All footwear companies are subject to exchange rate adjustments at two different points in their business.
The first occurs when footwear is shipped from a plant in one region to distribution warehouses in a
different region (where local currencies are different from that in which the footwear was produced). The
production costs of footwear made at Asia-Pacific plants are tied to the Singapore dollar (Sing$); the
production costs of footwear made at Europe-Africa plants are tied to the euro (€); the production costs of
footwear made at Latin American plants are tied to the Brazilian real; and the costs of footwear made in
North American plants are tied to the U.S. dollar (US$). Thus, the production cost of footwear made at an
Asia Pacific plant and shipped to Latin America is adjusted up or down for any exchange rate change
between the Sing$ and the Brazilian real that occurs between the time the goods leave the plant and the
time they are sold from the distribution center in Latin America (a period of 3-6 weeks). Similarly, the
manufacturing cost of footwear shipped between North America and Latin America is adjusted up or down
for recent exchange rate changes between the US$ and the Brazilian real; the manufacturing cost of pairs
shipped between North America and Europe-Africa is adjusted up or down based on recent exchange rate
fluctuations between the US$ and the €; the manufacturing cost of pairs shipped between Asia-Pacific and
Europe-Africa is adjusted for recent fluctuations between the Sing$ and the €; and so on.