NIKE, Inc. Reports Fiscal 2011 Second Quarter Results
-- Revenue $4.8 billion; up 10 percent versus prior year or up 11 percent
excluding currency changes
-- Diluted earnings per share up 24 percent from prior year to $0.94
-- NIKE Brand futures orders up 11 percent
-- Inventories up 8 percent versus prior year
BEAVERTON, Ore.--(BUSINESS WIRE)-- NIKE, Inc. (NYSE:NKE) today reported financial results for its fiscal 2011 second quarter ended November 30, 2010. Earnings per share for the quarter were up 24 percent on 10 percent higher net revenue as NIKE, Inc. brands continued to experience strong sales in the marketplace and benefit from clean inventory positions while better leveraging SG&A expenses.
"We had a great second quarter. Almost every brand, category and geography delivered growth," said Mark Parker, President and CEO of NIKE, Inc. "We continue to outperform the market thanks to our innovative product, compelling brands and strong marketplace management. That's good for athletes and consumers, good for our industry, and it's good for our shareholders. Going forward, we're in the enviable position of having far more opportunities than challenges. I'm confident our strategies can continue to deliver sustainable, profitable growth."*
Futures Orders
As of the end of the quarter futures orders for NIKE Brand athletic footwear and apparel, scheduled for delivery from December 2010 through April 2011, totaled $7.7 billion, 11 percent higher than orders reported for the same period last year with minimal impact from changes in foreign currency exchange rates compared to the prior year.*
By geography, futures orders were as follows:
Geography Reported Futures Orders Excluding Currency Changes North America +16% +16% Western Europe 0% +3% Central and Eastern Europe +9% +11% Greater China +18% +14% Japan -2% -5% Emerging Markets +15% +15% Total NIKE Brand Futures +11% +11% Orders
Second Quarter Income Statement Review
-- Revenuesincreased 10 percent to $4.8 billion. Excluding the impacts of
changes in foreign currency, NIKE, Inc. revenue increased 11 percent.
Revenues for the NIKE Brand were up 9 percent, or up 10 percent on a
currency neutral basis, driven by growth in all seven NIKE Brand key
categories except Sportswear, which was down slightly compared to the
prior year, and every geography except Japan. Our Other Businesses
revenues increased 13 percent, with a minimal impact from changes in
foreign currency exchange rates, as Cole Haan, Converse, Hurley, NIKE
Golf and Umbro all experienced growth during the quarter.
-- Gross margins improved 80 basis points to 45.3 percent. The improvement
was due to a higher mix of full-price sales and fewer and more
profitable close-out sales resulting from strong demand for our products
and cleaner inventory positions, as well as improved profitability from
our Direct to Consumer operations. These factors more than offset margin
pressure from higher total freight costs, including additional
airfreight costs incurred to meet strong demand for NIKE Brand products.
-- Selling and administrative expenses were up 9 percent to $1.6 billion
mainly due to operating overhead, which increased 14 percent to $1.0
billion. This increase was a result of additional investments made in
both our wholesale and Direct to Consumer businesses, higher performance
based compensation expense and meeting and travel expense increases
given comparisons to reduced levels last year. Demand Creation spending
was inline with the same period last year at $574 million.
-- Other incomewas $28 million, comprised largely of non-recurring items
and net conversion gains primarily on 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 25.0 percent compared to 23.6 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 22 percent to $457 million and diluted earnings per
share increased 24 percent to $0.94, reflecting higher net income and an
approximate 1 percent decline in the number of diluted weighted average
common shares outstanding.
November 30, 2010 Balance Sheet Review
-- Inventories for NIKE, Inc. were $2.3 billion, up 8 percent from November
30, 2009.
-- Cash and short-term investments at period-end were $4.8 billion, 19
percent higher than last year mainly as a result of higher net income.
Share Repurchases
During the second quarter, the Company repurchased a total of 3.5 million shares for approximately $280 million as part of the Company's four-year, $5 billion share repurchase program, approved by the Board of Directors in September 2008. As of the end of the second quarter the Company has purchased a total of 17.4 million shares for approximately $1.3 billion under this program.
Conference Call
Nike management will host a conference call beginning at approximately 2:00 p.m. PT on December 21, 2010, to review second 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, December 28, 2010.
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.
NIKE, Inc.
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD ENDED NOVEMBER 30, 2010
(In millions, except per share data)
QUARTER ENDED YEAR TO DATE ENDED
INCOME 11/30/2010 11/30/2009 % Chg 11/30/2010 11/30/2009 % Chg
STATEMENT
Revenues $ 4,842 $ 4,405 10 % $ 10,017 $ 9,204 9 %
Cost of sales 2,649 2,445 8 % 5,390 5,028 7 %
Gross margin 2,193 1,960 12 % 4,627 4,176 11 %
45.3 % 44.5 % 46.2 % 45.4 %
Demand
creation 574 573 0 % 1,253 1,127 11 %
expense
Operating
overhead 1,037 906 14 % 2,031 1,898 7 %
expense
Total selling
and 1,611 1,479 9 % 3,284 3,025 9 %
administrative
expense
33.3 % 33.6 % 32.8 % 32.9 %
Other (28 ) (12 ) 133 % (21 ) (24 ) -13 %
(income), net
Interest 1 2 -50 % - 3 -100 %
expense, net
Income before 609 491 24 % 1,364 1,172 16 %
income taxes
Income taxes 152 116 31 % 348 284 23 %
25.0 % 23.6 % 25.5 % 24.2 %
Net income $ 457 $ 375 22 % $ 1,016 $ 888 14 %
Diluted EPS $ 0.94 $ 0.76 24 % $ 2.08 $ 1.80 16 %
Basic EPS $ 0.96 $ 0.77 25 % $ 2.12 $ 1.83 16 %
Weighted
Average Common
Shares
Outstanding:
Diluted 487.6 494.5 488.4 493.5
Basic 477.9 487.2 478.8 486.5
Dividends $ 0.31 $ 0.27 $ 0.58 $ 0.52
declared
NIKE, Inc.
BALANCE SHEET 11/30/2010 11/30/2009 % Change
(In millions)
ASSETS
Current assets:
Cash and equivalents $ 1,768 $ 2,035 -13 %
Short-term investments 3,021 1,975 53 %
Accounts receivable, net 2,792 2,717 3 %
Inventories 2,348 2,176 8 %
Deferred income taxes 267 220 21 %
Prepaid expenses and other current 720 643 12 %
assets
Total current assets 10,916 9,766 12 %
Property, plant and equipment 4,641 4,503 3 %
Less accumulated depreciation 2,638 2,479 6 %
Property, plant and equipment, net 2,003 2,024 -1 %
Identifiable intangible assets, net 469 473 -1 %
Goodwill 192 196 -2 %
Deferred income taxes and other assets 884 899 -2 %
Total assets $ 14,464 $ 13,358 8 %
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $ 132 8 -
Notes payable 128 103 24 %
Accounts payable 1,225 1,008 22 %
Accrued liabilities 1,685 1,598 5 %
Income taxes payable 78 81 -4 %
Total current liabilities 3,248 2,798 16 %
Long-term debt 338 460 -27 %
Deferred income taxes and other 929 876 6 %
liabilities
Redeemable preferred stock - - -
Shareholders' equity 9,949 9,224 8 %
Total liabilities and shareholders' $ 14,464 $ 13,358 8 %
equity
NIKE, Inc.
QUARTER ENDED YEAR TO DATE ENDED
% Change % Change
% Excluding % Excluding
DIVISIONAL 11/30/2010 11/30/2009 Change Currency 11/30/2010 11/30/2009 Change Currency
REVENUES1 Changes2 Changes2
(In millions)
North
America
Footwear $ 1,083 $ 981 10 % 10 % $ 2,372 $ 2,200 8 % 8 %
Apparel 538 441 22 % 22 % 1,053 885 19 % 19 %
Equipment 80 75 7 % 4 % 179 172 4 % 3 %
Total 1,701 1,497 14 % 13 % 3,604 3,257 11 % 10 %
Western
Europe
Footwear 499 515 -3 % 6 % 1,126 1,150 -2 % 8 %
Apparel 297 323 -8 % 0 % 661 716 -8 % 2 %
Equipment 47 64 -27 % -20 % 112 141 -21 % -12 %
Total 843 902 -7 % 2 % 1,899 2,007 -5 % 4 %
Central and
Eastern
Europe
Footwear 120 108 11 % 17 % 266 247 8 % 14 %
Apparel 88 85 4 % 8 % 180 174 3 % 9 %
Equipment 15 15 0 % 0 % 40 42 -5 % -5 %
Total 223 208 7 % 12 % 486 463 5 % 10 %
Greater
China
Footwear 264 210 26 % 24 % 510 428 19 % 18 %
Apparel 191 170 12 % 11 % 373 338 10 % 9 %
Equipment 27 23 17 % 13 % 59 53 11 % 11 %
Total 482 403 20 % 18 % 942 819 15 % 14 %
Japan
Footwear 93 103 -10 % -17 % 179 201 -11 % -17 %
Apparel 85 98 -13 % -20 % 145 165 -12 % -19 %
Equipment 14 21 -33 % -38 % 31 42 -26 % -31 %
Total 192 222 -14 % -21 % 355 408 -13 % -19 %
Emerging
Markets
Footwear 521 405 29 % 23 % 925 704 31 % 26 %
Apparel 183 158 16 % 11 % 332 274 21 % 15 %
Equipment 51 44 16 % 9 % 89 82 9 % 2 %
Total 755 607 24 % 19 % 1,346 1,060 27 % 21 %
Global
Brand 27 25 8 % 24 % 59 56 5 % 14 %
Divisions3
Total NIKE 4,223 3,864 9 % 10 % 8,691 8,070 8 % 9 %
Brand
Other 631 556 13 % 13 % 1,324 1,160 14 % 14 %
Businesses4
Corporate5 (12 ) (15 ) 20 % 27 % 2 (26 ) - -
Total NIKE,
Inc. $ 4,842 $ 4,405 10 % 11 % $ 10,017 $ 9,204 9 % 10 %
Revenues
Total NIKE
Brand
Footwear $ 2,580 $ 2,322 11 % 12 % $ 5,378 $ 4,930 9 % 10 %
Apparel 1,382 1,275 8 % 9 % 2,744 2,552 8 % 9 %
Equipment 234 242 -3 % -5 % 510 532 -4 % -4 %
Global
Brand 27 25 8 % 24 % 59 56 5 % 14 %
Divisions3
1 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.
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.
EARNINGS QUARTER ENDED YEAR TO DATE ENDED
BEFORE
INTEREST % Chg % Chg
AND 11/30/2010 11/30/2009 11/30/2010 11/30/2009
TAXES1,2
(In millions)
North $ 359 $ 290 24 % $ 805 $ 701 15 %
America
Western 141 175 -19 % 420 464 -9 %
Europe
Central and
Eastern 44 49 -10 % 107 126 -15 %
Europe
Greater 174 125 39 % 338 274 23 %
China
Japan 36 45 -20 % 63 80 -21 %
Emerging 194 171 13 % 318 277 15 %
Markets
Global
Brand (227 ) (175 ) -30 % (477 ) (356 ) -34 %
Divisions3
Total NIKE 721 680 6 % 1,574 1,566 1 %
Brand
Other 59 35 69 % 168 122 38 %
Businesses4
Corporate5 (170 ) (222 ) 23 % (378 ) (513 ) 26 %
Total
earnings
before $ 610 $ 493 24 % $ 1,364 $ 1,175 16 %
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.
3 Global 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 December 21, 2010