COLUMBIA SPORTSWEAR CO 10-Q

ITEM 1. FINANCIAL STATEMENTS CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (in thousands) March 31, 2024 December 31, 2023 March 31, 2023 ASSETS Current Assets: Cash and cash equivalents $ 418,462 $ 350,319 $ 361,049 Short-term investments 369,270 414,185 99,511 Accounts receivable, net of allowance of $ 6,260 , $ 5,450 and $ 5,200 , respectively 366,375 423,079 466,690 Inventories 607,373 746,288 959,234 Prepaid expenses and other current assets 84,738 80,814 100,880 Total current assets 1,846,218 2,014,685 1,987,364 Property, plant and equipment, net of accumulated depreciation of $ 681,497 , $ 671,929 and $ 635,256 , respectively 277,947 287,281 282,921 Operating lease right-of-use assets 361,103 357,295 318,728 Intangible assets, net 79,496 79,908 81,146 Goodwill 26,694 26,694 51,694 Deferred income taxes 100,162 105,574 96,865 Other non-current assets 70,611 67,576 70,256 Total assets $ 2,762,231 $ 2,939,013 $ 2,888,974 LIABILITIES AND EQUITY Current Liabilities: Accounts payable $ 150,131 $ 235,927 $ 220,231 Accrued liabilities 216,903 272,058 271,625 Operating lease liabilities 71,550 71,086 69,452 Income taxes payable 8,722 17,556 7,377 Total current liabilities 447,306 596,627 568,685 Non-current operating lease liabilities 340,310 336,772 303,571 Income taxes payable 26,262 25,688 33,765 Deferred income taxes — 66 146 Other long-term liabilities 38,910 41,250 35,022 Total liabilities 852,788 1,000,403 941,189 Commitments and contingencies (Note 4) Shareholders' Equity: Preferred stock; 10,000 shares authorized; none issued and outstanding — — — Common stock (no par value); 250,000 shares authorized; 59,473 , 59,996 and 62,076 issued and outstanding, respectively — — 1,076 Retained earnings 1,960,634 1,984,446 1,981,287 Accumulated other comprehensive income (loss) ( 51,191 ) ( 45,836 ) ( 34,578 ) Total shareholders' equity 1,909,443 1,938,610 1,947,785 Total liabilities and shareholders' equity $ 2,762,231 $ 2,939,013 $ 2,888,974 See accompanying notes to unaudited condensed consolidated financial statements. COLUMBIA SPORTSWEAR COMPANY | Q1 2024 FORM 10-Q | 1 Table of Contents Notes to unaudited Condensed Consolidated Financial Statements CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) Three Months Ended March 31, (in thousands, except per share amounts) 2024 2023 Net sales $ 769,982 $ 820,593 Cost of sales 380,423 421,093 Gross profit 389,559 399,500 Selling, general and administrative expenses 349,270 347,398 Net licensing income 4,392 4,325 Operating income 44,681 56,427 Interest income, net 9,197 3,283 Other non-operating income, net 271 850 Income before income tax 54,149 60,560 Income tax expense 11,849 14,358 Net income $ 42,300 $ 46,202 Earnings per share: Basic $ 0.71 $ 0.74 Diluted $ 0.71 $ 0.74 Weighted average shares outstanding: Basic 59,823 62,133 Diluted 59,998 62,417 See accompanying notes to unaudited condensed consolidated financial statements. COLUMBIA SPORTSWEAR COMPANY | Q1 2024 FORM 10-Q | 2 Table of Contents Notes to unaudited Condensed Consolidated Financial Statements CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited) Three Months Ended March 31, (in thousands) 2024 2023 Net income $ 42,300 $ 46,202 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 $( 3,435 ) and $ 2,710 , respectively) 9,777 ( 5,421 ) Foreign currency translation adjustments (net of tax effects of $ 187 and $( 78 ), respectively) ( 14,987 ) 1,480 Other comprehensive income (loss) ( 5,355 ) ( 3,941 ) Comprehensive income $ 36,945 $ 42,261 See accompanying notes to unaudited condensed consolidated financial statements. COLUMBIA SPORTSWEAR COMPANY | Q1 2024 FORM 10-Q | 3 Table of Contents Notes to unaudited Condensed Consolidated Financial Statements CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) Three Months Ended March 31, (in thousands) 2024 2023 Cash flows from operating activities: Net income $ 42,300 $ 46,202 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 15,070 13,834 Non-cash lease expense 18,603 16,749 Provision for uncollectible accounts receivable 1,033 ( 90 ) Deferred income taxes 1,232 ( 85 ) Stock-based compensation 5,644 5,808 Other, net ( 4,198 ) 287 Changes in operating assets and liabilities: Accounts receivable 50,409 82,927 Inventories 131,721 71,503 Prepaid expenses and other current assets ( 511 ) 23,101 Other assets ( 2,055 ) ( 837 ) Accounts payable ( 77,004 ) ( 95,423 ) Accrued liabilities ( 49,050 ) ( 59,538 ) Income taxes payable ( 8,128 ) ( 10,941 ) Operating lease assets and liabilities ( 18,410 ) ( 17,355 ) Other liabilities 117 1,860 Net cash provided by operating activities 106,773 78,002 Cash flows from investing activities: Purchases of short-term investments ( 58,974 ) ( 98,203 ) Sales and maturities of short-term investments 110,878 570 Capital expenditures ( 14,795 ) ( 14,047 ) Net cash provided by (used in) investing activities 37,109 ( 111,680 ) Cash flows from financing activities: Proceeds from issuance of common stock related to stock-based compensation 1,106 2,678 Tax payments related to stock-based compensation ( 4,354 ) ( 4,297 ) Repurchase of common stock ( 50,168 ) ( 15,293 ) Cash dividends paid ( 17,927 ) ( 18,649 ) Net cash used in financing activities ( 71,343 ) ( 35,561 ) Net effect of exchange rate changes on cash ( 4,396 ) 47 Net increase (decrease) in cash and cash equivalents 68,143 ( 69,192 ) Cash and cash equivalents, beginning of period 350,319 430,241 Cash and cash equivalents, end of period $ 418,462 $ 361,049 Supplemental disclosures of cash flow information: Cash paid during the period for income taxes $ 29,070 $ 30,775 Supplemental disclosures of non-cash investing and financing activities: Property, plant and equipment acquired through increase in liabilities $ 3,492 $ 2,899 See accompanying notes to unaudited condensed consolidated financial statements. COLUMBIA SPORTSWEAR COMPANY | Q1 2024 FORM 10-Q | 4 Table of Contents Notes to unaudited Condensed Consolidated Financial Statements CONDENSED CONSOLIDATED STATEMENTS OF EQUITY (Unaudited) (in thousands, except per share amounts) Common Stock Retained Earnings Accumulated Other Comprehensive Income (Loss) Total Shares Outstanding Amount Balance, December 31, 2023 59,996 $ — $ 1,984,446 $ ( 45,836 ) $ 1,938,610 Net income — — 42,300 — 42,300 Other comprehensive income (loss) — — — ( 5,355 ) ( 5,355 ) Cash dividends ($ 0.30 per share) — — ( 17,927 ) — ( 17,927 ) Issuance of common stock related to stock-based compensation, net 108 ( 3,248 ) — — ( 3,248 ) Stock-based compensation expense — 5,644 — — 5,644 Repurchase of common stock ( 631 ) ( 1,983 ) ( 48,185 ) — ( 50,168 ) Excise taxes related to repurchase of common stock — ( 413 ) — — ( 413 ) Balance, March 31, 2024 59,473 $ — $ 1,960,634 $ ( 51,191 ) $ 1,909,443 (in thousands, except per share amounts) Common Stock Retained Earnings Accumulated Other Comprehensive Income (Loss) Total Shares Outstanding Amount Balance, December 31, 2022 62,139 $ 12,692 $ 1,953,734 $ ( 30,637 ) $ 1,935,789 Net income — — 46,202 — 46,202 Other comprehensive income (loss) — — — ( 3,941 ) ( 3,941 ) Cash dividends ($ 0.30 per share) — — ( 18,649 ) — ( 18,649 ) Issuance of common stock related to stock-based compensation, net 116 ( 1,619 ) — — ( 1,619 ) Stock-based compensation expense — 5,808 — — 5,808 Repurchase of common stock ( 179 ) ( 15,753 ) — — ( 15,753 ) Excise taxes related to repurchase of common stock — ( 52 ) — — ( 52 ) Balance, March 31, 2023 62,076 $ 1,076 $ 1,981,287 $ ( 34,578 ) $ 1,947,785 See accompanying notes to unaudited condensed consolidated financial statements. COLUMBIA SPORTSWEAR COMPANY | Q1 2024 FORM 10-Q | 5 Table of Contents Notes to unaudited Condensed Consolidated Financial Statements NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) NOTE PAGE Note 1 Basis of Presentation and Organization 7 Note 2 Revenues 8 Note 3 Intangible Assets, Net and Goodwill 9 Note 4 Commitments and Contingencies 9 Note 5 Shareholders' Equity 9 Note 6 Stock-Based Compensation 10 Note 7 Earnings Per Share 11 Note 8 Accumulated Other Comprehensive Income (Loss) 12 Note 9 Segment Information 13 Note 10 Financial Instruments and Risk Management 13 Note 11 Fair Value Measures 15 COLUMBIA SPORTSWEAR COMPANY | Q1 2024 FORM 10-Q | 6 Table of Contents Notes to unaudited Condensed Consolidated Financial Statements NOTE 1 — BASIS OF PRESENTATION AND ORGANIZATION The accompanying unaudited condensed consolidated financial statements have been prepared by the management of Columbia Sportswear Company (together with its wholly owned subsidiaries, the "Company") and, in the opinion of management, include all normal recurring material adjustments necessary to present fairly the Company's financial position as of March 31, 2024, December 31, 2023 and March 31, 2023, the results of operations for the three months ended March 31, 2024 and 2023, and cash flows for the three months ended March 31, 2024 and 2023. The December 31, 2023 financial information was derived from the Company's audited consolidated financial statements included in the Company's Annual Report on Form 10-K for the year ended December 31, 2023. A significant part of the Company's business is of a seasonal nature; therefore, results of operations for the three months ended March 31, 2024 are not necessarily indicative of results to be expected for other quarterly periods or for the full year. Certain information and disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission. The Company, however, believes that the disclosures contained in this report comply with the requirements of Section 13(a) of the Securities Exchange Act of 1934, as amended, for a Quarterly Report on Form 10-Q and are adequate to make the information presented not misleading. These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 2023. PRINCIPLES OF CONSOLIDATION The unaudited condensed consolidated financial statements include the accounts of the Company. All significant intercompany balances and transactions have been eliminated in consolidation. ESTIMATES AND ASSUMPTIONS The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the unaudited condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results may differ from these estimates and assumptions. The Company's significant estimates relate to sales reserves, allowance for uncollectible accounts receivable, excess, close-out and slow-moving inventory, impairment of long-lived assets, impairment of indefinite-lived intangible assets and goodwill, and income taxes. RECENTLY ADOPTED ACCOUNTING PRONOUNCEMENTS None. 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. COLUMBIA SPORTSWEAR COMPANY | Q1 2024 FORM 10-Q | 7 Table of Contents Notes to unaudited Condensed Consolidated Financial Statements RECLASSIFICATIONS Certain amounts in the prior-period financial statements have been reclassified to conform to the current-period presentation. Non-cash lease expense is now presented on its own line in the Company's Condensed Consolidated Statements of Cash Flows instead of combined with depreciation and amortization. Additionally, Loss on disposal or impairment of property, plant and equipment is now included in Other, net in the Company's Condensed Consolidated Statements of Cash Flows. NOTE 2 — REVENUES DISAGGREGATED REVENUE As disclosed below in Note 9, the Company has four geographic reportable segments: United States ("U.S."), Latin America and Asia Pacific ("LAAP"), Europe, Middle East and Africa ("EMEA") and Canada. The following tables disaggregate the Company's reportable segment Net sales by product category and channel, which the Company believes provides a meaningful depiction of how the nature, timing, and uncertainty of Net sales are affected by economic factors: Three Months Ended March 31, 2024 (in thousands) U.S. LAAP EMEA Canada Total Product category net sales Apparel, Accessories and Equipment $ 397,488 $ 107,963 $ 72,390 $ 41,213 $ 619,054 Footwear 76,918 30,683 32,130 11,197 150,928 Total $ 474,406 $ 138,646 $ 104,520 $ 52,410 $ 769,982 Channel net sales Wholesale $ 217,134 $ 67,031 $ 75,748 $ 30,984 $ 390,897 Direct-to-consumer 257,272 71,615 28,772 21,426 379,085 Total $ 474,406 $ 138,646 $ 104,520 $ 52,410 $ 769,982 Three Months Ended March 31, 2023 (in thousands) U.S. LAAP EMEA Canada Total Product category net sales Apparel, Accessories and Equipment $ 415,928 $ 100,421 $ 71,957 $ 44,296 $ 632,602 Footwear 101,547 35,992 36,332 14,120 187,991 Total $ 517,475 $ 136,413 $ 108,289 $ 58,416 $ 820,593 Channel net sales Wholesale $ 259,350 $ 71,162 $ 84,578 $ 37,398 $ 452,488 Direct-to-consumer 258,125 65,251 23,711 21,018 368,105 Total $ 517,475 $ 136,413 $ 108,289 $ 58,416 $ 820,593 PERFORMANCE OBLIGATIONS For the three months ended March 31, 2024 and 2023, 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 March 31, 2024, December 31, 2023 and March 31, 2023, the Company did not have contract assets and had an immaterial amount of contract liabilities included in Accrued liabilities on the unaudited Condensed Consolidated Balance Sheets. COLUMBIA SPORTSWEAR COMPANY | Q1 2024 FORM 10-Q | 8 Table of Contents Notes to unaudited Condensed Consolidated Financial Statements NOTE 3 — INTANGIBLE ASSETS, NET AND GOODWILL INTANGIBLE ASSETS, NET Intangible assets, net consisted of the following: (in thousands) March 31, 2024 December 31, 2023 March 31, 2023 Intangible assets with definite lives: Patents and purchased technology $ 14,198 $ 14,198 $ 14,198 Customer relationships 23,000 23,000 23,000 Gross carrying amount 37,198 37,198 37,198 Accumulated amortization: Patents and purchased technology ( 14,198 ) ( 14,198 ) ( 14,198 ) Customer relationships ( 22,725 ) ( 22,313 ) ( 21,075 ) Accumulated amortization ( 36,923 ) ( 36,511 ) ( 35,273 ) Net carrying amount 275 687 1,925 Intangible assets with indefinite lives 79,221 79,221 79,221 Intangible assets, net $ 79,496 $ 79,908 $ 81,146 Amortization expense for intangible assets subject to amortization was $ 0.4 million for each of the three months ended March 31, 2024 and 2023. The remaining amortization expense of intangible assets with definite lives will be recognized in 2024. GOODWILL There have been no changes to the Company's goodwill as described in Note 6 in Part II, Item 8 of the Company's Annual Report on Form 10-K for the year ended December 31, 2023. NOTE 4 — COMMITMENTS AND CONTINGENCIES LITIGATION The Company is involved in litigation and various legal matters arising in the normal course of business, including matters related to employment, retail, intellectual property, contractual agreements, and various regulatory compliance activities. Management has considered facts related to legal and regulatory matters and opinions of counsel handling these matters, and does not believe the ultimate resolution of these proceedings will have a material adverse effect on the Company's financial position, results of operations or cash flows. NOTE 5 — SHAREHOLDERS' EQUITY Since the inception of the Company's stock repurchase plan in 2004 through March 31, 2024, 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 March 31, 2024, the Company had repurchased 34.7 million shares at an aggregate purchase price of $ 1,704.8 million and had $ 295.2 million remaining available, excluding excise tax. During the three months ended March 31, 2024 and 2023, the Company repurchased an aggregate of $ 50.2 million and $ 15.8 million, respectively, of common stock under this program, excluding excise tax. COLUMBIA SPORTSWEAR COMPANY | Q1 2024 FORM 10-Q | 9 Table of Contents Notes to unaudited Condensed Consolidated Financial Statements NOTE 6 — STOCK-BASED COMPENSATION The Company's Stock Incentive Plan allows for grants of incentive stock options, non-statutory stock options, restricted stock awards, restricted stock units, and other stock-based or cash-based awards. The Company uses original issuance shares to satisfy share-based payments. STOCK-BASED COMPENSATION EXPENSE Stock-based compensation expense consisted of the following: Three Months Ended March 31, (in thousands) 2024 2023 Stock options $ 1,647 $ 2,038 Restricted stock units 3,997 3,770 Total $ 5,644 $ 5,808 STOCK OPTIONS During the three months ended March 31, 2024, the Company granted a total of 156,277 stock options at a weighted average grant date fair value of $ 20.87 per option. As of March 31, 2024, unrecognized costs related to outstanding stock options totaled $ 13.4 million, before any related tax benefit. These unrecognized costs related to stock options are expected to be recognized over a weighted average remaining period of 2.61 years. RESTRICTED STOCK UNITS During the three months ended March 31, 2024, the Company granted 399,170 restricted stock units at a weighted average grant date fair value of $ 78.65 per restricted stock unit. As of March 31, 2024, unrecognized costs related to outstanding restricted stock units totaled $ 45.6 million, before any related tax benefit. These unrecognized costs related to restricted stock units are expected to be recognized over a weighted average remaining period of 3.05 years. COLUMBIA SPORTSWEAR COMPANY | Q1 2024 FORM 10-Q | 10 Table of Contents Notes to unaudited Condensed Consolidated Financial Statements NOTE 7 — EARNINGS PER SHARE Earnings per share ("EPS") is presented on both a basic and diluted basis. Basic EPS is based on the weighted average number of common shares outstanding. Diluted EPS reflects the potential dilution that could occur if outstanding securities or other contracts to issue common stock were exercised or converted into common stock. A reconciliation of the common shares used in the denominator for computing basic and diluted EPS is as follows: Three Months Ended March 31, (in thousands, except per share amounts) 2024 2023 Weighted average common shares outstanding, used in computing basic earnings per share 59,823 62,133 Effect of dilutive stock options and restricted stock units 175 284 Weighted average common shares outstanding, used in computing diluted earnings per share 59,998 62,417 Earnings per share: Basic $ 0.71 $ 0.74 Diluted $ 0.71 $ 0.74 Anti-dilutive common shares (1) 1,996 1,574 (1) Common stock related to stock options, service-based restricted stock units and certain market-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 | Q1 2024 FORM 10-Q | 11 Table of Contents Notes to unaudited Condensed Consolidated Financial Statements NOTE 8 — ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) Accumulated other comprehensive income (loss) on the unaudited Condensed Consolidated Balance Sheets is net of applicable taxes, and consists of unrealized gains and losses on available-for-sale securities, unrealized gains and losses on certain derivative transactions and foreign currency translation adjustments. The following tables set forth the changes in Accumulated other comprehensive income (loss) : (in thousands) Available-for- sale securities Derivative transactions Foreign currency translation adjustments Total Balance as of December 31, 2023 $ 145 $ 3,689 $ ( 49,670 ) $ ( 45,836 ) Other comprehensive income (loss) before reclassifications ( 145 ) 11,727 ( 14,987 ) ( 3,405 ) Amounts reclassified from accumulated other comprehensive income (loss) (1) — ( 1,950 ) — ( 1,950 ) Net other comprehensive income (loss) during the period ( 145 ) 9,777 ( 14,987 ) ( 5,355 ) Balance as of March 31, 2024 $ — $ 13,466 $ ( 64,657 ) $ ( 51,191 ) (1) Amounts reclassified are recorded in Net sales , Cost of sales , or Other non-operating income, net on the unaudited Condensed Consolidated Statements of Operations. Refer to Note 10 for further information regarding reclassifications . (in thousands) Derivative transactions Foreign currency translation adjustments Total Balance as of December 31, 2022 $ 21,790 $ ( 52,427 ) $ ( 30,637 ) Other comprehensive income (loss) before reclassifications ( 1,678 ) 1,480 ( 198 ) Amounts reclassified from accumulated other comprehensive income (loss) (1) ( 3,743 ) — ( 3,743 ) Net other comprehensive income (loss) during the period ( 5,421 ) 1,480 ( 3,941 ) Balance as of March 31, 2023 $ 16,369 $ ( 50,947 ) $ ( 34,578 ) (1) Amounts reclassified are recorded in Net sales , Cost of sales , or Other non-operating income, net on the unaudited Condensed Consolidated Statements of Operations. Refer to Note 10 for further information regarding reclassifications. COLUMBIA SPORTSWEAR COMPANY | Q1 2024 FORM 10-Q | 12 Table of Contents Notes to unaudited Condensed Consolidated Financial Statements NOTE 9 — SEGMENT INFORMATION The Company has four reportable geographic segments: U.S., LAAP, EMEA, and Canada, which are reflective of the Company's internal organization, management and oversight structure. Each geographic segment operates predominantly in one industry: the design, development, marketing, and distribution of outdoor, active and lifestyle products, including apparel, footwear, accessories, and equipment. Intersegment net sales and intersegment profits, which are recorded at a negotiated mark-up and eliminated in consolidation, are not material. Unallocated corporate expenses consist of expenses incurred by centrally-managed departmental functions, including information technology, certain supply chain functions, finance, human resources and legal, as well as executive compensation, unallocated benefit program expense, and other miscellaneous costs. The following tables present financial information for the Company's reportable segments: Three Months Ended March 31, (in thousands) 2024 2023 Net sales to unrelated entities: U.S. $ 474,406 $ 517,475 LAAP 138,646 136,413 EMEA 104,520 108,289 Canada 52,410 58,416 $ 769,982 $ 820,593 Segment operating income: U.S. $ 72,993 $ 81,600 LAAP 21,822 18,326 EMEA 19,146 20,354 Canada 11,168 10,801 Total segment operating income 125,129 131,081 Unallocated corporate expenses ( 80,448 ) ( 74,654 ) Interest income, net 9,197 3,283 Other non-operating income, net 271 850 Income before income tax $ 54,149 $ 60,560 CONCENTRATIONS The Company had one customer that accounted for approximately 14.4 %, 19.8 % and 12.3 % of Accounts receivable, net as of March 31, 2024, December 31, 2023 and March 31, 2023, respectively. The Company did not have any customers that accounted for 10% or more of Net sales for the three months ended March 31, 2024 and 2023. NOTE 10 — FINANCIAL INSTRUMENTS AND RISK MANAGEMENT In the normal course of business, the Company's financial position, results of operations and cash flows are routinely subject to a variety of risks. These risks include risks associated with financial markets, primarily currency exchange rate risk and, to a lesser extent, interest rate risk and equity market risk. The Company regularly assesses these risks and has established policies and business practices designed to mitigate them. The Company does not engage in speculative trading in any financial market. The Company actively manages the risk of changes in functional currency equivalent cash flows resulting from anticipated non-functional currency denominated purchases and sales. Subsidiaries that use European euros, Canadian dollars, Japanese yen, Chinese renminbi, or Korean won as their functional currency are primarily exposed to changes in functional currency equivalent cash flows from anticipated United States dollar inventory purchases. Subsidiaries that use United States dollars and euros as their functional currency also have non-functional currency denominated sales for which the Company hedges the Canadian dollar and British pound sterling. The Company seeks to COLUMBIA SPORTSWEAR COMPANY | Q1 2024 FORM 10-Q | 13 Table of Contents Notes to unaudited Condensed Consolidated Financial Statements 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 are 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. The following table presents the gross notional amount of outstanding derivative instruments: (in thousands) March 31, 2024 December 31, 2023 March 31, 2023 Derivative instruments designated as cash flow hedges: Currency forward contracts $ 597,355 $ 634,676 $ 525,781 Derivative instruments not designated as hedges: Currency forward contracts $ 231,449 $ 342,532 $ 393,450 As of March 31, 2024 , $ 13.0 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 or Cost of sales in the unaudited Condensed Consolidated Statements of Operations. When outstanding derivative contracts mature, actual amounts ultimately reclassified to Net sa les or Cost of sales in the unaudited Condensed Consolidated Statements of Operations are dependent on United States dollar exchange rates in effect against the euro, pound sterling, renminbi, Canadian dollar, won, and yen as well as the euro exchange rate in effect against the pound sterling. As of March 31, 2024, the Company's derivative contracts had a remaining maturity of less than 3 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 $ 4.4 million as of March 31, 2024. All of the Company's derivative counterparties have credit ratings that are investment grade or higher. The Company is a party to master netting arrangements that contain features that allow counterparties to net settle amounts arising from multiple separate derivative transactions or net settle in the case of certain triggering events such as a bankruptcy or major default of one of the counterparties to the transaction. The Company has not pledged assets or posted collateral as a requirement for entering into or maintaining derivative positions. COLUMBIA SPORTSWEAR COMPANY | Q1 2024 FORM 10-Q | 14 The following table presents the balance sheet classification and fair value of derivative instruments: (in thousands) Balance Sheet Classification March 31, 2024 December 31, 2023 March 31, 2023 Derivative instruments designated as cash flow hedges: Derivative instruments in asset positions: Currency forward contracts Prepaid expenses and other current assets $ 12,864 $ 7,367 $ 16,826 Currency forward contracts Other non-current assets 5,423 961 5,935 Derivative instruments in liability positions: Currency forward contracts Accrued liabilities 1,090 4,121 2,630 Currency forward contracts Other long-term liabilities 155 2,629 1,788 Derivative instruments not designated as cash flow hedges: Derivative instruments in asset positions: Currency forward contracts Prepaid expenses and other current assets 1,978 2,833 890 Derivative instruments in liability positions: Currency forward contracts Accrued liabilities 828 2,269 2,257 The following table presents the statement of operations effect and classification of derivative instruments: Statement Of Operations Classification Three Months Ended March 31, (in thousands) 2024 2023 Currency forward contracts: Derivative instruments designated as cash flow hedges: Gain (loss) recognized in other comprehensive income (loss), net of tax — $ 11,727 $ ( 1,678 ) Gain (loss) reclassified from accumulated other comprehensive income (loss) to income for the effective portion Net sales ( 282 ) 191 Gain reclassified from accumulated other comprehensive income (loss) to income for the effective portion Cost of sales 2,971 5,762 Gain (loss) reclassified from accumulated other comprehensive income (loss) to income as a result of cash flow hedge discontinuance Other non-operating income, net 68 ( 7 ) Derivative instruments not designated as cash flow hedges: Gain (loss) recognized in income Other non-operating income, net 2,925 ( 1,187 ) NOTE 11 — FAIR VALUE MEASURES Certain assets and liabilities are reported at fair value on either a recurring or nonrecurring basis. Fair value is defined as an exit price, representing the amount that the Company would receive to sell an asset or pay to transfer a liability in an orderly transaction between market participants, under a three-tier fair value hierarchy that prioritizes the inputs used in measuring fair value as follows: COLUMBIA SPORTSWEAR COMPANY | Q1 2024 FORM 10-Q | 15 Table of Contents Notes to unaudited Condensed Consolidated Financial Statements Level 1 — observable inputs such as quoted prices for identical assets or liabilities in active liquid markets; Level 2 — inputs, other than the quoted market prices in active markets, that are observable, either directly or indirectly; or observable market prices in markets with insufficient volume or infrequent transactions; and Level 3 — unobservable inputs for which there is little or no market data available, that require the reporting entity to develop its own assumptions. The Company's assets and liabilities measured at fair value are categorized as Level 1 or Level 2 instruments. Level 1 instrument valuations are obtained from real-time quotes for transactions in active exchange markets involving identical assets. Level 2 instrument valuations are obtained from inputs, other than quoted market prices in active markets, that are directly or indirectly observable in the marketplace and quoted prices in markets with limited volume or infrequent transactions. Assets and liabilities measured at fair value on a recurring basis as of March 31, 2024 are as follows: (in thousands) Level 1 Level 2 Level 3 Total Assets: Cash equivalents: Money market funds $ 57,144 $ — $ — $ 57,144 U.S. Government treasury bills — 74,828 — 74,828 Time deposits (1) — 40,699 — 40,699 Short-term investments: Available-for-sale short-term investments: (2) U.S. Government treasury bills — 366,982 — 366,982 Other short-term investments: Money market funds 343 — — 343 Mutual fund shares 1,945 — — 1,945 Prepaid expenses and other current assets: Derivative financial instruments — 14,842 — 14,842 Other non-current assets: Money market funds 1,532 — — 1,532 Mutual fund shares 25,449 — — 25,449 Derivative financial instruments — 5,423 — 5,423 Total assets measured at fair value $ 86,413 $ 502,774 $ — $ 589,187 Liabilities: Accrued liabilities: Derivative financial instruments $ — $ 1,918 $ — $ 1,918 Other long-term liabilities: Derivative financial instruments — 155 — 155 Total liabilities measured at fair value $ — $ 2,073 $ — $ 2,073 (1) Time deposits are carried at amortized cost on the unaudited Condensed 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 | Q1 2024 FORM 10-Q | 16 Table of Contents Notes to unaudited Condensed Consolidated Financial Statements Assets and liabilities measured at fair value on a recurring basis as of December 31, 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 unaudited Condensed 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 | Q1 2024 FORM 10-Q | 17 Table of Contents Notes to unaudited Condensed Consolidated Financial Statements Assets and liabilities measured at fair value on a recurring basis as of March 31, 2023 are as follows: (in thousands) Level 1 Level 2 Level 3 Total Assets: Cash equivalents: Money market funds $ 106,092 $ — $ — $ 106,092 U.S. Government treasury bills — 49,695 — 49,695 Short-term investments: Available-for-sale short-term investments: (1) U.S. Government treasury bills $ — $ 98,746 $ — $ 98,746 Other short-term investments: Money market funds 284 — — 284 Mutual fund shares 482 — — 482 Prepaid expenses and other current assets: Derivative financial instruments — 17,716 — 17,716 Other non-current assets: Money market funds 1,712 — — 1,712 Mutual fund shares 20,762 — — 20,762 Derivative financial instruments — 5,935 — 5,935 Total assets measured at fair value $ 129,332 $ 172,092 $ — $ 301,424 Liabilities: Accrued liabilities: Derivative financial instruments $ — $ 4,887 $ — $ 4,887 Other long-term liabilities: Derivative financial instruments — 1,788 — 1,788 Total liabilities measured at fair value $ — $ 6,675 $ — $ 6,675 (1) Available-for-sale short-term investments have remaining maturities of less than one year. 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.