Form 8-K NIKE, Inc. For: Sep 24
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_______________
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): | September 24, 2019 | |
 NIKE, Inc. | ||
(Exact name of registrant as specified in charter) | ||
OREGON | 1-10635 | 93-0584541 |
(State or other jurisdiction of incorporation) | (Commission File Number) | (IRS Employer Identification No.) |
ONE BOWERMAN DRIVE BEAVERTON, OR | 97005-6453 | |
(Address of principal executive offices) | (Zip Code) | |
Registrant’s telephone number, including area code: | (503) 671-6453 | |
NO CHANGE | ||
(Former name or former address, if changed since last report.) | ||
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
r | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
r | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
r | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
r | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Securities registered pursuant to Section 12(b) of the Act:
CLASS B COMMON STOCK | NKE | NEW YORK STOCK EXCHANGE |
(Title of each class) | (Trading Symbol) | (Name of each exchange on which registered) |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Item 2.02 Results of Operations and Financial Condition
Today NIKE, Inc. issued a press release disclosing financial results for the fiscal quarter ended August 31, 2019. The text of the release is furnished herewith as Exhibit 99.1.
Item 9.01 Financial Statements and Exhibits
(d) Exhibits.
The following exhibit is furnished with this Form 8-K:
Exhibit No. | Exhibit | |
99.1 | ||
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
NIKE, Inc. (Registrant) | |||
Date: | September 24, 2019 | By: | /s/ Andrew Campion |
Andrew Campion | |||
Executive Vice President and Chief Financial Officer | |||
Investor Contact: | Media Contact: | |
Matt Friend | Mark Rhodes | |
(503) 532-4213 | (503) 532-8877 | |
NIKE, INC. REPORTS FISCAL 2020 FIRST QUARTER RESULTS
BEAVERTON, Ore., Sept. 24, 2019 - NIKE, Inc. (NYSE: NKE) today reported fiscal 2020 financial results for its first quarter ended August 31, 2019.
Revenue increased to $10.7 billion in the first quarter, up 7 percent on a reported basis and up 10 percent on a currency-neutral basis*, driven by growth across all geographies.
“Our strong start to FY20 highlighted the depth and balance of NIKE’s complete offense,” said Mark Parker, Chairman, President and CEO, NIKE, Inc. “NIKE’s strong product innovation, combined with our industry-leading digital experiences, continue to deepen our consumer relationships around the world.”**
Diluted earnings per share for the quarter was $0.86, an increase of 28 percent driven primarily by strong revenue growth and gross margin expansion.
“Our targeted strategic investments are accelerating NIKE’s digital transformation and extending our competitive advantage, ” said Andy Campion, Executive Vice President and Chief Financial Officer, NIKE, Inc. “Even amidst the increasingly volatile macroeconomic and geopolitical environment, we expect our unrelenting focus on better serving the consumer to continue fueling strong, broad-based growth across our global portfolio.”**
First Quarter Income Statement Review
• | Revenues for NIKE, Inc. increased 7 percent to $10.7 billion, up 10 percent on a currency-neutral basis. |
◦ | Revenues for the NIKE Brand were $10.1 billion, up 10 percent on a currency-neutral basis driven by growth across NIKE Direct and wholesale, key categories including Sportswear and the Jordan Brand, and continued growth across footwear and apparel. |
◦ | Revenues for Converse were $555 million, up 8 percent on a currency-neutral basis, mainly driven by double-digit growth in Asia and through digital globally, which was partially offset by declines in the U.S. |
• | Gross margin increased 150 basis points to 45.7 percent primarily due to higher average selling prices and margin expansion in NIKE Direct, partially offset by impacts from changes in foreign currency exchange rates and higher product costs. |
• | Selling and administrative expense increased 9 percent to $3.3 billion. Demand creation expense was $1.0 billion, up 6 percent primarily driven by higher advertising expenses and sports marketing investments. Operating overhead expense increased 10 percent to $2.3 billion driven by continued investments in transformational capabilities, particularly in NIKE Direct and global operations. |
• | The effective tax rate was 12.4 percent, compared to 14 percent for the same period last year, primarily due to discrete items which favorably impacted the quarter. |
• | Net income increased 25 percent to $1.4 billion driven primarily by strong revenue growth and gross margin expansion while diluted earnings per share increased 28 percent to $0.86 reflecting a 2 percent decline in the weighted average diluted common shares outstanding. |
August 31, 2019 Balance Sheet Review
• | Inventories for NIKE, Inc. were $5.8 billion, up 12 percent compared to the prior year period, reflecting strong consumer demand globally, and to a lesser extent, the impact from changes in foreign currency exchange rates. |
• | Cash and equivalents and short-term investments were $3.6 billion, $625 million lower than last year as share repurchases, dividends, and investments in infrastructure more than offset proceeds from net income. |
NIKE, Inc. adopted Accounting Standards Update No. 2016-02 Leases (Topic 842) in the first quarter. In connection with the adoption, the Company’s balance sheet as of August 31, 2019 reflects the addition of operating lease right-of-use assets and operating lease liabilities.
Share Repurchases
During the first quarter, NIKE, Inc. repurchased 11.9 million shares for approximately $995 million as part of the four-year, $15 billion program approved by the Board of Directors in June 2018. As of August 31, 2019, a total of 23.5 million shares had been repurchased under this program for approximately $2.0 billion.
Conference Call
NIKE, Inc. management will host a conference call beginning at approximately 2:00 p.m. PT on September 24, 2019, to review fiscal first quarter results. The conference call will be broadcast live via 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, October 1, 2019.
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. Individuals can also visit http://news.nike.com and follow @NIKE.
* | See additional information in the accompanying Divisional Revenues table regarding this non-GAAP financial measure. |
** | The marked paragraph contains 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 U.S. Securities and Exchange Commission (SEC), including Forms 8-K, 10-Q and 10-K. |
(Tables Follow)
NIKE, Inc. | ||||||||
CONSOLIDATED STATEMENTS OF INCOME | ||||||||
(Unaudited) | ||||||||
THREE MONTHS ENDED | % | |||||||
(Dollars in millions, except per share data) | 8/31/2019 | 8/31/2018 | Change | |||||
Revenues | $ | 10,660 | $ | 9,948 | 7 | % | ||
Cost of sales | 5,789 | 5,551 | 4 | % | ||||
Gross profit | 4,871 | 4,397 | 11 | % | ||||
Gross margin | 45.7 | % | 44.2 | % | ||||
Demand creation expense | 1,018 | 964 | 6 | % | ||||
Operating overhead expense | 2,310 | 2,099 | 10 | % | ||||
Total selling and administrative expense | 3,328 | 3,063 | 9 | % | ||||
% of revenues | 31.2 | % | 30.8 | % | ||||
Interest expense (income), net | 15 | 11 | — | |||||
Other (income) expense, net | (33 | ) | 53 | — | ||||
Income before income taxes | 1,561 | 1,270 | 23 | % | ||||
Income tax expense | 194 | 178 | 9 | % | ||||
Effective tax rate | 12.4 | % | 14.0 | % | ||||
NET INCOME | $ | 1,367 | $ | 1,092 | 25 | % | ||
Earnings per common share: | ||||||||
Basic | $ | 0.87 | $ | 0.69 | 26 | % | ||
Diluted | $ | 0.86 | $ | 0.67 | 28 | % | ||
Weighted average common shares outstanding: | ||||||||
Basic | 1,562.4 | 1,594.0 | ||||||
Diluted | 1,597.5 | 1,634.4 | ||||||
Dividends declared per common share | $ | 0.22 | $ | 0.20 | ||||
NIKE, Inc. | ||||||||
CONSOLIDATED BALANCE SHEETS | ||||||||
(Unaudited) | ||||||||
August 31, | August 31, | % Change | ||||||
(Dollars in millions) | 2019 | 2018 | ||||||
ASSETS | ||||||||
Current assets: | ||||||||
Cash and equivalents | $ | 3,446 | $ | 3,282 | 5 | % | ||
Short-term investments | 198 | 987 | -80 | % | ||||
Accounts receivable, net | 4,656 | 4,330 | 8 | % | ||||
Inventories | 5,835 | 5,227 | 12 | % | ||||
Prepaid expenses and other current assets | 2,093 | 1,675 | 25 | % | ||||
Total current assets | 16,228 | 15,501 | 5 | % | ||||
Property, plant and equipment, net | 4,615 | 4,487 | 3 | % | ||||
Operating lease right-of-use assets, net | 2,832 | — | — | |||||
Identifiable intangible assets, net | 279 | 284 | -2 | % | ||||
Goodwill | 224 | 154 | 45 | % | ||||
Deferred income taxes and other assets | 2,071 | 2,057 | 1 | % | ||||
TOTAL ASSETS | $ | 26,249 | $ | 22,483 | 17 | % | ||
LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||
Current liabilities: | ||||||||
Current portion of long-term debt | $ | 6 | $ | 6 | 0 | % | ||
Notes payable | 250 | 13 | — | |||||
Accounts payable | 2,716 | 2,333 | 16 | % | ||||
Current portion of operating lease liabilities | 427 | — | — | |||||
Accrued liabilities | 4,455 | 4,174 | 7 | % | ||||
Income taxes payable | 216 | 182 | 19 | % | ||||
Total current liabilities | 8,070 | 6,708 | 20 | % | ||||
Long-term debt | 3,463 | 3,467 | 0 | % | ||||
Operating lease liabilities | 2,675 | — | — | |||||
Deferred income taxes and other liabilities | 2,841 | 3,316 | -14 | % | ||||
Redeemable preferred stock | — | — | — | |||||
Shareholders’ equity | 9,200 | 8,992 | 2 | % | ||||
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY | $ | 26,249 | $ | 22,483 | 17 | % | ||
NIKE, Inc. | ||||||||||
DIVISIONAL REVENUES | ||||||||||
(Unaudited) | ||||||||||
% Change Excluding Currency Changes1 | ||||||||||
THREE MONTHS ENDED | % | |||||||||
(Dollars in millions) | 8/31/2019 | 8/31/2018 | Change | |||||||
North America | ||||||||||
Footwear | $ | 2,669 | $ | 2,555 | 4 | % | 4 | % | ||
Apparel | 1,431 | 1,407 | 2 | % | 2 | % | ||||
Equipment | 193 | 183 | 5 | % | 5 | % | ||||
Total | 4,293 | 4,145 | 4 | % | 4 | % | ||||
Europe, Middle East & Africa | ||||||||||
Footwear | 1,758 | 1,642 | 7 | % | 13 | % | ||||
Apparel | 869 | 830 | 5 | % | 10 | % | ||||
Equipment | 146 | 135 | 8 | % | 13 | % | ||||
Total | 2,773 | 2,607 | 6 | % | 12 | % | ||||
Greater China | ||||||||||
Footwear | 1,164 | 958 | 22 | % | 27 | % | ||||
Apparel | 465 | 380 | 22 | % | 28 | % | ||||
Equipment | 50 | 41 | 22 | % | 29 | % | ||||
Total | 1,679 | 1,379 | 22 | % | 27 | % | ||||
Asia Pacific & Latin America | ||||||||||
Footwear | 930 | 881 | 6 | % | 12 | % | ||||
Apparel | 356 | 332 | 7 | % | 15 | % | ||||
Equipment | 59 | 57 | 4 | % | 10 | % | ||||
Total | 1,345 | 1,270 | 6 | % | 13 | % | ||||
Global Brand Divisions2 | 6 | 16 | -63 | % | -58 | % | ||||
TOTAL NIKE BRAND | 10,096 | 9,417 | 7 | % | 10 | % | ||||
Converse | 555 | 527 | 5 | % | 8 | % | ||||
Corporate3 | 9 | 4 | — | — | ||||||
TOTAL NIKE, INC. REVENUES | $ | 10,660 | $ | 9,948 | 7 | % | 10 | % | ||
TOTAL NIKE BRAND | ||||||||||
Footwear | $ | 6,521 | $ | 6,036 | 8 | % | 11 | % | ||
Apparel | 3,121 | 2,949 | 6 | % | 9 | % | ||||
Equipment | 448 | 416 | 8 | % | 11 | % | ||||
Global Brand Divisions2 | 6 | 16 | -63 | % | -58 | % | ||||
TOTAL NIKE BRAND REVENUES | $ | 10,096 | $ | 9,417 | 7 | % | 10 | % | ||
1 The percent change has been calculated using actual exchange rates in use during the comparative prior year period to enhance the visibility of the underlying business trends by 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 consist primarily 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 the Company’s central foreign exchange risk management program. | ||||||||||
NIKE, Inc. | ||||||||
EARNINGS BEFORE INTEREST AND TAXES1 | ||||||||
(Unaudited) | ||||||||
THREE MONTHS ENDED | % | |||||||
(Dollars in millions) | 8/31/2019 | 8/31/2018 | Change | |||||
North America | $ | 1,100 | $ | 1,077 | 2 | % | ||
Europe, Middle East & Africa | 609 | 501 | 22 | % | ||||
Greater China | 669 | 502 | 33 | % | ||||
Asia Pacific & Latin America | 341 | 323 | 6 | % | ||||
Global Brand Divisions2 | (857 | ) | (818 | ) | -5 | % | ||
TOTAL NIKE BRAND1 | 1,862 | 1,585 | 17 | % | ||||
Converse | 138 | 98 | 41 | % | ||||
Corporate3 | (424 | ) | (402 | ) | -5 | % | ||
TOTAL NIKE, INC. EARNINGS BEFORE INTEREST AND TAXES1 | 1,576 | 1,281 | 23 | % | ||||
Interest expense (income), net | 15 | 11 | — | |||||
TOTAL NIKE, INC. INCOME BEFORE INCOME TAXES | $ | 1,561 | $ | 1,270 | 23 | % | ||
1 The Company evaluates the 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. Total NIKE Brand EBIT and Total NIKE, Inc. EBIT are considered non-GAAP financial measures and are being provided as management believes this additional information should be considered when assessing the Company’s underlying business performance and trends. References to EBIT should not be considered in isolation or as a substitute for other financial measures calculated and presented in accordance with U.S. GAAP and may not be comparable to similarly titled non-GAAP measures used by other companies. | ||||||||
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 primarily 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. | ||||||||