Under Armour 2010 Annual Report Download - page 50

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When deemed necessary, we have used foreign currency forward contracts to reduce the risk from exchange
rate fluctuations on inter-company transactions and projected inventory purchases for our European and
Canadian subsidiaries. We do not enter into derivative financial instruments for speculative or trading purposes.
Based on the foreign currency forward contracts outstanding as of December 31, 2010, we receive US
Dollars in exchange for Canadian Dollars at a weighted average contractual forward foreign currency exchange
rate of 1.00 CAD per $1.00 and US Dollars in exchange for Euros at a weighted average contractual foreign
currency exchange rate of 0.76 EUR per $1.00. As of December 31, 2010, the notional value of our outstanding
foreign currency forward contracts for our Canadian subsidiary was $17.6 million with contract maturities of 1
month, and the notional value of our outstanding foreign currency forward contracts for our European subsidiary
was $34.8 million with contract maturities of 1 month. The foreign currency forward contracts are not designated
as cash flow hedges, and accordingly, changes in their fair value are recorded in other expense, net on the
consolidated statements of income. The fair values of our foreign currency forward contracts were liabilities of
$0.6 million as of December 31, 2010, and were included in accrued expenses on the consolidated balance sheet.
The fair values of our foreign currency forward contracts were assets of $0.3 million as of December 31, 2009,
and were included in prepaid expenses and other current assets on the consolidated balance sheet. Refer to Note 9
for a discussion of the fair value measurements. Included in other expense, net were the following amounts
related to changes in foreign currency exchange rates and derivative foreign currency forward contracts:
Year Ended December 31,
(In thousands) 2010 2009 2008
Unrealized foreign currency exchange rate gains (losses) $(1,280) $ 5,222 $(5,459)
Realized foreign currency exchange rate losses (2,638) (261) (2,166)
Unrealized derivative gains (losses) (809) (1,060) 1,650
Realized derivative gains (losses) 3,549 (4,412) (204)
Although we have entered into foreign currency forward contracts to minimize some of the impact of
foreign currency exchange rate fluctuations on future cash flows, we cannot be assured that foreign currency
exchange rate fluctuations will not have a material adverse impact on our financial condition and results of
operations.
Inflation
Inflationary factors such as increases in the cost of our product and overhead costs may adversely affect our
operating results. Although we do not believe that inflation has had a material impact on our financial position or
results of operations to date, a high rate of inflation in the future may have an adverse effect on our ability to
maintain current levels of gross margin and selling, general and administrative expenses as a percentage of net
revenues if the selling prices of our products do not increase with these increased costs.
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