Nike 2015 Annual Report Download - page 60

PART II
NOTE 8 — Long-Term Debt
Long-term debt, net of unamortized premiums and discounts and swap fair value adjustments, comprises the following:
Book Value Outstanding
As of May 31,
Scheduled Maturity (Dollars and Yen in millions)
Original
Principal
Interest
Rate
Interest
Payments 2015 2014
Corporate Bond Payables:(4)
October 15, 2015(1) $ 100 5.15% Semi-Annually $ 101 $ 108
May 1, 2023(5) $ 500 2.25% Semi-Annually 499 499
May 1, 2043(5) $ 500 3.63% Semi-Annually 499 499
Promissory Notes:
April 1, 2017(2) $ 40 6.20% Monthly 39 39
January 1, 2018(2) $ 19 6.79% Monthly 19 19
Japanese Yen Notes:
August 20, 2001 through November 20, 2020(3) ¥ 9,000 2.60% Quarterly 20 29
August 20, 2001 through November 20, 2020(3) ¥ 4,000 2.00% Quarterly 9 13
Total 1,186 1,206
Less current maturities 107 7
TOTAL LONG-TERM DEBT $ 1,079 $ 1,199
(1) The Company has entered into interest rate swap agreements whereby the Company receives fixed interest payments at the same rate as the note and pays variable interest payments
based on the six -month LIBOR plus a spread. The swaps have the same notional amount and maturity date as the corresponding note. At May 31, 2015, the interest rates payable on
these swap agreements ranged from approximately 0.3% to 0.5%.
(2) The Company assumed a total of $59 million in bonds payable as part of its agreement to purchase certain Corporate properties; this was treated as a non-cash financing transaction. The
property serves as collateral for the debt. The purchase of these properties was accounted for as a business combination where the total consideration of $85 million was allocated to the
land and buildings acquired; no other tangible or intangible assets or liabilities resulted from the purchase. The bonds mature in 2017 and 2018 and the Company does not have the ability
to re-negotiate the terms of the debt agreements and would incur significant financial penalties if the notes were paid-off prior to maturity.
(3) NIKE Logistics YK assumed a total of ¥13.0 billion in loans as part of its agreement to purchase a distribution center in Japan, which serves as collateral for the loans. These loans mature in
equal quarterly installments during the period August 20, 2001 through November 20, 2020.
(4) These senior unsecured obligations rank equally with the Company’s other unsecured and unsubordinated indebtedness.
(5) The bonds are redeemable at the Company’s option prior to February 1, 2023 and November 1, 2042, respectively, at a price equal to the greater of (i) 100% of the aggregate principal
amount of the notes to be redeemed, and (ii) the sum of the present values of the remaining scheduled payments, plus in each case, accrued and unpaid interest. Subsequent to
February 1, 2023 and November 1, 2042, respectively, the bonds also feature a par call provision, which allows for the bonds to be redeemed at a price equal to 100% of the aggregate
principal amount of the notes being redeemed, plus accrued and unpaid interest.
The scheduled maturity of Long-term debt in each of the years ending
May 31, 2016 through 2020 are $106 million, $44 million, $24 million, $6
million and $6 million, respectively, at face value.
The fair value of the Company’s Long-term debt, including the current
portion, was approximately $1,160 million at May 31, 2015 and $1,154 million
at May 31, 2014. The fair value of Long-term debt is estimated based upon
quoted prices of similar instruments (level 2).
NOTE 9 — Income Taxes
Income before income taxes is as follows:
Year Ended May 31,
(In millions) 2015 2014 2013
Income before income taxes:
United States $ 1,967 $ 3,066 $ 1,231
Foreign 2,238 478 2,025
TOTAL INCOME BEFORE INCOME TAXES $ 4,205 $ 3,544 $ 3,256
NIKE, INC. 2015 Annual Report and Notice of Annual Meeting 121
FORM 10-K