NIKE Reports Second Quarter Earnings Per Share of US$1.14, Up 18 Percent From Prior Year
Beaverton, Oregon (ots/PRNewswire)
- Worldwide Futures Orders Up 2.5 Percent, Up 7 Percent Excluding Effects of Foreign Currency
NIKE, Inc. (NYSE: NKE) today reported record results for the second quarter ended November 30, 2005. Second quarter revenues increased 10 percent to US$3.5 billion, compared to US$3.1 billion for the same period last year. Net income grew 15 percent to US$301.1 million, compared to US$261.9 million, and diluted earnings per share grew 18 percent to US$1.14, versus US$0.97 in the prior year.
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"Led by the outstanding performance of the Nike brand in the U.S. and Americas regions, we delivered strong growth in revenue and profitability in the second quarter," said William D. Perez, President and Chief Executive Officer, Nike, Inc. "In addition to the Nike brand, our other businesses also delivered double digit growth in revenue and profits. The power of our Nike, Inc. portfolio was evident this quarter, with strength in the U.S., China and Latin America balancing more challenging results in Western Europe and Japan. We feel very good about our business overall, and our prospects for delivering on our financial goals for the fiscal year."(i)
Futures Orders
The Company reported worldwide futures orders for athletic footwear and apparel, scheduled for delivery from December 2005 through April 2006, totaling US$5.2 billion, two and a half percent higher than such orders reported for the same period last year. Changes in currency exchange rates significantly reduced this growth relative to recent quarters, as global futures orders grew by seven percent excluding the impact of currency changes.(i)
By region, futures orders for the U.S. increased nine percent; Europe (which includes the Middle East and Africa) declined six percent; Asia Pacific grew two percent; and the Americas increased 23 percent. Changes in currency exchange rates reduced the reported futures orders by eight percentage points in Europe and by seven percentage points in the Asia Pacific region. In the Americas region, three percentage points of the increase were due to changes in currency exchange rates.(i)
Regional Highlights
U.S.
During the second quarter, U.S. revenues increased 15 percent to US$1.3 billion versus US$1.1 billion for the second quarter of fiscal 2005. U.S. athletic footwear revenues increased 19 percent to US$811.5 million. Apparel revenues increased 13 percent to US$433.8 million. Equipment revenues declined eight percent to US$61.8 million. U.S. pre-tax income improved 14 percent to US$265.7 million.
Europe
Revenues for the European region grew two percent to US$977.4 million, up from US$961.1 million for the same period last year. Foreign currency exchange rates did not have a material impact on this growth for the quarter. Footwear revenues were US$533.2 million, up slightly from US$531.8 million a year ago. Apparel revenues increased three percent to US$379.6 million and equipment revenues increased nine percent to US$64.6 million. Pre-tax income declined two percent to US$194.2 million.
Asia Pacific
Revenues in the Asia Pacific region grew four percent to US$503.3 million compared to US$483.5 million a year ago. Two percentage points of this growth were the result of changes in currency exchange rates. Footwear revenues were up four percent to US$245.4 million, apparel revenues increased three percent to US$214.6 million and equipment revenues grew 11 percent to US$43.3 million. Pre-tax income increased three percent to US$115.2 million.
Americas
Revenues in the Americas region increased 33 percent to US$252.1 million, an improvement from US$189.3 million in the second quarter of fiscal 2005. Currency exchange rates contributed 13 percentage points to this growth rate. Footwear revenues were up 37 percent to US$178.1 million, apparel revenues increased 18 percent to US$55.4 million and equipment jumped 48 percent to US$18.6 million. Pre-tax income was up 30 percent to US$57.4 million.
Other Businesses
Other business revenues, which include Converse Inc., NIKE Golf, Bauer NIKE Hockey Inc., Cole Haan, Hurley International LLC and Exeter Brands Group LLC, grew 14 percent to US$434.8 million from US$382.4 million last year. Pre-tax income was up 11 percent to US$23.0 million.
Income Statement Review
Gross margins were 43.5 percent compared to 44.1 percent last year. Selling and administrative expenses were 30.4 percent of second quarter revenues, compared to 30.9 percent last year. The effective tax rate for the second quarter was 35.1 percent.
Balance Sheet Review
At quarter end, global inventories stood at US$1.9 billion, an increase of 10 percent from November 30, 2004. Cash and short-term investments were US$2.1 billion at the end of the quarter, compared to US$1.7 billion last year.
Share Repurchase
During the quarter, the Company purchased a total of 2,926,400 shares for approximately US$240 million in conjunction with the Company's four-year, US$1.5 billion share repurchase program that was approved by the Board of Directors in June 2004.
NIKE, Inc. based in 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; Bauer NIKE Hockey Inc., a leading designer and distributor of hockey equipment; Cole Haan, a leading designer and marketer of luxury shoes, handbags, accessories and coats; 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/invest.
(i) 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.
NIKE, Inc.
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD ENDED NOVEMBER 30, 2005
(In millions of USD, except per share data)
QUARTER ENDING YEAR TO DATE ENDING
INCOME % %
STATEMENT 11/30/2005 11/30/2004 Chg 11/30/2005 11/30/2004 Chg
Revenues $3,474.7 $3,148.3 10% $7,336.7 $6,710.1 9%
Cost of sales 1,963.3 1,760.2 12% 4,077.2 3,736.2 9%
Gross margin 1,511.4 1,388.1 9% 3,259.5 2,973.9 10%
43.5% 44.1% 44.4% 44.3%
Selling and
administrative
expense 1,054.7 973.2 8% 2,159.1 2,046.8 5%
30.4% 30.9% 29.4% 30.5%
Interest
(income)
expense, net (5.7) 3.7 -- (12.1) 8.5 --
Other
(income)
expense, net (1.4) 8.2 -- (11.3) 10.1 --
Income
before
income
taxes 463.8 403.0 15% 1,123.8 908.5 24%
Income taxes 162.7 141.1 15% 390.4 319.8 22%
35.1% 35.0% 34.7% 35.2%
Net income $301.1 $261.9 15% $733.4 $588.7 25%
Diluted EPS $1.14 $0.97 18% $2.77 $2.18 27%
Basic EPS $1.16 $0.99 17% $2.82 $2.24 26%
Weighted
Average
Common
Shares
Outstanding:
Diluted 263.7 271.1 265.0 270.5
Basic 259.0 263.3 260.0 263.0
Dividends
declared $0.31 $0.25 $0.56 $0.45
NIKE, Inc.
BALANCE SHEET (a) 11/30/2005 11/30/2004
ASSETS
Current assets:
Cash and equivalents $1,134.5 $1,181.8
Short-term investments 920.0 476.2
Accounts receivable, net 2,166.2 2,125.8
Inventories 1,892.7 1,714.2
Deferred income taxes 86.9 184.2
Prepaid expenses and other current assets 496.2 392.1
Total current assets 6,696.5 6,074.3
Property, plant and equipment 3,216.6 3,340.7
Less accumulated depreciation 1,630.8 1,697.3
Property, plant and equipment, net 1,585.8 1,643.4
Identifiable intangible assets, net 403.9 407.8
Goodwill 135.4 135.4
Deferred income taxes and other assets 322.5 317.0
Total assets $9,144.1 $8,577.9
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $254.5 $6.5
Notes payable 79.2 144.4
Accounts payable 797.1 672.5
Accrued liabilities 959.2 1,042.6
Income taxes payable 71.1 180.8
Total current liabilities 2,161.1 2,046.8
Long-term debt 408.3 699.0
Deferred income taxes and other liabilities 492.9 489.5
Redeemable preferred stock 0.3 0.3
Shareholders' equity 6,081.5 5,342.3
Total liabilities and shareholders' equity $9,144.1 $8,577.9
(a) Certain prior year amounts have been reclassified to conform to
fiscal year 2006 presentation.
These changes had no impact on previously reported results of operations
or shareholders' equity.
NIKE, Inc.
QUARTER ENDING YEAR TO DATE ENDING
DIVISIONAL % %
REVENUES 11/30/2005 11/30/2004 Chg 11/30/2005 11/30/2004 Chg
U.S. Region
Footwear $811.5 $680.0 19% $1,832.6 $1,601.4 14%
Apparel 433.8 384.7 13% 829.3 776.0 7%
Equipment 61.8 67.3 -8% 154.1 156.3 -1%
Total 1,307.1 1,132.0 15% 2,816.0 2,533.7 11%
EMEA Region
Footwear 533.2 531.8 0% 1,218.3 1,195.1 2%
Apparel 379.6 370.0 3% 814.8 779.7 5%
Equipment 64.6 59.3 9% 161.8 144.2 12%
Total 977.4 961.1 2% 2,194.9 2,119.0 4%
Asia Pacific
Region
Footwear 245.4 236.6 4% 482.8 455.2 6%
Apparel 214.6 207.8 3% 391.1 356.6 10%
Equipment 43.3 39.1 11% 89.0 77.7 15%
Total 503.3 483.5 4% 962.9 889.5 8%
Americas Region
Footwear 178.1 129.8 37% 335.0 244.6 37%
Apparel 55.4 46.9 18% 96.1 82.4 17%
Equipment 18.6 12.6 48% 34.7 24.0 45%
Total 252.1 189.3 33% 465.8 351.0 33%
3,039.9 2,765.9 10% 6,439.6 5,893.2 9%
Other 434.8 382.4 14% 897.1 816.9 10%
Total
NIKE, Inc.
revenues $3,474.7 $3,148.3 10% $7,336.7 $6,710.1 9%
NIKE, Inc.
QUARTER ENDING YEAR TO DATE ENDING
PRE-TAX % %
INCOME(1),(b) 11/30/2005 11/30/2004 Chg 11/30/2005 11/30/2004 Chg
U.S. Region $265.7 $233.1 14% $610.9 $555.4 10%
EMEA Region 194.2 197.6 -2% 524.4 444.0 18%
Asia Pacific
Region 115.2 112.0 3% 206.6 175.4 18%
Americas Region 57.4 44.3 30% 102.0 64.7 58%
Other 23.0 20.8 11% 63.0 61.0 3%
Corporate(2) (191.7) (204.8) 6% (383.1) (392.0) 2%
Total
pre-tax
income(1) $463.8 $403.0 15% $1,123.8 $908.5 24%
(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) "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.
(b) Certain prior year amounts have been reclassified to conform to
fiscal year 2006 presentation. These changes had no impact on previously
reported results of operations or shareholders' equity.Web site: http://www.nikebiz.com
Contact:
media, Alan Marks, +1-503-671-4235, or investors, Pamela Catlett,
+1-503-671-4589, both of NIKE, Inc. /Photo:
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