Nike 2010 Annual Report Download - page 56

Table of Contents
currency derivative portfolio combined with decreased foreign currency volatilities at May 31, 2010. Such a hypothetical loss in fair value of our derivatives
would be offset by increases in the value of the underlying transactions being hedged. The average monthly change in the fair values of foreign currency
forward and foreign currency option derivative instruments was $52 million and $207 million during fiscal 2010 and fiscal 2009, respectively.
The instruments not included in the VaR are intercompany loans denominated in non−functional currencies, fixed interest rate Japanese Yen
denominated debt, fixed interest rate U.S. dollar denominated debt and interest rate swaps. Intercompany loans and related interest amounts are eliminated
in consolidation. Furthermore, our non−functional currency intercompany loans are substantially hedged against foreign exchange risk through the use of
forward contracts, which are included in the VaR calculation above. We, therefore, consider the interest rate and foreign currency market risks associated
with our non−functional currency intercompany loans to be immaterial to our consolidated financial position, results from operations and cash flows.
Details of third party debt and interest rate swaps are provided in the table below. The table presents principal cash flows and related weighted
average interest rates by expected maturity dates. Weighted average interest rates for the fixed rate swapped to floating rate debt reflect the effective interest
rates as of May 31, 2010.
Expected Maturity Date
Year Ending May 31,
2011 2012 2013 2014 2015 Thereafter Total Fair Value
(In millions, except interest rates)
Foreign Exchange Risk
Japanese Yen Functional Currency
Japanese Yen debt — Fixed rate
Principal payments $ 7 $178 $ 7 $ 7 $ 7 $ 42 $248 $ 247
Average interest rate 2.4% 3.4% 2.4% 2.4% 2.4% 2.4% 3.1%
Interest Rate Risk
Japanese Yen Functional Currency
Long−term Japanese Yen debt — Fixed rate
Principal payments $ 7 $178 $ 7 $ 7 $ 7 $ 42 $248 $ 247
Average interest rate 2.4% 3.4% 2.4% 2.4% 2.4% 2.4% 3.1%
U.S. Dollar Functional Currency
Long−term U.S. Dollar debt — Fixed rate swapped to
Floating rate
Principal payments $ — $ — $ 40 $ — $ — $ 100 $140 $ 152
Average interest rate 0.0% 0.0% 1.0% 0.0% 0.0% 0.4% 0.6%
Long−term U.S. Dollar debt — Fixed rate
Principal payments $ — $ — $ — $ 50 $ — $ — $ 50 $ 54
Average interest rate 0.0% 0.0% 0.0% 4.7% 0.0% 0.0% 4.7%
The fixed interest rate Japanese Yen denominated debt instruments were issued by and are accounted for by one of our Japanese subsidiaries.
Accordingly, the monthly translation of these instruments, which varies due to changes in foreign exchange rates, is recognized in accumulated other
comprehensive income upon the consolidation of this subsidiary.
Item 8. Financial Statements and Supplemental Data
Management of NIKE, Inc. is responsible for the information and representations contained in this report. The financial statements have been
prepared in conformity with the generally accepted accounting principles we considered appropriate in the circumstances and include some amounts based
on our best estimates and judgments. Other financial information in this report is consistent with these financial statements.
Our accounting systems include controls designed to reasonably assure assets are safeguarded from unauthorized use or disposition and provide for
the preparation of financial statements in conformity with generally accepted accounting principles. These systems are supplemented by the selection and
training of qualified financial personnel and an organizational structure providing for appropriate segregation of duties.
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