BEAVERTON, Oregon, March 21 /PRNewswire/ --
- Worldwide Futures Orders Up 2.9 Percent, Up 5.4 Percent Excluding Effects of Foreign Currency
NIKE, Inc. (NYSE: NKE) today reported record results for the third quarter ended February 28, 2006. Third quarter revenues increased nine percent to US$3.6 billion, compared to US$3.3 billion for the same period last year. Changes in currency exchange rates reduced revenue growth by three percentage points. Net income grew 19 percent to US$325.8 million, compared to US$273.4 million in the prior year. Diluted earnings per share grew 23 percent to US$1.24, versus US$1.01 last year.
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"We're very pleased with the performance of the Nike brand and our Nike Inc. portfolio, both for the quarter and year to date," said Mark Parker, President and Chief Executive Officer, Nike, Inc. "The strength of our product pipeline, brand portfolio and global reach is enabling us to balance continued challenges in markets such as Western Europe and Japan with strong momentum in other key markets and regions. This, combined with our ability to manage expenses, enabled us to deliver on our long-term goal of sustainable, profitable growth."(i)
Futures Orders
The Company reported worldwide futures orders for athletic footwear and apparel, scheduled for delivery from March 2006 through July 2006, totaling US$5.4 billion, 2.9 percent higher than such orders reported for the same period last year. Changes in currency exchange rates reduced this growth, as global futures orders grew by 5.4 percent excluding the impact of currency changes.(i)
By region, futures orders for the U.S. increased six percent; Europe (which includes the Middle East and Africa) declined two percent; Asia Pacific grew five percent; and the Americas increased ten percent. Changes in currency exchange rates reduced the reported futures orders by five percentage points in Europe and by four percentage points in the Asia Pacific region. In the Americas region, two percentage points of the increase were due to changes in currency exchange rates.(i)
Regional Highlights
U.S.
During the third quarter, U.S. revenues increased 14 percent to US$1.4 billion versus US$1.3 billion for the third quarter of fiscal 2005. U.S. athletic footwear revenues increased 18 percent to US$1.0 billion. Apparel revenues increased six percent to US$366.6 million. Equipment revenues declined three percent to US$70.3 million. U.S. pre-tax income improved ten percent to US$286.2 million.
Europe
Revenues for the European region declined five percent to US$980.1 million from US$1.0 billion for the same period last year. Changes in currency exchange rates reduced revenue growth by nine percentage points. Footwear revenues were US$563.8 million, down eight percent from US$615.3 million a year ago. Apparel revenues decreased by one percent to US$347.1 million and equipment revenues increased three percent to US$69.2 million. Pre-tax income declined five percent to US$208.7 million.
Asia Pacific
Third quarter revenues for the Asia Pacific region grew 13 percent to US$532.3 million compared to US$472.8 million a year ago. Changes in currency exchange rates reduced revenue growth by four percentage points. Footwear revenues were up 19 percent to US$284.1 million, apparel revenues increased six percent to US$199.0 million and equipment revenues grew six percent to US$49.2 million. Pre-tax income increased 19 percent to US$119.6 million.
Americas
Revenues in the Americas region increased 41 percent to US$203.1 million, an improvement from US$143.7 million in the third quarter of fiscal 2005. Changes in currency exchange rates contributed 11 percentage points to this growth rate. Footwear revenues were up 44 percent to US$143.7 million, apparel revenues increased 33 percent to US$44.4 million and equipment jumped 42 percent to US$15.0 million. Pre-tax income was up 69 percent to US$38.5 million.
Other Businesses
Third quarter Other business revenues, which include Converse Inc., NIKE Golf, NIKE Bauer Hockey Inc., Cole Haan, Hurley International LLC and Exeter Brands Group LLC, grew 17 percent to US$454.5 million from US$389.6 million last year. Pre-tax income was up 90 percent to US$43.6 million.
Income Statement Review
Gross margins were 43.6 percent in the third quarter compared to 44.1 percent last year. Selling and administrative expenses were 30.1 percent of third quarter revenues, compared to 31.3 percent last year. The effective tax rate for the third quarter was 35.7 percent.
Balance Sheet Review
At quarter end, global inventories stood at US$2.0 billion, an increase of 16 percent from February 28, 2005. Cash and short-term investments were US$2.0 billion at the end of the quarter, compared to US$1.6 billion last year.
Share Repurchase
During the quarter, the Company purchased a total of 1,494,000 shares for approximately US$128 million in conjunction with the Company's four-year, US$1.5 billion share repurchase program that was approved by the Board of Directors in June 2004.
NIKE, Inc. based near Beaverton, Oregon is the world's leading designer, marketer and distributor of authentic athletic footwear, apparel, equipment and accessories for a wide variety of sports and fitness activities. Wholly owned Nike subsidiaries include Converse Inc., which designs, markets and distributes athletic footwear, apparel and accessories; NIKE Bauer Hockey Inc., a leading designer and distributor of hockey equipment; Cole Haan, a leading designer and marketer of luxury shoes, handbags, accessories and coats; Hurley International LLC, which designs, markets and distributes action sports and youth lifestyle footwear, apparel and accessories and Exeter Brands Group LLC, which designs and markets athletic footwear and apparel for the value retail channel.
NIKE's earnings releases and other financial information are available on the Internet at www.NikeBiz.com/invest.
(i) The marked paragraphs contain forward-looking statements that involve risks and uncertainties that could cause actual results to differ materially. These risks and uncertainties are detailed from time to time in reports filed by NIKE with the S.E.C., including Forms 8-K, 10-Q, and 10-K. Some forward-looking statements in this release concern changes in futures orders that are not necessarily indicative of changes in total revenues for subsequent periods due to the mix of futures and "at once" orders, exchange rate fluctuations, order cancellations and discounts, which may vary significantly from quarter to quarter, and because a significant portion of the business does not report futures orders.
NIKE, Inc.
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD ENDED FEBRUARY 28, 2006
(In millions, except per share data)
(all figures in US$)
QUARTER ENDING YEAR TO DATE ENDING
INCOME % %
STATEMENT 02/28/2006 02/28/2005 Chg 02/28/2006 02/28/2005 Chg
Revenues $3,612.8 $3,308.2 9% $10,949.5 $10,018.3 9%
Cost of sales 2,038.7 1,849.4 10% 6,115.9 5,585.6 9%
Gross margin 1,574.1 1,458.8 8% 4,833.6 4,432.7 9%
43.6% 44.1% 44.1% 44.2%
Selling and
administrative
expense 1,086.6 1,035.7 5% 3,245.7 3,082.5 5%
30.1% 31.3% 29.6% 30.8%
Interest
(income)
expense, net (8.4) (0.1) -- (20.5) 8.4 --
Other (income)
expense, net (10.7) 9.8 -- (22.0) 19.9 --
Income before
income taxes 506.6 413.4 23% 1,630.4 1,321.9 23%
Income taxes 180.8 140.0 29% 571.2 459.8 24%
35.7% 33.9% 35.0% 34.8%
Net income $325.8 $273.4 19% $1,059.2 $862.1 23%
Diluted EPS $1.24 $1.01 23% $4.00 $3.18 26%
Basic EPS $1.26 $1.04 21% $4.08 $3.28 24%
Weighted
Average
Common
Shares
Outstanding:
Diluted 263.4 271.7 264.6 270.9
Basic 258.9 263.3 259.6 263.1
Dividends
declared $0.31 $0.25 $0.87 $0.70
NIKE, Inc.
BALANCE SHEET (ii) 02/28/2006 02/28/2005
ASSETS
Current assets:
Cash and equivalents $1,472.1 $1,222.5
Short-term investments 535.0 418.3
Accounts receivable, net 2,351.6 2,304.9
Inventories 2,034.2 1,746.8
Deferred income taxes 115.0 170.5
Prepaid expenses and other current assets 536.8 355.5
Total current assets 7,044.7 6,218.5
Property, plant and equipment 3,283.2 3,302.9
Less accumulated depreciation 1,684.8 1,679.7
Property, plant and equipment, net 1,598.4 1,623.2
Identifiable intangible assets, net 406.2 403.2
Goodwill 135.3 135.4
Deferred income taxes and other assets 333.6 291.6
Total assets $9,518.2 $8,671.9
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $254.7 $6.4
Notes payable 79.3 101.3
Accounts payable 785.8 630.8
Accrued liabilities 1,128.9 1,164.6
Income taxes payable 55.5 182.7
Total current liabilities 2,304.2 2,085.8
Long-term debt 411.3 691.4
Deferred income taxes and other liabilities 540.8 467.3
Redeemable preferred stock 0.3 0.3
Shareholders' equity 6,261.6 5,427.1
Total liabilities and shareholders' equity $9,518.2 $8,671.9
(ii) Certain prior year amounts have been reclassified to conform to
fiscal year 2006 presentation. These changes had no impact on previously
reported results of operations or shareholders' equity.
NIKE, Inc.
DIVISIONAL QUARTER ENDING YEAR TO DATE ENDING
REVENUES 02/28/2006 02/28/2005 % Chg 02/28/2006 02/28/2005 % Chg
U.S. Region
Footwear $1,005.9 $849.6 18% $2,838.5 $2,451.0 16%
Apparel 366.6 345.8 6% 1,195.9 1,121.8 7%
Equipment 70.3 72.8 -3% 224.4 229.1 -2%
Total 1,442.8 1,268.2 14% 4,258.8 3,801.9 12%
EMEA Region
Footwear 563.8 615.3 -8% 1,782.1 1,810.4 -2%
Apparel 347.1 351.3 -1% 1,161.9 1,131.0 3%
Equipment 69.2 67.3 3% 231.0 211.5 9%
Total 980.1 1,033.9 -5% 3,175.0 3,152.9 1%
Asia Pacific
Region
Footwear 284.1 237.9 19% 766.9 693.1 11%
Apparel 199.0 188.3 6% 590.1 544.9 8%
Equipment 49.2 46.6 6% 138.2 124.3 11%
Total 532.3 472.8 13% 1,495.2 1,362.3 10%
Americas Region
Footwear 143.7 99.6 44% 478.7 344.2 39%
Apparel 44.4 33.5 33% 140.5 115.9 21%
Equipment 15.0 10.6 42% 49.7 34.6 44%
Total 203.1 143.7 41% 668.9 494.7 35%
3,158.3 2,918.6 8% 9,597.9 8,811.8 9%
Other 454.5 389.6 17% 1,351.6 1,206.5 12%
Total
NIKE, Inc.
revenues $3,612.8 $3,308.2 9% $10,949.5 $10,018.3 9%
NIKE, Inc.
PRE-TAX
INCOME QUARTER ENDING % YEAR TO DATE ENDING %
(1,(iii)) 02/28/2006 02/28/2005 Chg 02/28/2006 02/28/2005 Chg
U.S.
Region $286.2 $260.1 10% $897.1 $ 815.5 10%
EMEA
Region 208.7 219.3 -5% 733.1 663.3 11%
Asia
Pacific
Region 119.6 100.4 19% 326.2 275.8 18%
Americas
Region 38.5 22.8 69% 140.5 87.5 61%
Other 43.6 23.0 90% 106.6 84.0 27%
Corporate(2) (190.0) (212.2) 10% (573.1) (604.2) 5%
Total
pre-tax
income(1) $ 506.6 $ 413.4 23% $1,630.4 $1,321.9 23%
(1) The Company evaluates performance of individual operating segments
based on pre-tax income. Total pre-tax income equals Income before income
taxes as shown on the Consolidated Income Statement.
(2) "Corporate" represents items necessary to reconcile to total pre-tax
income, which includes corporate costs that are not allocated to the
operating segments for management reporting and intercompany eliminations
for specific items in the Consolidated Income Statement.
(iii) Certain prior year amounts have been reclassified to conform to
fiscal year 2006 presentation. These changes had no impact on previously
reported results of operations or shareholders' equity.
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