NIKE, Inc. Reports Fiscal 2007 Earnings Per Share

NIKE, Inc. Reports Fiscal 2007 Earnings Per Share

- Revenue up 9 percent for the fiscal year and fourth quarter

- Fourth quarter earnings per share up 34 percent

- Worldwide futures orders up 12 percent

NIKE, Inc. (NYSE: NKE) today reported financial results for the 2007 fiscal year, ended May 31, 2007. For the fiscal year, revenues grew 9 percent to US$16.3 billion, compared to US$15.0 billion last year. Net income increased 7 percent to US$1.5 billion, compared to US$1.4 billion last year, and diluted earnings per share increased 11 percent to US$2.93 versus US$2.64 last year. For the fourth quarter, revenues increased 9 percent to US$4.4 billion, compared to US$4.0 billion for the same period last year. Fourth quarter net income increased 32 percent to US$437.9 million, compared to US$332.8 million in the prior year, and diluted earnings per share increased 34 percent to US$0.86, versus US$0.64 last year. Changes in currency exchange rates increased revenue growth by 2 percentage points for the full year and fourth quarter.

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Commenting on results, Mark Parker, Nike, Inc. President and CEO said, “Nike is a growth company, and fiscal 2007 was no exception. We delivered another record year of revenue, earnings and cash flow. The Nike brand is extremely strong worldwide, and the Nike subsidiaries continue to increase their contribution to the performance of the company.”

“Opportunities for growth at Nike have never been greater,” Parker added. “We have a unique ability to consistently turn consumer insights into performance products and experiences. That’s a big part of what distinguishes Nike as the global industry leader.”

Futures Orders

The Company reported worldwide futures orders for athletic footwear and apparel, scheduled for delivery from June 2007 through November 2007, totaling US$7.7 billion, 12 percent higher than such orders reported for the same period last year. Changes in currency exchange rates increased reported orders growth by 1 percentage point.(i)

By region, futures orders for the U.S. increased 7 percent; Europe (which includes the Middle East and Africa) increased 12 percent; Asia Pacific grew 19 percent; and the Americas increased 15 percent. Changes in currency exchange rates increased reported futures orders growth in Europe by 1 percentage point; in the Asia Pacific region by 4 percentage points; and in the Americas region decreased reported futures orders by 1 percentage point.(i)

Regional Highlights

U.S.

During the fourth quarter, U.S. revenues increased 10 percent to US$1.6 billion versus US$1.5 billion for the same period last year. Footwear revenues increased 9 percent to US$1.1 billion. Apparel revenues increased 11 percent to US$437.9 million. Equipment revenues increased 23 percent to US$91.5 million. U.S. pre-tax income improved 20 percent to US$415.2 million.

For the full fiscal year, U.S. revenues were up 7 percent to US$6.1 billion. Footwear revenues increased 6 percent to US$4.1 billion, apparel revenues grew 8 percent to US$1.7 billion and equipment revenues increased 8 percent to US$323.8 million. U.S. pre-tax income rose 4 percent to US$1.3 billion for the fiscal year.

Europe

Fourth quarter revenues for the European region grew 12 percent to US$1.3 billion from US$1.2 billion for the same period last year. Changes in currency exchange rates increased revenue growth by 9 percentage points. Footwear revenues increased 13 percent to US$757.1 million. Apparel revenues grew by 10 percent to US$436.0 million and equipment revenues increased 19 percent to US$98.3 million. Fourth quarter pre-tax income increased 29 percent to US$292.9 million.

Full fiscal year European revenues grew 9 percent to US$4.7 billion. Changes in currency exchange rates increased revenue growth by 6 percentage points. Footwear revenues were up 6 percent to US$2.6 billion, apparel revenues increased 13 percent to US$1.8 billion and equipment revenues grew 14 percent to US$358.1 million. European fiscal year pre-tax income increased 4 percent to US$1.0 billion.

Asia Pacific

Fourth quarter revenues for the Asia Pacific region grew 7 percent to US$596.9 million compared to US$558.6 million a year ago. Changes in currency exchange rates increased revenue growth by 2 percentage points. Footwear revenues were up 7 percent to US$296.4 million, apparel revenues increased 7 percent to US$240.4 million and equipment revenues grew 8 percent to US$60.1 million. Fourth quarter pre-tax income increased 37 percent to US$118.5 million.

For the full fiscal year, Asia Pacific revenues increased 11 percent to US$2.3 billion, compared to US$2.1 billion last year. Changes in currency exchange rates increased revenue growth by 1 percentage point. Footwear revenues were US$1.2 billion, up 11 percent from US$1.0 billion last year. Apparel revenues increased 11 percent to US$909.3 million and equipment revenues grew by 11 percent to US$214.9 million. Pre-tax income increased 17 percent to US$483.7 million for the fiscal year.

Americas

Fourth quarter revenues in the Americas region were relatively flat to the prior year at US$235.0 million. Changes in currency exchange rates did not have a significant impact on revenue growth. Footwear revenues were up 8 percent to US$169.4 million, apparel revenues decreased 27 percent to US$44.7 million and equipment revenues rose 15 percent to US$20.9 million. Pre-tax income was up 20 percent to US$38.5 million for the quarter.

Full fiscal year revenues for the Americas region grew 5 percent to US$952.5 million, 1 percentage point of this growth was the result of changes in currency exchange rates. Footwear revenues increased 7 percent to US$679.6 million, apparel revenues decreased 4 percent to US$193.9 million, and equipment revenues rose 17 percent to US$79.0 million. Pre-tax income increased 9 percent for the fiscal year to US$187.4 million.

Other Businesses

For the fourth quarter, Other business revenues, which include Cole Haan Holdings Incorporated, Converse Inc., Exeter Brands Group LLC, Hurley International LLC, NIKE Bauer Hockey Inc., and NIKE Golf, grew 9 percent to US$649.7 million and pre-tax income was up 102 percent to US$93.1 million. For the fiscal year, Other business revenues increased 16 percent to US$2.3 billion and pre-tax income increased 98 percent to US$303.7 million.

Prior year fourth quarter and fiscal year pre-tax income included a one-time US$51.9 million charge related to an arbitration ruling involving Converse and a former South American licensee. In fiscal 2007 the ruling was settled for less than this amount, which resulted in a US$14.2 million benefit to Other business pre-tax income. Excluding these items, Other business pre-tax income would have decreased 5 percent for the fourth quarter and increased 41 percent for the fiscal year.

Income Statement Review

In the fourth quarter of fiscal 2007 gross margins were comparable to the prior year at 43.8 percent; selling and administrative expenses were 29.0 percent or revenues versus 30.8 percent last year and the effective tax rate was 33.5 percent compared to 34.9 percent last year. Fourth quarter net income included US$19.3 million, net of taxes, related to the expensing of stock options. In addition, the prior year fourth quarter net income included a one-time US$30.8 million charge, net of taxes, related to the Converse arbitration ruling. Excluding these two items fourth quarter diluted earnings per share would have increased 29 percent to US$0.90 from US$0.70 last year.

For the fiscal year, gross margins were 43.9 percent compared to 44.0 percent last year; selling and administrative expenses were 30.8 percent versus 29.9 percent last year; and the effective tax rate was 32.2 percent compared to 35.0 percent last year. Net income for the fiscal year included US$96.7 million, net of taxes, related to the expensing of stock options and a US$9.6 million benefit, net of taxes, for settling the Converse arbitration ruling for less than the amount accrued in fiscal 2006. Excluding these two items diluted earnings per share for the fiscal year would have increased 15 percent to US$3.10 compared to US$2.70 last year.