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Press release from Business Wire

NIKE, Inc. Reports Fiscal 2012 Second Quarter Results

<ul> <li class='bwlistitemmargb'> Revenues up 18 percent to $5.7 billion, up 16 percent excluding currency changes </li> <li class='bwlistitemmargb'> Diluted earnings per share up 6 percent to $1.00 </li> <li class='bwlistitemmargb'> Worldwide futures orders up 13 percent </li> <li class='bwlistitemmargb'> Inventories up 35 percent </li> </ul>

Tuesday, December 20, 2011

NIKE, Inc. Reports Fiscal 2012 Second Quarter Results16:15 EST Tuesday, December 20, 2011 BEAVERTON, Ore. (Business Wire) -- NIKE, Inc. (NYSE:NKE) today reported financial results for its fiscal 2012 second quarter ended November 30, 2011. Earnings per share for the quarter rose 6 percent as a result of continued strong demand for NIKE, Inc. brands, SG&A expense leverage and a lower average share count, which more than offset the impact of a lower gross margin. “Our strong second quarter results demonstrate that the NIKE, Inc. portfolio is a powerful engine for growth,” said Mark Parker, President and CEO, NIKE, Inc. “We're able to accomplish this by staying focused on what we do best – deliver innovative products and experiences that serve athletes, inspire consumers and reward our shareholders. Going forward we'll continue to use the unique power of our portfolio to drive growth, manage risk and connect with consumers.”* Second Quarter Income Statement ReviewRevenuesfor NIKE, Inc. increased 18 percent to $5.7 billion, up 16 percent on a currency-neutral basis. Excluding the impacts of changes in foreign currency, NIKE Brand revenues rose 18 percent with growth in every geography except Japan and in all key categories except Action Sports. Revenues for Other Businesses increased 5 percent with minimal impact from changes in currency exchange rates, as growth at Converse more than offset lower revenues at NIKE Golf, Cole Haan, Hurley and Umbro. Gross margin declined 260 basis points to 42.7 percent due primarily to higher product costs, which more than offset the positive effects of growing sales in our Direct to Consumer operations, price increases and ongoing product cost reduction initiatives. Selling and administrative expenses grew at a lower rate than revenue, up 13 percent to $1.8 billion. Demand creation expenses increased 12 percent to $644 million driven by marketing support for key product initiatives and investments in consumer events for the NIKE Brand. Operating overhead expenses increased 13 percent to $1.2 billion due to additional investments made in our wholesale and Direct to Consumer businesses. Other expense, net was $9 million, primarily comprised of net foreign exchange losses, partially offset by non-recurring items. For the quarter, we estimate the year-over-year change in foreign currency related gains and losses included in Other expense, net combined with the impact of changes in foreign currency exchange rates on the translation of foreign currency-denominated profits decreased Income before income taxes by approximately $17 million. The Effective tax rate was 24.1 percent compared to 25.0 percent for the same period last year, an improvement due primarily to a reduction in the effective tax rate on operations outside the United States. Net income increased 3 percent to $469 million and Diluted earnings per share increased 6 percent to $1.00, reflecting a 4 percent decline in the weighted average diluted common shares outstanding. November 30, 2011 Balance Sheet ReviewInventories for NIKE, Inc. were $3.2 billion, up 35 percent from November 30, 2010. Inventories were higher compared to a year ago due to significantly higher average unit product cost and growth in total units. NIKE Brand inventories were up 39 percent. Approximately 20 percentage points of the increase was due to higher wholesale unit inventories as a result of strong demand and more timely deliveries from our product suppliers. The remaining 19 percentage points of the increase in NIKE Brand inventories were primarily a result of significantly higher product input costs. Relative to revenues and futures, current unit inventories remain broadly consistent with levels reported prior to the 2009 – 2010 economic downturn. Cash and short-term investments were $3.4 billion, $1.4 billion lower than last year as higher working capital investments reduced free cash flow from operations, while share repurchases, dividend payments and long-term debt payments also increased year-on-year. Share Repurchases During the second quarter, a total of 7.6 million shares were repurchased for approximately $672 million as part of our four-year, $5 billion share repurchase program, approved by the Board of Directors in September 2008. As of the end of the second quarter, a total of 45.6 million shares were repurchased for approximately $3.6 billion under this program. Futures Orders As of the end of the quarter worldwide futures orders for NIKE Brand athletic footwear and apparel, scheduled for delivery from December 2011 through April 2012, totaled $8.9 billion, 13 percent higher than orders reported for the same period last year. Changes in foreign currency exchange rates did not have a significant impact on reported futures orders.* Conference Call Nike management will host a conference call beginning at approximately 2:00 p.m. PT on December 20, 2011, to review second quarter results. The conference call will be broadcast live over the Internet and can be accessed at http://investors.nikeinc.com. 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 27, 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 International Limited, which designs, distributes and licenses athletic and casual footwear, apparel and equipment, primarily for global football (soccer). For more information, NIKE's earnings releases and other financial information are available on the Internet at http://investors.nikeinc.com. *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 STATEMENTSFOR THE PERIOD ENDED NOVEMBER 30, 2011(In millions, except per share data)               QUARTER ENDEDYEAR TO DATE ENDEDINCOME STATEMENT   11/30/2011   11/30/2010   % Chg   11/30/2011   11/30/2010   % Chg Revenues $ 5,731 $ 4,842 18% $ 11,812 $ 10,017 18% Cost of sales   3,281       2,649   24%   6,669       5,390   24% Gross profit 2,450 2,193 12% 5,143 4,627 11%Gross margin42.7%45.3%43.5%46.2%   Demand creation expense 644 574 12% 1,336 1,253 7% Operating overhead expense   1,176       1,037   13%   2,307       2,031   14% Total selling and administrative expense 1,820 1,611 13% 3,643 3,284 11%% of revenue31.8%33.3%30.8%32.8%   Other expense (income), net 9 (28 ) - 27 (21 ) - Interest expense, net   3       1   -   3       -   -   Income before income taxes 618 609 1% 1,470 1,364 8%   Income taxes   149       152   -2%   356       348   2%Effective tax rate24.1%25.0%24.2%25.5%     Net income $ 469     $ 457   3% $ 1,114     $ 1,016   10%   Diluted EPS $ 1.00 $ 0.94 6% $ 2.36 $ 2.08 13%   Basic EPS $ 1.02 $ 0.96 6% $ 2.41 $ 2.12 14%   Weighted Average Common Shares Outstanding: Diluted 468.5 487.6 471.5 488.4 Basic   459.2       477.9     462.1       478.8   Dividends declared $ 0.36     $ 0.31   $ 0.67     $ 0.58   NIKE, Inc.         BALANCE SHEET   11/30/2011   11/30/2010   % Change(In millions)ASSETS Current assets: Cash and equivalents $ 1,929 $ 1,768 9 % Short-term investments 1,436 3,021 -52 % Accounts receivable, net 3,103 2,792 11 % Inventories 3,164 2,348 35 % Deferred income taxes 298 267 12 % Prepaid expenses and other current assets   795     720 10 %   Total current assets10,72510,916 -2 %   Property, plant and equipment 5,064 4,641 9 % Less accumulated depreciation   2,887     2,638 9 % Property, plant and equipment, net 2,177 2,003 9 %   Identifiable intangible assets, net 532 469 13 % Goodwill 201 192 5 % Deferred income taxes and other assets 930 884 5 %       Total assets$14,565   $14,464 1 %   LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Current portion of long-term debt $ 114 $ 132 -14 % Notes payable 123 128 -4 % Accounts payable 1,411 1,225 15 % Accrued liabilities 1,834 1,685 9 % Income taxes payable   81     78 4 %   Total current liabilities3,5633,248 10 %   Long-term debt 234 338 -31 % Deferred income taxes and other liabilities 925 929 0 % Redeemable preferred stock - - - Shareholders' equity 9,843 9,949 -1 %       Total liabilities and shareholders' equity$14,565   $14,464 1 % NIKE, Inc.                 QUARTER ENDED   % Change Excluding Currency Changes 2YEAR TO DATE ENDED   % Change Excluding Currency Changes 2DIVISIONAL REVENUES1   11/30/2011   11/30/2010   % Change     11/30/2011   11/30/2010   % Change   (In millions)(In millions)North America Footwear $ 1,306 $ 1,083 21 % 20 % $ 2,749 $ 2,372 16 % 16 % Apparel 661 538 23 % 23 % 1,293 1,053 23 % 23 % Equipment   99       80   24 % 27 %   224       179   25 % 26 % Total 2,066 1,701 21 % 21 % 4,266 3,604 18 % 18 %   Western Europe Footwear 538 502 7 % 2 % 1,269 1,134 12 % 2 % Apparel 324 305 6 % 1 % 740 682 9 % -1 % Equipment   53       46   15 % 7 %   134       113   19 % 7 % Total 915 853 7 % 2 % 2,143 1,929 11 % 1 %   Central & Eastern Europe Footwear 135 121 12 % 14 % 315 270 17 % 12 % Apparel 111 88 26 % 28 % 234 183 28 % 24 % Equipment   15       15   0 % 4 %   46       40   15 % 10 % Total 261 224 17 % 19 % 595 493 21 % 16 %   Greater China Footwear 353 264 34 % 27 % 667 510 31 % 24 % Apparel 268 191 40 % 34 % 445 373 19 % 13 % Equipment   29       27   7 % 6 %   66       59   12 % 7 % Total 650 482 35 % 28 % 1,178 942 25 % 19 %   Japan Footwear 99 93 6 % -3 % 202 179 13 % 2 % Apparel 83 85 -2 % -11 % 153 145 6 % -4 % Equipment   15       14   7 % -10 %   33       31   6 % -8 % Total 197 192 3 % -7 % 388 355 9 % -1 %   Emerging Markets Footwear 660 521 27 % 27 % 1,227 925 33 % 28 % Apparel 233 183 27 % 27 % 415 332 25 % 20 % Equipment   55       51   8 % 10 %   105       89   18 % 15 % Total 948 755 26 % 26 % 1,747 1,346 30 % 25 %   Global Brand Divisions3 25 24 4 % 1 % 58 45 29 % 20 %             Total NIKE Brand 5,062 4,231 20 % 18 % 10,375 8,714 19 % 15 %   Other Businesses4 673 639 5 % 5 % 1,446 1,342 8 % 7 % Corporate5 (4 ) (28 ) 86 % - (9 ) (39 ) 77 % -             Total NIKE, Inc. Revenues $ 5,731     $ 4,842   18 % 16 % $ 11,812     $ 10,017   18 % 14 %   Total NIKE Brand Footwear $ 3,091 $ 2,584 20 % 18 % $ 6,429 $ 5,390 19 % 15 % Apparel 1,680 1,390 21 % 18 % 3,280 2,768 18 % 14 % Equipment 266 233 14 % 13 % 608 511 19 % 14 % Global Brand Divisions3 25 24 4 % 1 % 58 45 29 % 20 %                                   1 Certain prior year amounts have been reclassified to conform to fiscal year 2012 presentation. These changes had no impact on previously reported results of operations or shareholders' equity. 2 Fiscal 2012 results have been restated using fiscal 2011 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 intercompany revenue eliminations and foreign currency revenue-related hedge gains and losses generated by entities within the NIKE Brand geographic operating segments and certain Other Businesses through our centrally managed foreign exchange risk management program.               NIKE, Inc.QUARTER ENDED%YEAR TO DATE ENDED%EARNINGS BEFORE INTEREST AND TAXES1,2   11/30/2011   11/30/2010   Chg   11/30/2011   11/30/2010   Chg(In millions)(In millions)   North America $ 418 $ 356 17% $ 952 $ 799 19% Western Europe 92 142 -35% 315 425 -26% Central & Eastern Europe 33 48 -31% 103 118 -13% Greater China 220 174 26% 391 338 16% Japan 35 36 -3% 69 63 10% Emerging Markets 247 194 27% 437 318 37% Global Brand Divisions3 (273)   (221) -24% (534)   (466) -15%   Total NIKE Brand 772 729 6% 1,733 1,595 9%   Other Businesses4 57 59 -3% 143 168 -15% Corporate5 (208)   (178) -17% (403)   (399) -1%   Total earnings before interest and taxes1,2 $ 621   $ 610 2% $ 1,473   $ 1,364 8%                                   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 2012 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.NIKE BRAND REPORTED FUTURES GROWTH BY GEOGRAPHY1Reported Futures Orders   Excluding Currency Changes 2   North America 16% 16% Western Europe 5% 4% Central & Eastern Europe 12% 15% Greater China 31% 27% Japan -5% -8% Emerging Markets 12%   17%   Total NIKE Brand Reported Futures 13%   13%             1 Futures orders by geography and in total for NIKE Brand athletic footwear and apparel scheduled for delivery from December 2011 through April 2012.   The reported futures and advance orders growth is not necessarily indicative of our expectation of revenue growth during this period. This is due to year-over-year changes in shipment timing and because the mix of orders can shift between advance/futures and at-once orders and the fulfillment of certain orders may fall outside of the schedule noted above. In addition, exchange rate fluctuations as well as differing levels of order cancellations and discounts can cause differences in the comparisons between advance/futures orders and actual revenues. Moreover, a significant portion of our revenue is not derived from futures and advance orders, including at-once and close-out sales of NIKE Brand footwear and apparel, sales of NIKE Brand equipment, sales from certain of our Direct to Consumer operations, and sales from our Other Businesses.   2 Reported futures restated using prior year exchange rates to enhance the visibility of the underlying business trends excluding the impact of foreign currency exchange rate fluctuations. NIKE, Inc.Investor Contact:Kelley Hall, 503-532-3793orMedia Contact:Kellie Leonard, 503-671-6171