ACC 490 University of Phoenix Internal Control Over Financial Reporting Report

Description

Management’s Report on Internal Control Over Financial Reporting
The Independent Registered Public Accounting Firm’s Report on Internal Control Over Financial Reporting
The Independent Registered Public Accounting Firm’s Report on the Financial Statements

Explain the purpose and content of each of these reports.
Assuming the report you review is an Unqualified Opinion, express your thoughts on other types of financial statement reports such as Qualified Opinions, Adverse Opinions, and Disclaimer of Opinions.

FORM 10-K
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
þ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED MAY 31, 2019
OR
¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM
TO
.
Commission File No. 1-10635
NIKE, Inc.
(Exact name of Registrant as specified in its charter)
OREGON
93-0584541
(State or other jurisdiction of incorporation)
(IRS Employer Identification No.)
One Bowerman Drive, Beaverton, Oregon
97005-6453
(Address of principal executive offices)
(Zip Code)
(503) 671-6453
(Registrant’s telephone number, including area code)
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
Class B Common Stock
NKE
New York Stock Exchange
(Title of each class)
(Trading symbol)
(Name of each exchange on which registered)
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
NONE
Indicate by check mark:
• if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
• if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
• whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities
•
•
•
•
YES
þ
NO
¨
¨
þ
þ
¨
Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant
þ
¨
to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter
period that the registrant was required to submit such files).
whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company or an emerging growth
company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of
the Exchange Act.
Large accelerated filer þ Accelerated filer ¨
Non-accelerated filer ¨ Smaller reporting company ¨
Emerging growth company ¨
if an emerging growth company, if the registrant has elected not to use the extended transition period for
¨
complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the
Exchange Act.
whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).
¨
þ
As of November 30, 2018, the aggregate market values of the Registrant’s Common Stock held by non-affiliates were:
Class A
$
Class B
5,260,259,370
94,690,612,760
$
99,950,872,130
As of July 19, 2019, the number of shares of the Registrant’s Common Stock outstanding were:
Class A
315,024,752
Class B
1,251,863,621
1,566,888,373
DOCUMENTS INCORPORATED BY REFERENCE:
Parts of Registrant’s Proxy Statement for the Annual Meeting of Shareholders to be held on September 19, 2019 are incorporated by
reference into Part III of this Report.
NIKE, INC.
ANNUAL REPORT ON FORM 10-K
TABLE OF CONTENTS
PAGE
PART I
ITEM 1.
ITEM 1A.
ITEM 1B.
ITEM 2.
ITEM 3.
ITEM 4.
69
Business
General
Products
69
69
69
Sales and Marketing
United States Market
70
70
International Markets
Significant Customer
Product Research, Design and Development
71
71
72
Manufacturing
72
International Operations and Trade
73
Competition
Trademarks and Patents
Employees
73
74
74
Information about our Executive Officers
75
Risk Factors
76
Unresolved Staff Comments
87
Properties
87
Legal Proceedings
87
Mine Safety Disclosures
87
PART II
ITEM 5.
ITEM 6.
ITEM 7.
ITEM 7A.
ITEM 8.
ITEM 9.
ITEM 9A.
ITEM 9B.
88
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
88
Selected Financial Data
90
Management’s Discussion and Analysis of Financial Condition and Results of Operations
92
Quantitative and Qualitative Disclosures about Market Risk
112
Financial Statements and Supplementary Data
114
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
153
Controls and Procedures
153
Other Information
153
PART III
154
(Except for the information set forth under “Information about our Executive Officers” in Item 1 above, Part III
is incorporated by reference from the Proxy Statement for the NIKE, Inc. 2019 Annual Meeting of
Shareholders.)
ITEM 10.
ITEM 11.
ITEM 12.
ITEM 13.
ITEM 14.
Directors, Executive Officers and Corporate Governance
154
Executive Compensation
154
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
154
Certain Relationships and Related Transactions and Director Independence
154
Principal Accountant Fees and Services
154
PART IV
ITEM 15.
ITEM 16.
155
Exhibits and Financial Statement Schedules
155
Form 10-K Summary
158
Signatures
160
PART I
ITEM 1. BUSINESS
GENERAL
NIKE, Inc. was incorporated in 1967 under the laws of the State of Oregon. As used in this report, the terms “we,” “us,” “NIKE”
and the “Company” refer to NIKE, Inc. and its predecessors, subsidiaries and affiliates, collectively, unless the context indicates
otherwise. Our NIKE digital commerce website is located at www.nike.com. On our NIKE corporate website, located at
investors.nike.com, we post the following filings as soon as reasonably practicable after they are electronically filed with, or
furnished to, the United States Securities and Exchange Commission (the “SEC”): our annual report on Form 10-K, our quarterly
reports on Form 10-Q, our current reports on Form 8-K and any amendments to those reports filed or furnished pursuant to
Section 13(a) or 15(d) of the Securities and Exchange Act of 1934, as amended. Our definitive Proxy Statements are also posted
on our corporate website. All such filings on our corporate website are available free of charge. Copies of these filings are also
available on the SEC’s website (www.sec.gov). Also available on our corporate website are the charters of the committees of our
Board of Directors, as well as our corporate governance guidelines and code of ethics; copies of any of these documents will be
provided in print to any shareholder who submits a request in writing to NIKE Investor Relations, One Bowerman Drive,
Beaverton, Oregon 97005-6453.
Our principal business activity is the design, development and worldwide marketing and selling of athletic footwear, apparel,
equipment, accessories and services. NIKE is the largest seller of athletic footwear and apparel in the world. We sell our
products through NIKE-owned retail stores and through digital platforms (which we refer to collectively as our “NIKE Direct”
operations), to retail accounts and a mix of independent distributors, licensees and sales representatives in virtually all countries
around the world. Virtually all of our products are manufactured by independent contractors. Nearly all footwear and apparel
products are produced outside the United States, while equipment products are produced both in the United States and abroad.
PRODUCTS
We focus our NIKE Brand product offerings in six key categories: Running, NIKE Basketball, the Jordan Brand, Football (Soccer),
Training and Sportswear (our sports-inspired lifestyle products). We also market products designed for kids, as well as for other
athletic and recreational uses such as American football, baseball, cricket, golf, lacrosse, skateboarding, tennis, volleyball,
walking, wrestling and other outdoor activities.
NIKE’s athletic footwear products are designed primarily for specific athletic use, although a large percentage of the products are
worn for casual or leisure purposes. We place considerable emphasis on innovation and high-quality construction in the
development and manufacturing of our products. Sportswear, Running and the Jordan Brand are currently our top-selling
footwear categories and we expect them to continue to lead in footwear sales.
We also sell sports apparel covering the above-mentioned categories, which feature the same trademarks and are sold
predominantly through the same marketing and distribution channels as athletic footwear. Our sports apparel, similar to our
athletic footwear products, is designed primarily for athletic use and exemplifies our commitment to innovation and high-quality
construction. Sportswear, Training and Running are currently our top-selling apparel categories and we expect them to continue
to lead in apparel sales. We often market footwear, apparel and accessories in “collections” of similar use or by category. We also
market apparel with licensed college and professional team and league logos.
We sell a line of performance equipment and accessories under the NIKE Brand name, including bags, socks, sport balls,
eyewear, timepieces, digital devices, bats, gloves, protective equipment and other equipment designed for sports activities. We
also sell small amounts of various plastic products to other manufacturers through our wholly-owned subsidiary, NIKE IHM, Inc.,
doing business as Air Manufacturing Innovation.
2019 FORM 10-K
69
PART I
Our Jordan Brand designs, distributes and licenses athletic and casual footwear, apparel and accessories predominantly focused
on basketball using the Jumpman trademark. Sales and operating results for Jordan Brand products are reported within the
respective NIKE Brand geographic operating segments.
One of our wholly-owned subsidiary brands, Converse, headquartered in Boston, Massachusetts, designs, distributes and
licenses casual sneakers, apparel and accessories under the Converse, Chuck Taylor, All Star, One Star, Star Chevron and Jack
Purcell trademarks. Operating results of the Converse brand are reported on a stand-alone basis.
Another of our wholly-owned subsidiary brands, Hurley, headquartered in Costa Mesa, California, designs and distributes a line
of action sports and youth lifestyle apparel and accessories under the Hurley trademark. Sales and operating results for Hurley
products are included within the NIKE Brand’s North America geographic operating segment.
In addition to the products we sell to our wholesale customers and directly to consumers through our NIKE Direct operations, we
have also entered into license agreements that permit unaffiliated parties to manufacture and sell, using NIKE-owned
trademarks, certain apparel, digital devices and applications and other equipment designed for sports activities.
SALES AND MARKETING
We experience moderate fluctuations in aggregate sales volume during the year. Historically, revenues in the first and fourth
fiscal quarters have slightly exceeded those in the second and third quarters. However, the mix of product sales may vary
considerably as a result of changes in seasonal and geographic demand for particular types of footwear, apparel and equipment,
as well as other macroeconomic, operating and logistics-related factors.
Because NIKE is a consumer products company, the relative popularity of various sports and fitness activities and changing
design trends affect the demand for our products. We must, therefore, respond to trends and shifts in consumer preferences by
adjusting the mix of existing product offerings, developing new products, styles and categories and influencing sports and fitness
preferences through extensive marketing. Failure to respond in a timely and adequate manner could have a material adverse
effect on our sales and profitability. This is a continuing risk. Refer to Item 1A. Risk Factors.
We report our NIKE Brand operations based on our internal geographic organization. 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, Jordan and Hurley brands.
Sales through our NIKE Direct operations are managed within each geographic operating segment.
Converse is also a reportable operating segment and operates predominately in one industry: the design, marketing, licensing
and selling of casual sneakers, apparel and accessories. Converse direct to consumer operations, including digital commerce,
are reported within the Converse operating segment results.
UNITED STATES MARKET
For fiscal 2019, NIKE Brand and Converse sales in the United States accounted for approximately 41% of total revenues,
compared to 42% and 46% for fiscal 2018 and fiscal 2017, respectively. We sell our NIKE Brand, Jordan Brand, Hurley and
Converse products to thousands of retail accounts in the United States, including a mix of footwear stores, sporting goods stores,
athletic specialty stores, department stores, skate, tennis and golf shops and other retail accounts. In the United States, we utilize
NIKE sales offices to solicit such sales. During fiscal 2019, our three largest United States customers accounted for
approximately 24% of sales in the United States.
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NIKE, INC.
PART I
Our NIKE Direct and Converse direct to consumer operations sell NIKE Brand, Jordan Brand, Hurley and Converse products to
consumers through various digital platforms. In addition, our NIKE Direct and Converse direct to consumer operations sell
through the following number of retail stores in the United States:
U.S. RETAIL STORES
NIKE Brand factory stores
NUMBER
217
NIKE Brand in-line stores (including employee-only stores)
29
Converse stores (including factory stores)
109
Hurley stores (including factory and employee-only stores)
29
TOTAL
384
In the United States, NIKE has six significant distribution centers. Four are located in Memphis, Tennessee, two of which are
owned and two of which are leased. Two other distribution centers, one located in Indianapolis, Indiana and one located in
Dayton, Tennessee, are leased and operated by third-party logistics providers. NIKE Brand apparel and equipment are also
shipped from our Foothill Ranch, California distribution center, which we lease. Smaller leased and third-party leased and
operated distribution facilities are located in various parts of the United States.
INTERNATIONAL MARKETS
For fiscal 2019, non-U.S. NIKE Brand and Converse sales accounted for approximately 59% of total revenues, compared to 58%
and 54% for fiscal 2018 and fiscal 2017, respectively. We sell our products to retail accounts, through our own NIKE Direct
operations and through a mix of independent distributors, licensees and sales representatives around the world. We sell to
thousands of retail accounts and ship products from 67 distribution centers outside of the United States. During fiscal 2019,
NIKE’s three largest customers outside of the United States accounted for approximately 14% of total non-U.S. sales.
In addition to NIKE and Converse owned digital commerce platforms in over 45 countries, our NIKE Direct and Converse direct to
consumer businesses operate the following number of retail stores outside the United States:
NON-U.S. RETAIL STORES
NIKE Brand factory stores
NUMBER
648
NIKE Brand in-line stores (including employee-only stores)
57
Converse stores (including factory stores)
63
TOTAL
768
International branch offices and subsidiaries of NIKE are located in Argentina, Australia, Austria, Belgium, Bermuda, Brazil,
Canada, Chile, China, Croatia, the Czech Republic, Denmark, Finland, France, Germany, Greece, Hong Kong, Hungary, India,
Indonesia, Ireland, Israel, Italy, Japan, Korea, Macau, Malaysia, Mexico, the Netherlands, New Zealand, Norway, Panama, the
Philippines, Poland, Portugal, Russia, Singapore, Slovakia, Slovenia, South Africa, Spain, Sri Lanka, Sweden, Switzerland,
Taiwan, Thailand, Turkey, the United Arab Emirates, the United Kingdom, Uruguay and Vietnam.
SIGNIFICANT CUSTOMER
No customer accounted for 10% or more of our worldwide net revenues during fiscal 2019.
2019 FORM 10-K
71
PART I
PRODUCT RESEARCH, DESIGN AND DEVELOPMENT
We believe our research, design and development efforts are key factors in our success. Technical innovation in the design and
manufacturing process of footwear, apparel and athletic equipment receives continued emphasis as we strive to produce
products that help to enhance athletic performance, reduce injury and maximize comfort, while reducing waste.
In addition to our own staff of specialists in the areas of biomechanics, chemistry, exercise physiology, engineering, industrial
design, sustainability and related fields, we also utilize research committees and advisory boards made up of athletes, coaches,
trainers, equipment managers, orthopedists, podiatrists and other experts who consult with us and review designs, materials,
concepts for product and manufacturing process improvements and compliance with product safety regulations around the world.
Employee athletes, athletes engaged under sports marketing contracts and other athletes wear-test and evaluate products during
the design and development process.
As we continue to develop new technologies, we are simultaneously focused on the design of innovative products incorporating
such technologies throughout our product categories. Using market intelligence and research, our various design teams identify
opportunities to leverage new technologies in existing categories responding to consumer preferences. The proliferation of NIKE
Air, Lunar, Zoom, Free, Flywire, Dri-Fit, Flyknit, Flyweave, ZoomX, React, Adaptive and NIKE+ technologies, among others,
throughout our Running, NIKE Basketball, Jordan Brand, Football (Soccer), Training and Sportswear categories typifies our
dedication to designing innovative products.
MANUFACTURING
We are supplied by 112 footwear factories located in 12 countries. The largest single footwear factory accounted for
approximately 9% of total fiscal 2019 NIKE Brand footwear production. Virtually all of our footwear is manufactured outside of the
United States by independent contract manufacturers which often operate multiple factories. For fiscal 2019, contract factories in
Vietnam, China and Indonesia manufactured approximately 49%, 23% and 21% of total NIKE Brand footwear, respectively. We
also have manufacturing agreements with independent contract manufacturers in Argentina and India to manufacture footwear
for sale primarily within those countries. For fiscal 2019, four footwear contract manufacturers each accounted for greater than
10% of footwear production and in the aggregate accounted for approximately 61% of NIKE Brand footwear production.
We are supplied by 334 apparel factories located in 36 countries. The largest single apparel factory accounted for approximately
14% of total fiscal 2019 NIKE Brand apparel production. Virtually all of our apparel is manufactured outside of the United States
by independent contract manufacturers which often operate multiple factories. For fiscal 2019, contract factories in China,
Vietnam and Thailand produced approximately 27%, 22% and 10% of total NIKE Brand apparel, respectively. For fiscal 2019,
one apparel contract manufacturer accounted for more than 10% of apparel production, and the top five contract manufacturers
in the aggregate accounted for approximately 49% of NIKE Brand apparel production.
The principal materials used in our footwear products are natural and synthetic rubber, plastic compounds, foam cushioning
materials, natural and synthetic leather, nylon, polyester and canvas, as well as polyurethane films used to make NIKE Air-Sole
cushioning components. During fiscal 2019, Air Manufacturing Innovation, a wholly-owned subsidiary, with facilities near
Beaverton, Oregon and in St. Charles, Missouri, as well as independent contractors in China and Vietnam, were our suppliers of
the Air-Sole cushioning components used in footwear. The principal materials used in our apparel products are natural and
synthetic fabrics and threads (both virgin and recycled); specialized performance fabrics designed to efficiently wick moisture
away from the body, retain heat and repel rain and/or snow; and plastic and metal hardware. NIKE’s independent contractors and
suppliers buy raw materials for the manufacturing of our footwear, apparel and equipment products. Most raw materials are
available and purchased by those independent contractors and suppliers in the countries where manufacturing takes place.
NIKE’s independent contract manufacturers and suppliers have thus far experienced little difficulty in satisfying raw material
requirements for the production of our products.
Since 1972, Sojitz Corporation of America (“Sojitz America”), a large Japanese trading company and the sole owner of our
redeemable preferred stock, has performed import-export financing services for us. During fiscal 2019, Sojitz America provided
financing and purchasing services for NIKE Brand products sold in certain NIKE markets including Argentina, Brazil, Canada,
India, South Africa and Uruguay, excluding products produced and sold in the same country. Approximately 5% of NIKE Brand
sales occurred in those countries. Any failure of Sojitz America to provide these services or any failure of Sojitz America’s banks
could disrupt our ability to acquire products from our suppliers and to deliver products to our customers in those markets. Such a
disruption could result in canceled orders that would adversely affect sales and profitability. However, we believe that any such
disruption would be short-term in duration due to the ready availability of alternative sources of financing at competitive rates.
72
NIKE, INC.
PART I
INTERNATIONAL OPERATIONS AND TRADE
Our international operations and sources of supply are subject to the usual risks of doing business abroad, such as the
implementation of, or potential changes in, foreign and domestic trade policies, increases in import duties, anti-dumping
measures, quotas, safeguard measures, trade restrictions, restrictions on the transfer of funds and, in certain parts of the world,
political instability and terrorism. We have not, to date, been materially affected by any such risk, but cannot predict the likelihood
of such material effects occurring in the future.
In recent years, uncertain global and regional economic and political conditions have affected international trade and increased
protectionist actions around the world. These trends are affecting many global manufacturing and service sectors, and the
footwear and apparel industries, as a whole, are not immune. Companies in our industry are facing trade protectionism in many
different regions, and in nearly all cases we are working together with industry groups to address trade issues and reduce the
impact to the industry, while observing applicable competition laws. Notwithstanding our efforts, protectionist measures have
resulted in increases in the cost of our products, and additional measures, if implemented, could adversely affect sales and/or
profitability for NIKE, as well as the imported footwear and apparel industry as a whole.
We monitor protectionist trends and developments throughout the world that may materially impact our industry, and we engage
in administrative and judicial processes to mitigate trade restrictions. We are actively monitoring actions that may result in
additional anti-dumping measures and could affect our industry. We are also monitoring for and advocating against other
impediments that may limit or delay customs clearance for imports of footwear, apparel and equipment. NIKE also advocates for
trade liberalization for footwear and apparel in a number of regional and bilateral free trade agreements. Changes in U.S. trade
policies, including new and potential tariffs or penalties on imported goods, may negatively affect U.S. corporations with
production activities outside the U.S., including NIKE. There have also been discussions and commentary regarding retaliatory
actions by countries affected by the new tariffs and other changes in U.S. trade policy, and certain foreign governments have
instituted or are considering imposing retaliatory measures on certain U.S. goods, which could negatively affect U.S. corporations
with business operations and/or consumer markets in those countries. Depending on the extent that certain new or proposed
reforms are implemented by the U.S. government and the manner in which foreign governments respond to such reforms, it may
become necessary for us to change the way we conduct business, which may adversely affect our results of operations. In
addition, with respect to proposed trade restrictions targeting China, which represents an important sourcing country and
consumer market for us, we are working with a broad coalition of global businesses and trade associations representing a wide
variety of sectors to help ensure that any legislation enacted and implemented (i) addresses legitimate and core concerns, (ii) is
consistent with international trade rules and (iii) reflects and considers China’s domestic economy and the important role it has in
the global economic community.
Where trade protection measures are implemented, we believe that we have the ability to develop, over a period of time,
adequate alternative sources of supply for the products obtained from our present suppliers. If events prevented us from
acquiring products from our suppliers in a particular country, our operations could be temporarily disrupted and we could
experience an adverse financial impact. However, we believe we could abate any such disruption, and that much of the adverse
impact on supply would, therefore, be of a short-term nature, although alternate sources of supply might not be as cost-effective
and could have an ongoing adverse impact on profitability.
Our international operations are also subject to compliance with the U.S. Foreign Corrupt Practices Act, or “FCPA”, and other
anti-bribery laws applicable to our operations. We source a significant portion of our products from, and have important consumer
markets, outside of the United States, and we have an ethics and compliance program to address compliance with the FCPA and
similar laws by us, our employees, agents, suppliers and other partners.
COMPETITION
The athletic footwear, apparel and equipment industry is highly competitive on a worldwide basis. We compete internationally
with a significant number of athletic and leisure footwear companies, athletic and leisure apparel companies, sports equipment
companies and large companies having diversified lines of athletic and leisure footwear, apparel and equipment, including
adidas, Anta, ASICS, Li Ning, lululemon athletica, Puma, Under Armour and V.F. Corporation, among others. The intense
competition and the rapid changes in technology and consumer preferences in the markets for athletic and leisure footwear and
apparel and athletic equipment, constitute significant risk factors in our operations.
2019 FORM 10-K
73
PART I
NIKE is the largest seller of athletic footwear and apparel in the world. Important aspects of competition in this industry are:
• Product attributes such as quality; performance and reliability; new product innovation and development and consumer
price/value.
• Consumer connection and affinity for brands and products, developed through marketing and promotion; social media
interaction; customer support and service; identification with prominent and influential athletes, public figures, coaches,
teams, colleges and sports leagues who endorse our brands and use our products and active engagement through
sponsored sporting events and clinics.
• Effective sourcing and distribution of products, with attractive merchandising and presentation at retail, both in-store and
digital platforms.
We believe that we are competitive in all of these areas.
TRADEMARKS AND PATENTS
We believe that our intellectual property rights are important to our brand, our success and our competitive position. We pursue
available protections of these rights and vigorously protect them against third-party theft and infringement.
We use trademarks on nearly all of our products and believe having distinctive marks that are readily identifiable is an important
factor in creating a market for our goods, in identifying our brands and the Company, and in distinguishing our goods from the
goods of others. We consider our NIKE and Swoosh Design trademarks to be among our most valuable assets and we have
registered these trademarks in almost 170 jurisdictions worldwide. In addition, we own many other trademarks that we use in
marketing our products. We own common law rights in the trade dress of several significant shoe designs and elements. For
certain trade dress, we have sought and obtained trademark registrations.
We have copyright protection in our design, graphics and other original works. In some instances, we also obtain registered
copyrights.
We file for, own and maintain many U.S. and foreign utility and design patents protecting components, technologies, materials,
manufacturing techniques, features, functionality, and industrial and aesthetic designs used in and for the manufacture of various
athletic and leisure footwear and apparel, athletic equipment and digital devices and related software applications. These patents
expire at various times.
We believe our success depends upon our capabilities in areas such as design, research and development, production and
marketing and is supported by our intellectual property rights, such as trademarks, patents and trade secrets, among others.
We have followed a policy of applying for and registering intellectual property rights in the United States and select foreign
countries on trademarks, inventions, innovations and designs that we deem valuable. We also continue to vigorously protect our
intellectual property, including trademarks, patents and trade secrets against third-party infringement.
EMPLOYEES
As of May 31, 2019, we had approximately 76,700 employees worldwide, including retail and part-time employees. Management
is committed to maintaining an environment where all NIKE employees have the opportunity to reach their full potential. None of
our employees are represented by a union, except for certain employees in the APLA geography, where local law requires those
employees to be represented by a trade union. Also, in some countries outside of the United States, local laws require employee
representation by works councils (which may be entitled to information and consultation on certain Company decisions) or by
organizations similar to a union. In certain European countries, we are required by local law to enter into and/or comply with
industry-wide or national collective bargaining agreements. NIKE has never experienced a material interruption of operations due
to labor disagreements.
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NIKE, INC.
PART I
INFORMATION ABOUT OUR EXECUTIVE OFFICERS
The executive officers of NIKE, Inc. as of July 23, 2019 are as follows:
Mark G. Parker, Chairman, President and Chief Executive Officer — Mr. Parker, 63, was appointed
President and Chief Executive Officer in January 2006 and named Chairman of the Board in 2016. He
has been employed by NIKE since 1979 with primary responsibilities in product research, design and
development, marketing and brand management. Mr. Parker was appointed divisional Vice President in
charge of product development in 1987, corporate Vice President in 1989, General Manager in 1993,
Vice President of Global Footwear in 1998 and President of the NIKE Brand in 2001.
Andrew Campion, Executive Vice President and Chief Financial Officer — Mr. Campion, 47, joined
NIKE in 2007 as Vice President of Global Planning and Development, leading strategic and financial
planning. He was appointed Chief Financial Officer of the NIKE Brand in 2010, responsible for leading
all aspects of financial management for the Company’s flagship brand. In 2014, he was appointed
Senior Vice President, Strategy, Finance and Investor Relations in addition to his role as Chief Financial
Officer of NIKE Brand. Mr. Campion assumed the role of Executive Vice President and Chief Financial
Officer in August 2015. Prior to joining NIKE, he held leadership roles in strategic planning, mergers and
acquisitions, financial planning and analysis, operations and planning, investor relations and tax at The
Walt Disney Company from 1996 to 2007.
Elliott Hill, President, Consumer and Marketplace — Mr. Hill, 55, joined NIKE in 1988, with primary
responsibilities in sales and retail. He has served as Apparel Sales Director in Europe, Retail
Development Director in Europe, Vice President of Sales and Retail in EMEA, General Manager of US
Retail, Vice President of US Sales, Retail and NIKE.com, and Vice President of Global Retail. Most
recently, Mr. Hill served as President of Geographies and Sales and Vice President and General
Manager of North America. Mr. Hill was appointed President, Consumer and Marketplace in 2018.
Hilary K. Krane, Executive Vice President, Chief Administrative Officer and General Counsel —
Ms. Krane, 55, joined NIKE as Vice President and General Counsel in 2010. In 2011, her responsibilities
expanded, and she became Vice President, General Counsel and Corporate Affairs. Ms. Krane was
appointed Executive Vice President, Chief Administrative Officer and General Counsel in 2013. Prior to
joining NIKE, Ms. Krane was General Counsel and Senior Vice President for Corporate Affairs at Levi
Strauss & Co. from 2006 to 2010. From 1996 to 2006, she was a Partner and Assistant General
Counsel at PricewaterhouseCoopers LLP.
Monique S. Matheson, Executive Vice President, Global Human Resources — Ms. Matheson, 52,
joined NIKE in 1998, with primary responsibilities in the human resources function. She was appointed
as Vice President and Senior Business Partner in 2011 and Vice President, Chief Talent and Diversity
Officer in 2012. Ms. Matheson was appointed Executive Vice President, Global Human Resources in
2017.
John F. Slusher, Executive Vice President, Global Sports Marketing — Mr. Slusher, 50, joined NIKE in
1998, with primary responsibilities in global sports marketing. Mr. Slusher was appointed Director of
Sports Marketing for Asia Pacific and Americas in 2006, divisional Vice President of Asia Pacific &
Americas Sports Marketing in September 2007 and Vice President, Global Sports Marketing in
November 2007. Prior to joining NIKE, Mr. Slusher was an attorney at the law firm of O’Melveny &
Myers from 1995 to 1998.
Eric D. Sprunk, Chief Operating Officer — Mr. Sprunk, 55, joined NIKE in 1993. He was appointed
Finance Director and General Manager of the Americas in 1994, Finance Director for NIKE Europe in
1995, Regional General Manager of NIKE Europe Footwear in 1998 and Vice President & General
Manager of the Americas in 2000. Mr. Sprunk was appointed Vice President of Global Footwear in 2001,
Vice President of Merchandising and Product in 2009 and Chief Operating Officer in 2013. Prior to
joining NIKE, Mr. Sprunk was a certified public accountant with Price Waterhouse from 1987 to 1993.
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ITEM 1A. RISK FACTORS
Special Note Regarding Forward-Looking Statements and Analyst Reports
Certain written and oral statements, other than purely historic information, including estimates, projections, statements relating to
NIKE’s business plans, objectives and expected operating results and the assumptions upon which those statements are based,
made or incorporated by reference from time to time by NIKE or its representatives in this report, other reports, filings with the
SEC, press releases, conferences or otherwise, are “forward-looking statements” within the meaning of the Private Securities
Litigation Reform Act of 1995 and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements
include, without limitation, any statement that may predict, forecast, indicate or imply future results, performance or
achievements, and may contain the words “believe,” “anticipate,” “expect,” “estimate,” “project,” “will be,” “will continue,” “will likely
result” or words or phrases of similar meaning. Forward-looking statements involve risks and uncertainties which may cause
actual results to differ materially from the forward-looking statements. The risks and uncertainties are detailed from time to time in
reports filed by NIKE with the SEC, including reports filed on Forms 8-K, 10-Q and 10-K, and include, among others, the
following: international, national and local general economic and market conditions; the size and growth of the overall athletic
footwear, apparel and equipment markets; intense competition among designers, marketers, distributors and sellers of athletic
footwear, apparel and equipment for consumers and endorsers; demographic changes; changes in consumer preferences;
popularity of particular designs, categories of products and sports; seasonal and geographic demand for NIKE products;
difficulties in anticipating or forecasting changes in consumer preferences, consumer demand for NIKE products and the various
market factors described above; difficulties in implementing, operating and maintaining NIKE’s increasingly complex information
technology systems and controls, including, without limitation, the systems related to demand and supply planning and inventory
control; interruptions in data and information technology systems; consumer data security; fluctuations and difficulty in forecasting
operating results, including, without limitation, the fact that advance orders may not be indicative of future revenues due to
changes in shipment timing, the changing mix of orders with shorter lead times, and discounts, order cancellations and returns;
the ability of NIKE to sustain, manage or forecast its growth and inventories; the size, timing and mix of purchases of NIKE’s
products; increases in the cost of materials, labor and energy used to manufacture products; new product development and
introduction; the ability to secure and protect trademarks, patents and other intellectual property; product performance and
quality; customer service; adverse publicity, including without limitation, through social media or in connection with brand
damaging events; the loss of significant customers or suppliers; dependence on distributors and licensees; business disruptions;
increased costs of freight and transportation to meet delivery deadlines; increases in borrowing costs due to any decline in
NIKE’s debt ratings; changes in business strategy or development plans; general risks associated with doing business outside of
the United States, including, without limitation, exchange rate fluctuations, inflation, import duties, tariffs, quotas, political and
economic instability and terrorism; the impact of U.S. tax reform legislation on our results of operations; the potential impact of
new laws, regulations or policy, including, without limitation, tariffs, import/export, trade and immigration regulations or policies;
changes in government regulations; the impact of, including business and legal developments relating to, climate change and
natural disasters; litigation, regulatory proceedings, sanctions or any other claims asserted against NIKE; the ability to attract and
retain qualified employees, and any negative public perception with respect to key personnel; the effects of NIKE’s decision to
invest in or divest of businesses and other factors referenced or incorporated by reference in this report and other reports.
The risks included here are not exhaustive. Other sections of this report may include additional factors which could adversely
affect NIKE’s business and financial performance. Moreover, NIKE operates in a very competitive and rapidly changing
environment. New risks emerge from time to time and it is not possible for management to predict all such risks, nor can it assess
the impact of all such risks on NIKE’s business or the extent to which any risk, or combination of risks, may cause actual results
to differ materially from those contained in any forward-looking statements. Given these risks and uncertainties, investors should
not place undue reliance on forward-looking statements as a prediction of actual results.
Investors should also be aware that while NIKE does, from time to time, communicate with securities analysts, it is against
NIKE’s policy to disclose to them any material non-public information or other confidential commercial information. Accordingly,
shareholders should not assume that NIKE agrees with any statement or report issued by any analyst irrespective of the content
of the statement or report. Furthermore, NIKE has a policy against confirming financial forecasts or projections issued by others.
Thus, to the extent that reports issued by securities analysts contain any projections, forecasts or opinions, such reports are not
the responsibility of NIKE.
Our products face intense competition.
NIKE is a consumer products company and the relative popularity of various sports and fitness activities and changing design
trends affect the demand for our products. The athletic footwear, apparel and equipment industry is highly competitive both in the
United States and worldwide. We compete internationally with a significant number of athletic and leisure footwear companies,
athletic and leisure apparel companies, sports equipment companies and large companies having diversified lines of athletic and
leisure footwear, apparel and equipment. We also compete with other companies for the production capacity of independent
manufacturers that produce our products. Our NIKE Direct operations, both through our digital commerce operations and retail
stores, also compete with multi-brand retailers selling our products.
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Product offerings, technologies, marketing expenditures (including expenditures for advertising and endorsements), pricing, costs
of production, customer service, digital commerce platforms and social media presence are areas of intense competition. This, in
addition to rapid changes in technology and consumer preferences in the markets for athletic and leisure footwear and apparel
and athletic equipment, constitute significant risk factors in our operations. In addition, the competitive nature of retail including
shifts in the ways in which consumers are shopping, and the rising trend of digital commerce, constitutes a risk factor implicating
our NIKE Direct and wholesale operations. If we do not adequately and timely anticipate and respond to our competitors, our
costs may increase or the consumer demand for our products may decline significantly.
Failure to maintain our reputation and brand image could negatively impact our business.
Our iconic brands have worldwide recognition, and our success depends on our ability to maintain and enhance our brand image
and reputation. Maintaining, promoting and growing our brands will depend on our design and marketing efforts, including
advertising and consumer campaigns, product innovation and product quality. Our commitment to product innovation and quality
and our continuing investment in design (including materials) and marketing may not have the desired impact on our brand image
and reputation. In addition, our success in maintaining, extending and expanding our brand image depends on our ability to adapt
to a rapidly changing media environment, including our increasing reliance on social media and digital dissemination of
advertising campaigns. We could be adversely impacted if we fail to achieve any of these objectives.
Our brand value also depends on our ability to maintain a positive consumer perception of our corporate integrity and brand
culture. Negative claims or publicity involving us, our products, consumer data, or any of our key employees, endorsers,
sponsors or suppliers could seriously damage our reputation and brand image, regardless of whether such claims are accurate.
For example, while we require our suppliers of our products to operate their business in compliance with applicable laws and
regulations, we do not control their practices. Negative publicity relating to a violation or an alleged violation of policies or laws by
such suppliers could damage our brand image. Social media, which accelerates and potentially amplifies the scope of negative
publicity, can increase the challenges of responding to negative claims. Adverse publicity about regulatory or legal action against
us, or by us, could also damage our reputation and brand image, undermine consumer confidence in us and reduce long-term
demand for our products, even if the regulatory or legal action is unfounded or not material to our operations. If the reputation or
image of any of our brands is tarnished or if we receive negative publicity, then our sales, financial condition and results of
operations could be materially and adversely affected.
If we are unable to anticipate consumer preferences and develop new products, we may not be able to maintain or
increase our revenues and profits.
Our success depends on our ability to identify, originate and define product trends as well as to anticipate, gauge and react to
changing consumer demands in a timely manner. However, lead times for many of our products may make it more difficult for us
to respond rapidly to new or changing product trends or consumer preferences. All of our products are subject to changing
consumer preferences that cannot be predicted with certainty. Our new products may not receive consumer acceptance as
consumer preferences could shift rapidly to different types of performance products or away from these types of products
altogether, and our future success depends in part on our ability to anticipate and respond to these changes. If we fail to
anticipate accurately and respond to trends and shifts in consumer preferences by adjusting the mix of existing product offerings,
developing new products, designs, styles and categories, and influencing sports and fitness preferences through extensive
marketing, we could experience lower sales, excess inventories or lower profit margins, any of which could have an adverse
effect on our results of operations and financial condition. In addition, we market our products globally through a diverse
spectrum of advertising and promotional programs and campaigns, including social media, mobile applications and online
advertising. If we do not successfully market our products or if advertising and promotional costs increase, these factors could
have an adverse effect on our business, financial condition and results of operations.
We rely on technical innovation and high-quality products to compete in the market for our products.
Technical innovation and quality control in the design and manufacturing process of footwear, apparel and athletic equipment is
essential to the commercial success of our products. Research and development play a key role in technical innovation. We rely
upon specialists in the fields of biomechanics, chemistry, exercise physiology, engineering, industrial design, sustainability and
related fields, as well as research committees and advisory boards made up of athletes, coaches, trainers, equipment managers,
orthopedists, podiatrists and other experts to develop and test cutting-edge performance products. While we strive to produce
products that help to enhance athletic performance, reduce injury and maximize comfort, if we fail to introduce technical
innovation in our products, consumer demand for our products could decline, and if we experience problems with the quality of
our products, we may incur substantial expense to remedy the problems.
Failure to continue to obtain or maintain high-quality endorsers of our products could harm our business.
We establish relationships with professional athletes, sports teams and leagues, as well as other public figures, including artists,
designers and influencers, to develop, evaluate and promote our products, as well as establish product authenticity with
consumers. However, as competition in our industry has increased, the costs associated with establishing and retaining such
sponsorships and other relationships have increased. If we are unable to maintain our current associations with professional
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athletes, sports teams and leagues, or other public figures, or to do so at a reasonable cost, we could lose the high visibility or
on-field authenticity associated with our products, and we may be required to modify and substantially increase our marketing
investments. As a result, our brands, net revenues, expenses and profitability could be harmed.
Furthermore, if certain endorsers were to stop using our products contrary to their endorsement agreements, our business could
be adversely affected. In addition, actions taken by athletes, teams or leagues, or other endorsers, associated with our products
that harm the reputations of those athletes, teams or leagues, or endorsers, could also seriously harm our brand image with
consumers and, as a result, could have an adverse effect on our sales and financial condition. In addition, poor performance by
our endorsers, a failure to continue to correctly identify promising athletes, public figures or sports organizations, to use and
endorse our products or a failure to enter into cost-effective endorsement arrangements with prominent athletes, public figures,
and sports organizations could adversely affect our brand, sales and profitability.
General economic factors beyond our control, and changes in the global economic environment, including fluctuations
in inflation and currency exchange rates, could result in lower revenues, higher costs and decreased margins and
earnings.
A majority of our products are manufactured and sold outside of the United States, and we conduct purchase and sale
transactions in various currencies, which increases our exposure to the volatility of global economic conditions, including
fluctuations in inflation and foreign currency exchange rates. Additionally, there has been, and may continue to be, volatility in
currency exchange rates as a result of the United Kingdom’s impending exit from the European Union, commonly referred to as
“Brexit” or new or proposed U.S. policy changes that impact the U.S. Dollar value relative to other international currencies. Our
international revenues and expenses generally are derived from sales and operations in foreign currencies, and these revenues
and expenses could be affected by currency fluctuations, specifically amounts recorded in foreign currencies and translated into
U.S. Dollars for consolidated financial reporting, as weakening of foreign currencies relative to the U.S. Dollar adversely affects
the U.S. Dollar value of the Company’s foreign currency-denominated sales and earnings. Currency exchange rate fluctuations
could also disrupt the business of the independent manufacturers that produce our products by making their purchases of raw
materials more expensive and more difficult to finance. Foreign currency fluctuations have adversely affected and could continue
to have an adverse effect on our results of operations and financial condition.
We may hedge certain foreign currency exposures to lessen and delay, but not to completely eliminate, the effects of foreign
currency fluctuations on our financial results. Since the hedging activities are designed to lessen volatility, they not only reduce
the negative impact of a stronger U.S. Dollar or other trading currency, but they also reduce the positive impact of a weaker U.S.
Dollar or other trading currency. Our future financial results could be significantly affected by the value of the U.S. Dollar in
relation to the foreign currencies in which we conduct business. The degree to which our financial results are affected for any
given time period will depend in part upon our hedging activities.
Global economic conditions could have a material adverse effect on our business, operating results and financial
condition.
The uncertain state of the global economy continues to impact businesses around the world, most acutely in emerging markets
and developing economies. If global economic and financial market conditions do not improve or deteriorate, the following factors
could have a material adverse effect on our business, operating results and financial condition:
• Slower consumer spending may result in reduced demand for our products, reduced orders from retailers for our products,
order cancellations, lower revenues, higher discounts, increased inventories and lower gross margins.
• In the future, we may be unable to access financing in the credit and capital markets at reasonable rates in the event we find
it desirable to do so.
• We conduct transactions in various currencies, which increases our exposure to fluctuations in foreign currency exchange
rates relative to the U.S. Dollar. Continued volatility in the markets and exchange rates for foreign currencies and contracts
in foreign currencies, including in response to certain policies advocated or implemented by the U.S. presidential
administration, could have a significant impact on our reported operating results and financial condition.
• Continued volatility in the availability and prices for commodities and raw materials we use in our products and in our supply
chain (such as cotton or petroleum derivatives) could have a material adverse effect on our costs, gross margins and
profitability.
• If retailers of our products experience declining revenues or experience difficulty obtaining financing in the capital and credit
markets to purchase our products, this could result in reduced orders for our products, order cancellations, late retailer
payments, extended payment terms, higher accounts receivable, reduced cash flows, greater expense associated with
collection efforts and increased bad debt expense.
• If retailers of our products experience severe financial difficulty, some may become insolvent and cease business
operations, which could negatively impact the sale of our products to consumers.
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• If contract manufacturers of our products or other participants in our supply chain experience difficulty obtaining financing in
the capital and credit markets to purchase raw materials or to finance capital equipment and other general working capital
needs, it may result in delays or non-delivery of shipments of our products.
Our business is affected by seasonality, which could result in fluctuations in our operating results.
We experience moderate fluctuations in aggregate sales volume during the year. Historically, revenues in the first and fourth
fiscal quarters have slightly exceeded those in the second and third fiscal quarters. However, the mix of product sales may vary
considerably from time to time as a result of changes in seasonal and geographic demand for particular types of footwear,
apparel and equipment and in connection with the timing of significant sporting events, such as the NBA Finals, Olympics or the
World Cup, among others. In addition, our customers may cancel orders, change delivery schedules or change the mix of
products ordered with minimal notice. As a result, we may not be able to accurately predict our quarterly sales. Accordingly, our
results of operations are likely to fluctuate significantly from period to period. This seasonality, along with other factors that are
beyond our control, including general economic conditions, changes in consumer preferences, weather conditions, availability of
import quotas, transportation disruptions and currency exchange rate fluctuations, could adversely affect our business and cause
our results of operations to fluctuate. Our operating margins are also sensitive to a number of additional factors that are beyond
our control, including manufacturing and transportation costs, shifts in product sales mix and geographic sales trends, all of which
we expect to continue. Results of operations in any period should not be considered indicative of the results to be expected for
any future period.
We may be adversely affected by the financial health of our customers.
We extend credit to our customers based on an assessment of a customer’s financial condition, generally without requiring
collateral. To assist in the scheduling of production and the shipping of our products, we offer certain customers the opportunity to
place orders five to six months ahead of delivery under our futures ordering program. These advance orders may be canceled
under certain conditions, and the risk of cancellation may increase when dealing with financially unstable retailers or retailers
struggling with economic uncertainty. In the past, some customers have experienced financial difficulties up to and including
bankruptcies, which have had an adverse effect on our sales, our ability to collect on receivables and our financial condition.
When the retail economy weakens or as consumer behavior shifts, retailers may be more cautious with orders. A slowing or
changing economy in our key markets could adversely affect the financial health of our customers, which in turn could have an
adverse effect on our results of operations and financial condition. In addition, product sales are dependent in part on high quality
merchandising and an appealing retail environment to attract consumers, which requires continuing investments by retailers.
Retailers that experience financial difficulties may fail to make such investments or delay them, resulting in lower sales and
orders for our products.
Failure to accurately forecast consumer demand could lead to excess inventories or inventory shortages, which could
result in decreased operating margins, reduced cash flows and harm to our business.
To meet anticipated demand for our products, we purchase products from manufacturers outside of our futures ordering program
and in advance of customer orders, which we hold in inventory and resell to customers. There is a risk we may be unable to sell
excess products ordered from manufacturers. Inventory levels in excess of customer demand may result in inventory writedowns, and the sale of excess inventory at discounted prices could significantly impair our brand image and have an adverse
effect on our operating results, financial condition and cash flows. Conversely, if we underestimate consumer demand for our
products or if our manufacturers fail to supply products we require at the time we need them, we may experience inventory
shortages. Inventory shortages might delay shipments to customers, negatively impact retailer, distributor and consumer
relationships and diminish brand loyalty. The difficulty in forecasting demand also makes it difficult to estimate our future results
of operations, financial condition and cash flows from period to period. A failure to accurately predict the level of demand for our
products could adversely affect our net revenues and net income, and we are unlikely to forecast such effects with any certainty
in advance.
Consolidation of retailers or concentration of retail market share among a few retailers may increase and concentrate
our credit risk and impair our ability to sell products.
The athletic footwear, apparel and equipment retail markets in some countries are dominated by a few large athletic footwear,
apparel and equipment retailers with many stores. These retailers have in the past increased their market share by expanding
through acquisitions and construction of additional stores. These situations concentrate our credit risk with a relatively small
number of retailers, and, if any of these retailers were to experience a shortage of liquidity or consumer behavior shifts away from
traditional retail, it would increase the risk that their outstanding payables to us may not be paid. In addition, increasing market
share concentration among one or a few retailers in a particular country or region increases the risk that if any one of them
substantially reduces their purchases of our products, we may be unable to find a sufficient number of other retail outlets for our
products to sustain the same level of sales and revenues.
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Our NIKE Direct operations have required and will continue to require a substantial investment and commitment of
resources and are subject to numerous risks and uncertainties.
Our NIKE Direct stores have required substantial fixed investment in equipment and leasehold improvements, information
systems and personnel. We have entered into substantial operating lease commitments for retail space. Certain stores have
been designed and built to serve as high-profile venues to promote brand awareness and marketing activities. Because of their
unique design elements, locations and size, these stores require substantially more investment than other stores. Due to the high
fixed-cost structure associated with our NIKE Direct operations, a decline in sales, a shift in consumer behavior away from brickand-mortar retail, or the closure or poor performance of individual or multiple stores could result in significant lease termination
costs, write-offs of equipment and leasehold improvements and employee-related costs.
Many factors unique to retail operations, some of which are beyond the Company’s control, pose risks and uncertainties. Risks
include, but are not limited to: credit card fraud; mismanagement of existing retail channel partners; and inability to manage costs
associated with store construction and operation. In addition, extreme weather conditions in the areas in which our stores are
located could adversely affect our business.
If the technology-based systems that give our consumers the ability to shop with us online do not function effectively,
our operating results, as well as our ability to grow our digital commerce business globally, could be materially
adversely affected.
Many of our consumers shop with us through our digital platforms. Increasingly, consumers are using mobile-based devices and
applications to shop online with us and with our competitors, and to do comparison shopping. We are increasingly using social
media and proprietary mobile applications to interact with our consumers and as a means to enhance their shopping experience.
Any failure on our part to provide attractive, effective, reliable, user-friendly digital commerce platforms that offer a wide
assortment of merchandise with rapid delivery options and that continually meet the changing expectations of online shoppers
could place us at a competitive disadvantage, result in the loss of digital commerce and other sales, harm our reputation with
consumers, have a material adverse impact on the growth of our digital commerce business globally and could have a material
adverse impact on our business and results of operations.
Risks specific to our digital commerce business also include diversion of sales from our and our retailers’ brick and mortar stores,
difficulty in recreating the in-store experience through direct channels and liability for online content. Our failure to successfully
respond to these risks might adversely affect sales in our digital commerce business, as well as damage our reputation and
brands.
Failure to adequately protect or enforce our intellectual property rights could adversely affect our business.
We periodically discover counterfeit reproductions of our products or products that otherwise infringe our intellectual property
rights. If we are unsuccessful in enforcing our intellectual property rights, continued sales of these products could adversely affect
our sales and our brand and could result in a shift of consumer preference away from our products.
The actions we take to establish and protect our intellectual property rights may not be adequate to prevent imitation of our
products by others. We also may be unable to prevent others from seeking to block sales of our products as violations of
proprietary rights.
We may be subject to liability if third parties successfully claim we infringe on their intellectual property rights. Defending
infringement claims could be expensive and time-consuming and might result in our entering into costly license agreements. We
also may be subject to significant damages or injunctions against development, use, importation and/or sale of certain products.
We take various actions to prevent the unauthorized use and/or disclosure of our confidential information and intellectual property
rights. These actions include contractual measures such as entering into non-disclosure and non-compete agreements and
agreements relating to our collaborations with third parties and providing confidential information awareness training. Our
controls and efforts to prevent unauthorized use and/or disclosure of confidential information and intellectual property rights might
not always be effective. For example, confidential information related to business strategy, new technologies, mergers and
acquisitions, unpublished financial results or personal data could be prematurely, inadvertently, or improperly used and/or
disclosed, resulting in a loss of reputation, a decline in our stock price and/or a negative impact on our market position, and could
lead to damages, fines, penalties or injunctions.
In addition, the laws of certain countries may not protect or allow enforcement of intellectual property rights to the same extent as
the laws of the United States. We may face significant expenses and liability in connection with the protection of our intellectual
property rights, including outside the United States, and if we are unable to successfully protect our rights or resolve intellectual
property conflicts with others, our business or financial condition may be adversely affected.
We are subject to data security and privacy risks that could negatively affect our results, operations or reputation.
In addition to our own sensitive and proprietary business information, we handle transactional and personal information about our
customers and users of our digital experiences, which include online distribution channels and product engagement, adaptive
products and personal fitness applications. Hackers and data thieves are increasingly sophisticated and operate social
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engineering, such as phishing, and large-scale, complex automated attacks that can evade detection for long periods of time.
Any breach of our or our service providers’ network, or other vendor systems, may result in the loss of confidential business and
financial data, misappropriation of our consumers’, users’ or employees’ personal information or a disruption of our business. Any
of these outcomes could have a material adverse effect on our business, including unwanted media attention, impairment of our
consumer and customer relationships, damage to our reputation; resulting in lost sales and consumers, fines, lawsuits, or
significant legal and remediation expenses. We also may need to expend significant resources to protect against, respond to
and/or redress problems caused by any breach.
In addition, we must comply with increasingly complex and rigorous regulatory standards enacted to protect business and
personal data in the U.S., Europe and elsewhere. For example, the European Union adopted the General Data Protection
Regulation (the “GDPR”), which became effective on May 25, 2018; and California passed the California Consumer Privacy Act
(the “CCPA”) which will go into effect in 2020. These laws impose additional obligations on companies regarding the handling of
personal data and provides certain individual privacy rights to persons whose data is stored. Compliance with existing, proposed
and recently enacted laws (including implementation of the privacy and process enhancements called for under GDPR and
CCPA) and regulations can be costly; any failure to comply with these regulatory standards could subject us to legal and
reputational risks. Misuse of or failure to secure personal information could also result in violation of data privacy laws and
regulations, proceedings against the Company by governmental entities or others, damage to our reputation and credibility and
could have a negative impact on revenues and profits.
We are subject to the risk our licensees may not generate expected sales or maintain the value of our brands.
We currently license, and expect to continue licensing, certain of our proprietary rights, such as trademarks or copyrighted
material, to third parties. If our licensees fail to successfully market and sell licensed products, or fail to obtain sufficient capital or
effectively manage their business operations, customer relationships, labor relationships, supplier relationships or credit risks, it
could adversely affect our revenues, both directly from reduced royalties received and indirectly from reduced sales of our other
products.
We also rely on our licensees to help preserve the value of our brands. Although we attempt to protect our brands through
approval rights over the design, production processes, quality, packaging, merchandising, distribution, advertising and promotion
of our licensed products, we cannot completely control the use of our licensed brands by our licensees. The misuse of a brand by
or negative publicity involving a licensee could have a material adverse effect on that brand and on us.
Failure of our contractors or our licensees’ contractors to comply with our code of conduct, local laws and other
standards could harm our business.
We work with hundreds of contractors outside of the United States to manufacture our products, and we also have license
agreements that permit unaffiliated parties to manufacture or contract for the manufacture of products using our intellectual
property. We require the contractors that directly manufacture our products and our licensees that make products using our
intellectual property (including, indirectly, their contract manufacturers) to comply with a code of conduct and other environmental,
health and safety standards for the benefit of workers. We also require these contractors to comply with applicable standards for
product safety. Notwithstanding their contractual obligations, from time to time contractors may not comply with such standards or
applicable local law or our licensees may fail to enforce such standards or applicable local law on their contractors. Significant or
continuing noncompliance with such standards and laws by one or more contractors could harm our reputation or result in a
product recall and, as a result, could have an adverse effect on our sales and financial condition. Negative publicity regarding
production methods, alleged practices or workplace or related conditions of any of our suppliers, manufacturers or licensees
could adversely affect our brand image and sales and force us to locate alternative suppliers, manufacturers or licenses.
Our international operations involve inherent risks which could result in harm to our business.
Virtually all of our athletic footwear and apparel is manufactured outside of the United States, and the majority of our products are
sold outside of the United States. Accordingly, we are subject to the risks generally associated with global trade and doing
business abroad, which include foreign laws and regulations, varying consumer preferences across geographic regions, political
unrest, disruptions or delays in cross-border shipments and changes in economic conditions in countries in which our products
are manufactured or where we sell products. This includes, for example, the uncertainty surrounding the effect of Brexit, including
changes to the legal and regulatory framework that apply to the United Kingdom and its relationship with the European Union, as
well as new and proposed changes affecting tax laws and trade policy in the U.S. and elsewhere as further described below
under “We could be subject to changes in tax rates, adoption of new tax laws, additional tax liabilities or increased volatility in our
effective tax rate” and “Changes to U.S. trade policy, tariff and import/export regulations may have a material adverse effect on
our business, financial condition and results of operations.” The U.S. presidential administration has indicated a focus on policy
reforms that discourage U.S. corporations from outsourcing manufacturing and production activities to foreign jurisdictions,
including through tariffs or penalties on goods manufactured outside the U.S., which may require us to change the way we
conduct business and adversely affect our results of operations. The administration has also targeted the specific practices of
certain U.S. multinational corporations in public statements which, if directed at us, could harm our reputation or otherwise
negatively impact our business.
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In addition, disease outbreaks, terrorist acts and military conflict have increased the risks of doing business abroad. These
factors, among others, could affect our ability to manufacture products or procure materials, our ability to import products, our
ability to sell products in international markets and our cost of doing business. If any of these or other factors make the conduct of
business in a particular country undesirable or impractical, our business could be adversely affected. In addition, many of our
imported products are subject to duties, tariffs or quotas that affect the cost and quantity of various types of goods imported into
the United States and other countries. Any country in which our products are produced or sold may eliminate, adjust or impose
new quotas, duties, tariffs, safeguard measures, anti-dumping duties, cargo restrictions to prevent terrorism, restrictions on the
transfer of currency, climate change legislation, product safety regulations or other charges or restrictions, any of which could
have an adverse effect on our results of operations and financial condition.
We could be subject to changes in tax rates, adoption of new tax laws, additional tax liabilities or increased volatility in
our effective tax rate.
We are subject to the tax laws in the United States and numerous foreign jurisdictions. Current economic and political conditions
make tax laws and regulations, or their interpretation and application, in any jurisdiction subject to significant change. On
December 22, 2017, the U.S. enacted the Tax Cuts and Jobs Act (the “Tax Act”), which includes a number of significant changes
to previous U.S. tax laws that impact us, including provisions for a one-time transition tax on deemed repatriation of undistributed
foreign earnings, and a reduction in the corporate tax rate from 35% to 21% for tax years beginning after December 31, 2017,
among other changes. The Tax Act also transitions U.S. international taxation from a worldwide system to a modified territorial
system and includes base erosion prevention measures on non-U.S. earnings, which has the effect of subjecting certain earnings
of our foreign subsidiaries to U.S. taxation.
Implementation of the Tax Act required us to record incremental provisional tax expense in fiscal 2018, which increased our
effective tax rate in fiscal 2018. We completed our analysis of the Tax Act in the second quarter of fiscal 2019 and no adjustments
were made to the provisional amounts recorded.
We earn a substantial portion of our income in foreign countries and are subject to the tax laws of those jurisdictions. There have
been proposals to reform foreign tax laws that could significantly impact how U.S. multinational corporations are taxed on foreign
earnings. Although we cannot predict whether or in what form these proposals will pass, several of the proposals considered, if
enacted into law, could have an adverse impact on our income tax expense and cash flows.
Portions of our operations are subject to a reduced tax rate or are free of tax under various tax holidays and rulings. We also
utilize tax rulings and other agreements to obtain certainty in treatment of certain tax matters. These holidays and rulings expire
in whole or in part from time to time and may be extended when certain conditions are met, or terminated if certain conditions are
not met. The impact of any changes in conditions would be the loss of certainty in treatment thus potentially impacting our
effective income tax rate. For example, 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. If this matter is
adversely resolved, the Netherlands may be required to assess additional amounts with respect to current and prior periods and
the Company’s Netherlands income taxes in the future could increase.
We are also subject to the examination of our tax returns by the United States Internal Revenue Service (“IRS”) and other tax
authorities. We regularly assess the likelihood of an adverse outcome resulting from these examinations to determine the
adequacy of its provision for income taxes. Although we believe our tax provisions are adequate, the final determination of tax
audits and any related disputes could be materially different from our historical income tax provisions and accruals. The results of
audits or related disputes could have an adverse effect on our financial statements for the period or periods for which the
applicable final determinations are made. For example, we and our subsidiaries are also engaged in a number of intercompany
transactions across multiple tax jurisdictions. Although we believe we have clearly reflected the economics of these transactions
and the proper local transfer pricing documentation is in place, tax authorities may propose and sustain adjustments that could
result in changes that may impact our mix of earnings in countries with differing statutory tax rates.
Changes to U.S. trade policy, tariff and import/export regulations or our failure to comply with such regulations may
have a material adverse effect on our reputation, business, financial condition and results of operations.
Changes in U.S. or international social, political, regulatory and economic conditions or in laws and policies governing foreign
trade, manufacturing, development and investment in the territories or countries where we currently sell our products or conduct
our business, as well as any negative sentiment toward the U.S. as a result of such changes, could adversely affect our
business. The U.S. presidential administration has instituted or proposed changes in trade policies that include the negotiation or
termination of trade agreements, the imposition of higher tariffs on imports into the U.S., economic sanctions on individuals,
corporations or countries, and other government regulations affecting trade between the U.S. and other countries where we
conduct our business. It may be time-consuming and expensive for us to alter our business operations in order to adapt to or
comply with any such changes.
As a result of recent policy changes of the U.S. presidential administration and recent U.S. government proposals, there may be
greater restrictions and economic disincentives on international trade. The new tariffs and other changes in U.S. trade policy has
in the past and could continue to trigger retaliatory actions by affected countries, and certain foreign governments have instituted
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or are considering imposing retaliatory measures on certain U.S. goods. The Company, similar to many other multinational
corporations, does a significant amount of business that would be impacted by changes to the trade policies of the U.S. and
foreign countries (including governmental action related to tariffs, international trade agreements, or economic sanctions). Such
changes have the potential to adversely impact the U.S. economy or certain sectors thereof, our industry and the global demand
for our products, and as a result, could have a material adverse effect on our business, financial condition and results of
operations.
If one or more of our counterparty financial institutions default on their obligations to us or fail, we may incur significant
losses.
As part of our hedging activities, we enter into transactions involving derivative financial instruments, which may include forward
contracts, commodity futures contracts, option contracts, collars and swaps with various financial institutions. In addition, we
have significant amounts of cash, cash equivalents and other investments on deposit or in accounts with banks or other financial
institutions in the United States and abroad. As a result, we are exposed to the risk of default by or failure of counterparty
financial institutions. The risk of counterparty default or failure may be heightened during economic downturns and periods of
uncertainty in the financial markets. If one of our counterparties were to become insolvent or file for bankruptcy, our ability to
recover losses incurred as a result of default, or our assets deposited or held in accounts with such counterparty, may be limited
by the counterparty’s liquidity or the applicable laws governing the insolvency or bankruptcy proceedings. In the event of default
or failure of one or more of our counterparties, we could incur significant losses, which could negatively impact our results of
operations and financial condition.
We rely on a concentrated source base of contract manufacturers to supply a significant portion of our footwear
products.
NIKE is supplied by 112 footwear factories located in 12 countries. We do not own or operate any of the footwear manufacturing
facilities and depend upon independent contract manufacturers to manufacture all of the footwear products we sell. In fiscal
2019, four footwear contract manufacturers each accounted for greater than 10% of fiscal 2019 footwear production and in
aggregate accounted for approximately 61% of NIKE Brand footwear production in fiscal 2019. Our ability to meet our customers’
needs depends on our ability to maintain a steady supply of products from our independent contract manufacturers. If one or
more of our significant suppliers were to sever their relationship with us or significantly alter the terms of our relationship,
including due to changes in applicable trade policies, we may not be able to obtain replacement products in a timely manner,
which could have a material adverse effect on our sales, financial condition or results of operations. Additionally, if any of our
primary contract manufacturers fail to make timely shipments, do not meet our quality standards or otherwise fail to deliver us
product in accordance with our plans, there could be a material adverse effect on our results of operations.
Our products are subject to risks associated with overseas sourcing, manufacturing and financing.
The principal materials used in our apparel products — natural and synthetic fabrics and threads, specialized performance
fabrics designed to efficiently wick moisture away from the body, retain heat or repel rain and/or snow as well as plastic and metal
hardware — are available in countries where our manufacturing takes place. The principal materials used in our footwear
products — natural and synthetic rubber, plastic compounds, foam cushioning materials, natural and synthetic leather, natural
and synthetic fabrics and threads, nylon, canvas and polyurethane films — are also locally available to manufacturers. Both our
apparel and footwear products are dependent upon the ability of our unaffiliated contract manufacturers to locate, train, employ
and retain adequate personnel. NIKE contractors and suppliers buy raw materials and are subject to wage rates that are
oftentimes regulated by the governments of the countries in which our products are manufactured.
There could be a significant disruption in the supply of fabrics or raw materials from current sources or, in the event of a
disruption, our contract manufacturers might not be able to locate alternative suppliers of materials of comparable quality at an
acceptable price or at all. Further, our unaffiliated contract manufacturers have experienced and may continue to experience in
the future, unexpected increases in work wages, whether government mandated or otherwise and increases in compliance costs
due to governmental regulation concerning certain metals used in the manufacturing of our products. In addition, we cannot be
certain that our unaffiliated manufacturers will be able to fill our orders in a timely manner. If we experience significant increases
in demand, or reductions in the availability of materials, or need to replace an existing manufacturer, there can be no assurance
additional supplies of fabrics or raw materials or additional manufacturing capacity will be available when required on terms
acceptable to us, or at all, or that any supplier or manufacturer would allocate sufficient capacity to us in order to meet our
requirements. In addition, even if we are able to expand existing or find new manufacturing or sources of materials, we may
encounter delays in production and added costs as a result of the time it takes to train suppliers and manufacturers in our
methods, products, quality control standards and labor, health and safety standards. Any delays, interruption or increased costs
in labor or wages, or the supply of materials or manufacture of our products could have an adverse effect on our ability to meet
retail customer and consumer demand for our products and result in lower revenues and net income both in the short- and longterm.
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Because independent manufacturers make a majority of our products outside of our principal sales markets, our products must
be transported by third parties over large geographic distances. Delays in the shipment or delivery of our products due to the
availability of transportation, work stoppages, port strikes, infrastructure congestion or other factors, and costs and delays
associated with consolidating or transitioning between manufacturers, could adversely impact our financial performance. In
addition, manufacturing delays or unexpected demand for our products may require us to use faster, but more expensive,
transportation methods such as air freight, which could adversely affect our profit margins. The cost of oil is a significant
component in manufacturing and transportation costs, so increases in the price of petroleum products can adversely affect our
profit margins. Changes in U.S. trade policies, including new and potential changes to import tariffs and existing trade policies
and agreements, could also have a significant impact on our activities in foreign jurisdictions, and could adversely affect our
results of operations.
In addition, Sojitz America performs significant import-export financing services for the Company. During fiscal 2019, Sojitz
America provided financing and purchasing services for NIKE Brand products sold in certain NIKE markets including Argentina,
Brazil, Canada, India, South Africa and Uruguay (collectively the “Sojitz Markets”), excluding products produced and sold in the
same country. Any failure of Sojitz America to provide these services or any failure of Sojitz America’s banks could disrupt our
ability to acquire products from our suppliers and to deliver products to our customers in the Sojitz Markets. Such a disruption
could result in canceled orders that would adversely affect sales and profitability.
Our success depends on our global distribution facilities.
We distribute our products to customers directly from the factory and through distribution centers located throughout the world.
Our ability to meet customer expectations, manage inventory, complete sales and achieve objectives for operating efficiencies
and growth, particularly in emerging markets, depends on the proper operation of our distribution facilities, the development or
expansion of additional distribution capabilities and the timely performance of services by third parties (including those involved in
shipping product to and from our distribution facilities). Our distribution facilities could be interrupted by information technology
problems and disasters such as earthquakes or fires. Any significant failure in our distribution facilities could result in an adverse
effect on our business. We maintain business interruption insurance, but it may not adequately protect us from adverse effects
caused by significant disruptions in our distribution facilities.
We rely significantly on information technology to operate our business, including our supply chain and retail
operations, and any failure, inadequacy or interruption of that technology could harm our ability to effectively operate
our business.
We are heavily dependent on information technology systems and networks, including the Internet and third-party services
(“Information Technology Systems”), across our supply chain, including product design, production, forecasting, ordering,
manufacturing, transportation, sales and distribution, as well as for processing financial information for external and internal
reporting purposes, retail operations and other business activities. Information Technology Systems are critical to many of our
operating activities and our business processes and may be negatively impacted by any service interruption or shutdown. For
example, our ability to effectively manage and maintain our inventory and to ship products to customers on a timely basis
depends significantly on the reliability of these Information Technology Systems. Over a number of years, we have implemented
Information Technology Systems in all of the geographical regions in which we operate. Our work to integrate, secure and
enhance these systems and related processes in our global operations is ongoing and NIKE will continue to invest in these
efforts. The failure of these systems to operate effectively, including as a result of security breaches, viruses, hackers, malware,
natural disasters, vendor business interruptions or other causes, or failure to properly maintain, protect, repair or upgrade
systems, or problems with transitioning to upgraded or replacement systems could cause delays in product fulfillment and
reduced efficiency of our operations, could require significant capital investments to remediate the problem which may not be
sufficient to cover all eventualities, and may have an adverse effect on our reputation, results of operations and financial
condition.
We also use Information Technology Systems to process financial information and results of operations for internal reporting
purposes and to comply with regulatory financial reporting, legal and tax requirements. If Information Technology Systems suffer
severe damage, disruption or shutdown and our business continuity plans, or those of our vendors, do not effectively resolve the
issues in a timely manner, we could experience delays in reporting our financial results, which could result in lost revenues and
profits, as well as reputational damage. Furthermore, we depend on Information Technology Systems and personal data
collection for digital marketing, digital commerce, consumer engagement and the marketing and use of our digital products and
services. We also rely on our ability to engage in electronic communications throughout the world between and among our
employees as well as with other third parties, including customers, suppliers, vendors and consumers. Any interruption in
Information Technology Systems may impede our ability to engage in the digital space and result in lost revenues, damage to our
reputation, and loss of users.
The market for prime real estate is competitive.
Our ability to effectively obtain real estate to open new retail stores and otherwise conduct our operations, both domestically and
internationally, depends on the availability of real estate that meets our criteria for traffic, square footage, co-tenancies, lease
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economics, demographics and other factors. We also must be able to effectively renew our existing real estate leases. In
addition, from time to time, we seek to downsize, consolidate, reposition or close some of our real estate locations, which may
require modification of an existing lease. Failure to secure adequate new locations or successfully modify leases for existing
locations, or failure to effectively manage the profitability of our existing fleet of retail stores, could have an adverse effect on our
operating results and financial condition.
Additionally, the economic environment may make it difficult to determine the fair market rent of real estate properties
domestically and internationally. This could impact the quality of our decisions to exercise lease options at previously negotiated
rents and to renew expiring leases at negotiated rents. Any adverse effect on the quality of these decisions could impact our
ability to retain real estate locations adequate to meet our targets or efficiently manage the profitability of our existing fleet of
stores, which could have an adverse effect on our operating results and financial condition.
Extreme weather conditions and natural disasters could negatively impact our operating results and financial condition.
Extreme weather conditions in the areas in which our retail stores, suppliers, customers, distribution centers, headquarters and
vendors are located could adversely affect our operating results and financial condition. Moreover, natural disasters such as
earthquakes, hurricanes and tsunamis, whether occurring in the United States or abroad, and their related consequences and
effects, including energy shortages and public health issues, could disrupt our operations, the operations of our vendors and
other suppliers or result in economic instability that may negatively impact our operating results and financial condition.
Our financial results may be adversely affected if substantial investments in businesses and operations fail to produce
expected returns.
From time to time, we may invest in technology, business infrastructure, new businesses, product offering and manufacturing
innovation and expansion of existing businesses, such as our digital commerce operations, which require substantial cash
investments and management attention. We believe cost-effective investments are essential to business growth and profitability;
however, significant investments are subject to typical risks and uncertainties inherent in developing a new business or
expanding an existing business. The failure of any significant investment to provide expected returns or profitability could have a
material adverse effect on our financial results and divert management attention from more profitable business operations.
We are subject to a complex array of laws and regulations and litigation and other legal and regulatory proceedings,
which could have an adverse effect on our business, financial condition and results of operations.
As a multinational corporation with operations and distribution channels throughout the world, we are subject to and must comply
with extensive laws and regulations in the U.S. and other jurisdictions in which we have operations and distribution channels. If
we or our employees, agents, suppliers, and other partners fail to comply with any of these laws or regulations, such failure could
subject us to fines, sanctions or other penalties that could negatively affect our reputation, business, financial condition and
results of operations. We are involved in various types of claims, lawsuits, regulatory proceedings and government investigations
relating to our business, our products and the actions of our employees and representatives, including contractual and
employment relationships, product liability, antitrust, trademark rights and a variety of other matters. It is not possible to predict
with certainty the outcome of any such legal or regulatory proceedings or investigations, and we could in the future incur
judgments, fines or penalties, or enter into settlements of lawsuits and claims that could have a material adverse effect on our
business, financial condition and results of operations and negatively impact our reputation. The global nature of our business
means legal and compliance risks, such as anti-bribery, anti-corruption, fraud, trade, environmental, competition, privacy and
other regulatory matters, will continue to exist and additional legal proceedings and other contingencies will arise from time to
time, which could adversely affect us. In addition, the adoption of new laws or regulations, or changes in the interpretation of
existing laws or regulations, may result in significant unanticipated legal and reputational risks. Any current or future legal or
regulatory proceedings could divert management’s attention from our operations and result in substantial legal fees.
The success of our business depends, in part, on high-quality employees, including key personnel.
Our success depends in part on the continued service of high-quality employees, including key executive officers and personnel.
The loss of the services of key individuals, or any negative perception with respect to these individuals, could harm our business.
Our success also depends on our ability to recruit, retain and engage our personnel sufficiently, both to maintain our current
business and to execute our strategic initiatives. Competition for employees in our industry is intense and we may not be
successful in attracting and retaining such personnel. In addition, shifts in U.S. immigration policy could negatively impact our
ability to attract, hire and retain highly skilled employees who are from outside the U.S.
The sale of a large number of shares of common stock by our principal stockholder could depress the market price of
our common stock.
As of June 30, 2019, Swoosh, LLC beneficially owned approximately 78% of our Class A Common Stock. If, on June 30, 2019, all
of these shares were converted into Class B Common Stock, the commensurate ownership percentage of our Class B Common
Stock would be approximately 16%. The shares are available for resale, subject to the requirements of the U.S. securities laws
and the terms of the limited liability company agreement governing Swoosh, LLC. The sale or prospect of a sale of a substantial
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number of these shares could have an adverse effect on the market price of our common stock. Swoosh, LLC was formed by
Philip H. Knight, our Chairman Emeritus, to hold the majority of his shares of Class A Common Stock. Swoosh, LLC is controlled
by Mr. Knight’s son and NIKE director, Travis Knight.
Changes in our credit ratings or macroeconomic conditions may affect our liquidity, increasing borrowing costs and
limiting our financing options.
Our long-term debt is currently rated Investment Grade by Standard & Poor’s and Moody’s Investors Service. If our credit ratings
are lowered, borrowing costs for future long-term debt or short-term credit facilities may increase and our financing options,
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