NIKE, Inc. Consolidated Statements of Income Year Ended May 31, 2017 (In millions, except per share data) 2018 2016 Revenues $ 36,397 $ 32.376 34,350 $ 19,038 Cost of sales 20,441 17,405 15.956 15,312 14,971 Gross profit Demand creation expense 3,341 3,278 3,577 7,934 7,222 11,511 7,191 10,469 19 Operating overhead expense Total selling and administrative expense Interest expense (income), net Other expense (income), net Income before income taxes Income tax expense NET INCOME 54 66 4,325 2,392 10,563 59 (196) 4,886 646 (140) 4,623 863 $ 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 NIKE, Inc. Consolidated Statements of Comprehensive Income Year Ended May 31, (In millions) 2018 2017 2016 Net income 1,933 $ 4,240 $ 3,760 16 (6) 76 (176) (757) (515) 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 34 (32) 5 104 (928) (531) 3,709 $ 2,037 $ $ 2,832 NIKE, Inc. Consolidated Balance Sheets May 31, 2018 2017 4.249 996 3.498 5.261 1,130 3,808 2.371 3,677 5,055 1.150 15.134 4,454 16,061 3.989 285 283 154 139 2,509 22,536 2.787 23,259 $ 6 6 336 325 (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 TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY The accompanying Notes to the Consolidated Financial Statements are an integral part of this statement. 2.279 3.269 150 2,048 3,011 84 5.474 6,040 3,468 3.216 3,471 1,907 3 3 6,384 (92) 3,517 9.812 5,710 (213) 6.907 12,407 23,259 22,536 $ C7 Appendix C Selected Excerpts from Nike Inc., Form 10-K for the Fiscal Year Ended May 31, 2018 NIKE, Inc. Consolidated Statements of Cash Flows Year Ended May 31, 2017 2018 2016 1.933 4.240 $ 3.760 747 549 547 218 705 (273) 215 10 (117 (80) 236 13 27 199) 187 (255) 35 (426) (231) (120) (158) 3.846 60 (590) (161) (586) 3,399 1,515 4,965 (4.783) 3.613 2,495 (5.928) 3,623 2.423 15,367) 2.924 2.386 150 (1.028) (1.105) (1.143) 10 (In millions) Cash provided by operations: Net Income Adjustments to reconcile net income to net cash provided by operations: Depreciation Deferred income taxes Stock-based compensation Amortization and other Net foreign currency adjustments Changes in certain working capital components and other assets and liabilities: Decrease increase) in accounts receivable (Increase) in inventories Decrease increase) in prepaid expenses and other current and non-current assets Increase (decrease in accounts payable, accrued liabilities and other current and non-current liabilities Cash provided by operations Cash provided (used) by investing activities: Purchases of short-term investments 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 Cash used by financing activities: Net proceeds from long-term debt issuance Long-term debt payments, including current portion Increase (decrease) in notes payable Payments on capital lease and other financing obligations Proceeds from exercise of stock options and other stock issuances Repurchase of common stock Dividends - common and preferred Tax payments for net share settlement of equity awards Cash used by financing activities Effect of exchange rate changes on cash and equivalents Net increase (decrease) in cash and equivalents Cash and equivalents, beginning of year CASH AND EQUIVALENTS, END OF YEAR Supplemental disclosure of cash flow information: Cash paid during the year for: Interest, net of capitalized interest Income taxes Non-cash additions to property, plant and equipment Dividends declared and not paid The accompanying Notes to the Consolidated Financial Statements are an integral part of this statement (25) 6 (34) (1.008) 276 (1.034) 1.482 981 (106) 13 123) 733 507 (3.238) (4.254) (1.243) (55) (4.835) 489 (3.223) (1.133) (29) (2.148) (20) (22) 45 441 670 2.974) (105) (714) 3852 3,138 3138 3,808 4,249 $ $ 3.800 $ 125 98 $ 529 700 70 748 252 294 266 300 320 271 C-8 Appendixc Selected Excerpts from Nike Inc. Form 10-K for the Fiscal Year Ended May NIKE, Inc. Consolidated Statements of Shareholders' Equity , n_ Accumulated Other Comprehensive Income 1.246 Retained Earnings $ 7,293 $ Total 12.707 680 (3,090) (3.238) (1,053) (1.053) 3 (11) 230 3.750 3.760 (928) 1928 318 5 6,899 $ 12.258 525 17 525 1 (3.060) (3.249) Common Stock Capital in Class A Class B Excess of Stated (in Millionsexcept per share data) Shares Amount Shares Amount Value Balance at May 31, 2015 355 $ 1,357 $ 3 $ 4,165 $ Stock options exercised 680 Conversion to Class B Common Stock (2) 2 Repurchase of Class B Common Stock (55) (148) Dividends on common stock (50.62 per share) and preferred stock (50.10 per share) Issuance of shares to employees, net of shares withheld for employee taxes 105 Stock-based compensation 236 Net income Other comprehensive income (loss) Balance at May 31, 2016 353 1.329 5 5,038 $ Stock options exercised Conversion to Class B Common Stock (24) 24 Repurchase of Class B Common Stock (60) (189) Dividends on common stock (S0.70 per share) and preferred stock (S0. 10 per share) Issuance of shares to employees, net of shares withheld for employee taxes 121 Stock-based compensation 215 Net income Other comprehensive income (loss) Balance at May 31, 2017 329 1,314 5 3 5,710 Stock options exercised 24 600 Conversion to Class B Common Stock Repurchase of Class B Common Stock (70) (254) Dividends on common stock (90.78 per share) and preferred stock (50.10 per share) Issuance of shares to employees, net of shares withheld for employee taxes 110 Stock-based compensation 218 Net income Other comprehensive income (loss) Reclassifications to retained earnings in accordance with ASU 2018-02 Balance at May 31, 2018 329 $ 1.272 $ 3 $ 6,384 $ The accompanying Notes to the Consolidated Financial Statements are an integral part of this statement (1.159) (1.159) (13) 108 215 4.240 4 240 (531 $31) (213) $ $ $ 6.907 5 12,407 600 - (4,013) (4.267) (1.265) (1.265) (28) 82 218 1.933 1.933 104 104 17 (17) 3,517 (92) $ $ 9.812 Financial Statement Analysis The financial statements for Nike, Inc., are presented in Appendix C. Use the following additional information (in millions): Accounts receivable at May 31, 2016 $3,241 Inventories at May 31, 2016 4,838 Total assets at May 31, 2016 21,379 Stockholders' equity at May 31, 2016 12,258 1. Determine the following measures for the fiscal years ended May 31, 2018, and May 31, 2017. Assume 365 days a year. Do not round interim calculations. Round the working capital amount in part (a) to the nearest dollar. Round all other final answers to one decimal place. When required, use the rounded final answers in subsequent computations. May 31, 2017 May 31, 2018 9,700 X a. Working capital (in millions) $ $ b. Current ratio 3.5 X c. Quick ratio 2.3 d. Accounts receivable turnover 8.1 X e. Number of days' sales in receivables 44.4 X days days f. Inventory turnover 4.3 g. 83.7 X days days Number of days' sales in inventory Ratio of liabilities to stockholders' equity h. 0.6 X i. Asset turnover 1.4 j. Return on total assets 14.9 X % % k. Return on common stockholders' equity 23.1 X % % a. Working capital (in millions) $ 9,700 X $ b. Current ratio 3.5 X c. Quick ratio 2.3 X d. Accounts receivable turnover 8.1 e. 44.4 X days days f. 4.3 X Number of days' sales in receivables Inventory turnover Number of days' sales in inventory Ratio of liabilities to stockholders' equity g. 83.7 X days days h. 0.6 X i. Asset turnover 1.4 X j. Return on total assets 14.9 X % % k. Return on common stockholders' equity 23.1 X % % I. Price-earnings ratio, assuming that the market price was $72.12 per 9.8 share on May 29, 2018, and $53.06 per share on May 30, 2017. 2. The working capital decreased between 2017 and 2018. The current and quick ratios both decreased during 2018. The accounts receivable turnover decreased X and number of days' sales in receivables decreased slightly. The margin of protection to creditors decreased X . The return on total assets decreased during 2018. The return on common stockholders' equity decreased Feedback