Nike 2013 Annual Report Download - page 62

PART II
NOTE 14 — Accumulated Other Comprehensive Income
The components of accumulated other comprehensive income, net of tax, are as follows:
May 31
(In millions) 2013 2012
Cumulative translation adjustment and other $ (14) $ (127)
Net deferred gain on cash flow hedge derivatives 193 181
Net deferred gain on net investment hedge derivatives 95 95
ACCUMULATED OTHER COMPREHENSIVE INCOME $ 274 $ 149
Refer to Note 17 — Risk Management and Derivatives for more information on the Company’s risk management program and derivatives.
NOTE 15 — Discontinued Operations
The Company continually evaluates its existing portfolio of businesses to
ensure resources are invested in those businesses that are accretive to the
NIKE Brand and represent the largest growth potential and highest returns.
During the year, the Company divested of Umbro and Cole Haan, allowing it
to focus its resources on driving growth in the NIKE, Jordan, Converse and
Hurley brands.
On February 1, 2013, the Company completed the sale of Cole Haan to Apax
Partners for an agreed upon purchase price of $570 million and received at
closing $561 million, net of $9 million of purchase price adjustments. The
transaction resulted in a gain on sale of $231 million, net of $137 million in tax
expense; this gain is included in the net income (loss) from discontinued
operations line item on the consolidated statements of income. There were no
adjustments to these recorded amounts as of May 31, 2013. Beginning
November 30, 2012, the Company classified the Cole Haan disposal group
as held-for-sale and presented the results of Cole Haan’s operations in the
net income (loss) from discontinued operations line item on the consolidated
statements of income. From this date until the sale, the assets and liabilities of
Cole Haan were recorded in the assets of discontinued operations and
liabilities of discontinued operations line items on the consolidated balance
sheets, respectively. Previously, these amounts were reported in the
Company’s segment presentation as “Other Businesses.”
Under the sale agreement, the Company agreed to provide certain transition
services to Cole Haan for an expected period of 3 to 9 months from the date
of sale. The Company will also license NIKE proprietary Air and Lunar
technologies to Cole Haan for a transition period. The continuing cash flows
related to these items are not expected to be significant to Cole Haan and the
Company will have no significant continuing involvement with Cole Haan
beyond the transition services. Additionally, preexisting guarantees of certain
Cole Haan lease payments remain in place after the sale; the maximum
exposure under the guarantees is $44 million at May 31, 2013. The fair value
of the guarantees is not material.
On November 30, 2012, the Company completed the sale of certain assets of
Umbro to Iconix Brand Group (“Iconix”) for $225 million. The Umbro disposal
group was classified as held-for-sale as of November 30, 2012 and the
results of Umbro’s operations are presented in the net income (loss) from
discontinued operations line item on the consolidated statements of income.
The remaining liabilities of Umbro are recorded in the liabilities of discontinued
operations line items on the consolidated balance sheets. Previously, these
amounts were reported in the Company’s segment presentation as “Other
Businesses.” Upon meeting the held-for-sale criteria, the Company recorded
a loss of $107 million, net of tax, on the sale of Umbro and the loss is included
in the net income (loss) from discontinued operations line item on the
consolidated statements of income. The loss on sale was calculated as the
net sales price less Umbro assets of $248 million, including intangibles,
goodwill, and fixed assets, other miscellaneous charges of $22 million, and
the release of the associated cumulative translation adjustment of $129
million. The tax benefit on the loss was $67 million. There were no
adjustments to these recorded amounts as of May 31, 2013.
Under the sale agreement, the Company provided transition services to Iconix
while certain markets were transitioned to Iconix-designated licensees. These
transition services are complete and the Company has wound down the
remaining operations of Umbro.
For the year ended May 31, 2013, net income (loss) from discontinued
operations included, for both businesses, the net gain or loss on sale, net
operating losses, tax expenses, and approximately $20 million in wind down
costs.
Summarized results of the Company’s discontinued operations are as follows:
Year Ended May 31,
(In millions) 2013 2012 2011
Revenues $ 523 $ 796 $ 746
Income (loss) before income taxes 108 (43) (18)
Income tax expense (benefit) 87 3 21
Net income (loss) from discontinued operations $ 21 $ (46) $ (39)
As of May 31, 2013 and 2012, the aggregate components of assets and liabilities classified as discontinued operations and included in current assets and current
liabilities consisted of the following:
As of May 31,
(In millions) 2013 2012
Accounts Receivable, net $ — $ 148
Inventories — 128
Deferred income taxes and other assets —35
Property, plant and equipment, net —70
Identifiable intangible assets, net — 234
TOTAL ASSETS $ — $ 615
Accounts payable $1$42
Accrued liabilities 17 112
Deferred income taxes and other liabilities —16
TOTAL LIABILITIES $ 18 $ 170
NIKE, INC. 2013 Annual Report and Notice of Annual Meeting 107
FORM 10-K