Q2FY06 Earnings Increase
December 20, 2005
Beaverton, OR (20 December, 2005) – NIKE, Inc. (NYSE:NKE) today reported record results for the second quarter ended November 30, 2005. Second quarter revenues increased 10 percent to $3.5 billion, compared to $3.1 billion for the same period last year. Net income grew 15 percent to $301.1 million, compared to $261.9 million, and diluted earnings per share grew 18 percent to $1.14, versus $0.97 in the prior year.
“Led by the outstanding performance of the Nike brand in the U.S. and Americas regions, we delivered strong growth in revenue and profitability in the second quarter,” said William D. Perez, President and Chief Executive Officer, Nike, Inc. “In addition to the Nike brand, our Other businesses also delivered double digit growth in revenue and profits. The power of our Nike, Inc. portfolio was evident this quarter, with strength in the U.S., China and Latin America balancing more challenging results in Western Europe and Japan. We feel very good about our business overall, and our prospects for delivering on our financial goals for the fiscal year.” *
Futures Orders The Company reported worldwide futures orders for athletic footwear and apparel, scheduled for delivery from December 2005 through April 2006, totaling $5.2 billion, two and a half percent higher than such orders reported for the same period last year. Changes in currency exchange rates significantly reduced this growth relative to recent quarters, as global futures orders grew by seven percent excluding the impact of currency changes.*
By region, futures orders for the U.S. increased nine percent; Europe (which includes the Middle East and Africa) declined six percent; Asia Pacific grew two percent; and the Americas increased 23 percent. Changes in currency exchange rates reduced the reported futures orders by eight percentage points in Europe and by seven percentage points in the Asia Pacific region. In the Americas region, three percentage points of the increase were due to changes in currency exchange rates.*
Regional Highlights U.S. During the second quarter, U.S. revenues increased 15 percent to $1.3 billion versus $1.1 billion for the second quarter of fiscal 2005. U.S. athletic footwear revenues increased 19 percent to $811.5 million. Apparel revenues increased 13 percent to $433.8 million. Equipment revenues declined eight percent to $61.8 million. U.S. pre-tax income improved 14 percent to $265.7 million.
Europe Revenues for the European region grew two percent to $977.4 million, up from $961.1 million for the same period last year. Foreign currency exchange rates did not have a material impact on this growth for the quarter. Footwear revenues were $533.2 million, up slightly from $531.8 million a year ago. Apparel revenues increased three percent to $379.6 million and equipment revenues increased nine percent to $64.6 million. Pre-tax income declined two percent to $194.2 million.
Asia Pacific Revenues in the Asia Pacific region grew four percent to $503.3 million compared to $483.5 million a year ago. Two percentage points of this growth were the result of changes in currency exchange rates. Footwear revenues were up four percent to $245.4 million, apparel revenues increased three percent to $214.6 million and equipment revenues grew 11 percent to $43.3 million. Pre-tax income increased three percent to $115.2 million.
Americas Revenues in the Americas region increased 33 percent to $252.1 million, an improvement from $189.3 million in the second quarter of fiscal 2005. Currency exchange rates contributed 13 percentage points to this growth rate. Footwear revenues were up 37 percent to $178.1 million, apparel revenues increased 18 percent to $55.4 million and equipment jumped 48 percent to $18.6 million. Pre-tax income was up 30 percent to $57.4 million.
Other Businesses Other business revenues, which include Converse Inc., NIKE Golf, Bauer NIKE Hockey Inc., Cole Haan, Hurley International LLC and Exeter Brands Group LLC, grew 14 percent to $434.8 million from $382.4 million last year. Pre-tax income was up 11 percent to $23.0 million.
Income Statement Review Gross margins were 43.5 percent compared to 44.1 percent last year. Selling and administrative expenses were 30.4 percent of second quarter revenues, compared to 30.9 percent last year. The effective tax rate for the second quarter was 35.1 percent.
Balance Sheet Review At quarter end, global inventories stood at $1.9 billion, an increase of 10 percent from November 30, 2004. Cash and short-term investments were $2.1 billion at the end of the quarter, compared to $1.7 billion last year. Share Repurchase During the quarter, the Company purchased a total of 2,926,400 shares for approximately $240 million in conjunction with the Company’s four-year, $1.5 billion share repurchase program that was approved by the Board of Directors in June 2004.
NIKE, Inc. based in Beaverton, Oregon is the world's leading designer, marketer and distributor of authentic athletic footwear, apparel, equipment and accessories for a wide variety of sports and fitness activities. Wholly-owned Nike subsidiaries include Converse Inc., which designs, markets and distributes athletic footwear, apparel and accessories; Bauer NIKE Hockey Inc., a leading designer and distributor of hockey equipment; Cole Haan, a leading designer and marketer of luxury shoes, handbags, accessories and coats; Hurley International LLC, which designs, markets and distributes action sports and youth lifestyle footwear, apparel and accessories and Exeter Brands Group LLC, which designs and markets athletic footwear and apparel for the value retail channel.
NIKE’s earnings releases and other financial information are available on the Internet at invest.nike.com.
* The marked paragraphs contain 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 S.E.C., including Forms 8-K, 10-Q, and 10-K. Some forward-looking statements in this release concern changes in futures orders that are not necessarily indicative of changes in total revenues for subsequent periods due to the mix of futures and “at once” orders, exchange rate fluctuations, order cancellations and discounts, which may vary significantly from quarter to quarter.