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NIKE, Inc. Reports Fiscal 2013 Second Quarter Results

For the second fiscal quarter of 2013, the Company’s Net Loss from Discontinued Operations was $137 million. This includes the loss recorded for the sale of the Umbro brand of $107 million, net of tax, in addition to net operating losses and divesture transaction costs for Umbro and Cole Haan during the period, net of tax.

Conference Call

NIKE management will host a conference call beginning at approximately 2:00 p.m. PT on December 20, 2012, 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 For those unable to listen to the live broadcast, an archived version will be available at the same location through 9:00 p.m. PT, December 27, 2012.

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 footwear, apparel and accessories and Hurley International LLC, which designs, markets and distributes action sports 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 INCOMEFor the period ended November 30, 2012
 
  THREE MONTHS ENDED   %   SIX MONTHS ENDED   %
(Dollars in millions, except per share data)   11/30/2012   11/30/2011   Change   11/30/2012   11/30/2011   Change
Income from continuing operations:    
Revenues $ 5,955 $ 5,546 7 % $ 12,429 $ 11,439 9 %
Cost of sales     3,425       3,170     8 %     7,071       6,445     10 %
Gross profit 2,530 2,376 6 % 5,358 4,994 7 %
Gross margin 42.5 % 42.8 % 43.1 % 43.7 %
 
Demand creation expense 613 616 0 % 1,484 1,280 16 %
Operating overhead expense     1,223       1,115     10 %     2,411       2,181     11 %
Total selling and administrative expense 1,836 1,731 6 % 3,895 3,461 13 %
% of revenue 30.8 % 31.2 % 31.3 % 30.3 %
 
Interest (income) expense, net (1 ) 3 - (4 ) 3 -
Other (income) expense, net     (17 )     10     -       (45 )     27     -  
Income before income taxes 712 632 13 % 1,512 1,503 1 %
Income taxes     191       152     26 %     406       362     12 %
Effective tax rate 26.8 % 24.1 % 26.9 % 24.1 %
                         
NET INCOME FROM CONTINUING OPERATIONS     521       480     9 %     1,106       1,141     -3 %
NET LOSS FROM DISCONTINUED OPERATIONS     (137 )     (11 )   -       (155 )     (27 )   -  
NET INCOME   $ 384     $ 469     -18 %   $ 951     $ 1,114     -15 %
 
Earnings per share from continuing operations:
Basic earnings per common share $ 1.16 $ 1.05 10 % $ 2.45 $ 2.47 -1 %
Diluted earnings per common share $ 1.14 $ 1.03 11 % $ 2.41 $ 2.42 0 %
 
Earnings per share from discontinued operations:
Basic earnings per common share $ (0.30 ) $ (0.03 ) - $ (0.34 ) $ (0.06 ) -
Diluted earnings per common share $ (0.30 ) $ (0.03 ) - $ (0.34 ) $ (0.06 ) -
 
Weighted Average Common Shares Outstanding:
Basic 448.5 459.2 450.7 462.1
Diluted 456.6 468.5 459.2 471.5
 
Dividends declared per common share   $ 0.42     $ 0.36         $ 0.78     $ 0.67      
 
 
NIKE, Inc. CONSOLIDATED BALANCE SHEETSAs of November 30, 2012
 
  November 30,   November 30,  
(Dollars in millions)   2012   2011   % Change  
ASSETS
Current assets:
Cash and equivalents $ 2,291 $ 1,929 19 %
Short-term investments 1,234 1,436 -14 %
Accounts receivable, net 3,188 3,016 6 %
Inventories 3,318 3,035 9 %
Deferred income taxes 327 289 13 %
Prepaid expenses and other current assets 733 768 -5 %
Assets of discontinued operations     344     576   -40 %
Total current assets 11,435 11,049 3 %
Property, plant and equipment 5,310 4,883 9 %
Less accumulated depreciation     3,052     2,780   10 %
Property, plant and equipment, net 2,258 2,103 7 %
Identifiable intangible assets, net 374 364 3 %
Goodwill 131 131 0 %
Deferred income taxes and other assets     973     918   6 %
TOTAL ASSETS   $ 15,171   $ 14,565   4 %
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $ 58 $ 114 -49 %
Notes payable 100 123 -19 %
Accounts payable 1,519 1,370 11 %
Accrued liabilities 1,879 1,727 9 %
Income taxes payable 45 81 -44 %
Liabilities of discontinued operations     198     181   9 %
Total current liabilities 3,799 3,596 6 %
Long-term debt 170 234 -27 %
Deferred income taxes and other liabilities 1,188 892 33 %
Redeemable preferred stock - - -
Shareholders' equity     10,014     9,843   2 %
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY   $ 15,171   $ 14,565   4 %
 
 
NIKE, Inc. DIVISIONAL REVENUES 1 For the period ended November 30, 2012
 
      % Change       % Change
Excluding Excluding
THREE MONTHS ENDED % Currency SIX MONTHS ENDED % Currency
(Dollars in millions)   11/30/2012   11/30/2011   Change  

Changes 2

  11/30/2012   11/30/2011   Change  

Changes 2

North America    
Footwear $ 1,471 $ 1,305 13 % 13 % $ 3,203 $ 2,749 17 % 17 %
Apparel 788 661 19 % 19 % 1,583 1,293 22 % 23 %
Equipment     162       100     62 %   61 %     341       224     52 %   52 %
Total 2,421 2,066 17 % 17 % 5,127 4,266 20 % 20 %
Western Europe
Footwear 545 538 1 % 8 % 1,259 1,269 -1 % 9 %
Apparel 301 324 -7 % -1 % 683 740 -8 % 1 %
Equipment     51       53     -4 %   4 %     122       134     -9 %   -1 %
Total 897 915 -2 % 4 % 2,064 2,143 -4 % 6 %
Central & Eastern Europe
Footwear 134 135 -1 % 4 % 312 315 -1 % 9 %
Apparel 117 111 5 % 10 % 251 234 7 % 17 %
Equipment     15       15     0 %   5 %     45       46     -2 %   9 %
Total 266 261 2 % 7 % 608 595 2 % 12 %
Greater China
Footwear 324 353 -8 % -9 % 680 667 2 % 1 %
Apparel 224 268 -16 % -17 % 402 445 -10 % -11 %
Equipment     29       29     0 %   -2 %     67       66     2 %   -1 %
Total 577 650 -11 % -12 % 1,149 1,178 -2 % -4 %
Japan
Footwear 107 100 7 % 10 % 213 203 5 % 6 %
Apparel 98 83 18 % 19 % 159 155 3 % 3 %
Equipment     14       15     -7 %   -6 %     30       34     -12 %   -12 %
Total 219 198 11 % 13 % 402 392 3 % 3 %
Emerging Markets
Footwear 718 660 9 % 16 % 1,322 1,227 8 % 18 %
Apparel 273 233 17 % 24 % 484 415 17 % 27 %
Equipment     61       55     11 %   16 %     113       106     7 %   16 %
Total 1,052 948 11 % 18 % 1,919 1,748 10 % 20 %
Global Brand Divisions 3     27       25     8 %   15 %     54       57     -5 %   2 %
Total NIKE Brand     5,459       5,063     8 %   11 %     11,323       10,379     9 %   13 %
Other Businesses 4 518 488 6 % 6 % 1,153 1,073 7 % 8 %
Corporate 5     (22 )     (5 )   -     -       (47 )     (13 )   -     -  
Total NIKE, Inc. Revenues From Continuing Operations   $ 5,955     $ 5,546     7 %   10 %   $ 12,429     $ 11,439     9 %   13 %
 
Total NIKE Brand
Footwear $ 3,299 $ 3,091 7 % 10 % $ 6,989 $ 6,430 9 % 13 %
Apparel 1,801 1,680 7 % 10 % 3,562 3,282 9 % 12 %
Equipment 332 267 24 % 27 % 718 610 18 % 22 %
Global Brand Divisions 3     27       25     8 %   15 %     54       57     -5 %   2 %

1 Certain prior year amounts have been reclassified to conform to fiscal year 2013 presentation. These changes had no impact on previously reported results of operations or shareholders' equity.

 

2 Fiscal 2013 results have been restated using fiscal 2012 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 Converse, Hurley, and NIKE Golf.

 

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. EARNINGS BEFORE INTEREST AND TAXES 1,2 For the period ended November 30, 2012
 
  THREE MONTHS ENDED   %   SIX MONTHS ENDED   %
(Dollars in millions)   11/30/2012   11/30/2011   Change   11/30/2012   11/30/2011   Change
North America $ 556   $ 426 31% $ 1,186   $ 965 23%
Western Europe 113 92 23% 327 315 4%
Central & Eastern Europe 43 33 30% 104 103 1%
Greater China 185 220 -16% 349 391 -11%
Japan 43 35 23% 67 69 -3%
Emerging Markets 305 247 23% 528 437 21%
Global Brand Divisions 3   (324)   (281)   -15%   (699)   (547)   -28%
TOTAL NIKE BRAND   921   772   19%   1,862   1,733   7%
Other Businesses 4 80 71 13% 201 176 14%
Corporate 5   (290)   (208)   -39%   (555)   (403)   -38%
TOTAL EARNINGS BEFORE INTEREST AND TAXES   $ 711   $ 635   12%   $ 1,508   $ 1,506   0%
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 2013 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 Converse, Hurley, and NIKE Golf.

 

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 GEOGRAPHY 1 As of November 30, 2012
 
   

Reported Futures Orders

 

Excluding Currency Changes 2

North America   14%   14%
Western Europe -1% 0%
Central & Eastern Europe 10% 11%
Greater China -6% -7%
Japan -3% 4%
Emerging Markets   7%   11%
Total NIKE Brand Reported Futures   6%   7%
1 Futures orders by geography and in total for NIKE Brand athletic footwear and apparel scheduled for delivery from December 2012 through April 2013.
 
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.
 




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