Nike 2016 Annual Report Download - page 58

PART II
As of May 31, 2015
Derivative Assets Derivative Liabilities
(In millions)
Assets
at Fair
Value
Other
Current
Assets
Other
Long-
term
Assets
Liabilities
at Fair
Value
Accrued
Liabilities
Other
Long-term
Liabilities
Level 2:
Foreign exchange forwards and options(1) $ 1,554 $ 1,034 $ 520 $ 164 $ 160 $ 4
Embedded derivatives 7 2 5 11 2 9
Interest rate swaps(2) 78 78 — — — —
TOTAL $ 1,639 $ 1,114 $ 525 $ 175 $ 162 $ 13
(1) If the foreign exchange derivative instruments had been netted in the Consolidated Balance Sheets, the asset and liability positions each would have been reduced by $161 million as of
May 31, 2015. As of that date, the Company had received $900 million of cash collateral and $74 million of securities from various counterparties related to these foreign exchange
derivative instruments. No amount of collateral was posted on the Company’s derivative liability balance as of May 31, 2015.
(2) As of May 31, 2015, the Company had received $68 million of cash collateral related to its interest rate swaps.
Available-for-sale securities comprise investments in U.S. Treasury and
Agency securities, money market funds, corporate commercial paper and
bonds. These securities are valued using market prices on both active
markets (Level 1) and less active markets (Level 2). As of May 31, 2016, the
Company held $2,113 million of available-for-sale securities with maturity
dates within one year and $206 million with maturity dates over one year and
less than five years within Short-term investments on the Consolidated
Balance Sheets. The gross realized gains and losses on sales of available-for-
sale securities were immaterial for the fiscal years ended May 31, 2016 and
2015. Unrealized gains and losses on available-for-sale securities included in
Other comprehensive income were immaterial as of May 31, 2016 and 2015.
The Company regularly reviews its available-for-sale securities for other-than-
temporary impairment. For the years ended May 31, 2016 and 2015, the
Company did not consider its securities to be other-than-temporarily impaired
and accordingly, did not recognize any impairment losses.
Included in Interest expense (income), net was interest income related to the
Company’s available-for-sale securities of $12 million, $6 million and $5
million for the years ended May 31, 2016, 2015 and 2014, respectively.
The Company’s Level 3 assets comprise investments in certain non-
marketable preferred stock. These Level 3 investments are an immaterial
portion of the Company’s portfolio. Changes in Level 3 investment assets
were immaterial during the years ended May 31, 2016 and 2015.
No transfers among the levels within the fair value hierarchy occurred during
the years ended May 31, 2016 or 2015.
Derivative financial instruments include foreign exchange forwards and options,
embedded derivatives and interest rate swaps. Refer to Note 16 — Risk
Management and Derivatives for additional detail. For fair value information
regarding Notes payable and Long-term debt, refer to Note 7 — Short-Term
Borrowings and Credit Lines and Note 8 — Long-Term Debt, respectively.
As of May 31, 2016 and May 31, 2015, assets or liabilities that were required
to be measured at fair value on a non-recurring basis were immaterial.
At May 31, 2015, the Company had $150 million of outstanding receivables
related to its investments in reverse repurchase agreements recorded within
Prepaid expenses and other current assets on the Consolidated Balance
Sheets. The carrying amount of these agreements approximates their fair
value based upon observable inputs other than quoted prices (Level 2). The
reverse repurchase agreements are fully collateralized. At May 31, 2016, there
were no outstanding receivables related to investments in reverse repurchase
agreements.
NOTE 7 — Short-Term Borrowings and Credit Lines
Notes payable and interest-bearing accounts payable to Sojitz Corporation of America (“Sojitz America”) as of May 31, 2016 and 2015 are summarized below:
As of May 31,
2016 2015
(Dollars in millions) Borrowings Interest Rate Borrowings Interest Rate
Notes payable:
U.S. operations $ — 0.00%(1) $ — 0.00%(1)
Non-U.S. operations 1 13.00%(1) 74 12.39%(1)
TOTAL NOTES PAYABLE $ 1 $ 74
Interest-bearing accounts payable:
Sojitz America $ 39 1.27% $ 78 0.98%
(1) Weighted average interest rate includes non-interest bearing overdrafts.
The carrying amounts reflected in the Consolidated Balance Sheets for Notes
payable approximate fair value.
The Company purchases through Sojitz America certain NIKE Brand
products it acquires from non-U.S. suppliers. These purchases are for
products sold in certain countries in the Company’s Emerging Markets
geographic operating segment and Canada, excluding products produced
and sold in the same country. Accounts payable to Sojitz America are
generally due up to 60 days after shipment of goods from the foreign port.
The interest rate on such accounts payable is the 60-day London Interbank
Offered Rate (“LIBOR”) as of the beginning of the month of the invoice date,
plus 0.75%.
As of May 31, 2016 and 2015, the Company had no amounts outstanding
under its $2 billion commercial paper program.
On August 28, 2015, the Company entered into a committed credit facility
agreement with a syndicate of banks which provides for up to $2 billion of
borrowings. The facility matures August 28, 2020, with a one year extension
NIKE, INC. 2016 Annual Report and Notice of Annual Meeting 111
FORM 10-K