Date of Report (Date of earliest event reported): | December 21, 2017 | |
![]() 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)) |
NIKE, Inc. (Registrant) | |||
Date: | December 21, 2017 | By: | /s/ Andrew Campion |
Andrew Campion | |||
Chief Financial Officer | |||
Exhibit No. | Exhibit | |
99.1 |
Investor Contact: | Media Contact: | |
Nitesh Sharan | Kellie Leonard | |
(503) 532-2828 | (503) 671-6171 |
• | Revenues for NIKE, Inc. increased 5 percent to $8.6 billion, up 3 percent on a currency-neutral basis.** |
◦ | Revenues for the NIKE Brand were $8.1 billion, up 4 percent on a constant-currency basis, driven by EMEA, Greater China and APLA, including growth in the Sportswear and NIKE Basketball categories. |
◦ | Revenues for Converse were $408 million, down 4 percent on a currency-neutral basis, as international growth was more than offset by declines in North America. |
• | Gross margin declined 120 basis points to 43.0 percent, as higher average selling prices were more than offset by unfavorable changes in foreign currency exchange rates and, to a lesser extent, higher product costs per unit. |
• | Selling and administrative expense increased 10 percent to $2.8 billion. Demand creation expense was $877 million, up 15 percent, primarily driven by higher sports marketing and advertising costs. Operating overhead expense increased 8 percent to $1.9 billion, due largely to higher administrative costs and continued investments in NIKE Direct. |
• | Other expense, net was $18 million as net foreign currency exchange losses were partially offset by non-operating items. |
• | The effective tax rate was 12.7 percent, compared to 24.4 percent for the same period last year, reflecting the tax benefit from stock-based compensation in the current period, as well as an increase in the mix of earnings from operations outside of the U.S., which are generally subject to a lower tax rate. |
• | Net income decreased 9 percent to $767 million as a decline in gross margin and higher selling and administrative expense more than offset revenue growth and a lower tax rate, while diluted earnings per share decreased 8 percent from the prior year to $0.46, including a 2 percent decline in the weighted average diluted common shares outstanding. |
• | Inventories for NIKE, Inc. were $5.3 billion, up 6 percent from November 30, 2016, driven primarily by changes in foreign currency exchange rates and, to a lesser extent, an increase in NIKE Brand units. |
• | Cash and equivalents and short-term investments were $6.4 billion, $446 million higher than last year due to net income, and proceeds from debt issuance and employee exercises of stock options, which more than offset share repurchases, dividends and investments in infrastructure. |
* | 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 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 | ||||||||||||||||
THREE MONTHS ENDED | % | SIX MONTHS ENDED | % | |||||||||||||
(Dollars in millions, except per share data) | 11/30/2017 | 11/30/2016 | Change | 11/30/2017 | 11/30/2016 | Change | ||||||||||
Revenues | $ | 8,554 | $ | 8,180 | 5 | % | $ | 17,624 | $ | 17,241 | 2 | % | ||||
Cost of sales | 4,876 | 4,564 | 7 | % | 9,984 | 9,502 | 5 | % | ||||||||
Gross profit | 3,678 | 3,616 | 2 | % | 7,640 | 7,739 | -1 | % | ||||||||
Gross margin | 43.0 | % | 44.2 | % | 43.3 | % | 44.9 | % | ||||||||
Demand creation expense | 877 | 762 | 15 | % | 1,732 | 1,803 | -4 | % | ||||||||
Operating overhead expense | 1,891 | 1,743 | 8 | % | 3,892 | 3,599 | 8 | % | ||||||||
Total selling and administrative expense | 2,768 | 2,505 | 10 | % | 5,624 | 5,402 | 4 | % | ||||||||
% of revenues | 32.4 | % | 30.6 | % | 31.9 | % | 31.3 | % | ||||||||
Interest expense (income), net | 13 | 15 | — | 29 | 22 | — | ||||||||||
Other expense (income), net | 18 | (18 | ) | — | 36 | (80 | ) | — | ||||||||
Income before income taxes | 879 | 1,114 | -21 | % | 1,951 | 2,395 | -19 | % | ||||||||
Income tax expense | 112 | 272 | -59 | % | 234 | 304 | -23 | % | ||||||||
Effective tax rate | 12.7 | % | 24.4 | % | 12.0 | % | 12.7 | % | ||||||||
NET INCOME | $ | 767 | $ | 842 | -9 | % | $ | 1,717 | $ | 2,091 | -18 | % | ||||
Earnings per common share: | ||||||||||||||||
Basic | $ | 0.47 | $ | 0.51 | -8 | % | $ | 1.05 | $ | 1.26 | -17 | % | ||||
Diluted | $ | 0.46 | $ | 0.50 | -8 | % | $ | 1.03 | $ | 1.23 | -16 | % | ||||
Weighted average common shares outstanding: | ||||||||||||||||
Basic | 1,627.0 | 1,659.1 | 1,633.1 | 1,665.6 | ||||||||||||
Diluted | 1,660.9 | 1,693.2 | 1,669.1 | 1,701.3 | ||||||||||||
Dividends declared per common share | $ | 0.20 | $ | 0.18 | $ | 0.38 | $ | 0.34 |
NIKE, Inc. | ||||||||
CONSOLIDATED BALANCE SHEETS | ||||||||
November 30, | November 30, | % Change | ||||||
(Dollars in millions) | 2017 | 2016 | ||||||
ASSETS | ||||||||
Current assets: | ||||||||
Cash and equivalents | $ | 4,304 | $ | 4,339 | -1 | % | ||
Short-term investments | 2,085 | 1,604 | 30 | % | ||||
Accounts receivable, net | 3,613 | 3,478 | 4 | % | ||||
Inventories | 5,326 | 5,033 | 6 | % | ||||
Prepaid expenses and other current assets | 1,254 | 1,557 | -19 | % | ||||
Total current assets | 16,582 | 16,011 | 4 | % | ||||
Property, plant and equipment, net | 4,117 | 3,566 | 15 | % | ||||
Identifiable intangible assets, net | 282 | 283 | 0 | % | ||||
Goodwill | 139 | 139 | 0 | % | ||||
Deferred income taxes and other assets | 2,935 | 2,653 | 11 | % | ||||
TOTAL ASSETS | $ | 24,055 | $ | 22,652 | 6 | % | ||
LIABILITIES AND SHAREHOLDERS' EQUITY | ||||||||
Current liabilities: | ||||||||
Current portion of long-term debt | $ | 10 | $ | 44 | -77 | % | ||
Notes payable | 1,229 | 20 | — | |||||
Accounts payable | 2,141 | 2,033 | 5 | % | ||||
Accrued liabilities | 3,278 | 3,076 | 7 | % | ||||
Income taxes payable | 92 | 52 | 77 | % | ||||
Total current liabilities | 6,750 | 5,225 | 29 | % | ||||
Long-term debt | 3,472 | 3,473 | 0 | % | ||||
Deferred income taxes and other liabilities | 2,075 | 1,631 | 27 | % | ||||
Redeemable preferred stock | — | — | — | |||||
Shareholders' equity | 11,758 | 12,323 | -5 | % | ||||
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY | $ | 24,055 | $ | 22,652 | 6 | % |
NIKE, Inc. | ||||||||||||||||||||
DIVISIONAL REVENUES1 | ||||||||||||||||||||
% Change Excluding Currency Changes2 | % Change Excluding Currency Changes2 | |||||||||||||||||||
THREE MONTHS ENDED | % | SIX MONTHS ENDED | % | |||||||||||||||||
(Dollars in millions) | 11/30/2017 | 11/30/2016 | Change | 11/30/2017 | 11/30/2016 | Change | ||||||||||||||
North America | ||||||||||||||||||||
Footwear | $ | 2,070 | $ | 2,219 | -7 | % | -7 | % | $ | 4,504 | $ | 4,737 | -5 | % | -5 | % | ||||
Apparel | 1,279 | 1,273 | 0 | % | 0 | % | 2,578 | 2,590 | 0 | % | -1 | % | ||||||||
Equipment | 136 | 158 | -14 | % | -14 | % | 327 | 354 | -8 | % | -8 | % | ||||||||
Total | 3,485 | 3,650 | -5 | % | -5 | % | 7,409 | 7,681 | -4 | % | -4 | % | ||||||||
Europe, Middle East & Africa | ||||||||||||||||||||
Footwear | 1,290 | 1,116 | 16 | % | 11 | % | 2,761 | 2,573 | 7 | % | 6 | % | ||||||||
Apparel | 743 | 588 | 26 | % | 21 | % | 1,486 | 1,272 | 17 | % | 15 | % | ||||||||
Equipment | 100 | 88 | 14 | % | 10 | % | 230 | 209 | 10 | % | 9 | % | ||||||||
Total | 2,133 | 1,792 | 19 | % | 14 | % | 4,477 | 4,054 | 10 | % | 9 | % | ||||||||
Greater China | ||||||||||||||||||||
Footwear | 793 | 669 | 19 | % | 17 | % | 1,554 | 1,379 | 13 | % | 14 | % | ||||||||
Apparel | 397 | 355 | 12 | % | 11 | % | 706 | 624 | 13 | % | 14 | % | ||||||||
Equipment | 32 | 31 | 3 | % | 0 | % | 70 | 72 | -3 | % | -2 | % | ||||||||
Total | 1,222 | 1,055 | 16 | % | 15 | % | 2,330 | 2,075 | 12 | % | 13 | % | ||||||||
Asia Pacific & Latin America | ||||||||||||||||||||
Footwear | 873 | 818 | 7 | % | 9 | % | 1,700 | 1,605 | 6 | % | 8 | % | ||||||||
Apparel | 342 | 319 | 7 | % | 10 | % | 643 | 598 | 8 | % | 10 | % | ||||||||
Equipment | 58 | 69 | -16 | % | -15 | % | 119 | 134 | -11 | % | -10 | % | ||||||||
Total | 1,273 | 1,206 | 6 | % | 8 | % | 2,462 | 2,337 | 5 | % | 7 | % | ||||||||
Global Brand Divisions3 | 23 | 21 | 10 | % | 19 | % | 43 | 36 | 19 | % | 17 | % | ||||||||
TOTAL NIKE BRAND | 8,136 | 7,724 | 5 | % | 4 | % | 16,721 | 16,183 | 3 | % | 3 | % | ||||||||
Converse | 408 | 416 | -2 | % | -4 | % | 891 | 990 | -10 | % | -11 | % | ||||||||
Corporate4 | 10 | 40 | — | — | 12 | 68 | — | — | ||||||||||||
TOTAL NIKE, INC. REVENUES | $ | 8,554 | $ | 8,180 | 5 | % | 3 | % | $ | 17,624 | $ | 17,241 | 2 | % | 2 | % | ||||
TOTAL NIKE BRAND | ||||||||||||||||||||
Footwear | $ | 5,026 | $ | 4,822 | 4 | % | 3 | % | $ | 10,519 | $ | 10,294 | 2 | % | 2 | % | ||||
Apparel | 2,761 | 2,535 | 9 | % | 8 | % | 5,413 | 5,084 | 6 | % | 6 | % | ||||||||
Equipment | 326 | 346 | -6 | % | -7 | % | 746 | 769 | -3 | % | -3 | % | ||||||||
Global Brand Divisions3 | 23 | 21 | 10 | % | 19 | % | 43 | 36 | 19 | % | 17 | % | ||||||||
TOTAL NIKE BRAND REVENUES | $ | 8,136 | $ | 7,724 | 5 | % | 4 | % | $ | 16,721 | $ | 16,183 | 3 | % | 3 | % | ||||
1 Certain prior year amounts have been reclassified to conform to fiscal 2018 presentation. This includes reclassified operating segment data to reflect the changes in the Company's operating structure, which became effective June 1, 2017. These changes had no impact on previously reported consolidated results of operations or shareholders' equity. | ||||||||||||||||||||
2 The percentage 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. | ||||||||||||||||||||
3 Global Brand Divisions revenues are primarily attributable to NIKE Brand licensing businesses that are not part of a geographic operating segment. | ||||||||||||||||||||
4 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 our central foreign exchange risk management program. |
NIKE, Inc. | ||||||||||||||||
EARNINGS BEFORE INTEREST AND TAXES1,2 | ||||||||||||||||
THREE MONTHS ENDED | % | SIX MONTHS ENDED | % | |||||||||||||
(Dollars in millions) | 11/30/2017 | 11/30/2016 | Change | 11/30/2017 | 11/30/2016 | Change | ||||||||||
North America | $ | 783 | $ | 912 | -14 | % | $ | 1,785 | $ | 1,916 | -7 | % | ||||
Europe, Middle East & Africa | 337 | 313 | 8 | % | 788 | 798 | -1 | % | ||||||||
Greater China | 378 | 375 | 1 | % | 772 | 746 | 3 | % | ||||||||
Asia Pacific & Latin America | 291 | 266 | 9 | % | 551 | 475 | 16 | % | ||||||||
Global Brand Divisions3 | (602 | ) | (619 | ) | 3 | % | (1,277 | ) | (1,390 | ) | 8 | % | ||||
TOTAL NIKE BRAND | 1,187 | 1,247 | -5 | % | 2,619 | 2,545 | 3 | % | ||||||||
Converse | 48 | 78 | -38 | % | 137 | 231 | -41 | % | ||||||||
Corporate4 | (343 | ) | (196 | ) | -75 | % | (776 | ) | (359 | ) | -116 | % | ||||
TOTAL NIKE, INC. EARNINGS BEFORE INTEREST AND TAXES | 892 | 1,129 | -21 | % | 1,980 | 2,417 | -18 | % | ||||||||
Interest expense (income), net | 13 | 15 | — | 29 | 22 | — | ||||||||||
TOTAL NIKE, INC. INCOME BEFORE INCOME TAXES | $ | 879 | $ | 1,114 | -21 | % | $ | 1,951 | $ | 2,395 | -19 | % | ||||
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 Certain prior year amounts have been reclassified to conform to fiscal 2018 presentation. This includes reclassified operating segment data to reflect the changes in the Company's operating structure, which became effective June 1, 2017. These changes had no impact on previously reported consolidated results of operations or shareholders' equity. | ||||||||||||||||
3 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. | ||||||||||||||||
4 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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