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NIKE INC ( NKE )
ONE BOWERMAN DR
BEAVERTON, OR, 97005−6453
503−671−3173
www.nikebiz.com
10−K
Annual report pursuant to section 13 and 15(d)
Filed on 7/20/2010
Filed Period 5/31/2010

Table of contents

  • Page 1
    NIKE INC ( NKE ) ONE BOWERMAN DR BEAVERTON, OR, 97005âˆ'6453 503âˆ'671âˆ'3173 www.nikebiz.com 10âˆ'K Annual report pursuant to section 13 and 15(d) Filed on 7/20/2010 Filed Period 5/31/2010

  • Page 2
    ... Drive Beaverton, Oregon 97005âˆ'6453 (Address of principal executive offices) (Zip Code) (503) 671âˆ'6453 (Registrant's Telephone Number, Including Area Code) Securities registered pursuant to Section 12(b) of the Act: Class B Common Stock (Title of Each Class) New York Stock Exchange (Name...

  • Page 3
    ... Contents NIKE, INC. ANNUAL REPORT ON FORM 10âˆ'K TABLE OF CONTENTS Page PART I Item 1. Business General Products Sales and Marketing United States Market International Markets Significant Customer Orders Product Research and Development Manufacturing International Operations and Trade Competition...

  • Page 4
    ... Drive, Beaverton, Oregon 97005âˆ'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...

  • Page 5
    ... athletic and casual footwear, apparel and equipment, primarily for the sport of football (soccer), under the Umbro ® trademark. Sales and Marketing Financial information about geographic and segment operations appears in Note 19 of the accompanying Notes to the Consolidated Financial Statements on...

  • Page 6
    ... from Irvine, California. International Markets In fiscal 2010 and 2009, nonâˆ'U.S. sales (including nonâˆ'U.S. sales of our Other Businesses) accounted for 58% of total revenues, compared to 57% in fiscal 2008. We sell our products to retail accounts, through NIKEâˆ'owned retail stores, and through...

  • Page 7
    ... No customer accounted for 10% or more of our net sales during fiscal 2010. Orders Worldwide futures and advance orders for NIKE Brand athletic footwear and apparel, scheduled for delivery from June through November 2010, were $8.8 billion compared to $7.8 billion for the same period last year. This...

  • Page 8
    ..., China, Korea, and Thailand, excluding products produced and sold in the same country. Approximately 17% of NIKE Brand sales occurred in those countries. Any failure of Sojitz America to provide these services or any failure of Sojitz America's banks could disrupt our ability to acquire products...

  • Page 9
    ... 2010. Trade Relations with China China represents an important sourcing and marketing country for us. Many governments around the world are concerned about China's growing and fastâˆ'paced economy, compliance with WTO rules, currency valuation, and high trade surpluses. As a result, a wide range...

  • Page 10
    ...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 important...

  • Page 11
    ...a certified public accountant with Deloitte, Haskins, and Sells. Charles D. Denson, President of the NIKE Brand - Mr. Denson, 54, has been employed by NIKE since 1979. Mr. Denson held several management positions within the Company, including his appointments as Director of USA Apparel Sales in 1994...

  • Page 12
    ... Indivers in business development. Item 1A. Risk Factors Special Note Regarding Forwardâˆ'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...

  • Page 13
    ...preferences, consumer demand for NIKE products, and the various market factors described above; difficulties in implementing, operating, and maintaining NIKE's increasingly complex information systems and controls, including, without limitation, the systems related to demand and supply planning, and...

  • Page 14
    ... and respond to our competitors, our costs may increase or the consumer demand for our products may decline significantly. If we are unable to anticipate consumer preferences and develop new products, we may not be able to maintain or increase our net revenues and profits. Our success depends on our...

  • Page 15
    ... in the capital and credit markets to purchase our products, this could result in reduced orders for our products, order cancellations, inability of retailers to timely meet their payment obligations to us, extended payment terms, higher accounts receivable, reduced cash flows, greater expense...

  • Page 16
    ..., 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 products from manufacturers...

  • Page 17
    ...outstanding payables to us may not be paid. In addition, increasing market share concentration among one or a few retailers in a particular country or region increases the risk that if any one of them substantially reduces their purchases of our products, we may be unable to find a sufficient number...

  • Page 18
    ... affected by a number of factors, including: changes in the mix of earnings in countries with differing statutory tax rates, changes in the valuation of deferred tax assets and liabilities, changes in tax laws, the outcome of income tax audits in various jurisdictions around the world, and any...

  • Page 19
    ... dependent on information technology systems across our supply chain, including product design, production, forecasting, ordering, manufacturing, transportation, sales, and distribution. Our ability to effectively manage and maintain our inventory and to ship products to customers on a timely basis...

  • Page 20
    ... for employees in our industry is intense and we may not be successful in attracting and retaining such personnel. The sale of a large number of shares held by our Chairman could depress the market price of our common stock. Philip H. Knight, Coâˆ'founder and Chairman of our Board of Directors...

  • Page 21
    ... 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 5,800 employees engaged in management, research, design, development, marketing, finance, and...

  • Page 22
    ... the fourâˆ'year, $5 billion program approved by our Board of Directors in September 2008. The following table presents a summary of share repurchases made by NIKE during the quarter ended May 31, 2010. Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (In thousands...

  • Page 23
    ...& Poor's Apparel, Accessories, and Luxury Goods Index include companies in two major lines of business in which the Company competes. The indices do not encompass all of the Company's competitors, nor all product categories and lines of business in which the Company is engaged. The stock performance...

  • Page 24
    ...common share Cash flow from operations Price range of common stock High Low At May 31, Cash and equivalents Shortâˆ'term investments Inventories Working capital Total assets Longâˆ'term debt Redeemable Preferred Stock Shareholders' equity Yearâˆ'end stock price Market capitalization Financial Ratios...

  • Page 25
    ... Management's Discussion and Analysis of Financial Condition and Results of Operations Overview NIKE designs, develops and markets high quality footwear, apparel, equipment and accessory products worldwide. We are the largest seller of athletic footwear and apparel in the world and sell our products...

  • Page 26
    ... operations around the world. These conditions could continue to affect our business in a number of direct and indirect ways, including lower revenue from slowing consumer/customer demand for our products, reduced profit margins and/or increased costs, changes in interest and currency exchange rates...

  • Page 27
    ...) FY09 vs. FY08 % Change Fiscal 2010 Revenues Cost of sales Gross margin Gross margin % Selling and administrative expense % of Revenues Restructuring charges Goodwill impairment Intangible and other asset impairment Income before income taxes Net income Diluted earnings per share $ 19,014 10,214...

  • Page 28
    ... prior year exchange rates, worldwide futures and advance orders for NIKE Brand footwear and apparel scheduled for delivery from June through November 2010 were 10% higher than the orders reported for the comparable prior year period. This futures growth was driven by increases in unit sales volume...

  • Page 29
    ... discounted closeâˆ'out to higher margin inâˆ'line sales; and Growth of NIKEâˆ'owned retail as a percentage of total revenue, across most NIKE Brand geographies, driven by an increase in both new store openings and comparable store sales. Together, these factors increased consolidated gross margins...

  • Page 30
    ... the 2010 World Cup. We anticipate operating overhead will grow at a mid singleâˆ'digit rate, with faster growth in the first half of the fiscal year, driven by increased investments in our NIKEâˆ'owned retail business. Fiscal 2009 Compared to Fiscal 2008 Changes in foreign currency exchange rates...

  • Page 31
    ... and our decision to adjust the level of investment in the business. We measured the fair value of Umbro by using an equal weighting of the fair value implied by a discounted cash flow analysis and by comparisons with the market values of similar publicly traded companies. We believe the use of both...

  • Page 32
    ..., drive innovation more quickly to market and establish a more scalable cost structure. Effective June 1, 2009, the Company's new reportable operating segments for the NIKE Brand became: North America, Western Europe, Central and Eastern Europe, Greater China, Japan, and Emerging Markets. Previously...

  • Page 33
    ... Currency Changes(2) Fiscal 2010 Fiscal 2009 (1) FY10 vs. FY09 % Change Fiscal 2008 (1) FY09 vs. FY08 % Change North America Western Europe Central and Eastern Europe Greater China Japan Emerging Markets Global Brand Divisions Total NIKE Brand Revenues Other Businesses (3) Corporate Total NIKE...

  • Page 34
    ... millions) FY09 vs. FY08 % Change Fiscal 2010 Fiscal 2009 (1) Fiscal 2008 (1) North America Western Europe Central and Eastern Europe Greater China Japan Emerging Markets Global Brand Divisions Total NIKE Brand Other Businesses Corporate Total NIKE Consolidated Earnings Before Interest and Taxes...

  • Page 35
    ...generally softer demand in the overall apparel market. Average selling prices increased slightly as a result of the reduction in products sold to value retailers, mostly offset by an increased mix of closeâˆ'out sales and higher levels of discounts provided retailers to manage inventory levels. EBIT...

  • Page 36
    ...kids and NIKE Brand sportswear products. Average selling price per pair remained flat compared to the prior year. The decrease in apparel revenue was primarily driven by lower average selling prices resulting from a higher mix of closeâˆ'out sales and higher levels of discounts provided to retailers...

  • Page 37
    ...higher demand for NIKE Brand sportswear, kids, and running products. The increase in apparel revenues was primarily driven by a double digit percentage increase in unit sales, partially offset by a midâˆ'single digit decrease in average selling price, resulting from a higher mix of closeâˆ'out sales...

  • Page 38
    ... apparel revenues was driven primarily by a doubleâˆ'digit increase in unit sales. The growth in unit sales was partially offset by a reduction in average selling price in fiscal 2009, resulting primarily from increased discounts on inâˆ'line products provided to retailers to manage inventory levels...

  • Page 39
    ... the first six months of fiscal 2011 were 16% lower compared to the same period in the prior year. For fiscal 2010, the decrease in Japan's EBIT was primarily due to lower revenues and higher selling and administrative expense, driven by increased investments in NIKEâˆ'owned retail, which more than...

  • Page 40
    ... favorable yearâˆ'overâˆ'year standard currency rates assigned to the geography, which more than offset improved inâˆ'line product margins. Fiscal 2009 Compared to Fiscal 2008 Excluding changes in foreign currency exchange rates, most markets in the Emerging Markets geography reported revenue growth...

  • Page 41
    ... operating segment and selling, general and administrative expenses that are centrally managed for the NIKE Brand. Fiscal 2010 Compared to Fiscal 2009 For fiscal 2010, the increase in Global Brand Division's loss before interest and taxes was largely due to increases in centrally managed demand...

  • Page 42
    ... (854) - 12% Fiscal 2010 Corporate revenues primarily consist of foreign currency revenueâˆ'related hedge gains and losses generated by entities within the NIKE Brand geographic operating segments through our centrally managed foreign exchange risk management program and foreign currency gains and...

  • Page 43
    ... fluctuations on our reported 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, dependent upon hedge horizons. We manage global foreign exchange risk centrally, on...

  • Page 44
    ... changes in fair value of these instruments is reported in other comprehensive income ("OCI"), a component of shareholders' equity, and reclassified into earnings in the same financial statement line item and in the same period or periods during which the related hedged transactions affect earnings...

  • Page 45
    ... gain or loss remaining in OCI; concurrent with settlement, we enter into new forward contracts at the current market rate. The fair value of outstanding net investment hedges at May 31, 2010 and 2009 were $32 million in assets and $23 million in liabilities, respectively. Cash flows from net...

  • Page 46
    ... from operating cash flow, excess cash, and/or debt. The timing and the amount of shares purchased will be dictated by our capital needs and stock market conditions. Offâˆ'Balance Sheet Arrangements In connection with various contracts and agreements, we provide routine indemnifications relating to...

  • Page 47
    ... terms. In some cases, prices are subject to change throughout the production process. The reported amounts exclude product purchase liabilities included in accounts payable on the consolidated balance sheet as of May 31, 2010. Other amounts primarily include service and marketing commitments...

  • Page 48
    ...31, 2010, no amounts were outstanding under this program. We may issue commercial paper from time to time during fiscal 2011 depending on general corporate needs. We currently have shortâˆ'term debt ratings of A1 and P1 from Standard and Poor's Corporation and Moody's Investor Services, respectively...

  • Page 49
    ...the period of expected cash flows used to measure the fair value of the asset. This guidance became effective for us beginning June 1, 2009. The adoption of this guidance did not have a material impact on our consolidated financial position or results of operations. In December 2007, the FASB issued...

  • Page 50
    ... product for periods up to several weeks. In certain countries outside of the U.S., precise information regarding the date of receipt by the customer is not readily available. In these cases, we estimate the date of receipt by the customer based upon historical delivery times by geographic location...

  • Page 51
    ... portion of our demand creation expense relates to payments under endorsement contracts. In general, endorsement payments are expensed uniformly over the term of the contract. However, certain contract elements may be accounted for differently, based upon the facts and circumstances of each...

  • Page 52
    ...obligation to pay royalties for the benefits received from them. This method requires us to estimate the future revenue for the related brands, the appropriate royalty rate and the weighted average cost of capital. Hedge Accounting for Derivatives We use forward and option contracts to hedge certain...

  • Page 53
    ... hedged levels, any resulting ineffectiveness would be reported directly to earnings in the period incurred. Stockâˆ'based Compensation We account for stockâˆ'based compensation by estimating the fair value of stockâˆ'based compensation on the date of grant using the Blackâˆ'Scholes option pricing...

  • Page 54
    ... fluctuation as a result of our international sales, product sourcing and funding activities. Our foreign exchange risk 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 51

  • Page 55
    ...the impact of current market rates on our consolidated financial statements dependent upon hedge horizons. We use forward exchange contracts and options to hedge certain anticipated but not yet firmly committed transactions as well as certain firm commitments and the related receivables and payables...

  • Page 56
    ... to changes in foreign exchange rates, is recognized in accumulated other comprehensive income upon the consolidation of this subsidiary. Item 8. Financial Statements and Supplemental Data Management of NIKE, Inc. is responsible for the information and representations contained in this report. The...

  • Page 57
    ... of our management and directors; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of assets of the company that could have a material effect on the financial statements. While "reasonable assurance" is a high level of...

  • Page 58
    ..., 2010 and 2009, and the results of their operations and their cash flows for each of the three years in the period ended May 31, 2010 in conformity with accounting principles generally accepted in the United States of America. In addition, in our opinion, the financial statement schedule listed in...

  • Page 59
    ... of Contents NIKE, INC. CONSOLIDATED STATEMENTS OF INCOME Year Ended May 31, 2010 2009 2008 (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 impairment...

  • Page 60
    ... NIKE, INC. CONSOLIDATED BALANCE SHEETS May 31, 2010 (In millions) 2009 ASSETS Current assets: Cash and equivalents Shortâˆ'term investments (Note 6) Accounts receivable, net (Note 1) Inventories (Notes 1 and 2) Deferred income taxes (Note 9) Prepaid expenses and other current assets Total current...

  • Page 61
    Table of Contents NIKE, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS 2010 Year Ended May 31, 2009 (In millions) 2008 Cash provided by operations: Net income Income charges (credits) not affecting cash: Depreciation Deferred income taxes Stockâˆ'based compensation (Note 11) Impairment of goodwill, ...

  • Page 62
    ..., INC. CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY Common Stock Class A Class B Shares Balance at May 31, 2007 Stock options exercised Conversion to Class B Common Stock Repurchase of Class B Common Stock Dividends on Common stock ($0.875 per share) Issuance of shares to employees Stockâˆ'based...

  • Page 63
    ... ownership have passed to the customer, based on the terms of sale. This occurs upon shipment or upon receipt by the customer depending on the country of the sale and the agreement with the customer. Retail store revenues are recorded at the time of sale. Provisions for sales discounts, returns and...

  • Page 64
    ... all securities with maturity dates beyond three months as current assets within shortâˆ'term investments on the consolidated balance sheet. See Note 6 - Fair Value Measurements for more information on the Company's short term investments. Allowance for Uncollectible Accounts Receivable Accounts...

  • Page 65
    ... trade names and trademarks have value to the extent that their owner is relieved of the obligation to pay royalties for the benefits received from them. This method requires the Company to estimate the future revenue for the related brands, the appropriate royalty rate and the weighted average cost...

  • Page 66
    ... of the cash flow statement. See Note 18 - Risk Management and Derivatives for more information on the Company's risk management program and derivatives. Stockâˆ'Based Compensation The Company estimates the fair value of options granted under the NIKE, Inc. 1990 Stock Incentive Plan (the "1990...

  • Page 67
    ... NIKE, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) See Note 9 - Income Taxes for further discussion. Earnings Per Share Basic earnings per common share is calculated by dividing net income by the weighted average number of common shares outstanding during the year. Diluted earnings...

  • Page 68
    ... useful life of a recognized intangible asset and the period of expected cash flows used to measure the fair value of the asset. This guidance became effective for the Company beginning June 1, 2009. The adoption of this guidance did not have a material impact on the Company's consolidated financial...

  • Page 69
    ...the outstanding shares of Umbro, a leading United Kingdomâˆ'based global soccer brand, for a purchase price of 290.5 million British Pounds Sterling in cash (approximately $576.4 million), inclusive of direct transaction costs. This acquisition is intended to strengthen the Company's market position...

  • Page 70
    ... NIKE, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) sourcing network, established customer relationships, and the United Soccer League Franchise. These intangible assets are amortized on a straightâˆ'line basis over estimated lives of 12 to 20 years. During fiscal 2009, the Company...

  • Page 71
    ... estimates 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...

  • Page 72
    ... included the following: May 31, 2010 (In millions) 2009 Compensation and benefits, excluding taxes Endorser compensation Fair value of derivatives Taxes other than income taxes Dividends payable Advertising and marketing Import and logistics costs (1) Restructuring charges (2) Other $ 598.8 266...

  • Page 73
    ... pricing an asset or liability. As a basis for considering such assumptions, the Company uses a threeâˆ'level hierarchy established by the FASB which prioritizes fair value measurements based on the types of inputs used for the various valuation techniques (market approach, income approach, and cost...

  • Page 74
    ... by the Company to determine such fair value. Fair Value Measurements Using Level 1 Level 2 Level 3 (In millions) May 31, 2010 Assets / Liabilities at Fair Value Balance Sheet Classification Assets Derivatives: Foreign exchange forwards and options Interest rate swap contracts Total derivatives...

  • Page 75
    .... NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) Fair Value Measurements Using Level 1 Level 2 Level 3 (In millions) May 31, 2009 Assets / Liabilities at Fair Value Balance Sheet Classification Assets Derivatives: Foreign exchange forwards and options Interest rate swap contracts Total...

  • Page 76
    ...2010, 2009 and 2008 was interest income of $30.1 million, $49.7 million, and $115.8 million, respectively, related to cash and equivalents and shortâˆ'term investments. For fair value information regarding notes payable and longâˆ'term debt, refer to Note 7 - Shortâˆ'Term Borrowings and Credit Lines...

  • Page 77
    ...revolving credit facility with a group of banks. The facility matures in December 2012. Based on the Company's current longâˆ'term senior unsecured debt ratings of A+ and A1 from Standard and Poor's Corporation and Moody's Investor Services, respectively, the interest rate charged on any outstanding...

  • Page 78
    ... May 31, 2010) term loan that replaced certain intercompany borrowings and matures on February 14, 2012. The interest rate on the loan is approximately 1.5% and interest is paid semiâˆ'annually. Note 9 - Income Taxes Income before income taxes is as follows: 2010 Year Ended May 31, 2009 (In millions...

  • Page 79
    ... NIKE, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) A reconciliation from the U.S. statutory federal income tax rate to the effective income tax rate follows: 2010 Year Ended May 31, 2009 2008 Federal income tax rate State taxes, net of federal benefit Foreign earnings Other...

  • Page 80
    ... Contents NIKE, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) The following is a reconciliation of the changes in the gross balance of unrecognized tax benefits: 2010 May 31, 2009 (In millions) 2008 Unrecognized tax benefits, as of the beginning of the period Gross increases related...

  • Page 81
    ... During the years ended May 31, 2010, 2009, and 2008, income tax benefits attributable to employee stockâˆ'based compensation transactions of $56.8 million, $25.4 million, and $68.9 million, respectively, were allocated to shareholders' equity. Note 10 - Redeemable Preferred Stock Sojitz America is...

  • Page 82
    ...As of May 31, 2010, the Company had $86.8 million of unrecognized compensation costs from stock options, net of estimated forfeitures, to be recognized as selling and administrative expense over a weighted average period of 2.2 years. The weighted average fair value per share of the options granted...

  • Page 83
    ... fair market value at the beginning or the end of the offering period. Employees purchased 0.8 million shares, 1.0 million shares and 0.8 million shares during the years ended May 31, 2010, 2009 and 2008, respectively. From time to time, the Company grants restricted stock and unrestricted stock to...

  • Page 84
    ... by the Board of Directors and approved by shareholders in September 1997 and later amended in fiscal 2007. The Company recognized $24.1 million, $17.6 million and $35.9 million of selling and administrative expense related to cash awards under the LTIP during the years ended May 31, 2010, 2009 and...

  • Page 85
    ... 2009, the Company does not expect to recognize additional costs in future periods relating to these actions. The restructuring charge is reflected in the corporate expense line in the segment presentation of earnings before interest and taxes in Note 19 - Operating Segments and Related Information...

  • Page 86
    ... (income) expense, net and in the corporate expense line in the segment presentation of earnings before interest and taxes 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...

  • Page 87
    ... as the cash flows from the related hedged items, generally within the cash provided by operations component of the cash flow statement. The majority of derivatives outstanding as of May 31, 2010 are designated as either cash flow, fair value or net investment hedges under the accounting standards...

  • Page 88
    ... Measurements for a description of how the above financial instruments are valued, Note 14 - Accumulated Other Comprehensive Income and the Consolidated Statement of Shareholders' Equity for additional information on changes in other comprehensive income for the years ended May 31, 2010 and 2009. 85

  • Page 89
    ... net income are dependent on the exchange rates in effect when derivative contracts that are currently outstanding mature. As of May 31, 2010, the maximum term over which the Company is hedging exposures to the variability of cash flows for its forecasted and recorded transactions is 18 months. The...

  • Page 90
    ... of the cash flow statement. The Company assesses hedge effectiveness based on changes in forward rates. The Company recorded no ineffectiveness from its net investment hedges for the years ended May 31, 2010, 2009, and 2008. Credit Risk The Company is exposed to creditâˆ'related losses in the...

  • Page 91
    ... of a geographic operating segment, selling, general and administrative expenses that are centrally managed for the NIKE Brand and costs associated with product development and supply chain operations. The "Other Businesses" category primarily consists of the activities of Cole Haan, Converse Inc...

  • Page 92
    ...FINANCIAL STATEMENTS - (Continued) As part of the Company's centrally managed foreign exchange risk management program, standard foreign currency rates are assigned to each NIKE Brand entity in our geographic operating segments and are used to record any nonâˆ'functional currency revenues or product...

  • Page 93
    ... FINANCIAL STATEMENTS - (Continued) 2010 Year Ended May 31, 2009 (In millions) 2008 Revenue North America Western Europe Central and Eastern Europe Greater China Japan Emerging Markets Global Brand Divisions Total NIKE Brand Other Businesses Corporate Total NIKE Consolidated Revenues Earnings...

  • Page 94
    ... for more information. Year Ended May 31, 2010 2009 (In millions) (2) Accounts Receivable, net North America Western Europe Central and Eastern Europe Greater China Japan Emerging Markets Global Brand Divisions Total NIKE Brand Other Businesses Corporate Total Accounts Receivable, net Inventories...

  • Page 95
    ...NIKE, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) Revenues by Major Product Lines. Revenues to external customers for NIKE Brand products are attributable to sales of footwear, apparel and equipment. Other revenues to external customers primarily include external sales by Cole Haan...

  • Page 96
    ...Act reports is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as...

  • Page 97
    ... Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters The information required by Item 201(d) of Regulation Sâˆ'K is included under "Equity Compensation Plans" in the definitive Proxy Statement for our 2010 Annual Meeting of Shareholders and is incorporated herein by...

  • Page 98
    .... 1. FINANCIAL STATEMENTS: Report of Independent Registered Public Accounting Firm Consolidated Statements of Income for each of the three years ended May 31, 2010, May 31, 2009 and May 31, 2008 Consolidated Balance Sheets at May 31, 2010 and May 31, 2009 Consolidated Statements of Cash Flows for...

  • Page 99
    ... 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 10âˆ'K for the fiscal year ended May 31, 2008).* NIKE, Inc. 1990 Stock Incentive Plan.* NIKE, Inc. Executive Performance Sharing Plan (incorporated by...

  • Page 100
    ... Company's Current Report on Form 8âˆ'K filed July 20, 2010).* Computation of Ratio of Earnings to Fixed Charges. Subsidiaries of the Registrant. Consent of PricewaterhouseCoopers LLP, Independent Registered Public Accounting Firm (set forth on page Fâˆ'2 of this Annual Report on Form 10âˆ'K). Rule...

  • Page 101
    ... of any such instrument to the SEC upon request. Upon written request to Investor Relations, NIKE, Inc., One Bowerman Drive, Beaverton, Oregon 97005âˆ'6453, NIKE will furnish shareholders with a copy of any Exhibit upon payment of $.10 per page, which represents our reasonable expenses in furnishing...

  • Page 102
    ...31, 2009 For the year ended May 31, 2010 (1) $ 71.7 78.4 110.8 $ 25.7 62.4 45.7 $ 4.0 (11.7) (9.9) $ (23.0) (18.3) (29.9) $ 78.4 110.8 116.7 The nonâˆ'current portion of the allowance for doubtful accounts is classified in deferred income taxes and other assets on the consolidated balance...

  • Page 103
    ...133360 and 333âˆ'164248) of NIKE, Inc. of our report dated July 20, 2010 relating to the financial statements, financial statement schedule and the effectiveness of internal control over financial reporting, which appears in this Form 10âˆ'K. /s/ PRICEWATERHOUSECOOPERS LLP Portland, Oregon July 20...

  • Page 104
    ..., Chief Executive Officer and President July 20, 2010 Principal Financial Officer: /s/ DONALD W. BLAIR Donald W. Blair Chief Financial Officer July 20, 2010 Principal Accounting Officer: /s/ BERNARD F. PLISKA Bernard F. Pliska Corporate Controller July 20, 2010 Directors: /s/ PHILIP H. KNIGHT...

  • Page 105
    ... C. Lechleiter JOHNATHAN A. RODGERS Johnathan A. Rodgers /s/ ORIN C. SMITH Orin C. Smith Director July 20, 2010 /s/ Director July 20, 2010 /s/ Director July 20, 2010 /s/ Director July 20, 2010 Director July 20, 2010 /s/ JOHN R. THOMPSON, JR. John R. Thompson, Jr. /s/ PHYLLIS M. WISE...

  • Page 106
    ... Plan (the "Plan") of NIKE, Inc., an Oregon corporation (the "Company"), the Company grants to (the "Optionee") the right and the option (the "Option") to purchase all or any part of shares of the Company's Class B Common Stock at a purchase price of $ per share, subject to the terms and conditions...

  • Page 107
    ... shall pass by the Optionee's will or by the laws of descent and distribution of the state or country of domicile at the time of death. 1.5 Absence on Leave. Absence on leave or on account of illness or disability under rules established by the committee of the Board of Directors of the Company 1

  • Page 108
    ... exercisable only by the Optionee. 4. Changes in Capital Structure. If the outstanding shares of Common Stock of the Company are hereafter increased or decreased or changed into or exchanged for a different number or kind of shares or other securities of the Company by reason of any recapitalization...

  • Page 109
    5. Sale of the Company; Change in Control. 5.1 Sale of the Company. If there shall occur a merger, consolidation or plan of exchange involving the Company pursuant to which the outstanding shares of Common Stock of the Company are converted into cash or other stock, securities or property, or a sale...

  • Page 110
    ... Stock of the Company have the right to elect (voting as a separate class) a majority of the members of the Board of Directors of the Company, any "person" or "group" (within the meaning of Sections 13(d) and 14(d)(2) of the Exchange Act) shall, as a result of a tender or exchange offer, open market...

  • Page 111
    ...ceases to be a public company whose Class B Common Stock is traded on the New York Stock Exchange or other comparable securities exchange, (b) the Board of Directors of the Company, any holder of more than fifty percent (50%) of the then outstanding Class A Common Stock of the Company, or any holder...

  • Page 112
    ...any documents related to current or future participation in the Plan by electronic means. The Optionee hereby consents to receive such documents by electronic delivery and agrees to participate in the Plan through an onâˆ'line or electronic system established and maintained by the Company or a third...

  • Page 113
    ...oneâˆ'member committee of the Board of Directors, the authority to grant awards with respect to a maximum of 50,000 Shares to any eligible employee who is not, at the time of such grant, subject to the reporting requirements and liability provisions contained in Section 16 of the Securities Exchange...

  • Page 114
    ... of the last action by the Board of Directors approving an increase in the number of shares available for issuance under the Plan, which action was subsequently approved within 12 months by the shareholders. (c) Nonâˆ'Statutory Stock Options. The option price for Nonâˆ'Statutory Stock Options shall...

  • Page 115
    ... period. For purposes of this paragraph 6(f), "normal retirement" means a termination of employment that occurs at a time when (A) the optionee's age is at least 60 years, and (B) the optionee has at least five full years of service as an employee of the Company or a parent or subsidiary corporation...

  • Page 116
    ... paid the Company the full purchase price of such Shares in cash or with the consent of the Committee, in whole or in part, in Common Stock of the Company valued at fair market value. The fair market value of Common Stock of the Company provided in payment of the purchase price shall be the closing...

  • Page 117
    ... (including another award under the Plan) in exchange for any outstanding option granted under the Plan at a time when the option price of the outstanding option exceeds the fair market value of the Shares covered by the option. 7. Stock Awards, including Restricted Stock and Restricted Stock Units...

  • Page 118
    ... of this paragraph 9, the fair market value of the Class B Common Stock of the Company on the date a stock appreciation right is exercised shall be the closing price of the Class B Common Stock of the Company as reported in the New York Stock Exchange Composite Transactions in the Wall Street...

  • Page 119
    ... time of grant, if during the term of an option, stock appreciation right or restricted stock unit award, there shall occur a merger, consolidation or plan of exchange involving the Company pursuant to which outstanding Shares are converted into cash or other stock, securities or property, or a sale...

  • Page 120
    ..., that the term "Incumbent Director" shall also include each new director elected during such twoâˆ'year period whose nomination or election was approved by twoâˆ'thirds of the Incumbent Directors then in office; (B) At any time that the holders of the Class A Common Stock of the Company have the...

  • Page 121
    ... company, (B) a reduction in the award holder's base pay as in effect immediately prior to Shareholder Approval, if applicable, or the Change in Control, (C) a material reduction in total benefits available to the award holder under cash incentive, stock incentive and other employee benefit plans...

  • Page 122
    ..."). By accepting this Agreement, Recipient agrees to all of the terms and conditions of the award. On _____, 20__, the Compensation Committee (the "Committee") of the Company's Board of Directors authorized this performanceâˆ'based award to Recipient. Compensation paid pursuant to this award is...

  • Page 123
    ... sum of the Company's revenues for the _____ fiscal years of the Company in the Performance Period. For this purpose, the Company's revenues for each fiscal year of the Company during the Performance Period shall be as set forth in the audited consolidated financial statements of the Company and its...

  • Page 124
    ... or loss on the sale, (b) as provided in Section 2.5(ii) below to reflect an assumed level of operating income of the divested business for that portion of the Performance Period occurring after the divestiture, (c) to reduce interest income for any cash or notes received in the divestiture based on...

  • Page 125
    ...calculated Dollar Target Award Payment based on circumstances relating to the performance of the Company or Recipient. Without limiting the generality of the foregoing, if at any time during the Performance Period Recipient's base pay is reduced or Recipient is assigned a different title, job or set...

  • Page 126
    ... this income amount. 6. Promotions. If at any time during the Performance Period Recipient's base pay is increased or Recipient is assigned a different title, job or set of responsibilities resulting in an increase in Recipient's level of responsibility for the Company (any such increase in base pay...

  • Page 127
    ... its principal executive offices or to Recipient at the address of Recipient in the Company's records, or at such other address as such party may designate by ten (10) days' advance written notice to the other party. 9.3 No Assignment; Rights and Benefits. Recipient shall not sell, assign, pledge or...

  • Page 128
    ...her wages or other cash compensation paid to Recipient by the Company and/or the Employer or from the Dollar Target Award Payment. Finally, Recipient shall pay the Company or the Employer any amount of Taxâˆ'Related Items that the Company or the Employer may be required to withhold or account for as...

  • Page 129
    ... or other right to receive future awards of cash, or benefits in lieu of cash awards even if cash awards have been awarded repeatedly in the past; all decisions with respect to future awards, if any, will be at the sole discretion of the Company; Recipient is voluntarily accepting the grant of the...

  • Page 130
    ... name, home address and telephone number, date of birth, social insurance number or other identification number, salary, nationality, job title, any shares of stock or directorships held in the Company, details of any entitlement to shares of stock awarded, canceled, vested, unvested or outstanding...

  • Page 131
    Language If Recipient has received this Agreement or any other document related to the award translated into a language other than English and if the meaning of the translated version is different from the English version, the English version will control. APPâˆ'4

  • Page 132
    ... follows: 1. Covenant Not to Compete. (a) Competition Restriction. During EMPLOYEE's employment by NIKE, under the terms of any employment contract or otherwise, and for one year thereafter, (the "Restriction Period"), EMPLOYEE will not directly or indirectly, own, manage, control, or participate in...

  • Page 133
    ..., athletic apparel or sports equipment and accessories business, or any other business which directly competes with NIKE or any of its parent, subsidiaries or affiliated corporations ( "Competitor"). By way of illustration only, examples of NIKE competitors include, but are not limited to: Adidas...

  • Page 134
    ...and ideas, customer and vendor lists, contract factory lists, pricing information, manufacturing plans, business and marketing plans, sales information, methods of operation, manufacturing processes and methods, products, and personnel information. (b) Excluded Information. Notwithstanding paragraph...

  • Page 135
    ... company or business organization, any NIKE employee, whether or not such employee is a fullâˆ'time employee or temporary employee and whether or not such employment is pursuant to a written agreement or is at will. 7. Accounting of Profits. EMPLOYEE agrees that, if EMPLOYEE should violate any term...

  • Page 136
    ... over and venue for any action or proceeding arising out of or relating to this Agreement shall lie in the state and federal courts located in Oregon. EMPLOYEE /s/ Eric Dean Sprunk DATE 04/18/01 NIKE, Inc. By Name: Title: /s/ Jeffrey M. Cava Jeffrey M. Cava Vice President, Global Human Resources

  • Page 137
    ... 12.1 NIKE, INC. COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES 2010 2009 Year Ended May 31, 2008 (In millions) 2007 2006 Net income Income taxes Income before income taxes Add fixed charges (1) Interest expense (2) Interest component of leases Total fixed charges Earnings before income taxes...

  • Page 138
    ... 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, Inc. Converse (Asia Pacific) Limited Converse Canada Corp. Converse Canada Holding B.V. Converse Europe Limited Converse Footwear Technical Service (Zhongshan...

  • Page 139
    ...o. o. NIKE Retail Services, Inc. NIKE Russia LLC NIKE SALES (MALAYSIA) SDN. BHD. NIKE Servicios de Mexico S. de R.L. de C.V. NIKE SINGAPORE PTE LTD NIKE Sourcing India Private Limited NIKE South Africa (Proprietary) Limited NIKE South Africa Holdings LLC NIKE Sports (China) Company, Ltd. NIKE Sports...

  • Page 140
    ... Name Jurisdiction of Formation NIKE Sweden AB NIKE (Switzerland) GmbH NIKE Tailwind NIKE (Thailand) Limited NIKE TN, Inc. NIKE Trading Company B.V. NIKE UK Holding B.V. NIKE (UK) Limited NIKE USA, Inc. NIKE Vapor Ltd. NIKE Vietnam Limited Liability Company NIKE Vision, Timing and Techlab, LP NIKE...

  • Page 141
    ...not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of...

  • Page 142
    ...not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of...

  • Page 143
    ... NIKE, Inc. (the "Company") hereby certifies, to such officer's knowledge, that: (i) the Annual Report on Form 10âˆ'K of the Company for the fiscal year ended May 31, 2010 (the "Report") fully complies with the requirements of Section 13(a) or Section 15(d), as applicable, of the Securities Exchange...

  • Page 144
    ... NIKE, Inc. (the "Company") hereby certifies, to such officer's knowledge, that: (i) the Annual Report on Form 10âˆ'K of the Company for the fiscal year ended May 31, 2010 (the "Report") fully complies with the requirements of Section 13(a) or Section 15(d), as applicable, of the Securities Exchange...