 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 $ 413 2024 $ 687 2025 and thereafter $ — 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 September 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 September 30, 2023, the Company had repurchased 33.5 million shares at an aggregate purchase price of $ 1,615.3 million and had $ 384.7 million remaining available, excluding excise tax. During the three and nine months ended September 30, 2023, the Company repurchased an aggregate of $ 65.9 million and $ 144.6 million, respectively, of common stock under this program, excluding excise tax. COLUMBIA SPORTSWEAR COMPANY | Q3 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 September 30, Nine Months Ended September 30, (in thousands) 2023 2022 2023 2022 Stock options $ 2,083 $ 2,018 $ 6,019 $ 5,853 Restricted stock units 3,735 3,417 11,007 10,218 Total $ 5,818 $ 5,435 $ 17,026 $ 16,071 STOCK OPTIONS During the nine months ended September 30, 2023, the Company granted a total of 499,440 stock options at a weighted average grant date fair value of $ 22.61 per option. As of September 30, 2023, unrecognized costs related to outstanding stock options totaled $ 14.9 million, before any related tax benefit. These unrecognized costs related to stock options are expected to be recognized over a weighted average remaining period of 2.28 years. RESTRICTED STOCK UNITS During the nine months ended September 30, 2023, the Company granted 286,951 restricted stock units at a weighted average grant date fair value of $ 82.55 per restricted stock unit. As of September 30, 2023, unrecognized costs related to outstanding restricted stock units totaled $ 28.7 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 2.58 years. COLUMBIA SPORTSWEAR COMPANY | Q3 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 September 30, Nine Months Ended September 30, (in thousands, except per share amounts) 2023 2022 2023 2022 Weighted average common shares outstanding, used in computing basic earnings per share 60,844 62,098 61,575 62,967 Effect of dilutive stock options and restricted stock units 88 112 200 211 Weighted average common shares outstanding, used in computing diluted earnings per share 60,932 62,210 61,775 63,178 Earnings per share: Basic $ 1.70 $ 1.80 $ 2.57 $ 2.95 Diluted $ 1.70 $ 1.80 $ 2.56 $ 2.94 Anti-dilutive common shares (1) 2,266 2,175 1,989 1,738 (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 June 30, 2023 $ 15,643 $ ( 56,975 ) $ ( 41,332 ) Other comprehensive income (loss) before reclassifications 9,876 ( 9,659 ) 217 Amounts reclassified from accumulated other comprehensive income (loss) (1) ( 6,283 ) — ( 6,283 ) Net other comprehensive income (loss) during the period 3,593 ( 9,659 ) ( 6,066 ) Balance as of September 30, 2023 $ 19,236 $ ( 66,634 ) $ ( 47,398 ) (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 | Q3 2023 FORM 10-Q | 13 Table of Contents Notes to unaudited Condensed Consolidated Financial Statements (in thousands) Derivative transactions Foreign currency translation adjustments Total Balance as of June 30, 2022 $ 23,631 $ ( 45,364 ) $ ( 21,733 ) Other comprehensive income (loss) before reclassifications 17,191 ( 30,058 ) ( 12,867 ) Amounts reclassified from accumulated other comprehensive income (loss) (1) ( 2,970 ) — ( 2,970 ) Net other comprehensive income (loss) during the period 14,221 ( 30,058 ) ( 15,837 ) Balance as of September 30, 2022 $ 37,852 $ ( 75,422 ) $ ( 37,570 ) (1) Amounts reclassified are recorded in Net sales, 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 10,602 ( 14,207 ) ( 3,605 ) Amounts reclassified from accumulated other comprehensive income (loss) (1) ( 13,156 ) — ( 13,156 ) Net other comprehensive income (loss) during the period ( 2,554 ) ( 14,207 ) ( 16,761 ) Balance as of September 30, 2023 $ 19,236 $ ( 66,634 ) $ ( 47,398 ) (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 ) 31,780 ( 61,132 ) ( 29,803 ) Amounts reclassified from accumulated other comprehensive income (loss) (1) 451 ( 3,842 ) — ( 3,391 ) Net other comprehensive income (loss) during the period — 27,938 ( 61,132 ) ( 33,194 ) Balance as of September 30, 2022 $ — $ 37,852 $ ( 75,422 ) $ ( 37,570 ) (1) Amounts reclassified are recorded in Net sales , Cost of sales , or Other non-operating income (expense), net on the unaudited Condensed Consolidated Statements of Operations. Refer to Note 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 | Q3 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 September 30, Nine Months Ended September 30, (in thousands) 2023 2022 2023 2022 Net sales to unrelated entities: U.S. $ 635,413 $ 607,074 $ 1,551,997 $ 1,521,453 LAAP 115,357 115,328 345,099 309,896 EMEA 129,351 153,530 338,494 305,789 Canada 105,562 79,127 191,619 157,494 $ 985,683 $ 955,059 $ 2,427,209 $ 2,294,632 Segment operating income: U.S. $ 131,602 $ 145,268 $ 268,260 $ 325,790 LAAP 14,509 11,771 36,932 21,712 EMEA 34,241 35,567 69,636 51,036 Canada 30,150 20,237 41,065 31,913 Total segment operating income 210,502 212,843 415,893 430,451 Unallocated corporate expenses ( 75,948 ) ( 67,582 ) ( 218,683 ) ( 192,751 ) Interest income, net 1,870 765 8,659 1,659 Other non-operating income (expense), net ( 311 ) ( 269 ) 354 ( 1,660 ) Income before income tax $ 136,113 $ 145,757 $ 206,223 $ 237,699 CONCENTRATIONS The Company had one customer that accounted for approximately 11.6 % and 13.8 % of Accounts receivable, net as of September 30, 2023 and December 31, 2022, respectively. The Company did not have any customer that accounted for 10% or more of Accounts receivable, net as of September 30, 2022. The Company did not have any customers that accounted for 10% or more of Net sales for the three and nine months ended September 30, 2023 and September 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 COLUMBIA SPORTSWEAR COMPANY | Q3 2023 FORM 10-Q | 15 Table of Contents Notes to unaudited Condensed Consolidated Financial Statements monetary assets and liabilities consists of cash and cash equivalents, short-term investments, receivables, payables, deferred income taxes, 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) September 30, 2023 December 31, 2022 September 30, 2022 Derivative instruments designated as cash flow hedges: Currency forward contracts $ 548,424 $ 514,365 $ 459,189 Derivative instruments not designated as hedges: Currency forward contracts $ 477,843 $ 448,838 $ 287,825 As of September 30, 2023, $ 16.8 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 sales, 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 September 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 $ 7.5 million as of September 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. COLUMBIA SPORTSWEAR COMPANY | Q3 2023 FORM 10-Q | 16 Table of Contents Notes to unaudited Condensed Consolidated Financial Statements The following table presents the balance sheet classification and fair value of derivative instruments: (in thousands) Balance Sheet Classification September 30, 2023 December 31, 2022 September 30, 2022 Derivative instruments designated as cash flow hedges: Derivative instruments in asset positions: Currency forward contracts Prepaid expenses and other current assets $ 17,121 $ 20,306 $ 32,289 Currency forward contracts Other non-current assets 6,511 7,153 13,919 Derivative instruments in liability positions: Currency forward contracts Accrued liabilities 972 1,249 — Currency forward contracts Other long-term liabilities 104 1,770 436 Derivative instruments not designated as cash flow hedges: Derivative instruments in asset positions: Currency forward contracts Prepaid expenses and other current assets 4,485 3,027 2,912 Derivative instruments in liability positions: Currency forward contracts Accrued liabilities 1,389 2,533 1,514 The following table presents the statement of operations effect and classification of derivative instruments: Statement Of Operations Classification Three Months Ended September 30, Nine Months Ended September 30, (in thousands) 2023 2022 2023 2022 Currency Forward Contracts: Derivative instruments designated as cash flow hedges: Gain recognized in other comprehensive income (loss), net of tax — $ 9,876 $ 17,191 $ 10,602 $ 31,780 Gain (loss) reclassified from accumulated other comprehensive income (loss) to income for the effective portion Net sales ( 236 ) ( 28 ) 10 ( 204 ) Gain reclassified from accumulated other comprehensive income (loss) to income for the effective portion Cost of sales 8,874 4,114 18,149 5,373 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 — — ( 2 ) 222 Derivative instruments not designated as cash flow hedges: Gain recognized in income Other non-operating income (expense), net 3,313 1,341 2,033 2,638 COLUMBIA SPORTSWEAR COMPANY | Q3 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 September 30, 2023 are as follows: (in thousands) Level 1 Level 2 Level 3 Total Assets: Cash equivalents: Money market funds $ 60,120 $ — $ — $ 60,120 Time deposits (1) — 19,412 — 19,412 Short-term investments: Money market funds 302 — — 302 Mutual fund shares 1,172 — — 1,172 Prepaid expenses and other current assets: Derivative financial instruments — 21,606 — 21,606 Other non-current assets: Money market funds 1,699 — — 1,699 Mutual fund shares 21,879 — — 21,879 Derivative financial instruments — 6,511 — 6,511 Total assets measured at fair value $ 85,172 $ 47,529 $ — $ 132,701 Liabilities: Accrued liabilities: Derivative financial instruments $ — $ 2,361 $ — $ 2,361 Other long-term liabilities: Derivative financial instruments — 104 — 104 Total liabilities measured at fair value $ — $ 2,465 $ — $ 2,465 (1) Time deposits are carried at amortized cost on the unaudited Condensed Consolidated Balance Sheet, which reasonably approximates fair value. COLUMBIA SPORTSWEAR COMPANY | Q3 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 | Q3 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 September 30, 2022 are as follows: (in thousands) Level 1 Level 2 Level 3 Total Assets: Short-term investments: Money market funds $ 79 $ — $ — $ 79 Mutual fund shares 893 — — 893 Prepaid expenses and other current assets: Derivative financial instruments — 35,201 — 35,201 Other non-current assets: Money market funds 1,201 — — 1,201 Mutual fund shares 17,332 — — 17,332 Derivative financial instruments — 13,919 — 13,919 Total assets measured at fair value $ 19,505 $ 49,120 $ — $ 68,625 Liabilities: Accrued liabilities: Derivative financial instruments $ — $ 1,514 $ — $ 1,514 Other long-term liabilities: Derivative financial instruments — 436 — 436 Total liabilities measured at fair value $ — $ 1,950 $ — $ 1,950 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 | Q3 2023 FORM 10-Q | 20 Table of Contents