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NOTE 1 — Summary of Significant Accounting Policies
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements reflect all normal adjustments which are, in the opinion of management, necessary for a fair statement of the results of operations for the interim period. The year-end condensed consolidated balance sheet data as of May 31, 2012 was derived from audited financial statements, but does not include all disclosures required by accounting principles generally accepted in the United States of America (“U.S. GAAP”). The interim financial information and notes thereto should be read in conjunction with the Company’s latest Annual Report on Form 10-K. The results of operations for the three and nine months ended February 28, 2013 are not necessarily indicative of results to be expected for the entire year.
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 condensed consolidated statements of income for all periods presented. In addition, the assets and liabilities associated with these businesses are reported as assets of discontinued operations and liabilities of discontinued operations, as appropriate, in the condensed consolidated balance sheets (refer to Note 10 — Discontinued Operations). Unless otherwise indicated, the disclosures accompanying the condensed 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.
Recently Adopted Accounting Standards
In September 2011, the Financial Accounting Standards Board (“FASB”) issued updated guidance on the periodic testing of goodwill for impairment. This guidance will allow companies to assess qualitative factors to determine if it is more-likely-than-not that goodwill might be impaired and whether it is necessary to perform the two-step goodwill impairment test required under current accounting standards. This new guidance became effective for the Company beginning June 1, 2012. The adoption did not have a material effect on the Company’s consolidated financial position or results of operations.
In June 2011, the FASB issued guidance on the presentation of comprehensive income. This new guidance eliminates the current option to report other comprehensive income and its components in the statement of shareholders’ equity. Companies are now required to present the components of net income and other comprehensive income in either one continuous statement, referred to as the statement of comprehensive income, or in two separate, but consecutive statements. This requirement was effective for the Company beginning June 1, 2012. Further, this guidance required companies to present reclassification adjustments out of accumulated other comprehensive income by component in both the statement in which net income is presented and the statement in which other comprehensive income is presented. This requirement will be effective for the Company beginning June 1, 2013. As this guidance only amends the presentation of the components of comprehensive income, the adoption did not have an impact on the Company’s consolidated financial position or results of operations.
Recently Issued Accounting Standards
In July 2012, the FASB issued an accounting standard 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 will be effective for the Company beginning June 1, 2013, and early adoption is permitted. The Company does not anticipate the adoption will have an impact on its 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 is effective for the Company beginning June 1, 2013. As this guidance only requires expanded disclosures, the Company does not anticipate the adoption will have an impact on its consolidated financial position or results of operations.
|
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NOTE 2 — Inventories
Inventory balances of $3,329 million and $3,222 million at February 28, 2013 and May 31, 2012, respectively, were substantially all finished goods.
|
|||
NOTE 3 — Identifiable Intangible Assets and Goodwill
The following table summarizes the Company’s identifiable intangible asset balances at February 28, 2013 and May 31, 2012:
| February 28, 2013 | May 31, 2012 | |||||||||||||||||||||||||
|
(In millions) |
Gross Carrying Amount |
Accumulated Amortization |
Net Carrying Amount |
Gross Carrying Amount |
Accumulated Amortization |
Net Carrying Amount |
||||||||||||||||||||
|
Amortized intangible assets: |
||||||||||||||||||||||||||
|
Patents |
$ | 110 | $ | (34 | ) | $ | 76 | $ | 99 | $ | (29 | ) | $ | 70 | ||||||||||||
|
Trademarks |
45 | (32 | ) | 13 | 40 | (26 | ) | 14 | ||||||||||||||||||
|
Other |
20 | (15 | ) | 5 | 19 | (16 | ) | 3 | ||||||||||||||||||
|
TOTAL |
$ | 175 | $ | (81 | ) | $ | 94 | $ | 158 | $ | (71 | ) | $ | 87 | ||||||||||||
|
Unamortized intangible assets – Trademarks |
282 | 283 | ||||||||||||||||||||||||
|
IDENTIFIABLE INTANGIBLE ASSETS, NET |
$ | 376 | $ | 370 | ||||||||||||||||||||||
Amortization expense, which is included in selling and administrative expense, was $3 million and $4 million for the three month periods ended February 28, 2013 and February 29, 2012, respectively, and $10 million and $11 million for the nine month periods ended February 28, 2013 and February 29, 2012, respectively. The estimated amortization expense for intangible assets subject to amortization for the remainder of fiscal year 2013 and each of the years ending May 31, 2014 through May 31, 2017 are as follows: remainder of 2013: $4 million; 2014: $12 million; 2015: $9 million; 2016: $8 million; 2017: $7 million.
Goodwill was $131 million at February 28, 2013 and May 31, 2012, respectively, and is included in the Company’s “Other Businesses” categories for segment reporting purposes. There were no accumulated impairment balances for goodwill as of either period end.
|
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NOTE 4 — Accrued Liabilities
Accrued liabilities included the following:
| February 28, | May 31, | |||||||
| (In millions) | 2013 | 2012 | ||||||
|
Compensation and benefits, excluding taxes |
$ | 633 | $ | 691 | ||||
|
Taxes other than income taxes |
221 | 169 | ||||||
|
Endorsement compensation |
213 | 288 | ||||||
|
Dividends payable |
188 | 165 | ||||||
|
Advertising and marketing |
118 | 94 | ||||||
|
Import and logistics costs |
101 | 133 | ||||||
|
Fair value of derivatives |
62 | 55 | ||||||
|
Other(1) |
363 | 346 | ||||||
|
TOTAL ACCRUED LIABILITIES |
$ | 1,899 | $ | 1,941 | ||||
| (1) |
Other consists of various accrued expenses with no individual item accounting for more than 5% of the balance at February 28, 2013 and May 31, 2012. |
|
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NOTE 5 — 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 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 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.
The following table presents information about the Company’s financial assets and liabilities measured at fair value on a recurring basis as of February 28, 2013 and May 31, 2012 and indicates the fair value hierarchy of the valuation techniques utilized by the Company to determine such fair value.
| February 28, 2013 | ||||||||||||||||||
| Fair Value Measurements Using |
Assets / Liabilities at |
|||||||||||||||||
| (In millions) | Level 1 | Level 2 | Level 3 | Fair Value | Balance Sheet Classification | |||||||||||||
|
ASSETS |
||||||||||||||||||
|
Derivatives: |
||||||||||||||||||
|
Foreign exchange forwards and options |
$ | 0 | $ | 260 | $ | 0 | $ | 260 | Other current assets and other long-term assets | |||||||||
|
Interest rate swap contracts |
0 | 12 | 0 | 12 | Other long-term assets | |||||||||||||
|
Total derivatives |
0 | 272 | 0 | 272 | ||||||||||||||
|
Available-for-sale securities: |
||||||||||||||||||
|
U.S. Treasury securities |
690 | 0 | 0 | 690 | Cash and equivalents | |||||||||||||
|
Commercial paper and bonds |
0 | 368 | 0 | 368 | Cash and equivalents | |||||||||||||
|
Money market funds |
0 | 565 | 0 | 565 | Cash and equivalents | |||||||||||||
|
U.S. Treasury securities |
807 | 0 | 0 | 807 | Short-term investments | |||||||||||||
|
U.S. Agency securities |
0 | 286 | 0 | 286 | Short-term investments | |||||||||||||
|
Commercial paper and bonds |
0 | 392 | 0 | 392 | Short-term investments | |||||||||||||
|
Non-marketable preferred stock |
0 | 0 | 5 | 5 | Other long-term assets | |||||||||||||
|
Total available-for-sale securities |
1,497 | 1,611 | 5 | 3,113 | ||||||||||||||
|
TOTAL ASSETS |
$ | 1,497 | $ | 1,883 | $ | 5 | $ | 3,385 | ||||||||||
|
LIABILITIES |
||||||||||||||||||
|
Derivatives: |
||||||||||||||||||
|
Foreign exchange forwards and options |
0 | 62 | 0 | 62 | Accrued liabilities and other long-term liabilities | |||||||||||||
|
TOTAL LIABILITIES |
$ | 0 | $ | 62 | $ | 0 | $ | 62 | ||||||||||
| May 31, 2012 | ||||||||||||||||||
| Fair Value Measurements Using |
Assets / Liabilities at |
|||||||||||||||||
| (In millions) | Level 1 | Level 2 | Level 3 | Fair Value | Balance Sheet Classification | |||||||||||||
|
ASSETS |
||||||||||||||||||
|
Derivatives: |
||||||||||||||||||
|
Foreign exchange forwards and options |
$ | 0 | $ | 265 | $ | 0 | $ | 265 | Other current assets and other long-term assets | |||||||||
|
Embedded derivatives |
0 | 1 | 0 | 1 | Other current assets | |||||||||||||
|
Interest rate swap contracts |
0 | 15 | 0 | 15 | Other current assets and other long-term assets | |||||||||||||
|
Total derivatives |
0 | 281 | 0 | 281 | ||||||||||||||
|
Available-for-sale securities: |
||||||||||||||||||
|
U.S. Treasury securities |
226 | 0 | 0 | 226 | Cash and equivalents | |||||||||||||
|
U.S. Agency securities |
0 | 254 | 0 | 254 | Cash and equivalents | |||||||||||||
|
Commercial paper and bonds |
0 | 159 | 0 | 159 | Cash and equivalents | |||||||||||||
|
Money market funds |
0 | 770 | 0 | 770 | Cash and equivalents | |||||||||||||
|
U.S. Treasury securities |
927 | 0 | 0 | 927 | Short-term investments | |||||||||||||
|
U.S. Agency securities |
0 | 230 | 0 | 230 | Short-term investments | |||||||||||||
|
Commercial paper and bonds |
0 | 283 | 0 | 283 | Short-term investments | |||||||||||||
|
Non-marketable preferred stock |
0 | 0 | 3 | 3 | Other long-term assets | |||||||||||||
|
Total available-for-sale securities |
1,153 | 1,696 | 3 | 2,852 | ||||||||||||||
|
TOTAL ASSETS |
$ | 1,153 | $ | 1,977 | $ | 3 | $ | 3,133 | ||||||||||
|
LIABILITIES |
||||||||||||||||||
|
Derivatives: |
||||||||||||||||||
|
Foreign exchange forwards and options |
$ | 0 | $ | 55 | $ | 0 | $ | 55 | Accrued liabilities and other long-term liabilities | |||||||||
|
TOTAL LIABILITIES |
$ | 0 | $ | 55 | $ | 0 | $ | 55 | ||||||||||
Derivative financial instruments include foreign exchange forwards and options, embedded derivatives and interest rate swap contracts. 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. Adjustments relating to these nonperformance risks were not material at February 28, 2013 or May 31, 2012. Refer to Note 9 — Risk Management and Derivatives for additional detail.
Available-for-sale securities comprise investments in U.S. Treasury and agency securities, money market funds, and 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 Company’s Level 3 assets comprise investments in certain non-marketable preferred stock. These investments are valued using internally developed models with unobservable inputs. These Level 3 investments are an immaterial portion of our portfolio. Changes in Level 3 investment assets were immaterial during the nine months ended February 28, 2013 and the year ended May 31, 2012.
No transfers among the levels within the fair value hierarchy occurred during the nine months ended February 28, 2013 and the year ended May 31, 2012.
As of February 28, 2013 and May 31, 2012, the Company had no assets or liabilities that were required to be measured at fair value on a non-recurring basis.
Short-Term Investments
As of February 28, 2013 and May 31, 2012, short-term investments consisted of available-for-sale securities. As of February 28, 2013, the Company held $1,199 million of available-for-sale securities with maturity dates within one year from purchase date and $286 million with maturity dates over one year and less than five years from purchase date within short-term investments. As of May 31, 2012, the Company held $1,129 million of available-for-sale securities with maturity dates within one year from purchase date and $311 million with maturity dates over one year and less than five years from purchase date within short-term investments.
Short-term investments classified as available-for-sale consist of the following at fair value:
| February 28, | May 31, | |||||||
| (In millions) | 2013 | 2012 | ||||||
|
Available-for-sale investments: |
||||||||
|
U.S. treasury and agencies |
$ | 1,093 | $ | 1,157 | ||||
|
Commercial paper and bonds |
392 | 283 | ||||||
|
TOTAL AVAILABLE-FOR-SALE INVESTMENTS |
$ | 1,485 | $ | 1,440 | ||||
Interest income related to cash and equivalents and short-term investments included within interest (income) expense, net was $6 million and $7 million for each of the three month periods ended February 28, 2013 and February 29, 2012, respectively, and $20 million and $22 million for each of the nine month periods ended February 28, 2013 and February 29, 2012, respectively.
Fair Value of Long-Term Debt and Notes Payable
The Company’s long-term debt is recorded at adjusted cost, net of amortized premiums and discounts and interest rate swap fair value adjustments. The fair value of long-term debt is estimated based upon quoted prices for similar instruments (Level 2). The fair value of the Company’s long-term debt, including the current portion, was approximately $223 million at February 28, 2013 and $283 million at May 31, 2012.
The carrying amounts reflected in the unaudited condensed consolidated balance sheets for notes payable approximate fair value.
|
|||
NOTE 6 — Income Taxes
The effective tax rate on continuing operations was 25.4% and 25.3% for the nine months ended February 28, 2013 and February 29, 2012, respectively. The increase in the Company’s effective tax rate was primarily driven by an increase in the effective tax rate on foreign operations as a result of changes in the geographical mix of earnings partially offset by a benefit from the retroactive reinstatement of the U.S. research and development credit by the American Taxpayer Relief Act of 2012.
As of February 28, 2013, total gross unrecognized tax benefits, excluding related interest and penalties, were $419 million, $213 million of which would affect the Company’s effective tax rate if recognized in future periods. As of May 31, 2012, total gross unrecognized tax benefits, excluding interest and penalties, were $285 million, $150 million of which would affect the Company’s effective tax rate if recognized in future periods. The gross liability for payment of interest and penalties increased $34 million during the nine months ended February 28, 2013. As of February 28, 2013, accrued interest and penalties related to uncertain tax positions was $142 million (excluding federal benefit).
The Company is subject to taxation primarily in the United States, China, the Netherlands and Brazil as well as various other state and foreign jurisdictions. The Company has concluded substantially all U.S. federal income tax matters through fiscal year 2010, and is currently under examination by the Internal Revenue Service (“IRS”) for the fiscal 2011 and 2012 tax years. The Company’s major foreign jurisdictions, China, the Netherlands, and Brazil have concluded substantially all income tax matters through calendar 2002, fiscal 2006, and calendar 2006, respectively. The Company estimates that it is reasonably possible that the total gross unrecognized tax benefits could decrease by up to $58 million within the next 12 months as a result of resolutions of global tax examinations and the expiration of applicable statutes of limitations.
|
|||
NOTE 7 — Stock-Based Compensation
In 1990, the Board of Directors adopted, and the shareholders approved, the NIKE, Inc. 1990 Stock Incentive Plan (the “1990 Plan”). The 1990 Plan 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.
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.
The Company accounts for stock-based compensation by estimating the fair value of options granted under the 1990 Plan and employees’ purchase rights under the ESPPs using the Black-Scholes option pricing model. The Company recognizes this fair value as operating overhead expense over the vesting period using the straight-line method.
The following table summarizes the Company’s total stock-based compensation expense recognized in selling and administrative expense:
| Three Months Ended | Nine Months Ended | |||||||||||||||||
| February 28 and 29, | February 28 and 29, | |||||||||||||||||
| (In millions) | 2013 | 2012 | 2013 | 2012 | ||||||||||||||
|
Stock options(1) |
$ | 32 | $ | 26 | $ | 90 | $ | 70 | ||||||||||
|
ESPPs |
4 | 4 | 14 | 12 | ||||||||||||||
|
Restricted stock |
9 | 4 | 24 | 13 | ||||||||||||||
|
TOTAL STOCK-BASED COMPENSATION EXPENSE |
$ | 45 | $ | 34 | $ | 128 | $ | 95 | ||||||||||
| (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 was $6 million and $4 million for the three month periods ended February 28, 2013 and February 29, 2012, respectively, and $16 million and $12 million for the nine month periods ended February 28, 2013 and February 29, 2012, respectively. |
As of February 28, 2013, the Company had $232 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 2.5 years.
The weighted average fair value per share of the options granted during the nine months ended February 28, 2013 and February 29, 2012, as computed using the Black-Scholes pricing model, was $12.71, and $11.07, respectively. The weighted average assumptions used to estimate these fair values are as follows:
| Nine Months Ended | ||||||||
| February 28 and 29, | ||||||||
| 2013 | 2012 | |||||||
|
Dividend yield |
1.5 | % | 1.4 | % | ||||
|
Expected volatility |
35.0 | % | 29.5 | % | ||||
|
Weighted average expected life (in years) |
5.3 | 5.0 | ||||||
|
Risk-free interest rate |
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 one 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.
|
|||
NOTE 9 — 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 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 February 28, 2013 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 February 28, 2013 was approximately $9 billion, which primarily comprises cash flow hedges for Euro/U.S. Dollar, British Pound/Euro, and Japanese Yen/U.S. Dollar currency pairs.
The following table presents the fair values of derivative instruments included within the consolidated balance sheets as of February 28, 2013 and May 31, 2012:
| Asset Derivatives | Liability Derivatives | |||||||||||||||||||||
| (In millions) | Balance Sheet Location | February 28, 2013 |
May 31, 2012 |
Balance Sheet Location | February 28, 2013 |
May 31, 2012 |
||||||||||||||||
|
Derivatives formally designated as hedging instruments: |
||||||||||||||||||||||
|
Foreign exchange forwards and options |
Prepaid expenses and other current assets | $ | 122 | $ | 203 | Accrued liabilities | $ | 37 | $ | 35 | ||||||||||||
|
Foreign exchange forwards and options |
Deferred income taxes and other long-term assets | 73 | 7 | Deferred income taxes and other long-term liabilities | 1 | 0 | ||||||||||||||||
|
Interest rate swap contracts |
Deferred income taxes and other long-term assets | 12 | 15 | Deferred income taxes and other long-term liabilities | 0 | 0 | ||||||||||||||||
|
Total derivatives formally designated as hedging instruments |
207 | 225 | 38 | 35 | ||||||||||||||||||
|
Derivatives not designated as hedging instruments: |
||||||||||||||||||||||
|
Foreign exchange forwards and options |
Prepaid expenses and other current assets | 65 | 55 | Accrued liabilities | 24 | 20 | ||||||||||||||||
|
Embedded derivatives |
Prepaid expenses and other current assets | 0 | 1 | Accrued liabilities | 0 | 0 | ||||||||||||||||
|
Total derivatives not designated as hedging instruments |
65 | 56 | 24 | 20 | ||||||||||||||||||
|
TOTAL DERIVATIVES |
$ | 272 | $ | 281 | $ | 62 | $ | 55 | ||||||||||||||
The following tables present the amounts affecting the consolidated statements of income for the three and nine months ended February 28, 2013 and February 29, 2012:
| 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) |
|||||||||||||||||||||||
|
Three Months
Ended |
Nine Months
Ended |
Location of Gain (Loss) Reclassified From Accumulated Other Comprehensive Income Into Income |
Three Months
Ended |
Nine Months
Ended |
||||||||||||||||||||
| (In millions) | 2013 | 2013 | 2013 | 2013 | ||||||||||||||||||||
|
Derivatives designated as cash flow hedges: |
||||||||||||||||||||||||
|
Foreign exchange forwards and options |
$ | 37 | $ | 41 | Revenue | $ | (3 | ) | $ | (28 | ) | |||||||||||||
|
Foreign exchange forwards and options |
60 | 17 | Cost of sales | 26 | 109 | |||||||||||||||||||
|
Foreign exchange forwards and options |
(1 | ) | (3 | ) |
Selling and administrative expense |
1 | 2 | |||||||||||||||||
|
Foreign exchange forwards and options |
25 | 15 |
Other expense (income), net |
(4 | ) | 9 | ||||||||||||||||||
|
Total designated cash flow hedges |
$ | 121 | $ | 70 | $ | 20 | $ | 92 | ||||||||||||||||
|
Derivatives designated as net investment hedges: |
||||||||||||||||||||||||
|
Foreign exchange forwards and options |
$ | 0 | $ | 0 |
Other expense (income), net |
$ | 0 | $ | 0 | |||||||||||||||
| (1) |
For the three and nine months ended February 28, 2013, 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 Other Comprehensive Income on Derivatives (1) |
Amount of Gain (Loss) Reclassified From
Accumulated Other Comprehensive Income into Income (1) |
|||||||||||||||||||||||
|
Three Months
Ended |
Nine Months
Ended |
Location of Gain (Loss) Reclassified From Accumulated Other Comprehensive Income Into Income |
Three Months
Ended |
Nine Months
Ended |
||||||||||||||||||||
| (In millions) | 2012 | 2012 | 2012 | 2012 | ||||||||||||||||||||
|
Derivatives designated as cash flow hedges: |
||||||||||||||||||||||||
|
Foreign exchange forwards and options |
$ | (12 | ) | $ | 5 | Revenue | $ | 0 | $ | 14 | ||||||||||||||
|
Foreign exchange forwards and options |
3 | 146 | Cost of sales | (1 | ) | (74 | ) | |||||||||||||||||
|
Foreign exchange forwards and options |
0 | 0 |
Selling and administrative expense |
(1 | ) | (3 | ) | |||||||||||||||||
|
Foreign exchange forwards and options |
(3 | ) | 8 |
Other expense (income), net |
4 | (14 | ) | |||||||||||||||||
|
Total designated cash flow hedges |
$ | (12 | ) | $ | 159 | $ | 2 | $ | (77 | ) | ||||||||||||||
|
Derivatives designated as net investment hedges: |
||||||||||||||||||||||||
|
Foreign exchange forwards and options |
$ | (2 | ) | $ | 35 |
Other expense (income), net |
$ | 0 | $ | 0 | ||||||||||||||
| (1) |
For the three and nine months ended February 29, 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 |
||||||||||||||||||||
| Three Months Ended February 28 and 29, |
Nine Months Ended February 28 and 29, |
Location of Gain (Loss) Recognized in Income on Derivatives |
||||||||||||||||||
| (In millions) | 2013 | 2012 | 2013 | 2012 | ||||||||||||||||
|
Derivatives designated as fair value hedges: |
||||||||||||||||||||
|
Interest rate swaps(1) |
$ | 1 | $ | 1 | $ | 4 | $ | 5 | Interest (income) expense, net | |||||||||||
|
Derivatives not designated as hedging instruments: |
||||||||||||||||||||
|
Foreign exchange forwards and options |
$ | 37 | $ | (17 | ) | $ | (14 | ) | $ | (14 | ) | Other expense (income), net | ||||||||
|
Embedded derivatives |
$ | 0 | $ | 0 | $ | (3 | ) | $ | 0 | 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 4 — Accrued Liabilities for derivative instruments recorded in accrued liabilities, and Note 5 — Fair Value Measurements for a description of how the above financial instruments are valued.
Cash Flow Hedges
The purpose of the Company’s foreign currency hedging activities is to protect the Company from the risk that the eventual cash flows resulting from transactions in foreign currencies will be adversely affected by changes in 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 other 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) Certain NIKE entities purchase product from the NIKE Trading Company (“NTC”), a wholly-owned centralized sourcing hub that buys NIKE branded products from external 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; and 2) Other NIKE entities purchase product directly from external 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 our 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 is created upon the factory’s acceptance of NIKE’s purchase order. Embedded derivatives 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. The Company may enter into hedge contracts typically starting 12 to 18 months in advance of the forecasted transaction and may place incremental hedges for up to 100% of the exposure by the time the forecasted transaction occurs.
All changes in 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 some time 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 cash flow statement.
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 forward rates. Ineffectiveness was not material for the three and nine month periods ended February 28, 2013 and February 29, 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 balance sheet, recognizing future changes in the fair value in other expense (income), net. For the three and nine month periods ended February 28, 2013 and February 29, 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 February 28, 2013, $86 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 February 28, 2013, the maximum term over which the Company is hedging exposures to the variability of cash flows for its forecasted transactions is 27 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 February 28, 2013, 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 cash flow statement. The Company recorded no ineffectiveness from its interest rate swaps designated as fair value hedges for the three and nine month periods ended February 28, 2013 or February 29, 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 provided or used by investing component of the cash flow statement. The Company assesses hedge effectiveness based on changes in forward rates. The Company recorded no ineffectiveness from its net investment hedges for the three and nine months ended February 28, 2013 or February 29, 2012.
Embedded Derivatives
As part of the foreign currency adjustment program described above, currencies within the factory currency exposure indices that are neither the U.S. Dollar nor the local or functional currency of the factory, create an embedded derivative upon the factory’s acceptance of NIKE’s purchase order. Embedded derivatives 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 balance sheet 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 February 28, 2013, the notional amount of embedded derivatives was approximately $121 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 balance sheet 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 balance sheet 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 cash flow statement.
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 and managed according to prescribed guidelines. The Company also utilizes a portfolio of financial institutions either headquartered or operating in the same countries in which the Company conducts its business.
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 per 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 February 28, 2013, the Company was in compliance with all credit risk related contingent features and the aggregate fair value of derivative instruments with credit risk related contingent features that were in a net liability position was $6 million. Accordingly, the Company was not required to post any collateral as a result of these contingent features. Given the considerations described above, the Company considers the impact of the risk of counterparty default to be immaterial.
|
|||
NOTE 10 — Discontinued Operations
The Company continually evaluates its existing portfolio of businesses to ensure resources are invested in those businesses that are accretive to the NIKE Brand and represent the largest growth potential and highest returns. On May 31, 2012, the Company announced its intention to divest 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 tax; this gain is included in the net income (loss) from discontinued operations line item on the condensed consolidated statements of income. 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 condensed consolidated statements of income. Prior to 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 condensed consolidated balance sheets, respectively. Previously, these amounts were reported in the Company’s segment presentation as “Businesses to be Divested.”
Under the sale agreement, the Company will provide certain transition services to Cole Haan for an expected period of 3 to 9 months from the date of sale. The company will also license NIKE proprietary Air and Lunar technologies to Cole Haan for a transition period. The continuing cash flows related to these items are not expected to be significant to Cole Haan and the Company will have no significant continuing involvement with Cole Haan beyond the transition services. Additionally, preexisting guarantees of certain Cole Haan lease payments remain in place after the sale; the maximum exposure under the guarantees is $47 million. 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 condensed consolidated statements of income. The remaining assets and liabilities of Umbro are recorded in the assets of discontinued operations and liabilities of discontinued operations line items on the condensed consolidated balance sheets, respectively. Previously, these amounts were reported in the Company’s segment presentation as “Businesses to be Divested.” 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 condensed 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 February 28, 2013.
Under the sale agreement, the Company continues to provide transition services to Iconix while certain markets are converted and transitioned to Iconix-designated licensees. These transition services are expected to be completed by May 31, 2013. The Company expects to substantially wind down the remaining operations of Umbro over the remainder of fiscal 2013. The continuing operating cash flows are not expected to be significant to the Umbro business and the Company will have no significant continuing involvement with the Umbro business beyond the transition period. For the quarter ended February 28, 2013, the Company recognized $18 million in wind down costs.
Summarized results of the Company’s results from discontinued operations are as follows:
| Three Months Ended | Nine Months Ended | |||||||||||||||||
| February 28 and 29, | February 28 and 29, | |||||||||||||||||
| (In millions) | 2013 | 2012 | 2013 | 2012 | ||||||||||||||
|
Revenues |
$ | 132 | $ | 190 | $ | 513 | $ | 563 | ||||||||||
|
Income (loss) before income taxes |
345 | (17 | ) | 107 | (50 | ) | ||||||||||||
|
Income tax expense (benefit) |
141 | (8 | ) | 58 | (14 | ) | ||||||||||||
|
Net income (loss) from discontinued operations |
$ | 204 | $ | (9 | ) | $ | 49 | $ | (36 | ) | ||||||||
As of February 28, 2013 and May 31, 2012, the aggregate components of assets and liabilities classified as discontinued operations and included in current assets and current liabilities consisted of the following:
| February 28, | May 31, | |||||||||
| (In millions) | 2013 | 2012 | ||||||||
|
Accounts Receivable, net |
$ | 25 | $ | 148 | ||||||
|
Inventories |
1 | 128 | ||||||||
|
Deferred income taxes and other assets |
3 | 35 | ||||||||
|
Property, plant and equipment, net |
0 | 70 | ||||||||
|
Identifiable intangible assets, net |
0 | 234 | ||||||||
|
TOTAL ASSETS |
$ | 29 | $ | 615 | ||||||
|
Accounts Payable |
4 | 42 | ||||||||
|
Accrued liabilities |
58 | 112 | ||||||||
|
Deferred income taxes and other liabilities |
0 | 33 | ||||||||
|
TOTAL LIABILITIES |
$ | 62 | $ | 187 | ||||||
|
|||
NOTE 11 — Operating Segments
The Company’s operating segments are evidence of the structure of the Company’s internal organization. The major segments are defined by geographic regions for operations participating in NIKE Brand sales activity excluding NIKE Golf. Each NIKE Brand geographic segment operates predominantly in one industry: the design, development, marketing and selling of athletic footwear, apparel, and equipment. The Company’s reportable operating segments for the NIKE Brand are: North America, Western Europe, Central & Eastern Europe, Greater China, Japan, and Emerging Markets. The Company’s NIKE Brand Direct to Consumer operations are managed within each geographic segment.
The Company’s “Other” category is broken into two components for presentation purposes to align with the way management views the Company. The “Global Brand Divisions” category primarily represents NIKE Brand licensing businesses that are not part of a geographic operating segment, demand creation and operating overhead expenses that are centrally managed for the NIKE Brand, and costs associated with product development and supply chain operations. The “Other Businesses” category consists of the activities of Converse Inc., Hurley International LLC, and NIKE Golf. Activities represented in the “Other” category are considered immaterial for individual disclosure.
Corporate consists of unallocated general and administrative expenses, including expenses associated with centrally managed departments; depreciation and amortization related to the Company’s headquarters; unallocated insurance, benefit and compensation programs, including stock-based compensation; certain foreign currency gains and losses, including certain hedge gains and losses; corporate eliminations and other items.
The primary financial measure used by the Company to evaluate performance of individual operating segments is earnings before interest and taxes (commonly referred to as “EBIT”), which represents net income before interest (income) expense, net and income taxes in the consolidated statements of income. Reconciling items for EBIT represent corporate expense items that are not allocated to the operating segments for management reporting.
As part of the Company’s centrally managed foreign exchange risk management program, standard foreign currency rates are assigned twice per year to each NIKE Brand entity in our geographic operating segments and certain Other Businesses. These rates are set approximately nine months in advance of the future selling season based on average market spot rates in the calendar month preceding the date they are established. Inventories and cost of sales for geographic operating segments and certain Other Businesses reflect use of these standard rates to record non-functional currency product purchases in the entity’s functional currency. Differences between assigned standard foreign currency rates and actual market rates are included in Corporate, together with foreign currency hedge gains and losses generated from the Company’s centrally managed foreign exchange risk management program and other conversion gains and losses.
Accounts receivable, inventories and property, plant and equipment for operating segments are regularly reviewed by management and are therefore provided below.
Certain prior year amounts have been reclassified to conform to fiscal 2013 presentation.
| Three Months Ended | Nine Months Ended | |||||||||||||||||
| February 28 and 29, | February 28 and 29, | |||||||||||||||||
| (In millions) | 2013 | 2012 | 2013 | 2012 | ||||||||||||||
|
REVENUE |
||||||||||||||||||
|
North America |
$ | 2,546 | $ | 2,149 | $ | 7,673 | $ | 6,415 | ||||||||||
|
Western Europe |
1,040 | 962 | 3,104 | 3,105 | ||||||||||||||
|
Central & Eastern Europe |
318 | 275 | 926 | 870 | ||||||||||||||
|
Greater China |
635 | 694 | 1,784 | 1,872 | ||||||||||||||
|
Japan |
175 | 202 | 577 | 594 | ||||||||||||||
|
Emerging Markets |
839 | 793 | 2,758 | 2,541 | ||||||||||||||
|
Global Brand Divisions |
30 | 27 | 84 | 84 | ||||||||||||||
|
Total NIKE Brand |
5,583 | 5,102 | 16,906 | 15,481 | ||||||||||||||
|
Other Businesses |
615 | 563 | 1,768 | 1,636 | ||||||||||||||
|
Corporate |
(11 | ) | (9 | ) | (58 | ) | (22 | ) | ||||||||||
|
TOTAL NIKE CONSOLIDATED REVENUES |
$ | 6,187 | $ | 5,656 | $ | 18,616 | $ | 17,095 | ||||||||||
|
EARNINGS BEFORE INTEREST AND TAXES |
||||||||||||||||||
|
North America |
$ | 625 | $ | 503 | $ | 1,811 | $ | 1,468 | ||||||||||
|
Western Europe |
178 | 149 | 505 | 464 | ||||||||||||||
|
Central & Eastern Europe |
71 | 60 | 175 | 163 | ||||||||||||||
|
Greater China |
218 | 273 | 567 | 664 | ||||||||||||||
|
Japan |
24 | 24 | 91 | 93 | ||||||||||||||
|
Emerging Markets |
221 | 215 | 749 | 652 | ||||||||||||||
|
Global Brand Divisions |
(324 | ) | (299 | ) | (1,023 | ) | (846 | ) | ||||||||||
|
Total NIKE Brand |
1,013 | 925 | 2,875 | 2,658 | ||||||||||||||
|
Other Businesses |
128 | 104 | 329 | 280 | ||||||||||||||
|
Corporate |
(285 | ) | (242 | ) | (840 | ) | (645 | ) | ||||||||||
|
Total NIKE Consolidated Earnings Before Interest and Taxes |
856 | 787 | 2,364 | 2,293 | ||||||||||||||
|
Interest (income) expense, net |
(2 | ) | 0 | (6 | ) | 3 | ||||||||||||
|
TOTAL NIKE CONSOLIDATED EARNINGS BEFORE TAXES |
$ | 858 | $ | 787 | $ | 2,370 | $ | 2,290 | ||||||||||
| February 28, | May 31, | |||||||
| (In millions) | 2013 | 2012 | ||||||
|
ACCOUNTS RECEIVABLE, NET |
||||||||
|
North America |
$ | 1,260 | $ | 1,149 | ||||
|
Western Europe |
391 | 420 | ||||||
|
Central & Eastern Europe |
328 | 261 | ||||||
|
Greater China |
124 | 221 | ||||||
|
Japan |
100 | 152 | ||||||
|
Emerging Markets |
551 | 476 | ||||||
|
Global Brand Divisions |
32 | 30 | ||||||
|
Total NIKE Brand |
2,786 | 2,709 | ||||||
|
Other Businesses |
425 | 401 | ||||||
|
Corporate |
21 | 22 | ||||||
|
TOTAL ACCOUNTS RECEIVABLE, NET |
$ | 3,232 | $ | 3,132 | ||||
|
INVENTORIES |
||||||||
|
North America |
$ | 1,316 | $ | 1,272 | ||||
|
Western Europe |
505 | 488 | ||||||
|
Central & Eastern Europe |
167 | 180 | ||||||
|
Greater China |
216 | 217 | ||||||
|
Japan |
90 | 83 | ||||||
|
Emerging Markets |
555 | 521 | ||||||
|
Global Brand Divisions |
37 | 35 | ||||||
|
Total NIKE Brand |
2,886 | 2,796 | ||||||
|
Other Businesses |
429 | 384 | ||||||
|
Corporate |
14 | 42 | ||||||
|
TOTAL INVENTORIES |
$ | 3,329 | $ | 3,222 | ||||
|
PROPERTY, PLANT AND EQUIPMENT, NET |
||||||||
|
North America |
$ | 380 | $ | 378 | ||||
|
Western Europe |
328 | 314 | ||||||
|
Central & Eastern Europe |
42 | 30 | ||||||
|
Greater China |
204 | 191 | ||||||
|
Japan |
297 | 359 | ||||||
|
Emerging Markets |
80 | 59 | ||||||
|
Global Brand Divisions |
253 | 205 | ||||||
|
Total NIKE Brand |
1,584 | 1,536 | ||||||
|
Other Businesses |
73 | 76 | ||||||
|
Corporate |
603 | 597 | ||||||
|
TOTAL PROPERTY, PLANT AND EQUIPMENT, NET |
$ | 2,260 | $ | 2,209 | ||||
|
|||
NOTE 12 — Commitments and Contingencies
At February 28, 2013, the Company had letters of credit outstanding totaling $129 million. These letters of credit were issued primarily for the purchase of inventory and guarantees of the Company’s performance under certain self-insurance and other programs.
There have been no other significant subsequent developments relating to the commitments and contingencies reported on the Company’s latest Annual Report on Form 10-K.
|
|||
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements reflect all normal adjustments which are, in the opinion of management, necessary for a fair statement of the results of operations for the interim period. The year-end condensed consolidated balance sheet data as of May 31, 2012 was derived from audited financial statements, but does not include all disclosures required by accounting principles generally accepted in the United States of America (“U.S. GAAP”). The interim financial information and notes thereto should be read in conjunction with the Company’s latest Annual Report on Form 10-K. The results of operations for the three and nine months ended February 28, 2013 are not necessarily indicative of results to be expected for the entire year.
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 condensed consolidated statements of income for all periods presented. In addition, the assets and liabilities associated with these businesses are reported as assets of discontinued operations and liabilities of discontinued operations, as appropriate, in the condensed consolidated balance sheets (refer to Note 10 — Discontinued Operations). Unless otherwise indicated, the disclosures accompanying the condensed 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.
Recently Adopted Accounting Standards
In September 2011, the Financial Accounting Standards Board (“FASB”) issued updated guidance on the periodic testing of goodwill for impairment. This guidance will allow companies to assess qualitative factors to determine if it is more-likely-than-not that goodwill might be impaired and whether it is necessary to perform the two-step goodwill impairment test required under current accounting standards. This new guidance became effective for the Company beginning June 1, 2012. The adoption did not have a material effect on the Company’s consolidated financial position or results of operations.
In June 2011, the FASB issued guidance on the presentation of comprehensive income. This new guidance eliminates the current option to report other comprehensive income and its components in the statement of shareholders’ equity. Companies are now required to present the components of net income and other comprehensive income in either one continuous statement, referred to as the statement of comprehensive income, or in two separate, but consecutive statements. This requirement was effective for the Company beginning June 1, 2012. Further, this guidance required companies to present reclassification adjustments out of accumulated other comprehensive income by component in both the statement in which net income is presented and the statement in which other comprehensive income is presented. This requirement will be effective for the Company beginning June 1, 2013. As this guidance only amends the presentation of the components of comprehensive income, the adoption did not have an impact on the Company’s consolidated financial position or results of operations.
Recently Issued Accounting Standards
In July 2012, the FASB issued an accounting standard 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 will be effective for the Company beginning June 1, 2013, and early adoption is permitted. The Company does not anticipate the adoption will have an impact on its 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 is effective for the Company beginning June 1, 2013. As this guidance only requires expanded disclosures, the Company does not anticipate the adoption will have an impact on its consolidated financial position or results of operations.
|
|||
The following table summarizes the Company’s identifiable intangible asset balances at February 28, 2013 and May 31, 2012:
| February 28, 2013 | May 31, 2012 | |||||||||||||||||||||||||
|
(In millions) |
Gross Carrying Amount |
Accumulated Amortization |
Net Carrying Amount |
Gross Carrying Amount |
Accumulated Amortization |
Net Carrying Amount |
||||||||||||||||||||
|
Amortized intangible assets: |
||||||||||||||||||||||||||
|
Patents |
$ | 110 | $ | (34 | ) | $ | 76 | $ | 99 | $ | (29 | ) | $ | 70 | ||||||||||||
|
Trademarks |
45 | (32 | ) | 13 | 40 | (26 | ) | 14 | ||||||||||||||||||
|
Other |
20 | (15 | ) | 5 | 19 | (16 | ) | 3 | ||||||||||||||||||
|
TOTAL |
$ | 175 | $ | (81 | ) | $ | 94 | $ | 158 | $ | (71 | ) | $ | 87 | ||||||||||||
|
Unamortized intangible assets – Trademarks |
282 | 283 | ||||||||||||||||||||||||
|
IDENTIFIABLE INTANGIBLE ASSETS, NET |
$ | 376 | $ | 370 | ||||||||||||||||||||||
|
|||
Accrued liabilities included the following:
| February 28, | May 31, | |||||||
| (In millions) | 2013 | 2012 | ||||||
|
Compensation and benefits, excluding taxes |
$ | 633 | $ | 691 | ||||
|
Taxes other than income taxes |
221 | 169 | ||||||
|
Endorsement compensation |
213 | 288 | ||||||
|
Dividends payable |
188 | 165 | ||||||
|
Advertising and marketing |
118 | 94 | ||||||
|
Import and logistics costs |
101 | 133 | ||||||
|
Fair value of derivatives |
62 | 55 | ||||||
|
Other(1) |
363 | 346 | ||||||
|
TOTAL ACCRUED LIABILITIES |
$ | 1,899 | $ | 1,941 | ||||
| (1) |
Other consists of various accrued expenses with no individual item accounting for more than 5% of the balance at February 28, 2013 and May 31, 2012. |
|
|||
The following table presents information about the Company’s financial assets and liabilities measured at fair value on a recurring basis as of February 28, 2013 and May 31, 2012 and indicates the fair value hierarchy of the valuation techniques utilized by the Company to determine such fair value.
| February 28, 2013 | ||||||||||||||||||
| Fair Value Measurements Using |
Assets / Liabilities at |
|||||||||||||||||
| (In millions) | Level 1 | Level 2 | Level 3 | Fair Value | Balance Sheet Classification | |||||||||||||
|
ASSETS |
||||||||||||||||||
|
Derivatives: |
||||||||||||||||||
|
Foreign exchange forwards and options |
$ | 0 | $ | 260 | $ | 0 | $ | 260 | Other current assets and other long-term assets | |||||||||
|
Interest rate swap contracts |
0 | 12 | 0 | 12 | Other long-term assets | |||||||||||||
|
Total derivatives |
0 | 272 | 0 | 272 | ||||||||||||||
|
Available-for-sale securities: |
||||||||||||||||||
|
U.S. Treasury securities |
690 | 0 | 0 | 690 | Cash and equivalents | |||||||||||||
|
Commercial paper and bonds |
0 | 368 | 0 | 368 | Cash and equivalents | |||||||||||||
|
Money market funds |
0 | 565 | 0 | 565 | Cash and equivalents | |||||||||||||
|
U.S. Treasury securities |
807 | 0 | 0 | 807 | Short-term investments | |||||||||||||
|
U.S. Agency securities |
0 | 286 | 0 | 286 | Short-term investments | |||||||||||||
|
Commercial paper and bonds |
0 | 392 | 0 | 392 | Short-term investments | |||||||||||||
|
Non-marketable preferred stock |
0 | 0 | 5 | 5 | Other long-term assets | |||||||||||||
|
Total available-for-sale securities |
1,497 | 1,611 | 5 | 3,113 | ||||||||||||||
|
TOTAL ASSETS |
$ | 1,497 | $ | 1,883 | $ | 5 | $ | 3,385 | ||||||||||
|
LIABILITIES |
||||||||||||||||||
|
Derivatives: |
||||||||||||||||||
|
Foreign exchange forwards and options |
0 | 62 | 0 | 62 | Accrued liabilities and other long-term liabilities | |||||||||||||
|
TOTAL LIABILITIES |
$ | 0 | $ | 62 | $ | 0 | $ | 62 | ||||||||||
| May 31, 2012 | ||||||||||||||||||
| Fair Value Measurements Using |
Assets / Liabilities at |
|||||||||||||||||
| (In millions) | Level 1 | Level 2 | Level 3 | Fair Value | Balance Sheet Classification | |||||||||||||
|
ASSETS |
||||||||||||||||||
|
Derivatives: |
||||||||||||||||||
|
Foreign exchange forwards and options |
$ | 0 | $ | 265 | $ | 0 | $ | 265 | Other current assets and other long-term assets | |||||||||
|
Embedded derivatives |
0 | 1 | 0 | 1 | Other current assets | |||||||||||||
|
Interest rate swap contracts |
0 | 15 | 0 | 15 | Other current assets and other long-term assets | |||||||||||||
|
Total derivatives |
0 | 281 | 0 | 281 | ||||||||||||||
|
Available-for-sale securities: |
||||||||||||||||||
|
U.S. Treasury securities |
226 | 0 | 0 | 226 | Cash and equivalents | |||||||||||||
|
U.S. Agency securities |
0 | 254 | 0 | 254 | Cash and equivalents | |||||||||||||
|
Commercial paper and bonds |
0 | 159 | 0 | 159 | Cash and equivalents | |||||||||||||
|
Money market funds |
0 | 770 | 0 | 770 | Cash and equivalents | |||||||||||||
|
U.S. Treasury securities |
927 | 0 | 0 | 927 | Short-term investments | |||||||||||||
|
U.S. Agency securities |
0 | 230 | 0 | 230 | Short-term investments | |||||||||||||
|
Commercial paper and bonds |
0 | 283 | 0 | 283 | Short-term investments | |||||||||||||
|
Non-marketable preferred stock |
0 | 0 | 3 | 3 | Other long-term assets | |||||||||||||
|
Total available-for-sale securities |
1,153 | 1,696 | 3 | 2,852 | ||||||||||||||
|
TOTAL ASSETS |
$ | 1,153 | $ | 1,977 | $ | 3 | $ | 3,133 | ||||||||||
|
LIABILITIES |
||||||||||||||||||
|
Derivatives: |
||||||||||||||||||
|
Foreign exchange forwards and options |
$ | 0 | $ | 55 | $ | 0 | $ | 55 | Accrued liabilities and other long-term liabilities | |||||||||
|
TOTAL LIABILITIES |
$ | 0 | $ | 55 | $ | 0 | $ | 55 | ||||||||||
Short-term investments classified as available-for-sale consist of the following at fair value:
| February 28, | May 31, | |||||||
| (In millions) | 2013 | 2012 | ||||||
|
Available-for-sale investments: |
||||||||
|
U.S. treasury and agencies |
$ | 1,093 | $ | 1,157 | ||||
|
Commercial paper and bonds |
392 | 283 | ||||||
|
TOTAL AVAILABLE-FOR-SALE INVESTMENTS |
$ | 1,485 | $ | 1,440 | ||||
|
|||
The following table summarizes the Company’s total stock-based compensation expense recognized in selling and administrative expense:
| Three Months Ended | Nine Months Ended | |||||||||||||||||
| February 28 and 29, | February 28 and 29, | |||||||||||||||||
| (In millions) | 2013 | 2012 | 2013 | 2012 | ||||||||||||||
|
Stock options(1) |
$ | 32 | $ | 26 | $ | 90 | $ | 70 | ||||||||||
|
ESPPs |
4 | 4 | 14 | 12 | ||||||||||||||
|
Restricted stock |
9 | 4 | 24 | 13 | ||||||||||||||
|
TOTAL STOCK-BASED COMPENSATION EXPENSE |
$ | 45 | $ | 34 | $ | 128 | $ | 95 | ||||||||||
| (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 was $6 million and $4 million for the three month periods ended February 28, 2013 and February 29, 2012, respectively, and $16 million and $12 million for the nine month periods ended February 28, 2013 and February 29, 2012, respectively. |
The weighted average assumptions used to estimate these fair values are as follows:
| Nine Months Ended | ||||||||
| February 28 and 29, | ||||||||
| 2013 | 2012 | |||||||
|
Dividend yield |
1.5 | % | 1.4 | % | ||||
|
Expected volatility |
35.0 | % | 29.5 | % | ||||
|
Weighted average expected life (in years) |
5.3 | 5.0 | ||||||
|
Risk-free interest rate |
0.6 | % | 1.4 | % | ||||
|
|||
The following table presents the fair values of derivative instruments included within the consolidated balance sheets as of February 28, 2013 and May 31, 2012:
| Asset Derivatives | Liability Derivatives | |||||||||||||||||||||
| (In millions) | Balance Sheet Location | February 28, 2013 |
May 31, 2012 |
Balance Sheet Location | February 28, 2013 |
May 31, 2012 |
||||||||||||||||
|
Derivatives formally designated as hedging instruments: |
||||||||||||||||||||||
|
Foreign exchange forwards and options |
Prepaid expenses and other current assets | $ | 122 | $ | 203 | Accrued liabilities | $ | 37 | $ | 35 | ||||||||||||
|
Foreign exchange forwards and options |
Deferred income taxes and other long-term assets | 73 | 7 | Deferred income taxes and other long-term liabilities | 1 | 0 | ||||||||||||||||
|
Interest rate swap contracts |
Deferred income taxes and other long-term assets | 12 | 15 | Deferred income taxes and other long-term liabilities | 0 | 0 | ||||||||||||||||
|
Total derivatives formally designated as hedging instruments |
207 | 225 | 38 | 35 | ||||||||||||||||||
|
Derivatives not designated as hedging instruments: |
||||||||||||||||||||||
|
Foreign exchange forwards and options |
Prepaid expenses and other current assets | 65 | 55 | Accrued liabilities | 24 | 20 | ||||||||||||||||
|
Embedded derivatives |
Prepaid expenses and other current assets | 0 | 1 | Accrued liabilities | 0 | 0 | ||||||||||||||||
|
Total derivatives not designated as hedging instruments |
65 | 56 | 24 | 20 | ||||||||||||||||||
|
TOTAL DERIVATIVES |
$ | 272 | $ | 281 | $ | 62 | $ | 55 | ||||||||||||||
The following tables present the amounts affecting the consolidated statements of income for the three and nine months ended February 28, 2013 and February 29, 2012:
| 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) |
|||||||||||||||||||||||
|
Three Months
Ended |
Nine Months
Ended |
Location of Gain (Loss) Reclassified From Accumulated Other Comprehensive Income Into Income |
Three Months
Ended |
Nine Months
Ended |
||||||||||||||||||||
| (In millions) | 2013 | 2013 | 2013 | 2013 | ||||||||||||||||||||
|
Derivatives designated as cash flow hedges: |
||||||||||||||||||||||||
|
Foreign exchange forwards and options |
$ | 37 | $ | 41 | Revenue | $ | (3 | ) | $ | (28 | ) | |||||||||||||
|
Foreign exchange forwards and options |
60 | 17 | Cost of sales | 26 | 109 | |||||||||||||||||||
|
Foreign exchange forwards and options |
(1 | ) | (3 | ) |
Selling and administrative expense |
1 | 2 | |||||||||||||||||
|
Foreign exchange forwards and options |
25 | 15 |
Other expense (income), net |
(4 | ) | 9 | ||||||||||||||||||
|
Total designated cash flow hedges |
$ | 121 | $ | 70 | $ | 20 | $ | 92 | ||||||||||||||||
|
Derivatives designated as net investment hedges: |
||||||||||||||||||||||||
|
Foreign exchange forwards and options |
$ | 0 | $ | 0 |
Other expense (income), net |
$ | 0 | $ | 0 | |||||||||||||||
| (1) |
For the three and nine months ended February 28, 2013, 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 Other Comprehensive Income on Derivatives (1) |
Amount of Gain (Loss) Reclassified From
Accumulated Other Comprehensive Income into Income (1) |
|||||||||||||||||||||||
|
Three Months
Ended |
Nine Months
Ended |
Location of Gain (Loss) Reclassified From Accumulated Other Comprehensive Income Into Income |
Three Months
Ended |
Nine Months
Ended |
||||||||||||||||||||
| (In millions) | 2012 | 2012 | 2012 | 2012 | ||||||||||||||||||||
|
Derivatives designated as cash flow hedges: |
||||||||||||||||||||||||
|
Foreign exchange forwards and options |
$ | (12 | ) | $ | 5 | Revenue | $ | 0 | $ | 14 | ||||||||||||||
|
Foreign exchange forwards and options |
3 | 146 | Cost of sales | (1 | ) | (74 | ) | |||||||||||||||||
|
Foreign exchange forwards and options |
0 | 0 |
Selling and administrative expense |
(1 | ) | (3 | ) | |||||||||||||||||
|
Foreign exchange forwards and options |
(3 | ) | 8 |
Other expense (income), net |
4 | (14 | ) | |||||||||||||||||
|
Total designated cash flow hedges |
$ | (12 | ) | $ | 159 | $ | 2 | $ | (77 | ) | ||||||||||||||
|
Derivatives designated as net investment hedges: |
||||||||||||||||||||||||
|
Foreign exchange forwards and options |
$ | (2 | ) | $ | 35 |
Other expense (income), net |
$ | 0 | $ | 0 | ||||||||||||||
| (1) |
For the three and nine months ended February 29, 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 |
||||||||||||||||||||
| Three Months Ended February 28 and 29, |
Nine Months Ended February 28 and 29, |
Location of Gain (Loss) Recognized in Income on Derivatives |
||||||||||||||||||
| (In millions) | 2013 | 2012 | 2013 | 2012 | ||||||||||||||||
|
Derivatives designated as fair value hedges: |
||||||||||||||||||||
|
Interest rate swaps(1) |
$ | 1 | $ | 1 | $ | 4 | $ | 5 | Interest (income) expense, net | |||||||||||
|
Derivatives not designated as hedging instruments: |
||||||||||||||||||||
|
Foreign exchange forwards and options |
$ | 37 | $ | (17 | ) | $ | (14 | ) | $ | (14 | ) | Other expense (income), net | ||||||||
|
Embedded derivatives |
$ | 0 | $ | 0 | $ | (3 | ) | $ | 0 | 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. |
|
|||
Summarized results of the Company’s results from discontinued operations are as follows:
| Three Months Ended | Nine Months Ended | |||||||||||||||||
| February 28 and 29, | February 28 and 29, | |||||||||||||||||
| (In millions) | 2013 | 2012 | 2013 | 2012 | ||||||||||||||
|
Revenues |
$ | 132 | $ | 190 | $ | 513 | $ | 563 | ||||||||||
|
Income (loss) before income taxes |
345 | (17 | ) | 107 | (50 | ) | ||||||||||||
|
Income tax expense (benefit) |
141 | (8 | ) | 58 | (14 | ) | ||||||||||||
|
Net income (loss) from discontinued operations |
$ | 204 | $ | (9 | ) | $ | 49 | $ | (36 | ) | ||||||||
As of February 28, 2013 and May 31, 2012, the aggregate components of assets and liabilities classified as discontinued operations and included in current assets and current liabilities consisted of the following:
| February 28, | May 31, | |||||||||
| (In millions) | 2013 | 2012 | ||||||||
|
Accounts Receivable, net |
$ | 25 | $ | 148 | ||||||
|
Inventories |
1 | 128 | ||||||||
|
Deferred income taxes and other assets |
3 | 35 | ||||||||
|
Property, plant and equipment, net |
0 | 70 | ||||||||
|
Identifiable intangible assets, net |
0 | 234 | ||||||||
|
TOTAL ASSETS |
$ | 29 | $ | 615 | ||||||
|
Accounts Payable |
4 | 42 | ||||||||
|
Accrued liabilities |
58 | 112 | ||||||||
|
Deferred income taxes and other liabilities |
0 | 33 | ||||||||
|
TOTAL LIABILITIES |
$ | 62 | $ | 187 | ||||||
|
|||
Certain prior year amounts have been reclassified to conform to fiscal 2013 presentation.
| Three Months Ended | Nine Months Ended | |||||||||||||||||
| February 28 and 29, | February 28 and 29, | |||||||||||||||||
| (In millions) | 2013 | 2012 | 2013 | 2012 | ||||||||||||||
|
REVENUE |
||||||||||||||||||
|
North America |
$ | 2,546 | $ | 2,149 | $ | 7,673 | $ | 6,415 | ||||||||||
|
Western Europe |
1,040 | 962 | 3,104 | 3,105 | ||||||||||||||
|
Central & Eastern Europe |
318 | 275 | 926 | 870 | ||||||||||||||
|
Greater China |
635 | 694 | 1,784 | 1,872 | ||||||||||||||
|
Japan |
175 | 202 | 577 | 594 | ||||||||||||||
|
Emerging Markets |
839 | 793 | 2,758 | 2,541 | ||||||||||||||
|
Global Brand Divisions |
30 | 27 | 84 | 84 | ||||||||||||||
|
Total NIKE Brand |
5,583 | 5,102 | 16,906 | 15,481 | ||||||||||||||
|
Other Businesses |
615 | 563 | 1,768 | 1,636 | ||||||||||||||
|
Corporate |
(11 | ) | (9 | ) | (58 | ) | (22 | ) | ||||||||||
|
TOTAL NIKE CONSOLIDATED REVENUES |
$ | 6,187 | $ | 5,656 | $ | 18,616 | $ | 17,095 | ||||||||||
|
EARNINGS BEFORE INTEREST AND TAXES |
||||||||||||||||||
|
North America |
$ | 625 | $ | 503 | $ | 1,811 | $ | 1,468 | ||||||||||
|
Western Europe |
178 | 149 | 505 | 464 | ||||||||||||||
|
Central & Eastern Europe |
71 | 60 | 175 | 163 | ||||||||||||||
|
Greater China |
218 | 273 | 567 | 664 | ||||||||||||||
|
Japan |
24 | 24 | 91 | 93 | ||||||||||||||
|
Emerging Markets |
221 | 215 | 749 | 652 | ||||||||||||||
|
Global Brand Divisions |
(324 | ) | (299 | ) | (1,023 | ) | (846 | ) | ||||||||||
|
Total NIKE Brand |
1,013 | 925 | 2,875 | 2,658 | ||||||||||||||
|
Other Businesses |
128 | 104 | 329 | 280 | ||||||||||||||
|
Corporate |
(285 | ) | (242 | ) | (840 | ) | (645 | ) | ||||||||||
|
Total NIKE Consolidated Earnings Before Interest and Taxes |
856 | 787 | 2,364 | 2,293 | ||||||||||||||
|
Interest (income) expense, net |
(2 | ) | 0 | (6 | ) | 3 | ||||||||||||
|
TOTAL NIKE CONSOLIDATED EARNINGS BEFORE TAXES |
$ | 858 | $ | 787 | $ | 2,370 | $ | 2,290 | ||||||||||
| February 28, | May 31, | |||||||
| (In millions) | 2013 | 2012 | ||||||
|
ACCOUNTS RECEIVABLE, NET |
||||||||
|
North America |
$ | 1,260 | $ | 1,149 | ||||
|
Western Europe |
391 | 420 | ||||||
|
Central & Eastern Europe |
328 | 261 | ||||||
|
Greater China |
124 | 221 | ||||||
|
Japan |
100 | 152 | ||||||
|
Emerging Markets |
551 | 476 | ||||||
|
Global Brand Divisions |
32 | 30 | ||||||
|
Total NIKE Brand |
2,786 | 2,709 | ||||||
|
Other Businesses |
425 | 401 | ||||||
|
Corporate |
21 | 22 | ||||||
|
TOTAL ACCOUNTS RECEIVABLE, NET |
$ | 3,232 | $ | 3,132 | ||||
|
INVENTORIES |
||||||||
|
North America |
$ | 1,316 | $ | 1,272 | ||||
|
Western Europe |
505 | 488 | ||||||
|
Central & Eastern Europe |
167 | 180 | ||||||
|
Greater China |
216 | 217 | ||||||
|
Japan |
90 | 83 | ||||||
|
Emerging Markets |
555 | 521 | ||||||
|
Global Brand Divisions |
37 | 35 | ||||||
|
Total NIKE Brand |
2,886 | 2,796 | ||||||
|
Other Businesses |
429 | 384 | ||||||
|
Corporate |
14 | 42 | ||||||
|
TOTAL INVENTORIES |
$ | 3,329 | $ | 3,222 | ||||
|
PROPERTY, PLANT AND EQUIPMENT, NET |
||||||||
|
North America |
$ | 380 | $ | 378 | ||||
|
Western Europe |
328 | 314 | ||||||
|
Central & Eastern Europe |
42 | 30 | ||||||
|
Greater China |
204 | 191 | ||||||
|
Japan |
297 | 359 | ||||||
|
Emerging Markets |
80 | 59 | ||||||
|
Global Brand Divisions |
253 | 205 | ||||||
|
Total NIKE Brand |
1,584 | 1,536 | ||||||
|
Other Businesses |
73 | 76 | ||||||
|
Corporate |
603 | 597 | ||||||
|
TOTAL PROPERTY, PLANT AND EQUIPMENT, NET |
$ | 2,260 | $ | 2,209 | ||||
|
|
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