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What changed in COLUMBIA SPORTSWEAR CO's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of COLUMBIA SPORTSWEAR CO's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+236 added−239 removedSource: 10-K (2024-02-26) vs 10-K (2023-02-23)

Top changes in COLUMBIA SPORTSWEAR CO's 2023 10-K

236 paragraphs added · 239 removed · 184 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

43 edited+6 added−5 removed35 unchanged
Biggest changeHe was promoted to Senior Vice President, Global Wholesale in October 2021. Prior to joining the Company, Mr. Sheerin held various leadership positions at Nike, Inc., including Vice President, North America Sales, Vice President of Global Sales, Nike Sportswear and Managing Director/General Manager of Nike Korea. COLUMBIA SPORTSWEAR COMPANY | 2022 FORM 10-K | 6 Table of Contents Jim A.
Biggest changeCOLUMBIA SPORTSWEAR COMPANY | 2023 FORM 10-K | 6 Table of Contents Craig Zanon joined the Company in 2021 as Senior Vice President, Emerging Brands and was elevated to Executive Vice President, Emerging Brands, EMEA and Asia Direct in February 2024. Prior to joining the Company, Mr.
We authorize and encourage our international distributors to connect with consumers by operating e-commerce and marketing sites and maintaining a presence on social media platforms. Digital marketing and social media engagement increase our ability to build strong emotional connections with consumers through consistent, brand-enhancing content.
We also authorize and encourage our international distributors to connect with consumers by operating e-commerce and marketing sites and maintaining a presence on social media platforms. Digital marketing and social media engagement increase our ability to build strong emotional connections with consumers through consistent, brand-enhancing content.
We meet the diverse needs of our customers and consumers through our four well-known brands by designing, developing, marketing, and distributing our outdoor, active and lifestyle products, including apparel, footwear, accessories and equipment. Columbia® | Founded in 1938, our Columbia brand's mission is to unlock the outdoors for everyone.
We meet the diverse needs of our customers and consumers through our four brands by designing, developing, marketing, and distributing our outdoor, active and lifestyle products, including apparel, footwear, accessories and equipment. Columbia® | Founded in 1938, our Columbia brand's mission is to unlock the outdoors for everyone.
We distribute the majority of our U.S. products from distribution centers that we own and operate in Portland, Oregon and Robards, Kentucky, as well as through third-party logistics companies that operate distribution centers in Louisville, Kentucky and other facilities located near United States ports.
We distribute the majority of our U.S. products from distribution centers that we own and operate in Portland, Oregon and Robards, Kentucky, as well as through third-party logistics companies that operate distribution centers in Cincinnati, Ohio and Louisville, Kentucky and other facilities located near United States ports.
In 2022, finished goods manufacturers in Vietnam, Bangladesh, Indonesia, and India produced approximately 40%, 20%, 15% and 10%, respectively, of these products. Five of the largest contract finished goods manufacturers account for approximately 30% of our apparel, accessories and equipment production, with the largest manufacturer accounting for approximately 10%.
In 2023, finished goods manufacturers in Vietnam, Bangladesh, Indonesia, and India produced approximately 40%, 20%, 15% and 10%, respectively, of these products. Five of the largest contract finished goods manufacturers account for approximately 30% of our apparel, accessories and equipment production, with the largest manufacturer accounting for approximately 10%.
Our wholesale distribution channel consists of small, independently operated specialty outdoor and sporting goods stores, regional, national and international sporting goods chains, large regional, national and international department store chains, internet retailers, and international distributors where we generally do not have our own direct operations.
Our wholesale distribution channel consists of small, independently operated specialty outdoor and sporting goods stores, regional, national and international sporting goods chains, large regional, national and international department store chains, internet retailers, international distributors where we generally do not have our own direct operations, and certain other retailers.
COMPETITION The markets for outdoor, active and lifestyle apparel, footwear, accessories, and equipment products are highly competitive and we face significant competition from numerous companies. Our competition includes large companies with significant financial, marketing and operational resources, small companies with limited resources but deep entrenchment in their local markets, and other branded competitors.
COMPETITION The markets for outdoor, active and lifestyle apparel, footwear, accessories, and equipment products are highly competitive and we face significant competition from numerous companies. Our competition includes large companies with significant financial, marketing and operational resources, small companies with limited resources but deep entrenchment in their local markets, emerging brands with a large DTC presence, and other branded competitors.
These products are sold by our wholly-owned subsidiaries in Japan, Korea and China, and through distributors in other LAAP markets. We have nearly 300 wholesale customers, including distributors, in LAAP. In 2022, our four largest LAAP wholesale customers accounted for approximately 10% of LAAP net sales, and were less than 10% individually.
These products are sold by our wholly-owned subsidiaries in Japan, Korea and China, and through distributors in other LAAP markets. We have nearly 350 wholesale customers, including distributors, in LAAP. In 2023, our four largest LAAP wholesale customers accounted for approximately 15% of LAAP net sales, and were less than 10% individually.
In the United States, the self-disclosed ethnicity of our workforce, including retail and distribution employees, was 59% White, 21% Hispanic or Latino, 7% Asian, 7% Black, less than 1% American Indian or Alaskan Native, less than 1% Native Hawaiian or other Pacific Islander, 3% two or more races and 2% undisclosed or chose not to identify.
In the United States, the self-disclosed ethnicity of our workforce, including retail and distribution employees, was 56% White, 23% Hispanic or Latino, 7% Asian, 6% Black, less than 1% American Indian or Alaskan Native, less than 1% Native Hawaiian or other Pacific Islander, 4% two or more races and 2% undisclosed or chose not to identify.
COLUMBIA SPORTSWEAR COMPANY | 2022 FORM 10-K | 2 Table of Contents SALES AND DISTRIBUTION We sell our products in approximately 90 countries and operate in four geographic segments: United States ("U.S."), Latin America and Asia Pacific ("LAAP"), Europe, Middle East and Africa ("EMEA"), and Canada.
COLUMBIA SPORTSWEAR COMPANY | 2023 FORM 10-K | 2 Table of Contents SALES AND DISTRIBUTION We sell our products in more than 100 countries and operate in four geographic segments: United States ("U.S."), Latin America and Asia Pacific ("LAAP"), Europe, Middle East and Africa ("EMEA"), and Canada.
Employee Well-Being We align our employee programs to the five elements of well-being: physical health, career, social and emotional health, financial, and community. For more information on our efforts to support our workforce, see our "Environmental, Social and Governance Report" at http://columbia.com/corporate-responsibility.
Employee Well-Being We align our employee programs to the five elements of well-being: physical health, career, social and emotional health, financial, and community. For more information on our efforts to support our workforce, see our "Impact Report: Environmental, Social, Governance" at http://columbia.com/corporate-responsibility. The content of such report is not incorporated by reference.
Swanson 48 Executive Vice President, Chief Financial Officer Craig Zanon 63 Senior Vice President, Emerging Brands Timothy P. Boyle joined the Company in 1971 as General Manager, served as the Company's President from 1988 to 2015 and reassumed the role in 2017. Mr. Boyle has served as Chief Executive Officer since 1988.
Swanson 49 Executive Vice President, Chief Financial Officer Craig Zanon 64 Executive Vice President, Emerging Brands, EMEA and Asia Direct Timothy P. Boyle joined the Company in 1971 as General Manager, served as the Company's President from 1988 to 2015 and reassumed the role in 2017. Mr. Boyle has served as Chief Executive Officer since 1988.
As of December 31, 2022, our global workforce was self-disclosed as 55% female, 42% male, less than 1% non-binary and 2% undisclosed or chose not to identify.
As of December 31, 2023, our global workforce was self-disclosed as 54% female, 43% male, less than 1% non-binary and 2% undisclosed or chose not to identify.
As of December 31, 2022, we directly operated 257 retail stores, and maintained 31 concession and 62 franchise based arrangements with third-parties. We distribute LAAP products through third-party logistics companies that operate distribution centers near Tokyo, Seoul, and Shanghai for our Japan, Korea and China businesses, respectively.
As of December 31, 2023, we directly operated 248 retail stores, and third-parties operated 27 concession and 47 franchise based stores. We distribute LAAP products through third-party logistics companies that operate distribution centers near Tokyo, Seoul, and Shanghai for our Japan, Korea and China businesses, respectively.
In 2022, our footwear products for our wholesale customer and DTC businesses were manufactured into finished goods in six countries. In 2022, finished goods manufacturers in Vietnam and China produced approximately 70% and 20%, respectively, of these products.
In 2023, our footwear products for our wholesale and DTC businesses were manufactured into finished goods in five countries. In 2023, finished goods manufacturers in Vietnam and China produced approximately 75% and 20%, respectively, of these products.
From December 31, 2021 to December 31, 2022, we had an overall employee turnover rate of approximately 62%, impacted by approximately 89% and 85% turnover rates in our distribution and retail employee base, respectively. Approximately 28% of our workforce was located outside of the United States as of December 31, 2022.
From December 31, 2022 to December 31, 2023, we had an overall employee turnover rate of approximately 57%, impacted by approximately 80% and 66% turnover rates in our retail and distribution employee base, respectively. Approximately 29% of our workforce was located outside of the United States as of December 31, 2023.
Our team of specialists leads both our internal research and development efforts and works closely with independent suppliers to conceive, develop and commercialize innovative technologies and products to provide the unique performance benefits desired by consumers.
COLUMBIA SPORTSWEAR COMPANY | 2023 FORM 10-K | 1 Table of Contents Our team of specialists leads both our internal research and development efforts and works closely with independent suppliers to conceive, develop and commercialize innovative technologies and products to provide the unique performance benefits desired by consumers.
MARKETING Our portfolio of brands enables us to target a wide range of consumers with differentiated products. Our marketing supports and enhances our competitive position in the marketplace, drives alignment through seasonal initiatives, builds brand equity, raises brand relevance and awareness, infuses our brands with excitement, and, most importantly, stimulates consumer demand for our products.
Our marketing supports and enhances our competitive position in the marketplace, drives alignment through seasonal initiatives, builds brand equity, raises brand relevance and awareness, infuses our brands with excitement, and, most importantly, stimulates consumer demand for our products.
CANADA Canada provides apparel, accessories and equipment products through our Columbia, Mountain Hardwear and prAna brands and footwear products through our Columbia and SOREL brands. These products are sold by our Canada wholesale and DTC businesses. We have over 550 wholesale customers in Canada.
U.S. U.S. is our largest segment and provides apparel, accessories and equipment products through our Columbia, Mountain Hardwear, and prAna brands and footwear products through our Columbia and SOREL brands. These products are sold by our U.S. wholesale and DTC businesses. We have over 1,850 wholesale customers in the U.S.
We value legal, ethical and fair treatment of people involved in manufacturing our products. Independent contractors manufacturing our products are subject to our standards of manufacturing practices to facilitate safe and humane working conditions, as well as to promote ethical business practices. We have programs in place to monitor manufacturer practices and assess alignment against these standards.
Independent contractors manufacturing our products are subject to our standards of manufacturing practices to facilitate safe and humane working conditions, as well as to promote ethical business practices. We have programs in place to monitor manufacturer practices and assess alignment against these standards. We maintain eight manufacturing liaison offices in seven Asia Pacific countries.
We utilize a variety of means to deliver our marketing messages, including digital marketing, social media interactions, television and print publications, experiential events, brand ambassadors, enhanced product store displays, and consumer focused public relations efforts.
Our integrated marketing efforts deliver consistent messages about the performance benefits, features and styles of our products within each of our brands and their target consumers. We utilize a variety of means to deliver our marketing messages, including digital marketing, social media interactions, television and print publications, experiential events, brand ambassadors, enhanced product store displays, and consumer-focused public relations efforts.
Each of our four brands focuses on impacts that are unique to their positioning within this strategy. Detailed information regarding our (and our brands’) corporate responsibility priorities and progress can be found in our latest "Environmental, Social and Governance Report" at http://columbia.com/corporate-responsibility. HUMAN CAPITAL We believe that attracting and retaining talent strengthens our enterprise.
Each of our four brands focuses on impacts that are unique to their positioning within this strategy. Detailed information regarding our (and our brands’) corporate responsibility priorities and progress can be found in our latest "Impact Report: Environmental, Social, Governance" at http://columbia.com/corporate-responsibility. The content of such report is not incorporated by reference.
Potter held various leadership positions, including Chief Technology Officer and Managing Vice President of Engineering with Nike, Inc., as well as Vice President of Technology Innovation with Capital One, and CIO/CTO for British Telecommunication's Enterprise Group. Tim Sheerin joined the Company in January 2021 as Senior Vice President, US Wholesale Sales.
Potter held various leadership positions, including Chief Technology Officer and Managing Vice President of Engineering with Nike, Inc., as well as Vice President of Technology Innovation with Capital One, and CIO/CTO for British Telecommunication's Enterprise Group. Jim A.
These products are sold by our U.S. wholesale and DTC businesses. We have nearly 2,000 wholesale customers in the U.S. In 2022, our three largest U.S. wholesale customers accounted for approximately 15% of U.S. net sales, and were less than 10% individually. As of December 31, 2022, we directly operated 156 retail stores.
These products are sold by our Canada wholesale and DTC businesses. We have nearly 550 wholesale customers in Canada. In 2023, our two largest Canada wholesale customers accounted for approximately 25% of Canada net sales, and were approximately 15% and 10% individually. As of December 31, 2023, we directly operated 13 retail stores.
These products are sold by our Europe-direct and EMEA distributor businesses. We have nearly 3,550 wholesale customers, including distributors, in EMEA. In 2022, our largest EMEA wholesale customer accounted for approximately 12% of EMEA net sales. As of December 31, 2022, we directly operated 25 retail stores and maintained 23 concession-based arrangements with third-parties.
These products are sold by our Europe-direct and EMEA distributor businesses. We have over 3,400 wholesale customers, including distributors, in EMEA. In 2023, our three largest EMEA wholesale customers accounted for approximately 15% of EMEA net sales, and were less than 10% individually. As of December 31, 2023, we directly operated 31 retail stores and third-parties operated 23 concession-based stores.
We maintain seven manufacturing liaison offices in six Asia Pacific countries. Our personnel in these offices monitor production at our contract manufacturers' facilities to ensure our products are manufactured to our specifications. In 2022, our apparel, accessories and equipment products for our wholesale customers and DTC businesses were manufactured into finished goods in 14 countries.
Our personnel in these offices monitor production at our contract manufacturers' facilities to ensure our products are manufactured to our specifications. In 2023, our apparel, accessories and equipment products for our wholesale and direct-to-consumer ("DTC") businesses were manufactured into finished goods in 15 countries.
Swanson served in a variety of financial planning and analysis, tax, and accounting roles, including senior financial analyst at Freightliner Corporation and at Tality Corporation, and as a senior tax and business advisory associate at Arthur Andersen. Craig Zanon joined the Company in 2021 as Senior Vice President, Emerging Brands. Prior to joining the Company, Mr.
Swanson served in a variety of financial planning and analysis, tax, and accounting roles, including senior financial analyst at Freightliner Corporation and at Tality Corporation, and as a senior tax and business advisory associate at Arthur Andersen.
Our direct-to-consumer ("DTC") distribution channel consists of our own network of branded and outlet retail stores, brand-specific e-commerce sites, and concession or franchise based arrangements with third-parties at branded, outlet and shop-in-shop retail locations in the LAAP and EMEA regions.
Our DTC distribution channel consists of our own network of branded and outlet retail stores, brand-specific e-commerce sites, and concession or franchise based arrangements with third-parties at branded, outlet and shop-in-shop retail locations in the LAAP and EMEA regions. In addition, we earn revenue through licensing certain of our trademarks across a range of apparel, accessories, equipment, and home products.
Our apparel, accessories and equipment products are designed to be used for all seasons, activities and locations. Our footwear products include durable, lightweight hiking boots, trail running shoes, rugged cold weather boots for activities on snow and ice, sandals and shoes for use in water activities, and function-first fashion footwear and casual shoes for lifestyle wear.
Our footwear products include durable, lightweight hiking boots, trail running shoes, rugged cold weather boots for activities on snow and ice, sandals and shoes for use in water activities, and footwear for lifestyle wear.
We COLUMBIA SPORTSWEAR COMPANY | 2022 FORM 10-K | 1 Table of Contents utilize our working relationships with specialists in the fields of chemistry, biochemistry, engineering, industrial design, materials research, graphic design, and other related fields, along with consumer insights and feedback, to develop and test innovative performance products, processes, packaging, and displays.
We utilize our working relationships with specialists in the fields of chemistry, biochemistry, engineering, industrial design, materials research, graphic design, and other related fields, along with consumer insights and feedback, to develop and test innovative performance products, processes, packaging, and displays. These efforts, coupled with our drive for continuous improvement, represent key factors in the ongoing success of our products.
The majority of our products are produced by contract manufacturers located outside the United States. We establish and maintain long-term relationships with key manufacturing partners, but generally do not maintain formal long-term manufacturing volume commitments. The use of contract manufacturers maximizes our flexibility and improves our product pricing.
We establish and maintain long-term relationships with key finished good manufacturing partners, but generally do not maintain formal long-term manufacturing volume commitments. The use of contract manufacturers for our finished goods maximizes our flexibility and improves our product pricing. We value legal, ethical and fair treatment of people involved in manufacturing our products.
COLUMBIA SPORTSWEAR COMPANY | 2022 FORM 10-K | 4 Table of Contents As of December 31, 2022, our employee workforce of approximately 9,450 employees consisted of approximately 5,040 full-time and part-time retail employees, 1,270 distribution center employees and 3,140 corporate and/or office employees.
As of December 31, 2023, our employee workforce of approximately 10,070 employees consisted of approximately 5,770 full-time and part-time retail employees, 1,150 distribution center employees and 3,150 corporate and/or office employees.
In 2022, our two largest Canada wholesale customers accounted for approximately 25% of Canada net sales, and were approximately 15% and 10% individually. As of December 31, 2022, we directly operated 11 retail stores.
In 2023, our four largest U.S. wholesale customers accounted for approximately 20% of U.S. net sales, and were less than 10% individually. As of December 31, 2023, we directly operated 161 retail stores and 34 temporary clearance locations.
These efforts, coupled with our drive for continuous improvement, represent key factors in the ongoing success of our products. MANUFACTURING AND SOURCING We seek to substantially limit our invested capital and avoid the costs and risks associated with large production facilities and the associated labor forces; therefore, we do not own, operate or manage manufacturing facilities.
MANUFACTURING AND SOURCING We seek to substantially limit our invested capital and avoid the costs and risks associated with large production facilities and the associated labor forces; therefore, we do not own, operate or manage manufacturing facilities. The majority of our finished goods are produced by contract manufacturers located outside the United States.
Our Columbia brand offers authentic, high-value outdoor apparel, footwear, accessories and equipment products suited for hiking, trail running, snow, and fishing and hunting activities, as well as everyday outdoor activities. SOREL® | Acquired in 2000, our SOREL brand's mission is to challenge the status quo by creating unexpected footwear that pushes the boundaries of function-first fashion.
Our Columbia brand offers authentic, high-value outdoor apparel, footwear, accessories and equipment products suited for hiking, trail running, snow, and fishing and hunting activities, as well as everyday outdoor activities. SOREL® | Acquired in 2000, our SOREL brand has evolved from a men's utility boot brand into a contemporary lifestyle brand bringing style to the outdoors.
Kulok 57 Executive Vice President, Chief Supply Chain Officer Richelle T. Luther 54 Executive Vice President, Corporate Affairs and Chief Human Resources Officer Skip Potter 51 Executive Vice President, Chief Digital Information Officer Tim Sheerin 58 Senior Vice President, Global Wholesale Jim A.
Boyle 43 Executive Vice President, Columbia Brand President Peter J. Bragdon 61 Executive Vice President, Chief Administrative Officer and General Counsel Lisa A. Kulok 58 Executive Vice President, Chief Supply Chain Officer Richelle T. Luther 55 Executive Vice President, Corporate Affairs and Chief Human Resources Officer Skip Potter 53 Executive Vice President, Chief Digital Information Officer Jim A.
Five of the largest contract finished goods manufacturers account for approximately 65% of our footwear production, with the largest manufacturer accounting for approximately 20% and two manufacturers accounting for approximately 15% each. Raw materials for the finished goods manufacturing of our apparel, accessories, equipment, and footwear products are primarily sourced from Asia and are purchased directly by our contract manufacturers.
Five of the largest contract finished goods manufacturers account for approximately 75% of our footwear production, with the two largest manufacturers accounting for approximately 20% each and three manufacturers accounting for approximately 15%, 10% and 10% individually.
Our prAna brand offers apparel, accessories and equipment products for trail, climbing, studio and water based activities. Across our diverse portfolio of brands, our products have gained recognition for their innovation, quality, value, and performance. Our products incorporate the cumulative design, fabrication, fit, and construction technologies that we have pioneered over several decades and continue to innovate.
Our products incorporate the cumulative design, fabrication, fit, and construction technologies that we have pioneered over several decades and continue to innovate. Our apparel, accessories and equipment products are designed to be used for all seasons, activities and locations.
COLUMBIA SPORTSWEAR COMPANY | 2022 FORM 10-K | 3 Table of Contents We distribute the majority of Canada products from a distribution center that we own and operate in the province of Ontario in Canada. See Part II, Item 7 and Item 8 in this Annual Report on Form 10-K for further discussion regarding our reportable segments.
See Part II, Item 7 and Item 8 in this Annual Report on Form 10-K for further discussion regarding our reportable segments. INTELLECTUAL PROPERTY Our trademarks create a market for our products, identify our company and differentiate our products from competitors' products.
We distribute the majority of EMEA products from a distribution center that we own and operate in France for our Europe-direct business. The vast majority of our products sold to EMEA distributors are shipped directly to the distributors from the contract manufacturers from which we source our products.
We distribute the majority of EMEA products from a distribution center that we own and operate in France for our Europe-direct business, as well as through third-party logistics companies that operate facilities located near receiving ports.
As part of these efforts, we strive to offer a competitive compensation and benefits program and promote employee well-being.
COLUMBIA SPORTSWEAR COMPANY | 2023 FORM 10-K | 4 Table of Contents HUMAN CAPITAL We believe that attracting and retaining talent strengthens our enterprise. As part of these efforts, we strive to offer a competitive compensation and benefits program and promote employee well-being.
The content on any website referred to in this Annual Report on Form 10-K is not incorporated by reference in this annual report unless expressly noted. COLUMBIA SPORTSWEAR COMPANY | 2022 FORM 10-K | 5 Table of Contents INFORMATION ABOUT OUR EXECUTIVE OFFICERS The following table sets forth information about our executive officers.
The content contained on or accessible through any website referred to in this Annual Report on Form 10-K, including those mentioned above, is not incorporated by reference in this annual report unless expressly noted.
All information is as of the date of the filing of this report. Name Age Position Timothy P. Boyle 73 Chairman, President and Chief Executive Officer Joseph P. Boyle 42 Executive Vice President, Columbia Brand President Peter J. Bragdon 60 Executive Vice President, Chief Administrative Officer and General Counsel Lisa A.
COLUMBIA SPORTSWEAR COMPANY | 2023 FORM 10-K | 5 Table of Contents INFORMATION ABOUT OUR EXECUTIVE OFFICERS The following table sets forth information about our executive officers. All information is as of the date of the filing of this report. Name Age Position Timothy P. Boyle 74 Chairman, President and Chief Executive Officer Joseph P.
Removed
Our SOREL brand offers functional and fashionable footwear suited for all seasons. Mountain Hard Wear® | Acquired in 2003, our Mountain Hardwear brand's mission is to create performance apparel and equipment to empower outdoor athletes to live boldly.
Added
Our SOREL brand leverages its rich heritage, innovation and style to offer distinct, compelling, and unexpected footwear to consumers around the world. Mountain Hard Wear® | Acquired in 2003, our Mountain Hardwear brand's mission is to encourage and equip people to seek a wilder path in life.
Removed
Our Mountain Hardwear brand offers premium apparel, accessories and equipment products designed to meet the high-performance needs of mountaineering, climbing, skiing and snowboarding, trail, and camp enthusiasts. prAna® | Acquired in 2014, our prAna brand's mission is to inspire the pursuit of wellness to create a healthier body, mind and planet.
Added
With over 30 years of wild wisdom, our Mountain Hardwear brand continues to design essential, premium apparel, accessories and equipment products for climbers, mountaineers, skiers, snowboarders, and trail athletes. prAna® | Acquired in 2014, our prAna brand's mission is to inspire an intentional, authentic life.
Removed
Our integrated marketing efforts deliver consistent messages about the performance benefits, features and styles of our products within each of our brands and their target consumers.
Added
Energized by the culture of yoga and climbing, our prAna brand offers apparel, accessories and equipment products for consumers defining their own kind of movement. Across our diverse portfolio of brands, our products have gained recognition for their innovation, quality, value, and performance.
Removed
In addition, we earn revenue through licensing certain of our trademarks across a range of apparel, accessories, equipment, footwear, and home products. U.S. U.S. is our largest segment and provides apparel, accessories and equipment products through our Columbia, Mountain Hardwear, and prAna brands and footwear products through our Columbia and SOREL brands.
Added
Raw materials for the finished goods manufacturing of our apparel, accessories, equipment, and footwear products are primarily sourced from Asia and are purchased directly by our contract manufacturers. In addition, our trademark licensees directly contract for the manufacture of their products. MARKETING Our portfolio of brands enables us to target a wide range of consumers with differentiated products.
Removed
INTELLECTUAL PROPERTY Our trademarks create a market for our products, identify our company and differentiate our products from competitors' products.
Added
The vast majority of our products sold to EMEA distributors are shipped directly to the distributors from the contract manufacturers from which we source our products. CANADA Canada provides apparel, accessories and equipment products through our Columbia, Mountain Hardwear and prAna brands and footwear products through our Columbia and SOREL brands.
Added
COLUMBIA SPORTSWEAR COMPANY | 2023 FORM 10-K | 3 Table of Contents We distribute the majority of Canada products from a distribution center that we own and operate in the province of Ontario in Canada, as well as through third-party logistics companies that operate facilities located near receiving ports.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

54 edited+7 added−8 removed115 unchanged
Biggest changeIn 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.
Biggest changeAs 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.
If we and/or our cloud-based solution providers are not successful in preventing or effectively responding to outages and cyberattacks, our financial condition, results of operations and cash flow could be materially and adversely affected.
If we and/or our cloud-based solution providers are not successful in preventing or effectively responding to outages or cyberattacks, our financial condition, results of operations and cash flow could be materially and adversely affected.
Should certain of these events occur in Vietnam or China, they could cause a substantial disruption to our business and have a material adverse effect on our financial condition, results of operations and cash flows.
Should certain of these events occur in Vietnam or China, they could cause a substantial disruption to our business and have a material adverse effect on our financial condition, results of operations or cash flows.
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.
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 customers 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.
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.
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 experienced this with the new privacy laws in China. Limitations on the use of data may also impact our future business strategies.
The foregoing includes potential impacts to our business as a result of the International Longshore and Warehouse Union negotiations. Labor matters may have a material adverse effect on our 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.
The foregoing includes potential impacts to our business as a result of the International Longshore and Warehouse Union and Teamsters negotiations. Labor matters may have a material adverse effect on our 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.
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.
These constraints, conflicts 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.
Additionally, we place orders for our products with our contract manufacturers in advance of the related selling season and, as a result, are vulnerable to changes in consumer and/or customer demand for our products. Therefore, we must accurately forecast consumer and/or customer demand for our products well in advance of the selling season.
We place orders for our products with our contract manufacturers in advance of the related selling season and, as a result, are vulnerable to changes in consumer and/or customer demand for our products. Therefore, we must accurately forecast consumer and/or customer demand for our products well in advance of the selling season.
These risks include, but are not limited to, the burden of complying with, and unexpected changes to, foreign and domestic laws and regulations, such as anti-corruption and forced labor regulations and sanctions regimes, climate-change regulations, the effects of fiscal and political crises and political and economic disputes, changes in diverse consumer preferences, foreign currency exchange rate fluctuations, managing a diverse and widespread workforce, political unrest, terrorist acts, military operations, disruptions or delays in shipments, disease outbreaks, natural disasters, and changes in economic conditions in countries in which we contract to manufacture, source raw materials or sell products.
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, sustainability regulations, the effects of fiscal and political crises and political and economic disputes, changes in diverse consumer preferences, foreign currency exchange rate fluctuations, managing a diverse and widespread workforce, political unrest, terrorist acts, military operations, disruptions or delays in shipments, disease outbreaks, natural disasters, and changes in economic conditions in countries in which we contract to manufacture, source raw materials or sell products.
Certain Shareholders Have Substantial Control Over Us and Are Able to Influence Corporate Matters. As of December 31, 2022, three related shareholders, Timothy P. Boyle, Joseph P. Boyle, and Molly E. Boyle, controlled just under 50% of our common stock outstanding. As a result, if acting together, Timothy P. Boyle, Joseph P. Boyle, and Molly E.
Certain Shareholders Have Substantial Control Over Us and Are Able to Influence Corporate Matters. As of December 31, 2023, three related shareholders, Timothy P. Boyle, Joseph P. Boyle, and Molly E. Boyle, controlled just under 50% of our common stock outstanding. As a result, if acting together, Timothy P. Boyle, Joseph P. Boyle, and Molly E.
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.
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 of such preferences in a timely manner.
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 are located, unemployment levels within those markets, absenteeism, prevailing wage rates, changing demographics, parental responsibilities, health and other insurance costs, adoption of new or revised employment and labor laws and regulations, and fear of contracting COVID-19.
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 are located, unemployment levels within those markets, absenteeism, prevailing wage rates, changing demographics, parental responsibilities, health and other insurance costs, and adoption of new or revised employment and labor laws and regulations.
Our failure to 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 owned outlet stores or third-party liquidation channels and could have a material adverse effect on our brand image and gross margin.
Our failure to 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 outlet stores, temporary clearance locations, or third-party liquidation channels and could have a material adverse effect on our brand image and gross margin.
If there are supply disruptions or 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.
If there are supply disruptions or price increases for raw materials we use in our products 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.
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.
This is particularly the case 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.
Our ability to sell products in certain markets, demand for our products in certain markets, our ability to collect accounts receivable, our contract manufacturers' ability to procure raw materials or manufacture products, distribution and logistics 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 be impacted by these events should they occur and laws and regulations.
Our ability to sell products in certain markets, demand for our products in certain markets, our ability to collect accounts receivable, our contract manufacturers' ability to procure raw materials or manufacture products, distribution and logistics 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 be impacted by these events should they occur and laws and regulations that are enacted in response to such events.
Any breaches of our or our third-parties’ systems could expose us, our customers, our 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.
Any breaches of our or our third-parties’ systems could expose us, our customers, our consumers, our suppliers, our employees, or other individuals 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.
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.
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 or having optimal inventory assortments for our DTC channels resulting in lost sales, negatively affect our wholesale customer and consumer relationships, result in increased costs to expedite production and delivery, or diminish our ability to build brand loyalty.
We 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.
We also may issue our capital stock or securities convertible into our capital stock from time to time in connection with a financing, acquisition, investment, or otherwise. Any such issuance could result in substantial dilution to our existing shareholders and cause the market price of our common stock to decline. ITEM 1B. UNRESOLVED STAFF COMMENTS None.
COLUMBIA SPORTSWEAR COMPANY | 2022 FORM 10-K | 8 Table of Contents 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.
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.
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 COLUMBIA SPORTSWEAR COMPANY | 2022 FORM 10-K | 12 Table of Contents wholesale customers or in other financial penalties.
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.
COLUMBIA SPORTSWEAR COMPANY | 2022 FORM 10-K | 13 Table of Contents 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, 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.
Boyle are able to exercise significant influence over all matters requiring shareholder approval. These holdings could be significantly diminished (and with them the related effective control percentage) to satisfy any applicable estate or unrealized gains tax obligations of holders.
Boyle are able to exercise COLUMBIA SPORTSWEAR COMPANY | 2023 FORM 10-K | 16 Table of Contents significant influence over all matters requiring shareholder approval. These holdings could be significantly diminished (and with them the related effective control percentage) to satisfy any applicable estate or unrealized gains tax obligations of the holders.
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.
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 COLUMBIA SPORTSWEAR COMPANY | 2023 FORM 10-K | 12 Table of Contents expenses. Most of our products carry limited warranties for defects in quality and workmanship.
In addition, obtaining real estate and effectively renewing real estate leases for our DTC brick and mortar operations is subject to the real estate market and we may not be able to secure adequate new locations or successfully renew leases for existing locations.
In addition, obtaining real estate and effectively COLUMBIA SPORTSWEAR COMPANY | 2023 FORM 10-K | 10 Table of Contents renewing real estate leases for our DTC brick and mortar operations is subject to the real estate market and we may not be able to secure adequate new locations or successfully renew leases for existing locations.
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.
The magnitude of climate change and whether resulting weather patterns continue to 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.
COLUMBIA SPORTSWEAR COMPANY | 2022 FORM 10-K | 11 Table of Contents 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 or liabilities.
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 or liabilities.
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.
Contract manufacturers may need to use sub-contracted manufacturers to fulfill our orders, which could result in compromised quality of our products.
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.
If a contract manufacturer fails to ship orders in a timely manner, we could experience supply disruptions that result in missed delivery deadlines, which may cause our customers to cancel their orders, refuse to accept deliveries or demand a reduction in purchase price or cause us to incur additional freight costs. Reliance on contract manufacturers also creates quality control risks.
COLUMBIA SPORTSWEAR COMPANY | 2022 FORM 10-K | 14 Table of Contents 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.
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.
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.
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.
Our strategic priorities also generally involve increased expenditures, which could 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. This could result in a decision to delay, modify, or terminate certain initiatives related to our strategic priorities.
Our strategic priorities also generally involve increased expenditures, which could 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 (as is currently occurring).
In each of our geographic markets, we face significant competition from global and 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.
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.
Transitioning to these new or upgraded processes and systems requires significant capital investments and personnel resources. Implementation is also highly dependent on the coordination of numerous employees, contractors and software and system providers.
We regularly implement business process improvement and information technology initiatives intended to optimize our operational and financial performance. Transitioning to these new or upgraded processes and systems requires significant capital investments and personnel resources. Implementation is also highly dependent on the coordination of numerous employees, contractors and software and system providers.
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. COLUMBIA SPORTSWEAR COMPANY | 2022 FORM 10-K | 16 Table of Contents RISKS RELATED TO OUR SECURITIES Our Common Stock Price May Be Volatile.
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. RISKS RELATED TO OUR SECURITIES Our Common Stock Price May Be Volatile. Our common stock is traded on the NASDAQ Global Select Market.
COLUMBIA SPORTSWEAR COMPANY | 2022 FORM 10-K | 15 Table of Contents 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.
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 (as has recently occurred with the prAna brand).
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.
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.
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.
Trade and Cooperation Agreement, to govern aspects of the relationship of the E.U. and U.K. following Brexit. As a result of no longer having "free circulation" between the U.K. and COLUMBIA SPORTSWEAR COMPANY | 2023 FORM 10-K | 13 Table of Contents the E.U., we have incurred and will continue to incur additional duties.
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. Extreme Weather Conditions, Climate Change, and Natural Disasters Could Negatively Impact Our Operating Results and Financial Condition.
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.
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.
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, COLUMBIA SPORTSWEAR COMPANY | 2023 FORM 10-K | 11 Table of Contents investigations or litigation.
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.
While a majority of our own operations are not subject to organized labor agreements, certain of our operations in Europe include 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 the risk thereof) at contract manufacturers where our goods are produced, shipping ports, transportation carriers, retail stores, 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 disruptions.
Matters that may affect our workforce at contract manufacturers where our goods are produced, shipping ports, transportation carriers, retail stores, or distribution centers create risks for our business, particularly if these COLUMBIA SPORTSWEAR COMPANY | 2023 FORM 10-K | 14 Table of Contents matters result in work shut-downs (with little to no notice), slowdowns, lockouts, strikes, or other disruptions.
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. We regularly implement business process improvement and information technology initiatives intended to optimize our operational and financial performance.
This could result in a decision to delay, modify, or terminate certain initiatives related to our strategic priorities. 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.
Fluctuations in Inflation and Currency Exchange Rates Could Result in Lower Revenues, Higher Costs and/or Decreased Margins and Earnings.
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.
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 COLUMBIA SPORTSWEAR COMPANY | 2022 FORM 10-K | 7 Table of Contents 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.
Shifts in consumer purchasing patterns 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.
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.
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.
Without long-term commitments, there is no assurance that COLUMBIA SPORTSWEAR COMPANY | 2023 FORM 10-K | 8 Table of Contents 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.
Extreme weather conditions in the areas in which our retail stores, suppliers, consumers, customers, distribution centers, headquarters and vendors are located could adversely affect our operating results and financial condition.
COLUMBIA SPORTSWEAR COMPANY | 2023 FORM 10-K | 15 Table of Contents Extreme Weather Conditions, Climate Change, and Natural Disasters Could Negatively Impact Our Operating Results and Financial Condition. Extreme weather conditions in the areas in which our retail stores, suppliers, consumers, customers, distribution centers, headquarters and vendors are located could adversely affect our operating results and financial condition.
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.
Furthermore, 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.
(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”).
(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.
In addition, we are experiencing and may continue to experience additional costs relating to the storage of excess inventory.
In addition, we have experienced and may continue to experience additional costs and margin pressure relating to the storage and processing of excess inventory, including through our outlet stores and temporary clearance locations.
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").
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.
COLUMBIA SPORTSWEAR COMPANY | 2022 FORM 10-K | 9 Table of Contents 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.
In addition, the ability to move products over larger geographical distances could be negatively affected by ocean, air and trucking cargo capacity constraints or labor disruptions, or such constraints or disruptions at ports or borders, or geopolitical conflicts (such as is occurring currently in the Red Sea).
In addition, contract manufacturers may fail to perform as expected.
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.
Removed
We also experience direct competition in our DTC business from retailers that are our wholesale customers.
Added
In each of our geographic markets, we face significant competition from global and regional branded apparel, footwear, accessories, and equipment companies. More recently this competition has extended to emerging brands that may not be viewed as outdoor brands but are participating in the outdoor apparel industry.
Removed
We have implemented key strategic initiatives designed to improve the efficiency of our supply chain, such as spreading out the production of our products over time, which may lead to the build-up of inventory well in advance of the selling seasons for such products.
Added
We also extend credit to our wholesale customers based on an assessment of the wholesale COLUMBIA SPORTSWEAR COMPANY | 2023 FORM 10-K | 7 Table of Contents customer's financial condition, generally without requiring collateral.
Removed
Since many of the costs of our DTC COLUMBIA SPORTSWEAR COMPANY | 2022 FORM 10-K | 10 Table of Contents 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.
Added
COLUMBIA SPORTSWEAR COMPANY | 2023 FORM 10-K | 9 Table of Contents We receive our products from third-party logistics providers at our owned distribution centers in the United States, Canada and France.
Removed
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").
Added
The OECD Pillar 2 global minimum tax rules, which generally provide for a minimum effective tax rate of 15%, are intended to apply for tax years beginning in 2024. On February 2, 2023, the OECD issued administrative guidance providing transition and safe harbor rules around the implementation of the Pillar 2 global minimum tax.
Removed
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 respect to 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 provisional estimates.
Added
Under a transitional safe harbor released July 17, 2023, the undertaxed profits rule top-up tax in the jurisdiction of a company's ultimate parent entity will be zero for each fiscal year of the transition period if that jurisdiction has a corporate tax rate of at least 20%.
Removed
In addition, proposals to 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.
Added
The safe harbor transition period will apply to fiscal years beginning on or before December 31, 2025 and ending before December 31, 2026. We are closely monitoring developments and evaluating the impact these new rules are anticipated to have on our tax rate, including eligibility to qualify for these safe harbor rules.
Removed
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 effective tax rate, income tax expense and cash flows.
Added
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.
Removed
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.

Item 2. Properties

Properties — owned and leased real estate

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Biggest change(2) A portion of the SOREL Headquarters is leased and the remainder is owned by the Company. In addition, as of December 31, 2022, we directly operated approximately 450 retail stores, the vast majority of which are leased under a variety of arrangements, including long-term, short-term, and variable-payment leases.
Biggest changeIn addition, as of December 31, 2023, we directly operated approximately 450 reta il stores and 34 temporary clearance locations. The vast majority of our retail stores are leased under a variety of arrangements, including long-term, short-term, and variable-payment leases. Our temporary clearance locations are leased on a short-term basis.
We also have several leases globally for office space, warehouse facilities, storage space, vehicles, and equipment, among other things. Refer to Note 9 in Part II, Item 8 of this Annual Report on Form 10-K for further lease-related disclosures.
We also have several leases globally for showrooms, office space, warehouse facilities, storage space, vehicles, and equipment, among other things. Refer to Note 9 in Part II, Item 8 of this Annual Report on Form 10-K for further lease-related disclosures.
ITEM 2. PROPERTIES The following is a summary of principal properties owned or leased by us. Location Use Ownership Portland, Oregon Corporate Headquarters (1) Owned Portland, Oregon SOREL Headquarters Leased/Owned (2) Carlsbad, California prAna Headquarters Leased Richmond, California Mountain Hardwear Headquarters Leased Portland, Oregon U.S. Distribution Center Owned Robards, Kentucky U.S.
ITEM 2. PROPERTIES The following is a summary of principal properties owned or leased by us. Location Use Ownership Portland, Oregon Corporate Headquarters (1) Owned Carlsbad, California prAna Headquarters Leased Richmond, California Mountain Hardwear Headquarters Leased Portland, Oregon U.S. Distribution Center Owned Robards, Kentucky U.S.
Distribution Center Owned London, Ontario Canadian Operation and Distribution Center Owned Geneva, Switzerland Europe Headquarters Leased Strasbourg, France Europe Administrative Operation Owned Cambrai, France Europe Distribution Center Owned Shanghai, China LAAP China Headquarters Leased Tokyo, Japan LAAP Japan Headquarters Leased Seoul, Korea LAAP Korea Headquarters Leased (1) Corporate Headquarters is an approximate 30-acre site consisting of over 10 buildings, which includes the Columbia brand headquarters and centrally-managed departmental functions, including consumer digital technology, certain supply chain functions, finance, human resources and legal.
Distribution Center Owned London, Ontario Canadian Operations and Distribution Center Owned Geneva, Switzerland Europe Headquarters Leased Strasbourg, France Europe Administrative Operations Owned Cambrai, France Europe Distribution Center Owned Shanghai, China China Headquarters Leased Tokyo, Japan Japan Headquarters Leased Seoul, Korea Korea Headquarters Leased (1) Corporate Headquarters is an approximate 30-acre site consisting of over 10 buildings, which includes the Columbia and SOREL brands' headquarters and centrally-managed departmental functions, including consumer digital technology, certain supply chain functions, finance, human resources and legal.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeCOLUMBIA SPORTSWEAR COMPANY | 2022 FORM 10-K | 19 Table of Contents Total Return Analysis Year Ended December 31, 2017 2018 2019 2020 2021 2022 Columbia Sportswear Company $ 100.00 $ 118.22 $ 142.28 $ 124.53 $ 140.26 $ 127.95 Russell 1000 Index $ 100.00 $ 95.22 $ 125.14 $ 151.37 $ 191.42 $ 154.80 Russell 1000 Clothing and Accessories Index $ 100.00 $ 102.79 $ 140.93 $ 175.76 $ 194.82 $ 135.97 ISSUER PURCHASES OF EQUITY SECURITIES Since the inception of our share repurchase program in 2004 through December 31, 2022, our Board of Directors has authorized the repurchase of $2.0 billion of our common stock.
Biggest changeCOLUMBIA SPORTSWEAR COMPANY | 2023 FORM 10-K | 19 Table of Contents Total Return Analysis Year Ended December 31, 2018 2019 2020 2021 2022 2023 Columbia Sportswear Company $ 100.00 $ 120.35 $ 105.34 $ 118.64 $ 108.23 $ 99.79 Russell 1000 Index $ 100.00 $ 131.43 $ 158.98 $ 201.03 $ 162.58 $ 205.72 Russell 1000 Clothing and Accessories Index $ 100.00 $ 134.10 $ 144.76 $ 160.46 $ 111.99 $ 143.67 PURCHASES OF EQUITY SECURITIES BY THE ISSUER Since the inception of our share repurchase program in 2004 through December 31, 2023, our Board of Directors has authorized the repurchase of $2.0 billion of our common stock, excluding excise tax.
PERFORMANCE GRAPH The line graph below compares the cumulative total shareholder return of our common stock with the cumulative total return of the Russell 1000 Index and Russell 1000 Clothing and Accessories Index for the period beginning December 31, 2017 and ending December 31, 2022.
PERFORMANCE GRAPH The line graph below compares the cumulative total shareholder return of our common stock with the cumulative total return of the Russell 1000 Index and Russell 1000 Clothing and Accessories Index for the period beginning December 31, 2018 and ending December 31, 2023.
HOLDERS As of February 10, 2023, we had 252 shareholders of record, although we have a much larger number of beneficial owners, whose shares of record are held by banks, brokers and other financial institutions.
HOLDERS As of February 9, 2024, we had 247 shareholders of record, although we have a much larger number of beneficial owners, whose shares of record are held by banks, brokers and other financial institutions.
Our Board of Directors approved a regular quarterly cash dividend of $0.30 per share, payable on March 21, 2023 to shareholders of record on March 10, 2023.
Our Board of Directors approved a regular quarterly cash dividend of $0.30 per share, payable on March 22, 2024 to shareholders of record on March 8, 2024.
The graph and table below assume that $100 was invested on December 31, 2017, and that any dividends were reinvested. Historical stock price performance should not be relied on as indicative of future stock price performance. (1) The FTSE Russell, which manages various indexes, completed a multi-year consultation and enhancement process for Russell US Indexes.
The graph and table below assume that $100 was invested on December 31, 2018, and that any dividends were reinvested. Historical stock price performance should not be relied on as indicative of future stock price performance.
Under this program as of December 31, 2022, we had repurchased 31.7 million shares at an aggregate purchase price of $1,470.6 million , and had $529.4 million remaining available. The Company did not repurchase common stock during the quarter ended December 31, 2022. ITEM 6. [Reserved] Not applicable.
Under this program as of December 31, 2023, we had repurchased 34.1 million shares at an aggregate purchase price of $1,654.7 million, and had $345.3 million remaining available, excluding excise tax.
Removed
This resulted in the Russell 1000 Textile Apparel and Shoe Index to be classified as the Russell 1000 Clothing and Accessories Index.
Added
The following is a summary of our common stock repurchases, excluding excise tax, during the quarter ended December 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) October 1, 2023 through October 31, 2023 200,706 $ 72.04 200,706 $ 370.3 November 1, 2023 through November 30, 2023 335,411 $ 74.32 335,411 $ 345.3 December 1, 2023 through December 31, 2023 — $ — — $ — Total 536,117 $ 73.47 536,117 $ 345.3 ITEM 6. [Reserved] Not applicable.

Item 6. [Reserved]

Selected Financial Data — reserved (removed by SEC in 2021)

3 edited+0 added−0 removed1 unchanged
Biggest changeChanges in and Disagreements with Accountants on Accounting and Financial Disclosure 70 Item 9A. Controls and Procedures 70 Item 9B. Other Information 70 PART III Item 10. Directors, Executive Officers and Corporate Governance 71 Item 11. Executive Compensation 71 Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters 71 Item 13.
Biggest changeChanges in and Disagreements with Accountants on Accounting and Financial Disclosure 70 Item 9A. Controls and Procedures 70 Item 9B. Other Information 70 Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections 71 PART III Item 10. Directors, Executive Officers and Corporate Governance 72 Item 11. Executive Compensation 72 Item 12.
Financial Statements and Supplementary Data 33 Report of Independent Registered Public Accounting Firm (PCAOB 34) 34 Consolidated Balance Sheets 38 Consolidated Statements of Operations 39 Consolidated Statements of Comprehensive Income 40 Consolidated Statements of Cash Flows 41 Consolidated Statements of Equity 42 Notes to Consolidated Financial Statements 43 Item 9.
Financial Statements and Supplementary Data 34 Report of Independent Registered Public Accounting Firm (PCAOB 34) 35 Consolidated Balance Sheets 38 Consolidated Statements of Operations 39 Consolidated Statements of Comprehensive Income 40 Consolidated Statements of Cash Flows 41 Consolidated Statements of Equity 42 Notes to Consolidated Financial Statements 43 Item 9.
Certain Relationships and Related Transactions, and Director Independence 71
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters 72 Item 13. Certain Relationships and Related Transactions, and Director Independence 73

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeCOLUMBIA SPORTSWEAR COMPANY | 2022 FORM 10-K | 22 Table of Contents Results of Operations — Consolidated The following table presents the items in our Consolidated Statements of Operations, both in dollars and as a percentage of net sales: Year Ended December 31, (in millions, except for percentage of net sales and per share amounts) 2022 2021 Net sales $ 3,464.2 100.0 % $ 3,126.4 100.0 % Cost of sales 1,753.1 50.6 1,513.9 48.4 Gross profit 1,711.1 49.4 1,612.5 51.6 Selling, general and administrative expenses 1,304.4 37.7 1,180.3 37.8 Impairment of goodwill and intangible assets 35.6 1.1 — — Net licensing income 22.0 0.7 18.3 0.6 Operating income 393.1 11.3 450.5 14.4 Interest income, net 2.7 0.1 1.4 — Other non-operating income (expense), net 1.6 0.1 (0.4) — Income before income tax 397.4 11.5 451.5 14.4 Income tax expense (86.0) (2.5) (97.4) (3.1) Net income $ 311.4 9.0 % $ 354.1 11.3 % Diluted earnings per share $ 4.95 $ 5.33 Year Ended December 31, 2022 Compared to Year Ended December 31, 2021 Net Sales.
Biggest changeCOLUMBIA SPORTSWEAR COMPANY | 2023 FORM 10-K | 22 Table of Contents Results of Operations — Consolidated The following table presents the items in our Consolidated Statements of Operations, both in dollars and as a percentage of net sales: Year Ended December 31, (in millions, except for percentage of net sales and per share amounts) 2023 2022 Net sales $ 3,487.2 100.0 % $ 3,464.2 100.0 % Cost of sales 1,757.3 50.4 % 1,753.1 50.6 % Gross profit 1,729.9 49.6 % 1,711.1 49.4 % Selling, general and administrative expenses 1,416.3 40.6 % 1,304.4 37.7 % Impairment of goodwill and intangible assets 25.0 0.7 % 35.6 1.1 % Net licensing income 21.7 0.6 % 22.0 0.7 % Operating income 310.3 8.9 % 393.1 11.3 % Interest income, net 13.7 0.4 % 2.7 0.1 % Other non-operating income, net 2.2 0.1 % 1.6 0.1 % Income before income tax 326.2 9.4 % 397.4 11.5 % Income tax expense 74.8 2.1 % 86.0 2.5 % Net income $ 251.4 7.3 % $ 311.4 9.0 % Diluted earnings per share $ 4.09 $ 4.95 COLUMBIA SPORTSWEAR COMPANY | 2023 FORM 10-K | 23 Table of Contents Year Ended December 31, 2023 Compared to Year Ended December 31, 2022 Net Sales.
For the year ended December 31, 2022, our effective income tax rate was primarily impacted by a non-recurring benefit related to the finalization of U.S. and foreign tax audits, a non-recurring benefit related to a decrease in accrued foreign withholding taxes and a non-recurring benefit related to a foreign currency loss resulting from an intercompany transaction.
For the year ended December 31, 2022, our effective income tax rate was primarily impacted by a non-recurring benefit related to the finalization of the U.S. and foreign tax audits, a non-recurring benefit related to a decrease in accrued foreign withholding taxes and a non-recurring benefit related to a foreign currency loss resulting from an intercompany transaction.
Changes in tax law or our interpretation of tax laws and the resolution of current and future tax audits could significantly affect the amounts provided for Income tax expense in our Consolidated Statements of Operations.
Changes in tax law or our interpretation of tax laws and the resolution of current and future tax audits could significantly affect the amounts provided for Income tax expense in our Consolidated Statements of Operations.
Dependent upon market conditions and our strategic priorities, our capital allocation approach includes: • investing in organic growth opportunities to drive long-term profitable growth; • returning at least 40% of free cash flow to shareholders through dividends and share repurchases; and • considering opportunistic mergers and acquisitions. Free cash flow is a non-GAAP financial measure.
Dependent upon our financial position, market conditions and our strategic priorities, our capital allocation approach includes: • investing in organic growth opportunities to drive long-term profitable growth; • returning at least 40% of free cash flow to shareholders through dividends and share repurchases; and • considering opportunistic mergers and acquisitions. Free cash flow is a non-GAAP financial measure.
(2) Refer to Income Taxes in Note 10 in Part II, Item 8 of this Annual Report on Form 10-K. CRITICAL ACCOUNTING POLICIES AND ESTIMATES Management's discussion and analysis of our financial condition and results of operations are based on our consolidated financial statements, which have been prepared in accordance with GAAP.
(2) Refer to Income Taxes in Note 10 in Part II, Item 8 of this Annual Report on Form 10-K. CRITICAL ACCOUNTING ESTIMATES Management's discussion and analysis of our financial condition and results of operations are based on our consolidated financial statements, which have been prepared in accordance with GAAP.
These estimates are based on 1) historical rates of product returns and claims; and 2) events and circumstances that indicate changes to such historical rates, such as our customers' net inventory positions and their anticipated sell-through rates. However, actual returns and claims in any future period are inherently uncertain and thus may differ from our estimates.
These estimates are based on 1) historical rates of product returns and claims; and 2) events and circumstances that indicate changes to such historical rates, such as our customers' inventory positions and their anticipated sell-through rates. However, actual returns and claims in any future period are inherently uncertain and thus may differ from our estimates.
We review and test our intangible assets with indefinite lives and goodwill for impairment in the fourth quarter of each year and when events or changes in circumstances indicate that it is more likely than not that the fair value of the asset or reporting unit is less than its carrying amount.
Indefinite-Lived Intangible Assets and Goodwill We review and test our intangible assets with indefinite lives and goodwill for impairment in the fourth quarter of each year and when events or changes in circumstances indicate that it is more likely than not that the fair value of the asset or reporting unit is less than its carrying amount.
Our impairment tests and related fair value estimates are based on a number of factors, including assumptions and estimates for projected sales, income, cash flows, discount rates, market-based multiples, and other operating performance measures. Changes in estimates or the application of alternative assumptions could produce significantly different results.
Our impairment tests and related fair value estimates are based on a number of factors, including assumptions and estimates for projected net sales, income, cash flows, discount rates, market-based multiples, and other operating performance measures. Changes in estimates or the application of alternative assumptions could produce significantly different results.
Domestic Credit Facility Refer to Note 7 in Part II, Item 8 of this Annual Report on Form 10-K for further information regarding the domestic credit facility. As of December 31, 2022, we had available an unsecured, committed revolving credit facility, which provides for borrowings up to $500.0 million.
Domestic Credit Facility Refer to Note 7 in Part II, Item 8 of this Annual Report on Form 10-K for further information regarding the domestic credit facility. As of December 31, 2023, we had available an unsecured, committed revolving credit facility, which provides for borrowings up to $500.0 million.
An impairment is recorded if the fair value of the retail location long‐lived asset is less than the carrying amount. During 2022 we tested certain long-lived assets consisting of property, plant, and equipment and lease ROU assets for impairment at certain underperforming retail locations.
An impairment is recorded if the fair value of the retail location long‐lived asset is less than the carrying amount. During 2023 we tested certain long-lived assets consisting of property, plant, and equipment and lease ROU assets for impairment at certain underperforming retail locations.
For the years ended December 31, 2022 and 2021, impairment charges from underperforming retail stores were not material. Further declines in projected future performance may adversely affect the recovery of retail locations assets.
For the years ended December 31, 2023 and 2022, impairment charges from underperforming retail stores were not material. Further declines in projected future performance may adversely affect the recovery of retail locations assets.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion and analysis of our financial condition and results of operations should be read in conjunction with "Special Note Regarding Forward-Looking Statements", Part I, Item 1 and Item 1A of this Annual Report on Form 10-K.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion and analysis of our financial condition and results of operations should be read in conjunction with "Special Note Regarding Forward-Looking Statements", Item 1, Item 1A, and Item 8 of this Annual Report on Form 10-K.
We were in compliance with all associated covenants and there was no balance outstanding under the facility. International Credit Facility As of December 31, 2022, our European subsidiary had available an unsecured, committed line of credit, which is guaranteed by the Company and provides for borrowings up to €4.4 million (approximately US$4.7 million).
We were in compliance with all associated covenants and there was no balance outstanding under the facility. International Credit Facility As of December 31, 2023, our European subsidiary had available an unsecured, committed line of credit, which is guaranteed by the Company and provides for borrowings up to €4.4 million (approximately US$4.9 million).
The most significant variable affecting these reserve balances is net sales levels. As a percentage of Net sales , the sales reserves balances were 3.3% as of December 31, 2022 compared to 3.2% as of December 31, 2021. The reserve for returns from customers or consumers is the most susceptible component of our sales related to reserves to estimation uncertainty.
The most significant variable affecting these reserve balances is sales levels. As a percentage of Net sales , the sales reserves balances were 3.0% as of December 31, 2023 compared to 3.3% as of December 31, 2022. The reserve for returns from customers or consumers is the component of our sales related reserves most susceptible to estimation uncertainty.
Impairment of Goodwill and Intangible Assets. For the year ended December 31, 2022, we recognized $35.6 million of impairment charges related to the prAna brand as a result of our annual fourth quarter impairment testing.
For the year ended December 31, 2022, we recognized $35.6 million of impairment charges related to the prAna brand as a result of our annual fourth quarter impairment testing.
When we give our customers the right to return products or provide other accommodations such as chargebacks and markdowns, we estimate the expected sales returns and miscellaneous claims from customers and record sales reserves to reduce Net sales. As of December 31, 2022, our sales-related reserves were $115.4 million compared to $99.0 million as of December 31, 2021.
When we give our customers the right to return products or provide other accommodations such as chargebacks and markdowns, we estimate the expected sales returns and miscellaneous claims from customers and record sales reserves to reduce Net sales. As of December 31, 2023, our sales-related reserves were $103.9 million compared to $115.4 million as of December 31, 2022.
We analyze specific customer accounts, including aged receivables, customer concentrations, credit insurance coverage, standby letters of credit, and other forms of collateral, current economic trends, and changes in customer payment terms. Our allowance for uncollectible accounts receivable decreased to $5.4 million as of December 31, 2022 compared to $8.9 million as of December 31, 2021.
We analyze specific customer accounts, including aged receivables, customer concentrations, credit insurance coverage, standby letters of credit, and other forms of collateral, current economic trends, and changes in customer payment terms. Our allowance for uncollectible accounts receivable increased to $5.5 million as of December 31, 2023 compared to $5.4 million as of December 31, 2022.
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.
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 more than 100 countries and operate in four geographic segments: U.S., LAAP, EMEA, and Canada.
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 2022, over 60% of our net sales and over 75% of our operating income were realized in the second half of the year.
Our products are marketed on a seasonal basis, and our sales are weighted substantially toward the third and fourth quarters, while our operating costs are more equally distributed throughout the year. In 2023, nearly 60% of our net sales and nearly 80% of our operating income were realized in the second half of the year.
Impairment of Long-Lived Assets, Intangible Assets and Goodwill Long-lived assets, which include property, plant and equipment, lease right-of-use ("ROU") assets, capitalized implementation costs for cloud computing arrangements, and intangible assets with finite lives are measured for impairment only when events or circumstances indicate the carrying value may not be recoverable.
Long-Lived Assets Long-lived assets, which include property, plant and equipment, lease right-of-use ("ROU") assets, capitalized implementation costs for cloud computing arrangements, and intangible assets with finite lives are measured for impairment only when events or circumstances indicate the carrying value may not be recoverable. Our retail fleet long‐lived assets are evaluated at the retail location level.
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.
COLUMBIA SPORTSWEAR COMPANY | 2023 FORM 10-K | 20 Table of Contents 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.
LIQUIDITY AND CAPITAL RESOURCES Including cash, cash equivalents, short-term investments and available committed credit lines, we had approximately $935 million in total liquidity as of December 31, 2022. Our liquidity may be affected by the general seasonal trends common to the industry.
LIQUIDITY AND CAPITAL RESOURCES Including cash, cash equivalents, short-term investments and available committed credit lines, we had approximately $1.25 billion in total liquidity as of December 31, 2023. Our liquidity may be affected by the general seasonal trends common to the industry.
Income tax expense and the related effective income tax rate are summarized in the following table: Year Ended December 31, (in millions, except for percentages) 2022 2021 Change Income tax expense $ (86.0) $ (97.4) $ (11.4) (12) % Effective income tax rate 21.6 % 21.6 % Our effective income tax rates for the years ended December 31, 2022 and 2021 were impacted by discrete tax items, which lowered the effective income tax rate in each period.
Income tax expense and the related effective income tax rate are summarized in the following table: Year Ended December 31, (in millions, except for percentages) 2023 2022 Change Income tax expense $ 74.8 $ 86.0 $ (11.2) (13) % Effective income tax rate 22.9 % 21.6 % Our effective income tax rates for the years ended December 31, 2023 and 2022 were impacted by discrete tax items, which lowered the effective income tax rate in each period.
In our 2022 impairment test, we determined that prAna goodwill was impaired and we recognized a $16.9 million impairment charge for the year ended December 31, 2022, reducing the carrying value of prAna's goodwill to $37.3 million.
In our 2023 impairment test, we determined that prAna goodwill was impaired and we recognized a $25.0 million impairment charge for the year ended December 31, 2023, reducing the carrying value of prAna's goodwill to $12.3 million.
The following table presents our estimated significant contractual commitments that will require use of funds: Year Ended December 31, (in millions) 2023 2024 2025 2026 2027 Thereafter Total Inventory purchase obligations $ 401.4 $ — $ — $ — $ — $ — $ 401.4 Operating lease obligations (1) 79.8 74.0 64.8 57.2 48.0 100.7 424.5 TCJA transition tax obligations (2) 7.7 10.6 13.3 — — — 31.6 (1) Refer to Operating Leases in Note 9 in Part II, Item 8 of this Annual Report on Form 10-K.
The following table presents our estimated significant contractual commitments that will require use of funds: Year Ended December 31, (in millions) 2024 2025 2026 2027 2028 Thereafter Total Inventory purchase obligations $ 343.4 $ — $ — $ — $ — $ — $ 343.4 Operating lease obligations (1) 86.6 81.9 74.3 63.1 55.0 106.3 467.2 TCJA transition tax obligations (2) 10.6 13.3 — — — — 23.9 (1) Refer to Operating Leases in Note 9 in Part II, Item 8 of this Annual Report on Form 10-K.
RECENT ACCOUNTING PRONOUNCEMENTS Refer to Note 2 in Part II, Item 8 of this Annual Report on Form 10-K. COLUMBIA SPORTSWEAR COMPANY | 2022 FORM 10-K | 31 Table of Contents
RECENT ACCOUNTING PRONOUNCEMENTS Refer to Note 2 in Part II, Item 8 of this Annual Report on Form 10-K.
There was no balance outstanding under the facility. Other Sources As of December 31, 2022, collectively, our international subsidiaries had unsecured, uncommitted lines of credit, credit facilities and overdraft facilities, providing for borrowings up to approximately US$106.1 million. There was no balance outstanding under these facilities.
There was no balance outstanding under the facility. COLUMBIA SPORTSWEAR COMPANY | 2023 FORM 10-K | 28 Table of Contents Other Sources As of December 31, 2023, collectively, our international subsidiaries had unsecured, uncommitted lines of credit, credit facilities and overdraft facilities, providing for borrowings up to approximately US$106.7 million. There was no balance outstanding under these facilities.
The preparation of these financial statements requires us to make various estimates and judgments that affect reported amounts of assets, liabilities, sales, cost of sales, and expenses and related disclosure of contingent assets and liabilities.
The preparation of these financial statements requires us to make various COLUMBIA SPORTSWEAR COMPANY | 2023 FORM 10-K | 29 Table of Contents estimates and judgments that affect reported amounts of assets, liabilities, sales, cost of sales, and expenses and related disclosure of contingent assets and liabilities.
COLUMBIA SPORTSWEAR COMPANY | 2022 FORM 10-K | 29 Table of Contents Allowance for Uncollectible Accounts Receivable We make ongoing estimates of the collectability of our accounts receivable and maintain an allowance for estimated credit losses resulting from the inability of our customers to make required payments.
Allowance for Uncollectible Accounts Receivable We make ongoing estimates of the collectability of our accounts receivable and maintain an allowance for estimated credit losses resulting from the inability of our customers to make required payments.
In addition, refer to Part II, Item 7 in our Annual Report on Form 10-K for the year ended December 31, 2021 for our discussion and analysis comparing financial condition and results of operations from 2021 to 2020. OVERVIEW We connect active people with their passions.
In addition, refer to 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.
Our retail fleet long‐lived assets are evaluated at the retail location level. Events that result in an impairment review of a retail location include plans to close a retail location or a significant decrease in the operating results of the retail location.
Events that result in an impairment review of a retail location include plans to close a retail location or a significant decrease in the operating results of the retail location.
Net cash used in financing activities was $360.8 million for 2022 compared to $210.9 million for 2021. For 2022, net cash used in financing activities primarily consisted of repurchases of common stock of $287.4 million and dividend payments to our shareholders of $75.1 million.
For 2023, net cash used in financing activities primarily consisted of repurchases of common stock of $184.0 million and dividend payments to our shareholders of $73.4 million. For 2022, net cash used in financing activities primarily consisted of repurchases of common stock of $287.4 million and dividend payments to our shareholders of $75.1 million.
Cash Flow Activities Cash flows are summarized in the following table: Year Ended December 31, (in millions) 2022 2021 Change Net cash provided by (used in): Operating activities $ (25.2) $ 354.4 $ (379.6) Investing activities 72.7 (163.8) 236.5 Financing activities (360.8) (210.9) (149.9) Net effect of exchange rate changes on cash (19.8) (7.0) (12.8) Net decrease in cash and cash equivalents $ (333.1) $ (27.3) $ (305.8) The change in cash flows used in operating activities was driven by a $388.1 million increase in cash used in changes in assets and liabilities, partially offset by a $8.5 million increase in cash provided by net income and non-cash adjustments.
COLUMBIA SPORTSWEAR COMPANY | 2023 FORM 10-K | 27 Table of Contents Cash Flow Activities Cash flows are summarized in the following table: Year Ended December 31, (in millions) 2023 2022 Change Net cash provided by (used in): Operating activities $ 636.3 $ (25.2) $ 661.5 Investing activities (461.8) 72.7 (534.5) Financing activities (254.8) (360.8) 106.0 Net effect of exchange rate changes on cash 0.4 (19.8) 20.2 Net decrease in cash and cash equivalents $ (79.9) $ (333.1) $ 253.2 The change in cash flows provided by operating activities was driven by a $713.5 million increase in cash provided by changes in assets and liabilities, partially offset by a $52.0 million decrease in cash provided by net income and non-cash adjustments.
Provisions are established when necessary in the period in which we make such a determination. As of December 31, 2022, our inventory provisions reduced gross inventory by $29.4 million compared to $19.9 million as of December 31, 2021.
Provisions are established when necessary in the period in which we make COLUMBIA SPORTSWEAR COMPANY | 2023 FORM 10-K | 30 Table of Contents such a determination. As of December 31, 2023, our inventory provisions reduced gross inventory by $23.3 million compared to $29.4 million as of December 31, 2022.
For 2022, net cash provided by investing activities consisted of $131.2 million in net sales and maturities of short-term investments, partially offset by $58.5 million in cash used for capital expenditures. For 2021, net cash used in investing activities consisted of $129.1 million in net purchases of short-term investments and $34.7 million for capital expenditures.
For 2022, net cash provided by investing activities consisted of $131.2 million in net sales and maturities of short-term investments partially offset by $58.5 million in cash used for capital expenditures. Net cash used in financing activities was $254.8 million for 2023 compared to $360.8 million for 2022.
In our 2022 impairment test, we determined that the prAna brand’s trademark was impaired and we recognized an $18.7 million impairment charge for the year ended December 31, 2022 reducing the carrying value to $51.8 million.
In 2022, we determined that the prAna brand’s trademark was impaired and we recognized an $18.7 million impairment charge for the year ended December 31, 2022. In the impairment test for goodwill, we compare the estimated fair value of the reporting unit with the carrying amount of that reporting unit.
COLUMBIA SPORTSWEAR COMPANY | 2022 FORM 10-K | 25 Table of Contents Operating income for each reportable segment and unallocated corporate expenses are summarized in the following table: Year Ended December 31, (in millions) 2022 2021 Change U.S. $ 519.8 $ 536.5 $ (16.7) LAAP 47.0 42.0 5.0 EMEA 80.2 65.5 14.7 Canada 53.0 52.7 0.3 Total segment operating income 700.0 696.7 3.3 Unallocated corporate expenses (306.9) (246.2) (60.7) Operating income $ 393.1 $ 450.5 $ (57.4) U.S.
Operating income for each reportable segment and unallocated corporate expenses are summarized in the following table: Year Ended December 31, (in millions) 2023 2022 Change U.S. $ 415.7 $ 519.8 $ (104.1) LAAP 61.8 47.0 14.8 EMEA 99.0 80.2 18.8 Canada 55.6 53.0 2.6 Total segment operating income 632.1 700.0 (67.9) Unallocated corporate expenses (321.8) (306.9) (14.9) Operating income $ 310.3 $ 393.1 $ (82.8) COLUMBIA SPORTSWEAR COMPANY | 2023 FORM 10-K | 26 Table of Contents U.S.
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 well-known brands: Columbia, SOREL, Mountain Hardwear, and prAna.
OVERVIEW As a global leader in designing, developing, marketing, and distributing outdoor, active and lifestyle products, our mission is to connect active people with their passions. We manage our product line in two major categories: apparel, accessories, and equipment products and footwear products. We provide our products through our four brands: Columbia, SOREL, Mountain Hardwear, and prAna.
Income Taxes We make assumptions, judgments and estimates to determine our current provision for income taxes, our deferred tax assets and liabilities and our uncertain tax positions.
COLUMBIA SPORTSWEAR COMPANY | 2023 FORM 10-K | 31 Table of Contents Income Taxes We make assumptions, judgments and estimates to determine our current provision for income taxes, our deferred tax assets and liabilities and our uncertain tax positions.
Year Ended December 31, 2022 Compared to Year Ended December 31, 2021 Net sales by geographic segment are summarized in the following table: Year Ended December 31, (in millions, except for percentage changes) Reported Net Sales 2022 Adjust for Foreign Currency Translation Constant-currency Net Sales 2022 (1) Reported Net Sales 2021 Reported Net Sales % Change Constant-currency Net Sales % Change (1) U.S. $ 2,302.2 $ — $ 2,302.2 $ 2,060.3 12% 12% LAAP 473.9 51.8 525.7 465.5 2% 13% EMEA 438.6 41.9 480.5 382.1 15% 26% Canada 249.5 11.3 260.8 218.5 14% 19% $ 3,464.2 $ 105.0 $ 3,569.2 $ 3,126.4 11% 14% (1) Constant-currency net sales is a non-GAAP financial measure.
Year Ended December 31, 2023 Compared to Year Ended December 31, 2022 Net sales by geographic segment are summarized in the following table: Year Ended December 31, (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. $ 2,241.4 $ — $ 2,241.4 $ 2,302.2 (3)% (3)% LAAP 519.8 22.0 541.8 473.9 10% 14% EMEA 469.2 (10.7) 458.5 438.6 7% 5% Canada 256.8 8.7 265.5 249.5 3% 6% $ 3,487.2 $ 20.0 $ 3,507.2 $ 3,464.2 1% 1% (1) Constant-currency net sales is a non-GAAP financial measure.
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.
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. Profit Improvement Program As part of our strategic priorities, we are implementing a multi-year profit improvement program to accelerate profitable growth and improve the efficiency of our operations.
LAAP LAAP operating income increased $5.0 million to $47.0 million, or 9.9% of net sales, in 2022 from $42.0 million, or 9.0% of net sales, in 2021. The increase was driven primarily by increased net sales. LAAP net sales increased $8.4 million, or 2% (13% constant-currency), in 2022, compared to 2021, primarily in our LAAP distributor business.
LAAP LAAP operating income increased $14.8 million to $61.8 million, or 11.9% of net sales, in 2023 from $47.0 million, or 9.9% of net sales, in 2022. The increase was driven primarily by increased net sales. LAAP net sales increased $45.9 million, or 10% (14% constant-currency), in 2023, compared to 2022.
RESULTS OF OPERATIONS The following discussion of our results of operations and liquidity and capital resources should be read in conjunction with Part II, Item 8 of this Annual Report on Form 10-K.
In addition, these PFAS matters may result in a more promotional environment in 2024 as retailers move through merchandise containing PFAS. RESULTS OF OPERATIONS The following discussion of our results of operations and liquidity and capital resources should be read in conjunction with Part II, Item 8 of this Annual Report on Form 10-K.
Canada net sales increased $31.0 million, or 14% (19% constant-currency), in 2022, compared to 2021, primarily driven by increased net sales in our Canada DTC and wholesale businesses. Canada SG&A expenses increased as a percentage of net sales to 25.0% in 2022, compared to 24.0% in 2021.
Canada net sales increased $7.3 million, or 3% (6% constant-currency), in 2023, compared to 2022, driven by increased net sales in our Canada DTC business. Canada SG&A expenses increased as a percentage of net sales to 25.9% in 2023, compared to 25.0% in 2022.
COLUMBIA SPORTSWEAR COMPANY | 2022 FORM 10-K | 28 Table of Contents Other cash commitments Our non-current Income taxes payable on the Consolidated Balance Sheet as of December 31, 2022 includes approximately $9.3 million of net unrecognized tax benefits. We are uncertain about whether or when these amounts may be settled.
Other cash commitments Our non-current Income taxes payable on the Consolidated Balance Sheet as of December 31, 2023 includes approximately $12.4 million of net unrecognized tax benefits. We are uncertain about whether or when these amounts may be settled. Refer to Note 10 in Part II, Item 8 of this Annual Report on Form 10-K for additional information.
Net sales by brand, product category and channel are summarized in the following table: Year Ended December 31, (in millions, except for percentages) Reported Net Sales 2022 Adjust for Foreign Currency Translation Constant-currency Net Sales 2022 (1) Reported Net Sales 2021 Reported Net Sales % Change Constant-currency Net Sales % Change (1) Brand Net Sales: Columbia $ 2,864.3 $ 94.2 $ 2,958.5 $ 2,557.4 12% 16% SOREL 347.3 9.1 356.4 320.9 8% 11% prAna 143.1 — 143.1 141.9 1% 1% Mountain Hardwear 109.5 1.7 111.2 106.2 3% 5% Total $ 3,464.2 $ 105.0 $ 3,569.2 $ 3,126.4 11% 14% Product Category Net Sales: Apparel, Accessories and Equipment $ 2,661.1 $ 74.6 $ 2,735.7 $ 2,389.2 11% 15% Footwear 803.1 30.4 833.5 737.2 9% 13% Total $ 3,464.2 $ 105.0 $ 3,569.2 $ 3,126.4 11% 14% Channel Net Sales: Wholesale $ 1,867.7 $ 57.8 $ 1,925.5 $ 1,660.4 12% 16% Direct-to-consumer 1,596.5 47.2 1,643.7 1,466.0 9% 12% Total $ 3,464.2 $ 105.0 $ 3,569.2 $ 3,126.4 11% 14% (1) Constant-currency net sales is a non-GAAP financial measure.
Net sales by brand, product category and channel are summarized in the following table: Year Ended December 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 $ 2,935.1 $ 19.4 $ 2,954.5 $ 2,864.3 2% 3% SOREL 336.7 (0.3) 336.4 347.3 (3)% (3)% prAna 113.6 0.1 113.7 143.1 (21)% (21)% Mountain Hardwear 101.8 0.8 102.6 109.5 (7)% (6)% Total $ 3,487.2 $ 20.0 $ 3,507.2 $ 3,464.2 1% 1% Product Category Net Sales: Apparel, Accessories and Equipment $ 2,676.6 $ 15.7 $ 2,692.3 $ 2,661.1 1% 1% Footwear 810.6 4.3 814.9 803.1 1% 1% Total $ 3,487.2 $ 20.0 $ 3,507.2 $ 3,464.2 1% 1% Channel Net Sales: Wholesale $ 1,874.0 $ 7.5 $ 1,881.5 $ 1,867.7 —% 1% Direct-to-consumer 1,613.2 12.5 1,625.7 1,596.5 1% 2% Total $ 3,487.2 $ 20.0 $ 3,507.2 $ 3,464.2 1% 1% (1) Constant-currency net sales is a non-GAAP financial measure.
Canada Canada operating income increased $0.3 million to $53.0 million, or 21.2% of net sales, in 2022 from $52.7 million, or 24.1% of net sales in 2021. The increase primarily resulted from increased net sales.
EMEA SG&A expenses increased as a percentage of net sales to 27.1% in 2023 compared to 26.1% in 2022. Canada Canada operating income increased $2.6 million to $55.6 million, or 21.7% of net sales, in 2023 from $53.0 million, or 21.2% of net sales in 2022. The increase primarily resulted from increased net sales.
We expect to incur COLUMBIA SPORTSWEAR COMPANY | 2022 FORM 10-K | 21 Table of Contents additional inventory carrying costs in 2023 as a result of additional costs for outside storage, and other inventory related holding costs, as we look to normalize our inventory position.
These pressures included additional inventory carrying costs related to incremental outside storage, and other inventory related holding and handling costs, including losses in productivity, as we COLUMBIA SPORTSWEAR COMPANY | 2023 FORM 10-K | 21 Table of Contents worked to normalize our inventory position. We exited 2023 with more normalized inventory levels.
COLUMBIA SPORTSWEAR COMPANY | 2022 FORM 10-K | 27 Table of Contents Sources of Liquidity Cash and cash equivalents and short-term investments As of December 31, 2022, we had cash and cash equivalents of $430.2 million and short-term investments of $0.7 million, compared to $763.4 million and $131.1 million, respectively, as of December 31, 2021.
Sources of Liquidity Cash and cash equivalents and short-term investments As of December 31, 2023, we had cash and cash equivalents of $350.3 million and short-term investments of $414.2 million, compared to $430.2 million and $0.7 million, respectively, as of December 31, 2022.
SG&A expenses is summarized in the following table: Year Ended December 31, (in millions, except for percentages and basis points) 2022 2021 Change Selling, general and administrative expenses $ 1,304.4 $ 1,180.3 $ 124.1 11 % Selling, general and administrative expenses as percent of net sales 37.7 % 37.8 % -10 bps SG&A expense growth reflects expenses to support the growth of our business, inflationary pressures, and investments to drive our brand-led consumer-focused strategies.
SG&A expenses is summarized in the following table: Year Ended December 31, (in millions, except for percentages and basis points) 2023 2022 Change Selling, general and administrative expenses $ 1,416.3 $ 1,304.4 $ 111.9 9 % Selling, general and administrative expenses as percent of net sales 40.6 % 37.7 % 290 bps SG&A expenses growth reflected investments to support growth strategies, increased distribution and fulfillment costs related to elevated inventory, and inflationary pressures including increases in employee salaries and wages.
U.S. operating income decreased $16.7 million to $519.8 million, or 22.6% of net sales, in 2022 from $536.5 million, or 26.0% of net sales, in 2021. The decrease was driven primarily by increased net sales, more than offset by decreased gross margin. U.S. net sales increased $241.9 million, or 12%, in 2022, compared to 2021.
U.S. operating income decreased $104.1 million to $415.7 million, or 18.5% of net sales, in 2023 from $519.8 million, or 22.6% of net sales, in 2022. The decrease was driven primarily by decreased net sales and increased SG&A expenses. U.S. net sales decreased $60.8 million, or 3%, in 2023, compared to 2022.
Gross profit is summarized in the following table: Year Ended December 31, (in millions, except for percentages and basis points) 2022 2021 Change Gross profit $ 1,711.1 $ 1,612.5 $ 98.6 6 % Gross margin 49.4 % 51.6 % -220 bps Gross margin contracted primarily due to the following factors: • an approximate 180 bps decrease related to elevated inbound freight costs; and • unfavorable channel and regional net sales shifts primarily due to a higher mix of wholesale sales which typically carry a lower margin compared to DTC sales.
Gross profit is summarized in the following table: Year Ended December 31, (in millions, except for percentages and basis points) 2023 2022 Change Gross profit $ 1,729.9 $ 1,711.1 $ 18.8 1 % Gross margin 49.6 % 49.4 % 20 bps Gross margin expanded primarily due to the following factors: • an approximate 240 bps increase related to lower inbound freight costs; partially offset by • unfavorable channel profitability reflecting lower DTC product margins and lower wholesale margins.
EMEA EMEA operating income increased $14.7 million to $80.2 million, or 18.3% of net sales, in 2022 from $65.5 million, or 17.1% of net sales, in 2021. The increase was driven primarily by increased net sales.
LAAP SG&A expenses decreased as a percentage of net sales to 44.4% in 2023 compared to 46.0% in 2022. EMEA EMEA operating income increased $18.8 million to $99.0 million, or 21.1% of net sales, in 2023 from $80.2 million, or 18.3% of net sales, in 2022. The increase was driven primarily by increased net sales and gross margin.
These charges consisted of an $18.7 million impairment charge related to prAna's trademark, an indefinite-lived intangible asset, and a $16.9 million impairment charge related to the goodwill attributable to the prAna business. For the year ended December 31, 2021, there were no impairment charges recorded for goodwill and intangible assets with indefinite lives.
These charges consisted of an $18.7 million impairment charge related to prAna's trademark, an indefinite-lived intangible asset, and a $16.9 million impairment charge related to goodwill attributable to the prAna reporting unit. Refer to our Critical Accounting Policies and Estimates below for further information regarding impairments. Interest Income, net.
Increased Freight Charges | In the first nine months 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.
As these storage and process capacity pressures have alleviated, we expect to see a benefit to our operating results in 2024. Normalized Freight Charges | For the majority of 2022, we experienced elevated ocean freight costs, which had a substantially unfavorable impact on our gross margin.
For the year ended December 31, 2021, our effective income tax rate was primarily impacted by a decrease in accrued foreign withholding taxes and a non-recurring benefit related to common stock benefits. 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.
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.
U.S. gross margin decreased primarily due to elevated inbound freight costs. As of December 31, 2022, our U.S. business operated 156 retail stores, compared to 142 stores as of December 31, 2021. SG&A expenses increased as a percentage of net sales to 27.7% in 2022 compared to 26.7% for 2021.
U.S. net sales decreased primarily due to decreased wholesale shipments and lower DTC consumer demand. As of December 31, 2023, our U.S. business operated 161 retail stores, compared to 156 stores as of December 31, 2022.
We expect our inventory position to normalize in the latter half of 2023. Increased U.S. Distribution Center Capacity Pressure | Elevated inventory levels combined with uneven flow of inventory receipts and shipments are resulting in storage and process capacity pressures within our U.S. distribution centers and third-party logistics operations.
Distribution Center and Third-Party Capacity Pressure | As a result of highly volatile shifts in supply and demand and supply chain challenges, we exited 2022 with elevated inventory. These elevated inventory levels resulted in storage and process capacity pressures within our distribution centers and third-party logistics operations throughout 2023.
The most significant comparative changes in assets and liabilities included Inventories, and to a lesser extent, Accrued liabilities, Accounts payable, Accounts receivable, net , and Operating lease assets and liabilities .
The most significant comparative changes in assets and liabilities included Inventories , and to a lesser extent, Accounts Receivable, Accounts Payable and Accrued liabilities . The $683.7 million increase in cash provided by Inventories reflected a decrease in inventory as we curtailed inventory purchases to compensate for elevated inventories exiting 2022 and liquidated excess inventory levels throughout 2023.
COLUMBIA SPORTSWEAR COMPANY | 2022 FORM 10-K | 26 Table of Contents Unallocated Corporate Expenses Unallocated corporate expenses increased by $60.7 million to $306.9 million in 2022 from $246.2 million in 2021, largely driven by prAna impairment charges of $35.6 million, higher personnel expenses and technology related expenses, partially offset by lower incentive compensation.
Unallocated Corporate Expenses Unallocated corporate expenses increased by $14.9 million to $321.8 million in 2023 from $306.9 million in 2022, largely driven by higher personnel expenses, partially offset by the impacts of the $25.0 million impairment charge related to prAna compared to the $36.5 million impairment charges in 2022.
EMEA net sales increased $56.5 million, or 15% (26% constant-currency), in 2022, compared to 2021, driven by increased net sales in our Europe-direct and EMEA distributor businesses. Europe-direct net sales increased primarily due to higher consumer demand, partially offset by unfavorable impacts from changes in foreign currency exchange rates.
EMEA net sales increased $30.6 million, or 7% (5% constant-currency), in 2023, compared to 2022, driven by increased net sales in our Europe-direct business, partially offset by declines in our EMEA distributor business. Europe-direct net sales increased primarily due to broad-based growth across our DTC and wholesale businesses, including the earlier shipment of Spring 2024 orders compared to prior year.
LAAP net sales increased due to higher shipment of Fall 2022 orders compared to shipment of Fall 2021 orders, earlier shipment of Spring 2023 orders compared to shipment of Spring 2022 orders, and higher consumer demand as we lapped prior year restrictions to prevent the spread of COVID-19 in Japan.
LAAP distributor net sales increased due to higher Spring 2023 and Fall 2023 orders compared to the same periods in the prior year, as well as earlier shipment of Spring 2024 orders compared to the shipment of Spring 2023 orders. Decreased Korea net sales reflected challenging market conditions and efforts to reset the business to support long-term growth opportunities.
We maintain and continue to make substantial investments in information systems, processes and personnel to support our ongoing demand planning efforts to provide forecasting of optimal inventory to meet customer and consumer demands. Seasonality | Our business is affected by the general seasonal trends common to the industry, including seasonal weather and discretionary consumer shopping and spending patterns.
We anticipate these lower ocean freight costs will persist and continue to benefit gross margin through the first quarter of 2024. Seasonality | Our business is affected by the general seasonal trends common to the industry, including seasonal weather and discretionary consumer shopping and spending patterns.
COLUMBIA SPORTSWEAR COMPANY | 2022 FORM 10-K | 24 Table of Contents Refer to our Critical Accounting Policies and Estimates below for further information regarding impairments. Income Tax Expense.
COLUMBIA SPORTSWEAR COMPANY | 2023 FORM 10-K | 25 Table of Contents Income Tax Expense.
The decline in estimated fair value from the fourth quarter 2021 impairment test reflects lower assumed revenue and operating income lev els, w hile the weighted average costs of capital used in the discounted cash flow model remained relatively unchanged.
The decline in estimated fair value from the fourth quarter 2022 impairment test reflected an increase in the weighted-average cost of capital used in the discounted cash flow model and lower operating income levels. In 2022, we determined that prAna goodwill was impaired and we recognized a $16.9 million impairment charge for the year ended December 31, 2022.
This includes investments in our DTC operations, including new stores, U.S. distribution projects to increase efficiency and expand storage, and digital and supply chain capabilities to support our strategic priorities.
We believe older season inventories represent a manageable portion of our total inventory mix. We have planned 2024 capital expenditures of approximately $60 to $80 million. This includes investments in our DTC operations, including new stores and digital and supply chain capabilities to support our strategic priorities.
SG&A expenses increased primarily due to the following factors: • higher personnel expenses of $39.8 million, reflecting increased headcount to support business growth, as well as annual merit and other wage rate increases; • increased demand creation spending of $21.0 million, including higher spending aligned with sales growth; • higher global retail expenses associated with sales growth and the impact of new stores; • higher information technology related expenses; and • higher outside storage and third-party logistics expenses; partially offset by • lower incentive compensation expense.
SG&A expenses increased primarily due to the following factors: • higher omni-channel expenses of $46.2 million, primarily reflecting higher DTC expenses, including personnel expenses and costs associated with new stores and temporary clearance locations; • higher supply chain expenses of $31.0 million, reflecting increased global distribution center expenses resulting from elevated inventory levels, including higher warehousing and fulfillment expenses, as well as third-party logistics transition-related costs; and • higher information technology related expenses, reflecting increased personnel expenses to support digital strategies.
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 directly operate.
Heightened Geopolitical Risk | We sell our products in more than 100 countries and our ability to sell in certain markets may be impacted by ongoing geopolitical tensions. We believe these tensions will remain elevated and have manifested, and will continue to manifest, themselves in certain regions where we operate.
The $32.9 million increase in cash used in Accounts receivable, net was primarily driven by growth in wholesale sales, partially offset by an increase in collections.
The $188.3 million increase in cash provided by Accounts receivable was primarily driven by higher fourth quarter 2022 wholesale sales collected in 2023 compared to the same period in the prior year.
See "Non-GAAP Financial Measure" above for further information. COLUMBIA SPORTSWEAR COMPANY | 2022 FORM 10-K | 23 Table of Contents Overall, our global net sales increase reflected higher shipments of Spring 2022 and Fall 2022 wholesale orders and higher consumer demand in our DTC business.
See "Non-GAAP Financial Measure" above for further information. Overall, global net sales increased, driven by international sales growth in our Columbia brand, primarily from our Europe-direct, China and LAAP distributor businesses. In Europe-direct and China markets, healthy consumer demand drove growth in both our wholesale and DTC businesses throughout the year.
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COLUMBIA SPORTSWEAR COMPANY | 2022 FORM 10-K | 20 Table of Contents Business Environment and Trends Economic Environment Impacting Consumer Spending Ability and Preferences | In 2022, we believe inflationary pressures, rising interest rates and recessionary fears began to impact wholesale customer behavior.
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We are focused on four areas of cost reduction and realignment, including: • operational cost savings; • organizational cost savings; • operating model improvements; and • indirect, or non-inventory, spending.
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We expect consumer discretionary spending to be under pressure in 2023 and are preparing for the potential of a mild recession in the second half of 2023. Elevated Inflationary Pressures | Inflationary pressures, including inbound and outbound freight, raw materials, labor, and product input costs, impacted our 2022 results.
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When the benefits of this program are combined with the cost savings we anticipate to receive from normalized inventory levels, we believe we can reach $125 million to $150 million in annualized savings by 2026. We anticipate these cost savings will ramp up over the course of 2024 and 2025, with the full benefit being realized in 2026.
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We implemented product price increases for our Spring 2022 season and, to a greater extent, for our Fall 2022 and Spring 2023 seasons. Price increases varied by market and product category.
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In 2024, we anticipate realizing approximately $75 million to $90 million in realized cost savings. Business Environment and Trends Changing U.S. Marketplace | We believe there has been some moderation of the U.S. outdoor market following the exit from the COVID-19 pandemic.
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In the U.S., on average, we increased pricing by a mid-single digit percent for our Spring 2022 product line, by a high-single to low-double-digit percent for our Fall 2022 product line, and by a high-single to low double-digit percent for our Spring 2023 product line.
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There are also new entrants into the historical U.S. outdoor market in the form of emerging brands and historically lifestyle and/or active brands. These brands are crossing over as we believe U.S. consumers and customers use more lifestyle products during outdoor activities.
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Although price increases were not expected to fully offset gross margin pressure in 2022, in the fourth quarter of 2022, we began to experience lower inbound freight costs which we expect will benefit gross margin beginning in 2023. We do not expect to implement meaningful product price increases as we begin to see the benefit of these lower costs.
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Economic Environment Impacting Demand | We believe general economic uncertainty is impacting consumer and wholesale customer behavior and demand. Wholesale customers have been increasingly cautious managing inventory and in placing advance orders. This cautiousness has been most pronounced in the U.S., but we believe that retailer prudence is spreading to other regions, including Canada and Europe.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeFluctuations in short-term interest rates cause interest payments on drawn amounts to increase or decrease. As of December 31, 2022, no balance was outstanding under our credit facilities. COMMODITY PRICE RISK We are exposed to market risk for the pricing of the raw materials used to manufacture our products. These raw materials are purchased directly by our contract manufacturers.
Biggest changeINTEREST RATE RISK Our negotiated credit facilities generally charge interest based on a benchmark rate such as the secured overnight financing rate. Fluctuations in short-term interest rates cause interest payments on drawn amounts to increase or decrease. As of December 31, 2023, no balance was outstanding under our credit facilities.
A 10% unfavorable exchange rate change in the euro, franc, Canadian dollar, yen, renminbi, won, pound sterling, krone, zloty, krona and koruna against the United States dollar would have resulted in the net fair value declining by approximately $66.4 million as of December 31, 2022.
A 10% unfavorable exchange rate change in the euro, franc, Canadian dollar, yen, renminbi, won, pound sterling, krone, zloty, krona and koruna against the United States dollar would have resulted in the net fair value declining by approximately $74.6 million as of December 31, 2023.
Non-functional currency denominated monetary assets and liabilities consist of cash and cash equivalents, short-term investments, receivables, payables, deferred income taxes, and intercompany loans and dividends. The net fair value of our derivative contracts was favorable by approximately $24.9 million as of December 31, 2022.
Non-functional currency denominated monetary assets and liabilities consist of cash and cash equivalents, short-term investments, receivables, payables, deferred income taxes, and intercompany loans and dividends. The net fair value of our derivative contracts was favorable by $2.1 million as of December 31, 2023.
Changes in fair value of derivative contracts resulting from foreign exchange rate fluctuations would be substantially offset by the change in value of the underlying hedged transactions. INTEREST RATE RISK Our negotiated credit facilities generally charge interest based on a benchmark rate such as the secured overnight financing rate.
Changes in fair value of COLUMBIA SPORTSWEAR COMPANY | 2023 FORM 10-K | 32 Table of Contents derivative contracts resulting from foreign exchange rate fluctuations would be substantially offset by the change in value of the underlying hedged transactions.
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COLUMBIA SPORTSWEAR COMPANY | 2022 FORM 10-K | 32 Table of Contents
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COMMODITY PRICE RISK We are exposed to market risk for the pricing of the raw materials used to manufacture our products. These raw materials are purchased directly by our contract manufacturers. COLUMBIA SPORTSWEAR COMPANY | 2023 FORM 10-K | 33 Table of Contents

Other COLM 10-K year-over-year comparisons