NIKE, Inc. Reports Fiscal 2014 First Quarter Results *Revenues from continuing operations up 8 percent to $7.0 billion *Diluted earnings per share from continuing operations up 37 percent to $0.86 *Worldwide futures orders up 8 percent, 10 percent growth excluding currency changes *Inventories as of August 31, 2013 up 6 percent Business Wire BEAVERTON, Ore. -- September 26, 2013 NIKE, Inc. (NYSE:NKE) today reported financial results for its fiscal 2014 first quarter ended August 31, 2013. Strong demand for NIKE, Inc. brands propelled revenue growth, and diluted earnings per share grew faster than revenue due to gross margin expansion, SG&A leverage, a lower tax rate and a lower average share count. “We had a great first quarter driven by our unrelenting commitment to delivering innovative products and services to athletes around the world,” said Mark Parker, President and CEO of NIKE, Inc. “Our powerful portfolio of businesses combined with unmatched leadership and resources allows us to capitalize on opportunities that drive long-term value for our shareholders. I am more excited than ever about our potential to continue to innovate with purpose, and fuel NIKE’s growth.”* First Quarter Continuing Operations Income Statement Review Starting in the first quarter of fiscal 2014, the Company changed the reporting structure for what was historically identified as Other Businesses. Hurley and NIKE Golf have been included in the overall financial results for the NIKE Brand and for individual geographies, reflecting the operational integration of these businesses into the NIKE Brand category offense. Converse will now be reported as a separate segment, reflecting the ongoing operation of this brand as a stand-alone business. *Revenues for NIKE, Inc. increased 8 percent to $7.0 billion. Changes in foreign currency exchange rates did not have a significant impact on total reported revenue growth. *Revenues for the NIKE Brand were $6.5 billion, up 7 percent on a currency neutral basis, with growth in every product type and every geography except Greater China. For the first quarter, NIKE Brand revenues were higher in Running, Basketball, Football (Soccer) and Men’s Training, offsetting a slight decline in Sportswear. *Revenues for Converse were $494 million, up 16 percent on a currency neutral basis, driven by strong performance in our largest owned markets: the United Kingdom, North America and China. *Gross margin increased 120 basis points to 44.9 percent. Gross margin benefitted from easing raw material costs, a shift in the mix of the Company’s revenues to higher margin products, lower discounts and growth in the higher margin Direct to Consumer business. These benefits were partially offset by higher labor costs and unfavorable changes in foreign exchange rates. *Selling and administrative expense was in line with the same period last year at $2.1 billion. Demand creation expense was $731 million, down 16 percent versus the prior year, which included higher spending supporting key product initiatives, as well as the Olympics and European Football Championships. Operating overhead expense increased 12 percent to $1.3 billion due to investments in digital innovation and other growth businesses, as well as higher Direct to Consumer costs driven by growth and new store openings. *Other expense, net was $28 million, comprised primarily of foreign currency exchange losses. For the quarter, the Company estimates the year-over-year change in foreign currency related gains and losses included in other expense (income), net, combined with the impact of changes in currency exchange rates on the translation of foreign currency-denominated profits, decreased pretax income by approximately $38 million. *The effective tax rate was 25.0 percent, compared to 26.9 percent for the same period last year, an improvement due primarily to a lower effective tax rate on operations outside the United States. *Net income increased 33 percent to $780 million while diluted earnings per share increased 37 percent to $0.86, reflecting a 1 percent decline in the weighted average diluted common shares outstanding. August 31, 2013 Balance Sheet Review for Continuing Operations *Inventories for NIKE, Inc. were $3.5 billion, up 6 percent from August 31, 2012. NIKE Brand wholesale unit inventories increased 8 percent to support future demand. Changes in foreign currency exchange rates and product cost drove approximately a 2 percentage point decline in NIKE, Inc. inventory growth. *Cash and short-term investments were $5.6 billion, $2.3 billion higher than last year mainly as a result of proceeds from the issuance of debt and sale of the Umbro and Cole Haan businesses in the prior fiscal year, in addition to higher net income and continued focus on working capital productivity. Share Repurchases During the first quarter, NIKE, Inc. repurchased a total of 8.4 million shares for approximately $526 million as part of the four-year, $8 billion program approved by the Board of Directors in September 2012. As of the end of the first quarter, a total of 23.7 million shares had been repurchased under this program at a cost of approximately $1.3 billion. Futures Orders As of the end of the quarter, worldwide futures orders for NIKE Brand athletic footwear and apparel scheduled for delivery from September 2013 through January 2014 were 8 percent higher than orders reported for the same period last year. Excluding currency changes, reported orders would have increased 10 percent.* Conference Call NIKE management will host a conference call beginning at approximately 2:00 p.m. PT on September 26, 2013, to review first 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, October 3, 2013. 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, Inc. subsidiaries include Converse Inc., which designs, markets and distributes athletic lifestyle footwear, apparel and accessories, and Hurley International LLC, which designs, markets and distributes surf and youth lifestyle footwear, apparel and accessories. For more information, NIKE’s earnings releases and other financial information are available on the Internet at http://investors.nikeinc.com and individuals can follow @Nike. * 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, discounts and returns, 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 STATEMENTS OF INCOME For the period ended August 31, 2013 THREE MONTHS ENDED % (Dollars in millions, 8/31/2013 8/31/2012 Change except per share data) Income from continuing operations: Revenues $ 6,971 $ 6,474 8% Cost of sales 3,839 3,646 5% Gross profit 3,132 2,828 11% Gross margin 44.9% 43.7% Demand creation expense 731 871 -16% Operating overhead 1,325 1,188 12% expense Total selling and 2,056 2,059 0% administrative expense % of revenue 29.5% 31.8% Interest expense 8 (3) - (income), net Other expense (income), 28 (28) - net Income before income 1,040 800 30% taxes Income taxes 260 215 21% Effective tax rate 25.0% 26.9% NET INCOME FROM 780 585 33% CONTINUING OPERATIONS NET (LOSS) INCOME FROM - (18) - DISCONTINUED OPERATIONS NET INCOME $ 780 $ 567 38% Earnings per share from continuing operations: Basic earnings per $ 0.88 $ 0.65 35% common share Diluted earnings per $ 0.86 $ 0.63 37% common share Earnings per share from discontinued operations: Basic earnings per $ - $ (0.03) - common share Diluted earnings per $ - $ (0.02) - common share Weighted average common shares outstanding: Basic 889.4 905.6 Diluted 910.7 922.8 Dividends declared per $ 0.21 $ 0.18 common share NIKE, Inc. CONSOLIDATED BALANCE SHEETS As of August 31, 2013 August 31, August 31, (Dollars in 2013 2012 % millions) Change ASSETS Current assets: Cash and $ 2,936 $ 2,165 36% equivalents Short-term 2,642 1,102 140% investments Accounts 3,207 3,291 -3% receivable, net Inventories 3,472 3,263 6% Deferred income 308 270 14% taxes Prepaid expenses and other 1,053 720 46% current assets Assets of discontinued - 636 - operations Total current 13,618 11,447 19% assets Property, plant 5,684 5,175 10% and equipment Less accumulated 3,127 2,951 6% depreciation Property, plant and equipment, 2,557 2,224 15% net Identifiable intangible 383 372 3% assets, net Goodwill 131 131 0% Deferred income taxes and other 985 940 5% assets TOTAL ASSETS $ 17,674 $ 15,114 17% LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Current portion of long-term $ 57 $ 9 533% debt Notes payable 111 129 -14% Accounts payable 1,559 1,492 4% Accrued 1,913 1,864 3% liabilities Income taxes 211 114 85% payable Liabilities of discontinued 12 151 -92% operations Total current 3,863 3,759 3% liabilities Long-term debt 1,207 226 434% Deferred income taxes and other 1,322 1,082 22% liabilities Redeemable - - - preferred stock Shareholders' 11,282 10,047 12% equity TOTAL LIABILITIES AND $ 17,674 $ 15,114 17% SHAREHOLDERS' EQUITY NIKE, Inc. DIVISIONAL REVENUES^1 For the period ended August 31, 2013 % Change Excluding THREE MONTHS ENDED % Currency (Dollars in 8/31/2013 8/31/2012 Change Changes^2 millions) North America Footwear $ 1,904 $ 1,745 9% 9% Apparel 1,009 924 9% 9% Equipment 222 197 13% 13% Total 3,135 2,866 9% 9% Western Europe Footwear 829 716 16% 12% Apparel 399 388 3% 1% Equipment 73 72 1% -3% Total 1,301 1,176 11% 8% Central & Eastern Europe Footwear 193 168 15% 13% Apparel 139 129 8% 6% Equipment 34 30 13% 14% Total 366 327 12% 10% Greater China Footwear 341 357 -4% -7% Apparel 197 181 9% 6% Equipment 36 39 -8% -11% Total 574 577 -1% -3% Japan Footwear 88 108 -19% 2% Apparel 53 67 -21% -1% Equipment 17 22 -23% 1% Total 158 197 -20% 1% Emerging Markets Footwear 624 617 1% 5% Apparel 226 223 1% 6% Equipment 52 57 -9% -6% Total 902 897 1% 5% Global Brand 32 27 19% 12% Divisions^3 Total NIKE Brand 6,468 6,067 7% 7% Converse 494 418 18% 16% Corporate^4 9 (11) - - Total NIKE, Inc. Revenues From $ 6,971 $ 6,474 8% 8% Continuing Operations Total NIKE Brand Footwear $ 3,979 $ 3,711 7% 8% Apparel 2,023 1,912 6% 6% Equipment 434 417 4% 5% Global Brand 32 27 19% 12% Divisions^3 ^1 Certain prior year amounts have been reclassified to conform to fiscal year 2014 presentation. These changes had no impact on previously reported results of operations or shareholders' equity. ^2 Fiscal 2014 results have been restated using fiscal 2013 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 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 Converse through our centrally managed foreign exchange risk management program. NIKE, Inc. EARNINGS BEFORE INTEREST AND TAXES^1,2 For the period ended August 31, 2013 THREE MONTHS ENDED % (Dollars in millions) 8/31/2013 8/31/2012 Change North America $ 813 $ 645 26% Western Europe 265 212 25% Central & Eastern 81 54 50% Europe Greater China 170 165 3% Japan 24 23 4% Emerging Markets 210 221 -5% Global Brand (466) (456) -2% Divisions^3 TOTAL NIKE BRAND 1,097 864 27% Converse 169 124 36% Corporate^4 (218) (191) -14% TOTAL EARNINGS BEFORE $ 1,048 $ 797 31% INTEREST AND TAXES ^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 (income), net, and income taxes. ^2 Certain prior year amounts have been reclassified to conform to fiscal year 2014 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 selling general and administrative expenses that are centrally managed for the NIKE Brand. ^4 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 GEOGRAPHY^1 As of August 31, 2013 Reported Futures Excluding Currency Orders Changes(2) North America 11% 12% Western Europe 12% 12% Central & Eastern Europe 25% 27% Greater China 3% 2% Japan -19% 1% Emerging Markets 1% 7% Total NIKE Brand Reported 8% 10% Futures ^1 Futures orders by geography and in total for NIKE Brand athletic footwear and apparel scheduled for delivery from September 2013 through January 2014, excluding NIKE Golf and Hurley. 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, discounts and returns 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 Converse, NIKE Golf and Hurley. ^2 Reported futures have been restated using prior year exchange rates to enhance the visibility of the underlying business trends excluding the impact of foreign currency exchange rate fluctuations. Contact: NIKE, Inc. Investor Contact: Kelley Hall, 503-532-3793 or Media Contact: Kellie Leonard, 503-671-6171
NIKE, Inc. Reports Fiscal 2014 First Quarter Results
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