Operating Segments

6 Months Ended

Nov. 30, 2017

Segment Reporting [Abstract]

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 November 30,						Six Months Ended November 30,
(In millions)	2017			2016			2017			2016
REVENUES
North America	$	3,485		$	3,650		$	7,409		$	7,681
Europe, Middle East & Africa	2,133			1,792			4,477			4,054
Greater China	1,222			1,055			2,330			2,075
Asia Pacific & Latin America	1,273			1,206			2,462			2,337
Global Brand Divisions	23			21			43			36
Total NIKE Brand	8,136			7,724			16,721			16,183
Converse	408			416			891			990
Corporate	10			40			12			68
TOTAL NIKE, INC. REVENUES	$	8,554		$	8,180		$	17,624		$	17,241
EARNINGS BEFORE INTEREST AND TAXES
North America	$	783		$	912		$	1,785		$	1,916
Europe, Middle East & Africa	337			313			788			798
Greater China	378			375			772			746
Asia Pacific & Latin America	291			266			551			475
Global Brand Divisions	(602		)	(619		)	(1,277		)	(1,390		)
Total NIKE Brand	1,187			1,247			2,619			2,545
Converse	48			78			137			231
Corporate	(343		)	(196		)	(776		)	(359		)
Total NIKE, Inc. Earnings Before Interest and Taxes	892			1,129			1,980			2,417
Interest expense (income), net	13			15			29			22
TOTAL NIKE, INC. INCOME BEFORE INCOME TAXES	$	879		$	1,114		$	1,951		$	2,395

	As of November 30,			As of May 31,
(In millions)	2017			2017
ACCOUNTS RECEIVABLE, NET
North America	$	1,608		$	1,798
Europe, Middle East & Africa	768			690
Greater China	146			102
Asia Pacific & Latin America	767			693
Global Brand Divisions	95			86
Total NIKE Brand	3,384			3,369
Converse	205			297
Corporate	24			11
TOTAL ACCOUNTS RECEIVABLE, NET	$	3,613		$	3,677
INVENTORIES
North America	$	2,241		$	2,218
Europe, Middle East & Africa	1,421			1,327
Greater China	600			463
Asia Pacific & Latin America	786			694
Global Brand Divisions	84			68
Total NIKE Brand	5,132			4,770
Converse	263			286
Corporate	(69		)	(1		)
TOTAL INVENTORIES	$	5,326		$	5,055
PROPERTY, PLANT AND EQUIPMENT, NET
North America	$	805		$	819
Europe, Middle East & Africa	732			709
Greater China	227			225
Asia Pacific & Latin America	342			340
Global Brand Divisions	539			533
Total NIKE Brand	2,645			2,626
Converse	124			125
Corporate	1,348			1,238
TOTAL PROPERTY, PLANT AND EQUIPMENT, NET	$	4,117		$	3,989