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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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