Nike, inc. reports fiscal 2012 second quarter results
Beaverton, ore.--(business wire)--nike, inc. (nyse:nke) today reported financial results for its fiscal 2012 second quarter ended november 30, 2011. earnings per share for the quarter rose 6 percent as a result of continued strong demand for nike, inc. brands, sg&a expense leverage and a lower average share count, which more than offset the impact of a lower gross margin. “our strong second quarter results demonstrate that the nike, inc. portfolio is a powerful engine for growth,” said mark parker, president and ceo, nike, inc. “we’re able to accomplish this by staying focused on what we do best – deliver innovative products and experiences that serve athletes, inspire consumers and reward our shareholders. going forward we’ll continue to use the unique power of our portfolio to drive growth, manage risk and connect with consumers.”* second quarter income statement review revenues for nike, inc. increased 18 percent to $5.7 billion, up 16 percent on a currency-neutral basis. excluding the impacts of changes in foreign currency, nike brand revenues rose 18 percent with growth in every geography except japan and in all key categories except action sports. revenues for other businesses increased 5 percent with minimal impact from changes in currency exchange rates, as growth at converse more than offset lower revenues at nike golf, cole haan, hurley and umbro. gross margin declined 260 basis points to 42.7 percent due primarily to higher product costs, which more than offset the positive effects of growing sales in our direct to consumer operations, price increases and ongoing product cost reduction initiatives. selling and administrative expenses grew at a lower rate than revenue, up 13 percent to $1.8 billion. demand creation expenses increased 12 percent to $644 million driven by marketing support for key product initiatives and investments in consumer events for the nike brand. operating overhead expenses increased 13 percent to $1.2 billion due to additional investments made in our wholesale and direct to consumer businesses. other expense, net was $9 million, primarily comprised of net foreign exchange losses, partially offset by non-recurring items. for the quarter, we estimate the year-over-year change in foreign currency related gains and losses included in other expense, net combined with the impact of changes in foreign currency exchange rates on the translation of foreign currency-denominated profits decreased income before income taxes by approximately $17 million. the effective tax rate was 24.1 percent compared to 25.0 percent for the same period last year, an improvement due primarily to a reduction in the effective tax rate on operations outside the united states. net income increased 3 percent to $469 million and diluted earnings per share increased 6 percent to $1.00, reflecting a 4 percent decline in the weighted average diluted common shares outstanding. november 30, 2011 balance sheet review inventories for nike, inc. were $3.2 billion, up 35 percent from november 30, 2010. inventories were higher compared to a year ago due to significantly higher average unit product cost and growth in total units. nike brand inventories were up 39 percent. approximately 20 percentage points of the increase was due to higher wholesale unit inventories as a result of strong demand and more timely deliveries from our product suppliers. the remaining 19 percentage points of the increase in nike brand inventories were primarily a result of significantly higher product input costs. relative to revenues and futures, current unit inventories remain broadly consistent with levels reported prior to the 2009 – 2010 economic downturn. cash and short-term investments were $3.4 billion, $1.4 billion lower than last year as higher working capital investments reduced free cash flow from operations, while share repurchases, dividend payments and long-term debt payments also increased year-on-year. share repurchases during the second quarter, a total of 7.6 million shares were repurchased for approximately $672 million as part of our four-year, $5 billion share repurchase program, approved by the board of directors in september 2008. as of the end of the second quarter, a total of 45.6 million shares were repurchased for approximately $3.6 billion under this program. futures orders as of the end of the quarter worldwide futures orders for nike brand athletic footwear and apparel, scheduled for delivery from december 2011 through april 2012, totaled $8.9 billion, 13 percent higher than orders reported for the same period last year. changes in foreign currency exchange rates did not have a significant impact on reported futures orders.* conference call nike management will host a conference call beginning at approximately 2:00 p.m. pt on december 20, 2011, to review second quarter results. the conference call will be broadcast live over the internet and can be accessed at http://investors.nikeinc.com. for those unable to listen to the live broadcast, an archived version will be available at the same location through 9:00 p.m. pt, december 27, 2011. about nike, inc. nike, inc. based near 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 cole haan, which designs, markets and distributes luxury shoes, handbags, accessories and coats; converse inc., which designs, markets and distributes athletic footwear, apparel and accessories; hurley international llc, which designs, markets and distributes action sports and youth lifestyle footwear, apparel and accessories; and umbro international limited, which designs, distributes and licenses athletic and casual footwear, apparel and equipment, primarily for global football (soccer). for more information, nike’s earnings releases and other financial information are available on the internet at http://investors.nikeinc.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, and because a significant portion of the business does not report futures orders. (additional tables follow) % change excluding currency changes 2 % change % change 1 certain prior year amounts have been reclassified to conform to fiscal year 2012 presentation. these changes had no impact on previously reported results of operations or shareholders' equity. 2 fiscal 2012 results have been restated using fiscal 2011 exchange rates for the comparative period to enhance the visibility of the underlying business trends excluding the impact of foreign currency exchange rate fluctuations. 3 global brand divisions primarily represent nike brand licensing businesses that are not part of a geographic operating segment. 4 other businesses represent activities of cole haan, converse, hurley, nike golf and umbro. 5 corporate revenues primarily consist of intercompany revenue eliminations and foreign currency revenue-related hedge gains and losses generated by entities within the nike brand geographic operating segments and certain other businesses through our centrally managed foreign exchange risk management program. 2 certain prior year amounts have been reclassified to conform to fiscal year 2012 presentation. these changes had no impact on previously reported results of operations or shareholders' equity. 3 global brand divisions primarily represent nike brand licensing businesses that are not part of a geographic operating segment and general and administrative expenses that are centrally managed for the nike brand. 4 other businesses represent activities of cole haan, converse, hurley, nike golf and umbro. 5 corporate consists of unallocated general and administrative expenses, which includes expenses associated with centrally managed departments, depreciation and amortization related to the company’s corporate headquarters, unallocated insurance and benefit programs, certain foreign currency gains and losses, including certain hedge gains and losses, corporate eliminations and other items. excluding currency changes 2
