Supercuts 2008 Annual Report Download - page 67

On January 3, 2007, the Company terminated its remaining Canadian forward foreign currency contracts entered into on February 1, 2006
having a $14.5 million notional amount. The termination resulted in a deferred gain of $0.4 million which is recorded in AOCI in the
Consolidated Balance Sheet. The deferred gain will be recorded into income through May 31, 2009 as the forecasted foreign currency
transactions are recognized in earnings. Approximately $0.2 million and $0.1 million of the deferred gain was amortized against cost of sales
during fiscal years 2008 and 2007, respectively, resulting in a remaining deferred gain of $0.1 million and $0.3 million in AOCI at June 30, 2008
and 2007.
In September 2007 the Company entered into several forward foreign currency contracts to hedge the U.S. Dollar value of future Chinese
Yuan denominated payments to Chinese vendors. The foreign currency contracts totaled approximately 6.0 million Chinese Yuan or $0.8 million
U.S. dollars and have maturation dates between April 2008 and September 2008. The purpose of the forward contracts is to protect against
adverse movements in the Chinese Yuan exchange rate. The contracts were designated and are effective as cash flow hedges of Chinese Yuan
denominated foreign currency firm commitments. These cash flow hedges were recorded at fair value within other current assets in the
Condensed Consolidated Balance Sheet, with a corresponding offset in other comprehensive income within shareholders' equity.
The table below provides information about the Company's forecasted sales transactions in U.S. dollar equivalents. (The information is
presented in U.S. dollars because that is the Company's reporting currency.) The table summarizes information on transactions that are sensitive
to foreign currency exchange rates and the related foreign currency forward exchange agreements. For the foreign currency forward exchange
agreements, the table presents the notional amounts and weighted average exchange rates by expected (contractual) maturity dates. These
notional amounts generally are used to calculate the contractual payments to be exchanged under the contract.
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Expected Transaction date June 30,
June 30, 2008
Fair Value
2009 2010 Total
Forecasted Transactions
(U.S.$ equivalent in thousands)
Inventory Shipments to Canadian Salons (U.S.$)
$
5,621
$
4,684
$
10,305
$
(460
)
Business Travel to Asian Countries (U.S. $)
571
—
571
27
Foreign Currency Forward Exchange Agreements
(U.S.$ equivalent in thousands)
Pay $CND and CNY/receive $U.S.:
Contract Amount
$
6,192
$
4,684
$
10,876
$
(433
)
Average Contractual Exchange Rate
0.8633
0.9368
0.8949