Famous Footwear 2011 Annual Report Download - page 69

2011 BROWN SHOE COMPANY, INC. FORM 10-K 67
The Company’s hedging strategy uses forward contracts as cash fl ow hedging instruments, which are recorded in the
Company’s consolidated balance sheets at fair value. The e ective portion of gains and losses resulting from changes in the
fair value of these hedge instruments are deferred in accumulated other comprehensive income and reclassifi ed to earnings
in the period that the hedged transaction is recognized in earnings.
As of January 28, 2012, the Company had forward contracts maturing at various dates through February 2013. The contract
amount represents the net amount of all purchase and sale contracts of a foreign currency.
Contract Amount
(U.S. $ equivalent in thousands) January 28, 2012 January 29, 2011
Financial Instruments
Chinese yuan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 43,407 $ 13,199
U.S. dollars (purchased by the Company’s Canadian division with Canadian dollars) . . . . . . . . . . . . . . . . . 19,002 19,200
Euro . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,293 5,977
Great Britain pounds sterling . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,947 229
Japanese yen . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,365 1,344
New Taiwanese dollars . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 830 1,263
Other currencies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,107 795
$ 75,951 $ 42,007
The classifi cation and fair values of derivative instruments designated as hedging instruments included within the
consolidated balance sheet as of January 28, 2012 and January 29, 2011 are as follows:
Asset Derivatives Liability Derivatives
($ in thousands) Balance Sheet Location Fair Value Balance Sheet Location Fair Value
Foreign exchange forwards contracts:
January 28, 2012 . . . . . . . . . . . . . . Prepaid expenses and other current assets $ 839 Other accrued expenses $ 633
January 29, 2011 . . . . . . . . . . . . . . Prepaid expenses and other current assets $ 223 Other accrued expenses $ 567
During 2011 and 2010, the e ect of derivative instruments in cash fl ow hedging relationships on the consolidated statement
of earnings was as follows:
($ in thousands) Fiscal Year Ended 2011 Fiscal Year Ended 2010
Gain (Loss) Gain (Loss) Gain (Loss)
Foreign exchange forward contracts: Recognized in Reclassifi ed from Recognized in Loss Reclassifi ed
Income Statement Classifi cation OCI on Accumulated OCI OCI on from Accumulated
Gains (Losses) - Realized Derivatives into Earnings Derivatives OCI into Earnings
Net sales. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (99) $ 145 $ (242) $ (232)
Cost of goods sold . . . . . . . . . . . . . . . . . . . . . . . . . 335 90 442 (34)
Selling and administrative expenses . . . . . . . . . . . . . . . 232 (169) 41 (91)
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . 14 – (7) –
All of the gains and losses currently included within accumulated other comprehensive income associated with the
Company’s foreign exchange forward contracts are expected to be reclassifi ed into net earnings within the next 12 months.
Additional information related to the Company’s derivative fi nancial instruments are disclosed within Note 1 and Note 14 to
the consolidated fi nancial statements.
14. FAIR VALUE MEASUREMENTS
Fair Value Hierarchy
Fair value measurement disclosures specify a hierarchy of valuation techniques based upon whether the inputs to those
valuation techniques refl ect assumptions other market participants would use based upon market data obtained from
independent sources (“observable inputs”) or refl ect the Company’s own assumptions of market participant valuation
(“unobservable inputs”). In accordance with the fair value guidance, the hierarchy is broken down into three levels based on
the reliability of the inputs as follows:
• Level 1 – Quoted prices in active markets that are unadjusted and accessible at the measurement date for identical,
unrestricted assets or liabilities;
• Level 2 – Quoted prices for identical assets and liabilities in markets that are not active, quoted prices for similar assets
and liabilities in active markets or fi nancial instruments for which signifi cant inputs are observable, either directly or
indirectly; and
• Level 3 – Prices or valuations that require inputs that are both signifi cant to the fair value measurement and unobservable.
In determining fair value, the Company utilizes valuation techniques that maximize the use of observable inputs and
minimize the use of unobservable inputs to the extent possible as well as considers counterparty credit risk in its
assessment of fair value. Classifi cation of the fi nancial or non-fi nancial asset or liability within the hierarchy is determined
based on the lowest level input that is signifi cant to the fair value measurement.