Operating Segments

3 Months Ended

Aug. 31, 2012

Operating Segments

NOTE 10 — Operating Segments

The Company’s operating segments are evidence of the structure of the Company’s internal organization. The major segments are defined by geographic regions for operations participating in NIKE Brand sales activity excluding NIKE Golf. 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, Western Europe, Central & Eastern Europe, Greater China, Japan, and Emerging Markets. The Company’s NIKE Brand Direct to Consumer operations are managed within each geographic segment.

The Company’s “Other” category is broken into three components for presentation purposes to align with the way management views the Company. The “Global Brand Divisions” category primarily represents NIKE Brand licensing businesses that are not part of a geographic operating segment, demand creation and operating overhead expenses that are centrally managed for the NIKE Brand, and costs associated with product development and supply chain operations. The “Other Businesses” category consists of the activities of Converse Inc., Hurley International LLC, and NIKE Golf. On May 31, 2012, the Company announced its intention to divest the Cole Haan and Umbro businesses. The “Businesses to be Divested” category consists of these businesses along with the costs for executing these divestitures. Activities represented in the “Other” category are considered immaterial for individual disclosure.

Corporate consists 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; certain foreign currency gains and losses, including certain hedge gains and losses; corporate eliminations and other items.

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 (income) expense, net and income taxes in the consolidated statements of income. Reconciling items for EBIT represent corporate expense items that are not allocated to the operating segments for management reporting.

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 our geographic operating segments and certain Other Businesses. These rates are set approximately nine months in advance of the future selling season 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 certain Other Businesses reflect 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, inventories and property, plant and equipment for operating segments are regularly reviewed by management and are therefore provided below.

Certain prior year amounts have been reclassified to conform to fiscal 2013 presentation.

	Three Months Ended August 31,
(In millions)	2012			2011
REVENUE
North America	$	2,706		$	2,200
Western Europe		1,167			1,228
Central & Eastern Europe		342			334
Greater China		572			528
Japan		183			194
Emerging Markets		867			800
Global Brand Divisions		27			32
Total NIKE Brand		5,864			5,316
Other Businesses		635			585
Businesses to be Divested		195			188
Corporate		(25	)		(8	)
TOTAL NIKE CONSOLIDATED REVENUES	$	6,669		$	6,081
EARNINGS BEFORE INTEREST AND TAXES
North America	$	630		$	539
Western Europe		214			223
Central & Eastern Europe		61			70
Greater China		164			171
Japan		24			34
Emerging Markets		223			190
Global Brand Divisions		(375	)		(266	)
Total NIKE Brand		941			961
Other Businesses		121			104
Businesses to be Divested		(18	)		(18	)
Corporate		(265	)		(195	)
Total NIKE Consolidated Earnings Before Interest and Taxes		779			852
Interest (income) expense, net		(3	)		0
TOTAL NIKE CONSOLIDATED EARNINGS BEFORE TAXES	$	782		$	852

	August 31,		May 31,
(In millions)	2012		2012
ACCOUNTS RECEIVABLE, NET
North America	$	1,238	$	1,149
Western Europe		518		420
Central & Eastern Europe		326		261
Greater China		195		221
Japan		99		152
Emerging Markets		514		476
Global Brand Divisions		14		30
Total NIKE Brand		2,904		2,709
Other Businesses		363		401
Businesses to be Divested		139		148
Corporate		25		22
TOTAL ACCOUNTS RECEIVABLE, NET	$	3,431	$	3,280
INVENTORIES
North America	$	1,267	$	1,272
Western Europe		485		488
Central & Eastern Europe		134		180
Greater China		237		217
Japan		97		83
Emerging Markets		594		521
Global Brand Divisions		36		35
Total NIKE Brand		2,850		2,796
Other Businesses		337		384
Businesses to be Divested		148		127
Corporate		76		43
TOTAL INVENTORIES	$	3,411	$	3,350
PROPERTY, PLANT AND EQUIPMENT, NET
North America	$	380	$	378
Western Europe		314		314
Central & Eastern Europe		33		30
Greater China		191		191
Japan		356		359
Emerging Markets		67		59
Global Brand Divisions		215		205
Total NIKE Brand		1,556		1,536
Other Businesses		75		76
Businesses to be Divested		67		70
Corporate		593		597
TOTAL PROPERTY, PLANT AND EQUIPMENT, NET	$	2,291	$	2,279