NIKE INC, 10-K filed on 7/25/2014
Annual Report
Document and Entity Information (USD $)
12 Months Ended
May 31, 2014
Jul. 18, 2014
Nov. 30, 2013
Document Type
10-K 
 
 
Amendment Flag
false 
 
 
Document Period End Date
May 31, 2014 
 
 
Document Fiscal Year Focus
2014 
 
 
Document Fiscal Period Focus
FY 
 
 
Trading Symbol
NKE 
 
 
Entity Registrant Name
NIKE INC 
 
 
Entity Central Index Key
0000320187 
 
 
Current Fiscal Year End Date
--05-31 
 
 
Entity Well-known Seasoned Issuer
Yes 
 
 
Entity Current Reporting Status
Yes 
 
 
Entity Voluntary Filers
No 
 
 
Entity Filer Category
Large Accelerated Filer 
 
 
Entity Public Float (In Dollars)
 
 
$ 59,634,158,357 
Entity Common Stock Shares Outstanding (In Shares)
 
868,297,496 
 
Class A Convertible Common Stock
 
 
 
Entity Public Float (In Dollars)
 
 
3,536,091,219 
Entity Common Stock Shares Outstanding (In Shares)
 
177,557,876 
 
Class B Common Stock
 
 
 
Entity Public Float (In Dollars)
 
 
$ 56,098,067,138 
Entity Common Stock Shares Outstanding (In Shares)
 
690,739,620 
 
Consolidated Statements Of Income (USD $)
In Millions, except Per Share data, unless otherwise specified
12 Months Ended
May 31, 2014
May 31, 2013
May 31, 2012
Revenues
$ 27,799 
$ 25,313 
$ 23,331 
Cost of sales
15,353 
14,279 
13,183 
Gross profit
12,446 
11,034 
10,148 
Demand creation expense
3,031 
2,745 
2,607 
Operating overhead expense
5,735 
5,051 
4,472 
Total selling and administrative expense
8,766 
7,796 
7,079 
Interest expense (income), net (Notes 6, 7, and 8)
33 
(3)
4 
Other expense (income), net (Note 17)
103 
(15)
54 
Income before income taxes
3,544 
3,256 
3,011 
Income tax expense (Note 9)
851 
805 
754 
NET INCOME FROM CONTINUING OPERATIONS
2,693 
2,451 
2,257 
NET INCOME (LOSS) FROM DISCONTINUED OPERATIONS
0 
21 
(46)
NET INCOME
$ 2,693 
$ 2,472 
$ 2,211 
Basic earnings per common share (Notes 1 and 12)(in dollars per share)
$ 3.05 
$ 2.74 
$ 2.45 
Diluted earnings per common share (Notes 1 and 12)(in dollars per share)
$ 2.97 
$ 2.68 
$ 2.40 
Basic earnings per common share (Notes 1 and 12)(in dollars per share)
$ 0.00 
$ 0.02 
$ (0.05)
Diluted earnings per common share (Notes 1 and 12)(in dollars per share)
$ 0.00 
$ 0.02 
$ (0.05)
Dividends declared per common share (in dollars per share)
$ 0.93 
$ 0.813 
$ 0.7 
Consolidated Statements of Comprehensive Income (USD $)
In Millions, unless otherwise specified
12 Months Ended
May 31, 2014
May 31, 2013
May 31, 2012
Net income
$ 2,693 
$ 2,472 
$ 2,211 
Other comprehensive income (loss), net of tax:
 
 
 
Change in net foreign currency translation adjustment
(32)1
38 1
(277)1
Change in net gains (losses) on cash flow hedges
(161)2
12 2
304 2
Change in net gains (losses) on net investment hedges
0 3
0 3
45 3
Change in net gains (losses) on other
4 4
(8)4
(18)4
Change in release of cumulative translation loss related to Umbro
0 5
83 5
0 5
Total other comprehensive income (loss), net of tax
(189)
125 
54 
TOTAL COMPREHENSIVE INCOME
$ 2,504 
$ 2,597 
$ 2,265 
Consolidated Statements of Comprehensive Income (Parenthetical) (USD $)
In Millions, unless otherwise specified
12 Months Ended
May 31, 2014
May 31, 2013
May 31, 2012
Foreign currency translation and other, tax benefit (expense)
$ 0 
$ (13)
$ 0 
Net gain (loss) on cash flow hedges, tax benefit (expense)
18 
(22)
(22)
Net gain (loss) on net investment hedges, tax benefit (expense)
0 
0 
0 
Reclassification to net income of previously deferred net gains related to hedge derivatives, tax (benefit) expense
0 
1 
0 
Release of cumulative translation loss related to Umbro, tax expense
$ 0 
$ 47 
$ 0 
Consolidated Balance Sheets (USD $)
In Millions, unless otherwise specified
May 31, 2014
May 31, 2013
Current assets:
 
 
Cash and equivalents
$ 2,220 
$ 3,337 
Short-term investments (Note 6)
2,922 
2,628 
Accounts receivable, net (Note 1)
3,434 
3,117 
Inventories (Notes 1 and 2)
3,947 
3,484 
Deferred income taxes (Note 9)
355 
308 
Prepaid expenses and other current assets (Notes 6 and 17)
818 
756 
Total current assets
13,696 
13,630 
Property, plant and equipment, net (Note 3)
2,834 
2,452 
Identifiable intangible assets, net (Note 4)
282 
289 
Goodwill (Note 4)
131 
131 
Deferred income taxes and other assets (Notes 6, 9, and 17)
1,651 
1,043 
TOTAL ASSETS
18,594 
17,545 
Current liabilities:
 
 
Current portion of long-term debt (Note 8)
7 
57 
Notes payable (Note 7)
167 
98 
Accounts payable (Note 7)
1,930 
1,669 
Accrued liabilities (Notes 5, 6, and 17)
2,491 
2,036 
Income taxes payable (Note 9)
432 
84 
Liabilities of discontinued operations (Note 15)
0 
18 
Total current liabilities
5,027 
3,962 
Long-term debt (Note 8)
1,199 
1,210 
Deferred income taxes and other liabilities (Notes 6, 9, 13 and 17)
1,544 
1,292 
Commitments and contingencies (Note 16)
   
   
Redeemable preferred stock (Note 10)
0 
0 
Shareholders’ equity:
 
 
Capital in excess of stated value
5,865 
5,184 
Accumulated other comprehensive income (Note 14)
85 
274 
Retained earnings
4,871 
5,620 
Total shareholders’ equity
10,824 
11,081 
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY
18,594 
17,545 
Class A Convertible Common Stock
 
 
Shareholders’ equity:
 
 
Common Stock
0 
0 
Class B Common Stock
 
 
Shareholders’ equity:
 
 
Common Stock
$ 3 
$ 3 
Consolidated Balance Sheets (Parenthetical)
In Millions, unless otherwise specified
May 31, 2014
May 31, 2013
Class A Convertible Common Stock
 
 
Common Stock, shares outstanding
178 
178 
Class B Common Stock
 
 
Common Stock, shares outstanding
692 
716 
Consolidated Statements of Cash Flows (USD $)
In Millions, unless otherwise specified
12 Months Ended
May 31, 2014
May 31, 2013
May 31, 2012
Cash provided by operations:
 
 
 
Net income
$ 2,693 
$ 2,472 
$ 2,211 
Income charges (credits) not affecting cash:
 
 
 
Depreciation
518 
438 
373 
Deferred income taxes
(11)
20 
(59)
Stock-based compensation (Note 11)
177 
174 
130 
Amortization and other
114 
66 
23 
Net gain on divestitures
0 
(124)
0 
Changes in certain working capital components and other assets and liabilities:
 
 
 
(Increase) decrease in accounts receivable
(298)
142 
(323)
(Increase) in inventories
(505)
(219)
(815)
(Increase) in prepaid expenses and other current assets
(210)
(28)
(141)
Increase in accounts payable, accrued liabilities and income taxes payable
525 
27 
425 
Cash provided by operations
3,003 
2,968 
1,824 
Cash (used) provided by investing activities:
 
 
 
Purchases of short-term investments
(5,386)
(4,133)
(3,245)
Maturities of short-term investments
3,932 
1,663 
2,663 
Sales of short-term investments
1,126 
1,330 
1,721 
Additions to property, plant and equipment
(880)
(598)
(563)
Disposals of property, plant and equipment
3 
14 
2 
Proceeds from divestitures
0 
786 
0 
Increase in other assets, net of other liabilities
(2)
(2)
(14)
Settlement of net investment hedges
0 
0 
22 
Cash (used) provided by investing activities
(1,207)
(940)
586 
Cash used by financing activities:
 
 
 
Net proceeds from long-term debt issuance
0 
986 
0 
Long-term debt payments, including current portion
(60)
(49)
(203)
Increase (decrease) in notes payable
75 
10 
(47)
Payments on capital lease obligations
(17)
0 
0 
Proceeds from exercise of stock options and other stock issuances
383 
313 
468 
Excess tax benefits from share-based payment arrangements
132 
72 
115 
Repurchase of common stock
(2,628)
(1,674)
(1,814)
Dividends — common and preferred
(799)
(703)
(619)
Cash used by financing activities
(2,914)
(1,045)
(2,100)
Effect of exchange rate changes
1 
100 
67 
Net (decrease) increase in cash and equivalents
(1,117)
1,083 
377 
Cash and equivalents, beginning of year
3,337 
2,254 
1,877 
CASH AND EQUIVALENTS, END OF YEAR
2,220 
3,337 
2,254 
Cash paid during the year for:
 
 
 
Interest, net of capitalized interest
53 
20 
29 
Income taxes
856 
702 
638 
Non-cash additions to property, plant and equipment
167 
137 
99 
Dividends declared and not paid
$ 209 
$ 188 
$ 165 
Consolidated Statements of Shareholders' Equity (USD $)
In Millions, unless otherwise specified
Total
USD ($)
Capital in Excess of Stated Value
USD ($)
Accumulated Other Comprehensive Income
USD ($)
Retained Earnings
USD ($)
Common Stock Class A
Common Stock Class A
Common Stock
USD ($)
Class B Common Stock
Class B Common Stock
Common Stock
USD ($)
Beginning Balance at May. 31, 2011
$ 9,793 
$ 3,944 
$ 95 
$ 5,751 
 
$ 0 
 
$ 3 
Beginning Balance (in shares) at May. 31, 2011
 
 
 
 
 
180 
 
756 
Increase (Decrease) in Stockholders' Equity [Roll Forward]
 
 
 
 
 
 
 
 
Stock options exercised (in shares)
 
 
 
 
 
 
 
18.0 
Stock options exercised
528 
528 
 
 
 
 
 
 
Repurchase of Class B Common Stock
(1,805)
(12)
 
(1,793)
 
 
 
 
Repurchase of Class B Common Stock (in shares)
 
 
 
 
 
 
 
(40)
Dividends on Common stock
(639)
 
 
(639)
 
 
 
 
Issuance of shares to employees (in shares)
 
 
 
 
 
 
 
2 
Issuance of shares to employees
57 
57 
 
 
 
 
 
 
Stock-based compensation (Note 11)
130 
130 
 
 
 
 
 
 
Forfeiture of shares from employees (in shares)
 
 
 
 
 
 
 
0 
Forfeiture of shares from employees
(10)
(6)
 
(4)
 
 
 
 
Net income
2,211 
 
 
2,211 
 
 
 
 
Other comprehensive income
54 
 
54 
 
 
 
 
 
Ending Balance at May. 31, 2012
10,319 
4,641 
149 
5,526 
 
0 
 
3 
Ending Balance (in shares) at May. 31, 2012
 
 
 
 
 
180 
 
736 
Increase (Decrease) in Stockholders' Equity [Roll Forward]
 
 
 
 
 
 
 
 
Stock options exercised (in shares)
 
 
 
 
 
 
 
10.0 
Stock options exercised
322 
322 
 
 
 
 
 
 
Conversion of Stock, Shares Converted
 
 
 
 
 
(2)
 
2 
Repurchase of Class B Common Stock
(1,657)
(10)
 
(1,647)
 
 
 
 
Repurchase of Class B Common Stock (in shares)
 
 
 
 
 
 
 
(34)
Dividends on Common stock
(727)
 
 
(727)
 
 
 
 
Issuance of shares to employees (in shares)
 
 
 
 
 
 
 
2 
Issuance of shares to employees
65 
65 
 
 
 
 
 
 
Stock-based compensation (Note 11)
174 
174 
 
 
 
 
 
 
Forfeiture of shares from employees (in shares)
 
 
 
 
 
 
 
0 
Forfeiture of shares from employees
(12)
(8)
 
(4)
 
 
 
 
Net income
2,472 
 
 
2,472 
 
 
 
 
Other comprehensive income
125 
 
125 
 
 
 
 
 
Ending Balance at May. 31, 2013
11,081 
5,184 
274 
5,620 
 
0 
 
3 
Ending Balance (in shares) at May. 31, 2013
 
 
 
 
178 
178 
716 
716 
Increase (Decrease) in Stockholders' Equity [Roll Forward]
 
 
 
 
 
 
 
 
Stock options exercised (in shares)
 
 
 
 
 
 
 
11.0 
Stock options exercised
445 
445 
 
 
 
 
 
 
Repurchase of Class B Common Stock
(2,628)
(11)
 
(2,617)
 
 
 
 
Repurchase of Class B Common Stock (in shares)
 
 
 
 
 
 
 
(37)
Dividends on Common stock
(821)
 
 
(821)
 
 
 
 
Issuance of shares to employees (in shares)
 
 
 
 
 
 
 
2 
Issuance of shares to employees
78 
78 
 
 
 
 
 
 
Stock-based compensation (Note 11)
177 
177 
 
 
 
 
 
 
Forfeiture of shares from employees (in shares)
 
 
 
 
 
 
 
0 
Forfeiture of shares from employees
(12)
(8)
 
(4)
 
 
 
 
Net income
2,693 
 
 
2,693 
 
 
 
 
Other comprehensive income
(189)
 
(189)
 
 
 
 
 
Ending Balance at May. 31, 2014
$ 10,824 
$ 5,865 
$ 85 
$ 4,871 
 
$ 0 
 
$ 3 
Ending Balance (in shares) at May. 31, 2014
 
 
 
 
178 
178 
692 
692 
Consolidated Statements of Shareholders' Equity (Parenthetical)
12 Months Ended
May 31, 2014
May 31, 2013
May 31, 2012
Statement of Stockholders' Equity [Abstract]
 
 
 
Dividends on Common stock, per share (in dollars per share)
$ 0.93 
$ 0.81 
$ 0.7 
Summary of Significant Accounting Policies
Summary of Significant Accounting Policies
NOTE 1 — Summary of Significant Accounting Policies
 
Description of Business
NIKE, Inc. is a worldwide leader in the design, development and worldwide marketing and selling of athletic footwear, apparel, equipment, accessories and services. Wholly-owned NIKE, Inc. subsidiaries include Converse Inc., which designs, markets and distributes casual sneakers, apparel and accessories and Hurley International LLC, which designs, markets and distributes action sports and youth lifestyle footwear, apparel and accessories.
Basis of Consolidation
The Consolidated Financial Statements include the accounts of NIKE, Inc. and its subsidiaries (the "Company”). All significant intercompany transactions and balances have been eliminated.
The Company completed the sale of Cole Haan during the third quarter ended February 28, 2013 and completed the sale of Umbro during the second quarter ended November 30, 2012. As a result, the Company reports the operating results of Cole Haan and Umbro in the Net income (loss) from discontinued operations line in the Consolidated Statements of Income for all periods presented. In addition, the liabilities associated with these businesses are reported as Liabilities of discontinued operations in the Consolidated Balance Sheets (refer to Note 15 — Discontinued Operations). Unless otherwise indicated, the disclosures accompanying the Consolidated Financial Statements reflect the Company’s continuing operations.
On November 15, 2012, the Company announced a two-for-one split of both NIKE Class A and Class B Common shares. The stock split was a 100 percent stock dividend payable on December 24, 2012 to shareholders of record at the close of business December 10, 2012. Common stock began trading at the split-adjusted price on December 26, 2012. All share numbers and per share amounts presented reflect the stock split.
Reclassifications
Certain prior year amounts have been reclassified to conform to fiscal 2014 presentation.
Revisions
The Company has historically capitalized costs associated with internally generated patents and trademarks, and amortized these assets over the legal term of the patents and trademarks. During the fourth quarter of fiscal 2014, management determined that these capitalized costs were not accurately identified with specific patent or trademark assets, and therefore, concluded that amounts previously capitalized should have been expensed as incurred. Accordingly, the Consolidated Financial Statements have been revised to correctly expense costs associated with internally developed patents and trademarks in the period incurred and to reverse expenses for amortization of previously capitalized costs. The revisions resulted in a decrease in Net income from continuing operations of $13 million and $12 million for the years ended May 31, 2013 and 2012, respectively. Identifiable intangible assets decreased $93 million at May 31, 2013 and Retained earnings at May 31, 2013 decreased $75 million as a result of the cumulative adjustment for prior periods. Cash provided by operations decreased $26 million and $23 million for the years ended May 31, 2013 and 2012, respectively, while Cash used by investing activities decreased $26 million for the year ended May 31, 2013 and Cash provided by investing activities increased by $23 million for the year ended May 31, 2012.
Also, in the fourth quarter of fiscal 2014, the Company revised certain prior year amounts in the Consolidated Statements of Cash Flows to eliminate intercompany transfers of short-term investments, to correctly reflect the purchases, sales and maturities of short-term investments related to the Company's hedging program involving U.S. Dollar denominated available-for-sale securities, and to correctly classify certain investment holdings as Short-term investments. For the year ended May 31, 2013, the revisions resulted in a net increase in Purchases of short-term investments of $431 million, a net increase in Maturities of short-term investments of $162 million, and a net increase in Sales of short-term investments of $332 million, which caused a net decrease of $63 million in Cash used by investing activities. For the year ended May 31, 2012, the revisions resulted in a net increase in Purchases of short-term investments of $540 million, a net increase in Maturities of short-term investments of $78 million, and a net increase in Sales of short-term investments of $477 million, which caused an increase of $15 million in Cash provided by investing activities. For the year ended May 31, 2012, these revisions also resulted in a decrease of $78 million in Cash and equivalents, beginning of year and a $63 million decrease in Cash and equivalents, end of year.
Certain prior year amounts have also been revised in the Consolidated Balance Sheets to correctly recognize certain inventory amounts held by third parties, which were identified during the third quarter of fiscal 2014 and resulted in a $50 million increase to both Inventories and Accrued liabilities at May 31, 2013. In addition, prior year amounts on the Consolidated Statements of Cash Flows were revised to correctly reflect the related cash flow impacts of $22 million and $10 million for the years ended May 31, 2013 and 2012, respectively. This revision had no impact on Cash provided by operations or Net (decrease) increase in cash and equivalents, for any year.
The Company also revised certain prior period amounts in the Consolidated Statements of Cash Flows to correctly reflect non-cash additions to property, plant, and equipment, which were identified during the second quarter of fiscal 2014. For the year ended May 31, 2013, this revision decreased Cash provided by operations and decreased Cash used by investing activities, each by $38 million. For the year ended May 31, 2012, this revision decreased Cash provided by operations and increased Cash provided by investing activities, each by $34 million.
The Company assessed the materiality of these misstatements on prior periods’ financial statements in accordance with SEC Staff Accounting Bulletin ("SAB") No. 99, Materiality, codified in ASC 250 ("ASC 250"), Presentation of Financial Statements, and concluded that these misstatements were not material to any prior annual or interim periods. Accordingly, in accordance with ASC 250 (SAB No. 108, Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements), the Consolidated Financial Statements as of May 31, 2013 and 2012, and the years then ended, which are presented herein, have been revised. The following are selected line items from the Company's Consolidated Financial Statements illustrating the effect of these corrections and the correction of other immaterial errors:
 
 
NIKE, Inc. Consolidated Statements of Income
 
 
Year Ended May 31, 2013
 
Year Ended May 31, 2012
(In millions, except per share data)
 
As Reported
 
Adjustment
 
As Revised
 
As Reported
 
Adjustment
 
As Revised
Total selling and administrative expense
 
$
7,780

 
$
16

 
$
7,796

 
$
7,065

 
$
14

 
$
7,079

Income before income taxes
 
3,272

 
(16
)
 
3,256

 
3,025

 
(14
)
 
3,011

Income tax expense
 
808

 
(3
)
 
805

 
756

 
(2
)
 
754

NET INCOME FROM CONTINUING OPERATIONS
 
2,464

 
(13
)
 
2,451

 
2,269

 
(12
)
 
2,257

NET INCOME
 
$
2,485

 
$
(13
)
 
$
2,472

 
$
2,223

 
$
(12
)
 
$
2,211

 
 
 
 
 
 
 
 
 
 
 
 
 
Earnings per share from continuing operations:
 
 
 
 
 
 
 
 
 
 
 
 
Basic earnings per common share
 
$
2.75

 
$
(0.01
)
 
$
2.74

 
$
2.47

 
$
(0.02
)
 
$
2.45

Diluted earnings per common share
 
$
2.69

 
$
(0.01
)
 
$
2.68

 
$
2.42

 
$
(0.02
)
 
$
2.40

 
 
 
 
 
 
 
 
 
 
 
 
 
Earnings per share for NIKE Inc.
 
 
 
 
 
 
 
 
 
 
 
 
Basic earnings per common share
 
$
2.77

 
$
(0.01
)
 
$
2.76

 
$
2.42

 
$
(0.02
)
 
$
2.40

Diluted earnings per common share
 
$
2.71

 
$
(0.01
)
 
$
2.70

 
$
2.37

 
$
(0.02
)
 
$
2.35

 
 
NIKE, Inc. Consolidated Statements of Comprehensive Income
 
 
Year Ended May 31, 2013
 
Year Ended May 31, 2012
(In millions)
 
As Reported
 
Adjustment
 
As Revised
 
As Reported
 
Adjustment
 
As Revised
Net income
 
$
2,485

 
$
(13
)
 
$
2,472

 
$
2,223

 
$
(12
)
 
$
2,211

TOTAL COMPREHENSIVE INCOME
 
$
2,610

 
$
(13
)
 
$
2,597

 
$
2,277

 
$
(12
)
 
$
2,265

 
 
NIKE, Inc. Consolidated Balance Sheet
 
 
May 31, 2013
(In millions)
 
As Reported
 
Adjustment
 
As Revised
ASSETS
 
 
 
 
 
 
Inventories
 
$
3,434

 
$
50

 
$
3,484

Prepaid expenses and other current assets
 
802

 
(46
)
 
756

Total current assets
 
13,626

 
4

 
13,630

Identifiable intangible assets, net
 
382

 
(93
)
 
289

Deferred income taxes and other assets
 
993

 
50

 
1,043

TOTAL ASSETS
 
$
17,584

 
$
(39
)
 
$
17,545

LIABILITIES AND SHAREHOLDERS' EQUITY
 
 
 
 
 
 
Notes payable
 
$
121

 
$
(23
)
 
$
98

Accounts payable
 
1,646

 
23

 
1,669

Accrued liabilities
 
1,986

 
50

 
2,036

Income taxes payable
 
98

 
(14
)
 
84

Total current liabilities
 
3,926

 
36

 
3,962

Retained earnings
 
5,695

 
(75
)
 
5,620

Total shareholders’ equity
 
11,156

 
(75
)
 
11,081

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY
 
$
17,584

 
$
(39
)
 
$
17,545

 
 
NIKE, Inc. Consolidated Statements of Cash Flows
 
 
Year Ended May 31, 2013
 
Year Ended May 31, 2012
(In millions)
 
As Reported
 
Adjustment
 
As Revised
 
As Reported
 
Adjustment
 
As Revised
Cash provided by operations:
 
 
 
 
 
 
 
 
 
 
 
 
Net income
 
$
2,485

 
$
(13
)
 
$
2,472

 
$
2,223

 
$
(12
)
 
$
2,211

Income charges (credits) not affecting cash:
 
 
 
 
 
 
 
 
 
 
 
 
Deferred income taxes
 
21

 
(1
)
 
20

 
(60
)
 
1

 
(59
)
Amortization and other
 
75

 
(9
)
 
66

 
32

 
(9
)
 
23

(Increase) in inventories
 
(197
)
 
(22
)
 
(219
)
 
(805
)
 
(10
)
 
(815
)
Increase in accounts payable, accrued liabilities and income taxes payable
 
41

 
(14
)
 
27

 
470

 
(45
)
 
425

Cash provided by operations
 
3,027

 
(59
)
 
2,968

 
1,899

 
(75
)
 
1,824

Cash (used) provided by investing activities:
 
 
 
 
 
 
 
 
 
 
 
 
Purchases of short-term investments
 
(3,702
)
 
(431
)
 
(4,133
)
 
(2,705
)
 
(540
)
 
(3,245
)
Maturities of short-term investments
 
1,501

 
162

 
1,663

 
2,585

 
78

 
2,663

Sales of short-term investments
 
998

 
332

 
1,330

 
1,244

 
477

 
1,721

Additions to property, plant and equipment
 
(636
)
 
38

 
(598
)
 
(597
)
 
34

 
(563
)
Increase in other assets, net of other liabilities
 
(28
)
 
26

 
(2
)
 
(37
)
 
23

 
(14
)
Cash (used) provided by investing activities
 
(1,067
)
 
127

 
(940
)
 
514

 
72

 
586

Cash used by financing activities:
 
 
 
 
 
 
 
 
 
 
 
 
Increase (decrease) in notes payable
 
15

 
(5
)
 
10

 
(65
)
 
18

 
(47
)
Cash used by financing activities
 
(1,040
)
 
(5
)
 
(1,045
)
 
(2,118
)
 
18

 
(2,100
)
Net (decrease) increase in cash and equivalents
 
1,020

 
63

 
1,083

 
362

 
15

 
377

Cash and equivalents, beginning of year
 
2,317

 
(63
)
 
2,254

 
1,955

 
(78
)
 
1,877

CASH AND EQUIVALENTS, END OF YEAR
 
$
3,337

 
$
—

 
$
3,337

 
$
2,317

 
$
(63
)
 
$
2,254

 
 
NIKE, Inc. Consolidated Statements of Shareholders' Equity
 
 
Retained Earnings
 
Total Shareholders' Equity
(In millions)
 
As Reported
 
Adjustment
 
As Revised
 
As Reported
 
Adjustment
 
As Revised
Balance at May 31, 2011
 
$
5,801

 
$
(50
)
 
$
5,751

 
$
9,843

 
$
(50
)
 
$
9,793

Net income
 
2,223

 
(12
)
 
2,211

 
2,223

 
(12
)
 
2,211

Balance at May 31, 2012
 
$
5,588

 
$
(62
)
 
$
5,526

 
$
10,381

 
$
(62
)
 
$
10,319

Net income
 
2,485

 
(13
)
 
2,472

 
2,485

 
(13
)
 
2,472

Balance at May 31, 2013
 
$
5,695

 
$
(75
)
 
$
5,620

 
$
11,156

 
$
(75
)
 
$
11,081


Recognition of Revenues
Wholesale revenues are recognized when title and the risks and rewards of ownership have passed to the customer, based on the terms of sale. This occurs upon shipment or upon receipt by the customer depending on the country of the sale and the agreement with the customer. Retail store revenues are recorded at the time of sale. Provisions for post-invoice sales discounts, returns and miscellaneous claims from customers are estimated and recorded as a reduction to revenue at the time of sale. Post-invoice sales discounts consist of contractual programs with certain customers or discretionary discounts that are expected to be granted to certain customers at a later date. Estimates of discretionary discounts, returns and claims are based on historical rates, specific identification of outstanding claims and outstanding returns not yet received from customers, and estimated discounts, returns and claims expected but not yet finalized with customers. As of May 31, 2014 and 2013, the Company’s reserve balances for post-invoice sales discounts, returns and miscellaneous claims were $610 million and $531 million, respectively.
Cost of Sales
Cost of sales consists primarily of inventory costs, as well as warehousing costs (including the cost of warehouse labor), third-party royalties, certain foreign currency hedge gains and losses, and research, design and development costs.
Shipping and Handling Costs
Shipping and handling costs are expensed as incurred and included in Cost of sales.
Operating Overhead Expense
Operating overhead expense consists primarily of payroll and benefit related costs, rent, depreciation and amortization, professional services, and meetings and travel.
Demand Creation Expense
Demand creation expense consists of advertising and promotion costs, including costs of endorsement contracts, television, digital and print advertising, brand events, and retail brand presentation. Advertising production costs are expensed the first time an advertisement is run. Advertising placement costs are expensed in the month the advertising appears, while costs related to brand events are expensed when the event occurs. Costs related to retail brand presentation are expensed when the presentation is completed and delivered.
A significant amount of the Company’s promotional expenses result from payments under endorsement contracts. Accounting for endorsement payments is based upon specific contract provisions. Generally, endorsement payments are expensed on a straight-line basis over the term of the contract after giving recognition to periodic performance compliance provisions of the contracts. Prepayments made under contracts are included in Prepaid expenses and other current assets or Deferred income taxes and other assets depending on the period to which the prepayment applies.
Certain contracts provide for contingent payments to endorsers based upon specific achievements in their sports (e.g., winning a championship). The Company records Demand creation expense for these amounts when the endorser achieves the specific goal.
Certain contracts provide for variable payments based upon endorsers maintaining a level of performance in their sport over an extended period of time (e.g., maintaining a specified ranking in a sport for a year). These amounts are recorded in Demand creation expense when the Company determines that it is probable that the specified level of performance will be maintained throughout the period. In these instances, to the extent that actual payments to the endorser differ from the Company's estimate due to changes in the endorser’s performance, increased or decreased Demand creation expense may be recorded in a future period.
Certain contracts provide for royalty payments to endorsers based upon a predetermined percentage of sales of particular products. The Company expenses these payments in Cost of sales as the related sales occur. In certain contracts, the Company offers minimum guaranteed royalty payments. For contracts for which the Company estimates it will not meet the minimum guaranteed amount of royalty fees through sales of product, the Company records the amount of the guaranteed payment in excess of that earned through sales of product in Demand creation expense uniformly over the remaining guarantee period.
Through cooperative advertising programs, the Company reimburses retail customers for certain costs of advertising the Company’s products. The Company records these costs in Demand creation expense at the point in time when it is obligated to its customers for the costs, which is when the related revenues are recognized. This obligation may arise prior to the related advertisement being run.
Total advertising and promotion expenses were $3,031 million, $2,745 million, and $2,607 million for the years ended May 31, 2014, 2013 and 2012, respectively. Prepaid advertising and promotion expenses totaled $516 million and $386 million at May 31, 2014 and 2013, respectively, and were recorded in Prepaid expenses and other current assets and Deferred income taxes and other assets depending on the period to which the prepayment applies.
Cash and Equivalents
Cash and equivalents represent cash and short-term, highly liquid investments, including commercial paper, U.S. Treasury, U.S. Agency, and corporate debt securities with maturities of three months or less at date of purchase.
Short-Term Investments
Short-term investments consist of highly liquid investments, including commercial paper, U.S. Treasury, U.S. Agency, and corporate debt securities, with maturities over three months from the date of purchase. Debt securities that the Company has the ability and positive intent to hold to maturity are carried at amortized cost. At May 31, 2014 and 2013, the Company did not hold any short-term investments that were classified as trading or held-to-maturity.
At May 31, 2014 and 2013, Short-term investments consisted of available-for-sale securities. Available-for-sale securities are recorded at fair value with unrealized gains and losses reported, net of tax, in Other comprehensive income, unless unrealized losses are determined to be other than temporary. Realized gains and losses on the sale of securities are determined by specific identification. The Company considers all available-for-sale securities, including those with maturity dates beyond 12 months, as available to support current operational liquidity needs and therefore classifies all securities with maturity dates beyond three months at the date of purchase as current assets within Short-term investments on the Consolidated Balance Sheets.
Refer to Note 6 — Fair Value Measurements for more information on the Company’s short-term investments.
Allowance for Uncollectible Accounts Receivable
Accounts receivable consists primarily of amounts receivable from customers. The Company makes ongoing estimates relating to the collectability of its accounts receivable and maintains an allowance for estimated losses resulting from the inability of its customers to make required payments. In determining the amount of the allowance, the Company considers historical levels of credit losses and makes judgments about the creditworthiness of significant customers based on ongoing credit evaluations. Accounts receivable with anticipated collection dates greater than 12 months from the balance sheet date and related allowances are considered non-current and recorded in Deferred income taxes and other assets. The allowance for uncollectible accounts receivable was $78 million and $104 million at May 31, 2014 and 2013, respectively, of which $37 million and $54 million, respectively, was classified as long-term and recorded in Deferred income taxes and other assets.
Inventory Valuation
Inventories are stated at lower of cost or market and valued on either an average or specific identification cost basis. For inventories in transit that represent direct shipments to customers, the related inventory and cost of sales is recognized on a specific identification basis. Inventory costs primarily consist of product cost from the Company's suppliers, as well as freight, import duties, taxes, insurance and logistics and other handling fees.
Property, Plant and Equipment and Depreciation
Property, plant and equipment are recorded at cost. Depreciation is determined on a straight-line basis for buildings and leasehold improvements over 2 to 40 years and for machinery and equipment over 2 to 15 years.
Depreciation and amortization of assets used in manufacturing, warehousing and product distribution are recorded in Cost of sales. Depreciation and amortization of other assets are recorded in Total selling and administrative expense.
Software Development Costs
Internal Use Software. Expenditures for major software purchases and software developed for internal use are capitalized and amortized over a 2 to 10 year period on a straight-line basis. The Company’s policy provides for the capitalization of external direct costs of materials and services associated with developing or obtaining internal use computer software. In addition, the Company also capitalizes certain payroll and payroll-related costs for employees who are directly associated with internal use computer software projects. The amount of capitalizable payroll costs with respect to these employees is limited to the time directly spent on such projects. Costs associated with preliminary project stage activities, training, maintenance and all other post-implementation stage activities are expensed as incurred.
Computer Software to be Sold, Leased or Otherwise Marketed. Development costs of computer software to be sold, leased, or otherwise marketed as an integral part of a product are subject to capitalization beginning when a product’s technological feasibility has been established and ending when a product is available for general release to customers. In most instances, the Company’s products are released soon after technological feasibility has been established. Therefore, software development costs incurred subsequent to achievement of technological feasibility are usually not significant, and generally most software development costs have been expensed as incurred.
Impairment of Long-Lived Assets
The Company reviews the carrying value of long-lived assets or asset groups to be used in operations whenever events or changes in circumstances indicate that the carrying amount of the assets might not be recoverable. Factors that would necessitate an impairment assessment include a significant adverse change in the extent or manner in which an asset is used, a significant adverse change in legal factors or the business climate that could affect the value of the asset, or a significant decline in the observable market value of an asset, among others. If such facts indicate a potential impairment, the Company would assess the recoverability of an asset group by determining if the carrying value of the asset group exceeds the sum of the projected undiscounted cash flows expected to result from the use and eventual disposition of the assets over the remaining economic life of the primary asset in the asset group. If the recoverability test indicates that the carrying value of the asset group is not recoverable, the Company will estimate the fair value of the asset group using appropriate valuation methodologies, which would typically include an estimate of discounted cash flows. Any impairment would be measured as the difference between the asset group’s carrying amount and its estimated fair value.
Goodwill and Indefinite-Lived Intangible Assets
The Company performs annual impairment tests on goodwill and intangible assets with indefinite lives in the fourth quarter of each fiscal year, or when events occur or circumstances change that would, more likely than not, reduce the fair value of a reporting unit or an intangible asset with an indefinite life below its carrying value. Events or changes in circumstances that may trigger interim impairment reviews include significant changes in business climate, operating results, planned investments in the reporting unit, planned divestitures or an expectation that the carrying amount may not be recoverable, among other factors. The Company may first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If, after assessing the totality of events and circumstances, the Company determines that it is more likely than not that the fair value of the reporting unit is greater than its carrying amount, the two-step impairment test is unnecessary. The two-step impairment test first requires the Company to estimate the fair value of its reporting units. If the carrying value of a reporting unit exceeds its fair value, the goodwill of that reporting unit is potentially impaired and the Company proceeds to step two of the impairment analysis. In step two of the analysis, the Company measures and records an impairment loss equal to the excess of the carrying value of the reporting unit's goodwill over its implied fair value, if any.
The Company generally bases its measurement of the fair value of a reporting unit on a blended analysis of the present value of future discounted cash flows and the market valuation approach. The discounted cash flows model indicates the fair value of the reporting unit based on the present value of the cash flows that the Company expects the reporting unit to generate in the future. The Company's significant estimates in the discounted cash flows model include: its weighted average cost of capital; long-term rate of growth and profitability of the reporting unit's business; and working capital effects. The market valuation approach indicates the fair value of the business based on a comparison of the reporting unit to comparable publicly traded companies in similar lines of business. Significant estimates in the market valuation approach model include identifying similar companies with comparable business factors such as size, growth, profitability, risk and return on investment, and assessing comparable revenue and operating income multiples in estimating the fair value of the reporting unit.
Indefinite-lived intangible assets primarily consist of acquired trade names and trademarks. The Company may first perform a qualitative assessment to determine whether it is more likely than not that an indefinite-lived intangible asset is impaired. If, after assessing the totality of events and circumstances, the Company determines that it is more likely than not that the indefinite-lived intangible asset is not impaired, no quantitative fair value measurement is necessary. If a quantitative fair value measurement calculation is required for these intangible assets, the Company utilizes the relief-from-royalty method. This method assumes that trade names and trademarks have value to the extent that their owner is relieved of the obligation to pay royalties for the benefits received from them. This method requires the Company to estimate the future revenue for the related brands, the appropriate royalty rate and the weighted average cost of capital.
Operating Leases
The Company leases retail store space, certain distribution and warehouse facilities, office space, and other non-real estate assets under operating leases. Operating lease agreements may contain rent escalation clauses, rent holidays or certain landlord incentives, including tenant improvement allowances. Rent expense for non-cancelable operating leases with scheduled rent increases or landlord incentives are recognized on a straight-line basis over the lease term, beginning with the effective lease commencement date, which is generally the date in which the Company takes possession of or controls the physical use of the property. Certain leases also provide for contingent rents, which are determined as a percentage of sales in excess of specified levels. A contingent rent liability is recognized together with the corresponding rent expense when specified levels have been achieved or when the Company determines that achieving the specified levels during the period is probable.
Fair Value Measurements
The Company measures certain financial assets and liabilities at fair value on a recurring basis, including derivatives and available-for-sale securities. Fair value is the price the Company would receive to sell an asset or pay to transfer a liability in an orderly transaction with a market participant at the measurement date. The Company uses a three-level hierarchy established by the Financial Accounting Standards Board ("FASB") that prioritizes fair value measurements based on the types of inputs used for the various valuation techniques (market approach, income approach, and cost approach).
The levels of hierarchy are described below:
•
Level 1: Observable inputs such as quoted prices in active markets for identical assets or liabilities.
•
Level 2: Inputs other than quoted prices that are observable for the asset or liability, either directly or indirectly; these include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active.
•
Level 3: Unobservable inputs for which there is little or no market data available, which require the reporting entity to develop its own assumptions.
The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability. Financial assets and liabilities are classified in their entirety based on the most conservative level of input that is significant to the fair value measurement.
Pricing vendors are utilized for certain Level 1 and Level 2 investments. These vendors either provide a quoted market price in an active market or use observable inputs without applying significant adjustments in their pricing. Observable inputs include broker quotes, interest rates and yield curves observable at commonly quoted intervals, volatilities and credit risks. The fair value of derivative contracts is determined using observable market inputs such as the daily market foreign currency rates, forward pricing curves, currency volatilities, currency correlations and interest rates, and considers nonperformance risk of the Company and that of its counterparties.
The Company’s fair value processes include controls that are designed to ensure appropriate fair values are recorded. These controls include an analysis of period-over-period fluctuations and comparison to another independent pricing vendor.
Refer to Note 6 — Fair Value Measurements for additional information.
Foreign Currency Translation and Foreign Currency Transactions
Adjustments resulting from translating foreign functional currency financial statements into U.S. Dollars are included in the foreign currency translation adjustment, a component of Accumulated other comprehensive income in Total shareholders’ equity.
The Company’s global subsidiaries have various assets and liabilities, primarily receivables and payables, which are denominated in currencies other than their functional currency. These balance sheet items are subject to re-measurement, the impact of which is recorded in Other expense (income), net, within the Consolidated Statements of Income.
Accounting for Derivatives and Hedging Activities
The Company uses derivative financial instruments to reduce its exposure to changes in foreign currency exchange rates and interest rates. All derivatives are recorded at fair value on the Consolidated Balance Sheets and changes in the fair value of derivative financial instruments are either recognized in Accumulated other comprehensive income (a component of Total shareholders’ equity), Long-term debt or Net income depending on the nature of the underlying exposure, whether the derivative is formally designated as a hedge, and, if designated, the extent to which the hedge is effective. The Company classifies the cash flows at settlement from derivatives in the same category as the cash flows from the related hedged items. For undesignated hedges and designated cash flow hedges, this is within the Cash provided by operations component of the Consolidated Statements of Cash Flows. For designated net investment hedges, this is generally within the Cash (used) provided by investing activities component of the Consolidated Statement of Cash Flows. For the Company’s fair value hedges, which are interest rate swaps used to mitigate the change in fair value of its fixed-rate debt attributable to changes in interest rates, the related cash flows from periodic interest payments are reflected within the Cash provided by operations component of the Consolidated Statements of Cash Flows. Refer to Note 17 — Risk Management and Derivatives for more information on the Company’s risk management program and derivatives.
Stock-Based Compensation
The Company estimates the fair value of options and stock appreciation rights granted under the NIKE, Inc. 1990 Stock Incentive Plan (the “1990 Plan”) and employees’ purchase rights under the Employee Stock Purchase Plans (“ESPPs”) using the Black-Scholes option pricing model. The Company recognizes this fair value, net of estimated forfeitures, as Total selling and administrative expense in the Consolidated Statements of Income over the vesting period using the straight-line method.
Refer to Note 11 — Common Stock and Stock-Based Compensation for more information on the Company’s stock programs.
Income Taxes
The Company accounts for income taxes using the asset and liability method. This approach requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the carrying amounts and the tax basis of assets and liabilities. The Company records a valuation allowance to reduce deferred tax assets to the amount management believes is more likely than not to be realized. United States income taxes are provided currently on financial statement earnings of non-U.S. subsidiaries that are expected to be repatriated. The Company determines annually the amount of undistributed non-U.S. earnings to invest indefinitely in its non-U.S. operations.
The Company recognizes a tax benefit from uncertain tax positions in the financial statements only when it is more likely than not that the position will be sustained upon examination by relevant tax authorities. The Company recognizes interest and penalties related to income tax matters in Income tax expense.
Refer to Note 9 — Income Taxes for further discussion.
Earnings Per Share
Basic earnings per common share is calculated by dividing Net income by the weighted average number of common shares outstanding during the year. Diluted earnings per common share is calculated by adjusting weighted average outstanding shares, assuming conversion of all potentially dilutive stock options and awards.
Refer to Note 12 — Earnings Per Share for further discussion.
Management Estimates
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates, including estimates relating to assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates.
Recently Adopted Accounting Standards
In July 2013, the FASB issued an accounting standards update intended to provide guidance on the presentation of unrecognized tax benefits, reflecting the manner in which an entity would settle, at the reporting date, any additional income taxes that would result from the disallowance of a tax position when net operating loss carryforwards, similar tax losses, or tax credit carryforwards exist. This accounting standard is effective for the Company beginning June 1, 2014 and early adoption is permitted. Management early adopted this guidance and the adoption did not have a material impact on the Company's consolidated financial position or results of operations.
In July 2012, the FASB issued an accounting standards update intended to simplify how an entity tests indefinite-lived intangible assets other than goodwill for impairment by providing entities with an option to perform a qualitative assessment to determine whether further impairment testing is necessary. This accounting standard update was effective for us beginning June 1, 2013. The adoption of this standard did not have a material impact on our consolidated financial position or results of operations.
In December 2011, the FASB issued guidance enhancing disclosure requirements surrounding the nature of an entity’s right to offset and related arrangements associated with its financial instruments and derivative instruments. This new guidance requires companies to disclose both gross and net information about instruments and transactions eligible for offset in the statement of financial position and instruments and transactions subject to master netting arrangements. This new guidance was effective for the Company beginning June 1, 2013. As this guidance only requires expanded disclosures, the adoption had no impact on the Company's consolidated financial position or results of operations.
Recently Issued Accounting Standards
In May 2014, the FASB issued an accounting standards update that replaces existing revenue recognition guidance. Among other things, the updated guidance requires companies to recognize revenue in a way that depicts the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The new guidance is effective for the Company beginning June 1, 2017. The Company is currently evaluating the effect the guidance will have on the Consolidated Financial Statements.
Inventories
Inventories
NOTE 2 — Inventories
Inventory balances of $3,947 million and $3,484 million at May 31, 2014 and 2013, respectively, were substantially all finished goods.
Property, Plant and Equipment
Property, Plant and Equipment
NOTE 3 — Property, Plant and Equipment
Property, plant and equipment included the following:
 
 
As of May 31,
(In millions)
 
2014
 
2013
Land
 
$
270

 
$
268

Buildings
 
1,261

 
1,174

Machinery, equipment and internal-use software
 
3,376

 
2,985

Leasehold improvements
 
1,066

 
945

Construction in process
 
247

 
128

Total property, plant and equipment, gross
 
6,220

 
5,500

Less accumulated depreciation
 
3,386

 
3,048

TOTAL PROPERTY, PLANT AND EQUIPMENT, NET
 
$
2,834

 
$
2,452


Capitalized interest was not material for the years ended May 31, 2014, 2013, and 2012. The Company had $74 million and $81 million in capital lease obligations as of May 31, 2014 and May 31, 2013, respectively, included in machinery, equipment and internal-use software.
Identifiable Intangible Assets and Goodwill
Identifiable Intangible Assets and Goodwill
NOTE 4 — Identifiable Intangible Assets and Goodwill
The following table summarizes the Company’s Identifiable intangible asset balances as of May 31, 2014 and 2013:
 
 
As of May 31, 2014
 
As of May 31, 2013
(In millions)
 
Gross Carrying
Amount
 
Accumulated
Amortization
 
Net Carrying
Amount
 
Gross Carrying
Amount
 
Accumulated
Amortization
 
Net Carrying
Amount
Acquired trademarks and other
 
$
39

 
$
(39
)
 
$
—

 
$
43

 
$
(36
)
 
$
7

Indefinite-lived trademarks
 
 
 
 
 
282

 
 
 
 
 
282

IDENTIFIABLE INTANGIBLE
ASSETS, NET
 
 
 
 
 
$
282

 
 
 
 
 
$
289


Goodwill was $131 million at May 31, 2014 and May 31, 2013; $64 million is included in the Converse segment and the remaining amounts are included in Global Brand Divisions for segment reporting purposes. There were no accumulated impairment balances for goodwill as of either period end.
Accrued Liabilities
Accrued Liabilities
NOTE 5 — Accrued Liabilities
Accrued liabilities included the following:
 
 
As of May 31,
(In millions)
 
2014
 
2013
Compensation and benefits, excluding taxes
 
$
782

 
$
713

Endorsement compensation
 
328

 
264

Dividends payable
 
209

 
188

Taxes other than income taxes
 
204

 
192

Advertising and marketing
 
133

 
77

Import and logistics costs
 
127

 
111

Fair value of derivatives
 
85

 
34

Other(1)
 
623

 
457

TOTAL ACCRUED LIABILITIES
 
$
2,491

 
$
2,036

(1)
Other consists of various accrued expenses with no individual item accounting for more than 5% of the total Accrued liabilities balance at May 31, 2014 and 2013.
Fair Value Measurements
Fair Value Measurements
NOTE 6 — Fair Value Measurements
The following tables present information about the Company's financial assets and liabilities measured at fair value on a recurring basis as of May 31, 2014 and 2013 and indicate the fair value hierarchy of the valuation techniques utilized by the Company to determine such fair value. Refer to Note 1 – Summary of Significant Accounting Policies for additional detail regarding the Company’s fair value measurement methodology.
 
As of May 31, 2014
(In millions)
 
Assets at Fair Value
 
Cash and Cash Equivalents
 
Short-term Investments
 
Other Long-term Assets
Cash
 
$
780

 
$
780

 
$
—

 
$
—

Level 1:
 
 
 
 
 
 
 
 
U.S. Treasury securities
 
1,137

 
151

 
986

 
—

Level 2:
 
 
 
 
 
 
 
 
Time deposits
 
227

 
227

 
—

 
—

U.S. Agency securities
 
1,027

 
25

 
1,002

 
—

Commercial paper and bonds
 
959

 
25

 
934

 
—

Money market funds
 
1,012

 
1,012

 
—

 
—

Total level 2
 
3,225

 
1,289

 
1,936

 
—

Level 3:
 
 
 
 
 
 
 
 
Non-marketable preferred stock
 
7

 
—

 
—

 
7

TOTAL
 
$
5,149

 
$
2,220

 
$
2,922

 
$
7

 
 
As of May 31, 2013
(In millions)
 
Assets at Fair Value
 
Cash and Cash Equivalents
 
Short-term Investments
 
Other Long-term Assets
Cash
 
$
663

 
$
663

 
$
—

 
$
—

Level 1:
 
 
 
 
 
 
 
 
U.S. Treasury securities
 
2,008

 
425

 
1,583

 
—

Level 2:
 
 
 
 
 
 
 
 
Time deposits
 
358

 
358

 
—

 
—

U.S. Agency securities(1)
 
1,026

 
395

 
631

 
—

Commercial paper and bonds(1)
 
1,074

 
660

 
414

 
—

Money market funds
 
836

 
836

 
—

 
—

Total level 2
 
3,294

 
2,249

 
1,045

 
—

Level 3:
 
 
 
 
 
 
 
 
Non-marketable preferred stock
 
5

 
—

 
—

 
5

TOTAL
 
$
5,970

 
$
3,337

 
$
2,628

 
$
5


(1)
Amounts have been revised to reflect proper classification between U.S. Agency securities and commercial paper and bonds.
 
As of May 31, 2014
 
 
Asset Derivatives
 
Liability Derivatives
(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)
 
$
127

 
$
101

 
$
26

 
$
85

 
$
84

 
$
1

Interest rate swap contracts
 
6

 
—

 
6

 
—

 
—

 
—

TOTAL
 
$
133

 
$
101

 
$
32

 
$
85

 
$
84

 
$
1

(1)
The Company’s derivative financial instruments are subject to master netting arrangements that allow for the offset of assets and liabilities in the event of default or early termination of the contract. The Company elects to record the gross assets and liabilities of its derivative financial instruments in the Consolidated Balance Sheets. If the derivative financial instruments had been netted in the Consolidated Balance Sheets, the asset and liability positions each would have been reduced by $63 million. No material amounts of collateral were received or posted on the Company’s derivative assets and liabilities as of May 31, 2014.
 
As of May 31, 2013
 
 
Asset Derivatives
 
Liability Derivatives
(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)
 
$
278

 
$
199

 
$
79

 
$
34

 
$
34

 
$
—

Interest rate swap contracts
 
11

 
—

 
11

 
—

 
—

 
—

TOTAL
 
$
289

 
$
199

 
$
90

 
$
34

 
$
34

 
$
—

(1)
The Company’s derivative financial instruments are subject to master netting arrangements that allow for the offset of assets and liabilities in the event of default or early termination of the contract. The Company elects to record the gross assets and liabilities of its derivative financial instruments in the Consolidated Balance Sheets. If the derivative financial instruments had been netted in the Consolidated Balance Sheets, the asset and liability positions each would have been reduced by $34 million. No material amounts of collateral were received or posted on the Company’s derivative assets and liabilities as of May 31, 2013.
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). The gross realized gains and losses on sales of available-for-sale securities were immaterial for the fiscal years ended May 31, 2014 and 2013. Unrealized gains and losses on available-for-sale securities included in Other comprehensive income were immaterial as of May 31, 2014 and 2013.
The Company regularly reviews its available-for-sale securities for other-than-temporary impairment. For the years ended May 31, 2014 and 2013, the Company did not consider its securities to be other-than-temporarily impaired and accordingly, did not recognize any impairment losses.
As of May 31, 2014, the Company held $2,287 million of available-for-sale securities with maturity dates within one year from the purchase date and $635 million with maturity dates over one year and less than five years from the purchase date within short-term investments. As of May 31, 2013, the Company held $2,229 million of available-for-sale securities with maturity dates within one year from purchase date and $399 million with maturity dates over one year and less than five years from purchase date within Short-term investments.
Included in Interest expense (income), net was interest income related to the Company's available-for-sale securities of $5 million, $4 million, and $6 million for the years ended May 31, 2014, 2013, and 2012, 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, 2014 and 2013.
Derivative financial instruments include foreign exchange forwards and options, embedded derivatives and interest rate swap contracts. Refer to Note 17 — Risk Management and Derivatives for additional detail.
No transfers among the levels within the fair value hierarchy occurred during the years ended May 31, 2014 or 2013.
As of May 31, 2014 and 2013, the Company had no assets or liabilities that were required to be measured at fair value on a non-recurring basis.
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.
Short-Term Borrowings and Credit Lines
Short-Term Borrowings and Credit Lines
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, 2014 and 2013 are summarized below:
 
 
As of May 31,
 
 
 
2014
 
 
2013
 
(Dollars in millions)
 
Borrowings

 
Interest Rate

 
 
Borrowings

 
Interest Rate

 
Notes payable:
 
 
 
 
 
 
 
 
 
 
U.S. operations
 
$
—

 
0.00
%
(1) 
 
$
—

 
0.00
%
(1) 
Non-U.S. operations
 
167

 
10.04
%
(1) 
 
98

 
4.94
%
(1) 
TOTAL NOTES PAYABLE
 
$
167

 
 
 
 
$
98

 
 
 
Interest-Bearing Accounts Payable:
 
 
 
 
 
 
 
 
 
 
Sojitz America
 
$
60

 
0.94
%
 
 
$
55

 
0.99
%
 
(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 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, 2014 and 2013, the Company had no amounts outstanding under its commercial paper program.
On November 1, 2011, the Company entered into a committed credit facility agreement with a syndicate of banks which provides for up to $1 billion of borrowings with the option to increase borrowings to $1.5 billion with lender approval. Following an extension agreement on September 17, 2013 between the Company and the syndicate of banks, the facility matures November 1, 2017, with a one-year extension option exercisable through October 31, 2014. Based on the Company’s current long-term senior unsecured debt ratings of AA- and A1 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 0.445%. The facility fee is 0.055% of the total commitment. Under this committed credit facility, the Company must maintain, among other things, certain minimum specified financial ratios with which the Company was in compliance at May 31, 2014. No amounts were outstanding under this facility as of May 31, 2014 or 2013.
Long-Term Debt
Long-Term Debt
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
 
2014
 
2013
Corporate Bond Payables:(4)
 
 
 
 
 
 
 
 
 
 
October 1, 2013
 
$
50

 
4.70
%
 
Semi-Annually
 
$
—

 
$
50

October 15, 2015(1)
 
$
100

 
5.15
%
 
Semi-Annually
 
108

 
111

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

 
40

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
 
29

 
34

August 20, 2001 through November 20, 2020(3)
 
¥
4,000

 
2.00
%
 
Quarterly
 
13

 
15

Total
 
 
 
 
 
 
 
1,206

 
1,267

Less current maturities
 
 

 
 

 
 
 
7

 
57

TOTAL LONG-TERM DEBT
 
 
 
 
 
 
 
$
1,199

 
$
1,210

(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, 2014, the interest rates payable on these swap agreements ranged from approximately 0.2% to 0.4%.
(2)
On May 30, 2013, 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, 2015 through 2019 are $7 million, $108 million, $45 million, $25 million and $7 million, respectively, at face value.
The fair value of the Company’s Long-term debt, including the current portion, was approximately $1,154 million at May 31, 2014 and $1,219 million at May 31, 2013. The fair value of Long-term debt is estimated based upon quoted prices of similar instruments (level 2).
Income Taxes
Income Taxes
NOTE 9 — Income Taxes
Income before income taxes is as follows:
 
 
Year Ended May 31,
(In millions)
 
2014
 
2013
 
2012
Income before income taxes:
 
 
 
 
 
 
United States
 
$
3,066

 
$
1,231

 
$
799

Foreign
 
478

 
2,025

 
2,212

TOTAL INCOME BEFORE INCOME TAXES
 
$
3,544

 
$
3,256

 
$
3,011


The provision for income taxes is as follows:
 
 
Year Ended May 31,
(In millions)
 
2014
 
2013
 
2012
Current:
 
 
 
 
 
 
United States
 
 
 
 
 
 
Federal
 
$
371

 
$
432

 
$
286

State
 
93

 
69

 
51

Foreign
 
398

 
398

 
488

Total
 
862

 
899

 
825

Deferred:
 
 
 
 
 
 
United States
 
 
 
 
 
 
Federal
 
8

 
—

 
(47
)
State
 
(3
)
 
(4
)
 
5

Foreign
 
(16
)
 
(90
)
 
(29
)
Total
 
(11
)
 
(94
)
 
(71
)
TOTAL INCOME TAX EXPENSE
 
$
851

 
$
805

 
$
754


A reconciliation from the U.S. statutory federal income tax rate to the effective income tax rate is as follows:
 
 
Year Ended May 31,
  
 
2014
 
2013
 
2012
Federal income tax rate
 
35.0
 %
 
35.0
 %
 
35.0
 %
State taxes, net of federal benefit
 
1.8
 %
 
1.4
 %
 
1.3
 %
Foreign earnings
 
2.2
 %
 
-11.8
 %
 
-11.9
 %
Deferred charge
 
-14.6
 %
 
0.0
 %
 
0.0
 %
Other, net
 
-0.4
 %
 
0.1
 %
 
0.6
 %
EFFECTIVE INCOME TAX RATE
 
24.0
 %
 
24.7
 %
 
25.0
 %

The effective tax rate from continuing operations for the year ended May 31, 2014 was 70 basis points lower than the effective tax rate from continuing operations for the year ended May 31, 2013 primarily due to an increase in the amount of earnings from lower tax rate jurisdictions. 
During the fourth quarter of the fiscal year ended May 31, 2014, the Company reached a resolution with the IRS on a U.S. Unilateral Advanced Pricing Agreement that covers intercompany transfer pricing for fiscal years 2011 through 2020. This agreement resulted in a reduction in the Company's permanently reinvested foreign earnings, which increased the effective income tax rate and Income taxes payable. The agreement also resulted in a reduction of previously unrecognized tax benefits and the creation of a deferred tax charge, both of which reduced the effective income tax rate. The net result of the agreement did not have a material impact on the Company’s effective income tax rate in fiscal 2014.
The effective tax rate from continuing operations for the year ended May 31, 2013 was 30 basis points lower than the effective tax rate from continuing operations for the year ended May 31, 2012 primarily due to tax benefits received from the intercompany sale of intellectual property rights outside of the U.S., the retroactive reinstatement of the research and development credit and the intra-period allocation of tax expense between continuing operations, discontinued operations and Other comprehensive income. The decrease in the effective rate was partially offset by a higher effective tax rate on operations as a result of an increase in earnings in higher tax jurisdictions.
Deferred tax assets and (liabilities) comprise the following: 
 
 
As of May 31,
(In millions)
 
2014
 
2013
Deferred tax assets:
 
 
 
 
Allowance for doubtful accounts
 
$
11

 
$
20

Inventories
 
49

 
40

Sales return reserves
 
113

 
101

Deferred compensation
 
211

 
197

Stock-based compensation
 
162

 
140

Reserves and accrued liabilities
 
95

 
66

Foreign loss carry-forwards
 
16

 
19

Foreign tax credit carry-forwards
 
—

 
106

Undistributed earnings of foreign subsidiaries
 
194

 
147

Other
 
51

 
47

Total deferred tax assets
 
902

 
883

Valuation allowance
 
(9
)
 
(5
)
Total deferred tax assets after valuation allowance
 
893

 
878

Deferred tax liabilities:
 
 
 
 
Property, plant and equipment
 
(237
)
 
(241
)
Intangibles
 
(94
)
 
(78
)
Other
 
(2
)
 
(20
)
Total deferred tax liability
 
(333
)
 
(339
)
NET DEFERRED TAX ASSET
 
$
560

 
$
539


The following is a reconciliation of the changes in the gross balance of unrecognized tax benefits:
 
 
As of May 31,
(In millions)
 
2014
 
2013
 
2012
Unrecognized tax benefits, as of the beginning of the period
 
$
447

 
$
285

 
$
212

Gross increases related to prior period tax positions(1)
 
814

 
77

 
48

Gross decreases related to prior period tax positions(1)
 
(166
)
 
(3
)
 
(25
)
Gross increases related to current period tax positions
 
125

 
130

 
91

Gross decreases related to current period tax positions
 
(30
)
 
(9
)
 
(1
)
Settlements(1)
 
(676
)
 
—

 
(20
)
Lapse of statute of limitations
 
(4
)
 
(21
)
 
(9
)
Changes due to currency translation
 
(4
)
 
(12
)
 
(11
)
UNRECOGNIZED TAX BENEFITS, AS OF THE END OF THE PERIOD
 
$
506

 
$
447

 
$
285


(1)
During the fourth quarter of the fiscal year ended May 31, 2014, the Company reached a resolution with the IRS on a U.S. Unilateral Advanced Pricing Agreement that covers intercompany transfer pricing for fiscal years 2011 through 2020. As a result, the Company recorded a gross increase in unrecognized tax benefits related to prior period tax positions, a gross decrease in unrecognized tax benefits related to prior period tax positions, and a settlement. The net impact of these items resulted in a decrease to unrecognized tax benefits.
As of May 31, 2014, the total gross unrecognized tax benefits, excluding related interest and penalties, were $506 million, $264 million of which would affect the Company's effective tax rate if recognized in future periods.
The Company recognizes interest and penalties related to income tax matters in Income tax expense. The liability for payment of interest and penalties increased $55 million, $4 million, and $17 million during the years ended May 31, 2014, 2013, and 2012, respectively. As of May 31, 2014 and 2013, accrued interest and penalties related to uncertain tax positions were $167 million and $112 million, respectively (excluding federal benefit).
The Company is subject to taxation primarily in the United States, China, the Netherlands, and Brazil, as well as various state and other foreign jurisdictions. The Company has concluded substantially all U.S. federal income tax matters through fiscal 2010. The Company is currently under audit by the Internal Revenue Service for the 2011 through 2014 tax years, and many issues are at an advanced stage in the examination process. In addition, the Company is in appeals regarding the validation of foreign tax credits taken. The Company’s major foreign jurisdictions, China, the Netherlands and Brazil, have concluded substantially all income tax matters through calendar 2005, fiscal 2008 and calendar 2008, respectively. Although the timing of resolution of audits is not certain, the Company evaluates all domestic and foreign audit issues in the aggregate, along with the expiration of applicable statutes of limitations, and estimates that it is reasonably possible the total gross unrecognized tax benefits could decrease by up to $70 million within the next 12 months.
The Company provides for U.S. income taxes on the undistributed earnings of foreign subsidiaries unless they are considered indefinitely reinvested outside the United States. At May 31, 2014, the indefinitely reinvested earnings in foreign subsidiaries upon which United States income taxes have not been provided was approximately $6.6 billion, which includes a reduction of permanently reinvested earnings for the year ended May 31, 2014. If these undistributed earnings were repatriated to the United States, or if the shares of the relevant foreign subsidiaries were sold or otherwise transferred, they would generate foreign tax credits that would reduce the federal tax liability associated with the foreign dividend or the otherwise taxable transaction. Assuming a full utilization of the foreign tax credits, the potential net deferred tax liability associated with these temporary differences of undistributed earnings would be approximately $2.1 billion at May 31, 2014.
A portion of the Company's foreign operations are benefiting from a tax holiday, which is set to expire in 2021. This tax holiday may be extended when certain conditions are met or may be terminated early if certain conditions are not met. The impact of this tax holiday decreased foreign taxes by $138 million, $108 million, and $117 million for the fiscal years ended May 31, 2014, 2013, and 2012, respectively. The benefit of the tax holiday on Diluted earnings per common share was $0.15, $0.12, and $0.12 for the fiscal years ended May 31, 2014, 2013, and 2012, respectively.
Deferred tax assets at May 31, 2014 and 2013 were reduced by a valuation allowance relating to tax benefits of certain subsidiaries with operating losses. The net change in the valuation allowance was an increase of $4 million, a decrease of $22 million, and an increase of $23 million for the years ended May 31, 2014, 2013, and 2012, respectively.
The Company has available domestic and foreign loss carry-forwards of $55 million at May 31, 2014. Such losses will expire as follows: 
 
 
Year Ending May 31,
(In millions)
 
2015
 
2016
 
2017
 
2018
 
2019-2034
 
Indefinite

 
Total

Net operating losses
 
$
—

 
$
—

 
$
—

 
$
6

 
$
37

 
$
12

 
$
55


During the years ended May 31, 2014, 2013, and 2012, income tax benefits attributable to employee stock-based compensation transactions of $135 million, $76 million, and $120 million, respectively, were allocated to Total shareholders’ equity.
Redeemable Preferred Stock
Redeemable Preferred Stock
NOTE 10 — Redeemable Preferred Stock
Sojitz America is the sole owner of the Company’s authorized Redeemable preferred stock, $1 par value, which is redeemable at the option of Sojitz America or the Company at par value aggregating $0.3 million. A cumulative dividend of $0.10 per share is payable annually on May 31 and no dividends may be declared or paid on the common stock of the Company unless dividends on the Redeemable preferred stock have been declared and paid in full. There have been no changes in the Redeemable preferred stock in the three years ended May 31, 2014, 2013, and 2012. As the holder of the Redeemable preferred stock, Sojitz America does not have general voting rights but does have the right to vote as a separate class on the sale of all or substantially all of the assets of the Company and its subsidiaries, on merger, consolidation, liquidation or dissolution of the Company or on the sale or assignment of the NIKE trademark for athletic footwear sold in the United States. The Redeemable preferred stock has been fully issued to Sojitz America and is not blank check preferred stock. The Company's articles of incorporation do not permit the issuance of additional preferred stock.
Common Stock and Stock-Based Compensation
Common Stock and Stock-Based Compensation
NOTE 11 — Common Stock and Stock-Based Compensation
The authorized number of shares of Class A Common Stock, no par value, and Class B Common Stock, no par value, are 200 million and 1,200 million, respectively. Each share of Class A Common Stock is convertible into one share of Class B Common Stock. Voting rights of Class B Common Stock are limited in certain circumstances with respect to the election of directors. There are no differences in the dividend and liquidation preferences or participation rights of the Class A and Class B common shareholders.
In 1990, the Board of Directors adopted, and the shareholders approved, the NIKE, Inc. 1990 Stock Incentive Plan (the “1990 Plan”). The 1990 Plan, as amended, provides for the issuance of up to 326 million previously unissued shares of Class B Common Stock in connection with stock options and other awards granted under the plan. The 1990 Plan authorizes the grant of non-statutory stock options, incentive stock options, stock appreciation rights, restricted stock, restricted stock units, and performance-based awards. The exercise price for stock options and stock appreciation rights may not be less than the fair market value of the underlying shares on the date of grant. A committee of the Board of Directors administers the 1990 Plan. The committee has the authority to determine the employees to whom awards will be made, the amount of the awards, and the other terms and conditions of the awards. Substantially all stock option grants outstanding under the 1990 Plan were granted in the first quarter of each fiscal year, vest ratably over four years, and expire 10 years from the date of grant.
The following table summarizes the Company’s total stock-based compensation expense recognized in Total selling and administrative expense: 
 
 
Year Ended May 31,
(In millions)
 
2014
 
2013
 
2012
Stock options(1)
 
$
125

 
$
123

 
$
96

ESPPs
 
22

 
19

 
16

Restricted stock
 
30

 
32

 
18

TOTAL STOCK-BASED COMPENSATION EXPENSE
 
$
177

 
$
174

 
$
130

(1)
Expense for stock options includes the expense associated with stock appreciation rights. Accelerated stock option expense is recorded for employees eligible for accelerated stock option vesting upon retirement. Accelerated stock option expense for years ended May 31, 2014, 2013, and 2012 was $15 million, $22 million, and $17 million, respectively.
As of May 31, 2014, the Company had $179 million of unrecognized compensation costs from stock options, net of estimated forfeitures, to be recognized as selling and administrative expense over a weighted average period of 2.1 years.
The weighted average fair value per share of the options granted during the years ended May 31, 2014, 2013, and 2012, as computed using the Black-Scholes pricing model, was $14.89, $12.71, and $11.08, respectively. The weighted average assumptions used to estimate these fair values are as follows:
 
 
Year Ended May 31,
  
 
2014
 
2013
 
2012
Dividend yield
 
1.3
%
 
1.5
%
 
1.4
%
Expected volatility
 
27.9
%
 
35.0
%
 
29.5
%
Weighted average expected life (in years)
 
5.3

 
5.3

 
5.0

Risk-free interest rate
 
1.3
%
 
0.6
%
 
1.4
%

The Company estimates the expected volatility based on the implied volatility in market traded options on the Company’s common stock with a term greater than 1 year, along with other factors. The weighted average expected life of options is based on an analysis of historical and expected future exercise patterns. The interest rate is based on the U.S. Treasury (constant maturity) risk-free rate in effect at the date of grant for periods corresponding with the expected term of the options.
The following summarizes the stock option transactions under the plan discussed above: 
 
 
Shares (1)
 
Weighted Average
Option Price
  
 
(In millions)

 
  
Options outstanding May 31, 2011
 
69.6

 
$
25.65

Exercised
 
(18.0
)
 
22.81

Forfeited
 
(1.0
)
 
35.61

Granted
 
13.7

 
45.87

Options outstanding May 31, 2012
 
64.3

 
$
30.59

Exercised
 
(9.9
)
 
24.70

Forfeited
 
(1.3
)
 
40.14

Granted
 
14.6

 
46.55

Options outstanding May 31, 2013
 
67.7

 
$
34.72

Exercised
 
(11.0
)
 
28.29

Forfeited
 
(1.3
)
 
48.33

Granted
 
8.1

 
63.54

Options outstanding May 31, 2014
 
63.5

 
$
39.28

Options exercisable at May 31,
 
 
 
 
2012
 
33.9

 
$
24.38

2013
 
35.9

 
27.70

2014
 
37.0

 
31.42

(1)
Includes stock appreciation rights transactions.

The weighted average contractual life remaining for options outstanding and options exercisable at May 31, 2014 was 6.0 years and 4.6 years, respectively. The aggregate intrinsic value for options outstanding and exercisable at May 31, 2014 was $2,391 million and $1,682 million, respectively. The aggregate intrinsic value was the amount by which the market value of the underlying stock exceeded the exercise price of the options. The total intrinsic value of the options exercised during the years ended May 31, 2014, 2013, and 2012 was $474 million, $293 million, and $453 million, respectively.
In addition to the 1990 Plan, the Company gives employees the right to purchase shares at a discount to the market price under employee stock purchase plans (“ESPPs”). Employees are eligible to participate through payroll deductions of up to 10% of their compensation. At the end of each six-month offering period, shares are purchased by the participants at 85% of the lower of the fair market value at the beginning or the end of the offering period. Employees purchased 1.4 million, 1.6 million, and 1.7 million shares during each of the three years ended May 31, 2014, 2013 and 2012, respectively.
From time to time, the Company grants restricted stock units and restricted stock to key employees under the 1990 Plan. The number of shares underlying such awards granted to employees during the years ended May 31, 2014, 2013, and 2012 were 0.3 million, 1.6 million, and 0.7 million with weighted average values per share of $63.89, $46.86, and $49.49, respectively. Recipients of restricted stock are entitled to cash dividends and to vote their respective shares throughout the period of restriction. Recipients of restricted stock units are entitled to dividend equivalent cash payments upon vesting. The value of all grants of restricted stock and restricted stock units was established by the market price on the date of grant. During the years ended May 31, 2014, 2013, and 2012, the aggregate fair value of restricted stock and restricted stock units vested was $28 million, $25 million, and $22 million, respectively, determined as of the date of vesting. As of May 31, 2014, the Company had $61 million of unrecognized compensation costs from restricted stock units to be recognized in Total selling and administrative expense over a weighted average period of 2.7 years.
Earnings Per Share
Earnings Per Share
NOTE 12 — Earnings Per Share
The following is a reconciliation from Basic earnings per common share to Diluted earnings per common share. Options to purchase an additional 0.1 million, 0.1 million, and 0.2 million shares of common stock were outstanding at May 31, 2014, 2013, and 2012, respectively, but were not included in the computation of Diluted earnings per common share because the options were anti-dilutive.
 
 
Year Ended May 31,
(In millions, except per share data)
 
2014
 
2013
 
2012
Determination of shares:
 
 
 
 
 
 
Weighted average common shares outstanding
 
883.4

 
897.3

 
920.0

Assumed conversion of dilutive stock options and awards
 
22.4

 
19.1

 
19.6

DILUTED WEIGHTED AVERAGE COMMON SHARES OUTSTANDING
 
905.8

 
916.4

 
939.6

 
 
 
 
 
 
 
Earnings per share from continuing operations:
 
 
 
 
 
 
Basic earnings per common share
 
$
3.05

 
$
2.74

 
$
2.45

Diluted earnings per common share
 
$
2.97

 
$
2.68

 
$
2.40

 
 
 
 
 
 
 
Earnings per share from discontinued operations:
 
 
 
 
 
 
Basic earnings per common share
 
$
—

 
$
0.02

 
$
(0.05
)
Diluted earnings per common share
 
$
—

 
$
0.02

 
$
(0.05
)
 
 
 
 
 
 
 
Basic earnings per common share for NIKE, Inc.
 
$
3.05

 
$
2.76

 
$
2.40

Diluted earnings per common share for NIKE, Inc.
 
$
2.97

 
$
2.70

 
$
2.35

Benefit Plans
Benefit Plans
NOTE 13 — Benefit Plans
The Company has a qualified 401(k) Savings and Profit Sharing Plan to which all U.S. employees who work at least 1,000 hours in a year are able to participate. The Company matches a portion of employee contributions. Company contributions to the savings plan were $51 million, $46 million, and $42 million for the years ended May 31, 2014, 2013, and 2012, respectively, and are included in Total selling and administrative expense. The terms of the plan also allow for annual discretionary profit sharing contributions to the accounts of eligible employees by the Company as determined by the Board of Directors. Contributions of $49 million, $47 million, and $40 million were made to the plan and are included in Total selling and administrative expense for the years ended May 31, 2014, 2013, and 2012, respectively.
The Company also has a Long-Term Incentive Plan (“LTIP”) that was adopted by the Board of Directors and approved by shareholders in September 1997 and later amended in fiscal 2007. The Company recognized $46 million, $50 million, and $51 million of Total selling and administrative expense related to cash awards under the LTIP during the years ended May 31, 2014, 2013, and 2012, respectively.
The Company allows certain highly compensated employees and non-employee directors of the Company to defer compensation under a nonqualified deferred compensation plan. Deferred compensation plan liabilities were $390 million and $326 million at May 31, 2014 and May 31, 2013, respectively, and classified as long-term in Deferred income taxes and other liabilities.
The Company has pension plans in various countries worldwide. The pension plans are only available to local employees and are generally government mandated. The liability related to the unfunded pension liabilities of the plans was $100 million and $104 million at May 31, 2014 and May 31, 2013, respectively, which was primarily classified as long-term in Deferred income taxes and other liabilities.
Accumulated Other Comprehensive Income
Accumulated Other Comprehensive Income
NOTE 14 — Accumulated Other Comprehensive Income
The changes in Accumulated other comprehensive income, net of tax, were as follows:
(In millions)
 
Foreign Currency Translation Adjustment(1)
 
Cash Flow Hedges
 
Net Investment Hedges(1)
 
Other
 
Total
Balance at May 31, 2013
 
$
41

 
$
193

 
$
95

 
$
(55
)
 
$
274

Other comprehensive gains (losses) before reclassifications (2)
 
(32
)
 
(134
)
 
—

 
—

 
(166
)
Reclassifications to net income of previously deferred (gains) losses (3)
 
—

 
(27
)
 
—

 
4

 
(23
)
Other comprehensive income (loss)
 
(32
)
 
(161
)
 
—

 
4

 
(189
)
Balance at May 31, 2014
 
$
9

 
$
32

 
$
95

 
$
(51
)
 
$
85


(1)
The accumulated foreign currency translation adjustment and net investment hedge gains/losses related to an investment in a foreign subsidiary are reclassified to Net income upon sale or upon complete or substantially complete liquidation of the respective entity.
(2)
Net of tax benefit of $0 million, $9 million, $0 million, $0 million, and $9 million, respectively.
(3)
Net of tax expense of $0 million, $9 million, $0 million, $0 million, and $9 million, respectively.
The following table summarizes the reclassifications from Accumulated other comprehensive income to the Consolidated Statements of Income:
 
 
Amount of Gain (Loss) Reclassified from Accumulated Other Comprehensive Income into Income
 
Location of Gain (Loss) Reclassified from Accumulated Other Comprehensive Income into Income
 
 
 
(In millions)
 
Year Ended May 31, 2014
 
Gains on cash flow hedges:
 
 
 
 
Foreign exchange forwards and options
 
$
14

 
Revenues
Foreign exchange forwards and options
 
12

 
Cost of sales
Foreign exchange forwards and options
 
—

 
Total selling and administrative expense
Foreign exchange forwards and options
 
10

 
Other expense (income), net
Total before tax
 
36

 
 
Tax expense
 
(9
)
 
 
Gain, net of tax
 
27

 
 
Losses on other
 
(4
)
 
Other expense (income), net
Total before tax
 
(4
)
 
 
Tax expense
 
—

 
 
Loss, net of tax
 
(4
)
 
 
Total net gain reclassified for the period
 
$
23

 
 

Refer to Note 17— Risk Management and Derivatives for more information on the Company's risk management program and derivatives.
Discontinued Operations
Discontinued Operations
NOTE 15 — Discontinued Operations
During the year ended May 31, 2013, the Company divested of Umbro and Cole Haan, allowing it to focus its resources on driving growth in the NIKE, Jordan, Converse, and Hurley brands.
On February 1, 2013, the Company completed the sale of Cole Haan to Apax Partners for an agreed upon purchase price of $570 million and received at closing $561 million, net of $9 million of purchase price adjustments. The transaction resulted in a gain on sale of $231 million, net of $137 million in Income tax expense; this gain is included in the Net income (loss) from discontinued operations line item on the Consolidated Statements of Income. There were no adjustments to these recorded amounts as of May 31, 2014. Beginning November 30, 2012, the Company classified the Cole Haan disposal group as held-for-sale and presented the results of Cole Haan's operations in the Net income (loss) from discontinued operations line item on the Consolidated Statements of Income. From this date until the sale, the assets and liabilities of Cole Haan were recorded in the Assets of discontinued operations and Liabilities of discontinued operations line items on the Consolidated Balance Sheets, respectively. Previously, these amounts were reported in the Company's segment presentation as “Other Businesses.”
Under the sale agreement, the Company agreed to provide certain transition services to Cole Haan for an expected period of 3 to 9 months from the date of sale. These services were essentially complete as of May 31, 2013 and the Company has had no significant involvement with Cole Haan beyond the transition services. The Company has also licensed NIKE proprietary Air and Lunar technologies to Cole Haan for a transition period. The continuing cash flows related to these items are not significant to Cole Haan. Additionally, preexisting guarantees of certain Cole Haan lease payments remained in place after the sale; the maximum exposure under the guarantees is $33 million at May 31, 2014. The fair value of the guarantees is not material.
On November 30, 2012, the Company completed the sale of certain assets of Umbro to Iconix Brand Group (“Iconix”) for $225 million. The Umbro disposal group was classified as held-for-sale as of November 30, 2012 and the results of Umbro's operations are presented in the Net income (loss) from discontinued operations line item on the Consolidated Statements of Income. The liabilities of Umbro were recorded in the Liabilities of discontinued operations line items on the Consolidated Balance Sheets. Previously, these amounts were reported in the Company's segment presentation as “Other Businesses.” Upon meeting the held-for-sale criteria, the Company recorded a loss of $107 million, net of tax, on the sale of Umbro and the loss is included in the Net income (loss) from discontinued operations line item on the Consolidated Statements of Income. The loss on sale was calculated as the net sales price less Umbro assets of $248 million, including intangibles, goodwill, and fixed assets, other miscellaneous charges of $22 million, and the release of the associated cumulative translation adjustment of $129 million. The tax benefit on the loss was $67 million. There were no adjustments to these recorded amounts as of May 31, 2014.
Under the sale agreement, the Company provided transition services to Iconix while certain markets were transitioned to Iconix-designated licensees. These transition services are complete and the Company has wound down the remaining operations of Umbro.
Summarized results of the Company's discontinued operations are as follows:
 
 
Year Ended May 31,
(In millions)
 
2014
 
2013
 
2012
Revenues
 
$
—

 
$
523

 
$
796

Income (loss) before income taxes
 
—

 
108

 
(43
)
Income tax expense
 
—

 
87

 
3

Net income (loss) from discontinued operations
 
$
—

 
$
21

 
$
(46
)

As of May 31, 2014 and 2013, the aggregate components of liabilities classified as discontinued operations and included in Total current liabilities consisted of the following:
 
 
As of May 31,
(In millions)
 
2014
 
2013
Accounts payable
 
$
—

 
$
1

Accrued liabilities
 
—

 
17

TOTAL LIABILITIES
 
$
—

 
$
18

Commitments and Contingencies
Commitments and Contingencies
NOTE 16 — Commitments and Contingencies
The Company leases space for certain of its offices, warehouses and retail stores under leases expiring from 1 to 20 years after May 31, 2014. Rent expense was $533 million, $482 million, and $431 million for the years ended May 31, 2014, 2013 and 2012, respectively. Amounts of minimum future annual commitments under non-cancelable operating and capital leases are as follows (in millions):
 
 
2015
 
2016
 
2017
 
2018
 
2019
 
Thereafter
 
Total
Operating leases
 
$
427

 
$
399

 
$
366

 
$
311

 
$
251

 
$
1,050

 
$
2,804

Capital leases
 
$
36

 
$
35

 
$
1

 
$
1

 
$
1

 
$
—

 
$
74


As of May 31, 2014 and 2013, the Company had letters of credit outstanding totaling $135 million and $149 million, respectively. These letters of credit were generally issued for the purchase of inventory and guarantees of the Company’s performance under certain self-insurance and other programs.
In connection with various contracts and agreements, the Company provides routine indemnification relating to the enforceability of intellectual property rights, coverage for legal issues that arise and other items where the Company is acting as the guarantor. Currently, the Company has several such agreements in place. However, based on the Company’s historical experience and the estimated probability of future loss, the Company has determined that the fair value of such indemnification is not material to the Company’s financial position or results of operations.
In the ordinary course of its business, the Company is involved in various legal proceedings involving contractual and employment relationships, product liability claims, trademark rights, and a variety of other matters. While the Company cannot predict the outcome of its pending legal matters with certainty, the Company does not believe any currently identified claim, proceeding or litigation, either individually or in aggregate, will have a material impact on the Company’s results of operations, financial position or cash flows.
Risk Management and Derivatives
Risk Management and Derivatives
NOTE 17 — Risk Management and Derivatives
The Company is exposed to global market risks, including the effect of changes in foreign currency exchange rates and interest rates, and uses derivatives to manage financial exposures that occur in the normal course of business. The Company does not hold or issue derivatives for trading or speculative purposes.
The Company may elect to designate certain derivatives as hedging instruments under the accounting standards for derivatives and hedging. The Company formally documents all relationships between designated hedging instruments and hedged items as well as its risk management objective and strategy for undertaking hedge transactions. This process includes linking all derivatives designated as hedges to either recognized assets or liabilities or forecasted transactions.
The majority of derivatives outstanding as of May 31, 2014 are designated as cash flow or fair value hedges. All derivatives are recognized on the balance sheet at fair value and classified based on the instrument’s maturity date. The total notional amount of outstanding derivatives as of May 31, 2014 was approximately $12 billion, which primarily comprises cash flow hedges for Euro/U.S. Dollar, British Pound/Euro, and Japanese Yen/U.S. Dollar currency pairs. As of May 31, 2014, there were outstanding currency forward contracts with maturities up to 24 months.

The following table presents the fair values of derivative instruments included within the Consolidated Balance Sheets as of May 31, 2014 and 2013: 
 
 
Asset Derivatives
 
Liability Derivatives
(In millions)
 
Balance Sheet
Location
 
2014
 
2013
 
Balance Sheet 
Location
 
2014
 
2013
Derivatives formally designated as hedging instruments:
 
 
 
 
 
 
 
 
 
 
 
 
Foreign exchange forwards and options
 
Prepaid expenses and other current assets
 
$
76

 
$
141

 
Accrued liabilities
 
$
57

 
$
12

Foreign exchange forwards and options
 
Deferred income taxes and other assets
 
26

 
79

 
Deferred income taxes and other liabilities
 
1

 
—

Interest rate swap contracts
 
Deferred income taxes and other assets
 
6

 
11

 
Deferred income taxes and other liabilities
 
—

 
—

Total derivatives formally designated as hedging instruments
 
 
 
108

 
231

 
 
 
58

 
12

Derivatives not designated as hedging instruments:
 
 
 
 
 
 
 
 
 
 
 
 
Foreign exchange forwards and options
 
Prepaid expenses and other current assets
 
25

 
58

 
Accrued liabilities
 
27

 
22

Total derivatives not designated as hedging instruments
 
 
 
25

 
58

 
 
 
27

 
22

TOTAL DERIVATIVES
 
 
 
$
133

 
$
289

 
 
 
$
85

 
$
34


The following tables present the amounts affecting the Consolidated Statements of Income for years ended May 31, 2014, 2013 and 2012:

(In millions)
 
Amount of Gain (Loss)
Recognized in Other
Comprehensive Income
on Derivatives(1)
 
Amount of Gain (Loss)
Reclassified From Accumulated
Other Comprehensive Income into Income(1)
Year Ended May 31,
 
Location of Gain (Loss) Reclassified From 
Accumulated Other Comprehensive Income Into Income(1)
 
Year Ended May 31,
2014
 
2013
 
2012
 
2014
 
2013
 
2012
Derivatives designated as cash flow hedges:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Foreign exchange forwards and options
 
$
(48
)
 
$
42

 
$
(29
)
 
Revenues

 
$
14

 
$
(19
)
 
$
5

Foreign exchange forwards and options
 
(78
)
 
67

 
253

 
Cost of sales

 
12

 
113

 
(57
)
Foreign exchange forwards and options
 
4

 
(3
)
 
3

 
Total selling and administrative expense

 
—

 
2

 
(2
)
Foreign exchange forwards and options
 
(21
)
 
33

 
36

 
Other expense (income), net

 
10

 
9

 
(9
)
Total designated cash flow hedges
 
$
(143
)
 
$
139

 
$
263

 
 
 
$
36

 
$
105

 
$
(63
)
Derivatives designated as net investment hedges:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Foreign exchange forwards and options
 
$
—

 
$
—

 
$
45

 
Other expense (income), net

 
$
—

 
$
—

 
$
—

(1)
For the years ended May 31, 2014, 2013, and 2012, the amounts recorded in Other expense (income), net as a result of hedge ineffectiveness and the discontinuance of cash flow hedges because the forecasted transactions were no longer probable of occurring were immaterial.
 
 
Amount of Gain (Loss) Recognized in
Income on Derivatives
 
Location of Gain (Loss) 
Recognized in Income on Derivatives
 
 
Year Ended May 31,
 
(In millions)
 
2014
 
2013
 
2012
 
Derivatives designated as fair value hedges:
 
 
 
 
 
 
 
 
Interest rate swaps(1)
 
$
5

 
$
5

 
$
6

 
Interest expense (income), net
Derivatives not designated as hedging instruments:
 
 
 
 
 
 
 
 
Foreign exchange forwards and options
 
$
(75
)
 
$
51

 
$
64

 
Other expense (income), net
Embedded derivatives
 
$
(1
)
 
$
(4
)
 
$
1

 
Other expense (income), net
(1)
All interest rate swap agreements meet the shortcut method requirements under the accounting standards for derivatives and hedging. Accordingly, changes in the fair values of the interest rate swap agreements are considered to exactly offset changes in the fair value of the underlying long-term debt. Refer to “Fair Value Hedges” in this note for additional detail.
Refer to Note 5 — Accrued Liabilities for derivative instruments recorded in Accrued liabilities, Note 6 — Fair Value Measurements for a description of how the above financial instruments are valued, Note 14 — Accumulated Other Comprehensive Income and the Consolidated Statements of Shareholders’ Equity for additional information on changes in Other comprehensive income for the years ended May 31, 2014, 2013 and 2012.
Cash Flow Hedges
The purpose of the Company’s foreign currency hedging activities is to reduce the volatility of the Company's cash flows resulting from changes in currency exchange rates. Foreign currency exposures that the Company may elect to hedge in this manner include product cost exposures, non-functional currency denominated external and intercompany revenues, selling and administrative expenses, investments in U.S. Dollar-denominated available-for-sale debt securities and certain intercompany transactions.
Product cost exposures are primarily generated through non-functional currency denominated product purchases and the foreign currency adjustment program described below. NIKE entities primarily purchase products in two ways: (1) Some NIKE entities purchase product from the NIKE Trading Company (“NTC”), a wholly-owned sourcing hub that buys NIKE branded products from third-party factories, predominantly in U.S. Dollars. The NTC, whose functional currency is the U.S. Dollar, then sells the products to NIKE entities in their respective functional currencies. When the NTC sells to a NIKE entity with a different functional currency, the result is a foreign currency exposure for the NTC; (2) Other NIKE entities purchase product directly from third-party factories in U.S. Dollars. These purchases generate a foreign currency exposure for those NIKE entities with a functional currency other than the U.S. Dollar.
In January 2012, the Company implemented a foreign currency adjustment program with certain factories. The program is designed to more effectively manage foreign currency risk by assuming certain of the factories’ foreign currency exposures, some of which are natural offsets to the Company's existing foreign currency exposures. Under this program, the Company’s payments to these factories are adjusted for rate fluctuations in the basket of currencies (“factory currency exposure index”) in which the labor, materials and overhead costs incurred by the factories in the production of NIKE branded products (“factory input costs”) are denominated. For the portion of the indices denominated in the local or functional currency of the factory, the Company may elect to place formally designated cash flow hedges. For all currencies within the indices, excluding the U.S. Dollar and the local or functional currency of the factory, an embedded derivative contract is created upon the factory’s acceptance of NIKE’s purchase order. Embedded derivative contracts are separated from the related purchase order and their accounting treatment is described further below.
The Company’s policy permits the utilization of derivatives to reduce its foreign currency exposures where internal netting or other strategies cannot be effectively employed. Hedged transactions are denominated primarily in Euros, British Pounds and Japanese Yen. Typically the Company may enter into hedge contracts starting 12 to 24 months in advance of the forecasted transaction and may place incremental hedges up to 100% of the exposure by the time the forecasted transaction occurs.
All changes in the fair value of derivatives designated as cash flow hedges, excluding any ineffective portion, are recorded in Other comprehensive income until Net income is affected by the variability of cash flows of the hedged transaction. In most cases, amounts recorded in Other comprehensive income will be released to Net income sometime after the maturity of the related derivative. Effective hedge results are classified within the Consolidated Statements of Income in the same manner as the underlying exposure, with the results of hedges of non-functional currency denominated revenues and product cost exposures, excluding embedded derivatives as described below, recorded in Revenues or Cost of sales, when the underlying hedged transaction affects consolidated Net income. Results of hedges of selling and administrative expense are recorded together with those costs when the related expense is recorded. Results of hedges of anticipated purchases and sales of U.S. Dollar-denominated available-for-sale securities are recorded in Other expense (income), net when the securities are sold. Results of hedges of certain anticipated intercompany transactions are recorded in Other expense (income), net when the transaction occurs. The Company classifies the cash flows at settlement from these designated cash flow hedge derivatives in the same category as the cash flows from the related hedged items, generally within the Cash provided by operations component of the Consolidated Statement of Cash Flows.
Premiums paid on options are initially recorded as deferred charges. The Company assesses the effectiveness of options based on the total cash flows method and records total changes in the options’ fair value to Other comprehensive income to the degree they are effective.
The Company formally assesses, both at a hedge’s inception and on an ongoing basis, whether the derivatives that are used in the hedging transaction have been highly effective in offsetting changes in the cash flows of hedged items and whether those derivatives may be expected to remain highly effective in future periods. Effectiveness for cash flow hedges is assessed based on changes in forward rates. Ineffectiveness was immaterial for the years ended May 31, 2014, 2013, and 2012.
The Company discontinues hedge accounting prospectively when (1) it determines that the derivative is no longer highly effective in offsetting changes in the cash flows of a hedged item (including hedged items such as firm commitments or forecasted transactions); (2) the derivative expires or is sold, terminated, or exercised; (3) it is no longer probable that the forecasted transaction will occur; or (4) management determines that designating the derivative as a hedging instrument is no longer appropriate.
When the Company discontinues hedge accounting because it is no longer probable that the forecasted transaction will occur in the originally expected period, but is expected to occur within an additional two-month period of time thereafter, the gain or loss on the derivative remains in Accumulated other comprehensive income and is reclassified to Net income when the forecasted transaction affects consolidated Net income. However, if it is probable that a forecasted transaction will not occur by the end of the originally specified time period or within an additional two-month period of time thereafter, the gains and losses that were accumulated in Other comprehensive income will be recognized immediately in Other expense (income), net. In all situations in which hedge accounting is discontinued and the derivative remains outstanding, the Company will carry the derivative at its fair value on the Consolidated Balance Sheets, recognizing future changes in the fair value in Other expense (income), net. For the years ended May 31, 2014, 2013, and 2012, the amounts recorded in Other expense (income), net as a result of the discontinuance of cash flow hedging because the forecasted transaction was no longer probable of occurring were immaterial.
As of May 31, 2014, $10 million of deferred net gains (net of tax) on both outstanding and matured derivatives accumulated in Other comprehensive income are expected to be reclassified to Net income during the next 12 months concurrent with the underlying hedged transactions also being recorded in Net income. Actual amounts ultimately reclassified to Net income are dependent on the exchange rates in effect when derivative contracts that are currently outstanding mature. As of May 31, 2014, the maximum term over which the Company is hedging exposures to the variability of cash flows for its forecasted transactions is 24 months.
Fair Value Hedges
The Company is also exposed to the risk of changes in the fair value of certain fixed-rate debt attributable to changes in interest rates. Derivatives currently used by the Company to hedge this risk are receive-fixed, pay-variable interest rate swaps. As of May 31, 2014, all interest rate swap agreements are designated as fair value hedges of the related long-term debt and meet the shortcut method requirements under the accounting standards for derivatives and hedging. Accordingly, changes in the fair values of the interest rate swap agreements are considered to exactly offset changes in the fair value of the underlying long-term debt. The cash flows associated with the Company’s fair value hedges are periodic interest payments while the swaps are outstanding, which are reflected within the Cash provided by operations component of the Consolidated Statement of Cash Flows. The Company recorded no ineffectiveness from its interest rate swaps designated as fair value hedges for the years ended May 31, 2014, 2013, or 2012.
Net Investment Hedges
The Company has hedged and may, in the future, hedge the risk of variability in foreign-currency-denominated net investments in wholly-owned international operations. All changes in fair value of the derivatives designated as net investment hedges, except ineffective portions, are reported in the Cumulative translation adjustment component of Other comprehensive income along with the foreign currency translation adjustments on those investments. The Company classifies the cash flows at settlement of its net investment hedges within the Cash (used) provided by investing activities component of the Consolidated Statement of Cash Flows. The Company assesses hedge effectiveness based on changes in forward rates. The Company recorded no ineffectiveness from its net investment hedges for the years ended May 31, 2014, 2013, or 2012.
Embedded Derivatives
As part of the foreign currency adjustment program described above, an embedded derivative contract is created upon the factory's acceptance of NIKE's purchase order for currencies within the factory currency exposure indices that are neither the U.S. Dollar nor the local or functional currency of the factory. Embedded derivative contracts are treated as foreign currency forward contracts that are bifurcated from the related purchase order and recorded at fair value as a derivative asset or liability on the Consolidated Balance Sheets with their corresponding change in fair value recognized in Other expense (income), net from the date a purchase order is accepted by a factory through the date the purchase price is no longer subject to foreign currency fluctuations. At May 31, 2014, the notional amount of embedded derivatives was approximately $100 million.
Undesignated Derivative Instruments
The Company may elect to enter into foreign exchange forwards to mitigate the change in fair value of specific assets and liabilities on the Consolidated Balance Sheets and/or the embedded derivative contracts explained above. These forwards are not designated as hedging instruments under the accounting standards for derivatives and hedging. Accordingly, these undesignated instruments are recorded at fair value as a derivative asset or liability on the Consolidated Balance Sheets with their corresponding change in fair value recognized in Other expense (income), net, together with the re-measurement gain or loss from the hedged balance sheet position or embedded derivative contract. The Company classifies the cash flows at settlement from undesignated instruments in the same category as the cash flows from the related hedged items, generally within the Cash provided by operations component of the Consolidated Statement of Cash Flows.
Credit Risk
The Company is exposed to credit-related losses in the event of non-performance by counterparties to hedging instruments. The counterparties to all derivative transactions are major financial institutions with investment grade credit ratings. However, this does not eliminate the Company’s exposure to credit risk with these institutions. This credit risk is limited to the unrealized gains in such contracts should any of these counterparties fail to perform as contracted. To manage this risk, the Company has established strict counterparty credit guidelines that are continually monitored.
The Company’s derivative contracts contain credit risk related contingent features designed to protect against significant deterioration in counterparties’ creditworthiness and their ultimate ability to settle outstanding derivative contracts in the normal course of business. The Company’s bilateral credit related contingent features generally require the owing entity, either the Company or the derivative counterparty, to post collateral for the portion of the fair value in excess of $50 million should the fair value of outstanding derivatives to either counterparty be greater than $50 million. Additionally, a certain level of decline in credit rating of either the Company or the counterparty could also trigger collateral requirements. As of May 31, 2014, the Company was in compliance with all credit risk related contingent features and the fair value of its derivative instruments with credit risk related contingent features in a net liability position was $22 million. Accordingly, the Company was not required to post any collateral as a result of these contingent features. Further, as of May 31, 2014 those counterparties which were required to post collateral complied with such requirements. Given the considerations described above, the Company considers the impact of the risk of counterparty default to be immaterial.
SCHEDULE II - Valuation and qualifying accounts
SCHEDULE II - Valuation and qualifying accounts
SCHEDULE II — Valuation and Qualifying Accounts
(In millions)
 
Balance at
Beginning of Period
 
Charged to Costs
and Expenses
 
Charged to
Other Accounts
 
Write-Offs, Net
 
Balance at End
of Period
Sales returns reserve
 
 
 
 
 
 
 
 
 

For the year ended May 31, 2012
 
$
151

 
$
401

 
$
(3
)
 
$
(376
)
 
$
173

For the year ended May 31, 2013
 
173

 
538

 
1

 
(471
)
 
241

For the year ended May 31, 2014
 
241

 
619

 
(3
)
 
(549
)
 
308

Allowance for doubtful accounts(1)
 
 
 
 
 
 
 
 
 
 
For the year ended May 31, 2012
 
$
120

 
$
21

 
$
(9
)
 
$
(41
)
 
$
91

For the year ended May 31, 2013
 
91

 
31

 
1

 
(19
)
 
104

For the year ended May 31, 2014
 
104

 
13

 
(2
)
 
(37
)
 
78

(1)
Includes both current and non-current portions of the allowance for doubtful accounts. The non-current portion is classified in Deferred income taxes and other assets on the Consolidated Balance Sheets.
Summary of Significant Accounting Policies (Policies)
Basis of Consolidation 
Basis of Consolidation
The Consolidated Financial Statements include the accounts of NIKE, Inc. and its subsidiaries (the "Company”). All significant intercompany transactions and balances have been eliminated.
The Company completed the sale of Cole Haan during the third quarter ended February 28, 2013 and completed the sale of Umbro during the second quarter ended November 30, 2012. As a result, the Company reports the operating results of Cole Haan and Umbro in the Net income (loss) from discontinued operations line in the Consolidated Statements of Income for all periods presented. In addition, the liabilities associated with these businesses are reported as Liabilities of discontinued operations in the Consolidated Balance Sheets (refer to Note 15 — Discontinued Operations). Unless otherwise indicated, the disclosures accompanying the Consolidated Financial Statements reflect the Company’s continuing operations.
On November 15, 2012, the Company announced a two-for-one split of both NIKE Class A and Class B Common shares. The stock split was a 100 percent stock dividend payable on December 24, 2012 to shareholders of record at the close of business December 10, 2012. Common stock began trading at the split-adjusted price on December 26, 2012. All share numbers and per share amounts presented reflect the stock split.
Recognition of Revenues 
Recognition of Revenues
Wholesale revenues are recognized when title and the risks and rewards of ownership have passed to the customer, based on the terms of sale. This occurs upon shipment or upon receipt by the customer depending on the country of the sale and the agreement with the customer. Retail store revenues are recorded at the time of sale. Provisions for post-invoice sales discounts, returns and miscellaneous claims from customers are estimated and recorded as a reduction to revenue at the time of sale. Post-invoice sales discounts consist of contractual programs with certain customers or discretionary discounts that are expected to be granted to certain customers at a later date. Estimates of discretionary discounts, returns and claims are based on historical rates, specific identification of outstanding claims and outstanding returns not yet received from customers, and estimated discounts, returns and claims expected but not yet finalized with customers. As of May 31, 2014 and 2013, the Company’s reserve balances for post-invoice sales discounts, returns and miscellaneous claims were $610 million and $531 million, respectively.
Cost of Sales 
Cost of Sales
Cost of sales consists primarily of inventory costs, as well as warehousing costs (including the cost of warehouse labor), third-party royalties, certain foreign currency hedge gains and losses, and research, design and development costs.
Shipping and Handling Costs 
Shipping and Handling Costs
Shipping and handling costs are expensed as incurred and included in Cost of sales.
Operating Overhead Expense 
Operating Overhead Expense
Operating overhead expense consists primarily of payroll and benefit related costs, rent, depreciation and amortization, professional services, and meetings and travel.
Demand Creation Expense 
Demand Creation Expense
Demand creation expense consists of advertising and promotion costs, including costs of endorsement contracts, television, digital and print advertising, brand events, and retail brand presentation. Advertising production costs are expensed the first time an advertisement is run. Advertising placement costs are expensed in the month the advertising appears, while costs related to brand events are expensed when the event occurs. Costs related to retail brand presentation are expensed when the presentation is completed and delivered.
A significant amount of the Company’s promotional expenses result from payments under endorsement contracts. Accounting for endorsement payments is based upon specific contract provisions. Generally, endorsement payments are expensed on a straight-line basis over the term of the contract after giving recognition to periodic performance compliance provisions of the contracts. Prepayments made under contracts are included in Prepaid expenses and other current assets or Deferred income taxes and other assets depending on the period to which the prepayment applies.
Certain contracts provide for contingent payments to endorsers based upon specific achievements in their sports (e.g., winning a championship). The Company records Demand creation expense for these amounts when the endorser achieves the specific goal.
Certain contracts provide for variable payments based upon endorsers maintaining a level of performance in their sport over an extended period of time (e.g., maintaining a specified ranking in a sport for a year). These amounts are recorded in Demand creation expense when the Company determines that it is probable that the specified level of performance will be maintained throughout the period. In these instances, to the extent that actual payments to the endorser differ from the Company's estimate due to changes in the endorser’s performance, increased or decreased Demand creation expense may be recorded in a future period.
Certain contracts provide for royalty payments to endorsers based upon a predetermined percentage of sales of particular products. The Company expenses these payments in Cost of sales as the related sales occur. In certain contracts, the Company offers minimum guaranteed royalty payments. For contracts for which the Company estimates it will not meet the minimum guaranteed amount of royalty fees through sales of product, the Company records the amount of the guaranteed payment in excess of that earned through sales of product in Demand creation expense uniformly over the remaining guarantee period.
Through cooperative advertising programs, the Company reimburses retail customers for certain costs of advertising the Company’s products. The Company records these costs in Demand creation expense at the point in time when it is obligated to its customers for the costs, which is when the related revenues are recognized. This obligation may arise prior to the related advertisement being run.
Total advertising and promotion expenses were $3,031 million, $2,745 million, and $2,607 million for the years ended May 31, 2014, 2013 and 2012, respectively. Prepaid advertising and promotion expenses totaled $516 million and $386 million at May 31, 2014 and 2013, respectively, and were recorded in Prepaid expenses and other current assets and Deferred income taxes and other assets depending on the period to which the prepayment applies.
Cash and Equivalents 
Cash and Equivalents
Cash and equivalents represent cash and short-term, highly liquid investments, including commercial paper, U.S. Treasury, U.S. Agency, and corporate debt securities with maturities of three months or less at date of purchase.
Short-Term Investments 
Short-Term Investments
Short-term investments consist of highly liquid investments, including commercial paper, U.S. Treasury, U.S. Agency, and corporate debt securities, with maturities over three months from the date of purchase. Debt securities that the Company has the ability and positive intent to hold to maturity are carried at amortized cost. At May 31, 2014 and 2013, the Company did not hold any short-term investments that were classified as trading or held-to-maturity.
At May 31, 2014 and 2013, Short-term investments consisted of available-for-sale securities. Available-for-sale securities are recorded at fair value with unrealized gains and losses reported, net of tax, in Other comprehensive income, unless unrealized losses are determined to be other than temporary. Realized gains and losses on the sale of securities are determined by specific identification. The Company considers all available-for-sale securities, including those with maturity dates beyond 12 months, as available to support current operational liquidity needs and therefore classifies all securities with maturity dates beyond three months at the date of purchase as current assets within Short-term investments on the Consolidated Balance Sheets.
Allowance for Uncollectible Accounts Receivable 
Allowance for Uncollectible Accounts Receivable
Accounts receivable consists primarily of amounts receivable from customers. The Company makes ongoing estimates relating to the collectability of its accounts receivable and maintains an allowance for estimated losses resulting from the inability of its customers to make required payments. In determining the amount of the allowance, the Company considers historical levels of credit losses and makes judgments about the creditworthiness of significant customers based on ongoing credit evaluations. Accounts receivable with anticipated collection dates greater than 12 months from the balance sheet date and related allowances are considered non-current and recorded in Deferred income taxes and other assets. The allowance for uncollectible accounts receivable was $78 million and $104 million at May 31, 2014 and 2013, respectively, of which $37 million and $54 million, respectively, was classified as long-term and recorded in Deferred income taxes and other assets.
Inventory Valuation 
Inventory Valuation
Inventories are stated at lower of cost or market and valued on either an average or specific identification cost basis. For inventories in transit that represent direct shipments to customers, the related inventory and cost of sales is recognized on a specific identification basis. Inventory costs primarily consist of product cost from the Company's suppliers, as well as freight, import duties, taxes, insurance and logistics and other handling fees.
Property, Plant and Equipment and Depreciation 
Property, Plant and Equipment and Depreciation
Property, plant and equipment are recorded at cost. Depreciation is determined on a straight-line basis for buildings and leasehold improvements over 2 to 40 years and for machinery and equipment over 2 to 15 years.
Depreciation and amortization of assets used in manufacturing, warehousing and product distribution are recorded in Cost of sales. Depreciation and amortization of other assets are recorded in Total selling and administrative expense.
Software Development Costs 
Software Development Costs
Internal Use Software. Expenditures for major software purchases and software developed for internal use are capitalized and amortized over a 2 to 10 year period on a straight-line basis. The Company’s policy provides for the capitalization of external direct costs of materials and services associated with developing or obtaining internal use computer software. In addition, the Company also capitalizes certain payroll and payroll-related costs for employees who are directly associated with internal use computer software projects. The amount of capitalizable payroll costs with respect to these employees is limited to the time directly spent on such projects. Costs associated with preliminary project stage activities, training, maintenance and all other post-implementation stage activities are expensed as incurred.
Computer Software to be Sold, Leased or Otherwise Marketed 
Computer Software to be Sold, Leased or Otherwise Marketed. Development costs of computer software to be sold, leased, or otherwise marketed as an integral part of a product are subject to capitalization beginning when a product’s technological feasibility has been established and ending when a product is available for general release to customers. In most instances, the Company’s products are released soon after technological feasibility has been established. Therefore, software development costs incurred subsequent to achievement of technological feasibility are usually not significant, and generally most software development costs have been expensed as incurred.
Impairment of Long-Lived Assets 
Impairment of Long-Lived Assets
The Company reviews the carrying value of long-lived assets or asset groups to be used in operations whenever events or changes in circumstances indicate that the carrying amount of the assets might not be recoverable. Factors that would necessitate an impairment assessment include a significant adverse change in the extent or manner in which an asset is used, a significant adverse change in legal factors or the business climate that could affect the value of the asset, or a significant decline in the observable market value of an asset, among others. If such facts indicate a potential impairment, the Company would assess the recoverability of an asset group by determining if the carrying value of the asset group exceeds the sum of the projected undiscounted cash flows expected to result from the use and eventual disposition of the assets over the remaining economic life of the primary asset in the asset group. If the recoverability test indicates that the carrying value of the asset group is not recoverable, the Company will estimate the fair value of the asset group using appropriate valuation methodologies, which would typically include an estimate of discounted cash flows. Any impairment would be measured as the difference between the asset group’s carrying amount and its estimated fair value.
Identifiable Intangible Assets and Goodwill 
Goodwill and Indefinite-Lived Intangible Assets
The Company performs annual impairment tests on goodwill and intangible assets with indefinite lives in the fourth quarter of each fiscal year, or when events occur or circumstances change that would, more likely than not, reduce the fair value of a reporting unit or an intangible asset with an indefinite life below its carrying value. Events or changes in circumstances that may trigger interim impairment reviews include significant changes in business climate, operating results, planned investments in the reporting unit, planned divestitures or an expectation that the carrying amount may not be recoverable, among other factors. The Company may first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If, after assessing the totality of events and circumstances, the Company determines that it is more likely than not that the fair value of the reporting unit is greater than its carrying amount, the two-step impairment test is unnecessary. The two-step impairment test first requires the Company to estimate the fair value of its reporting units. If the carrying value of a reporting unit exceeds its fair value, the goodwill of that reporting unit is potentially impaired and the Company proceeds to step two of the impairment analysis. In step two of the analysis, the Company measures and records an impairment loss equal to the excess of the carrying value of the reporting unit's goodwill over its implied fair value, if any.
The Company generally bases its measurement of the fair value of a reporting unit on a blended analysis of the present value of future discounted cash flows and the market valuation approach. The discounted cash flows model indicates the fair value of the reporting unit based on the present value of the cash flows that the Company expects the reporting unit to generate in the future. The Company's significant estimates in the discounted cash flows model include: its weighted average cost of capital; long-term rate of growth and profitability of the reporting unit's business; and working capital effects. The market valuation approach indicates the fair value of the business based on a comparison of the reporting unit to comparable publicly traded companies in similar lines of business. Significant estimates in the market valuation approach model include identifying similar companies with comparable business factors such as size, growth, profitability, risk and return on investment, and assessing comparable revenue and operating income multiples in estimating the fair value of the reporting unit.
Indefinite-lived intangible assets primarily consist of acquired trade names and trademarks. The Company may first perform a qualitative assessment to determine whether it is more likely than not that an indefinite-lived intangible asset is impaired. If, after assessing the totality of events and circumstances, the Company determines that it is more likely than not that the indefinite-lived intangible asset is not impaired, no quantitative fair value measurement is necessary. If a quantitative fair value measurement calculation is required for these intangible assets, the Company utilizes the relief-from-royalty method. This method assumes that trade names and trademarks have value to the extent that their owner is relieved of the obligation to pay royalties for the benefits received from them. This method requires the Company to estimate the future revenue for the related brands, the appropriate royalty rate and the weighted average cost of capital.
Operating Leases 
Operating Leases
The Company leases retail store space, certain distribution and warehouse facilities, office space, and other non-real estate assets under operating leases. Operating lease agreements may contain rent escalation clauses, rent holidays or certain landlord incentives, including tenant improvement allowances. Rent expense for non-cancelable operating leases with scheduled rent increases or landlord incentives are recognized on a straight-line basis over the lease term, beginning with the effective lease commencement date, which is generally the date in which the Company takes possession of or controls the physical use of the property. Certain leases also provide for contingent rents, which are determined as a percentage of sales in excess of specified levels. A contingent rent liability is recognized together with the corresponding rent expense when specified levels have been achieved or when the Company determines that achieving the specified levels during the period is probable.
Fair Value Measurements 
Fair Value Measurements
The Company measures certain financial assets and liabilities at fair value on a recurring basis, including derivatives and available-for-sale securities. Fair value is the price the Company would receive to sell an asset or pay to transfer a liability in an orderly transaction with a market participant at the measurement date. The Company uses a three-level hierarchy established by the Financial Accounting Standards Board ("FASB") that prioritizes fair value measurements based on the types of inputs used for the various valuation techniques (market approach, income approach, and cost approach).
The levels of hierarchy are described below:
•
Level 1: Observable inputs such as quoted prices in active markets for identical assets or liabilities.
•
Level 2: Inputs other than quoted prices that are observable for the asset or liability, either directly or indirectly; these include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active.
•
Level 3: Unobservable inputs for which there is little or no market data available, which require the reporting entity to develop its own assumptions.
The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability. Financial assets and liabilities are classified in their entirety based on the most conservative level of input that is significant to the fair value measurement.
Pricing vendors are utilized for certain Level 1 and Level 2 investments. These vendors either provide a quoted market price in an active market or use observable inputs without applying significant adjustments in their pricing. Observable inputs include broker quotes, interest rates and yield curves observable at commonly quoted intervals, volatilities and credit risks. The fair value of derivative contracts is determined using observable market inputs such as the daily market foreign currency rates, forward pricing curves, currency volatilities, currency correlations and interest rates, and considers nonperformance risk of the Company and that of its counterparties.
The Company’s fair value processes include controls that are designed to ensure appropriate fair values are recorded. These controls include an analysis of period-over-period fluctuations and comparison to another independent pricing vendor.
Foreign Currency Translation and Foreign Currency Transactions 
Foreign Currency Translation and Foreign Currency Transactions
Adjustments resulting from translating foreign functional currency financial statements into U.S. Dollars are included in the foreign currency translation adjustment, a component of Accumulated other comprehensive income in Total shareholders’ equity.
The Company’s global subsidiaries have various assets and liabilities, primarily receivables and payables, which are denominated in currencies other than their functional currency. These balance sheet items are subject to re-measurement, the impact of which is recorded in Other expense (income), net, within the Consolidated Statements of Income.
Accounting for Derivatives and Hedging Activities 
Accounting for Derivatives and Hedging Activities
The Company uses derivative financial instruments to reduce its exposure to changes in foreign currency exchange rates and interest rates. All derivatives are recorded at fair value on the Consolidated Balance Sheets and changes in the fair value of derivative financial instruments are either recognized in Accumulated other comprehensive income (a component of Total shareholders’ equity), Long-term debt or Net income depending on the nature of the underlying exposure, whether the derivative is formally designated as a hedge, and, if designated, the extent to which the hedge is effective. The Company classifies the cash flows at settlement from derivatives in the same category as the cash flows from the related hedged items. For undesignated hedges and designated cash flow hedges, this is within the Cash provided by operations component of the Consolidated Statements of Cash Flows. For designated net investment hedges, this is generally within the Cash (used) provided by investing activities component of the Consolidated Statement of Cash Flows. For the Company’s fair value hedges, which are interest rate swaps used to mitigate the change in fair value of its fixed-rate debt attributable to changes in interest rates, the related cash flows from periodic interest payments are reflected within the Cash provided by operations component of the Consolidated Statements of Cash Flows. Refer to Note 17 — Risk Management and Derivatives for more information on the Company’s risk management program and derivatives.
Stock-Based Compensation 
Stock-Based Compensation
The Company estimates the fair value of options and stock appreciation rights granted under the NIKE, Inc. 1990 Stock Incentive Plan (the “1990 Plan”) and employees’ purchase rights under the Employee Stock Purchase Plans (“ESPPs”) using the Black-Scholes option pricing model. The Company recognizes this fair value, net of estimated forfeitures, as Total selling and administrative expense in the Consolidated Statements of Income over the vesting period using the straight-line method.
Income Taxes 
Income Taxes
The Company accounts for income taxes using the asset and liability method. This approach requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the carrying amounts and the tax basis of assets and liabilities. The Company records a valuation allowance to reduce deferred tax assets to the amount management believes is more likely than not to be realized. United States income taxes are provided currently on financial statement earnings of non-U.S. subsidiaries that are expected to be repatriated. The Company determines annually the amount of undistributed non-U.S. earnings to invest indefinitely in its non-U.S. operations.
The Company recognizes a tax benefit from uncertain tax positions in the financial statements only when it is more likely than not that the position will be sustained upon examination by relevant tax authorities. The Company recognizes interest and penalties related to income tax matters in Income tax expense.
Earnings Per Share 
Earnings Per Share
Basic earnings per common share is calculated by dividing Net income by the weighted average number of common shares outstanding during the year. Diluted earnings per common share is calculated by adjusting weighted average outstanding shares, assuming conversion of all potentially dilutive stock options and awards.
Management Estimates 
Management Estimates
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates, including estimates relating to assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates.
Recently Adopted Accounting Standards 
Recently Adopted Accounting Standards
In July 2013, the FASB issued an accounting standards update intended to provide guidance on the presentation of unrecognized tax benefits, reflecting the manner in which an entity would settle, at the reporting date, any additional income taxes that would result from the disallowance of a tax position when net operating loss carryforwards, similar tax losses, or tax credit carryforwards exist. This accounting standard is effective for the Company beginning June 1, 2014 and early adoption is permitted. Management early adopted this guidance and the adoption did not have a material impact on the Company's consolidated financial position or results of operations.
In July 2012, the FASB issued an accounting standards update intended to simplify how an entity tests indefinite-lived intangible assets other than goodwill for impairment by providing entities with an option to perform a qualitative assessment to determine whether further impairment testing is necessary. This accounting standard update was effective for us beginning June 1, 2013. The adoption of this standard did not have a material impact on our consolidated financial position or results of operations.
In December 2011, the FASB issued guidance enhancing disclosure requirements surrounding the nature of an entity’s right to offset and related arrangements associated with its financial instruments and derivative instruments. This new guidance requires companies to disclose both gross and net information about instruments and transactions eligible for offset in the statement of financial position and instruments and transactions subject to master netting arrangements. This new guidance was effective for the Company beginning June 1, 2013. As this guidance only requires expanded disclosures, the adoption had no impact on the Company's consolidated financial position or results of operations.
Recently Issued Accounting Standards 
Recently Issued Accounting Standards
In May 2014, the FASB issued an accounting standards update that replaces existing revenue recognition guidance. Among other things, the updated guidance requires companies to recognize revenue in a way that depicts the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The new guidance is effective for the Company beginning June 1, 2017. The Company is currently evaluating the effect the guidance will have on the Consolidated Financial Statements.
Summary of Significant Accounting Policies (Tables)
Schedule of Error Corrections and Prior Period Adjustments
The following are selected line items from the Company's Consolidated Financial Statements illustrating the effect of these corrections and the correction of other immaterial errors:
 
 
NIKE, Inc. Consolidated Statements of Income
 
 
Year Ended May 31, 2013
 
Year Ended May 31, 2012
(In millions, except per share data)
 
As Reported
 
Adjustment
 
As Revised
 
As Reported
 
Adjustment
 
As Revised
Total selling and administrative expense
 
$
7,780

 
$
16

 
$
7,796

 
$
7,065

 
$
14

 
$
7,079

Income before income taxes
 
3,272

 
(16
)
 
3,256

 
3,025

 
(14
)
 
3,011

Income tax expense
 
808

 
(3
)
 
805

 
756

 
(2
)
 
754

NET INCOME FROM CONTINUING OPERATIONS
 
2,464

 
(13
)
 
2,451

 
2,269

 
(12
)
 
2,257

NET INCOME
 
$
2,485

 
$
(13
)
 
$
2,472

 
$
2,223

 
$
(12
)
 
$
2,211

 
 
 
 
 
 
 
 
 
 
 
 
 
Earnings per share from continuing operations:
 
 
 
 
 
 
 
 
 
 
 
 
Basic earnings per common share
 
$
2.75

 
$
(0.01
)
 
$
2.74

 
$
2.47

 
$
(0.02
)
 
$
2.45

Diluted earnings per common share
 
$
2.69

 
$
(0.01
)
 
$
2.68

 
$
2.42

 
$
(0.02
)
 
$
2.40

 
 
 
 
 
 
 
 
 
 
 
 
 
Earnings per share for NIKE Inc.
 
 
 
 
 
 
 
 
 
 
 
 
Basic earnings per common share
 
$
2.77

 
$
(0.01
)
 
$
2.76

 
$
2.42

 
$
(0.02
)
 
$
2.40

Diluted earnings per common share
 
$
2.71

 
$
(0.01
)
 
$
2.70

 
$
2.37

 
$
(0.02
)
 
$
2.35

 
 
NIKE, Inc. Consolidated Statements of Comprehensive Income
 
 
Year Ended May 31, 2013
 
Year Ended May 31, 2012
(In millions)
 
As Reported
 
Adjustment
 
As Revised
 
As Reported
 
Adjustment
 
As Revised
Net income
 
$
2,485

 
$
(13
)
 
$
2,472

 
$
2,223

 
$
(12
)
 
$
2,211

TOTAL COMPREHENSIVE INCOME
 
$
2,610

 
$
(13
)
 
$
2,597

 
$
2,277

 
$
(12
)
 
$
2,265

 
 
NIKE, Inc. Consolidated Balance Sheet
 
 
May 31, 2013
(In millions)
 
As Reported
 
Adjustment
 
As Revised
ASSETS
 
 
 
 
 
 
Inventories
 
$
3,434

 
$
50

 
$
3,484

Prepaid expenses and other current assets
 
802

 
(46
)
 
756

Total current assets
 
13,626

 
4

 
13,630

Identifiable intangible assets, net
 
382

 
(93
)
 
289

Deferred income taxes and other assets
 
993

 
50

 
1,043

TOTAL ASSETS
 
$
17,584

 
$
(39
)
 
$
17,545

LIABILITIES AND SHAREHOLDERS' EQUITY
 
 
 
 
 
 
Notes payable
 
$
121

 
$
(23
)
 
$
98

Accounts payable
 
1,646

 
23

 
1,669

Accrued liabilities
 
1,986

 
50

 
2,036

Income taxes payable
 
98

 
(14
)
 
84

Total current liabilities
 
3,926

 
36

 
3,962

Retained earnings
 
5,695

 
(75
)
 
5,620

Total shareholders’ equity
 
11,156

 
(75
)
 
11,081

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY
 
$
17,584

 
$
(39
)
 
$
17,545

 
 
NIKE, Inc. Consolidated Statements of Cash Flows
 
 
Year Ended May 31, 2013
 
Year Ended May 31, 2012
(In millions)
 
As Reported
 
Adjustment
 
As Revised
 
As Reported
 
Adjustment
 
As Revised
Cash provided by operations:
 
 
 
 
 
 
 
 
 
 
 
 
Net income
 
$
2,485

 
$
(13
)
 
$
2,472

 
$
2,223

 
$
(12
)
 
$
2,211

Income charges (credits) not affecting cash:
 
 
 
 
 
 
 
 
 
 
 
 
Deferred income taxes
 
21

 
(1
)
 
20

 
(60
)
 
1

 
(59
)
Amortization and other
 
75

 
(9
)
 
66

 
32

 
(9
)
 
23

(Increase) in inventories
 
(197
)
 
(22
)
 
(219
)
 
(805
)
 
(10
)
 
(815
)
Increase in accounts payable, accrued liabilities and income taxes payable
 
41

 
(14
)
 
27

 
470

 
(45
)
 
425

Cash provided by operations
 
3,027

 
(59
)
 
2,968

 
1,899

 
(75
)
 
1,824

Cash (used) provided by investing activities:
 
 
 
 
 
 
 
 
 
 
 
 
Purchases of short-term investments
 
(3,702
)
 
(431
)
 
(4,133
)
 
(2,705
)
 
(540
)
 
(3,245
)
Maturities of short-term investments
 
1,501

 
162

 
1,663

 
2,585

 
78

 
2,663

Sales of short-term investments
 
998

 
332

 
1,330

 
1,244

 
477

 
1,721

Additions to property, plant and equipment
 
(636
)
 
38

 
(598
)
 
(597
)
 
34

 
(563
)
Increase in other assets, net of other liabilities
 
(28
)
 
26

 
(2
)
 
(37
)
 
23

 
(14
)
Cash (used) provided by investing activities
 
(1,067
)
 
127

 
(940
)
 
514

 
72

 
586

Cash used by financing activities:
 
 
 
 
 
 
 
 
 
 
 
 
Increase (decrease) in notes payable
 
15

 
(5
)
 
10

 
(65
)
 
18

 
(47
)
Cash used by financing activities
 
(1,040
)
 
(5
)
 
(1,045
)
 
(2,118
)
 
18

 
(2,100
)
Net (decrease) increase in cash and equivalents
 
1,020

 
63

 
1,083

 
362

 
15

 
377

Cash and equivalents, beginning of year
 
2,317

 
(63
)
 
2,254

 
1,955

 
(78
)
 
1,877

CASH AND EQUIVALENTS, END OF YEAR
 
$
3,337

 
$
—

 
$
3,337

 
$
2,317

 
$
(63
)
 
$
2,254

 
 
NIKE, Inc. Consolidated Statements of Shareholders' Equity
 
 
Retained Earnings
 
Total Shareholders' Equity
(In millions)
 
As Reported
 
Adjustment
 
As Revised
 
As Reported
 
Adjustment
 
As Revised
Balance at May 31, 2011
 
$
5,801

 
$
(50
)
 
$
5,751

 
$
9,843

 
$
(50
)
 
$
9,793

Net income
 
2,223

 
(12
)
 
2,211

 
2,223

 
(12
)
 
2,211

Balance at May 31, 2012
 
$
5,588

 
$
(62
)
 
$
5,526

 
$
10,381

 
$
(62
)
 
$
10,319

Net income
 
2,485

 
(13
)
 
2,472

 
2,485

 
(13
)
 
2,472

Balance at May 31, 2013
 
$
5,695

 
$
(75
)
 
$
5,620

 
$
11,156

 
$
(75
)
 
$
11,081

Property, Plant and Equipment (Tables)
Schedule of Property, Plant and Equipment
Property, plant and equipment included the following:
 
 
As of May 31,
(In millions)
 
2014
 
2013
Land
 
$
270

 
$
268

Buildings
 
1,261

 
1,174

Machinery, equipment and internal-use software
 
3,376

 
2,985

Leasehold improvements
 
1,066

 
945

Construction in process
 
247

 
128

Total property, plant and equipment, gross
 
6,220

 
5,500

Less accumulated depreciation
 
3,386

 
3,048

TOTAL PROPERTY, PLANT AND EQUIPMENT, NET
 
$
2,834

 
$
2,452

Identifiable Intangible Assets and Goodwill (Tables)
Schedule of Intangible Assets by Major Class
The following table summarizes the Company’s Identifiable intangible asset balances as of May 31, 2014 and 2013:
 
 
As of May 31, 2014
 
As of May 31, 2013
(In millions)
 
Gross Carrying
Amount
 
Accumulated
Amortization
 
Net Carrying
Amount
 
Gross Carrying
Amount
 
Accumulated
Amortization
 
Net Carrying
Amount
Acquired trademarks and other
 
$
39

 
$
(39
)
 
$
—

 
$
43

 
$
(36
)
 
$
7

Indefinite-lived trademarks
 
 
 
 
 
282

 
 
 
 
 
282

IDENTIFIABLE INTANGIBLE
ASSETS, NET
 
 
 
 
 
$
282

 
 
 
 
 
$
289

Accrued Liabilities (Tables)
Schedule of Accrued Liabilities
Accrued liabilities included the following:
 
 
As of May 31,
(In millions)
 
2014
 
2013
Compensation and benefits, excluding taxes
 
$
782

 
$
713

Endorsement compensation
 
328

 
264

Dividends payable
 
209

 
188

Taxes other than income taxes
 
204

 
192

Advertising and marketing
 
133

 
77

Import and logistics costs
 
127

 
111

Fair value of derivatives
 
85

 
34

Other(1)
 
623

 
457

TOTAL ACCRUED LIABILITIES
 
$
2,491

 
$
2,036

(1)
Other consists of various accrued expenses with no individual item accounting for more than 5% of the total Accrued liabilities balance at May 31, 2014 and 2013.
Fair Value Measurements (Tables)
Schedule of Fair Value, Assets and Liabilities Measured on Recurring Basis 
The following tables present information about the Company's financial assets and liabilities measured at fair value on a recurring basis as of May 31, 2014 and 2013 and indicate the fair value hierarchy of the valuation techniques utilized by the Company to determine such fair value. Refer to Note 1 – Summary of Significant Accounting Policies for additional detail regarding the Company’s fair value measurement methodology.
 
As of May 31, 2014
(In millions)
 
Assets at Fair Value
 
Cash and Cash Equivalents
 
Short-term Investments
 
Other Long-term Assets
Cash
 
$
780

 
$
780

 
$
—

 
$
—

Level 1:
 
 
 
 
 
 
 
 
U.S. Treasury securities
 
1,137

 
151

 
986

 
—

Level 2:
 
 
 
 
 
 
 
 
Time deposits
 
227

 
227

 
—

 
—

U.S. Agency securities
 
1,027

 
25

 
1,002

 
—

Commercial paper and bonds
 
959

 
25

 
934

 
—

Money market funds
 
1,012

 
1,012

 
—

 
—

Total level 2
 
3,225

 
1,289

 
1,936

 
—

Level 3:
 
 
 
 
 
 
 
 
Non-marketable preferred stock
 
7

 
—

 
—

 
7

TOTAL
 
$
5,149

 
$
2,220

 
$
2,922

 
$
7

 
 
As of May 31, 2013
(In millions)
 
Assets at Fair Value
 
Cash and Cash Equivalents
 
Short-term Investments
 
Other Long-term Assets
Cash
 
$
663

 
$
663

 
$
—

 
$
—

Level 1:
 
 
 
 
 
 
 
 
U.S. Treasury securities
 
2,008

 
425

 
1,583

 
—

Level 2:
 
 
 
 
 
 
 
 
Time deposits
 
358

 
358

 
—

 
—

U.S. Agency securities(1)
 
1,026

 
395

 
631

 
—

Commercial paper and bonds(1)
 
1,074

 
660

 
414

 
—

Money market funds
 
836

 
836

 
—

 
—

Total level 2
 
3,294

 
2,249

 
1,045

 
—

Level 3:
 
 
 
 
 
 
 
 
Non-marketable preferred stock
 
5

 
—

 
—

 
5

TOTAL
 
$
5,970

 
$
3,337

 
$
2,628

 
$
5


(1)
Amounts have been revised to reflect proper classification between U.S. Agency securities and commercial paper and bonds.
Schedule of Derivative Instruments in Statement of Financial Position, Fair Value 
 
As of May 31, 2014
 
 
Asset Derivatives
 
Liability Derivatives
(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)
 
$
127

 
$
101

 
$
26

 
$
85

 
$
84

 
$
1

Interest rate swap contracts
 
6

 
—

 
6

 
—

 
—

 
—

TOTAL
 
$
133

 
$
101

 
$
32

 
$
85

 
$
84

 
$
1

(1)
The Company’s derivative financial instruments are subject to master netting arrangements that allow for the offset of assets and liabilities in the event of default or early termination of the contract. The Company elects to record the gross assets and liabilities of its derivative financial instruments in the Consolidated Balance Sheets. If the derivative financial instruments had been netted in the Consolidated Balance Sheets, the asset and liability positions each would have been reduced by $63 million. No material amounts of collateral were received or posted on the Company’s derivative assets and liabilities as of May 31, 2014.
 
As of May 31, 2013
 
 
Asset Derivatives
 
Liability Derivatives
(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)
 
$
278

 
$
199

 
$
79

 
$
34

 
$
34

 
$
—

Interest rate swap contracts
 
11

 
—

 
11

 
—

 
—

 
—

TOTAL
 
$
289

 
$
199

 
$
90

 
$
34

 
$
34

 
$
—

(1)
The Company’s derivative financial instruments are subject to master netting arrangements that allow for the offset of assets and liabilities in the event of default or early termination of the contract. The Company elects to record the gross assets and liabilities of its derivative financial instruments in the Consolidated Balance Sheets. If the derivative financial instruments had been netted in the Consolidated Balance Sheets, the asset and liability positions each would have been reduced by $34 million. No material amounts of collateral were received or posted on the Company’s derivative assets and liabilities as of May 31, 2013.
The following table presents the fair values of derivative instruments included within the Consolidated Balance Sheets as of May 31, 2014 and 2013: 
 
 
Asset Derivatives
 
Liability Derivatives
(In millions)
 
Balance Sheet
Location
 
2014
 
2013
 
Balance Sheet 
Location
 
2014
 
2013
Derivatives formally designated as hedging instruments:
 
 
 
 
 
 
 
 
 
 
 
 
Foreign exchange forwards and options
 
Prepaid expenses and other current assets
 
$
76

 
$
141

 
Accrued liabilities
 
$
57

 
$
12

Foreign exchange forwards and options
 
Deferred income taxes and other assets
 
26

 
79

 
Deferred income taxes and other liabilities
 
1

 
—

Interest rate swap contracts
 
Deferred income taxes and other assets
 
6

 
11

 
Deferred income taxes and other liabilities
 
—

 
—

Total derivatives formally designated as hedging instruments
 
 
 
108

 
231

 
 
 
58

 
12

Derivatives not designated as hedging instruments:
 
 
 
 
 
 
 
 
 
 
 
 
Foreign exchange forwards and options
 
Prepaid expenses and other current assets
 
25

 
58

 
Accrued liabilities
 
27

 
22

Total derivatives not designated as hedging instruments
 
 
 
25

 
58

 
 
 
27

 
22

TOTAL DERIVATIVES
 
 
 
$
133

 
$
289

 
 
 
$
85

 
$
34

Short-Term Borrowings and Credit Lines (Tables)
Schedule of Short-term Debt
Notes payable and interest-bearing accounts payable to Sojitz Corporation of America (“Sojitz America”) as of May 31, 2014 and 2013 are summarized below:
 
 
As of May 31,
 
 
 
2014
 
 
2013
 
(Dollars in millions)
 
Borrowings

 
Interest Rate

 
 
Borrowings

 
Interest Rate

 
Notes payable:
 
 
 
 
 
 
 
 
 
 
U.S. operations
 
$
—

 
0.00
%
(1) 
 
$
—

 
0.00
%
(1) 
Non-U.S. operations
 
167

 
10.04
%
(1) 
 
98

 
4.94
%
(1) 
TOTAL NOTES PAYABLE
 
$
167

 
 
 
 
$
98

 
 
 
Interest-Bearing Accounts Payable:
 
 
 
 
 
 
 
 
 
 
Sojitz America
 
$
60

 
0.94
%
 
 
$
55

 
0.99
%
 
(1)
Weighted average interest rate includes non-interest bearing overdrafts.
Long-Term Debt (Tables)
Schedule of Long-term Debt Instruments
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
 
2014
 
2013
Corporate Bond Payables:(4)
 
 
 
 
 
 
 
 
 
 
October 1, 2013
 
$
50

 
4.70
%
 
Semi-Annually
 
$
—

 
$
50

October 15, 2015(1)
 
$
100

 
5.15
%
 
Semi-Annually
 
108

 
111

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

 
40

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
 
29

 
34

August 20, 2001 through November 20, 2020(3)
 
¥
4,000

 
2.00
%
 
Quarterly
 
13

 
15

Total
 
 
 
 
 
 
 
1,206

 
1,267

Less current maturities
 
 

 
 

 
 
 
7

 
57

TOTAL LONG-TERM DEBT
 
 
 
 
 
 
 
$
1,199

 
$
1,210

(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, 2014, the interest rates payable on these swap agreements ranged from approximately 0.2% to 0.4%.
(2)
On May 30, 2013, 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.
Income Taxes (Tables)
Schedule of Income before Income Tax, Domestic and Foreign 
Income before income taxes is as follows:
 
 
Year Ended May 31,
(In millions)
 
2014
 
2013
 
2012
Income before income taxes:
 
 
 
 
 
 
United States
 
$
3,066

 
$
1,231

 
$
799

Foreign
 
478

 
2,025

 
2,212

TOTAL INCOME BEFORE INCOME TAXES
 
$
3,544

 
$
3,256

 
$
3,011

Schedule of Components of Income Tax Expense (Benefit) 
The provision for income taxes is as follows:
 
 
Year Ended May 31,
(In millions)
 
2014
 
2013
 
2012
Current:
 
 
 
 
 
 
United States
 
 
 
 
 
 
Federal
 
$
371

 
$
432

 
$
286

State
 
93

 
69

 
51

Foreign
 
398

 
398

 
488

Total
 
862

 
899

 
825

Deferred:
 
 
 
 
 
 
United States
 
 
 
 
 
 
Federal
 
8

 
—

 
(47
)
State
 
(3
)
 
(4
)
 
5

Foreign
 
(16
)
 
(90
)
 
(29
)
Total
 
(11
)
 
(94
)
 
(71
)
TOTAL INCOME TAX EXPENSE
 
$
851

 
$
805

 
$
754

Schedule of Effective Income Tax Rate Reconciliation 
A reconciliation from the U.S. statutory federal income tax rate to the effective income tax rate is as follows:
 
 
Year Ended May 31,
  
 
2014
 
2013
 
2012
Federal income tax rate
 
35.0
 %
 
35.0
 %
 
35.0
 %
State taxes, net of federal benefit
 
1.8
 %
 
1.4
 %
 
1.3
 %
Foreign earnings
 
2.2
 %
 
-11.8
 %
 
-11.9
 %
Deferred charge
 
-14.6
 %
 
0.0
 %
 
0.0
 %
Other, net
 
-0.4
 %
 
0.1
 %
 
0.6
 %
EFFECTIVE INCOME TAX RATE
 
24.0
 %
 
24.7
 %
 
25.0
 %
Schedule of Deferred Tax Assets and Liabilities 
Deferred tax assets and (liabilities) comprise the following: 
 
 
As of May 31,
(In millions)
 
2014
 
2013
Deferred tax assets:
 
 
 
 
Allowance for doubtful accounts
 
$
11

 
$
20

Inventories
 
49

 
40

Sales return reserves
 
113

 
101

Deferred compensation
 
211

 
197

Stock-based compensation
 
162

 
140

Reserves and accrued liabilities
 
95

 
66

Foreign loss carry-forwards
 
16

 
19

Foreign tax credit carry-forwards
 
—

 
106

Undistributed earnings of foreign subsidiaries
 
194

 
147

Other
 
51

 
47

Total deferred tax assets
 
902

 
883

Valuation allowance
 
(9
)
 
(5
)
Total deferred tax assets after valuation allowance
 
893

 
878

Deferred tax liabilities:
 
 
 
 
Property, plant and equipment
 
(237
)
 
(241
)
Intangibles
 
(94
)
 
(78
)
Other
 
(2
)
 
(20
)
Total deferred tax liability
 
(333
)
 
(339
)
NET DEFERRED TAX ASSET
 
$
560

 
$
539

Unrecognized Tax Benefits Reconciliation 
The following is a reconciliation of the changes in the gross balance of unrecognized tax benefits:
 
 
As of May 31,
(In millions)
 
2014
 
2013
 
2012
Unrecognized tax benefits, as of the beginning of the period
 
$
447

 
$
285

 
$
212

Gross increases related to prior period tax positions(1)
 
814

 
77

 
48

Gross decreases related to prior period tax positions(1)
 
(166
)
 
(3
)
 
(25
)
Gross increases related to current period tax positions
 
125

 
130

 
91

Gross decreases related to current period tax positions
 
(30
)
 
(9
)
 
(1
)
Settlements(1)
 
(676
)
 
—

 
(20
)
Lapse of statute of limitations
 
(4
)
 
(21
)
 
(9
)
Changes due to currency translation
 
(4
)
 
(12
)
 
(11
)
UNRECOGNIZED TAX BENEFITS, AS OF THE END OF THE PERIOD
 
$
506

 
$
447

 
$
285

Summary of Operating Loss Carryforwards 
The Company has available domestic and foreign loss carry-forwards of $55 million at May 31, 2014. Such losses will expire as follows: 
 
 
Year Ending May 31,
(In millions)
 
2015
 
2016
 
2017
 
2018
 
2019-2034
 
Indefinite

 
Total

Net operating losses
 
$
—

 
$
—

 
$
—

 
$
6

 
$
37

 
$
12

 
$
55

Common Stock and Stock-Based Compensation (Tables)
Schedule of Compensation Cost for Share-based Payment Arrangements, Allocation of Share-based Compensation Costs by Plan 
The following table summarizes the Company’s total stock-based compensation expense recognized in Total selling and administrative expense: 
 
 
Year Ended May 31,
(In millions)
 
2014
 
2013
 
2012
Stock options(1)
 
$
125

 
$
123

 
$
96

ESPPs
 
22

 
19

 
16

Restricted stock
 
30

 
32

 
18

TOTAL STOCK-BASED COMPENSATION EXPENSE
 
$
177

 
$
174

 
$
130

(1)
Expense for stock options includes the expense associated with stock appreciation rights. Accelerated stock option expense is recorded for employees eligible for accelerated stock option vesting upon retirement. Accelerated stock option expense for years ended May 31, 2014, 2013, and 2012 was $15 million, $22 million, and $17 million, respectively.
Schedule of Share-based Payment Award, Stock Options, Valuation Assumptions 
The weighted average assumptions used to estimate these fair values are as follows:
 
 
Year Ended May 31,
  
 
2014
 
2013
 
2012
Dividend yield
 
1.3
%
 
1.5
%
 
1.4
%
Expected volatility
 
27.9
%
 
35.0
%
 
29.5
%
Weighted average expected life (in years)
 
5.3

 
5.3

 
5.0

Risk-free interest rate
 
1.3
%
 
0.6
%
 
1.4
%
Schedule of Share-based Compensation, Stock Options, Activity 
The following summarizes the stock option transactions under the plan discussed above: 
 
 
Shares (1)
 
Weighted Average
Option Price
  
 
(In millions)

 
  
Options outstanding May 31, 2011
 
69.6

 
$
25.65

Exercised
 
(18.0
)
 
22.81

Forfeited
 
(1.0
)
 
35.61

Granted
 
13.7

 
45.87

Options outstanding May 31, 2012
 
64.3

 
$
30.59

Exercised
 
(9.9
)
 
24.70

Forfeited
 
(1.3
)
 
40.14

Granted
 
14.6

 
46.55

Options outstanding May 31, 2013
 
67.7

 
$
34.72

Exercised
 
(11.0
)
 
28.29

Forfeited
 
(1.3
)
 
48.33

Granted
 
8.1

 
63.54

Options outstanding May 31, 2014
 
63.5

 
$
39.28

Options exercisable at May 31,
 
 
 
 
2012
 
33.9

 
$
24.38

2013
 
35.9

 
27.70

2014
 
37.0

 
31.42

(1)
Includes stock appreciation rights transactions.
Earnings Per Share (Tables)
Schedule of Earnings Per Share, Basic and Diluted
The following is a reconciliation from Basic earnings per common share to Diluted earnings per common share. Options to purchase an additional 0.1 million, 0.1 million, and 0.2 million shares of common stock were outstanding at May 31, 2014, 2013, and 2012, respectively, but were not included in the computation of Diluted earnings per common share because the options were anti-dilutive.
 
 
Year Ended May 31,
(In millions, except per share data)
 
2014
 
2013
 
2012
Determination of shares:
 
 
 
 
 
 
Weighted average common shares outstanding
 
883.4

 
897.3

 
920.0

Assumed conversion of dilutive stock options and awards
 
22.4

 
19.1

 
19.6

DILUTED WEIGHTED AVERAGE COMMON SHARES OUTSTANDING
 
905.8

 
916.4

 
939.6

 
 
 
 
 
 
 
Earnings per share from continuing operations:
 
 
 
 
 
 
Basic earnings per common share
 
$
3.05

 
$
2.74

 
$
2.45

Diluted earnings per common share
 
$
2.97

 
$
2.68

 
$
2.40

 
 
 
 
 
 
 
Earnings per share from discontinued operations:
 
 
 
 
 
 
Basic earnings per common share
 
$
—

 
$
0.02

 
$
(0.05
)
Diluted earnings per common share
 
$
—

 
$
0.02

 
$
(0.05
)
 
 
 
 
 
 
 
Basic earnings per common share for NIKE, Inc.
 
$
3.05

 
$
2.76

 
$
2.40

Diluted earnings per common share for NIKE, Inc.
 
$
2.97

 
$
2.70

 
$
2.35

Accumulated Other Comprehensive Income (Tables)
Schedule of Accumulated Other Comprehensive Income 
The changes in Accumulated other comprehensive income, net of tax, were as follows:
(In millions)
 
Foreign Currency Translation Adjustment(1)
 
Cash Flow Hedges
 
Net Investment Hedges(1)
 
Other
 
Total
Balance at May 31, 2013
 
$
41

 
$
193

 
$
95

 
$
(55
)
 
$
274

Other comprehensive gains (losses) before reclassifications (2)
 
(32
)
 
(134
)
 
—

 
—

 
(166
)
Reclassifications to net income of previously deferred (gains) losses (3)
 
—

 
(27
)
 
—

 
4

 
(23
)
Other comprehensive income (loss)
 
(32
)
 
(161
)
 
—

 
4

 
(189
)
Balance at May 31, 2014
 
$
9

 
$
32

 
$
95

 
$
(51
)
 
$
85


(1)
The accumulated foreign currency translation adjustment and net investment hedge gains/losses related to an investment in a foreign subsidiary are reclassified to Net income upon sale or upon complete or substantially complete liquidation of the respective entity.
(2)
Net of tax benefit of $0 million, $9 million, $0 million, $0 million, and $9 million, respectively.
(3)
Net of tax expense of $0 million, $9 million, $0 million, $0 million, and $9 million, respectively.
Reclassification out of Accumulated Other Comprehensive Income 
The following table summarizes the reclassifications from Accumulated other comprehensive income to the Consolidated Statements of Income:
 
 
Amount of Gain (Loss) Reclassified from Accumulated Other Comprehensive Income into Income
 
Location of Gain (Loss) Reclassified from Accumulated Other Comprehensive Income into Income
 
 
 
(In millions)
 
Year Ended May 31, 2014
 
Gains on cash flow hedges:
 
 
 
 
Foreign exchange forwards and options
 
$
14

 
Revenues
Foreign exchange forwards and options
 
12

 
Cost of sales
Foreign exchange forwards and options
 
—

 
Total selling and administrative expense
Foreign exchange forwards and options
 
10

 
Other expense (income), net
Total before tax
 
36

 
 
Tax expense
 
(9
)
 
 
Gain, net of tax
 
27

 
 
Losses on other
 
(4
)
 
Other expense (income), net
Total before tax
 
(4
)
 
 
Tax expense
 
—

 
 
Loss, net of tax
 
(4
)
 
 
Total net gain reclassified for the period
 
$
23

 
 
Discontinued Operations (Tables)
Summarized results from discontinued operations
Summarized results of the Company's discontinued operations are as follows:
 
 
Year Ended May 31,
(In millions)
 
2014
 
2013
 
2012
Revenues
 
$
—

 
$
523

 
$
796

Income (loss) before income taxes
 
—

 
108

 
(43
)
Income tax expense
 
—

 
87

 
3

Net income (loss) from discontinued operations
 
$
—

 
$
21

 
$
(46
)

As of May 31, 2014 and 2013, the aggregate components of liabilities classified as discontinued operations and included in Total current liabilities consisted of the following:
 
 
As of May 31,
(In millions)
 
2014
 
2013
Accounts payable
 
$
—

 
$
1

Accrued liabilities
 
—

 
17

TOTAL LIABILITIES
 
$
—

 
$
18

Commitments and Contingencies (Tables)
Schedule of Future Minimum Lease Payments for Capital Leases 
Amounts of minimum future annual commitments under non-cancelable operating and capital leases are as follows (in millions):
 
 
2015
 
2016
 
2017
 
2018
 
2019
 
Thereafter
 
Total
Operating leases
 
$
427

 
$
399

 
$
366

 
$
311

 
$
251

 
$
1,050

 
$
2,804

Capital leases
 
$
36

 
$
35

 
$
1

 
$
1

 
$
1

 
$
—

 
$
74

Schedule of Future Minimum Lease Payments for Operating Leases 
Amounts of minimum future annual commitments under non-cancelable operating and capital leases are as follows (in millions):
 
 
2015
 
2016
 
2017
 
2018
 
2019
 
Thereafter
 
Total
Operating leases
 
$
427

 
$
399

 
$
366

 
$
311

 
$
251

 
$
1,050

 
$
2,804

Capital leases
 
$
36

 
$
35

 
$
1

 
$
1

 
$
1

 
$
—

 
$
74

Risk Management and Derivatives (Tables)
Schedule of Derivative Instruments in Statement of Financial Position, Fair Value 
 
As of May 31, 2014
 
 
Asset Derivatives
 
Liability Derivatives
(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)
 
$
127

 
$
101

 
$
26

 
$
85

 
$
84

 
$
1

Interest rate swap contracts
 
6

 
—

 
6

 
—

 
—

 
—

TOTAL
 
$
133

 
$
101

 
$
32

 
$
85

 
$
84

 
$
1

(1)
The Company’s derivative financial instruments are subject to master netting arrangements that allow for the offset of assets and liabilities in the event of default or early termination of the contract. The Company elects to record the gross assets and liabilities of its derivative financial instruments in the Consolidated Balance Sheets. If the derivative financial instruments had been netted in the Consolidated Balance Sheets, the asset and liability positions each would have been reduced by $63 million. No material amounts of collateral were received or posted on the Company’s derivative assets and liabilities as of May 31, 2014.
 
As of May 31, 2013
 
 
Asset Derivatives
 
Liability Derivatives
(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)
 
$
278

 
$
199

 
$
79

 
$
34

 
$
34

 
$
—

Interest rate swap contracts
 
11

 
—

 
11

 
—

 
—

 
—

TOTAL
 
$
289

 
$
199

 
$
90

 
$
34

 
$
34

 
$
—

(1)
The Company’s derivative financial instruments are subject to master netting arrangements that allow for the offset of assets and liabilities in the event of default or early termination of the contract. The Company elects to record the gross assets and liabilities of its derivative financial instruments in the Consolidated Balance Sheets. If the derivative financial instruments had been netted in the Consolidated Balance Sheets, the asset and liability positions each would have been reduced by $34 million. No material amounts of collateral were received or posted on the Company’s derivative assets and liabilities as of May 31, 2013.
The following table presents the fair values of derivative instruments included within the Consolidated Balance Sheets as of May 31, 2014 and 2013: 
 
 
Asset Derivatives
 
Liability Derivatives
(In millions)
 
Balance Sheet
Location
 
2014
 
2013
 
Balance Sheet 
Location
 
2014
 
2013
Derivatives formally designated as hedging instruments:
 
 
 
 
 
 
 
 
 
 
 
 
Foreign exchange forwards and options
 
Prepaid expenses and other current assets
 
$
76

 
$
141

 
Accrued liabilities
 
$
57

 
$
12

Foreign exchange forwards and options
 
Deferred income taxes and other assets
 
26

 
79

 
Deferred income taxes and other liabilities
 
1

 
—

Interest rate swap contracts
 
Deferred income taxes and other assets
 
6

 
11

 
Deferred income taxes and other liabilities
 
—

 
—

Total derivatives formally designated as hedging instruments
 
 
 
108

 
231

 
 
 
58

 
12

Derivatives not designated as hedging instruments:
 
 
 
 
 
 
 
 
 
 
 
 
Foreign exchange forwards and options
 
Prepaid expenses and other current assets
 
25

 
58

 
Accrued liabilities
 
27

 
22

Total derivatives not designated as hedging instruments
 
 
 
25

 
58

 
 
 
27

 
22

TOTAL DERIVATIVES
 
 
 
$
133

 
$
289

 
 
 
$
85

 
$
34

Schedule of Derivative Instruments, Gain (Loss) in Statement of Financial Performance 
The following tables present the amounts affecting the Consolidated Statements of Income for years ended May 31, 2014, 2013 and 2012:

(In millions)
 
Amount of Gain (Loss)
Recognized in Other
Comprehensive Income
on Derivatives(1)
 
Amount of Gain (Loss)
Reclassified From Accumulated
Other Comprehensive Income into Income(1)
Year Ended May 31,
 
Location of Gain (Loss) Reclassified From 
Accumulated Other Comprehensive Income Into Income(1)
 
Year Ended May 31,
2014
 
2013
 
2012
 
2014
 
2013
 
2012
Derivatives designated as cash flow hedges:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Foreign exchange forwards and options
 
$
(48
)
 
$
42

 
$
(29
)
 
Revenues

 
$
14

 
$
(19
)
 
$
5

Foreign exchange forwards and options
 
(78
)
 
67

 
253

 
Cost of sales

 
12

 
113

 
(57
)
Foreign exchange forwards and options
 
4

 
(3
)
 
3

 
Total selling and administrative expense

 
—

 
2

 
(2
)
Foreign exchange forwards and options
 
(21
)
 
33

 
36

 
Other expense (income), net

 
10

 
9

 
(9
)
Total designated cash flow hedges
 
$
(143
)
 
$
139

 
$
263

 
 
 
$
36

 
$
105

 
$
(63
)
Derivatives designated as net investment hedges:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Foreign exchange forwards and options
 
$
—

 
$
—

 
$
45

 
Other expense (income), net

 
$
—

 
$
—

 
$
—

(1)
For the years ended May 31, 2014, 2013, and 2012, the amounts recorded in Other expense (income), net as a result of hedge ineffectiveness and the discontinuance of cash flow hedges because the forecasted transactions were no longer probable of occurring were immaterial.
 
 
Amount of Gain (Loss) Recognized in
Income on Derivatives
 
Location of Gain (Loss) 
Recognized in Income on Derivatives
 
 
Year Ended May 31,
 
(In millions)
 
2014
 
2013
 
2012
 
Derivatives designated as fair value hedges:
 
 
 
 
 
 
 
 
Interest rate swaps(1)
 
$
5

 
$
5

 
$
6

 
Interest expense (income), net
Derivatives not designated as hedging instruments:
 
 
 
 
 
 
 
 
Foreign exchange forwards and options
 
$
(75
)
 
$
51

 
$
64

 
Other expense (income), net
Embedded derivatives
 
$
(1
)
 
$
(4
)
 
$
1

 
Other expense (income), net
(1)
All interest rate swap agreements meet the shortcut method requirements under the accounting standards for derivatives and hedging. Accordingly, changes in the fair values of the interest rate swap agreements are considered to exactly offset changes in the fair value of the underlying long-term debt. Refer to “Fair Value Hedges” in this note for additional detail.
Summary of Significant Accounting Policies - Additional Information (Detail) (USD $)
In Millions, unless otherwise specified
0 Months Ended 12 Months Ended
Nov. 15, 2012
May 31, 2014
May 31, 2013
May 31, 2012
Dec. 24, 2012
Significant Accounting Policies [Line Items]
 
 
 
 
 
Stock split ratio for 100 percent of stock dividend declared
2 
 
 
 
 
Dividend payable as result of stock split (as a percent)
 
 
 
 
100.00% 
Reserve balances for sales discounts, returns and miscellaneous claims
 
$ 610 
$ 531 
 
 
Total advertising and promotion expenses
 
3,031 
2,745 
2,607 
 
Prepaid advertising and promotion expenses
 
516 
386 
 
 
Allowance for uncollectible accounts receivable
 
78 
104 
 
 
Minimum |
Building
 
 
 
 
 
Significant Accounting Policies [Line Items]
 
 
 
 
 
Property, plant and equipment, minimum useful life (in years)
 
2 years 
 
 
 
Minimum |
Leasehold improvements
 
 
 
 
 
Significant Accounting Policies [Line Items]
 
 
 
 
 
Property, plant and equipment, minimum useful life (in years)
 
2 years 
 
 
 
Minimum |
Machinery and Equipment
 
 
 
 
 
Significant Accounting Policies [Line Items]
 
 
 
 
 
Property, plant and equipment, minimum useful life (in years)
 
2 years 
 
 
 
Minimum |
Software and Software Development Costs
 
 
 
 
 
Significant Accounting Policies [Line Items]
 
 
 
 
 
Property, plant and equipment, minimum useful life (in years)
 
2 years 
 
 
 
Maximum |
Building
 
 
 
 
 
Significant Accounting Policies [Line Items]
 
 
 
 
 
Property, plant and equipment, minimum useful life (in years)
 
40 years 
 
 
 
Maximum |
Leasehold improvements
 
 
 
 
 
Significant Accounting Policies [Line Items]
 
 
 
 
 
Property, plant and equipment, minimum useful life (in years)
 
40 years 
 
 
 
Maximum |
Machinery and Equipment
 
 
 
 
 
Significant Accounting Policies [Line Items]
 
 
 
 
 
Property, plant and equipment, minimum useful life (in years)
 
15 years 
 
 
 
Maximum |
Software and Software Development Costs
 
 
 
 
 
Significant Accounting Policies [Line Items]
 
 
 
 
 
Property, plant and equipment, minimum useful life (in years)
 
10 years 
 
 
 
Class B Common Stock
 
 
 
 
 
Significant Accounting Policies [Line Items]
 
 
 
 
 
Stock split ratio for 100 percent of stock dividend declared
2 
 
 
 
 
Class A Convertible Common Stock
 
 
 
 
 
Significant Accounting Policies [Line Items]
 
 
 
 
 
Stock split ratio for 100 percent of stock dividend declared
2 
 
 
 
 
Other Noncurrent Assets [Member]
 
 
 
 
 
Significant Accounting Policies [Line Items]
 
 
 
 
 
Allowance for uncollectible accounts receivable
 
$ 37 
$ 54 
 
 
Summary of Significant Accounting Policies - Revisions (Details) (USD $)
12 Months Ended 12 Months Ended 12 Months Ended
May 31, 2014
May 31, 2013
May 31, 2012
May 31, 2013
Prior Year Revision
As Reported
May 31, 2012
Prior Year Revision
As Reported
May 31, 2010
Prior Year Revision
As Reported
May 31, 2013
Prior Year Revision
Adjustment
May 31, 2012
Prior Year Revision
Adjustment
May 31, 2010
Prior Year Revision
Adjustment
May 31, 2013
Prior Year Revision to Inventory Amounts
Adjustment
May 31, 2012
Prior Year Revision to Inventory Amounts
Adjustment
May 31, 2013
Prior Period Revisions to Non-cash Property Plant And Equipment Additions
Adjustment
May 31, 2012
Prior Period Revisions to Non-cash Property Plant And Equipment Additions
Adjustment
May 31, 2014
Retained Earnings
May 31, 2013
Retained Earnings
May 31, 2012
Retained Earnings
May 31, 2013
Retained Earnings
Prior Year Revision
As Reported
May 31, 2012
Retained Earnings
Prior Year Revision
As Reported
May 31, 2010
Retained Earnings
Prior Year Revision
As Reported
May 31, 2013
Retained Earnings
Prior Year Revision
Adjustment
May 31, 2012
Retained Earnings
Prior Year Revision
Adjustment
May 31, 2010
Retained Earnings
Prior Year Revision
Adjustment
Net Income (Loss) [Abstract]
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total selling and administrative expense
$ 8,766,000,000 
$ 7,796,000,000 
$ 7,079,000,000 
$ 7,780,000,000 
$ 7,065,000,000 
 
$ 16,000,000 
$ 14,000,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Income before income taxes
3,544,000,000 
3,256,000,000 
3,011,000,000 
3,272,000,000 
3,025,000,000 
 
(16,000,000)
(14,000,000)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Income tax expense
851,000,000 
805,000,000 
754,000,000 
808,000,000 
756,000,000 
 
(3,000,000)
(2,000,000)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
NET INCOME FROM CONTINUING OPERATIONS
2,693,000,000 
2,451,000,000 
2,257,000,000 
2,464,000,000 
2,269,000,000 
 
(13,000,000)
(12,000,000)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income
2,693,000,000 
2,472,000,000 
2,211,000,000 
2,485,000,000 
2,223,000,000 
 
(13,000,000)
(12,000,000)
 
 
 
 
 
2,693,000,000 
2,472,000,000 
2,211,000,000 
 
 
 
 
 
 
Basic earnings per common share (in dollars per share)
$ 3.05 
$ 2.74 
$ 2.45 
$ 2.75 
$ 2.47 
 
$ (0.01)
$ (0.02)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Diluted earnings per common share (in dollars per share)
$ 2.97 
$ 2.68 
$ 2.40 
$ 2.69 
$ 2.42 
 
$ (0.01)
$ (0.02)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Basic earnings per common share (in dollars per share)
$ 3.05 
$ 2.76 
$ 2.40 
$ 2.77 
$ 2.42 
 
$ (0.01)
$ (0.02)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Diluted earnings per common share (in dollars per share)
$ 2.97 
$ 2.70 
$ 2.35 
$ 2.71 
$ 2.37 
 
$ (0.01)
$ (0.02)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Comprehensive Income [Abstract]
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income
2,693,000,000 
2,472,000,000 
2,211,000,000 
2,485,000,000 
2,223,000,000 
 
(13,000,000)
(12,000,000)
 
 
 
 
 
2,693,000,000 
2,472,000,000 
2,211,000,000 
 
 
 
 
 
 
TOTAL COMPREHENSIVE INCOME
2,504,000,000 
2,597,000,000 
2,265,000,000 
2,610,000,000 
2,277,000,000 
 
(13,000,000)
(12,000,000)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
ASSETS
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Inventories
3,947,000,000 
3,484,000,000 
 
3,434,000,000 
 
 
50,000,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Prepaid expenses and other current assets
818,000,000 
756,000,000 
 
802,000,000 
 
 
(46,000,000)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total current assets
13,696,000,000 
13,630,000,000 
 
13,626,000,000 
 
 
4,000,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Identifiable intangible assets, net
282,000,000 
289,000,000 
 
382,000,000 
 
 
(93,000,000)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Deferred income taxes and other assets
1,651,000,000 
1,043,000,000 
 
993,000,000 
 
 
50,000,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Assets
18,594,000,000 
17,545,000,000 
 
17,584,000,000 
 
 
(39,000,000)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
LIABILITIES AND SHAREHOLDERS’ EQUITY
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
TOTAL NOTES PAYABLE
167,000,000 
98,000,000 
 
121,000,000 
 
 
(23,000,000)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Accounts payable
1,930,000,000 
1,669,000,000 
 
1,646,000,000 
 
 
23,000,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Accrued liabilities
2,491,000,000 
2,036,000,000 
 
1,986,000,000 
 
 
50,000,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Income taxes payable
432,000,000 
84,000,000 
 
98,000,000 
 
 
(14,000,000)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total current liabilities
5,027,000,000 
3,962,000,000 
 
3,926,000,000 
 
 
36,000,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Retained earnings
4,871,000,000 
5,620,000,000 
 
5,695,000,000 
 
 
(75,000,000)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total shareholders’ equity
10,824,000,000 
11,081,000,000 
10,319,000,000 
11,156,000,000 
10,381,000,000 
9,843,000,000 
(75,000,000)
(62,000,000)
(50,000,000)
 
 
 
 
4,871,000,000 
5,620,000,000 
5,526,000,000 
5,695,000,000 
5,588,000,000 
5,801,000,000 
(75,000,000)
(62,000,000)
(50,000,000)
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY
18,594,000,000 
17,545,000,000 
 
17,584,000,000 
 
 
(39,000,000)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash provided by operations:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income
2,693,000,000 
2,472,000,000 
2,211,000,000 
2,485,000,000 
2,223,000,000 
 
(13,000,000)
(12,000,000)
 
 
 
 
 
2,693,000,000 
2,472,000,000 
2,211,000,000 
 
 
 
 
 
 
Deferred income taxes
(11,000,000)
20,000,000 
(59,000,000)
21,000,000 
(60,000,000)
 
(1,000,000)
1,000,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Amortization and other
114,000,000 
66,000,000 
23,000,000 
75,000,000 
32,000,000 
 
(9,000,000)
(9,000,000)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(Increase) in inventories
(505,000,000)
(219,000,000)
(815,000,000)
(197,000,000)
(805,000,000)
 
(22,000,000)
(10,000,000)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Increase in accounts payable, accrued liabilities and income taxes payable
525,000,000 
27,000,000 
425,000,000 
41,000,000 
470,000,000 
 
(14,000,000)
(45,000,000)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash provided by operations
3,003,000,000 
2,968,000,000 
1,824,000,000 
3,027,000,000 
1,899,000,000 
 
(59,000,000)
(75,000,000)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash (used) provided by investing activities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Purchases of short-term investments
(5,386,000,000)
(4,133,000,000)
(3,245,000,000)
(3,702,000,000)
(2,705,000,000)
 
(431,000,000)
(540,000,000)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Maturities of short-term investments
3,932,000,000 
1,663,000,000 
2,663,000,000 
1,501,000,000 
2,585,000,000 
 
162,000,000 
78,000,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Sales of short-term investments
1,126,000,000 
1,330,000,000 
1,721,000,000 
998,000,000 
1,244,000,000 
 
332,000,000 
477,000,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Additions to property, plant and equipment
(880,000,000)
(598,000,000)
(563,000,000)
(636,000,000)
(597,000,000)
 
38,000,000 
34,000,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Increase in other assets, net of other liabilities
(2,000,000)
(2,000,000)
(14,000,000)
(28,000,000)
(37,000,000)
 
26,000,000 
23,000,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash (used) provided by investing activities
(1,207,000,000)
(940,000,000)
586,000,000 
(1,067,000,000)
514,000,000 
 
127,000,000 
72,000,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash used by financing activities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Increase (decrease) in notes payable
75,000,000 
10,000,000 
(47,000,000)
15,000,000 
(65,000,000)
 
(5,000,000)
18,000,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash used by financing activities
(2,914,000,000)
(1,045,000,000)
(2,100,000,000)
(1,040,000,000)
(2,118,000,000)
 
(5,000,000)
18,000,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net (decrease) increase in cash and equivalents
(1,117,000,000)
1,083,000,000 
377,000,000 
1,020,000,000 
362,000,000 
 
63,000,000 
15,000,000 
 
0 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and equivalents, beginning of year
3,337,000,000 
2,254,000,000 
1,877,000,000 
2,317,000,000 
1,955,000,000 
 
(63,000,000)
(78,000,000)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
CASH AND EQUIVALENTS, END OF YEAR
2,220,000,000 
3,337,000,000 
2,254,000,000 
3,337,000,000 
2,317,000,000 
 
0 
(63,000,000)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash provided (used) by operations, adjustment
 
 
 
 
 
 
26,000,000 
(23,000,000)
 
0 
0 
38,000,000 
34,000,000 
 
 
 
 
 
 
 
 
 
Cash provided (used) by investing activities, adjustment
 
 
 
 
 
 
26,000,000 
(23,000,000)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Increase in accrued liabilities
 
 
 
 
 
 
50,000,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Statement of Stockholders' Equity [Abstract]
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Beginning Balance
11,081,000,000 
10,319,000,000 
9,793,000,000 
10,381,000,000 
 
9,843,000,000 
(62,000,000)
 
(50,000,000)
 
 
 
 
5,620,000,000 
5,526,000,000 
5,751,000,000 
5,695,000,000 
5,588,000,000 
5,801,000,000 
(75,000,000)
(62,000,000)
(50,000,000)
Net income
2,693,000,000 
2,472,000,000 
2,211,000,000 
2,485,000,000 
2,223,000,000 
 
(13,000,000)
(12,000,000)
 
 
 
 
 
2,693,000,000 
2,472,000,000 
2,211,000,000 
 
 
 
 
 
 
Ending Balance
$ 10,824,000,000 
$ 11,081,000,000 
$ 10,319,000,000 
$ 11,156,000,000 
$ 10,381,000,000 
$ 9,843,000,000 
$ (75,000,000)
$ (62,000,000)
$ (50,000,000)
 
 
 
 
$ 4,871,000,000 
$ 5,620,000,000 
$ 5,526,000,000 
$ 5,695,000,000 
$ 5,588,000,000 
$ 5,801,000,000 
$ (75,000,000)
$ (62,000,000)
$ (50,000,000)
Inventories - Additional Information (Detail) (USD $)
In Millions, unless otherwise specified
May 31, 2014
May 31, 2013
Inventory Disclosure [Abstract]
 
 
Inventory balances, were substantially all finished goods
$ 3,947 
$ 3,484 
Property Plant and Equipment (Detail) (USD $)
In Millions, unless otherwise specified
May 31, 2014
May 31, 2013
Property, Plant and Equipment [Line Items]
 
 
Total property, plant and equipment, gross
$ 6,220 
$ 5,500 
Less accumulated depreciation
3,386 
3,048 
TOTAL PROPERTY, PLANT AND EQUIPMENT, NET
2,834 
2,452 
Capital lease obligations
74 
81 
Land
 
 
Property, Plant and Equipment [Line Items]
 
 
Total property, plant and equipment, gross
270 
268 
Buildings
 
 
Property, Plant and Equipment [Line Items]
 
 
Total property, plant and equipment, gross
1,261 
1,174 
Machinery, equipment and internal-use software
 
 
Property, Plant and Equipment [Line Items]
 
 
Total property, plant and equipment, gross
3,376 
2,985 
Leasehold improvements
 
 
Property, Plant and Equipment [Line Items]
 
 
Total property, plant and equipment, gross
1,066 
945 
Construction in process
 
 
Property, Plant and Equipment [Line Items]
 
 
Total property, plant and equipment, gross
$ 247 
$ 128 
Identifiable Intangible Assets and Goodwill - Identifiable Intangible Asset Balances (Detail) (USD $)
In Millions, unless otherwise specified
May 31, 2014
May 31, 2013
Goodwill and Intangible Assets Disclosure [Line Items]
 
 
Unamortized intangible assets - Trademarks
$ 282 
$ 282 
Identifiable intangible assets, net
282 
289 
Other
 
 
Goodwill and Intangible Assets Disclosure [Line Items]
 
 
Gross Carrying Amount
39 
43 
Accumulated Amortization
(39)
(36)
Net Carrying Amount
$ 0 
$ 7 
Identified Intangible Assets and Goodwill - Additional Information (Detail) (USD $)
In Millions, unless otherwise specified
May 31, 2014
May 31, 2013
Goodwill and Intangible Assets Disclosure [Line Items]
 
 
Goodwill
$ 131 
$ 131 
Converse
 
 
Goodwill and Intangible Assets Disclosure [Line Items]
 
 
Goodwill
$ 64 
$ 64 
Accrued Liabilities (Detail) (USD $)
In Millions, unless otherwise specified
May 31, 2014
May 31, 2013
Accrued Liabilities, Current [Abstract]
 
 
Compensation and benefits, excluding taxes
$ 782 
$ 713 
Endorsement compensation
328 
264 
Dividends payable
209 
188 
Taxes other than income taxes
204 
192 
Advertising and marketing
133 
77 
Import and logistics costs
127 
111 
Fair value of derivatives
85 
34 
Other
623 1
457 1
TOTAL ACCRUED LIABILITIES
$ 2,491 
$ 2,036 
Maximum percent of accrued liabilities to be included in Other
5.00% 
5.00% 
Fair Value Measurements - Financial Assets and Liabilities Measured at Fair Value on Recurring Basis (Detail) (Fair Value, Measurements, Recurring, USD $)
In Millions, unless otherwise specified
May 31, 2014
May 31, 2013
Fair Value, Assets and Liabilities Measured on Recurring Basis [Line Items]
 
 
Cash
$ 780 
$ 663 
Assets at Fair Value
5,149 
5,970 
Cash and Cash Equivalents
2,220 
3,337 
Short-term Investments
2,922 
2,628 
Other Long-term Assets
7 
5 
Fair Value Measurements Using Level 1 |
U.S. Treasury securities
 
 
Fair Value, Assets and Liabilities Measured on Recurring Basis [Line Items]
 
 
Assets at Fair Value
1,137 
2,008 
Cash and Cash Equivalents
151 
425 
Short-term Investments
986 
1,583 
Other Long-term Assets
0 
0 
Fair Value Measurements Using Level 2
 
 
Fair Value, Assets and Liabilities Measured on Recurring Basis [Line Items]
 
 
Assets at Fair Value
3,225 
3,294 
Cash and Cash Equivalents
1,289 
2,249 
Short-term Investments
1,936 
1,045 
Other Long-term Assets
0 
0 
Fair Value Measurements Using Level 2 |
Time deposits
 
 
Fair Value, Assets and Liabilities Measured on Recurring Basis [Line Items]
 
 
Assets at Fair Value
227 
358 
Cash and Cash Equivalents
227 
358 
Short-term Investments
0 
0 
Other Long-term Assets
0 
0 
Fair Value Measurements Using Level 2 |
U.S. Agency securities
 
 
Fair Value, Assets and Liabilities Measured on Recurring Basis [Line Items]
 
 
Assets at Fair Value
1,027 
1,026 1
Cash and Cash Equivalents
25 
395 1
Short-term Investments
1,002 
631 1
Other Long-term Assets
0 
0 1
Fair Value Measurements Using Level 2 |
Commercial paper and bonds
 
 
Fair Value, Assets and Liabilities Measured on Recurring Basis [Line Items]
 
 
Assets at Fair Value
959 
1,074 1
Cash and Cash Equivalents
25 
660 1
Short-term Investments
934 
414 1
Other Long-term Assets
0 
0 1
Fair Value Measurements Using Level 2 |
Money market funds
 
 
Fair Value, Assets and Liabilities Measured on Recurring Basis [Line Items]
 
 
Assets at Fair Value
1,012 
836 
Cash and Cash Equivalents
1,012 
836 
Short-term Investments
0 
0 
Other Long-term Assets
0 
0 
Fair Value Measurements Using Level 3 |
Non-marketable preferred stock
 
 
Fair Value, Assets and Liabilities Measured on Recurring Basis [Line Items]
 
 
Assets at Fair Value
7 
5 
Other Long-term Assets
$ 7 
$ 5 
Fair Value Measurements - Derivative Assets and Liabilities at Fair Value (Detail) (USD $)
In Millions, unless otherwise specified
May 31, 2014
May 31, 2013
Derivatives, Fair Value [Line Items]
 
 
Accrued Liabilities
$ 85 
$ 34 
Fair Value, Measurements, Recurring
 
 
Derivatives, Fair Value [Line Items]
 
 
Reduction in derivative liabilities if netted
63 
34 
Fair Value Measurements Using Level 2 |
Fair Value, Measurements, Recurring
 
 
Derivatives, Fair Value [Line Items]
 
 
Assets at Fair Value
133 
289 
Other Current Assets
101 
199 
Other Long-term Assets
32 
90 
Liabilities at Fair Value
85 
34 
Accrued Liabilities
84 
34 
Other Long-term Liabilities
1 
0 
Fair Value Measurements Using Level 2 |
Fair Value, Measurements, Recurring |
Foreign exchange forwards and options
 
 
Derivatives, Fair Value [Line Items]
 
 
Assets at Fair Value
127 1
278 2
Other Current Assets
101 1
199 2
Other Long-term Assets
26 1
79 2
Liabilities at Fair Value
85 1
34 2
Accrued Liabilities
84 1
34 2
Other Long-term Liabilities
1 1
0 2
Fair Value Measurements Using Level 2 |
Fair Value, Measurements, Recurring |
Interest rate swap contracts
 
 
Derivatives, Fair Value [Line Items]
 
 
Assets at Fair Value
6 
11 
Other Current Assets
0 
0 
Other Long-term Assets
6 
11 
Liabilities at Fair Value
0 
0 
Accrued Liabilities
0 
0 
Other Long-term Liabilities
$ 0 
$ 0 
Fair Value Measurements - Additional Information (Detail) (USD $)
In Millions, unless otherwise specified
12 Months Ended
May 31, 2014
May 31, 2013
May 31, 2012
Fair Value Disclosures [Abstract]
 
 
 
Available-for-sale securities with maturity dates within one year from purchase date
$ 2,287 
$ 2,229 
 
Available-for-sale securities with maturity dates over one year and less than five years from purchase date
635 
399 
 
Interest income related to cash and equivalents and short-term investments
$ 5 
$ 4 
$ 6 
Short-Term Borrowings and Credit Lines - Notes Payable to Banks and Interest Bearing Accounts Payable to Sojitz Corporation of America (Detail) (USD $)
In Millions, unless otherwise specified
May 31, 2014
May 31, 2013
Notes payable:
 
 
TOTAL NOTES PAYABLE
$ 167 
$ 98 
Interest-Bearing Accounts Payable:
 
 
Sojitz America
60 
55 
Sojitz America - interest rate
0.94% 
0.99% 
UNITED STATES
 
 
Notes payable:
 
 
TOTAL NOTES PAYABLE
0 
0 
UNITED STATES |
Notes Payable
 
 
Notes payable:
 
 
Notes payable - interest rate
0.00% 1
0.00% 1
Non-U.S. operations
 
 
Notes payable:
 
 
TOTAL NOTES PAYABLE
$ 167 
$ 98 
Non-U.S. operations |
Notes Payable
 
 
Notes payable:
 
 
Notes payable - interest rate
10.04% 1
4.94% 1
Short Term Borrowings and Credit Lines - Additional Information (Detail) (USD $)
1 Months Ended 12 Months Ended
Nov. 1, 2011
May 31, 2014
May 31, 2013
Debt Instrument [Line Items]
 
 
 
Notes payable (Note 7)
 
$ 167,000,000 
$ 98,000,000 
Amounts outstanding under commercial paper program
 
0 
0 
Revolving credit facility, borrowing capacity
1,000,000,000 
 
 
Revolving credit facility, optional maximum borrowing capacity
1,500,000,000.0 
 
 
Revolving credit facility, optional extension period (in years)
1 year 
 
 
Revolving credit facility, fee
 
0.055% 
 
Line of credit facility, amount outstanding
 
$ 0 
$ 0 
Sojitz America Accounts Payable
 
 
 
Debt Instrument [Line Items]
 
 
 
Accounts payable, due date period (in days)
 
60 days 
 
60-day London Interbank Offered Rate (LIBOR)
 
 
 
Debt Instrument [Line Items]
 
 
 
Basis spread on variable rate, above LIBOR
 
0.445% 
 
60-day London Interbank Offered Rate (LIBOR) |
Sojitz America Accounts Payable
 
 
 
Debt Instrument [Line Items]
 
 
 
Basis spread on variable rate, above LIBOR
 
0.75% 
 
Long Term Debt - Net of Unamortized Premiums and Discounts and Swap Fair Value Adjustments (Detail)
12 Months Ended 12 Months Ended 12 Months Ended 12 Months Ended 12 Months Ended 12 Months Ended 12 Months Ended 12 Months Ended
May 31, 2014
USD ($)
May 31, 2013
USD ($)
May 31, 2014
4.70% Corporate bond, payable October 1, 2013
USD ($)
May 31, 2013
4.70% Corporate bond, payable October 1, 2013
USD ($)
May 31, 2014
5.15% Corporate bond, payable October 15, 2015
USD ($)
May 31, 2013
5.15% Corporate bond, payable October 15, 2015
USD ($)
May 31, 2014
2.25% Corporate bond, payable May 1, 2023
USD ($)
May 31, 2013
2.25% Corporate bond, payable May 1, 2023
USD ($)
May 31, 2014
3.63 % Corporate bond, payable May 1, 2043
USD ($)
May 31, 2013
3.63 % Corporate bond, payable May 1, 2043
USD ($)
May 31, 2014
6.20% Promissory note, payable April 1, 2017
USD ($)
May 31, 2013
6.20% Promissory note, payable April 1, 2017
USD ($)
May 31, 2014
6.79% Promissory note, payable January 1, 2018
USD ($)
May 31, 2013
6.79% Promissory note, payable January 1, 2018
USD ($)
May 31, 2014
2.60% Japanese Yen note, maturing August 20, 2001 through November 20, 2020
USD ($)
May 31, 2014
2.60% Japanese Yen note, maturing August 20, 2001 through November 20, 2020
JPY (¥)
May 31, 2013
2.60% Japanese Yen note, maturing August 20, 2001 through November 20, 2020
USD ($)
May 31, 2014
2.00% Japanese Yen note, maturing August 20, 2001 through November 20, 2020
USD ($)
May 31, 2014
2.00% Japanese Yen note, maturing August 20, 2001 through November 20, 2020
JPY (¥)
May 31, 2013
2.00% Japanese Yen note, maturing August 20, 2001 through November 20, 2020
USD ($)
Debt Instrument [Line Items]
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Long Term Debt, original principal
 
 
$ 50,000,000 1
 
$ 100,000,000 1 2
 
$ 500,000,000 1 3
 
$ 500,000,000 1 3
 
$ 40,000,000 4
 
$ 19,000,000 4
 
 
¥ 9,000,000,000 5
 
 
¥ 4,000,000,000 5
 
Long-term debt, interest rate
 
 
4.70% 1
 
5.15% 1 2
 
2.25% 1 3
 
3.625% 1 3
 
6.20% 4
 
6.79% 4
 
2.60% 5
2.60% 5
 
2.00% 5
2.00% 5
 
Long-term debt, interest payment
 
 
Semi-Annually 1
 
Semi-Annually 1 2
 
Semi-Annually 1 3
 
Semi-Annually 1 3
 
Monthly 4
 
Monthly 4
 
Quarterly 5
Quarterly 5
 
Quarterly 5
Quarterly 5
 
Long Term Debt
1,206,000,000 
1,267,000,000 
0 1
50,000,000 1
108,000,000 1 2
111,000,000 1 2
499,000,000 1 3
499,000,000 1 3
499,000,000 1 3
499,000,000 1 3
39,000,000 4
40,000,000 4
19,000,000 4
19,000,000 4
29,000,000 5
 
34,000,000 5
13,000,000 5
 
15,000,000 5
Less current maturities
7,000,000 
57,000,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
TOTAL LONG-TERM DEBT
$ 1,199,000,000 
$ 1,210,000,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Long Term Debt - Net of Unamortized Premiums and Discounts and Swap Fair Value Adjustments (Parenthetical) (Detail)
12 Months Ended 12 Months Ended
May 31, 2014
May 31, 2014
4.70% Corporate bond, payable October 1, 2013
USD ($)
May 30, 2013
6.2% and 6.79% Promissory notes, payable April 1, 2017 and January 1, 2018
USD ($)
May 31, 2014
5.15% Corporate bond, payable October 15, 2015
USD ($)
May 31, 2014
2.25% Corporate bond, payable May 1, 2023
USD ($)
May 31, 2014
3.63 % Corporate bond, payable May 1, 2043
USD ($)
May 31, 2014
6.20% Promissory note, payable April 1, 2017
USD ($)
May 31, 2014
6.79% Promissory note, payable January 1, 2018
USD ($)
May 31, 2014
2.60% Japanese Yen note, maturing August 20, 2001 through November 20, 2020
JPY (¥)
May 31, 2014
2.00% Japanese Yen note, maturing August 20, 2001 through November 20, 2020
JPY (¥)
May 31, 2014
2.6% and 2.0% Japanese Yen note, maturing August 20, 2001 through November 20, 2020
JPY (¥)
Debt Instrument [Line Items]
 
 
 
 
 
 
 
 
 
 
 
Debt instrument, maturity date
 
Oct. 01, 2013 
 
Oct. 15, 2015 
May 01, 2023 
May 01, 2043 
Apr. 01, 2017 
Jan. 01, 2018 
Nov. 20, 2020 
Nov. 20, 2020 
 
Long Term Debt, original principal
 
$ 50,000,000 1
$ 59,000,000 
$ 100,000,000 1 2
$ 500,000,000 1 3
$ 500,000,000 1 3
$ 40,000,000 4
$ 19,000,000 4
¥ 9,000,000,000 5
¥ 4,000,000,000 5
¥ 13,000,000,000.0 
Interest Rates swap, lower range of variable interest rate payable
0.20% 
 
 
 
 
 
 
 
 
 
 
Interest Rates swap, higher range of variable interest rate payable
0.40% 
 
 
 
 
 
 
 
 
 
 
Debt instrument, minimum maturity date
 
 
 
 
 
 
 
 
 
 
Aug. 20, 2001 
Debt instrument, maximum maturity date
 
 
 
 
 
 
 
 
 
 
Nov. 20, 2020 
Percent of aggregate principal amount of the notes to be redeemed
 
 
 
 
100.00% 
 
 
 
 
 
 
Long Term Debt - Additional Information (Detail) (USD $)
In Millions, unless otherwise specified
0 Months Ended
May 30, 2013
May 31, 2014
May 31, 2013
Long-term Debt Disclosure [Abstract]
 
 
 
Purchase of properties
$ 85 
 
 
Maturity of long-term debt in 2015
 
7 
 
Maturity of long-term debt in 2016
 
108 
 
Maturity of long-term debt in 2017
 
45 
 
Maturity of long-term debt in 2018
 
25 
 
Maturity of long-term debt in 2019
 
7 
 
Fair value of long term debt
 
$ 1,154 
$ 1,219 
Income Taxes - Income before Income Taxes (Detail) (USD $)
In Millions, unless otherwise specified
12 Months Ended
May 31, 2014
May 31, 2013
May 31, 2012
Income before income taxes:
 
 
 
United States
$ 3,066 
$ 1,231 
$ 799 
Foreign
478 
2,025 
2,212 
Income before income taxes
$ 3,544 
$ 3,256 
$ 3,011 
Income Taxes - Provision for Income Taxes (Detail) (USD $)
In Millions, unless otherwise specified
12 Months Ended
May 31, 2014
May 31, 2013
May 31, 2012
Current:
 
 
 
Federal
$ 371 
$ 432 
$ 286 
State
93 
69 
51 
Foreign
398 
398 
488 
Current Income Tax Expense (Benefit), Total
862 
899 
825 
Deferred:
 
 
 
Federal
8 
0 
(47)
State
(3)
(4)
5 
Foreign
(16)
(90)
(29)
Total Deferred Income Tax Expense (Benefit)
(11)
(94)
(71)
Income tax expense
$ 851 
$ 805 
$ 754 
Income Taxes - Reconciliation from United States Statutory Federal Income Tax Rate to Effective Income Tax Rate (Detail)
12 Months Ended
May 31, 2014
May 31, 2013
May 31, 2012
Income Tax Disclosure [Abstract]
 
 
 
Federal income tax rate
35.00% 
35.00% 
35.00% 
State taxes, net of federal benefit
1.80% 
1.40% 
1.30% 
Foreign earnings
2.20% 
(11.80%)
(11.90%)
Deferred charge
(14.60%)
0.00% 
0.00% 
Other, net
(0.40%)
0.10% 
0.60% 
EFFECTIVE INCOME TAX RATE
24.00% 
24.70% 
25.00% 
Income Taxes - Additional Information (Detail) (USD $)
12 Months Ended
May 31, 2014
May 31, 2013
May 31, 2012
May 31, 2011
Income Tax Disclosure [Abstract]
 
 
 
 
Effective tax rate, change from prior period
(70.00%)
(30.00%)
 
 
Total gross unrecognized tax benefits, excluding related interest and penalties
$ 506,000,000 
$ 447,000,000 
$ 285,000,000 
$ 212,000,000 
Total gross unrecognized tax benefits, excluding related interest and penalties, amount which would affect the Company's effective tax rate if recognized in future periods
264,000,000 
 
 
 
Increase in liability for payment of interest and penalties
55,000,000 
4,000,000 
17,000,000 
 
Accrued interest and penalties related to uncertain tax positions (excluding federal benefit)
167,000,000 
112,000,000 
 
 
Estimated decrease in total gross unrecognized tax benefits as a result of resolutions of global tax examinations and expiration of applicable statutes of limitations
70,000,000 
 
 
 
Reinvestment of the cumulative undistributed earnings of certain foreign subsidiaries
6,600,000,000 
 
 
 
Unrecognized deferred tax liability associated with the indefinitely reinvested undistributed earnings
2,100,000,000 
 
 
 
Tax holiday, expiration period (year)
2021 
 
 
 
Decrease in income tax expense related to tax holiday
138,000,000 
108,000,000 
117,000,000 
 
Decrease in income tax expense related to tax holiday per diluted share, (in dollars per share)
$ 0.15 
$ 0.12 
$ 0.12 
 
Valuation allowance related to tax benefits of certain subsidiaries with operating losses
4,000,000 
(22,000,000)
23,000,000 
 
Deferred tax assets for foreign tax credit carry-forwards
0 
106,000,000 
 
 
Available domestic and foreign loss carry-forwards
55,000,000 
 
 
 
Income tax benefits attributable to employee stock-based compensation
$ 135,000,000 
$ 76,000,000 
$ 120,000,000 
 
Income Taxes - Deferred Tax Assets and Liabilities (Detail) (USD $)
In Millions, unless otherwise specified
May 31, 2014
May 31, 2013
Deferred tax assets:
 
 
Allowance for doubtful accounts
$ 11 
$ 20 
Inventories
49 
40 
Sales return reserves
113 
101 
Deferred compensation
211 
197 
Stock-based compensation
162 
140 
Reserves and accrued liabilities
95 
66 
Foreign loss carry-forwards
16 
19 
Foreign tax credit carry-forwards
0 
106 
Undistributed earnings of foreign subsidiaries
194 
147 
Other
51 
47 
Total deferred tax assets
902 
883 
Valuation allowance
(9)
(5)
Total deferred tax assets after valuation allowance
893 
878 
Deferred tax liabilities:
 
 
Property, plant and equipment
(237)
(241)
Intangibles
(94)
(78)
Other
(2)
(20)
Total deferred tax liability
(333)
(339)
NET DEFERRED TAX ASSET
$ 560 
$ 539 
Income Taxes - Reconciliation of Changes in Gross Balance of Unrecognized Tax Benefits (Detail) (USD $)
In Millions, unless otherwise specified
12 Months Ended
May 31, 2014
May 31, 2013
May 31, 2012
Reconciliation of Unrecognized Tax Benefits, Excluding Amounts Pertaining to Examined Tax Returns [Roll Forward]
 
 
 
Unrecognized tax benefits, as of the beginning of the period
$ 447 
$ 285 
$ 212 
Gross increases related to prior period tax positions
814 1
77 1
48 1
Gross decreases related to prior period tax positions
(166)1
(3)1
(25)1
Gross increases related to current period tax positions
125 
130 
91 
Gross decreases related to current period tax positions
(30)
(9)
(1)
Settlements
(676)1
0 1
(20)1
Lapse of statute of limitations
(4)
(21)
(9)
Changes due to currency translation
(4)
(12)
(11)
UNRECOGNIZED TAX BENEFITS, AS OF THE END OF THE PERIOD
$ 506 
$ 447 
$ 285 
Income Taxes - Available Domestic and Foreign Loss Carryforwards (Detail) (USD $)
In Millions, unless otherwise specified
May 31, 2014
Operating Loss Carryforwards [Line Items]
 
Net Operating Losses
$ 55 
2015
 
Operating Loss Carryforwards [Line Items]
 
Net Operating Losses
0 
2016
 
Operating Loss Carryforwards [Line Items]
 
Net Operating Losses
0 
2017
 
Operating Loss Carryforwards [Line Items]
 
Net Operating Losses
0 
2018
 
Operating Loss Carryforwards [Line Items]
 
Net Operating Losses
6 
2019 - 2034
 
Operating Loss Carryforwards [Line Items]
 
Net Operating Losses
37 
Indefinite
 
Operating Loss Carryforwards [Line Items]
 
Net Operating Losses
$ 12 
Redeemable Preferred Stock - Additional Information (Detail) (Non-marketable preferred stock, USD $)
In Millions, except Per Share data, unless otherwise specified
12 Months Ended
May 31, 2014
Non-marketable preferred stock
 
Temporary Equity [Line Items]
 
Redeemable preferred stock, par value
$ 1 
Redeemable preferred stock, redeemable value (in dollars)
$ 0.3 
Redeemable preferred stock, dividends payable annually per share
$ 0.10 
Common Stock and Stock Based Compensation - Additional Information (Detail) (USD $)
In Millions, except Share data, unless otherwise specified
12 Months Ended
May 31, 2014
May 31, 2013
May 31, 2012
Class A Convertible Common Stock
 
 
 
Common Stock and Share Based Compensation [Line Items]
 
 
 
Common Stock, number of shares authorized (in shares)
200,000,000 
 
 
Common stock conversion
Each share of Class A Common Stock is convertible into one share of Class B Common Stock. 
 
 
Common stock, Class A conversion ratio to Class B (in shares)
1 
 
 
Class B Common Stock
 
 
 
Common Stock and Share Based Compensation [Line Items]
 
 
 
Common Stock, number of shares authorized (in shares)
1,200,000,000 
 
 
Stock Incentive Plan 1990 [Member] |
Class B Common Stock
 
 
 
Common Stock and Share Based Compensation [Line Items]
 
 
 
Shares available for grant (in shares)
326,000,000 
 
 
Stock options vesting period (in years)
4 years 
 
 
Stock options expiration from the date of grant (in years)
10 years 
 
 
Weighted average fair value per share of the options granted (in dollars per share)
$ 14.89 
$ 12.71 
$ 11.08 
Minimum term of market traded options for estimates of expected volatility (in years)
1 year 
 
 
Weighted average remaining contractual life for options outstanding (in years)
6 years 
 
 
Weighted average remaining contractual life for options exercisable (in years)
4 years 7 months 6 days 
 
 
Aggregate intrinsic value for options outstanding
$ 2,391 
 
 
Aggregate intrinsic value for options exercisable
1,682 
 
 
Total intrinsic value of options exercised
474 
293 
453 
Stock Options |
Stock Incentive Plan 1990 [Member]
 
 
 
Common Stock and Share Based Compensation [Line Items]
 
 
 
Unrecognized compensation costs from stock options, net of estimated forfeitures
179 
 
 
Unrecognized compensation costs from stock options, net of estimated forfeitures, to be recognized as operating overhead expense over a weighted average period (in years)
2 years 1 month 6 days 
 
 
Restricted Stock |
Stock Incentive Plan 1990 [Member]
 
 
 
Common Stock and Share Based Compensation [Line Items]
 
 
 
Unrecognized compensation costs from stock options, net of estimated forfeitures
61 
 
 
Unrecognized compensation costs from stock options, net of estimated forfeitures, to be recognized as operating overhead expense over a weighted average period (in years)
2 years 8 months 12 days 
 
 
Restricted Stock |
Stock Incentive Plan 1990 [Member] |
Class B Common Stock
 
 
 
Common Stock and Share Based Compensation [Line Items]
 
 
 
Restricted and unrestricted stock granted to key employees under 1990 Plan, number of shares (in shares)
300,000 
1,600,000 
700,000 
Restricted stock granted to key employees under 1990 Plan, weighted average values per share (in dollars per shares)
$ 63.89 
$ 46.86 
$ 49.49 
Restricted stock vested, fair value
$ 28 
$ 25 
$ 22 
Employee Stock |
Class B Common Stock
 
 
 
Common Stock and Share Based Compensation [Line Items]
 
 
 
Employee stock purchase plans, payroll deductions
10.00% 
 
 
Employee stock purchase plan offering period
6 months 
 
 
Shares purchased, price as percentage of lower of the fair market value
85.00% 
 
 
Purchase of shares by employee (in shares)
1,400,000 
1,600,000 
1,700,000 
Common Stock and Stock-Based Compensation - Total Stock-Based Compensation Expense (Detail) (USD $)
In Millions, unless otherwise specified
12 Months Ended
May 31, 2014
May 31, 2013
May 31, 2012
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
 
 
 
Stock-based compensation expense
$ 177 
$ 174 
$ 130 
Stock Options
 
 
 
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
 
 
 
Stock-based compensation expense
125 1
123 1
96 1
ESPPs
 
 
 
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
 
 
 
Stock-based compensation expense
22 
19 
16 
Restricted Stock
 
 
 
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
 
 
 
Stock-based compensation expense
$ 30 
$ 32 
$ 18 
Common Stock and Stock-Based Compensation - Total Stock-Based Compensation Expense (Parenthetical) (Detail) (USD $)
In Millions, unless otherwise specified
12 Months Ended
May 31, 2014
May 31, 2013
May 31, 2012
Common Stock and Stock-based Compensation [Abstract]
 
 
 
Accelerated stock option expense
$ 15 
$ 22 
$ 17 
Common Stock and Stock-Based Compensation - Weighted Average Assumptions Used to Estimate Fair Values (Detail)
12 Months Ended
May 31, 2014
May 31, 2013
May 31, 2012
Common Stock and Stock-based Compensation [Abstract]
 
 
 
Dividend yield
1.30% 
1.50% 
1.40% 
Expected volatility
27.90% 
35.00% 
29.50% 
Weighted average expected life (in years)
5 years 3 months 
5 years 3 months 
5 years 
Risk-free interest rate
1.30% 
0.60% 
1.40% 
Common Stock and Stock-Based Compensation - Stock Option Transactions Under Plan (Detail) (Stock Incentive Plan 1990 [Member], USD $)
In Millions, except Per Share data, unless otherwise specified
12 Months Ended
May 31, 2014
May 31, 2013
May 31, 2012
Stock Incentive Plan 1990 [Member]
 
 
 
Options Outstanding - Shares
 
 
 
Beginning Balance (in shares)
67.7 1
64.3 1
69.6 1
Exercised (in shares)
(11.0)1
(9.9)1
(18.0)1
Forfeited (in shares)
(1.3)1
(1.3)1
(1.0)1
Granted (in shares)
8.1 1
14.6 1
13.7 1
Ending Balance (in shares)
63.5 1
67.7 1
64.3 1
Options exercisable (in shares)
37.0 1
35.9 1
33.9 1
Options Outstanding - Weighted-Average Option Price
 
 
 
Beginning Balance (in dollars per share)
$ 34.72 
$ 30.59 
$ 25.65 
Exercised (in dollars per share)
$ 28.29 
$ 24.70 
$ 22.81 
Forfeited (in dollars per share)
$ 48.33 
$ 40.14 
$ 35.61 
Granted (in dollars per share)
$ 63.54 
$ 46.55 
$ 45.87 
Ending Balance (in dollars per share)
$ 39.28 
$ 34.72 
$ 30.59 
Options exercisable (in dollars per share)
$ 31.42 
$ 27.70 
$ 24.38 
Earnings Per Share - Additional Information (Detail)
In Millions, unless otherwise specified
12 Months Ended
May 31, 2014
May 31, 2013
May 31, 2012
Earnings Per Share [Abstract]
 
 
 
Anti-dilutive options not included in the computation of diluted earnings per share
0.1 
0.1 
0.2 
Earnings Per Share - Reconciliation from Basic Earnings Per Share to Diluted Earnings Per Share (Detail) (USD $)
In Millions, except Per Share data, unless otherwise specified
12 Months Ended
May 31, 2014
May 31, 2013
May 31, 2012
Determination of shares:
 
 
 
Weighted average common shares outstanding (in shares)
883.4 
897.3 
920.0 
Assumed conversion of dilutive stock options and awards (in shares)
22.4 
19.1 
19.6 
DILUTED WEIGHTED AVERAGE COMMON SHARES OUTSTANDING (in shares)
905.8 
916.4 
939.6 
Earnings per share from continuing operations:
 
 
 
Income (Loss) from Continuing Operations, Per Basic Share (in dollars per share)
$ 3.05 
$ 2.74 
$ 2.45 
Diluted earnings per common share (in dollars per share)
$ 2.97 
$ 2.68 
$ 2.40 
Earnings per share from discontinued operations:
 
 
 
Income (Loss) from Discontinued Operations, Per Basic Share (in dollars per share)
$ 0.00 
$ 0.02 
$ (0.05)
Income (Loss) from Discontinued Operations, Per Diluted Share (in dollars per share)
$ 0.00 
$ 0.02 
$ (0.05)
Basic earnings per common share (in dollars per share)
$ 3.05 
$ 2.76 
$ 2.40 
Diluted earnings per common share (in dollars per share)
$ 2.97 
$ 2.70 
$ 2.35 
Benefit Plans - Additional Information (Detail) (USD $)
In Millions, unless otherwise specified
12 Months Ended
May 31, 2014
May 31, 2013
May 31, 2012
Defined Contribution Plan Disclosure [Line Items]
 
 
 
401(k) employee savings plans, expenses
$ 51 
$ 46 
$ 42 
Liability related to the unfunded pension plan
100 
104 
 
Profit Sharing Plan
 
 
 
Defined Contribution Plan Disclosure [Line Items]
 
 
 
Contribution and cash award expenses included in selling and administrative expenses
49 
47 
40 
Long Term Incentive Plan
 
 
 
Defined Contribution Plan Disclosure [Line Items]
 
 
 
Contribution and cash award expenses included in selling and administrative expenses
46 
50 
51 
Deferred income taxes and other long-term liabilities
 
 
 
Defined Contribution Plan Disclosure [Line Items]
 
 
 
Deferred compensation plan liabilities
$ 390 
$ 326 
 
Accumulated Other Comprehensive Income - Changes in AOCI (Detail) (USD $)
In Millions, unless otherwise specified
12 Months Ended
May 31, 2014
Increase (Decrease) in Stockholders' Equity [Roll Forward]
 
Accumulated other comprehensive income balance at the beginning of the period
$ 274 
Other comprehensive gains (losses) before reclassifications, net of tax
(166)1
Reclassifications to net income of previously deferred (gains) losses, net of tax
(23)2
Other comprehensive income (loss)
(189)
Accumulated other comprehensive income balance at the end of the period
85 
Other comprehensive income, before reclassification, tax benefit (expense)
9 
Reclassification from accumulated other comprehensive income, tax (benefit) expense
9 
Foreign Currency Translation Adjustment
 
Increase (Decrease) in Stockholders' Equity [Roll Forward]
 
Accumulated other comprehensive income balance at the beginning of the period
41 3
Other comprehensive gains (losses) before reclassifications, net of tax
(32)1 3
Reclassifications to net income of previously deferred (gains) losses, net of tax
0 2 3
Other comprehensive income (loss)
(32)3
Accumulated other comprehensive income balance at the end of the period
9 3
Other comprehensive income, before reclassification, tax benefit (expense)
0 
Reclassification from accumulated other comprehensive income, tax (benefit) expense
0 
Cash Flow Hedges
 
Increase (Decrease) in Stockholders' Equity [Roll Forward]
 
Accumulated other comprehensive income balance at the beginning of the period
193 
Other comprehensive gains (losses) before reclassifications, net of tax
(134)1
Reclassifications to net income of previously deferred (gains) losses, net of tax
(27)2
Other comprehensive income (loss)
(161)
Accumulated other comprehensive income balance at the end of the period
32 
Other comprehensive income, before reclassification, tax benefit (expense)
9 
Reclassification from accumulated other comprehensive income, tax (benefit) expense
9 
Net Investment Hedges
 
Increase (Decrease) in Stockholders' Equity [Roll Forward]
 
Accumulated other comprehensive income balance at the beginning of the period
95 
Other comprehensive gains (losses) before reclassifications, net of tax
0 1
Reclassifications to net income of previously deferred (gains) losses, net of tax
0 2
Other comprehensive income (loss)
0 
Accumulated other comprehensive income balance at the end of the period
95 
Other comprehensive income, before reclassification, tax benefit (expense)
0 
Reclassification from accumulated other comprehensive income, tax (benefit) expense
0 
Other
 
Increase (Decrease) in Stockholders' Equity [Roll Forward]
 
Accumulated other comprehensive income balance at the beginning of the period
(55)
Other comprehensive gains (losses) before reclassifications, net of tax
0 1
Reclassifications to net income of previously deferred (gains) losses, net of tax
4 2
Other comprehensive income (loss)
4 
Accumulated other comprehensive income balance at the end of the period
(51)
Other comprehensive income, before reclassification, tax benefit (expense)
0 
Reclassification from accumulated other comprehensive income, tax (benefit) expense
$ 0 
Accumulated Other Comprehensive Income - Reclassification out of AOCI (Details) (USD $)
In Millions, unless otherwise specified
12 Months Ended
May 31, 2014
May 31, 2013
May 31, 2012
Reclassification out of Accumulated Other Comprehensive Income [Line Items]
 
 
 
Cost of sales
$ 15,353 
$ 14,279 
$ 13,183 
Selling and administrative expense
8,766 
7,796 
7,079 
Other expense (income), net
(103)
15 
(54)
Income before income taxes
3,544 
3,256 
3,011 
Tax benefit (expense)
(851)
(805)
(754)
NET INCOME FROM CONTINUING OPERATIONS
2,693 
2,451 
2,257 
Amount of Gain (Loss) Reclassified from Accumulated Other Comprehensive Income into Income
 
 
 
Reclassification out of Accumulated Other Comprehensive Income [Line Items]
 
 
 
NET INCOME FROM CONTINUING OPERATIONS
23 
 
 
Gain (losses) on cash flow hedges |
Amount of Gain (Loss) Reclassified from Accumulated Other Comprehensive Income into Income
 
 
 
Reclassification out of Accumulated Other Comprehensive Income [Line Items]
 
 
 
Income before income taxes
36 
 
 
Tax benefit (expense)
(9)
 
 
NET INCOME FROM CONTINUING OPERATIONS
27 
 
 
Gain (losses) on cash flow hedges |
Foreign exchange forwards and options |
Amount of Gain (Loss) Reclassified from Accumulated Other Comprehensive Income into Income
 
 
 
Reclassification out of Accumulated Other Comprehensive Income [Line Items]
 
 
 
Revenue
14 
 
 
Cost of sales
12 
 
 
Selling and administrative expense
0 
 
 
Other expense (income), net
10 
 
 
Other |
Amount of Gain (Loss) Reclassified from Accumulated Other Comprehensive Income into Income
 
 
 
Reclassification out of Accumulated Other Comprehensive Income [Line Items]
 
 
 
Other expense (income), net
(4)
 
 
Income before income taxes
(4)
 
 
Tax benefit (expense)
0 
 
 
NET INCOME FROM CONTINUING OPERATIONS
$ (4)
 
 
Discontinued Operations (Details) (USD $)
12 Months Ended 0 Months Ended
May 31, 2014
May 31, 2013
May 31, 2012
Feb. 1, 2013
Cole Haan
Feb. 1, 2013
Cole Haan
Minimum
Feb. 1, 2013
Cole Haan
Maximum
Nov. 30, 2012
Umbro
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
 
 
 
 
 
 
 
Agreed upon purchase price from discontinued operations
 
 
 
$ 570,000,000 
 
 
 
Proceeds from divestiture of businesses
0 
786,000,000 
0 
561,000,000 
 
 
225,000,000 
Purchase price adjustments
 
 
 
9,000,000 
 
 
 
Tax (benefit) expense on sale of discontinued operations
 
 
 
137,000,000 
 
 
(67,000,000)
Net gain (loss) on divestitures
0 
124,000,000 
0 
231,000,000 
 
 
(107,000,000)
Period of transition service (in months)
 
 
 
 
3 months 
9 months 
 
Lease guarantee
 
 
 
33,000,000 
 
 
 
Assets, including intangibles, goodwill, and fixed assets
 
 
 
 
 
 
248,000,000 
Other miscellaneous charges
 
 
 
 
 
 
22,000,000 
Release of cumulative translation adjustment related to Umbro, pre-tax
 
 
 
 
 
 
$ 129,000,000 
Discontinued Operations - Summarized Results (Details) (USD $)
In Millions, unless otherwise specified
12 Months Ended
May 31, 2014
May 31, 2013
May 31, 2012
Disposal Group, Including Discontinued Operation, Income Statement Disclosures [Abstract]
 
 
 
Revenues
$ 0 
$ 523 
$ 796 
Income (loss) before income taxes
0 
108 
(43)
Income tax expense
0 
87 
3 
Net income (loss) from discontinued operations
0 
21 
(46)
Disposal Group, Including Discontinued Operation, Balance Sheet Disclosures [Abstract]
 
 
 
Accounts payable
0 
1 
 
Accrued liabilities
0 
17 
 
TOTAL LIABILITIES
$ 0 
$ 18 
 
Commitments and Contingencies - Additional Information (Detail) (USD $)
12 Months Ended
May 31, 2014
May 31, 2013
May 31, 2012
Commitments and Contingencies Disclosure [Abstract]
 
 
 
Expiration date of operating lease, lower limit (in years)
1 year 
 
 
Expiration date of operating lease, upper limit (in years)
20 years 
 
 
Rent expense
$ 533,000,000 
$ 482,000,000 
$ 431,000,000 
Minimum rental commitments, operating leases, 2015
427,000,000 
 
 
Minimum rental commitments, operating leases, 2016
399,000,000 
 
 
Minimum rental commitments, operating leases, 2017
366,000,000 
 
 
Minimum rental commitments, operating leases, 2018
311,000,000 
 
 
Minimum rental commitments, operating leases, 2019
251,000,000 
 
 
Minimum rental commitments, operating leases, thereafter
1,050,000,000 
 
 
Operating leases
2,804,000,000 
 
 
Minimum commitments, capital leases, 2015
36,000,000 
 
 
Minimum commitments, capital leases, 2016
35,000,000 
 
 
Minimum commitments, capital leases, 2017
1,000,000 
 
 
Minimum commitments, capital leases, 2018
1,000,000 
 
 
Minimum commitments, capital leases, 2019
1,000,000 
 
 
Minimum commitments, capital leases, thereafter
0 
 
 
Letters of credit outstanding
135,000,000 
149,000,000 
 
Capital leases
$ 74,000,000 
 
 
Risk Management and Derivatives - Additional Information (Detail) (USD $)
12 Months Ended
May 31, 2014
Derivative Instruments and Hedging Activities Disclosure [Line Items]
 
Percentage of anticipated exposures hedged (percent)
100.00% 
Deferred net gains (net of tax) on both outstanding and matured derivatives accumulated in other comprehensive income are expected to be reclassified to net income during the next twelve months as a result of underlying hedged transactions also being recorded in net income
$ 10,000,000 
Maximum term over which the Company is hedging exposures to the variability of cash flows for its forecasted and recorded transactions (in months)
24 months 
Total notional amount of outstanding derivatives
12,000,000,000 
Aggregate fair value of derivative instruments in net liability position
22,000,000 
Embedded derivatives
 
Derivative Instruments and Hedging Activities Disclosure [Line Items]
 
Total notional amount of outstanding derivatives
100,000,000 
Minimum
 
Derivative Instruments and Hedging Activities Disclosure [Line Items]
 
Typical time period that anticipated exposures are hedged against (in months)
12 months 
Minimum fair value of outstanding derivative above which the credit related contingent features require the derivative party to post collateral
$ 50,000,000 
Maximum
 
Derivative Instruments and Hedging Activities Disclosure [Line Items]
 
Typical time period that anticipated exposures are hedged against (in months)
24 months 
Risk Management and Derivatives - FV of Derivative Instruments Included within Consolidated Balance Sheet (Detail) (USD $)
In Millions, unless otherwise specified
May 31, 2014
May 31, 2013
Derivatives, Fair Value [Line Items]
 
 
Asset Derivatives
$ 133 
$ 289 
Liability Derivatives
85 
34 
Designated as Hedging Instrument
 
 
Derivatives, Fair Value [Line Items]
 
 
Asset Derivatives
108 
231 
Liability Derivatives
58 
12 
Designated as Hedging Instrument |
Foreign exchange forwards and options |
Prepaid expenses and other current assets
 
 
Derivatives, Fair Value [Line Items]
 
 
Asset Derivatives
76 
141 
Designated as Hedging Instrument |
Foreign exchange forwards and options |
Deferred income taxes and other assets
 
 
Derivatives, Fair Value [Line Items]
 
 
Asset Derivatives
26 
79 
Designated as Hedging Instrument |
Foreign exchange forwards and options |
Accrued liabilities
 
 
Derivatives, Fair Value [Line Items]
 
 
Liability Derivatives
57 
12 
Designated as Hedging Instrument |
Foreign exchange forwards and options |
Deferred income taxes and other liabilities
 
 
Derivatives, Fair Value [Line Items]
 
 
Liability Derivatives
1 
0 
Designated as Hedging Instrument |
Interest rate swap contracts |
Deferred income taxes and other assets
 
 
Derivatives, Fair Value [Line Items]
 
 
Asset Derivatives
6 
11 
Designated as Hedging Instrument |
Interest rate swap contracts |
Deferred income taxes and other liabilities
 
 
Derivatives, Fair Value [Line Items]
 
 
Liability Derivatives
0 
0 
Derivatives not designated as hedging instruments
 
 
Derivatives, Fair Value [Line Items]
 
 
Asset Derivatives
25 
58 
Liability Derivatives
27 
22 
Derivatives not designated as hedging instruments |
Foreign exchange forwards and options |
Prepaid expenses and other current assets
 
 
Derivatives, Fair Value [Line Items]
 
 
Asset Derivatives
25 
58 
Derivatives not designated as hedging instruments |
Foreign exchange forwards and options |
Accrued liabilities
 
 
Derivatives, Fair Value [Line Items]
 
 
Liability Derivatives
$ 27 
$ 22 
Risk Management and Derivatives - Amounts Affecting Consolidated Statements of Income (Detail) (USD $)
In Millions, unless otherwise specified
12 Months Ended
May 31, 2014
May 31, 2013
May 31, 2012
Foreign exchange forwards and options |
Other (income) expense, net |
Derivatives not designated as hedging instruments
 
 
 
Derivative Instruments, Gain (Loss) [Line Items]
 
 
 
Amount of Gain (Loss) Recognized in Income on Derivatives
$ (75)
$ 51 
$ 64 
Embedded derivatives |
Other (income) expense, net |
Derivatives not designated as hedging instruments
 
 
 
Derivative Instruments, Gain (Loss) [Line Items]
 
 
 
Amount of Gain (Loss) Recognized in Income on Derivatives
(1)
(4)
1 
Derivatives designated as cash flow hedges
 
 
 
Derivative Instruments, Gain (Loss) [Line Items]
 
 
 
Amount of Gain (Loss) Recognized in Other Comprehensive Income on Derivatives
(143)1
139 1
263 1
Amount of Gain (Loss) Reclassified From Accumulated Other Comprehensive Income into Income
36 1
105 1
(63)1
Derivatives designated as cash flow hedges |
Foreign exchange forwards and options |
Revenue
 
 
 
Derivative Instruments, Gain (Loss) [Line Items]
 
 
 
Amount of Gain (Loss) Recognized in Other Comprehensive Income on Derivatives
(48)1
42 1
(29)1
Amount of Gain (Loss) Reclassified From Accumulated Other Comprehensive Income into Income
14 1
(19)1
5 1
Derivatives designated as cash flow hedges |
Foreign exchange forwards and options |
Cost of sales
 
 
 
Derivative Instruments, Gain (Loss) [Line Items]
 
 
 
Amount of Gain (Loss) Recognized in Other Comprehensive Income on Derivatives
(78)1
67 1
253 1
Amount of Gain (Loss) Reclassified From Accumulated Other Comprehensive Income into Income
12 1
113 1
(57)1
Derivatives designated as cash flow hedges |
Foreign exchange forwards and options |
Selling and administrative expense
 
 
 
Derivative Instruments, Gain (Loss) [Line Items]
 
 
 
Amount of Gain (Loss) Recognized in Other Comprehensive Income on Derivatives
4 1
(3)1
3 1
Amount of Gain (Loss) Reclassified From Accumulated Other Comprehensive Income into Income
0 1
2 1
(2)1
Derivatives designated as cash flow hedges |
Foreign exchange forwards and options |
Other (income) expense, net
 
 
 
Derivative Instruments, Gain (Loss) [Line Items]
 
 
 
Amount of Gain (Loss) Recognized in Other Comprehensive Income on Derivatives
(21)1
33 1
36 1
Amount of Gain (Loss) Reclassified From Accumulated Other Comprehensive Income into Income
10 1
9 1
(9)1
Derivatives designated as net investment hedges |
Foreign exchange forwards and options |
Other (income) expense, net
 
 
 
Derivative Instruments, Gain (Loss) [Line Items]
 
 
 
Amount of Gain (Loss) Recognized in Other Comprehensive Income on Derivatives
0 1
0 1
45 1
Amount of Gain (Loss) Reclassified From Accumulated Other Comprehensive Income into Income
0 1
0 1
0 1
Derivatives designated as fair value hedges |
Interest rate swap contracts |
Interest (income) expense, net
 
 
 
Derivative Instruments, Gain (Loss) [Line Items]
 
 
 
Amount of Gain (Loss) Recognized in Income on Derivatives
$ 5 2
$ 5 2
$ 6 2
Operating Segments and Related Information - Information by Operating Segments (Detail) (USD $)
In Millions, unless otherwise specified
12 Months Ended
May 31, 2014
May 31, 2013
May 31, 2012
Segment Reporting, Revenue Reconciling Item [Line Items]
 
 
 
Net Revenue
$ 27,799 
$ 25,313 
$ 23,331 
Earnings Before Interest and Taxes
3,577 
3,253 
3,015 
Interest expense (income), net
33 
(3)
4 
Income before income taxes
3,544 
3,256 
3,011 
Additions to Long-lived Assets
922 
781 
587 
Depreciation
518 
418 
353 
NIKE Brand
 
 
 
Segment Reporting, Revenue Reconciling Item [Line Items]
 
 
 
Net Revenue
26,112 
23,881 
22,011 
Earnings Before Interest and Taxes
4,090 
3,712 
3,295 
Additions to Long-lived Assets
731 
608 
551 
Depreciation
448 
365 
302 
NIKE Brand |
North America
 
 
 
Segment Reporting, Revenue Reconciling Item [Line Items]
 
 
 
Net Revenue
12,299 
11,158 
9,538 
Earnings Before Interest and Taxes
3,075 
2,641 
2,092 
Additions to Long-lived Assets
240 
132 
139 
Depreciation
109 
92 
85 
NIKE Brand |
Western Europe
 
 
 
Segment Reporting, Revenue Reconciling Item [Line Items]
 
 
 
Net Revenue
4,979 
4,193 
4,212 
Earnings Before Interest and Taxes
855 
643 
599 
Additions to Long-lived Assets
120 
75 
93 
Depreciation
71 
68 
62 
NIKE Brand |
Central & Eastern Europe
 
 
 
Segment Reporting, Revenue Reconciling Item [Line Items]
 
 
 
Net Revenue
1,387 
1,229 
1,146 
Earnings Before Interest and Taxes
279 
234 
209 
Additions to Long-lived Assets
19 
22 
20 
Depreciation
11 
9 
6 
NIKE Brand |
Greater China
 
 
 
Segment Reporting, Revenue Reconciling Item [Line Items]
 
 
 
Net Revenue
2,602 
2,478 
2,561 
Earnings Before Interest and Taxes
816 
813 
913 
Additions to Long-lived Assets
63 
52 
38 
Depreciation
38 
32 
25 
NIKE Brand |
Japan
 
 
 
Segment Reporting, Revenue Reconciling Item [Line Items]
 
 
 
Net Revenue
771 
876 
920 
Earnings Before Interest and Taxes
131 
139 
135 
Additions to Long-lived Assets
9 
7 
14 
Depreciation
19 
22 
23 
NIKE Brand |
Emerging Markets
 
 
 
Segment Reporting, Revenue Reconciling Item [Line Items]
 
 
 
Net Revenue
3,949 
3,832 
3,523 
Earnings Before Interest and Taxes
955 
988 
826 
Additions to Long-lived Assets
55 
50 
27 
Depreciation
25 
20 
16 
NIKE Brand |
Global Brand Division
 
 
 
Segment Reporting, Revenue Reconciling Item [Line Items]
 
 
 
Net Revenue
125 
115 
111 
Earnings Before Interest and Taxes
(2,021)
(1,746)
(1,479)
Additions to Long-lived Assets
225 
270 
220 
Depreciation
175 
122 
85 
Converse
 
 
 
Segment Reporting, Revenue Reconciling Item [Line Items]
 
 
 
Net Revenue
1,684 
1,449 
1,324 
Earnings Before Interest and Taxes
496 
425 
394 
Additions to Long-lived Assets
30 
20 
11 
Depreciation
16 
15 
14 
Corporate
 
 
 
Segment Reporting, Revenue Reconciling Item [Line Items]
 
 
 
Net Revenue
3 
(17)
(4)
Earnings Before Interest and Taxes
(1,009)
(884)
(674)
Additions to Long-lived Assets
161 
153 
25 
Depreciation
$ 54 
$ 38 
$ 37 
Operating Segments and Related Information - Accounts Receivable Net Inventories and Property Plant and Equipment Net by Operating Segments (Detail) (USD $)
In Millions, unless otherwise specified
May 31, 2014
May 31, 2013
Segment Reporting, Asset Reconciling Item [Line Items]
 
 
Accounts Receivable, net
$ 3,434 
$ 3,117 
Inventories
3,947 
3,484 
Property, Plant and Equipment, net
2,834 
2,452 
NIKE Brand
 
 
Segment Reporting, Asset Reconciling Item [Line Items]
 
 
Accounts Receivable, net
3,246 
2,935 
Inventories
3,706 
3,268 
Property, Plant and Equipment, net
2,122 
1,839 
NIKE Brand |
North America
 
 
Segment Reporting, Asset Reconciling Item [Line Items]
 
 
Accounts Receivable, net
1,505 
1,459 
Inventories
1,758 
1,626 
Property, Plant and Equipment, net
545 
424 
NIKE Brand |
Western Europe
 
 
Segment Reporting, Asset Reconciling Item [Line Items]
 
 
Accounts Receivable, net
341 
375 
Inventories
711 
560 
Property, Plant and Equipment, net
384 
327 
NIKE Brand |
Central & Eastern Europe
 
 
Segment Reporting, Asset Reconciling Item [Line Items]
 
 
Accounts Receivable, net
280 
287 
Inventories
271 
207 
Property, Plant and Equipment, net
51 
44 
NIKE Brand |
Greater China
 
 
Segment Reporting, Asset Reconciling Item [Line Items]
 
 
Accounts Receivable, net
68 
56 
Inventories
221 
209 
Property, Plant and Equipment, net
232 
213 
NIKE Brand |
Japan
 
 
Segment Reporting, Asset Reconciling Item [Line Items]
 
 
Accounts Receivable, net
162 
154 
Inventories
94 
69 
Property, Plant and Equipment, net
258 
269 
NIKE Brand |
Emerging Markets
 
 
Segment Reporting, Asset Reconciling Item [Line Items]
 
 
Accounts Receivable, net
819 
574 
Inventories
633 
567 
Property, Plant and Equipment, net
115 
89 
NIKE Brand |
Global Brand Division
 
 
Segment Reporting, Asset Reconciling Item [Line Items]
 
 
Accounts Receivable, net
71 
30 
Inventories
18 
30 
Property, Plant and Equipment, net
537 
473 
Converse
 
 
Segment Reporting, Asset Reconciling Item [Line Items]
 
 
Accounts Receivable, net
171 
131 
Inventories
261 
210 
Property, Plant and Equipment, net
70 
52 
Corporate
 
 
Segment Reporting, Asset Reconciling Item [Line Items]
 
 
Accounts Receivable, net
17 
51 
Inventories
(20)
6 
Property, Plant and Equipment, net
$ 642 
$ 561 
Operating Segments and Related Information - Revenues by Major Product Line (Detail) (USD $)
In Millions, unless otherwise specified
12 Months Ended
May 31, 2014
May 31, 2013
May 31, 2012
Revenue from External Customer [Line Items]
 
 
 
Revenues
$ 27,799 
$ 25,313 
$ 23,331 
Footwear
 
 
 
Revenue from External Customer [Line Items]
 
 
 
Revenues
16,208 
14,635 
13,513 
Apparel
 
 
 
Revenue from External Customer [Line Items]
 
 
 
Revenues
8,109 
7,491 
6,958 
Equipment
 
 
 
Revenue from External Customer [Line Items]
 
 
 
Revenues
1,670 
1,640 
1,429 
Other
 
 
 
Revenue from External Customer [Line Items]
 
 
 
Revenues
$ 1,812 
$ 1,547 
$ 1,431 
Operating Segments and Related Information - Additional Information (Detail) (USD $)
In Millions, unless otherwise specified
12 Months Ended
May 31, 2014
customer
May 31, 2013
customer
May 31, 2012
customer
Sales Revenue, Net
 
 
 
Regional Reporting Disclosure [Line Items]
 
 
 
Number of customers exceeding risk threshold
0 
0 
0 
Net Revenues [Member]
 
 
 
Regional Reporting Disclosure [Line Items]
 
 
 
Concentration risk percentage
10.00% 
 
 
CHINA
 
 
 
Regional Reporting Disclosure [Line Items]
 
 
 
Long-lived assets attributable to operations (Domestic)
$ 234 
$ 212 
 
Japan
 
 
 
Regional Reporting Disclosure [Line Items]
 
 
 
Long-lived assets attributable to operations (Domestic)
258 
270 
 
UNITED STATES
 
 
 
Regional Reporting Disclosure [Line Items]
 
 
 
Revenue
12,711 
11,385 
9,793 
Long-lived assets attributable to operations (Domestic)
1,652 
1,374 
 
Belgium
 
 
 
Regional Reporting Disclosure [Line Items]
 
 
 
Long-lived assets attributable to operations (Domestic)
$ 175 
$ 157 
 
SCHEDULE II - Valuation and Qualifying Accounts (Detail) (USD $)
In Millions, unless otherwise specified
12 Months Ended
May 31, 2014
May 31, 2013
May 31, 2012
Allowance for Sales Returns
 
 
 
Movement in Valuation Allowances and Reserves [Roll Forward]
 
 
 
Balance at Beginning of Period
$ 241 
$ 173 
$ 151 
Charged to Costs and Expenses
619 
538 
401 
Charged to Other Accounts
(3)
1 
(3)
Write-Offs, Net
(549)
(471)
(376)
Balance at End of Period
308 
241 
173 
Allowance for Doubtful Accounts
 
 
 
Movement in Valuation Allowances and Reserves [Roll Forward]
 
 
 
Balance at Beginning of Period
104 1
91 1
120 1
Charged to Costs and Expenses
13 
31 
21 
Charged to Other Accounts
(2)
1 
(9)
Write-Offs, Net
(37)
(19)
(41)
Balance at End of Period
$ 78 1
$ 104 1
$ 91 1