COLUMBIA SPORTSWEAR CO 10-K

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA Our management is responsible for the information and representations contained in this report. The financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America ("GAAP"), which we consider appropriate in the circumstances and include some amounts based on our best estimates and judgments. Other financial information in this report is consistent with these financial statements. Our accounting systems include controls designed to reasonably ensure that assets are safeguarded from unauthorized use or disposition and which provide for the preparation of financial statements in conformity with GAAP. These systems are supplemented by the selection and training of qualified financial personnel and an organizational structure providing for appropriate segregation of duties. The Audit Committee is responsible for appointing the independent registered public accounting firm and reviews with the independent registered public accounting firm and management the scope and the results of the annual examination, the effectiveness of the accounting control system and other matters relating to our financial affairs as they deem appropriate. COLUMBIA SPORTSWEAR COMPANY | 2023 FORM 10-K | 34 Report of Independent Registered Public Accounting Firm To the Shareholders and Board of Directors of Columbia Sportswear Company Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of Columbia Sportswear Company and subsidiaries (the "Company") as of December 31, 2023 and 2022, the related consolidated statements of operations, comprehensive income, equity, and cash flows for each of the three years in the period ended December 31, 2023, the related notes, and the schedule listed in the Index at Item 15 (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2023, in conformity with accounting principles generally accepted in the United States of America. We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 26, 2024, expressed an unqualified opinion on the Company's internal control over financial reporting. Basis for Opinion These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matters The critical audit matters communicated below are matters arising from the current-period audit of the financial statements that were communicated or required to be communicated to the Audit Committee and that (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate. Intangible Assets, Net – prAna Trademark– Refer to Notes 2 and 6 to the consolidated financial statements Critical Audit Matter Description The Company has trademarks and trade names (“trademarks”) that are indefinite-lived intangible assets. As of December 31, 2023, the carrying value of the Intangible assets, net were $79.9 million, of which $51.8 million was attributed to prAna’s trademark. The Company used the relief from royalty method to estimate fair value, which requires management to make significant estimates and assumptions related to projected net sales, royalty rates and discount rates. Auditing management’s estimates and assumptions related to projected net sales, discount rate, and royalty rate for prAna involved especially subjective judgement. How the Critical Audit Matter Was Addressed in the Audit Our audit procedures related to management’s estimates and assumptions related to projected net sales for the prAna trademark valuation included the following, among others: • We tested the effectiveness of controls over intangible assets, including those over the forecasts of future net sales. • We evaluated management’s ability to accurately forecast future net sales by comparing actual results to management’s historical forecasts. COLUMBIA SPORTSWEAR COMPANY | 2023 FORM 10-K | 35 • We evaluated the reasonableness of management’s net sales forecasts by comparing the forecasts to: ◦ Historical net sales. ◦ Forecasted information included in the Company's press releases as well as in analyst and industry reports for the Company and certain of its peer companies. • To evaluate the reasonableness of the (1) discount rate and (2) royalty rate, with the assistance of our fair value specialists, we: ◦ Developed a range of independent estimates of the discount rate and compared those to the discount rate selected by management to assess the appropriateness of the discount rate assumption. ◦ Tested the inputs and source information underlying the determination of the discount rate by comparing to reputable third-party data or industry information and tested the mathematical accuracy of the calculation. ◦ Tested the source information underlying the determination of the royalty rate selected by management and compared the selected royalty rates from royalty agreements for comparable companies. Goodwill – prAna Reporting Unit – Refer to Notes 2 and 6 to the consolidated financial statements Critical Audit Matter Description The Company’s evaluation of goodwill for impairment involves the comparison of the fair value of each reporting unit to its carrying value. The Goodwill balance was $26.7 million as of December 31, 2023, of which $12.3 million was allocated to the prAna Reporting Unit (“prAna”), after recognizing $25.0 million of impairment loss in the year ended December 31, 2023. The Company used a combination of discounted cash flow analysis and market-based valuation methods, which requires management to make significant estimates and assumptions related to projected net sales, discount rates, market-based multiples, and other operating performance measures. Changes in these assumptions could have a significant impact on either the fair value, the amount of any goodwill impairment charge, if any, or both. Auditing management’s estimates and assumptions related to projected net sales, discount rate and market-based multiples for prAna involved especially subjective judgment. How the Critical Audit Matter Was Addressed in the Audit Our audit procedures for management’s estimates and assumptions related to projected net sales, for the prAna valuation included the following, among others: • We tested the effectiveness of internal controls over the prAna impairment analysis, including those over the forecast of future net sales, the selection of the discount rate and market-based multiples. • We evaluated management’s ability to accurately forecast net sales by comparing actual results to management’s historical forecasts. • We evaluated the reasonableness of management’s net sales forecasts by comparing the forecasts to: ◦ Historical net sales. ◦ Forecasted information included in the Company's press releases as well as in analyst and industry reports for the Company and certain of its peer companies. • To evaluate the reasonableness of the discount rate, with the assistance of our fair value specialists, we: ◦ Developed a range of independent estimates of the discount rate and compared those to the discount rate by comparing to reputable third-party data or industry information and tested the mathematical accuracy of the calculation. ◦ Tested the inputs and source information underlying the determination of the discount rate by comparing to reputable third-party data or industry information and tested the mathematical accuracy of the calculation. • With the assistance of our fair value specialists, we evaluated the reasonableness of the market-based multiple management applied to the projected revenues as part of their market-based valuation method through comparison to valuation multiples for guideline public companies. /s/ DELOITTE & TOUCHE LLP Portland, Oregon February 26, 2024 We have served as the Company’s auditor since at least 1994; however, an earlier year could not be reliably determined. COLUMBIA SPORTSWEAR COMPANY | 2023 FORM 10-K | 36 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Shareholders and Board of Directors of Columbia Sportswear Company Opinion on Internal Control over Financial Reporting We have audited the internal control over financial reporting of Columbia Sportswear Company and subsidiaries (the “Company”) as of December 31, 2023, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control – Integrated Framework (2013) issued by COSO. We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated financial statements as of and for the year ended December 31, 2023, of the Company and our report dated February 26, 2024, expressed an unqualified opinion on those financial statements. Basis for Opinion The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Report of Management. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Definition and Limitations of Internal Control over Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. /s/ DELOITTE & TOUCHE LLP Portland, Oregon February 26, 2024 COLUMBIA SPORTSWEAR COMPANY | 2023 FORM 10-K | 37 Table of Contents Notes to Consolidated Financial Statements CONSOLIDATED BALANCE SHEETS (in thousands) 2023 2022 ASSETS Current Assets: Cash and cash equivalents $ 350,319 $ 430,241 Short-term investments 414,185 722 Accounts receivable, net of allowance of $ 5,450 and $ 5,443 , respectively 423,079 547,561 Inventories 746,288 1,028,545 Prepaid expenses and other current assets 80,814 129,872 Total current assets 2,014,685 2,136,941 Property, plant and equipment, net 287,281 291,214 Operating lease right-of-use assets 357,295 324,409 Intangible assets, net 79,908 81,558 Goodwill 26,694 51,694 Deferred income taxes 105,574 94,162 Other non-current assets 67,576 71,568 Total assets $ 2,939,013 $ 3,051,546 LIABILITIES AND EQUITY Current Liabilities: Accounts payable $ 235,927 $ 322,472 Accrued liabilities 272,058 328,759 Operating lease liabilities 71,086 68,685 Income taxes payable 17,556 18,802 Total current liabilities 596,627 738,718 Non-current operating lease liabilities 336,772 310,625 Income taxes payable 25,688 33,251 Deferred income taxes 66 143 Other long-term liabilities 41,250 33,020 Total liabilities 1,000,403 1,115,757 Commitments and contingencies (Note 12) Shareholders' Equity: Preferred stock; 10,000 shares authorized; none issued and outstanding — — Common stock (no par value); 250,000 shares authorized; 59,996 and 62,139 issued and outstanding, respectively — 12,692 Retained earnings 1,984,446 1,953,734 Accumulated other comprehensive income (loss) ( 45,836 ) ( 30,637 ) Total shareholders' equity 1,938,610 1,935,789 Total liabilities and shareholders' equity $ 2,939,013 $ 3,051,546 See accompanying notes to consolidated financial statements. COLUMBIA SPORTSWEAR COMPANY | 2023 FORM 10-K | 38 Table of Contents Notes to Consolidated Financial Statements CONSOLIDATED STATEMENTS OF OPERATIONS Year Ended December 31, (in thousands, except per share amounts) 2023 2022 2021 Net sales $ 3,487,203 $ 3,464,152 $ 3,126,402 Cost of sales 1,757,271 1,753,074 1,513,947 Gross profit 1,729,932 1,711,078 1,612,455 Selling, general and administrative expenses 1,416,313 1,304,394 1,180,323 Impairment of goodwill and intangible assets 25,000 35,600 — Net licensing income 21,665 22,020 18,372 Operating income 310,284 393,104 450,504 Interest income, net 13,687 2,713 1,380 Other non-operating income (expense), net 2,221 1,593 ( 373 ) Income before income tax 326,192 397,410 451,511 Income tax expense 74,792 85,970 97,403 Net income $ 251,400 $ 311,440 $ 354,108 Earnings per share: Basic $ 4.11 $ 4.96 $ 5.37 Diluted $ 4.09 $ 4.95 $ 5.33 Weighted average shares outstanding: Basic 61,232 62,754 65,942 Diluted 61,424 62,970 66,415 See accompanying notes to consolidated financial statements. COLUMBIA SPORTSWEAR COMPANY | 2023 FORM 10-K | 39 Table of Contents Notes to Consolidated Financial Statements CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME Year Ended December 31, (in thousands) 2023 2022 2021 Net income $ 251,400 $ 311,440 $ 354,108 Other comprehensive income (loss): Change in available-for-sale securities (net of tax effect of $46) 145 — — Change in derivative transactions (net of tax effects of $ 6,662 , $( 4,358 ), and $( 7,138 ), respectively) ( 18,101 ) 11,876 19,283 Foreign currency translation adjustments (net of tax effects of $ 285 , $ 218 , and $( 40 ), respectively) 2,757 ( 38,137 ) ( 24,465 ) Other comprehensive income (loss) ( 15,199 ) ( 26,261 ) ( 5,182 ) Comprehensive income $ 236,201 $ 285,179 $ 348,926 See accompanying notes to consolidated financial statements. COLUMBIA SPORTSWEAR COMPANY | 2023 FORM 10-K | 40 Table of Contents Notes to Consolidated Financial Statements CONSOLIDATED STATEMENTS OF CASH FLOWS Year Ended December 31, (in thousands) 2023 2022 2021 Cash flows from operating activities: Net income $ 251,400 $ 311,440 $ 354,108 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation, amortization, and non-cash lease expense 127,052 117,399 115,571 Provision for uncollectible accounts receivable 3,142 ( 2,044 ) ( 10,758 ) Loss on disposal or impairment of investments, property, plant and equipment, right-of-use assets, goodwill, and intangible assets 26,374 38,194 1,233 Deferred income taxes ( 5,135 ) ( 8,118 ) ( 9,798 ) Stock-based compensation 23,051 21,021 19,126 Changes in operating assets and liabilities: Accounts receivable 123,830 ( 64,495 ) ( 31,622 ) Inventories 283,826 ( 399,851 ) ( 100,261 ) Prepaid expenses and other current assets 29,840 ( 25,749 ) ( 24,858 ) Other assets ( 3,148 ) ( 2,475 ) 1,231 Accounts payable ( 85,862 ) 40,429 75,513 Accrued liabilities ( 62,239 ) 20,683 66,457 Income taxes payable ( 8,800 ) ( 5,871 ) ( 15,248 ) Operating lease assets and liabilities ( 73,718 ) ( 62,749 ) ( 85,176 ) Other liabilities 6,684 ( 3,055 ) ( 1,112 ) Net cash provided by (used in) operating activities 636,297 ( 25,241 ) 354,406 Cash flows from investing activities: Purchases of short-term investments ( 528,491 ) ( 44,876 ) ( 130,191 ) Sales and maturities of short-term investments 121,279 176,083 1,184 Capital expenditures ( 54,607 ) ( 58,467 ) ( 34,744 ) Net cash provided by (used in) investing activities ( 461,819 ) 72,740 ( 163,751 ) Cash flows from financing activities: Proceeds from credit facilities 837 52,918 38,334 Repayments on credit facilities ( 837 ) ( 52,979 ) ( 38,156 ) Payment of line of credit issuance fees — ( 604 ) — Proceeds from issuance of common stock related to stock-based compensation 7,354 6,588 28,783 Tax payments related to stock-based compensation ( 4,681 ) ( 4,229 ) ( 5,812 ) Repurchase of common stock ( 184,022 ) ( 287,443 ) ( 165,415 ) Cash dividends paid ( 73,440 ) ( 75,082 ) ( 68,623 ) Net cash used in financing activities ( 254,789 ) ( 360,831 ) ( 210,889 ) Net effect of exchange rate changes on cash 389 ( 19,831 ) ( 7,087 ) Net decrease in cash and cash equivalents ( 79,922 ) ( 333,163 ) ( 27,321 ) Cash and cash equivalents, beginning of period 430,241 763,404 790,725 Cash and cash equivalents, end of period $ 350,319 $ 430,241 $ 763,404 Supplemental disclosures of cash flow information: Cash paid during the period for income taxes $ 90,507 $ 92,110 $ 129,483 Supplemental disclosures of non-cash investing and financing activities: Property, plant and equipment acquired through increase in liabilities $ 10,125 $ 11,103 $ 5,853 See accompanying notes to consolidated financial statements. COLUMBIA SPORTSWEAR COMPANY | 2023 FORM 10-K | 41 Table of Contents Notes to Consolidated Financial Statements CONSOLIDATED STATEMENTS OF EQUITY (in thousands, except per share amounts) Common Stock Retained Earnings Accumulated Other Comprehensive Income (Loss) Total Shares Outstanding Amount Balance, December 31, 2020 66,252 $ 20,165 $ 1,811,800 $ 806 $ 1,832,771 Net income — — 354,108 — 354,108 Other comprehensive income (loss) — — — ( 5,182 ) ( 5,182 ) Cash dividends ($ 1.04 per share) — — ( 68,623 ) — ( 68,623 ) Issuance of common stock related to stock-based compensation, net 567 22,971 — — 22,971 Stock-based compensation expense — 19,126 — — 19,126 Repurchase of common stock ( 1,655 ) ( 62,262 ) ( 103,657 ) — ( 165,919 ) Balance, December 31, 2021 65,164 — 1,993,628 ( 4,376 ) 1,989,252 Net income — — 311,440 — 311,440 Other comprehensive income (loss) — — — ( 26,261 ) ( 26,261 ) Cash dividends ($ 1.20 per share) — — ( 75,082 ) — ( 75,082 ) Issuance of common stock related to stock-based compensation, net 210 2,359 — — 2,359 Stock-based compensation expense — 21,021 — — 21,021 Repurchase of common stock ( 3,235 ) ( 10,688 ) ( 276,252 ) — ( 286,940 ) Balance, December 31, 2022 62,139 12,692 1,953,734 ( 30,637 ) 1,935,789 Net income — — 251,400 — 251,400 Other comprehensive income (loss) — — — ( 15,199 ) ( 15,199 ) Cash dividends ($ 1.20 per share) — — ( 73,440 ) — ( 73,440 ) Issuance of common stock related to stock-based compensation, net 235 2,673 — — 2,673 Stock-based compensation expense — 23,051 — — 23,051 Repurchase of common stock ( 2,378 ) ( 36,774 ) ( 147,248 ) — ( 184,022 ) Excise taxes related to repurchase of common stock — ( 1,642 ) — — (1,642) Balance, December 31, 2023 59,996 $ — $ 1,984,446 $ ( 45,836 ) $ 1,938,610 See accompanying notes to consolidated financial statements. COLUMBIA SPORTSWEAR COMPANY | 2023 FORM 10-K | 42 Table of Contents Notes to Consolidated Financial Statements NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE PAGE Note 1 Basis of Presentation and Organization 44 Note 2 Summary of Significant Accounting Policies 44 Note 3 Revenues 49 Note 4 Concentrations 50 Note 5 Property, Plant and Equipment, Net 51 Note 6 Intangible Assets, Net and Goodwill 51 Note 7 Short-Term Borrowings and Credit Lines 53 Note 8 Accrued Liabilities 53 Note 9 Leases 54 Note 10 Income Taxes 55 Note 11 Retirement Savings Plans 58 Note 12 Commitments and Contingencies 58 Note 13 Shareholders' Equity 59 Note 14 Stock-Based Compensation 59 Note 15 Earnings Per Share 62 Note 16 Accumulated Other Comprehensive Income (Loss) 63 Note 17 Segment Information 64 Note 18 Financial Instruments and Risk Management 65 Note 19 Fair Value Measures 67 COLUMBIA SPORTSWEAR COMPANY | 2023 FORM 10-K | 43 Table of Contents Notes to Consolidated Financial Statements NOTE 1 — BASIS OF PRESENTATION AND ORGANIZATION NATURE OF THE BUSINESS Columbia Sportswear Company connects active people with their passions through its four brands, Columbia, SOREL, Mountain Hardwear, and prAna, by designing, developing, marketing, and distributing its outdoor, active and lifestyle apparel, footwear, accessories, and equipment products to meet the diverse needs of its customers and consumers. PRINCIPLES OF CONSOLIDATION The consolidated financial statements include the accounts of the Columbia Sportswear Company, its wholly owned subsidiaries and entities in which it maintained a controlling financial interest (the "Company"). All significant intercompany balances and transactions have been eliminated in consolidation. ESTIMATES AND ASSUMPTIONS The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America ("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 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, impairment of indefinite-lived intangible assets and goodwill, and income taxes. NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES CASH AND CASH EQUIVALENTS Cash and cash equivalents are stated at fair value or at cost, which approximates fair value, and include short-term highly liquid investments that are both readily convertible to known amounts of cash and so near their maturity they present insignificant risk of changes in value because of changes in interest rates, with original maturities of three months or less. As of December 31, 2023, Cash and cash equivalents consisted of cash, money market funds and time deposits. As of December 31, 2022, Cash and cash equivalents consisted of cash and money market funds. INVESTMENTS As of December 31, 2023, Short-term investments consisted of United States government treasury bills, as well as money market funds and mutual fund shares held as part of the Company's deferred compensation plan expected to be distributed in the next twelve months. As of December 31, 2022 , Short-term investments consisted of money market funds and mutual fund shares held as part of the Company's deferred compensation plan expected to be distributed in the next twelve months. The United States government treasury bills are classified as available-for-sale securities and are recorded at fair value with any unrealized gains or losses reported, net of tax, in Other comprehensive income (loss) . Investments held as part of the Company's deferred compensation plan are classified as trading securities and are recorded at fair value with any gains and losses included in Selling, general, and administrative ("SG&A") expenses . As of December 31, 2023 and 2022, long-term investments included in Other non-current assets consisted of money market funds and mutual fund shares held to offset liabilities to participants in the Company's deferred compensation plan. These investments are classified as long-term because the related deferred compensation liabilities are not expected to be paid within the next twelve months. These investments are classified as trading securities and are recorded at fair value with gains and losses reported as SG&A expenses . ALLOWANCE FOR DOUBTFUL ACCOUNTS Accounts receivable have been reduced by an allowance for doubtful accounts. The Company maintains an allowance for estimated credit losses resulting from the inability of the Company's 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 COLUMBIA SPORTSWEAR COMPANY | 2023 FORM 10-K | 44 Table of Contents Notes to Consolidated Financial Statements supportable forecasts when appropriate. The estimate is a result of the Company’s ongoing evaluation of collectability, customer creditworthiness, historical levels of credit losses, and future expectations. Write-offs of accounts receivable were $ 2.8 million and $ 1.0 million for the years ended December 31, 2023 and 2022 , respectively. INVENTORIES Inventories consist primarily of finished goods and are carried at the lower of cost or net realizable value. Cost is determined using standard cost, which approximates the first-in, first-out method. The Company periodically reviews its inventories for excess, close-out or slow-moving items and makes provisions as necessary to properly reflect inventory value. PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment are stated at cost, net of accumulated depreciation. Depreciation is provided using the straight-line method over the estimated useful lives of the assets. The principal estimated useful lives are: land improvements, 15 years; buildings and building improvements, 15 - 30 years; furniture and fixtures, 3-10 years; and machinery, software and equipment, 3 - 10 years. Leasehold improvements are depreciated over the lesser of the estimated useful life of the improvement, which is most commonly 7 years, or the remaining term of the underlying lease. Improvements to property, plant and equipment that substantially extend the useful life of the asset are capitalized. Repair and maintenance costs are expensed as incurred. Internal and external costs directly related to the development of internal-use software during the application development stage, including costs incurred for third party contractors and employee compensation, are capitalized and depreciated over a 3-10 year estimated useful life. CLOUD COMPUTING ARRANGEMENTS The Company’s cloud computing arrangements that are service contracts ("CCAs") primarily relate to various enterprise resource planning systems, as well as other supporting systems. Implementation costs associated with CCAs are capitalized ("CCA assets") when incurred during the application development stage and generally included in Other non-current assets in the Consolidated Balance Sheets. CCA assets are amortized on a straight-line basis over the lesser of their assessed useful lives or the contractual term of the CCA contract, whichever is shorter, with amortization included in the same financial statement line item in the Consolidated Statement of Operations as the expense for fees in the associated CCA contract. As of December 31, 2023, CCA assets in-service have useful lives which range from approximately one year to six years. As of December 31, 2023 and 2022, CCA assets consisted of capitalized implementation costs of $ 38.6 million and $ 36.0 million, respectively and associated accumulated amortization of $ 19.8 million and $ 12.6 million, respectively. Changes in these assets are recorded in Other assets within operating activities in the Consolidated Statements of Cash Flows. IMPAIRMENT OF LONG-LIVED ASSETS Long-lived assets, which include property, plant and equipment, lease ROU assets, and capitalized implementation costs for cloud computing arrangements are tested for recoverability only when events or circumstances indicate the carrying value may not be recoverable. In these cases, the Company estimates the future undiscounted cash flows to be derived from the asset or asset group to determine whether the asset or asset group is recoverable. If the sum of the estimated future undiscounted cash flows is less than the carrying value of the asset or asset group, the Company recognizes an impairment loss, measured as the amount by which the carrying value exceeds the estimate of fair value. Impairment charges of long-lived assets, if any, are classified as SG&A expenses . Impairment charges of goodwill and indefinite-lived intangible assets, if any, are classified as Impairment of goodwill and intangible assets in the Consolidated Statements of Operations. DEFINITE-LIVED INTANGIBLE ASSETS Intangible assets that are determined to have finite lives are amortized using the straight-line method over their estimated useful lives and are measured for impairment only when events or circumstances indicate the carrying value may not be recoverable. Intangible assets with finite lives include patents, purchased technology and customer relationships and have estimated useful lives which range from approximately 3 to 10 years. INDEFINITE-LIVED INTANGIBLE ASSETS AND GOODWILL COLUMBIA SPORTSWEAR COMPANY | 2023 FORM 10-K | 45 Table of Contents Notes to Consolidated Financial Statements The Company reviews and tests its indefinite-lived 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. The Company's intangible assets with indefinite lives consist of trademarks and trade names. In the impairment test for goodwill, the estimated fair value of the reporting unit is compared with the carrying amount of that reporting unit. In the impairment tests for trademarks and trade names indefinite-lived intangibles, the Company compares the estimated fair value of each asset to its carrying amount. In the impairment tests for goodwill, the estimated fair value of the reporting unit is compared with the carrying amount of that reporting unit. For goodwill and trademarks and trade names indefinite-lived intangible assets and goodwill, if the carrying amount exceeds its estimated fair value, the Company calculates an impairment as the excess of carrying amount over the estimate of fair value. LEASES The Company leases, among other things, retail space, office space, warehouse facilities, storage space, vehicles, and equipment. Generally, the initial lease terms are between 5 and 10 years. Certain lease agreements contain scheduled rent escalation clauses and others include rental payments adjusted periodically depending on an index or rate. Certain retail space lease agreements provide for additional rents based on a percentage of annual sales in excess of stipulated minimums ("percentage rent"). Certain lease agreements require the Company to pay real estate taxes, insurance, common area maintenance, and other costs, collectively referred to as operating costs, in addition to base rent. Certain lease agreements also contain lease incentives, such as tenant improvement allowances and rent holidays. Most leases include one or more options to renew, with renewal terms that can extend the lease term from one to 10 years or more. The exercise of lease renewal options is generally at the Company's sole discretion. The Company's lease agreements do not contain any material residual value guarantees or material restrictive covenants. The Company determines if an arrangement is or contains a lease at contract inception. The Company recognizes a right-of-use ("ROU") asset and a lease liability at the lease commencement date. The lease liability is initially measured at the present value of the unpaid lease payments at the lease commencement date. Key estimates and judgments include how the Company determines (1) the discount rate it uses to discount the unpaid lease payments to present value, (2) the lease term and (3) lease payments. Unpaid lease payments are discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the Company's incremental borrowing rate. Generally, the Company cannot determine the interest rate implicit in the lease because it does not have access to the lessor's estimated residual value or the amount of the lessor's deferred initial direct costs. Therefore, the Company generally uses its incremental borrowing rate as the discount rate for the lease. The Company's incremental borrowing rate for a lease is the rate of interest it would have to pay on a collateralized basis to borrow an amount equal to the lease payments under similar terms. Because the Company does not generally borrow on a collateralized basis, it uses market-based rates as an input to derive an appropriate incremental borrowing rate, adjusted for the lease term and the effect on that rate of designating specific collateral with a value equal to the unpaid lease payments for that lease. The Company also contemplates adjusting the discount rate for the amount of the lease payments. The Company's lease contracts may include options to extend the lease following the initial term or terminate the lease prior to the end of the initial term. In most instances, at the commencement of the leases, the Company has determined that it is not reasonably certain to exercise either of these options; accordingly, these options are generally not considered in determining the initial lease term. In instances where the Company exercises an option it had previously determined it was not reasonably certain to exercise, the Company reassesses any remaining options in the contract that it is reasonably certain to exercise in its measurement of the lease term. For lease agreements entered into or reassessed after the adoption of Accounting Standards Codification ("ASC") 842, the Company has elected the practical expedient to account for the lease and non-lease components as a single lease component. Therefore, for those leases, the lease payments used to measure the lease liability include all of the fixed consideration in the contract. Variable lease payments associated with the Company's leases are recognized upon occurrence of the event, activity, or circumstance in the lease agreement on which those payments are assessed. Variable lease payments are presented in the Company's Consolidated Statements of Operations in the same line item as expense arising from fixed lease payments, which is generally within SG&A expenses . Leases with an initial term of 12 months or less are considered short-term leases and not recorded on the Consolidated Balance Sheets. The Company recognizes lease expense for short-term leases on a straight-line basis over the lease term. For lease concessions related to the effects of the COVID-19 pandemic that provided a deferral of payments with no substantive changes to the consideration in the original contract, the Company continues to recognize expense during the deferral period. For concessions related to COLUMBIA SPORTSWEAR COMPANY | 2023 FORM 10-K | 46 Table of Contents Notes to Consolidated Financial Statements the effects of the COVID-19 pandemic in the form of lease abatements, the reduced lease payments were accounted for as reductions to variable lease expense. INCOME TAXES Income taxes are based on amounts of taxes payable or refundable in the current year and on expected future tax consequences of events that are recognized in the financial statements in different periods than they are recognized in tax returns. As a result of timing of recognition and measurement differences between financial accounting standards and income tax laws, temporary differences arise between amounts of pre-tax financial statement income and taxable income and between reported amounts of assets and liabilities in the Consolidated Balance Sheets and their respective tax bases. Deferred income tax assets and liabilities reported in the Consolidated Balance Sheets reflect estimated future tax effects attributable to these temporary differences and to net operating loss and net capital loss carryforwards, based on tax rates expected to be in effect for years in which the differences are expected to be settled or realized. Realization of deferred tax assets is dependent on future taxable income in specific jurisdictions. Valuation allowances are used to reduce deferred tax assets to amounts considered likely to be realized. Accrued income taxes in the Consolidated Balance Sheets include unrecognized income tax benefits relating to uncertain tax positions, including related interest and penalties, appropriately classified as current or non-current. The Company recognizes the tax benefit from an uncertain tax position if it is more likely than not that the tax position will be sustained on examination by the relevant taxing authority based on the technical merits of the position. The tax benefits recognized in the financial statements from such positions are then measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement with the relevant tax authority. In making this determination, the Company assumes that the taxing authority will examine the position and that it will have full knowledge of all relevant information. Changes in the Company's assessment may result in the recognition of a tax benefit or an additional charge to the tax provision in the period the assessment changes. DERIVATIVES The effective portion of changes in the fair value of outstanding cash flow hedges is recorded in Accumulated other comprehensive income (loss) until earnings are affected by the hedged transaction, and any ineffective portion is included in earnings. In most cases, amounts recorded in Accumulated other comprehensive income (loss) will be released to earnings after maturity of the related derivative. The Consolidated Statements of Operations classification of effective hedge results is the same as that of the underlying exposure. Results of hedges of product costs are recorded in Cost of sales when the underlying hedged transactions affect earnings. Results of hedges of revenue are recorded in Net sales when the underlying hedged transactions affect earnings. Unrealized derivative gains and losses, which are recorded in assets and liabilities, respectively, are non-cash items and therefore are taken into account in the preparation of the Consolidated Statements of Cash Flows based on their respective balance sheet classifications. FOREIGN CURRENCY TRANSLATION For the Company's subsidiaries whose functional currency is not the United States dollar, assets and liabilities have been translated into United States dollars using the exchange rates in effect at period end, and the sales and expenses have been translated into United States dollars using average exchange rates in effect during the period. The foreign currency translation adjustments are included as a component of Accumulated other comprehensive income (loss) in the Consolidated Balance Sheets. REVENUE RECOGNITION Revenues are recognized when the Company's performance obligations are satisfied as evidenced by transfer of control of promised goods to customers or consumers, in an amount that reflects the consideration the Company expects to be entitled to receive in exchange for those goods or services. Within the Company's wholesale channel, control generally transfers to the customer upon shipment to, or upon receipt by, the customer depending on the terms of sale with the customer. Within the Company's direct-to-consumer ("DTC") channel, control generally transfers to the consumer at the time of sale within retail stores and concession-based arrangements and generally upon shipment to the consumer with respect to e-commerce transactions. The amount of consideration the Company expects to be entitled to receive and recognize as Net sales across both wholesale and DTC channels varies with changes in sales returns, other accommodations and incentives offered. The Company estimates expected sales returns and other accommodations, such as chargebacks and markdowns, and records a sales reserve to reduce Net sales. These estimates are based on historical rates of product returns and claims, as well as events and circumstances that indicate changes to such historical rates are warranted. However, actual returns and claims in any future period are inherently uncertain and thus may differ from estimates. As a COLUMBIA SPORTSWEAR COMPANY | 2023 FORM 10-K | 47 Table of Contents Notes to Consolidated Financial Statements result, the Company adjusts estimates of revenue at the earlier of when the most likely amount of consideration the Company expects 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 reserves established, the Company records an adjustment to Net sales in the period in which it made such determination. Licensing income, which is presented separately as Net licensing income on the Consolidated Statements of Operations and represents less than 1 % of total revenue, is recognized over time based on the greater of contractual minimum royalty guarantees and actual, or estimated, sales of licensed products by the Company's licensees. The Company expenses sales commissions when incurred, which is generally at the time of sale, because the amortization period would have been one year or less. These costs are recorded within SG&A expenses . Revenue recognized from contracts with customers is recorded net of sales taxes, value added taxes, or similar taxes that are collected on behalf of local taxing authorities. Shipping and Handling Costs Fees for shipping and handling activities which are billed to customers and consumers are recorded as Net Sales . The Company has elected to account for shipping and handling activities that occur after a customer has obtained control of a good as fulfillment costs rather than an additional performance obligation. Freight costs associated with the shipment of goods to customers and consumers, including freight costs associated with the transfer of inventory within the Company's distribution network and to our retail stores, are recorded as Cost of sales . Shipping and handling costs also include costs associated with the handling of inventory and warehousing costs associated with the operation of our owned distribution centers and third-party logistics providers are recorded as SG&A expenses , and were $ 183.2 million , $ 155.8 million and $ 114.4 million for the years ended December 31, 2023, 2022 and 2021, respectively. COST OF SALES Cost of sales consists of all direct costs to source and purchase inventory, including product costs, freight, duties and other importation costs, as well as specific provisions for excess, close-out or slow-moving inventory. In addition, certain products carry life-time or limited warranty provisions for defects in quality and workmanship. Cost of sales includes a warranty reserve established for these provisions at the time of sale to cover estimated costs based on the Company's history of warranty repairs and replacements. SELLING, GENERAL AND ADMINISTRATIVE EXPENSES SG&A expenses consists of personnel-related costs, advertising, depreciation and amortization, occupancy, warehousing, and other selling and general operating expenses related to the Company's business functions. STOCK-BASED COMPENSATION Stock-based compensation cost is estimated at the grant date based on the award's fair value. For stock options and service-based restricted stock units, stock-based compensation cost is recognized over the expected requisite service period using the straight-line attribution method. For performance-based restricted stock units, stock-based compensation cost is recognized based on the Company's assessment of the probability of achieving the related performance targets. The Company estimates forfeitures for stock-based awards granted, but which are not expected to vest. ADVERTISING COSTS Advertising costs, including marketing and demand creation spending, are expensed in the period incurred and are included in SG&A expenses . The Company may reimburse its customers for certain marketing activities at the Company's discretion. The costs for such activities are recorded as advertising costs when the Company has determined a payment is in exchange for a distinct good or service and approximates the fair value of the good or service received. Total advertising expense was $ 209.4 million, $ 205.9 million and $ 184.8 million for the years ended December 31, 2023, 2022 and 2021, respectively. RECENTLY ADOPTED ACCOUNTING PRONOUNCEMENTS None. COLUMBIA SPORTSWEAR COMPANY | 2023 FORM 10-K | 48 Table of Contents Notes to Consolidated Financial Statements RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS NOT YET ADOPTED In November 2023, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update ("ASU") No. 2023-07 (“ASU 2023-07”), Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which is intended to improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant expenses. The amendments will require public entities to disclose significant segment expenses that are regularly provided to the chief operating decision maker and included within the reported measure of segment profit or loss, among other disclosure requirements. ASU 2023-07 is effective for annual periods beginning after December 15, 2023, and interim periods beginning after December 15, 2024, with early adoption permitted, and should be applied retrospectively to all prior periods presented in the financial statements. The Company is currently evaluating the ASU to determine the impact on the Company's disclosures. In December 2023, the FASB issued ASU No. 2023-09 (“ASU 2023-09”), Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which includes amendments that further enhance income tax disclosures, primarily through disaggregation of specific rate reconciliation categories and income taxes paid by jurisdiction. The amendments are effective for annual periods beginning after December 15, 2024, with early adoption permitted, and may be applied prospectively or retrospectively. The Company is currently evaluating the ASU to determine the impact on the Company’s disclosures. NOTE 3 — REVENUES DISAGGREGATED REVENUE As disclosed below in Note 17, 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: Year Ended December 31, 2023 (in thousands) U.S. LAAP EMEA Canada Total Product category net sales Apparel, Accessories and Equipment $ 1,783,205 $ 392,690 $ 319,468 $ 181,234 $ 2,676,597 Footwear 458,232 127,064 149,769 75,541 810,606 Total $ 2,241,437 $ 519,754 $ 469,237 $ 256,775 $ 3,487,203 Channel net sales Wholesale $ 1,082,197 $ 256,423 $ 373,583 $ 161,800 $ 1,874,003 Direct-to-consumer 1,159,240 263,331 95,654 94,975 1,613,200 Total $ 2,241,437 $ 519,754 $ 469,237 $ 256,775 $ 3,487,203 Year Ended December 31, 2022 (in thousands) U.S. LAAP EMEA Canada Total Product category net sales Apparel, Accessories and Equipment $ 1,829,389 $ 354,000 $ 303,731 $ 173,911 $ 2,661,031 Footwear 472,857 119,866 134,823 75,575 803,121 Total $ 2,302,246 $ 473,866 $ 438,554 $ 249,486 $ 3,464,152 Channel net sales Wholesale $ 1,114,337 $ 225,932 $ 364,598 $ 162,773 $ 1,867,640 Direct-to-consumer 1,187,909 247,934 73,956 86,713 1,596,512 Total $ 2,302,246 $ 473,866 $ 438,554 $ 249,486 $ 3,464,152 COLUMBIA SPORTSWEAR COMPANY | 2023 FORM 10-K | 49 Table of Contents Notes to Consolidated Financial Statements Year Ended December 31, 2021 (in thousands) U.S. LAAP EMEA Canada Total Product category net sales Apparel, Accessories and Equipment $ 1,624,542 $ 347,071 $ 263,432 $ 154,109 $ 2,389,154 Footwear 435,758 118,428 118,628 64,434 737,248 Total $ 2,060,300 $ 465,499 $ 382,060 $ 218,543 $ 3,126,402 Channel net sales Wholesale $ 983,799 $ 215,448 $ 317,104 $ 144,008 $ 1,660,359 Direct-to-consumer 1,076,501 250,051 64,956 74,535 1,466,043 Total $ 2,060,300 $ 465,499 $ 382,060 $ 218,543 $ 3,126,402 PERFORMANCE OBLIGATIONS For the years December 31, 2023, 2022 and 2021, Net sales recognized from performance obligations related to prior periods were not material. Net sales expected to be recognized in any future period related to remaining performance obligations is not material. CONTRACT BALANCES As of December 31, 2023 and 2022, the Company did not have contract assets and had an immaterial amount of contract liabilities included in Accrued liabilities on the Consolidated Balance Sheets. NOTE 4 — CONCENTRATIONS TRADE RECEIVABLES The Company had one customer that accounted for approximately 19.8 % and 13.8 % of Accounts receivable, net as of December 31, 2023 and 2022, respectively. No single customer accounted for 10% or more of Net sales for any of the years ended December 31, 2023, 2022 or 2021. COLUMBIA SPORTSWEAR COMPANY | 2023 FORM 10-K | 50 Table of Contents Notes to Consolidated Financial Statements NOTE 5 — PROPERTY, PLANT AND EQUIPMENT, NET Property, plant and equipment, net consisted of the following: December 31, (in thousands) 2023 2022 Land and improvements $ 33,028 $ 32,964 Buildings and improvements 226,510 211,495 Machinery, software and equipment 397,310 386,657 Furniture and fixtures 115,430 104,190 Leasehold improvements 176,731 162,210 Construction in progress 10,202 17,609 959,211 915,125 Less accumulated depreciation ( 671,930 ) ( 623,911 ) $ 287,281 $ 291,214 Depreciation expense for Property, plant and equipment, net was $ 56.4 million , $ 53.1 million, and $ 54.2 million for the years ended December 31, 2023, 2022 and 2021, respectively. NOTE 6 — INTANGIBLE ASSETS, NET AND GOODWILL INTANGIBLE ASSETS, NET Intangible assets, net consisted of the following: December 31, (in thousands) 2023 2022 Intangible assets with definite lives: Patents and purchased technology $ 14,198 $ 14,198 Customer relationships 23,000 23,000 Gross carrying amount 37,198 37,198 Accumulated amortization: Patents and purchased technology ( 14,198 ) ( 14,198 ) Customer relationships ( 22,313 ) ( 20,663 ) Accumulated amortization ( 36,511 ) ( 34,861 ) Net carrying amount 687 2,337 Intangible assets with indefinite lives 79,221 79,221 Intangible assets, net $ 79,908 $ 81,558 Amortization expense for intangible assets subject to amortization was $ 1.7 million for each of the years ended December 31, 2023, 2022 and 2021. For the year ended December 31, 2023 , there was no impairment recorded for intangible assets with indefinite lives. For the year ended December 31, 2022, an im pairment charge of $ 18.7 million was recorded for the impairment of prAna's trademar k and trade name (collectively, "trademark"), which is an indefinite-lived intangible asset recorded in the U.S. segment. The impairment of the prAna trademark was determined as part of the annual impairment test. The decline in estimated fair value from the fourth quarter 2021 impairment test COLUMBIA SPORTSWEAR COMPANY | 2023 FORM 10-K | 51 Table of Contents Notes to Consolidated Financial Statements reflected a decline in forecasted revenue, a lower estimated royalty rate, and a slightly higher discount rate. For the year ended December 31, 2021 , there was no impairment recorded for intangible assets with indefinite lives. The following table presents the remaining estimated annual amortization expense of intangible assets with definite lives: (in thousands) 2024 $ 687 2025 and thereafter $ — GOODWILL The following table sets forth the changes in Goodwill . (in thousands) Balance as of December 31, 2021 Gross $ 73,208 Accumulated impairment losses ( 4,614 ) Carrying value 68,594 Impairment losses during 2022 ( 16,900 ) Balance as of December 31, 2022 Gross 73,208 Accumulated impairment losses ( 21,514 ) Carrying value 51,694 Impairment losses during 2023 ( 25,000 ) Balance as of December 31, 2023 Gross 73,208 Accumulated impairment losses ( 46,514 ) Carrying value $ 26,694 Substantially all of the Company's goodwill is recorded in the U.S. segment. For the years ended December 31 2023 and 2022, the impairment of goodwill attributable to the prAna reporting unit was determined as part of the annual impairment test. The Company estimated the fair value of the prAna reporting unit using a combination of discounted cash flow analysis and market-based valuation methods. Key assumptions used in the discounted cash flow models included the cash flow projections and the discount rate. Cash flow projections are developed in part from our annual planning process. The discount rate reflected the estimated weighted-average cost of capital of the reporting unit from a market-participant perspective. The market-based valuation methods to estimate fair value of the reporting units utilized market multiples for guideline public companies . For the year ended December 31, 2 023 an impairment charge of $ 25.0 million was recorded. The decline in estimated fair value from the fourth quarter 2022 impairment test reflected an increase in the weighted-average cost of capital used in the discounted cash flow model and lower operating income levels. For the y ear ended December 31, 2022, an impairment charge of $ 16.9 million was recorded. The decline in estimated fair value from the fourth quarter 2021 impairment test reflected lower assumed revenue and operating income levels, while the weighted-average cost of capital used in the discounted cash flow model remained relatively unchanged. For the year ended December 31, 2021 , there was no impairment recorded for goodwill. COLUMBIA SPORTSWEAR COMPANY | 2023 FORM 10-K | 52 Table of Contents Notes to Consolidated Financial Statements NOTE 7 — SHORT-TERM BORROWINGS AND CREDIT LINES DOMESTIC CREDIT FACILITY The Company has an unsecured, committed revolving credit facility (the “Credit Facility”) that provides for up to $ 500.0 million of borrowings, which is available for working capital and general corporate purposes, including a sublimit for the issuance of letters of credit. The Credit Facility matures on July 12, 2027. Interest, generally payable monthly, is based on the Company's option of either the secured overnight financing rate (“SOFR”) plus an applicable margin or a base rate. Base rate is defined as the highest of the following, plus an applicable margin: • the administrative agent's prime rate; • the higher of the federal funds rate or overnight bank funding rate set by the Federal Reserve Bank of New York, plus 0.50%; or • the one-month SOFR plus 1.00%. The applicable margin for SOFR loans will range from 1.00% to 1.50% based on the Company’s funded debt ratio. The applicable margin for base rate loans will range from 0.00% to 0.50% based on the Company’s funded debt ratio. A commitment fee ranging from 0.10% to 0.20% based on the Company's funded debt ratio is paid quarterly on the average daily unused commitment amount of the Credit Facility. The agreement for the Credit Facility requires the Company to comply with a financial covenant to maintain a certain funded debt ratio. In addition, the agreement includes customary covenants that, among other things, limit or restrict the ability of the Company and its subsidiaries to incur additional indebtedness and liens, engage in mergers, acquisitions and dispositions, and engage in transactions with affiliates, as well as restrict the amount of certain payments, including dividends and share buybacks in the event the Company's funded debt ratio is greater than a set amount. As of December 31, 2023, the Company was in compliance with all associated covenants. As of December 31, 2023 and 2022, there was no balance outstanding. INTERNATIONAL CREDIT FACILITIES The Company's European subsidiary has available an unsecured, committed line of credit, which is guaranteed by the Company, and provides for borrowing up to a maximum of € 4.4 million (approximately US$ 4.9 million) as of December 31, 2023, with borrowings to accrue interest at a base rate plus 75 basis points. As of December 31, 2023 and 2022 there was no balance outstanding. NOTE 8 — ACCRUED LIABILITIES Accrued liabilities consisted of the following: December 31, (in thousands) 2023 2022 Sales reserves $ 103,907 $ 115,366 Accrued salaries, bonus, paid time off and other benefits 72,726 99,524 Accrued import duties 18,741 30,847 Taxes other than income taxes payable 18,706 23,262 Product warranties 11,620 13,810 Other 46,358 45,950 $ 272,058 $ 328,759 COLUMBIA SPORTSWEAR COMPANY | 2023 FORM 10-K | 53 Table of Contents Notes to Consolidated Financial Statements A reconciliation of product warranties is as follows: Year Ended December 31, (in thousands) 2023 2022 2021 Balance at beginning of year $ 13,810 $ 13,645 $ 14,745 Provision for warranty claims 877 3,627 2,179 Warranty claims ( 3,075 ) ( 3,163 ) ( 2,917 ) Other 8 ( 299 ) ( 362 ) Balance at end of year $ 11,620 $ 13,810 $ 13,645 NOTE 9 — LEASES The components of lease cost consisted of the following: Year Ended December 31, (in thousands) 2023 2022 2021 Operating lease cost $ 83,866 $ 76,650 $ 71,996 Variable lease cost 65,376 63,537 67,745 Short term lease cost 10,117 5,775 5,612 $ 159,359 $ 145,962 $ 145,353 For the year ended December 31, 2023, there were no impairments recorded for ROU assets related to underperforming retail locations or gains from lease termination negotiations or settlements related to previous store closures. For the year ended December 31, 2022, operating lease costs included $ 0.8 million of ROU asset impairment charges related to underperforming retail locations, as well as a gain of $ 4.8 million from the completion of lease termination negotiations and settlements related to certain retail store closures in 2020 and 2022, primarily in the U.S. segment. For the year ended December 31, 2021, operating lease costs included $ 0.5 million of ROU asset impairment charges related to underperforming retail locations primarily in the EMEA. segment, as well as a gain of $ 8.6 million from the completion of lease termination negotiations and settlements related to certain 2020 retail store closures, primarily in the U.S. segment. In the periods presented, lease concessions reducing variable lease expense were not material. The following table presents supplemental cash flow information related to leases: Year Ended December 31, (in thousands) 2023 2022 2021 Cash paid for amounts included in the measurement of operating lease liabilities $ 85,793 $ 81,130 $ 83,827 Operating lease liabilities arising from obtaining ROU assets (1) $ 83,393 $ 51,976 $ 53,168 Reductions to ROU assets resulting from reductions to operating lease liabilities $ 234 $ 52 $ 118 (1) Includes amounts added to the carrying amount of lease liabilities resulting from lease modifications and reassessments. The following table presents supplemental balance sheet information related to leases: December 31, 2023 2022 Weighted average remaining lease term 5.45 years 6.02 years Weighted average discount rate 4.42 % 4.21 % COLUMBIA SPORTSWEAR COMPANY | 2023 FORM 10-K | 54 Table of Contents Notes to Consolidated Financial Statements The following table presents the future maturities of operating lease liabilities as of December 31, 2023: (in thousands) 2024 $ 86,610 2025 81,884 2026 74,278 2027 63,143 2028 55,021 Thereafter 106,339 Total operating lease payments 467,275 Less: imputed interest ( 59,417 ) Total operating lease liabilities 407,858 Less: current operating lease liabilities ( 71,086 ) Non-current operating lease liabilities $ 336,772 As of December 31, 2023, the Company has additional commitments for operating lease that have not yet commenced of $ 3.8 million. These leases will commence in 2024 with lease terms of approximately one to ten years. NOTE 10 — INCOME TAXES INCOME TAX PROVISION Consolidated income from operations before income taxes consisted of the following: Year Ended December 31, (in thousands) 2023 2022 2021 United States operations $ 125,578 $ 243,695 $ 318,306 Foreign operations 200,614 153,715 133,205 Income before income tax $ 326,192 $ 397,410 $ 451,511 The components of the provision for income taxes consisted of the following: Year Ended December 31, (in thousands) 2023 2022 2021 Current: Federal $ 39,939 $ 52,503 $ 51,790 State and local 6,879 11,191 14,429 Non-United States 33,109 25,615 33,825 79,927 89,309 100,044 Deferred: Federal ( 5,492 ) ( 13,248 ) ( 3,042 ) State and local ( 1,589 ) ( 710 ) ( 266 ) Non-United States 1,946 10,619 667 ( 5,135 ) ( 3,339 ) ( 2,641 ) Income tax expense $ 74,792 $ 85,970 $ 97,403 COLUMBIA SPORTSWEAR COMPANY | 2023 FORM 10-K | 55 Table of Contents Notes to Consolidated Financial Statements The following is a reconciliation of the statutory federal income tax rate to the effective rate reported in the financial statements: Year Ended December 31, (percent of income before tax) 2023 2022 2021 Provision for federal income taxes at the statutory rate 21.0 % 21.0 % 21.0 % State and local income taxes, net of federal benefit 1.2 1.6 2.5 Non-United States income taxed at different rates ( 1.4 ) ( 0.4 ) 2.7 Foreign tax credits — — ( 2.4 ) Adjustment to deferred taxes — 0.1 — Global Intangible Low-Taxed Income 0.9 0.1 0.1 Research credits ( 0.7 ) ( 0.4 ) ( 0.4 ) Withholding taxes 1.0 0.2 ( 1.4 ) Excess tax benefits from stock plans 0.1 — ( 0.9 ) Other 0.8 ( 0.6 ) 0.4 Actual provision for income taxes 22.9 % 21.6 % 21.6 % DEFERRED INCOME TAX BALANCES Significant components of the Company's deferred taxes consisted of the following: December 31, (in thousands) 2023 2022 Deferred tax assets: Accruals and allowances $ 29,585 $ 31,957 Lease liability 103,551 89,742 Capitalized inventory costs 20,589 26,147 Sales reserves 16,559 16,897 Stock compensation 9,166 7,659 Net operating loss carryforwards 1,720 18,778 Depreciation and amortization 20,335 15,463 Capitalized research and development expenditures (1) 17,008 8,530 Tax credits 860 2,751 Other 2,471 2,372 Gross deferred tax assets 221,844 220,296 Valuation allowance ( 7,141 ) ( 19,649 ) Net deferred tax assets 214,703 200,647 Deferred tax liabilities: Depreciation and amortization ( 879 ) ( 5,844 ) Prepaid expenses ( 3,315 ) ( 2,892 ) ROU lease asset ( 90,756 ) ( 78,274 ) Deferred tax liability associated with future repatriations ( 11,657 ) ( 11,267 ) Foreign currency ( 2,588 ) ( 8,351 ) Gross deferred tax liabilities ( 109,195 ) ( 106,628 ) Total net deferred taxes $ 105,508 $ 94,019 (1) Capitalized research and development expenditures balance as of December 31, 2022 were previously classified as Other. COLUMBIA SPORTSWEAR COMPANY | 2023 FORM 10-K | 56 Table of Contents Notes to Consolidated Financial Statements The Company records net deferred tax assets to the extent it believes these assets will more likely than not be realized. In making such a determination, the Company considers all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax-planning strategies, and results of recent operations. The Company had foreign net operating loss carryforwards of $ 8.2 million as of December 31, 2023, of which $ 7.9 million have a 15-year carryforward period and $ 0.3 million have an unlimited carryforward period. As of December 31, 2023 and 2022, the net operating losses result in deferred tax assets of $ 1.7 million and $ 18.8 million, respectively, and were subject to a valuation allowance of $ 0.0 million and $ 18.8 million, respectively. Due to a foreign reorganization, the $ 18.8 million net operating losses and related valuation allowance as of December 31, 2022 were written off as the losses were no longer available to offset income. As of December 31, 2023, the Company had a foreign deferred tax asset of $ 9.4 million, which is subject to a valuation allowance of $ 7.0 million. As of December 31, 2023, the Company had accumulated undistributed earnings generated by the Company's foreign subsidiaries of $ 299.6 million. These earnings have been subject to U.S. tax, so any further taxes associated with such earnings would generally be limited to foreign withholding and state taxes. The Company has recorded a deferred tax liability for these, except in the jurisdictions where the Company intends to indefinitely reinvest the earnings. UNRECOGNIZED TAX BENEFITS The Company conducts business globally and, as a result, the Company or one or more of its subsidiaries file income tax returns in the United States federal jurisdiction and various state and foreign jurisdictions. The Company is subject to examination by taxing authorities throughout the world, including such major jurisdictions as Canada, China, France, Japan, South Korea, Switzerland, and the United States. The Company has effectively settled Canadian tax examinations of all years through 2018, United States tax examinations of all years through 2018, Japanese tax examinations of all years through 2019, France tax examinations of all years through 2016, Swiss tax examinations of all years through 2019, Italy tax examinations of all years through 2016, and China tax examinations of all years through 2018. The Korean National Tax Service concluded an audit of the Company's 2009 through 2013 corporate income tax returns in 2014, an audit of the Company's 2014 corporate income tax return in 2016, and an audit of 2016 through 2020 corporate income tax returns in 2022. Due to the nature of the findings in the 2009 through 2014 audits, the Company has invoked the Mutual Agreement Procedures outlined in the United States-Korean income tax treaty. The Company does not anticipate that adjustments relative to these findings, or any other ongoing tax audits, will result in material impacts to its financial condition, results of operations or cash flows. Other than the findings and audits previously noted, the Company is not currently under examination in any other major jurisdiction. A reconciliation of the beginning and ending amount of gross unrecognized tax benefits is as follows: Year Ended December 31, (in thousands) 2023 2022 2021 Balance at beginning of year $ 10,177 $ 13,855 $ 14,493 Increases related to prior year tax positions 578 234 355 Decreases related to prior year tax positions — ( 1,646 ) ( 1,447 ) Increases related to current year tax positions 1,376 1,355 883 Expiration of statute of limitations ( 1,813 ) ( 3,621 ) ( 429 ) Balance at end of year $ 10,318 $ 10,177 $ 13,855 Due to the potential for resolution of income tax audits currently in progress, and the expiration of various statutes of limitation, it is reasonably possible that the unrecognized tax benefits balance may change within the twelve months following December 31, 2023 by a range of zero to $ 1.7 million. Open tax years, including those previously mentioned, contain matters that could be subject to differing interpretations of applicable tax laws and regulations as they relate to the amount, timing, or inclusion of revenue and expenses or the sustainability of income tax credits for a given examination cycle. Unrecognized tax benefits of $ 9.2 million, $ 9.2 million and $ 12.9 million would affect the effective tax rate if recognized as of December 31, 2023, 2022 and 2021, respectively. The Company recognizes interest expense and penalties related to income tax matters in Income tax expense . The Company recognized a net increase of accrued interest and penalties of $ 2.7 million in 2023, and a net decrease of accrued interest and penalties of $ 0.8 million in COLUMBIA SPORTSWEAR COMPANY | 2023 FORM 10-K | 57 Table of Contents Notes to Consolidated Financial Statements 2022 and a net increase of accrued interest and penalties of $ 0.3 million in 2021, all of which related to uncertain tax positions. The Company had $ 4.5 million and $ 1.8 million of accrued interest and penalties related to uncertain tax positions as of December 31, 2023 and 2022, respectively. NOTE 11 — RETIREMENT SAVINGS PLANS 401(K) PROFIT-SHARING PLAN The Company has a 401(k) profit-sharing plan, which covers substantially all United States employees. Participation begins the first day of the quarter following completion of 30 days of service. The Company, with approval of the Board of Directors, may elect to make discretionary matching or non-matching contributions. Costs recognized for Company contributions to the pla n were $ 15.6 million, $ 13.3 million and $ 10.7 million for the years ended December 31, 2023, 2022 and 2021, respectively. DEFERRED COMPENSATION PLAN The Company sponsors a nonqualified retirement savings plan for certain senior management employees whose contributions to the tax qualified 401(k) plan would be limited by provisions of the Internal Revenue Code. This plan allows participants to defer receipt of a portion of their salary and incentive compensation and to receive matching contributions for a portion of the deferred amounts. Costs recognized for Company matching contributions to the plan were immaterial for the years ended December 31, 2023, 2022 and 2021. Participants earn a return on their deferred compensation based on investment earnings of participant-selected investments. Deferred compensation, including accumulated earnings on the participant-directe d investment selections, is distributable in cash at participant-specified dates or upon retirement, death, disability, or termination of employment. The Company has purchased specific money market and mutual funds in the same amounts as the participant-directed investment selections underlying the deferred compensation liabilities. These investment securities and earnings thereon, held in an irrevocable trust, are intended to provide a source of funds to meet the deferred compensation obligations, subject to claims of creditors in the event of the Company's insolvency. Changes in the market value of the participants' investment selections are recorded as an adjustment to the investments and as gains and losses in SG&A expenses . A corresponding adjustment of an equal amount is made to the deferred compensation liabilities and compensation expense, which is included in SG&A expenses . As of December 31, 2023 and 2022, the long-term portion of the liability to participants under this plan was $ 26.6 million and $ 20.5 million, respectively, and was recorded in Other long-term liabilities . As of December 31, 2023 and 2022, the current portion of the participant liability was $ 1.2 million and $ 0.7 million, respectively, and was recorded in Accrued liabilities . As of December 31, 2023 and 2022, the fair value of the long-term portion of the investments related to this plan was $ 26.6 million and $ 20.5 million, respectively, and was recorded in Other non-current assets . As of December 31, 2023 and 2022, the current portion of the investments related to this plan was $ 1.2 million and $ 0.7 million, respectively, and was recorded in Short-term investments . NOTE 12 — 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. INDEMNITIES AND GUARANTEES During its normal course of business, the Company has made certain indemnities, commitments and guarantees under which it may be required to make payments in relation to certain transactions. These include (i) intellectual property indemnities to the Company's customers and licensees in connection with the use, sale or license of Company products, (ii) indemnities to various lessors in connection with facility leases for certain claims arising from such facility or lease, (iii) indemnities to customers, vendors and service providers pertaining to claims based on the negligence or willful misconduct of the Company, (iv) executive severance arrangements, and (v) indemnities involving the accuracy of representations and warranties in certain contracts. The duration of these indemnities, commitments and guarantees varies, and COLUMBIA SPORTSWEAR COMPANY | 2023 FORM 10-K | 58 Table of Contents Notes to Consolidated Financial Statements in certain cases, may be indefinite. The majority of these indemnities, commitments and guarantees do not provide for any limitation of the maximum potential for future payments the Company could be obligated to make. The Company has not recorded any liability for these indemnities, commitments and guarantees in the accompanying Consolidated Balance Sheets. NOTE 13 — SHAREHOLDERS' EQUITY Since the inception of the Company's stock repurchase plan in 2004 through December 31, 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 December 31, 2023, the Company had repurchased 34.1 million shares at an aggregate purchase price of $ 1,654.7 million and had $ 345.3 million remaining available, excluding excise tax. During the years ended December 31, 2023 and 2022, the Company repurchased an aggregate of $ 184.0 million and $ 286.9 million, respectively, of common stock under this program, excluding excise tax. NOTE 14 — STOCK-BASED COMPENSATION At its Annual Meeting held on June 3, 2020, the Company’s shareholders approved the Company’s 2020 Stock Incentive Plan (the “2020 Plan”), and the 2020 Plan became effective on that date following such approval. The 2020 Plan replaced the Company’s 1997 Stock Incentive Plan (the "Prior Plan”) and no new awards will be granted under the Prior Plan. The terms and conditions of the awards granted under the Prior Plan will remain in effect with respect to awards granted under the Prior Plan. The Company has reserved 3.0 million shares of common stock for issuance under the 2020 Plan, plus up to an aggregate of 1.5 million shares of the Company's common stock that were previously authorized and available for issuance under the Prior Plan. As of December 31, 2023, 2,552,993 shares were available for future grants under the 2020 Plan. 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: Year Ended December 31, (in thousands) 2023 2022 2021 Cost of sales $ 311 $ 312 $ 313 SG&A expenses 22,740 20,709 18,813 Pre-tax stock-based compensation expense 23,051 21,021 19,126 Income tax benefits ( 5,365 ) ( 4,867 ) ( 4,465 ) Total stock-based compensation expense, net of tax $ 17,686 $ 16,154 $ 14,661 The Company realized a tax benefit for the deduction from stock-based award transactions of $ 3.9 million, $ 3.6 million and $ 8.3 million for the years ended December 31, 2023, 2022 and 2021, respectively. STOCK OPTIONS Options to purchase the Company's common stock are granted at exercise prices equal to or greater than the fair market value of the Company's common stock on the date of grant. Options generally vest and become exercisable ratably on an annual basis over a period of four years and expire ten years from the date of the grant. The fair value of stock options is determined using the Black-Scholes model. Key inputs and assumptions used in the model include the COLUMBIA SPORTSWEAR COMPANY | 2023 FORM 10-K | 59 Table of Contents Notes to Consolidated Financial Statements exercise price of the award, the expected option term, the expected stock price volatility of the Company's stock over the option's expected term, the risk-free interest rate over the option's expected term, and the Company's expected annual dividend yield. The option's expected term is derived from historical option exercise behavior and the option's terms and conditions, which the Company believes provide a reasonable basis for estimating an expected term. The expected volatility is estimated based on observations of the Company's historical volatility over the most recent term commensurate with the expected term. The risk-free interest rate is based on the United States Treasury yield approximating the expected term. The dividend yield is based on the expected cash dividend payouts. The weighted average assumptions for stock options granted and resulting fair value is as follows: Year Ended December 31, 2023 2022 2021 Expected option term 4.39 years 4.36 years 4.35 years Expected stock price volatility 27.37 % 25.38 % 24.88 % Risk-free interest rate 4.03 % 1.72 % 0.54 % Expected annual dividend yield 1.36 % 1.26 % 1.09 % Weighted average grant date fair value per stock option granted $ 22.61 $ 18.33 $ 17.95 The following table summarizes stock option activity under the Plan: Number of Options Weighted Average Exercise Price Weighted Average Remaining Contractual Life Aggregate Intrinsic Value (1) (in thousands) Options outstanding as of December 31, 2020 1,919,163 $ 74.45 7.19 $ 29,489 Granted 687,772 95.90 Forfeited or expired ( 213,444 ) 89.96 Exercised ( 459,957 ) 62.58 Options outstanding as of December 31, 2021 1,933,534 83.19 7.26 29,889 Granted 561,295 89.25 Forfeited or expired ( 223,813 ) 91.09 Exercised ( 116,109 ) 56.75 Options outstanding as of December 31, 2022 2,154,907 85.37 7.02 13,929 Granted 500,219 88.39 Forfeited or expired ( 246,104 ) 90.60 Exercised ( 129,008 ) 57.00 Options outstanding as of December 31, 2023 2,280,014 $ 87.08 6.72 $ 10,051 Options vested and expected to vest as of December 31, 2023 2,208,014 $ 87.01 6.66 $ 9,979 Options exercisable as of December 31, 2023 1,250,833 $ 84.88 5.48 $ 9,038 (1) The aggregate intrinsic value above represents pre-tax intrinsic value that would have been realized if all options had been exercised on the last business day of the period indicated, based on the Company's closing stock price on that day. Stock option compensation expense was $ 8.2 million, $ 7.8 million and $ 6.9 million for the years ended December 31, 2023, 2022 and 2021, respectively. As of December 31, 2023, unrecognized costs related to outstanding stock options totaled $ 13.0 million, before any related tax benefit. The unrecognized costs related to stock options are being amortized over the related vesting period using the straight-line attribution method. These unrecognized costs related to stock options are being amortized over a weighted average period of 2.26 years. The aggregate intrinsic value of stock options exercised was $ 3.0 million, $ 3.4 million and $ 19.2 million for the years ended December 31, 2023, 2022 and 2021, respectively. The total cash received as a result of stock option exercises was $ 7.4 million, $ 6.6 million and $ 28.8 million for the years ended December 31, 2023, 2022 and 2021, respectively. COLUMBIA SPORTSWEAR COMPANY | 2023 FORM 10-K | 60 Table of Contents Notes to Consolidated Financial Statements RESTRICTED STOCK UNITS Service-based restricted stock units are granted at no cost to key employees and generally vest over a period of four years. Performance-based restricted stock units are granted at no cost to certain members of the Company's senior executive team, excluding the Chief Executive Officer. Performance-based restricted stock units granted after 2009 generally vest over a performance period of between two and three years. Restricted stock units vest in accordance with the terms and conditions established by the Compensation Committee of the Board of Directors, and are based on continued service and, in some instances, on individual performance or Company performance or both. The fair value of service-based and performance-based restricted stock units that are not eligible for dividends are valued at the closing price of the Company’s common stock on the date of grant, reduced by the present value of dividends not received during the vesting period. Other assumptions incorporated into the grant date fair value include the vesting period and the Company's expected annual dividend yield. The weighted average assumptions for restricted stock units granted and resulting fair value are as follows: Year Ended December 31, 2023 2022 2021 Vesting period 3.74 years 3.71 years 3.77 years Expected annual dividend yield 1.38 % 1.31 % 1.04 % Weighted average grant date fair value per restricted stock unit granted $ 82.49 $ 85.27 $ 96.07 The following table summarizes the restricted stock unit activity under the Plan: Number of Restricted Stock Units Weighted Average Grant Date Fair Value Per Unit Restricted stock units outstanding as of December 31, 2020 425,275 $ 80.37 Granted 176,804 96.07 Vested (1) ( 164,088 ) 75.61 Forfeited ( 68,399 ) 86.38 Restricted stock units outstanding as of December 31, 2021 369,592 88.88 Granted 247,860 85.27 Vested (1) ( 141,674 ) 87.64 Forfeited ( 64,925 ) 89.29 Restricted stock units outstanding as of December 31, 2022 410,853 87.07 Granted 289,172 82.49 Vested (1) ( 158,616 ) 86.38 Forfeited ( 62,394 ) 85.11 Restricted stock units outstanding as of December 31, 2023 479,015 $ 84.79 (1) The number of vested units includes shares withheld by the Company to pay up to maximum statutory requirements to taxing authorities on behalf of the employee. For the years ended December 31, 2023, 2022 and 2021, the Company withheld 52,615 , 47,130 and 56,792 shares, respectively, to satisfy $ 4.7 million, $ 4.2 million and $ 5.8 million of employees' tax obligations, respectively. Restricted stock unit compensation expense was $ 14.9 million, $ 13.2 million and $ 12.2 million for the years ended December 31, 2023, 2022 and 2021, respectively. As of December 31, 2023, unrecognized costs related to restricted stock units totaled $ 25.1 million, before any related tax benefit. The unrecognized costs related to restricted stock units are being amortized over the related vesting period using the straight-line attribution method. These unrecognized costs as of December 31, 2023 are expected to be recognized over a weighted average period of 2.33 years. The total grant date fair value of restricted stock units vested was $ 13.7 million, $ 12.4 million and $ 12.4 million during the years ended December 31, 2023, 2022 and 2021, respectively. COLUMBIA SPORTSWEAR COMPANY | 2023 FORM 10-K | 61 Table of Contents Notes to Consolidated Financial Statements NOTE 15 — 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: Year Ended December 31, (in thousands, except per share amounts) 2023 2022 2021 Weighted average common shares outstanding, used in computing basic earnings per share 61,232 62,754 65,942 Effect of dilutive stock options and restricted stock units 192 216 473 Weighted average common shares outstanding, used in computing diluted earnings per share 61,424 62,970 66,415 Earnings per share: Basic $ 4.11 $ 4.96 $ 5.37 Diluted $ 4.09 $ 4.95 $ 5.33 Anti-dilutive common shares (1) 1,996 1,735 844 (1) Common stock related to stock options and service-based restricted stock units, and performance-based restricted stock units 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. COLUMBIA SPORTSWEAR COMPANY | 2023 FORM 10-K | 62 Table of Contents Notes to Consolidated Financial Statements NOTE 16 — ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) Accumulated other comprehensive income (loss) on the 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) Available-for-sale securities Derivative transactions Foreign currency translation adjustments Total Balance as of December 31, 2020 $ — $ ( 9,369 ) $ 10,175 $ 806 Other comprehensive income (loss) before reclassifications — 16,113 ( 24,465 ) ( 8,352 ) Amounts reclassified from accumulated other comprehensive income (loss) (1) — 3,170 — 3,170 Net other comprehensive income (loss) — 19,283 ( 24,465 ) ( 5,182 ) Balance as of December 31, 2021 — 9,914 ( 14,290 ) ( 4,376 ) Other comprehensive income (loss) before reclassifications ( 451 ) 20,724 ( 38,137 ) ( 17,864 ) Amounts reclassified from accumulated other comprehensive income (loss) (1) 451 ( 8,848 ) — ( 8,397 ) Net other comprehensive income (loss) — 11,876 ( 38,137 ) ( 26,261 ) Balance as of December 31, 2022 $ — $ 21,790 $ ( 52,427 ) $ ( 30,637 ) Other comprehensive income (loss) before reclassifications 145 ( 849 ) 2,757 2,053 Amounts reclassified from accumulated other comprehensive income (loss) (1) — ( 17,252 ) — ( 17,252 ) Net other comprehensive income (loss) 145 ( 18,101 ) 2,757 ( 15,199 ) Balance as of December 31, 2023 $ 145 $ 3,689 $ ( 49,670 ) $ ( 45,836 ) (1) Amounts reclassified are recorded in Net sales , Cost of sales , or Other non-operating income, net on the Consolidated Statements of Operations. Refer to Note 18 for further information regarding reclassifications. COLUMBIA SPORTSWEAR COMPANY | 2023 FORM 10-K | 63 Table of Contents Notes to Consolidated Financial Statements NOTE 17 — 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, goodwill and intangible asset impairment charges and other miscellaneous costs. The following tables present financial information for the Company's reportable segments: Year Ended December 31, (in thousands) 2023 2022 2021 Net sales to unrelated entities: U.S. $ 2,241,437 $ 2,302,246 $ 2,060,300 LAAP 519,754 473,866 465,499 EMEA 469,237 438,554 382,060 Canada 256,775 249,486 218,543 $ 3,487,203 $ 3,464,152 $ 3,126,402 Segment operating income: U.S. $ 415,731 $ 519,812 $ 536,475 LAAP 61,824 47,025 42,025 EMEA 98,943 80,192 65,496 Canada 55,599 52,957 52,731 Total segment operating income 632,097 699,986 696,727 Unallocated corporate expenses ( 321,813 ) ( 306,882 ) ( 246,223 ) Interest income, net 13,687 2,713 1,380 Other non-operating income (expense), net 2,221 1,593 ( 373 ) Income before income tax $ 326,192 $ 397,410 $ 451,511 Depreciation and amortization expense: U.S. $ 21,429 $ 20,428 $ 21,098 LAAP 5,440 4,984 5,733 EMEA 3,545 3,066 3,423 Canada 2,616 2,461 2,586 Unallocated corporate expense 25,033 23,813 23,082 $ 58,063 $ 54,752 $ 55,922 COLUMBIA SPORTSWEAR COMPANY | 2023 FORM 10-K | 64 Table of Contents Notes to Consolidated Financial Statements December 31, (in thousands) 2023 2022 Accounts receivable, net: U.S. $ 206,119 $ 280,199 LAAP 71,236 87,391 EMEA 104,871 107,626 Canada 40,853 72,345 $ 423,079 $ 547,561 Inventories: U.S. $ 487,860 $ 747,762 LAAP 106,785 105,158 EMEA 89,303 98,777 Canada 62,340 76,848 $ 746,288 $ 1,028,545 Property, plant and equipment, net: U.S. $ 226,243 $ 233,382 Canada 25,174 25,350 All other countries 35,864 32,482 $ 287,281 $ 291,214 NOTE 18 — 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, 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, net by the gains and losses generated from the remeasurement of the non-functional currency denominated monetary assets and liabilities. COLUMBIA SPORTSWEAR COMPANY | 2023 FORM 10-K | 65 Table of Contents Notes to Consolidated Financial Statements The following table presents the gross notional amount of outstanding derivative instruments: December 31, (in thousands) 2023 2022 Derivative instruments designated as cash flow hedges: Currency forward contracts $ 634,676 $ 514,365 Derivative instruments not designated as hedges: Currency forward contracts $ 342,532 $ 448,838 As of December 31, 2023, $ 8.1 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 sales, Cost of sales, or Other non-operating income, net in the 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, net in the 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 December 31, 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 $ 2.9 million as of December 31, 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: December 31, (in thousands) Balance Sheet Classification 2023 2022 Derivative instruments designated as cash flow hedges: Derivative instruments in asset positions: Currency forward contracts Prepaid expenses and other current assets $ 7,367 $ 20,306 Currency forward contracts Other non-current assets 961 7,153 Derivative instruments in liability positions: Currency forward contracts Accrued liabilities 4,121 1,249 Currency forward contracts Other long-term liabilities 2,629 1,770 Derivative instruments not designated as cash flow hedges: Derivative instruments in asset positions: Currency forward contracts Prepaid expenses and other current assets 2,833 3,027 Derivative instruments in liability positions: Currency forward contracts Accrued liabilities 2,269 2,533 COLUMBIA SPORTSWEAR COMPANY | 2023 FORM 10-K | 66 The following table presents the statement of operations effect and classification of derivative instruments: Statement Of Operations Classification Year Ended December 31, (in thousands) 2023 2022 2021 Currency Forward Contracts: Derivative instruments designated as cash flow hedges: Gain (loss) recognized in other comprehensive income (loss), net of tax — $ ( 849 ) $ 20,724 $ 16,113 Gain (loss) reclassified from accumulated other comprehensive income (loss) to income for the effective portion Net sales 60 ( 146 ) ( 448 ) Gain (loss) reclassified from accumulated other comprehensive income (loss) to income for the effective portion Cost of sales 23.307 12,100 ( 4,072 ) Gain reclassified from accumulated other comprehensive income (loss) to income as a result of cash flow hedge discontinuance Other non-operating income, net 521 320 451 Derivative instruments not designated as cash flow hedges: Loss recognized in income Other non-operating income, net ( 1,822 ) ( 1,955 ) ( 608 ) NOTE 19 — 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. COLUMBIA SPORTSWEAR COMPANY | 2023 FORM 10-K | 67 Table of Contents Notes to Consolidated Financial Statements Assets and liabilities measured at fair value on a recurring basis as of December 31, 2023 are as follows: (in thousands) Level 1 Level 2 Level 3 Total Assets: Cash equivalents: Money market funds $ 75,758 $ — $ — $ 75,758 U.S. Government treasury bills — 9,977 — 9,977 Time deposits (1) — 40,876 — 40,876 Short-term investments: Available-for-sale short-term investments: (2) U.S. Government treasury bills — 412,987 — 412,987 Other short-term investments: Money market funds 314 — — 314 Mutual fund shares 884 — — 884 Prepaid expenses and other current assets: Derivative financial instruments — 10,200 — 10,200 Other non-current assets: Money market funds 1,796 — — 1,796 Mutual fund shares 24,808 — — 24,808 Derivative financial instruments — 961 — 961 Total assets measured at fair value $ 103,560 $ 475,001 $ — $ 578,561 Liabilities: Accrued liabilities: Derivative financial instruments $ — $ 6,390 $ — $ 6,390 Other long-term liabilities: Derivative financial instruments — 2,629 — 2,629 Total liabilities measured at fair value $ — $ 9,019 $ — $ 9,019 (1) Time deposits are carried at amortized cost on the Consolidated Balance Sheet, which reasonably approximates fair value. (2) Available-for-sale short-term investments have remaining maturities of less than one year. COLUMBIA SPORTSWEAR COMPANY | 2023 FORM 10-K | 68 Table of Contents Notes to 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 NON-RECURRING FAIR VALUE MEASUREMENTS The Company measured the fair value of certain trademark indefinite-lived intangible assets and goodwill as part of impairment testing for the year ended December 31, 2023. The inputs used to measure the fair value of these assets are primarily significant unobservable inputs and, as such, considered Level 3 fair value measurements. Refer to Note 6 in Part II, Item 8 in the Annual Report on Form 10-K for further discussion. COLUMBIA SPORTSWEAR COMPANY | 2023 FORM 10-K | 69 Table of Contents ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None.