If we are unable to anticipate consumer preferences and develop new products, we may not be able to maintain or increase our revenues and profits.

Our success depends on our ability to identify, originate and define product trends as well as to anticipate, gauge and react to changing consumer demands in a timely manner. However, lead times for many of our products may make it more difficult for us to respond rapidly to new or changing product trends or consumer preferences. All of our products are subject to changing consumer preferences that cannot be predicted with certainty. Our new products may not receive consumer acceptance as consumer preferences could shift rapidly to different types of performance products or away from these types of products altogether, and our future success depends in part on our ability to anticipate and respond to these changes. If we fail to anticipate accurately and respond to trends and shifts in consumer preferences by adjusting the mix of existing product offerings, developing new products, designs, styles and categories, and influencing sports and fitness preferences through aggressive marketing, we could experience lower sales, excess inventories or lower profit margins, any of which could have an adverse effect on our results of operations and financial condition. In addition, we market our products globally through a diverse spectrum of advertising and promotional programs and campaigns, including social media and online advertising. If we do not successfully market our products or if advertising and promotional costs increase, these factors could have an adverse effect on our business, financial condition and results of operations.

We rely on technical innovation and high-quality products to compete in the market for our products.

Technical innovation and quality control in the design and manufacturing process of footwear, apparel and athletic equipment is essential to the commercial success of our products. Research and development plays a key role in technical innovation. We rely upon specialists in the fields of biomechanics, chemistry, exercise physiology, engineering, industrial design, sustainability and related fields, as well as research committees and advisory boards made up of athletes, coaches, trainers, equipment managers, orthopedists, podiatrists and other experts to develop and test cutting edge performance products. While we strive to produce products that help to enhance athletic performance, reduce injury and maximize comfort, if we fail to introduce technical innovation in our products, consumer demand for our products could decline, and if we experience problems with the quality of our products, we may incur substantial expense to remedy the problems.

Failure to continue to obtain ~~high quality~~or maintain high-quality endorsers of our products could harm our business.

We establish relationships with professional athletes, sports teams and leagues to develop, evaluate and promote our products, as well as establish product authenticity with consumers. However, as competition in our industry has increased, the costs associated with establishing and retaining such sponsorships and other relationships have increased. If we are unable to maintain our current associations with professional athletes, sports teams and leagues, or to do so at a reasonable cost, we could lose the on-field authenticity associated with our products, and we may be required to modify and substantially increase our marketing investments. As a result, our brands, net revenues, expenses and profitability could be harmed.

Furthermore, if certain endorsers were to stop using our products contrary to their endorsement agreements, our business could be adversely affected. In addition, actions taken by athletes, teams or leagues associated with our products that harm the reputations of those athletes, teams or leagues, could also seriously harm our brand image with consumers and, as a result, could have an adverse effect on our sales and financial condition. In addition, poor performance by our endorsers, a failure to continue to correctly identify promising athletes to use and endorse our products or a failure to enter into cost-effective endorsement arrangements with prominent athletes and sports organizations could adversely affect our brand, sales and profitability.

Currency exchange rate fluctuations could result in lower revenues, higher costs and decreased margins and earnings.

A majority of our products are manufactured and sold outside of the United States. As a result, we conduct purchase and sale transactions in various currencies, which increases our exposure to fluctuations in foreign currency exchange rates globally. Additionally, there has been, and may continue to be, volatility in currency exchange rates as a result of the United Kingdom's June 23, 2016 referendum in which voters approved the United Kingdom's exit from the European Union, commonly referred to as “Brexit.” Our international revenues and expenses generally are derived from sales and operations in foreign currencies, and these revenues and expenses could be affected by currency fluctuations, ~~including~~specifically amounts recorded in foreign currencies and translated into U.S. Dollars for consolidated financial reporting, as weakening of foreign currencies relative to the U.S. Dollar adversely affects the U.S. Dollar value of the Company's foreign currency-denominated sales and earnings. Currency exchange rate fluctuations could also disrupt the business of the independent manufacturers that produce our products by making their purchases of raw materials more expensive and more difficult to finance. Foreign currency fluctuations have adversely affected and could continue to have an adverse effect on our results of operations and financial condition.

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We may hedge certain foreign currency exposures to lessen and delay, but not to completely eliminate, the effects of foreign currency fluctuations on our financial results. Since the hedging activities are designed to lessen volatility, they not only reduce the negative impact of a stronger U.S. Dollar or other trading currency, but they also reduce the positive impact of a weaker U.S. Dollar or other trading currency. Our future financial results could be significantly affected by the value of the U.S. Dollar in relation to the foreign currencies in which we conduct business. The degree to which our financial results are affected for any given time period will depend in part upon our hedging activities.

Global economic conditions could have a material adverse effect on our business, operating results and financial condition.

~~Although~~The uncertain state of the global economy ~~has been showing signs of improvement, its uncertain state~~ continues to impact businesses around the world, ~~and~~ most acutely in emerging markets and developing economies. Continuing uncertainty in the global capital and credit markets have led to fluctuations in the availability of business credit and capital liquidity, a contraction of consumer credit, business failures, sustained unemployment at historically high levels, and declines in consumer confidence and spending in many parts of the world. If global economic and financial market conditions do not improve or deteriorate, the following factors could have a material adverse effect on our business, operating results and financial condition:

Slower consumer spending may result in reduced demand for our products, reduced orders from retailers for our products, order cancellations, lower revenues, higher discounts, increased inventories and lower gross margins.

In the future, we may be unable to access financing in the credit and capital markets at reasonable rates in the event we find it desirable to do so.

We conduct transactions in various currencies, which ~~increase~~increases our exposure to fluctuations in foreign currency exchange rates relative to the U.S. Dollar. Continued volatility in the markets and exchange rates for foreign currencies and contracts in foreign currencies could have a significant impact on our reported ~~financial~~operating results and financial condition.

Continued volatility in the availability and prices for commodities and raw materials we use in our products and in our supply chain (such as cotton or petroleum derivatives) could have a material adverse effect on our costs, gross margins and profitability.

If retailers of our products experience declining revenues or experience difficulty obtaining financing in the capital and credit markets to purchase our products, this could result in reduced orders for our products, order cancellations, late retailer payments, extended payment terms, higher accounts receivable, reduced cash flows, greater expense associated with collection efforts and increased bad debt expense.

If retailers of our products experience severe financial difficulty, some may become insolvent and cease business operations, which could negatively impact the sale of our products to consumers.

If contract manufacturers of our products or other participants in our supply chain experience difficulty obtaining financing in the capital and credit markets to purchase raw materials or to finance capital equipment and other general working capital needs, it may result in delays or non-delivery of shipments of our products.

Our business is affected by seasonality, which could result in fluctuations in our operating results.

We experience moderate fluctuations in aggregate sales volume during the year. Historically, revenues in the first and fourth fiscal quarters have slightly exceeded those in the second and third fiscal quarters. However, the mix of product sales may vary considerably from time to time as a result of changes in seasonal and geographic demand for particular types of footwear, apparel and ~~equipment.~~equipment and in connection with the timing of significant sporting events, including without limitation the Olympics and the European football championship. In addition, our customers may cancel orders, change delivery schedules or change the mix of products ordered with minimal notice. As a result, we may not be able to accurately predict our quarterly sales. Accordingly, our results of operations are likely to fluctuate significantly from period to period. This seasonality, along with other factors that are beyond our control, including general economic conditions, changes in consumer preferences, weather conditions, availability of import quotas, transportation disruptions and currency exchange rate fluctuations, could adversely affect our business and cause our results of operations to fluctuate. Our operating margins are also sensitive to a number of additional factors that are beyond our control, including manufacturing and transportation costs, shifts in product sales mix and geographic sales trends, all of which we expect to continue. Results of operations in any period should not be considered indicative of the results to be expected for any future period.

Futures orders may not be an accurate indication of our future revenues.

We make substantial use of our futures ordering program, which allows retailers to order five to six months in advance of delivery with the commitment that their orders will be delivered within a set period of time at a fixed price. Our futures ordering program allows us to minimize the amount of products we hold in inventory, purchasing costs, the time necessary to fill customer orders and the risk of non-delivery. We report changes in futures orders in our periodic financial reports. Although we believe futures orders are an important indicator of our future revenues, reported futures orders are not necessarily indicative of our expectation of ~~changes in~~ revenues for any future period. This is ~~because~~due to year-over-year changes in shipment timing, changes in the mix of orders ~~can shift~~ between futures and at-once ~~orders.~~orders and because the fulfillment of certain orders may fall outside of the schedule noted above. In addition, foreign currency exchange rate fluctuations, as well as differing levels of order cancellations, ~~shipping timing,~~discounts and returns ~~and discounts~~ can cause differences in the comparisons between futures orders and actual revenues. Moreover, a ~~significant~~ portion of our revenue is not derived from futures orders, including sales of at-once and closeout ~~sales of~~ NIKE Brand footwear and apparel, all sales of NIKE Brand equipment, the difference between retail sales and internal orders from our Direct to Consumer in-line stores and e-commerce operations, and sales from ~~our~~ Converse, ~~Hurley, and~~ NIKE Golf ~~businesses.~~and Hurley.

Our futures ordering program does not prevent excess inventories or inventory shortages, which could result in decreased operating margins, reduced cash flows and harm to our business.

We purchase products from manufacturers outside of our futures ordering program and in advance of customer orders, which we hold in inventory and resell to customers. There is a risk we may be unable to sell excess products ordered from manufacturers. Inventory levels in excess of customer demand may result in inventory write-downs, and the sale of excess inventory at discounted prices could significantly impair our brand image and have an adverse effect on our operating results, financial condition and ~~financial condition.~~cash flows. Conversely, if we underestimate consumer demand for our products or if our manufacturers fail to supply products we require at the time we need them, we may experience inventory shortages. Inventory shortages might delay shipments to customers, negatively impact retailer and distributor relationships and diminish brand loyalty.

The difficulty in forecasting demand also makes it difficult to estimate our future results of operations, ~~and~~ financial condition and cash flows from period to period. A failure to accurately predict the level of demand for our products could adversely affect our net revenues and net income, and we are unlikely to forecast such effects with any certainty in advance.

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We may be adversely affected by the financial health of our ~~retailers.~~customers.

We extend credit to our customers based on an assessment of a customer’s financial condition, generally without requiring collateral. To assist in the scheduling of production and the shipping of seasonal products, we offer customers the ability to place orders five to six months ahead of delivery under our futures ordering program. These advance orders may be canceled, and the risk of cancellation may increase when dealing with financially ~~ailing~~unstable retailers or retailers struggling with economic uncertainty. In the past, some customers have experienced financial difficulties up to and including bankruptcies, which have had an adverse effect on our ~~business.~~sales, our ability to collect on receivables and our financial condition. When the retail economy weakens, retailers may be more cautious with orders. A slowing economy in our key markets could adversely affect the financial health of our customers, which in turn could have an adverse effect on our results of operations and financial condition. In addition, product sales are dependent in part on high quality merchandising and an appealing store environment to attract consumers, which requires continuing investments by retailers. Retailers that experience financial difficulties may fail to make such investments or delay them, resulting in lower sales and orders for our products.

Consolidation of retailers or concentration of retail market share among a few retailers may increase and concentrate our credit risk and impair our ability to sell products.

The athletic footwear, apparel and equipment retail markets in some countries are dominated by a few large athletic footwear, apparel and equipment retailers with many stores. These retailers have in the past increased their market share and may continue to do so in the future by expanding through acquisitions and construction of additional stores. These situations concentrate our credit risk with a relatively small number of retailers, and, if any of these retailers were to experience a shortage of liquidity, it would increase the risk that their outstanding payables to us may not be paid. In addition, increasing market share concentration among one or a few retailers in a particular country or region increases the risk that if any one of them substantially reduces their purchases of our products, we may be unable to find a sufficient number of other retail outlets for our products to sustain the same level of sales and revenues.

Our Direct to Consumer operations have required and will continue to require a substantial investment and commitment of resources and are subject to numerous risks and uncertainties.

Our Direct to Consumer stores have required substantial fixed investment in equipment and leasehold improvements, information systems, inventory and personnel. We have entered into substantial operating lease commitments for retail space. Certain stores have been designed and built to serve as high-profile venues to promote brand awareness and marketing activities. Because of their unique design elements, locations and size, these stores require substantially more investment than other stores. Due to the high fixed-cost structure associated with our Direct to Consumer operations, a decline in sales or the closure or poor performance of individual or multiple stores could result in significant lease termination costs, write-offs of equipment and leasehold improvements and employee-related costs.

Many factors unique to retail operations, some of which are beyond the Company’s control, pose risks and uncertainties. Risks include, but are not limited to: credit card fraud; mismanagement of existing retail channel partners; and inability to manage costs associated with store construction and operation. In addition, extreme weather conditions in the areas in which our stores are located could adversely affect our business.

If the technology-based systems that give our customers the ability to shop with us online do not function effectively, our operating results, as well as our ability to grow our e-commerce business globally, could be materially adversely affected.

Many of our customers shop with us through our e-commerce website and mobile commerce applications. Increasingly, customers are using tablets and smart phones to shop online with us and with our competitors and to do comparison shopping. We are increasingly using social media and proprietary mobile applications to interact with our customers and as a means to enhance their shopping experience. Any failure on our part to provide attractive, effective, reliable, user-friendly e-commerce platforms that offer a wide assortment of merchandise with rapid delivery options and that continually meet the changing expectations of online shoppers could place us at a competitive disadvantage, result in the loss of e-commerce and other sales, harm our reputation with customers, have a material adverse impact on the growth of our e-commerce business globally and could have a material adverse impact on our business and results of operations.

Risks specific to our e-commerce business also include diversion of sales from our and our ~~retailer's~~retailers' brick and mortar stores, difficulty in recreating the in-store experience through direct channels and liability for online content. Our failure to successfully respond to these risks might adversely affect sales in our e-commerce business, as well as damage our reputation and brands.

Failure to adequately protect or enforce our intellectual property rights could adversely affect our business.

We utilize trademarks on nearly all of our products and believe that having distinctive marks that are readily identifiable is an important factor in creating a market for our goods, in identifying us, and in distinguishing our goods from the goods of others. We consider our NIKE and Swoosh Design trademarks to be among our most valuable assets and we have registered these trademarks in almost 170 jurisdictions. In addition, we own many other trademarks that we utilize in marketing our products and services.

We believe that our ~~trademarks, patents, trade secrets, and other~~ intellectual property rights are important to our brand, our success and our competitive position. We periodically discover products that are counterfeit reproductions of our products or that otherwise infringe on our intellectual property rights. If we are unsuccessful in ~~challenging a party’s products on the basis of trade secret misappropriation or trademark, copyright, design patent, utility patent, or other~~enforcing our intellectual property, ~~infringement,~~ continued sales of these products could adversely affect our sales and our brand and could result in ~~the~~a shift of consumer preference away from our products.

The actions we take to establish and protect ~~trademarks, copyrights, trade secrets, patents, and other~~our intellectual property rights may not be adequate to prevent imitation of our products by others or to prevent others from seeking to block sales of our products as violations of proprietary rights.

We may be subject to liability if third parties successfully claim that we infringe on their ~~trademarks, copyrights, patents, or other~~ intellectual property rights. Defending infringement claims could be expensive and time-consuming and might result in our entering into costly license agreements. We also may be subject to significant damages or injunctions against development, use, importation and/or sale of certain products.

We take various actions to prevent ~~confidential information from~~the unauthorized use and/or ~~disclosure.~~disclosure of confidential information. Such actions include contractual measures such as entering into non-disclosure and non-compete agreements and providing confidential information awareness training. Our controls and efforts to prevent unauthorized use and/or disclosure of confidential information might not always be effective. Confidential information that is related to business strategy, new technologies, mergers and acquisitions, unpublished financial results or personal data could be prematurely or inadvertently used and/or disclosed, resulting in a loss of reputation, or a decline in our stock price and/or a negative impact on our market position, and could lead to damages, fines, penalties or injunctions.

In addition, the laws of certain ~~foreign~~ countries may not protect or allow enforcement of intellectual property rights to the same extent as the laws of the United States. We may face significant expenses and liability in connection with the protection of our intellectual property rights, including outside the United States, and if we are unable to successfully protect our rights or resolve intellectual property conflicts with others, our business or financial condition may be adversely affected.

We are subject to the risk that our licensees may not generate expected sales or maintain the value of our brands.

We currently license, and expect to continue licensing, certain of our proprietary rights, such as trademarks or copyrighted material, to third parties. If our licensees fail to successfully market and sell licensed products, or fail to obtain sufficient capital or effectively manage their business operations, customer relationships, labor relationships, supplier relationships or credit risks, it could adversely affect our revenues, both directly from reduced royalties received and indirectly from reduced sales of our other products.

We also rely on our licensees to help preserve the value of our brands. Although we attempt to protect our brands through approval rights over the design, production processes, quality, packaging, merchandising, distribution, advertising and promotion of our licensed products, we cannot completely control the use of our licensed brands by our licensees. The misuse of a brand by a licensee could have a material adverse effect on that brand and on us.

We are subject to data security and privacy risks that could negatively affect our results, operations or reputation.

In addition to our own sensitive and proprietary business information, we collect transactional and personal information about our customers and users of our digital experiences, which include online distribution channels and product engagement and personal fitness applications. Hackers and data thieves are increasingly sophisticated and operate large-scale and complex automated attacks. Any breach of our network may result in the loss of valuable business data, misappropriation of our consumers’, users' or employees’ personal information or a disruption of our business, which could give rise to unwanted media attention, materially damage our consumers, customer relationships and our reputation and result in lost sales, lost users, fines, or lawsuits. We also may need to expend significant resources to protect against, respond to and/or redress problems caused by any breach.

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In addition, we must comply with increasingly complex and rigorous regulatory standards enacted to protect business and personal data. ~~Any~~Compliance with existing and proposed laws and regulations can be costly, and any failure to comply with these regulatory standards could subject us to legal and reputational risks. Misuse of or failure to secure personal information could also result in violation of data privacy laws and regulations, proceedings against the Company by governmental entities or others, damage to our reputation and credibility and could have a negative impact on revenues and profits.

Failure of our contractors or our licensees’ contractors to comply with our code of conduct, local laws and other standards could harm our business.

We work with hundreds of contractors outside of the United States to manufacture our products, and we also have license agreements that permit unaffiliated parties to manufacture or contract for the manufacture of products using our intellectual property. We require the contractors that directly manufacture our products and our licensees that make products using our intellectual property (including, indirectly, their contract manufacturers) to comply with a code of conduct and other environmental, health and safety standards for the benefit of workers. We also require these contractors to comply with applicable standards for product safety. Notwithstanding their contractual obligations, from time to time contractors may not comply with such standards or applicable local law or our licensees may fail to enforce such standards or applicable local law on their contractors. Significant or continuing noncompliance with such standards and laws by one or more contractors could harm our reputation or result in a product recall and, as a result, could have an adverse effect on our sales and financial condition.

Our international operations involve inherent risks which could result in harm to our business.

Virtually all of our athletic footwear and apparel is manufactured outside of the United States, and the majority of our products are sold outside of the United States. Accordingly, we are subject to the risks generally associated with global trade and doing business abroad, which include foreign laws and regulations, varying consumer preferences across geographic regions, political unrest, disruptions or delays in cross-border shipments and changes in economic conditions in countries in which our products are manufactured or where we ~~manufacture or~~ sell products. This includes, for example, the uncertainty surrounding the implementation and effect of Brexit, including changes to the legal and regulatory framework that apply to the United Kingdom and its relationship with the European Union. In addition, disease outbreaks, terrorist acts and military conflict have increased the risks of doing business abroad. These factors, among others, could affect our ability to manufacture products or procure materials, our ability to import products, our ability to sell products in international markets and our cost of doing business. If any of these or other factors make the conduct of business in a particular country undesirable or impractical, our business could be adversely affected. In addition, many of our imported products are subject to duties, tariffs or quotas that affect the cost and quantity of various types of goods imported into the United States and other countries. Any country in which our products are produced or sold may eliminate, adjust or impose new quotas, duties, tariffs, safeguard measures, anti-dumping duties, cargo restrictions to prevent terrorism, restrictions on the transfer of currency, climate change legislation, product safety regulations or other charges or restrictions, any of which could have an adverse effect on our results of operations and financial condition.

~~Changes~~We could be subject to changes in tax rates, adoption of new tax laws ~~and unanticipated~~or additional tax ~~liabilities could adversely affect our effective income tax rate and profitability.~~liabilities.

We are subject to ~~income taxes~~the tax laws in the United States and numerous foreign jurisdictions. We earn a substantial portion of our income in foreign countries. If our capital or financing needs in the United States require us to repatriate earnings from foreign jurisdictions above our current levels, our effective income tax rates for the affected periods could be negatively impacted. Current economic and political conditions make tax rules in any jurisdiction, including the United States, subject to significant change. There have been proposals to reform U.S. and foreign tax laws that could significantly impact how U.S. multinational corporations are taxed on foreign earnings. Although we cannot predict whether or in what form these proposals will pass, several of the proposals considered, if enacted into law, could have an adverse impact on our income tax expense and cash flows.

~~Our~~ We earn a substantial portion of our income in foreign countries and are subject to the tax laws of those jurisdictions. If our capital or financing needs in the United States require us to repatriate earnings from foreign jurisdictions above our current levels, our effective income tax ~~rate in~~rates for the ~~future~~affected periods could be adversely affected by a number of factors, including changes in the mix of earnings in countries with differing statutory tax rates, changes in the valuation of deferred tax assets and liabilities, changes in tax laws, the outcome of income tax audits in various jurisdictions around the world, and any repatriation of non-U.S. earnings for which we have not previously provided for U.S. taxes.negatively impacted.

We and our subsidiaries are engaged in a number of intercompany transactions across multiple tax jurisdictions. Although we believe that these transactions reflect the accurate economic allocation of profit and that the proper transfer pricing documentation is in place, the profit allocation and transfer pricing terms and conditions (required to be arm's length) may be scrutinized by local tax authorities during an audit and any resulting changes may impact our mix of earnings in countries with differing statutory tax rates.

Portions of our operations are subject to a reduced tax rate or are free of tax under various tax holidays and rulings that expire in whole or in part from time to time. These tax holidays and rulings may be extended when certain conditions are met, or terminated if certain conditions are not met. If the tax holidays and rulings are not extended, or if we fail to satisfy the conditions of the reduced tax rate, ~~then~~ our future effective income tax rate would increase in the future.

We are also subject to the examination of our tax returns by the United States Internal Revenue Service (“IRS”) and other tax authorities. We regularly assess ~~all~~the likelihood of an adverse outcome resulting from these ~~matters~~examinations to determine the adequacy of ~~our tax~~its provision ~~which is subject to significant discretion.~~for income taxes. Although we believe our tax provisions are adequate, the final determination of tax audits and any related disputes could be materially different from our historical income tax provisions and accruals. The results of audits or related disputes could have an adverse effect on our financial statements for the period or periods for which the applicable final determinations are made. For example, the IRS has assessed additional tax liabilities for 2011 and 2012 related to a foreign tax credit matter. We are currently contesting the matter in U.S. Tax Court. In addition to the risk of additional tax for these years, if this litigation is adversely determined and the IRS was to seek similar adjustments in subsequent years, we could be subject to significant additional tax liabilities. Additionally, we and our subsidiaries are engaged in a number of intercompany transactions across multiple tax jurisdictions. Although we believe we have clearly reflected the economics of these transactions and the proper local transfer pricing documentation is in place, tax authorities may propose and sustain adjustments that could result in changes that may impact our mix of earnings in countries with differing statutory tax rates.

If one or more of our counterparty financial institutions default on their obligations to us or fail, we may incur significant losses.

As part of our hedging activities, we enter into transactions involving derivative financial instruments, which may include forward contracts, commodity futures contracts, option contracts, collars and swaps with various financial institutions. In addition, we have significant amounts of cash, cash equivalents and other investments on deposit or in accounts with banks or other financial institutions in the United States and abroad. As a result, we are exposed to the risk of default by or failure of counterparty financial institutions. The risk of counterparty default or failure may be heightened during economic downturns and periods of uncertainty in the financial markets. If one of our counterparties were to become insolvent or file for bankruptcy, our ability to recover losses incurred as a result of default or our assets that are deposited or held in accounts with such counterparty may be limited by the counterparty’s liquidity or the applicable laws governing the insolvency or bankruptcy proceedings. In the event of default or failure of one or more of our counterparties, we could incur significant losses, which could negatively impact our results of operations and financial condition.

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We rely on a concentrated source base of contract manufacturers to supply a significant portion of our footwear products.

NIKE is supplied by approximately ~~150~~142 footwear factories located in 1415 countries. We do not own or operate any of our own footwear manufacturing facilities and depend upon independent contract manufacturers to manufacture all of the footwear products we sell. In fiscal ~~2014,~~2016, five footwear contract manufacturers each accounted for greater than 10% of fiscal ~~2014~~2016 footwear production and in aggregate accounted for approximately ~~67%~~69% of NIKE Brand footwear production in fiscal ~~2014.~~2016. Our ability to meet our customers' needs depends on our ability to maintain a steady supply of products from our independent contract manufacturers. If one or more of our significant suppliers were to sever their relationship with us or significantly alter the terms of our relationship, we may not be able to obtain replacement products in a timely manner, which could have a material adverse effect on our sales, financial condition or results of operations. Additionally, if any of our primary contract manufacturers fail to make timely shipments, do not meet our quality standards or otherwise fail to deliver us product in accordance with our plans, there could be a material adverse effect on our results of operations.

Our products are subject to risks associated with overseas sourcing, manufacturing and financing.

The principal materials used in our apparel products — natural and synthetic fabrics and threads, specialized performance fabrics designed to efficiently wick moisture away from the body, retain heat or repel rain and/or snow as well as plastic and metal hardware — are available in countries where our manufacturing takes place. The principal materials used in our footwear products — natural and synthetic rubber, plastic compounds, foam cushioning materials, natural and synthetic leather, natural and synthetic fabrics and threads, nylon, ~~leather,~~ canvas and polyurethane films — are also locally available to manufacturers. Both our apparel and footwear products are dependent upon the ability of our unaffiliated contract manufacturers to locate, train, employ and ~~employ~~retain adequate personnel. NIKE contractors and suppliers buy raw materials ~~in bulk~~ and are subject to wage rates that are oftentimes regulated by the governments of the countries in which our products are manufactured.

There could be a significant disruption in the supply of fabrics or raw materials from current sources or, in the event of a disruption, our contract manufacturers might not be able to locate alternative suppliers of materials of comparable quality at an acceptable price or at all. Further, our unaffiliated contract manufacturers have experienced and may continue to experience in the future, unexpected increases in work wages, whether government mandated or ~~otherwise.~~otherwise and increases in compliance costs due to governmental regulation concerning certain metals used in the manufacturing of our products. In addition, we cannot be certain that our unaffiliated manufacturers will be able to fill our orders in a timely manner. If we experience significant increases in demand, or reductions in the availability of materials, or need to replace an existing manufacturer, there can be no assurance that additional supplies of fabrics or raw materials or additional manufacturing capacity will be available when required on terms that are acceptable to us, or at all, or that any supplier or manufacturer would allocate sufficient capacity to us in order to meet our requirements. In addition, even if we are able to expand existing or find new manufacturing or sources of materials, we may encounter delays in production and added costs as a result of the time it takes to train suppliers and manufacturers in our methods, products, quality control standards and labor, health and safety standards. Any delays, interruption or increased costs in labor or wages, or the supply of materials or manufacture of our products could have an adverse effect on our ability to meet retail customer and consumer demand for our products and result in lower revenues and net income both in the short- and ~~long- term.~~long-term.

Because independent manufacturers ~~manufacture~~make a majority of our products outside of our principal sales markets, our products must be transported by third parties over large geographic distances. Delays in the shipment or delivery of our products due to the availability of transportation, work stoppages, port strikes, infrastructure congestion or other factors, and costs and delays associated with consolidating or transitioning between manufacturers, could adversely impact our financial performance. In addition, manufacturing delays or unexpected demand for our products may require us to use faster, but more expensive, transportation methods such as air freight, which could adversely affect our profit margins. The cost of oil is a significant component in manufacturing and transportation costs, so increases in the price of petroleum products can adversely affect our profit margins.

In addition, Sojitz America performs significant import-export financing services for the Company. During fiscal ~~2014,~~2016, Sojitz America provided financing and purchasing services for NIKE Brand products sold in certain NIKE markets including Argentina, Uruguay, Brazil, Canada, ~~Brazil,~~ India, ~~Indonesia, the Philippines, Malaysia,~~ South Africa and Thailand (collectively the ~~"Sojitz Markets"~~“Sojitz Markets”), excluding products produced and sold in the same country. Any failure of Sojitz America to provide these services or any failure of Sojitz America’s banks could disrupt our ability to acquire products from our suppliers and to deliver products to our customers in the Sojitz Markets. Such a disruption could result in canceled orders that would adversely affect sales and profitability.

Our success depends on our global distribution facilities.

We distribute our products to customers directly from the factory and through distribution centers located throughout the world. Our ability to meet customer expectations, manage inventory, complete sales and achieve objectives for operating efficiencies and growth, particularly in emerging markets, depends on the proper operation of our distribution facilities, the development or expansion of additional distribution capabilities and the timely performance of services by third parties (including those involved in shipping product to and from our distribution facilities). Our distribution facilities could be interrupted by information technology problems and disasters such as earthquakes or fires. Any significant failure in our distribution facilities could result in an adverse effect on our business. We maintain business interruption insurance, but it may not adequately protect us from adverse effects that could be caused by significant disruptions in our distribution facilities.

We rely significantly on information technology to operate our business, including our supply chain and retail operations, and any failure, inadequacy or interruption of that technology could harm our ability to effectively operate our business.

We are heavily dependent on information technology systems and networks, including the Internet and third-party hosted services (“information technology systems”), across our supply chain, including product design, production, forecasting, ordering, manufacturing, transportation, sales and distribution, as well as for processing financial information for external and internal reporting purposes, retail operations and other business activities. Our information technology systems are critical to many of our operating activities and our business processes and may be negatively impacted by any service interruption or shutdown. For example, our ability to effectively manage and maintain our inventory and to ship products to customers on a timely basis depends significantly on the reliability of these information technology systems. Over a number of years, we have implemented information technology systems in all of the geographical regions in which we operate. Our work to integrate, secure and enhance these systems and related processes in our global operations is ~~ongoing.~~ongoing and NIKE will continue to invest in these efforts. The failure of these systems to operate effectively, including as a result of security breaches, viruses, hackers or other causes, or our failure to properly maintain, protect, repair or upgrade our systems, or problems with transitioning to upgraded or replacement systems could cause delays in product fulfillment and reduced efficiency of our operations, could require significant capital investments to remediate the problem and may have an adverse effect on our reputation, results of operations and financial condition.

We also use information technology systems to process financial information and results of operations for internal reporting purposes and to comply with regulatory financial reporting, legal and tax requirements. If our information technology systems suffer severe damage, disruption or shutdown

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and our business continuity plans do not effectively resolve the issues in a timely manner, we could experience delays in reporting our financial results, which could result in lost revenues and profits, as well as reputational damage. Furthermore, we depend on information technology systems and personal data collection and use for digital marketing, digital commerce, consumer engagement and the marketing and use of our ~~Digital Sport products.~~digital products and services. We also rely on our ability to engage in electronic communications throughout the world between and among our employees as well as with other third parties, including customers, suppliers, vendors and consumers. ~~Our~~Any interruption in our information technology systems ~~are critical~~may impede our ability to ~~many~~engage in the digital space and result in lost revenues, damage to our reputation, and loss of ~~our operating activities and our business processes and may be negatively impacted by any service interruption or shutdown.~~users.

The market for prime real estate is competitive.

Our ability to effectively obtain real estate to open new retail stores and otherwise conduct our operations, both domestically and internationally, depends on the availability of real estate that meets our criteria for traffic, square footage, co-tenancies, lease economics, demographics and other factors. We also must be able to effectively renew our existing real estate leases. In addition, from time to time, we seek to downsize, consolidate, reposition or close some of our real estate locations, which may require modification of an existing lease. Failure to secure adequate new locations or successfully modify leases for existing locations, or failure to effectively manage the profitability of our existing fleet of retail stores, could have an adverse effect on our operating results and financial condition.

Additionally, the economic environment may at times make it difficult to determine the fair market rent of real estate properties domestically and internationally. This could impact the quality of our decisions to exercise lease options at previously negotiated rents and to renew expiring leases at negotiated rents. Any adverse effect on the quality of these decisions could impact our ability to retain real estate locations adequate to meet our targets or efficiently manage the profitability of our existing fleet of stores, which could have an adverse effect on our operating results and financial condition.

Extreme weather conditions and natural disasters could negatively impact our operating results and financial condition.

Extreme weather conditions in the areas in which our retail stores, suppliers, customers, distribution centers and vendors are located could adversely affect our operating results and financial condition. Moreover, natural disasters such as earthquakes, hurricanes and tsunamis, whether occurring in the United States or abroad, and their related consequences and effects, including energy shortages and public health issues, could disrupt our operations, the operations of our vendors and other suppliers or result in economic instability that may negatively impact our operating results and financial condition.

Our financial results may be adversely affected if substantial investments in businesses and operations fail to produce expected returns.

From time to time, we may invest in technology, business infrastructure, new businesses, product offering and manufacturing innovation and expansion of existing businesses, such as our retail operations, which require substantial cash investments and management attention. We believe cost-effective investments are essential to business growth and profitability. However, significant investments are subject to typical risks and uncertainties inherent in developing a new business or expanding an existing business. The failure of any significant investment to provide expected returns or profitability could have a material adverse effect on our financial results and divert management attention from more profitable business operations.

We are subject to periodic litigation and other regulatory proceedings, which could result in unexpected expense of time and resources.

From time to time we are called upon to defend ourselves against lawsuits and regulatory actions relating to our business. Due to the inherent uncertainties of litigation and regulatory proceedings, we cannot accurately predict the ultimate outcome of any such proceedings. An unfavorable outcome could have an adverse impact on our business, financial condition and results of operations. In addition, any significant litigation in the future, regardless of its merits, could divert management’s attention from our operations and result in substantial legal fees.

We depend on key personnel, the loss of whom would harm our business.

Our future success will depend in part on the continued service of key executive officers and personnel. The loss of the services of any key individual could harm our business. Our future success also depends on our ability to recruit, retain and ~~motivate~~engage our personnel sufficiently, both to maintain our current business and to execute our strategic initiatives. Competition for employees in our industry is intense and we may not be successful in attracting and retaining such personnel.

The sale of a large number of shares ~~held~~of common stock by our ~~Chairman~~principal stockholder could depress the market price of our common stock.

As of June 30, ~~2014, Philip H. Knight, Co-founder and Chairman of our Board of Directors,~~2016, Swoosh, LLC beneficially owned more than ~~75.1%~~78% of our Class A Common Stock. If, on June 30, ~~2014~~2016, all of ~~his Class A Common Stock~~these shares were converted into Class B Common Stock, ~~Mr. Knight would have owned more than 16.2%~~the commensurate ownership percentage of our Class B Common ~~Stock. These~~Stock would be approximately 16%. The shares are available for resale, subject to the requirements of the U.S. securities ~~laws.~~laws and the terms of the limited liability company agreement governing Swoosh, LLC. The sale or prospect of ~~the~~a sale of a substantial number of these shares could have an adverse effect on the market price of our common stock. Swoosh, LLC was formed by Philip H. Knight, our Chairman Emeritus, to hold the majority of his shares of Class A Common Stock. On June 30, 2016, Mr. Knight sold his voting interest in Swoosh, LLC to a trust controlled by his son and NIKE director, Travis Knight.

Changes in our credit ratings or macroeconomic conditions may affect our liquidity, increasing borrowing costs and limiting our financing options.

Our long-term debt is currently rated ~~investment grade~~Investment Grade by Standard & Poor’s and Moody’s Investors Service. If our credit ratings are lowered, borrowing costs for future long-term debt or short-term credit facilities may increase and our financing options, including our access to the unsecured credit market, could be limited. We may also be subject to restrictive covenants that would reduce our ~~flexibility.~~flexibility to, among other things, incur additional indebtedness, make restricted payments, pledge assets as security, make investments, loans, advances, guarantees and acquisitions, undergo fundamental changes and enter into transactions with affiliates. Failure to comply with such covenants could result in a default, and as a result, the commitments of our lenders under our credit agreements may be terminated and the maturity of amounts owed may be accelerated. In addition, macroeconomic conditions, such as increased volatility or disruption in the credit markets, could adversely affect our ability to refinance existing ~~debt~~debt.

If our internal controls are ineffective, our operating results could be adversely affected.

Our internal control over financial reporting may not prevent or ~~obtain additional financing~~detect misstatements because of its inherent limitations, including the possibility of human error, the circumvention or overriding of controls or fraud. Even effective internal controls can provide only reasonable assurance with respect to ~~support operations~~the preparation and fair presentation of financial statements. If we fail to maintain the adequacy of our internal controls, including any failure to implement required new or improved controls, or if we experience difficulties in their implementation, our business and operating results could be harmed and we could fail to ~~fund new initiatives.~~meet our financial reporting obligations.

If our estimates or judgments relating to our critical accounting policies prove to be incorrect, our operating results could be adversely affected.

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, as provided in “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” The results of these estimates form the basis for making judgments about the carrying values of assets, liabilities and equity, and the amount of revenue and expenses that are not readily apparent from other sources. Significant assumptions and estimates used in preparing our consolidated financial statements include those related to revenue recognition, allowance for uncollectible accounts receivable, inventories, contingent payments under endorsement contracts, accounting for property, plant and equipment and definite-lived assets and goodwill and indefinite-lived intangible assets. Our operating results may be adversely affected if our assumptions change or if actual circumstances differ from those in our assumptions, which could cause our operating results to fall below the expectations of securities analysts and investors, resulting in a decline in the price of our Class B Common Stock.

Anti-takeover provisions may impair an acquisition of the Company or reduce the price of our common stock.

There are provisions of our articles of incorporation and Oregon law that are intended to protect shareholder interests by providing the Board of Directors a means to attempt to deny coercive takeover attempts or to negotiate with a potential acquirer in order to obtain more favorable terms. Such provisions include a control share acquisition statute, a freeze-out statute, two classes of stock that vote separately on certain issues, and the fact that holders of Class A Common Stock elect three-quarters of the Board of Directors rounded down to the next whole number. However, such provisions could discourage, delay or prevent an unsolicited merger, acquisition or other change in control of our company that some

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shareholders might believe to be in their best interests or in which shareholders might receive a premium for their common stock over the prevailing market price. These provisions could also discourage proxy contests for control of the Company.

We may fail to meet market expectations, which could cause the price of our stock to decline.

Our Class B Common Stock is traded publicly, and at any given time various securities analysts follow our financial results and issue reports on us. These reports include information about our historical financial results as well as analysts’ estimates of our future performance. Analysts’ estimates are based upon their own opinions and are often different from our estimates or expectations. If our operating results are below the estimates or expectations of public market analysts and investors, our stock price could decline. In the past, securities class action litigation has been brought against NIKE and other companies following a decline in the market price of their securities. If our stock price is volatile, we may become involved in this type of litigation in the future. Any litigation could result in substantial costs and a diversion of management’s attention and resources that are needed to successfully run our business.

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ITEM 1B. Unresolved Staff Comments

~~Not applicable.~~None.

ITEM 2. Properties

The following is a summary of principal properties owned or leased by ~~NIKE.~~NIKE:

The NIKE World Campus, owned by NIKE and located near Beaverton, Oregon, USA, is a ~~270-acre facility~~400-acre site consisting of 38over 40 buildings which, together with adjacent leased properties, functions as our world headquarters and is occupied by ~~more than 8,500 employees~~approximately 10,700 employees engaged in management, research, design, development, marketing, finance and other administrative functions serving nearly all of our divisions. We also lease various office facilities in the surrounding metropolitan area. We lease a similar, but smaller, administrative facility in Hilversum, the Netherlands, which serves as the headquarters for the Western Europe and Central & Eastern Europe geographies and ~~manages~~management of certain brand ~~management~~ functions for our non-U.S. operations. We also lease an office complex in Shanghai, China, our headquarters for Greater China, occupied by employees focused on implementing our wholesale, DTC and merchandising strategies in the region, among other functions. In the United States, ~~there are~~NIKE has five significant distribution centers located in Memphis, ~~Tennessee;~~Tennessee, two of which are owned and three are leased. NIKE Brand apparel and equipment are also shipped from our Foothill Ranch, California distribution center, which we lease. Smaller leased distribution facilities ~~for non-NIKE Brand businesses~~ are located in various parts of the United States. We also own or lease distribution and customer service facilities outside the United States. The most significant are the distribution facilities located in Laakdal, Belgium; Taicang, China; Tomisato, Japan and ~~Tomisato, Japan;~~Incheon, Korea, all of which we own.

NIKE IHM, Inc. manufactures Air-Sole cushioning components at NIKE-owned facilities located near Beaverton, Oregon and in St. Charles, Missouri. We also manufacture and sell small amounts of various other plastic products to other manufacturers through NIKE IHM, Inc.

Aside from the principal properties described above, we lease ~~approximately 111~~many offices worldwide for sales ~~offices~~ and ~~approximately 110~~ administrative ~~offices worldwide.~~purposes. We lease ~~more than 850~~approximately 1,044 retail stores worldwide, which consist primarily of factory outlet stores. See “United States Market” and “International Markets” in Part 1I of this Report. Our leases expire at various dates through the year 2033.

ITEM 3. Legal Proceedings

There are no material pending legal proceedings, other than ordinary routine litigation incidental to our business, to which we are a party or of which any of our property is the subject.

ITEM 4. Mine Safety Disclosures

Not applicable.

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PART II

ITEM 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

NIKE’s Class B Common Stock is listed on the New York Stock Exchange and trades under the symbol NKE. At July ~~18, 2014,~~15, 2016, there were ~~32,758~~23,196 holders of record of our Class B Common Stock and 2116 holders of record of our Class A Common Stock. These figures do not include beneficial owners who hold shares in nominee name. The Class A Common Stock is not publicly traded but each share is convertible upon request of the holder into one share of Class B Common Stock. ~~The following tables set forth,~~Refer to Selected Quarterly Financial Data in Part II, Item 6 of this Report for ~~each of the~~information regarding quarterly ~~periods indicated, the~~ high and low sales prices for the Class B Common Stock as reported on the New York Stock Exchange Composite Tape, and dividends declared on the Class A and Class B Common Stock. ~~All~~

During the third quarter of fiscal 2016, the Company concluded its four-year, $8 billion share ~~and~~repurchase program approved by the Board of Directors in September 2012. Under this program the Company purchased a total of 197.1 million shares at a cost of $8 billion (an average price of $40.58 per share). Following the completion of this program, the Company began repurchases under the new four-year, $12 billion program approved by the Board of Directors in November 2015. As of the end of the fourth quarter of fiscal 2016, the Company had repurchased 20.1 million shares at an average price of $59.21 per share ~~amounts presented are reflective~~for a total approximate cost of $1.2 billion under the ~~two-for-one stock split that began trading at~~new program. We intend to use excess cash, future cash from operations and/or proceeds from debt to fund repurchases under the ~~split adjusted price on December 26, 2012.~~share repurchase program.

Fiscal 2014 (June 1, 2013 — May 31, 2014) High Low
Dividends
Declared

First quarter $ 66.85
$ 59.11
$ 0.21
Second quarter 79.87
63.50
0.24
Third quarter 80.26
69.85
0.24
Fourth quarter 80.09
70.60
0.24
Fiscal 2013 (June 1, 2012 — May 31, 2013) High Low
Dividends
Declared

First quarter $ 54.32
$ 43.89
$ 0.18
Second quarter 50.42
45.30
0.21
Third quarter 55.55
48.46
0.21
Fourth quarter 65.91
53.49
0.21

The following table presents a summary of share repurchases made by NIKE under these programs during the quarter ended May 31, ~~2014~~. During the second quarter of fiscal 2013, the Company completed the previous four-year, $5 billion share repurchase program approved by our Board of Directors in September 2008. During the prior program, the Company purchased a total of 118.8 million shares at an average price of $42.08 per share. Following the completion of this program, the Company began repurchases under the four-year, $8 billion share repurchase program approved by the Board in September 2012.2016:

Period Total Number of Shares Purchased
Average Price
Paid per Share

Total Number of Shares
Purchased as Part of
Publicly Announced
Plans or Programs

Maximum Number (or Approximate Dollar Value)
of Shares that May Yet
Be Purchased Under the
Plans or Programs
(In millions)
March 1 — March 31, 2014 2,775,000
$ 77.68
2,775,000
$ 5,280
April 1 — April 30, 2014 4,797,224
$ 73.16
4,797,224
$ 4,929
May 1 — May 31, 2014 4,709,740
$ 73.40
4,709,740
$ 4,583
12,281,964
$ 74.27
12,281,964



Period	Total Number of Shares Purchased	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Maximum Number (or Approximate Dollar Value) of Shares that May Yet Be Purchased Under the Plans or Programs (In millions)
March 1 — March 31, 2016	2,923,173	$	61.04	2,923,173	$	11,173
April 1 — April 30, 2016	4,328,107	$	59.69	4,328,107	$	10,914
May 1 — May 31, 2016	1,765,373	$	58.47	1,765,373	$	10,811
	9,016,653	$	59.89	9,016,653

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Performance Graph

The following graph demonstrates a five-year comparison of cumulative total returns for NIKE’s Class B Common Stock, the Standard & Poor’s 500 Stock Index, the Standard & Poor’s Apparel, Accessories & Luxury Goods Index and the Dow Jones U.S. Footwear Index. The graph assumes an investment of $100 on May 31, ~~2009~~2011 in each of our Class B Common Stock, and the stocks comprising the Standard & Poor’s 500 Stock Index, the Standard & Poor’s Apparel, Accessories & Luxury Goods Index and the Dow Jones U.S. Footwear Index. Each of the indices assumes that all dividends were reinvested on the day of issuance.

COMPARISON OF 5-YEAR CUMULATIVE TOTAL RETURN AMONG NIKE, INC.; S&P 500 INDEX; S&P APPAREL, ACCESSORIES & LUXURY GOODS ~~INDEX;~~INDEX AND THE DOW JONES U.S. FOOTWEAR INDEX

The Dow Jones U.S. Footwear Index consists of NIKE, Deckers Outdoor Corp., Wolverine World Wide, Inc., ~~Iconix Brand Group,~~Skechers U.S.A., Inc.~~, Crocs, Inc.,~~ and Steven Madden, Ltd., among other companies. Because NIKE is part of the Dow Jones U.S. Footwear Index, the price and returns of NIKE stock have a substantial effect on this index. The Standard & Poor’s Apparel, Accessories & Luxury Goods Index consists of V.F. ~~Corp.,~~Corporation, Coach, Inc., ~~Polo~~ Ralph Lauren Corporation, Under Armour, Inc. and ~~Fossil Group, Inc.~~Michael Kors Holdings, Limited, among other companies. The Dow Jones U.S. Footwear Index and the Standard & Poor’s Apparel, Accessories ~~and~~& Luxury Goods Index include companies in two major lines of business in which the Company competes. The indices do not encompass all of the Company’s competitors, nor all product categories and lines of business in which the Company is engaged.

The stock performance shown on the performance graph above is not necessarily indicative of future performance. The Company will not make or endorse any predictions as to future stock performance.

The performance graph above is being furnished solely to accompany this Report pursuant to Item 201(e) of Regulation S-K, and is not being filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and is not to be incorporated by reference into any filing of the Company, whether made before or after the date hereof, regardless of any general incorporation language in such filing.

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ITEM 6. Selected Financial Data

Unless otherwise indicated, the following disclosures reflect the Company’s continuing ~~operations; refer to Note 15 — Discontinued Operations in the accompanying Notes to the Consolidated Financial Statements for additional information regarding discontinued~~ operations. All share and per share amounts are reflective of the two-for-one stock ~~split~~splits that began trading at ~~the~~ split-adjusted ~~price~~prices on December 24, 2015 and December 26, 2012.


(Dollars in millions, except per share data and financial ratios)	Financial History
	2014			2013⁽¹⁾			2012⁽¹⁾			2011⁽¹⁾			2010⁽¹⁾
(In millions, except per share data and financial ratios)																Financial History
																2016			2015			2014			2013			2012
Year Ended May 31,
Revenues	$	27,799		$	25,313		$	23,331		$	20,117		$	18,324		$	32,376		$	30,601		$	27,799		$	25,313		$	23,331
Gross profit	12,446			11,034			10,148			9,202			8,498			14,971			14,067			12,446			11,034			10,148
Gross margin %	44.8		%	43.6		%	43.5		%	45.7		%	46.4		%	46.2		%	46.0		%	44.8		%	43.6		%	43.5		%
Net income from continuing operations	2,693			2,451			2,257			2,163			1,916			3,760			3,273			2,693			2,451			2,257
Net income (loss) from discontinued operations	—			21			(46		)	(39		)	(16		)	—			—			—			21			(46		)
Net income	2,693			2,472			2,211			2,124			1,900			3,760			3,273			2,693			2,472			2,211
Earnings per share from continuing operations:
Basic earnings per common share	3.05			2.74			2.45			2.27			1.98
Diluted earnings per common share	2.97			2.68			2.40			2.23			1.94
Earnings per share from discontinued operations:
Basic earnings per common share	—			0.02			(0.05		)	(0.04		)	(0.02		)
Diluted earnings per common share	—			0.02			(0.05		)	(0.04		)	(0.02		)
Earnings per common share from continuing operations:
Basic																2.21			1.90			1.52			1.37			1.23
Diluted																2.16			1.85			1.49			1.34			1.20
Earnings per common share from discontinued operations:
Basic																—			—			—			0.01			(0.03		)
Diluted																—			—			—			0.01			(0.02		)
Weighted average common shares outstanding	883.4			897.3			920.0			951.1			971.0			1,697.9			1,723.5			1,766.7			1,794.6			1,839.9
Diluted weighted average common shares outstanding	905.8			916.4			939.6			971.3			987.8			1,742.5			1,768.8			1,811.6			1,832.9			1,879.2
Cash dividends declared per common share	0.93			0.81			0.70			0.60			0.53			0.62			0.54			0.47			0.41			0.35
Cash flow from operations, inclusive of discontinued operations	3,003			2,968			1,824			1,796			3,167			3,096			4,680			3,013			3,032			1,932
Price range of common stock:
High	80.26			65.91			57.20			46.15			39.28			68.19			52.75			40.13			32.96			28.60
Low	59.11			43.89			39.29			33.61			25.08			47.25			36.57			29.56			21.95			19.65
At May 31,
Cash and equivalents	$	2,220		$	3,337		$	2,254		$	1,877		$	3,026		$	3,138		$	3,852		$	2,220		$	3,337		$	2,254
Short-term investments	2,922			2,628			1,503			2,661			2,120			2,319			2,072			2,922			2,628			1,503
Inventories	3,947			3,484			3,251			2,630			1,953			4,838			4,337			3,947			3,484			3,251
Working capital, excluding assets and liabilities of discontinued operations⁽²⁾⁽³⁾	8,669			9,686			7,531			7,275			7,518
Total assets, excluding assets of discontinued operations⁽²⁾	18,594			17,545			14,804			14,398			13,852
Working capital, excluding assets and liabilities of discontinued operations^(1)(2)(3)																9,667			9,255			8,319			9,391			7,271
Total assets, excluding assets of discontinued operations⁽¹⁾⁽²⁾																21,396			21,597			18,587			17,540			14,800
Long-term debt	1,199			1,210			228			276			446			2,010			1,079			1,199			1,210			228
Capital lease obligations(4)	74			81			—			—			—			15			5			74			81			—
Redeemable preferred stock	0.3			0.3			0.3			0.3			0.3			0.3			0.3			0.3			0.3			0.3
Shareholders’ equity	10,824			11,081			10,319			9,793			9,713			12,258			12,707			10,824			11,081			10,319
Year-end stock price	76.91			61.66			54.09			42.23			36.19			55.22			50.84			38.46			30.83			27.05
Market capitalization	66,921			55,124			49,546			39,523			35,032			92,867			87,044			66,921			55,124			49,546
Financial Ratios:
Return on equity	24.6		%	23.1		%	22.0		%	21.8		%	20.7		%	30.1		%	27.8		%	24.6		%	23.1		%	22.0		%
Return on assets(1)	14.9		%	15.3		%	15.1		%	15.0		%	14.3		%	17.5		%	16.3		%	14.9		%	15.3		%	15.1		%
Inventory turns	4.1			4.2			4.5			4.8			4.7			3.8			4.0			4.1			4.2			4.5
Current ratio at May 31(1)	2.7			3.5			3.0			2.9			3.3			2.8			2.5			2.7			3.4			3.0
Price/Earnings ratio at May 31	25.9			22.8			23.0			19.3			18.8			25.6			27.5			25.9			22.8			23.0

(1)

Prior year amounts have been ~~revised~~updated to ~~correct immaterial misstatements,~~reflect the adoption of Accounting Standards Update No. 2015-17, which requires all deferred tax assets and deferred tax liabilities to be classified as ~~described~~non-current. Refer to Recently Adopted Accounting Standards in Note 1 — Summary of Significant Accounting Policies in the accompanying Notes to the Consolidated Financial Statements. Shareholders' equity for fiscal year 2010 includes a decrease to beginning Retained earnings of $34 million for the cumulative effect of the revision to correctly expense internally developed patent and trademark costs as incurred.


(2)	Assets of discontinued operations were $0 million, $0 million, ~~$615~~$0 million, ~~$560~~$0 million and ~~$530~~$615 million for the years ended May 31, 2016, 2015, 2014, 2013 and 2012, ~~2011, and~~ ~~2010~~, respectively.


(3)	Liabilities of discontinued operations were $0 million, $0 million, $0 million, $18 million ~~$170 million, $184 million,~~ and ~~$182~~$170 million for the years ended May 31, 2016, 2015, 2014, 2013 ~~2012, 2011,~~ and ~~2010,~~2012, respectively.


(4)	During the fiscal year ended May 31, 2015, the Company restructured the terms of certain capital leases, which subsequently qualified as operating leases.

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Selected Quarterly Financial Data

(Unaudited)
(Dollars in millions, except per share data)
1st Quarter 2nd Quarter 3rd Quarter 4th Quarter
2014⁽¹⁾

2013⁽¹⁾

2014⁽¹⁾

2013⁽¹⁾

2014⁽¹⁾

2013⁽¹⁾
2014
2013⁽¹⁾
Revenues $ 6,971
$ 6,474
$ 6,431
$ 5,955
$ 6,972
$ 6,187
$ 7,425
$ 6,697
Gross profit 3,132
2,828
2,826
2,530
3,103
2,736
3,385
2,940
Gross margin % 44.9 % 43.7 % 43.9 % 42.5 % 44.5 % 44.2 % 45.6 % 43.9 %
Net income from continuing operations 779
582
534
519
682
660
698
690
Net income (loss) from discontinued operations —
(18 ) —
(137 ) —
204
—
(28 )
Net income 779
564
534
382
682
864
698
662
Earnings per share from continuing operations:
Basic earnings per common share 0.88
0.64
0.60
0.58
0.77
0.74
0.80
0.77
Diluted earnings per common share 0.86
0.63
0.59
0.57
0.75
0.72
0.78
0.76
Earnings per share from discontinued operations:
Basic earnings per common share —
(0.03 ) —
(0.15 ) —
0.23
—
(0.03 )
Diluted earnings per common share —
(0.02 ) —
(0.15 ) —
0.22
—
(0.03 )
Weighted average common shares outstanding 889.4
905.6
888.0
897.0
882.3
893.9
873.7
892.6
Diluted weighted average common shares outstanding 910.7
922.8
910.6
913.1
904.8
911.7
895.2
913.4
Cash dividends declared per common share 0.21
0.18
0.24
0.21
0.24
0.21
0.24
0.21
Price range of common stock
High 66.85
54.32
79.87
50.42
80.26
55.55
80.09
65.91
Low 59.11
43.89
63.50
45.30
69.85
48.46
70.60
53.49



(Unaudited) (In millions, except per share data)	1st Quarter						2nd Quarter						3rd Quarter						4th Quarter
(Unaudited) (In millions, except per share data)	2016			2015			2016			2015			2016			2015			2016			2015
Revenues	$	8,414		$	7,982		$	7,686		$	7,380		$	8,032		$	7,460		$	8,244		$	7,779
Gross profit	3,995			3,721			3,501			3,327			3,689			3,426			3,786			3,593
Gross margin %	47.5		%	46.6		%	45.6		%	45.1		%	45.9		%	45.9		%	45.9		%	46.2		%
Net income	1,179			962			785			655			950			791			846			865
Earnings per common share:
Basic	0.69			0.56			0.46			0.38			0.56			0.46			0.50			0.50
Diluted	0.67			0.54			0.45			0.37			0.55			0.45			0.49			0.49
Weighted average common shares outstanding	1,709.0			1,729.8			1,706.5			1,726.2			1,693.8			1,722.9			1,682.4			1,715.0
Diluted weighted average common shares outstanding	1,754.5			1,772.4			1,751.4			1,769.6			1,737.3			1,767.7			1,723.1			1,759.6
Cash dividends declared per common share	0.14			0.12			0.16			0.14			0.16			0.14			0.16			0.14
Price range of common stock:
High	58.86			40.15			67.65			49.88			68.19			49.75			65.44			52.75
Low	47.25			36.57			54.01			39.18			53.64			43.35			55.17			47.59

~~(1)~~

Amounts presented have been revised from what was previously filed to correctly expense internally developed patent and trademark costs as incurred. As a result of this revision, Net income as previously presented for the three months ended August 31, 2013, November 30, 2013 and February 28, 2014 decreased by $1 million, $3 million and $3 million, respectively. Net income as previously presented for the three months ended August 31, 2012, November 30, 2012, February 28, 2013 and May 31, 2013 decreased by $3 million, $2 million, $2 million and $6 million, respectively. The Company plans to reflect the revised amounts in its quarterly Condensed Consolidated Financial Statements for fiscal 2014 in future filings containing such information. Refer to Note 1 — Summary of Significant Accounting Policies in the accompanying Notes to the Consolidated Financial Statements.

~~Table of Contents~~

ITEM 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

NIKE designs, develops, markets and sells athletic footwear, apparel, equipment, accessories and services worldwide. We are the largest seller of athletic footwear and apparel in the world. We sell our products to retail accounts, ~~as well as~~ through NIKE-owned in-line and factory retail stores and NIKE-owned internet websites (which we refer to collectively as our “Direct to Consumer” or ~~"DTC"~~“DTC” operations), and through a mix of independent distributors, licensees and sales representatives in virtually all countries around the world. Our goal is to deliver value to our shareholders by building a profitable global portfolio of branded footwear, apparel, equipment and accessories businesses. Our strategy is to achieve long-term revenue growth by creating innovative, “must have” products, building deep personal consumer connections with our brands and delivering compelling consumer experiences at retail and online.

In addition to achieving long-term, sustainable revenue growth, we continue to strive to deliver shareholder value by driving operational excellence in several key areas:

Expanding gross margin by:

-Delivering innovative, premium products that command higher prices while maintaining a ~~strong consumer~~balanced price-to-value ~~proposition;~~equation for consumers;

- Reducing product costs through a continued focus on manufacturing efficiency, product design and innovation; ~~and~~

- Making our supply chain a competitive ~~advantage.~~advantage by investing in new technologies that increase automation, help reduce waste and have long-term potential to increase both customization of our products and speed to market; and

~~Improving~~- Driving growth in our higher gross margin DTC business, led by NIKE.com, as part of an integrated marketplace growth strategy across our DTC and wholesale operations.

Optimizing selling and administrative expense ~~productivity~~ by focusing ~~on investments~~ on:

- Investments in consumer engagement that drive economic returns in the form of incremental revenue and gross ~~profit,~~profit;

- Infrastructure investments that improve the efficiency and ~~leveraging existing infrastructure across~~effectiveness of our ~~portfolio~~operations; and

- Investments in key areas of ~~businesses to eliminate duplicative costs;~~future growth, including our DTC business.

~~Improving~~Managing working capital efficiency; and

Deploying capital effectively.

Through execution of this strategy, our long-term financial goals ~~continue to be:~~through fiscal 2020, on average per year, are as follows:

High single-digit to low-double digit revenue ~~growth,~~growth;

Mid-teens earnings per share ~~growth,~~growth;

~~Consistent~~High-twenties to low-thirties percentage rate of return on invested ~~capital and accelerated~~capital;

Free cash ~~flows,~~flow growing faster than net income; and

~~Steady results~~Sustainable, profitable, long-term growth through effective management of our diversified portfolio of businesses.

Over the past ten years, we have achieved many of ~~these~~our financial goals. During this time, revenues and diluted earnings per common share for NIKE, Inc., inclusive of both continuing and discontinued operations, have grown 9%8% and 13%, respectively, on an annual compounded basis. ~~Our~~We expanded gross margin by approximately 220 basis points and our return on invested capital has increased from ~~22%~~22.6% to ~~25% and we expanded gross margins by approximately 190 basis points.~~29.7%.

On November ~~15, 2012,~~19, 2015, we announced a two-for-one stock split of both NIKE Class A and Class B Common ~~shares.~~Stock. The stock split was in the form of a 100 percent stock dividend payable on December ~~24, 2012~~23, 2015 to shareholders of record at the close of business on December ~~10, 2012.~~9, 2015. Common stock began trading at the split-adjusted price on December ~~26, 2012.~~24, 2015. All share ~~numbers~~ and per share amounts presented reflect the stock split.

Our fiscal ~~2014~~2016 results ~~from continuing operations~~ demonstrated the power of the NIKE, Inc. portfolio to deliver ~~consistent~~continued growth inand expanding profitability. Despite significant foreign currency headwinds, we achieved record revenues and earnings per share for fiscal 2016. NIKE, Inc. Revenues grew 6% to $32.4 billion, gross margin expanded 20 basis points, Net income increased 15% and diluted earnings per common share grew 17% to $2.16. We also delivered strong cash returns to shareholders while investing for long-term growth. Despite significant foreign currency headwinds, we delivered record revenues and earnings per share in fiscal 2014. Our revenues grew 10% to $27.8 billion, net income from continuing operations increased 10% to $2.7 billion, and we delivered diluted earnings per common share of $2.97, an 11% increase from fiscal 2013.

Earnings before interest and income taxes ("EBIT") ~~from continuing operations~~ increased 10% for fiscal ~~2014,~~2016, driven by revenue growth and ~~improved~~ gross margin ~~which more than offset higher~~expansion, while selling and administrative ~~expense.~~expense was flat as a percent of revenues. The increase in revenues was ~~driven by~~attributable to growth for nearly every NIKE Brand geography and across ~~nearly all NIKEBrand geographies,~~most key categories and product types. This broad-based growth was primarily fueled by:

Innovative performance and sportswear products, incorporating proprietary technology platforms such as NIKE ~~AIR,~~Air, Free, Zoom, Lunar, ~~Shox, Free,~~ Flywire, Dri-Fit ~~FlyKnit, NIKE+,~~ and ~~NIKE Fuel;~~Flyknit;

Deep brand connections towith consumers through aour category ~~lens,~~offense, reinforced by investments in endorsements by high-profile athletes, sports teams and ~~teams,~~leagues, high-impact marketing around global sporting events ~~(such as the World Cup, Olympics, and NFL Super Bowl)~~ and digital marketing; and

Strong category retail presentation online and at NIKE-owned and retail partner stores.

~~We also delivered strong results for~~ Converse ~~with revenue~~revenues and EBIT decreased 1% and 6%, respectively, as growth in direct distribution markets was more than offset by the negative impact of ~~16% and 17%, respectively.~~changes in foreign currency exchange rates.

~~Our gross margins improved largely~~Gross margin increased primarily due to higher full-price average selling price and the ~~positive~~favorable impact of ~~higher average selling prices and contribution from~~growth in our ~~higher margin~~higher-margin DTC ~~business,~~businesses, partially offset by higher product ~~input~~ costs, primarily due ~~primarily~~ to shifts in mix to higher-cost products and labor input cost inflation, higher off-price mix and unfavorable changes in ~~our product costs, and~~ foreign currency ~~headwinds.~~exchange rates.

For fiscal ~~2014,~~2016, the growth ~~of our net~~in Net income ~~from continuing operations~~ was positively affected by a year-over-year decrease in our effective tax rate of 350 basis points primarily due to an increase in the proportion of earnings from operations outside the United States, which are generally subject to a lower tax rate. ~~In addition, diluted~~Diluted earnings per common share grew at a higher rate than ~~net~~Net income due to a 1% decrease in the weighted average ~~number of~~ diluted common shares outstanding, ~~as a result of~~driven by our share ~~repurchases.~~

During the second quarter of fiscal 2013, we completed the sale of certain assets of the Umbro brand and recorded a loss on the sale of these assets of $107 million, net of tax. During the third quarter of fiscal 2013, we completed the sale of Cole Haan and recorded a gain on sale of $231 million, net of tax. As of May 31, 2013, the Company had substantially completed all transition services related to the sale of both businesses. Unless otherwise indicated, the following disclosures reflect the Company's continuing operations; refer to our “Discontinued Operations" section for additional information regarding our discontinued operations.repurchase program.

While ~~macroeconomic uncertainties in the global economy are likely to persist,~~foreign currency markets remain volatile, we continue to see opportunities to drive future growth and profitability, and remain committed to effectively managing our business to achieve our financial goals over the ~~long term~~long-term by executing against the operational strategies outlined above.

~~Table of Contents~~

Results of Operations

~~Unless otherwise indicated, the following disclosures reflect the Company’s continuing operations.~~


(Dollars in millions, except per share data)	Fiscal 2014			Fiscal 2013⁽¹⁾			% Change		Fiscal 2012⁽¹⁾			% Change		Fiscal 2016			Fiscal 2015			% Change		Fiscal 2014			% Change
Revenues	$	27,799		$	25,313		10	%	$	23,331		8	%	$	32,376		$	30,601		6	%	$	27,799		10	%
Cost of sales	15,353			14,279			8	%	13,183			8	%	17,405			16,534			5	%	15,353			8	%
Gross profit	12,446			11,034			13	%	10,148			9	%	14,971			14,067			6	%	12,446			13	%
Gross margin %	44.8		%	43.6		%			43.5		%			46.2		%	46.0		%			44.8		%
Demand creation expense	3,031			2,745			10	%	2,607			5	%	3,278			3,213			2	%	3,031			6	%
Operating overhead expense	5,735			5,051			14	%	4,472			13	%	7,191			6,679			8	%	5,735			16	%
Total selling and administrative expense	8,766			7,796			12	%	7,079			10	%	10,469			9,892			6	%	8,766			13	%
% of Revenues	31.5		%	30.8		%			30.3		%			32.3		%	32.3		%			31.5		%
Interest expense (income), net	33			(3		)	—		4			—		19			28			—		33			—
Other expense (income), net	103			(15		)	—		54			—
Other (income) expense, net														(140		)	(58		)	—		103			—
Income before income taxes	3,544			3,256			9	%	3,011			8	%	4,623			4,205			10	%	3,544			19	%
Income tax expense	851			805			6	%	754			7	%	863			932			-7	%	851			10	%
Effective tax rate	24.0		%	24.7		%			25.0		%			18.7		%	22.2		%			24.0		%
Net income from continuing operations	2,693			2,451			10	%	2,257			9	%
Net income (loss) from discontinued operations	—			21			—		(46		)	—
Net income	$	2,693		$	2,472		9	%	$	2,211		12	%	$	3,760		$	3,273		15	%	$	2,693		22	%
Diluted earnings per share - continuing operations	$	2.97		$	2.68		11	%	$	2.40		12	%
Diluted earnings per share - discontinued operations	$	—		$	0.02		—		$	(0.05	)	—
Diluted earnings per common share														$	2.16		$	1.85		17	%	$	1.49		24	%


~~(1)~~	Prior year amounts have been revised to correctly expense internally developed patent and trademark costs as incurred. Refer to Note 1 — Summary of Significant Accounting Policies in the accompanying Notes to the Consolidated Financial Statements.

~~Table of Contents~~

Consolidated Operating Results

Revenues


(Dollars in millions)	Fiscal 2014		Fiscal 2013⁽¹⁾			% Change		% Change Excluding Currency Changes⁽²⁾		Fiscal 2012⁽¹⁾			% Change		% Change Excluding Currency Changes⁽²⁾		Fiscal 2016			Fiscal 2015⁽¹⁾			% Change		% Change Excluding Currency Changes⁽²⁾		Fiscal 2014⁽¹⁾		% Change		% Change Excluding Currency Changes⁽²⁾
NIKE, Inc. Revenues:
NIKE Brand Revenues by:
Footwear	$	16,208	$	14,635		11	%	12	%	$	13,513		8	%	11	%	$	19,871		$	18,318		8	%	15	%	$	16,208	13	%	17	%
Apparel	8,109		7,491			8	%	10	%	6,958			8	%	10	%	9,067			8,637			5	%	11	%	8,109		7	%	10	%
Equipment	1,670		1,640			2	%	4	%	1,429			15	%	17	%	1,496			1,631			-8	%	-2	%	1,670		-2	%	1	%
Global Brand Divisions⁽³⁾	125		115			9	%	6	%	111			4	%	7	%	73			115			-37	%	-30	%	125		-8	%	-2	%
Total NIKE Brand Revenues	26,112		23,881			9	%	11	%	22,011			8	%	11	%	30,507			28,701			6	%	13	%	26,112		10	%	14	%
Converse	1,684		1,449			16	%	15	%	1,324			9	%	10	%	1,955			1,982			-1	%	2	%	1,684		18	%	21	%
Corporate⁽⁴⁾	3		(17		)	—		—		(4		)	—		—		(86		)	(82		)	—		—		3		—		—
TOTAL NIKE, INC. REVENUES	$	27,799	$	25,313		10	%	11	%	$	23,331		8	%	11	%	$	32,376		$	30,601		6	%	12	%	$	27,799	10	%	14	%
Supplemental NIKE Brand Revenues Details:
NIKE Brand Revenues by:
Sales to Wholesale Customers	$	20,683	$	19,401		7	%	8	%	$	18,335		6	%	8	%	$	22,577		$	21,952		3	%	9	%	$	20,683	6	%	10	%
Sales Direct to Consumer	5,304		4,365			22	%	22	%	3,565			22	%	24	%	7,857			6,634			18	%	25	%	5,304		25	%	29	%
Global Brand Divisions⁽³⁾	125		115			9	%	6	%	111			4	%	7	%	73			115			-37	%	-30	%	125		-8	%	-2	%
TOTAL NIKE BRAND REVENUES	$	26,112	$	23,881		9	%	11	%	$	22,011		8	%	11	%	$	30,507		$	28,701		6	%	13	%	$	26,112	10	%	14	%
NIKE Brand Revenues on a Wholesale Equivalent Basis:⁽⁵⁾
Sales to Wholesale Customers	$	20,683	$	19,401		7	%	8	%	$	18,335		6	%	8	%	$	22,577		$	21,952		3	%	9	%	$	20,683	6	%	10	%
Sales from our Wholesale Operations to Direct to Consumer Operations	3,107		2,499			24	%	25	%	2,027			23	%	25	%	4,672			3,881			20	%	27	%	3,107		25	%	29	%
TOTAL NIKE BRAND WHOLESALE EQUIVALENT REVENUES	$	23,790	$	21,900		9	%	10	%	$	20,362		8	%	10	%	$	27,249		$	25,833		5	%	12	%	$	23,790	9	%	13	%
NIKE Brand Wholesale Equivalent Revenues by:⁽⁵⁾
Men's	$	14,001	$	13,073		7	%	9	%	$	12,269		7	%	9	%	$	15,410		$	14,689		5	%	11	%	$	13,996	5	%	9	%
Women's	4,971		4,494			11	%	12	%	4,221			6	%	9	%	6,296			5,732			10	%	17	%	4,976		15	%	20	%
Young Athletes'	3,737		3,251			15	%	16	%	3,004			8	%	11	%	4,560			4,301			6	%	11	%	3,737		15	%	19	%
Others⁽⁶⁾	1,081		1,082			0	%	1	%	868			25	%	27	%	983			1,111			-12	%	-4	%	1,081		3	%	7	%
TOTAL NIKE BRAND WHOLESALE EQUIVALENT REVENUES	$	23,790	$	21,900		9	%	10	%	$	20,362		8	%	10	%	$	27,249		$	25,833		5	%	12	%	$	23,790	9	%	13	%
NIKE Brand Wholesale Equivalent Revenues by:⁽⁵⁾
Running	$	4,623	$	4,274		8	%	10	%	$	3,694		16	%	18	%	$	5,017		$	4,863		3	%	10	%	$	4,626	5	%	9	%
Basketball	3,119		2,629			19	%	19	%	2,169			21	%	22	%
NIKE Basketball																	1,378			1,385			-1	%	2	%	1,178		18	%	19	%
Jordan Brand																	2,753			2,329			18	%	21	%	1,941		20	%	22	%
Football (Soccer)	2,270		1,930			18	%	21	%	1,862			4	%	9	%	2,143			2,250			-5	%	7	%	2,414		-7	%	-2	%
Men’s Training	2,479		2,391			4	%	5	%	2,072			15	%	17	%	2,611			2,545			3	%	6	%	2,485		2	%	4	%
Women’s Training	1,149		1,067			8	%	10	%	1,011			6	%	8	%	1,344			1,281			5	%	11	%	1,145		12	%	16	%
Action Sports	738		683			8	%	9	%	664			3	%	5	%	711			737			-4	%	3	%	738		0	%	4	%
Sportswear	5,877		5,569			6	%	7	%	5,764			-3	%	-1	%	7,513			6,604			14	%	22	%	5,744		15	%	20	%
Golf	789		792			0	%	1	%	726			9	%	10	%	706			769			-8	%	-6	%	788		-2	%	0	%
Others⁽⁷⁾	2,746		2,565			7	%	8	%	2,400			7	%	9	%	3,073			3,070			0	%	6	%	2,731		12	%	17	%
TOTAL NIKE BRAND WHOLESALE EQUIVALENT REVENUES	$	23,790	$	21,900		9	%	10	%	$	20,362		8	%	10	%	$	27,249		$	25,833		5	%	12	%	$	23,790	9	%	13	%

~~Table of Contents~~


(1)	Certain prior year amounts have been reclassified to conform to fiscal ~~2014~~2016 presentation. These changes had no impact on previously reported results of operations or shareholders' equity.


(2)	Results have been restated using actual exchange rates in use during the comparative prior year period to enhance the visibility of the underlying business trends by excluding the impact of translation arising from foreign currency exchange rate fluctuations.


(3)	Global Brand Divisions revenues are primarily ~~represent~~attributable to NIKE Brand licensing businesses that are not part of a geographic operating segment.


(4)	Corporate revenues primarily consist of foreign currency ~~revenue-related~~ hedge gains and losses related to revenues generated by entities within the NIKE Brand geographic operating segments and Converse but managed through our ~~centrally managed~~central foreign exchange risk management program.

(5)

References to NIKE Brand wholesale equivalent revenues are intended to provide context as to the total size of our NIKE Brand market footprint if we had no Direct to Consumer operations. NIKE Brand wholesale equivalent revenues consist of (1) sales to external wholesale customers and (2) internal sales from our wholesale operations to our Direct to Consumer operations which are charged at prices that are comparable to prices charged to external wholesale customers.


(6)	Others include all unisex products, equipment and other products not allocated to ~~Men's, Women's,~~Men’s, Women’s and Young ~~Athletes'~~Athletes’, as well as certain adjustments that are not allocated to products designated by gender or age.


(7)	Others include all other categories and certain adjustments that are not allocated at the category level.

Fiscal ~~2014~~2016 Compared to Fiscal ~~2013~~2015

On a ~~currency neutral~~currency-neutral basis, ~~revenues from~~ NIKE, Inc. ~~continuing operations~~Revenues grew ~~11%~~12% for fiscal ~~2014,~~2016, primarily driven by ~~increases in~~higher revenues for ~~both~~ the NIKE ~~Brand and Converse.~~Brand. Every NIKE Brand geography ~~delivered higher~~grew revenues for fiscal ~~2014.~~2016 as our category offense continued to deliver innovative products, deep brand connections and compelling retail experiences to consumers online and at NIKE-owned and retail partner stores, driving strong demand for NIKE Brand products. North America contributed 5approximately 4 percentage points of the increase in NIKE, Inc. revenues, while Greater China and Western Europe ~~and~~each contributed approximately 3 percentage points, Emerging Markets ~~each~~ contributed approximately 2 percentage points and Central & Eastern Europe ~~and Converse each~~ contributed approximately 1 percentage point.

~~On a~~Excluding the effects of changes in currency ~~neutral basis,~~exchange rates, NIKE Brand footwear and apparel revenues increased ~~12%~~15% and ~~10%~~11%, respectively, for fiscal 2016, while NIKE Brand equipment revenues ~~increased 4% during fiscal 2014.~~decreased 2%. The increase in NIKE Brand footwear revenues for fiscal 2014 was mainly due to growth in our Basketball, Sportswear, Running, and Football (Soccer) categories. The growth of NIKE footwear revenues continued to be fueled by increased demand for performance products, including NIKE and Brand Jordan Basketball styles; Running models with NIKE Free, Air Max, Lunar, and FlyKnit technologies; and performance Football (Soccer) products. Footwear unit sales in fiscal 2014 increased approximately 7% and the average selling price per pair increased approximately 5%, driven nearly equally by price increases and a shift in mix to higher priced products.

~~For NIKE Brand apparel, the increase in revenues for fiscal 2014~~2016 was driven by growth in ~~all~~nearly every key ~~categories, most notably our Football (Soccer), Running,~~category, including strong growth in Sportswear, the Jordan Brand and ~~Women's Training categories. In fiscal 2014,~~Running. Footwear unit sales ~~of apparel~~for fiscal 2016 increased ~~approximately 6% and the~~9%, with higher average selling price (ASP) per ~~unit increased~~pair contributing approximately ~~4%,~~6 percentage points of footwear revenue growth. Higher ASP per pair was driven by ~~price increases,~~higher full-price ASP, and to a lesser extent, ~~a shift~~the favorable impact of an increase in ~~mix~~the proportion of revenues from our higher-priced DTC business.

The constant-currency increase in NIKE Brand apparel revenues for fiscal 2016 was attributable to growth in most key categories, led by Sportswear, Men's Training, Running, Women's Training and Football (Soccer). Apparel unit sales for fiscal 2016 increased 7%. Higher ASP per unit contributed approximately 4 percentage points of apparel revenue growth, primarily due to higher ~~priced products.~~full-price ASP and growth in our higher-priced DTC business.

While wholesale revenues remain the largest component of overall NIKE Brand revenues, we continue to expand our DTC businesses in each of our geographies. ~~Our~~ NIKE Brand DTC operations include NIKE-owned in-line and factory stores, as well as online sales through NIKE-owned websites. For fiscal ~~2014,~~2016, DTC revenues represented approximately ~~20%~~26% of our total NIKE Brand ~~revenues compared to 18% in fiscal 2013.~~revenues. On a ~~currency neutral~~currency-neutral basis, DTC revenues ~~grew 22%~~increased 25% for fiscal ~~2014, as~~2016, driven by strong online sales growth, the addition of new stores and comparable store sales ~~grew~~growth of 10% ~~and we continued to open new stores and expand our e-commerce business.~~. Comparable store sales include revenues from NIKE-owned in-line and factory stores for which all three of the following requirements have been met: (1) the store has been open at least one year, (2) square footage has not changed by more than 15% within the past year and (3) the store has not been permanently repositioned within the past year. Online sales through NIKE-owned websites, which are not included in comparable store sales, grew ~~42%~~51% in fiscal ~~2014. Online~~2016. For fiscal 2016, online sales represented approximately ~~15%~~22% of our total NIKE Brand DTC ~~revenues for fiscal 2014, compared to 12% for fiscal 2013.~~revenues.

On a wholesale equivalent basis and excluding the effects of changes in currency exchange rates, fiscal ~~2014~~2016 NIKE Brand ~~Men's~~Men’s revenues increased ~~9% mainly as a result of strong~~11%, driven by growth in ~~our Basketball, Football (Soccer), Running,~~Sportswear and ~~Sportswear categories.~~the Jordan Brand, while Women's revenues increased ~~12% in large part due to increases in our~~17%, led by Sportswear, Running ~~Sportswear,~~ and Women's ~~Training categories. The 16% increase in the~~Training. Revenues for our Young Athletes' business ~~was driven by increases in~~increased 11%, with growth across multiple categories, most notably the ~~Basketball and Football (Soccer) categories in part due to our expanded footwear and apparel offerings for this age group.~~Jordan Brand.

Fiscal ~~2013~~2015 Compared to Fiscal ~~2012~~2014

On a ~~currency neutral~~currency-neutral basis, revenues from ~~our~~ NIKE, Inc. continuing operations grew ~~11%~~14% for fiscal ~~2013,~~2015, driven by increases in revenues for both the NIKE Brand and Converse. Every NIKE Brand geography ~~except Greater China~~ delivered higher revenues for fiscal ~~2013.~~2015 as our category offense continued to deliver innovative products, deep brand connections and compelling retail experiences to consumers. North America contributed 75 percentage points of the increase in NIKE, Inc. revenues, while ~~Emerging Markets~~Western Europe contributed 4 percentage points, Greater China contributed 2 percentage points and ~~Western and~~ Central & Eastern Europe, Emerging Markets and Converse each contributed 1 percentage point. ~~Greater China~~'~~s results reduced NIKE, Inc. revenue growth by 1 percentage point. Revenues for Converse contributed 1 percentage point to our consolidated revenue growth.~~

Excluding the effects of changes in currency exchange rates, NIKE Brand footwear and apparel revenues increased ~~11%~~17% and 10%, respectively, while NIKE Brand equipment revenues increased ~~17%~~1% during fiscal ~~2013.~~2015. The increase in NIKE Brand footwear revenues for fiscal 2013 was attributable to growth across our Running, Basketball, Football (Soccer), and Sportswear categories. The growth of NIKE footwear revenues continued to be fueled by increased demand for performance products, including Running models with NIKE Free and Lunar technologies, NIKE and Brand Jordan Basketball styles, and performance Football (Soccer) products. In fiscal 2013, unit sales of footwear increased approximately 7% and the average selling price per pair increased approximately 4%, driven equally by price increases and a shift in mix to higher priced products.

~~For NIKE Brand apparel, the increase in revenues for fiscal 2013~~2015 was driven by ~~our Men~~'~~s Training category (which includes~~strong performance in Sportswear, the ~~NFL licensed business), in addition to strong demand for~~Jordan Brand, Running, NIKE Basketball and ~~Basketball products. Apparel~~Football (Soccer). Footwear unit sales in fiscal ~~2013~~2015 increased 9%. Higher ASP per pair contributed approximately ~~7% and the average selling price per unit increased approximately 3%, reflecting a favorable mix~~8 percentage points of footwear revenue growth, driven primarily by higher ~~priced products, such as performance Running, Basketball, and NFL licensed apparel;~~full-price ASP, and to a lesser extent, the favorable impact of growth in our higher-priced DTC business.

The constant-currency increase in NIKE Brand apparel revenues for fiscal 2015 was driven by growth in most key categories, led by Sportswear, Running and Women's Training, which were partially offset by a decline in Football (Soccer) due largely to the comparison to significant sales of replica apparel in advance of the World Cup in 2014. Fiscal 2015 unit sales of apparel increased 8% with higher ~~selling prices~~.ASP per unit contributing approximately 2 percentage points of apparel revenue growth, driven primarily by growth in our higher-priced DTC business.

For fiscal ~~2013,~~2015, DTC ~~channels~~revenues represented approximately ~~18%~~23% of ~~overall~~our total NIKE Brand revenues compared to ~~16%~~20% in fiscal ~~2012.~~2014. On a ~~currency neutral~~currency-neutral basis, DTC revenues grew ~~24%~~29% for fiscal ~~2013, as~~2015, driven by strong comparable store sales ~~grew 14%~~growth of 16%, significant online sales growth and ~~we continued to expand our store network and e-commerce businesses.~~the addition of new stores. Online sales through NIKE-owned websites grew ~~32%~~59% in fiscal ~~2013 and~~2015. Online sales represented approximately ~~12%~~18% of our total NIKE Brand DTC revenues for fiscal ~~2013.~~2015 compared to 15% for fiscal 2014.

~~Table of Contents~~

On a wholesale equivalent basis and excluding the effects of changes in currency ~~neutral basis,~~exchange rates, fiscal ~~2013~~2015 NIKE Brand ~~Men's~~Men’s revenues increased 9% ~~due primarily to~~, driven by growth in our Sportswear, the Jordan Brand, NIKE Basketball and Running ~~Men's Training, and Basketball~~ categories. ~~Women's~~Women’s revenues ~~increased 9% driven~~accelerated in fiscal 2015, achieving 20% growth primarily ~~by an increase~~due to increases in Sportswear, Running and Women's ~~Training. The 11% increase~~Training categories. Revenues in ~~the~~our Young Athletes' business ~~was due primarily~~increased 19% as a result of continued efforts to ~~increases in Basketball.~~expand footwear and apparel offerings for this group across multiple categories, particularly the Jordan Brand.

Futures Orders

Futures orders for NIKE Brand footwear and apparel scheduled for delivery from June through November ~~2014~~2016 totaled $14.9 billion and were ~~11%~~8% higher than the orders reported for the comparable prior year period. NIKE Brand reported futures include (1) orders from external wholesale customers and (2) internal orders from our DTC in-line stores and e-commerce operations which are reflected at prices that are comparable to prices charged to external wholesale customers. The U.S.Dollar futures ~~order~~orders amount is calculated based upon our internal forecast of the currency exchange rates under which our revenues will be translated during this period.Excluding the impact of currency changes, futures orders increased ~~12%~~11%, with unit orders increasing 4% and average selling price per unit contributing approximately ~~8 and 4~~7 percentage points of ~~growth, respectively.~~growth.

By geography, futures orders growth was as follows:


	Reported Futures Orders Growth		Futures Orders Excluding Currency Changes⁽¹⁾		Reported Futures Orders	Futures Orders Excluding Currency Changes⁽¹⁾
North America	11	%	11	%	6%	6%
Western Europe	25	%	22	%	8%	11%
Central & Eastern Europe	10	%	14	%	3%	7%
Greater China	6	%	6	%	19%	24%
Japan	-6	%	0	%	24%	15%
Emerging Markets	2	%	9	%	3%	13%
Total NIKE Brand futures orders	11	%	12	%
TOTAL NIKE BRAND FUTURES ORDERS					8%	11%


(1)	~~Growth rates~~Reported futures have been restated using ~~constant~~prior year exchange rates for the comparative period to enhance the visibility of the underlying business trends, excluding the impact of foreign currency exchange rate fluctuations.

The reported futures orders growth is not necessarily indicative of our expectation of revenue growth during this period. This is due to year-over-year changes in shipment timing, changes in the mix of orders between futures and at-once orders, and because the fulfillment of certain orders may fall outside of the schedule noted above. In addition, exchange rate fluctuations as well as differing levels of order cancellations, discounts and returns can cause differences in the comparisons between futures orders and actual revenues. Moreover, a portion of our revenue is not derived from futures orders, including sales of at-once and closeout NIKE Brand footwear and apparel, all sales of NIKE Brand equipment, the difference between retail sales and internal orders from our DTC ~~operation sales,~~in-line stores and e-commerce operations, and sales from Converse, NIKE Golf and Hurley.

Gross Margin


(Dollars in millions)	Fiscal 2014			Fiscal 2013			% Change		Fiscal 2012			% Change		Fiscal 2016			Fiscal 2015			% Change		Fiscal 2014			% Change
Gross profit	$	12,446		$	11,034		13	%	$	10,148		9	%	$	14,971		$	14,067		6	%	$	12,446		13	%
Gross margin %	44.8		%	43.6		%	120	bps	43.5		%	10	bps	46.2		%	46.0		%	20	bps	44.8		%	120	bps

Fiscal ~~2014~~2016 Compared to Fiscal ~~2013~~2015

For fiscal 2016, our consolidated gross margin was 20 basis points higher than fiscal 2015, primarily attributable to the following factors:

Higher NIKE Brand full-price ASP (increasing gross margin approximately 190 basis points) aligned with our strategy to deliver innovative, premium products with higher prices and, to a lesser extent, due to price increases reflecting inflationary conditions in certain territories;

Growth in our higher-margin DTC business (increasing gross margin approximately 20 basis points);

Higher NIKE Brand product costs (decreasing gross margin approximately 70 basis points) as shifts in mix to higher-cost products and labor input cost inflation were only partially offset by lower material input costs;

Higher off-price mix (decreasing gross margin approximately 30 basis points), primarily reflecting the impacts from clearing excess inventory in North America;

Unfavorable changes in foreign currency exchange rates, net of hedges (decreasing gross margin approximately 40 basis points);

Higher other costs (decreasing gross margin approximately 20 basis points), primarily due to higher product design and development costs; and

Lower gross margin from Converse (decreasing gross margin approximately 20 basis points), primarily resulting from shifts in mix to lower-margin products.

Fiscal 2015 Compared to Fiscal 2014

For fiscal ~~2014,~~2015, our consolidated gross margin was 120 basis points higher than fiscal ~~2013,~~2014, primarily driven by ~~higher~~the following factors:

Higher NIKE Brand ~~average selling prices~~full-price ASP (increasing gross margin approximately ~~160~~250 basis points), primarily attributable to ~~both price increases and a shift~~shifts in mix to higher-priced products and, to a lesser extent, price increases in response to inflationary conditions in certain territories;

Higher NIKE Brand product costs (decreasing gross margin approximately 190 basis points) largely due to shifts in mix to higher-cost products, labor input cost inflation and higher ~~priced products. Gross margin was also positively impacted by growth~~air freight costs, in part to mitigate the negative impacts from product delays due to the West Coast port congestion in the United States;

Growth in our ~~higher margin~~higher-margin DTC business (increasing gross margin approximately 40 basis points); and ~~improved margins due to cleaner closeout inventories (increasing~~

Changes in foreign currency exchange rates (including gains and losses on hedge transactions) increased gross margin approximately 20 basis points). These increases in gross margin were partially offset by higher product costs (decreasing gross margin approximately 50 basis points), primarily due to a shift in mix to higher cost products, as well as product labor input cost inflation. Gross margins were also negatively impacted by unfavorable foreign currency exchange rate movements (decreasing gross margin approximately 50 basis points).points.

~~Fiscal 2013 Compared to Fiscal 2012~~

For fiscal 2013, our consolidated gross margin was 10 basis points higher than fiscal 2012, primarily driven by higher average selling prices (approximately 160 basis points) that were attributable to higher prices and a favorable sales mix. The positive benefit of higher net average selling prices was largely offset by higher product costs (approximately 110 basis points), primarily due to higher factory labor costs, and unfavorable foreign currency exchange rate movements (approximately 40 basis points).

In addition, in fiscal 2013 we experienced significant shifts in the mix of revenues from higher to lower margin segments of our business. While growth in these lower gross margin segments delivered incremental revenue and profits, it had a negative effect on our consolidated gross margin.

~~Table of Contents~~

Total Selling and Administrative Expense


(Dollars in millions)	Fiscal 2014			Fiscal 2013			% Change		Fiscal 2012			% Change		Fiscal 2016			Fiscal 2015			% Change		Fiscal 2014			% Change
Demand creation expense⁽¹⁾	$	3,031		$	2,745		10	%	$	2,607		5	%	$	3,278		$	3,213		2	%	$	3,031		6	%
Operating overhead expense⁽²⁾	5,735			5,051			14	%	4,472			13	%	7,191			6,679			8	%	5,735			16	%
Total selling and administrative expense	$	8,766		$	7,796		12	%	$	7,079		10	%	$	10,469		$	9,892		6	%	$	8,766		13	%
% of Revenues	31.5		%	30.8		%	70	bps	30.3		%	50	bps	32.3		%	32.3		%	—		31.5		%	80	bps


(1)	Demand creation expense consists of advertising and promotion ~~expenses,~~costs, including costs of endorsement ~~contracts.~~


~~(2)~~	~~Fiscal 2013~~contracts, television, digital and ~~2012 amounts have been revised to correctly expense internally developed patent~~print advertising, brand events and ~~trademark costs as incurred. Refer to Note 1 — Summary of Significant Accounting Policies in the accompanying Notes to the Consolidated Financial Statements.~~retail brand presentation.

Fiscal ~~2014~~2016 Compared to Fiscal ~~2013~~2015

Demand creation expense increased ~~10%~~2% for fiscal 2016 compared to ~~the prior year, mainly driven by~~fiscal 2015, primarily due to investments in digital brand marketing, including for our DTC business, as well as support for ~~events, including the World Cup, higher sports marketing expense,~~ key ~~product launches~~brand events and initiatives, and sports marketing investments, ~~to upgrade the presentation of our products in wholesale accounts.~~partially offset by lower advertising expense. For fiscal ~~2014,~~2016, changes in foreign currency exchange rates ~~did not have a material impact on~~ decreased growth in Demand creation ~~expense.~~expense by approximately 6 percentage points.

~~Compared to the prior year,~~ Operating overhead expense increased ~~14%,~~8% compared to fiscal 2015, primarily ~~attributable to growth~~as a result of continued investments in our DTC business, ~~driven by~~including new store openings and higher ~~personnel costs, and e-commerce launches,~~variable expenses, as well as ~~increased~~targeted investments in ~~our~~operational infrastructure and consumer-focused digital capabilities, ~~and corporate infrastructure.~~partially offset by lower performance-based compensation. Changes in foreign currency exchange rates ~~did not have a material impact on~~ decreased growth in Operating overhead expense by approximately 4 percentage points for fiscal ~~2014.~~2016.

Fiscal ~~2013~~2015 Compared to Fiscal ~~2012~~2014

Demand creation expense increased 5%6% for fiscal 2015 compared to the prior year, ~~mainly driven by an increase in sports marketing expense, marketing~~primarily due to support for key ~~product initiatives,~~brand and consumer events, including the ~~NIKE FuelBand~~World Cup in early fiscal 2015, increased digital brand marketing, investments in DTC marketing and ~~NFL launch, as well as an~~higher sports marketing expense. Changes in foreign currency exchange rates decreased growth in Demand creation expense by approximately 4 percentage points for fiscal 2015.

Operating overhead expense increased ~~level of marketing spending around global sporting events such as~~16% compared to the ~~European Football Championships~~prior year, primarily driven by investments in our rapidly growing DTC business, including new store openings and ~~London Summer Olympics. Excluding the effects of~~higher variable expenses, investments in operational infrastructure and consumer-focused digital capabilities and higher performance-based compensation. For fiscal 2015, changes in foreign currency exchange rates ~~Demand creation expense increased 8%.~~

~~Compared to the prior year,~~ decreased growth in Operating overhead expense increased 13%, primarily attributable to increased investments in our DTC operations, higher personnel costs, and corporate initiatives to support the growth of our overall business. Excluding the effects of changes in foreign currency exchange rates, the growth in Operating overhead expense was 15%. by approximately 3 percentage points.

Other (Income) Expense, ~~(Income),~~ Net


(In millions)	Fiscal 2014		Fiscal 2013			Fiscal 2012		Fiscal 2016			Fiscal 2015			Fiscal 2014
Other expense (income), net	$	103	$	(15	)	$	54
Other (income) expense, net								$	(140	)	$	(58	)	$	103

Other (income) expense, ~~(income),~~ net comprises foreign currency conversion gains and losses from the re-measurement of monetary assets and liabilities denominated in non-functional currencies and the impact of certain foreign currency derivative instruments, as well as unusual or non-operating transactions that are outside the normal course of business.

Fiscal ~~2014~~2016 Compared to Fiscal ~~2013~~2015

Other (income) expense, ~~(income),~~ net ~~shifted~~ increased from ~~$15~~$58 million of other ~~(income),~~income, net for fiscal ~~2013~~2015 to $140 million of other income, net for fiscal 2016, driven by a $26 million net change in foreign currency conversion gains and losses, a favorable settlement of a legal judgment related to a bankruptcy case in Western Europe and net gains from other non-operating items.

We estimate the combination of the translation of foreign currency-denominated profits from our international business and the year-over-year change in foreign currency-related gains and losses included in Other (income) expense, net had an unfavorable impact on our Income before income taxes of $423 million for fiscal 2016.

Fiscal 2015 Compared to Fiscal 2014

Other (income) expense, net shifted from $103 million of other expense, net for fiscal 2014 to $58 million of other income, net for fiscal 2015, primarily driven by a ~~$90~~$147 million ~~adverse~~net change in foreign currency conversion gains and losses, primarily due to significant hedge gains from available-for-sale investments, as well as an adverse legal judgment in the ~~second quarter of the current~~prior year related to a long outstanding bankruptcy case for a former customer in Western Europe.

We estimate the combination of the translation of foreign currency-denominated profits from our international ~~businesses~~business and the year-over-year change in foreign ~~currency related~~currency-related gains and losses included in Other (income) expense, ~~(income),~~ net had an unfavorable impact on our Income before income taxes of ~~$139~~$73 million for fiscal ~~2014.~~

~~Fiscal 2013 Compared to Fiscal 2012~~2015.

Other expense (income), net shifted from $54 million of other expense, net for fiscal 2012 to $15 million of other (income) net, for fiscal 2013. This change was primarily driven by a $48 million decrease in foreign currency net losses as well as the recognition of a $24 million restructuring charge for NIKE Brand'~~s Western Europe operations in fiscal 2012. These positive impacts were partially offset by smaller net gains from non-operating items.~~

We estimate the combination of the translation of foreign currency-denominated profits from our international businesses and the year-over-year change in foreign currency related gains and losses included in Other expense (income), net had an unfavorable impact on our Income before income taxes of $56 million for fiscal 2013.

~~Table of Contents~~

Income Taxes

Fiscal 2014
Fiscal 2013
% Change Fiscal 2012
% Change
Effective tax rate 24.0 % 24.7 % (70) bps
25.0 % (30) bps



	Fiscal 2016		Fiscal 2015		% Change	Fiscal 2014		% Change
Effective tax rate	18.7	%	22.2	%	(350) bps	24.0	%	(180) bps

Fiscal ~~2014~~2016 Compared to Fiscal ~~2013~~2015

The 70350 basis point decrease in our effective tax rate for the fiscal year was primarily ~~driven by~~due to an increase in the proportion of earnings infrom operations outside the United States, which are generally subject to a lower tax jurisdictions. During the fourth quarter of the fiscal year ended May 31, 2014, we reached a resolution with the IRS on an Advanced Pricing Agreement. This agreement did not have a material impact on our effective tax rate for fiscal 2014. Refer to Note 9 — Income Taxes in the accompanying Notes to the Consolidated Financial Statements for additional disclosure.rate.

Fiscal ~~2013~~2015 Compared to Fiscal ~~2012~~2014

The 30180 basis point decrease in our effective tax rate for the fiscal year was primarily driven by the U.S. legislative retroactive reinstatement of the research and development tax credit and a reduction of tax reserves on foreign operations, partially offset by an increase in the percentage of earnings in higher tax jurisdictions.

~~Discontinued Operations~~

During fiscal 2013, we divested of Umbro and Cole Haan, allowing us to focus our resources on driving growth in the NIKE, Jordan, Converse, and Hurley brands. The results of the divestiture are presented as discontinued operations. Please refer to Note 15 — Discontinued Operations in the accompanying Notesdue to the ~~Consolidated Financial Statements for more detail.~~favorable resolution of audits in several jurisdictions.

Operating Segments

Our ~~reportable~~ operating segments are evidence of the structure of the ~~Company's~~Company’s internal ~~organization, which changed beginning in the first quarter of fiscal 2014.~~organization. The NIKE Brand segments ~~continue to be~~are defined by geographic regions for operations participating in NIKE Brand sales ~~activity, which now includes the results of NIKE Golf and Hurley. Previously, NIKE Golf and Hurley were combined with Converse and reported as "Other Businesses."~~activity.

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.~~Markets, and include results for the NIKE, Jordan and Hurley brands. The Company’s NIKE Brand DTC operations are managed within each geographic operating segment. Converse is also a reportable segment for ~~NIKE, Inc.,~~the Company and operates in one industry: the design, marketing, licensing and selling of casual sneakers, apparel and accessories. ~~Prior year amounts have been restated to conform to fiscal 2014 presentation.~~

As part of our centrally managed foreign exchange risk management program, standard foreign currency rates are assigned twice per year to each NIKE Brand entity in our geographic operating segments and Converse. These rates are set approximately nine and twelve months in advance of the future selling ~~season~~seasons to which they relate (specifically, for each currency, one standard rate applies to the fall and holiday selling seasons and one standard rate applies to the spring and summer selling seasons) based on average market spot rates in the calendar month preceding the date they are established. Inventories and ~~cost~~Cost of sales for geographic operating segments and Converse reflect ~~the~~ use of these standard rates to record non-functional currency product purchases into 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 our centrally managed foreign exchange risk management ~~program.~~program and other conversion gains and losses.

The breakdown of revenues is as follows:


(Dollars in millions)	Fiscal 2014		Fiscal 2013⁽¹⁾			% Change		% Change Excluding Currency Changes⁽²⁾		Fiscal 2012⁽¹⁾			% Change		% Change Excluding Currency Changes⁽²⁾		Fiscal 2016			Fiscal 2015⁽¹⁾			% Change		% Change Excluding Currency Changes⁽²⁾		Fiscal 2014⁽¹⁾		% Change		% Change Excluding Currency Changes⁽²⁾
North America	$	12,299	$	11,158		10	%	10	%	$	9,538		17	%	17	%	$	14,764		$	13,740		7	%	8	%	$	12,299	12	%	12	%
Western Europe	4,979		4,193			19	%	14	%	4,212			0	%	5	%	5,884			5,705			3	%	14	%	4,979		15	%	21	%
Central & Eastern Europe	1,387		1,229			13	%	15	%	1,146			7	%	12	%	1,431			1,421			1	%	17	%	1,387		2	%	15	%
Greater China	2,602		2,478			5	%	3	%	2,561			-3	%	-5	%	3,785			3,067			23	%	27	%	2,602		18	%	19	%
Japan	771		876			-12	%	5	%	920			-5	%	2	%	869			755			15	%	22	%	771		-2	%	9	%
Emerging Markets	3,949		3,832			3	%	13	%	3,523			9	%	16	%	3,701			3,898			-5	%	13	%	3,949		-1	%	8	%
Global Brand Divisions⁽³⁾	125		115			9	%	6	%	111			4	%	7	%	73			115			-37	%	-30	%	125		-8	%	-2	%
Total NIKE Brand Revenues	26,112		23,881			9	%	11	%	22,011			8	%	11	%	30,507			28,701			6	%	13	%	26,112		10	%	14	%
Converse	1,684		1,449			16	%	15	%	1,324			9	%	10	%	1,955			1,982			-1	%	2	%	1,684		18	%	21	%
Corporate⁽⁴⁾	3		(17		)	—		—		(4		)	—		—		(86		)	(82		)	—		—		3		—		—
TOTAL NIKE, INC. REVENUES	$	27,799	$	25,313		10	%	11	%	$	23,331		8	%	11	%	$	32,376		$	30,601		6	%	12	%	$	27,799	10	%	14	%

~~Table of Contents~~


(1)	Certain prior year amounts have been reclassified to conform to fiscal ~~2014~~2016 presentation. These changes had no impact on previously reported results of operations or ~~shareholders’~~shareholders' equity.


(2)	Results have been restated using actual exchange rates in use during the comparative prior year period to enhance the visibility of the underlying business trends by excluding the impact of translation arising from foreign currency exchange rate fluctuations.


(3)	Global Brand Divisions revenues are primarily ~~represent~~attributable to NIKE Brand licensing businesses that are not part of a geographic operating segment.


(4)	Corporate revenues primarily consist of foreign currency ~~revenue-related~~ hedge gains and losses related to revenues generated by entities within the NIKE Brand geographic operating segments and Converse, but managed through our ~~centrally managed~~central foreign exchange risk management program.

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 Consolidated Statements of Income. As discussed in Note 1817 — Operating Segments and Related Information in the accompanying Notes to the Consolidated Financial Statements, certain corporate costs are not included in EBIT of our operating segments.

The breakdown of earnings before interest and taxes is as follows:


(Dollars in millions)	Fiscal 2014			Fiscal 2013⁽¹⁾			% Change		Fiscal 2012⁽¹⁾			% Change		Fiscal 2016			Fiscal 2015⁽¹⁾			% Change		Fiscal 2014⁽¹⁾			% Change
North America	$	3,075		$	2,641		16	%	$	2,092		26	%	$	3,763		$	3,645		3	%	$	3,077		18	%
Western Europe	855			643			33	%	599			7	%	1,434			1,275			12	%	855			49	%
Central & Eastern Europe	279			234			19	%	209			12	%	289			249			16	%	279			-11	%
Greater China	816			813			0	%	913			-11	%	1,372			993			38	%	816			22	%
Japan	131			139			-6	%	135			3	%	174			100			74	%	131			-24	%
Emerging Markets	955			988			-3	%	826			20	%	892			818			9	%	952			-14	%
Global Brand Divisions	(2,021		)	(1,746		)	-16	%	(1,479		)	-18	%	(2,596		)	(2,267		)	-15	%	(1,993		)	-14	%
Total NIKE Brand	4,090			3,712			10	%	3,295			13	%	5,328			4,813			11	%	4,117			17	%
Converse	496			425			17	%	394			8	%	487			517			-6	%	496			4	%
Corporate⁽²⁾	(1,009		)	(884		)	-14	%	(674		)	-31	%	(1,173		)	(1,097		)	-7	%	(1,036		)	-6	%
TOTAL CONSOLIDATED EARNINGS BEFORE INTEREST AND TAXES	3,577			3,253			10	%	3,015			8	%	4,642			4,233			10	%	3,577			18	%
Interest expense (income), net	33			(3		)	—		4			—		19			28			—		33			—
TOTAL CONSOLIDATED INCOME BEFORE INCOME TAXES	$	3,544		$	3,256		9	%	$	3,011		8	%	$	4,623		$	4,205		10	%	$	3,544		19	%

~~Recently Issued Accounting Standards~~

In May 2014, the FASB issued an accounting standards update that replaces existing revenue recognition guidance. Among other things, the updated guidance requires companies to recognize revenue in a way that depicts the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The new guidance is effective for the Company beginning June 1, 2017. We are currently evaluating the effect the guidance will have on the Company's consolidated financial position or results of operations.

Critical Accounting Policies

Our previous discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses and related disclosure of contingent assets and liabilities.

We believe that the estimates, assumptions and judgments involved in the accounting policies described below have the greatest potential impact on our financial statements, so we consider these to be our critical accounting policies. Because of the uncertainty inherent in these matters, actual results could differ from the estimates we use in applying the critical accounting policies. Certain of these critical accounting policies affect working capital account balances, including the policies for revenue recognition, the allowance for uncollectible accounts receivable, inventory reserves and contingent payments under endorsement contracts. These policies require that we make estimates in the preparation of our financial statements as of a given date. However, since our business cycle is relatively short, actual results related to these estimates are generally known within the six-month period following the financial statement date. Thus, these policies generally affect only the timing of reported amounts across two to three fiscal quarters.

Within the context of these critical accounting policies, we are not currently aware of any reasonably likely events or circumstances that would result in materially different amounts being reported.

Revenue Recognition

We record wholesale revenues when title passes and the risks and rewards of ownership have passed to the customer, based on the terms of sale. Title passes generally upon shipment or upon receipt by the customer depending on the country of the sale and the agreement with the customer. Retail store revenues are recorded at the time of ~~sale.~~sale and online store revenues are recorded upon delivery to the customer.

In some instances, we ship product directly from our supplier to the customer and recognize revenue when the product is delivered to and accepted by the customer. Our revenues may fluctuate in cases when our customers delay accepting shipment of product for periods of up to several weeks.

In certain countries outside of the United States, precise information regarding the date of receipt by the customer is not readily available. In these cases, we estimate the date of receipt by the customer based upon historical delivery times by geographic location. On the basis of our tests of actual transactions, we have no indication that these estimates have been materially inaccurate historically.

As part of our revenue recognition policy, we record estimated sales returns, discounts and miscellaneous claims from customers as reductions to revenues at the time revenues are recorded. Our post invoice sales discounts consist of contractual programs with certain customers or discretionary discounts that are expected to be granted to certain customers at a later date. We base our estimates on (1) historical rates of product returns, discounts and claims, (2) specific identification of outstanding claims and outstanding returns not yet received from customers and (3) estimated returns, discounts and claims expected but not yet finalized with our customers. Actual returns, discounts and claims in any future period are inherently uncertain and thus may differ from our estimates. If actual or expected future returns, discounts and claims ~~were~~are significantly greater or lower than ~~the~~established reserves, we ~~had established, we would~~ record a reduction or increase to net revenues in the period in which we ~~made~~make such determination.

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Allowance for Uncollectible Accounts Receivable

We make ongoing estimates relating to the ability to collect our accounts receivable and maintain an allowance for estimated losses resulting from the inability of our customers to make required payments. In determining the amount of the allowance, we consider our historical level of credit losses and make judgments about the creditworthiness of significant customers based on ongoing credit evaluations. Since we cannot predict future changes in the financial stability of our customers, actual future losses from uncollectible accounts may differ from our estimates. If the financial condition of our customers were to deteriorate, resulting in their inability to make payments, a larger allowance might be required. In the event we determine that a smaller or larger allowance is appropriate, we would record a credit or a charge to Operating overhead expense in the period in which such a determination is made.

Inventory Reserves

We also make ongoing estimates relating to the net realizable value of inventories based upon our assumptions about future demand and market conditions. If we estimate that the net realizable value of our inventory is less than the cost of the inventory recorded on our books, we record a reserve equal to the difference between the cost of the inventory and the estimated net realizable value. This reserve is recorded as a charge to Cost of ~~sales.~~sales. If changes in market conditions result in reductions in the estimated net realizable value of our inventory below our previous estimate, we would increase our reserve in the period in which we made such a determination and record a charge to Cost of ~~sales.~~sales.

Contingent Payments under Endorsement Contracts

A significant portion of our Demand creation expense relates to payments under endorsement contracts. In general, endorsement payments are expensed uniformly over the term of the contract. However, certain contract elements may be accounted for differently, based upon the facts and circumstances of each individual contract.

Certain contracts provide for contingent payments to endorsers based upon specific achievements in their sports (e.g., winning a championship). We record demand creation expense for these amounts when the endorser achieves the specific goal.

Certain contracts provide for variable payments based upon endorsers maintaining a level of performance in their sport over an extended period of time (e.g., maintaining a specified ranking in a sport for a year). ~~These~~When we determine payments are probable, the amounts are ~~reported~~recorded in Demand creation expense ~~when we determine that it is probable that~~ ratably over the ~~specified level~~contract period based on our best estimate of ~~performance will be maintained throughout~~ the ~~period.~~endorser's performance. In these instances, to the extent that actual payments to the endorser differ from our estimate due to changes in the endorser’s performance, increased or decreased Demand creation expense may be ~~reported~~recorded in a future period.

Certain contracts provide for royalty payments to endorsers based upon a predetermined ~~percentage~~percent of sales of particular products. We expense these payments in Cost of sales as the related sales occur. In certain contracts, we offer minimum guaranteed royalty payments. For contracts for which we estimate we will not meet the minimum guaranteed amount of royalty fees through sales of product, we record the amount of the guaranteed payment in excess of that earned through sales of product in Demand creation expense uniformly over the ~~remaining guarantee period.~~contract term.

Property, Plant and Equipment and Definite-Lived Assets

Property, plant and equipment, including buildings, equipment and computer hardware and software are recorded at cost (including, in some cases, the cost of internal labor) and are depreciated over the estimated useful life. Changes in circumstances (such as technological advances or changes to our business operations) can result in differences between the actual and estimated useful lives. In those cases where we determine that the useful life of a long-lived asset should be shortened, we increase depreciation expense over the remaining useful life to depreciate the asset’s net book value to its salvage value.

We review the carrying value of long-lived assets or asset groups to be used in operations whenever events or changes in circumstances indicate that the carrying amount of the assets might not be recoverable. Factors that would necessitate an impairment assessment include a significant adverse change in the extent or manner in which an asset is used, a significant adverse change in legal factors or the business climate that could affect the value of the asset or a significant decline in the observable market value of an asset, among others. If such facts indicate a potential impairment, we would assess the recoverability of an asset group by determining if the carrying value of the asset group exceeds the sum of the projected undiscounted cash flows expected to result from the use and eventual disposition of the assets over the remaining economic life of the primary asset in the asset group. If the recoverability test indicates that the carrying value of the asset group is not recoverable, we will estimate the fair value of the asset group using appropriate valuation methodologies that would typically include an estimate of discounted cash flows. Any impairment would be measured as the difference between the asset group’s carrying amount and its estimated fair value.

Goodwill and Indefinite-Lived Intangible Assets

We perform annual impairment tests on goodwill and intangible assets with indefinite lives in the fourth quarter of each fiscal year or when events occur or circumstances change that would, more likely than not, reduce the fair value of a reporting unit or an intangible asset with an indefinite life below its carrying value. Events or changes in circumstances that may trigger interim impairment reviews include significant changes in business climate, operating results, planned investments in the reporting unit, planned divestitures or an expectation that the carrying amount may not be recoverable, among other factors. We may first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If, after assessing the totality of events and circumstances, we determine that it is more likely than not that the fair value of the reporting unit is greater than its carrying amount, the two-step impairment test is unnecessary. The two-step impairment test requires us to estimate the fair value of our reporting units. If the carrying value of a reporting unit exceeds its fair value, the goodwill of that reporting unit is potentially impaired and we proceed to step two of the impairment analysis. In step two of the analysis, we measure and record an impairment loss equal to the excess of the carrying value of the reporting unit's goodwill over its implied fair value, if any.

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We generally base our measurement of the fair value of a reporting unit on a blended analysis of the present value of future discounted cash flows and the market valuation approach. The discounted cash flows model indicates the fair value of the reporting unit based on the present value of the cash flows that we expect the reporting unit to generate in the future. Our significant estimates in the discounted cash flows model include: our weighted average cost of capital; long-term rate of growth and profitability of the reporting unit's business; and working capital effects. The market valuation approach indicates the fair value of the business based on a comparison of the reporting unit to comparable publicly traded companies in similar lines of business. Significant estimates in the market valuation approach model include identifying similar companies with comparable business factors such as size, growth, profitability, risk and return on investment, and assessing comparable revenue and operating income multiples in estimating the fair value of the reporting unit.

Indefinite-lived intangible assets primarily consist of acquired trade names and trademarks. We may first perform a qualitative assessment to determine whether it is more likely than not that an indefinite-lived intangible asset is impaired. If, after assessing the totality of events and circumstances, we determine that it is more likely than not that the indefinite-lived intangible asset is not impaired, no quantitative fair value measurement is necessary. If a quantitative fair value measurement calculation is required for these intangible assets, we utilize the relief-from-royalty method. This method assumes that trade names and trademarks have value to the extent that their owner is relieved of the obligation to pay royalties for the benefits received from them. This method requires us to estimate the future revenue for the related brands, the appropriate royalty rate and the weighted average cost of capital.

Fair Value Measurements

For financial assets and liabilities measured at fair value on a recurring basis, fair value is the price we would receive to sell an asset or pay to transfer a liability in an orderly transaction with a market participant at the measurement date. In general, and where applicable, we use quoted prices in active markets for identical assets or liabilities to determine the fair values of our financial instruments. This pricing methodology applies to our Level 1 investments, including U.S. Treasury securities.

In the absence of active markets for identical assets or liabilities, such measurements involve developing assumptions based on market observable data, including quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active. This pricing methodology applies to our Level 2 investments such as time deposits, commercial paper and bonds, U.S. Agency securities and money market funds.

Level 3 investments are valued using internally developed models with unobservable inputs. Assets and liabilities measured using unobservable inputs are an immaterial portion of our portfolio.

A majority of our available-for-sale securities are priced by pricing vendors and are generally Level 1 or Level 2 investments as 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. Our fair value processes include controls that are designed to ensure appropriate fair values are recorded. These controls include ~~an analysis of period-over-period fluctuations and~~a comparison to another independent pricing vendor.

Hedge Accounting for Derivatives

We use ~~forward and option~~derivative contracts to hedge certain anticipated foreign currency ~~exchange~~and interest rate transactions as well as certain non-functional currency monetary assets and liabilities. When the specific criteria to qualify for hedge accounting has been met, changes in the fair value of contracts hedging probable forecasted future cash flows are recorded in Other comprehensive income, rather than Net income, until the underlying hedged transaction affects Net ~~income.~~income. In most cases, this results in gains and losses on hedge derivatives being released from Other comprehensive income into Net income sometime after the maturity of the derivative. One of the criteria for this accounting treatment is that the notional value of ~~forward and option~~these derivative contracts should not be in excess of specifically identified anticipated transactions. By their very nature, our estimates of anticipated transactions may fluctuate over time and may ultimately vary from actual transactions. When anticipated transaction estimates or actual transaction amounts decline below hedged levels, or if it is no longer probable that a forecasted transaction will occur by the end of the originally specified time period or within an additional two-month period of time thereafter, we are required to reclassify the cumulative change in fair value of the over-hedged portion of the related hedge contract from Other comprehensive income to Other (income) expense, ~~(income),~~ net during the quarter in which the decrease occurs.

We have used in the past, and may use in the future, ~~use,~~ forward contracts or options to hedge our investment in the net assets of certain international subsidiaries to offset foreign currency translation related to our net investment in those subsidiaries. The change in fair value of the forward contracts or options hedging our net investments is reported in the cumulative translation adjustment component of Accumulated other comprehensive income within Total shareholders’ equity, to the extent effective, to offset the foreign currency translation adjustments on those investments. As the value of our underlying net investments in wholly-owned international subsidiaries is known at the time a hedge is placed, the designated hedge is matched to the portion of our net investment at risk. Accordingly, the variability involved in net investment hedges is substantially less than that of other types of hedge transactions and we do not expect any material ineffectiveness. We consider, on a quarterly basis, the need to redesignate existing hedge relationships based on changes in the underlying net investment. Should the level of our net investment decrease below hedged levels, the cumulative change in fair value of the over-hedged portion of the related hedge contract would be reported as Other (income) expense, ~~(income),~~ net during the period in which changes occur.

Stock-based Compensation

We account for stock-based compensation by estimating the fair value of stock-based compensation on the date of grant using the Black-Scholes option pricing model. The Black-Scholes option pricing model requires the input of highly subjective assumptions including volatility. Expected volatility is estimated based on implied volatility in market traded options on our common stock with a term greater than one year, along with other factors. Our decision to use implied volatility was based on the availability of actively traded options on our common stock and our assessment that implied volatility is more representative of future stock price trends than historical volatility. If factors change and we use different assumptions for estimating stock-based compensation expense in future periods, stock-based compensation expense may differ materially in the future from that recorded in the current period.

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Income Taxes

We record valuation allowances against our deferred tax assets, when necessary. Realization of deferred tax assets (such as net operating loss carry-forwards) is dependent on future taxable earnings and is therefore uncertain. At least quarterly, we assess the likelihood that our deferred tax asset balance will be recovered from future taxable income. To the extent we believe that recovery is not likely, we establish a valuation allowance against our net deferred tax asset, which increases our Income tax expense in the period when such determination is made.

In addition, we have not recorded U.S. income tax expense for foreign earnings that we have determined to be indefinitely reinvested outside the United States, thus reducing our overall Income tax ~~expense.~~expense. The amount of earnings designated as indefinitely reinvested offshore is based upon the actual deployment of such earnings in our offshore assets and our expectations of the future cash needs of our U.S. and foreign entities. Income tax considerations are also a factor in determining the amount of foreign earnings to be indefinitely reinvested offshore.

We carefully review all factors that drive the ultimate disposition of foreign earnings determined to be reinvested offshore and apply stringent standards to overcome the presumption of repatriation. Despite this approach, because the determination involves our future plans and expectations of future events, the possibility exists that amounts declared as indefinitely reinvested offshore may ultimately be repatriated. For instance, the actual cash needs of our U.S. entities may exceed our current expectations, or the actual cash needs of our foreign entities may be less than our current expectations. This would result in additional Income tax expense in the year we determined that amounts were no longer indefinitely reinvested offshore. Conversely, our approach may also result in a determination that accumulated foreign earnings (for which U.S. income taxes have been provided) will be indefinitely reinvested offshore. In this case, our Income tax expense would be reduced in the year of such determination.

On an interim basis, we estimate what our effective tax rate will be for the full fiscal year. This estimated annual effective tax rate is then applied to the year-to-date Income before income taxes excluding infrequently occurring or unusual items, to determine the year-to-date Income tax ~~expense.~~expense. The income tax effects of infrequent or unusual items are recognized in the interim period in which they occur. As the fiscal year progresses, we continually refine our estimate based upon actual events and earnings by jurisdiction during the year. This continual estimation process periodically results in a change to our expected effective tax rate for the fiscal year. When this occurs, we adjust the income tax provision during the quarter in which the change in estimate occurs.

On a quarterly basis, we evaluate the probability that a tax position will be effectively sustained and the appropriateness of the amount recognized for uncertain tax positions based on factors including changes in facts or circumstances, changes in tax law, settled audit issues and new audit activity. Changes in our assessment may result in the recognition of a tax benefit or an additional charge to the tax provision in the period our assessment changes. We recognize interest and penalties related to income tax matters in Income tax ~~expense.~~expense.

Other Contingencies

In the ordinary course of business, we are involved in legal proceedings regarding contractual and employment relationships, product liability claims, trademark rights and a variety of other matters. We record contingent liabilities resulting from claims against us, including related legal costs, when a loss is assessed to be probable and the amount of the loss is reasonably estimable. Assessing probability of loss and estimating probable losses requires analysis of multiple factors, including in some cases judgments about the potential actions of third-party claimants and courts. Recorded contingent liabilities are based on the best information available and actual losses in any future period are inherently uncertain. If future adjustments to estimated probable future losses or actual losses exceed our recorded liability for such claims, we would record additional charges ~~as Other expense (income), net~~ during the period in which the actual loss or change in estimate occurred. In addition to contingent liabilities recorded for probable losses, we disclose contingent liabilities when there is a reasonable possibility that the ultimate loss will materially exceed the recorded liability. While we cannot predict the outcome of pending legal matters with certainty, we do not believe any currently identified claim, proceeding or litigation, either individually or in aggregate, will have a material impact on our results of operations, financial position or cash flows.

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ITEM 7A. Quantitative and Qualitative Disclosures about Market Risk

In the normal course of business and consistent with established policies and procedures, we employ a variety of financial instruments to manage exposure to fluctuations in the value of foreign currencies and interest rates. It is our policy to utilize these financial instruments only where necessary to finance our business and manage such exposures; we do not enter into these transactions for trading or speculative purposes.

We are exposed to foreign currency fluctuations, primarily as a result of our international sales, product sourcing and funding activities. Our foreign exchange risk management program is intended to lessen both the positive and negative effects of currency fluctuations on our consolidated results of operations, financial position and cash flows. We use forward ~~exchange~~and option contracts ~~and options~~ to hedge certain anticipated but not yet firmly committed transactions as well as certain firm commitments and the related receivables and payables, including third-party and intercompany transactions. We have, in the past, and may in the future, also use forward ~~contracts~~ or options contracts to hedge our investment in the net assets of certain international subsidiaries to offset foreign currency translation adjustments related to our net investment in those subsidiaries. Where exposures are hedged, our program has the effect of delaying the impact of exchange rate movements on our Consolidated Financial Statements.

The timing for hedging exposures, as well as the type and duration of the hedge instruments employed, are guided by our hedging policies and determined based upon the nature of the exposure and prevailing market conditions. 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. ~~Hedged transactions~~The majority of derivatives outstanding as of May 31, 2016 are ~~principally denominated in Euros,~~designated as foreign currency cash flow hedges, primarily for Euro/U.S. Dollar, British ~~Pounds,~~Pound/Euro and Japanese ~~Yen.~~Yen/U.S. Dollar currency pairs. See section “Foreign Currency Exposures and Hedging Practices” under Item 7 for additional detail.

Our earnings are also exposed to movements in short- and long-term market interest rates. Our objective in managing this interest rate exposure is to limit the impact of interest rate changes on earnings and cash flows and to reduce overall borrowing costs. To achieve these objectives, we maintain a mix of commercial paper, bank loans, ~~and fixed rate~~fixed-rate debt of varying maturities and have entered into receive-fixed, pay-variable interest rate swaps for a portion of our ~~fixed~~fixed-rate debt, as well as pay-fixed, receive-variable forward-starting interest rate swaps for cash outflows of interest payments on future debt.

Market Risk Measurement

We monitor foreign exchange risk, interest rate risk and related derivatives using a variety of techniques including a review of market value, sensitivity analysis and Value-at-Risk (“VaR”). Our market-sensitive derivative and other financial instruments are foreign currency forward contracts, foreign currency option contracts, interest rate swaps, intercompany loans denominated in non-functional currencies, fixed interest rate U.S. Dollar denominated debt and fixed interest rate Japanese Yen denominated debt.

We use VaR to monitor the foreign exchange risk of our foreign currency forward and foreign currency option derivative instruments only. The VaR determines the maximum potential one-day loss in the fair value of these foreign exchange rate-sensitive financial instruments. The VaR model estimates assume normal market conditions and a 95% confidence level. There are various modeling techniques that can be used in the VaR computation. Our computations are based on interrelationships between currencies and interest rates (a “variance/co-variance” technique). These interrelationships are a function of foreign exchange currency market changes and interest rate changes over the preceding one year period. The value of foreign currency options does not change on a one-to-one basis with changes in the underlying currency rate. We adjust the potential loss in option value for the estimated sensitivity (the “delta” and “gamma”) to changes in the underlying currency rate. This calculation reflects the impact of foreign currency rate fluctuations on the derivative instruments only and does not include the impact of such rate fluctuations on non-functional currency transactions (such as anticipated transactions, firm commitments, cash balances and accounts and loans receivable and payable), including those which are hedged by these instruments.

The VaR model is a risk analysis tool and does not purport to represent actual losses in fair value that we will incur nor does it consider the potential effect of favorable changes in market rates. It also does not represent the full extent of the possible loss that may occur. Actual future gains and losses will differ from those estimated because of changes or differences in market rates and interrelationships, hedging instruments and hedge percentages, timing and other factors.

The estimated maximum one-day loss in fair value on our foreign currency sensitive derivative financial instruments, derived using the VaR model, was ~~$50~~$109 million and ~~$34~~$117 million at May 31, ~~2014~~2016 and ~~2013,~~2015, respectively. The VaR ~~increased~~decreased year-over-year as a result of ~~an increase~~a decrease in the total notional value of our foreign currency derivative portfolio ~~combined with a longer average duration on our outstanding trades~~ at May 31, ~~2014.~~2016. Such a hypothetical loss in the fair value of our derivatives would be offset by increases in the value of the underlying transactions being hedged. The average monthly change in the fair values of foreign currency forward and foreign currency option derivative instruments was ~~$70~~$209 million and ~~$49~~$205 million during fiscal ~~2014~~2016 and fiscal ~~2013,~~2015, respectively.

The instruments not included in the VaR are intercompany loans denominated in non-functional currencies, fixed interest rate Japanese Yen denominated debt, fixed interest rate U.S. Dollar denominated debt and interest rate swaps. Intercompany loans and related interest amounts are eliminated in consolidation. Furthermore, our non-functional currency intercompany loans are substantially hedged against foreign exchange risk through the use of forward contracts, which are included in the VaR calculation above. Therefore, we consider the interest rate and foreign currency market risks associated with our non-functional currency intercompany loans to be immaterial to our consolidated financial position, results from operations and cash flows.

During the year ended May 31, 2016, we entered into a series of forward-starting interest rate swap agreements. A forward-starting interest rate swap is an agreement that effectively hedges the variability in future benchmark interest payments attributable to changes in interest rates on the forecasted issuance of fixed-rate debt. We entered into these forward-starting interest rate swaps in order to lock in fixed interest rates on our forecasted issuance of debt. These instruments were designated as cash flow hedges of the variability in the expected cash outflows of interest payments on future debt due to changes in benchmark interest rates.

Details of third-party debt and interest rate swaps are provided in the table below. The table presents principal cash flows and related weighted average interest rates by expected maturity dates. ~~Weighted average interest rates for the fixed rate swapped to floating rate debt reflect the effective interest rates at May 31, 2014.~~

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	Expected Maturity Date Year Ending May 31,																							Expected Maturity Date Year Ending May 31,
(Dollars in millions)	2015			2016			2017			2018			2019			Thereafter			Total			Fair Value		2017			2018			2019			2020			2021			Thereafter			Total			Fair Value
Foreign Exchange Risk
Japanese Yen Functional Currency
Long-term Japanese Yen debt — Fixed rate
Principal payments	$	7		$	7		$	7		$	7		$	7		$	7		$	42		$	45	$	6		$	6		$	6		$	6		$	3		$	—		$	27		$	28
Average interest rate	2.4		%	2.4		%	2.4		%	2.4		%	2.4		%	2.4		%	2.4		%			2.4		%	2.4		%	2.4		%	2.4		%	2.4		%	0.0		%	2.4		%
Interest Rate Risk
Japanese Yen Functional Currency
Long-term Japanese Yen debt — Fixed rate
Principal payments	$	7		$	7		$	7		$	7		$	7		$	7		$	42		$	45	$	6		$	6		$	6		$	6		$	3		$	—		$	27		$	28
Average interest rate	2.4		%	2.4		%	2.4		%	2.4		%	2.4		%	2.4		%	2.4		%			2.4		%	2.4		%	2.4		%	2.4		%	2.4		%	0.0		%	2.4		%
U.S. Dollar Functional Currency
Long-term U.S. Dollar debt — Fixed rate swapped to Floating rate
Principal payments	$	—		$	100		$	—		$	—		$	—		$	—		$	100		$	106
Average interest rate	0.0		%	0.3		%	0.0		%	0.0		%	0.0		%	0.0		%	0.3		%
Long-term U.S. Dollar debt — Fixed rate
Principal payments	$	1		$	1		$	38		$	18		$	—		$	1,000		$	1,058		$	1,003	$	38		$	—		$	—		$	—		$	—		$	2,000		$	2,038		$	2,097
Average interest rate	6.4		%	6.4		%	6.2		%	6.8		%	—		%	2.9		%	3.1		%			6.2		%	0.0		%	0.0		%	0.0		%	0.0		%	3.4		%	3.5		%
Anticipated long-term U.S. Dollar debt issuance - Floating rate swapped to fixed rate
Notional⁽¹⁾																								$	1,500		$	—		$	—		$	—		$	—		$	—		$	1,500		$	38
Weighted-average fixed rate																								2.2		%	0.0		%	0.0		%	0.0		%	0.0		%	0.0		%	2.2		%
Weighted-average floating rate																								0.7		%	0.0		%	0.0		%	0.0		%	0.0		%	0.0		%	0.7		%

(1) Forward-starting interest rate swaps have been included in the maturities category based on when the related forecasted debt issuance and corresponding swap terminations are expected to occur.

The fixed interest rate Japanese Yen denominated debt instruments were issued by and are accounted for by one of our Japanese subsidiaries. Accordingly, the monthly translation of these instruments, which varies due to changes in foreign exchange rates, is recognized in Accumulated other comprehensive income upon consolidation of this subsidiary.

ITEM 8. Financial Statements and Supplementary Data

Management of NIKE, Inc. is responsible for the information and representations contained in this report. The financial statements have been prepared in conformity with ~~the~~accounting principles generally accepted ~~accounting principles we considered appropriate~~ in the ~~circumstances~~United States of America ("U.S. GAAP") and include ~~some~~certain amounts based on our best estimates and judgments. Other financial information in this report is consistent with these financial statements.

Our accounting systems include controls designed to reasonably assure assets are safeguarded from unauthorized use or disposition and provide for the preparation of financial statements in conformity with ~~generally accepted accounting principles.~~U.S. GAAP. These systems are supplemented by the selection and training of qualified financial personnel and an organizational structure providing for appropriate segregation of duties.

An internal Corporate Audit department reviews the results of its work with the Audit Committee of the Board of Directors, presently consisting of four outside directors. The Audit Committee is responsible for the appointment of the independent registered public accounting firm and reviews, with the independent registered public accounting firm, management and the internal audit staff, the scope and the results of the annual ~~examination,~~audit, the effectiveness of the accounting control system and other matters relating to the financial affairs of NIKE as the Audit Committee deems appropriate. The independent registered public accounting firm and the internal auditors have full access to the Audit Committee, with and without the presence of management, to discuss any appropriate matters.

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Management’s Annual Report on Internal Control Over Financial Reporting

Management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rule 13(a) - 15(f) and Rule 15(d) - 15(f) of the Securities Exchange Act of 1934, as amended. Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the financial statements for external purposes in accordance with generally accepted accounting principles in the United States of America. Internal control over financial reporting includes those policies and procedures that: (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of assets of the Company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of our management and directors; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of assets of the Company that could have a material effect on the financial statements.

While “reasonable assurance” is a high level of assurance, it does not mean absolute assurance. Because of its inherent limitations, internal control over financial reporting may not prevent or detect every misstatement and instance of fraud. Controls are susceptible to manipulation, especially in instances of fraud caused by the collusion of two or more people, including our senior management. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, our management conducted an evaluation of the effectiveness of our internal control over financial reporting based upon the framework in Internal Control — Integrated Framework~~(1992)~~ (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on the results of our evaluation, our management concluded that our internal control over financial reporting was effective as of May 31, ~~2014~~.2016.

PricewaterhouseCoopers LLP, an independent registered public accounting firm, has audited (1) the Consolidated Financial Statements and (2) the effectiveness of our internal control over financial reporting as of May 31, ~~2014~~,2016, as stated in their report herein.



Mark G. Parker	~~Donald W. Blair~~Andrew Campion
Chairman, President and Chief Executive Officer	Chief Financial Officer

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Report of Independent Registered Public Accounting Firm

To the Board of Directors and Shareholders of NIKE, Inc.:

In our opinion, the consolidated financial statements listed in the index appearing under Item 15(a)(1) present fairly, in all material respects, the financial position of NIKE, Inc. and its subsidiaries at May 31, ~~2014~~2016 and ~~2013~~,2015, and the results of their operations and their cash flows for each of the three years in the period ended May 31, ~~2014~~2016 in conformity with accounting principles generally accepted in the United States of America. In addition, in our opinion, the financial statement schedule listed in the index appearing under Item 15(a)(2) presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of May 31, ~~2014~~,2016, based on criteria established in Internal Control — Integrated Framework ~~(1992)~~(2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Company’s management is responsible for these financial statements and financial statement schedule, for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in Management’s Annual Report on Internal Control ~~Over~~over Financial Reporting appearing under Item 8. Our responsibility is to express opinions on these financial statements, on the financial statement schedule and on the Company’s internal control over financial reporting based on our integrated audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the financial statements included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management and evaluating the overall financial statement presentation. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the ~~Company;~~company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the ~~Company~~company are being made only in accordance with authorizations of management and directors of the ~~Company;~~company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the ~~Company’s~~company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/S/ PRICEWATERHOUSECOOPERS LLP

Portland, Oregon

July ~~25, 2014~~21, 2016

~~Table of Contents~~

NIKE, Inc. Consolidated Statements of Income

Year Ended May 31,
(In millions, except per share data) 2014 2013 2012
Income from continuing operations:
    Revenues $ 27,799
$ 25,313
$ 23,331
    Cost of sales 15,353
14,279
13,183
    Gross profit 12,446
11,034
10,148
    Demand creation expense 3,031
2,745
2,607
    Operating overhead expense 5,735
5,051
4,472
    Total selling and administrative expense 8,766
7,796
7,079
    Interest expense (income), net (Notes 6, 7, and 8) 33
(3 ) 4
    Other expense (income), net (Note 17) 103
(15 ) 54
    Income before income taxes 3,544
3,256
3,011
    Income tax expense (Note 9) 851
805
754
NET INCOME FROM CONTINUING OPERATIONS 2,693
2,451
2,257
NET INCOME (LOSS) FROM DISCONTINUED OPERATIONS —
21
(46 )
        NET INCOME $ 2,693
$ 2,472
$ 2,211

Earnings per share from continuing operations:
    Basic earnings per common share (Notes 1 and 12) $ 3.05
$ 2.74
$ 2.45
    Diluted earnings per common share (Notes 1 and 12) $ 2.97
$ 2.68
$ 2.40

Earnings per share from discontinued operations:
    Basic earnings per common share (Notes 1 and 12) $ —
$ 0.02
$ (0.05 )
    Diluted earnings per common share (Notes 1 and 12) $ —
$ 0.02
$ (0.05 )

Dividends declared per common share $ 0.93
$ 0.81
$ 0.70



	Year Ended May 31,
(In millions, except per share data)	2016			2015			2014
Revenues	$	32,376		$	30,601		$	27,799
Cost of sales	17,405			16,534			15,353
Gross profit	14,971			14,067			12,446
Demand creation expense	3,278			3,213			3,031
Operating overhead expense	7,191			6,679			5,735
Total selling and administrative expense	10,469			9,892			8,766
Interest expense (income), net	19			28			33
Other (income) expense, net	(140		)	(58		)	103
Income before income taxes	4,623			4,205			3,544
Income tax expense	863			932			851
NET INCOME	$	3,760		$	3,273		$	2,693

Earnings per common share:
Basic	$	2.21		$	1.90		$	1.52
Diluted	$	2.16		$	1.85		$	1.49

Dividends declared per common share	$	0.62		$	0.54		$	0.47

The accompanying Notes to the Consolidated Financial Statements are an integral part of this statement.

~~Table of Contents~~



NIKE, Inc. Consolidated Statements of Comprehensive Income


	Year Ended May 31,									Year Ended May 31,
(In millions)	2014			2013			2012			2016			2015			2014
Net income	$	2,693		$	2,472		$	2,211		$	3,760		$	3,273		$	2,693
Other comprehensive income (loss), net of tax:
Change in net foreign currency translation adjustment ⁽¹⁾	(32		)	38			(277		)	(176		)	(20		)	(32		)
Change in net gains (losses) on cash flow hedges ⁽²⁾	(161		)	12			304			(757		)	1,188			(161		)
Change in net gains (losses) on net investment hedges⁽³⁾	—			—			45
Change in net gains (losses) on other ⁽⁴⁾	4			(8		)	(18		)
Change in release of cumulative translation loss related to Umbro ⁽⁵⁾	—			83			—
Change in net gains (losses) on other⁽³⁾										5			(7		)	4
Total other comprehensive income (loss), net of tax	(189		)	125			54			(928		)	1,161			(189		)
TOTAL COMPREHENSIVE INCOME	$	2,504		$	2,597		$	2,265		$	2,832		$	4,434		$	2,504


(1)	Net of tax benefit (expense) of $0$0 million,, ~~$(13)~~ $0 million, and$0 $0 million,, respectively.


(2)	Net of tax benefit (expense) of ~~$18~~$35 million,, ~~$(22)~~ $(31) million,and~~$(22)~~ $18 million,, respectively.


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


~~(4)~~	~~Net of tax benefit of~~ ~~$0 million~~, ~~$1 million, and$0 million, respectively.~~


~~(5)~~	~~Net of tax benefit of~~ ~~$0 million~~, ~~$47 million~~,~~and~~ ~~$0 million, respectively.~~

The accompanying Notes to the Consolidated Financial Statements are an integral part of this statement.

~~Table of Contents~~

NIKE, Inc. Consolidated Balance Sheets

May 31,
(In millions) 2014 2013
ASSETS
Current assets:
Cash and equivalents $ 2,220
$ 3,337
Short-term investments (Note 6) 2,922
2,628
Accounts receivable, net (Note 1) 3,434
3,117
Inventories (Notes 1 and 2) 3,947
3,484
Deferred income taxes (Note 9) 355
308
Prepaid expenses and other current assets (Notes 6 and 17) 818
756
Total current assets 13,696
13,630
Property, plant and equipment, net (Note 3) 2,834
2,452
Identifiable intangible assets, net (Note 4) 282
289
Goodwill (Note 4) 131
131
Deferred income taxes and other assets (Notes 6, 9, and 17) 1,651
1,043
TOTAL ASSETS $ 18,594
$ 17,545
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Current portion of long-term debt (Note 8) $ 7
$ 57
Notes payable (Note 7) 167
98
Accounts payable (Note 7) 1,930
1,669
Accrued liabilities (Notes 5, 6, and 17) 2,491
2,036
Income taxes payable (Note 9) 432
84
Liabilities of discontinued operations (Note 15) —
18
Total current liabilities 5,027
3,962
Long-term debt (Note 8) 1,199
1,210
Deferred income taxes and other liabilities (Notes 6, 9, 13 and 17) 1,544
1,292
Commitments and contingencies (Note 16)

Redeemable preferred stock (Note 10) —
—
Shareholders’ equity:
Common stock at stated value (Note 11):
Class A convertible — 178 and 178 shares outstanding —
—
Class B — 692 and 716 shares outstanding 3
3
Capital in excess of stated value 5,865
5,184
Accumulated other comprehensive income (Note 14) 85
274
Retained earnings 4,871
5,620
Total shareholders’ equity 10,824
11,081
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY $ 18,594
$ 17,545



	May 31,
(In millions)	2016		2015
ASSETS
Current assets:
Cash and equivalents	$	3,138	$	3,852
Short-term investments	2,319		2,072
Accounts receivable, net	3,241		3,358
Inventories	4,838		4,337
Prepaid expenses and other current assets	1,489		1,968
Total current assets	15,025		15,587
Property, plant and equipment, net	3,520		3,011
Identifiable intangible assets, net	281		281
Goodwill	131		131
Deferred income taxes and other assets	2,439		2,587
TOTAL ASSETS	$	21,396	$	21,597
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Current portion of long-term debt	$	44	$	107
Notes payable	1		74
Accounts payable	2,191		2,131
Accrued liabilities	3,037		3,949
Income taxes payable	85		71
Total current liabilities	5,358		6,332
Long-term debt	2,010		1,079
Deferred income taxes and other liabilities	1,770		1,479
Commitments and contingencies
Redeemable preferred stock	—		—
Shareholders’ equity:
Common stock at stated value:
Class A convertible — 353 and 355 shares outstanding	—		—
Class B — 1,329 and 1,357 shares outstanding	3		3
Capital in excess of stated value	7,786		6,773
Accumulated other comprehensive income	318		1,246
Retained earnings	4,151		4,685
Total shareholders’ equity	12,258		12,707
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	21,396	$	21,597

The accompanying Notes to the Consolidated Financial Statements are an integral part of this statement.

~~Table of Contents~~

NIKE, Inc. Consolidated Statements of Cash Flows


	Year Ended May 31,									Year Ended May 31,
(In millions)	2014			2013			2012			2016			2015			2014
Cash provided by operations:
Net income	$	2,693		$	2,472		$	2,211		$	3,760		$	3,273		$	2,693
Income charges (credits) not affecting cash:
Depreciation	518			438			373			649			606			518
Deferred income taxes	(11		)	20			(59		)	(80		)	(113		)	(11		)
Stock-based compensation (Note 11)	177			174			130
Stock-based compensation										236			191			177
Amortization and other	114			66			23			13			43			68
Net gain on divestitures	—			(124		)	—
Net foreign currency adjustments										98			424			56
Changes in certain working capital components and other assets and liabilities:
(Increase) decrease in accounts receivable	(298		)	142			(323		)
Decrease (increase) in accounts receivable										60			(216		)	(298		)
(Increase) in inventories	(505		)	(219		)	(815		)	(590		)	(621		)	(505		)
(Increase) in prepaid expenses and other current assets	(210		)	(28		)	(141		)	(161		)	(144		)	(210		)
Increase in accounts payable, accrued liabilities and income taxes payable	525			27			425
(Decrease) increase in accounts payable, accrued liabilities and income taxes payable										(889		)	1,237			525
Cash provided by operations	3,003			2,968			1,824			3,096			4,680			3,013
Cash (used) provided by investing activities:
Cash used by investing activities:
Purchases of short-term investments	(5,386		)	(4,133		)	(3,245		)	(5,367		)	(4,936		)	(5,386		)
Maturities of short-term investments	3,932			1,663			2,663			2,924			3,655			3,932
Sales of short-term investments	1,126			1,330			1,721			2,386			2,216			1,126
Investments in reverse repurchase agreements										150			(150		)	—
Additions to property, plant and equipment	(880		)	(598		)	(563		)	(1,143		)	(963		)	(880		)
Disposals of property, plant and equipment	3			14			2			10			3			3
Proceeds from divestitures	—			786			—
Increase in other assets, net of other liabilities	(2		)	(2		)	(14		)
Settlement of net investment hedges	—			—			22
Cash (used) provided by investing activities	(1,207		)	(940		)	586
Decrease (increase) in other assets, net of other liabilities										6			—			(2		)
Cash used by investing activities										(1,034		)	(175		)	(1,207		)
Cash used by financing activities:
Net proceeds from long-term debt issuance	—			986			—			981			—			—
Long-term debt payments, including current portion	(60		)	(49		)	(203		)	(106		)	(7		)	(60		)
Increase (decrease) in notes payable	75			10			(47		)
(Decrease) increase in notes payable										(67		)	(63		)	75
Payments on capital lease obligations	(17		)	—			—			(7		)	(19		)	(17		)
Proceeds from exercise of stock options and other stock issuances	383			313			468			507			514			383
Excess tax benefits from share-based payment arrangements	132			72			115			281			218			132
Repurchase of common stock	(2,628		)	(1,674		)	(1,814		)	(3,238		)	(2,534		)	(2,628		)
Dividends — common and preferred	(799		)	(703		)	(619		)	(1,022		)	(899		)	(799		)
Cash used by financing activities	(2,914		)	(1,045		)	(2,100		)	(2,671		)	(2,790		)	(2,914		)
Effect of exchange rate changes	1			100			67
Effect of exchange rate changes on cash and equivalents										(105		)	(83		)	(9		)
Net (decrease) increase in cash and equivalents	(1,117		)	1,083			377			(714		)	1,632			(1,117		)
Cash and equivalents, beginning of year	3,337			2,254			1,877			3,852			2,220			3,337
CASH AND EQUIVALENTS, END OF YEAR	$	2,220		$	3,337		$	2,254		$	3,138		$	3,852		$	2,220
Supplemental disclosure of cash flow information:
Cash paid during the year for:
Interest, net of capitalized interest	$	53		$	20		$	29		$	70		$	53		$	53
Income taxes	856			702			638			748			1,262			856
Non-cash additions to property, plant and equipment	167			137			99			252			206			167
Dividends declared and not paid	209			188			165			271			240			209

The accompanying Notes to the Consolidated Financial Statements are an integral part of this statement.

~~Table of Contents~~

NIKE, Inc. Consolidated Statements of Shareholders’ Equity


	Common Stock								Capital in Excess of Stated Value			Accumulated Other Comprehensive Income			Retained Earnings			Total			Common Stock								Capital in Excess of Stated Value			Accumulated Other Comprehensive Income			Retained Earnings			Total
	Class A				Class B																Class A				Class B
(In millions, except per share data)	Shares		Amount		Shares		Amount														Shares		Amount		Shares		Amount
Balance at May 31, 2011	180		$	—	756		$	3	$	3,944		$	95		$	5,751		$	9,793
Stock options exercised					18				528									528
Repurchase of Class B Common Stock					(40	)			(12		)				(1,793		)	(1,805		)
Dividends on common stock ($0.70 per share)															(639		)	(639		)
Issuance of shares to employees					2				57									57
Stock-based compensation (Note 11)									130									130
Forfeiture of shares from employees					—				(6		)				(4		)	(10		)
Net income															2,211			2,211
Other comprehensive income												54						54
Balance at May 31, 2012	180		$	—	736		$	3	$	4,641		$	149		$	5,526		$	10,319
Balance at May 31, 2013																					356		$	—	1,433		$	3	$	5,184		$	274		$	5,620		$	11,081
Stock options exercised					10				322									322							22				445									445
Conversion to Class B Common Stock	(2	)			2													—			(1	)	—		1		—											—
Repurchase of Class B Common Stock					(34	)			(10		)				(1,647		)	(1,657		)					(73	)			(11		)				(2,617		)	(2,628		)
Dividends on common stock ($0.81 per share)															(727		)	(727		)
Dividends on common stock ($0.47 per share)																																			(821		)	(821		)
Issuance of shares to employees					2				65									65							3				78									78
Stock-based compensation (Note 11)									174									174
Stock-based compensation																													177									177
Forfeiture of shares from employees					—				(8		)				(4		)	(12		)					(1	)			(8		)				(4		)	(12		)
Net income															2,472			2,472																	2,693			2,693
Other comprehensive income												125						125
Balance at May 31, 2013	178		$	—	716		$	3	$	5,184		$	274		$	5,620		$	11,081
Other comprehensive income (loss)																																(189		)				(189		)
Balance at May 31, 2014																					355		$	—	1,385		$	3	$	5,865		$	85		$	4,871		$	10,824
Stock options exercised					11				445									445							27				639									639
Repurchase of Class B Common Stock					(37	)			(11		)				(2,617		)	(2,628		)					(58	)			(9		)				(2,525		)	(2,534		)
Dividends on common stock ($0.93 per share)															(821		)	(821		)
Dividends on common stock ($0.54 per share)																																			(931		)	(931		)
Issuance of shares to employees					2				78									78							3				92									92
Stock-based compensation (Note 11)									177									177
Stock-based compensation																													191									191
Forfeiture of shares from employees					—				(8		)				(4		)	(12		)					—				(5		)				(3		)	(8		)
Net income															2,693			2,693																	3,273			3,273
Other comprehensive income												(189		)				(189		)
Balance at May 31, 2014	178		$	—	692		$	3	$	5,865		$	85		$	4,871		$	10,824
Other comprehensive income (loss)																																1,161						1,161
Balance at May 31, 2015																					355		$	—	1,357		$	3	$	6,773		$	1,246		$	4,685		$	12,707
Stock options exercised																									22				680									680
Conversion to Class B Common Stock																					(2	)	—		2		—											—
Repurchase of Class B Common Stock																									(55	)			(8		)				(3,230		)	(3,238		)
Dividends on common stock ($0.62 per share)																																			(1,053		)	(1,053		)
Issuance of shares to employees																									3				115									115
Stock-based compensation																													236									236
Forfeiture of shares from employees																									—				(10		)				(11		)	(21		)
Net income																																			3,760			3,760
Other comprehensive income (loss)																																(928		)				(928		)
Balance at May 31, 2016																					353		$	—	1,329		$	3	$	7,786		$	318		$	4,151		$	12,258

The accompanying Notes to the Consolidated Financial Statements are an integral part of this statement.

~~Table of Contents~~

Notes to Consolidated Financial Statements



Note 1	Summary of Significant Accounting Policies	5054
Note 2	Inventories	5658
Note 3	Property, Plant and Equipment	5658
Note 4	Identifiable Intangible Assets and Goodwill	5758
Note 5	Accrued Liabilities	5759
Note 6	Fair Value Measurements	5759
Note 7	Short-Term Borrowings and Credit Lines	5961
Note 8	Long-Term Debt	6062
Note 9	Income Taxes	6063
Note 10	Redeemable Preferred Stock	6365
Note 11	Common Stock and Stock-Based Compensation	6365
Note 12	Earnings Per Share	6567
Note 13	Benefit Plans	6567
Note 14	Accumulated Other Comprehensive Income	6567
Note 15	~~Discontinued Operations~~	66
~~Note 16~~	Commitments and Contingencies	6768
Note 1716	Risk Management and Derivatives	6769
Note 1817	Operating Segments and Related Information	7172

~~Table of Contents~~

NOTE 1 — Summary of Significant Accounting Policies

Description of Business

NIKE, Inc. is a worldwide leader in the design, development and worldwide marketing and selling of athletic footwear, apparel, equipment, accessories and services. ~~Wholly-owned~~ NIKE, Inc. ~~subsidiaries~~portfolio brands include ~~Converse Inc., which designs, markets~~the NIKE Brand, Jordan Brand, Hurley and ~~distributes~~Converse. The NIKE Brand is focused on performance athletic footwear, apparel, equipment, accessories and services across a wide range of sport categories, amplified with sport-inspired sportswear products carrying the Swoosh trademark as well as other NIKE Brand trademarks. The Jordan Brand is focused on athletic and casual ~~sneakers,~~footwear, apparel and accessories, ~~and~~using the Jumpman trademark. Sales of Jordan Brand products are reported as a separate category within the respective NIKE Brand geographic operating segments. The Hurley ~~International LLC, which designs, markets~~brand is focused on surf and ~~distributes~~ action sports and youth lifestyle footwear, apparel and ~~accessories.~~accessories, using the Hurley trademark. Sales of Hurley brand products are included within the NIKE Brand Action Sports category and within the NIKE Brand's North America geographic operating segment, respectively. Converse designs, distributes, markets and sells casual sneakers, apparel and accessories under the Converse, Chuck Taylor, All Star, One Star, Star Chevron and Jack Purcell trademarks. In some markets outside the U.S., these trademarks are licensed to third parties who design, distribute, market and sell similar products. Operating results of the Converse brand are reported on a stand-alone basis.

Basis of Consolidation

The Consolidated Financial Statements include the accounts of NIKE, Inc. and its subsidiaries (the ~~"Company”~~“Company”). All significant intercompany transactions and balances have been eliminated.

The Company completed the sale of Cole Haan during the third quarter ended February 28, 2013 and completed the sale of Umbro during the second quarter ended November 30, 2012. As a result, the Company reports the operating results of Cole Haan and Umbro in the Net income (loss) from discontinued operations line in the Consolidated Statements of Income for all periods presented. In addition, the liabilities associated with these businesses are reported as Liabilities of discontinued operations in the Consolidated Balance Sheets (refer to Note 15 — Discontinued Operations). Unless otherwise indicated, the disclosures accompanying the Consolidated Financial Statements reflect the Company’s continuing operations.

On November ~~15, 2012,~~19, 2015, the Company announced a two-for-one split of both NIKE Class A and Class B Common ~~shares.~~Stock. The stock split was in the form of a 100 percent stock dividend payable on December ~~24, 2012~~23, 2015 to shareholders of record at the close of business on December ~~10, 2012.~~9, 2015. Common stock began trading at the split-adjusted price on December ~~26, 2012.~~24, 2015. All share ~~numbers~~ and per share amounts presented reflect the stock split.

Reclassifications

Certain prior year amounts have been reclassified to conform to fiscal ~~2014~~2016 presentation.

~~Revisions~~

~~The Company has historically capitalized costs associated with internally generated patents and trademarks, and amortized these assets over the legal term of the patents and trademarks. During the~~ ~~fourth quarter~~ ~~of fiscal~~ ~~2014~~, management determined that these capitalized costs were not accurately identified with specific patent or trademark assets, and therefore, concluded that amounts previously capitalized should have been expensed as incurred. Accordingly, the Consolidated Financial Statements have been revised to correctly expense costs associated with internally developed patents and trademarks in the period incurred and to reverse expenses for amortization of previously capitalized costs. The revisions resulted in a decrease in Net income from continuing operations of ~~$13 million~~ ~~and~~ ~~$12 million~~ ~~for the years ended~~ ~~May 31, 2013~~ ~~and~~ ~~2012, respectively. Identifiable intangible assets decreased~~ ~~$93 million~~ at ~~May 31, 2013~~ ~~and Retained earnings at~~ ~~May 31, 2013~~ ~~decreased~~ ~~$75 million~~ ~~as a result of the cumulative adjustment for prior periods. Cash provided by operations decreased~~ ~~$26 million~~ ~~and~~ ~~$23 million~~ ~~for the years ended~~ ~~May 31, 2013~~ ~~and~~ ~~2012, respectively, while Cash used by investing activities decreased~~ ~~$26 million~~ ~~for the year ended~~ ~~May 31, 2013~~ ~~and Cash provided by investing activities increased by~~ ~~$23 million~~ ~~for the year ended~~ ~~May 31, 2012~~.

~~Also, in the~~ ~~fourth quarter~~ ~~of fiscal~~ ~~2014~~, the Company revised certain prior year amounts in the Consolidated Statements of Cash Flows to eliminate intercompany transfers of short-term investments, to correctly reflect the purchases, sales and maturities of short-term investments related to the Company's hedging program involving U.S. Dollar denominated available-for-sale securities, and to correctly classify certain investment holdings as Short-term investments. For the year ended May 31, 2013, the revisions resulted in a net increase in Purchases of short-term investments of $431 million, a net increase in Maturities of short-term investments of $162 million, and a net increase in Sales of short-term investments of $332 million, which caused a net decrease of $63 million in Cash used by investing activities. For the year ended May 31, 2012, the revisions resulted in a net increase in Purchases of short-term investments of $540 million, a net increase in Maturities of short-term investments of $78 million, and a net increase in Sales of short-term investments of $477 million, which caused an increase of $15 million in Cash provided by investing activities. For the year ended May 31, 2012, these revisions also resulted in a decrease of $78 million in Cash and equivalents, beginning of year and a $63 million decrease in Cash and equivalents, end of year.

Certain prior year amounts have also been revised in the Consolidated Balance Sheets to correctly recognize certain inventory amounts held by third parties, which were identified during the third quarter of fiscal ~~2014~~ ~~and resulted in a $50 million increase to both Inventories and Accrued liabilities at~~ ~~May 31, 2013. In addition, prior year amounts on the Consolidated Statements of Cash Flows were revised to correctly reflect the related cash flow impacts of $22 million and $10 million for the years ended~~ ~~May 31, 2013~~ ~~and~~ ~~2012, respectively. This revision had no impact on Cash provided by operations or Net (decrease) increase in cash and equivalents, for any year.~~

The Company also revised certain prior period amounts in the Consolidated Statements of Cash Flows to correctly reflect non-cash additions to property, plant, and equipment, which were identified during the second quarter of fiscal ~~2014~~. For the year ended May 31, 2013, this revision decreased Cash provided by operations and decreased Cash used by investing activities, each by $38 million. For the year ended May 31, 2012, this revision decreased Cash provided by operations and increased Cash provided by investing activities, each by $34 million.

The Company assessed the materiality of these misstatements on prior periods’ financial statements in accordance with SEC Staff Accounting Bulletin ("SAB") No. 99, Materiality, codified in ASC 250 ("ASC 250"), Presentation of Financial Statements, and concluded that these misstatements were not material to any prior annual or interim periods. Accordingly, in accordance with ASC 250 (SAB No. 108, Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements), the Consolidated Financial Statements as of ~~May 31, 2013~~ ~~and~~ ~~2012~~, and the years then ended, which are presented herein, have been revised. The following are selected line items from the Company's Consolidated Financial Statements illustrating the effect of these corrections and the correction of other immaterial errors:

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NIKE, Inc. Consolidated Statements of Income
Year Ended May 31, 2013 Year Ended May 31, 2012
(In millions, except per share data) As Reported Adjustment As Revised As Reported Adjustment As Revised
Total selling and administrative expense $ 7,780
$ 16
$ 7,796
$ 7,065
$ 14
$ 7,079
Income before income taxes 3,272
(16 ) 3,256
3,025
(14 ) 3,011
Income tax expense 808
(3 ) 805
756
(2 ) 754
NET INCOME FROM CONTINUING OPERATIONS 2,464
(13 ) 2,451
2,269
(12 ) 2,257
NET INCOME $ 2,485
$ (13 ) $ 2,472
$ 2,223
$ (12 ) $ 2,211

Earnings per share from continuing operations:
Basic earnings per common share $ 2.75
$ (0.01 ) $ 2.74
$ 2.47
$ (0.02 ) $ 2.45
Diluted earnings per common share $ 2.69
$ (0.01 ) $ 2.68
$ 2.42
$ (0.02 ) $ 2.40

Earnings per share for NIKE Inc.
Basic earnings per common share $ 2.77
$ (0.01 ) $ 2.76
$ 2.42
$ (0.02 ) $ 2.40
Diluted earnings per common share $ 2.71
$ (0.01 ) $ 2.70
$ 2.37
$ (0.02 ) $ 2.35

NIKE, Inc. Consolidated Statements of Comprehensive Income
Year Ended May 31, 2013 Year Ended May 31, 2012
(In millions) As Reported Adjustment As Revised As Reported Adjustment As Revised
Net income $ 2,485
$ (13 ) $ 2,472
$ 2,223
$ (12 ) $ 2,211
TOTAL COMPREHENSIVE INCOME $ 2,610
$ (13 ) $ 2,597
$ 2,277
$ (12 ) $ 2,265

NIKE, Inc. Consolidated Balance Sheet
May 31, 2013
(In millions) As Reported Adjustment As Revised
ASSETS
Inventories $ 3,434
$ 50
$ 3,484
Prepaid expenses and other current assets 802
(46 ) 756
Total current assets 13,626
4
13,630
Identifiable intangible assets, net 382
(93 ) 289
Deferred income taxes and other assets 993
50
1,043
TOTAL ASSETS $ 17,584
$ (39 ) $ 17,545
LIABILITIES AND SHAREHOLDERS' EQUITY
Notes payable $ 121
$ (23 ) $ 98
Accounts payable 1,646
23
1,669
Accrued liabilities 1,986
50
2,036
Income taxes payable 98
(14 ) 84
Total current liabilities 3,926
36
3,962
Retained earnings 5,695
(75 ) 5,620
Total shareholders’ equity 11,156
(75 ) 11,081
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY $ 17,584
$ (39 ) $ 17,545

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NIKE, Inc. Consolidated Statements of Cash Flows
Year Ended May 31, 2013 Year Ended May 31, 2012
(In millions) As Reported Adjustment As Revised As Reported Adjustment As Revised
Cash provided by operations:
Net income $ 2,485
$ (13 ) $ 2,472
$ 2,223
$ (12 ) $ 2,211
Income charges (credits) not affecting cash:
Deferred income taxes 21
(1 ) 20
(60 ) 1
(59 )
Amortization and other 75
(9 ) 66
32
(9 ) 23
(Increase) in inventories (197 ) (22 ) (219 ) (805 ) (10 ) (815 )
Increase in accounts payable, accrued liabilities and income taxes payable 41
(14 ) 27
470
(45 ) 425
Cash provided by operations 3,027
(59 ) 2,968
1,899
(75 ) 1,824
Cash (used) provided by investing activities:
Purchases of short-term investments (3,702 ) (431 ) (4,133 ) (2,705 ) (540 ) (3,245 )
Maturities of short-term investments 1,501
162
1,663
2,585
78
2,663
Sales of short-term investments 998
332
1,330
1,244
477
1,721
Additions to property, plant and equipment (636 ) 38
(598 ) (597 ) 34
(563 )
Increase in other assets, net of other liabilities (28 ) 26
(2 ) (37 ) 23
(14 )
Cash (used) provided by investing activities (1,067 ) 127
(940 ) 514
72
586
Cash used by financing activities:
Increase (decrease) in notes payable 15
(5 ) 10
(65 ) 18
(47 )
Cash used by financing activities (1,040 ) (5 ) (1,045 ) (2,118 ) 18
(2,100 )
Net (decrease) increase in cash and equivalents 1,020
63
1,083
362
15
377
Cash and equivalents, beginning of year 2,317
(63 ) 2,254
1,955
(78 ) 1,877
CASH AND EQUIVALENTS, END OF YEAR $ 3,337
$ —
$ 3,337
$ 2,317
$ (63 ) $ 2,254

NIKE, Inc. Consolidated Statements of Shareholders' Equity
Retained Earnings Total Shareholders' Equity
(In millions) As Reported Adjustment As Revised As Reported Adjustment As Revised
Balance at May 31, 2011 $ 5,801
$ (50 ) $ 5,751
$ 9,843
$ (50 ) $ 9,793
Net income 2,223
(12 ) 2,211
2,223
(12 ) 2,211
Balance at May 31, 2012 $ 5,588
$ (62 ) $ 5,526
$ 10,381
$ (62 ) $ 10,319
Net income 2,485
(13 ) 2,472
2,485
(13 ) 2,472
Balance at May 31, 2013 $ 5,695
$ (75 ) $ 5,620
$ 11,156
$ (75 ) $ 11,081

Revenue Recognition ~~of Revenues~~

Wholesale revenues are recognized when title and the risks and rewards of ownership have passed to the customer, based on the terms of sale. This occurs upon shipment or upon receipt by the customer depending on the country of the sale and the agreement with the customer. Retail store revenues are recorded at the time of ~~sale.~~sale and online store revenues are recorded upon delivery to the customer. Provisions for post-invoice sales discounts, returns and miscellaneous claims from customers are estimated and recorded as a reduction to revenue at the time of sale. Post-invoice sales discounts consist of contractual programs with certain customers or discretionary discounts that are expected to be granted to certain customers at a later date. Estimates of discretionary discounts, returns and claims are based on (1) historical rates, (2) specific identification of outstanding claims and outstanding returns not yet received from customers and (3) estimated discounts, returns and claims expected, but not yet finalized with customers. As of May 31, ~~2014~~2016 and ~~2013~~,2015, the Company’s reserve balances for post-invoice sales discounts, returns and miscellaneous claims were $~~610~~789 million and $~~531~~724 million, respectively.

Cost of Sales

Cost of sales consists primarily of inventory costs, as well as warehousing costs (including the cost of warehouse labor), third-party royalties, certain foreign currency hedge gains and losses and research, design and development costs.

~~Shipping and Handling Costs~~

~~Shipping~~ Outbound shipping and handling costs are expensed as incurred and included in Cost of ~~sales.~~sales.

Operating Overhead Expense

Operating overhead expense consists primarily of payroll and benefit related costs, rent, depreciation and amortization, professional services and meetings and travel.

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Demand Creation Expense

Demand creation expense consists of advertising and promotion costs, including costs of endorsement contracts, television, digital and print advertising, brand events and retail brand presentation. Advertising production costs are expensed the first time an advertisement is run. Advertising ~~placement~~communication costs are expensed inwhen the ~~month the advertising appears, while costs~~advertisement appears. Costs related to brand events are expensed when the event occurs. Costs related to retail brand presentation are expensed when the presentation is completed and delivered.

A significant amount of the Company’s promotional expenses result from payments under endorsement contracts. Accounting for endorsement payments is based upon specific contract provisions. Generally, endorsement payments are expensed on a straight-line basis over the term of the contract after giving recognition to periodic performance compliance provisions of the contracts. Prepayments made under contracts are included in Prepaid expenses and other current assets or Deferred income taxes and other assets depending on the period to which the prepayment applies.

Certain contracts provide for contingent payments to endorsers based upon specific achievements in their sports (e.g., winning a championship). The Company records ~~Demand~~demand creation expense for these amounts when the endorser achieves the specific goal.

Certain contracts provide for variable payments based upon endorsers maintaining a level of performance in their sport over an extended period of time (e.g., maintaining a specified ranking in a sport for a year). ~~These amounts are recorded in Demand creation expense when~~When the Company determines ~~that it is~~payments are probable, ~~that~~ the ~~specified level~~amounts are reported in Demand creation expense ratably over the contract period based on our best estimate of ~~performance will be maintained throughout~~ the ~~period.~~endorser's performance. In these instances, to the extent that actual payments to the endorser differ from the Company's estimate due to changes in the endorser’s performance, increased or decreased ~~Demand~~demand creation expense may be recorded in a future period.

Certain contracts provide for royalty payments to endorsers based upon a predetermined ~~percentage~~percent of sales of particular products. The Company expenses these payments in Cost of sales as the related sales occur. In certain contracts, the Company offers minimum guaranteed royalty payments. For contracts for which the Company estimates it will not meet the minimum guaranteed amount of royalty fees through sales of product, the Company records the amount of the guaranteed payment in excess of that earned through sales of product in Demand creation expense uniformly over the ~~remaining guarantee period.~~contract term.

Through cooperative advertising programs, the Company reimburses retail customers for certain costs of advertising the Company’s products. The Company records these costs in Demand creation expense at the point in time when it is obligated to its customers for the ~~costs, which is when the related revenues are recognized.~~costs. This obligation may arise prior to the related advertisement being run.

Total advertising and promotion expenses were ~~$3,031~~$3,278 million,, ~~$2,745~~ $3,213 million, and ~~$2,607~~$3,031 million for the years ended May 31, ~~2014~~, ~~2013~~2016, 2015 and ~~2012~~,2014, respectively. Prepaid advertising and promotion expenses totaled $~~516~~540 million and $~~386~~455 million at May 31, ~~2014~~2016 and ~~2013~~,2015, respectively, and were recorded in Prepaid expenses and other current assets and Deferred income taxes and other assets depending on the period to which the prepayment applies.

Cash and Equivalents

Cash and equivalents represent cash and short-term, highly liquid investments, including commercial paper, U.S. Treasury, U.S. Agency, money market funds, time deposits and corporate debt securities with maturities of ~~three months~~90 days or less at the date of purchase.

Short-Term Investments

Short-term investments consist of highly liquid investments, including commercial paper, U.S. Treasury, U.S. Agency, time deposits and corporate debt securities, with maturities over ~~three months from~~90 days at the date of purchase. Debt securities that the Company has the ability and positive intent to hold to maturity are carried at amortized cost. At May 31, ~~2014~~2016 and ~~2013~~,2015, the Company did not hold any short-term investments that were classified as trading or held-to-maturity.

At May 31, ~~2014~~2016 and 2015, ~~and~~ ~~2013~~, Short-term investments consisted of available-for-sale securities. Available-for-sale securities are recorded at fair value with unrealized gains and losses reported, net of tax, in ~~Other~~Accumulated other comprehensive income, unless unrealized losses are determined to be other than temporary. Realized gains and losses on the sale of securities are determined by specific identification. The Company considers all available-for-sale securities, including those with maturity dates beyond 12 months, as available to support current operational liquidity needs and therefore classifies all securities with maturity dates beyond ~~three months~~90 days at the date of purchase as current assets within Short-term investments on the Consolidated Balance Sheets.

Refer to Note 6 — Fair Value Measurements for more information on the Company’s short-term investments.

Allowance for Uncollectible Accounts Receivable

Accounts receivable, ~~consists~~net consist primarily of amounts receivable from customers. The Company makes ongoing estimates relating to the collectability of its accounts receivable and maintains an allowance for estimated losses resulting from the inability of its customers to make required payments. In determining the amount of the allowance, the Company considers historical levels of credit losses and makes judgments about the creditworthiness of significant customers based on ongoing credit evaluations. Accounts receivable with anticipated collection dates greater than 12 months from the balance sheet date and related allowances are considered non-current and recorded in Deferred income taxes and other ~~assets.~~assets. The allowance for uncollectible accounts receivable was $43 million and $78 million ~~and $104 million~~ at May 31, ~~2014~~2016 and ~~2013~~,2015, respectively, of which ~~$37~~$17 million and ~~$54~~$24 million, respectively, was classified as long-term and recorded in Deferred income taxes and other ~~assets.~~assets.

Inventory Valuation

Inventories are stated at lower of cost or market and valued on either an average or specific identification cost basis. For inventories in transit that represent direct shipments to customers, the related inventory and cost of sales isare recognized on a specific identification basis. Inventory costs primarily consist of product cost from the Company's suppliers, as well as inbound freight, import duties, taxes, insurance and logistics and other handling fees.

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Property, Plant and Equipment and Depreciation

Property, plant and equipment are recorded at cost. Depreciation is determined on a straight-line basis for buildings and leasehold improvements over 2 to 40 years and for machinery and equipment over 2 to 15 years.

Depreciation and amortization of assets used in manufacturing, warehousing and product distribution are recorded in Cost of ~~sales.~~sales. Depreciation and amortization of other assets are recorded in ~~Total selling and administrative expense.~~Operating overhead expense.

Software Development Costs

Internal Use Software.: Expenditures for major software purchases and software developed for internal use are capitalized and amortized over a 2 to 10 year period on a straight-line basis. The Company’s policy provides for the capitalization of external direct costs of materials and services associated with developing or obtaining internal use computer software. In addition, the Company also capitalizes certain payroll and payroll-related costs for employees who are directly associated with internal use computer software projects. The amount of capitalizable payroll costs with respect to these employees is limited to the time directly spent on such projects. Costs associated with preliminary project stage activities, training, maintenance and all other post-implementation stage activities are expensed as incurred.

Computer Software to be Sold, Leased or Otherwise Marketed.: Development costs of computer software to be sold, leased or otherwise marketed as an integral part of a product are subject to capitalization beginning when a product’s technological feasibility has been established and ending when a product is available for general release to customers. In most instances, the Company’s products are released soon after technological feasibility has been established. Therefore, software development costs incurred subsequent to achievement of technological feasibility are usually not significant, and generally most software development costs have been expensed as incurred.

Impairment of Long-Lived Assets

The Company reviews the carrying value of long-lived assets or asset groups to be used in operations whenever events or changes in circumstances indicate that the carrying amount of the assets might not be recoverable. Factors that would necessitate an impairment assessment include a significant adverse change in the extent or manner in which an asset is used, a significant adverse change in legal factors or the business climate that could affect the value of the asset or a significant decline in the observable market value of an asset, among others. If such facts indicate a potential impairment, the Company would assess the recoverability of an asset group by determining if the carrying value of the asset group exceeds the sum of the projected undiscounted cash flows expected to result from the use and eventual disposition of the assets over the remaining economic life of the primary asset in the asset group. If the recoverability test indicates that the carrying value of the asset group is not recoverable, the Company will estimate the fair value of the asset group using appropriate valuation methodologies, which would typically include an estimate of discounted cash flows. Any impairment would be measured as the difference between the asset group’s carrying amount and its estimated fair value.

Goodwill and Indefinite-Lived Intangible Assets

The Company performs annual impairment tests on goodwill and intangible assets with indefinite lives in the fourth quarter of each fiscal year or when events occur or circumstances change that would, more likely than not, reduce the fair value of a reporting unit or an intangible asset with an indefinite life below its carrying value. Events or changes in circumstances that may trigger interim impairment reviews include significant changes in business climate, operating results, planned investments in the reporting unit, planned divestitures or an expectation that the carrying amount may not be recoverable, among other factors. The Company may first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If, after assessing the totality of events and circumstances, the Company determines that it is more likely than not that the fair value of the reporting unit is greater than its carrying amount, the two-step impairment test is unnecessary. The two-step impairment test first requires the Company to estimate the fair value of its reporting units. If the carrying value of a reporting unit exceeds its fair value, the goodwill of that reporting unit is potentially impaired and the Company proceeds to step two of the impairment analysis. In step two of the analysis, the Company measures and records an impairment loss equal to the excess of the carrying value of the reporting unit's goodwill over its implied fair value, if any.

The Company generally bases its measurement of the fair value of a reporting unit on a blended analysis of the present value of future discounted cash flows and the market valuation approach. The discounted cash flows model indicates the fair value of the reporting unit based on the present value of the cash flows that the Company expects the reporting unit to generate in the future. The Company's significant estimates in the discounted cash flows model include: its weighted average cost of capital; long-term rate of growth and profitability of the reporting unit's business; and working capital effects. The market valuation approach indicates the fair value of the business based on a comparison of the reporting unit to comparable publicly traded companies in similar lines of business. Significant estimates in the market valuation approach model include identifying similar companies with comparable business factors such as size, growth, profitability, risk and return on investment and assessing comparable revenue and operating income multiples in estimating the fair value of the reporting unit.

Indefinite-lived intangible assets primarily consist of acquired trade names and trademarks. The Company may first perform a qualitative assessment to determine whether it is more likely than not that an indefinite-lived intangible asset is impaired. If, after assessing the totality of events and circumstances, the C~~ompany~~ Company determines that it is more likely than not that the indefinite-lived intangible asset is not impaired, no quantitative fair value measurement is necessary. If a quantitative fair value measurement calculation is required for these intangible assets, the Company utilizes the relief-from-royalty method. This method assumes that trade names and trademarks have value to the extent that their owner is relieved of the obligation to pay royalties for the benefits received from them. This method requires the Company to estimate the future revenue for the related brands, the appropriate royalty rate and the weighted average cost of capital.

Operating Leases

The Company leases retail store space, certain distribution and warehouse facilities, office space and other non-real estate assets under operating leases. Operating lease agreements may contain rent escalation clauses, renewal options, rent holidays or certain landlord incentives, including tenant improvement allowances. Rent expense for non-cancelable operating leases with scheduled rent increases or landlord incentives are recognized on a straight-line basis over the lease term, beginning with the effective lease commencement date, which is generally the date in which the Company takes possession of or controls the physical use of the property. Certain leases also provide for contingent ~~rents,~~rent, which ~~are~~is determined as a ~~percentage~~percent of sales in excess of specified levels. A contingent rent liability is recognized together with the corresponding rent expense when specified levels have been achieved or when the Company determines that achieving the specified levels during the period is probable.

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Fair Value Measurements

The Company measures certain financial assets and liabilities at fair value on a recurring basis, including derivatives and available-for-sale securities. Fair value is the price the Company would receive to sell an asset or pay to transfer a liability in an orderly transaction with a market participant at the measurement date. The Company uses a three-level hierarchy established by the Financial Accounting Standards Board ("FASB") that prioritizes fair value measurements based on the types of inputs used for the various valuation techniques (market approach, income approach and cost approach).

The levels of hierarchy are described below:

Level 1: ~~Observable inputs such as quoted~~Quoted prices in active markets for identical assets or liabilities.

Level 2: Inputs other than quoted prices that are observable for the asset or liability, either directly or indirectly; these include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active.

Level 3: Unobservable inputs for which there is little or no market data available, which require the reporting entity to develop its own assumptions.

The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability. Financial assets and liabilities are classified in their entirety based on the most conservative level of input that is significant to the fair value measurement.

Pricing vendors are utilized for certain Level 1 and Level 2 investments. These vendors either provide a quoted market price in an active market or use observable inputs without applying significant adjustments in their pricing. Observable inputs include broker quotes, interest rates and yield curves observable at commonly quoted intervals, volatilities and credit risks. The fair value of derivative contracts is determined using observable market inputs such as the daily market foreign currency rates, forward pricing curves, currency volatilities, currency correlations and interest rates and considers nonperformance risk of the Company and that of its counterparties.

The Company’s fair value processes include controls that are designed to ensure appropriate fair values are recorded. These controls include ~~an analysis~~a comparison of ~~period-over-period fluctuations and comparison~~fair values to another independent pricing vendor.

Refer to Note 6 — Fair Value Measurements for additional information.

Foreign Currency Translation and Foreign Currency Transactions

Adjustments resulting from translating foreign functional currency financial statements into U.S. Dollars are included in the foreign currency translation adjustment, a component of Accumulated other comprehensive income in Total shareholders’ ~~equity.~~equity.

The Company’s global subsidiaries have various assets and liabilities, primarily receivables and payables, which are denominated in currencies other than their functional currency. These balance sheet items are subject to re-measurement, the impact of which is recorded in Other (income) expense, ~~(income)~~net, ~~net,~~ within the Consolidated Statements of Income.

Accounting for Derivatives and Hedging Activities

The Company uses derivative financial instruments to reduce its exposure to changes in foreign currency exchange rates and interest rates. All derivatives are recorded at fair value on the Consolidated Balance Sheets and changes in the fair value of derivative financial instruments are either recognized in Accumulated other comprehensive income (a component of Total shareholders’ ~~equity)~~equity), Long-term debt or Net income depending on the nature of the underlying exposure, whether the derivative is formally designated as a hedge and, if designated, the extent to which the hedge is effective. The Company classifies the cash flows at settlement from derivatives in the same category as the cash flows from the related hedged items. For undesignated hedges and designated cash flow hedges, this is primarily within the Cash provided by operations component of the Consolidated Statements of Cash Flows. For designated net investment hedges, this is ~~generally~~ within the Cash ~~(used) provided~~used by investing activities component of the Consolidated ~~Statement~~Statements of Cash Flows. For the Company’s fair value hedges, which are interest rate swaps used to mitigate the change in fair value of its fixed-rate debt attributable to changes in interest rates, the related cash flows from periodic interest payments are reflected within the Cash provided by operations component of the Consolidated Statements of Cash Flows. Refer to Note 1716 — Risk Management and Derivatives for more information on the Company’s risk management program and derivatives.

Stock-Based Compensation

The Company estimates the fair value of options and stock appreciation rights granted under the NIKE, Inc. ~~1990~~ Stock Incentive Plan ~~(the “1990 Plan”)~~ and employees’ purchase rights under the Employee Stock Purchase Plans (“ESPPs”) using the Black-Scholes option pricing model. The Company recognizes this fair value, net of estimated forfeitures, as ~~Total selling and administrative~~Operating overhead expense in the Consolidated Statements of Income over the vesting period using the straight-line method.

Refer to Note 11 — Common Stock and Stock-Based Compensation for more information on the Company’s ~~stock~~stock-based compensation programs.

Income Taxes

The Company accounts for income taxes using the asset and liability method. This approach requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the carrying amounts and the tax basis of assets and liabilities. The Company records a valuation allowance to reduce deferred tax assets to the amount management believes is more likely than not to be realized. United States income taxes are provided currently on financial statement earnings of non-U.S. subsidiaries that are expected to be repatriated. The Company determines annually the amount of undistributed non-U.S. earnings to invest indefinitely in its non-U.S. operations.

The Company recognizes a tax benefit from uncertain tax positions in the financial statements only when it is more likely than not that the position will be sustained upon examination by relevant tax authorities. The Company recognizes interest and penalties related to income tax matters in Income tax ~~expense.~~expense.

Refer to Note 9 — Income Taxes for further discussion.

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Earnings Per Share

Basic earnings per common share is calculated by dividing Net income by the weighted average number of common shares outstanding during the year. Diluted earnings per common share is calculated by adjusting weighted average outstanding shares, assuming conversion of all potentially dilutive stock options and awards.

Refer to Note 12 — Earnings Per Share for further discussion.

Management Estimates

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates, including estimates relating to assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates.

Recently Adopted Accounting Standards

In ~~July 2013,~~November 2015, the FASB issued ~~an accounting standards update intended~~ASU No. 2015-17, Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes to ~~provide guidance on~~simplify the presentation of ~~unrecognized~~deferred taxes in the statement of financial position. The updated guidance requires that deferred tax ~~benefits, reflecting~~assets and liabilities be classified as non-current in a classified balance sheet. The Company elected to early adopt ASU 2015-17 on a retrospective basis in the ~~manner in which an entity would settle, at the reporting date, any additional income taxes that would result from the disallowance~~fourth quarter of a tax position when net operating loss carryforwards, similar tax losses, or tax credit carryforwards exist. This accounting standard is effective for the Company beginning June 1, 2014 and early adoption is permitted. Management early adopted this guidance and the adoption did not have a material impact on the Company's consolidated financial position or results of operations.

In July 2012, the FASB issued an accounting standards update intended to simplify how an entity tests indefinite-lived intangible assets other than goodwill for impairment by providing entities with an option to perform a qualitative assessment to determine whether further impairment testing is necessary. This accounting standard update was effective for us beginning June 1, 2013.fiscal 2016. The adoption of this standard ~~did not have a material impact on our consolidated financial position or results of operations.~~

~~In December 2011, the FASB issued guidance enhancing disclosure requirements surrounding the nature of an entity’s right to offset~~reduced Total current assets by $389 million, increased Deferred income taxes and ~~related arrangements associated with its financial instruments~~other assets by $386 million and ~~derivative instruments. This new guidance requires companies to disclose both gross~~reduced Total current liabilities and ~~net information about instruments~~Deferred income taxes and ~~transactions eligible for offset in the statement of financial position~~other liabilities by $2 million and instruments and transactions subject to master netting arrangements. This new guidance was effective for the Company beginning June 1, 2013. As this guidance only requires expanded disclosures, the adoption had no impact$1 million, respectively, on the ~~Company's consolidated financial position or results~~Consolidated Balance Sheet as of ~~operations.~~May 31, 2015.

Recently Issued Accounting Standards

In May 2014, the ~~FASB~~Financial Accounting Standards Board ("FASB") issued an accounting standards update that replaces existing revenue recognition guidance. ~~Among other things, the~~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. In addition, the new standard requires that reporting companies disclose the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. Based on the FASB's decision in July 2015 to defer the effective date and to allow more flexibility with implementation, the new standard will be effective for the Company beginning June 1, 2018, with early application permitted. The new standard is required to be applied retrospectively to each prior reporting period presented or retrospectively with the cumulative effect of initially applying it recognized at the date of initial application. The Company has not yet selected a transition method and is currently evaluating the effect the guidance will have on the Consolidated Financial Statements.

In January 2016, the FASB issued ASU No. 2016-01, Financial Instruments - Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities. The updated guidance enhances the reporting model for financial instruments, which includes amendments to address aspects of recognition, measurement, presentation and disclosure. The update to the standard is effective for the Company beginning June 1, ~~2017.~~2018. The Company does not expect the adoption to have a material impact on the Consolidated Financial Statements.

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842) that replaces existing lease guidance. The new standard is intended to provide enhanced transparency and comparability by requiring lessees to record right-of-use assets and corresponding lease liabilities on the balance sheet. The new guidance will continue to classify leases as either finance or operating, with classification affecting the pattern of expense recognition in the statement of income. The standard is effective for the Company beginning June 1, 2019, with early application permitted. The new standard is required to be applied with a modified retrospective approach to each prior reporting period presented with optional practical expedients. The Company is currently evaluating the effect the guidance will have on the Consolidated Financial Statements.

In March 2016, the FASB Issued ASU No. 2016-09, Compensation-Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting. The updated guidance changes how companies account for certain aspects of share-based payment awards to employees, including the accounting for income taxes, forfeitures and statutory tax withholding requirements, as well as classification in the statement of cash flows. The update to the standard is effective for the Company beginning June 1, 2017, with early application permitted. The Company is currently evaluating the effect the guidance will have on the Consolidated Financial Statements.

NOTE 2 — Inventories

Inventory balances of ~~$3,947~~$4,838 million and ~~$3,484~~$4,337 million at May 31, ~~2014~~2016 and ~~2013~~,2015, respectively, were substantially all finished goods.

NOTE 3 — Property, Plant and Equipment

Property, plant and equipment, netincluded the following:


	As of May 31,				As of May 31,
(In millions)	2014		2013		2016		2015
Land	$	270	$	268	$	286	$	273
Buildings	1,261		1,174		1,467		1,250
Machinery, equipment and internal-use software	3,376		2,985		3,510		3,329
Leasehold improvements	1,066		945		1,338		1,150
Construction in process	247		128		437		350
Total property, plant and equipment, gross	6,220		5,500		7,038		6,352
Less accumulated depreciation	3,386		3,048		3,518		3,341
TOTAL PROPERTY, PLANT AND EQUIPMENT, NET	$	2,834	$	2,452	$	3,520	$	3,011

Capitalized interest was not material for the years ended May 31, ~~2014~~, ~~2013~~,2016, 2015 and ~~2012. The Company had~~ ~~$74 million~~ ~~and $81 million in capital lease obligations as of~~ ~~May 31, 2014~~ ~~and May 31, 2013, respectively, included in machinery, equipment and internal-use software.~~2014.

~~Table of Contents~~

NOTE 4 — Identifiable Intangible Assets and Goodwill

~~The following table summarizes the Company’s~~ Identifiable intangible ~~asset balances as~~assets, net consist of indefinite-lived trademarks, which are not subject to amortization, and acquired trademarks and other intangible assets, which are subject to amortization. Indefinite-lived trademarks were $281 million at May 31, ~~2014~~2016 and 2015. Acquired trademarks and other intangible assets at May 31, 2016 and 2015 were $16 million and $17 million, respectively, and were fully amortized at the end of both periods. ~~and~~ Goodwill~~2013~~:

As of May 31, 2014 As of May 31, 2013
(In millions)
Gross Carrying
Amount

Accumulated
Amortization

Net Carrying
Amount

Gross Carrying
Amount

Accumulated
Amortization

Net Carrying
Amount
Acquired trademarks and other $ 39
$ (39 ) $ —
$ 43
$ (36 ) $ 7
Indefinite-lived trademarks 282
282
IDENTIFIABLE INTANGIBLE
ASSETS, NET
$ 282
$ 289

~~Goodwill~~ was $131 million at May 31, ~~2014~~2016 and ~~May 31, 2013; $64~~2015 of which $65 million iswas included in the Converse segment ~~and~~for the respective periods. The remaining amounts ~~are~~were included in Global Brand Divisions for segment reporting purposes. There were no accumulated impairment balances for goodwill as of either period end.

NOTE 5 — Accrued Liabilities

Accrued liabilities included the following:


	As of May 31,				As of May 31,
(In millions)	2014		2013		2016		2015
Compensation and benefits, excluding taxes	$	782	$	713	$	943	$	997
Endorsement compensation	328		264		393		388
Dividends payable	209		188		271		240
Taxes other than income taxes	204		192
Advertising and marketing	133		77
Import and logistics costs	127		111		198		207
Fair value of derivatives	85		34		162		162
Taxes other than income taxes payable					159		172
Advertising and marketing					119		117
Collateral received from counterparties to hedging instruments					105		968
Other⁽¹⁾	623		457		687		698
TOTAL ACCRUED LIABILITIES	$	2,491	$	2,036	$	3,037	$	3,949


(1)	Other consists of various accrued expenses with no individual item accounting for more than 5% of the total Accrued liabilities balance at May 31, ~~2014~~2016 and ~~2013~~. 2015.

NOTE 6 — Fair Value Measurements

The following tables present information about the Company's financial assets and liabilities measured at fair value on a recurring basis as of May 31, ~~2014~~2016 and ~~2013~~2015, and indicate the fair value hierarchy of the valuation techniques utilized by the Company to determine such fair value. Refer to Note 1 –— Summary of Significant Accounting Policies for additional detail regarding the Company’s fair value measurement methodology.


	As of May 31, 2014									As of May 31, 2016
(In millions)		Assets at Fair Value		Cash and Cash Equivalents		Short-term Investments		Other Long-term Assets		Assets at Fair Value		Cash Equivalents		Short-term Investments		Other Long-term Assets
Cash		$	780	$	780	$	—	$	—	$	774	$	774	$	—	$	—
Level 1:
U.S. Treasury securities		1,137		151		986		—		1,265		100		1,165		—
Level 2:
Time deposits		227		227		—		—		831		827		4		—
U.S. Agency securities		1,027		25		1,002		—		679		—		679		—
Commercial paper and bonds		959		25		934		—		733		262		471		—
Money market funds		1,012		1,012		—		—		1,175		1,175		—		—
Total level 2		3,225		1,289		1,936		—		3,418		2,264		1,154		—
Level 3:
Non-marketable preferred stock		7		—		—		7		10		—		—		10
TOTAL		$	5,149	$	2,220	$	2,922	$	7	$	5,467	$	3,138	$	2,319	$	10

~~Table of Contents~~


	As of May 31, 2013									As of May 31, 2015
(In millions)		Assets at Fair Value		Cash and Cash Equivalents		Short-term Investments		Other Long-term Assets		Assets at Fair Value		Cash Equivalents		Short-term Investments		Other Long-term Assets
Cash		$	663	$	663	$	—	$	—	$	615	$	615	$	—	$	—
Level 1:
U.S. Treasury securities		2,008		425		1,583		—		869		225		644		—
Level 2:
Time deposits		358		358		—		—		684		684		—		—
U.S. Agency securities⁽¹⁾		1,026		395		631		—		976		110		866		—
Commercial paper and bonds⁽¹⁾		1,074		660		414		—		914		352		562		—
Money market funds		836		836		—		—		1,866		1,866		—		—
Total level 2		3,294		2,249		1,045		—		4,440		3,012		1,428		—
Level 3:
Non-marketable preferred stock		5		—		—		5		8		—		—		8
TOTAL		$	5,970	$	3,337	$	2,628	$	5	$	5,932	$	3,852	$	2,072	$	8

The Company elects to record the gross assets and liabilities of its derivative financial instruments on the Consolidated Balance Sheets. 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. Any amounts of cash collateral received related to these instruments associated with the Company's credit-related contingent features are recorded in Cash and equivalents and Accrued liabilities, the latter of which would further offset against the Company’s derivative asset balance (refer to Note 16 — Risk Management and Derivatives). Cash collateral received related to the Company's credit related contingent features is presented in the Cash provided by operations component of the Consolidated Statements of Cash Flows. Any amounts of non-cash collateral received, such as securities, are not recorded on the Consolidated Balance Sheets pursuant to the accounting standards for non-cash collateral received.

The following tables present information about the Company’s derivative assets and liabilities measured at fair value on a recurring basis as of May 31, 2016 and 2015, and indicate the level in the fair value hierarchy in which the Company classifies the fair value measurement.



	As of May 31, 2016
	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⁾	$	603	$	487	$	116	$	145	$	115	$	30
Embedded derivatives	7		2		5		9		2		7
Interest rate swaps⁽²⁾	7		7		—		45		45		—
TOTAL	$	617	$	496	$	121	$	199	$	162	$	37


(1)	~~Amounts have been revised to reflect proper classification between U.S. Agency securities and commercial paper and bonds.~~

As of May 31, 2014
Asset Derivatives Liability Derivatives
(In millions) Assets at Fair Value Other Current Assets Other Long-term Assets Liabilities at Fair Value Accrued Liabilities Other Long-term Liabilities
Level 2:
Foreign exchange forwards and options⁽¹⁾
$ 127
$ 101
$ 26
$ 85
$ 84
$ 1
Interest rate swap contracts 6
—
6
—
—
—
TOTAL $ 133
$ 101
$ 32
$ 85
$ 84
$ 1

~~(1)~~

The Company’s derivative financial instruments are subject to master netting arrangements that allow for the offset of assets and liabilities in the event of default or early termination of the contract. The Company elects to record the gross assets and liabilities of its derivative financial instruments in the Consolidated Balance Sheets. If the foreign exchange derivative ~~financial~~ instruments had been netted in the Consolidated Balance Sheets, the asset and liability positions each would have been reduced by ~~$63~~$136 million. as of May 31, 2016. As of that date, the Company had received $105 million of cash collateral from various counterparties related to these foreign exchange derivative instruments. No ~~material amounts~~amount of collateral ~~were~~was posted on the Company’s derivative liability balance as of May 31, 2016.


(2)	As of May 31, 2016, no amount of cash collateral had been received or posted on the ~~Company’s~~ derivative ~~assets~~asset and ~~liabilities as of May 31, 2014.~~liability balances related to the Company's interest rate swaps.


	As of May 31, 2013													As of May 31, 2015
		Asset Derivatives						Liability Derivatives						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		Assets at Fair Value		Other Current Assets		Other Long-term Assets		Liabilities at Fair Value		Accrued Liabilities		Other Long-term Liabilities
Level 2:
Foreign exchange forwards and options⁽¹⁾		$	278	$	199	$	79	$	34	$	34	$	—	$	1,554	$	1,034	$	520	$	164	$	160	$	4
Interest rate swap contracts		11		—		11		—		—		—
Embedded derivatives														7		2		5		11		2		9
Interest rate swaps⁽²⁾														78		78		—		—		—		—
TOTAL		$	289	$	199	$	90	$	34	$	34	$	—	$	1,639	$	1,114	$	525	$	175	$	162	$	13

(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 foreign exchange derivative ~~financial~~ instruments had been netted in the Consolidated Balance Sheets, the asset and liability positions each would have been reduced by$161 millionas of May 31, 2015. As of that date, the Company had received $900 million of cash collateral and $74 million of securities from various counterparties related to these foreign exchange derivative instruments. ~~$34 million~~No~~. No material amounts~~ amount of collateral ~~were received or~~was posted on the Company’s derivative ~~assets and liabilities~~liability balance as of May 31, ~~2013.~~2015.


(2)	As of May 31, 2015, the Company had received $68 million of cash collateral related to its interest rate swaps.

Available-for-sale securities comprise investments in U.S. Treasury and Agency securities, money market funds, corporate commercial paper and bonds. These securities are valued using market prices on both active markets (Level 1) and less active markets (Level 2). As of May 31, 2016, the Company held $2,113 million of available-for-sale securities with maturity dates within one year and $206 million with maturity dates over one year and less than five years within Short-term investments on the Consolidated Balance Sheets. The gross realized gains and losses on sales of available-for-sale securities were immaterial for the fiscal years ended May 31, ~~2014~~2016 and ~~2013.~~2015. Unrealized gains and losses on available-for-sale securities included in Other comprehensive income were immaterial as of May 31, ~~2014~~2016 and ~~2013.~~

2015. The Company regularly reviews its available-for-sale securities for other-than-temporary impairment. For the years ended May 31, ~~2014~~2016 and ~~2013~~,2015, the Company did not consider its securities to be other-than-temporarily impaired and accordingly, did not recognize any impairment losses.

~~As of~~ ~~May 31, 2014, the Company held~~ ~~$2,287 million~~ ~~of available-for-sale securities with maturity dates within one year from the purchase date and~~ ~~$635 million~~ ~~with maturity dates over one year and less than five years from the purchase date within short-term investments. As of~~ ~~May 31, 2013, the Company held $2,229 million~~ ~~of available-for-sale securities with maturity dates within one year from purchase date and $399 million~~ ~~with maturity dates over one year and less than five years from purchase date within Short-term investments.~~

Included in Interest expense (income), net was interest income related to the Company's available-for-sale securities of $512 million, $46 million, and $65 million for the years ended May 31, ~~2014~~, ~~2013~~,2016, 2015 and ~~2012~~,2014, respectively.

~~Table of Contents~~

The Company’s Level 3 assets comprise investments in certain non-marketable preferred stock. These Level 3 investments are an immaterial portion of the Company's portfolio. Changes in Level 3 investment assets were immaterial during the years ended May 31, ~~2014~~2016 and ~~2013.~~2015.

Derivative financial instruments include foreign exchange forwards and options, embedded derivatives and interest rate swap contracts. Refer to Note 17 — Risk Management and Derivatives for additional detail.

No transfers among the levels within the fair value hierarchy occurred during the years ended May 31, ~~2014~~2016 or ~~2013~~.2015.

~~As of~~Derivative financial instruments include foreign exchange forwards and options, embedded derivatives and interest rate swaps. Refer to Note 16 — Risk Management and Derivatives for additional detail. For fair value information regarding ~~May 31, 2014~~Notes payable and ~~2013~~Long-term debt, ~~the Company had no~~refer to Note 7 — Short-Term Borrowings and Credit Lines and Note 8 — Long-Term Debt, respectively.

As of May 31, 2016 and May 31, 2015, assets or liabilities that were required to be measured at fair value on a non-recurring ~~basis.~~basis were immaterial.

~~For~~At May 31, 2015, the Company had $150 million of outstanding receivables related to its investments in reverse repurchase agreements recorded within Prepaid expenses and other current assets on the Consolidated Balance Sheets. The carrying amount of these agreements approximates their fair value ~~information regarding Notes payable and Long-term debt, refer~~based upon observable inputs other than quoted prices (Level 2). The reverse repurchase agreements are fully collateralized. At May 31, 2016, there were no outstanding receivables related to ~~Note 7 — Short-Term Borrowings and Credit Lines and Note 8 — Long-Term Debt.~~investments in reverse repurchase agreements.

NOTE 7 — Short-Term Borrowings and Credit Lines

Notes payable and interest-bearing accounts payable to Sojitz Corporation of America (“Sojitz America”) as of May 31, ~~2014~~2016 and ~~2013~~2015 are summarized below:


	As of May 31,										As of May 31,
	2014					2013					2016					2015
(Dollars in millions)	Borrowings		Interest Rate			Borrowings		Interest Rate			Borrowings		Interest Rate			Borrowings		Interest Rate
Notes payable:
U.S. operations	$	—	0.00	%	⁽¹⁾	$	—	0.00	%	⁽¹⁾	$	—	0.00	%	⁽¹⁾	$	—	0.00	%	⁽¹⁾
Non-U.S. operations	167		10.04	%	⁽¹⁾	98		4.94	%	⁽¹⁾	1		13.00	%	⁽¹⁾	74		12.39	%	⁽¹⁾
TOTAL NOTES PAYABLE	$	167				$	98				$	1				$	74
Interest-Bearing Accounts Payable:
Interest-bearing accounts payable:
Sojitz America	$	60	0.94	%		$	55	0.99	%		$	39	1.27	%		$	78	0.98	%


(1)	Weighted average interest rate includes non-interest bearing overdrafts.

The carrying amounts reflected in the Consolidated Balance Sheets for Notes payable approximate fair value.

The Company purchases through Sojitz America certain NIKE Brand products it acquires from non-U.S. suppliers. These purchases are for products sold in certain countries in the Company's Emerging Markets geographic operating segment and Canada, excluding products produced and sold in the same country. Accounts payable to Sojitz America are generally due up to 60 days after shipment of goods from the foreign port. The interest rate on such accounts payable is the 60-day London Interbank Offered Rate (“LIBOR”) as of the beginning of the month of the invoice date, plus 0.75%.

As of May 31, ~~2014~~2016 and ~~2013~~,2015, the Company had no amounts outstanding under its $2 billion commercial paper program.

On ~~November 1, 2011,~~August 28, 2015, the Company entered into a committed credit facility agreement with a syndicate of banks which provides for up to $1$2 billion of ~~borrowings with the option to increase borrowings to $1.5 billion with lender approval. Following an extension agreement on September 17, 2013 between the Company and the syndicate of banks, the~~borrowings. The facility matures ~~November 1, 2017,~~August 28, 2020, with a ~~one-year~~one year extension option ~~exercisable through October 31, 2014.~~prior to any anniversary of the closing date, provided that in no event shall it extend beyond August 28, 2022. Based on the Company’s current long-term senior unsecured debt ratings of AA- and A1 from Standard and Poor’s Corporation and Moody’s Investor Services, respectively, the interest rate charged on any outstanding borrowings would be the prevailing LIBOR plus ~~0.445%~~0.455%. The facility fee is ~~0.055%~~0.045% of the total commitment. Under this committed credit facility, the Company must maintain certain financial ratios, among other things, ~~certain minimum specified financial ratios~~ with which the Company was in compliance at May 31, ~~2014~~.2016. This facility replaces the prior $1 billion credit facility agreement entered into on November 1, 2011, which would have matured November 1, 2017. No amounts were outstanding under ~~this~~either committed credit facility as of May 31, ~~2014~~2016 or ~~2013~~.2015.

~~Table of Contents~~

NOTE 8 — Long-Term Debt

Long-term debt, net of unamortized premiums and discounts and swap fair value adjustments, comprises the ~~following:~~following:


						Book Value Outstanding As of May 31,									Book Value Outstanding As of May 31,
Scheduled Maturity (Dollars and Yen in millions)	Original Principal		Interest Rate		Interest Payments	2014		2013		Original Principal		Interest Rate		Interest Payments	2016		2015
Corporate Bond Payables:⁽⁴⁾⁽¹⁾
October 1, 2013	$	50	4.70	%	Semi-Annually	$	—	$	50
October 15, 2015⁽¹⁾	$	100	5.15	%	Semi-Annually	108		111
May 1, 2023⁽⁵⁾	$	500	2.25	%	Semi-Annually	499		499
May 1, 2043⁽⁵⁾	$	500	3.63	%	Semi-Annually	499		499
October 15, 2015⁽²⁾										$	100	5.15	%	Semi-Annually	$	—	$	101
May 1, 2023⁽³⁾										$	500	2.25	%	Semi-Annually	499		499
May 1, 2043⁽³⁾										$	500	3.63	%	Semi-Annually	499		499
November 1, 2045⁽⁴⁾										$	1,000	3.88	%	Semi-Annually	991		—
Promissory Notes:
April 1, 2017 ⁽²⁾⁽⁵⁾	$	40	6.20	%	Monthly	39		40		$	40	6.20	%	Monthly	38		39
January 1, 2018 ⁽²⁾⁽⁵⁾	$	19	6.79	%	Monthly	19		19		$	19	6.79	%	Monthly	—		19
Japanese Yen Notes:
August 20, 2001 through November 20, 2020⁽³⁾⁽⁶⁾	¥	9,000	2.60	%	Quarterly	29		34		¥	9,000	2.60	%	Quarterly	18		20
August 20, 2001 through November 20, 2020⁽³⁾⁽⁶⁾	¥	4,000	2.00	%	Quarterly	13		15		¥	4,000	2.00	%	Quarterly	9		9
Total						1,206		1,267							2,054		1,186
Less current maturities						7		57							44		107
TOTAL LONG-TERM DEBT						$	1,199	$	1,210						$	2,010	$	1,079


(1)	These senior unsecured obligations rank equally with the Company's other unsecured and unsubordinated indebtedness.

(2)

The Company has entered into interest rate swap agreements whereby the Company receives fixed interest payments at the same rate as the note and pays variable interest payments based on the six-month LIBOR plus a spread. The swaps have the same notional amount and maturity date as the corresponding note. At On October 15, 2015, the Company repaid the long-term debt which had previously been hedged with these interest rate swaps. Accordingly, as of May 31, ~~2014, the interest rates payable on these swap agreements ranged from approximately~~ ~~0.2%~~ to ~~0.4%~~.

~~(2)~~

~~On May 30, 2013,~~2016, the Company ~~assumed a total of~~ ~~$59 million~~ ~~in bonds payable~~had no interest rate swaps designated as part of its agreement to purchase certain Corporate properties; this was treated as a non-cash financing transaction. The property serves as collateral for the debt. The purchase of these properties was accounted for as a business combination where the total consideration of ~~$85 million~~ was allocated to the land and buildings acquired; no other tangible or intangible assets or liabilities resulted from the purchase. The bonds mature in 2017 and 2018 and the Company does not have the ability to re-negotiate the terms of the debt agreements and would incur significant financial penalties if the notes were paid off prior to maturity.

fair value hedges.


(3)	~~NIKE Logistics YK assumed a total of~~ ~~¥13.0 billion~~ ~~in loans as part of its agreement to purchase a distribution center in Japan, which serves as collateral for the loans. These loans mature in equal quarterly installments during the period~~ ~~August 20, 2001~~ ~~through~~ ~~November 20, 2020~~.


~~(4)~~	~~These senior unsecured obligations rank equally with the Company's other unsecured and unsubordinated indebtedness.~~

~~(5)~~

The bonds are redeemable at the Company's option prior to February 1, 2023 and November 1, 2042, respectively, at a price equal to the greater of (i) 100% of the aggregate principal amount of the notes to be redeemed ~~and~~or (ii) the sum of the present values of the remaining scheduled payments, plus in each case, accrued and unpaid interest. Subsequent to February 1, 2023 and November 1, 2042, respectively, the bonds also feature a par call provision, which allows for the bonds to be redeemed at a price equal to 100% of the aggregate principal amount of the notes being redeemed, plus accrued and unpaid interest.

(4)

The bonds are redeemable at the Company's option prior to May 1, 2045, at a price equal to the greater of (i) 100% of the aggregate principal amount of the notes to be redeemed or (ii) the sum of the present values of the remaining scheduled payments, plus in each case, accrued and unpaid interest. Subsequent to May 1, 2045, the bonds also feature a par call provision, which allows for the bonds to be redeemed at a price equal to 100% of the aggregate principal amount of the notes being redeemed, plus accrued and unpaid interest.

(5)

The Company assumed a total of $59 million in bonds payable as part of its agreement to purchase certain Corporate properties; this was treated as a non-cash financing transaction. The property serves as collateral for the debt. The purchase of these properties was accounted for as a business combination where the total consideration of $85 million was allocated to the land and buildings acquired; no other tangible or intangible assets or liabilities resulted from the purchase. The bonds mature in 2017 and 2018 and the Company does not have the ability to re-negotiate the terms of the debt agreements and would incur significant financial penalties if the notes were paid-off prior to maturity. During the year ended May 31, 2016, the notes due January 1, 2018 were legally defeased and an insignificant loss on defeasance was recognized.


(6)	NIKE Logistics YK assumed a total of ¥13.0 billion in loans as part of its agreement to purchase a distribution center in Japan, which serves as collateral for the loans. These loans mature in equal quarterly installments during the period August 20, 2001 through November 20, 2020.

The scheduled maturity of Long-term debt in each of the years ending May 31, ~~2015~~2017 through ~~2019~~2021 are $744 million, $~~108~~6 million, $456 million, $256 million and $73 million, respectively, at face value.

The Company's Long-term debt is recorded at adjusted cost, net of unamortized 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 $~~1,154~~2,125 million at May 31, ~~2014~~2016 and $~~1,219~~1,160 million at May 31, ~~2013. The fair value of Long-term debt is estimated based upon quoted prices of similar instruments (level 2).~~2015.

NOTE 9 — Income Taxes

Income before income taxes is as follows:


	Year Ended May 31,						Year Ended May 31,
(In millions)	2014		2013		2012		2016		2015		2014
Income before income taxes:
United States	$	3,066	$	1,231	$	799	$	956	$	1,967	$	3,066
Foreign	478		2,025		2,212		3,667		2,238		478
TOTAL INCOME BEFORE INCOME TAXES	$	3,544	$	3,256	$	3,011	$	4,623	$	4,205	$	3,544

~~Table of Contents~~

The provision for income taxes is as follows:


	Year Ended May 31,									Year Ended May 31,
(In millions)	2014			2013			2012			2016			2015			2014
Current:
United States
Federal	$	371		$	432		$	286		$	304		$	596		$	259
State	93			69			51			71			80			104
Foreign	398			398			488			568			369			499
Total	862			899			825			943			1,045			862
Deferred:
United States
Federal	8			—			(47		)	(57		)	(66		)	19
State	(3		)	(4		)	5			(16		)	(11		)	(3		)
Foreign	(16		)	(90		)	(29		)	(7		)	(36		)	(27		)
Total	(11		)	(94		)	(71		)	(80		)	(113		)	(11		)
TOTAL INCOME TAX EXPENSE	$	851		$	805		$	754		$	863		$	932		$	851

A reconciliation from the U.S. statutory federal income tax rate to the effective income tax rate is as follows:


	Year Ended May 31,						Year Ended May 31,
	2014		2013		2012		2016		2015		2014
Federal income tax rate	35.0	%	35.0	%	35.0	%	35.0	%	35.0	%	35.0	%
State taxes, net of federal benefit	1.8	%	1.4	%	1.3	%	1.1	%	0.9	%	1.8	%
Foreign earnings	2.2	%	-11.8	%	-11.9	%	-18.6	%	-15.7	%	2.2	%
Deferred charge	-14.6	%	0.0	%	0.0	%	0.4	%	0.9	%	-14.6	%
Other, net	-0.4	%	0.1	%	0.6	%	0.8	%	1.1	%	-0.4	%
EFFECTIVE INCOME TAX RATE	24.0	%	24.7	%	25.0	%	18.7	%	22.2	%	24.0	%



OREGON	93-0584541
(State or other jurisdiction of incorporation)	(IRS Employer Identification No.)
One Bowerman Drive, Beaverton, Oregon	97005-6453
(Address of principal executive offices)	(Zip Code)
(503) 671-6453



SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
Class B Common Stock	New York Stock Exchange
(Title of Each Class)	(Name of Each Exchange on Which Registered)



Indicate by check ~~mark~~mark:			YES	NO
•	if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.			þ	¨
•	if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.			¨	þ
•	whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.			þ	¨
•			whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§~~229.405~~232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).			þ	¨
•	if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.			¨		þ
•	whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
	Large accelerated filer þ	Accelerated filer¨	Non-accelerated ~~file~~filer ¨	Smaller ~~Reporting Company~~ reporting company¨
•	whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).			¨	þ



As of November 30, 2013, the aggregate market values of the Registrant’s Common Stock held by non-affiliates were:
	Class A	$	3,536,091,219
	Class B	56,098,067,138
		$	59,634,158,357



As of November 30, 2015, the aggregate market values of the Registrant’s Common Stock held by non-affiliates were:
	Class A	$	4,075,394,149
	Class B	89,393,235,582
		$	93,468,629,731



SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
NONE



As of July ~~18, 2014,~~15, 2016, the number of shares of the Registrant’s Common Stock outstanding were:
	Class A	~~177,557,876~~329,251,752
	Class B	~~690,739,620~~1,348,366,883
		~~868,297,496~~1,677,618,635



		Page
PART I		1
ITEM 1.	Business	1
	General	1
	Products	1
	Sales and Marketing	2
	United States Market	2
	International Markets	2
	Significant Customer	23
	Orders	3
	Product Research, Design and Development	3
	Manufacturing	3
	International Operations and Trade	4
	Competition	4
	Trademarks and Patents	4
	Employees	5
	Executive Officers of the Registrant	5
ITEM 1A.	Risk Factors	67
ITEM 1B.	Unresolved Staff Comments	1416
ITEM 2.	Properties	1416
ITEM 3.	Legal Proceedings	1416
ITEM 4.	Mine Safety Disclosures	1416

PART II		1517
ITEM 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	1517
ITEM 6.	Selected Financial Data	1719
ITEM 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	1921
ITEM 7A.	Quantitative and Qualitative Disclosures about Market Risk	4044
ITEM 8.	Financial Statements and Supplementary Data	4145
ITEM 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	7476
ITEM 9A.	Controls and Procedures	7476
ITEM 9B.	Other Information	7476

PART III		7577
	(Except for the information set forth under “Executive Officers of the Registrant” in Item 1 above, Part III is incorporated by reference from the Proxy Statement for the NIKE, Inc. ~~2014~~2016 Annual Meeting of Shareholders.)
ITEM 10.	Directors, Executive Officers and Corporate Governance	7577
ITEM 11.	Executive Compensation	7577
ITEM 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	7577
ITEM 13.	Certain Relationships and Related Transactions and Director Independence	7577
ITEM 14.	Principal Accountant Fees and Services	7577

PART IV		7678
ITEM 15.	Exhibits and Financial Statement Schedules	7678
	Signatures	8082



U.S. Retail Stores	Number
NIKE Brand factory stores	~~176~~196
NIKE Brand in-line stores, including ~~NIKETOWNs and~~ employee-only stores	3334
Converse stores (including factory stores)	84103
Hurley stores (including factory and employee stores)	29
TOTAL	~~322~~362



Non-U.S. Retail Stores	Number
NIKE Brand factory stores	~~459~~588
NIKE Brand in-line stores, including ~~NIKETOWNs and~~ employee-only stores	7172
Converse stores (including factory stores)	623
TOTAL	~~536~~683



Fiscal 2014 (June 1, 2013 — May 31, 2014)	High		Low		Dividends Declared
First quarter	$	66.85	$	59.11	$	0.21
Second quarter	79.87		63.50		0.24
Third quarter	80.26		69.85		0.24
Fourth quarter	80.09		70.60		0.24
Fiscal 2013 (June 1, 2012 — May 31, 2013)	High		Low		Dividends Declared
First quarter	$	54.32	$	43.89	$	0.18
Second quarter	50.42		45.30		0.21
Third quarter	55.55		48.46		0.21
Fourth quarter	65.91		53.49		0.21


~~(2)~~	Fiscal 2013 and 2012 amounts have been revised to correctly expense internally developed patent and trademark costs as incurred. Refer to Note 1 — Summary of Significant Accounting Policies in the accompanying Notes to the Consolidated Financial Statements.


1.	Product purchases denominated in currencies other than the functional currency of the transacting entity:


b.	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.


Description of Commitment	Cash Payments Due During the Year Ending May 31,														Cash Payments Due During the Year Ending May 31,
(In millions)	2015		2016		2017		2018		2019		Thereafter		Total		2017		2018		2019		2020		2021		Thereafter		Total
Operating Leases	$	427	$	399	$	366	$	311	$	251	$	1,050	$	2,804	$	491	$	453	$	395	$	347	$	301	$	1,244	$	3,231
Capital Leases	36		35		1		1		1		—		74		7		5		2		1		—		—		15
Long-term Debt⁽¹⁾	46		145		79		56		37		1,488		1,851
Long-Term Debt⁽¹⁾															115		75		74		74		71		3,365		3,774
Endorsement Contracts⁽²⁾	991		787		672		524		349		1,381		4,704		1,198		1,238		945		827		698		4,514		9,420
Product Purchase Obligations⁽³⁾	3,688		—		—		—		—		—		3,688		4,149		—		—		—		—		—		4,149
Other⁽⁴⁾	309		108		78		7		3		12		517
Other Purchase Obligations⁽⁴⁾															384		118		90		48		42		90		772
TOTAL	$	5,497	$	1,474	$	1,196	$	899	$	641	$	3,931	$	13,638	$	6,344	$	1,889	$	1,506	$	1,297	$	1,112	$	9,213	$	21,361


(1)	The cash payments due for long-term debt include estimated interest payments. Estimates of interest payments are based on outstanding principal amounts, applicable fixed interest rates or currently effective interest rates as of May 31, ~~2014~~2016 (if variable), timing of scheduled payments and the term of the debt obligations.



	NIKE, Inc. Consolidated Statements of Income
	Year Ended May 31, 2013							Year Ended May 31, 2012
(In millions, except per share data)	As Reported		Adjustment			As Revised		As Reported		Adjustment			As Revised
Total selling and administrative expense	$	7,780	$	16		$	7,796	$	7,065	$	14		$	7,079
Income before income taxes	3,272		(16		)	3,256		3,025		(14		)	3,011
Income tax expense	808		(3		)	805		756		(2		)	754
NET INCOME FROM CONTINUING OPERATIONS	2,464		(13		)	2,451		2,269		(12		)	2,257
NET INCOME	$	2,485	$	(13	)	$	2,472	$	2,223	$	(12	)	$	2,211

Earnings per share from continuing operations:
Basic earnings per common share	$	2.75	$	(0.01	)	$	2.74	$	2.47	$	(0.02	)	$	2.45
Diluted earnings per common share	$	2.69	$	(0.01	)	$	2.68	$	2.42	$	(0.02	)	$	2.40

Earnings per share for NIKE Inc.
Basic earnings per common share	$	2.77	$	(0.01	)	$	2.76	$	2.42	$	(0.02	)	$	2.40
Diluted earnings per common share	$	2.71	$	(0.01	)	$	2.70	$	2.37	$	(0.02	)	$	2.35



	NIKE, Inc. Consolidated Balance Sheet
	May 31, 2013
(In millions)	As Reported		Adjustment			As Revised
ASSETS
Inventories	$	3,434	$	50		$	3,484
Prepaid expenses and other current assets	802		(46		)	756
Total current assets	13,626		4			13,630
Identifiable intangible assets, net	382		(93		)	289
Deferred income taxes and other assets	993		50			1,043
TOTAL ASSETS	$	17,584	$	(39	)	$	17,545
LIABILITIES AND SHAREHOLDERS' EQUITY
Notes payable	$	121	$	(23	)	$	98
Accounts payable	1,646		23			1,669
Accrued liabilities	1,986		50			2,036
Income taxes payable	98		(14		)	84
Total current liabilities	3,926		36			3,962
Retained earnings	5,695		(75		)	5,620
Total shareholders’ equity	11,156		(75		)	11,081
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	17,584	$	(39	)	$	17,545



	NIKE, Inc. Consolidated Statements of Shareholders' Equity
	Retained Earnings							Total Shareholders' Equity
(In millions)	As Reported		Adjustment			As Revised		As Reported		Adjustment			As Revised
Balance at May 31, 2011	$	5,801	$	(50	)	$	5,751	$	9,843	$	(50	)	$	9,793
Net income	2,223		(12		)	2,211		2,223		(12		)	2,211
Balance at May 31, 2012	$	5,588	$	(62	)	$	5,526	$	10,381	$	(62	)	$	10,319
Net income	2,485		(13		)	2,472		2,485		(13		)	2,472
Balance at May 31, 2013	$	5,695	$	(75	)	$	5,620	$	11,156	$	(75	)	$	11,081


	Year Ending May 31,														Year Ending May 31,
(In millions)	2015		2016		2017		2018		2019-2034		Indefinite		Total		2017		2018		2019		2020		2021-2035		Indefinite		Total
Net operating losses	$	—	$	—	$	—	$	6	$	37	$	12	$	55	$	1	$	4	$	1	$	1	$	35	$	101	$	143


	Shares ⁽¹⁾		Weighted Average Option Price		Shares⁽¹⁾		Weighted Average Option Price
	(In millions)				(In millions)
Options outstanding May 31, 2011	69.6		$	25.65
Exercised	(18.0	)	22.81
Forfeited	(1.0	)	35.61
Granted	13.7		45.87
Options outstanding May 31, 2012	64.3		$	30.59
Exercised	(9.9	)	24.70
Forfeited	(1.3	)	40.14
Granted	14.6		46.55
Options outstanding May 31, 2013	67.7		$	34.72	135.3		$	17.36
Exercised	(11.0	)	28.29		(22.0	)	14.15
Forfeited	(1.3	)	48.33		(2.5	)	24.17
Granted	8.1		63.54		16.3		31.77
Options outstanding May 31, 2014	63.5		$	39.28	127.1		19.64
Exercised					(27.2	)	15.39
Forfeited					(2.1	)	29.51
Granted					18.4		38.84
Options outstanding May 31, 2015					116.2		23.50
Exercised					(22.5	)	17.75
Forfeited					(2.3	)	39.96
Granted					20.6		56.41
Options outstanding May 31, 2016					112.0		$	30.38
Options exercisable at May 31,
2012	33.9		$	24.38
2013	35.9		27.70
2014	37.0		31.42		74.0		$	15.71
2015					68.6		18.26
2016					66.5		21.48


(In millions)	Foreign Currency Translation Adjustment⁽¹⁾			Cash Flow Hedges			Net Investment Hedges⁽¹⁾		Other			Total			Foreign Currency Translation Adjustment⁽¹⁾⁽²⁾			Cash Flow Hedges			Net Investment Hedges⁽¹⁾⁽²⁾		Other			Total
Balance at May 31, 2013	$	41		$	193		$	95	$	(55	)	$	274
Balance at May 31, 2015															$	(31	)	$	1,220		$	115	$	(58	)	$	1,246
Other comprehensive gains (losses) before reclassifications ⁽²⁾⁽³⁾	(32		)	(134		)	—		—			(166		)	(178		)	(47		)	—		6			(219		)
Reclassifications to net income of previously deferred (gains) losses ⁽³⁾⁽⁴⁾	—			(27		)	—		4			(23		)	2			(710		)	—		(1		)	(709		)
Other comprehensive income (loss)	(32		)	(161		)	—		4			(189		)	(176		)	(757		)	—		5			(928		)
Balance at May 31, 2014	$	9		$	32		$	95	$	(51	)	$	85
Balance at May 31, 2016															$	(207	)	$	463		$	115	$	(53	)	$	318


(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)	Beginning balances have been updated to reflect the proper classification of $20 million of deferred tax balances between Foreign Currency Translation Adjustment and Net ~~of tax benefit of $0 million, $9 million, $0 million, $0 million, and $9 million, respectively.~~Investment Hedges.


(3)	Net of tax benefit (expense) of $0 million, $28 million, $0 million, $(2) million and $26 million, respectively.


(4)	Net of tax (benefit) expense of $0 million, $7 million, $0 million, $2 million and $9 million, respectively.


(2)	Beginning and ending balances have been updated to reflect the proper classification of $20 million of deferred tax balances between Foreign Currency Translation Adjustment and Net Investment Hedges.


						Amount of Gain (Loss) Reclassified from Accumulated Other Comprehensive Income into Income						Location of Gain (Loss) Reclassified from Accumulated Other Comprehensive Income into Income
	Amount of Gain (Loss) Reclassified from Accumulated Other Comprehensive Income into Income			Location of Gain (Loss) Reclassified from Accumulated Other Comprehensive Income into Income
					Year Ended May 31,
(In millions)		Year Ended May 31, 2014					2016			2015
Gains on cash flow hedges:
Gains (losses) on foreign currency translation adjustment						$	(2	)	$	—			Other (income) expense, net
Total before tax						(2		)	—
Tax (expense) benefit						—			—
Gain (loss) net of tax						(2		)	—
Gains (losses) on cash flow hedges:
Foreign exchange forwards and options	$	14		Revenues		(88		)	(95		)	Revenues
Foreign exchange forwards and options	12			Cost of sales		586			220			Cost of sales
Foreign exchange forwards and options	—			Total selling and administrative expense		—			—			Total selling and administrative expense
Foreign exchange forwards and options	10			Other expense (income), net		219			136			Other (income) expense, net
Total before tax	36					717			261
Tax expense	(9		)
Gain, net of tax	27
Losses on other	(4		)	Other expense (income), net
Tax (expense) benefit						(7		)	(2		)
Gain (loss) net of tax						710			259
Gains (losses) on other						3			40			Other (income) expense, net
Total before tax	(4		)			3			40
Tax expense	—
Loss, net of tax	(4		)
Total net gain reclassified for the period	$	23
Tax (expense) benefit						(2		)	—
Gain (loss) net of tax						1			40
Total net gain (loss) reclassified for the period						$	709		$	299


(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⁾
	Amount of Gain (Loss) Recognized in Other Comprehensive Income on Derivatives⁽¹⁾									Amount of Gain (Loss) Reclassified From Accumulated Other Comprehensive Income into Income⁽¹⁾									Year Ended May 31,									Location of Gain (Loss) Reclassified From Accumulated Other Comprehensive Income Into Income		Year Ended May 31,
	Year Ended May 31,									Location of Gain (Loss) Reclassified From Accumulated Other Comprehensive Income Into Income⁽¹⁾	Year Ended May 31,
	2014			2013			2012				2014		2013			2012			2016			2015			2014				2016				2015				2014
Derivatives designated as cash flow hedges:
Foreign exchange forwards and options	$	(48	)	$	42		$	(29	)	Revenues	$	14	$	(19	)	$	5		$	90		$	(202	)	$	(48	)		Revenues		$	(88	)		$	(95	)		$	14
Foreign exchange forwards and options	(78		)	67			253			Cost of sales	12		113			(57		)	(57		)	1,109			(78		)	Cost of sales		586				220				12
Foreign exchange forwards and options	4			(3		)	3			Total selling and administrative expense	—		2			(2		)	—			—			4			Total selling and administrative expense		—				—				—
Foreign exchange forwards and options	(21		)	33			36			Other expense (income), net	10		9			(9		)	(25		)	497			(21		)	Other (income) expense, net		219				136				10
Interest rate swaps																			(83		)	76			—			Interest expense (income), net		—				—				—
Total designated cash flow hedges	$	(143	)	$	139		$	263			$	36	$	105		$	(63	)	(75		)	1,480			(143		)			717				261				36
Derivatives designated as net investment hedges:
Foreign exchange forwards and options	$	—		$	—		$	45		Other expense (income), net	$	—	$	—		$	—		$	—		$	—		$	—		Other (income) expense, net		$	—			$	—			$	—


(1)	For the years ended May 31, ~~2014~~2016, ~~2013~~2015, and ~~2012~~2014, the amounts recorded in Other (income) 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	Amount of Gain (Loss) Recognized in Income on Derivatives									Location of Gain (Loss) Recognized in Income on Derivatives
	Year Ended May 31,									Year Ended May 31,
(In millions)	2014			2013			2012			2016			2015			2014
Derivatives designated as fair value hedges:
Interest rate swaps⁽¹⁾	$	5		$	5		$	6	Interest expense (income), net	$	2		$	5		$	5		Interest expense (income), net
Derivatives not designated as hedging instruments:
Foreign exchange forwards and options	$	(75	)	$	51		$	64	Other expense (income), net	(68		)	611			(75		)	Other (income) expense, net
Embedded derivatives	$	(1	)	$	(4	)	$	1	Other expense (income), net	$	(2	)	$	(1	)	$	(1	)	Other (income) expense, net



(a)	The following documents are filed as part of this report:
		Form 10-K Page No.

1.	Financial Statements:

	Report of Independent Registered Public Accounting Firm	4347

	Consolidated Statements of Income for each of the three years ended May 31, ~~2014,~~2016, May 31, ~~2013,~~2015 and May 31, ~~2012~~2014	4448

	Consolidated Statements of Comprehensive Income for each of the three years ended May 31, ~~2014,~~2016, May 31, ~~2013,~~2015 and May 31, ~~2012~~2014	4549

	Consolidated Balance Sheets at May 31, ~~2014~~2016 and May 31, ~~2013~~2015	4650

	Consolidated Statements of Cash Flows for each of the three years ended May 31, ~~2014,~~2016, May 31, ~~2013,~~2015 and May 31, ~~2012~~2014	4751

	Consolidated Statements of Shareholders’ Equity for each of the three years ended May 31, ~~2014,~~2016, May 31, ~~2013,~~2015 and May 31, ~~2012~~2014	4852

	Notes to Consolidated Financial Statements	4953

2.	Financial Statement Schedule:

	II — Valuation and Qualifying Accounts	7880

	All other schedules are omitted because they are not applicable or the required information is shown in the financial statements or notes thereto.

3.	Exhibits:




3.1	Restated Articles of Incorporation, as amended (incorporated by reference to Exhibit 3.1 to the Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended November 30, ~~2012)~~2015).
3.2	Third Restated Bylaws, as amended (incorporated by reference to Exhibit 3.2 to the Company’s Current Report on Form 8-K filed June 21, 2013).
4.1	Restated Articles of Incorporation, as amended (see Exhibit 3.1).
4.2	Third Restated Bylaws, as amended (see Exhibit 3.2).
4.3	Indenture dated as of April 26, 2013, by and between NIKE, Inc. and Deutsche Bank Trust Company Americas, as trustee (incorporated by reference to Exhibit 4.1 tot he Company's Form 8-Q filed April 26, 2013).
4.4	Second Supplemental Indenture, dated as of October 29, 2015, by and between NIKE, Inc. and Deutsche Bank Trust Company Americas, as trustee, including the form of 3.875% Notes due 2045 (incorporated by reference to Exhibit 5.2 to the Company's Form 8-Q filed October 29, 2015).
10.1	Form of Non-Statutory Stock Option Agreement for options granted to non-employee directors prior to May 31, 2010 under the 1990 Stock Incentive Plan (incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K filed June 21, ~~2005, File No. 1-10635)~~2005).*
10.2	Form of Non-Statutory Stock Option Agreement for options granted to non-employee directors after May 31, 2010 under the 1990 Stock Incentive Plan (incorporated by reference to Exhibit 10.2 to the Company’s Annual Report on Form 10-K for the fiscal year ended May 31, 2010).*
10.3	Form of Non-Statutory Stock Option Agreement for options granted to executives prior to May 31, 2010 under the 1990 Stock Incentive Plan (incorporated by reference to Exhibit 10.1 to the Company’s Annual Report on Form 10-K for the fiscal year ended May 31, ~~2009, File No. 1-10635)~~2009).*
10.4	Form of Restricted Stock Agreement for non-employee directors under the 1990 Stock Incentive Plan.*
~~10.5~~	~~Form of Non-Statutory Stock Option Agreement for options granted to executives after May 31, 2010~~ under the 1990 Stock Incentive Plan (incorporated by reference to Exhibit 10.4 to the Company's Annual Report on Form 10-K for the fiscal year ended May ~~3, 2013)~~31, 2014).*
10.5	Form of Non-Statutory Stock Option Agreement for options granted to executives after May 31, 2010 under the Stock Incentive Plan (incorporated by reference to Exhibit 10.5 to the Company's Annual Report on Form 10-K for the fiscal year ended May 31, 2015).*
10.6	Form of Indemnity Agreement entered into between the Company and each of its officers and directors (incorporated by reference to Exhibit 10.2 to the Company’s Annual Report on Form 10-K for the fiscal year ended May 31, ~~2008, File No. 1-10635)~~2008).*
10.7	NIKE, Inc. 1990 Stock Incentive ~~Plan.~~Plan (incorporated by reference to Exhibit 10.7 to the Company's Annual Report on Form 10-K for the fiscal year ended May 31, 2014).*



10.8	NIKE, Inc. Executive Performance Sharing Plan (incorporated by reference to Exhibit 10.7 to the Company's Annual Report on Form 10-K for the fiscal year ended May 31, 2012).*
10.9	NIKE, Inc. Long-Term Incentive Plan (incorporated by reference to Exhibit ~~10.1~~10.9 to the ~~Company’s Current~~Company's Annual Report on Form ~~8-K filed on September 26, 2012)~~10-K for the fiscal year ended May 31, 2015).*

Outstanding as of

(In millions)

Outstanding as of May 31, 2014

May 31, 2016

Notes payable, due at mutually agreed-upon dates within one year of issuance or on demand

Payable to Sojitz America for the purchase of inventories, generally due 60 days after shipment of goods from a foreign port