Nike 2014 Annual Report Download - page 65

PART II
NOTE 14 — Accumulated Other Comprehensive Income
The changes in Accumulated other comprehensive income, net of tax, were as follows:
(In millions)
Foreign
Currency
Translation
Adjustment(1)
Cash Flow
Hedges
Net Investment
Hedges(1) Other Total
Balance at May 31, 2013 $ 41 $ 193 $ 95 $ (55) $274
Other comprehensive gains (losses) before reclassifications(2) (32) (134) — — (166)
Reclassifications to net income of previously deferred (gains) losses(3) — (27) — 4 (23)
Other comprehensive income (loss) (32) (161) — 4 (189)
Balance at May 31, 2014 $ 9 $ 32 $ 95 $ (51) $ 85
(1) The accumulated foreign currency translation adjustment and net investment hedge gains/losses related to an investment in a foreign subsidiary are reclassified to Net income upon sale or
upon complete or substantially complete liquidation of the respective entity.
(2) Net of tax benefit of $0 million, $9 million, $0 million, $0 million, and $9 million, respectively.
(3) Net of tax expense of $0 million, $9 million, $0 million, $0 million, and $9 million, respectively.
The following table summarizes the reclassifications from Accumulated other comprehensive income to the Consolidated Statements of Income:
Amount of Gain (Loss)
Reclassified from Accumulated
Other Comprehensive Income
into Income Location of Gain (Loss) Reclassified from
Accumulated Other Comprehensive Income
into Income
(In millions) Year Ended May 31, 2014
Gains on cash flow hedges:
Foreign exchange forwards and options $ 14 Revenues
Foreign exchange forwards and options 12 Cost of sales
Foreign exchange forwards and options — Total selling and administrative expense
Foreign exchange forwards and options 10 Other expense (income), net
Total before tax 36
Tax expense (9)
Gain, net of tax 27
Losses on other (4) Other expense (income), net
Total before tax (4)
Tax expense —
Loss, net of tax (4)
Total net gain reclassified for the period $23
Refer to Note 17— Risk Management and Derivatives for more information on the Company’s risk management program and derivatives.
NOTE 15 — Discontinued Operations
During the year ended May 31, 2013, the Company divested of Umbro and
Cole Haan, allowing it to focus its resources on driving growth in the NIKE,
Jordan, Converse, and Hurley brands.
On February 1, 2013, the Company completed the sale of Cole Haan to Apax
Partners for an agreed upon purchase price of $570 million and received at
closing $561 million, net of $9 million of purchase price adjustments. The
transaction resulted in a gain on sale of $231 million, net of $137 million in
Income tax expense; this gain is included in the Net income (loss) from
discontinued operations line item on the Consolidated Statements of Income.
There were no adjustments to these recorded amounts as of May 31, 2014.
Beginning November 30, 2012, the Company classified the Cole Haan
disposal group as held-for-sale and presented the results of Cole Haan’s
operations in the Net income (loss) from discontinued operations line item on
the Consolidated Statements of Income. From this date until the sale, the
assets and liabilities of Cole Haan were recorded in the Assets of discontinued
operations and Liabilities of discontinued operations line items on the
Consolidated Balance Sheets, respectively. Previously, these amounts were
reported in the Company’s segment presentation as “Other Businesses.”
Under the sale agreement, the Company agreed to provide certain transition
services to Cole Haan for an expected period of 3 to 9 months from the date
of sale. These services were essentially complete as of May 31, 2013 and the
Company has had no significant involvement with Cole Haan beyond the
transition services. The Company has also licensed NIKE proprietary Air and
Lunar technologies to Cole Haan for a transition period. The continuing cash
flows related to these items are not significant to Cole Haan. Additionally,
preexisting guarantees of certain Cole Haan lease payments remained in
place after the sale; the maximum exposure under the guarantees is $33
million at May 31, 2014. The fair value of the guarantees is not material.
On November 30, 2012, the Company completed the sale of certain assets of
Umbro to Iconix Brand Group (“Iconix”) for $225 million. The Umbro disposal
group was classified as held-for-sale as of November 30, 2012 and the
results of Umbro’s operations are presented in the Net income (loss) from
discontinued operations line item on the Consolidated Statements of Income.
The liabilities of Umbro were recorded in the Liabilities of discontinued
operations line items on the Consolidated Balance Sheets. Previously, these
amounts were reported in the Company’s segment presentation as “Other
Businesses.” Upon meeting the held-for-sale criteria, the Company recorded
a loss of $107 million, net of tax, on the sale of Umbro and the loss is included
in the Net income (loss) from discontinued operations line item on the
Consolidated Statements of Income. The loss on sale was calculated as the
net sales price less Umbro assets of $248 million, including intangibles,
goodwill, and fixed assets, other miscellaneous charges of $22 million, and
the release of the associated cumulative translation adjustment of $129
million. The tax benefit on the loss was $67 million. There were no
adjustments to these recorded amounts as of May 31, 2014.
Under the sale agreement, the Company provided transition services to Iconix
while certain markets were transitioned to Iconix-designated licensees. These
transition services are complete and the Company has wound down the
remaining operations of Umbro.
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