NIKE, Inc. reported revenues for the fiscal second quarter ended November 30, 2003. Second quarter revenues increased 13 percent to $2.8 billion, versus $2.5 billion for the same period last year. Second quarter net
income totaled $179.1 million, or $0.66 per diluted share, compared to $152.0 million, or $0.57 per diluted share, in the prior year.
“It was a great quarter,” Philip H. Knight, Chairman and Chief Executive
Officer said. “These positive results span most of Nike's portfolio of
businesses and categories. They reflect our management's ability to lead in
innovative product, communication, and operational performance.”*
Knight added, “We are optimistic the momentum we are seeing in the
business, coupled with the improving health of the footwear and apparel
industry, is setting the stage for continued profitable growth through the
remainder of fiscal 2004.”*
Futures Orders
The Company reported worldwide futures orders for athletic footwear and
apparel, scheduled for delivery from December 2003 through April 2004,
totaling $4.4 billion, 9.7 percent higher than such orders reported for the
same period last year. Approximately four points of this growth were due to
changes in currency exchange rates.
By region, futures orders for the USA were up one percent; Europe
increased 16 percent; Asia Pacific grew 18 percent; and the Americas increased
11 percent. In Europe, eight points of the increase were due to changes in
currency exchange rates. Currency exchange rate movements contributed approximately four points and seven points, respectively, to futures growth in the Asia Pacific and Americas regions.
Knight continued, “The 9.7 percent increase in our worldwide futures orders is the result of Nike's strong brand and product momentum around the globe. We are particularly pleased by the continued improvement in our USA region, which posted the first futures increase in six quarters. This rebound in the USA complements continued strong performance in our international regions, which delivered 16 percent futures orders growth for the period.”*
Regional Highlights
USA
During the second quarter, U.S. revenues increased five percent to $1.09
billion versus $1.03 billion for the second quarter of 2003. U.S. athletic
footwear revenues increased five percent to $624.0 million. Apparel revenues
increased eight percent to $398.3 million. Equipment revenues fell six percent
to $63.3 million.
Europe
Revenues for the European region (which includes the Middle East and
Africa) grew nine percent to $848.9 million, up from $781.2 million for the
same period last year. Fifteen points of this growth were the result of
changes in currency exchange rates. Footwear revenues increased eight percent
to $472.5 million, apparel revenues increased ten percent to $324.9 million
and equipment revenues increased four percent to $51.5 million.
Asia Pacific
Revenues in the Asia Pacific region grew 18 percent to $412.7 million
compared to $350.4 million a year ago. Five points of this growth were the
result of changes in currency exchange rates. Footwear revenues were up 21
percent to $205.6 million; apparel revenues increased 15 percent to $174.5
million and equipment grew 11 percent to $32.6 million.
Americas
Revenues in the Americas region increased 17 percent to $156.1 million, an
improvement from $133.5 million in the second quarter of 2003. This growth
rate reflected an eight percent increase due to changes in currency exchange
rates. Footwear revenues were up 25 percent to $103.7 million, apparel
revenues increased three percent to $41.9 million and equipment improved five
percent to $10.5 million.
Other Revenues
Other revenues, which include Nike Golf, Converse, Inc., Bauer Nike Hockey
Inc., Cole Haan(R), and Hurley International LLC, grew 54 percent to $333.8
million from $217.0 million last year. This is the first quarter in which
Converse results are reflected in the “Other Revenues” category, as Nike
completed the acquisition of the company on September 4, 2003.
Income Statement Review
Gross margins were 42.3 percent compared to 40.2 percent last year.
Selling and administrative expenses were 31.8 percent of second quarter
revenues, compared to 30.3 percent last year. The effective tax rate for the
second quarter was 34.8 percent.
Balance Sheet Review
At quarter end, global inventories stood at $1.6 billion, an increase of
15 percent from November 30, 2002. Cash and short-term investments were
$968.9 million at the end of the quarter, compared to $555.8 million last
year.
NIKE, INC. CONSOLIDATED FINANCIAL STATEMENTS
FOR THE QUARTER ENDED NOVEMBER 30, 2003
(In millions, except per share data)
INCOME QUARTER ENDING YEAR TO DATE ENDING
STATEMENT * 11/30/03 11/30/02 % Chg 11/30/03 11/30/02 % Chg
Revenues $2,837.1 $2,514.7 13% $5,862.0 $5,311.0 10%
Cost of Sales 1,637.5 1,504.6 9% 3,360.9 3,143.8 7%
Gross Margin 1,199.6 1,010.1 19% 2,501.1 2,167.2 15%
42.3% 40.2% 42.7% 40.8%
SG&A 902.5 761.9 18% 1,772.1 1,566.5 13%
31.8% 30.3% 30.2% 29.5%
Interest Expense,
net 8.1 7.1 14% 15.6 14.5 8%
Other 14.3 11.5 24% 38.1 22.5 69%
Income before
income taxes
and cumulative
effect of
accounting change 274.7 229.6 20% 675.3 563.7 20%
Income Taxes 95.6 77.6 23% 235.0 194.5 21%
34.8% 33.8% 34.8% 34.5%
Income before
cumulative effect
of accounting
change 179.1 152.0 18% 440.3 369.2 19%
Cumulative effect
of accounting
change, net of
income taxes -- -- -- 266.1
Net Income $179.1 $152.0 18% $440.3 $103.1 327%
Diluted EPS -
before accounting
change $0.66 $0.57 16% $1.64 $1.38 19%
Cumulative effect
of accounting
change -- -- -- (0.99)
$0.66 $0.57 16% $1.64 $0.39 321%
Basic EPS - before
accounting change $0.68 $0.57 19% $1.67 $1.39 20%
Cumulative effect
of accounting
change -- -- -- (1.00)
$0.68 $0.57 19% $1.67 $0.39 328%
