NIKE, INC. MANAGEMENT REPORT AND ANALYSIS OF FINANCIAL POSITION AND OPERATING RESULTS (Form 10-K)

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NIKE designs, develops, markets and sells athletic footwear, apparel, equipment,
accessories and services worldwide. We are the largest seller of athletic
footwear and apparel in the world. We sell our products through NIKE Direct
operations, which is comprised of both NIKE-owned retail stores and sales
through our digital platforms (also referred to as "NIKE Brand Digital"), to
retail accounts and to a mix of independent distributors, licensees and sales
representatives in virtually all countries around the world. Our goal is to
deliver value to our shareholders by building a profitable global portfolio of
branded footwear, apparel, equipment and accessories businesses. Our strategy is
to achieve long-term revenue growth by creating innovative, "must-have"
products, building deep personal consumer connections with our brands and
delivering compelling consumer experiences through digital platforms and at
retail.

Through the Consumer Direct Acceleration, we are focusing on creating the
marketplace of the future through more premium, consistent and seamless consumer
experiences, leading with digital and our owned stores, as well as select
wholesale partners that share our marketplace vision. Over the last several
years, as we have executed against the Consumer Direct Acceleration, we have
grown our NIKE Direct business to be approximately 42% of total NIKE Brand
revenues for fiscal 2022, and we have reduced the number of wholesale accounts
globally. Additionally, we have aligned our product creation and category
organizations around a new consumer construct focused on Men's, Women's and
Kids' and continue to invest in data and analytics, demand sensing, insight
gathering, inventory management and other areas to create an end-to-end
technology foundation, which we expect will further accelerate our digital
transformation. We believe this unified approach will accelerate growth and
unlock more efficiency for our business, while driving speed and responsiveness
as we serve consumers globally.

During fiscal 2021, we substantially completed a series of leadership and
operating model changes to streamline and speed up the strategic execution of
the Consumer Direct Acceleration. These changes resulted in a net reduction of
our global workforce and during fiscal 2021, we incurred pre-tax charges of $294
million, which relate to employee termination costs and, to a lesser extent,
stock-based compensation expense. For fiscal 2022, we recognized an immaterial
amount of related employee termination costs and, to a lesser extent,
stock-based compensation expense. We expect future annual wage-related savings
will be reinvested to execute against this next phase of our strategy. For more
information related to our organizational realignment and related costs, see
Note 21 - Restructuring within the accompanying Notes to the Consolidated
Financial Statements.

COVID-19 AND MARKET DYNAMICS UPDATE
The COVID-19 pandemic and its impacts on the global supply chain created
volatility in our fiscal 2022 business results and operations globally. Despite
these challenges, we achieved record Revenues for fiscal 2022, which increased
5% compared to the prior fiscal year with gross margin expansion of 120 basis
points. Our NIKE Direct business continued its momentum, growing 14% and 15% on
a reported and currency-neutral basis, respectively, led by North America, APLA
and EMEA, partially offset by declines in Greater China due to a COVID-19
resurgence in the third and fourth quarters of fiscal 2022 as well as
marketplace dynamics. During fiscal 2022, nearly all of our owned stores
remained open across North America, EMEA and APLA. In Greater China however, due
to a COVID-19 resurgence, we experienced a higher level of temporary store
closures, with some operating on reduced hours, as well as lower physical
traffic compared to pre-pandemic levels.

During the first quarter of fiscal 2022, the majority of NIKE Brand and Converse
contract manufacturers in Vietnam and Indonesia were subject to government
mandated shutdowns due to COVID-19. As a result of these closures, we lost
approximately three months of production, impacting available product supply
throughout fiscal 2022. Globally, nearly all of our supplier base is currently
operational without restrictions and with factory production exceeding
pre-closure production levels. In addition, our supply of available inventory
continued to be impacted in the fourth quarter of fiscal 2022 as extended
inventory transit times drove elevated levels of in-transit inventory. These
supply chain impacts and a COVID-19 resurgence in Greater China, combined with
other factors, caused Inventories to grow to $8.4 billion, an increase of 23%
compared to fiscal 2021.

We also experienced high transportation, logistics and fulfillment costs due to this dynamic environment, which partially offset the increase in gross margin in fiscal 2022.

Inventory transit times as well as logistics and fulfillment costs are expected
to remain elevated. We also expect product costs to remain elevated due to
higher input costs. In the first quarter of fiscal 2023, we expect gross margin
could be negatively impacted by increased promotional activity to sell seasonal
product arriving late due to the combination of temporary factory closures at
the beginning of fiscal 2022 and continued elevated transit times. To mitigate
the impact across our business, our teams are continuing to leverage our
operational playbook and taking actions where we can, including balancing
inventory across our geographies, pricing actions and employing a seasonless
approach to products. Despite these short-term dynamics, we believe our Consumer
Direct Acceleration strategy continues to drive our business towards our
long-term financial goals.

During fiscal 2022, we continued to invest in our digital transformation and
brand campaigns as the world returned to sport, and we expect to maintain our
multi-year investment plans in order to transform our business of the future.

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We expect the operating environment could remain volatile in fiscal 2023 as
there remains risk that COVID-19 variants may continue to cause disruption to
our operations and could have a material adverse impact on future revenue growth
as well as overall profitability.

For more information, see point 1A. Risk factors, in part I, point 1. Company.

FISCAL 2022 OVERVIEW
In fiscal 2022, NIKE, Inc. achieved record Revenues of $46.7 billion, which
increased 5% and 6% on a reported and currency-neutral basis, respectively,
driven by higher revenues in EMEA, North America and APLA, partially offset by
declines in Greater China. The NIKE Brand, which represents over 90% of NIKE,
Inc. Revenues, increased 5% and 6% on a reported and currency-neutral basis,
respectively, compared to fiscal 2021. NIKE Direct grew 14% and 15%, on a
reported and currency-neutral basis, respectively, driven by an increase of 18%
in NIKE Brand Digital, as growth in North America, APLA and EMEA was partially
offset by a decline in Greater China. Wholesale revenues declined 1% as declines
in North America and Greater China were partially offset by growth in EMEA and
APLA. Revenues for Converse increased 6% and 7%, on a reported and
currency-neutral basis, respectively, led by double-digit growth in our direct
to consumer business, partially offset by lower wholesale revenues.

Income before income taxes remained flat for fiscal 2022, as higher revenues and
gross margin expansion were offset by higher selling and administrative expense.
NIKE, Inc. gross margin increased 120 basis points, led by margin expansion in
our NIKE Direct business, a higher mix of full-price sales and favorable changes
in net foreign currency exchange rates, including hedges, partially offset by
elevated freight and logistics costs and higher inventory obsolescence reserves
primarily recognized in Greater China in the fourth quarter of fiscal 2022.
Selling and administrative expense increased due to higher Operating overhead
and Demand creation expense. Operating overhead expense increased primarily due
to higher strategic technology investments as well as increases in wage-related
expenses and NIKE Direct variable costs. This activity was partially offset by
higher restructuring-related costs in the prior year related to our
organizational realignment. For more information, see Note 21 - Restructuring
within the accompanying Notes to the Consolidated Financial Statements. Demand
creation expense increased primarily due to normalization of spend against brand
campaigns and continued investments in digital marketing to support heightened
digital demand. ROIC as of May 31, 2022 was 46.5% compared to 48.8% as of May
31, 2021. ROIC is considered a non-GAAP financial measure, see "Use of Non-GAAP
Financial Measures" for further information.

During the fourth quarter of fiscal 2022, we entered into separate definitive
agreements to sell our legal entities in Argentina and Uruguay as well as our
legal entity in Chile to third-party distributors. The assets and liabilities of
these entities will remain classified as held-for-sale on our Consolidated
Balance Sheets until the transactions close, which is expected to occur prior to
the end of the third quarter of fiscal 2023. For more information related to our
planned distributor partnership transition within APLA, see Note 20 -
Acquisitions and Divestitures within the accompanying Notes to the Consolidated
Financial Statements. In future quarters, as we shift from a wholesale and
direct to consumer operating model to a distributor operating model within these
countries, we expect consolidated NIKE, Inc. and APLA revenue growth will be
reduced due to differences in commercial terms. However, over time we expect the
future operating model to have a favorable impact on our overall profitability
as we reduce selling and administrative expenses, as well as lessen exposure to
foreign exchange rate volatility.

Economic sanctions imposed on Russia during the fourth quarter of fiscal 2022,
impacted our local business and a reduction in the Ruble liquidity affected our
ability to manage operational impact and related foreign currency risk. As a
result, we deconsolidated our Russian legal entities, the net revenues of which
were less than one percent of consolidated net Revenues for fiscal 2021. The
deconsolidation of our Russian legal entities resulted in a one-time, pre-tax
charge of $96 million recognized within Other (income) expense, net, classified
within Corporate. Subsequent to the end of fiscal 2022, we made the decision to
leave the Russian marketplace.

While currency markets remain volatile, in part due to geopolitical dynamics that have led to stronger WE Dollar, we continue to see opportunities to drive future growth and profitability. We remain committed to effectively managing our business and mitigating financial market risks in order to achieve our long-term financial goals by executing the operating strategies described above.

For discussion related to the results of operations and changes in financial
condition for fiscal 2021 compared to fiscal 2020 refer to Part II, Item 7.
Management's Discussion and Analysis of Financial Condition and Results of
Operations in our fiscal 2021 Form 10-K, which was filed with the United States
Securities and Exchange Commission on July 20, 2021.

USE OF NON-GAAP FINANCIAL MEASURES
Throughout this Annual Report on Form 10-K, we discuss non-GAAP financial
measures, including references to wholesale equivalent revenues,
currency-neutral revenues, Total NIKE Brand earnings before interest and taxes
(EBIT) and Total NIKE, Inc. EBIT, as well as EBIT Margin and ROIC, which should
be considered in addition to, and not in lieu of, the financial measures
calculated and presented in accordance with accounting principles generally
accepted in the United States of America ("U.S. GAAP"). References to wholesale
equivalent revenues are intended to provide context as to the total size of our
NIKE Brand market footprint if we had no NIKE Direct operations. NIKE Brand
wholesale equivalent revenues consist of (1) sales to external wholesale
customers and (2) internal sales from our wholesale operations to our NIKE
Direct operations, which are charged at prices comparable to those charged to
external wholesale customers. Additionally, currency-neutral revenues are
calculated


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using actual exchange rates in use during the comparative prior year period to
enhance the visibility of the underlying business trends, excluding the impact
of translation arising from foreign currency exchange rate fluctuations. EBIT is
calculated as Net Income before Interest expense (income), net and Income tax
expense in the Consolidated Statements of Income. EBIT Margin is calculated as
EBIT divided by total NIKE, Inc. Revenues. ROIC represents a performance measure
that management believes is useful information in understanding the Company's
ability to effectively manage invested capital, see the table below for how the
Company calculates this measure.

Management uses these non-GAAP financial measures when evaluating the Company's
performance, including when making financial and operating decisions.
Additionally, management believes these non-GAAP financial measures provide
investors with additional financial information that should be considered when
assessing our underlying business performance and trends. However, references to
wholesale equivalent revenues, currency-neutral revenues, ROIC, EBIT and EBIT
margin should not be considered in isolation or as a substitute for other
financial measures calculated and presented in accordance with U.S. GAAP and may
not be comparable to similarly titled non-GAAP measures used by other companies.

Our ROIC calculation at May 31, 2022 and 2021 is as follows:

                                                                       FOR THE TRAILING FOUR QUARTERS
                                                                                   ENDED
(Dollars in millions)                                                   MAY 31, 2022    MAY 31, 2021
Numerator
Net income                                                            $     6,046      $     5,727
Add: Interest expense (income), net                                           205              262
Add: Income tax expense                                                       605              934
Earnings before interest and taxes                                          6,856            6,923
Income tax adjustment(1)                                                     (624)            (970)
Earnings before interest and after taxes                              $     

6,232 $5,953

AVERAGE FOR THE NEXT FIVE

                                                                               QUARTERS ENDED
                                                                        MAY 31, 2022    MAY 31, 2021
Denominator
Total debt(2)                                                         $    12,722      $    12,890
Add: Shareholders' equity                                                  14,425           10,523
Less: Cash and equivalents and Short-term investments                      13,748           11,217
Total invested capital                                                $    13,399      $    12,196

RETURN ON INVESTED CAPITAL                                                   46.5    %        48.8   %

(1) Equals earnings before interest and taxes multiplied by the effective tax rate at the end of the respective quarter.

(2)Total debt includes the following: 1) Current portion of long-term debt, 2)
Notes Payable, 3) Current portion of operating lease liabilities, 4) Long-term
debt and 5) Operating lease liabilities.

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RESULTS OF OPERATIONS

(in millions of dollars, except per share data) FISCAL 2022 FISCAL 2021

      % CHANGE      FISCAL 2020       % CHANGE
Revenues                                       $    46,710    $    44,538                5  % $    37,403               19  %
Cost of sales                                       25,231         24,576                3  %      21,162               16  %
Gross profit                                        21,479         19,962                8  %      16,241               23  %
Gross margin                                          46.0  %        44.8  %                         43.4  %
Demand creation expense                              3,850          3,114               24  %       3,592              -13  %
Operating overhead expense                          10,954          9,911               11  %       9,534                4  %
Total selling and administrative expense            14,804         13,025               14  %      13,126               -1  %
% of revenues                                         31.7  %        29.2  %                         35.1  %
Interest expense (income), net                         205            262                -             89                -
Other (income) expense, net                           (181)            14                -            139                -
Income before income taxes                           6,651          6,661                0  %       2,887              131  %
Income tax expense                                     605            934              -35  %         348              168  %
Effective tax rate                                     9.1  %        14.0  %                         12.1  %
NET INCOME                                     $     6,046    $     5,727                6  % $     2,539              126  %
Diluted earnings per common share              $      3.75    $      3.56                5  % $      1.60              123  %



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CONSOLIDATED OPERATING RESULTS

REVENUES

                                                                                          % CHANGE EXCLUDING                                % CHANGE EXCLUDING
                                                                                                    CURRENCY                                          CURRENCY
(Dollars in millions)                        FISCAL 2022     FISCAL 2021         % CHANGE         CHANGES(1)   FISCAL 2020         % CHANGE         CHANGES(1)
NIKE, Inc. Revenues:
NIKE Brand Revenues by:
Footwear                                   $     29,143    $     28,021              4  %               4  % $     23,305             20  %              18  %
Apparel                                          13,567          12,865              5  %               6  %       10,953             17  %              15  %
Equipment                                         1,624           1,382             18  %              18  %        1,280              8  %               7  %
Global Brand Divisions(2)                           102              25            308  %             302  %           30            -17  %             -17  %
Total NIKE Brand Revenues                        44,436          42,293              5  %               6  %       35,568             19  %              17  %
Converse                                          2,346           2,205              6  %               7  %        1,846             19  %              16  %
Corporate(3)                                        (72)             40              -                  -             (11)             -                  -
TOTAL NIKE, INC. REVENUES                  $     46,710    $     44,538              5  %               6  % $     37,403             19  %              17  %
Supplemental NIKE Brand Revenues Details:
NIKE Brand Revenues by:
Sales to Wholesale Customers               $     25,608    $     25,898             -1  %              -1  % $     23,156             12  %              10  %
Sales through NIKE Direct                        18,726          16,370             14  %              15  %       12,382             32  %              30  %
Global Brand Divisions(2)                           102              25            308  %             302  %           30            -17  %             -17  %
TOTAL NIKE BRAND REVENUES                  $     44,436    $     42,293              5  %               6  % $     35,568             19  %              17  %
NIKE Brand Revenues on a Wholesale
Equivalent Basis:(1)
Sales to Wholesale Customers               $     25,608    $     25,898             -1  %              -1  % $     23,156             12  %              10  %
Sales from our Wholesale Operations to
NIKE Direct Operations                           10,543           9,872              7  %               7  %        7,452             32  %              30  %
TOTAL NIKE BRAND WHOLESALE EQUIVALENT
REVENUES                                   $     36,151    $     35,770              1  %               1  % $     30,608             17  %              15  %
NIKE Brand Wholesale Equivalent Revenues
by:(1),(4)
Men's                                      $     18,797    $     18,391              2  %               3  % $     16,430             12  %              10  %
Women's                                           8,273           8,225              1  %               1  %        6,954             18  %              16  %
NIKE Kids'                                        4,874           4,882              0  %               0  %        4,199             16  %              14  %
Jordan Brand                                      5,122           4,780              7  %               7  %        3,687             30  %              27  %
Others(5)                                          (915)           (508)           -80  %             -79  %         (662)            23  %              24  %
TOTAL NIKE BRAND WHOLESALE EQUIVALENT
REVENUES                                   $     36,151    $     35,770              1  %               1  % $     30,608             17  %              15  %

(1) The percentage change excluding foreign exchange variations and the presentation of equivalent wholesale revenues represent non-GAAP financial measures. See “Use of Non-GAAP Financial Measures” for more information.

(2) The sales of the Global Brand Divisions include NIKE Trademark licensing and other miscellaneous revenue that is not part of a geographic operating segment.

(3)Business revenue consists primarily of foreign exchange hedging gains and losses related to revenue generated by entities within the NIKE Brand and Converse geographic operating segments, but managed through our central currency risk management program.

(4)As a result of the Consumer Direct Acceleration strategy, announced in fiscal
2021, the Company is now organized around a new consumer construct of Men's,
Women's and Kids'. Beginning in the first quarter of fiscal 2022, unisex
products are classified within Men's, and Jordan Brand revenues are separately
reported. Certain prior year amounts have been reclassified to conform to fiscal
2022 presentation. These changes had no impact on previously reported
consolidated results of operations or shareholders' equity. For additional
information about the Consumer Direct Acceleration refer to Item 7. Management's
Discussion and Analysis of Financial Condition and Results of Operations within
the Company's Annual Report on Form 10-K for the fiscal year ended May 31, 2021.

(5)Other includes products not allocated to men, women, NIKE children and Jordan Brandas well as certain adjustments that are not allocated to the products designated by the consumer.




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FISCAL 2022 NIKE BRAND REVENUE HIGHLIGHTS
The following tables present NIKE Brand revenues disaggregated by reportable
operating segment, distribution channel and major product line:

[[Image Removed: nke-20220531_g10.jpg]] [[Image Removed: nke-20220531_g11.jpg]] [[Image Removed: nke-20220531_g12.jpg]]


FISCAL 2022 COMPARED TO FISCAL 2021
On a currency-neutral basis, NIKE, Inc. Revenues increased 6% for fiscal 2022,
driven by higher revenues in EMEA, North America and APLA, partially offset by
lower revenues in Greater China. Higher revenues in EMEA and North America each
contributed approximately 3 percentage points to NIKE, Inc. Revenues, and APLA
contributed approximately 2 percentage points, while lower revenues in Greater
China reduced NIKE, Inc. Revenues by approximately 2 percentage points.

On a currency-neutral basis, NIKE Brand footwear revenues increased 4% for
fiscal 2022, driven by growth in NIKE Direct, partially offset by a decline in
our wholesale business. Unit sales of footwear decreased 3%, while higher
average selling price (ASP) per pair contributed approximately 7 percentage
points of footwear revenue growth. Higher ASP per pair was primarily due to
higher NIKE Direct ASP, the favorable impact of growth in our NIKE Direct
business, higher full-price ASP, net of discounts, on a wholesale equivalent
basis, and a higher mix of full-price sales.

Currency-neutral NIKE Brand apparel revenues increased 6% for fiscal 2022,
driven primarily by growth in Men's. Unit sales of apparel remained flat, and
higher ASP per unit contributed approximately 6 percentage points of apparel
revenue growth. Higher ASP per unit was primarily due to higher full-price and
NIKE Direct ASPs.

On a reported basis, NIKE Direct revenues represented approximately 42% of our
total NIKE Brand revenues for fiscal 2022 compared to 39% for fiscal 2021. NIKE
Brand Digital sales were $10.7 billion for fiscal 2022 compared to $9.1 billion
for fiscal 2021. On a currency-neutral basis, NIKE Direct revenues increased 15%
for fiscal 2022, driven by NIKE Brand Digital sales growth of 18%, comparable
store sales growth of 10%, in part due to improved physical retail traffic, and
the addition of new stores. Comparable store sales, which exclude NIKE Brand
Digital sales, comprises revenues from NIKE-owned in-line and factory stores for
which all three of the following requirements have been met: (1) the store has
been open at least one year, (2) square footage has not changed by more than 15%
within the past year and (3) the store has not been permanently repositioned
within the past year. Comparable store sales includes revenues from stores that
were temporarily closed during the period as a result of COVID-19. Comparable
store sales represents a performance measure that we believe is useful
information for management and investors in understanding the performance of our
established NIKE-owned in-line and factory stores. Management considers this
metric when making financial and operating decisions. The method of calculating
comparable store sales varies across the retail industry. As a result, our
calculation of this metric may not be comparable to similarly titled measures
used by other companies.

On a currency-neutral basis, fiscal 2022 NIKE Brand revenue growth of 6% was
primarily driven by increases in Men's and the Jordan Brand, which grew 3% and
7%, respectively.


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GROSS MARGIN

FISCAL 2022 COMPARED TO FISCAL 2021
For fiscal 2022, our consolidated gross profit increased 8% to $21,479 million
compared to $19,962 million for fiscal 2021. Gross margin increased 120 basis
points to 46.0% for fiscal 2022 compared to 44.8% for fiscal 2021 due to the
following:

[[Image Removed: nke-20220531_g13.jpg]]
*Wholesale equivalent


The increase in gross margin for fiscal 2022 was primarily due to higher margin
in our NIKE Direct business, a higher mix of full-price sales on a wholesale
equivalent basis and favorable changes in net foreign currency exchange rates,
including hedges. This activity was partially offset by higher product costs on
a wholesale equivalent basis, largely due to elevated freight and logistics
costs as well as an increase in other costs primarily due to higher inventory
obsolescence reserves recognized in Greater China in the fourth quarter of
fiscal 2022.

TOTAL SELLING AND ADMINISTRATION EXPENSES

(Dollars in millions)                        FISCAL 2022    FISCAL 2021            % CHANGE  FISCAL 2020             % CHANGE
Demand creation expense(1)                  $     3,850    $     3,114             24  %    $     3,592             -13  %
Operating overhead expense                       10,954          9,911             11  %          9,534               4  %

Total selling and administrative expenses $14,804 $13,025

       14  %    $    13,126              -1  %
% of revenues                                      31.7  %        29.2  %         250   bps        35.1  %         (590)  bps


(1)Demand creation expense consists of advertising and promotion costs,
including costs of endorsement contracts, complimentary product, television,
digital and print advertising and media costs, brand events and retail brand
presentation.

FISCAL 2022 COMPARED TO FISCAL 2021
Demand creation expense increased 24% for fiscal 2022, primarily due to higher
advertising and marketing spend against brand campaigns as we experienced
marketplace closures in the prior year due to COVID-19, as well as continued
investments in digital marketing to support heightened digital demand. Changes
in foreign currency exchange rates decreased Demand creation expense by
approximately 1 percentage point.

Operating overhead expense increased 11% for fiscal 2022, primarily due to
higher strategic technology investments and increases in wage-related expenses
and NIKE Direct variable costs. This activity was partially offset by higher
restructuring-related costs in the prior year related to our organizational
realignment. For more information, see Note 21 - Restructuring within the
accompanying Notes to the Consolidated Financial Statements. Changes in foreign
currency exchange rates had an insignificant impact on Operating overhead
expense.

OTHER (INCOME) EXPENSE, NET

(Dollars in millions)             FISCAL 2022       FISCAL 2021       FISCAL 2020
Other (income) expense, net      $       (181)     $         14      $        139


Other (income) expense, net comprises foreign currency conversion gains and
losses from the remeasurement of monetary assets and liabilities denominated in
non-functional currencies and the impact of certain foreign currency derivative
instruments, as well as unusual or non-operating transactions that are outside
the normal course of business.

FISCAL 2022 COMPARED TO FISCAL 2021
Other (income) expense, net changed from $14 million of other expense, net in
fiscal 2021 to $181 million of other income, net in the current year, primarily
due to a $219 million net favorable change in foreign currency conversion gains
and losses, including hedges, as well as a net favorable impact related to our
strategic distributor partnership transition within APLA, partially offset by
the one-time charge related to the deconsolidation of our Russian operations.

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For more information related to our distributor partnership transition within
APLA, see Note 20 - Acquisitions and Divestitures within the accompanying Notes
to the Consolidated Financial Statements.

We estimate the combination of the translation of foreign currency-denominated
profits from our international businesses, and the year-over-year change in
foreign currency-related gains and losses included in Other (income) expense,
net had a favorable impact on our Income before income taxes of $132 million for
fiscal 2022.

INCOME TAXES

                      FISCAL 2022   FISCAL 2021     % CHANGE  FISCAL 2020     % CHANGE
Effective tax rate          9.1  %       14.0  %   (490) bps       12.1  %     190 bps


FISCAL 2022 COMPARED TO FISCAL 2021
Our effective tax rate was 9.1% for fiscal 2022, compared to 14.0% for fiscal
2021, primarily due to a shift in our earnings mix and recognition of a
non-cash, one-time benefit related to the onshoring of certain non-U.S.
intangible property ownership rights in the fourth quarter of fiscal 2022.

OPERATING SECTORS

Our operating segments reflect the internal organizational structure of the Company. The NIKE Brand segments are defined by geographic regions for operations participating in NIKE Commercial activity of the brand.

Each NIKE Brand geographic segment operates predominantly in one industry: the
design, development, marketing and selling of athletic footwear, apparel and
equipment. The Company's reportable operating segments for the NIKE Brand are:
North America; Europe, Middle East & Africa (EMEA); Greater China; and Asia
Pacific & Latin America (APLA), and include results for the NIKE and Jordan
brands. The Company's NIKE Direct operations are managed within each geographic
operating segment. Converse is also a reportable operating segment for the
Company and operates predominately in one industry: the design, marketing,
licensing and selling of athletic lifestyle sneakers, apparel and accessories.

As part of our centrally managed foreign exchange risk management program,
standard foreign currency exchange rates are assigned twice per year to each
NIKE Brand entity in our geographic operating segments and Converse. These rates
are set approximately nine and twelve months in advance of the future selling
seasons to which they relate (specifically, for each currency, one standard rate
applies to the fall and holiday selling seasons and one standard rate applies to
the spring and summer selling seasons) based on average market spot rates in the
calendar month preceding the date they are established. Inventories and Cost of
sales for geographic operating segments and Converse reflect the use of these
standard rates to record non-functional currency product purchases into the
entity's functional currency. Differences between assigned standard foreign
currency exchange rates and actual market rates are included in Corporate,
together with foreign currency hedge gains and losses generated from our
centrally managed foreign exchange risk management program and other conversion
gains and losses.



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The breakdown of income is as follows:

                                                                                                  % CHANGE EXCLUDING                                  % CHANGE EXCLUDING
                                                                                                            CURRENCY                                            CURRENCY
(Dollars in millions)                              FISCAL 2022     FISCAL 2021           % CHANGE         CHANGES(1)   FISCAL 2020           % CHANGE         CHANGES(1)
North America                                    $     18,353    $     17,179                7  %               7  % $     14,484               19  %              19  %
Europe, Middle East & Africa                           12,479          11,456                9  %              12  %        9,347               23  %              17  %
Greater China                                           7,547           8,290               -9  %             -13  %        6,679               24  %              19  %
Asia Pacific & Latin America(2)                         5,955           5,343               11  %              16  %        5,028                6  %               8  %
Global Brand Divisions(3)                                 102              25              308  %             302  %           30              -17  %             -17  %
TOTAL NIKE BRAND                                       44,436          42,293                5  %               6  %       35,568               19  %              17  %
Converse                                                2,346           2,205                6  %               7  %        1,846               19  %              16  %
Corporate(4)                                              (72)             40                -                  -             (11)               -                  -
TOTAL NIKE, INC. REVENUES                        $     46,710    $     44,538                5  %               6  % $     37,403               19  %              17  %

(1) The percentage change excluding foreign exchange variations represents a non-GAAP financial measure. See “Use of Non-GAAP Financial Measures” for more information.

(2)  Refer to Note 20 - Acquisitions and Divestitures within the accompanying
Notes to the Consolidated Financial Statements for additional information on the
transition of our NIKE Brand business in Brazil to a third-party distributor.

(3) The sales of the Worldwide Brand Divisions include NIKE Trademark licensing and other miscellaneous revenue that is not part of a geographic operating segment.

(4) Corporate income primarily consists of foreign exchange hedging gains and losses related to income generated by the entities NIKE Brand and Converse geographic operating segments, but managed through our central currency risk management program.

The primary financial measure used by the Company to evaluate performance of
individual operating segments is EBIT, which represents Net income before
Interest expense (income), net and Income tax expense in the Consolidated
Statements of Income. As discussed in Note 17 - Operating Segments and Related
Information in the accompanying Notes to the Consolidated Financial Statements,
certain corporate costs are not included in EBIT of our operating segments.

The breakdown of earnings before interest and taxes is as follows:

(Dollars in millions)                   FISCAL 2022          FISCAL 2021                  % CHANGE        FISCAL 2020                  % CHANGE
North America                          $     5,114          $     5,089                       0  %       $     2,899                      76  %
Europe, Middle East & Africa                 3,293                2,435                      35  %             1,541                      58  %
Greater China                                2,365                3,243                     -27  %             2,490                      30  %
Asia Pacific & Latin America                 1,896                1,530                      24  %             1,184                      29  %
Global Brand Divisions                      (4,262)              (3,656)                    -17  %            (3,468)                     -5  %
TOTAL NIKE BRAND(1)                    $     8,406          $     8,641                      -3  %       $     4,646                      86  %
Converse                                       669                  543                      23  %               297                      83  %
Corporate                                   (2,219)              (2,261)                      2  %            (1,967)                    -15  %
TOTAL NIKE, INC. EARNINGS BEFORE
INTEREST AND TAXES(1)                  $     6,856          $     6,923                      -1  %       $     2,976                     133  %
EBIT margin(1)                                14.7  %              15.5  %                                       8.0  %
Interest expense (income), net                 205                  262                       -                   89                       -
TOTAL NIKE, INC. INCOME BEFORE INCOME
TAXES                                  $     6,651          $     6,661                       0  %       $     2,887                     131  %


(1) Set NIKE Brand EBIT, TotalNIKE, Inc. EBIT and EBIT margin represent non-GAAP financial measures. See “Use of Non-GAAP Financial Measures” for more information.

2022 FORM 10-K 36


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NORTH AMERICA

                                                                                                            % CHANGE                                           % CHANGE
                                                                                                           EXCLUDING                                          EXCLUDING
(Dollars in millions)                               FISCAL 2022     FISCAL 2021           % CHANGE  CURRENCY CHANGES   FISCAL 2020           % CHANGE  CURRENCY CHANGES
Revenues by:
Footwear                                          $     12,228    $     11,644                5  %              5  % $      9,329               25  %             25  %
Apparel                                                  5,492           5,028                9  %              9  %        4,639                8  %              8  %
Equipment                                                  633             507               25  %             25  %          516               -2  %             -2  %
TOTAL REVENUES                                    $     18,353    $     17,179                7  %              7  % $     14,484               19  %             19  %
Revenues by:
Sales to Wholesale Customers                      $      9,621    $     10,186               -6  %             -6  % $      9,371                9  %              9  %
Sales through NIKE Direct                                8,732           6,993               25  %             25  %        5,113               37  %             37  %
TOTAL REVENUES                                    $     18,353    $     17,179                7  %              7  % $     14,484               19  %             19  %
EARNINGS BEFORE INTEREST AND TAXES                $      5,114    $      5,089                0  %                   $      2,899               76  %


FISCAL 2022 COMPARED TO FISCAL 2021
On a currency-neutral basis, North America revenues increased 7%, due primarily
to higher revenues in Men's and the Jordan Brand. NIKE Direct revenues increased
25%, driven by strong digital sales growth of 30%, comparable store sales growth
of 17% and the addition of new stores.

Footwear revenues increased 5% on a currency-neutral basis, driven by growth in
NIKE Direct, partially offset by a decline in our wholesale business. Unit sales
of footwear decreased 4%, while higher ASP per pair contributed approximately 9
percentage points of footwear revenue growth. Higher ASP per pair was primarily
due to higher NIKE Direct ASP, the favorable impact of growth in our NIKE Direct
business and a higher mix of full-price sales.

On a currency-neutral basis, apparel revenues increased 9%, driven primarily by
higher revenues in Men's. Unit sales of apparel decreased 2%, while higher ASP
per unit contributed approximately 11 percentage points of apparel revenue
growth. The increase in ASP per unit was primarily driven by higher full-price
and NIKE Direct ASPs as well as a higher mix of full-price sales.

Reported EBIT remained flat as higher revenues were offset by higher selling and
administrative expense and gross margin contraction. Gross margin decreased
approximately 10 basis points, largely due to higher product and other costs,
partially offset by higher margins and the favorable impact of growth in our
NIKE Direct business, a higher mix of full-price sales and higher full-price
ASP, net of discounts, primarily due to strategic pricing actions. Higher
product and other costs were primarily due to increased freight, logistics and
warehousing costs. Selling and administrative expense increased due to higher
demand creation and operating overhead expense. Demand creation expense
increased primarily as a result of higher advertising and marketing expense, as
well as higher digital marketing investments. The increase in operating overhead
expense reflected higher wage-related costs as well as an increase in NIKE
Direct variable costs.


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EUROPE, MIDDLE EAST & AFRICA

                                                                                                            % CHANGE                                           % CHANGE
                                                                                                           EXCLUDING                                          EXCLUDING
(Dollars in millions)                               FISCAL 2022     FISCAL 2021           % CHANGE  CURRENCY CHANGES   FISCAL 2020           % CHANGE  CURRENCY CHANGES
Revenues by:
Footwear                                          $      7,388    $      6,970                6  %              9  % $      5,892               18  %             13  %
Apparel                                                  4,527           3,996               13  %             16  %        3,053               31  %             25  %
Equipment                                                  564             490               15  %             17  %          402               22  %             19  %
TOTAL REVENUES                                    $     12,479    $     11,456                9  %             12  % $      9,347               23  %             17  %
Revenues by:
Sales to Wholesale Customers                      $      8,377    $      7,812                7  %             10  % $      6,574               19  %             14  %
Sales through NIKE Direct                                4,102           3,644               13  %             15  %        2,773               31  %             25  %
TOTAL REVENUES                                    $     12,479    $     11,456                9  %             12  % $      9,347               23  %             17  %
EARNINGS BEFORE INTEREST AND TAXES                $      3,293    $      2,435               35  %                   $      1,541               58  %


FISCAL 2022 COMPARED TO FISCAL 2021
On a currency-neutral basis, EMEA revenues for fiscal 2022 grew 12%, due
primarily to higher revenues in Men's, the Jordan Brand and Women's. NIKE Direct
revenues increased 15%, primarily due to comparable store sales growth of 30%
due to improved physical retail traffic, in part resulting from temporary store
closures and safety-related measures in response to COVID-19 in the prior year,
as well as digital sales growth of 8%.

Currency-neutral footwear revenues increased 9%, driven by higher revenues in
the Jordan Brand and Men's. Unit sales of footwear decreased 1%, while higher
ASP per pair contributed approximately 10 percentage points of footwear revenue
growth. Higher ASP per pair was primarily due to higher NIKE Direct and
full-price ASPs as well as a higher mix of full-price sales.

Currency-neutral apparel revenues increased 16% due primarily to higher revenues
in Men's and Women's. Unit sales of apparel increased 9%, while higher ASP per
unit contributed approximately 7 percentage points of apparel revenue growth,
primarily due to higher full-price and NIKE Direct ASPs.

Reported EBIT increased 35% as gross margin expansion and higher revenues more
than offset higher selling and administrative expense. Gross margin increased
approximately 570 basis points primarily due to higher NIKE Direct margins,
favorable changes in standard foreign currency exchange rates, a higher mix of
full-price sales and higher full-price ASP, net of discounts, partially offset
by higher product costs. Higher full-price ASP, net of discounts, was largely
due to strategic pricing actions, while higher product costs were primarily due
to increased freight and logistics costs. Selling and administrative expense
increased due to higher demand creation and operating overhead expense. Higher
demand creation expense was driven by higher advertising and marketing expense.
Higher operating overhead expense was primarily due to increases in wage-related
expenses and professional services.

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GREATER CHINA

                                                                                                            % CHANGE                                           % CHANGE
                                                                                                           EXCLUDING                                          EXCLUDING
(Dollars in millions)                               FISCAL 2022     FISCAL 2021           % CHANGE  CURRENCY CHANGES   FISCAL 2020           % CHANGE  CURRENCY CHANGES
Revenues by:
Footwear                                          $      5,416    $      5,748               -6  %            -10  % $      4,635               24  %             19  %
Apparel                                                  1,938           2,347              -17  %            -21  %        1,896               24  %             19  %
Equipment                                                  193             195               -1  %             -6  %          148               32  %             26  %
TOTAL REVENUES                                    $      7,547    $      8,290               -9  %            -13  % $      6,679               24  %             19  %
Revenues by:
Sales to Wholesale Customers                      $      4,081    $      4,513              -10  %            -14  % $      3,803               19  %             14  %
Sales through NIKE Direct                                3,466           3,777               -8  %            -12  %        2,876               31  %             26  %
TOTAL REVENUES                                    $      7,547    $      8,290               -9  %            -13  % $      6,679               24  %             19  %
EARNINGS BEFORE INTEREST AND TAXES                $      2,365    $      3,243              -27  %                   $      2,490               30  %


FISCAL 2022 COMPARED TO FISCAL 2021
On a currency-neutral basis, Greater China revenues for fiscal 2022 decreased
13%, reflecting impacts from supply chain constraints, government restrictions
due to COVID-19 as well as marketplace dynamics. The decrease in revenues was
primarily due to lower revenues in Men's and Women's. NIKE Direct revenues
decreased 12% due to digital sales declines of 15% and comparable store sales
declines of 14%, in part due to reduced physical retail traffic as a result of
government restrictions due to COVID-19 as well as ongoing marketplace dynamics,
partially offset by the addition of new stores.

Currency-neutral footwear revenues decreased 10%, driven primarily by lower
revenues in Men's and Women's. Unit sales of footwear decreased 7%, while lower
ASP per pair reduced footwear revenues by approximately 3 percentage points,
driven by lower NIKE Direct and full-price ASPs, reflecting higher discounts.

Currency-neutral apparel revenues decreased 21%, due primarily to lower revenues
in Men's and Women's. Unit sales of apparel decreased 15%, while lower ASP per
unit reduced apparel revenues by approximately 6 percentage points, primarily
due to lower NIKE Direct and full-price ASPs, reflecting higher discounts.

Reported EBIT decreased 27% due to lower revenues, gross margin contraction and
higher selling and administrative expense. Gross margin decreased approximately
390 basis points, reflecting impacts from COVID-19 related government
restrictions which reduced physical retail traffic and led to higher inventory
obsolescence reserves recognized primarily in the fourth quarter of fiscal 2022.
The decrease in gross margin was also largely due to higher product costs and
lower NIKE Direct margins. This activity was partially offset by favorable
changes in standard foreign currency exchange rates. Selling and administrative
expense increased due to higher demand creation and operating overhead expense.
Growth in demand creation expense was primarily due to higher advertising and
marketing expense. Operating overhead expense increased largely due to higher
wage-related costs and higher strategic technology investments.


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ASIA PACIFIC & LATIN AMERICA

                                                                                                            % CHANGE                                           % CHANGE
                                                                                                           EXCLUDING                                          EXCLUDING
(Dollars in millions)                               FISCAL 2022     FISCAL 2021           % CHANGE  CURRENCY CHANGES   FISCAL 2020           % CHANGE  CURRENCY CHANGES
Revenues by:
Footwear                                          $      4,111    $      3,659               12  %             17  % $      3,449                6  %              8  %
Apparel                                                  1,610           1,494                8  %             12  %        1,365                9  %             10  %
Equipment                                                  234             190               23  %             28  %          214              -11  %             -9  %
TOTAL REVENUES                                    $      5,955    $      5,343               11  %             16  % $      5,028                6  %              8  %
Revenues by:
Sales to Wholesale Customers                      $      3,529    $      3,387                4  %              8  % $      3,408               -1  %              2  %
Sales through NIKE Direct                                2,426           1,956               24  %             30  %        1,620               21  %             22  %
TOTAL REVENUES                                    $      5,955    $      5,343               11  %             16  % $      5,028                6  %              8  %
EARNINGS BEFORE INTEREST AND TAXES                $      1,896    $      1,530               24  %                   $      1,184               29  %


As discussed previously, our NIKE Brand business in Brazil transitioned to a
distributor operating model during fiscal 2021. During the fourth quarter of
fiscal 2022, we signed separate definitive agreements to sell our legal entities
in Argentina and Uruguay as well as our legal entity in Chile to third-party
distributors. The assets and liabilities of our legal entities in Argentina,
Chile and Uruguay will remain classified as held-for-sale on the Consolidated
Balance Sheets until the transactions close, which is expected to occur prior to
the end of the third quarter of fiscal 2023. The impacts of closing the Brazil
transaction as well as classifying the Argentina, Chile, and Uruguay entities as
held-for-sale in fiscal 2020 are included within Corporate and are not reflected
in the APLA operating segment results. For more information see Note 20 -
Acquisitions and Divestitures within the accompanying Notes to the Consolidated
Financial Statements.

FISCAL 2022 COMPARED TO FISCAL 2021
On a currency-neutral basis, APLA revenues increased 16% for fiscal 2022. The
increase was due to higher revenues across nearly all territories, driven by
SOCO (which comprises Argentina, Chile and Uruguay), Mexico and Korea, which
increased 58%, 35% and 16%, respectively. Revenues increased primarily due to
higher revenues in Men's and Women's. NIKE Direct revenues increased 30%,
primarily due to digital sales growth of 51% and comparable store sales growth
of 13%, in part due to improved physical retail traffic, partially offset by
store closures.

Currency-neutral footwear revenues increased 17% for fiscal 2022 in part due to
higher revenues in Women's and Men's. Unit sales of footwear increased 2%, while
higher ASP per pair contributed approximately 15 percentage points of footwear
revenue growth. Higher ASP per pair was driven by higher NIKE Direct ASP, higher
full-price ASP, reflecting lower discounts, higher off-price ASP and a higher
mix of full-price sales. Higher ASPs, in part, reflect inflationary conditions
in our SOCO territory.

Currency-neutral apparel revenues increased 12% for fiscal 2022 due primarily to
higher revenues in Men's. Unit sales of apparel increased 3%, while higher ASP
per unit contributed approximately 9 percentage points of apparel revenue
growth, driven by higher full-price ASP, reflecting lower discounts, as well as
higher NIKE Direct and off-price ASPs. Higher ASPs, in part, reflect
inflationary conditions in our SOCO territory.

Reported EBIT increased 24% for fiscal 2022, as higher revenues and gross margin
expansion more than offset higher selling and administrative expense. Gross
margin increased approximately 400 basis points primarily due to higher margins
and the favorable impact of growth in our NIKE Direct business, higher
full-price ASP largely due to lower discounts, favorable changes in standard
foreign currency exchange rates, lower other costs as well as a higher mix of
full-price sales. The decrease in other costs was primarily due to lower
warehousing costs. Selling and administrative expense increased due to higher
demand creation and operating overhead expense. Higher demand creation expense
was primarily due to higher digital marketing investments to support heightened
digital demand. The increase in operating overhead expense was primarily due to
an increase in NIKE Direct variable expenses as well as higher bad debt expense.

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GLOBAL BRAND DIVISIONS

                                                                                            % CHANGE                                           % CHANGE
                                                                                           EXCLUDING                                          EXCLUDING
(Dollars in millions)               FISCAL 2022     FISCAL 2021           % CHANGE  CURRENCY CHANGES   FISCAL 2020           % CHANGE  CURRENCY CHANGES
Revenues                          $        102    $         25              308  %            302  % $         30              -17  %            -17  %
Earnings (Loss) Before Interest
and Taxes                         $     (4,262)   $     (3,656)             -17  %                   $     (3,468)              -5  %


The Global Brand Divisions represent primarily demand generation and operating overhead, including product creation and design expenses that are centrally managed for the NIKE Brand, as well as the costs associated with NIKE
Lead global digital operations and enterprise technology. Revenues from the brand’s global divisions include NIKE Trademark licensing and other miscellaneous revenue that is not part of a geographic operating segment.

FISCAL 2022 COMPARED TO FISCAL 2021
Global Brand Divisions' loss before interest and taxes increased 17% for fiscal
2022 due to higher total selling and administrative expense, driven by higher
operating overhead and demand creation expense. Higher operating overhead
expense was primarily due to an increase in strategic technology investments,
continued investment in digital capabilities and higher wage-related expenses.
Higher demand creation expense was primarily due to higher advertising and
marketing expense and higher sports marketing costs.

CONVERSE

                                                                                                            % CHANGE                                           % CHANGE
                                                                                                           EXCLUDING                                          EXCLUDING
(Dollars in millions)                               FISCAL 2022     FISCAL 2021           % CHANGE  CURRENCY CHANGES   FISCAL 2020           % CHANGE  CURRENCY CHANGES
Revenues by:
Footwear                                          $      2,094    $      1,986                5  %              6  % $      1,642               21  %             17  %
Apparel                                                    103             104               -1  %             -3  %           89               17  %             13  %
Equipment                                                   26              29              -10  %            -16  %           25               16  %             14  %
Other(1)                                                   123              86               43  %             42  %           90               -4  %             -1  %
TOTAL REVENUES                                    $      2,346    $      2,205                6  %              7  % $      1,846               19  %             16  %
Revenues by:
Sales to Wholesale Customers                      $      1,292    $      1,353               -5  %             -4  % $      1,154               17  %             13  %
Sales through Direct to Consumer                           931             766               22  %             22  %          602               27  %             24  %
Other(1)                                                   123              86               43  %             42  %           90               -4  %             -1  %
TOTAL REVENUES                                    $      2,346    $      2,205                6  %              7  % $      1,846               19  %             16  %
EARNINGS BEFORE INTEREST AND TAXES                $        669    $        543               23  %                   $        297               83  %


(1)  Other revenues consist of territories serviced by third-party licensees who
pay royalties to Converse for the use of its registered trademarks and other
intellectual property rights. We do not own the Converse trademarks in Japan and
accordingly do not earn revenues in Japan.

FISCAL 2022 COMPARED TO FISCAL 2021
On a currency-neutral basis, Converse revenues increased 7% for fiscal 2022 due
to revenue growth in North America, Western Europe and licensee markets,
partially offset by declines in Asia. Direct to consumer revenues increased 22%,
led by strong digital demand. Wholesale revenues decreased 4%, primarily due to
ongoing marketplace dynamics in China as well as global supply chain
constraints. Combined unit sales within the wholesale and direct to consumer
channels decreased 6%, while ASP increased 12%, driven by growth in direct to
consumer.

Reported EBIT increased 23%, driven by gross margin expansion and higher
revenues, partially offset by higher selling and administrative expense. Gross
margin increased approximately 360 basis points as higher margins in direct to
consumer, growth in licensee revenues, favorable changes in standard foreign
currency exchange rates, and higher full-price ASP, net of discounts, were
partially offset by higher product costs due to increased freight, duty and
logistics costs. Selling and administrative expense increased due to higher
demand creation and operating overhead expense. Demand creation expense
increased primarily due to higher advertising and marketing expense, while
operating overhead increased primarily due to higher professional services
costs.


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CORPORATE

(Dollars in millions)                         FISCAL 2022     FISCAL 2021            % CHANGE   FISCAL 2020            % CHANGE
Revenues                                    $        (72)   $         40                 -    $        (11)                -

Earnings (loss) before interest and taxes ($2,219) ($2,261)

              2  % $     (1,967)              -15  %


Corporate revenue primarily consists of foreign exchange hedging gains and losses related to revenue generated by entities within the NIKE Brand and Converse geographic operating segments, but managed through our central currency risk management program.

The Corporate loss before interest and taxes primarily consists of unallocated
general and administrative expenses, including expenses associated with
centrally managed departments; depreciation and amortization related to our
corporate headquarters; unallocated insurance, benefit and compensation
programs, including stock-based compensation; and certain foreign currency gains
and losses.

In addition to the foreign currency gains and losses recognized in Corporate
revenues, foreign currency results in Corporate include gains and losses
resulting from the difference between actual foreign currency exchange rates and
standard rates used to record non-functional currency denominated product
purchases within the NIKE Brand geographic operating segments and Converse;
related foreign currency hedge results; conversion gains and losses arising from
remeasurement of monetary assets and liabilities in non-functional currencies;
and certain other foreign currency derivative instruments.

FISCAL 2022 COMPARED TO FISCAL 2021
Corporate's loss before interest and taxes decreased $42 million during fiscal
2022, primarily due to the following:

•a favorable change in net foreign currency gains and losses of $219 million
related to the remeasurement of monetary assets and liabilities denominated in
non-functional currencies and the impact of certain foreign currency derivative
instruments, reported as a component of consolidated Other (income) expense,
net;

•an unfavorable change of $190 million related to the difference between actual
foreign currency exchange rates and standard foreign currency exchange rates
assigned to the NIKE Brand geographic operating segments and Converse, net of
hedge gains and losses; these results are reported as a component of
consolidated gross margin; and

•a favorable change of $13 million largely due to higher restructuring-related
costs associated with our organizational realignment in the prior year and, to a
lesser extent, a net favorable impact related to our strategic distributor
partnership transition within APLA in the current year, partially offset by the
one-time charge related to the deconsolidation of our Russian operations and
higher administrative and wage-related expenses in fiscal 2022.

CURRENCY EXPOSURES AND HEDGING PRACTICES

OVERVIEW

As a global company with significant operations outside the United States, in
the normal course of business we are exposed to risk arising from changes in
currency exchange rates. Our primary foreign currency exposures arise from the
recording of transactions denominated in non-functional currencies and the
translation of foreign currency denominated results of operations, financial
position and cash flows into U.S. Dollars.

Our foreign exchange risk management program is intended to lessen both the
positive and negative effects of currency fluctuations on our consolidated
results of operations, financial position and cash flows. We manage global
foreign exchange risk centrally on a portfolio basis to address those risks
material to NIKE, Inc. We manage these exposures by taking advantage of natural
offsets and currency correlations existing within the portfolio and, where
practical and material, by hedging a portion of the remaining exposures using
derivative instruments such as forward contracts and options. As described
below, the implementation of the NIKE Trading Company (NTC) and our foreign
currency adjustment program enhanced our ability to manage our foreign exchange
risk by increasing the natural offsets and currency correlation benefits
existing within our portfolio of foreign exchange exposures. Our hedging policy
is designed to partially or entirely offset the impact of exchange rate changes
on the underlying net exposures being hedged. Where exposures are hedged, our
program has the effect of delaying the impact of exchange rate movements on our
Consolidated Financial Statements; the length of the delay is dependent upon
hedge horizons. We do not hold or issue derivative instruments for trading or
speculative purposes.

Refer to Note 6 - Fair Value Measurements and Note 14 - Risk Management and
Derivatives in the accompanying Notes to the Consolidated Financial Statements
for additional description of outstanding derivatives at each reported period
end.

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Contents

TRANSACTIONAL EXPOSURES

We conduct business in various currencies and have transactions which subject us
to foreign currency risk. Our most significant transactional foreign currency
exposures are:

• Product Costs – NIKEProduct costs are exposed to foreign currency fluctuations in the following ways:

1. Purchases of products denominated in currencies other than the functional currency of the entity carrying out the transaction:

a.Certain NIKE entities purchase product from the NTC, a wholly-owned sourcing
hub that buys NIKE branded products from third-party factories, predominantly in
U.S. Dollars. The NTC, whose functional currency is the U.S. Dollar, then sells
the products to NIKE entities in their respective functional currencies. NTC
sales to a NIKE entity with a different functional currency results in a foreign
currency exposure for the NTC.

b.Other NIKE entities purchase product directly from third-party factories in
U.S. Dollars. These purchases generate a foreign currency exposure for those
NIKE entities with a functional currency other than the U.S. Dollar.

In both buying scenarios, a lower WE Dollar reduces inventory costs incurred by NIKE while a stronger WE The dollar increases its cost.

2.Factory input costs: NIKE operates a foreign currency adjustment program with
certain factories. The program is designed to more effectively manage foreign
currency risk by assuming certain of the factories' foreign currency exposures,
some of which are natural offsets to our existing foreign currency exposures.
Under this program, our payments to these factories are adjusted for rate
fluctuations in the basket of currencies ("factory currency exposure index") in
which the labor, materials and overhead costs incurred by the factories in the
production of NIKE branded products ("factory input costs") are denominated.

For the currency within the factory currency exposure indices that is the local
or functional currency of the factory, the currency rate fluctuation affecting
the product cost is recorded within Inventories and is recognized in Cost of
sales when the related product is sold to a third-party. All currencies within
the indices, excluding the U.S. Dollar and the local or functional currency of
the factory, are recognized as embedded derivative contracts and are recorded at
fair value through Other (income) expense, net. Refer to Note 14 - Risk
Management and Derivatives in the accompanying Notes to the Consolidated
Financial Statements for additional detail.

As an offset to the impacts of the fluctuating U.S. Dollar on our non-functional
currency denominated product purchases described above, a strengthening
U.S. Dollar against the foreign currencies within the factory currency exposure
indices reduces NIKE's U.S. Dollar inventory cost. Conversely, a weakening
U.S. Dollar against the indexed foreign currencies increases our inventory cost.

•Non-Functional Currency Denominated External Sales - A portion of our NIKE
Brand and Converse revenues associated with European operations are earned in
currencies other than the Euro (e.g., the British Pound) but are recognized at a
subsidiary that uses the Euro as its functional currency. These sales generate a
foreign currency exposure.

•Other Costs - Non-functional currency denominated costs, such as endorsement
contracts, also generate foreign currency risk, though to a lesser extent. In
certain cases, the Company has entered into contractual agreements which have
payments indexed to foreign currencies that create embedded derivative contracts
recorded at fair value through Other (income) expense, net. Refer to Note 14 -
Risk Management and Derivatives in the accompanying Notes to the Consolidated
Financial Statements for additional detail.

•Non-Functional Currency Denominated Monetary Assets and Liabilities - Our
global subsidiaries have various assets and liabilities, primarily receivables
and payables, including intercompany receivables and payables, denominated in
currencies other than their functional currencies. These balance sheet items are
subject to remeasurement which may create fluctuations in Other (income)
expense, net within our consolidated results of operations.

MANAGING TRANSACTIONAL EXPOSURES
Transactional exposures are managed on a portfolio basis within our foreign
currency risk management program. We manage these exposures by taking advantage
of natural offsets and currency correlations that exist within the portfolio and
may also elect to use currency forward and option contracts to hedge the
remaining effect of exchange rate fluctuations on probable forecasted future
cash flows, including certain product cost exposures, non-functional currency
denominated external sales and other costs described above. Generally, these are
accounted for as cash flow hedges, except for hedges of the embedded derivative
components of the product cost exposures and other contractual agreements.


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Certain currency forward contracts used to manage the foreign exchange exposure
of non-functional currency denominated monetary assets and liabilities subject
to remeasurement, and embedded derivative contracts are not formally designated
as hedging instruments. Accordingly, changes in fair value of these instruments
are recognized in Other (income) expense, net and are intended to offset the
foreign currency impact of the remeasurement of the related non-functional
currency denominated asset or liability or the embedded derivative contract
being hedged.

TRANSLATIONAL EXHIBITIONS

Many of our foreign subsidiaries operate in functional currencies other than the
U.S. Dollar. Fluctuations in currency exchange rates create volatility in our
reported results as we are required to translate the balance sheets, operational
results and cash flows of these subsidiaries into U.S. Dollars for consolidated
reporting. The translation of foreign subsidiaries' non-U.S. Dollar denominated
balance sheets into U.S. Dollars for consolidated reporting results in a
cumulative translation adjustment to Accumulated other comprehensive income
(loss) within Shareholders' equity. In the translation of our Consolidated
Statements of Income, a weaker U.S. Dollar in relation to foreign functional
currencies benefits our consolidated earnings whereas a stronger U.S. Dollar
reduces our consolidated earnings. The impact of foreign exchange rate
fluctuations on the translation of our consolidated Revenues was a detriment of
approximately $295 million, a benefit of approximately $893 million and a
detriment of approximately $867 million for the years ended May 31, 2022, 2021
and 2020, respectively. The impact of foreign exchange rate fluctuations on the
translation of our Income before income taxes was a detriment of approximately
$87 million, a benefit of approximately $260 million and a detriment of
approximately $212 million for the years ended May 31, 2022, 2021 and 2020,
respectively.

Management generally identifies hyper-inflationary markets as those markets
whose cumulative inflation rate over a three-year period exceeds 100%.
Management has concluded our Argentina subsidiary within our APLA operating
segment is operating in a hyper-inflationary market. As a result, beginning in
the second quarter of fiscal 2019, the functional currency of our Argentina
subsidiary changed from the local currency to the U.S. Dollar. As of and for the
period ended May 31, 2022, this change did not have a material impact on our
results of operations or financial condition, and we do not anticipate it will
have a material impact in future periods based on current rates.

MANAGING TRANSLATIONAL EXPOSURES
To minimize the impact of translating foreign currency denominated revenues and
expenses into U.S. Dollars for consolidated reporting, certain foreign
subsidiaries use excess cash to purchase U.S. Dollar denominated
available-for-sale investments. The variable future cash flows associated with
the purchase and subsequent sale of these U.S. Dollar denominated investments at
non-U.S. Dollar functional currency subsidiaries creates a foreign currency
exposure that qualifies for hedge accounting under U.S. GAAP. We utilize forward
contracts and/or options to mitigate the variability of the forecasted future
purchases and sales of these U.S. Dollar investments. The combination of the
purchase and sale of the U.S. Dollar investment and the hedging instrument has
the effect of partially offsetting the year-over-year foreign currency
translation impact on net earnings in the period the investments are sold.
Hedges of the purchase of U.S. Dollar denominated available-for-sale investments
are accounted for as cash flow hedges.

We estimate the combination of translation of foreign currency-denominated
profits from our international businesses and the year-over-year change in
foreign currency related gains and losses included in Other (income) expense,
net had favorable impacts of approximately $132 million and $19 million and an
unfavorable impact of approximately $91 million on our Income before income
taxes for the years ended May 31, 2022, 2021 and 2020, respectively.

NET INVESTMENTS IN FOREIGN SUBSIDIARIES

We are also exposed to the impact of foreign exchange fluctuations on our
investments in wholly-owned foreign subsidiaries denominated in a currency other
than the U.S. Dollar, which could adversely impact the U.S. Dollar value of
these investments and therefore the value of future repatriated earnings. We
have, in the past, hedged and may, in the future, hedge net investment positions
in certain foreign subsidiaries to mitigate the effects of foreign exchange
fluctuations on these net investments. These hedges are accounted for as net
investment hedges in accordance with U.S. GAAP. There were no outstanding net
investment hedges as of May 31, 2022 and 2021. There were no cash flows from net
investment hedge settlements for the years ended May 31, 2022, 2021 and 2020.

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CASH AND CAPITAL RESOURCES

CASH ACTIVITY

Cash provided (used) by operations was an inflow of $5,188 million for fiscal
2022 compared to $6,657 million for fiscal 2021. Net income, adjusted for
non-cash items, generated $6,848 million of operating cash inflow for fiscal
2022 compared to $6,612 million for fiscal 2021. The net change in working
capital and other assets and liabilities resulted in a decrease to Cash provided
(used) by operations of $1,660 million for fiscal 2022, compared to an increase
of $45 million for fiscal 2021. The net change in working capital was
unfavorably impacted by a $2,183 million increase in Inventories, partially
offset by a favorable impact from a $1,102 million decrease in Accounts
receivable. These changes were, in part, due to supply chain constraints, which
caused higher levels of in-transit inventory and therefore a lower supply of
available inventory to meet consumer demand.

Cash provided (used) by investing activities was an outflow of $1,524 million
for fiscal 2022, compared to an outflow of $3,800 million for fiscal 2021,
primarily driven by the net change in short-term investments. During fiscal
2022, the net change in short-term investments (including sales, maturities and
purchases) resulted in a cash outflow of $747 million compared to a cash outflow
of $3,276 million in fiscal 2021. Additionally, during fiscal 2022, we continued
investing in our infrastructure to support future growth, specifically focused
around digital capabilities, our end-to-end technology foundation, our corporate
facilities and improvements across our supply chain. In future periods, we
expect to make annual capital expenditures of approximately 3% of annual
revenues.

Cash provided (used) by financing activities was an outflow of $4,836 million
for fiscal 2022 compared to an outflow of $1,459 million for fiscal 2021. This
change was driven by our resumption of the share repurchase program in the
fourth quarter of fiscal 2021, resulting in $4,014 million of share repurchases
during fiscal 2022 compared to $608 million during fiscal 2021.

In fiscal 2022, we purchased 27.3 million shares of NIKE's Class B Common Stock
for $3,994 million (an average price of $146.11 per share) under the four-year,
$15 billion share repurchase program approved by the Board of Directors in June
2018. As of May 31, 2022, we had repurchased 77.4 million shares at a cost of
$8,663 million (an average price of $111.98 per share) under this program. In
June 2022, the Board of Directors authorized a new four-year, $18 billion
program to repurchase shares of the Company's Class B common stock. The new
program will replace the current $15 billion share repurchase program, which
will be terminated in fiscal 2023. Repurchases under the new program will be
made in open market or privately negotiated transactions in compliance with the
Securities and Exchange Commission Rule 10b-18, subject to market conditions,
applicable legal requirements and other relevant factors. The new share
repurchase program does not obligate the Company to acquire any particular
amount of common stock, and it may be suspended at any time at our discretion.
We continue to expect funding of share repurchases will come from operating cash
flows and excess cash. The timing and the amount of share repurchases will be
dictated by our capital needs and stock market conditions.

CAPITAL RESOURCES

On July 23, 2019, we filed a shelf registration statement (the "Shelf") with the
U.S. Securities and Exchange Commission (SEC) which permits us to issue an
unlimited amount of debt securities from time to time. The Shelf expires on July
23, 2022, and we plan to file a new shelf registration statement with the SEC in
July 2022.

On March 11, 2022, we entered into a 364-day committed credit facility agreement
with a syndicate of banks which provides for up to $1 billion of borrowings,
with the option to increase borrowings up to $1.5 billion in total with lender
approval. The facility matures on March 10, 2023, with an option to extend the
maturity date an additional 364 days. This facility replaces the prior $1
billion 364-day credit facility agreement entered into on March 15, 2021, which
would have matured on March 14, 2022. Refer to Note 7 - Short-Term Borrowings
and Credit Lines for additional information.

On March 11, 2022, we also entered into a five-year committed credit facility
agreement with a syndicate of banks which provides for up to $2 billion of
borrowings, with the option to increase borrowings up to $3 billion in total
with lender approval. The facility matures on March 11, 2027, with options to
extend the maturity date up to an additional two years. This facility replaces
the prior $2 billion five-year credit facility agreement entered into on August
16, 2019, which would have matured on August 16, 2024. Refer to Note 7 -
Short-Term Borrowings and Credit Lines for additional information.

We currently have long-term debt ratings of AA- and A1 from Standard and Poor's
Corporation and Moody's Investor Services, respectively. As it relates to our
committed credit facilities entered into on March 11, 2022, if our long-term
debt ratings were to decline, the facility fees and interest rates would
increase. Conversely, if our long-term debt ratings were to improve, the
facility fees and interest rates would decrease. Changes in our long-term debt
ratings would not trigger acceleration of maturity of any then-outstanding
borrowings or any future borrowings under the committed credit facilities. Under
these facilities, we have agreed to various covenants. These covenants include
limits on our disposal of assets and the amount of debt secured by liens we may
incur. In the event we were to have any borrowings outstanding under these
facilities, failed to meet any covenant and were unable to obtain a waiver from
a majority of the banks in the syndicate, any borrowings would become
immediately due and


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payable. From May 31, 2022we fully comply with each of these covenants and believe that it is unlikely that we will fail to comply with any of these covenants in the foreseeable future.

Liquidity is also provided by our $3 billion commercial paper program. As of and for the year ended May 31, 2022we had no outstanding loans under our $3 billion program. From May 31, 2021we had no outstanding commercial paper.

We may continue to issue commercial paper or other debt securities for general business purposes.

To date, we have not experienced difficulty accessing the credit markets;
however, future volatility in the capital markets may increase costs associated
with issuing commercial paper or other debt instruments or affect our ability to
access those markets.

As of May 31, 2022, we had cash, cash equivalents and short-term investments
totaling $13.0 billion, primarily consisting of commercial paper, corporate
notes, deposits held at major banks, money market funds, U.S. government
sponsored enterprise obligations, U.S. Treasury obligations and other investment
grade fixed-income securities. Our fixed-income investments are exposed to both
credit and interest rate risk. All of our investments are investment grade to
minimize our credit risk. While individual securities have varying durations, as
of May 31, 2022, the weighted-average days to maturity of our cash equivalents
and short-term investments portfolio was 113 days.

We believe that existing cash, cash equivalents, short-term investments and cash
generated by operations, together with access to external sources of funds as
described above, will be sufficient to meet our domestic and foreign capital
needs in the foreseeable future.

Our material cash requirements May 31, 2022were the following:

•Debt Obligations - Refer to Note 7 - Short-Term Borrowings and Credit Lines and
Note 8 - Long-Term Debt in the accompanying Notes to the Consolidated Financial
Statements for further information.

• Operating leases – Refer to Note 19 – Leases in the notes to the consolidated financial statements for more information.

•Endorsement Contracts - As of May 31, 2022, we had endorsement contract
obligations of $7.6 billion, with $1.3 billion payable within 12 months,
representing approximate amounts of base compensation and minimum guaranteed
royalty fees we are obligated to pay athlete, public figure, sport team and
league endorsers of our products. Actual payments under some contracts may be
higher than these amounts as these contracts provide for bonuses to be paid to
the endorsers based upon athletic achievements and/or royalties on product sales
in future periods. Actual payments under some contracts may also be lower as
these contracts include provisions for reduced payments if athletic performance
declines in future periods. In addition to the cash payments, we are obligated
to furnish our endorsers with NIKE product for their use. It is not possible to
determine how much we will spend on this product on an annual basis as the
amount of product provided to the endorsers will depend on many factors and the
contracts generally do not stipulate a minimum amount of cash to be spent on the
product.

•Product Purchase Obligations - As of May 31, 2022, we had product purchase
obligations of $6.6 billion, all of which are payable within the next 12 months.
Product purchase obligations represent agreements (including open purchase
orders) to purchase products in the ordinary course of business that are
enforceable and legally binding and specify all significant terms. We generally
order product at least four to five months in advance of sale based primarily on
advanced orders received from external wholesale customers and internal orders
from our direct to consumer operations. In some cases, prices are subject to
change throughout the production process.

•Other Purchase Obligations - As of May 31, 2022, we had $3.1 billion of other
purchase obligations, with $1.7 billion payable within the next 12 months. Other
purchase obligations primarily include technology investments, construction,
service and marketing commitments, including marketing commitments associated
with endorsement contracts, made in the ordinary course of business. The amounts
represent the minimum payments required by legally binding contracts and
agreements that specify all significant terms, and may include open purchase
orders for non-product purchases.

In addition to the above, we have long-term obligations for uncertain tax
positions and various post-retirement benefits for which we are not able to
reasonably estimate when cash payments will occur. Refer to Note 9 - Income
Taxes and Note 13 - Benefit Plans in the accompanying Notes to the Consolidated
Financial Statements for further information related to uncertain tax positions
and post-retirement benefits, respectively.

As a part of the transition tax related to the Tax Cuts and Jobs Act, as of
May 31, 2022, we had $730 million in estimated future cash payments, with $86
million payable within the next 12 months. These amounts represent the
transition tax on deemed repatriation of undistributed earnings of foreign
subsidiaries, which are reflected net of foreign tax credits we utilized. Refer
to Part II, Item 8. Financial Statements and Supplementary Data, Note 9 - Income
Taxes, in our fiscal 2020 Form 10-K, which was filed with the United States
Securities and Exchange Commission on July 24, 2020, for additional information.

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Refer to Note 18 - Commitments and Contingencies in the accompanying Notes to
the Consolidated Financial Statements for further information related to our
off-balance sheet arrangements, bank guarantees and letters of credit.

OFF-BALANCE SHEET ARRANGEMENTS

In connection with various contracts and agreements, we routinely provide
indemnification relating to the enforceability of intellectual property rights,
coverage for legal issues that arise and other items where we are acting as the
guarantor. Currently, we have several such agreements in place. Based on our
historical experience and the estimated probability of future loss, we have
determined that the fair value of such indemnification is not material to our
financial position or results of operations.

NEW ACCOUNTING PRONOUNCEMENTS

We do not expect recently issued accounting pronouncements to have a material impact on our consolidated financial statements.

CRITICAL ACCOUNTING ESTIMATES

Our previous discussion and analysis of our financial condition and results of
operations are based upon our Consolidated Financial Statements, which have been
prepared in accordance with accounting principles generally accepted in the
United States of America. The preparation of these financial statements requires
us to make estimates and judgments that affect the reported amounts of assets,
liabilities, revenues and expenses and related disclosure of contingent assets
and liabilities. Note 1 - Summary of Significant Accounting Policies in the
accompanying Notes to the Consolidated Financial Statements describes the
significant accounting policies and methods used in the preparation of our
Consolidated Financial Statements.

We believe the assumptions and judgments involved in the accounting estimates
described below have the greatest potential impact on our Consolidated Financial
Statements, so we consider these to be our critical accounting estimates.
Management has reviewed and discussed these critical accounting estimates with
the Audit & Finance Committee of the Board of Directors.

These policies require that we make estimates in the preparation of our
Consolidated Financial Statements as of a given date. Because of the uncertainty
inherent in these matters, actual results could differ from the estimates we use
in applying the critical accounting estimates. Within the context of these
critical accounting estimates, we are not currently aware of any reasonably
likely events or circumstances that would result in materially different amounts
being reported.

REVENUE RECOGNITION

Revenue is recognized when transfer of control to the customer has occurred,
which is either upon shipment or upon receipt, depending on the terms of sale.
The transaction price is determined based upon the invoiced sales price, less
anticipated sales returns, discounts and miscellaneous claims from customers.

The provision for anticipated sales returns consists of both contractual return
rights and discretionary authorized returns. Provisions for post-invoice sales
discounts consist of both contractual programs and discretionary discounts that
are expected to be granted at a later date.

Estimates of discretionary authorized returns, discounts and claims are based on
(1) historical rates, (2) specific identification of outstanding returns not yet
received from customers and outstanding discounts and claims and (3) estimated
returns, discounts and claims expected but not yet finalized with customers.
Actual returns, discounts and claims in any future period are inherently
uncertain and may differ from estimates recorded. If actual or expected future
returns, discounts or claims were significantly different than reserves
established, a reduction or increase to net revenues would be recorded in the
period in which such determination was made.

Refer also to Note 1 - Summary of Significant Accounting Policies and Note 16 -
Revenues in the accompanying Notes to the Consolidated Financial Statements for
additional information.

INVENTORY RESERVES

We make ongoing estimates relating to the net realizable value of inventories
based upon our assumptions about future demand and market conditions. If we
estimate the net realizable value of our inventory is less than the cost of the
inventory recorded on our books, we record a reserve equal to the difference
between the cost of the inventory and the estimated net realizable value. This
reserve is recorded as a charge to Cost of sales. If changes in market
conditions result in reductions to the estimated net realizable value of our
inventory below our previous estimate, we would increase our reserve in the
period in which we made such a determination.


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CONDITIONAL PAYMENTS UNDER AVENANCE CONTRACTS

A significant amount of our Demand creation expense relates to payments under
endorsement contracts. In general, endorsement payments are expensed on a
straight-line basis over the term of the contract. However, certain contract
elements may be accounted for differently based upon the facts and circumstances
of each individual contract.

Some contracts provide conditional payments to endorsers based on specific achievements in their sports (eg, winning a championship). We record demand creation expenses for these amounts when the endorser reaches the specific goal.

Certain contracts provide for variable payments based upon endorsers maintaining
a level of performance in their sport over an extended period of time (e.g.,
maintaining a specified ranking in a sport for a year). When we determine
payments are probable, the amounts are reported in Demand creation expense
ratably over the contract period based on our best estimate of the endorser's
performance. In these instances, to the extent actual payments to the endorser
differ from our estimate due to changes in the endorser's performance,
adjustments to Demand creation expense may be recorded in a future period.

Certain contracts provide for royalty payments to endorsers based upon a
predetermined percent of sales of particular products, which we record in Cost
of sales as the related sales occur. For contracts containing minimum guaranteed
royalty payments, we record the amount of any guaranteed payment in excess of
that earned through sales of product within Demand creation expense.

TANGIBLE FIXED ASSETS AND ASSETS WITH A FINITED LIFE

We review the carrying value of long-lived assets or asset groups to be used in
operations whenever events or changes in circumstances indicate the carrying
amount of the assets might not be recoverable. Factors that would necessitate an
impairment assessment include a significant adverse change in the extent or
manner in which an asset is used, a significant adverse change in legal factors
or the business climate that could affect the value of the asset or a
significant decline in the observable market value of an asset, among others. If
such facts indicate a potential impairment, we would assess the recoverability
of an asset group by determining if the carrying value of the asset group
exceeds the sum of the projected undiscounted cash flows expected to result from
the use and eventual disposition of the assets over the remaining economic life
of the primary asset in the asset group. If the recoverability test indicates
the carrying value of the asset group is not recoverable, we will estimate the
fair value of the asset group using appropriate valuation methodologies that
would typically include an estimate of discounted cash flows. Any impairment
would be measured as the difference between the asset group's carrying amount
and its estimated fair value.

HEDGE ACCOUNTING FOR DERIVATIVES

We use derivative contracts to hedge certain anticipated foreign currency and
interest rate transactions as well as certain non-functional currency monetary
assets and liabilities. When the specific criteria to qualify for hedge
accounting has been met, changes in the fair value of contracts hedging probable
forecasted future cash flows are recorded in Accumulated other comprehensive
income (loss), rather than Net income, until the underlying hedged transaction
affects Net income. In most cases, this results in gains and losses on hedge
derivatives being released from Accumulated other comprehensive income (loss)
into Net income sometime after the maturity of the derivative. One of the
criteria for this accounting treatment is that the notional value of these
derivative contracts should not be in excess of the designated amount of
anticipated transactions. By their very nature, our estimates of anticipated
transactions may fluctuate over time and may ultimately vary from actual
transactions. When the designated amount of anticipated or actual transactions
decline below hedged levels, or if it is no longer probable a forecasted
transaction will occur by the end of the originally specified time period or
within an additional two-month period of time thereafter, we are required to
reclassify the cumulative change in fair value of the over-hedged portion of the
related hedge contract from Accumulated other comprehensive income (loss) to
Other (income) expense, net during the quarter in which the decrease occurs. In
rare circumstances, the additional period of time may exceed two months due to
extenuating circumstances related to the nature of the forecasted transaction
that are outside our control or influence.

INCOME TAXES

We are subject to taxation in the United States, as well as various state and
foreign jurisdictions. The determination of our provision for income taxes
requires significant judgment, the use of estimates and the interpretation and
application of complex tax laws. On an interim basis, we estimate our effective
tax rate for the full fiscal year. This estimated annual effective tax rate is
then applied to the year-to-date Income before income taxes excluding
infrequently occurring or unusual items, to determine the year-to-date Income
tax expense. The income tax effects of infrequent or unusual items are
recognized in the interim period in which they occur. As the fiscal year
progresses, we continually refine our estimate based upon actual events and
earnings by jurisdiction during the year. This continual estimation process
periodically results in a change to our expected effective tax rate for the
fiscal year. When this occurs, we adjust the income tax provision during the
quarter in which the change in estimate occurs.

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We record valuation allowances against our deferred tax assets, when necessary.
Realization of deferred tax assets (such as net operating loss carry-forwards)
is dependent on future taxable earnings and is therefore uncertain. At least
quarterly, we assess the likelihood that our deferred tax asset balance will be
recovered from future taxable income. To the extent we believe that recovery is
not likely, we establish a valuation allowance against our net deferred tax
asset, which increases our Income tax expense in the period when such
determination is made.

We historically had not provided for deferred income taxes on the undistributed
earnings of certain foreign subsidiaries as they were considered indefinitely
reinvested outside the U.S. During the fourth quarter of fiscal 2022, in
connection with a change in our legal entity structure that reduced the
withholding tax consequences of a decision to remit undistributed earnings in
the Netherlands, we changed our assertion regarding our ability and intent to
indefinitely reinvest undistributed earnings of certain foreign subsidiaries. We
have evaluated our historic indefinite reinvestment assertion as a result of the
legal entity restructuring and determined that any historical or future
undistributed earnings of foreign subsidiaries are no longer considered to be
indefinitely reinvested. There is no deferred tax liability associated with
those earnings.

On a quarterly basis, we evaluate the probability a tax position will be
effectively sustained and the appropriateness of the amount recognized for
uncertain tax positions based on factors including changes in facts or
circumstances, changes in tax law, settled audit issues and new audit activity.
Changes in our assessment may result in the recognition of a tax benefit or an
additional charge to the tax provision in the period our assessment changes. We
recognize interest and penalties related to income tax matters in Income tax
expense.

Refer to Note 9 – Income Taxes in the Notes to the Consolidated Financial Statements for further information.

OTHER CONTINGENCIES

In the ordinary course of business, we are involved in legal proceedings
regarding contractual and employment relationships, product liability claims,
trademark rights and a variety of other matters. We record contingent
liabilities resulting from claims against us when a loss is assessed to be
probable and the amount of the loss is reasonably estimable. Assessing
probability of loss and estimating probable losses requires analysis of multiple
factors, including in some cases judgments about the potential actions of
third-party claimants and courts. Recorded contingent liabilities are based on
the best information available and actual losses in any future period are
inherently uncertain. If future adjustments to estimated probable future losses
or actual losses exceed our recorded liability for such claims, we would record
additional charges during the period in which the actual loss or change in
estimate occurred. In addition to contingent liabilities recorded for probable
losses, we disclose contingent liabilities when there is a reasonable
possibility the ultimate loss will materially exceed the recorded liability.

Refer to Note 18 – Commitments and contingencies in the notes to the consolidated financial statements for more information.

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