Nike 2015 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, 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 2015.
Orders
Worldwide futures orders for NIKE Brand athletic footwear and apparel,
scheduled for delivery from June through November 2015, were $13.5 billion
compared with $13.3 billion for the same period last year. This futures orders
amount is calculated based upon our forecast of the actual currency
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 while reducing waste.
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, Zoom, Free, Flywire, Dri-Fit, Flyknit, Flyweave
and NIKE+ technologies through Running, Basketball, Men’s Training,
Women’s Training and Sportswear, among others, typifies our dedication to
designing innovative products.
Manufacturing
We are supplied by approximately 146 footwear factories located in 14
countries. The largest single footwear factory accounted for approximately
7% of total fiscal 2015 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 2015,
contract factories in Vietnam, China and Indonesia manufactured
approximately 43%, 32% and 20% 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 2015, five footwear contract
manufacturers each accounted for greater than 10% of footwear production,
and in aggregate accounted for approximately 69% of NIKE Brand footwear
production.
We are supplied by approximately 408 apparel factories located in 39
countries. The largest single apparel factory accounted for approximately
11% of total fiscal 2015 NIKE Brand apparel production. Virtually all of our
apparel is manufactured outside of the United States by independent contract
manufacturers which often operate multiple factories. In fiscal 2015, most of
this apparel production occurred in China, Vietnam, Sri Lanka, Thailand,
Indonesia, Malaysia and Cambodia. In fiscal 2015, one apparel contract
manufacturer accounted for more than 10% of apparel production, and the
top five contract manufacturers in aggregate accounted for approximately
36% of NIKE Brand apparel production.
The principal materials used in our footwear products are natural and
synthetic rubber, plastic compounds, foam cushioning materials, natural and
synthetic leather, nylon, polyester and canvas, as well as polyurethane films
used to make NIKE Air-Sole cushioning components. During fiscal 2015,
NIKE IHM, Inc., a wholly-owned subsidiary of NIKE, Inc., with facilities near
Beaverton, Oregon and in St. Louis, Missouri, and 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 and repel rain and/or snow; and
plastic and metal hardware. NIKE’s independent contractors and suppliers
buy raw materials 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. 2015 Annual Report and Notice of Annual Meeting 67
FORM 10-K