NIKE, Inc. Reports Fiscal 2014 Third Quarter Results

  NIKE, Inc. Reports Fiscal 2014 Third Quarter Results

  *Revenues from continuing operations up 13 percent to $7.0 billion
  *Diluted earnings per share from continuing operations up 4 percent to
    $0.76
  *Worldwide futures orders up 12 percent, 14 percent growth excluding
    currency changes
  *Inventories as of February 28, 2014 up 12 percent

Business Wire

BEAVERTON, Ore. -- March 20, 2014

NIKE, Inc. (NYSE:NKE) today reported financial results for its fiscal 2014
third quarter ended February 28, 2014. Despite the negative impact of changes
in foreign exchange rates, earnings per share for the quarter were up 4
percent due to higher revenues driven by strong demand for NIKE, Inc. brands,
gross margin expansion, a lower tax rate and slightly lower average share
count, partially offset by the impact of higher SG&A investments in NIKE, Inc.
brands and business capabilities.

"Our strong Q3 results demonstrate our relentless focus on delivering
innovations that resonate with consumers,” said Mark Parker, President and CEO
of NIKE, Inc. “Despite macroeconomic challenges, NIKE delivers consistent
results because we focus on the biggest opportunities for growth while we
manage risk across our diverse global portfolio. This is how we continue to
drive long-term value for our shareholders.”*

Third Quarter Continuing Operations Income Statement Review

  *Revenues  for NIKE, Inc. rose 13 percent to $7.0 billion, up 14 percent on
    a currency neutral basis.

       *Revenues for the NIKE Brand were $6.6 billion, up 14 percent on a
         currency neutral basis powered by growth in every geography and key
         category.
       *Revenues for Converse were $420 million, up 16 percent on a currency
         neutral basis, mainly driven by strong performance in our largest
         direct distribution markets: the United States, China and the United
         Kingdom.

  *Gross margin expanded 30 basis points to 44.5 percent. Gross margin
    benefitted from higher average prices and continued growth in the higher
    margin Direct to Consumer business, partially offset by higher product
    input costs, unfavorable foreign exchange rates, and higher discounts,
    reflecting actions to clear excess inventory in select markets.
  *Selling and administrative expense increased 16 percent to $2.2 billion.
    Demand creation expense was $733 million, up 18 percent, driven by
    marketing support for key product launches, the upcoming World Cup and
    investments in retail product presentation for wholesale accounts.
    Operating overhead expense increased 15 percent to $1.4 billion due to
    investments in infrastructure, digital innovations and higher Direct to
    Consumer costs driven by comparable store sales growth and new store
    openings.
  *Other expense, net was $45 million, comprised primarily of foreign
    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 $40 million.
  *The effective tax rate was 22.4 percent, compared to 22.8 percent for the
    same period last year, an improvement primarily due to an increase in
    earnings from operations outside of the U.S., which are generally subject
    to a lower tax rate, partially offset by a benefit in the prior-year
    period from the retroactive reinstatement of the U.S. research and
    development credit.
  *Net income increased 3 percent to $685 million while diluted earnings per
    share increased 4 percent to $0.76, reflecting a slight decline in the
    weighted average diluted common shares outstanding.

February 28, 2014 Balance Sheet Review for Continuing Operations

  *Inventories for NIKE, Inc. were $3.8 billion, up 12 percent from February
    28, 2013. NIKE Brand wholesale unit inventories increased 7 percent to
    support future demand. Changes in the average NIKE Brand wholesale product
    cost per unit, combined with the impact of changes in foreign currency
    exchange rates, drove approximately 5 percentage points of net inventory
    growth.
  *Cash and short-term investments were $5.0 billion, $987 million higher
    than last year as a result of proceeds from the issuance of debt as well
    as higher net income.

Share Repurchases

During the third quarter, NIKE, Inc. repurchased a total of 10.4 million
shares for approximately $788 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 third quarter, a total of 39.6 million shares had been repurchased under
this program at a cost of approximately $2.5 billion, an average cost of
$63.21 per share.

Futures Orders

As of the end of the quarter, worldwide futures orders for NIKE Brand athletic
footwear and apparel scheduled for delivery from March 2014 through July 2014
totaled $10.9 billion, 12 percent higher than orders reported for the same
period last year, and 14 percent higher on a currency neutral basis.*

Conference Call

NIKE management will host a conference call beginning at approximately 2:00
p.m. PT on March 20, 2014, to review third 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, March 27, 2014.

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.


NIKE, Inc.
CONSOLIDATED STATEMENTS OF INCOME
For the period ended February 28, 2014
                                                                              
               THREE MONTHS ENDED          %      NINE MONTHS ENDED           %
(Dollars in
millions,       2/28/2014   2/28/2013  Change  2/28/2014   2/28/2013  Change
except per
share data)
Income from
continuing
operations:
Revenues       $ 6,972       $ 6,187       13   % $ 20,374      $ 18,616      9   %
Cost of sales   3,869       3,451      12   %  11,313      10,522     8   %
Gross profit     3,103         2,736       13   %   9,061         8,094       12  %
Gross margin     44.5      %   44.2      %          44.5      %   43.5      %
                                                                              
Demand
creation         733           619         18   %   2,155         2,103       2   %
expense
Operating
overhead        1,433       1,244      15   %  4,155       3,655      14  %
expense
Total selling
and              2,166         1,863       16   %   6,310         5,758       10  %
administrative
expense
% of revenue     31.1      %   30.1      %          31.0      %   30.9      %
                                                                              
Interest
expense          9             (2        ) -        25            (6        ) -
(income), net
Other expense   45          17         -      86          (28       ) -   
(income), net
Income before    883           858         3    %   2,640         2,370       11  %
income taxes
Income taxes    198         196        1    %  638         602        6   %
Effective tax    22.4      %   22.8      %          24.2      %   25.4      %
rate
                                                                        
NET INCOME
FROM            685         662        3    %  2,002       1,768      13  %
CONTINUING
OPERATIONS
NET INCOME
FROM            -           204        -      -           49         -   
DISCONTINUED
OPERATIONS
NET INCOME     $ 685        $ 866        -21  % $ 2,002      $ 1,817      10  %
                                                                              
Earnings per
share from
continuing
operations:
Basic earnings
per common     $ 0.78        $ 0.74        5    % $ 2.26        $ 1.97        15  %
share
Diluted
earnings per   $ 0.76        $ 0.73        4    % $ 2.20        $ 1.93        14  %
common share
                                                                              
Earnings per
share from
discontinued
operations:
Basic earnings
per common     $ -           $ 0.23        -      $ -           $ 0.05        -
share
Diluted
earnings per   $ -           $ 0.22        -      $ -           $ 0.05        -
common share
                                                                              
Weighted
average common
shares
outstanding:
Basic            882.3         893.9                886.6         898.9
Diluted          904.8         911.7                909.1         916.5
                                                                              
Dividends
declared per   $ 0.24       $ 0.21             $ 0.69       $ 0.60       
common share
                                                                              


NIKE, Inc.
CONSOLIDATED BALANCE SHEETS
As of February 28, 2014
                                                              
                                 February 28,     February 28,
(Dollars in millions)               2014         2013^1      % Change 
ASSETS
Current assets:
Cash and equivalents             $    1,864       $  2,557         -27      %
Short-term investments                3,165          1,485         113      %
Accounts receivable, net              3,355          3,232         4        %
Inventories                           3,825          3,424         12       %
Deferred income taxes                 319            275           16       %
Prepaid expenses and other            882            861           2        %
current assets
Assets of discontinued              -            29          -        
operations
Total current assets                  13,410         11,863        13       %
Property, plant and equipment         6,073          5,370         13       %
Less accumulated depreciation       3,337        3,110       7        %
Property, plant and                   2,736          2,260         21       %
equipment, net
Identifiable intangible               386            376           3        %
assets, net
Goodwill                              131            131           0        %
Deferred income taxes and           1,140        1,080       6        %
other assets
TOTAL ASSETS                    $    17,803     $  15,710      13       %
LIABILITIES AND SHAREHOLDERS'
EQUITY
Current liabilities:
Current portion of long-term     $    7           $  57            -88      %
debt
Notes payable                         119            85            40       %
Accounts payable                      1,480          1,259         18       %
Accrued liabilities                   2,303          1,994         15       %
Income taxes payable                  45             138           -67      %
Liabilities of discontinued         -            62          -        
operations
Total current liabilities             3,954          3,595         10       %
Long-term debt                        1,201          161           646      %
Deferred income taxes and             1,515          1,287         18       %
other liabilities
Redeemable preferred stock            -              -             -
Shareholders' equity                11,133       10,667      4        %
TOTAL LIABILITIES AND           $    17,803     $  15,710      13       %
SHAREHOLDERS' EQUITY
^1 Prior year inventories and accrued liabilities have been revised to
recognize certain inventories held at third parties.



NIKE, Inc.
DIVISIONAL REVENUES^1
For the period ended February 28, 2014
                                                                                           
            THREE MONTHS ENDED                  % Change  NINE MONTHS ENDED                 % Change
                                                 Excluding                                    Excluding
(Dollars in                             %        Currency                            %        Currency
millions)    2/28/2014   2/28/2013  Change  Changes    2/28/2014  2/28/2013  Change  Changes
                                                 ^2                                           ^2
North
America
Footwear    $ 1,928       $ 1,708       13   %   13    %   $ 5,459     $ 4,933       11   %   11    %
Apparel       925           830         11   %   12    %     2,920       2,657       10   %   10    %
Equipment    216         199        9    %  9     %    626        577        8    %  9     %
Total         3,069         2,737       12   %   12    %     9,005       8,167       10   %   10    %
Western
Europe
Footwear      891           695         28   %   24    %     2,415       1,958       23   %   19    %
Apparel       338           305         11   %   8     %     1,061       999         6    %   3     %
Equipment    63          57         11   %  7     %    191        184        4    %  0     %
Total         1,292         1,057       22   %   19    %     3,667       3,141       17   %   13    %
Central &
Eastern
Europe
Footwear      207           168         23   %   27    %     544         460         18   %   19    %
Apparel       129           115         12   %   17    %     403         358         13   %   14    %
Equipment    20          20         0    %  9     %    70         64         9    %  11    %
Total         356           303         17   %   22    %     1,017       882         15   %   16    %
Greater
China
Footwear      467           410         14   %   12    %     1,166       1,091       7    %   5     %
Apparel       199           199         0    %   -2    %     641         608         5    %   3     %
Equipment    31          32         -3   %  -7    %    93         101        -8   %  -11   %
Total         697           641         9    %   7     %     1,900       1,800       6    %   3     %
Japan
Footwear      92            98          -6   %   14    %     281         315         -11  %   10    %
Apparel       59            70          -16  %   4     %     201         247         -19  %   1     %
Equipment    26          27         -4   %  11    %    63         70         -10  %  10    %
Total         177           195         -9   %   10    %     545         632         -14  %   7     %
Emerging
Markets
Footwear      631           603         5    %   15    %     1,941       1,948       0    %   7     %
Apparel       243           206         18   %   31    %     748         713         5    %   13    %
Equipment    63          58         9    %  19    %    180        177        2    %  9     %
Total         937           867         8    %   19    %     2,869       2,838       1    %   9     %
Global
Brand        26          29         -10  %  -13   %    89         84         6    %  4     %
Divisions^3
Total NIKE   6,554       5,829      12   %  14    %    19,092     17,544     9    %  10    %
Brand
Converse      420           361         16   %   16    %     1,274       1,095       16   %   15    %
Corporate^4  (2        )  (3        ) -      -         8          (23       ) -      -     
Total NIKE,
Inc.
Revenues    $ 6,972      $ 6,187      13   %  14    %   $ 20,374    $ 18,616     9    %  10    %
From
Continuing
Operations
                                                                                              
Total NIKE
Brand
Footwear    $ 4,216       $ 3,682       15   %   16    %   $ 11,806    $ 10,705      10   %   11    %
Apparel       1,893         1,725       10   %   12    %     5,974       5,582       7    %   8     %
Equipment     419           393         7    %   9     %     1,223       1,173       4    %   6     %
Global
Brand        26          29         -10  %  -13   %    89         84         6    %  4     %
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 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 February 28, 2014
                                                                           
            THREE MONTHS ENDED          %      NINE MONTHS ENDED           %
(Dollars in  2/28/2014   2/28/2013  Change  2/28/2014   2/28/2013  Change
millions)
North       $ 726         $ 653         11   % $ 2,188       $ 1,863       17   %
America
Western       275           179         54   %   663           501         32   %
Europe
Central &
Eastern       79            64          23   %   208           155         34   %
Europe
Greater       234           218         7    %   601           570         5    %
China
Japan         21            24          -13  %   92            92          0    %
Emerging      229           216         6    %   682           735         -7   %
Markets
Global
Brand        (533      )  (414      ) -29  %  (1,461    )  (1,280    ) -14  %
Divisions^3
TOTAL NIKE   1,031       940        10   %  2,973       2,636      13   %
BRAND
Converse      133           121         10   %   402           336         20   %
Corporate^4  (272      )  (205      ) -33  %  (710      )  (608      ) -17  %
TOTAL
EARNINGS
BEFORE      $ 892        $ 856        4    % $ 2,665      $ 2,364      13   %
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 demand creation, operating
overhead, information technology, and product creation and design expenses that
are centrally managed for the NIKE Brand. Revenues for Global Brand Divisions are
primarily attributable to NIKE Brand licensing businesses that are not part of a
geographic operating segment.
^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 February 28, 2014
                                                          
                             Reported Futures Orders     Excluding Currency
                                                          Changes ^2
North America                 9%                          9%
Western Europe                33%                         30%
Central & Eastern Europe      7%                          13%
Greater China                 -1%                         -3%
Japan                         -6%                         -1%
Emerging Markets              12%                         24%
Total NIKE Brand Reported     12%                         14%
Futures
^1 Futures orders by geography and in total for NIKE Brand athletic footwear
and apparel scheduled for delivery from March 2014 through July 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
 
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