NIKE, Inc. Consolidated Statements of Income On millions, except per share data) 2018 Year Ended May 31, 2017 2016 Revenues Cost of sales 36,397 $ 34,350 $ 32,376 20.441 19,038 17,405 Gross profit Demand creation expense Operating overhead expense Total selling and administrative expense Interest expense income), net Other expense (income), net Income before income taxes 15,956 15,312 14,971 3,577 3,341 3,278 7.934 7,222 7,191 11,511 10,563 10,469 54 59 19 66 (196) (140) 4,325 4,886 4,623 Income tax expense NET INCOME 2,392 646 863 $ 1,933 $ 4,240 $ 3,760 Earnings per common share: Basic $ 1.19 $ 2.56 $ 2.21 Diluted $ 1.17 $ 2.51 $ 2.16 Dividends declared per common share $ 0.78 $ 0.70 $ 0.62 The accompanying Notes to the Consolidated Financial Statements are an integral part of this statement NIKE, Inc. Consolidated Statements of Comprehensive Income (in millions) Net income Other comprehensive income (loss), net of tax: Change in net foreign currency translation adjustment Change in net gains (losses) on cash flow hedges Change in net gains (losses) on other Total other comprehensive income (loss), net of tax TOTAL COMPREHENSIVE INCOME 2018 Year Ended May 31, 2017 2016 1,933 $ 4,240 S 3,760 (6) 16 (176) 76 (515) (757) 34 (32) 5 104 (531) (928) $ 2,037 $ 3,709 $ 2,832 The accompanying Notes to the Consolidated Financial Statements are an integral part of this statement. NIKE, Inc. Consolidated Balance Sheets (in millions) ASSETS Current assets: Cash and equivalents Short-term investments Accounts receivable, net Inventories Prepaid expenses and other current assets Total current assets Property, plant and equipment, net Identifiable intangible assets, net Goodwill Deferred income taxes and other assets TOTAL ASSETS LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities; Current portion of long-term debt Notes payable Accounts payable Accrued liabilities Income taxes payable Total current liabilities Long-term debt Deferred income taxes and other liabilities Commitments and contingencies (Note 15) Redeemable preferred stock Shareholders' equity: Common stock at stated value: Class A convertible-329 and 329 shares outstanding Class B-1,272 and 1,314 shares outstanding Capital in excess of stated value Accumulated other comprehensive loss Retained earnings Total shareholders' equity May 31, 2018 2017 $ 4,249 $ 3,808 996 2,371 3,498 3,677 5,261 5.055 1,130 1,150 15,134 16,061 4,454 3,989 285 283 154 2,509 139 2,787 $ 22,536 $ 23,259 6 $ 336 2,279 3,269 325 2,048 3,011 150 84 6,040 5,474 3,468 3,471 3,216 1,907 3 6,384 5,710 (92) (213) 3,517 6,907 9.812 12.407 TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 22,536 $ 23,259 The accompanying Notes to the Consolidated Financial Statements are an integral part of this statement NIKE, Inc. Consolidated Statements of Cash Flows Stock-based compensation In millions) Cash provided by operations: Net income Adjustments to reconcile net income to net cash provided by operations: Depreciation Deferred income taxes Amortization and other Net foreign currency adjustments Changes in certain working capital components and other assets and liabilities: 2018 Year Ended May 31, 2017 2016 1.933 $ 4,240 $ 3,760 747 706 649 647 (273) (80) 218 215 236 27 10 13 (99) (117) 98 Decrease (increase) in accounts receivable 187 (426) 60 (Increase) in inventories (256) (231) (590) Decrease (increase) in prepaid expenses and other current and non-current assets 35 (120) (161) Increase (decrease) in accounts payable, accrued labilities and other current and non-current liabilities 1.515 (158) 586) Cash provided by operations 4,955 3,846 3.399 Cash provided (used) by investing activities: Purchases of short-term investments (4,783) (5,928) (5,367) Maturities of short-term investments Sales of short-term investments Investments in reverse repurchase agreements Additions to property, plant and equipment Disposals of property, plant and equipment Other investing activities Cash provided (used) by investing activities 3,613) 3,623 2.924 2,496 2,423 2,386 150 (1,028) (1,105) (1,143) 3 13 10 (25) (34) 6 276 (1,008) (1,034) Cash used by financing activities: Net proceeds from long-term debt issuance 1,482 981 Long-term debt payments, including current portion (6) (44) (106) Increase (decrease) in notes payable 13 327 (67) Payments on capital lease and other financing obligations (23) (17) (7) Proceeds from exercise of stock options and other stock issuances 733 489 507 Repurchase of common stock (4,254) (3,223) (3,238) Dividends-common and preferred (1.243) (1,133) (1,022) Tax payments for net share settlement of equity awards (55) (29) (22) Cash used by financing activities (4,835) (2.148) (2.974) Effect of exchange rate changes on cash and equivalents 45 (20) (105) Net increase (decrease) in cash and equivalents 441 670 (714) Cash and equivalents, beginning of year 3,808 3,138 3,852 CASH AND EQUIVALENTS, END OF YEAR Cash paid during the year for: Interest, not of capitalized interest $ 4,249 $ 3,808 $ 3,138 Supplemental disclosure of cash flow information: 125 $ 98 $ 70 Income taxes 529 703 748 Non-cash additions to property, plant and equipment 294 266 252 Dividends declared and not paid 320 300 271 The accompanying Notes to the Consolidated Financial Statements are an integral part of this statement NIKE, Inc. Consolidated Statements of Shareholders' Equity Common Stock Class A On millions, except per share data) Shares Amount Class B Shares Amount Capital in Excess of Stated Value Accumulated Other Comprehensive Income Retained Earnings Balance at May 31, 2015 Stock options exercised Conversion to Class B Common Stock Repurchase of Class B Common Stock Dividends on common stock ($0.62 per share) and preferred stock ($0.10 per share) Issuance of shares to employees, net of shares withheld for employee taxes Stock-based compensation Net income Other comprehensive income (loss) Balance at May 31, 2016 Stock options exercised Conversion to Class B Common Stock Repurchase of Class B Common Stock Dividends on common stock ($0.70 per share) and preferred stock ($0.10 per share) Issuance of shares to employees, net of shares withheld for employee taxes Stock-based compensation Net income (24) 355 $ (2) 259 1,357 S 22 3 $ 4,165 $ 1,246 S Total 7,293 $ 12,707 680 680 (55) - (148) (3,090) (3,238) (1.053) (1,053) 3 105 236 (11) 941 236 3,760 3,760 (928) (928) 353 $ - 1,329 $ 3 $ 5,038 $ 318 $ 6,899 $ 12,258 17 525 525 24 (60) (189) (3,060) (3,249) (1,159) (1,159) 121 215 (13) 108 215 4,240 4,240 Other comprehensive income (loss) Balance at May 31, 2017 (531) (531) 329 $ Stock options exercised 1,314 24 3 $ 5,710 $ (213) $ 6,907 $ 12,407 600 600 Conversion to Class B Common Stock Repurchase of Class B Common Stock Dividends on common stock ($0.78 per share) and preferred stock ($0.10 per share) Issuance of shares to employees, net of shares withheld for employee taxes Stock-based compensation Net income (70) (254) (4,013) (4,267) (1,265) (1,265) 110 (28) 82 218 218 1,933 1,933 Other comprehensive income (loss) 104 104 Reclassifications to retained earnings in accordance with ASU 2018-02 17 (17) Balance at May 31, 2018 329 1,272 S 3 $ 6,384 $ (92) $ 3,517 $ 9,812 The accompanying Notes to the Consolidated Financial Statements are an integral part of this statement. FSA 3: Inventory Turnover and number of days sales in inventory You will use the NIKE financial statements in appendix C for these ratios. They are also located under the FSA module under the content tab in Cobra. The formula for inventory turnover is Cost of merchandise sold average merchandise inventory Average inventory is the sum of the beginning and ending added together and then divided by 2. The beginning inventory for 5/31/18 is the ending inventory for 5/31/17. The beginning inventory for 5/31/17 is 4,838. You will round the average inventory to the nearest tenth before diving into the cost of merchandise sold (Nike uses cost of sales). Then round the ratio to the nearest tenth. 5/31/18 ratio 5/31/17 ratio This ratio measures the number of times inventory is turned over during the year. The higher the number, the more efficiently the company is buying, selling and replacing the inventory, and managing it's inventory well. Comment on NIKES inventory efficiency and management between the two years. The formula for number of days sales in inventory is: Average merchandise inventory Average daily cost of merchandise sold Average inventory is the sum of the beginning and ending added together and then divided by 2. The beginning inventory for 5/31/18 is the ending inventory for 5/31/17. The beginning inventory for 5/31/17 is 4,838. You will round the average inventory to the nearest tenth before diving into the cost of merchandise sold (Nike uses cost of sales). Then round the ratio to the nearest tenth. The average daily cost of merchandise sold is Cost of merchandise sold / 365. You will round this to the nearest tenth before dividing into average inventory This ratio is a rough measure of the number of days it takes to purchase, sell and replace the inventory. 5/31/18 ratio. 5/31/17 ratio Comment on NIKES inventory efficiency and management between the two years You will use the NIKE financial statements in appendix C for these ratios. They are also located under the FSA module under the content tab in The formula for inventory turnover is = Cost of merchandise sold average merchandise inventory Average inventory is the sum of the beginning and ending added together and then divided by 2. The beginning inventory for 5/31/18 is the end 5/31/17. The beginning inventory for 5/31/17 is 4,838. You will round the average inventory to the nearest tenth before diving into the cost of me Nike uses cost of sales). Then round the ratio to the nearest tenth. 5/31/18 ratio 5/31/17 ratio This ratio measures the number of times inventory is turned over during the year. The higher the number, the more efficiently the company is bu replacing the inventory, and managing it's inventory well. The formula for number of days sales in inventory is: Average merchandise inventory Average daily cost of merchandise sold Average inventory is the sum of the beginning and ending added together and then divided by 2. The beginning inventory for 5/31/18 is the ending inventory for 5/31/17. The beginning inventory for 5/31/17 is 4,838. You will round the average inventory to the nearest tenth before diving into the cost of merchandise sold (Nike uses cost of sales). Then round the ratio to the nearest tenth. The average daily cost of merchandise sold is Cost of merchandise sold/365. You will round this to the nearest tenth before dividing into average inventory This ratio is a rough measure of the number of days it takes to purchase, sell and replace the inventory. 5/31/18 ratio 5/31/17 ratio Comment on NIKES inventory efficiency and management between the two years