Nike 2009 Annual Report Download

Download and view the complete annual report

Please find the complete 2009 Nike annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 105

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K
(Mark One)
ÍANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended May 31, 2009
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to .
Commission File No. 1-10635
NIKE, Inc.
(Exact name of Registrant as specified in its charter)
Oregon 93-0584541
(State or other jurisdiction
of incorporation)
(IRS Employer
Identification No.)
One Bowerman Drive (503) 671-6453
Beaverton, Oregon 97005-6453 (Registrant’s Telephone Number, Including Area Code)
(Address of principal executive offices) (Zip Code)
Securities registered pursuant to Section 12(b) of the Act:
Class B Common Stock New York Stock Exchange
(Title of Each Class) (Name of Each Exchange on Which Registered)
Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities
Act. Yes ÍNo
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the
Act. Yes No Í
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file
such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ÍNo
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every
Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§229.405 of this chapter) during the
preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is
not contained herein, and will not be contained, to the best of Registrant’s knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. Í
Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a
smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer” “non-accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer ÍAccelerated filer
Non-accelerated filer Smaller Reporting Company
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes No Í
As of November 30, 2008, the aggregate market value of the Registrant’s Class A Common Stock held by nonaffiliates of the
Registrant was $221,932,688 and the aggregate market value of the Registrant’s Class B Common Stock held by nonaffiliates of
the Registrant was $20,688,140,567.
As of July 24, 2009, the number of shares of the Registrant’s Class A Common Stock outstanding was 95,299,318 and the
number of shares of the Registrant’s Class B Common Stock outstanding was 390,631,331.
DOCUMENTS INCORPORATED BY REFERENCE:
Parts of Registrant’s Proxy Statement for the annual meeting of shareholders to be held on September 21, 2009 are
incorporated by reference into Part III of this Report.

Table of contents

  • Page 1
    ...Beaverton, Oregon 97005-6453 (Address of principal executive offices) (Zip Code) (503) 671-6453 (Registrant's Telephone Number, Including Area Code) Securities registered pursuant to Section 12(b) of the Act: Class B Common Stock New York Stock Exchange (Title of Each Class) (Name of Each Exchange...

  • Page 2
    ... I Business ...General ...Products ...Sales and Marketing ...United States Market ...International Markets ...Significant Customer ...Orders ...Product Research and Development ...Manufacturing ...International Operations and Trade ...Competition ...Trademarks and Patents ...Employees ...Executive...

  • Page 3
    ..., Beaverton, Oregon 97005-6453. Our principal business activity is the design, development and worldwide marketing of high quality footwear, apparel, equipment, and accessory products. NIKE is the largest seller of athletic footwear and athletic apparel in the world. We sell our products to retail...

  • Page 4
    ..., distributes and licenses athletic and casual footwear, apparel and equipment, primarily for the sport of soccer, under the Umbro® trademarks. Sales and Marketing Financial information about geographic and segment operations appears in Note 19 of the accompanying consolidated financial statements...

  • Page 5
    ... largest customers outside of the U.S. accounted for approximately 11% of total non-U.S. sales. We operate the following retail outlets outside the United States: Non-U.S. Retail Stores Number NIKE factory stores ...NIKE stores ...NIKETOWNs ...NIKE employee-only stores ...Cole Haan stores ...Hurley...

  • Page 6
    ... advance orders, including at-once and close-out sales of NIKE footwear and apparel, wholesale sales of equipment, Cole Haan, Converse, Hurley, Umbro, NIKE Golf, and retail sales across all brands. Product Research and Development We believe our research and development efforts are a key factor in...

  • Page 7
    ... raw material requirements. Since 1972, Sojitz Corporation of America ("Sojitz America"), a large Japanese trading company, has performed significant import-export financing services for us. During fiscal 2009, Sojitz America provided financing and purchasing services for NIKE brand products sold in...

  • Page 8
    ... risk factors in our operations. NIKE is the largest seller of athletic footwear and athletic apparel in the world. Performance and reliability of shoes, apparel, and equipment, new product development, price, product identity through marketing and promotion, and customer support and service are...

  • Page 9
    ... at Portland State University. Mark G. Parker, Chief Executive Officer and President - Mr. Parker, 53, was appointed CEO and President in January 2006. He has been employed by NIKE since 1979 with primary responsibilities in product research, design and development, marketing, and brand management...

  • Page 10
    ... Global Brand and Category Management in 2006. Prior to NIKE, Mr. Edwards was with the Colgate-Palmolive Company. Jeanne P. Jackson, President, Direct to Consumer - Ms. Jackson, 57, served as a member of the NIKE, Inc. Board of Directors from 2001 through March 2009, when she resigned from our Board...

  • Page 11
    ... development. Item 1A. Risk Factors Special Note Regarding Forward-Looking Statements and Analyst Reports Certain written and oral statements, other than purely historical information, including estimates, projections, statements relating to NIKE's business plans, objectives and expected operating...

  • Page 12
    ... (including expenditures for advertising and endorsements), pricing, costs of production, and customer service are areas of intense competition. This, in addition to rapid changes in technology and consumer preferences in the markets for athletic and leisure footwear and apparel, and athletic...

  • Page 13
    ... adverse effect on our business, operating results, and financial condition: • Slower consumer spending may result in reduced demand for our products, reduced orders from retailers for our products, order cancellations, lower revenues, increased inventories, and lower gross margins. We may be...

  • Page 14
    ..., wholesale sales of equipment, Cole Haan, Converse, Hurley, NIKE Golf and Umbro, and retail sales across all brands. Our "futures" ordering program does not prevent excess inventories or inventory shortages, which could result in decreased operating margins and harm to our business. We purchase...

  • Page 15
    ... production and the shipping of seasonal products, we offer customers the ability to place orders five to six months ahead of delivery under our "futures" ordering program. These advance orders may be cancelled, and the risk of cancellation may increase when dealing with financially ailing retailers...

  • Page 16
    ... all of our athletic footwear and apparel is manufactured outside of the United States, and the majority of our products are sold outside of the United States. Accordingly, we are subject to the risks generally associated with global trade and doing business abroad, which include foreign laws and...

  • Page 17
    ... to train suppliers and manufacturers in our methods, products, quality control standards, and labor, health and safety standards. Any delays, interruption or increased costs in the supply of materials or manufacture of our products could have an adverse effect on our ability to meet retail customer...

  • Page 18
    ...Our success depends on our global distribution facilities. We distribute our products to customers directly from the factory and through distribution centers located throughout the world. Our ability to meet customer expectations, manage inventory, complete sales and achieve objectives for operating...

  • Page 19
    ... or leased by NIKE. The NIKE World Campus, owned by NIKE and located in Beaverton, Oregon, USA, is a 176 acre facility of 18 buildings which functions as our world headquarters and is occupied by almost 5,700 employees engaged in management, research, design, development, marketing, finance, and...

  • Page 20
    ... 60 administrative offices worldwide. We lease more than 600 retail stores worldwide, which consist primarily of factory outlet stores. See "United States Market" and "International Markets" starting on page 2 of this Report. Our leases expire at various dates through the year 2034. Item...

  • Page 21
    ...5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities NIKE's Class B Common Stock is listed on the New York Stock Exchange and trades under the symbol NKE. At July 24, 2009, there were 20,672 holders of record of our Class B Common Stock and...

  • Page 22
    Performance Graph The following graph demonstrates a five-year comparison of cumulative total returns for NIKE's Class B Common Stock, the Standard & Poor's 500 Stock Index, the Standard & Poor's Apparel, Accessories & Luxury Goods Index, and the Dow Jones U.S. Footwear Index. The graph assumes an ...

  • Page 23
    ... 0.475 Cash flow from operations ...1,736.1 1,936.3 1,878.7 1,667.9 1,570.7 Price range of common stock High ...70.28 70.60 57.12 45.77 46.22 Low ...38.24 51.50 37.76 38.27 34.31 At May 31, Cash and equivalents ...Short-term investments ...Inventories ...Working capital ...Total assets ...Long-term...

  • Page 24
    ... outstanding . . Cash dividends declared per common share ...Price range of common stock High ...Low ... Item 7. Overview Management's Discussion and Analysis of Financial Condition and Results of Operations NIKE designs, develops and markets high quality footwear, apparel, equipment and accessory...

  • Page 25
    ... the year grew at a higher rate than net income given lower outstanding shares due to repurchases made under our share repurchase program in the first half of fiscal 2009. Our cash flows from operations and return on invested capital both declined as compared to fiscal 2008. During fiscal 2009, we...

  • Page 26
    ... Items(1) FY09 vs. FY08 Fiscal 2008 Change Fiscal 2009 (In millions, except per share data) Net income, as reported ...Add: Restructuring charges, net of tax(2) ...Umbro impairment of goodwill, intangible and other assets, net of tax(3) ...Gain recognized on sale of NIKE Bauer Hockey, net of tax...

  • Page 27
    ... revenue for fiscal 2009. Worldwide NIKE branded apparel revenues were in line with the prior year, while equipment revenues declined 2% or $20 million. Our Other businesses, comprised primarily of results from Cole Haan, Converse Inc., Hurley International LLC, NIKE Golf, and Umbro in fiscal 2009...

  • Page 28
    ... to better inventory management. The factors driving an increased gross margin percentage were partially offset by lower apparel in-line gross pricing margins primarily driven by higher product costs, most notably in the U.S. and EMEA regions, and increased apparel close-out sales, primarily in the...

  • Page 29
    ...sport team endorsers of our products, spending around major sporting events including the European Football Championships and the Beijing Summer Olympics, key product initiatives such as Men's Training in the U.S. and retail presentation. Excluding the effects of changes in exchange rates, operating...

  • Page 30
    ... of gains and losses generated by the EMEA Region and Other businesses, are reflected in the Corporate line in our segment presentation of pre-tax income in the accompanying notes to the consolidated financial statements (Note 19 - Operating Segments and Related Information). For fiscal 2009, we...

  • Page 31
    ... advance orders, and actual revenues. Moreover, a significant portion of our revenue is not derived from futures and advance orders, including at-once and close-out sales of NIKE footwear and apparel, wholesale sales of equipment, Cole Haan, Converse, Hurley, Umbro, NIKE Golf and retail sales across...

  • Page 32
    ... with Statement of Financial Accounting Standard ("SFAS") No. 131, "Disclosures about Segments of an Enterprise and Related Information." As discussed in Note 19 - Operating Segments and Related Information in the accompanying notes to the consolidated financial statements, certain corporate costs...

  • Page 33
    ...of kids' products which are lower priced. The year-over-year decrease in U.S. apparel revenues during fiscal 2009 reflected a mid-single digit decrease in unit sales, primarily driven by a reduction in products sold to value channel retailers and generally softer demand in the overall apparel market...

  • Page 34
    .... The gross margin improvement in fiscal 2009 was primarily attributable to improved year-over-year currency hedge rates which more than offset higher warehousing costs and discounts on in-line products. The increase in selling and administrative expenses was mainly driven by retail expansion across...

  • Page 35
    ...-year hedge rates and improved margins on close-out product. The increase in selling and administrative expenses was driven by an increase in demand creation spending, primarily attributable to spending around the European Football Championships. As a result of retail expansion and overall business...

  • Page 36
    ... creation and operating overhead expenses mainly driven by spending around retail marketing programs, brand events and normal wage inflation. The slight decrease in gross margin percentage in fiscal 2009 was mainly due to a higher sales mix of lower margin footwear products and higher import costs...

  • Page 37
    ... to investments in sports marketing, most notably in soccer, brand events and investments in our retail presentation. Other Businesses FY09 vs. FY08 % Change (In millions) FY08 vs. FY07 % Change Fiscal 2009 Fiscal 2008 Fiscal 2007 Revenues Converse ...NIKE Golf ...Cole Haan ...Hurley ...Umbro...

  • Page 38
    ... United States and international markets. The growth at Cole Haan is mainly driven by the strong results at Company-owned retail stores. During fiscal 2008, growth at Converse and NIKE Golf, combined with margin improvements across most businesses drove the year-over-year increase in pre-tax income...

  • Page 39
    ... due to the increase in centralized corporate functions, higher performance-based compensation as well as increased investments in demand creation, including other spending around the Beijing Summer Olympics. In fiscal 2008, foreign currency conversion loss reported in Corporate expense totaled $76...

  • Page 40
    ... sheets into U.S. dollars for consolidated reporting results in a cumulative translation adjustment to OCI within shareholders' equity. In preparing our consolidated statements of income, foreign exchange rate fluctuations impact our operating results as the revenues and expenses of our foreign...

  • Page 41
    ... and Capital Resources Cash Flow Activity Cash provided by operations was $1.7 billion for fiscal 2009 compared to $1.9 billion for fiscal 2008. This decrease was mainly due to an increase in cash used for our working capital as a result of lower accounts payable and a higher accounts receivable...

  • Page 42
    ... the current financial market conditions. In fiscal 2009, we purchased approximately 10.6 million shares of NIKE's Class B Common Stock for $639.0 million. As of the end of fiscal 2009, we have repurchased 49.2 million shares for $2.7 billion under the $3 billion program approved by our Board of...

  • Page 43
    ... the consolidated financial statements (Note 7 - Short-Term Borrowings and Credit Lines) for further description and interest rates related to the short-term debt obligations listed below. Outstanding as of May 31, 2009 (In millions) Notes payable, due at mutually agreed-upon dates within one year...

  • Page 44
    ... and cash flows. The adoption of FAS 161 did not have an impact on our consolidated financial position or results of operations. For additional information, see Note 18 - Risk Management and Derivatives in the accompanying notes to the consolidated financial statements. On June 1, 2008, we...

  • Page 45
    ... beginning June 1, 2009. We do not expect that the adoption of FAS 160 will have a material impact on the Company's consolidated financial position or results of operations. In April 2008, the FASB issued Staff Position No. FAS 142-3, "Determination of the Useful Life of Intangible Assets" ("FSP FAS...

  • Page 46
    ... or upon receipt by the customer depending on the country of the sale and the agreement with the customer. Retail store revenues are recorded at the time of sale. In some instances, we ship product directly from our supplier to the customer and recognize revenue when the product is delivered to and...

  • Page 47
    ... over the estimated useful life. Changes in circumstances (such as technological advances or changes to our business operations) can result in differences between the actual and estimated useful lives. In those cases where we determine that the useful life of a long-lived asset should be shortened...

  • Page 48
    ... publicly traded firms in similar lines of business. Significant estimates in the market valuation approach model include identifying similar companies with comparable business factors such as size, growth, profitability, risk and return on investment and assessing comparable revenue and operating...

  • Page 49
    ... option pricing model requires the input of highly subjective assumptions including volatility. Expected volatility is estimated based on implied volatility in market traded options on our common stock with a term greater than one year, along with other factors. Our decision to use implied...

  • Page 50
    ... management program is intended to minimize both the positive or negative effects of currency fluctuations on our consolidated results of operations, financial position and cash flows. This also has the effect of delaying the impact of current market rates on our consolidated financial statements...

  • Page 51
    ... the impact of such rate fluctuations on non-functional currency transactions (such as anticipated transactions, firm commitments, cash balances, and accounts and loans receivable and payable), including those which are hedged by these instruments. The VaR model is a risk analysis tool and does not...

  • Page 52
    ...for the years ended May 31, 2009, 2008 and 2007. Both the intercompany loan and the related interest rate swap matured during fiscal 2009. Item 8. Financial Statements and Supplemental Data Management of NIKE, Inc. is responsible for the information and representations contained in this report. The...

  • Page 53
    ... public accounting firm, has audited (1) the consolidated financial statements and (2) the effectiveness of our internal control over financial reporting as of May 31, 2009, as stated in their report herein. Mark G. Parker Chief Executive Officer and President Donald W. Blair Chief Financial Officer...

  • Page 54
    REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Directors and Shareholders of NIKE, Inc.: In our opinion, the consolidated financial statements listed in the index appearing under Item 15(a)(1) present fairly, in all material respects, the financial position of NIKE, Inc. and...

  • Page 55
    NIKE, INC. CONSOLIDATED STATEMENTS OF INCOME Year Ended May 31, 2009 2008 2007 (In millions, except per share data) Revenues ...Cost of sales ...Gross margin ...Selling and administrative expense ...Restructuring charges (Note 16) ...Goodwill impairment (Note 4) ...Intangible and other asset ...

  • Page 56
    ... INC. CONSOLIDATED BALANCE SHEETS May 31, 2009 2008 (In millions) ASSETS Current assets: Cash and equivalents ...Short-term investments ...Accounts receivable, net (Note 1) ...Inventories (Notes 1 and 2) ...Deferred income taxes (Note 9) ...Prepaid expenses and other current assets ...Total current...

  • Page 57
    ... share-based payment arrangements ...25.1 63.0 55.8 Repurchase of common stock ...(649.2) (1,248.0) (985.2) Dividends - common and preferred ...(466.7) (412.9) (343.7) Cash used by financing activities ...(733.9) (1,226.1) (1,111.5) Effect of exchange rate changes ...(46.9) 56.8 42.4 Net increase...

  • Page 58
    NIKE, INC. CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY Capital in Accumulated Excess of Other Stated Comprehensive Retained Shares Amount Shares Amount Value Income Earnings Class A Class B Common Stock Total Balance at May 31, 2006 ...Stock options exercised ...Conversion to Class B Common ...

  • Page 59
    NIKE, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 1 - Summary of Significant Accounting Policies Description of Business NIKE, Inc. is a worldwide leader in the design, marketing and distribution of athletic and sports-inspired footwear, apparel, equipment and accessories. Wholly-owned Nike...

  • Page 60
    ... to support current operational liquidity needs and therefore classifies these securities as short-term investments within current assets on the consolidated balance sheet. As of May 31, 2009, the Company held $1,005.0 million of available-for-sale securities with maturity dates within one year and...

  • Page 61
    NIKE, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) Inventory Valuation Inventories related to our wholesale operations are stated at lower of cost or market and valued on a first-in, first-out ("FIFO") or moving average cost basis. Inventories related to our retail operations are ...

  • Page 62
    NIKE, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) reporting unit's business; and working capital effects. The market valuation approach indicates the fair value of the business based on a comparison of the reporting unit to comparable publicly traded companies in similar lines of ...

  • Page 63
    ... Relating to Accounting for the Tax Effects of Share-Based Payment Awards." See Note 11 - Common Stock and Stock-Based Compensation for more information on the Company's stock programs. Income Taxes The Company accounts for income taxes using the asset and liability method. This approach requires...

  • Page 64
    ... and the related hedged items affect an entity's financial position, financial performance and cash flows. The adoption of FAS 161 did not have an impact on the Company's consolidated financial position or results of operations. For additional information, see Note 18 - Risk Management and...

  • Page 65
    ... beginning June 1, 2009. The Company does not expect the adoption of FAS 160 will have a material impact on its consolidated financial position or results of operations. In April 2008, the FASB issued Staff Position No. FAS 142-3, "Determination of the Useful Life of Intangible Assets" ("FSP FAS...

  • Page 66
    ... as part of the Company's "Other" operating segment. The acquisition of Umbro was accounted for as a purchase business combination in accordance with SFAS No. 141 "Business Combinations." The purchase price was allocated to tangible and identifiable intangible assets acquired and liabilities assumed...

  • Page 67
    ... used in the discounted cash flow analysis include the rates of projected growth and profitability of Umbro's business and working capital effects. The market valuation approach indicates the fair value of Umbro based on a comparison of Umbro to publicly traded companies in similar lines of business...

  • Page 68
    NIKE, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) Identified Intangible Assets and Goodwill All goodwill balances are included in the Company's "Other" category for segment reporting purposes. The following table summarizes the Company's goodwill balance as of May 31, 2009 and 2008...

  • Page 69
    ...: May 31, 2009 2008 (In millions) Compensation and benefits, excluding taxes ...Endorser compensation ...Taxes other than income taxes ...Restructuring charges(1) ...Dividends payable ...Advertising and marketing ...Fair value of derivatives ...Import and logistics costs ...Other(2) ... $ 491...

  • Page 70
    ... relating to these risks were not material for the year ended May 31, 2009. Available-for-sale securities are primarily comprised of investments in U.S. Treasury and agency securities, corporate commercial paper and bonds. These securities are valued using market prices on both active markets...

  • Page 71
    NIKE, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) Note 7 - Short-Term Borrowings and Credit Lines Notes payable to banks and interest-bearing accounts payable to Sojitz Corporation of America ("Sojitz America") as of May 31, 2009 and 2008, are summarized below: May 31, 2009 ...

  • Page 72
    ...million at May 31, 2009 and $450.8 million at May 31, 2008. In fiscal years 2003 and 2004, the Company issued a total of $240 million in medium-term notes of which $215 million, at face value, were outstanding at May 31, 2009 and 2008. The outstanding notes have coupon rates that range from 4.70% to...

  • Page 73
    NIKE, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) Note 9 - Income Taxes Income before income taxes is as follows: 2009 Year Ended May 31, 2008... for income taxes is as follows: 2009 Year Ended May 31, 2008 2007 (In millions) Current: United States Federal ...State ...Foreign ...

  • Page 74
    NIKE, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) Deferred tax assets and (liabilities) are comprised of the following: May 31, 2009 2008 (In millions) Deferred tax assets: Allowance for doubtful accounts ...Inventories ...Sales return reserves ...Deferred compensation ...Stock-...

  • Page 75
    ... from the fiscal 2008 effective tax rate of 24.8%. The effective tax rate for the year ended May 31, 2009 was favorably impacted by a benefit associated with the impairment of goodwill, intangible, and other assets of Umbro (see Note 4 - Acquisition, Identifiable Intangible Assets, Goodwill and...

  • Page 76
    ...In millions) Net Operating Losses ... $2.2 $10.9 During the years ended May 31, 2009, 2008, and 2007, income tax benefits attributable to employee stockbased compensation transactions of $25.4 million, $68.9 million, and $56.6 million, respectively, were allocated to shareholders' equity. Note 10...

  • Page 77
    NIKE, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) Note 11 - Common Stock and Stock-Based Compensation The authorized number of shares of Class A Common Stock, no par value, and Class B Common Stock, no par value, are 175 million and 750 million, respectively. Each share of Class A ...

  • Page 78
    NIKE, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) The weighted average fair value per share of the options granted during the years ended May 31, 2009, 2008 and 2007, as computed using the Black-Scholes pricing model, was $17.13, $13.87 and $8.80, respectively. The weighted average...

  • Page 79
    NIKE, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) In addition to the 1990 Plan, the Company gives employees the right to purchase shares at a discount to the market price under employee stock purchase plans ("ESPPs"). Employees are eligible to participate through payroll deductions...

  • Page 80
    NIKE, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) Note 13 - Benefit Plans The Company has a profit sharing plan available to most U.S.-based employees. The terms of the plan call for annual contributions by the Company as determined by the Board of Directors. A subsidiary of the ...

  • Page 81
    ...the corporate expense line in the segment presentation of pre-tax income in Note 19 - Operating Segments and Related Information. The activity in the restructuring accrual for the year ended May 31, 2009 is as follows (in millions): Restructuring accrual - June 1, 2008 ...Severance and related costs...

  • Page 82
    ...corporate expense line in the segment presentation of pre-tax income in Note 19 - Operating Segments and Related Information. Note 18 - 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...

  • Page 83
    ... the consolidated balance sheet as of May 31, 2009: Asset Derivatives Liability Derivatives Balance Sheet Location Fair Value Balance Sheet Location Fair Value (In millions) Derivatives designated as hedging instruments under FAS 133: Foreign exchange forwards and options ...Interest rate swap...

  • Page 84
    ... for a description of how the above financial instruments are valued in accordance with FAS 157, Note 14 - Accumulated Other Comprehensive Income and the Consolidated Statement of Shareholders' Equity for additional information on changes in other comprehensive income for the year ended May 31...

  • Page 85
    ..., including revenues, product costs, selling and administrative expenses, investments in U.S. dollar-denominated available-for-sale debt securities and payments related to intercompany transactions, will be adversely affected by changes in exchange rates. It is the Company's policy to utilize...

  • Page 86
    ... currently used by the Company to hedge this risk are receive-fixed, pay-variable interest rate swaps. As of May 31, 2009, all interest rate swap agreements are designated as fair value hedges of the related long-term debt and meet the shortcut method requirements under FAS 133. Accordingly, changes...

  • Page 87
    ... brand geographic segment operates predominantly in one industry: the design, production, marketing and selling of sports and fitness footwear, apparel, and equipment. The "Other" category shown below represents activities of Cole Haan, Converse, Exeter Brands Group (whose primary business was the...

  • Page 88
    ... assets of Umbro, which was recorded in the third quarter of fiscal 2009. See Note 4 - Acquisition, Identifiable Intangible Assets, Goodwill and Umbro Impairment for more information. (2) During the year ended May 31, 2009, Corporate expense included pre-tax charges of $195.0 million for the Company...

  • Page 89
    ... to external customers primarily include external sales by Cole Haan, Converse, Exeter (whose primary business was the Starter brand business which was sold December 17, 2007), Hurley, NIKE Bauer Hockey (through April 16, 2008), NIKE Golf, and Umbro (beginning March 3, 2008). 2009 Year Ended May...

  • Page 90
    ... 9% of the Company's consolidated revenues for the years ended May 31, 2009 and 2008, and 10% for the year ended May 31, 2007. Sales to this customer are included in all segments of the Company. Item 9. Changes In and Disagreements with Accountants on Accounting and Financial Disclosure There has...

  • Page 91
    .... Item 12. Matters Security Ownership of Certain Beneficial Owners and Management and Related Stockholder The information required by Item 201(d) of Regulation S-K is included under "Equity Compensation Plans" in the definitive Proxy Statement for our 2009 Annual Meeting of Shareholders and is...

  • Page 92
    ...or the required information is shown in the financial statements or notes thereto. 3. 2.1 EXHIBITS: Implementation Agreement, dated October 23, 2007, between Umbro Plc, NIKE Vapor Ltd., and NIKE, Inc. (incorporated by reference to Exhibit 2.1 to the Company's Current Report on Form 8-K filed October...

  • Page 93
    ... July 17, 2009).* Form of Indemnity Agreement entered into between the Company and each of its officers and directors (incorporated by reference to Exhibit 10.2 to the Company's Annual Report on Form 10-K for the fiscal year ended May 31, 2008).* NIKE, Inc. 1990 Stock Incentive Plan (incorporated by...

  • Page 94
    ...total assets of NIKE and its subsidiaries on a consolidated basis. NIKE agrees, pursuant to Item 601(b)(4)(iii) of Regulation S-K, that it will furnish a copy of any such instrument to the SEC upon request. Upon written request to Investor Relations, NIKE, Inc., One Bowerman Drive, Beaverton, Oregon...

  • Page 95
    ... year ended May 31, 2008 ...For the year ended May 31, 2009 ...(1) $67.6 71.7 78.4 $18.5 25.7 62.4 $ 1.8 4.0 (11.7) $(16.2) (23.0) (18.3) $ 71.7 78.4 110.8 The non-current portion of the allowance for doubtful accounts is classified in deferred income taxes and other assets on the consolidated...

  • Page 96
    ...333-117059, and 333-133360) of NIKE, Inc. of our report dated July 27, 2009 relating to the financial statements, financial statement schedule and the effectiveness of internal control over financial reporting, which appears in this Form 10-K. /s/ PRICEWATERHOUSECOOPERS LLP Portland, Oregon July 27...

  • Page 97
    ... Mark G. Parker Director, Chief Executive Officer and President July 27, 2009 Principal Financial Officer: /s/ DONALD W. BLAIR Donald W. Blair Chief Financial Officer July 27, 2009 Principal Accounting Officer: /s/ BERNARD F. PLISKA Bernard F. Pliska Corporate Controller July 27, 2009 Directors...

  • Page 98
    ... G. Houser JOHN C. LECHLEITER John C. Lechleiter Director July 27, 2009 /s/ Director July 27, 2009 /s/ Director July 27, 2009 /s/ JOHNATHAN A. RODGERS Johnathan A. Rodgers /s/ ORIN C. SMITH Orin C. Smith Director July 27, 2009 Director July 27, 2009 /s/ JOHN R. THOMPSON, JR. John...

  • Page 99
    EXHIBIT 12.1 NIKE, INC. COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES 2009 2008 Year Ended May 31, 2007 2006 (In millions...both expensed and capitalized. Interest component of leases includes one-tenth of rental expense which approximates the interest component of operating leases. Earnings before...

  • Page 100
    ...NIKE S.L. Bragano Trading S.r.l. BRS NIKE Taiwan, Inc. Cole Haan Cole Haan Company Store Cole Haan Hong Kong Limited Cole Haan Japan Converse (Asia Pacific) Limited Converse Canada Corp. Converse Canada Holding B.V. Converse Footwear Technical Service (Zhongshan) Co., Ltd. Converse Hong Kong Holding...

  • Page 101
    ...OY NIKE Flight NIKE France S.A.S. NIKE Galaxy Holding B.V. NIKE Global Holding B.V. NIKE Global Services PTE. LTD. NIKE Global Trading PTE. LTD. NIKE GmbH. NIKE Group Holding B.V. NIKE Hellas EPE NIKE Holding, LLC NIKE Hong Kong Limited NIKE Huarache NIKE IHM, Inc. NIKE India Holding B.V. NIKE India...

  • Page 102
    ... NIKE USA, Inc. NIKE Vapor Ltd. NIKE Vietnam Limited Liability Company NIKE Vision, Timing and Techlab, LP NIKE Waffle NIKE Zoom LLC PMG International Limited PT Hurley Indonesia PT NIKE Indonesia Savier, Inc. Triax Insurance, Inc. Twin Dragons Global Limited Twin Dragons Holding B.V. Umbro Asia...

  • Page 103
    ... H. Knight Chairman of the Board of Directors Mark G. Parker President & Chief Executive Officer David J. Ayre Vice President, Global Human Resources Donald W. Blair Vice President & Chief Financial Officer Alexander W. Bodecker Vice President, NIKE Global Design & Action Sports Craig R. Cheek Vice...

  • Page 104
    ...Global Category Supply Marketing, Football Chain Ops Beaverton, Oregon Beaverton, Oregon Martin Brok Vice President, Western Europe Retail Hilversum, The Netherlands Andrew Campion Vice President, Global Planning & Development Beaverton, Oregon Oscar E. Cardona Vice President, Global Human Resources...

  • Page 105
    ... to NIKE's Investor Relations Department at NIKE World Headquarters, One Bowerman Drive, Beaverton, Oregon 97005-6453. Financial information is also available via the internet at www.nikebiz.com. Dividend Payments Quarterly dividends on NIKE common stock, when declared by the Board of Directors, are...