NIKE (NKE) 10-K risk factor changes: FY2017 vs FY2016

The risks and uncertainties are detailed from time to time in reports filed by NIKE with the SEC, including reports filed on Forms 8-K, 10-Q and 10-K, and include, among others, the following: international, national and local general economic and market conditions; the size and growth of the overall athletic footwear, apparel and equipment markets; intense competition among designers, marketers, distributors and sellers of athletic footwear, apparel and equipment for consumers and endorsers; demographic changes; changes in consumer preferences; popularity of particular designs, categories of products and sports; seasonal and geographic demand for NIKE products; difficulties in anticipating or forecasting changes in consumer preferences, consumer demand for NIKE products and the various market factors described above; difficulties in implementing, operating and maintaining NIKE’s increasingly complex information systems and controls, including, without limitation, the systems related to demand and supply planning and inventory control; interruptions in data and information technology systems; consumer data security; fluctuations and difficulty in forecasting operating results, including, without limitation, the fact that advance futures orders may not be indicative of future revenues due to changes in shipment timing, the changing mix of futures and [removed: at-once orders,] [added: orders with shorter lead times,] and discounts, order cancellations and returns; the ability of NIKE to sustain, manage or forecast its growth and inventories; the size, timing and mix of purchases of NIKE’s products; increases in the cost of materials, labor and energy used to manufacture products; new product development and introduction; the ability to secure and protect trademarks, patents and other intellectual property; product performance and quality; customer service; adverse publicity; the loss of significant customers or suppliers; dependence on distributors and licensees; business disruptions; increased costs of freight and transportation to meet delivery deadlines; increases in borrowing costs due to any decline in [removed: NIKE's] [added: NIKE’s] debt ratings; changes in business strategy or development plans; general risks associated with doing business outside [added: of] the United States, including, without limitation, exchange rate fluctuations, import duties, tariffs, quotas, political and economic instability and terrorism; [added: proposed] changes [added: to U.S. tax laws or policy, tariff and import/export regulations; changes] in government regulations; the impact of, including business and legal developments relating to, climate [removed: change,] [added: change and] natural [removed: disasters, liability] [added: disasters; litigation, regulatory proceedings] and other claims asserted against NIKE; the ability to attract and retain qualified personnel; the effects of [removed: NIKE's] [added: NIKE’s] decision to invest in or divest of businesses and other factors referenced or incorporated by reference in this report and other reports.

Product offerings, technologies, marketing expenditures (including expenditures for advertising and endorsements), pricing, costs of production, customer [removed: service] [added: service, digital commerce platforms] and social media presence are areas of intense competition.

Negative posts or comments about us on social networking [added: applications or] websites could seriously damage our reputation and brand image.

In addition, we market our products globally through a diverse spectrum of advertising and promotional programs and campaigns, including social [removed: media] [added: media, mobile applications] and online advertising.

Research and development [removed: plays] [added: play] a key role in technical innovation.

We rely upon specialists in the fields of biomechanics, chemistry, exercise physiology, engineering, industrial design, sustainability and related fields, as well as research committees and advisory boards made up of athletes, coaches, trainers, equipment managers, orthopedists, podiatrists and other experts to develop and test [removed: cutting edge] [added: cutting-edge] performance products.

We establish relationships with professional athletes, sports teams and [removed: leagues] [added: leagues, as well as other public figures,] to develop, evaluate and promote our products, as well as establish product authenticity with consumers.

If we are unable to maintain our current associations with professional athletes, sports teams and leagues, or [added: other public figures, or] to do so at a reasonable cost, we could lose the [added: high visibility or] on-field authenticity associated with our products, and we may be required to modify and substantially increase our marketing investments.

In addition, actions taken by athletes, teams or [removed: leagues] [added: leagues, or other endorsers,] associated with our products that harm the reputations of those athletes, teams or leagues, [added: or endorsers,] could also seriously harm our brand image with consumers and, as a result, could have an adverse effect on our sales and financial condition.

In addition, poor performance by our endorsers, a failure to continue to correctly identify promising [removed: athletes] [added: athletes, or public figures,] to use and endorse our products or a failure to enter into cost-effective endorsement arrangements with prominent [removed: athletes] [added: athletes, public figures,] and sports organizations could adversely affect our brand, sales and profitability.

[removed: Additionally, there has been, and may continue to be, volatility in currency exchange rates as a result of the United Kingdom's June 23, 2016 referendum in which voters approved the United Kingdom's exit from the European Union, commonly referred to as “Brexit.”] Our international revenues and expenses generally are derived from sales and operations in foreign currencies, and these revenues and expenses could be affected by currency fluctuations, specifically amounts recorded in foreign currencies and translated into U.S. Dollars for consolidated financial reporting, as weakening of foreign currencies relative to the U.S. Dollar adversely affects the U.S. Dollar value of the Company's foreign currency-denominated sales and earnings.

| • | We conduct transactions in various currencies, which increases our exposure to fluctuations in foreign currency exchange rates relative to the U.S. Dollar. Continued volatility in the markets and exchange rates for foreign currencies and contracts in foreign [removed: currencies] [added: currencies, including in response to certain policies advocated by the U.S. presidential administration,] could have a significant impact on our reported operating results and financial condition. |

However, the mix of product sales may vary considerably from time to time as a result of changes in seasonal and geographic demand for particular types of footwear, apparel and equipment and in connection with the timing of significant sporting events, [removed: including without limitation] [added: such as] the Olympics [removed: and] [added: or] the European [removed: football championship.][added: Football Championship, among others.]

We [removed: make substantial use of our] [added: utilize a] futures ordering program, which allows retailers to order five to six months in advance of delivery with the commitment that their orders will be delivered within a set period of time at a fixed price.

We [added: currently] report changes in futures orders in our periodic financial reports.

[removed: This is] [added: Differences are also] due to year-over-year changes in shipment timing, changes in the mix of orders between futures and [removed: at-once] orders [added: with shorter lead times] and because the fulfillment of certain orders may fall outside of the schedule noted above.

Moreover, a portion of our revenue is not derived from futures orders, including sales [removed: of at-once and] [added: with short lead times,] closeout NIKE Brand footwear and apparel, all sales of NIKE Brand equipment, the difference between retail sales and internal orders from our Direct to Consumer in-line stores and [removed: e-commerce] [added: digital commerce] operations, and sales from Converse, NIKE Golf and Hurley.

Inventory shortages might delay shipments to customers, negatively impact [removed: retailer and] [added: retailer,] distributor [added: and consumer] relationships and diminish brand loyalty.

To assist in the scheduling of production and the shipping of [removed: seasonal] [added: our] products, we offer [added: certain] customers the [removed: ability] [added: opportunity] to place orders five to six months ahead of delivery under our futures ordering program.

These advance orders may be [removed: canceled,] [added: canceled under certain conditions,] and the risk of cancellation may increase when dealing with financially unstable retailers or retailers struggling with economic uncertainty.

When the retail economy [removed: weakens,] [added: weakens or as consumer behavior shifts,] retailers may be more cautious with orders.

A slowing [added: or changing] economy in our key markets could adversely affect the financial health of our customers, which in turn could have an adverse effect on our results of operations and financial condition.

In addition, product sales are dependent in part on high quality merchandising and an appealing [removed: store] [added: retail] environment to attract consumers, which requires continuing investments by retailers.

These retailers have in the past increased their market share [removed: and may continue to do so in the future] by expanding through acquisitions and construction of additional stores.

These situations concentrate our credit risk with a relatively small number of retailers, and, if any of these retailers were to experience a shortage of [removed: liquidity,] [added: liquidity or consumer behavior shifts away from traditional retail,] it would increase the risk that their outstanding payables to us may not be paid.

Due to the high fixed-cost structure associated with our Direct to Consumer operations, a decline in [removed: sales] [added: sales, a shift in consumer behavior away from brick-and-mortar retail,] or the closure or poor performance of individual or multiple stores could result in significant lease termination costs, write-offs of equipment and leasehold improvements and employee-related costs.

If the technology-based systems that give our customers the ability to shop with us online do not function effectively, our operating results, as well as our ability to grow our [removed: e-commerce] [added: digital commerce] business globally, could be materially adversely affected.

Many of our customers shop with us through our [removed: e-commerce] [added: digital commerce] website and mobile [removed: commerce] applications.

Any failure on our part to provide attractive, effective, reliable, user-friendly [removed: e-commerce] [added: digital commerce] platforms that offer a wide assortment of merchandise with rapid delivery options and that continually meet the changing expectations of online shoppers could place us at a competitive disadvantage, result in the loss of [removed: e-commerce] [added: digital commerce] and other sales, harm our reputation with customers, have a material adverse impact on the growth of our [removed: e-commerce] [added: digital commerce] business globally and could have a material adverse impact on our business and results of operations.

Risks specific to our [removed: e-commerce] [added: digital commerce] business also include diversion of sales from our and our retailers' brick and mortar stores, difficulty in recreating the in-store experience through direct channels and liability for online content.

Our failure to successfully respond to these risks might adversely affect sales in our [removed: e-commerce] [added: digital commerce] business, as well as damage our reputation and brands.

We periodically discover products that are counterfeit reproductions of our products or that otherwise infringe [removed: on] our intellectual property rights.

The actions we take to establish and protect our intellectual property rights may not be adequate to prevent imitation of our products by [removed: others or to prevent others from seeking to block sales of our products as violations of proprietary rights.][added: others.]

We may be subject to liability if third parties successfully claim that we infringe [removed: on] their intellectual property rights.

We take various actions to prevent the unauthorized use and/or disclosure of [added: our] confidential [removed: information.][added: information and intellectual property rights.]

Such actions include contractual measures such as entering into non-disclosure and non-compete agreements and [added: agreements relating to our collaborations with third parties, and] providing confidential information awareness training.

Our controls and efforts to prevent unauthorized use and/or disclosure of confidential information [added: and intellectual property rights] might not always be effective.

[removed: Confidential] [added: For example, confidential] information that is related to business strategy, new technologies, mergers and acquisitions, unpublished financial results or personal data could be prematurely or inadvertently used and/or disclosed, resulting in a loss of reputation, a decline in our stock price and/or a negative impact on our market position, and could lead to damages, fines, penalties or injunctions.

Any breach of our [removed: network] [added: network, or vendor systems,] may result in the loss of [removed: valuable] [added: confidential] business [added: and financial] data, misappropriation of our consumers’, users' or employees’ personal information or a disruption of our [removed: business, which could give rise to unwanted media attention, materially damage our consumers, customer relationships and our reputation and result in lost sales, lost users, fines, or lawsuits.][added: business.]

If the tax holidays and rulings are not extended, or if we fail to satisfy the conditions of the reduced tax rate, our [removed: future] effective income tax rate would increase in the future.

Our DTC operations, both through our digital commerce operations and retail stores, also compete with multi-brand retailers selling our products.

In addition, the competitive nature of retail including shifts in the ways in which consumers are shopping, and the rising trend of digital commerce, constitutes a risk factor implicating our DTC and wholesale operations.

Additionally, there has been, and may continue to be, volatility in currency exchange rates as a result of the United Kingdom's impending exit from the European Union, commonly referred to as “Brexit” and current U.S. policy proposals.

Reported futures orders are not necessarily indicative of our expectation of revenues for any future period, and the relationship between reported futures and reported revenues in a given period has become less correlated over time based on our evolving business model.

We also may be unable to prevent others from seeking to block sales of our products as violations of proprietary rights.

Any of these outcomes could have a material adverse effect on our business, including, unwanted media attention, impairment of our consumer and customer relationships, damage to our reputation and result in lost sales and consumers, fines, or lawsuits.

This includes, for example, the uncertainty surrounding the effect of Brexit, including changes to the legal and regulatory framework that apply to the United Kingdom and its relationship with the European Union, as well as the current proposals affecting trade policy in the U.S. The U.S. presidential administration has indicated a focus on policy reforms that discourage U.S. corporations from outsourcing manufacturing and production activities to foreign jurisdictions, including through potential tariffs or penalties on goods manufactured outside the U.S. If any of these reforms are implemented, it may become necessary for us to change the way we conduct business which may adversely affect our results of operations.

The administration has also targeted the specific practices of certain U.S. multinational corporations in public statements which, if directed at us, could harm our reputation or otherwise negatively impact our business.

Proposed changes to U.S. tax law or policy, tariff and import/export regulations may have a material adverse effect on our business, financial condition and results of operations.

During, and following, the recent U.S. presidential election, there has been discussion and commentary regarding potential significant changes to U.S. trade policies, legislation, treaties and tariffs, including NAFTA and trade policies and tariffs affecting China.

There have also been discussions of a disallowance of tax deductions for imported merchandise or the imposition of unilateral tariffs on imported products.

It is unknown at this time whether and to what extent new legislation will be passed into law, pending or new regulatory proposals will be adopted, international trade agreements will be negotiated, or the effect that any such action would have, either positively or negatively, on our industry, or on us.

The Company, similar to many other multinational corporations, does a significant amount of business that would be impacted by these changes.

If any new legislation and/or regulations are implemented, or if existing trade agreements are renegotiated, it may be time-consuming and expensive for us to alter our business operations in order to adapt to or comply with such changes.

Current U.S. trade policy proposals, including potential changes to import tariffs and existing trade policies and agreements, could also have a significant impact on our activities in foreign jurisdictions, and could adversely affect our results of operations.

We are subject to litigation and other legal and regulatory proceedings, which could have an adverse effect on our business, financial condition and results of operations.

As a multinational corporation with operations and distribution channels throughout the world, we are involved in various types of claims, lawsuits, regulatory proceedings and government investigations relating to our business, our products and the actions of our employees and representatives, including contractual and employment relationships, product liability claims, trademark rights and a variety of other matters.

It is not possible to predict with certainty the outcome of any such legal or regulatory proceedings or investigations, and we could in the future incur judgments, fines or penalties, or enter into settlements of lawsuits and claims that could have a material adverse effect on our business, financial condition and results of operations and negatively impact our reputation.

The global nature of our business means that legal and compliance risks will continue to exist and additional legal proceedings and other contingencies will arise from time to time, which could adversely affect us.

Although we believe futures orders are an important indicator of our future revenues, reported futures orders are not necessarily indicative of our expectation of revenues for any future period.

We believe that our intellectual property rights are important to our brand, our success and our competitive position.

This includes, for example, the uncertainty surrounding the implementation and effect of Brexit, including changes to the legal and regulatory framework that apply to the United Kingdom and its relationship with the European Union.

For example, the IRS has assessed additional tax liabilities for 2011 and 2012 related to a foreign tax credit matter.

We are currently contesting the matter in U.S. Tax Court.

In addition to the risk of additional tax for these years, if this litigation is adversely determined and the IRS was to seek similar adjustments in subsequent years, we could be subject to significant additional tax liabilities.

We are subject to periodic litigation and other regulatory proceedings, which could result in unexpected expense of time and resources.

From time to time we are called upon to defend ourselves against lawsuits and regulatory actions relating to our business.

Due to the inherent uncertainties of litigation and regulatory proceedings, we cannot accurately predict the ultimate outcome of any such proceedings.

We sell our products to retail accounts, through NIKE-owned in-line and factory retail stores and NIKE-owned internet websites [added: and mobile applications] (which we refer to collectively as our “Direct to Consumer” or “DTC” [removed: operations)] [added: operations),] and through a mix of independent distributors, licensees and sales representatives in virtually all countries around the world.

Our strategy is to achieve long-term revenue growth by creating innovative, “must have” products, building deep personal consumer connections with our brands and delivering compelling consumer experiences at [removed: retail] [added: retail, online] and [removed: online.][added: through mobile applications.]

\- Driving growth in our higher gross margin DTC business, led by [removed: NIKE.com,] [added: digital commerce,] as part of an integrated marketplace growth strategy across our DTC and wholesale operations.

| • | High single-digit to [removed: low-double digit] [added: low double-digit] revenue growth; |

We expanded gross margin by approximately [removed: 220] [added: 70] basis [removed: points] [added: points,] and our return on invested capital has increased from [removed: 22.6%] [added: 21.9%] to [removed: 29.7%.][added: 34.7%.]

On November 19, 2015, we announced a [removed: two-for-one stock] [added: two\-for-one] split of both NIKE Class A and Class B Common Stock.

Our fiscal [removed: 2016] [added: 2017] results demonstrated the power of the NIKE, Inc. portfolio to deliver continued growth and expanding profitability.

Despite [removed: significant] foreign currency headwinds, we achieved record revenues and earnings per share for fiscal [removed: 2016.][added: 2017.]

NIKE, Inc. Revenues grew 6% to [removed: $32.4] [added: $34.4] billion, [removed: gross margin expanded 20 basis points,] Net income increased [removed: 15%] [added: 13%] and diluted earnings per common share grew [removed: 17%] [added: 16%] to [removed: $2.16.][added: $2.51.]

Earnings before interest and income taxes [removed: ("EBIT")] [added: (“EBIT”)] increased [removed: 10%] [added: 7%] for fiscal [removed: 2016,] [added: 2017,] driven by revenue growth and [removed: gross margin expansion, while] selling and administrative expense [removed: was flat as a percent of revenues.][added: leverage, partially offset by gross margin contraction.]

| • | Strong category retail presentation [removed: online] [added: through digital commerce] and [removed: at] NIKE-owned and retail partner stores. |

Converse revenues [added: increased 4%] and EBIT [removed: decreased 1% and 6%, respectively,] [added: declined 2%,] as growth in direct distribution markets [removed: was] [added: and lower selling and administrative expense were] more than offset by [added: lower gross margin, primarily a result of] the negative impact of changes in foreign currency exchange [removed: rates.][added: rates and higher product costs, as well as the unfavorable impact of lower licensing revenues primarily due to market transitions.]

Diluted earnings per common share grew at a higher rate than Net income due to a [removed: 1%] [added: 3%] decrease in the weighted average diluted common shares outstanding, driven by our share repurchase program.

| (Dollars in millions, except per share data) | | Fiscal [removed: 2016] [added: 2017] | | | | Fiscal [removed: 2015] [added: 2016] | | | | % Change | | | Fiscal [removed: 2014] [added: 2015] | | | | % Change | |

| Revenues | | $ | [removed: 32,376] [added: 34,350] | | | $ | [removed: 30,601] [added: 32,376] | | | 6 | % | | $ | [removed: 27,799] [added: 30,601] | | | [removed: 10] [added: 6] | % |

| Cost of sales | | [removed: 17,405] [added: 19,038] | | | | [removed: 16,534] [added: 17,405] | | | | [removed: 5] [added: 9] | % | | [removed: 15,353] [added: 16,534] | | | | [removed: 8] [added: 5] | % |

| Gross profit | | [removed: 14,971] [added: 15,312] | | | | [removed: 14,067] [added: 14,971] | | | | [removed: 6] [added: 2] | % | | [removed: 12,446] [added: 14,067] | | | | [removed: 13] [added: 6] | % |

| Gross margin [removed: %] | | [removed: 46.2] [added: 44.6] | | % | | [removed: 46.0] [added: 46.2] | | % | | | | | [removed: 44.8] [added: 46.0] | | % | | | |

| Demand creation expense | | [removed: 3,278] [added: 3,341] | | | | [removed: 3,213] [added: 3,278] | | | | 2 | % | | [removed: 3,031] [added: 3,213] | | | | [removed: 6] [added: 2] | % |

| Operating overhead expense | | [removed: 7,191] [added: 7,222] | | | | [removed: 6,679] [added: 7,191] | | | | [removed: 8] [added: 0] | % | | [removed: 5,735] [added: 6,679] | | | | [removed: 16] [added: 8] | % |

| Total selling and administrative expense | | [removed: 10,469] [added: 10,563] | | | | [removed: 9,892] [added: 10,469] | | | | [removed: 6] [added: 1] | % | | [removed: 8,766] [added: 9,892] | | | | [removed: 13] [added: 6] | % |

| % of [removed: Revenues] [added: revenues] | | [removed: 32.3] [added: 30.8] | | % | | 32.3 | | % | | | | | [removed: 31.5] [added: 32.3] | | % | | | |

| Interest expense (income), net | | [removed: 19] [added: 59] | | | | [removed: 28] [added: 19] | | | | — | | | [removed: 33] [added: 28] | | | | — | |

| Other (income) expense, net | | [removed: (140] [added: (196] | | ) | | [removed: (58] [added: (140] | | ) | | — | | | [removed: 103] [added: (58] | | [added: )] | | — | |

| Income before income taxes | | [removed: 4,623] [added: 4,886] | | | | [removed: 4,205] [added: 4,623] | | | | [removed: 10] [added: 6] | % | | [removed: 3,544] [added: 4,205] | | | | [removed: 19] [added: 10] | % |

| Income tax expense | | [removed: 863] [added: 646] | | | | [removed: 932] [added: 863] | | | | [removed: \-7] [added: \-25] | % | | [removed: 851] [added: 932] | | | | [removed: 10] [added: \-7] | % |

| Effective tax rate | | [removed: 18.7] [added: 13.2] | | % | | [removed: 22.2] [added: 18.7] | | % | | | | | [removed: 24.0] [added: 22.2] | | % | | | |

| [removed: Net income] [added: NET INCOME] | | $ | [removed: 3,760] [added: 4,240] | | | $ | [removed: 3,273] [added: 3,760] | | | [removed: 15] [added: 13] | % | | $ | [removed: 2,693] [added: 3,273] | | | [removed: 22] [added: 15] | % |

| Diluted earnings per common share | | $ | [removed: 2.16] [added: 2.51] | | | $ | [removed: 1.85] [added: 2.16] | | | [removed: 17] [added: 16] | % | | $ | [removed: 1.49] [added: 1.85] | | | [removed: 24] [added: 17] | % |

| (Dollars in millions) | Fiscal [removed: 2016] [added: 2017] | | | Fiscal [removed: 2015(1)] [added: 2016(1)] | | | % Change | | % Change Excluding Currency Changes(2) | | Fiscal [removed: 2014(1)] [added: 2015(1)] | | | % Change | | % Change Excluding Currency Changes(2) | |

| Footwear | $ | [removed: 19,871] [added: 21,081] | | $ | [removed: 18,318] [added: 19,871] | | [removed: 8] [added: 6] | % | [removed: 15] [added: 8] | % | $ | [removed: 16,208] [added: 18,318] | | [removed: 13] [added: 8] | % | [removed: 17] [added: 15] | % |

| Apparel | [removed: 9,067] [added: 9,654] | | | [removed: 8,637] [added: 9,067] | | | [removed: 5] [added: 6] | % | [removed: 11] [added: 9] | % | [removed: 8,109] [added: 8,637] | | | [removed: 7] [added: 5] | % | [removed: 10] [added: 11] | % |

| Equipment | [removed: 1,496] [added: 1,425] | | | [removed: 1,631] [added: 1,496] | | | [removed: \-8] [added: \-5] | % | [removed: \-2] [added: \-3] | % | [removed: 1,670] [added: 1,631] | | | [removed: \-2] [added: \-8] | % | [removed: 1] [added: \-2] | % |

| Global Brand Divisions(3) | 73 | | | [removed: 115] [added: 73] | | | [removed: \-37] [added: 0] | % | [removed: \-30] [added: 2] | % | [removed: 125] [added: 115] | | | [removed: \-8] [added: \-37] | % | [removed: \-2] [added: \-30] | % |

| Total NIKE Brand Revenues | [removed: 30,507] [added: 32,233] | | | [removed: 28,701] [added: 30,507] | | | 6 | % | [removed: 13] [added: 8] | % | [removed: 26,112] [added: 28,701] | | | [removed: 10] [added: 6] | % | [removed: 14] [added: 13] | % |

| Converse | [removed: 1,955] [added: 2,042] | | | [removed: 1,982] [added: 1,955] | | | [removed: \-1] [added: 4] | % | [removed: 2] [added: 6] | % | [removed: 1,684] [added: 1,982] | | | [removed: 18] [added: \-1] | % | [removed: 21] [added: 2] | % |

| Corporate(4) | [removed: (86] [added: 75] | | [removed: )] | [removed: (82] [added: (86] | | ) | — | | — | | [removed: 3] [added: (82] | | [added: )] | — | | — | |

| TOTAL NIKE, INC. REVENUES | $ | [removed: 32,376] [added: 34,350] | | $ | [removed: 30,601] [added: 32,376] | | 6 | % | [removed: 12] [added: 8] | % | $ | [removed: 27,799] [added: 30,601] | | [removed: 10] [added: 6] | % | [removed: 14] [added: 12] | % |

| Sales to Wholesale Customers | $ | [removed: 22,577] [added: 23,078] | | $ | [removed: 21,952] [added: 22,577] | | [removed: 3] [added: 2] | % | [removed: 9] [added: 5] | % | $ | [removed: 20,683] [added: 21,952] | | [removed: 6] [added: 3] | % | [removed: 10] [added: 9] | % |

| Sales Direct to Consumer | [removed: 7,857] [added: 9,082] | | | [removed: 6,634] [added: 7,857] | | | [removed: 18] [added: 16] | % | [removed: 25] [added: 18] | % | [removed: 5,304] [added: 6,634] | | | [removed: 25] [added: 18] | % | [removed: 29] [added: 25] | % |

In June 2017, we announced the Consumer Direct Offense, a new company alignment designed to allow NIKE to better serve the consumer personally, at scale.

Leveraging the power of digital, NIKE will drive growth — by accelerating innovation and product creation, moving even closer to the consumer through key cities, and deepening one-to-one connections.

The increase in revenues was driven by growth across all NIKE Brand geographies and Converse, footwear and apparel, and several key categories.

NIKE, Inc. gross margin decreased 160 basis points primarily due to higher product costs and foreign currency exchange rate headwinds, which more than offset higher full-price average selling price (ASP).

At current rates, we anticipate foreign currency exchange rate headwinds will continue to negatively impact gross margin and Net income in fiscal 2018.

For fiscal 2017, the growth in Net income was positively affected by a year-over-year decrease in our effective tax rate of 550 basis points primarily due to a one-time benefit in the first quarter of the fiscal year related to the resolution with the U.S. Internal Revenue Service (IRS) of a foreign tax credit matter and a decrease in foreign earnings taxed in the United States.

Use of Non-GAAP Financial Measures

Throughout this Annual Report on Form 10-K, we discuss non-GAAP financial measures, including references to wholesale equivalent revenues and currency-neutral revenues, which should be considered in addition to, and not in lieu of, the financial measures calculated and presented in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”).

References to wholesale equivalent revenues are intended to provide context as to the total size of our NIKE Brand market footprint if we had no Direct to Consumer operations.

NIKE Brand wholesale equivalent revenues consist of (1) sales to external wholesale customers and (2) internal sales from our wholesale operations to our Direct to Consumer operations, which are charged at prices that are comparable to prices charged to external wholesale customers.

Additionally, currency-neutral revenues are calculated using actual exchange rates in use during the comparative prior year period to enhance the visibility of the underlying business trends excluding the impact of translation arising from foreign currency exchange rate fluctuations.

Management uses these non-GAAP financial measures when evaluating the Company’s performance, including when making financial and operating decisions.

Additionally, management believes these non-GAAP financial measures provide investors with additional financial information that should be considered when assessing our underlying business performance and trends.

However, references to wholesale equivalent revenues and currency-neutral revenues should not be considered in isolation or as a substitute for other financial measures calculated and presented in accordance with U.S. GAAP and may not be comparable to similarly titled non-GAAP measures used by other companies.

| Sales to Wholesale Customers | $ | 23,078 | | $ | 22,577 | | 2 | % | 5 | % | $ | 21,952 | | 3 | % | 9 | % |

| TOTAL NIKE BRAND WHOLESALE EQUIVALENT REVENUES | $ | 28,694 | | $ | 27,249 | | 5 | % | 8 | % | $ | 25,833 | | 5 | % | 12 | % |

| Action Sports | 596 | | | 655 | | | \-9 | % | \-7 | % | 667 | | | \-2 | % | 3 | % |

| Others(7) | 3,394 | | | 3,129 | | | 8 | % | 11 | % | 3,140 | | | 0 | % | 6 | % |

| TOTAL NIKE BRAND WHOLESALE EQUIVALENT REVENUES | $ | 28,694 | | $ | 27,249 | | 5 | % | 8 | % | $ | 25,833 | | 5 | % | 12 | % |

Fiscal 2017 Compared to Fiscal 2016

Footwear unit sales for fiscal 2017 increased 7%, with higher ASP per pair contributing approximately 1 percentage point of footwear revenue growth, primarily driven by higher full-price and off-price ASPs, partially offset by the impact of higher off-price sales.

On a reported basis, digital commerce sales through NIKE-owned websites and mobile applications, which are not included in comparable store sales, were $2.2 billion for fiscal 2017 compared to $1.7 billion for fiscal 2016 and represented approximately 24% of our total NIKE Brand DTC revenues for fiscal 2017 compared to 22% for fiscal 2016.

Every NIKE Brand geography grew revenues for fiscal 2016.

| | | | | | | |

| --- | --- | --- | --- | --- | --- | --- |

| | | | | | | |

| Japan | | \-7 | % | | 3 | % |

Fiscal 2017 Compared to Fiscal 2016

| • | Higher NIKE Brand full-price ASP, net of discounts, (increasing gross margin approximately 70 basis points) aligned with our strategy to deliver innovative, premium products to the consumer; |

| • | Lower NIKE Brand DTC margins (decreasing gross margin approximately 20 basis points) reflecting the impact of higher off-price sales. |

| Operating overhead expense | | 7,222 | | | | 7,191 | | | | 0 | % | | 6,679 | | | | 8 | % |

Fiscal 2017 Compared to Fiscal 2016

These increases were partially offset by lower retail brand presentation costs.

Operating overhead expense was flat compared to fiscal 2016 as continued investments in our growing DTC business were offset by administrative cost efficiencies and lower variable compensation.

Fiscal 2017 Compared to Fiscal 2016

Fiscal 2017 Compared to Fiscal 2016

| Global Brand Divisions(2) | | 73 | | | | 73 | | | | 0 | % | | 2 | % | | 115 | | | | \-37 | % | | \-30 | % |

| (1) | Results have been restated using actual exchange rates in use during the comparative prior year period to enhance the visibility of the underlying business trends excluding the impact of translation arising from foreign currency exchange rate fluctuations, which is considered a non-GAAP financial measure. |

| (Dollars in millions) | | Fiscal 2017 | | | | Fiscal 2016 | | | | % Change | | | Fiscal 2015 | | | | % Change | |

| Interest expense (income), net | | 59 | | | | 19 | | | | — | | | 28 | | | | — | |

| | |

| --- | --- |

The increase in revenues was attributable to growth for nearly every NIKE Brand geography and across most key categories and product types.

Gross margin increased primarily due to higher full-price average selling price and the favorable impact of growth in our higher-margin DTC businesses, partially offset by higher product costs, primarily due to shifts in mix to higher-cost products and labor input cost inflation, higher off-price mix and unfavorable changes in foreign currency exchange rates.

For fiscal 2016, the growth in Net income was positively affected by a year-over-year decrease in our effective tax rate of 350 basis points primarily due to an increase in the proportion of earnings from operations outside the United States, which are generally subject to a lower tax rate.

| Action Sports | 711 | | | 737 | | | \-4 | % | 3 | % | 738 | | | 0 | % | 4 | % |

| Others(7) | 3,073 | | | 3,070 | | | 0 | % | 6 | % | 2,731 | | | 12 | % | 17 | % |

Fiscal 2015 Compared to Fiscal 2014

Every NIKE Brand geography delivered higher revenues for fiscal 2015 as our category offense continued to deliver innovative products, deep brand connections and compelling retail experiences to consumers.

The constant-currency increase in NIKE Brand apparel revenues for fiscal 2015 was driven by growth in most key categories, led by Sportswear, Running and Women's Training, which were partially offset by a decline in Football (Soccer) due largely to the comparison to significant sales of replica apparel in advance of the World Cup in 2014.

Online sales represented approximately 18% of our total NIKE Brand DTC revenues for fiscal 2015 compared to 15% for fiscal 2014.

Women’s revenues accelerated in fiscal 2015, achieving 20% growth primarily due to increases in Sportswear, Running and Women's Training categories.

Excluding the impact of currency changes, futures orders increased 11%, with unit orders increasing 4% and average selling price per unit contributing approximately 7 percentage points of growth.

| | | | | |

| --- | --- | --- | --- | --- |

| Japan | | 24% | | 15% |

| • | Higher NIKE Brand full-price ASP (increasing gross margin approximately 250 basis points) primarily attributable to shifts in mix to higher-priced products and, to a lesser extent, price increases in response to inflationary conditions in certain territories; |

| • | Growth in our higher-margin DTC business (increasing gross margin approximately 40 basis points); and |

Operating overhead expense increased 16% compared to the prior year, primarily driven by investments in our rapidly growing DTC business, including new store openings and higher variable expenses, investments in operational infrastructure and consumer-focused digital capabilities and higher performance-based compensation.

Other (income) expense, net shifted from $103 million of other expense, net for fiscal 2014 to $58 million of other income, net for fiscal 2015, primarily driven by a $147 million net change in foreign currency conversion gains and losses, primarily due to significant hedge gains from available-for-sale investments, as well as an adverse legal judgment in the prior year related to a long outstanding bankruptcy case for a former customer in Western Europe.

North America revenues increased 12%, despite congestion at ports on the West Coast of the United States in the second half of the fiscal year, which affected the Company's supply chain and flow of product to customers.

Apparel revenue growth was attributable to strong demand in most key categories, led by Sportswear, Men's Training, Women's Training and Running, partially offset by slight declines in Football (Soccer) and Action Sports.

For fiscal 2015, unit sales of apparel increased 9%.

Gross margin increased 110 basis points due to higher full-price ASP, improved off-price product margins and lower inventory obsolescence costs, partially offset by higher product input and logistics costs.

Operating overhead costs also increased to support DTC growth and investments in infrastructure, as well as higher performance-based compensation costs.

Excluding the changes in currency exchange rates, revenues for fiscal 2015 increased 21% and grew in every territory, led by AGS and the UK & Ireland, our largest territories in Western Europe, which grew 27% and 20%, respectively.

Unit sales of apparel in fiscal 2015 increased 14% while ASP per unit was flat.

Despite the negative translation impact from changes in foreign currency exchange rates, most notably the Euro, reported EBIT grew 49% for fiscal 2015 as a result of strong revenue growth, gross margin expansion and selling and administrative expense leverage.

Selling and administrative expense decreased as a percent of revenues despite increases in operating overhead, primarily as a result of higher costs to support our growing DTC business.

Demand creation increased largely as a result of higher sports marketing and digital demand creation costs.

Excluding changes in currency exchange rates, Central & Eastern Europe revenues for fiscal 2015 grew 15%, attributable to increases in most territories.

Turkey grew 23% and our distributors business grew 18%, while revenues declined in Israel, our smallest territory.

Fiscal 2015 unit sales of footwear increased 11%.

The constant currency growth in apparel revenue in fiscal 2015 resulted from growth in most key categories, led by Sportswear and Running, partially offset by a decline in Football (Soccer) due to comparison to strong sales related to the World Cup in fiscal 2014.

Unit sales of apparel increased 1% for fiscal 2015.

Selling and administrative expense decreased as a percent of revenue despite increases in both demand creation and operating overhead.

Operating overhead increased primarily as a result of investments in our growing DTC business, while demand creation increased as a result of higher sports marketing costs.

Unit sales of footwear increased 20% for fiscal 2015.

Higher ASP per pair contributed approximately 8 percentage points of footwear revenue growth, primarily due to an increase in the proportion of revenues from our higher-priced DTC business.

Constant currency apparel revenue growth in fiscal 2015 was driven by increases in the Sportswear, Running, Jordan Brand and NIKE Basketball categories, partially offset by decreases in other categories, primarily Football (Soccer) and Men’s Training.

We use forward and option contracts to hedge certain [removed: anticipated] [added: anticipated,] but not yet firmly [removed: committed] [added: committed,] transactions as well as certain firm commitments and the related receivables and payables, including third-party and intercompany transactions.

The majority of derivatives outstanding as of May 31, [removed: 2016] [added: 2017] are designated as foreign currency cash flow hedges, primarily for Euro/U.S. Dollar, British Pound/Euro and Japanese Yen/U.S. Dollar currency pairs.

To achieve these objectives, we maintain a mix of commercial paper, bank loans, [added: and] fixed-rate debt of varying [removed: maturities and have entered into receive-fixed, pay-variable interest rate swaps for a portion of our fixed-rate debt, as well as pay-fixed, receive-variable forward-starting interest rate swaps for cash outflows of interest payments on future debt.][added: maturities.]

The estimated maximum one-day loss in fair value on our foreign currency sensitive derivative financial instruments, derived using the VaR model, was [removed: $109] [added: $97] million and [removed: $117] [added: $109] million at May 31, [removed: 2016] [added: 2017] and [removed: 2015,] [added: 2016,] respectively.

The [removed: VaR] [added: VAR] decreased year-over-year as a result of a decrease in [removed: the total notional value of our] foreign currency [removed: derivative portfolio] [added: volatilities] at May 31, [removed: 2016.][added: 2017.]

The average monthly change in the fair values of foreign currency forward and foreign currency option derivative instruments was [removed: $209] [added: $161] million and [removed: $205] [added: $209] million during fiscal [removed: 2016] [added: 2017] and fiscal [removed: 2015,] [added: 2016,] respectively.

Details of third-party debt [removed: and interest rate swaps] are provided in the table below.

| (Dollars in millions) | | [removed: 2017 | | | |] 2018 | | | | 2019 | | | | 2020 | | | | 2021 | | | | [added: 2022 | | | |] Thereafter | | | | Total | | | | Fair Value | | |

| Principal payments | | $ | 6 | | | $ | 6 | | | $ | 6 | | | $ | [removed: 6] [added: 3] | | | $ | [removed: 3] [added: —] | | | $ | — | | | $ | [removed: 27] [added: 21] | | | $ | [removed: 28] [added: 22] | |

| Average interest rate | | 2.4 | | % | | 2.4 | | % | | 2.4 | | % | | 2.4 | | % | | [removed: 2.4] [added: 0.0] | | % | | 0.0 | | % | | 2.4 | | % | | | | |

| Principal payments | | $ | [removed: 38] [added: 6] | | | $ | [removed: —] [added: 6] | | | $ | [removed: —] [added: 6] | | | $ | [removed: —] [added: 3] | | | $ | — | | | $ | [removed: 2,000] [added: —] | | | $ | [removed: 2,038] [added: 21] | | | $ | [removed: 2,097] [added: 22] | |

| Average interest rate | | [removed: 6.2] [added: 2.4] | | % | | [removed: 0.0] [added: 2.4] | | % | | [removed: 0.0] [added: 2.4] | | % | | [removed: 0.0] [added: 2.4] | | % | | 0.0 | | % | | [removed: 3.4] [added: 0.0] | | % | | [removed: 3.5] [added: 2.4] | | % | | | | |

Refer to Note 16 — Risk Management and Derivatives in the accompanying Notes to the Consolidated Financial Statements for additional detail.

| Principal payments | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | 3,500 | | | $ | 3,500 | | | $ | 3,379 | |

| Average interest rate | | 0.0 | | % | | 0.0 | | % | | 0.0 | | % | | 0.0 | | % | | 0.0 | | % | | 3.1 | | % | | 3.1 | | % | | | | |

See section “Foreign Currency Exposures and Hedging Practices” under Item 7 for additional detail.

During the year ended May 31, 2016, we entered into a series of forward-starting interest rate swap agreements.

A forward-starting interest rate swap is an agreement that effectively hedges the variability in future benchmark interest payments attributable to changes in interest rates on the forecasted issuance of fixed-rate debt.

We entered into these forward-starting interest rate swaps in order to lock in fixed interest rates on our forecasted issuance of debt.

These instruments were designated as cash flow hedges of the variability in the expected cash outflows of interest payments on future debt due to changes in benchmark interest rates.

| Anticipated long-term U.S. Dollar debt issuance - Floating rate swapped to fixed rate | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |

| Notional(1) | | $ | 1,500 | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | 1,500 | | | $ | 38 | |

| Weighted-average fixed rate | | 2.2 | | % | | 0.0 | | % | | 0.0 | | % | | 0.0 | | % | | 0.0 | | % | | 0.0 | | % | | 2.2 | | % | | | | |

| Weighted-average floating rate | | 0.7 | | % | | 0.0 | | % | | 0.0 | | % | | 0.0 | | % | | 0.0 | | % | | 0.0 | | % | | 0.7 | | % | | | | |

(1) Forward-starting interest rate swaps have been included in the maturities category based on when the related forecasted debt issuance and corresponding swap terminations are expected to occur.

Our NIKE [removed: e-commerce] [added: digital commerce] website is located at www.nike.com.

On our NIKE corporate website, located at [removed: news.nike.com,] [added: investors.nike.com,] we post the following filings as soon as reasonably practicable after they are electronically filed [removed: with] [added: with,] or furnished [removed: to] [added: to,] the United States Securities and Exchange Commission (the “SEC”): our annual report on Form 10-K, our quarterly reports on Form 10-Q, our current reports on Form 8-K and any amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities and Exchange Act of 1934, as amended.

Copies of these filings may also be obtained by visiting the Public Reference Room of the SEC at 100 F Street, NE, Washington, D.C. 20549, or by calling the SEC at [removed: 1-800-SEC-0330.][added: 1-800-SEC-0330 and are available on the SEC's website (www.sec.gov).]

We sell our products to retail accounts, through NIKE-owned retail [removed: stores and] [added: stores,] internet [removed: websites] [added: websites, and mobile applications] (which we refer to collectively as our “Direct to Consumer” or “DTC” operations), and through a mix of independent distributors and licensees throughout the world.

We place considerable emphasis on innovation and high-quality construction in [added: the development and manufacturing of] our products.

Sportswear, [removed: Running,] [added: Running and] the Jordan Brand [removed: and Football (Soccer)] are currently our top-selling footwear categories and we expect them to continue to lead in footwear sales.

Sportswear, [removed: Men's Training, Running, Football (Soccer) and Women's] [added: Men’s] Training [added: and Running] are currently our top-selling apparel [removed: categories,] [added: categories] and we expect them to continue to lead in apparel sales.

We sell a line of performance equipment and accessories under the NIKE Brand name, including bags, socks, sport balls, eyewear, timepieces, digital devices, bats, gloves, protective [removed: equipment, golf clubs] [added: equipment] and other equipment designed for sports activities.

We also sell small amounts of various plastic products to other manufacturers through our wholly-owned subsidiary, NIKE IHM, [removed: Inc.][added: Inc., doing business as Air Manufacturing Innovation.]

Sales and operating results for [removed: the] Jordan Brand [added: products] are reported [removed: as a separate category and] within the [added: respective] NIKE Brand geographic operating [removed: segments, respectively.][added: segments.]

Sales and operating results for Hurley [added: products] are included within the NIKE [removed: Brand Action Sports category and within the NIKE] Brand's North America geographic operating [removed: segment, respectively.][added: segment with sales reported within the Action Sports category.]

[removed: Our] [added: For fiscal 2017, our] reportable operating segments for the NIKE Brand are: North America, Western Europe, Central & Eastern Europe, Greater China, Japan and Emerging Markets.

Our NIKE Brand Direct to Consumer operations [removed: are] [added: are, and will continue to be,] managed within each geographic operating segment.

Converse [removed: is also] [added: is, and will continue to be,] a reportable segment and operates in one industry: the design, marketing, licensing and selling of casual sneakers, apparel and accessories.

Converse Direct to Consumer operations, including [removed: e-commerce,] [added: digital commerce,] are reported within the Converse operating segment results.

For fiscal [removed: 2016,] [added: 2017,] NIKE Brand and Converse sales in the United States accounted for approximately [removed: 47%] [added: 46%] of total revenues, compared to [added: 47% and] 46% for [removed: both] fiscal [removed: 2015] [added: 2016] and fiscal [removed: 2014.][added: 2015, respectively.]

In the United States, we utilize NIKE sales offices to solicit [removed: sales as well as independent sales representatives to sell specialty products for golf and skateboarding.][added: such sales.]

During fiscal [removed: 2016,] [added: 2017,] our three largest customers accounted for approximately [removed: 25%] [added: 23%] of sales in the United States.

We [removed: make substantial use of our] [added: also operate a] futures ordering program, which allows retailers to order five to six months in advance of delivery with the commitment that their orders will be delivered within a set time period at a fixed price.

[removed: In] [added: For] fiscal [removed: 2016, 84%] [added: 2017, orders under the futures program represented 83%] of our U.S. wholesale footwear [removed: shipments were made under the futures program,] [added: revenues,] compared to [removed: 87% in] [added: 84% for] fiscal [removed: 2015] [added: 2016] and [removed: 86% in] [added: 87% for] fiscal [removed: 2014.][added: 2015.]

[removed: In] [added: For] fiscal [removed: 2016,] [added: 2017, futures orders represented] 66% of our U.S. wholesale apparel [removed: shipments were made under the futures program,] [added: revenues,] compared to [removed: 67% in] [added: 66% for] fiscal [removed: 2015] [added: 2016] and [removed: 71% in] [added: 67% for] fiscal [removed: 2014.][added: 2015.]

Our Direct to Consumer operations sell NIKE Brand, Jordan Brand, Hurley and Converse products to consumers through our [removed: e-commerce] [added: digital commerce] website, [removed: www.nike.com.][added: www.nike.com and through mobile applications.]

| NIKE Brand factory stores | [removed: 196] [added: 209] | |

| NIKE Brand in-line [removed: stores, including employee-only] stores [added: (including employee-only stores)] | 34 | |

| Converse stores (including factory stores) | [removed: 103] [added: 45] | |

In the United States, NIKE has [removed: five] [added: six] significant distribution centers located in Memphis, Tennessee, two of which are owned and [removed: three] [added: four of which] are leased.

Converse and Hurley products are shipped primarily from leased facilities in Ontario, [removed: California.][added: California, as well as from Memphis, Tennessee.]

For fiscal [removed: 2016,] [added: 2017,] non-U.S. NIKE Brand and Converse sales accounted for [removed: 53%] [added: 54%] of total revenues, compared to [added: 53% and] 54% for [removed: both] fiscal [removed: 2015] [added: 2016] and fiscal [removed: 2014.][added: 2015, respectively.]

We sell to thousands of retail accounts and ship products from [removed: 42] [added: 60] distribution centers outside of the United States.

In many countries and regions, including Canada, Asia, [added: Europe and] some Latin American [removed: countries and Europe,] [added: countries,] we have a futures ordering program for retailers similar to the United States futures ordering program described above.

During fiscal [removed: 2016,] [added: 2017,] NIKE’s three largest customers outside of the United States accounted for approximately [removed: 13%] [added: 12%] of total non-U.S. sales.

In addition to NIKE and Converse owned [removed: e-commerce] [added: digital commerce] websites in over [removed: 40] [added: 45] countries, our Direct to Consumer business operates the following number of retail stores outside the United States:

| NIKE Brand factory stores | [removed: 588] [added: 642] | |

| NIKE Brand in-line [removed: stores, including employee-only] stores [added: (including employee-only stores)] | [removed: 72] [added: 71] | |

| Converse stores (including factory stores) | [removed: 23] [added: 112] | |

International branch offices and subsidiaries of NIKE are located in Argentina, Australia, Austria, Belgium, Bermuda, Brazil, Canada, Chile, China, Croatia, the Czech Republic, Denmark, Finland, France, Germany, Greece, Hong Kong, Hungary, India, Indonesia, Ireland, Israel, Italy, Japan, [removed: Jordan,] Korea, [added: Macau,] Malaysia, Mexico, [removed: New Zealand,] the Netherlands, [added: New Zealand,] Norway, Panama, the Philippines, Poland, Portugal, Russia, Singapore, Slovakia, Slovenia, South Africa, Spain, Sri Lanka, Sweden, Switzerland, Taiwan, Thailand, Turkey, the United Arab Emirates, the United Kingdom, Uruguay and Vietnam.

No customer accounted for 10% or more of our worldwide net revenues during fiscal [removed: 2016.][added: 2017.]

[removed: Worldwide futures] [added: Futures] orders for NIKE Brand [removed: athletic] footwear and [removed: apparel,] [added: apparel] scheduled for delivery from June through November [removed: 2016,] [added: 2017] were [removed: $14.9] [added: $14.7] billion compared [removed: with $13.8] [added: to $15.0] billion for the same period last year.

NIKE Brand [removed: reported] futures [added: orders] include (1) orders from external wholesale customers and (2) internal orders from our DTC in-line stores and [removed: e-commerce] [added: digital commerce] operations which are reflected at prices that are comparable to prices charged to external wholesale customers.

Reported futures orders are not necessarily indicative of our expectation of revenues for this [removed: period.][added: period and have become less correlated due to our evolving business model.]

In June 2017, we announced a new company alignment designed to allow NIKE to better serve the consumer personally, at scale.

As a result of this organizational realignment, beginning in fiscal 2018, the Company's reportable operating segments for the NIKE Brand will be: North America; Europe, Middle East and Africa; Greater China; and Asia Pacific and Latin America.

| TOTAL | 384 | |

| TOTAL | 758 | |

Current U.S. policy proposals, including potential tariffs or penalties on imported goods, if enacted, may negatively affect U.S. corporations with production activities outside the U.S., including NIKE.

There have also been discussions and commentary regarding potential changes to U.S. trade policies.

If any of these reforms are implemented, it may become necessary for us to change the way we conduct business which may adversely affect our results of operations.

We believe that our intellectual property rights are important to our brand, our success, and our competitive position.

We pursue available protections of these rights and vigorously protect them against third-party theft and infringement.

In some instances, we also obtain registered copyrights.

These patents expire at various times.

As recently announced by the Company, Mr. Ayre will retire at the end of the calendar year.

Succeeding Mr. Ayre as Executive Vice President, Global Human Resources, will be Monique Matheson.

Ms. Matheson, 50, has been employed by NIKE since 1998, with primary responsibilities in the human resources function and most recently serving as Vice President, Chief Talent and Diversity Officer.

In addition, the SEC maintains a website (www.sec.gov) that contains current, quarterly and annual reports, proxy and information statements and other information regarding issuers that file electronically.

| TOTAL | 362 | |

| TOTAL | 683 | |

The Trans-Pacific Partnership (TPP), if ultimately ratified, has the potential to reduce or eliminate high rates of customs duties for imports into the United States of NIKE products sourced from TPP countries (primarily footwear and apparel from Vietnam and apparel from Malaysia).

Similarly, the European Union has concluded a free trade agreement with Vietnam that, if approved, could lead to duty reduction or elimination for footwear and apparel.

When appropriate, we have sought registrations for this content.

These patents expire at various times; patents issued for original applications filed this calendar year in the United States may last until 2031 for design patents and until 2036 for utility patents.

Jeanne P.

Jackson, President & Strategic Advisor — Ms. Jackson, 64, joined NIKE in 2009.

She was appointed President & Strategic Advisor in June 2016.

She was appointed President, Product and Merchandising in 2013 and President, Direct to Consumer in 2009.

Ms. Jackson also served as a member of the NIKE, Inc. Board of Directors from 2001 through 2009.

She founded and served as Chief Executive Officer of MSP Capital, a private investment company, from 2002 to 2009.

Ms. Jackson was Chief Executive Officer of Walmart.com from March 2000 to January 2002.

She was with Gap, Inc., as President and Chief Executive Officer of Banana Republic from 1995 to 2000, also serving as Chief Executive Officer of Gap, Inc. Direct from 1998 to 2000.

Since 1978, she has held various retail management positions with Victoria’s Secret, The Walt Disney Company, Saks Fifth Avenue and Federated Department Stores.

Michael Spillane, President, Product and Merchandising — Mr. Spillane, 56, joined NIKE in 2007.

He was appointed President, Product and Merchandising in 2016.

He has served the Company in various roles including Vice President and General Manager of Greater China, Chief Executive Officer of Umbro and Converse and most recently as Vice President and General Manager of Footwear.

Prior to joining NIKE, Mr. Spillane held leadership roles at Polartec, Maiden Mills Industries, Inc. and Tommy Hilfiger Licensing, LLC.

FOR THE FISCAL YEAR ENDED May 31, [removed: 2016][added: 2017]

[removed: ][added: ]

| Indicate by check mark: | | | | [added: |] YES | NO |

| • | if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. | | | [removed: þ] | ¨ | [added: þ |]

| • | if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. | | | [added: |] ¨ | þ |

| • | whether the [removed: Registrant] [added: registrant] (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the [removed: Registrant] [added: registrant] was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. | | | [added: |] þ | ¨ |

| • | whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). | | | [added: |] þ | ¨ |

| • | if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of [removed: Registrant’s] [added: registrant’s] knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. | | | [added: |] þ | |

| • | whether the [removed: Registrant] [added: registrant] is a large accelerated filer, an accelerated filer, a non-accelerated filer, [removed: or a] smaller reporting [added: company or an emerging growth] company. See the definitions of “large accelerated filer,” “accelerated [removed: filer” and] [added: filer,”] “smaller reporting company” [added: and “emerging growth company”] in Rule 12b-2 of the Exchange Act. | | | | | [added: |]

| | Large accelerated filer þ | Accelerated filer ¨ | Non-accelerated filer ¨ | Smaller reporting company ¨ | [added: Emerging growth company ¨] | [added: |]

| • | whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). | | | [added: |] ¨ | þ |

| As of November 30, [removed: 2015,] [added: 2016,] the aggregate market values of the Registrant’s Common Stock held by non-affiliates were: | | | | |

| As of July [removed: 15, 2016,] [added: 17, 2017,] the number of shares of the Registrant’s Common Stock outstanding were: | | | |

| | Class A | [removed: 329,251,752] [added: 329,245,752] | |

Parts of Registrant’s Proxy Statement for the Annual Meeting of Shareholders to be held on September [removed: 22, 2016] [added: 21, 2017] are incorporated by reference into Part III of this Report.

| ITEM 1. | [removed: [Business](#sF8BBC118A5EA25FD1E0881E261026907)] [added: [Business](#s3C61437FE0FD7FBEF52DB1AD7B9CD7B2)] | [removed: [1](#sF8BBC118A5EA25FD1E0881E261026907)] [added: [1](#s3C61437FE0FD7FBEF52DB1AD7B9CD7B2)] |

| | [Sales and [removed: Marketing](#s4FB3ADCCDC5C0116B1C681E26179556B)] [added: Marketing](#s17CB28ABE4C15F9316C9B1AD7C117189)] | [removed: [2](#s4FB3ADCCDC5C0116B1C681E26179556B)] [added: [2](#s17CB28ABE4C15F9316C9B1AD7C117189)] |

| | [United States [removed: Market](#sB7B8278B5350FF7442BD81E25E42D3FC)] [added: Market](#sEF6C4D196A035BEED31CB1AD649421CE)] | [removed: [2](#sB7B8278B5350FF7442BD81E25E42D3FC)] [added: [2](#sEF6C4D196A035BEED31CB1AD649421CE)] |

| | [International [removed: Markets](#s337AF9B02624D71E94A781E25B85A0FD)] [added: Markets](#s9FDA2412CC185772466DB1AD6C594725)] | [removed: [2](#s337AF9B02624D71E94A781E25B85A0FD)] [added: [2](#s9FDA2412CC185772466DB1AD6C594725)] |

| | [Significant [removed: Customer](#s9038862E8A63288E3DA981E261FDEA84)] [added: Customer](#s65A04A39C100BA96DEEFB1AD7C7D6348)] | [removed: [3](#s9038862E8A63288E3DA981E261FDEA84)] [added: [3](#s65A04A39C100BA96DEEFB1AD7C7D6348)] |

| | [Product Research, Design and [removed: Development](#s4B00D68F4C7D77315A0081E26252218A)] [added: Development](#sF38A172B39E9633E1B11B1AD7CD1BF7D)] | [removed: [3](#s4B00D68F4C7D77315A0081E26252218A)] [added: [3](#sF38A172B39E9633E1B11B1AD7CD1BF7D)] |

| | [International Operations and [removed: Trade](#s8265BEE110620831E3A681E262A5E49E)] [added: Trade](#sD3DB29C0348EE6FB5EA8B1AD7D3D2F65)] | [removed: [4](#s8265BEE110620831E3A681E262A5E49E)] [added: [4](#sD3DB29C0348EE6FB5EA8B1AD7D3D2F65)] |

| | [Trademarks and [removed: Patents](#s6D69768EAE77B9AF90B081E262F7ECF5)] [added: Patents](#sEBEFAC1A48550A995BB9B1AD7D91A868)] | [removed: [4](#s6D69768EAE77B9AF90B081E262F7ECF5)] [added: [5](#sEBEFAC1A48550A995BB9B1AD7D91A868)] |

| | [Executive Officers of the [removed: Registrant](#s7820C5D990160C1C367381E26349C6F4)] [added: Registrant](#s716216076306CB7ECB9CB1AD7DE41D50)] | [removed: [5](#s7820C5D990160C1C367381E26349C6F4)] [added: [5](#s716216076306CB7ECB9CB1AD7DE41D50)] |

| ITEM 1A. | [Risk [removed: Factors](#s89CD7B5EFC2C9D84679181E2636B79C2)] [added: Factors](#s63E70C90DD8A0D42FBB8B1AD7DEC8A6D)] | [removed: [7](#s89CD7B5EFC2C9D84679181E2636B79C2)] [added: [7](#s63E70C90DD8A0D42FBB8B1AD7DEC8A6D)] |

| ITEM 1B. | [Unresolved Staff [removed: Comments](#s41DA5CA95A47C5D72F3581E2639E62B9)] [added: Comments](#s8B8B074E5ED16FADA5C5B1AD7E1E63D4)] | [removed: [16](#s41DA5CA95A47C5D72F3581E2639E62B9)] [added: [16](#s8B8B074E5ED16FADA5C5B1AD7E1E63D4)] |

| ITEM 2. | [removed: [Properties](#sDE965DE04C0B7EAD06E781E263BE08CE)] [added: [Properties](#s22A05DEC9AED305E2E08B1AD7E40A13E)] | [removed: [16](#sDE965DE04C0B7EAD06E781E263BE08CE)] [added: [16](#s22A05DEC9AED305E2E08B1AD7E40A13E)] |

| ITEM 3. | [Legal [removed: Proceedings](#s5455F3977A916BE00C1181E263F182CC)] [added: Proceedings](#sC13503F50D6A3DE97338B1AD7E852381)] | [removed: [16](#s5455F3977A916BE00C1181E263F182CC)] [added: [16](#sC13503F50D6A3DE97338B1AD7E852381)] |

| ITEM 4. | [Mine Safety [removed: Disclosures](#s3AE2079BE0780F3CD18A81E264143220)] [added: Disclosures](#s238ECF529276DAF6DB05B1AD7E93632B)] | [removed: [16](#s3AE2079BE0780F3CD18A81E264143220)] [added: [16](#s238ECF529276DAF6DB05B1AD7E93632B)] |

| ITEM 5. | [Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity [removed: Securities](#s07540CFCA0F7DBBACE6281E26465CDEE)] [added: Securities](#sE9AD93F5ABC20A473BD3B1AD7EE6348E)] | [removed: [17](#s07540CFCA0F7DBBACE6281E26465CDEE)] [added: [17](#sE9AD93F5ABC20A473BD3B1AD7EE6348E)] |

| ITEM 6. | [Selected Financial [removed: Data](#sE48F07CC7C2BFE7259EB81E26498D460)] [added: Data](#s9C2CAACDC86638B1B554B1AD7F18D169)] | [removed: [19](#sE48F07CC7C2BFE7259EB81E26498D460)] [added: [19](#s9C2CAACDC86638B1B554B1AD7F18D169)] |

| ITEM 7. | [Management’s Discussion and Analysis of Financial Condition and Results of [removed: Operations](#s0B90C4E6C5AB20CD7E2B81E264CFA8A5)] [added: Operations](#s7F6CCA86FDCDD0EA2563B1AD7F617A11)] | [removed: [21](#s0B90C4E6C5AB20CD7E2B81E264CFA8A5)] [added: [21](#s7F6CCA86FDCDD0EA2563B1AD7F617A11)] |

| ITEM 7A. | [Quantitative and Qualitative Disclosures about Market [removed: Risk](#s5D158C4255BF9E182AC981E26637609F)] [added: Risk](#s79A0EFF04F9F6E548CE1B1AD8160893B)] | [removed: [44](#s5D158C4255BF9E182AC981E26637609F)] [added: [42](#s79A0EFF04F9F6E548CE1B1AD8160893B)] |

| ITEM 8. | [Financial Statements and Supplementary [removed: Data](#sB6BB68D050729FBFC53481E2665B0CB7)] [added: Data](#s6108B95C44B70D82F2F7B1AD8193668A)] | [removed: [45](#sB6BB68D050729FBFC53481E2665B0CB7)] [added: [43](#s6108B95C44B70D82F2F7B1AD8193668A)] |

| ITEM 9. | [Changes in and Disagreements with Accountants on Accounting and Financial [removed: Disclosure](#s391FB123CF4745AF90A681E26CBAA96C)] [added: Disclosure](#s0727A0D900FD8DF79AE3B1AD87FC1973)] | [removed: [76](#s391FB123CF4745AF90A681E26CBAA96C)] [added: [74](#s0727A0D900FD8DF79AE3B1AD87FC1973)] |

| ITEM 9A. | [Controls and [removed: Procedures](#s3A4D1AE816746951822C81E26CDD1C64)] [added: Procedures](#sBBE4DCA1BC06DEEA48B2B1AD8803AB80)] | [removed: [76](#s3A4D1AE816746951822C81E26CDD1C64)] [added: [74](#sBBE4DCA1BC06DEEA48B2B1AD8803AB80)] |

| ITEM 9B. | [Other [removed: Information](#s69D226915FFE5167154481E26D0F61C2)] [added: Information](#s03C9D75AE6244180C8EEB1AD8836BF9D)] | [removed: [76](#s69D226915FFE5167154481E26D0F61C2)] [added: [74](#s03C9D75AE6244180C8EEB1AD8836BF9D)] |

| [PART [removed: III](#s51048512A12DFBF81F2F81E26D31F2F5)] [added: III](#s79F302BB12007D317C39B1AD8855FC4B)] | | [removed: [77](#s51048512A12DFBF81F2F81E26D31F2F5)] [added: [75](#s79F302BB12007D317C39B1AD8855FC4B)] |

| | (Except for the information set forth under “Executive Officers of the Registrant” in Item 1 above, Part III is incorporated by reference from the Proxy Statement for the NIKE, Inc. [removed: 2016] [added: 2017] Annual Meeting of Shareholders.) | |

| ITEM 10. | [Directors, Executive Officers and Corporate [removed: Governance](#sC03B731460D302F90A1881E26D62DD88)] [added: Governance](#sDFEF6CC0FD20115C781BB1AD8888BF6A)] | [removed: [77](#sC03B731460D302F90A1881E26D62DD88)] [added: [75](#sDFEF6CC0FD20115C781BB1AD8888BF6A)] |

10-K 1 nke-5312017x10k.htm 10-K

| | | | | | | |

| --- | --- | --- | --- | --- | --- | --- |

| | | | | | | |

| • | if an emerging growth company, if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. | | | | ¨ | |

| | Class A | $ | 3,617,645,223 | |

| | Class B | 66,325,855,280 | | |

| | | $ | 69,943,500,503 | |

| | Class B | 1,313,949,313 | |

| | | 1,643,195,065 | |

| [PART I](#s5220763D59E6BB7716F4B1AD7B56706D) | | [1](#s5220763D59E6BB7716F4B1AD7B56706D) |

| | [General](#s868C9C4B0FADEA8D1380B1AD7BA84BDA) | [1](#s868C9C4B0FADEA8D1380B1AD7BA84BDA) |

| | [Products](#s0F28647A0E8708EDE85DB1AD7BD67714) | [1](#s0F28647A0E8708EDE85DB1AD7BD67714) |

| | [Orders](#s37EAF795D2BB32AE07A2B1AD7CB85474) | [3](#s37EAF795D2BB32AE07A2B1AD7CB85474) |

| | [Manufacturing](#sFD708B4BCE3C29979172B1AD7CF2FCE7) | [3](#sFD708B4BCE3C29979172B1AD7CF2FCE7) |

| | [Competition](#sD6988BF64D20D1AE079BB1AD7D46E76E) | [4](#sD6988BF64D20D1AE079BB1AD7D46E76E) |

| | [Employees](#s1A7E28BE71CECCD57CD0B1AD7D98F4AF) | [5](#s1A7E28BE71CECCD57CD0B1AD7D98F4AF) |

| [PART II](#s2EEA4C48D4437ED2B252B1AD7EDFE888) | | [17](#s2EEA4C48D4437ED2B252B1AD7EDFE888) |

| [PART IV](#s901BC7E0B01E55EC2DE6B1AD895001BD) | | [76](#s901BC7E0B01E55EC2DE6B1AD895001BD) |

| ITEM 16. | [Form 10-K Summary](#s98b30b2319a548cf84c747ca41e119e6) | [78](#s98b30b2319a548cf84c747ca41e119e6) |

| | [Signatures](#s0B4617AA40176ED52586B1AD89F78600) | [81](#s0B4617AA40176ED52586B1AD89F78600) |

10-K 1 nke-5312016x10k.htm 10-K

| | | | | | |

| --- | --- | --- | --- | --- | --- |

| | Class A | $ | 4,075,394,149 | |

| | Class B | 89,393,235,582 | | |

| | | $ | 93,468,629,731 | |

| | Class B | 1,348,366,883 | |

| | | 1,677,618,635 | |

| [PART I](#sF20AD2391B153AA7773E81E260D01FE6) | | [1](#sF20AD2391B153AA7773E81E260D01FE6) |

| | [General](#sE6E6975679DB4861305F81E26123D70D) | [1](#sE6E6975679DB4861305F81E26123D70D) |

| | [Products](#s99306D2662CD4726482681E261562117) | [1](#s99306D2662CD4726482681E261562117) |

| | [Orders](#sB80983F1FD15F9ACE43381E2621DDCDC) | [3](#sB80983F1FD15F9ACE43381E2621DDCDC) |

| | [Manufacturing](#s87192BD70D09240EAEF481E26271E25B) | [3](#s87192BD70D09240EAEF481E26271E25B) |

| | [Competition](#s05DE126C2BE427631BA981E262C5E90C) | [4](#s05DE126C2BE427631BA981E262C5E90C) |

| | [Employees](#s169C6C0930953640164781E263194973) | [5](#s169C6C0930953640164781E263194973) |

| [PART II](#s06A2EE3B56DF85A009F181E26444EBDD) | | [17](#s06A2EE3B56DF85A009F181E26444EBDD) |

| [PART IV](#sC5FDE6DBA964636E4C8181E26E2A32E6) | | [78](#sC5FDE6DBA964636E4C8181E26E2A32E6) |

| | [Signatures](#sE9105F440FDCF4A73A8D81E26ED0463D) | [82](#sE9105F440FDCF4A73A8D81E26ED0463D) |

The NIKE World Campus, owned by NIKE and located near Beaverton, Oregon, USA, is a 400-acre site consisting of over 40 buildings which, together with adjacent leased properties, functions as our world headquarters and is occupied by approximately [removed: 10,700] [added: 10,800] employees engaged in management, research, design, development, marketing, finance and other administrative functions serving nearly all of our divisions.

In the United States, NIKE has [removed: five] [added: six] significant distribution centers located in Memphis, Tennessee, two of which are owned and [removed: three] [added: four] are leased.

[removed: NIKE IHM, Inc.] [added: Air Manufacturing Innovation] manufactures Air-Sole cushioning components at NIKE-owned facilities [added: and one leased facility] located near Beaverton, Oregon and in St. Charles, Missouri.

We lease approximately [removed: 1,044] [added: 1,141] retail stores worldwide, which consist primarily of factory outlet stores.

Air Manufacturing Innovation also manufactures and sells small amounts of various other plastic products to other manufacturers.

We also manufacture and sell small amounts of various other plastic products to other manufacturers through NIKE IHM, Inc.

At July [removed: 15, 2016,] [added: 17, 2017,] there were [removed: 23,196] [added: 22,698] holders of record of our Class B Common Stock and [removed: 16] [added: 15] holders of record of our Class A Common Stock.

[removed: Under this program] [added: As of May 31, 2017,] the Company [removed: purchased a total of 197.1] [added: had repurchased 79.8] million shares at [removed: a cost of $8 billion (an] [added: an] average price of [removed: $40.58] [added: $55.63] per [removed: share).][added: share for a total approximate cost of $4.4 billion under this program.]

We intend to use excess cash, future cash from operations and/or proceeds from debt to fund [removed: repurchases under the share repurchase program.][added: repurchases.]

The following table presents a summary of share repurchases made by NIKE under [removed: these programs] [added: this program] during the quarter ended May 31, [removed: 2016:][added: 2017:]

The graph assumes an investment of $100 on May 31, [removed: 2011] [added: 2012] in each of our Class B Common Stock, and the stocks comprising the Standard & Poor’s 500 Stock Index, the Standard & Poor’s Apparel, Accessories & Luxury Goods Index and the Dow Jones U.S. Footwear Index.

[removed: ][added: ]

The Standard & Poor’s Apparel, Accessories & Luxury Goods Index consists of V.F. Corporation, Coach, Inc., Ralph Lauren Corporation, Under Armour, Inc. and Michael Kors [removed: Holdings,] [added: Holdings] Limited, among other companies.

In November 2015, the Board of Directors approved a four-year, $12 billion share repurchase program.

| March 1 — March 31, 2017 | | 3,450,000 | | | $ | 56.87 | | | 3,450,000 | | | $ | 8,186 | |

| April 1 — April 30, 2017 | | 4,628,851 | | | $ | 55.68 | | | 4,628,851 | | | $ | 7,929 | |

| May 1 — May 31, 2017 | | 6,829,025 | | | $ | 53.61 | | | 6,829,025 | | | $ | 7,563 | |

| | | 14,907,876 | | | $ | 55.00 | | | 14,907,876 | | | | | |

During the third quarter of fiscal 2016, the Company concluded its four-year, $8 billion share repurchase program approved by the Board of Directors in September 2012.

Following the completion of this program, the Company began repurchases under the new four-year, $12 billion program approved by the Board of Directors in November 2015.

As of the end of the fourth quarter of fiscal 2016, the Company had repurchased 20.1 million shares at an average price of $59.21 per share for a total approximate cost of $1.2 billion under the new program.

| March 1 — March 31, 2016 | | 2,923,173 | | | $ | 61.04 | | | 2,923,173 | | | $ | 11,173 | |

| April 1 — April 30, 2016 | | 4,328,107 | | | $ | 59.69 | | | 4,328,107 | | | $ | 10,914 | |

| May 1 — May 31, 2016 | | 1,765,373 | | | $ | 58.47 | | | 1,765,373 | | | $ | 10,811 | |

| | | 9,016,653 | | | $ | 59.89 | | | 9,016,653 | | | | | |

| [removed: 2016] [added: 2017] | | | | [removed: 2015] [added: 2016] | | | | [removed: 2014] [added: 2015] | | | | [removed: 2013] [added: 2014] | | | | [removed: 2012] [added: 2013] | | | |

| Revenues | $ | [removed: 32,376] [added: 34,350] | | | $ | [removed: 30,601] [added: 32,376] | | | $ | [removed: 27,799] [added: 30,601] | | | $ | [removed: 25,313] [added: 27,799] | | | $ | [removed: 23,331] [added: 25,313] | |

| Gross profit | [removed: 14,971] [added: 15,312] | | | | [removed: 14,067] [added: 14,971] | | | | [removed: 12,446] [added: 14,067] | | | | [removed: 11,034] [added: 12,446] | | | | [removed: 10,148] [added: 11,034] | | |

| Gross margin [removed: %] | [removed: 46.2] [added: 44.6] | | % | | [removed: 46.0] [added: 46.2] | | % | | [removed: 44.8] [added: 46.0] | | % | | [removed: 43.6] [added: 44.8] | | % | | [removed: 43.5] [added: 43.6] | | % |

| Net income from continuing operations | [removed: 3,760] [added: 4,240] | | | | [removed: 3,273] [added: 3,760] | | | | [removed: 2,693] [added: 3,273] | | | | [removed: 2,451] [added: 2,693] | | | | [removed: 2,257] [added: 2,451] | | |

| Net income (loss) from discontinued operations | — | | | | — | | | | — | | | | [removed: 21] [added: —] | | | | [removed: (46] [added: 21] | | [removed: )] |

| Net income | [removed: 3,760] [added: 4,240] | | | | [removed: 3,273] [added: 3,760] | | | | [removed: 2,693] [added: 3,273] | | | | [removed: 2,472] [added: 2,693] | | | | [removed: 2,211] [added: 2,472] | | |

| Basic | [removed: 2.21] [added: 2.56] | | | | [removed: 1.90] [added: 2.21] | | | | [removed: 1.52] [added: 1.90] | | | | [removed: 1.37] [added: 1.52] | | | | [removed: 1.23] [added: 1.37] | | |

| Diluted | [removed: 2.16] [added: 2.51] | | | | [removed: 1.85] [added: 2.16] | | | | [removed: 1.49] [added: 1.85] | | | | [removed: 1.34] [added: 1.49] | | | | [removed: 1.20] [added: 1.34] | | |

| Basic | — | | | | — | | | | — | | | | [removed: 0.01] [added: —] | | | | [removed: (0.03] [added: 0.01] | | [removed: )] |

| Diluted | — | | | | — | | | | — | | | | [removed: 0.01] [added: —] | | | | [removed: (0.02] [added: 0.01] | | [removed: )] |

| Weighted average common shares outstanding | [removed: 1,697.9] [added: 1,657.8] | | | | [removed: 1,723.5] [added: 1,697.9] | | | | [removed: 1,766.7] [added: 1,723.5] | | | | [removed: 1,794.6] [added: 1,766.7] | | | | [removed: 1,839.9] [added: 1,794.6] | | |

| Diluted weighted average common shares outstanding | [removed: 1,742.5] [added: 1,692.0] | | | | [removed: 1,768.8] [added: 1,742.5] | | | | [removed: 1,811.6] [added: 1,768.8] | | | | [removed: 1,832.9] [added: 1,811.6] | | | | [removed: 1,879.2] [added: 1,832.9] | | |

| Cash dividends declared per common share | [removed: 0.62] [added: 0.70] | | | | [removed: 0.54] [added: 0.62] | | | | [removed: 0.47] [added: 0.54] | | | | [removed: 0.41] [added: 0.47] | | | | [removed: 0.35] [added: 0.41] | | |

| Cash flow from operations, inclusive of discontinued operations | [removed: 3,096] [added: 3,640] | | | | [removed: 4,680] [added: 3,096] | | | | [removed: 3,013] [added: 4,680] | | | | [removed: 3,032] [added: 3,013] | | | | [removed: 1,932] [added: 3,032] | | |

| High | [removed: 68.19] [added: 60.33] | | | | [removed: 52.75] [added: 68.19] | | | | [removed: 40.13] [added: 52.75] | | | | [removed: 32.96] [added: 40.13] | | | | [removed: 28.60] [added: 32.96] | | |

| Low | [removed: 47.25] [added: 49.01] | | | | [removed: 36.57] [added: 47.25] | | | | [removed: 29.56] [added: 36.57] | | | | [removed: 21.95] [added: 29.56] | | | | [removed: 19.65] [added: 21.95] | | |

| Cash and equivalents | $ | [removed: 3,138] [added: 3,808] | | | $ | [removed: 3,852] [added: 3,138] | | | $ | [removed: 2,220] [added: 3,852] | | | $ | [removed: 3,337] [added: 2,220] | | | $ | [removed: 2,254] [added: 3,337] | |

| Short-term investments | [removed: 2,319] [added: 2,371] | | | | [removed: 2,072] [added: 2,319] | | | | [removed: 2,922] [added: 2,072] | | | | [removed: 2,628] [added: 2,922] | | | | [removed: 1,503] [added: 2,628] | | |

| Inventories | [removed: 4,838] [added: 5,055] | | | | [removed: 4,337] [added: 4,838] | | | | [removed: 3,947] [added: 4,337] | | | | [removed: 3,484] [added: 3,947] | | | | [removed: 3,251] [added: 3,484] | | |

| Working capital, excluding assets and liabilities of discontinued [removed: operations(1)(2)(3)] [added: operations(1)] | [removed: 9,667] [added: 10,587] | | | | [removed: 9,255] [added: 9,667] | | | | [removed: 8,319] [added: 9,225] | | | | [removed: 9,391] [added: 8,319] | | | | [removed: 7,271] [added: 9,391] | | |

| Capital lease [removed: obligations(4)] [added: obligations(3)] | [removed: 15] [added: 27] | | | | [removed: 5] [added: 15] | | | | [removed: 74] [added: 5] | | | | [removed: 81] [added: 74] | | | | [removed: —] [added: 81] | | |

| Shareholders’ equity | [removed: 12,258] [added: 12,407] | | | | [removed: 12,707] [added: 12,258] | | | | [removed: 10,824] [added: 12,707] | | | | [removed: 11,081] [added: 10,824] | | | | [removed: 10,319] [added: 11,081] | | |

| Year-end stock price | [removed: 55.22] [added: 52.99] | | | | [removed: 50.84] [added: 55.22] | | | | [removed: 38.46] [added: 50.84] | | | | [removed: 30.83] [added: 38.46] | | | | [removed: 27.05] [added: 30.83] | | |

| Market capitalization | [removed: 92,867] [added: 87,084] | | | | [removed: 87,044] [added: 92,867] | | | | [removed: 66,921] [added: 87,044] | | | | [removed: 55,124] [added: 66,921] | | | | [removed: 49,546] [added: 55,124] | | |

| Return on equity | [removed: 30.1] [added: 34.4] | | % | | [removed: 27.8] [added: 30.1] | | % | | [removed: 24.6] [added: 27.8] | | % | | [removed: 23.1] [added: 24.6] | | % | | [removed: 22.0] [added: 23.1] | | % |

| Return on [removed: assets(1)] [added: assets(2)] | [removed: 17.5] [added: 19.0] | | % | | [removed: 16.3] [added: 17.5] | | % | | [removed: 14.9] [added: 16.3] | | % | | [removed: 15.3] [added: 14.9] | | % | | [removed: 15.1] [added: 15.3] | | % |

| Inventory turns | 3.8 | | | | [removed: 4.0] [added: 3.8] | | | | [removed: 4.1] [added: 4.0] | | | | [removed: 4.2] [added: 4.1] | | | | [removed: 4.5] [added: 4.2] | | |

| Current ratio at May [removed: 31(1)] [added: 31] | [removed: 2.8] [added: 2.9] | | | | [removed: 2.5] [added: 2.8] | | | | [removed: 2.7] [added: 2.5] | | | | [removed: 3.4] [added: 2.7] | | | | [removed: 3.0] [added: 3.4] | | |

| Price/Earnings ratio at May 31 | [removed: 25.6] [added: 21.1] | | | | [removed: 27.5] [added: 25.6] | | | | [removed: 25.9] [added: 27.5] | | | | [removed: 22.8] [added: 25.9] | | | | [removed: 23.0] [added: 22.8] | | |

| [removed: (1)] [added: (2)] | Prior year amounts have been updated to reflect the adoption of Accounting Standards Update No. [removed: 2015-17,] [added: 2015-03, Interest — Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs,] which requires all [removed: deferred tax assets and deferred tax liabilities] [added: debt issuance costs] to be [removed: classified] [added: presented] as [removed: non-current.] [added: a direct deduction from the carrying amount of the corresponding debt liability on the balance sheet.] Refer to Recently Adopted Accounting Standards in Note 1 — Summary of Significant Accounting Policies in the accompanying Notes to the Consolidated Financial Statements. |

| [removed: (2)] [added: (1)] | [removed: Assets] [added: Liabilities] of discontinued operations were $0 million, $0 million, $0 million, $0 million and [removed: $615] [added: $18] million for the years ended May 31, [added: 2017,] 2016, 2015, [removed: 2014, 2013] [added: 2014] and [removed: 2012,] [added: 2013,] respectively. [added: There were no assets of discontinued operations for the years presented.] |

| [removed: (4)] [added: (3)] | During the fiscal year ended May 31, 2015, the Company restructured the terms of certain capital leases, which subsequently qualified as operating leases. |

| Gross profit | | [removed: 3,995] [added: 4,123] | | | | [removed: 3,721] [added: 3,995] | | | | [removed: 3,501] [added: 3,616] | | | | [removed: 3,327] [added: 3,501] | | | | [removed: 3,689] [added: 3,750] | | | | [removed: 3,426] [added: 3,689] | | | | [removed: 3,786] [added: 3,823] | | | | [removed: 3,593] [added: 3,786] | | |

| Gross margin [removed: %] | | [removed: 47.5] [added: 45.5] | | % | | [removed: 46.6] [added: 47.5] | | % | | [removed: 45.6] [added: 44.2] | | % | | [removed: 45.1] [added: 45.6] | | % | | [removed: 45.9] [added: 44.5] | | % | | 45.9 | | % | | [removed: 45.9] [added: 44.1] | | % | | [removed: 46.2] [added: 45.9] | | % |

| Net income | | [removed: 1,179] [added: 1,249] | | | | [removed: 962] [added: 1,179] | | | | [removed: 785] [added: 842] | | | | [removed: 655] [added: 785] | | | | [removed: 950] [added: 1,141] | | | | [removed: 791] [added: 950] | | | | [removed: 846] [added: 1,008] | | | | [removed: 865] [added: 846] | | |

| Basic | | [removed: 0.69] [added: 0.75] | | | | [removed: 0.56] [added: 0.69] | | | | [removed: 0.46] [added: 0.51] | | | | [removed: 0.38] [added: 0.46] | | | | [removed: 0.56] [added: 0.69] | | | | [removed: 0.46] [added: 0.56] | | | | [removed: 0.50] [added: 0.61] | | | | 0.50 | | |

| Diluted | | [removed: 0.67] [added: 0.73] | | | | [removed: 0.54] [added: 0.67] | | | | [removed: 0.45] [added: 0.50] | | | | [removed: 0.37] [added: 0.45] | | | | [removed: 0.55] [added: 0.68] | | | | [removed: 0.45] [added: 0.55] | | | | [removed: 0.49] [added: 0.60] | | | | 0.49 | | |

| Weighted average common shares outstanding | | [removed: 1,709.0] [added: 1,672.0] | | | | [removed: 1,729.8] [added: 1,709.0] | | | | [removed: 1,706.5] [added: 1,659.1] | | | | [removed: 1,726.2] [added: 1,706.5] | | | | [removed: 1,693.8] [added: 1,653.1] | | | | [removed: 1,722.9] [added: 1,693.8] | | | | [removed: 1,682.4] [added: 1,646.9] | | | | [removed: 1,715.0] [added: 1,682.4] | | |

| Diluted weighted average common shares outstanding | | [removed: 1,754.5] [added: 1,708.9] | | | | [removed: 1,772.4] [added: 1,754.5] | | | | [removed: 1,751.4] [added: 1,693.2] | | | | [removed: 1,769.6] [added: 1,751.4] | | | | [removed: 1,737.3] [added: 1,686.3] | | | | [removed: 1,767.7] [added: 1,737.3] | | | | [removed: 1,723.1] [added: 1,678.6] | | | | [removed: 1,759.6] [added: 1,723.1] | | |

| Total assets, excluding assets of discontinued operations(1)(2) | 23,259 | | | | 21,379 | | | | 21,590 | | | | 18,579 | | | | 17,531 | | |

| Long-term debt(2) | 3,471 | | | | 1,993 | | | | 1,072 | | | | 1,191 | | | | 1,201 | | |

| 2017 | | | | 2016 | | | | 2017 | | | | 2016 | | | | 2017 | | | | 2016 | | | | 2017 | | | | 2016 | | | | |

| Revenues | | $ | 9,061 | | | $ | 8,414 | | | $ | 8,180 | | | $ | 7,686 | | | $ | 8,432 | | | $ | 8,032 | | | $ | 8,677 | | | $ | 8,244 | |

| High | | 60.33 | | | | 58.86 | | | | 59.18 | | | | 67.65 | | | | 58.42 | | | | 68.19 | | | | 59.00 | | | | 65.44 | | |

| Low | | 51.48 | | | | 47.25 | | | | 49.01 | | | | 54.01 | | | | 50.06 | | | | 53.64 | | | | 50.81 | | | | 55.17 | | |

| Total assets, excluding assets of discontinued operations(1)(2) | 21,396 | | | | 21,597 | | | | 18,587 | | | | 17,540 | | | | 14,800 | | |

| Long-term debt | 2,010 | | | | 1,079 | | | | 1,199 | | | | 1,210 | | | | 228 | | |

| | |

| --- | --- |

| (3) | Liabilities of discontinued operations were $0 million, $0 million, $0 million, $18 million and $170 million for the years ended May 31, 2016, 2015, 2014, 2013 and 2012, respectively. |

| 2016 | | | | 2015 | | | | 2016 | | | | 2015 | | | | 2016 | | | | 2015 | | | | 2016 | | | | 2015 | | | | |

| Revenues | | $ | 8,414 | | | $ | 7,982 | | | $ | 7,686 | | | $ | 7,380 | | | $ | 8,032 | | | $ | 7,460 | | | $ | 8,244 | | | $ | 7,779 | |

| High | | 58.86 | | | | 40.15 | | | | 67.65 | | | | 49.88 | | | | 68.19 | | | | 49.75 | | | | 65.44 | | | | 52.75 | | |

| Low | | 47.25 | | | | 36.57 | | | | 54.01 | | | | 39.18 | | | | 53.64 | | | | 43.35 | | | | 55.17 | | | | 47.59 | | |

An internal Corporate Audit department reviews the results of its work with the Audit Committee of the Board of Directors, presently [removed: consisting] [added: comprised] of four [removed: outside] [added: outside, independent] directors.

Based on the results of our evaluation, our management concluded that our internal control over financial reporting was effective as of May 31, [removed: 2016.][added: 2017.]

PricewaterhouseCoopers LLP, an independent registered public accounting firm, has audited (1) the Consolidated Financial Statements and (2) the effectiveness of our internal control over financial reporting as of May 31, [removed: 2016,] [added: 2017,] as stated in their report herein.

In our opinion, the consolidated financial statements listed in the index appearing under Item 15(a)(1) present fairly, in all material respects, the financial position of NIKE, Inc. and its subsidiaries [removed: at] [added: as of] May 31, [removed: 2016] [added: 2017] and [removed: 2015,] [added: 2016,] and the results of their operations and their cash flows for each of the three years in the period ended May 31, [removed: 2016] [added: 2017] in conformity with accounting principles generally accepted in the United States of America.

Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of May 31, [removed: 2016,] [added: 2017,] based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

| (In millions, except per share data) | | [removed: 2016] [added: 2017] | | | | [removed: 2015] [added: 2016] | | | | [removed: 2014] [added: 2015] | | |

| Revenues | | $ | [removed: 32,376] [added: 34,350] | | | $ | [removed: 30,601] [added: 32,376] | | | $ | [removed: 27,799] [added: 30,601] | |

| Cost of sales | | [removed: 17,405] [added: 19,038] | | | | [removed: 16,534] [added: 17,405] | | | | [removed: 15,353] [added: 16,534] | | |

| Gross profit | | [removed: 14,971] [added: 15,312] | | | | [removed: 14,067] [added: 14,971] | | | | [removed: 12,446] [added: 14,067] | | |

| Demand creation expense | | [removed: 3,278] [added: 3,341] | | | | [removed: 3,213] [added: 3,278] | | | | [removed: 3,031] [added: 3,213] | | |

| Operating overhead expense | | [removed: 7,191] [added: 7,222] | | | | [removed: 6,679] [added: 7,191] | | | | [removed: 5,735] [added: 6,679] | | |

| Total selling and administrative expense | | [removed: 10,469] [added: 10,563] | | | | [removed: 9,892] [added: 10,469] | | | | [removed: 8,766] [added: 9,892] | | |

| Interest expense (income), net | | [removed: 19] [added: 59] | | | | [removed: 28] [added: 19] | | | | [removed: 33] [added: 28] | | |

| Other (income) expense, net | | [removed: (140] [added: (196] | | ) | | [removed: (58] [added: (140] | | ) | | [removed: 103] [added: (58] | | [added: )] |

| Income before income taxes | | [removed: 4,623] [added: 4,886] | | | | [removed: 4,205] [added: 4,623] | | | | [removed: 3,544] [added: 4,205] | | |

| Income tax expense | | [removed: 863] [added: 646] | | | | [removed: 932] [added: 863] | | | | [removed: 851] [added: 932] | | |

| NET INCOME | | $ | [removed: 3,760] [added: 4,240] | | | $ | [removed: 3,273] [added: 3,760] | | | $ | [removed: 2,693] [added: 3,273] | |

| Basic | | $ | [removed: 2.21] [added: 2.56] | | | $ | [removed: 1.90] [added: 2.21] | | | $ | [removed: 1.52] [added: 1.90] | |