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Table of Contents NIKE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
these institutions. This credit risk is limited to the unrealized gains in such contracts should any of these counterparties fail to perform as contracted. To
manage this risk, the Company has established strict counterparty credit guidelines that are continually monitored and reported to senior management
according to prescribed guidelines. The Company utilizes a portfolio of financial institutions either headquartered or operating in the same countries the
Company conducts its business. As a result of the above considerations, the Company considers the impact of the risk of counterparty default to be
immaterial.
Certain of the Company’s derivative instruments contain credit risk related contingent features. As of May 31, 2010, the Company was in compliance
with all such credit risk related contingent features. The aggregate fair value of derivative instruments with credit risk related contingent features that are in
a net liability position at May 31, 2010 was $18.3 million. The Company was not required to post any collateral as a result of these contingent features.
Note 19 — Operating Segments and Related Information
Operating Segments. The Company’s operating segments are evidence of the structure of the Company’s internal organization. The major segments
are defined by geographic regions for operations participating in NIKE Brand sales activity excluding NIKE Golf. Each NIKE Brand geographic segment
operates predominantly in one industry: the design, production, marketing and selling of sports and fitness footwear, apparel, and equipment. In fiscal 2009,
the Company initiated a reorganization of the NIKE Brand into a new model consisting of six geographies. Effective June 1, 2009, the Company’s new
reportable operating segments for the NIKE Brand are: North America, Western Europe, Central and Eastern Europe, Greater China, Japan, and Emerging
Markets. Previously, NIKE Brand operations were organized into the following four geographic regions: U.S., Europe, Middle East and Africa (collectively,
“EMEA”), Asia Pacific, and Americas.
The Company’s “Other” category is broken into two components for presentation purposes to align with the way management views the Company.
The “Global Brand Divisions” category primarily represents NIKE Brand licensing businesses that are not part 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., Hurley International LLC, NIKE Golf and
Umbro Ltd. Activities represented in the “Other” category are considered immaterial for individual disclosure. Prior period amounts have been reclassified
to conform to the Company’s new operating structure described above.
Revenues as shown below represent sales to external customers for each segment. Intercompany revenues have been eliminated and are immaterial
for separate disclosure.
Corporate consists of unallocated general and administrative expenses, which includes expenses associated with centrally managed departments,
depreciation and amortization related to the Company’s headquarters, unallocated insurance and benefit programs, including stock−based compensation,
certain foreign currency gains and losses, including hedge gains and losses, certain corporate eliminations and other items.
Effective June 1, 2009, the primary financial measure used by the Company to evaluate performance of individual operating segments is Earnings
Before Interest and Taxes (commonly referred to as “EBIT”) which represents net income before interest expense (income), net and income taxes in the
Consolidated Statements of Income. Reconciling items for EBIT represent corporate expense items that are not allocated to the operating segments for
management reporting. Previously, the Company evaluated performance of individual operating segments based on pre−tax income or income before
income taxes.
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