- Revenues up 4 percent to $7.7 billion;
12 percent growth excluding currency changes
- Diluted earnings per share up 22
percent to $0.90
- Worldwide futures orders up 15 percent;
20 percent growth excluding currency changes
- Inventories as of November 30, 2015 up
11 percent
NIKE, Inc. (NYSE:NKE) today reported financial results for its
fiscal 2016 second quarter ended November 30, 2015. Strong consumer
demand drove revenue growth across the NIKE Brand portfolio.
Diluted earnings per share grew faster than revenue, up 22 percent,
primarily due to gross margin expansion, a lower effective tax rate
and a lower average share count, which more than offset higher
SG&A investments in NIKE, Inc. brands and business
capabilities.
“Our strong Q2 growth and profitability show that NIKE continues
to drive real momentum through the Category Offense – by going deep
with consumers by sport and serving them completely,” said Mark
Parker, President and CEO, NIKE, Inc. “And our powerful global
portfolio of businesses, combined with strong financial discipline,
continue to drive significant shareholder value. We see tremendous
opportunity ahead as we enter an Olympic and European Championships
year with a full pipeline of inspiring innovation for athletes
everywhere.”*
Second Quarter Income Statement Review
- Revenues for NIKE, Inc.
increased 4 percent to $7.7 billion, up 12 percent on a currency
neutral basis.
- Revenues for the NIKE Brand were $7.3
billion, up 13 percent on a currency neutral basis, driven by
double-digit growth in every geography and most key
categories.
- Revenues for Converse were $398
million, down 5 percent on a currency neutral basis, as strong
growth in North America was more than offset by a decline in
Europe.
- Gross margin increased 50 basis
points to 45.6 percent, primarily due to higher average selling
prices, partially offset by higher product input costs and
unfavorable changes in foreign exchange rates.
- Selling and administrative
expense increased 5 percent to $2.6 billion. Demand creation
expense was $769 million, flat versus the prior year. Operating
overhead expense increased 7 percent to $1.8 billion, reflecting
continued growth in the Direct To Consumer (DTC) business, as well
as investments in operational infrastructure and consumer-focused
digital capabilities.
- Other income, net was $34
million comprised primarily of net foreign currency exchange gains,
and a favorable settlement of a legal judgment related to a
bankruptcy case in Western Europe. For the quarter, the Company
estimates the year-over-year change in foreign currency related
gains and losses included in other 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 $109 million.
- The effective tax rate was 19.1
percent, compared to 25.4 percent for the same period last year,
primarily due to adjustments in the prior year to tax expense on
intercompany transactions and an increase in earnings from
operations outside the U.S. in the current period, which are
generally subject to a lower tax rate. These factors were
partially offset by the resolution of tax audits across multiple
jurisdictions in the prior year period.
- Net income increased 20 percent
to $785 million, while diluted earnings per share increased
22 percent to $0.90, reflecting revenue growth, gross margin
expansion, a lower tax rate and a one percent decline in the
weighted average diluted common shares outstanding.
November 30, 2015 Balance Sheet Review
- Inventories for NIKE, Inc. were
$4.6 billion, up 11 percent from November 30, 2014, driven
primarily by an 8 percent increase in NIKE Brand wholesale unit
inventories. Increases in average product cost per unit, as well as
higher inventories associated with growth in DTC, were largely
offset by changes in the value of inventories due to foreign
currency exchange rates.
- Cash and short-term investments
were $6.1 billion, $1.4 billion higher than last year mainly as a
result of proceeds from the issuance of debt in the second quarter,
collateral received from counterparties to foreign currency hedging
instruments and growth in net income, which more than offset share
repurchases, investments in working capital and higher
dividends.
Share Repurchases
During the second quarter, NIKE, Inc. repurchased a total of 5.6
million shares for approximately $652 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 second quarter, a total of 92
million shares had been repurchased under this program for $7.2
billion, an average cost of approximately $78.19 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
December 2015 through April 2016 were 15 percent higher than orders
reported for the same period last year. Excluding currency changes,
futures orders would have increased 20 percent.*
Stock Split
On November 19, 2015, the Company announced a two-for-one
split of both NIKE Class A and Class B Common Stock. The
Company expects its common stock to begin trading at the
split-adjusted price on December 24, 2015. As the common stock is
not yet trading on a post-split basis, all share and per-share
amounts in this earnings release and the accompanying schedules are
presented on a pre-split basis.
Conference Call
NIKE, Inc. management will host a conference call beginning at
approximately 2:00 p.m. PT on December 22, 2015, to review fiscal
second quarter results. The conference call will be broadcast live
over the Internet and can be accessed at http://investors.NIKE.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 29, 2015.
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. subsidiary brands
include Converse, which designs, distributes and licenses casual
sneakers, apparel and accessories; and Hurley, which designs and
distributes a line of action sports and youth lifestyle apparel and
accessories. For more information, NIKE, Inc.’s earnings releases
and other financial information are available on the Internet at
http://investors.NIKE.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 Securities and
Exchange Commission (SEC), 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 portion of the business does not report
futures orders.
NIKE, Inc.
CONSOLIDATED STATEMENTS OF INCOME THREE
MONTHS ENDED % SIX MONTHS ENDED % (Dollars
in millions, except per share data)
11/30/2015
11/30/2014
Change
11/30/2015
11/30/2014 Change Revenues $ 7,686 $ 7,380 4%
$ 16,100 $ 15,362 5% Cost of sales 4,185
4,053 3% 8,604
8,314 3% Gross profit 3,501 3,327 5% 7,496 7,048 6% Gross
margin 45.6% 45.1% 46.6% 45.9% Demand creation expense 769
766 0% 1,601 1,663 -4% Operating overhead expense
1,791 1,672 7% 3,536
3,255 9% Total selling and administrative
expense 2,560 2,438 5% 5,137 4,918 4% % of revenue 33.3% 33.0%
31.9% 32.0% Interest expense (income), net 5 9 - 9 18 -
Other (income) expense, net (34) 2
- (65) 5 - Income
before income taxes 970 878 10% 2,415 2,107 15% Income taxes
185 223 -17% 451
490 -8% Effective tax rate 19.1% 25.4% 18.7%
23.3%
NET INCOME
$ 785 $ 655 20%
$ 1,964 $ 1,617
21% Earnings per common share: Basic $ 0.92 $
0.76 21% $ 2.30 $ 1.87 23% Diluted $ 0.90 $ 0.74 22% $ 2.24 $ 1.83
22% Weighted average common shares outstanding: Basic 853.3
863.1 853.9 864.0 Diluted 875.7 884.8 876.7 885.8 Dividends
declared per common share $ 0.32 $ 0.28
$ 0.60 $ 0.52
NIKE, Inc. CONSOLIDATED
BALANCE SHEETS November 30, November 30,
(Dollars in millions)
2015 2014
% Change ASSETS Current assets: Cash and
equivalents $ 3,851 $ 2,273 69% Short-term investments 2,265 2,440
-7% Accounts receivable, net 3,437 3,457 -1% Inventories 4,600
4,150 11% Deferred income taxes 405 334 21% Prepaid expenses and
other current assets 2,197 1,379
59% Total current assets 16,755 14,033 19% Property,
plant and equipment, net 3,235 2,927 11% Identifiable intangible
assets, net 281 281 0% Goodwill 131 131 0% Deferred income taxes
and other assets 2,181 1,795
22%
TOTAL ASSETS $ 22,583
$ 19,167 18%
LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Current
portion of long-term debt $ 5 $ 110 -95% Notes payable 99 93 6%
Accounts payable 1,915 2,074 -8% Accrued liabilities 3,451 2,622
32% Income taxes payable 41 38
8% Total current liabilities 5,511 4,937 12%
Long-term debt 2,067 1,084 91% Deferred income taxes and other
liabilities 1,600 1,446 11% Redeemable preferred stock — — —
Shareholders' equity 13,405
11,700 15%
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY $ 22,583 $
19,167 18%
NIKE, Inc.
DIVISIONAL REVENUES
% Change
% Change
Excluding
Excluding
THREE MONTHS ENDED %
Currency
SIX MONTHS ENDED
%
Currency
(Dollars in millions)
11/30/2015
11/30/20141
Change
Changes2
11/30/2015
11/30/20141 Change
Changes2
North America Footwear $ 2,162 $ 1,925 12% 13% $ 4,528 $
4,108 10% 11% Apparel 1,221 1,131 8% 8% 2,468 2,235 10% 11%
Equipment 164 185 -11%
-12% 350 411 -15%
-15% Total 3,547 3,241 9% 10% 7,346 6,754 9% 9%
Western
Europe Footwear 845 864 -2% 11% 1,973 1,991 -1% 15% Apparel 391
384 2% 15% 825 881 -6% 8% Equipment 63
64 -2% 11% 142 153
-7% 7% Total 1,299 1,312 -1% 12% 2,940 3,025 -3% 13%
Central & Eastern Europe Footwear 183 180 2% 23% 421 403
4% 28% Apparel 126 149 -15% 5% 259 284 -9% 13% Equipment
17 18 -6% 19%
47 53 -11% 11% Total 326 347 -6%
15% 727 740 -2% 21%
Greater China Footwear 600 463 30% 34%
1,199 903 33% 35% Apparel 306 266 15% 19% 552 468 18% 20% Equipment
32 29 10% 14%
73 66 11% 12% Total 938
758 24% 28% 1,824 1,437 27% 29%
Japan Footwear 128 108 19%
36% 250 208 20% 41% Apparel 63 75 -16% -4% 106 121 -12% 2%
Equipment 14 16 -13% -7%
28 30 -7% 8% Total
205 199 3% 17% 384 359 7% 25%
Emerging Markets Footwear 674
727 -7% 12% 1,344 1,355 -1% 17% Apparel 255 280 -9% 10% 493 532 -7%
10% Equipment 55 68 -19%
4% 113 122 -7% 13%
Total 984 1,075 -8% 11% 1,950 2,009 -3% 15%
Global Brand
Divisions3 18 27 -33%
-26% 44 56 -21%
-11%
Total NIKE Brand 7,317
6,959 5% 13% 15,215
14,380 6% 14% Converse 398 434 -8% -5%
953 1,009 -6% -1% Corporate4 (29) (13)
— — (68) (27)
— —
Total NIKE, Inc. Revenues $ 7,686
$ 7,380 4% 12% $ 16,100 $
15,362 5% 13%
Total NIKE Brand Footwear
$ 4,592 $ 4,267 8% 16% $ 9,715 $ 8,968 8% 17% Apparel 2,362 2,285
3% 10% 4,703 4,521 4% 11% Equipment 345 380 -9% -1% 753 835 -10%
-2% Global Brand Divisions3 18 27
-33% -26% 44 56
-21% -11% 1 Certain prior year amounts have been
reclassified to conform to fiscal 2016 presentation. These changes
had no impact on previously reported results of operations or
shareholders' equity.
2 Fiscal 2016 results have been restated
using fiscal 2015 exchange rates for the comparative period to
enhance the visibility of the underlying business trends excluding
the impact of translation arising from foreign currency exchange
rate fluctuations.
3 Global Brand Divisions revenues are
primarily attributable to NIKE Brand licensing businesses that are
not part of a geographic operating segment.
4 Corporate revenues primarily consist of
foreign currency hedge gains and losses related to revenues
generated by entities within the NIKE Brand geographic operating
segments and Converse but managed through our central foreign
exchange risk management program.
NIKE,
Inc. EARNINGS BEFORE INTEREST AND TAXES1
THREE MONTHS ENDED % SIX MONTHS ENDED
% (Dollars in millions)
11/30/2015
11/30/20142 Change
11/30/2015
11/30/20142 Change North America $ 882
$ 785 12% $ 1,924 $ 1,755 10% Western Europe 307 261 18% 792 665
19% Central & Eastern Europe 76 57 33% 174 126 38% Greater
China 327 258 27% 657 476 38% Japan 47 29 62% 83 40 108% Emerging
Markets 241 236 2% 499 392 27% Global Brand Divisions3
(625) (554) -13%
(1,249) (1,088) -15%
TOTAL NIKE BRAND
1,255 1,072
17% 2,880
2,366 22% Converse 85 88 -3% 232 274 -15%
Corporate4 (365) (273) -34%
(688) (515) -34%
TOTAL
EARNINGS BEFORE INTEREST AND TAXES $ 975
$ 887 10% $
2,424 $ 2,125 14%
1 The Company evaluates performance of
individual operating segments based on earnings before interest and
taxes (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 2016 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 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 largely of
unallocated general and administrative expenses, including expenses
associated with centrally managed departments; depreciation and
amortization related to the Company’s corporate headquarters;
unallocated insurance, benefit and compensation programs, including
stock-based compensation; and certain foreign currency gains and
losses, including certain hedge gains and losses.
NIKE, Inc. NIKE BRAND
REPORTED FUTURES GROWTH BY GEOGRAPHY1 As of November 30,
2015
Reported Futures Excluding Currency
Orders
Changes2
North America 14% 14% Western Europe 17% 25% Central & Eastern
Europe 3% 13% Greater China 31% 34% Japan 26% 32% Emerging Markets
0% 14%
Total NIKE Brand Reported
Futures 15% 20% 1 Futures orders for NIKE
Brand footwear and apparel scheduled for delivery from December
2015 through April 2016. The U.S. Dollar futures orders amount is
calculated based upon our internal forecast of the currency
exchange rates under which our revenues will be translated during
this period. The reported futures 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, changes
in the mix of orders between futures and at-once orders and because
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 futures orders and
actual revenues. Moreover, a portion of our revenue is not derived
from futures orders, including sales of at-once and closeout NIKE
Brand footwear and apparel, sales of NIKE Brand equipment, sales
from our DTC operations and sales from Converse, NIKE Golf and
Hurley. 2 Reported futures have been restated using prior year
exchange rates for the comparative period to enhance the visibility
of the underlying business trends excluding the impact of foreign
currency exchange rate fluctuations.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20151222005958/en/
NIKE, Inc.Investor Contact:Kelley
Hall, 503-532-3793orMedia
Contact:Kellie Leonard, 503-671-6171
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