NIKE, Inc. Reports Fiscal 2011 Third Quarter Results
-- Revenue $5.1 billion; up 7 percent versus prior year or up 8 percent
excluding currency changes
-- Diluted earnings per share up 7 percent from prior year to $1.08
-- NIKE Brand futures orders up 11 percent or up 9 percent excluding
currency changes
-- Inventories up 18 percent versus prior year
BEAVERTON, Ore.--(BUSINESS WIRE)-- NIKE, Inc. (NYSE:NKE) today reported financial results for its fiscal 2011 third quarter ended February 28, 2011. Earnings per share for the quarter were up 7 percent on a 7 percent increase in net revenue as higher NIKE, Inc. sales and SG&A expense leverage offset lower gross margin results.
"Our solid third-quarter results demonstrate the power of the NIKE, Inc. portfolio," said Mark Parker, President and CEO of NIKE, Inc. "Our unique ability to create deep connections with consumers, led by an impressive pipeline of innovative product and exciting retail experiences, continues to strengthen our brands and accelerate growth. Moving forward, we'll continue to leverage our scale, financial resources, and operational discipline to drive near and long-term value to shareholders."*
Futures Orders
As of the end of the quarter futures orders for NIKE Brand athletic footwear and apparel, scheduled for delivery from March through July 2011, totaled $7.9 billion, 11 percent higher than orders reported for the same period last year. Excluding currency changes, reported orders would have increased 9 percent.*
By geography, futures orders were as follows:
Geography Reported Futures Orders Excluding Currency Changes North America +11% +11% Western Europe +4% 0% Central and Eastern Europe +9% +9% Greater China +19% +13% Japan +4% +2% Emerging Markets +21% +18% Total NIKE Brand Futures +11% +9% Orders
Third Quarter Income Statement Review
-- Revenuesfor NIKE, Inc. increased 7 percent to $5.1 billion or up 8
percent on a currency neutral basis. Revenues for the NIKE Brand were up
8 percent. Excluding the impacts of changes in foreign currency NIKE
Brand revenues rose 9 percent driven by growth in all seven NIKE Brand
key categories and every geography except Japan. Revenues for our Other
Businesses increased 1 percent, with minimal impact from changes in
foreign currency exchange rates, as growth in Converse, Cole Haan, and
Hurley was largely offset by lower revenues in Umbro and NIKE Golf.
-- Gross margin declined 110 basis points to 45.8 percent mainly as a
result of higher product costs, elevated freight costs, including
additional airfreight incurred to meet strong demand for NIKE Brand
products, and a smaller proportion of license revenue due in part to the
conversion of Converse's U.K. business to direct distribution. These
factors more than offset the positive impacts of favorable
year-over-year changes in foreign exchange rates, a higher mix of
full-price sales, the benefits of ongoing product cost reduction
initiatives, and growing sales from our Direct to Consumer operations.
-- Selling and administrative expenses grew at a slower rate than revenue,
up 5 percent to $1.6 billion. Operating overhead expenses increased 6
percent to $1.1 billion as a result of additional investments made in
both our wholesale and direct to consumer businesses. Demand creation
expenses rose 3 percent to $578 million due to marketing support for key
product initiatives and investments in retail product presentation for
wholesale accounts.
-- Other incomewas $17 million, comprised largely of non-recurring items
and foreign exchange gains, primarily from currency hedges. For the
quarter, we estimate the year-over-year change in foreign currency
related gains included in other income, net, combined with the impact of
changes in foreign currency exchange rates on the translation of foreign
currency-denominated profits had an insignificant impact on pretax
income.
-- The effective tax rate was 26.0 percent compared to 24.9 percent for the
same period last year. The effective tax rate was higher due to a larger
percentage of pretax income coming from operations in the United States
which has a higher effective tax rate than operations abroad.
-- Net income increased 5 percent to $523 million and diluted earnings per
share increased 7 percent to $1.08, reflecting higher net income and a 1
percent decline in the number of diluted weighted average common shares
outstanding.
February 28, 2011 Balance Sheet Review
-- Inventories for NIKE, Inc. were $2.5 billion, up 18percent from February
28, 2010, to meet strong demand and given comparisons to extremely low
levels last year when inventories were down 13 percent.
-- Cash and short-term investments at period-end were $4.5 billion,
11percent higher than last year mainly as a result of higher net income.
Share Repurchases
During the third quarter, NIKE, Inc. repurchased a total of 5.5 million shares for approximately $468 million as part of its four-year, $5 billion share repurchase program, approved by the Board of Directors in September 2008. As of the end of the third quarter the Company has purchased a total of 22.9 million shares for approximately $1.7 billion under this program.
Conference Call
NIKE, Inc. management will host a conference call beginning at approximately 2:00 p.m. PT on March 17, 2011, to review third quarter results. The conference call will be broadcast live over the Internet and can be accessed at www.nikebiz.com/investors. For those unable to listen to the live broadcast, an archived version will be available at the same location through 9:00 p.m. PT, March 24, 2011.
About NIKE, Inc.
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 Cole Haan, which designs, markets and distributes luxury shoes, handbags, accessories and coats; Converse Inc., which designs, markets and distributes athletic footwear, apparel and accessories; Hurley International LLC, which designs, markets and distributes action sports and youth lifestyle footwear, apparel and accessories; and Umbro Ltd., a leading United Kingdom-based global football (soccer) brand. For more information, NIKE's earnings releases and other financial information are available on the Internet at www.nikebiz.com/investors.
* 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.
(Additional Tables Follow)
NIKE, Inc.
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD ENDED FEBRUARY 28, 2011
(In millions, except per share data)
QUARTER ENDED YEAR TO DATE ENDED
INCOME STATEMENT 2/28/2011 2/28/2010 % Chg 2/28/2011 2/28/2010 % Chg
Revenues $ 5,079 $ 4,733 7% $ 15,096 $ 13,937 8%
Cost of sales 2,752 2,515 9% 8,142 7,543 8%
Gross margin 2,327 2,218 5% 6,954 6,394 9%
45.8 % 46.9 % 46.1 % 45.9 %
Demand creation 578 563 3% 1,831 1,690 8%
expense
Operating overhead 1,059 1,000 6% 3,090 2,898 7%
expense
Total selling and
administrative 1,637 1,563 5% 4,921 4,588 7%
expense
32.2 % 33.0 % 32.6 % 32.9 %
Other (income), net (17 ) (8 ) 113% (38 ) (32 ) 19%
Interest expense, - 1 - - 4 -
net
Income before income 707 662 7% 2,071 1,834 13%
taxes
Income taxes 184 165 12% 532 449 18%
26.0 % 24.9 % 25.7 % 24.5 %
Net income $ 523 $ 497 5% $ 1,539 $ 1,385 11%
Diluted EPS $ 1.08 $ 1.01 7% $ 3.16 $ 2.81 12%
Basic EPS $ 1.10 $ 1.02 8% $ 3.22 $ 2.85 13%
Weighted Average
Common Shares
Outstanding:
Diluted 485.5 492.3 487.7 493.3
Basic 475.3 484.4 477.6 485.8
Dividends declared $ 0.31 $ 0.27 $ 0.89 $ 0.79
NIKE, Inc.
BALANCE SHEET 2/28/2011 2/28/2010 % Change
(In millions)
ASSETS
Current assets:
Cash and equivalents $ 2,132 $ 2,225 -4%
Short-term investments 2,333 1,814 29%
Accounts receivable, net 2,985 2,834 5%
Inventories 2,536 2,150 18%
Deferred income taxes 286 222 29%
Prepaid expenses and other current assets 513 843 -39%
Total current assets 10,785 10,088 7%
Property, plant and equipment 4,804 4,437 8%
Less accumulated depreciation 2,747 2,474 11%
Property, plant and equipment, net 2,057 1,963 5%
Identifiable intangible assets, net 472 468 1%
Goodwill 194 191 2%
Deferred income taxes and other assets 970 866 12%
Total assets $ 14,478 $ 13,576 7%
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $ 198 8 -
Notes payable 139 109 28%
Accounts payable 1,147 994 15%
Accrued liabilities 1,745 1,648 6%
Income taxes payable 113 88 28%
Total current liabilities 3,342 2,847 17%
Long-term debt 276 452 -39%
Deferred income taxes and other liabilities 958 848 13%
Redeemable preferred stock - - -
Shareholders' equity 9,902 9,429 5%
Total liabilities and shareholders' equity $ 14,478 $ 13,576 7%
NIKE, Inc.
QUARTER ENDED YEAR TO DATE ENDED
% Change % Change
% Excluding % Excluding
DIVISIONAL 2/28/2011 2/28/2010 Change Currency 2/28/2011 2/28/2010 Change Currency
REVENUES1 Changes2 Changes2
(In millions)
North
America
Footwear $ 1,273 $ 1,186 7% 7% $ 3,645 $ 3,386 8% 7%
Apparel 481 408 18% 18% 1,534 1,293 19% 18%
Equipment 81 85 -5% -4% 260 257 1% 1%
Total 1,835 1,679 9% 9% 5,439 4,936 10% 10%
Western
Europe
Footwear 563 577 -2% 6% 1,689 1,727 -2% 7%
Apparel 294 300 -2% 7% 955 1,016 -6% 3%
Equipment 50 52 -4% 4% 162 193 -16% -8%
Total 907 929 -2% 6% 2,806 2,936 -4% 5%
Central and
Eastern
Europe
Footwear 143 137 4% 9% 409 384 7% 12%
Apparel 91 85 7% 13% 271 259 5% 10%
Equipment 17 17 0% 18% 57 59 -3% 2%
Total 251 239 5% 11% 737 702 5% 11%
Greater
China
Footwear 333 279 19% 16% 843 707 19% 17%
Apparel 201 153 31% 28% 574 491 17% 15%
Equipment 20 26 -23% -23% 79 79 0% 0%
Total 554 458 21% 18% 1,496 1,277 17% 15%
Japan
Footwear 100 103 -3% -12% 279 304 -8% -15%
Apparel 78 86 -9% -16% 223 251 -11% -18%
Equipment 17 24 -29% -38% 48 66 -27% -33%
Total 195 213 -8% -16% 550 621 -11% -18%
Emerging
Markets
Footwear 448 375 19% 15% 1,373 1,079 27% 22%
Apparel 148 127 17% 13% 480 401 20% 14%
Equipment 47 40 18% 15% 136 122 11% 7%
Total 643 542 19% 15% 1,989 1,602 24% 19%
Global
Brand 28 22 27% 23% 87 78 12% 17%
Divisions3
Total NIKE 4,413 4,082 8% 9% 13,104 12,152 8% 9%
Brand
Other 663 655 1% 1% 1,987 1,815 9% 10%
Businesses4
Corporate5 3 (4) - - 5 (30) - -
Total NIKE,
Inc. $ 5,079 $ 4,733 7% 8% $ 15,096 $ 13,937 8% 9%
Revenues
Total NIKE
Brand
Footwear $ 2,860 $ 2,657 8% 8% $ 8,238 $ 7,587 9% 10%
Apparel 1,293 1,159 12% 13% 4,037 3,711 9% 10%
Equipment 232 244 -5% -3% 742 776 -4% -3%
Global
Brand 28 22 27% 23% 87 78 12% 17%
Divisions3
1Certain prior year amounts have been reclassified to conform to fiscal year 2011
presentation. These changes had no impact on previously reported results of operations or
shareholders' equity.
2 Fiscal 2011 results have been restated using fiscal 2010 exchange rates for the comparative
period to enhance the visibility of the underlying business trends excluding the impact of
foreign currency exchange rate fluctuations.
3 Global Brand Divisions primarily represent NIKE Brand licensing businesses that are not
part of a geographic operating segment.
4 Other businesses represent activities of Cole Haan, Converse, Hurley, NIKE Golf and Umbro.
5 Corporate revenues primarily consist of foreign currency revenue-related hedge gains and
losses generated by entities within the NIKE Brand geographic operating segments through our
centrally managed foreign exchange risk management program and foreign currency gains and
losses resulting from the difference between actual foreign currency rates and standard rates
assigned to these entities, which are used to record any non-functional currency revenues
into the entity's functional currency.
NIKE, Inc.
QUARTER ENDED YEAR TO DATE ENDED
EARNINGS % %
BEFORE 2/28/2011 2/28/2010 Chg 2/28/2011 2/28/2010 Chg
INTEREST AND
TAXES1,2
(In millions)
North $ 423 $ 403 5 % $ 1,228 $ 1,104 11 %
America
Western 161 199 -19 % 581 663 -12 %
Europe
Central and
Eastern 57 46 24 % 164 172 -5 %
Europe
Greater 213 176 21 % 551 450 22 %
China
Japan 31 40 -23 % 94 120 -22 %
Emerging 173 127 36 % 491 404 22 %
Markets
Global Brand (245 ) (234 ) -5 % (722 ) (590 ) -22 %
Divisions3
Total NIKE 813 757 7 % 2,387 2,323 3 %
Brand
Other 85 105 -19 % 253 227 11 %
Businesses4
Corporate5 (191 ) (199 ) 4 % (569 ) (712 ) 20 %
Total
earnings
before $ 707 $ 663 7 % $ 2,071 $ 1,838 13 %
interest and
taxes1,2
1 The Company evaluates performance of individual operating segments based on
earnings before interest and taxes (also commonly referred to as "EBIT"), which
represents net income before interest expense, net and income taxes.
2 Certain prior year amounts have been reclassified to conform to fiscal year
2011 presentation. These changes had no impact on previously reported results of
operations or shareholders' equity.
3Global Brand Divisions primarily represent NIKE Brand licensing businesses that
are not part of a geographic operating segment and general and administrative
expenses that are centrally managed for the NIKE Brand.
4 Other businesses represent activities of Cole Haan, Converse, Hurley, NIKE
Golf and Umbro.
5 Corporate consists of unallocated general and administrative expenses, which
includes expenses associated with centrally managed departments, depreciation
and amortization related to the Company's corporate headquarters, unallocated
insurance and benefit programs, certain foreign currency gains and losses,
including certain hedge gains and losses, corporate eliminations and other
items.
Source: NIKE, Inc.
Released March 17, 2011