NOTE 5 — ACCRUED LIABILITIES |
AS OF MAY 31, | ||||||
(Dollars in millions) | 2019 | 2018 | ||||
Compensation and benefits, excluding taxes | $ | 1,232 | $ | 897 | ||
Sales-related reserves(1) | 1,218 | 20 | ||||
Endorsement compensation | 424 | 425 | ||||
Dividends payable | 346 | 320 | ||||
Import and logistics costs | 296 | 268 | ||||
Collateral received from counterparties to hedging instruments | 289 | 23 | ||||
Taxes other than income taxes payable | 234 | 224 | ||||
Advertising and marketing | 114 | 140 | ||||
Fair value of derivatives | 52 | 184 | ||||
Other(2) | 805 | 768 | ||||
TOTAL ACCRUED LIABILITIES | $ | 5,010 | $ | 3,269 |
(1) | Sales-related reserves as of May 31, 2019 reflect the Company's fiscal 2019 adoption of Topic 606. As of May 31, 2018, Sales-related reserves reflect the Company's prior accounting under Topic 605. Refer to Note 1 — Summary of Significant Accounting Policies for additional information on the adoption of the new standard. |
(2) | Other consists of various accrued expenses with no individual item accounting for more than 5% of the total Accrued liabilities balance at May 31, 2019 and 2018. |
NOTE 13 — BENEFIT PLANS |
YEAR ENDED MAY 31, | ||||||||||||||||||||
2019 | 2018 | 2017 | ||||||||||||||||||
(Dollars in millions) | TOTAL | AMOUNT OF GAIN (LOSS) ON CASH FLOW HEDGE ACTIVITY | TOTAL | AMOUNT OF GAIN (LOSS) ON CASH FLOW HEDGE ACTIVITY | TOTAL | AMOUNT OF GAIN (LOSS) ON CASH FLOW HEDGE ACTIVITY | ||||||||||||||
Revenues | $ | 39,117 | $ | (5 | ) | $ | 36,397 | $ | 34 | $ | 34,350 | $ | 96 | |||||||
Cost of sales | 21,643 | 53 | 20,441 | (90 | ) | 19,038 | 339 | |||||||||||||
Demand creation expense | 3,753 | — | 3,577 | 1 | 3,341 | — | ||||||||||||||
Other (income) expense, net | (78 | ) | 35 | 66 | (69 | ) | (196 | ) | 199 | |||||||||||
Interest expense (income), net | 49 | (7 | ) | 54 | (7 | ) | 59 | (4 | ) |
(Dollars in millions) | BALANCE AT BEGINNING OF PERIOD | CHARGED TO COSTS AND EXPENSES | CHARGED TO OTHER ACCOUNTS(1) | WRITE-OFFS, NET | BALANCE AT END OF PERIOD | ||||||||||
Sales returns reserve | |||||||||||||||
For the year ended May 31, 2017 | $ | 444 | $ | 696 | $ | 3 | $ | (800 | ) | $ | 343 | ||||
For the year ended May 31, 2018 | 343 | 640 | 5 | (658 | ) | 330 | |||||||||
For the year ended May 31, 2019 (2) | 734 | 1,959 | (30 | ) | (1,820 | ) | 843 |
(1) | Amounts included in this column primarily relate to foreign currency translation. |
(2) | As a result of the adoption of ASC Topic 606 during the first quarter of fiscal 2019, an asset for the estimated cost of inventory for expected products returns is now recognized separately from the liability for sales returns reserves, which is presented above. |
NOTE 18 — COMMITMENTS AND CONTINGENCIES |
YEAR ENDING MAY 31, | |||||||||||||||||||||
(Dollars in millions) | 2020 | 2021 | 2022 | 2023 | 2024 | THEREAFTER | TOTAL | ||||||||||||||
Operating leases | $ | 553 | $ | 513 | $ | 441 | $ | 386 | $ | 345 | $ | 1,494 | $ | 3,732 | |||||||
Capital leases and other financing obligations(1) | 32 | 34 | 40 | 37 | 34 | 197 | 374 |
(1) | Capital leases and other financing obligations include payments related to build-to-suit lease arrangements. |
NOTE 15 — ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) |
(Dollars in millions) | FOREIGN CURRENCY TRANSLATION ADJUSTMENT(1) | CASH FLOW HEDGES | NET INVESTMENT HEDGES(1) | OTHER | TOTAL | ||||||||||
Balance at May 31, 2018 | $ | (173 | ) | $ | 17 | $ | 115 | $ | (51 | ) | $ | (92 | ) | ||
Other comprehensive income (loss): | |||||||||||||||
Other comprehensive gains (losses) before reclassifications(2) | (173 | ) | 573 | — | 10 | 410 | |||||||||
Reclassifications to net income of previously deferred (gains) losses(3) | — | (70 | ) | — | (17 | ) | (87 | ) | |||||||
Total other comprehensive income (loss) | (173 | ) | 503 | — | (7 | ) | 323 | ||||||||
Balance at May 31, 2019 | $ | (346 | ) | $ | 520 | $ | 115 | $ | (58 | ) | $ | 231 |
(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, $(4) million, $0 million, $1 million and $(3) million, respectively. |
(3) | Net of tax (benefit) expense of $0 million, $6 million, $0 million, $0 million and $6 million, respectively. |
(Dollars in millions) | FOREIGN CURRENCY TRANSLATION ADJUSTMENT(1) | CASH FLOW HEDGES | NET INVESTMENT HEDGES(1) | OTHER | TOTAL | ||||||||||
Balance at May 31, 2017 | $ | (191 | ) | $ | (52 | ) | $ | 115 | $ | (85 | ) | $ | (213 | ) | |
Other comprehensive income (loss): | |||||||||||||||
Other comprehensive gains (losses) before reclassifications(2) | (6 | ) | (52 | ) | — | 2 | (56 | ) | |||||||
Reclassifications to net income of previously deferred (gains) losses(3) | — | 128 | — | 32 | 160 | ||||||||||
Total other comprehensive income (loss) | (6 | ) | 76 | — | 34 | 104 | |||||||||
Reclassifications to retained earnings in accordance with ASU 2018-02(4) | 24 | (7 | ) | — | — | 17 | |||||||||
Balance at May 31, 2018 | $ | (173 | ) | $ | 17 | $ | 115 | $ | (51 | ) | $ | (92 | ) |
(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 $(24) million, $(3) million, $0 million, $(4) million and $(31) million, respectively. |
(3) | Net of tax (benefit) expense of $0 million, $(3) million, $0 million, $0 million and $(3) million, respectively. |
(4) | Refer to Note 1 — Summary of Significant Accounting Policies for additional information on the adoption of ASU 2018-02 during the third quarter of fiscal 2018. |
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 | ||||||
YEAR ENDED MAY 31, | |||||||
(Dollars in millions) | 2019 | 2018 | |||||
Gains (losses) on cash flow hedges: | |||||||
Foreign exchange forwards and options | $ | (5 | ) | $ | 34 | Revenues | |
Foreign exchange forwards and options | 53 | (90 | ) | Cost of sales | |||
Foreign exchange forwards and options | — | 1 | Demand creation expense | ||||
Foreign exchange forwards and options | 35 | (69 | ) | Other (income) expense, net | |||
Interest rate swaps | (7 | ) | (7 | ) | Interest expense (income), net | ||
Total before tax | 76 | (131 | ) | ||||
Tax (expense) benefit | (6 | ) | 3 | ||||
Gain (loss) net of tax | 70 | (128 | ) | ||||
Gains (losses) on other | 17 | (32 | ) | Other (income) expense, net | |||
Total before tax | 17 | (32 | ) | ||||
Tax (expense) benefit | — | — | |||||
Gain (loss) net of tax | 17 | (32 | ) | ||||
Total net gain (loss) reclassified for the period | $ | 87 | $ | (160 | ) |
NOTE 14 — RISK MANAGEMENT AND DERIVATIVES |
DERIVATIVE ASSETS | DERIVATIVE LIABILITIES | ||||||||||||||
BALANCE SHEET LOCATION | AS OF MAY 31, | BALANCE SHEET LOCATION | AS OF MAY 31, | ||||||||||||
(Dollars in millions) | 2019 | 2018 | 2019 | 2018 | |||||||||||
Derivatives formally designated as hedging instruments: | |||||||||||||||
Foreign exchange forwards and options | Prepaid expenses and other current assets | $ | 509 | $ | 118 | Accrued liabilities | $ | 5 | $ | 156 | |||||
Foreign exchange forwards and options | Deferred income taxes and other assets | — | 152 | Deferred income taxes and other liabilities | — | — | |||||||||
Total derivatives formally designated as hedging instruments | 509 | 270 | 5 | 156 | |||||||||||
Derivatives not designated as hedging instruments: | |||||||||||||||
Foreign exchange forwards and options | Prepaid expenses and other current assets | 102 | 119 | Accrued liabilities | 46 | 26 | |||||||||
Embedded derivatives | Prepaid expenses and other current assets | 5 | 3 | Accrued liabilities | 1 | 2 | |||||||||
Embedded derivatives | Deferred income taxes and other assets | 6 | 8 | Deferred income taxes and other liabilities | 2 | 6 | |||||||||
Total derivatives not designated as hedging instruments | 113 | 130 | 49 | 34 | |||||||||||
TOTAL DERIVATIVES | $ | 622 | $ | 400 | $ | 54 | $ | 190 |
YEAR ENDED MAY 31, | ||||||||||||||||||||
2019 | 2018 | 2017 | ||||||||||||||||||
(Dollars in millions) | TOTAL | AMOUNT OF GAIN (LOSS) ON CASH FLOW HEDGE ACTIVITY | TOTAL | AMOUNT OF GAIN (LOSS) ON CASH FLOW HEDGE ACTIVITY | TOTAL | AMOUNT OF GAIN (LOSS) ON CASH FLOW HEDGE ACTIVITY | ||||||||||||||
Revenues | $ | 39,117 | $ | (5 | ) | $ | 36,397 | $ | 34 | $ | 34,350 | $ | 96 | |||||||
Cost of sales | 21,643 | 53 | 20,441 | (90 | ) | 19,038 | 339 | |||||||||||||
Demand creation expense | 3,753 | — | 3,577 | 1 | 3,341 | — | ||||||||||||||
Other (income) expense, net | (78 | ) | 35 | 66 | (69 | ) | (196 | ) | 199 | |||||||||||
Interest expense (income), net | 49 | (7 | ) | 54 | (7 | ) | 59 | (4 | ) |
(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) | |||||||||||||||||||
YEAR ENDED MAY 31, | LOCATION OF GAIN (LOSS) RECLASSIFIED FROM ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) INTO INCOME | YEAR ENDED MAY 31, | |||||||||||||||||||
2019 | 2018 | 2017 | 2019 | 2018 | 2017 | ||||||||||||||||
Derivatives designated as cash flow hedges: | |||||||||||||||||||||
Foreign exchange forwards and options | $ | 14 | $ | 19 | $ | 72 | Revenues | $ | (5 | ) | $ | 34 | $ | 96 | |||||||
Foreign exchange forwards and options | 405 | (50 | ) | 43 | Cost of sales | 53 | (90 | ) | 339 | ||||||||||||
Foreign exchange forwards and options | 2 | 1 | (4 | ) | Demand creation expense | — | 1 | — | |||||||||||||
Foreign exchange forwards and options | 156 | (19 | ) | 37 | Other (income) expense, net | 35 | (69 | ) | 199 | ||||||||||||
Interest rate swaps(2) | — | — | (54 | ) | Interest expense (income), net | (7 | ) | (7 | ) | (4 | ) | ||||||||||
Total designated cash flow hedges | $ | 577 | $ | (49 | ) | $ | 94 | $ | 76 | $ | (131 | ) | $ | 630 |
(1) | For the years ended May 31, 2019, 2018 and 2017, 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 | ||||||||||
YEAR ENDED MAY 31, | |||||||||||
(Dollars in millions) | 2019 | 2018 | 2017 | ||||||||
Derivatives not designated as hedging instruments: | |||||||||||
Foreign exchange forwards and options | $ | 166 | $ | (57 | ) | $ | (44 | ) | Other (income) expense, net | ||
Embedded derivatives | 7 | (4 | ) | (2 | ) | Other (income) expense, net |
YEAR ENDED MAY 31, 2019 | |||||||||||||||||||||||||||
(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 | $ | 10,045 | $ | 6,293 | $ | 4,262 | $ | 3,622 | $ | — | $ | 24,222 | $ | 1,658 | $ | — | $ | 25,880 | |||||||||
Apparel | 5,260 | 3,087 | 1,808 | 1,395 | — | 11,550 | 118 | — | 11,668 | ||||||||||||||||||
Equipment | 597 | 432 | 138 | 237 | — | 1,404 | 24 | — | 1,428 | ||||||||||||||||||
Other(1) | — | — | — | — | 42 | 42 | 106 | (7 | ) | 141 | |||||||||||||||||
TOTAL REVENUES | $ | 15,902 | $ | 9,812 | $ | 6,208 | $ | 5,254 | $ | 42 | $ | 37,218 | $ | 1,906 | $ | (7 | ) | $ | 39,117 | ||||||||
Revenues by: | |||||||||||||||||||||||||||
Sales to Wholesale Customers | $ | 10,875 | $ | 7,076 | $ | 3,726 | $ | 3,746 | $ | — | $ | 25,423 | $ | 1,247 | $ | — | $ | 26,670 | |||||||||
Sales through Direct to Consumer | 5,027 | 2,736 | 2,482 | 1,508 | — | 11,753 | 553 | — | 12,306 | ||||||||||||||||||
Other(1) | — | — | — | — | 42 | 42 | 106 | (7 | ) | 141 | |||||||||||||||||
TOTAL REVENUES | $ | 15,902 | $ | 9,812 | $ | 6,208 | $ | 5,254 | $ | 42 | $ | 37,218 | $ | 1,906 | $ | (7 | ) | $ | 39,117 |
(1) | Other revenues for Global Brand Divisions and Converse are primarily attributable to licensing businesses. Other revenues for Corporate primarily consist 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. |
NOTE 11 — COMMON STOCK AND STOCK-BASED COMPENSATION |
YEAR ENDED MAY 31, | |||||||||
(Dollars in millions) | 2019 | 2018 | 2017 | ||||||
Stock options(1) | $ | 207 | $ | 149 | $ | 145 | |||
ESPPs | 40 | 34 | 36 | ||||||
Restricted stock | 78 | 35 | 34 | ||||||
TOTAL STOCK-BASED COMPENSATION EXPENSE | $ | 325 | $ | 218 | $ | 215 |
(1) | Expense for stock options includes the expense associated with stock appreciation rights. Accelerated stock option expense is recorded for employees meeting certain retirement eligibility requirements. Accelerated stock option expense was $41 million, $18 million and $14 million for the years ended May 31, 2019, 2018 and 2017, respectively. |
YEAR ENDED MAY 31, | ||||||
2019 | 2018 | 2017 | ||||
Dividend yield | 1.0 | % | 1.2 | % | 1.1 | % |
Expected volatility | 26.6 | % | 16.4 | % | 17.4 | % |
Weighted average expected life (in years) | 6.0 | 6.0 | 6.0 | |||
Risk-free interest rate | 2.8 | % | 2.0 | % | 1.3 | % |
SHARES(1) | WEIGHTED AVERAGE OPTION PRICE | ||||
(In millions) | |||||
Options outstanding as of May 31, 2018 | 93.2 | $ | 40.73 | ||
Exercised | (18.2 | ) | 29.70 | ||
Forfeited | (1.8 | ) | 66.66 | ||
Granted | 18.1 | 81.79 | |||
Options outstanding as of May 31, 2019 | 91.3 | $ | 50.59 |
(1) | Includes stock appreciation rights transactions. |
SHARES | WEIGHTED AVERAGE GRANT DATE FAIR VALUE | |||||
(In millions) | ||||||
Nonvested as of May 31, 2018 | 2.8 | $ | 59.14 | |||
Vested | (0.6 | ) | 59.01 | |||
Forfeited | (0.3 | ) | 66.24 | |||
Granted | 2.5 | 80.95 | ||||
Nonvested as of May 31, 2019 | 4.4 | $ | 70.93 |
NOTE 12 — EARNINGS PER SHARE |
YEAR ENDED MAY 31, | |||||||||
(Dollars in millions, except per share data) | 2019 | 2018 | 2017 | ||||||
Net income available to common stockholders | $ | 4,029 | $ | 1,933 | $ | 4,240 | |||
Determination of shares: | |||||||||
Weighted average common shares outstanding | 1,579.7 | 1,623.8 | 1,657.8 | ||||||
Assumed conversion of dilutive stock options and awards | 38.7 | 35.3 | 34.2 | ||||||
DILUTED WEIGHTED AVERAGE COMMON SHARES OUTSTANDING | 1,618.4 | 1,659.1 | 1,692.0 | ||||||
Earnings per common share: | |||||||||
Basic | $ | 2.55 | $ | 1.19 | $ | 2.56 | |||
Diluted | $ | 2.49 | $ | 1.17 | $ | 2.51 |
NOTE 6 — FAIR VALUE MEASUREMENTS |
AS OF MAY 31, 2019 | |||||||||
(Dollars in millions) | ASSETS AT FAIR VALUE | CASH AND EQUIVALENTS | SHORT-TERM INVESTMENTS | ||||||
Cash | $ | 853 | $ | 853 | $ | — | |||
Level 1: | |||||||||
U.S. Treasury securities | 347 | 200 | 147 | ||||||
Level 2: | |||||||||
Commercial paper and bonds | 34 | 1 | 33 | ||||||
Money market funds | 1,637 | 1,637 | — | ||||||
Time deposits | 1,791 | 1,775 | 16 | ||||||
U.S. Agency securities | 1 | — | 1 | ||||||
Total Level 2 | 3,463 | 3,413 | 50 | ||||||
TOTAL | $ | 4,663 | $ | 4,466 | $ | 197 |
AS OF MAY 31, 2018 | |||||||||
(Dollars in millions) | ASSETS AT FAIR VALUE | CASH AND EQUIVALENTS | SHORT-TERM INVESTMENTS | ||||||
Cash | $ | 415 | $ | 415 | $ | — | |||
Level 1: | |||||||||
U.S. Treasury securities | 1,178 | 500 | 678 | ||||||
Level 2: | |||||||||
Commercial paper and bonds | 451 | 153 | 298 | ||||||
Money market funds | 2,174 | 2,174 | — | ||||||
Time deposits | 925 | 907 | 18 | ||||||
U.S. Agency securities | 102 | 100 | 2 | ||||||
Total Level 2 | 3,652 | 3,334 | 318 | ||||||
TOTAL | $ | 5,245 | $ | 4,249 | $ | 996 |
AS OF MAY 31, 2019 | |||||||||||||||||||
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) | $ | 611 | $ | 611 | $ | — | $ | 51 | $ | 51 | $ | — | |||||||
Embedded derivatives | 11 | 5 | 6 | 3 | 1 | 2 | |||||||||||||
TOTAL | $ | 622 | $ | 616 | $ | 6 | $ | 54 | $ | 52 | $ | 2 |
(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 $50 million as of May 31, 2019. As of that date, the Company had received $289 million of cash collateral from various counterparties related to foreign exchange derivative instruments. No amount of collateral was posted on the Company's derivative liability balance as of May 31, 2019. |
AS OF MAY 31, 2018 | |||||||||||||||||||
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) | $ | 389 | $ | 237 | $ | 152 | $ | 182 | $ | 182 | $ | — | |||||||
Embedded derivatives | 11 | 3 | 8 | 8 | 2 | 6 | |||||||||||||
TOTAL | $ | 400 | $ | 240 | $ | 160 | $ | 190 | $ | 184 | $ | 6 |
(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 $182 million as of May 31, 2018. As of that date, the Company had received $23 million of cash collateral from various counterparties related to foreign exchange derivative instruments. No amount of collateral was posted on the Company's derivative liability balance as of May 31, 2018. |
• | Level 1: Quoted prices in active markets for identical assets or liabilities. |
• | Level 2: Inputs other than quoted prices that are observable for the asset or liability, either directly or indirectly; these include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active. |
• | Level 3: Unobservable inputs with little or no market data available, which require the reporting entity to develop its own assumptions. |
NOTE 4 — IDENTIFIABLE INTANGIBLE ASSETS AND GOODWILL |
AS OF MAY 31, | |||||||||||||||||||
2019 | 2018 | ||||||||||||||||||
(Dollars in millions) | GROSS CARRYING AMOUNT | ACCUMULATED AMORTIZATION | NET CARRYING AMOUNT | GROSS CARRYING AMOUNT | ACCUMULATED AMORTIZATION | NET CARRYING AMOUNT | |||||||||||||
Indefinite-lived trademarks | $ | 281 | $ | — | $ | 281 | $ | 281 | $ | — | $ | 281 | |||||||
Acquired trademarks and other | 22 | 20 | 2 | 22 | 18 | 4 | |||||||||||||
IDENTIFIABLE INTANGIBLE ASSETS, NET | $ | 303 | $ | 20 | $ | 283 | $ | 303 | $ | 18 | $ | 285 |
NOTE 9 — INCOME TAXES |
YEAR ENDED MAY 31, | |||||||||
(Dollars in millions) | 2019 | 2018 | 2017 | ||||||
Income before income taxes: | |||||||||
United States | $ | 593 | $ | 744 | $ | 1,240 | |||
Foreign | 4,208 | 3,581 | 3,646 | ||||||
TOTAL INCOME BEFORE INCOME TAXES | $ | 4,801 | $ | 4,325 | $ | 4,886 |
YEAR ENDED MAY 31, | |||||||||
(Dollars in millions) | 2019 | 2018 | 2017 | ||||||
Current: | |||||||||
United States | |||||||||
Federal | $ | 74 | $ | 1,167 | $ | 398 | |||
State | 56 | 45 | 82 | ||||||
Foreign | 608 | 533 | 439 | ||||||
Total Current | 738 | 1,745 | 919 | ||||||
Deferred: | |||||||||
United States | |||||||||
Federal | (33 | ) | 595 | (279 | ) | ||||
State | (9 | ) | 25 | (9 | ) | ||||
Foreign | 76 | 27 | 15 | ||||||
Total Deferred | 34 | 647 | (273 | ) | |||||
TOTAL INCOME TAX EXPENSE | $ | 772 | $ | 2,392 | $ | 646 |
YEAR ENDED MAY 31, | ||||||
2019 | 2018 | 2017 | ||||
Federal income tax rate | 21.0 | % | 29.2 | % | 35.0 | % |
State taxes, net of federal benefit | 1.2 | % | 1.2 | % | 1.1 | % |
Foreign earnings | -2.1 | % | -17.5 | % | -20.7 | % |
Transition tax related to the Tax Act | — | % | 43.3 | % | — | % |
Remeasurement of deferred tax assets and liabilities related to the Tax Act | — | % | 3.7 | % | — | % |
Excess tax benefits from share-based compensation | -3.6 | % | -5.3 | % | — | % |
Resolution of a U.S. tax matter | — | % | — | % | -3.2 | % |
U.S. Research and Development tax credit | -1.1 | % | -0.6 | % | -0.6 | % |
Other, net | 0.7 | % | 1.3 | % | 1.6 | % |
EFFECTIVE INCOME TAX RATE | 16.1 | % | 55.3 | % | 13.2 | % |
AS OF MAY 31, | ||||||
(Dollars in millions) | 2019 | 2018 | ||||
Deferred tax assets: | ||||||
Inventories | $ | 66 | $ | 73 | ||
Sales return reserves | 128 | 104 | ||||
Deferred compensation | 271 | 250 | ||||
Stock-based compensation | 156 | 135 | ||||
Reserves and accrued liabilities | 101 | 102 | ||||
Net operating loss carry-forwards | 81 | 88 | ||||
Other | 125 | 106 | ||||
Total deferred tax assets | 928 | 858 | ||||
Valuation allowance | (88 | ) | (95 | ) | ||
Total deferred tax assets after valuation allowance | 840 | 763 | ||||
Deferred tax liabilities: | ||||||
Foreign withholding tax on undistributed earnings of foreign subsidiaries | (235 | ) | (155 | ) | ||
Property, plant and equipment | (188 | ) | (167 | ) | ||
Intangibles | (23 | ) | (77 | ) | ||
Other | (18 | ) | (26 | ) | ||
Total deferred tax liabilities | (464 | ) | (425 | ) | ||
NET DEFERRED TAX ASSET | $ | 376 | $ | 338 |
AS OF MAY 31, | |||||||||
(Dollars in millions) | 2019 | 2018 | 2017 | ||||||
Unrecognized tax benefits, beginning of the period | $ | 698 | $ | 461 | $ | 506 | |||
Gross increases related to prior period tax positions | 85 | 19 | 31 | ||||||
Gross decreases related to prior period tax positions | (32 | ) | (12 | ) | (163 | ) | |||
Gross increases related to current period tax positions | 81 | 249 | 115 | ||||||
Settlements | — | — | (12 | ) | |||||
Lapse of statute of limitations | (35 | ) | (20 | ) | (21 | ) | |||
Changes due to currency translation | 11 | 1 | 5 | ||||||
UNRECOGNIZED TAX BENEFITS, END OF THE PERIOD | $ | 808 | $ | 698 | $ | 461 |
YEAR ENDING MAY 31, | |||||||||||||||||||||
(Dollars in millions) | 2020 | 2021 | 2022 | 2023 | 2024-2039 | INDEFINITE | TOTAL | ||||||||||||||
Net operating losses | $ | 5 | $ | 2 | $ | 1 | $ | 26 | $ | 34 | $ | 189 | $ | 257 |
NOTE 2 — INVENTORIES |
AS OF MAY 31, | ||||||
(Dollars in millions) | 2019 | 2018 | ||||
United States | $ | 3,174 | $ | 2,930 | ||
Belgium | 618 | 534 | ||||
China | 242 | 262 |
NOTE 8 — LONG-TERM DEBT |
BOOK VALUE OUTSTANDING AS OF MAY 31, | ||||||||||||
Scheduled Maturity (Dollars and Yen in millions) | ORIGINAL PRINCIPAL | INTEREST RATE | INTEREST PAYMENTS | 2019 | 2018 | |||||||
Corporate Bond Payables:(1)(2) | ||||||||||||
May 1, 2023 | $ | 500 | 2.25 | % | Semi-Annually | $ | 498 | $ | 498 | |||
November 1, 2026 | 1,000 | 2.38 | % | Semi-Annually | 994 | 994 | ||||||
May 1, 2043 | 500 | 3.63 | % | Semi-Annually | 495 | 495 | ||||||
November 1, 2045 | 1,000 | 3.88 | % | Semi-Annually | 983 | 982 | ||||||
November 1, 2046 | 500 | 3.38 | % | Semi-Annually | 491 | 490 | ||||||
Japanese Yen Notes:(3) | ||||||||||||
August 20, 2001 through November 20, 2020 | ¥ | 9,000 | 2.60 | % | Quarterly | $ | 6 | $ | 10 | |||
August 20, 2001 through November 20, 2020 | 4,000 | 2.00 | % | Quarterly | 3 | 5 | ||||||
Total | 3,470 | 3,474 | ||||||||||
Less current maturities | 6 | 6 | ||||||||||
TOTAL LONG-TERM DEBT | $ | 3,464 | $ | 3,468 |
(1) | These senior unsecured obligations rank equally with the Company's other unsecured and unsubordinated indebtedness. |
(2) | The bonds are redeemable at the Company's option up to three months prior to the scheduled maturity date for the bonds maturing in 2023 and 2026, and up to six months prior to the scheduled maturity date for the bonds maturing in 2043, 2045 and 2046, at a price equal to the greater of (i) 100% of the aggregate principal amount of the notes to be redeemed or (ii) the sum of the present values of the remaining scheduled payments, plus in each case, accrued and unpaid interest. Within three and six months to scheduled maturity, respectively, the bonds also feature a par call provision, which allows for the bonds to be redeemed at a price equal to 100% of the aggregate principal amount of the notes being redeemed, plus accrued and unpaid interest. |
(3) | NIKE Logistics YK assumed a total of ¥13.0 billion in loans as part of its agreement to purchase a distribution center in Japan, which serves as collateral for the loans. These loans mature in equal quarterly installments during the period August 20, 2001 through November 20, 2020. |
AS OF MAY 31, 2019 | |||||||||
(Dollars in millions) | AS REPORTED | EFFECT OF ADOPTION | BALANCES WITHOUT ADOPTION OF TOPIC 606 | ||||||
Accounts receivable, net | $ | 4,272 | $ | 782 | $ | 3,490 | |||
Prepaid expenses and other current assets | 1,968 | 410 | 1,558 | ||||||
Total current assets | 16,525 | 1,192 | 15,333 | ||||||
TOTAL ASSETS | 23,717 | 1,192 | 22,525 | ||||||
Accrued liabilities | 5,010 | 1,192 | 3,818 | ||||||
Total current liabilities | 7,866 | 1,192 | 6,674 | ||||||
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY | $ | 23,717 | $ | 1,192 | $ | 22,525 |
NOTE 10 — REDEEMABLE PREFERRED STOCK |
NOTE 3 — PROPERTY, PLANT AND EQUIPMENT |
AS OF MAY 31, | ||||||
(Dollars in millions) | 2019 | 2018 | ||||
Land and improvements | $ | 329 | $ | 331 | ||
Buildings | 2,445 | 2,195 | ||||
Machinery, equipment and internal-use software | 4,335 | 4,230 | ||||
Leasehold improvements | 1,563 | 1,494 | ||||
Construction in process | 797 | 641 | ||||
Total property, plant and equipment, gross | 9,469 | 8,891 | ||||
Less accumulated depreciation | 4,725 | 4,437 | ||||
TOTAL PROPERTY, PLANT AND EQUIPMENT, NET | $ | 4,744 | $ | 4,454 |
AS OF MAY 31, | ||||||
(Dollars in millions) | 2019 | 2018 | ||||
Land and improvements | $ | 329 | $ | 331 | ||
Buildings | 2,445 | 2,195 | ||||
Machinery, equipment and internal-use software | 4,335 | 4,230 | ||||
Leasehold improvements | 1,563 | 1,494 | ||||
Construction in process | 797 | 641 | ||||
Total property, plant and equipment, gross | 9,469 | 8,891 | ||||
Less accumulated depreciation | 4,725 | 4,437 | ||||
TOTAL PROPERTY, PLANT AND EQUIPMENT, NET | $ | 4,744 | $ | 4,454 |
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 | ||||||
YEAR ENDED MAY 31, | |||||||
(Dollars in millions) | 2019 | 2018 | |||||
Gains (losses) on cash flow hedges: | |||||||
Foreign exchange forwards and options | $ | (5 | ) | $ | 34 | Revenues | |
Foreign exchange forwards and options | 53 | (90 | ) | Cost of sales | |||
Foreign exchange forwards and options | — | 1 | Demand creation expense | ||||
Foreign exchange forwards and options | 35 | (69 | ) | Other (income) expense, net | |||
Interest rate swaps | (7 | ) | (7 | ) | Interest expense (income), net | ||
Total before tax | 76 | (131 | ) | ||||
Tax (expense) benefit | (6 | ) | 3 | ||||
Gain (loss) net of tax | 70 | (128 | ) | ||||
Gains (losses) on other | 17 | (32 | ) | Other (income) expense, net | |||
Total before tax | 17 | (32 | ) | ||||
Tax (expense) benefit | — | — | |||||
Gain (loss) net of tax | 17 | (32 | ) | ||||
Total net gain (loss) reclassified for the period | $ | 87 | $ | (160 | ) |
AS OF MAY 31, | ||||||
(Dollars in millions) | 2019 | 2018 | ||||
ACCOUNTS RECEIVABLE, NET | ||||||
North America | $ | 1,718 | $ | 1,443 | ||
Europe, Middle East & Africa | 1,164 | 870 | ||||
Greater China | 245 | 101 | ||||
Asia Pacific & Latin America | 771 | 720 | ||||
Global Brand Divisions | 105 | 102 | ||||
Total NIKE Brand | 4,003 | 3,236 | ||||
Converse | 243 | 240 | ||||
Corporate | 26 | 22 | ||||
TOTAL ACCOUNTS RECEIVABLE, NET | $ | 4,272 | $ | 3,498 | ||
INVENTORIES | ||||||
North America | $ | 2,328 | $ | 2,270 | ||
Europe, Middle East & Africa | 1,390 | 1,433 | ||||
Greater China | 693 | 580 | ||||
Asia Pacific & Latin America | 694 | 687 | ||||
Global Brand Divisions | 126 | 91 | ||||
Total NIKE Brand | 5,231 | 5,061 | ||||
Converse | 269 | 268 | ||||
Corporate | 122 | (68 | ) | |||
TOTAL INVENTORIES | $ | 5,622 | $ | 5,261 | ||
PROPERTY, PLANT AND EQUIPMENT, NET | ||||||
North America | $ | 814 | $ | 848 | ||
Europe, Middle East & Africa | 929 | 849 | ||||
Greater China | 237 | 256 | ||||
Asia Pacific & Latin America | 326 | 339 | ||||
Global Brand Divisions | 665 | 597 | ||||
Total NIKE Brand | 2,971 | 2,889 | ||||
Converse | 100 | 115 | ||||
Corporate | 1,673 | 1,450 | ||||
TOTAL PROPERTY, PLANT AND EQUIPMENT, NET | $ | 4,744 | $ | 4,454 |
NOTE 16 — REVENUES |
YEAR ENDED MAY 31, 2019 | |||||||||||||||||||||||||||
(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 | $ | 10,045 | $ | 6,293 | $ | 4,262 | $ | 3,622 | $ | — | $ | 24,222 | $ | 1,658 | $ | — | $ | 25,880 | |||||||||
Apparel | 5,260 | 3,087 | 1,808 | 1,395 | — | 11,550 | 118 | — | 11,668 | ||||||||||||||||||
Equipment | 597 | 432 | 138 | 237 | — | 1,404 | 24 | — | 1,428 | ||||||||||||||||||
Other(1) | — | — | — | — | 42 | 42 | 106 | (7 | ) | 141 | |||||||||||||||||
TOTAL REVENUES | $ | 15,902 | $ | 9,812 | $ | 6,208 | $ | 5,254 | $ | 42 | $ | 37,218 | $ | 1,906 | $ | (7 | ) | $ | 39,117 | ||||||||
Revenues by: | |||||||||||||||||||||||||||
Sales to Wholesale Customers | $ | 10,875 | $ | 7,076 | $ | 3,726 | $ | 3,746 | $ | — | $ | 25,423 | $ | 1,247 | $ | — | $ | 26,670 | |||||||||
Sales through Direct to Consumer | 5,027 | 2,736 | 2,482 | 1,508 | — | 11,753 | 553 | — | 12,306 | ||||||||||||||||||
Other(1) | — | — | — | — | 42 | 42 | 106 | (7 | ) | 141 | |||||||||||||||||
TOTAL REVENUES | $ | 15,902 | $ | 9,812 | $ | 6,208 | $ | 5,254 | $ | 42 | $ | 37,218 | $ | 1,906 | $ | (7 | ) | $ | 39,117 |
(1) | Other revenues for Global Brand Divisions and Converse are primarily attributable to licensing businesses. Other revenues for Corporate primarily consist 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 MAY 31, 2019 | |||||||||
(Dollars in millions) | AS REPORTED | EFFECT OF ADOPTION | BALANCES WITHOUT ADOPTION OF TOPIC 606 | ||||||
Accounts receivable, net | $ | 4,272 | $ | 782 | $ | 3,490 | |||
Prepaid expenses and other current assets | 1,968 | 410 | 1,558 | ||||||
Total current assets | 16,525 | 1,192 | 15,333 | ||||||
TOTAL ASSETS | 23,717 | 1,192 | 22,525 | ||||||
Accrued liabilities | 5,010 | 1,192 | 3,818 | ||||||
Total current liabilities | 7,866 | 1,192 | 6,674 | ||||||
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY | $ | 23,717 | $ | 1,192 | $ | 22,525 |
AS OF MAY 31, | ||||||
(Dollars in millions) | 2019 | 2018 | ||||
Compensation and benefits, excluding taxes | $ | 1,232 | $ | 897 | ||
Sales-related reserves(1) | 1,218 | 20 | ||||
Endorsement compensation | 424 | 425 | ||||
Dividends payable | 346 | 320 | ||||
Import and logistics costs | 296 | 268 | ||||
Collateral received from counterparties to hedging instruments | 289 | 23 | ||||
Taxes other than income taxes payable | 234 | 224 | ||||
Advertising and marketing | 114 | 140 | ||||
Fair value of derivatives | 52 | 184 | ||||
Other(2) | 805 | 768 | ||||
TOTAL ACCRUED LIABILITIES | $ | 5,010 | $ | 3,269 |
(1) | Sales-related reserves as of May 31, 2019 reflect the Company's fiscal 2019 adoption of Topic 606. As of May 31, 2018, Sales-related reserves reflect the Company's prior accounting under Topic 605. Refer to Note 1 — Summary of Significant Accounting Policies for additional information on the adoption of the new standard. |
(2) | Other consists of various accrued expenses with no individual item accounting for more than 5% of the total Accrued liabilities balance at May 31, 2019 and 2018. |
(Dollars in millions) | FOREIGN CURRENCY TRANSLATION ADJUSTMENT(1) | CASH FLOW HEDGES | NET INVESTMENT HEDGES(1) | OTHER | TOTAL | ||||||||||
Balance at May 31, 2018 | $ | (173 | ) | $ | 17 | $ | 115 | $ | (51 | ) | $ | (92 | ) | ||
Other comprehensive income (loss): | |||||||||||||||
Other comprehensive gains (losses) before reclassifications(2) | (173 | ) | 573 | — | 10 | 410 | |||||||||
Reclassifications to net income of previously deferred (gains) losses(3) | — | (70 | ) | — | (17 | ) | (87 | ) | |||||||
Total other comprehensive income (loss) | (173 | ) | 503 | — | (7 | ) | 323 | ||||||||
Balance at May 31, 2019 | $ | (346 | ) | $ | 520 | $ | 115 | $ | (58 | ) | $ | 231 |
(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, $(4) million, $0 million, $1 million and $(3) million, respectively. |
(3) | Net of tax (benefit) expense of $0 million, $6 million, $0 million, $0 million and $6 million, respectively. |
(Dollars in millions) | FOREIGN CURRENCY TRANSLATION ADJUSTMENT(1) | CASH FLOW HEDGES | NET INVESTMENT HEDGES(1) | OTHER | TOTAL | ||||||||||
Balance at May 31, 2017 | $ | (191 | ) | $ | (52 | ) | $ | 115 | $ | (85 | ) | $ | (213 | ) | |
Other comprehensive income (loss): | |||||||||||||||
Other comprehensive gains (losses) before reclassifications(2) | (6 | ) | (52 | ) | — | 2 | (56 | ) | |||||||
Reclassifications to net income of previously deferred (gains) losses(3) | — | 128 | — | 32 | 160 | ||||||||||
Total other comprehensive income (loss) | (6 | ) | 76 | — | 34 | 104 | |||||||||
Reclassifications to retained earnings in accordance with ASU 2018-02(4) | 24 | (7 | ) | — | — | 17 | |||||||||
Balance at May 31, 2018 | $ | (173 | ) | $ | 17 | $ | 115 | $ | (51 | ) | $ | (92 | ) |
(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 $(24) million, $(3) million, $0 million, $(4) million and $(31) million, respectively. |
(3) | Net of tax (benefit) expense of $0 million, $(3) million, $0 million, $0 million and $(3) million, respectively. |
(4) | Refer to Note 1 — Summary of Significant Accounting Policies for additional information on the adoption of ASU 2018-02 during the third quarter of fiscal 2018. |
YEAR ENDED MAY 31, | |||||||||
(Dollars in millions) | 2019 | 2018 | 2017 | ||||||
Stock options(1) | $ | 207 | $ | 149 | $ | 145 | |||
ESPPs | 40 | 34 | 36 | ||||||
Restricted stock | 78 | 35 | 34 | ||||||
TOTAL STOCK-BASED COMPENSATION EXPENSE | $ | 325 | $ | 218 | $ | 215 |
(1) | Expense for stock options includes the expense associated with stock appreciation rights. Accelerated stock option expense is recorded for employees meeting certain retirement eligibility requirements. Accelerated stock option expense was $41 million, $18 million and $14 million for the years ended May 31, 2019, 2018 and 2017, respectively. |
YEAR ENDED MAY 31, | |||||||||
(Dollars in millions) | 2019 | 2018 | 2017 | ||||||
Current: | |||||||||
United States | |||||||||
Federal | $ | 74 | $ | 1,167 | $ | 398 | |||
State | 56 | 45 | 82 | ||||||
Foreign | 608 | 533 | 439 | ||||||
Total Current | 738 | 1,745 | 919 | ||||||
Deferred: | |||||||||
United States | |||||||||
Federal | (33 | ) | 595 | (279 | ) | ||||
State | (9 | ) | 25 | (9 | ) | ||||
Foreign | 76 | 27 | 15 | ||||||
Total Deferred | 34 | 647 | (273 | ) | |||||
TOTAL INCOME TAX EXPENSE | $ | 772 | $ | 2,392 | $ | 646 |
BOOK VALUE OUTSTANDING AS OF MAY 31, | ||||||||||||
Scheduled Maturity (Dollars and Yen in millions) | ORIGINAL PRINCIPAL | INTEREST RATE | INTEREST PAYMENTS | 2019 | 2018 | |||||||
Corporate Bond Payables:(1)(2) | ||||||||||||
May 1, 2023 | $ | 500 | 2.25 | % | Semi-Annually | $ | 498 | $ | 498 | |||
November 1, 2026 | 1,000 | 2.38 | % | Semi-Annually | 994 | 994 | ||||||
May 1, 2043 | 500 | 3.63 | % | Semi-Annually | 495 | 495 | ||||||
November 1, 2045 | 1,000 | 3.88 | % | Semi-Annually | 983 | 982 | ||||||
November 1, 2046 | 500 | 3.38 | % | Semi-Annually | 491 | 490 | ||||||
Japanese Yen Notes:(3) | ||||||||||||
August 20, 2001 through November 20, 2020 | ¥ | 9,000 | 2.60 | % | Quarterly | $ | 6 | $ | 10 | |||
August 20, 2001 through November 20, 2020 | 4,000 | 2.00 | % | Quarterly | 3 | 5 | ||||||
Total | 3,470 | 3,474 | ||||||||||
Less current maturities | 6 | 6 | ||||||||||
TOTAL LONG-TERM DEBT | $ | 3,464 | $ | 3,468 |
(1) | These senior unsecured obligations rank equally with the Company's other unsecured and unsubordinated indebtedness. |
(2) | The bonds are redeemable at the Company's option up to three months prior to the scheduled maturity date for the bonds maturing in 2023 and 2026, and up to six months prior to the scheduled maturity date for the bonds maturing in 2043, 2045 and 2046, at a price equal to the greater of (i) 100% of the aggregate principal amount of the notes to be redeemed or (ii) the sum of the present values of the remaining scheduled payments, plus in each case, accrued and unpaid interest. Within three and six months to scheduled maturity, respectively, the bonds also feature a par call provision, which allows for the bonds to be redeemed at a price equal to 100% of the aggregate principal amount of the notes being redeemed, plus accrued and unpaid interest. |
(3) | NIKE Logistics YK assumed a total of ¥13.0 billion in loans as part of its agreement to purchase a distribution center in Japan, which serves as collateral for the loans. These loans mature in equal quarterly installments during the period August 20, 2001 through November 20, 2020. |
AS OF MAY 31, | ||||||
(Dollars in millions) | 2019 | 2018 | ||||
Deferred tax assets: | ||||||
Inventories | $ | 66 | $ | 73 | ||
Sales return reserves | 128 | 104 | ||||
Deferred compensation | 271 | 250 | ||||
Stock-based compensation | 156 | 135 | ||||
Reserves and accrued liabilities | 101 | 102 | ||||
Net operating loss carry-forwards | 81 | 88 | ||||
Other | 125 | 106 | ||||
Total deferred tax assets | 928 | 858 | ||||
Valuation allowance | (88 | ) | (95 | ) | ||
Total deferred tax assets after valuation allowance | 840 | 763 | ||||
Deferred tax liabilities: | ||||||
Foreign withholding tax on undistributed earnings of foreign subsidiaries | (235 | ) | (155 | ) | ||
Property, plant and equipment | (188 | ) | (167 | ) | ||
Intangibles | (23 | ) | (77 | ) | ||
Other | (18 | ) | (26 | ) | ||
Total deferred tax liabilities | (464 | ) | (425 | ) | ||
NET DEFERRED TAX ASSET | $ | 376 | $ | 338 |
(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) | |||||||||||||||||||
YEAR ENDED MAY 31, | LOCATION OF GAIN (LOSS) RECLASSIFIED FROM ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) INTO INCOME | YEAR ENDED MAY 31, | |||||||||||||||||||
2019 | 2018 | 2017 | 2019 | 2018 | 2017 | ||||||||||||||||
Derivatives designated as cash flow hedges: | |||||||||||||||||||||
Foreign exchange forwards and options | $ | 14 | $ | 19 | $ | 72 | Revenues | $ | (5 | ) | $ | 34 | $ | 96 | |||||||
Foreign exchange forwards and options | 405 | (50 | ) | 43 | Cost of sales | 53 | (90 | ) | 339 | ||||||||||||
Foreign exchange forwards and options | 2 | 1 | (4 | ) | Demand creation expense | — | 1 | — | |||||||||||||
Foreign exchange forwards and options | 156 | (19 | ) | 37 | Other (income) expense, net | 35 | (69 | ) | 199 | ||||||||||||
Interest rate swaps(2) | — | — | (54 | ) | Interest expense (income), net | (7 | ) | (7 | ) | (4 | ) | ||||||||||
Total designated cash flow hedges | $ | 577 | $ | (49 | ) | $ | 94 | $ | 76 | $ | (131 | ) | $ | 630 |
(1) | For the years ended May 31, 2019, 2018 and 2017, 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 | ||||||||||
YEAR ENDED MAY 31, | |||||||||||
(Dollars in millions) | 2019 | 2018 | 2017 | ||||||||
Derivatives not designated as hedging instruments: | |||||||||||
Foreign exchange forwards and options | $ | 166 | $ | (57 | ) | $ | (44 | ) | Other (income) expense, net | ||
Embedded derivatives | 7 | (4 | ) | (2 | ) | Other (income) expense, net |
AS OF MAY 31, 2019 | |||||||||||||||||||
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) | $ | 611 | $ | 611 | $ | — | $ | 51 | $ | 51 | $ | — | |||||||
Embedded derivatives | 11 | 5 | 6 | 3 | 1 | 2 | |||||||||||||
TOTAL | $ | 622 | $ | 616 | $ | 6 | $ | 54 | $ | 52 | $ | 2 |
(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 $50 million as of May 31, 2019. As of that date, the Company had received $289 million of cash collateral from various counterparties related to foreign exchange derivative instruments. No amount of collateral was posted on the Company's derivative liability balance as of May 31, 2019. |
AS OF MAY 31, 2018 | |||||||||||||||||||
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) | $ | 389 | $ | 237 | $ | 152 | $ | 182 | $ | 182 | $ | — | |||||||
Embedded derivatives | 11 | 3 | 8 | 8 | 2 | 6 | |||||||||||||
TOTAL | $ | 400 | $ | 240 | $ | 160 | $ | 190 | $ | 184 | $ | 6 |
(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 $182 million as of May 31, 2018. As of that date, the Company had received $23 million of cash collateral from various counterparties related to foreign exchange derivative instruments. No amount of collateral was posted on the Company's derivative liability balance as of May 31, 2018. |
DERIVATIVE ASSETS | DERIVATIVE LIABILITIES | ||||||||||||||
BALANCE SHEET LOCATION | AS OF MAY 31, | BALANCE SHEET LOCATION | AS OF MAY 31, | ||||||||||||
(Dollars in millions) | 2019 | 2018 | 2019 | 2018 | |||||||||||
Derivatives formally designated as hedging instruments: | |||||||||||||||
Foreign exchange forwards and options | Prepaid expenses and other current assets | $ | 509 | $ | 118 | Accrued liabilities | $ | 5 | $ | 156 | |||||
Foreign exchange forwards and options | Deferred income taxes and other assets | — | 152 | Deferred income taxes and other liabilities | — | — | |||||||||
Total derivatives formally designated as hedging instruments | 509 | 270 | 5 | 156 | |||||||||||
Derivatives not designated as hedging instruments: | |||||||||||||||
Foreign exchange forwards and options | Prepaid expenses and other current assets | 102 | 119 | Accrued liabilities | 46 | 26 | |||||||||
Embedded derivatives | Prepaid expenses and other current assets | 5 | 3 | Accrued liabilities | 1 | 2 | |||||||||
Embedded derivatives | Deferred income taxes and other assets | 6 | 8 | Deferred income taxes and other liabilities | 2 | 6 | |||||||||
Total derivatives not designated as hedging instruments | 113 | 130 | 49 | 34 | |||||||||||
TOTAL DERIVATIVES | $ | 622 | $ | 400 | $ | 54 | $ | 190 |
YEAR ENDED MAY 31, | |||||||||
(Dollars in millions, except per share data) | 2019 | 2018 | 2017 | ||||||
Net income available to common stockholders | $ | 4,029 | $ | 1,933 | $ | 4,240 | |||
Determination of shares: | |||||||||
Weighted average common shares outstanding | 1,579.7 | 1,623.8 | 1,657.8 | ||||||
Assumed conversion of dilutive stock options and awards | 38.7 | 35.3 | 34.2 | ||||||
DILUTED WEIGHTED AVERAGE COMMON SHARES OUTSTANDING | 1,618.4 | 1,659.1 | 1,692.0 | ||||||
Earnings per common share: | |||||||||
Basic | $ | 2.55 | $ | 1.19 | $ | 2.56 | |||
Diluted | $ | 2.49 | $ | 1.17 | $ | 2.51 |
YEAR ENDED MAY 31, | ||||||
2019 | 2018 | 2017 | ||||
Federal income tax rate | 21.0 | % | 29.2 | % | 35.0 | % |
State taxes, net of federal benefit | 1.2 | % | 1.2 | % | 1.1 | % |
Foreign earnings | -2.1 | % | -17.5 | % | -20.7 | % |
Transition tax related to the Tax Act | — | % | 43.3 | % | — | % |
Remeasurement of deferred tax assets and liabilities related to the Tax Act | — | % | 3.7 | % | — | % |
Excess tax benefits from share-based compensation | -3.6 | % | -5.3 | % | — | % |
Resolution of a U.S. tax matter | — | % | — | % | -3.2 | % |
U.S. Research and Development tax credit | -1.1 | % | -0.6 | % | -0.6 | % |
Other, net | 0.7 | % | 1.3 | % | 1.6 | % |
EFFECTIVE INCOME TAX RATE | 16.1 | % | 55.3 | % | 13.2 | % |
AS OF MAY 31, 2019 | |||||||||
(Dollars in millions) | ASSETS AT FAIR VALUE | CASH AND EQUIVALENTS | SHORT-TERM INVESTMENTS | ||||||
Cash | $ | 853 | $ | 853 | $ | — | |||
Level 1: | |||||||||
U.S. Treasury securities | 347 | 200 | 147 | ||||||
Level 2: | |||||||||
Commercial paper and bonds | 34 | 1 | 33 | ||||||
Money market funds | 1,637 | 1,637 | — | ||||||
Time deposits | 1,791 | 1,775 | 16 | ||||||
U.S. Agency securities | 1 | — | 1 | ||||||
Total Level 2 | 3,463 | 3,413 | 50 | ||||||
TOTAL | $ | 4,663 | $ | 4,466 | $ | 197 |
AS OF MAY 31, 2018 | |||||||||
(Dollars in millions) | ASSETS AT FAIR VALUE | CASH AND EQUIVALENTS | SHORT-TERM INVESTMENTS | ||||||
Cash | $ | 415 | $ | 415 | $ | — | |||
Level 1: | |||||||||
U.S. Treasury securities | 1,178 | 500 | 678 | ||||||
Level 2: | |||||||||
Commercial paper and bonds | 451 | 153 | 298 | ||||||
Money market funds | 2,174 | 2,174 | — | ||||||
Time deposits | 925 | 907 | 18 | ||||||
U.S. Agency securities | 102 | 100 | 2 | ||||||
Total Level 2 | 3,652 | 3,334 | 318 | ||||||
TOTAL | $ | 5,245 | $ | 4,249 | $ | 996 |
AS OF MAY 31, | |||||||||||||||||||
2019 | 2018 | ||||||||||||||||||
(Dollars in millions) | GROSS CARRYING AMOUNT | ACCUMULATED AMORTIZATION | NET CARRYING AMOUNT | GROSS CARRYING AMOUNT | ACCUMULATED AMORTIZATION | NET CARRYING AMOUNT | |||||||||||||
Indefinite-lived trademarks | $ | 281 | $ | — | $ | 281 | $ | 281 | $ | — | $ | 281 | |||||||
Acquired trademarks and other | 22 | 20 | 2 | 22 | 18 | 4 | |||||||||||||
IDENTIFIABLE INTANGIBLE ASSETS, NET | $ | 303 | $ | 20 | $ | 283 | $ | 303 | $ | 18 | $ | 285 |
YEAR ENDING MAY 31, | |||||||||||||||||||||
(Dollars in millions) | 2020 | 2021 | 2022 | 2023 | 2024 | THEREAFTER | TOTAL | ||||||||||||||
Operating leases | $ | 553 | $ | 513 | $ | 441 | $ | 386 | $ | 345 | $ | 1,494 | $ | 3,732 | |||||||
Capital leases and other financing obligations(1) | 32 | 34 | 40 | 37 | 34 | 197 | 374 |
(1) | Capital leases and other financing obligations include payments related to build-to-suit lease arrangements. |
YEAR ENDING MAY 31, | |||||||||||||||||||||
(Dollars in millions) | 2020 | 2021 | 2022 | 2023 | 2024 | THEREAFTER | TOTAL | ||||||||||||||
Operating leases | $ | 553 | $ | 513 | $ | 441 | $ | 386 | $ | 345 | $ | 1,494 | $ | 3,732 | |||||||
Capital leases and other financing obligations(1) | 32 | 34 | 40 | 37 | 34 | 197 | 374 |
(1) | Capital leases and other financing obligations include payments related to build-to-suit lease arrangements. |
YEAR ENDED MAY 31, | |||||||||
(Dollars in millions) | 2019 | 2018 | 2017 | ||||||
Income before income taxes: | |||||||||
United States | $ | 593 | $ | 744 | $ | 1,240 | |||
Foreign | 4,208 | 3,581 | 3,646 | ||||||
TOTAL INCOME BEFORE INCOME TAXES | $ | 4,801 | $ | 4,325 | $ | 4,886 |
AS OF MAY 31, | |||||||||||||||||||
2019 | 2018 | ||||||||||||||||||
(Dollars in millions) | GROSS CARRYING AMOUNT | ACCUMULATED AMORTIZATION | NET CARRYING AMOUNT | GROSS CARRYING AMOUNT | ACCUMULATED AMORTIZATION | NET CARRYING AMOUNT | |||||||||||||
Indefinite-lived trademarks | $ | 281 | $ | — | $ | 281 | $ | 281 | $ | — | $ | 281 | |||||||
Acquired trademarks and other | 22 | 20 | 2 | 22 | 18 | 4 | |||||||||||||
IDENTIFIABLE INTANGIBLE ASSETS, NET | $ | 303 | $ | 20 | $ | 283 | $ | 303 | $ | 18 | $ | 285 |
AS OF MAY 31, 2019 | |||||||||
(Dollars in millions) | AS REPORTED | EFFECT OF ADOPTION | BALANCES WITHOUT ADOPTION OF TOPIC 606 | ||||||
Accounts receivable, net | $ | 4,272 | $ | 782 | $ | 3,490 | |||
Prepaid expenses and other current assets | 1,968 | 410 | 1,558 | ||||||
Total current assets | 16,525 | 1,192 | 15,333 | ||||||
TOTAL ASSETS | 23,717 | 1,192 | 22,525 | ||||||
Accrued liabilities | 5,010 | 1,192 | 3,818 | ||||||
Total current liabilities | 7,866 | 1,192 | 6,674 | ||||||
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY | $ | 23,717 | $ | 1,192 | $ | 22,525 |
YEAR ENDED MAY 31, | |||||||||
(Dollars in millions) | 2019 | 2018 | 2017 | ||||||
REVENUES | |||||||||
North America | $ | 15,902 | $ | 14,855 | $ | 15,216 | |||
Europe, Middle East & Africa | 9,812 | 9,242 | 7,970 | ||||||
Greater China | 6,208 | 5,134 | 4,237 | ||||||
Asia Pacific & Latin America | 5,254 | 5,166 | 4,737 | ||||||
Global Brand Divisions | 42 | 88 | 73 | ||||||
Total NIKE Brand | 37,218 | 34,485 | 32,233 | ||||||
Converse | 1,906 | 1,886 | 2,042 | ||||||
Corporate | (7 | ) | 26 | 75 | |||||
TOTAL NIKE, INC. REVENUES | $ | 39,117 | $ | 36,397 | $ | 34,350 | |||
EARNINGS BEFORE INTEREST AND TAXES | |||||||||
North America | $ | 3,925 | $ | 3,600 | $ | 3,875 | |||
Europe, Middle East & Africa | 1,995 | 1,587 | 1,507 | ||||||
Greater China | 2,376 | 1,807 | 1,507 | ||||||
Asia Pacific & Latin America | 1,323 | 1,189 | 980 | ||||||
Global Brand Divisions | (3,262 | ) | (2,658 | ) | (2,677 | ) | |||
Total NIKE Brand | 6,357 | 5,525 | 5,192 | ||||||
Converse | 303 | 310 | 477 | ||||||
Corporate | (1,810 | ) | (1,456 | ) | (724 | ) | |||
Total NIKE, Inc. Earnings Before Interest and Taxes | 4,850 | 4,379 | 4,945 | ||||||
Interest expense (income), net | 49 | 54 | 59 | ||||||
TOTAL NIKE, INC. INCOME BEFORE INCOME TAXES | $ | 4,801 | $ | 4,325 | $ | 4,886 | |||
ADDITIONS TO LONG-LIVED ASSETS | |||||||||
North America | $ | 117 | $ | 196 | $ | 223 | |||
Europe, Middle East & Africa | 233 | 240 | 173 | ||||||
Greater China | 49 | 76 | 51 | ||||||
Asia Pacific & Latin America | 47 | 49 | 59 | ||||||
Global Brand Divisions | 278 | 286 | 278 | ||||||
Total NIKE Brand | 724 | 847 | 784 | ||||||
Converse | 18 | 22 | 30 | ||||||
Corporate | 333 | 325 | 387 | ||||||
TOTAL ADDITIONS TO LONG-LIVED ASSETS | $ | 1,075 | $ | 1,194 | $ | 1,201 | |||
DEPRECIATION | |||||||||
North America | $ | 149 | $ | 160 | $ | 140 | |||
Europe, Middle East & Africa | 111 | 116 | 106 | ||||||
Greater China | 50 | 56 | 54 | ||||||
Asia Pacific & Latin America | 53 | 55 | 54 | ||||||
Global Brand Divisions | 195 | 217 | 233 | ||||||
Total NIKE Brand | 558 | 604 | 587 | ||||||
Converse | 31 | 33 | 28 | ||||||
Corporate | 116 | 110 | 91 | ||||||
TOTAL DEPRECIATION | $ | 705 | $ | 747 | $ | 706 |
SHARES(1) | WEIGHTED AVERAGE OPTION PRICE | ||||
(In millions) | |||||
Options outstanding as of May 31, 2018 | 93.2 | $ | 40.73 | ||
Exercised | (18.2 | ) | 29.70 | ||
Forfeited | (1.8 | ) | 66.66 | ||
Granted | 18.1 | 81.79 | |||
Options outstanding as of May 31, 2019 | 91.3 | $ | 50.59 |
(1) | Includes stock appreciation rights transactions. |
YEAR ENDED MAY 31, | ||||||
2019 | 2018 | 2017 | ||||
Dividend yield | 1.0 | % | 1.2 | % | 1.1 | % |
Expected volatility | 26.6 | % | 16.4 | % | 17.4 | % |
Weighted average expected life (in years) | 6.0 | 6.0 | 6.0 | |||
Risk-free interest rate | 2.8 | % | 2.0 | % | 1.3 | % |
SHARES | WEIGHTED AVERAGE GRANT DATE FAIR VALUE | |||||
(In millions) | ||||||
Nonvested as of May 31, 2018 | 2.8 | $ | 59.14 | |||
Vested | (0.6 | ) | 59.01 | |||
Forfeited | (0.3 | ) | 66.24 | |||
Granted | 2.5 | 80.95 | ||||
Nonvested as of May 31, 2019 | 4.4 | $ | 70.93 |
AS OF MAY 31, | |||||||||||||
2019 | 2018 | ||||||||||||
(Dollars in millions) | BORROWINGS | INTEREST RATE | BORROWINGS | INTEREST RATE | |||||||||
Notes payable: | |||||||||||||
Commercial paper | $ | — | 0.00 | % | $ | 325 | 1.77 | % | |||||
U.S. operations | 2 | 0.00 | % | (1) | 1 | 0.00 | % | (1) | |||||
Non-U.S. operations | 7 | 26.00 | % | (1) | 10 | 18.11 | % | (1) | |||||
TOTAL NOTES PAYABLE | $ | 9 | $ | 336 | |||||||||
Interest-bearing accounts payable: | |||||||||||||
Sojitz America | $ | 75 | 3.27 | % | $ | 61 | 2.82 | % |
(1) | Weighted average interest rate includes non-interest bearing overdrafts. |
NOTE 17 — OPERATING SEGMENTS AND RELATED INFORMATION |
YEAR ENDED MAY 31, | |||||||||
(Dollars in millions) | 2019 | 2018 | 2017 | ||||||
REVENUES | |||||||||
North America | $ | 15,902 | $ | 14,855 | $ | 15,216 | |||
Europe, Middle East & Africa | 9,812 | 9,242 | 7,970 | ||||||
Greater China | 6,208 | 5,134 | 4,237 | ||||||
Asia Pacific & Latin America | 5,254 | 5,166 | 4,737 | ||||||
Global Brand Divisions | 42 | 88 | 73 | ||||||
Total NIKE Brand | 37,218 | 34,485 | 32,233 | ||||||
Converse | 1,906 | 1,886 | 2,042 | ||||||
Corporate | (7 | ) | 26 | 75 | |||||
TOTAL NIKE, INC. REVENUES | $ | 39,117 | $ | 36,397 | $ | 34,350 | |||
EARNINGS BEFORE INTEREST AND TAXES | |||||||||
North America | $ | 3,925 | $ | 3,600 | $ | 3,875 | |||
Europe, Middle East & Africa | 1,995 | 1,587 | 1,507 | ||||||
Greater China | 2,376 | 1,807 | 1,507 | ||||||
Asia Pacific & Latin America | 1,323 | 1,189 | 980 | ||||||
Global Brand Divisions | (3,262 | ) | (2,658 | ) | (2,677 | ) | |||
Total NIKE Brand | 6,357 | 5,525 | 5,192 | ||||||
Converse | 303 | 310 | 477 | ||||||
Corporate | (1,810 | ) | (1,456 | ) | (724 | ) | |||
Total NIKE, Inc. Earnings Before Interest and Taxes | 4,850 | 4,379 | 4,945 | ||||||
Interest expense (income), net | 49 | 54 | 59 | ||||||
TOTAL NIKE, INC. INCOME BEFORE INCOME TAXES | $ | 4,801 | $ | 4,325 | $ | 4,886 | |||
ADDITIONS TO LONG-LIVED ASSETS | |||||||||
North America | $ | 117 | $ | 196 | $ | 223 | |||
Europe, Middle East & Africa | 233 | 240 | 173 | ||||||
Greater China | 49 | 76 | 51 | ||||||
Asia Pacific & Latin America | 47 | 49 | 59 | ||||||
Global Brand Divisions | 278 | 286 | 278 | ||||||
Total NIKE Brand | 724 | 847 | 784 | ||||||
Converse | 18 | 22 | 30 | ||||||
Corporate | 333 | 325 | 387 | ||||||
TOTAL ADDITIONS TO LONG-LIVED ASSETS | $ | 1,075 | $ | 1,194 | $ | 1,201 | |||
DEPRECIATION | |||||||||
North America | $ | 149 | $ | 160 | $ | 140 | |||
Europe, Middle East & Africa | 111 | 116 | 106 | ||||||
Greater China | 50 | 56 | 54 | ||||||
Asia Pacific & Latin America | 53 | 55 | 54 | ||||||
Global Brand Divisions | 195 | 217 | 233 | ||||||
Total NIKE Brand | 558 | 604 | 587 | ||||||
Converse | 31 | 33 | 28 | ||||||
Corporate | 116 | 110 | 91 | ||||||
TOTAL DEPRECIATION | $ | 705 | $ | 747 | $ | 706 |
AS OF MAY 31, | ||||||
(Dollars in millions) | 2019 | 2018 | ||||
ACCOUNTS RECEIVABLE, NET | ||||||
North America | $ | 1,718 | $ | 1,443 | ||
Europe, Middle East & Africa | 1,164 | 870 | ||||
Greater China | 245 | 101 | ||||
Asia Pacific & Latin America | 771 | 720 | ||||
Global Brand Divisions | 105 | 102 | ||||
Total NIKE Brand | 4,003 | 3,236 | ||||
Converse | 243 | 240 | ||||
Corporate | 26 | 22 | ||||
TOTAL ACCOUNTS RECEIVABLE, NET | $ | 4,272 | $ | 3,498 | ||
INVENTORIES | ||||||
North America | $ | 2,328 | $ | 2,270 | ||
Europe, Middle East & Africa | 1,390 | 1,433 | ||||
Greater China | 693 | 580 | ||||
Asia Pacific & Latin America | 694 | 687 | ||||
Global Brand Divisions | 126 | 91 | ||||
Total NIKE Brand | 5,231 | 5,061 | ||||
Converse | 269 | 268 | ||||
Corporate | 122 | (68 | ) | |||
TOTAL INVENTORIES | $ | 5,622 | $ | 5,261 | ||
PROPERTY, PLANT AND EQUIPMENT, NET | ||||||
North America | $ | 814 | $ | 848 | ||
Europe, Middle East & Africa | 929 | 849 | ||||
Greater China | 237 | 256 | ||||
Asia Pacific & Latin America | 326 | 339 | ||||
Global Brand Divisions | 665 | 597 | ||||
Total NIKE Brand | 2,971 | 2,889 | ||||
Converse | 100 | 115 | ||||
Corporate | 1,673 | 1,450 | ||||
TOTAL PROPERTY, PLANT AND EQUIPMENT, NET | $ | 4,744 | $ | 4,454 |
AS OF MAY 31, | ||||||
(Dollars in millions) | 2019 | 2018 | ||||
United States | $ | 3,174 | $ | 2,930 | ||
Belgium | 618 | 534 | ||||
China | 242 | 262 |
NOTE 7 — SHORT-TERM BORROWINGS AND CREDIT LINES |
AS OF MAY 31, | |||||||||||||
2019 | 2018 | ||||||||||||
(Dollars in millions) | BORROWINGS | INTEREST RATE | BORROWINGS | INTEREST RATE | |||||||||
Notes payable: | |||||||||||||
Commercial paper | $ | — | 0.00 | % | $ | 325 | 1.77 | % | |||||
U.S. operations | 2 | 0.00 | % | (1) | 1 | 0.00 | % | (1) | |||||
Non-U.S. operations | 7 | 26.00 | % | (1) | 10 | 18.11 | % | (1) | |||||
TOTAL NOTES PAYABLE | $ | 9 | $ | 336 | |||||||||
Interest-bearing accounts payable: | |||||||||||||
Sojitz America | $ | 75 | 3.27 | % | $ | 61 | 2.82 | % |
(1) | Weighted average interest rate includes non-interest bearing overdrafts. |
NOTE 1 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
• | Level 1: Quoted prices in active markets for identical assets or liabilities. |
• | Level 2: Inputs other than quoted prices that are observable for the asset or liability, either directly or indirectly; these include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active. |
• | Level 3: Unobservable inputs with little or no market data available, which require the reporting entity to develop its own assumptions. |
AS OF MAY 31, 2019 | |||||||||
(Dollars in millions) | AS REPORTED | EFFECT OF ADOPTION | BALANCES WITHOUT ADOPTION OF TOPIC 606 | ||||||
Accounts receivable, net | $ | 4,272 | $ | 782 | $ | 3,490 | |||
Prepaid expenses and other current assets | 1,968 | 410 | 1,558 | ||||||
Total current assets | 16,525 | 1,192 | 15,333 | ||||||
TOTAL ASSETS | 23,717 | 1,192 | 22,525 | ||||||
Accrued liabilities | 5,010 | 1,192 | 3,818 | ||||||
Total current liabilities | 7,866 | 1,192 | 6,674 | ||||||
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY | $ | 23,717 | $ | 1,192 | $ | 22,525 |
AS OF MAY 31, | |||||||||
(Dollars in millions) | 2019 | 2018 | 2017 | ||||||
Unrecognized tax benefits, beginning of the period | $ | 698 | $ | 461 | $ | 506 | |||
Gross increases related to prior period tax positions | 85 | 19 | 31 | ||||||
Gross decreases related to prior period tax positions | (32 | ) | (12 | ) | (163 | ) | |||
Gross increases related to current period tax positions | 81 | 249 | 115 | ||||||
Settlements | — | — | (12 | ) | |||||
Lapse of statute of limitations | (35 | ) | (20 | ) | (21 | ) | |||
Changes due to currency translation | 11 | 1 | 5 | ||||||
UNRECOGNIZED TAX BENEFITS, END OF THE PERIOD | $ | 808 | $ | 698 | $ | 461 |
YEAR ENDING MAY 31, | |||||||||||||||||||||
(Dollars in millions) | 2020 | 2021 | 2022 | 2023 | 2024-2039 | INDEFINITE | TOTAL | ||||||||||||||
Net operating losses | $ | 5 | $ | 2 | $ | 1 | $ | 26 | $ | 34 | $ | 189 | $ | 257 |