COLUMBIA SPORTSWEAR COCOLM

COLUMBIA SPORTSWEAR CO Income Taxes Disclosure

10-KFiled Feb 25, 20266 min read
NOTE 10 — INCOME TAXES

INCOME TAX PROVISION

Income before income tax consisted of the following:

Year Ended December 31,
(in thousands)
202520242023
U.S. operations
$(1,738)$83,120 $125,578 
Foreign operations231,362 215,067 200,614 
Income before income tax$229,624 $298,187 $326,192 

Components of the provision for income taxes consisted of the following:

Year Ended December 31,
(in thousands)
202520242023
Current:
Federal$7,757 $32,073 $39,939 
State and local4,588 8,394 6,879 
Non-U.S.
39,633 40,651 33,109 
51,978 81,118 79,927 
Deferred:
Federal(3,732)(11,925)(5,492)
State and local(2,986)(1,258)(1,589)
Non-U.S.
7,140 6,979 1,946 
422 (6,204)(5,135)
Income tax expense$52,400 $74,914 $74,792 
The following table presents a reconciliation of the federal statutory tax rate to the effective tax rate reported in the financial statements:

Year Ended December 31,
202520242023
(in thousands, except for percentages of income before tax)Amount%Amount%Amount%
U.S. federal statutory tax rate$48,221 21.0 %$62,619 21.0 %$68,500 21.0 %
State and local income taxes, net of federal income tax effect1,717 0.7 5,802 1.9 5,567 1.7 
Foreign tax effects:
Canada:
Non-federal taxes3,044 1.3 3,811 1.3 4,198 1.3 
Other948 0.4 689 0.2 859 0.3 
China:
Other
7,181 3.1 2,430 0.8 4,372 1.3 
Korea:
Changes in valuation allowance480 0.2 6,355 2.1 — — 
Other95 — 244 0.1 956 0.3 
Switzerland:
Statutory tax rate difference between Switzerland and the U.S.(20,208)(8.8)(17,489)(5.9)(15,113)(4.6)
Non-federal taxes10,935 4.8 9,536 3.2 7,137 2.2 
Changes in valuation allowance
(141)(0.1)(538)(0.2)7,001 2.1 
Intangible assets— — — — (9,458)(2.9)
Other27 — (745)(0.2)(2,059)(0.6)
Other foreign jurisdictions490 0.3 1,062 0.4 1,542 0.5 
Enactment of new tax laws:
Section 987 regulations
(2,860)(1.2)— — — — 
Effect of cross-border tax laws:
Other
509 0.3 2,981 1.0 4,118 1.3 
Tax credits:
Research and developments tax credits(622)(0.3)(2,223)(0.7)(2,373)(0.7)
Foreign tax credits(3,640)(1.6)(1,676)(0.6)(1,674)(0.5)
Nontaxable or nondeductible items:
Impairment of goodwill
2,553 1.1 — — — — 
Other
1,571 0.7 1,733 0.6 1,141 0.3 
Changes in unrecognized tax benefits1,598 0.7 323 0.1 790 0.2 
Other adjustments
502 0.2 — — (712)(0.3)
Effective tax rate$52,400 22.8 %$74,914 25.1 %$74,792 22.9 %
(a) State taxes in Oregon, California, Texas, Florida, New Jersey, and Georgia in the current period made up the majority (greater than 50 percent) of the tax effect in this category.
DEFERRED INCOME TAX BALANCES

Significant components of the Company's deferred taxes consisted of the following:

As of December 31,
(in thousands)
2025
2024
Deferred tax assets:
Accruals and allowances$41,251 $37,436 
Operating lease liabilities
120,198 114,079 
Capitalized inventory costs18,087 17,895 
Sales reserves15,083 16,648 
Share-based compensation
11,529 10,682 
Net operating loss carryforwards3,156 2,550 
Depreciation and amortization6,398 10,473 
Capitalized research and development expenditures18,087 23,392 
Tax credits3,241 153 
Other1,399 3,153 
Gross deferred tax assets238,429 236,461 
Valuation allowance(11,182)(10,670)
Net deferred tax assets227,247 225,791 
Deferred tax liabilities:
Depreciation and amortization(1,540)(3,149)
Prepaid expenses(3,044)(3,216)
Operating lease ROU assets
(104,927)(100,475)
Deferred tax liability associated with future repatriations(7,953)(7,849)
Foreign currency(2,689)(7,209)
Gross deferred tax liabilities(120,153)(121,898)
Total net deferred taxes$107,094 $103,893 

The Company records net deferred tax assets to the extent it believes these assets will more likely than not be realized. In making such a determination, the Company considers all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax-planning strategies, and results of recent operations. The Company has foreign net operating loss carryforwards of $15.0 million as of December 31, 2025, of which $14.5 million have a 15-year carryforward period, $0.2 million have a 5-year carryforward period, and $0.3 million have an unlimited carryforward period. As of December 31, 2025 and 2024, the net operating losses result in deferred tax assets of $3.2 million and $2.6 million, respectively, and were subject to a valuation allowance of $3.0 million and $2.5 million, respectively.

The Company has other foreign deferred tax assets which do not relate to net operating losses of $10.6 million and $10.7 million for the tax years ending December 31, 2025 and 2024. These foreign deferred tax assets which do not relate to net operating losses were subject to valuation allowances of $8.2 million and $8.2 million, respectively.
Net cash paid (refunds received) for income taxes consisted of the following:

Year Ended December 31,
(in thousands)
202520242023
Federal$36,065 $25,606 $43,000 
Aggregated state and local jurisdictions 1,940 4,875 5,855 
Disaggregated state and local jurisdictions:
California654 1,870 1,700 
Oregon(303)1,165 921 
Illinois— — 845 
New Jersey375 475 750 
New York428 492 929 
Minnesota
346 — — 
Texas
314 — — 
Florida
317 — — 
Pennsylvania
290 — — 
Aggregated foreign jurisdictions4,497 7,978 6,432 
Disaggregated foreign jurisdictions:
Canada10,931 12,313 14,447 
China 16,567 11,289 9,461 
Switzerland13,973 10,041 6,167 
Net cash paid for income taxes
$86,394 $76,104 $90,507 

As of December 31, 2025, the Company had accumulated undistributed earnings generated by the Company's foreign subsidiaries of $268.0 million. These earnings have been subject to U.S. tax, so any further taxes associated with such earnings would generally be limited to foreign withholdings and state taxes. The Company has recorded a deferred tax liability for these, except in the jurisdiction where the Company intends to indefinitely reinvest the earnings.

UNRECOGNIZED TAX BENEFITS

The Company conducts business globally and, as a result, the Company or one or more of its subsidiaries file income tax returns in the U.S. federal jurisdiction and various state and foreign jurisdictions. The Company is subject to examination by taxing authorities throughout the world, including major jurisdictions such as Canada, China, France, Japan, South Korea, Switzerland, and the U.S. The Company has effectively settled France tax examinations of all years through 2016, Canadian tax examinations of all years through 2018, China tax examinations of all years through 2018, U.S. tax examinations of all years through 2018, Japanese tax examinations of all years through 2019, and Swiss tax examinations of all years through 2019. The Korean National Tax Service concluded an audit of the Company's 2009 through 2013 corporate income tax returns in 2014, an audit of the Company's 2014 corporate income tax return in 2016, and an audit of 2016 through 2020 corporate income tax returns in 2022. Due to the nature of the findings in the 2009 through 2014 audits, the Company has invoked the Mutual Agreement Procedures outlined in the U.S.-Korean income tax treaty. The Company does not anticipate that adjustments relative to these findings, or any other ongoing tax audits, will result in material impacts to its financial condition, results of operations or cash flows. Other than the findings and audits previously noted, the Company is not currently under examination in any other major jurisdiction.
A reconciliation of the beginning and ending amount of gross unrecognized tax benefits is as follows:

Year Ended December 31,
(in thousands)
202520242023
Balance at beginning of year$10,064 $10,318 $10,177 
Increases related to prior year tax positions728 264 578 
Decreases related to prior year tax positions(523)(307)— 
Increases related to current year tax positions2,169 1,247 1,376 
Expiration of statute of limitations(1,402)(1,458)(1,813)
Balance at end of year$11,036 $10,064 $10,318 

Unrecognized tax benefits of $9.6 million, $8.8 million and $9.2 million would affect the effective tax rate if recognized as of December 31, 2025, 2024 and 2023, respectively.
The Company recognizes interest expense and penalties related to income tax matters in Income tax expense. The Company recognized a net increase of interest and penalties of $0.7 million, $0.8 million and $2.7 million in 2025, 2024, and 2023 respectively, all of which related to uncertain tax positions. The Company had $6.0 million and $5.3 million of accrued interest and penalties related to uncertain tax positions as of December 31, 2025 and 2024, respectively.

Historical Timeline

Fiscal YearFiled
2025Feb 25, 2026Showing above
2024Feb 27, 2025
2023Feb 26, 2024
2022Feb 23, 2023
2021Feb 24, 2022
2020Feb 25, 2021

About Income Taxes Disclosures

The income tax disclosure reveals how much a company actually pays in taxes versus what the statutory rate would predict. Analysts focus on the effective tax rate (ETR) reconciliation, which breaks down every item driving the gap between the 21% federal rate and the company's reported ETR — including R&D credits, foreign rate differentials, and state taxes. Deferred tax assets (DTAs) and their valuation allowances signal management's confidence in future profitability: a rising allowance suggests the company doubts it can use accumulated tax benefits. Uncertain tax benefit (UTB) reserves quantify exposure to IRS challenges on aggressive positions.

Key signals to watch: sudden ETR drops without clear operational reasons, large increases in valuation allowances, growing UTB balances, and significant unremitted foreign earnings. Post-TCJA, pay attention to GILTI and BEAT provisions that affect multinational tax structures. Compare the cash taxes paid (from the cash flow statement) against the income tax provision to gauge earnings quality.

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