*, Form of Non-Statutory Stock Option Agreement for options granted to executives after May 31, 2010 under the Stock Incentive Plan (incorporated by reference to Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q for the fiscal quarter ended February 28, 2018). NIKE, Inc. is a worldwide leader in the design, development and worldwide marketing and selling of athletic footwear, apparel, equipment, accessories and services. Changes in Level 3 investment assets were immaterial during the years ended May 31, 2018 and 2017 . However, references to wholesale equivalent revenues and currency-neutral revenues should not be considered in isolation or as a substitute for other financial measures calculated and presented in accordance with U.S. GAAP and may not be comparable to similarly titled non-GAAP measures used by other companies. NIKE Direct revenues grew 27% for fiscal 2017 due to comparable store sales growth of 15%, strong digital commerce sales growth and the addition of new stores. Hilary K. Krane, Executive Vice President, Chief Administrative Officer and General Counsel - Ms. Krane, 54, joined NIKE as Vice President and General Counsel in April 2010. Sales and operating results for Jordan Brand products are reported within the respective NIKE Brand geographic operating segments. A slowing or changing economy in our key markets could adversely affect the financial health of our customers, which in turn could have an adverse effect on our results of operations and financial condition. The largest direct distribution markets are the United States, the United Kingdom and China. The Company recorded no ineffectiveness from net investment hedges for the years ended May 31, 2018 , 2017 or 2016 . On July 21, 2016, we filed a shelf registration statement (the "Shelf") with the SEC which permits us to issue an unlimited amount of debt securities from time to time. All of our investments are investment grade to minimize our credit risk. Annual Report 2005 “ Phhilip H. Knightilip H. Knight Chairman of the Board, Nike, Inc. athletes earned Olympic gold in every men’s running event except the marathon. The percent change has been calculated using actual exchange rates in use during the comparative prior year period to enhance the visibility of the underlying business trends by excluding the impact of translation arising from foreign currency exchange rate fluctuations, which is considered a non-GAAP financial measure. Refer to Note 16 - Risk Management and Derivatives for more information on the Company's risk management program and derivatives. Revenue growth was broad-based across all territories, led by SOCO, Korea and Mexico, which grew 34%, 14% and 18%, respectively. Additionally, currency-neutral revenues are calculated using actual exchange rates in use during the comparative prior year period to enhance the visibility of the underlying business trends excluding the impact of translation arising from foreign currency exchange rate fluctuations. In the event we were to have any borrowings outstanding under this facility and failed to meet any covenant, and were unable to obtain a waiver from a majority of the banks in the syndicate, any borrowings would become immediately due and payable. Our ability to meet customer expectations, manage inventory, complete sales and achieve objectives for operating efficiencies and growth, particularly in emerging markets, depends on the proper operation of our distribution facilities, the development or expansion of additional distribution capabilities and the timely performance of services by third parties (including those involved in shipping product to and from our distribution facilities). Selling and administrative expense increased due to higher demand creation expense driven by sports marketing and advertising costs. The Company may elect to designate certain derivatives as hedging instruments under the accounting standards for derivatives and hedging. The VaR model estimates assume normal market conditions and a 95% confidence level. Non-Functional Currency Denominated Monetary Assets and Liabilities - Our global subsidiaries have various assets and liabilities, primarily receivables and payables, including intercompany receivables and payables, denominated in currencies other than their functional currencies. We conduct transactions in various currencies, which increases our exposure to fluctuations in foreign currency exchange rates relative to the U.S. Dollar. To manage this risk, the Company has established strict counterparty credit guidelines that are continually monitored. Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. Assumed conversion of dilutive stock options and awards, DILUTED WEIGHTED AVERAGE COMMON SHARES OUTSTANDING. Our previous discussion and analysis of our financial condition and results of operations are based upon our Consolidated Financial Statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. We currently have short-term debt ratings of A1+ and P1 from Standard and Poor's Corporation and Moody's Investor Services, respectively. As of that date, the Company had received. In most cases, this results in gains and losses on hedge derivatives being released from Other comprehensive income into Net income sometime after the maturity of the derivative. And we deliver an integrated marketplace with compelling retail experiences. We extend credit to our customers based on an assessment of a customer's financial condition, generally without requiring collateral. Changes in U.S. trade policies, including new and potential changes to import tariffs and existing trade policies and agreements, could also have a significant impact on our activities in foreign jurisdictions, and could adversely affect our results of operations. Dollar, British Pound/Euro and Japanese Yen/U.S. The Company's policy permits the utilization of derivatives to reduce its foreign currency exposures where internal netting or other strategies cannot be effectively employed. a detrimental change of $196 million related to the difference between actual foreign currency exchange rates and standard foreign currency exchange rates assigned to the NIKE Brand geographic operating segments and Converse, net of hedge gains and losses; these results are reported as a component of consolidated gross margin. In all situations in which hedge accounting is discontinued and the derivative remains outstanding, the Company will account for the derivative as an undesignated instrument as discussed below. NIKE Direct revenues increased 32%, driven by strong digital commerce sales growth, the addition of new stores and comparable store sales growth of 9%. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of May 31, 2018 and 2017 , and the results of their operations and their cash flows for each of the three years in the period ended May 31, 2018 in conformity with accounting principles generally accepted in the United States of America. The risks and uncertainties are detailed from time to time in reports filed by NIKE with the SEC, including reports filed on Forms 8-K, 10-Q and 10-K, and include, among others, the following: international, national and local general economic and market conditions; the size and growth of the overall athletic footwear, apparel and equipment markets; intense competition among designers, marketers, distributors and sellers of athletic footwear, apparel and equipment for consumers and endorsers; demographic changes; changes in consumer preferences; popularity of particular designs, categories of products and sports; seasonal and geographic demand for NIKE products; difficulties in anticipating or forecasting changes in consumer preferences, consumer demand for NIKE products and the various market factors described above; difficulties in implementing, operating and maintaining NIKE's increasingly complex information technology systems and controls, including, without limitation, the systems related to demand and supply planning and inventory control; interruptions in data and information technology systems; consumer data security; fluctuations and difficulty in forecasting operating results, including, without limitation, the fact that advance orders may not be indicative of future revenues due to changes in shipment timing, the changing mix of orders with shorter lead times, and discounts, order cancellations and returns; the ability of NIKE to sustain, manage or forecast its growth and inventories; the size, timing and mix of purchases of NIKE's products; increases in the cost of materials, labor and energy used to manufacture products; new product development and introduction; the ability to secure and protect trademarks, patents and other intellectual property; product performance and quality; customer service; adverse publicity, including without limitation, through social media or in connection with brand damaging events; the loss of significant customers or suppliers; dependence on distributors and licensees; business disruptions; increased costs of freight and transportation to meet delivery deadlines; increases in borrowing costs due to any decline in NIKE's debt ratings; changes in business strategy or development plans; general risks associated with doing business outside of the United States, including, without limitation, exchange rate fluctuations, inflation, import duties, tariffs, quotas, political and economic instability and terrorism; the impact of recent U.S. tax reform legislation on our results of operations; the potential impact of new laws, regulations or policy, including, without limitation, tariffs, import/export, trade and immigration regulations or policies; changes in government regulations; the impact of, including business and legal developments relating to, climate change and natural disasters; litigation, regulatory proceedings and other claims asserted against NIKE; the ability to attract and retain qualified employees, and any negative public perception with respect to key personnel; the effects of NIKE's decision to invest in or divest of businesses and other factors referenced or incorporated by reference in this report and other reports. UNITED STATES. In March 2016, the FASB issued ASU No. Currency-neutral growth in apparel revenue was fueled by increases in all key categories, led by Sportswear and Running. *, Form of Discretionary Performance Award Agreement.*. This includes reclassified operating segment data to reflect the changes in the Company's operating structure, which became effective June 1, 2017. In accordance with SAB 118, the Company's accounting for the tax effects of the Tax Act will be completed during the measurement period, which should not extend beyond one year from the enactment date. The Company also has a Long-Term Incentive Plan (LTIP) adopted by the Board of Directors and approved by shareholders in September 1997 and later amended and approved in fiscal 2007 and fiscal 2012. These figures do not include beneficial owners who hold shares in nominee name. However, based on the Company's historical experience and the estimated probability of future loss, the Company has determined the fair value of such indemnification is not material to the Company's financial position or results of operations. Corporate Governance … Unit sales of apparel for fiscal 2017 increased 12%, while higher ASP per unit contributed approximately 5 percentage points of apparel revenue growth. united states securities and exchange commission washington, d.c. 20549 form 10-k (mark one) Íannual report pursuant to section 13 or 15(d) of the securities exchange act of 1934 for the fiscal year ended may 31, 2018 or ‘transition report pursuant to section 13 or 15(d) of the securities exchange act of 1934 for the transition period from to. The weighted average expected life of options is based on an analysis of historical and expected future exercise patterns. Rent expense for non-cancelable operating leases with scheduled rent increases or landlord incentives are recognized on a straight-line basis over the lease term, beginning with the effective lease commencement date, which is generally the date in which the Company takes possession of or controls the physical use of the property. The two-step impairment test first requires the Company to estimate the fair value of its reporting units. In addition, our success in maintaining, extending and expanding our brand image depends on our ability to adapt to a rapidly changing media environment, including our increasing reliance on social media and digital dissemination of advertising campaigns. For fiscal 2018, unit sales of footwear increased 6% while ASP per pair was flat, as higher off-price ASP was offset by lower full-price ASP. Footwear revenues declined 4% for fiscal 2018, as lower revenues in nearly all categories, most notably the Jordan Brand, more than offset higher revenues in Sportswear. Smaller leased, and third-party leased and operated, distribution facilities are located in various parts of the United States. Global Brand Divisions' loss before interest and taxes increased 3% for fiscal 2017 primarily due to higher demand creation expense, which was only partially offset by a decline in operating overhead expense. These policies require we make estimates in the preparation of our financial statements as of a given date. In the United States, NIKE has seven significant distribution centers. The aggregate intrinsic value was the amount by which the market value of the underlying stock exceeded the exercise price of the options. Operating overhead expense was flat compared to fiscal 2016 as continued investments in our growing NIKE Direct business were offset by administrative cost efficiencies and lower variable compensation. Accounts payable to Sojitz America are generally due up to 60 days after shipment of goods from the foreign port. NIKE Brand apparel and equipment are also shipped from our Foothill Ranch, California distribution center, which we lease. Update your location? Demand creation was flat as higher sports marketing and retail brand presentation costs offset lower marketing and advertising costs. A portion of the Company's foreign operations are benefiting from a tax holiday, which is set to expire in 2021 . When this occurs, we adjust the income tax provision during the quarter in which the change in estimate occurs. Academia.edu is a platform for academics to share research papers. The variable future cash flows associated with the purchase and subsequent sale of these U.S. Dollar denominated securities at non-U.S. Dollar functional currency subsidiaries creates a foreign currency exposure that qualifies for hedge accounting under the accounting standards for derivatives and hedging. Virtually all of our apparel is manufactured outside of the United States by independent contract manufacturers which often operate multiple factories. Our NIKE digital commerce website is located at www.nike.com. SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. In addition, Sojitz America performs significant import-export financing services for the Company. Certain prior year amounts have been reclassified to conform to fiscal 2018 presentation. We are subject to litigation and other legal and regulatory proceedings, which could have an adverse effect on our business, financial condition and results of operations. Prior to that he was Vice President and Controller of Walmart International from February 2013 to January 2015, responsible for the oversight of international accounting and reporting, and Vice President and Assistant Controller of Wal-Mart Stores, Inc. from May 2011 to January 2013. Diluted earnings per common share is calculated by adjusting weighted average outstanding shares, assuming conversion of all potentially dilutive stock options and awards. These reports include information about our historical financial results as well as analysts' estimates of our future performance. Costs associated with preliminary project stage activities, training, maintenance and all other post-implementation stage activities are expensed as incurred. Derivative instruments designated as cash flow hedges must be discontinued when it is no longer probable the forecasted hedged transaction will occur in the initially identified time period. De-selecting these cookies may result in seeing advertising that is not as relevant to you or you not being able to link effectively with Facebook, Twitter, or other social networks and/or not allowing you to share content on social media. In addition, macroeconomic conditions, such as increased volatility or disruption in the credit markets, could adversely affect our ability to refinance existing debt. Dollars for consolidated reporting results in a cumulative translation adjustment to Accumulated other comprehensive income within the Consolidated Statements of Shareholders' Equity. in loans as part of its agreement to purchase a distribution center in Japan, which serves as collateral for the loans. Table of Contents UNITED STATES SECURITIES AND … NIKE is the largest seller of athletic footwear and apparel in the world. We may be adversely affected by the financial health of our customers. If such facts indicate a potential impairment, the Company would assess the recoverability of an asset group by determining if the carrying value of the asset group exceeds the sum of the projected undiscounted cash flows expected to result from the use and eventual disposition of the assets over the remaining economic life of the primary asset in the asset group. When the specific criteria to qualify for hedge accounting has been met, changes in the fair value of contracts hedging probable forecasted future cash flows are recorded in Accumulated other comprehensive income , rather than Net income , until the underlying hedged transaction affects Net income . The Company recorded no ineffectiveness from its interest rate swaps designated as fair value hedges for the years ended May 31, 2018 , 2017 or 2016 . Income tax effects of intra-entity transfers of inventory will continue to be deferred until the inventory has been sold to a third party. The updated guidance enhances the reporting model for financial instruments, which includes amendments to address aspects of recognition, measurement, presentation and disclosure. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates, including estimates relating to assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of financial statements and the reported amounts of revenues and expenses during the reporting period. On a reported basis, digital commerce sales, which are not included in comparable store sales, were $2.8 billion for fiscal 2018 compared to $2.2 billion for fiscal 2017, and represented approximately 27% of our total NIKE Brand NIKE Direct revenues for fiscal 2018 compared to 24% for fiscal 2017. Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. View Privacy & Cookie Policy for full details. *, Stock Incentive Plan, as amended (incorporated by reference to Exhibit 10.2 to the Company's Current Report on Form 8-K filed September 23, 2015). Pricing vendors are utilized for a majority of Level 1 and Level 2 investments. Additionally, revenues increased in all key categories, led by Running and Sportswear. To minimize the impact of translating foreign currency denominated revenues and expenses into U.S. As of that date, no amount of cash collateral had been received or posted on the derivative asset and liability balance related to these foreign exchange derivative instruments. Every training run in this plan has an accompanying Guided Run that you can find in the Nike Run Club App. Sales and operating results of Hurley brand products are reported within the NIKE Brand's North America geographic operating segment. We utilize trademarks on nearly all of our products and believe having distinctive marks that are readily identifiable is an important factor in creating a market for our goods, in identifying our brands and the Company, and in distinguishing our goods from the goods of others. 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