Nike (ticker: NKE, exchange: New York Stock Exchange (.N))
News Release -
Nike Reports Third Quarter Earnings Per Share Of $1.24, Up 23 Percent From Prior Year
Worldwide futures orders up 2.9 percent, up 5.4 percent excluding effects of foreign currency
Beaverton, OR (21 March, 2006) - NIKE, Inc. (NYSE:NKE) today reported record results for the third quarter ended February 28, 2006. Third quarter revenues increased nine percent to $3.6 billion, compared to $3.3 billion for the same period last year. Changes in currency exchange rates reduced revenue growth by three percentage points. Net income grew 19 percent to $325.8 million, compared to $273.4 million in the prior year. Diluted earnings per share grew 23 percent to $1.24, versus $1.01 last year.
"We're very pleased with the performance of the Nike brand and our Nike Inc. portfolio, both for the quarter and year to date," said Mark Parker, President and Chief Executive Officer, Nike, Inc. "The strength of our product pipeline, brand portfolio and global reach is enabling us to balance continued challenges in markets such as Western Europe and Japan with strong momentum in other key markets and regions. This, combined with our ability to manage expenses, enabled us to deliver on our long-term goal of sustainable, profitable growth." *
The Company reported worldwide futures orders for athletic footwear and apparel, scheduled for delivery from March 2006 through July 2006, totaling $5.4 billion, 2.9 percent higher than such orders reported for the same period last year. Changes in currency exchange rates reduced this growth, as global futures orders grew by 5.4 percent excluding the impact of currency changes.*
By region, futures orders for the U.S. increased six percent; Europe (which includes the Middle East and Africa) declined two percent; Asia Pacific grew five percent; and the Americas increased ten percent. Changes in currency exchange rates reduced the reported futures orders by five percentage points in Europe and by four percentage points in the Asia Pacific region. In the Americas region, two percentage points of the increase were due to changes in currency exchange rates.*
During the third quarter, U.S. revenues increased 14 percent to $1.4 billion versus $1.3 billion for the third quarter of fiscal 2005. U.S. athletic footwear revenues increased 18 percent to $1.0 billion. Apparel revenues increased six percent to $366.6 million. Equipment revenues declined three percent to $70.3 million. U.S. pre-tax income improved ten percent to $286.2 million.
Revenues for the European region declined five percent to $980.1 million from $1.0 billion for the same period last year. Changes in currency exchange rates reduced revenue growth by nine percentage points. Footwear revenues were $563.8 million, down eight percent from $615.3 million a year ago. Apparel revenues decreased by one percent to $347.1 million and equipment revenues increased three percent to $69.2 million. Pre-tax income declined five percent to $208.7 million.
Third quarter revenues for the Asia Pacific region grew 13 percent to $532.3 million compared to $472.8 million a year ago. Changes in currency exchange rates reduced revenue growth by four percentage points. Footwear revenues were up 19 percent to $284.1 million, apparel revenues increased six percent to $199.0 million and equipment revenues grew six percent to $49.2 million. Pre-tax income increased 19 percent to $119.6 million.
Revenues in the Americas region increased 41 percent to $203.1 million, an improvement from $143.7 million in the third quarter of fiscal 2005. Changes in currency exchange rates contributed 11 percentage points to this growth rate. Footwear revenues were up 44 percent to $143.7 million, apparel revenues increased 33 percent to $44.4 million and equipment jumped 42 percent to $15.0 million. Pre-tax income was up 69 percent to $38.5 million.
Third quarter Other business revenues, which include Converse Inc., NIKE Golf, NIKE Bauer Hockey Inc., Cole Haan, Hurley International LLC and Exeter Brands Group LLC, grew 17 percent to $454.5 million from $389.6 million last year. Pre-tax income was up 90 percent to $43.6 million.
Income Statement Review
Gross margins were 43.6 percent in the third quarter compared to 44.1 percent last year. Selling and administrative expenses were 30.1 percent of third quarter revenues, compared to 31.3 percent last year. The effective tax rate for the third quarter was 35.7 percent.
Balance Sheet Review
At quarter end, global inventories stood at $2.0 billion, an increase of 16 percent from February 28, 2005. Cash and short-term investments were $2.0 billion at the end of the quarter, compared to $1.6 billion last year.
During the quarter, the Company purchased a total of 1,494,000 shares for approximately $128 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 www.NikeBiz.com/invest. This quarter, Nikebiz will feature expanded information and relevant highlights of product and key initiatives for the reporting period.
* 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, which may vary significantly from quarter to quarter.