COLUMBIA SPORTSWEAR COMPANY | Q1 2023 FORM 10-Q | 17

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)~~

~~(Unaudited)~~

September 30, 2017. Interest expense related to this note was $253,000 for the three months ended September 30, 2016, and $429,000 and $779,000 for the nine months ended September 30, 2017 and 2016, respectively.


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As of September 30, 2017 and 2016, and December 31, 2016, net payables to Swire for service fees, interest expense and miscellaneous expenses totaled $87,000, $948,000 and $707,000, respectively, and were included in accounts payable in the Condensed Consolidated Balance Sheets.

In addition to the transactions described above, Swire is also a third-party distributor of the Company's brands in certain regions outside of mainland China and purchases products from the Company under the Company's standard third-party distributor terms and pricing.

~~Item 2.~~ ~~MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS~~


ITEM 2.			MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

~~This quarterly report contains forward-looking statements. Forward-looking statements include any statements related to~~

The following discussion and analysis of our ~~expectations regarding future performance or market position, including any statements regarding anticipated sales, gross margins~~financial condition and ~~operating margins across markets, profitability and the effect of specified factors on profitability for 2017, expenses, sourcing costs, effects of unseasonable weather on our~~ results of operations ~~inventory levels, investments~~should be read in ~~our business, investments in~~conjunction with "Special Note Regarding Forward-Looking Statements", Part I, Item 1 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, income tax rates and pre-tax income, and our exposure to market risk associated with interest rates and foreign currency exchange rates.

These forward-looking statements, and others we make from time to time, are subject to a number of risks and uncertainties. Many factors may cause actual results to differ materially from those projected in forward-looking statements, including the risks described below in Part II, Item 1A ~~Risk Factors.~~of this Quarterly Report on Form 10-Q. In addition, refer to Part II, Item 7 in our Annual Report on Form 10-K for the year ended December 31, 2022 for our discussion and analysis comparing financial condition and results of operations from 2022 to 2021.

OVERVIEW

We connect active people with their passions. We are a global leader in designing, developing, marketing, and distributing outdoor, active and lifestyle products. We manage these products in two categories: apparel, accessories, and equipment products and footwear products. We provide our products through our four 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.

We are investing in our strategic priorities to:

•accelerate profitable growth;

•create iconic products that are differentiated, functional and innovative;

•drive brand engagement through increased, focused demand creation investments;

•enhance consumer experiences by investing in capabilities to delight and retain consumers;

•amplify marketplace excellence, with digitally-led, omni-channel, global distribution; and

•empower talent that is driven by our core values through a diverse and inclusive workplace.

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

Economic Environment Impacting Consumer Spending Ability and Preferences | We believe inflationary pressures, increasing interest rates and recessionary fears are impacting wholesale customer behavior, including cautiousness in placing advance orders for merchandise. In addition, we anticipate risk of consumer discretionary spending coming under pressure as the U.S. federal funds rate fluctuates and credit markets tighten.

Elevated Inflationary Pressures | Inflationary pressures, including outbound freight, raw materials, labor and wage rates, and product input costs, impacted our first quarter 2023 results. We implemented product price increases for our Spring 2023 season, which varied by market and product category. In the U.S., on average, we increased pricing by a mid-single to high-single-digit percent. We do not ~~undertake any duty~~expect to ~~update forward-looking statements after~~implement additional meaningful product price increases as we anniversary prior year increases and begin to see inflationary pressure moderate.

Strong U.S. Dollar | In 2022, the ~~date they are made or to conform them to actual results or to changes in circumstances or expectations.~~

~~Our Business~~

~~As one~~rapid strengthening of the ~~largest outdoor~~U.S. dollar relative to major foreign currencies unfavorably impacted our results. The impact of unfavorable foreign currency translation unfavorably impacted net sales and ~~active lifestyle apparel and footwear companies~~profitability in the ~~world,~~first quarter of 2023, and is anticipated to continue to through at least the first half of 2023 before shifting to a favorable impact in the second half of 2023.

Heightened Geopolitical Environment | Geopolitical tensions throughout the globe escalated in 2022 as a result of the invasion of Ukraine by Russia and other actions. We believe these geopolitical tensions will remain elevated and have the potential to manifest themselves in certain regions where we ~~design, source,~~directly operate.

Increased Freight Charges | For the majority of 2022, we experienced elevated ocean freight costs as a result of price increases stemming from an imbalance of supply and demand for steamship and ocean container capacity. As a result, these costs have had a substantially unfavorable impact on our gross margin. Beginning in the fourth quarter of 2022, we experienced significant declines in ocean freight cost, which we expect will benefit gross margin throughout 2023. We anticipate these lower ocean freight costs to persist into 2023.

COLUMBIA SPORTSWEAR COMPANY | Q1 2023 FORM 10-Q | 18


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Improved Inventory Receipts | As a result of certain supply chain disruptions, we received Spring 2022 and Fall 2022 inventory later than expected and realized much higher than normal cancellations from our wholesale customers. Inventory production and logistics transit times have improved markedly for Spring 2023, impacting sales and inventory. We expect to continue to uphold these improved transit times and to be more in-line with our historical experience throughout 2023, assuming no material downturn in port or railroad labor relations.

COVID-19 Impacts in China | From 2020 to 2022, government efforts to control the spread of COVID-19 in China severely impacted our business in China. We believe these efforts resulted in lower consumer demand, as well as disruption of our operations, including operations of our owned DTC stores and stores operated by our wholesale customers, and warehousing and fulfillment operations. Upon the change in China's zero-COVID policy in December 2022, our business in China has experienced a surge in consumer demand. We expect to continue to see our China business improve in 2023 as the market benefits from re-opening and ~~distribute outdoor~~pent-up demand.

Elevated Inventories | Following strong consumer demand in 2021 combined with healthy retail marketplace inventories exiting 2021, wholesale customers placed aggressive orders for inventory. Correspondingly, our inventory purchases were far greater than historical norms. However, in 2022, a slowing of consumer demand in the market combined with our delivery delays, resulted in our elevated inventory levels. As retailers rationalized their inventory needs and ~~active lifestyle apparel, footwear, accessories,~~demonstrated a more conservative approach to inventory management, we experienced increased order cancellations for Spring 2022 and ~~equipment primarily under~~Fall 2022 orders. At the ~~Columbia, SOREL, prAna,~~end of the first quarter of 2023, our inventory levels reflected elevated carryover inventory and, ~~Mountain Hardwear brands. Our products~~to a lesser extent, increased older season inventory. To address these higher inventory levels, we have adjusted future inventory purchases and plan to utilize our outlet stores to sell a portion of our excess inventory. We expect our inventories to remain elevated through the first half of 2023 and to begin to normalize in the second half of the year.

Increased Distribution Center Capacity Pressure | Elevated inventory levels combined with uneven flow of inventory receipts and shipments are ~~sold through~~resulting in storage and process capacity pressures within our distribution centers and third-party logistics operations. We began to experience these pressures as we received Fall 2022 inventory and expect this trend to continue well into 2023. We have and expect to continue to incur additional inventory carrying costs in 2023 as a ~~mix~~result of ~~wholesale distribution channels,~~additional costs for outside storage, and other inventory related holding costs, including losses in productivity, as we look to normalize our ~~own direct-to-consumer channels~~inventory position.

Changes in Promotional Environment | Near the end of the third quarter of 2022, we began to increase promotional activity based on the marketplace and ~~independent international distributors.~~our inventory position. This resulted in an unfavorable impact to our DTC product margins compared to the same period in the prior year in which promotional activity was exceptionally low. In the first quarter of 2023, we believe our current level of promotional activity is consistent with historical norms and reflects a return to those levels in the marketplace. We anticipate this to continue throughout 2023. In addition, in the first quarter of 2023, we ~~license some~~experienced strong consumer traffic in our retail stores and a softening of e-commerce sales as we believe consumers are seeking out value and promotions in the marketplace.

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. We believe we have benefited from the consumers need for outdoor products. However, we believe the outdoor participation growth rates are returning to normalized levels. We have seen this in certain parts of our ~~trademarks across a range of apparel,~~business, such as outdoor footwear. In the first quarter 2023, footwear ~~accessories,~~sales for hiking and ~~equipment.~~trail activities have softened, following growth over the last several years.

~~The popularity of outdoor activities, changing design trends, consumer adoption of innovative performance technologies, variations in seasonal weather,~~

Changing Consumer Expectations and Shopping Habits | Consumer behavior continues to fluctuate. Consumer expectations and the ~~availability~~related competitive pressures have increased and ~~desirability~~continue to increase relative to various aspects of ~~competitor alternatives affect consumer desire for~~ our ~~products. Therefore, we seek to drive, anticipate~~e-commerce business, including speed of product delivery, shipping charges, return privileges and ~~respond to trends and shifts~~other evolving expectations. We also believe consumers in ~~consumer preferences and~~the U.S. are still adjusting shopping patterns by adjusting our product offerings and selling channels, developing new products with innovative performance features and designs and creating persuasive and memorable marketing communications to generate consumer awareness, demand and retention. Failure to anticipate or respond to consumer needs and preferenceshabits in a ~~timely~~post-COVID world, which may be indicative of consumer habits shifting back to brick and ~~adequate manner could have a material adverse effect on our sales and profitability.~~mortar retail.

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 ~~2016, approximately~~2022, over 60% of our net sales and ~~approximately 90%~~over 75% of our ~~profitability was~~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 channels has increased the proportion of sales, profits and cash flows that we generate in the second half of the year, particularly in the fourth quarter.year.

We generally solicit orders from wholesale customers and independent international distributors for the fall and spring seasons based on seasonal ordering deadlines that we establish to aid our efforts to plan manufacturing volumes to meet demand. We typically ship the majority of our advance spring season orders to customers beginning in January and continuing through June. Similarly, we typically ship the majority of our advance fall season orders to customers beginning in July and continuing through December. Generally, orders are subject to cancellation prior to the date of shipment.

Results of operations in any period should not be considered indicative of the results to be expected for any future period, particularly in light of persistent volatility in global economic and geopolitical conditions and volatility of foreign currency exchange rates which, when combined with seasonal weather patterns and inflationary or volatile sourcing costs, reduce the predictability of our business.

COLUMBIA SPORTSWEAR COMPANY | Q1 2023 FORM 10-Q | 19

~~Business Outlook~~

The global business climate continues to present us with a great deal of uncertainty, making it difficult to predict future results. Consistent with the historical seasonality of the business, we anticipate 2017 profitability to be heavily concentrated in the second half of the year. Factors that could significantly affect our full year 2017 financial results include:


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~~Performance and profitability of our owned brick-and-mortar stores and e-commerce direct-to-consumer sales globally;~~RESULTS OF OPERATIONS

Unseasonable weather conditions or other unforeseen factors affecting consumer demand and the resulting effect on cancellations of advance wholesale orders, sales returns, wholesale customer accommodations, replenishment orders and reorders, direct-to-consumer sales, changes in mix and volume of full price sales in relation to promotional and closeout product sales, and suppressed wholesale and end-consumer demand in subsequent seasons;

Industry trends affecting consumer traffic and spending in brick and mortar retail channels, which are creating uncertainty regarding the long-term financial health of several of our U.S. wholesale customers, including some who have recently closed stores, or initiated restructuring activities, bankruptcy proceedings or liquidation;

~~Difficult economic and competitive environments in certain key markets within our Latin America and Asia Pacific ("LAAP") region, in particular, Korea;~~

~~Continued sales growth and profitability contributed by our EMEA region, particularly our European wholesale and direct-to-consumer businesses;~~

~~The effects of changes in foreign currency exchange rates on sales, gross margin, operating income, and net income;~~

~~A reduction in the rate of net sales growth of our prAna business;~~

~~Performance of our Mountain Hardwear business as we work to re-invigorate that brand in the marketplace; and~~

~~The financial impact of activities associated with and resulting from Project CONNECT.~~

~~These factors and others may have a material effect on our financial condition, results of operations or cash flows, particularly with respect to quarterly comparisons.~~

During the second quarter of 2017, we commenced an initiative to invest in a global retail platform ("GRP"), which encompasses the IT systems infrastructure to support the growth and expansion of our direct-to-consumer businesses. The objective of this initiative is to deliver an improved consumer experience and to modernize and standardize our processes and systems to enable us to better anticipate and deliver against the needs of our consumers. This GRP initiative is currently in the design phase with planned regional implementations beginning in the first half of 2019.

In addition, we are continuing to invest in our ongoing multi-year global enterprise resource planning ("ERP") implementation, which has been executed in the majority of our operations to date. During the second quarter of 2017, we implemented the ERP system in our China joint venture and plan to transition our European wholesale and direct-to-consumer businesses onto the system in mid-2018.

During the first quarter of 2017, we commenced a thorough assessment of our operating model, referred to as Project CONNECT, to ensure that the business is aligned and organized to successfully execute our strategic plan. We completed the operational assessment phase earlier this year, which resulted in modifications to the company’s operating model and executive organization structure to align with our strategies in being a brand-led and consumer focused organization. During the third quarter, additional analysis was conducted to begin implementing operational improvements throughout the business, which are intended to streamline and improve the effectiveness of certain processes leading to sales growth, gross margin enhancement and selling, general and administrative ("SG&A") expense efficiency. As these anticipated improvements are implemented over the next two to three years and with the goal of continuing to drive sustainable and profitable growth, we intend to reallocate resources to strategic priorities including incremental demand creation spending and other investments to drive growth across our distribution channels. We anticipate providing further updates as the project progresses.

We remain focused on driving sustainable and profitable sales growth by providing innovative, stylish products at accessible prices through effective sales channels, nurturing stronger emotional connections with consumers through compelling marketing communications, transforming our global supply chain and information technology platforms, and effectively managing inventory and other working capital assets.

~~Results of Operations~~

The following discussion of our results of operations and liquidity and capital resources should be read in conjunction with ~~the Condensed Consolidated~~Part I, Item 1 of this Quarterly Report on Form 10-Q.

Non-GAAP Financial ~~Statements and accompanying Notes that appear elsewhere in this quarterly report. All references to quarters relate to the quarter ended September 30 of the particular year.~~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 generated~~that 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 ~~measures~~measure useful

by reviewing our net sales results without the volatility in 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 calculated 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 calculated in accordance with ~~GAAP.~~GAAP below.

~~Highlights~~

Results of ~~the Third Quarter of 2017~~Operations — Consolidated

~~Net sales for the third quarter of 2017 increased $1.7 million, or less than 1%, to $747.4 million from $745.7 million for the~~ ~~third~~ ~~quarter of 2016.~~

Net income attributable to Columbia Sportswear Company increased $4.1 million, or 5%, for the third quarter of 2017 to $87.7 million, or $1.25 per diluted share, including program expenses and discrete costs of approximately $2.1 million net of tax, or $0.03 per diluted share, related to Project CONNECT, compared to net income of $83.6 million, or $1.18 per diluted share, for the third quarter of 2016.

~~We paid a quarterly cash dividend of $0.18 per share, or $12.6 million, in the third quarter of 2017.~~

The following table ~~sets forth, for~~presents the ~~periods indicated, the percentage relationship to net sales of specified~~ items in our unaudited Condensed Consolidated Statements of ~~Operations:~~Operations, both in dollars and as a percentage of net sales:


	Three Months Ended March 31,
(in millions, except for percentage of net sales and per share amounts)		2023	2022
Net sales			$	820.6	100.0	%	$	761.5	100.0	%
Cost of sales			421.1		51.3	%	383.1		50.3	%
Gross profit			399.5		48.7	%	378.4		49.7	%
Selling, general and administrative expenses			347.4		42.3	%	299.1		39.3	%

Net licensing income			4.3		0.5	%	4.4		0.6	%
Operating income			56.4		6.9	%	83.7		11.0	%
Interest income, net			3.3		0.4	%	0.4		—	%
Other non-operating income, net			0.9		0.1	%	—		—	%
Income before income tax			60.6		7.4	%	84.1		11.0	%
Income tax expense			14.4		1.8	%	17.3		2.2	%
Net income			$	46.2	5.6	%	$	66.8	8.8	%

Diluted earnings per share			$	0.74			$	1.03

COLUMBIA SPORTSWEAR COMPANY | Q1 2023 FORM 10-Q | 20

Three Months Ended September 30, Nine Months Ended September 30,
2017 2016 2017 2016
Net sales 100.0 % 100.0 % 100.0 % 100.0 %
Cost of sales 53.3
53.6
53.3
53.4
Gross profit 46.7
46.4
46.7
46.6
Selling, general and administrative expenses 30.8
30.1
38.1
37.5
Net licensing income 0.5
0.3
0.5
0.3
Income from operations 16.4
16.6
9.1
9.4
Interest income, net 0.2
—
0.2
0.1
Interest expense on note payable to related party —
—
—
(0.1 )
Other non-operating income (expense) —
(0.1 ) —
—
Income before income tax 16.6
16.5
9.3
9.4
Income tax expense (4.4 ) (4.9 ) (2.3 ) (2.6 )
Net income 12.2
11.6
7.0
6.8
Net income attributable to non-controlling interest 0.5
0.4
0.4
0.3
Net income attributable to Columbia Sportswear Company 11.7 % 11.2 % 6.6 % 6.5 %


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~~Quarter~~Three Months Ended ~~September 30, 2017~~March 31, 2023 Compared to ~~Quarter~~Three Months Ended ~~September 30, 2016~~March 31, 2022

Net ~~Sales:~~ ~~Consolidated~~Sales.Net sales by brand, product category and channel are summarized in the following table:


	Three Months Ended March 31,
(in millions, except for percentages)	Reported Net Sales 2023		Adjust for Foreign Currency Translation		Constant-currency Net Sales 2023 (1)		Reported Net Sales 2022		Reported Net Sales % Change	Constant-currency Net Sales % Change (1)
Brand Net Sales:
Columbia	$	702.8	$	19.2	$	722.0	$	643.8	9%	12%
SOREL	60.5		0.9		61.4		63.6		(5)%	(3)%
prAna	32.5		—		32.5		32.7		(1)%	(1)%
Mountain Hardwear	24.8		0.5		25.3		21.4		16%	18%
Total	$	820.6	$	20.6	$	841.2	$	761.5	8%	10%

Product Category Net Sales:
Apparel, Accessories and Equipment	$	632.6	$	14.9	$	647.5	$	565.9	12%	14%
Footwear	188.0		5.7		193.7		195.6		(4)%	(1)%
Total	$	820.6	$	20.6	$	841.2	$	761.5	8%	10%

Channel Net Sales:
Wholesale	$	452.5	$	11.1	$	463.6	$	408.2	11%	14%
Direct-to-consumer	368.1		9.5		377.6		353.3		4%	7%
Total	$	820.6	$	20.6	$	841.2	$	761.5	8%	10%

(1) Constant-currency net sales is a non-GAAP financial measure. See "Non-GAAP Financial Measure" above for further information.

Overall, our global net sales increased ~~$1.7 million, or less than one percent,~~primarily due to ~~$747.4 million~~earlier shipments of Spring 2023 wholesale orders and higher consumer demand in our DTC business, partially offset by unfavorable impacts from changes in foreign currency exchange rates. While our wholesale business benefited from improved transit times, Columbia and SOREL brand net sales reflect a decline in footwear net sales, highlighting challenging dynamics in the footwear market. Our DTC e-commerce net sales contracted 1% year-over-year for the ~~third~~ ~~quarter~~three months ended March 31, 2023 compared to the same period in the prior year. For the three months ended March 31, 2022, DTC e-commerce net sales grew 21% compared to the same period in the prior year.

Gross Profit.Gross profit is summarized in the following table:


	Three Months Ended March 31,
(in millions, except for percentages and basis points)	2023			2022			Change
Gross profit	$	399.5		$	378.4		$	21.1	6	%
Gross margin	48.7		%	49.7		%	-100 bps

Gross margin contracted primarily due to the following factors:

•unfavorable channel profitability due to the net effect of ~~2017~~lower DTC margins and, to a lesser extent, higher wholesale margins; partially offset by

•lower inbound freight costs.

Lower DTC margins discussed above were primarily driven by higher promotional activity and elevated outbound freight costs. Higher wholesale margins discussed above were primarily driven by price increases more than offsetting inflationary product costs, partially offset by actions to reduce excess inventory.

COLUMBIA SPORTSWEAR COMPANY | Q1 2023 FORM 10-Q | 21


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Selling, General and Administrative Expenses.SG&A expenses is summarized in the following table:


	Three Months Ended March 31,
(in millions, except for percentages and basis points)	2023			2022			Change
Selling, general and administrative expenses	$	347.4		$	299.1		$	48.3	16	%
Selling, general and administrative expenses as percent of net sales	42.3		%	39.3		%	300 bps

SG&A expense growth reflects elevated expenses to support the growth of our business, inflationary pressures, and investments to drive our brand-led consumer-focused strategies.

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

•higher supply chain expenses of $18.8 million, reflecting increased global distribution center expenses, including higher warehousing and fulfillment expenses, resulting from ~~$745.7~~elevated inventory levels as well as third-party logistics transition-related costs; and

•higher omni-channel expenses of $13.8 million, including higher DTC expenses, including variable expenses including personnel expenses and costs associated with new stores.

Income Tax Expense. Income tax expense and the related effective income tax rate are summarized in the following table:


	Three Months Ended March 31,
(in millions, except for percentages)	2023			2022			Change
Income tax expense	$	14.4		$	17.3		$	(2.9)	(17)	%
Effective income tax rate	23.7		%	20.5		%

Our effective income tax rates for the ~~comparable period~~three months ended March 31, 2023 and 2022 were impacted by discrete tax items, which lowered the effective income tax rate in ~~2016~~.each period. For the three months ended March 31, 2023, our effective income tax rate was primarily impacted by a non-recurring benefit related to foreign currency gains resulting from an intercompany transaction. For the three months ended March 31, 2022, our effective income tax rate was primarily impacted by the non-recurring benefit related to the finalization of U.S. and foreign audits.

~~Sales by Geographic Region~~

COLUMBIA SPORTSWEAR COMPANY | Q1 2023 FORM 10-Q | 22


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Results of Operations — Segment

Segment operating income includes net sales, cost of sales, SG&A expenses, and net licensing income for each of our four reportable geographic segments. Operating income as a percentage of net sales in the U.S. is typically higher than the other segments primarily due to scale efficiencies associated with the larger base of net sales in the U.S. and, to a lesser extent, incremental licensing income.

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

Three Months Ended March 31, 2023 Compared to Three Months Ended March 31, 2022

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


													Three Months Ended March 31,
	Three Months Ended September 30,
			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	$	456.0	$	—		$	456.0	$	484.8	(6)%	(6)%
(in millions, except for percentage changes)												(in millions, except for percentage changes)	Reported Net Sales 2023		Adjust for Foreign Currency Translation		Constant-currency Net Sales 2023 (1)		Reported Net Sales 2022		Reported Net Sales % Change	Constant-currency Net Sales % Change (1)
U.S.												U.S.	$	517.5	$	—	$	517.5	$	501.9	3%	3%
LAAP	123.0		2.6			125.6		112.7		9%	11%	LAAP	136.4		11.9		148.3		121.7		12%	22%
EMEA	87.5		(3.4		)	84.1		73.0		20%	15%	EMEA	108.3		5.3		113.6		94.7		14%	20%
Canada	80.9		(2.6		)	78.3		75.2		8%	4%	Canada	58.4		3.4		61.8		43.2		35%	43%
	$	747.4	$	(3.4	)	$	744.0	$	745.7	—%	—%		$	820.6	$	20.6	$	841.2	$	761.5	8%	10%

~~Item 3.~~ ~~QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK~~


ITEM 3.			QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

There has not been any material change in the market risk disclosure contained in Part II, Item 7A of our Annual Report on Form 10-K for the year ended December 31, ~~2016~~.2022.


ITEM 4.			CONTROLS AND PROCEDURES

~~Item 4.~~

EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES

~~Disclosure Controls and Procedures~~

We have evaluated, under the supervision and with the participation of management, including our ~~chief executive officer~~Chief Executive Officer and ~~chief financial officer,~~Chief Financial Officer, the effectiveness of our disclosure controls and procedures ~~as of the end of the period covered by this report~~ pursuant to Rule 13a-15(b) under the Securities Exchange Act of 1934, as amended (the "Exchange Act")~~. Based on that evaluation, our chief executive officer and chief financial officer have concluded that,~~ as of the end of the period covered by this ~~report, our~~report. These disclosure controls and procedures ~~were effective in ensuring that~~require information ~~required~~ to be disclosed in our Exchange Act reports isto be (1) recorded, processed, summarized, and reported in a timely manner and (2) accumulated and communicated to our management, including our ~~chief executive officer~~Chief Executive Officer and ~~chief financial officer,~~Chief Financial Officer.

Based on our evaluation, we, including our Chief Executive Officer and Chief Financial Officer, have concluded that as of March 31, 2023 our disclosure controls and procedures are designed at a reasonable assurance level and are effective to provide reasonable assurance that information we are required to disclose in reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

~~Changes in Internal Control over Financial Reporting~~

We are implementing an ERP system and complementary systems that support our operations and financial reporting. This implementation is occurring in phases globally over several years, and has been executed in the majority of our operations to date. Each implementation phase involves changes to the processes that constitute our internal control over financial reporting. We are taking steps to monitor and maintain appropriate internal control over financial reporting and will continue to evaluate these controls for effectiveness.

CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING

There ~~were no other~~have not been any changes in our internal control over financial reporting that occurred during the quarter ended ~~September 30, 2017~~March 31, 2023 that have materially affected, or are reasonably likely to materially affect, our internal ~~controls~~control over financial reporting.

~~PART II—OTHER INFORMATION~~

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PART II — OTHER INFORMATION


ITEM 1.			LEGAL PROCEEDINGS

~~Item 1.~~ ~~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 ~~position,~~condition, results of operations or cash flows.


Item 1A.			RISK FACTORS

~~Item 1A.~~ ~~RISK FACTORS~~

In addition to the other information contained in this Quarterly Report on Form 10-Q, 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.

The following risk factors include changes to and supersede the description of the risk factors associated with our business previously disclosed in Part I, Item 1A of our Annual Report on Form 10-K for the ~~fiscal~~ year ended December 31, ~~2016.~~2022.

CHANGES IN PRODUCT DEMAND CAN ADVERSELY AFFECT OUR FINANCIAL RESULTS

We ~~Face Many Challenges Executing Growth Strategies~~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.

~~Our business strategies aim to achieve sustainable, profitable growth by creating innovative~~

These risks include, but are not limited to:

•Volatile Economic Conditions. We are a consumer products ~~at competitive prices, focusing~~company 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 drive~~discretionary spending. Consumer discretionary spending behavior is inherently unpredictable. Consumer demand, and related wholesale customer demand, for our ~~brands~~products 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-through~~regional 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 sure~~may 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 affected by weather conditions. Our DTC sales are 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. Unseasonably warm weather also impacts future sales to our wholesale customers, who may hold inventory into subsequent seasons in response to unseasonably warm weather. Our results may be negatively impacted if management is not able to adjust expenses in a timely manner in response to unfavorable weather

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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 outerwear products will be negatively affected.

•Shifts in Retail Traffic Patterns. Shifts in consumer purchasing patterns, including the growth of e-commerce and large one-stop digital marketplaces, e-commerce off-price retailing and online comparison shopping, in our key markets may have an adverse effect on our DTC operations and the financial health of certain of our wholesale customers, some of whom may reduce their brick and mortar 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 our wholesale customers based on an assessment of the wholesale customer's financial condition, generally without requiring collateral. We may choose (and have chosen in the past) to limit 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.

Our Orders from Wholesale Customers are ~~merchandised~~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 contracts 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 wholesale customers (other than our international distributors) are generally on an order-by-order basis and ~~displayed appropriately~~are subject to rights of cancellation and rescheduling prior to shipment of orders. We place the majority of our orders for products with our contract manufacturers for our wholesale customers based on these advance orders. We consider the timing of delivery dates in ~~retail environments, expanding~~ our ~~presence~~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, or if we are unable to deliver products to our wholesale customer in the agreed upon manner or reach mutually agreeable accommodations, these customers could postpone, reduce, cancel, or discontinue purchases from us, including after we have begun production on any order, or seek to impose chargebacks.

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.

We have implemented key ~~markets around~~strategic initiatives designed to improve the ~~world,~~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, ~~continuing~~as a result, are vulnerable to ~~build brand-enhancing direct-to-consumer businesses.~~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 ~~intend~~are subject to ~~pursue~~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 ~~strategies across~~risks, as well as our ~~portfolio~~reliance on manual processes and judgments that are subject to human error. These risks are heightened during periods of ~~brands, product categories~~macroeconomic and ~~geographic markets.~~ geopolitical volatility, such as we are currently experiencing.

Our failure to ~~successfully implement~~accurately forecast consumer and/or customer demand could result in inventory levels in excess of demand (as currently is the case), 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 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 are experiencing and may continue to experience additional costs relating to the storage and processing 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 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.

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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 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.

In addition, contract manufacturers may fail to perform as expected. If a contract manufacturer fails to ship orders in a timely manner (as was the case throughout 2022), 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.

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In addition, the ability to move products over larger geographical distances could be 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 limited to freight costs, could 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 or we could incur additional expense. Transitions within our distribution network amongst third-party distribution partners, as is currently occurring, exacerbates this risk.

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. The uneven flow of inventory receipts during peak times at our distribution centers may cause us to miss delivery deadlines, as we work through inventory, which in turn may cause our customers to cancel their orders, refuse to accept deliveries or demand a reduction in purchase price.

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, 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 maintain~~effectively 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 other~~internal resources, and we may have operating difficulties as a result. For example, in support of our strategic initiatives, 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. These business initiatives 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~~strategic 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 operating expenses, our profitability will decline.~~ This could result in a decision to delay, ~~reduce,~~ modify, or terminate certain initiatives related to our strategic ~~business initiatives, which could limit our ability to invest in and grow our business and could have a material adverse effect on our financial condition, results of operations or cash flows.~~priorities.

Initiatives to Upgrade Our Business Processes and Information Technology ~~Infrastructure~~Systems 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 plans~~Transitioning to ~~improve business results through standardization of business~~these new or upgraded processes and ~~technologies that support our supply chain~~systems requires significant capital investments and ~~go-to-market strategies through on-going implementation of and upgrades to integrated global ERP software solutions and other complementary information technology systems over the next several years.~~personnel resources. Implementation ~~of and upgrades to these solutions and systems are~~is also highly dependent on the coordination of numerous employees, contractors and software and system providers. The interdependence of these ~~solutions~~processes and systems is a significant risk to the successful completion and continued refinement of ~~the~~these initiatives, and the failure of any ~~one contractor or system~~aspect could have a material adverse effect on the ~~implementation~~functionality of our overall ~~information technology infrastructure.~~business. We may also experience difficulties ~~as we transition to these~~in 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, including~~loss of system availability, which could lead to increased implementation and/or operational costs, loss or corruption of data, delayed shipments, ~~decreases~~excess inventory and interruptions of operations resulting in ~~productivity~~lost sales and/or profits.

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We May Not Realize Returns on Our Fixed Cost Investments in Our DTC Business Operations.

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 implement~~existing brick and

~~become familiar with new systems, increased costs, and lost revenues.~~ mortar stores. In addition, ~~transitioning~~obtaining real estate and effectively renewing real estate leases for our DTC brick and mortar operations is subject to ~~these~~the 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.

Implementation of this information technology infrastructure has a pervasive effect on our business processes and information systems across a significant portion of our operations. As a result, we are undergoing significant changes in our operational processes and internal controls as our implementation progresses, which in turn require significant change management, including training of and testing by our personnel. If we are unable to successfully manage these changes as we implement these systems, including harmonizing our systems, data, processes and reporting analytics, our ability to conduct, manage and control routine business functions could be negatively affected and significant disruptions to our business could occur. In addition, we could incur material unanticipated expenses, including additional costs of implementation or costs of conducting business. These risks could result in significant business disruptions or divert management's attention from key strategic initiatives and have a material adverse effect on our financial condition, results of operations or cash flows.

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 Systems~~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.

Our ~~business~~reputation and ability to attract, retain and serve consumers and customers is ~~increasingly reliant on information technology. Information~~dependent 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 chain~~vulnerable 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 and retail stores.we have experienced interruptions in the past. We ~~also~~ rely on ~~our information systems~~cloud-based solutions furnished by third-parties primarily to allocate resources, pay vendors, collect from customers, manage ~~product data,~~loyalty programs, process transactions, develop demand and supply plans, manage product design, production, transportation, and distribution, forecast and report operating results, ~~and~~ meet regulatory ~~requirements.~~

~~Our legacy ERP, product development, retail point-of-sale~~requirements and administer employee payroll and benefits, among other ~~systems,~~functions. In addition, our DTC operations, both in-store and online, rely on ~~which we continue~~cloud-based solutions to ~~manage~~process transactions. We have also designed a ~~substantial~~significant portion of our ~~business activities, are highly customized. As a~~software and computer systems to utilize data processing and storage capabilities from third-party cloud solution providers. Both our on-premises and cloud-based infrastructure may be susceptible to outages due to any number of reasons, including, human error, fire, floods, power loss, telecommunications failures, terrorist attacks and similar events. Despite the implementation of security measures that we believe to be reasonable, both our on-premises and our cloud-based infrastructure may also be vulnerable to hacking, computer viruses, the installation of malware and similar disruptions either by third-parties or employees, which may result ~~the availability~~in outages. We do not have redundancy for all of ~~internal~~our systems and ~~external resources with the expertise to maintain these systems is limited. Our legacy systems~~our disaster recovery planning may not ~~support desired functionality~~account for all eventualities. If we or our ~~operations~~existing third-party cloud-based solution providers experience interruptions in service regularly or for a prolonged basis, or other similar issues, our business could be seriously harmed and, in some instances, our consumers and customers may not be able to purchase our products, which could significantly and negatively affect our sales. Additionally, our existing cloud-based solution providers have broad discretion to change and interpret their terms of service and other policies with respect to us, and they may take actions beyond our control that could harm our business. We also may not be able to control the quality of the systems and services we receive from our third-party cloud-based solution providers. Any transition of the cloud-based solutions currently provided to different cloud providers would be difficult to implement and may ~~inhibit~~cause us to incur significant time and expense.

If we and/or our ~~ability~~cloud-based solution providers are not successful in preventing or effectively responding to ~~operate efficiently, which could have an adverse effect on~~outages and cyberattacks, our financial condition, results of operations orand cash ~~flows. As we continue to transition from our legacy ERP~~flow could be materially and supporting systems to our new ERP and supporting 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. 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 ~~store~~maintain various types of proprietary information and sensitive and confidential data relating to our business, ~~including~~such as personally identifiable ~~information. Our~~ information ~~systems are subject to an increasing threat~~ of ~~continually evolving cybersecurity risks.~~our consumers, our customers, our employees, and our business partners, as well as credit card information in certain instances. Unauthorized parties may attempt to gain access to ~~our~~these 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, the~~The ever-evolving threats mean we and our third-parties must continually evaluate and adapt our systems and processes, and there is no guarantee that ~~they~~these 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, any future~~Any breaches of our ~~security measures,~~ or ~~the accidental loss, inadvertent disclosure or unapproved or non-compliant dissemination of proprietary information or sensitive and confidential data about~~our third-parties’ systems could expose us, our customers, our ~~suppliers, or our employees, could expose us, our customers,~~consumers, our suppliers, our employees, or other individuals that may be affected to a risk of loss or misuse of this information, result in litigation and potential liability for us, damage our reputation, or otherwise harm our ~~business~~business. While we maintain cyber liability insurance policies for coverage in the event of a cybersecurity

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incident, we cannot be certain that our existing coverage will continue to be available on acceptable terms or will be available, and in sufficient amount, to cover the potentially significant losses that could ~~have~~result from a ~~material adverse effect on our financial condition, results of operations~~cybersecurity incident or ~~cash flows.~~ that the insurer will not deny coverage as to any future claims.

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.~~costs or liabilities. Non-U.S. data privacy and data security laws and regulations, various U.S. federal and state laws and other information privacy and security standards may be and are applicable to us. Violations of these requirements could result in significant penalties, investigations or litigation. Significant legislative, judicial or regulatory changes have been and could be issued in the 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 these employees may impact our operations and there may be additional costs incurred by us for third-party resources to advise on the constantly changing landscape. We have recently experienced this with the new privacy laws in China. Limitations on the use of data may also impact our future business strategies. Additionally, our DTC business depends on customers' willingness to entrust us with their personal information. Events that adversely affect that trust could adversely affect our brand and reputation.

We Depend on ~~Contract Manufacturers~~Certain 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.

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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, performance, environmental and safety standards, laws and other regulations, including those pertaining to perfluoroalkyl and polyfluoroalkyl substances and other environmental impacts. 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, a loss of advance orders from wholesale customers 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.

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 commitments~~accrue 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 differs~~the 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 fail~~provisional estimates. In addition, proposals to ~~perform as expected~~reform 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 limit~~effective 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 ~~eliminate~~an adverse change in the ~~availability~~treatment of ~~these resources to us. If a contract manufacturer fails to ship orders~~an item of income or expense, could result in a ~~timely manner~~material 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.

Due to the nature of the findings in the Korea 2009 through 2014 income tax audits, the Company has invoked the Mutual Agreement Procedures outlined in the United States-Korean income tax treaty. The Company does not anticipate that adjustments relative to these findings will result in material changes to its financial condition, results of operations or cash flows.

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 ~~meet~~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,

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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 manufacture, 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 hinder~~products in certain markets, our ability to ~~satisfy demand through~~collect accounts receivable, our ~~direct-to-consumer businesses~~contract 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 deadlines~~be impacted by these events should they occur and laws and regulations. Our exposure to these risks is heightened in Vietnam, where a significant portion of our contract manufacturing 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 or ~~incur additional costs, which may~~China, 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 could~~business and have a material adverse effect on our financial condition, results of operations orand cash flows.

~~Reliance~~

In addition, many of our imported products are subject to duties, tariffs or other import limitations that affect the cost and quantity of various types of goods 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 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 the E.U., we have incurred and will continue to incur additional duties. We are investigating alternatives to mitigate these additional costs in the future.

Fluctuations in Inflation and Currency Exchange Rates Could Result in Lower Revenues, Higher Costs and/or Decreased Margins and Earnings.

We derive a significant portion of our sales from markets outside the United States, which consist of sales to wholesale customers and directly to consumers by our entities in Europe, Asia, and Canada and sales to independent international distributors who operate within EMEA and LAAP. The majority of our purchases of finished goods inventory from contract manufacturers ~~also creates quality control risks. Contract manufacturers may need~~are denominated in United States dollars, including purchases by our foreign entities. These purchase and sale transactions expose us to ~~use sub-contracted manufacturers to fulfill demand~~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 ~~manufacturers may~~revenues and expenses could be and have ~~less experience producing~~been 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 to the United States dollar adversely affects the United States dollar value of the Company’s foreign currency-denominated sales and earnings.

Our exposure is increased with respect to our ~~products or possess lower overall capabilities, which could result~~wholesale customers (including international distributors), where, in ~~compromised quality~~order to facilitate solicitation of advance orders for the spring and fall seasons, we establish local-currency-denominated wholesale and retail price lists in each of our ~~products. A failure in~~foreign entities approximately six to nine months prior to United States dollar-denominated seasonal inventory purchases. As a result, our ~~quality control program,~~consolidated results are directly exposed to transactional foreign currency exchange risk and have been and could be further impacted by the United States dollar strengthening during the six to nine months between when we establish seasonal local-currency prices and when we purchase inventory. In addition to the direct currency exchange rate exposures described above, our wholesale business is indirectly exposed to currency exchange rate risks. Weakening of a wholesale customer’s functional currency relative to the United States dollar makes it more expensive for it to purchase finished goods inventory from us, which may cause a wholesale customer to cancel orders or a failure of our contract manufacturers or their contractors to meet our quality control standards, may result in diminished product quality, which in turn could result in increased order cancellations, price concessions and returns, decreased consumer demandincrease prices for our products, ~~non-compliance~~which may make our products less price-competitive in those markets. In addition, in order to make purchases and pay us on a timely basis, our international distributors must exchange sufficient quantities of their functional currency for United States dollars through the financial markets and may be limited in the amount of United States dollars they are able to obtain.

We employ several strategies in an effort to mitigate this transactional currency risk, but these strategies may not and, in the current environment, have not fully mitigated the negative effects of adverse foreign currency exchange rate fluctuations on the cost of our finished goods in a given period and there is no assurance 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.

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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 Ability to Manage 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 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, often a majority of our operating profits are generated in the second half of the year. If we are unable to manage our fixed costs in the seasons where we experience lower net sales, our profits may be adversely impacted.

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 source and distribute products in a timely manner. While a majority of our own operations are not subject to organized labor agreements, our relationship with our ~~product standards~~Cambrai distribution center employees is governed by French law, which includes a formal representation of employees by a Works Council and the application of a collective bargaining agreement. Matters that may affect our workforce (including COVID-19 infections or ~~regulatory requirements,~~the risk thereof) at contract manufacturers where our goods are produced, shipping ports, transportation carriers, retail stores, or ~~product recalls (or~~distribution centers create risks for our business, particularly if these matters result in work shut-downs (with little to no notice), slowdowns, lockouts, strikes, limitations on the number of individuals able to work (e.g. social distancing) or other ~~regulatory actions), any~~disruptions. The foregoing includes potential impacts to our business as a result of ~~which~~the International Longshore and Warehouse Union negotiations. Labor matters may have a material adverse effect on our ~~financial condition, results~~business, potentially resulting in canceled orders by customers, inability to fulfill potential e-commerce demand, unanticipated inventory accumulation and reduced net sales and net income.

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 sufficient number of qualified people in the work force of the markets in which our operations ~~or cash flows.~~

We also have license agreements that permit unaffiliated parties to manufacture or contract to manufacture products using our trademarks. We impose standards of manufacturing practices on our contract manufacturers and licensees for the benefit of workers and require compliance with our restricted substances list and product safetyare located, unemployment levels within those markets, absenteeism, prevailing wage rates, changing demographics, parental responsibilities, health and other ~~applicable environmental, health~~insurance costs, adoption of new or revised employment and ~~safety laws. We also require~~labor laws and regulations, and fear of contracting COVID-19. Our ability to source, distribute and sell products in a timely and cost-effective manner may be negatively affected to the extent we experience these factors. Our ability to comply with labor laws, including our ~~contract manufacturers~~ability to adapt to rapidly changing labor laws, as well as provide a safe working environment may increase our risk of litigation and ~~licensees~~cause us to impose these practices, standards and laws on their contractors. If a contract manufacturer, licensee or subcontractor violates labor or other laws or engages in practices that are not generally accepted as safe or ethical, the manufacturer, licensee or subcontractor or its respective employees may suffer serious injury due to industrial accidents, the manufacturer may suffer disruptions to its operations due to work stoppages or employee protests and 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 independent manufacturers', licensees' or subcontractors' labor and operational practices, which could have a material adverse effect on our brand image and our financial condition, results of operations or cash flows, in particular if such assertions are successful.incur additional costs.

We May Incur Additional Expenses, Be ~~Adversely Affected by Volatility~~Unable to Obtain Financing, or Be Unable to Meet Financial Covenants of Our Financing Agreements as a Result of Downturns in the Global ~~Production and Transportation Costs and Capacity~~Markets.

Our ~~product costs are subject to substantial fluctuation based on:~~

~~Availability and quality of raw materials;~~

~~The prices of oil, leather, natural down, cotton, and other raw materials whose prices are determined by global commodity markets and can be very volatile;~~

Changes in labor markets and wage rates paid by our independent factory partners, which are often mandated by governments in the countries where our products are manufactured, particularly in China and Vietnam;

~~Disruption to shipping and transportation channels utilized to bring our products to market;~~

~~Interest rates and currency exchange rates;~~

~~Availability of skilled labor and production capacity at contract manufacturers; and~~

~~General economic conditions.~~

Prolonged periods of inflationary pressure on some or all input costs will result in increased costs to produce our products that may result in reduced gross profit or necessitate price increases for our products that could adversely affect consumer demand for our products.

In addition, since the majority of our products are manufactured outside of our principal sales markets, our products must be transported by third parties 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 modes 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 transportation and other costs may be difficult to predict, we may not be able to pass all or any portion of these higher costs on to our customers or adjust

~~our pricing structure 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 May Be Adversely Affected by Volatile Economic Conditions~~

~~We are a consumer products company and are highly dependent on consumer discretionary spending and retail traffic patterns. Purchasing patterns of our~~vendors, wholesale customers, can vary year to year as they attempt to forecast and match their seasonal advance orders, in-season replenishment and at-once orders to eventual seasonal consumer demand. In addition, as we have expanded our direct-to-consumer businesses, we have increased our direct exposure to the risks associated with volatile and unpredictable consumer discretionary spending patterns. Consumer discretionary spending behavior is inherently unpredictable and consumer demand for our products may not reach our sales targets, or may decline, especially during periods of heightened economic uncertainty in our key markets. Our sensitivity to economic cycles and any related fluctuation in consumer demand may have a material adverse effect on our financial condition, results of operations or cash flows.

~~We May Be Adversely Affected by the Financial Health of Our Customers~~

In recent periods, sluggish economies and consumer uncertainty regarding future economic prospects in our key markets have had an adverse effect on the financial health of our customers, some of whom have reduced their store fleet, filed or may file for protection under bankruptcy laws, restructured, or ceased operations, which may in turn have a material adverse effect on our financial condition, results of operations or cash flows. We extend credit to our customers based on an assessment of the customer's financial condition, generally without requiring collateral. To assist in the scheduling of production and the shipping of seasonal products, we offer customers discounts for placing advance orders. In addition, we face increased risk of order reduction and cancellation and reduced availability of credit insurance coverage when dealing with financially ailing retailers or retailers struggling with economic uncertainty. Some of our significant wholesale customers and international independent distributors have liquidated or reorganized, while others have had financial difficulties in the past or have experienced tightened credit markets, sales declines and reduced profitability, which in turn have had an adverse effect on our business. Future customer liquidations or reorganizations could have a material adverse effect on our financial condition, results of operations or cash flows. We may choose to limit our credit risk by reducing our level of business with customers experiencing financial difficulties and may not be able to replace those revenues with other customers or through our direct-to-consumer businesses within a reasonable period, which could have a material adverse effect on our financial condition, results of operations or cash flows.

~~We May Be Adversely Affected by Retailer Consolidation~~

When our wholesale customers combine their operations through mergers, acquisitions or other transactions, their consolidated order volume may decrease while their bargaining power and the competitive threat they pose by marketing products under their own private labels may increase. Some of our significant customers have consolidated their operations in the past, which in turn has had a negative effect on our business. Future customer consolidations could have a material adverse effect on our financial condition, results of operations or cash flows.

~~We May Be Adversely Affected by Global Credit Market Conditions~~

~~Economic downturns and economic uncertainty generally affect global credit markets. Our vendors, 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 limited 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 and 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.

~~We May Be Adversely Affected by Currency Exchange Rate Fluctuations~~

We derive a significant portion of our net sales from markets outside the United States, comprised of sales to wholesale customers and directly to consumers by our consolidated subsidiaries in Europe, Korea, Japan, 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.

The majority of our purchases of finished goods inventory from contract manufacturers are denominated in U.S. dollars, including purchases by our foreign subsidiaries and China joint venture. The cost of these products may be affected by relative changes in the value of the local currencies of these subsidiaries and the joint venture 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 subsidiaries approximately six to nine months prior to U.S. dollar-denominated seasonal inventory purchases. As a result, our consolidated results are directly exposed to transactional foreign currency exchange risk to the extent that the U.S. dollar strengthens during the six to nine months between when we establish seasonal local-currency prices and when we purchase inventory.

We employ several tactics 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. There is no assurance that our use of currency forward and option contracts and implementation of price increases, in combination with other tactics, 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, 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.

Because the functional currencies of our foreign subsidiaries and China joint venture are not the U.S. dollar, we are also exposed to potential material gains or losses from the remeasurement of U.S. dollar monetary transactions into the respective functional currencies of those entities. In an effort to mitigate this risk, we use foreign currency forward contracts to hedge net balance sheet exposures related primarily to our foreign subsidiaries' and joint venture's non-functional currency denominated monetary assets and liabilities. These consist primarily of cash and cash equivalents, short-term investments, payables, and intercompany loans for subsidiaries that use European euros, Swiss francs, Canadian dollars, Japanese yen, Korean won, or Chinese renminbi as their functional currency.

In addition to the direct currency exchange rate exposures described above, our business is indirectly exposed to currency exchange rate risks. For example, all of the EMEA and LAAP distributors to whom we sell purchase their inventory from us in U.S. dollars. Weakening of a distributor's functional currency relative to the U.S. dollar makes it more expensive for it to purchase finished goods inventory from us. In order to make those purchases and pay us on a timely basis, our distributors must exchange sufficient quantities of their functional currency for U.S. dollars through the financial markets. Some of our distributors have experienced periods during which they have been unable to obtain U.S. dollars in sufficient amounts to complete their purchase of finished goods inventory or to pay amounts owed for past purchases. Although each distributor bears the full risk of fluctuations in the value of its currency against the U.S. dollar, our business can be indirectly affected when adverse fluctuations cause a distributor to cancel portions of prior advance orders or significantly reduce its future purchases or both. In addition, price increases that our distributors implement in an effort to offset higher product costs may make our products less price-competitive in those markets and reduce consumer demand for our products.

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.

Primarily for each of the reasons described above, currency fluctuations and disruptions in currency exchange markets may have a material adverse effect on our financial condition, results of operations or cash flows.

Our ~~Orders from Customers Are Subject to Cancellation~~

~~We do not~~credit agreements have long-term contracts with any of our wholesale customers. We do have contracts with our independent international distributors; however, although these contracts may have annual purchase minimums which must be met in order to retain distribution rights, the distributors are not otherwise obligated to purchase product. Sales to our wholesale customers and distributors are generally on an order-by-order basis and are subject to rights of cancellation and rescheduling. 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 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. As a result, we could

experience a decline in sales or gross profit, write-downs of excess inventory, increased discounts, extended credit terms to our customers, or uncollectable accounts receivable, which could have a material adverse effect on ourvarious financial ~~condition, results of operations or cash flows.~~

~~We May Not Realize Returns on Our Investments in Our Direct-to-Consumer Businesses~~

In recent years, our direct-to-consumer businesses have grown substantially and we anticipate continued growth in the future. Accordingly, we continue to make significant investments in our online platforms and physical retail locations, including system upgrades, entering into long-term store leases, constructing leasehold improvements, purchasing fixtures and equipment, and investing in inventory and personnel. Since many of the costs of our direct-to-consumer businesses are fixed, we may be unable to reduce expenses in order to avoid losses or negative cash flows if we have insufficient sales. Our direct-to-consumer businesses are dependent upon our ability to operate in an increasingly complex and evolving marketplace and these businesses' results are highly dependent on retail traffic patterns in our physical locations and our on-line platforms where our products are sold, as well as the spending patterns of our consumers. If we are unable to effectively navigate the direct-to-consumer marketplace or anticipate consumer buying patterns, our ability to generate sales through our direct-to-consumer businesses may be adversely affected, which in turn could have a material adverse effect on our financial condition, results of operations or cash flows.

Labor costs and labor-related benefits are primary components in the cost of our retail operations and are affected by various federal, state and foreign laws governing matters such as minimum wage rates, overtime compensation and other ~~requirements. For example, we have seen significant political pressure and legislative actions~~covenants. If an event of default were to ~~increase~~occur, the minimum wage rate in many of the jurisdictions within which our stores are located. If we are unable to operate profitable 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, whichlenders could, ~~have a material adverse effect on our financial condition, results of operations or cash flows.~~

In addition, from time to time we license the right to operate retail stores for our brands to third parties, primarily to our 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 harm the third parties' sales and as a result harm our financial condition, results of operations or cash flows.

~~Our Results of Operations Could Be Materially Harmed If We Are Unable to Accurately Match Supply Forecast with Consumer Demand for Our Products~~

~~Many factors may significantly affect demand for our products, including,~~ among other things, ~~economic conditions, fashion trends, the financial condition of~~declare outstanding amounts due and payable. If we were to borrow under our independent international distributors and wholesale customers, consumer and customer preferences, and weather, making it difficult to accurately forecast demand for our products and our future results of operations. To minimize our purchasing costs, the time necessary to fill customer orders and the risk of non-delivery,credit agreements, we ~~place a significant amount of orders for our products with contract manufacturers prior to receiving orders from our customers, and we maintain an inventory of various products that we anticipate will~~would be ~~in greatest demand. In addition, customers are generally allowed to cancel orders prior to shipment.~~

~~Factors that could affect our ability to accurately forecast demand for our products include:~~

~~Unseasonable weather conditions;~~

~~Our reliance, for certain demand and supply planning functions, on manual processes and judgments that are~~ subject to ~~human error;~~

~~Consumer acceptance of our products or changes in consumer demand for products of our competitors, which could increase pressure on our product development cycle;~~

~~Unanticipated changes in general~~ market ~~conditions or other factors, which~~interest rates and may ~~result in lower advance orders from wholesale customers and distributors, cancellations of advance orders or a reduction or increase in the rate of reorders placed by retailers; and~~

~~Weak economic conditions or consumer confidence, which could reduce demand for discretionary items such as our products.~~

In some cases, we may produce quantities of product that exceed actual demand, which could result in higher inventory levels that we need to liquidate at discounted prices. During periods of unseasonable weather conditions, weak economic conditions, unfavorable currency fluctuations, or unfavorable geopolitical conditions in key markets, we may experience a significant increase in the volume of order cancellations by our customers, including cancellations resulting from the bankruptcy, liquidation or contraction of some customers' operations. We may not be able to sell all of the products we have ordered from contract manufacturers or that we have in our inventory. Inventory levels in excess of customer demand may result in inventory write-

downs and the sale of excess inventory at discounted prices through our owned outlet stores or third-party liquidation channels, which could have a material adverse effect on our brand image, financial condition, results of operations, or cash flows.

~~Conversely, if we underestimate demand for our products or if our contract manufacturers are unable to supply products~~incur additional interest expense when we need them, we may experience inventory shortages. Inventory shortages may prevent us from fulfilling customer orders, delay shipments to customers, negatively affect customer relationships, result in increased costs to expedite production and delivery, and diminish our ability to build brand loyalty. Shipments delayed due to limited factory capacity, transportation or port disruption or other factors could result in order cancellations by our customers, which could have a material adverse effect on our financial condition, results of operations or cash flows.

~~We Face Risks Associated with Consumer Preferences and Fashion Trends~~

Changes in consumer preferences, consumer purchasing behavior or consumer interest in outdoor activities may have a material adverse effect on our business and changes in fashion trends may have a greater effect than in the past as we expand our offerings 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 our and our customers' abilities to anticipate consumer preferences and buying patterns, including the growth of e-commerce off-price retailing, and respond to changesborrowing 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 orders 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.high interest rate environment.

~~We May Be Adversely Affected by Weather Conditions, Including Global Climate Change Trends~~

Our business is adversely affected by unseasonable weather conditions. A significant portion of the sales of our products is dependent in part on the weather and likely to decline in years in which weather conditions do not stimulate demand for our products. Periods of unseasonably warm weather in the fall or winter or unseasonably cold weather in the spring and summer may have a material adverse effect on our financial condition, results of operations or cash flows. Unintended inventory accumulation by our wholesale customers resulting from unseasonable weather in one season generally negatively affects orders in future seasons, which may have a material adverse effect on our financial condition, results of operations or cash flows.

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A significant portion of our business is highly dependent on cold-weather seasons and patterns to generate consumer demand for our cold-weather apparel and footwear. Consumer demand for our cold-weather apparel and footwear may be negatively affected to the extent global weather patterns trend warmer, reducing typical patterns of cold-weather events or increasing weather volatility, which could have a material adverse effect on our financial condition, results of operations or cash flows.


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Acquisitions Are Subject to Many ~~Risks~~Risks.

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.

~~We May Not Succeed~~Extreme Weather Conditions, Climate Change, and Natural Disasters Could Negatively Impact Our Operating Results and Financial Condition.

Extreme weather conditions in ~~Realizing~~ the ~~Anticipated Benefits of Our Joint Venture in China~~

~~Effective January 2014, our joint venture in China with Swire began operations. The joint venture,~~areas in which ~~we hold a 60% interest, is subject to a number of risks~~our retail stores, suppliers, consumers, customers, distribution centers, headquarters 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, or as a result of other factors, we may not realize the anticipated benefits of the joint venture, and our results of operationsvendors are located could ~~be adversely affected.~~

~~Global Economic and Political Conditions, as well as Potential Changes in Legislation and Government Policy, May Negatively Affect Our Business~~

We are subject to risks generally associated with doing business internationally. These risks include the effects of foreign and domestic laws and regulations, foreign or domestic government fiscal and political crises, political and economic disputes and sanctions, 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 manufacture or sell products. These factors, among others, may affect our ability to sell products in certain markets, our ability to collect accounts receivable, our ability to manufacture products or procure materials, and our cost of doing business.

In the past, political and economic turmoil in certain South American distributor markets have resulted in currency and import restrictions, limiting our ability to sell products in some countries in this region. Also, Russia constitutes a significant portion of our non-U.S. sales and operating income and a significant change in conditions in that market has had an adverse effect on our results of operations in the past. The United Kingdom's June 23, 2016 referendum, in which voters approved its exit from the European Union (commonly referred to as "Brexit"), has created economic uncertainty and volatility in currency exchange rates, and the potential adverse effects of changes to the legal and regulatory framework that apply to the United Kingdom and its relationship with the European Union, and the associated effects on our European operations, are unknown. If any of these or other factors make the conduct of business in a particular country, or region, undesirable or impractical, our business may be materially and adversely affected.

In addition, the new U.S. administration has publicly supported potential trade proposals, including import tariffs, modifications to international trade policy, and other changes that may affect U.S. trade relations with other countries, any of which may require us to significantly modify our current business practices or may otherwise materially and adversely affect our ~~business.~~

~~As we continue to operate globally~~operating results and ~~to extend our geographic scope~~financial condition. Moreover, climate change and product categories, intellectual property disputes may increase, making it more expensive and challenging to establish and protect our intellectual property rights and to defend against claims of infringement by others. In addition, many of our imported products are subject to duties, tariffs or other import limitations that affect the cost and quantity of various types of goods imported into the United States and other markets. Any country in which our products are produced or sold may eliminate, adjust or impose new import limitations, duties, anti-dumping penalties, or other charges or restrictions, any of which could have a material adverse effect on our financial condition, results of operations or cash flows.

~~We May Have Additional Tax Liabilities~~

As a global company, we determine our income tax liability in various competing tax jurisdictions based on an analysis and interpretation of local tax laws and regulations. This analysis requires a significant amount of judgment and estimation and is often based on various assumptions about the future actions 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 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, which may have a material adverse effect on our financial condition, results of operations or cash flows.

Changes in the tax laws of the jurisdictions where we do business, including an increase in tax rates or an adverse change in the treatment of an item of income or expense, could result in a material 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 (BEPS) project undertaken by the Organization for Economic Co-operation and Development (OECD). The OECD, which represents a coalition of member countries, is recommending changes to numerous long-standing tax principles. If these changes are adopted by countries, tax uncertainty could increase and may adversely affect our provision for income taxes. In addition, in the United States, a number of proposals for broad reform of the corporate tax system are under evaluation by various legislative and administrative bodies, and while it is not possible to accurately determine or predict at this time whether, when or to what extent new U.S. federal tax laws, regulations, interpretations, or rulings will be issued, or the overall effect of any such changes on our effective tax rate, any such changes may have a material adverse effect on our financial condition, results of operations or cash flows.

We earn a significant amount of our operating income from outside the United States for which deferred taxes have not been provided. These earnings are considered indefinitely invested outside of the United States and a repatriation of these funds may result in a significant increase in our U.S. income taxes and foreign withholding taxes. If we become legally required to repatriate funds or we encounter a significant need for liquidity domestically or at a particular location that we cannot fulfill on favorable terms through borrowings, equity offerings or other internal or external sources, we may experience unfavorable tax and earnings consequences as a result of cash transfers.

~~We Operate in Highly Competitive Markets~~

The markets for apparel, footwear, accessories, and equipment are highly competitive, as are the markets for our licensed products. In each of our geographic markets, we face significant competition from global and regional branded apparel, footwear, accessories, and equipment companies, including competition from companies with significantly greater resources than ours.

Retailers who are our customers often pose our most significant competitive threat by designing and marketing apparel, footwear, accessories, and equipment under their own private labels. For example, in the United States and Europe, several of our largest customers have developed significant private label brands that compete directly with our products. These retailers have assumed an increasing degree of inventory risk in their private label products and, as a result, may first cancel advance orders with us in order to manage their own inventory levels downward during periods of unseasonable weather or weak economic cycles. As our direct-to-consumer businesses grow, we also experience direct competition from retailers that are our customers, some of which primarily operate e-commerce operations and employ aggressive pricing strategies. We also compete with other companies for the production capacity of contract manufacturers from which we source our products and for import capacity. Many of our competitors are significantly larger than we are and have substantially greater financial, distribution, marketing, and other resources, more stable manufacturing resources and greater brand strength than we have. In addition, when our competitors combine operations through mergers, acquisitions or other transactions, their competitive strengths may increase.

Increased competition may result in reduced access to production capacity, challenges in obtaining favorable locations for our retail stores, reductions in display areas in retail locations, reductions in sales, or reductions in our profit margins, any of which may have a material adverse effect on our financial condition, results of operations or cash flows.

~~We Rely on Innovation to Compete in the Market for Our Products~~

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. Although we are committed to designing innovative and functional products that deliver relevant performance benefits to consumers, who participate in a wide range of competitive and recreational outdoor activities, if we fail to introduce technical innovation in our products that address consumers' performance expectations, we could suffer reputational damage to our brands and demand for our products could decline.

As we strive to achieve product innovations, 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. In addition, technical innovations often involve more complex manufacturing processes, which may lead to higher instances of quality issues, and if we experience problems with the quality of our products, we may incur substantial expense to address the problems and any associated product risks. Failure to successfully bring to market innovations in our product lines could have a material adverse effect on our financial condition, results of operations or cash flows.

~~Our Success Depends on Our Use and Protection of Intellectual Property Rights~~

Our registered and common law trademarks and our patented or patent-pending designs and technologies have significant value and are important to our ability to differentiate our products from those of our competitors and to create and sustain demand for our products. We also place significant value on our trade dress, the overall appearance and image of our products. We regularly discover products that are counterfeit reproductions of our products or that otherwise infringe on our proprietary rights. Counterfeiting activities typically increase as brand recognition increases, especially in markets outside the United States. Increased instances of counterfeit manufacture 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. We also license our proprietary rights to third parties. We could suffer reputational damage to our brands if we fail to choose appropriate licensees and licensed product categories. In addition to our own intellectual property rights, many of the intellectual property rights in the technology, fabrics and processes used to manufacture our products are generally owned or controlled by our suppliers and are generally not unique to us. In those

cases, we may not be able to adequately protect our products or differentiate their performance characteristics and fabrications from those of our competitors. The management of our intellectual property portfolio may affect the strength of our brands, which may in turn have a material adverse effect on our financial condition, results of operations or cash flows.

Although we have not been materially inhibited from selling products in connection with patent, trademark and trade dress disputes, as we focus on innovation in our product lines, extend our brands into new product categories and expand the geographic scope of our marketing, we may become subject to litigation based on allegations of infringement or other improper use of intellectual property rights of third parties, including third party trademark, copyright and patent rights. An increasing number of our products include technologies or designs for which we have obtained or applied for patent protection. Failure to successfully obtain and maintain patents on these innovations could negatively affect our ability to market and sell our products. Litigation is often necessary to defend against claims of infringement or to enforce and protect our intellectual property rights. As we utilize e-commerce and social media to a greater degree in our sales and marketing efforts, we face an increasing risk of patent infringement claims from non-operating entities and others covering broad functional aspects of internet operations. 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. Any of these outcomes may have a material adverse effect on our financial condition, results of operations or cash flows.

~~Our Success Depends on Our Distribution Facilities~~

Our ability to meet customer expectations, manage inventory, complete sales, and achieve objectives for operating efficiencies depends on the proper operation of our existing distribution facilities, the development or expansion of additional distribution capabilities and services, such as the transition of value-added services functions from contract manufacturers to our distribution centers, and the timely performance of services by third parties, including those involved in shipping product to and from our distribution facilities. In the United States, we rely primarily on our distribution centers in Portland, Oregon and Robards, Kentucky; in Canada, we rely primarily on our distribution facility in London, Ontario; in Europe, we rely primarily on our distribution center in Cambrai, France; in Japan, we rely primarily on a third-party logistics distribution provider in Tokyo; in Korea, we rely primarily on one leased distribution facility near Seoul that we manage and operate; and in China, we rely primarily on two distribution centers managed by third parties.

Our primary distribution facilities in the United States, France and Canada are highly automated, which means that their operations are complicated and may be subject to a number of risks related to computer viruses, the proper operation of software and hardware, electronic or power interruptions, and other system failures. Risks associated with upgrading or expanding these facilities may significantly disrupt or increase the cost of our operations. For example, in addition to supporting our traditional wholesale business, our existing distribution facilities have been modified to enable them to also support our e-commerce businesses in the United States, Canada and Europe. Failure to successfully maintain and update these modifications could disrupt our wholesale and e-commerce shipments and may have a material adverse effect on our financial condition, results of operations or cash flows.

The fixed costs associated with owning, operating and maintaining these large, highly automated 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. This has occurred in recent years in Europe, where our distribution center is underutilized. This fixed cost structure may make it difficult for us to achieve or maintain profitability if sales volumes decline for an extended period of time and could have material adverse effects on our financial condition, results of operations or cash flows.

~~Our distribution facilities may also be interrupted by~~ natural disasters such as earthquakes, ~~tornadoes~~hurricanes and tsunamis, whether occurring in the United States or ~~fires. We maintain business interruption insurance, but it may not adequately protect us from~~abroad, and their related consequences and effects, including energy shortages and public health issues, could disrupt our operations, the ~~adverse effect~~operations of our vendors and other suppliers or result in economic instability and changes in consumer preferences and spending that may ~~be caused by significant disruptions~~negatively impact our operating results and financial condition.

An Outbreak of Disease or Similar Public Health Threat, Such as a Pandemic, Could Have an Adverse Impact on Our Business, Operating Results and Financial Condition.

An outbreak of disease or similar public health threat, such a pandemic, could have an adverse impact on our business, financial condition and operating results, including in ~~our distribution facilities.~~the form of lowered net sales and the delay of inventory production and fulfillment in impacted regions.

Our ~~Investments~~Investment Securities May Be Adversely Affected by Market ~~Conditions~~Conditions.

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 May Be Adversely Affected by Labor Disruptions, Changes in Labor Laws and Other Labor Issues~~

Our business depends on our ability to source and distribute products in a timely manner. While a majority of our own operations are not subject to organized labor agreements, our relationship with our Cambrai distribution center employees is governed by French law, which includes a formal representation of employees by a Works Council and the application of a collective bargaining agreement. Labor disputes at contract manufacturers where our goods are produced, shipping ports, transportation carriers, retail stores, or distribution centers create significant risks for our business, particularly if these disputes result in work slowdowns, lockouts, strikes, or other disruptions during our peak manufacturing, shipping and selling seasons. For example, work slowdowns and stoppages at ports on the west coast of the United States have, in the past, resulted in product delays and increased costs. Labor disruptions may have a material adverse effect on our business, potentially resulting in canceled orders by customers, unanticipated inventory accumulation and reduced revenues and earnings.

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 sufficient number of qualified persons in the work force of the markets in which our operations are located, unemployment levels within those markets, prevailing and minimum wage rates, changing demographics, health and other insurance costs, and adoption of new or revised employment and labor laws and regulations. If we are unable to locate, attract or retain qualified employees, our ability to source, distribute and sell products in a timely and cost-effective manner may be negatively affected, which could have a material adverse effect on our financial condition, results of operations or cash flows.

We Depend on Certain Key ~~Suppliers~~Personnel.

Some of the materials that we use may be available from only one source or a very limited number of sources. For example, some specialty fabrics are manufactured to our specification by one source or a few sources, and a single vendor supplies the majority of the zippers used in our products. From time to time, we have difficulty satisfying our raw material and finished goods requirements. Although we believe that we can identify and qualify additional contract manufacturers to produce these 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, which may have a material adverse effect on our financial condition, results of operations or cash flows.

~~We Depend on Key Personnel~~

Our future success will depend in part on ~~the continued service of key personnel and~~ our ability to attract, retain and develop certain key ~~managers, designers, sales~~talent 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 Seasonality~~Brands if We Fail to Choose Appropriate Licensees.

~~Our business is affected by the general seasonal trends common~~

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 in~~proprietary 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 expansion~~value of our ~~direct-to-consumer businesses and sales growth in~~brands. Although we attempt to protect our ~~winter footwear business has increased~~brands through approval rights, we cannot completely control the ~~proportion~~use 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 affect~~licensed brands by our ~~business and cause our results~~licensees. 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 patterns~~brand 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.~~

~~Our Products Are Subject to Increasing Product Regulations and We Face Risks of Product Liability and Warranty Claims~~

Our products are 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 innegative publicity involving 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 and, as a result,licensee could have a material adverse effect on ~~our financial condition, results of operations or cash flows.~~that brand and on us.

~~Our products are used in outdoor activities, sometimes in severe conditions. Product recalls or product liability claims resulting~~

COLUMBIA SPORTSWEAR COMPANY | Q1 2023 FORM 10-Q | 37


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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 of~~right to operate retail stores for our brands to third-parties, primarily to our 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 harm these third-parties' sales.

our financial condition, results of operations, 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.RISKS RELATED TO OUR SECURITIES

Our Common Stock Price May Be ~~Volatile~~Volatile.

~~The price of our common stock has fluctuated substantially since our initial public offering.~~

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 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.

~~Insiders~~

Certain Shareholders Have Substantial Control ~~a Majority~~Over Us and Are Able to Influence Corporate Matters.

As of ~~Our Common Stock and May Sell Shares~~

~~Five~~March 31, 2023, three related shareholders, ~~Gertrude~~Timothy P. Boyle, ~~Sarah Bany, Timothy Boyle,~~ Joseph P. Boyle, and Molly E. Boyle, ~~beneficially own a majority~~controlled just under 50% of our common ~~stock.~~stock outstanding. As a result, if acting together, ~~they can effectively control~~Timothy P. Boyle, Joseph P. Boyle, and Molly E. Boyle are able to exercise significant influence over all matters requiring shareholder ~~approval without~~approval. These holdings could be significantly diminished (and with them the ~~cooperation~~related 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 shareholders~~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 2.~~


Item 2.			UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

ISSUER PURCHASES OF EQUITY SECURITIES ~~AND USE OF PROCEEDS~~

~~Our~~

Since the inception of our share repurchase program in 2004 through March 31, 2023, our Board of Directors has authorized the repurchase of ~~$700,000,000~~$2.0 billion of our common ~~stock. As of September 30, 2017, we had repurchased 21,658,035 shares under this program at an aggregate purchase price of approximately $562,064,000.~~stock, excluding excise tax. 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 March 31, 2023, we had repurchased 31.9 million shares at an aggregate purchase price of $1,486.4 million, and had $513.6 million remaining available, excluding excise tax.

~~We did not repurchase any equity securities~~

The following is a summary of our common stock repurchases, excluding excise tax, during the ~~three months~~quarter ended ~~September 30, 2017.~~March 31, 2023:


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)
January 1, 2023 through January 31, 2023	—	$	—	—	$	529.4
February 1, 2023 through February 28, 2023	86,976	$	89.08	86,976	$	521.6
March 1, 2023 through March 31, 2023	92,445	$	86.59	92,445	$	513.6
Total	179,421	$	87.80	179,421	$	513.6

COLUMBIA SPORTSWEAR COMPANY | Q1 2023 FORM 10-Q | 38


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~~Item 6.~~ ~~EXHIBITS~~


~~(a)~~ITEM 6.			~~Exhibits~~EXHIBITS

(a) | See Exhibit Index below for a description of the documents that are filed as Exhibits to this Quarterly Report on Form 10-Q or incorporated herein by reference.


EXHIBIT INDEX


Exhibit No.					Exhibit Name
			3.1		Third Restated Articles of Incorporation (incorporated by reference to exhibit 3.1 to the Company's Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2000) (File No. 000-23939).
			3.1(a)		Amendment to Third Restated Articles of Incorporation (incorporated by reference to exhibit 3.1 to the Company's Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2002) (File No. 000-23939).
			3.1(b)		Second Amendment to Third Restated Articles of Incorporation (incorporated by reference to exhibit 3.1 to the Company's Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2018) (File No. 000-23939).
			3.2		2023 Amended and Restated Bylaws of Columbia Sportswear Company (incorporated by reference to exhibit 3.2 to the Company's Form 8-K filed on February 1, 2023) (File No. 000-23939).


+









































			10.1		~~10.1~~	~~Employment Offer Letter from~~ Columbia Sportswear Company ~~to Franco Fogliato~~Third Amendment Change in Control Severance Plan

31.1	~~31.1~~			Rule 13a-14(a) Certification of Timothy P. Boyle, Chairman, President and Chief Executive ~~Officer~~Officer.

31.2	~~31.2~~			Rule 13a-14(a) Certification of Jim A. Swanson, ~~Senior~~Executive Vice President and Chief Financial ~~Officer~~Officer.

32.1	~~32.1~~			Section 1350 Certification of Timothy P. Boyle, Chairman, President and Chief Executive ~~Officer~~Officer.

32.2	~~32.2~~			Section 1350 Certification of Jim A. Swanson, ~~Senior~~Executive Vice President and Chief Financial ~~Officer~~Officer.
			101.INS
	~~101~~	~~INS~~ XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document
			101.SCH
	~~101~~	~~SCH~~ XBRL Taxonomy Extension Schema Document
			101.CAL
	~~101~~	~~CAL~~ XBRL Taxonomy Extension Calculation Linkbase Document
			101.DEF
	~~101~~	~~DEF~~ XBRL Taxonomy Extension Definition Linkbase Document
			101.LAB
	~~101~~	~~LAB~~ XBRL Taxonomy Extension Label Linkbase Document
			101.PRE
	~~101~~	~~PRE~~ XBRL Taxonomy Extension Presentation Linkbase Document
			104		Cover Page Interactive Data File, formatted as Inline XBRL and contained in Exhibit 101

COLUMBIA SPORTSWEAR COMPANY | Q1 2023 FORM 10-Q | 39

~~+ Management Contract or Compensatory Plan~~


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SIGNATURES

Pursuant to the requirements of Section 13 or Section 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

COLUMBIA SPORTSWEAR COMPANY

~~Date: November 2, 2017~~

Date:

May 4, 2023

By:

/s/ JIM A. SWANSON

Jim A. Swanson

~~Senior~~

Executive Vice President and Chief Financial Officer

(Duly Authorized Officer and

Principal Financial and Accounting Officer)

COLUMBIA SPORTSWEAR COMPANY | Q1 2023 FORM 10-Q | 40



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 ~~offices)~~offices and zip code)
	(503) 985-4000
	(~~Zip Code)~~Registrant's telephone number, including area code)



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 Global Select Market

	~~PAGE NO.~~
				Page
~~PART I—FINANCIAL INFORMATION~~SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS








~~Item 1. – Financial Statements – Columbia Sportswear Company (Unaudited)~~PART I — FINANCIAL INFORMATION					2
Item 1.		Financial Statements and Supplementary Data		1
		Condensed Consolidated Balance Sheets (Unaudited)		21

Condensed Consolidated Statements of Operations (Unaudited)	32

Condensed Consolidated Statements of Comprehensive Income (Unaudited)	43

Condensed Consolidated Statements of Cash Flows (Unaudited)	54
		Condensed Consolidated Statements of Equity (Unaudited)		5
		Notes to Condensed Consolidated Financial Statements (Unaudited)		6

Item 2. –	Management's Discussion and Analysis of Financial Condition and Results of Operations		1918

Item 3. –	Quantitative and Qualitative Disclosures About Market Risk		2927

Item 4. –	Controls and Procedures		2927
















PART ~~II—~~II — OTHER INFORMATION

~~Item 1. – Legal Proceedings~~	30
Item 1.
~~Item 1A. – Risk Factors~~Legal Proceedings	3028
Item 1A.		Risk Factors		28
Item 2. –		Unregistered Sales of Equity Securities and Use of Proceeds		4238
Item 6.		Exhibits		39
		Signatures		40


	September 30, 2017			December 31, 2016			September 30, 2016
(in thousands)										(in thousands)	March 31, 2023		December 31, 2022		March 31, 2022
ASSETS										ASSETS
Current Assets:										Current Assets:
Cash and cash equivalents	$	411,805		$	551,389		$	219,189		Cash and cash equivalents	$	361,049	$	430,241	$	435,240

Short-term investments	18,469			472			467			Short-term investments	99,511		722		175,024
Accounts receivable, net of allowance of $10,789, $8,556 and $8,519, respectively	466,852			333,678			486,236

Accounts receivable, net of allowance of $5,200, $5,443 and $5,412, respectively										Accounts receivable, net of allowance of $5,200, $5,443 and $5,412, respectively	466,690		547,561		408,186
Inventories	558,558			487,997			588,021			Inventories	959,234		1,028,545		714,415

Prepaid expenses and other current assets	36,113			38,487			33,514			Prepaid expenses and other current assets	100,880		129,872		105,261
Total current assets	1,491,797			1,412,023			1,327,427			Total current assets	1,987,364		2,136,941		1,838,126
Property, plant and equipment, at cost, net of accumulated depreciation of $450,079, $408,676 and $403,244, respectively	285,582			279,650			285,514
Intangible assets, net (Note 4)	130,300			133,438			134,724

Property, plant and equipment, net of accumulated depreciation of $635,256, $623,911 and $603,229, respectively										Property, plant and equipment, net of accumulated depreciation of $635,256, $623,911 and $603,229, respectively	282,921		291,214		290,070
Operating lease right-of-use assets										Operating lease right-of-use assets	318,728		324,409		333,356
Intangible assets, net										Intangible assets, net	81,146		81,558		101,496
Goodwill	68,594			68,594			68,594			Goodwill	51,694		51,694		68,594
Deferred income taxes	98,062			92,494			79,934			Deferred income taxes	96,865		94,162		89,613
Other non-current assets	26,479			27,695			25,622			Other non-current assets	70,256		71,568		66,724
Total assets	$	2,100,814		$	2,013,894		$	1,921,815		Total assets	$	2,888,974	$	3,051,546	$	2,787,979
LIABILITIES AND EQUITY										LIABILITIES AND EQUITY
Current Liabilities:										Current Liabilities:
Short-term borrowings	$	—		$	—		$	20

Accounts payable	190,634			215,048			136,667			Accounts payable	$	220,231	$	322,472	$	262,255
Accrued liabilities (Note 5)	170,909			142,158			166,496
Accrued liabilities										Accrued liabilities	271,625		328,759		234,326
Operating lease liabilities										Operating lease liabilities	69,452		68,685		68,136
Income taxes payable	22,921			5,645			29,332			Income taxes payable	7,377		18,802		6,297

Total current liabilities	384,464			362,851			332,515			Total current liabilities	568,685		738,718		571,014
Note payable to related party (Note 13)	—			14,053			14,629
Other long-term liabilities	47,129			42,622			43,066

Non-current operating lease liabilities										Non-current operating lease liabilities	303,571		310,625		321,250
Income taxes payable	10,647			12,710			10,724			Income taxes payable	33,765		33,251		40,299
Deferred income taxes	154			147			229			Deferred income taxes	146		143		—
Other long-term liabilities										Other long-term liabilities	35,022		33,020		36,516
Total liabilities	442,394			432,383			401,163			Total liabilities	941,189		1,115,757		969,079
Commitments and contingencies (Note 11)
Columbia Sportswear Company Shareholders' Equity:
Commitments and contingencies (Note 4)										Commitments and contingencies (Note 4)
Shareholders' Equity:										Shareholders' Equity:
Preferred stock; 10,000 shares authorized; none issued and outstanding	—			—			—			Preferred stock; 10,000 shares authorized; none issued and outstanding	—		—		—
Common stock (no par value); 250,000 shares authorized; 69,863, 69,873, and 69,792, issued and outstanding, respectively (Note 8)	39,007			53,801			49,091

Common stock (no par value); 250,000 shares authorized; 62,076, 62,139 and 62,948 issued and outstanding, respectively										Common stock (no par value); 250,000 shares authorized; 62,076, 62,139 and 62,948 issued and outstanding, respectively	1,076		12,692		—
Retained earnings	1,604,214			1,529,636			1,457,495			Retained earnings	1,981,287		1,953,734		1,828,074
Accumulated other comprehensive loss (Note 7)	(13,929		)	(22,617		)	(6,934		)
Total Columbia Sportswear Company shareholders' equity	1,629,292			1,560,820			1,499,652
Non-controlling interest (Note 3)	29,128			20,691			21,000
Total equity	1,658,420			1,581,511			1,520,652
Total liabilities and equity	$	2,100,814		$	2,013,894		$	1,921,815
Accumulated other comprehensive income (loss)										Accumulated other comprehensive income (loss)	(34,578)		(30,637)		(9,174)
Total shareholders' equity										Total shareholders' equity	1,947,785		1,935,789		1,818,900
Total liabilities and shareholders' equity										Total liabilities and shareholders' equity	$	2,888,974	$	3,051,546	$	2,787,979


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934



	Three Months Ended September 30,						Nine Months Ended September 30,
	2017			2016			2017			2016
Net sales	$	747,367		$	745,714		$	1,690,064		$	1,659,595
Cost of sales	398,177			400,002			901,545			886,922
Gross profit	349,190			345,712			788,519			772,673
Selling, general and administrative expenses	230,446			224,497			643,859			622,843
Net licensing income	4,143			2,415			8,947			6,279
Income from operations	122,887			123,630			153,607			156,109
Interest income, net	1,035			393			3,240			1,576
Interest expense on note payable to related party (Note 13)	—			(253		)	(429		)	(779		)
Other non-operating income (expense), net	(104		)	(620		)	203			(736		)
Income before income tax	123,818			123,150			156,621			156,170
Income tax expense	(32,716		)	(36,598		)	(37,950		)	(43,297		)
Net income	91,102			86,552			118,671			112,873
Net income attributable to non-controlling interest	3,378			2,967			6,476			5,690
Net income attributable to Columbia Sportswear Company	$	87,724		$	83,585		$	112,195		$	107,183
Earnings per share attributable to Columbia Sportswear Company (Note 8):
Basic	$	1.26		$	1.20		$	1.61		$	1.54
Diluted	$	1.25		$	1.18		$	1.59		$	1.52
Cash dividends per share	$	0.18		$	0.17		$	0.54		$	0.51
Weighted average shares outstanding (Note 8):
Basic	69,815			69,761			69,698			69,632
Diluted	70,389			70,630			70,390			70,586


Table of Contents Notes to unaudited Condensed Consolidated Financial Statements


	Three Months Ended March 31,
(in thousands, except per share amounts)		2023		2022
Net sales		$	820,593	$	761,510
Cost of sales		421,093		383,063
Gross profit		399,500		378,447
Selling, general and administrative expenses		347,398		299,086

Net licensing income		4,325		4,305
Operating income		56,427		83,666
Interest income, net		3,283		395
Other non-operating income, net		850		44
Income before income tax		60,560		84,105
Income tax expense		14,358		17,268
Net income		$	46,202	$	66,837

Earnings per share:
Basic		$	0.74	$	1.04
Diluted		$	0.74	$	1.03
Weighted average shares outstanding:
Basic		62,133		64,273
Diluted		62,417		64,591


	Three Months Ended March 31, 2023
(in thousands)	U.S.		LAAP		EMEA		Canada		Total
Product category net sales
Apparel, Accessories and Equipment	$	415,928	$	100,421	$	71,957	$	44,296	$	632,602
Footwear	101,547		35,992		36,332		14,120		187,991
Total	$	517,475	$	136,413	$	108,289	$	58,416	$	820,593
Channel net sales
Wholesale	$	259,350	$	71,162	$	84,578	$	37,398	$	452,488
Direct-to-consumer	258,125		65,251		23,711		21,018		368,105
Total	$	517,475	$	136,413	$	108,289	$	58,416	$	820,593


	Three Months Ended March 31, 2022
(in thousands)	U.S.		LAAP		EMEA		Canada		Total
Product category net sales
Apparel, Accessories and Equipment	$	385,228	$	85,925	$	63,269	$	31,521	$	565,943
Footwear	116,666		35,818		31,448		11,635		195,567
Total	$	501,894	$	121,743	$	94,717	$	43,156	$	761,510
Channel net sales
Wholesale	$	247,509	$	59,938	$	75,294	$	25,483	$	408,224
Direct-to-consumer	254,385		61,805		19,423		17,673		353,286
Total	$	501,894	$	121,743	$	94,717	$	43,156	$	761,510



(in thousands)	March 31, 2023		December 31, 2022		March 31, 2022
Intangible assets with definite lives:
Patents and purchased technology	$	14,198	$	14,198	$	14,198
Customer relationships	23,000		23,000		23,000
Gross carrying amount	37,198		37,198		37,198
Accumulated amortization:
Patents and purchased technology	(14,198)		(14,198)		(14,198)
Customer relationships	(21,075)		(20,663)		(19,425)
Accumulated amortization	(35,273)		(34,861)		(33,623)
Net carrying amount	1,925		2,337		3,575
Intangible assets with indefinite lives	79,221		79,221		97,921
Intangible assets, net	$	81,146	$	81,558	$	101,496



	Columbia Sportswear Company			Non-Controlling Interest			Total
Balance at December 31, 2016	$	1,560,820		$	20,691		$	1,581,511
Net income	112,195			6,476			118,671
Other comprehensive income (loss), net of tax:
Derivative holding losses	(15,993		)	(375		)	(16,368		)
Foreign currency translation adjustments	24,681			2,336			27,017
Cash dividends ($0.54 per share)	(37,617		)	—			(37,617		)
Issuance of common stock under employee stock plans, net	12,471			—			12,471
Stock-based compensation expense	8,277			—			8,277
Repurchase of common stock	(35,542		)	—			(35,542		)
Balance at September 30, 2017	$	1,629,292		$	29,128		$	1,658,420



	Unrealized losses on available-for-sale securities			Unrealized holding losses on derivative transactions			Foreign currency translation adjustments			Total
Balance at June 30, 2017	$	(4	)	$	(794	)	$	(12,498	)	$	(13,296	)
Other comprehensive income (loss) before reclassifications	—			(7,391		)	7,793			402
Amounts reclassified from other comprehensive income	—			(1,035		)	—			(1,035		)
Net other comprehensive income (loss) during the period	—			(8,426		)	7,793			(633		)
Balance at September 30, 2017	$	(4	)	$	(9,220	)	$	(4,705	)	$	(13,929	)



	Unrealized losses on available-for-sale securities			Unrealized holding gains (losses) on derivative transactions			Foreign currency translation adjustments			Total
Balance at June 30, 2016	$	—		$	(3,337	)	$	(7,436	)	$	(10,773	)
Other comprehensive income (loss) before reclassifications	(4		)	(319		)	3,497			3,174
Amounts reclassified from other comprehensive income	—			665			—			665
Net other comprehensive income (loss) during the period	(4		)	346			3,497			3,839
Balance at September 30, 2016	$	(4	)	$	(2,991	)	$	(3,939	)	$	(6,934	)


TABLE OF CONTENTS


NOTE 1 — BASIS OF PRESENTATION AND ORGANIZATION


(in thousands)	Derivative transactions		Foreign currency translation adjustments		Total
Balance as of December 31, 2022	$	21,790	$	(52,427)	$	(30,637)
Other comprehensive income (loss) before reclassifications	(1,678)		1,480		(198)
Amounts reclassified from accumulated other comprehensive income (loss) (1)	(3,743)		—		(3,743)
Net other comprehensive income (loss) during the period	(5,421)		1,480		(3,941)
Balance as of March 31, 2023	$	16,369	$	(50,947)	$	(34,578)


(in thousands)	Available-for- sale securities		Derivative transactions		Foreign currency translation adjustments		Total
Balance as of December 31, 2021	$	—	$	9,914	$	(14,290)	$	(4,376)
Other comprehensive loss before reclassifications	(451)		(1,864)		(2,256)		(4,571)
Amounts reclassified from accumulated other comprehensive income (loss) (1)	—		(227)		—		(227)
Net other comprehensive loss during the period	(451)		(2,091)		(2,256)		(4,798)
Balance as of March 31, 2022	$	(451)	$	7,823	$	(16,546)	$	(9,174)


	Balance Sheet Classification	September 30, 2017		December 31, 2016		September 30, 2016
(in thousands)								(in thousands)	Balance Sheet Classification	March 31, 2023		December 31, 2022		March 31, 2022
Derivative instruments designated as cash flow hedges:								Derivative instruments designated as cash flow hedges:
Derivative instruments in asset positions:								Derivative instruments in asset positions:
Currency forward contracts	Prepaid expenses and other current assets	$	1,930	$	9,805	$	1,880	Currency forward contracts	Prepaid expenses and other current assets	$	16,826	$	20,306	$	9,184
Currency forward contracts	Other non-current assets	509		1,969		344		Currency forward contracts	Other non-current assets	5,935		7,153		7,351
Derivative instruments in liability positions:								Derivative instruments in liability positions:
Currency forward contracts	Accrued liabilities	10,152		106		3,295		Currency forward contracts	Accrued liabilities	2,630		1,249		3,411
Currency forward contracts	Other long-term liabilities	3,048		—		559		Currency forward contracts	Other long-term liabilities	1,788		1,770		1,383
Derivative instruments not designated as cash flow hedges:								Derivative instruments not designated as cash flow hedges:
Derivative instruments in asset positions:								Derivative instruments in asset positions:
Currency forward contracts	Prepaid expenses and other current assets	959		1,361		99		Currency forward contracts	Prepaid expenses and other current assets	890		3,027		1,888

Derivative instruments in liability positions:								Derivative instruments in liability positions:
Currency forward contracts	Accrued liabilities	407		180		850		Currency forward contracts	Accrued liabilities	2,257		2,533		902


	Statement Of Operations Classification	Three Months Ended March 31,
(in thousands)			2023		2022
Currency Forward Contracts:
Derivative instruments designated as cash flow hedges:
Loss recognized in other comprehensive income (loss), net of tax	—		$	(1,678)	$	(1,864)
Gain (loss) reclassified from accumulated other comprehensive income (loss) to income for the effective portion	Net sales		191		(136)
Gain reclassified from accumulated other comprehensive income (loss) to income for the effective portion	Cost of sales		5,762		311

Gain (loss) reclassified from accumulated other comprehensive income (loss) to income as a result of cash flow hedge discontinuance	Other non-operating income, net		(7)		222


Derivative instruments not designated as cash flow hedges:

Gain (loss) recognized in income	Other non-operating income, net		(1,187)		590


Level 1	—	observable inputs such as quoted prices for identical assets or liabilities in active liquid markets;
Level 2	—	inputs, other than the quoted market prices in active markets, that are observable, either directly or indirectly; or observable market prices in markets with insufficient volume or infrequent transactions; and
Level 3	—	unobservable inputs for which there is little or no market data available, that require the reporting entity to develop its own assumptions.


	Three Months Ended March 31,
(in millions)	2023		2022		Change
U.S.	$	81.6	$	113.2	$	(31.6)
LAAP	18.3		13.0		5.3
EMEA	20.4		16.5		3.9
Canada	10.8		8.1		2.7
Total segment operating income	131.1		150.8		(19.7)
Unallocated corporate expenses	(74.7)		(67.1)		(7.6)
Operating income	$	56.4	$	83.7	$	(27.3)

For the quarterly period ended March 31, 2023

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from_______to_______