NIKE, Inc. third fiscal quarter revenue grew 9% to $3.9 billion, compared to $3.6 billion for the same period last year. Changes in currency exchange rates increased revenue growth by 3 percentage points for the quarter. Third quarter net income grew 8% to $350.8 million, compared to $325.8 million in the prior year and diluted earnings per share increased 10% to $1.37, versus $1.24 last year.
“We had a strong third quarter. Our mix of compelling product and premium consumer experiences drove a meaningful acceleration of futures orders,” said Mark Parker, Nike, Inc. president and chief executive officer. “We continue to grow because we're innovative, disciplined, and connected to our consumers.”
Futures Orders
The Company reported worldwide futures orders for athletic footwear and apparel, scheduled for delivery from March 2007 through July 2007, totaling $6.0 billion, 9 percent higher than such orders reported for the same period last year. Changes in currency exchange rates increased reported orders growth by 1 percentage point.*
By region, futures orders for the U.S. increased 8 percent; Europe (which includes the Middle East and Africa) increased 9 percent; Asia Pacific grew 14 percent; and the Americas increased 2 percent. Changes in currency exchange rates increased the reported futures orders growth in Europe and Asia Pacific by 2 percentage points; and in the Americas region decreased reported futures growth by 1 percentage point.*
Regional Highlights
U.S.
During the third quarter, U.S. revenues increased 2 percent to $1.5 billion versus $1.4 billion for the third quarter of fiscal 2006. U.S. athletic footwear revenues increased 2 percent to $1.0 billion, apparel revenues increased 1 percent to $371.3 million and equipment revenues increased 11 percent to $77.8 million. U.S. pre-tax income decreased 2 percent to $280.2 million from $286.2 million a year ago.
Europe
Third quarter revenues for the European region grew 15 percent to $1.1 billion from $980.1 million for the same period last year. Changes in currency exchange rates increased revenue growth by 9 percentage points. Footwear revenues increased 12 percent to $630.0 million, apparel revenues increased 19 percent to $413.2 million and equipment revenues increased 18 percent to $81.6 million. Pre-tax income increased 18 percent to $246.5 million.
Asia Pacific
In the third quarter revenues in the Asia Pacific region grew 11 percent to $589.9 million compared to $532.3 million a year ago. Changes in currency exchange rates increased revenue by 3 percentage points. Footwear revenues increased 12 percent to $319.4 million, apparel revenues increased 9 percent to $217.4 million and equipment revenues grew 8 percent to $53.1 million. Pre-tax income increased 6 percent to $126.4 million.
Americas
Revenues in the Americas region increased 5 percent to $212.5 million compared to $203.1 million in the third quarter of fiscal 2006. Changes in currency exchange rates did not have a significant impact on revenue growth. Footwear revenues were up 6 percent to $152.8 million, apparel revenues declined 5 percent to $42.3 million and equipment revenues grew 16 percent to $17.4 million. Pre-tax income was up 6 percent to $40.7 million.
Other Businesses
For the third quarter, Other business revenues, which are comprised of results from Cole Haan Holdings Incorporated, Converse Inc., Exeter Brands Group LLC, Hurley International LLC, NIKE Bauer Hockey Inc. and NIKE Golf, grew 15 percent to $522.7 million from $454.5 million last year. Pre-tax income increased 53 percent to $68.4 million for the quarter.
Income Statement Review
Gross margins were 44.2 percent during the third quarter compared to 43.6 percent for the same period in the prior year.
Selling and administrative expenses were 31.7 percent of third quarter revenues, compared to 30.1 percent last year. Results for the third quarter included $17.8 million, net of taxes, related to the expensing of stock options, which reduced diluted earnings per share by $0.07. Excluding stock option expense third quarter net income increased 13 percent and diluted earnings per share increased 16 percent to $1.44.
The effective tax rate for the third quarter declined to 32.3 percent mainly due to a European tax agreement, which was finalized in the second quarter of fiscal 2007 and the retroactive reinstatement of the U.S. research and development tax credit signed into law in December.
Balance Sheet Review
At quarter end, global inventories stood at $2.2 billion, an increase of 7 percent from February 28, 2006. Cash and short-term investments were $2.3 billion at the end of the quarter, compared to $2.0 billion last year.
NIKE, Inc.
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD ENDED FEBRUARY 28, 2007
(In millions, except per share data)
YEAR TO DATE
QUARTER ENDED ENDED
2/28/2007 2/28/2006 % Chg 2/28/2007 2/28/2006 % Chg
INCOME STATEMENT
Revenues $3,926.9 $3,612.8 9% $11,942.7 $10,949.5 9%
Cost of sales 2,191.7 2,038.7 8% 6,701.2 6,115.9 10%
Gross margin 1,735.2 1,574.1 10% 5,241.5 4,833.6 8%
44.2% 43.6% 43.9% 44.1%
Selling and
administrative
expense 1,243.3 1,086.6 14% 3,756.7 3,245.7 16%
31.7% 30.1% 31.5% 29.6%
Interest income, net (15.8) (8.4) 88% (43.0) (20.5) 110%
Other income, net (10.3) (10.7) -4% (13.3) (22.0) -40%
Income before income
taxes 518.0 506.6 2% 1,541.1 1,630.4 -5%
Income taxes 167.2 180.8 -8% 487.5 571.2 -15%
32.3% 35.7% 31.6% 35.0%
Net income $350.8 $325.8 8% $1,053.6 $1059.2 -1%
Diluted EPS $1.37 $1.24 10% $4.14 $4.00 4%
Basic EPS $1.39 $1.26 10% $4.18 $4.08 2%
Weighted Average Common Shares Outstanding:
Diluted 255.4 263.4 254.8 264.6
Basic 252.3 258.9 252.1 259.6
Dividends declared $0.37 $0.31 $1.05 $0.87
