NIKE INC, 10-Q filed on 10/7/2014
Quarterly Report
Document and Entity Information
3 Months Ended
Aug. 31, 2014
Oct. 2, 2014
Document Type
10-Q 
 
Amendment Flag
false 
 
Document Period End Date
Aug. 31, 2014 
 
Document Fiscal Year Focus
2015 
 
Document Fiscal Period Focus
Q1 
 
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 Common Stock Shares Outstanding (In Shares)
 
861,508,468 
Class A Convertible Common Stock
 
 
Entity Common Stock Shares Outstanding (In Shares)
 
177,557,876 
Class B Common Stock
 
 
Entity Common Stock Shares Outstanding (In Shares)
 
683,950,592 
Unaudited Condensed Consolidated Balance Sheets (USD $)
In Millions, unless otherwise specified
Aug. 31, 2014
May 31, 2014
Current assets:
 
 
Cash and equivalents (Note 4)
$ 2,303 
$ 2,220 
Short-term investments (Note 4)
2,276 
2,922 
Accounts receivable, net
3,587 
3,434 
Inventories (Note 2)
4,030 
3,947 
Deferred income taxes (Note 5)
348 
355 
Prepaid expenses and other current assets (Notes 4 and 8)
996 
818 
Total current assets
13,540 
13,696 
Property, plant and equipment, net
2,895 
2,834 
Identifiable intangible assets, net
282 
282 
Goodwill
131 
131 
Deferred income taxes and other assets (Notes 4, 5 and 8)
1,673 
1,651 
TOTAL ASSETS
18,521 
18,594 
Current liabilities:
 
 
Current portion of long-term debt (Note 4)
6 
7 
Notes payable (Note 4)
146 
167 
Accounts payable
1,970 
1,930 
Accrued liabilities (Notes 3, 4 and 8)
2,441 
2,491 
Income taxes payable (Note 5)
250 
432 
Total current liabilities
4,813 
5,027 
Long-term debt (Note 4)
1,195 
1,199 
Deferred income taxes and other liabilities (Notes 4, 5 and 8)
1,408 
1,544 
Commitments and contingencies (Note 11)
0 
0 
Redeemable preferred stock
0 
0 
Shareholders’ equity:
 
 
Capital in excess of stated value
6,070 
5,865 
Accumulated other comprehensive income (Note 9)
224 
85 
Retained earnings
4,808 
4,871 
Total shareholders’ equity
11,105 
10,824 
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY
18,521 
18,594 
Class A Convertible Common Stock
 
 
Shareholders’ equity:
 
 
Common Stock
0 
0 
Class B Common Stock
 
 
Shareholders’ equity:
 
 
Common Stock
$ 3 
$ 3 
Unaudited Condensed Consolidated Balance Sheets (Parenthetical)
In Millions, unless otherwise specified
Aug. 31, 2014
May 31, 2014
Class A Convertible Common Stock
 
 
Common Stock, shares outstanding
178 
178 
Class B Common Stock
 
 
Common Stock, shares outstanding
686 
692 
Unaudited Condensed Consolidated Statements Of Income (USD $)
In Millions, except Per Share data, unless otherwise specified
3 Months Ended
Aug. 31, 2014
Aug. 31, 2013
Revenues
$ 7,982 
$ 6,971 
Cost of sales
4,261 
3,839 
Gross profit
3,721 
3,132 
Demand creation expense
897 
731 
Operating overhead expense
1,583 
1,327 
Total selling and administrative expense
2,480 
2,058 
Interest expense (income), net
9 
8 
Other expense (income), net
3 
28 
Income before income taxes
1,229 
1,038 
Income tax expense (Note 5)
267 
259 
NET INCOME
$ 962 
$ 779 
Earnings per common share:
 
 
Basic earnings per common share for NIKE, Inc. (in dollars per share)
$ 1.11 
$ 0.88 
Diluted earnings per common share for NIKE, Inc. (in dollars per share)
$ 1.09 
$ 0.86 
Dividends declared per common share (in dollars per share)
$ 0.24 
$ 0.21 
Unaudited Condensed Consolidated Statements of Comprehensive Income (USD $)
In Millions, unless otherwise specified
3 Months Ended
Aug. 31, 2014
Aug. 31, 2013
Net income
$ 962 
$ 779 
Other comprehensive income (loss), net of tax:
 
 
Change in net foreign currency translation adjustment
2 
(31)
Change in net gains (losses) on cash flow hedges
135 
(65)
Change in net gains (losses) on other
2 
(1)
Total other comprehensive income (loss), net of tax
139 
(97)
TOTAL COMPREHENSIVE INCOME
$ 1,101 
$ 682 
Unaudited Condensed Consolidated Statements of Cash Flows (USD $)
In Millions, unless otherwise specified
3 Months Ended
Aug. 31, 2014
Aug. 31, 2013
Cash provided by operations:
 
 
Net income
$ 962 
$ 779 
Income charges (credits) not affecting cash:
 
 
Depreciation
147 
122 
Deferred income taxes
35 
24 
Stock-based compensation (Note 6)
43 
42 
Amortization and other
(34)
30 
Changes in certain working capital components and other assets and liabilities:
 
 
(Increase) in accounts receivable
(203)
(102)
(Increase) in inventories
(111)
(61)
(Increase) in prepaid expenses and other current assets
0 
(102)
(Decrease) in accounts payable, accrued liabilities and income taxes
(251)
(114)
Cash provided by operations
588 
618 
Cash provided (used) by investing activities:
 
 
Purchases of short-term investments
(1,296)
(1,417)
Maturities of short-term investments
1,074 
818 
Sales of short-term investments
762 
250 
Investments in reverse repurchase agreements
0 
(100)
Additions to property, plant and equipment
(262)
(245)
Disposals of property, plant and equipment
2 
1 
Increase in other assets, net of other liabilities
0 
(1)
Cash provided (used) by investing activities
280 
(694)
Cash used by financing activities:
 
 
Long-term debt payments, including current portion
(2)
(2)
(Decrease) increase in notes payable
(17)
3 
Payments on capital lease obligations
(6)
0 
Proceeds from exercise of stock options and other stock issuances
127 
94 
Excess tax benefits from share-based payment arrangements
44 
27 
Repurchase of common stock
(819)
(526)
Dividends — common and preferred
(209)
(188)
Cash used by financing activities
(882)
(592)
Effect of exchange rate changes
97 
(8)
Net increase (decrease) in cash and equivalents
83 
(676)
Cash and equivalents, beginning of period
2,220 
3,337 
CASH AND EQUIVALENTS, END OF PERIOD
2,303 
2,661 
Cash paid during the year for:
 
 
Non-cash additions to property, plant and equipment
125 
107 
Dividends declared and not paid
$ 207 
$ 187 
Summary of Significant Accounting Policies
Summary of Significant Accounting Policies
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, 2014 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 months ended August 31, 2014 are not necessarily indicative of results to be expected for the entire year.
Reclassifications
Certain prior year amounts have been reclassified to conform to fiscal 2015 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 Unaudited Condensed 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 of $1 million for the three months ended August 31, 2013. Cash provided by operations decreased $3 million while Cash used by investing activities decreased $3 million for the three months ended August 31, 2013.
Also, in the fourth quarter of fiscal 2014, the Company revised certain prior year amounts 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. Cash and equivalents decreased $275 million and Short-term investments increased $275 million at August 31, 2013. In the Unaudited Condensed Consolidated Statements of Cash Flows for the three months ended August 31, 2013, the revisions resulted in a net increase in Purchases of short-term investments of $89 million and a net decrease in Sales of short-term investments of $186 million, which caused a net increase of $275 million in Cash used by investing activities.
Certain prior year amounts have also been revised in the Unaudited Condensed Consolidated Statements of Cash Flows to correctly recognize the cash flow impacts of certain inventory amounts held by third parties, which were identified during the third quarter of fiscal 2014 and resulted in cash flow impacts of $2 million for both Inventories and Accrued liabilities for the three months ended August 31, 2013. This revision had no impact on Cash provided by operations or Net increase (decrease) in cash and equivalents.
The Company also revised certain prior period amounts in the Unaudited Condensed 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 three months ended August 31, 2013, this revision increased Cash provided by operations and increased Cash used by investing activities, each by $30 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 Accounting Standards Codification ("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 Unaudited Condensed Consolidated Financial Statements as of August 31, 2013, and for the three months then ended, which are presented herein, have been revised. The following are selected line items from the Company's Unaudited Condensed Consolidated Financial Statements illustrating the effect of these corrections and the correction of other immaterial errors:
 
 
NIKE, Inc. Unaudited Condensed Consolidated Statements of Income
 
 
Three Months Ended August 31, 2013
(In millions, except per share data)
 
As Reported
 
Adjustment
 
As Revised
Total selling and administrative expense
 
$
2,056

 
$
2

 
$
2,058

Income before income taxes
 
1,040

 
(2
)
 
1,038

Income tax expense
 
260

 
(1
)
 
259

NET INCOME
 
$
780

 
$
(1
)
 
$
779

 
 
 
 
 
 
 
Earnings per common share:
 
 
 
 
 
 
Basic
 
$
0.88

 
$
0.00

 
$
0.88

Diluted
 
$
0.86

 
$
0.00

 
$
0.86

 
 
NIKE, Inc. Unaudited Condensed Consolidated Statements of Comprehensive Income
 
 
Three Months Ended August 31, 2013
(In millions)
 
As Reported
 
Adjustment
 
As Revised
Net income
 
$
780

 
$
(1
)
 
$
779

TOTAL COMPREHENSIVE INCOME
 
$
683

 
$
(1
)
 
$
682

 
 
NIKE, Inc. Unaudited Condensed Consolidated Statements of Cash Flows
 
 
Three Months Ended August 31, 2013
(In millions)
 
As Reported
 
Adjustment
 
As Revised
Cash provided by operations:
 
 
 
 
 
 
Net income
 
$
780

 
$
(1
)
 
$
779

Income charges (credits) not affecting cash:
 
 
 
 
 
 
Amortization and other
 
31

 
(1
)
 
30

(Increase) in inventories
 
(63
)
 
2

 
(61
)
(Decrease) in accounts payable, accrued liabilities and income taxes
 
(135
)
 
21

 
(114
)
Cash provided by operations
 
597

 
21

 
618

Cash provided (used) by investing activities:
 
 
 
 
 
 
Purchases of short-term investments
 
(1,328
)
 
(89
)
 
(1,417
)
Sales of short-term investments
 
436

 
(186
)
 
250

Additions to property, plant and equipment
 
(215
)
 
(30
)
 
(245
)
Increase in other assets, net of other liabilities
 
(4
)
 
3

 
(1
)
Cash provided (used) by investing activities
 
(392
)
 
(302
)
 
(694
)
Cash used by financing activities:
 
 
 
 
 
 
(Decrease) increase in notes payable
 
(3
)
 
6

 
3

Cash used by financing activities
 
(598
)
 
6

 
(592
)
Net increase (decrease) in cash and equivalents
 
(401
)
 
(275
)
 
(676
)
Cash and equivalents, beginning of period
 
3,337

 
—

 
3,337

CASH AND EQUIVALENTS, END OF PERIOD
 
$
2,936

 
$
(275
)
 
$
2,661


Recently Issued Accounting Standards
In May 2014, the Financial Accounting Standards Board ("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 and early adoption is not permitted. The Company is currently evaluating the effect the guidance will have on the Consolidated Financial Statements.
Inventories
Inventories
NOTE 2 — Inventories
Inventory balances of $4,030 million and $3,947 million at August 31, 2014 and May 31, 2014, respectively, were substantially all finished goods.
Accrued Liabilities
Accrued Liabilities
NOTE 3 — Accrued Liabilities
Accrued liabilities included the following:
 
 
As of August 31,
 
As of May 31,
(In millions)
 
2014
 
2014
Compensation and benefits, excluding taxes
 
$
578

 
$
782

Endorsement compensation
 
420

 
328

Taxes other than income taxes
 
232

 
204

Dividends payable
 
207

 
209

Import and logistics costs
 
149

 
127

Advertising and marketing
 
142

 
133

Fair value of derivatives
 
61

 
85

Other(1)
 
652

 
623

TOTAL ACCRUED LIABILITIES
 
$
2,441

 
$
2,491

(1)
Other consists of various accrued expenses with no individual item accounting for more than 5% of the total Accrued liabilities balance at August 31, 2014 and May 31, 2014.
Fair Value Measurements
Fair Value Measurements
NOTE 4 — 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 the 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 the fair value hierarchy are described below:
•
Level 1: 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 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 a comparison of fair values to another independent pricing vendor.
The following tables present information about the Company’s financial assets measured at fair value on a recurring basis as of August 31, 2014 and May 31, 2014, and indicate the level in the fair value hierarchy in which the Company classifies the fair value measurement.
 
As of August 31, 2014
(In millions)
 
Assets at Fair Value
 
Cash and Cash Equivalents
 
Short-term Investments
 
Other Long-term Assets
Cash
 
$
976

 
$
976

 
$
—

 
$
—

Level 1:
 
 
 
 
 
 
 
 
U.S. Treasury securities
 
985

 
150

 
835

 
—

Level 2:
 
 
 
 
 
 
 
 
Time deposits
 
244

 
244

 
—

 
—

U.S. Agency securities
 
785

 
48

 
737

 
—

Commercial paper and bonds
 
779

 
75

 
704

 
—

Money market funds
 
810

 
810

 
—

 
—

Total Level 2:
 
2,618

 
1,177

 
1,441

 
—

Level 3:
 
 
 
 
 
 
 
 
Non-marketable preferred stock
 
7

 
—

 
—

 
7

TOTAL
 
$
4,586

 
$
2,303

 
$
2,276

 
$
7


 
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



The following tables present information about the Company’s derivative assets and liabilities measured at fair value on a recurring basis as of August 31, 2014 and May 31, 2014, and indicate the level in the fair value hierarchy in which the Company classifies the fair value measurement.
 
As of August 31, 2014
 
 
Derivative Assets
 
Derivative Liabilities
(In millions)
 
Assets at Fair Value
 
Other Current Assets
 
Other Long-term Assets
 
Liabilities at Fair Value
 
Accrued Liabilities
 
Other Long-term Liabilities
Level 2:
 
 
 
 
 
 
 
 
 
 
 
 
Foreign exchange forwards and options(1)
 
$
278

 
$
219

 
$
59

 
$
65

 
$
60

 
$
5

Embedded derivatives
 
—

 
—

 
—

 
1

 
1

 
—

Interest rate swap contracts
 
5

 
—

 
5

 
—

 
—

 
—

TOTAL
 
$
283

 
$
219

 
$
64

 
$
66

 
$
61

 
$
5

(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 Unaudited Condensed Consolidated Balance Sheets. If the derivative financial instruments had been netted in the Unaudited Condensed Consolidated Balance Sheets, the asset and liability positions each would have been reduced by $61 million. No material amounts of collateral were received or posted on the Company’s derivative assets and liabilities as of August 31, 2014.
 
As of May 31, 2014
 
 
Derivative Assets
 
Derivative Liabilities
(In millions)
 
Assets at Fair Value
 
Other Current Assets
 
Other Long-term Assets
 
Liabilities at Fair Value
 
Accrued Liabilities
 
Other Long-term Liabilities
Level 2:
 
 
 
 
 
 
 
 
 
 
 
 
Foreign exchange forwards and options(1)
 
$
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.
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 three months ended August 31, 2014 and 2013. Unrealized gains and losses on available-for-sale securities included in Other comprehensive income were immaterial as of August 31, 2014 and May 31, 2014.
The Company regularly reviews its available-for-sale securities for other-than-temporary impairment. For the three months ended August 31, 2014 the Company did not consider any of its securities to be other-than-temporarily impaired and accordingly, did not recognize any impairment losses.
As of August 31, 2014, the Company held $1,674 million of available-for-sale securities with maturity dates within one year from the purchase date and $602 million with maturity dates over one year and less than five years from the purchase date within Short-term investments. As of May 31, 2014, the Company held $2,287 million of available-for-sale securities with maturity dates within one year from purchase date and $635 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 for each of the three months ended August 31, 2014 and 2013 was interest income related to the Company's available-for-sale securities of $1 million.
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 three months ended August 31, 2014 and the year ended May 31, 2014.
Derivative financial instruments include foreign exchange forwards and options, embedded derivatives and interest rate swap contracts. Refer to Note 8 — Risk Management and Derivatives for additional detail.
No transfers among the levels within the fair value hierarchy occurred during the three months ended August 31, 2014.
As of August 31, 2014 and May 31, 2014, the Company had no assets or liabilities that were required to be measured at fair value on a non-recurring basis.
Financial Assets and Liabilities Not Recorded at Fair Value
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 or quoted prices for identical instruments in inactive markets (Level 2). The fair value of the Company’s long-term debt, including the current portion, was approximately $1,177 million at August 31, 2014 and $1,154 million at May 31, 2014.
The carrying amounts reflected in the Unaudited Condensed Consolidated Balance Sheets for Notes payable approximate fair value.
Income Taxes
Income Taxes
NOTE 5 — Income Taxes
The effective tax rate was 21.7% and 25.0% for the three month periods ended August 31, 2014 and 2013, respectively. The decrease in the Company’s effective tax rate was primarily due to the resolution of audits and an increase in the proportion of earnings from operations outside of the United States, which are generally subject to a lower tax rate.
As of August 31, 2014, total gross unrecognized tax benefits, excluding related interest and penalties, were $473 million, $253 million of which would affect the Company’s effective tax rate if recognized in future periods. As of May 31, 2014, total gross unrecognized tax benefits, excluding related interest and penalties, were $506 million. The liability for payment of interest and penalties decreased $7 million during the three months ended August 31, 2014. As of August 31, 2014 and May 31, 2014, accrued interest and penalties related to uncertain tax positions were $160 million and $167 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 other state and 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. Many issues are at an advanced stage in the examination process, including 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 $71 million within the next 12 months.
Stock-Based Compensation
Stock-Based Compensation
NOTE 6 — 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 1990 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 6-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 Operating overhead expense: 
 
 
Three Months Ended August 31,
(In millions)
 
2014
 
2013
Stock options(1)
 
$
30

 
$
29

ESPPs
 
6

 
5

Restricted stock
 
7

 
8

TOTAL STOCK-BASED COMPENSATION EXPENSE
 
$
43

 
$
42

(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 the three month periods ended August 31, 2014 and 2013 was $4 million for each respective period.
As of August 31, 2014, the Company had $285 million of unrecognized compensation costs from stock options, net of estimated forfeitures, to be recognized in Operating overhead expense over a weighted average remaining period of 2.7 years.
The weighted average fair value per share of the options granted during the three month periods ended August 31, 2014 and 2013, as computed using the Black-Scholes pricing model, was $16.91 and $14.85, respectively. The weighted average assumptions used to estimate these fair values are as follows:
 
 
Three Months Ended August 31,
  
 
2014
 
2013
Dividend yield
 
1.2
%
 
1.3
%
Expected volatility
 
23.6
%
 
27.9
%
Weighted average expected life (in years)
 
5.8

 
5.3

Risk-free interest rate
 
1.7
%
 
1.3
%

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.
Earnings Per Share
Earnings Per Share
NOTE 7 — Earnings Per Share
The following is a reconciliation from basic earnings per share to diluted earnings per share. Options to purchase an additional 9.2 million and 7.9 million shares of common stock were outstanding at August 31, 2014 and 2013, respectively, but were not included in the computation of diluted earnings per share because the options were anti-dilutive.
 
 
Three Months Ended August 31,
(In millions, except per share data)
 
2014
 
2013
Determination of shares:
 
 
 
 
Weighted average common shares outstanding
 
864.9

 
889.4

Assumed conversion of dilutive stock options and awards
 
21.3

 
21.3

DILUTED WEIGHTED AVERAGE COMMON SHARES OUTSTANDING
 
886.2

 
910.7

 
 
 
 
 
Earnings per common share:
 
 
 
 
Basic
 
$
1.11

 
$
0.88

Diluted
 
$
1.09

 
$
0.86

Risk Management and Derivatives
Risk Management and Derivatives
NOTE 8 — 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 objectives and strategies 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 August 31, 2014 are designated as cash flow or fair value hedges. All derivatives are recognized in the Unaudited Condensed Consolidated Balance Sheet at fair value and classified based on the instrument’s maturity date. The total notional amount of outstanding derivatives as of August 31, 2014 was approximately $13 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 August 31, 2014, there were outstanding currency forward contracts with maturities up to 21 months.
The following table presents the fair values of derivative instruments included within the Unaudited Condensed Consolidated Balance Sheets as of August 31, 2014 and May 31, 2014: 
 
 
Derivative Assets
 
Derivative Liabilities
(In millions)
 
Balance Sheet
Location
 
August 31,
2014
 
May 31,
2014
 
Balance Sheet 
Location
 
August 31,
2014
 
May 31,
2014
Derivatives formally designated as hedging instruments:
 
 
 
 
 
 
 
 
 
 
 
 
Foreign exchange forwards and options
 
Prepaid expenses and other current assets
 
$
169

 
$
76

 
Accrued liabilities
 
$
53

 
$
57

Foreign exchange forwards and options
 
Deferred income taxes and other assets
 
59

 
26

 
Deferred income taxes and other liabilities
 
5

 
1

Interest rate swap contracts
 
Deferred income taxes and other assets
 
5

 
6

 
Deferred income taxes and other liabilities
 
—

 
—

Total derivatives formally designated as hedging instruments
 
 
 
233

 
108

 
 
 
58

 
58

Derivatives not designated as hedging instruments:
 
 
 
 
 
 
 
 
 
 
 
 
Foreign exchange forwards and options
 
Prepaid expenses and other current assets
 
50

 
25

 
Accrued liabilities
 
7

 
27

Embedded derivatives
 
Prepaid expenses and other current assets
 
—

 
—

 
Accrued liabilities
 
1

 
—

Total derivatives not designated as hedging instruments
 
 
 
50

 
25

 
 
 
8

 
27

TOTAL DERIVATIVES
 
 
 
$
283

 
$
133

 
 
 
$
66

 
$
85


The following tables present the amounts affecting the Unaudited Condensed Consolidated Statements of Income for the three months ended August 31, 2014 and 2013:

(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)
Three Months Ended August 31,
 
Location of Gain (Loss) Reclassified From  Accumulated Other Comprehensive Income into Income(1)
 
Three Months Ended August 31,
2014
 
2013
 
2014
 
2013
Derivatives designated as cash flow hedges:
 
 
 
 
 
 
 
 
 
 
Foreign exchange forwards and options
 
$
(38
)
 
$
(3
)
 
Revenues
 
$
(17
)
 
$
14

Foreign exchange forwards and options
 
119

 
(24
)
 
Cost of sales
 
(8
)
 
16

Foreign exchange forwards and options
 
—

 
1

 
Total selling and administrative expense
 
—

 
—

Foreign exchange forwards and options
 
37

 
(7
)
 
Other expense (income), net
 
5

 
5

Total designated cash flow hedges
 
$
118

 
$
(33
)
 
 
 
$
(20
)
 
$
35

(1)
For the three months ended August 31, 2014, 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
 
 
Three Months Ended August 31,
 
(In millions)
 
2014
 
2013
 
Derivatives designated as fair value hedges:
 
 
 
 
 
 
Interest rate swaps(1)
 
$
1

 
$
1

 
Interest expense (income), net
Derivatives not designated as hedging instruments:
 
 
 
 
 
 
Foreign exchange forwards and options
 
$
93

 
$
(15
)
 
Other expense (income), net
Embedded derivatives
 
$
(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 3 — Accrued Liabilities for derivative instruments recorded in Accrued liabilities, Note 4 — Fair Value Measurements for a description of how the above financial instruments are valued, and Note 9 — Accumulated Other Comprehensive Income for additional information on changes in Other comprehensive income for the three months ended August 31, 2014 and 2013.
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 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.
The Company operates 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 up to 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 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 Unaudited Condensed 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 Unaudited Condensed Consolidated Statements 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 not material for the three months ended August 31, 2014 and 2013.
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 months ended August 31, 2014 and 2013, 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 August 31, 2014, $104 million of deferred net gains (net of tax) on both outstanding and matured derivatives accumulated in Other comprehensive income were 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 August 31, 2014, the maximum term over which the Company is hedging exposures to the variability of cash flows for its forecasted transactions was 21 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 August 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 Unaudited Condensed Consolidated Statements of Cash Flows. The Company recorded no ineffectiveness from its interest rate swaps designated as fair value hedges for the three months ended August 31, 2014 or 2013.
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 (used) by investing activities component of the Unaudited Condensed Consolidated Statements 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 three months ended August 31, 2014 or 2013.
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 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 August 31, 2014, the notional amount of embedded derivatives outstanding was approximately $127 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 Unaudited Condensed 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 Unaudited Condensed Consolidated Statements of Cash Flows.
Credit Risk
The Company is exposed to credit-related losses in the event of nonperformance 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 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 August 31, 2014, the Company was in compliance with all credit risk related contingent features and the aggregate fair value of its derivative instruments with credit risk related contingent features in a net liability position was $3 million. Accordingly, the Company was not required to post any collateral as a result of these contingent features. Further, as of August 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.
Accumulated Other Comprehensive Income
Accumulated Other Comprehensive Income
NOTE 9 — 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, 2014
 
$
9

 
$
32

 
$
95

 
$
(51
)
 
$
85

Other comprehensive gains (losses) before reclassifications(2)
 
2

 
119

 
—

 
5

 
126

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

 
16

 
—

 
(3
)
 
13

Other comprehensive income (loss)
 
2

 
135

 
—

 
2

 
139

Balance at August 31, 2014
 
$
11

 
$
167

 
$
95

 
$
(49
)
 
$
224

(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 (expense) of $(11) million, $1 million, $0 million, $(2) million, and $(12) million, respectively.
(3)
Net of tax (benefit) expense of $0 million, $(4) million, $0 million, $1 million, and $(3) million, respectively.
(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)
 
(31
)
 
(35
)
 
—

 
(2
)
 
(68
)
Reclassifications to net income of previously deferred (gains) losses(3)
 
—

 
(30
)
 
—

 
1

 
(29
)
Other comprehensive income (loss)
 
(31
)
 
(65
)
 
—

 
(1
)
 
(97
)
Balance at August 31, 2013
 
$
10

 
$
128

 
$
95

 
$
(56
)
 
$
177

(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 (expense) of $0 million, $(2) million, $0 million, $0 million, and $(2) million, respectively.
(3)
Net of tax (benefit) expense of $0 million, $5 million, $0 million, $0 million, and $5 million, respectively.

The following table summarizes the reclassifications from Accumulated other comprehensive income to the Unaudited Condensed Consolidated Statements of Income:
 
 
Amount of Gain (Loss) Reclassified from Accumulated Other Comprehensive Income into Income
 
 
 
 
Three Months Ended August 31,
 
Location of Gain (Loss) Reclassified from Accumulated Other Comprehensive Income into Income
(In millions)
 
2014
 
2013
 
Gains (losses) on cash flow hedges:
 
 
 
 
 
 
Foreign exchange forwards and options
 
$
(17
)
 
$
14

 
Revenue
Foreign exchange forwards and options
 
(8
)
 
16

 
Cost of sales
Foreign exchange forwards and options
 
—

 
—

 
Total selling and administrative expense
Foreign exchange forwards and options
 
5

 
5

 
Other expense (income), net
Total before tax
 
(20
)
 
35

 
 
Tax benefit (expense)
 
4

 
(5
)
 
 
(Loss) gain net of tax
 
(16
)
 
30

 
 
Gains (losses) on other
 
4

 
(1
)
 
Other expense (income), net
Total before tax
 
4

 
(1
)
 
 
Tax (expense)
 
(1
)
 
—

 
 
Gain (loss) net of tax
 
3

 
(1
)
 
 
Total net (loss) gain reclassified for the period
 
$
(13
)
 
$
29

 
 
Operating Segments
Operating Segments
NOTE 10 — Operating Segments
The Company’s operating segments are evidence of the structure of the Company's internal organization. The NIKE Brand segments are defined by geographic regions for operations participating in NIKE Brand sales activity and also include the results of NIKE Golf and Hurley.
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 operating segment. Converse is also a reportable segment for NIKE, Inc., and operates in one industry: the design, marketing, licensing and selling of casual sneakers, apparel and accessories.
Global Brand Divisions is included within the NIKE Brand for presentation purposes to align with the way management views the Company. Global Brand Divisions primarily represent 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.
Corporate consists largely of unallocated general and administrative expenses, including expenses associated with centrally managed departments; depreciation and amortization related to the Company’s headquarters; unallocated insurance and benefit programs, including stock-based compensation; and certain foreign currency gains and losses, certain 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 expense (income), net and Income tax expense in the Unaudited Condensed 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 the Company's geographic operating segments and Converse. 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 Converse 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, net for operating segments are regularly reviewed by management and are therefore provided below.
Certain prior year amounts have been reclassified to conform to fiscal 2015 presentation.
 
 
Three Months Ended August 31,
(In millions)
 
2014
 
2013
REVENUES
 
 
 
 
North America
 
$
3,513

 
$
3,135

Western Europe
 
1,714

 
1,301

Central & Eastern Europe
 
392

 
366

Greater China
 
679

 
574

Japan
 
160

 
158

Emerging Markets
 
934

 
902

Global Brand Divisions
 
29

 
32

Total NIKE Brand
 
7,421

 
6,468

Converse
 
575

 
494

Corporate
 
(14
)
 
9

TOTAL NIKE CONSOLIDATED REVENUES
 
$
7,982

 
$
6,971

EARNINGS BEFORE INTEREST AND TAXES
 
 
 
 
North America
 
$
970

 
$
813

Western Europe
 
404

 
265

Central & Eastern Europe
 
68

 
81

Greater China
 
218

 
170

Japan
 
11

 
24

Emerging Markets
 
156

 
210

Global Brand Divisions
 
(533
)
 
(466
)
Total NIKE Brand
 
1,294

 
1,097

Converse
 
186

 
169

Corporate
 
(242
)
 
(220
)
Total NIKE Consolidated Earnings Before Interest and Taxes
 
1,238

 
1,046

Interest expense (income), net
 
9

 
8

TOTAL NIKE CONSOLIDATED EARNINGS BEFORE TAXES
 
$
1,229

 
$
1,038


 

 
 
As of August 31,
 
As of May 31,
(In millions)
 
2014
 
2014
ACCOUNTS RECEIVABLE, NET
 
 
 
 
North America
 
$
1,485

 
$
1,505

Western Europe
 
584

 
341

Central & Eastern Europe
 
286

 
280

Greater China
 
66

 
68

Japan
 
94

 
162

Emerging Markets
 
733

 
819

Global Brand Divisions
 
79

 
71

Total NIKE Brand
 
3,327

 
3,246

Converse
 
241

 
171

Corporate
 
19

 
17

TOTAL ACCOUNTS RECEIVABLE, NET
 
$
3,587

 
$
3,434

INVENTORIES
 
 
 
 
North America
 
$
1,828

 
$
1,758

Western Europe
 
709

 
711

Central & Eastern Europe
 
192

 
271

Greater China
 
272

 
221

Japan
 
114

 
94

Emerging Markets
 
685

 
633

Global Brand Divisions
 
37

 
18

Total NIKE Brand
 
3,837

 
3,706

Converse
 
210

 
261

Corporate
 
(17
)
 
(20
)
TOTAL INVENTORIES
 
$
4,030

 
$
3,947

PROPERTY, PLANT AND EQUIPMENT, NET
 
 
 
 
North America
 
$
565

 
$
545

Western Europe
 
413

 
384

Central & Eastern Europe
 
53

 
51

Greater China
 
238

 
232

Japan
 
250

 
258

Emerging Markets
 
112

 
115

Global Brand Divisions
 
537

 
537

Total NIKE Brand
 
2,168

 
2,122

Converse
 
79

 
70

Corporate
 
648

 
642

TOTAL PROPERTY, PLANT AND EQUIPMENT, NET
 
$
2,895

 
$
2,834

Commitments and Contingencies
Commitments and Contingencies
NOTE 11 — Commitments and Contingencies
At August 31, 2014, the Company had letters of credit outstanding totaling $117 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.
During the year ended May 31, 2013, the Company divested of Cole Haan. Preexisting guarantees of certain Cole Haan lease payments remained in place after the sale; the maximum exposure under the guarantees was $30 million at August 31, 2014. The fair value of the guarantees is not material.
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.
Summary of Significant Accounting Policies (Policies)
Recently Adopted Accounting Standards
Recently Issued Accounting Standards
In May 2014, the Financial Accounting Standards Board ("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 and early adoption is not permitted. The Company is currently evaluating the effect the guidance will have
Summary of Significant Accounting Policies (Tables)
Schedule of Error Corrections and Prior Period Adjustments
The following are selected line items from the Company's Unaudited Condensed Consolidated Financial Statements illustrating the effect of these corrections and the correction of other immaterial errors:
 
 
NIKE, Inc. Unaudited Condensed Consolidated Statements of Income
 
 
Three Months Ended August 31, 2013
(In millions, except per share data)
 
As Reported
 
Adjustment
 
As Revised
Total selling and administrative expense
 
$
2,056

 
$
2

 
$
2,058

Income before income taxes
 
1,040

 
(2
)
 
1,038

Income tax expense
 
260

 
(1
)
 
259

NET INCOME
 
$
780

 
$
(1
)
 
$
779

 
 
 
 
 
 
 
Earnings per common share:
 
 
 
 
 
 
Basic
 
$
0.88

 
$
0.00

 
$
0.88

Diluted
 
$
0.86

 
$
0.00

 
$
0.86

 
 
NIKE, Inc. Unaudited Condensed Consolidated Statements of Comprehensive Income
 
 
Three Months Ended August 31, 2013
(In millions)
 
As Reported
 
Adjustment
 
As Revised
Net income
 
$
780

 
$
(1
)
 
$
779

TOTAL COMPREHENSIVE INCOME
 
$
683

 
$
(1
)
 
$
682

 
 
NIKE, Inc. Unaudited Condensed Consolidated Statements of Cash Flows
 
 
Three Months Ended August 31, 2013
(In millions)
 
As Reported
 
Adjustment
 
As Revised
Cash provided by operations:
 
 
 
 
 
 
Net income
 
$
780

 
$
(1
)
 
$
779

Income charges (credits) not affecting cash:
 
 
 
 
 
 
Amortization and other
 
31

 
(1
)
 
30

(Increase) in inventories
 
(63
)
 
2

 
(61
)
(Decrease) in accounts payable, accrued liabilities and income taxes
 
(135
)
 
21

 
(114
)
Cash provided by operations
 
597

 
21

 
618

Cash provided (used) by investing activities:
 
 
 
 
 
 
Purchases of short-term investments
 
(1,328
)
 
(89
)
 
(1,417
)
Sales of short-term investments
 
436

 
(186
)
 
250

Additions to property, plant and equipment
 
(215
)
 
(30
)
 
(245
)
Increase in other assets, net of other liabilities
 
(4
)
 
3

 
(1
)
Cash provided (used) by investing activities
 
(392
)
 
(302
)
 
(694
)
Cash used by financing activities:
 
 
 
 
 
 
(Decrease) increase in notes payable
 
(3
)
 
6

 
3

Cash used by financing activities
 
(598
)
 
6

 
(592
)
Net increase (decrease) in cash and equivalents
 
(401
)
 
(275
)
 
(676
)
Cash and equivalents, beginning of period
 
3,337

 
—

 
3,337

CASH AND EQUIVALENTS, END OF PERIOD
 
$
2,936

 
$
(275
)
 
$
2,661

Accrued Liabilities (Tables)
Schedule of Accrued Liabilities
Accrued liabilities included the following:
 
 
As of August 31,
 
As of May 31,
(In millions)
 
2014
 
2014
Compensation and benefits, excluding taxes
 
$
578

 
$
782

Endorsement compensation
 
420

 
328

Taxes other than income taxes
 
232

 
204

Dividends payable
 
207

 
209

Import and logistics costs
 
149

 
127

Advertising and marketing
 
142

 
133

Fair value of derivatives
 
61

 
85

Other(1)
 
652

 
623

TOTAL ACCRUED LIABILITIES
 
$
2,441

 
$
2,491

(1)
Other consists of various accrued expenses with no individual item accounting for more than 5% of the total Accrued liabilities balance at August 31, 2014 and May 31, 2014.
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 measured at fair value on a recurring basis as of August 31, 2014 and May 31, 2014, and indicate the level in the fair value hierarchy in which the Company classifies the fair value measurement.
 
As of August 31, 2014
(In millions)
 
Assets at Fair Value
 
Cash and Cash Equivalents
 
Short-term Investments
 
Other Long-term Assets
Cash
 
$
976

 
$
976

 
$
—

 
$
—

Level 1:
 
 
 
 
 
 
 
 
U.S. Treasury securities
 
985

 
150

 
835

 
—

Level 2:
 
 
 
 
 
 
 
 
Time deposits
 
244

 
244

 
—

 
—

U.S. Agency securities
 
785

 
48

 
737

 
—

Commercial paper and bonds
 
779

 
75

 
704

 
—

Money market funds
 
810

 
810

 
—

 
—

Total Level 2:
 
2,618

 
1,177

 
1,441

 
—

Level 3:
 
 
 
 
 
 
 
 
Non-marketable preferred stock
 
7

 
—

 
—

 
7

TOTAL
 
$
4,586

 
$
2,303

 
$
2,276

 
$
7


 
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

Schedule of Derivative Instruments in Statement of Financial Position, Fair Value 
The following tables present information about the Company’s derivative assets and liabilities measured at fair value on a recurring basis as of August 31, 2014 and May 31, 2014, and indicate the level in the fair value hierarchy in which the Company classifies the fair value measurement.
 
As of August 31, 2014
 
 
Derivative Assets
 
Derivative Liabilities
(In millions)
 
Assets at Fair Value
 
Other Current Assets
 
Other Long-term Assets
 
Liabilities at Fair Value
 
Accrued Liabilities
 
Other Long-term Liabilities
Level 2:
 
 
 
 
 
 
 
 
 
 
 
 
Foreign exchange forwards and options(1)
 
$
278

 
$
219

 
$
59

 
$
65

 
$
60

 
$
5

Embedded derivatives
 
—

 
—

 
—

 
1

 
1

 
—

Interest rate swap contracts
 
5

 
—

 
5

 
—

 
—

 
—

TOTAL
 
$
283

 
$
219

 
$
64

 
$
66

 
$
61

 
$
5

(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 Unaudited Condensed Consolidated Balance Sheets. If the derivative financial instruments had been netted in the Unaudited Condensed Consolidated Balance Sheets, the asset and liability positions each would have been reduced by $61 million. No material amounts of collateral were received or posted on the Company’s derivative assets and liabilities as of August 31, 2014.
 
As of May 31, 2014
 
 
Derivative Assets
 
Derivative Liabilities
(In millions)
 
Assets at Fair Value
 
Other Current Assets
 
Other Long-term Assets
 
Liabilities at Fair Value
 
Accrued Liabilities
 
Other Long-term Liabilities
Level 2:
 
 
 
 
 
 
 
 
 
 
 
 
Foreign exchange forwards and options(1)
 
$
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.
The following table presents the fair values of derivative instruments included within the Unaudited Condensed Consolidated Balance Sheets as of August 31, 2014 and May 31, 2014: 
 
 
Derivative Assets
 
Derivative Liabilities
(In millions)
 
Balance Sheet
Location
 
August 31,
2014
 
May 31,
2014
 
Balance Sheet 
Location
 
August 31,
2014
 
May 31,
2014
Derivatives formally designated as hedging instruments:
 
 
 
 
 
 
 
 
 
 
 
 
Foreign exchange forwards and options
 
Prepaid expenses and other current assets
 
$
169

 
$
76

 
Accrued liabilities
 
$
53

 
$
57

Foreign exchange forwards and options
 
Deferred income taxes and other assets
 
59

 
26

 
Deferred income taxes and other liabilities
 
5

 
1

Interest rate swap contracts
 
Deferred income taxes and other assets
 
5

 
6

 
Deferred income taxes and other liabilities
 
—

 
—

Total derivatives formally designated as hedging instruments
 
 
 
233

 
108

 
 
 
58

 
58

Derivatives not designated as hedging instruments:
 
 
 
 
 
 
 
 
 
 
 
 
Foreign exchange forwards and options
 
Prepaid expenses and other current assets
 
50

 
25

 
Accrued liabilities
 
7

 
27

Embedded derivatives
 
Prepaid expenses and other current assets
 
—

 
—

 
Accrued liabilities
 
1

 
—

Total derivatives not designated as hedging instruments
 
 
 
50

 
25

 
 
 
8

 
27

TOTAL DERIVATIVES
 
 
 
$
283

 
$
133

 
 
 
$
66

 
$
85

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 Operating overhead expense: 
 
 
Three Months Ended August 31,
(In millions)
 
2014
 
2013
Stock options(1)
 
$
30

 
$
29

ESPPs
 
6

 
5

Restricted stock
 
7

 
8

TOTAL STOCK-BASED COMPENSATION EXPENSE
 
$
43

 
$
42

(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 the three month periods ended August 31, 2014 and 2013 was $4 million for each respective period.
Schedule of Share-based Payment Award, Stock Options, Valuation Assumptions 
The weighted average assumptions used to estimate these fair values are as follows:
 
 
Three Months Ended August 31,
  
 
2014
 
2013
Dividend yield
 
1.2
%
 
1.3
%
Expected volatility
 
23.6
%
 
27.9
%
Weighted average expected life (in years)
 
5.8

 
5.3

Risk-free interest rate
 
1.7
%
 
1.3
%
Earnings Per Share (Tables)
Schedule of Earnings Per Share, Basic and Diluted
The following is a reconciliation from basic earnings per share to diluted earnings per share. Options to purchase an additional 9.2 million and 7.9 million shares of common stock were outstanding at August 31, 2014 and 2013, respectively, but were not included in the computation of diluted earnings per share because the options were anti-dilutive.
 
 
Three Months Ended August 31,
(In millions, except per share data)
 
2014
 
2013
Determination of shares:
 
 
 
 
Weighted average common shares outstanding
 
864.9

 
889.4

Assumed conversion of dilutive stock options and awards
 
21.3

 
21.3

DILUTED WEIGHTED AVERAGE COMMON SHARES OUTSTANDING
 
886.2

 
910.7

 
 
 
 
 
Earnings per common share:
 
 
 
 
Basic
 
$
1.11

 
$
0.88

Diluted
 
$
1.09

 
$
0.86

Risk Management and Derivatives (Tables)
Schedule of Derivative Instruments in Statement of Financial Position, Fair Value 
The following tables present information about the Company’s derivative assets and liabilities measured at fair value on a recurring basis as of August 31, 2014 and May 31, 2014, and indicate the level in the fair value hierarchy in which the Company classifies the fair value measurement.
 
As of August 31, 2014
 
 
Derivative Assets
 
Derivative Liabilities
(In millions)
 
Assets at Fair Value
 
Other Current Assets
 
Other Long-term Assets
 
Liabilities at Fair Value
 
Accrued Liabilities
 
Other Long-term Liabilities
Level 2:
 
 
 
 
 
 
 
 
 
 
 
 
Foreign exchange forwards and options(1)
 
$
278

 
$
219

 
$
59

 
$
65

 
$
60

 
$
5

Embedded derivatives
 
—

 
—

 
—

 
1

 
1

 
—

Interest rate swap contracts
 
5

 
—

 
5

 
—

 
—

 
—

TOTAL
 
$
283

 
$
219

 
$
64

 
$
66

 
$
61

 
$
5

(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 Unaudited Condensed Consolidated Balance Sheets. If the derivative financial instruments had been netted in the Unaudited Condensed Consolidated Balance Sheets, the asset and liability positions each would have been reduced by $61 million. No material amounts of collateral were received or posted on the Company’s derivative assets and liabilities as of August 31, 2014.
 
As of May 31, 2014
 
 
Derivative Assets
 
Derivative Liabilities
(In millions)
 
Assets at Fair Value
 
Other Current Assets
 
Other Long-term Assets
 
Liabilities at Fair Value
 
Accrued Liabilities
 
Other Long-term Liabilities
Level 2:
 
 
 
 
 
 
 
 
 
 
 
 
Foreign exchange forwards and options(1)
 
$
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.
The following table presents the fair values of derivative instruments included within the Unaudited Condensed Consolidated Balance Sheets as of August 31, 2014 and May 31, 2014: 
 
 
Derivative Assets
 
Derivative Liabilities
(In millions)
 
Balance Sheet
Location
 
August 31,
2014
 
May 31,
2014
 
Balance Sheet 
Location
 
August 31,
2014
 
May 31,
2014
Derivatives formally designated as hedging instruments:
 
 
 
 
 
 
 
 
 
 
 
 
Foreign exchange forwards and options
 
Prepaid expenses and other current assets
 
$
169

 
$
76

 
Accrued liabilities
 
$
53

 
$
57

Foreign exchange forwards and options
 
Deferred income taxes and other assets
 
59

 
26

 
Deferred income taxes and other liabilities
 
5

 
1

Interest rate swap contracts
 
Deferred income taxes and other assets
 
5

 
6

 
Deferred income taxes and other liabilities
 
—

 
—

Total derivatives formally designated as hedging instruments
 
 
 
233

 
108

 
 
 
58

 
58

Derivatives not designated as hedging instruments:
 
 
 
 
 
 
 
 
 
 
 
 
Foreign exchange forwards and options
 
Prepaid expenses and other current assets
 
50

 
25

 
Accrued liabilities
 
7

 
27

Embedded derivatives
 
Prepaid expenses and other current assets
 
—

 
—

 
Accrued liabilities
 
1

 
—

Total derivatives not designated as hedging instruments
 
 
 
50

 
25

 
 
 
8

 
27

TOTAL DERIVATIVES
 
 
 
$
283

 
$
133

 
 
 
$
66

 
$
85

Schedule of Derivative Instruments, Gain (Loss) in Statement of Financial Performance 
The following tables present the amounts affecting the Unaudited Condensed Consolidated Statements of Income for the three months ended August 31, 2014 and 2013:

(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)
Three Months Ended August 31,
 
Location of Gain (Loss) Reclassified From  Accumulated Other Comprehensive Income into Income(1)
 
Three Months Ended August 31,
2014
 
2013
 
2014
 
2013
Derivatives designated as cash flow hedges:
 
 
 
 
 
 
 
 
 
 
Foreign exchange forwards and options
 
$
(38
)
 
$
(3
)
 
Revenues
 
$
(17
)
 
$
14

Foreign exchange forwards and options
 
119

 
(24
)
 
Cost of sales
 
(8
)
 
16

Foreign exchange forwards and options
 
—

 
1

 
Total selling and administrative expense
 
—

 
—

Foreign exchange forwards and options
 
37

 
(7
)
 
Other expense (income), net
 
5

 
5

Total designated cash flow hedges
 
$
118

 
$
(33
)
 
 
 
$
(20
)
 
$
35

(1)
For the three months ended August 31, 2014, 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
 
 
Three Months Ended August 31,
 
(In millions)
 
2014
 
2013
 
Derivatives designated as fair value hedges:
 
 
 
 
 
 
Interest rate swaps(1)
 
$
1

 
$
1

 
Interest expense (income), net
Derivatives not designated as hedging instruments:
 
 
 
 
 
 
Foreign exchange forwards and options
 
$
93

 
$
(15
)
 
Other expense (income), net
Embedded derivatives
 
$
(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.
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, 2014
 
$
9

 
$
32

 
$
95

 
$
(51
)
 
$
85

Other comprehensive gains (losses) before reclassifications(2)
 
2

 
119

 
—

 
5

 
126

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

 
16

 
—

 
(3
)
 
13

Other comprehensive income (loss)
 
2

 
135

 
—

 
2

 
139

Balance at August 31, 2014
 
$
11

 
$
167

 
$
95

 
$
(49
)
 
$
224

(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 (expense) of $(11) million, $1 million, $0 million, $(2) million, and $(12) million, respectively.
(3)
Net of tax (benefit) expense of $0 million, $(4) million, $0 million, $1 million, and $(3) million, respectively.
(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)
 
(31
)
 
(35
)
 
—

 
(2
)
 
(68
)
Reclassifications to net income of previously deferred (gains) losses(3)
 
—

 
(30
)
 
—

 
1

 
(29
)
Other comprehensive income (loss)
 
(31
)
 
(65
)
 
—

 
(1
)
 
(97
)
Balance at August 31, 2013
 
$
10

 
$
128

 
$
95

 
$
(56
)
 
$
177

(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 (expense) of $0 million, $(2) million, $0 million, $0 million, and $(2) million, respectively.
(3)
Net of tax (benefit) expense of $0 million, $5 million, $0 million, $0 million, and $5 million, respectively.
Reclassification out of Accumulated Other Comprehensive Income 
The following table summarizes the reclassifications from Accumulated other comprehensive income to the Unaudited Condensed Consolidated Statements of Income:
 
 
Amount of Gain (Loss) Reclassified from Accumulated Other Comprehensive Income into Income
 
 
 
 
Three Months Ended August 31,
 
Location of Gain (Loss) Reclassified from Accumulated Other Comprehensive Income into Income
(In millions)
 
2014
 
2013
 
Gains (losses) on cash flow hedges:
 
 
 
 
 
 
Foreign exchange forwards and options
 
$
(17
)
 
$
14

 
Revenue
Foreign exchange forwards and options
 
(8
)
 
16

 
Cost of sales
Foreign exchange forwards and options
 
—

 
—

 
Total selling and administrative expense
Foreign exchange forwards and options
 
5

 
5

 
Other expense (income), net
Total before tax
 
(20
)
 
35

 
 
Tax benefit (expense)
 
4

 
(5
)
 
 
(Loss) gain net of tax
 
(16
)
 
30

 
 
Gains (losses) on other
 
4

 
(1
)
 
Other expense (income), net
Total before tax
 
4

 
(1
)
 
 
Tax (expense)
 
(1
)
 
—

 
 
Gain (loss) net of tax
 
3

 
(1
)
 
 
Total net (loss) gain reclassified for the period
 
$
(13
)
 
$
29

 
 
Operating Segments (Tables)
Schedule of Segment Reporting Information, by Segment 
 
 
Three Months Ended August 31,
(In millions)
 
2014
 
2013
REVENUES
 
 
 
 
North America
 
$
3,513

 
$
3,135

Western Europe
 
1,714

 
1,301

Central & Eastern Europe
 
392

 
366

Greater China
 
679

 
574

Japan
 
160

 
158

Emerging Markets
 
934

 
902

Global Brand Divisions
 
29

 
32

Total NIKE Brand
 
7,421

 
6,468

Converse
 
575

 
494

Corporate
 
(14
)
 
9

TOTAL NIKE CONSOLIDATED REVENUES
 
$
7,982

 
$
6,971

EARNINGS BEFORE INTEREST AND TAXES
 
 
 
 
North America
 
$
970

 
$
813

Western Europe
 
404

 
265

Central & Eastern Europe
 
68

 
81

Greater China
 
218

 
170

Japan
 
11

 
24

Emerging Markets
 
156

 
210

Global Brand Divisions
 
(533
)
 
(466
)
Total NIKE Brand
 
1,294

 
1,097

Converse
 
186

 
169

Corporate
 
(242
)
 
(220
)
Total NIKE Consolidated Earnings Before Interest and Taxes
 
1,238

 
1,046

Interest expense (income), net
 
9

 
8

TOTAL NIKE CONSOLIDATED EARNINGS BEFORE TAXES
 
$
1,229

 
$
1,038

Reconciliation of Assets from Segment to Consolidated 
 
 
As of August 31,
 
As of May 31,
(In millions)
 
2014
 
2014
ACCOUNTS RECEIVABLE, NET
 
 
 
 
North America
 
$
1,485

 
$
1,505

Western Europe
 
584

 
341

Central & Eastern Europe
 
286

 
280

Greater China
 
66

 
68

Japan
 
94

 
162

Emerging Markets
 
733

 
819

Global Brand Divisions
 
79

 
71

Total NIKE Brand
 
3,327

 
3,246

Converse
 
241

 
171

Corporate
 
19

 
17

TOTAL ACCOUNTS RECEIVABLE, NET
 
$
3,587

 
$
3,434

INVENTORIES
 
 
 
 
North America
 
$
1,828

 
$
1,758

Western Europe
 
709

 
711

Central & Eastern Europe
 
192

 
271

Greater China
 
272

 
221

Japan
 
114

 
94

Emerging Markets
 
685

 
633

Global Brand Divisions
 
37

 
18

Total NIKE Brand
 
3,837

 
3,706

Converse
 
210

 
261

Corporate
 
(17
)
 
(20
)
TOTAL INVENTORIES
 
$
4,030

 
$
3,947

PROPERTY, PLANT AND EQUIPMENT, NET
 
 
 
 
North America
 
$
565

 
$
545

Western Europe
 
413

 
384

Central & Eastern Europe
 
53

 
51

Greater China
 
238

 
232

Japan
 
250

 
258

Emerging Markets
 
112

 
115

Global Brand Divisions
 
537

 
537

Total NIKE Brand
 
2,168

 
2,122

Converse
 
79

 
70

Corporate
 
648

 
642

TOTAL PROPERTY, PLANT AND EQUIPMENT, NET
 
$
2,895

 
$
2,834

Summary of Significant Accounting Policies - Revisions (Details) (USD $)
In Millions, except Per Share data, unless otherwise specified
3 Months Ended
Aug. 31, 2014
Aug. 31, 2013
May 31, 2014
Short-term investments
$ 2,276 
 
$ 2,922 
Net Income (Loss) [Abstract]
 
 
 
Total selling and administrative expense
2,480 
2,058 
 
Total before tax
1,229 
1,038 
 
Income tax expense
267 
259 
 
Net income
962 
779 
 
Basic earnings per common share for NIKE, Inc. (in dollars per share)
$ 1.11 
$ 0.88 
 
Diluted earnings per common share for NIKE, Inc. (in dollars per share)
$ 1.09 
$ 0.86 
 
Comprehensive Income [Abstract]
 
 
 
Net income
962 
779 
 
TOTAL COMPREHENSIVE INCOME
1,101 
682 
 
Cash provided by operations:
 
 
 
Net income
962 
779 
 
Amortization and other
(34)
30 
 
(Increase) in inventories
(111)
(61)
 
(Decrease) in accounts payable, accrued liabilities and income taxes
(251)
(114)
 
Cash provided by operations
588 
618 
 
Cash provided (used) by investing activities:
 
 
 
Purchases of short-term investments
(1,296)
(1,417)
 
Sales of short-term investments
762 
250 
 
Additions to property, plant and equipment
262 
245 
 
Increase in other assets, net of other liabilities
0 
(1)
 
Cash (used) provided by investing activities
280 
(694)
 
Cash used by financing activities:
 
 
 
(Decrease) increase in notes payable
(17)
3 
 
Cash used by financing activities
(882)
(592)
 
Net increase (decrease) in cash and equivalents
83 
(676)
 
Cash and equivalents, beginning of period
2,220 
3,337 
 
CASH AND EQUIVALENTS, END OF PERIOD
2,303 
2,661 
 
As Reported
 
 
 
Net Income (Loss) [Abstract]
 
 
 
Total selling and administrative expense
 
2,056 
 
Total before tax
 
1,040 
 
Income tax expense
 
260 
 
Net income
 
780 
 
Basic earnings per common share for NIKE, Inc. (in dollars per share)
 
$ 0.88 
 
Diluted earnings per common share for NIKE, Inc. (in dollars per share)
 
$ 0.86 
 
Comprehensive Income [Abstract]
 
 
 
Net income
 
780 
 
TOTAL COMPREHENSIVE INCOME
 
683 
 
Cash provided by operations:
 
 
 
Net income
 
780 
 
Amortization and other
 
31 
 
(Increase) in inventories
 
(63)
 
(Decrease) in accounts payable, accrued liabilities and income taxes
 
(135)
 
Cash provided by operations
 
597 
 
Cash provided (used) by investing activities:
 
 
 
Purchases of short-term investments
 
(1,328)
 
Sales of short-term investments
 
436 
 
Additions to property, plant and equipment
 
215 
 
Increase in other assets, net of other liabilities
 
(4)
 
Cash (used) provided by investing activities
 
(392)
 
Cash used by financing activities:
 
 
 
(Decrease) increase in notes payable
 
(3)
 
Cash used by financing activities
 
(598)
 
Net increase (decrease) in cash and equivalents
 
(401)
 
Cash and equivalents, beginning of period
 
3,337 
 
CASH AND EQUIVALENTS, END OF PERIOD
 
2,936 
 
Adjustment
 
 
 
Net Income (Loss) [Abstract]
 
 
 
Total selling and administrative expense
 
2 
 
Total before tax
 
(2)
 
Income tax expense
 
(1)
 
Net income
 
(1)
 
Basic earnings per common share for NIKE, Inc. (in dollars per share)
 
$ 0.00 
 
Diluted earnings per common share for NIKE, Inc. (in dollars per share)
 
$ 0.00 
 
Comprehensive Income [Abstract]
 
 
 
Net income
 
(1)
 
TOTAL COMPREHENSIVE INCOME
 
(1)
 
Cash provided by operations:
 
 
 
Net income
 
(1)
 
Amortization and other
 
(1)
 
(Increase) in inventories
 
2 
 
(Decrease) in accounts payable, accrued liabilities and income taxes
 
21 
 
Cash provided by operations
 
21 
 
Cash provided (used) by investing activities:
 
 
 
Purchases of short-term investments
 
(89)
 
Sales of short-term investments
 
(186)
 
Additions to property, plant and equipment
 
30 
 
Increase in other assets, net of other liabilities
 
3 
 
Cash (used) provided by investing activities
 
(302)
 
Cash used by financing activities:
 
 
 
(Decrease) increase in notes payable
 
6 
 
Cash used by financing activities
 
6 
 
Net increase (decrease) in cash and equivalents
 
(275)
 
Cash and equivalents, beginning of period
 
0 
 
CASH AND EQUIVALENTS, END OF PERIOD
 
(275)
 
Prior Year Revision To Capitalized Costs |
Adjustment
 
 
 
Net Income (Loss) [Abstract]
 
 
 
Net income
 
(1)
 
Comprehensive Income [Abstract]
 
 
 
Net income
 
(1)
 
Cash provided by operations:
 
 
 
Net income
 
(1)
 
Cash provided by operations
 
(3)
 
Cash provided (used) by investing activities:
 
 
 
Cash (used) provided by investing activities
 
3 
 
Prior Year Revision To Short-term Investments |
Adjustment
 
 
 
Short-term investments
 
275 
 
Cash provided (used) by investing activities:
 
 
 
Purchases of short-term investments
 
(89)
 
Sales of short-term investments
 
(186)
 
Cash (used) provided by investing activities
 
275 
 
Cash used by financing activities:
 
 
 
CASH AND EQUIVALENTS, END OF PERIOD
 
(275)
 
Prior Year Revision to Inventory Amounts |
Adjustment
 
 
 
Cash flow impact on accrued liabilities
 
2 
 
Cash provided by operations:
 
 
 
(Increase) in inventories
 
2 
 
Prior Period Revisions to Non-cash Property Plant And Equipment Additions |
Adjustment
 
 
 
Cash provided (used) by investing activities:
 
 
 
Additions to property, plant and equipment
 
$ 30 
 
Inventories - Additional Information (Detail) (USD $)
In Millions, unless otherwise specified
Aug. 31, 2014
May 31, 2014
Inventory Disclosure [Abstract]
 
 
Inventory balances (substantially all finished goods)
$ 4,030 
$ 3,947 
Accrued Liabilities (Detail) (USD $)
In Millions, unless otherwise specified
Aug. 31, 2014
May 31, 2014
Accrued Liabilities, Current [Abstract]
 
 
Compensation and benefits, excluding taxes
$ 578 
$ 782 
Endorsement compensation
420 
328 
Dividends payable
207 
209 
Taxes other than income taxes
232 
204 
Import and logistics costs
149 
127 
Advertising and marketing
142 
133 
Fair value of derivatives
61 
85 
Other
652 1
623 1
TOTAL ACCRUED LIABILITIES
$ 2,441 
$ 2,491 
Maximum percent of accrued liabilities to be included in Other (percent)
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
Aug. 31, 2014
May 31, 2014
Fair Value, Assets and Liabilities Measured on Recurring Basis [Line Items]
 
 
Cash
$ 976 
$ 780 
Assets at Fair Value
4,586 
5,149 
Cash and Cash Equivalents
2,303 
2,220 
Short-term Investments
2,276 
2,922 
Other Long-term Assets
7 
7 
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
985 
1,137 
Cash and Cash Equivalents
150 
151 
Short-term Investments
835 
986 
Other Long-term Assets
0 
0 
Fair Value Measurements Using Level 2
 
 
Fair Value, Assets and Liabilities Measured on Recurring Basis [Line Items]
 
 
Derivative Asset
283 
133 
Assets at Fair Value
2,618 
3,225 
Cash and Cash Equivalents
1,177 
1,289 
Short-term Investments
1,441 
1,936 
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
244 
227 
Cash and Cash Equivalents
244 
227 
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
785 
1,027 
Cash and Cash Equivalents
48 
25 
Short-term Investments
737 
1,002 
Other Long-term Assets
0 
0 
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
779 
959 
Cash and Cash Equivalents
75 
25 
Short-term Investments
704 
934 
Other Long-term Assets
0 
0 
Fair Value Measurements Using Level 2 |
Money market funds
 
 
Fair Value, Assets and Liabilities Measured on Recurring Basis [Line Items]
 
 
Assets at Fair Value
810 
1,012 
Cash and Cash Equivalents
810 
1,012 
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 
7 
Cash and Cash Equivalents
0 
0 
Short-term Investments
0 
0 
Other Long-term Assets
$ 7 
$ 7 
Fair Value Measurements - Derivative Assets and Liabilities at Fair Value (Detail) (USD $)
In Millions, unless otherwise specified
Aug. 31, 2014
May 31, 2014
Derivatives, Fair Value [Line Items]
 
 
Fair value of derivatives
$ 61 
$ 85 
Fair Value, Measurements, Recurring
 
 
Derivatives, Fair Value [Line Items]
 
 
Reduction in derivative assets if netted
61 
63 
Reduction in derivative liabilities if netted
61 
63 
Fair Value Measurements Using Level 2 |
Fair Value, Measurements, Recurring
 
 
Derivatives, Fair Value [Line Items]
 
 
Assets at Fair Value
283 
133 
Other Current Assets
219 
101 
Other Long-term Assets
64 
32 
Liabilities at Fair Value
66 
85 
Fair value of derivatives
61 
84 
Other Long-term Liabilities
5 
1 
Fair Value Measurements Using Level 2 |
Fair Value, Measurements, Recurring |
Foreign exchange forwards and options
 
 
Derivatives, Fair Value [Line Items]
 
 
Assets at Fair Value
278 1
127 2
Other Current Assets
219 1
101 2
Other Long-term Assets
59 1
26 2
Liabilities at Fair Value
65 1
85 2
Fair value of derivatives
60 1
84 2
Other Long-term Liabilities
5 1
1 2
Fair Value Measurements Using Level 2 |
Fair Value, Measurements, Recurring |
Embedded derivatives
 
 
Derivatives, Fair Value [Line Items]
 
 
Assets at Fair Value
0 
 
Other Current Assets
0 
 
Other Long-term Assets
0 
 
Liabilities at Fair Value
1 
 
Fair value of derivatives
1 
 
Other Long-term Liabilities
0 
 
Fair Value Measurements Using Level 2 |
Fair Value, Measurements, Recurring |
Interest rate swap contracts
 
 
Derivatives, Fair Value [Line Items]
 
 
Assets at Fair Value
5 
6 
Other Current Assets
0 
0 
Other Long-term Assets
5 
6 
Liabilities at Fair Value
0 
0 
Fair value of derivatives
0 
0 
Other Long-term Liabilities
$ 0 
$ 0 
Fair Value Measurements - Additional Information (Detail) (USD $)
In Millions, unless otherwise specified
3 Months Ended
Aug. 31, 2014
Aug. 31, 2013
May 31, 2014
Fair Value, Assets and Liabilities Measured on Recurring Basis [Line Items]
 
 
 
Available-for-sale securities with maturity dates within one year from purchase date
$ 1,674 
 
$ 2,287 
Available-for-sale securities with maturity dates over one year and less than five years from purchase date
602 
 
635 
Interest income related to cash and equivalents and short-term investments
1 
1 
 
Fair value of long term debt
$ 1,177 
 
$ 1,154 
Income Taxes - Income before Income Taxes (Detail) (USD $)
In Millions, unless otherwise specified
3 Months Ended
Aug. 31, 2014
Aug. 31, 2013
May 31, 2014
Income Tax Disclosure [Abstract]
 
 
 
Effective tax rate on continuing operations (percent)
21.70% 
25.00% 
 
Total gross unrecognized tax benefits, excluding related interest and penalties
$ 473 
 
$ 506 
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
253 
 
 
Increase in liability for payment of interest and penalties
7 
 
 
Accrued interest and penalties related to uncertain tax positions (excluding federal benefit)
160 
 
167 
Estimated decrease in total gross unrecognized tax benefits as a result of resolutions of global tax examinations and expiration of applicable statutes of limitations
$ 71 
 
 
Stock Based Compensation - Additional Information (Detail) (Common Class B, USD $)
In Millions, except Share data, unless otherwise specified
3 Months Ended
Aug. 31, 2014
Aug. 31, 2013
Stock Incentive Plan 1990
 
 
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 
 
Unrecognized compensation costs from stock options, net of estimated forfeitures
$ 285 
 
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 
 
Weighted average fair value per share of the options granted (in dollars per share)
$ 16.91 
$ 14.85 
Minimum term of market traded options for estimates of expected volatility (in years)
1 year 
 
Employee Stock
 
 
Common Stock and Share Based Compensation [Line Items]
 
 
Employee stock purchase plans, payroll deductions (percent)
10.00% 
 
Employee stock purchase plan offering period (in months)
6 months 
 
Shares purchased, price as percentage of lower of the fair market value (percent)
85.00% 
 
Employee Stock |
Stock Incentive Plan 1990
 
 
Common Stock and Share Based Compensation [Line Items]
 
 
Accelerated stock option expense
$ 4 
$ 4 
Stock-Based Compensation - Total Stock-Based Compensation Expense (Detail) (USD $)
In Millions, unless otherwise specified
3 Months Ended
Aug. 31, 2014
Aug. 31, 2013
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
 
 
Stock-based compensation expense
$ 43 
$ 42 
Class B Common Stock |
Stock Incentive Plan 1990
 
 
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
 
 
Stock-based compensation expense
43 
42 
Class B Common Stock |
Stock Incentive Plan 1990 |
Stock Options
 
 
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
 
 
Stock-based compensation expense
30 1
29 1
Class B Common Stock |
Stock Incentive Plan 1990 |
ESPPs
 
 
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
 
 
Stock-based compensation expense
6 
5 
Class B Common Stock |
Stock Incentive Plan 1990 |
Restricted stock
 
 
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
 
 
Stock-based compensation expense
$ 7 
$ 8 
Stock-Based Compensation - Weighted Average Assumptions Used to Estimate Fair Values (Detail) (Stock Incentive Plan 1990, Class B Common Stock)
3 Months Ended
Aug. 31, 2014
Aug. 31, 2013
Stock Incentive Plan 1990 |
Class B Common Stock
 
 
Common Stock and Share Based Compensation [Line Items]
 
 
Dividend yield
1.20% 
1.30% 
Expected volatility
23.60% 
27.90% 
Weighted average expected life (in years)
5 years 9 months 18 days 
5 years 3 months 18 days 
Risk-free interest rate
1.70% 
1.30% 
Earnings Per Share - Additional Information (Detail)
In Millions, unless otherwise specified
3 Months Ended
Aug. 31, 2014
Aug. 31, 2013
Earnings Per Share [Abstract]
 
 
Anti-dilutive options not included in the computation of diluted earnings per share
9.2 
7.9 
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
3 Months Ended
Aug. 31, 2014
Aug. 31, 2013
Determination of shares:
 
 
Weighted average common shares outstanding (in shares)
864.9 
889.4 
Assumed conversion of dilutive stock options and awards (in shares)
21.3 
21.3 
DILUTED WEIGHTED AVERAGE COMMON SHARES OUTSTANDING (in shares)
886.2 
910.7 
Basic earnings per common share for NIKE, Inc. (in dollars per share)
$ 1.11 
$ 0.88 
Diluted earnings per common share for NIKE, Inc. (in dollars per share)
$ 1.09 
$ 0.86 
Risk Management and Derivatives - Additional Information (Detail) (USD $)
3 Months Ended
Aug. 31, 2014
Derivative Instruments and Hedging Activities Disclosure [Line Items]
 
Total notional amount of outstanding derivatives
$ 13,000,000,000 
Maximum term over which the Company is hedging exposures to the variability of cash flows for its forecasted and recorded transactions (in months)
21 months 
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
104,000,000 
Aggregate fair value of derivative instruments in net liability position
3,000,000 
Embedded derivatives
 
Derivative Instruments and Hedging Activities Disclosure [Line Items]
 
Total notional amount of outstanding derivatives
127,000,000 
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
Aug. 31, 2014
May 31, 2014
Derivatives, Fair Value [Line Items]
 
 
Derivative Assets
$ 283 
$ 133 
Derivative Liabilities
66 
85 
Designated as Hedging Instrument
 
 
Derivatives, Fair Value [Line Items]
 
 
Derivative Assets
233 
108 
Derivative Liabilities
58 
58 
Designated as Hedging Instrument |
Foreign exchange forwards and options |
Prepaid expenses and other current assets
 
 
Derivatives, Fair Value [Line Items]
 
 
Derivative Assets
169 
76 
Designated as Hedging Instrument |
Foreign exchange forwards and options |
Deferred income taxes and other long-term assets
 
 
Derivatives, Fair Value [Line Items]
 
 
Derivative Assets
59 
26 
Designated as Hedging Instrument |
Foreign exchange forwards and options |
Accrued liabilities
 
 
Derivatives, Fair Value [Line Items]
 
 
Derivative Liabilities
53 
57 
Designated as Hedging Instrument |
Foreign exchange forwards and options |
Deferred income taxes and other long-term liabilities
 
 
Derivatives, Fair Value [Line Items]
 
 
Derivative Liabilities
5 
1 
Designated as Hedging Instrument |
Interest rate swap contracts |
Deferred income taxes and other long-term assets
 
 
Derivatives, Fair Value [Line Items]
 
 
Derivative Assets
5 
6 
Designated as Hedging Instrument |
Interest rate swap contracts |
Deferred income taxes and other long-term liabilities
 
 
Derivatives, Fair Value [Line Items]
 
 
Derivative Liabilities
0 
0 
Derivatives not designated as hedging instruments
 
 
Derivatives, Fair Value [Line Items]
 
 
Derivative Assets
50 
25 
Derivative Liabilities
8 
27 
Derivatives not designated as hedging instruments |
Foreign exchange forwards and options |
Prepaid expenses and other current assets
 
 
Derivatives, Fair Value [Line Items]
 
 
Derivative Assets
50 
25 
Derivatives not designated as hedging instruments |
Foreign exchange forwards and options |
Accrued liabilities
 
 
Derivatives, Fair Value [Line Items]
 
 
Derivative Liabilities
7 
27 
Derivatives not designated as hedging instruments |
Embedded derivatives |
Prepaid expenses and other current assets
 
 
Derivatives, Fair Value [Line Items]
 
 
Derivative Assets
0 
0 
Derivatives not designated as hedging instruments |
Embedded derivatives |
Accrued liabilities
 
 
Derivatives, Fair Value [Line Items]
 
 
Derivative Liabilities
$ 1 
$ 0 
Risk Management and Derivatives - Amounts Affecting Consolidated Statements of Income (Detail) (USD $)
In Millions, unless otherwise specified
3 Months Ended
Aug. 31, 2014
Aug. 31, 2013
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
$ 93 
$ (15)
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)
0 
Derivatives designated as cash flow hedges
 
 
Derivative Instruments, Gain (Loss) [Line Items]
 
 
Amount of Gain (Loss) Recognized in Other Comprehensive Income on Derivatives
118 1
(33)1
Amount of Gain (Loss) Reclassified From Accumulated Other Comprehensive Income into Income
(20)1
35 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
(38)1
(3)1
Amount of Gain (Loss) Reclassified From Accumulated Other Comprehensive Income into Income
(17)1
14 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
119 1
(24)1
Amount of Gain (Loss) Reclassified From Accumulated Other Comprehensive Income into Income
(8)1
16 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
0 1
1 1
Amount of Gain (Loss) Reclassified From Accumulated Other Comprehensive Income into Income
0 1
0 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
37 1
(7)1
Amount of Gain (Loss) Reclassified From Accumulated Other Comprehensive Income into Income
5 1
5 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
$ 1 2
$ 1 2
Accumulated Other Comprehensive Income - Changes in AOCI (Detail) (USD $)
In Millions, unless otherwise specified
3 Months Ended
Aug. 31, 2014
Aug. 31, 2013
Increase (Decrease) in Stockholders' Equity [Roll Forward]
 
 
Accumulated other comprehensive income balance at the beginning of the period
$ 85 
$ 274 
Other comprehensive gains (losses) before reclassifications, net of tax
126 1
(68)2
Reclassifications to net income of previously deferred (gains) losses, net of tax
13 3
(29)4
Other comprehensive income (loss)
139 
(97)
Accumulated other comprehensive income balance at the end of the period
224 
177 
Other comprehensive income, before reclassification, tax benefit (expense)
(12)
(2)
Reclassification from accumulated other comprehensive income, tax (benefit) expense
(3)
5 
Foreign Currency Translation Adjustment
 
 
Increase (Decrease) in Stockholders' Equity [Roll Forward]
 
 
Accumulated other comprehensive income balance at the beginning of the period
9 5
41 5
Other comprehensive gains (losses) before reclassifications, net of tax
2 1 5
(31)2 5
Reclassifications to net income of previously deferred (gains) losses, net of tax
0 3 5
0 4 5
Other comprehensive income (loss)
2 5
(31)5
Accumulated other comprehensive income balance at the end of the period
11 5
10 5
Other comprehensive income, before reclassification, tax benefit (expense)
(11)
0 
Reclassification from accumulated other comprehensive income, tax (benefit) expense
0 
0 
Cash Flow Hedges
 
 
Increase (Decrease) in Stockholders' Equity [Roll Forward]
 
 
Accumulated other comprehensive income balance at the beginning of the period
32 
193 
Other comprehensive gains (losses) before reclassifications, net of tax
119 1
(35)2
Reclassifications to net income of previously deferred (gains) losses, net of tax
16 3
(30)4
Other comprehensive income (loss)
135 
(65)
Accumulated other comprehensive income balance at the end of the period
167 
128 
Other comprehensive income, before reclassification, tax benefit (expense)
1 
(2)
Reclassification from accumulated other comprehensive income, tax (benefit) expense
(4)
5 
Net Investment Hedges
 
 
Increase (Decrease) in Stockholders' Equity [Roll Forward]
 
 
Accumulated other comprehensive income balance at the beginning of the period
95 5
95 5
Other comprehensive gains (losses) before reclassifications, net of tax
0 1 5
0 2 5
Reclassifications to net income of previously deferred (gains) losses, net of tax
0 3 5
0 4 5
Other comprehensive income (loss)
0 5
0 5
Accumulated other comprehensive income balance at the end of the period
95 5
95 5
Other comprehensive income, before reclassification, tax benefit (expense)
0 
0 
Reclassification from accumulated other comprehensive income, tax (benefit) expense
0 
0 
Other
 
 
Increase (Decrease) in Stockholders' Equity [Roll Forward]
 
 
Accumulated other comprehensive income balance at the beginning of the period
(51)
(55)
Other comprehensive gains (losses) before reclassifications, net of tax
5 1
(2)2
Reclassifications to net income of previously deferred (gains) losses, net of tax
(3)3
1 4
Other comprehensive income (loss)
2 
(1)
Accumulated other comprehensive income balance at the end of the period
(49)
(56)
Other comprehensive income, before reclassification, tax benefit (expense)
(2)
0 
Reclassification from accumulated other comprehensive income, tax (benefit) expense
$ 1 
$ 0 
Accumulated Other Comprehensive Income - Reclassification out of AOCI (Details) (USD $)
In Millions, unless otherwise specified
3 Months Ended
Aug. 31, 2014
Aug. 31, 2013
Reclassification out of Accumulated Other Comprehensive Income [Line Items]
 
 
Cost of sales
$ 4,261 
$ 3,839 
Total selling and administrative expense
2,480 
2,058 
Other expense (income), net
(3)
(28)
Total before tax
1,229 
1,038 
Tax benefit (expense)
(267)
(259)
Amount of Gain (Loss) Reclassified from Accumulated Other Comprehensive Income into Income
 
 
Reclassification out of Accumulated Other Comprehensive Income [Line Items]
 
 
NET INCOME
(13)
29 
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]
 
 
Total before tax
(20)
35 
Tax benefit (expense)
4 
(5)
NET INCOME
(16)
30 
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
(17)
14 
Cost of sales
(8)
16 
Total selling and administrative expense
0 
0 
Other expense (income), net
5 
5 
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 
(1)
Total before tax
4 
(1)
Tax benefit (expense)
(1)
0 
NET INCOME
$ 3 
$ (1)
Operating Segments - Information by Operating Segments (Detail) (USD $)
In Millions, unless otherwise specified
3 Months Ended
Aug. 31, 2014
Aug. 31, 2013
Segment Reporting, Revenue Reconciling Item [Line Items]
 
 
Net Revenue
$ 7,982 
$ 6,971 
Earnings Before Interest and Taxes
1,238 
1,046 
Interest expense (income), net
9 
8 
Income before income taxes
1,229 
1,038 
NIKE Brand
 
 
Segment Reporting, Revenue Reconciling Item [Line Items]
 
 
Net Revenue
7,421 
6,468 
Earnings Before Interest and Taxes
1,294 
1,097 
NIKE Brand |
North America
 
 
Segment Reporting, Revenue Reconciling Item [Line Items]
 
 
Net Revenue
3,513 
3,135 
Earnings Before Interest and Taxes
970 
813 
NIKE Brand |
Western Europe
 
 
Segment Reporting, Revenue Reconciling Item [Line Items]
 
 
Net Revenue
1,714 
1,301 
Earnings Before Interest and Taxes
404 
265 
NIKE Brand |
Central & Eastern Europe
 
 
Segment Reporting, Revenue Reconciling Item [Line Items]
 
 
Net Revenue
392 
366 
Earnings Before Interest and Taxes
68 
81 
NIKE Brand |
Greater China
 
 
Segment Reporting, Revenue Reconciling Item [Line Items]
 
 
Net Revenue
679 
574 
Earnings Before Interest and Taxes
218 
170 
NIKE Brand |
Japan
 
 
Segment Reporting, Revenue Reconciling Item [Line Items]
 
 
Net Revenue
160 
158 
Earnings Before Interest and Taxes
11 
24 
NIKE Brand |
Emerging Markets
 
 
Segment Reporting, Revenue Reconciling Item [Line Items]
 
 
Net Revenue
934 
902 
Earnings Before Interest and Taxes
156 
210 
NIKE Brand |
Global Brand Division
 
 
Segment Reporting, Revenue Reconciling Item [Line Items]
 
 
Net Revenue
29 
32 
Earnings Before Interest and Taxes
(533)
(466)
Converse
 
 
Segment Reporting, Revenue Reconciling Item [Line Items]
 
 
Net Revenue
575 
494 
Earnings Before Interest and Taxes
186 
169 
Corporate
 
 
Segment Reporting, Revenue Reconciling Item [Line Items]
 
 
Net Revenue
(14)
9 
Earnings Before Interest and Taxes
$ (242)
$ (220)
Operating Segments - Accounts Receivable Net Inventories and Property Plant and Equipment Net by Operating Segments (Detail) (USD $)
In Millions, unless otherwise specified
Aug. 31, 2014
May 31, 2014
Segment Reporting, Asset Reconciling Item [Line Items]
 
 
Accounts Receivable, net
$ 3,587 
$ 3,434 
Inventories
4,030 
3,947 
Property, Plant and Equipment, net
2,895 
2,834 
NIKE Brand
 
 
Segment Reporting, Asset Reconciling Item [Line Items]
 
 
Accounts Receivable, net
3,327 
3,246 
Inventories
3,837 
3,706 
Property, Plant and Equipment, net
2,168 
2,122 
NIKE Brand |
North America
 
 
Segment Reporting, Asset Reconciling Item [Line Items]
 
 
Accounts Receivable, net
1,485 
1,505 
Inventories
1,828 
1,758 
Property, Plant and Equipment, net
565 
545 
NIKE Brand |
Western Europe
 
 
Segment Reporting, Asset Reconciling Item [Line Items]
 
 
Accounts Receivable, net
584 
341 
Inventories
709 
711 
Property, Plant and Equipment, net
413 
384 
NIKE Brand |
Central & Eastern Europe
 
 
Segment Reporting, Asset Reconciling Item [Line Items]
 
 
Accounts Receivable, net
286 
280 
Inventories
192 
271 
Property, Plant and Equipment, net
53 
51 
NIKE Brand |
Greater China
 
 
Segment Reporting, Asset Reconciling Item [Line Items]
 
 
Accounts Receivable, net
66 
68 
Inventories
272 
221 
Property, Plant and Equipment, net
238 
232 
NIKE Brand |
Japan
 
 
Segment Reporting, Asset Reconciling Item [Line Items]
 
 
Accounts Receivable, net
94 
162 
Inventories
114 
94 
Property, Plant and Equipment, net
250 
258 
NIKE Brand |
Emerging Markets
 
 
Segment Reporting, Asset Reconciling Item [Line Items]
 
 
Accounts Receivable, net
733 
819 
Inventories
685 
633 
Property, Plant and Equipment, net
112 
115 
NIKE Brand |
Global Brand Divisions
 
 
Segment Reporting, Asset Reconciling Item [Line Items]
 
 
Accounts Receivable, net
79 
71 
Inventories
37 
18 
Property, Plant and Equipment, net
537 
537 
Converse
 
 
Segment Reporting, Asset Reconciling Item [Line Items]
 
 
Accounts Receivable, net
241 
171 
Inventories
210 
261 
Property, Plant and Equipment, net
79 
70 
Corporate
 
 
Segment Reporting, Asset Reconciling Item [Line Items]
 
 
Accounts Receivable, net
19 
17 
Inventories
(17)
(20)
Property, Plant and Equipment, net
$ 648 
$ 642 
Commitments and Contingencies - Additional Information (Detail) (USD $)
Aug. 31, 2014
Loss Contingencies [Line Items]
 
Letters of credit outstanding
$ 117,000,000 
Cole Haan
 
Loss Contingencies [Line Items]
 
Maximum exposure under guarantees
$ 30,000,000