Columbia Sportswear 2002 Annual Report Download - page 24

from the timing of shipments to wholesale customers for the fall outerwear season. As our sportswear and
footwear product lines mature, we expect an increasing impact on seasonal shipments and corresponding working
capital requirements. We believe that our liquidity requirements for at least the next 12 months will be
adequately covered by existing cash, cash provided by operations and existing short-term borrowing
arrangements.
The following table presents our estimated contractual commitments (in thousands):
Year ending December 31,
2003 2004 2005 2006 2007 Thereafter
Debtrepayments .............................. $4,498 $4,498 $4,498 $4,498 $3,571 $3,571
Operating leases (1):
Non-related parties .......................... 2,658 2,175 1,488 1,076 772 735
Related parties .............................. 370 370 370 370 370 1,481
(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 utilize 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 sales, purchases and
other costs from exchange rate movements. We manage this risk by using forward exchange contracts and
purchased options to hedge certain 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 hedges was unfavorable by $2.8 million and $0.3 million as of December 31, 2002 and
2001, respectively. A 10% change in the Euro, Japanese yen and Canadian dollar exchange rates would have
resulted in the fair value fluctuating approximately $8.1 million at December 31, 2002 and $6.0 million at
December 31, 2001. 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 cash flow exposure due to rate changes on our $20.6 million and $25.0 million of long-term debt as of
December 31, 2002 and 2001, respectively. We do, however, have cash flow exposure on our committed and
uncommitted bank lines of credit because interest 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 is 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
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