NIKE, Inc. CONSOLIDATED STATEMENTS OF INCOME (Unaudited) THREE MONTHS ENDED % SIX MONTHS ENDED % (In millions, except per share data) 11/30/2019 11/30/2018 Change 11/30/2019 11/30/2018 Change Revenues $ 10,326 $ 9,374 10% $ 20,986 $ 19,322 9% Cost of sales 5,782 5,269 10% 11,571 10,820 7% Gross profit 4,544 4,105 11% 9,415 8,502 11% Gross margin 44.0% 43.8% 44.9% 44.0% Demand creation expense 881 910 -3% 1,899 1,874 1% Operating overhead expense 2,443 2,232 9% 4,753 4,331 10% Total selling and administrative expense 3,324 3,142 6% 6,652 6,205 7% % of revenues 32.2% 33.5% 31.7% 32.1% Interest expense (income), net 12 14 27 25 Other (income) expense, net (41) (48) (74) 5 Income before income taxes 1,249 997 25% 2,810 2,267 24% Income tax expense 134 150 -11% 328 328 0% Effective tax rate 10.7% 15.0% 11.7% 14.5% NET INCOME $ 1,115 $ 847 32% $ 2,482 $ 1,939 28% Earnings per common share: Basic $ 0.71 $ 0.54 31% $ 1.59 $ 1.22 30% Diluted $ 0.70 $ 0.52 35% $ 1.56 $ 1.19 31% Weighted average common shares outstanding: Basic 1,560.6 1,581.4 1,561.5 1,587.7 Diluted 1,594.4 1,620.7 1,596.0 1,627.2 Dividends declared per common share $ 0.245 $ 0.22 $ 0.465 $ 0.42NIKE, Inc. CONSOLIDATED BALANCE SHEETS (Unaudited) November 30, November 30, % Change (Dollars in millions) 2019 2018 ASSETS Current assets: Cash and equivalents $ 3,070 $ 3,423 -10% Short-term investments 432 618 -30% Accounts receivable, net 4,792 4,346 10% Inventories 6,199 5,388 15% Prepaid expenses and other current assets 1,876 1,791 5% Total current assets 16,369 15,566 5% Property, plant and equipment, net 4,668 4,588 2% Operating lease right-of-use assets, net 2,882 Identifiable intangible assets, net 277 284 -2% Goodwill 224 154 45% Deferred income taxes and other assets 2,182 2,085 5% TOTAL ASSETS $ 26,602 $ 22,677 17% LIABILITIES AND SHAREHOLDERS EQUITY Current liabilities: Current portion of long-term debt $ 6 $ 6 0% Notes payable 300 9 Accounts payable 2,627 2,574 2% Current portion of operating lease liabilities 431 Accrued liabilities 4,672 4,478 4% Income taxes payable 228 211 8% Total current liabilities 8,264 7,278 14% Long-term debt 3,462 3,466 0% Operating lease liabilities 2,723 Deferred income taxes and other liabilities 2,802 3,204 -13% Redeemable preferred stock Shareholders equity 9,351 8,729 7% TOTAL LIABILITIES AND SHAREHOLDERS EQUITY $ 26,602 $ 22,677 17%NIKE, Inc. DIVISIONAL REVENUES (Unaudited) % Change Excluding Currency Changes 1 % Change Excluding Currency Changes 1 THREE MONTHS ENDED % SIX MONTHS ENDED % (Dollars in millions) 11/30/2019 11/30/2018 Change 11/30/2019 11/30/2018 Change North America Footwear $ 2,426 $ 2,245 8% 8% $ 5,095 $ 4,800 6% 6% Apparel 1,417 1,405 1% 1% 2,848 2,812 1% 1% Equipment 139 132 5% 6% 332 315 5% 5% Total 3,982 3,782 5% 5% 8,275 7,927 4% 4% Europe, Middle East depreciation and amortization related to the Companys corporate headquarters; unallocated insurance, benefit and compensation programs, including stock-based compensation; and certain foreign currency gains and losses, including certain hedge gains and losses.NIKE, Inc. RETURN ON INVESTED CAPITAL 1,2 (Unaudited) FOR THE TRAILING FOUR QUARTERS ENDED (Dollars in millions) 11/30/2019 5/31/2019 Numerator Net income $ 4,572 $ 4,029 Add: Interest expense (income), net 51 49 Add: Income tax expense 772 772 Earnings before interest and taxes 5,395 4,850 Income tax adjustment 3 (778) (779) Earnings before interest and after taxes $ 4,617 $ 4,071 AVERAGE FOR THE TRAILING FIVE QUARTERS ENDED 11/30/2019 5/31/2019 Denominator Total debt 4,5 $ 6,768 $ 6,766 Add: Shareholders' equity 9,056 9,107 Less: Cash and equivalents and Short-term investments 3,979 4,453 Total invested capital $ 11,845 $ 11,420 RETURN ON INVESTED CAPITAL 39.0% 35.6% 1 ROIC represents a performance measure that management believes is useful information in understanding the Company's ability to effectively manage invested capital. ROIC is considered a non-GAAP financial measure and 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. 2On June 1, 2019, the Company adopted Accounting Standards Codification (ASC) No. 842, Leases, which among other things, requires operating leases to be recorded as liabilities on the Consolidated Balance Sheets. Accordingly, the Company has updated the way in which it calculates ROIC to reflect the adoption of the new standard. For additional information on the impact of the adoption of ASC 842, see the Company's quarterly report on Form 10-Q, for the first quarter of fiscal 2020, filed with the U.S. Securities and Exchange Commission on October 4, 2019. For the Company's historical ROIC calculation see investors.nike. 3Equals Earnings before interest and taxes multiplied by the effective tax rate as of the respective quarter end. 4Total debt includes the following: 1) Current portion of long-term debt, 2) Notes Payable, 3) Current portion of operating lease liabilities, 4) Long-term debt and 5) Operating lease liabilities. 5 Due to the adoption of ASC 842, for comparability, total debt for each quarter prior to 6/1/2019 includes approximately $3.2 billion, which represents the current and long-term portion of the Company's operating lease liabilities as of June 1, 2019.