NIKE, INC. MANAGEMENT REPORT AND ANALYSIS OF FINANCIAL POSITION AND OPERATING RESULTS (Form 10-Q)


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 through NIKE Direct
operations, which is comprised of both NIKE-owned retail stores and sales
through our digital platforms (also referred to as "NIKE Brand Digital"), to
retail accounts and to 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 building a profitable 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 through digital platforms and at
retail.

Through the Consumer Direct Acceleration, we are focusing on creating the
marketplace of the future through more premium, consistent and seamless consumer
experiences, leading with digital and our owned stores, as well as select
wholesale partners that share our marketplace vision. Over the last several
years, as we have executed against the Consumer Direct Acceleration, we have
grown our NIKE Direct business to be approximately 42% of total NIKE Brand
revenues for the first quarter of fiscal 2023, and we have reduced the number of
wholesale accounts globally. Additionally, we have aligned our product creation
and category organizations around a new consumer construct focused on Men's,
Women's and Kids' and continue to invest in data and analytics, demand sensing,
insight gathering, inventory management and other areas to create an end-to-end
technology foundation, which we expect will further accelerate our digital
transformation. We believe this unified approach will accelerate growth and
unlock more efficiency for our business, while driving speed and responsiveness
as we serve consumers globally.

CURRENT ECONOMIC CONDITIONS AND MARKET DYNAMICS
Ongoing supply chain challenges, macroeconomic conditions and the COVID-19
pandemic continue to create volatility in our business results and operations
globally. Despite these challenges, our first quarter Revenues increased 4% and
10% on a reported and currency-neutral basis, respectively, led by North
America, EMEA and APLA, partially offset by declines in Greater China due to
COVID-19 disruptions. However, gross margin decreased by 220 basis points in the
first quarter of fiscal 2023 with elevated freight and logistics costs and
higher promotional activity, among other items, contributing to this decrease.

During fiscal 2022, we experienced elevated inventory transit times due to port
congestion, transportation delays, and labor and container shortages which
caused seasonally late product to arrive in the first quarter of fiscal 2023. As
a result, we planned our fiscal 2023 product purchases based on elevated
inventory transit times continuing. However, during the first quarter of fiscal
2023, inventory transit times improved ahead of plan, particularly in North
America, resulting in challenges managing the timing of seasonal inventory flow.
This disruption in the flow of product caused inventories in North America to
grow to $4.7 billion, an increase of 15% compared to the fourth quarter of
fiscal 2022. At the same time, there is increased promotional activity across
the retail industry. We increased promotional activity in the first quarter of
fiscal 2023, primarily in North America, and expect to increase promotional
activity in the second quarter of fiscal 2023, to sell excess inventory and
create capacity in the marketplace for new seasonally relevant product.

Most of our geographies are currently operating with little to no COVID-19 restrictions, but revenue in Greater China for the first quarter of fiscal 2023 were impacted by lower retail traffic due to disruptions related to COVID-19.

Fluctuations in currency exchange rates also create volatility in our reported
results as we translate the balance sheets, operational results and cash flows
of our subsidiaries into U.S. Dollars for consolidated reporting. During the
first quarter of fiscal 2023, foreign currency headwinds increased significantly
as the U.S. Dollar strengthened in relation to most foreign currencies, reducing
reported Revenues by $823 million.

We expect unfavorable changes in foreign currency exchange rates, net of hedges,
will have a material negative impact on reported Revenues and Income before
income taxes for the second quarter of fiscal 2023. Additionally, we expect the
continued combination of elevated freight and logistics costs and increased
promotional activity will have a negative impact on gross margin for the second
quarter of fiscal 2023.

We also continue to closely monitor macroeconomic conditions, including consumer
behavior and the potential impacts inflation could have on consumer demand for
our product. While we believe our Consumer Direct Acceleration Strategy
continues to drive our business toward our long-term financial goals, worsening
macroeconomic conditions could affect our business, including, among other
things, higher inventory levels in various markets, higher inventory
obsolescence reserves, higher promotional activity, reduced demand for our
products, reduced orders from our wholesale customers for our products and order
cancellations. There could also be new COVID-19 related restrictions or
disruptions across our geographies. Any of these factors, among others, could
have material adverse impacts on our revenue growth as well as overall
profitability in future periods.

                                                                            

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FIRST QUARTER OVERVIEW
For the first quarter of fiscal 2023, NIKE, Inc. Revenues increased 4% to $12.7
billion compared to the first quarter of fiscal 2022 and increased 10% on a
currency-neutral basis. Net income was $1,468 million and diluted earnings per
common share was $0.93 for the first quarter of fiscal 2023, compared to Net
income of $1,874 million and diluted earnings per common share of $1.16 for the
first quarter of fiscal 2022.

Income before income taxes decreased 13% compared to the first quarter of fiscal
2022, due to higher Selling and administrative expense and gross margin
contraction, partially offset by higher Revenues. NIKE Brand revenues, which
represent over 90% of NIKE, Inc. Revenues, increased 4% compared to the first
quarter of fiscal 2022. On a currency-neutral basis, NIKE Brand revenues
increased 10%, driven by higher revenues in North America, EMEA and APLA,
partially offset by declines in Greater China. Additionally, NIKE Brand
currency-neutral revenues were higher across footwear and apparel, as well as
Men's, the Jordan Brand, Kids' and Women's. Revenues for Converse increased 2%
and 8% compared to the first quarter of fiscal 2022, on a reported and
currency-neutral basis, respectively, led by strong performance in North America
and Western Europe, partially offset by declines in Asia.

Our effective tax rate was 19.7% for the first quarter of Fiscal 2023, compared to 11.0% for the first quarter of Fiscal 2022, primarily due to lower compensation benefits at stock basis.

On August 16, 2022, the U.S. government enacted the Inflation Reduction Act of
2022 that includes, among other provisions, changes to the U.S. corporate income
tax system, including a fifteen percent minimum tax based on "adjusted financial
statement income," which is effective for NIKE beginning June 1, 2023, and a one
percent excise tax on net repurchases of stock after December 31, 2022. We are
continuing to evaluate the Inflation Reduction Act and its requirements, as well
as the application to our business.

During the first quarter of fiscal 2023, we completed the sale of our entity in
Chile to a third party distributor and the impacts of completing this
transaction were not material to the Unaudited Condensed Consolidated Financial
Statements. Subsequent to the end of the first quarter we completed the sale of
our entities in Argentina and Uruguay to a third party distributor. For more
information see Note 13 - Acquisitions and Divestitures within the accompanying
Notes to the Unaudited Condensed Consolidated Financial Statements. As we shift
from a wholesale and direct to consumer operating model within these countries,
we expect consolidated NIKE, Inc. and APLA revenue growth will be reduced due to
different commercial terms. However, over time we expect the future operating
model to have a favorable impact on our overall profitability as we reduce
selling and administrative expenses, as well as lessen exposure to foreign
exchange rate volatility.

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,
currency-neutral revenues, as well as Total NIKE Brand earnings before interest
and taxes (EBIT), Total NIKE, Inc. EBIT and EBIT Margin, 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 comparable to those 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. EBIT is calculated as
Net income before Interest expense (income), net and Income tax expense in the
Unaudited Condensed Consolidated Statements of Income. EBIT Margin is calculated
as EBIT divided by total NIKE, Inc. Revenues.

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, currency-neutral revenues, EBIT and EBIT margin
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.

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RESULTS OF OPERATIONS

                                                                        THREE MONTHS ENDED AUGUST 31,
(Dollars in millions, except per share data)                      2022              2021                  % CHANGE
Revenues                                                    $      12,687     $      12,248                   4  %
Cost of sales                                                       7,072             6,552                   8  %
Gross profit                                                        5,615             5,696                  -1  %
Gross margin                                                         44.3   %           46.5 %
Demand creation expense                                               943               918                   3  %
Operating overhead expense                                          2,977             2,654                  12  %
Total selling and administrative expense                            3,920             3,572                  10  %
% of revenues                                                        30.9   %          29.2  %
Interest expense (income), net                                         13                57                   -
Other (income) expense, net                                          (146)              (39)                  -
Income before income taxes                                          1,828             2,106                 -13  %
Income tax expense                                                    360               232                  55  %
Effective tax rate                                                   19.7   %          11.0  %
NET INCOME                                                  $       1,468     $       1,874                 -22  %
Diluted earnings per common share                           $        0.93     $        1.16                 -20  %


CONSOLIDATED OPERATING RESULTS

REVENUES

                                                                      THREE MONTHS ENDED AUGUST 31,
                                                                                                      % CHANGE EXCLUDING
(Dollars in millions)                                   2022            2021               % CHANGE  CURRENCY CHANGES(1)
NIKE, Inc. Revenues:
NIKE Brand Revenues by:
Footwear                                          $        8,114    $   7,718                  5  %                12  %
Apparel                                                    3,434        3,450                  0  %                 7  %
Equipment                                                    486          465                  5  %                12  %
Global Brand Divisions(2)                                     14            7                100  %                96  %
Total NIKE Brand Revenues                                 12,048       11,640                  4  %                10  %
Converse                                                     643          629                  2  %                 8  %
Corporate(3)                                                  (4)         (21)                 -                    -
TOTAL NIKE, INC. REVENUES                         $       12,687    $  12,248                  4  %                10  %
Supplemental NIKE Brand Revenues Details:
NIKE Brand Revenues by:
Sales to Wholesale Customers                      $        6,983    $   6,943                  1  %                 8  %
Sales through NIKE Direct                                  5,051        4,690                  8  %                14  %
Global Brand Divisions(2)                                     14            7                100  %                96  %
TOTAL NIKE BRAND REVENUES                         $       12,048    $  11,640                  4  %                10  %

(1) The percentage change excluding foreign exchange variations represents a non-GAAP financial measure. See “Use of Non-GAAP Financial Measures” for more information.

(2) The sales of the Global Brand Divisions include NIKE Trademark licensing and other miscellaneous revenue that is not part of a geographic operating segment.

(3)Business revenue consists primarily of foreign exchange hedging gains and losses related to revenue generated by entities within the NIKE Brand and Converse geographic operating segments, but managed through our central currency risk management program.

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FIRST QUARTER OF FISCAL 2023 COMPARED TO FIRST QUARTER OF FISCAL 2022
On a currency-neutral basis, NIKE, Inc. Revenues increased 10% for the first
quarter of fiscal 2023, driven by growth in North America, EMEA and APLA,
partially offset by lower revenues in Greater China. Higher revenues in North
America, EMEA and APLA contributed approximately 5, 5 and 2 percentage points to
NIKE, Inc. Revenues, respectively, while lower revenues in Greater China reduced
NIKE, Inc. Revenues by approximately 2 percentage points.

On a currency-neutral basis, NIKE Brand footwear revenues increased 12% in the
first quarter of fiscal 2023, driven by higher revenues in Men's and the Jordan
Brand. Unit sales of footwear increased 3%, while higher average selling price
(ASP) per pair contributed approximately 9 percentage points of footwear revenue
growth, primarily due to higher full-price ASP, net of discounts, on a wholesale
equivalent basis, the favorable impact of growth in our NIKE Direct business and
higher NIKE Direct ASP.

Currency-neutral NIKE Brand apparel revenues, for the first quarter of fiscal
2023, increased 7%, driven primarily by growth in Men's. Unit sales of apparel
increased 5%, and higher ASP per unit contributed approximately 2 percentage
points of apparel revenue growth, primarily due to higher full-price ASP, net of
discounts, partially offset by lower NIKE Direct ASP.

On a reported basis, NIKE Direct revenues represented approximately 42% of our
total NIKE Brand revenues for the first quarter of fiscal 2023 compared to 40%
for the first quarter of fiscal 2022. NIKE Brand Digital sales were $2.9 billion
for the first quarter of fiscal 2023 compared to $2.5 billion for the first
quarter of fiscal 2022. On a currency-neutral basis, NIKE Direct revenues
increased 14%, driven by NIKE Brand Digital sales growth of 23%, comparable
store sales growth of 4%, in part due to improved physical retail traffic, and
the addition of new stores. Comparable store sales, which exclude NIKE Brand
Digital sales, comprises 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. Comparable store sales includes revenues from stores that
were temporarily closed during the period as a result of COVID-19. Comparable
store sales represents a performance measure that we believe is useful
information for management and investors in understanding the performance of our
established NIKE-owned in-line and factory stores. Management considers this
metric when making financial and operating decisions. The method of calculating
comparable store sales varies across the retail industry. As a result, our
calculation of this metric may not be comparable to similarly titled measures
used by other companies.

GROSS MARGIN

                                           THREE MONTHS ENDED AUGUST 31,
           (Dollars in millions)         2022             2021          % CHANGE
           Gross profit            $       5,615     $       5,696         -1  %
           Gross margin                     44.3   %          46.5 %   (220) bps

For the first quarter of fiscal 2023, our consolidated gross margin was 220 basis points lower than the prior year and mainly reflected the following factors:

•Higher NIKE Brand product costs, on a wholesale equivalent basis, primarily due
to elevated freight and logistics costs and product mix (decreasing gross margin
approximately 190 basis points);

•Higher other costs, in part due to higher inventory obsolescence in North
America and EMEA, among other factors (decreasing gross margin approximately 100
basis points);

• Lower margin in our NIKE The direct activity, mainly driven by greater promotional activity in North America (gross margin down about 90 basis points);

•Adverse changes in net currency exchange rates, including hedging, (decrease in gross margin of around 70 basis points); and

• Higher full-price ASP, net of discounts, on a wholesale equivalent basis (gross margin increase of approximately 200 basis points), reflecting strategic price increases and product mix.

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TOTAL SELLING AND ADMINISTRATION EXPENSES

                                                     THREE MONTHS ENDED AUGUST 31,
(Dollars in millions)                              2022              2021         % CHANGE
Demand creation expense(1)                   $         943     $         918          3  %
Operating overhead expense                           2,977             2,654         12  %
Total selling and administrative expense     $       3,920     $       3,572         10  %
% of revenues                                         30.9   %          29.2  %    170 bps


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

Q1 FY2023 VS Q1 FY2022 Demand generation spending increased 3% for the first quarter of FY2023, primarily due to normalization of spending versus investments in sports marketing and brand campaigns. Changes in exchange rates reduced demand generation spending by about 5 percentage points.

Operating overhead expense increased 12% primarily due to higher wage-related
expenses, an increase in strategic technology investments and increased NIKE
Direct costs. Changes in foreign currency exchange rates decreased Operating
overhead expense by approximately 4 percentage points.

OTHER (INCOME) EXPENSE, NET

                                      THREE MONTHS ENDED AUGUST 31,
(Dollars in millions)                         2022                   2021
Other (income) expense, net   $            (146)                    $ (39)


Other (income) expense, net comprises foreign currency conversion gains and
losses from the remeasurement 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 first quarter of fiscal 2023, Other (income) expense, net increased from
$39 million of other income to $146 million in the current year, primarily due
to a favorable change in foreign currency conversion gains and losses, including
hedges, as well as settlements of legal matters, partially offset by net
favorable activity in the prior year related to our strategic distributor
partnership transition within APLA.

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-related gains and losses included in Other (income) expense,
net had unfavorable impacts of approximately $234 million on our Income before
income taxes for the first quarter of fiscal 2023.

INCOME TAXES

                                THREE MONTHS ENDED AUGUST 31,
                                  2022                2021      % CHANGE
Effective tax rate                          19.7  %  11.0  %     870 bps

Our effective tax rate was 19.7% for the first quarter of Fiscal 2023, compared to 11.0% for the first quarter of Fiscal 2022, primarily due to lower compensation benefits at stock basis.

Refer to Note 5 – Income Taxes in the Notes to the Unaudited Condensed Consolidated Financial Statements for more information.

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OPERATING SECTORS

Our operating segments reflect the internal organizational structure of the Company. The NIKE Brand segments are defined by geographic regions for operations participating in NIKE Commercial activity of the brand.

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; Europe, Middle East & Africa (EMEA); Greater China; and Asia
Pacific & Latin America (APLA), and include results for the NIKE and Jordan
brands. The Company's NIKE Direct operations are managed within each geographic
operating segment. Converse is also a reportable operating segment for the
Company, and operates predominately in one industry: the design, marketing,
licensing and selling of athletic lifestyle sneakers, apparel and accessories.

As part of our centrally managed foreign exchange risk management program,
standard foreign currency exchange 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 exchange 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 income is as follows:

THREE MONTHS ENDED AUGUST 31,

                                                                                                                % CHANGE EXCLUDING
(Dollars in millions)                                             2022            2021               % CHANGE  CURRENCY CHANGES(1)
North America                                               $        5,510    $   4,879                 13  %                13  %
Europe, Middle East & Africa                                         3,333        3,307                  1  %                17  %
Greater China                                                        1,656        1,982                -16  %               -13  %
Asia Pacific & Latin America                                         1,535        1,465                  5  %                16  %
Global Brand Divisions(2)                                               14            7                100  %                96  %
TOTAL NIKE BRAND                                                    12,048       11,640                  4  %                10  %
Converse                                                               643          629                  2  %                 8  %
Corporate(3)                                                            (4)         (21)                 -                    -
TOTAL NIKE, INC. REVENUES                                   $       12,687    $  12,248                  4  %                10  %

(1) The percentage change excluding foreign exchange variations represents a non-GAAP financial measure. See “Use of Non-GAAP Financial Measures” for more information.

(2) The sales of the Worldwide Brand Divisions include NIKE Trademark licensing and other miscellaneous revenue that is not part of a geographic operating segment.

(3) Corporate income primarily consists of foreign exchange hedging gains and losses related to revenues generated by the entities NIKE Brand and Converse geographic operating segments, but managed through our central currency risk management program.

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

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The breakdown of earnings before interest and taxes is as follows:

                                                                    THREE MONTHS ENDED AUGUST 31,
(Dollars in millions)                                         2022              2021                  % CHANGE
North America                                           $       1,377     $       1,434                  -4  %
Europe, Middle East & Africa                                      975               875                  11  %
Greater China                                                     541               701                 -23  %
Asia Pacific & Latin America                                      500               481                   4  %
Global Brand Divisions                                         (1,187)             (987)                -20  %
TOTAL NIKE BRAND(1)                                             2,206             2,504                 -12  %
Converse                                                          209               204                   2  %
Corporate                                                        (574)             (545)                 -5  %

TOTAL NIKE, INC. EARNINGS BEFORE INTEREST AND TAX(1) 1,841

       2,163                 -15  %
EBIT margin(1)                                                   14.5   %          17.7  %
Interest expense (income), net                                     13                57                   -
TOTAL NIKE, INC. INCOME BEFORE INCOME TAXES             $       1,828     $       2,106                 -13  %


(1) Set NIKE Brand EBIT, TotalNIKE, Inc. EBIT and EBIT margin represent non-GAAP financial measures. See “Use of Non-GAAP Financial Measures” for more information.

NORTH AMERICA

                                                                            

THREE MONTHS ENDED AUGUST 31,

                                                                                                                % CHANGE EXCLUDING
(Dollars in millions)                                               2022           2021               % CHANGE    CURRENCY CHANGES
Revenues by:
Footwear                                                      $       3,805    $   3,264                 17  %               17  %
Apparel                                                               1,494        1,430                  4  %                5  %
Equipment                                                               211          185                 14  %               14  %
TOTAL REVENUES                                                $       5,510    $   4,879                 13  %               13  %
Revenues by:
Sales to Wholesale Customers                                  $       3,027    $   2,678                 13  %               13  %
Sales through NIKE Direct                                             2,483        2,201                 13  %               13  %
TOTAL REVENUES                                                $       5,510    $   4,879                 13  %               13  %
EARNINGS BEFORE INTEREST AND TAXES                            $       1,377    $   1,434                 -4  %


COMPARISON OF THE FIRST QUARTER OF FISCAL 2023 WITH THE FIRST QUARTER OF FISCAL 2022

On a currency-neutral basis, North America revenues for the first quarter of
fiscal 2023 increased 13%, due primarily to higher revenues in Men's and the
Jordan Brand. NIKE Direct revenues increased 13%, driven by strong digital sales
growth of 19%, comparable store sales growth of 4%, in part due to improved
physical retail traffic, and the addition of new stores.

Footwear revenues increased 17% on a currency-neutral basis, driven by higher
revenues in Men's and the Jordan Brand. Unit sales of footwear increased 10%,
while higher ASP per pair contributed approximately 7 percentage points of
footwear revenue growth, primarily due to higher full-price ASP.

                                                                            

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On a currency-neutral basis, apparel revenues increased 5%, driven by higher
revenues in Men's. Unit sales of apparel increased 5%, while ASP per unit
remained flat, as higher full-price ASP was offset by lower NIKE Direct ASP,
primarily due to higher promotional activity.

Reported EBIT decreased 4% primarily due to gross margin contraction, offset by
higher revenues and lower selling and administrative expense as a percent of
revenues. Gross margin decreased approximately 460 basis points largely driven
by higher product costs, primarily due to increased freight and logistics costs
as well as product mix, lower margin in our NIKE Direct business driven by
higher promotional activity, an increase in other costs reflecting higher
inventory obsolescence and a lower mix of full-price sales. This activity was
partially offset by higher full-price ASP, net of discounts, due to product mix
and strategic pricing increases. Selling and administrative expense increased
due to higher operating overhead expense, slightly offset by lower demand
creation expense. Operating overhead expense increased primarily as a result of
an increase in wage-related expenses, lower bad debt recoveries and increased
NIKE Direct costs. The decrease in demand creation expense reflected lower
advertising and marketing expense for brand events and our retail operations,
partially offset by higher sports marketing expense.

EUROPE, MIDDLE EAST & AFRICA

THREE MONTHS ENDED AUGUST 31,

                                                                                                                % CHANGE EXCLUDING
(Dollars in millions)                                               2022           2021               % CHANGE    CURRENCY CHANGES
Revenues by:
Footwear                                                      $       2,012    $   1,983                  1  %               18  %
Apparel                                                               1,153        1,159                 -1  %               15  %
Equipment                                                               168          165                  2  %               18  %
TOTAL REVENUES                                                $       3,333    $   3,307                  1  %               17  %
Revenues by:
Sales to Wholesale Customers                                  $       2,203    $   2,224                 -1  %               15  %
Sales through NIKE Direct                                             1,130        1,083                  4  %               20  %
TOTAL REVENUES                                                $       3,333    $   3,307                  1  %               17  %
EARNINGS BEFORE INTEREST AND TAXES                            $         975    $     875                 11  %


FIRST QUARTER OF FISCAL 2023 COMPARED TO FIRST QUARTER OF FISCAL 2022
On a currency-neutral basis, EMEA revenues for the first quarter of fiscal
2023 increased 17%, primarily driven by growth in Men's and the Jordan Brand.
NIKE Direct revenues increased 20%, driven by strong digital sales growth of 46%
and comparable store sales growth of 3%, partially offset by store closures.

Currency-neutral footwear revenues increased 18%, driven by higher revenues in
Men's and the Jordan Brand. Unit sales of footwear remained flat, while higher
ASP per pair contributed approximately 18 percentage points of footwear revenue
growth. Higher ASP per pair was primarily due to higher full-price and NIKE
Direct ASPs as well as a higher mix of full-price sales.

Currency-neutral apparel revenues increased 15% due primarily to higher revenues
in Men's. Unit sales of apparel increased 7%, while higher ASP per unit
contributed approximately 8 percentage points of apparel revenue growth,
primarily due to higher full-price ASP, partially offset by a lower mix of NIKE
Direct sales and lower NIKE Direct ASP.

Reported EBIT increased 11% as gross margin expansion and higher revenues more
than offset higher selling and administrative expense. Gross margin increased
approximately 380 basis points primarily due to higher full-price ASP, net of
discounts, reflecting strategic pricing increases, as well as higher margin and
the favorable impact of growth in our NIKE Direct business, a higher mix of
full-price sales, higher off-price margin and favorable changes in standard
foreign currency exchange rates. This activity was partially offset by higher
product costs and higher other costs, particularly higher inventory
obsolescence. Selling and administrative expense increased due to higher demand
creation and operating overhead expense. Higher demand creation expense was
primarily due to increases in advertising and marketing expense as well as
sports marketing expense. Higher operating overhead expense was driven by lower
bad debt recoveries and an increase in strategic technology investments, offset
by lower wage-related expense.


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GREATER CHINA

                                                                           

THREE MONTHS ENDED AUGUST 31,

                                                                                                                % CHANGE EXCLUDING
(Dollars in millions)                                               2022           2021               % CHANGE    CURRENCY CHANGES
Revenues by:
Footwear                                                      $       1,233    $   1,449                -15  %              -11  %
Apparel                                                                 374          476                -21  %              -18  %
Equipment                                                                49           57                -14  %              -10  %
TOTAL REVENUES                                                $       1,656    $   1,982                -16  %              -13  %
Revenues by:
Sales to Wholesale Customers                                  $         839    $   1,114                -25  %              -21  %
Sales through NIKE Direct                                               817          868                 -6  %               -2  %
TOTAL REVENUES                                                $       1,656    $   1,982                -16  %              -13  %
EARNINGS BEFORE INTEREST AND TAXES                            $         541    $     701                -23  %


COMPARISON OF THE FIRST QUARTER OF FISCAL 2023 WITH THE FIRST QUARTER OF FISCAL 2022

On a currency-neutral basis, Greater China revenues for the first quarter of
fiscal 2023 decreased 13%, reflecting impacts from COVID-19 related disruptions.
The decrease in revenues was primarily due to lower revenues in Men's and
Women's, partially offset by growth in the Jordan Brand. NIKE Direct revenues
decreased 2% due to digital sales declines of 5%, comparable store sales
declines of 3%, in part due to reduced physical retail traffic as a result of
COVID-19 related disruptions, partially offset by the addition of new stores.

Currency-neutral footwear revenues decreased 11%, driven primarily by lower
revenues in Men's and Women's, partially offset by growth in the Jordan Brand.
Unit sales of footwear decreased 10%, while lower ASP per pair reduced footwear
revenues by approximately 1 percentage point, driven by lower full-price and
off-price ASPs, partially offset by higher NIKE Direct ASP.

Currency-neutral apparel revenues decreased 18%, due primarily to lower revenues
in Men's and Women's. Unit sales of apparel decreased 7%, while lower ASP per
unit reduced apparel revenues by approximately 11 percentage points, primarily
due to lower off-price, full-price and NIKE Direct ASPs.

Reported EBIT decreased 23% due to lower revenues, gross margin contraction and
higher selling and administrative expense as a percent of revenues. Gross margin
decreased approximately 20 basis points reflecting lower NIKE Direct margin and
full-price ASP, net of discounts. This activity was partially offset by lower
other costs, primarily due to lower warehousing and freight charges and lower
inventory obsolescence, as well as favorable changes in standard foreign
currency exchange rates. Selling and administrative expense decreased due to
lower demand creation, offset by higher operating overhead expense. The decrease
in demand creation expense was primarily due to lower retail brand presentation
expense as well as lower investments in digital marketing, partially offset by
higher advertising and marketing expense. Operating overhead expense increased
largely due to higher wage-related costs and higher NIKE Direct strategic
technology investments.

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ASIA PACIFIC & LATIN AMERICA

                                                                           

THREE MONTHS ENDED AUGUST 31,

                                                                                                                % CHANGE EXCLUDING
(Dollars in millions)                                               2022           2021               % CHANGE    CURRENCY CHANGES
Revenues by:
Footwear                                                      $       1,064    $   1,022                  4  %               15  %
Apparel                                                                 413          385                  7  %               19  %
Equipment                                                                58           58                  0  %               12  %
TOTAL REVENUES                                                $       1,535    $   1,465                  5  %               16  %
Revenues by:
Sales to Wholesale Customers                                  $         914    $     927                 -1  %                8  %
Sales through NIKE Direct                                               621          538                 15  %               30  %
TOTAL REVENUES                                                $       1,535    $   1,465                  5  %               16  %
EARNINGS BEFORE INTEREST AND TAXES                            $         500    $     481                  4  %


As discussed previously, our NIKE Brand business in Brazil transitioned to a
distributor operating model during fiscal 2021. During the first quarter of
fiscal 2023, we completed the sale of our entity in Chile to a third-party
distributor and the impacts from closing this transaction are included within
Corporate and are not reflected in the APLA operating segment results.
Subsequent to the end of the first quarter of fiscal 2023, we completed the sale
of our Argentina and Uruguay entities to a third party distributor. This
completes the transition of our NIKE Brand businesses in these markets to a
distributor operating model. Our Central and South America (CASA) marketplace
now reflects a full distributor operating model. For more information see
Note 13 - Acquisitions and Divestitures within the accompanying Notes to the
Unaudited Condensed Consolidated Financial Statements.

COMPARISON OF THE FIRST QUARTER OF FISCAL 2023 WITH THE FIRST QUARTER OF FISCAL 2022

On a currency-neutral basis, APLA revenues increased 16% for the first quarter
of fiscal 2023. The increase was due to higher revenues across nearly all
territories, led by Southeast Asia & India and Korea, which increased 64% and
23%, respectively. Revenues increased primarily due to higher revenues in Men's,
Women's and the Jordan Brand. NIKE Direct revenues increased 30%, primarily due
to digital sales growth of 29%, comparable store sales growth of 24%, in part
due to improved physical retail traffic, and the addition of new stores.

Currency-neutral footwear revenues increased 15%, due primarily to higher
revenues in Women's and the Jordan Brand. Unit sales of footwear increased 1%,
while higher ASP per pair contributed approximately 14 percentage points of
footwear revenue growth. Higher ASP per pair was driven by the favorable impact
of growth in our NIKE Direct business as well as higher full-price ASP. Higher
ASPs, in part, reflect inflationary conditions in Argentina.

Currency-neutral apparel revenues increased 19%, due primarily to higher
revenues in Men's and Women's. Unit sales of apparel increased 18%, while higher
ASP per unit contributed approximately 1 percentage point of apparel revenue
growth, driven by higher off-price ASP. Higher ASPs, in part, reflect
inflationary conditions in Argentina.

Reported EBIT increased 4% for the first quarter of fiscal 2023, as higher
revenues and gross margin expansion more than offset higher selling and
administrative expense. Gross margin increased approximately 90 basis points due
to higher full-price ASP, net of discounts, the favorable impact of growth and
higher margin in our NIKE Direct business, higher off-price margin, and
favorable changes in standard foreign currency exchange rates. This activity was
partially offset by higher other costs, primarily higher warehousing and
freight, as well as higher product costs. Selling and administrative expense
increased due to higher operating overhead and demand creation expense. Higher
operating overhead expense was primarily due to an increase in professional
services costs, as well as higher wage-related expenses. The increase in demand
creation expense was primarily due to normalization of sports marketing spend.


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GLOBAL BRAND DIVISIONS

                                                                         

THREE MONTHS ENDED AUGUST 31,

                                                                                                          % CHANGE EXCLUDING
(Dollars in millions)                                        2022            2021               % CHANGE    CURRENCY CHANGES
Revenues                                              $            14    $       7                100  %               96  %
Earnings (Loss) Before Interest and Taxes             $        (1,187)   $    (987)               -20  %


The Global Brand Divisions represent primarily demand generation and operating overhead, including product creation and design expenses that are centrally managed for the NIKE Brand, as well as the costs associated with NIKE
Lead global digital operations and enterprise technology. Revenues from the brand’s global divisions include NIKE Trademark licensing and other miscellaneous revenue that is not part of a geographic operating segment.

COMPARISON OF THE FIRST QUARTER OF FISCAL 2023 WITH THE FIRST QUARTER OF FISCAL 2022

Global Brand Divisions' loss before interest and taxes increased 20% for the
first quarter of fiscal 2023 driven primarily by higher operating overhead
expense while demand creation expense remained flat. Higher operating overhead
expense was primarily due to an increase in wage-related costs and strategic
technology investments.


CONVERSE

                                                                           

THREE MONTHS ENDED AUGUST 31,

                                                                                                                % CHANGE EXCLUDING
(Dollars in millions)                                               2022           2021               % CHANGE    CURRENCY CHANGES
Revenues by:
Footwear                                                      $         577    $     567                  2  %                7  %
Apparel                                                                  20           24                -17  %              -10  %
Equipment                                                                 8            9                -11  %                1  %
Other(1)                                                                 38           29                 31  %               30  %
TOTAL REVENUES                                                $         643    $     629                  2  %                8  %
Revenues by:
Sales to Wholesale Customers                                  $         344    $     369                 -7  %                0  %
Sales through Direct to Consumer                                        261          231                 13  %               17  %
Other(1)                                                                 38           29                 31  %               30  %
TOTAL REVENUES                                                $         643    $     629                  2  %                8  %
EARNINGS BEFORE INTEREST AND TAXES                            $         209    $     204                  2  %


(1)Other revenues consist of territories serviced by third-party licensees who
pay royalties to Converse for the use of its registered trademarks and other
intellectual property rights. We do not own the Converse trademarks in Japan and
accordingly do not earn revenues in Japan.

COMPARISON OF THE FIRST QUARTER OF FISCAL 2023 WITH THE FIRST QUARTER OF FISCAL 2022

On a currency-neutral basis, Converse revenues increased 8% for the first
quarter of fiscal 2023 as revenue growth in North America and Western Europe was
partially offset by declines in Asia. Direct to consumer revenues increased 17%,
driven by strong digital demand in North America. Combined unit sales within the
wholesale and direct to consumer channels decreased 5%, while ASP increased 12%,
driven by growth in direct to consumer.

Reported EBIT increased 2%, driven by gross margin expansion and higher
revenues, partially offset by higher selling and administrative expense. Gross
margin increased approximately 220 basis points as higher ASP, net of discounts,
and higher margin in direct to consumer were partially offset by higher product
and other costs, primarily due to increased freight costs. Selling and
administrative expense increased due to higher operating overhead expense,
partially offset by a decrease in demand creation expense. Operating overhead
expense increased as a result of higher professional services costs, lower bad
debt recoveries and an increase in wage-related expenses.

                                                                            

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CORPORATE

                                                                   THREE MONTHS ENDED AUGUST 31,
(Dollars in millions)                                          2022            2021                 % CHANGE
Revenues                                                $            (4)   $      (21)                  -
Earnings (Loss) Before Interest and Taxes               $          (574)   $     (545)                 -5  %


Corporate revenue primarily consists of foreign exchange hedging gains and losses related to revenue generated by entities within the NIKE Brand and Converse geographic operating segments, but managed through our central currency risk management program.

The Corporate loss before interest and taxes primarily consists 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 exchange 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
remeasurement of monetary assets and liabilities in non-functional currencies;
and certain other foreign currency derivative instruments.

COMPARISON OF THE FIRST QUARTER OF FISCAL 2023 WITH THE FIRST QUARTER OF FISCAL 2022

Increase in business loss before interest and taxes $29 million for the first quarter of fiscal 2023, primarily due to the following:

•an unfavorable change of $140 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;

•a favorable change in net foreign currency gains and losses of $67 million
related to the remeasurement 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

•a favorable change in $44 million related to the settlement of legal matters, partially offset by favorable net activity in the prior year related to the transition of our strategic distribution partnership within APLA.

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

Refer to Note 4 - Fair Value Measurements and Note 8 - Risk Management and
Derivatives in the accompanying Notes to the Unaudited Condensed Consolidated
Financial Statements for additional description of outstanding derivatives at
each reported period end. For additional information about our Foreign Currency
Exposures and Hedging Practices refer to Part II, Item 7. Management's
Discussion and Analysis of Financial Condition and Results of Operations of our
Annual Report on Form 10-K for the fiscal year ended May 31, 2022.

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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 - Product purchases denominated in currencies other than the
functional currency of the transacting entity and factory input costs from the
foreign currency adjustments program with certain factories.

•Non-Functional Currency Denominated External Sales - A portion of our NIKE
Brand and Converse revenues associated with European operations 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 – Costs denominated in non-functional currencies, such as endorsement contracts, also generate currency risk, although to a lesser extent.

•Non-Functional Currency Denominated Monetary Assets and Liabilities - Our
global subsidiaries have various monetary 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 remeasurement which may create fluctuations in Other
(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, except for hedges of the embedded derivative
components of the product cost exposures and other contractual agreements.

Certain currency forward contracts used to manage the foreign exchange exposure
of non-functional currency denominated monetary assets and liabilities subject
to remeasurement and embedded derivative contracts are not formally designated
as hedging instruments and are recognized in Other (income) expense, net.

TRANSLATIONAL EXHIBITIONS

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
(loss) within Shareholders' equity. The impact of foreign exchange rate
fluctuations on the translation of our consolidated Revenues was a detriment of
approximately $823 million for the three months ended August 31, 2022, and a
benefit of approximately $382 million for the three months ended August 31,
2021. The impact of foreign exchange rate fluctuations on the translation of our
Income before income taxes was a detriment of approximately $253 million for the
three months ended August 31, 2022, and a benefit of approximately $117 million
for the three months ended August 31, 2021.

Management generally identifies hyper-inflationary markets as those markets
whose cumulative inflation rate over a three-year period exceeds 100%.
Management has concluded our Argentina subsidiary within our APLA operating
segment and our Turkey subsidiary within our EMEA operating segment are
operating in hyper-inflationary markets. As a result, beginning in the second
quarter of fiscal 2019 and the first quarter of fiscal 2023, the functional
currency of our Argentina subsidiary and our Turkey subsidiary, respectively,
changed from the local currency to the U.S. Dollar. As of and for the three
months ended August 31, 2022, these changes did not have a material impact on
our results of operations or financial condition, and we do not anticipate they
will have a material impact in future periods based on current rates.

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.

                                                                            

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We estimate the combination of translation of foreign currency-denominated
profits from our international businesses and the year-over-year change in
foreign currency related gains and losses included in Other (income) expense,
net had an unfavorable impact of approximately $234 million on our Income before
income taxes for the three months ended August 31, 2022.

CASH AND CAPITAL RESOURCES

CASH ACTIVITY

Cash provided (used) by operations was an inflow of $357 million for the first
three months of fiscal 2023, compared to $1,111 million for the first three
months of fiscal 2022. Net income, adjusted for non-cash items, generated $1,771
million of operating cash inflow for the first three months of fiscal 2023,
compared to $2,076 million for the first three months of fiscal 2022. The net
change in working capital and other assets and liabilities resulted in a
decrease to Cash provided (used) by operations of $1,414 million for the first
three months of fiscal 2023 compared to $965 million for the first three months
of fiscal 2022. The net change in working capital was unfavorably impacted by an
increase in Inventories of $1,464 million as a result of higher inventory levels
due to extended lead times and shifts in product flow as a result of ongoing
supply chain volatility. The change in working capital was also impacted by a
$707 million favorable change in Accounts payable due to higher product
purchases and the net favorable change in cash collateral with derivative
counterparties as a result of hedging transactions. During the first three
months of fiscal 2023, we received cash collateral of $476 million as compared
to $39 million during the first three months of fiscal 2022. Refer to the Credit
Risk section of Note 8 - Risk Management and Derivatives in the accompanying
Notes to the Unaudited Condensed Consolidated Financial Statements for
additional details.

Cash provided (used) by investing activities was an outflow of $214 million for
the first three months of fiscal 2023, compared to an inflow of $501 million for
the first three months of fiscal 2022, primarily driven by the net change in
short-term investments. For the first three months of fiscal 2023, the net
change in short-term investments (including sales, maturities and purchases)
resulted in a cash outflow of $89 million compared to a cash inflow of $583
million for the first three months of fiscal 2022.

Cash provided (used) by financing activities was an outflow of $1,404 million
for the first three months of fiscal 2023 compared to $743 million for the first
three months of fiscal 2022. The increased outflow in the first three months of
fiscal 2023 was driven by lower proceeds from stock option exercises, which
resulted in a cash inflow of $82 million in the first three months of fiscal
2023 compared to $473 million in the first three months of fiscal 2022, as well
as higher share repurchases of $983 million for the first three months of fiscal
2023 compared to $752 million in the first three months of fiscal 2022.

During the first three months of fiscal 2023, we repurchased a total of 9.0
million shares of NIKE's Class B Common Stock for $991.1 million (an average
price of $110.58 per share). In August 2022, we terminated the previous
four-year, $15 billion share repurchase program approved by the Board of
Directors in June 2018. Under this program, we repurchased 6.5 million shares
for a total approximate cost of $710.0 million (an average price of $109.85 per
share) during the first quarter of fiscal 2023 and 83.8 million shares for a
total approximate cost of $9.4 billion (an average price of $111.82 per share)
during the term of the program. Upon termination of the four-year, $15 billion
program, we began purchasing shares under the new four-year, $18 billion share
repurchase plan authorized by the Board of Directors in June 2022. As of
August 31, 2022, we had repurchased 2.5 million shares at a cost of
approximately $281.1 million (an average price of $112.48 per share) under this
new program. We continue to expect funding of share repurchases will come from
operating cash flows and excess cash. The timing and the amount of share
repurchases will be dictated by our capital needs and stock market conditions.

CAPITAL RESOURCES

On July 21, 2022, we filed a shelf registration statement (the "Shelf") with the
U.S. Securities and Exchange Commission (SEC) which permits us to issue an
unlimited amount of debt securities from time to time. The Shelf expires on July
21, 2025.

As of August 31, 2022, our committed credit facilities were unchanged from the
information previously reported on Form 10-K for the fiscal year ended May 31,
2022. We currently have long-term debt ratings of AA- and A1 from Standard and
Poor's Corporation and Moody's Investor Services, respectively. Any changes to
these ratings could result in interest rate and facility fee changes. As of
August 31, 2022, we were in full compliance with the covenants under our
facilities and believe it is unlikely we will fail to meet any of the covenants
in the foreseeable future. As of August 31, 2022 and May 31, 2022, no amounts
were outstanding under our committed credit facilities.

Liquidity was also provided by our $3 billion commercial paper program. As of
and for the three months ended August 31, 2022, we did not have any borrowings
outstanding under our $3 billion program. We may issue commercial paper or other
debt securities depending on general corporate needs. We currently have
short-term debt ratings of A1+ and P1 from Standard and Poor's Corporation and
Moody's Investor Services, respectively.

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To date, in fiscal 2023, we have not experienced difficulty accessing the credit
markets; however, future volatility in the capital markets may increase costs
associated with issuing commercial paper or other debt instruments or affect our
ability to access those markets.

As of August 31, 2022, we had cash, cash equivalents and short-term investments
totaling $11.9 billion, primarily consisting of commercial paper, corporate
notes, deposits held at major banks, money market funds, U.S. Treasury
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 August 31, 2022, the weighted average
days to maturity of our cash equivalents and short-term investments portfolio
was 136 days.

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.

There have been no material changes in the material cash requirements reported in our Annual Report on Form 10-K for the year ended May 31, 2022.

OFF-BALANCE SHEET ARRANGEMENTS

From August 31, 2022we had no off-balance sheet arrangements that have, or are reasonably likely to have, a material effect on our current or future financial condition, results of operations, liquidity, capital expenditures or capital resources .

NEW ACCOUNTING PRONOUNCEMENTS

There have been no material changes in recently issued or adopted accounting
standards from those disclosed in our Annual Report on Form 10-K for the fiscal
year ended May 31, 2022.

CRITICAL ACCOUNTING ESTIMATES

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 accounting principles generally accepted
in the United States of America. 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 the assumptions and judgments involved in the accounting estimates
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 estimates. Actual results could differ from
these estimates. We are not currently aware of any reasonably likely events or
circumstances that would result in materially different amounts being reported.

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