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Item 1. Financial Statements

2024-04-04 compared with 2024-01-05 · 129 added, 86 removed, 602 unchanged (26% of the section changed)

1 unchanged sentence

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME

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

THREE MONTHS ENDED NINE MONTHS ENDED

(In millions, except per share data)

2023 2022 2023 2022

FEBRUARY 29, 2024 FEBRUARY 28, 2023 FEBRUARY 29, 2024 FEBRUARY 28, 2023

Revenues $ 12,429 $ 12,390 $ 38,756 $ 38,392

19 unchanged sentences

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

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

THREE MONTHS ENDED NINE MONTHS ENDED

(Dollars in millions)

2023 2022 2023 2022

FEBRUARY 29, 2024 FEBRUARY 28, 2023 FEBRUARY 29, 2024 FEBRUARY 28, 2023

Net income $ 1,172 $ 1,240 $ 4,200 $ 4,039

7 unchanged sentences

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

NOVEMBER 30, MAY 31,

FEBRUARY 29, MAY 31,

(In millions)

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UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

SIX MONTHS ENDED NOVEMBER 30,

NINE MONTHS ENDED

(Dollars in millions)

FEBRUARY 29, 2024 FEBRUARY 28, 2023

Cash provided (used) by operations:

39 unchanged sentences

SHARES AMOUNT SHARES AMOUNT

Balance at August 31, 2023 298 $ — 1,226 $ 3 $ 12,590 $ 136 $ 1,242 $ 13,971

Balance at November 30, 2023 298 $ — 1,219 $ 3 $ 12,871 $ 121 $ 1,151 $ 14,146

Stock options exercised 2 135 135

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Other comprehensive income (loss) 4 4

Balance at November 30, 2023 298 $ — 1,219 $ 3 $ 12,871 $ 121 $ 1,151 $ 14,146

Balance at February 29, 2024 298 $ — 1,213 $ 3 $ 13,128 $ 125 $ 970 $ 14,226

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

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SHARES AMOUNT SHARES AMOUNT

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

Stock options exercised 3 153 153

6 unchanged sentences

Other comprehensive income (loss) ( 257 ) ( 257 )

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

Balance at February 28, 2023 305 $ — 1,235 $ 3 $ 12,074 $ 302 $ 2,152 $ 14,531

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

12 unchanged sentences

Other comprehensive income (loss) ( 106 ) ( 106 )

Balance at November 30, 2023 298 $ — 1,219 $ 3 $ 12,871 $ 121 $ 1,151 $ 14,146

Balance at February 29, 2024 298 $ — 1,213 $ 3 $ 13,128 $ 125 $ 970 $ 14,226

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

11 unchanged sentences

Other comprehensive income (loss) ( 16 ) ( 16 )

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

Balance at February 28, 2023 305 $ — 1,235 $ 3 $ 12,074 $ 302 $ 2,152 $ 14,531

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

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NOTE 3 Fair Value Measurements

NOTE 4 Short-Term Borrowings and Credit Lines

NOTE 5 Income Taxes

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NOTE 13 Acquisitions and Divestitures

NOTE 13 Subsequent Events

NOTE 14 Restructuring

NOTE 1 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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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, 2023 (the "Annual Report").

The results of operations for the three and six months ended November 30, 2023, are not necessarily indicative of results to be expected for the entire fiscal year.

RECENTLY ISSUED ACCOUNTING STANDARDS

The results of operations for the three and nine months ended February 29, 2024, are not necessarily indicative of results to be expected for the entire fiscal year.

RECENTLY ISSUED ACCOUNTING STANDARDS AND DISCLOSURE RULES

In November 2023, the Financial Accounting Standards Board (the "FASB") issued Accounting Standards Update ("ASU") 2023-07, Segment Reporting (Topic 280):

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The Company is currently evaluating the ASU to determine its impact on the Company's disclosures.

In March 2024, the U.S.

Securities and Exchange Commission ("SEC") adopted the final rule under SEC Release No.

33-11275, The Enhancement and Standardization of Climate-Related Disclosures for Investors.

This rule will require registrants to disclose certain climate-related information in registration statements and annual reports.

The disclosure requirements will apply to the Company's fiscal year beginning June 1, 2025.

The Company is currently evaluating the final rule to determine its impact on the Company's disclosures.

RECENTLY ADOPTED ACCOUNTING STANDARDS

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The Company's obligations to its suppliers, including amounts due and payment terms, are not affected by a supplier's decision to participate in these programs and the Company does not provide guarantees to third parties in connection with these programs.

As of November 30, 2023 and May 31, 2023, the Company had $ 819 million and $ 834 million, respectively, of outstanding supplier obligations confirmed as valid under these programs.

As of February 29, 2024 and May 31, 2023, the Company had $ 704 million and $ 834 million, respectively, of outstanding supplier obligations confirmed as valid under these programs.

These amounts are included within Accounts payable on the Unaudited Condensed Consolidated Balance Sheets.

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Accrued liabilities included the following:

NOVEMBER 30, MAY 31,

FEBRUARY 29, MAY 31,

(Dollars in millions) 2024 2023

3 unchanged sentences

Dividends payable 566 529

Taxes other than income taxes payable

Endorsement compensation

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For additional information about the Company's fair value policies, refer to Note 1 — Summary of Significant Accounting Policies within the Annual Report.

The following tables present information about the Company's financial assets measured at fair value on a recurring basis as of November 30, 2023 and May 31, 2023, and indicate the level in the fair value hierarchy in which the Company classifies the fair value measurement:

NOVEMBER 30, 2023

The following tables present information about the Company's financial assets measured at fair value on a recurring basis as of February 29, 2024 and May 31, 2023, and indicate the level in the fair value hierarchy in which the Company classifies the fair value measurement:

FEBRUARY 29, 2024

(Dollars in millions)

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TOTAL $ 10,675 $ 7,441 $ 3,234

As of November 30, 2023, the Company held $ 1,316 million of available-for-sale debt securities with maturity dates within one year and $ 692 million with maturity dates greater than one year and less than five years in Short-term investments on the Unaudited Condensed Consolidated Balance Sheets.

As of February 29, 2024, the Company held $ 867 million of available-for-sale debt securities with maturity dates within one year and $ 746 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 $ 92 million and $ 49 million for the three months ended November 30, 2023 and 2022, respectively, and $ 191 million and $ 114 million for the six months ended November 30, 2023 and 2022, respectively.

Included in Interest expense (income), net was interest income related to the Company's investment portfolio of $ 113 million and $ 83 million for the three months ended February 29, 2024 and February 28, 2023, respectively, and $ 304 million and $ 196 million for the nine months ended February 29, 2024 and February 28, 2023, 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:

NOVEMBER 30, 2023

FEBRUARY 29, 2024

DERIVATIVE ASSETS DERIVATIVE LIABILITIES

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$ 390 $ 324 $ 66 $ 149 $ 132 $ 17

(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 $ 180 million as of November 30, 2023.

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.

Interest rate swap contracts (1)

$ 392 $ 324 $ 68 $ 153 $ 132 $ 21

(1) If the derivative instruments had been netted on the Unaudited Condensed Consolidated Balance Sheets, the asset and liability positions each would have been reduced by $ 149 million as of February 29, 2024.

As of that date, the Company received $ 48 million of cash collateral from counterparties related to derivative instruments.

No amount of collateral was posted on the derivative liability balance as of February 29, 2024.

DERIVATIVE ASSETS DERIVATIVE LIABILITIES

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$ 557 $ 493 $ 64 $ 180 $ 128 $ 52

(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 $ 178 million as of May 31, 2023.

As of that date, the Company received $ 36 million of cash collateral from counterparties related to foreign exchange derivative instruments.

(1) If the derivative instruments had been netted on the Consolidated Balance Sheets, the asset and liability positions each would have been reduced by $ 178 million as of May 31, 2023.

As of that date, the Company received $ 36 million of cash collateral from counterparties related to derivative instruments.

No amount of collateral was posted on the derivative liability balance as of May 31, 2023.

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FINANCIAL ASSETS AND LIABILITIES NOT RECORDED AT FAIR VALUE

The Company's Long-term debt is recorded at adjusted cost, net of unamortized premiums, discounts and debt issuance costs.

The Company's Long-term debt is recorded at adjusted cost, net of unamortized premiums, discounts, debt issuance costs and interest rate swap fair value adjustments.

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 $ 7,744 million at November 30, 2023 and $ 7,889 million at May 31, 2023.

The fair value of the Company's Long-term debt was approximately $ 7,764 million at February 29, 2024 and $ 7,889 million at May 31, 2023.

NOTE 4 — SHORT-TERM BORROWINGS AND CREDIT LINES

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

As of February 29, 2024 and May 31, 2023, the Company had no borrowings outstanding under its $ 3 billion commercial paper program.

On March 8, 2024, subsequent to the end of the third quarter of fiscal 2024, 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 7, 2025, 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 10, 2023, which matured on March 8, 2024.

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 Term Secured Overnight Financing Rate (Term SOFR) for the applicable interest period plus 0.60 %.

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

As of April 4, 2024, no amounts were outstanding under this committed credit facility.

There have been no other changes to the credit lines reported in the Annual Report for the fiscal year ended May 31, 2023.

NOTE 5 — INCOME TAXES

The effective tax rate was 15.2 % and 19.5 % for the six months ended November 30, 2023 and 2022, respectively.

The effective tax rate was 15.6 % and 18.5 % for the nine months ended February 29, 2024 and February 28, 2023, respectively.

The decrease in the Company's effective tax rate was primarily due to one-time benefits including the impact of temporary relief provided by the Internal Revenue Service ("IRS") relating to U.S.

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Based on the Company's current analysis of the provisions, these tax law changes are not expected to have a material impact on the Company's financial statements for fiscal 2024.

As of November 30, 2023, total gross unrecognized tax benefits, excluding related interest and penalties, were $ 931 million, $ 649 million of which would affect the Company's effective tax rate if recognized in future periods.

As of February 29, 2024, total gross unrecognized tax benefits, excluding related interest and penalties, were $ 988 million, $ 701 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, 2023, total gross unrecognized tax benefits, excluding related interest and penalties, were $ 936 million.

As of November 30, 2023 and May 31, 2023, accrued interest and penalties related to uncertain tax positions were $ 287 million and $ 268 million, respectively, (excluding federal benefit) and included within Deferred income taxes and other liabilities on the Unaudited Condensed Consolidated Balance Sheets.

As of February 29, 2024 and May 31, 2023, accrued interest and penalties related to uncertain tax positions were $ 314 million and $ 268 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 NOVEMBER 30, SIX MONTHS ENDED NOVEMBER 30,

THREE MONTHS ENDED NINE MONTHS ENDED

(Dollars in millions)

2023 2022 2023 2022

FEBRUARY 29, 2024 FEBRUARY 28, 2023 FEBRUARY 29, 2024 FEBRUARY 28, 2023

Stock options (1)

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(2) Restricted stock units include RSUs and PSUs.

The income tax benefit related to stock-based compensation expense was $ 1 million and $ 2 million for the three months ended November 30, 2023 and 2022, respectively, and $ 18 million and $ 22 million for the six months ended November 30, 2023 and 2022, respectively, and reported within Income tax expense.

The income tax benefit related to stock-based compensation expense was $ 12 million and $ 22 million for the three months ended February 29, 2024 and February 28, 2023, respectively, and $ 30 million and $ 44 million for the nine months ended February 29, 2024 and February 28, 2023, respectively, and reported within Income tax expense.

STOCK OPTIONS

As of November 30, 2023, the Company had $ 621 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.

As of February 29, 2024, the Company had $ 478 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 2.6 years.

RESTRICTED STOCK AND RESTRICTED STOCK UNITS

As of November 30, 2023, the Company had $ 859 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 2.7 years.

As of February 29, 2024, the Company had $ 699 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 2.5 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 exclude restricted stock, restricted stock units and options, including shares under ESPPs, to purchase an estimated additional 46.2 million and 38.0 million shares of common stock outstanding for the three months ended November 30, 2023 and 2022, respectively, and 43.5 million and 35.1 million shares of common stock outstanding for the six months ended November 30, 2023 and 2022, respectively, because the awards were assumed to be anti-dilutive.

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

The computations of diluted earnings per common share exclude restricted stock, restricted stock units and options, including shares under ESPPs, to purchase an estimated additional 40.9 million and 29.5 million shares of common stock outstanding for the three months ended February 29, 2024 and February 28, 2023, respectively, and 42.6 million and 31.8 million shares of common stock outstanding for the nine months ended February 29, 2024 and February 28, 2023, respectively, because the awards were assumed to be anti-dilutive.

THREE MONTHS ENDED NINE MONTHS ENDED

(In millions, except per share data)

2023 2022 2023 2022

FEBRUARY 29, 2024 FEBRUARY 28, 2023 FEBRUARY 29, 2024 FEBRUARY 28, 2023

Net income available to common stockholders $ 1,172 $ 1,240 $ 4,200 $ 4,039

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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 six months ended November 30, 2023, there have been no material changes to the Company's hedging program or strategy from what was disclosed within the Annual Report.

As of and for the nine months ended February 29, 2024, there have been no material changes to the Company's hedging program or strategy from what was disclosed within the Annual Report.

For additional information about the Company's derivatives and hedging policies, refer to Note 1 — Summary of Significant Accounting Policies and Note 12 — Risk Management and Derivatives within the Annual Report.

The majority of derivatives outstanding as of November 30, 2023, are designated as foreign currency cash flow hedges, primarily for Euro/U.S.

The majority of derivatives outstanding as of February 29, 2024, are designated as foreign currency cash flow hedges, primarily for Euro/U.S.

Dollar, British Pound/Euro, Chinese Yuan/U.S.

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DERIVATIVE ASSETS

BALANCE SHEET LOCATION NOVEMBER 30, MAY 31,

BALANCE SHEET LOCATION FEBRUARY 29, MAY 31,

(Dollars in millions)

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Foreign exchange forwards and options Deferred income taxes and other assets 66 64

Interest rate swap contracts

Deferred income taxes and other assets

Total derivatives formally designated as hedging instruments 380 544

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DERIVATIVE LIABILITIES

BALANCE SHEET LOCATION NOVEMBER 30, MAY 31,

BALANCE SHEET LOCATION FEBRUARY 29, MAY 31,

(Dollars in millions)

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Foreign exchange forwards and options Deferred income taxes and other liabilities 17 52

Interest rate swap contracts

Deferred income taxes and other liabilities

Total derivatives formally designated as hedging instruments 142 145

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INCOME (LOSS) INTO INCOME (1)

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

THREE MONTHS ENDED LOCATION OF GAIN (LOSS)

RECLASSIFIED FROM ACCUMULATED

OTHER COMPREHENSIVE INCOME

(LOSS) INTO INCOME THREE MONTHS ENDED NOVEMBER 30,

2023 2022 2023 2022

(LOSS) INTO INCOME THREE MONTHS ENDED

FEBRUARY 29, 2024 FEBRUARY 28, 2023 FEBRUARY 29, 2024 FEBRUARY 28, 2023

Derivatives designated as cash flow hedges:

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TOTAL DESIGNATED CASH FLOW HEDGES $ 152 $ ( 175 ) $ 111 $ 283

(1) For the three months ended November 30, 2023 and 2022, 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 February 29, 2024 and February 28, 2023, 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.

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INCOME (LOSS) INTO INCOME (1)

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

NINE MONTHS ENDED LOCATION OF GAIN (LOSS)

RECLASSIFIED FROM ACCUMULATED

OTHER COMPREHENSIVE INCOME

(LOSS) INTO INCOME SIX MONTHS ENDED NOVEMBER 30,

2023 2022 2023 2022

(LOSS) INTO INCOME NINE MONTHS ENDED

FEBRUARY 29, 2024 FEBRUARY 28, 2023 FEBRUARY 29, 2024 FEBRUARY 28, 2023

Derivatives designated as cash flow hedges:

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TOTAL DESIGNATED CASH FLOW HEDGES $ 179 $ 476 $ 347 $ 760

(1) For the six months ended November 30, 2023 and 2022, 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 nine months ended February 29, 2024 and February 28, 2023, 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.

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ON DERIVATIVES

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

THREE MONTHS ENDED NINE MONTHS ENDED

(Dollars in millions)

2023 2022 2023 2022

FEBRUARY 29, 2024 FEBRUARY 28, 2023 FEBRUARY 29, 2024 FEBRUARY 28, 2023

Derivatives not designated as hedging instruments:

Foreign exchange forwards and options and embedded derivatives

$ 17 $ 17 $ ( 10 ) $ 78 Other (income) expense, net

Foreign exchange forwards and options and embedded derivatives $ 9 $ ( 26 ) $ ( 1 ) $ 52 Other (income) expense, net

CASH FLOW HEDGES

The total notional amount of outstanding foreign currency derivatives designated as cash flow hedges was approximately $ 17.7 billion as of November 30, 2023.

Approximately $ 252 million of deferred net gains (net of tax) on both outstanding and matured derivatives in Accumulated other comprehensive income (loss) as of November 30, 2023, 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 $ 17.6 billion as of February 29, 2024.

Approximately $ 250 million of deferred net gains (net of tax) on both outstanding and matured derivatives in Accumulated other comprehensive income (loss) as of February 29, 2024, 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 November 30, 2023, the maximum term over which the Company hedges exposures to the variability of cash flows for its forecasted transactions was 27 months.

As of February 29, 2024, the maximum term over which the Company hedges exposures to the variability of cash flows for its forecasted transactions was 27 months.

FAIR VALUE HEDGES

The total notional amount of outstanding interest rate swap contracts designated as fair value hedges was $ 901 million as of February 29, 2024.

UNDESIGNATED DERIVATIVE INSTRUMENTS

The total notional amount of outstanding undesignated derivative instruments was $ 4.6 billion as of November 30, 2023.

As of November 30, 2023, 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 $ 169 million.

The total notional amount of outstanding undesignated derivative instruments was $ 3.9 billion as of February 29, 2024.

As of February 29, 2024, 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 $ 239 million.

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

Further, no collateral was received on the Company's derivative asset balance as of November 30, 2023.

Further, $ 48 million of collateral was received on the Company's derivative asset balance as of February 29, 2024.

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 August 31, 2023 $ ( 217 ) $ 297 $ 115 $ ( 59 ) $ 136

Balance at November 30, 2023 $ ( 178 ) $ 242 $ 115 $ ( 58 ) $ 121

Other comprehensive income (loss):

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Total other comprehensive income (loss) ( 57 ) 50 — 11 4

Balance at November 30, 2023 $ ( 178 ) $ 242 $ 115 $ ( 58 ) $ 121

Balance at February 29, 2024 $ ( 235 ) $ 292 $ 115 $ ( 47 ) $ 125

(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.

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CASH FLOW HEDGES NET INVESTMENT HEDGES (1)

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

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

Other comprehensive income (loss):

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Total other comprehensive income (loss) 153 ( 433 ) — 23 ( 257 )

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

Balance at February 28, 2023 $ ( 239 ) $ 500 $ 115 $ ( 74 ) $ 302

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Total other comprehensive income (loss) 18 ( 139 ) — 15 ( 106 )

Balance at November 30, 2023 $ ( 178 ) $ 242 $ 115 $ ( 58 ) $ 121

Balance at February 29, 2024 $ ( 235 ) $ 292 $ 115 $ ( 47 ) $ 125

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Total other comprehensive income (loss) 281 ( 279 ) — ( 18 ) ( 16 )

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

Balance at February 28, 2023 $ ( 239 ) $ 500 $ 115 $ ( 74 ) $ 302

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(LOSS) INTO INCOME

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

THREE MONTHS ENDED NINE MONTHS ENDED

(Dollars in millions)

2023 2022 2023 2022

FEBRUARY 29, 2024 FEBRUARY 28, 2023 FEBRUARY 29, 2024 FEBRUARY 28, 2023

Gains (losses) on foreign currency translation adjustment $ — $ ( 3 ) $ ( 2 ) $ ( 374 ) 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 NOVEMBER 30, 2023

THREE MONTHS ENDED FEBRUARY 29, 2024

(Dollars in millions)

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TOTAL REVENUES $ 5,070 $ 3,138 $ 2,084 $ 1,647 $ 9 $ 11,948 $ 495 $ ( 14 ) $ 12,429

THREE MONTHS ENDED NOVEMBER 30, 2022

THREE MONTHS ENDED FEBRUARY 28, 2023

(Dollars in millions)

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TOTAL REVENUES $ 4,913 $ 3,246 $ 1,994 $ 1,601 $ 12 $ 11,766 $ 612 $ 12 $ 12,390

SIX MONTHS ENDED NOVEMBER 30, 2023

NINE MONTHS ENDED FEBRUARY 29, 2024

(Dollars in millions)

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TOTAL REVENUES $ 16,118 $ 10,315 $ 5,682 $ 5,024 $ 34 $ 37,173 $ 1,602 $ ( 19 ) $ 38,756

SIX MONTHS ENDED NOVEMBER 30, 2022

NINE MONTHS ENDED FEBRUARY 28, 2023

(Dollars in millions)

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TOTAL REVENUES $ 16,253 $ 10,068 $ 5,438 $ 4,735 $ 44 $ 36,538 $ 1,841 $ 13 $ 38,392

For the three and six months ended November 30, 2023 and 2022, Global Brand Divisions revenues included NIKE Brand licensing and other miscellaneous revenues that are not part of a geographic operating segment.

For the three and nine months ended February 29, 2024 and three and nine months ended February 28, 2023, 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 November 30, 2023 and May 31, 2023, 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.

As of February 29, 2024 and May 31, 2023, 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

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and certain foreign currency gains and losses, including certain hedge gains and losses.

For the three and nine months ended February 29, 2024, Corporate also includes pre-tax restructuring charges recognized as a result of the Company taking steps to streamline the organization.

These pre-tax charges primarily reflect employee severance costs and accelerated stock-based compensation expense.

For more information, refer to Note 14 — Restructuring.

The primary financial measure used by the Company to evaluate performance of individual operating segments is earnings before interest and taxes ("EBIT"), which represents Net income before Interest expense (income), net, and Income taxes in the Unaudited Condensed Consolidated Statements of Income.

4 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 NOVEMBER 30, SIX MONTHS ENDED NOVEMBER 30,

THREE MONTHS ENDED NINE MONTHS ENDED

(Dollars in millions)

2023 2022 2023 2022

FEBRUARY 29, 2024 FEBRUARY 28, 2023 FEBRUARY 29, 2024 FEBRUARY 28, 2023

North America $ 5,070 $ 4,913 $ 16,118 $ 16,253

19 unchanged sentences

INCOME BEFORE INCOME TAXES $ 1,404 $ 1,477 $ 4,974 $ 4,955

NOVEMBER 30, MAY 31,

FEBRUARY 29, MAY 31,

(Dollars in millions)

19 unchanged sentences

$ 7,726 $ 8,454

(1) Inventories as of November 30, 2023 and May 31, 2023, were substantially all finished goods.

NOVEMBER 30, MAY 31,

(1) Inventories as of February 29, 2024 and May 31, 2023, were substantially all finished goods.

FEBRUARY 29, MAY 31,

(Dollars in millions)

28 unchanged sentences

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

NOTE 13 — SUBSEQUENT EVENTS

In December 2023, the Company announced an enterprise initiative designed to accelerate its future growth.

As part of this initiative, management is taking steps to streamline the organization which are expected to result in pre-tax restructuring charges of approximately $ 400 million to $ 450 million, primarily associated with employee severance costs largely expected to be recognized in the third quarter of fiscal 2024 within Operating overhead expense.

The expected pre-tax charges are estimates and are subject to a number of assumptions.

Actual results may vary from the estimates provided above.

NOTE 14 — RESTRUCTURING

During the third quarter of fiscal 2024, the Company announced a multi-year enterprise initiative designed to accelerate its future growth.

As part of this initiative, management is taking steps to streamline the organization which will include a net reduction in the Company's global workforce.

As of February 29, 2024, the Company expects to recognize pre-tax restructuring charges of approximately $ 450 million, primarily associated with employee severance costs and accelerated stock-based compensation expense, the majority of which are expected to be recognized by the end of fiscal 2024.

The related cash payments are expected to take place through the first half of fiscal 2025.

The expected pre-tax charges are estimates and are subject to a number of assumptions and actual results may vary from the estimates provided.

During the third quarter of fiscal 2024, the Company recognized pre-tax restructuring charges of $ 403 million.

These charges were classified within Corporate as follows:

THREE MONTHS ENDED FEBRUARY 29, 2024

(Dollars in millions)

OPERATING OVERHEAD EXPENSE

COST OF SALES TOTAL

Employee severance and related costs (1)

$ 319 $ 60 $ 379

Stock-based compensation expense (2)

Total pre-tax restructuring charges

$ 340 $ 63 $ 403

(1) Employee severance costs are recognized when a future related expense is considered probable and reasonably estimable.

(2) Non-cash restructuring related stock-based compensation expense is accelerated over the requisite service period, which for certain impacted employees could extend through the first half of fiscal 2025.

As of February 29, 2024, a majority of the $ 379 million of employee severance and related costs are reflected within Accrued liabilities on the Unaudited Condensed Consolidated Balance Sheets, classified within Other in Note 2 — Accrued Liabilities, and an immaterial amount is reflected within Accounts payable.

As of February 29, 2024, the Company has no t made any cash payments related to this activity.

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