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GUESS?, Inc. and Subsidiaries
Concentration of Credit Risk
The Company's financial instruments that are exposed to concentrations of credit risk consist primarily of accounts receivable. The Company
maintains cash with various major financial institutions and performs evaluations of the relative credit standing of these financial institu-
tions in order to limit the amount of credit exposure with any institution. The Company extends credit to corporate customers based upon
an evaluation of the customer's financial condition and credit history and generally requires no collateral. The Company's customers are
principally located throughout North America, and their ability to pay amounts due to the Company may be dependent on the prevailing
economic conditions of their geographic region. However, such credit risk is considered limited due to the Company's large customer base.
Management performs regular evaluations concerning the ability of its customers to satisfy their obligations and records a provision
for doubtful accounts based on these evaluations. The Company's credit losses for the periods presented are insignificant and have not
significantly exceeded management's estimates. A few of the Company's domestic wholesale customers, including some under common
ownership, have accounted for significant portions of its net revenue. Bloomingdale's, Macy's and other affiliated stores owned by
Federated Department Stores, Inc. together accounted for approximately 11.8% and 12.4% of the Company's net revenue in 2000 and
1999, respectively.
Inventories
Inventories are stated at the lower of cost (first-in, first-out and weighted average) or market.
Revenue Recognition
The Company recognizes retail operations revenue at the point of sale, and wholesale operations revenue from the sale of merchandise
upon shipment. Royalty income is based upon a percentage, as defined in the underlying agreement, of the licensees' net revenue. The
Company accrues for estimated sales returns and allowances in the period in which the related revenue is recognized.
Depreciation and Amortization
Depreciation and amortization of property and equipment are provided using the straight-line and declining balance methods over the
following useful lives:
Building and building improvements
10 to 31 years
Land improvements
5 years
Machinery and equipment
3 to 5 years
Corporate aircraft
10 years
Corporate vehicles
3 years
Shop fixtures
5 years
Leasehold improvements are amortized over the lesser of the estimated useful life of the asset or the term of the lease. Construction
in progress is not depreciated until the related asset is completed.
Goodwill, which represents the excess of purchase price over fair value of net assets acquired, is amortized on a straight-line basis
over the expected periods to be benefited, generally 10 to 15 years. Accumulated amortization totaled $4,470,000 and $3,589,000 at
December 31, 2000 and 1999, respectively.
Foreign Currency Translation
In accordance with SFAS No. 52, "Foreign Currency Translation", assets and liabilities of the Company's foreign operations are
translated from foreign currencies into U.S. dollars at year-end rates, while income and expenses are translated at the weighted-
average exchange rates for the year. The related translation adjustments are reflected as a foreign currency translation adjustment
in other comprehensive income as a separate component of stockholders' equity.
Hedging Activities
At December 31, 2000, the Company had forward exchange contracts to purchase $3.5 million U.S. currency for approximately $5.3 million
Canadian currency.
Unrealized gains and losses on outstanding foreign currency exchange contracts, used to hedge future revenues and purchases, are not
recorded in the financial statements but are included in the measurement of the related hedged transaction when realized.
