Nike Release:
nikebiz.com
NIKE REPORTS SECOND QUARTER FISCAL 1999 EARNINGS; WORLDWIDE FUTURES ORDERS DECREASE 10 PERCENT
Highlights:
Revenues for the quarter decreased 15% to $1.91 billion; Earnings per share $0.24 versus $0.48
Global footwear revenues down 23 percent; global apparel down 5 percent
European revenues increased 9 percent; 1 percent in constant dollars
Worldwide Futures Orders decreased 10 percent
Beaverton, OR (December 17, 1998) -- NIKE, Inc. (NYSE:NKE) today reported revenues and earnings for the Company's second quarter ended November 30, 1998. Second quarter net income totaled $68.9 million or $0.24 per diluted share compared to $141.1 million, or $0.48 per diluted share. Second quarter revenues were $1.91 billion, down 15 percent from $2.26 billion last year.
Philip H. Knight, Chairman and CEO, said, "We endured many significant challenges in the second quarter, in particular, a soft U.S. retail market for athletic footwear and apparel. Despite these challenges, we met our bottom line expectations as we began to see an impact from our efforts to control expenses in a weak retail environment.
"We are encouraged by our results in Europe, where our brand strength and authentic athletic positioning continues to gain momentum. In Asia Pacific, we are optimistic that our business has stabilized after a difficult 12-month period."*
Future Orders
The Company reported worldwide futures orders for athletic footwear and apparel, scheduled for delivery between December 1998 and April 1999 total $3.8 billion, 10 percent lower than such orders for the same period last year. The impact of exchange rates on worldwide futures orders was not materially significant.*
Looking at futures orders by region, the USA region was down 7 percent, Europe increased 5 percent, Asia Pacific was down 37 percent and the Americas was down 29 percent. In constant dollars, futures orders for Europe decreased 1 percent, Asia Pacific decreased 33 percent and Americas was down 19 percent.*
Regional Highlights
USA
U.S. athletic footwear revenues declined 15 percent to $665.9 million, compared to $787.6 million in the same period last year. U.S. athletic apparel revenues declined 13 percent in the quarter to $365.0 million. Mr. Knight noted, "In the short term, we remain cautious on the U.S. market due to the weakness in the overall athletic apparel business at retail and the continuing uncertainty surrounding the outlook for the NBA season."*
Europe
European revenues in the quarter increased 9 percent to $433.8 million. Had the dollar remained constant at year-ago levels, revenues would have increased 1 percent. Mr. Knight added, "We remain bullish on growth prospects for the athletic footwear and apparel markets in Europe. We're still benefiting from last summer's World Cup marketing efforts and continue to gain share in key European markets."*
Asia Pacific
Revenues in the Asia Pacific region declined 46 percent to $196.9 million. In constant dollars, regional revenues decreased 38 percent. Revenues in Japan declined 53 percent and 49 percent in constant dollars. Mr. Knight said, "We are seeing signs of life among Asian consumers. While this moderate activity does not portend a return to explosive regional growth, it does provide encouragement that our new business model for Asia Pacific can operate profitably going forward."*
Americas
Revenues in the Americas region declined 16 percent to $119.7 million. Had the dollar remained constant, revenues would have decreased 9 percent.
Income Statement Review
In the second quarter, consolidated revenues decreased 15 percent. Other brand revenues, which include Bauer Nike Hockey, Cole Haan®, NIKE IHM, Inc. and Sports Specialties, decreased 12 percent to $114.2 million. Gross margins in the quarter were 35.7 percent compared to 37.5 percent last year. Selling and administrative expenses were 27.8 percent of second quarter revenues, compared to 26.3 percent last year.
Balance Sheet Review
Cash and short-term investments increased to $254.6 in the second quarter. Inventories totaled $1.2 billion, down 17 percent from November 30, 1997. Total U.S. footwear inventory units ended the quarter up 16 percent compared to August 31, 1998, and down 26 percent from November 30, 1997.
Share Repurchase
As of November 30, 1998, the Company had purchased a total of 6,410,800 shares of Nike's Class B Common Stock for approximately $252 million in the open market in conjunction with the $1 billion share repurchase program approved in December 1997. During the second quarter, the Company purchased a total of 3,904,800 shares for approximately $146 million.
NIKE, Inc., based in Beaverton, Oregon, is the world's leading designer and marketer of authentic athletic footwear, apparel, equipment and accessories for a wide variety of sports and fitness activities. Wholly owned Nike subsidiaries include Bauer Nike Hockey, Inc., the world's leading manufacturer of hockey equipment; Cole Haan, which markets a line of high-quality men's and women's dress and casual shoes; and Sports Specialties Corporation, which markets a full line of licensed headwear. Total revenues for the trailing twelve months ending November 30, 1998, were $8.95 billion.
* 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 cancellations and the mix of futures and "at once" orders, which may vary significantly from quarter to quarter.
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE QUARTER ENDED NOVEMBER 30, 1998
(In millions, except per share data)
INCOME STATEMENT QUARTER ENDING YEAR TO DATE ENDING
11/30/98 11/30/97 % Chg 11/30/98 11/30/97 % Chg
Revenues $1,913.0 $2,255.3 -15% $4,417.9 $5,021.4 -12%
Cost of Sales 1,229.6 1,409.5 -13% 2,792.3 3,075.0 -9%
Gross Profit 683.4 845.8 -19% 1,625.6 1,946.4 -16%
35.7% 37.5% 36.8% 38.8%
SG&A 531.9 593.1 -10% 1,184.5 1,252.0 -5%
27.8% 26.3% 26.8% 24.9%
Interest Expense 10.1 17.1 -41% 24.3 34.0 -29%
Other 27.6 6.3 338% 32.1 19.5 65%
Pre-tax Income 113.8 229.3 -50% 384.7 640.9 -40%
Income Taxes 44.9 88.2 -49% 151.9 246.7 -38%
39.5% 38.5% 39.5% 38.5%
Net Income $68.9 $141.1 -51% $232.8 $394.2 -41%
Diluted EPS $0.24 $0.48 -50% $0.80 $1.33 -40%
Basic EPS $0.24 $0.49 -51% $0.82 $1.36 -40%
Weighted Average Common Shares Outstanding:
Diluted 287.7 296.7 289.8 297.1
Basic 283.0 290.3 284.9 290.1
Dividend $0.12 $0.12 $0.24 $0.22
QUARTER ENDING YEAR TO DATE ENDING
Divisional Revenues 11/30/98 11/30/97 %Chg 11/30/98 11/30/97 %Chg
U.S. Region
Footwear $665.9 $787.6 -15% $1583.3 $1,843.7 -14%
Apparel 365.0 418.3 -13% 770.2 843.5 -9%
Equipment 17.5 17.7 -1% 42.8 36.7 17%
Total 1,048.4 1,223.6 -14% 2,396.3 2,723.9 -12%
Europe Region
Footwear 199.3 245.6 -19% 553.4 629.6 -12%
Apparel 217.7 143.0 52% 528.5 361.3 46%
Equipment 16.8 7.9 113% 32.7 15.4 112%
Total 433.8 396.5 9% 1,114.6 1,006.3 11%
Asia Pacific Region
Footwear 90.7 208.4 -56% 197.1 472.5 -58%
Apparel 101.4 151.7 -33% 180.7 254.7 -29%
Equipment 4.8 2.6 85% 10.5 3.0 250%
Total 196.9 362.7 -46% 388.3 730.2 -47%
Americas Region
Footwear 73.7 91.2 -19% 176.3 212.7 -17%
Apparel 42.5 50.7 -16% 89.5 96.3 -7%
Equipment 3.5 1.3 169% 6.5 4.6 41%
Total 119.7 143.2 -16% 272.3 313.6 -13%
Total Nike Brand Revenue 1,798.8 2,126.0 -15% 4,171.5 4,774.0 -13%
Other Brands 114.2 129.3 -12% 246.4 247.4 0%
Total NIKE Inc. Revenue $1,913.0 $2,255.3 -15% $4,417.9 $5,021.4 -12%
BALANCE SHEET 11/30/98 11/30/97
ASSETS
Cash & Investments $254.6 $139.7
Accounts Receivable 1,511.2 1,759.4
Inventory 1,197.7 1,448.6
Deferred Taxes 175.0 140.0
Prepaid Expenses 161.0 188.3
Current Assets 3,299.5 3,676.0
Fixed Assets 1,967.6 1,632.0
Depreciation 736.8 580.8
Net Fixed Assets 1,230.8 1,051.2
Identifiable Intangible
Assets and Goodwill 435.5 454.8
Other Assets 284.1 201.1
Total Assets $5,249.9 $5,383.1
LIAB AND EQUITY
Current Long-Term Debt $1.3 $2.0
Payable to Banks 431.6 241.7
Accounts Payable 429.9 495.4
Accrued Liabilities 678.5 688.9
Income Taxes Payable 31.4 67.5
Current Liabilities 1,572.7 1,495.5
Long-term Debt 389.1 386.2
Def Inc Taxes & Oth Liab 52.3 44.9
Preferred Stock 0.3 0.3
Common Equity 3,235.5 3,456.2
Total Liab. & Equity $5,249.9 $5,383.1
|
