NIKE INC, 10-Q filed on 10/6/2017
Quarterly Report
Document and Entity Information
3 Months Ended
Aug. 31, 2017
Oct. 3, 2017
Class A Convertible Common Stock
Oct. 3, 2017
Class B Common Stock
Entity Listings [Line Items]
 
 
 
Document Type
10-Q 
 
 
Amendment Flag
false 
 
 
Document Period End Date
Aug. 31, 2017 
 
 
Document Fiscal Year Focus
2018 
 
 
Document Fiscal Period Focus
Q1 
 
 
Trading Symbol
NKE 
 
 
Entity Registrant Name
NIKE INC 
 
 
Entity Central Index Key
0000320187 
 
 
Current Fiscal Year End Date
--05-31 
 
 
Entity Filer Category
Large Accelerated Filer 
 
 
Entity Common Stock Shares Outstanding (In Shares)
 
329,245,752 
1,302,272,700 
Unaudited Condensed Consolidated Balance Sheets (USD $)
Aug. 31, 2017
May 31, 2017
Current assets:
 
 
Cash and equivalents
$ 3,413,000,000 
$ 3,808,000,000 
Short-term investments
2,106,000,000 
2,371,000,000 
Accounts receivable, net
3,871,000,000 
3,677,000,000 
Inventories
5,211,000,000 
5,055,000,000 
Prepaid expenses and other current assets
1,591,000,000 
1,150,000,000 
Total current assets
16,192,000,000 
16,061,000,000 
Property, plant and equipment, net
4,086,000,000 
3,989,000,000 
Identifiable intangible assets, net
283,000,000 
283,000,000 
Goodwill
139,000,000 
139,000,000 
Deferred income taxes and other assets
2,947,000,000 
2,787,000,000 
TOTAL ASSETS
23,647,000,000 
23,259,000,000 
Current liabilities:
 
 
Current portion of long-term debt
7,000,000 
6,000,000 
Notes payable
335,000,000 
325,000,000 
Accounts payable
2,116,000,000 
2,048,000,000 
Accrued liabilities
3,501,000,000 
3,011,000,000 
Income taxes payable
97,000,000 
84,000,000 
Total current liabilities
6,056,000,000 
5,474,000,000 
Long-term debt
3,472,000,000 
3,471,000,000 
Deferred income taxes and other liabilities
2,126,000,000 
1,907,000,000 
Commitments and contingencies (Note 12)
   
   
Redeemable preferred stock
0 
0 
Shareholders’ equity:
 
 
Capital in excess of stated value
8,817,000,000 
8,638,000,000 
Accumulated other comprehensive loss
(586,000,000)
(213,000,000)
Retained earnings
3,759,000,000 
3,979,000,000 
Total shareholders’ equity
11,993,000,000 
12,407,000,000 
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY
23,647,000,000 
23,259,000,000 
Class A Convertible Common Stock
 
 
Shareholders’ equity:
 
 
Common stock at stated value: Class A convertible - 329 and 329 shares outstanding, Class B - 1,308 and 1,314 shares outstanding
0 
0 
Class B Common Stock
 
 
Shareholders’ equity:
 
 
Common stock at stated value: Class A convertible - 329 and 329 shares outstanding, Class B - 1,308 and 1,314 shares outstanding
$ 3,000,000 
$ 3,000,000 
Unaudited Condensed Consolidated Balance Sheets (Parenthetical)
In Millions, unless otherwise specified
Aug. 31, 2017
May 31, 2017
Class A Convertible Common Stock
 
 
Common Stock, shares outstanding
329 
329 
Class B Common Stock
 
 
Common Stock, shares outstanding
1,308 
1,314 
Unaudited Condensed Consolidated Statements of Income (USD $)
In Millions, except Per Share data, unless otherwise specified
3 Months Ended
Aug. 31, 2017
Aug. 31, 2016
Income Statement [Abstract]
 
 
Revenues
$ 9,070 
$ 9,061 
Cost of sales
5,108 
4,938 
Gross profit
3,962 
4,123 
Demand creation expense
855 
1,041 
Operating overhead expense
2,001 
1,856 
Total selling and administrative expense
2,856 
2,897 
Interest expense (income), net
16 
7 
Other expense (income), net
18 
(62)
Income before income taxes
1,072 
1,281 
Income tax expense
122 
32 
NET INCOME
$ 950 
$ 1,249 
Earnings per common share:
 
 
Basic (in dollars per share)
$ 0.58 
$ 0.75 
Diluted (in dollars per share)
$ 0.57 
$ 0.73 
Dividends declared per common share (in dollars per share)
$ 0.18 
$ 0.16 
Unaudited Condensed Consolidated Statements of Comprehensive Income (USD $)
In Millions, unless otherwise specified
3 Months Ended
Aug. 31, 2017
Aug. 31, 2016
Statement of Comprehensive Income [Abstract]
 
 
Net income
$ 950 
$ 1,249 
Other comprehensive income (loss), net of tax:
 
 
Change in net foreign currency translation adjustment
22 
3 
Change in net gains (losses) on cash flow hedges
(395)
(240)
Change in net gains (losses) on other
0 
4 
Total other comprehensive income (loss), net of tax
(373)
(233)
TOTAL COMPREHENSIVE INCOME
$ 577 
$ 1,016 
Unaudited Condensed Consolidated Statements of Cash Flows (USD $)
In Millions, unless otherwise specified
3 Months Ended
Aug. 31, 2017
Aug. 31, 2016
Cash provided by operations:
 
 
Net income
$ 950 
$ 1,249 
Income charges (credits) not affecting cash:
 
 
Depreciation
179 
173 
Deferred income taxes
(59)
(50)
Stock-based compensation
50 
57 
Amortization and other
6 
7 
Net foreign currency adjustments
(19)
(61)
Changes in certain working capital components and other assets and liabilities:
 
 
(Increase) in accounts receivable
(101)
(284)
(Increase) in inventories
(96)
(62)
(Increase) in prepaid expenses and other current assets
(543)
(63)
Increase (decrease) in accounts payable, accrued liabilities and income taxes payable
208 
(178)
Cash provided by operations
575 
788 
Cash used by investing activities:
 
 
Purchases of short-term investments
(1,663)
(1,279)
Maturities of short-term investments
1,403 
562 
Sales of short-term investments
518 
960 
Additions to property, plant and equipment
(270)
(277)
Other investing activities
0 
(42)
Cash used by investing activities
(12)
(76)
Cash used by financing activities:
 
 
Long-term debt payments, including current portion
(1)
(2)
Increase in notes payable
9 
21 
Payments on capital lease and other financing obligations
(6)
(2)
Proceeds from exercise of stock options and other stock issuances
158 
112 
Repurchase of common stock
(804)
(1,054)
Dividends — common and preferred
(300)
(269)
Tax payments for net share settlement of equity awards
(54)
(8)
Cash used by financing activities
(998)
(1,202)
Effect of exchange rate changes on cash and equivalents
40 
11 
Net decrease in cash and equivalents
(395)
(479)
Cash and equivalents, beginning of period
3,808 
3,138 
CASH AND EQUIVALENTS, END OF PERIOD
3,413 
2,659 
Supplemental disclosure of cash flow information:
 
 
Non-cash additions to property, plant and equipment
98 
96 
Dividends declared and not paid
$ 295 
$ 272 
Summary of Significant Accounting Policies
Summary of Significant Accounting Policies
Note 1 — Summary of Significant Accounting Policies
Basis of Presentation
The Unaudited Condensed Consolidated Financial Statements include the accounts of NIKE, Inc. and its subsidiaries (the “Company”) and reflect all normal adjustments which are, in the opinion of management, necessary for a fair statement of the results of operations for the interim period. The year-end Condensed Consolidated Balance Sheet data as of May 31, 2017 was derived from audited financial statements, but does not include all disclosures required by accounting principles generally accepted in the United States of America (“U.S. GAAP”). The interim financial information and notes thereto should be read in conjunction with the Company’s latest Annual Report on Form 10-K. The results of operations for the three months ended August 31, 2017 are not necessarily indicative of results to be expected for the entire year.
Reclassifications
Certain prior year amounts have been reclassified to conform to fiscal 2018 presentation, including reclassified geographic operating segment data to reflect the changes in the Company’s operating structure, which became effective on June 1, 2017. Refer to Note 11 — Operating Segments for additional information.
Recently Adopted Accounting Standards
In March 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2016-09, Compensation — Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting, which changes how companies account for certain aspects of share-based payment awards to employees. The Company adopted the ASU in the first quarter of fiscal 2018. The updated guidance requires excess tax benefits and deficiencies from share-based payment awards to be recorded in income tax expense in the income statement. Previously, excess tax benefits and deficiencies were recognized in shareholders’ equity on the balance sheet. This change is required to be applied prospectively. During the first quarter of fiscal 2018, the Company recognized $88 million of excess tax benefits related to share-based payment awards in Income tax expense in the Unaudited Condensed Consolidated Statements of Income.
Additionally, ASU 2016-09 modified the classification of certain share-based payment activities within the statement of cash flows, which the Company applied retrospectively. As a result, for the three months ended August 31, 2016, the Company reclassified a cash inflow of $59 million related to excess tax benefits from share-based payment awards from Cash used by financing activities to Cash provided by operations, and reclassified a cash outflow of $8 million related to tax payments for the net settlement of share-based payment awards from Cash provided by operations to Cash used by financing activities within the Unaudited Condensed Consolidated Statement of Cash Flows.
Recently Issued Accounting Standards
In August 2017, the FASB issued ASU 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities, which expands and refines hedge accounting for both financial and non-financial risk components, aligns the recognition and presentation of the effects of hedging instruments and hedge items in the financial statements, and includes certain targeted improvements to ease the application of current guidance related to the assessment of hedge effectiveness. The update to the standard is effective for the Company June 1, 2019, with early adoption permitted in any interim period. The Company is currently evaluating the effect the guidance will have on the Consolidated Financial Statements.
In October 2016, the FASB issued ASU No. 2016-16, Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory. The updated guidance requires companies to recognize the income tax consequences of an intra-entity transfer of an asset other than inventory when the transfer occurs. 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 Company will adopt the standard on June 1, 2018, using a modified retrospective approach with the cumulative effect recognized through retained earnings at the date of adoption. The Company continues to assess the impact this update will have on its existing accounting policies and the Consolidated Financial Statements and anticipates the updated guidance could have a material impact on the Consolidated Financial Statements at adoption through the recognition of a cumulative-effect adjustment to retained earnings of previously deferred charges.
In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842), which replaces existing lease accounting guidance. The new standard is intended to provide enhanced transparency and comparability by requiring lessees to record right-of-use assets and corresponding lease liabilities on the balance sheet. The new guidance will require the Company to continue to classify leases as either operating or financing, with classification affecting the pattern of expense recognition in the income statement. The Company will adopt the standard on June 1, 2019. The ASU is required to be applied using a modified retrospective approach at the beginning of the earliest period presented, with optional practical expedients. The Company continues to assess the effect the guidance will have on its existing accounting policies and the Consolidated Financial Statements and expects there will be an increase in assets and liabilities on the Consolidated Balance Sheets at adoption due to the recording of right-of-use assets and corresponding lease liabilities, which may be material. Refer to Note 15 — Commitments and Contingencies of the Annual Report on Form 10-K for the fiscal year ended May 31, 2017 for information about the Company’s lease obligations.
In January 2016, the FASB issued ASU No. 2016-01, Financial Instruments — Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities. The updated guidance enhances the reporting model for financial instruments, which includes amendments to address aspects of recognition, measurement, presentation and disclosure. The update to the standard is effective for the Company beginning June 1, 2018. The Company does not expect the adoption to have a material impact on the Consolidated Financial Statements.
In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606), that replaces existing revenue recognition guidance. The updated guidance requires companies to recognize revenue in a way that depicts the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. In addition, the new standard requires that reporting companies disclose the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. The Company will adopt the standard on June 1, 2018 using a modified retrospective approach with the cumulative effect of initially applying the new standard recognized in retained earnings at the date of adoption. The Company is in the process of evaluating the new standard against its existing accounting policies, including the timing of revenue recognition, and its contracts with customers, to determine the effect the guidance will have on the Consolidated Financial Statements.
Inventories
Inventories
Note 2 — Inventories
Inventory balances of $5,211 million and $5,055 million at August 31, 2017 and May 31, 2017, respectively, were substantially all finished goods.
Accrued Liabilities
Accrued Liabilities
Note 3 — Accrued Liabilities
Accrued liabilities included the following:
 
 
As of August 31,
 
As of May 31,
(In millions)
 
2017
 
2017
Compensation and benefits, excluding taxes
 
$
837

 
$
871

Fair value of derivatives
 
528

 
168

Endorsement compensation
 
383

 
396

Dividends payable
 
295

 
300

Import and logistics costs
 
280

 
257

Taxes other than income taxes payable
 
243

 
196

Advertising and marketing
 
152

 
125

Other(1)
 
783

 
698

TOTAL ACCRUED LIABILITIES
 
$
3,501

 
$
3,011

(1)
Other consists of various accrued expenses with no individual item accounting for more than 5% of the total Accrued liabilities balance at August 31, 2017 and May 31, 2017.
Fair Value Measurements
Fair Value Measurements
Note 4 — Fair Value Measurements
The Company measures certain financial assets and liabilities at fair value on a recurring basis, including derivatives and available-for-sale securities. Fair value is the price the Company would receive to sell an asset or pay to transfer a liability in an orderly transaction with a market participant at the measurement date. The Company uses a three-level hierarchy established by the FASB that prioritizes fair value measurements based on the types of inputs used for the various valuation techniques (market approach, income approach and cost approach).
The levels of the fair value hierarchy are described below:
•
Level 1: Quoted prices in active markets for identical assets or liabilities.
•
Level 2: Inputs other than quoted prices that are observable for the asset or liability, either directly or indirectly; these include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active.
•
Level 3: Unobservable inputs for which there is little or no market data available, which require the reporting entity to develop its own assumptions.
The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability. Financial assets and liabilities are classified in their entirety based on the most conservative level of input that is significant to the fair value measurement.
Pricing vendors are utilized for a majority of Level 1 and Level 2 investments. These vendors either provide a quoted market price in an active market or use observable inputs without applying significant adjustments in their pricing. Observable inputs include broker quotes, interest rates and yield curves observable at commonly quoted intervals, volatilities and credit risks. The fair value of derivative contracts is determined using observable market inputs such as the daily market foreign currency rates, forward pricing curves, currency volatilities, currency correlations and interest rates, and considers non-performance risk of the Company and that of its counterparties.
The Company’s fair value measurement process includes comparing fair values to another independent pricing vendor to ensure appropriate fair values are recorded.
The following tables present information about the Company’s financial assets measured at fair value on a recurring basis as of August 31, 2017 and May 31, 2017, and indicate the level in the fair value hierarchy in which the Company classifies the fair value measurement.
 
 
As of August 31, 2017
(In millions)
 
Assets at Fair Value
 
Cash and Equivalents
 
Short-term Investments
 
Other Long-term Assets
Cash
 
$
624

 
$
624

 
$
—

 
$
—

Level 1:
 
 
 
 
 
 
 
 
U.S. Treasury securities
 
1,205

 
200

 
1,005

 
—

Level 2:
 
 
 
 
 
 
 
 
Time deposits
 
901

 
862

 
39

 
—

U.S. Agency securities
 
354

 
50

 
304

 
—

Commercial paper and bonds
 
797

 
39

 
758

 
—

Money market funds
 
1,638

 
1,638

 
—

 
—

Total Level 2:
 
3,690

 
2,589

 
1,101

 
—

Level 3:
 
 
 
 
 
 
 
 
Non-marketable preferred stock
 
10

 
—

 
—

 
10

TOTAL
 
$
5,529

 
$
3,413

 
$
2,106

 
$
10


 
 
As of May 31, 2017
(In millions)
 
Assets at Fair Value
 
Cash and Equivalents
 
Short-term Investments
 
Other Long-term Assets
Cash
 
$
505

 
$
505

 
$
—

 
$
—

Level 1:
 
 
 
 
 
 
 
 
U.S. Treasury securities
 
1,545

 
159

 
1,386

 
—

Level 2:
 
 
 
 
 
 
 
 
Time deposits
 
813

 
769

 
44

 
—

U.S. Agency securities
 
522

 
150

 
372

 
—

Commercial paper and bonds
 
820

 
251

 
569

 
—

Money market funds
 
1,974

 
1,974

 
—

 
—

Total Level 2:
 
4,129

 
3,144

 
985

 
—

Level 3:
 
 
 
 
 
 
 
 
Non-marketable preferred stock
 
10

 
—

 
—

 
10

TOTAL
 
$
6,189

 
$
3,808

 
$
2,371

 
$
10


The Company elects to record the gross assets and liabilities of its derivative financial instruments on the Unaudited Condensed Consolidated Balance Sheets. The Company’s derivative financial instruments are subject to master netting arrangements that allow for the offset of assets and liabilities in the event of default or early termination of the contract. Any amounts of cash collateral received related to these instruments associated with the Company’s credit-related contingent features are recorded in Cash and equivalents and Accrued liabilities, the latter of which would further offset against the Company’s derivative asset balance. Any amounts of cash collateral posted related to these instruments associated with the Company’s credit-related contingent features are recorded in Prepaid expenses and other current assets, which would further offset against the Company’s derivative liability balance. Cash collateral received or posted related to the Company’s credit-related contingent features is presented in the Cash provided by operations component of the Unaudited Condensed Consolidated Statements of Cash Flows. Any amounts of non-cash collateral received, such as securities, are not recorded on the Unaudited Condensed Consolidated Balance Sheets pursuant to U.S. GAAP. For further information related to credit risk, refer to Note 9 — Risk Management and Derivatives.
The following tables present information about the Company’s derivative assets and liabilities measured at fair value on a recurring basis as of August 31, 2017 and May 31, 2017, and indicate the level in the fair value hierarchy in which the Company classifies the fair value measurement.
 
 
As of August 31, 2017
 
 
Derivative Assets
 
Derivative Liabilities
(In millions)
 
Assets at Fair Value
 
Other Current Assets
 
Other Long-term Assets
 
Liabilities at Fair Value
 
Accrued Liabilities
 
Other Long-term Liabilities
Level 2:
 
 
 
 
 
 
 
 
 
 
 
 
Foreign exchange forwards and options(1)
 
$
183

 
$
175

 
$
8

 
$
708

 
$
525

 
$
183

Embedded derivatives
 
10

 
1

 
9

 
8

 
3

 
5

TOTAL
 
$
193

 
$
176

 
$
17

 
$
716

 
$
528

 
$
188

(1)
If the foreign exchange derivative instruments had been netted on the Unaudited Condensed Consolidated Balance Sheets, the asset and liability positions each would have been reduced by $164 million as of August 31, 2017. As of that date, the Company had posted $273 million of cash collateral to various counterparties related to these foreign exchange derivative instruments. No amount of collateral was received on the Company’s derivative asset balance as of August 31, 2017.
 
 
As of May 31, 2017
 
 
Derivative Assets
 
Derivative Liabilities
(In millions)
 
Assets at Fair Value
 
Other Current Assets
 
Other Long-term Assets
 
Liabilities at Fair Value
 
Accrued Liabilities
 
Other Long-term Liabilities
Level 2:
 
 
 
 
 
 
 
 
 
 
 
 
Foreign exchange forwards and options(1)
 
$
231

 
$
216

 
$
15

 
$
246

 
$
166

 
$
80

Embedded derivatives
 
10

 
1

 
9

 
8

 
2

 
6

TOTAL
 
$
241

 
$
217

 
$
24

 
$
254

 
$
168

 
$
86

(1)
If the foreign exchange derivative instruments had been netted on the Condensed Consolidated Balance Sheets, the asset and liability positions each would have been reduced by $187 million as of May 31, 2017. As of that date, no amount of cash collateral had been received or posted on the derivative asset and liability balances related to these foreign exchange derivative instruments.
Available-for-sale securities comprise investments in U.S. Treasury and Agency securities, time deposits, money market funds, corporate commercial paper and bonds. These securities are valued using market prices in both active markets (Level 1) and less active markets (Level 2). As of August 31, 2017, the Company held $1,852 million of available-for-sale securities with maturity dates within one year and $254 million with maturity dates over one year and less than five years within Short-term investments on the Unaudited Condensed Consolidated Balance Sheets. The gross realized gains and losses on sales of available-for-sale securities were immaterial for the three months ended August 31, 2017 and 2016. Unrealized gains and losses on available-for-sale securities included in Accumulated other comprehensive income were immaterial as of August 31, 2017 and May 31, 2017. The Company regularly reviews its available-for-sale securities for other-than-temporary impairment. For the three months ended August 31, 2017 and 2016, the Company did not consider any of its securities to be other-than-temporarily impaired and, accordingly, did not recognize any impairment losses.
Included in Interest expense (income), net for the three months ended August 31, 2017 and 2016 was interest income related to the Company’s available-for-sale securities of $11 million and $4 million, respectively.
The Company’s Level 3 assets comprise investments in certain non-marketable preferred stock. These Level 3 investments are an immaterial portion of the Company’s portfolio. Changes in Level 3 investment assets were immaterial during the three months ended August 31, 2017 and the fiscal year ended May 31, 2017.
No transfers among levels within the fair value hierarchy occurred during the three months ended August 31, 2017 and the fiscal year ended May 31, 2017.
For additional information related to the Company’s derivative financial instruments, refer to Note 9 — Risk Management and Derivatives. The carrying amounts of other current financial assets and other current financial liabilities approximate fair value.
As of August 31, 2017 and May 31, 2017, assets or liabilities that were required to be measured at fair value on a non-recurring basis were immaterial.
Financial Assets and Liabilities Not Recorded at Fair Value
The Company’s Long-term debt is recorded at adjusted cost, net of unamortized premiums, discounts and debt issuance costs. The fair value of Long-term debt is estimated based upon quoted prices for similar instruments or quoted prices for identical instruments in inactive markets (Level 2). The fair value of the Company’s Long-term debt, including the current portion, was approximately $3,502 million at August 31, 2017 and $3,401 million at May 31, 2017.
For fair value information regarding Notes payable, refer to Note 5 — Short-Term Borrowings and Credit Lines.
Short-Term Borrowings and Credit Lines
Short-Term Borrowings and Credit Lines
Note 5 — Short-Term Borrowings and Credit Lines
As of August 31, 2017, the Company had $325 million of outstanding borrowings under its $2 billion commercial paper program at a weighted average interest rate of 1.15%. As of May 31, 2017, $325 million of commercial paper was outstanding at a weighted average interest rate of 0.86%. These borrowings are included within Notes payable.
The carrying amounts reflected on the Unaudited Condensed Consolidated Balance Sheets for Notes payable approximate fair value.
Income Taxes
Income Taxes
Note 6 — Income Taxes
The effective tax rate was 11.4% and 2.5% for the three months ended August 31, 2017 and 2016, respectively. The Company’s effective tax rate reflected the tax benefit from stock-based compensation in the current period as a result of the adoption of ASU 2016-09. The prior year period included one-time benefits related to the resolution with the U.S. Internal Revenue Service (IRS) of a foreign tax credit matter and an adjustment to the deferred tax asset related to the nonqualified deferred compensation plan.
As of August 31, 2017, total gross unrecognized tax benefits, excluding related interest and penalties, were $498 million, $247 million of which would affect the Company’s effective tax rate if recognized in future periods. As of May 31, 2017, total gross unrecognized tax benefits, excluding related interest and penalties, were $461 million. The liability for payment of interest and penalties increased $9 million during the three months ended August 31, 2017. As of August 31, 2017 and May 31, 2017, accrued interest and penalties related to uncertain tax positions were $180 million and $171 million, respectively (excluding federal benefit).
The Company is subject to taxation in the United States as well as various state and foreign jurisdictions. The Company has closed all U.S. federal income tax matters through fiscal 2014, with the exception of certain transfer pricing adjustments. The Company is currently under audit by the IRS for fiscal 2015 and 2016.
The Company’s major foreign jurisdictions, China and the Netherlands, have concluded substantially all income tax matters through calendar 2006 and fiscal 2010, respectively. Although the timing of resolution of audits is not certain, the Company evaluates all domestic and foreign audit issues in the aggregate, along with the expiration of applicable statutes of limitations, and estimates that it is reasonably possible the total gross unrecognized tax benefits could decrease by up to $78 million within the next 12 months.
Common Stock and Stock-Based Compensation
Common Stock and Stock-Based Compensation
Note 7 — Common Stock and Stock-Based Compensation
The authorized number of shares of Class A Common Stock, no par value, and Class B Common Stock, no par value, are 400 million and 2,400 million, respectively. Each share of Class A Common Stock is convertible into one share of Class B Common Stock. Voting rights of Class B Common Stock are limited in certain circumstances with respect to the election of directors. There are no differences in the dividend and liquidation preferences or participation rights of the holders of Class A and Class B Common Stock.
The NIKE, Inc. Stock Incentive Plan (the “Stock Incentive Plan”) provides for the issuance of up to 718 million previously unissued shares of Class B Common Stock in connection with stock options and other awards granted under the Stock Incentive Plan. The Stock Incentive Plan authorizes the grant of non-statutory stock options, incentive stock options, stock appreciation rights, restricted stock, restricted stock units and performance-based awards. The exercise price for stock options and stock appreciation rights may not be less than the fair market value of the underlying shares on the date of grant. A committee of the Board of Directors administers the Stock Incentive Plan. The committee has the authority to determine the employees to whom awards will be made, the amount of the awards and the other terms and conditions of the awards. Substantially all stock option grants outstanding under the Stock Incentive Plan are granted in the first quarter of each fiscal year, vest ratably over four years and expire ten years from the date of grant.
In addition to the Stock Incentive Plan, the Company gives employees the right to purchase shares at a discount to the market price under employee stock purchase plans (ESPPs). Subject to the annual statutory limit, employees are eligible to participate through payroll deductions of up to 10% of their compensation. At the end of each six month offering period, shares are purchased by the participants at 85% of the lower of the fair market value at the beginning or the end of the offering period.
The Company accounts for stock-based compensation by estimating the fair value of options granted under the Stock Incentive Plan and employees’ purchase rights under the ESPPs using the Black-Scholes option pricing model. The Company recognizes this fair value as Cost of sales or Operating overhead expense, as applicable, over the vesting period using the straight-line method.
The following table summarizes the Company’s total stock-based compensation expense recognized in Cost of sales or Operating overhead expense, as applicable: 
 
 
Three Months Ended August 31,
(In millions)
 
2017
 
2016
Stock options(1)
 
$
33

 
$
39

ESPPs
 
8

 
9

Restricted stock
 
9

 
9

TOTAL STOCK-BASED COMPENSATION EXPENSE
 
$
50

 
$
57

(1)
Expense for stock options includes the expense associated with stock appreciation rights. Accelerated stock option expense is recorded for employees eligible for accelerated stock option vesting upon retirement. Accelerated stock option expense was $3 million and $5 million for the three months ended August 31, 2017 and 2016, respectively.
As of August 31, 2017, the Company had $311 million of unrecognized compensation costs from stock options, net of estimated forfeitures, to be recognized in Cost of sales or Operating overhead expense, as applicable, over a weighted average remaining period of 2.7 years.
The weighted average fair value per share of the options granted during the three months ended August 31, 2017 and 2016, computed as of the grant date using the Black-Scholes pricing model, was $9.82 and $9.36, respectively. The weighted average assumptions used to estimate these fair values were as follows:
 
 
Three Months Ended August 31,
  
 
2017
 
2016
Dividend yield
 
1.2
%
 
1.1
%
Expected volatility
 
16.4
%
 
17.3
%
Weighted average expected life (in years)
 
6.0

 
6.0

Risk-free interest rate
 
2.0
%
 
1.3
%
The Company estimates the expected volatility based on the implied volatility in market traded options on the Company’s common stock with a term greater than one year, along with other factors. The weighted average expected life of options is based on an analysis of historical and expected future exercise patterns. The interest rate is based on the U.S. Treasury (constant maturity) risk-free rate in effect at the date of grant for periods corresponding with the expected term of the options.
Earnings Per Share
Earnings Per Share
Note 8 — Earnings Per Share
The following is a reconciliation from basic earnings per common share to diluted earnings per common share. The computations of diluted earnings per common share excluded options, including shares under ESPPs, to purchase an additional 46.0 million and 31.7 million shares of common stock outstanding for the three months ended August 31, 2017 and 2016, respectively, because the options were anti-dilutive.
 
 
Three Months Ended August 31,
(In millions, except per share data)
 
2017
 
2016
Determination of shares:
 
 
 
 
Weighted average common shares outstanding
 
1,639.1

 
1,672.0

Assumed conversion of dilutive stock options and awards
 
37.8

 
36.9

DILUTED WEIGHTED AVERAGE COMMON SHARES OUTSTANDING
 
1,676.9

 
1,708.9

 
 
 
 
 
Earnings per common share:
 
 
 
 
Basic
 
$
0.58

 
$
0.75

Diluted
 
$
0.57

 
$
0.73

Risk Management and Derivatives
Risk Management and Derivatives
Note 9 — Risk Management and Derivatives
The Company is exposed to global market risks, including the effect of changes in foreign currency exchange rates and interest rates, and uses derivatives to manage financial exposures that occur in the normal course of business. The Company does not hold or issue derivatives for trading or speculative purposes.
The Company may elect to designate certain derivatives as hedging instruments under U.S. GAAP. The Company formally documents all relationships between designated hedging instruments and hedged items as well as its risk management objectives and strategies for undertaking hedge transactions. This process includes linking all derivatives designated as hedges to either recognized assets, liabilities, or forecasted transactions and assessing, both at inception and on an ongoing basis, the effectiveness of the hedging relationships.
The majority of derivatives outstanding as of August 31, 2017 are designated as foreign currency cash flow hedges, primarily for Euro/U.S. Dollar, Japanese Yen/U.S. Dollar and British Pound/Euro currency pairs. All derivatives are recognized on the Unaudited Condensed Consolidated Balance Sheets at fair value and classified based on the instrument’s maturity date.
The following table presents the fair values of derivative instruments included within the Unaudited Condensed Consolidated Balance Sheets as of August 31, 2017 and May 31, 2017. Refer to Note 4 — Fair Value Measurements for a description of how the financial instruments in the table below are valued.
 
 
Derivative Assets
 
Derivative Liabilities
(In millions)
 
Balance Sheet
Location
 
August 31,
2017
 
May 31,
2017
 
Balance Sheet 
Location
 
August 31,
2017
 
May 31,
2017
Derivatives formally designated as hedging instruments:
 
 
 
 
 
 
 
 
 
 
 
 
Foreign exchange forwards and options
 
Prepaid expenses and other current assets
 
$
92

 
$
113

 
Accrued liabilities
 
$
291

 
$
59

Foreign exchange forwards and options
 
Deferred income taxes and other assets
 
8

 
13

 
Deferred income taxes and other liabilities
 
173

 
73

Total derivatives formally designated as hedging instruments
 
 
 
100

 
126

 
 
 
464

 
132

Derivatives not designated as hedging instruments:
 
 
 
 
 
 
 
 
 
 
 
 
Foreign exchange forwards and options
 
Prepaid expenses and other current assets
 
83

 
103

 
Accrued liabilities
 
234

 
107

Embedded derivatives
 
Prepaid expenses and other current assets
 
1

 
1

 
Accrued liabilities
 
3

 
2

Foreign exchange forwards and options
 
Deferred income taxes and other assets
 
—

 
2

 
Deferred income taxes and other liabilities
 
10

 
7

Embedded derivatives
 
Deferred income taxes and other assets
 
9

 
9

 
Deferred income taxes and other liabilities
 
5

 
6

Total derivatives not designated as hedging instruments
 
 
 
93

 
115

 
 
 
252

 
122

TOTAL DERIVATIVES
 
 
 
$
193

 
$
241

 
 
 
$
716

 
$
254


The following tables present the amounts affecting the Unaudited Condensed Consolidated Statements of Income for the three months ended August 31, 2017 and 2016:

(In millions)
Amount of Gain (Loss) Recognized in Other Comprehensive Income on Derivatives(1)

Amount of Gain (Loss) Reclassified from Accumulated Other Comprehensive Income into Income(1)
Three Months Ended August 31,
 
Location of Gain (Loss) Reclassified from Accumulated Other Comprehensive Income into Income
 
Three Months Ended August 31,
2017
 
2016


2017
 
2016
Derivatives designated as cash flow hedges:
 
 
 
 
 
 
 
 
 
Foreign exchange forwards and options
$
55

 
$
53


Revenues

$
2

 
$
33

Foreign exchange forwards and options
(277
)
 
(52
)

Cost of sales

45

 
104

Foreign exchange forwards and options
1

 
—


Total selling and administrative expense

—

 
—

Foreign exchange forwards and options
(129
)
 
(16
)

Other expense (income), net

2

 
43

Interest rate swaps(2)
—

 
(91
)
 
Interest expense (income), net
 
(2
)
 
—

Total designated cash flow hedges
$
(350
)
 
$
(106
)



$
47

 
$
180

(1)
For the three months ended August 31, 2017 and 2016, the amounts recorded in Other expense (income), net as a result of hedge ineffectiveness and the discontinuance of cash flow hedges because the forecasted transactions were no longer probable of occurring were immaterial.
(2)
Gains and losses associated with terminated interest rate swaps, which were previously designated as cash flow hedges and recorded in Accumulated other comprehensive income, will be released through Interest expense (income), net over the term of the issued debt.

 
 
Amount of Gain (Loss) Recognized in Income on Derivatives
Location of Gain (Loss) 
Recognized in Income on Derivatives
 
 
Three Months Ended August 31,
 
(In millions)
 
2017
 
2016
 
Derivatives not designated as hedging instruments:
 
 
 
 
 
 
Foreign exchange forwards and options
 
$
(194
)
 
$
(35
)
 
Other expense (income), net
Embedded derivatives
 
(1
)
 
3

 
Other expense (income), net

Cash Flow Hedges
All changes in fair value of derivatives designated as cash flow hedges, excluding any ineffective portion, are recorded in Accumulated other comprehensive income until Net income is affected by the variability of cash flows of the hedged transaction. Effective hedge results are classified within the Unaudited Condensed Consolidated Statements of Income in the same manner as the underlying exposure. The ineffective portion of the unrealized gains and losses on these contracts, if any, is recorded immediately in earnings. 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. The gains and losses associated with discontinued derivative instruments that were in Accumulated other comprehensive income will be recognized immediately in Other expense (income), net if it is probable the forecasted hedged transaction will not occur by the end of the initially identified time period or within an additional two-month period thereafter. 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.
The purpose of the Company’s foreign exchange risk management program is to lessen both the positive and negative effects of currency fluctuations on the Company’s consolidated results of operations, financial position and cash flows. Foreign currency exposures that the Company may elect to hedge in this manner include product cost exposures, non-functional currency denominated external and intercompany revenues, selling and administrative expenses, investments in U.S. Dollar-denominated available-for-sale debt securities and certain other intercompany transactions.
Product cost exposures are primarily generated through non-functional currency denominated product purchases and the foreign currency adjustment program described below. NIKE entities primarily purchase product in two ways: (1) Certain NIKE entities purchase product from the NIKE Trading Company (NTC), a wholly-owned sourcing hub that buys NIKE branded product from third-party factories, predominantly in U.S. Dollars. The NTC, whose functional currency is the U.S. Dollar, then sells the product to NIKE entities in their respective functional currencies. When the NTC sells to a NIKE entity with a different functional currency, the result is a foreign currency exposure for the NTC. (2) Other NIKE entities purchase product directly from third-party factories in U.S. Dollars. These purchases generate a foreign currency exposure for those NIKE entities with a functional currency other than the U.S. Dollar.
The Company operates a foreign currency adjustment program with certain factories. The program is designed to more effectively manage foreign currency risk by assuming certain of the factories’ foreign currency exposures, some of which are natural offsets to the Company’s existing foreign currency exposures. Under this program, the Company’s payments to these factories are adjusted for rate fluctuations in the basket of currencies (“factory currency exposure index”) in which the labor, materials and overhead costs incurred by the factories in the production of NIKE branded products (“factory input costs”) are denominated. For the portion of the indices denominated in the local or functional currency of the factory, the Company may elect to place formally designated cash flow hedges. For all currencies within the indices, excluding the U.S. Dollar and the local or functional currency of the factory, an embedded derivative contract is created upon the factory’s acceptance of NIKE’s purchase order. Embedded derivative contracts are separated from the related purchase order, as further described within the Embedded Derivatives section below.
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. Typically, the Company may enter into hedge contracts starting up to 12 to 24 months in advance of the forecasted transaction and may place incremental hedges up to 100% of the exposure by the time the forecasted transaction occurs. The total notional amount of outstanding foreign currency derivatives designated as cash flow hedges was $12 billion as of August 31, 2017.
As of August 31, 2017, $151 million of deferred net losses (net of tax) on both outstanding and matured derivatives in Accumulated other comprehensive income are expected to be reclassified to Net income during the next 12 months concurrent with the underlying hedged transactions also being recorded in Net income. Actual amounts ultimately reclassified to Net income are dependent on the exchange rates in effect when derivative contracts that are currently outstanding mature. As of August 31, 2017, the maximum term over which the Company was hedging exposures to the variability of cash flows for its forecasted transactions was 27 months.
Fair Value Hedges
The Company has, in the past, been exposed to the risk of changes in the fair value of certain fixed-rate debt attributable to changes in interest rates. Derivatives used by the Company to hedge this risk are receive-fixed, pay-variable interest rate swaps. All interest rate swaps designated as fair value hedges of the related long-term debt meet the shortcut method requirements under U.S. GAAP. Accordingly, changes in the fair values of the interest rate swaps are considered to exactly offset changes in the fair value of the underlying long-term debt. The Company recorded no ineffectiveness from its interest rate swaps designated as fair value hedges for the three months ended August 31, 2017 or 2016. The Company had no interest rate swaps designated as fair value hedges as of August 31, 2017.
Net Investment Hedges
All changes in fair value of the derivatives designated as net investment hedges, except ineffective portions, are reported in Accumulated other comprehensive income along with the foreign currency translation adjustments on those investments. The ineffective portion of the unrealized gains and losses on these contracts, if any, are recorded immediately in earnings. The Company has, in the past, hedged and may, in the future, hedge the risk of variability in foreign-currency-denominated net investments in wholly-owned international operations. The Company recorded no ineffectiveness from its net investment hedges for the three months ended August 31, 2017 or 2016. The Company had no outstanding net investment hedges as of August 31, 2017.
Undesignated Derivative Instruments
The Company may elect to enter into foreign exchange forwards to mitigate the change in fair value of specific assets and liabilities on the Unaudited Condensed Consolidated Balance Sheets and/or embedded derivative contracts. These undesignated instruments are recorded at fair value as a derivative asset or liability on the Unaudited Condensed Consolidated Balance Sheets with their corresponding change in fair value recognized in Other expense (income), net, together with the re-measurement gain or loss from the hedged balance sheet position and/or embedded derivative contract. The total notional amount of outstanding undesignated derivative instruments was $10 billion as of August 31, 2017.
Embedded Derivatives
As part of the foreign currency adjustment program described above, an embedded derivative contract is created upon the factory’s acceptance of NIKE’s purchase order for currencies within the factory currency exposure indices that are neither the U.S. Dollar nor the local or functional currency of the factory. In addition, embedded derivative contracts are created when the Company enters into certain other contractual agreements which have payments that are indexed to currencies that are not the functional currency of either substantial party to the contracts. Embedded derivative contracts are treated as foreign currency forward contracts that are bifurcated from the related contract and recorded at fair value as a derivative asset or liability on the Unaudited Condensed Consolidated Balance Sheets with their corresponding change in fair value recognized in Other expense (income), net, through the date the foreign currency fluctuations cease to exist.
As of August 31, 2017, the total notional amount of embedded derivatives outstanding was approximately $265 million.
Credit Risk
The Company is exposed to credit-related losses in the event of non-performance by counterparties to hedging instruments. The counterparties to all derivative transactions are major financial institutions with investment grade credit ratings. However, this does not eliminate the Company’s exposure to credit risk with 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.
The Company’s derivative contracts contain credit risk-related contingent features designed to protect against significant deterioration in counterparties’ creditworthiness and their ultimate ability to settle outstanding derivative contracts in the normal course of business. The Company’s bilateral credit-related contingent features generally require the owing entity, either the Company or the derivative counterparty, to post collateral for the portion of the fair value in excess of $50 million should the fair value of outstanding derivatives per counterparty be greater than $50 million. Additionally, a certain level of decline in credit rating of either the Company or the counterparty could also trigger collateral requirements. As of August 31, 2017, the Company was in compliance with all credit risk-related contingent features and had derivative instruments with credit risk-related contingent features in a net liability position of $545 million. Accordingly, the Company was required to post $273 million of cash collateral to various counterparties to its derivative contracts as a result of these contingent features. As of August 31, 2017, the Company had received no cash collateral from its counterparties to its derivative contracts (refer to Note 4 — Fair Value Measurements). The Company considers the impact of the risk of counterparty default to be immaterial.
Accumulated Other Comprehensive Income
Accumulated Other Comprehensive Income
Note 10 — Accumulated Other Comprehensive Income
The changes in Accumulated other comprehensive income, net of tax, for the three months ended August 31, 2017 were as follows:
(In millions)
 
Foreign Currency Translation Adjustment(1)
 
Cash Flow Hedges
 
Net Investment Hedges(1)
 
Other
 
Total
Balance at May 31, 2017
 
$
(191
)
 
$
(52
)
 
$
115

 
$
(85
)
 
$
(213
)
Other comprehensive gains (losses) before reclassifications(2)
 
22

 
(347
)
 
—

 
(18
)
 
(343
)
Reclassifications to net income of previously deferred (gains) losses(3)
 
—

 
(48
)
 
—

 
18

 
(30
)
Other comprehensive income (loss)
 
22

 
(395
)
 
—

 
—

 
(373
)
Balance at August 31, 2017
 
$
(169
)
 
$
(447
)
 
$
115

 
$
(85
)
 
$
(586
)
(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 (expense) of $(19) million, $3 million, $0 million, $0 million and $(16) million, respectively.
(3)
Net of tax (benefit) expense of $0 million, $(1) million, $0 million, $0 million and $(1) million, respectively.
The changes in Accumulated other comprehensive income, net of tax, for the three months ended August 31, 2016 were as follows:
(In millions)
 
Foreign Currency Translation Adjustment(1)
 
Cash Flow Hedges
 
Net Investment Hedges(1)
 
Other
 
Total
Balance at May 31, 2016
 
$
(207
)
 
$
463

 
$
115

 
$
(53
)
 
$
318

Other comprehensive gains (losses) before reclassifications(2)
 
3

 
(60
)
 
—

 
13

 
(44
)
Reclassifications to net income of previously deferred (gains) losses(3)
 
—

 
(180
)
 
—

 
(9
)
 
(189
)
Other comprehensive income (loss)
 
3

 
(240
)
 
—

 
4

 
(233
)
Balance at August 31, 2016
 
$
(204
)
 
$
223

 
$
115

 
$
(49
)
 
$
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 (expense) of $0 million, $46 million, $0 million, $1 million and $47 million, respectively.
(3)
Net of tax (benefit) expense of $0 million, $0 million, $0 million, $(1) million and $(1) million, respectively.
The following table summarizes the reclassifications from Accumulated other comprehensive income to the Unaudited Condensed 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
 
 
Three Months Ended August 31,
 
(In millions)
 
2017
 
2016
 
Gains (losses) on cash flow hedges:
 
 
 
 
 
 
Foreign exchange forwards and options
 
$
2

 
$
33

 
Revenues
Foreign exchange forwards and options
 
45

 
104

 
Cost of sales
Foreign exchange forwards and options
 
2

 
43

 
Other expense (income), net
Interest rate swaps
 
(2
)
 
—

 
Interest expense (income), net
Total before tax
 
47

 
180

 
 
Tax (expense) benefit
 
1

 
—

 
 
Gain (loss) net of tax
 
48

 
180

 
 
Gains (losses) on other
 
(18
)
 
8

 
Other expense (income), net
Total before tax
 
(18
)
 
8

 
 
Tax (expense) benefit
 
—

 
1

 
 
Gain (loss) net of tax
 
(18
)
 
9

 
 
Total net gain (loss) reclassified for the period
 
$
30

 
$
189

 
 
Operating Segments
Operating Segments
Note 11 — Operating Segments
The Company’s operating segments are evidence of the structure of the Company’s internal organization. The NIKE Brand segments are defined by geographic regions for operations participating in NIKE Brand sales activity.
Each NIKE Brand geographic segment operates predominantly in one industry: the design, development, marketing and selling of athletic footwear, apparel and equipment. In June 2017, NIKE, Inc. announced a new company alignment designed to allow NIKE to better serve the consumer personally, at scale. As a result of this organizational realignment, the Company’s reportable operating segments for the NIKE Brand are: North America; Europe, Middle East & Africa; Greater China; and Asia Pacific & Latin America, and include results for the NIKE, Jordan and Hurley brands. Certain prior year amounts have been reclassified to conform to fiscal 2018 presentation. This includes reclassified operating segment data to reflect the changes in the Company’s operating structure, which became effective June 1, 2017. These changes had no impact on previously reported consolidated statements of income, balance sheets, statements of cash flows or statements of shareholders’ equity.
The Company’s NIKE Direct operations are managed within each geographic operating segment. Converse is also a reportable segment for the Company, and operates in one industry: the design, marketing, licensing and selling of casual sneakers, apparel and accessories.
Global Brand Divisions is included within the NIKE Brand for presentation purposes to align with the way management views the Company. Global Brand Divisions primarily represents NIKE Brand licensing businesses that are not part of a geographic operating segment, and demand creation, operating overhead and product creation and design expenses that are centrally managed for the NIKE Brand.
Corporate consists largely of unallocated general and administrative expenses, including expenses associated with centrally managed departments; depreciation and amortization related to the Company’s headquarters; unallocated insurance, benefit and compensation programs, including stock-based compensation; and certain foreign currency gains and losses, including certain hedge gains and losses.
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 tax expense in the Unaudited Condensed Consolidated Statements of Income.
As part of the Company’s centrally managed foreign exchange risk management program, standard foreign currency rates are assigned twice per year to each NIKE Brand entity in the Company’s geographic operating segments and to Converse. These rates are set approximately nine and twelve months in advance of the future selling seasons to which they relate (specifically, for each currency, one standard rate applies to the fall and holiday selling seasons and one standard rate applies to the spring and summer selling seasons) based on average market spot rates in the calendar month preceding the date they are established. Inventories and Cost of sales for geographic operating segments and Converse reflect the use of these standard rates to record non-functional currency product purchases in the entity’s functional currency. Differences between assigned standard foreign currency rates and actual market rates are included in Corporate, together with foreign currency hedge gains and losses generated from the Company’s centrally managed foreign exchange risk management program and other conversion gains and losses.
Accounts receivable, net, Inventories and Property, plant and equipment, net for operating segments are regularly reviewed by management and are therefore provided below.
 
 
Three Months Ended August 31,
(In millions)
 
2017
 
2016
REVENUES
 
 
 
 
North America
 
$
3,924

 
$
4,031

Europe, Middle East & Africa
 
2,344

 
2,262

Greater China
 
1,108

 
1,020

Asia Pacific & Latin America
 
1,189

 
1,131

Global Brand Divisions
 
20

 
15

Total NIKE Brand
 
8,585

 
8,459

Converse
 
483

 
574

Corporate
 
2

 
28

TOTAL NIKE, INC. REVENUES
 
$
9,070

 
$
9,061

EARNINGS BEFORE INTEREST AND TAXES
 
 
 
 
North America
 
$
1,002

 
$
1,004

Europe, Middle East & Africa
 
451

 
485

Greater China
 
394

 
371

Asia Pacific & Latin America
 
260

 
209

Global Brand Divisions
 
(675
)
 
(771
)
Total NIKE Brand
 
1,432

 
1,298

Converse
 
89

 
153

Corporate
 
(433
)
 
(163
)
Total NIKE, Inc. Earnings Before Interest and Taxes
 
1,088

 
1,288

Interest expense (income), net
 
16

 
7

TOTAL NIKE, INC. INCOME BEFORE INCOME TAXES
 
$
1,072

 
$
1,281


 
 
As of August 31,
 
As of May 31,
(In millions)
 
2017
 
2017
ACCOUNTS RECEIVABLE, NET
 
 
 
 
North America
 
$
1,759

 
$
1,798

Europe, Middle East & Africa
 
972

 
690

Greater China
 
112

 
102

Asia Pacific & Latin America
 
696

 
693

Global Brand Divisions
 
88

 
86

Total NIKE Brand
 
3,627

 
3,369

Converse
 
229

 
297

Corporate
 
15

 
11

TOTAL ACCOUNTS RECEIVABLE, NET
 
$
3,871

 
$
3,677

INVENTORIES
 
 
 
 
North America
 
$
2,222

 
$
2,218

Europe, Middle East & Africa
 
1,359

 
1,327

Greater China
 
537

 
463

Asia Pacific & Latin America
 
769

 
694

Global Brand Divisions
 
72

 
68

Total NIKE Brand
 
4,959

 
4,770

Converse
 
274

 
286

Corporate
 
(22
)
 
(1
)
TOTAL INVENTORIES
 
$
5,211

 
$
5,055

PROPERTY, PLANT AND EQUIPMENT, NET
 
 
 
 
North America
 
$
827

 
$
819

Europe, Middle East & Africa
 
731

 
709

Greater China
 
229

 
225

Asia Pacific & Latin America
 
343

 
340

Global Brand Divisions
 
543

 
533

Total NIKE Brand
 
2,673

 
2,626

Converse
 
122

 
125

Corporate
 
1,291

 
1,238

TOTAL PROPERTY, PLANT AND EQUIPMENT, NET
 
$
4,086

 
$
3,989

Commitments and Contingencies
Commitments and Contingencies
Note 12 — Commitments and Contingencies
As of August 31, 2017, the Company had letters of credit outstanding totaling $143 million. These letters of credit were issued primarily for the purchase of inventory and guarantees of the Company’s performance under certain self-insurance and other programs.
There have been no other significant subsequent developments relating to the commitments and contingencies reported on the Company’s latest Annual Report on Form 10-K.
Summary of Significant Accounting Policies (Policies)
Basis of Presentation 
Basis of Presentation
The Unaudited Condensed Consolidated Financial Statements include the accounts of NIKE, Inc. and its subsidiaries (the “Company”) and reflect all normal adjustments which are, in the opinion of management, necessary for a fair statement of the results of operations for the interim period. The year-end Condensed Consolidated Balance Sheet data as of May 31, 2017 was derived from audited financial statements, but does not include all disclosures required by accounting principles generally accepted in the United States of America (“U.S. GAAP”). The interim financial information and notes thereto should be read in conjunction with the Company’s latest Annual Report on Form 10-K. The results of operations for the three months ended August 31, 2017 are not necessarily indicative of results to be expected for the entire year.
Reclassifications 
Reclassifications
Certain prior year amounts have been reclassified to conform to fiscal 2018 presentation, including reclassified geographic operating segment data to reflect the changes in the Company’s operating structure, which became effective on June 1, 2017. Refer to Note 11 — Operating Segments for additional information.
Recently Issued Accounting Standards 
Recently Adopted Accounting Standards
In March 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2016-09, Compensation — Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting, which changes how companies account for certain aspects of share-based payment awards to employees. The Company adopted the ASU in the first quarter of fiscal 2018. The updated guidance requires excess tax benefits and deficiencies from share-based payment awards to be recorded in income tax expense in the income statement. Previously, excess tax benefits and deficiencies were recognized in shareholders’ equity on the balance sheet. This change is required to be applied prospectively. During the first quarter of fiscal 2018, the Company recognized $88 million of excess tax benefits related to share-based payment awards in Income tax expense in the Unaudited Condensed Consolidated Statements of Income.
Additionally, ASU 2016-09 modified the classification of certain share-based payment activities within the statement of cash flows, which the Company applied retrospectively. As a result, for the three months ended August 31, 2016, the Company reclassified a cash inflow of $59 million related to excess tax benefits from share-based payment awards from Cash used by financing activities to Cash provided by operations, and reclassified a cash outflow of $8 million related to tax payments for the net settlement of share-based payment awards from Cash provided by operations to Cash used by financing activities within the Unaudited Condensed Consolidated Statement of Cash Flows.
Recently Issued Accounting Standards
In August 2017, the FASB issued ASU 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities, which expands and refines hedge accounting for both financial and non-financial risk components, aligns the recognition and presentation of the effects of hedging instruments and hedge items in the financial statements, and includes certain targeted improvements to ease the application of current guidance related to the assessment of hedge effectiveness. The update to the standard is effective for the Company June 1, 2019, with early adoption permitted in any interim period. The Company is currently evaluating the effect the guidance will have on the Consolidated Financial Statements.
In October 2016, the FASB issued ASU No. 2016-16, Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory. The updated guidance requires companies to recognize the income tax consequences of an intra-entity transfer of an asset other than inventory when the transfer occurs. 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 Company will adopt the standard on June 1, 2018, using a modified retrospective approach with the cumulative effect recognized through retained earnings at the date of adoption. The Company continues to assess the impact this update will have on its existing accounting policies and the Consolidated Financial Statements and anticipates the updated guidance could have a material impact on the Consolidated Financial Statements at adoption through the recognition of a cumulative-effect adjustment to retained earnings of previously deferred charges.
In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842), which replaces existing lease accounting guidance. The new standard is intended to provide enhanced transparency and comparability by requiring lessees to record right-of-use assets and corresponding lease liabilities on the balance sheet. The new guidance will require the Company to continue to classify leases as either operating or financing, with classification affecting the pattern of expense recognition in the income statement. The Company will adopt the standard on June 1, 2019. The ASU is required to be applied using a modified retrospective approach at the beginning of the earliest period presented, with optional practical expedients. The Company continues to assess the effect the guidance will have on its existing accounting policies and the Consolidated Financial Statements and expects there will be an increase in assets and liabilities on the Consolidated Balance Sheets at adoption due to the recording of right-of-use assets and corresponding lease liabilities, which may be material. Refer to Note 15 — Commitments and Contingencies of the Annual Report on Form 10-K for the fiscal year ended May 31, 2017 for information about the Company’s lease obligations.
In January 2016, the FASB issued ASU No. 2016-01, Financial Instruments — Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities. The updated guidance enhances the reporting model for financial instruments, which includes amendments to address aspects of recognition, measurement, presentation and disclosure. The update to the standard is effective for the Company beginning June 1, 2018. The Company does not expect the adoption to have a material impact on the Consolidated Financial Statements.
In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606), that replaces existing revenue recognition guidance. The updated guidance requires companies to recognize revenue in a way that depicts the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. In addition, the new standard requires that reporting companies disclose the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. The Company will adopt the standard on June 1, 2018 using a modified retrospective approach with the cumulative effect of initially applying the new standard recognized in retained earnings at the date of adoption. The Company is in the process of evaluating the new standard against its existing accounting policies, including the timing of revenue recognition, and its contracts with customers, to determine the effect the guidance will have on the Consolidated Financial Statements.
Fair Value Measurements 
The Company measures certain financial assets and liabilities at fair value on a recurring basis, including derivatives and available-for-sale securities. Fair value is the price the Company would receive to sell an asset or pay to transfer a liability in an orderly transaction with a market participant at the measurement date. The Company uses a three-level hierarchy established by the FASB that prioritizes fair value measurements based on the types of inputs used for the various valuation techniques (market approach, income approach and cost approach).
The levels of the fair value hierarchy are described below:
•
Level 1: Quoted prices in active markets for identical assets or liabilities.
•
Level 2: Inputs other than quoted prices that are observable for the asset or liability, either directly or indirectly; these include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active.
•
Level 3: Unobservable inputs for which there is little or no market data available, which require the reporting entity to develop its own assumptions.
The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability. Financial assets and liabilities are classified in their entirety based on the most conservative level of input that is significant to the fair value measurement.
Pricing vendors are utilized for a majority of Level 1 and Level 2 investments. These vendors either provide a quoted market price in an active market or use observable inputs without applying significant adjustments in their pricing. Observable inputs include broker quotes, interest rates and yield curves observable at commonly quoted intervals, volatilities and credit risks. The fair value of derivative contracts is determined using observable market inputs such as the daily market foreign currency rates, forward pricing curves, currency volatilities, currency correlations and interest rates, and considers non-performance risk of the Company and that of its counterparties.
The Company’s fair value measurement process includes comparing fair values to another independent pricing vendor to ensure appropriate fair values are recorded.
Hedging Derivatives 
The Company elects to record the gross assets and liabilities of its derivative financial instruments on the Unaudited Condensed Consolidated Balance Sheets. The Company’s derivative financial instruments are subject to master netting arrangements that allow for the offset of assets and liabilities in the event of default or early termination of the contract. Any amounts of cash collateral received related to these instruments associated with the Company’s credit-related contingent features are recorded in Cash and equivalents and Accrued liabilities, the latter of which would further offset against the Company’s derivative asset balance. Any amounts of cash collateral posted related to these instruments associated with the Company’s credit-related contingent features are recorded in Prepaid expenses and other current assets, which would further offset against the Company’s derivative liability balance. Cash collateral received or posted related to the Company’s credit-related contingent features is presented in the Cash provided by operations component of the Unaudited Condensed Consolidated Statements of Cash Flows. Any amounts of non-cash collateral received, such as securities, are not recorded on the Unaudited Condensed Consolidated Balance Sheets pursuant to U.S. GAAP. For further information related to credit risk, refer to Note 9 — Risk Management and Derivatives.
Net Investment Hedges
All changes in fair value of the derivatives designated as net investment hedges, except ineffective portions, are reported in Accumulated other comprehensive income along with the foreign currency translation adjustments on those investments. The ineffective portion of the unrealized gains and losses on these contracts, if any, are recorded immediately in earnings. The Company has, in the past, hedged and may, in the future, hedge the risk of variability in foreign-currency-denominated net investments in wholly-owned international operations.
Fair Value Hedges
The Company has, in the past, been exposed to the risk of changes in the fair value of certain fixed-rate debt attributable to changes in interest rates. Derivatives used by the Company to hedge this risk are receive-fixed, pay-variable interest rate swaps. All interest rate swaps designated as fair value hedges of the related long-term debt meet the shortcut method requirements under U.S. GAAP. Accordingly, changes in the fair values of the interest rate swaps are considered to exactly offset changes in the fair value of the underlying long-term debt.
Cash Flow Hedges
All changes in fair value of derivatives designated as cash flow hedges, excluding any ineffective portion, are recorded in Accumulated other comprehensive income until Net income is affected by the variability of cash flows of the hedged transaction. Effective hedge results are classified within the Unaudited Condensed Consolidated Statements of Income in the same manner as the underlying exposure. The ineffective portion of the unrealized gains and losses on these contracts, if any, is recorded immediately in earnings. 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. The gains and losses associated with discontinued derivative instruments that were in Accumulated other comprehensive income will be recognized immediately in Other expense (income), net if it is probable the forecasted hedged transaction will not occur by the end of the initially identified time period or within an additional two-month period thereafter. 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.
The purpose of the Company’s foreign exchange risk management program is to lessen both the positive and negative effects of currency fluctuations on the Company’s consolidated results of operations, financial position and cash flows. Foreign currency exposures that the Company may elect to hedge in this manner include product cost exposures, non-functional currency denominated external and intercompany revenues, selling and administrative expenses, investments in U.S. Dollar-denominated available-for-sale debt securities and certain other intercompany transactions.
Product cost exposures are primarily generated through non-functional currency denominated product purchases and the foreign currency adjustment program described below. NIKE entities primarily purchase product in two ways: (1) Certain NIKE entities purchase product from the NIKE Trading Company (NTC), a wholly-owned sourcing hub that buys NIKE branded product from third-party factories, predominantly in U.S. Dollars. The NTC, whose functional currency is the U.S. Dollar, then sells the product to NIKE entities in their respective functional currencies. When the NTC sells to a NIKE entity with a different functional currency, the result is a foreign currency exposure for the NTC. (2) Other NIKE entities purchase product directly from third-party factories in U.S. Dollars. These purchases generate a foreign currency exposure for those NIKE entities with a functional currency other than the U.S. Dollar.
The Company operates a foreign currency adjustment program with certain factories. The program is designed to more effectively manage foreign currency risk by assuming certain of the factories’ foreign currency exposures, some of which are natural offsets to the Company’s existing foreign currency exposures. Under this program, the Company’s payments to these factories are adjusted for rate fluctuations in the basket of currencies (“factory currency exposure index”) in which the labor, materials and overhead costs incurred by the factories in the production of NIKE branded products (“factory input costs”) are denominated. For the portion of the indices denominated in the local or functional currency of the factory, the Company may elect to place formally designated cash flow hedges. For all currencies within the indices, excluding the U.S. Dollar and the local or functional currency of the factory, an embedded derivative contract is created upon the factory’s acceptance of NIKE’s purchase order. Embedded derivative contracts are separated from the related purchase order, as further described within the Embedded Derivatives section below.
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. Typically, the Company may enter into hedge contracts starting up to 12 to 24 months in advance of the forecasted transaction and may place incremental hedges up to 100% of the exposure by the time the forecasted transaction occurs.
Undesignated Derivative Instruments 
Undesignated Derivative Instruments
The Company may elect to enter into foreign exchange forwards to mitigate the change in fair value of specific assets and liabilities on the Unaudited Condensed Consolidated Balance Sheets and/or embedded derivative contracts. These undesignated instruments are recorded at fair value as a derivative asset or liability on the Unaudited Condensed Consolidated Balance Sheets with their corresponding change in fair value recognized in Other expense (income), net, together with the re-measurement gain or loss from the hedged balance sheet position and/or embedded derivative contract.
Embedded Derivatives 
Embedded Derivatives
As part of the foreign currency adjustment program described above, an embedded derivative contract is created upon the factory’s acceptance of NIKE’s purchase order for currencies within the factory currency exposure indices that are neither the U.S. Dollar nor the local or functional currency of the factory. In addition, embedded derivative contracts are created when the Company enters into certain other contractual agreements which have payments that are indexed to currencies that are not the functional currency of either substantial party to the contracts. Embedded derivative contracts are treated as foreign currency forward contracts that are bifurcated from the related contract and recorded at fair value as a derivative asset or liability on the Unaudited Condensed Consolidated Balance Sheets with their corresponding change in fair value recognized in Other expense (income), net, through the date the foreign currency fluctuations cease to exist.
Accrued Liabilities (Tables)
Schedule of Accrued Liabilities
Accrued liabilities included the following:
 
 
As of August 31,
 
As of May 31,
(In millions)
 
2017
 
2017
Compensation and benefits, excluding taxes
 
$
837

 
$
871

Fair value of derivatives
 
528

 
168

Endorsement compensation
 
383

 
396

Dividends payable
 
295

 
300

Import and logistics costs
 
280

 
257

Taxes other than income taxes payable
 
243

 
196

Advertising and marketing
 
152

 
125

Other(1)
 
783

 
698

TOTAL ACCRUED LIABILITIES
 
$
3,501

 
$
3,011

(1)
Other consists of various accrued expenses with no individual item accounting for more than 5% of the total Accrued liabilities balance at August 31, 2017 and May 31, 2017.
Fair Value Measurements (Tables)
Schedule of Fair Value, Assets and Liabilities Measured on Recurring Basis 
The following tables present information about the Company’s financial assets measured at fair value on a recurring basis as of August 31, 2017 and May 31, 2017, and indicate the level in the fair value hierarchy in which the Company classifies the fair value measurement.
 
 
As of August 31, 2017
(In millions)
 
Assets at Fair Value
 
Cash and Equivalents
 
Short-term Investments
 
Other Long-term Assets
Cash
 
$
624

 
$
624

 
$
—

 
$
—

Level 1:
 
 
 
 
 
 
 
 
U.S. Treasury securities
 
1,205

 
200

 
1,005

 
—

Level 2:
 
 
 
 
 
 
 
 
Time deposits
 
901

 
862

 
39

 
—

U.S. Agency securities
 
354

 
50

 
304

 
—

Commercial paper and bonds
 
797

 
39

 
758

 
—

Money market funds
 
1,638

 
1,638

 
—

 
—

Total Level 2:
 
3,690

 
2,589

 
1,101

 
—

Level 3:
 
 
 
 
 
 
 
 
Non-marketable preferred stock
 
10

 
—

 
—

 
10

TOTAL
 
$
5,529

 
$
3,413

 
$
2,106

 
$
10


 
 
As of May 31, 2017
(In millions)
 
Assets at Fair Value
 
Cash and Equivalents
 
Short-term Investments
 
Other Long-term Assets
Cash
 
$
505

 
$
505

 
$
—

 
$
—

Level 1:
 
 
 
 
 
 
 
 
U.S. Treasury securities
 
1,545

 
159

 
1,386

 
—

Level 2:
 
 
 
 
 
 
 
 
Time deposits
 
813

 
769

 
44

 
—

U.S. Agency securities
 
522

 
150

 
372

 
—

Commercial paper and bonds
 
820

 
251

 
569

 
—

Money market funds
 
1,974

 
1,974

 
—

 
—

Total Level 2:
 
4,129

 
3,144

 
985

 
—

Level 3:
 
 
 
 
 
 
 
 
Non-marketable preferred stock
 
10

 
—

 
—

 
10

TOTAL
 
$
6,189

 
$
3,808

 
$
2,371

 
$
10

Schedule of Derivative Instruments in Statement of Financial Position, Fair Value 
The following tables present information about the Company’s derivative assets and liabilities measured at fair value on a recurring basis as of August 31, 2017 and May 31, 2017, and indicate the level in the fair value hierarchy in which the Company classifies the fair value measurement.
 
 
As of August 31, 2017
 
 
Derivative Assets
 
Derivative Liabilities
(In millions)
 
Assets at Fair Value
 
Other Current Assets
 
Other Long-term Assets
 
Liabilities at Fair Value
 
Accrued Liabilities
 
Other Long-term Liabilities
Level 2:
 
 
 
 
 
 
 
 
 
 
 
 
Foreign exchange forwards and options(1)
 
$
183

 
$
175

 
$
8

 
$
708

 
$
525

 
$
183

Embedded derivatives
 
10

 
1

 
9

 
8

 
3

 
5

TOTAL
 
$
193

 
$
176

 
$
17

 
$
716

 
$
528

 
$
188

(1)
If the foreign exchange derivative instruments had been netted on the Unaudited Condensed Consolidated Balance Sheets, the asset and liability positions each would have been reduced by $164 million as of August 31, 2017. As of that date, the Company had posted $273 million of cash collateral to various counterparties related to these foreign exchange derivative instruments. No amount of collateral was received on the Company’s derivative asset balance as of August 31, 2017.
 
 
As of May 31, 2017
 
 
Derivative Assets
 
Derivative Liabilities
(In millions)
 
Assets at Fair Value
 
Other Current Assets
 
Other Long-term Assets
 
Liabilities at Fair Value
 
Accrued Liabilities
 
Other Long-term Liabilities
Level 2:
 
 
 
 
 
 
 
 
 
 
 
 
Foreign exchange forwards and options(1)
 
$
231

 
$
216

 
$
15

 
$
246

 
$
166

 
$
80

Embedded derivatives
 
10

 
1

 
9

 
8

 
2

 
6

TOTAL
 
$
241

 
$
217

 
$
24

 
$
254

 
$
168

 
$
86

(1)
If the foreign exchange derivative instruments had been netted on the Condensed Consolidated Balance Sheets, the asset and liability positions each would have been reduced by $187 million as of May 31, 2017. As of that date, no amount of cash collateral had been received or posted on the derivative asset and liability balances related to these foreign exchange derivative instruments.
The following table presents the fair values of derivative instruments included within the Unaudited Condensed Consolidated Balance Sheets as of August 31, 2017 and May 31, 2017. Refer to Note 4 — Fair Value Measurements for a description of how the financial instruments in the table below are valued.
 
 
Derivative Assets
 
Derivative Liabilities
(In millions)
 
Balance Sheet
Location
 
August 31,
2017
 
May 31,
2017
 
Balance Sheet 
Location
 
August 31,
2017
 
May 31,
2017
Derivatives formally designated as hedging instruments:
 
 
 
 
 
 
 
 
 
 
 
 
Foreign exchange forwards and options
 
Prepaid expenses and other current assets
 
$
92

 
$
113

 
Accrued liabilities
 
$
291

 
$
59

Foreign exchange forwards and options
 
Deferred income taxes and other assets
 
8

 
13

 
Deferred income taxes and other liabilities
 
173

 
73

Total derivatives formally designated as hedging instruments
 
 
 
100

 
126

 
 
 
464

 
132

Derivatives not designated as hedging instruments:
 
 
 
 
 
 
 
 
 
 
 
 
Foreign exchange forwards and options
 
Prepaid expenses and other current assets
 
83

 
103

 
Accrued liabilities
 
234

 
107

Embedded derivatives
 
Prepaid expenses and other current assets
 
1

 
1

 
Accrued liabilities
 
3

 
2

Foreign exchange forwards and options
 
Deferred income taxes and other assets
 
—

 
2

 
Deferred income taxes and other liabilities
 
10

 
7

Embedded derivatives
 
Deferred income taxes and other assets
 
9

 
9

 
Deferred income taxes and other liabilities
 
5

 
6

Total derivatives not designated as hedging instruments
 
 
 
93

 
115

 
 
 
252

 
122

TOTAL DERIVATIVES
 
 
 
$
193

 
$
241

 
 
 
$
716

 
$
254

Common Stock and Stock-Based Compensation (Tables)
Schedule of Compensation Cost for Share-based Payment Arrangements, Allocation of Share-based Compensation Costs by Plan 
The following table summarizes the Company’s total stock-based compensation expense recognized in Cost of sales or Operating overhead expense, as applicable: 
 
 
Three Months Ended August 31,
(In millions)
 
2017
 
2016
Stock options(1)
 
$
33

 
$
39

ESPPs
 
8

 
9

Restricted stock
 
9

 
9

TOTAL STOCK-BASED COMPENSATION EXPENSE
 
$
50

 
$
57

(1)
Expense for stock options includes the expense associated with stock appreciation rights. Accelerated stock option expense is recorded for employees eligible for accelerated stock option vesting upon retirement. Accelerated stock option expense was $3 million and $5 million for the three months ended August 31, 2017 and 2016, respectively.
Schedule of Share-based Payment Award, Stock Options, Valuation Assumptions 
The weighted average assumptions used to estimate these fair values were as follows:
 
 
Three Months Ended August 31,
  
 
2017
 
2016
Dividend yield
 
1.2
%
 
1.1
%
Expected volatility
 
16.4
%
 
17.3
%
Weighted average expected life (in years)
 
6.0

 
6.0

Risk-free interest rate
 
2.0
%
 
1.3
%
Earnings Per Share (Tables)
Schedule of Earnings Per Share, Basic and Diluted
The following is a reconciliation from basic earnings per common share to diluted earnings per common share. The computations of diluted earnings per common share excluded options, including shares under ESPPs, to purchase an additional 46.0 million and 31.7 million shares of common stock outstanding for the three months ended August 31, 2017 and 2016, respectively, because the options were anti-dilutive.
 
 
Three Months Ended August 31,
(In millions, except per share data)
 
2017
 
2016
Determination of shares:
 
 
 
 
Weighted average common shares outstanding
 
1,639.1

 
1,672.0

Assumed conversion of dilutive stock options and awards
 
37.8

 
36.9

DILUTED WEIGHTED AVERAGE COMMON SHARES OUTSTANDING
 
1,676.9

 
1,708.9

 
 
 
 
 
Earnings per common share:
 
 
 
 
Basic
 
$
0.58

 
$
0.75

Diluted
 
$
0.57

 
$
0.73

Risk Management and Derivatives (Tables)
Schedule of Derivative Instruments in Statement of Financial Position, Fair Value 
The following tables present information about the Company’s derivative assets and liabilities measured at fair value on a recurring basis as of August 31, 2017 and May 31, 2017, and indicate the level in the fair value hierarchy in which the Company classifies the fair value measurement.
 
 
As of August 31, 2017
 
 
Derivative Assets
 
Derivative Liabilities
(In millions)
 
Assets at Fair Value
 
Other Current Assets
 
Other Long-term Assets
 
Liabilities at Fair Value
 
Accrued Liabilities
 
Other Long-term Liabilities
Level 2:
 
 
 
 
 
 
 
 
 
 
 
 
Foreign exchange forwards and options(1)
 
$
183

 
$
175

 
$
8

 
$
708

 
$
525

 
$
183

Embedded derivatives
 
10

 
1

 
9

 
8

 
3

 
5

TOTAL
 
$
193

 
$
176

 
$
17

 
$
716

 
$
528

 
$
188

(1)
If the foreign exchange derivative instruments had been netted on the Unaudited Condensed Consolidated Balance Sheets, the asset and liability positions each would have been reduced by $164 million as of August 31, 2017. As of that date, the Company had posted $273 million of cash collateral to various counterparties related to these foreign exchange derivative instruments. No amount of collateral was received on the Company’s derivative asset balance as of August 31, 2017.
 
 
As of May 31, 2017
 
 
Derivative Assets
 
Derivative Liabilities
(In millions)
 
Assets at Fair Value
 
Other Current Assets
 
Other Long-term Assets
 
Liabilities at Fair Value
 
Accrued Liabilities
 
Other Long-term Liabilities
Level 2:
 
 
 
 
 
 
 
 
 
 
 
 
Foreign exchange forwards and options(1)
 
$
231

 
$
216

 
$
15

 
$
246

 
$
166

 
$
80

Embedded derivatives
 
10

 
1

 
9

 
8

 
2

 
6

TOTAL
 
$
241

 
$
217

 
$
24

 
$
254

 
$
168

 
$
86

(1)
If the foreign exchange derivative instruments had been netted on the Condensed Consolidated Balance Sheets, the asset and liability positions each would have been reduced by $187 million as of May 31, 2017. As of that date, no amount of cash collateral had been received or posted on the derivative asset and liability balances related to these foreign exchange derivative instruments.
The following table presents the fair values of derivative instruments included within the Unaudited Condensed Consolidated Balance Sheets as of August 31, 2017 and May 31, 2017. Refer to Note 4 — Fair Value Measurements for a description of how the financial instruments in the table below are valued.
 
 
Derivative Assets
 
Derivative Liabilities
(In millions)
 
Balance Sheet
Location
 
August 31,
2017
 
May 31,
2017
 
Balance Sheet 
Location
 
August 31,
2017
 
May 31,
2017
Derivatives formally designated as hedging instruments:
 
 
 
 
 
 
 
 
 
 
 
 
Foreign exchange forwards and options
 
Prepaid expenses and other current assets
 
$
92

 
$
113

 
Accrued liabilities
 
$
291

 
$
59

Foreign exchange forwards and options
 
Deferred income taxes and other assets
 
8

 
13

 
Deferred income taxes and other liabilities
 
173

 
73

Total derivatives formally designated as hedging instruments
 
 
 
100

 
126

 
 
 
464

 
132

Derivatives not designated as hedging instruments:
 
 
 
 
 
 
 
 
 
 
 
 
Foreign exchange forwards and options
 
Prepaid expenses and other current assets
 
83

 
103

 
Accrued liabilities
 
234

 
107

Embedded derivatives
 
Prepaid expenses and other current assets
 
1

 
1

 
Accrued liabilities
 
3

 
2

Foreign exchange forwards and options
 
Deferred income taxes and other assets
 
—

 
2

 
Deferred income taxes and other liabilities
 
10

 
7

Embedded derivatives
 
Deferred income taxes and other assets
 
9

 
9

 
Deferred income taxes and other liabilities
 
5

 
6

Total derivatives not designated as hedging instruments
 
 
 
93

 
115

 
 
 
252

 
122

TOTAL DERIVATIVES
 
 
 
$
193

 
$
241

 
 
 
$
716

 
$
254

Schedule of Derivative Instruments, Gain (Loss) in Statement of Financial Performance 
The following tables present the amounts affecting the Unaudited Condensed Consolidated Statements of Income for the three months ended August 31, 2017 and 2016:

(In millions)
Amount of Gain (Loss) Recognized in Other Comprehensive Income on Derivatives(1)

Amount of Gain (Loss) Reclassified from Accumulated Other Comprehensive Income into Income(1)
Three Months Ended August 31,
 
Location of Gain (Loss) Reclassified from Accumulated Other Comprehensive Income into Income
 
Three Months Ended August 31,
2017
 
2016


2017
 
2016
Derivatives designated as cash flow hedges:
 
 
 
 
 
 
 
 
 
Foreign exchange forwards and options
$
55

 
$
53


Revenues

$
2

 
$
33

Foreign exchange forwards and options
(277
)
 
(52
)

Cost of sales

45

 
104

Foreign exchange forwards and options
1

 
—


Total selling and administrative expense

—

 
—

Foreign exchange forwards and options
(129
)
 
(16
)

Other expense (income), net

2

 
43

Interest rate swaps(2)
—

 
(91
)
 
Interest expense (income), net
 
(2
)
 
—

Total designated cash flow hedges
$
(350
)
 
$
(106
)



$
47

 
$
180

(1)
For the three months ended August 31, 2017 and 2016, the amounts recorded in Other expense (income), net as a result of hedge ineffectiveness and the discontinuance of cash flow hedges because the forecasted transactions were no longer probable of occurring were immaterial.
(2)
Gains and losses associated with terminated interest rate swaps, which were previously designated as cash flow hedges and recorded in Accumulated other comprehensive income, will be released through Interest expense (income), net over the term of the issued debt.

 
 
Amount of Gain (Loss) Recognized in Income on Derivatives
Location of Gain (Loss) 
Recognized in Income on Derivatives
 
 
Three Months Ended August 31,
 
(In millions)
 
2017
 
2016
 
Derivatives not designated as hedging instruments:
 
 
 
 
 
 
Foreign exchange forwards and options
 
$
(194
)
 
$
(35
)
 
Other expense (income), net
Embedded derivatives
 
(1
)
 
3

 
Other expense (income), net
Accumulated Other Comprehensive Income (Tables)
Schedule of Accumulated Other Comprehensive Income 
The changes in Accumulated other comprehensive income, net of tax, for the three months ended August 31, 2017 were as follows:
(In millions)
 
Foreign Currency Translation Adjustment(1)
 
Cash Flow Hedges
 
Net Investment Hedges(1)
 
Other
 
Total
Balance at May 31, 2017
 
$
(191
)
 
$
(52
)
 
$
115

 
$
(85
)
 
$
(213
)
Other comprehensive gains (losses) before reclassifications(2)
 
22

 
(347
)
 
—

 
(18
)
 
(343
)
Reclassifications to net income of previously deferred (gains) losses(3)
 
—

 
(48
)
 
—

 
18

 
(30
)
Other comprehensive income (loss)
 
22

 
(395
)
 
—

 
—

 
(373
)
Balance at August 31, 2017
 
$
(169
)
 
$
(447
)
 
$
115

 
$
(85
)
 
$
(586
)
(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 (expense) of $(19) million, $3 million, $0 million, $0 million and $(16) million, respectively.
(3)
Net of tax (benefit) expense of $0 million, $(1) million, $0 million, $0 million and $(1) million, respectively.
The changes in Accumulated other comprehensive income, net of tax, for the three months ended August 31, 2016 were as follows:
(In millions)
 
Foreign Currency Translation Adjustment(1)
 
Cash Flow Hedges
 
Net Investment Hedges(1)
 
Other
 
Total
Balance at May 31, 2016
 
$
(207
)
 
$
463

 
$
115

 
$
(53
)
 
$
318

Other comprehensive gains (losses) before reclassifications(2)
 
3

 
(60
)
 
—

 
13

 
(44
)
Reclassifications to net income of previously deferred (gains) losses(3)
 
—

 
(180
)
 
—

 
(9
)
 
(189
)
Other comprehensive income (loss)
 
3

 
(240
)
 
—

 
4

 
(233
)
Balance at August 31, 2016
 
$
(204
)
 
$
223

 
$
115

 
$
(49
)
 
$
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 (expense) of $0 million, $46 million, $0 million, $1 million and $47 million, respectively.
(3)
Net of tax (benefit) expense of $0 million, $0 million, $0 million, $(1) million and $(1) million, respectively.
Reclassification out of Accumulated Other Comprehensive Income 
The following table summarizes the reclassifications from Accumulated other comprehensive income to the Unaudited Condensed 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
 
 
Three Months Ended August 31,
 
(In millions)
 
2017
 
2016
 
Gains (losses) on cash flow hedges:
 
 
 
 
 
 
Foreign exchange forwards and options
 
$
2

 
$
33

 
Revenues
Foreign exchange forwards and options
 
45

 
104

 
Cost of sales
Foreign exchange forwards and options
 
2

 
43

 
Other expense (income), net
Interest rate swaps
 
(2
)
 
—

 
Interest expense (income), net
Total before tax
 
47

 
180

 
 
Tax (expense) benefit
 
1

 
—

 
 
Gain (loss) net of tax
 
48

 
180

 
 
Gains (losses) on other
 
(18
)
 
8

 
Other expense (income), net
Total before tax
 
(18
)
 
8

 
 
Tax (expense) benefit
 
—

 
1

 
 
Gain (loss) net of tax
 
(18
)
 
9

 
 
Total net gain (loss) reclassified for the period
 
$
30

 
$
189

 
 
Operating Segments (Tables)
Schedule of Segment Reporting Information, by Segment 
 
 
Three Months Ended August 31,
(In millions)
 
2017
 
2016
REVENUES
 
 
 
 
North America
 
$
3,924

 
$
4,031

Europe, Middle East & Africa
 
2,344

 
2,262

Greater China
 
1,108

 
1,020

Asia Pacific & Latin America
 
1,189

 
1,131

Global Brand Divisions
 
20

 
15

Total NIKE Brand
 
8,585

 
8,459

Converse
 
483

 
574

Corporate
 
2

 
28

TOTAL NIKE, INC. REVENUES
 
$
9,070

 
$
9,061

EARNINGS BEFORE INTEREST AND TAXES
 
 
 
 
North America
 
$
1,002

 
$
1,004

Europe, Middle East & Africa
 
451

 
485

Greater China
 
394

 
371

Asia Pacific & Latin America
 
260

 
209

Global Brand Divisions
 
(675
)
 
(771
)
Total NIKE Brand
 
1,432

 
1,298

Converse
 
89

 
153

Corporate
 
(433
)
 
(163
)
Total NIKE, Inc. Earnings Before Interest and Taxes
 
1,088

 
1,288

Interest expense (income), net
 
16

 
7

TOTAL NIKE, INC. INCOME BEFORE INCOME TAXES
 
$
1,072

 
$
1,281

Reconciliation of Assets from Segment to Consolidated 
 
 
As of August 31,
 
As of May 31,
(In millions)
 
2017
 
2017
ACCOUNTS RECEIVABLE, NET
 
 
 
 
North America
 
$
1,759

 
$
1,798

Europe, Middle East & Africa
 
972

 
690

Greater China
 
112

 
102

Asia Pacific & Latin America
 
696

 
693

Global Brand Divisions
 
88

 
86

Total NIKE Brand
 
3,627

 
3,369

Converse
 
229

 
297

Corporate
 
15

 
11

TOTAL ACCOUNTS RECEIVABLE, NET
 
$
3,871

 
$
3,677

INVENTORIES
 
 
 
 
North America
 
$
2,222

 
$
2,218

Europe, Middle East & Africa
 
1,359

 
1,327

Greater China
 
537

 
463

Asia Pacific & Latin America
 
769

 
694

Global Brand Divisions
 
72

 
68

Total NIKE Brand
 
4,959

 
4,770

Converse
 
274

 
286

Corporate
 
(22
)
 
(1
)
TOTAL INVENTORIES
 
$
5,211

 
$
5,055

PROPERTY, PLANT AND EQUIPMENT, NET
 
 
 
 
North America
 
$
827

 
$
819

Europe, Middle East & Africa
 
731

 
709

Greater China
 
229

 
225

Asia Pacific & Latin America
 
343

 
340

Global Brand Divisions
 
543

 
533

Total NIKE Brand
 
2,673

 
2,626

Converse
 
122

 
125

Corporate
 
1,291

 
1,238

TOTAL PROPERTY, PLANT AND EQUIPMENT, NET
 
$
4,086

 
$
3,989

Summary of Significant Accounting Policies (Details) (USD $)
In Millions, unless otherwise specified
3 Months Ended
Aug. 31, 2017
Aug. 31, 2016
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
 
 
Excess tax benefit, amount
$ 88 
 
Cash provided by operations
575 
788 
Cash used by financing activities
998 
1,202 
Accounting Standard Update 2016-09, Excess Tax Benefit Component
 
 
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
 
 
Cash provided by operations
 
59 
Cash used by financing activities
 
59 
Accounting Standard Update 2016-09, Statutory Tax Withholding Component
 
 
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
 
 
Cash provided by operations
 
8 
Cash used by financing activities
 
$ 8 
Inventories (Detail) (USD $)
In Millions, unless otherwise specified
Aug. 31, 2017
May 31, 2017
Inventory Disclosure [Abstract]
 
 
Inventory balances (substantially all finished goods)
$ 5,211 
$ 5,055 
Accrued Liabilities (Detail) (USD $)
In Millions, unless otherwise specified
Aug. 31, 2017
May 31, 2017
Accrued Liabilities, Current [Abstract]
 
 
Compensation and benefits, excluding taxes
$ 837 
$ 871 
Fair value of derivatives
528 
168 
Endorsement compensation
383 
396 
Dividends payable
295 
300 
Import and logistics costs
280 
257 
Taxes other than income taxes payable
243 
196 
Advertising and marketing
152 
125 
Other
783 
698 
TOTAL ACCRUED LIABILITIES
$ 3,501 
$ 3,011 
Fair Value Measurements - Financial Assets and Liabilities Measured at Fair Value on Recurring Basis (Detail) (Fair Value, Measurements, Recurring, USD $)
In Millions, unless otherwise specified
Aug. 31, 2017
May 31, 2017
Fair Value, Assets and Liabilities Measured on Recurring Basis [Line Items]
 
 
Cash
$ 624 
$ 505 
Assets at Fair Value
5,529 
6,189 
Cash and Equivalents
3,413 
3,808 
Short-term Investments
2,106 
2,371 
Other Long-term Assets
10 
10 
Fair Value Measurements Using Level 1 |
U.S. Treasury securities
 
 
Fair Value, Assets and Liabilities Measured on Recurring Basis [Line Items]
 
 
Assets at Fair Value
1,205 
1,545 
Cash and Equivalents
200 
159 
Short-term Investments
1,005 
1,386 
Other Long-term Assets
0 
0 
Fair Value Measurements Using Level 2
 
 
Fair Value, Assets and Liabilities Measured on Recurring Basis [Line Items]
 
 
Assets at Fair Value
3,690 
4,129 
Cash and Equivalents
2,589 
3,144 
Short-term Investments
1,101 
985 
Other Long-term Assets
0 
0 
Fair Value Measurements Using Level 2 |
Time deposits
 
 
Fair Value, Assets and Liabilities Measured on Recurring Basis [Line Items]
 
 
Assets at Fair Value
901 
813 
Cash and Equivalents
862 
769 
Short-term Investments
39 
44 
Other Long-term Assets
0 
0 
Fair Value Measurements Using Level 2 |
U.S. Agency securities
 
 
Fair Value, Assets and Liabilities Measured on Recurring Basis [Line Items]
 
 
Assets at Fair Value
354 
522 
Cash and Equivalents
50 
150 
Short-term Investments
304 
372 
Other Long-term Assets
0 
0 
Fair Value Measurements Using Level 2 |
Commercial paper and bonds
 
 
Fair Value, Assets and Liabilities Measured on Recurring Basis [Line Items]
 
 
Assets at Fair Value
797 
820 
Cash and Equivalents
39 
251 
Short-term Investments
758 
569 
Other Long-term Assets
0 
0 
Fair Value Measurements Using Level 2 |
Money market funds
 
 
Fair Value, Assets and Liabilities Measured on Recurring Basis [Line Items]
 
 
Assets at Fair Value
1,638 
1,974 
Cash and Equivalents
1,638 
1,974 
Short-term Investments
0 
0 
Other Long-term Assets
0 
0 
Fair Value Measurements Using Level 3 |
Non-marketable preferred stock
 
 
Fair Value, Assets and Liabilities Measured on Recurring Basis [Line Items]
 
 
Assets at Fair Value
10 
10 
Cash and Equivalents
0 
0 
Short-term Investments
0 
0 
Other Long-term Assets
$ 10 
$ 10 
Fair Value Measurements - Derivative Assets and Liabilities at Fair Value (Detail) (USD $)
Aug. 31, 2017
May 31, 2017
Derivatives, Fair Value [Line Items]
 
 
Accrued Liabilities
$ 528,000,000 
$ 168,000,000 
Fair Value, Measurements, Recurring |
Foreign exchange forwards and options
 
 
Derivatives, Fair Value [Line Items]
 
 
Reduction in derivative assets if netted
164,000,000 
187,000,000 
Reduction in derivative liabilities if netted
164,000,000 
187,000,000 
Fair Value Measurements Using Level 2 |
Fair Value, Measurements, Recurring
 
 
Derivatives, Fair Value [Line Items]
 
 
Assets at Fair Value
193,000,000 
241,000,000 
Other Current Assets
176,000,000 
217,000,000 
Other Long-term Assets
17,000,000 
24,000,000 
Liabilities at Fair Value
716,000,000 
254,000,000 
Accrued Liabilities
528,000,000 
168,000,000 
Other Long-term Liabilities
188,000,000 
86,000,000 
Fair Value Measurements Using Level 2 |
Fair Value, Measurements, Recurring |
Foreign exchange forwards and options
 
 
Derivatives, Fair Value [Line Items]
 
 
Assets at Fair Value
183,000,000 
231,000,000 
Other Current Assets
175,000,000 
216,000,000 
Other Long-term Assets
8,000,000 
15,000,000 
Liabilities at Fair Value
708,000,000 
246,000,000 
Accrued Liabilities
525,000,000 
166,000,000 
Other Long-term Liabilities
183,000,000 
80,000,000 
Fair Value Measurements Using Level 2 |
Fair Value, Measurements, Recurring |
Embedded derivatives
 
 
Derivatives, Fair Value [Line Items]
 
 
Assets at Fair Value
10,000,000 
10,000,000 
Other Current Assets
1,000,000 
1,000,000 
Other Long-term Assets
9,000,000 
9,000,000 
Liabilities at Fair Value
8,000,000 
8,000,000 
Accrued Liabilities
3,000,000 
2,000,000 
Other Long-term Liabilities
5,000,000 
6,000,000 
Cash and Cash Equivalents |
Foreign exchange forwards and options
 
 
Derivatives, Fair Value [Line Items]
 
 
Collateral posted on derivative liabilities
273,000,000 
0 
Collateral received on derivative assets
$ 0 
$ 0 
Fair Value Measurements - Additional Information (Detail) (USD $)
3 Months Ended 12 Months Ended
Aug. 31, 2017
Aug. 31, 2016
May 31, 2016
Aug. 31, 2017
Available-for-sale Securities
Aug. 31, 2017
Fair Value Measurements Using Level 2
May 31, 2017
Fair Value Measurements Using Level 2
Fair Value, Assets and Liabilities Measured on Recurring Basis [Line Items]
 
 
 
 
 
 
Available-for-sale securities with maturity dates within one year from purchase date
 
 
 
$ 1,852,000,000 
 
 
Available-for-sale securities with maturity dates over one year and less than five years from purchase date
 
 
 
254,000,000 
 
 
Interest income
11,000,000 
4,000,000 
 
 
 
 
Fair value transfers between fair value hierarchy levels
0 
 
0 
 
 
 
Fair value of long term debt
 
 
 
 
$ 3,502,000,000 
$ 3,401,000,000 
Short-Term Borrowings and Credit Lines - (Detail) (USD $)
Aug. 31, 2017
May 31, 2017
Short-term Debt [Line Items]
 
 
Notes payable
$ 335,000,000 
$ 325,000,000 
Commercial paper
 
 
Short-term Debt [Line Items]
 
 
Notes payable
325,000,000 
325,000,000 
Borrowing capacity
$ 2,000,000,000 
 
Notes payable - interest rate
1.15% 
0.86% 
Income Taxes (Detail) (USD $)
In Millions, unless otherwise specified
3 Months Ended
Aug. 31, 2017
Aug. 31, 2016
May 31, 2017
Income Tax Disclosure [Abstract]
 
 
 
Effective tax rate on continuing operations (percent)
11.40% 
2.50% 
 
Total gross unrecognized tax benefits, excluding related interest and penalties
$ 498 
 
$ 461 
Total gross unrecognized tax benefits, excluding related interest and penalties, amount which would affect the Company's effective tax rate if recognized in future periods
247 
 
 
Change in income tax penalties and interest accrued
9 
 
 
Accrued interest and penalties related to uncertain tax positions (excluding federal benefit)
180 
 
171 
Estimated decrease in total gross unrecognized tax benefits as a result of resolutions of global tax examinations and expiration of applicable statutes of limitations
$ 78 
 
 
Common Stock and Stock-Based Compensation - Additional Information (Detail) (USD $)
In Millions, except Share data, unless otherwise specified
3 Months Ended
Aug. 31, 2017
Aug. 31, 2016
Class A Convertible Common Stock
 
 
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
 
 
Common stock, no par value (in dollars per share)
$ 0 
 
Common stock, shares authorized (in shares)
400,000,000 
 
Common stock, conversion basis
Each share of Class A Common Stock is convertible into one share of Class B Common Stock. 
 
Common stock, Class A conversion ratio to Class B (in shares)
1 
 
Class B Common Stock
 
 
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
 
 
Common stock, no par value (in dollars per share)
$ 0 
 
Common stock, shares authorized (in shares)
2,400,000,000 
 
Shares available for grant (in shares)
718,000,000 
 
Stock options |
Class B Common Stock
 
 
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
 
 
Stock options vesting period
4 years 
 
Stock options expiration from the date of grant
10 years 
 
Unrecognized compensation costs from stock options, net of estimated forfeitures
$ 311 
 
Unrecognized compensation costs from stock options, net of estimated forfeitures, to be recognized as operating overhead expense over a weighted average period
2 years 8 months 12 days 
 
Weighted average fair value per share of the options granted (in dollars per share)
$ 9.82 
$ 9.36 
Minimum term of market traded options for estimates of expected volatility
1 year 
 
ESPPs |
Class B Common Stock
 
 
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
 
 
Employee stock purchase plans, payroll deductions
10.00% 
 
Employee stock purchase plan offering period
6 months 
 
Purchase price of common stock, percent
85.00% 
 
Common Stock and Stock-Based Compensation - Total Stock-Based Compensation Expense (Detail) (USD $)
In Millions, unless otherwise specified
3 Months Ended
Aug. 31, 2017
Aug. 31, 2016
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
 
 
Stock-based compensation expense
$ 50 
$ 57 
Class B Common Stock
 
 
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
 
 
Stock-based compensation expense
50 
57 
Class B Common Stock |
Stock options
 
 
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
 
 
Stock-based compensation expense
33 
39 
Accelerated stock option expense
3 
5 
Class B Common Stock |
ESPPs
 
 
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
 
 
Stock-based compensation expense
8 
9 
Class B Common Stock |
Restricted stock
 
 
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
 
 
Stock-based compensation expense
$ 9 
$ 9 
Common Stock and Stock-Based Compensation - Weighted Average Assumptions Used to Estimate Fair Values (Detail) (Stock options, Class B Common Stock)
3 Months Ended
Aug. 31, 2017
Aug. 31, 2016
Stock options |
Class B Common Stock
 
 
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
 
 
Dividend yield
1.20% 
1.10% 
Expected volatility
16.40% 
17.30% 
Weighted average expected life
6 years 
6 years 
Risk-free interest rate
2.00% 
1.30% 
Earnings Per Share - Additional Information (Detail)
In Millions, unless otherwise specified
3 Months Ended
Aug. 31, 2017
Aug. 31, 2016
Earnings Per Share [Abstract]
 
 
Anti-dilutive options not included in the computation of diluted earnings per share
46.0 
31.7 
Earnings Per Share - Reconciliation from Basic to Diluted Earnings Per Share (Detail) (USD $)
In Millions, except Per Share data, unless otherwise specified
3 Months Ended
Aug. 31, 2017
Aug. 31, 2016
Determination of shares:
 
 
Weighted average common shares outstanding
1,639.1 
1,672.0 
Assumed conversion of dilutive stock options and awards
37.8 
36.9 
DILUTED WEIGHTED AVERAGE COMMON SHARES OUTSTANDING
1,676.9 
1,708.9 
Earnings per common share:
 
 
Basic (in dollars per share)
$ 0.58 
$ 0.75 
Diluted (in dollars per share)
$ 0.57 
$ 0.73 
Risk Management and Derivatives - Additional Information (Detail) (USD $)
3 Months Ended 3 Months Ended 3 Months Ended
Aug. 31, 2017
Aug. 31, 2016
Aug. 31, 2017
Minimum
Aug. 31, 2017
Derivatives designated as cash flow hedges
Aug. 31, 2017
Derivatives designated as cash flow hedges
Minimum
Aug. 31, 2017
Derivatives designated as cash flow hedges
Maximum
Aug. 31, 2017
Embedded derivatives
Aug. 31, 2017
Interest rate swaps
Derivatives designated as fair value hedges
Aug. 31, 2017
Foreign exchange forwards and options
Cash and Cash Equivalents
May 31, 2017
Foreign exchange forwards and options
Cash and Cash Equivalents
Aug. 31, 2017
Foreign exchange forwards and options
Derivatives designated as net investment hedges
Aug. 31, 2017
Undesignated derivative instruments
Derivative Instruments and Hedging Activities Disclosure [Line Items]
 
 
 
 
 
 
 
 
 
 
 
 
Additional period for forecasted transaction expected to occur
 
 
 
2 months 
 
 
 
 
 
 
 
 
Typical time period that anticipated exposures are hedged against (in months)
 
 
 
 
12 months 
24 months 
 
 
 
 
 
 
Percentage of anticipated exposures hedged (percent)
 
 
 
100.00% 
 
 
 
 
 
 
 
 
Total notional amount of outstanding derivatives
 
 
 
$ 12,000,000,000 
 
 
$ 265,000,000 
$ 0 
 
 
 
$ 10,000,000,000 
Deferred net gains (net of tax) on both outstanding and matured derivatives accumulated in other comprehensive income are expected to be reclassified to net income during the next twelve months as a result of underlying hedged transactions also being recorded in net income
151,000,000 
 
 
 
 
 
 
 
 
 
 
 
Maximum term over which the Company is hedging exposures to the variability of cash flows for its forecasted and recorded transactions (in months)
27 months 
 
 
 
 
 
 
 
 
 
 
 
Gain (loss) on fair value hedge ineffectiveness, net
0 
0 
 
 
 
 
 
0 
 
 
 
 
Amount of ineffectiveness on net investment hedges
0 
0 
 
 
 
 
 
 
 
 
 
 
Derivative assets (liabilities), at fair value, net
 
 
 
 
 
 
 
 
 
 
0 
 
Minimum fair value of outstanding derivative above which the credit related contingent features require the derivative party to post collateral
 
 
50,000,000 
 
 
 
 
 
 
 
 
 
Aggregate fair value of derivative instruments in net liability position
545,000,000 
 
 
 
 
 
 
 
 
 
 
 
Collateral required
273,000,000 
 
 
 
 
 
 
 
 
 
 
 
Collateral received on derivative assets
 
 
 
 
 
 
 
 
$ 0 
$ 0 
 
 
Risk Management and Derivatives - FV of Derivative Instruments Included within Consolidated Balance Sheet (Detail) (USD $)
In Millions, unless otherwise specified
Aug. 31, 2017
May 31, 2017
Derivatives, Fair Value [Line Items]
 
 
Derivative Assets
$ 193 
$ 241 
Derivative Liabilities
716 
254 
Derivatives formally designated as hedging instruments
 
 
Derivatives, Fair Value [Line Items]
 
 
Derivative Assets
100 
126 
Derivative Liabilities
464 
132 
Derivatives formally designated as hedging instruments |
Foreign exchange forwards and options |
Prepaid expenses and other current assets
 
 
Derivatives, Fair Value [Line Items]
 
 
Derivative Assets
92 
113 
Derivatives formally designated as hedging instruments |
Foreign exchange forwards and options |
Deferred income taxes and other assets
 
 
Derivatives, Fair Value [Line Items]
 
 
Derivative Assets
8 
13 
Derivatives formally designated as hedging instruments |
Foreign exchange forwards and options |
Accrued liabilities
 
 
Derivatives, Fair Value [Line Items]
 
 
Derivative Liabilities
291 
59 
Derivatives formally designated as hedging instruments |
Foreign exchange forwards and options |
Deferred income taxes and other liabilities
 
 
Derivatives, Fair Value [Line Items]
 
 
Derivative Liabilities
173 
73 
Derivatives not designated as hedging instruments
 
 
Derivatives, Fair Value [Line Items]
 
 
Derivative Assets
93 
115 
Derivative Liabilities
252 
122 
Derivatives not designated as hedging instruments |
Foreign exchange forwards and options |
Prepaid expenses and other current assets
 
 
Derivatives, Fair Value [Line Items]
 
 
Derivative Assets
83 
103 
Derivatives not designated as hedging instruments |
Foreign exchange forwards and options |
Deferred income taxes and other assets
 
 
Derivatives, Fair Value [Line Items]
 
 
Derivative Assets
0 
2 
Derivatives not designated as hedging instruments |
Foreign exchange forwards and options |
Accrued liabilities
 
 
Derivatives, Fair Value [Line Items]
 
 
Derivative Liabilities
234 
107 
Derivatives not designated as hedging instruments |
Foreign exchange forwards and options |
Deferred income taxes and other liabilities
 
 
Derivatives, Fair Value [Line Items]
 
 
Derivative Liabilities
10 
7 
Derivatives not designated as hedging instruments |
Embedded derivatives |
Prepaid expenses and other current assets
 
 
Derivatives, Fair Value [Line Items]
 
 
Derivative Assets
1 
1 
Derivatives not designated as hedging instruments |
Embedded derivatives |
Deferred income taxes and other assets
 
 
Derivatives, Fair Value [Line Items]
 
 
Derivative Assets
9 
9 
Derivatives not designated as hedging instruments |
Embedded derivatives |
Accrued liabilities
 
 
Derivatives, Fair Value [Line Items]
 
 
Derivative Liabilities
3 
2 
Derivatives not designated as hedging instruments |
Embedded derivatives |
Deferred income taxes and other liabilities
 
 
Derivatives, Fair Value [Line Items]
 
 
Derivative Liabilities
$ 5 
$ 6 
Risk Management and Derivatives - Amounts Affecting Consolidated Statements of Income (Detail) (USD $)
In Millions, unless otherwise specified
3 Months Ended
Aug. 31, 2017
Aug. 31, 2016
Derivatives not designated as hedging instruments |
Foreign exchange forwards and options |
Other expense (income), net
 
 
Derivative Instruments, Gain (Loss) [Line Items]
 
 
Amount of Gain (Loss) Recognized in Income on Derivatives
$ (194)
$ (35)
Derivatives not designated as hedging instruments |
Embedded derivatives |
Other expense (income), net
 
 
Derivative Instruments, Gain (Loss) [Line Items]
 
 
Amount of Gain (Loss) Recognized in Income on Derivatives
(1)
3 
Derivatives designated as cash flow hedges
 
 
Derivative Instruments, Gain (Loss) [Line Items]
 
 
Amount of Gain (Loss) Recognized in Other Comprehensive Income on Derivatives
(350)
(106)
Amount of Gain (Loss) Reclassified From Accumulated Other Comprehensive Income into Income
47 
180 
Derivatives designated as cash flow hedges |
Foreign exchange forwards and options |
Revenues
 
 
Derivative Instruments, Gain (Loss) [Line Items]
 
 
Amount of Gain (Loss) Recognized in Other Comprehensive Income on Derivatives
55 
53 
Amount of Gain (Loss) Reclassified From Accumulated Other Comprehensive Income into Income
2 
33 
Derivatives designated as cash flow hedges |
Foreign exchange forwards and options |
Cost of sales
 
 
Derivative Instruments, Gain (Loss) [Line Items]
 
 
Amount of Gain (Loss) Recognized in Other Comprehensive Income on Derivatives
(277)
(52)
Amount of Gain (Loss) Reclassified From Accumulated Other Comprehensive Income into Income
45 
104 
Derivatives designated as cash flow hedges |
Foreign exchange forwards and options |
Total selling and administrative expense
 
 
Derivative Instruments, Gain (Loss) [Line Items]
 
 
Amount of Gain (Loss) Recognized in Other Comprehensive Income on Derivatives
1 
0 
Amount of Gain (Loss) Reclassified From Accumulated Other Comprehensive Income into Income
0 
0 
Derivatives designated as cash flow hedges |
Foreign exchange forwards and options |
Other expense (income), net
 
 
Derivative Instruments, Gain (Loss) [Line Items]
 
 
Amount of Gain (Loss) Recognized in Other Comprehensive Income on Derivatives
(129)
(16)
Amount of Gain (Loss) Reclassified From Accumulated Other Comprehensive Income into Income
2 
43 
Derivatives designated as cash flow hedges |
Interest rate swaps |
Interest expense (income), net
 
 
Derivative Instruments, Gain (Loss) [Line Items]
 
 
Amount of Gain (Loss) Recognized in Other Comprehensive Income on Derivatives
0 
(91)
Amount of Gain (Loss) Reclassified From Accumulated Other Comprehensive Income into Income
$ (2)
$ 0 
Accumulated Other Comprehensive Income - Changes in AOCI (Detail) (USD $)
In Millions, unless otherwise specified
3 Months Ended
Aug. 31, 2017
Aug. 31, 2016
Aug. 31, 2017
Foreign Currency Translation Adjustment
Aug. 31, 2016
Foreign Currency Translation Adjustment
Aug. 31, 2017
Cash Flow Hedges
Aug. 31, 2016
Cash Flow Hedges
Aug. 31, 2017
Net Investment Hedges
Aug. 31, 2016
Net Investment Hedges
Aug. 31, 2017
Other
Aug. 31, 2016
Other
Aug. 31, 2017
Total
May 31, 2017
Total
Aug. 31, 2016
Total
May 31, 2016
Total
AOCI Including Portion Attributable to Noncontrolling, Net of Tax [Roll Forward]
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Beginning balance
$ 12,407 
 
$ (191)
$ (207)
$ (52)
$ 463 
$ 115 
$ 115 
$ (85)
$ (53)
$ (586)
$ (213)
$ 85 
$ 318 
Other comprehensive gains (losses) before reclassifications, net of tax
(343)
(44)
22 
3 
(347)
(60)
0 
0 
(18)
13 
 
 
 
 
Reclassifications to net income of previously deferred (gains) losses, net of tax
(30)
(189)
0 
0 
(48)
(180)
0 
0 
18 
(9)
 
 
 
 
Total other comprehensive income (loss), net of tax
(373)
(233)
22 
3 
(395)
(240)
0 
0 
0 
4 
 
 
 
 
Ending balance
11,993 
 
(169)
(204)
(447)
223 
115 
115 
(85)
(49)
(586)
(213)
85 
318 
Other comprehensive income, before reclassification, tax benefit (expense)
(16)
47 
(19)
0 
3 
46 
0 
0 
0 
1 
 
 
 
 
Reclassification from AOCI, Current Period, Tax
$ (1)
$ (1)
$ 0 
$ 0 
$ (1)
$ 0 
$ 0 
$ 0 
$ 0 
$ (1)
 
 
 
 
Accumulated Other Comprehensive Income - Reclassification out of AOCI (Details) (USD $)
In Millions, unless otherwise specified
3 Months Ended
Aug. 31, 2017
Aug. 31, 2016
Reclassification out of Accumulated Other Comprehensive Income [Line Items]
 
 
Revenues
$ 9,070 
$ 9,061 
Cost of sales
(5,108)
(4,938)
Other expense (income), net
(18)
62 
Interest expense (income), net
(16)
(7)
Income before income taxes
1,072 
1,281 
Tax (expense) benefit
(122)
(32)
Amount of Gain (Loss) Reclassified from Accumulated Other Comprehensive Income into Income
 
 
Reclassification out of Accumulated Other Comprehensive Income [Line Items]
 
 
NET INCOME
30 
189 
Amount of Gain (Loss) Reclassified from Accumulated Other Comprehensive Income into Income |
Gain (losses) on cash flow hedges
 
 
Reclassification out of Accumulated Other Comprehensive Income [Line Items]
 
 
Income before income taxes
47 
180 
Tax (expense) benefit
1 
0 
NET INCOME
48 
180 
Amount of Gain (Loss) Reclassified from Accumulated Other Comprehensive Income into Income |
Gain (losses) on cash flow hedges |
Foreign exchange forwards and options
 
 
Reclassification out of Accumulated Other Comprehensive Income [Line Items]
 
 
Revenues
2 
33 
Cost of sales
45 
104 
Other expense (income), net
2 
43 
Amount of Gain (Loss) Reclassified from Accumulated Other Comprehensive Income into Income |
Gain (losses) on cash flow hedges |
Interest rate swaps
 
 
Reclassification out of Accumulated Other Comprehensive Income [Line Items]
 
 
Interest expense (income), net
(2)
0 
Amount of Gain (Loss) Reclassified from Accumulated Other Comprehensive Income into Income |
Other
 
 
Reclassification out of Accumulated Other Comprehensive Income [Line Items]
 
 
Other expense (income), net
(18)
8 
Income before income taxes
(18)
8 
Tax (expense) benefit
0 
1 
NET INCOME
$ (18)
$ 9 
Operating Segments - Information by Operating Segments (Detail) (USD $)
In Millions, unless otherwise specified
3 Months Ended
Aug. 31, 2017
Aug. 31, 2016
Segment Reporting, Revenue Reconciling Item [Line Items]
 
 
Revenues
$ 9,070 
$ 9,061 
EARNINGS BEFORE INTEREST AND TAXES
1,088 
1,288 
Interest expense (income), net
16 
7 
Income before income taxes
1,072 
1,281 
Corporate
 
 
Segment Reporting, Revenue Reconciling Item [Line Items]
 
 
Revenues
2 
28 
EARNINGS BEFORE INTEREST AND TAXES
(433)
(163)
NIKE Brand
 
 
Segment Reporting, Revenue Reconciling Item [Line Items]
 
 
Revenues
8,585 
8,459 
EARNINGS BEFORE INTEREST AND TAXES
1,432 
1,298 
NIKE Brand |
Global Brand Divisions
 
 
Segment Reporting, Revenue Reconciling Item [Line Items]
 
 
Revenues
20 
15 
EARNINGS BEFORE INTEREST AND TAXES
(675)
(771)
NIKE Brand |
North America
 
 
Segment Reporting, Revenue Reconciling Item [Line Items]
 
 
Revenues
3,924 
4,031 
EARNINGS BEFORE INTEREST AND TAXES
1,002 
1,004 
NIKE Brand |
Europe, Middle East & Africa
 
 
Segment Reporting, Revenue Reconciling Item [Line Items]
 
 
Revenues
2,344 
2,262 
EARNINGS BEFORE INTEREST AND TAXES
451 
485 
NIKE Brand |
Greater China
 
 
Segment Reporting, Revenue Reconciling Item [Line Items]
 
 
Revenues
1,108 
1,020 
EARNINGS BEFORE INTEREST AND TAXES
394 
371 
NIKE Brand |
Asia Pacific & Latin America
 
 
Segment Reporting, Revenue Reconciling Item [Line Items]
 
 
Revenues
1,189 
1,131 
EARNINGS BEFORE INTEREST AND TAXES
260 
209 
Converse
 
 
Segment Reporting, Revenue Reconciling Item [Line Items]
 
 
Revenues
483 
574 
EARNINGS BEFORE INTEREST AND TAXES
$ 89 
$ 153 
Operating Segments - Accounts Receivable Net Inventories and Property, Plant and Equipment Net (Detail) (USD $)
In Millions, unless otherwise specified
Aug. 31, 2017
May 31, 2017
Segment Reporting, Asset Reconciling Item [Line Items]
 
 
Accounts receivable, net
$ 3,871 
$ 3,677 
Inventories
5,211 
5,055 
Property, plant and equipment, net
4,086 
3,989 
Corporate
 
 
Segment Reporting, Asset Reconciling Item [Line Items]
 
 
Accounts receivable, net
15 
11 
Inventories
(22)
(1)
Property, plant and equipment, net
1,291 
1,238 
Converse
 
 
Segment Reporting, Asset Reconciling Item [Line Items]
 
 
Accounts receivable, net
229 
297 
Inventories
274 
286 
Property, plant and equipment, net
122 
125 
NIKE Brand
 
 
Segment Reporting, Asset Reconciling Item [Line Items]
 
 
Accounts receivable, net
3,627 
3,369 
Inventories
4,959 
4,770 
Property, plant and equipment, net
2,673 
2,626 
NIKE Brand |
Global Brand Divisions
 
 
Segment Reporting, Asset Reconciling Item [Line Items]
 
 
Accounts receivable, net
88 
86 
Inventories
72 
68 
Property, plant and equipment, net
543 
533 
NIKE Brand |
North America
 
 
Segment Reporting, Asset Reconciling Item [Line Items]
 
 
Accounts receivable, net
1,759 
1,798 
Inventories
2,222 
2,218 
Property, plant and equipment, net
827 
819 
NIKE Brand |
Europe, Middle East & Africa
 
 
Segment Reporting, Asset Reconciling Item [Line Items]
 
 
Accounts receivable, net
972 
690 
Inventories
1,359 
1,327 
Property, plant and equipment, net
731 
709 
NIKE Brand |
Greater China
 
 
Segment Reporting, Asset Reconciling Item [Line Items]
 
 
Accounts receivable, net
112 
102 
Inventories
537 
463 
Property, plant and equipment, net
229 
225 
NIKE Brand |
Asia Pacific & Latin America
 
 
Segment Reporting, Asset Reconciling Item [Line Items]
 
 
Accounts receivable, net
696 
693 
Inventories
769 
694 
Property, plant and equipment, net
$ 343 
$ 340 
Commitments and Contingencies (Detail) (USD $)
In Millions, unless otherwise specified
Aug. 31, 2017
Commitments and Contingencies Disclosure [Abstract]
 
Letters of credit outstanding
$ 143