NKE
$56.75
Nike
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Earnings Details
2nd Quarter November 2016
Tuesday, December 20, 2016 4:15:01 PM
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Summary

Nike Beats

Nike (NKE) reported 2nd Quarter November 2016 earnings of $0.50 per share on revenue of $8.2 billion. The consensus earnings estimate was $0.43 per share on revenue of $8.1 billion. The Earnings Whisper number was $0.48 per share. Revenue grew 6.4% on a year-over-year basis.

Nike Inc designs, develops and markets footwear, apparel, equipment, and accessory products. It is a seller of athletic footwear and athletic apparel. It sells its products through NIKE-owned in-line and factory retail stores and internet websites.

Results
Reported Earnings
$0.50
Earnings Whisper
$0.48
Consensus Estimate
$0.43
Reported Revenue
$8.18 Bil
Revenue Estimate
$8.09 Bil
Growth
Earnings Growth
Revenue Growth
Power Rating
Grade
Earnings Release

NIKE, Inc. Reports Fiscal 2017 Second Quarter Results

Diluted earnings per share up 11 percent to $0.50 compared to prior year

--Inventories up 9 percent as of November 30, 2016

NIKE, Inc. (NKE) today reported financial results for its fiscal 2017 second quarter ended November 30, 2016. Global consumer demand drove revenue growth across the NIKE Brand portfolio. Diluted earnings per share were up 11 percent and grew faster than revenue, primarily due to selling and administrative expense leverage and a lower average share count.

"NIKE’s ability to attack the opportunities that consistently drive growth over the near and long term is what sets us apart," said Mark Parker, Chairman, President and CEO, NIKE, Inc. "With industry-defining innovation platforms, highly anticipated signature basketball styles and more personalized retail experiences on the horizon, we are well-positioned to carry our momentum into the back half of the fiscal year and beyond."**

Second Quarter Income Statement Review

Revenues for NIKE, Inc. increased 6 percent to $8.2 billion, up 8 percent on a currency neutral basis. -- Revenues for the NIKE Brand were $7.7 billion, up 8 percent on a constant currency basis, driven by double-digit currency neutral growth in Western Europe, Greater China and the Emerging Markets as well as the Sportswear and Running categories.

Revenues for Converse were $416 million, up 5 percent on a currency neutral basis, driven by strong growth in North America.

Gross margin contracted 140 basis points to 44.2 percent, as higher average selling prices were more than offset by higher product costs, unfavorable changes in foreign exchange rates and the impact of higher off-price sales.

Selling and administrative expense declined 2 percent to $2.5 billion. Demand creation expense was $762 million, relatively unchanged from the prior year. Operating overhead expense decreased 3 percent to $1.7 billion, as continued investments in Direct-to-Consumer (DTC) were offset by productivity gains compared to the prior year.

Other income, net was $18 million comprised primarily of non-operating items, and to a lesser extent, net foreign exchange gains. For the quarter, the Company estimates the year-over-year change in foreign currency related gains and losses included in other income, net, combined with the impact of changes in currency exchange rates on the translation of foreign currency-denominated profits, decreased pretax income by approximately $29 million.

The effective tax rate was 24.4 percent, compared to 19.1 percent for the same period last year, primarily due to an increased mix of U.S. earnings, which are generally subject to a higher tax rate.

Net income increased 7 percent to $842 million, while diluted earnings per share increased 11 percent to $0.50, reflecting revenue growth, selling and administrative expense leverage and a three percent decline in the weighted average diluted common shares outstanding, partially offset by lower gross margin.

November 30, 2016 Balance Sheet Review

Inventories for NIKE, Inc. were $5.0 billion, up 9 percent from November 30, 2015, due to a one percent increase in NIKE Brand wholesale unit inventories and increases in average product costs per unit primarily due to product mix, as well as higher inventories associated with growth in DTC.

Cash and short-term investments were $5.9 billion, $173 million lower than November 30, 2015 as growth in net income and proceeds from the issuance of debt in the second quarter of fiscal 2017 were more than offset by share repurchases, higher dividends, investments in infrastructure and a reduction in collateral received from counterparties to foreign currency hedging instruments.

Share Repurchases

During the second quarter, NIKE, Inc. repurchased a total of 17.0 million shares for approximately $900 million as part of the four-year, $12 billion program approved by the Board of Directors in November 2015. As of November 30, 2016, a total of 56.0 million shares had been repurchased under this program for approximately $3.1 billion.

Futures Orders

Worldwide futures orders for the NIKE Brand will be referenced on our earnings conference calls as deemed appropriate. NIKE Brand and geography Futures Orders growth versus the prior year will be posted on the NIKE, Inc. Investor Relations website at http://investors.nike.com following the call.

Conference Call

NIKE, Inc. management will host a conference call beginning at approximately 2:00 p.m. PT on December 20, 2016, to review fiscal second quarter results. The conference call will be broadcast live over the Internet and can be accessed at http://investors.NIKE.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, 2016.

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, Inc. subsidiary brands include Converse, which designs, markets and distributes athletic lifestyle footwear, apparel and accessories; and Hurley, which designs, markets and distributes surf and youth lifestyle footwear, apparel and accessories. For more information, NIKE, Inc.’s earnings releases and other financial information are available on the Internet at http://investors.NIKE.com and individuals can follow @NIKE.

* See additional information in the accompanying Divisional Revenues table regarding this non-GAAP financial measure.

** 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 Securities and Exchange Commission (SEC), including Forms 8-K, 10-Q, and 10-K.

NIKE, Inc.
CONSOLIDATED STATEMENTS OF INCOME
THREE MONTHS ENDED
%
SIX MONTHS ENDED
%
(Dollars in millions, except per share data)
11/30/2016
11/30/2015
Change
11/30/2016
11/30/2015
Change
Revenues
$
8,180
$
7,686
6 %
$
17,241
$
16,100
7 %
Cost of sales
4,564
4,185
9 %
9,502
8,604
10 %
Gross profit
3,616
3,501
3 %
7,739
7,496
3 %
Gross margin
44.2 %
45.6 %
44.9 %
46.6 %
Demand creation expense
762
769
-1 %
1,803
1,601
13 %
Operating overhead expense
1,743
1,791
-3 %
3,599
3,536
2 %
Total selling and administrative expense
2,505
2,560
-2 %
5,402
5,137
5 %
% of revenue
30.6 %
33.3 %
31.3 %
31.9 %
Interest expense (income), net
15
5
--
22
9
--
Other (income) expense, net
(18 )
(34 )
--
(80 )
(65 )
--
Income before income taxes
1,114
970
15 %
2,395
2,415
-1 %
Income tax expense
272
185
47 %
304
451
-33 %
Effective tax rate
24.4 %
19.1 %
12.7 %
18.7 %
NET INCOME
$
842
$
785
7 %
$
2,091
$
1,964
6 %
Earnings per common share:
Basic
$
0.51
$
0.46
11 %
$
1.26
$
1.15
10 %
Diluted
$
0.50
$
0.45
11 %
$
1.23
$
1.12
10 %
Weighted average common shares outstanding:
Basic
1,659.1
1,706.5
1,665.6
1,707.8
Diluted
1,693.2
1,751.4
1,701.3
1,753.4
Dividends declared per common share
$
0.18
$
0.16
$
0.34
$
0.30
NIKE, Inc.
CONSOLIDATED BALANCE SHEETS
November 30,
November 30,
(Dollars in millions)
2016
2015
% Change
ASSETS
Current assets:
Cash and equivalents
$
4,339
$
3,851
13 %
Short-term investments
1,604
2,265
-29 %
Accounts receivable, net
3,478
3,437
1 %
Inventories
5,033
4,600
9 %
Prepaid expenses and other current assets
1,557
2,197
-29 %
Total current assets
16,011
16,350
-2 %
Property, plant and equipment, net
3,566
3,235
10 %
Identifiable intangible assets, net
283
281
1 %
Goodwill
139
131
6 %
Deferred income taxes and other assets(1)
2,653
2,567
3 %
TOTAL ASSETS
$
22,652
$
22,564
0 %
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Current portion of long-term debt
$
44
$
5
780 %
Notes payable
20
99
-80 %
Accounts payable
2,033
1,915
6 %
Accrued liabilities(1)
3,076
3,449
-11 %
Income taxes payable
52
41
27 %
Total current liabilities
5,225
5,509
-5 %
Long-term debt
3,473
2,050
69 %
Deferred income taxes and other liabilities(1)
1,631
1,600
2 %
Redeemable preferred stock
--
--
--
Shareholders’ equity
12,323
13,405
-8 %
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY
$
22,652
$
22,564
0 %
(1) During the fourth quarter of fiscal 2016, NIKE, Inc.
adopted Accounting Standards Update No. 2015-17, which requires all
deferred tax assets and deferred tax liabilities to be classified as
non-current. All periods presented have been updated to reflect
these changes.
NIKE, Inc.
DIVISIONAL REVENUES
% Change
% Change
Excluding
Excluding
THREE MONTHS ENDED
%
Currency
SIX MONTHS ENDED
%
Currency
(Dollars in millions)
11/30/2016
11/30/2015
Change
Changes(1)
11/30/2016
11/30/2015
Change
Changes(1)
North America
Footwear
$
2,219
$
2,162
3 %
3 %
$
4,737
$
4,528
5 %
5 %
Apparel
1,273
1,221
4 %
4 %
2,590
2,468
5 %
5 %
Equipment
158
164
-4 %
-3 %
354
350
1 %
1 %
Total
3,650
3,547
3 %
3 %
7,681
7,346
5 %
5 %
Western Europe
Footwear
865
845
2 %
8 %
2,012
1,973
2 %
5 %
Apparel
454
391
16 %
23 %
985
825
19 %
25 %
Equipment
66
63
5 %
12 %
151
142
6 %
11 %
Total
1,385
1,299
7 %
12 %
3,148
2,940
7 %
11 %
Central & Eastern Europe
Footwear
192
183
5 %
6 %
462
421
10 %
13 %
Apparel
120
126
-5 %
-4 %
258
259
0 %
4 %
Equipment
16
17
-6 %
-6 %
48
47
2 %
6 %
Total
328
326
1 %
1 %
768
727
6 %
10 %
Greater China
Footwear
669
600
12 %
16 %
1,379
1,199
15 %
21 %
Apparel
355
306
16 %
21 %
624
552
13 %
18 %
Equipment
31
32
-3 %
3 %
72
73
-1 %
3 %
Total
1,055
938
12 %
17 %
2,075
1,824
14 %
19 %
Japan
Footwear
151
128
18 %
0 %
317
250
27 %
8 %
Apparel
70
63
11 %
-6 %
130
106
23 %
5 %
Equipment
17
14
21 %
9 %
36
28
29 %
11 %
Total
238
205
16 %
-2 %
483
384
26 %
7 %
Emerging Markets
Footwear
726
674
8 %
15 %
1,387
1,344
3 %
14 %
Apparel
263
255
3 %
9 %
497
493
1 %
11 %
Equipment
58
55
5 %
10 %
108
113
-4 %
4 %
Total
1,047
984
6 %
13 %
1,992
1,950
2 %
12 %
Global Brand Divisions(2)
21
18
17 %
17 %
36
44
-18 %
-21 %
Total NIKE Brand
7,724
7,317
6 %
8 %
16,183
15,215
6 %
9 %
Converse
416
398
5 %
5 %
990
953
4 %
5 %
Corporate(3)
40
(29 )
--
--
68
(68 )
--
--
Total NIKE, Inc. Revenues
$
8,180
$
7,686
6 %
8 %
$
17,241
$
16,100
7 %
9 %
Total NIKE Brand
Footwear
$
4,822
$
4,592
5 %
7 %
$
10,294
$
9,715
6 %
8 %
Apparel
2,535
2,362
7 %
9 %
5,084
4,703
8 %
11 %
Equipment
346
345
0 %
2 %
769
753
2 %
4 %
Global Brand Divisions(2)
21
18
17 %
17 %
36
44
-18 %
-21 %
(1) Fiscal 2017 results have been restated using fiscal
2016 exchange rates for the comparative period to enhance the
visibility of the underlying business trends 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 our central foreign exchange risk
management program.
NIKE, Inc.
EARNINGS BEFORE INTEREST AND TAXES(1)
THREE MONTHS ENDED
%
SIX MONTHS ENDED
%
(Dollars in millions)
11/30/2016
11/30/2015
Change
11/30/2016
11/30/2015
Change
North America
$
912
$
882
3 %
$
1,916
$
1,924
0 %
Western Europe
236
307
-23 %
628
792
-21 %
Central & Eastern Europe
58
76
-24 %
139
174
-20 %
Greater China
375
327
15 %
746
657
14 %
Japan
48
47
2 %
98
83
18 %
Emerging Markets
237
241
-2 %
408
499
-18 %
Global Brand Divisions(2)
(619 )
(625 )
1 %
(1,390 )
(1,249 )
-11 %
TOTAL NIKE BRAND
1,247
1,255
-1 %
2,545
2,880
-12 %
Converse
78
85
-8 %
231
232
0 %
Corporate(3)
(196 )
(365 )
46 %
(359 )
(688 )
48 %
TOTAL EARNINGS BEFORE INTEREST AND TAXES
1,129
975
16 %
2,417
2,424
0 %
Interest expense (income), net
15
5
--
22
9
--
TOTAL INCOME BEFORE INCOME TAXES
$
1,114
$
970
15 %
$
2,395
$
2,415
-1 %
(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 and
is considered a non-GAAP financial measure.
(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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SOURCE: NIKE, Inc.

NIKE, Inc.
Investor Contact:
Nitesh Sharan, 503-532-2828
or
Media Contact:
Kellie Leonard, 503-671-6171