Columbia Sportswear 2010 Annual Report Download - page 75

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COLUMBIA SPORTSWEAR COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
The classification of effective hedge results in the Consolidated Statements of Operations is the same as that
of the underlying exposure. Results of hedges of product costs are recorded in cost of sales when the underlying
hedged transaction affects income. Unrealized derivative gains and losses, which are recorded in current assets
and liabilities, respectively, are non-cash items and therefore are taken into account in the preparation of the
Condensed Consolidated Statements of Cash Flows based on their respective balance sheet classifications.
The Company uses derivative instruments not formally designated as hedges to manage the exchange rate
risk associated with both the remeasurement of monetary assets and liabilities and anticipated transactions that do
not qualify as the hedged items in cash flow hedging relationships. The change in fair value of these instruments
is recognized immediately in cost of sales or SG&A expense, depending on the underlying exposure.
The following table presents the gross notional amount of outstanding derivative instruments (in thousands):
December 31,
2010 2009
Derivative instruments designated as cash flow hedges:
Currency forward contracts ....................................... $ 86,260 $82,730
Currency option contracts ........................................ 4,500 —
Derivative instruments not designated as cash flow hedges:
Currency forward contracts ....................................... 179,382 61,017
At December 31, 2010, approximately $1,349,000 of deferred net losses 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 December 31, 2010, the Company’s derivative contracts had a remaining maturity of approximately two
years or less. All the counterparties to these transactions had investment grade short-term credit ratings. 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 $1,000,000 at December 31, 2010. The majority of the
Company’s derivative counterparties have strong credit ratings and, as a result, the Company does not require
collateral to facilitate transactions. The Company does not hold derivatives featuring credit-related contingent
terms. In addition, the Company is not a party to any derivative master agreement featuring credit-related
contingent terms. Finally, the Company has not pledged assets or posted collateral as a requirement for entering
into or maintaining derivative positions.
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