Adidas 2001 Annual Report Download - page 89

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84 Consolidated Accounts
Out of the total amount of outstanding hedges, the following contracts
relate to the coverage of the biggest single exposure, the US dollar:
Out of the fair value of €28 million for forward contracts, €24 million
relate to cash flow hedges, €1 million relate to fair value hedges and
€3 million are attributable to net investment hedges. The total amount
shown for currency options relates to cash flow hedges.
The fair value gains as at December 31, 2001 on open cash flow hedges
which hedge anticipated future foreign currency purchases will be
transferred from equity to the income statement when the forecasted
transaction occurs, at various dates within the next year.
The fair value of the above instruments is as follows:
In addition, fair value gains on cash flow hedges which are used to hedge
an embedded derivative within a specific contract will be released from
equity to the income statement at specified payment dates up to 2008
which are stated within the contract. The embedded derivative is not
separated from the host contract as the economic characteristics and risk
of the embedded derivative is closely related to the host contract. Other
significant embedded derivatives do not exist at the balance sheet date.
The Company designated a US dollar borrowing of $ 250 million as a
hedge of the net investment in its subsidiary adidas International BV,
Amsterdam (Netherlands). The foreign exchange loss of €8 million on
the translation of the borrowing was recognized in shareholders’ equity.
In addition, adidas-Salomon hedges part of its net investment in Salomon
& Taylor Made Co., Ltd., Tokyo (Japan) with forward contracts. The fair
value gain of €3 million was recognized in equity.
Management of Interest Rate Risk
Taking advantage of the declining interest rates, the Company reduced,
in a zero cost strategy, the protection level for €0.4 billion of the euro
interest rate hedges to a lower interest rate, with the inclusion of a floor
at an average rate of 3.6% . As of the end of 2001, the outstanding inter-
est rate hedges protect the Company’s borrowings in a notional amount
of €1.5 billion (2000: €1.8 billion) against a rise of the weighted aver-
age interest rate above 5.45% (2000: 6.5% ). Out of this amount, the pro-
tection ends for €1.2 billion (2000: €1.6 billion) at a weighted average
rate of 9.2% (2000: 8.9% ).
Dec. 31 Dec. 31
(US dollars in millions) 2001 2000
Forward contracts 647 330
Currency options 131 466
Total 778 796
Dec. 31 Dec. 31
(euros in millions) 2001 2000
Forward contracts 28 4
Currency options 7 20
Total 35 24