Revenue up 14 percent, worldwide futures orders up 13 percent
BEAVERTON, Ore., Dec 19, 2007 (BUSINESS WIRE) -- NIKE, Inc. (NYSE:NKE) today reported financial results for the
second quarter ended November 30, 2007. For the quarter, revenue grew
14 percent to $4.3 billion, compared to $3.8 billion for the same
period last year. Changes in currency exchange rates increased revenue
growth by 4 percentage points for the quarter. Second quarter net
income grew 10 percent to $359.4 million, compared to $325.6 million
in the prior year and diluted earnings per share increased 11 percent
to $0.71, versus $0.64 last year.
Mark Parker, Nike, Inc. President and Chief Executive Officer,
said, "Our second quarter was another great one, and it illustrates
the ability of our portfolio to deliver consistent, profitable growth.
Our strategy for continued growth is very clear -- commit totally to
the consumer, deliver innovative and relevant product, and focus our
execution and discipline on those parts of the business that offer the
greatest growth opportunity."(a)
Futures Orders
The Company reported worldwide futures orders for athletic
footwear and apparel, scheduled for delivery from December 2007
through April 2008, totaling $6.5 billion, 13 percent higher than such
orders reported for the same period last year. Changes in currency
exchange rates increased reported orders growth by 3 percentage
points.(a)
By region, futures orders for the U.S. increased 1 percent; Europe
(which includes the Middle East and Africa) increased 19 percent; Asia
Pacific grew 24 percent; and the Americas increased 21 percent.
Changes in currency exchange rates increased reported futures orders
growth in Europe by 6 percentage points and by 4 percentage points in
Asia Pacific and in the Americas.(a)
Regional Highlights
U.S.
During the second quarter, U.S. revenues increased 7 percent to
$1.5 billion versus $1.4 billion for the second quarter of fiscal
2007. U.S. athletic footwear revenues increased 12 percent to $983.3
million; apparel revenues decreased 3 percent to $461.4 million; and
equipment revenues increased 9 percent to $68.7 million. U.S. pre-tax
income increased 9 percent to $306.6 million from $282.1 million a
year ago.
Europe
Second quarter revenues for the European region grew 18 percent to
$1.2 billion from $1.0 billion for the same period last year. Changes
in currency exchange rates increased revenue growth by 10 percentage
points. Footwear revenues were up 19 percent to $646.7 million.
Apparel revenues increased 15 percent to $485.9 million and equipment
revenues increased 24 percent to $91.6 million. Pre-tax income
increased 37 percent to $230.2 million.
Asia Pacific
In the second quarter, revenues in the Asia Pacific region grew 17
percent to $674.6 million compared to $578.2 million a year ago.
Changes in currency exchange rates increased revenue growth by 5
percentage points. Footwear revenues were up 20 percent to $334.1
million, apparel revenues increased 15 percent to $289.2 million and
equipment revenues grew 2 percent to $51.3 million. Pre-tax income
increased 19 percent to $174.1 million.
Americas
Revenues in the Americas region increased 19 percent to $313.6
million from $262.5 million in the second quarter of fiscal 2007.
Currency exchange rates contributed 5 percentage points to this growth
rate. Footwear revenues were up 16 percent to $214.3 million, apparel
revenues increased 31 percent to $73.2 million and equipment revenues
grew 20 percent to $26.1 million. Pre-tax income was up 12 percent to
$68.7 million.
Other Businesses
For the first quarter, Other business revenues, which include
Converse Inc., NIKE Golf, Cole Haan Holdings Incorporated, NIKE Bauer
Hockey Corp., Hurley International LLC and Exeter Brands Group LLC,
grew 16 percent to $613.7 million from $526.8 million last year.
Pre-tax income increased 31 percent to $70.8 million for the quarter.
Following a strategic review of the company's affiliate brands
portfolio, Nike management determined that Nike Bauer Hockey and the
Starter brand did not align with the Company's long-term growth
priorities. On November 15, 2007, the Company announced it had reached
a definitive agreement to sell the Starter brand to Iconix Brand Group
for $60 million in cash. This transaction was completed on December
17, 2007. The Company is still exploring the sale of the Bauer Hockey
business.
On October 23, 2007, the Company announced it had reached an
agreement on an all-cash offer to acquire all of the outstanding share
capital of Umbro plc at 193.06 pence, which values the company at
GBP285 million or approximately $570 million. The acquisition will
significantly expand Nike's global leadership in football, a key
growth category for the Company.
Commenting on these developments, Parker said: "Our focus on prime
growth opportunities extends throughout our portfolio of brands. We
are confident that our divestiture decisions this quarter are the
right ones for Bauer Hockey, for Starter, and for Nike. As for Umbro,
it is a brand that has tremendous heritage and respect in global
football. We're very excited about leveraging those connections and
bringing them to life in new ways that will reward consumers and
strengthen our competitive stance in football around the world."(a)
Income Statement Review
Gross margins were 44.3 percent compared to 43.4 percent for the
same period last year.
Selling and administrative expenses were 32.9 percent of second
quarter revenues, compared to 32.0 percent last year.
The effective tax rate for the second quarter was 30.3 percent.
This was a higher rate than last year's second quarter tax rate of
27.2 percent, which included a retroactive benefit from an
international tax agreement.
Balance Sheet Review
At quarter end, global inventories stood at $2.2 billion, an
increase of 3 percent from November 30, 2006. Cash and short-term
investments were $3.1 billion at the end of the quarter, compared to
$1.9 billion last year.
Share Repurchase
During the second quarter, the Company purchased a total of
4,807,300 shares for approximately $292.8 million in conjunction with
the Company's four-year $3 billion share repurchase program approved
by the Board of Directors in June 2006. As of the end of the second
quarter the Company has repurchased a total of 28.6 million shares for
approximately $1.4 billion under this program.
NIKE, Inc. based near Beaverton, Oregon, is the world's leading
designer, marketer and distributor of authentic athletic footwear,
apparel, equipment and accessories for a wide variety of sports and
fitness activities. Wholly owned Nike subsidiaries include Converse
Inc., which designs, markets and distributes athletic footwear,
apparel and accessories; Cole Haan Holdings Incorporated, which
designs, markets and distributes luxury shoes, handbags, accessories
and coats; NIKE Bauer Hockey Corp., a leading designer and distributor
of hockey equipment; Hurley International LLC, which designs, markets
and distributes action sports and youth lifestyle footwear, apparel
and accessories; and Exeter Brands Group LLC, which designs and
markets athletic footwear and apparel for the value retail channel.
NIKE's earnings releases and other financial information are
available on the Internet at www.nikebiz.com/investors.
(a) The marked paragraphs contain forward-looking statements that
involve risks and uncertainties that could cause actual results to
differ materially. These risks and uncertainties are detailed from
time to time in reports filed by NIKE with the S.E.C., including Forms
8-K, 10-Q, and 10-K. Some forward-looking statements in this release
concern changes in futures orders that are not necessarily indicative
of changes in total revenues for subsequent periods due to the mix of
futures and "at once" orders, exchange rate fluctuations, order
cancellations and discounts, which may vary significantly from quarter
to quarter, and because a significant portion of the business does not
report futures orders.
(Tables Follow)
NIKE, Inc.
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD ENDED NOVEMBER 30, 2007
(In millions, except per share data)
INCOME QUARTER ENDED % YEAR TO DATE ENDED %
STATEMENT 11/30/2007 11/30/2006 Chg 11/30/2007 11/30/2006 Chg
======================================================================
Revenues $4,339.5 $3,821.7 14% $8,994.6 $8,015.8 12%
Cost of sales 2,418.4 2,164.6 12% 4,986.5 4,509.5 11%
--------------------- ---------------------
Gross margin 1,921.1 1,657.1 16% 4,008.1 3,506.3 14%
44.3% 43.4% 44.6% 43.7%
Selling
and
administrative
expense 1,429.5 1,223.7 17% 2,864.2 2,513.4 14%
32.9% 32.0% 31.8% 31.4%
Interest
income, net 23.1 14.1 64% 47.7 27.2 75%
Other income
(expense), net 0.9 (0.2) 550% (5.7) 3.0 -290%
--------------------- ---------------------
Income before
income taxes 515.6 447.3 15% 1,185.9 1,023.1 16%
Income taxes 156.2 121.7 28% 256.8 320.3 -20%
--------------------- ---------------------
30.3% 27.2% 21.7% 31.3%
Net income $359.4 $325.6 10% $929.1 $702.8 32%
===================== =====================
Diluted EPS $0.71 $0.64 11% $1.83 $1.38 33%
Basic EPS(1) $0.72 $0.65 11% $1.86 $1.40 33%
Weighted
Average Common
Shares
Outstanding:
Diluted 506.2 507.3 506.8 508.8
Basic 497.6 502.4 498.5 503.9
===================== =====================
Dividends
declared $0.23 $0.185 $0.415 $0.34
===================== =====================
(1) Basic earnings per common share for the six months ended November
30, 2006 do not recalculate due to rounding
NIKE, Inc.
BALANCE SHEET (a) 11/30/2007 11/30/2006
======================================================================
ASSETS (in millions)
Current assets:
Cash and equivalents $2,470.5 $1,102.9
Short-term investments 601.0 804.4
Accounts receivable, net 2,617.1 2,375.9
Inventories 2,223.7 2,167.2
Deferred income taxes 253.9 186.2
Prepaid expenses and other current assets 521.2 561.3
---------------------
Total current assets 8,687.4 7,197.9
Property, plant and equipment 3,907.8 3,548.4
Less accumulated depreciation 2,119.7 1,875.4
---------------------
Property, plant and equipment, net 1,788.1 1,673.0
Identifiable intangible assets, net 409.7 406.7
Goodwill 130.8 130.8
Deferred income taxes and other assets 438.6 413.8
---------------------
Total assets $11,454.6 $9,822.2
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $6.1 $30.6
Notes payable 119.5 59.2
Accounts payable 1,053.5 880.3
Accrued liabilities 1,501.4 1,239.1
Income taxes payable 108.4 71.0
---------------------
Total current liabilities 2,788.9 2,280.2
Long-term debt 436.3 383.5
Deferred income taxes and other liabilities 736.9 620.1
Redeemable preferred stock 0.3 0.3
Shareholders' equity 7,492.2 6,538.1
---------------------
Total liabilities and shareholders' equity $11,454.6 $9,822.2
=====================
(a) Certain prior year amounts have been reclassified to conform to
fiscal year 2008 presentation. These changes had no impact on
previously reported results of operations or shareholders' equity.
NIKE, Inc.
QUARTER ENDED YEAR TO DATE ENDED
DIVISIONAL % %
REVENUES 11/30/2007 11/30/2006 Chg 11/30/2007 11/30/2006 Chg
======================================================================
(in millions)
U.S. Region
Footwear $983.3 $879.4 12% $2,103.2 $1,958.5 7%
Apparel 461.4 475.4 -3% 889.4 906.9 -2%
Equipment 68.7 63.2 9% 159.2 154.5 3%
--------------------- ---------------------
Total 1,513.4 1,418.0 7% 3,151.8 3,019.9 4%
EMEA Region
Footwear 646.7 541.4 19% 1,438.6 1,220.9 18%
Apparel 485.9 421.0 15% 1,052.9 908.0 16%
Equipment 91.6 73.8 24% 210.4 178.2 18%
--------------------- ---------------------
Total 1,224.2 1,036.2 18% 2,701.9 2,307.1 17%
Asia Pacific
Region
Footwear 334.1 277.4 20% 666.2 543.4 23%
Apparel 289.2 250.6 15% 529.7 451.5 17%
Equipment 51.3 50.2 2% 109.5 101.7 8%
--------------------- ---------------------
Total 674.6 578.2 17% 1,305.4 1,096.6 19%
Americas Region
Footwear 214.3 185.1 16% 412.7 357.4 15%
Apparel 73.2 55.7 31% 131.5 106.9 23%
Equipment 26.1 21.7 20% 48.9 40.7 20%
--------------------- ---------------------
Total 313.6 262.5 19% 593.1 505.0 17%
3,725.8 3,294.9 13% 7,752.2 6,928.6 12%
--------------------- ---------------------
Other 613.7 526.8 16% 1,242.4 1,087.2 14%
--------------------- ---------------------
Total NIKE, Inc.
revenues $4,339.5 $3,821.7 14% $8,994.6 $8,015.8 12%
--------------------- ---------------------
NIKE, Inc.
QUARTER ENDED YEAR TO DATE ENDED
PRE-TAX % %
INCOME(1),(2) 11/30/2007 11/30/2006 Chg 11/30/2007 11/30/2006 Chg
======================================================================
(in millions)
U.S. Region $ 306.6 $ 282.1 9% $ 653.9 $ 637.8 3%
EMEA Region 230.2 167.7 37% 605.7 478.3 27%
Asia Pacific
Region 174.1 145.8 19% 333.6 250.7 33%
Americas Region 68.7 61.1 12% 126.6 110.8 14%
Other 70.8 54.1 31% 166.0 141.5 17%
Corporate(3) (334.8) (263.5) -27% (699.9) (596.0) -17%
--------------------- ---------------------
Total pre-tax
income(1) $ 515.6 $ 447.3 15% $ 1,185.9 $ 1,023.1 16%
===================== =====================
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(1) The Company evaluates performance of individual operating segments
based on pre-tax income. Total pre-tax income equals Income before
income taxes as shown on the Consolidated Income Statement.
(2) Certain prior year amounts have been reclassified to conform to
fiscal year 2008 presentation. These changes had no impact on
previously reported results of operations or shareholders' equity.
(3) "Corporate" represents items necessary to reconcile to total pre-
tax income, which includes corporate costs that are not allocated to
the operating segments for management reporting and intercompany
eliminations for specific items in the Consolidated Income Statement.