NIKE, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY


	COMMON STOCK														CAPITAL IN EXCESS OF STATED VALUE	ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)	RETAINED EARNINGS (DEFICIT)	TOTAL
	CLASS A				CLASS B
(In millions, except per share data)	SHARES	AMOUNT		SHARES	AMOUNT
Balance at May 31, 2020	315	$	0	1,243	$	3	$	8,299	$	(56)	$	(191)	$	8,055
Stock options exercised				7			291						291
Dividends on common stock ($0.245 per share) and preferred stock ($0.10 per share)											(383)		(383)
Issuance of shares to employees, net of shares withheld for employee taxes							(31)				(17)		(48)
Stock-based compensation							136						136
Net income											1,518		1,518
Other comprehensive income (loss)									(345)				(345)
Balance at August 31, 2020	315	$	0	1,250	$	3	$	8,695	$	(401)	$	927	$	9,224

COMMON STOCK CAPITAL IN EXCESS OF STATED VALUE
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
RETAINED EARNINGS
TOTAL
CLASS A CLASS B
(In millions, except per share data) SHARES
AMOUNT
SHARES
AMOUNT
Balance at November 30, 2019 315
$ —
1,244
$ 3
$ 7,719
$ 52
$ 1,577
$ 9,351
Stock options exercised

6

199

199
Repurchase of Class B Common Stock

(10 )
(48 )
(909 ) (957 )
Dividends on common stock ($0.245 per share)

(383 ) (383 )
Issuance of shares to employees, net of shares withheld for employee taxes

(12 )
(4 ) (16 )
Stock-based compensation

113

113
Net income

847
847
Other comprehensive income (loss)

(109 )

(109 )
Balance at February 29, 2020 315
$ —
1,240
$ 3
$ 7,971
$ (57 ) $ 1,128
$ 9,045

COMMON STOCK CAPITAL IN EXCESS OF STATED VALUE
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
RETAINED EARNINGS
TOTAL
CLASS A CLASS B
(In millions, except per share data) SHARES
AMOUNT
SHARES
AMOUNT
Balance at November 30, 2018 315
$ —
1,262
$ 3
$ 6,707
$ 209
$ 1,810
$ 8,729
Stock options exercised

6

159

159
Repurchase of Class B Common Stock

(10 )
(44 )
(710 ) (754 )
Dividends on common stock ($0.22 per share)

(347 ) (347 )
Issuance of shares to employees, net of shares withheld for employee taxes

(5 )
(3 ) (8 )
Stock-based compensation

93

93
Net income

1,101
1,101
Other comprehensive income (loss)

(12 )
(12 )
Balance at February 28, 2019 315
$ —
1,258
$ 3
$ 6,910
$ 197
$ 1,851
$ 8,961

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~~NIKE, INC.~~

~~UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY~~

COMMON STOCK CAPITAL IN EXCESS OF STATED VALUE
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
RETAINED EARNINGS
TOTAL
CLASS A CLASS B
(In millions, except per share data) SHARES
AMOUNT
SHARES
AMOUNT
Balance at May 31, 2019 315
$ —
1,253
$ 3
$ 7,163
$ 231
$ 1,643
$ 9,040
Stock options exercised

17

580

580
Repurchase of Class B Common Stock

(32 )
(150 )
(2,724 ) (2,874 )
Dividends on common stock ($0.71 per share) and preferred stock ($0.10 per share)

(1,110 ) (1,110 )
Issuance of shares to employees, net of shares withheld for employee taxes

2

75

(9 ) 66
Stock-based compensation

303

303
Net income

3,329
3,329
Other comprehensive income (loss)

(288 )

(288 )
Adoption of ASC Topic 842 (Note 1)

(1 ) (1 )
Balance at February 29, 2020 315
$ —
1,240
$ 3
$ 7,971
$ (57 ) $ 1,128
$ 9,045

COMMON STOCK CAPITAL IN EXCESS OF STATED VALUE
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
RETAINED EARNINGS
TOTAL
CLASS A CLASS B
(In millions, except per share data) SHARES
AMOUNT
SHARES
AMOUNT
Balance at May 31, 2018 329
$ —
1,272
$ 3
$ 6,384
$ (92 ) $ 3,517
$ 9,812
Stock options exercised

14

419

419
Conversion to Class B Common Stock (14 )
14

—
Repurchase of Class B Common Stock

(44 )
(181 )
(3,205 ) (3,386 )
Dividends on common stock ($0.64 per share) and preferred stock ($0.10 per share)

(1,013 ) (1,013 )
Issuance of shares to employees, net of shares withheld for employee taxes

2

62

(4 ) 58
Stock-based compensation

226

226
Net income

3,040
3,040
Other comprehensive income (loss)

289

289
Adoption of ASU 2016-16

(507 ) (507 )
Adoption of ASC Topic 606

23
23
Balance at February 28, 2019 315
$ —
1,258
$ 3
$ 6,910
$ 197
$ 1,851
$ 8,961


	COMMON STOCK														CAPITAL IN EXCESS OF STATED VALUE	ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)	RETAINED EARNINGS	TOTAL
	CLASS A				CLASS B
(In millions, except per share data)	SHARES	AMOUNT		SHARES	AMOUNT
Balance at May 31, 2019	315	$	0	1,253	$	3	$	7,163	$	231	$	1,643	$	9,040
Stock options exercised				4			116						116
Repurchase of Class B Common Stock				(12)			(55)				(940)		(995)
Dividends on common stock ($0.22 per share) and preferred stock ($0.10 per share)											(344)		(344)
Issuance of shares to employees, net of shares withheld for employee taxes							(8)				(4)		(12)
Stock-based compensation							80						80
Net income											1,367		1,367
Other comprehensive income (loss)									(51)				(51)
Adoption of ASC Topic 842											(1)		(1)
Balance at August 31, 2019	315	$	0	1,245	$	3	$	7,296	$	180	$	1,721	$	9,200

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

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NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


Note 1	Summary of Significant Accounting Policies	7
Note 2	Inventories	7
Note 3	Accrued Liabilities	7
Note 4	Fair Value Measurements	7
Note 5	Short-Term Borrowings and Credit Lines	9
Note 6	Income Taxes	9
Note 7	Stock-Based Compensation	10
Note 8	Earnings Per Share	11
Note 9	Risk Management and Derivatives	11
Note 10	Accumulated Other Comprehensive Income (Loss)	15
Note 11	Revenues	17
Note 12	Operating Segments	18
Note 13	Acquisitions and Divestitures	20
Note 14	Restructuring	20

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~~Note 1~~			~~Summary of Significant Accounting Policies~~	8
~~Note 2~~	~~Inventories~~	8
~~Note 3~~	~~Accrued Liabilities~~	9
~~Note 4~~	~~Fair Value Measurements~~	9
~~Note 5~~	~~Short-Term Borrowings and Credit Lines~~	11
~~Note 6~~	~~Income Taxes~~	11
~~Note 7~~	~~Stock-Based Compensation~~	12
~~Note 8~~	~~Earnings Per Share~~	13
~~Note 9~~	~~Risk Management and Derivatives~~	14
~~Note 10~~	~~Accumulated Other Comprehensive Income (Loss)~~	17
~~Note 11~~	~~Revenues~~	20
~~Note 12~~	~~Operating Segments~~	22
~~Note 13~~	~~Leases~~	24
~~Note 14~~	~~Acquisitions and Divestitures~~	26
~~Note 15~~	~~Subsequent Events~~	26

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NOTE 1 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

BASIS OF PRESENTATION

The Unaudited Condensed Consolidated Financial Statements include the accounts of NIKE, Inc. and its subsidiaries (the “Company” or “NIKE”) and reflect all normal recurring adjustments which are, in the opinion of management, necessary for a fair statement of the results of operations for the interim period. The year-end Condensed Consolidated Balance Sheet data as of May 31, ~~2019~~2020 was derived from audited financial statements, but does not include all disclosures required by accounting principles generally accepted in the United States of America (“U.S. GAAP”). The interim financial information and notes thereto should be read in conjunction with the Company's latest Annual Report on Form 10-K. The results of operations for the three ~~and nine~~ months ended ~~February 29,~~August 31, 2020 are not necessarily indicative of results to be expected for the entire fiscal year.

~~RECENTLY ADOPTED ACCOUNTING STANDARDS~~

~~In February 2016,~~As previously disclosed in the ~~Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2016-02,~~Annual Report on Form 10-K for the fiscal year ended ~~Leases (Topic 842)~~May 31, 2020, the extent to which replaced existing lease accounting guidance. The new standard is intended to provide enhanced transparency and comparability by requiring lessees to record right-of-use (ROU) assets and corresponding lease liabilities on the ~~balance sheet. ROU assets represent~~evolving COVID-19 pandemic impacts the Company's ~~right to use an underlying asset for~~financial statements will depend on a number of factors, including the ~~lease term~~magnitude and lease liabilities represent the Company's obligation to make lease payments arising from the lease. The new guidance requires the Company to continue to classify leases as either an operating or finance lease, with classification affecting the pattern of expense recognition in the income statement. In addition, the new standard requires enhanced disclosure surrounding the amount, timing and uncertainty of cash flows arising from leasing agreements.

In July 2018, the FASB issued ASU No. 2018-11, which provided entities with an additional transition method. Under the new transition method, an entity initially applies the new standard at the adoption date, versus at the beginningduration of the earliest period presented, and recognizes a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. The Company elected this transition method and adopted Topic 842 using a modified retrospective approach in the first quarter of fiscal 2020 with the cumulative effect of initially applying the new standard recognized in ~~Retained earnings~~ at June 1, 2019. Comparative prior period information has not been adjusted and continues to be reported in accordance with previous lease accounting guidance in Accounting Standards Codification (ASC) Topic 840 — ~~Leases~~.

Upon adoption, the Company elected the package of transition practical expedients which allowed the Company to carry forward prior conclusions related to: (i) whether any expired or existing contracts are or contain leases, (ii) the lease classification for any expired or existing leases and (iii) initial direct costs for existing leases. Additionally, the Company elected the practical expedient to not separate lease components from nonlease components for all real estate leases within the portfolio. The Company made an accounting policy election to not record leases with an initial term of 12 months or lesspandemic. There remains risk that COVID-19 could have material adverse impacts on ~~the Unaudited Condensed Consolidated Balance Sheets and will recognize related lease payments in the Unaudited Condensed Consolidated Statements of Income on a straight-line basis over the lease term.~~

In preparation for implementation, the Company executed changes to business processes, including implementing a software solution to assist with the new reporting requirements. The adoption of Topic 842 resulted in a $2.7 billion increase to total assets and total liabilities as of June 1, 2019. Upon adoption, the Company recognized $3.2 billion of total operating lease liabilities and $2.9 billion of operating lease ROU assets,future revenue growth as well as ~~removed $348 million of existing deferred rent liabilities, which was recorded as an offset against the ROU assets. In addition, the Company removed $184 million of existing assets~~overall profitability and ~~liabilities related~~may lead to ~~build-to-suit lease arrangements. Several other asset~~higher than normal inventory levels in various markets, revised payment terms with certain wholesale customers, higher sales-related reserves and ~~liability line items~~a volatile effective tax rate driven by changes in the ~~Company's Unaudited Condensed Consolidated Balance Sheets were also impacted by immaterial amounts. The adoption~~mix of ~~the standard did not have a material impact on the Unaudited Condensed Consolidated Statements of Income or Unaudited Condensed Consolidated Statements of Cash Flows. For more information on~~earnings across the Company's ~~lease arrangements refer to Note 13 — Leases.~~jurisdictions.



NOTE 2 — INVENTORIES

Inventory balances of ~~$5,807~~$6,705 million and ~~$5,622~~$7,367 million at ~~February 29,~~August 31, 2020 and May 31, ~~2019,~~2020, respectively, were substantially all finished goods.

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NOTE 3 — ACCRUED LIABILITIES

Accrued liabilities included the following:


	AUGUST 31,		MAY 31,
(Dollars in millions)	2020		2020
Sales-related reserves	$	1,127	$	1,178
Compensation and benefits, excluding taxes	950		1,248
Fair value of derivatives	512		190
Allowance for expected loss on sale⁽¹⁾	438		405
Other	2,715		2,163
TOTAL ACCRUED LIABILITIES	$	5,742	$	5,184

(1)Refer to Note 13 — Acquisitions and Divestitures for additional information.

FEBRUARY 29, MAY 31,
(Dollars in millions) 2020 2019
Sales-related reserves $ 1,361
$ 1,218
Compensation and benefits, excluding taxes 1,202
1,232
Allowance for cumulative foreign currency translation losses⁽¹⁾
400
—
Dividends payable 384
346
Endorsement compensation 365
424
Import and logistics costs 297
296
Taxes other than income taxes payable 248
234
Liabilities held-for-sale⁽¹⁾
158
—
Advertising and marketing 120
114
Collateral received from counterparties to hedging instruments 86
289
Fair value of derivatives 48
52
Other⁽²⁾
687
805
TOTAL ACCRUED LIABILITIES $ 5,356
$ 5,010


~~(1)~~			~~Refer to Note 14 — Acquisitions and Divestitures for additional information.~~


~~(2)~~	~~Other consists of various accrued expenses with no individual item accounting for more than 5% of the total Accrued liabilities balance at February 29, 2020 and May 31, 2019.~~

NOTE 4 — FAIR VALUE MEASUREMENTS

The Company measures certain financial assets and liabilities at fair value on a recurring basis, including derivatives, equity securities and available-for-sale debt securities. For additional information about the Company's fair value policies refer to Note 1 — Summary of Significant Accounting Policies of the Annual Report on Form 10-K for the fiscal year ended May 31, ~~2019.~~2020.

The following tables present information about the Company's financial assets measured at fair value on a recurring basis as of ~~February 29,~~August 31, 2020 and May 31, ~~2019,~~2020, and indicate the level in the fair value hierarchy in which the Company classifies the fair value measurement:

FEBRUARY 29, 2020
(Dollars in millions) ASSETS AT FAIR VALUE
CASH AND EQUIVALENTS
SHORT-TERM INVESTMENTS
Cash $ 649
$ 649
$ —
Level 1:
U.S. Treasury securities 280
—
280
Level 2:
Commercial paper and bonds 36
1
35
Money market funds 1,390
1,390
—
Time deposits 826
823
3
U.S. Agency securities 1
—
1
Total Level 2 2,253
2,214
39
TOTAL $ 3,182
$ 2,863
$ 319

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MAY 31, 2019
(Dollars in millions) ASSETS AT FAIR VALUE
CASH AND EQUIVALENTS
SHORT-TERM INVESTMENTS
Cash $ 853
$ 853
$ —
Level 1:
U.S. Treasury securities 347
200
147
Level 2:
Commercial paper and bonds 34
1
33
Money market funds 1,637
1,637
—
Time deposits 1,791
1,775
16
U.S. Agency securities 1
—
1
Total Level 2 3,463
3,413
50
TOTAL $ 4,663
$ 4,466
$ 197

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	AUGUST 31, 2020
(Dollars in millions)	ASSETS AT FAIR VALUE		CASH AND EQUIVALENTS		SHORT-TERM INVESTMENTS
Cash	$	542	$	542	$	—
Level 1:
U.S. Treasury securities	1,695		400		1,295
Level 2:
Commercial paper and bonds	33		0		33
Money market funds	6,340		6,340		0
Time deposits	867		866		1
U.S. Agency securities	3		0		3
Total Level 2	7,243		7,206		37
TOTAL	$	9,480	$	8,148	$	1,332


	MAY 31, 2020
(Dollars in millions)	ASSETS AT FAIR VALUE		CASH AND EQUIVALENTS		SHORT-TERM INVESTMENTS
Cash	$	596	$	596	$	—
Level 1:
U.S. Treasury securities	1,204		800		404
Level 2:
Commercial paper and bonds	32		0		32
Money market funds	5,973		5,973		0
Time deposits	981		979		2
U.S. Agency securities	1		0		1
Total Level 2	6,987		6,952		35
TOTAL	$	8,787	$	8,348	$	439

As of ~~February 29,~~August 31, 2020, the Company held ~~$267~~$1,291 million of available-for-sale debt securities with maturity dates within one year and ~~$52~~$41 million with maturity dates over one year and less than five years in Short-term investments on the Unaudited Condensed Consolidated Balance Sheets. The fair value of the Company's available-for-sale debt securities approximates their amortized cost.

Included in Interest expense (income), net was interest income related to the Company's investment portfolio of ~~$16~~$7 million and ~~$20~~$21 million for the three months ended ~~February 29,~~August 31, 2020 and ~~February 28, 2019, respectively, and $51 million and $60 million for the nine months ended February 29, 2020 and February 28,~~ 2019, respectively.

The following tables present information about the Company's derivative assets and liabilities measured at fair value on a recurring basis as of ~~February 29,~~August 31, 2020 and May 31, ~~2019,~~2020, and indicate the level in the fair value hierarchy in which the Company classifies the fair value measurement:


	AUGUST 31, 2020
	DERIVATIVE ASSETS										DERIVATIVE LIABILITIES
(Dollars 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⁾	$	48	$	43	$	5	$	655	$	511	$	144
Embedded derivatives	0		0		0		1		1		0
TOTAL	$	48	$	43	$	5	$	656	$	512	$	144

(1)If the foreign exchange derivative instruments had been netted on the Unaudited Condensed Consolidated Balance Sheets, the asset and liability positions each would have been reduced by $44 million as of August 31, 2020. As of that date, the Company had posted $151 million of cash collateral to various counterparties related to foreign exchange derivative instruments. NaN amount of collateral was received on the Company's derivative asset balance as of August 31, 2020.

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FEBRUARY 29, 2020
DERIVATIVE ASSETS DERIVATIVE LIABILITIES
(Dollars 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⁾
$ 324
$ 297
$ 27
$ 48
$ 47
$ 1
Embedded derivatives 2
2
—
1
1
—
TOTAL $ 326
$ 299
$ 27
$ 49
$ 48
$ 1

~~(1)~~

If the foreign exchange derivative instruments had been netted on the Unaudited Condensed Consolidated Balance Sheets, the asset and liability positions each would have been reduced by $47 million as of February 29, 2020. As of that date, the Company had received $86 million of cash collateral from various counterparties related to foreign exchange derivative instruments. NaN amount of collateral was posted on the Company's derivative liability balance as of February 29, 2020.


	MAY 31, 2020
	DERIVATIVE ASSETS										DERIVATIVE LIABILITIES
(Dollars 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⁾	$	94	$	91	$	3	$	205	$	188	$	17
Embedded derivatives	1		1		0		2		2		0
TOTAL	$	95	$	92	$	3	$	207	$	190	$	17

MAY 31, 2019
DERIVATIVE ASSETS DERIVATIVE LIABILITIES
(Dollars 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⁾
$ 611
$ 611
$ —
$ 51
$ 51
$ —
Embedded derivatives 11
5
6
3
1
2
TOTAL $ 622
$ 616
$ 6
$ 54
$ 52
$ 2
(1)If the foreign exchange derivative instruments had been netted on the Consolidated Balance Sheets, the asset and liability positions each would have been reduced by $76 million as of May 31, 2020. As of that date, 0 amount of cash collateral had been received or posted on the derivative asset and liability balances related to these foreign exchange derivative instruments.

~~(1)~~

If the foreign exchange derivative instruments had been netted on the Consolidated Balance Sheets, the asset and liability positions each would have been reduced by $50 million as of May 31, 2019. As of that date, the Company had received $289 million of cash collateral from various counterparties related to foreign exchange derivative instruments. NaN amount of collateral was posted on the Company's derivative liability balance as of May 31, 2019.

For additional information related to the Company's derivative financial instruments and credit risk, refer to Note 9 — Risk Management and Derivatives.

The carrying amounts of other current financial assets and other current financial liabilities approximate fair value.

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FINANCIAL ASSETS AND LIABILITIES NOT RECORDED AT FAIR VALUE

Long-term debt is recorded at adjusted cost, net of unamortized premiums, discounts and debt issuance costs. 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 ~~$4,009~~$10,731 million at ~~February 29,~~August 31, 2020 and ~~$3,524~~$10,645 million at May 31, ~~2019.~~2020.

For fair value information regarding Notes payable,, refer to Note 5 — Short-Term Borrowings and Credit ~~Lines and Note 15 — Subsequent Events for additional information related to the Company's~~ ~~Long-term debt~~.Lines.

~~NON-RECURRING FAIR VALUE MEASUREMENTS~~

As further discussed in Note 14 — Acquisitions and Divestitures, the Company met the criteria to recognize the related assets and liabilities of its Brazil, Argentina, Chile and Uruguay entities as held-for-sale in the third quarter of fiscal 2020. This required the Company to remeasure the disposal groups at fair value, less costs to sell, which is considered a Level 3 fair value measurement and was based on each transaction's estimated consideration at the date of close. As of February 29, 2020, the carrying value of the Argentina, Chile and Uruguay disposal groups exceeded their fair value, less costs to sell and as a result, the Company recognized a non-recurring impairment charge of $400 million. This charge was primarily due to the anticipated release of non-cash cumulative foreign currency translation losses which were included as part of the carrying value of the Argentina, Chile and Uruguay disposal groups when measuring for impairment. For the three and nine months ended February 29, 2020, the charge was recognized in ~~Other (income) expense, net~~ ~~on the Unaudited Condensed Consolidated Statements of Income, classified within Corporate, and a corresponding allowance within~~ ~~Accrued Liabilities~~ ~~on the Unaudited Condensed Consolidated Balance Sheets.~~

All other assets or liabilities required to be measured at fair value on a non-recurring basis as of February 29, 2020 were immaterial. As of May 31, 2019, all assets or liabilities required to be measured at fair value on a non-recurring basis were immaterial.



NOTE 5 — SHORT-TERM BORROWINGS AND CREDIT LINES

The carrying amounts reflected on the Unaudited Condensed Consolidated Balance Sheets for Notes payable approximate fair value.

As of ~~February 29,~~August 31, 2020 and May 31, ~~2019,~~2020, the Company had 0$112 million and $248 million of borrowings outstanding at a weighted average interest rate of 1.72% and 1.65%, respectively, under its $2$4 billion commercial paper program.

~~On August 16, 2019, the Company entered into a committed credit facility agreement~~ Commercial paper repayments with ~~a syndicate of banks which provides for up to $2 billion of~~original maturities greater than three months are included in Repayments from borrowings with the option to increase borrowings up to $3 billion in total upon lender approval. The facility matures on August 16, 2024, with a one year extension option prior to any anniversary of the closing date, provided that in no event shall it extend beyond August 16, 2026. Based on the ~~Company's current long-term senior unsecured debt ratings~~Unaudited Condensed Consolidated Statements 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 London Interbank Offered Rate (LIBOR) plus 0.46%. The facility fee is 0.04% of the total commitment. The Company was in compliance with the covenants of the facility at February 29, 2020. This facility replaces the prior $2 billion credit facility agreement entered into on August 28, 2015, which would have matured August 28, 2020. As of and for the periods ended February 29, 2020 and May 31, 2019, 0 amounts were outstanding under either committed credit facility.Cash Flows.

As of ~~February 29,~~August 31, 2020, there have been no ~~other~~ significant changes to the credit lines reported in the Company's Annual Report on Form 10-K for the fiscal year ended May 31, ~~2019. Refer to Note 15 — Subsequent Events for additional information about the Company's commercial paper program and its credit facilities.~~2020.



NOTE 6 — INCOME TAXES

The effective tax rate was ~~9.8%~~11.5% and ~~14.6%~~12.4% for the ~~nine~~three months ended ~~February 29,~~August 31, 2020 and ~~February 28,~~ 2019, respectively. The ~~change~~decrease in the Company's effective tax rate was ~~due~~attributable to discrete items including a more favorable impact from stock-based compensation, offset by a reserve related to Altera Corp. v. Commissioner where the ~~proportion of income earned in~~taxpayer was denied a hearing before the U.S. Supreme Court on June 22, 2020, thereby ratifying the Ninth Circuit Court's decision and ~~favorable discrete items such as~~requiring the inclusion of stock-based compensation ~~and benefits related to a modification of the treatment of certain research and development expenditures. Refer to Note 15 — Subsequent Events for additional information.~~in intercompany cost-sharing arrangements.

As of ~~February 29,~~August 31, 2020, total gross unrecognized tax benefits, excluding related interest and penalties, were ~~$802~~$860 million, ~~$555~~$584 million of which would affect the Company's effective tax rate if recognized in future periods. During the three months ended August 31, 2020, the Company recognized $77 million of gross unrecognized tax benefits related to Altera Corp. v. Commissioner discussed above, of which $71 million impacted the effective tax rate. The majority of the total gross

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unrecognized tax benefits are long-term in nature and included within Deferred income taxes and other liabilities on the Unaudited Condensed Consolidated Balance Sheets. As of May 31, ~~2019,~~2020, total gross unrecognized tax benefits, excluding related interest and penalties, were ~~$808~~$771 million. The liability for payment of interest and penalties ~~decreased~~increased by ~~$20~~$21 million during the ~~nine~~three months ended ~~February 29,~~August 31, 2020. As of ~~February 29,~~August 31, 2020 and May 31, ~~2019,~~2020, accrued interest and penalties related to uncertain tax positions were ~~$154~~$179 million and ~~$174~~$158 million, respectively (excluding federal benefit).

The Company is subject to taxation in the United States, as well as various state and foreign jurisdictions. The Company is currently under audit by the U.S. Internal Revenue Service ("IRS") for fiscal years 2017 through 2019. The Company has closed all U.S. federal income tax matters through fiscal 2016, with the exception of certain transfer pricing adjustments.

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Tax years after 2009 remain open in certain major foreign jurisdictions. Although the timing of resolution of audits is not certain, the Company evaluates all domestic and foreign audit issues in the aggregate, along with the expiration of applicable statutes of limitations, and estimates that it is reasonably possible the total gross unrecognized tax benefits could decrease by up to ~~$40~~$50 million within the next 12 months. In January 2019, the European Commission opened a formal investigation to examine whether the Netherlands has breached State Aid rules when granting certain tax rulings to the Company. The Company believes the investigation is without merit. If this matter is adversely resolved, the Netherlands may be required to assess additional amounts with respect to current and prior periods, and the Company's Netherlands income taxes in the future could increase.

In fiscal 2018, as a result of the enactment of the U.S. Tax Cuts and Jobs Act (the "Tax Act"), the Company reevaluated its historical indefinite reinvestment assertion and determined that any historical or future undistributed earnings of foreign subsidiaries were no longer considered to be indefinitely reinvested. Effective January 1, 2020, however, the tax law in the Netherlands, one of the Company’s major jurisdictions, changed. As a result of the change in law, the Company’s undistributed earnings in the Netherlands are subject to withholding tax upon distribution. It is the Company's intention to indefinitely reinvest the historical earnings of its foreign subsidiaries in the Netherlands prior to December 31, 2019 to ensure there is sufficient working capital to expand operations outside the United States. Accordingly, the Company has 0t recorded a deferred tax liability related to foreign withholding taxes on approximately $8.7 billion of undistributed earnings of these foreign subsidiaries as of December 31, 2019. Withholding taxes of approximately $1.3 billion would be payable upon the remittance of these undistributed earnings at February 29, 2020. Current earnings not otherwise distributable in the current year are considered indefinitely reinvested in the Company's foreign operations.



NOTE 7 — STOCK-BASED COMPENSATION

STOCK-BASED COMPENSATION

The NIKE, Inc. Stock Incentive Plan (the “Stock Incentive Plan”) provides for the issuance of up to ~~718~~798 million previously unissued shares of Class B Common Stock in connection with equity awards granted under the Stock Incentive Plan. The Stock Incentive Plan authorizes the grant of non-statutory stock options, incentive stock options, stock appreciation rights, restricted stock, restricted stock units and performance-based awards. In addition to the Stock Incentive Plan, the Company gives employees the right to purchase shares at a discount from the market price under employee stock purchase plans (ESPPs). Refer to Note 11 — Common Stock and Stock-Based Compensation of the Annual Report on Form 10-K for the fiscal year ended May 31, ~~2019~~2020 for further information.

The following table summarizes the Company's total stock-based compensation expense recognized in Cost of sales or Operating overhead expense,, as applicable:


	THREE MONTHS ENDED AUGUST 31,
(Dollars in millions)	2020		2019
Stock options⁽¹⁾	$	70	$	42
ESPPs	18		13
Restricted stock	48		25
TOTAL STOCK-BASED COMPENSATION EXPENSE	$	136	$	80

(1)Expense for stock options includes the expense associated with stock appreciation rights. Accelerated stock option expense is primarily recorded for employees meeting certain retirement eligibility requirements.

THREE MONTHS ENDED NINE MONTHS ENDED
(Dollars in millions) FEBRUARY 29, 2020 FEBRUARY 28, 2019 FEBRUARY 29, 2020 FEBRUARY 28, 2019
Stock options⁽¹⁾
$ 64
$ 62
$ 170
$ 145
ESPPs 11
10
35
28
Restricted stock 38
21
98
53
TOTAL STOCK-BASED COMPENSATION EXPENSE $ 113
$ 93
$ 303
$ 226


~~(1)~~	Expense for stock options includes the expense associated with stock appreciation rights. Accelerated stock option expense is recorded for employees meeting certain retirement eligibility requirements.

The income tax benefit related to stock-based compensation expense was ~~$67~~$81 million and ~~$60~~$37 million for the three months ended ~~February 29,~~August 31, 2020 and ~~February 28, 2019, respectively, and $181 million and $134 million for the nine months ended February 29, 2020 and February 28,~~ 2019, respectively.

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STOCK OPTIONS

The weighted average fair value per share of the options granted during the ~~nine~~three months ended ~~February 29,~~August 31, 2020 and ~~February 28,~~ 2019, computed as of the grant date using the Black-Scholes pricing model, was ~~$18.71~~$22.55 and ~~$22.79,~~$18.33, respectively. The weighted average assumptions used to estimate these fair values were as follows:

NINE MONTHS ENDED
FEBRUARY 29, 2020 FEBRUARY 28, 2019
Dividend yield 1.0 % 1.0 %
Expected volatility 23.0 % 26.6 %
Weighted average expected life (in years) 6.0
6.0
Risk-free interest rate 1.5 % 2.8 %


	THREE MONTHS ENDED AUGUST 31,
	2020		2019
Dividend yield	1.0	%	1.1	%
Expected volatility	27.2	%	22.9	%
Weighted average expected life (in years)	6.0		6.0
Risk-free interest rate	0.3	%	1.7	%

Expected volatilities are based on the historical volatility of the Company's common stock, the implied volatility in market traded options on the Company's common stock with a term greater than one year, as well as other factors. The weighted average expected life of options is based on an analysis of historical and expected future exercise patterns. The interest rate is based on the U.S. Treasury (constant maturity) risk-free rate in effect at the date of grant for periods corresponding with the expected term of the options.

As of ~~February 29,~~August 31, 2020, the Company had ~~$475~~$378 million of unrecognized compensation costs from stock options, net of estimated forfeitures, to be recognized in Cost of sales or Operating overhead expense,, as applicable, over a weighted average remaining period of ~~2.7~~2.4 years.

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RESTRICTED STOCK AND RESTRICTED STOCK UNITS

The weighted average fair value per share of restricted stock and restricted stock units granted for the ~~nine~~three months ended ~~February 29,~~August 31, 2020 and ~~February 28,~~ 2019, computed as of the grant date, was ~~$88.28~~$98.47 and ~~$80.88,~~$84.19, respectively. As of ~~February 29,~~August 31, 2020, the Company had ~~$378~~$394 million of unrecognized compensation costs from restricted stock and restricted stock units, net of estimated forfeitures, to be recognized in Cost of sales or Operating overhead expense,, as applicable, over a weighted average remaining period of ~~2.9~~2.7 years.



NOTE 8 — EARNINGS PER SHARE

The following is a reconciliation from basic earnings per common share to diluted earnings per common share. The computations of diluted earnings per common share excluded options, including shares under ESPPs, and restricted stock to purchase an additional ~~15.8~~2.1 million and ~~18.7~~19.1 million shares of common stock outstanding for the three months ended ~~February 29,~~August 31, 2020 and ~~February 28, 2019, respectively, and 31.1 million and 19.1 million shares of common stock outstanding for the nine months ended February 29, 2020 and February 28,~~ 2019, respectively, because the options were anti-dilutive.


	THREE MONTHS ENDED AUGUST 31,
(In millions, except per share data)	2020		2019
Net income available to common stockholders	$	1,518	$	1,367
Determination of shares:
Weighted average common shares outstanding	1,561.8		1,562.4
Assumed conversion of dilutive stock options and awards	31.5		35.1
DILUTED WEIGHTED AVERAGE COMMON SHARES OUTSTANDING	1,593.3		1,597.5
Earnings per common share:
Basic	$	0.97	$	0.87
Diluted	$	0.95	$	0.86

THREE MONTHS ENDED NINE MONTHS ENDED
(In millions, except per share data) FEBRUARY 29, 2020 FEBRUARY 28, 2019 FEBRUARY 29, 2020 FEBRUARY 28, 2019
Net income available to common stockholders $ 847
$ 1,101
$ 3,329
$ 3,040
Determination of shares:
Weighted average common shares outstanding 1,556.3
1,572.8
1,559.8
1,582.8
Assumed conversion of dilutive stock options and awards 35.3
36.8
34.8
38.7
DILUTED WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 1,591.6
1,609.6
1,594.6
1,621.5
Earnings per common share:
Basic $ 0.54
$ 0.70
$ 2.13
$ 1.92
Diluted $ 0.53
$ 0.68
$ 2.09
$ 1.87

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NOTE 9 — RISK MANAGEMENT AND DERIVATIVES

The Company is exposed to global market risks, including the effect of changes in foreign currency exchange rates and interest rates, and uses derivatives to manage financial exposures that occur in the normal course of business. As of and for the ~~nine~~three months ended ~~February 29,~~August 31, 2020, there have been no material changes to the Company's hedging program or strategy from what was disclosed within the Annual Report on Form 10-K. For additional information about the Company's derivatives and hedging policies refer to Note 1 — Summary of Significant Accounting Policies and Note 14 — Risk Management and Derivatives of the Annual Report on Form 10-K for the fiscal year ended May 31, ~~2019.~~2020.

The majority of derivatives outstanding as of ~~February 29,~~August 31, 2020 are designated as foreign currency cash flow hedges, primarily for Euro/U.S. Dollar, ~~British Pound/Euro,~~ Japanese Yen/U.S. Dollar, ~~and~~ Chinese Yuan/U.S. Dollar, and British Pound/Euro, currency pairs. All derivatives are recognized on the Unaudited Condensed Consolidated Balance Sheets at fair value and classified based on the instrument's maturity date.

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The following tables present the fair values of derivative instruments included within the Unaudited Condensed Consolidated Balance Sheets as of ~~February 29,~~August 31, 2020 and May 31, ~~2019:~~2020:

DERIVATIVE ASSETS
BALANCE SHEET LOCATION FEBRUARY 29, MAY 31,
(Dollars in millions) 2020 2019
Derivatives formally designated as hedging instruments:
Foreign exchange forwards and options Prepaid expenses and other current assets $ 261
$ 509
Foreign exchange forwards and options Deferred income taxes and other assets 27
—
Total derivatives formally designated as hedging instruments 288
509
Derivatives not designated as hedging instruments:
Foreign exchange forwards and options Prepaid expenses and other current assets 36
102
Embedded derivatives Prepaid expenses and other current assets 2
5
Embedded derivatives Deferred income taxes and other assets —
6
Total derivatives not designated as hedging instruments 38
113
TOTAL DERIVATIVE ASSETS $ 326
$ 622

DERIVATIVE LIABILITIES
BALANCE SHEET LOCATION FEBRUARY 29, MAY 31,
(Dollars in millions) 2020 2019
Derivatives formally designated as hedging instruments:
Foreign exchange forwards and options Accrued liabilities $ 37
$ 5
Foreign exchange forwards and options Deferred income taxes and other liabilities 1
—
Total derivatives formally designated as hedging instruments 38
5
Derivatives not designated as hedging instruments:
Foreign exchange forwards and options Accrued liabilities 10
46
Embedded derivatives Accrued liabilities 1
1
Embedded derivatives Deferred income taxes and other liabilities —
2
Total derivatives not designated as hedging instruments 11
49
TOTAL DERIVATIVE LIABILITIES $ 49
$ 54

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	DERIVATIVE ASSETS
	BALANCE SHEET LOCATION	AUGUST 31,			MAY 31,
(Dollars in millions)				2020			2020
Derivatives formally designated as hedging instruments:
Foreign exchange forwards and options	Prepaid expenses and other current assets	$	13		$	43
Foreign exchange forwards and options	Deferred income taxes and other assets	3			1
Total derivatives formally designated as hedging instruments		16			44
Derivatives not designated as hedging instruments:
Foreign exchange forwards and options	Prepaid expenses and other current assets	30			48
Embedded derivatives	Prepaid expenses and other current assets	0			1
Foreign exchange forwards and options	Deferred income taxes and other assets	2			2

Total derivatives not designated as hedging instruments		32			51
TOTAL DERIVATIVE ASSETS		$	48		$	95

	DERIVATIVE LIABILITIES
	BALANCE SHEET LOCATION	AUGUST 31,			MAY 31,
(Dollars in millions)				2020			2020
Derivatives formally designated as hedging instruments:
Foreign exchange forwards and options	Accrued liabilities	$	488		$	173
Foreign exchange forwards and options	Deferred income taxes and other liabilities	144			17
Total derivatives formally designated as hedging instruments		632			190
Derivatives not designated as hedging instruments:
Foreign exchange forwards and options	Accrued liabilities	23			15
Embedded derivatives	Accrued liabilities	1			2


Total derivatives not designated as hedging instruments		24			17
TOTAL DERIVATIVE LIABILITIES		$	656		$	207

The following ~~tables present~~table presents the amounts in the Unaudited Condensed Consolidated Statements of Income in which the effects of cash flow hedges are recorded and the effects of cash flow hedge activity on these line items for the three ~~and nine~~ months ended ~~February 29,~~August 31, 2020 and ~~February 28,~~ 2019:


	THREE MONTHS ENDED AUGUST 31,
	2020						2019
(Dollars in millions)	TOTAL		AMOUNT OF GAIN (LOSS) ON CASH FLOW HEDGE ACTIVITY		TOTAL		AMOUNT OF GAIN (LOSS) ON CASH FLOW HEDGE ACTIVITY
Revenues	$	10,594	$	14	$	10,660	$	8
Cost of sales	5,853		114		5,789		75
Demand creation expense	677		1		1,018		0
Other (income) expense, net	(14)		8		(33)		46
Interest expense (income), net	65		(2)		15		(2)

THREE MONTHS ENDED
FEBRUARY 29, 2020 FEBRUARY 28, 2019
(Dollars in millions) TOTAL
AMOUNT OF
GAIN (LOSS)
ON CASH FLOW
HEDGE ACTIVITY
TOTAL
AMOUNT OF
GAIN (LOSS)
ON CASH FLOW
HEDGE ACTIVITY
Revenues $ 10,104
$ (21 ) $ 9,611
$ 1
Cost of sales 5,631
110
5,272
34
Demand creation expense 870
—
865
—
Other (income) expense, net 297
44
(55 ) 18
Interest expense (income), net 12
(2 ) 12
(2 )

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NINE MONTHS ENDED
FEBRUARY 29, 2020 FEBRUARY 28, 2019
(Dollars in millions) TOTAL
AMOUNT OF
GAIN (LOSS)
ON CASH FLOW
HEDGE ACTIVITY
TOTAL
AMOUNT OF
GAIN (LOSS)
ON CASH FLOW
HEDGE ACTIVITY
Revenues $ 31,090
$ (12 ) $ 28,933
$ 9
Cost of sales 17,202
287
16,092
—
Demand creation expense 2,769
(3 ) 2,739
—
Other (income) expense, net 223
121
(50 ) 9
Interest expense (income), net 39
(5 ) 37
(5 )

The following tables present the amounts affecting the Unaudited Condensed Consolidated Statements of Income for the three ~~and nine~~ months ended ~~February 29,~~August 31, 2020 and ~~February 28,~~ 2019:


(Dollars in millions)	AMOUNT OF GAIN (LOSS) RECOGNIZED IN OTHER COMPREHENSIVE INCOME (LOSS) ON DERIVATIVES⁽¹⁾						AMOUNT OF GAIN (LOSS) RECLASSIFIED FROM ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) INTO INCOME⁽¹⁾
			THREE MONTHS ENDED AUGUST 31,					LOCATION OF GAIN (LOSS) RECLASSIFIED FROM ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) INTO INCOME				THREE MONTHS ENDED AUGUST 31,
			2020		2019							2020	2019
Derivatives designated as cash flow hedges:
Foreign exchange forwards and options	$	0	$	21		Revenues		$	14	$	8
Foreign exchange forwards and options	(371)		109			Cost of sales		114		75
Foreign exchange forwards and options	1		33			Demand creation expense		1		0
Foreign exchange forwards and options	(160)		0			Other (income) expense, net		8		46
Interest rate swaps⁽²⁾	0		0			Interest expense (income), net		(2)		(2)
Total designated cash flow hedges	$	(530)	$	163				$	135	$	127

(Dollars in millions)
AMOUNT OF GAIN (LOSS)
RECOGNIZED IN OTHER
COMPREHENSIVE INCOME (LOSS) ON DERIVATIVES⁽¹⁾

AMOUNT OF GAIN (LOSS)
RECLASSIFIED FROM ACCUMULATED
OTHER COMPREHENSIVE
INCOME (LOSS) INTO INCOME⁽¹⁾
THREE MONTHS ENDED LOCATION OF GAIN (LOSS)
RECLASSIFIED FROM ACCUMULATED
OTHER COMPREHENSIVE INCOME
(LOSS) INTO INCOME THREE MONTHS ENDED
FEBRUARY 29, 2020 FEBRUARY 28, 2019 FEBRUARY 29, 2020 FEBRUARY 28, 2019
Derivatives designated as
cash flow hedges:

Foreign exchange forwards
and options
$ 17
$ (50 ) Revenues $ (21 ) $ 1
Foreign exchange forwards
and options
39
(1 ) Cost of sales 110
34
Foreign exchange forwards
and options
1
2
Demand creation expense —
—
Foreign exchange forwards
and options
7
7
Other (income) expense, net 44
18
Interest rate swaps⁽²⁾
—
—
Interest expense (income), net (2 ) (2 )
Total designated cash
flow hedges $ 64
$ (42 ) $ 131
$ 51


~~(1)~~	~~For the~~ ~~three months ended February 29,~~(1)For the three months ended August 31, 2020 and ~~February 28,~~ 2019, the amounts recorded in Other (income) expense, net as a result of the discontinuance of cash flow hedges because the forecasted transactions were no longer probable of occurring were immaterial.


~~(2)~~	Gains and losses associated with terminated interest rate swaps, which were previously designated as cash flow hedges and recorded in Accumulated other comprehensive income (loss), will be released through Interest expense (income), net over the term of the issued debt.

~~Table~~(2)Gains and losses associated with terminated interest rate swaps, which were previously designated as cash flow hedges and recorded in Accumulated other comprehensive income (loss), will be released through Interest expense (income), net over the term of ~~Contents~~the issued debt.

(Dollars in millions)
AMOUNT OF GAIN (LOSS)
RECOGNIZED IN OTHER
COMPREHENSIVE INCOME (LOSS) ON DERIVATIVES⁽¹⁾

AMOUNT OF GAIN (LOSS)
RECLASSIFIED FROM ACCUMULATED
OTHER COMPREHENSIVE
INCOME (LOSS) INTO INCOME⁽¹⁾
NINE MONTHS ENDED LOCATION OF GAIN (LOSS)
RECLASSIFIED FROM ACCUMULATED
OTHER COMPREHENSIVE INCOME
(LOSS) INTO INCOME NINE MONTHS ENDED
FEBRUARY 29, 2020 FEBRUARY 28, 2019 FEBRUARY 29, 2020 FEBRUARY 28, 2019
Derivatives designated as
cash flow hedges:

Foreign exchange forwards
and options
$ (45 ) $ (31 ) Revenues $ (12 ) $ 9
Foreign exchange forwards
and options
185
273
Cost of sales 287
—
Foreign exchange forwards
and options
1
2
Demand creation expense (3 ) —
Foreign exchange forwards
and options
67
112
Other (income) expense, net 121
9
Interest rate swaps⁽²⁾
—
—
Interest expense (income), net (5 ) (5 )
Total designated cash
flow hedges $ 208
$ 356
$ 388
$ 13


~~(1)~~	~~For the~~ ~~nine months ended February 29, 2020~~ and February 28, 2019, the amounts recorded in Other (income) expense, net as a result of the discontinuance of cash flow hedges because the forecasted transactions were no longer probable of occurring were immaterial.


~~(2)~~	Gains and losses associated with terminated interest rate swaps, which were previously designated as cash flow hedges and recorded in Accumulated other comprehensive income (loss), will be released through Interest expense (income), net over the term of the issued debt.

AMOUNT OF GAIN (LOSS) RECOGNIZED
IN INCOME ON DERIVATIVES

LOCATION OF GAIN (LOSS)
RECOGNIZED IN INCOME
ON DERIVATIVES
THREE MONTHS ENDED NINE MONTHS ENDED
(Dollars in millions) FEBRUARY 29, 2020 FEBRUARY 28, 2019 FEBRUARY 29, 2020 FEBRUARY 28, 2019
Derivatives not designated as hedging instruments:
Foreign exchange forwards and options $ 12
$ (59 ) $ (9 ) $ 129
Other (income) expense, net
Embedded derivatives (2 ) (2 ) (7 ) 2
Other (income) expense, net


	AMOUNT OF GAIN (LOSS) RECOGNIZED IN INCOME ON DERIVATIVES					LOCATION OF GAIN (LOSS) RECOGNIZED IN INCOME ON DERIVATIVES
	THREE MONTHS ENDED AUGUST 31,
(Dollars in millions)	2020		2019


Derivatives not designated as hedging instruments:
Foreign exchange forwards and options	$	(38)	$	0	Other (income) expense, net
Embedded derivatives	(4)		(1)		Other (income) expense, net

CASH FLOW HEDGES

All changes in fair value of derivatives designated as cash flow hedges are recorded in Accumulated other comprehensive income (loss) until ~~until~~ Net income is affected by the variability of cash flows of the hedged transaction. Effective hedge results are classified in the Unaudited Condensed Consolidated Statements of Income in the same manner as the underlying exposure. Derivative instruments designated as cash flow hedges must be discontinued when it is no longer probable the forecasted hedged transaction will occur in the initially identified time period. The gains and losses associated with discontinued derivative instruments in Accumulated other comprehensive income (loss) will be recognized immediately in Other (income) expense, net,, if it is probable the forecasted hedged transaction will not occur by the end of the initially identified time period or within an additional ~~two-month~~two-month period thereafter. In rare circumstances, the additional period of time may exceed two months due to extenuating circumstances related to the nature of the forecasted transaction that are outside the control or influence of the Company. In all situations in which hedge accounting is discontinued and the derivative remains outstanding, the Company accounts for the derivative as an undesignated instrument as discussed below.

The total notional amount of outstanding foreign currency derivatives designated as cash flow hedges was approximately ~~$8.2~~$13.9 billion as of ~~February 29,~~August 31, 2020. Approximately ~~$322~~$97 million of deferred net ~~gains~~losses (net of tax) on both outstanding and matured derivatives in Accumulated other comprehensive income (loss) as of ~~February 29,~~August 31, 2020, are expected to be reclassified to Net income during the next 12 months concurrent with the underlying hedged transactions also being recorded in Net ~~income~~.income. Actual amounts ultimately reclassified to Net income are dependent on the exchange rates in effect when derivative contracts currently outstanding mature. As of ~~February 29,~~August 31, 2020, the maximum term over which the Company hedges exposures to the variability of cash flows for its forecasted transactions was 2327 months.

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UNDESIGNATED DERIVATIVE INSTRUMENTS

The Company may elect to enter into foreign exchange forwards to mitigate the change in fair value of specific assets and liabilities on the Unaudited Condensed Consolidated Balance Sheets and/or the embedded derivative contracts. These undesignated instruments are recorded at fair value as a derivative asset or liability on the Unaudited Condensed Consolidated Balance Sheets with their corresponding change in fair value recognized in Other (income) expense, net,, together with the re-measurement gain or loss from the hedged balance sheet position and/or embedded derivative contract. The total notional amount of outstanding undesignated derivative instruments was ~~$3.6~~$4.2 billion as of ~~February 29,~~August 31, 2020.

EMBEDDED DERIVATIVES

Embedded derivative contracts are treated as foreign currency forward contracts that are bifurcated from the related contract and recorded at fair value as a derivative asset or liability on the Unaudited Condensed Consolidated Balance Sheets with their corresponding change in fair value recognized in Other (income) expense, net,, through the date the foreign currency fluctuations cease to exist.

~~At February 29,~~As of August 31, 2020, the total notional amount of embedded derivatives outstanding was approximately ~~$350~~$351 million.

CREDIT RISK

The Company's bilateral credit-related contingent features generally require the owing entity, either the Company or the derivative counterparty, to post collateral for the portion of the fair value in excess of $50 million should the fair value of outstanding derivatives per counterparty be greater than $50 million. Additionally, a certain level of decline in credit rating of either the Company or the counterparty could also trigger collateral requirements. As of ~~February 29,~~August 31, 2020, the Company was in compliance with all credit risk-related contingent features, and derivative instruments with such features were in a net liability position of approximately $1$611 million. Accordingly, the Company was ~~not~~ required to post ~~any~~$151 million of cash collateral as a result of these contingent features. Further, 0 amount of collateral was received on the Company's derivative asset balance as of ~~February 29, 2020, the Company had $86 million of cash collateral received from various counterparties to its derivative contracts.~~August 31, 2020. The Company considers the impact of the risk of counterparty default to be immaterial.

For additional information related to the Company's derivative financial instruments and collateral, refer to Note 4 — Fair Value Measurements.

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NOTE 10 — ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

The changes in Accumulated other comprehensive income (loss), net of tax, were as follows:


(Dollars in millions)	FOREIGN CURRENCY TRANSLATION ADJUSTMENT⁽¹⁾		CASH FLOW HEDGES		NET INVESTMENT HEDGES⁽¹⁾		OTHER		TOTAL
Balance at May 31, 2020	$	(494)	$	390	$	115	$	(67)	$	(56)
Other comprehensive income (loss):
Other comprehensive gains (losses) before reclassifications⁽²⁾	318		(526)		0		(13)		(221)
Reclassifications to net income of previously deferred (gains) losses⁽³⁾	0		(132)		0		8		(124)
Total other comprehensive income (loss)	318		(658)		0		(5)		(345)
Balance at August 31, 2020	$	(176)	$	(268)	$	115	$	(72)	$	(401)

(1)The accumulated foreign currency translation adjustment and net investment hedge gains/losses related to an investment in a foreign subsidiary are reclassified to Net income upon sale or upon complete or substantially complete liquidation of the respective entity.

(2)Net of tax benefit (expense) of $0 million, $4 million, $0 million, $1 million and $5 million, respectively.

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


(Dollars in millions)	FOREIGN CURRENCY TRANSLATION ADJUSTMENT⁽¹⁾		CASH FLOW HEDGES		NET INVESTMENT HEDGES⁽¹⁾		OTHER		TOTAL
Balance at May 31, 2019	$	(346)	$	520	$	115	$	(58)	$	231
Other comprehensive income (loss):
Other comprehensive gains (losses) before reclassifications⁽²⁾	(89)		163		0		3		77
Reclassifications to net income of previously deferred (gains) losses⁽³⁾	0		(127)		0		(1)		(128)
Total other comprehensive income (loss)	(89)		36		0		2		(51)
Balance at August 31, 2019	$	(435)	$	556	$	115	$	(56)	$	180

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

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

(Dollars in millions)
FOREIGN CURRENCY TRANSLATION ADJUSTMENT⁽¹⁾

CASH FLOW HEDGES
NET INVESTMENT HEDGES⁽¹⁾

OTHER
TOTAL
Balance at November 30, 2019 $ (407 ) $ 401
$ 115
$ (57 ) $ 52
Other comprehensive income (loss):
Other comprehensive gains (losses) before reclassifications⁽²⁾
(43 ) 63
—
1
21
Reclassifications to net income of previously deferred (gains) losses⁽³⁾
1
(131 ) —
—
(130 )
Total other comprehensive income (loss) (42 ) (68 ) —
1
(109 )
Balance at February 29, 2020 $ (449 ) $ 333
$ 115
$ (56 ) $ (57 )


~~(1)~~	The accumulated foreign currency translation adjustment and net investment hedge gains/losses related to an investment in a foreign subsidiary are reclassified to Net income upon sale or upon complete or substantially complete liquidation of the respective entity.


~~(2)~~	~~Net of tax (expense) of $0 million, $(1) million, $0 million, $0 million and $(1) million, respectively.~~


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

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(Dollars in millions)
FOREIGN CURRENCY TRANSLATION ADJUSTMENT⁽¹⁾

CASH FLOW HEDGES
NET INVESTMENT HEDGES⁽¹⁾

OTHER
TOTAL
Balance at May 31, 2019 $ (346 ) $ 520
$ 115
$ (58 ) $ 231
Other comprehensive income (loss):
Other comprehensive gains (losses) before reclassifications⁽²⁾
(104 ) 200
—
2
98
Reclassifications to net income of previously deferred (gains) losses⁽³⁾
1
(387 ) —
—
(386 )
Total other comprehensive income (loss) (103 ) (187 ) —
2
(288 )
Balance at February 29, 2020 $ (449 ) $ 333
$ 115
$ (56 ) $ (57 )


~~(1)~~	The accumulated foreign currency translation adjustment and net investment hedge gains/losses related to an investment in a foreign subsidiary are reclassified to Net income upon sale or upon complete or substantially complete liquidation of the respective entity.


~~(2)~~	~~Net of tax (expense) of $0 million, $(8) million, $0 million, $0 million and $(8) million, respectively.~~


~~(3)~~	~~Net of tax expense of $0 million, $1 million, $0 million, $0 million and $1 million, respectively.~~

(Dollars in millions)
FOREIGN CURRENCY TRANSLATION ADJUSTMENT⁽¹⁾

CASH FLOW HEDGES
NET INVESTMENT HEDGES⁽¹⁾

OTHER
TOTAL
Balance at November 30, 2018 $ (303 ) $ 451
$ 115
$ (54 ) $ 209
Other comprehensive income (loss):
Other comprehensive gains (losses) before reclassifications⁽²⁾
79
(43 ) —
(3 ) 33
Reclassifications to net income of previously deferred (gains) losses⁽³⁾
—
(48 ) —
3
(45 )
Total other comprehensive income (loss) 79
(91 ) —
—
(12 )
Balance at February 28, 2019 $ (224 ) $ 360
$ 115
$ (54 ) $ 197


~~(1)~~	The accumulated foreign currency translation adjustment and net investment hedge gains/losses related to an investment in a foreign subsidiary are reclassified to Net income upon sale or upon complete or substantially complete liquidation of the respective entity.


~~(2)~~	~~Net of tax (expense) of $0 million, $(1) million, $0 million, $0 million and $(1) million, respectively.~~


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

(Dollars in millions)
FOREIGN CURRENCY TRANSLATION ADJUSTMENT⁽¹⁾

CASH FLOW HEDGES
NET INVESTMENT HEDGES⁽¹⁾

OTHER
TOTAL
Balance at May 31, 2018 $ (173 ) $ 17
$ 115
$ (51 ) $ (92 )
Other comprehensive income (loss):
Other comprehensive gains (losses) before reclassifications⁽²⁾
(51 ) 351
—
5
305
Reclassifications to net income of previously deferred (gains) losses⁽³⁾
—
(8 ) —
(8 ) (16 )
Total other comprehensive income (loss) (51 ) 343
—
(3 ) 289
Balance at February 28, 2019 $ (224 ) $ 360
$ 115
$ (54 ) $ 197


~~(1)~~	The accumulated foreign currency translation adjustment and net investment hedge gains/losses related to an investment in a foreign subsidiary are reclassified to Net income upon sale or upon complete or substantially complete liquidation of the respective entity.


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


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

~~Table of Contents~~

The following table summarizes the reclassifications from Accumulated other comprehensive income (loss) to the Unaudited Condensed Consolidated Statements of Income:


	AMOUNT OF GAIN (LOSS) RECLASSIFIED FROM ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) INTO INCOME					LOCATION OF GAIN (LOSS) RECLASSIFIED FROM ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) INTO INCOME
	THREE MONTHS ENDED AUGUST 31,
(Dollars in millions)	2020		2019




Gains (losses) on cash flow hedges:
Foreign exchange forwards and options	$	14	$	8	Revenues
Foreign exchange forwards and options	114		75		Cost of sales
Foreign exchange forwards and options	1		0		Demand creation expense
Foreign exchange forwards and options	8		46		Other (income) expense, net
Interest rate swaps	(2)		(2)		Interest expense (income), net
Total before tax	135		127
Tax (expense)	(3)		0
Gain (loss) net of tax	132		127
Gains (losses) on other	(8)		1		Other (income) expense, net
Total before tax	(8)		1
Tax (expense)	0		0
Gain (loss) net of tax	(8)		1
Total net gain (loss) reclassified for the period	$	124	$	128

AMOUNT OF GAIN (LOSS)
RECLASSIFIED FROM ACCUMULATED
OTHER COMPREHENSIVE INCOME
(LOSS) INTO INCOME LOCATION OF GAIN (LOSS)
RECLASSIFIED FROM ACCUMULATED
OTHER COMPREHENSIVE INCOME
(LOSS) INTO INCOME
THREE MONTHS ENDED NINE MONTHS ENDED
(Dollars in millions) FEBRUARY 29, 2020 FEBRUARY 28, 2019 FEBRUARY 29, 2020 FEBRUARY 28, 2019
Gains (losses) on foreign currency translation adjustment $ (1 ) $ —
$ (1 ) $ —
Other expense (income), net
Total before tax (1 ) —
(1 ) —

Tax (expense) benefit —
—
—
—

Gain (loss) net of tax (1 ) —
(1 ) —

Gains (losses) on cash flow hedges:

Foreign exchange forwards and options (21 ) 1
(12 ) 9
Revenues
Foreign exchange forwards and options 110
34
287
—
Cost of sales
Foreign exchange forwards and options —
—
(3 ) —
Demand creation expense
Foreign exchange forwards and options 44
18
121
9
Other (income) expense, net
Interest rate swaps (2 ) (2 ) (5 ) (5 ) Interest expense (income), net
Total before tax 131
51
388
13

Tax (expense) —
(3 ) (1 ) (5 )
Gain (loss) net of tax 131
48
387
8

Gains (losses) on other —
(3 ) —
8
Other (income) expense, net
Total before tax —
(3 ) —
8

Tax (expense) —
—
—
—

Gain (loss) net of tax —
(3 ) —
8

Total net gain (loss) reclassified for the period $ 130
$ 45
$ 386
$ 16

Table of Contents



NOTE 11 — REVENUES

DISAGGREGATION OF REVENUES

The following tables present the Company's revenues disaggregated by reportable operating segment, major product line and by distribution channel:


	THREE MONTHS ENDED AUGUST 31, 2020
(Dollars in millions)	NORTH AMERICA		EUROPE, MIDDLE EAST & AFRICA		GREATER CHINA		ASIA PACIFIC & LATIN AMERICA		GLOBAL BRAND DIVISIONS		TOTAL NIKE BRAND		CONVERSE		CORPORATE		TOTAL NIKE, INC.
Revenues by:
Footwear	$	2,957	$	1,802	$	1,251	$	758	$	0	$	6,768	$	513	$	0	$	7,281
Apparel	1,125		971		478		301		0		2,875		22		0		2,897
Equipment	143		137		51		40		0		371		9		0		380
Other	0		0		0		0		4		4		19		13		36
TOTAL REVENUES	$	4,225	$	2,910	$	1,780	$	1,099	$	4	$	10,018	$	563	$	13	$	10,594
Revenues by:
Sales to Wholesale Customers	$	2,719	$	1,973	$	964	$	708	$	0	$	6,364	$	373	$	0	$	6,737
Sales through Direct to Consumer	1,506		937		816		391		0		3,650		171		0		3,821
Other	0		0		0		0		4		4		19		13		36
TOTAL REVENUES	$	4,225	$	2,910	$	1,780	$	1,099	$	4	$	10,018	$	563	$	13	$	10,594

THREE MONTHS ENDED FEBRUARY 29, 2020
(Dollars in millions) NORTH AMERICA
EUROPE, MIDDLE EAST & AFRICA
GREATER CHINA
ASIA PACIFIC & LATIN AMERICA
GLOBAL BRAND DIVISIONS
TOTAL NIKE BRAND
CONVERSE
CORPORATE
TOTAL NIKE, INC.
Revenues by:
Footwear $ 2,628
$ 1,711
$ 1,075
$ 963
$ —
$ 6,377
$ 455
$ —
$ 6,832
Apparel 1,228
889
400
388
—
2,905
20
—
2,925
Equipment 123
109
31
63
—
326
5
—
331
Other —
—
—
—
8
8
26
(18 ) 16
TOTAL REVENUES $ 3,979
$ 2,709
$ 1,506
$ 1,414
$ 8
$ 9,616
$ 506
$ (18 ) $ 10,104
Revenues by:
Sales to Wholesale Customers $ 2,521
$ 1,956
$ 881
$ 953
$ —
$ 6,311
$ 330
$ —
$ 6,641
Sales through Direct to Consumer 1,458
753
625
461
—
3,297
150
—
3,447
Other —
—
—
—
8
8
26
(18 ) 16
TOTAL REVENUES $ 3,979
$ 2,709
$ 1,506
$ 1,414
$ 8
$ 9,616
$ 506
$ (18 ) $ 10,104

THREE MONTHS ENDED FEBRUARY 28, 2019
(Dollars in millions) NORTH AMERICA
EUROPE, MIDDLE EAST & AFRICA
GREATER CHINA
ASIA PACIFIC & LATIN AMERICA
GLOBAL BRAND DIVISIONS
TOTAL NIKE BRAND
CONVERSE
CORPORATE
TOTAL NIKE, INC.
Revenues by:
Footwear $ 2,509
$ 1,589
$ 1,115
$ 909
$ —
$ 6,122
$ 405
$ —
$ 6,527
Apparel 1,173
750
444
340
—
2,707
27
—
2,734
Equipment 128
96
29
58
—
311
5
—
316
Other —
—
—
—
8
8
26
—
34
TOTAL REVENUES $ 3,810
$ 2,435
$ 1,588
$ 1,307
$ 8
$ 9,148
$ 463
$ —
$ 9,611
Revenues by:

Sales to Wholesale Customers $ 2,547
$ 1,785
$ 936
$ 906
$ —
$ 6,174
$ 308
$ —
$ 6,482
Sales through Direct to Consumer 1,263
650
652
401
—
2,966
129
—
3,095
Other —
—
—
—
8
8
26
—
34
TOTAL REVENUES $ 3,810
$ 2,435
$ 1,588
$ 1,307
$ 8
$ 9,148
$ 463
$ —
$ 9,611


	THREE MONTHS ENDED AUGUST 31, 2019
(Dollars in millions)	NORTH AMERICA		EUROPE, MIDDLE EAST & AFRICA		GREATER CHINA		ASIA PACIFIC & LATIN AMERICA		GLOBAL BRAND DIVISIONS		TOTAL NIKE BRAND		CONVERSE		CORPORATE		TOTAL NIKE, INC.
Revenues by:
Footwear	$	2,669	$	1,758	$	1,164	$	930	$	0	$	6,521	$	496	$	0	$	7,017
Apparel	1,431		869		465		356		0		3,121		26		0		3,147
Equipment	193		146		50		59		0		448		9		0		457
Other	0		0		0		0		6		6		24		9		39
TOTAL REVENUES	$	4,293	$	2,773	$	1,679	$	1,345	$	6	$	10,096	$	555	$	9	$	10,660
Revenues by:
Sales to Wholesale Customers	$	2,864	$	2,042	$	986	$	950	$	0	$	6,842	$	367	$	0	$	7,209
Sales through Direct to Consumer	1,429		731		693		395		0		3,248		164		0		3,412
Other	0		0		0		0		6		6		24		9		39
TOTAL REVENUES	$	4,293	$	2,773	$	1,679	$	1,345	$	6	$	10,096	$	555	$	9	$	10,660

~~Table of Contents~~

NINE MONTHS ENDED FEBRUARY 29, 2020
(Dollars in millions) NORTH AMERICA
EUROPE, MIDDLE EAST & AFRICA
GREATER CHINA
ASIA PACIFIC & LATIN AMERICA
GLOBAL BRAND DIVISIONS
TOTAL NIKE BRAND
CONVERSE
CORPORATE
TOTAL NIKE, INC.
Revenues by:
Footwear $ 7,723
$ 5,005
$ 3,486
$ 2,890
$ —
$ 19,104
$ 1,367
$ —
$ 20,471
Apparel 4,076
2,655
1,428
1,154
—
9,313
76
—
9,389
Equipment 455
359
118
183
—
1,115
20
—
1,135
Other —
—
—
—
24
24
78
(7 ) 95
TOTAL REVENUES $ 12,254
$ 8,019
$ 5,032
$ 4,227
$ 24
$ 29,556
$ 1,541
$ (7 ) $ 31,090
Revenues by:
Sales to Wholesale Customers $ 8,119
$ 5,792
$ 2,895
$ 2,925
$ —
$ 19,731
$ 983
$ —
$ 20,714
Sales through Direct to Consumer 4,135
2,227
2,137
1,302
—
9,801
480
—
10,281
Other —
—
—
—
24
24
78
(7 ) 95
TOTAL REVENUES $ 12,254
$ 8,019
$ 5,032
$ 4,227
$ 24
$ 29,556
$ 1,541
$ (7 ) $ 31,090

NINE MONTHS ENDED FEBRUARY 28, 2019
(Dollars in millions) NORTH AMERICA
EUROPE, MIDDLE EAST & AFRICA
GREATER CHINA
ASIA PACIFIC & LATIN AMERICA
GLOBAL BRAND DIVISIONS
TOTAL NIKE BRAND
CONVERSE
CORPORATE
TOTAL NIKE, INC.
Revenues by:
Footwear $ 7,309
$ 4,650
$ 3,095
$ 2,669
$ —
$ 17,723
$ 1,222
$ —
$ 18,945
Apparel 3,985
2,374
1,314
1,032
—
8,705
93
—
8,798
Equipment 443
331
102
174
—
1,050
18
—
1,068
Other —
—
—
—
33
33
82
7
122
TOTAL REVENUES $ 11,737
$ 7,355
$ 4,511
$ 3,875
$ 33
$ 27,511
$ 1,415
$ 7
$ 28,933
Revenues by:

Sales to Wholesale Customers $ 8,031
$ 5,318
$ 2,704
$ 2,777
$ —
$ 18,830
$ 930
$ —
$ 19,760
Sales through Direct to Consumer 3,706
2,037
1,807
1,098
—
8,648
403
—
9,051
Other —
—
—
—
33
33
82
7
122
TOTAL REVENUES $ 11,737
$ 7,355
$ 4,511
$ 3,875
$ 33
$ 27,511
$ 1,415
$ 7
$ 28,933

For the three ~~and nine~~ months ended ~~February 29,~~August 31, 2020 and ~~February 28,~~ 2019, ~~other~~Other revenues for Global Brand Divisions and Converse were primarily attributable to licensing businesses. For the three ~~and nine~~ months ended ~~February 29,~~August 31, 2020 and ~~February 28,~~ 2019, ~~other~~Other revenues for Corporate primarily consisted of foreign currency hedge gains and losses related to revenues generated by entities within the NIKE Brand geographic operating segments and Converse but managed through the Company's central foreign exchange risk management program.

As of ~~February 29,~~August 31, 2020 and May 31, ~~2019,~~2020, the Company did not have any contract assets and had an immaterial amount of contract liabilities recorded in Accrued ~~Liabilities~~liabilities on the Unaudited Condensed Consolidated Balance Sheets.

Table of Contents



NOTE 12 — OPERATING SEGMENTS

The Company's operating segments are evidence of the structure of the Company's internal organization. The NIKE Brand segments are defined by geographic regions for operations participating in NIKE Brand sales activity.

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; Europe, Middle East & Africa (EMEA); Greater China; and Asia Pacific & Latin America (APLA), and include results for the NIKE and Jordan brands, with results for the Hurley brand included in North America. Refer to Note 14 — Acquisitions and Divestitures for information regarding the divestiture of the Company's wholly owned subsidiary, Hurley, and the planned transition of NIKE Brand businesses in certain countries within APLA to third-party distributors.brands.

The Company's NIKE Direct operations are managed within each NIKE Brand geographic operating segment. Converse is also a reportable segment for the Company, and operates in one industry: the design, marketing, licensing and selling of athletic lifestyle sneakers, apparel and accessories.

Global Brand Divisions is included within the NIKE Brand for presentation purposes to align with the way management views the Company. Global Brand Divisions primarily represent NIKE Brand licensing businesses that are not part of a geographic operating segment, ~~and~~ demand creation and operating overhead expense ~~including~~that include product creation and design expenses ~~that are~~ centrally managed for the NIKE Brand, as well as costs associated with NIKE Direct global digital operations and enterprise technology.

Corporate consists primarily of unallocated general and administrative expenses, including expenses associated with centrally managed departments; depreciation and amortization related to the Company's headquarters; unallocated insurance, benefit and compensation programs, including stock-based compensation; and certain foreign currency gains and losses, including certain hedge gains and losses. For the three and nine months ended February 29, 2020, Corporate includes the non-recurring impairment charge, recognized as a result of the Company's decision to transition its operations in Brazil, Argentina, Chile and Uruguay to third-party distributors. This charge primarily reflects the anticipated release of associated non-cash cumulative foreign currency translation losses. For more information regarding this charge, refer to Note 14 — Acquisitions and Divestitures.

The primary financial measure used by the Company to evaluate performance of individual operating segments is earnings before interest and taxes (EBIT), which represents Net income before Interest expense (income), net and Income tax expense in the Unaudited Condensed Consolidated Statements of Income.

As part of the Company's centrally managed foreign exchange risk management program, standard foreign currency rates are assigned twice per year to each NIKE Brand entity in the Company's geographic operating segments and to Converse. These rates are set approximately nine and twelve months in advance of the future selling 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 in the entity's functional currency. Differences between assigned standard foreign currency rates and actual market rates are included in Corporate, together with foreign currency hedge gains and losses generated from the Company's centrally managed foreign exchange risk management program and other conversion gains and losses.

Accounts receivable, net, Inventories and Property, plant and equipment, net for operating segments are regularly reviewed by management and are therefore provided below.

2218

Table of Contents


	THREE MONTHS ENDED AUGUST 31,
(Dollars in millions)	2020		2019
REVENUES
North America	$	4,225	$	4,293
Europe, Middle East & Africa	2,910		2,773
Greater China	1,780		1,679
Asia Pacific & Latin America	1,099		1,345
Global Brand Divisions	4		6
Total NIKE Brand	10,018		10,096
Converse	563		555
Corporate	13		9
TOTAL NIKE, INC. REVENUES	$	10,594	$	10,660
EARNINGS BEFORE INTEREST AND TAXES
North America	$	1,302	$	1,100
Europe, Middle East & Africa	692		609
Greater China	688		669
Asia Pacific & Latin America	280		341
Global Brand Divisions	(853)		(857)
Converse	168		138
Corporate	(497)		(424)
Interest expense (income), net	65		15
TOTAL NIKE, INC. INCOME BEFORE INCOME TAXES	$	1,715	$	1,561


	AUGUST 31,		MAY 31,
(Dollars in millions)	2020		2020
ACCOUNTS RECEIVABLE, NET
North America	$	1,256	$	1,020
Europe, Middle East & Africa	1,439		712
Greater China	271		321
Asia Pacific & Latin America⁽¹⁾	504		425
Global Brand Divisions	81		65
Total NIKE Brand	3,551		2,543
Converse	213		149
Corporate	49		57
TOTAL ACCOUNTS RECEIVABLE, NET	$	3,813	$	2,749
INVENTORIES
North America	$	2,541	$	3,077
Europe, Middle East & Africa	1,891		2,070
Greater China	1,113		882
Asia Pacific & Latin America⁽¹⁾	753		770
Global Brand Divisions	137		137
Total NIKE Brand	6,435		6,936
Converse	293		341
Corporate	(23)		90
TOTAL INVENTORIES	$	6,705	$	7,367

THREE MONTHS ENDED NINE MONTHS ENDED
(Dollars in millions) FEBRUARY 29, 2020
FEBRUARY 28, 2019 FEBRUARY 29, 2020 FEBRUARY 28, 2019
REVENUES
North America $ 3,979
$ 3,810
$ 12,254
$ 11,737
Europe, Middle East & Africa 2,709
2,435
8,019
7,355
Greater China 1,506
1,588
5,032
4,511
Asia Pacific & Latin America 1,414
1,307
4,227
3,875
Global Brand Divisions 8
8
24
33
Total NIKE Brand 9,616
9,148
29,556
27,511
Converse 506
463
1,541
1,415
Corporate (18 ) —
(7 ) 7
TOTAL NIKE, INC. REVENUES $ 10,104
$ 9,611
$ 31,090
$ 28,933
EARNINGS BEFORE INTEREST AND TAXES
North America $ 937
$ 916
$ 2,912
$ 2,877
Europe, Middle East & Africa 575
538
1,694
1,489
Greater China 556
639
1,919
1,702
Asia Pacific & Latin America 387
339
1,105
983
Global Brand Divisions (895 ) (788 ) (2,624 ) (2,432 )
Converse 96
79
324
221
Corporate (763 ) (420 ) (1,600 ) (1,245 )
Interest expense (income), net 12
12
39
37
TOTAL NIKE, INC. INCOME BEFORE INCOME TAXES $ 881
$ 1,291
$ 3,691
$ 3,558

FEBRUARY 29, MAY 31,
(Dollars in millions) 2020 2019
ACCOUNTS RECEIVABLE, NET
North America $ 1,747
$ 1,718
Europe, Middle East & Africa 1,297
1,164
Greater China 398
245
Asia Pacific & Latin America⁽¹⁾
587
771
Global Brand Divisions 108
105
Total NIKE Brand 4,137
4,003
Converse 290
243
Corporate 46
26
TOTAL ACCOUNTS RECEIVABLE, NET $ 4,473
$ 4,272
INVENTORIES
North America $ 2,222
$ 2,328
Europe, Middle East & Africa 1,501
1,390
Greater China 916
693
Asia Pacific & Latin America⁽¹⁾
614
694
Global Brand Divisions 198
126
Total NIKE Brand 5,451
5,231
Converse 280
269
Corporate 76
122
TOTAL INVENTORIES $ 5,807
$ 5,622

Table of Contents

FEBRUARY 29, MAY 31,
(Dollars in millions) 2020 2019
PROPERTY, PLANT AND EQUIPMENT, NET
North America $ 655
$ 814
Europe, Middle East & Africa 857
929
Greater China 219
237
Asia Pacific & Latin America⁽¹⁾
298
326
Global Brand Divisions 800
665
Total NIKE Brand 2,829
2,971
Converse 84
100
Corporate 1,870
1,673
TOTAL PROPERTY, PLANT AND EQUIPMENT, NET $ 4,783
$ 4,744


~~(1)~~	~~Excludes assets held-for-sale as of~~ ~~February 29, 2020. See Note 14 — Acquisitions and Divestitures for additional information.~~


	AUGUST 31,		MAY 31,
(Dollars in millions)	2020		2020
PROPERTY, PLANT AND EQUIPMENT, NET
North America	$	637	$	645
Europe, Middle East & Africa	938		885
Greater China	224		214
Asia Pacific & Latin America⁽¹⁾	305		296
Global Brand Divisions	867		830
Total NIKE Brand	2,971		2,870
Converse	76		80
Corporate	1,922		1,916
TOTAL PROPERTY, PLANT AND EQUIPMENT, NET	$	4,969	$	4,866

(1)Excludes assets held-for-sale as of August 31, 2020 and May 31, 2020. See Note 13 — Acquisitions and Divestitures for additional information.

~~NOTE 13 — LEASES~~

The Company primarily leases retail store space, certain distribution and warehouse facilities, office space, equipment and other non-real estate assets. The Company determines if an arrangement is a lease at inception and begins recording lease activity at the commencement date, which is generally the date in which the Company takes possession of or controls the physical use of the asset. ROU assets and lease liabilities are recognized based on the present value of lease payments over the lease term with lease expense recognized on a straight-line basis. The Company's incremental borrowing rate is used to determine the present value of future lease payments unless the implicit rate is readily determinable. As of and for the nine months ended February 29, 2020, finance leases were not a material component of the Company's lease portfolio.

~~Lease agreements may contain rent escalation clauses, renewal or termination options, rent holidays or certain landlord incentives, including tenant improvement allowances. ROU assets~~include amounts for scheduled rent increases and are reduced by the amount of lease incentives. The lease term includes the non-cancelable period of the lease and options to extend or terminate the lease when it is reasonably certain the Company will exercise those options. Certain lease agreements include variable lease payments, which are based on a percent of retail sales over specified levels or adjust periodically for inflation as a result of changes in a published index, primarily the Consumer Price Index.

~~Lease expense is recognized in~~ ~~Cost of sales~~ or ~~Operating overhead expense~~ within the Unaudited Condensed Consolidated Statements of Income, based on the underlying nature of the leased asset. For the three months ended February 29, 2020, lease expense primarily consisted of operating lease costs of $137 million, and $83 million primarily related to variable lease costs which includes an immaterial amount of short-term lease costs. For the nine months ended February 29, 2020, lease expense primarily consisted of operating lease costs of $425 million, and $270 million primarily related to variable lease costs which includes an immaterial amount of short-term lease costs.

Amounts of future undiscounted cash flows related to operating lease payments over the lease term are as follows and are reconciled to the present value of the operating lease liabilities as recorded on the Unaudited Condensed Consolidated Balance Sheets:

(Dollars in millions)
AS OF FEBRUARY 29, 2020⁽¹⁾
Remainder of Fiscal 2020 $ 139
Fiscal 2021 538
Fiscal 2022 478
Fiscal 2023 420
Fiscal 2024 381
Thereafter 1,672
Total undiscounted future cash flows related to lease payments $ 3,628
Less: Interest 448
Present value of lease liabilities $ 3,180


~~(1)~~	~~Excludes $292 million of future operating lease payments for lease agreements signed but not yet commenced.~~

~~Table of Contents~~

~~Amounts of minimum future annual commitments under non-cancelable operating and capital leases in accordance with Topic 840 were as follows:~~

AS OF MAY 31, 2019
(Dollars in millions) OPERATING LEASES
CAPITAL LEASES AND OTHER FINANCING OBLIGATIONS⁽¹⁾
TOTAL
Fiscal 2020 $ 553
$ 32
$ 585
Fiscal 2021 513
34
547
Fiscal 2022 441
40
481
Fiscal 2023 386
37
423
Fiscal 2024 345
34
379
Thereafter 1,494
197
1,691
TOTAL $ 3,732
$ 374
$ 4,106


~~(1)~~	~~Capital leases and other financing obligations include payments related to build-to-suit lease arrangements.~~

~~The following table includes the weighted average remaining lease terms, in years, and the weighted average discount rate used to calculate the present value of operating lease liabilities:~~



			~~AS OF FEBRUARY 29,~~
	~~2020~~
~~Weighted-average remaining lease term (years)~~	~~8.6~~
~~Weighted-average discount rate~~	~~2.6~~	%

~~The following table includes supplemental cash and non-cash information related to operating leases:~~

NINE MONTHS ENDED
(Dollars in millions) FEBRUARY 29, 2020
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases $ 407
Operating lease right-of-use assets obtained in exchange for new operating lease liabilities⁽¹⁾
$ 368


~~(1)~~	~~Excludes the amount initially capitalized in conjunction with the adoption of Topic 842.~~

~~Table of Contents~~

NOTE 1413 — ACQUISITIONS AND DIVESTITURES

~~ACQUISITIONS~~

During fiscal 2020 and 2019, the Company made multiple acquisitions focused on gaining new capabilities to fuel its Consumer Direct Offense strategy, serving consumers personally at a global scale. The impact of acquisitions, individually and in the aggregate, was not considered material to the Company’s Unaudited Condensed Consolidated Financial Statements.

~~DIVESTITURES~~

During the third quarter of fiscal 2020, as a result of the ~~Company’s~~Company's decision to transition its wholesale and direct to consumer operating model in certain countries within its APLA operating segment, the Company signed definitive agreements to sell its NIKE Brand businesses in Brazil, Argentina, Chile and Uruguay to third-party distributors. Specifically, NIKE entered into agreements to sell its operations in Argentina, Chile and Uruguay to Grupo Axo and to sell substantially all of its operations in Brazil to Grupo SBF S.A., through its wholly owned subsidiary. The Company will retain a small operation in Brazil focused on certain sports marketing assets, local manufacturing and Converse. These transactions are expected to close ~~in the first half of fiscal~~prior to January 1, 2021, with Grupo SBF S.A.’s's transaction subject to Brazil Antitrust Authority approvals.

As a result of this decision, beginning in the third quarter of fiscal 2020, the related assets and liabilities of these entities were classified as held-for-sale and remain as such on the Unaudited Condensed Consolidated Balance Sheets as of ~~February 29,~~August 31, 2020, which consisted of the following:


•	~~Assets of $524 million, primarily consisting of $217 million of~~ ~~Inventories~~ ~~and $210 million of~~ ~~Accounts receivable, net~~ ~~which were reclassified to~~ ~~Prepaid expenses and other current assets~~ ~~on the Company’s Unaudited Condensed Consolidated Balance Sheets; and~~


•	~~Liabilities of $158 million, primarily consisting of $84 million of~~ ~~Accrued liabilities,~~ ~~as well as $60 million of~~ ~~Accounts Payable,~~ ~~which was reclassified to~~ ~~Accrued liabilities~~ ~~on the Company’s Unaudited Condensed Consolidated Balance Sheets.~~

~~Upon meeting~~•Held-for-sale assets of $545 million, classified within Prepaid expenses and other current assets, primarily consisting of $272 million of Inventories, $174 million of Accounts receivable, net and $54 million of Prepaid expenses and other current assets; and

•Held-for-sale liabilities of $88 million, classified within Accrued liabilities, primarily consisting of $52 million of Accrued liabilities, as well as $26 million of Accounts payable.

As of May 31, 2020, the ~~criteria for~~related assets and liabilities of these entities classified as held-for-sale ~~classification,~~on the Consolidated Balance Sheets consisted of the following:

•Held-for-sale assets of $506 million, classified within Prepaid expenses and other current assets, primarily consisting of $264 million of Inventories and $138 million of Accounts receivable, net; and

•Held-for-sale liabilities of $146 million, classified within Accrued liabilities, primarily consisting of $85 million of Accrued liabilities, as well as $49 million of Accounts payable.

The Company has recognized ~~a non-recurring impairment charge~~total expected losses related to the transaction of ~~$400~~$438 million within Other (income) expense, net, ~~on the Unaudited Condensed Consolidated Statements of Income,~~ classified within Corporate, and a corresponding allowance within Accrued ~~Liabilities~~liabilities on the Unaudited Condensed Consolidated Balance ~~Sheets. This charge~~Sheets; $405 million of which was recognized in fiscal 2020, primarily upon meeting the held-for-sale criteria. The expected loss is largely due to the anticipated release of ~~non-cash~~the cumulative foreign currency translation losses ~~which were included as part of the carrying value of~~recognized by the Argentina, Chile and Uruguay ~~disposal groups when measuring for impairment. These losses will be reclassified from~~ ~~Accumulated other comprehensive income (loss)~~ to ~~Net income~~ ~~upon closure of the transaction. For more information see Note 4 — Fair Value Measurements.~~legal entities.

On October 29, 2019, the Company signed a definitive agreement to sell the assets and liabilities of its wholly owned subsidiary brand, Hurley. The transaction closed on December 6, 2019, and the impacts of the divestiture are not considered material to the Company.

~~NOTE 15 — SUBSEQUENT EVENTS~~

A novel strain of coronavirus (COVID-19) was first identified in Wuhan, China in December 2019, and subsequently declared a pandemic by the World Health Organization. Subsequent to the end of the third quarter of fiscal 2020, nearly all NIKE-owned stores outside of Greater China and Korea were closed to help curb the spread of COVID-19 and there can be no assurance as to how long these closures may remain in effect. Furthermore, even after reopening there can be no assurance as to the time required to regain operations and sales at prior levels. Given the dynamic nature of this situation, the Company cannot reasonably estimate the impacts of COVID-19 on its financial condition, results of operations or cash flows for the foreseeable future. However, the Company expects it will have a material, adverse impact on future revenue growth as well as overall profitability and may lead to higher than normal inventory levels, revised payment terms with certain wholesale customers, higher sales-related reserves, factory cancellation costs and a volatile effective tax rate driven by changes in the mix of earnings across the Company's jurisdictions.

~~In response to the uncertainty of the circumstances described above, the Company has enhanced its liquidity position through the following actions as described below.~~

~~On March 27, 2020, the Company issued senior unsecured notes, as outlined in the table below:~~

~~Table of Contents~~

Scheduled Maturity (Dollars in millions) ORIGINAL PRINCIPAL
INTEREST RATE
INTEREST PAYMENTS
Corporate Term Debt:⁽¹⁾⁽²⁾

March 27, 2025 $ 1,000
2.40 % Semi-Annually
March 27, 2027 1,000
2.75 % Semi-Annually
March 27, 2030 1,500
2.85 % Semi-Annually
March 27, 2040 1,000
3.25 % Semi-Annually
March 27, 2050 1,500
3.38 % Semi-Annually
TOTAL ISSUANCE $ 6,000


~~(1)~~			~~These senior unsecured obligations rank equally with the Company's other unsecured and unsubordinated indebtedness.~~NOTE 14 —RESTRUCTURING

~~(2)~~

The bonds are redeemable at the Company's option up to one, two, three, six and six months prior to the scheduled maturity date for the bonds maturing in 2025, 2027, 2030, 2040 and 2050, respectively, at a price equal to the greater of (i) 100% of the aggregate principal amount of the bonds to be redeemed or (ii) the sum of the present values of the remaining scheduled payments, plus in each case, accrued and unpaid interest. Within one, two, three, six and six months to scheduled maturity, 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 bonds being redeemed, plus accrued and unpaid interest.

AsDuring the first quarter of ~~April 7, 2020,~~fiscal 2021, the Company ~~had $1 billion~~announced a new digitally empowered phase of ~~borrowings outstanding under~~ its ~~$2 billion commercial paper program at~~Consumer Direct Offense strategy: Consumer Direct Acceleration. As a ~~weighted average rate~~result, management announced a series of ~~1.65%.~~

~~On April 6, 2020,~~leadership and operating model changes to streamline and speed up strategic execution for the Company. These changes will result in a net reduction of the Company's global workforce and the Company ~~entered into~~expects to incur pre-tax charges of approximately $315 million, the majority of which relate to employee termination costs and, to a ~~committed credit facility agreement with a syndicate~~lesser extent, stock-based compensation expense. These amounts reflect the continued evaluation and variability of ~~banks which provides for up~~our original estimate of employee termination costs and required changes in assumptions used to ~~$2 billion~~calculate stock-based compensation expense. The amount of ~~borrowings, in addition~~costs recognized during the first quarter of fiscal 2021 were not material as the majority will be recognized during the second quarter and are subject to ~~the existing credit facility discussed in Note 5 — Short-Term Borrowings and Credit Lines.~~change until all details are finalized. The ~~new facility matures on April 5,~~related cash expenditures will take place throughout fiscal 2021. 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 1.05%. The facility fee is 0.20% of the total commitment. As of April 7, 2020, 0 amounts were outstanding under this committed credit facility.

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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

OVERVIEW

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 through NIKE-owned retail stores and through digital platforms (which we refer to collectively as our “NIKE Direct” operations), to retail accounts and to 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 through digital platforms and at retail. ~~Through~~

Since fiscal 2018, through the Consumer Direct Offense ~~we are focusing on~~and our Triple Double strategy, ~~with the objective of~~we have focused on doubling the impact of innovation, increasing our speed and agility to market and growing our direct connections with consumers. In June 2020, we announced a new digitally empowered phase of the Consumer Direct Offense strategy: Consumer Direct Acceleration. This strategic acceleration will focus on three specific areas. First, creating the marketplace of the future through more premium, consistent and seamless consumer experiences that more closely align with what consumers want and need. This strategy will lead with NIKE Digital and our own stores, as well as through select strategic partners who share our marketplace vision. Second, we will align our product creation and category organizations around a new consumer construct focused on Men’s, Women's and Kids'. This approach allows us to create product that better meets individual consumer needs, including more specialization of our category approach, while re-aligning and simplifying our offense to accelerate our largest growth opportunities. In particular, we’ll be reinvesting in our Women's and Kids' businesses and will also simplify our operating model across the remainder of the Company to optimize effectiveness. Third, we will unify investments in data and analytics, demand sensing, insight gathering, inventory management and other areas against an end-to-end technology foundation to accelerate our digital transformation. We believe this unified approach will accelerate growth and unlock more efficiency for our business, while driving speed and responsiveness as we serve consumers globally.

As a result of our strategic acceleration, management announced on July 22, 2020, a series of leadership and operating model changes to streamline and speed up our execution. These changes will result in a net reduction of our global workforce and we expect to incur pre-tax charges of approximately $315 million, the majority of which relate to employee termination costs and, to a lesser extent, stock-based compensation expense. These amounts reflect the continued evaluation and variability of our original estimate of employee termination costs and required changes in assumptions used to calculate stock-based compensation expense. The amount of costs recognized during the first quarter of fiscal 2021 were not material as the majority will be recognized during the second quarter and are subject to change until all details are finalized. The related cash expenditures will take place throughout fiscal 2021. We expect future annual wage-related savings, as a result of these actions, will be reinvested to execute against this next phase of our strategy.

COVID-19 UPDATE

~~A novel strain of coronavirus (COVID-19) was first identified in Wuhan, China in December 2019, and subsequently declared a~~The COVID-19 pandemic by the World Health Organization. To date, COVID-19 has surfaced in nearly all regions around the world and resulted in travel restrictions and business slowdowns or shutdowns in affected areas. As a result, COVID-19 has impactedcontinues to impact our business results and operations globally ~~including through store closures or reduced operating hours and decreased retail traffic. In particular,~~causing us to transform the ~~outbreak and preventive measures taken~~way we operate in order to ~~help curb~~better serve our consumers. Since the spread had material adverse impacts on our operations and business results in Greater China during the third quarter of fiscal 2020, following the temporary closure of, or reduced operating hours in, approximately 75 percent of NIKE-owned and partner stores within the region. Similarly, subsequent to the endonset of the third quarter of fiscal 2020, nearly all NIKE-owned stores outside of Greater China and Korea are closed to reduce the spread of COVID-19 and at this time we cannot reasonably estimate the length of time these closures will remain in effect. Certain of our wholesale partners have also closed stores, or reduced operating hours, resulting in lower than expected sales and a slowing of receipt of shipments of product from NIKE. Furthermore, even after reopening there can be no assurance as to the time required to regain operations and sales at prior levels.

COVID-19 has also impacted our distribution centers and our third-party manufacturing partners and other vendors, including through the effects of facility closures, reductions in operating hours, labor shortages, and real time changes in operating procedures to accommodate social distancing guidelines and additional cleaning and disinfection procedures.

~~In response to the outbreak and business disruption, first and foremost,~~pandemic, we have ~~prioritized~~focused on recalibrating supply and demand, increasing digital distribution capacity, securing liquidity and prudently managing spend, all while ensuring the health and safety of our employees and consumers. As a result, Revenues declined only 1% versus prior year and were flat on a currency-neutral basis, despite physical retail traffic being below prior year levels. Inventory levels declined 9% compared to May 31, 2020, and we ~~have closed our stores. However, our digital commerce remains open, supported by~~ended the ~~employees in the distribution centers. During the third~~first quarter of fiscal ~~2020~~2021 with $9.5 billion of Cash and equivalents and Short-term investments.

Our NIKE Direct business remains a priority as we navigate through the pandemic, as it enhances our ability to connect directly with the consumer. During the first quarter of fiscal 2021, NIKE Direct sales were $3.7 billion, growing 13% on a currency-neutral basis, with growth across all geographies. NIKE Brand digital remained our fastest growing channel, growing ~~36% on a currency-neutral basis~~83%, with ~~each~~North America, APLA and Greater China growing double-digits and EMEA growing triple-digits. Nearly all of our ~~Geographies~~NIKE-owned retail stores were open during the first quarter of fiscal 2021 across North America, EMEA and ~~Converse exceeding 30% of digital revenue growth in the quarter. Additionally, as of early April 2020, approximately 95 percent of NIKE-owned and partner stores in~~ Greater China, ~~are open. We are beginning to see our Greater China business recover~~ with ~~continued strong digital demand and retail~~approximately 90% of stores open in APLA. However, despite a majority of stores being open during the quarter, we experienced a decline in comparable store ~~traffic increasing on a week-over-week basis. In~~sales in North America, APLA and EMEA, ~~digital commerce continues~~primarily due to ~~experience strong demand versus the prior year.~~reduced physical retail traffic, in part resulting from safety-related measures in response to COVID-19.

We continue to monitor the ~~rapidly~~ongoing and evolving situation, ~~and~~as well as guidance from international and domestic authorities, including federal, state and local public health authorities and may take additional actions based on their recommendations. In these circumstances, there may be developments outside our control requiring us to adjust our operating plan. As such, ~~given~~fiscal 2021 will continue to be a time of uncertainty across each of our geographies and we expect each market recovery will be dynamic. While our results for the ~~dynamic nature~~first quarter of ~~this situation,~~fiscal 2021 are positive, there remains the ~~Company cannot reasonably estimate the impacts~~risk that COVID-19 could have

Table of ~~COVID-19 on our financial condition, results of operations or cash flows in the future. However, we do expect that it will have a~~ Contents

material adverse ~~impact~~impacts on our future revenue growth as well as our overall profitability and may lead to higher than normal inventory levels ~~and~~in various markets, revised payment terms with certain of our wholesale customers, higher sales-related reserves ~~factory cancellation costs~~ and a volatile effective tax rate driven by changes in the mix of earnings across the Company's jurisdictions.

~~THIRD~~FIRST QUARTER OVERVIEW

~~As we continue~~For the first quarter of fiscal 2021, NIKE, Inc. Revenues decreased 1% to ~~execute against~~$10.6 billion compared to the Consumer Direct Offense, we are focused on optimizing country operating models across our global portfolio and we remain committed to investing in our most significant growth opportunities. During the thirdfirst quarter of fiscal 2020 ~~we announced our intention to sell our NIKE Brand businesses in Brazil, Argentina, Chile~~ and Uruguay to strategic third-party distributors in an effort to more personally serve consumers in these respective marketplaces while driving sustainable, profitable growth. These transactions are expected to close in the first half of fiscal 2021. As a result of this decision, the related assets and liabilities of these entities were ~~classified as held-for-sale~~flat on ~~the Unaudited Condensed Consolidated Balance Sheets as of February 29, 2020. Additionally, we recognized a non-recurring impairment charge of $400 million, within~~ ~~Other (income) expense, net~~ ~~on the Unaudited Condensed Consolidated Statements of Income, classified within Corporate. This~~

~~Table of Contents~~

charge was primarily due to the anticipated release of non-cash cumulative foreign currency translation losses, and could fluctuate due to changes in exchange rates up to the date of close. In future quarters, as we shift from a wholesale and direct to consumer operating model to a distributor operating model within these countries, we expect consolidated NIKE, Inc. and APLA revenue growth will be reduced due to differences in commercial terms. However, we expect the future operating model to have a favorable impact on our overall profitability as we reduce selling and administrative expenses, as well as lessen exposure to foreign exchange rate volatility.

On October 29, 2019, we signed a definitive agreement to sell the assets and liabilities of our wholly owned subsidiary brand, Hurley. The transaction closed on December 6, 2019, and the impacts of the divestiture are not considered material to the Company.

~~For the third quarter of fiscal 2020, NIKE, Inc.~~ ~~Revenues~~ ~~increased 5% to $10.1 billion compared to the third quarter of fiscal 2019~~. On a currency-neutral ~~basis,~~ ~~Revenues~~ ~~increased 7%.~~ basis. Net income was ~~$847~~$1,518 million and diluted earnings per common share was ~~$0.53~~$0.95 for the ~~third~~first quarter of fiscal ~~2020,~~2021, compared to Net income of ~~$1,101~~$1,367 million and diluted earnings per common share of ~~$0.68~~$0.86 for the ~~third~~first quarter of fiscal ~~2019.~~2020.

Income before income taxes ~~decreased 32%~~ increased 10% compared to the ~~third~~first quarter of fiscal ~~2019, as revenue growth was~~2020, primarily due to lower selling and administrative expense partially offset by ~~the $400 million non-recurring impairment charge related to our transition to a distributor model in Brazil, Argentina, Chile and Uruguay,~~ a decline in gross margin ~~as well as higher selling~~ and ~~administrative expense.~~lower revenues. The NIKE Brand, which represents over 90% of NIKE, Inc. Revenues,~~, delivered 5% revenue growth.~~ declined 1% compared to the first quarter of fiscal 2020. On a currency-neutral basis, NIKE Brand revenues ~~grew 6%, driven by~~were flat as higher revenues in EMEA ~~North America~~ and ~~APLA,~~Greater China were offset by declines in ~~Greater China as a result of the impacts from COVID-19. Additionally,~~APLA and North America. NIKE Brand ~~revenues experienced~~revenue growth ~~across~~in footwear ~~and~~was offset by a decline in apparel, ~~as well as~~while growth in ~~nearly all key categories, primarily~~ Sportswear and the Jordan ~~Brand.~~Brand was offset by declines in all other key categories. Revenues for Converse increased 9%1% and ~~11%~~2% on a reported and currency-neutral basis, respectively,~~, mainly driven by~~ reflecting double-digit growth in Asia and Europe, as well as ~~through~~higher digital sales globally.

Our effective tax rate was ~~3.9%~~11.5% for the ~~third~~first quarter of fiscal 2021 compared to 12.4% for the first quarter of fiscal 2020, ~~compared to 14.7% for the third quarter of fiscal 2019, primarily~~ due to ~~the proportion of income earned in the U.S. and~~ discrete items including a more favorable impact from stock-based compensation, ~~as well as benefits~~offset by a reserve related to Altera Corp. v. Commissioner where the taxpayer was denied a ~~modification~~hearing before the U.S. Supreme Court on June 22, 2020, thereby ratifying the Ninth Circuit Court's decision and requiring the inclusion of ~~the treatment of certain research and development expenditures.~~stock-based compensation in intercompany cost-sharing arrangements.

Diluted earnings per common share reflects a ~~1% decline in the~~relatively unchanged weighted average diluted common shares outstanding, ~~driven by~~due to the temporary suspension of our share repurchase program.

While foreign currency markets remain volatile, in part due to geopolitical dynamics leading to a stronger U.S. Dollar, we continue to see opportunities to drive future growth and profitability. We remain committed to effectively managing our business to achieve our financial goals over the long-term by executing against the operational strategies outlined above.

USE OF NON-GAAP FINANCIAL MEASURES

Throughout this Quarterly Report on Form 10-Q, we discuss non-GAAP financial measures, including references to wholesale equivalent revenues, currency-neutral revenues as well as Total NIKE Brand earnings before interest and taxes (EBIT) and Total NIKE, Inc. EBIT, which should be considered in addition to, and not in lieu of, the financial measures calculated and presented in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). References to wholesale equivalent revenues are intended to provide context as to the total size of our NIKE Brand market footprint if we had no NIKE Direct operations. NIKE Brand wholesale equivalent revenues consist of (1) sales to external wholesale customers and (2) internal sales from our wholesale operations to our NIKE Direct operations, which are charged at prices comparable to those charged to external wholesale customers. Currency-neutral revenues are calculated using actual exchange rates in use during the comparative prior year period to enhance the visibility of the underlying business trends excluding the impact of translation arising from foreign currency exchange rate fluctuations. EBIT is calculated as Net Income before Interest expense (income), net and Income tax expense in the Unaudited Condensed Consolidated Statements of Income.

Management uses these non-GAAP financial measures when evaluating the Company's performance, including when making financial and operating decisions. Additionally, management believes these non-GAAP financial measures provide investors with additional financial information that should be considered when assessing our underlying business performance and trends. However, references to wholesale equivalent revenues, currency-neutral revenues and EBIT should not be considered in isolation or as a substitute for other financial measures calculated and presented in accordance with U.S. GAAP and may not be comparable to similarly titled non-GAAP measures used by other companies.

Table of Contents

RESULTS OF OPERATIONS


	THREE MONTHS ENDED AUGUST 31,
(Dollars in millions, except per share data)	2020			2019			% CHANGE
Revenues	$	10,594		$	10,660		-1	%
Cost of sales	5,853			5,789			1	%
Gross profit	4,741			4,871			-3	%
Gross margin	44.8		%	45.7		%
Demand creation expense	677			1,018			-33	%
Operating overhead expense	2,298			2,310			-1	%
Total selling and administrative expense	2,975			3,328			-11	%
% of revenues	28.1		%	31.2		%
Interest expense (income), net	65			15			—
Other (income) expense, net	(14)			(33)			—
Income before income taxes	1,715			1,561			10	%
Income tax expense	197			194			2	%
Effective tax rate	11.5		%	12.4		%
NET INCOME	$	1,518		$	1,367		11	%
Diluted earnings per common share	$	0.95		$	0.86		10	%

THREE MONTHS ENDED NINE MONTHS ENDED
(Dollars in millions, except per share data) FEBRUARY 29, 2020 FEBRUARY 28, 2019 % CHANGE
FEBRUARY 29, 2020 FEBRUARY 28, 2019 % CHANGE
Revenues $ 10,104
$ 9,611
5 % $ 31,090
$ 28,933
7 %
Cost of sales 5,631
5,272
7 % 17,202
16,092
7 %
Gross profit 4,473
4,339
3 % 13,888
12,841
8 %
Gross margin 44.3 % 45.1 %
44.7 % 44.4 %
Demand creation expense 870
865
1 % 2,769
2,739
1 %
Operating overhead expense 2,413
2,226
8 % 7,166
6,557
9 %
Total selling and administrative expense 3,283
3,091
6 % 9,935
9,296
7 %
% of revenues 32.5 % 32.2 %
32.0 % 32.1 %
Interest expense (income), net 12
12
—
39
37
—
Other (income) expense, net 297
(55 ) —
223
(50 ) —
Income before income taxes 881
1,291
-32 % 3,691
3,558
4 %
Income tax expense 34
190
-82 % 362
518
-30 %
Effective tax rate 3.9 % 14.7 %
9.8 % 14.6 %
NET INCOME $ 847
$ 1,101
-23 % $ 3,329
$ 3,040
10 %
Diluted earnings per common share $ 0.53
$ 0.68
-22 % $ 2.09
$ 1.87
12 %

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CONSOLIDATED OPERATING RESULTS

REVENUES


	THREE MONTHS ENDED AUGUST 31,
(Dollars in millions)	2020		2019		% CHANGE		% CHANGE EXCLUDING CURRENCY CHANGES⁽¹⁾
NIKE, Inc. Revenues:
NIKE Brand Revenues by:
Footwear	$	6,768	$	6,521	4	%	5	%
Apparel	2,875		3,121		-8	%	-7	%
Equipment	371		448		-17	%	-16	%
Global Brand Divisions⁽²⁾	4		6		-33	%	-31	%
Total NIKE Brand Revenues	10,018		10,096		-1	%	0	%
Converse	563		555		1	%	2	%
Corporate⁽³⁾	13		9		—		—
TOTAL NIKE, INC. REVENUES	$	10,594	$	10,660	-1	%	0	%
Supplemental NIKE Brand Revenues Details:
NIKE Brand Revenues by:
Sales to Wholesale Customers	$	6,364	$	6,842	-7	%	-6	%
Sales through NIKE Direct	3,650		3,248		12	%	13	%
Global Brand Divisions⁽²⁾	4		6		-33	%	-31	%
TOTAL NIKE BRAND REVENUES	$	10,018	$	10,096	-1	%	0	%

THREE MONTHS ENDED NINE MONTHS ENDED
(Dollars in millions) FEBRUARY 29, 2020 FEBRUARY 28, 2019 % CHANGE
% CHANGE EXCLUDING CURRENCY CHANGES⁽¹⁾

FEBRUARY 29, 2020 FEBRUARY 28, 2019 % CHANGE
% CHANGE EXCLUDING CURRENCY CHANGES⁽¹⁾

NIKE, Inc. Revenues:
NIKE Brand Revenues by:
Footwear $ 6,377
$ 6,122
4 % 5 % $ 19,104
$ 17,723
8 % 10 %
Apparel 2,905
2,707
7 % 9 % 9,313
8,705
7 % 9 %
Equipment 326
311
5 % 6 % 1,115
1,050
6 % 9 %
Global Brand Divisions⁽²⁾
8
8
0 % 2 % 24
33
-27 % -26 %
Total NIKE Brand Revenues 9,616
9,148
5 % 6 % 29,556
27,511
7 % 10 %
Converse 506
463
9 % 11 % 1,541
1,415
9 % 11 %
Corporate⁽³⁾
(18 ) —
—
—
(7 ) 7
—
—
TOTAL NIKE, INC. REVENUES $ 10,104
$ 9,611
5 % 7 % $ 31,090
$ 28,933
7 % 10 %
Supplemental NIKE Brand Revenues Details:
NIKE Brand Revenues by:
Sales to Wholesale Customers $ 6,311
$ 6,174
2 % 4 % $ 19,731
$ 18,830
5 % 7 %
Sales through NIKE Direct 3,297
2,966
11 % 13 % 9,801
8,648
13 % 16 %
Global Brand Divisions⁽²⁾
8
8
0 % 2 % 24
33
-27 % -26 %
TOTAL NIKE BRAND REVENUES $ 9,616
$ 9,148
5 % 6 % $ 29,556
$ 27,511
7 % 10 %
(1)The percent change excluding currency changes represents a non-GAAP financial measure. See "Use of Non-GAAP Financial Measures" for further information.


~~(1)~~	~~The percent change excluding currency changes represents a non-GAAP financial measure. See "Use of Non-GAAP Financial Measures" for further information.~~


~~(2)~~	~~Global Brand Divisions revenues are primarily attributable to NIKE Brand licensing businesses that are not part of a geographic operating segment.~~


~~(3)~~	Corporate revenues primarily consist of foreign currency hedge gains and losses related to revenues generated by entities within the NIKE Brand geographic operating segments and Converse, but managed through our central foreign exchange risk management program.

~~THIRD~~(2)Global Brand Divisions revenues are primarily attributable to NIKE Brand licensing businesses that are not part of a geographic operating segment.

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

FIRST QUARTER OF FISCAL ~~2020~~2021 COMPARED TO ~~THIRD~~FIRST QUARTER OF FISCAL ~~2019~~2020

On a currency-neutral basis, NIKE, Inc. Revenues ~~grew 7%~~ were flat for the ~~third~~first quarter of fiscal ~~2020, driven by growth in both~~2021, as revenues within the NIKE Brand were relatively unchanged and ~~Converse.~~Converse revenues increased slightly. Higher revenues in ~~Europe, Middle East & Africa (EMEA)~~Greater China and EMEA each contributed approximately 31 percentage ~~points~~point of growth to NIKE, Inc. ~~Revenues; Asia Pacific & Latin America (APLA)~~Revenues, while lower revenues in APLA and North America each ~~contributed approximately 2 percentage points and Converse contributed approximately 1 percentage point of growth. As a result of the impacts from COVID-19,~~ ~~Revenues~~ ~~for Greater China declined in the third quarter of fiscal 2020, reducing~~reduced NIKE, Inc. Revenues by approximately 1 percentage point.

On a currency-neutral basis, NIKE Brand footwear revenues increased 5%, driven by growth in ~~most~~several key categories, primarily Sportswear and the Jordan Brand. Unit sales of footwear ~~increased 1% and~~were flat, while higher average selling price (ASP) per pair contributed approximately 45 percentage points of footwear revenue growth, primarily due to higher full-price ASP, on a wholesale equivalent basis, as well as ~~higher~~the favorable impact of growth in our NIKE Direct business.

Currency-neutral NIKE Brand apparel revenues contracted 7%, reflecting lower revenues in several key categories, most notably Training, partially offset by growth in Football (Soccer). Unit sales of apparel decreased 6% and lower ASP per unit reduced apparel revenues by approximately 1 percentage point. Lower ASP per unit was primarily due to lower full-price ASP and unfavorable full-price mix, partially offset by the favorable impact of growth in our NIKE Direct business.

Currency-neutral NIKE Brand apparel revenues grew 9%, fueled by growth in nearly all key categories, most notably Sportswear and, to a lesser extent, Training. Unit sales of apparel increased 8% and higher ASP per unit contributed approximately 1 percentage point of apparel revenue growth.

On a reported basis, NIKE Direct revenues represented approximately ~~34%~~36% of our total NIKE Brand revenues for the ~~third~~first quarter of fiscal ~~2020~~2021 compared to 32% for the ~~third~~first quarter of fiscal ~~2019.~~2020. Digital commerce sales were ~~$1.4~~$1.9 billion for the ~~third~~first quarter of fiscal ~~2020~~2021 compared to ~~$1.0~~$1.1 billion for the ~~third~~first quarter of fiscal ~~2019.~~2020. On a currency-neutral basis, NIKE Direct revenues increased 13%, driven by digital commerce sales growth of ~~36% and~~83%, which more than offset comparable store sales ~~growth~~contraction of ~~1%, partially offset by certain store closures as we continually optimize our fleet~~20% primarily due to ~~meet consumer demand across~~reduced physical ~~and digital channels.~~retail traffic, in part resulting from safety-related measures in response to COVID-19. Comparable store sales, which exclude digital commerce sales, comprises 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. Comparable store sales includes revenues from stores that were temporarily closed during the period as a result of

~~Table of Contents~~

COVID-19. Comparable store sales represents a performance measure that we believe is useful information for management and investors in understanding the performance of our established NIKE-owned in-line and factory stores. Management considers this metric when making financial and

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operating decisions. The method of calculating comparable store sales varies across the retail industry. As a result, our calculation of this metric may not be comparable to similarly titled measures used by other companies.

~~FIRST NINE MONTHS OF FISCAL 2020 COMPARED TO FIRST NINE MONTHS OF FISCAL 2019~~

~~On a currency-neutral basis, NIKE, Inc.~~ ~~Revenues~~ grew 10% for the first nine months of fiscal 2020, driven by broad-based growth across all NIKE Brand geographies and Converse. Higher revenues in EMEA contributed approximately 3 percentage points of growth to NIKE, Inc. ~~Revenues. Greater China, APLA and North America each contributed approximately 2 percentage points of growth, while Converse contributed approximately 1 percentage point of growth.~~

On a currency-neutral basis, NIKE Brand footwear revenues increased 10%, driven by growth in several key categories, led by Sportswear and the Jordan Brand. Unit sales of footwear increased 4% and higher ASP per pair contributed approximately 6 percentage points of footwear revenue growth, primarily due to higher full-price and NIKE Direct ASPs, as well as the favorable impact of growth in our NIKE Direct business.

Currency-neutral NIKE Brand apparel revenues grew 9%, fueled by growth in nearly all key categories, primarily Sportswear and, to a lesser extent, the Jordan Brand and Training. Unit sales of apparel increased 7% and higher ASP per unit contributed approximately 2 percentage points of apparel revenue growth, primarily due to higher full-price ASP.

On a reported basis, NIKE Direct revenues represented approximately 33% of our total NIKE Brand revenues for the first nine months of fiscal 2020 compared to 31% for the first nine months of fiscal 2019. Digital commerce sales were $3.8 billion for the first nine months of fiscal 2020 compared to $2.8 billion for the first nine months of fiscal 2019. On a currency-neutral basis, NIKE Direct revenues increased 16% for the first nine months of fiscal 2020, driven by digital commerce sales growth of 38%, comparable store sales growth of 5% and the addition of new stores.

GROSS MARGIN


	THREE MONTHS ENDED								NINE MONTHS ENDED									THREE MONTHS ENDED AUGUST 31,
(Dollars in millions)	FEBRUARY 29, 2020			FEBRUARY 28, 2019			% CHANGE		FEBRUARY 29, 2020			FEBRUARY 28, 2019			% CHANGE		(Dollars in millions)	2020			2019			% CHANGE
Gross Profit	$	4,473		$	4,339		3	%	$	13,888		$	12,841		8	%	Gross Profit	$	4,741		$	4,871		-3	%
Gross Margin	44.3		%	45.1		%	(80) bps		44.7		%	44.4		%	30	bps	Gross Margin	44.8		%	45.7		%	(90) bps

For the ~~third~~first quarter of fiscal ~~2020,~~2021, our consolidated gross margin was 8090 basis points lower than the respective prior year period and reflected unfavorable impacts from COVID-19 as a result of a lower mix of sales from Greater China, our highest margin geography, as well as increased rebates extended to wholesale partners in Greater China and higher factory cancellation costs to re-balance global supply and demand. Specifically, theCOVID-19. The change in gross margin primarily reflected the following factors:

•Lower margin in our NIKE Direct business, reflecting higher promotions to reduce excess inventory (decreasing gross margin 150 basis points);

•Higher NIKE Brand ~~full-price ASP, net of discounts, as higher full-price ASP~~product costs, on a wholesale equivalent basis, in part due to incremental tariffs in North America ~~and APLA was more than offset by lower full-price ASP in EMEA and higher discounts in Greater China in response to COVID-19~~ (decreasing gross margin approximately 10120 basis points);

Higher other costs which partially reflects increased warehousing and freight costs, driven by supply chain investments globally, as well as higher factory cancellations as a result of COVID-19 and higher inventory obsolescence (decreasing gross margin approximately 60 basis points);

•Unfavorable changes in net foreign currency exchange rates, including hedges, (decreasing gross margin approximately ~~50 basis points);~~

~~Favorable impacts from higher off-price margins (increasing gross margin approximately~~ 30 basis points); ~~and~~

~~Higher gross margin from Converse (increasing gross margin approximately 10 basis points).~~

~~For the first nine months of fiscal 2020, our consolidated gross margin was 30 basis points higher than the respective prior year period, primarily reflecting the following factors:~~

•Higher NIKE Brand full-price ASP, net of discounts, (increasing gross margin approximately 90200 basis points); and

~~The~~•Lower other costs, in part reflecting the favorable impact from the release of ~~growth in our~~factory cancellation cost accruals due to higher ~~margin NIKE Direct business as well as~~than anticipated consumer demand, partially offset by higher ~~NIKE Direct margins~~supply chain costs (increasing gross margin approximately 20 basis points);

~~Higher gross margin from Converse (increasing gross margin approximately 20 basis points);~~

~~Higher NIKE Brand product costs, on a wholesale equivalent basis, (decreasing gross margin approximately 60 basis points); and~~

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~~Unfavorable changes in net foreign currency exchange rates, including hedges, (decreasing gross margin approximately 40 basis points).~~

TOTAL SELLING AND ADMINISTRATIVE EXPENSE


	THREE MONTHS ENDED AUGUST 31,
(Dollars in millions)	2020			2019			% CHANGE
Demand creation expense⁽¹⁾	$	677		$	1,018		-33	%
Operating overhead expense	2,298			2,310			-1	%
Total selling and administrative expense	$	2,975		$	3,328		-11	%
% of revenues	28.1		%	31.2		%	(310) bps

THREE MONTHS ENDED NINE MONTHS ENDED
(Dollars in millions) FEBRUARY 29, 2020 FEBRUARY 28, 2019 % CHANGE
FEBRUARY 29, 2020 FEBRUARY 28, 2019 % CHANGE
Demand creation expense⁽¹⁾
$ 870
$ 865
1 % $ 2,769
$ 2,739
1 %
Operating overhead expense 2,413
2,226
8 % 7,166
6,557
9 %
Total selling and administrative expense $ 3,283
$ 3,091
6 % $ 9,935
$ 9,296
7 %
% of revenues 32.5 % 32.2 % 30 bps
32.0 % 32.1 % (10) bps
(1)Demand creation expense consists of advertising and promotion costs, including costs of endorsement contracts, complimentary product, television, digital and print advertising and media costs, brand events and retail brand presentation.


~~(1)~~	Demand creation expense consists of advertising and promotion costs, including costs of endorsement contracts, complimentary product, television, digital and print advertising and media costs, brand events and retail brand presentation.

~~THIRD~~FIRST QUARTER OF FISCAL ~~2020~~2021 COMPARED TO ~~THIRD~~FIRST QUARTER OF FISCAL ~~2019~~2020

Demand creation expense ~~increased 1%~~ decreased 33% for the ~~third~~first quarter of fiscal ~~2020,~~2021, primarily driven by lower advertising and marketing costs, as well as lower sports marketing expenses, due to ~~key~~live sporting events being predominately postponed or cancelled, and a decline in retail brand ~~moments.~~presentation costs. This activity was partially offset by an increase in digital marketing to support heightened digital demand. Changes in foreign currency exchange rates decreased Demand creation expense by approximately 1 percentage point.

Operating overhead expense ~~increased 8%~~ decreased 1% driven by ~~wage-related~~lower travel and ~~administrative~~related expenses, ~~which in part reflects~~partially offset by continued investments in ~~data~~digital capabilities and ~~analytics and other enterprise-wide transformational capabilities, particularly~~restructuring costs associated with changes to our organization model announced in ~~NIKE Direct and global operations, as well as investments in a new enterprise resource planning tool to accelerate our end-to-end digital transformation.~~July 2020. Changes in foreign currency exchange rates decreased Operating overhead expense by approximately 1 percentage point.

~~FIRST NINE MONTHS OF FISCAL 2020 COMPARED TO FIRST NINE MONTHS OF FISCAL 2019~~

~~Demand creation expense~~ increased 1% for the first nine months of fiscal 2020 as higher advertising and marketing expenses, as well as higher sports marketing investments, were partially offset by lower retail brand presentation costs. Changes in foreign currency exchange rates decreased ~~Demand creation expense~~ ~~by approximately 2 percentage points.~~

~~Operating overhead expense~~ increased 9% primarily driven by higher wage-related and administrative expenses, which in part reflects continued investments to support our transformational capabilities, including innovation, data and analytics, digital commerce platforms and investments in a new enterprise resource planning tool to accelerate our end-to-end digital transformation. Changes in foreign currency exchange rates decreased ~~Operating overhead expense~~ ~~by approximately 1 percentage point.~~

OTHER (INCOME) EXPENSE, NET


	THREE MONTHS ENDED AUGUST 31,
(Dollars in millions)	2020		2019
Other (income) expense, net	$	(14)	$	(33)

THREE MONTHS ENDED NINE MONTHS ENDED
(Dollars in millions) FEBRUARY 29, 2020 FEBRUARY 28, 2019 FEBRUARY 29, 2020 FEBRUARY 28, 2019
Other (income) expense, net $ 297
$ (55 ) $ 223
$ (50 )

Other (income) expense, 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.

For the ~~third~~first quarter of fiscal ~~2020,~~ 2021, Other (income) expense, net ~~changed~~ decreased from $5533 million of other income, net to $~~297~~14 million ~~of other expense, net~~ in the current year, primarily due to ~~the~~an incremental ~~$400 million non-recurring impairment charge.~~charge related to our planned, strategic distributor partnership transition within APLA. For more information see Note 1413 — Acquisitions and Divestitures within the accompanying Notes to the Unaudited Condensed Consolidated Financial Statements.

~~For the~~

~~first nine months~~ Table of ~~fiscal 2020,~~ Contents

~~Other (income) expense, net~~
~~changed from $50 million of other income, net to $223 million of other expense, net in the current year, primarily due to the non-recurring impairment~~ ~~charge of $400 million noted above.~~ ~~This was offset by an~~ ~~$83 million~~ ~~net beneficial change in foreign currency conversion gains and losses, including hedges.~~

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 (income) expense, net had unfavorable impacts of approximately $~~20 million~~ ~~and~~ ~~$112~~38 million on our Income before income ~~taxe~~staxes for the ~~third~~first quarter ~~and~~ ~~first nine months~~ of fiscal ~~2020, respectively.~~2021.

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INCOME TAXES

THREE MONTHS ENDED NINE MONTHS ENDED
FEBRUARY 29, 2020 FEBRUARY 28, 2019 % CHANGE FEBRUARY 29, 2020 FEBRUARY 28, 2019 % CHANGE
Effective tax rate 3.9 % 14.7 % (1,080) bps 9.8 % 14.6 % (480) bps


	THREE MONTHS ENDED AUGUST 31,
	2020		2019		% CHANGE
Effective tax rate	11.5	%	12.4	%	(90) bps

Our effective tax rate was ~~3.9% and 9.8%~~11.5% for the ~~third~~first quarter ~~and first nine months~~ of fiscal ~~2020, respectively,~~2021, compared to ~~14.7% and 14.6%~~12.4% for the ~~respective prior year periods.~~first quarter of fiscal 2020. The decrease in our effective tax rate was ~~primarily due~~attributable to ~~the proportion of income earned in the U.S. and~~ discrete items including a more favorable impact from stock-based compensation, ~~as well as benefits~~offset by a reserve related to Altera Corp. v. Commissioner where the taxpayer was denied a ~~modification~~hearing before the U.S. Supreme Court on June 22, 2020, thereby ratifying the Ninth Circuit Court's decision and requiring the inclusion of ~~the treatment of certain research and development expenditures.~~stock-based compensation in intercompany cost-sharing arrangements. Refer to Note 156 — ~~Subsequent Events~~Income Taxes within the accompanying Notes to the Unaudited Condensed Consolidated Financial Statements for additional information.

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OPERATING SEGMENTS

Our operating segments are evidence of the structure of the Company's internal organization. The NIKE Brand segments are defined by geographic regions for operations participating in NIKE Brand sales activity.

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; Europe, Middle East & Africa (EMEA); Greater China; and Asia Pacific & Latin America (APLA), and include results for the NIKE and Jordan brands, with results for the Hurley brand included in North America. Refer to Note 14 — Acquisitions and Divestitures within the accompanying Notes to the Unaudited Condensed Consolidated Financial Statements for additional information.brands. The Company's NIKE Direct operations are managed within each geographic operating segment. Converse is also a reportable operating segment for the Company, and operates predominately in one industry: the design, marketing, licensing and selling of athletic lifestyle sneakers, apparel and accessories.

As part of our centrally managed foreign exchange risk management program, standard foreign currency exchange 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 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 exchange 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 and other conversion gains and losses.

The breakdown of revenues is as follows:


	THREE MONTHS ENDED AUGUST 31,
(Dollars in millions)	2020		2019		% CHANGE		% CHANGE EXCLUDING CURRENCY CHANGES⁽¹⁾
North America	$	4,225	$	4,293	-2	%	-1	%
Europe, Middle East & Africa	2,910		2,773		5	%	5	%
Greater China	1,780		1,679		6	%	8	%
Asia Pacific & Latin America	1,099		1,345		-18	%	-12	%
Global Brand Divisions⁽²⁾	4		6		-33	%	-31	%
TOTAL NIKE BRAND	10,018		10,096		-1	%	0	%
Converse	563		555		1	%	2	%
Corporate⁽³⁾	13		9		—		—
TOTAL NIKE, INC. REVENUES	$	10,594	$	10,660	-1	%	0	%

THREE MONTHS ENDED NINE MONTHS ENDED
(Dollars in millions) FEBRUARY 29, 2020 FEBRUARY 28, 2019 % CHANGE
% CHANGE EXCLUDING CURRENCY CHANGES⁽¹⁾

FEBRUARY 29, 2020 FEBRUARY 28, 2019 % CHANGE
% CHANGE EXCLUDING CURRENCY CHANGES⁽¹⁾

North America $ 3,979
$ 3,810
4 % 4 % $ 12,254
$ 11,737
4 % 4 %
Europe, Middle East & Africa 2,709
2,435
11 % 13 % 8,019
7,355
9 % 13 %
Greater China 1,506
1,588
-5 % -4 % 5,032
4,511
12 % 15 %
Asia Pacific & Latin America 1,414
1,307
8 % 13 % 4,227
3,875
9 % 15 %
Global Brand Divisions⁽²⁾
8
8
0 % 2 % 24
33
-27 % -26 %
TOTAL NIKE BRAND 9,616
9,148
5 % 6 % 29,556
27,511
7 % 10 %
Converse 506
463
9 % 11 % 1,541
1,415
9 % 11 %
Corporate⁽³⁾
(18 ) —
—
—
(7 ) 7
—
—
TOTAL NIKE, INC. REVENUES $ 10,104
$ 9,611
5 % 7 % $ 31,090
$ 28,933
7 % 10 %
(1) The percent change excluding currency changes represents a non-GAAP financial measure. See "Use of Non-GAAP Financial Measures" for further information.


~~(1)~~	~~The percent change excluding currency changes represents a non-GAAP financial measure. See "Use of Non-GAAP Financial Measures" for further information.~~


~~(2)~~	~~Global Brand Divisions revenues are primarily attributable to NIKE Brand licensing businesses that are not part of a geographic operating segment.~~


~~(3)~~	Corporate revenues primarily consist of foreign currency hedge gains and losses related to revenues generated by entities within the NIKE Brand geographic operating segments and Converse, but managed through our central foreign exchange risk management program.

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

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

The primary financial measure used by the Company to evaluate performance of individual operating segments is EBIT, which represents Net income before Interest expense (income), net and Income tax expense in the Unaudited Condensed Consolidated Statements of Income. As discussed in Note 12 — Operating Segments in the accompanying Notes to the Unaudited Condensed Consolidated Financial Statements, certain corporate costs are not included in EBIT of our operating segments.

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


	THREE MONTHS ENDED AUGUST 31,
(Dollars in millions)	2020		2019		% CHANGE
North America	$	1,302	$	1,100	18	%
Europe, Middle East & Africa	692		609		14	%
Greater China	688		669		3	%
Asia Pacific & Latin America	280		341		-18	%
Global Brand Divisions	(853)		(857)		0	%
TOTAL NIKE BRAND⁽¹⁾	2,109		1,862		13	%
Converse	168		138		22	%
Corporate	(497)		(424)		-17	%
TOTAL NIKE, INC. EARNINGS BEFORE INTEREST AND TAXES⁽¹⁾	1,780		1,576		13	%
Interest expense (income), net	65		15		—
TOTAL NIKE, INC. INCOME BEFORE INCOME TAXES	$	1,715	$	1,561	10	%

THREE MONTHS ENDED NINE MONTHS ENDED
(Dollars in millions) FEBRUARY 29, 2020 FEBRUARY 28, 2019 % CHANGE
FEBRUARY 29, 2020 FEBRUARY 28, 2019 % CHANGE
North America $ 937
$ 916
2 % $ 2,912
$ 2,877
1 %
Europe, Middle East & Africa 575
538
7 % 1,694
1,489
14 %
Greater China 556
639
-13 % 1,919
1,702
13 %
Asia Pacific & Latin America 387
339
14 % 1,105
983
12 %
Global Brand Divisions (895 ) (788 ) -14 % (2,624 ) (2,432 ) -8 %
TOTAL NIKE BRAND⁽¹⁾
1,560
1,644
-5 % 5,006
4,619
8 %
Converse 96
79
22 % 324
221
47 %
Corporate (763 ) (420 ) -82 % (1,600 ) (1,245 ) -29 %
TOTAL NIKE, INC. EARNINGS BEFORE INTEREST AND TAXES⁽¹⁾
893
1,303
-31 % 3,730
3,595
4 %
Interest expense (income), net 12
12
—
39
37
—
TOTAL NIKE, INC. INCOME BEFORE INCOME TAXES $ 881
$ 1,291
-32 % $ 3,691
$ 3,558
4 %
(1) Total NIKE Brand EBIT and Total NIKE, Inc. EBIT represent non-GAAP financial measures. See "Use of Non-GAAP Financial Measures" for further information.


~~(1)~~	~~Total NIKE Brand EBIT and Total NIKE, Inc. EBIT represent non-GAAP financial measures. See "Use of Non-GAAP Financial Measures" for further information.~~

NORTH AMERICA


	THREE MONTHS ENDED								NINE MONTHS ENDED									THREE MONTHS ENDED AUGUST 31,
(Dollars in millions)	FEBRUARY 29, 2020		FEBRUARY 28, 2019		% CHANGE		% CHANGE EXCLUDING CURRENCY CHANGES		FEBRUARY 29, 2020		FEBRUARY 28, 2019		% CHANGE		% CHANGE EXCLUDING CURRENCY CHANGES		(Dollars in millions)	2020		2019		% CHANGE		% CHANGE EXCLUDING CURRENCY CHANGES
Revenues by:																	Revenues by:
Footwear	$	2,628	$	2,509	5	%	5	%	$	7,723	$	7,309	6	%	6	%	Footwear	$	2,957	$	2,669	11	%	11	%
Apparel	1,228		1,173		5	%	5	%	4,076		3,985		2	%	2	%	Apparel	1,125		1,431		-21	%	-21	%
Equipment	123		128		-4	%	-4	%	455		443		3	%	3	%	Equipment	143		193		-26	%	-26	%
TOTAL REVENUES	$	3,979	$	3,810	4	%	4	%	$	12,254	$	11,737	4	%	4	%	TOTAL REVENUES	$	4,225	$	4,293	-2	%	-1	%
Revenues by:																	Revenues by:
Sales to Wholesale Customers	$	2,521	$	2,547	-1	%	-1	%	$	8,119	$	8,031	1	%	1	%	Sales to Wholesale Customers	$	2,719	$	2,864	-5	%	-5	%
Sales through NIKE Direct	1,458		1,263		15	%	15	%	4,135		3,706		12	%	12	%	Sales through NIKE Direct	1,506		1,429		5	%	5	%
TOTAL REVENUES	$	3,979	$	3,810	4	%	4	%	$	12,254	$	11,737	4	%	4	%	TOTAL REVENUES	$	4,225	$	4,293	-2	%	-1	%
EARNINGS BEFORE INTEREST AND TAXES	$	937	$	916	2	%			$	2,912	$	2,877	1	%			EARNINGS BEFORE INTEREST AND TAXES	$	1,302	$	1,100	18	%

We believe there continues to be a meaningful shift in the way consumers shop for product and make purchasing ~~decisions.~~decisions across each of our geographies. Consumers are demanding a constant flow of fresh and innovative product, and have an expectation for superior service and rapid delivery, all fueled by the shift toward digital and mono-brand experiences in NIKE Direct. ~~Specifically, in North America we~~We anticipate continued evolution within the retail landscape, driven by shifting consumer traffic patterns across digital and physical channels. ~~The~~Specifically, the evolution of the North America marketplace is resulting in third-party retail store closures, which is expected to be further accelerated as a result of the effects of COVID-19; however, we remain focused on building long-term momentum with our differentiated strategic wholesale customers, fueled by our deliberate shifts in product allocations and investments in enhanced consumer experiences leveraging digital.

~~THIRD~~FIRST QUARTER OF FISCAL ~~2020~~2021 COMPARED TO ~~THIRD~~FIRST QUARTER OF FISCAL ~~2019~~2020

On a currency-neutral basis, North America revenues for the third quarter of fiscal 2020 increased 4%, driven by growth in several key categories, primarily Sportswear. NIKE Direct revenues increased 15% as digital commerce sales growth of 33% and comparable store sales growth of 6% more than offset declines from certain store closures as we continually optimize our fleet to meet consumer demand across physical and digital channels.

~~Table of Contents~~

Footwear revenues increased 5% on a currency-neutral basis, driven by growth in several key categories, primarily Sportswear. Unit sales of footwear were flat and higher ASP per pair contributed approximately 5 percentage points of footwear revenue growth. Higher ASP per pair was primarily due to higher full-price ASP, as well as the favorable impact of growth in our NIKE Direct business.

On a currency-neutral basis, apparel revenues increased 5%, driven by higher revenues in most key categories, led by Sportswear. Unit sales of apparel increased 2%, while higher ASP per unit contributed approximately 3 percentage points of apparel revenue growth. The increase in ASP per unit was driven by the favorable impact of growth in our NIKE Direct business, as well as higher NIKE Direct and full-price ASPs, which more than offset a reduction in off-price ASP.

Reported EBIT increased 2% as higher revenues more than offset a decline in gross margin and higher selling and administrative expense. Gross margin decreased approximately 40 basis points primarily due to higher product costs, reflecting the impact of incremental tariffs in the United States on product imported from China, and higher other costs, partially offset by higher full-price ASP. Selling and administrative expense grew due to higher operating overhead and demand creation expense. Operating overhead expense increased primarily as a result of higher bad debt expense related to specific reserves for undifferentiated wholesale customers, as well as higher administrative costs. The increase in demand creation expense was primarily due to higher advertising and marketing costs, as well as higher sports marketing expense, partially offset by lower retail brand presentation costs.

~~FIRST NINE MONTHS OF FISCAL 2020 COMPARED TO FIRST NINE MONTHS OF FISCAL 2019~~

On a currency-neutral basis, North America revenues for the first ~~nine months~~quarter of fiscal ~~2020 increased 4% driven~~2021 decreased 1%, as lower revenues in most key categories, led by Training, were partially offset by growth in Sportswear and the Jordan ~~Brand, partially offset by a decline in Running.~~Brand. NIKE Direct revenues increased ~~12%, primarily due to~~5% as strong digital commerce sales growth of ~~32%,~~99% more than offset a 35% decline in comparable store sales ~~growth of 1% and the addition of new stores.~~primarily due to reduced physical retail traffic, in part resulting from safety-related measures in response to COVID-19.

Footwear revenues increased 6%11% on a currency-neutral basis, driven by growth in several key categories, most notably Sportswear and the Jordan Brand, which more than offset a decline in Running. Unit sales of footwear increased 1%, while higher ASP per pair contributed approximately 5 percentage points of footwear revenue growth. Higher ASP per pair was primarily due to higher full-price ASP, the favorable impact of growth in our NIKE Direct business and higher NIKE Direct ASP.

On a currency-neutral basis, apparel revenues increased 2%, driven by growth in several key categories, primarily Sportswear. Unit sales of apparel increased 1%, while higher ASP per unit contributed approximately 1 percentage point of apparel revenue growth. The increase in ASP per unit was driven by higher full-price ASP, in part reflecting lower discounts.

Reported EBIT increased 1% as higher revenues more than offset a decline in gross margin and higher selling and administrative expense. Gross margin decreased approximately 70 basis points as higher product costs, in part reflecting the impact of incremental tariffs, more than offset higher full-price ASP. Selling and administrative expense grew due to higher operating overhead and demand creation expense. Operating overhead expense increased primarily as a result of higher wage-related expenses within our NIKE Direct operations, as well as higher administrative costs. The increase in demand creation expense was primarily due to higher sports marketing expense, as well as higher advertising and marketing costs, partially offset by lower retail brand presentation costs.

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~~EUROPE, MIDDLE EAST & AFRICA~~

THREE MONTHS ENDED NINE MONTHS ENDED
(Dollars in millions) FEBRUARY 29, 2020 FEBRUARY 28, 2019 % CHANGE
% CHANGE EXCLUDING CURRENCY CHANGES
FEBRUARY 29, 2020 FEBRUARY 28, 2019 % CHANGE
% CHANGE EXCLUDING CURRENCY CHANGES
Revenues by:
Footwear $ 1,711
$ 1,589
8 % 9 % $ 5,005
$ 4,650
8 % 11 %
Apparel 889
750
19 % 20 % 2,655
2,374
12 % 15 %
Equipment 109
96
14 % 14 % 359
331
8 % 12 %
TOTAL REVENUES $ 2,709
$ 2,435
11 % 13 % $ 8,019
$ 7,355
9 % 13 %
Revenues by:
Sales to Wholesale Customers $ 1,956
$ 1,785
10 % 11 % $ 5,792
$ 5,318
9 % 13 %
Sales through NIKE Direct 753
650
16 % 18 % 2,227
2,037
9 % 13 %
TOTAL REVENUES $ 2,709
$ 2,435
11 % 13 % $ 8,019
$ 7,355
9 % 13 %
EARNINGS BEFORE INTEREST AND TAXES $ 575
$ 538
7 % $ 1,694
$ 1,489
14 %

~~THIRD QUARTER OF FISCAL 2020 COMPARED TO THIRD QUARTER OF FISCAL 2019~~

On a currency-neutral basis, EMEA revenues for the third quarter of fiscal 2020 grew 13%, driven by higher revenues across all territories, most notably UK & Ireland and Central Europe, which grew 22% and 13%, respectively. Revenues increased in all key categories, led by Sportswear, the Jordan Brand and Training. NIKE Direct revenues increased 18% as digital commerce sales growth of 43% and comparable store sales growth of 6% more than offset declines from certain store closures as we continually optimize our fleet to meet consumer demand across physical and digital channels.

Currency-neutral footwear revenues grew 9%, driven by higher revenues in nearly all key categories, led by the Jordan Brand and Sportswear. Unit sales of footwear increased 6% and higher ASP per pair contributed approximately 3 percentage points of footwear revenue growth. Higher ASP per pair primarily resulted from higher NIKE Direct and full-price ASPs.

Currency-neutral apparel revenues increased 20% due to growth in all key categories, led by Sportswear and Training. Unit sales of apparel increased 21% while lower ASP per unit reduced apparel revenues by approximately 1 percentage point. Lower ASP per unit was primarily due to a lower mix of NIKE Direct sales as well as lower NIKE Direct ASP.

Reported EBIT increased 7% as higher revenues and selling and administrative expense leverage more than offset a decline in gross margin. Gross margin decreased approximately 300 basis points primarily due to unfavorable changes in standard foreign currency exchange rates and lower full-price ASP, which more than offset lower product costs. Selling and administrative expense was relatively flat. Demand creation expense was mostly unchanged as higher sports marketing expense was offset by lower advertising and marketing costs. Operating overhead expense was relatively flat as higher administrative costs and bad debt expense were offset by lower wage-related expenses.

~~FIRST NINE MONTHS OF FISCAL 2020 COMPARED TO FIRST NINE MONTHS OF FISCAL 2019~~

On a currency-neutral basis, EMEA revenues for the first nine months of fiscal 2020 grew 13%, driven by higher revenues across all territories, most notably UK & Ireland, Central Europe and Eastern Europe, which grew 18%, 12% and 18%, respectively. Revenues increased in nearly all key categories, led by Sportswear and, to a lesser extent, the Jordan Brand. NIKE Direct revenues increased 13% as digital commerce sales growth of 33% and comparable store sales growth of 6% more than offset declines from certain store closures as we continually optimize our fleet to meet consumer demand across physical and digital channels.

~~Currency-neutral footwear revenues grew 11%, driven by higher revenues in nearly all key categories, led by~~ Sportswear and the Jordan Brand. Unit sales of footwear increased 6% and higher ASP per pair contributed approximately 5 percentage points of footwear revenue growth. Higher ASP per pair ~~primarily resulted from higher full-price and NIKE Direct ASPs.~~

Currency-neutral apparel revenues increased 15% due to growth in nearly all key categories, led by Sportswear. Unit sales of apparel increased 14% and higher ASP per unit contributed approximately 1 percentage point of apparel revenue growth. Higher ASP per unit was primarily due to higher NIKE Direct and full-price ~~ASP.~~

Reported EBIT increased 14% for the first nine months of fiscal 2020, as higher revenues and selling and administrative expense leverage more than offset a decline in gross margin. Gross margin decreased approximately 30 basis points as unfavorable changes in standard foreign currency exchange rates more than offset lower product costs and higher full-price ASP. Selling and administrative expense increased due to higher demand creation and operating overhead expense. The increase in demand

ASPs.

3828

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creation expense was driven by higher sports marketing expense, as well as higher advertising and marketing costs, partially offset by lower retail brand presentation costs. Growth in operating overhead expense was primarily due to higher bad debt expense and wage-related costs.

~~GREATER CHINA~~

THREE MONTHS ENDED NINE MONTHS ENDED
(Dollars in millions) FEBRUARY 29, 2020 FEBRUARY 28, 2019 % CHANGE
% CHANGE EXCLUDING CURRENCY CHANGES
FEBRUARY 29, 2020 FEBRUARY 28, 2019 % CHANGE
% CHANGE EXCLUDING CURRENCY CHANGES
Revenues by:
Footwear $ 1,075
$ 1,115
-4 % -3 % $ 3,486
$ 3,095
13 % 16 %
Apparel 400
444
-10 % -9 % 1,428
1,314
9 % 12 %
Equipment 31
29
7 % 3 % 118
102
16 % 18 %
TOTAL REVENUES $ 1,506
$ 1,588
-5 % -4 % $ 5,032
$ 4,511
12 % 15 %
Revenues by:
Sales to Wholesale Customers $ 881
$ 936
-6 % -5 % $ 2,895
$ 2,704
7 % 10 %
Sales through NIKE Direct 625
652
-4 % -3 % 2,137
1,807
18 % 21 %
TOTAL REVENUES $ 1,506
$ 1,588
-5 % -4 % $ 5,032
$ 4,511
12 % 15 %
EARNINGS BEFORE INTEREST AND TAXES $ 556
$ 639
-13 % $ 1,919
$ 1,702
13 %

~~THIRD QUARTER OF FISCAL 2020 COMPARED TO THIRD QUARTER OF FISCAL 2019~~

On a currency-neutral basis, Greater China revenues for the third quarter of fiscal 2020 decreased 4% as growth in the Jordan Brand was more than offset by declines in all other key categories, primarily Sportswear and Running. NIKE Direct revenues decreased 3% as comparable store sales contracted 22% and new store sales declined, both due to temporary store closures or stores operating on reduced hours as a result of COVID-19. These declines were only partially offset by digital commerce sales growth of 32%.

Currency-neutral footwear revenues contracted 3% for the third quarter of fiscal 2020 as declines in most key categories, primarily Sportswear, were only partially offset by growth in the Jordan Brand. Unit sales of footwear decreased 5%, partially offset by higher ASP per pair contributing approximately 2 percentage points, driven by higher NIKE Direct ASP.

~~Currency-neutral~~ apparel revenues decreased ~~9% for the third quarter of fiscal 2020 due to declines~~21%, reflecting lower revenues in nearly all key categories, primarily ~~Running~~Training and Sportswear. Unit sales of apparel ~~decreased 12%~~contracted 19%, while lower ASP per unit reduced apparel revenues by approximately 2 percentage points. The decrease in ASP per unit was primarily driven by lower full-price ASP, partially offset by the favorable impact of growth in our NIKE Direct business, as well as higher NIKE Direct ASP.

Reported EBIT increased 18% as lower selling and administrative expense and gross margin expansion more than offset lower revenues. Gross margin increased approximately 150 basis points primarily due to higher full-price ASP and lower other costs, partially offset by higher ~~ASP per unit contributing approximately 3 percentage points as higher full-price and off-price ASPs more than offset unfavorable full-price mix.~~

~~Reported EBIT decreased 13% for the third quarter of fiscal 2020 primarily~~product costs, in part due to incremental tariffs, and lower margin in our NIKE Direct business driven by higher promotions to reduce excess inventory. The decrease in other costs was primarily a ~~decline~~result of the favorable impact from the release of factory cancellation cost accruals due to an increase in revenues and gross margin. Gross margin decreased 170 basis points, in part reflecting the impacts from COVID-19, as unfavorable changes in standard foreign currency exchange rates and higher product costs, more than offset higher off-price margin and higher full-price ASP, net of discounts.consumer demand. Selling and administrative expense decreased due to lower demand creation and operating overhead expense. The decrease in demand creation expense reflected lower advertising and marketing costs, a decline in retail brand presentation costs, as well as lower sports marketing expense, partially offset by ~~higher operating~~continued investments in digital marketing to support heightened digital demand. Operating overhead ~~expense. Demand creation~~ expense decreased primarily ~~due to~~as a result of lower ~~advertising and marketing expenses, as well as lower retail brand presentation costs. Growth in operating overhead expense was driven by higher~~ wage-related expense and ~~higher~~ administrative costs.

EUROPE, MIDDLE EAST & AFRICA


	THREE MONTHS ENDED AUGUST 31,
(Dollars in millions)	2020		2019		% CHANGE		% CHANGE EXCLUDING CURRENCY CHANGES
Revenues by:
Footwear	$	1,802	$	1,758	3	%	2	%
Apparel	971		869		12	%	11	%
Equipment	137		146		-6	%	-6	%
TOTAL REVENUES	$	2,910	$	2,773	5	%	5	%
Revenues by:
Sales to Wholesale Customers	$	1,973	$	2,042	-3	%	-4	%
Sales through NIKE Direct	937		731		28	%	27	%
TOTAL REVENUES	$	2,910	$	2,773	5	%	5	%
EARNINGS BEFORE INTEREST AND TAXES	$	692	$	609	14	%

FIRST ~~NINE MONTHS~~QUARTER OF FISCAL ~~2020~~2021 COMPARED TO FIRST ~~NINE MONTHS~~QUARTER OF FISCAL ~~2019~~2020

On a currency-neutral basis, ~~Greater China~~EMEA revenues for the first ~~nine months~~quarter of fiscal ~~2020 increased 15%~~2021 grew 5%, driven by higher revenues across most territories, led by UK & Ireland, which grew 30%, partially offset by lower revenues in Eastern Europe, which declined 23%. Revenues increased in all key categories, led by the Jordan Brand and Sportswear. NIKE Direct revenues increased ~~21%,~~27% driven by strong digital commerce sales growth of ~~47%~~116%, partially offset by comparable store sales contraction of 11% primarily due to reduced physical retail traffic, in part resulting from safety-related measures in response to COVID-19.

Currency-neutral footwear revenues grew 2%, driven by higher revenues in most key categories, led by the Jordan Brand and Sportswear, partially offset by declines in Football (Soccer). Unit sales of footwear decreased 6% while higher ASP per pair contributed approximately 8 percentage points of footwear revenue growth. Higher ASP per pair primarily resulted from higher full-price and off-price ASPs, as well as the favorable impact of growth in our NIKE Direct business.

Currency-neutral apparel revenues increased 11% due to growth in all key categories, led by Football (Soccer) and Sportswear. Unit sales of apparel increased 9% and higher ASP per unit contributed approximately 2 percentage points of apparel revenue growth. Higher ASP per unit was primarily due to higher full-price ASP, in part reflecting lower discounts, and the favorable impact of growth in our NIKE Direct business.

Reported EBIT increased 14% as higher revenues and lower selling and administrative expense more than offset a decline in gross margin. Gross margin decreased approximately 360 basis points primarily due to lower margin in our NIKE Direct business driven by higher promotions to reduce excess inventory, unfavorable changes in standard foreign currency exchange rates and unfavorable full-price mix, partially offset by higher full-price ASP and off-price margin. Selling and administrative expense decreased due to lower demand creation and operating overhead expense. Lower demand creation expense was driven by lower sports marketing expense, as well as lower advertising and marketing costs. The decrease in operating overhead expense was primarily due to lower travel and related expenses.

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GREATER CHINA


	THREE MONTHS ENDED AUGUST 31,
(Dollars in millions)	2020		2019		% CHANGE		% CHANGE EXCLUDING CURRENCY CHANGES
Revenues by:
Footwear	$	1,251	$	1,164	7	%	10	%
Apparel	478		465		3	%	5	%
Equipment	51		50		2	%	3	%
TOTAL REVENUES	$	1,780	$	1,679	6	%	8	%
Revenues by:
Sales to Wholesale Customers	$	964	$	986	-2	%	0	%
Sales through NIKE Direct	816		693		18	%	21	%
TOTAL REVENUES	$	1,780	$	1,679	6	%	8	%
EARNINGS BEFORE INTEREST AND TAXES	$	688	$	669	3	%

FIRST QUARTER OF FISCAL 2021 COMPARED TO FIRST QUARTER OF FISCAL 2020

On a currency-neutral basis, Greater China revenues for the first quarter of fiscal 2021 increased 8% due to higher revenues in nearly all key categories, led by Sportswear and the Jordan Brand. NIKE Direct revenues increased 21% due to digital commerce sales growth of 28%, comparable store sales growth of 3%13% and the addition of new stores.

Currency-neutral footwear revenues increased ~~16%,~~10% for the first quarter of fiscal 2021 driven by ~~growth~~higher revenues in ~~nearly all~~most key categories, ~~led by~~primarily Sportswear, the Jordan Brand and ~~Sportswear.~~NIKE Basketball. Unit sales of footwear increased ~~10% and higher~~19% while lower ASP per pair ~~contributed~~reduced footwear revenues by approximately 69 percentage points, ~~of footwear revenue growth,~~ driven by ~~higher full-price and~~lower NIKE Direct ~~ASPs.~~ASP and unfavorable full-price mix.

~~The currency-neutral~~Currency-neutral apparel ~~revenue growth~~revenues grew 5% for the first quarter of ~~12% was fueled by~~fiscal 2021 due to higher revenues in ~~nearly all~~most key categories, ~~most notably Sportswear and the Jordan Brand.~~led by Sportswear. Unit sales of apparel increased ~~10% and higher~~11% while lower ASP per unit ~~contributed~~reduced apparel revenues by approximately 26 percentage points ~~of revenue growth, driven by~~as unfavorable full-price mix, as well as lower full-price and NIKE Direct ASPs, more than offset higher off-price ~~and full-price ASPs.~~ASP.

Reported EBIT increased ~~13%, driven by revenue growth,~~3% for the first quarter of fiscal 2021 as higher revenues and lower selling and administrative expense ~~leverage and an increase~~more than offset a decline in gross margin. Gross margin ~~increased approximately 10~~decreased 530 basis points ~~primarily due to higher full-price ASP and the favorable impact of growth~~reflecting lower margin in our NIKE Direct business ~~which more than offset~~driven by higher promotions to reduce excess inventory, unfavorable changes in standard foreign currency exchange rates,

~~Table of Contents~~

~~and~~ higher product ~~costs.~~costs and unfavorable full-price mix. Selling and administrative expense ~~increased~~decreased due to ~~higher operating overhead and~~lower demand creation ~~expense. Growth in~~expense, while operating overhead expense was ~~driven by higher investments within our NIKE Direct operations and higher administrative costs.~~relatively flat. Demand creation expense ~~increased~~decreased primarily due to ~~higher retail brand presentation~~lower advertising and marketing expenses. Operating overhead expense was relatively unchanged as lower travel and related expenses were offset by increases in other administrative costs.

Table of Contents

ASIA PACIFIC & LATIN AMERICA


	THREE MONTHS ENDED								NINE MONTHS ENDED									THREE MONTHS ENDED AUGUST 31,
(Dollars in millions)	FEBRUARY 29, 2020		FEBRUARY 28, 2019		% CHANGE		% CHANGE EXCLUDING CURRENCY CHANGES		FEBRUARY 29, 2020		FEBRUARY 28, 2019		% CHANGE		% CHANGE EXCLUDING CURRENCY CHANGES		(Dollars in millions)	2020		2019		% CHANGE		% CHANGE EXCLUDING CURRENCY CHANGES
Revenues by:																	Revenues by:
Footwear	$	963	$	909	6	%	11	%	$	2,890	$	2,669	8	%	14	%	Footwear	$	758	$	930	-18	%	-12	%
Apparel	388		340		14	%	20	%	1,154		1,032		12	%	18	%	Apparel	301		356		-15	%	-10	%
Equipment	63		58		9	%	15	%	183		174		5	%	11	%	Equipment	40		59		-32	%	-28	%
TOTAL REVENUES	$	1,414	$	1,307	8	%	13	%	$	4,227	$	3,875	9	%	15	%	TOTAL REVENUES	$	1,099	$	1,345	-18	%	-12	%
Revenues by:																	Revenues by:
Sales to Wholesale Customers	$	953	$	906	5	%	11	%	$	2,925	$	2,777	5	%	11	%	Sales to Wholesale Customers	$	708	$	950	-25	%	-19	%
Sales through NIKE Direct	461		401		15	%	20	%	1,302		1,098		19	%	24	%	Sales through NIKE Direct	391		395		-1	%	4	%
TOTAL REVENUES	$	1,414	$	1,307	8	%	13	%	$	4,227	$	3,875	9	%	15	%	TOTAL REVENUES	$	1,099	$	1,345	-18	%	-12	%
EARNINGS BEFORE INTEREST AND TAXES	$	387	$	339	14	%			$	1,105	$	983	12	%			EARNINGS BEFORE INTEREST AND TAXES	$	280	$	341	-18	%

As discussed previously, we entered into definitive agreements to sell our NIKE Brand businesses in Brazil, Argentina, Chile and Uruguay and shift to a distributor operating model. The impacts of entering into these agreements are included within Corporate and are not reflected in the APLA operating segment ~~results for either the three or nine-month periods ended February 29, 2020.~~results. These transactions are expected to close prior to January 1, 2021.

~~THIRD~~FIRST QUARTER OF FISCAL ~~2020~~2021 COMPARED TO ~~THIRD~~FIRST QUARTER OF FISCAL ~~2019~~2020

On a currency-neutral basis, APLA revenues ~~increased 13%~~decreased 12% for the ~~third~~first quarter of fiscal ~~2020, driven by higher~~2021. The decline was due to lower revenues in ~~all~~several territories, ~~most notably Japan,~~led by our Latin America third-party distributor business and SOCO (which comprises Argentina, Chile and Uruguay), which decreased 79% and ~~Korea, which increased 16%, 28% and 13%~~34%, respectively. Revenues ~~increased~~decreased in nearly all key categories, ~~most notably Sportswear, the Jordan Brand~~primarily Football (Soccer) and Running. NIKE Direct revenues increased ~~20%~~4%, ~~fueled~~driven by digital commerce sales growth of ~~51%~~91%, partially offset by comparable store sales ~~growth~~contraction of ~~10%~~28% primarily due to temporary store closures and ~~the addition of new stores.~~reduced physical retail traffic, in part due to safety-related measures in response to COVID-19.

Currency-neutral footwear revenues ~~increased 11%~~decreased 12% for the ~~third~~first quarter of fiscal ~~2020~~2021 due to ~~growth~~lower revenues in nearly all key categories, ~~led~~primarily Sportswear, Football (Soccer) and Running, partially offset by ~~Sportswear and~~ the Jordan Brand. Unit sales of footwear ~~were flat as~~decreased 24%, partially offset by higher ASP per pair ~~contributed~~contributing approximately 1112 percentage ~~points of footwear revenue growth,~~points. Higher ASP per pair was driven by higher full-price ~~and~~ASP, in part reflecting inflationary conditions in our SOCO territory, as well as the favorable impact of growth in our NIKE Direct ~~ASPs, both~~business.

Currency-neutral apparel revenues contracted 10% for the first quarter of ~~which~~fiscal 2021, as higher revenues in Sportswear were more than offset by lower revenues in all other key categories, most notably Football (Soccer) and Running. Unit sales of apparel decreased 14%, partially offset by higher ASP per unit contributing approximately 4 percentage points, driven by higher full-price ASP, in part ~~reflect~~reflecting inflationary conditions in our SOCO territory.

~~Currency-neutral apparel revenues grew 20%~~Reported EBIT decreased 18% for the ~~third~~first quarter of fiscal ~~2020, driven~~2021 primarily due to lower revenues and a decline in gross margin, partially offset by ~~higher revenues in nearly all key categories, most notably Sportswear~~lower selling and ~~to a lesser extent, Training and Running. Unit sales of apparel increased 18% and higher ASP per unit contributed~~administrative expense. Gross margin decreased approximately ~~2 percentage~~100 basis points ~~of apparel revenue growth, driven by~~as higher full-price ~~and off-price ASPs,~~ASP, in part reflecting inflationary conditions in our SOCO territory, ~~partially offset by a decline in NIKE Direct ASP.~~

~~Reported EBIT increased 14% for the third quarter of fiscal 2020 as higher revenues and lower selling and administrative expense~~was more than offset ~~a decline~~by higher product costs, an increase in ~~gross margin. Gross~~other costs, lower margin ~~decreased approximately 90 basis points~~in our NIKE Direct business, as well as unfavorable changes in standard foreign currency exchange ~~rates, as well as higher~~rates. The increase in other costs was primarily due to higher ~~inventory obsolescence and~~ warehousing and freight costs, ~~more than offset higher full-price ASP.~~as well as inventory obsolescence. Selling and administrative expense decreased due to lower demand creation ~~expense, partially offset by higher operating~~and overhead expense. The decrease in demand creation expense was primarily due to lower ~~sports~~advertising and marketing ~~expense,~~costs, as well as ~~lower advertising and~~sports marketing ~~costs. Operating overhead expense increased primarily as a result of higher wage-related expenses.~~

~~FIRST NINE MONTHS OF FISCAL 2020 COMPARED TO FIRST NINE MONTHS OF FISCAL 2019~~

On a currency-neutral basis, APLA revenues increased 15% for the first nine months of fiscal 2020, driven by higher revenues in all territories, most notably SOCO, Japan and Korea, which increased 31%, 15% and 17%, respectively. Revenues increased in all key categories, most notably Sportswear, Running and the Jordan Brand. NIKE Direct revenues increased 24%, fueled by digital commerce sales growth of 55%, comparable store sales growth of 14% and the addition of new stores.

~~Table of Contents~~

Currency-neutral footwear revenues increased 14% for the first nine months of fiscal 2020 due to growth in nearly all key categories, led by Sportswear, the Jordan Brand and Running. Unit sales of footwear increased 1%, while higher ASP per pair contributed approximately 13 percentage points of footwear revenue growth, driven by higher full-price and NIKE Direct ASPs, both of which in part reflect inflationary conditions in our SOCO territory.

Currency-neutral apparel revenues grew 18% for the first nine months of fiscal 2020, driven by higher revenues in nearly all key categories, most notably Sportswear. Unit sales of apparel increased 10% and higher ASP per unit contributed approximately 8 percentage points of apparel revenue growth, driven by higher full-price, off-price and NIKE Direct ASPs, all of which in part reflect inflationary conditions in our SOCO territory.

Reported EBIT increased 12% for the first nine months of fiscal 2020 as higher revenues and selling and administrative expense leverage more than offset a decline in gross margin. Gross margin decreased approximately 70 basis points as unfavorable changes in standard foreign currency exchange rates and higher product costs more than offset higher full-price ASP. Selling and administrative expense increased as higherexpense. Lower operating overhead costs were partially offset by lower demand creation expense. Operating overhead expense increased as a result of higher investments in our NIKE Direct operations including higher wage-related expenses. The decrease in demand creation expense was primarily due to lower ~~sports marketing~~travel and ~~retail brand presentation costs.~~related expenses.

GLOBAL BRAND DIVISIONS


	THREE MONTHS ENDED										NINE MONTHS ENDED											THREE MONTHS ENDED AUGUST 31,
(Dollars in millions)	FEBRUARY 29, 2020			FEBRUARY 28, 2019			% CHANGE		% CHANGE EXCLUDING CURRENCY CHANGES		FEBRUARY 29, 2020			FEBRUARY 28, 2019			% CHANGE		% CHANGE EXCLUDING CURRENCY CHANGES		(Dollars in millions)	2020		2019		% CHANGE		% CHANGE EXCLUDING CURRENCY CHANGES
Revenues	$	8		$	8		0	%	2	%	$	24		$	33		-27	%	-26	%	Revenues	$	4	$	6	-33	%	-31	%
Earnings (Loss) Before Interest and Taxes	$	(895	)	$	(788	)	-14	%			$	(2,624	)	$	(2,432	)	-8	%			Earnings (Loss) Before Interest and Taxes	$	(853)	$	(857)	0	%



As of ~~April 2,~~September 28, 2020, the number of shares of the Registrant's Common Stock outstanding were:
Class A			315,017,252
Class B			~~1,240,017,482~~1,254,809,281
			~~1,555,034,734~~1,569,826,533



		PAGE
PART I - FINANCIAL INFORMATION					1
ITEM 1.			Financial Statements	~~Financial Statements~~	1
			Unaudited Condensed Consolidated Statements of Income	1
			Unaudited Condensed Consolidated Statements of Comprehensive Income	2
			Unaudited Condensed Consolidated Balance Sheets	3
			Unaudited Condensed Consolidated Statements of Cash Flows	4
			Unaudited Condensed Consolidated Statements of Shareholders' Equity	5
			Notes to the Unaudited Condensed Consolidated Financial Statements	76
ITEM 2.			Management's Discussion and Analysis of Financial Condition and Results of Operations	2821
ITEM 3.			Quantitative and Qualitative Disclosures about Market Risk	4837
ITEM 4.			Controls and Procedures	4837
PART II - OTHER INFORMATION					5039
ITEM 1.			Legal Proceedings	5039
ITEM 1A.			Risk Factors	5039
ITEM 2.			Unregistered Sales of Equity Securities and Use of Proceeds	5140
ITEM 5.6.			~~Other Information~~Exhibits	5141
~~ITEM 6.~~			~~Exhibits~~Signatures	5242
	~~Signatures~~	53


	NINE MONTHS ENDED							THREE MONTHS ENDED AUGUST 31,
(Dollars in millions)	FEBRUARY 29, 2020			FEBRUARY 28, 2019			(Dollars in millions)	2020		2019
Cash provided (used) by operations:							Cash provided (used) by operations:
Net income	$	3,329		$	3,040		Net income	$	1,518	$	1,367
Adjustments to reconcile net income to net cash provided (used) by operations:							Adjustments to reconcile net income to net cash provided (used) by operations:
Depreciation	513			527			Depreciation	176		169
Deferred income taxes	(372		)	67			Deferred income taxes	(220)		(42)
Stock-based compensation	303			226			Stock-based compensation	136		80
Amortization, impairment and other	383			9			Amortization, impairment and other	41		6
Net foreign currency adjustments	(49		)	218			Net foreign currency adjustments	(45)		49
Changes in certain working capital components and other assets and liabilities:							Changes in certain working capital components and other assets and liabilities:
(Increase) decrease in accounts receivable	(475		)	(460		)	(Increase) decrease in accounts receivable	(990)		(456)
(Increase) decrease in inventories	(455		)	(226		)	(Increase) decrease in inventories	689		(270)
(Increase) decrease in prepaid expenses, operating lease right-of-use assets and other current and non-current assets	(494		)	(167		)	(Increase) decrease in prepaid expenses, operating lease right-of-use assets and other current and non-current assets	(338)		38
Increase (decrease) in accounts payable, accrued liabilities, operating lease liabilities and other current and non-current liabilities	(197		)	659			Increase (decrease) in accounts payable, accrued liabilities, operating lease liabilities and other current and non-current liabilities	(85)		(547)
Cash provided (used) by operations	2,486			3,893			Cash provided (used) by operations	882		394
Cash provided (used) by investing activities:							Cash provided (used) by investing activities:
Purchases of short-term investments	(1,775		)	(2,384		)	Purchases of short-term investments	(1,401)		(504)
Maturities of short-term investments	20			1,613			Maturities of short-term investments	302		16
Sales of short-term investments	1,764			1,491			Sales of short-term investments	384		533
Additions to property, plant and equipment	(797		)	(846		)	Additions to property, plant and equipment	(176)		(284)
Other investing activities	30			5			Other investing activities	2		(109)
Cash provided (used) by investing activities	(758		)	(121		)	Cash provided (used) by investing activities	(889)		(348)
Cash provided (used) by financing activities:							Cash provided (used) by financing activities:
Increase (decrease) in notes payable	—			(320		)	Increase (decrease) in notes payable	(30)		241
Repayment of borrowings							Repayment of borrowings	(83)		(2)
Proceeds from exercise of stock options and other stock issuances	678			487			Proceeds from exercise of stock options and other stock issuances	302		111
Repurchase of common stock	(2,865		)	(3,405		)	Repurchase of common stock	0		(999)
Dividends — common and preferred	(1,071		)	(986		)	Dividends — common and preferred	(384)		(345)
Other financing activities	(52		)	(43		)	Other financing activities	(53)		(16)
Cash provided (used) by financing activities	(3,310		)	(4,267		)	Cash provided (used) by financing activities	(248)		(1,010)
Effect of exchange rate changes on cash and equivalents	(21		)	(59		)	Effect of exchange rate changes on cash and equivalents	55		(56)
Net increase (decrease) in cash and equivalents	(1,603		)	(554		)	Net increase (decrease) in cash and equivalents	(200)		(1,020)
Cash and equivalents, beginning of period	4,466			4,249			Cash and equivalents, beginning of period	8,348		4,466
CASH AND EQUIVALENTS, END OF PERIOD	$	2,863		$	3,695		CASH AND EQUIVALENTS, END OF PERIOD	$	8,148	$	3,446
Supplemental disclosure of cash flow information:							Supplemental disclosure of cash flow information:
Non-cash additions to property, plant and equipment	$	115		$	171		Non-cash additions to property, plant and equipment	$	114	$	90
Dividends declared and not paid	384			347			Dividends declared and not paid	383		344


	FEBRUARY 29,			MAY 31,			AUGUST 31,		MAY 31,
(In millions)	2020			2019		(In millions)	2020		2020
ASSETS						ASSETS
Current assets:						Current assets:
Cash and equivalents	$	2,863		$	4,466	Cash and equivalents	$	8,148	$	8,348
Short-term investments	319			197		Short-term investments	1,332		439
Accounts receivable, net	4,473			4,272		Accounts receivable, net	3,813		2,749
Inventories	5,807			5,622		Inventories	6,705		7,367
Prepaid expenses and other current assets	2,282			1,968		Prepaid expenses and other current assets	1,939		1,653
Total current assets	15,744			16,525		Total current assets	21,937		20,556
Property, plant and equipment, net	4,783			4,744		Property, plant and equipment, net	4,969		4,866
Operating lease right-of-use assets, net	2,907			—		Operating lease right-of-use assets, net	3,158		3,097
Identifiable intangible assets, net	275			283		Identifiable intangible assets, net	272		274
Goodwill	223			154		Goodwill	223		223
Deferred income taxes and other assets	2,288			2,011		Deferred income taxes and other assets	2,699		2,326
TOTAL ASSETS	$	26,220		$	23,717	TOTAL ASSETS	$	33,258	$	31,342
LIABILITIES AND SHAREHOLDERS' EQUITY						LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:						Current liabilities:
Current portion of long-term debt	$	4		$	6	Current portion of long-term debt	$	1	$	3
Notes payable	9			9		Notes payable	137		248
Accounts payable	2,221			2,612		Accounts payable	1,983		2,248
Current portion of operating lease liabilities	422			—		Current portion of operating lease liabilities	459		445
Accrued liabilities	5,356			5,010		Accrued liabilities	5,742		5,184
Income taxes payable	268			229		Income taxes payable	297		156
Total current liabilities	8,280			7,866		Total current liabilities	8,619		8,284
Long-term debt	3,463			3,464		Long-term debt	9,408		9,406
Operating lease liabilities	2,758			—		Operating lease liabilities	2,961		2,913
Deferred income taxes and other liabilities	2,674			3,347		Deferred income taxes and other liabilities	3,046		2,684
Redeemable preferred stock	—			—		Redeemable preferred stock	0		0
Shareholders' equity:						Shareholders' equity:
Common stock at stated value:						Common stock at stated value:
Class A convertible — 315 and 315 shares outstanding	—			—		Class A convertible — 315 and 315 shares outstanding	0		0
Class B — 1,240 and 1,253 shares outstanding	3			3
Class B — 1,250 and 1,243 shares outstanding						Class B — 1,250 and 1,243 shares outstanding	3		3
Capital in excess of stated value	7,971			7,163		Capital in excess of stated value	8,695		8,299
Accumulated other comprehensive income (loss)	(57		)	231		Accumulated other comprehensive income (loss)	(401)		(56)
Retained earnings	1,128			1,643
Retained earnings (deficit)						Retained earnings (deficit)	927		(191)
Total shareholders' equity	9,045			9,040		Total shareholders' equity	9,224		8,055
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY	$	26,220		$	23,717	TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY	$	33,258	$	31,342



	MAY 31, 2019
(Dollars in millions)	ASSETS AT FAIR VALUE		CASH AND EQUIVALENTS		SHORT-TERM INVESTMENTS
Cash	$	853	$	853	$	—
Level 1:
U.S. Treasury securities	347		200		147
Level 2:
Commercial paper and bonds	34		1		33
Money market funds	1,637		1,637		—
Time deposits	1,791		1,775		16
U.S. Agency securities	1		—		1
Total Level 2	3,463		3,413		50
TOTAL	$	4,663	$	4,466	$	197



	THREE MONTHS ENDED FEBRUARY 29, 2020
(Dollars in millions)	NORTH AMERICA		EUROPE, MIDDLE EAST & AFRICA		GREATER CHINA		ASIA PACIFIC & LATIN AMERICA		GLOBAL BRAND DIVISIONS		TOTAL NIKE BRAND		CONVERSE		CORPORATE			TOTAL NIKE, INC.
Revenues by:
Footwear	$	2,628	$	1,711	$	1,075	$	963	$	—	$	6,377	$	455	$	—		$	6,832
Apparel	1,228		889		400		388		—		2,905		20		—			2,925
Equipment	123		109		31		63		—		326		5		—			331
Other	—		—		—		—		8		8		26		(18		)	16
TOTAL REVENUES	$	3,979	$	2,709	$	1,506	$	1,414	$	8	$	9,616	$	506	$	(18	)	$	10,104
Revenues by:
Sales to Wholesale Customers	$	2,521	$	1,956	$	881	$	953	$	—	$	6,311	$	330	$	—		$	6,641
Sales through Direct to Consumer	1,458		753		625		461		—		3,297		150		—			3,447
Other	—		—		—		—		8		8		26		(18		)	16
TOTAL REVENUES	$	3,979	$	2,709	$	1,506	$	1,414	$	8	$	9,616	$	506	$	(18	)	$	10,104



	THREE MONTHS ENDED FEBRUARY 28, 2019
(Dollars in millions)	NORTH AMERICA		EUROPE, MIDDLE EAST & AFRICA		GREATER CHINA		ASIA PACIFIC & LATIN AMERICA		GLOBAL BRAND DIVISIONS		TOTAL NIKE BRAND		CONVERSE		CORPORATE		TOTAL NIKE, INC.
Revenues by:
Footwear	$	2,509	$	1,589	$	1,115	$	909	$	—	$	6,122	$	405	$	—	$	6,527
Apparel	1,173		750		444		340		—		2,707		27		—		2,734
Equipment	128		96		29		58		—		311		5		—		316
Other	—		—		—		—		8		8		26		—		34
TOTAL REVENUES	$	3,810	$	2,435	$	1,588	$	1,307	$	8	$	9,148	$	463	$	—	$	9,611
Revenues by:
Sales to Wholesale Customers	$	2,547	$	1,785	$	936	$	906	$	—	$	6,174	$	308	$	—	$	6,482
Sales through Direct to Consumer	1,263		650		652		401		—		2,966		129		—		3,095
Other	—		—		—		—		8		8		26		—		34
TOTAL REVENUES	$	3,810	$	2,435	$	1,588	$	1,307	$	8	$	9,148	$	463	$	—	$	9,611



	NINE MONTHS ENDED FEBRUARY 29, 2020
(Dollars in millions)	NORTH AMERICA		EUROPE, MIDDLE EAST & AFRICA		GREATER CHINA		ASIA PACIFIC & LATIN AMERICA		GLOBAL BRAND DIVISIONS		TOTAL NIKE BRAND		CONVERSE		CORPORATE			TOTAL NIKE, INC.
Revenues by:
Footwear	$	7,723	$	5,005	$	3,486	$	2,890	$	—	$	19,104	$	1,367	$	—		$	20,471
Apparel	4,076		2,655		1,428		1,154		—		9,313		76		—			9,389
Equipment	455		359		118		183		—		1,115		20		—			1,135
Other	—		—		—		—		24		24		78		(7		)	95
TOTAL REVENUES	$	12,254	$	8,019	$	5,032	$	4,227	$	24	$	29,556	$	1,541	$	(7	)	$	31,090
Revenues by:
Sales to Wholesale Customers	$	8,119	$	5,792	$	2,895	$	2,925	$	—	$	19,731	$	983	$	—		$	20,714
Sales through Direct to Consumer	4,135		2,227		2,137		1,302		—		9,801		480		—			10,281
Other	—		—		—		—		24		24		78		(7		)	95
TOTAL REVENUES	$	12,254	$	8,019	$	5,032	$	4,227	$	24	$	29,556	$	1,541	$	(7	)	$	31,090



	NINE MONTHS ENDED FEBRUARY 28, 2019
(Dollars in millions)	NORTH AMERICA		EUROPE, MIDDLE EAST & AFRICA		GREATER CHINA		ASIA PACIFIC & LATIN AMERICA		GLOBAL BRAND DIVISIONS		TOTAL NIKE BRAND		CONVERSE		CORPORATE		TOTAL NIKE, INC.
Revenues by:
Footwear	$	7,309	$	4,650	$	3,095	$	2,669	$	—	$	17,723	$	1,222	$	—	$	18,945
Apparel	3,985		2,374		1,314		1,032		—		8,705		93		—		8,798
Equipment	443		331		102		174		—		1,050		18		—		1,068
Other	—		—		—		—		33		33		82		7		122
TOTAL REVENUES	$	11,737	$	7,355	$	4,511	$	3,875	$	33	$	27,511	$	1,415	$	7	$	28,933
Revenues by:
Sales to Wholesale Customers	$	8,031	$	5,318	$	2,704	$	2,777	$	—	$	18,830	$	930	$	—	$	19,760
Sales through Direct to Consumer	3,706		2,037		1,807		1,098		—		8,648		403		—		9,051
Other	—		—		—		—		33		33		82		7		122
TOTAL REVENUES	$	11,737	$	7,355	$	4,511	$	3,875	$	33	$	27,511	$	1,415	$	7	$	28,933



(Dollars in millions)	AS OF FEBRUARY 29, 2020⁽¹⁾
Remainder of Fiscal 2020	$	139
Fiscal 2021	538
Fiscal 2022	478
Fiscal 2023	420
Fiscal 2024	381
Thereafter	1,672
Total undiscounted future cash flows related to lease payments	$	3,628
Less: Interest	448
Present value of lease liabilities	$	3,180



	AS OF MAY 31, 2019
(Dollars in millions)	OPERATING LEASES		CAPITAL LEASES AND OTHER FINANCING OBLIGATIONS⁽¹⁾		TOTAL
Fiscal 2020	$	553	$	32	$	585
Fiscal 2021	513		34		547
Fiscal 2022	441		40		481
Fiscal 2023	386		37		423
Fiscal 2024	345		34		379
Thereafter	1,494		197		1,691
TOTAL	$	3,732	$	374	$	4,106



Scheduled Maturity (Dollars in millions)	ORIGINAL PRINCIPAL		INTEREST RATE		INTEREST PAYMENTS
Corporate Term Debt:⁽¹⁾⁽²⁾
March 27, 2025	$	1,000	2.40	%	Semi-Annually
March 27, 2027	1,000		2.75	%	Semi-Annually
March 27, 2030	1,500		2.85	%	Semi-Annually
March 27, 2040	1,000		3.25	%	Semi-Annually
March 27, 2050	1,500		3.38	%	Semi-Annually
TOTAL ISSUANCE	$	6,000


~~(1)~~	Other revenues consist of territories serviced by third-party licensees who pay royalties to Converse for the use of its registered trademarks and other intellectual property rights. We do not own the Converse trademarks in Japan and accordingly do not earn revenues in Japan.


•	~~an unfavorable change of $566 million, primarily due to the non-recurring impairment charge of $400 million discussed above~~ ~~and~~ ~~higher operating overhead expense driven by higher wage-related costs;~~


•	a favorable change in net foreign currency gains and losses of $85 million related to the re-measurement of monetary assets and liabilities denominated in non-functional currencies and the impact of certain foreign currency derivative instruments, reported as a component of consolidated Other (income) expense, net.~~Other (income) expense, net.~~



	EXPECTED MATURITY DATE YEAR ENDING MAY 31,
(Dollars in millions)	REMAINDER OF 2020			2021			2022			2023			2024			THEREAFTER			TOTAL
Interest Rate Risk
Long-term U.S. Dollar debt — Fixed rate
Principal payments	$	—		$	—		$	—		$	500		$	—		$	9,000		$	9,500
Weighted-average interest rate	0.0		%	0.0		%	0.0		%	2.3		%	0.0		%	3.1		%	3.0		%



PERIOD	TOTAL NUMBER OF SHARES PURCHASED	AVERAGE PRICE PAID PER SHARE		APPROXIMATE DOLLAR VALUE OF SHARES THAT MAY YET BE PURCHASED UNDER THE PLANS OR PROGRAMS (IN MILLIONS)
December 1 — December 31, 2019	2,819,495	$	97.92	$	11,821
January 1 — January 31, 2020	3,040,720	$	101.36	$	11,513
February 1 — February 29, 2020	3,786,933	$	98.39	$	11,140
	9,647,148	$	99.19



3.		Exhibits:
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, 2015).
3.2		Fifth Restated Bylaws, as amended (incorporated by reference to Exhibit ~~3.2~~3.1 to the Company's Current Report on Form 8-K filed ~~November 17, 2017)~~June 19, 2020 ).
4.1		Restated Articles of Incorporation, as amended (see Exhibit 3.1).
4.2		Fifth Restated Bylaws, as amended (see Exhibit 3.2).
~~4.3~~31.1†		Fourth Supplemental Indenture, dated as of March 27, 2020, by and between NIKE, Inc. and Deutsche Bank Trust Company Americas, as trustee, including the form of 2.400% Notes due 2025, form of 2.750% Notes due 2027, form of 2.850% Notes due 2030, form of 3.250% Notes due 2040 and form of 3.375% Notes due 2050 (incorporated by reference to Exhibit 4.2 to the Company's Form 8-K filed March 27, 2020).
~~10.1~~	~~Offer Letter between NIKE, Inc. and John J. Donahoe II (incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed October 22, 2019).~~
~~10.2~~	Form of Covenant Not to Compete and Non-Disclosure Agreement between NIKE, Inc. and John J. Donahoe II (incorporated by reference to Exhibit 10.3 to the Company's Current Report on Form 8-K filed October 22, 2019).
~~10.3~~	~~Form of Performance-Based Stock Option Agreement (incorporated by reference to Exhibit 10.2 to the Company's Current Report on Form 8-K filed October 22, 2019).~~
~~10.4~~	~~Letter Agreement between NIKE, Inc. and Mark G. Parker (incorporated by reference to Exhibit 10.6 to the Company's Current Report on Form 8-K filed October 22, 2019).~~
~~10.5~~	~~Credit Agreement, dated as of April 6, 2020, among NIKE, Inc., Bank of America, N.A., as Administrative Agent, and the other Banks named therein.~~
~~31.1†~~	Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer.
31.2†		Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer.
32.1†		Section 1350 Certificate of Chief Executive Officer.
32.2†		Section 1350 Certificate of Chief Financial Officer.
101.INS		XBRL Instance Document.
101.SCH		XBRL Taxonomy Extension Schema Document.
101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF		XBRL Taxonomy Extension Definition Document.
101.LAB		XBRL Taxonomy Extension Label Linkbase Document.
101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document.
104		Cover Page Interactive Data File (formatted in iXBRL Exhibit 101)