Columbia(US:COLM)2023-02-22 16:00Part I Business Columbia Sportswear, a global leader in outdoor and lifestyle products, operates four brands and sells through wholesale and direct-to-consumer channels globally - The company's four primary brands are Columbia®, SOREL®, Mountain Hardwear®, and prAna®, each targeting different segments of the outdoor, active, and lifestyle market161718 - The business is seasonal, with a significant portion of sales occurring in the third and fourth quarters21 - The company sells products in approximately 90 countries across four geographic segments: U.S., Latin America and Asia Pacific (LAAP), Europe, Middle East and Africa (EMEA), and Canada35 Manufacturing Concentration by Country (2022) | Product Category | Country | Production Share | | :--- | :--- | :--- | | Apparel, Accessories & Equipment | Vietnam | ~40% | | | Bangladesh | ~20% | | | Indonesia | ~15% | | | India | ~10% | | Footwear | Vietnam | ~70% | | | China | ~20% | Employee Workforce Breakdown (as of Dec 31, 2022) | Employee Type | Number of Employees | | :--- | :--- | | Full-time and part-time retail | ~5,040 | | Distribution center | ~1,270 | | Corporate and/or office | ~3,140 | | Total | ~9,450 | Information About Our Executive Officers This section details biographical information for the company's nine executive officers, including Chairman, President, and CEO Timothy P. Boyle - Timothy P. Boyle, a third-generation member of the founding family, serves as Chairman, President, and Chief Executive Officer68 - The executive team includes leaders with significant prior experience at Nike, Inc., such as Lisa A. Kulok (Chief Supply Chain Officer), Skip Potter (Chief Digital Information Officer), Tim Sheerin (SVP, Global Wholesale), and Craig Zanon (SVP, Emerging Brands)717374 Risk Factors The company faces numerous material risks including volatile consumer demand, intense competition, supply chain disruptions, and global regulatory changes - Changes in consumer demand are a primary risk, influenced by volatile economic conditions, competition, weather, and shifting consumer preferences80 - Inaccurate demand forecasting poses a significant risk, potentially leading to excess inventory and write-downs, or inventory shortages and lost sales; the company notes it currently has inventory levels in excess of demand8485 - The company relies on contract manufacturers, primarily in the Asia Pacific region, creating risks related to production capacity, quality control, and labor practices8891 - Global operations are subject to risks from currency fluctuations, geopolitical instability, and changes in trade policies, with heightened exposure in Vietnam (manufacturing) and China (raw materials)125130 - As of December 31, 2022, three related shareholders controlled just under 50% of the company's outstanding common stock, allowing them to exercise significant influence over corporate matters153 Unresolved Staff Comments The company reports no unresolved staff comments - None156 Properties The company's principal properties include owned headquarters and distribution centers, alongside approximately 450 mostly leased retail stores - Key owned properties include the corporate headquarters in Portland, OR, and major distribution centers in the U.S., Canada, and France159 - As of December 31, 2022, the company operated approximately 450 retail stores, with most locations being leased159 Legal Proceedings The company is involved in various legal matters, none of which are expected to materially affect its financial condition or operations - The company does not expect ongoing litigation to have a material adverse effect on its financials160 Mine Safety Disclosures This section is not applicable to the company - Not applicable161 Part II Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities The company's common stock trades on NASDAQ, with a quarterly dividend approved and $529.4 million remaining for share repurchases - The Board of Directors approved a regular quarterly cash dividend of $0.30 per share, payable on March 21, 2023166 - As of December 31, 2022, $529.4 million remained available under the company's share repurchase authorization; no stock was repurchased during the quarter ended December 31, 2022170171 Management's Discussion and Analysis of Financial Condition and Results of Operations In 2022, net sales grew 11% to $3.46 billion, but gross margin declined due to freight costs, and operating income fell, impacted by an impairment charge Consolidated Results of Operations (2022 vs 2021, in Millions) | Metric | 2022 | 2021 | % Change | | :--- | :--- | :--- | :--- | | Net Sales | $3,464.2 M | $3,126.4 M | 11% | | Gross Profit | $1,711.1 M | $1,612.5 M | 6% | | Gross Margin | 49.4% | 51.6% | -220 bps | | Operating Income | $393.1 M | $450.5 M | -13% | | Net Income | $311.4 M | $354.1 M | -12% | | Diluted EPS | $4.95 | $5.33 | -7% | - The company recognized a $35.6 million impairment charge in 2022 related to the prAna brand's trademark and goodwill202 - Key business environment trends impacting results included inflationary pressures, a strengthening U.S. dollar, increased freight costs, later inventory receipts, and elevated inventory levels across the marketplace177178179 - Inventory increased to $1,028.5 million at year-end 2022 from $645.4 million in 2021, due to unrealized sales growth projections and earlier receipts of Spring 2023 products; the company expects inventory to normalize in the second half of 2023228 - Planned capital expenditures for 2023 are approximately $70 to $90 million, focusing on DTC operations, distribution projects, and digital capabilities229 Quantitative and Qualitative Disclosures About Market Risk The company's primary market risk is foreign currency exchange rate fluctuations, managed through forward contracts, with limited interest rate risk due to no outstanding credit facility balances - The primary market risk is foreign currency exchange rate fluctuations, which the company manages mainly through currency forward contracts to hedge anticipated inventory purchases and non-functional currency sales257 - A hypothetical 10% unfavorable change in exchange rates would have resulted in a decline of approximately $66.4 million in the net fair value of derivative contracts as of December 31, 2022, which would be substantially offset by changes in the value of the underlying hedged transactions258 Financial Statements and Supplementary Data This section presents the audited consolidated financial statements, with an unqualified auditor's opinion, noting critical audit matters related to prAna trademark and goodwill impairment testing - The independent auditor, Deloitte & Touche LLP, issued an unqualified opinion on the consolidated financial statements and the effectiveness of internal control over financial reporting266280 - Critical Audit Matters identified were related to the valuation of the prAna trademark and goodwill, specifically the subjective nature of management's projected revenue forecasts used in the impairment analysis271274 Key Consolidated Balance Sheet Data (as of Dec 31, in thousands) | (in thousands) | 2022 | 2021 | | :--- | :--- | :--- | | Cash and cash equivalents | $430,241 | $763,404 | | Inventories | $1,028,545 | $645,379 | | Total Assets | $3,051,546 | $3,067,128 | | Total Liabilities | $1,115,757 | $1,077,876 | | Total Shareholders' Equity | $1,935,789 | $1,989,252 | Key Consolidated Statements of Cash Flows Data (Year Ended Dec 31, in thousands) | (in thousands) | 2022 | 2021 | | :--- | :--- | :--- | | Net cash provided by (used in) operating activities | $(25,241) | $354,406 | | Net cash provided by (used in) investing activities | $72,740 | $(163,751) | | Net cash used in financing activities | $(360,831) | $(210,889) | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure The company reports no changes in or disagreements with its accountants on accounting and financial disclosure - None430 Controls and Procedures Management concluded that the company's disclosure controls and internal control over financial reporting were effective as of December 31, 2022 - Management concluded that disclosure controls and procedures were effective as of December 31, 2022432 - Management concluded that internal control over financial reporting was effective as of December 31, 2022434 Other Information The company reports no other information - None438 Part III Directors, Executive Officers and Corporate Governance Information on directors, executive officers, and corporate governance is incorporated by reference from the company's 2023 Proxy Statement - This section incorporates information by reference from the company's 2023 Proxy Statement441 Executive Compensation Information regarding executive and director compensation is incorporated by reference from the company's 2023 Proxy Statement - This section incorporates information by reference from the company's 2023 Proxy Statement442 Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters Information regarding security ownership and equity compensation plans is incorporated by reference from the company's 2023 Proxy Statement - This section incorporates information by reference from the company's 2023 Proxy Statement443 Certain Relationships and Related Transactions, and Director Independence Information regarding related person transactions and director independence is incorporated by reference from the company's 2023 Proxy Statement - This section incorporates information by reference from the company's 2023 Proxy Statement444 Principal Accountant Fees and Services Information regarding principal accountant fees and services is incorporated by reference from the company's 2023 Proxy Statement - This section incorporates information by reference from the company's 2023 Proxy Statement445 Part IV Exhibits, Financial Statement Schedules This section lists financial statements, schedules, and exhibits filed as part of the Annual Report on Form 10-K, including Schedule II - This section contains the index of all exhibits filed with the 10-K, including credit agreements, incentive plans, and certifications449451 Schedule II: Valuation and Qualifying Accounts - Allowance for Doubtful Accounts (in thousands) | (in thousands) | Balance at Beginning of Period | Charged to Costs and Expenses | Deductions | Other | Balance at End of Period | | :--- | :--- | :--- | :--- | :--- | :--- | | Year Ended Dec 31, 2022 | $8,893 | $(2,044) | $(980) | $(426) | $5,443 | | Year Ended Dec 31, 2021 | $21,810 | $(10,758) | $(210) | $(1,949) | $8,893 | Form 10-K Summary The company provides no summary in this section - None463