Determination of shares:
Weighted average common shares outstanding 485.5 484.9 495.6
Assumed conversion of dilutive stock options and awards 8.4 5.8 8.5
Diluted weighted average common shares outstanding 493.9 490.7 504.1
Basic earnings per common share $ 3.93 $ 3.07 $ 3.80
Diluted earnings per common share $ 3.86 $ 3.03 $ 3.74
Note 13 — Benefit Plans
The Company has a profit sharing plan available to most U.S.−based employees. The terms of the plan call for annual contributions by the Company as determined by the Board of Directors. A subsidiary of the Company also has a profit sharing plan available to its U.S.−based employees. The terms of the plan call for annual contributions as determined by the subsidiary’s executive management. Contributions of $34.9 million, $27.6 million and $37.3 million were made to the plans and are included in selling and administrative expense for the years ended May 31, 2010, 2009 and 2008, respectively. The Company has various 401(k) employee savings plans available to U.S.−based employees. The Company matches a portion of employee contributions with common stock or cash. Company contributions to the savings plans were $34.2 million, $37.6 million and $33.9 million for the years ended May 31, 2010, 2009 and 2008, respectively, and are included in selling and administrative expense.
The Company also has a Long−Term Incentive Plan (“LTIP”) that was adopted by the Board of Directors and approved by shareholders in September 1997 and later amended in fiscal 2007. The Company recognized $24.1 million, $17.6 million and $35.9 million of selling and administrative expense related to cash awards under the LTIP during the years ended May 31, 2010, 2009 and 2008, respectively.
The Company has pension plans in various countries worldwide. The pension plans are only available to local employees and are generally
government mandated. The liability related to the unfunded pension liabilities of the plans was $113.0 million and $82.8 million at May 31, 2010 and 2009, respectively.
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NIKE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) Note 14 — Accumulated Other Comprehensive Income
The components of accumulated other comprehensive income, net of tax, are as follows:
May 31, 2010 2009
(In millions)
Cumulative translation adjustment and other $ (94.6) $ 64.6
Net deferred gain on net investment hedge derivatives 107.3 62.5
Net deferred gain on cash flow hedge derivatives 202.1 240.4
$214.8 $367.5
Note 15 — Commitments and Contingencies
The Company leases space for certain of its offices, warehouses and retail stores under leases expiring from 1 to 25 years after May 31, 2010. Rent expense was $416.1 million, $397.0 million and $344.2 million for the years ended May 31, 2010, 2009 and 2008, respectively. Amounts of minimum future annual rental commitments under non−cancelable operating leases in each of the five years ending May 31, 2011 through 2015 are $334.4 million, $264.0 million, $219.9 million, $177.2 million, $148.0 million, respectively, and $465.8 million in later years.
As of May 31, 2010 and 2009, the Company had letters of credit outstanding totaling $101.1 million and $154.8 million, respectively. These letters of credit were generally issued for the purchase of inventory.
In connection with various contracts and agreements, the Company provides routine indemnifications relating to the enforceability of intellectual property rights, coverage for legal issues that arise and other items where the Company is acting as the guarantor. Currently, the Company has several such agreements in place. However, based on the Company’s historical experience and the estimated probability of future loss, the Company has determined that the fair value of such indemnifications is not material to the Company’s financial position or results of operations.
In the ordinary course of its business, the Company is involved in various legal proceedings involving contractual and employment relationships, product liability claims, trademark rights, and a variety of other matters. The Company does not believe there are any pending legal proceedings that will have a material impact on the Company’s financial position or results of operations.
Note 16 — Restructuring Charges
During fiscal 2009, the Company took necessary steps to streamline its management structure, enhance consumer focus, drive innovation more quickly to market and establish a more scalable, long−term cost structure. As a result, the Company reduced its global workforce by approximately 5% and incurred pre−tax restructuring charges of $195 million, primarily consisting of severance costs related to the workforce reduction. As nearly all of the restructuring activities were completed in fiscal 2009, the Company does not expect to recognize additional costs in future periods relating to these actions. The restructuring charge is reflected in the corporate expense line in the segment presentation of earnings before interest and taxes in Note 19 — Operating Segments and Related Information.
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NIKE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) The activity in the restructuring accrual for the years ended May 31, 2010 and 2009 is as follows (in millions):
Restructuring accrual — June 1, 2008 $ —
Severance and related costs 195.0
Cash payments (29.4)
Non−cash stock option and restricted stock expense (19.5)
Foreign currency translation and other 3.5
Restructuring accrual — May 31, 2009 149.6
Cash payments (142.6)
Foreign currency translation and other 1.2
Restructuring accrual — May 31, 2010 $ 8.2
The accrual balance as of May 31, 2010 will be relieved throughout the first half of fiscal year 2011, as final severance payments are completed. The restructuring accrual is included in Accrued liabilities in the Consolidated Balance Sheet.
Note 17 — Divestitures
On December 17, 2007, the Company completed the sale of the Starter brand business to Iconix Brand Group, Inc. for $60.0 million in cash. This transaction resulted in a gain of $28.6 million during the year ended May 31, 2008.
On April 17, 2008, the Company completed the sale of NIKE Bauer Hockey for $189.2 million in cash to a group of private investors (“the Buyer”). The sale resulted in a net gain of $32.0 million recorded in the fourth quarter of the year ended May 31, 2008. This gain included the recognition of a $46.3 million cumulative foreign currency translation adjustment previously included in accumulated other comprehensive income. As part of the terms of the sale agreement, the Company granted the Buyer a royalty free limited license for the use of certain NIKE trademarks for a transitional period of approximately two years. The Company deferred $41.0 million of the sale proceeds related to this license agreement, to be recognized over the license period.
The gains resulting from these divestitures are reflected in other (income) expense, net and in the corporate expense line in the segment presentation of earnings before interest and taxes in Note 19 — Operating Segments and Related Information.