NOTE 18 Operating Segments and Related Information

PART II Note 18 Operating Segments and Related Information counterparty, to post collateral should the fair value of outstanding derivatives of derivative instruments with credit risk related contingent features that are per counterparty be greater than $50 million. Additionally, a certain level of in a net liability position at May 31, 2011 was $160 million. The Company, or decline in credit rating of either the Company or the counterparty could trigger any counterparty, were not required to post any collateral as a result of these collateral requirements. As of May 31, 2011, the Company was in compliance contingent features. As a result of the above considerations, the Company with all such credit risk related contingent features. The aggregate fair value considers the impact of the risk of counterparty default to be immaterial. NOTE 18 Operating Segments and Related Information Operating Segments Effective June 1, 2009, the primary fi nancial measure used by the Company to evaluate performance of individual operating segments is Earnings Before The Company’s operating segments are evidence of the structure of the Interest and Taxes (commonly referred to as “EBIT”) which represents net income Company’s internal organization. The major segments are defi ned by geographic before interest expense (income), net and income taxes in the consolidated regions for operations participating in NIKE Brand sales activity excluding statements of income. Reconciling items for EBIT represent corporate expense NIKE Golf. Each NIKE Brand geographic segment operates predominantly in one items that are not allocated to the operating segments for management industry: the design, development, marketing and selling of athletic footwear, reporting. Previously, the Company evaluated performance of individual apparel, and equipment. In fi scal 2009, the Company initiated a reorganization operating segments based on pre-tax income or income before income taxes. of the NIKE Brand into a new model consisting of six geographies. Effective June 1, 2009, the Company’s new reportable operating segments for the As part of the Company’s centrally managed foreign exchange risk management NIKE Brand are: North America, Western Europe, Central and Eastern Europe, program, standard foreign currency rates are assigned to each NIKE Brand Greater China, Japan, and Emerging Markets. Previously, NIKE Brand operations entity in our geographic operating segments and are used to record any non- were organized into the following four geographic regions: U.S., Europe, functional currency revenues or product purchases into the entity’s functional Middle East and Africa (collectively, “EMEA”), Asia Pacifi c, and Americas. currency. Geographic operating segment revenues and cost of sales refl ect use The Company’s NIKE Brand Direct to Consumer operations are managed of these standard rates. For all NIKE Brand operating segments, differences within each geographic segment. between assigned standard foreign currency rates and actual market rates are included in Corporate together with foreign currency hedge gains and losses The Company’s “Other” category is broken into two components for presentation generated from the centrally managed foreign exchange risk management purposes to align with the way management views the Company. The “Global program and other conversion gains and losses. Prior to June 1, 2010, foreign Brand Divisions” category primarily represents NIKE Brand licensing businesses currency results, including hedge results and other conversion gains and losses that are not part of a geographic operating segment, selling, general and generated by the Western Europe and Central & Eastern Europe geographies administrative expenses that are centrally managed for the NIKE Brand and were recorded in their respective geographic results. costs associated with product development and supply chain operations. The “Other Businesses” category primarily consists of the activities of our Additions to long-lived assets as presented in the following table represent affi liate brands; Cole Haan, Converse Inc., Hurley International LLC and Umbro capital expenditures. International Limited; and NIKE Golf. Activities represented in the “Other” Accounts receivable, inventories and property, plant and equipment for category are immaterial for individual disclosure. operating segments are regularly reviewed by management and are therefore Revenues as shown below represent sales to external customers for each provided below. segment. Intercompany revenues have been eliminated and are immaterial Certain prior year amounts have been reclassifi ed to conform to fi scal 2011 for separate disclosure. presentation, as South Africa became part of the Emerging Markets operating Corporate consists of unallocated general and administrative expenses, which segment beginning June 1, 2010. Previously, South Africa was part of the includes expenses associated with centrally managed departments, depreciation Central & Eastern Europe operating segment. and amortization related to the Company’s headquarters, unallocated insurance and benefi t programs, including stock-based compensation, certain foreign currency gains and losses, including hedge gains and losses, certain corporate eliminations and other items. NIKE, INC. - Form 10-K 55.

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