UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended November 30, 2016August 31, 2017
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from              to
Commission file number-001-10635File Number: 001-10635
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NIKE, Inc.
(Exact name of registrant as specified in its charter)
   
OREGON 93-0584541
(State or other jurisdiction of
incorporation or organization)
 
(I.R.S. Employer
Identification No.)
  
One Bowerman Drive,
Beaverton, Oregon
 97005-6453
(Address of principal executive offices) (Zip Code)
Registrant’s
Registrants telephone number, including area code: (503) 671-6453
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes      No 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes      No  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”filer,” “smaller reporting company” and “smaller reporting“emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer

Accelerated filerSmaller reporting company
    
Non-accelerated filer   (Do(Do not check if a smaller reporting company)Smaller Reporting CompanyEmerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes      No  
Shares of Common Stock outstanding as of JanuaryOctober 3, 2017 were:
Class A329,251,752329,245,752
Class B1,325,225,3781,302,272,700
 1,654,477,1301,631,518,452

NIKE, INC.
FORM 10-Q
Table of Contents
   
Page
ITEM 1.
 
 
 
 
 
ITEM 2.
ITEM 3.
ITEM 4.
  
 
ITEM 1.
ITEM 1A.
ITEM 2.
ITEM 6.
 
 


Table of Contents

PART I - FINANCIAL INFORMATION
ITEM 1. Financial Statements
NIKE, Inc. Unaudited Condensed Consolidated Balance Sheets
 November 30, May 31, August 31, May 31,
(In millions) 2016 2016 2017 2017
ASSETS        
Current assets:        
Cash and equivalents $4,339
 $3,138
 $3,413
 $3,808
Short-term investments 1,604
 2,319
 2,106
 2,371
Accounts receivable, net 3,478
 3,241
 3,871
 3,677
Inventories 5,033
 4,838
 5,211
 5,055
Prepaid expenses and other current assets 1,557
 1,489
 1,591
 1,150
Total current assets 16,011
 15,025
 16,192
 16,061
Property, plant and equipment, net 3,566
 3,520
 4,086
 3,989
Identifiable intangible assets, net 283
 281
 283
 283
Goodwill 139
 131
 139
 139
Deferred income taxes and other assets 2,653
 2,422
 2,947
 2,787
TOTAL ASSETS $22,652
 $21,379
 $23,647
 $23,259
LIABILITIES AND SHAREHOLDERS’ EQUITY        
Current liabilities:        
Current portion of long-term debt $44
 $44
 $7
 $6
Notes payable 20
 1
 335
 325
Accounts payable 2,033
 2,191
 2,116
 2,048
Accrued liabilities 3,076
 3,037
 3,501
 3,011
Income taxes payable 52
 85
 97
 84
Total current liabilities 5,225
 5,358
 6,056
 5,474
Long-term debt 3,473
 1,993
 3,472
 3,471
Deferred income taxes and other liabilities 1,631
 1,770
 2,126
 1,907
Commitments and contingencies 

 

Commitments and contingencies (Note 12) 

 

Redeemable preferred stock 
 
 
 
Shareholders’ equity:        
Common stock at stated value:        
Class A convertible — 329 and 353 shares outstanding 
 
Class B — 1,327 and 1,329 shares outstanding 3
 3
Class A convertible — 329 and 329 shares outstanding 
 
Class B — 1,308 and 1,314 shares outstanding 3
 3
Capital in excess of stated value 8,196
 7,786
 8,817
 8,638
Accumulated other comprehensive income 399
 318
Accumulated other comprehensive loss (586) (213)
Retained earnings 3,725
 4,151
 3,759
 3,979
Total shareholders’ equity 12,323
 12,258
 11,993
 12,407
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY $22,652
 $21,379
 $23,647
 $23,259
The accompanying Notes to the Unaudited Condensed Consolidated Financial Statements are an integral part of this statement.

NIKE, Inc. Unaudited Condensed Consolidated Statements of Income
 Three Months Ended November 30, Six Months Ended November 30, Three Months Ended August 31,
(In millions, except per share data) 2016 2015 2016 2015 2017 2016
Revenues $8,180
 $7,686
 $17,241
 $16,100
 $9,070
 $9,061
Cost of sales 4,564
 4,185
 9,502
 8,604
 5,108
 4,938
Gross profit 3,616
 3,501
 7,739
 7,496
 3,962
 4,123
Demand creation expense 762
 769
 1,803
 1,601
 855
 1,041
Operating overhead expense 1,743
 1,791
 3,599
 3,536
 2,001
 1,856
Total selling and administrative expense 2,505
 2,560
 5,402
 5,137
 2,856
 2,897
Interest expense (income), net 15
 5
 22
 9
 16
 7
Other (income) expense, net (18) (34) (80) (65)
Other expense (income), net 18
 (62)
Income before income taxes 1,114
 970
 2,395
 2,415
 1,072
 1,281
Income tax expense 272
 185
 304
 451
 122
 32
NET INCOME $842
 $785
 $2,091
 $1,964
 $950
 $1,249
            
Earnings per common share:            
Basic $0.51
 $0.46
 $1.26
 $1.15
 $0.58
 $0.75
Diluted $0.50
 $0.45
 $1.23
 $1.12
 $0.57
 $0.73
            
Dividends declared per common share $0.18
 $0.16
 $0.34
 $0.30
 $0.18
 $0.16
The accompanying Notes to the Unaudited Condensed Consolidated Financial Statements are an integral part of this statement.

NIKE, Inc. Unaudited Condensed Consolidated Statements of Comprehensive Income
 Three Months Ended November 30, Six Months Ended November 30, Three Months Ended August 31,
(In millions) 2016 2015 2016 2015 2017 2016
Net income $842
 $785
 $2,091
 $1,964
 $950
 $1,249
Other comprehensive income (loss), net of tax:            
Change in net foreign currency translation adjustment (14) (29) (11) (110) 22
 3
Change in net gains (losses) on cash flow hedges 323
 290
 83
 (39) (395) (240)
Change in net gains (losses) on other 5
 13
 9
 10
 
 4
Total other comprehensive income (loss), net of tax 314
 274
 81
 (139) (373) (233)
TOTAL COMPREHENSIVE INCOME $1,156
 $1,059
 $2,172
 $1,825
 $577
 $1,016
The accompanying Notes to the Unaudited Condensed Consolidated Financial Statements are an integral part of this statement.


NIKE, Inc. Unaudited Condensed Consolidated Statements of Cash Flows
 Six Months Ended November 30, Three Months Ended August 31,
(In millions) 2016 2015 2017 2016
Cash provided by operations:        
Net income $2,091
 $1,964
 $950
 $1,249
Income charges (credits) not affecting cash:        
Depreciation 346
 314
 179
 173
Deferred income taxes (70) (39) (59) (50)
Stock-based compensation 111
 116
 50
 57
Amortization and other 12
 8
 6
 7
Net foreign currency adjustments (34) 74
 (19) (61)
Changes in certain working capital components and other assets and liabilities:        
(Increase) in accounts receivable (318) (139) (101) (284)
(Increase) in inventories (300) (354) (96) (62)
(Increase) in prepaid expenses and other current assets (85) (114) (543) (63)
(Decrease) in accounts payable, accrued liabilities and income taxes payable (69) (794)
Increase (decrease) in accounts payable, accrued liabilities and income taxes payable 208
 (178)
Cash provided by operations 1,684
 1,036
 575
 788
Cash provided (used) by investing activities:    
Cash used by investing activities:    
Purchases of short-term investments (2,358) (2,851) (1,663) (1,279)
Maturities of short-term investments 1,743
 1,510
 1,403
 562
Sales of short-term investments 1,404
 1,250
 518
 960
Additions to property, plant and equipment (512) (615) (270) (277)
Disposals of property, plant and equipment 12
 9
Other investing activities (53) 
 
 (42)
Cash provided (used) by investing activities 236
 (697)
Cash used by investing activities (12) (76)
Cash used by financing activities:        
Net proceeds from long-term debt issuance 1,482
 981
Long-term debt payments, including current portion (3) (103) (1) (2)
Increase in notes payable 21
 33
 9
 21
Payments on capital lease obligations (6) (3)
Payments on capital lease and other financing obligations (6) (2)
Proceeds from exercise of stock options and other stock issuances 238
 328
 158
 112
Excess tax benefits from share-based payment arrangements 78
 201
Repurchase of common stock (1,954) (1,240) (804) (1,054)
Dividends — common and preferred (536) (479) (300) (269)
Tax payments for net share settlement of equity awards
 (54) (8)
Cash used by financing activities (680) (282) (998) (1,202)
Effect of exchange rate changes on cash and equivalents (39) (58) 40
 11
Net increase (decrease) in cash and equivalents 1,201
 (1)
Net decrease in cash and equivalents (395) (479)
Cash and equivalents, beginning of period 3,138
 3,852
 3,808
 3,138
CASH AND EQUIVALENTS, END OF PERIOD $4,339
 $3,851
 $3,413
 $2,659
Supplemental disclosure of cash flow information:        
Non-cash additions to property, plant and equipment $120
 $201
 $98
 $96
Dividends declared and not paid 304
 273
 295
 272
The accompanying Notes to the Unaudited Condensed Consolidated Financial Statements are an integral part of this statement.

Notes to the Unaudited Condensed Consolidated Financial Statements
Note 1
Note 2
Note 3
Note 4
Note 5
Note 6
Note 7
Note 8
Note 9
Note 10
Note 11
Note 12

Note 1 — Summary of Significant Accounting Policies
Basis of Presentation
The Unaudited Condensed Consolidated Financial Statements include the accounts of NIKE, Inc. and its subsidiaries (the “Company”) and reflect all normal adjustments which are, in the opinion of management, necessary for a fair statement of the results of operations for the interim period. The year-end Condensed Consolidated Balance Sheet data as of May 31, 20162017 was derived from audited financial statements, but does not include all disclosures required by accounting principles generally accepted in the United States of America (“U.S. GAAP”). The interim financial information and notes thereto should be read in conjunction with the Company’s latest Annual Report on Form 10-K. The results of operations for the three and six months ended November 30, 2016August 31, 2017 are not necessarily indicative of results to be expected for the entire year.
Reclassifications
Certain prior year amounts have been reclassified to conform to fiscal 2017 presentation.2018 presentation, including reclassified geographic operating segment data to reflect the changes in the Company’s operating structure, which became effective on June 1, 2017. Refer to Note 11 — Operating Segments for additional information.
Recently Adopted Accounting Standards
In April 2015,March 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2015-03,2016-09, InterestCompensationImputationStock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting, which changes how companies account for certain aspects of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs. The updated guidance requires debt issuance costsshare-based payment awards to be presented as a direct deduction from the carrying amount of the corresponding debt liability on the balance sheet.employees. The Company adopted the standard on a retrospective basisASU in the first quarter of fiscal 2017.2018. The adoptionupdated guidance requires excess tax benefits and deficiencies from share-based payment awards to be recorded in income tax expense in the income statement. Previously, excess tax benefits and deficiencies were recognized in shareholders’ equity on the balance sheet. This change is required to be applied prospectively. During the first quarter of this standard reduced bothfiscal 2018, the Company recognized $88 million of excess tax benefits related to share-based payment awards in Deferred income taxes and other assets Income tax expenseand Long-term debt by$17 million on in the Unaudited Condensed Consolidated Balance Sheet asStatements of MayIncome.
Additionally, ASU 2016-09 modified the classification of certain share-based payment activities within the statement of cash flows, which the Company applied retrospectively. As a result, for the three months ended August 31, 2016.2016, the Company reclassified a cash inflow of $59 million related to excess tax benefits from share-based payment awards from Cash used by financing activities to Cash provided by operations, and reclassified a cash outflow of $8 million related to tax payments for the net settlement of share-based payment awards from Cash provided by operations to Cash used by financing activities within the Unaudited Condensed Consolidated Statement of Cash Flows.
Recently Issued Accounting Standards
In August 2017, the FASB issued ASU 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities, which expands and refines hedge accounting for both financial and non-financial risk components, aligns the recognition and presentation of the effects of hedging instruments and hedge items in the financial statements, and includes certain targeted improvements to ease the application of current guidance related to the assessment of hedge effectiveness. The update to the standard is effective for the Company June 1, 2019, with early adoption permitted in any interim period. The Company is currently evaluating the effect the guidance will have on the Consolidated Financial Statements.
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 ASU is effective forCompany will adopt the Company beginningstandard on June 1, 2018, using a modified retrospective approach with the cumulative effect recognized through retained earnings at the date of adoption. Early adoption is permitted. The Company is evaluatingcontinues to assess the impact this update will have on its existing accounting policies and the Consolidated Financial Statements. The CompanyStatements and anticipates the updated guidance could have a material impact on the Consolidated Financial Statements at adoption through the recognition of a cumulative-effect adjustment to retained earnings of previously deferred charges.
In March 2016, the FASB issued ASU No. 2016-09, Compensation — Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting, which changes how companies account for certain aspects of share-based payment awards to employees. The updated guidance requires excess tax benefits and deficiencies from share-based payment awards to be recorded in income tax expense in the income statement. Currently, excess tax benefits and deficiencies are recognized in shareholders’ equity on the balance sheet. In addition, the updated guidance also changes the accounting for forfeitures and statutory tax withholding requirements, as well as the classification in the statement of cash flows. The Company will adopt the standard on June 1, 2017. The Company continues to evaluate the impact this update will have on its existing accounting policies and the Consolidated Financial Statements. Based on a preliminary assessment, the ASU is expected to result in increased volatility to the Company’s income tax expense in future periods dependent upon, among other variables, the price of its common stock and the timing and volume of share-based payment award activity, such as employee exercises of stock options and vesting of restricted stock awards.
In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842), thatwhich replaces existing lease accounting guidance. The new standard is intended to provide enhanced transparency and comparability by requiring lessees to record right-of-use assets and corresponding lease liabilities on the balance sheet. The new guidance will require the Company to continue to classify leases as either financeoperating or operating,financing, with classification affecting the pattern of expense recognition in the income statement. The Company will adopt the standard on June 1, 2019. The ASU is required to be applied using a modified retrospective approach at the beginning of the earliest period presented, with optional practical expedients. The Company is in the preliminary stages of the assessment ofcontinues to assess the effect the guidance will have on its existing accounting policies and the Consolidated Financial Statements butand expects there will be an increase in assets and liabilities on the Consolidated Balance Sheets at adoption due to the recording of right-of-use assets and corresponding lease liabilities, which may be material. Refer to Note 15 — Commitments and Contingencies of the Annual Report on Form 10-K for the fiscal year ended May 31, 20162017 for information about the Company’s lease obligations.
In January 2016, the FASB issued ASU No. 2016-01, Financial Instruments — Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities. The updated guidance enhances the reporting model for financial instruments, which includes amendments to address aspects of recognition, measurement, presentation and disclosure. The update to the standard is effective for the Company beginning June 1, 2018. The Company does not expect the adoption to have a material impact on the Consolidated Financial Statements.
In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606), that replaces existing revenue recognition guidance. The updated guidance requires companies to recognize revenue in a way that depicts the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. In addition, the new standard requires that reporting companies disclose the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. The Company expects towill adopt the standard on June 1, 2018. The new standard is required to be applied retrospectively to each prior reporting period presented or retrospectively2018 using a modified retrospective approach with the cumulative effect of initially applying itthe new standard recognized in retained earnings at the date of initial application. The Company has not yet selected a transition method.adoption. The Company is in the process of evaluating the new standard against its existing accounting policies, including the timing of revenue recognition, and its contracts with customers, to determine the effect the guidance will have on the Consolidated Financial Statements.

Note 2 — Inventories
Inventory balances of $5,033$5,211 million and $4,838$5,055 million at November 30, 2016August 31, 2017 and May 31, 2016,2017, respectively, were substantially all finished goods.
Note 3 — Accrued Liabilities
Accrued liabilities included the following:
 As of November 30, As of May 31, As of August 31, As of May 31,
(In millions) 2016 2016 2017 2017
Compensation and benefits, excluding taxes $698
 $943
 $837
 $871
Collateral received from counterparties to hedging instruments 369
 105
Fair value of derivatives 528
 168
Endorsement compensation 383
 396
Dividends payable 304
 271
 295
 300
Endorsement compensation 290
 393
Import and logistics costs 250
 198
 280
 257
Taxes other than income taxes 219
 159
Taxes other than income taxes payable 243
 196
Advertising and marketing 158
 119
 152
 125
Fair value of derivatives 88
 162
Other(1)
 700
 687
 783
 698
TOTAL ACCRUED LIABILITIES $3,076
 $3,037
 $3,501
 $3,011
(1)Other consists of various accrued expenses with no individual item accounting for more than 5% of the total Accrued liabilities balance at November 30, 2016August 31, 2017 and May 31, 2016.2017.
Note 4 — Fair Value Measurements
The Company measures certain financial assets and liabilities at fair value on a recurring basis, including derivatives and available-for-sale securities. 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 thea three-level hierarchy established by the 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:
Level 1: Quoted prices in active markets for identical assets or liabilities.
Level 2: Inputs other than quoted prices that are observable for the asset or liability, either directly or indirectly; these include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active.
Level 3: Unobservable inputs for which there is little or no market data available, which require the reporting entity to develop its own assumptions.
The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability. Financial assets and liabilities are classified in their entirety based on the most conservative level of input that is significant to the fair value measurement.
Pricing vendors are utilized for certaina majority of Level 1 and Level 2 investments. These vendors either provide a quoted market price in an active market or use observable inputs without applying significant adjustments in their pricing. Observable inputs include broker quotes, interest rates and yield curves observable at commonly quoted intervals, volatilities and credit risks. The fair value of derivative contracts is determined using observable market inputs such as the daily market foreign currency rates, forward pricing curves, currency volatilities, currency correlations and interest rates, and considers nonperformancenon-performance risk of the Company and that of its counterparties.
The Company’s fair value processes include controls that are designedmeasurement process includes comparing fair values to another independent pricing vendor to ensure appropriate fair values are recorded. These controls include a comparison of fair values to another independent pricing vendor.

The following tables present information about the Company’s financial assets measured at fair value on a recurring basis as of November 30, 2016August 31, 2017 and May 31, 2016,2017, and indicate the level in the fair value hierarchy in which the Company classifies the fair value measurement.
 As of November 30, 2016 As of August 31, 2017
(In millions) Assets at Fair Value Cash and Equivalents Short-term Investments Other Long-term Assets Assets at Fair Value Cash and Equivalents Short-term Investments Other Long-term Assets
Cash $681
 $681
 $
 $
 $624
 $624
 $
 $
Level 1:                
U.S. Treasury securities 1,256
 350
 906
 
 1,205
 200
 1,005
 
Level 2:                
Time deposits 820
 781
 39
 
 901
 862
 39
 
U.S. Agency securities 628
 335
 293
 
 354
 50
 304
 
Commercial paper and bonds 647
 281
 366
 
 797
 39
 758
 
Money market funds 1,911
 1,911
 
 
 1,638
 1,638
 
 
Total Level 2: 4,006
 3,308
 698
 
 3,690
 2,589
 1,101
 
Level 3:                
Non-marketable preferred stock 10
 
 
 10
 10
 
 
 10
TOTAL $5,953
 $4,339
 $1,604
 $10
 $5,529
 $3,413
 $2,106
 $10
 As of May 31, 2016 As of May 31, 2017
(In millions) Assets at Fair Value Cash and Equivalents Short-term Investments Other Long-term Assets Assets at Fair Value Cash and Equivalents Short-term Investments Other Long-term Assets
Cash $774
 $774
 $
 $
 $505
 $505
 $
 $
Level 1:                
U.S. Treasury securities 1,265
 100
 1,165
 
 1,545
 159
 1,386
 
Level 2:                
Time deposits 831
 827
 4
 
 813
 769
 44
 
U.S. Agency securities 679
 
 679
 
 522
 150
 372
 
Commercial paper and bonds 733
 262
 471
 
 820
 251
 569
 
Money market funds 1,175
 1,175
 
 
 1,974
 1,974
 
 
Total Level 2: 3,418
 2,264
 1,154
 
 4,129
 3,144
 985
 
Level 3:                
Non-marketable preferred stock 10
 
 
 10
 10
 
 
 10
TOTAL $5,467
 $3,138
 $2,319
 $10
 $6,189
 $3,808
 $2,371
 $10
The Company elects to record the gross assets and liabilities of its derivative financial instruments on the Unaudited Condensed Consolidated Balance Sheets. The Company’s derivative financial instruments are subject to master netting arrangements that allow for the offset of assets and liabilities in the event of default or early termination of the contract. Any amounts of cash collateral received related to these instruments associated with the Company'sCompany’s credit-related contingent features are recorded in Cash and equivalents and Accrued liabilities, the latter of which would further offset against the Company’s derivative asset balance (refer to Note 9 — Risk Management and Derivatives).balance. Any amounts of cash collateral posted related to these instruments associated with the Company'sCompany’s credit-related contingent features are recorded in Prepaid expenses and other current assets, which would further offset against the Company’s derivative liability balance (refer to Note 9 — Risk Management and Derivatives).balance. Cash collateral received or posted related to the Company'sCompany’s credit-related contingent features is presented in the Cash provided by operations component of the Unaudited Condensed Consolidated Statements of Cash Flows. Any amounts of non-cash collateral received, such as securities, are not recorded on the Unaudited Condensed Consolidated Balance Sheets pursuant to U.S. GAAP. For further information related to credit risk, refer to Note 9 — Risk Management and Derivatives.

The following tables present information about the Company’s derivative assets and liabilities measured at fair value on a recurring basis as of November 30, 2016August 31, 2017 and May 31, 2016,2017, and indicate the level in the fair value hierarchy in which the Company classifies the fair value measurement.
 As of November 30, 2016 As of August 31, 2017
 Derivative Assets Derivative Liabilities Derivative Assets Derivative Liabilities
(In millions) Assets at Fair Value Other Current Assets Other Long-term Assets Liabilities at Fair Value Accrued Liabilities Other Long-term Liabilities Assets at Fair Value Other Current Assets Other Long-term Assets Liabilities at Fair Value Accrued Liabilities Other Long-term Liabilities
Level 2:                        
Foreign exchange forwards and options(1)
 $844
 $657
 $187
 $92
 $86
 $6
 $183
 $175
 $8
 $708
 $525
 $183
Embedded derivatives 10
 4
 6
 9
 2
 7
 10
 1
 9
 8
 3
 5
TOTAL $854
 $661
 $193
 $101
 $88
 $13
 $193
 $176
 $17
 $716
 $528
 $188
(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 $92$164 million as of November 30, 2016.August 31, 2017. As of that date, the Company had receivedposted $369273 million of cash collateral fromto various counterparties related to these foreign exchange derivative instruments. No amount of collateral was postedreceived on the Company'sCompanys derivative liabilityasset balance as of November 30, 2016.August 31, 2017.

 As of May 31, 2016 As of May 31, 2017
 Derivative Assets Derivative Liabilities Derivative Assets Derivative Liabilities
(In millions) Assets at Fair Value Other Current Assets Other Long-term Assets Liabilities at Fair Value Accrued Liabilities Other Long-term Liabilities Assets at Fair Value Other Current Assets Other Long-term Assets Liabilities at Fair Value Accrued Liabilities Other Long-term Liabilities
Level 2:                        
Foreign exchange forwards and options(1)
 $603
 $487
 $116
 $145
 $115
 $30
 $231
 $216
 $15
 $246
 $166
 $80
Embedded derivatives 7
 2
 5
 9
 2
 7
 10
 1
 9
 8
 2
 6
Interest rate swaps(2)
 7
 7
 
 45
 45
 
TOTAL $617
 $496
 $121
 $199
 $162
 $37
 $241
 $217
 $24
 $254
 $168
 $86
(1)If the foreign exchange derivative instruments had been netted on the Condensed Consolidated Balance Sheets, the asset and liability positions each would have been reduced by $136$187 million as of May 31, 2016.2017. As of that date, the Company had received $105 million of cash collateral from various counterparties related to these foreign exchange derivative instruments. No amount of collateral was posted on the Company’s derivative liability balance as of May 31, 2016.
(2)As of May 31, 2016, no amount of cash collateral had been received or posted on the derivative asset orand liability balancebalances related to the Company's interest rate swaps.these foreign exchange derivative instruments.
Available-for-sale securities comprise investments in U.S. Treasury and Agency securities, time deposits, money market funds, corporate commercial paper and bonds. These securities are valued using market prices in both active markets (Level 1) and less active markets (Level 2). As of November 30, 2016,August 31, 2017, the Company held $1,369$1,852 million of available-for-sale securities with maturity dates within one year and $235$254 million with maturity dates over one year and less than five years within Short-term investments on the Unaudited Condensed Consolidated Balance Sheets. The gross realized gains and losses on sales of available-for-sale securities were immaterial for the three and six months ended November 30, 2016August 31, 2017 and 2015.2016. Unrealized gains and losses on available-for-sale securities included in Accumulated other comprehensive income were immaterial as of November 30, 2016August 31, 2017 and May 31, 2016.2017. The Company regularly reviews its available-for-sale securities for other-than-temporary impairment. For the sixthree months ended November 30,August 31, 2017 and 2016, and 2015, the Company did not consider any of its securities to be other-than-temporarily impaired and, accordingly, did not recognize any impairment losses.
Included in Interest expense (income), net for the three months ended November 30,August 31, 2017 and 2016 and 2015 was interest income related to the Company'sCompany’s available-for-sale securities of $5 million and $2 million, respectively, and $9$11 million and $4 million, for the six months ended November 30, 2016 and 2015, respectively.
The Company’s Level 3 assets comprise investments in certain non-marketable preferred stock. These Level 3 investments are an immaterial portion of the Company'sCompany’s portfolio. Changes in Level 3 investment assets were immaterial during the sixthree months ended November 30, 2016August 31, 2017 and the fiscal year ended May 31, 2016.2017.
No transfers among levels within the fair value hierarchy occurred during the sixthree months ended November 30, 2016August 31, 2017 and the fiscal year ended May 31, 2016.2017.
DerivativeFor additional information related to the Company’s derivative financial instruments, include foreign exchange forwards and options, embedded derivatives and interest rate swaps. Referrefer to Note 9 — Risk Management and Derivatives for additional detail.Derivatives. The carrying amounts of other current financial assets and other current financial liabilities approximate fair value.
As of November 30, 2016August 31, 2017 and May 31, 2016,2017, assets or liabilities that were required to be measured at fair value on a non-recurring basis were immaterial.
Financial Assets and Liabilities Not Recorded at Fair Value
For fair value information regarding Long-term debt, refer to Note 5 — Long-Term Debt.
The carrying amounts reflected on the Unaudited Condensed Consolidated Balance Sheets for Notes payable approximate fair value.

Note 5 — Long-Term Debt
Long-term debt, net of unamortized premiums, discounts and debt issuance costs, comprises the following
  
 Original
Principal
 
 Interest
Rate
 
 Interest
Payments
 Book Value Outstanding as of
Scheduled Maturity (Dollars and Yen in millions)    November 30, 2016 May 31, 2016
Corporate Bond Payables:(1)
          
May 1, 2023(2)
 $500
 2.25% Semi-Annually $497
 $497
November 1, 2026(3)
 $1,000
 2.38% Semi-Annually 993
 
May 1, 2043(2)
 $500
 3.63% Semi-Annually 495
 494
November 1, 2045(4)
 $1,000
 3.88% Semi-Annually 981
 981
November 1, 2046(3)
 $500
 3.38% Semi-Annually 490
 
Promissory Notes:          
April 1, 2017(5)
 $40
 6.20% Monthly 38
 38
Japanese Yen Notes:          
August 20, 2001 through November 20, 2020(6)
 ¥9,000
 2.60% Quarterly 16
 18
August 20, 2001 through November 20, 2020(6)
 ¥4,000
 2.00% Quarterly 7
 9
Total       3,517
 2,037
Less current maturities  
  
   44
 44
TOTAL LONG-TERM DEBT       $3,473
 $1,993
(1)These senior unsecured obligations rank equally with the Company's other unsecured and unsubordinated indebtedness.
(2)The bonds are redeemable at the Company's option prior to February 1, 2023 and November 1, 2042, respectively, at a price equal to the greater of (i) 100% of the aggregate principal amount of the notes to be redeemed or (ii) the sum of the present values of the remaining scheduled payments, plus in each case, accrued and unpaid interest. Subsequent to February 1, 2023 and November 1, 2042, respectively, 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.
(3)The bonds are redeemable at the Company's option prior to August 1, 2026 and May 1, 2046, respectively, at a price equal to the greater of (i) 100% of the aggregate principal amount of the notes to be redeemed or (ii) the sum of the present values of the remaining scheduled payments, plus in each case, accrued and unpaid interest. Subsequent to August 1, 2026 and May 1, 2046, respectively, 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.
(4)The bonds are redeemable at the Company's option prior to May 1, 2045, at a price equal to the greater of (i) 100% of the aggregate principal amount of the notes to be redeemed or (ii) the sum of the present values of the remaining scheduled payments, plus in each case, accrued and unpaid interest. Subsequent to May 1, 2045, 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.
(5)The Company assumed a total of $59 million in bonds payable as part of its agreement to purchase certain Corporate properties; this was treated as a non-cash financing transaction. The property serves as collateral for the debt. The purchase of these properties was accounted for as a business combination where the total consideration of $85 million was allocated to the land and buildings acquired; no other tangible or intangible assets or liabilities resulted from the purchase. During the year ended May 31, 2016, the notes due January 1, 2018 were legally defeased and an insignificant loss on defeasance was recognized. The remaining bonds mature in 2017 and the Company does not have the ability to re-negotiate the terms of the debt agreement.
(6)NIKE Logistics YK assumed a total of ¥13 billion in loans as part of its agreement to purchase a distribution center in Japan, which serves as collateral for the loans. These loans mature 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 twelve month periods ending November 30, 2017 through 2021 are $44 million, $6 million, $6 million, $6 million and $0 million, respectively, at face value.
The Company’s Long-term debtis recorded at adjusted cost, net of unamortized premiums, discounts and debt issuance costs. The fair value of Long-term debtis 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 $3,374$3,502 million at November 30, 2016August 31, 2017 and $2,125$3,401 million at May 31, 2016.2017.
For fair value information regarding Notes payable, refer to Note 5 — Short-Term Borrowings and Credit Lines.

Note 5 — Short-Term Borrowings and Credit Lines
As of August 31, 2017, the Company had $325 million of outstanding borrowings under its $2 billion commercial paper program at a weighted average interest rate of 1.15%. As of May 31, 2017, $325 million of commercial paper was outstanding at a weighted average interest rate of 0.86%. These borrowings are included within Notes payable.
The carrying amounts reflected on the Unaudited Condensed Consolidated Balance Sheets for Notes payable approximate fair value.
Note 6 — Income Taxes
The effective tax rate was 12.7%11.4% and 18.7%2.5% for the sixthree months ended November 30,August 31, 2017 and 2016, and 2015, respectively. The decrease in the Company'sCompany’s effective tax rate was primarily due toreflected the tax benefit from stock-based compensation in the current period as a discrete benefitresult of the adoption of ASU 2016-09. The prior year period included one-time benefits related to the resolution with the U.S. Internal Revenue Service (IRS) of a foreign tax credit matter with the U.S. Internal Revenue Service (IRS). The Company also benefited from a one-timeand an adjustment to athe deferred tax asset related to the nonqualified deferred compensation plan.
As of November 30, 2016,August 31, 2017, total gross unrecognized tax benefits, excluding related interest and penalties, were $397498 million, $174247 million of which would affect the Company’s effective tax rate if recognized in future periods. As of May 31, 2016,2017, total gross unrecognized tax benefits, excluding related interest and penalties, were $506461 million. The liability for payment of interest and penalties increased $11$9 million during the sixthree months ended November 30, 2016.August 31, 2017. As of November 30, 2016August 31, 2017 and May 31, 2016,2017, accrued interest and penalties related to uncertain tax positions were $220$180 million and $209$171 million, respectively (excluding federal benefit).

The Company incurs tax liabilities primarilyis subject to taxation in the United States China and the Netherlands, as well as various state and other foreign jurisdictions. The Company has closed all U.S. federal income tax matters through fiscal 2014, with the exception of certain transfer pricing adjustments. The Company is currently under audit by the IRS for fiscal years 2013 through2015 and 2016. As previously disclosed, the Company received statutory notices of deficiency for fiscal 2011 and fiscal 2012 proposing a total increase in tax of $254 million, subject to interest, related to a foreign tax credit matter. The Company contested these deficiencies by filing petitions with the U.S. Tax Court. During the three months ended August 31, 2016, the Company reached a resolution with the IRS on this matter. Decisions were subsequently filed in U.S. District Tax Court stating there is no deficiency in income tax due from the Company. The Company has now resolved all U.S. federal income tax matters through fiscal 2012.
The Company’s major foreign jurisdictions, China and the Netherlands, have concluded substantially all income tax matters through calendar 20052006 and fiscal 2010, respectively. Although the timing of resolution of audits is not certain, the Company evaluates all domestic and foreign audit issues in the aggregate, along with the expiration of applicable statutes of limitations, and estimates that it is reasonably possible the total gross unrecognized tax benefits could decrease by up to $17078 million within the next 12 months.
Note 7 — Common Stock and Stock-Based Compensation
The authorized number of shares of Class A Common Stock, no par value, and Class B Common Stock, no par value, are 400 million and 2,400 million, respectively. Each share of Class A Common Stock is convertible into one share of Class B Common Stock. Voting rights of Class B Common Stock are limited in certain circumstances with respect to the election of directors. There are no differences in the dividend and liquidation preferences or participation rights of the holders of Class A and Class B Common Stock.
The NIKE, Inc. Stock Incentive Plan (the “Stock Incentive Plan”) provides for the issuance of up to 718 million previously unissued shares of Class B Common Stock in connection with stock options and other 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 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. Substantially all stock option grants outstanding under the Stock Incentive Plan are granted in the first quarter of each fiscal year, vest ratably over four years and expire ten years from the date of grant.
In addition to the Stock Incentive Plan, the Company gives employees the right to purchase shares at a discount to the market price under employee stock purchase plans (ESPPs). EmployeesSubject to the annual statutory limit, employees are eligible to participate through payroll deductions of up to 10% of their compensation. At the end of each six month offering period, shares are purchased by the participants at 85% of the lower of the fair market value at the beginning or the end of the offering period.
The Company accounts for stock-based compensation by estimating the fair value of options granted under the Stock Incentive Plan and employees’ purchase rights under the ESPPs using the Black-Scholes option pricing model. The Company recognizes this fair value as Cost of sales or Operating overhead expense, as applicable, over the vesting period using the straight-line method.
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 August 31,
(In millions) 2016 2015 2016 2015 2017 2016
Stock options(1)
 $36
 $45
 $75
 $84
 $33
 $39
ESPPs 11
 8
 20
 15
 8
 9
Restricted stock 7
 9
 16
 17
 9
 9
TOTAL STOCK-BASED COMPENSATION EXPENSE $54
 $62
 $111
 $116
 $50
 $57
(1)Expense for stock options includes the expense associated with stock appreciation rights. Accelerated stock option expense is recorded for employees eligible for accelerated stock option vesting upon retirement. Accelerated stock option expense was $3 million and $8$5 million for the three months ended November 30,August 31, 2017 and 2016, and 2015, respectively, and $8 million and $14 million for the six months ended November 30, 2016 and 2015, respectively.
As of November 30, 2016,August 31, 2017, the Company had $271$311 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 2.42.7 years.

The weighted average fair value per share of the options granted during the sixthree months ended November 30,August 31, 2017 and 2016, and 2015, computed as of the grant date using the Black-Scholes pricing model, was $9.38$9.82 and $12.67,$9.36, respectively. The weighted average assumptions used to estimate these fair values were as follows:
 Six Months Ended November 30, Three Months Ended August 31,
 2016 2015 2017 2016
Dividend yield 1.1% 1.0% 1.2% 1.1%
Expected volatility 17.4% 23.6% 16.4% 17.3%
Weighted average expected life (in years) 6.0
 5.8
 6.0
 6.0
Risk-free interest rate 1.3% 1.7% 2.0% 1.3%
The Company estimates the expected volatility based on the implied volatility in market traded options on the Company’s common stock with a term greater than one year, along with other factors. The weighted average expected life of options is based on an analysis of historical and expected future exercise patterns. 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 expected term of the options.

Note 8 — 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 options, including shares under employee stock purchase plans (ESPPs),ESPPs, to purchase an additional 31.446.0 million and 21.231.7 million shares of common stock outstanding for the three months ended November 30,August 31, 2017 and 2016, and 2015, respectively, and 31.4 million and 21.1 million shares of common stock outstanding for the six months ended November 30, 2016 and 2015, respectively, because the options were anti-dilutive.
 Three Months Ended November 30, Six Months Ended November 30, Three Months Ended August 31,
(In millions, except per share data) 2016 2015 2016 2015 2017 2016
Determination of shares:            
Weighted average common shares outstanding 1,659.1
 1,706.5
 1,665.6
 1,707.8
 1,639.1
 1,672.0
Assumed conversion of dilutive stock options and awards 34.1
 44.9
 35.7
 45.6
 37.8
 36.9
DILUTED WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 1,693.2
 1,751.4
 1,701.3
 1,753.4
 1,676.9
 1,708.9
            
Earnings per common share:            
Basic $0.51
 $0.46
 $1.26
 $1.15
 $0.58
 $0.75
Diluted $0.50
 $0.45
 $1.23
 $1.12
 $0.57
 $0.73
Note 9 — Risk Management and Derivatives
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. The Company does not hold or issue derivatives for trading or speculative purposes.
The Company may elect to designate certain derivatives as hedging instruments under U.S. GAAP. The Company formally documents all relationships between designated hedging instruments and hedged items as well as its risk management objectives and strategies for undertaking hedge transactions. This process includes linking all derivatives designated as hedges to either recognized assets, or liabilities, or forecasted transactions.transactions and assessing, both at inception and on an ongoing basis, the effectiveness of the hedging relationships.
The majority of derivatives outstanding as of November 30, 2016August 31, 2017 are designated as foreign currency cash flow hedges, primarily for Euro/U.S. Dollar, Japanese Yen/U.S. Dollar and British Pound/Euro currency pairs. All derivatives are recognized on the Unaudited Condensed Consolidated Balance Sheets at fair value and classified based on the instrument’s maturity date.

The following table presents the fair values of derivative instruments included within the Unaudited Condensed Consolidated Balance Sheets as of November 30, 2016August 31, 2017 and May 31, 2016: 2017. Refer to Note 4 — Fair Value Measurements for a description of how the financial instruments in the table below are valued.
 Derivative Assets Derivative Liabilities Derivative Assets Derivative Liabilities
(In millions) 
Balance Sheet
Location
 November 30,
2016
 May 31,
2016
 
Balance Sheet 
Location
 November 30,
2016
 May 31,
2016
 
Balance Sheet
Location
 August 31,
2017
 May 31,
2017
 
Balance Sheet 
Location
 August 31,
2017
 May 31,
2017
Derivatives formally designated as hedging instruments:                
Foreign exchange forwards and options Prepaid expenses and other current assets $490
 $447
 Accrued liabilities $26
 $38
 Prepaid expenses and other current assets $92
 $113
 Accrued liabilities $291
 $59
Interest rate swaps Prepaid expenses and other current assets 
 7
 Accrued liabilities 
 45
Foreign exchange forwards and options Deferred income taxes and other assets 165
 90
 Deferred income taxes and other liabilities 3
 12
 Deferred income taxes and other assets 8
 13
 Deferred income taxes and other liabilities 173
 73
Total derivatives formally designated as hedging instruments   655
 544
   29
 95
   100
 126
   464
 132
Derivatives not designated as hedging instruments:                
Foreign exchange forwards and options Prepaid expenses and other current assets 167
 40
 Accrued liabilities 60
 76
 Prepaid expenses and other current assets 83
 103
 Accrued liabilities 234
 107
Embedded derivatives Prepaid expenses and other current assets 4
 2
 Accrued liabilities 2
 2
 Prepaid expenses and other current assets 1
 1
 Accrued liabilities 3
 2
Foreign exchange forwards and options Deferred income taxes and other assets 22
 26
 Deferred income taxes and other liabilities 3
 19
 Deferred income taxes and other assets 
 2
 Deferred income taxes and other liabilities 10
 7
Embedded derivatives Deferred income taxes and other assets 6
 5
 Deferred income taxes and other liabilities 7
 7
 Deferred income taxes and other assets 9
 9
 Deferred income taxes and other liabilities 5
 6
Total derivatives not designated as hedging instruments   199
 73
   72
 104
   93
 115
   252
 122
TOTAL DERIVATIVES   $854
 $617
   $101
 $199
   $193
 $241
   $716
 $254
The following tables present the amounts affecting the Unaudited Condensed Consolidated Statements of Income for the three and six months ended November 30, 2016August 31, 2017 and 2015:2016:

(In millions)
Amount of Gain (Loss) Recognized in Other Comprehensive Income on Derivatives(1)

Amount of Gain (Loss) Reclassified From Accumulated Other Comprehensive Income into Income(1)
Amount of Gain (Loss) Recognized in Other Comprehensive Income on Derivatives(1)

Amount of Gain (Loss) Reclassified from Accumulated Other Comprehensive Income into Income(1)
Three Months Ended November 30, Location of Gain (Loss) Reclassified From Accumulated Other Comprehensive Income into Income Three Months Ended November 30,Three Months Ended August 31, Location of Gain (Loss) Reclassified from Accumulated Other Comprehensive Income into Income Three Months Ended August 31,
2016 2015
2016 20152017 2016
2017 2016
Derivatives designated as cash flow hedges:                  
Foreign exchange forwards and options$(13) $(39)
Revenues
$39
 $(29)$55
 $53

Revenues
$2
 $33
Foreign exchange forwards and options302
 309

Cost of sales
69
 125
(277) (52)
Cost of sales
45
 104
Foreign exchange forwards and options2
 

Total selling and administrative expense

 
1
 

Total selling and administrative expense

 
Foreign exchange forwards and options160
 187

Other (income) expense, net
31
 39
(129) (16)
Other expense (income), net
2
 43
Interest rate swaps(2)37
 (50) Interest expense (income), net 
 

 (91) Interest expense (income), net (2) 
Total designated cash flow hedges$488
 $407



$139
 $135
$(350) $(106)


$47
 $180
(1)For the three months ended November 30,August 31, 2017 and 2016, and 2015, the amounts recorded in Other expense (income) expense,, net as a result of hedge ineffectiveness and the discontinuance of cash flow hedges because the forecasted transactions were no longer probable of occurring were immaterial.


(In millions)
Amount of Gain (Loss) Recognized in Other Comprehensive Income on Derivatives(1)
 
Amount of Gain (Loss) Reclassified From Accumulated Other Comprehensive Income into Income(1)
Six Months Ended November 30, Location of Gain (Loss) Reclassified From Accumulated Other Comprehensive Income into Income Six Months Ended November 30,
2016 2015  2016 2015
Derivatives designated as cash flow hedges:         
Foreign exchange forwards and options$40
 $(10) Revenues $72
 $(75)
Foreign exchange forwards and options250
 205
 Cost of sales 173
 298
Foreign exchange forwards and options2
 
 Total selling and administrative expense 
 
Foreign exchange forwards and options144
 122
 Other (income) expense, net 74
 100
Interest rate swaps(54) (50) Interest expense (income), net 
 
Total designated cash flow hedges$382
 $267
   $319
 $323
(1)(2)For the six months ended November 30, 2016
Gains and 2015, the amounts recorded in Other (income) expense, netlosses associated with terminated interest rate swaps, which were previously designated as a result of hedge ineffectiveness and the discontinuance of cash flow hedges becauseand recorded in Accumulated other comprehensive income, will be released through Interest expense (income), net over the forecasted transactions were no longer probableterm of occurring were immaterial.the issued debt.


 Amount of Gain (Loss) Recognized in Income on Derivatives 
Location of Gain (Loss) 
Recognized in Income on Derivatives
 Amount of Gain (Loss) Recognized in Income on Derivatives
Location of Gain (Loss) 
Recognized in Income on Derivatives
 Three Months Ended November 30, Six Months Ended November 30,  Three Months Ended August 31, 
(In millions) 2016 2015 2016 2015  2017 2016 
Derivatives designated as fair value hedges:         
Interest rate swaps(1)
 $
 $1
 $
 $2
 Interest expense (income), net
Derivatives not designated as hedging instruments:              
Foreign exchange forwards and options 202
 63
 167
 34
 Other (income) expense, net $(194) $(35) Other expense (income), net
Embedded derivatives 2
 
 (1) 
 Other (income) expense, net (1) 3
 Other expense (income), net
(1)All interest rate swaps designated as fair value hedges meet the shortcut method requirements under U.S. GAAP. Accordingly, changes in the fair values of the interest rate swaps are considered to exactly offset changes in the fair value of the underlying long-term debt. Refer to “Fair Value Hedges” in this note for additional detail.
Cash Flow Hedges
Refer to Note 3 — Accrued Liabilities for derivative instrumentsAll changes in fair value of derivatives designated as cash flow hedges, excluding any ineffective portion, are recorded in Accrued liabilities, Note 4 — Fair Value Measurements for a description of how the above financial instruments are valued and Note 10 — Accumulated Other Comprehensive Income for additional information on changes in Accumulated other comprehensive income until Net income is affected by the variability of cash flows of the hedged transaction. Effective hedge results are classified within the Unaudited Condensed Consolidated Statements of Income in the same manner as the underlying exposure. The ineffective portion of the unrealized gains and losses on these contracts, if any, is recorded immediately in earnings. Derivative instruments designated as cash flow hedges must be discontinued when it is no longer probable the forecasted hedged transaction will occur in the initially identified time period. The gains and losses associated with discontinued derivative instruments that were in Accumulated other comprehensive income will be recognized immediately in Other expense (income), net if it is probable the forecasted hedged transaction will not occur by the end of the initially identified time period or within an additional two-month period thereafter. In all situations in which hedge accounting is discontinued and the derivative remains outstanding, the Company will account for the three and six months ended November 30, 2016 and 2015.derivative as an undesignated instrument as discussed below.
Cash Flow Hedges
The purpose of the Company'sCompany’s foreign exchange risk management program is to lessen both the positive and negative effects of currency fluctuations on the Company'sCompany’s consolidated results of operations, financial position and cash flows. Foreign currency exposures that the Company may elect to hedge in this manner include product cost exposures, non-functional currency denominated external and intercompany revenues, selling and administrative expenses, investments in U.S. Dollar-denominated available-for-sale debt securities and certain other intercompany transactions.
Product cost exposures are primarily generated through non-functional currency denominated product purchases and the foreign currency adjustment program described below. NIKE entities primarily purchase product in two ways: (1) Certain NIKE entities purchase product from the NIKE Trading Company (NTC), a wholly-owned sourcing hub that buys NIKE branded product from third-party factories, predominantly in U.S. Dollars. The NTC, whose functional currency is the U.S. Dollar, then sells the product to NIKE entities in their respective functional currencies. When the NTC sells to a NIKE entity with a different functional currency, the result is a foreign currency exposure for the NTC. (2) Other NIKE entities purchase product directly from third-party factories in U.S. Dollars. These purchases generate a foreign currency exposure for those NIKE entities with a functional currency other than the U.S. Dollar.
The Company operates a foreign currency adjustment program with certain factories. The program is designed to more effectively manage foreign currency risk by assuming certain of the factories’ foreign currency exposures, some of which are natural offsets to the Company'sCompany’s existing foreign currency exposures. Under this program, the Company’s payments to these factories are adjusted for rate fluctuations in the basket of currencies (“factory currency exposure index”) in which the labor, materials and overhead costs incurred by the factories in the production of NIKE branded products (“factory input costs”) are denominated. For the portion of the indices denominated in the local or functional currency of the factory, the Company may elect to enter into derivative contractsplace formally designated as cash flow hedges. For all currencies within the indices, excluding the U.S. Dollar and the local or functional currency of the factory, an embedded derivative contract is created upon the factory’s acceptance of NIKE’s purchase order. Embedded derivative contracts are separated from the related purchase order, as further described within the Embedded Derivatives section below.
The Company’s policy permits the utilization of derivatives to reduce its foreign currency exposures where internal netting or other strategies cannot be effectively employed. Typically, the Company may enter into hedge contracts starting up to 12 to 24 months in advance of the forecasted transaction and may place incremental hedges up to 100% of the exposure by the time the forecasted transaction occurs. The total notional amount of outstanding foreign currency derivatives designated as cash flow hedges was $10.2$12 billion as of November 30, 2016.

During the three months ended November 30, 2016, the Company terminated all forward-starting interest rate swap agreements with a total notional amount of $1.5 billion in connection with the October 21, 2016 debt issuance (refer to Note 5 — Long-Term Debt). Upon termination of these forward-starting swaps, the Company made cash payments to the related counterparties of $92 million, which was recorded in Accumulated other comprehensive income and will be released through Interest expense (income), net as interest expense is incurred over the term of the issued debt.
All changes in fair value of derivatives designated as cash flow hedges, excluding any ineffective portion, are recorded in Accumulated other comprehensive income until Net income is affected by the variability of cash flows of the hedged transaction. In most cases, amounts recorded in Accumulated other comprehensive income will be released to Net income in periods following the maturity of the related derivative, rather than at maturity. Effective hedge results are classified within the Unaudited Condensed Consolidated Statements of Income in the same manner as the underlying exposure. The results of hedges of non-functional currency denominated revenues and product cost exposures, excluding embedded derivatives, are recorded in Revenues or Cost of sales when theunderlying hedged transaction affects consolidated Net income. Results of hedges of selling and administrative expense are recorded together with those costs when the related expense is recorded. Amounts recorded in Accumulated other comprehensive income related to forward-starting interest rate swaps will be released through Interest expense (income), net as interest expense is incurred over the term of the issued debt. Results of hedges of anticipated purchases of U.S. Dollar-denominated available-for-sale securities are recorded in Other (income) expense, net when the securities are sold. Results of hedges of certain anticipated intercompany transactions are recorded in Other (income) expense, net when the transaction occurs. The Company classifies the cash flows at settlement from these designated cash flow hedge derivatives in the same category as the cash flows from the related hedged items, primarily within the Cash provided by operations component of the Unaudited Condensed Consolidated Statements of Cash Flows.
Premiums paid or received on options are initially recorded as deferred charges or deferred credits, respectively. The Company assesses the effectiveness of options based on the total cash flows method and records total changes in the options’ fair value to Accumulated other comprehensive income to the degree they are effective.
The Company formally assesses, both at a hedge’s inception and on an ongoing basis, whether the derivatives that are used in the hedging transaction have been highly effective in offsetting changes in the cash flows of hedged items and whether those derivatives may be expected to remain highly effective in future periods. Effectiveness for cash flow hedges is assessed based on changes in forward rates. Ineffectiveness was immaterial for the three and six months ended November 30, 2016 and 2015.
The Company discontinues hedge accounting prospectively when: (1) it determines that the derivative is no longer highly effective in offsetting changes in the cash flows of a hedged item (including hedged items such as firm commitments or forecasted transactions); (2) the derivative expires or is sold, terminated or exercised; (3) it is no longer probable that the forecasted transaction will occur; or (4) management determines that designating the derivative as a hedging instrument is no longer appropriate.
When the Company discontinues hedge accounting because it is no longer probable that the forecasted transaction will occur in the originally expected period, but is expected to occur within an additional two-month period of time thereafter, the gain or loss on the derivative remains in Accumulated other comprehensive income and is reclassified to Net income when the forecasted transaction affects consolidated Net income. However, if it is probable that a forecasted transaction will not occur by the end of the originally specified time period or within an additional two-month period of time thereafter, the gains and losses that were in Accumulated other comprehensive income will be recognized immediately in Other (income) expense, net. In all situations in which hedge accounting is discontinued and the derivative remains outstanding, the Company will carry the derivative at its fair value on the Unaudited Condensed Consolidated Balance Sheets, recognizing future changes in the fair value in Other (income) expense, net. For the three and six months ended November 30, 2016 and 2015, the amounts recorded in Other (income) expense, net as a result of the discontinuance of cash flow hedging because the forecasted transactions were no longer probable of occurring were immaterial.August 31, 2017.
As of November 30, 2016, $454August 31, 2017, $151 million of deferred net gainslosses (net of tax) on both outstanding and matured derivatives in Accumulated other comprehensive income wereare 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 that are currently outstanding mature. As of November 30, 2016,August 31, 2017, the maximum term over which the Company was hedging exposures to the variability of cash flows for its forecasted transactions was 2427 months.
Fair Value Hedges
The Company has, in the past, been exposed to the risk of changes in the fair value of certain fixed-rate debt attributable to changes in interest rates. Derivatives used by the Company to hedge this risk are receive-fixed, pay-variable interest rate swaps. All interest rate swaps designated as fair value hedges of the related long-term debt meet the shortcut method requirements under U.S. GAAP. Accordingly, changes in the fair values of the interest rate swaps are considered to exactly offset changes in the fair value of the underlying long-term debt. The cash flows associated with the Company’s fair value hedges are periodic interest payments while the swaps are outstanding, which are reflected within the Cash provided by operations component of the Unaudited Condensed Consolidated Statements of Cash Flows. The Company recorded no ineffectiveness from its interest rate swaps designated as fair value hedges for the three and six months ended November 30, 2016August 31, 2017 or 2015. On October 15, 2015, the Company repaid the long-term debt which had previously been hedged with these interest rate swaps. Accordingly, as of November 30, 2016, the2016. The Company had no interest rate swaps designated as fair value hedges.hedges as of August 31, 2017.
Net Investment Hedges
The Company has, in the past, hedged and may, in the future, hedge the risk of variability in foreign-currency-denominated net investments in wholly-owned international operations. All changes in fair value of the derivatives designated as net investment hedges, except ineffective portions, are reported in Accumulated other comprehensive income along with the foreign currency translation adjustments on those investments. The Company classifies the cash flows at settlement of its net investment hedges within the Cash provided (used) by investing activities componentineffective portion of the Unaudited Condensed Consolidated Statements of Cash Flows.unrealized gains and losses on these contracts, if any, are recorded immediately in earnings. The Company assesseshas, in the past, hedged and may, in the future, hedge effectiveness based on changesthe risk of variability in forward rates.foreign-currency-denominated net investments in wholly-owned international operations. The Company recorded no ineffectiveness from its net investment hedges for the three and six months ended November 30, 2016August 31, 2017 or 2015.2016. The Company had no outstanding net investment hedges as of November 30, 2016.August 31, 2017.

Undesignated Derivative Instruments
The Company may elect to enter into foreign exchange forwards to mitigate the change in fair value of specific assets and liabilities on the Unaudited Condensed Consolidated Balance Sheets and/or embedded derivative contracts. These forwards are not designated as hedging instruments under U.S. GAAP. Accordingly, 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 expense (income) expense,, net, together with the re-measurement gain or loss from the hedged balance sheet position and/or embedded derivative contract. The Company classifies the cash flows at settlement from undesignated instruments in the same category as the cash flows from the related hedged items, generally within the Cash provided by operations component of the Unaudited Condensed Consolidated Statements of Cash Flows. The total notional amount of outstanding undesignated derivative instruments was $7.2$10 billion as of November 30, 2016.August 31, 2017.
Embedded Derivatives
As part of the foreign currency adjustment program described above, an embedded derivative contract is created upon the factory’s acceptance of NIKE’s purchase order for currencies within the factory currency exposure indices that are neither the U.S. Dollar nor the local or functional currency of the factory. In addition, embedded derivative contracts are created when the Company enters into certain other contractual agreements which have payments that are indexed to currencies that are not the functional currency of either substantial party to the contracts. Embedded derivative contracts are treated as foreign currency forward contracts that are bifurcated from the related purchase ordercontract 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 expense (income) expense,, net from the date a purchase order is accepted by a factory, through the date the purchase price is no longer subject to foreign currency fluctuations.fluctuations cease to exist.
In addition, the Company has entered into certain other contractual agreements which have payments that are indexed to currencies that are not the functional currencyAs of either substantial party to the contracts. These payment terms expose NIKE to variability in foreign exchange rates and create embedded derivative contracts that must be bifurcated from the related contract and recorded at fair value as derivative assets or liabilities on the Unaudited Condensed Consolidated Balance Sheets with their corresponding changes in fair value recognized in Other (income) expense, net until each payment is settled.
At November 30, 2016,August 31, 2017, the total notional amount of embedded derivatives outstanding was approximately $248 million.$265 million.
Credit Risk
The Company is exposed to credit-related losses in the event of nonperformancenon-performance by counterparties to hedging instruments. The counterparties to all derivative transactions are major financial institutions with investment grade credit ratings. However, this does not eliminate the Company’s exposure to credit risk with these institutions. This credit risk is limited to the unrealized gains in such contracts should any of these counterparties fail to perform as contracted. To manage this risk, the Company has established strict counterparty credit guidelines that are continually monitored.
The Company’s derivative contracts contain credit risk-related contingent features designed to protect against significant deterioration in counterparties’ creditworthiness and their ultimate ability to settle outstanding derivative contracts in the normal course of business. 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.$50 million. Additionally, a certain level of decline in credit rating of either the Company or the counterparty could also trigger collateral requirements. As of November 30, 2016,August 31, 2017, the Company was in compliance with all credit risk-related contingent features and had derivative instruments with credit risk-related contingent features in a net liability position were insignificant.of $545 million. Accordingly, the Company was not required to post any$273 million of cash collateral to various counterparties to its derivative contracts as a result of these contingent features. Further, asAs of November 30, 2016,August 31, 2017, the Company had received $369 million ofno cash collateral from variousits counterparties to its derivative contracts (refer to Note 4 — Fair Value Measurements). The Company considers the impact of the risk of counterparty default to be immaterial.immaterial.
Note 10 — Accumulated Other Comprehensive Income
The changes in Accumulated other comprehensive income, net of tax, for the three and six months ended November 30,August 31, 2017 were as follows:
(In millions) 
Foreign Currency Translation Adjustment(1)
 Cash Flow Hedges 
Net Investment Hedges(1)
 Other Total
Balance at May 31, 2017 $(191) $(52) $115
 $(85) $(213)
Other comprehensive gains (losses) before reclassifications(2)
 22
 (347) 
 (18) (343)
Reclassifications to net income of previously deferred (gains) losses(3)
 
 (48) 
 18
 (30)
Other comprehensive income (loss) 22
 (395) 
 
 (373)
Balance at August 31, 2017 $(169) $(447) $115
 $(85) $(586)
(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 $(19) million, $3 million, $0 million, $0 million and $(16) million, respectively.
(3)Net of tax (benefit) expense of $0 million, $(1) million, $0 million, $0 million and $(1) million, respectively.

The changes in Accumulated other comprehensive income, net of tax, for the three months ended August 31, 2016 were as follows:
(In millions) 
Foreign Currency Translation Adjustment(1)
 Cash Flow Hedges 
Net Investment Hedges(1)
 Other Total 
Foreign Currency Translation Adjustment(1)
 Cash Flow Hedges 
Net Investment Hedges(1)
 Other Total
Balance at August 31, 2016 $(204) $223
 $115
 $(49) $85
Balance at May 31, 2016 $(207) $463
 $115
 $(53) $318
Other comprehensive gains (losses) before reclassifications(2)
 (14) 464
 
 5
 455
 3
 (60) 
 13
 (44)
Reclassifications to net income of previously deferred (gains) losses(3)
 
 (141) 
 
 (141) 
 (180) 
 (9) (189)
Other comprehensive income (loss) (14) 323
 
 5
 314
 3
 (240) 
 4
 (233)
Balance at November 30, 2016 $(218) $546
 $115
 $(44) $399
Balance at August 31, 2016 $(204) $223
 $115
 $(49) $85
(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, $(24) million, $0 million, $0 million and $(24) million, respectively.
(3)Net of tax (benefit) expense of $0 million, $(2) million, $0 million, $0 million and $(2) million, respectively.

(In millions) 
Foreign Currency Translation Adjustment(1)
 Cash Flow Hedges 
Net Investment Hedges(1)
 Other Total
Balance at May 31, 2016 $(207) $463
 $115
 $(53) $318
Other comprehensive gains (losses) before reclassifications(2)
 (11) 404
 
 18
 411
Reclassifications to net income of previously deferred (gains) losses(3)
 
 (321) 
 (9) (330)
Other comprehensive income (loss) (11) 83
 
 9
 81
Balance at November 30, 2016 $(218) $546
 $115
 $(44) $399
(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, $22$46 million, $0 million, $1 million and $23 million, respectively.
(3)Net of tax (benefit) expense of $0 million, $(2) million, $0 million, $(1) million and $(3) million, respectively.
The changes in Accumulated other comprehensive income, net of tax, for the three and six months ended November 30, 2015 were as follows:
(In millions) 
Foreign Currency Translation Adjustment(1)
 Cash Flow Hedges 
Net Investment Hedges(1)
 Other Total
Balance at August 31, 2015 $(112) $891
 $115
 $(61) $833
Other comprehensive gains (losses) before reclassifications(2)
 (29) 425
 
 11
 407
Reclassifications to net income of previously deferred (gains) losses(3)
 
 (135) 
 2
 (133)
Other comprehensive income (loss) (29) 290
 
 13
 274
Balance at November 30, 2015 $(141) $1,181
 $115
 $(48) $1,107
(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, $18 million, $0 million, $(2) million and $16$47 million, respectively.
(3)Net of tax (benefit) expense of $0 million, $0 million, $0 million, $0$(1) million and $0$(1) million, respectively.
(In millions) 
Foreign Currency Translation Adjustment(1)
 Cash Flow Hedges 
Net Investment Hedges(1)
 Other Total
Balance at May 31, 2015 $(31) $1,220
 $115
 $(58) $1,246
Other comprehensive gains (losses) before reclassifications(2)
 (110) 283
 
 11
 184
Reclassifications to net income of previously deferred (gains) losses(3)
 
 (322) 
 (1) (323)
Other comprehensive income (loss) (110) (39) 
 10
 (139)
Balance at November 30, 2015 $(141) $1,181
 $115
 $(48) $1,107
(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, $16 million, $0 million, $(2) million and $14 million, respectively.
(3)
Net of tax (benefit) expense of $0 million, $1 million, $0 million,$0 millionand $1 million, respectively.

The following table summarizes the reclassifications from Accumulated other comprehensive income to the Unaudited Condensed Consolidated Statements of Income:
 Amount of Gain (Loss) Reclassified from Accumulated Other Comprehensive Income into Income Location of Gain (Loss) Reclassified from Accumulated Other Comprehensive Income into Income Amount of Gain (Loss) Reclassified from Accumulated Other Comprehensive Income into IncomeLocation of Gain (Loss) Reclassified from Accumulated Other Comprehensive Income into Income
 Three Months Ended November 30, Six Months Ended November 30,  Three Months Ended August 31, 
(In millions) 2016 2015 2016 2015  2017 2016 
Gains (losses) on cash flow hedges:              
Foreign exchange forwards and options $39
 $(29) $72
 $(75) Revenues
Foreign exchange forwards and options 69
 125
 173
 298
 Cost of sales $2
 $33
 Revenues
Foreign exchange forwards and options 
 
 
 
 Total selling and administrative expense 45
 104
 Cost of sales
Foreign exchange forwards and options 31
 39
 74
 100
 Other (income) expense, net 2
 43
 Other expense (income), net
Interest rate swaps 
 
 
 
 Interest expense (income), net (2) 
 Interest expense (income), net
Total before tax 139
 135
 319
 323
  47
 180
 
Tax (expense) benefit 2
 
 2
 (1)  1
 
 
Gain (loss) net of tax 141
 135
 321
 322
  48
 180
 
Gains (losses) on other 
 (2) 8
 1
 Other (income) expense, net (18) 8
 Other expense (income), net
Total before tax 
 (2) 8
 1
  (18) 8
 
Tax (expense) benefit 
 
 1
 
  
 1
 
Gain (loss) net of tax 
 (2) 9
 1
  (18) 9
 
Total net gain (loss) reclassified for the period $141
 $133
 $330
 $323
  $30
 $189
 
Note 11 — Operating Segments
The Company’s operating segments are evidence of the structure of the Company'sCompany’s internal organization. The NIKE Brand segments are defined by geographic regions for operations participating in NIKE Brand sales activity.
Each NIKE Brand geographic segment operates predominantly in one industry: the design, development, marketing and selling of athletic footwear, apparel and equipment. TheIn June 2017, NIKE, Inc. announced a new company alignment designed to allow NIKE to better serve the consumer personally, at scale. As a result of this organizational realignment, the Company’s reportable operating segments for the NIKE Brand are: North America, WesternAmerica; Europe, CentralMiddle East & Eastern Europe,Africa; Greater China, JapanChina; and Emerging Markets,Asia Pacific & Latin America, and include results for the NIKE, Jordan and Hurley brands. Certain prior year amounts have been reclassified to conform to fiscal 2018 presentation. This includes reclassified operating segment data to reflect the changes in the Company’s operating structure, which became effective June 1, 2017. These changes had no impact on previously reported consolidated statements of income, balance sheets, statements of cash flows or statements of shareholders’ equity.
The Company’s NIKE Brand Direct to Consumer (DTC) operations are managed within each geographic operating segment. Converse is also a reportable segment for the Company, and operates in one industry: the design, marketing, licensing and selling of casual sneakers, apparel and accessories.
Global Brand Divisions is included within the NIKE Brand for presentation purposes to align with the way management views the Company. Global Brand Divisions primarily represents NIKE Brand licensing businesses that are not part of a geographic operating segment, and demand creation, operating overhead and product creation and design expenses that are centrally managed for the NIKE Brand.
Corporate consists largely of unallocated general and administrative expenses, including expenses associated with centrally managed departments; depreciation and amortization related to the Company’s headquarters; unallocated insurance, benefit and compensation programs, including stock-based compensation; and certain foreign currency gains and losses, including certain hedge gains and losses.

The primary financial measure used by the Company to evaluate performance of individual operating segments is earnings before interest and taxes (commonly referred to as “EBIT”), which represents Net income before Interest expense (income), net and Income tax expense in the Unaudited Condensed Consolidated Statements of Income.
As part of the Company'sCompany’s centrally managed foreign exchange risk management program, standard foreign currency rates are assigned twice per year to each NIKE Brand entity in the Company'sCompany’s geographic operating segments and to Converse. These rates are set approximately nine and twelve months in advance of the future selling seasons to which they relate (specifically, for each currency, one standard rate applies to the fall and holiday selling seasons and one standard rate applies to the spring and summer selling seasons) based on average market spot rates in the calendar month preceding the date they are established. Inventories and Cost of sales for geographic operating segments and Converse reflect the use of these standard rates to record non-functional currency product purchases in the entity’s functional currency. Differences between assigned standard foreign currency rates and actual market rates are included in Corporate, together with foreign currency hedge gains and losses generated from the Company'sCompany’s centrally managed foreign exchange risk management program and other conversion gains and losses.
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,
(In millions) 2017 2016
REVENUES    
North America $3,924
 $4,031
Europe, Middle East & Africa 2,344
 2,262
Greater China 1,108
 1,020
Asia Pacific & Latin America 1,189
 1,131
Global Brand Divisions 20
 15
Total NIKE Brand 8,585
 8,459
Converse 483
 574
Corporate 2
 28
TOTAL NIKE, INC. REVENUES $9,070
 $9,061
EARNINGS BEFORE INTEREST AND TAXES    
North America $1,002
 $1,004
Europe, Middle East & Africa 451
 485
Greater China 394
 371
Asia Pacific & Latin America 260
 209
Global Brand Divisions (675) (771)
Total NIKE Brand 1,432
 1,298
Converse 89
 153
Corporate (433) (163)
Total NIKE, Inc. Earnings Before Interest and Taxes 1,088
 1,288
Interest expense (income), net 16
 7
TOTAL NIKE, INC. INCOME BEFORE INCOME TAXES $1,072
 $1,281

  Three Months Ended November 30, Six Months Ended November 30,
(In millions) 2016 2015 2016 2015
REVENUES        
North America $3,650
 $3,547
 $7,681
 $7,346
Western Europe 1,385
 1,299
 3,148
 2,940
Central & Eastern Europe 328
 326
 768
 727
Greater China 1,055
 938
 2,075
 1,824
Japan 238
 205
 483
 384
Emerging Markets 1,047
 984
 1,992
 1,950
Global Brand Divisions 21
 18
 36
 44
Total NIKE Brand 7,724
 7,317
 16,183
 15,215
Converse 416
 398
 990
 953
Corporate 40
 (29) 68
 (68)
TOTAL NIKE, INC. REVENUES $8,180
 $7,686
 $17,241
 $16,100
EARNINGS BEFORE INTEREST AND TAXES        
North America $912
 $882
 $1,916
 $1,924
Western Europe 236
 307
 628
 792
Central & Eastern Europe 58
 76
 139
 174
Greater China 375
 327
 746
 657
Japan 48
 47
 98
 83
Emerging Markets 237
 241
 408
 499
Global Brand Divisions (619) (625) (1,390) (1,249)
Total NIKE Brand 1,247
 1,255
 2,545
 2,880
Converse 78
 85
 231
 232
Corporate (196) (365) (359) (688)
Total NIKE, Inc. Earnings Before Interest and Taxes 1,129
 975
 2,417
 2,424
Interest expense (income), net 15
 5
 22
 9
TOTAL NIKE, INC. INCOME BEFORE INCOME TAXES $1,114
 $970
 $2,395
 $2,415

 As of November 30, As of May 31, As of August 31, As of May 31,
(In millions) 2016 2016 2017 2017
ACCOUNTS RECEIVABLE, NET        
North America $1,691
 $1,689
 $1,759
 $1,798
Western Europe 385
 378
Central & Eastern Europe 205
 194
Europe, Middle East & Africa 972
 690
Greater China 167
 74
 112
 102
Japan 114
 129
Emerging Markets 620
 409
Asia Pacific & Latin America 696
 693
Global Brand Divisions 81
 76
 88
 86
Total NIKE Brand 3,263
 2,949
 3,627
 3,369
Converse 209
 270
 229
 297
Corporate 6
 22
 15
 11
TOTAL ACCOUNTS RECEIVABLE, NET $3,478
 $3,241
 $3,871
 $3,677
INVENTORIES        
North America $2,290
 $2,363
 $2,222
 $2,218
Western Europe 994
 929
Central & Eastern Europe 207
 210
Europe, Middle East & Africa 1,359
 1,327
Greater China 442
 375
 537
 463
Japan 166
 146
Emerging Markets 569
 478
Asia Pacific & Latin America 769
 694
Global Brand Divisions 45
 35
 72
 68
Total NIKE Brand 4,713
 4,536
 4,959
 4,770
Converse 313
 306
 274
 286
Corporate 7
 (4) (22) (1)
TOTAL INVENTORIES $5,033
 $4,838
 $5,211
 $5,055
PROPERTY, PLANT AND EQUIPMENT, NET        
North America $755
 $742
 $827
 $819
Western Europe 573
 589
Central & Eastern Europe 44
 50
Europe, Middle East & Africa 731
 709
Greater China 212
 234
 229
 225
Japan 212
 223
Emerging Markets 117
 109
Asia Pacific & Latin America 343
 340
Global Brand Divisions 471
 511
 543
 533
Total NIKE Brand 2,384
 2,458
 2,673
 2,626
Converse 120
 125
 122
 125
Corporate 1,062
 937
 1,291
 1,238
TOTAL PROPERTY, PLANT AND EQUIPMENT, NET $3,566
 $3,520
 $4,086
 $3,989
Note 12 — Commitments and Contingencies
At November 30, 2016,As of August 31, 2017, the Company had letters of credit outstanding totaling $137143 million. These letters of credit were issued primarily for the purchase of inventory and guarantees of the Company’s performance under certain self-insurance and other programs.
There have been no other significant subsequent developments relating to the commitments and contingencies reported on the Company'sCompany’s latest Annual Report on Form 10-K.

ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Overview
NIKE designs, develops, markets and sells athletic footwear, apparel, equipment, accessories and services worldwide. We are the largest seller of athletic footwear and apparel in the world. We sell our products to retail accounts, through NIKE-owned in-line and factory retail stores and NIKE-owned internet websites and mobile applications (which we refer to collectively as our “NIKE Direct” operations), and through a mix of independent distributors, licensees and sales representatives in virtually all countries around the world. Our goal is to deliver value to our shareholders by delivering sustainable, profitable, growth across a global portfolio of branded footwear, apparel, equipment and accessories businesses. Our strategy is to achieve long-term revenue growth by creating innovative, “must have” products, building deep personal consumer connections with our brands and delivering compelling consumer experiences at retail, online and in store.
In the current marketplace environment, we believe there has been a meaningful shift in the way consumers shop for product and make purchasing decisions. Consumers are demanding a constant flow of fresh and innovative product, have an expectation for superior service and a demand for real-time delivery, all fueled by the shift towards digital. Specifically, in North America we anticipate continued evolution within the retail landscape, driven by shifting consumer traffic patterns across digital and physical channels. The evolution of the North America marketplace has resulted in third-party retail store closures and a promotional environment. In many of our international markets, we continue to see momentum fueled by macroeconomic and consumer tailwinds, including strong growth in consumer spending, a rapidly emerging middle class, accelerating participation in sport, along with current marketplace growth driven through NIKE Brand consumer experiences leveraging digital.
In June 2017, we announced the Consumer Direct Offense, a new company alignment designed to allow NIKE to better serve the consumer personally, at scale. Leveraging the power of digital, NIKE believes it will drive growth—by accelerating innovation and product creation, moving even closer to the consumer through key cities, and deepening one-to-one connections. As a result of this organizational realignment, beginning in fiscal 2018, the Company’s reportable operating segments for the NIKE Brand are: North America; Europe, Middle East & Africa (EMEA); Greater China; and Asia Pacific & Latin America (APLA).
NIKE, Inc. Revenues for the secondfirst quarter of fiscal 2018 were flat compared to the first quarter of fiscal 2017 increased 6% to $8.2 billion. Onon both a reported and currency-neutral basis, Revenues increased 8%.basis. Net income for the secondfirst quarter of fiscal 20172018 was $842$950 million and diluted earnings per common share was $0.50, 7%$0.57, 24% and 11% higher, respectively,22% lower than the secondfirst quarter of fiscal 2016.2017, respectively.
Income before income taxes increased 15%declined 16% compared to the secondfirst quarter of fiscal 20162017 as revenue growth and a decrease inlower selling and administrative expense was partiallymore than offset by lower gross margin. Themargin contraction and a shift from other income, net to other expense, net. Revenues for the NIKE Brand, which represents over 90% of NIKE, Inc. Revenues, delivered 6% revenue growth.grew 1% for the first quarter. On a currency-neutral basis, NIKE Brand revenues grew 8%2%, driven by higher revenues across nearly all international geographies, all product enginesfootwear and apparel and our Sportswear Running, Jordan Brand and Men's Training categories.category. Revenues for Converse increased 5%decreased 16% on both a reported and constant currencycurrency-neutral basis primarily due to revenue growthlower revenues in direct distribution markets, most notably the United States.States and Europe.
Our effective tax rate was 24.4%11.4%, compared to 2.5% for the second quarter of fiscal 2017 compared to 19.1% forsame period last year, reflecting the second quarter of fiscal 2016. The change was primarily due to an increasetax benefit from stock-based compensation in the mixcurrent period as a result of earnings from the United States, which are generally subjectadoption of Accounting Standards Update (ASU) 2016-09. The prior period included one-time benefits related to the resolution with the U.S. Internal Revenue Service (IRS) of a higherforeign tax rate.credit matter and an adjustment to the deferred tax asset related to our nonqualified deferred compensation plan.
Diluted earnings per common share benefited fromreflects a 3%2% decline in the diluted weighted average common shares outstanding, compared to the first quarter of fiscal 2017, driven by our share repurchase program.
Use of Non-GAAP Financial Measures
Throughout this Quarterly Report on Form 10-Q, we discuss non-GAAP financial measures, including references to wholesale equivalent revenues and currency-neutral revenues, which should be considered in addition to, and not in lieu of, the financial measures calculated and presented in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). References to wholesale equivalent revenues are intended to provide context as to the total size of our NIKE Brand market footprint if we had no NIKE Direct operations. NIKE Brand wholesale equivalent revenues consist of (1) sales to external wholesale customers and (2) internal sales from our wholesale operations to our NIKE Direct operations, which are charged at prices that are comparable to prices charged to external wholesale customers. Additionally, currency-neutral revenues are calculated using actual exchange rates in use during the comparative prior year period to enhance the visibility of the underlying business trends excluding the impact of translation arising from foreign currency exchange rate fluctuations.
Management uses these non-GAAP financial measures when evaluating the Company’s performance, including when making financial and operating decisions. Additionally, management believes these non-GAAP financial measures provide investors with additional financial information that should be considered when assessing our underlying business performance and trends. However, references to wholesale equivalent revenues and currency-neutral revenues should not be considered in isolation or as a substitute for other financial measures calculated and presented in accordance with U.S. GAAP and may not be comparable to similarly titled non-GAAP measures used by other companies.

Results of Operations
 Three Months Ended November 30, Six Months Ended November 30, Three Months Ended August 31,
(Dollars in millions, except per share data) 2016 2015 % Change 2016 2015 % Change 2017 2016 % Change
Revenues $8,180
 $7,686
 6% $17,241
 $16,100
 7% $9,070
 $9,061
 0%
Cost of sales 4,564
 4,185
 9% 9,502
 8,604
 10% 5,108
 4,938
 3%
Gross profit 3,616
 3,501
 3% 7,739
 7,496
 3% 3,962
 4,123
 -4%
Gross margin % 44.2% 45.6%   44.9% 46.6%  
Gross margin 43.7% 45.5%  
Demand creation expense 762
 769
 -1% 1,803
 1,601
 13% 855
 1,041
 -18%
Operating overhead expense 1,743
 1,791
 -3% 3,599
 3,536
 2% 2,001
 1,856
 8%
Total selling and administrative expense 2,505
 2,560
 -2% 5,402
 5,137
 5% 2,856
 2,897
 -1%
% of Revenues 30.6% 33.3%   31.3% 31.9%  
% of revenues 31.5% 32.0%  
Interest expense (income), net 15
 5
 
 22
 9
 
 16
 7
 
Other (income) expense, net (18) (34) 
 (80) (65) 
Other expense (income), net 18
 (62) 
Income before income taxes 1,114
 970
 15% 2,395
 2,415
 -1% 1,072
 1,281
 -16%
Income tax expense 272
 185
 47% 304
 451
 -33% 122
 32
 281%
Effective tax rate 24.4% 19.1%   12.7% 18.7%   11.4% 2.5%  
NET INCOME $842
 $785
 7% $2,091
 $1,964
 6% $950
 $1,249
 -24%
Diluted earnings per common share $0.50
 $0.45
 11% $1.23
 $1.12
 10% $0.57
 $0.73
 -22%

Consolidated Operating Results
Revenues
Three Months Ended November 30, Six Months Ended November 30,Three Months Ended August 31,
(Dollars in millions)2016
2015 % Change 
% Change Excluding Currency
Changes(1)
 2016 2015 % Change 
% Change Excluding Currency
Changes(1)
2017
2016 % Change 
% Change Excluding Currency
Changes(1)
NIKE, Inc. Revenues:                      
NIKE Brand Revenues by:                      
Footwear$4,822
 $4,592
 5% 7% $10,294
 $9,715
 6 % 8 %$5,493
 $5,472
 0 % 1 %
Apparel2,535
 2,362
 7% 9% 5,084
 4,703
 8 % 11 %2,652
 2,549
 4 % 5 %
Equipment346
 345
 0% 2% 769
 753
 2 % 4 %420
 423
 -1 % 0 %
Global Brand Divisions(2)
21
 18
 17% 17% 36
 44
 -18 % -21 %20
 15
 33 % 16 %
Total NIKE Brand Revenues7,724
 7,317
 6% 8% 16,183
 15,215
 6 % 9 %
TOTAL NIKE BRAND8,585
 8,459
 1 % 2 %
Converse416
 398
 5% 5% 990
 953
 4 % 5 %483
 574
 -16 % -16 %
Corporate(3)
40
 (29) 
 
 68
 (68) 
 
2
 28
 
 
TOTAL NIKE, INC. REVENUES$8,180
 $7,686
 6% 8% $17,241
 $16,100
 7 % 9 %$9,070
 $9,061
 0 % 0 %
Supplemental NIKE Brand Revenues Details:                      
NIKE Brand Revenues by:                      
Sales to Wholesale Customers$5,559
 $5,558
 0% 2% $11,698
 $11,498
 2 % 4 %$6,030
 $6,139
 -2 % -1 %
Sales Direct to Consumer2,144
 1,741
 23% 25% 4,449
 3,673
 21 % 23 %
Sales through NIKE Direct2,535
 2,305
 10 % 11 %
Global Brand Divisions(2)
21
 18
 17% 17% 36
 44
 -18 % -21 %20
 15
 33 % 16 %
TOTAL NIKE BRAND REVENUES$7,724
 $7,317
 6% 8% $16,183
 $15,215
 6 % 9 %$8,585
 $8,459
 1 % 2 %
(1)The percentage change has been calculated using actual exchange rates in use during the comparative prior year period to enhance the visibility of the underlying business trends by excluding the impact of translation arising from foreign currency exchange rate fluctuations, which is considered a non-GAAP financial measure.
(2)Global Brand Divisions revenues are primarily attributable to NIKE Brand licensing businesses that are not part of a geographic operating segment.
(3)Corporate revenues primarily consist 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 our central foreign exchange risk management program.
On a currency-neutral basis, NIKE, Inc. Revenues grew 8% and 9%were flat for the secondfirst quarter and first six months of fiscal 2017, respectively, driven by higher revenues for2018 compared to the NIKE Brand and Converse. Nearly every NIKE Brand geography delivered higher revenues for the secondfirst quarter and first six months of fiscal 2017 as our category offense continued to deliver innovative products, deep brand connections and compelling retail experiences to consumers online and at NIKE-owned and retail partner stores, driving strong demand forgrowth in the NIKE Brand products. For both the second quarter and first six months of fiscal 2017, revenuewas offset by lower revenues at Converse. Revenue growth was broad-based as North America, Western Europe,across all international NIKE Brand geographies with Greater China, EMEA and Emerging MarketsAPLA each contributed approximately 2 percentage points of the increase in NIKE, Inc. Revenues. Central & Eastern Europe contributedcontributing approximately 1 percentage point of growth to NIKE, Inc. Revenues. Revenues for North America and Converse declined for the year-to-date period.first quarter of fiscal 2018, each reducing NIKE, Inc. Revenues by approximately 1 percentage point.

For the secondfirst quarter and first six months of fiscal 2017, constant currency2018, currency-neutral NIKE Brand footwear revenues increased as strong growth in our Sportswear Running and Jordan Brand categories more thancategory was partially offset by declines in other categories, most notably Football (Soccer) and NIKE Basketball. For the second quarter and first six months of fiscal 2017, unitJordan Brand. Unit sales of footwear increased approximately 4% and 5%3%, respectively, with higherwhile lower average selling price (ASP) per pair contributing approximately 3 percentage points ofreduced footwear revenue growth for both periods.by approximately 2 percentage points. The increasedecrease in ASP per pair for both periodsthe first quarter was primarilydue to lower full-price ASP, driven by product mix and higher full-price ASP and the favorable impact of growth in our Direct to Consumer (DTC) business, partially offset by higher off-price mix.discounts.
The currency-neutralconstant-currency growth in NIKE Brand apparel revenues for the secondfirst quarter and first six months of fiscal 2017 was driven by increases2018 reflected growth in mostnearly all key categories, led by Sportswear, Men's Training, Running and Football (Soccer). For the second quarter and first six months of fiscal 2017, unitSportswear. Unit sales of apparel increased approximately 5%3% and 7%, respectively. Higherhigher ASP per unit contributed approximately 42 percentage points of apparel revenue growth, for both periods, primarily due to higher full-price ASP.favorable NIKE Direct and off-price ASPs.
While wholesale revenues remain the largest component of overall NIKE Brand revenues, we continue to expand our NIKE Brand DTC operations in each of our geographies. Our NIKE Brand DTC operations include NIKE-owned in-line and factory stores, as well as NIKE-owned digital commerce. For the secondfirst quarter and first six months of fiscal 2017, DTC2018, NIKE Direct revenues represented approximately 28% and 27%30% of our total NIKE Brand revenues respectively, compared to 24%27% for both the secondfirst quarter and first six months of fiscal 2016.2017. On a currency-neutral basis, DTCNIKE Direct revenues grew 25%increased 11% for the secondfirst quarter of fiscal 2017,2018, driven by strong digital commerce sales growth comparable store sales growth of 11% and the addition of new stores. For the first six months of fiscal 2017, constant currency DTC revenues grew 23% due to significant digital commerce sales growth,19%, the addition of new stores and 5% comparable store sales growth of 10%.growth. Comparable store sales include revenues from NIKE-owned in-line and factory stores for which all three of the following requirements have been met: (1) the store has been open at least one year, (2) square footage has not changed by more than 15% within the past year and (3) the store has not been permanently repositioned within the past year. DigitalOn a reported basis, digital commerce sales through NIKE-owned websites and mobile applications, which are not included in comparable store sales, grew 49%were $567 million for both the secondfirst quarter and first six months of fiscal 2017. Digital commerce sales2018 compared to $481 million for the first quarter of fiscal 2017 and represented approximately 25%22% and 23%21% of our total NIKE Brand DTCDirect revenues for the secondfirst quarter and first six months of fiscal 2018 and fiscal 2017, respectively, compared to 21% and 19% for the second quarter and first six months of fiscal 2016, respectively.

Futures Orders
Futures orders for NIKE Brand footwear and apparel scheduled for delivery from December 2016 through April 2017 totaled $12.3 billion, flat compared to the prior year period. NIKE Brand reported futures orders include (1) orders from external wholesale customers and (2) internal orders from our DTC in-line stores and digital commerce operations, which are reflected at prices that are comparable to prices charged to external wholesale customers. The U.S. Dollar futures orders amount is calculated based upon our internal forecast of the currency exchange rates under which our revenues will be translated during this period. Excluding the impact of currency changes, futures orders increased 2%, with unit orders increasing 1% and ASP per unit contributing approximately 1 percentage point of growth.
By geography, futures orders growth was as follows: 
  
Reported Futures
Orders
 
Futures Orders 
Excluding Currency Changes(1)
North America -4% -4 %
Western Europe -4% 2 %
Central & Eastern Europe 4% 6 %
Greater China 6% 12 %
Japan 10% 5 %
Emerging Markets 9% 10 %
TOTAL NIKE BRAND FUTURES ORDERS 0% 2 %
(1)Futures orders growth has been calculated using prior year exchange rates for the comparative period to enhance the visibility of the underlying business trends, excluding the impact of foreign currency exchange rate fluctuations.
The reported futures orders growth is not necessarily indicative of our expectation of revenue growth during this period. This is due to year-over-year changes in shipment timing, changes in the mix of orders between futures and at-once orders, and because the fulfillment of certain orders may fall outside of the schedule noted above. In addition, exchange rate fluctuations as well as differing levels of order cancellations, discounts and returns can cause differences in the comparisons between futures orders and actual revenues. Moreover, a portion of our revenue is not derived from futures orders, including sales of at-once and closeout NIKE Brand footwear and apparel, all sales of NIKE Brand equipment, the difference between retail sales and internal orders from our DTC in-line stores and digital commerce operations, and sales from Converse, NIKE Golf and Hurley.

Gross Margin
 Three Months Ended November 30, Six Months Ended November 30, Three Months Ended August 31,
(Dollars in millions) 2016 2015 % Change 2016 2015 % Change 2017 2016 % Change
Gross profit $3,616
 $3,501
 3% $7,739
 $7,496
 3% $3,962
 $4,123
 -4%
Gross margin % 44.2% 45.6% (140) bps
 44.9% 46.6% (170) bps
Gross margin 43.7% 45.5% (180) bps
For the secondfirst quarter and first six months of fiscal 2017,2018, our consolidated gross margin was 140 and 170180 basis points lower than the respective prior year periods,first quarter of fiscal 2017, primarily driven by the following factors:
HigherLower NIKE Brand full-price ASP, on a wholesale equivalent basis, (decreasing gross margin approximately 80 basis points) reflecting higher discounts and product mix;
Lower NIKE Brand product costs (increasing gross margin approximately 40 basis points) driven by a shift in product mix to lower cost products;
Unfavorable changes in net of discountsforeign currency exchange rates, including hedges (decreasing gross margin approximately 130 basis points);
Lower NIKE Direct and off-price margins (decreasing gross margin 40 and 50 basis points, respectively), reflecting growth in off-price sales; and
Lower other costs (increasing gross margin approximately 80 basis points for the second quarter and 70 basis points forpoints) primarily reflecting one-time costs incurred in the first six months) alignedquarter of fiscal 2017 associated with our strategy to deliver innovative, premium products to the consumer;
Higher NIKE Brand product costs (decreasing gross margin approximately 80 basis points forexit from the second quarter and 60 basis points for the first six months) as labor input cost inflation more than offset lower material input costs;
Unfavorable changes in foreign currency exchange rates, net of hedges (decreasing gross margin approximately 70 basis points for the second quarter and 50 basis points for the first six months);
Unfavorable impact of increased off-price sales (decreasing gross margin approximately 30 basis points for both the second quarter and first six months);
Lower gross margin from Converse for the second quarter (decreasing gross margin approximately 20 basis points) primarily due to the negative impact of lower licensing revenues and increased off-price sales; for the first six months, Converse gross margin was lower (decreasing gross margin approximately 20 basis points) primarily due to higher product costs, increased off-price sales and lower licensing revenues; and
Higher other costs (having an insignificant impact on gross margin for the second quarter and decreasing gross margin approximately 40 basis points for the first six months) primarily driven by investments in sourcing and manufacturing resourcesGolf equipment business as well as lower warehousing and logisticsother costs.
Total Selling and Administrative Expense
 Three Months Ended November 30, Six Months Ended November 30, Three Months Ended August 31,
(Dollars in millions) 2016 2015 % Change 2016 2015 % Change 2017 2016 % Change
Demand creation expense(1)
 $762
 $769
 -1% $1,803
 $1,601
 13% $855
 $1,041
 -18%
Operating overhead expense 1,743
 1,791
 -3% 3,599
 3,536
 2% 2,001
 1,856
 8%
Total selling and administrative expense $2,505
 $2,560
 -2% $5,402
 $5,137
 5% $2,856
 $2,897
 -1%
% of Revenues 30.6% 33.3% (270) bps
 31.3% 31.9% (60) bps
% of revenues 31.5% 32.0% (50) bps
(1)Demand creation expense consists of advertising and promotion costs, including costs of endorsement contracts, television, digital and print advertising, brand events and retail brand presentation.
Demand creation expense decreased 1%declined 18% for the secondfirst quarter of fiscal 20172018 primarily due to lower advertising and retail brand presentation costs, partially offset by an increasereflecting higher prior year investments in marketing support for brand events. For the first six months of fiscal 2017, Demand creation expense increased 13% driven by higher marketing, digital brand marketing and advertising costs, primarily to support key sporting events, including the Rio Olympics and European Football Championship in the first quarter. Championship.
Demand creationOperating overhead expense also increased 8% for the first six monthsquarter of fiscal 2017 due to higher sports marketing costs. 2018 primarily driven by one-time wage-related costs associated with the Consumer Direct Offense organizational realignment, as well as continued investments in our growing NIKE Direct business.
Changes in foreign currency exchange rates reducedhad an insignificant impact on Demand creation expense by approximately 1 percentage point for both the second quarter and first six months of fiscal 2017.
Operating overhead expense decreased 3% for the second quarter of fiscal 2017 as efficiencies in variable compensation and administrative costs more than offset continued investments in our growing DTC business and operational infrastructure. For the first six months of fiscal 2017, Operating overhead expense increased 2% due to investments in our DTC business and operational infrastructure, partially offset by efficiencies in administrative costs and variable compensation. Changes in foreign currency exchange rates reduced Operating overhead expense by approximately 1 percentage point for both the secondfirst quarter and first six months of fiscal 2017.2018.
Other Expense (Income) Expense,, Net
 Three Months Ended November 30, Six Months Ended November 30, Three Months Ended August 31,
(In millions) 2016 2015 2016 2015 2017 2016
Other (income) expense, net $(18) $(34) $(80) $(65)
Other expense (income), net $18
 $(62)

Other expense (income) expense,, net comprises foreign currency conversion gains and losses from the re-measurement of monetary assets and liabilities denominated in non-functional currencies and the impact of certain foreign currency derivative instruments, as well as unusual or non-operating transactions that are outside the normal course of business.
For the secondfirst quarter of fiscal 2017,2018, Other expense (income) expense,, net decreased from $34$62 million of other income, net in the prior year to $18 million of other income,expense, net in the current year, primarily due to a $7$78 million detrimental net change in foreign currency conversion gains and losses, as well as other non-operating items.including hedges.
For the first six months of fiscal 2017, Other (income) expense, net increased from $65 million of other income, net in the prior year, to $80 million of other income, net in the current year, primarily due to a $22 million net beneficial change in foreign currency conversion gains and losses.

We estimate the combination of the translation of foreign currency-denominated profits from our international businesses and the year-over-year change in foreign currency relatedcurrency-related gains and losses included in Other expense (income) expense,, net had an unfavorable impactsimpact of approximately $29 million and $26$88 million on our Income before income taxes for the secondfirst quarter and first six months of fiscal 2017, respectively.2018.
Income Taxes
  Three Months Ended November 30, Six Months Ended November 30,
  2016 2015 % Change 2016 2015 % Change
Effective tax rate 24.4% 19.1% 530 bps
 12.7% 18.7% (600) bps
  Three Months Ended August 31,
  2017 2016 % Change
Effective tax rate 11.4% 2.5% 890 bps
Our effective tax rate was 11.4% for the secondfirst quarter of fiscal 2017 was 24.4%,2018 compared to 19.1%2.5% for the second quarter of fiscal 2016. The change was primarily due to an increasesame period last year, reflecting the tax benefit from stock-based compensation in the mixcurrent period as a result of earnings from the United States, which are generally subject to a higher tax rate.
Our effective tax rate for the first six monthsadoption of fiscal 2017 was 12.7% compared to 18.7% for the first six months of fiscal 2016.ASU 2016-09. The decrease was primarily due to aprior year period included one-time benefitbenefits related to the resolution with the U.S. Internal Revenue Service (IRS)IRS of a foreign tax credit matter. We also benefited from a one-timematter and an adjustment to ourthe deferred tax asset related to our nonqualified deferred compensation plan.
We continue to expect ouranticipate the effective tax rate for the full fiscal year will be approximately 17.0%15 to 17%. The impact of stock-based compensation under the newly adopted ASU 2016-09 may result in increased volatility in our quarterly effective tax rate.

Operating Segments
Our operating segments are evidence of the structure of the Company'sCompany’s internal organization. The NIKE Brand segments are defined by geographic regions for operations participating in NIKE Brand sales activity.
Each NIKE Brand geographic segment operates predominantly in one industry: the design, development, marketing and selling of athletic footwear, apparel and equipment. The Company’s reportable operating segments for the NIKE Brand are: North America, WesternAmerica; Europe, CentralMiddle East & Eastern Europe,Africa; Greater China, JapanChina; and Emerging Markets,Asia Pacific & Latin America, and include results for the NIKE, Jordan and Hurley brands.
The Company’s NIKE Brand DTCDirect operations are managed within each geographic operating segment. Converse is also a reportable segment for the Company, and operates in one industry: the design, marketing, licensing and selling of casual sneakers, apparel and accessories.
Certain prior year amounts have been reclassified to conform to fiscal 2018 presentation. This includes reclassified geographic operating segment data to reflect the changes in the Company’s operating structure, which became effective June 1, 2017. These changes had no impact on previously reported consolidated results of operations or shareholders’ equity.
As part of our centrally managed foreign exchange risk management program, standard foreign currency rates are assigned twice per year to each NIKE Brand entity in our geographic operating segments and Converse. These rates are set approximately nine and twelve months in advance of the future selling seasons to which they relate (specifically, for each currency, one standard rate applies to the fall and holiday selling seasons and one standard rate applies to the spring and summer selling seasons) based on average market spot rates in the calendar month preceding the date they are established. Inventories and Cost of sales for geographic operating segments and Converse reflect the use of these standard rates to record non-functional currency product purchases into the entity’s functional currency. Differences between assigned standard foreign currency rates and actual market rates are included in Corporate, together with foreign currency hedge gains and losses generated from our centrally managed foreign exchange risk management program and other conversion gains and losses.

The breakdown of revenues is as follows:
  Three Months Ended November 30, Six Months Ended November 30,
(Dollars in millions) 2016 2015 % Change 
% Change Excluding Currency Changes(1)
 2016 2015 % Change 
% Change Excluding Currency Changes(1)
North America $3,650
 $3,547
 3% 3% $7,681
 $7,346
 5% 5%
Western Europe 1,385
 1,299
 7% 12% 3,148
 2,940
 7% 11%
Central & Eastern Europe 328
 326
 1% 1% 768
 727
 6% 10%
Greater China 1,055
 938
 12% 17% 2,075
 1,824
 14% 19%
Japan 238
 205
 16% -2% 483
 384
 26% 7%
Emerging Markets 1,047
 984
 6% 13% 1,992
 1,950
 2% 12%
Global Brand Divisions(2)
 21
 18
 17% 17% 36
 44
 -18% -21%
Total NIKE Brand 7,724
 7,317
 6% 8% 16,183
 15,215
 6% 9%
Converse 416
 398
 5% 5% 990
 953
 4% 5%
Corporate(3)
 40
 (29) 
 
 68
 (68) 
 
TOTAL NIKE, INC. REVENUES   $8,180
 $7,686
 6% 8% $17,241
 $16,100
 7% 9%
  Three Months Ended August 31,
(Dollars in millions) 2017 
2016(1)
 % Change 
% Change Excluding Currency Changes(2)
North America $3,924
 $4,031
 -3% -3%
Europe, Middle East & Africa 2,344
 2,262
 4% 5%
Greater China 1,108
 1,020
 9% 12%
Asia Pacific & Latin America 1,189
 1,131
 5% 6%
Global Brand Divisions(3)
 20
 15
 33% 16%
TOTAL NIKE BRAND 8,585
 8,459
 1% 2%
Converse 483
 574
 -16% -16%
Corporate(4)
 2
 28
 
 
TOTAL NIKE, INC. REVENUES   $9,070
 $9,061
 0% 0%
(1)Certain prior year amounts have been reclassified to conform to fiscal 2018 presentation. This includes reclassified operating segment data to reflect the changes in the Company’s operating structure, which became effective June 1, 2017. These changes had no impact on previously reported consolidated results of operations or shareholders’ equity.
(2)The percentage change has been calculated using actual exchange rates in use during the comparative prior year period to enhance the visibility of the underlying business trends by excluding the impact of translation arising from foreign currency exchange rate fluctuations, which is considered a non-GAAP financial measure.
(2)(3)Global Brand Divisions revenues are primarily attributable to NIKE Brand licensing businesses that are not part of a geographic operating segment.
(3)(4)Corporate revenues primarily consist 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 our central foreign exchange risk management program.
The primary financial measure used by the Company to evaluate performance of individual operating segments is earnings before interest and taxes (commonly referred to as “EBIT”), which represents Net income before Interest expense (income), net and Income tax expense in the Unaudited Condensed Consolidated Statements of Income, and is considered a non-GAAP financial measure.Income. As discussed in Note 11 — Operating Segments in the accompanying Notes to the Unaudited Condensed Consolidated Financial Statements, certain corporate costs are not included in EBIT of our operating segments.
The breakdown of earnings before interest and taxes is as follows:
 Three Months Ended November 30, Six Months Ended November 30, Three Months Ended August 31,
(Dollars in millions) 2016 2015 % Change 2016 2015 % Change 2017 
2016(1)
 % Change
North America $912
 $882
 3% $1,916
 $1,924
 0% $1,002
 $1,004
 0%
Western Europe 236
 307
 -23% 628
 792
 -21%
Central & Eastern Europe 58
 76
 -24% 139
 174
 -20%
Europe, Middle East & Africa 451
 485
 -7%
Greater China 375
 327
 15% 746
 657
 14% 394
 371
 6%
Japan 48
 47
 2% 98
 83
 18%
Emerging Markets 237
 241
 -2% 408
 499
 -18%
Asia Pacific & Latin America 260
 209
 24%
Global Brand Divisions (619) (625) 1% (1,390) (1,249) -11% (675) (771) 12%
Total NIKE Brand 1,247
 1,255
 -1% 2,545
 2,880
 -12%
TOTAL NIKE BRAND 1,432
 1,298
 10%
Converse 78
 85
 -8% 231
 232
 0% 89
 153
 -42%
Corporate (196) (365) 46% (359) (688) 48% (433) (163) -166%
TOTAL NIKE, INC. EARNINGS BEFORE INTEREST AND TAXES 1,129
 975
 16% 2,417
 2,424
 0% 1,088
 1,288
 -16%
Interest expense (income), net 15
 5
 
 22
 9
 
 16
 7
 
TOTAL NIKE, INC. INCOME BEFORE INCOME TAXES $1,114
 $970
 15% $2,395
 $2,415
 -1% $1,072
 $1,281
 -16%
(1)Certain prior year amounts have been reclassified to conform to fiscal 2018 presentation. This includes reclassified operating segment data to reflect the changes in the Company’s operating structure, which became effective June 1, 2017. These changes had no impact on previously reported consolidated results of operations or shareholders’ equity.

North America
 Three Months Ended November 30, Six Months Ended November 30, Three Months Ended August 31,
(Dollars in millions) 2016 2015 % Change % Change Excluding Currency Changes 2016 2015 % Change % Change Excluding Currency Changes 2017 2016 % Change % Change Excluding Currency Changes
Revenues by:                        
Footwear $2,219
 $2,162
 3% 3% $4,737
 $4,528
 5% 5% $2,434
 $2,518
 -3% -3%
Apparel 1,273
 1,221
 4% 4% 2,590
 2,468
 5% 5% 1,299
 1,317
 -1% -1%
Equipment 158
 164
 -4% -3% 354
 350
 1% 1% 191
 196
 -3% -3%
TOTAL REVENUES $3,650
 $3,547
 3% 3% $7,681
 $7,346
 5% 5% $3,924
 $4,031
 -3% -3%
Revenues by:                        
Sales to Wholesale Customers $2,637
 $2,678
 -2% -1% $5,461
 $5,427
 1% 1% $2,689
 $2,824
 -5% -5%
Sales Direct to Consumer 1,013
 869
 17% 17% 2,220
 1,919
 16% 16%
Sales through NIKE Direct 1,235
 1,207
 2% 2%
TOTAL REVENUES  $3,650
 $3,547
 3% 3% $7,681
 $7,346
 5% 5% $3,924
 $4,031
 -3% -3%
EARNINGS BEFORE INTEREST AND TAXES $912
 $882
 3%   $1,916
 $1,924
 0%   $1,002
 $1,004
 0%  
 
North America revenues for the secondfirst quarter and first six months of fiscal 2017 increased2018 decreased 3% and 5%, respectively, primarily driven byas growth in our Sportswear and Jordan Brand categories, partiallycategory was more than offset by declines primarily concentrated in NIKE Basketball.other categories, including the Jordan Brand and Running. For the secondfirst quarter of fiscal 2017, DTC2018, NIKE Direct revenues increased 17%,2% driven by comparable store sales growth of 10%, digital commerce sales growth and the addition of new stores.
Footwear revenues declined as growth in our Sportswear category was more than offset by declines in other categories, including the Jordan Brand and Running. Unit sales of footwear for the first quarter of fiscal 2018 were flat, while lower ASP per pair reduced footwear revenues by approximately 3 percentage points primarily due to lower full-price ASP, driven by product mix and higher discounts.
For the first six monthsquarter of fiscal 2017, DTC2018, apparel revenues decreased slightly as growth concentrated in our Sportswear category was more than offset by declines in other categories. Unit sales of apparel decreased approximately 6%, while higher ASP per unit contributed approximately 5 percentage points of apparel revenue growth primarily due to higher NIKE Direct and full-price ASPs.
EBIT was flat for the first quarter of fiscal 2018 as a decrease in selling and administrative expense was offset by lower revenues and gross margin contraction. Gross margin declined 40 basis points primarily driven by higher product costs, which were only partially offset by lower other costs, including warehousing. Selling and administrative expense declined as significantly lower demand creation expense more than offset higher operating overhead expense. Demand creation expense decreased primarily due to prior year investments in marketing and advertising expenses to support key sporting events, including the Rio Olympics and, to a lesser extent, lower retail brand presentation costs. Operating overhead increased as continued investments in our growing NIKE Direct business were only partially offset by administrative cost efficiencies.
Europe, Middle East & Africa
  Three Months Ended August 31,
(Dollars in millions) 2017 2016 % Change % Change Excluding Currency Changes
Revenues by:        
Footwear $1,471
 $1,457
 1% 2%
Apparel 743
 684
 9% 10%
Equipment 130
 121
 7% 8%
TOTAL REVENUES $2,344
 $2,262
 4% 5%
Revenues by:        
Sales to Wholesale Customers $1,722
 $1,733
 -1% 0%
Sales through NIKE Direct 622
 529
 18% 19%
TOTAL REVENUES $2,344
 $2,262
 4% 5%
EARNINGS BEFORE INTEREST AND TAXES $451
 $485
 -7%  
On a currency-neutral basis, Europe, Middle East & Africa revenues for the first quarter of fiscal 2018 grew 16%, fueled5% due to higher revenues in nearly all territories, most notably UK & Ireland, which grew 23%. On a category basis, revenues increased in every key category, led by Sportswear, Football (Soccer) and Men’s Training. NIKE Direct revenues increased 19% driven by strong digital commerce sales growth, comparable store sales growth of 7%10% and the addition of new stores.
FootwearFor the first quarter of fiscal 2018, currency-neutral footwear revenue growth was led by Football (Soccer) and Sportswear. Unit sales of footwear increased approximately 4%, while lower ASP per pair reduced footwear revenue growth by approximately 2 percentage points. Lower ASP per pair was due to lower full-price ASP, reflecting a shift in the mix of products.
Constant-currency apparel revenue growth for the secondfirst quarter and first six months of fiscal 20172018 was attributable to growth in our Sportswear and Jordan Brand categories, partially offset by declines in othernearly all categories, most notably NIKE Basketball. For the second quarter and first six months of fiscal 2017, unit sales of footwear increased approximately 2% and 4%, respectively, while higher ASP per pair contributed approximately 1 percentage point of footwear revenue growth for both periods. Higher ASP per pair for the second quarter and first six months of fiscal 2017 was primarily due to higher off-price ASPSportswear, Men’s Training, Running and the favorable impact of growth in our DTC business, partially offset by higher off-price mix.
The increase in apparel revenues for the second quarter and first six months of fiscal 2017 was fueled by growth in most key categories, led by Sportswear and Men's Training. Second quarter unitJordan Brand. Unit sales of apparel increased approximately 1%13%, while higherlower ASP per unit contributedreduced apparel revenue growth by approximately 3 percentage points of apparel revenue growth primarily due to higher full-price ASP. For the first six months of fiscal 2017, unit sales of apparel increased approximately 5%, whilepoints. The decrease in ASP per unit was flat as higherprimarily attributable to lower full-price ASP, was offset by lower off-price ASPlargely resulting from the clearance of inventories through off-price channels, including through our DTC business.higher discounts.

On a reported basis, EBIT increased 3%decreased 7% for the secondfirst quarter of fiscal 2017 as2018. Reported revenue growth was partiallyand selling and administrative expense leverage were more than offset by lower gross margin. Gross margin declined 30 basis points as higher full-price ASP and favorable off-price margin were more than offset by higher off-price mix as a result of clearing excess inventories through off-price channels, including through our DTC business, as well as higher product costs. Selling and administrative expense was flat as lower demand creation offset higher operating overhead. Demand creation expense decreased as higher sports marketing and DTC marketing costs were more than offset by lower advertising and other demand creation costs. Operating overhead increased as continued investments in our growing DTC operations more than offset efficiencies in administrative costs and variable compensation.
EBIT was flat for the first six months of fiscal 2017 as higher revenues were offset by gross margin contraction and higher selling and administrative expense as a percent of revenues. Gross margin declined 60270 basis points as lower product costs were more than offset by higher off-price mix as a result of clearing excess inventories through off-price channels, including through our DTC business. Selling and administrative expense grew faster than revenues primarily due to higher demand creation resulting from increased sports marketing and DTC marketing costs, as well as marketing support for the Rio Olympics in the first quarter. Operating overhead expense also increased due to continued investments in our growing DTC business.

Western Europe
  Three Months Ended November 30, Six Months Ended November 30,
(Dollars in millions) 2016 2015 % Change % Change Excluding Currency Changes 2016 2015 % Change % Change Excluding Currency Changes
Revenues by:                
Footwear $865
 $845
 2% 8% $2,012
 $1,973
 2% 5%
Apparel 454
 391
 16% 23% 985
 825
 19% 25%
Equipment 66
 63
 5% 12% 151
 142
 6% 11%
TOTAL REVENUES $1,385
 $1,299
 7% 12% $3,148
 $2,940
 7% 11%
Revenues by:                
Sales to Wholesale Customers $978
 $977
 0% 6% $2,282
 $2,257
 1% 5%
Sales Direct to Consumer 407
 322
 26% 33% 866
 683
 27% 32%
TOTAL REVENUES $1,385
 $1,299
 7% 12% $3,148
 $2,940
 7% 11%
EARNINGS BEFORE INTEREST AND TAXES $236
 $307
 -23%   $628
 $792
 -21%  
On a currency-neutral basis, Western Europe revenues for the second quarter and first six months of fiscal 2017 grew 12% and 11%, respectively, due to higher revenues in every territory. Revenue growth for the second quarter was led by Western Europe's largest territory, the UK & Ireland, which grew 10%, and by AGS (Austria, Germany and Switzerland), which grew 16%. For the first six months of fiscal 2017, growth was led by the UK & Ireland, France and AGS, which grew 9%, 14% and 10%, respectively. On a category basis, revenues for the second quarter and first six months of fiscal 2017 increased in nearly every key category led by Sportswear, Running and the Jordan Brand, with Football (Soccer) also contributing to year-to-date growth. DTC revenues increased 33% for the second quarter of fiscal 2017 driven by digital commerce sales growth, comparable store sales growth of 18% and the addition of new stores. For the first six months of fiscal 2017, DTC revenues increased 32% fueled by comparable store sales growth of 17%, digital commerce sales growth and the addition of new stores.
Currency-neutral footwear revenue growth for the second quarter and first six months of fiscal 2017 was led by Sportswear, the Jordan Brand and Running, partially offset by declines concentrated in Football (Soccer). For the second quarter and first six months of fiscal 2017, unit sales of footwear increased approximately 3% and 1%, respectively, while higher ASP per pair contributed approximately 5 and 4 percentage points of footwear revenue growth for the respective periods. Higher ASP per pair for both periods was primarily driven by the favorable impact of growth in our DTC business and higherlower full-price ASP partially offset by higher off-price mix.
The increase in constant currency apparel revenues for the second quarter and first six months of fiscal 2017 was due to growth in nearly every category, most notably Sportswear and Football (Soccer). Second quarter unit sales of apparel increased approximately 22% while higher ASP per unit contributed approximately 1 percentage point of apparel revenue growth, primarily driven by the favorable impact of growth in our DTC business. For the first six months of fiscal 2017, unit sales of apparel increased approximately 16% and higher ASP per unit contributed approximately 9 percentage points of apparel revenue growth. The increase in ASP per unit for the first six months of fiscal 2017 was primarily attributable to higher full-price ASP, and to a lesser extent, the favorable impact of growth in our DTC business.
On a reported basis, EBIT decreased 23% for the second quarter of fiscal 2017 as revenue growth and lower selling and administrative expense were more than offset by significantly lower gross margin. Gross margin declined 730 basis points primarily driven by the effects of unfavorable standard foreign currency exchange rates. Selling and administrative expense declined despiteincreased due to higher demand creation costs, primarily for sports marketing. Operatingoperating overhead decreased as efficiencies in administrative costs and variable compensation were only partially offset byexpense resulting from increased investments in our growing DTCNIKE Direct business.
Reported EBIT for the first six months of fiscal 2017 declined 21% as higher reported revenues and selling and administrative expense leverage were more than offset by significant gross margin contraction. Gross margin declined 670 basis points primarily driven by the effects of unfavorable standard foreign currency exchange rates. Selling and administrative expense decreased as a percent of revenues, despite an increase in demand Demand creation expense driven bydeclined primarily due to higher sports marketing costs, as well as higher advertising and marketing expenseinvestments in the prior year, largely in support of the Rio Olympics and European Football Championship, in the first quarter. Operating overhead also increased due to continued investments in our growing DTC business, partially offset by administrative cost and variable compensation efficiencies.

Central & Eastern Europe
  Three Months Ended November 30, Six Months Ended November 30,
(Dollars in millions) 2016 2015 % Change % Change Excluding Currency Changes 2016 2015 % Change % Change Excluding Currency Changes
Revenues by:                
Footwear $192
 $183
 5% 6% $462
 $421
 10% 13%
Apparel 120
 126
 -5% -4% 258
 259
 0% 4%
Equipment 16
 17
 -6% -6% 48
 47
 2% 6%
TOTAL REVENUES $328
 $326
 1% 1% $768
 $727
 6% 10%
Revenues by:                
Sales to Wholesale Customers $266
 $277
 -4% -3% $644
 $627
 3% 7%
Sales Direct to Consumer 62
 49
 27% 26% 124
 100
 24% 28%
TOTAL REVENUES $328
 $326
 1% 1% $768
 $727
 6% 10%
EARNINGS BEFORE INTEREST AND TAXES $58
 $76
 -24%   $139
 $174
 -20%  
On a currency-neutral basis, Central & Eastern Europe revenues increased 1% and 10% for the second quarter and first six months of fiscal 2017, respectively, with strong growth in nearly every territory, partially offset by lower revenues for our distributors business. Territory revenue growth was led by Central & Eastern Europe's two largest territories, Russia and Turkey, which grew 11% and 9%, respectively, for the second quarter of fiscal 2017, and 25% and 14%, respectively, for the first six months of fiscal 2017. For the second quarter and first six months of fiscal 2017, revenues for our distributors business decreased 15% and 10%, respectively. On a category basis, revenue growth for the second quarter and first six months of fiscal 2017 was fueled by growth in Sportswear, which more than offset declines in most other categories. For the second quarter and first six months of fiscal 2017, DTC revenues increased 26% and 28%, respectively, fueled by comparable store sales growth of 14% and 17%, respectively, and the addition of new stores.
Constant currency footwear revenue growth for the second quarter and first six months of fiscal 2017 was primarily attributable to growth in Sportswear, partially offset by declines concentrated in Football (Soccer). Unit sales of footwear for the second quarter and first six months of fiscal 2017 increased approximately 5% and 11%, respectively, while higher ASP per pair contributed approximately 1 and 2 percentage points, respectively, of footwear revenue growth. The increase in ASP per pair for the second quarter of fiscal 2017 was driven by lower off-price mix and higher off-price ASP. For the first six months of fiscal 2017, higher ASP per pair was driven by higher full-price and off-price ASP.
The constant currency decrease in apparel revenues for the second quarter of fiscal 2017 was due to declines in several key categories, most notably Running, partially offset by growth in Men's Training. For the first six months of fiscal 2017, revenue growth was driven by increases in our Sportswear and Men's Training categories, while most other categories declined. Unit sales of apparel for the second quarter of fiscal 2017 decreased approximately 6%, but increased 2% for the first six months, while increases in ASP per unit contributed approximately 2 percentage points of apparel revenue growth for both periods. Higher ASP per unit for the second quarter of fiscal 2017 was driven by lower off-price mix, the favorable impact of growth in our DTC business and higher full-price ASP. For the first six months of fiscal 2017, higher ASP per unit was primarily due to the favorable impact of growth in our DTC business and lower off-price mix, partially offset by lower full-price ASP.
Reported EBIT for the second quarter of fiscal 2017 decreased 24% as modest revenue growth and significantly lower selling and administrative expense were more than offset by gross margin contraction. Gross margin declined 620 basis points driven by significant unfavorable standard foreign currency exchange rates, partially offset by lower product costs and higher full-price ASP. For the second quarter of fiscal 2017, selling and administrative expense decreased due to lower operating overhead expense resulting from efficiencies in administrative costs and variable compensation, partially offset by ongoing investments in our growing DTC business. Demand creation expense also decreased as higher advertising expense was more than offset by lower retail brand presentation costs.
On a reported basis, EBIT for the first six months of fiscal 2017 decreased 20%, in part reflecting the negative impact of weakening foreign currency exchange rates. Reported revenue growth and lower selling and administrative expense were more than offset by a decrease in gross margin. Gross margin declined 770 basis points due to significant unfavorable standard foreign currency exchange rates, which were only partially offset by higher full-price ASP. Selling and administrative expense decreased as lower operating overhead costs were only partially offset by higher demand creation expense. Operating overhead expense decreased due to efficiencies in administrative costs and variable compensation, partially offset by continued investments in DTC. Demand creation expense increased primarily due to higher advertising and sports marketing costs partially offset by lower retail brand presentation costs.

in the first quarter of fiscal 2018.
Greater China
 Three Months Ended November 30, Six Months Ended November 30, Three Months Ended August 31,
(Dollars in millions) 2016 2015 % Change % Change Excluding Currency Changes 2016 2015 % Change % Change Excluding Currency Changes 2017 2016 % Change % Change Excluding Currency Changes
Revenues by:                        
Footwear $669
 $600
 12% 16% $1,379
 $1,199
 15% 21% $761
 $710
 7% 10%
Apparel 355
 306
 16% 21% 624
 552
 13% 18% 309
 269
 15% 18%
Equipment 31
 32
 -3% 3% 72
 73
 -1% 3% 38
 41
 -7% -3%
TOTAL REVENUES $1,055
 $938
 12% 17% $2,075
 $1,824
 14% 19% $1,108
 $1,020
 9% 12%
Revenues by:                        
Sales to Wholesale Customers $673
 $657
 2% 6% $1,368
 $1,291
 6% 11% $730
 $695
 5% 8%
Sales Direct to Consumer 382
 281
 36% 42% 707
 533
 33% 40%
Sales through NIKE Direct 378
 325
 16% 20%
TOTAL REVENUES  $1,055
 $938
 12% 17% $2,075
 $1,824
 14% 19% $1,108
 $1,020
 9% 12%
EARNINGS BEFORE INTEREST AND TAXES $375
 $327
 15%   $746
 $657
 14%   $394
 $371
 6%  
On a currency-neutral basis, Greater China revenues grew 17% and 19%increased 12% for the secondfirst quarter and first six months of fiscal 2017, respectively,2018, driven by strong demand for NIKE Brand products. Mosthigher revenues in most key categories, grew, led by Sportswear, Running Sportswear,and the Jordan Brand andBrand. NIKE Basketball, with Sportswear having a greater impact than Running for the second quarter. DTCDirect revenues increased 42% and 40% for the second quarter and first six months of fiscal 2017, respectively,20%, fueled by significantstrong digital commerce sales growth, the addition of new stores and increases in2% comparable store sales of 6% and 9%, respectively.growth.
The constant currency growthconstant-currency increase in footwear revenues for the secondfirst quarter and first six months of fiscal 20172018 was attributable to increases in nearly allseveral key categories, most notably Sportswear, Running Sportswear and the Jordan Brand. Unit sales of footwear for the second quarter and first six months of fiscal 2017 increased approximately 19% and 22%13%, respectively, while lower ASP per pair reduced footwear revenue growth by approximately 3 and 1 percentage points respectively. The decrease in ASP for both periods was attributable to higher off-price mixas a result of lower full-price and lower DTC ASP, which more than offset higher full-price ASP.NIKE Direct ASPs.
Constant currencyCurrency-neutral apparel revenue growth for the secondfirst quarter and first six months of fiscal 20172018 was due to higher revenues in mostall key categories, led by Sportswear, Running and the Jordan Brand and NIKE Basketball. Second quarter unitBrand. Unit sales of apparel increased approximately 21%13%, while higher ASP per unit increased apparel revenue growth by approximately 5 percentage points. The increase in ASP per unit was flat asattributable to higher full-price ASP was offset by higher off-price mix. For the first six months of fiscal 2017, unit sales of apparel increased approximately 18%, while ASP per unit was unchanged as higher full-price ASP was offset by higher off-price mix and lower ASP in our DTC business.ASP.
On a reported basis, EBIT for the second quarter of fiscal 2017 increased 15% despiteDespite the negative impact of changes in foreign currency exchange rates.translation, EBIT increased 6% for the first quarter of fiscal 2018. EBIT growth was driven by higher reported revenue growthrevenues and lower selling and administrative expense, leverage, partially offset by lowera decline in gross margin. Gross margin declined 190 basis points primarily driven by unfavorable standard foreign currency exchange rates, higher off-price mix and lower DTC margin. Selling and administrative expense increased as higher operating overhead, primarily to support our growing DTC business, more than offset lower demand creation. The decrease in demand creation expense was attributable to lower expenses for advertising, which more than offset higher marketing support for brand events.
Reported EBIT increased 14% for the first six months of fiscal 2017, driven by higher revenues and selling and administrative expense leverage, partially offset by lower gross margin. Gross margin contracted 200270 basis points as higher full-price ASP was more than offset by unfavorable standard foreign currency exchange rates and lower off-price margins, including through our NIKE Direct business. Selling and administrative expense was lower as a significant decrease in demand creation expense was only partially offset by higher operating overhead expense. The decrease in demand creation expense was attributable to higher prior year marketing and advertising costs to support key sporting events, including the Rio Olympics. Operating overhead increased due to continued investments in our growing NIKE Direct business.


Asia Pacific & Latin America
  Three Months Ended August 31,
(Dollars in millions) 2017 2016 % Change % Change Excluding Currency Changes
Revenues by:        
Footwear $827
 $787
 5% 6%
Apparel 301
 279
 8% 9%
Equipment 61
 65
 -6% -5%
TOTAL REVENUES $1,189
 $1,131
 5% 6%
Revenues by:        
Sales to Wholesale Customers $889
 $887
 0% 2%
Sales through NIKE Direct 300
 244
 23% 24%
TOTAL REVENUES   $1,189
 $1,131
 5% 6%
EARNINGS BEFORE INTEREST AND TAXES $260
 $209
 24%  
On a currency-neutral basis, Asia Pacific & Latin America revenues for the first quarter of fiscal 2018 increased 6%, driven by higher revenues in most territories. Territory revenue growth was led by SOCO (which comprises Argentina, Uruguay and Chile), Mexico and Korea, which increased 18%, 18% and 12%, respectively. On a category basis, revenues increased in all key categories, led by Sportswear, Running and Men’s Training. NIKE Direct revenues increased 24%, fueled by comparable store sales growth of 19%, the addition of new stores and digital commerce sales growth.
The increase in constant-currency footwear revenues for the first quarter of fiscal 2018 was attributable to growth in most key categories, led by Sportswear. Unit sales of footwear increased approximately 6%, while ASP per pair was flat as higher off-price mix,ASP was offset by lower NIKE Direct ASP.
Currency-neutral growth in apparel revenues for the first quarter of fiscal 2018 was driven by higher revenues in every key category, most notably Men’s Training, Sportswear and Running. Unit sales of apparel increased 10%, while lower ASP per unit reduced apparel revenue growth by approximately 1 percentage point. The decrease in ASP per unit was primarily driven by lower full-price ASP, reflecting higher discounts, and lower NIKE Direct ASP.
On a reported basis, EBIT increased 24% for the first quarter of fiscal 2018 as reported revenue growth and lower selling and administrative expense more than offset lower gross margin. Gross margin contracted 80 basis points as favorable standard foreign currency exchange rates were more than offset by higher product costs and lower DTCoff-price margin. Selling and administrative expense decreased as a percent of revenues despite higher operating overhead to support DTC growth. Demand creation expense also increased as higher marketing and digital brand marketing costs, in part to support the Rio Olympics in the first quarter, more than offset lower retail brand presentation expenses.

Japan
  Three Months Ended November 30, Six Months Ended November 30,
(Dollars in millions) 2016 2015 % Change % Change Excluding Currency Changes 2016 2015 % Change % Change Excluding Currency Changes
Revenues by:                
Footwear $151
 $128
 18% 0% $317
 $250
 27% 8%
Apparel 70
 63
 11% -6% 130
 106
 23% 5%
Equipment 17
 14
 21% 9% 36
 28
 29% 11%
TOTAL REVENUES $238
 $205
 16% -2% $483
 $384
 26% 7%
Revenues by:                
Sales to Wholesale Customers $160
 $144
 11% -6% $321
 $258
 24% 6%
Sales Direct to Consumer 78
 61
 28% 7% 162
 126
 29% 10%
TOTAL REVENUES   $238
 $205
 16% -2% $483
 $384
 26% 7%
EARNINGS BEFORE INTEREST AND TAXES $48
 $47
 2%   $98
 $83
 18%  
On a constant currency basis, revenues for Japan decreased 2% for the second quarter of fiscal 2017 as declines concentrated in Football (Soccer) were only partially offset by growth in other categories, primarily Running. Revenues for the first six months of fiscal 2017 increased 7%, primarily driven by growth in several key categories, most notably Sportswear and Running. DTC revenues grew 7% and 10% for the second quarter and first six months of fiscal 2017, respectively, due to increases in digital commerce sales and comparable store sales growth of 7% and 6%, respectively, with comparable store sales growth having a greater impact than digital commerce sales for the second quarter.
Reported EBIT for the second quarter increased 2% driven by higher reported revenues, in part reflecting the impact of the stronger Yen, and selling and administrative expense leverage, partially offset by lower gross margin. Gross margin declined 500 basis points as lower product costs were more than offset by the significant impact of unfavorable standard foreign currency exchange rates, as well as lower full-price ASP and unfavorable off-price margin. Reported selling and administrative expense was leveraged despite higher operating overhead and demand creation expenses. Operating overhead increased as efficiencies in variable compensation and operational infrastructure were more than offset by the impact of changes in foreign currency exchange rates. Demand creation expense also increased as reduced marketing support for brand events was more than offset by higher retail brand presentation costs and the impact of changes in foreign currency exchange rates.
For the first six months of fiscal 2017, reported EBIT increased 18% compared to the prior year period, also reflecting the impact of the stronger Yen. Gross margin declined 370 basis points as lower product costs were more than offset by the impact of unfavorable standard foreign currency exchange rates, unfavorable off-price margin, lower DTC margin and lower full-price ASP. Selling and administrative expense increased on a reported basis, but was lower as a percent of revenues. Operating overhead increased as efficiencies in variable compensation and operational infrastructure were more than offset by the impact of changes in foreign currency exchange rates. Demand creation expense also increased as reduced marketing support for brand events was more than offset by higher digital demand creation and retail brand presentation costs, as well as the impact of changes in foreign currency exchange rates.
Emerging Markets
  Three Months Ended November 30, Six Months Ended November 30,
(Dollars in millions) 2016 2015 % Change % Change Excluding Currency Changes 2016 2015 % Change % Change Excluding Currency Changes
Revenues by:                
Footwear $726
 $674
 8% 15% $1,387
 $1,344
 3% 14%
Apparel 263
 255
 3% 9% 497
 493
 1% 11%
Equipment 58
 55
 5% 10% 108
 113
 -4% 4%
TOTAL REVENUES $1,047
 $984
 6% 13% $1,992
 $1,950
 2% 12%
Revenues by:                
Sales to Wholesale Customers $845
 $825
 2% 10% $1,622
 $1,638
 -1% 9%
Sales Direct to Consumer 202
 159
 27% 30% 370
 312
 19% 28%
TOTAL REVENUES   $1,047
 $984
 6% 13% $1,992
 $1,950
 2% 12%
EARNINGS BEFORE INTEREST AND TAXES $237
 $241
 -2%   $408
 $499
 -18%  
On a currency-neutral basis, Emerging Markets revenues for the second quarter and first six months of fiscal 2017 increased 13% and 12%, respectively, driven by higher revenues in most territories. Revenues for three of Emerging Market's largest territories, SOCO (which includes Argentina, Uruguay and Chile), Korea and Mexico, grew 44%,14% and 14%, respectively, for the second quarter of fiscal 2017 and 45%, 10% and 12%, respectively, for the first six months of fiscal 2017. On a category basis, revenues for the second quarter and first six months of fiscal 2017 increased in most key categories, led by Sportswear and Running. DTC revenues increased 30% and 28% for the second quarter and first six months of fiscal 2017, respectively, fueled by the addition of new stores, comparable store sales growth of 13% and 10%, respectively, and higher digital commerce sales.

Constant currency footwear revenue growth for the second quarter and first six months of fiscal 2017 was primarily driven by higher revenues in our Sportswear and Running categories. Unit sales of footwear decreased approximately 1% for both the second quarter and first six months of fiscal 2017, while higher ASP per pair contributed approximately 16 and 15 percentage points of footwear revenue growth for the respective periods. Higher ASP per pair for both the second quarter and first six months of fiscal 2017 was attributable to higher full-price ASP, in part reflecting inflationary conditions in certain territories.
The constant currency apparel revenue growth for the second quarter and first six months of fiscal 2017 was fueled by increases in most key categories, led by Sportswear and Running. For the second quarter and first six months of fiscal 2017, unit sales of apparel decreased approximately 5% and 3%, respectively, while higher ASP per unit contributed approximately 14 percentage points of apparel revenue growth for both periods. The increases in ASP per unit for both the second quarter and first six months of fiscal 2017 were primarily driven by higher full-price ASP, in part reflecting inflationary conditions in certain territories.
On a reported basis, EBIT decreased 2% for the second quarter of fiscal 2017, reflecting the negative impact of changes in foreign currency exchange rates, primarily the Argentine Peso and Mexican Peso. Reported revenue growth was more than offset by lower gross margin. Gross margin decreased 320 basis points as unfavorable standard foreign currency exchange rates and higher product costs were only partially offset by higher full-price ASP. Selling and administrative expense was flat assignificantly lower demand creation expense more than offset higher operating overhead expense. The decrease in demand creation expense was attributable to lower advertising expense, partially offset by increased sportshigher marketing costs while operatingin the first quarter of fiscal 2017 to support the Rio Olympics. Operating overhead expense increased primarily as a result of continued investments in our growing DTC business.
For the first six months of fiscal 2017, reported EBIT decreased 18%, in part reflecting the negative impact of translation. Reported revenue growth was more than offset by gross margin contraction and higher selling and administrative expense as a percent of sales. Gross margin declined 330 basis points as unfavorable standard foreign currency exchange rates and higher product costs were onlyNIKE Direct business, partially offset by higher full-price ASP. Selling and administrative expense increased as a percent of revenues due to higher demand creation expense resulting from increased marketing and digital brand marketing support for the Rio Olympics in the first quarter, as well as higher sports marketing costs. Operating overhead also increased, reflecting increased investments in our growing DTC business.costs efficiencies.
Global Brand Divisions
 Three Months Ended November 30, Six Months Ended November 30, Three Months Ended August 31,
(Dollars in millions) 2016 2015 % Change % Change Excluding Currency Changes 2016 2015 % Change % Change Excluding Currency Changes 2017 2016 % Change % Change Excluding Currency Changes
Revenues $21
 $18
 17% 17% $36
 $44
 -18 % -21 % $20
 $15
 33% 16%
(Loss) Before Interest and Taxes $(619) $(625) -1%   $(1,390) $(1,249) 11 %   $(675) $(771) -12%  
Global Brand Divisions primarily represent demand creation, operating overhead and product creation and design expenses that are centrally managed for the NIKE Brand. Revenues for Global Brand Divisions are primarily attributable to NIKE Brand licensing businesses that are not part of a geographic operating segment.
Global Brand Divisions'Divisions’ loss before interest and taxes decreased 1%12% for the secondfirst quarter of fiscal 20172018 as highera result of lower demand creation expense was more than offset by lowerand operating overhead expense.expenses. Demand creation expense grew due to increased marketing support for brand events, as well as higher advertising expense. These increases more than offset lower sports marketing expense. Operating overhead expense decreased as variable compensation and administrative cost efficiencies more than offset continued investments in operational infrastructure.
Global Brand Divisions' loss before interest and taxes increased 11% for the first six months of fiscal 2017declined primarily due to higher demand creation expense, partially offset by lower operating overhead expense. The increaseadvertising expenses in demand creation expense wasthe first quarter of fiscal 2018, largely due to higher advertising and marketinginvestments in the prior year to support as well as digital brand marketing expenses, largely in support of the Rio Olympics and the European Football Championship, in the first quarter.as well as lower sports marketing costs. Operating overhead expense decreased primarily as continued investments in operational infrastructure were more than offset by efficiencies in variable compensation and administrativea result of lower wage-related costs.

Converse
 Three Months Ended November 30, Six Months Ended November 30, Three Months Ended August 31,
(Dollars in millions) 2016 2015 % Change % Change Excluding Currency Changes 2016 2015 % Change % Change Excluding Currency Changes 2017 2016 % Change % Change Excluding Currency Changes
Revenues $416
 $398
 5 % 5% $990
 $953
 4 % 5% $483
 $574
 -16 % -16 %
Earnings Before Interest and Taxes $78
 $85
 -8 %   $231
 $232
 0 %   $89
 $153
 -42 %  
In territories we define as “direct distribution markets,” Converse designs, markets and sells products directly to distributors and wholesale customers, and to consumers through DTCdirect to consumer operations. The largest direct distribution markets are the United States, the United Kingdom and China. We do not own the Converse trademarks in Japan and accordingly do not earn revenues in Japan. Territories other than direct distribution markets and Japan are serviced by third-party licensees who pay royalty revenues to Converse for the use of its registered trademarks and other intellectual property rights.

On a currency-neutral basis, revenues for Converse increased 5%declined 16% for both the secondfirst quarter and first six months of fiscal 2017.2018. Comparable direct distribution markets (i.e., markets served under a direct distribution model for comparable periods in the current and prior fiscal years) grew 8% for the second quarter of fiscal 2017, contributing approximately 7 percentage points ofdeclined 17%, reducing total Converse revenue growth. For the first six months of fiscal 2017, comparable direct distribution markets grew 5%, contributingrevenues by approximately 516 percentage points of total Converse revenue growth.points. Comparable direct distribution market unit sales increased approximately 7% and 3% for the second quarter and first six months of fiscal 2017, respectively,decreased 17%, while higher ASP per unit contributed approximately 1 and 2 percentage points, respectively,was flat compared to the first quarter of direct distribution markets revenue growth.fiscal 2017. On a territory basis, the increase in comparable direct distribution markets revenues for the second quarter was primarily attributable to growthdeclined as lower sales in the United States while the increase for the first six months of fiscal 2017 was primarily due toand Europe more than offset growth in the United States, partially offset by lower revenues in Europe.China. Conversion of markets from licensed to direct distribution had no impact for the second quarter and increased total Converse revenues by approximately 1 percentage point for the first six monthsquarter of fiscal 2018, primarily driven by the market transition in Italy in the third quarter of fiscal 2017. Revenues from comparable licensed markets decreased 20% and 12% for the second quarter and first six months of fiscal 2017, respectively,17%, reducing total Converse revenue growthrevenues by approximately 2 and 1 percentage points for the respective periods.point. The decrease in comparable licensed marketsmarket revenues is primarily due primarily to lower revenues in Brazil and Italy.Latin America.
Reported EBIT for Converse decreased 8%declined 42% for the secondfirst quarter asof fiscal 2018 driven by lower reported revenues, gross margin contraction and higher revenues and lower selling and administrative expense were more than offset by lower gross margin. For the second quarter of fiscal 2017, grossexpense. Gross margin decreased 470declined 100 basis points primarily due to unfavorable standard foreign currency exchange rates,as the favorable impact of lower licensing revenues and unfavorable off-price sales, which more than offset lower product costs. Selling and administrative expense was lower foron ASP from the second quarter of fiscal 2017 due to lower demand creation expense driven by lower retail brand presentation and advertising costs. The decreasemarket transition in demand creation was partially offset by an increase in operating overhead, as lower variable compensationItaly was more than offset by investments in operational infrastructure and higher administrative costs.
EBIT was flat for the first six months of fiscal 2017 as revenue growth and lower selling and administrative expense were offset by gross margin contraction. Gross margin decreased 410 basis points for the first six months of fiscal 2017 as unfavorable standard foreign currency exchange rates, higher product costs and unfavorable off-price sales and the impact of lower licensing revenues more than offset higher full-price ASP.margin. Selling and administrative expense decreasedincreased due to lower demand creation expense,higher operating overhead, primarily as a result of lower retail brand presentation costs and a decrease inhigher wage-related costs. Demand creation also grew, reflecting higher marketing support for brand events. Operating overhead also declined as investments in operational infrastructure were more than offset by efficiencies in administrative costs and variable compensation.expense on initiatives to drive growth.
Corporate
 Three Months Ended November 30, Six Months Ended November 30, Three Months Ended August 31,
(Dollars in millions) 2016 2015 % Change 2016 2015 % Change 2017 2016 % Change
Revenues $40
 $(29) 
 $68
 $(68) 
 $2
 $28
 
(Loss) Before Interest and Taxes $(196) $(365) -46 % $(359) $(688) -48 % $(433) $(163) 166%
Corporate revenues primarily consist 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 our central foreign exchange risk management program.
The Corporate loss before interest and taxes consists largely of unallocated general and administrative expenses, including expenses associated with centrally managed departments; depreciation and amortization related to our corporate headquarters; unallocated insurance, benefit and compensation programs, including stock-based compensation; and certain foreign currency gains and losses.
In addition to the foreign currency gains and losses recognized in Corporate revenues, foreign currency results in Corporate include gains and losses resulting from the difference between actual foreign currency rates and standard rates used to record non-functional currency denominated product purchases within the NIKE Brand geographic operating segments and Converse; related foreign currency hedge results; conversion gains and losses arising from re-measurement of monetary assets and liabilities in non-functional currencies; and certain other foreign currency derivative instruments.
Corporate'sFor the first quarter of fiscal 2018, Corporate’s loss before interest and taxes decreased $169increased $270 million, and $329 million for the second quarter and first six months of fiscal 2017, respectively. The decreases wereprimarily due to the following:
a beneficialan unfavorable change of $125$113 million, and $263 million for the second quarter and first six months of fiscal 2017, respectively, fromlargely due to higher operating overhead expense, primarily driven by higher one-time wage-related costs associated with our organizational realignment;
a decrease in net foreign currency losses to net foreign currency gains of approximately $79 million related to the difference between actual foreign currency exchange rates and standard foreign currency exchange rates assigned to the NIKE Brand geographic operating segments and Converse, net of hedge gains and losses; these results are reported as a component of consolidated gross margin; and
an increaseunfavorable change in net foreign currency gains and losses of $4$78 million and $27 million for the second quarter and first six months of fiscal 2017, respectively, related to the re-measurement of monetary assets and liabilities denominated in non-functional currencies and the impact of certain foreign currency derivative instruments, reported as a component of consolidated Other (income) expense net; and(income), net.
a beneficial change of $40 million and $39 million for the second quarter and first six months of fiscal 2017, respectively, primarily driven by the impact of lower variable compensation on operating overhead expense.


Foreign Currency Exposures and Hedging Practices
Overview
As a global company with significant operations outside the United States, in the normal course of business we are exposed to risk arising from changes in currency exchange rates. Our primary foreign currency exposures arise from the recording of transactions denominated in non-functional currencies and the translation of foreign currency denominated results of operations, financial position and cash flows into U.S. Dollars.
Our foreign exchange risk management program is intended to lessen both the positive and negative effects of currency fluctuations on our consolidated results of operations, financial position and cash flows. We manage global foreign exchange risk centrally on a portfolio basis to address those risks that are material to NIKE, Inc. We manage these exposures by taking advantage of natural offsets and currency correlations that exist within the portfolio and, where practical and material, by hedging a portion of the remaining exposures using derivative instruments such as forward contracts and options. As described below, the implementation of the NIKE Trading Company (NTC) and our foreign currency adjustment program enhanced our ability to manage our foreign exchange risk by increasing the natural offsets and currency correlation benefits that exist within our portfolio of foreign exchange exposures. Our hedging policy is designed to partially or entirely offset the impact of exchange rate changes on the underlying net exposures being hedged. Where exposures are hedged, our program has the effect of delaying the impact of exchange rate movements on our Unaudited Condensed Consolidated Financial Statements; the length of the delay is dependent upon hedge horizons. We do not hold or issue derivative instruments for trading or speculative purposes.
Refer to Note 4 — Fair Value Measurements and Note 9 — Risk Management and Derivatives in the accompanying Notes to the Unaudited Condensed Consolidated Financial Statements for additional description of how the above financial instruments are valued and recorded, as well as the fair value of outstanding derivatives at each reported period end.
Transactional Exposures
We conduct business in various currencies and have transactions which subject us to foreign currency risk. Our most significant transactional foreign currency exposures are:
Product Costs — NIKE’s product costs are exposed to fluctuations in foreign currencies in the following ways:
1.Product purchases denominated in currencies other than the functional currency of the transacting entity:
a.Certain NIKE entities purchase product from the NTC, a wholly-owned sourcing hub that buys NIKE branded products from third-party factories, predominantly in U.S. Dollars. The NTC, whose functional currency is the U.S. Dollar, then sells the products to NIKE entities in their respective functional currencies. When the NTC sells to a NIKE entity with a different functional currency, the result is a foreign currency exposure for the NTC.
b.Other NIKE entities purchase product directly from third-party factories in U.S. Dollars. These purchases generate a foreign currency exposure for those NIKE entities with a functional currency other than the U.S. Dollar.
In both purchasing scenarios, a weaker U.S. Dollar reduces the inventory cost incurred by NIKE whereas a stronger U.S. Dollar increases its cost.
2.Factory input costs: NIKE operates a foreign currency adjustment program with certain factories. The program is designed to more effectively manage foreign currency risk by assuming certain of the factories’ foreign currency exposures, some of which are natural offsets to our existing foreign currency exposures. Under this program, our payments to these factories are adjusted for rate fluctuations in the basket of currencies (“factory currency exposure index”) in which the labor, materials and overhead costs incurred by the factories in the production of NIKE branded products (“factory input costs”) are denominated.
For the currency within the factory currency exposure indices that is the local or functional currency of the factory, the currency rate fluctuation affecting the product cost is recorded within Inventories and is recognized in Cost of sales when the related product is sold to a third-party. All currencies within the indices, excluding the U.S. Dollar and the local or functional currency of the factory, are recognized as embedded derivative contracts and are recorded at fair value through Other expense (income) expense,, net. Refer to Note 9 — Risk Management and Derivatives in the accompanying Notes to the Unaudited Condensed Consolidated Financial Statements for additional detail.
As an offset to the impacts of the fluctuating U.S. Dollar on our non-functional currency denominated product purchases described above, a strengthening U.S. Dollar against the foreign currencies within the factory currency exposure indices decreases NIKE’s U.S. Dollar inventory cost. Conversely, a weakening U.S. Dollar against the indexed foreign currencies increases our inventory cost.
Non-Functional Currency Denominated External Sales — A portion of our Western EuropeNIKE Brand and Central & Eastern Europe geographyConverse revenues as well as a portion of our Converseassociated with European operations revenues, are earned in currencies other than the Euro (e.g. the British Pound) but are recognized at a subsidiary that uses the Euro as its functional currency. These sales generate a foreign currency exposure.
Other Costs — Non-functional currency denominated costs, such as endorsement contracts, also generate foreign currency risk, though to a lesser extent. In certain cases, the Company has also entered into other contractual agreements which have payments that are indexed to foreign currencies and create embedded derivative contracts that are recorded at fair value through Other expense (income) expense,, net. Refer to Note 9 — Risk Management and Derivatives in the accompanying Notes to the Unaudited Condensed Consolidated Financial Statements for additional detail.
Non-Functional Currency Denominated Monetary Assets and Liabilities — Our global subsidiaries have various assets and liabilities, primarily receivables and payables, including intercompany receivables and payables, denominated in currencies other than their functional currencies. These balance sheet items are subject to re-measurement which may create fluctuations in Other expense (income) expense,, net within our consolidated results of operations.

Managing Transactional Exposures
Transactional exposures are managed on a portfolio basis within our foreign currency risk management program. We manage these exposures by taking advantage of natural offsets and currency correlations that exist within the portfolio and may also elect to use currency forward and option contracts to hedge the remaining effect of exchange rate fluctuations on probable forecasted future cash flows, including certain product cost exposures, non-functional currency denominated external sales and other costs described above. Generally, these are accounted for as cash flow hedges in accordance with U.S. GAAP, except for hedges of the embedded derivative components of the product cost exposures and other contractual agreements as discussed above.agreements.
Certain currency forward contracts used to manage the foreign exchange exposure of non-functional currency denominated monetary assets and liabilities subject to re-measurement and embedded derivative contracts are not formally designated as hedging instruments under U.S. GAAP. Accordingly, changes in fair value of these instruments are immediately recognized in Other expense (income) expense,, net and are intended to offset the foreign currency impact of the re-measurement of the related non-functional currency denominated asset or liability or the embedded derivative contract being hedged.
Refer to Note 4 — Fair Value Measurements and Note 9 — Risk Management and Derivatives in the accompanying Notes to the Unaudited Condensed Consolidated Financial Statements for additional description of how the above financial instruments are valued and recorded, as well as the fair value of outstanding derivatives at each reported period end.
Translational Exposures
Many of our foreign subsidiaries operate in functional currencies other than the U.S. Dollar. Fluctuations in currency exchange rates create volatility in our reported results as we are required to translate the balance sheets, operational results and cash flows of these subsidiaries into U.S. Dollars for consolidated reporting. The translation of foreign subsidiaries’ non-U.S. Dollar denominated balance sheets into U.S. Dollars for consolidated reporting results in a cumulative translation adjustment to Accumulated other comprehensive income within Shareholders’ equity. In the translation of our Unaudited Condensed Consolidated Statements of Income, a weaker U.S. Dollar in relation to foreign functional currencies benefits our consolidated earnings whereas a stronger U.S. Dollar reduces our consolidated earnings. The impact of foreign exchange rate fluctuations on the translation of our consolidated Revenues was a detriment of approximately $95$36 million and $586$185 million for the three months ended November 30,August 31, 2017 and 2016, and 2015, respectively. The impact of foreign exchange rate fluctuations on the translation of our Income before income taxes was a detriment of approximately $22$10 million and $130$26 million for the three months ended November 30,August 31, 2017 and 2016, and 2015, respectively. The impact of foreign exchange rate fluctuations on the translation of our consolidated Revenues was a detriment of approximately $280 million and $1,287 million for the six months ended November 30, 2016 and 2015, respectively. The impact of foreign exchange rate fluctuations on the translation of our Income before income taxes was a detriment of approximately $48 million and $303 million for the six months ended November 30, 2016 and 2015, respectively.
Managing Translational Exposures
To minimize the impact of translating foreign currency denominated revenues and expenses into U.S. Dollars for consolidated reporting, certain foreign subsidiaries use excess cash to purchase U.S. Dollar denominated available-for-sale investments. The variable future cash flows associated with the purchase and subsequent sale of these U.S. Dollar denominated investments at non-U.S. Dollar functional currency subsidiaries creates a foreign currency exposure that qualifies for hedge accounting under U.S. GAAP. We utilize forward contracts and/or options to mitigate the variability of the forecasted future purchases and sales of these U.S. Dollar investments. The combination of the purchase and sale of the U.S. Dollar investment and the hedging instrument has the effect of partially offsetting the year-over-year foreign currency translation impact on net earnings in the period the investments are sold. Hedges of the purchase of U.S. Dollar denominated available-for-sale investments are accounted for as cash flow hedges.
Refer to Note 4 — Fair Value Measurements and Note 9 — Risk Management and Derivatives in the accompanying Notes to the Unaudited Condensed Consolidated Financial Statements for additional description of how the above financial instruments are valued and recorded as well as the fair value of outstanding derivatives at each reported period end.
We estimate the combination of translation of foreign currency-denominated profits from our international businesses and the year-over-year change in foreign currency relatedcurrency-related gains and losses included in Other expense (income) expense,, net had an unfavorable impact of approximately $29 million and $26$88 million on our Income before income taxes for the three and six months ended November 30, 2016, respectively.August 31, 2017.
Net Investments in Foreign Subsidiaries
We are also exposed to the impact of foreign exchange fluctuations on our investments in wholly-owned foreign subsidiaries denominated in a currency other than the U.S. Dollar, which could adversely impact the U.S. Dollar value of these investments, and therefore the value of future repatriated earnings. We have, in the past, hedged and may, in the future, hedge net investment positions in certain foreign subsidiaries to mitigate the effects of foreign exchange fluctuations on these net investments. These hedges are accounted for as net investment hedges in accordance with U.S. GAAP. There were no outstanding net investment hedges as of November 30, 2016August 31, 2017 and 2015.2016. There were no cash flows from net investment hedge settlements for the three and six months ended November 30, 2016August 31, 2017 and 2015.2016.
Liquidity and Capital Resources
Cash Flow Activity
Cash provided by operations was $1,684$575 million for the first sixthree months of fiscal 20172018 compared to $1,036$788 million for the first sixthree months of fiscal 2016. Our primary source2017. Net income, adjusted for non-cash items, generated $1,107 million of operating cash flows for the first sixthree months of fiscal 2017 was Net income of $2,091 million2018 compared to $1,964$1,375 million for the first sixthree months of fiscal 2016.2017. Operating cash flows also increaseddecreased due to changes in working capital, which resulted in a cash outflow of $772$532 million for the first sixthree months of fiscal 20172018 compared to an outflow of $1,401$587 million for the first sixthree months of fiscal 2016.2017. The change in working capital was primarily due to the amount of posteda net change in cash collateral posted with derivative counterparties as a result of hedging activities. For the first sixthree months of fiscal 2017,2018, cash collateral received fromposted with derivative counterparties, which is recorded in Prepaid expenses and other current assets on the Unaudited Condensed Consolidated Balance Sheets, increased $264$273 million as compared to a decreasean increase of $243$136 million during the first sixthree months of fiscal 2016.2017. Refer to the Credit Risk section of Note 9 — Risk Management and Derivatives in the accompanying Notes to the Unaudited Condensed Consolidated Financial Statements for additional detail. This increase in cash collateral posted with counterparties was partially offset by a $183 million change in

Accounts receivable, net, driven by the timing of revenues.
Cash provided (used)used by investing activities was a source of cash of $236$12 million for the first sixthree months of fiscal 2018 compared to $76 million for the first three months of fiscal 2017 as cash flows related to short-term investments, additions to property, plant and equipment and other investing activities were largely unchanged compared to a use of cash of $697 million for the first six monthsquarter of fiscal 2016. The primary driver of the increase in Cash provided (used) by investing activities was the net change in short-term investments (including sales, maturities and purchases) from net purchases to net sales/maturities. For the first six months of fiscal 2017, there were $789 million of net sales/maturities compared to $91 million of net purchases for the first six months of fiscal 2016.2017.
Cash used by financing activities was $680$998 million for the first sixthree months of fiscal 20172018 compared to $282$1,202 million for the first sixthree months of fiscal 2016, as increased proceeds from the issuance of debt were more than offset by higher share repurchases and dividends paid. 2017. The decrease inCash used by financing activities also increased due towas primarily driven by lower excess tax benefits from share-based payment arrangements and decreases in proceeds from the exercise of stock options and other stock issuancesshare repurchases during the first sixthree months of fiscal 20172018 compared to the first sixthree months of fiscal 2016.2017.

During the first sixthree months of fiscal 2017,2018, we purchased 35.915.3 million shares of NIKE'sNIKE’s Class B Common Stock for $1,954$849 million (an average price of $54.39$55.67 per share) under the four-year, $12 billion share repurchase program approved by the Board of Directors in November 2015. As of November 30, 2016,August 31, 2017, we had repurchased 56.095.0 million shares at a cost of approximately $3,143$5,287 million (an average price of $56.12$55.64 per share) under this program. We continue to expect funding of share repurchases will come from operating cash flows, excess cash and/or proceeds from debt. The timing and the amount of shares purchased will be dictated by our capital needs and stock market conditions.
Capital Resources
On July 21, 2016, we filed a shelf registration statement (the “Shelf”) with the SEC which permits us to issue an unlimited amount of debt securities. The Shelf expires on July 21, 2019. On October 21, 2016, we issued $1.5 billion of senior notes with tranches maturing in 2026 and 2046. The 2026 senior notes were issued in an initial aggregate principal amount of $1.0 billion at a 2.375% fixed, annual interest rate and will mature on November 1, 2026. The 2046 senior notes were issued in an initial aggregate principal amount of $500 million at a 3.375% fixed, annual interest rate and will mature on November 1, 2046. Interest on the senior notes is payable semi-annually on May 1 and November 1 of each year. The issuance resulted in proceeds before expenses of $1,493 million. ReferFor additional detail refer to Note 58Long-TermLong Term Debt in our Annual Report on Form 10-K for the accompanying Notes to the Unaudited Condensed Consolidated Financial Statements for additional detail on Long-term debt.fiscal year ended May 31, 2017.
On August 28, 2015, we entered into a committed credit facility agreement with a syndicate of banks, which provides for up to $2 billion of borrowings. The facility matures August 28, 2020, with a one year extension option prior to any anniversary of the closing date, provided that in no event shall it extend beyond August 28, 2022. As of and for the sixthree month period ended November 30, 2016,August 31, 2017, we had no amounts outstanding under the committed credit facility.
We currently have long-term debt ratings of AA- and A1 from Standard and Poor'sPoor’s Corporation and Moody'sMoody’s Investor Services, respectively. If our long-term debt ratingratings were to decline, the facility fee and interest rate under our committed credit facility would increase. Conversely, if our long-term debt ratingratings were to improve, the facility fee and interest rate would decrease. Changes in our long-term debt ratingratings would not trigger acceleration of maturity of any then-outstanding borrowings or any future borrowings under the committed credit facility. Under this committed revolving credit facility, we have agreed to various covenants. These covenants include limits on our disposal of fixed assets and the amount of debt secured by liens we may incur, as well as limits on the indebtedness we can incur relative to our net worth. In the event we were to have any borrowings outstanding under this facility and failed to meet any covenant, and were unable to obtain a waiver from a majority of the banks in the syndicate, any borrowings would become immediately due and payable. As of November 30, 2016,August 31, 2017, we were in full compliance with each of these covenants and believe it is unlikely we will fail to meet any of these covenants in the foreseeable future.
Liquidity is also provided by our $2 billion commercial paper program. During the three months ended November 30, 2016,August 31, 2017, the maximum amount of commercial paper borrowings outstanding at any point was $919$325 million. As of November 30, 2016,August 31, 2017, there were no$325 million of outstanding borrowings under this program. We may continue to issue commercial paper or other debt securities during fiscal 20172018 depending on general corporate needs. We currently have short-term debt ratings of A1+ and P1 from Standard and Poor'sPoor’s Corporation and Moody'sMoody’s Investor Services, respectively.
As of November 30, 2016,August 31, 2017, we had cash, cash equivalents and short-term investments totaling $5.9$5.5 billion, of which $5.3$4.9 billion was held by our foreign subsidiaries. Cash equivalents and short-termShort-term investments consist primarily of deposits held at major banks, money market funds, commercial paper, corporate notes, U.S. Treasury obligations, U.S. government sponsored enterprise obligations and other investment grade fixed-income securities. Our fixed-income investments are exposed to both credit and interest rate risk. All of our investments are investment grade to minimize our credit risk. While individual securities have varying durations, as of November 30, 2016,August 31, 2017, the average duration of our cash equivalents and short-term investments portfolio was 6780 days.
To date we have not experienced difficulty accessing the credit markets or incurred higher interest costs. Future volatility in the capital markets, however, may increase costs associated with issuing commercial paper or other debt instruments or affect our ability to access those markets. We believe that existing cash, cash equivalents, short-term investments and cash generated by operations, together with access to external sources of funds as described above, will be sufficient to meet our domestic and foreign capital needs in the foreseeable future.
We utilize a variety of tax planning and financing strategies to manage our worldwide cash and deploy funds to locations where they are needed. We routinely repatriate a portion of our foreign earnings for which U.S. taxes have previously been provided. We also indefinitely reinvest a significant portion of our foreign earnings, and our current plans do not demonstrate a need to repatriate these earnings. Should we require additional capital in the United States, we may elect to repatriate indefinitely reinvested foreign funds or raise capital in the United States through debt. If we were to repatriate indefinitely reinvested foreign funds, we would be required to accrue and pay additional U.S. taxes less applicable foreign tax credits. If we elect to raise capital in the United States through debt, we would incur additional interest expense.
Contractual Obligations
As a result of our October 2016 debt issuance, cash payments due on long-term debt have increased from what was reported in our Annual Report on Form 10-K for the fiscal year ended May 31, 2016.

Long-term debt obligations as of November 30, 2016 are as follows:
Description of Commitment Cash Payments Due During the Year Ending May 31,
(In millions) Remainder of 2017 2018 2019 2020 2021 Thereafter Total
Long-Term Debt(1)
 $96
 $115
 $115
 $115
 $112
 $5,422
 $5,975
(1)The cash payments due for long-term debt include estimated interest payments. Estimates of interest payments are based on outstanding principal amounts, applicable fixed interest rates or currently effective interest rates as of November 30, 2016 (if variable), timing of scheduled payments and the term of the debt obligations.
Other than the changes reported above, thereThere have been no significant changes to the contractual obligations reported in our Annual Report on Form 10-K for the fiscal year ended May 31, 2016.2017.
Off-Balance Sheet Arrangements
As of November 30, 2016,August 31, 2017, we did not have any off-balance sheet arrangements that have, or are reasonably likely to have, a current or future effect on our financial condition, results of operations, liquidity, capital expenditures or capital resources.
New Accounting Pronouncements
Refer to Note 1 — Summary of Significant Accounting Policies in the accompanying Notes to the Unaudited Condensed Consolidated Financial Statements for recently adopted and recently issued accounting standards.

Critical Accounting Policies
Our discussion and analysis of our financial condition and results of operations are based upon our Unaudited Condensed Consolidated Financial Statements, which have been prepared in accordance with U.S. GAAP. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses and related disclosure of contingent assets and liabilities.
We believe that the estimates, assumptions and judgments involved in the accounting policies described in the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section of our most recent Annual Report on Form 10-K have the greatest potential impact on our financial statements, so we consider these to be our critical accounting policies. Actual results could differ from the estimates we use in applying our critical accounting policies. We are not currently aware of any reasonably likely events or circumstances that would result in materially different amounts being reported.

ITEM 3. Quantitative and Qualitative Disclosures about Market Risk
Other than the items noted below, as well as the termination of our forward-starting interest rate swaps, thereThere have been no material changes from the information previously reported under Part II, Item 7A of our Annual Report on Form 10-K for the fiscal year ended May 31, 2016.
We use the Value-at-Risk (“VaR”) model to monitor the foreign exchange risk of our foreign currency forward and foreign currency option derivative instruments. The VaR model determines the maximum potential one-day loss in the fair value of these foreign exchange rate-sensitive financial instruments assuming normal market conditions and a 95% confidence level. Since May 31, 2016, decreases in the total notional amount and increases in foreign currency volatilities have resulted in a decreased estimated maximum one-day loss in fair value of $75 million as of November 30, 2016, as compared to $109 million as of May 31, 2016. This hypothetical loss in fair value of our derivatives would be offset by increases in the value of the underlying transactions being hedged. The average monthly change in the net fair values of foreign currency forward and foreign currency option derivatives instruments was $178 million for the six months ended November 30, 2016, compared with $209 million for the fiscal year ended May 31, 2016. The VaR model is a risk analysis tool and does not purport to represent actual losses in fair value that we will incur nor does it consider the potential effect of favorable changes in market rates. Actual future gains and losses will differ from and could exceed those estimates because of changes or differences in market rates and interrelationships, hedging instruments and hedge percentages, timing and other factors.
Changes regarding interest rate risk from the information previously reported under Part II, Item 7A of our Annual Report on Form 10-K for the fiscal year ended May 31, 2016 are as follows:
  Expected Maturity Date
Year Ending May 31,
(Dollars in millions) Remainder of 2017 2018 2019 2020 2021 Thereafter Total Fair Value
Interest Rate Risk 
 
 
 
 
 
 
 
Long-term U.S. Dollar debt — Fixed rate 
 
 
 
 
 
 
 
Principal payments $38
 $
 $
 $
 $
 $3,500
 $3,538
 $3,350
Weighted-average interest rate 6.2% 0.0% 0.0% 0.0% 0.0% 3.1% 3.1% 

2017.
ITEM 4. Controls and Procedures
We maintain disclosure controls and procedures that are designed to ensureprovide reasonable assurance that information required to be disclosed in our Securities Exchange Act of 1934, as amended (“the Exchange Act”) reports is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow for timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.
We carry out a variety of ongoing procedures under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, to evaluate the effectiveness of the design and operation of our disclosure controls and procedures. Based on the foregoing, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective at the reasonable assurance level as of November 30, 2016.August 31, 2017.
We have continuedare continuing several transformation initiatives to centralize and simplify our business processes and systems. These are long-term initiatives, which we believe will enhance our internal control over financial reporting due to increased automation and further integration of related processes. We will continue to monitor our internal control over financial reporting for effectiveness throughout the transformation.
There have not been any other changes in our internal control over financial reporting during our most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Special Note Regarding Forward-Looking
Statements and Analyst Reports
Certain written and oral statements, other than purely historic information, including estimates, projections, statements relating to NIKE’s business plans, objectives and expected operating results and the assumptions upon which those statements are based, made or incorporated by reference from time to time by NIKE or its representatives in this report, other reports, filings with the Securities and Exchange Commission, press releases, conferences or otherwise, are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 and Section 21E of the Securities Exchange Act of 1934, as amended.Act. Forward-looking statements include, without limitation, any statement that may predict, forecast, indicate, or imply future results, performance or achievements, and may contain the words “believe,” “anticipate,” “expect,” “estimate,” “project,” “will be,” “will continue,” “will likely result,” or words or phrases of similar meaning. Forward-looking statements involveCertain factors, including various risks and uncertainties, which may cause actual results to differ materially from the forward-looking statements. The risks and uncertainties are detailed from time to time in reports filed by NIKE with the Securities and Exchange Commission, including reports filed on Forms 8-K, 10-Q and 10-K, and include, among others, the following: international, national and local general economic and market conditions; the size and growth of the overall athletic footwear, apparel and equipment markets; intense competition among designers, marketers, distributors and sellers of athletic footwear, apparel and equipment for consumers and endorsers; demographic changes; changes in consumer preferences; popularity of particular designs, categories of products and sports; seasonal and geographic demand for NIKE products; difficulties in anticipating or forecasting changes in consumer preferences, consumer demand for NIKE products and the various market factors described above; difficulties in implementing, operating and maintaining NIKE’s increasingly complex information systems and controls, including, without limitation, the systems related to demand and supply planning and inventory control; interruptions in data and information technology systems; consumer data security; fluctuations and difficulty in forecasting operating results, including, without limitation, the fact that advance futures orders may not be indicative of future revenues due to, changes in shipmentamong other factors, the timing the changing mix of futures and at-once orders and discounts, order cancellations and returns;returns, and increasing online and mobile commercial activity; the ability of NIKE to sustain, manage or forecast its growth and inventories; the size, timing and mix of purchases of NIKE’s products; increases in the cost of materials, labor and energy used to manufacture products, new product development and introduction; the ability of NIKE to secure and protect trademarks, patents and other intellectual property; product performance and quality; customer service; adverse publicity; the loss of significant customers or suppliers; dependence on distributors and licensees; business disruptions; increased costs of freight and transportation to meet delivery deadlines; increases in borrowing costs due to any decline in NIKE'sNIKE’s debt ratings; changes in business strategy or development plans; general risks associated with doing business outside the United States, including, without limitation, exchange rate fluctuations, import duties, tariffs, quotas, political and economic instability and terrorism; changes in government regulations; the impact of, including business and legal developments relating to, climate change; natural disasters; liability and other claims asserted against NIKE; the ability to attract and retain qualified personnel; the effects of NIKE'sNIKE’s decision to invest in or divest of businesses; and other factors referenced or incorporated by reference in this report and other reports.
The risks included here are not exhaustive. Other sections of this report may include additional factors which could adversely affect NIKE’s business and financial performance. Moreover, NIKE operates in a very competitive and rapidly changing environment. New risks emerge from time to time and it is not possible for management to predict all such risks, nor can it assess the impact of all such risks on NIKE’s business or the extent to which any risk, or combination of risks, may cause actual results to differ materially from those contained in any forward-looking statements. Given these risks and uncertainties, investors should not place undue reliance on forward-looking statements as a prediction of actual results.
Investors should also be aware that while NIKE does, from time to time, communicate with securities analysts, it is against NIKE’s policy to disclose to them any material non-public information or other confidential commercial information. Accordingly, shareholders should not assume that NIKE agrees with any statement or report issued by any analyst irrespective of the content of the statement or report. Furthermore, NIKE has a policy against issuing or confirming financial forecasts or projections issued by others. Thus, to the extent that reports issued by securities analysts contain any projections, forecasts or opinions, such reports are not the responsibility of NIKE.NIKE and may not reflect NIKE’s current views.

PART II - OTHER INFORMATION
ITEM 1. Legal Proceedings
There have been no material developments with respect to the information previously reported under Part I, Item 3 of our Annual Report on Form 10-K for the fiscal year ended May 31, 2016.2017.
ITEM 1A. Risk Factors
There have been no material changes in our risk factors from those disclosed in Part I, Item 1A of our Annual Report on Form 10-K for the fiscal year ended May 31, 2016.2017.
ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds
In November 2015, the Board of Directors approved a four-year, $12 billion share repurchase program. As of November 30, 2016,August 31, 2017, the Company had repurchased 56.095.0 million shares at an average price of $56.12$55.64 per share for a total approximate cost of $3.1$5.3 billion under this program. We intend to use excess cash, future cash from operations and/or proceeds from debt to fund repurchases.
The following table presents a summary of share repurchases made by NIKE under this program during the quarter ended November 30, 2016:August 31, 2017:
Period Total Number of Shares Purchased Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs 
Maximum Number (or Approximate Dollar Value) of Shares that May Yet Be Purchased Under the Plans or Programs (In millions)
September 1 — September 30, 2016 5,980,539
 $56.00
 5,980,539
 $9,422
October 1 — October 31, 2016 5,896,847
 $52.18
 5,896,847
 $9,114
November 1 — November 30, 2016 5,079,527
 $50.59
 5,079,527
 $8,857
  16,956,913
 $53.05
 16,956,913
  
Period Total Number of Shares Purchased Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs 
Maximum Number (or Approximate Dollar Value) of Shares that May Yet Be Purchased Under the Plans or Programs (In millions)
June 1 — June 30, 2017 4,814,118
 $53.01
 4,814,118
 $7,307
July 1 — July 31, 2017 2,494,988
 $58.29
 2,494,988
 $7,162
August 1 — August 31, 2017 7,947,729
 $56.46
 7,947,729
 $6,713
  15,256,835
 $55.67
 15,256,835
  

ITEM 6. Exhibits
(a) EXHIBITS:
   
3.1  Restated Articles of Incorporation, as amended (incorporated by reference to Exhibit 3.1 to the Company'sCompany’s Quarterly Report on Form 10-Q for the fiscal quarter ended November 30, 2015).
3.2  ThirdFourth Restated Bylaws, as amended (incorporated by reference to Exhibit 3.2 to the Company’s Current Report on Form 8-K filed June 21, 2013)April 24, 2017).
4.1  Restated Articles of Incorporation, as amended (see Exhibit 3.1).
4.2  ThirdFourth Restated Bylaws, as amended (see Exhibit 3.2).
4.3 Third Supplemental Indenture, dated as of October 21, 2016, by and between NIKE, Inc. and Deutsche Bank Trust Company Americas, as trustee, including the form of 2.375% Notes due 2026 and form of 3.375% Notes due 2046 (incorporated by reference to Exhibit 4.2 to the Company'sCompany’s Form 8-K filed October 21, 2016).
31.1†  Rule 13(a)-14(a) Certification of Chief Executive Officer.
31.2†  Rule 13(a)-14(a) Certification of Chief Financial Officer.
32.1†  Section 1350 Certificate of Chief Executive Officer.
32.2†  Section 1350 Certificate of Chief Financial Officer.
101.INS  XBRL Instance Document.
101.SCH  XBRL Taxonomy Extension Schema Document.
101.CAL  XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF  XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB  XBRL Taxonomy Extension Label Linkbase Document.
101.PRE  XBRL Taxonomy Extension Presentation Linkbase Document.
Furnished herewith

EXHIBIT INDEX


3.1
3.2
4.1
4.2
4.3
31.1†
31.2†
32.1†
32.2†
101.INSXBRL Instance Document.
101.SCHXBRL Taxonomy Extension Schema Document.
101.CALXBRL Taxonomy Extension Calculation Linkbase Document.
101.DEFXBRL Taxonomy Extension Definition Linkbase Document.
101.LABXBRL Taxonomy Extension Label Linkbase Document.
101.PREXBRL Taxonomy Extension Presentation Linkbase Document.
Furnished herewith


Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
 
  
 
NIKE, Inc.
an Oregon Corporation
  
 /S/    ANDREW CAMPION
 
Andrew Campion
Chief Financial Officer and Authorized Officer
DATED: January 5,October 6, 2017
 
 


EXHIBIT INDEX


39
3.1Restated Articles of Incorporation, as amended (incorporated by reference to Exhibit 3.1 to the Company's Quarterly Report on Form 10-Q for the fiscal quarter ended November 30, 2015).
3.2Third Restated Bylaws, as amended (incorporated by reference to Exhibit 3.2 to the Company’s Current Report on Form 8-K filed June 21, 2013).
4.1Restated Articles of Incorporation, as amended (see Exhibit 3.1).
4.2Third Restated Bylaws, as amended (see Exhibit 3.2).
4.3Third Supplemental Indenture, dated as of October 21, 2016, by and between NIKE, Inc. and Deutsche Bank Trust Company Americas, as trustee, including the form of 2.375% Notes due 2026 and form of 3.375% Notes due 2046 (incorporated by reference to Exhibit 4.2 to the Company's Form 8-K filed October 21, 2016).
31.1†Rule 13(a)-14(a) Certification of Chief Executive Officer.
31.2†Rule 13(a)-14(a) Certification of Chief Financial Officer.
32.1†Section 1350 Certificate of Chief Executive Officer.
32.2†Section 1350 Certificate of Chief Financial Officer.
101.INSXBRL Instance Document.
101.SCHXBRL Taxonomy Extension Schema Document.
101.CALXBRL Taxonomy Extension Calculation Linkbase Document.
101.DEFXBRL Taxonomy Extension Definition Linkbase Document.
101.LABXBRL Taxonomy Extension Label Linkbase Document.
101.PREXBRL Taxonomy Extension Presentation Linkbase Document.
Furnished herewith


45