Under Armour 2010 Annual Report Download - page 75

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Company enters into foreign currency forward contracts to reduce the risk associated with foreign currency
exchange rate fluctuations on intercompany transactions and projected inventory purchases for its European and
Canadian subsidiaries.
As of December 31, 2010, the notional value of the Company’s outstanding foreign currency forward
contracts used to mitigate the foreign currency exchange rate fluctuations on its Canadian subsidiary’s
intercompany transactions was $17.6 million with contract maturities of 1 month. As of December 31, 2010, the
notional value of the Company’s outstanding foreign currency forward contracts used to mitigate the foreign
currency exchange rate fluctuations on its European subsidiary’s intercompany transactions 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 earnings. The fair values of the Company’s
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 the Company’s 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:
(In thousands)
Year Ended December 31,
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)
The Company enters into foreign currency forward contracts with major financial institutions with
investment grade credit ratings and is exposed to credit losses in the event of non-performance by these financial
institutions. This credit risk is generally limited to the unrealized gains in the foreign currency forward contracts.
However, the Company monitors the credit quality of these financial institutions and considers the risk of
counterparty default to be minimal.
15. Related Party Transactions
The Company has an agreement to license a software system with a vendor whose Co-CEO is a director of
the Company. During the years ended December 31, 2010, 2009 and 2008, the Company paid $1.5 million, $2.0
million and $3.2 million, respectively, in licensing fees and related support services to this vendor. There were no
amounts payable to this related party as of December 31, 2010. Amounts payable to this related party as of
December 31, 2009 were $0.1 million.
The Company has an operating lease agreement with an entity controlled by the Company’s CEO to lease an
aircraft for business purposes. The Company paid $1.0 million in usage fees to this entity for its use of the
aircraft during the year ended December 31, 2010, and $0.6 million during each of the years ended December 31,
2009 and 2008, respectively. No amounts were payable to this related party as of December 31, 2010. Amounts
payable to this related party as of December 31, 2009 were $0.1 million. The Company determined the usage fees
charged are at or below market.
16. Segment Data and Related Information
The Company historically operated within one operating and reportable segment based on how the Chief
Operating Decision Maker (“CODM”) managed the business. During 2010, the Company’s operating segments
changed to reflect how the CODM makes decisions about allocating resources and assessing performance. In
order to make these decisions, the CODM receives discrete financial information by geographic region based on
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