Nike 2003 Annual Report Download - page 33

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In fiscal 2002 we issued a $250 million long-term fixed-rate corporate bond which matures in August 2006.
In fiscal 2003, we issued an additional $90 million in long-term fixed-rate corporate bonds which mature on
various dates beginning in July 2007 through August 2012. Fixed interest rates on these bonds range from 4.8%
to 5.66%. For each of these bonds issued in fiscal 2002 and fiscal 2003, we have entered into interest rate swap
agreements whereby we receive fixed interest payments at the same rate as the bonds and pay variable interest
payments based on the three-month or six-month LIBOR plus a spread. Each swap has the same notional amount
and maturity date as the corresponding bond. As a result of the interest rate swap agreements, the average
effective interest rate payable on these bonds was 2.5% at May 31, 2003 and 3.3% at May 31, 2002. These
interest rate swaps are accounted for as fair value hedges, so changes in the recorded fair values of the swaps are
offset by changes in the recorded fair value of the related debt. The recorded fair value of the interest rate swaps
was a $25.5 million gain at May 31, 2003 and a $1.8 million loss at May 31, 2002.
In fiscal 2003 we also entered into an interest rate swap agreement related to a Japanese yen denominated
intercompany loan with one of our Japanese subsidiaries. The Japanese subsidiary pays variable interest on the
intercompany loan based on 3-month LIBOR plus a spread. Under the interest rate swap agreement, the subsidiary
pays fixed interest payments at 0.8% and receives variable interest payments based on 3-month LIBOR plus a
spread based on a notional amount of 8 billion Japanese yen. This interest rate swap is not accounted for as a hedge,
accordingly changes in the fair value of the swap are recorded to net income. As of May 31, 2003, the recorded fair
value of the swap was a $1.0 million loss.
Expected Maturity Date
Year Ended May 31,
2004 2005 2006 2007 2008 Thereafter Total Fair Value
(In millions, except interest rates)
Foreign Exchange Risk
Euro Functional Currency
Intercompany loan — U.S. dollar
denominated — Fixed rate
Principalpayments ................................ $ — — — — — 270.4 $270.4 $270.4
Average interest rate ............................... — — — — — 2.7% 2.7%
Intercompany loan — British pound
denominated — Fixed rate
Principalpayments ................................ $ 30.0 — — — — — $ 30.0 $ 30.0
Average interest rate ............................... 3.4% — — — — — 3.4%
U.S. Dollar Functional Currency
Intercompany loans — Euro
denominated — Fixed rate
Principalpayments ................................ $186.0 — — — — — $186.0 $186.0
Average interest rate ............................... 5.6% — — — — — 5.6%
Intercompany loan — Japanese yen
denominated — Variable rate
Principalpayments ................................ $189.1 — — — — — $189.1 $189.1
Average interest rate ............................... 0.4% — — — — — 0.4%
Intercompany loan — Canadian dollar
denominated — Fixed rate
Principalpayments ................................ $ 36.3 — — — — — $ 36.3 $ 36.3
Average interest rate ............................... 3.5% — — — — — 3.5%
Japanese Yen Functional Currency
Long-term Japanese yen debt — Fixed rate
Principalpayments ................................ $ 5.7 5.7 5.7 5.7 5.7 161.6 $190.1 $234.5
Average interest rate ............................... 3.3% 3.3% 3.4% 3.4% 3.4% 2.9% 3.0%
Interest Rate Risk
Japanese Yen Functional Currency
Long-term Japanese yen debt — Fixed rate
Principalpayments ................................ $ 5.7 5.7 5.7 5.7 5.7 161.6 $190.1 $234.5
Average interest rate ............................... 3.3% 3.3% 3.4% 3.4% 3.4% 2.9% 3.0%
U.S. Dollar Functional Currency
Long-term U.S. dollar debt — Fixed rate
Principalpayments ................................ $200.0 — — 250.0 25.0 65.0 $540.0 $582.2
Average interest rate ............................... 5.7% 5.4% 5.4% 5.4% 5.5% 5.5% 5.5%
Fixed euro for fixed U.S. dollar
cross-currency swap
Euroswappayable .................................. $186.0 — — — — — $186.0 $193.5
U.S. dollar swap receivable ........................... $200.0 — — — — — $200.0 $211.6
Average pay rate (euro) .............................. 5.6% — — — — — 5.6%
Average receive rate (U.S. dollars) ...................... 6.5% — — — — — 6.5%
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