What changed in this filing

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Item 1. Financial Statements

2023-01-05 compared with 2022-10-06 · 190 added, 72 removed, 528 unchanged (33% of the section changed)

1 unchanged sentence

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME

THREE MONTHS ENDED AUGUST 31,

THREE MONTHS ENDED NOVEMBER 30, SIX MONTHS ENDED NOVEMBER 30,

(In millions, except per share data)

2022 2021 2022 2021

Revenues $ 13,315 $ 11,357 $ 26,002 $ 23,605

17 unchanged sentences

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

THREE MONTHS ENDED AUGUST 31,

THREE MONTHS ENDED NOVEMBER 30, SIX MONTHS ENDED NOVEMBER 30,

(Dollars in millions)

2022 2021 2022 2021

Net income $ 1,331 $ 1,337 $ 2,799 $ 3,211

7 unchanged sentences

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

AUGUST 31, MAY 31,

NOVEMBER 30, MAY 31,

(In millions)

37 unchanged sentences

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

THREE MONTHS ENDED AUGUST 31,

SIX MONTHS ENDED NOVEMBER 30,

(Dollars in millions)

40 unchanged sentences

SHARES AMOUNT SHARES AMOUNT

Balance at August 31, 2022 305 $ — 1,259 $ 3 $ 11,648 $ 636 $ 3,535 $ 15,822

Stock options exercised 1 69 69

Repurchase of Class B Common Stock ( 17 ) ( 123 ) ( 1,484 ) ( 1,607 )

Dividends on common stock ($ 0.340 per share)

( 526 ) ( 526 )

Issuance of shares to employees, net of shares withheld for employee taxes 2 63 3 66

Stock-based compensation 194 194

Net income 1,331 1,331

Other comprehensive income (loss) ( 77 ) ( 77 )

Balance at November 30, 2022 305 $ — 1,245 $ 3 $ 11,851 $ 559 $ 2,859 $ 15,272

COMMON STOCK CAPITAL IN EXCESS OF STATED VALUE ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) RETAINED EARNINGS TOTAL

CLASS A CLASS B

(In millions, except per share data)

SHARES AMOUNT SHARES AMOUNT

Balance at August 31, 2021 305 $ — 1,278 $ 3 $ 10,521 $ ( 67 ) $ 3,886 $ 14,343

Stock options exercised 3 256 256

Repurchase of Class B Common Stock ( 6 ) ( 40 ) ( 928 ) ( 968 )

Dividends on common stock ($ 0.305 per share)

( 483 ) ( 483 )

Issuance of shares to employees, net of shares withheld for employee taxes 3 83 ( 26 ) 57

Stock-based compensation 170 170

Net income 1,337 1,337

Other comprehensive income (loss) 212 212

Balance at November 30, 2021 305 $ — 1,278 $ 3 $ 10,990 $ 145 $ 3,786 $ 14,924

COMMON STOCK CAPITAL IN EXCESS OF STATED VALUE ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) RETAINED EARNINGS TOTAL

CLASS A CLASS B

(In millions, except per share data)

SHARES AMOUNT SHARES AMOUNT

Balance at May 31, 2022 305 $ — 1,266 $ 3 $ 11,484 $ 318 $ 3,476 $ 15,281

7 unchanged sentences

Other comprehensive income (loss) 241 241

Balance at August 31, 2022 305 $ — 1,259 $ 3 $ 11,648 $ 636 $ 3,535 $ 15,822

Balance at November 30, 2022 305 $ — 1,245 $ 3 $ 11,851 $ 559 $ 2,859 $ 15,272

COMMON STOCK CAPITAL IN EXCESS OF STATED VALUE ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) RETAINED EARNINGS TOTAL

11 unchanged sentences

Other comprehensive income (loss) 525 525

Balance at August 31, 2021 305 $ — 1,278 $ 3 $ 10,521 $ ( 67 ) $ 3,886 $ 14,343

Balance at November 30, 2021 305 $ — 1,278 $ 3 $ 10,990 $ 145 $ 3,786 $ 14,924

The accompanying Notes to the Unaudited Condensed Consolidated Financial Statements are an integral part of this statement.

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The interim financial information and notes thereto should be read in conjunction with the Company's latest Annual Report on Form 10-K for the fiscal year ended May 31, 2022.

The results of operations for the three months ended August 31, 2022, are not necessarily indicative of results to be expected for the entire fiscal year.

The results of operations for the three and six months ended November 30, 2022, are not necessarily indicative of results to be expected for the entire fiscal year.

The uncertain state of the global economy or worsening macroeconomic conditions could affect the Company’s business, including, among other things, higher inventory levels in various markets, higher inventory obsolescence reserves, higher promotional activity, reduced demand for product, reduced orders from wholesale customers for product and order cancellations.

There could also be new COVID-19 related restrictions or disruptions.

There could also be new or prolonged COVID-19 related restrictions or disruptions.

Any of these factors, among others, could have material adverse impacts on the Company’s revenue growth as well as overall profitability in future periods.

NOTE 2 — INVENTORIES

Inventory balances of $ 9,662 million and $ 8,420 million at August 31, 2022 and May 31, 2022, respectively, were substantially all finished goods.

Inventory balances of $ 9,326 million and $ 8,420 million at November 30, 2022 and May 31, 2022, respectively, were substantially all finished goods.

NOTE 3 — ACCRUED LIABILITIES

Accrued liabilities included the following:

AUGUST 31, MAY 31,

NOVEMBER 30, MAY 31,

(Dollars in millions) 2022 2022

Compensation and benefits, excluding taxes $ 1,220 $ 1,297

Collateral received from counterparties to hedging instruments 962 486

Sales-related reserves 1,149 1,015

Import and logistics costs 580 489

Dividends payable 534 485

Allowance for expected loss on sale (1)

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For additional information about the Company's fair value policies, refer to Note 1 — Summary of Significant Accounting Policies of the Annual Report on Form 10-K for the fiscal year ended May 31, 2022.

The following tables present information about the Company's financial assets 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:

AUGUST 31, 2022

The following tables present information about the Company's financial assets measured at fair value on a recurring basis as of November 30, 2022 and May 31, 2022, and indicate the level in the fair value hierarchy in which the Company classifies the fair value measurement:

NOVEMBER 30, 2022

(Dollars in millions)

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TOTAL $ 12,997 $ 8,574 $ 4,423

As of August 31, 2022, the Company held $ 3,165 million of available-for-sale debt securities with maturity dates within one year and $ 1,485 million with maturity dates over one year and less than five years in Short-term investments on the Unaudited Condensed Consolidated Balance Sheets.

As of November 30, 2022, the Company held $ 3,060 million of available-for-sale debt securities with maturity dates within one year and $ 1,071 million with maturity dates greater than one year and less than five years in Short-term investments on the Unaudited Condensed Consolidated Balance Sheets.

The fair value of the Company's available-for-sale debt securities approximates their amortized cost.

Included in Interest expense (income), net was interest income related to the Company's investment portfolio of $ 65 million and $ 17 million for the three months ended August 31, 2022 and 2021, respectively.

Included in Interest expense (income), net was interest income related to the Company's investment portfolio of $ 49 million and $ 18 million for the three months ended November 30, 2022 and 2021, respectively, and $ 114 million and $ 35 million for the six months ended November 30, 2022 and 2021, respectively.

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:

AUGUST 31, 2022

NOVEMBER 30, 2022

DERIVATIVE ASSETS DERIVATIVE LIABILITIES

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TOTAL $ 959 $ 765 $ 194 $ 135 $ 94 $ 41

(1) If the foreign exchange derivative instruments had been netted on the Unaudited Condensed Consolidated Balance Sheets, the asset and liability positions each would have been reduced by $ 43 million as of August 31, 2022.

As of that date, the Company received $ 345 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 August 31, 2022.

No amount of collateral was posted on the derivative liability balance as of November 30, 2022.

DERIVATIVE ASSETS DERIVATIVE LIABILITIES

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The fair value of long-term debt is estimated based upon quoted prices for similar instruments or quoted prices for identical instruments in inactive markets (Level 2).

The fair value of the Company's Long-term debt, including the current portion, was approximately $ 8,600 million at August 31, 2022 and $ 8,933 million at May 31, 2022.

The fair value of the Company's Long-term debt, including the current portion, was approximately $ 8,410 million at November 30, 2022 and $ 8,933 million at May 31, 2022.

The carrying amounts reflected on the Unaudited Condensed Consolidated Balance Sheets for Notes payable approximate fair value.

NOTE 5 — INCOME TAXES

The effective tax rate was 19.7 % and 11.0 % for the three months ended August 31, 2022 and 2021, respectively.

The increase in the Company's effective tax rate was primarily due to a less favorable impact from stock-based compensation.

As of August 31, 2022, total gross unrecognized tax benefits, excluding related interest and penalties, were $ 861 million, $ 638 million of which would affect the Company's effective tax rate if recognized in future periods.

The effective tax rate was 19.5 % and 11.0 % for the six months ended November 30, 2022 and 2021, respectively.

The increase in the Company's effective tax rate was primarily due to a less favorable impact from stock-based compensation and a shift in the Company's earnings mix.

As of November 30, 2022, total gross unrecognized tax benefits, excluding related interest and penalties, were $ 867 million, $ 652 million of which 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 Unaudited Condensed Consolidated Balance Sheets.

As of May 31, 2022, total gross unrecognized tax benefits, excluding related interest and penalties, were $ 848 million.

As of August 31, 2022 and May 31, 2022, accrued interest and penalties related to uncertain tax positions were $ 262 million and $ 248 million, respectively, (excluding federal benefit) and included within Deferred income taxes and other liabilities on the Unaudited Condensed Consolidated Balance Sheets.

As of November 30, 2022 and May 31, 2022, accrued interest and penalties related to uncertain tax positions were $ 276 million and $ 248 million, respectively, (excluding federal benefit) and included within Deferred income taxes and other liabilities on the Unaudited Condensed Consolidated Balance Sheets.

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

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

THREE MONTHS ENDED AUGUST 31,

THREE MONTHS ENDED NOVEMBER 30, SIX MONTHS ENDED NOVEMBER 30,

(Dollars in millions)

2022 2021 2022 2021

Stock options (1)

$ 79 $ 81 $ 154 $ 146

ESPPs 18 14 33 29

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

97 75 177 131

TOTAL STOCK-BASED COMPENSATION EXPENSE $ 194 $ 170 $ 364 $ 306

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(2) Restricted stock units include RSUs and PSUs.

The income tax benefit related to stock-based compensation expense was $ 20 million and $ 186 million for the three months ended August 31, 2022 and 2021, respectively, and reported within Income tax expense.

The income tax benefit related to stock-based compensation expense was $ 2 million and $ 87 million for the three months ended November 30, 2022 and 2021, respectively, and $ 22 million and $ 273 million for the six months ended November 30, 2022 and 2021, respectively, and reported within Income tax expense.

STOCK OPTIONS

The weighted average fair value per share of the options granted during the three months ended August 31, 2022 and 2021, computed as of the grant date using the Black-Scholes pricing model, was $ 32.13 and $ 38.64 , respectively.

The weighted average fair value per share of options granted during the six months ended November 30, 2022 and 2021, computed as of the grant date using the Black-Scholes pricing model, was $ 31.31 and $ 37.53 , respectively.

The weighted average assumptions used to estimate these fair values were as follows:

THREE MONTHS ENDED AUGUST 31,

SIX MONTHS ENDED NOVEMBER 30,

Dividend yield 0.9 % 0.8 %

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Treasury (constant maturity) risk-free rate in effect at the date of grant for periods corresponding with the expected term of the options.

As of August 31, 2022, the Company had $ 370 million of unrecognized compensation costs from stock options, 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.

As of November 30, 2022, the Company had $ 584 million of unrecognized compensation costs from stock options, net of estimated forfeitures, to be recognized in Cost of sales or Operating overhead expense, as applicable, over a weighted average remaining period of 2.7 years.

RESTRICTED STOCK AND RESTRICTED STOCK UNITS

The weighted average fair value per share of restricted stock and RSUs granted for the three months ended August 31, 2022 and 2021, computed as of the grant date, was $ 112.83 and $ 161.46 , respectively.

The weighted average fair value per share of PSUs granted for the three months ended August 31, 2022 and 2021, computed as of the grant date, was $ 137.77 and $ 247.06 , respectively.

The impact of granting PSUs for the three months ended August 31, 2022 and 2021, was not material to the Company's Unaudited Condensed Consolidated Financial Statements.

As of August 31, 2022, the Company had $ 659 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.

The weighted average fair value per share of restricted stock and RSUs granted for the six months ended November 30, 2022 and 2021, computed as of the grant date, was $ 107.60 and $ 163.27 , respectively.

The weighted average fair value per share of PSUs granted for the six months ended November 30, 2022 and 2021, computed as of the grant date, was $ 134.71 and $ 250.52 , respectively.

As of November 30, 2022, the Company had $ 760 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 2.6 years.

NOTE 7 — EARNINGS PER SHARE

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, restricted stock units and options, including shares under ESPPs, to purchase an estimated additional 23.8 million and 1.1 million shares of common stock outstanding for the three months ended August 31, 2022 and 2021, respectively, because the awards were assumed to be anti-dilutive.

THREE MONTHS ENDED AUGUST 31,

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 38.0 million and 9.2 million shares of common stock outstanding for the three months ended November 30, 2022 and 2021, respectively, and 35.1 million and 9.1 million shares of common stock outstanding for the six months ended November 30, 2022 and 2021, respectively, because the awards were assumed to be anti-dilutive.

THREE MONTHS ENDED NOVEMBER 30, SIX MONTHS ENDED NOVEMBER 30,

(In millions, except per share data)

2022 2021 2022 2021

Net income available to common stockholders $ 1,331 $ 1,337 $ 2,799 $ 3,211

8 unchanged sentences

The Company is exposed to global market risks, including the effect of changes in foreign currency exchange rates and interest rates, and uses derivatives to manage financial exposures that occur in the normal course of business.

As of and for the three months ended August 31, 2022, there have been no material changes to the Company's hedging program or strategy from what was disclosed within the Annual Report on Form 10-K.

As of and for the six months ended November 30, 2022, there have been no material changes to the Company's hedging program or strategy from what was disclosed within the Annual Report on Form 10-K.

For additional information about the Company's derivatives and hedging policies refer to Note 1 — Summary of Significant Accounting Policies and Note 14 — Risk Management and Derivatives of the Annual Report on Form 10-K for the fiscal year ended May 31, 2022.

The majority of derivatives outstanding as of August 31, 2022, are designated as foreign currency cash flow hedges, primarily for Euro/U.S.

The majority of derivatives outstanding as of November 30, 2022, are designated as foreign currency cash flow hedges, primarily for Euro/U.S.

Dollar, British Pound/Euro, Japanese Yen/U.S.

4 unchanged sentences

DERIVATIVE ASSETS

BALANCE SHEET LOCATION AUGUST 31, MAY 31,

BALANCE SHEET LOCATION NOVEMBER 30, MAY 31,

(Dollars in millions)

9 unchanged sentences

DERIVATIVE LIABILITIES

BALANCE SHEET LOCATION AUGUST 31, MAY 31,

BALANCE SHEET LOCATION NOVEMBER 30, MAY 31,

(Dollars in millions)

9 unchanged sentences

The following tables present the amounts in the Unaudited Condensed Consolidated Statements of Income in which the effects of cash flow hedges are recorded and the effects of cash flow hedge activity on these line items:

THREE MONTHS ENDED AUGUST 31,

THREE MONTHS ENDED NOVEMBER 30,

(Dollars in millions)

7 unchanged sentences

Interest expense (income), net 16 ( 2 ) 55 ( 1 )

SIX MONTHS ENDED NOVEMBER 30,

(Dollars in millions)

TOTAL AMOUNT OF GAIN (LOSS)

HEDGE ACTIVITY TOTAL AMOUNT OF GAIN (LOSS)

HEDGE ACTIVITY

Revenues $ 26,002 $ ( 5 ) $ 23,605 $ ( 41 )

Cost of sales 14,676 282 12,696 ( 96 )

Demand creation expense 2,045 ( 3 ) 1,935 1

Other (income) expense, net ( 225 ) 207 ( 141 ) 11

Interest expense (income), net 29 ( 4 ) 112 ( 3 )

The following tables present the amounts affecting the Unaudited Condensed Consolidated Statements of Income:

6 unchanged sentences

INCOME (LOSS) INTO INCOME (1)

THREE MONTHS ENDED AUGUST 31, LOCATION OF GAIN (LOSS)

THREE MONTHS ENDED NOVEMBER 30, LOCATION OF GAIN (LOSS)

RECLASSIFIED FROM ACCUMULATED

OTHER COMPREHENSIVE INCOME

(LOSS) INTO INCOME THREE MONTHS ENDED AUGUST 31,

(LOSS) INTO INCOME THREE MONTHS ENDED NOVEMBER 30,

2022 2021 2022 2021

7 unchanged sentences

TOTAL DESIGNATED CASH FLOW HEDGES $ ( 149 ) $ 363 $ 298 $ ( 31 )

(1) For the three months ended August 31, 2022 and 2021, the amounts recorded in Other (income) expense, net as a result of the discontinuance of cash flow hedges because the forecasted transactions were no longer probable of occurring were immaterial.

(1) For the three months ended November 30, 2022 and 2021, the amounts recorded in Other (income) expense, net as a result of the discontinuance of cash flow hedges because the forecasted transactions were no longer probable of occurring were immaterial.

(2) Gains and losses associated with terminated interest rate swaps, which were previously designated as cash flow hedges and recorded in Accumulated other comprehensive income (loss), will be released through Interest expense (income), net over the term of the issued debt.

(Dollars in millions)

AMOUNT OF GAIN (LOSS) RECOGNIZED IN OTHER

COMPREHENSIVE INCOME (LOSS) ON DERIVATIVES (1)

AMOUNT OF GAIN (LOSS)

RECLASSIFIED FROM ACCUMULATED

OTHER COMPREHENSIVE

INCOME (LOSS) INTO INCOME (1)

SIX MONTHS ENDED NOVEMBER 30, LOCATION OF GAIN (LOSS)

RECLASSIFIED FROM ACCUMULATED

OTHER COMPREHENSIVE INCOME

(LOSS) INTO INCOME SIX MONTHS ENDED NOVEMBER 30,

2022 2021 2022 2021

Derivatives designated as cash flow hedges:

Foreign exchange forwards and options $ 22 $ ( 37 ) Revenues $ ( 5 ) $ ( 41 )

Foreign exchange forwards and options 386 518 Cost of sales 282 ( 96 )

Foreign exchange forwards and options ( 3 ) ( 3 ) Demand creation expense ( 3 ) 1

Foreign exchange forwards and options 246 273 Other (income) expense, net 207 11

Interest rate swaps (2)

— — Interest expense (income), net ( 4 ) ( 3 )

TOTAL DESIGNATED CASH FLOW HEDGES $ 651 $ 751 $ 477 $ ( 128 )

(1) For the six months ended November 30, 2022 and 2021, the amounts recorded in Other (income) expense, net as a result of the discontinuance of cash flow hedges because the forecasted transactions were no longer probable of occurring were immaterial.

AMOUNT OF GAIN (LOSS) RECOGNIZED

2 unchanged sentences

ON DERIVATIVES

THREE MONTHS ENDED AUGUST 31,

THREE MONTHS ENDED NOVEMBER 30, SIX MONTHS ENDED NOVEMBER 30,

(Dollars in millions)

2022 2021 2022 2021

Derivatives not designated as hedging instruments:

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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 the control or influence of the Company.

The total notional amount of outstanding foreign currency derivatives designated as cash flow hedges was approximately $ 15.9 billion as of August 31, 2022.

Approximately $ 971 million of deferred net gains (net of tax) on both outstanding and matured derivatives in Accumulated other comprehensive income (loss) as of August 31, 2022, 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.

The total notional amount of outstanding foreign currency derivatives designated as cash flow hedges was approximately $ 17.4 billion as of November 30, 2022.

Approximately $ 798 million of deferred net gains (net of tax) on both outstanding and matured derivatives in Accumulated other comprehensive income (loss) as of November 30, 2022, 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.

As of August 31, 2022, the maximum term over which the Company hedges exposures to the variability of cash flows for its forecasted transactions was 33 months.

As of November 30, 2022, the maximum term over which the Company hedges exposures to the variability of cash flows for its forecasted transactions was 30 months.

UNDESIGNATED DERIVATIVE INSTRUMENTS

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These undesignated instruments are recorded at fair value as a derivative asset or liability on the Unaudited Condensed Consolidated Balance Sheets with their corresponding change in fair value recognized in Other (income) expense, net, together with the remeasurement gain or loss from the hedged balance sheet position and/or embedded derivative contract.

The total notional amount of outstanding undesignated derivative instruments was $ 4 billion as of August 31, 2022.

The total notional amount of outstanding undesignated derivative instruments was $ 4.6 billion as of November 30, 2022.

EMBEDDED DERIVATIVES

Embedded derivative contracts are treated as foreign currency forward contracts that are bifurcated from the related contract and recorded at fair value as a derivative asset or liability on the Unaudited Condensed Consolidated Balance Sheets with their corresponding change in fair value recognized in Other (income) expense, net, through the date the foreign currency fluctuations cease to exist.

As of August 31, 2022, the total notional amount of embedded derivatives outstanding was approximately $ 434 million.

As of November 30, 2022, the total notional amount of embedded derivatives outstanding was approximately $ 360 million.

The Company's bilateral credit-related contingent features generally require the owing entity, either the Company or the derivative counterparty, to post collateral for the portion of the fair value in excess of $ 50 million should the fair value of outstanding derivatives per counterparty be greater than $ 50 million.

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

As of August 31, 2022, the Company was in compliance with all credit risk-related contingent features, and derivative instruments with such features were in a net asset position of approximately $ 1.4 billion.

As of November 30, 2022, the Company was in compliance with all credit risk-related contingent features, and derivative instruments with such features were in a net asset position of approximately $ 820 million.

Accordingly, the Company was not required to post cash collateral as a result of these contingent features.

Further, $ 962 million of collateral was received on the Company's derivative asset balance as of August 31, 2022.

Further, $ 345 million of collateral was received on the Company's derivative asset balance as of November 30, 2022.

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

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CASH FLOW HEDGES NET INVESTMENT HEDGES (1)

Balance at May 31, 2022 $ ( 520 ) $ 779 $ 115 $ ( 56 ) $ 318

Balance at August 31, 2022 $ ( 746 ) $ 1,334 $ 115 $ ( 67 ) $ 636

Other comprehensive income (loss):

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Total other comprehensive income (loss) 354 ( 401 ) — ( 30 ) ( 77 )

Balance at November 30, 2022 $ ( 392 ) $ 933 $ 115 $ ( 97 ) $ 559

(1) The accumulated foreign currency translation adjustment and net investment hedge gains/losses related to an investment in a foreign subsidiary are reclassified to Net income upon sale or upon complete or substantially complete liquidation of the respective entity.

(2) Net of tax benefit (expense) of $ 0 million , $ 11 million, $ 0 million , $ 6 million and $ 17 million, respectively.

(3) Net of tax (benefit) expense of $( 16 ) million, $ 35 million, $ 0 million , $ 3 million and $ 22 million, respectively.

(Dollars in millions)

FOREIGN CURRENCY TRANSLATION ADJUSTMENT (1)

CASH FLOW HEDGES NET INVESTMENT HEDGES (1)

Balance at August 31, 2021 $ ( 126 ) $ 3 $ 115 $ ( 59 ) $ ( 67 )

Other comprehensive income (loss):

Other comprehensive gains (losses) before reclassifications (2)

( 155 ) 336 — 6 187

Reclassifications to net income of previously deferred (gains) losses (3)

— 30 — ( 5 ) 25

Total other comprehensive income (loss) ( 155 ) 366 — 1 212

Balance at November 30, 2021 $ ( 281 ) $ 369 $ 115 $ ( 58 ) $ 145

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Total other comprehensive income (loss) 128 154 — ( 41 ) 241

Balance at August 31, 2021 $ ( 126 ) $ 3 $ 115 $ ( 59 ) $ ( 67 )

Balance at November 30, 2022 $ ( 392 ) $ 933 $ 115 $ ( 97 ) $ 559

1 unchanged sentence

(3) Net of tax (benefit) expense of $( 16 ) million, $ 53 million, $ 0 million , $ 6 million and $ 43 million, respectively.

(Dollars in millions)

FOREIGN CURRENCY TRANSLATION ADJUSTMENT (1)

CASH FLOW HEDGES NET INVESTMENT HEDGES (1)

Balance at May 31, 2021 $ 2 $ ( 435 ) $ 115 $ ( 62 ) $ ( 380 )

Other comprehensive income (loss):

Other comprehensive gains (losses) before reclassifications (2)

( 283 ) 685 — 14 416

Reclassifications to net income of previously deferred (gains) losses (3)

— 119 — ( 10 ) 109

Total other comprehensive income (loss) ( 283 ) 804 — 4 525

Balance at November 30, 2021 $ ( 281 ) $ 369 $ 115 $ ( 58 ) $ 145

(2) Net of tax benefit (expense) of $ 0 million , $( 66 ) million, $ 0 million , $( 4 ) million and $( 70 ) million, respectively.

(3) Net of tax (benefit) expense of $ 0 million , $( 9 ) million, $ 0 million , $ 4 million and $( 5 ) million, respectively.

The following table summarizes the reclassifications from Accumulated other comprehensive income (loss) to the Unaudited Condensed Consolidated Statements of Income:

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(LOSS) INTO INCOME

THREE MONTHS ENDED AUGUST 31,

THREE MONTHS ENDED NOVEMBER 30, SIX MONTHS ENDED NOVEMBER 30,

(Dollars in millions)

2022 2021 2022 2021

Gains (losses) on foreign currency translation adjustment $ ( 325 ) $ — $ ( 371 ) $ — Other (income) expense, net

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The following tables present the Company's Revenues disaggregated by reportable operating segment, major product line and distribution channel:

THREE MONTHS ENDED AUGUST 31, 2022

THREE MONTHS ENDED NOVEMBER 30, 2022

(Dollars in millions)

9 unchanged sentences

TOTAL REVENUES $ 5,830 $ 3,489 $ 1,788 $ 1,599 $ 18 $ 12,724 $ 586 $ 5 $ 13,315

THREE MONTHS ENDED AUGUST 31, 2021

THREE MONTHS ENDED NOVEMBER 30, 2021

(Dollars in millions)

9 unchanged sentences

TOTAL REVENUES $ 4,477 $ 3,142 $ 1,844 $ 1,347 $ 6 $ 10,816 $ 557 $ ( 16 ) $ 11,357

For the three months ended August 31, 2022 and 2021, Global Brand Divisions revenues included NIKE Brand licensing and other miscellaneous revenues that are not part of a geographic operating segment.

SIX MONTHS ENDED NOVEMBER 30, 2022

(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.

Footwear $ 7,768 $ 4,075 $ 2,603 $ 2,172 $ — $ 16,618 $ 1,093 $ — $ 17,711

Apparel 3,179 2,434 767 848 — 7,228 42 — 7,270

Equipment 393 313 74 114 — 894 14 — 908

Other — — — — 32 32 80 1 113

TOTAL REVENUES $ 11,340 $ 6,822 $ 3,444 $ 3,134 $ 32 $ 24,772 $ 1,229 $ 1 $ 26,002

Sales to Wholesale Customers $ 6,210 $ 4,445 $ 1,736 $ 1,879 $ — $ 14,270 $ 647 $ — $ 14,917

Sales through Direct to Consumer 5,130 2,377 1,708 1,255 — 10,470 502 — 10,972

Other — — — — 32 32 80 1 113

TOTAL REVENUES $ 11,340 $ 6,822 $ 3,444 $ 3,134 $ 32 $ 24,772 $ 1,229 $ 1 $ 26,002

SIX MONTHS ENDED NOVEMBER 30, 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.

Footwear $ 6,116 $ 3,789 $ 2,684 $ 1,909 $ — $ 14,498 $ 1,052 $ — $ 15,550

Apparel 2,910 2,361 1,040 787 — 7,098 58 — 7,156

Equipment 330 299 102 116 — 847 14 — 861

Other — — — — 13 13 62 ( 37 ) 38

TOTAL REVENUES $ 9,356 $ 6,449 $ 3,826 $ 2,812 $ 13 $ 22,456 $ 1,186 $ ( 37 ) $ 23,605

Sales to Wholesale Customers $ 5,005 $ 4,336 $ 2,010 $ 1,711 $ — $ 13,062 $ 672 $ — $ 13,734

Sales through Direct to Consumer 4,351 2,113 1,816 1,101 — 9,381 452 — 9,833

Other — — — — 13 13 62 ( 37 ) 38

TOTAL REVENUES $ 9,356 $ 6,449 $ 3,826 $ 2,812 $ 13 $ 22,456 $ 1,186 $ ( 37 ) $ 23,605

For the three and six months ended November 30, 2022 and 2021, Global Brand Divisions revenues included NIKE Brand licensing and other miscellaneous revenues that are not part of a geographic operating segment.

Converse Other revenues were primarily attributable to licensing businesses.

Corporate revenues primarily consisted of foreign currency hedge gains and losses related to revenues generated by entities within the NIKE Brand geographic operating segments and Converse, but managed through the Company's central foreign exchange risk management program.

As of August 31, 2022 and May 31, 2022, the Company did not have any contract assets and had an immaterial amount of contract liabilities recorded in Accrued liabilities on the Unaudited Condensed Consolidated Balance Sheets.

As of November 30, 2022 and May 31, 2022, the Company did no t have any contract assets and had an immaterial amount of contract liabilities recorded in Accrued liabilities on the Unaudited Condensed Consolidated Balance Sheets.

NOTE 11 — OPERATING SEGMENTS

24 unchanged sentences

Accounts receivable, net, Inventories and Property, plant and equipment, net for operating segments are regularly reviewed by management and are therefore provided below.

THREE MONTHS ENDED AUGUST 31,

THREE MONTHS ENDED NOVEMBER 30, SIX MONTHS ENDED NOVEMBER 30,

(Dollars in millions)

2022 2021 2022 2021

North America $ 5,830 $ 4,477 $ 11,340 $ 9,356

19 unchanged sentences

INCOME BEFORE INCOME TAXES $ 1,650 $ 1,501 $ 3,478 $ 3,607

AUGUST 31, MAY 31,

NOVEMBER 30, MAY 31,

(Dollars in millions)

18 unchanged sentences

TOTAL INVENTORIES $ 9,326 $ 8,420

AUGUST 31, MAY 31,

NOVEMBER 30, MAY 31,

(Dollars in millions)

9 unchanged sentences

TOTAL PROPERTY, PLANT AND EQUIPMENT, NET $ 4,854 $ 4,791

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

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

See Note 13 — Acquisitions and Divestitures for additional information.

13 unchanged sentences

The related assets and liabilities of these entities within the Company’s APLA operating segment were classified as held-for-sale on the Consolidated Balance Sheets within Prepaid expenses and other current assets and Accrued liabilities, respectively, until the transactions closed.

During the first quarter of fiscal 2023, the sale of the Company’s entity in Chile to a third-party distributor was completed.

As of May 31, 2022, held-for-sale assets were $ 182 million and held-for-sale liabilities were $ 58 million.

The sale of the Company’s entity in Chile to a third-party distributor was completed during the first quarter of fiscal 2023.

The impacts from the transaction were not material to the Company’s Unaudited Condensed Consolidated Financial Statements.

ARGENTINA AND URUGUAY

As of August 31, 2022, held-for-sale assets were $ 99 million, primarily consisting of $ 38 million of Inventories and $ 23 million of Accounts receivable, net;

held-for-sale liabilities were $ 33 million.

Additionally, the Company has recognized cumulative expected net losses of $ 389 million within Other (income) expense, net, classified within Corporate, and a corresponding allowance within Accrued liabilities on the Unaudited Condensed Consolidated Balance Sheets.

A majority of these losses were recognized in fiscal 2020 upon meeting the held-for-sale criteria and are largely due to the anticipated release of the cumulative net foreign currency translation losses.

As of May 31, 2022, held-for-sale assets were $ 100 million, primarily consisting of $ 37 million of Inventories and $ 31 million of Accounts receivable, net;

held-for-sale liabilities were $ 37 million.

Subsequent to the end of the first quarter of fiscal 2023, the sale of the Company’s entities in Argentina and Uruguay to a third-party distributor was completed.

The net loss on the sale of these entities totaled approximately $ 550 million, $ 389 million of which was recognized by the Company in prior periods.

Upon completion of the sale, the remaining loss, primarily due to the devaluation of the local currency and cash equivalents included in the transfer of assets, will be recognized in the second quarter of fiscal 2023 within Other (income) expense, net, classified within Corporate.

During the second quarter of fiscal 2023, the Company completed the sale of its entities in Argentina and Uruguay to a third-party distributor.

The net loss on the sale of these entities totaled approximately $ 550 million, $ 389 million of which was recognized by the Company in prior periods and a corresponding allowance within in Accrued liabilities on the Unaudited Condensed Consolidated Balance Sheets.

The previously recognized loss was primarily due to the anticipated release of the cumulative foreign currency translation losses.

Upon completion of the sale, these foreign currency translation losses were reclassified from Accumulated other comprehensive income (loss) to Net income within Other (income) expense, net, classified within Corporate, and were largely offset by the release of the valuation allowance recognized within Accrued liabilities.

The remaining loss, primarily due to the devaluation of the local currency and cash equivalents included in the transfer of assets, was recognized upon completion of the sale within Other (income) expense, net, classified within Corporate on the Unaudited Condensed Consolidated Statements of Income.

Cash proceeds received, net of cash and cash equivalents transferred, are reflected within Other investing activities on the Unaudited Condensed Consolidated Statements of Cash Flows.

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-Q

Item 1. Financial Statements