What changed in this filing

/stocks — the workspaceLOADING

Item 8. Financial Statements and Supplementary Data

2022-07-21 compared with 2021-07-20 · 156 added, 174 removed, 1185 unchanged (22% of the section changed)

34 unchanged sentences

Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of May 31, 2022, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO.

Changes in Accounting Principles

As discussed in Note 1 to the consolidated financial statements, the Company changed the manner in which it accounts for leases as of June 1, 2019 and the manner in which it accounts for revenue from contracts with customers and the manner in which it accounts for income taxes related to intra-entity transfers other than inventory as of June 1, 2018.

Change in Accounting Principle

As discussed in Note 1 to the consolidated financial statements, the Company changed the manner in which it accounts for leases as of June 1, 2019.

Basis for Opinions

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As disclosed by management, the use of significant judgment and estimates, as well as the interpretation and application of complex tax laws is required by management to determine the Company's provision for income taxes.

The principal considerations for our determination that performing procedures relating to the accounting for income taxes is a critical audit matter are the high degree of auditor judgment, subjectivity and effort in performing procedures and evaluating audit evidence relating to (i) management's assessment of complex tax laws and regulations, including recent court rulings, as it relates to determining the provision for income taxes and other tax positions, and (ii) management's assessment of realizability of deferred tax assets, specifically around future taxable income, foreign tax credit utilization and available tax planning strategies.

The principal considerations for our determination that performing procedures relating to the accounting for income taxes is a critical audit matter are a high degree of auditor judgment, subjectivity and effort in performing procedures and evaluating audit evidence relating to (i) management's assessment of complex tax laws and regulations as it relates to determining the provision for income taxes and (ii) management's assessment of the realizability of deferred tax assets, specifically related to available tax planning strategies.

In addition, the audit effort involved the use of professionals with specialized skill and knowledge.

Addressing the matters involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements.

These procedures included testing the effectiveness of controls relating to the provision for income taxes and other tax positions, including controls over management's assessments of the realizability of deferred tax assets.

These procedures also included, among others, evaluating the effect on the Company's tax provision of changes in its legal entity structure, evaluating changes in and compliance with tax laws, and testing management's tax calculations including the Company's forecast of future taxable income, tax planning strategies, and foreign tax credit utilization of deferred tax assets.

Professionals with specialized skill and knowledge were used to assist in evaluating the application of relevant tax laws, the provision for income taxes and the reasonableness of management's assessments of whether certain tax positions are more-likely-than-not of being sustained.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements.

These procedures included testing the effectiveness of controls relating to income taxes, including controls over management's assessment of the realizability of deferred tax assets.

These procedures also included, among others, evaluating the effect on the Company's tax provision of changes in its legal entity structure, evaluating changes in and compliance with tax laws, and testing the calculation of the provision of income taxes, including assessing management’s tax planning strategies for the utilization of deferred tax assets.

Professionals with specialized skill and knowledge were used to assist in evaluating changes in and compliance with the tax laws and regulations and the provision for income taxes.

/s/ PricewaterhouseCoopers LLP

132 unchanged sentences

Stock options exercised 20 703 703

Conversion to Class B Common Stock ( 14 ) 14 —

Repurchase of Class B Common Stock ( 34 ) ( 161 ) ( 2,872 ) ( 3,033 )

5 unchanged sentences

Other comprehensive income (loss) ( 287 ) ( 287 )

Adoption of ASU 2016-16 (Note 1) ( 507 ) ( 507 )

Adoption of ASC Topic 842 (Note 1) ( 1 ) ( 1 )

1 unchanged sentence

Stock options exercised 21 954 954

Conversion to Class B Common Stock ( 10 ) 10 —

Repurchase of Class B Common Stock ( 5 ) ( 28 ) ( 622 ) ( 650 )

5 unchanged sentences

Other comprehensive income (loss) ( 324 ) ( 324 )

Adoption of ASC Topic 842 (Note 1) ( 1 ) ( 1 )

Balance at May 31, 2021 305 $ — 1,273 $ 3 $ 9,965 $ ( 380 ) $ 3,179 $ 12,767

Stock options exercised 17 924 924

Conversion to Class B Common Stock ( 10 ) 10 —

Repurchase of Class B Common Stock ( 27 ) ( 186 ) ( 3,808 ) ( 3,994 )

35 unchanged sentences

portfolio brands include the NIKE Brand, Jordan Brand, Hurley, prior to its divestiture in fiscal 2020, and Converse.

The NIKE Brand is focused on performance athletic footwear, apparel, equipment, accessories and services across a wide range of sport categories, amplified with sport-inspired lifestyle products carrying the Swoosh trademark, as well as other NIKE Brand trademarks.

The NIKE Brand is focused on performance athletic footwear, apparel, equipment, accessories and services across Men's, Women's and Kids', amplified with sport-inspired lifestyle products carrying the Swoosh trademark, as well as other NIKE Brand trademarks.

The Jordan Brand is focused on athletic and casual footwear, apparel and accessories using the Jumpman trademark.

9 unchanged sentences

All significant intercompany transactions and balances have been eliminated.

Economic sanctions imposed on Russia during the fourth quarter of fiscal 2022, impacted the Company's local business and a reduction in the Ruble liquidity affected the Company's ability to manage operational impact and related foreign currency risk.

As a result, the Company deconsolidated its Russian legal entities, which 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, the Company made the decision to leave the Russian marketplace.

REVENUE RECOGNITION

Beginning in fiscal 2019, the Company adopted Accounting Standards Update (ASU) No.

2014-09, Revenue from Contracts with Customers (Topic 606).

The Company's revenue recognition policies under Topic 606 are described in the following paragraphs.

Revenue transactions associated with the sale of NIKE Brand footwear, apparel and equipment, as well as Converse products, comprise a single performance obligation, which consists of the sale of products to customers either through wholesale or direct to consumer channels.

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The estimated cost of inventory for product returns is recorded in Prepaid expenses and other current assets on the Consolidated Balance Sheets.

2022 FORM 10-K 62

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.

2021 FORM 10-K 63

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.

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DEMAND CREATION EXPENSE

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

Demand creation expense consists of advertising and promotion costs, including costs of endorsement contracts, complimentary products, television, digital and print advertising as well as media costs, brand events and retail brand presentation.

Advertising production costs are expensed the first time an advertisement is run.

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Through cooperative advertising programs, the Company reimburses its wholesale customers for certain costs of advertising the Company's products.

The Company records these costs in Demand creation expense at the point in time it is obligated to its customers for the costs.

This obligation may arise prior to the related advertisement being run.

To the extent the Company receives a distinct good or service in exchange for consideration paid to the customer does not exceed the fair value of that good or service, the amounts reimbursed are recorded in Demand creation expense.

Total advertising and promotion expenses, which the Company refers to as Demand creation expense, were $ 3,850 million, $ 3,114 million and $ 3,592 million for the years ended May 31, 2022, 2021 and 2020, respectively.

1 unchanged sentence

OPERATING OVERHEAD EXPENSE

Operating overhead expense consists primarily of wage and benefit-related expenses, research and development costs, bad debt expense as well as other administrative expenses such as rent, depreciation and amortization, professional services, meetings and travel.

2022 FORM 10-K 63

CASH AND EQUIVALENTS

Cash and equivalents represent cash and short-term, highly liquid investments, that are both readily convertible to known amounts of cash, and so near their maturity they present insignificant risk of changes in value because of changes in interest rates, including commercial paper, U.S.

Treasury, U.S.

Agency, money market funds, time deposits and corporate debt securities with maturities of 90 days or less at the date of purchase.

Cash and equivalents represent cash and short-term, highly liquid investments, that are both readily convertible to known amounts of cash and so near their maturity they present insignificant risk of changes in value because of changes in interest rates, with maturities three months or less at the date of purchase.

SHORT-TERM INVESTMENTS

Short-term investments consist of highly liquid investments, including commercial paper, U.S.

Treasury, U.S.

Agency, time deposits and corporate debt securities with maturities over 90 days at the date of purchase.

Short-term investments consist of highly liquid investments with maturities over 90 days at the date of purchase.

At May 31, 2022 and 2021, Short-term investments consisted of available-for-sale debt securities, which are recorded at fair value with unrealized gains and losses reported, net of tax, in Accumulated other comprehensive income (loss), unless unrealized losses are determined to be unrecoverable.

Realized gains and losses on the sale of securities are determined by specific identification.

The Company considers all available-for-sale debt securities, including those with maturity dates beyond 12 months, as available to support current operational liquidity needs and, therefore, classifies all securities with maturity dates beyond 90 days at the date of purchase as current assets within Short-term investments on the Consolidated Balance Sheets.

The Company considers all available-for-sale debt securities, including those with maturity dates beyond 12 months, as available to support current operational liquidity needs and, therefore, classifies all securities with maturity dates beyond three months at the date of purchase as current assets within Short-term investments on the Consolidated Balance Sheets.

Refer to Note 6 — Fair Value Measurements for more information on the Company's Short-term investments.

2 unchanged sentences

The Company makes ongoing estimates relating to the collectability of its accounts receivable and maintains an allowance for expected losses resulting from the inability of its customers to make required payments.

In addition to judgments about the creditworthiness of significant customers based on ongoing credit evaluations, the Company considers historical levels of credit losses, as well as macroeconomic and industry trends, such as the impacts of COVID–19, to determine the amount of the allowance.

Accounts receivable with anticipated collection dates greater than 12 months from the balance sheet date and related allowances are considered non-current and recorded in Deferred income taxes and other assets.

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SOFTWARE DEVELOPMENT COSTS

Expenditures for major software purchases and software developed for internal use are capitalized and amortized over a 2 - to 12 -year period on a straight-line basis.

Expenditures for major software purchases and software developed for internal use are capitalized and amortized over 2 to 12 years on a straight-line basis.

The Company's policy provides for the capitalization of external direct costs associated with developing or obtaining internal use computer software.

30 unchanged sentences

2016-02, Leases (Topic 842) .

Periods prior to fiscal 2020 have not been restated and continue to be reported in accordance with the Company's historical accounting policies.

The Company's lease recognition policies under Topic 842 are described in the following paragraphs.

1 unchanged sentence

The Company determines if an arrangement is a lease at inception and begins recording lease activity at the commencement date, which is generally the date in which the Company takes possession of or controls the physical use of the asset.

Lease components are not separated from nonlease components for real estate leases within the Company's lease portfolio.

Lease components are not separated from non-lease components for real estate leases within the Company's lease portfolio.

Right-of-use (ROU) assets and lease liabilities are recognized based on the present value of lease payments over the lease term with lease expense recognized on a straight-line basis.

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Fair value is the price the Company would receive to sell an asset or pay to transfer a liability in an orderly transaction with a market participant at the measurement date.

The Company uses a three-level hierarchy established by the Financial Accounting Standards Board (FASB) that prioritizes fair value measurements based on the types of inputs used for the various valuation techniques (market approach, income approach and cost approach).

The levels of the fair value hierarchy are described below:

The Company uses a three-level hierarchy that prioritizes fair value measurements based on the types of inputs used, as follows:

Quoted prices in active markets for identical assets or liabilities.

27 unchanged sentences

Substantially all awards vest ratably over four years of continued employment, with stock options expiring 10 years from the date of grant.

Performance-based restricted stock units vest based on the Company's achievement of certain performance criteria throughout the three-year performance period and continued employment through the vesting date.

The fair value of options, stock appreciation rights and employees' purchase rights under the employee stock purchase plans (ESPPs) is determined using the Black-Scholes option pricing model.

The fair value of restricted stock and restricted stock units is established by the market price on the date of grant.

The fair value of restricted stock and time-vesting restricted stock units is established by the market price on the date of grant.

The fair value of performance-based restricted stock units is estimated as of the grant date using a Monte Carlo simulation.

Refer to Note 11 — Common Stock and Stock-Based Compensation for additional information on the Company's stock-based compensation programs.

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Actual results could differ from these estimates.

Additionally, the extent to which the evolving COVID-19 pandemic impacts the Company's financial statements will depend on a number of factors, including the magnitude and duration of the pandemic.

There remains risk that COVID-19 could have a material, adverse impact on future revenue growth as well as overall profitability and may lead to higher than normal inventory levels in various markets, adverse impacts on the global supply chain, revised payment terms with certain wholesale customers, higher sales-related reserves, factory cancellation costs and a volatile effective tax rate driven by changes in the mix of earnings across the Company's jurisdictions.

RECENTLY ADOPTED ACCOUNTING STANDARDS

In October 2016, the FASB issued ASU No.

2016-16, Income Taxes (Topic 740):

Intra-Entity Transfers of Assets Other Than Inventory .

The updated guidance requires companies to recognize the income tax consequences of an intra-entity transfer of an asset other than inventory when the transfer occurs.

Income tax effects of intra-entity transfers of inventory will continue to be deferred until the inventory has been sold to a third party.

The Company adopted the standard on June 1, 2018, using a modified retrospective approach, with the cumulative effect of applying the new standard recognized in Retained earnings at the date of adoption.

The adoption resulted in reductions to Retained earnings , Deferred income taxes and other assets and Prepaid

2021 FORM 10-K 68

expenses and other current assets of $ 507 million, $ 422 million and $ 45 million, respectively, and an increase in Deferred income taxes and other liabilities of $ 40 million on the Consolidated Balance Sheets.

Additionally, the extent to which the evolving COVID-19 pandemic impacts the Company's financial statements will depend on a number of factors, including the further spread and duration of COVID-19 and the economic impacts of the pandemic.

There remains risk that COVID-19 could have a material, adverse impact on future revenue growth as well as overall profitability .

NOTE 2 — INVENTORIES

Inventory balances of $ 8,420 million and $ 6,854 million as of May 31, 2022 and 2021, respectively, were substantially all finished goods.

2022 FORM 10-K 67

NOTE 3 — PROPERTY, PLANT AND EQUIPMENT

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TOTAL PROPERTY, PLANT AND EQUIPMENT, NET $ 4,791 $ 4,904

Capitalized interest was not material for the years ended May 31, 2021, 2020 and 2019.

Capitalized interest was not material for the fiscal years ended May 31, 2022, 2021 and 2020.

NOTE 4 — IDENTIFIABLE INTANGIBLE ASSETS AND GOODWILL

Identifiable intangible assets, net consist of indefinite-lived trademarks, acquired trademarks and other intangible assets.

The following table summarizes the Company's Identifiable intangible assets, net balances as of May 31, 2021 and 2020:

The following table summarizes the Company's Identifiable intangible assets, net balances:

(Dollars in millions)

5 unchanged sentences

Additionally, the impact to Goodwill during fiscal 2022 and 2021 as a result of acquisitions and divestitures was not material.

2021 FORM 10-K 69

NOTE 5 — ACCRUED LIABILITIES

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(1) Refer to Note 20 — Acquisitions and Divestitures for additional information.

2022 FORM 10-K 68

NOTE 6 — FAIR VALUE MEASUREMENTS

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Included in Interest expense (income), net was interest income related to the Company's investment portfolio of $ 94 million, $ 34 million and $ 62 million for the years ended May 31, 2022, 2021 and 2020, respectively.

2021 FORM 10-K 70

The Company records the assets and liabilities of its derivative financial instruments on a gross basis on the Consolidated Balance Sheets.

6 unchanged sentences

The following tables present information about the Company's derivative assets and liabilities measured at fair value on a recurring basis and indicate the level in the fair value hierarchy in which the Company classifies the fair value measurement:

2022 FORM 10-K 69

DERIVATIVE ASSETS DERIVATIVE LIABILITIES

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(1) If the foreign exchange derivative instruments had been netted on the Consolidated Balance Sheets, the asset and liability positions each would have been reduced by $ 76 million as of May 31, 2022.

As of that date, the Company had posted $ 39 million of cash collateral to various counterparties related to foreign exchange derivative instruments.

No amount of collateral was received on the Company's derivative asset balance as of May 31, 2021.

As of that date, the Company received $ 486 million of cash collateral from counterparties related to foreign exchange derivative instruments.

No amount of collateral was posted on the derivative liability balance as of May 31, 2022.

DERIVATIVE ASSETS DERIVATIVE LIABILITIES

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(1) If the foreign exchange derivative instruments had been netted on the Consolidated Balance Sheets, the asset and liability positions each would have been reduced by $ 93 million as of May 31, 2021.

As of that date, no amount of cash collateral had been received or posted on the derivative asset and liability balances related to these foreign exchange derivative instruments.

As of that date, the Company had posted $ 39 million of cash collateral to various counterparties related to foreign exchange derivative instruments.

No amount of collateral was received on the Company's derivative asset balance as of May 31, 2021.

For additional information related to the Company's derivative financial instruments, refer to Note 14 — Risk Management and Derivatives.

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Notes payable:

Commercial paper (1)

$ — 0.00 % $ 248 1.65 %

operations $ — 0.00 % — 0.00 %

operations $ 10 19.80 % (1)

$ 2 17.80 % (1)

TOTAL NOTES PAYABLE $ 10 $ 2

(1) Commercial paper borrowings and repayments with original maturities greater than three months are included in Proceeds from borrowings, net of debt issuance costs and Repayment of borrowings, respectively, on the Consolidated Statements of Cash Flows.

(1) Weighted average interest rate includes non-interest bearing overdrafts.

The carrying amounts reflected in the Consolidated Balance Sheets for Notes payable approximate fair value.

On August 16, 2019, the Company entered into a committed credit facility agreement with a syndicate of banks, which provides up to $ 2 billion of borrowings, with the option to increase borrowings up to $ 3 billion in total upon lender approval.

The facility matures on August 16, 2024, with a one-year extension option prior to any anniversary of the closing date, provided that in no event shall the facility extend beyond August 16, 2026.

Based on the Company's current long-term senior unsecured debt ratings of AA- and A1 from Standard and Poor's Corporation and Moody's Investor Services, respectively, the interest rate charged on any outstanding borrowings would be the prevailing London Interbank Offered Rate (LIBOR) plus 0.46 %.

The facility fee is 0.04 % of the total commitment.

This facility replaces the prior $ 2 billion credit facility agreement entered into on August 28, 2015, which would have matured August 28, 2020.

On March 15, 2021, the Company entered into a committed credit facility agreement with a syndicate of banks, which provides up to $ 1 billion of borrowings, with the option to increase borrowings up to $ 1.5 billion in total upon lender approval.

The facility matures on March 14, 2022, with a 364 -day extension option up to 30 days prior to the existing termination date, provided that in no event shall the facility extend beyond March 13, 2023.

This facility replaces the prior $ 2 billion credit facility agreement entered into on April 6, 2020, which would have matured on April 5, 2021.

On March 11, 2022, the Company entered into a 364 -day committed credit facility agreement with a syndicate of banks, which provides for up to $ 1 billion of borrowings, with an 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.

The facility fee is 0.02 % of the total undrawn commitment.

Additionally, the Company decreased its $ 4 billion commercial paper program to $ 3 billion in connection with the new credit facility agreement.

On March 11, 2022, the Company 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.

The facility fee is 0.04 % of the total undrawn commitment.

As of and for the periods ended May 31, 2022 and 2021, no amounts were outstanding under any of the Company's committed credit facilities.

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AS OF MAY 31,

Scheduled Maturity (Dollars and Yen in millions)

Scheduled Maturity (Dollars in millions)

ORIGINAL PRINCIPAL INTEREST RATE INTEREST PAYMENTS 2022 2021

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March 27, 2050 1,500 3.38 % Semi-Annually 1,481 1,481

Japanese Yen Notes:

August 20, 2001 through November 20, 2020

¥ 9,000 2.60 % Quarterly $ — $ 2

August 20, 2001 through November 20, 2020

4,000 2.00 % Quarterly — 1

Total 9,420 9,413

Less current maturities — 3

Less Current Portion of Long-Term Debt 500 —

TOTAL LONG-TERM DEBT $ 8,920 $ 9,413

2 unchanged sentences

However, the bonds also feature a par call provision, which allows for the bonds to be redeemed at a price equal to 100 % of the aggregate principal amount of the notes being redeemed, plus accrued and unpaid interest on or after the Par Call Date, as defined in the respective notes.

(3) NIKE Logistics YK assumed a total of ¥ 13.0 billion in loans as part of its agreement to purchase a distribution center in Japan, which serves as collateral for the loans.

These loans matured in equal quarterly installments during the period August 20, 2001 through November 20, 2020.

The scheduled maturity of Long-term debt in each of the years ending May 31, 2023 through 2027, are $ 500 million, $ 0 million , $ 1,000 million, $ 0 million and $ 2,000 million, respectively, at face value.

34 unchanged sentences

Foreign earnings - 1.8 % 0.2 % 5.9 %

Subpart F deferred tax benefit - 4.7 % 0.0 % 0.0 %

Foreign-derived intangible income benefit - 4.1 % - 3.7 % - 8.1 %

4 unchanged sentences

EFFECTIVE INCOME TAX RATE 9.1 % 14.0 % 12.1 %

On December 22, 2017, the United States enacted the Tax Cuts and Jobs Act (the "Tax Act"), which significantly changed U.S.

On December 22, 2017, the U.S.

enacted the Tax Cuts and Jobs Act (the "Tax Act"), which significantly changed U.S.

tax law and included a provision to tax global intangible low-taxed income (GILTI) of foreign subsidiaries.

The Company recognizes taxes due under the GILTI provision as a current period expense.

The effective tax rate for the fiscal year ended May 31, 2022 was lower than the effective tax rate for the fiscal year ended May 31, 2021.

The decrease was primarily due to a shift in the Company's earnings mix and recognition of a non-cash, one-time benefit related to the onshoring of the Company's non-U.S.

intangible property.

During the fourth quarter of fiscal 2022, the Company onshored certain non-U.S.

intangible property ownership rights and implemented changes in the Company's legal entity structure.

The tax restructuring increases the possibility that foreign earnings in future periods will be subject to tax in the U.S.

due to Subpart F of the Internal Revenue Code.

The Company recognized a deferred tax asset and corresponding non-cash deferred income tax benefit of 4.7 %, to establish the deferred tax deduction that is expected to reduce taxable income in future periods.

2022 FORM 10-K 73

The effective tax rate for the fiscal year ended May 31, 2021 was higher than the effective tax rate for the fiscal year ended May 31, 2020, due to a change in the proportion of earnings taxed in the U.S., related to the recovery from the impact of the COVID-19 pandemic and less favorable impacts from discrete items such as stock-based compensation.

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Supreme Court on June 22, 2020, thereby ratifying the Ninth Circuit Court's decision and requiring the inclusion of stock-based compensation in intercompany cost-sharing arrangements, and other matters of 0.3 %.

2021 FORM 10-K 74

The effective tax rate for the fiscal year ended May 31, 2020, was lower than the effective tax rate for the fiscal year ended May 31, 2019, due to increased benefits from discrete items such as stock-based compensation.

The foreign earnings rate impact shown above for the fiscal year ended May 31, 2020, includes withholding taxes of 6.5 % and held for sale accounting items of 2.9 %, offset by a benefit for statutory rate differences and other items of 3.5 %.

The foreign derived intangible income benefit reflects U.S.

tax benefits introduced by the Tax Act for companies serving foreign markets.

This benefit became available to the Company as a result of a restructuring of its intellectual property interests.

Income tax audit and contingency reserves reflect benefits associated with the modification of the treatment of certain research and development expenditures of 2.9 % offset by an increase related to the resolution of an audit by the U.S.

Internal Revenue Service ("IRS") and other matters of 1.5 %.

Included in other is the deferral of income tax effects related to intra-entity transfers of inventory of 2.3 % and other items of 0.6 %.

Deferred tax assets and liabilities comprise the following as of:

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Net operating loss carry-forwards 8 15

Subpart F deferred tax 313 —

Foreign tax credit carry-forward 103 —

Total deferred tax assets 2,606 2,027

Valuation allowance ( 19 ) ( 12 )

( 12 ) ( 26 )

Total deferred tax assets after valuation allowance 2,587 2,015

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UNRECOGNIZED TAX BENEFITS, END OF THE PERIOD $ 848 $ 896 $ 771

As of May 31, 2021, total gross unrecognized tax benefits, excluding related interest and penalties, were $ 896 million, $ 609 million of which would affect the Company's effective tax rate if recognized in future periods.

As of May 31, 2022, total gross unrecognized tax benefits, excluding related interest and penalties, were $ 848 million, of which $ 626 million would affect the Company's effective tax rate if recognized in future periods.

The majority of the total gross unrecognized tax benefits are long-term in nature and included within Deferred income taxes and other liabilities on the Consolidated Balance Sheets.

1 unchanged sentence

The Company recognizes interest and penalties related to income tax matters in Income tax expense.

The liability for payment of interest and penalties increased by $ 45 million during the year ended May 31, 2021, decreased by $ 16 million during the fiscal year ended May 31, 2020, and increased by $ 17 million during the fiscal year ended May 31, 2019.

As of May 31, 2021 and 2020, accrued interest and penalties related to uncertain tax positions were $ 203 million and $ 158 million, respectively (excluding federal benefit).

The liability for payment of interest and penalties increased by $ 45 million during the fiscal year ended May 31, 2022, increased by $ 45 million during the fiscal year ended May 31, 2021, and decreased by $ 16 million during the fiscal year ended May 31, 2020.

As of May 31, 2022 and 2021, accrued interest and penalties related to uncertain tax positions were $ 248 million and $ 203 million, respectively (excluding federal benefit) and included within Deferred income taxes and other liabilities on the Consolidated Balance Sheets.

As of May 31, 2022 and 2021, long-term income taxes payable were $ 535 million and $ 640 million, respectively, and were included within Deferred income taxes and other liabilities on the Consolidated Balance Sheets.

The Company is subject to taxation in the United States, as well as various state and foreign jurisdictions.

The Company is currently under audit by the IRS for fiscal years 2017 through 2019.

The Company is subject to taxation in the U.S., as well as various state and foreign jurisdictions.

The Company is currently under audit by the U.S.

IRS for fiscal years 2017 through 2019.

The Company has closed all U.S.

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The Company believes the investigation is without merit.

If this matter is adversely resolved, the Netherlands may be required to assess additional amounts with respect to current and prior periods, and the Company's Netherlands income taxes in the future could increase.

The Company historically provided for U.S.

income taxes on the undistributed earnings of foreign subsidiaries unless they were considered indefinitely reinvested outside the United States.

As a result of the enactment of the Tax Act, in fiscal 2018 the Company reevaluated its historic indefinite reinvestment assertion and determined that any historical or future undistributed earnings of foreign subsidiaries are no longer considered to be indefinitely reinvested.

Effective January 1, 2020, however, the tax law in the Netherlands, one of the Company's major jurisdictions, changed.

As a result of the change in law, the Company's undistributed earnings in the Netherlands are subject to withholding tax upon distribution.

It is the Company's intention to indefinitely reinvest the historical earnings of certain foreign subsidiaries outside North America prior to May 31, 2020, to ensure there is sufficient working capital to expand operations outside the United States.

Accordingly, the Company has not recorded a deferred tax liability related to foreign withholding taxes on approximately $ 10.3 billion of undistributed earnings of these foreign subsidiaries as of May 31, 2021.

Withholding taxes of approximately $ 1.5 billion would be payable upon the remittance of these undistributed earnings as of May 31, 2021.

If this matter is adversely resolved, the Netherlands may be required to assess additional amounts with respect to prior periods, and the Company's income taxes related to prior periods in the Netherlands could increase.

The Company 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 the Company's legal entity structure that reduced the withholding tax consequences of a decision to remit undistributed earnings in the Netherlands, the Company changed its assertion regarding its ability and intent to indefinitely reinvest undistributed earnings of certain foreign subsidiaries.

The Company has evaluated its 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.

A portion of the Company's foreign operations benefit from a tax holiday, which is set to expire in 2031 .

This tax holiday may be extended when certain conditions are met or may be terminated early if certain conditions are not met.

The tax benefit attributable to this tax holiday was $ 238 million, $ 238 million and $ 167 million for the fiscal years ended May 31, 2021, 2020 and 2019, respectively.

The tax benefit attributable to this tax holiday, before taking into consideration other U.S.

indirect tax provisions, was $ 221 million, $ 238 million and $ 238 million for the fiscal years ended May 31, 2022, 2021 and 2020, respectively.

The benefit of the tax holiday on diluted earnings per common share was $ 0.14 , $ 0.15 and $ 0.15 for the fiscal years ended May 31, 2022, 2021 and 2020, respectively.

3 unchanged sentences

For the fiscal year ended May 31, 2021, a valuation allowance was provided for U.S.

foreign tax credit carryforwards and on tax benefits generated by certain entities with operating losses.

There was a $ 14 million net decrease in the valuation allowance for the fiscal year ended May 31, 2021, compared to a $ 62 million net decrease for the fiscal year ended May 31, 2020, and $ 7 million net decrease for the year ended May 31, 2019.

capital loss carryforwards and on tax benefits generated by certain entities with operating losses.

There was a $ 7 million net increase in the valuation allowance for the fiscal year ended May 31, 2022, compared to a $ 14 million net decrease for the fiscal year ended May 31, 2021, and $ 62 million net decrease for the fiscal year ended May 31, 2020.

The Company has recorded deferred tax assets of $ 103 million as of May 31, 2022 for U.S.

foreign tax credit carry-forwards which will begin to expire in 2032.

The Company has available domestic and foreign loss carry-forwards of $ 44 million as of May 31, 2022.

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Stock Incentive Plan (the “Stock Incentive Plan”) provides for the issuance of up to 798 million previously unissued shares of Class B Common Stock in connection with equity awards granted under the Stock Incentive Plan.

The Stock Incentive Plan authorizes the grant of non-statutory stock options, incentive stock options, stock appreciation rights, restricted stock, restricted stock units and performance-based awards.

The Stock Incentive Plan authorizes the grant of non-statutory stock options, incentive stock options, stock appreciation rights, and stock awards, including restricted stock and restricted stock units.

Restricted stock units include both time-vesting restricted stock units (RSUs) as well as performance-based restricted stock units (PSUs).

A committee of the Board of Directors administers the Stock Incentive Plan and has the authority to determine the employees to whom awards will be made, the amount of the awards and the other terms and conditions of the awards.

The Company generally grants stock options, restricted stock and restricted stock units on an annual basis.

The exercise price for stock options and stock appreciation rights may not be less than the fair market value of the underlying shares on the date of grant.

A committee of the Board of Directors administers the Stock Incentive Plan.

The committee has the authority to determine the employees to whom awards will be made, the amount of the awards and the other terms and conditions of the awards.

The Company generally grants stock options and restricted stock on an annual basis.

Substantially all awards under the Stock Incentive Plan vest ratably over 4 years of continued employment, with stock options expiring 10 years from the date of grant.

During the fiscal year ended May 31, 2022, under the Stock Incentive Plan, the Company granted PSUs which replaced cash-based long-term incentive awards historically granted under the Company's Long-Term Incentive Plan.

The impact of granting PSUs during the fiscal year ended May 31, 2022, was not material to the Company’s Consolidated Financial Statements.

The following table summarizes the Company's total stock-based compensation expense recognized in Cost of sales or Operating overhead expense, as applicable:

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ESPPs 60 63 53

Restricted stock (1)

Restricted stock and restricted stock units (1)(2)

TOTAL STOCK-BASED COMPENSATION EXPENSE $ 638 $ 611 $ 429

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Accelerated stock option expense is primarily recorded for employees meeting certain retirement eligibility requirements and was $ 57 million, $ 67 million and $ 53 million for the fiscal years ended May 31, 2022, 2021 and 2020, respectively.

During fiscal 2021, an immaterial amount of accelerated stock option and restricted stock expense was also recorded for certain employees impacted by the Company's organizational realignment.

During fiscal 2022 and 2021, an immaterial amount of accelerated stock option and restricted stock unit expense was also recorded for certain employees impacted by the Company's organizational realignment.

For more information, see Note 21 — Restructuring.

(2) Restricted stock units includes RSUs and PSUs.

The income tax benefit related to stock-based compensation expense was $ 327 million, $ 297 million and $ 207 million for the fiscal years ended May 31, 2022, 2021 and 2020, respectively, and reported within Income tax expense.

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Risk-free interest rate 0.9 % 0.4 % 1.5 %

Expected volatilities are based on the historical volatility of the Company's common stock, the implied volatility in market traded options on the Company's common stock with a term greater than one year , as well as other factors.

Expected volatilities are based on an analysis of the historical volatility of the Company's common stock, the implied volatility in market traded options on the Company's common stock with a term greater than one year , as well as other factors.

The weighted average expected life of options is based on an analysis of historical and expected future exercise patterns.

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Recipients of restricted stock are entitled to cash dividends and to vote their respective shares throughout the period of restriction.

Recipients of restricted stock units are entitled to dividend equivalent cash payments upon vesting.

The number of restricted stock and restricted stock units vested includes shares of common stock withheld by the Company on behalf of employees to satisfy the minimum statutory tax withholding requirements.

Recipients of restricted stock units, which includes RSUs and PSUs, are entitled to dividend equivalent cash payments upon vesting.

The number of shares of restricted stock and restricted stock units vested includes shares of common stock withheld by the Company on behalf of employees to satisfy the minimum statutory tax withholding requirements.

PSUs provide the right to receive shares of the Company's common stock based on the Company's achievement of certain performance criteria throughout the three-year performance period and continued employment through the vesting date.

As such, the number of shares issued at the end of the performance period may range between 0 % and 200 % of the original target award amount ( 100 %).

2022 FORM 10-K 77

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Forfeited ( 0.7 ) 123.54

Granted 3.6 113.84

Nonvested as of May 31, 2022 6.7 $ 130.88

The weighted average fair value per share of restricted stock and restricted stock units granted for the years ended May 31, 2021, 2020 and 2019, computed as of the grant date, was $ 113.84 , $ 88.26 and $ 80.95 , respectively.

During the years ended May 31, 2021, 2020 and 2019, the aggregate fair value of restricted stock and restricted stock units vested was $ 310 million, $ 98 million and $ 44 million, respectively, computed as of the date of vesting.

(1) Includes 0.5 million PSUs, which are presented assuming issuance at the original target award amount (100%).

The weighted average fair value per share of restricted stock and RSUs granted for the fiscal years ended May 31, 2022, 2021 and 2020, computed as of the grant date, was $ 153.63 , $ 113.84 and $ 88.26 , respectively.

During the fiscal years ended May 31, 2022, 2021 and 2020, the aggregate fair value of vested restricted stock and RSUs was $ 354 million, $ 310 million and $ 98 million, respectively, computed as of the date of vesting.

The weighted average fair value per share of PSUs granted for the fiscal year ended May 31, 2022, computed as of the grant date was $ 239.38 .

The fair value of PSUs is estimated on the grant date using a Monte Carlo simulation assuming a weighted average expected volatility of 27.1 % and weighted average risk-free interest rate of 0.5 %.

Expected volatilities are based on an analysis of the historical volatility of the Company's common stock at the date of grant for periods corresponding with the vesting period of the PSU.

The interest rate is based on the U.S.

Treasury (constant maturity) risk-free rate in effect at the date of grant for periods corresponding with the vesting period of the PSU.

No PSUs vested during the fiscal year ended May 31, 2022.

As of May 31, 2022, the Company had $ 587 million of unrecognized compensation costs from restricted stock and restricted stock units, net of estimated forfeitures, to be recognized in Cost of sales or Operating overhead expense, as applicable, over a weighted average remaining period of 2.4 years.

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The following is a reconciliation from basic earnings per common share to diluted earnings per common share.

The computations of diluted earnings per common share excluded restricted stock and options, including shares under ESPPs, to purchase an additional 11.3 million, 30.6 million and 17.5 million shares of common stock outstanding for the fiscal years ended May 31, 2021, 2020 and 2019, respectively, because the awards were anti-dilutive.

The computations of diluted earnings per common share excluded restricted stock, restricted stock units and options, including shares under ESPPs, to purchase an estimated additional 9.4 million, 11.3 million and 30.6 million shares of common stock outstanding for the fiscal years ended May 31, 2022, 2021 and 2020, respectively, because the awards were assumed to be anti-dilutive.

YEAR ENDED MAY 31,

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There were no profit sharing contributions made to the plan for the fiscal years ended May 31, 2022, 2021 and 2020.

Profit sharing contributions of $ 37 million were made to the plan and included in Cost of sales or Operating overhead expense, as applicable, for the year ended May 31, 2019.

2022 FORM 10-K 78

The Company also has a Long-Term Incentive Plan (LTIP) adopted by the Board of Directors and approved by shareholders in September 1997, which has been amended from time to time.

The Company recognized $ 16 million, $ 78 million and $ 66 million of Operating overhead expense related to cash awards under the LTIP during the years ended May 31, 2022, 2021 and 2020, respectively.

During the fiscal year ended May 31, 2022, under the Stock Incentive Plan, the Company granted PSUs which replaced cash-based long-term incentive awards historically granted under the Company's LTIP.

Refer to Note 11 — Common Stock and Stock-Based Compensation for further information related to PSUs.

The Company allows certain highly compensated employees and non-employee directors of the Company to defer compensation under a nonqualified deferred compensation plan.

Deferred compensation plan liabilities were $ 944 million and $ 725 million as of

2021 FORM 10-K 79

May 31, 2021 and 2020, respectively, and primarily classified in Deferred income taxes and other liabilities on the Consolidated Balance Sheets.

A rabbi trust was established to fund the Company's nonqualified deferred compensation plan obligation.

The assets in the rabbi trust of approximately $ 876 million and $ 945 million as of May 31, 2022 and 2021, respectively, primarily consist of company owned life insurance policies recorded at their cash surrender value and are classified in Deferred income taxes and other assets on the Consolidated Balance Sheets.

Deferred compensation plan liabilities were $ 890 million and $ 944 million as of May 31, 2022 and 2021, respectively, and primarily classified in Deferred income taxes and other liabilities on the Consolidated Balance Sheets.

The Company has pension plans in various countries worldwide.

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Embedded derivatives Prepaid expenses and other current assets 5 —

Foreign exchange forwards and options Deferred income taxes and other assets — 2

Total derivatives not designated as hedging instruments 35 34

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The total notional amount of outstanding foreign currency derivatives designated as cash flow hedges was $ 18.5 billion as of May 31, 2022.

As of May 31, 2021, approximately $ 369 million of deferred net losses (net of tax) on both outstanding and matured derivatives in Accumulated other comprehensive income (loss) are expected to be reclassified to Net income during the next 12 months concurrent with the underlying hedged transactions also being recorded in Net income.

As of May 31, 2022, approximately $ 607 million of deferred net gains (net of tax) on both outstanding and matured derivatives in Accumulated other comprehensive income (loss) are expected to be reclassified to Net income during the next 12 months concurrent with the underlying hedged transactions also being recorded in Net income.

Actual amounts ultimately reclassified to Net income are dependent on the exchange rates in effect when derivative contracts currently outstanding mature.

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Additionally, a certain level of decline in credit rating of either the Company or the counterparty could trigger collateral requirements.

As of May 31, 2021, the Company was in compliance with all credit risk-related contingent features, and derivative instruments with such features were in a net liability position of approximately $ 364 million.

Accordingly, the Company posted $ 39 million of cash collateral as a result of these contingent features.

Further, as of May 31, 2021, the Company had received no cash collateral from various counterparties to its derivative contracts.

As of May 31, 2022, the Company was in compliance with all credit risk-related contingent features, and no derivative instruments with such features were in a net liability position.

Accordingly, the Company posted no cash collateral as a result of these contingent features.

Further, as of May 31, 2022, the Company had received $ 486 million in cash collateral from various counterparties to its derivative contracts.

The Company considers the impact of the risk of counterparty default to be immaterial.

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(Dollars in millions)

NORTH AMERICA EUROPE, MIDDLE EAST & AFRICA GREATER CHINA ASIA PACIFIC & LATIN AMERICA (1)

GLOBAL BRAND DIVISIONS TOTAL NIKE BRAND CONVERSE CORPORATE TOTAL NIKE, INC.

NORTH AMERICA EUROPE, MIDDLE EAST & AFRICA GREATER CHINA ASIA PACIFIC & LATIN AMERICA GLOBAL BRAND DIVISIONS TOTAL NIKE BRAND CONVERSE CORPORATE TOTAL NIKE, INC.

Footwear $ 12,228 $ 7,388 $ 5,416 $ 4,111 $ — $ 29,143 $ 2,094 $ — $ 31,237

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TOTAL REVENUES $ 18,353 $ 12,479 $ 7,547 $ 5,955 $ 102 $ 44,436 $ 2,346 $ ( 72 ) $ 46,710

(1) Refer to Note 20 — Acquisitions and Divestitures for additional information on the transition of the Company's NIKE Brand business in Brazil to a third-party distributor.

YEAR ENDED MAY 31, 2021

(Dollars in millions)

NORTH AMERICA EUROPE, MIDDLE EAST & AFRICA GREATER CHINA ASIA PACIFIC & LATIN AMERICA GLOBAL BRAND DIVISIONS TOTAL NIKE BRAND CONVERSE CORPORATE TOTAL NIKE, INC.

NORTH AMERICA EUROPE, MIDDLE EAST & AFRICA GREATER CHINA ASIA PACIFIC & LATIN AMERICA (1)

GLOBAL BRAND DIVISIONS TOTAL NIKE BRAND CONVERSE CORPORATE TOTAL NIKE, INC.

Footwear $ 11,644 $ 6,970 $ 5,748 $ 3,659 $ — $ 28,021 $ 1,986 $ — $ 30,007

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TOTAL REVENUES $ 17,179 $ 11,456 $ 8,290 $ 5,343 $ 25 $ 42,293 $ 2,205 $ 40 $ 44,538

(1) Refer to Note 20 — Acquisitions and Divestitures for additional information on the transition of the Company's NIKE Brand business in Brazil to a third-party distributor.

2022 FORM 10-K 85

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TOTAL PROPERTY, PLANT AND EQUIPMENT, NET $ 4,791 $ 4,904

(1) Excludes assets held-for-sale as of May 31, 2021.

(1) Excludes assets held-for-sale as of May 31, 2022 and 2021.

See Note 20 — Acquisitions and Divestitures for additional information.

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The Company's largest concentrations of long-lived assets primarily consist of the Company's corporate headquarters, retail locations and distribution facilities in the United States and China, as well as distribution facilities in Belgium.

Long-lived assets attributable to operations in these countries, which primarily consists of property, plant and equipment, net and operating lease ROU assets, net, were as follows:

Long-lived assets attributable to operations in these countries, which consist of property, plant and equipment, net and operating lease ROU assets, net, were as follows:

(Dollars in millions)

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However, based on the Company's historical experience and the estimated probability of future loss, the Company has determined the fair value of such indemnification is not material to the Company's financial position or results of operations.

In the ordinary course of business, the Company is involved in various legal proceedings involving contractual and employment relationships, product liability claims, trademark rights and a variety of other matters.

While the Company cannot predict the outcome of its pending legal matters with certainty, the Company does not believe any currently identified claim, proceeding or litigation, either individually or in aggregate, will have a material impact on the Company's results of operations, financial position or cash flows.

In the ordinary course of business, the Company is subject to various legal proceedings, claims and government investigations relating to its business, products and actions of its employees and representatives, including contractual and employment relationships, product liability, antitrust, customs, intellectual property and other matters.

The outcome of these legal matters is inherently uncertain, and the Company cannot predict the eventual outcome of currently pending matters, the timing of their ultimate resolution or the eventual losses, fines, penalties or consequences relating to those matters.

When a loss related to a legal proceeding or claim is probable and reasonably estimable, the Company accrues its best estimate for the ultimate resolution of the matter.

If one or more legal matters were to be resolved against the Company in a reporting period for amounts above management's expectations, the Company's financial position, operating results and cash flows for that reporting period could be materially adversely affected.

In the opinion of management, based on its current knowledge and after consultation with counsel, the Company does not believe any currently pending legal matters will have a material adverse impact on the Company's results of operations, financial position or cash flows, except as described below.

BELGIAN CUSTOMS CLAIM

The Company has received claims for certain years from the Belgian Customs Authorities for alleged underpaid duties related to products imported beginning in fiscal 2018.

The Company disputes these claims and plans to appeal.

At this time, the Company is unable to estimate the range of loss and cannot predict the final outcome as it could take several years to reach a resolution on this matter.

If this matter is ultimately resolved against the Company, the amounts owed, including fines, penalties and other consequences relating to the matter, could have a material adverse effect on the Company's results of operations, financial position and cash flows.

NOTE 19 — LEASES

Lease expense is recognized in Cost of sales or Operating overhead expense within the Consolidated Statements of Income, based on the underlying nature of the leased asset.

For the fiscal year ended May 31, 2021, lease expense primarily consisted of operating lease costs of $ 589 million, along with $ 347 million primarily related to variable lease costs, which includes an immaterial amount of short-term lease costs.

For the fiscal year ended May 31, 2020, lease expense primarily consisted of operating lease costs of $ 569 million, along with $ 337 million primarily related to variable lease costs, which includes an immaterial amount of short-term lease costs.

Prior to the adoption of Topic 842, and in accordance with ASC Topic 840 - Leases , rent expense, excluding executory costs, was $ 829 million for the fiscal year ended May 31, 2019.

As of and for the fiscal years ended May 31, 2021 and 2020, finance leases were not a material component of the Company's lease portfolio.

For the fiscal years ended May 31, 2022, 2021 and 2020, lease expense primarily consisted of operating lease costs of $ 593 million, $ 589 million and $ 569 million, respectively.

Lease expense also consisted of $ 366 million, $ 347 million and $ 337 million for fiscal years ended May 31, 2022, 2021 and 2020, respectively, primarily related to variable lease costs, which includes an immaterial amount of short-term lease costs.

As of and for the fiscal years ended May 31, 2022 and 2021 and 2020, finance leases were not a material component of the Company's lease portfolio.

The undiscounted cash flows for future maturities of the Company’s operating lease liabilities and the reconciliation to the Operating lease liabilities recognized in the Company’s Consolidated Balance Sheets are as follows:

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Total undiscounted future cash flows related to lease payments $ 3,529

Less interest 332

Present value of lease liabilities $ 3,197

(1) Excludes $ 175 million as of May 31, 2022, of future operating lease payments for lease agreements signed but not yet commenced.

2022 FORM 10-K 90

The following table includes supplemental information used to calculate the present value of Operating lease liabilities:

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Weighted-average discount rate 2.3 % 2.3 %

2021 FORM 10-K 91

The following table includes supplemental cash and non-cash information related to operating leases:

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(Dollars in millions)

2022 2021 2020

Cash paid for amounts included in the measurement of lease liabilities:

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The impact of acquisitions, individually and in aggregate, was not considered material to the Company's Consolidated Financial Statements.

During fiscal 2020, as a result of the Company's decision to transition its wholesale and direct to consumer operating model in certain countries within its APLA operating segment, the Company signed definitive agreements to sell its NIKE Brand businesses in Brazil, Argentina, Chile and Uruguay to third-party distributors.

Specifically, NIKE entered into agreements to sell its operations in Argentina, Chile and Uruguay to Grupo Axo and to sell substantially all of its operations in Brazil to Grupo SBF S.A., through its wholly-owned subsidiary.

The Company has maintained a small operation in Brazil focused on certain sports marketing assets, local manufacturing and Converse.

As a result of this decision, beginning in fiscal 2020, the related assets and liabilities of these entities were classified as held-for-sale within Prepaid expenses and other current assets and Accrued liabilities, respectively, on the Consolidated Balance Sheets.

During fiscal 2021, the transaction with Grupo SBF S.A.

closed, and the Company recognized a loss of approximately $ 50 million within Other (income) expense, net classified within Corporate, on the Consolidated Statements of Income.

Cash proceeds received were reflected within Other investing activities on the Consolidated Statements of Cash Flows.

As of May 31, 2020, held-for-sale assets and liabilities consisted of the following:

• Held-for-sale assets of $ 272 million, primarily consisting of $ 142 million of Inventories and $ 101 million of Accounts receivable, net;

• Held-for-sale liabilities of $ 91 million, primarily consisting of $ 51 million of Accrued liabilities.

ARGENTINA, CHILE AND URUGUAY

During fiscal 2021, the Company and Grupo Axo mutually agreed to terminate the sale and purchase agreement for the transition of NIKE’s businesses in Argentina, Chile and Uruguay to a distributor partnership.

However, as the Company remains committed to selling its legal entities in all three countries and granting distribution rights to third-party distributors, the assets and liabilities of the entities have remained classified as held-for-sale on the Consolidated Balance Sheets.

As of May 31, 2021, held-for-sale assets and liabilities consisted of the following:

• Held-for-sale assets of $ 175 million, primarily consisting of $ 76 million of Inventories and $ 59 million of Accounts receivable, net;

• Held-for-sale liabilities of $ 72 million, primarily consisting of $ 25 million of Accounts payable and $ 22 million of Accrued liabilities.

As of May 31, 2020, held-for-sale assets and liabilities consisted of the following:

• Held-for-sale assets of $ 234 million, primarily consisting of $ 122 million of Inventories and $ 50 million of Prepaid expenses and other current assets;

• Held-for-sale liabilities of $ 55 million, primarily consisting of $ 34 million of Accrued liabilities.

During fiscal 2020, as a result of the Company's decision to transition its wholesale and direct to consumer operating model in certain countries within its APLA operating segment to third-party distributors, the related assets and liabilities of these entities were classified as held-for-sale within Prepaid expenses and other current assets and Accrued liabilities, respectively, on the Consolidated Balance Sheets.

During the fourth quarter of fiscal 2022, the Company entered into separate definitive agreements to sell its entities in Argentina and Uruguay as well as its entity in Chile to third-party distributors.

The assets and liabilities of these entities 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.

As of May 31, 2022, held-for-sale assets were $ 182 million, primarily consisting of $ 73 million of Accounts receivable, net and $ 59 million of Inventories;

held-for-sale liabilities were $ 58 million, primarily consisting of $ 26 million of Accrued liabilities and $ 20 million of Accounts payable.

As of May 31, 2021, held-for-sale assets were $ 175 million, primarily consisting of $ 76 million of Inventories and $ 59 million of Accounts receivable, net;

held-for-sale liabilities were $ 72 million, primarily consisting of $ 25 million of Accounts payable and $ 22 million of Accrued liabilities.

2022 FORM 10-K 91

The Company has recognized total expected net losses of $ 358 million as of May 31, 2021, related to the Argentina, Chile and Uruguay transaction within Other (income) expense, net, classified within Corporate, and a corresponding allowance within Accrued liabilities on the Consolidated Balance Sheets.

The initial expected loss of $ 405 million recognized in fiscal 2020 and subsequently adjusted for changes in fair value is largely due to the anticipated release of the cumulative net foreign currency translation losses.

The Company has recognized total expected net losses of $ 397 million as of May 31, 2022, related to the Argentina, Uruguay and Chile transactions within Other (income) expense, net, classified within Corporate, and a corresponding allowance within Accrued liabilities on the Consolidated Balance Sheets.

The initial expected loss of $ 405 million recognized in fiscal 2020 was largely due to the anticipated release of the cumulative net foreign currency translation losses and subsequently adjusted for changes in fair value.

These losses will be reclassified from Accumulated other comprehensive income (loss) to Net income upon sale of the legal entities.

At the completion of the sale of the Argentina and Uruguay entities, the Company expects to recognize future losses, in part due to changes in foreign currency exchange rates.

The losses are not expected to be material to the Company's Consolidated Financial Statements.

For more information see Note 6 — Fair Value Measurements.

OTHER DIVESTITURES

During fiscal 2020, the Company entered into a definitive agreement to sell substantially all of its NIKE Brand operations in Brazil and shift to a distributor operating model.

During fiscal 2021, the transaction closed and the Company recognized a loss of approximately $ 50 million within Other (income) expense, net classified within Corporate, on the Consolidated Statements of Income.

Cash proceeds received were reflected within Other investing activities on the Consolidated Statements of Cash Flows.

On October 29, 2019, the Company signed a definitive agreement to sell the assets and liabilities of its wholly-owned subsidiary brand, Hurley.

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NOTE 21 — RESTRUCTURING

During the first quarter of fiscal 2021, the Company announced a new digitally empowered phase of its Consumer Direct Offense strategy:

In fiscal 2021, the Company announced a new digitally empowered phase of its Consumer Direct Offense strategy:

Consumer Direct Acceleration.

As a result, management announced a series of leadership and operating model changes to streamline and speed up strategic execution for the Company.

These changes resulted in a net reduction of the Company's global workforce, and during fiscal 2021, the Company incurred pre-tax charges of $ 294 million, which relate to employee termination costs and, to a lesser extent, stock-based compensation expense.

This amount reflects the continued evaluation and variability of the Company's original estimate of employee termination costs and required changes in assumptions used to calculate stock-based compensation expense.

The related cash expenditures primarily took place throughout fiscal 2021, and all related actions are substantially complete.

As of May 31, 2021, the Company recognized employee termination costs of $ 214 million and $ 35 million within Operating overhead expense and Cost of sales, respectively, on the Consolidated Statements of Income.

These costs were classified within Corporate.

The activity was recognized within Accrued liabilities as follows:

(Dollars in millions)

Balance at May 31, 2020 $ —

Employee termination costs 249

Cash payments ( 212 )

Foreign currency translation and other 1

Balance at May 31, 2021 $ 38

Additionally, the related stock-based compensation expense recorded within Operating overhead expense and Costs of sales was $ 41 million and $ 4 million, respectively, for the fiscal year ended May 31, 2021.

During fiscal 2021, the Company substantially completed a series of leadership and operating model changes to streamline and speed up the strategic execution of the Consumer Direct Acceleration.

For the fiscal year ended May 31, 2021, the Company recognized employee termination costs of $ 214 million and $ 35 million within Operating overhead expense and Cost of sales, respectively, and made cash payments of $ 212 million.

Additionally, the related stock-based compensation expense recorded within Operating overhead expense and Cost of sales was $ 41 million and $ 4 million, respectively, for the fiscal year ended May 31, 2021 .

For the fiscal year ended May 31, 2022 , the Co mpany recognized an immaterial amount of related employee termination costs and, to a lesser extent, stock-based compensation expense.

For all periods presented these costs were classified within Corporate.

2022 FORM 10-K 92

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data