Coach 2012 Annual Report Download - page 70

COACH, INC.
Notes to Consolidated Financial Statements (Continued)
(dollars and shares in thousands, except per share data)
9. DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES − (continued)
related to these loans, the Company entered into forward exchange and cross-currency swap contracts, the
terms of which include the exchange of foreign currency fixed interest for U.S. dollar fixed interest and an
exchange of the foreign currency and U.S. dollar based notional values at the maturity dates, the latest of
which is June 2013.
The Company’s derivative instruments are primarily designated as cash flow hedges. The effective portion
of gains or losses on the derivative instruments are reported as a component of other comprehensive income
and reclassified into earnings in the same periods during which the hedged transaction affects earnings. The
ineffective portion of gains or losses on the derivative instruments are recognized in current earnings and are
included within net cash provided by operating activities.
The following tables provide information related to the Company’s derivatives:
Derivatives Designated as Hedging Instruments
Balance Sheet
Classification
Fair Value
At June 30,
2012
At July 2,
2011
Foreign exchange contracts Other Current Assets $1,459 $2,020
Total derivative assets ........... $1,459 $2,020
Foreign exchange contracts Accrued Liabilities $4,098 $1,713
Total derivative liabilities......... $4,098 $1,713
Amount of Loss Recognized in OCI on
Derivatives (Effective Portion)
Year Ended
Derivatives in Cash Flow Hedging Relationships
June 30,
2012
July 2,
2011
Foreign exchange contracts ........................ $(2,095) $(9,394)
Total ........................................ $(2,095) $(9,394)
For fiscal 2012 and fiscal 2011, the amounts above are net of tax of $1,858 and $5,960, respectively.
Amount of Loss Reclassified from
Accumulated OCI into Income
(Effective Portion)
Year Ended
Location of Loss Reclassified from Accumulated OCI
into Income (Effective Portion)
June 30,
2012
July 2,
2011
Cost of Sales ................................. $(5,281) $(15,886)
Total ........................................ $(5,281) $(15,886)
During fiscal 2012 and fiscal 2011, there were no material gains or losses recognized in income due to
hedge ineffectiveness.
The Company expects that $994 of net derivative losses included in accumulated other comprehensive
income at June 30, 2012 will be reclassified into earnings within the next 12 months. This amount will vary
due to fluctuations in the Japanese yen and Canadian dollar exchange rates.
Hedging activity affected accumulated other comprehensive income, net of tax, as follows:
Year Ended
June 30,
2012
July 2,
2011
Balance at beginning of period ....................... $(1,465) $ (2,092)
Net losses transferred to earnings ..................... 3,100 10,021
Change in fair value, net of tax ...................... (2,095) (9,394)
Balance at end of period ........................... $ (460) $ (1,465)
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