What changed in this filing

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Item 7. Management’s Discussion and Analysis

2025-02-27 compared with 2024-02-26 · 209 added, 188 removed, 232 unchanged (63% of the section changed)

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As a global leader in designing, developing, marketing, and distributing outdoor, active and lifestyle products, our mission is to connect active people with their passions.

We manage our product line in two major categories:

apparel, accessories, and equipment products and footwear products.

We provide our products through our four brands:

Columbia, SOREL, Mountain Hardwear, and prAna;

and two major product categories:

apparel, accessories and equipment products and footwear products.

Apparel, accessories and equipment products are provided by our Columbia, Mountain Hardwear and prAna brands.

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

COLUMBIA SPORTSWEAR COMPANY | 2023 FORM 10-K | 20

We are investing in our strategic priorities to:

ACCELERATE Growth Strategy

As part of our strategic priorities, in October 2024, we announced the Columbia brand ("Brand") ACCELERATE Growth Strategy.

At its core, the ACCELERATE Growth Strategy is intended to elevate the Brand to target a younger and more active consumer.

It is a multi-year initiative centered around several consumer-centric shifts to the Brand, product and marketplace strategies, as well as enhanced ways of working.

We believe successful execution of the ACCELERATE Growth Strategy can elevate the Brand and drive profitable growth.

Through the ACCELERATE Growth Strategy, we will focus on achieving the following objectives:

• steward existing consumer segments while focusing on bringing new younger and active consumers into the Brand;

• elevate consumers' perception of the Brand;

• create product based on a consumer-centric product construct;

• enhance the positioning of the Brand in the U.S.

• deliver integrated full-funnel marketing.

In addition, we are committed to investing in our strategic priorities with a renewed emphasis to:

• accelerate profitable growth;

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Profit Improvement Program

As part of our strategic priorities, we are implementing a multi-year profit improvement program to accelerate profitable growth and improve the efficiency of our operations.

We are focused on four areas of cost reduction and realignment, including:

Concurrent with the ACCELERATE Growth Strategy, we continue to make progress on our multi-year Profit Improvement Program to accelerate profitable growth and improve the efficiency of our operations.

In 2024, we focused on four areas of cost reduction and realignment, including:

• operational cost savings;

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• indirect, or non-inventory, spending.

When the benefits of this program are combined with the cost savings we anticipate to receive from normalized inventory levels, we believe we can reach $125 million to $150 million in annualized savings by 2026.

We anticipate these cost savings will ramp up over the course of 2024 and 2025, with the full benefit being realized in 2026.

In 2024, we anticipate realizing approximately $75 million to $90 million in realized cost savings.

COLUMBIA SPORTSWEAR COMPANY | 2024 FORM 10-K | 22

In 2024, our Profit Improvement Program delivered approximately $90 million in realized cost savings, net of approximately $3 million to $4 million of severance and other costs.

While this program has meaningfully slowed SG&A spending growth, it has not been enough to align our cost structure with current sales levels.

With this in mind, we are expanding the review of our cost structure as we pursue additional savings and enhance profitability.

As we expand the program, our objectives include exceeding our previously stated goal of achieving $125 to $150 million in annualized savings by 2026 and positioning the Company to achieve SG&A expense leverage and operating margin expansion in future years.

Business Environment and Trends

Heightened Geopolitical Risk | We sell our products in more than 110 countries and our ability to sell, import into and produce in certain markets may be impacted by ongoing geopolitical tensions.

We believe these tensions will remain elevated, and will continue to manifest themselves in certain regions where we operate.

Changing U.S.

Marketplace | We believe there has been some moderation of the U.S.

outdoor market following the exit from the COVID-19 pandemic.

There are also new entrants into the historical U.S.

outdoor market in the form of emerging brands and historically lifestyle and/or active brands.

These brands are crossing over as we believe U.S.

consumers and customers use more lifestyle products during outdoor activities.

Economic Environment Impacting Demand | We believe general economic uncertainty is impacting consumer and wholesale customer behavior and demand.

Wholesale customers have been increasingly cautious managing inventory and in placing advance orders.

This cautiousness has been most pronounced in the U.S., but we believe that retailer prudence is spreading to other regions, including Canada and Europe.

Consumer demand, particularly in the U.S and Korea, has been generally soft for outdoor apparel and footwear products.

We anticipate these trends will persist into 2024.

Promotional and Clearance Environment | We believe consumers are seeking value and promotions in the marketplace, which has dampened demand in full price channels, particularly in the U.S., including our direct-to-consumer e-commerce sites and branded stores.

In 2023, our promotional levels were above levels prior to the COVID-19 pandemic as we leveraged our outlet stores and temporary clearance locations to profitably clear excess inventory.

The proportion of older season clearance inventory being marked down and sold through our outlet stores and temporary clearance locations increased and resulted in lower DTC product margins.

We anticipate continuing to utilize our fleet of outlet stores and temporary clearance locations to assist with inventory liquidation in 2024 and believe elevated promotional activity will continue into the first half of 2024.

Changing Consumer Shopping Habits | We believe consumers in the U.S.

have adjusted shopping habits in a post-COVID pandemic world and have shifted back to brick-and-mortar retail shopping experiences.

As a result, we expect our e-commerce channel to continue to be challenged year-over-year.

Distribution Center and Third-Party Capacity Pressure | As a result of highly volatile shifts in supply and demand and supply chain challenges, we exited 2022 with elevated inventory.

These elevated inventory levels resulted in storage and process capacity pressures within our distribution centers and third-party logistics operations throughout 2023.

These pressures included additional inventory carrying costs related to incremental outside storage, and other inventory related holding and handling costs, including losses in productivity, as we

Regulatory Environment | We are headquartered in the U.S.

and are subject to the laws and regulations governing companies operating in the U.S.

The recent U.S.

presidential administration change may impact us in several respects, including in the areas of taxes and tariffs.

With respect to tariffs, tariffs have long been built into apparel and footwear pricing and we attempt to minimize the impact felt by consumers through diversification of our source base and product engineering.

To that end, we expect less than 3 percent of our finished products imported into the U.S.

in 2025, by dollar value, will be manufactured in China.

To the extent broad-based tariffs are imposed by the U.S.

that impact a larger percentage of our source base, we may choose to raise prices to offset the increase in our cost of goods sold.

Tariffs can also have an impact outside of expenses incurred by the Company or prices to consumers;

they could impact the demand for our products as consumers weigh discretionary spending or even impact the availability of certain sourcing regions.

Retaliatory measures may also increase and impact our ability to compete in other regions of the world.

Increasing U.S.

Competitive Environment and Evolving U.S.

Consumer Trends | We believe our competition in the historical U.S.

outdoor and active apparel and footwear market has increased as many brands have shifted their strategies and new parties have entered the marketplace to capitalize on the emergence of casual and lifestyle trends.

The versatility of casual and lifestyle products provides consumers the ability to use these products in a variety of settings, including outdoor activities.

We believe the successful implementation of our strategic priorities, including the Columbia brand ACCELERATE Growth Strategy, will enable us to better compete in this evolved U.S.

marketplace in the future.

Evolving North America Omni-channel Strategy | As part of the Columbia brand ACCELERATE Growth Strategy, we are approaching the North America marketplace with an omni-channel perspective and evaluating how, when, and where we utilize promotions across all channels to attract different consumer segments.

We intend to retain our historical value-oriented consumers while attracting younger and more active consumers to the Columbia brand.

During 2024, we shifted our marketing strategies for the Columbia brand's U.S.

DTC e-commerce business to become less promotional, in order for Columbia.com to represent the best expression of the Brand.

In our DTC brick-and-mortar business, we are opening a small number of branded stores in high-traffic shopping malls in North America.

These new branded stores feature elevated product assortments that showcase Columbia’s apparel and footwear innovations.

These stores will join the hundreds of Columbia branded stores that raise the image of the Brand in important international markets.

Within our U.S.

wholesale business, we implemented pricing, promotional and segmentation strategies which are also intended to elevate the positioning of the Brand in the marketplace.

While we expand the Columbia brand's target consumer, we intend to continue serving our core consumer base that is focused primarily on value.

To capture demand associated with value-oriented consumers, we have increasingly relied on our fleet of DTC brick-and-mortar outlet stores.

We believe general economic uncertainty in the U.S.

and Canada is particularly impactful to these value-oriented consumers.

Normalizing Inventory Levels in the U.S.

| In 2024 we operated numerous temporary clearance locations in the U.S.

to move through excess inventory in a way that provided stronger financial returns to the Company in comparison to wholesale closeout sales channel alternatives and that had a less disruptive impact in the marketplace.

As we exited 2024, our inventories were down 7% for the year and we plan to rapidly close our temporary clearance locations now that our inventories are in a healthier position.

We also believe wholesale partners are entering 2025 with cleaner inventory levels.

We expect these changes in inventory in the market will support expansion of the Company's gross margin in 2025.

Changing International Consumer Trends | We believe consumers in many international markets have adjusted their shopping habits.

In China, the outdoor apparel and footwear market has expanded, driven, in part, by governmental efforts to stimulate outdoor recreation.

In Japan, the weakness of the Japanese Yen has contributed to an influx of international tourism which has benefited consumer demand, while

COLUMBIA SPORTSWEAR COMPANY | 2024 FORM 10-K | 23

worked to normalize our inventory position.

We exited 2023 with more normalized inventory levels.

As these storage and process capacity pressures have alleviated, we expect to see a benefit to our operating results in 2024.

Normalized Freight Charges | For the majority of 2022, we experienced elevated ocean freight costs, which had a substantially unfavorable impact on our gross margin.

Beginning in the fourth quarter of 2022, we began to experience significant declines in ocean freight costs and have since seen ocean freight container rates return to historical levels.

Throughout 2023, our gross margin realized the benefits of these lower costs.

We anticipate these lower ocean freight costs will persist and continue to benefit gross margin through the first quarter of 2024.

domestic consumption has been soft due to inflationary pressures.

Despite economic and geopolitical challenges in many other international markets, the outdoor apparel and footwear industry has been resilient and demand for our products has been healthy.

We expect most of our international businesses to continue to grow in 2025, despite currency pressures.

Supply Chain Disruptions | Continuing Red Sea disruptions resulted in longer inbound transit times for Fall 2024 inventory.

With pressure on key trade lanes, we expect inbound transit times to be elevated until the resolution of this conflict, which should result in reduced transit times and more favorable transit pricing.

Seasonality | Our business is affected by the general seasonal trends common to the industry, including seasonal weather and discretionary consumer shopping and spending patterns.

Our products are marketed on a seasonal basis, and our sales are weighted substantially toward the third and fourth quarters, while our operating costs are more equally distributed throughout the year.

In 2023, nearly 60% of our net sales and nearly 80% of our operating income were realized in the second half of the year.

Heightened Geopolitical Risk | We sell our products in more than 100 countries and our ability to sell in certain markets may be impacted by ongoing geopolitical tensions.

We believe these tensions will remain elevated and have manifested, and will continue to manifest, themselves in certain regions where we operate.

Increasing Regulatory Environment | Recently, the number of regulations at the global and jurisdictional level impacting our business, and in particular our products, has significantly increased.

We expect this trend to continue, and as a result, will impact our expenses, product input costs and ultimately our products, which may in turn impact our revenue.

These regulatory matters at a minimum include regulations related to climate, privacy and product chemistry.

For example, in anticipation of the effectiveness of the regulations in California and New York states related to perfluoroalkyl and polyfluoroalkyl substances ("PFAS"), we have been working to eliminate PFAS chemicals across our global product line.

We intend to stop manufacturing any apparel or footwear with PFAS intentionally added prior to our Fall 2024 season.

This transition has the potential to impact the flow of our wholesale business in 2024, as well as our inventory management strategies for existing merchandise.

In addition, these PFAS matters may result in a more promotional environment in 2024 as retailers move through merchandise containing PFAS.

In 2024, over 60% of our net sales and over 90% of o ur operating income were realized in the second half of the year.

RESULTS OF OPERATIONS

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Non-GAAP Financial Measure

To supplement financial information reported in accordance with accounting principles generally accepted in the United States ("GAAP"), we disclose constant-currency net sales information, which is a non-GAAP financial measure, to provide a framework to assess how the business performed excluding the effects of changes in foreign currency exchange rates against the United States dollar between comparable reporting periods.

We calculate constant-currency net sales by translating net sales in foreign currencies for the current period into United States dollars at the exchange rates that were in effect during the comparable period of the prior year.

To supplement financial information reported in accordance with accounting principles generally accepted in the U.S.

("GAAP"), we disclose constant-currency net sales information, which is a non-GAAP financial measure, to provide a framework to assess how the business performed excluding the effects of changes in foreign currency exchange rates against the U.S.

dollar between comparable reporting periods.

We calculate constant-currency net sales by translating net sales in foreign currencies for the current period into U.S.

dollars at the exchange rates that were in effect during the comparable period of the prior year.

Management believes that this non-GAAP financial measure reflects an additional and useful way of viewing an aspect of our operations that, when viewed in conjunction with our GAAP results, provides a more comprehensive understanding of our business and operations.

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Year Ended December 31,

(in millions, except for percentage of net sales and per share amounts) 2023 2022

(in thousands, except for percentage of net sales and per share amounts)

Net sales $ 3,368,582 100.0 % $ 3,487,203 100.0 %

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Selling, general and administrative expenses 1,443,906 42.9 % 1,416,313 40.6 %

Impairment of goodwill and intangible assets 25.0 0.7 % 35.6 1.1 %

Impairment of goodwill

— — % 25,000 0.7 %

Net licensing income 23,562 0.7 % 21,665 0.6 %

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Interest income, net 27,703 0.8 % 13,687 0.4 %

Other non-operating income, net 2.2 0.1 % 1.6 0.1 %

Other non-operating income (expense), net (257) — % 2,221 0.1 %

Income before income tax 298,187 8.8 % 326,192 9.4 %

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Year Ended December 31,

(in millions, except for percentages) Reported

(in thousands, except for percentages)

Adjust for Foreign Currency Translation Constant-currency

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See "Non-GAAP Financial Measure" above for further information.

Overall, global net sales increased, driven by international sales growth in our Columbia brand, primarily from our Europe-direct, China and LAAP distributor businesses.

In Europe-direct and China markets, healthy consumer demand drove growth in both our wholesale and DTC businesses throughout the year.

Sales growth in our LAAP distributor business reflected strong demand for Spring and Fall 2023 merchandise.

Earlier shipment of Spring 2024 also aided sales for our LAAP distributor business in the fourth quarter of 2023.

International sales growth was partially offset by softness in the U.S., driven by a culmination of factors including macro-economic uncertainty, warm winter weather, shifts in consumer shopping behavior, and slowing outdoor market trends.

As a result, sales of all our brands declined in the U.S.

Footwear sales growth reflected increased demand of clearance product sales, which more than offset weak demand for full price merchandise.

Throughout 2023, footwear sales in the outdoor industry softened while competitive pressures within the footwear category were amplified.

These headwinds, combined with warm winter weather in the fourth quarter of 2023, led to declining sales for both Columbia and SOREL footwear.

Our global DTC net sales reflected a 6% increase in brick-and-mortar business, offset by a 6% decrease in e-commerce business for the year ended December 31, 2023 compared to the same period in the prior year.

The growth from our DTC retail store business was driven by contributions from new stores and temporary clearance locations to liquidate excess inventory.

The decline in our DTC e-commerce sales was predominantly focused in the U.S.

and driven by the same U.S.

region factors mentioned above, as well as a shift in consumer shopping behavior back to physical in-store shopping.

COLUMBIA SPORTSWEAR COMPANY | 2023 FORM 10-K | 24

Our global net sales decrease primarily reflected lower wholesale net sales in the U.S.

and Canada, partially offset by strength in international markets, as compared to 2023.

The declines in wholesale net sales were driven by lower Spring and Fall 2024 orders, resulting from retailer cautiousness, including the transition of products to non-PFAS chemistry and a change in promotional practices, and a difficult competitive environment throughout the year, primarily in the U.S and Canada.

Internationally, our net sales growth was broad-based across many markets within our LAAP and EMEA regions.

We believe international net sales growth was attributable to the execution of our business strategies, as well as to the benefit of certain trends and/or factors favorably impacting the outdoor apparel and footwear sector.

DTC net sales increased, reflecting growth in our brick-and-mortar business from temporary clearance locations and new stores, partially offset by declines in our e-commerce business, compared to 2023.

The declines in e-commerce net sales have resulted from softness in the U.S.

and Canada throughout the year, which we attribute to a challenging environment and increased competition within the outdoor lifestyle category, and our decision to de-emphasize promotions on Columbia.com as part of the Brand's ACCELERATE Growth Strategy.

Gross Profit.

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Year Ended December 31,

(in millions, except for percentages and basis points) 2023 2022 Change

(in thousands, except for percentages and basis points)

2024 2023 Change

Gross profit $ 1,691,085 $ 1,729,932 $ (38,847) (2) %

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Gross margin expanded primarily due to the following factors:

• an approximate 240 bps increase related to lower inbound freight costs;

• favorable inbound freight costs;

• favorable region and channel net sales mix;

partially offset by

• unfavorable channel profitability reflecting lower DTC product margins and lower wholesale margins.

Lower DTC margins discussed above were primarily driven by higher clearance and promotional activity, including a greater proportion of sales of excess inventory through our DTC outlet stores and temporary clearance locations.

Lower wholesale margins discussed above were primarily driven by actions to reduce excess inventory, and, to a lesser extent, inflationary product costs which were partially offset by price increases.

Selling, General and Administrative Expenses.

SG&A expenses is summarized in the following table:

• unfavorable decrease in channel profitability reflecting higher clearance and promotional activity.

COLUMBIA SPORTSWEAR COMPANY | 2024 FORM 10-K | 26

Selling, General and Administrative Expenses ("SG&A").

SG&A expenses are summarized in the following table:

Year Ended December 31,

(in millions, except for percentages and basis points) 2023 2022 Change

(in thousands, except for percentages and basis points)

2024 2023 Change

Selling, general and administrative expenses $ 1,443,906 $ 1,416,313 $ 27,593 2 %

Selling, general and administrative expenses as percent of net sales 42.9 % 40.6 % 230 bps

SG&A expenses growth reflected investments to support growth strategies, increased distribution and fulfillment costs related to elevated inventory, and inflationary pressures including increases in employee salaries and wages.

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

• higher omni-channel expenses of $46.2 million, primarily reflecting higher DTC expenses, including personnel expenses and costs associated with new stores and temporary clearance locations;

• higher supply chain expenses of $31.0 million, reflecting increased global distribution center expenses resulting from elevated inventory levels, including higher warehousing and fulfillment expenses, as well as third-party logistics transition-related costs;

• higher information technology related expenses, reflecting increased personnel expenses to support digital strategies.

Impairment of Goodwill and Intangible Assets.

For the year ended December 31, 2023, we recognized a $25.0 million impairment charge related to goodwill attributable to the prAna reporting unit resulting from our annual fourth quarter impairment testing.

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

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

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

• higher omni-channel expenses of $40.5 million, reflecting higher DTC brick-and-mortar expenses, including costs associated with new stores and temporary clearance locations and personnel expenses;

• higher incentive compensation, reflecting higher performance against target as compared to 2023;

partially offset by

• lower supply chain expenses of $28.7 million, reflecting decreased global distribution center expenses resulting from more normalized inventory levels and supply chain optimization efforts;

• lower demand creation expenses, primarily reflecting decreased net sales.

Impairment of Goodwill.

For the year ended December 31, 2024, there were no impairment charges recorded for goodwill.

For the year ended December 31, 2023, we recognized $25.0 million of impairment charges related to goodwill attributable to the prAna reporting unit resulting from our annual fourth quarter impairment testing.

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

Interest Income, Net.

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Year Ended December 31,

(in millions, except for percentages) 2023 2022 Change

(in thousands, except for percentages)

2024 2023 Change

Interest income, net $ 27,703 $ 13,687 $ 14,016 102 %

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Interest income, net, increased primarily reflecting higher yields on increased levels of cash, cash equivalents and short-term investments.

COLUMBIA SPORTSWEAR COMPANY | 2023 FORM 10-K | 25

Income Tax Expense.

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Year Ended December 31,

(in millions, except for percentages) 2023 2022 Change

(in thousands, except for percentages)

2024 2023 Change

Income tax expense $ 74,914 $ 74,792 $ 122 — %

Effective income tax rate 25.1 % 22.9 %

Our effective income tax rates for the years ended December 31, 2023 and 2022 were impacted by discrete tax items, which lowered the effective income tax rate in each period.

For the year ended December 31, 2023, our effective income tax rate was primarily impacted by a non-recurring benefit related to a foreign currency loss resulting from an intercompany transaction and a non-recurring foreign tax benefit.

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

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

Income tax expense increased to $74.9 million for the year ended December 31, 2024 from $74.8 million for 2023.

Our effective tax rate was 25.1% for the year ended December 31, 2024 compared to 22.9% for 2023.

For the year ended December 31, 2024, our effective tax rate included a non-recurring expense related to a valuation allowance.

For the year ended December 31, 2023, our effective income tax rate included a non-recurring benefit related to a foreign currency loss resulting from an intercompany transaction and a non-recurring foreign tax benefit.

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Results of Operations — Segment

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

Operating income as a percentage of net sales in the U.S.

is typically higher than the other segments primarily due to scale efficiencies associated with the larger base of net sales in the U.S.

and, to a lesser extent, incremental licensing income.

We anticipate this trend to continue until other segments achieve scale efficiencies from higher levels of net sales volume relative to the fixed cost structure necessary to operate the business.

Segment operating income includes net sales, cost of sales, segment SG&A expenses, and other segment items for each of our four reportable segments.

For each reportable segment, other segment items include certain corporate expenses and net licensing income allocated to each of the reportable segments, as well as net licensing income directly attributable to each of the reportable segments.

Refer to Note 16 in Part II, Item 8 of this Annual Report on Form 10-K for further information.

Year Ended December 31, 2024 Compared to Year Ended December 31, 2023

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

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

Year Ended December 31,

(in millions, except for percentage changes) Reported

(in thousands, except for percentage changes)

Adjust for Foreign Currency Translation Constant-currency

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See "Non-GAAP Financial Measure" above for further information.

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

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

Year Ended December 31,

(in millions) 2023 2022 Change

(in thousands)

2024 2023 Change

$ 356,722 $ 415,731 $ (59,009)

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Operating income $ 270,741 $ 310,284 $ (39,543)

segment operating income decreased $59.0 million to $356.7 million, or 17.2% of net sales, in 2024 from $415.7 million, or 18.5% of net sales, in 2023.

The decrease was driven primarily by decreased net sales and gross profit, partially offset by lower segment SG&A expenses and other segment items.

net sales decreased $173.2 million, or 8%, in 2024, compared to 2023, driven primarily by decreased net sales in our U.S.

wholesale business.

DTC net sales also decreased driven by lower e-commerce net sales, partially offset by net sales growth from our brick-and-mortar business.

The declines in e-commerce net sales were attributable to a challenging e-commerce environment for outdoor brands, increased competition within the outdoor lifestyle category, and our decision to de-emphasize promotions on Columbia.com as part of the Brand's ACCELERATE Growth Strategy.

The increases in brick-and-mortar net sales were primarily driven by temporary clearance locations and new stores for the year ended December 31, 2024.

segment SG&A expenses and other segment items increased as a percentage of net sales to 31.9% in 2024 compared to 30.1% in 2023, primarily driven by fixed SG&A expenses and decreased net sales.

In total, U.S.

segment SG&A expenses and other segment items decreased for the year ended December 31, 2024 compared to 2023, primarily driven by lower supply chain expenses resulting from more normalized inventory levels and our Profit Improvement Program, including supply chain optimization efforts.

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operating income decreased $104.1 million to $415.7 million, or 18.5% of net sales, in 2023 from $519.8 million, or 22.6% of net sales, in 2022.

The decrease was driven primarily by decreased net sales and increased SG&A expenses.

net sales decreased $60.8 million, or 3%, in 2023, compared to 2022.

net sales decreased primarily due to decreased wholesale shipments and lower DTC consumer demand.

As of December 31, 2023, our U.S.

business operated 161 retail stores, compared to 156 stores as of December 31, 2022.

In addition, as part of our plan to reduce excess inventory, we operated 34 temporary clearance locations as of December 31, 2023 to support excess inventory liquidation efforts.

SG&A expenses increased as a percentage of net sales to 31.0% in 2023 compared to 27.7% in 2022, primarily driven by increased warehousing and fulfillment expenses resulting from elevated inventory levels and higher DTC expenses reflecting higher personnel and costs associated with new stores and temporary clearance locations.

LAAP operating income increased $14.8 million to $61.8 million, or 11.9% of net sales, in 2023 from $47.0 million, or 9.9% of net sales, in 2022.

The increase was driven primarily by increased net sales.

LAAP segment operating income increased $15.2 million to $77.0 million, or 13.7% of net sales, in 2024 from $61.8 million, or 11.9% of net sales, in 2023.

The increase was driven primarily by increased net sales and gross profit.

LAAP net sales increased $41.0 million, or 8% (11% constant-currency), in 2024, compared to 2023.

Increased LAAP net sales were primarily driven by our China and LAAP distributor businesses, partially offset by declines in our Korea business.

Increased China net sales reflected higher consumer demand, partially aided by the lapping of prior year government mandated restrictions to prevent the spread of COVID-19.

LAAP distributor net sales increased due to higher Spring 2023 and Fall 2023 orders compared to the same periods in the prior year, as well as earlier shipment of Spring 2024 orders compared to the shipment of Spring 2023 orders.

Decreased Korea net sales reflected challenging market conditions and efforts to reset the business to support long-term growth opportunities.

LAAP SG&A expenses decreased as a percentage of net sales to 44.4% in 2023 compared to 46.0% in 2022.

EMEA operating income increased $18.8 million to $99.0 million, or 21.1% of net sales, in 2023 from $80.2 million, or 18.3% of net sales, in 2022.

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

EMEA net sales increased $30.6 million, or 7% (5% constant-currency), in 2023, compared to 2022, driven by increased net sales in our Europe-direct business, partially offset by declines in our EMEA distributor business.

Europe-direct net sales increased primarily due to broad-based growth across our DTC and wholesale businesses, including the earlier shipment of Spring 2024 orders compared to prior year.

EMEA distributor net sales decreased primarily due to our anniversary of the prior year shipments to Russia (for orders that were placed prior to the invasion of Ukraine).

Gross margin increased primarily due to favorable channel shifts driven by a lower proportion of distributor sales, which generally carry lower gross margins.

EMEA SG&A expenses increased as a percentage of net sales to 27.1% in 2023 compared to 26.1% in 2022.

Canada operating income increased $2.6 million to $55.6 million, or 21.7% of net sales, in 2023 from $53.0 million, or 21.2% of net sales in 2022.

The increase primarily resulted from increased net sales.

Canada net sales increased $7.3 million, or 3% (6% constant-currency), in 2023, compared to 2022, driven by increased net sales in our Canada DTC business.

Canada SG&A expenses increased as a percentage of net sales to 25.9% in 2023, compared to 25.0% in 2022.

Increased LAAP net sales were primarily driven by our China, LAAP distributor, and, to a lesser extent, our Japan businesses, partially offset by declines in our Korea business.

Increased net sales in our China business reflected continued strong consumer demand, aided by positive outdoor category trends.

Increased net sales in our LAAP distributor business reflected growth in our Fall 2024 and Spring 2025 orders as compared to the same period in the prior year.

Increased net sales in our Japan business were driven by strong demand from increased international tourism, which was largely offset by unfavorable foreign currency translation compared to the same period in the prior year.

Decreased net sales in our Korea business reflected a continued challenging environment and increased competition within the outdoor lifestyle category.

LAAP segment SG&A expenses and other segment items decreased as a percentage of net sales to 42.1% in 2024, compared to 44.4% in 2023, primarily driven by increased net sales.

In total, LAAP segment SG&A expenses and other segment items increased for the year ended December 31, 2024 compared to 2023.

EMEA segment operating income increased $4.5 million to $103.5 million, or 20.2% of net sales, in 2024 from $98.9 million, or 21.1% of net sales, in 2023.

The increase was driven primarily by increased net sales and gross profit.

EMEA net sales increased $42.5 million, or 9% (8% constant-currency), in 2024, compared to 2023, primarily driven by our Europe-direct business.

Increased net sales in our Europe-direct business were driven by robust demand within our DTC brick-and-mortar and e-commerce businesses for the year ended December 31, 2024.

Our Europe-direct wholesale business realized a modest increase in net sales reflecting retailer cautiousness.

Increased net sales in our EMEA distributor business reflected growth in our Fall 2024 and Spring 2025 orders as compared to the same period in 2023.

EMEA segment SG&A expenses and other segment items increased in total and as a percentage of net sales to 28.1% in 2024 compared to 26.8% in 2023.

Canada segment operating income decreased $7.8 million to $47.8 million, or 21.0% of net sales, in 2024 from $55.6 million, or 21.7% of net sales, in 2023.

This decrease was primarily driven by lower net sales and gross profit.

Canada net sales decreased $28.9 million, or 11% (10% constant-currency), in 2024, compared to 2023, driven primarily by decreased net sales in our Canada wholesale business.

Decreased net sales in our wholesale business primarily reflected lower Spring and Fall 2024 orders, resulting from retailer cautiousness and a difficult competitive environment throughout the year.

DTC net sales decreased, driven by lower net sales in our Canada e-commerce business, partially offset by an increase in our Canada brick-and-mortar business.

Canada segment SG&A expenses and other segment items increased as a percentage of net sales to 29.1% in 2024 compared to 25.9% in 2023, primarily as a result of fixed expenses and decreased net sales.

In total, Canada segment SG&A expenses and other segment items were flat for the year ended December 31, 2024 compared to 2023.

Unallocated Corporate Expenses

Unallocated corporate expenses increased by $14.9 million to $321.8 million in 2023 from $306.9 million in 2022, largely driven by higher personnel expenses, partially offset by the impacts of the $25.0 million impairment charge related to prAna compared to the $36.5 million impairment charges in 2022.

Unallocated corporate expenses decreased by $7.5 million to $314.3 million in 2024 from $321.8 million in 2023.

LIQUIDITY AND CAPITAL RESOURCES

Including cash, cash equivalents, short-term investments and available committed credit lines, we had approximately $1.25 billion in total liquidity as of December 31, 2023.

Our primary sources of liquidity include cash, cash equivalents, short-term investments, and available committed credit lines.

Our liquidity may be affected by the general seasonal trends common to the industry.

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Year Ended December 31,

(in millions) 2023 2022 Change

(in thousands)

2024 2023 Change

Net cash provided by (used in):

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Net effect of exchange rate changes on cash (10,587) 389 (10,976)

Net decrease in cash and cash equivalents $ (79.9) $ (333.1) $ 253.2

The change in cash flows provided by operating activities was driven by a $713.5 million increase in cash provided by changes in assets and liabilities, partially offset by a $52.0 million decrease in cash provided by net income and non-cash adjustments.

The most significant comparative changes in assets and liabilities included Inventories , and to a lesser extent, Accounts Receivable, Accounts Payable and Accrued liabilities .

The $683.7 million increase in cash provided by Inventories reflected a decrease in inventory as we curtailed inventory purchases to compensate for elevated inventories exiting 2022 and liquidated excess inventory levels throughout 2023.

The $188.3 million increase in cash provided by Accounts receivable was primarily driven by higher fourth quarter 2022 wholesale sales collected in 2023 compared to the same period in the prior year.

These amounts were partially offset by the $126.3 million increase in cash used in Accounts payable primarily resulting from the earlier production of and payment for Spring 2024 and Fall 2024 inventory, as well as the $82.9 million increase in cash used in Accrued liabilities, which was primarily driven by higher sales reserves at the beginning of 2023 compared to 2022 resulting from higher sales in the fourth quarter of 2022.

Net cash used in investing activities was $461.8 million for 2023, compared to $72.7 million of cash provided by investing activities for 2022.

For 2023, net cash used in investing activities consisted of $407.2 million in cash used for net purchases of short-term investments, as well as $54.6 million in cash used for capital expenditures.

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

Net increase (decrease) in cash and cash equivalents

$ 181,550 $ (79,922) $ 261,472

The change in cash flows provided by operating activities was driven by a $86.1 million decrease in cash provided by changes in assets and liabilities, as well as a $59.2 million decrease in cash provided by net income and non-cash adjustments.

The most significant comparative changes in assets and liabilities included Inventories , Accounts receivable and Accounts payable.

The $244.7 million decrease in cash provided by Inventories was primarily driven by inventory liquidation efforts throughout 2023 and 2024.

The $135.6 million decrease in cash provided by Accounts receivable reflected cash provided of $123.8 million for the year ended December 31, 2023, primarily driven by a higher portion of fourth quarter wholesale sales collected in 2023 compared to the same period in 2022, as well as cash used of $11.8 million for the year ended December 31, 2024, primarily driven by a lower portion of fourth quarter wholesale sales collected in 2024 as compared to the same period in 2023.

These amounts were partially offset by the $241.0 million decrease in cash used in Accounts payable, reflecting cash used of $85.9 million for the year ended December 31, 2023, primarily resulting from the earlier production of and payment for Spring 2024 and Fall 2024 inventory, as well as cash provided of $155.0 million for the year ended December 31, 2024, primarily resulting from the timing of inventory receipts and related payments, including a reduction in the use of early payments and extension of payment terms with certain vendors.

Net cash provided by investing activities was $87.3 million for 2024, compared to $461.8 million of cash used in investing activities for 2023.

For 2024, net cash provided by investing activities consisted of $816.2 million in cash provided by sales and maturities of short-term investments, partially offset by $669.1 million in cash used for purchases of short-term investments and $59.8 million for capital expenditures.

For 2023, net cash used in investing activities consisted of $528.5 million in cash used for purchases of short-term investments and $54.6 million for capital expenditures, partially offset by $121.3 million in cash provided by sales and maturities of short-term investments.

Net cash used in financing activities was $386.2 million for 2024 compared to $254.8 million for 2023.

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Domestic Credit Facility

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

As of December 31, 2024, we had available an unsecured, committed revolving credit facility, which provides for borrowings up to $500.0 million.

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

Refer to Note 6 in Part II, Item 8 of this Annual Report on Form 10-K for further information regarding our domestic credit facility.

International Credit Facility

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As of December 31, 2024, collectively, our international subsidiaries had unsecured, uncommitted lines of credit, credit facilities and overdraft facilities, providing for borrowings up to approximately US$101.8 million.

There was no balance outstanding under these facilities.

There were no balances outstanding under these facilities.

Capital Requirements

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We expect to meet these short-term and long-term cash needs primarily with cash flows from operations and, if needed, borrowings from our existing credit facilities.

Our working capital management goals include maintaining an optimal level of inventory necessary to deliver goods on time to our customers and our retail stores to satisfy end consumer demand, alleviating manufacturing capacity constraints, and driving efficiencies to minimize the cycle time from the purchase of inventory from our suppliers to the collection of accounts receivable balances from our customers.

Our working capital management goals include maintaining an optimal level of inventory necessary to deliver goods on time to our customers and to satisfy end consumer demand, alleviating manufacturing capacity constraints, and driving efficiencies to minimize the cycle time from the purchase of inventory from our suppliers to the collection of accounts receivable balances from our customers.

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

As of December 31, 2023, our inventory balance decreased to $746.3 million, compared to $1,028.5 million as of December 31, 2022, driven by a meaningful reduction of purchases of Spring 2023 and Fall 2023 inventory, as well as the use of our outlet stores and temporary clearance locations to profitably clear excess merchandise.

As of December 31, 2024, our inventory balance decreased to $690.5 million, compared to $746.3 million as of December 31, 2023, driven by a reduction in current season and carryover inventory resulting from lower inventory buys, as well as the use of our outlet stores and temporary clearance locations to profitably sell excess merchandise.

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

We have planned 2025 capital expenditures of approximately $60 to $80 million.

This includes investments in our DTC operations, including new stores and digital and supply chain capabilities to support our strategic priorities.

Our actual capital expenditures may differ from the planned amounts depending on factors such as the timing of system implementations and new store openings and related construction as well as the availability of capital assets from suppliers.

This includes investments in our DTC operations, including new stores and supply chain and digital capabilities to support our strategic priorities.

Our actual capital expenditures may differ from the planned amounts depending on factors such as the timing of system implementations and new store openings and related construction.

Our long-term goal is to maintain a strong balance sheet and a disciplined approach to capital allocation.

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Other cash commitments

Our non-current Income taxes payable on the Consolidated Balance Sheet as of December 31, 2023 includes approximately $12.4 million of net unrecognized tax benefits.

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

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

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

Year Ended December 31,

(in millions) 2024 2025 2026 2027 2028 Thereafter Total

(in thousands)

2025 2026 2027 2028 2029 Thereafter Total

Inventory purchase obligations

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94,523 91,054 79,911 70,783 53,899 133,955 524,125

TCJA transition tax obligations (2)

Tax Cuts and Jobs Act transition tax obligations

13,281 — — — — — 13,281

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

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

CRITICAL ACCOUNTING ESTIMATES

Management's discussion and analysis of our financial condition and results of operations are based on our consolidated financial statements, which have been prepared in accordance with GAAP.

The preparation of these financial statements requires us to make various

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estimates and judgments that affect reported amounts of assets, liabilities, sales, cost of sales, and expenses and related disclosure of contingent assets and liabilities.

The preparation of these financial statements requires us to make various estimates and judgments that affect reported amounts of assets, liabilities, sales, cost of sales, and expenses and related disclosure of contingent assets and liabilities.

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

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

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We base our ongoing estimates on historical experience and other assumptions that we believe to be reasonable in the circumstances.

Our critical accounting policies and estimates relate to sales reserves, allowance for uncollectible accounts receivable, excess, close-out and slow-moving inventory, impairment of long-lived assets, intangible assets and goodwill, and income taxes.

Our critical accounting policies and estimates relate to sales reserves, excess, close-out and slow-moving inventory, impairment of long-lived assets, intangible assets and goodwill, and income taxes.

Management regularly discusses with our Audit Committee each of our critical accounting estimates, the development and selection of these accounting estimates, and the disclosure about each estimate in this Annual Report on Form 10-K.

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

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

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

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

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

Allowance for Uncollectible Accounts Receivable

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

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

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

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

Our allowance for uncollectible accounts receivable increased to $5.5 million as of December 31, 2023 compared to $5.4 million as of December 31, 2022.

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

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

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

Excess, Close-Out and Slow-Moving Inventory

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

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

2) sales forecasts;

3) historical liquidation experience;

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

Provisions are established when necessary in the period in which we make

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such a determination.

We evaluate our inventory on hand to identify excess, close-out or slow-moving inventory by contemplating our purchasing plans, sales forecasts, historical liquidation experience, and the level and composition of inventory from current and prior seasons that remains unsold and establish provisions as necessary to properly reflect inventory value at the lower of cost or net realizable value.

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

As of December 31, 2024, our inventory provisions reduced gross inventory by $20.4 million compared to $23.3 million as of December 31, 2023.

The level of estimated excess inventory as of December 31, 2023 decreased reflecting the use of our outlet stores and temporary clearance locations to profitably clear excess merchandise.

The level of estimated excess inventory as of December 31, 2024 decreased, reflecting the use of our outlet stores and temporary clearance locations to profitably sell excess merchandise.

Long-Lived Assets

Long-lived assets, which include property, plant and equipment, lease right-of-use ("ROU") assets, capitalized implementation costs for cloud computing arrangements, and intangible assets with finite lives are measured for impairment only when events or circumstances indicate the carrying value may not be recoverable.

Our retail fleet long‐lived assets are evaluated at the retail location level.

Long-lived assets, which include property, plant and equipment, lease right-of-use ("ROU") assets, and capitalized implementation costs for cloud computing arrangements are evaluated for impairment only when events or circumstances indicate the carrying value may not be recoverable.

Our retail store fleet long‐lived assets are generally evaluated at the retail location level.

Events that result in an impairment review of a retail location include plans to close a retail location or a significant decrease in the operating results of the retail location.

When such an indicator occurs, we evaluate retail location long‐lived assets for impairment by comparing the undiscounted future cash flow expected to be generated by the location to the location long‐lived asset’s carrying amount.

If the carrying amount of an asset exceeds the estimated undiscounted future cash flow, an analysis is performed to estimate the fair value of the asset.

An impairment is recorded if the fair value of the retail location long‐lived asset is less than the carrying amount.

When such an indicator occurs, we evaluate the retail location long‐lived asset or asset group for impairment by comparing the undiscounted future cash flows expected to be generated by the location to the location long‐lived asset group’s carrying amount.

If the carrying value of an asset or asset group exceeds the estimated undiscounted future cash flows, an analysis is performed to estimate the fair value of the asset or asset group.

An impairment is recorded if the fair value of the asset or asset group is less than the carrying amount.

During 2024, we tested certain long-lived assets consisting of property, plant, and equipment and lease ROU assets for impairment at certain underperforming retail locations.

For the years ended December 31, 2024 and 2023, impairment charges from underperforming retail stores were not material.

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

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

Indefinite-Lived Intangible Assets and Goodwill

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

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

As of December 31, 2023, the carrying value of indefinite-lived intangible assets was $79.2 million, of which $51.8 million was attributed to prAna's trademark.

At December 31, 2024, the carrying value of indefinite-lived intangible assets was $79.2 million, of which $51.8 million was attributed to prAna's trademark.

In our 2024 impairment test, the fair value of prAna's trademark exceeded its carrying value by approximately 33% as of the measurement date and, therefore, no impairment was recognized.

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

A 100 basis point decline in the compound annual growth rate for net sales assumed over the first five years would reduce the excess of fair value over the carrying amount to approximately 6%.

A 300 basis point decline in the compound annual growth rate for net sales assumed over the first eight years would reduce the excess of fair value over the carrying amount to approximately 12%.

Separately, a 100 basis point increase in the assumed discount rate would reduce the excess of the fair value over the carrying value to approximately 22%.

A separate 50 basis point decline in the assumed royalty rate would reduce the excess of fair value over the carrying amount to zero.

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

A separate 50 basis point decline in the assumed royalty rate would reduce the excess of fair value over the carrying amount to approximately 21%.

In our 2023 impairment test, we determined that the prAna brand's trademark was not impaired.

In our 2022 impairment test, we determined that the prAna brand's trademark was impaired and we recognized a $18.7 million impairment charge for the year ended December 31, 2022.

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

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

In our 2023 impairment test, we determined that prAna goodwill was impaired and we recognized a $25.0 million impairment charge for the year ended December 31, 2023, reducing the carrying value of prAna's goodwill to $12.3 million.

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.

In 2022, we determined that prAna goodwill was impaired and we recognized a $16.9 million impairment charge for the year ended December 31, 2022.

At December 31, 2024, the carrying value of goodwill was $26.7 million, of which $12.3 million was attributed to the prAna reporting unit.

In our 2024 impairment test, the fair value of the prAna reporting unit exceeded its carrying value by approximately 23% as of the measurement date and, therefore, no impairment was recognized.

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

A 300 basis point decline in the compound annual growth rate for net sales assumed over the first eight years would reduce the excess of fair value over the carrying amount to approximately 8%.

Separately, a 100 basis point increase in the assumed discount rate would reduce the excess of the fair value over the carrying value to approximately 15%.

In our 2023 and 2022 impairment tests, we determined that prAna goodwill was impaired and we recognized a $25.0 million and $16.9 million impairment charge for the years ended December 31, 2023 and December 31, 2022, respectively.

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

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These assumptions and estimates may change in the future due to changes in economic conditions, changes in our ability to meet sales and profitability objectives or changes in our business operations or strategic direction.

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We make assumptions, judgments and estimates to determine our current provision for income taxes, our deferred tax assets and liabilities and our uncertain tax positions.

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Our assumptions, judgement and estimates relative to uncertain tax positions take into account whether a tax position is more likely than not to be sustained upon examination by the relevant taxing authority based on the technical merits of the position and the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement with the relevant taxing authority.

Changes in tax law or our interpretation of tax laws and the resolution of current and future tax audits could significantly affect the amounts provided for Income tax expense in our Consolidated Statements of Operations.

Changes in tax law or our

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interpretation of tax laws and the resolution of current and future tax audits could significantly affect the amounts provided for Income tax expense in our Consolidated Statements of Operations.

Our tax provision for interim periods is determined using an estimate of our annual effective tax rate, adjusted for discrete items, if any, that are taken into account in the relevant period.

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

What changed 10-K

Item 7. Management’s Discussion and Analysis