Nike, Inc. saw net revenues grow 11% for the fiscal first quarter, ended August 31, 2007 to $4.7 billion from $4.2 billion last year. Changes in currency exchange rates increased revenue growth by 3 percentage points for the quarter. First quarter net income increased 51% to $569.7 million, compared to $377.2 million in the prior year and diluted earnings per share increased 51% to $1.12, versus 74 cents last year.
The first quarter effective tax rate reflects a one-time benefit related to utilization of past foreign losses, contributing 20 cents per diluted share. The company has now taken the steps necessary to realize this tax benefit, reducing the effective tax rate for the quarter by approximately 15.6 points.
Mark Parker, President and CEO of Nike, Inc. said, “Were off to a strong start as our first quarter results reflect the power of our brands as well as the strength and diversification of the Nike, Inc. portfolio. We have an aggressive growth plan to achieve $23 billion in revenue by fiscal year 2011, and we're well on our way.”
Parker continued, “As we execute against our long-term growth priorities, we will continue to distinguish ourselves as the industry leader with our relentless focus on creating innovative product, and on bringing a new level of excitement and energy to retail.”
Futures Orders
The company reported worldwide futures orders for athletic footwear and apparel, scheduled for delivery from September 2007 through January 2008, totaling $5.9 billion, 11.5% higher than such orders reported for the same period last year. Changes in currency exchange rates increased reported orders growth by 1 percentage point.
The company reported worldwide futures orders for athletic footwear and apparel, scheduled for delivery from September 2007 through January 2008, totaling $5.9 billion, 11.5% 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 3%; Europe (which includes the Middle East and Africa) and Asia Pacific both increased 17%; and the Americas grew 20%. Changes in currency exchange rates increased the reported futures orders growth in Europe by 3 percentage points. Changes in currency exchange rates increased reported futures orders growth in Asia Pacific by 1 percentage point. In the Americas region changes in currency exchange rates did not have a significant impact on futures growth.
Regional Highlights
U.S.
During the first quarter, U.S. revenues increased 2% to $1,638.4 million versus $1,601.9 million for the first quarter of fiscal 2007. U.S. athletic footwear revenues increased 4% to $1,119.9 million. Apparel revenues decreased 1% to $428.0 million. Equipment revenues declined 1% to $90.5 million. U.S. pre-tax income declined 2% to $347.3 million.
U.S.
During the first quarter, U.S. revenues increased 2% to $1,638.4 million versus $1,601.9 million for the first quarter of fiscal 2007. U.S. athletic footwear revenues increased 4% to $1,119.9 million. Apparel revenues decreased 1% to $428.0 million. Equipment revenues declined 1% to $90.5 million. U.S. pre-tax income declined 2% to $347.3 million.
Europe
First quarter revenues for the European region grew 16% to $1,477.7 million from $1,270.9 million for the same period last year. Changes in currency exchange rates increased revenue growth by 7 percentage points. Footwear revenues increased 17% to $791.9 million. Apparel revenues grew by 16% to $567.0 million and equipment revenues increased 14% to $118.8 million. Pre-tax income increased 21% to $375.5 million.
First quarter revenues for the European region grew 16% to $1,477.7 million from $1,270.9 million for the same period last year. Changes in currency exchange rates increased revenue growth by 7 percentage points. Footwear revenues increased 17% to $791.9 million. Apparel revenues grew by 16% to $567.0 million and equipment revenues increased 14% to $118.8 million. Pre-tax income increased 21% to $375.5 million.
Asia Pacific
In the first quarter, revenues in the Asia Pacific region grew 22% to $630.8 million compared to $518.4 million a year ago. Changes in currency exchange rates increased revenue growth by 2 percentage points. Footwear revenues were up 25% to $332.1 million, apparel revenues increased 20% to $240.5 million and equipment revenues grew 13% to $58.2 million. Pre-tax income increased 52% to $159.5 million.
In the first quarter, revenues in the Asia Pacific region grew 22% to $630.8 million compared to $518.4 million a year ago. Changes in currency exchange rates increased revenue growth by 2 percentage points. Footwear revenues were up 25% to $332.1 million, apparel revenues increased 20% to $240.5 million and equipment revenues grew 13% to $58.2 million. Pre-tax income increased 52% to $159.5 million.
Americas
Revenues in the Americas region increased 15% to $279.5 million, an improvement from $242.5 million in the first quarter of fiscal 2007. Currency exchange rates contributed 4 percentage points to this growth rate. Footwear revenues were up 15% to $198.4 million, apparel revenues increased 14% to $58.3 million and equipment revenues grew 20% to $22.8 million. Pre-tax income was up 16% to $57.9 million.
Revenues in the Americas region increased 15% to $279.5 million, an improvement from $242.5 million in the first quarter of fiscal 2007. Currency exchange rates contributed 4 percentage points to this growth rate. Footwear revenues were up 15% to $198.4 million, apparel revenues increased 14% to $58.3 million and equipment revenues grew 20% to $22.8 million. Pre-tax income was up 16% to $57.9 million.
Other Businesses
For the first quarter, Other business revenues, which include Converse Inc., NIKE Golf, Cole Haan Holdings Incorporated, NIKE Bauer Hockey Corp., Hurley International LLC and Exeter Brands Group LLC, grew 12% to $628.7 million from $560.4 million last year. Pre-tax income increased 9% to $95.2 million for the quarter. The prior year first quarter results included a $14.2 million benefit resulting from the favorable settlement of arbitration proceedings against Converse; excluding this benefit, pre-tax income for the Other businesses grew 30%.
For the first quarter, Other business revenues, which include Converse Inc., NIKE Golf, Cole Haan Holdings Incorporated, NIKE Bauer Hockey Corp., Hurley International LLC and Exeter Brands Group LLC, grew 12% to $628.7 million from $560.4 million last year. Pre-tax income increased 9% to $95.2 million for the quarter. The prior year first quarter results included a $14.2 million benefit resulting from the favorable settlement of arbitration proceedings against Converse; excluding this benefit, pre-tax income for the Other businesses grew 30%.
The company also announced today its intent to explore the sale of Nike Bauer Hockey. Following a strategic review of the companys affiliate brands portfolio, Nike determined that despite the strength of the business, Nike Bauer Hockey does not align with the companys long-term growth priorities and exploring a sale is the best strategic alternative. The company expects the exploration process and any potential sale that maximizes Nike Bauer Hockeys value to Nike will be completed within the current fiscal year.
Commenting on the anticipated sale, Parker said: “We are focused on investing our resources where we will achieve the greatest returns, both within the Nike brand and within a strong portfolio of complementary affiliate brands. Were confident its the right choice for our Company as we maximize our opportunities and drive toward our long-term growth targets. Given Nike Bauers market leading position, we believe we will be able to effectively execute this transaction.
Income Statement Review
Gross margins were 44.8% compared to 44.1% for the same period last year. Selling and administrative expenses were 30.8% of first quarter revenues, which is comparable to the same period last year. The effective tax rate for the first quarter declined significantly to 15.0% primarily due to the one-time tax benefit described above.
Gross margins were 44.8% compared to 44.1% for the same period last year. Selling and administrative expenses were 30.8% of first quarter revenues, which is comparable to the same period last year. The effective tax rate for the first quarter declined significantly to 15.0% primarily due to the one-time tax benefit described above.
Balance Sheet Review
At quarter end, global inventories stood at $2.2 billion, an increase of less than 1% from August 31, 2006. Cash and short-term investments were $2.8 billion at the end of the quarter, compared to $1.7 billion at the end of the first quarter last year.
At quarter end, global inventories stood at $2.2 billion, an increase of less than 1% from August 31, 2006. Cash and short-term investments were $2.8 billion at the end of the quarter, compared to $1.7 billion at the end of the first quarter last year.
Share Repurchase
During the first quarter, the company repurchased a total of 5,757,101 shares for approximately $321.5 million in conjunction with the company's four-year, $3 billion share repurchase program approved by the Board of Directors in June 2006. As of the end of the first quarter the company has repurchased a total of 23.8 million shares for approximately $1.1 billion under this program.
During the first quarter, the company repurchased a total of 5,757,101 shares for approximately $321.5 million in conjunction with the company's four-year, $3 billion share repurchase program approved by the Board of Directors in June 2006. As of the end of the first quarter the company has repurchased a total of 23.8 million shares for approximately $1.1 billion under this program.
NIKE, Inc.
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD ENDED AUGUST 31, 2007
(In millions, except per share data)
QUARTER ENDED
INCOME STATEMENT 08/31/2007 08/31/2006 %Chg
Revenues $4,655.1 $4,194.1 11%
Cost of sales 2,568.1 2,344.9 10%
Gross margin 2,087.0 1,849.2 13%
44.8% 44.1%
Selling and administrative
expense 1,434.7 1,289.7 11%
30.8% 30.8%
Interest income, net (24.6) (13.1) 88%
Other expense (income), net 6.6 (3.2) -306%
Income before income taxes 670.3 575.8 16%
Income taxes 100.6 198.6 -49%
15.0% 34.5%
Net income $569.7 $377.2 51%
Diluted EPS $1.12 $0.74 51%
Basic EPS $1.14 $0.75 52%
Weighted Average Common Shares Outstanding:
Diluted 507.3 512.0
Basic 499.4 505.4
Dividends declared $0.185 $0.155
