Operating Segments and Related Information

12 Months Ended

May 31, 2020

Operating Segments and Related Information

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. The Company's reportable operating segments for the NIKE Brand are: North America; Europe, Middle East & Africa (EMEA); Greater China; and Asia Pacific & Latin America (APLA), and include results for the NIKE and Jordan brands, with the results for the Hurley brand, prior to its divestiture, included in North America. Refer to Note 20 — Acquisitions and Divestitures for information regarding the divestiture of the Company's wholly-owned subsidiary, Hurley, and the planned transition of NIKE Brand businesses in certain countries within APLA to third-party distributors.

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 athletic lifestyle 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 represent NIKE Brand licensing businesses that are not part of a geographic operating segment, and demand creation and operating overhead expense, including product creation and design expenses that are centrally managed for the NIKE Brand, as well as costs associated with NIKE Direct global digital operations and enterprise technology.

Corporate consists primarily 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. For the fiscal year ended May 31, 2020, Corporate includes the non-recurring impairment charge, recognized as a result of the Company's decision to transition its operations in Brazil, Argentina, Chile and Uruguay to third-party distributors. This charge primarily reflects the anticipated release of associated non-cash cumulative foreign currency translation losses. For more information regarding this charge, refer to Note 20 — Acquisitions and Divestitures.

The primary financial measure used by the Company to evaluate performance of individual operating segments is earnings before interest and taxes (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 are therefore provided below.



	YEAR ENDED MAY 31,
(Dollars in millions)	2020			2019			2018
REVENUES
North America	$	14,484		$	15,902		$	14,855
Europe, Middle East & Africa	9,347			9,812			9,242
Greater China	6,679			6,208			5,134
Asia Pacific & Latin America	5,028			5,254			5,166
Global Brand Divisions	30			42			88
Total NIKE Brand	35,568			37,218			34,485
Converse	1,846			1,906			1,886
Corporate	(11		)	(7		)	26
TOTAL NIKE, INC. REVENUES	$	37,403		$	39,117		$	36,397
EARNINGS BEFORE INTEREST AND TAXES
North America	$	2,899		$	3,925		$	3,600
Europe, Middle East & Africa	1,541			1,995			1,587
Greater China	2,490			2,376			1,807
Asia Pacific & Latin America	1,184			1,323			1,189
Global Brand Divisions	(3,468		)	(3,262		)	(2,658		)
Converse	297			303			310
Corporate	(1,967		)	(1,810		)	(1,456		)
Interest expense (income), net	89			49			54
TOTAL NIKE, INC. INCOME BEFORE INCOME TAXES	$	2,887		$	4,801		$	4,325
ADDITIONS TO PROPERTY, PLANT AND EQUIPMENT
North America	$	110		$	117		$	196
Europe, Middle East & Africa	139			233			240
Greater China	28			49			76
Asia Pacific & Latin America	41			47			49
Global Brand Divisions	438			278			286
Total NIKE Brand	756			724			847
Converse	12			18			22
Corporate	356			333			325
TOTAL ADDITIONS TO PROPERTY, PLANT AND EQUIPMENT	$	1,124		$	1,075		$	1,194
DEPRECIATION
North America	$	148		$	149		$	160
Europe, Middle East & Africa	132			111			116
Greater China	44			50			56
Asia Pacific & Latin America	46			53			55
Global Brand Divisions	214			195			217
Total NIKE Brand	584			558			604
Converse	25			31			33
Corporate	112			116			110
TOTAL DEPRECIATION	$	721		$	705		$	747



	AS OF MAY 31,
(Dollars in millions)	2020		2019
ACCOUNTS RECEIVABLE, NET
North America	$	1,020	$	1,718
Europe, Middle East & Africa	712		1,164
Greater China	321		245
Asia Pacific & Latin America⁽¹⁾	425		771
Global Brand Divisions	65		105
Total NIKE Brand	2,543		4,003
Converse	149		243
Corporate	57		26
TOTAL ACCOUNTS RECEIVABLE, NET	$	2,749	$	4,272
INVENTORIES
North America	$	3,077	$	2,328
Europe, Middle East & Africa	2,070		1,390
Greater China	882		693
Asia Pacific & Latin America⁽¹⁾	770		694
Global Brand Divisions	137		126
Total NIKE Brand	6,936		5,231
Converse	341		269
Corporate	90		122
TOTAL INVENTORIES	$	7,367	$	5,622
PROPERTY, PLANT AND EQUIPMENT, NET
North America	$	645	$	814
Europe, Middle East & Africa	885		929
Greater China	214		237
Asia Pacific & Latin America⁽¹⁾	296		326
Global Brand Divisions	830		665
Total NIKE Brand	2,870		2,971
Converse	80		100
Corporate	1,916		1,673
TOTAL PROPERTY, PLANT AND EQUIPMENT, NET	$	4,866	$	4,744


(1)	Excludes assets held-for-sale as of May 31, 2020. See Note 20 — Acquisitions and Divestitures for additional information.

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 $14,625 million, $16,091 million and $15,314 million for the fiscal years ended May 31, 2020, 2019 and 2018, respectively.

The Company's largest concentrations of long-lived assets primarily consist of the Company's corporate headquarters, retail locations and distribution facilities in the United States and China, as well as distribution facilities in Belgium. Long-lived assets attributable to operations in these countries, which primarily consists of property, plant and equipment, net, as well as operating lease right-of-use assets, net in conjunction with the adoption of Topic 842 in fiscal 2020, were as follows:



	MAY 31,
(Dollars in millions)	2020⁽¹⁾		2019
United States	$	5,114	$	3,174
Belgium	606		618
China	457		242

(1)

Includes operating lease right-of-use assets, net in conjunction with the adoption of Topic 842. Comparative prior period information has not been adjusted and continues to be reported in accordance with previous accounting guidance in effect for those periods.