filings.toolsItem 1. FINANCIAL STATEMENTS
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Item 1. FINANCIAL STATEMENTS
NIKE, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME
| THREE MONTHS ENDED FEBRUARY 28, | NINE MONTHS ENDED FEBRUARY 28, | ||||||||||||||||||||||
| (In millions, except per share data) | 2022 | 2021 | 2022 | 2021 | |||||||||||||||||||
| Revenues | $ | 10,871 | $ | 10,357 | $ | 34,476 | $ | 32,194 | |||||||||||||||
| Cost of sales | 5,804 | 5,638 | 18,500 | 17,887 | |||||||||||||||||||
| Gross profit | 5,067 | 4,719 | 15,976 | 14,307 | |||||||||||||||||||
| Demand creation expense | 854 | 711 | 2,789 | 2,117 | |||||||||||||||||||
| Operating overhead expense | 2,584 | 2,330 | 7,980 | 7,166 | |||||||||||||||||||
| Total selling and administrative expense | 3,438 | 3,041 | 10,769 | 9,283 | |||||||||||||||||||
| Interest expense (income), net | 53 | 64 | 165 | 199 | |||||||||||||||||||
| Other (income) expense, net | (94) | (22) | (235) | 18 | |||||||||||||||||||
| Income before income taxes | 1,670 | 1,636 | 5,277 | 4,807 | |||||||||||||||||||
| Income tax expense | 274 | 187 | 670 | 589 | |||||||||||||||||||
| NET INCOME | $ | 1,396 | $ | 1,449 | $ | 4,607 | $ | 4,218 | |||||||||||||||
| Earnings per common share: | |||||||||||||||||||||||
| Basic | $ | 0.88 | $ | 0.92 | $ | 2.91 | $ | 2.68 | |||||||||||||||
| Diluted | $ | 0.87 | $ | 0.90 | $ | 2.85 | $ | 2.62 | |||||||||||||||
| Weighted average common shares outstanding: | |||||||||||||||||||||||
| Basic | 1,579.0 | 1,578.0 | 1,581.1 | 1,570.9 | |||||||||||||||||||
| Diluted | 1,610.7 | 1,616.9 | 1,615.8 | 1,607.3 |
The accompanying Notes to the Unaudited Condensed Consolidated Financial Statements are an integral part of this statement.
NIKE, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
| THREE MONTHS ENDED FEBRUARY 28, | NINE MONTHS ENDED FEBRUARY 28, | ||||||||||||||||
| (Dollars in millions) | 2022 | 2021 | 2022 | 2021 | |||||||||||||
| Net income | $ | 1,396 | $ | 1,449 | $ | 4,607 | $ | 4,218 | |||||||||
| Other comprehensive income (loss), net of tax: | |||||||||||||||||
| Change in net foreign currency translation adjustment | (6) | 98 | (289) | 494 | |||||||||||||
| Change in net gains (losses) on cash flow hedges | (29) | (117) | 775 | (878) | |||||||||||||
| Change in net gains (losses) on other | (11) | 2 | (7) | (6) | |||||||||||||
| Total other comprehensive income (loss), net of tax | (46) | (17) | 479 | (390) | |||||||||||||
| TOTAL COMPREHENSIVE INCOME | $ | 1,350 | $ | 1,432 | $ | 5,086 | $ | 3,828 |
The accompanying Notes to the Unaudited Condensed Consolidated Financial Statements are an integral part of this statement.
NIKE, INC.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
| FEBRUARY 28, | MAY 31, | ||||||||||
| (In millions) | 2022 | 2021 | |||||||||
| ASSETS | |||||||||||
| Current assets: | |||||||||||
| Cash and equivalents | $ | 8,704 | $ | 9,889 | |||||||
| Short-term investments | 4,763 | 3,587 | |||||||||
| Accounts receivable, net | 3,827 | 4,463 | |||||||||
| Inventories | 7,700 | 6,854 | |||||||||
| Prepaid expenses and other current assets | 1,968 | 1,498 | |||||||||
| Total current assets | 26,962 | 26,291 | |||||||||
| Property, plant and equipment, net | 4,806 | 4,904 | |||||||||
| Operating lease right-of-use assets, net | 2,959 | 3,113 | |||||||||
| Identifiable intangible assets, net | 291 | 269 | |||||||||
| Goodwill | 284 | 242 | |||||||||
| Deferred income taxes and other assets | 3,275 | 2,921 | |||||||||
| TOTAL ASSETS | $ | 38,577 | $ | 37,740 | |||||||
| LIABILITIES AND SHAREHOLDERS' EQUITY | |||||||||||
| Current liabilities: | |||||||||||
| Current portion of long-term debt | $ | — | $ | — | |||||||
| Notes payable | — | 2 | |||||||||
| Accounts payable | 2,770 | 2,836 | |||||||||
| Current portion of operating lease liabilities | 455 | 467 | |||||||||
| Accrued liabilities | 5,391 | 6,063 | |||||||||
| Income taxes payable | 202 | 306 | |||||||||
| Total current liabilities | 8,818 | 9,674 | |||||||||
| Long-term debt | 9,418 | 9,413 | |||||||||
| Operating lease liabilities | 2,784 | 2,931 | |||||||||
| Deferred income taxes and other liabilities | 2,748 | 2,955 | |||||||||
| Redeemable preferred stock | — | — | |||||||||
| Shareholders' equity: | |||||||||||
| Common stock at stated value: | |||||||||||
| Class A convertible — 305 and 305 shares outstanding | — | — | |||||||||
| Class B — 1,271 and 1,273 shares outstanding | 3 | 3 | |||||||||
| Capital in excess of stated value | 11,186 | 9,965 | |||||||||
| Accumulated other comprehensive income (loss) | 99 | (380) | |||||||||
| Retained earnings (deficit) | 3,521 | 3,179 | |||||||||
| Total shareholders' equity | 14,809 | 12,767 | |||||||||
| TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY | $ | 38,577 | $ | 37,740 |
The accompanying Notes to the Unaudited Condensed Consolidated Financial Statements are an integral part of this statement.
NIKE, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
| NINE MONTHS ENDED FEBRUARY 28, | ||||||||
| (Dollars in millions) | 2022 | 2021 | ||||||
| Cash provided (used) by operations: | ||||||||
| Net income | $ | 4,607 | $ | 4,218 | ||||
| Adjustments to reconcile net income to net cash provided (used) by operations: | ||||||||
| Depreciation | 538 | 543 | ||||||
| Deferred income taxes | (234) | (291) | ||||||
| Stock-based compensation | 467 | 467 | ||||||
| Amortization, impairment and other | 6 | 33 | ||||||
| Net foreign currency adjustments | 3 | (130) | ||||||
| Changes in certain working capital components and other assets and liabilities: | ||||||||
| (Increase) decrease in accounts receivable | 466 | (837) | ||||||
| (Increase) decrease in inventories | (872) | 674 | ||||||
| (Increase) decrease in prepaid expenses, operating lease right-of-use assets and other current and non-current assets | (639) | (406) | ||||||
| Increase (decrease) in accounts payable, accrued liabilities, operating lease liabilities and other current and non-current liabilities | (305) | 374 | ||||||
| Cash provided (used) by operations | 4,037 | 4,645 | ||||||
| Cash provided (used) by investing activities: | ||||||||
| Purchases of short-term investments | (9,229) | (7,441) | ||||||
| Maturities of short-term investments | 5,152 | 2,203 | ||||||
| Sales of short-term investments | 2,921 | 1,588 | ||||||
| Additions to property, plant and equipment | (516) | (521) | ||||||
| Other investing activities | (39) | 184 | ||||||
| Cash provided (used) by investing activities | (1,711) | (3,987) | ||||||
| Cash provided (used) by financing activities: | ||||||||
| Increase (decrease) in notes payable | 4 | (51) | ||||||
| Repayment of borrowings | — | (196) | ||||||
| Proceeds from exercise of stock options and other stock issuances | 959 | 969 | ||||||
| Repurchase of common stock | (2,923) | — | ||||||
| Dividends — common and preferred | (1,356) | (1,203) | ||||||
| Other financing activities | (140) | (131) | ||||||
| Cash provided (used) by financing activities | (3,456) | (612) | ||||||
| Effect of exchange rate changes on cash and equivalents | (55) | 122 | ||||||
| Net increase (decrease) in cash and equivalents | (1,185) | 168 | ||||||
| Cash and equivalents, beginning of period | 9,889 | 8,348 | ||||||
| CASH AND EQUIVALENTS, END OF PERIOD | $ | 8,704 | $ | 8,516 | ||||
| Supplemental disclosure of cash flow information: | ||||||||
| Non-cash additions to property, plant and equipment | $ | 126 | $ | 116 | ||||
| Dividends declared and not paid | 488 | 437 |
The accompanying Notes to the Unaudited Condensed Consolidated Financial Statements are an integral part of this statement.
NIKE, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
| COMMON STOCK | CAPITAL IN EXCESS OF STATED VALUE | ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) | RETAINED EARNINGS (DEFICIT) | TOTAL | |||||||||||||||||||||||||
| CLASS A | CLASS B | ||||||||||||||||||||||||||||
| (In millions, except per share data) | SHARES | AMOUNT | SHARES | AMOUNT | |||||||||||||||||||||||||
| Balance at November 30, 2021 | 305 | $ | — | 1,278 | $ | 3 | $ | 10,990 | $ | 145 | $ | 3,786 | $ | 14,924 | |||||||||||||||
| Stock options exercised | 1 | 112 | 112 | ||||||||||||||||||||||||||
| Repurchase of Class B common stock | (8) | (57) | (1,165) | (1,222) | |||||||||||||||||||||||||
| Dividends on common stock ($0.305 per share) | (488) | (488) | |||||||||||||||||||||||||||
| Issuance of shares to employees, net of shares withheld for employee taxes | (20) | (8) | (28) | ||||||||||||||||||||||||||
| Stock-based compensation | 161 | 161 | |||||||||||||||||||||||||||
| Net income | 1,396 | 1,396 | |||||||||||||||||||||||||||
| Other comprehensive income (loss) | (46) | (46) | |||||||||||||||||||||||||||
| Balance at February 28, 2022 | 305 | $ | — | 1,271 | $ | 3 | $ | 11,186 | $ | 99 | $ | 3,521 | $ | 14,809 |
| COMMON STOCK | CAPITAL IN EXCESS OF STATED VALUE | ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) | RETAINED EARNINGS (DEFICIT) | TOTAL | |||||||||||||||||||||||||
| CLASS A | CLASS B | ||||||||||||||||||||||||||||
| (In millions, except per share data) | SHARES | AMOUNT | SHARES | AMOUNT | |||||||||||||||||||||||||
| Balance at November 30, 2020 | 305 | $ | — | 1,270 | $ | 3 | $ | 9,336 | $ | (429) | $ | 1,730 | $ | 10,640 | |||||||||||||||
| Stock options exercised | 4 | 187 | 187 | ||||||||||||||||||||||||||
| Dividends on common stock ($0.275 per share) | (436) | (436) | |||||||||||||||||||||||||||
| Issuance of shares to employees, net of shares withheld for employee taxes | (20) | (14) | (34) | ||||||||||||||||||||||||||
| Stock-based compensation | 142 | 142 | |||||||||||||||||||||||||||
| Net income | 1,449 | 1,449 | |||||||||||||||||||||||||||
| Other comprehensive income (loss) | (17) | (17) | |||||||||||||||||||||||||||
| Balance at February 28, 2021 | 305 | $ | — | 1,274 | $ | 3 | $ | 9,645 | $ | (446) | $ | 2,729 | $ | 11,931 |
| COMMON STOCK | CAPITAL IN EXCESS OF STATED VALUE | ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) | RETAINED EARNINGS (DEFICIT) | TOTAL | |||||||||||||||||||||||||
| CLASS A | CLASS B | ||||||||||||||||||||||||||||
| (In millions, except per share data) | SHARES | AMOUNT | SHARES | AMOUNT | |||||||||||||||||||||||||
| Balance at May 31, 2021 | 305 | $ | — | 1,273 | $ | 3 | $ | 9,965 | $ | (380) | $ | 3,179 | $ | 12,767 | |||||||||||||||
| Stock options exercised | 14 | 837 | 837 | ||||||||||||||||||||||||||
| Repurchase of Class B Common Stock | (19) | (126) | (2,806) | (2,932) | |||||||||||||||||||||||||
| Dividends on common stock ($0.885 per share) and preferred stock ($0.10 per share) | (1,406) | (1,406) | |||||||||||||||||||||||||||
| Issuance of shares to employees, net of shares withheld for employee taxes | 3 | 43 | (53) | (10) | |||||||||||||||||||||||||
| Stock-based compensation | 467 | 467 | |||||||||||||||||||||||||||
| Net income | 4,607 | 4,607 | |||||||||||||||||||||||||||
| Other comprehensive income (loss) | 479 | 479 | |||||||||||||||||||||||||||
| Balance at February 28, 2022 | 305 | $ | — | 1,271 | $ | 3 | $ | 11,186 | $ | 99 | $ | 3,521 | $ | 14,809 |
| COMMON STOCK | CAPITAL IN EXCESS OF STATED VALUE | ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) | RETAINED EARNINGS (DEFICIT) | TOTAL | |||||||||||||||||||||||||
| CLASS A | CLASS B | ||||||||||||||||||||||||||||
| (In millions, except per share data) | SHARES | AMOUNT | SHARES | AMOUNT | |||||||||||||||||||||||||
| Balance at May 31, 2020 | 315 | $ | — | 1,243 | $ | 3 | $ | 8,299 | $ | (56) | $ | (191) | $ | 8,055 | |||||||||||||||
| Stock options exercised | 19 | 844 | 844 | ||||||||||||||||||||||||||
| Conversion to Class B Common Stock | (10) | 10 | — | ||||||||||||||||||||||||||
| Dividends on common stock ($0.795 per share) and preferred stock ($0.10 per share) | (1,256) | (1,256) | |||||||||||||||||||||||||||
| Issuance of shares to employees, net of shares withheld for employee taxes | 2 | 35 | (42) | (7) | |||||||||||||||||||||||||
| Stock-based compensation | 467 | 467 | |||||||||||||||||||||||||||
| Net income | 4,218 | 4,218 | |||||||||||||||||||||||||||
| Other comprehensive income (loss) | (390) | (390) | |||||||||||||||||||||||||||
| Balance at February 28, 2021 | 305 | $ | — | 1,274 | $ | 3 | $ | 9,645 | $ | (446) | $ | 2,729 | $ | 11,931 |
The accompanying Notes to the Unaudited Condensed Consolidated Financial Statements are an integral part of this statement.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
| Note 1 | Summary of Significant Accounting Policies | 8 | ||||||
| Note 2 | Inventories | 8 | ||||||
| Note 3 | Accrued Liabilities | 8 | ||||||
| Note 4 | Fair Value Measurements | 8 | ||||||
| Note 5 | Short-Term Borrowings and Credit Lines | 10 | ||||||
| Note 6 | Income Taxes | 11 | ||||||
| Note 7 | Stock-Based Compensation | 11 | ||||||
| Note 8 | Earnings Per Share | 13 | ||||||
| Note 9 | Risk Management and Derivatives | 13 | ||||||
| Note 10 | Accumulated Other Comprehensive Income (Loss) | 18 | ||||||
| Note 11 | Revenues | 20 | ||||||
| Note 12 | Operating Segments | 22 | ||||||
| Note 13 | Acquisitions and Divestitures | 24 | ||||||
| Note 14 | Restructuring | 24 |
| NOTE 1 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
BASIS OF PRESENTATION
The Unaudited Condensed Consolidated Financial Statements include the accounts of NIKE, Inc. and its subsidiaries (the “Company” or “NIKE”) and reflect all normal recurring adjustments which are, in the opinion of management, necessary for a fair statement of the results of operations for the interim period. The year-end Condensed Consolidated Balance Sheet data as of May 31, 2021, was derived from audited financial statements, but does not include all disclosures required by accounting principles generally accepted in the United States of America (“U.S. GAAP”). The interim financial information and notes thereto should be read in conjunction with the Company's latest Annual Report on Form 10-K for the fiscal year ended May 31, 2021. The results of operations for the three and nine months ended February 28, 2022, are not necessarily indicative of results to be expected for the entire fiscal year.
The extent to which the COVID-19 pandemic impacts the Company's financial statements depends on a number of factors, including the magnitude and duration of the pandemic. There have been and may continue to be developments outside of the Company's control, including new COVID-19 variants, that require the Company to make adjustments to its operating plan, such as store operating hours and the timeline to return to normal production volumes in factories impacted by COVID-19. Such developments and other potential impacts of COVID-19, such as new or prolonged factory closures, higher inventory levels or inventory shortages in various markets, other adverse impacts on the global supply chain, revised payment terms with certain of its wholesale customers, higher sales-related reserves, factory cancellation costs and a volatile effective tax rate driven by changes in the mix of earnings across its jurisdictions, among other factors, could have material adverse impacts on the Company's revenue growth as well as its overall profitability in future periods. As a result of these circumstances, COVID-19 related disruptions are making it more challenging to compare the Company's performance, including its revenue growth and overall profitability, across quarters and fiscal years, and the Company expects that the operating environment could remain volatile as COVID-19 variants may continue to cause disruption to operations.
| NOTE 2 — INVENTORIES |
Inventory balances of $7,700 million and $6,854 million at February 28, 2022 and May 31, 2021, respectively, were substantially all finished goods.
| NOTE 3 — ACCRUED LIABILITIES |
Accrued liabilities included the following:
| FEBRUARY 28, | MAY 31, | ||||||||||
| (Dollars in millions) | 2022 | 2021 | |||||||||
| Compensation and benefits, excluding taxes | $ | 1,176 | $ | 1,472 | |||||||
| Sales-related reserves | 898 | 1,077 | |||||||||
| Dividends payable | 486 | 436 | |||||||||
| Allowance for expected loss on sale(1) | 344 | 358 | |||||||||
| Other | 2,487 | 2,720 | |||||||||
| TOTAL ACCRUED LIABILITIES | $ | 5,391 | $ | 6,063 |
*(1)*Refer to Note 13 — Acquisitions and Divestitures for additional information.
| NOTE 4 — FAIR VALUE MEASUREMENTS |
The Company measures certain financial assets and liabilities at fair value on a recurring basis, including derivatives, equity securities and available-for-sale debt securities. For additional information about the Company's fair value policies, refer to Note 1 — Summary of Significant Accounting Policies of the Annual Report on Form 10-K for the fiscal year ended May 31, 2021.
The following tables present information about the Company's financial assets measured at fair value on a recurring basis as of February 28, 2022 and May 31, 2021, and indicate the level in the fair value hierarchy in which the Company classifies the fair value measurement:
| FEBRUARY 28, 2022 | |||||||||||
| (Dollars in millions) | ASSETS AT FAIR VALUE | CASH AND EQUIVALENTS | SHORT-TERM INVESTMENTS | ||||||||
| Cash | $ | 730 | $ | 730 | $ | — | |||||
| Level 1: | |||||||||||
| U.S. Treasury securities | 4,231 | 117 | 4,114 | ||||||||
| Level 2: | |||||||||||
| Commercial paper and bonds | 686 | 42 | 644 | ||||||||
| Money market funds | 6,662 | 6,662 | — | ||||||||
| Time deposits | 1,158 | 1,153 | 5 | ||||||||
| Total Level 2 | 8,506 | 7,857 | 649 | ||||||||
| TOTAL | $ | 13,467 | $ | 8,704 | $ | 4,763 |
| MAY 31, 2021 | |||||||||||
| (Dollars in millions) | ASSETS AT FAIR VALUE | CASH AND EQUIVALENTS | SHORT-TERM INVESTMENTS | ||||||||
| Cash | $ | 840 | $ | 840 | $ | — | |||||
| Level 1: | |||||||||||
| U.S. Treasury securities | 2,892 | — | 2,892 | ||||||||
| Level 2: | |||||||||||
| Commercial paper and bonds | 748 | 57 | 691 | ||||||||
| Money market funds | 7,701 | 7,701 | — | ||||||||
| Time deposits | 1,293 | 1,291 | 2 | ||||||||
| U.S. Agency securities | 2 | — | 2 | ||||||||
| Total Level 2 | 9,744 | 9,049 | 695 | ||||||||
| TOTAL | $ | 13,476 | $ | 9,889 | $ | 3,587 |
As of February 28, 2022, the Company held $4,077 million of available-for-sale debt securities with maturity dates within one year and $686 million with maturity dates over one year and less than five years in Short-term investments on the Unaudited Condensed Consolidated Balance Sheets. The fair value of the Company's available-for-sale debt securities approximates their amortized cost.
Included in Interest expense (income), net was interest income related to the Company's investment portfolio of $22 million and $8 million for the three months ended February 28, 2022 and 2021, respectively, and $57 million and $21 million for the nine months ended February 28, 2022 and 2021, respectively.
The following tables present information about the Company's derivative assets and liabilities measured at fair value on a recurring basis and indicate the level in the fair value hierarchy in which the Company classifies the fair value measurement:
| FEBRUARY 28, 2022 | |||||||||||||||||||||||
| DERIVATIVE ASSETS | DERIVATIVE LIABILITIES | ||||||||||||||||||||||
| (Dollars in millions) | ASSETS AT FAIR VALUE | OTHER CURRENT ASSETS | OTHER LONG-TERM ASSETS | LIABILITIES AT FAIR VALUE | ACCRUED LIABILITIES | OTHER LONG-TERM LIABILITIES | |||||||||||||||||
| Level 2: | |||||||||||||||||||||||
| Foreign exchange forwards and options(1) | $ | 482 | $ | 414 | $ | 68 | $ | 107 | $ | 103 | $ | 4 | |||||||||||
| Embedded derivatives | 2 | 2 | — | 1 | 1 | — | |||||||||||||||||
| TOTAL | $ | 484 | $ | 416 | $ | 68 | $ | 108 | $ | 104 | $ | 4 |
*(1)*If the foreign exchange derivative instruments had been netted on the Unaudited Condensed Consolidated Balance Sheets, the asset and liability positions each would have been reduced by $107 million as of February 28, 2022. As of that date, the Company received $62 million of cash collateral from various counterparties related to foreign exchange derivative instruments. No amount of collateral was posted on the derivative liability balance as of February 28, 2022.
| MAY 31, 2021 | |||||||||||||||||||||||
| DERIVATIVE ASSETS | DERIVATIVE LIABILITIES | ||||||||||||||||||||||
| (Dollars in millions) | ASSETS AT FAIR VALUE | OTHER CURRENT ASSETS | OTHER LONG-TERM ASSETS | LIABILITIES AT FAIR VALUE | ACCRUED LIABILITIES | OTHER LONG-TERM LIABILITIES | |||||||||||||||||
| Level 2: | |||||||||||||||||||||||
| Foreign exchange forwards and options(1) | $ | 92 | $ | 76 | $ | 16 | $ | 456 | $ | 415 | $ | 41 | |||||||||||
| Embedded derivatives | — | — | — | 1 | 1 | — | |||||||||||||||||
| TOTAL | $ | 92 | $ | 76 | $ | 16 | $ | 457 | $ | 416 | $ | 41 |
*(1)*If the foreign exchange derivative instruments had been netted on the Consolidated Balance Sheets, the asset and liability positions each would have been reduced by $93 million as of May 31, 2021. As of that date, the Company had posted $39 million of cash collateral to various counterparties related to foreign exchange derivative instruments. No amount of collateral was received on the Company's derivative asset balance as of May 31, 2021.
For additional information related to the Company's derivative financial instruments and credit risk, refer to Note 9 — Risk Management and Derivatives.
The carrying amounts of other current financial assets and other current financial liabilities approximate fair value.
FINANCIAL ASSETS AND LIABILITIES NOT RECORDED AT FAIR VALUE
The Company's Long-term debt is recorded at adjusted cost, net of unamortized premiums, discounts and debt issuance costs. The fair value of long-term debt is estimated based upon quoted prices for similar instruments or quoted prices for identical instruments in inactive markets (Level 2). The fair value of the Company's Long-term debt, including the current portion, was approximately $9,719 million at February 28, 2022 and $10,275 million at May 31, 2021.
For fair value information regarding Notes payable, refer to Note 5 — Short-Term Borrowings and Credit Lines.
| NOTE 5 — SHORT-TERM BORROWINGS AND CREDIT LINES |
The carrying amounts reflected on the Unaudited Condensed Consolidated Balance Sheets for Notes payable approximate fair value.
As of February 28, 2022 and May 31, 2021, the Company had no borrowings outstanding under its $3 billion commercial paper program.
On March 11, 2022, subsequent to the end of the third quarter of fiscal 2022, the Company entered into a 364-day committed credit facility agreement with a syndicate of banks, which provides for up to $1 billion of borrowings, with an option to increase borrowings up to $1.5 billion in total with lender approval. The facility matures on March 10, 2023, with an option to extend the maturity date an additional 364 days. This facility replaces the prior $1 billion 364-day credit facility agreement entered into on March 15, 2021, which would have matured on March 14, 2022. Based on the Company's current long-term senior unsecured debt ratings of AA- and A1 from Standard and Poor's Corporation and Moody's Investor Services, respectively, the interest rate charged on any outstanding borrowings would be the prevailing Term Secured Overnight Financing Rate (Term SOFR) for the applicable interest period plus 0.60%. The facility fee is 0.02% of the total undrawn commitment. As of April 5, 2022, no amounts were outstanding under this committed credit facility.
On March 11, 2022, the Company also entered into a five-year committed credit facility agreement with a syndicate of banks which provides for up to $2 billion of borrowings, with the option to increase borrowings up to $3 billion in total with lender approval. The facility matures on March 11, 2027, with options to extend the maturity date up to an additional two years. This facility replaces the prior $2 billion five-year credit facility agreement entered into on August 16, 2019, which would have matured on August 16, 2024. Based on the Company's current long-term senior unsecured debt ratings of AA- and A1 from Standard and Poor's Corporation and Moody's Investor Services, respectively, the interest rate charged on any outstanding borrowings would be the prevailing Term SOFR for the applicable interest period plus 0.60%. The facility fee is 0.04% of the total undrawn commitment. As of April 5, 2022, no amounts were outstanding under this committed credit facility.
There have been no other changes to the credit lines reported in the Company's Annual Report on Form 10-K for the fiscal year ended May 31, 2021.
| NOTE 6 — INCOME TAXES |
The effective tax rate was 12.7% and 12.3% for the nine months ended February 28, 2022 and 2021, respectively. The increase in the Company's effective tax rate was primarily due to the impact of recently finalized U.S. tax regulations published by the U.S. Treasury and Internal Revenue Service ("IRS") on January 4, 2022. These regulations overhaul various components of the foreign tax credit regime including the determination of creditable foreign taxes and limit the amount of foreign taxes that are creditable against U.S. income taxes. While these regulations are generally effective on March 7, 2022, some retroactive provisions limit the Company's ability to claim credits on certain foreign taxes as of the third quarter of fiscal 2022. The increase in the Company's effective tax rate was partially offset by changes in discrete items compared to the first nine months of fiscal 2021, including the recognition of a reserve in the first quarter of fiscal 2021 related to Altera Corp. v. Commissioner.
As of February 28, 2022, total gross unrecognized tax benefits, excluding related interest and penalties, were $871 million, $648 million of which would affect the Company's effective tax rate if recognized in future periods. The majority of the total gross unrecognized tax benefits are long-term in nature and included within Deferred income taxes and other liabilities on the Unaudited Condensed Consolidated Balance Sheets. As of May 31, 2021, total gross unrecognized tax benefits, excluding related interest and penalties, were $896 million. The liability for payment of interest and penalties increased by $27 million during the nine months ended February 28, 2022. As of February 28, 2022 and May 31, 2021, accrued interest and penalties related to uncertain tax positions were $230 million and $203 million, respectively, (excluding federal benefit) and included within Deferred income taxes and other liabilities on the Unaudited Condensed Consolidated Balance Sheets.
The Company is subject to taxation in the U.S., as well as various state and foreign jurisdictions. The Company is currently under audit by the U.S. IRS for fiscal years 2017 through 2019. The Company has closed all U.S. federal income tax matters through fiscal 2016, with the exception of certain transfer pricing adjustments.
Tax years after 2011 remain open in certain major foreign jurisdictions. Although the timing of resolution of audits is not certain, the Company evaluates all domestic and foreign audit issues in the aggregate, along with the expiration of applicable statutes of limitations, and estimates that it is reasonably possible the total gross unrecognized tax benefits could decrease by up to $80 million within the next 12 months. In January 2019, the European Commission opened a formal investigation to examine whether the Netherlands has breached State Aid rules when granting certain tax rulings to the Company. The Company believes the investigation is without merit. If this matter is adversely resolved, the Netherlands may be required to assess additional amounts with respect to prior periods, and the Company's income taxes related to prior periods in the Netherlands could increase.
| NOTE 7 — STOCK-BASED COMPENSATION |
STOCK-BASED COMPENSATION
The NIKE, Inc. Stock Incentive Plan (the “Stock Incentive Plan”) provides for the issuance of up to 798 million previously unissued shares of Class B Common Stock in connection with equity awards granted under the Stock Incentive Plan. The Stock Incentive Plan authorizes the grant of non-statutory stock options, incentive stock options, stock appreciation rights, restricted stock, restricted stock units and performance-based awards. In addition to the Stock Incentive Plan, the Company gives employees the right to purchase shares at a discount from the market price under employee stock purchase plans (ESPPs). Refer to Note 11 — Common Stock and Stock-Based Compensation of the Annual Report on Form 10-K for the fiscal year ended May 31, 2021 for further information.
The following table summarizes the Company's total stock-based compensation expense recognized in Cost of sales or Operating overhead expense, as applicable:
| THREE MONTHS ENDED FEBRUARY 28, | NINE MONTHS ENDED FEBRUARY 28, | ||||||||||||||||
| (Dollars in millions) | 2022 | 2021 | 2022 | 2021 | |||||||||||||
| Stock options(1) | $ | 75 | $ | 73 | $ | 221 | $ | 250 | |||||||||
| ESPPs | 15 | 15 | 44 | 50 | |||||||||||||
| Restricted stock and restricted stock units(1)(2) | 71 | 54 | 202 | 167 | |||||||||||||
| TOTAL STOCK-BASED COMPENSATION EXPENSE | $ | 161 | $ | 142 | $ | 467 | $ | 467 |
*(1)*Expense for stock options includes the expense associated with stock appreciation rights. Accelerated stock option expense is primarily recorded for employees meeting certain retirement eligibility requirements. An immaterial amount of accelerated stock option and restricted stock expense was also recorded for certain employees impacted by the Company's organizational realignment; for more information see Note 14 — Restructuring.
*(2)*Includes expense for performance-based restricted stock units granted during the nine months ended February 28, 2022.
The income tax benefit related to stock-based compensation expense was $34 million and $67 million for the three months ended February 28, 2022 and 2021, respectively, and $307 million and $256 million for the nine months ended February 28, 2022 and 2021, respectively.
STOCK OPTIONS
The weighted average fair value per share of the options granted during the nine months ended February 28, 2022 and 2021, computed as of the grant date using the Black-Scholes pricing model, was $37.53 and $26.75, respectively. The weighted average assumptions used to estimate these fair values were as follows:
| NINE MONTHS ENDED FEBRUARY 28, | ||||||||
| 2022 | 2021 | |||||||
| Dividend yield | 0.8 | % | 0.9 | % | ||||
| Expected volatility | 24.9 | % | 27.3 | % | ||||
| Weighted average expected life (in years) | 5.8 | 6.0 | ||||||
| Risk-free interest rate | 0.9 | % | 0.4 | % |
Expected volatilities are based on an analysis of the historical volatility of the Company's common stock, the implied volatility in market-traded options on the Company's common stock with a term greater than one year, as well as other factors. The weighted average expected life of options is based on an analysis of historical and expected future exercise patterns. The interest rate is based on the U.S. Treasury (constant maturity) risk-free rate in effect at the date of grant for periods corresponding with the expected term of the options.
As of February 28, 2022, the Company had $484 million of unrecognized compensation costs from stock options, net of estimated forfeitures, to be recognized in Cost of sales or Operating overhead expense, as applicable, over a weighted average remaining period of 2.6 years.
RESTRICTED STOCK AND RESTRICTED STOCK UNITS
The weighted average fair value per share of restricted stock and restricted stock units granted for the nine months ended February 28, 2022 and 2021, computed as of the grant date, was $158.94 and $112.44, respectively.
During the nine months ended February 28, 2022, under the Stock Incentive Plan, the Company granted performance-based restricted stock units (PSUs), which were historically in the form of cash-based long-term incentive awards under the Company's Long-Term Incentive Plan. The Company estimates the fair value of these PSUs as of the grant date using a Monte Carlo simulation. The weighted average fair value per share of PSUs granted for the nine months ended February 28, 2022, computed as of the grant date, was $250.52. The impact of granting PSUs during the nine months ended February 28, 2022, was not material to the Company's Unaudited Condensed Consolidated Financial Statements.
As of February 28, 2022, the Company had $629 million of unrecognized compensation costs from restricted stock, restricted stock units and PSUs, net of estimated forfeitures, to be recognized in Cost of sales or Operating overhead expense, as applicable, over a weighted average remaining period of 2.6 years.
| NOTE 8 — EARNINGS PER SHARE |
The following is a reconciliation from basic earnings per common share to diluted earnings per common share. The computations of diluted earnings per common share excluded restricted stock, restricted stock units and options, including shares under ESPPs, to purchase an additional 9.3 million shares of common stock outstanding for the three months ended February 28, 2022, because the awards were anti-dilutive. The amount of anti-dilutive awards for the three months ended February 28, 2021, was insignificant. For the nine months ended February 28, 2022 and 2021, the computations of diluted earnings per common share excluded 9.4 million and 11.6 million shares of common stock outstanding, respectively, because the awards were anti-dilutive.
| THREE MONTHS ENDED FEBRUARY 28, | NINE MONTHS ENDED FEBRUARY 28, | ||||||||||||||||
| (In millions, except per share data) | 2022 | 2021 | 2022 | 2021 | |||||||||||||
| Net income available to common stockholders | $ | 1,396 | $ | 1,449 | $ | 4,607 | $ | 4,218 | |||||||||
| Determination of shares: | |||||||||||||||||
| Weighted average common shares outstanding | 1,579.0 | 1,578.0 | 1,581.1 | 1,570.9 | |||||||||||||
| Assumed conversion of dilutive stock options and awards | 31.7 | 38.9 | 34.7 | 36.4 | |||||||||||||
| DILUTED WEIGHTED AVERAGE COMMON SHARES OUTSTANDING | 1,610.7 | 1,616.9 | 1,615.8 | 1,607.3 | |||||||||||||
| Earnings per common share: | |||||||||||||||||
| Basic | $ | 0.88 | $ | 0.92 | $ | 2.91 | $ | 2.68 | |||||||||
| Diluted | $ | 0.87 | $ | 0.90 | $ | 2.85 | $ | 2.62 |
| NOTE 9 — RISK MANAGEMENT AND DERIVATIVES |
The Company is exposed to global market risks, including the effect of changes in foreign currency exchange rates and interest rates, and uses derivatives to manage financial exposures that occur in the normal course of business. As of and for the nine months ended February 28, 2022, there have been no material changes to the Company's hedging program or strategy from what was disclosed within the Annual Report on Form 10-K. For additional information about the Company's derivatives and hedging policies refer to Note 1 — Summary of Significant Accounting Policies and Note 14 — Risk Management and Derivatives of the Annual Report on Form 10-K for the fiscal year ended May 31, 2021.
The majority of derivatives outstanding as of February 28, 2022, are designated as foreign currency cash flow hedges, primarily for Euro/U.S. Dollar, British Pound/Euro, Chinese Yuan/U.S. Dollar and Japanese Yen/U.S. Dollar currency pairs. All derivatives are recognized on the Unaudited Condensed Consolidated Balance Sheets at fair value and classified based on the instrument's maturity date.
The following tables present the fair values of derivative instruments included within the Unaudited Condensed Consolidated Balance Sheets:
| DERIVATIVE ASSETS | ||||||||||||||
| BALANCE SHEET LOCATION | FEBRUARY 28, | MAY 31, | ||||||||||||
| (Dollars in millions) | 2022 | 2021 | ||||||||||||
| Derivatives formally designated as hedging instruments: | ||||||||||||||
| Foreign exchange forwards and options | Prepaid expenses and other current assets | $ | 393 | $ | 42 | |||||||||
| Foreign exchange forwards and options | Deferred income taxes and other assets | 68 | 16 | |||||||||||
| Total derivatives formally designated as hedging instruments | 461 | 58 | ||||||||||||
| Derivatives not designated as hedging instruments: | ||||||||||||||
| Foreign exchange forwards and options | Prepaid expenses and other current assets | 21 | 34 | |||||||||||
| Embedded derivatives | Prepaid expenses and other current assets | 2 | — | |||||||||||
| Total derivatives not designated as hedging instruments | 23 | 34 | ||||||||||||
| TOTAL DERIVATIVE ASSETS | $ | 484 | $ | 92 | ||||||||||
| DERIVATIVE LIABILITIES | ||||||||||||||
| BALANCE SHEET LOCATION | FEBRUARY 28, | MAY 31, | ||||||||||||
| (Dollars in millions) | 2022 | 2021 | ||||||||||||
| Derivatives formally designated as hedging instruments: | ||||||||||||||
| Foreign exchange forwards and options | Accrued liabilities | $ | 83 | $ | 385 | |||||||||
| Foreign exchange forwards and options | Deferred income taxes and other liabilities | 4 | 41 | |||||||||||
| Total derivatives formally designated as hedging instruments | 87 | 426 | ||||||||||||
| Derivatives not designated as hedging instruments: | ||||||||||||||
| Foreign exchange forwards and options | Accrued liabilities | 20 | 30 | |||||||||||
| Embedded derivatives | Accrued liabilities | 1 | 1 | |||||||||||
| Total derivatives not designated as hedging instruments | 21 | 31 | ||||||||||||
| TOTAL DERIVATIVE LIABILITIES | $ | 108 | $ | 457 |
The following tables present the amounts in the Unaudited Condensed Consolidated Statements of Income in which the effects of cash flow hedges are recorded and the effects of cash flow hedge activity on these line items:
| THREE MONTHS ENDED FEBRUARY 28, | |||||||||||||||||
| 2022 | 2021 | ||||||||||||||||
| (Dollars in millions) | TOTAL | AMOUNT OF GAIN (LOSS) ON CASH FLOW HEDGE ACTIVITY | TOTAL | AMOUNT OF GAIN (LOSS) ON CASH FLOW HEDGE ACTIVITY | |||||||||||||
| Revenues | $ | 10,871 | $ | (22) | $ | 10,357 | $ | 16 | |||||||||
| Cost of sales | 5,804 | 17 | 5,638 | (35) | |||||||||||||
| Demand creation expense | 854 | — | 711 | 1 | |||||||||||||
| Other (income) expense, net | (94) | 45 | (22) | (26) | |||||||||||||
| Interest expense (income), net | 53 | (2) | 64 | (2) |
| NINE MONTHS ENDED FEBRUARY 28, | |||||||||||||||||
| 2022 | 2021 | ||||||||||||||||
| (Dollars in millions) | TOTAL | AMOUNT OF GAIN (LOSS) ON CASH FLOW HEDGE ACTIVITY | TOTAL | AMOUNT OF GAIN (LOSS) ON CASH FLOW HEDGE ACTIVITY | |||||||||||||
| Revenues | $ | 34,476 | $ | (63) | $ | 32,194 | $ | 56 | |||||||||
| Cost of sales | 18,500 | (79) | 17,887 | 110 | |||||||||||||
| Demand creation expense | 2,789 | 1 | 2,117 | 2 | |||||||||||||
| Other (income) expense, net | (235) | 56 | 18 | (31) | |||||||||||||
| Interest expense (income), net | 165 | (5) | 199 | (5) |
The following tables present the amounts affecting the Unaudited Condensed Consolidated Statements of Income:
| (Dollars in millions) | AMOUNT OF GAIN (LOSS) RECOGNIZED IN OTHER COMPREHENSIVE INCOME (LOSS) ON DERIVATIVES**(1)** | AMOUNT OF GAIN (LOSS) RECLASSIFIED FROM ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) INTO INCOME**(1)** | |||||||||||||||||||||
| THREE MONTHS ENDED FEBRUARY 28, | LOCATION OF GAIN (LOSS) RECLASSIFIED FROM ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) INTO INCOME | THREE MONTHS ENDED FEBRUARY 28, | |||||||||||||||||||||
| 2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||
| Derivatives designated ascash flow hedges: | |||||||||||||||||||||||
| Foreign exchange forwardsand options | $ | (37) | $ | (38) | Revenues | $ | (22) | $ | 16 | ||||||||||||||
| Foreign exchange forwardsand options | 4 | (99) | Cost of sales | 17 | (35) | ||||||||||||||||||
| Foreign exchange forwardsand options | — | 1 | Demand creation expense | — | 1 | ||||||||||||||||||
| Foreign exchange forwardsand options | 31 | (24) | Other (income) expense, net | 45 | (26) | ||||||||||||||||||
| Interest rate swaps(2) | — | — | Interest expense (income), net | (2) | (2) | ||||||||||||||||||
| TOTAL DESIGNATED CASH FLOW HEDGES | $ | (2) | $ | (160) | $ | 38 | $ | (46) |
*(1)*For the three months ended February 28, 2022 and 2021, the amounts recorded in Other (income) expense, net as a result of the discontinuance of cash flow hedges because the forecasted transactions were no longer probable of occurring were immaterial.
*(2)*Gains and losses associated with terminated interest rate swaps, which were previously designated as cash flow hedges and recorded in Accumulated other comprehensive income (loss), will be released through Interest expense (income), net over the term of the issued debt.
| (Dollars in millions) | AMOUNT OF GAIN (LOSS) RECOGNIZED IN OTHER COMPREHENSIVE INCOME (LOSS) ON DERIVATIVES**(1)** | AMOUNT OF GAIN (LOSS) RECLASSIFIED FROM ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) INTO INCOME**(1)** | |||||||||||||||||||||
| NINE MONTHS ENDED FEBRUARY 28, | LOCATION OF GAIN (LOSS) RECLASSIFIED FROM ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) INTO INCOME | NINE MONTHS ENDED FEBRUARY 28, | |||||||||||||||||||||
| 2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||
| Derivatives designated ascash flow hedges: | |||||||||||||||||||||||
| Foreign exchange forwardsand options | $ | (74) | $ | (32) | Revenues | $ | (63) | $ | 56 | ||||||||||||||
| Foreign exchange forwardsand options | 522 | (539) | Cost of sales | (79) | 110 | ||||||||||||||||||
| Foreign exchange forwardsand options | (3) | 4 | Demand creation expense | 1 | 2 | ||||||||||||||||||
| Foreign exchange forwardsand options | 304 | (183) | Other (income) expense, net | 56 | (31) | ||||||||||||||||||
| Interest rate swaps(2) | — | — | Interest expense (income), net | (5) | (5) | ||||||||||||||||||
| TOTAL DESIGNATED CASH FLOW HEDGES | $ | 749 | $ | (750) | $ | (90) | $ | 132 |
*(1)*For the nine months ended February 28, 2022 and 2021, the amounts recorded in Other (income) expense, net as a result of the discontinuance of cash flow hedges because the forecasted transactions were no longer probable of occurring were immaterial.
*(2)*Gains and losses associated with terminated interest rate swaps, which were previously designated as cash flow hedges and recorded in Accumulated other comprehensive income (loss), will be released through Interest expense (income), net over the term of the issued debt.
| AMOUNT OF GAIN (LOSS) RECOGNIZED IN INCOME ON DERIVATIVES | LOCATION OF GAIN (LOSS) RECOGNIZED IN INCOME ON DERIVATIVES | |||||||||||||||||||
| THREE MONTHS ENDED FEBRUARY 28, | NINE MONTHS ENDED FEBRUARY 28, | |||||||||||||||||||
| (Dollars in millions) | 2022 | 2021 | 2022 | 2021 | ||||||||||||||||
| Derivatives not designated as hedging instruments: | ||||||||||||||||||||
| Foreign exchange forwards and options | $ | (20) | $ | (11) | $ | 12 | $ | (98) | Other (income) expense, net | |||||||||||
| Embedded derivatives | — | (4) | (9) | (17) | Other (income) expense, net |
CASH FLOW HEDGES
All changes in fair value of derivatives designated as cash flow hedge instruments are recorded in Accumulated other comprehensive income (loss) until Net income is affected by the variability of cash flows of the hedged transaction. Effective hedge results are classified in the Unaudited Condensed Consolidated Statements of Income in the same manner as the underlying exposure. When it is no longer probable the forecasted hedged transaction will occur in the initially identified time period, hedge accounting is discontinued and the Company accounts for the associated derivative as an undesignated instrument as discussed below. Additionally, the gains and losses associated with derivatives no longer designated as cash flow hedge instruments in Accumulated other comprehensive income (loss) are recognized immediately in Other (income) expense, net, if it is probable the forecasted hedged transaction will not occur by the end of the initially identified time period or within an additional two-month period thereafter. In rare circumstances, the additional period of time may exceed two months due to extenuating circumstances related to the nature of the forecasted transaction that are outside the control or influence of the Company.
The total notional amount of outstanding foreign currency derivatives designated as cash flow hedges was approximately $17.2 billion as of February 28, 2022. Approximately $305 million of deferred net gains (net of tax) on both outstanding and matured derivatives in Accumulated other comprehensive income (loss) as of February 28, 2022, are expected to be reclassified to Net income during the next 12 months concurrent with the underlying hedged transactions also being recorded in Net income. Actual amounts ultimately reclassified to Net income are dependent on the exchange rates in effect when derivative contracts currently outstanding mature. As of February 28, 2022, the maximum term over which the Company hedges exposures to the variability of cash flows for its forecasted transactions was 27 months.
UNDESIGNATED DERIVATIVE INSTRUMENTS
The Company may elect to enter into foreign exchange forwards to mitigate the change in fair value of specific assets and liabilities on the Unaudited Condensed Consolidated Balance Sheets and/or embedded derivative contracts. These undesignated instruments are recorded at fair value as a derivative asset or liability on the Unaudited Condensed Consolidated Balance Sheets with their corresponding change in fair value recognized in Other (income) expense, net, together with the remeasurement gain or loss from the hedged balance sheet position and/or embedded derivative contract. The total notional amount of outstanding undesignated derivative instruments was $3.2 billion as of February 28, 2022.
EMBEDDED DERIVATIVES
Embedded derivative contracts are treated as foreign currency forward contracts that are bifurcated from the related contract and recorded at fair value as a derivative asset or liability on the Unaudited Condensed Consolidated Balance Sheets with their corresponding change in fair value recognized in Other (income) expense, net, through the date the foreign currency fluctuations cease to exist.
As of February 28, 2022, the total notional amount of embedded derivatives outstanding was approximately $589 million.
CREDIT RISK
The Company's bilateral credit-related contingent features generally require the owing entity, either the Company or the derivative counterparty, to post collateral for the portion of the fair value in excess of $50 million should the fair value of outstanding derivatives per counterparty be greater than $50 million. Additionally, a certain level of decline in credit rating of either the Company or the counterparty could trigger collateral requirements. As of February 28, 2022, the Company was in compliance with all credit risk-related contingent features, and derivative instruments with such features were in a net asset position of approximately $375 million. Accordingly, the Company was not required to post cash collateral as a result of these contingent features. Further, $62 million of collateral was received on the Company's derivative asset balance as of February 28, 2022. The Company considers the impact of the risk of counterparty default to be immaterial.
For additional information related to the Company's derivative financial instruments and collateral, refer to Note 4 — Fair Value Measurements.
| NOTE 10 — ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) |
The changes in Accumulated other comprehensive income (loss), net of tax, were as follows:
| (Dollars in millions) | FOREIGN CURRENCY TRANSLATION ADJUSTMENT**(1)** | CASH FLOW HEDGES | NET INVESTMENT HEDGES**(1)** | OTHER | TOTAL | ||||||||||||
| Balance at November 30, 2021 | $ | (281) | $ | 369 | $ | 115 | $ | (58) | $ | 145 | |||||||
| Other comprehensive income (loss): | |||||||||||||||||
| Other comprehensive gains (losses) before reclassifications(2) | (6) | 4 | — | (7) | (9) | ||||||||||||
| Reclassifications to net income of previously deferred (gains) losses(3) | — | (33) | — | (4) | (37) | ||||||||||||
| Total other comprehensive income (loss) | (6) | (29) | — | (11) | (46) | ||||||||||||
| Balance at February 28, 2022 | $ | (287) | $ | 340 | $ | 115 | $ | (69) | $ | 99 |
*(1)*The accumulated foreign currency translation adjustment and net investment hedge gains/losses related to an investment in a foreign subsidiary are reclassified to Net income upon sale or upon complete or substantially complete liquidation of the respective entity.
*(2)*Net of tax benefit (expense) of $0 million, $6 million, $0 million, $2 million and $8 million, respectively.
*(3)*Net of tax (benefit) expense of $0 million, $5 million, $0 million, $1 million and $6 million, respectively.
| (Dollars in millions) | FOREIGN CURRENCY TRANSLATION ADJUSTMENT**(1)** | CASH FLOW HEDGES | NET INVESTMENT HEDGES**(1)** | OTHER | TOTAL | ||||||||||||
| Balance at November 30, 2020 | $ | (98) | $ | (371) | $ | 115 | $ | (75) | $ | (429) | |||||||
| Other comprehensive income (loss): | |||||||||||||||||
| Other comprehensive gains (losses) before reclassifications(2) | 99 | (163) | — | (6) | (70) | ||||||||||||
| Reclassifications to net income of previously deferred (gains) losses(3) | (1) | 46 | — | 8 | 53 | ||||||||||||
| Total other comprehensive income (loss) | 98 | (117) | — | 2 | (17) | ||||||||||||
| Balance at February 28, 2021 | $ | — | $ | (488) | $ | 115 | $ | (73) | $ | (446) |
*(1)*The accumulated foreign currency translation adjustment and net investment hedge gains/losses related to an investment in a foreign subsidiary are reclassified to Net income upon sale or upon complete or substantially complete liquidation of the respective entity.
*(2)*Net of tax benefit (expense) of $0 million, $(3) million, $0 million, $1 million and $(2) million, respectively.
*(3)*Net of tax (benefit) expense of $0 million, $0 million, $0 million, $0 million and $0 million, respectively.
| (Dollars in millions) | FOREIGN CURRENCY TRANSLATION ADJUSTMENT**(1)** | CASH FLOW HEDGES | NET INVESTMENT HEDGES**(1)** | OTHER | TOTAL | ||||||||||||
| Balance at May 31, 2021 | $ | 2 | $ | (435) | $ | 115 | $ | (62) | $ | (380) | |||||||
| Other comprehensive income (loss): | |||||||||||||||||
| Other comprehensive gains (losses) before reclassifications(2) | (289) | 689 | — | 7 | 407 | ||||||||||||
| Reclassifications to net income of previously deferred (gains) losses(3) | — | 86 | — | (14) | 72 | ||||||||||||
| Total other comprehensive income (loss) | (289) | 775 | — | (7) | 479 | ||||||||||||
| Balance at February 28, 2022 | $ | (287) | $ | 340 | $ | 115 | $ | (69) | $ | 99 |
*(1)*The accumulated foreign currency translation adjustment and net investment hedge gains/losses related to an investment in a foreign subsidiary are reclassified to Net income upon sale or upon complete or substantially complete liquidation of the respective entity.
*(2)*Net of tax benefit (expense) of $0 million, $(60) million, $0 million, $(2) million and $(62) million, respectively.
*(3)*Net of tax (benefit) expense of $0 million, $(4) million, $0 million, $5 million and $1 million, respectively.
| (Dollars in millions) | FOREIGN CURRENCY TRANSLATION ADJUSTMENT**(1)** | CASH FLOW HEDGES | NET INVESTMENT HEDGES**(1)** | OTHER | TOTAL | ||||||||||||
| Balance at May 31, 2020 | $ | (494) | $ | 390 | $ | 115 | $ | (67) | $ | (56) | |||||||
| Other comprehensive income (loss): | |||||||||||||||||
| Other comprehensive gains (losses) before reclassifications(2) | 496 | (753) | — | (21) | (278) | ||||||||||||
| Reclassifications to net income of previously deferred (gains) losses(3) | (2) | (125) | — | 15 | (112) | ||||||||||||
| Total other comprehensive income (loss) | 494 | (878) | — | (6) | (390) | ||||||||||||
| Balance at February 28, 2021 | $ | — | $ | (488) | $ | 115 | $ | (73) | $ | (446) |
*(1)*The accumulated foreign currency translation adjustment and net investment hedge gains/losses related to an investment in a foreign subsidiary are reclassified to Net income upon sale or upon complete or substantially complete liquidation of the respective entity.
*(2)*Net of tax benefit (expense) of $0 million, $(3) million, $0 million, $2 million and $(1) million, respectively.
*(3)*Net of tax (benefit) expense of $0 million, $7 million, $0 million, $0 million and $7 million, respectively.
The following table summarizes the reclassifications from Accumulated other comprehensive income (loss) to the Unaudited Condensed Consolidated Statements of Income:
| AMOUNT OF GAIN (LOSS) RECLASSIFIED FROM ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) INTO INCOME | LOCATION OF GAIN (LOSS) RECLASSIFIED FROM ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) INTO INCOME | |||||||||||||||||||
| THREE MONTHS ENDED FEBRUARY 28, | NINE MONTHS ENDED FEBRUARY 28, | |||||||||||||||||||
| (Dollars in millions) | 2022 | 2021 | 2022 | 2021 | ||||||||||||||||
| Gains (losses) on foreign currency translation adjustment | $ | — | $ | 1 | $ | — | $ | 2 | Other expense (income), net | |||||||||||
| Total before tax | — | 1 | — | 2 | ||||||||||||||||
| Tax (expense) benefit | — | — | — | — | ||||||||||||||||
| Gain (loss) net of tax | — | 1 | — | 2 | ||||||||||||||||
| Gains (losses) on cash flow hedges: | ||||||||||||||||||||
| Foreign exchange forwards and options | $ | (22) | $ | 16 | $ | (63) | $ | 56 | Revenues | |||||||||||
| Foreign exchange forwards and options | 17 | (35) | (79) | 110 | Cost of sales | |||||||||||||||
| Foreign exchange forwards and options | — | 1 | 1 | 2 | Demand creation expense | |||||||||||||||
| Foreign exchange forwards and options | 45 | (26) | 56 | (31) | Other (income) expense, net | |||||||||||||||
| Interest rate swaps | (2) | (2) | (5) | (5) | Interest expense (income), net | |||||||||||||||
| Total before tax | 38 | (46) | (90) | 132 | ||||||||||||||||
| Tax (expense) benefit | (5) | — | 4 | (7) | ||||||||||||||||
| Gain (loss) net of tax | 33 | (46) | (86) | 125 | ||||||||||||||||
| Gains (losses) on other | 5 | (8) | 19 | (15) | Other (income) expense, net | |||||||||||||||
| Total before tax | 5 | (8) | 19 | (15) | ||||||||||||||||
| Tax (expense) benefit | (1) | — | (5) | — | ||||||||||||||||
| Gain (loss) net of tax | 4 | (8) | 14 | (15) | ||||||||||||||||
| Total net gain (loss) reclassified for the period | $ | 37 | $ | (53) | $ | (72) | $ | 112 |
| NOTE 11 — REVENUES |
DISAGGREGATION OF REVENUES
The following tables present the Company's Revenues disaggregated by reportable operating segment, major product line and distribution channel:
| THREE MONTHS ENDED FEBRUARY 28, 2022 | |||||||||||||||||||||||||||||
| (Dollars in millions) | NORTH AMERICA | EUROPE, MIDDLE EAST & AFRICA | GREATER CHINA | ASIA PACIFIC & LATIN AMERICA | GLOBAL BRAND DIVISIONS | TOTAL NIKE BRAND | CONVERSE | CORPORATE | TOTAL NIKE, INC. | ||||||||||||||||||||
| Revenues by: | |||||||||||||||||||||||||||||
| Footwear | $ | 2,532 | $ | 1,569 | $ | 1,554 | $ | 1,005 | $ | — | $ | 6,660 | $ | 503 | $ | — | $ | 7,163 | |||||||||||
| Apparel | 1,207 | 1,083 | 548 | 394 | — | 3,232 | 29 | — | 3,261 | ||||||||||||||||||||
| Equipment | 143 | 127 | 58 | 62 | — | 390 | 7 | — | 397 | ||||||||||||||||||||
| Other | — | — | — | — | 41 | 41 | 28 | (19) | 50 | ||||||||||||||||||||
| TOTAL REVENUES | $ | 3,882 | $ | 2,779 | $ | 2,160 | $ | 1,461 | $ | 41 | $ | 10,323 | $ | 567 | $ | (19) | $ | 10,871 | |||||||||||
| Revenues by: | |||||||||||||||||||||||||||||
| Sales to Wholesale Customers | $ | 1,769 | $ | 1,858 | $ | 1,241 | $ | 860 | $ | — | $ | 5,728 | $ | 303 | $ | — | $ | 6,031 | |||||||||||
| Sales through Direct to Consumer | 2,113 | 921 | 919 | 601 | — | 4,554 | 236 | — | 4,790 | ||||||||||||||||||||
| Other | — | — | — | — | 41 | 41 | 28 | (19) | 50 | ||||||||||||||||||||
| TOTAL REVENUES | $ | 3,882 | $ | 2,779 | $ | 2,160 | $ | 1,461 | $ | 41 | $ | 10,323 | $ | 567 | $ | (19) | $ | 10,871 |
| THREE MONTHS ENDED FEBRUARY 28, 2021 | |||||||||||||||||||||||||||||
| (Dollars in millions) | NORTH AMERICA | EUROPE, MIDDLE EAST & AFRICA | GREATER CHINA | ASIA PACIFIC & LATIN AMERICA | GLOBAL BRAND DIVISIONS | TOTAL NIKE BRAND | CONVERSE | CORPORATE | TOTAL NIKE, INC. | ||||||||||||||||||||
| Revenues by: | |||||||||||||||||||||||||||||
| Footwear | $ | 2,382 | $ | 1,606 | $ | 1,614 | $ | 903 | $ | — | $ | 6,505 | $ | 513 | $ | — | $ | 7,018 | |||||||||||
| Apparel | 1,087 | 898 | 616 | 365 | — | 2,966 | 28 | — | 2,994 | ||||||||||||||||||||
| Equipment | 95 | 105 | 49 | 47 | — | 296 | 6 | — | 302 | ||||||||||||||||||||
| Other | — | — | — | — | 6 | 6 | 23 | 14 | 43 | ||||||||||||||||||||
| TOTAL REVENUES | $ | 3,564 | $ | 2,609 | $ | 2,279 | $ | 1,315 | $ | 6 | $ | 9,773 | $ | 570 | $ | 14 | $ | 10,357 | |||||||||||
| Revenues by: | |||||||||||||||||||||||||||||
| Sales to Wholesale Customers | $ | 1,894 | $ | 1,805 | $ | 1,269 | $ | 846 | $ | — | $ | 5,814 | $ | 366 | $ | — | $ | 6,180 | |||||||||||
| Sales through Direct to Consumer | 1,670 | 804 | 1,010 | 469 | — | 3,953 | 181 | — | 4,134 | ||||||||||||||||||||
| Other | — | — | — | — | 6 | 6 | 23 | 14 | 43 | ||||||||||||||||||||
| TOTAL REVENUES | $ | 3,564 | $ | 2,609 | $ | 2,279 | $ | 1,315 | $ | 6 | $ | 9,773 | $ | 570 | $ | 14 | $ | 10,357 |
| NINE MONTHS ENDED FEBRUARY 28, 2022 | |||||||||||||||||||||||||||||
| (Dollars in millions) | NORTH AMERICA | EUROPE, MIDDLE EAST & AFRICA | GREATER CHINA | ASIA PACIFIC & LATIN AMERICA | GLOBAL BRAND DIVISIONS | TOTAL NIKE BRAND | CONVERSE | CORPORATE | TOTAL NIKE, INC. | ||||||||||||||||||||
| Revenues by: | |||||||||||||||||||||||||||||
| Footwear | $ | 8,648 | $ | 5,358 | $ | 4,238 | $ | 2,914 | $ | — | $ | 21,158 | $ | 1,555 | $ | — | $ | 22,713 | |||||||||||
| Apparel | 4,117 | 3,444 | 1,588 | 1,181 | — | 10,330 | 87 | — | 10,417 | ||||||||||||||||||||
| Equipment | 473 | 426 | 160 | 178 | — | 1,237 | 21 | — | 1,258 | ||||||||||||||||||||
| Other | — | — | — | — | 54 | 54 | 90 | (56) | 88 | ||||||||||||||||||||
| TOTAL REVENUES | $ | 13,238 | $ | 9,228 | $ | 5,986 | $ | 4,273 | $ | 54 | $ | 32,779 | $ | 1,753 | $ | (56) | $ | 34,476 | |||||||||||
| Revenues by: | |||||||||||||||||||||||||||||
| Sales to Wholesale Customers | $ | 6,774 | $ | 6,194 | $ | 3,251 | $ | 2,571 | $ | — | $ | 18,790 | $ | 975 | $ | — | $ | 19,765 | |||||||||||
| Sales through Direct to Consumer | 6,464 | 3,034 | 2,735 | 1,702 | — | 13,935 | 688 | — | 14,623 | ||||||||||||||||||||
| Other | — | — | — | — | 54 | 54 | 90 | (56) | 88 | ||||||||||||||||||||
| TOTAL REVENUES | $ | 13,238 | $ | 9,228 | $ | 5,986 | $ | 4,273 | $ | 54 | $ | 32,779 | $ | 1,753 | $ | (56) | $ | 34,476 |
| NINE MONTHS ENDED FEBRUARY 28, 2021 | |||||||||||||||||||||||||||||
| (Dollars in millions) | NORTH AMERICA | EUROPE, MIDDLE EAST & AFRICA | GREATER CHINA | ASIA PACIFIC & LATIN AMERICA | GLOBAL BRAND DIVISIONS | TOTAL NIKE BRAND | CONVERSE | CORPORATE | TOTAL NIKE, INC. | ||||||||||||||||||||
| Revenues by: | |||||||||||||||||||||||||||||
| Footwear | $ | 7,851 | $ | 5,139 | $ | 4,432 | $ | 2,652 | $ | — | $ | 20,074 | $ | 1,442 | $ | — | $ | 21,516 | |||||||||||
| Apparel | 3,580 | 2,973 | 1,775 | 1,098 | — | 9,426 | 82 | — | 9,508 | ||||||||||||||||||||
| Equipment | 364 | 365 | 150 | 135 | — | 1,014 | 22 | — | 1,036 | ||||||||||||||||||||
| Other | — | — | — | — | 18 | 18 | 63 | 53 | 134 | ||||||||||||||||||||
| TOTAL REVENUES | $ | 11,795 | $ | 8,477 | $ | 6,357 | $ | 3,885 | $ | 18 | $ | 30,532 | $ | 1,609 | $ | 53 | $ | 32,194 | |||||||||||
| Revenues by: | |||||||||||||||||||||||||||||
| Sales to Wholesale Customers | $ | 6,967 | $ | 5,763 | $ | 3,392 | $ | 2,479 | $ | — | $ | 18,601 | $ | 998 | $ | — | $ | 19,599 | |||||||||||
| Sales through Direct to Consumer | 4,828 | 2,714 | 2,965 | 1,406 | — | 11,913 | 548 | — | 12,461 | ||||||||||||||||||||
| Other | — | — | — | — | 18 | 18 | 63 | 53 | 134 | ||||||||||||||||||||
| TOTAL REVENUES | $ | 11,795 | $ | 8,477 | $ | 6,357 | $ | 3,885 | $ | 18 | $ | 30,532 | $ | 1,609 | $ | 53 | $ | 32,194 |
For the three and nine months ended February 28, 2022 and 2021, Global Brand Divisions revenues included NIKE Brand licensing and other miscellaneous revenues that are not part of a geographic operating segment. Converse Other revenues were primarily attributable to licensing businesses. Corporate revenues primarily consisted of foreign currency hedge gains and losses related to revenues generated by entities within the NIKE Brand geographic operating segments and Converse, but managed through the Company's central foreign exchange risk management program.
As of February 28, 2022 and May 31, 2021, the Company did not have any contract assets and had an immaterial amount of contract liabilities recorded in Accrued liabilities on the Unaudited Condensed Consolidated Balance Sheets.
| NOTE 12 — OPERATING SEGMENTS |
The Company's operating segments are evidence of the structure of the Company's internal organization. The NIKE Brand segments are defined by geographic regions for operations participating in NIKE Brand sales activity.
Each NIKE Brand geographic segment operates predominantly in one industry: the design, development, marketing and selling of athletic footwear, apparel and equipment. The Company's reportable operating segments for the NIKE Brand are: North America; Europe, Middle East & Africa (EMEA); Greater China; and Asia Pacific & Latin America (APLA), and include results for the NIKE and Jordan brands.
The Company's NIKE Direct operations are managed within each NIKE Brand geographic operating segment. Converse is also a reportable segment for the Company and operates in one industry: the design, marketing, licensing and selling of athletic lifestyle sneakers, apparel and accessories.
Global Brand Divisions is included within the NIKE Brand for presentation purposes to align with the way management views the Company. Global Brand Divisions revenues include NIKE Brand licensing and other miscellaneous revenues that are not part of a geographic operating segment. Global Brand Divisions costs represent demand creation and operating overhead expense that include product creation and design expenses centrally managed for the NIKE Brand, as well as costs associated with NIKE Direct global digital operations and enterprise technology.
Corporate consists primarily of unallocated general and administrative expenses, including expenses associated with centrally managed departments; depreciation and amortization related to the Company's headquarters; unallocated insurance, benefit and compensation programs, including stock-based compensation; and certain foreign currency gains and losses, including certain hedge gains and losses.
The primary financial measure used by the Company to evaluate performance of individual operating segments is earnings before interest and taxes (EBIT), which represents Net income before Interest expense (income), net and Income tax expense in the Unaudited Condensed Consolidated Statements of Income.
As part of the Company's centrally managed foreign exchange risk management program, standard foreign currency rates are assigned twice per year to each NIKE Brand entity in the Company's geographic operating segments and to Converse. These rates are set approximately nine and twelve months in advance of the future selling seasons to which they relate (specifically, for each currency, one standard rate applies to the fall and holiday selling seasons and one standard rate applies to the spring and summer selling seasons) based on average market spot rates in the calendar month preceding the date they are established. Inventories and Cost of sales for geographic operating segments and Converse reflect the use of these standard rates to record non-functional currency product purchases in the entity's functional currency. Differences between assigned standard foreign currency rates and actual market rates are included in Corporate, together with foreign currency hedge gains and losses generated from the Company's centrally managed foreign exchange risk management program and other conversion gains and losses.
Accounts receivable, net, Inventories and Property, plant and equipment, net for operating segments are regularly reviewed by management and are therefore provided below.
| THREE MONTHS ENDED FEBRUARY 28, | NINE MONTHS ENDED FEBRUARY 28, | ||||||||||||||||||||||
| (Dollars in millions) | 2022 | 2021 | 2022 | 2021 | |||||||||||||||||||
| REVENUES | |||||||||||||||||||||||
| North America | $ | 3,882 | $ | 3,564 | $ | 13,238 | $ | 11,795 | |||||||||||||||
| Europe, Middle East & Africa | 2,779 | 2,609 | 9,228 | 8,477 | |||||||||||||||||||
| Greater China | 2,160 | 2,279 | 5,986 | 6,357 | |||||||||||||||||||
| Asia Pacific & Latin America | 1,461 | 1,315 | 4,273 | 3,885 | |||||||||||||||||||
| Global Brand Divisions | 41 | 6 | 54 | 18 | |||||||||||||||||||
| Total NIKE Brand | 10,323 | 9,773 | 32,779 | 30,532 | |||||||||||||||||||
| Converse | 567 | 570 | 1,753 | 1,609 | |||||||||||||||||||
| Corporate | (19) | 14 | (56) | 53 | |||||||||||||||||||
| TOTAL NIKE, INC. REVENUES | $ | 10,871 | $ | 10,357 | $ | 34,476 | $ | 32,194 | |||||||||||||||
| EARNINGS BEFORE INTEREST AND TAXES | |||||||||||||||||||||||
| North America | $ | 967 | $ | 970 | $ | 3,636 | $ | 3,295 | |||||||||||||||
| Europe, Middle East & Africa | 713 | 533 | 2,394 | 1,885 | |||||||||||||||||||
| Greater China | 784 | 973 | 2,054 | 2,552 | |||||||||||||||||||
| Asia Pacific & Latin America | 478 | 408 | 1,347 | 1,112 | |||||||||||||||||||
| Global Brand Divisions | (975) | (852) | (3,033) | (2,546) | |||||||||||||||||||
| Converse | 168 | 150 | 504 | 405 | |||||||||||||||||||
| Corporate | (412) | (482) | (1,460) | (1,697) | |||||||||||||||||||
| Interest expense (income), net | 53 | 64 | 165 | 199 | |||||||||||||||||||
| TOTAL NIKE, INC. INCOME BEFORE INCOME TAXES | $ | 1,670 | $ | 1,636 | $ | 5,277 | $ | 4,807 |
| FEBRUARY 28, | MAY 31, | ||||||||||
| (Dollars in millions) | 2022 | 2021 | |||||||||
| ACCOUNTS RECEIVABLE, NET | |||||||||||
| North America | $ | 1,268 | $ | 1,777 | |||||||
| Europe, Middle East & Africa | 1,189 | 1,349 | |||||||||
| Greater China | 359 | 288 | |||||||||
| Asia Pacific & Latin America(1) | 599 | 643 | |||||||||
| Global Brand Divisions | 106 | 128 | |||||||||
| Total NIKE Brand | 3,521 | 4,185 | |||||||||
| Converse | 256 | 225 | |||||||||
| Corporate | 50 | 53 | |||||||||
| TOTAL ACCOUNTS RECEIVABLE, NET | $ | 3,827 | $ | 4,463 | |||||||
| INVENTORIES | |||||||||||
| North America | $ | 3,541 | $ | 2,851 | |||||||
| Europe, Middle East & Africa | 1,737 | 1,821 | |||||||||
| Greater China | 1,105 | 1,247 | |||||||||
| Asia Pacific & Latin America(1) | 721 | 667 | |||||||||
| Global Brand Divisions | 208 | 153 | |||||||||
| Total NIKE Brand | 7,312 | 6,739 | |||||||||
| Converse | 264 | 290 | |||||||||
| Corporate | 124 | (175) | |||||||||
| TOTAL INVENTORIES | $ | 7,700 | $ | 6,854 |
| FEBRUARY 28, | MAY 31, | ||||||||||
| (Dollars in millions) | 2022 | 2021 | |||||||||
| PROPERTY, PLANT AND EQUIPMENT, NET | |||||||||||
| North America | $ | 617 | $ | 617 | |||||||
| Europe, Middle East & Africa | 929 | 982 | |||||||||
| Greater China | 319 | 288 | |||||||||
| Asia Pacific & Latin America(1) | 284 | 304 | |||||||||
| Global Brand Divisions | 793 | 780 | |||||||||
| Total NIKE Brand | 2,942 | 2,971 | |||||||||
| Converse | 52 | 63 | |||||||||
| Corporate | 1,812 | 1,870 | |||||||||
| TOTAL PROPERTY, PLANT AND EQUIPMENT, NET | $ | 4,806 | $ | 4,904 |
*(1)*Excludes assets held-for-sale as of February 28, 2022 and May 31, 2021. See Note 13 — Acquisitions and Divestitures for additional information.
| NOTE 13 — ACQUISITIONS AND DIVESTITURES |
As previously disclosed in the Annual Report on Form 10-K for the fiscal year ended May 31, 2021, the Company remains committed to selling its legal entities in Argentina, Chile and Uruguay and granting distribution rights to third-party distributors. As such, the assets and liabilities of the entities have remained classified as held-for-sale on the Unaudited Condensed Consolidated Balance Sheets.
As of February 28, 2022, held-for-sale assets were $201 million, primarily consisting of $75 million of Accounts receivable, net and $60 million of Inventories; held-for-sale liabilities were $51 million, primarily consisting of $27 million of Accrued liabilities and $19 million of Accounts payable.
As of May 31, 2021, held-for-sale assets were $175 million, primarily consisting of $76 million of Inventories and $59 million of Accounts receivable, net; held-for-sale liabilities were $72 million, primarily consisting of $25 million of Accounts payable and $22 million of Accrued liabilities.
As of February 28, 2022, the Company has recognized a total expected net loss related to the Argentina, Chile and Uruguay transaction of $344 million within Other (income) expense, net, classified within Corporate, and a corresponding allowance within Accrued liabilities on the Unaudited Condensed Consolidated Balance Sheets. The initial expected loss of $405 million recognized in fiscal 2020 and the subsequent adjustments for changes in fair value are largely due to the anticipated release of the cumulative foreign currency translation losses. These losses will be reclassified from Accumulated other comprehensive income (loss) to Net income upon sale of the legal entities.
| NOTE 14 — RESTRUCTURING |
In fiscal 2021, the Company announced a new digitally empowered phase of its Consumer Direct Offense strategy: Consumer Direct Acceleration. During fiscal 2021, the Company substantially completed a series of leadership and operating model changes to streamline and speed up the strategic execution of the Consumer Direct Acceleration. For the three and nine months ended February 28, 2022, the Company recognized an immaterial amount of related employee termination costs and, to a lesser extent, stock-based compensation expense.
During the three months ended February 28, 2021, the Company recognized employee termination costs of $23 million and $6 million within Operating overhead expense and Cost of sales, respectively, and made cash payments of $99 million. For the nine months ended February 28, 2021, the Company recognized employee termination costs of $168 million and $36 million within Operating overhead expense and Cost of sales, respectively, and made cash payments of $170 million.
Additionally, the related stock-based compensation expense recorded within Operating overhead expense and Cost of sales was immaterial for the three months ended February 28, 2021, and was $40 million and $4 million, respectively, for the nine months ended February 28, 2021.
For all periods presented these costs were classified within Corporate.
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