COLM-2015.6.30-10Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

_______________________

FORM 10-Q

____________________________



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

For the quarterly period ended June 30, 2015



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

For the transition period from_______to_______

Commission file number 0-23939

_____________________________

COLUMBIA SPORTSWEAR COMPANY

(Exact name of registrant as specified in its charter)



Oregon		93-0498284
(State or other jurisdiction of incorporation or organization)		(IRS Employer Identification Number)
14375 Northwest Science Park Drive Portland, Oregon		97229
(Address of principal executive offices)		(Zip Code)

(503) 985-4000

(Registrant’s telephone number, including area code)

_____________________________________

Indicate by check mark whether registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.



Large accelerated filer	x	Accelerated filer	¨
Non-accelerated filer	o (Do not check if a smaller reporting company)	Smaller reporting company	¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x

The number of shares of Common Stock outstanding on July 24, 2015 was 70,299,415.

COLUMBIA SPORTSWEAR COMPANY

JUNE 30, 2015

INDEX TO FORM 10-Q




	PAGE NO.
PART I—FINANCIAL INFORMATION

Item 1. – Financial Statements – Columbia Sportswear Company (Unaudited)	2

Condensed Consolidated Balance Sheets	2

Condensed Consolidated Statements of Operations	3

Condensed Consolidated Statements of Comprehensive Income (Loss)	4

Condensed Consolidated Statements of Cash Flows	5

Notes to Condensed Consolidated Financial Statements	6

Item 2. – Management’s Discussion and Analysis of Financial Condition and Results of Operations	20

Item 3. – Quantitative and Qualitative Disclosures About Market Risk	29

Item 4. – Controls and Procedures	29

PART II—OTHER INFORMATION

Item 1. – Legal Proceedings	30

Item 1A. – Risk Factors	30

Item 2. – Unregistered Sales of Equity Securities and Use of Proceeds	41

Item 6. – Exhibits	41

Signatures	42

PART I—FINANCIAL INFORMATION

Item 1. FINANCIAL STATEMENTS

COLUMBIA SPORTSWEAR COMPANY

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands)

(Unaudited)



	June 30, 2015		December 31, 2014		June 30, 2014
ASSETS
Current Assets:
Cash and cash equivalents	$	371,062	$	413,558	$	367,165
Short-term investments	46,428		27,267		27,238
Accounts receivable, net of allowance of $7,436, $8,943 and $6,977, respectively	198,296		344,390		204,527
Inventories	581,031		384,650		456,448
Deferred income taxes	55,519		57,001		52,202
Prepaid expenses and other current assets	45,513		39,175		42,551
Total current assets	1,297,849		1,266,041		1,150,131
Property, plant and equipment, at cost, net of accumulated depreciation of $356,035, $345,612 and $345,153, respectively	285,833		291,563		291,270
Intangible assets, net (Notes 3, 5)	141,158		143,731		149,221
Goodwill (Notes 3, 5)	68,594		68,594		69,257
Other non-current assets	25,222		22,280		25,412
Total assets	$	1,818,656	$	1,792,209	$	1,685,291
LIABILITIES AND EQUITY
Current Liabilities:
Accounts payable	$	286,623	$	214,275	$	239,906
Accrued liabilities (Note 6)	110,528		144,288		104,332
Income taxes payable	3,436		14,388		3,315
Deferred income taxes	125		169		66
Total current liabilities	400,712		373,120		347,619
Note payable to related party (Note 14)	15,739		15,728		15,734
Other long-term liabilities	37,419		35,435		31,339
Income taxes payable	10,190		9,388		4,373
Deferred income taxes	3,104		3,304		8,261
Total liabilities	467,164		436,975		407,326
Commitments and contingencies (Note 12)
Columbia Sportswear Company Shareholders’ Equity:
Preferred stock; 10,000 shares authorized; none issued and outstanding	—		—		—
Common stock (no par value); 125,000 shares authorized; 70,263, 69,828, and 70,080 issued and outstanding, respectively (Note 9)	80,346		72,700		77,793
Retained earnings	1,253,883		1,255,070		1,154,103
Accumulated other comprehensive income (Note 8)	3,417		15,833		38,075
Total Columbia Sportswear Company shareholders’ equity	1,337,646		1,343,603		1,269,971
Non-controlling interest (Note 4)	13,846		11,631		7,994
Total equity	1,351,492		1,355,234		1,277,965
Total liabilities and equity	$	1,818,656	$	1,792,209	$	1,685,291

See accompanying notes to condensed consolidated financial statements.

COLUMBIA SPORTSWEAR COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share amounts)

(Unaudited)



	Three Months Ended June 30,						Six Months Ended June 30,
	2015			2014			2015			2014
Net sales	$	380,234		$	324,246		$	859,216		$	748,330
Cost of sales	208,916			180,221			459,124			407,219
Gross profit	171,318			144,025			400,092			341,111
Selling, general and administrative expenses	181,502			162,196			368,004			325,555
Net licensing income	1,222			1,182			3,072			2,906
Income (loss) from operations	(8,962		)	(16,989		)	35,160			18,462
Interest income, net	574			384			951			623
Interest expense on note payable to related party (Note 14)	(278		)	(277		)	(552		)	(487		)
Other non-operating income (expense)	467			(149		)	(1,729		)	(505		)
Income (loss) before income tax	(8,199		)	(17,031		)	33,830			18,093
Income tax benefit (expense)	2,395			10,293			(11,715		)	(1,155		)
Net income (loss)	(5,804		)	(6,738		)	22,115			16,938
Net income (loss) attributable to non-controlling interest	741			(409		)	2,189			1,012
Net income (loss) attributable to Columbia Sportswear Company	$	(6,545	)	$	(6,329	)	$	19,926		$	15,926
Earnings (loss) per share attributable to Columbia Sportswear Company (Note 9):
Basic	$	(0.09	)	$	(0.09	)	$	0.28		$	0.23
Diluted	(0.09		)	(0.09		)	0.28			0.23
Cash dividends per share	$	0.15		$	0.14		$	0.30		$	0.28
Weighted average shares outstanding (Note 9):
Basic	70,339			69,916			70,210			69,668
Diluted	70,339			69,916			71,152			70,602

See accompanying notes to condensed consolidated financial statements.

COLUMBIA SPORTSWEAR COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(In thousands)

(Unaudited)



	Three Months Ended June 30,						Six Months Ended June 30,
	2015			2014			2015			2014
Net income (loss)	$	(5,804	)	$	(6,738	)	$	22,115		$	16,938
Other comprehensive income (loss):
Unrealized holding gains (losses) on available-for-sale securities (net of tax benefit (expense) of $1, $1, $3 and ($1), respectively)	1			3			(2		)	4
Unrealized gains (losses) on derivative transactions (net of tax benefit of $1,004, $638, $289 and $741, respectively)	(2,010		)	(1,037		)	1,720			(809		)
Foreign currency translation adjustments (net of tax benefit of $241, $30, $1,070 and $23, respectively)	2,647			8,934			(14,108		)	3,056
Other comprehensive income (loss):	638			7,900			(12,390		)	2,251
Comprehensive income (loss)	(5,166		)	1,162			9,725			19,189
Comprehensive income (loss) attributable to non-controlling interest	740			(375		)	2,215			548
Comprehensive income (loss) attributable to Columbia Sportswear Company	$	(5,906	)	$	1,537		$	7,510		$	18,641

See accompanying notes to condensed consolidated financial statements.

COLUMBIA SPORTSWEAR COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)



	Six Months Ended June 30,
	2015			2014
Cash flows from operating activities:
Net income	$	22,115		$	16,938
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	27,778			23,234
Loss on disposal of property, plant, and equipment	507			229
Deferred income taxes	7,688			5,601
Stock-based compensation	5,939			5,208
Excess tax benefit from employee stock plans	(6,342		)	(3,951		)
Changes in operating assets and liabilities:
Accounts receivable	139,730			112,340
Inventories	(202,276		)	(114,716		)
Prepaid expenses and other current assets	(7,442		)	(7,357		)
Other assets	(3,018		)	297
Accounts payable	78,252			60,089
Accrued liabilities	(29,630		)	(23,095		)
Income taxes payable	(11,263		)	(13,596		)
Other liabilities	2,098			1,733
Net cash provided by operating activities	24,136			62,954
Cash flows from investing activities:
Acquisition of business, net of cash acquired	—			(188,467		)
Purchases of short-term investments	(38,208		)	(21,471		)
Sales of short-term investments	19,213			86,206
Capital expenditures	(28,365		)	(24,964		)
Proceeds from sale of property, plant, and equipment	104			16
Net cash used in investing activities	(47,256		)	(148,680		)
Cash flows from financing activities:
Proceeds from credit facilities	260			1,045
Repayments on credit facilities	(260		)	(1,045		)
Proceeds from issuance of common stock under employee stock plans	14,371			19,017
Tax payments related to restricted stock unit issuances	(4,531		)	(2,881		)
Excess tax benefit from employee stock plans	6,342			3,951
Repurchase of common stock	(14,525		)	—
Proceeds from note payable to related party	—			16,072
Cash dividends paid	(21,113		)	(19,556		)
Net cash provided by (used in) financing activities	(19,456		)	16,603
Net effect of exchange rate changes on cash	80			(1,201		)
Net decrease in cash and cash equivalents	(42,496		)	(70,324		)
Cash and cash equivalents, beginning of period	413,558			437,489
Cash and cash equivalents, end of period	$	371,062		$	367,165
Supplemental disclosures of cash flow information:
Cash paid during the period for income taxes	$	24,088		$	21,842
Supplemental disclosures of non-cash investing activities:
Capital expenditures incurred but not yet paid	$	4,044		$	8,145

See accompanying notes to condensed consolidated financial statements.

COLUMBIA SPORTSWEAR COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 1—BASIS OF PRESENTATION AND ORGANIZATION

The accompanying unaudited condensed consolidated financial statements have been prepared by the management of Columbia Sportswear Company (together with its wholly owned subsidiaries and entities in which it maintains a controlling financial interest, the “Company”) and in the opinion of management include all normal recurring material adjustments necessary to present fairly the Company’s financial position as of June 30, 2015 and 2014, the results of operations for the three and six months ended June 30, 2015 and 2014, and cash flows for the six months ended June 30, 2015 and 2014. The December 31, 2014 financial information was derived from the Company’s audited financial statements included in the Company's Annual Report on Form 10-K for the year ended December 31, 2014. A significant part of the Company’s business is of a seasonal nature; therefore, results of operations for the three and six months ended June 30, 2015 are not necessarily indicative of results to be expected for the full year.

Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“generally accepted accounting principles”) have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission. The Company, however, believes that the disclosures contained in this report comply with the requirements of Section 13(a) of the Securities Exchange Act of 1934 for a Quarterly Report on Form 10-Q and are adequate to make the information presented not misleading. These unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2014.

On September 26, 2014, the Company completed a two-for-one stock split paid in the form of a 100% stock dividend. All references made to share or per share amounts in the accompanying condensed consolidated financial statements and notes thereto have been adjusted to reflect the stock split.

Principles of consolidation

The condensed consolidated financial statements include the accounts of Columbia Sportswear Company, its wholly owned subsidiaries and entities in which it maintains a controlling financial interest. All significant intercompany balances and transactions have been eliminated in consolidation.

Estimates and assumptions

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results may differ from these estimates and assumptions. Some of these more significant estimates relate to revenue recognition, including sales returns and miscellaneous claims from customers, allowance for doubtful accounts, excess, slow-moving and closeout inventories, product warranty, long-lived and intangible assets, goodwill, income taxes and stock-based compensation.

NOTE 2—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

There have been no significant changes to the Company’s significant accounting policies as described in the Company’s Annual Report on Form 10-K for the year ended December 31, 2014.

Recent Accounting Pronouncements

In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers: Topic 606. This ASU outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance. In July 2015, the FASB announced a one-year deferral of the effective date of the new revenue recognition standard. The new standard will become effective beginning with the first quarter of 2018 and can be adopted either retrospectively to each prior reporting period presented or as a cumulative effect adjustment as of the date of adoption. The Company is currently evaluating the impact this ASU will have on the Company's financial position, results of operations and cash flows.

COLUMBIA SPORTSWEAR COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

In February 2015, the FASB issued ASU No. 2015-02, Amendments to the Consolidation Analysis: Topic 810. This ASU changes the analysis that a reporting entity must perform to determine whether it should consolidate certain types of legal entities. It is effective for annual reporting periods, and interim periods within those years, beginning after December 31, 2015. Early adoption is permitted, including adoption in an interim period. The Company is currently evaluating this ASU and does not expect the adoption of this standard to have a material effect on the Company's financial position, results of operations or cash flows.

NOTE 3—BUSINESS ACQUISITION

On May 30, 2014, the Company purchased 100% of the equity interest in prAna Living LLC (“prAna”) for $188,467,000, net of acquired cash of $4,946,000.

Purchase price allocation

Acquired assets and liabilities were recorded at estimated fair value as of the acquisition date. The excess of the purchase price over the estimated fair value of identifiable net assets resulted in the recognition of goodwill of $54,156,000, all of which was assigned to the United States segment, and is attributable to future growth opportunities and any intangible assets that did not qualify for separate recognition. The goodwill is expected to be deductible for tax purposes.

The following table summarizes the fair value of the net assets acquired and liabilities assumed as of the acquisition date of May 30, 2014, including measurement period adjustments (in thousands):




Cash	$	4,946
Accounts receivable	10,021
Inventories	9,641
Other current assets	2,531
Property, plant and equipment	5,192
Acquired intangible assets	114,500
Other non-current assets	258
Total assets acquired	147,089

Accounts payable	2,803
Other current liabilities	5,029
Total liabilities assumed	7,832

Net identifiable assets acquired	139,257
Goodwill	54,156
Net assets acquired	$	193,413

NOTE 4—NON-CONTROLLING INTEREST

The Company owns a 60% controlling interest in a joint venture formed with Swire Resources, Limited (“Swire”) to support the development and operation of the Company's business in China. The joint venture began operations on January 1, 2014. The accounts of the joint venture are included in the Condensed Consolidated Balance Sheets as of June 30, 2015 and 2014, and December 31, 2014. Swire's share of net income from the joint venture is included in net income attributable to non-controlling interest in the Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2015 and 2014. The 40% non-controlling equity interest in this entity is included in total equity as non-controlling interest in the Condensed Consolidated Balance Sheets as of June 30, 2015 and 2014, and December 31, 2014.

The following table presents the changes in Columbia Sportswear Company shareholders' equity and non-controlling interest for the six months ended June 30, 2015 (in thousands, except per share amounts):

COLUMBIA SPORTSWEAR COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)



	Columbia Sportswear Company			Non-Controlling Interest		Total
Balance at December 31, 2014	$	1,343,603		$	11,631	$	1,355,234
Net income	19,926			2,189		22,115
Other comprehensive income (loss), net of tax:
Unrealized holding losses on available-for-sale securities	(2		)	—		(2		)
Derivative holding gains	1,720			—		1,720
Foreign currency translation adjustments	(14,134		)	26		(14,108		)
Cash dividends ($0.30 per share)	(21,113		)	—		(21,113		)
Issuance of common stock under employee stock plans, net	9,840			—		9,840
Tax adjustment from stock plans	6,392			—		6,392
Stock-based compensation expense	5,939			—		5,939
Repurchase of common stock	(14,525		)	—		(14,525		)
Balance at June 30, 2015	$	1,337,646		$	13,846	$	1,351,492

The following table presents the changes in Columbia Sportswear Company shareholders' equity and non-controlling interest for the six months ended June 30, 2014 (in thousands, except per share amounts):



	Columbia Sportswear Company			Non-Controlling Interest			Total
Balance at December 31, 2013	$	1,245,418		$	7,446		$	1,252,864
Net income	15,926			1,012			16,938
Other comprehensive income (loss), net of tax:
Unrealized holding gains on available-for-sale securities	4			—			4
Derivative holding losses	(809		)	—			(809		)
Foreign currency translation adjustments	3,520			(464		)	3,056
Cash dividends ($0.28 per share)	(19,556		)	—			(19,556		)
Issuance of common stock under employee stock plans, net	16,136			—			16,136
Tax adjustment from stock plans	4,124			—			4,124
Stock-based compensation expense	5,208			—			5,208
Balance at June 30, 2014	$	1,269,971		$	7,994		$	1,277,965

NOTE 5—INTANGIBLE ASSETS, NET AND GOODWILL

Intangible assets that are determined to have finite lives include patents, purchased technology, customer relationships and order backlog and are amortized over their estimated useful lives, which range from less than one year to approximately 10 years, and are measured for impairment only when events or circumstances indicate the carrying value may be impaired. Goodwill and intangible assets with indefinite useful lives, including trademarks and trade names, are not amortized but are periodically evaluated for impairment.

Intangible assets

The following table summarizes the Company’s identifiable intangible assets balance (in thousands):

COLUMBIA SPORTSWEAR COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)



	June 30, 2015			December 31, 2014			June 30, 2014
Intangible assets subject to amortization:
Patents and purchased technology	$	14,198		$	14,198		$	14,198
Customer relationships	23,000			23,000			23,000
Order backlog	—			—			3,500
Gross carrying amount	37,198			37,198			40,698
Accumulated amortization:
Patents and purchased technology	(7,326		)	(6,661		)	(5,997		)
Customer relationships	(4,135		)	(2,227		)	(318		)
Order backlog	—			—			(583		)
Total accumulated amortization	(11,461		)	(8,888		)	(6,898		)
Net carrying amount	25,737			28,310			33,800
Intangible assets not subject to amortization	115,421			115,421			115,421
Intangible assets, net	$	141,158		$	143,731		$	149,221

Amortization expense for intangible assets subject to amortization was $1,287,000 and $1,234,000 for the three months ended June 30, 2015 and 2014, respectively, and was $2,573,000 and $1,567,000 for the six months ended June 30, 2015 and 2014, respectively.

Annual amortization expense is estimated to be as follows for the years 2015-2019 (in thousands):



2015	$	5,147
2016	5,147
2017	3,883
2018	2,980
2019	2,980

Goodwill

Goodwill was $68,594,000 at June 30, 2015 and December 31, 2014, and $69,257,000 at June 30, 2014. During the year ended December 31, 2014, goodwill increased $54,156,000, net of a remeasurement period adjustment of $663,000, related to the prAna acquisition (see Note 3).

NOTE 6—PRODUCT WARRANTY

Some of the Company’s products carry limited warranty provisions for defects in quality and workmanship. A warranty reserve is established at the time of sale to cover estimated costs based on the Company’s history of warranty repairs and replacements and is recorded in cost of sales. The warranty reserve is included in Accrued liabilities in the Condensed Consolidated Balance Sheets.

A reconciliation of product warranties is as follows (in thousands):



	Three Months Ended June 30,						Six Months Ended June 30,
	2015			2014			2015			2014
Balance at beginning of period	$	10,873		$	10,652		$	11,148		$	10,768
Provision for warranty claims	860			673			2,325			2,154
Warranty claims	(847		)	(736		)	(2,233		)	(2,265		)
Other	80			91			(274		)	23
Balance at end of period	$	10,966		$	10,680		$	10,966		$	10,680

COLUMBIA SPORTSWEAR COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

NOTE 7—STOCK-BASED COMPENSATION

The Company’s Stock Incentive Plan (the “Plan”) allows for grants of incentive stock options, non-statutory stock options, restricted stock awards, restricted stock units and other stock-based or cash-based awards. The majority of all stock options and restricted stock unit grants outstanding under the Plan were granted in the first quarter of each fiscal year.

Stock-based compensation expense consisted of the following (in thousands):



	Three Months Ended June 30,				Six Months Ended June 30,
	2015		2014		2015		2014
Stock options	$	913	$	862	$	1,829	$	1,743
Restricted stock units	2,080		1,769		4,110		3,465
Total	$	2,993	$	2,631	$	5,939	$	5,208

Stock Options

The Company estimates the fair value of stock options using the Black-Scholes model. Key inputs and assumptions used to estimate the fair value of stock options include the exercise price of the award, the expected option term, the expected stock price volatility of the Company’s stock over the option’s expected term, the risk-free interest rate over the option’s expected term, and the Company’s expected annual dividend yield.

The following table presents the weighted average assumptions for stock options granted in the periods:



	Three Months Ended June 30,		Six Months Ended June 30,
	2015	2014	2015	2014
Expected option term	7.46 years	7.82 years	4.60 years	4.71 years
Expected stock price volatility	29.54%	28.63%	26.53%	27.67%
Risk-free interest rate	1.95%	2.29%	1.20%	1.21%
Expected annual dividend yield	1.04%	1.33%	1.26%	1.33%
Weighted average grant date fair value	$17.81	$12.77	$10.31	$8.76

During the six months ended June 30, 2015 and 2014, the Company granted a total of 495,145 and 472,576 stock options, respectively. At June 30, 2015, unrecognized costs related to outstanding stock options totaled approximately $8,018,000, before any related tax benefit. The unrecognized costs related to stock options are amortized over the related vesting period using the straight-line attribution method. Unrecognized costs related to stock options at June 30, 2015 are expected to be recognized over a weighted average period of 2.53 years.

Restricted Stock Units

The Company estimates the fair value of service-based and performance-based restricted stock units using the Black-Scholes model. Key inputs and assumptions used to estimate the fair value of restricted stock units include the vesting period, expected annual dividend yield and closing price of the Company’s common stock on the date of grant.

The following table presents the weighted average assumptions for restricted stock units granted in the periods:



	Three Months Ended June 30,		Six Months Ended June 30,
	2015	2014	2015	2014
Vesting period	2.65 years	3.56 years	3.82 years	3.83 years
Expected annual dividend yield	1.05%	1.34%	1.14%	1.33%
Estimated average grant date fair value per restricted stock unit	$55.80	$39.91	$51.01	$39.08

During the six months ended June 30, 2015 and 2014, the Company granted 194,591 and 263,842 restricted stock units, respectively. At June 30, 2015, unrecognized costs related to outstanding restricted stock units totaled approximately $17,386,000, before any related tax benefit. The unrecognized costs related to restricted stock units are being amortized over the related vesting

COLUMBIA SPORTSWEAR COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

period using the straight-line attribution method. These unrecognized costs at June 30, 2015 are expected to be recognized over a weighted average period of 2.39 years.

NOTE 8—ACCUMULATED OTHER COMPREHENSIVE INCOME

Accumulated other comprehensive income, net of applicable taxes, reported on the Company’s Condensed Consolidated Balance Sheets consists of unrealized holding gains and losses on available-for-sale securities, unrealized gains and losses on certain derivative transactions and foreign currency translation adjustments.

The following table sets forth the changes in accumulated other comprehensive income attributable to Columbia Sportswear Company, net of tax, for the three months ended June 30, 2015 (in thousands):



	Unrealized gains on available-for-sale securities		Unrealized holding gains (losses) on derivative transactions			Foreign currency translation adjustments			Total
Balance at March 31, 2015	$	1	$	12,725		$	(9,948	)	$	2,778
Other comprehensive income (loss) before reclassifications	1		(742		)	2,648			1,907
Amounts reclassified from other comprehensive income	—		(1,268		)	—			(1,268		)
Net other comprehensive income (loss) during the period	1		(2,010		)	2,648			639
Balance at June 30, 2015	$	2	$	10,715		$	(7,300	)	$	3,417

The following table sets forth the changes in accumulated other comprehensive income attributable to Columbia Sportswear Company, net of tax, for the three months ended June 30, 2014 (in thousands):



	Unrealized gains (losses) on available-for-sale securities			Unrealized holding gains (losses) on derivative transactions			Foreign currency translation adjustments		Total
Balance at March 31, 2014	$	(5	)	$	1,472		$	28,742	$	30,209
Other comprehensive income (loss) before reclassifications	3			(634		)	8,900		8,269
Amounts reclassified from other comprehensive income	—			(403		)	—		(403		)
Net other comprehensive income (loss) during the period	3			(1,037		)	8,900		7,866
Balance at June 30, 2014	$	(2	)	$	435		$	37,642	$	38,075

The following table sets forth the changes in accumulated other comprehensive income attributable to Columbia Sportswear Company, net of tax, for the six months ended June 30, 2015 (in thousands):



	Unrealized gains (losses) on available-for-sale securities			Unrealized holding gains (losses) on derivative transactions			Foreign currency translation adjustments			Total
Balance at December 31, 2014	$	4		$	8,995		$	6,834		$	15,833
Other comprehensive income (loss) before reclassifications	(2		)	4,840			(14,134		)	(9,296		)
Amounts reclassified from other comprehensive income	—			(3,120		)	—			(3,120		)
Net other comprehensive income (loss) during the period	(2		)	1,720			(14,134		)	(12,416		)
Balance at June 30, 2015	$	2		$	10,715		$	(7,300	)	$	3,417

The following table sets forth the changes in accumulated other comprehensive income attributable to Columbia Sportswear Company, net of tax, for the six months ended June 30, 2014 (in thousands):

COLUMBIA SPORTSWEAR COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)



	Unrealized gains (losses) on available-for-sale securities			Unrealized holding gains (losses) on derivative transactions			Foreign currency translation adjustments		Total
Balance at December 31, 2013	$	(6	)	$	1,244		$	34,122	$	35,360
Other comprehensive income before reclassifications	4			70			3,520		3,594
Amounts reclassified from other comprehensive income	—			(879		)	—		(879		)
Net other comprehensive income (loss) during the period	4			(809		)	3,520		2,715
Balance at June 30, 2014	$	(2	)	$	435		$	37,642	$	38,075

All reclassification adjustments related to derivative transactions are recorded in cost of sales in the Condensed Consolidated Statements of Operations. See Note 11 for further information regarding derivative instrument reclassification adjustments.

NOTE 9—EARNINGS PER SHARE

Earnings per share (“EPS”) is presented on both a basic and diluted basis. Basic EPS is based on the weighted average number of common shares outstanding. Diluted EPS reflects the potential dilution that could occur if outstanding securities or other contracts to issue common stock were exercised or converted into common stock. For the calculation of diluted EPS, the basic weighted average number of shares is increased by the dilutive effect of stock options and restricted stock units determined using the treasury stock method.

A reconciliation of common shares used in the denominator for computing basic and diluted EPS is as follows (in thousands, except per share amounts):



	Three Months Ended June 30,						Six Months Ended June 30,
	2015			2014			2015		2014
Weighted average shares of common stock outstanding, used in computing basic earnings per share	70,339			69,916			70,210		69,668
Effect of dilutive stock options and restricted stock units	—			—			942		934
Weighted average shares of common stock outstanding, used in computing diluted earnings per share	70,339			69,916			71,152		70,602
Earnings per share of common stock attributable to Columbia Sportswear Company:
Basic	$	(0.09	)	$	(0.09	)	$	0.28	$	0.23
Diluted	(0.09		)	(0.09		)	0.28		0.23

Stock options and service-based restricted stock units representing 3,058,634 and 3,508,752 shares of common stock for the three months ended June 30, 2015 and 2014, respectively, were outstanding but were excluded from the computation of diluted EPS because their effect would be anti-dilutive due to a net loss in the period. Stock options and service-based restricted units representing 116,558 and 336,712 shares of common stock for the six months ended June 30, 2015 and 2014, respectively, were outstanding but were excluded from the computation of diluted EPS because their effect would be anti-dilutive as a result of applying the treasury stock method. In addition, performance-based restricted stock units representing 138,005 and 95,384 shares of common stock for the three months ended June 30, 2015 and 2014, respectively, and 129,954 and 78,746 shares of common stock for the six months ended June 30, 2015 and 2014, respectively, were outstanding but were excluded from the computation of diluted EPS because these shares were subject to performance conditions that had not been met.

Common stock repurchase plan

Since the inception of the Company’s stock repurchase plan in 2004 through June 30, 2015, the Company’s Board of Directors has authorized the repurchase of $700,000,000 of the Company’s common stock. Shares of the Company’s common stock may be purchased in the open market or through privately negotiated transactions, subject to market conditions. The repurchase program does not obligate the Company to acquire any specific number of shares or to acquire shares over any specified period of time. As of June 30, 2015, the Company had repurchased 19,865,932 shares under this program at an aggregate purchase price of

COLUMBIA SPORTSWEAR COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

approximately $470,968,000. During the six months ended June 30, 2015, the Company repurchased 258,874 shares of the Company's common stock at an aggregate purchase price of $14,525,000. During the six months ended June 30, 2014, the Company did not repurchase any shares of the Company's common stock.

NOTE 10—SEGMENT INFORMATION

The Company has aggregated its operating segments into four geographic segments: (1) United States, (2) Latin America and Asia Pacific (“LAAP”), (3) Europe, Middle East and Africa (“EMEA”) and (4) Canada, which are reflective of the Company’s internal organization, management, and oversight structure. Each geographic segment operates predominantly in one industry: the design, development, marketing and distribution of outdoor and active lifestyle apparel, footwear, accessories and equipment. Intersegment net sales and intersegment profits, which are recorded at a negotiated mark-up and eliminated in consolidation, are not material. Unallocated corporate expenses consist of expenses incurred by centrally-managed departments, including global information systems, finance and legal, executive compensation, unallocated benefit program expense and other miscellaneous costs.

The geographic distribution of the Company’s net sales and income from operations are summarized in the following table (in thousands) for the three and six months ended June 30, 2015 and 2014.



	Three Months Ended June 30,						Six Months Ended June 30,
	2015			2014			2015			2014
Net sales to unrelated entities:
United States	$	212,032		$	146,368		$	495,792		$	387,557
LAAP	97,068			96,100			210,130			212,913
EMEA	59,905			72,949			107,730			112,089
Canada	11,229			8,829			45,564			35,771
	$	380,234		$	324,246		$	859,216		$	748,330
Segment income (loss) from operations:
United States	$	22,708		$	2,365		$	75,520		$	46,536
LAAP	8,575			9,253			23,928			26,487
EMEA	2,115			5,797			3,481			2,271
Canada	(3,511		)	(3,784		)	2,791			(385		)
Total segment income from operations	29,887			13,631			105,720			74,909
Unallocated corporate expenses	(38,849		)	(30,620		)	(70,560		)	(56,447		)
Interest income, net	574			384			951			623
Interest expense on note payable to related party	(278		)	(277		)	(552		)	(487		)
Other non-operating income (expense)	467			(149		)	(1,729		)	(505		)
Income (loss) before income taxes	$	(8,199	)	$	(17,031	)	$	33,830		$	18,093

Concentrations

The Company had one customer in its EMEA segment that accounted for approximately 12.2% and 16.7% of consolidated accounts receivable at June 30, 2015 and 2014, respectively. No single customer accounted for 10% or more of consolidated accounts receivable at December 31, 2014. No single customer accounted for 10% or more of consolidated revenues for the three months ended June 30, 2015. The Company had one customer in its EMEA segment that accounted for approximately 12.1% of consolidated revenues for the three months ended June 30, 2014. No customer accounted for 10% or more of consolidated revenues for the six months ended June 30, 2015 or 2014.

COLUMBIA SPORTSWEAR COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

NOTE 11—FINANCIAL INSTRUMENTS AND RISK MANAGEMENT

In the normal course of business, the Company’s financial position, results of operations and cash flows are routinely subject to a variety of risks. These risks include risks associated with financial markets, primarily currency exchange rate risk, and, to a lesser extent, interest rate risk and equity market risk. The Company regularly assesses these risks and has established policies and business practices designed to mitigate them. The Company does not engage in speculative trading in any financial market.

The Company actively manages the risk of changes in functional currency equivalent cash flows resulting from anticipated non-functional currency denominated purchases and sales. Subsidiaries that use European euros, Canadian dollars, Japanese yen or Korean won as their functional currency are primarily exposed to changes in functional currency equivalent cash flows from anticipated U.S. dollar inventory purchases. Subsidiaries that use U.S. dollars as their functional currency are primarily exposed to anticipated Canadian dollar denominated sales. The Company manages these risks by using currency forward and option contracts formally designated and effective as cash flow hedges. Hedge effectiveness is generally determined by evaluating the ability of a hedging instrument’s cumulative change in fair value to offset the cumulative change in the present value of expected cash flows on the underlying exposures. For forward contracts, the change in fair value attributable to changes in forward points is excluded from the determination of hedge effectiveness and included in current period cost of sales for hedges of anticipated U.S. dollar inventory purchases and in net sales for hedges of anticipated Canadian dollar sales. For option contracts, the change in fair value attributable to changes in time value are excluded from the assessment of hedge effectiveness and included in current period cost of sales. Hedge ineffectiveness was not material during the three and six months ended June 30, 2015 and 2014.

The Company also uses currency forward contracts not formally designated as hedges to manage the consolidated currency exchange rate risk associated with the remeasurement of non-functional currency denominated monetary assets and liabilities by subsidiaries that use European euros, Canadian dollars, Japanese yen, Korean won or Chinese renminbi as their functional currency. Non-functional currency denominated monetary assets and liabilities consist primarily of cash and cash equivalents, short-term investments, receivables, payables and intercompany loans. The gains and losses generated on these currency forward contracts not formally designated as hedges are expected to be largely offset in other non-operating income (expense), net by the gains and losses generated from the remeasurement of the non-functional currency denominated monetary assets and liabilities.

The following table presents the gross notional amount of outstanding derivative instruments (in thousands):



	June 30, 2015		December 31, 2014		June 30, 2014
Derivative instruments designated as cash flow hedges:
Currency forward contracts	$	95,000	$	103,000	$	127,000
Derivative instruments not designated as cash flow hedges:
Currency forward contracts	117,000		128,000		63,500

At June 30, 2015, approximately $12,911,000 of deferred net gains on both outstanding and matured derivatives accumulated in other comprehensive income are expected to be reclassified to net income during the next twelve months as a result of underlying hedged transactions also being recorded in net income. Actual amounts ultimately reclassified to net income are dependent on U.S. dollar exchange rates in effect against the European euro, Canadian dollar, Japanese yen and Korean won when outstanding derivative contracts mature.

At June 30, 2015, the Company’s derivative contracts had a remaining maturity of less than two years . The maximum net exposure to any single counterparty, which is generally limited to the aggregate unrealized gain of all contracts with that counterparty, was less than $3,000,000 at June 30, 2015. All of the Company's derivative counterparties have investment grade credit ratings. The Company is a party to master netting arrangements that contain features that allow counterparties to net settle amounts arising from multiple separate derivative transactions or net settle in the case of certain triggering events such as a bankruptcy or major default of one of the counterparties to the transaction. Finally, the Company has not pledged assets or posted collateral as a requirement for entering into or maintaining derivative positions.

The following table presents the balance sheet classification and fair value of derivative instruments (in thousands):

COLUMBIA SPORTSWEAR COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)



	Balance Sheet Classification	June 30, 2015		December 31, 2014		June 30, 2014
Derivative instruments designated as cash flow hedges:
Derivative instruments in asset positions:
Currency forward contracts	Prepaid expenses and other current assets	$	4,485	$	9,993	$	986
Currency forward contracts	Other non-current assets	320		—		155
Derivative instruments in liability positions:
Currency forward contracts	Accrued liabilities	28		—		1,081
Currency forward contracts	Other long-term liabilities	—		—		12
Derivative instruments not designated as cash flow hedges:
Derivative instruments in asset positions:
Currency forward contracts	Prepaid expenses and other current assets	4,458		2,754		302
Derivative instruments in liability positions:
Currency forward contracts	Accrued liabilities	738		924		650

The following table presents the statement of operations effect and classification of derivative instruments (in thousands):



	Statement of Operations Classification	Three Months Ended June 30,						Six Months Ended June 30,
	Statement of Operations Classification	2015			2014			2015			2014
Currency Forward and Option Contracts:
Derivative instruments designated as cash flow hedges:
Gain (loss) recognized in other comprehensive income or loss	—	$	(742	)	$	(634	)	$	4,840		$	70
Gain reclassified from accumulated other comprehensive income or loss to income for the effective portion	Cost of sales	1,690			690			3,947			1,499
Loss recognized in income for amount excluded from effectiveness testing and for the ineffective portion	Net sales	(2		)	—			(17		)	—
Loss recognized in income for amount excluded from effectiveness testing and for the ineffective portion	Cost of sales	(88		)	(186		)	(210		)	(208		)
Derivative instruments not designated as cash flow hedges:
Gain (loss) recognized in income	Other non-operating expense	(356		)	(506		)	2,580			(1,971		)

NOTE 12—COMMITMENTS AND CONTINGENCIES

Inventory Purchase Obligations

Inventory purchase obligations consist of open production purchase orders and other commitments for raw materials and sourced apparel, footwear, accessories and equipment. At June 30, 2015, inventory purchase obligations were $364,435,000.

COLUMBIA SPORTSWEAR COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

Litigation

The Company is a party to various legal claims, actions and complaints from time to time. Although the ultimate resolution of legal proceedings cannot be predicted with certainty, management believes that disposition of these matters will not have a material adverse effect on the Company’s consolidated financial statements.

NOTE 13—FAIR VALUE MEASURES

Certain assets and liabilities are reported at fair value on either a recurring or nonrecurring basis. Fair value is defined as an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants, under a three-tier fair value hierarchy that prioritizes the inputs used in measuring fair value as follows:



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

Assets and liabilities measured at fair value on a recurring basis as of June 30, 2015 are as follows (in thousands):



	Level 1		Level 2		Level 3		Total
Assets:
Cash equivalents
Money market funds	$	116,316	$	—	$	—	$	116,316
Time deposits	102,756		—		—		102,756
Reverse repurchase agreements	—		20,000		—		20,000
U.S. Government-backed municipal bonds	—		6,775		—		6,775
Available-for-sale short-term investments⁽¹⁾
Certificates of deposit	—		10,291		—		10,291
U.S. Government-backed municipal bonds	—		35,481		—		35,481
Other short-term investments
Mutual fund shares	656		—		—		656
Other current assets
Derivative financial instruments (Note 11)	—		8,943		—		8,943
Other non-current assets
Derivative financial instruments (Note 11)	—		320		—		320
Mutual fund shares	6,874		—		—		6,874
Total assets measured at fair value	$	226,602	$	81,810	$	—	$	308,412
Liabilities:
Accrued liabilities
Derivative financial instruments (Note 11)	$	—	$	766	$	—	$	766
Total liabilities measured at fair value	$	—	$	766	$	—	$	766

COLUMBIA SPORTSWEAR COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

Assets and liabilities measured at fair value on a recurring basis as of December 31, 2014 are as follows (in thousands):



	Level 1		Level 2		Level 3		Total
Assets:
Cash equivalents
Money market funds	$	94,112	$	—	$	—	$	94,112
Time deposits	45,187		—		—		45,187
Certificates of deposit	—		1,470		—		1,470
Reverse repurchase agreements	—		40,000		—		40,000
U.S. Government-backed municipal bonds	—		5,812		—		5,812
Available-for-sale short-term investments⁽¹⁾
Certificates of deposit	—		3,184		—		3,184
U.S. Government-backed municipal bonds	—		23,598		—		23,598
Other short-term investments
Mutual fund shares	485		—		—		485
Other current assets
Derivative financial instruments (Note 11)	—		12,747		—		12,747
Other non-current assets
Mutual fund shares	6,039		—		—		6,039
Total assets measured at fair value	$	145,823	$	86,811	$	—	$	232,634
Liabilities:
Accrued liabilities
Derivative financial instruments (Note 11)	$	—	$	924	$	—	$	924
Total liabilities measured at fair value	$	—	$	924	$	—	$	924

COLUMBIA SPORTSWEAR COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

Assets and liabilities measured at fair value on a recurring basis as of June 30, 2014 are as follows (in thousands):



	Level 1		Level 2		Level 3		Total
Assets:
Cash equivalents
Money market funds	$	147,953	$	—	$	—	$	147,953
Time deposits	25,148		14,824		—		39,972
U.S. Government-backed repurchase agreements	—		40,000		—		40,000
Available-for-sale short-term investments⁽¹⁾
Certificates of deposit	—		3,429		—		3,429
Variable-rate demand notes	—		18,675		—		18,675
U.S. Government-backed municipal bonds	—		4,584		—		4,584
Other short-term investments
Mutual funds shares	550						550
Other current assets
Derivative financial instruments (Note 11)			1,288				1,288
Other non-current assets
Derivative financial instruments (Note 11)	—		155		—		155
Mutual fund shares	5,749		—		—		5,749
Total assets measured at fair value	$	179,400	$	82,955	$	—	$	262,355
Liabilities:
Accrued liabilities
Derivative financial instruments (Note 11)	$	—	$	1,731	$	—	$	1,731
Other long-term liabilities
Derivative financial instruments (Note 11)	—		12		—		12
Total liabilities measured at fair value	$	—	$	1,743	$	—	$	1,743


⁽¹⁾	Investments have remaining maturities of less than one year.

Level 1 instrument valuations are obtained from real-time quotes for transactions in active exchange markets involving identical assets. Level 2 instrument valuations are obtained from inputs, other than quoted market prices in active markets, which are directly or indirectly observable in the marketplace and quoted prices in markets with limited volume or infrequent transactions.

Non-recurring fair value measurements

There were no material assets and liabilities measured at fair value on a nonrecurring basis as of June 30, 2015, December 31, 2014 or June 30, 2014.

NOTE 14—RELATED PARTY TRANSACTIONS

On January 1, 2014, the Company commenced operations of a majority-owned joint venture in mainland China. Upon commencement, the joint venture entered into Transition Services Agreements (“TSAs”) with Swire, the non-controlling shareholder in the joint venture, under which Swire renders administrative and information technology services on behalf of the joint venture. The joint venture incurred service fees, valued under the TSAs at Swire's cost, of $2,120,000 and $2,173,000 during the three months ended June 30, 2015 and 2014, respectively, and $3,875,000 and $4,880,000 during the six months ended June 30, 2015 and 2014, respectively. These fees are included in selling, general and administrative expenses in the Condensed Consolidated Statements of Operations. In addition, the joint venture pays Swire sourcing fees related to the purchase of certain inventory. These sourcing fees are capitalized into inventories and charged to cost of sales as the inventories are sold. The joint venture did not incur sourcing fees for the three months ended June 30, 2015. For the three months ended June 30, 2014, the joint venture incurred sourcing fees of $8,000. For the six months ended June 30, 2015 and 2014, the joint venture incurred sourcing fees of $289,000 and $293,000, respectively.

COLUMBIA SPORTSWEAR COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

During the six months ended June 30, 2015 and 2014, both the Company and Swire funded long-term loans to the joint venture. The Company's loan has been eliminated in consolidation, while the Swire loan is reflected as note payable to related party in the Condensed Consolidated Balance Sheet as of June 30, 2015 and 2014 and December 31, 2014. The note with Swire, in the principal amount of 97,600,000 RMB (US$15,739,000 at June 30, 2015), matures on December 31, 2018 and bears interest at a fixed annual rate of 7%. Interest expense related to this note was $278,000 and $277,000 for the three months ended June 30, 2015 and 2014, respectively and $552,000 and $487,000 for the six months ended June 30, 2015 and 2014, respectively.

As of June 30, 2015 and 2014 and December 31, 2014, net payables to Swire for service fees, interest expense and miscellaneous expenses totaled $6,769,000, $5,044,000 and $3,651,000, respectively, and were included in accounts payable in the Condensed Consolidated Balance Sheets.

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

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

This quarterly report contains forward-looking statements. Forward-looking statements include any statements related to our expectations regarding future performance or market position, including any statements regarding anticipated sales, gross margins and operating margins across markets, including from the operations of our China joint venture and prAna subsidiary, profitability and the effect of specified factors on profitability for 2015, expenses, input costs, effects of unseasonable weather on our results of operations, inventory levels, investments in our business, investments in and implementation of our information technology systems, our direct-to-consumer channels and other capital expenditures, access to raw materials and factory capacity, financing and working capital requirements and resources, tax rates and pre-tax income, and our exposure to market risk associated with interest rates and foreign currency exchange rates.

These forward-looking statements, and others we make from time to time, are subject to a number of risks and uncertainties. Many factors may cause actual results to differ materially from those projected in forward-looking statements, including the risks described below in Part II, Item 1A, Risk Factors. We do not undertake any duty to update forward-looking statements after the date they are made or to conform them to actual results or to changes in circumstances or expectations.

Our Business

As one of the largest outdoor and active lifestyle apparel and footwear companies in the world, we design, source, market and distribute active outdoor and lifestyle apparel, footwear, accessories and equipment under the Columbia, Mountain Hardwear, Sorel, prAna and Montrail brands. Our products are sold through a mix of wholesale distribution channels, our own direct-to-consumer channels, and independent distributors. In addition, we license some of our trademarks across a range of apparel, footwear, accessories and equipment.

The popularity of outdoor activities, changing design trends, consumer adoption of innovative performance technologies, variations in seasonal weather, and the availability and desirability of competitor alternatives affect consumer desire for our products. Therefore, we seek to drive, anticipate and respond to trends and shifts in consumer preferences by adjusting our product offerings, developing new products with innovative performance features and designs, and creating persuasive and memorable marketing communications to generate consumer awareness, demand and retention. Failure to anticipate or respond to consumer needs and preferences in a timely and adequate manner could have a material adverse effect on our sales and profitability.

Seasonality and Variability of Business

Our business is affected by the general seasonal trends common to the industry, including seasonal weather and discretionary consumer shopping and spending patterns. Our products are marketed on a seasonal basis and our sales are weighted substantially toward the third and fourth quarters, while our operating costs are more equally distributed throughout the year. The expansion of our direct-to-consumer operations has increased the proportion of sales, profits and cash flows that we generate in the fourth calendar quarter. As a result, our sales and profits tend to be highest in the third and fourth calendar quarters. In 2014, approximately 60% of our net sales and approximately 90% of our profitability were realized in the second half of the year, illustrating our dependence upon sales results in the second half of the year, as well as the less seasonal nature of our operating costs.

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

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

Business Developments

On January 1, 2014 we commenced operations of a majority-owned joint venture in mainland China with Swire Resources, Limited (“Swire”). As a 60% majority-owned entity, the joint venture's operations are included in our consolidated financial results.

On May 30, 2014, we purchased 100% of the equity interest in prAna Living LLC (“prAna”) for $188.5 million, net of acquired cash. PrAna is a lifestyle apparel brand sold through select specialty and online retailers across North America, as well as through five company-owned retail stores, an e-commerce site and direct-mail catalogs. The acquisition of prAna strengthens

and diversifies our brand portfolio and generally offsets some of the more seasonal sales effects found within our other brands. The acquisition was funded with cash on hand.

Business Outlook

We expect 2015 profitability to be affected by the following major factors:


•	Net sales growth in the Columbia and Sorel brands across our United States, Canadian and European wholesale channels;


•	Continued growth of our brick-and-mortar and e-commerce direct-to-consumer sales in the United States and Canada, including the planned addition of 14 new stores in the United States and one in Canada;


•	Financial results of the prAna business, which was acquired on May 30, 2014;


•	Difficult economic and/or competitive environments in certain key international markets, particularly Russia, Korea and China; and


•	The effects of changes in foreign currency exchange rates on sales, gross margin and operating income.

Consistent with the historical seasonality of the business, we anticipate 2015 profitability to be heavily concentrated in the second half of the year.

We implemented our new enterprise resource planning (“ERP”) system in our international distributor businesses in May 2015, which joins our North American wholesale businesses and the majority of our global supply chain operations on our new ERP platform. The next planned phase of our global ERP system initiative is to transition our Japan business to our new ERP system in 2016.

The global business climate continues to present us with a great deal of uncertainty, making it difficult to predict future results. Factors that could significantly affect our full year 2015 outlook include:


•	Unseasonable weather conditions or other unforeseen factors affecting consumer demand and the resulting effect on order cancellations, sales returns, customer accommodations, reorders, direct-to-consumer sales, promotional activities, and suppressed demand in subsequent seasons;


•	Macroeconomic trends affecting consumer traffic and spending in brick and mortar retail channels;


•	The rate of new store expansion and productivity of our existing stores and e-commerce sites in our global direct-to-consumer operations;


•	Changes in mix and volume of full price sales in relation to closeout product sales and promotional sales activity;


•	Production capacity constraints and associated risks, including timely delivery, quality and non-compliance;


•	Costs and business interruption risks related to our supply chain;


•	Risks associated with information technology infrastructure investments and projects, including our multi-year global ERP system implementation;


•	Our ability to effectively manage operating costs;


•	Continued political and economic uncertainty, which is creating headwinds in key global markets; and


•	Fluctuating currency exchange rates.

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

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

Results of Operations

The following discussion of our results of operations and liquidity and capital resources should be read in conjunction with the Condensed Consolidated Financial Statements and accompanying Notes that appear elsewhere in this quarterly report. The following discussion includes references to constant-dollar net sales percentage changes, which exclude the effect of changes in foreign currency exchange rates between comparable reporting periods when translating net sales recognized in foreign currencies into U.S. dollars. All references to quarters relate to the quarter ended June 30 of the particular year.

Highlights of the Second Quarter of 2015


•	Net sales for the second quarter of 2015 increased $56.0 million, or 17% (21% constant-dollar), to $380.2 million from $324.2 million for the second quarter of 2014.

•

Net loss attributable to Columbia Sportswear Company for the second quarter of 2015 was $6.5 million, or $(0.09) per diluted share, compared to a net loss of $6.3 million, or $(0.09) per diluted share, for the second quarter of 2014, which included a non-recurring tax benefit of $5.6 million, or $0.08 per diluted share, reflecting the resolution of specific uncertain tax positions, and acquisition costs totaling approximately $2.1 million net of tax, or $(0.03) per diluted share, related to the purchase of prAna Living, LLC.


•	We paid a quarterly cash dividend of $0.15 per share, or $10.6 million, in the second quarter of 2015.

The following table sets forth, for the periods indicated, the percentage relationship to net sales of specified items in our Condensed Consolidated Statements of Operations:



	Three Months Ended June 30,				Six Months Ended June 30,
	2015		2014		2015		2014
Net sales	100.0	%	100.0	%	100.0	%	100.0	%
Cost of sales	54.9		55.6		53.4		54.4
Gross profit	45.1		44.4		46.6		45.6
Selling, general and administrative expenses	47.7		50.0		42.8		43.5
Net licensing income	0.2		0.4		0.3		0.4
Income (loss) from operations	(2.4	)	(5.2	)	4.1		2.5
Interest income, net	0.2		0.1		0.1		0.1
Interest expense on note payable to related party	(0.1	)	(0.1	)	(0.1	)	(0.1	)
Other non-operating income (expense)	0.1		(0.1	)	(0.2	)	(0.1	)
Income (loss) before income tax	(2.2	)	(5.3	)	3.9		2.4
Income tax benefit (expense)	0.7		3.2		(1.3	)	(0.2	)
Net income (loss)	(1.5	)	(2.1	)	2.6		2.2
Net income (loss) attributable to non-controlling interest	0.2		(0.1	)	0.3		0.1
Net income (loss) attributable to Columbia Sportswear Company	(1.7	)%	(2.0	)%	2.3	%	2.1	%

Quarter Ended June 30, 2015 Compared to Quarter Ended June 30, 2014

Net Sales: Consolidated net sales increased $56.0 million, or 17% (21% constant-dollar), to $380.2 million for the second quarter of 2015 from $324.2 million for the comparable period in 2014.

Sales by Geographic Region

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



	Three Months Ended June 30,
						Constant Dollar % Change ⁽¹⁾

	2015		2014		% Change
	(In millions, except for percentage changes)
United States	$	212.1	$	146.3	45%	45%
LAAP	97.0		96.1		1%	7%
EMEA	59.8		72.9		(18)%	(11)%
Canada	11.3		8.9		27%	43%
	$	380.2	$	324.2	17%	21%

⁽¹⁾Constant-dollar % change information excludes the effect of changes in foreign currency exchange rates vs. the U.S. dollar between comparable reporting periods. To calculate constant-dollar net sales percentage changes, net sales in foreign currencies for the current period are translated into U.S. dollars at the average exchange rates that were in effect during the comparable period of the prior year. The company uses constant-dollar information to provide a framework to assess how the business performed excluding the effects of changes in the exchange rates used to translate net sales generated in foreign currencies into U.S. dollars.

Net sales in the United States increased $65.8 million, or 45%, to $212.1 million for the second quarter of 2015 from $146.3 million for the comparable period in 2014. The net sales increase in the United States was primarily the result of a net sales increase in the Columbia brand, and $19.0 million of incremental prAna brand net sales. The United States net sales increase was led by an increase in net sales in our wholesale business, followed by our direct-to-consumer business. The net sales increase in our wholesale business consisted of net sales increases across all brands and both product categories resulting from increased advance orders, stronger reorders driven by favorable sell-through across all U.S. wholesale channels, and a prior year shift in timing of shipments of spring advance orders from April 2014 to March 2014 at the request of certain customers to mitigate risk related to the go-live of our ERP system in the United States in early April 2014. The net sales increase in our direct-to-consumer business was led by increased net sales within our retail stores, followed by increased e-commerce net sales. At June 30, 2015, we operated 95 retail stores, compared with 79 retail stores at June 30, 2014.

Net sales in the Latin America and Asia Pacific (“LAAP”) region increased $0.9 million, or 1% (7% constant-dollar), to $97.0 million for the second quarter of 2015 from $96.1 million for the comparable period in 2014. The net sales increase in the LAAP region was concentrated in the Columbia brand and consisted of a net sales increase in our China joint venture, partially offset by net sales decreases in Korea, our LAAP distributor business, and Japan. The net sales increase in our China joint venture was driven by discounted pricing that drove an increase in net sales volume, as well an increase in e-commerce net sales. The net sales decrease in Korea reflected continued business weakness amid the extremely competitive and promotional outdoor sector in that country. The net sales decrease in our LAAP distributor business primarily reflected a shift in timing of shipments from the second quarter of 2015 to the first quarter of 2015. The net sales decrease in Japan was negatively affected by foreign currency exchange rates, which offset a net sales increase in local currency.

Net sales in the Europe, Middle East and Africa (“EMEA”) region decreased $13.1 million, or 18% (11% constant-dollar), to $59.8 million for the second quarter of 2015 from $72.9 million for the comparable period in 2014. The EMEA net sales decrease was concentrated in our EMEA distributor business largely attributable to a decline in net sales to our Russian distributor, where challenging economic conditions persist.

Net sales in Canada increased $2.4 million, or 27% (43% constant-dollar), to $11.3 million for the second quarter of 2015 from $8.9 million for the comparable period in 2014. The increase in net sales in Canada primarily consisted of a net sales increase in the Columbia brand, and $1.0 million of incremental prAna brand net sales. The net sales increase in Canada reflected net sales increases in our wholesale and direct-to-consumer businesses, and reflected a prior year shift in timing of shipments of spring advance orders from April 2014 to March 2014 at the request of certain customers to mitigate risk related to the go-live of our ERP system in the United States in early April 2014.

Sales by Brand

Net sales by brand are summarized in the following table:



Three Months Ended June 30,
			Constant Dollar % Change

2015	2014	% Ch