Nike 2006 Annual Report Download - page 35

We also have the following outstanding short-term debt obligations as of May 31, 2006. Please refer to the
accompanying Notes to Consolidated Financial Statements (Note 6 — Short-term Borrowings and Credit Lines)
for further description and interest rates related to the short-term debt obligations listed below.
Outstanding as of
May 31, 2006
(In millions)
Notes payable, due at mutually agreed-upon dates, generally ninety days from
issuance or on demand ............................................... $43.4
Payable to Sojitz America for the purchase of inventories, generally due 60 days
after shipment of goods from a foreign port ............................... $69.7
As of May 31, 2006, letters of credit of $347.6 million were outstanding, generally for the purchase of
inventory. Most letters of credit expire within one year.
Capital Resources
In October 2001, we filed a shelf registration statement with the Securities and Exchange Commission
(“SEC”) under which $1 billion in debt securities may be issued. In May 2002, we commenced a medium-term
note program under the shelf registration that allows us to issue up to $500 million in medium-term notes, as our
capital needs dictate. We entered into this program to provide additional liquidity to meet our working capital
and general corporate cash requirements and since commencement of the medium-term note program we have
issued $240.0 million in medium-term notes. During fiscal 2006, there were no medium-term notes issued under
the program. We may issue additional notes under the shelf registration in fiscal 2007 depending on general
corporate needs.
As of May 31, 2006, we had a multi-year $750 million revolving credit facility in place with a group of
banks, and we currently have no amounts outstanding under the facility. The maturity date is November 20, 2008
and the facility can be extended for one additional year on the anniversary date. Based on our current long-term
senior unsecured debt ratings of A+ and A2 from Standard and Poor’s Corporation and Moody’s Investor
Services, respectively, the interest rate charged on any outstanding borrowings would be the prevailing LIBOR
plus 0.18%. The facility fee is 0.07% of the total commitment.
If our long-term debt rating were to decline, the facility fee and interest rate under our committed credit
facility would increase. Conversely, if our long-term debt rating were to improve, the facility fee and interest rate
would decrease. Changes in our long-term debt rating would not trigger acceleration of maturity of any then
outstanding borrowings or any future borrowings under the committed credit facilities. Under this committed
credit facility, we have agreed to various covenants. These covenants include limits on our disposal of fixed
assets and the amount of debt secured by liens we may incur, and set a minimum capitalization ratio. In the event
we were to have any borrowings outstanding under this facility, failed to meet any covenant, and were unable to
obtain a waiver from a majority of the banks, any borrowings would become immediately due and payable. As of
May 31, 2006, we were in full compliance with each of these covenants and believe it is unlikely we will fail to
meet any of these covenants in the foreseeable future.
Liquidity is also provided by our commercial paper program, under which there was no amount outstanding
at May 31, 2006 or May 31, 2005. We currently have short-term debt ratings of A1 and P1 from Standard and
Poor’s Corporation and Moody’s Investor Services, respectively.
We currently believe that cash generated by operations, together with access to external sources of funds as
described above, will be sufficient to meet our operating and capital needs in the foreseeable future.
Recently Issued Accounting Standards
In November 2004, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial
Accounting Standards (“SFAS”) No. 151, “Inventory Costs, an amendment of ARB No. 43, Chapter 4”
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