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x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended August 31, 2015
Commission file number-001-10635
One Bowerman Drive,
Registrant's 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 þ 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 þ No ¨
Large accelerated filer
Non-accelerated filer
(Do not check if a smaller reporting company)
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No þ
Shares of Common Stock outstanding as of October 1, 2015 were:
Unaudited Condensed Consolidated Balance Sheets
Unaudited Condensed Consolidated Statements of Income
Unaudited Condensed Consolidated Statements of Comprehensive Income
Unaudited Condensed Consolidated Statements of Cash Flows
Notes to the Unaudited Condensed Consolidated Financial Statements
Management's Discussion and Analysis of Financial Condition and Results of Operations
PART II - OTHER INFORMATION
NIKE, Inc. Unaudited Condensed Consolidated Balance Sheets
May 31,
Cash and equivalents (Note 4)
Short-term investments (Note 4)
Accounts receivable, net
Inventories (Note 2)
Deferred income taxes (Note 6)
Prepaid expenses and other current assets (Notes 4 and 9)
Identifiable intangible assets, net
Deferred income taxes and other assets (Notes 4, 6 and Note 9)
Current portion of long-term debt (Note 4)
Notes payable (Note 4)
Accrued liabilities (Notes 3, 4 and 9)
Income taxes payable (Note 6)
Long-term debt (Note 4)
Deferred income taxes and other liabilities (Notes 4, 6 and 9)
Redeemable preferred stock
Shareholders' equity:
Common stock at stated value:
Class A convertible — 177 and 178 shares outstanding
Class B — 677 and 679 shares outstanding
Capital in excess of stated value
Accumulated other comprehensive income (Note 10)
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 August 31,
Demand creation expense
Operating overhead expense
Total selling and administrative expense
Interest expense (income), net (Note 4)
Other (income) expense, net (Note 9)
Income before income taxes
Income tax expense (Note 6)
Earnings per common share:
Dividends declared per common share
NIKE, Inc. Unaudited Condensed Consolidated Statements of Comprehensive Income
Other comprehensive income (loss), net of tax:
Change in net foreign currency translation adjustment
Change in net gains (losses) on cash flow hedges
Change in net gains (losses) on other
Total other comprehensive income (loss), net of tax
TOTAL COMPREHENSIVE INCOME
NIKE, Inc. Unaudited Condensed Consolidated Statements of Cash Flows
Cash provided by operations:
Income charges (credits) not affecting cash:
Stock-based compensation (Note 7)
Amortization and other
Net foreign currency adjustments
Changes in certain working capital components and other assets and liabilities:
Decrease (increase) in accounts receivable
(Increase) in inventories
(Increase) in prepaid expenses and other current assets
(Decrease) in accounts payable, accrued liabilities and income taxes payable
Cash provided by operations
Cash (used) provided by investing activities:
Purchases of short-term investments
Maturities of short-term investments
Sales of short-term investments
Investments in reverse repurchase agreements
Additions to property, plant and equipment
Disposals of property, plant and equipment
Cash (used) provided by investing activities
Cash used by financing activities:
Long-term debt payments, including current portion
(Decrease) in notes payable
Payments on capital lease obligations
Proceeds from exercise of stock options and other stock issuances
Excess tax benefits from share-based payment arrangements
Repurchase of common stock
Dividends — common and preferred
Cash used by financing activities
Effect of exchange rate changes on cash and equivalents
Net (decrease) increase in cash and equivalents
Cash and equivalents, beginning of period
CASH AND EQUIVALENTS, END OF PERIOD
Supplemental disclosure of cash flow information:
Non-cash additions to property, plant and equipment
Dividends declared and not paid
Short-Term Borrowings and Credit Lines
Common Stock and Stock-Based Compensation
Risk Management and Derivatives
Accumulated Other Comprehensive Income
NOTE 1 — Summary of Significant Accounting Policies
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, 2015 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 months ended August 31, 2015 are not necessarily indicative of results to be expected for the entire year.
Certain prior year amounts have been reclassified to conform to fiscal 2016 presentation.
During the third quarter of fiscal 2015, management determined it had incorrectly reflected unrealized gains and losses from re-measurement of non-functional currency intercompany balances between certain of its foreign wholly-owned subsidiaries in its Consolidated Statements of Cash Flows. These unrealized gains and losses should have been classified as non-cash reconciling items from Net income to Cash provided by operations, but were instead reported on the Effect of exchange rate changes on cash and equivalents line of the Consolidated Statements of Cash Flows. This resulted in an understatement of Cash provided by operations reported on the Consolidated Statements of Cash Flows for certain prior periods; there was no impact for any period to Net increase (decrease) in cash and equivalents reported on the Consolidated Statements of Cash Flows, or Cash and equivalents reported on the Consolidated Statements of Cash Flows and Balance Sheets. The Company assessed the materiality of the misclassifications on prior periods' financial statements in accordance with SEC Staff Accounting Bulletin ("SAB") No. 99, Materiality, codified in Accounting Standards Codification ("ASC") 250, Presentation of Financial Statements and concluded that these misstatements were not material to any prior annual or interim periods. Accordingly, in accordance with ASC 250 (SAB No. 108, Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements), the amounts have been revised in the applicable Consolidated Statements of Cash Flows. For the three and six months ended August 31, 2014 and November 30, 2014 of fiscal 2015, the revisions increased Cash provided by operations and decreased Effect of exchange rate changes on cash and equivalents by $95 million and $312 million, respectively. These amounts have been reflected in the table below. As part of the revision to the Consolidated Statements of Cash Flows, the Company has updated its presentation to separately report Net foreign currency adjustments, which was previously included within Amortization and other.
Three Months Ended August 31, 2014
Six Months Ended November 30, 2014
As Revised
Net increase (decrease) in cash and equivalents
Recently Issued Accounting Standards
In May 2014, the Financial Accounting Standards Board ("FASB") issued an accounting standards update 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. Based on the FASB's decision in July 2015 to defer the effective date and to allow more flexibility with implementation, the Company anticipates the new standard will be effective for the Company beginning June 1, 2018. The new standard is required to be applied retrospectively to each prior reporting period presented or retrospectively with the cumulative effect of initially applying it recognized at the date of initial application. The Company has not yet selected a transition method and is currently evaluating the effect the guidance will have on the Consolidated Financial Statements.
NOTE 2 — Inventories
Inventory balances of $4,414 million and $4,337 million at August 31, 2015 and May 31, 2015, respectively, were substantially all finished goods.
NOTE 3 — Accrued Liabilities
Accrued liabilities included the following:
As of August 31,
As of May 31,
Compensation and benefits, excluding taxes
Collateral received from counterparties to hedging instruments
Endorsement compensation
Dividends payable
Taxes other than income taxes
Import and logistics costs
Fair value of derivatives
TOTAL ACCRUED LIABILITIES
Other consists of various accrued expenses with no individual item accounting for more than 5% of the total Accrued liabilities balance at August 31, 2015 and May 31, 2015.
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 the 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 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 certain 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 Company's fair value processes include controls that are designed 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 August 31, 2015 and May 31, 2015, and indicate the level in the fair value hierarchy in which the Company classifies the fair value measurement.
As of August 31, 2015
Assets at Fair Value
Cash and Equivalents
Other Long-term Assets
U.S. Treasury securities
U.S. Agency securities
Commercial paper and bonds
Total Level 2:
Non-marketable preferred stock
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 or posted related to these instruments associated with the Company'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). Cash collateral received or posted related to the Company's credit related contingent features is presented in the Cash provided by operations component of the Unaudited Condensed Consolidated Statement 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 the accounting standards for non-cash collateral received.
The following tables present information about the Company's derivative assets and liabilities measured at fair value on a recurring basis as of August 31, 2015 and May 31, 2015, and indicate the level in the fair value hierarchy in which the Company classifies the fair value measurement.
Liabilities at Fair Value
Foreign exchange forwards and options(1)
Embedded derivatives
Interest rate swaps(2)
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 $135 million as of August 31, 2015. As of that date, the Company had received $417 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 August 31, 2015.
As of August 31, 2015, the Company had received $51 million of cash collateral related to its interest rate swaps.
If the foreign exchange derivative instruments had been netted on the Consolidated Balance Sheets, the asset and liability positions each would have been reduced by $161 million as of May 31, 2015. As of that date, the Company had received $900 million of cash collateral and $74 million of securities 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, 2015.
As of May 31, 2015, the Company had received $68 million of cash collateral related to its interest rate swaps.
Available-for-sale securities comprise investments in U.S. Treasury and Agency securities, money market funds, corporate commercial paper and bonds. These securities are valued using market prices on both active markets (Level 1) and less active markets (Level 2). The gross realized gains and losses on sales of available-for-sale securities were immaterial for the three months ended August 31, 2015 and 2014. Unrealized gains and losses on available-for-sale securities included in Accumulated other comprehensive income were immaterial as of August 31, 2015 and May 31, 2015.
The Company regularly reviews its available-for-sale securities for other-than-temporary impairment. For the three months ended August 31, 2015 the Company did not consider any of its securities to be other-than-temporarily impaired and, accordingly, did not recognize any impairment losses.
As of August 31, 2015, the Company held $1,905 million of available-for-sale securities with maturity dates within one year and $257 million with maturity dates over one year and less than five years within Short-term investments on the Unaudited Condensed Consolidated Balance Sheets.
Included in Interest expense (income), net for each of the three months ended August 31, 2015 and 2014 was interest income related to the Company's available-for-sale securities of $2 million and $1 million, 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's portfolio. Changes in Level 3 investment assets were immaterial during the three months ended August 31, 2015 and the fiscal year ended May 31, 2015.
Derivative financial instruments include foreign exchange forwards and options, embedded derivatives and interest rate swaps. Refer to Note 9 — Risk Management and Derivatives for additional detail.
No transfers among the levels within the fair value hierarchy occurred during the three months ended August 31, 2015.
As of August 31, 2015 and May 31, 2015, the Company had no assets or liabilities that were required to be measured at fair value on a non-recurring basis.
Financial Assets and Liabilities Not Recorded at Fair Value
The Company's long-term debt is recorded at adjusted cost, net of amortized premiums and discounts and interest rate swap fair value adjustments. The fair value of long-term debt is 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 $1,130 million at August 31, 2015 and $1,160 million at May 31, 2015.
The carrying amounts reflected on the Unaudited Condensed Consolidated Balance Sheets for Notes payable approximate fair value.
At August 31, 2015 and May 31, 2015, the Company had $200 million and $150 million, respectively, of outstanding receivables related to its investments in reverse repurchase agreements recorded within Prepaid expenses and other current assets on the Unaudited Condensed Consolidated Balance Sheets. The carrying amount of these agreements approximates their fair value based upon observable inputs other than quoted prices (Level 2). The reverse repurchase agreements are fully collateralized.
NOTE 5 — Short-Term Borrowings and Credit Lines
There have been no significant changes to the short-term borrowings and credit lines reported in the Company's Annual Report on Form 10-K for the fiscal year ended May 31, 2015, except for the following:
On August 28, 2015, the Company 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. Based on the Company's current long-term senior unsecured debt ratings of AA- and A1 from Standard and Poor's Corporation and Moody's Investor Services, respectively, the interest rate charged on any outstanding borrowings would be the prevailing LIBOR plus 0.455%. The facility fee is 0.045% of the total commitment. Under this committed credit facility, the Company must maintain certain financial ratios, among other things, with which the Company was in compliance at August 31, 2015. This facility replaces the prior $1 billion credit facility agreement entered into on November 1, 2011, which would have matured November 1, 2017. As of and for the period ended August 31, 2015, no amounts were outstanding under either committed credit facility.
NOTE 6 — Income Taxes
The effective tax rate was 18.4% and 21.7% for the three month periods ended August 31, 2015 and 2014, respectively. The decrease in the Company's effective tax rate was primarily due to an increase in the proportion of earnings from operations outside of the United States, which are generally subject to a lower tax rate, as well as certain discrete items recognized in the quarter.
As of August 31, 2015, total gross unrecognized tax benefits, excluding related interest and penalties, were $460 million, $258 million of which would affect the Company's effective tax rate if recognized in future periods. As of May 31, 2015, total gross unrecognized tax benefits, excluding related interest and penalties, were $438 million. The liability for payment of interest and penalties increased $13 million during the three months ended August 31, 2015. As of August 31, 2015 and May 31, 2015, accrued interest and penalties related to uncertain tax positions were $177 million and $164 million, respectively (excluding federal benefit).
The Company incurs tax liabilities primarily in the United States, China and the Netherlands, as well as various other state and foreign jurisdictions. The Company is currently under audit by the U.S. Internal Revenue Service (IRS) for the 2013 and 2014 fiscal years. The Company has closed all U.S. federal income tax matters through fiscal 2012, with the exception of the validation of foreign tax credits utilized. As previously disclosed, the Company received a statutory notice of deficiency for fiscal 2011 proposing an increase in tax of $31 million, subject to interest, related to the foreign tax credit matter. This notice also reported a decrease in foreign tax credit carryovers for fiscal 2010 and 2011. The Company has contested this deficiency notice by filing a petition with the U.S. Tax Court in April 2015. The Company does not expect the outcome of this matter to have a material impact on the financial statements. No payments on the assessment would be required until the dispute is definitively resolved. Based on the information currently available, the Company does not anticipate a significant increase or decrease to its unrecognized tax benefits for this matter within the next 12 months.
The Company's major foreign jurisdictions, China and the Netherlands, have concluded substantially all income tax matters through calendar 2005 and fiscal 2009, 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 $43 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 Class A and Class B common shareholders.
The NIKE, Inc. Stock Incentive Plan (the "Stock Incentive Plan") provides for the issuance of up to 359 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 10 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"). 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 Operating overhead expense over the vesting period using the straight-line method.
The following table summarizes the Company's total stock-based compensation expense recognized in Operating overhead expense:
Stock options(1)
ESPPs
Restricted stock
TOTAL STOCK-BASED COMPENSATION EXPENSE
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 for the three month periods ended August 31, 2015 and 2014 was $6 million and $4 million, respectively.
As of August 31, 2015, the Company had $377 million of unrecognized compensation costs from stock options, net of estimated forfeitures, to be recognized in Operating overhead expense over a weighted average remaining period of 2.7 years.
The weighted average fair value per share of the options granted during the three month periods ended August 31, 2015 and 2014, computed as of the grant date using the Black-Scholes pricing model, was $25.32 and $16.91, respectively. The weighted average assumptions used to estimate these fair values are as follows:
Expected volatility
Weighted average expected life (in years)
Risk-free interest rate
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 to purchase an additional 10.2 million and 9.2 million shares of common stock outstanding for the three month periods ended August 31, 2015 and 2014, respectively, because the options were anti-dilutive.
Determination of shares:
Weighted average common shares outstanding
Assumed conversion of dilutive stock options and awards
DILUTED WEIGHTED AVERAGE COMMON SHARES OUTSTANDING
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 the accounting standards for derivatives and hedging. 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.
The majority of derivatives outstanding as of August 31, 2015 are designated as foreign currency cash flow hedges, primarily for Euro/U.S. Dollar, British Pound/Euro and Japanese Yen/U.S. Dollar 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 August 31, 2015 and May 31, 2015:
Derivatives formally designated as hedging instruments:
Foreign exchange forwards and options
Deferred income taxes and other assets
Deferred income taxes and other liabilities
Total derivatives formally designated as hedging instruments
Derivatives not designated as hedging instruments:
Total derivatives not designated as hedging instruments
TOTAL DERIVATIVES
The following tables present the amounts affecting the Unaudited Condensed Consolidated Statements of Income for the three months ended August 31, 2015 and 2014:
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)
Location of Gain (Loss) Reclassified From Accumulated Other Comprehensive Income into Income
Derivatives designated as cash flow hedges:
Other (income) expense, net
Interest expense (income), net
Total designated cash flow hedges
For the three months ended August 31, 2015, the amounts recorded in Other (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.
Amount of Gain (Loss) Recognized in Income on Derivatives
Location of Gain (Loss)
Recognized in Income on Derivatives
Derivatives designated as fair value hedges:
All interest rate swaps designated as fair value hedges meet the shortcut method requirements under the accounting standards for derivatives and hedging. 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.
Refer to Note 3 — Accrued Liabilities for derivative instruments 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 for the three months ended August 31, 2015 and 2014.
Cash Flow Hedges
The purpose of the Company's foreign exchange risk management program is to lessen both the positive and negative effects of currency fluctuations on the Company'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 products in two ways: (1) Certain NIKE entities purchase product from the NIKE Trading Company ("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. (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'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 place formally designated 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, and their accounting treatment is described further 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 $13.5 billion as of August 31, 2015.
As of August 31, 2015, the Company had outstanding a series of forward-starting interest rate swap agreements with a total notional amount of $1 billion. These instruments were designated as cash flow hedges of the variability in the expected cash outflows of interest payments on future debt due to changes in benchmark interest rates.
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, with the results of hedges of non-functional currency denominated revenues and product cost exposures, excluding embedded derivatives as described below, recorded in Revenues or Cost of sales, when the underlying 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 over the term of the issued debt. Results of hedges of anticipated purchases and sales 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 on options are initially recorded as deferred charges. 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 months ended August 31, 2015 and 2014.
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 months ended August 31, 2015 and 2014, the amounts recorded in Other (income) expense, net as a result of the discontinuance of cash flow hedging because the forecasted transaction was no longer probable of occurring were immaterial.
As of August 31, 2015, $603 million of deferred net gains (net of tax) on both outstanding and matured derivatives in Accumulated other comprehensive income were 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 August 31, 2015, the maximum term over which the Company was hedging exposures to the variability of cash flows for its forecasted transactions was 33 months.
Fair Value Hedges
The Company is also exposed to the risk of changes in the fair value of certain fixed-rate debt attributable to changes in interest rates. Derivatives currently 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 the accounting standards for derivatives and hedging. 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 months ended August 31, 2015 or 2014. As of August 31, 2015, interest rate swaps designated as fair value hedges had a total notional amount of $100 million.
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 the cumulative translation adjustment component of 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 (used) provided by investing activities component of the Unaudited Condensed Consolidated Statements of Cash Flows. The Company assesses hedge effectiveness based on changes in forward rates. The Company recorded no ineffectiveness from its net investment hedges for the three months ended August 31, 2015 or 2014. The Company had no outstanding net investment hedges as of August 31, 2015.
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 the embedded derivative contracts explained above. These forwards are not designated as hedging instruments under the accounting standards for derivatives and hedging. 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 (income) expense, net, together with the re-measurement gain or loss from the hedged balance sheet position 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 $5.3 billion as of August 31, 2015.
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. Embedded derivative contracts are treated as foreign currency forward contracts that are bifurcated from the related purchase order 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 (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.
In addition, the Company has entered 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. 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 Consolidated Balance Sheets with their corresponding changes in fair value recognized in Other (income) expense, net until each payment is settled.
At August 31, 2015, the total notional amount of embedded derivatives outstanding was approximately $225 million.
The Company is exposed to credit-related losses in the event of nonperformance 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. Additionally, a certain level of decline in credit rating of either the Company or the counterparty could also trigger collateral requirements. As of August 31, 2015, the Company was in compliance with all credit risk related contingent features and had no derivative instruments with credit risk related contingent features in a net liability position. Accordingly, the Company was not required to post any collateral as a result of these contingent features. Further, as of August 31, 2015, the Company had received $468 million of cash collateral from various counterparties to its derivative contracts (refer to Note 4 — Fair Value Measurements). Given the considerations described above, the Company considers the impact of the risk of counterparty default to be immaterial.
NOTE 10 — Accumulated Other Comprehensive Income
The changes in Accumulated other comprehensive income, net of tax, for the three months ended August 31, 2015 were as follows:
Foreign Currency Translation Adjustment(1)
Net Investment Hedges(1)
Balance at May 31, 2015
Other comprehensive gains (losses) before reclassifications(2)
Reclassifications to net income of previously deferred (gains) losses(3)
Balance at August 31, 2015
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.
Net of tax benefit (expense) of $0 million, $(2) million, $0 million, $0 million and $(2) million, respectively.
Net of tax (benefit) expense of $0 million, $1 million, $0 million, $0 million and $1 million, respectively.
Net of tax benefit (expense) of $(11) million, $1 million, $0 million, $(2) million and $(12) million, respectively.
Net of tax (benefit) expense of $0 million, $(4) million, $0 million, $1 million and $(3) 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
Gains (losses) on cash flow hedges:
Total before tax
Tax (expense) benefit
Gain (loss) net of tax
Gains (losses) on other
Tax (expense)
Total net gain (loss) reclassified for the period
NOTE 11 — Operating Segments
The Company's operating segments are evidence of the structure of the Company'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 and worldwide marketing and selling of athletic footwear, apparel and equipment. The Company's reportable operating segments for the NIKE Brand are: North America, Western Europe, Central & Eastern Europe, Greater China, Japan and Emerging Markets, and include results for the NIKE, Jordan and Hurley brands. The Company's NIKE Brand Direct to Consumer 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 represent 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. Reconciling items for EBIT represent corporate expense items that are not allocated to the operating segments for management reporting.
As part of the Company'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's geographic operating segments and Converse. These rates are set approximately nine months in advance of the future selling season 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 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'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.
Global Brand Divisions
Total NIKE Brand
TOTAL NIKE CONSOLIDATED REVENUES
EARNINGS BEFORE INTEREST AND TAXES
Total NIKE Consolidated Earnings Before Interest and Taxes
TOTAL NIKE CONSOLIDATED EARNINGS BEFORE TAXES
TOTAL ACCOUNTS RECEIVABLE, NET
TOTAL PROPERTY, PLANT AND EQUIPMENT, NET
NOTE 12 — Commitments and Contingencies
At August 31, 2015, the Company had letters of credit outstanding totaling $154 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.
During the fiscal year ended May 31, 2013, the Company divested of Cole Haan. Preexisting guarantees of certain Cole Haan lease payments remained in place after the sale; the maximum exposure under the guarantees was $21 million at August 31, 2015. The fair value of the guarantees is not material.
There have been no other significant subsequent developments relating to the commitments and contingencies reported on the Company's latest Annual Report on Form 10-K.
In the first quarter of fiscal 2016, NIKE, Inc. Revenues increased 5% to $8.4 billion. Excluding the impact of foreign currency exchange rates, Revenues increased 14%. For the first quarter of fiscal 2016, Net income was $1,179 million and diluted earnings per common share was $1.34, each reflecting 23% growth compared to the first quarter of fiscal 2015.
Income before income taxes increased 18% compared to the first quarter of fiscal 2015 due to revenue growth, gross margin expansion and selling and administrative expense leverage. The NIKE Brand, which represents over 90% of NIKE, Inc. Revenues, delivered constant currency revenue growth of 15%, reflecting higher revenues across all geographies, footwear and apparel and most key categories. 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 for NIKE Brand products in the first quarter of fiscal 2016. Constant currency revenues for Converse increased 3% due to growth in comparable direct distribution markets, particularly the United States, partially offset by declines in certain European markets, primarily the United Kingdom.
Our first quarter effective tax rate decreased 330 basis points versus the first quarter of fiscal 2015, driven primarily by an increase in the proportion of earnings from operations outside the United States, which are generally subject to a lower tax rate, as well as certain discrete items recognized in the quarter.
Diluted earnings per common share also benefited from a 1% decline in the weighted average diluted common shares outstanding driven by our share repurchase program.
Results of Operations
(Dollars in millions, except per share data)
% of Revenues
Consolidated Operating Results
(Dollars in millions)
% Change Excluding Currency
Changes(2)
NIKE, Inc. Revenues:
NIKE Brand Revenues by:
Global Brand Divisions(3)
Total NIKE Brand Revenues
Corporate(4)
TOTAL NIKE, INC. REVENUES
Supplemental NIKE Brand Revenues Details:
Sales to Wholesale Customers
Sales Direct to Consumer
Certain prior year amounts have been reclassified to conform to fiscal 2016 presentation. These changes had no impact on previously reported results of operations or shareholders' equity.
Results have been restated using actual exchange rates in use during the comparative period to enhance the visibility of the underlying business trends by excluding the impact of translation arising from foreign currency exchange rate fluctuations.
Global Brand Divisions revenues are primarily attributable to NIKE Brand licensing businesses that are not part of a geographic operating segment.
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 increased 14% for the first quarter of fiscal 2016, driven by higher revenues for both the NIKE Brand and Converse. Excluding the effects of changes in currency exchange rates, every NIKE Brand geography delivered higher revenues for the first quarter of fiscal 2016, driven by our portfolio of innovative products, deep brand connections and compelling retail experiences to consumers. North America contributed approximately 4 percentage points of the increase in NIKE, Inc. Revenues for the first quarter of fiscal 2016, while Western Europe and Greater China each contributed approximately 3 percentage points, Emerging Markets contributed approximately 2 percentage points and Central and Eastern Europe and Japan each contributed approximately 1 percentage point.
Excluding the effects of changes in currency exchange rates, the 18% increase in NIKE Brand footwear revenues for the first quarter of fiscal 2016 was attributable to increases in nearly all key categories, led by Sportswear, Basketball and Running. First quarter fiscal 2016 unit sales of footwear increased approximately 10% and increases in average selling price per pair contributed approximately 8 percentage points of footwear revenue growth. The increase in average selling price per pair was driven approximately equally by shifts in mix to higher-priced products and the favorable impact of growth in our higher-priced Direct to Consumer ("DTC") business.
The 12% constant currency increase in NIKE Brand apparel revenues for the first quarter of fiscal 2016 was driven by increases in most key categories, led by Sportswear, Men's Training, Women's Training and Running, partially offset by a decline in Football (Soccer). The decline in Football (Soccer) was largely attributable to comparisons to higher World Cup-related sales in the first quarter of fiscal 2015. For the first quarter of fiscal 2016, unit sales of apparel increased approximately 9% and increases in average selling price per unit contributed approximately 3 percentage points of apparel revenue growth. The increase in average selling price per unit for the first quarter of fiscal 2016 was primarily attributable to growth in our higher-priced DTC business.
While wholesale revenues remain the largest component of overall NIKE Brand revenues, we continue to expand our NIKE Brand DTC distribution in each of our geographies. Our NIKE Brand DTC operations include NIKE-owned in-line and factory stores, as well as online sales through NIKE-owned websites. For the first quarter of fiscal 2016, DTC revenues represented approximately 24% of our total NIKE Brand revenues compared to 23% for the first quarter of fiscal 2015. On a currency-neutral basis, DTC revenues increased 21% for the first quarter of fiscal 2016, driven by the addition of new stores, online sales growth and comparable store sales growth of 7%. 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. On a currency-neutral basis, online sales through NIKE-owned websites, which are not included in comparable store sales, grew 46% for the first quarter of fiscal 2016. Online sales represented approximately 17% of our total NIKE Brand DTC revenues for the first quarter of fiscal 2016 compared to 14% for the first quarter of fiscal 2015.
Futures Orders
Futures orders for NIKE Brand footwear and apparel scheduled for delivery from September 2015 through January 2016 totaled $11.6 billion and were 9% higher than the orders reported for the comparable prior year period. 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 17%, with unit orders and average selling price per unit contributing approximately 11 and 6 percentage points of growth, respectively.
By geography, futures orders growth was as follows:
Reported Futures
Excluding Currency Changes(1)
TOTAL NIKE BRAND FUTURES ORDERS
Reported futures have been restated 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, sales of NIKE Brand equipment, sales from our DTC operations and sales from Converse, NIKE Golf and Hurley.


I meet so many people that are absolutely in love with Costa Rica's natural beauty, the real estate in Costa Rica and the Costa Rican people and lifestyle. The question I get the most from those considering retiring to Costa Rica is, "What am I going to do with my free time if I move to Costa Rica?"
Activity 1. Watch a Costa Rican soccer game. It's Costa Rica's national past time. Kind of like baseball, basketball and football put together. The Costa Rican people are very passionate about their sport and soccer (futbol) for all ages is fun and exciting not only to watch the game, but there is some great people watching. It also helps you to get familiar with the culture and allows you to mix with the locals, and if you are cheering for their team, gives you something in common. Always a great conversation starter. In Jaco, we have the Jaco Rays, a division 2 professional soccer team. It really is fun to go to the games, support the local community and cheer on the local team.
Activity 2. Surf, Boogie Board or Watch the surfers. High tide happens twice each day. If you live in one of Costa Rica's beachfront communities, you are treated to some of the best surfing conditions and surfing waves in the world. Our local surfers and surf tourists are amazing athletes.
Even 10 times World Champion, Kelly Slater is seen surfing in Jaco and Hermosa. The admission is free. Just jump on your board or pull up your beach chair and watch with amazement as these amazing athletes defy gravity and put on a great show! There is a local surf tournament every Saturday at 4pm at Backyard Bar in Playa Hermosa. Grab a drink, find some shade and watch with amazement! It is well worth attending!
Activity 3. Watch a Costa Rican sunset. Costa Rica has some of the most amazing sunsets in the world. If you are retired, this is a great excuse to have a few friends over on your beachfront balcony for happy hour while you stare off into the Pacific Ocean.
If you see the green flash, tomorrow will be a lucky day. If not, come back the next day and watch again. Actually, every day you are in Costa Rica is a lucky day. Admission is free, except for the tropical beverages, of course.
Activity 4. Walk or run the beach. It's excellent exercise. It's also good for your mental health as you stare out into the calming blue of the Pacific Ocean, listen to beat of the surf, smell the fresh, salty air and let your eyes wander about. Admission is free. Just bring a hat and some sunscreen. Go early before the heat of the day or just before sunset.
Activity 5. Explore Costa Rica. Costa Rica is rich with mountains, dirt roads and interesting small towns that are literally located in the middle of nowhere. Take a drive and do some exploring. Better yet, invest in an atv or one of the new multipurpose sport vehicles (like a golf cart on steroids). It's a great way to see the country.
Middle Costa Rica is the real Costa Rica and each little town center has a soccer field, a church and a school next to the tiny local stores where you can get a water, Coke or even an Imperial (ice cold if you are lucky).
Activity 6. Go Shopping. Escazu is the location of the Multiplaza Shopping Mall. This huge three story mall will make you feel like you are back home in the US or Canada. Sometimes when living in a small city or town, it feels good to spend a day in civilization. There are also excellent restaurants and specialty stores, movie theatres (even an IMAX) in Escazu and Santa Ana.
After a day in the city, you will be glad to get back to your beach life once again. But it is good to know that it's only a short drive to civilization. Don't forget to go to Sarchi, a town known for wooden furniture. Each small town has its own unique personality so while in Costa Rica, please don't forget to buy local.
Activity 7. Go to a museum. San Jose is filled with cultural activities and several museums. The museum of Gold is one of the popular ones to see with many ancient artifacts from Pre-Columbian times. If you have a family, the Children's Museum is worth seeing on a rainy day.
Activity 8. Go to one of many art galleries. Costa Rica is home to some very talented local artists with an array of styles and media. Escazu is home to many galleries, but there are local artists throughout Costa Rica. Check in your locality for one close by. In Jaco, Felix Murillo's art has received a lot of attention. Jaco also hosts Art Prize. A local art festival with cash prizes. Artists come from all around Costa Rica (and internationally) with their best works.
Activity 9. Go Golfing. Golf in Costa Rica is a year around sport. You will find excellent golf courses throughout the country from those in Santa Ana and the Central Valley to Guanacaste and the Central Pacific like La Iguana in Los Suenos.
Activity 10. Go to a national park. Costa Rica has set aside approximately 17% of its land for National Parks (more than any other country) and there are many to choose from. In the Central Pacific near Jaco, Manual Antonio National Park is the most visited with about 90% of Costa Rica's National Park visitors.
Want something a little more private and off the beaten path, try the Carara National Park near Tarcoles. There are a variety of paths for all ages and skill levels. You can see hundred year old trees, many species of butterflies, vibrant colored frogs, an occasional sloth or two and my favorite, the monkeys. Costa is minimal and varies by location.
Note - most parks are not handicapped accessible, so call ahead if you have special needs.
Activity 11. Visit a volcano. Costa Rica has several volcanoes; some active and more that are inactive.
Visit Arenal Volcano, Costa Rica's most active volcano to hear the cannon like boom and see lava flows. Afterwards, relax in the hot springs at Tabacon.
Poas is another National Park and you can drive up to the rim of the volcano, where the crater is 1.5km wide (one of the largest active craters in the world). Poas is busy on the weekends, so it is best to visit midweek.
Activity 12. Volunteer. You can not only live in Paradise, but you can do your part to change the world at the same time. There are many projects and non-profit organizations in Costa Rica that need volunteers and financial assistance. If you have a specialty, you can share that with a local organization. We have clients of ours that volunteer at schools, preschools, donate school supplies and help to purchase uniforms. In Jaco, the Mckee Project is a non-profit that works to keep stray dogs off the streets. Others volunteer to help with beach and forest area clean up projects. Some others plant trees. Others go to low income neighborhoods and work with the children and the families in teaching them life skills. No matter your specialty, you can be sure that someone can benefit from the time that you spend giving back.
Activity 13. Learn a craft and sell your wares at a local farmers market. Most communities in Costa Rica have a local farmers market. In Jaco, the feria or farmer's market is held every Friday at the municipal grounds near the soccer stadium. In addition to fresh fruits and vegetables and baked goods, craftsmen line up to sell their specialty products. You probably won't get rich, but it may give you something to do and give you another opportunity to mingle with the local crowd.
Activity 14. Join a local expat club. There are many around Costa Rica and if there isn't one in the area you decide to settle, you can start your own club. If you don't know what is available or where to go, check with the local Chamber of Commerce or with your real estate agent. In Jaco, there's a group that gathers twice a week for horseshoes. There's a Woman's Group and also a Men's Group through the Chamber of Commerce that both meet once per month. I also hear of cribbage tournaments, poker nights, sewing clubs and many more. If your favorite past time isn't represented, then you can start one. Here is a link to the Jaco Central Pacific Chamber of Commerce (Cenpac) Women's Group outing to the turtle sanctuary in Hermosa. They are helping harvest turtle eggs and release new born turtles into the sea.
Activity 15. Journal Your Adventures. You are living your dream life in paradise. It is an exciting and fulfilling time, so why not write about it? Costa Rica is a magical country that brings out the creative side in even the least creative people. Use some of your free time to write about your experiences. Who knows, maybe your journal will be sold to a New York publishing house for the next special Costa Rica Travel Guide or Costa Rica Expat Guide. No matter, you will have fun writing about all of your adventures!
Activity 16. Create a Blog. Blogs are easy to create and don't cost anything. Start blogging about your Costa Rica adventures, post excerpts from your Costa Rican Journal or blog about the wildlife that you encounter. No matter what you topic, your friends and family from back home will love to read about your experiences while living in Costa Rica. Even though they think you are crazy for making the move, we all know that they are extremely jealous. Why not show them a little of what they are missing!
Activity 17. Jaco Football League - Play American Flag Football. This is the inaugaral season for flag football in Jaco, Costa Rica. Presently there are four teams with about ten players each. It is six on six football played on a sixty yard field marked off at the municipal soccer field. Games are eighty minutes. Ages range from 25 to about 60 years old and are mostly gringos, but we do have some ticos that are playing and having a great time.
Activity 18. Release Turtles at the Hermosa Turtle Refuge. Each year turtles return home to Hermosa and Jaco Costa Rica to lay their eggs. The eggs have so many predators, both human and animal that this refuge was established to rescue them and help to assure that the turtles survive and thrive in the Costa Rican waters in the Pacific Ocean. Volunteer to gather and incubate eggs and to help the baby turtles find their way into the sea. It is an experience you will never forget. The season is June through December.
Activity 19. Bicycling. Great for all ages and skill levels. Hop on a bike and feel free and alive. Ride a beach cruiser for transportation along the beach, to your favorite pub or a trip to the grocery store. Ride for some moderate cardio exercise on the flat, beach roads (it's flat the entire 50 mile distance between Jaco and Quepos). Need an intense work out? Head up into the mountains. There are endless mountain trails waiting to test your agility and skill levels all the way up to the famous "La Ruta De La Conquistadores", (Route of the Conquistadors) mountain bike race where expert riders start in Jaco and ride to the Caribbean Coast. Ride early morning or late afternoon to avoid to mid day heat.


I cooked dinner last night. Can I remember the last time that happened? Nope. And we enjoyed it!
My husband is a man a few likes when it comes to food. Chicken is one thing he does like so I make it a lot. Sometimes finding different ways to use boneless skinless chicken breasts is hard. I found a recipe to help me make it less difficult.
Preheat oven to 350 degrees. Coat a medium baking dish with 1/4 cup melted butter.
Along with a baked potato and mixed veggies, it was a filling and satisfying meal.
Breakfast this morning was pineapple Chobani, strawberries and the last of the Coconut-Sour Cherry Granola. Must make more granola ASAP.
I took the kids to school, went to Target, back to the school for an event then to lunch. I decided to try a new (to me) sandwich place that my husband has been raving about: Which Wich.
You basically grab a bag and mark off what you want your sandwich to have. I enjoy these "assemble your own meal" type places. I chose a turkey sandwich with yellow mustard, spicy mayo, spicy pepper spread, lettuce, tomatoes, red onion, vinegar and pepper.
I also had a bag of jalapeno chips as well. I enjoyed the sandwich but it was no Jersey Mike's. Jersey Mike's aside, it was a good sandwich. Fresh ingredients and it was really spicy….just the way I like it!
Tonight is Bunco. I feel like I haven't seen my friends in AGES.
Update on my dad: he was transferred out of ICU last night into a more regular room. He's still continuing to show signs of improvement!
Do you make a lot of chicken recipes at home? Any favorites?


I read about this! How exciting! Lee and Thurston so often seem to release albums in the same year (or roughly the same 6- to 8-month span).
Which he wasn't restricting his touring to the south. The south is terrible. What's with that?
Anyway, I don't love the album title. Sounds a bit uncharacteristically tacky for Lee. It would be a HELL of a band name though ... not sure why I hold Album titles and band names to different tackiness standards, but I guess I do.
Lee Ranaldo's gig last year in Helsinki was awesome! Raul Fernandez and other spanish guy were his backing band on that tour. I've been waiting for Electric Trim to be released since and now it's finally gonna happen. Great!
new lp on Mute of all labels! whoduthunk?
What's with all the scantilycladness after the article?
Seems like a decent fit. Me, I'd wanna roll with Drag City. But whatever.
ETA: Love the cover — did Neil Young write the text?
so finaly it is coming out. it took a long time. I mean by the time it is out it is already old material, hehe. but i am looking forward to how it will sound on the record.
I'd really like to know the story behind the cover photo. Did Lee come across the scene and shoot the pic himself?
i think it's a richard prince photograph.
I got to see these three on Sunday night. Three different approaches to acoustic guitar all in one night. I got to chat with lee for a bit, I was very awkward, but he was very kind. I asked him about the Screaming Fields of Sonic Love DVD and he said its all finished and should be out soon.
Lee's new songs were great, and the songs I recognized from his records with the Dust were fun to hear in such a stripped down environment. The only bummer was when this one kid would not stop texting. Up in the front of the audience, leaning on monitor speakers and just texting. I saw Meg Baird shoot him a glance, Lee admonished him during one song, and Steve Gunn finally just asked him to stop, and thats when the kid got a little upset. They closed with a cover of Neil Young's Revolution Blues....anyway.... here are some pictures.


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Q: Search query alteration not working for meta values The bellow code works on category archive pages, it filters out the necessary products. But on the search page it doesn't work. If I uncomment the line //$query->set("s", "chelsea");, then on the search page it does show the results for that search term. But the rest of the query, that is the meta query and tax query, are not working on the search page.
This is my query alteration code:
//Alter query to exclude posts that are outdated, or whose category is hidden
function mts_alter_query($query){

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        $query->set("meta_value", date("Y-m-d"));
        $query->set("meta_compare", ">");

        //Hide posts that belong to a hidden category

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        $original_tax_query = $query->get( 'tax_query', [] );

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add_action( 'pre_get_posts', 'mts_alter_query', 999);

redpajama_set_name: RedPajamaStackExchange


text:
Jerry Doyle (1956-2016)
"I call it like I see it. I don't hold back."
-Jerry Doyle-
This is a belated tribute to the passing of Jerry Doyle (1956-2016), the famous face of Babylon 5 (1993-1998) security chief Michael Garibaldi.
Doyle was just 60 years of age when he passed in July. Like my father who passed in his fifties ---Doyle left us way too young from much the same illness.
Doyle was on the right politically, a libertarian. This science fiction fan couldn't agree with him more on most matters particularly the concept of less government. Doyle released a book Have You Seen My Country Lately? America's Wake-Up Call (2010). His book tour landed him in my neighborhood that year. This writer didn't let the opportunity pass.
Taking my then roughly twelve year old son along we attended his book signing and he couldn't have been a nicer gentleman. Though I wasn't sure if consumers buying the book were fans of his political persuasion or fans of Babylon 5. It may have been the latter. It may have been the former. For me it was a bit of both and there's no doubt Doyle used his science fiction credentials to help sell his title and he should have. There's certainly not enough conservative or libertarian folks out there and he implemented his voice on conservative radio.
When I first started this blog in its infancy one of the first things I did was a very cursory analysis of Babylon 5 here. This writer was still finding his feet then, perhaps his voice and his approach on where to take this blog, and generally speaking, looking back, I don't love those entries. Still it was a lot of fun watching Babylon 5, writing about it and conversing with those readers and sci-fi fans who discovered me out here in cyberspace and waxing poetic on Babylon 5. In general, Doyle and Babylon 5 opened the doors to the blogging universe for me (along with then blogger The Finest Kind Of Pork) and made the introduction to it a great deal of fun.
There was very little noted out there regarding the man's passing. Perhaps it was a disdain for his politics by a mostly left-leaning media or his place was perceived to be a small piece of the science fiction universe. Whatever the reason I'm sorry to see another recognizable, friendly, fun and fascinating face and voice leave us. More importantly I was sorry to see the man go so young and knew one day I needed to mark the moment of his passing here in tribute to someone who was clearly a decent, principled man. We could certainly use more of them.
Babylon 5 creator J. Michael Straczynski himself noted of the man, "Regardless of whatever was going on in his life, whether it was marital issues, a broken arm, forced couch-surfing with Bruce and Andreas or other problems, he never once pulled a prima donna on us; he showed up every day on time, knew his lines, and insisted that the guest cast live up to the standards of the main cast."
There's a lot to be said about Doyle in that quality called a work ethic.
Labels: Babylon 5, Remembered The

redpajama_set_name: RedPajamaCommonCrawl


So, I kind of stumbled over this, but it is very cool. Amazon Charts puts out a "Year in Books" report that provides some really interesting data on the book business, which is fine, but also on the culture, which is more interesting.
So, the most read book on the Amazon platforms this year is The Handmaid's Tale. Eight of the top 10 are typical much-read books by Rowling, King, Martin, Brown, which is not to denigrate them but just to say that I don't divine much Zeitgeist in there.
But The Handmaid's Tale? #1? In 2017? Let's talk.
First, I have a confession to make. Until this year, I had not read The Handmaid's Tale. That's not something I am proud of. I hadn't. I knew lots of people thought it was significant and important, but I had kind of written it off as speculative fiction, which is something I think is kind of irrelevant and cheating and uninteresting…as opposed to, say, honestly looking at what has and is happening.
So, with the TV series (which I did not watch) and the seeming rise of an authoritarian-leaning sentiment in the United States, I thought it might be time for me to read it.
With that, it is also time to admit that I was 100% wrong. The book is brilliant and not speculative in the sense that it packages things that have happened and shows them to use in the future. It is not fantastical, but chilling in how women are treated, but also dissent. It presents you things you cannot bear to look at and reminds you that they are not fiction.
It might be the rare book that was so far ahead of its time that it is more relevant today than when it came out. In fact, I might not have had the same reaction had I read it on release date, but in these times, it was far too close to reality than comfort would allow.
Second, though, is the other things that have happened as it relates to women. So, we can't deny that the Hulu series on The Handmaid's Tale is probably driving most of that Amazon readership. That certainly happens a lot.
But bear with me. In the time since the Hulu series ran and in the time when this reading was going on, we saw a surge of women telling their stories of harassment and victimization by powerful men, actions which are the chemical precursor of the world that Atwood envisioned.
My question–which we will probably never know the answer to–is to what extent The Handmaid's Tale…in video and book form…dropped into today's world where there appear to be even less protection than there was before…where things that should not be are increasingly being normalized…to what extent that had a role in women speaking out and raising this kind of stuff to a new level of awareness.
That's the power of art and the power of literature, for sure. Art doesn't have to be political, but I wonder if Atwood's book will end up with Uncle Tom's Cabin, The Jungle and others as books that truly influenced the generally immovable curve of history.


text:
Teach North Korean Refugees (TNKR)
Teach North Korean Refugees (TNKR) is a nonprofit organization in Seoul that empowers North Korean refugees to find their own voice and path through education, advocacy and support. For more information, take a look at our About page.
Support TNKR NOW!
#loveTNKR
Refugee Learners.
Have Been Empowered by TNKR
Tutors & Mentors
Have Volunteered Their Time.
Love what we do?
Make a donation or create a fundraiser!
What the refugees are saying…
"I am thankful that I have volunteer English teachers helping me to improve my English. My happiest time is when I am studying English with my private tutors."
Yeonmi Park, former TNKR Ambassador
"There are many NGOs for helping North Korean refugees, but TNKR is the best model for helping refugees practically and productively."
Jang Jin-sung, author of Dear Leader
"I have many chances to go abroad because of my career, but I can't communicate with others. Thank you so much to TNKR and the tutors. I think your small help can contribute to the reunification in Korea and peace in the world. You are helping refugees who are struggling with English. I will study actively, I promise."
"I studied in an academy, but it was too expensive for me and it wasn't very effective. The teachers couldn't correct me because there were other students there. I was also afraid to ask because they might think I am stupid for asking basic questions. With TNKR teachers, I don't feel that fear. They focus on me. I think I have improved a lot because of the TNKR tutors. Thank you to TNKR for allowing us to study without worrying about the cost. I have been lucky because the teachers have been willing to adjust to my schedule."
"I really lacked confidence, even when I first applied for TNKR I wasn't sure that I would be able to study in English with native English speakers. But after the orientation and seeing the tutors today at the Matching session, I believe that I can do it. I can feel that the tutors will be supportive and really want to help us."
Got a question? An idea for a fundraiser? A media inquiry?
For all of the above and more, please use the form below to contact TNKR and we will get in touch as quickly as we can. In the meantime, feel free to check out our About, YouTube channel, Social media pages (TNKR and Casey Lartigue) for more information about who we are and what we do.


Can Alex & Brooke help Morning Glory overcome her racing slump?
When a terrible accident shakes the Showmans, Alex finds herself questioning her place in the family. Feeling like a second class citizen, she turns once again to find her solace in horse racing.
With a new filly to manage with Brooke, and Venus Galaxies's first foal on the way, the girls must rely on each other to make things work out.
But will a handsome, foreign newcomer split them apart once again?
Rating: Mild+. Mild crude humor; mild language; mild sensuality; prominent gay/lesbian character(s).


Metropolitan's safe deposit facilities are strategically placed in the inner central area of Metropolitan London. The Company is the largest independent provider of this service in the United Kingdom. The two vaults provide thousands of boxes in over 20 different sizes ranging from four-inch wide and two-inch high boxes up to walk-in secure storage areas. The locations of the vaults are in Knightsbridge and St John's Wood.
Both vaults were designed, built and fitted out by Rosengrens of Sweden who are regarded as world leaders in this field. The vaults are specially constructed with massive physical strength and equipped with sophisticated alarm and surveillance systems. It is believed that this type of vault, when locked with the time-locked doors, has never been successfully breached.
The alarms cover not only the vault fabric and perimeter, but also each individual box. The safe deposit boxes are automated and controlled by a computer used by a security officer to supervise the use of any of the boxes. All alarm systems are monitored 24 hours a day by alarm company monitoring stations, which are in direct contact with the police.
The sophisticated alarm and control systems within the vaults give Metropolitan significant business advantages. They give the particular advantage of permitting the public to open their boxes without the necessity of an accompanying guard. The computer identifies each customer by means of an electronic card with an exclusive PIN number or by touch card, key and fingerprint technology. This provides the customer with immediate access and a visit to a box can be completed within a few minutes of arrival. For longer visits, private rooms and booths are available to allow customers to consult papers or documents.
Why risk leaving your valuables at home?
The background to the requirement for safe deposit facilities is well known. The trend of domestic burglaries has been rising sharply and there seems little hope that this situation will improve very much. The installation of home safety provides only limited protection since, particularly if it is suspected that items of high value are present, robberies are increasingly taking place with owners being forced to open safes under threat of physical violence. The corollary of this rise in the number of burglaries is that insurance premiums have risen very sharply, and in certain locations and for particular types of items, the cost is now almost prohibitive. The safe deposit provides a convenient method of avoiding the risks and costs of having valuables at home.
Why use Metropolitan rather than a bank?
Traditionally, security-minded people have tended to use the clearing banks for depositing valuables and documents, but this has a number of drawbacks for both the customer and the banks. It is inconvenient for the customer, since his/her visits must necessarily be made during banking hours and it is normally necessary to make an appointment. On the bank's side, staff must be provided to supervise visits and considerable space is taken up. With the increasing rationalisation of branch banking networks and reduction in staffing levels, safe deposit facilities are not high on a bank's list of priorities. Metropolitan continues to take full advantage of the banking industry's declining appetite for providing safe deposit facilities to its customers.


Nancy Pelosi has a puzzle to solve as she embarks on her quest to reclaim the Speaker's gavel.
A dozen Democratic candidates who have been critical of the California Democrat won election to Congress on Tuesday night, while another 12 incumbents have vowed to oppose Pelosi's bid to lead the conference.
Pelosi, who likely can't afford more than a dozen Democrats voting against her in a public floor vote for Speaker, knows she has little room for error and has already been taking steps to whittle down her potential numbers problem.
Democrats are likely to have just a 20- to 25-seat majority after the midterms once a handful of contested races are determined.
"She's got a serious math problem," said one Democratic lawmaker who has been in contact with both anti-Pelosi candidates and incumbents.
The good news for Pelosi, a fundraising juggernaut who helped the party seize back power for the first time since 2010, is that she's been preparing for this moment for some time - which is one of the reasons why many on Capitol Hill are predicting that she will ultimately close the deal.
The minority leader crisscrossed the country to elevate many of the first-time candidates who carried their party to victory on Tuesday, winning loyalty in the process.
Rep. Dan Kildee (D-Mich.) told The Hill that some members of the insurgent group of Pelosi detractors are gettable.
"A couple of them may be a firm no. I think for some - for some of these incoming candidates - I think there are probably things that can be done [to win their support]," he said. "I think one of those things is ... clarifying what the term 'transitional' might mean. Because I think that does make a difference in terms of the way people [will choose whether to] support."
Pelosi is also a historic figure herself: the first female Speaker in another "year of the woman" for Democrats.
"2018 was the Year of the Woman and the last thing Democrats will do when they elect a historic number of women to the Congress is tell the one and only woman who has ever had a seat at the top levels of American government that she needs to go and be replaced with a man," said one senior Democratic aide.
Other aides and observers agreed that it would be foolish to bet against Pelosi, a shrewd political operator who has been a master of her caucus.
Just three of the candidates who have been critical of Pelosi have actually vowed to oppose her unconditionally. Others have given themselves some wiggle room, which could allow Pelosi to pick off some detractors by twisting arms or sweetening the pot.
"She's going to use every tool in her toolbox," the Democratic lawmaker said.
At least 12 Democratic candidates who have been outwardly critical of Pelosi won their election Tuesday night, according to an analysis from The Hill.
Three of them are firm "no" votes on Pelosi.
Rep.-elects Jason Crow (Colo.) and Abigail Spanberger (Va.), as well as Rep. Conor Lamb (D-Pa.), who won a full two-year term, have said they won't vote for Pelosi on the House floor.
Several other Democrats critical of Pelosi have been more vague about their intentions ahead of the Nov. 28 Democratic leadership elections.
Seven Democrats have said they oppose Pelosi as Speaker, but have not said how they'll vote. This group comprises Rep.-elects Haley Stevens (Mich.), Mikie Sherrill (N.J.), Jeff Van Drew (N.J.), Anthony Brindisi (N.Y.), Rashida Tlaib (Mich.), Joe Cunningham (S.C.) and Jahana Hayes (Conn.).
Two others simply say they want new leadership: Rep.-elects Dean Phillips (Minn.) and Max Rose (N.Y.). On paper, that opens the door to changes in the leadership team that might not include Pelosi.
Pelosi has pitched the idea of a "transitional" Speakership where she'd serve until the end of the next Congress. That strategy is seen as a way to make it more palatable for critical Democrats to back her.
Pelosi expressed confidence Wednesday that she would secure the votes to become Speaker, saying she was the best person for the job and dismissing further questions on the matter.
"It's not about what you have done, it's about what you can do," Pelosi told reporters. "And I think I'm the best person to go forward, to unify, to negotiate."
Another real issue is that no formidable challenger to Pelosi has emerged.
Rep. Tim Ryan (D-Ohio), who challenged Pelosi in 2016 and garnered 63 votes, told The Hill early Wednesday morning he has "no intentions" of challenging her, though he added that he hasn't completely "closed the door on it."
Ryan said those looking for new leaders need to hear from newly elected Democrats about who they think should be Speaker.
There are competing theories about how much freedom incoming Democratic freshmen who voiced opposition to Pelosi on the campaign trail will have in a vote on the Speakership.
One camp says those lawmakers can satisfy their campaign promises by opposing Pelosi in the closed-door caucus vote, even if they support her on the House floor - particularly if the alternative is empowering Republicans. Defections on the floor, at some point, could just lead to a GOP Speaker.
"There's a way out," said a former House leadership aide. "[You tell voters,] 'I voted against her in the caucus, but I'm not going to vote against the Democratic nominee - whoever that might be - for Speaker."
An opposing camp says voters would never buy that argument, and that it would be political suicide to support Pelosi on the floor and claim to have opposed her behind closed doors.
One former Democratic lawmaker said that while "that might work in Washington," it won't resonate outside the Beltway.
"The first thing you did after being elected was to lie to voters," the lawmaker added. "If you got elected in any kind of competitive district, good luck with that one."
Rep. Filemon Vela (D-Texas), a vocal Pelosi detractor who has been calling fellow Democrats to build support for an insurgency, said he counts at least 12 lawmakers who will go to the floor and oppose the longtime leader in January, regardless of the outcome of the elections.
A Democratic chief of staff, not affiliated with Pelosi's opponents but familiar with their tactics, confirmed the group of die-hard opponents is roughly a dozen strong.
"They call themselves the insurgents; they talk on the phone every two days; they are solid believers," the chief of staff said, adding that they're also putting pressure on other Democrats to join their cause.
A senior Democratic aide said those dynamics will likely set up "a game of chicken," with insurgents vowing to oppose Pelosi while a majority of the caucus puts "enormous pressure" on the detractors to rally behind the Democratic nominee for the sake of party unity.
The question, the senior aide said, "is whether or not we want to look like idiots by going to the floor and not being able to elect a Speaker."
While Pelosi still faces a number of hurdles, she appears the best positioned to win the Speaker's gavel, especially given the historic number of women elected to the House.
Pelosi has also given Democratic candidates a huge financial boost. According to fundraising numbers analyzed by The Hill, Pelosi donated a staggering $121 million to the House Democrats' campaign arm and candidates running in the most competitive House races this cycle.
Pelosi could pick up more supporters by courting detractors with plum committee posts, choice office space, special assignments and the promise of House rule changes. Or, if she chooses to rule with a more iron fist, she could threaten to deny subcommittee gavels to lawmakers who defy her.
"To attack her is to reject so much of the agenda that President Obama passed," said freshman Rep. Ro Khanna (D-Calif.), a fellow Bay Area-lawmaker who supports Pelosi for Speaker but has called for generational change in leadership.
"She's a symbol. If you believe in the [Affordable Care Act], if you believe in Dodd-Frank, if you believe in the stimulus bill ... how can you not respect Pelosi's leadership?"
This story was updated at 6:29 p.m.