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Press release from Business Wire

NIKE, Inc. Reports Fiscal 2011 Second Quarter Results

<ul> <li class='bwlistitemmargb'> Revenue $4.8 billion; up 10 percent versus prior year or up 11 percent excluding currency changes </li> <li class='bwlistitemmargb'> Diluted earnings per share up 24 percent from prior year to $0.94 </li> <li class='bwlistitemmargb'> NIKE Brand futures orders up 11 percent </li> <li class='bwlistitemmargb'> Inventories up 8 percent versus prior year </li> </ul>

Tuesday, December 21, 2010

NIKE, Inc. Reports Fiscal 2011 Second Quarter Results16:15 EST Tuesday, December 21, 2010 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 Orders   +11%   +11%   Second Quarter Income Statement ReviewRevenuesincreased 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 income was $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 ReviewInventories 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 STATEMENTSFOR THE PERIOD ENDED NOVEMBER 30, 2010(In millions, except per share data)             QUARTER ENDEDYEAR TO DATE ENDEDINCOME STATEMENT     11/30/2010       11/30/2009     % Chg     11/30/2010       11/30/2009     % Chg 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 expense 574 573 0% 1,253 1,127 11% Operating overhead expense   1,037       906   14%   2,031       1,898   7% Total selling and administrative expense 1,611 1,479 9% 3,284 3,025 9%33.3%33.6%32.8%32.9%   Other (income), net (28 ) (12 ) 133% (21 ) (24 ) -13% Interest expense, net   1       2   -50%   -       3   -100%   Income before income taxes 609 491 24% 1,364 1,172 16%   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 declared $ 0.31     $ 0.27   $ 0.58     $ 0.52       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 assets   720     643 12 %   Total current assets10,9169,766 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 liabilities3,2482,798 16 %   Long-term debt 338 460 -27 % Deferred income taxes and other liabilities 929 876 6 % Redeemable preferred stock - - - Shareholders' equity 9,949 9,224 8 %       Total liabilities and shareholders' equity$14,464   $13,358 8 %   NIKE, Inc.       QUARTER ENDED   % Change     % Change Excluding Currency Changes 2   YEAR TO DATE ENDED   % Change     % Change Excluding Currency Changes2DIVISIONAL REVENUES1     11/30/2010       11/30/2009           11/30/2010     11/30/2009       (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 Divisions3 27 25 8 % 24 % 59 56 5 % 14 %             Total NIKE Brand 4,223 3,864 9 % 10 % 8,691 8,070 8 % 9 %   Other Businesses4 631 556 13 % 13 % 1,324 1,160 14 % 14 % Corporate5 (12 ) (15 ) 20 % 27 % 2 (26 ) - -             Total NIKE, Inc. Revenues $ 4,842     $ 4,405   10 % 11 % $ 10,017   $ 9,204   9 % 10 %   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 Divisions3 27 25 8 % 24 % 59 56 5 % 14 %                                   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 BEFORE INTEREST AND TAXES1,2QUARTER ENDED%ChgYEAR TO DATE ENDED%Chg     11/30/2010       11/30/2009             11/30/2010       11/30/2009     (In millions)   North America $ 359 $ 290 24 % $ 805 $ 701 15 % Western Europe 141 175 -19 % 420 464 -9 % Central and Eastern Europe 44 49 -10 % 107 126 -15 % Greater China 174 125 39 % 338 274 23 % Japan 36 45 -20 % 63 80 -21 % Emerging Markets 194 171 13 % 318 277 15 % Global Brand Divisions3   (227 )     (175 ) -30 %   (477 )     (356 ) -34 %   Total NIKE Brand 721 680 6 % 1,574 1,566 1 %   Other Businesses4 59 35 69 % 168 122 38 % Corporate5   (170 )     (222 ) 23 %   (378 )     (513 ) 26 %   Total earnings before interest and taxes1,2 $ 610     $ 493   24 % $ 1,364     $ 1,175   16 %                               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. NIKE, Inc.Investor Contact:Kelley Hall, 503-532-3793orMedia Contact:Kellie Leonard, 503-671-6171