NIKE, Inc. Reports Fiscal 2011 First Quarter Results
-- Revenue $5.2 billion; up 8 percent versus prior year or up 10 percent
excluding currency changes
-- Diluted earnings per share up 10 percent from prior year to $1.14
-- Worldwide futures orders up 10 percent, up 13 percent excluding currency
changes
-- Inventories down 3 percent versus prior year
BEAVERTON, Ore.--(BUSINESS WIRE)-- NIKE, Inc. (NYSE:NKE) today reported financial results for its fiscal 2011 first quarter ended August 31, 2010. Earnings per share for the quarter were up 10 percent on 8 percent higher net revenue as a result of gross margin expansion driven by the strength of the NIKE, Inc. brands in the marketplace and continued clean inventory positions.
"We had a great first quarter. It demonstrates the power of our growth strategy, which is to create innovative products, amazing brand experiences, and premium retail destinations wherever consumers connect with NIKE," said Mark Parker, President and CEO, NIKE, Inc. "Going forward we'll continue to maximize the flexibility, balance and alignment that we have built into our portfolio of brands and categories. Those strengths will help us navigate the continued uncertainty in the macro-economic picture. More importantly they help us leverage the global appetite for sports and innovation, which has never been stronger. That's how we continue to grow our businesses, strengthen our balance sheet and increase our returns to shareholders over the long term."*
Futures Orders
As of the end of the quarter worldwide futures orders for NIKE Brand athletic footwear and apparel, scheduled for delivery from September 2010 through January 2011, totaled $7.1 billion, 10 percent higher than orders reported for the same period last year. Excluding currency changes, reported orders would have increased 13 percent.*
By geography, futures orders were as follows:
Geography Reported Futures Orders Excluding Currency Changes North America +15% +14% Western Europe -7% +6% Central and Eastern Europe +8% +14% Greater China +25% +23% Japan -8% -14% Emerging Markets +21% +24% Total NIKE Brand +10% +13%
First Quarter Income Statement Review
-- Revenuesincreased 8 percent to $5.2 billion. Excluding the impacts of
changes in foreign currency, NIKE, Inc. revenue increased 10 percent.
Revenues for the NIKE Brand were up 8 percent on a currency neutral
basis driven by growth in each of the seven NIKE Brand categories:
Action Sports, Athletic Training, Basketball, Football (Soccer),
Running, Sportswear and Women's Training. Excluding currency changes,
revenues for our Other Businesses increased 16 percent as Cole Haan,
Converse, Hurley, NIKE Golf and Umbro all experienced growth during the
quarter.
-- Gross margins improved 80 basis points to 47.0 percent due to growth and
improved profitability from Direct to Consumer operations, fewer and
more profitable close-out sales and improved in-line product margins.
These factors more than offset margin pressures resulting from changes
in foreign currency and higher airfreight costs to meet strong demand
for NIKE Brand products.
-- Selling and administrative expenses were up 8 percent to $1.7 billion
due to planned investments in demand creation spending, which increased
23 percent to $679 million primarily as a result of marketing expenses
incurred for the World Cup and World Basketball Festival. Operating
overhead spending was $994 million, in line with last year, as
investments in our Direct to Consumer business and key brand events were
offset by changes in stock-based compensation expense.
-- Other expensewas $7 million, comprised largely of non-recurring items
which offset 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 expense (income), net combined with the
impact of changes in foreign currency exchange rates on the translation
of foreign currency-denominated profits decreased pretax income by
approximately $33 million.
-- The effective tax rate was 26.0 percent compared to 24.7 percent for the
same period last year primarily because a larger percentage of pretax
income related to operations in the United States, which has a higher
effective tax rate than operations abroad.
-- Net income increased 9 percent to $559 million and diluted earnings per
share increased 10 percent to $1.14 reflecting an approximate 1 percent
decline in the number of diluted weighted average common shares
outstanding.
August 31, 2010 Balance Sheet Review
-- Inventories for NIKE, Inc. were $2.2 billion, down 3 percent from August
31, 2009.
-- Cash and short-term investments at period-end were $4.7 billion, 29
percent higher than last year mainly as a result of higher net income
and continued focus on working capital management.
Share Repurchases
During the first quarter, the Company repurchased a total of 7.3 million shares for approximately $517 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 first quarter the Company has purchased a total of 13.9 million shares for approximately $971 million under this program.
Conference Call
Nike management will host a conference call beginning at approximately 2:00 p.m. PT on September 23, 2010, to review first 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, September 30, 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 AUGUST 31, 2010
(In millions, except per share data)
QUARTER ENDED
INCOME STATEMENT 8/31/2010 8/31/2009 % Chg
Revenues $ 5,175 $ 4,799 8 %
Cost of sales 2,741 2,583 6 %
Gross margin 2,434 2,216 10 %
47.0 % 46.2 %
Demand creation expense 679 554 23 %
Operating overhead expense 994 992 0 %
Total selling and administrative expense 1,673 1,546 8 %
32.3 % 32.2 %
Other expense (income), net 7 (12 ) -
Interest (income) expense, net (1 ) 1 -
Income before income taxes 755 681 11 %
Income taxes 196 168 17 %
26.0 % 24.7 %
Net income $ 559 $ 513 9 %
Diluted EPS $ 1.14 $ 1.04 10 %
Basic EPS $ 1.17 $ 1.06 10 %
Weighted Average Common Shares Outstanding:
Diluted 488.6 491.6
Basic 479.6 485.8
Dividends declared $ 0.27 $ 0.25
NIKE, Inc.
BALANCE SHEET 8/31/2010 8/31/2009 % Change
(In millions)
ASSETS
Current assets:
Cash and equivalents $ 2,010 $ 2,261 -11 %
Short-term investments 2,678 1,369 96 %
Accounts receivable, net 2,791 2,835 -2 %
Inventories 2,210 2,288 -3 %
Deferred income taxes 259 214 21 %
Prepaid expenses and other current assets 583 640 -9 %
Total current assets 10,531 9,607 10 %
Property, plant and equipment 4,535 4,374 4 %
Less accumulated depreciation 2,560 2,393 7 %
Property, plant and equipment, net 1,975 1,981 0 %
Identifiable intangible assets, net 470 471 0 %
Goodwill 192 195 -2 %
Deferred income taxes and other assets 883 937 -6 %
Total assets $ 14,051 $ 13,191 7 %
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $ 132 $ 7 -
Notes payable 109 95 15 %
Accounts payable 1,101 962 14 %
Accrued liabilities 1,696 1,643 3 %
Income taxes payable 104 146 -29 %
Total current liabilities 3,142 2,853 10 %
Long-term debt 342 443 -23 %
Deferred income taxes and other 907 804 13 %
liabilities
Redeemable preferred stock - - -
Shareholders' equity 9,660 9,091 6 %
Total liabilities and shareholders' equity $ 14,051 $ 13,191 7 %
NIKE, Inc.
QUARTER ENDED
DIVISIONAL REVENUES1 8/31/2010 8/31/2009 % Change % Change Excluding
Currency Changes2
(In millions)
North America
Footwear $ 1,289 $ 1,219 6 % 5 %
Apparel 515 444 16 % 16 %
Equipment 99 97 2 % 2 %
Total 1,903 1,760 8 % 8 %
Western Europe
Footwear 627 635 -1 % 10 %
Apparel 364 393 -7 % 3 %
Equipment 65 77 -16 % -5 %
Total 1,056 1,105 -4 % 6 %
Central and Eastern
Europe
Footwear 146 139 5 % 12 %
Apparel 92 89 3 % 10 %
Equipment 25 27 -7 % -7 %
Total 263 255 3 % 9 %
Greater China
Footwear 246 218 13 % 12 %
Apparel 182 168 8 % 8 %
Equipment 32 30 7 % 10 %
Total 460 416 11 % 10 %
Japan
Footwear 86 98 -12 % -17 %
Apparel 60 67 -10 % -16 %
Equipment 17 21 -19 % -24 %
Total 163 186 -12 % -18 %
Emerging Markets
Footwear 404 299 35 % 29 %
Apparel 149 116 28 % 22 %
Equipment 38 38 0 % -5 %
Total 591 453 30 % 24 %
Global Brand 32 31 3 % 6 %
Divisions3
Total NIKE Brand 4,468 4,206 6 % 8 %
Other Businesses4 693 604 15 % 16 %
Corporate5 14 (11 ) - -
Total NIKE, Inc. $ 5,175 $ 4,799 8 % 10 %
Revenues
Total NIKE Brand
Footwear $ 2,798 $ 2,608 7 % 9 %
Apparel 1,362 1,277 7 % 9 %
Equipment 276 290 -5 % -3 %
Global Brand 32 31 3 % 6 %
Divisions4
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.
2Fiscal 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.
4Other 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 %
EARNINGS BEFORE INTEREST AND TAXES1,2 8/31/2010 8/31/2009 Chg
(In millions)
North America $ 446 $ 411 9 %
Western Europe 279 289 -3 %
Central and Eastern Europe 63 77 -18 %
Greater China 164 149 10 %
Japan 27 35 -23 %
Emerging Markets 124 106 17 %
Global Brand Divisions3 (250 ) (181 ) -38 %
Total NIKE Brand 853 886 -4 %
Other Businesses4 109 87 25 %
Corporate5 (208 ) (291 ) 29 %
Total earnings before interest and taxes1,2 $ 754 $ 682 11 %
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 (income) 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 September 23, 2010