NOTE 17 — Operating Segments and Related Information

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 NIKE Brand 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 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, therefore, are provided below. Additions to long-lived assets as presented in the following table represent capital expenditures.



	Year Ended May 31,
(In millions)	2018			2017			2016
REVENUES
North America	$	14,855		$	15,216		$	14,764
Europe, Middle East & Africa	9,242			7,970			7,568
Greater China	5,134			4,237			3,785
Asia Pacific & Latin America	5,166			4,737			4,317
Global Brand Divisions	88			73			73
Total NIKE Brand	34,485			32,233			30,507
Converse	1,886			2,042			1,955
Corporate	26			75			(86		)
TOTAL NIKE, INC. REVENUES	$	36,397		$	34,350		$	32,376
EARNINGS BEFORE INTEREST AND TAXES
North America	$	3,600		$	3,875		$	3,763
Europe, Middle East & Africa	1,587			1,507			1,787
Greater China	1,807			1,507			1,372
Asia Pacific & Latin America	1,189			980			1,002
Global Brand Divisions	(2,658		)	(2,677		)	(2,596		)
Total NIKE Brand	5,525			5,192			5,328
Converse	310			477			487
Corporate	(1,456		)	(724		)	(1,173		)
Total NIKE, Inc. Earnings Before Interest and Taxes	4,379			4,945			4,642
Interest expense (income), net	54			59			19
TOTAL NIKE, INC. INCOME BEFORE INCOME TAXES	$	4,325		$	4,886		$	4,623
ADDITIONS TO LONG-LIVED ASSETS
North America	$	196		$	223		$	242
Europe, Middle East & Africa	240			173			234
Greater China	76			51			44
Asia Pacific & Latin America	49			59			62
Global Brand Divisions	286			278			258
Total NIKE Brand	847			784			840
Converse	22			30			39
Corporate	325			387			312
TOTAL ADDITIONS TO LONG-LIVED ASSETS	$	1,194		$	1,201		$	1,191
DEPRECIATION
North America	$	160		$	140		$	133
Europe, Middle East & Africa	116			106			85
Greater China	56			54			48
Asia Pacific & Latin America	55			54			42
Global Brand Divisions	217			233			230
Total NIKE Brand	604			587			538
Converse	33			28			27
Corporate	110			91			84
TOTAL DEPRECIATION	$	747		$	706		$	649



	As of May 31,
(In millions)	2018			2017
ACCOUNTS RECEIVABLE, NET
North America	$	1,443		$	1,798
Europe, Middle East & Africa	870			690
Greater China	101			102
Asia Pacific & Latin America	720			693
Global Brand Divisions	102			86
Total NIKE Brand	3,236			3,369
Converse	240			297
Corporate	22			11
TOTAL ACCOUNTS RECEIVABLE, NET	$	3,498		$	3,677
INVENTORIES
North America	$	2,270		$	2,218
Europe, Middle East & Africa	1,433			1,327
Greater China	580			463
Asia Pacific & Latin America	687			694
Global Brand Divisions	91			68
Total NIKE Brand	5,061			4,770
Converse	268			286
Corporate	(68		)	(1		)
TOTAL INVENTORIES	$	5,261		$	5,055
PROPERTY, PLANT AND EQUIPMENT, NET
North America	$	848		$	819
Europe, Middle East & Africa	849			709
Greater China	256			225
Asia Pacific & Latin America	339			340
Global Brand Divisions	597			533
Total NIKE Brand	2,889			2,626
Converse	115			125
Corporate	1,450			1,238
TOTAL PROPERTY, PLANT AND EQUIPMENT, NET	$	4,454		$	3,989

Revenues by Major Product Lines

Revenues from external customers for NIKE Brand products are attributable to sales of footwear, apparel and equipment. Other revenues from external customers consist primarily of sales by Converse.



	Year Ended May 31,
(In millions)	2018		2017		2016
Footwear	$	22,268	$	21,081	$	19,871
Apparel	10,733		9,654		9,067
Equipment	1,396		1,425		1,496
Other	2,000		2,190		1,942
TOTAL NIKE, INC. REVENUES	$	36,397	$	34,350	$	32,376

Revenues and Long-Lived Assets by Geographic Area

After allocation of revenues for Global Brand Divisions, Converse and Corporate to geographical areas based on the location where the sales originated, revenues by geographical area are essentially the same as reported above for the NIKE Brand operating segments with the exception of the United States. Revenues derived in the United States were $15,314 million, $15,778 million and $15,304 million for the years ended May 31, 2018, 2017 and 2016, respectively. The Company’s largest concentrations of long-lived assets primarily consist of the Company’s world headquarters and distribution facilities in the United States and distribution facilities in Belgium, China and Japan. Long-lived assets attributable to operations in the United States, which are primarily composed of net property, plant & equipment, were $2,930 million and $2,629 million at May 31, 2018 and 2017, respectively. Long-lived assets attributable to operations in Belgium were $534 million and $390 million at May 31, 2018 and 2017, respectively. Long-lived assets attributable to operations in China were $262 million and $232 million at May 31, 2018 and 2017, respectively. Long-lived assets attributable to operations in Japan were $237 million and $223 million at May 31, 2018 and 2017, respectively.

Major Customers

No customer accounted for 10% or more of the Company’s net revenues during the years ended May 31, 2018, 2017 and 2016.