Columbia Sportswear 2003 Annual Report Download - page 28

The following table presents our estimated contractual commitments (in thousands):
Year ending December 31,
2004 2005 2006 2007 2008 Thereafter Total
Debtrepayments ...................... $4,596 $4,596 $4,596 $3,572 $3,571 $ — $20,931
Operating leases (1):
Non-related parties ................ 3,036 1,927 1,487 1,101 687 429 8,667
Related parties ................... 449 449 449 449 449 1,347 3,592
(1) These operating lease commitments are not reflected on the consolidated balance sheet under accounting
principles generally accepted in the United States.
Quantitative and Qualitative Disclosures About Market Risk
We are exposed to market risks from fluctuations of foreign currency exchange rates and interest rates as a
result of our international sales, production and funding requirements. Our policy is to use financial instruments
to reduce market risk where internal netting and other strategies cannot be effectively employed. Foreign
currency and interest rate transactions are used only to the extent considered necessary to meet our objectives.
We do not enter into foreign currency or interest rate transactions for speculative purposes.
Our foreign currency risk management objective is to protect cash flows resulting from production
purchases, intercompany transactions and other costs from exchange rate movements. We manage this risk by
using forward exchange contracts and purchased options to hedge various firm as well as anticipated
commitments and the related receivables and payables, including third party or intercompany transactions.
Anticipated, but not yet firmly committed, transactions that we hedge carry a high level of certainty and are
expected to be recognized within one year. We use cross-currency swaps to hedge foreign currency denominated
payments related to intercompany loan agreements. Hedged transactions are denominated primarily in the Euro,
Japanese yen and Canadian dollars.
The fair value of our hedging contracts was unfavorable by $2.8 million at December 31, 2003 and
December 31, 2002. A 10% change in the Euro, Japanese yen and Canadian dollar exchange rates would have
resulted in the fair value fluctuating approximately $7.0 million at December 31, 2003 and $8.1 million at
December 31, 2002. Changes in fair value, resulting from foreign exchange rate fluctuations, would be
substantially offset by the change in value of the underlying hedged transactions.
Our exposure to market risk for changes in interest rates relates primarily to our debt obligations. We have
no exposure due to interest rate changes on our $16.3 million and $20.6 million of long-term debt as of
December 31, 2003 and 2002, respectively. We do, however, have cash flow exposure on our committed and
uncommitted bank lines of credit because interest on those lines floats and is based on LIBOR and other interest
rate indices.
Critical Accounting Policies and Estimates
Management’s discussion and analysis of our financial condition and results of operations are based on our
consolidated financial statements, which have been prepared in accordance with accounting principles generally
accepted in the United States. The preparation of these financial statements requires us to make various estimates
and judgments that affect reported amounts of assets, liabilities, sales, cost of sales and expenses and related
disclosure of contingent assets and liabilities. We believe that the estimates, assumptions and judgments involved
in the accounting policies described below have the greatest potential impact on our financial statements, so we
consider these to be our critical accounting policies and estimates. Because of the uncertainty inherent in these
matters, actual results could differ from the estimates we use in applying the critical accounting policies. We base
our ongoing estimates on historical experience and other various assumptions that we believe to be reasonable
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