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This excerpt taken from the HBI 10-Q filed May 11, 2009. Cash Flow
Hedges — Foreign Currency Derivatives
The Company uses forward exchange and option contracts to reduce
the effect of fluctuating foreign currencies on short-term
foreign currency-denominated transactions, foreign
currency-denominated investments, and other known foreign
currency exposures. Gains and losses on these contracts are
intended to offset losses and gains on the hedged transaction in
an effort to reduce the earnings volatility resulting from
fluctuating foreign currency exchange rates. The effective
portion of foreign exchange hedge gains and losses deferred in
“Accumulated other comprehensive loss” is reclassified
into earnings as the underlying inventory is sold, using
historical inventory turnover rates. The settlement of foreign
exchange hedge derivative contracts related to the purchase of
inventory or other hedged items are reported in the Condensed
Consolidated Statements of Cash Flows as cash flow from
operating activities.
Historically, the principal currencies hedged by the Company
include the Euro, Mexican peso, Canadian dollar and Japanese
yen. Forward exchange contracts mature on the anticipated cash
requirement date of the hedged transaction, generally within one
year. As of April 4, 2009, the U.S. dollar equivalent
of commitments to sell foreign currencies in our foreign
currency cash flow hedge derivative portfolio is $35,616, using
the exchange rate at the reporting date.
Table of Contents
HANESBRANDS
INC.
Notes to Condensed Consolidated Financial Statements — (Continued) (dollars and shares in thousands, except per share data) (unaudited) |
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