| ☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | ||||
For the transition period from_______to_______
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Commission file number 000-23939
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COLUMBIA SPORTSWEAR COMPANY
(Exact name of registrant as specified in its charter)
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| Oregon | 93-0498284 | |||||||||
| (State or other jurisdiction of incorporation or organization) | (IRS Employer Identification Number) | |||||||||
| 14375 Northwest Science Park Drive, Portland Oregon | 97229 | |||||||||
| (Address of principal executive | ||||||||||
| (503) 985-4000 | ||||||||||
| ( | ||||||||||
| Securities registered pursuant to Section 12(b) of the Act: | ||||||||
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||||||
| Common Stock | COLM | The NASDAQ | ||||||
| Securities registered pursuant to Section 12(g) of the Act: | ||||||||
| None | ||||||||
| Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. | Yes | ☒ | No | ☐ | ||||||||||||||||||||||||||||
| Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. | Yes | ☐ | No | ☒ | ||||||||||||||||||||||||||||
| Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. | Yes | ☒ | No | ☐ | ||||||||||||||||||||||||||||
| Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such short period that the registrant was required to submit such files) | Yes | ☒ | No | ☐ | ||||||||||||||||||||||||||||
| Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act. | ||||||||||||||||||||||||||||||||
| Large Accelerated Filer | ☒ | Accelerated filer | ☐ | |||||||||||||||||||||||||||||
| Non-accelerated filer | ☐ | Smaller reporting company | ☐ | |||||||||||||||||||||||||||||
| Emerging growth company | ||||||||||||||||||||||||||||||||
| If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act | ☐ | |||||||||||||||||||||||||||||||
| Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C.7262(b)) by the registered public accounting firm that prepared or issued its audit report. | ☒ | |||||||||||||||||||||||||||||||
| Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). | Yes | ☐ | No | ☒ | ||||||||||||||||||||||||||||
The aggregate market value of the voting and non-voting common stockequity held by non-affiliates of the registrant as of June 30, 2017,2021, based upon the closing price of the common stock on the last business day of the registrant's most recently completed second fiscal quarter, was $1,713,522,574 based on the last reported sale price of the Company's common stock as reported by the NASDAQ Global Select Market System on that day.$3,280,599,605.
The number of shares outstanding of the registrant's common stock outstanding on February 9, 201811, 2022 was 70,016,897.64,513,156.
this report.
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| TABLE OF CONTENTS | ||
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PART I | |||||||||
| Item 1. | |||||||||
| Item 1A. | |||||||||
| Item 1B. | |||||||||
| Item 2. | |||||||||
| Item 3. | |||||||||
| Item 4. | |||||||||
PART II | |||||||||
| Item 5. | |||||||||
| Item 6. | |||||||||
| Item 7. | |||||||||
| Item 7A. | |||||||||
| Item 8. | |||||||||
| Item 9. | |||||||||
| Item 9A. | |||||||||
| Item 9B. | |||||||||
PART III | |||||||||
| Item 10. | |||||||||
| Item 11. | |||||||||
| Item 12. | |||||||||
| Item 13. | |||||||||
| Item 14. | |||||||||
PART IV | |||||||||
| Item 15. | |||||||||
| Item | |||||||||
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This annual report contains forward-looking statements within the meaning of federal securities laws. Forward-looking statements often use words such as "will", "anticipate", "estimate", "expect", "should", "may" and other words and terms of similar meaning or reference future dates. Forward-looking statements include any statements related to our expectations regarding future performance or market position, including any statements regarding outdoor participation by consumers, the casualization of the apparel and footwear markets, the promotional environment, wholesale trade terms, inventories, consumer spending and preferences, store traffic, ocean freight charges, inventory receipts, logistics constraints, manufacturing constraints, labor availability, inflationary pressures, consumer expectations, our short and long-term cash needs and our ability to meet those needs, amortization expenses and maturities of liabilities.
These forward-looking statements, and others we make from time to time expressed in good faith, are believed to have a reasonable basis; however, each forward-looking statement involves risks and uncertainties. Many factors may cause actual results to differ materially from projected results in forward-looking statements, including the risks described in Item 1A of this Annual Report on Form 10-K. Forward-looking statements are inherently less reliable than historical information. Except as required by law, we do not undertake any duty to update forward-looking statements after the date they are made or to conform them to actual results or to changes in circumstances or to reflect changes in events, circumstances or expectations. New factors emerge from time to time and it is not possible for us to predict or assess the effects of all such factors or the extent to which any factor, or combination of factors, may cause results to differ materially from those contained in any forward-looking statement.
COLUMBIA SPORTSWEAR COMPANY | 2021 FORM 10-K | i
| PART I | ||
| ITEM 1. | BUSINESS | ||||
GENERAL
Founded in 1938 in Portland, Oregon, as a small, family-owned, regional hat distributor and incorporated in Oregon in 1961, Columbia Sportswear Company has grown to become a global leader in designing, sourcing,developing, marketing, and distributing outdoor, active and activeeveryday lifestyle apparel, footwear, accessories, and equipment. equipment products.
Unless the context indicates otherwise, the terms "we", "us", "our","we," "us," "our," "the Company," and "Columbia" refer to Columbia Sportswear Company, together with its wholly owned subsidiaries and entities in which it maintainsmaintained a controlling financial interest.
BRANDS AND PRODUCTS
We connect active people with their passions through our four well-known brands by designing, developing, marketing, and distributing our outdoor, active and active lifestyle apparel and footwear companies in the world, our products have earned an international reputation for innovation, quality and performance. We design, source, market, and distribute outdoor and activeeveryday lifestyle apparel, footwear, accessories and equipment under four primary brands, which complement each otherproducts to addressmeet the diverse needs of consumers:our customers and consumers.
SOREL® |Acquired in 2000, our SOREL brand primarily offerscreates powerful footwear for unstoppable individuals. Our SOREL brand provides premium, durable and design-driven footwear productsand accessories primarily to a market of fashion forward and brandfashion-forward savvy female consumers. The SOREL brand also offers a collection of premium men’swomen, as well as to men and youth utility footwear.consumers.
Mountain Hardwear®
Hard Wear® |Acquired in 2003, theour Mountain Hardwear brand headquarteredexists to make gear that works, because out in Richmond, California,the mountains, it matters for climbers. Our Mountain Hardwear brand offers premium apparel, accessories and equipment primarily fordesigned to meet the high performancehigh-performance needs of mountaineeringclimbing enthusiasts and other outdoor athletes, as well as for consumers who are inspired by the outdoor lifestyle.to satisfy climbers' everyday lifestyles.
prAna® |Acquired in 2014, theour prAna brand headquarteredfocuses on clothing for positive change, in Carlsbad, California, offers stylishan effort to positively impact the planet and versatile active lifestyle apparel and accessories designed and manufactured with an emphasis on sustainable materials and processes.its people. Our prAna brand provides consumers with clothes that tell a story. From city streets to mountain peaks, prAna outfits adventurous spirits in stylish, sustainable and versatile gear.
Across our diverse portfolio of brands, our products have gained recognition for their innovation, quality and performance. Our products incorporate the cumulative design, fabrication, fit, and construction technologies that we have pioneered over several decades and continue to innovate. Our apparel, accessories and equipment products focus on consumers whose active lifestyles includeare designed to be used during a wide variety of activities, such as rockskiing, snowboarding, hiking, climbing, mountaineering, camping, hunting, fishing, trail running, water sports, yoga, outdoor watersports, hiking,golf, and adventure travel. Our footwear products include durable, lightweight hiking boots, trail running shoes, rugged cold weather boots for activities on snow and ice, sandals and shoes for use in water activities, and function-first fashion footwear and casual shoes for everyday use.
We sell our products in 2010, holds various patents pertaining to processes for manufacturing waterproofapproximately 90 countries and breathableoperate in four geographic segments: United States ("U.S."), Latin America and Asia Pacific ("LAAP"), Europe, Middle East and Africa ("EMEA"), and Canada. Each geographic segment operates predominantly in one industry: the design, sourcing, marketing, and distribution of outdoor, active and everyday lifestyle apparel, footwear, accessories, and equipment. equipment products.
We have incorporated the OutDry technology in select Columbia, Mountain Hardwear and SOREL products, and also license the technology to third parties.
COLUMBIA SPORTSWEAR COMPANY | 2021 FORM 10-K | 1
locations in the LAAP and EMEA regions. In addition, we earn revenue through licensing certain of our trademarks across a range of apparel, accessories, equipment, footwear, and home products.
U.S.
U.S. is our largest segment and provides apparel, accessories and equipment products through our Columbia, Mountain Hardwear, and prAna brands and footwear products through our Columbia and SOREL brands. These products are sold by our U.S. wholesale and DTC businesses. We have nearly 2,200 wholesale customers in the U.S. In 2021, our two largest U.S. wholesale customers accounted for approximately 12% of U.S. net sales, or less than 10% individually. At December 31, 2021, we directly operated 142 retail stores.
We distribute the majority of our U.S. products from distribution centers that we own and operate in Portland, Oregon and Robards, Kentucky, as well as through a third-party logistics company that operates a distribution center in Louisville, Kentucky. We also arrange to have products directly shipped from contract manufacturers to wholesale customer-designated facilities in the United States.
LAAP
LAAP provides apparel, accessories and equipment products through our Columbia, Mountain Hardwear and prAna brands and footwear products through our Columbia and SOREL brands. These products are sold by our wholly-owned subsidiaries in Japan, Korea and China, and through distributors in other LAAP markets. We have over 300 wholesale customers, including distributors, in LAAP. In 2021, our five largest LAAP wholesale customers accounted for approximately 10% of LAAP net sales, or less than 10% individually. At December 31, 2021, we directly operated 277 retail stores, and e-commerce), independent internationalmaintained 29 concession and 69 franchise based arrangements with third-parties.
We distribute LAAP products through third-party logistics companies that operate distribution centers near Tokyo, Seoul, and Shanghai. In addition, we utilize various distributors and licensees. In 2017, our products were sold in approximately 90 countries. Substantially allthe LAAP region. The vast majority of our products sold to distributors are manufactured byshipped directly to the distributors from the contract manufacturers located outsidefrom which we source our products.
EMEA
EMEA provides apparel, accessories and equipment products through our Columbia, Mountain Hardwear and prAna brands and footwear products through our Columbia and SOREL brands. These products are sold by our Europe-direct and EMEA distributor businesses. We have over 3,450 wholesale customers, including distributors, in EMEA. In 2021, our largest EMEA wholesale customer accounted for approximately 17% of EMEA net sales. At December 31, 2021, we directly operated 26 retail stores and maintained 21 concession-based arrangements with third-parties.
We distribute the United States.
CANADA
Canada provides apparel, accessories and equipment products through our Columbia, Mountain Hardwear and prAna brands and footwear products through our Columbia and SOREL brands. These products are sold by many variables, includingour Canada wholesale and DTC businesses. We have nearly 550 wholesale customers in Canada. In 2021, our two largest Canada wholesale customers accounted for approximately 24% of Canada net sales, or approximately 14% and 10% individually. At December 31, 2021, we directly operated 10 retail stores.
We distribute the popularitymajority of outdoor activitiesCanada products from a distribution center that we own and active lifestyles, changing design trends, consumer adoption of innovative performance technologies, variationsoperate in seasonal weather,Ontario.
See Item 7 and the availability and desirability of competitor alternatives. Therefore, we seek to drive, anticipate and respond to trends and shiftsItem 8 in consumer preferences by developing new products with innovative performance features and designs, creating persuasive and memorable marketing communications to generate consumer awareness, demand and retention, and adjusting the mix and price points of available product offerings. Failure to anticipate or respond to consumer needs and preferences in a timely and adequate manner could have a material adverse effectthis Annual Report on Form 10-K for further discussion regarding our sales and profitability.reportable segments.
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 2017, approximately 60% of our net sales and approximately 90% of our operating income were realized in the second half of the year, illustrating our dependence upon sales results in the second half of the year, as well as the less seasonal nature of our operating costs. The expansion of our direct-to-consumer operations has increased the proportion of sales, profits and cash flows that we generate in the second half of the year.
COLUMBIA SPORTSWEAR COMPANY | 2021 FORM 10-K | 2
| 2017 | 2016 | 2015 | ||||||||||||||||||
| Net Sales | % of Sales | Net Sales | % of Sales | Net Sales | % of Sales | |||||||||||||||
| Apparel, accessories and equipment | $ | 1,928.0 | 78.2 | % | $ | 1,865.4 | 78.5 | % | $ | 1,821.2 | 78.3 | % | ||||||||
| Footwear | 538.1 | 21.8 | 511.6 | 21.5 | 505.0 | 21.7 | ||||||||||||||
| Total | $ | 2,466.1 | 100.0 | % | $ | 2,377.0 | 100.0 | % | $ | 2,326.2 | 100.0 | % | ||||||||
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We are committed to designing innovative and functional products for consumers who participate in a wide range of outdoor, active and everyday lifestyle activities, enabling them to enjoy those activities longer and in greater comfort by keeping them warm or cool, dry and protected.comfort. We also place significant value on product design and fit (the overall appearance and image of our products) that, along with technical performance features, distinguish our products in the marketplace.marketplace by placing significant value in the design and fit, including the overall appearance and image, and technical performance features of our products.
Our team of specialists both lead our internal research and development efforts are led by an internal team of specialists whoand work closely with independent suppliers to conceive, develop and commercialize innovative technologies and products thatto provide the unique performance benefits desired by consumers during outdoor activities.consumers. We have also establishedutilize our working relationships with specialists in the fields of chemistry, biochemistry, engineering, industrial design, materials research, and graphic design, and in other related fields. We utilize these relationships,fields, along with consumer insights and feedback, to develop and test innovative performance products, processes, packaging, and displays. We believe that theseThese efforts, coupled with our technical innovation efforts,drive for continuous improvement, represent key factors in the past and futureongoing success of our products.
MANUFACTURING AND SOURCING
We seek to substantially limit our invested capital and avoid the costs and risks associated with large production facilities and the associated large labor forces; therefore, we do not own, operate or manage manufacturing facilities. The majority of our products are manufactured by contract manufacturers located outside the United States. We establish and maintain long-term relationships with key manufacturing partners, but generally do not maintain formal long-term manufacturing volume commitments. The use of contract manufacturers greatly increases our production capacity, maximizes our flexibility and improves our product pricing.
We value legal, ethical and fair treatment of people involved in manufacturing our products. Independent contractors manufacturing our products are subject to our standards of manufacturing practices to facilitate decent, safe and humane working conditions, as well as promote ethical business practices. We have programs in place to monitor manufacturer practices and assess alignment against these standards.
We maintain seven manufacturing liaison offices in six Asia Pacific countries. Our personnel in these offices monitor production at our contract manufacturers' facilities to ensure our products are manufactured to our specifications. The physical location of our employees in these regional offices enhances our ability to monitor contract manufacturers for compliance with our policies, procedures and standards regarding quality, delivery, pricing, and labor practices. The design of our quality assurance process seeks to ensure that our products meet and maintain our quality standards and product reputation.
In 2021, our apparel, accessories and equipment products were manufactured in 13 countries. In 2021, manufacturers in Vietnam, Bangladesh, and Indonesia produced approximately 45%, 15% and 15%, respectively, of these products. Five of the largest contract manufacturers account for approximately 35% of our apparel, accessories and equipment production, with the largest manufacturer accounting for nearly 10%.
In 2021, our footwear products were manufactured in six countries. In 2021, manufacturers in Vietnam and China produced approximately 85% and 10%, respectively, of these products. Five of the largest contract manufacturers account for approximately 85% of our footwear production, with the largest manufacturer accounting for approximately 30%, three manufacturers accounting for approximately 15% each and one manufacturer accounting for approximately 10%.
Raw materials for the manufacturing of our apparel, accessories, equipment, and footwear products are primarily sourced from Asia and are purchased directly by our contract manufacturers.
MARKETING
Our portfolio of brands enables us to target a wide range of consumers with differentiated products. Our marketing supports and enhances our competitive position in the marketplace, drives global alignment through seasonal initiatives, builds brand equity, raises global brand relevance and awareness, infuses our brands with excitement, and, most importantly, stimulates worldwide consumer demand for our products.
Our integrated marketing efforts deliver consistent messages about the performance benefits, features and styles of our products within each of our brands and their different target consumers. We utilize a variety of means to deliver our marketing messages, including digital marketing, social media interactions, television and print publications, experiential events, brand ambassadors, enhanced product store displays, and consumer focused public relations efforts. In addition, we reinforce our brands' marketing messages with our key wholesale
COLUMBIA SPORTSWEAR COMPANY | 2021 FORM 10-K | 3
customers by utilizing digital platforms, television, radio, print and advertising campaigns, as well as in-store branded visual merchandising display tools and favorable product presentation.
We operate branded e-commerce and marketing sites and maintain an active presence on a variety of global social media platforms. We authorize and encourage our international distributors to connect with consumers by operating e-commerce and marketing sites and maintaining a presence on social media platforms. Digital marketing and social media engagement increase our brands' global ability to build strong emotional connections with consumers through consistent, brand-enhancing content. Our digital media connects our consumers to brand content and products, while facilitating their direct product purchases or directing them to nearby retail locations.
INTELLECTUAL PROPERTY
Our trademarks create a market for our products, identify our company and differentiate our products from competitors' products. We own many trademarks, including Columbia Sportswear Company®Company®, Columbia®Columbia®, SOREL®SOREL®, Mountain Hard Wear®Wear®, prAna®, OutDry®, Pacific Trail®prAna®, the Columbia diamond shaped logo, the Mountain Hardwear nut logo, the SOREL polar bear logo, and the prAna sitting pose logo, as well as many other trademarks relating to our brands, products, styles, and technologies. We believe that
Our design and utility patents describe the technologies, processes and designs incorporated into many of our trademarks are anmost important factor in creating a market for our products, in identifying our Company, and in differentiating our products from competitors' products. We file applications for United States and foreign patents to protect inventions, designs and enhancements that we deem to have commercial value. We have design process and utility patents, which expire at various times, as well as pending patent applications in the United States and other countries. We file applications for United States and foreign patents for inventions, designs and improvements that we believe have commercial value; however, these patents may or may not ultimately be issued, enforceable or used in our business. The technologies, processes and designs described in our patents are incorporated into many of our most important products. We believe our success primarily depends on our ability to continue offering innovative solutions to match consumer needs through design, research, development, and production advancements, rather than our ability to secure patents.
We vigorously protect these proprietary rights against counterfeit reproductions and other infringing activities. Additionally, we license some of our trademarks across a range of apparel, footwear, accessories, equipment, and home products.
| 2017 | 2016 | 2015 | ||||||||||||||||||
| Net Sales | % of Sales | Net Sales | % of Sales | Net Sales | % of Sales | |||||||||||||||
| United States | $ | 1,520.0 | 61.6 | % | $ | 1,505.2 | 63.3 | % | $ | 1,455.2 | 62.6 | % | ||||||||
| LAAP | 475.1 | 19.3 | 453.7 | 19.1 | 469.2 | 20.2 | ||||||||||||||
| EMEA | 293.7 | 11.9 | 253.5 | 10.7 | 233.2 | 10.0 | ||||||||||||||
| Canada | 177.3 | 7.2 | 164.6 | 6.9 | 168.6 | 7.2 | ||||||||||||||
| Total | $ | 2,466.1 | 100.0 | % | $ | 2,377.0 | 100.0 | % | $ | 2,326.2 | 100.0 | % | ||||||||
The markets for outdoor, active and activeeveryday lifestyle apparel, footwear, accessories, and equipment products are highly competitive.competitive and we face significant competition from numerous companies. Our competition includes large companies with significant financial, marketing and operational resources, small companies with limited resources but deep entrenchment in their local markets, and other branded competitors. We believe that thealso face competition from our wholesale customers who, under their own private brand names, produce and distribute similar products to our target consumers through their own retail stores and e-commerce businesses. We identify our primary competitive factors in the end-use markets arefor outdoor, active and everyday lifestyle products to be brand strength, product innovation, design, functionality, durability, and price, effectiveness ofas well as effective marketing efforts, and speeddelivery of product delivery to meetin alignment with consumer expectations.
GOVERNMENT REGULATION
As a company with global operations, we are, and have greater financial, marketing and operational resources with which to compete, and others that are smaller with fewer resources but that may be deeply entrenched in local markets. The markets in Japan, China and Korea have attracted a large number of competitive local and global brands. In other markets, such as Europe, we face competition from brands that hold significant market share in one or several European markets but are not significant competitors in other key markets. Some of our large wholesale customers also market competitive apparel, footwear, accessories, and equipment under their own private label brand names. In addition, our direct-to-consumer businesses expose us to branded competitors and wholesale customers who operate retail stores in key markets and who sell competitive products online. Our independent international distributors and licensees also operate in very competitive markets and compete against a variety of local and global brands.
See Item 1A of this Annual Report on Form 10-K for more information of risks relating to these laws, rules, and regulations.
HUMAN CAPITAL
We believe that attracting and other regulations, which are increasingly restrictiveretaining exceptional talent strengthens our enterprise and complex.propels us as a leader in product innovation. As part of these efforts, we strive to achieve technical innovations, we faceoffer a greater risk of compliance issues with regulations applicablecompetitive compensation and benefits program, foster a community where everyone feels included and empowered to products with complex technical features. Although we diligently monitor these standardsdo their best work and restrictions, a state, federal or foreign government may impose new or adjusted quotas, duties, safety requirements, material restrictions, or other restrictions or regulations, any of which could have a material adverse effect on our financial condition, results of operations or cash flows.promote employee well-being.
At December 31, 2017,2021, our employee workforce of approximately 8,325 employees was comprised of approximately 4,500 full-time and part-time retail employees, 925 distribution center employees and 2,900 corporate employees. From December 31, 2020 to December 31, 2021, we had 6,188 full-time equivalent employees.an overall employee turnover rate of approximately 58%, impacted by approximately 87% and 61% turnover rate in our retail and distribution employee base, respectively. Approximately 31% of our workforce was located outside of the United States at December 31, 2021.
COLUMBIA SPORTSWEAR COMPANY | 2021 FORM 10-K | 4
Compensation and Benefits
Our compensation plans aim to reward performance. We offer competitive wages and, to align the interest of our management with those of our shareholders, shares of our common stock through a stock incentive plan. Globally, we offer employees affordable, competitive and comprehensive benefit programs. In the United States, for our largest employee base, we sponsor comprehensive medical, dental, vision and health savings or flexible spending account plans. We also provide 401(k) plan matching of employee contributions, paid time off, an employee assistance plan, life insurance, and short-term and long-term disability insurance.
Diversity, Equity and Inclusion
At December 31, 2021, our global workforce was self-disclosed as 42% male, 55% female, less than 1% non-binary and 2% undisclosed or chose not to identify. In the United States, the self-disclosed ethnicity of our workforce, including retail and distribution employees, was 60% White, 7% Asian, 19% Hispanic or Latino, 7% Black, less than 1% American Indian or Alaskan Native, less than 1% Native Hawaiian or other Pacific Islander, 4% two or more races and 2% undisclosed or chose not to identify. A Diversity, Equity and Inclusion Leadership Team was formed in 2020 to lead our efforts toward a more diverse, equitable, and inclusive workplace. This team focuses on supporting strategies and efforts to advance progress in the following categories: listening and learning, diversifying talent, creating and sponsoring opportunities, and being a force for good.
Employee Well-Being
We file withalign our employee programs to the Securitiesfive elements of well-being: physical health, career, social and Exchange Commission ("SEC") our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-Kemotional health, financial, and any amendments to those reports, proxy statements, and registration statements. You may read and copy any material we file with the SEC at the SEC's Public Reference Room at 100 F Street, NE, Washington, D.C. 20549. You may also obtaincommunity.
For more information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. In addition, the SEC maintains an internet siteour efforts to support our workforce, see our latest Corporate Responsibility Report at http://www.sec.gov that contains reports, proxy and information statements, and other information regarding issuers, including us, that file electronically. columbia.com/corporate-responsibility.
AVAILABLE INFORMATION
We make available free of charge on or through the investor relations section on our website at www.columbia.comhttp://investor.columbia.com/sec-filings our proxy statements, annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to these reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act as soon as reasonably practicable after we file these materials with the SEC.Securities and Exchange Commission ("SEC").
The content on any website referred to in this Annual Report on Form 10-K is not incorporated by reference in this annual report unless expressly noted.
COLUMBIA SPORTSWEAR COMPANY | 2021 FORM 10-K | 5
INFORMATION ABOUT OUR EXECUTIVE OFFICERS
The following table sets forth information about our executive officers. All information is as of the date of the filing of this report.
| Name | Age | Position | ||||||
| Timothy P. Boyle | 72 | Chairman, President and Chief Executive Officer | ||||||
| Joseph P. Boyle | 41 | Executive Vice President, Columbia Brand President | ||||||
| Peter J. Bragdon | 59 | Executive Vice President, Chief Administrative Officer, General Counsel, and Secretary | ||||||
| Lisa A. Kulok | 56 | Executive Vice President, Chief Supply Chain Officer | ||||||
| Skip Potter | 51 | Executive Vice President, Chief Digital Information Officer | ||||||
| Tim Sheerin | 57 | Senior Vice President, Global Wholesale | ||||||
| Jim A. Swanson | 47 | Executive Vice President, Chief Financial Officer | ||||||
| Craig Zanon | 62 | Senior Vice President, Emerging Brands | ||||||
Timothy P. Boyle joined the Company in 1971 as General Manager, served as the Company's President from 1988 to 2015 and reassumed the role in 2017. Mr. Boyle has served as Chief Executive Officer since 1988. He has served as a member of the Board of Directors since 1978, and as Interim Chairman of the Board of Directors from November 2019 until his appointment as Chairman of the Board of Directors in January 2020. Mr. Boyle is also a member of the Board of Directors of Northwest Natural Holding Company (NYSE: NWN), and its subsidiary, Northwest Natural Gas Company. Mr. Boyle is a third-generation member of the Company's founding Boyle family, the father of Joseph P. Boyle, and the son of Gertrude Boyle, who served as the Chairman of the Board of Directors from 1970 until her death in 2019.
Joseph P. Boyle joined the Company in 2005 and has served in numerous roles of increasing leadership and responsibility, including General Merchandising Manager of Outerwear, Accessories, Equipment, Collegiate and Licensing, Vice President of Apparel Merchandising, and Senior Vice President of Columbia Brand Merchandising & Design. He was promoted to Executive Vice President, Columbia Brand President in 2017. Prior to joining the Company, Mr. Boyle served in a business development role for Robert Trent Jones II Golf Course Architects. Mr. Boyle is a fourth-generation member of the Company's founding Boyle family, and the son of Timothy P. Boyle.
Peter J. Bragdon joined the Company in 1999 and served as Senior Counsel and Director of Intellectual Property until January 2003. From 2003 to 2004, Mr. Bragdon served as Chief of Staff in the Oregon Governor's office. Mr. Bragdon returned to Columbia in 2004 as Vice President, General Counsel and Secretary, was named Senior Vice President of Legal and Corporate Affairs, General Counsel and Secretary in 2010 and Executive Vice President, Chief Administrative Officer, General Counsel and Secretary in 2015. In 2017, he assumed oversight of the Company's international distributor business. Prior to joining the Company, Mr. Bragdon served as an attorney in the corporate securities and finance group at Stoel Rives LLP, and Special Assistant Attorney General for the Oregon Department of Justice.
Lisa A. Kulok joined the Company in 2008 as Senior Director of Global Planning. She was promoted to Senior Vice President of Global Supply Chain Operations in 2015, was named Senior Vice President of Global Supply Chain Operations and Manufacturing in July 2020 and Executive Vice President, Chief Supply Chain Officer in November 2020. Prior to joining the Company, Ms. Kulok held various leadership positions at Nike, Inc, including USA Apparel Marketplace Planning Director and Director of Regional Planning.
Skip Potter joined the Company in 2021 as Executive Vice President, Chief Digital Information Officer. Prior to joining the Company, Mr. Potter held various leadership positions, including Chief Technology Officer and Managing Vice President of Engineering with Nike, Inc., as well as Vice President of Technology Innovation with Capital One, and CIO/CTO for British Telecommunication's Enterprise Group.
Tim Sheerin joined the Company in January 2021 as Senior Vice President, US Wholesale Sales. He was promoted to Senior Vice President, Global Wholesale in October 2021. Prior to joining the Company, Mr. Sheerin held various leadership positions at Nike, Inc., including Vice President, North America Sales, Vice President of Global Sales, Nike Sportswear and Managing Director/General Manager of Nike Korea.
Jim A. Swanson joined the Company in 2003 and has served in numerous roles of increasing responsibility during his tenure, being named Vice President of Finance in 2015 and promoted to Senior Vice President, Chief Financial Officer in 2017 and to Executive Vice President and Chief Financial Officer in 2020. Prior to joining the Company, Mr. Swanson served in a variety of financial planning and analysis, tax, and accounting roles, including senior financial analyst at Freightliner Corporation and at Tality Corporation, and as a senior tax and business advisory associate at Arthur Andersen.
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Craig Zanon joined the Company in 2021 as Senior Vice President, Emerging Brands. Prior to joining the Company, Mr. Zanon spent more than 20 years with Nike, Inc. and held various leadership roles, including Vice President and General Manager of Global Basketball, as well as Vice President of U.S. Footwear and General Manager for the Americas.
| Item 1A. | RISK FACTORS | ||||
In addition to the other information contained in this Annual Report on Form 10-K, the following risk factors should be considered carefully in evaluating our business. Our business, financial condition, results of operations, or cash flows may be materially adversely affected by these and other risks. Please note that additional risks not presently known to us or that we currently deem immaterial may also impair our business and operations.
CHANGES IN PRODUCT DEMAND CAN ADVERSELY AFFECT OUR FINANCIAL RESULTS
We Face Many Challenges Executing Growth Strategiesare Subject to a Number of Risks Which May Adversely Affect Consumer and/or Wholesale Customer Demand for Our Products and Lead to a Decline in Sales and/or Earnings.
These risks include, but are not limited to:
•Volatile Economic Conditions. We are a consumer products at competitive prices, focusingcompany and are highly dependent on product design, utilizing innovations to differentiate our brands from competitors, working to ensure that our products are sold through strong distribution partners capable of effectively presenting our brands to consumers, increasing the impact of consumer communications to drivediscretionary spending. Consumer discretionary spending behavior is inherently unpredictable. Consumer demand, and related wholesale customer demand, for our brandsproducts may not support our sales targets, or may decline, especially during periods of heightened economic uncertainty in our key markets.
•Highly Competitive Markets. In each of our geographic markets, we face significant competition from global and sell-throughregional branded apparel, footwear, accessories, and equipment companies. Retailers who are our wholesale customers often pose a significant competitive threat by designing, marketing and distributing apparel, footwear, accessories, and equipment under their own private labels. We also experience direct competition in our DTC business from retailers that are our wholesale customers. This is true in particular in the digital marketplace, where increased consumer expectations and competitive pressure related to various aspects of our e-commerce business, including speed of product delivery, shipping charges, return privileges, and other evolving expectations are key factors.
•Consumer Preferences and Fashion/Product Trends. Changes in consumer preferences, consumer interest in outdoor activities, and fashion/product trends may have a material adverse effect on our business. We also face risks because our success depends on our and our customers' abilities to anticipate consumer preferences and our ability to respond to changes in a timely manner. Product development and/or production lead times for many of our products making suremay make it more difficult for us to respond rapidly to new or changing fashion/product trends or consumer preferences.
•Brand Images. Our brands have wide recognition, and our success has been due in large part to our ability to maintain, enhance and protect our brand image and reputation and our consumers' and customers' connection to our brands. Our continued success depends in part on our ability to adapt to a rapidly changing media environment, including our increasing reliance on social media and online dissemination of advertising campaigns. In addition, consumer and customer sentiment could be shaped by our sustainability policies and related design, sourcing and operational decisions.
•Weather Conditions, Including Global Climate Change Trends. Our sales are adversely affected by unseasonable weather conditions. A significant portion of our DTC sales is dependent in part on the weather and our DTC sales growth is likely to be adversely impacted or may even decline in years in which weather conditions do not stimulate demand for our products. Unseasonable weather also impacts future sales to our wholesale customers, who may hold inventory into subsequent seasons in response to unseasonable weather. Our results may be negatively impacted if management is not able to adjust expenses in a timely manner in response to unfavorable weather conditions and the resulting impact on consumer and customer demand. The magnitude by which global weather patterns trend warmer will influence the extent to which consumer and customer demand for our products are merchandisedwill be negatively affected.
•Shifts in Retail Traffic Patterns. Shifts in consumer purchasing patterns, including the growth of e-commerce and displayed appropriatelylarge one-stop digital marketplaces, e-commerce off-price retailing and online comparison shopping, in retail environments, expanding our presence in key markets aroundmay have an adverse effect on our DTC operations and the world,financial health of certain of our wholesale customers, some of whom may reduce their brick and continuingmortar store fleet, file for protection under bankruptcy laws, restructure, or cease operations. These related business impacts have already occurred at certain of our wholesale customers. We face increased risk of order reduction and cancellation when dealing with financially ailing wholesale customers. We also extend credit to build brand-enhancing direct-to-consumer businesses.our wholesale customers based on an assessment of the wholesale customer's financial condition, generally without requiring collateral. We intend may choose (and have chosen in the past)
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to pursuelimit our credit risk by reducing our level of business with wholesale customers experiencing financial difficulties and may not be able to replace those revenues with other customers or through our DTC businesses within a reasonable period or at all.
•Innovation. To distinguish our products in the marketplace and achieve commercial success, we rely on product innovations, including new or exclusive technologies, inventive and appealing design or other differentiating features. If we fail to introduce innovative products that appeal to consumers and customers, we could suffer reputational damage to our brands and demand for our products could decline.
Certain of the above risks may be or have been exacerbated by the COVID-19 pandemic, see “An Outbreak of Disease or Similar Public Health Threat, or Fear of Such an Event, Such as the COVID-19 Pandemic, Could Have, and in the Case of the COVID-19 Pandemic Has Had and is Expected to Continue to Have, an Adverse Impact on Our Business, Operating Results and Financial Condition.”
Our Orders from Wholesale Customers are Subject to Cancellation, Which Could Lead to a Decline in Sales or Gross Profit, Write-downs of Excess Inventory, Increased Discounts or Extended Credit Terms to Our Wholesale Customers.
We do not have long-term contracts with any of our wholesale customers. We do have contracts with our independent international distributors; although these strategies acrosscontracts may have annual purchase minimums that must be met in order to retain distribution rights, the distributors are not otherwise obligated to purchase products from us. Sales to our portfoliowholesale customers (other than our international distributors) are generally on an order-by-order basis and are subject to rights of cancellation and rescheduling prior to shipment of orders. We consider the timing of delivery dates in our wholesale customer orders when we forecast our sales and earnings for future periods. If any of our major wholesale customers experience a significant downturn in business or fail to remain committed to our products or brands, product categoriesor if we are unable to deliver products to our wholesale customer in the agreed upon manner, these customers could postpone, reduce, cancel, or discontinue purchases from us, including after we have begun production on any order.
Our Inability to Accurately Predict Consumer and/or Customer Demand for Our Products Could Lead to a Build-up of Inventory or a Lack of Inventory and geographic markets. Affect Our Gross Margin.
We have implemented key strategic initiatives designed to improve the efficiency of our supply chain, such as spreading out the production of our products over time, which may lead to the build-up of inventory well in advance of the selling seasons for such products. Additionally, we place orders for our products with our contract manufacturers in advance of the related selling season and, as a result, are vulnerable to changes in consumer and/or customer demand for our products. Therefore, we must accurately forecast consumer and/or customer demand for our products well in advance of the selling season. We are subject to numerous risks relating to consumer and/or customer demand (see “We are Subject to a Number of Risks Which May Adversely Affect Consumer and/or Customer Demand for our Products and Lead to a Decline in Sales and/or Earnings” and “Our Orders from Wholesale Customers are Subject to Cancellation, Which Could Lead to a Decline in Sales or Gross Profit, Write-downs of Excess Inventory, Increased Discounts or Extended Credit Terms to Our Wholesale Customers” for additional information). Our ability to accurately predict consumer and/or customer demand well in advance of the selling season for our products is impacted by these risks, as well as our reliance on manual processes and judgments that are subject to human error.
Our failure to successfully implementaccurately forecast consumer and/or customer demand could result in inventory levels in excess of demand, which may cause inventory write-downs and/or the sale of excess inventory at discounted prices through our business strategies, including those identified in connection with the Company's operating model assessment, referred to as Project CONNECT,owned outlet stores or third-party liquidation channels and could have a material adverse effect on our financial condition,brand image and gross margin. In addition, we may experience additional costs relating to the storage of excess inventory.
Conversely, if we underestimate consumer and/or customer demand for our products or if our contract manufacturers or third-party logistics providers are unable to supply or deliver products when we need them, we may experience and have been experiencing inventory shortages, which may prevent us from fulfilling product orders resulting in lost sales, delay shipments of product, negatively affect our wholesale customer and consumer relationships, result in increased costs to expedite production and delivery, or diminish our ability to build brand loyalty.
WE ARE SUBJECT TO VARIOUS RISKS IN OUR SUPPLY CHAIN.
Our Reliance on Contract Manufacturers, Including Our Ability to Enter Into Purchase Order Commitments with Them and Maintain Quality Standards of Our Products and Standards of Manufacturing Processes at Contract Manufacturers, May Result in Lost Sales and Impact our Gross Margin and Results of Operations.
Our products are manufactured by contract manufacturers worldwide, primarily in the Asia Pacific region. Although we enter into purchase order commitments with these contract manufacturers each season, we generally do not maintain long-term manufacturing commitments with
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them, and various factors could interfere with our ability to source our products. Without long-term commitments, there is no assurance that we will be able to secure adequate or timely production capacity and our competitors may obtain production capacities that effectively limit or eliminate the availability of our contract manufacturers. If we are unable to obtain necessary production capacities, we may be unable to meet consumer demand, resulting in lost sales, as occurred in 2021.
In addition, contract manufacturers may fail to perform as expected. If a contract manufacturer fails to ship orders in a timely manner, we could experience supply disruptions that result in missed delivery deadlines, which may cause our customers to cancel their orders, refuse to accept deliveries or demand a reduction in purchase price or cause us to incur additional freight costs.
Reliance on contract manufacturers also creates quality control risks. Contract manufacturers may need to use sub-contracted manufacturers to fulfill our orders, which could result in compromised quality of our products. A failure in our quality control program, or a failure of our contract manufacturers or their subcontractors to meet our quality control standards, may result in diminished product quality, which in turn could result in increased order cancellations, price concessions, product returns, decreased consumer and customer demand for our products, non-compliance with our product standards or regulatory requirements, or product recalls or other regulatory actions.
We impose standards of manufacturing practices on our contract manufacturers for the benefit of workers and require compliance with our restricted substances list and product safety and other applicable laws, including environmental, health and safety and forced labor laws. We also require that our contract manufacturers impose these practices, standards and laws on their subcontractors. If a contract manufacturer or subcontractor violates labor or other laws or engages in practices that are not generally accepted as safe or ethical, we may experience production disruptions, lost sales or significant negative publicity that could result in long-term damage to our reputation. In some circumstances, parties may assert that we are liable for our contract manufacturers' or subcontractors' labor and operational practices, which could have a material adverse effect on our brand image, results of operations and our financial condition.
Volatility in the Availability of and Prices for Raw Materials We Use in Our Products Could Have a Material Adverse Effect on Our Revenues, Costs, Gross Margins and Profitability.
Our products are derived from raw materials that are subject to both disruptions to supply availability and price volatility. If there are supply disruptions or cash flows.price increases for raw materials we use in our products (as is currently the case) and we are unable to obtain sufficient raw materials to meet production needs or offset rising costs by increasing the price of our products or achieving efficiency improvements, we could experience negative impacts to our sales and profitability.
For Certain Materials We Depend on a Limited Number of Suppliers, Which May Cause Increased Costs or Production Delays.
As an innovative company, some of our materials are highly technical and/or proprietary and may be available from only one source or a very limited number of sources. As a result, from time to time, we may have difficulty satisfying our material requirements. Although we believe that we can identify and qualify additional contract manufacturers to produce or supply these materials or alternative materials as necessary, there are no guarantees that additional contract manufacturers will be available. In addition, depending on the timing, any changes in sources or materials may result in increased costs or production delays.
Our Success Depends on Third-Party Logistics Providers and Our and Third-Party Distribution Facilities.
The majority of our products are manufactured outside of our principal sales markets, which requires these products to be consolidated and transported, sometimes over large geographical distances. A small number of third-party logistics providers currently consolidate, deconsolidate and/or transload almost all of our products. Any disruption in the operations of these providers or changes to the costs they charge, due to capacity constraints, volatile fuel prices or otherwise, could materially impact our sales and profitability. A prolonged disruption in the operations of these providers could also require us to seek alternative distribution arrangements, which may not be available on attractive terms and could lead to delays in distribution of products, either of which could have a significant and material adverse effect on our business, results of operations and financial condition. One of our third-party logistics providers, Expeditors International of Washington Inc. (Expeditors", NASDAQ: EXPD), has announced that it was the subject of a targeted cyberattack resulting in a shut-down of systems and a limited ability to conduct operations. The impact of the Expeditors' limited ability to conduct operations on our business, results of operations and financial condition is unknown at this time.
In addition, the ability to move products over larger geographical distances could be (as is currently the case) constrained by ocean, air and trucking cargo capacity, or disrupted by limitations at ports or borders. These constraints and disruptions could hinder our ability to satisfy demand through our wholesale and DTC businesses, and we may miss delivery deadlines, which may cause our customers to cancel their orders, refuse to accept deliveries or demand a reduction in purchase price. In addition, increases in distribution costs, including but not
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limited to trucking and freight costs, could (as is currently the case) adversely affect our costs, which we may not be able to offset through price increases or decreased promotions.
We receive our products from third-party logistics providers at our owned distribution centers in the United States, Canada and France. The fixed costs associated with owning, operating and maintaining such distribution centers during a period of economic weakness or declining sales can result in lower operating efficiencies, financial deleverage and potential impairment in the recorded value of distribution assets.
We also receive and distribute our products through third-party operated distribution facilities internationally and domestically. We depend on these third-parties to manage the operation of their distribution facilities as necessary to meet our business needs. If the third-parties fail to manage these responsibilities, our international and domestic distribution operations could face significant disruptions.
Our ability to meet consumer and customer expectations, manage inventory, complete sales, and achieve our objectives for operating efficiencies depends on the proper operation of our existing distribution facilities, as well as the facilities of third-parties, the development or expansion of additional distribution capabilities and services, and the timely performance of services by third-parties, including those involved in moving products to and from our distribution facilities and facilities operated by third-parties.
OUR INVESTMENT IN STRATEGIC PRIORITIES EXPOSES US TO CERTAIN RISKS
We May Be Unable to Execute Our Strategic Priorities, Which Could Limit Our Ability to Invest in and Grow Our Business.
Our strategic priorities are to drive brand awareness and sales growth through increased, focused demand creation investments, enhance consumer experience and digital capabilities in all of our channels and geographies, expand and improve global DTC operations with supporting processes and systems and invest in our people and optimize our organization across our portfolio of brands.
To implement our business strategies and initiatives, including those that may result from Project CONNECT,strategic priorities, we must continue to, among other things, modify and fund various aspects of our business, to maintaineffectively prioritize our initiatives and enhance our information systems and supply chain operations to improve efficiencies and to attract, retain and manage qualified personnel.execute effective change management. These efforts, coupled with cost containment measures,a continuous focus on expense discipline, may place increasing strain on management, information technology, financial, product design, marketing, distribution, supply chain, and otherinternal resources, and we may have operating difficulties as a result. For example, in support of our business strategies, we are making significant investments in our business processes and information technology infrastructure that require significant management attention and corporate resources. These changes may make it increasingly difficult to pursue acquisitions or to adapt our information technology systems and business processes to integrate an acquired business. These integration challenges may also be present as we continue to fully integrate operations of prAna, which we acquired in May 2014. Our business strategies involve many risks and uncertainties that, if not managed effectively, may have a material adverse effect on our financial condition, results of operations or cash flows.
Our business strategies and related initiatives andstrategic priorities also generally involve increased expenditures, which could also cause our profitability or operating margin to decline if we are unable to offset our increased spending with increased sales or gross profit or comparable reductions in other operating costs. If our sales or gross profit decline or fail to grow as planned and we fail to sufficiently leverage our
Initiatives to Upgrade Our Business Processes and Information Technology InfrastructureSystems to Optimize Our Operational and Financial Performance Involve Many Risks Which Could Result in, Among Other Things, Business Interruptions, and Higher Costs and Lost Profits.
We regularly implement business process improvement and information technology initiatives intended to optimize our operational and financial performance. Our current initiatives include an initiative to invest in a global retail platform, which encompasses our information technology systems infrastructure to support the growth and expansion of our direct-to-consumer businesses, as well as continued implementation of and upgrades to our integrated global enterprise resource planning ("ERP") software solutions and other complementary information technology systems, which support our supply chain, go-to-market strategies, and direct-to-consumer strategies and operations. Implementation of and upgradesTransitioning to these solutionsnew or upgraded processes and systems arerequires significant capital investments and personnel resources. Implementation is also highly dependent on the coordination of numerous employees, contractors and software and system providers. The interdependence of these solutionsprocesses and systems is a significant risk to the successful completion and continued refinement of these initiatives, and the failure of any one contractor or systemaspect could have a material adverse effect on the implementationfunctionality of our overall information technology infrastructure.business. We may also experience difficulties as we transition to thesein implementing or operating our new or upgraded business processes or information technology systems, including, but not limited to, ineffective or inefficient operations, significant system failures, system outages, delayed implementation and processes, includingloss of system availability, which could lead to increased implementation and/or operational costs, loss or corruption of data, delayed shipments, excess inventory and interruptions of direct-to-consumer operations decreasesresulting in productivitylost sales and/or profits.
We May Not Realize Returns on Our Fixed Cost Investments in Our DTC Business Operations.
One of our strategic priorities is to expand and improve our global DTC business operations. Accordingly, we continue to make investments in our digital capabilities and our DTC operations, including new stores. (See “Initiatives to Upgrade Our Business Processes and Information Technology Systems to Optimize Our Operational and Financial Performance Involve Many Risks Which Could Result in, Among Other Things, Business Interruptions, Higher Costs and Lost Profits”). Since many of the costs of our DTC operations are fixed, we may be unable to reduce expenses in order to avoid losses or negative cash flows if we have insufficient sales, including as a result of restrictions on operations. We may not be able to exit DTC brick and mortar locations and related leases at all or without significant cost or loss, renegotiate the terms thereof, or effectively manage the profitability of our personnel implementexisting brick and become familiar with new systems, increased costs, and lost revenues.mortar stores. In addition, transitioningobtaining real estate and effectively renewing real estate leases for our DTC brick and mortar operations is subject to thesethe real estate market and we may not be able to secure adequate new locations or upgraded systems requires significant capital investments and personnel resources. Difficulties in implementing new or upgraded information systems or significant system failures, including system outages and loss of system availability, could disrupt our operations and have a material adverse effect on our financial condition, results of operations or cash flows.successfully renew leases for existing locations.
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WE ARE SUBJECT TO CERTAIN INFORMATION TECHNOLOGY RISKS
We Rely on Information Technology Systems, including Third-Party Cloud-based Solutions, and Any Failure of These Systems May Result in Disruptions or Outages in Our Highly Customized Information Management SystemsE-Commerce and In-Store Retail Platforms, Loss of Processing Capabilities, and/or Loss of Data, Any of Which May Have a Material Adverse Effect on Our Financial Condition, Results of Operations or Cash Flow.
Our businessreputation and ability to attract, retain and serve consumers and customers is increasingly reliant on information technology. Informationdependent upon the reliable performance of our underlying technology infrastructure and external service providers, including third-party cloud-based solutions. These systems are used across our supply chainvulnerable to damage or interruption and retail operations, from design to distribution and sales, and are used as a method of communication among employees, with our subsidiaries and liaison offices overseas and with our customers, vendors and retail stores.we have experienced interruptions in the past. We also rely on our information systemscloud-based solutions furnished by third-parties primarily to allocate resources, pay vendors, collect from customers, manage product data,process transactions, develop demand and supply plans, manage product design, production, transportation, and distribution, forecast and report operating results, and meet regulatory requirements.
If we and/or our abilitycloud-based solution providers are not successful in preventing or effectively responding to operate efficiently, which could have an adverse effect onoutages and cyberattacks, our financial condition, results of operations orand cash flows. As we continue to transition from our legacy ERPflow could be materially and supporting systems to our new ERP and supporting systems and as we initiate our global retail platform initiative, certain functionality and information from our legacy systems, including that of third party systems that interface with our legacy systems, may not be fully compatible with the new systems. As a result, temporary processes or solutions may be required, including manual operations, which could significantly increase the risk of loss or corruption of data and information used by the business or result in business disruptions, which could have a material adverse effect on our financial condition, results of operations or cash flows.adversely affected.
A Security Breach in the Security of Our or Our Third-Parties' Systems, Exposure of Personal or Confidential Information or Increased Government Regulation Relating to Handling of Personal Data, Could, Among Other Things, Disrupt Our Operations or Cause Us to Incur Substantial Costs or Negatively Affect Our Reputation.
We and many of our third-party vendors manage and storemaintain various types of proprietary information and sensitive and confidential data relating to our business, includingsuch as personally identifiable information. Our information systems, or those of our consumers, our customers, our employees, and our business partners, as well as credit card information in certain key partners whose information systems we may rely on, are subject to an increasing threat of continually evolving cybersecurity risks.instances. Unauthorized parties may attempt to gain access to ourthese systems or information through fraud or other means of deceiving our employees or third-party service providers. Hardware, software or applications we develop or obtain from third parties may contain defects in design or manufacture or other problems that could unexpectedly compromise information security. The methods used to obtain unauthorized access, disable or degrade service or sabotage systems are constantly changing and evolving, and may be difficult to anticipate or detect for long periods of time. We have implemented and regularly review and update processes and procedures to protect against unauthorized access to or use of secured data and to prevent data loss. However, theThe ever-evolving threats mean we and our third-parties must continually evaluate and adapt our systems and processes, and there is no guarantee that theythese efforts will be adequate to safeguard against all data security breaches or misuses of data. For example, in February 2017, we reported the discovery of a cybersecurity incident involving our prAna.com e-commerce website, for which a number of responsive actions were taken, including notification of potentially affected prAna customers.
In addition, as the regulatory environment related to information security, data collection and use and privacy becomes increasingly rigorous, with new and constantly changing requirements applicable to our business, compliance with those requirements could also result in additional costs. For example, the European Union adopted a new regulation that becomes effective May 25, 2018, called the General Data Protection Regulation (“GDPR”), which requires companies to meet additional requirements regarding the handling of personalcosts or liabilities. Non-U.S. data including its use, protection and the ability of persons whose data is stored to exercise certain individual rights with respect to their personal data. The GDPR calls for privacy and process enhancements, accompanied by a commitment of resourcesdata security laws, various U.S. federal and state laws and other expendituresinformation privacy and security standards may be applicable to us. Significant legislative, judicial or regulatory changes have been and could be issued in supportthe future. As new requirements are issued, new processes must be implemented to ensure compliance. In addition, previously implemented processes must be continually refined. This work is accomplished through significant efforts by our employees. The diverted attention of compliance. Violationsthese employees may impact our operations and there may be additional costs incurred by us for third-party resources to advise on the constantly
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changing landscape. Limitations on the use of the GDPRdata may also impact our future business strategies. Additionally, violations of these requirements could result in significant penalties.penalties or litigation from consumers.
In June 2021, the European Commission finalized recommendations in relation to cross border data transfers and published new versions of the Standard Contractual Clauses. The new requirements may cause us to incur costs and expenses in order to comply and may impact the transfer of personal data throughout the Company and to third parties.
We Depend on Contract ManufacturersCertain Legacy Information Technology Systems, Which May Inhibit Our Ability to Operate Efficiently.
Our legacy product development, retail and other systems, on which we continue to manage a portion of our business activities, rely on the availability of limited internal and external resources with the expertise to maintain the systems. In addition, our legacy systems, including aged systems in our Japanese and Korean businesses, may not support desired functionality for our operations and may inhibit our ability to operate efficiently. As we continue to transition from our legacy systems and implement new systems, certain functionality and information from our legacy systems, including that of third-party systems that interface with our legacy systems, may not be fully compatible with the new systems.
WE ARE SUBJECT TO LEGAL AND REGULATORY RISKS
Our Success Depends on the Protection of Our Intellectual Property Rights.
Our registered and common law trademarks, our patented or patent-pending designs and technologies, trade dress and the overall appearance and image of our products have significant value and are important to our ability to differentiate our products from those of our competitors.
As we strive to achieve product innovations, extend our brands into new product categories and expand the geographic scope of our marketing, we face a greater risk of inadvertent infringements of third-party rights or compliance issues with regulations applicable to products with technical features or components. We may become subject to litigation based on allegations of infringement or other improper use of intellectual property rights of third-parties. In addition, failure to successfully obtain and maintain patents on innovations could negatively affect our ability to market and sell our products.
We regularly discover products that are counterfeit reproductions of our products or that otherwise infringe on our proprietary rights. Increased instances of counterfeit manufactured products and sales may adversely affect our sales and the reputation of our brands and result in a shift of consumer preference away from our products. The actions we take to establish and protect trademarks and other proprietary rights may not be adequate to prevent imitation of our products by others or to prevent others from seeking to block sales of our products as violations of proprietary rights. In markets outside of the United States, it may be more difficult for us to establish our proprietary rights and to successfully challenge use of those rights by other parties.
Litigation is often necessary to defend against claims of infringement or to enforce and protect our intellectual property rights. Intellectual property litigation may be costly and may divert management's attention from the operation of our business. Adverse determinations in any litigation may result in the loss of our proprietary rights, subject us to significant liabilities or require us to seek licenses from third-parties, which may not be available on commercially reasonable terms, if at all.
Certain of Our Products Are Subject to Product Regulations and/or Carry Warranties, Which May Cause an Increase to Our Expenses in the Event of Non-Compliance and/or Warranty Claims.
Our products are manufactured by contract manufacturers worldwide.subject to increasingly stringent and complex domestic and foreign product labeling and performance and safety standards, laws and other regulations. These requirements could result in greater expense associated with compliance efforts, and failure to comply with these regulations could result in a delay, non-delivery, recall, or destruction of inventory shipments during key seasons or in other financial penalties. Significant or continuing noncompliance with these standards and laws could disrupt our business and harm our reputation.
Our products are generally used in outdoor activities, sometimes in severe conditions. Product recalls or product liability claims resulting from the failure, or alleged failure, of our products could have a material adverse effect on the reputation of our brands and result in additional expenses. Most of our products carry limited warranties for defects in quality and workmanship. We maintain a warranty reserve for estimated future warranty claims, but the actual costs of servicing future warranty claims may exceed the reserve.
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We May Have Additional Tax Liabilities or Experience Increased Volatility in Our Effective Tax Rate.
As a global company, we determine our income tax liability in various tax jurisdictions and our effective tax rate based on an analysis and interpretation of local tax laws and regulations and our financial projections. This analysis requires a significant amount of judgment and estimation and is often based on various assumptions about the future, which, in times of economic disruptions, are highly uncertain. These determinations are the subject of periodic domestic and foreign tax audits. Although we enter into purchase order commitmentsaccrue for uncertain tax positions, our accruals may be insufficient to satisfy unfavorable findings. Unfavorable audit findings and tax rulings may result in payment of taxes, fines and penalties for prior periods and higher tax rates in future periods.
On December 22, 2017, the United States government enacted comprehensive tax legislation, commonly referred to as the Tax Cuts and Jobs Act (the "TCJA"). The TCJA made broad and complex changes to the United States tax code. In addition, on March 27, 2020, the United States government enacted the U.S. Coronavirus Aid, Relief, and Economic Security Act (the "CARES Act"). A change in interpretation of the applicable revisions to the United States tax code and related tax accounting guidance, changes in assumptions made in developing these estimates, and regulatory guidance that may be issued with these contract manufacturers each season, we generally do not maintain long-term manufacturing commitments with them. Without long-term or reserve commitments, there is no assurance that we will be ablerespect to secure adequate or timely production capacity or favorable pricing if growth or product demand differsthe applicable revisions to the United States tax code, and state tax implications as a result of the TCJA, the CARES Act, and other recent legislation may cause actual amounts to differ from our forecasts. Contract manufacturers may failprovisional estimates. In addition, proposals to perform as expectedreform U.S. and foreign tax laws could significantly impact how U.S. multinational corporations are taxed on foreign earnings and could increase the U.S. corporate tax rate. Although we cannot predict whether or in what form these proposals will pass, several of the proposals considered, if enacted into law, could have an adverse impact on our competitors may obtain production capacities that effectively limiteffective tax rate, income tax expense and cash flows.
Other changes in the tax laws of the jurisdictions where we do business, including an increase in tax rates or eliminatean adverse change in the availabilitytreatment of these resources to us. If a contract manufacturer fails to ship ordersan item of income or expense, could result in a timely mannermaterial increase in our tax expense. For example, changes in the tax laws of foreign jurisdictions could arise as a result of the Base Erosion and Profit Shifting project undertaken by the Organization for Economic Co-operation and Development ("OECD"). The OECD, which represents a coalition of member countries, has recommended changes to numerous long-standing tax principles. In addition, recent efforts to reform how digital profits are taxed globally could have significant compliance and cost implications. As these changes are adopted by countries, tax uncertainty could increase and may adversely affect our provision for income taxes.
WE OPERATE GLOBALLY AND ARE SUBJECT TO SIGNIFICANT RISKS IN MANY JURISDICTIONS
Global Regulation and Economic and Political Conditions, as well as Potential Changes in Regulations, Legislation and Government Policy, May Negatively Affect Our Business.
We are subject to risks generally associated with doing business internationally. These risks include, but are not limited to, the burden of complying with, and unexpected changes to, foreign and domestic laws and regulations, such as anti-corruption and forced labor regulations and sanctions regimes, climate-change regulations, the effects of fiscal and political crises and political and economic disputes, changes in diverse consumer preferences, foreign currency exchange rate fluctuations, managing a diverse and widespread workforce, political unrest, terrorist acts, military operations, disruptions or delays in shipments, disease outbreaks, natural disasters, and changes in economic conditions in countries in which we contract to meetmanufacture, source raw materials or sell products. Our ability to sell products in certain markets, demand for our standards or if we are unable to obtain necessary capacities, we could experience supply disruptions that would hinderproducts in certain markets, our ability to satisfy demand throughcollect accounts receivable, our direct-to-consumer businessescontract manufacturers' ability to procure raw materials or manufacture products, distribution and welogistics providers' ability to operate, our ability to operate brick and mortar stores, our workforce, and our cost of doing business (including the cost of freight and logistics) may miss delivery deadlinesbe impacted by these events should they occur. Our exposure to these risks is heightened in Vietnam, where a significant portion of our contract manufacturing is located, in Russia, where our largest international distributor is located, and in China, where a large portion of the raw materials used in our products is sourced by our contract manufacturers. Should certain of these events occur in Vietnam, Russia or incur additional costs, which mayChina, they could cause a substantial disruption to our wholesale or distributor customers to cancel their orders, refuse to accept deliveries or demand a reduction in purchase prices, any of which couldbusiness and have a material adverse effect on our financial condition, results of operations orand cash flows.
In addition, many of our imported products are manufactured outsidesubject to duties, tariffs or other import limitations that affect the cost and quantity of our principal sales markets, which requires these products to be transported by third parties, sometimes over large geographical distances. Shortages in ocean or air freight capacity and volatile fuel costs can result in rapidly changing transportation costs. Similarly, disruption to shipping and transportation channels due to labor disputes could cause us to rely more heavily on alternative modesvarious types of transportation to achieve timely delivery to our customers, resulting in significantly higher freight costs. Because we price our products in advance and changes in transportationgoods imported into the United States and other markets, including the punitive tariffs on U.S. products imported from China imposed in 2019. In addition, goods suspected of being manufactured with forced labor could be blocked from importation into the U.S., which could materially impact sales.
In connection with the United Kingdom's recent exit from the European Union (commonly referred to as "Brexit"), on December 24, 2020, the European Union ("E.U.") and the United Kingdom ("U.K.") reached an agreement, the E.U.-U.K. Trade and Cooperation Agreement, to govern aspects of the relationship of the E.U. and U.K. following Brexit. As a result of no longer having "free circulation" between the U.K. and
COLUMBIA SPORTSWEAR COMPANY | 2021 FORM 10-K | 13
the E.U., we may, and have incurred additional duties. These additional costs may be difficultmitigated, to predict,the extent we may not beare able, to pass all achieve favorable interpretations and/or any portion of these higher costs on to our customers or adjust our pricing structurerulings from the U.K.'s Her Majesty's Revenue and Customs.
Fluctuations in a timely manner in order to remain competitive, either of which could have a material adverse effect on our financial condition, results of operations or cash flows.
We derive a significant portion of our net sales from markets outside the United States, comprisedwhich consist of sales to wholesale customers and directly to consumers by our consolidated subsidiariesentities in Europe, Korea, Japan,Asia, and Canada our China joint venture, and sales to independent international distributors who operate within the EMEA and LAAP regions. Sales and related operational expenses of our foreign subsidiaries and China joint venture, as well as their respective assets and liabilities, are denominated in currencies other than the U.S. dollar and translated into U.S. dollars for periodic reporting purposes using the exchange rates in effect during each period. If the U.S. dollar strengthens against the foreign subsidiary's functional currency, translated revenues and expenses will decline on a relative basis.
LAAP. The majority of our purchases of finished goods inventory from contract manufacturers are denominated in U.S.United States dollars, including purchases by our foreign subsidiariesentities. These purchase and China joint venture. The costsale transactions expose us to the volatility of global economic conditions, including fluctuations in inflation and foreign currency exchange rates. Our international revenues and expenses generally are derived from sales and operations in foreign currencies, and these products mayrevenues and expenses could be affected by currency fluctuations, specifically amounts recorded in foreign currencies and translated into United States dollars for consolidated financial reporting, as weakening of foreign currencies relative changes into the United States dollar adversely affects the United States dollar value of the local currencies of these subsidiariesCompany’s foreign currency-denominated sales and the joint ventureearnings.
Our exposure is increased with respect to our wholesale customers (including international distributors), where, in relation to the U.S. dollar and in relation to the local currencies of our manufacturing vendors. In order to facilitate solicitation of advance orders from wholesale customers and distributors for the spring and fall seasons, we establish local-currency-denominated wholesale and retail price lists in each of our foreign subsidiariesentities approximately six to nine months prior to U.S. dollar-
We employ several tacticsstrategies in an effort to mitigate this transactional currency risk, including the use of currency forward and option contracts. We may also implement local-currency wholesale and retail price increases in our subsidiary and joint venture markets in an effort to mitigate the effects of currency exchange rate fluctuations on inventory costs. Therebut there is no assurance that our use of currency forward and option contracts and implementation of price increases, in combination with other tactics,these strategies will succeed in fully mitigating the negative effects of adverse foreign currency exchange rate fluctuations on the cost of our finished goods in a given period or that price increases will be accepted by our wholesale customers, international distributors or consumers. Our gross margins are adversely affected whenever we are not able to offset the full extent of finished goods cost increases caused by adverse fluctuations in foreign currency exchange rates.
Currency exchange rate fluctuations may also create indirect risk to our business by disrupting the business of independent finished goods manufacturers from which we purchase our products. When their functional currencies weaken in relation to other currencies, the raw materials they purchase on global commodities markets become more expensive and more difficult to finance. Although each manufacturer bears the full risk of fluctuations in the value of its currency against other currencies, our business can be indirectly affected when adverse fluctuations cause a manufacturer to raise the prices of goods it produces for us, disrupt the manufacturer's ability to purchase the necessary raw materials on a timely basis, or disrupt the manufacturer's ability to function as an ongoing business.
WE ARE SUBJECT TO NUMEROUS OPERATIONAL RISKS
Our Orders from Customers Are SubjectAbility to CancellationManage Fixed Costs Across a Business That is Affected by Seasonality May Impact Our Profits.
Our business is affected by the general seasonal trends common to retain distribution rights, the distributorsoutdoor industry. Our products are not otherwise obligated to purchase product. Sales to our wholesale customers and distributors are generallymarketed on an order-by-ordera seasonal basis and our annual net sales are subject to rights of cancellation and rescheduling. We considerweighted heavily toward the timing of delivery dates infall/winter season, while our wholesale customer orders when we forecast our sales and earnings for future periods. If any of our major customers, including distributors, experience a significant downturn in business or fail to remain committed to our products or brands, these customers could postpone, reduce, cancel, or discontinue purchases from us.operating expenses are more equally distributed throughout the year. As a result, we could experienceoften a decline in sales or gross profit, write-downsmajority of excess inventory, increased discounts, extended credit terms to our customers, or uncollectable accounts receivable, which could have a material adverse effect on our financial condition, results of operations or cash flows.
Labor Matters, Changes in Labor Laws and Our Ability to Meet Our Labor Needs May Reduce Our Revenues and Earnings.
Our business depends on our ability to generate sales through our direct-to-consumer businesses may be adversely affected, whichsource and distribute products in turn could have a material adverse effect on our financial condition, results of operations or cash flows.
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ports, transportation carriers, retail stores, or if we close stores, we may experience significant reductions in sales and income or incur significant write-downs of inventory, severance costs, lease termination costs, impairment losses on long-lived assets, or loss of working capital, which could have a material adverse effect on our financial condition, results of operations or cash flows.
In addition, our ability to meet our labor needs at our distribution centers, retail stores, corporate headquarters, and regional subsidiaries, including our ability to find qualified employees while controlling wage and related labor costs, is generally subject to numerous external factors, including the availability of a greater effect thansufficient number of qualified people in the past as we expandwork force of the markets in which our offeringsoperations are located, unemployment levels within those markets, absenteeism, prevailing wage rates, changing demographics, parental responsibilities, health and other insurance costs, adoption of new or revised employment and labor laws and regulations, and fear of contracting COVID-19. Our ability to include more product categories in more geographic areas that are generally more sensitive to fashion trends. We also face risks because our success depends on oursource, distribute and our customers' abilities to anticipate consumer preferences and buying patterns, including the growth of e-commerce off-price retailing, and respond to changessell products in a timely manner. Lead times for many of our products may make it more difficult for us to respond rapidly to new or changing product trends or consumer preferences. In addition, our decisions about product designs often are made far in advance of consumer acceptance. Although we try to manage our inventory risk by soliciting advance order commitments from customers, we generally place a significant portion of our seasonal production orders with our contract manufacturers before we have received all of a season's advance orders from customers, and orderscost-effective manner may be canceled by customers before shipment. If we or our customers fail to anticipate and respond to consumer preferences or fail to respond in a timely manner or if we or our customers are unable to effectively navigate a transforming retail marketplace, we could suffer reputational damage to our brands and we may experience lower sales, excess inventories and lower profit margins in current and future periods, any of which could have a material adverse effect on our financial condition, results of operations or cash flows.
We May Incur Additional Expenses, Be Unable to Obtain Financing, or Be Unable to Meet Financial Covenants of Our Financing Agreements as a Result of Downturns in the Global Markets.
Our vendors, wholesale customers, licensees and other participants in our supply chain may require access to credit markets in order to do business. Credit market conditions may slow our collection efforts as our wholesale customers find it more difficult to obtain necessary financing, leading to higher than normal accounts receivable. This could result in greater expense associated with collection efforts and increased bad debt expense. Credit conditions and/or supply chain disruptions may impair our vendors' ability to finance the purchase of raw materials or general working capital needs to support our production requirements, resulting in a delay or non-receipt of inventory shipments during key seasons.
Historically, we have a material adverse effectlimited our reliance on debt to finance our working capital, capital expenditures and investing activity requirements. We expect to fund our future capital expenditures with existing cash, expected operating cash flows and credit facilities, but, if the need arises to finance additional expenditures, we may need to seek additional funding. Our ability to obtain additional financing will depend on many factors, including prevailing market conditions, our financial condition resultsand our ability to negotiate favorable terms and conditions. Financing may not be available on terms that are acceptable or favorable to us, if at all.
Our credit agreements have various financial and other covenants. If an event of operationsdefault were to occur, the lenders could, among other things, declare outstanding amounts due and payable. In addition, if the financial markets were to return to recessionary conditions, the ability of one or cash flows.more of the banks participating in our credit agreement to honor their commitments thereunder could be impaired.
Acquisitions Are Subject to Many RisksRisks.
From time to time, we may pursue growth through strategic acquisitions of assets or companies. Acquisitions such as our acquisition of prAna in May 2014, are subject to many risks, including potential loss of significant customers or key personnel of the acquired business as a result of the change in ownership, difficulty integrating the operations of the acquired business or achieving targeted efficiencies, the incurrence of substantial costs and expenses related to the acquisition effort, and diversion of management's attention from other aspects of our business operations.
Acquisitions may also cause us to incur debt or result in dilutive issuances of our equity securities. Our acquisitions may cause large one-time expenses or create goodwill or other intangible assets that could result in significant impairment charges in the future. We also make various estimates and assumptions in order to determine purchase price allocation and estimate the fair value of assets acquired and liabilities assumed. If our estimates or assumptions used to value these assets and liabilities vary from actual or future projected results, we may be exposed to losses, including impairment losses, that could be material.
We do not provide any assurance that we will be able to successfully integrate the operations of any acquired businesses into our operations or achieve the expected benefits of any acquisitions. The failure to successfully integrate newly acquired
businesses or achieve the expected benefits of strategic acquisitions in the future could have an adverse effect on our financial condition, results of operations or cash flows. We may not complete a potential acquisition for a variety of reasons, but we may nonetheless incur material costs in the preliminary stages of evaluating and pursuing such an acquisition that we cannot recover.
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Extreme Weather Conditions, Climate Change, and Natural Disasters Could Negatively Impact Our Operating Results and Financial Condition.
Extreme weather conditions in the areas in which our retail stores, suppliers, consumers, customers, distribution centers, headquarters and vendors are located could adversely affect our operating results and financial condition. Moreover, climate change and natural disasters such as earthquakes, hurricanes and tsunamis, whether occurring in the United States or abroad, and their related consequences and effects, including energy shortages and public health issues, could disrupt our operations, the operations of our vendors and other suppliers or result in economic instability and changes in consumer preferences and spending that may negatively impact our operating results and financial condition.
An Outbreak of Disease or Similar Public Health Threat, Such as the COVID-19 Pandemic, Could Have, and in the Case of the COVID-19 Pandemic Has Had and is Expected to Continue to Have, an Adverse Impact on Our Business, Operating Results and Financial Condition.
An outbreak of disease or similar public health threat, such as the COVID-19 pandemic, could have, and in the case of the COVID-19 pandemic has had and is expected to continue to have, an adverse impact on our business, financial condition and operating results, including in the form of lowered net sales and the delay of inventory production and fulfillment in impacted regions. Fear of contracting COVID-19, individuals contracting COVID-19 and the actions taken, and that may be taken, by governmental authorities, our third-party logistics providers, our landlords, our competitors or by us relating to the COVID-19 pandemic may (and in many cases, have):
•Cause disruptions in the supply chain, including the ability to produce and deliver product as expected (see “Our Reliance on Contract Manufacturers, Including Our Ability to Enter Into Purchase Order Commitments with Them and Maintain Quality Standards of Our Products and Standards of Manufacturing Processes at Contract Manufacturers, May Result in Lost Sales and Impact our Gross Margin and Results of Operations”, “For Certain Materials We Depend on a Limited Number of Suppliers, Which May Cause Increased Costs or Production Delays” and “Our Success Depends on Third-Party Logistics Providers and Our and Third-Party Distribution Facilities”);
•Result in canceled orders, non-payment for orders received and/or delayed payment for orders received (see "Our Orders from Wholesale Customers are Subject to Cancellation, Which Could Lead to a Decline in Sales or Gross Profit, Write-downs of Excess Inventory, Increased Discounts or Extended Credit Terms to Our Wholesale Customers");
•Restrict the operation of our retail store operations and our ability to meet consumer demand at our stores (see "Labor Matters, Changes in Labor Laws and Our Ability to Meet Our Labor Needs May Reduce Our Revenues and Earnings" and "We May Not Realize All of the Anticipated Benefits ofReturns on Our Joint VentureFixed Cost Investments in ChinaOur DTC Business Operations");
•Result in a 60% interest, is subjectmisalignment between demand and supply (see "Our Inability to Accurately Predict Consumer and/or Customer Demand for Our Products Could Lead to a numberBuild-up of risksInventory or a Lack of Inventory and uncertainties. For example, because our joint venture partner has protective voting rights with respect to specified major business decisions of the joint venture, we may experience difficulty reaching agreement as to implementation of various changes to the joint venture's business. For this reason, orAffect Our Gross Margin");
•Result in labor shortages, including as a result of other factors, we may not realize allany vaccine mandate or our return to work policies ("Labor Matters, Changes in Labor Laws and Our Ability to Meet Our Labor Needs May Reduce Our Revenues and Earnings");
•Increase reliance by consumers on e-commerce platforms (see "We are Subject to a Number of Risks Which May Adversely Affect Consumer and/or Wholesale Customer Demand for Our Products and Lead to a Decline in Sales and/or Earnings" and "We Rely on Information Technology Systems, including Third-Party Cloud-based Solutions, and Any Failure of These Systems May Result in Disruptions or Outages in Our E-Commerce and In-Store Retail Platforms, Loss of Processing Capabilities, and/or Loss of Data, Any of Which May Have a Material Adverse Effect on Our Financial Condition, Results of Operations or Cash Flow");
•Impair the anticipated benefitsfinancial health of certain of our wholesale customers (see "We are Subject to a Number of Risks Which May Adversely Affect Consumer and/or Wholesale Customer Demand for Our Products and Lead to a Decline in Sales and/or Earnings");
•Impact previous business assumptions (see "Acquisitions Are Subject to Many Risks", "We May Have Additional Tax Liabilities or Experience Increased Volatility in Our Effective Tax Rate" and "Our Inability to Accurately Predict Consumer and/or Customer Demand for Our Products Could Lead to a Build-up of Inventory or a Lack of Inventory and Affect Our Gross Margin");
•Increase the joint venture,reliance of our employees on digital solutions (see “We Rely on Information Technology Systems, including Third-Party Cloud-based Solutions, and our resultsAny Failure of operations could be adversely affected.These Systems May Result in Disruptions or Outages in Our E-Commerce and In-Store Retail Platforms, Loss of Processing Capabilities, and/or Loss of Data, Any of Which May Have a Material Adverse Effect on Our Financial Condition, Results of Operations or Cash Flow” and “A Security Breach of Our or Our Third-Parties' Systems, Exposure of Personal or Confidential Information or Increased Government Regulation Relating to Handling of Personal Data, Could, Among Other Things, Disrupt Our Operations or Cause Us to Incur Substantial Costs or Negatively Affect Our Reputation”);
COLUMBIA SPORTSWEAR COMPANY | 2021 FORM 10-K | 16
•Restrict global business and travel (see “Global Regulation and Economic and Political Conditions, as well as Potential Changes in Regulations, Legislation and Government Policy, May Negatively Affect Our BusinessBusiness”);
•Result in various tax jurisdictions based on an analysisincremental costs from the adoption of preventative measures, including providing facial coverings and interpretationhand sanitizer, rearranging operations to follow social distancing protocols, conducting temperature checks and undertaking regular and thorough disinfecting of local tax lawssurfaces, and regulations. This analysis requires a significant amountproviding testing; and/or
•Cause any number of judgment and estimation and is often based on various assumptions aboutother disruptions to our business, the future actionsrisks of the local tax authorities. These determinations are the subject of periodic domestic and foreign tax audits. Although we accrue for uncertain tax positions, our accrualswhich may be insufficient to satisfy unfavorable findings. Unfavorable audit findings and tax rulings may result in payment of taxes, fines and penalties for prior periods and higher tax rates in future periods, which may have a material adverse effect on our financial condition, results of operations or cash flows. otherwise identified herein.
Our Investment Securities May Be Adversely Affected by Market ConditionsConditions.
Our investment portfolio is subject to a number of risks and uncertainties. Changes in market conditions, such as those that accompany an economic downturn or economic uncertainty, may negatively affect the value and liquidity of our investment portfolio, perhaps significantly. Our ability to find diversified investments that are both safe and liquid and that provide a reasonable return may be impaired, potentially resulting in lower interest income, less diversification, longer investment maturities, or other-than-temporary impairments.
We Depend on Key SuppliersPersonnel.
Our future success will depend in part on the continued service of key personnel and our ability to attract, retain and develop key managers, designers, salestalent and information technology professionals, and others.to effectively manage succession. We face intense competition for these individuals worldwide, and there is a significant concentration of well-funded apparel and footwear competitors near our headquarters in Portland, Oregon. We may not be able to attract qualified new employees or retain existing employees, which may have a material adverse effect on our financial condition, results of operations or cash flows.
We License our Proprietary Rights to Third-Parties and Could Suffer Reputational Damage to Our Business Is Affected by SeasonalityBrands if We Fail to Choose Appropriate Licensees.
We currently license, and expect to the outdoor industry. Our products are marketed on a seasonal basis and our annual net sales are weighted heavily toward the fall/winter season, while our operating expenses are more equally distributed throughout the year. As a result, the majority, and sometimes all,continue licensing, certain of our operating profits are generated inproprietary rights, such as trademarks or copyrighted material, to third-parties. We rely on our licensees to help preserve the second half of the year. The expansionvalue of our direct-to-consumer businesses and sales growth inbrands. Although we attempt to protect our winter footwear business has increasedbrands through approval rights, we cannot completely control the proportionuse of sales and profits that we generate in the fourth calendar quarter. This seasonality, along with other factors that are beyond our control and that are discussed elsewhere in this section, may adversely affectlicensed brands by our business and cause our resultslicensees. The misuse of operations to fluctuate. As a result, our profitability may be materially affected if management is not able to timely adjust expenses in reaction to adverse events such as unfavorable weather, weak consumer spending patternsbrand by or unanticipated levels of order cancellations. Results of operations in any period should not be considered indicative of the results to be expected for any future period.
In addition, from time to time we license the failure, or alleged failure, of our products could have a material adverse effect on the reputation ofright to operate retail stores for our brands to third-parties, primarily to our financial condition, results of operations,independent international distributors. We provide training to support these stores and set operational standards. However, these third-parties may not operate the stores in a manner consistent with our standards, which could cause reputational damage to our brands or cash flows. Most of our products carry limited warranties for defects in quality and workmanship. We maintain a warranty reserve for estimated future warranty claims, but the actual costs of servicing future warranty claims may exceed the reserve, which may also have a material adverse effect on our financial condition, results of operations or cash flows.harm these third-parties' sales.
RISKS RELATED TO OUR SECURITIES
Our Common Stock Price May Be VolatileVolatile.
Our common stock is traded on the NASDAQ Global Select Market. The size of our public float and our average daily trading volume makes the price of our common stock susceptible to large degrees of fluctuation. Factors such as general market conditions, actions by institutional investors to rapidly accumulate or divest of a substantial number of our shares, fluctuations in financial results, variances from financial
COLUMBIA SPORTSWEAR COMPANY | 2021 FORM 10-K | 17
market expectations, changes in earnings estimates or recommendations by analysts, or announcements by us or our competitors may cause the market price of our common stock to fluctuate, perhaps substantially.
Certain Shareholders Have Substantial Control a Majority of Our Common StockOver us and May Sell SharesAre Able to Influence Corporate Matters.
At December 31, 2021, five related shareholders, The Gertrude Boyle Trust, Sarah A. Bany, Timothy P. Boyle, Joseph P. Boyle, and Molly E. Boyle, beneficially own a majoritycontrolled just under 50% of our common stock.stock outstanding. Following Gertrude Boyle's death, Sarah A. Bany is serving as trustee of The Gertrude Boyle Trust, which holds the shares that were beneficially owned by Gertrude Boyle. As a result, if acting together, they can effectively controlSarah A. Bany, Timothy P. Boyle, Joseph P. Boyle, and Molly E. Boyle are able to exercise significant influence over all matters requiring shareholder approval withoutapproval. These holdings could be significantly diminished (and with them the cooperationrelated effective control percentage) to satisfy any applicable estate or unrealized gains tax obligations of other shareholders. holders.
The Sale or Proposed Sale of a Substantial Number of Shares of Our Common Stock Could Cause the Market Price of Our Common Stock to Decline.
Shares held by these five shareholdersThe Gertrude Boyle Trust, Sarah A. Bany, Timothy P. Boyle, Joseph P. Boyle, and Molly E. Boyle, are available for resale, subject to the requirements of, and the rules under, the Securities Act of 1933 and the Securities Exchange Act of 1934. The sale or the prospect of the sale of a substantial number of these shares may have an adverse effect on the market price of our common stock.
We also may issue our capital stock or securities convertible into our capital stock from time to time in connection with a financing, acquisition, investments, or otherwise. Any such issuance could result in substantial dilution to our existing shareholders and cause the market price of our common stock to decline.
| ITEM 1B. | UNRESOLVED STAFF COMMENTS | ||||
None.
COLUMBIA SPORTSWEAR COMPANY | 2021 FORM 10-K | 18
| ITEM 2. | PROPERTIES | ||||
The following is a summary of principal properties owned or leased by us:us.
| Ownership | ||||||||
| Portland, Oregon | Corporate Headquarters | Owned | ||||||
| Portland, Oregon | SOREL Headquarters | |||||||
| Leased | ||||||||
| Richmond, California | Mountain Hardwear Headquarters | Leased | ||||||
| Portland, Oregon | Owned | |||||||
| Robards, Kentucky | Owned | |||||||
London, Ontario | Canadian Operation and Distribution | Owned | ||||||
| Geneva, Switzerland | Europe Headquarters | Leased | ||||||
| Strasbourg, France | Europe Administrative Operation | Owned | ||||||
| Cambrai, France | Europe Distribution Center | Owned | ||||||
| LAAP China Headquarters | Leased | |||||||
| Tokyo, Japan | LAAP Japan Headquarters | Leased | ||||||
| Seoul, Korea | LAAP Korea Headquarters | Leased | ||||||
In addition, as of December 31, 2017,2021, we directly operated approximately 455 retail stores, the vast majority of which are leased approximately 290 locations globally for the operationunder a variety of our brandedarrangements, including long-term, short-term, and outlet retail stores.variable-payment leases. We also have several leases globally for office space, warehouse facilities, storage space, vehicles, and equipment, among other things. Refer to Note 139 in Item 8 of Notes to Consolidated Financial Statementsthis Annual Report on Form 10-K for further lease-related disclosures.
| ITEM 3. | LEGAL PROCEEDINGS | ||||
We are 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. We have considered facts related to legal and regulatory matters and opinions of counsel handling these matters and do not believe the ultimate resolution of these proceedings will have a material adverse effect on our financial condition, results of operations or cash flows.
| ITEM 4. | MINE SAFETY DISCLOSURES | ||||
Not applicable.
COLUMBIA SPORTSWEAR COMPANY | 2021 FORM 10-K | 19
| Item 5. | MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES | ||||
MARKET INFORMATION
Our common stock is listedtraded on the NASDAQ Global Select Market and trades under the symbol "COLM."
HOLDERS
At February 9, 2018,11, 2022, we had approximately 280262 shareholders of record, although there iswe have a much larger number of beneficial owners.owners, whose shares of record are held by banks, brokers and other financial institutions
DIVIDENDS
HIGH | LOW | DIVIDENDS DECLARED | |||
| 2017 | |||||
| First Quarter | $60.91 | $51.76 | $0.18 | ||
| Second Quarter | $60.00 | $51.56 | $0.18 | ||
| Third Quarter | $62.09 | $54.89 | $0.18 | ||
| Fourth Quarter | $72.54 | $59.06 | $0.19 | ||
| 2016 | |||||
| First Quarter | $62.32 | $43.94 | $0.17 | ||
| Second Quarter | $62.95 | $51.70 | $0.17 | ||
| Third Quarter | $61.98 | $52.97 | $0.17 | ||
| Fourth Quarter | $63.55 | $53.00 | $0.18 | ||
Our current dividend policy is dependent on our earnings, capital requirements, financial condition, restrictions imposed by our credit agreements, and other factors considered relevant by our Board of Directors. For various restrictionsQuarterly dividends on our abilitycommon stock, when declared by our Board of Directors, are paid in March, May, August, and November.
Our Board of Directors approved a quarterly cash dividend of $0.30 per share, payable on March 21, 2022 to pay dividends, refer to Note 8shareholders of Notes to Consolidated Financial Statements.record on March 11, 2022.
PERFORMANCE GRAPH
The line graph below compares the cumulative total shareholder return of our common stock with the cumulative total return of the Standard & Poor's ("S&P") 400 Mid-CapRussell 1000 Index and the Russell 30001000 Textiles Apparel Manufacturersand Shoes Index for the period beginning December 31, 20122016 and ending December 31, 2017.2021. The graph assumesand table assume that $100 was invested on December 31, 2012,2016, and that any dividends were reinvested.
Historical stock price performance should not be relied on as indicative of future stock price performance.
COLUMBIA SPORTSWEAR COMPANY | 2021 FORM 10-K | 20
Total Return Analysis
| 12/31/2012 | 12/31/2013 | 12/31/2014 | 12/31/2015 | 12/31/2016 | 12/31/2017 | ||||||
| Columbia Sportswear Co. | $100.00 | $149.82 | $171.82 | $190.20 | $230.18 | $287.41 | |||||
| S&P 400 Mid-Cap Index | $100.00 | $133.50 | $146.54 | $143.35 | $173.08 | $201.20 | |||||
| Russell 3000 Textiles Apparel Mfrs. | $100.00 | $147.05 | $163.51 | $159.99 | $141.39 | $175.19 | |||||
| Year Ended December 31, | |||||||||||||||||||||||||||||||||||
| 2016 | 2017 | 2018 | 2019 | 2020 | 2021 | ||||||||||||||||||||||||||||||
| Columbia Sportswear Company | $ | 100.00 | $ | 124.86 | $ | 147.61 | $ | 177.65 | $ | 155.49 | $ | 175.13 | |||||||||||||||||||||||
| Russell 1000 Index | $ | 100.00 | $ | 121.69 | $ | 115.87 | $ | 152.28 | $ | 184.20 | $ | 232.93 | |||||||||||||||||||||||
| Russell 1000 Textiles Apparel and Shoes Index | $ | 100.00 | $ | 123.55 | $ | 126.99 | $ | 174.11 | $ | 217.14 | $ | 240.70 | |||||||||||||||||||||||
ISSUER PURCHASES OF EQUITY SECURITIES
Since the inception of our stockshare repurchase planprogram in 2004 through December 31, 2017,2021, our Board of Directors has authorized the repurchase of up to $700,000,000$1.5 billion of our common stock. As of December 31, 2017, we had repurchased 21,658,035 shares under this program for an aggregate purchase price of approximately $562,064,000. Shares of our common stock may be purchased in the open market or through privately negotiated transactions, subject to market conditions.conditions, and generally settle subsequent to the trade date. The repurchase program does not obligate us to acquire any specific number of shares or to acquire shares over any specified period of time. Under this program as of December 31, 2021, we had repurchased 28.5 million shares at an aggregate purchase price of $1,183.7 million, and had $316.3 million remaining available.
The following is a summary of our common stock repurchases during the three monthsquarter ended December 31, 2017.
2021:
| Period | Total Number of Shares Purchased | Average Price Paid per Share | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (in millions) | ||||||||||||||||||||||
| October 1, 2021 through October 31, 2021 | 313,779 | $ | 95.67 | 313,779 | $ | 325.0 | ||||||||||||||||||||
| November 1, 2021 through November 30, 2021 | 31,301 | $ | 102.70 | 31,301 | $ | 321.8 | ||||||||||||||||||||
| December 1, 2021 through December 31, 2021 | 56,246 | $ | 97.38 | 56,246 | $ | 316.3 | ||||||||||||||||||||
| Total | 401,326 | $ | 96.46 | 401,326 | $ | 316.3 | ||||||||||||||||||||
| ITEM 6. | [Reserved] | ||||
Part II, Item 6. SELECTED FINANCIAL DATA6 of this Annual Report on Form 10-K is no longer required.
| Year Ended December 31, | ||||||||||||||||||||
| 2017 | 2016 | 2015 | 2014 | 2013 | ||||||||||||||||
| (In thousands, except per share amounts) | ||||||||||||||||||||
| Statement of Operations Data: | ||||||||||||||||||||
| Net sales | $ | 2,466,105 | $ | 2,377,045 | $ | 2,326,180 | $ | 2,100,590 | $ | 1,684,996 | ||||||||||
| Net income attributable to Columbia Sportswear Company | 105,123 | 191,898 | 174,337 | 137,173 | 94,341 | |||||||||||||||
| Per Share of Common Stock Data: | ||||||||||||||||||||
| Earnings per share attributable to Columbia Sportswear Company: | ||||||||||||||||||||
| Basic | $ | 1.51 | $ | 2.75 | $ | 2.48 | $ | 1.97 | $ | 1.37 | ||||||||||
| Diluted | 1.49 | 2.72 | 2.45 | 1.94 | 1.36 | |||||||||||||||
| Cash dividends per share | 0.73 | 0.69 | 0.62 | 0.57 | 0.46 | |||||||||||||||
| Weighted average shares outstanding: | ||||||||||||||||||||
| Basic | 69,759 | 69,683 | 70,162 | 69,807 | 68,756 | |||||||||||||||
| Diluted | 70,453 | 70,632 | 71,064 | 70,681 | 69,434 | |||||||||||||||
| December 31, | ||||||||||||||||||||
| 2017 | 2016 | 2015 | 2014 | 2013 | ||||||||||||||||
| Balance Sheet Data: | ||||||||||||||||||||
| Total assets | $ | 2,212,902 | $ | 2,013,894 | $ | 1,846,153 | $ | 1,792,209 | $ | 1,605,588 | ||||||||||
| Note payable to related party | — | 14,053 | 15,030 | 15,728 | — | |||||||||||||||
| ITEM 7. | MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS | ||||
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with "Special Note Regarding Forward Looking Statements", Item 1, of Part IItem 1A, and Item 8 of this Annual Report on Form 10-K. In addition, refer to Item 7 in our Annual Report on Form 10-K for the year ended December 31, 2020 for our discussion and analysis comparing financial condition and results of Part II, contains forward-looking statements. Forward-looking statements include any statements relatedoperations from 2020 to 2019.
OVERVIEW
We connect active people with their passions. We are a global leader in designing, developing, marketing, and distributing outdoor, active and everyday lifestyle products. We manage these products in two categories: apparel, accessories, and equipment products and footwear products. We provide our products through our four well-known brands, Columbia, SOREL, Mountain Hardwear, and prAna. Apparel, accessories, and equipment products are provided by our Columbia, Mountain Hardwear and prAna brands. Footwear products are provided by our Columbia and SOREL brands. We sell our products in approximately 90 countries and operate in four geographic segments: U.S., LAAP, EMEA, and Canada.
COLUMBIA SPORTSWEAR COMPANY | 2021 FORM 10-K | 21
We are committed to driving sustainable and profitable long-term growth and investing in our strategic priorities to:
•drive brand awareness and sales growth through increased, focused demand creation investments;
•enhance consumer experience and digital capabilities in all of our channels and geographies;
•expand and improve global DTC operations with supporting processes and systems; and
•invest in our people and optimize our organization across our portfolio of brands.
Ultimately, we expect our investments to enable market share capture across our brand portfolio, expand gross margin, improve selling, general and administrative expense efficiency, and drive improved operating margin over the long-term.
Business Environment and Trends
Increased Outdoor Participation by Consumers | The COVID-19 pandemic drew a record number of individuals in the United States to spend an increased amount of time outside, including participating in outdoor recreational activities. While outdoor participation rates may not be maintained, we believe that our addressable consumer base worldwide has been expanded and expect outdoor participation to remain elevated in comparison to pre-pandemic levels.
Casualization of the Apparel and Footwear Market | During the COVID-19 pandemic, we saw a move to casualization by consumers. Our products provide comfort and function in diverse environments. We believe we have benefited from this trend and expect it to continue to be a tailwind moving forward.
Decreased Promotional Environment | In 2021, we operated in an extremely low promotional environment and experienced fewer order cancellations, sales returns and customer accommodations than historically experienced. We expect these trends to remain favorable in early 2022 and expect a gradual return to a more normalized promotional environment and a potential transition towards more normalized trading terms. For 2022, we do not expect these metrics to return to levels experienced in 2019 and prior years.
Lean Inventory Across the Marketplace | Consumer demand accelerated in 2021 resulting in lower inventory in the marketplace. Lower marketplace inventories contributed to a full price selling environment resulting in lower promotional activity and higher gross margins for our business in 2021. Given ongoing supply chain disruptions and the imbalance between global supply and demand, we expect marketplace inventories to remain low until supply chain constraints ease and retailers are able to replenish diminished inventory levels.
Changes in Consumer Spending Ability and Preferences | We believe government stimulus and unemployment benefits increased consumers’ discretionary spending ability in 2021 and 2020. In addition, we believe the limited ability to travel, attend entertainment-based experiences or purchase certain services increased consumers' savings levels. As we move into 2022, we expect these tailwinds to diminish. However, we expect growth in wages will enable consumer spending, to the extent it more than offsets inflationary pressures.
Decreased Direct-to-Consumer Store Traffic | During 2021, the majority of our stores remained open. At varying times during the year, government efforts to control the spread of COVID-19 impacted our stores in various regions. Our stores in Europe and Canada were impacted by these government efforts for most of the first quarter and at varying times in the second quarter of 2021. Declared states of emergency impacted our stores in Japan in the first, second and third quarters. Our stores in China were also impacted by these government efforts at varying times during 2021. Overall, our store retail traffic trends improved during 2021, but remained below pre-pandemic levels. Certain stores in tourist-dependent locations continue to be impacted by limited international tourism. While store traffic is improving, we expect it to continue to remain uneven across our store fleet by region, depending on regional impacts of the virus and government efforts.
Increased Ocean Freight Charges | In 2021, we experienced elevated ocean freight charges as a result of an imbalance of supply and demand for steamship and ocean container capacity and changes in our ocean freight sourcing practices. We expect our ocean freight charges to be reduced in the latter part of 2022. However, the imbalance in the marketplace persists and ocean freight costs will remain elevated compared to historical norms.
Later Inventory Receipts | During the third quarter of 2021, government mandated factory closures in Vietnam disrupted our manufacturing partners' operations and impacted production of Fall 2021 and Spring 2022 product. Factories in Vietnam began to reopen as of October 1, 2021 at less than full capacity. In addition, port congestion and shortages in transportation and labor further slowed the transportation of our inventory. As a result of these supply chain disruptions, we received Fall 2021 inventory later than expected and anticipate similar delays for Spring 2022 inventory. We do not expect the supply chain to normalize in 2022 and continue to anticipate later than expected inventory receipts and shipments to our expectations regardingwholesale customers and inventory available for our DTC businesses in 2022, resulting in impacts to future performance ornet sales and gross margin.
COLUMBIA SPORTSWEAR COMPANY | 2021 FORM 10-K | 22
Manufacturing Capacity Constraints | In 2021, we experienced footwear manufacturing capacity constraints which prevented us from securing footwear product to meet demand. Although we are growing footwear manufacturing capacity in 2022, we again expect demand to outstrip capacity due to anticipated footwear sales growth rates. We anticipate being able to meet footwear demand with appropriate supply in 2023.
Continued Labor Shortages | We have and continue to experience U.S. labor shortages, affecting our ability to staff and operate our U.S. distribution centers, retail stores and consumer call centers, as well as find qualified employees for our corporate offices and regional subsidiaries. In addition, labor costs have risen recently as a result of competition to attract and retain qualified talent in an environment in which there is low unemployment and strong demand for employees. We anticipate these rising costs and labor shortages to continue in 2022.
Increased Inflationary Pressures | Inflationary pressures, including increased inbound freight costs, impacted our results in 2021. In addition to increased inbound freight costs, we expect increased product input costs, including higher wages and raw materials costs, to impact our results in 2022. We are implementing product price increases beginning with our Spring 2022 season and, to a greater extent, our Fall 2022 season to mitigate these higher costs, to the extent possible, while attempting to minimize potential risks of dampening consumer demand. Price increases varied by market position, including any statements regarding anticipated sales,and product category. In the U.S., on average, we increased pricing by a mid-single digit percent for our Spring 2022 product line and a high-single to low-double-digit percent for our Fall 2022 product line. We do not expect planned price increases will fully offset gross margins and operating margins across markets, profitability andmargin pressure, particularly the effect of specified factors on profitability for 2018, expenses, sourcing costs, effectsincreased ocean freight costs. Looking beyond 2022, we anticipate ocean freight and raw material cost inflation will be transitory, while wage inflation will be more permanent.
Changing Consumer Expectations | Consumer behavior continues to fluctuate. Consumer expectations and the related competitive pressures have increased and continue to increase related to various aspects of unseasonable weather on our resultse-commerce business, including speed of operations, inventory levels,product delivery, shipping charges, return privileges and other evolving expectations. We maintain and continue to make substantial investments in information systems, processes and personnel to support our business, investments inongoing demand planning efforts to provide forecasting of optimal inventory to meet customer and implementation of our information technology systems, our operating model assessment referred to as Project CONNECT, intellectual property disputes, our direct-to-consumer channels and other capital expenditures, including planned store additions, access to raw materials and factory capacity, financing and working capital requirements and resources, effects of the TCJA, income tax rates and pre-tax income, and our exposure to market risk associated with interest rates and foreign currency exchange rates.consumer demands.
Seasonality and Variability of Business
|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 2017, approximately2021, over 60% of our net sales and approximately 90%over 75% of our operating income waswere realized in the second half of the year, illustrating our dependence upon sales results in the second half of the year as well as the less seasonal nature of our operating costs. The expansion of our direct-to-consumer channels has increased the proportion of sales, profits and cash flows that we generate in the second half of the year.
The following discussion of our results of operations and liquidity and capital resources should be read in conjunction with the Consolidated Financial Statements and accompanying Notes in Item 8 of this annual report. Annual Report on Form 10-K. All references to years relate to the fiscal year ended December 31.
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 used to translate net sales generatedthat were in foreign currencies into U.S. dollars.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. In particular, investors may find the non-GAAP measuresmeasure useful by reviewing our net sales results without the significant volatility ofin foreign currency exchange rates. This non-GAAP financial measure also facilitates management's internal comparisons to our historical net sales results and comparisons to competitors' net sales results. Constant-currency financial measures should be viewed in addition to, and not in lieu of or superior to, our financial measures presentedcalculated in accordance with GAAP.
The following discussion includes references to constant-currency net sales, and we provide a reconciliation of this non-GAAP measure to the most directly comparable financial measure presentedcalculated in accordance with GAAP. All references to years relate to the calendar year ended December 31.GAAP below.
COLUMBIA SPORTSWEAR COMPANY | 2021 FORM 10-K | 23
Results of our website at http://investor.columbia.com/results.cfm. A reconciliation of these non-GAAP financial measures to comparable measures reported under GAAP can be found in the supplemental financial tables that accompany our earnings release, along with an explanation of management’s rationale for referencing these non-GAAP financial measures.Operations — Consolidated
The following table sets forth, forpresents the years indicated, the percentage relationship to net sales of specified items in our Consolidated Statements of Operations:Operations, both in dollars and as a percentage of net sales:
| Year Ended December 31, | ||||||||||||||||||||||||||
| (in millions, except for percentage of net sales and per share amounts) | 2021 | 2020 | ||||||||||||||||||||||||
| Net sales | $ | 3,126.4 | 100.0 | % | $ | 2,501.6 | 100.0 | % | ||||||||||||||||||
| Cost of sales | 1,513.9 | 48.4 | % | 1,277.7 | 51.1 | % | ||||||||||||||||||||
| Gross profit | 1,612.5 | 51.6 | % | 1,223.9 | 48.9 | % | ||||||||||||||||||||
| Selling, general and administrative expenses | 1,180.3 | 37.8 | % | 1,098.9 | 43.9 | % | ||||||||||||||||||||
| Net licensing income | 18.3 | 0.6 | % | 12.0 | 0.5 | % | ||||||||||||||||||||
| Operating income | 450.5 | 14.4 | % | 137.0 | 5.5 | % | ||||||||||||||||||||
| Interest income, net | 1.4 | — | % | 0.4 | — | % | ||||||||||||||||||||
| Other non-operating income (expense), net | (0.4) | — | % | 2.1 | 0.1 | % | ||||||||||||||||||||
| Income before income tax | 451.5 | 14.4 | % | 139.5 | 5.6 | % | ||||||||||||||||||||
| Income tax expense | (97.4) | (3.1) | % | (31.5) | (1.3) | % | ||||||||||||||||||||
| Net income | $ | 354.1 | 11.3 | % | $ | 108.0 | 4.3 | % | ||||||||||||||||||
| Diluted earnings per share | $ | 5.33 | $ | 1.62 | ||||||||||||||||||||||
| Year Ended December 31, | ||||||||
| 2017 | 2016 | 2015 | ||||||
| Net sales | 100.0 | % | 100.0 | % | 100.0 | % | ||
| Cost of sales | 53.0 | 53.3 | 53.9 | |||||
| Gross profit | 47.0 | 46.7 | 46.1 | |||||
| Selling, general and administrative expenses | 36.9 | 36.4 | 35.8 | |||||
| Net licensing income | 0.6 | 0.5 | 0.4 | |||||
| Income from operations | 10.7 | 10.8 | 10.7 | |||||
| Interest income, net | 0.2 | — | — | |||||
| Other non-operating expense | — | — | (0.1 | ) | ||||
| Income before income tax | 10.9 | 10.8 | 10.6 | |||||
| Income tax expense | (6.3 | ) | (2.5 | ) | (2.9 | ) | ||
| Net income | 4.6 | 8.3 | 7.7 | |||||
| Net income attributable to non-controlling interest | 0.3 | 0.2 | 0.2 | |||||
| Net income attributable to Columbia Sportswear Company | 4.3 | % | 8.1 | % | 7.5 | % | ||
Net Sales: Consolidated net sales increased $89.1 million, or 4%, to $2,466.1 million in 2017 from $2,377.0 million in 2016.
Sales.Net sales by geographic regionbrand, product category and channel are summarized in the following table:
| Year Ended December 31, | |||||||||||||||||||
| Adjust for | Constant- | Constant- | |||||||||||||||||
| Reported | Foreign | currency | Reported | Reported | currency | ||||||||||||||
| Net Sales | Currency | Net Sales | Net Sales | Net Sales | Net Sales | ||||||||||||||
| 2017 | Translation | 2017(1) | 2016 | % Change | % Change(1) | ||||||||||||||
| (In millions, except for percentage changes) | |||||||||||||||||||
| United States | $ | 1,520.0 | $ | — | $ | 1,520.0 | $ | 1,505.2 | 1% | 1% | |||||||||
| LAAP | 475.1 | 6.3 | 481.4 | 453.7 | 5% | 6% | |||||||||||||
| EMEA | 293.7 | (4.9 | ) | 288.8 | 253.5 | 16% | 14% | ||||||||||||
| Canada | 177.3 | (5.6 | ) | 171.7 | 164.6 | 8% | 4% | ||||||||||||
| $ | 2,466.1 | $ | (4.2 | ) | $ | 2,461.9 | $ | 2,377.0 | 4% | 4% | |||||||||
| Year Ended December 31, | ||||||||||||||||||||||||||||||||||||||
| (in millions, except for percentages) | Reported Net Sales 2021 | Adjust for Foreign Currency Translation | Constant-currency Net Sales 2021 (1) | Reported Net Sales 2020 | Reported Net Sales % Change | Constant-currency Net Sales % Change(1) | ||||||||||||||||||||||||||||||||
| Brand Net Sales: | ||||||||||||||||||||||||||||||||||||||
| Columbia | $ | 2,557.4 | $ | (26.4) | $ | 2,531.0 | $ | 1,996.9 | 28% | 27% | ||||||||||||||||||||||||||||
| SOREL | 320.9 | (2.4) | 318.5 | 293.5 | 9% | 9% | ||||||||||||||||||||||||||||||||
| prAna | 141.9 | — | 141.9 | 131.6 | 8% | 8% | ||||||||||||||||||||||||||||||||
| Mountain Hardwear | 106.2 | (0.5) | 105.7 | 79.6 | 33% | 33% | ||||||||||||||||||||||||||||||||
| Total | $ | 3,126.4 | $ | (29.3) | $ | 3,097.1 | $ | 2,501.6 | 25% | 24% | ||||||||||||||||||||||||||||
| Product Category Net Sales: | ||||||||||||||||||||||||||||||||||||||
| Apparel, Accessories and Equipment | $ | 2,389.2 | $ | (20.3) | $ | 2,368.9 | $ | 1,867.6 | 28% | 27% | ||||||||||||||||||||||||||||
| Footwear | 737.2 | (9.0) | 728.2 | 634.0 | 16% | 15% | ||||||||||||||||||||||||||||||||
| Total | $ | 3,126.4 | $ | (29.3) | $ | 3,097.1 | $ | 2,501.6 | 25% | 24% | ||||||||||||||||||||||||||||
| Channel Net Sales: | ||||||||||||||||||||||||||||||||||||||
| Wholesale | $ | 1,660.4 | $ | (19.5) | $ | 1,640.9 | $ | 1,403.3 | 18% | 17% | ||||||||||||||||||||||||||||
| DTC | 1,466.0 | (9.8) | 1,456.2 | 1,098.3 | 33% | 33% | ||||||||||||||||||||||||||||||||
| Total | $ | 3,126.4 | $ | (29.3) | $ | 3,097.1 | $ | 2,501.6 | 25% | 24% | ||||||||||||||||||||||||||||
(1)Constant-currency net sales information is a non-GAAP financial measure, which excludes the effect 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 currenciesmeasure. See "Non-GAAP Financial Measure" above for the current period into U.S. dollars at the exchange rates that were in effect during the comparable period of the prior year.further information.
COLUMBIA SPORTSWEAR COMPANY | 2021 FORM 10-K | 24
Overall, our direct-to-consumer business, partially offset by a net sales decrease in our wholesale business. Theglobal net sales increase in our direct-to-consumer business primarily consisted of a net sales increase from our retail stores, followed by increased e-commerce net sales. At December 31, 2017, we operated 129 retail stores, compared with 118 stores at December 31, 2016. The net sales decrease in our wholesale business resulted primarilyreflects the higher consumer demand and economic recovery from the comparative effects of sales to U.S.ongoing COVID-19 pandemic. This increase was constrained by supply chain disruptions that limited factory capacities for footwear products and resulted in later inventory receipts and lower than expected wholesale customers who have gone through bankruptcies, liquidations and store closures.shipments.
Net sales by brand are summarized in the following table:
| Year Ended December 31, | |||||||||||||||||||
| Adjust for | Constant- | Constant- | |||||||||||||||||
| Reported | Foreign | currency | Reported | Reported | currency | ||||||||||||||
| Net Sales | Currency | Net Sales | Net Sales | Net Sales | Net Sales | ||||||||||||||
| 2017 | Translation | 2017 | 2016 | % Change | % Change | ||||||||||||||
| (In millions, except for percentage changes) | |||||||||||||||||||
| Columbia | $ | 1,990.3 | $ | (1.4 | ) | $ | 1,988.9 | $ | 1,910.1 | 4% | 4% | ||||||||
| SOREL | 228.8 | (2.6 | ) | 226.2 | 213.0 | 7% | 6% | ||||||||||||
| prAna | 140.9 | — | 140.9 | 139.9 | 1% | 1% | |||||||||||||
| Mountain Hardwear | 101.6 | (0.3 | ) | 101.3 | 104.0 | (2)% | (3)% | ||||||||||||
| Other | 4.5 | 0.1 | 4.6 | 10.0 | (55)% | (54)% | |||||||||||||
| $ | 2,466.1 | $ | (4.2 | ) | $ | 2,461.9 | $ | 2,377.0 | 4% | 4% | |||||||||
| Year Ended December 31, | |||||||||||||||||||
| Adjust for | Constant- | Constant- | |||||||||||||||||
| Reported | Foreign | currency | Reported | Reported | currency | ||||||||||||||
| Net Sales | Currency | Net Sales | Net Sales | Net Sales | Net Sales | ||||||||||||||
| 2017 | Translation | 2017 | 2016 | % Change | % Change | ||||||||||||||
| (In millions, except for percentage changes) | |||||||||||||||||||
| Apparel, Accessories and Equipment | $ | 1,928.0 | $ | (2.5 | ) | $ | 1,925.5 | $ | 1,865.4 | 3% | 3% | ||||||||
| Footwear | 538.1 | (1.7 | ) | 536.4 | 511.6 | 5% | 5% | ||||||||||||
| $ | 2,466.1 | $ | (4.2 | ) | $ | 2,461.9 | $ | 2,377.0 | 4% | 4% | |||||||||
Gross Profit.Our gross profit may not be comparable to other companies in our industry becauseas some of these companies may include all of the costs related to their distribution network in costCost of sales, while we like many others, include these expenses in SG&A expense. Gross profit is summarized in the following table:
| Year Ended December 31, | ||||||||||||||||||||
| (in millions, except for percentages and basis points) | 2021 | 2020 | Change | |||||||||||||||||
| Gross profit | $ | 1,612.5 | $ | 1,223.9 | $ | 388.6 | 32 | % | ||||||||||||
| Gross margin | 51.6 | % | 48.9 | % | 270 bps | |||||||||||||||
Gross profit as a componentpercentage of SG&A expense.net sales expanded primarily due to:
•an approximate 230 bps increase in channel profitability substantially due to higher DTC product margins reflecting lower promotional levels and, to a lesser extent, higher wholesale product margin driven by strong retail sell-through performance resulting in a higher proportion of full price vs off price sales mix and lower customer accommodations, partially offset by unfavorable impacts from higher inbound freight costs due to supply chain constraints; and
•favorable impacts from lower year-over-year inventory provisions.
Selling, General and Administrative Expenses:Expenses.SG&A expenseexpenses includes all costs associated with our design, merchandising, marketing, distribution, and corporate functions, including related depreciation and amortization.
SG&A expense increased $46.8 million, or 5%, to $910.9 million, or 36.9% of net sales,expenses is summarized in 2017 includingthe following table:
| Year Ended December 31, | ||||||||||||||||||||
| (in millions, except for percentages and basis points) | 2021 | 2020 | Change | |||||||||||||||||
| Selling, general and administrative expenses | $ | 1,180.3 | $ | 1,098.9 | $ | 81.4 | 7 | % | ||||||||||||
| Selling, general and administrative expenses as percent of net sales | 37.8 | % | 43.9 | % | -610 bps | |||||||||||||||
The SG&A expenseexpenses increase was primarily due to:
Factors contributing to the increase of SG&A expenses included:
•higher global retail expenses of $51.8 million relative to prior year temporary store closures;
•increased $3.7demand creation spend of $43.6 million;
•higher personnel expenses of $37.6 million to $13.9support business growth as well as annual merit and other wage rate increases;
•higher incentive compensation of $31.1 million; and
•higher professional fees and insurance; partially offset by
•decreased retail impairments and store closures charges of $37.4 million, in 2017, compared reflecting the non-recurrence of prior year retail impairments and store closure charges of $28.8 million and the 2021 benefit of $8.6 million from the completion of lease terminations and settlements related to $10.2certain of those closures;
•decreased bad debt expenses of $29.7 million, in 2016. Thewhich primarily reflected the non-recurrence of a 2020 bad debt expense increase in net licensing income was driven by growth in newer licensing partners.of $19.7 million resulting from the COVID-19 pandemic;
COLUMBIA SPORTSWEAR COMPANY | 2021 FORM 10-K | 25
•the non-recurrence of prior year expenses of $18.9 million related to $4.5 million in 2017, compared to $2.0 million in 2016. The increase in interest income was primarily driven by higher average cashthe COVID-19 pandemic; and investment balances, followed by higher average interest rates during 2017 compared to 2016.
•the non-recurrence of prior year prAna brand trademark impairment charge of $17.5 million.
Income Tax Expense:Expense. Income tax expense increased to $154.4 millionand the related effective income tax rate is summarized in 2017, including provisional amounts of $95.6 million in additionalthe following table:
| Year Ended December 31, | ||||||||||||||||||||
| (in millions, except for percentages) | 2021 | 2020 | Change | |||||||||||||||||
| Income tax expense | $ | (97.4) | $ | (31.5) | $ | (65.9) | 209 | % | ||||||||||||
| Effective income tax rate | 21.6 | % | 22.6 | % | ||||||||||||||||
Our effective income tax expense related torates for the TCJA, from $58.5 million in 2016.years ended December 31, 2021 and 2020 were impacted by discrete tax items, which lowered the effective tax rate each year. Our effective income tax rate increasedfor the year ended December 31, 2021 decreased, compared to 57.9% from 22.8% in 2016. Refer to Note 10 of the Consolidated Financial Statements for further information.
Results of Operations — Segment
Year Ended December 31, 20162021 Compared to Year Ended December 31, 20152020
Segment income from operations includes net sales, increased $50.8 million, or 2% (2% constant-currency),cost of sales, SG&A expense, and net licensing income for each of our four reportable geographic segments. Income from operations as a percentage of net sales in the U.S. is typically higher than the other segments primarily due to $2,377.0 millionscale efficiencies associated with the larger base of net sales in 2016the U.S. and, to a lesser extent, incremental licensing income.
We anticipate this trend to continue until other segments achieve scale efficiencies from $2,326.2 million in 2015.higher levels of net sales volume relative to the fixed cost structure necessary to operate the business.
Net sales by geographic regionsegment are summarized in the following table:
| Year Ended December 31, | ||||||||||||||||||||||||||||||||||||||
| (in millions, except for percentage changes) | Reported Net Sales 2021 | Adjust for Foreign Currency Translation | Constant-currency Net Sales 2021 (1) | Reported Net Sales 2020 | Reported Net Sales % Change | Constant-currency Net Sales % Change(1) | ||||||||||||||||||||||||||||||||
| U.S. | $ | 2,060.3 | $ | — | $ | 2,060.3 | $ | 1,603.8 | 28% | 28% | ||||||||||||||||||||||||||||
| LAAP | 465.5 | (7.5) | 458.0 | 424.5 | 10% | 8% | ||||||||||||||||||||||||||||||||
| EMEA | 382.1 | (9.0) | 373.1 | 298.9 | 28% | 25% | ||||||||||||||||||||||||||||||||
| Canada | 218.5 | (12.8) | 205.7 | 174.4 | 25% | 18% | ||||||||||||||||||||||||||||||||
| $ | 3,126.4 | $ | (29.3) | $ | 3,097.1 | $ | 2,501.6 | 25% | 24% | |||||||||||||||||||||||||||||
| Year Ended December 31, | |||||||||||||||||||
| Adjust for | Constant- | Constant- | |||||||||||||||||
| Reported | Foreign | currency | Reported | Reported | currency | ||||||||||||||
| Net Sales | Currency | Net Sales | Net Sales | Net Sales | Net Sales | ||||||||||||||
| 2016 | Translation | 2016 | 2015 | % Change | % Change | ||||||||||||||
| (In millions, except for percentage changes) | |||||||||||||||||||
| United States | $ | 1,505.2 | $ | — | $ | 1,505.2 | $ | 1,455.2 | 3% | 3% | |||||||||
| LAAP | 453.7 | (3.6 | ) | 450.1 | 469.2 | (3)% | (4)% | ||||||||||||
| EMEA | 253.5 | 2.4 | 255.9 | 233.2 | 9% | 10% | |||||||||||||
| Canada | 164.6 | 5.7 | 170.3 | 168.6 | (2)% | 1% | |||||||||||||
| $ | 2,377.0 | $ | 4.5 | $ | 2,381.5 | $ | 2,326.2 | 2% | 2% | ||||||||||
Operating income for each reportable segments and our LAAP distributor business, partially offset by net sales increases in Japan and China. The net sales decrease in Korea reflected a change in consumer preferences in that country away from the outdoor category that has created an industry-wide excess of inventory in that market. The net sales decrease in our LAAP distributor business primarily reflected a shift in timing of shipments of spring advance orders. The net sales increase in Japan was driven by the positive effects of foreign exchange rates, as nets sales in local currency were essentially unchanged.
| Year Ended December 31, | ||||||||||||||||||||
| (in millions) | 2021 | 2020 | Change | |||||||||||||||||
| U.S. | $ | 536.5 | $ | 250.5 | $ | 286.0 | ||||||||||||||
| LAAP | 42.0 | 35.9 | 6.1 | |||||||||||||||||
| EMEA | 65.5 | 31.2 | 34.3 | |||||||||||||||||
| Canada | 52.7 | 37.6 | 15.1 | |||||||||||||||||
| Total segment operating income | 696.7 | 355.2 | 341.5 | |||||||||||||||||
| Unallocated corporate expenses | (246.2) | (218.2) | (28.0) | |||||||||||||||||
| Operating income | $ | 450.5 | $ | 137.0 | $ | 313.5 | ||||||||||||||
COLUMBIA SPORTSWEAR COMPANY | 2021 FORM 10-K | 26
| Year Ended December 31, | |||||||||||||||||||
| Adjust for | Constant- | Constant- | |||||||||||||||||
| Reported | Foreign | currency | Reported | Reported | currency | ||||||||||||||
| Net Sales | Currency | Net Sales | Net Sales | Net Sales | Net Sales | ||||||||||||||
| 2016 | Translation | 2016 | 2015 | % Change | % Change | ||||||||||||||
| (In millions, except for percentage changes) | |||||||||||||||||||
| Columbia | $ | 1,910.1 | $ | 5.3 | $ | 1,915.4 | $ | 1,864.7 | 2% | 3% | |||||||||
| SOREL | 213.0 | (0.8 | ) | 212.2 | 209.2 | 2% | 1% | ||||||||||||
| prAna | 139.9 | — | 139.9 | 125.3 | 12% | 12% | |||||||||||||
| Mountain Hardwear | 104.0 | 0.1 | 104.1 | 116.3 | (11)% | (10)% | |||||||||||||
| Other | 10.0 | (0.1 | ) | 9.9 | 10.7 | (7)% | (7)% | ||||||||||||
| $ | 2,377.0 | $ | 4.5 | $ | 2,381.5 | $ | 2,326.2 | 2% | 2% | ||||||||||
| ||||||||
U.S. U.S. income from operations increased $286.0 million to $536.5 million, or 26.0% of net sales, in 2021 from $250.5 million, or 15.6% of net sales, in 2020. The increase was driven primarily by increased net sales, increased gross margins, and the non-recurrence of prior year retail impairments and store closure charges of $28.8 million and the 2021 benefit of $8.6 million from settlements related to those closures. U.S. net sales increased $456.5 million, or 28% in 20162021 compared to 2015 was led by$1,603.8 million in 2020. U.S. net sales increased in our DTC and wholesale businesses. U.S DTC net sales increased largely from net sales growth generated from retail stores, and to a lesser extent, our e-commerce business. At December 31, 2021, our U.S. business operated 142 retail stores, compared to 132 stores at December 31, 2020. SG&A expenses decreased as a percentage of net sales to 26.7% in 2021 compared to 33.8% in 2020 largely due to the Columbia brand, followed by the prAna brandimpact of net sales increases, and the SOREL brand,non-recurrence of prior year retail impairments, other store closure charges and COVID-19 related expenses.
LAAP. LAAP income from operations increased $6.1 million to $42.0 million, or 9.0% of net sales, in 2021 from $35.9 million, or 8.5% of net sales, in 2020. The increase was driven primarily by increased net sales combined with increased gross margin. LAAP net sales increased $41.0 million, or 10% (8% constant-currency) in 2021 compared to $424.5 million in 2020, driven largely by increased net sales in our China business, and to a lesser extent, our Korea business, partially offset by lower Mountain Hardwear net sales. The Columbia branddecreased net sales increase was led by the United States, followed by the EMEA regionin our LAAP distributors and Canada,Japan businesses. LAAP SG&A expense increased as a percentage of net sales to 48.3% in 2021 compared to 45.7% in 2020 largely due to incremental demand creation expense, partially offset by athe impact of net sales decreaseincreases.
EMEA. EMEA income from operations increased $34.3 million to $65.5 million, or 17.1% of net sales, in 2021 from $31.2 million, or 10.4% of net sales, in 2020. The increase was driven primarily by increased net sales combined with increased gross margin. EMEA net sales increased $83.2 million, or 28% (25% constant-currency) in 2021 compared to $298.9 million in 2020. EMEA net sales increased primarily in our Europe-direct business, followed by our EMEA distributor business. EMEA SG&A expense decreased as a percentage of net sales to 28.0% in 2021 compared to 33.4% in 2020 largely due to the LAAP region.impact of net sales increases and the non-recurrence of prior year COVID-19 related expenses.
Unallocated corporate expenses increased by $28.0 million to $246.2 million in 2021, from $218.2 million in 2020, largely driven by higher incentive compensation and personnel expenses, partially offset by the non-recurrence of the 2020 prAna brand trademark impairment charge of $17.5 million.
LIQUIDITY AND CAPITAL RESOURCES
Including cash, cash equivalents, short-term investments and available committed and uncommitted credit lines, we had more than $1.5 billion in total liquidity at December 31, 2021. Our liquidity may be affected by the general seasonal trends common to the industry. Our products are marketed on a seasonal basis and our sales by product categoryare weighted substantially toward the third and fourth quarters, while our operating costs are more equally distributed throughout the year. Our cash and cash equivalents and short-term investments balances generally are at their lowest level at the end of the third quarter and increase during the fourth quarter from collection of wholesale business receivables and fourth quarter DTC sales.
COLUMBIA SPORTSWEAR COMPANY | 2021 FORM 10-K | 27
Cash Flow Activities
Cash flows from continuing operations are summarized in the following table:
| Year Ended December 31, | |||||||||||||||||||
| Adjust for | Constant- | Constant- | |||||||||||||||||
| Reported | Foreign | currency | Reported | Reported | currency | ||||||||||||||
| Net Sales | Currency | Net Sales | Net Sales | Net Sales | Net Sales | ||||||||||||||
| 2016 | Translation | 2016 | 2015 | % Change | % Change | ||||||||||||||
| (In millions, except for percentage changes) | |||||||||||||||||||
| Apparel, Accessories and Equipment | $ | 1,865.4 | $ | 4.1 | $ | 1,869.5 | $ | 1,821.2 | 2% | 3% | |||||||||
| Footwear | 511.6 | 0.4 | 512.0 | 505.0 | 1% | 1% | |||||||||||||
| $ | 2,377.0 | $ | 4.5 | $ | 2,381.5 | $ | 2,326.2 | 2% | 2% | ||||||||||
| Year Ended December 31, | ||||||||||||||||||||
| (in millions) | 2021 | 2020 | Change | |||||||||||||||||
| Cash and cash equivalents | $ | 763.4 | $ | 790.7 | $ | (27.3) | ||||||||||||||
| Net cash provided by (used in): | ||||||||||||||||||||
| Operating activities | $ | 354.4 | $ | 276.1 | $ | 78.3 | ||||||||||||||
| Investing activities | (163.8) | (27.2) | (136.6) | |||||||||||||||||
| Financing activities | (210.9) | (151.7) | (59.2) | |||||||||||||||||
| Net effect of exchange rate changes on cash | (7.0) | 7.5 | (14.5) | |||||||||||||||||
| Net increase (decrease) in cash and cash equivalents | $ | (27.3) | $ | 104.7 | $ | (132.0) | ||||||||||||||
The change in 2016 from $1,821.2 million in 2015. The increase in apparel, accessories and equipment net salescash flows provided by operating activities was leddriven by a net sales increase in the Columbia brand, followed the prAna brand and the SOREL brand, partially offset by lower Mountain Hardwear brand net sales. The apparel, accessories and equipment net sales increase was led by the United States, followed by the EMEA region and Canada, partially offset by lower net sales in the LAAP region.
Net cash used in investing activities was $147.8$163.8 million in 2017, for 2021 compared to $49.9$27.2 million in 2016. for 2020. For 2017,2021, net cash used in investing activities primarily consisted of $94.7$129.1 million in net purchases of short-term investments and $53.4$34.7 million for capital expenditures. For 2016,2020, net cash used in investing activities primarily consisted of $50.0$28.8 million for capital expenditures.
Net cash used in financing activities was $84.4$210.9 million in 2017, for the 2021 compared to $42.0$151.7 million in 2016. for 2020. For 2017,2021, net cash used in financing activities primarily consisted of dividend payments of $50.9 million, the repurchaserepurchases of common stock at an aggregate purchase price of $35.5$165.4 million and paymentdividend payments to our shareholders of a related-party note payable of $14.2$68.6 million, partially offset by net proceeds of $16.3 million from the issuance of common stock related to our stockstock-based compensation programs.of $23.0 million. For 2016,2020, net cash used in financing activities primarily consisted of dividend payments of $48.1 million, partially offset by net proceeds of $8.1 million from the issuancerepurchases of common stock relatedof $132.9 million and dividend payments to our stock compensation programs.shareholders of $17.2 million.
Sources of Liquidity
Cash and cash equivalents and short-term investments
At December 31, 2021, we had cash and cash equivalents of $763.4 million and short-term investments of $131.1 million, compared to 2015
Domestic Credit Facility
We have available an unsecured, committed revolving line of credit available to fund our domestic working capital requirements. Monthly variable commitments availablefacility that provides for funding average $100.0 million overup to $500.0 million. This credit agreement matures on December 30, 2025. Interest, payable monthly, is based on the courseCompany's option of either LIBOR plus an applicable margin or a calendar year. base rate. Base rate is defined as the highest of the following, plus an applicable margin:
•the administrative agent's prime rate;
•the higher of the federal funds rate or the overnight bank funding rate set by the Federal Reserve Bank of New York, plus 0.50%; or
•the one-month LIBOR plus 1.00%.
COLUMBIA SPORTSWEAR COMPANY | 2021 FORM 10-K | 28
This credit agreement requires the Company to comply with certain financial covenants covering the Company's funded debt ratio and asset coverage ratio. The credit agreement also includes customary covenants that, among other things, limit or restrict the ability of the Company and its subsidiaries to incur additional indebtedness and liens, engage in mergers, acquisitions and dispositions, and engage in transactions with affiliates, as well as restrict certain payments, including dividends and share buybacks.
At December 31, 2017,2021, there was no balance was outstanding under our credit facility. At the time of this line of credit andfiling, we wereare in compliance with all associated covenants. Internationally,financial covenants necessary as a condition for borrowing under the Columbia Sportswear Company credit agreement.
International Credit Facilities
Our European subsidiary has available an unsecured, committed line of credit, which is guaranteed by the Company and provides for borrowing up to €4.4 million (approximately US$5.0 million). Borrowings accrue interest at a base rate plus 75 basis points.
In addition, collectively, our international subsidiaries have operatingavailable approximately US$111.7 million in unsecured and uncommitted lines of credit in place guaranteed by the parent company with a combined limit of approximately $90.3 million at December 31, 2017. and overdraft facilities.
At December 31, 2017,2021, there was no balance was outstanding under theseour international subsidiaries' lines of credit.credit and overdraft facilities.
Capital Requirements
Our expected short-term and long-term cash needs are primarily for working capital and capital expenditures. We expect to fundmeet these short-term and long-term cash needs primarily with cash flows from operations and, if needed, borrowings from our futureexisting domestic credit facility.
Our working capital expenditures with existing cash, operating cash flows and credit facilities. If the need arises, we may needmanagement goals include maintaining an optimal level of inventory necessary to seek additional funding. Our abilitydeliver goods on time to obtain additional financing will depend on many factors, including prevailing market conditions, our financial condition,customers and our abilityretail stores to negotiate favorable termssatisfy end consumer demand, alleviating manufacturing capacity constraints, and conditions. Financingdriving efficiencies to minimize the cycle time from the purchase of inventory from our suppliers to the collections of accounts receivable balances from our customers. We maintain and continue to make substantial investments in information systems, processes and personnel to support our ongoing demand planning efforts to meet our working capital management goals.
We have planned 2022 capital expenditures of approximately $80 to $100 million. This includes investments in our digital and supply chain capabilities to support our strategic priorities and our DTC operations, including new stores. Our actual planned capital expenditures may not be availablediffer from the planned amounts depending on terms that are acceptable or favorable to us, if at all.
Our long-term goal is to wholesale customersmaintain a strong balance sheet and a disciplined approach to capital allocation. Dependent upon market conditions and our strategic priorities, our capital allocation approach includes:
•investing in the third and fourth quarters and proportionally higher sales in our direct-to-consumer channels in the fourth quarter, combined with proportionally higher inventory purchases in the second and third calendar quarters and an expense base that is more consistent throughout the year. We believe that our liquidity requirements for at least the next 12 months will be adequately covered by existingorganic growth opportunities to drive long-term profitable growth;
•returning 40% of free cash cash provided by operations and existing short-term borrowing arrangements. We planflow to fund future cashshareholders through dividends and share repurchases withrepurchases; and
•considering opportunistic mergers and acquisitions.
Free cash generatedflow is a non-GAAP financial measure. Free cash flow is calculated by reducing net cash flow from operating activities.activities by capital expenditures. Management believes free cash flow provides investors with an important perspective on the cash available for shareholders and acquisitions after making the capital investments required to support ongoing business operations and long-term value creation. Free cash flow does not represent the residual cash flow available for discretionary expenditures as it excludes certain mandatory expenditures. Management uses free cash flow as a measure to assess both business performance and overall liquidity.
Other cash commitments (in thousands):
Year ended December 31, | |||||||||||||||||||||||||||
| 2018 | 2019 | 2020 | 2021 | 2022 | Thereafter | Total | |||||||||||||||||||||
Inventory purchase obligations (1) | $ | 266,507 | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 266,507 | |||||||||||||
Operating lease obligations (2) | 68,686 | 58,286 | 49,148 | 42,041 | 38,416 | 113,961 | 370,538 | ||||||||||||||||||||
TCJA transition tax obligations (3) | 3,996 | 3,996 | 3,996 | 3,996 | 3,996 | 29,967 | 49,947 | ||||||||||||||||||||
COLUMBIA SPORTSWEAR COMPANY | 2021 FORM 10-K | 29
The following table presents our estimated significant contractual commitments that will require use of funds:
Year ended December 31, | |||||||||||||||||||||||||||||||||||||||||
| (in millions) | 2022 | 2023 | 2024 | 2025 | 2026 | Thereafter | Total | ||||||||||||||||||||||||||||||||||
| Inventory purchase obligations | $ | 656.5 | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 656.5 | |||||||||||||||||||||||||||
Operating lease obligations (1) | 78.2 | 72.5 | 65.7 | 55.8 | 49.1 | 106.3 | 427.6 | ||||||||||||||||||||||||||||||||||
TCJA transition tax obligations (2) | 4.2 | 8.0 | 10.6 | 13.3 | — | — | 36.1 | ||||||||||||||||||||||||||||||||||
(1) Refer to Consolidated Financial Statements.Operating Leases in Note 9 in Item 8 of this Annual Report on Form 10-K.
Management's discussion and analysis of our financial condition and results of operations are based on our Consolidated Financial Statements,consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America.GAAP. The preparation of these financial statements requires us to make various estimates and assumptionsjudgments that affect reported amounts of assets, liabilities, sales, cost of sales, and liabilitiesexpenses and related disclosure of contingent assets and liabilities atliabilities. Refer to Note 2 in Item 8 of this Annual Report on Form 10-K for additional information regarding the datesignificant accounting policies and methods used in the preparation of the Consolidated Financial Statements and the reported amounts of revenue and expenses during the reporting period. our consolidated financial statements.
We believe that the estimates, assumptions and assumptionsjudgments involved in the accounting policies described below have the greatest potential impacteffect on our financial statements, so we consider these to be our critical accounting policies and estimates. Because of the uncertainty inherent in these matters, actual results may differ from the estimates we use in applying these critical accounting policies.policies and estimates. We base our ongoing estimates on historical experience and various other assumptions that we believe to be importantreasonable in the circumstances. Many of theseOur critical accounting policies affect working capital account balances, including the policy for revenue recognition, theand estimates relate to sales reserves, allowance for doubtfuluncollectible accounts the provision for potentialreceivable, excess, closeoutclose-out and slow movingslow-moving inventory, product warranty,impairment of long-lived assets, intangible assets and goodwill, and income taxes, and stock-based compensation.taxes.
Management regularly discusses with our Audit Committeeaudit committee each of our critical accounting estimates, the development and selection of these accounting estimates, and the disclosure about each estimate in Management's Discussion and Analysis of Financial Condition and Results of Operations.this annual report. These discussions typically occur at our quarterly Audit Committeeaudit committee meetings and include the basis and methodology used in developing and selecting these estimates, the trends in and amounts of these estimates, specific matters affecting the amount of and changes in these estimates, and any other relevant matters related to these estimates, including significant issues concerning accounting principles and financial statement presentation.
The amount of consideration we receive and recognize as Net sales across both wholesale distributor, e-commerce and licensed product revenues when title passesDTC channels varies with changes in sales returns and other accommodations and incentives we offer to our customers. When we give our customers the risksright to return products or provide other accommodations such as chargebacks and rewards of ownership have passed to the customer. Title generally passes upon shipment to or upon receipt by the customer depending on the applicable terms of sale with the customer. Retail store revenues are recorded at the time of sale. Revenue is recorded net of sales taxes, value added taxes or similar taxes, which are collected on behalf of local taxing authorities.
Allowance for UncollectableUncollectible 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 the 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, and we makeas well as our judgments about the creditworthiness of customers based on ongoing credit evaluations. We analyze specific customer accounts, including aged receivables,
COLUMBIA SPORTSWEAR COMPANY | 2021 FORM 10-K | 30
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 decreased to $8.9 million at December 31, 2021 compared to $21.8 million at December 31, 2020. The balance at December 31, 2021 compared to the prior year reflects an improving credit environment with wholesale customers during 2021 and economic recovery of the retail sector through the ongoing COVID-19 pandemic. Continued uncertainty in credit and market conditions may slow our collection efforts if customers experience difficulty accessing credit and paying their obligations, leading to higher than normal accounts receivable and increased bad debt expense.risk. Because we cannot predict future changes in the financial stability of our customers is difficult to estimate, actual future losses from uncollectableuncollectible accounts may differ from our estimates and may have a material effect on our consolidated 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 a credit or a chargean adjustment to SG&A expense in the period in which we make such a determination.
Excess, Close-Out and Slow MovingSlow-Moving Inventory
We make ongoing estimates of potential excess, close-out or slow movingslow-moving inventory. We evaluate our inventory on hand considering our purchase commitments, sales forecasts and historical liquidation experience to identify excess, close-out or slow movingslow-moving inventory by contemplating our 1) purchase commitments; 2), sales forecasts; 3) historical liquidation experience; and make4) the level 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 estimated marketnet realizable value. If we determine that a smaller or larger reserve is appropriate, we will record a credit or a charge to cost of salesProvisions are established when necessary in the period in which we make such a determination. At December 31, 2021, our inventory reserve offset gross inventory by $19.9 million compared to $29.5 million at December 31, 2020. Although Inventories, net increased 16% from December 31, 2020 to December 31, 2021, the level of estimated excess inventory at December 31, 2021 declined reflecting strong consumer demand resulting in a lower inventory reserve.
Impairment of Long-Lived Assets, Intangible Assets and Goodwill
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 amortized over their estimated useful lives and are measured for impairment only when events or circumstances indicate the carrying value may not be impaired. In these cases,recoverable. Our retail fleet long‐lived assets are 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 estimateevaluate retail location long‐lived assets for impairment by comparing the undiscounted future undiscounted cash flowsflow expected to be derived fromgenerated by the asset or asset grouplocation to determine whether a potential impairment exists.the location long‐lived asset’s carrying amount. If the sumcarrying amount of an asset exceeds the estimated undiscounted future cash flowsflow, 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 valueamount.
During 2021 we tested certain long-lived assets consisting of the asset, we recognize anproperty, plant, and equipment and lease ROU assets for impairment loss, measured as the amount by which the carrying value exceeds the estimated fair value of the asset.at certain underperforming retail locations. For the yearsyear ended December 31, 2017, 2016 and 2015, we recorded2021, impairment charges for certainfrom underperforming retail stores were not material. Further declines in projected future performance may adversely affect the recovery of $1.4retail locations assets. For the year ended December 31, 2020, impairment charges from underperforming retail stores were $7.0 million $4.3for lease ROU assets and $5.0 million for property, plant and $4.2 million, respectively.equipment.
We review and test our intangible assets with indefinite useful lives and goodwill for impairment in the fourth quarter of each year and when events or changes in circumstances indicate that the carrying amount of such assets may be impaired. Our intangible assets with indefinite lives consist of trademarks and trade names. Substantially all of our goodwill is recorded in the United StatesU.S. segment and impairment testing for goodwill is performed at the reporting unit level. InOur 2021 impairment tests of intangible assets with indefinite lives and goodwill indicated the impairment test for goodwill, the two-step process first compares the estimated fair value of the reporting unit with the carrying amount of that reporting unit. We estimate the fair value of our reporting units using a combination of discounted cash flow analysis and market-based valuation methods, as appropriate. If step one indicates impairment, step two compares the estimated fair value of the reporting unit to the estimated fair value of all reporting unitunits and intangible assets and liabilities, except goodwill, to determine the implied fair value of goodwill. We calculate impairment as the excess ofwith indefinite lives exceeded their respective carrying amount of goodwill over the implied fair value of goodwill. values.
In the impairment tests for trademarks and trade names, we compare the estimated fair value of each asset to its carrying amount. The fair values of trademarks and trade names are generally estimated using a relief from royalty method under the income approach. If the carrying amount of a trademark or trade name exceeds its estimated fair value, we calculate impairment as the excess of carrying amount over the estimate of fair value. At December 31, 2021, the carrying value of indefinite-lived intangible assets was $97.9 million, of which $70.5 million was attributed to prAna’s trademark. In our 2021 impairment test, the fair value of prAna’s trademark exceeded its carrying value by approximately 26% as of the measurement date and, therefore, no impairment was recognized. As part of our evaluation, we performed sensitivity analysis on the trademark impairment model. A 10% decrease in estimated net sales for each of the next five years did not cause the fair value of the trademark to decline below its carrying value. Separately, a 100 basis point increase in the assumed discount rate did not cause the fair value of the trademark to decline below its carrying value. In 2020, our impairment test of prAna’s trademark resulted in a $17.5 million impairment charge.
COLUMBIA SPORTSWEAR COMPANY | 2021 FORM 10-K | 31
In the impairment test for goodwill, we compare the estimated fair value of the reporting unit with the carrying amount of that reporting unit. If the carrying amount of the reporting unit exceeds its estimated fair value, we calculate an impairment as the excess of carrying amount over the estimate of fair value. We estimate the fair value of our reporting units using a combination of discounted cash flow analysis and market-based valuation methods, as appropriate. Key assumptions used in the discounted cash flow models are cash flow projections and the discount rate. Cash flow projections are developed in part from our annual planning process. The discount rate is the estimated weighted-average costs of capital of the reporting unit from a market-participant perspective. When we include market-based valuation methods to estimate fair value of our reporting units, we utilize market multiples for guideline public companies. The goodwill balance was $68.6 million at December 31, 2021, of which $54.2 million was allocated to the prAna reporting unit. In our 2021 impairment test, the fair value of the prAna reporting unit exceeded its carrying value by approximately 39% as of the measurement date and, therefore, no impairment was recognized.
Our impairment tests and related fair value estimates are based on a number of factors, including assumptions and estimates for projected sales, income, cash flows, discount rates, market-based multiples, remaining useful lives, and other operating performance measures. Changes in estimates or the application of alternative assumptions could produce
significantly different results. 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.
Income Taxes
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. Our judgments, assumptions and estimates relative to the current provision for income tax take into account current tax laws, our interpretation of current tax laws and possible outcomes of current and future audits conducted by foreign and domestic tax authorities. 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 taxesIncome tax expense in our Consolidated Financial Statements. Statements of Operations.
Our assumptions, judgments and estimates relative to the value of a deferred tax asset take into account predictions of the amount and category of future taxable income. Actual operating results and the underlying amount and category of income in future years could cause our current assumptions, judgments and estimates of recoverable net deferred taxestax assets to be inaccurate. Changes in any of the assumptions, judgments and estimates mentioned above could cause our actual income tax obligations to differ from our estimates, which could materially affect our financial position, results of operations or cash flows.
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.
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. As the calendar year progresses, we periodically refine our estimate based on actual events and earnings by jurisdiction. This ongoing estimation process can result in changes to our expected effective tax rate for the full calendar year. When this occurs, we adjust the income tax provision during the quarter in which the change in estimate occurs so that our year-to-date provision equals our expected annual effective tax rate.
Refer to "Recent Accounting Pronouncements" in Note 2 in Item 8 of Notes to Consolidated Financial Statements.
this Annual Report on Form 10-K.
| ITEM 7A. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK | ||||
In the normal course of business, our financial position and results of operations are subject to a variety of risks, including risks associated with global financial and capital markets, primarily currency exchange rate risk and, to a lesser extent, interest rate risk. We regularly assess these risks and have established policies and business practices designed to mitigate their effects. We do not engage in speculative trading in any financial or capital market.
COLUMBIA SPORTSWEAR COMPANY | 2021 FORM 10-K | 32
FOREIGN EXCHANGE RISK
Our primary currency exchange rate risk management objective is to mitigate the uncertainty of anticipated cash flows attributable to changes in exchange rates. We focus on mitigating changes in functional currency equivalent cash flows resulting from anticipated United States dollar denominated inventory purchases by subsidiaries that use European euros, Canadian dollars, Japanese yen, Chinese renminbi, or Korean won as their functional currency. We also mitigate changes in functional currency equivalent cash flows resulting from anticipated non-functional currency denominated sales for subsidiaries that use United States dollars and euros as their functional currency. We manage this risk primarily by using currency forward contracts. Additionally, we hedge net balance sheet exposures related primarily to non-functional currency denominated monetary assets and liabilities using foreign currency forward contracts in European euros, Japanese yen, Canadian dollars, Swiss francs, Chinese renminbi, Korean won, British pound, Danish krone, Norwegian kroner, Polish zloty, Swedish krona and Czech koruna. Non-functional currency denominated monetary assets and liabilities consist primarily of cash and cash equivalents, short-term investments, receivables, payables, deferred income taxes, and intercompany loans and dividends.
The information requirednet fair value of our derivative contracts was favorable by this item is includedapproximately $15.6 million at December 31, 2021. A 10% unfavorable exchange rate change in Management's Discussionthe euro, franc, Canadian dollar, yen, renminbi, won, pound, krone, zloty, krona and Analysiskoruna against the United States dollar would have resulted in the net fair value declining by approximately $57.3 million at December 31, 2021. Changes in fair value of Financial Condition and Resultsderivative contracts resulting from foreign exchange rate fluctuations would be substantially offset by the change in value of Operations and is incorporated hereinthe underlying hedged transactions.
INTEREST RATE RISK
Our negotiated credit facilities generally charge interest based on a benchmark rate such as the London Interbank Offered Rate ("LIBOR"). Fluctuations in short-term interest rates cause interest payments on drawn amounts to increase or decrease. At December 31, 2021, no balance was outstanding under our credit facilities.
COMMODITY PRICE RISK
We are exposed to market risk for the pricing of the raw materials used to manufacture our products. These raw materials are purchased directly by this reference.our contract manufacturers.
| ITEM 8. | FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA | ||||
Our management is responsible for the information and representations contained in this report. The financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America ("GAAP"), which we consider appropriate in the circumstances and include some amounts based on our best estimates and judgments. Other financial information in this report is consistent with these financial statements.
Our accounting systems include controls designed to reasonably ensure that assets are safeguarded from unauthorized use or disposition and which provide for the preparation of financial statements in conformity with accounting principles generally accepted in the United States.GAAP. These systems are supplemented by the selection and training of qualified financial personnel and an organizational structure providing for appropriate segregation of duties.
The Audit Committeeaudit committee is responsible for appointing the independent registered public accounting firm and reviews with the independent registered public accounting firm and management the scope and the results of the annual examination, the effectiveness of the accounting control system and other matters relating to our financial affairs as they deem appropriate.
COLUMBIA SPORTSWEAR COMPANY | 2021 FORM 10-K | 34
 | Deloitte & Touche LLP U.S. Bancorp Tower 111 Southwest Fifth Avenue Suite 3900 Portland, OR 97204-3642 USA Tel:+1 503 222 1341 Fax: +1 503 224 2172 www.deloitte.com | |||||||
Report of Independent Registered Public Accounting Firm
To the Shareholders and Board of Directors and Shareholders
of Columbia Sportswear Company
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Columbia Sportswear Company and subsidiaries (the "Company") as of December 31, 20172021 and 2016,2020, the related consolidated statements of operations, comprehensive income, equity, and cash flows for each of the three years in the period ended December 31, 2017, and2021, the related notes, and the schedule listed in the Index at Item 15 (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 20172021 and 2016,2020, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2017,2021, in conformity with accounting principles generally accepted in the United States of America.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2017,2021, based on criteria established in Internal Control -– Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 22, 2018,24, 2022, expressed an unqualified opinion on the Company's internal control over financial reporting.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current-period audit of the financial statements that were communicated or required to be communicated to the audit committee and that (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.
COLUMBIA SPORTSWEAR COMPANY | 2021 FORM 10-K | 35
Intangible Assets, Net – prAna Trademark– Refer to Notes 2 and 6 to the Consolidated Financial Statements
Critical Audit Matter Description
The Company has intangible assets, including trademarks and trade names (“trademarks”). As of December 31, 2021, the carrying value of the intangible assets was $101.9 million, of which $70.5 million was attributed to prAna’s trademark. The Company used the relief from royalty method to estimate fair value, which requires management to make significant estimates and assumptions related to projected revenues.
Auditing management’s estimates and assumptions related to projected revenues for prAna involved especially subjective judgement.
How the Critical Audit Matter Was Addressed in the Audit
Our audit procedures related to management’s estimates and assumptions related to projected revenues for the prAna trademark valuation included the following, among others:
•We tested the effectiveness of controls over intangible assets, including those over the forecasts of future revenues.
•We evaluated management’s ability to accurately forecast future revenues by comparing actual results to management’s historical forecasts.
•We evaluated the reasonableness of management’s revenues forecasts by comparing the forecasts to:
◦Historical revenues.
◦Forecasted information included in Company press releases as well as in analyst and industry reports for the Company and certain of its peer companies.
•We evaluated the inputs used in the forecast and the basis for the assumptions made by management.
•We evaluated the impact of changes in management’s forecasts from the October 31, 2021 annual measurement date to December 31, 2021.
Long-lived Asset Valuation – Refer to Notes 2, 5 and 9 to the Consolidated Financial Statements
Critical Audit Matter Description
The Company evaluates retail location long-lived assets for impairment when events or changes in circumstances exist that may indicate that the carrying amounts of retail location long-lived assets are no longer recoverable. Events that result in an impairment review include plans to close a retail location or a significant decrease in the operating results of the retail location. When such an indicator occurs, the Company evaluates its 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.
The Company makes significant assumptions to evaluate retail location long-lived assets for possible indications of impairment. Changes in these assumptions could have a significant impact on the retail location long-lived assets identified for further analysis. For the year ended December 31, 2021, impairment charges from underperforming retail location long-lived assets were immaterial.
Given the Company’s evaluation of possible indications of impairment of retail location long-lived assets requires management to make significant assumptions, performing audit procedures to evaluate whether management appropriately identified events or changes in circumstances indicating that the carrying amounts of retail location long-lived assets may not be recoverable involved especially subjective judgment.
How the Critical Audit Matter Was Addressed in the Audit
Our audit procedures related to the evaluation of retail location long-lived assets for possible indications of impairment included the following, among others:
COLUMBIA SPORTSWEAR COMPANY | 2021 FORM 10-K | 36
•We tested the effectiveness of the controls over management's identification of possible circumstances that may indicate that the carrying amounts of retail location long-lived assets are no longer recoverable.
•We evaluated management's impairment analysis by:
◦Testing retail location long-lived assets for possible indications of impairment, including searching for locations with a history of losses, current period loss, or projected losses.
◦Performing inquiries of management regarding the process and assumptions used to identify potential indicators of impairment and evaluating the consistency of the assumptions with evidence obtained in other areas of the audit.
/s/ DELOITTE & TOUCHE LLP
Portland, Oregon
February 22, 201824, 2022
We have served as the Company’s auditor since at least 1994; however, the specifican earlier year hascould not beenbe reliably determined.
COLUMBIA SPORTSWEAR COMPANY | 2021 FORM 10-K | 37
| Deloitte & Touche LLP U.S. Bancorp Tower 111 Southwest Fifth Avenue Suite 3900 Portland, OR 97204-3642 USA Tel:+1 503 222 1341 Fax: +1 503 224 2172 www.deloitte.com | |||||||
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and Board of Directors of Columbia Sportswear Company
Opinion on Internal Control over Financial Reporting
We have audited the internal control over financial reporting of Columbia Sportswear Company and subsidiaries (the “Company”) as of December 31, 2021, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In thousands)our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control – Integrated Framework (2013) issued by COSO.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated financial statements as of and for the year ended December 31, 2021, of the Company and our report dated February 24, 2022, expressed an unqualified opinion on those financial statements.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Report of Management. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ DELOITTE & TOUCHE LLP
Portland, Oregon
February 24, 2022
COLUMBIA SPORTSWEAR COMPANY | 2021 FORM 10-K | 38
| December 31, | ||||||||
| 2017 | 2016 | |||||||
| ASSETS | ||||||||
| Current Assets: | ||||||||
| Cash and cash equivalents (Note 20) | $ | 673,166 | $ | 551,389 | ||||
| Short-term investments (Note 20) | 94,983 | 472 | ||||||
| Accounts receivable, net (Note 5) | 364,862 | 333,678 | ||||||
| Inventories | 457,927 | 487,997 | ||||||
| Prepaid expenses and other current assets | 58,559 | 38,487 | ||||||
| Total current assets | 1,649,497 | 1,412,023 | ||||||
| Property, plant, and equipment, net (Note 6) | 281,394 | 279,650 | ||||||
| Intangible assets, net (Note 7) | 129,555 | 133,438 | ||||||
| Goodwill (Note 7) | 68,594 | 68,594 | ||||||
| Deferred income taxes (Note 10) | 56,804 | 92,494 | ||||||
| Other non-current assets | 27,058 | 27,695 | ||||||
| Total assets | $ | 2,212,902 | $ | 2,013,894 | ||||
| LIABILITIES AND EQUITY | ||||||||
| Current Liabilities: | ||||||||
| Accounts payable | $ | 252,301 | $ | 215,048 | ||||
| Accrued liabilities (Note 9) | 182,228 | 142,158 | ||||||
| Income taxes payable (Note 10) | 19,107 | 5,645 | ||||||
| Total current liabilities | 453,636 | 362,851 | ||||||
| Note payable to related party (Note 21) | — | 14,053 | ||||||
| Other long-term liabilities (Notes 11, 12) | 48,735 | 42,622 | ||||||
| Income taxes payable (Note 10) | 58,104 | 12,710 | ||||||
| Deferred income taxes (Note 10) | 168 | 147 | ||||||
| Total liabilities | 560,643 | 432,383 | ||||||
| Commitments and contingencies (Note 13) | ||||||||
| Shareholders' Equity: | ||||||||
| Preferred stock; 10,000 shares authorized; none issued and outstanding | — | — | ||||||
| Common stock (no par value); 125,000 shares authorized; 69,995 and 69,873 issued and outstanding (Note 14) | 45,829 | 53,801 | ||||||
| Retained earnings | 1,585,009 | 1,529,636 | ||||||
| Accumulated other comprehensive loss (Note 17) | (8,887 | ) | (22,617 | ) | ||||
| Total Columbia Sportswear Company shareholders' equity | 1,621,951 | 1,560,820 | ||||||
| Non-controlling interest (Note 4) | 30,308 | 20,691 | ||||||
| Total equity | 1,652,259 | 1,581,511 | ||||||
| Total liabilities and equity | $ | 2,212,902 | $ | 2,013,894 | ||||
| ||||||||
| CONSOLIDATED BALANCE SHEETS | ||
| December 31, | ||||||||||||||||||||
| (in thousands) | 2021 | 2020 | ||||||||||||||||||
| ASSETS | ||||||||||||||||||||
| Current Assets: | ||||||||||||||||||||
| Cash and cash equivalents | $ | 763,404 | $ | 790,725 | ||||||||||||||||
| Short-term investments | 131,145 | 1,224 | ||||||||||||||||||
| Accounts receivable, net of allowance of 8,893 and 21,810, respectively | 487,803 | 452,945 | ||||||||||||||||||
| Inventories, net | 645,379 | 556,530 | ||||||||||||||||||
| Prepaid expenses and other current assets | 86,306 | 54,197 | ||||||||||||||||||
| Total current assets | 2,114,037 | 1,855,621 | ||||||||||||||||||
| Property, plant and equipment, net | 291,088 | 309,792 | ||||||||||||||||||
| Operating lease right-of-use assets | 330,928 | 339,244 | ||||||||||||||||||
| Intangible assets, net | 101,908 | 103,558 | ||||||||||||||||||
| Goodwill | 68,594 | 68,594 | ||||||||||||||||||
| Deferred income taxes | 92,121 | 96,126 | ||||||||||||||||||
| Other non-current assets | 68,452 | 63,636 | ||||||||||||||||||
| Total assets | $ | 3,067,128 | $ | 2,836,571 | ||||||||||||||||
| LIABILITIES AND EQUITY | ||||||||||||||||||||
| Current Liabilities: | ||||||||||||||||||||
| Accounts payable | $ | 283,349 | $ | 206,697 | ||||||||||||||||
| Accrued liabilities | 316,485 | 257,278 | ||||||||||||||||||
| Operating lease liabilities | 67,429 | 65,466 | ||||||||||||||||||
| Income taxes payable | 13,127 | 23,181 | ||||||||||||||||||
| Total current liabilities | 680,390 | 552,622 | ||||||||||||||||||
| Non-current operating lease liabilities | 317,666 | 353,181 | ||||||||||||||||||
| Income taxes payable | 44,541 | 49,922 | ||||||||||||||||||
| Deferred income taxes | — | 5,205 | ||||||||||||||||||
| Other long-term liabilities | 35,279 | 42,870 | ||||||||||||||||||
| Total liabilities | 1,077,876 | 1,003,800 | ||||||||||||||||||
| Commitments and contingencies (Note 12) | ||||||||||||||||||||
| Shareholders' Equity: | ||||||||||||||||||||
| Preferred stock; 10,000 shares authorized; none issued and outstanding | — | — | ||||||||||||||||||
| Common stock (no par value); 250,000 shares authorized; 65,164 and 66,252 issued and outstanding, respectively | — | 20,165 | ||||||||||||||||||
| Retained earnings | 1,993,628 | 1,811,800 | ||||||||||||||||||
| Accumulated other comprehensive income (loss) | (4,376) | 806 | ||||||||||||||||||
| Total shareholders' equity | 1,989,252 | 1,832,771 | ||||||||||||||||||
| Total liabilities and shareholders' equity | $ | 3,067,128 | $ | 2,836,571 | ||||||||||||||||
See accompanying notes to consolidated financial statements.
COLUMBIA SPORTSWEAR COMPANY | 2021 FORM 10-K | 39
| Year Ended December 31, | ||||||||||||
| 2017 | 2016 | 2015 | ||||||||||
| Net sales | $ | 2,466,105 | $ | 2,377,045 | $ | 2,326,180 | ||||||
| Cost of sales | 1,306,143 | 1,266,697 | 1,252,680 | |||||||||
| Gross profit | 1,159,962 | 1,110,348 | 1,073,500 | |||||||||
| Selling, general and administrative expenses | 910,894 | 864,084 | 831,971 | |||||||||
| Net licensing income | 13,901 | 10,244 | 8,192 | |||||||||
| Income from operations | 262,969 | 256,508 | 249,721 | |||||||||
| Interest income, net | 4,515 | 2,003 | 1,531 | |||||||||
| Interest expense on note payable to related party (Note 21) | (429 | ) | (1,041 | ) | (1,099 | ) | ||||||
| Other non-operating expense | (321 | ) | (572 | ) | (2,834 | ) | ||||||
| Income before income tax | 266,734 | 256,898 | 247,319 | |||||||||
| Income tax expense (Note 10) | (154,419 | ) | (58,459 | ) | (67,468 | ) | ||||||
| Net income | 112,315 | 198,439 | 179,851 | |||||||||
| Net income attributable to non-controlling interest | 7,192 | 6,541 | 5,514 | |||||||||
| Net income attributable to Columbia Sportswear Company | $ | 105,123 | $ | 191,898 | $ | 174,337 | ||||||
| Earnings per share attributable to Columbia Sportswear Company (Note 16): | ||||||||||||
| Basic | $ | 1.51 | $ | 2.75 | $ | 2.48 | ||||||
| Diluted | 1.49 | 2.72 | 2.45 | |||||||||
| Weighted average shares outstanding (Note 16): | ||||||||||||
| Basic | 69,759 | 69,683 | 70,162 | |||||||||
| Diluted | 70,453 | 70,632 | 71,064 | |||||||||
| ||||||||
| CONSOLIDATED STATEMENTS OF OPERATIONS | ||
| Year Ended December 31, | ||||||||||||||||||||
| (in thousands, except per share amounts) | 2021 | 2020 | 2019 | |||||||||||||||||
| Net sales | $ | 3,126,402 | $ | 2,501,554 | $ | 3,042,478 | ||||||||||||||
| Cost of sales | 1,513,947 | 1,277,665 | 1,526,808 | |||||||||||||||||
| Gross profit | 1,612,455 | 1,223,889 | 1,515,670 | |||||||||||||||||
| Selling, general and administrative expenses | 1,180,323 | 1,098,948 | 1,136,186 | |||||||||||||||||
| Net licensing income | 18,372 | 12,108 | 15,487 | |||||||||||||||||
| Operating income | 450,504 | 137,049 | 394,971 | |||||||||||||||||
| Interest income, net | 1,380 | 435 | 8,302 | |||||||||||||||||
| Other non-operating income (expense), net | (373) | 2,039 | 2,156 | |||||||||||||||||
| Income before income tax | 451,511 | 139,523 | 405,429 | |||||||||||||||||
| Income tax expense | (97,403) | (31,510) | (74,940) | |||||||||||||||||
| Net income | 354,108 | 108,013 | 330,489 | |||||||||||||||||
| Earnings per share: | ||||||||||||||||||||
| Basic | $ | 5.37 | $ | 1.63 | $ | 4.87 | ||||||||||||||
| Diluted | $ | 5.33 | $ | 1.62 | $ | 4.83 | ||||||||||||||
| Weighted average shares outstanding: | ||||||||||||||||||||
| Basic | 65,942 | 66,376 | 67,837 | |||||||||||||||||
| Diluted | 66,415 | 66,772 | 68,493 | |||||||||||||||||
See accompanying notes to consolidated financial statements.
COLUMBIA SPORTSWEAR COMPANY | 2021 FORM 10-K | 40
| Year Ended December 31, | ||||||||||||
| 2017 | 2016 | 2015 | ||||||||||
| Net income | $ | 112,315 | $ | 198,439 | $ | 179,851 | ||||||
| Other comprehensive income (loss): | ||||||||||||
| Unrealized holding losses on available-for-sale securities (net of tax effects of $0, $0, and ($3), respectively) | — | (2 | ) | (6 | ) | |||||||
| Unrealized gains (losses) on derivative transactions (net of tax effects of $8,176, ($1,922) and ($849), respectively) | (18,005 | ) | 843 | (2,908 | ) | |||||||
| Foreign currency translation adjustments (net of tax effects of $4, ($347) and ($760), respectively) | 34,160 | (4,485 | ) | (34,887 | ) | |||||||
| Other comprehensive income (loss) | 16,155 | (3,644 | ) | (37,801 | ) | |||||||
| Comprehensive income | 128,470 | 194,795 | 142,050 | |||||||||
| Comprehensive income attributable to non-controlling interest | 9,617 | 4,678 | 4,382 | |||||||||
| Comprehensive income attributable to Columbia Sportswear Company | $ | 118,853 | $ | 190,117 | $ | 137,668 | ||||||
| ||||||||
| CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME | ||
| Year Ended December 31, | ||||||||||||||||||||
| (in thousands) | 2021 | 2020 | 2019 | |||||||||||||||||
| Net income | $ | 354,108 | $ | 108,013 | $ | 330,489 | ||||||||||||||
| Other comprehensive income (loss): | ||||||||||||||||||||
| Unrealized holding gains on available-for-sale securities, net | — | 4 | 56 | |||||||||||||||||
| Unrealized holding gains (losses) on derivative transactions (net of tax effects of $(7,138), $6,271, and $830, respectively) | 19,283 | (18,851) | (2,383) | |||||||||||||||||
| Foreign currency translation adjustments (net of tax effects of $(40), $(388), and $2,188, respectively) | (24,465) | 24,078 | 2,064 | |||||||||||||||||
| Other comprehensive income (loss) | (5,182) | 5,231 | (263) | |||||||||||||||||
| Comprehensive income | 348,926 | 113,244 | 330,226 | |||||||||||||||||
See accompanying notes to consolidated financial statements.
COLUMBIA SPORTSWEAR COMPANY | 2021 FORM 10-K | 41
Year Ended December 31, | ||||||||||||
| 2017 | 2016 | 2015 | ||||||||||
| Cash flows from operating activities: | ||||||||||||
| Net income | $ | 112,315 | $ | 198,439 | $ | 179,851 | ||||||
| Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||||||
| Depreciation and amortization | 59,945 | 60,016 | 56,521 | |||||||||
| Loss on disposal or impairment of property, plant, and equipment | 1,927 | 4,805 | 5,098 | |||||||||
| Deferred income taxes | 44,851 | (19,178 | ) | (11,709 | ) | |||||||
| Stock-based compensation | 11,286 | 10,986 | 11,672 | |||||||||
| Excess tax benefit from employee stock plans | — | — | (7,873 | ) | ||||||||
| Changes in operating assets and liabilities: | ||||||||||||
| Accounts receivable | (24,197 | ) | 36,710 | (40,419 | ) | |||||||
| Inventories | 46,662 | (18,777 | ) | (103,296 | ) | |||||||
| Prepaid expenses and other current assets | (19,241 | ) | (5,452 | ) | 4,411 | |||||||
| Other assets | 931 | (5,948 | ) | (2,524 | ) | |||||||
| Accounts payable | 30,568 | 1,483 | 11,418 | |||||||||
| Accrued liabilities | 11,581 | 4,847 | (2,017 | ) | ||||||||
| Income taxes payable | 58,702 | 4,768 | (10,994 | ) | ||||||||
| Other liabilities | 5,798 | 2,468 | 4,966 | |||||||||
| Net cash provided by operating activities | 341,128 | 275,167 | 95,105 | |||||||||
| Cash flows from investing activities: | ||||||||||||
| Purchases of short-term investments | (130,993 | ) | (21,263 | ) | (38,208 | ) | ||||||
| Sales of short-term investments | 36,282 | 21,263 | 64,980 | |||||||||
| Capital expenditures | (53,352 | ) | (49,987 | ) | (69,917 | ) | ||||||
| Proceeds from sale of property, plant, and equipment | 279 | 97 | 144 | |||||||||
| Net cash used in investing activities | (147,784 | ) | (49,890 | ) | (43,001 | ) | ||||||
| Cash flows from financing activities: | ||||||||||||
| Proceeds from credit facilities | 3,374 | 62,885 | 53,429 | |||||||||
| Repayments on credit facilities | (3,374 | ) | (64,825 | ) | (51,479 | ) | ||||||
| Proceeds from issuance of common stock under employee stock plans | 19,946 | 13,167 | 17,442 | |||||||||
| Tax payments related to restricted stock unit issuances | (3,662 | ) | (5,117 | ) | (4,895 | ) | ||||||
| Excess tax benefit from employee stock plans | — | — | 7,873 | |||||||||
| Repurchase of common stock | (35,542 | ) | (11 | ) | (70,068 | ) | ||||||
| Cash dividends paid | (50,909 | ) | (48,122 | ) | (43,547 | ) | ||||||
| Payment of related party note payable | (14,236 | ) | — | — | ||||||||
| Net cash used in financing activities | (84,403 | ) | (42,023 | ) | (91,245 | ) | ||||||
| Net effect of exchange rate changes on cash | 12,836 | (1,635 | ) | (4,647 | ) | |||||||
| Net increase (decrease) in cash and cash equivalents | 121,777 | 181,619 | (43,788 | ) | ||||||||
| Cash and cash equivalents, beginning of year | 551,389 | 369,770 | 413,558 | |||||||||
| Cash and cash equivalents, end of year | $ | 673,166 | $ | 551,389 | $ | 369,770 | ||||||
| Supplemental disclosures of cash flow information: | ||||||||||||
| Cash paid during the year for income taxes | $ | 81,045 | $ | 70,424 | $ | 87,350 | ||||||
| Cash paid during the year for interest on note payable to related party | 685 | 1,049 | 1,115 | |||||||||
| Supplemental disclosures of non-cash investing activities: | ||||||||||||
| Capital expenditures incurred but not yet paid | 3,188 | 2,710 | 4,698 | |||||||||
| ||||||||
| CONSOLIDATED STATEMENTS OF CASH FLOWS | ||
| Year Ended December 31, | ||||||||||||||||||||
| (in thousands) | 2021 | 2020 | 2019 | |||||||||||||||||
| Cash flows from operating activities: | ||||||||||||||||||||
| Net income | $ | 354,108 | $ | 108,013 | $ | 330,489 | ||||||||||||||
| Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||||||||||||||
| Depreciation, amortization, and non-cash lease expense | 115,571 | 146,601 | 121,725 | |||||||||||||||||
| Provision for uncollectible accounts receivable | (10,758) | 19,156 | (108) | |||||||||||||||||
| Loss on disposal or impairment of intangible assets, property, plant and equipment, and right-of-use assets | 1,233 | 31,342 | 5,442 | |||||||||||||||||
| Deferred income taxes | (9,798) | (11,263) | (1,808) | |||||||||||||||||
| Stock-based compensation | 19,126 | 17,778 | 17,832 | |||||||||||||||||
| Changes in operating assets and liabilities: | ||||||||||||||||||||
| Accounts receivable | (31,622) | 22,885 | (37,429) | |||||||||||||||||
| Inventories, net | (100,261) | 64,884 | (84,058) | |||||||||||||||||
| Prepaid expenses and other current assets | (24,858) | 33,712 | (15,068) | |||||||||||||||||
| Other assets | 1,231 | (21,224) | (3,547) | |||||||||||||||||
| Accounts payable | 75,513 | (49,275) | (10,419) | |||||||||||||||||
| Accrued liabilities | 66,457 | (52,115) | 18,863 | |||||||||||||||||
| Income taxes payable | (15,248) | 9,082 | (9,402) | |||||||||||||||||
| Operating lease assets and liabilities | (85,176) | (52,112) | (54,197) | |||||||||||||||||
| Other liabilities | (1,112) | 8,613 | 7,137 | |||||||||||||||||
| Net cash provided by operating activities | 354,406 | 276,077 | 285,452 | |||||||||||||||||
| Cash flows from investing activities: | ||||||||||||||||||||
| Purchases of short-term investments | (130,191) | (35,044) | (136,257) | |||||||||||||||||
| Sales and maturities of short-term investments | 1,184 | 36,631 | 400,501 | |||||||||||||||||
| Capital expenditures | (34,744) | (28,758) | (123,516) | |||||||||||||||||
| Net cash provided by (used in) investing activities | (163,751) | (27,171) | 140,728 | |||||||||||||||||
| Cash flows from financing activities: | ||||||||||||||||||||
| Proceeds from credit facilities | 38,334 | 402,422 | 78,186 | |||||||||||||||||
| Repayments on credit facilities | (38,156) | (403,146) | (78,186) | |||||||||||||||||
| Payment of line of credit issuance fees | — | (3,278) | — | |||||||||||||||||
| Proceeds from issuance of common stock related to stock-based compensation | 28,783 | 6,919 | 19,793 | |||||||||||||||||
| Tax payments related to stock-based compensation | (5,812) | (4,533) | (5,806) | |||||||||||||||||
| Repurchase of common stock | (165,415) | (132,889) | (121,702) | |||||||||||||||||
| Purchase of non-controlling interest | — | — | (17,880) | |||||||||||||||||
| Cash dividends paid | (68,623) | (17,195) | (65,127) | |||||||||||||||||
| Net cash used in financing activities | (210,889) | (151,700) | (190,722) | |||||||||||||||||
| Net effect of exchange rate changes on cash | (7,087) | 7,510 | (1,244) | |||||||||||||||||
| Net increase (decrease) in cash and cash equivalents | (27,321) | 104,716 | 234,214 | |||||||||||||||||
| Cash and cash equivalents, beginning of period | 790,725 | 686,009 | 451,795 | |||||||||||||||||
| Cash and cash equivalents, end of period | $ | 763,404 | $ | 790,725 | $ | 686,009 | ||||||||||||||
| Supplemental disclosures of cash flow information: | ||||||||||||||||||||
| Cash paid during the year for income taxes | $ | 129,483 | $ | 14,687 | $ | 99,062 | ||||||||||||||
| Supplemental disclosures of non-cash investing and financing activities: | ||||||||||||||||||||
| Property, plant and equipment acquired through increase in liabilities | $ | 5,853 | $ | 3,831 | $ | 9,543 | ||||||||||||||
See accompanying notes to consolidated financial statements.
COLUMBIA SPORTSWEAR COMPANY | 2021 FORM 10-K | 42