Date of Report (Date of earliest event reported): | September 25, 2018 | |
NIKE, Inc. | ||
(Exact name of registrant as specified in charter) | ||
OREGON | 1-10635 | 93-0584541 |
(State or other jurisdiction of incorporation) | (Commission File Number) | (IRS Employer Identification No.) |
ONE BOWERMAN DRIVE BEAVERTON, OR | 97005-6453 | |
(Address of principal executive offices) | (Zip Code) | |
Registrant’s telephone number, including area code: | (503) 671-6453 | |
NO CHANGE | ||
(Former name or former address, if changed since last report.) |
r | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
r | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
r | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
r | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Exhibit No. | Exhibit | |
99.1 |
NIKE, Inc. (Registrant) | |||
Date: | September 25, 2018 | By: | /s/ Andrew Campion |
Andrew Campion | |||
Chief Financial Officer | |||
Investor Contact: | Media Contact: | |
Nitesh Sharan | Mark Rhodes | |
(503) 532-2828 | (503) 532-8877 |
• | Revenues for NIKE, Inc. increased 10 percent to $9.9 billion, up 9 percent on a currency-neutral basis.** |
▪ | Revenues for the NIKE Brand were $9.4 billion, up 10 percent on a currency-neutral basis driven by double-digit growth internationally and in NIKE Direct, strong momentum in North America, and growth in almost every category led by Sportswear. |
▪ | Revenues for Converse were $527 million, up 7 percent on a currency-neutral basis, mainly driven by growth in Europe and Asia. |
• | Gross margin increased 50 basis points to 44.2 percent primarily due to higher average selling prices, favorable full-price sales mix and margin expansion in NIKE Direct, partially offset by higher product costs. |
• | Selling and administrative expense increased 7 percent to $3.1 billion. Demand creation expense was $964 million, up 13 percent primarily driven by sports marketing investments, brand campaigns and key sports moments. Operating overhead expense increased 5 percent to $2.1 billion driven by investments in capabilities to drive the Consumer Direct Offense, particularly in NIKE Direct and global operations. |
• | The effective tax rate was 14 percent, which reflects the new U.S. statutory rate and implemented provisions of the U.S. Tax Cuts and Jobs Act. |
• | Net income increased 15 percent to $1.1 billion driven primarily by strong revenue growth, gross margin expansion and selling and administrative expense leverage while diluted earnings per share increased 18 percent from the prior year to $0.67 reflecting a 2.5 percent decline in the weighted average diluted common shares outstanding. |
• | Inventories for NIKE, Inc. were $5.2 billion, flat to prior year, primarily driven by a clean marketplace with healthy inventories across all geographies due to strong full-price sell through on new innovation. |
• | Cash and equivalents and short-term investments were $4.3 billion, $1.3 billion lower than last year as share repurchases, dividends and investments in infrastructure more than offset net income and proceeds from employee exercises of stock options. |
* | The marked paragraph contains 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 U.S. Securities and Exchange Commission (SEC), including Forms 8-K, 10-Q and 10-K. |
** | See additional information in the accompanying Divisional Revenues table regarding this non-GAAP financial measure. |
NIKE, Inc. | ||||||||
CONSOLIDATED STATEMENTS OF INCOME | ||||||||
(Unaudited) | ||||||||
THREE MONTHS ENDED | % | |||||||
(Dollars in millions, except per share data) | 8/31/2018 | 8/31/2017 | Change | |||||
Revenues | $ | 9,948 | $ | 9,070 | 10 | % | ||
Cost of sales | 5,551 | 5,108 | 9 | % | ||||
Gross profit | 4,397 | 3,962 | 11 | % | ||||
Gross margin | 44.2 | % | 43.7 | % | ||||
Demand creation expense | 964 | 855 | 13 | % | ||||
Operating overhead expense | 2,099 | 2,001 | 5 | % | ||||
Total selling and administrative expense | 3,063 | 2,856 | 7 | % | ||||
% of revenues | 30.8 | % | 31.5 | % | ||||
Interest expense (income), net | 11 | 16 | — | |||||
Other expense (income), net | 53 | 18 | — | |||||
Income before income taxes | 1,270 | 1,072 | 18 | % | ||||
Income tax expense | 178 | 122 | 46 | % | ||||
Effective tax rate | 14.0 | % | 11.4 | % | ||||
NET INCOME | $ | 1,092 | $ | 950 | 15 | % | ||
Earnings per common share: | ||||||||
Basic | $ | 0.69 | $ | 0.58 | 19 | % | ||
Diluted | $ | 0.67 | $ | 0.57 | 18 | % | ||
Weighted average common shares outstanding: | ||||||||
Basic | 1,594.0 | 1,639.1 | ||||||
Diluted | 1,634.4 | 1,676.9 | ||||||
Dividends declared per common share | $ | 0.20 | $ | 0.18 |
NIKE, Inc. | ||||||||
CONSOLIDATED BALANCE SHEETS | ||||||||
(Unaudited) | ||||||||
August 31, | August 31, | % Change | ||||||
(Dollars in millions) | 2018 | 2017 | ||||||
ASSETS | ||||||||
Current assets: | ||||||||
Cash and equivalents | $ | 3,282 | $ | 3,413 | -4 | % | ||
Short-term investments | 987 | 2,106 | -53 | % | ||||
Accounts receivable, net | 4,330 | 3,871 | 12 | % | ||||
Inventories | 5,227 | 5,211 | 0 | % | ||||
Prepaid expenses and other current assets | 1,675 | 1,591 | 5 | % | ||||
Total current assets | 15,501 | 16,192 | -4 | % | ||||
Property, plant and equipment, net | 4,487 | 4,086 | 10 | % | ||||
Identifiable intangible assets, net | 284 | 283 | 0 | % | ||||
Goodwill | 154 | 139 | 11 | % | ||||
Deferred income taxes and other assets | 2,057 | 2,947 | -30 | % | ||||
TOTAL ASSETS | $ | 22,483 | $ | 23,647 | -5 | % | ||
LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||
Current liabilities: | ||||||||
Current portion of long-term debt | $ | 6 | $ | 7 | -14 | % | ||
Notes payable | 13 | 335 | -96 | % | ||||
Accounts payable | 2,333 | 2,116 | 10 | % | ||||
Accrued liabilities | 4,174 | 3,501 | 19 | % | ||||
Income taxes payable | 182 | 97 | 88 | % | ||||
Total current liabilities | 6,708 | 6,056 | 11 | % | ||||
Long-term debt | 3,467 | 3,472 | 0 | % | ||||
Deferred income taxes and other liabilities | 3,316 | 2,126 | 56 | % | ||||
Redeemable preferred stock | — | — | — | |||||
Shareholders’ equity | 8,992 | 11,993 | -25 | % | ||||
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY | $ | 22,483 | $ | 23,647 | -5 | % |
NIKE, Inc. | ||||||||||
DIVISIONAL REVENUES | ||||||||||
(Unaudited) | ||||||||||
% Change Excluding Currency Changes1 | ||||||||||
THREE MONTHS ENDED | % | |||||||||
(Dollars in millions) | 8/31/2018 | 8/31/2017 | Change | |||||||
North America | ||||||||||
Footwear | $ | 2,555 | $ | 2,434 | 5 | % | 5 | % | ||
Apparel | 1,407 | 1,299 | 8 | % | 8 | % | ||||
Equipment | 183 | 191 | -4 | % | -4 | % | ||||
Total | 4,145 | 3,924 | 6 | % | 6 | % | ||||
Europe, Middle East & Africa | ||||||||||
Footwear | 1,642 | 1,471 | 12 | % | 10 | % | ||||
Apparel | 830 | 743 | 12 | % | 10 | % | ||||
Equipment | 135 | 130 | 4 | % | 3 | % | ||||
Total | 2,607 | 2,344 | 11 | % | 9 | % | ||||
Greater China | ||||||||||
Footwear | 958 | 761 | 26 | % | 22 | % | ||||
Apparel | 380 | 309 | 23 | % | 19 | % | ||||
Equipment | 41 | 38 | 8 | % | 2 | % | ||||
Total | 1,379 | 1,108 | 24 | % | 20 | % | ||||
Asia Pacific & Latin America | ||||||||||
Footwear | 881 | 827 | 7 | % | 14 | % | ||||
Apparel | 332 | 301 | 10 | % | 18 | % | ||||
Equipment | 57 | 61 | -7 | % | -1 | % | ||||
Total | 1,270 | 1,189 | 7 | % | 14 | % | ||||
Global Brand Divisions2 | 16 | 20 | -20 | % | -27 | % | ||||
TOTAL NIKE BRAND | 9,417 | 8,585 | 10 | % | 10 | % | ||||
Converse | 527 | 483 | 9 | % | 7 | % | ||||
Corporate3 | 4 | 2 | — | — | ||||||
TOTAL NIKE, INC. REVENUES | $ | 9,948 | $ | 9,070 | 10 | % | 9 | % | ||
TOTAL NIKE BRAND | ||||||||||
Footwear | $ | 6,036 | $ | 5,493 | 10 | % | 10 | % | ||
Apparel | 2,949 | 2,652 | 11 | % | 11 | % | ||||
Equipment | 416 | 420 | -1 | % | -1 | % | ||||
Global Brand Divisions2 | 16 | 20 | -20 | % | -27 | % | ||||
TOTAL NIKE BRAND REVENUES | $ | 9,417 | $ | 8,585 | 10 | % | 10 | % | ||
1 The percent change has been calculated using actual exchange rates in use during the comparative prior year period to enhance the visibility of the underlying business trends by excluding the impact of translation arising from foreign currency exchange rate fluctuations, which is considered a non-GAAP financial measure. | ||||||||||
2 Global Brand Divisions revenues are primarily attributable to NIKE Brand licensing businesses that are not part of a geographic operating segment. | ||||||||||
3 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 the Company’s central foreign exchange risk management program. |
NIKE, Inc. | ||||||||
EARNINGS BEFORE INTEREST AND TAXES1 | ||||||||
(Unaudited) | ||||||||
THREE MONTHS ENDED | % | |||||||
(Dollars in millions) | 8/31/2018 | 8/31/2017 | Change | |||||
North America | $ | 1,077 | $ | 1,002 | 7 | % | ||
Europe, Middle East & Africa | 501 | 451 | 11 | % | ||||
Greater China | 502 | 394 | 27 | % | ||||
Asia Pacific & Latin America | 323 | 260 | 24 | % | ||||
Global Brand Divisions2 | (818 | ) | (675 | ) | -21 | % | ||
TOTAL NIKE BRAND | 1,585 | 1,432 | 11 | % | ||||
Converse | 98 | 89 | 10 | % | ||||
Corporate3 | (402 | ) | (433 | ) | 7 | % | ||
TOTAL NIKE, INC. EARNINGS BEFORE INTEREST AND TAXES | 1,281 | 1,088 | 18 | % | ||||
Interest expense (income), net | 11 | 16 | — | |||||
TOTAL NIKE, INC. INCOME BEFORE INCOME TAXES | $ | 1,270 | $ | 1,072 | 18 | % | ||
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 tax expense. | ||||||||
2 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. | ||||||||
3 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. |
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