Columbia Sportswear 2001 Annual Report Download - page 45

COLUMBIA SPORTSWEAR COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Ì (Continued)
There were no adjustments to net income in computing diluted earnings per share for the years ended
December 31, 2001, 2000 and 1999. A reconciliation of the common shares used in the denominator for
computing basic and diluted earnings per share is as follows (in thousands, except per share amounts):
Year Ended December 31,
2001 2000 1999
Weighted average common shares outstanding, used in computing basic
earnings per share ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 39,051 38,541 37,997
EÅect of dilutive stock options ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 789 1,067 415
Weighted-average common shares outstanding, used in computing
diluted earnings per share ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 39,840 39,608 38,412
Earnings per share of common stock:
BasicÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 2.27 $ 1.52 $ 0.87
Diluted ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 2.23 1.48 0.86
Earnings per share and weighted average shares outstanding above have been restated to reÖect the
three-for-two stock split that was distributed on June 4, 2001, to all shareholders of record at the close of
business on May 17, 2001.
Options to purchase an additional 34,000, 16,000, and 667,000 shares of common stock were outstanding
at December 31, 2001, 2000 and 1999, respectively, but were not included in the computation of diluted
earnings per share because their eÅect would be anti-dilutive.
Note 16 Ì Financial Risk Management and Derivatives
Our foreign currency risk management objective is to protect cash Öows resulting from sales, purchases
and other costs from the impact of exchange rate movements. The Company manages a portion of these
exposures with short-term strategies after giving consideration to market conditions, contractual agreements,
anticipated sale and purchase transactions, and other factors. Firmly committed and anticipated transactions
and the related receivables and payables may be hedged with forward exchange contracts or purchased
options. Premiums paid on purchased options are included in prepaid expenses and are recognized in earnings
ratably over the life of the option. Gains and losses arising from foreign currency forward and purchased option
contracts, and cross-currency swap transactions are recognized in cost of goods sold or selling, general and
administrative expenses as oÅsets of gains and losses resulting from the underlying hedged transactions. Hedge
eÅectiveness is determined by evaluating whether gains and losses on hedges will oÅset gains and losses on the
underlying exposures. This evaluation is performed at inception of the hedge and periodically over the life of
the hedge.
At December 31, 2001 and 2000, the Company had approximately $53,974,000 and $47,201,000
(notional) in forward exchange contracts. The net derivative gain (loss) included in the Company's liabilities
and deferred in other comprehensive income was $844,000 and $(1,615,000) at December 31, 2001 and 2000,
respectively.
The counterparties to derivative transactions are major Ñnancial institutions with high investment grade
credit ratings. However, this does not eliminate the Company's exposure to credit risk with these institutions.
This credit risk is generally limited to the unrealized gains in such contracts should any of these counterparties
fail to perform as contracted and is immaterial to any one institution at December 31, 2001 and 2000. To
manage this risk, the Company has established strict counterparty credit guidelines, which are continually
monitored and reported to Senior Management according to prescribed guidelines. As a result, the Company
considers the risk of counterparty default to be minimal.
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