Nike 2014 Annual Report Download - page 6

PART I
International branch offices and subsidiaries of NIKE are located in Argentina,
Australia,Austria,Belgium,Bermuda,Brazil,Canada,Chile,China,Costa
Rica, Croatia, Cyprus, the Czech Republic, Denmark, Finland, France,
Germany, Greece, Hong Kong, Hungary, India, Indonesia, Ireland, Israel, Italy,
Japan, Korea, Malaysia, Mexico, New Zealand, the Netherlands, Norway,
Panama, the Philippines, Poland, Portugal, Russia, Singapore, Slovakia,
Slovenia, South Africa, Spain, Sri Lanka, Sweden, Switzerland, Taiwan,
Thailand, Turkey, the United Arab Emirates, the United Kingdom, Uruguay,
and Vietnam.
Significant Customer
No customer accounted for 10% or more of our worldwide net sales during fiscal 2014.
Orders
Worldwide futures orders for NIKE Brand (excluding NIKE Golf and Hurley)
athletic footwear and apparel, scheduled for delivery from June through
November 2014, were $13.3 billion compared to $12.1 billion for the same
period last year. This futures orders amount is calculated based upon our
forecast of the actual exchange rates under which our revenues will be
translated during this period. Reported futures orders are not necessarily
indicative of our expectation of revenues for this period. This is because the
mix of orders can shift between futures and at-once orders and the fulfillment
of certain of these futures orders may fall outside of the scheduled time period
noted above. In addition, foreign currency exchange rate fluctuations as well
as differing levels of discounts, order cancellations, and returns can cause
differences in the comparisons between futures orders and actual revenues.
Moreover, a portion of our revenue is not derived from futures orders,
including at-once and closeout sales of NIKE Brand footwear and apparel,
sales of NIKE Brand equipment, sales from our Direct to Consumer
operations, and sales from our Converse, Hurley, and NIKE Golf businesses.
Product Research, Design and Development
We believe our research, design, and development efforts are key factors in
our success. Technical innovation in the design and manufacturing process of
footwear, apparel, and athletic equipment receive continued emphasis as
NIKE strives to produce products that help to enhance athletic performance,
reduce injury, and maximize comfort.
In addition to NIKE’s own staff of specialists in the areas of biomechanics,
chemistry, exercise physiology, engineering, industrial design, sustainability,
and related fields, we also utilize research committees and advisory boards
made up of athletes, coaches, trainers, equipment managers, orthopedists,
podiatrists, and other experts who consult with us and review designs,
materials, concepts for product and manufacturing process improvements,
and compliance with product safety regulations around the world. Employee
athletes, athletes engaged under sports marketing contracts, and other
athletes wear-test and evaluate products during the design and development
process.
As we continue to develop new technologies, NIKE is simultaneously focused
on the design of innovative products incorporating such technologies
throughout our product categories. Using market intelligence and research,
the various NIKE design teams identify opportunities to leverage new
technologies in existing categories responding to consumer preferences. The
proliferation of NIKE AIR, Lunar, Shox, Free, Flywire, Dri-Fit, Flyknit, NIKE+,
and NIKE Fuel technologies through Running, Basketball, Men’s Training,
Women’s Training, and Sportswear, among others, typifies the Company’s
dedication to designing innovative products.
Manufacturing
We are supplied by approximately 150 footwear factories located in 14
countries. The largest single footwear factory accounted for approximately
5% of total fiscal 2014 NIKE Brand footwear production. Virtually all of our
footwear is manufactured outside of the United States by independent
contract manufacturers who often operate multiple factories. In fiscal 2014,
contract factories in Vietnam, China, and Indonesia manufactured
approximately 43%, 28%, and 25% of total NIKE Brand footwear,
respectively. We also have manufacturing agreements with independent
factories in Argentina, Brazil, India, and Mexico to manufacture footwear for
sale primarily within those countries. In fiscal 2014, five footwear contract
manufacturers each accounted for greater than 10% of fiscal 2014 footwear
production, and in aggregate accounted for approximately 67% of NIKE
Brand footwear production in fiscal 2014.
We are supplied by approximately 430 apparel factories located in 41
countries. The largest single apparel factory accounted for approximately 7%
of total fiscal 2014 NIKE Brand apparel production. Virtually all of our apparel
is manufactured outside of the United States by independent contract
manufacturers who often operate multiple factories. In fiscal 2014, most of
this apparel production occurred in China, Vietnam, Thailand, Indonesia,
Sri Lanka, Pakistan, and Malaysia. In fiscal 2014, one apparel contract
manufacturer accounted for greater than 10% of fiscal 2014 apparel
production, and the top five contract manufacturers in aggregate accounted
for approximately 34% of NIKE Brand apparel production in fiscal 2014.
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. During fiscal 2014, NIKE IHM, Inc., a wholly-owned
subsidiary of NIKE, Inc., with facilities near Beaverton, Oregon and in
St. Louis, Missouri, as well as independent contractors in China and Vietnam,
were our largest suppliers of the Air-Sole cushioning components used in
footwear. The principal materials used in our apparel products are natural and
synthetic fabrics and threads (both virgin and recycled), specialized
performance fabrics designed to efficiently wick moisture away from the
body, retain heat, repel rain and/or snow, as well as plastic and metal
hardware. NIKE’s independent contractors and suppliers buy raw materials in
bulk for the manufacturing of our footwear, apparel, and equipment products.
Most raw materials are available and purchased by those independent
contractors and suppliers in the countries where manufacturing takes place.
NIKE’s independent contract manufacturers and suppliers have thus far
experienced little difficulty in satisfying raw material requirements for the
production of our products.
NIKE, INC. 2014 Annual Report and Notice of Annual Meeting 49
FORM 10-K