Our futures ordering program allows us to minimize the amount of products we hold in inventory, purchasing costs, the time necessary to fill customer orders, and the risk of non-delivery. The Company is exposed to credit-related losses in the event of non-performance by counterparties to hedging instruments. as a result of hedge ineffectiveness and the discontinuance of cash flow hedges because the forecasted transactions were no longer probable of occurring were immaterial. As discussed in Note 18 - Operating Segments and Related Information in the accompanying Notes to the Consolidated Financial Statements, certain corporate costs are not included in EBIT of our operating segments. Selling and administrative expense increased as a percent of revenues, driven primarily by the increased investment in our DTC business and the decrease in revenues. 333-188072) and Form S-8 (Nos. Differences between assigned standard foreign currency rates and actual market rates are included in Corporate together with foreign currency hedge gains and losses generated from our centrally managed foreign exchange risk management program. Brand Marketing in 2000. Our Direct to Consumer stores have required substantial fixed investment in equipment and leasehold improvements, information systems, inventory, and personnel. None of our employees are represented by a union, except for certain employees in the Emerging Markets geography, where local law requires those employees to be represented by a trade union. Founded in 1968, NIKE is the world’s biggest designer marketer and seller of athletic footwear, sports equipment, apparel, accessories and services, by sales revenue of $21.5 billion in 2012 (NIKE, 2013). If we estimate that the net realizable value of our inventory is less than the cost of the inventory recorded on our books, we record a reserve equal to the difference between the cost of the inventory and the estimated net realizable value. We hereby consent to the incorporation by reference in the Registration Statements on Form S-3 (No. Derivatives designated as cash flow hedges: Derivatives designated as net investment hedges: For the years ended May 31, 2014 , 2013 , and 2012 , the amounts recorded in Other expense (income), net as a result of hedge ineffectiveness and the discontinuance of cash flow hedges because the forecasted transactions were no longer probable of occurring were immaterial. Excluding the effects of changes in foreign currency exchange rates, the growth in Operating overhead expense was 15%. This can occur temporarily for a variety of reasons; shortly before the market opens, after the market closes or because of extraordinary price volatility during the trading day. In July 2012, the FASB issued an accounting standards update intended to simplify how an entity tests indefinite-lived intangible assets other than goodwill for impairment by providing entities with an option to perform a qualitative assessment to determine whether further impairment testing is necessary. Despite significant foreign currency headwinds, we delivered record revenues and earnings per share in fiscal 2014. Accelerated stock option expense for years ended, Accumulated Other Comprehensive Income Into Income. The amounts listed for endorsement contracts represent approximate amounts of base compensation and minimum guaranteed royalty fees we are obligated to pay athlete and sport team endorsers of our products. Apr 15, 2019. Gross margin increased 20 basis points as higher average selling prices, favorable off-price mix, and the favorable impact of higher margin DTC revenues were mostly offset by unfavorable standard foreign currency exchange rates. In most cases, amounts recorded in Other comprehensive income will be released to Net income sometime after the maturity of the related derivative. The continuing cash flows related to these items are not significant to Cole Haan. Share. Derivatives currently used by the Company to hedge this risk are receive-fixed, pay-variable interest rate swaps. The transaction resulted in a gain on sale of $231 million , net of $137 million in Income tax expense; this gain is included in the Net income (loss) from discontinued operations line item on the Consolidated Statements of Income. The Company performs annual impairment tests on goodwill and intangible assets with indefinite lives in the fourth quarter of each fiscal year, or when events occur or circumstances change that would, more likely than not, reduce the fair value of a reporting unit or an intangible asset with an indefinite life below its carrying value. It should only be considered an indication and not a recommendation. Development costs of computer software to be sold, leased, or otherwise marketed as an integral part of a product are subject to capitalization beginning when a product's technological feasibility has been established and ending when a product is available for general release to customers. The counterparties to all derivative transactions are major financial institutions with investment grade credit ratings. In some cases, prices are subject to change throughout the production process. 2015 Annual Report 10.9 MB. Our NIKE e-commerce website is located at www.nike.com. At May 31, 2014 , the interest rates payable on these swap agreements ranged from approximately 0.2% to 0.4% . Income charges (credits) not affecting cash: Changes in certain working capital components and other assets and liabilities: (Increase) decrease in accounts receivable, (Increase) in prepaid expenses and other current assets, Increase in accounts payable, accrued liabilities and income taxes payable. search Clear the search field Refer to Note 9 - Income Taxes for further discussion. The positive benefit of higher net average selling prices was largely offset by higher product costs (approximately 110 basis points), primarily due to higher factory labor costs, and unfavorable foreign currency exchange rate movements (approximately 40 basis points). We also use information technology systems to process financial information and results of operations for internal reporting purposes and to comply with regulatory financial reporting, legal, and tax requirements. Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the financial statements for external purposes in accordance with generally accepted accounting principles in the United States of America. A portion of the Company's foreign operations are benefiting from a tax holiday, which is set to expire in 2021 . The ongoing implementation of the category offense in Western Europe yielded successful results in fiscal 2014. The Company is currently evaluating the effect the guidance will have on the Consolidated Financial Statements. The intense competition and the rapid changes in technology and consumer preferences in the markets for athletic and leisure footwear and apparel, and athletic equipment, constitute significant risk factors in our operations. We also lease various office facilities in the surrounding metropolitan area. Excluding the effects of changes in foreign currency exchange rates, Demand creation expense increased 8%. Our objective in managing this interest rate exposure is to limit the impact of interest rate changes on earnings and cash flows and to reduce overall borrowing costs. These rates are set approximately nine months in advance of the future selling season based on average market spot rates in the calendar month preceding the date they are established. The aggregate intrinsic value for options outstanding and exercisable at May 31, 2014 was $2,391 million and $1,682 million , respectively. In fiscal 2014, NIKE Brand and Converse sales in the United States accounted for approximately 46% of total revenues, compared to 45% in fiscal 2013 and 42% in fiscal 2012. Accordingly, changes in the fair values of the interest rate swap agreements are considered to exactly offset changes in the fair value of the underlying long-term debt. The Company records a valuation allowance to reduce deferred tax assets to the amount management believes is more likely than not to be realized. The Company elects to record the gross assets and liabilities of its derivative financial instruments in the Consolidated Balance Sheets. DDAAYY ONE, THE PHONE CALL COMES. *, NIKE, Inc. Recipients of restricted stock are entitled to cash dividends and to vote their respective shares throughout the period of restriction. The Company's derivative contracts contain credit risk related contingent features designed to protect against significant deterioration in counterparties' creditworthiness and their ultimate ability to settle outstanding derivative contracts in the normal course of business. The principal materials used in our apparel products - natural and synthetic fabrics and threads, specialized performance fabrics designed to efficiently wick moisture away from the body, retain heat, or repel rain and/or snow as well as plastic and metal hardware - are available in countries where our manufacturing takes place. Mark G. Parker, President and Chief Executive Officer - Mr. Parker, 58, was appointed President and Chief Executive Officer in January 2006. The estimated maximum one-day loss in fair value on our foreign currency sensitive derivative financial instruments, derived using the VaR model, was $50 million and $34 million at May 31, 2014 and 2013, respectively. agencies. Such provisions include a control share acquisition statute, a freeze-out statute, two classes of stock that vote separately on certain issues, and the fact that holders of Class A Common Stock elect three-quarters of the Board of Directors rounded down to the next whole number. All per share amounts are reflective of the two-for-one stock split that began trading at the split-adjusted price on December 26, 2012. In addition to the cash payments, we are obligated to furnish our endorsers with NIKE product for their use. In addition, the Company also capitalizes certain payroll and payroll-related costs for employees who are directly associated with internal use computer software projects. Another of our wholly-owned subsidiary brands, Converse, headquartered in North Andover, Massachusetts ("Converse"), designs, distributes, and licenses casual sneakers, apparel, and accessories under the Converse, Chuck Taylor, All Star, One Star, Star Chevron, and Jack Purcell trademarks. We may fail to meet market expectations, which could cause the price of our stock to decline. Misuse of or failure to secure personal information could also result in violation of data privacy laws and regulations, proceedings against the Company by governmental entities or others, damage to our reputation and credibility, and could have a negative impact on revenues and profits. David J. Ayre, Executive Vice President, Global Human Resources - Mr. Ayre, 54, joined NIKE as Vice President, Global Human Resources in 2007. To achieve that, we need all parts of our value chain to understand and deliver on our goals—from our leaders to product designers, to the employees in our stores, and workers in contracted factories who make our products. Refer to "Fair Value Hedges" in this note for additional detail. If we are unsuccessful in challenging a party's products on the basis of trade secret misappropriation or trademark, copyright, design patent, utility patent, or other intellectual property infringement, continued sales of these products could adversely affect our sales and our brand and result in the shift of consumer preference away from our products. He was appointed Marketing Manager, Strategic Accounts for Foot Locker in 1993, Director of Marketing for the Americas Region in 1995, Director of Marketing for Europe in 1997, Vice President, Marketing for the Europe, Middle East and Africa Region in 1999, and Vice President, U.S. Indefinite-lived intangible assets primarily consist of acquired trade names and trademarks. In the past, securities class action litigation has been brought against NIKE and other companies following a decline in the market price of their securities. Accounts receivable, Inventories and Property, plant and equipment for operating segments are regularly reviewed by management and are therefore provided below. Prior to NIKE, Mr. Pliska was with Price Waterhouse from 1984 to 1995. Reconciling items for EBIT represent corporate expense items that are not allocated to the operating segments for management reporting. The value of all grants of restricted stock and restricted stock units was established by the market price on the date of grant. Depreciation and amortization of assets used in manufacturing, warehousing and product distribution are recorded in Cost of sales. For fiscal 2014, changes in foreign currency exchange rates did not have a material impact on Demand creation expense. The following summarizes the stock option transactions under the plan discussed above: Includes stock appreciation rights transactions. The performance graph above is being furnished solely to accompany this Report pursuant to Item 201(e) of Regulation S-K, and is not being filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and is not to be incorporated by reference into any filing of the Company, whether made before or after the date hereof, regardless of any general incorporation language in such filing. of the aggregate principal amount of the notes to be redeemed and (ii) the sum of the present values of the remaining scheduled payments, plus in each case, accrued and unpaid interest. This tax holiday may be extended when certain conditions are met or may be terminated early if certain conditions are not met. As an offset to the impacts of the fluctuating U.S. Dollar on our non-functional currency denominated product purchases described above, a strengthening U.S. Dollar against the foreign currencies within the factory currency exposure indices decreases NIKE's U.S. Dollar inventory cost. There has been no change of accountants nor any disagreements with accountants on any matter of accounting principles or practices or financial statement disclosure required to be reported under this Item. While "reasonable assurance" is a high level of assurance, it does not mean absolute assurance. Accelerated stock option expense is recorded for employees eligible for accelerated stock option vesting upon retirement. The Company classifies the cash flows at settlement of its net investment hedges within the Cash (used) provided by investing activities component of the Consolidated Statement of Cash Flows. The Company formally documents all relationships between designated hedging instruments and hedged items as well as its risk management objective and strategy for undertaking hedge transactions. Certain stores have been designed and built to serve as high-profile venues to promote brand awareness and marketing activities. Any adverse effect on the quality of these decisions could impact our ability to retain real estate locations adequate to meet our targets or efficiently manage the profitability of our existing fleet of stores, which could have an adverse effect on our operating results and financial condition. These amounts are reported in Demand creation expense when we determine that it is probable that the specified level of performance will be maintained throughout the period. This occurs upon shipment or upon receipt by the customer depending on the country of the sale and the agreement with the customer. We estimate the combination of the translation of foreign currency-denominated profits from our international businesses and the year-over-year change in foreign currency related gains and losses included in Other expense (income), net had an unfavorable impact on our Income before income taxes of $56 million for fiscal 2013. NIKE, Inc. is a worldwide leader in the design, development and worldwide marketing and selling of athletic footwear, apparel, equipment, accessories and services. These purchases are for products sold in certain countries in the Company's Emerging Markets geographic segment and Canada, excluding products produced and sold in the same country. In the United States, there are five significant distribution centers in Memphis, Tennessee; two are owned and three are leased. As of May 31, 2014 , the total gross unrecognized tax benefits, excluding related interest and penalties, were $506 million , $264 million of which would affect the Company's effective tax rate if recognized in future periods. Product cost exposures are primarily generated through non-functional currency denominated product purchases and the foreign currency adjustment program described below. Our post invoice sales discounts consist of contractual programs with certain customers or discretionary discounts that are expected to be granted to certain customers at a later date. Changes in Level 3 investment assets were immaterial during the years ended May 31, 2014 and 2013 . If we are unable to anticipate consumer preferences and develop new products, we may not be able to maintain or increase our revenues and profits. On a wholesale equivalent basis and excluding the effects of changes in currency exchange rates, fiscal 2014 NIKE Brand Men's revenues increased 9% mainly as a result of strong growth in our Basketball, Football (Soccer), Running, and Sportswear categories. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. These securities are valued using market prices on both active markets (Level 1) and less active markets (Level 2). The principal materials used in our footwear products are natural and synthetic rubber, plastic compounds, foam cushioning materials, nylon, leather, canvas, and polyurethane films used to make NIKE Air-Sole cushioning components. a $48 million decrease in foreign currency net losses, reported as a component of Other expense (income), net. Apparel revenues growth in North America was driven by higher demand in our Men ' s Training category, reflecting the addition of the NFL licensed business, as well as Basketball, Women ' s Training, and Running. Online sales represented approximately 15% of our total NIKE Brand DTC revenues for fiscal 2014, compared to 12% for fiscal 2013. If such facts indicate a potential impairment, the Company would assess the recoverability of an asset group by determining if the carrying value of the asset group exceeds the sum of the projected undiscounted cash flows expected to result from the use and eventual disposition of the assets over the remaining economic life of the primary asset in the asset group. 12/31/2018. Moreover, a portion of our revenue is not derived from futures orders, including sales of at-once and closeout NIKE Brand footwear and apparel, NIKE Brand equipment, DTC operation sales, and sales from Converse, NIKE Golf, and Hurley. In addition, product sales are dependent in part on high quality merchandising and an appealing store environment to attract consumers, which requires continuing investments by retailers. We may first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. Generally, these are accounted for as cash flow hedges in accordance with the accounting standards for derivatives and hedging, except for hedges of the embedded derivatives component of the product cost exposures as discussed below. The aggregate intrinsic value was the amount by which the market value of the underlying stock exceeded the exercise price of the options. a $56 million decrease in foreign exchange losses related to the difference between actual foreign currency exchange rates and standard foreign currency exchange rates assigned to the NIKE Brand geographic operating segments and Converse, net of hedge gains; these losses are reported as a component of consolidated gross margin. For inventories in transit that represent direct shipments to customers, the related inventory and cost of sales is recognized on a specific identification basis. For Nike, FY20 was a year that proved the power of our competitive advantages – and the opportunity we have to accelerate them. Advertising production costs are expensed the first time an advertisement is run. Capitalized interest was not material for the years ended May 31, 2014 , 2013 , and 2012 . 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